10KSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

ANNUAL REPORT

under Section 13 or 15(d)

of the Securities Exchange Act of 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

000-14136

(Commission file number)

CARDIUM THERAPEUTICS, INC.

(Name of small business issuer in its charter)

Delaware	27-0075787
(State of incorporation)	(IRS Employer Identification No.)
3611 Valley Centre Drive, Suite 525 San Diego, California 92130	(858) 436-1000
(Address of principal executive offices)	(Issuer’s telephone number)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.0001 par value per share

Check whether Cardium Therapeutics, Inc. (Cardium) is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.    ¨

Check whether Cardium (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that Cardium was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Cardium’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.    x

Indicate by check mark whether Cardium is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    ¨  Yes    x  No

Cardium’s revenues for its most recent fiscal year ended December 31, 2005 were $0.

The aggregate market value of Cardium’s common stock held by non-affiliates of Cardium as of March 13, 2006 was approximately $59,991,352 (based on the closing sale price of $2.50 reported by Nasdaq on March 13, 2006). For this purpose, all of Cardium’s officers and directors and their affiliates were assumed to be affiliates of Cardium.

As of March 28, 2006, 31,749,801 shares of Cardium’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (Check one):    ¨  Yes    x  No

TABLE OF CONTENTS

		Page
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS		1
PART I
Item 1.	Description of Business	2
Item 2.	Description of Property	20
Item 3.	Legal Proceedings	20
Item 4.	Submission of Matters to a Vote of Security Holders	21
PART II
Item 5.	Market for Common Equity and Related Stockholder Matters	22
Item 6.	Management’s Discussion and Analysis or Plan of Operation	23
Item 7.	Financial Statements	38
Item 8.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	52
Item 8A.	Controls and Procedures	52
Item 8B.	Other Information	52
PART III
Item 9.	Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act	53
Item 10.	Executive Compensation	58
Item 11.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	59
Item 12.	Certain Relationships and Related Transactions	61
Item 13.	Exhibits	61
Item 14.	Principal Accountant Fees and Services	64
SIGNATURES		66

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

Certain statements in this report, including information incorporated by reference, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect current views about future events and financial performance based on certain assumptions. They include opinions, forecasts, intentions, plans, goals, projections, guidance, expectations, beliefs or other statements that are not statements of historical fact. Words such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “believes,” “anticipates,” “intends,” “estimates,” “approximates,” “predicts,” or “projects,” or the negative or other variation of such words, and similar expressions may identify a statement as a forward-looking statement. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, our goals, strategies, focus and plans, and other characterizations of future events or circumstances, including statements expressing general optimism about future operating results and the development of our products, are forward-looking statements. Forward-looking statements in this report may include statements about:

• future financial and operating results;

• the conduct and outcome of regulatory submissions and clinical trials;

• the performance of Innercool’s Celsius Control System^™, Generx^™ and other product candidates and their potential to attract development partners and/or generate revenues;

• our beliefs and opinions about the safety and efficacy of our products and product candidates and the results of our clinical studies and trials;

• the development or commercialization of competitive products or medical procedures;

• our development of new products and product candidates;

• our growth, expansion and acquisition strategies, the success of such strategies, and the benefits we believe can be derived from such strategies;

• the outcome of litigation matters;

• our intellectual property rights and those of others, including actual or potential competitors;

• the ability to enter into acceptable relationships with one or more contract manufacturers or other service providers on which we may depend and the ability of such contract manufacturers or other service providers to manufacture biologics or devices or to provide services of an acceptable quality on a cost-effective basis;

• our personnel, consultants and collaborators;

• operations outside the United States;

• current and future economic and political conditions;

• overall industry and market performance;

• the impact of accounting pronouncements;

• management’s goals and plans for future operations; and

• other assumptions described in this report underlying or relating to any forward-looking statements.

The forward-looking statements in this report speak only as of the date of this report and caution should be taken not to place undue reliance on any such forward-looking statements. Forward-looking statements are subject to certain events, risks, and uncertainties that may be outside of our control. When considering forward-looking statements, you should carefully review the risks, uncertainties and other cautionary statements in this report as they identify certain important factors that could cause actual results to differ materially from those

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expressed in or implied by the forward-looking statements. These factors include, among others, the risks described under Item 6 and elsewhere in this report, as well as in other reports and documents we file with the United States Securities and Exchange Commission.

Unless the context requires otherwise, all references in this report to the “Company,” “Cardium,” “we,” “our,” and “us” refer to Cardium Therapeutics, Inc. and, as applicable, Innercool Therapies, Inc. and our other wholly-owned subsidiaries.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Overview

Cardium Therapeutics, Inc. is a medical technology company primarily focused on the development, manufacture and sale of innovative products for cardiovascular and related indications, which are leading healthcare priorities for adults in the United States, Europe and elsewhere. Cardium is based in San Diego and was incorporated as a Delaware corporation in December 2003.

In October 2005, we acquired a portfolio of biologic growth factors and related delivery techniques from the Schering AG Group, Germany, which we plan to develop as cardiovascular-directed growth factor therapeutics for various interventional cardiology applications, including potential treatments for ischemic heart disease. In March 2006, we also acquired the technologies and products of Innercool Therapies, Inc., a medical technology company in the emerging field of therapeutic hypothermia, whose systems and products are designed to rapidly and controllably cool the body in order to reduce cell death and damage following acute ischemic events such as cardiac arrest and stroke, and to potentially lessen or prevent associated injuries such as adverse neurologic outcomes. Innercool Therapies is operated as a wholly-owned subsidiary of Cardium.

Among the product candidates we acquired from Schering are Generx^™ and Corgentin^™. Generx (alferminogene tadenovex) is a DNA-based, myocardial-derived growth factor therapeutic being developed for potential use by interventional cardiologists as a one-time treatment to promote and stimulate the growth of collateral circulation in the hearts of patients with ischemic conditions such as recurrent angina. Angina, which is often felt as severe chest pain, can significantly limit patients’ mobility and quality of life and is a disorder that affects millions of adults in the United States and elsewhere.

Generx is our lead product candidate and has advanced to Phase 2b/3 clinical studies. Corgentin, a pre-clinical product candidate, is a next-generation therapeutic based on myocardial-derived insulin-like Growth Factor-I (mdIGF-I). Corgentin is being designed to be a one-time cardiomyocyte-directed treatment to promote the repair and restoration of damaged cardiomyocytes and enhance cardiac function following a heart attack (acute myocardial infarction) through the beneficial cardiac effects of prolonged IGF-I protein expression.

In addition, we have secured the rights to Genvascor^™, a pre-clinical, DNA-based, endothelial nitric oxide synthase (eNOS) therapeutic. Genvascor is being designed to induce production of nitric oxide and is directed at mediating the effects of multiple growth factors to enhance neovascularization and increased blood flow for the potential treatment of patients with critical limb ischemia due to advanced peripheral arterial occlusive disease (PAOD). We may elect to develop Genvascor alone or in collaboration with a development partner.

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The following chart summarizes certain attributes of the above-described product candidates we acquired from Schering, along with their potential indications and mechanisms of action:

Product	Growth Factor	Indication	Mechanism of Action
Generx	Fibroblast Growth Factor-4 (FGF-4)	Recurrent angina due to coronary disease	Promote and enhance the growth of collateral circulation in ischemic heart disease
Corgentin	Insulin-like Growth Factor-I (IGF-I)	Acute coronary syndrome following myocardial infarction	Improve recovery of injured myocardium and restore function following heart attack
Genvascor	Endothelial Nitric Oxide Synthase (eNOS)	Critical limb ischemia due to advanced peripheral arterial occlusive disease	Promote multiple vasculo-protective effects and mediate growth factors to enhance neovascularization and increased blood flow to the ischemic limb

In March 2006, Cardium, through its newly-formed, wholly-owned subsidiary, Innercool Therapies, Inc., a Delaware corporation, acquired substantially all of the assets and the business of Innercool Therapies, Inc., an unaffiliated California corporation, then in the development stage, engaged in the business of researching, developing, manufacturing, marketing, selling and distributing products and services related to endovascular temperature control therapy. Innercool’s business is focused on the emerging field of therapeutic hypothermia, principally through the development, manufacture and marketing of endovascular, catheter-based, therapeutic systems designed to rapidly and controllably cool the body. It’s Celsius Control System^™, which was among the assets acquired in the acquisition, is used in surgical and intensive care hospital units and has received 501(k) clearance from the Food and Drug Administration (FDA) for use in inducing, maintaining and reversing mild hypothermia in neurosurgical patients, both in surgery and in recovery or intensive care. The system has also received FDA clearance for use in cardiac patients to achieve or maintain normal body temperatures in surgery and in recovery or intensive care, and as an adjunctive treatment for fever control in patients with cerebral infarction and intracerebral hemorrhage. Innercool has also received a CE mark allowing the Celsius Control System to be marketed in the European Community, and approval from the Therapeutic Goods Administration (TGA) allowing the system to be marketed in Australia. Innercool is using a distributor to facilitate marketing and sales in Australia but has not yet entered into any distribution or other arrangements with respect to the European market.

Business Strategy

Building upon our core products and product candidates, our strategic goal is to develop a portfolio of medical products at various stages of development and secure additional financial resources to commercialize these products in a timely and effective manner. The key elements of our strategy are to:

• initiate a late-stage clinical study (AGENT-5) for Generx;

• seek to broaden and accelerate the development and sales of Innercool’s Celsius Control System and, at the same time, expand our therapeutic hypothermia technology into other medical indications and applications;

• leverage our financial resources and focused corporate infrastructure through the use of contract manufacturers to produce clinical supplies and product components and a contract research organization to manage or assist planned clinical studies;

• advance the pre-clinical development of Corgentin and potentially seek partnering opportunities for the Corgentin and Genvascor product candidates;

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• seek to broaden and expand our product base and financial resources through other corporate development transactions in an attempt to enhance stockholder value, which could include acquiring other companies or product opportunities and/or securing additional capital; and

• seek to monetize the economic value of our product portfolio by establishing strategic collaborations at appropriate valuation inflection points.

We recognize that the practical realities of cardiovascular drug development in the current regulatory environment require sizable financial investment. In view of this, we plan to pursue clinical and product development strategies intended to facilitate collaborations and partnerships for joint development of our products at appropriate valuation inflection points during their clinical development cycle. In the future, we plan to aggressively seek access to other therapeutics and/or medical device opportunities, as well as medical-related technologies, to further strengthen and broaden our portfolio, and will consider the opportunistic acquisition of other companies having financial and development resources that offer the potential to enhance our near- and longer-term stockholder value.

Corporate History

In 1995, Christopher Reinhard, our co-founder, Chairman, Chief Executive Officer, President and Treasurer, co-founded Collateral Therapeutics, Inc., a former Nasdaq-listed company, to commercialize medical discoveries and technology licensed from the University of California, San Diego related to the potential therapeutic application of methods of gene therapy to stimulate cardiac angiogenesis. In 1996, Collateral Therapeutics and the Schering AG Group, Germany, entered into a strategic research and development collaboration to commercially develop angiogenic gene therapy products based on Collateral Therapeutics’ technology platform, which included a portfolio of therapeutic genes, vectors and methods of gene therapy to enhance cardiac function. This research and development collaboration yielded two product candidates based on the human Fibroblast Growth Factor-4 gene (FGF-4) that entered clinical trials.

During the collaboration with Schering, Mr. Reinhard and other members of Collateral Therapeutics’ management team, several of whom have joined Cardium, successfully worked with Schering to promote Collateral Therapeutics’ lead product candidate through several human clinical trials that were principally funded and conducted by Schering. In 2002, as a result of the success of the Collateral Therapeutics/Schering collaboration and following positive Phase 1/2 and Phase 2a clinical studies for Generx, Schering acquired Collateral Therapeutics for approximately $160 million. This acquisition included all of Collateral Therapeutics’ intellectual property and assets, including the rights to the lead product candidate, Generx. After completing the sale of Collateral Therapeutics to Schering, Mr. Reinhard continued as Chief Executive of Collateral Therapeutics through December 2004.

Following its acquisition of Collateral Therapeutics, Schering initiated a multi-center Phase 2b/3 clinical program that was designed to evaluate up to 1,000 patients in a U.S. study and a concurrent European study. However, although Phase 1/2 and subsequent Phase 2 clinical data were encouraging, Schering announced in January 2004 that an interim analysis of the Generx Phase 2b/3 (AGENT-3) U.S. clinical study suggested that the Phase 2b/3 (AGENT-3) study as designed appeared to not be sufficient to demonstrate efficacy and it elected to discontinue enrollment pending a review of the study. Schering also reported, however, that the study revealed no evidence of serious safety concerns.

In December 2003, Mr. Reinhard and Dr. Tyler Dylan, who had been Executive Vice President and General Counsel of Collateral Therapeutics, founded Cardium to develop other product candidates that had been advanced by Collateral Therapeutics before its acquisition by Schering, including the Corgentin product candidate for use after acute myocardial infarction (heart attack). On June 15, 2004, Schering announced its intention to move out of cardiovascular research and development activities (including biologics as well as small molecule drugs) in order to refocus on its core business areas.

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In November 2004, Cardium completed a retrospective subgroup analysis of data from the AGENT-3 clinical study, which provided positive efficacy insights and reconfirmed the positive safety data. In light of this retrospective analysis, Cardium elected to pursue the acquisition, development and commercialization of Schering’s portfolio of cardiovascular growth factor therapeutic assets.

In October 2005, Cardium completed a “reverse merger” with Aries Ventures Inc., a Nevada corporation. Before the close of the reverse merger, Aries Ventures was a publicly traded “shell” company that had no business operations or significant non-cash assets. As a result of the reverse merger, Cardium became Aries Ventures’ wholly-owned operating subsidiary, Cardium’s former stockholders became significant stockholders of Aries Ventures and Cardium’s management replaced Aries Ventures’ management.

Concurrently with the closing of the reverse merger, we completed a private placement of a total of 19,325,651 shares of Aries Ventures’ common stock at a purchase price of $1.50 per share and received net proceeds of $25,542,389. In connection with the private placement, we issued warrants to purchase an aggregate of 2,856,818 shares of common stock to lead investors in the private placement, the placement agent and a former officer, director and significant stockholder of Aries Ventures.

Upon the close of the reverse merger and with the proceeds from the private placement, we acquired Schering’s portfolio of cardiovascular growth factor therapeutic assets for a purchase price of approximately $4,000,000 and other consideration as described below in connection with the Schering agreement.

In January 2006, we completed a corporate reorganization in which Aries Ventures was merged with and into Cardium, with Cardium as the surviving entity. As a result, we are now in our present form a publicly-traded, Delaware corporation named Cardium Therapeutics, Inc.

In late 2005, the American Heart Association revised its treatment guidelines to recommend the use of therapeutic cooling as part of the critical care procedures for patients with an out-of-hospital cardiac arrest following ventricular fibrillation. In March 2006, Cardium, through a newly-formed, wholly-owned subsidiary, Innercool Therapies, Inc., a Delaware corporation, completed the acquisition of substantially all of the assets and business of Innercool Therapies, Inc., a privately-held, unaffiliated California corporation engaged in the business of researching, developing, manufacturing, marketing, selling and distributing products and services related to endovascular cooling and temperature control therapy. As partial consideration for Innercool’s products and other assets received, Cardium issued to the seller 2,500,000 shares of Cardium’s common stock. Cardium will operate the acquired business through its Innercool Therapies subsidiary.

Product Candidates and Clinical Development

Coronary Heart Disease and Cardium’s Approach to Treatment

According to the American Heart Association, approximately 6.5 million adults in the United States experience angina pectoris associated with coronary heart disease (AHA, Heart Disease and Stroke Statistics—2006). The prevalence of angina is even higher in many areas of the European Union and elsewhere than it is in the United States. Angina, which is frequently experienced as chest pain, can severely limit patients’ daily activities, and represents a substantial healthcare burden throughout the industrialized world.

Cardium’s approach to the potential treatment of angina focuses on the use of adenovectors comprising DNA sequences that are capable of initiating or enhancing the growth of blood vessels in the heart—a process referred to as angiogenesis. Cardium’s methods employ a standard cardiac catheter to gradually infuse an angiogenic adenovector into the coronary circulation. The intracoronary route of delivery is not only readily accessible from outside of the heart but it directly supplies the underlying heart muscle as well as the coronary endothelium, to which adenovectors can bind and from which blood vessels can develop. Cardiac infusion catheters and the intracoronary delivery route are also beneficial because they are now routinely used by cardiologists for performing standard diagnostic procedures such as angiography.

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Adenovectors are the most widely-studied DNA delivery vehicles in human clinical trials; and, in the context of heart disease, angiogenic adenovectors are believed to be particularly useful as biologics in that they do not integrate into the human genome but can bind to and remain in the heart for a sufficient period of time to promote the development of new blood vessels. Naturally-occurring biological receptors for adenovectors are believed to facilitate its binding to a broad area of heart muscle supplied by the infused coronary circulation. Employing this readily-accessible coronary delivery route to the myocardium avoids the need for any mechanical devices or approaches that require entry into the heart chambers or piercing of the surrounding heart muscle, or that result in delivery and gene expression concentrated along needle tracks in the injected myocardium.

Cardium’s methods are applicable to multiple angiogenic DNAs including VEGFs, FGFs and other DNA sequences capable of promoting angiogenesis. Of these, the FGF-4 angiogenic DNA employed in Cardium’s Generx^™ product candidate was selected as being advantageous for promoting blood vessel growth in the heart. In particular, FGFs are believed to activate a number of downstream angiogenic factors, including VEGFs and related proteins that can contribute to the process of forming stable blood vessel growth in ischemic areas of need such as oxygen-deprived tissue downstream of narrow or blocked coronary arteries and/or smaller blood vessels located within the heart muscle.

While angioplasty and stenting as well as coronary artery bypass graft (CABG) surgeries can be performed for mechanically opening or surgically bypassing blockages of the large epicardial blood vessels that surround the myocardium, neither angioplasty nor CABG are believed to be capable of also addressing blockages or limitations affecting the mid-sized to smaller blood vessels that are located deeper within the heart muscle. These deeper blood vessels, which form the underlying coronary “microcirculation,” are directly responsible for conveying oxygenated blood into close proximity with the adjacent heart tissue. In addition, microcirculatory impedance or resistance to flow at the downstream level is believed to contribute substantially to reducing overall blood flow through the myocardium—which may be a contributory cause of ischemia in patients with heart disease. In that regard, many patients continue to experience angina even after surgical and other interventions have been performed to mechanically open or bypass accessible portions of the large upstream blood vessels that initially conduct blood flow into the heart.

Generx Clinical Studies

Generx has been evaluated in studies of 663 patients (including 450 Generx-treated patients and 213 controls) in four multi-center, double-blind, placebo-controlled clinical studies. These studies have been conducted at over 100 U.S., Canadian, European and South American medical centers.

Results from two multi-center, randomized, double-blind, placebo-controlled studies (Phase 1/2 and Phase 2), conducted by Schering AG and/or its affiliates, including Berlex Laboratories, in collaboration with Collateral Therapeutics, have provided important safety and preliminary efficacy information. Based on intracoronary administration to 450 patients, Generx appears to be safe and well tolerated with no significant adverse side effects. Results from the Phase 1/2 study (AGENT-1) demonstrated that, in patients whose baseline exercise treadmill tests (ETT) were equal to, or less than 10 minutes, Generx showed a significant improvement in ETT time compared to patients that received the placebo control. A Phase 2 study (AGENT-2), designed to assess enhancement of myocardial perfusion (blood flow to the heart) following intracoronary delivery of Generx in patients with documented reversible ischemia measured by stress adenosine single-photon emission computed tomography (SPECT) imaging, demonstrated that Generx provided improvement in myocardial perfusion in patients with moderate to severe angina.

Positive data from AGENT-1 and AGENT-2 supported the advancement of the Generx development program into two large-scale Phase 2b/3 trials worldwide (AGENT-3 and AGENT-4), which were designed to enroll up to 1,000 patients at more than 100 medical centers in the U.S., Canada, South America and Europe. Based on an interim analysis of 307 patients in the U.S.-based AGENT-3 study, the clinical data further confirmed the product’s positive safety profile and suggested improvements to study design in view of the level

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of placebo response observed among generally healthier patients. However, enrollment in the studies was stopped because, as designed, the studies were not considered sufficient to provide statistical evidence of efficacy. An independent Data Safety Monitoring Board monitored the studies and reported that there was no evidence of safety concerns. A detailed subgroup analysis of the AGENT-3 data confirmed that there were statistically significant improvements in the primary end-point (i.e. exercise treadmill testing or ETT) in key patient populations. This subgroup analysis is believed to provide support for further clinical trial evaluation to demonstrate the safety and effectiveness of Generx in certain patient populations with myocardial ischemia and associated symptomatic recurrent angina.

The following chart summarizes the clinical development of Generx:

Date	Trial	Study Objective	No. of Patients		Clinical Results
1999	AGENT 1	First in Man U.S. Phase 1/2 Clinical Study	79		Positive Safety & Preliminary Efficacy
2001	AGENT 2	Phase 2a Clinical Study Multi-Center, Randomized, Placebo-Controlled, U.S. Mechanism of Action Study Evaluation of Cardiac Perfusion	52		Positive Safety & Preliminary Efficacy, Positive Info. About Mechanism of Action (Cardiac Perfusion)
2004	AGENT 3	Multi-Center, Randomized, Placebo-Controlled, U.S. Phase 2b/3 Clinical Study Evaluate Safety & Efficacy	416		Positive Safety, Terminated Early Based on Protocol Design (High Placebo Response Among Generally Healthier Patients on Exercise Treadmill)
2004	AGENT 4	Multi-Center, Randomized, Placebo-Controlled, Europe, Canada, South America Phase 2b/3 Clinical Study Evaluate Safety & Efficacy	116		Positive Safety, Terminated Early Based on Protocol Design
2005	AGENT 3 (Review)	Retrospective Analysis of Phase 2b/3 Clinical Study Results	(416	)	Positive Safety and Statistically Significant Efficacy in Patients (>55 years of age) with Severe Angina or Limited Exercise Capacity
Total			663
2006	AGENT 5	Planned Clinical Study Based on Meta-Analyses of AGENT 1 through AGENT 4 Studies			Clinical Study Designed to Provide Confirmatory Safety and Efficacy Data

Comparative Anti-Anginal Therapeutic Approaches

During the past two decades several drugs have been approved by the FDA for the management of chronic stable angina pectoris, including beta-blockers, nitrates and calcium channel blockers. These drugs were approved based upon improvement in total ETT time and, in general, have demonstrated placebo-corrected increases of approximately 20 to 50 seconds. Very few medications to treat angina have been approved over the

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past 15 years. Currently, CV Therapeutics’ product Ranolazine^™, which is a fatty acid oxidation inhibitor, is being introduced as a potential new alternative to or addition to existing therapies. The clinical trial experience in AGENT-3 suggests that in patients with more severe angina, Generx, after a one-time administration, can produce sustained increases in total ETT time that are clinically meaningful when considered in the context of these available therapies. Most importantly, the effects of Generx have been demonstrated in patients who are already receiving one or more chronic anti-anginal medications.

Looking comparatively, the Ranolazine clinical trial data suggest that the magnitude of its effect is similar to the currently available drugs. For example, in the CARISA trial, Ranolazine achieved an approximately 24 second improvement in total ETT time over placebo at trough drug levels (as defined in the trial protocol). In addition to drug therapy, mechanical revascularization procedures such as percutaneous coronary intervention (PCI) and coronary artery bypass surgery graft (CABG) surgery are commonly employed interventional procedures used to manage patients with chronic angina. While there have been few published controlled clinical trials of PCI or CABG surgery that have collected ETT data, two studies that have directly compared PCI and CABG surgery using ETT have shown sustained improvements in total ETT time of approximately 90 to 114 seconds for PCI and 132 to 174 seconds for CABG surgery.

Comparative Clinical Data Based on

Total Exercise Treadmill Time: Change from Baseline

Study	Treatment Group	# of Patients	Mean ETT Change in Seconds	p-Value
DNA-Based Angiogenic Therapy Generx [mdFGF-4] AGENT-3/4 Age > 55, Baseline ETT £ 300 Seconds @ Six Months	Placebo	27	28.1 (11.5%)	—
	Generx 10e9 v.p. dosage	27	92.0 (38.3%)	0.03
	Generx 10e10 v.p. dosage	37	75.3 (31.2%)	0.02
Small Molecule Drug Ranolazine *CARISA Study(1) CV Therapeutics	Placebo	258	91.7 (21.9%)	—
	Ranolazine 750 mg	272	115.4 (27.7%)	0.03
	Ranolazine 1000 mg	261	115.8 (27.9%)	0.03
Mechanical Revascularizations American Heart Journal(2)	Coronary Artery Bypass Surgery	46	132.0 (29.7%)	—
	PCI—Angioplasty	40	114.0 (23.5%)	—
Mechanical Revascularizations ACIP Study(3)	Coronary Artery Bypass Surgery	78	174.0 (34.9%)	—
	PCI—Angioplasty	92	90.0 (19.4%)	—

* CARISA data are least square means and other study data are arithmetic means.

⁽¹⁾ Chaitman BR, Pepine CJ, Parker JO, Skopal J, Chumakova G, et al. Effects of ranolazine with atenolol, amlodipine, or diltiazem on exercise tolerance and angina frequency in patients with severe chronic angina: a randomized controlled trial. JAMA 2004;291(3):309-316.

⁽²⁾ Mulcahy D, Keegan J, Phadke K, Wright C, Sparrow J, Purcell H, Fox K. Effects of coronary artery bypass surgery and angioplasty on the total ischemic burden: a study of exercise testing and ambulatory ST segment monitoring. Am Heart J 1992;123(3):597-603.

⁽³⁾ Bourassa MG, Knatterud GL, Pepine CJ, Sopko G, Rogers WJ, et al. Asymptomatic Cardiac Ischemia Pilot (ACIP) Study. Improvement of cardiac ischemia at 1 year after PTCA and CABG. Circ 1995;92(9 Suppl):II1-7.

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These data confirmed earlier studies and suggested that the treatment could benefit patients with more serious angina that typically occurs as a result of advanced coronary artery disease. This may allow targeting patients who have had previous interventions such as angioplasty or bypass surgery, but have recurrent angina despite drug therapy. Furthermore, based on this substantial human clinical experience with Generx, coupled with unique insights regarding a particularly “responsive” patient population for what is considered to be the key efficacy end-point, we believe that Generx has the potential to obtain approvable clinical data in a pivotal trial in the foreseeable future and ahead of potential competition.

We plan to further build on Schering’s six-year clinical development activities and advance forward with AGENT-5, a newly redesigned, late-stage clinical study that would be structured and powered to serve as the basis for advancing Generx toward a regulatory submission seeking marketing approval from the FDA.

Generx Clinical Development Strategy

Since 1995, members of our executive management team, during their employment with Collateral Therapeutics and Schering, have had considerable experience in accomplishing regulatory clearance in pre-clinical research, pre-clinical toxicology, manufacturing, distribution and global clinical development of Generx that should allow us to begin our clinical development program in a more favorable position than most of our competitors. As part of the acquisition of Schering’s portfolio of cardiovascular growth factor therapeutic assets, we are receiving from Schering an active IND in the United States, Canada and several European and South American countries, and information about manufacturing and analytical processes approved by the FDA and the European Regulatory Agency.

We plan to initiate AGENT-5, a multi-center, randomized, double-blind, placebo-controlled study to prospectively evaluate the efficacy and safety of mdFGF-4 in the patient population identified as responders in meta-analyses of the prior clinical studies conducted by Schering AG and its affiliates (particularly including the AGENT-2 and AGENT-3 clinical studies).

Corgentin Pre-Clinical Development

Corgentin, a pre-clinical product candidate, is a next-generation DNA-based therapeutic based on myocardial derived insulin-like growth factor-I (mdIGF-I). Corgentin is being designed as a one time cardiomyocyte-derived treatment to promote the repair and restoration of damaged cardiomyocytes and enhance cardiac function following a heart attack (acute myocardial infarction) through the beneficial cardiac effects of prolonged IGF-I protein expression. We believe that myocardial derived IGF-I offers the potential to improve post-infarct cardiac healing through DNA-based, targeted myocardial cell delivery and resulting sustained cardiac-restorative bioactivity. Corgentin would be delivered using our methods of intracoronary cardiac administration. The biological properties of IGF-I, including inhibition of apoptosis, adaptive cardiomyocyte hypertrophy, recruitment of cardiac progenitor cells, as well as the induction of angiogenesis and enhancement of cardiac function, provide the rationale for the development of a therapy directed at myocardial repair and restoration. This biology predicts Corgentin’s potential to improve functional recovery and prevent ventricular dysfunction and the associated progression to congestive heart failure following myocardial infarction and reperfusion.

The safety of systemic IGF-I protein therapy has been confirmed in multiple human clinical studies for a number of medical indications. While there is abundant published scientific literature validating the multiple beneficial cardiac effects of IGF-I, systemic IGF-I protein delivery generally lacks the ability to target cardiomyocytes for effective therapy. We believe that by targeting the heart with intracoronary, DNA-coded, myocardial-directed delivery, using the methods pioneered for the Generx development program by Collateral Therapeutics and Schering, mdIGF-I has the potential to induce a positive biologic response. The targeted cardiomyocytes are expected to produce sustained therapeutic protein levels in the myocardium where it is needed. We estimate that over 1,000 patients have been treated with various dose levels of IGF-I protein, and 450 patients have received Generx via intracoronary administration of DNA-based myocardial delivery of the FGF-4

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angiogenic growth factor. We believe the safety and preliminary efficacy from these studies provide further support for the clinical potential of Corgentin.

Collateral Therapeutics’ in vitro pre-clinical development studies provided data supporting the myocardial benefits of IGF-I in cell-based assays by protecting cardiomyocytes against apoptosis, inducing adaptive cardiomyocyte hypertrophy and inducing proliferation of human coronary artery endothelial cells. Our in vivo proof-of-concept pilot study in pigs, based on our coronary occlusion/reperfusion myocardial infarct model, tested intracoronary mdIGF-I administration to promote myocardial repair following a significant heart attack (myocardial infarction). This double-blind, randomized, placebo-controlled study was designed to simulate the clinical approach in which Corgentin could be administered after emergency reperfusion therapy to a heart attack patient. Following infarction, echocardiographic analysis documented recovery and restoration of ventricular function and reversal of early left ventricular remodeling in the Corgentin-treated group, compared to placebo. Post-mortem analysis of the hearts provided histological evidence of the potential for post-infarct myocardial protection with this therapy. The initial clinical studies for Corgentin would be designed to seek product registration for use in patients with acute ST-elevation myocardial infarction undergoing percutaneous coronary intervention with or without associated fibrinolysis.

Corgentin Therapeutic Approach for Heart Attack

We will seek to advance the current standard of care for patients with acute coronary syndrome through the development of Corgentin to enhance myocardial healing in and around the infarct zone when used as an adjunct to existing vascular-directed pharmacologic and interventional therapies. As currently envisioned, Corgentin would be developed as a potential treatment to be administered for heart attack patients immediately following percutaneous coronary intervention. The objective of this treatment approach is focused on enhancing myocardial repair and restoration for heart cells that have been injured as a result of the heart attack. Today’s current standard of care is vascular-directed, focusing on restoring blood flow, while Corgentin would seek to broaden treatment to include a cardiomyocyte-directed therapy to repair cells that have been injured as a result of a heart attack.

It should be noted that even with the best of care and successful early intervention, about 30% of heart attack patients will eventually go on to develop congestive heart failure with decompensated coronary syndrome and the potential for eventual left ventricular remodeling. This explains in large part why heart failure remains an epidemic health problem despite improved treatments for acute cardiac events. A therapeutic approach such as Corgentin has the potential to change the clinical outcome for heart attack patients by slowing or preventing the development of decompensated coronary syndrome and subsequent heart failure.

To further confirm the utility of the Corgentin approach and establish its commercialization potential, we plan to develop additional pre-clinical information through sponsored studies. If confirmatory, we may then consider initiating clinical studies, on our own or with a corporate development partner.

Genvascor Pre-Clinical Development

As part of our acquisition of Schering AG’s portfolio of cardiovascular growth factor therapeutic assets, we also secured the rights to Genvascor, a pre-clinical, DNA-based, endothelial nitric oxide synthase (eNOS) therapeutic. This product candidate is being designed to induce production of nitric oxide directed at mediating the effects of multiple growth factors to enhance neovascularization and increased blood flow for the treatment of patients with critical limb ischemia due to advanced peripheral arterial occlusive disease. We may seek to develop additional pre-clinical information through sponsored studies and, if confirmatory, anticipate we would seek to further develop Genvascor either alone or through a corporate collaboration.

Nitric oxide (NO) is believed to play an important role in angiogenesis by mediating some of the effect of vascular endothelial growth factor (VEGF) and other growth factors and by inhibiting local anti-angiogenic mechanisms (e.g., VEGF receptor down-regulation). In the setting of atherosclerotic arterial disease and the

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presence of multiple concurrent cardiovascular risk factors, activation of vascular endothelial cells leads to reduced production of endothelial nitric oxide and impaired local angiogenesis. We believe that a treatment that re-establishes a sufficient level of bioavailable nitric oxide can potentially lead to enhanced neovascularization and increased blood flow to an ischemic limb. Based on its multiple vasculoprotective mechanisms, as well as the anti-inflammatory activity that nitric oxide exerts while also stimulating angiogenesis and arteriogenesis, treatment with Genvascor could lead to superior clinical efficacy to relieve peripheral limb ischemia over single growth factor treatments that are currently in development.

Critical limb ischemia due to advanced peripheral arterial occlusive disease (PAOD) is characterized by reduced blood flow and oxygen delivery with exercise or even at rest with severe disease, resulting in claudication (muscle pain) and eventual non-healing skin ulcers that can lead to gangrene. The estimated incidence of critical limb ischemia is 500-1000 per million per year in the United States. Progressive microcirculatory dysfunction and impairment of angiogenesis/arteriogenesis are crucial pathophysiologic determinants of critical limb ischemia. As critical limb ischemia progresses, deregulation of the microcirculation occurs, characterized by activation of white blood cells, platelet aggregation, plugging of capillaries, endothelial damage and release of free radicals, all of which promote further ischemia leading to tissue damage and eventual tissue necrosis. The prognosis of patients with critical limb ischemia is very poor. The survival rate for patients with significant tissue necrosis without major amputation is less than 50% after one year. Many patients presenting with ischemic pain and ulcers are not suitable candidates for surgical revascularization or angioplasty due to diffuse, distal occlusive vascular disease. Current pharmacotherapy has had little impact on limb salvage in patients with advanced critical limb ischemia and, likewise, little symptomatic effect.

Angiogenesis and collateral vessel formation in an extremity are complex processes that require the coordination of multiple factors. Therefore, the potential efficacy of treatments currently under development using a single growth factor may be limited. We believe that the delivery of the gene directed at the production of nitric oxide to mediate the effect of multiple growth factors to induce angiogenesis represents a promising new approach for the treatment of critical limb ischemia. Nitric oxide availability to the tissues can reverse ischemia through multiple mechanisms including stimulating impaired angiogenesis, ameliorating existing microvascular dysfunction, restoring vasomotor (vasodilator) activity of existing vessels and contributing to the remodeling and maturation of existing collateral vessels. This “biology-based” revascularization of ischemic limb tissues could possibly be efficacious for patients who are not amenable to percutaneous or surgical revascularization.

The proprietary endothelial nitric oxide synthase mutant we acquired in the Schering acquisition has an increased specific activity of the nitric oxide synthase enzyme, which induces the production of high local levels of nitric oxide. This production is not only independent of the level of endogenous growth factors present, but also is not inhibited by common concurrent risk factors such as hypercholesterolemia or increased oxidative stress, which are known to inhibit the activity of endogenous wildtype eNOS. The properties of this eNOS mutant, Genvascor, may predict a beneficial effect in chronic ischemic conditions. Significant improvement in revascularization and limb salvage has been shown with intramuscular delivery of Genvascor in eNOS-knock-out mouse models of chronic limb ischemia. Efficacy of Genvascor has also been demonstrated in mouse chronic limb ischemia models with reported functional deficiencies in eNOS due to diabetes, the most common cause of PAOD. Treatment with Genvascor therefore has the potential to be efficacious in patients with chronic limb ischemia who also exhibit severe endothelial nitric oxide deficiency, either due to genetic causes or due to metabolic or inflammatory factors. These properties may provide Genvascor a competitive advantage over single growth factor therapies in development as a novel therapy for symptomatic, severe PAOD.

Innercool Therapies

Through our Innercool Therapies subsidiary, we are also focused on the emerging field of therapeutic hypothermia. Innercool develops, manufactures and markets endovascular, catheter-based therapeutic systems designed to rapidly and controllably cool the body. Innercool’s Celsius Control System^™ is used in surgical and intensive care hospital units and provides physicians with an endovascular technology that can rapidly and controllably lower patient body temperature and maintain a chosen target temperature for a desired period of time

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before allowing the patient to return to normothermic levels. The system has received 501(k) clearance from the FDA for use in inducing, maintaining and reversing mild hypothermia in neurosurgical patients, both in surgery and in recovery or intensive care. The system also has received FDA clearance for use in cardiac patients to achieve or maintain normal body temperatures in surgery and in recovery or intensive care, and as an adjunctive treatment for fever control in patients with cerebral infarction and intracerebral hemorrhage.

The American Heart Association recently revised its treatment guidelines to recommend the use of therapeutic cooling as part of the critical care procedures for patients with an out-of-hospital cardiac arrest following ventricular fibrillation. Innercool’s hypothermia systems are now being introduced at a number of medical centers in the United States, including those at Stanford University, Cornell, Columbia, the University of Michigan, Seattle’s Harborview and Swedish medical centers, San Francisco General Hospital, and the University of California medical centers at San Diego and San Francisco.

Innercool’s approach to therapeutic hypothermia is based on a single use metallic catheter and a fully-integrated endovascular cooling system, which allows for rapid and controlled cooling and re-warming. The Celsius Control System integrates a number of features including a slim catheter profile, a highly efficient metal-based heat transfer element, a built-in temperature monitoring sensor, and a programmable console capable of rapidly and controllably inducing, maintaining and reversing therapeutic cooling. The distal portion of the catheter incorporates a flexible metallic heat-exchanged region (called the Temperature Control Element^™ or TCE^™), which can be cooled or warmed with saline solution circulated in a closed-loop manner from the console. When placed in the inferior vena cava, the TCE exchanges thermal energy with the blood, resulting in cooling or warming of the downstream organs and body. The Celsius Control System is particularly advantageous in that it can cool the body rapidly and controllably, yet does not infuse fluid into the patient, nor is blood circulated outside of the body. Innercool recently launched its new Accutrol Catheter^™, which integrates a temperature sensing probe directly into the catheter, avoiding the need for placing separate temperature probes that can be slow to respond and cumbersome to use, and may not reflect true core body temperature.

Therapeutic cooling is designed to protect endangered cells, prevent tissue death and preserve organ function following events associated with severe deprivation such as stroke or cardiac arrest. Therapeutic hypothermia is believed to work by protecting critical tissues and organs, such as the brain, heart and kidneys, following acute ischemic or inflammatory events, by lowering metabolism and preserving cellular energy stores, thereby potentially stabilizing cellular structure and preventing or reducing injuries at the cellular, tissue and organ level.

Studies for additional indications with Innercool’s system are expected to be conducted in collaboration with the National Institutes of Health and others. Potential future applications of the technology include endovascular cooling for cardiac arrest, acute ischemic stroke and myocardial infarction (heart attack).

Innercool has received a CE mark allowing the Celsius Control System to be marketed in the European Community, and approval from the Therapeutic Goods Administration (TGA) that allows it to market the system in Australia.

Government Regulation

New drugs and biologics, including gene therapy and other DNA-based products, are subject to regulation under the federal Food, Drug, and Cosmetic Act. In addition, biologics are also regulated under the Public Health Service Act. We believe that the pharmaceutical products we are attempting to develop will be regulated either as biological products or as new drugs. Both statutes and their corresponding regulations govern, among other things, the testing, manufacturing, distribution, safety, efficacy, labeling, storage, record keeping, advertising and other promotional practices involving biologics or new drugs. FDA approval or other clearances must be obtained before clinical testing, and before manufacturing and marketing, of biologics and drugs. Obtaining FDA approval has historically been a costly and time-consuming process. Different regulatory regimes are applicable in other major markets.

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In addition, any gene therapy and other DNA-based products we develop will require regulatory approvals before human trials and additional regulatory approvals before marketing. New biologics are subject to extensive regulation by the FDA and the Center for Biological Evaluation and Research and comparable agencies in other countries. Currently, each human-study protocol is reviewed by the FDA and, in some instances, the National Institutes of Health, on a case-by-case basis. The FDA and the National Institutes of Health have published guidance documents with respect to the development and submission of gene therapy protocols.

To commercialize our product candidates, we must sponsor and file an investigational new drug (IND) application and be responsible for initiating and overseeing the human studies to demonstrate the safety and efficacy and, for a biologic product, the potency, which are necessary to obtain FDA approval of any such products. For our newly sponsored investigational new drug applications, we will be required to select qualified investigators (usually physicians within medical institutions) to supervise the administration of the products, and we will be required to ensure that the investigations are conducted and monitored in accordance with FDA regulations and the general investigational plan and protocols contained in the IND application.

The FDA receives reports on the progress of each phase of testing, and it may require the modification, suspension, or termination of trials if an unwarranted risk is presented to patients. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. The IND application process can thus result in substantial delay and expense. Human gene therapy products, a primary area in which we are seeking to develop products, are a new category of therapeutics. Because this is a relatively new and expanding area of novel therapeutic interventions, there can be no assurance as to the length of the trial period, the number of patients the FDA will require to be enrolled in the trials to establish the safety, efficacy and potency of human gene therapy products, or that the data generated in these studies will be acceptable to the FDA to support marketing approval.

After the completion of trials of a new drug or biologic product, FDA marketing approval must be obtained. If the product is regulated as a biologic, the Center for Biological Evaluation and Research will require the submission and approval, depending on the type of biologic, of either a biologic license application or a product license application and a license application before commercial marketing of the biologic. If the product is classified as a new drug, we must file a new drug application with the Center for Drug Evaluation and Research and receive approval before commercial marketing of the drug. The new drug application or biologic license applications must include results of product development, laboratory, animal and human studies, and manufacturing information. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the new drug application or biologic license applications for filing and, even if filed, that any approval will be granted on a timely basis, if at all. In the past, new drug applications and biologic license applications submitted to the FDA have taken, on average, one to two years to receive approval after submission of all test data. If questions arise during the FDA review process, approval can take more than two years.

Notwithstanding the submission of relevant data, the FDA may ultimately decide that the new drug application or biologic license application does not satisfy its regulatory criteria for approval and may require additional studies. In addition, the FDA may condition marketing approval on the conduct of specific post-marketing studies to further evaluate safety and effectiveness. Rigorous and extensive FDA regulation of pharmaceutical products continues after approval, particularly with respect to compliance with current Good Manufacturing Practices (GMPs), reporting of adverse effects, advertising, promotion and marketing. Discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions.

Ethical, social and legal concerns about gene therapy, genetic testing and genetic research could result in additional regulations restricting or prohibiting the processes we or our suppliers may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in further regulating

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biotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing any such products.

The approval and/or clearance for marketing of medical devices, such as those being developed by our Innercool Therapies subsidiary, is also subject to extensive controls by health regulatory and other authorities. Although some devices can be cleared for marketing pursuant to a procedure referred to as an FDA 501(k) clearance, other devices and/or indications may require additional clinical studies and may be subject to even more extensive regulatory and other controls.

In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.

We are also subject to a variety of other regulations in the United States, including those relating to bioterrorism, taxes, labor and employment, import and export, and intellectual property.

To the extent we have operations outside the United States, any such operations would be similarly regulated by various agencies and entities in the countries in which we operate. The regulations of these countries may conflict with those in the United States and may vary from country to country. In markets outside the United States, we may be required to obtain approvals, licenses or certifications from a country’s ministry of health or comparable agency before we begin operations or the marketing of products in that country. Approvals or licenses may be conditioned or unavailable for certain products. These regulations may limit our ability to enter certain markets outside the United States.

Competition

The pharmaceutical, biotechnology and medical device industries are intensely competitive. Our products and any product candidates developed by us would compete with existing drugs, therapies and medical devices or procedures and with others under development. There are many pharmaceutical companies, biotechnology companies, medical device companies, public and private universities and research organizations actively engaged in research and development of products for the treatment of cardiovascular and related diseases, and/or products for temperature control therapy. Many of these organizations have financial, technical, research, clinical, manufacturing and marketing resources that are greater than ours. If a competing company develops or acquires rights to a more efficient, more effective, or safer competitive therapy for treatment of the same or similar diseases we have targeted, or one that offers significantly lower costs of treatment, our business, financial condition and results of operations could be materially adversely affected. In view of the relatively early stage of the industry, we believe that the most significant competitive factor in the field of gene therapy and biologics is the effectiveness and safety of a product candidate, as well as its relative safety, efficacy and cost as compared to other products, product candidates or approaches that may be useful for treating a particular disease condition.

We believe that our product development programs will be subject to significant competition from companies using alternative technologies, as well as to increasing competition from companies that develop and apply technologies similar to ours. Other companies may succeed in developing products earlier than we do, obtaining approvals for these products from the FDA more rapidly than we do or developing products that are safer, more effective or less expensive than those under development or proposed to be developed by us. We cannot assure you that research and development by others will not render our technology or product candidates

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obsolete or non-competitive or result in treatments superior to any therapy developed by us, or that any therapy developed by us will be preferred to any existing or newly developed technologies.

We are aware of products currently under development by competitors targeting the same or similar cardiovascular and vascular diseases as our Generx product development. These include biologic treatments using forms of genes and therapeutic proteins. For example, Corautus Genetics, Inc., pursuant to a development agreement with Boston Scientific, has initiated a clinical study to evaluate a non-viral delivery of vascular endothelial growth factor-2 (VEGF-2) DNA in the form of “naked” plasmid for the direct injection into the heart muscle of patients with severe angina. They are conducting a Phase 2 clinical study with plans to enroll patients with Class III or IV angina that are not suitable for traditional revascularization procedures. Additionally, GenVec, Inc. recently announced the initiation of a Phase 2 clinical study of BioByPass^™ Angiogen, which uses Vascular Endothelial Growth Factor-121 (VEGF-121) as a treatment for patients with severe coronary artery disease. This study will reportedly evaluate the effects of ETT time, heart function and quality of life in patients. Angiogen will apparently be administered to patients using direct injection into heart muscle using a guidance system (NOGA). GenVec previously announced a research collaboration with Cordis Corporation, a Johnson & Johnson company, to utilize the NOGA guidance delivery for its Angiogen product. We will also face competition from entities using other traditional methods, including new drugs and mechanical therapies, to treat cardiovascular and vascular disease.

In the areas of temperature control therapy, as practiced by our Innercool Therapies subsidiary, there are a number of actual or potential competitive approaches including alternative endovascular approaches based on inflatable balloon devices, such as the CoolGard^™ thermal regulating system developed by Alsius Corporation, and the Reprieve^™ system being developed by Radiant Medical Inc. Alsius is currently marketing its CoolGard^™ device, although it has recently recalled a number of units. Radiant is studying its Reprieve^™ device in “COOL MI,” an international study reportedly designed to demonstrate that lowering a patient’s body temperature in connection with treatment of a heart attack can reduce subsequent damage to the heart and that earlier, faster and deeper cooling results in a clinically significant reduction in heart damage. Other approaches being developed for therapeutic cooling include the use of specialized cooling pads such as those employed in the Artic Sun^™ system being developed by Medivance, and other devices such as cooling blankets and helmets.

Manufacturing Strategy

To leverage our experience and available financial resources, except as noted below with respect to Innercool Therapies, we do not plan to develop company-owned and operated manufacturing facilities. We plan to outsource all product manufacturing to a contract manufacturer of clinical drug products that operates at a manufacturing facility in compliance with current good manufacturing practices (GMPs). We may also seek to refine the current manufacturing process and final product formulation to achieve improvements in storage temperatures and the like.

Our management team already has experience with production of Adenovirus vector (“Adenovector”), DNA-based therapies, which is believed to be useful in understanding the unique requirements of our business. Schering, using their experience in the production of clinical grade, DNA-based drug products, has developed an adenovector manufacturing process employing the use of master viral banks and master cell banks. Technical transfer of process materials and methodologies from Schering to Cardium is expected to take place, combining the expertise of both companies.

The FDA has established guidelines and standards for the development and commercialization of molecular and gene-based drug products i.e.: Guidance for Industry—CMC for Human Gene Therapy INDs November 2004, Sterile Drug Products Produced by Aseptic Processing September 2004, Human Somatic Cell Therapy and Gene Therapy March 1998, PTC in the Characterization of Cell Lines Used to Produce Biologicals July 1993. These industry guidelines, among others, provide essential oversight with regard to process methodologies, product formulations and quality control standards to ensure the safety, efficacy and quality of these drug products.

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In January 2006, we entered into a Production Service Agreement with Molecular Medicine BioServices, Inc., pursuant to which Molecular Medicine will manufacture our lead product candidate, Generx, for late-stage clinical development. The agreement is due to expire upon completion of the project, which is anticipated to be completed in the third quarter of 2006. We may terminate the agreement at any time in our discretion by giving Molecular Medicine 60 days’ notice of termination. Molecular Medicine may terminate the agreement at any time in its discretion by giving us 180 days’ written notice. Either party may terminate the agreement upon a material breach by the other party, subject to certain cure periods.

The disposable portions of Innercool’s products, the catheter and administrative set, are currently assembled at its facilities in San Diego. The console’s cooling sub-assembly is currently purchased from a single vendor, although we believe there are several vendors that could supply this component. Innercool currently integrates this sub-assembly with additional software, printed circuit boards, electrical isolation, and a user interface in order to create the final product. We are currently considering improvements to the Innercool console which are designed to enhance functionality and/or manufacturability.

Innercool’s manufacturing operations are required to comply with certain quality assurance regulations. Specifically, Innercool must adhere to the FDA quality system regulations, comply with ISO 13485 requirements and maintain our CE mark. We believe Innercool’s operations meet such requirements.

Marketing and Sales

Our product candidates must undergo testing and development in clinical trials and pre-clinical studies. Other than Innercool’s Celsius Control System, we do not currently have any products approved for marketing nor any present capacity to market and sell products that could be commercially developed based on our technology. If we should obtain any such marketing approvals, we expect that we would elect to engage in marketing or sales through or in collaboration with a commercialization partner, although we are not currently involved with such a partner.

Innercool is currently selling its products into neurosurgical and neurocritical care markets. Innercool’s sales force currently consists of three individuals. Representative accounts include medical centers at Stanford University, Cornell, Columbia, the University of Michigan, Seattle’s Harborview and Swedish medical centers, San Francisco General Hospital, and the University of California medical centers at San Diego and San Francisco.

Innercool has received a CE mark allowing its products to be marketed in the European Community, and approval from the Therapeutic Goods Administration (TGA) that allows it to market its products in Australia. Innercool has used a distributorship arrangement to commence sales efforts in Australia and has opened accounts at some of the country’s premier hospitals. Innercool has not commenced sales efforts in Europe and does not currently expect to do so other than through a distributorship arrangement.

Intellectual Property

As part of our acquisition of Schering’s portfolio of cardiovascular growth factor therapeutic assets, pursuant to a Technology Transfer Agreement entered into between Cardium and Schering, we acquired from Schering a portfolio of methods and compositions directed at the treatment of cardiovascular diseases. We also have exclusive licenses to methods for introducing DNA to the heart and for improving heart muscle function, as well as to various biologics. Our resulting portfolio of cardiovascular product candidates and associated intellectual property include methods and genes applicable to the treatment of heart diseases, the promotion of healing, and the treatment of peripheral vascular disease. In March 2006, we also acquired a portfolio of intellectual property related to devices and methods for endovascular temperature control therapy, in connection with our acquisition of the assets of Innercool Therapies. There can be no assurance that our intellectual property assets will be sufficient to protect our commercialization opportunities, nor that our planned commercialization activities will not infringe any intellectual property rights held or developed by third parties.

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We have entered into certain collaborative and licensing arrangements in connection with the Schering portfolio acquisitions. We expect to continue evaluations of the safety, efficacy and possible commercialization of our therapeutic genes and methods of gene therapy. On the basis of such evaluations, we may alter our current research and development programs, clinical studies, partnering or other development or commercialization activities. Accordingly, we may elect to cancel, from time to time, one or more of the following arrangements with third parties, subject to any applicable accrued liabilities and, in certain cases, termination fees. Alternatively, the other parties to such arrangements may, in certain circumstances, be entitled to terminate the arrangements. Further, the amounts payable under certain of our arrangements may depend on the number of products or indications for which any particular technology licensed under such arrangement is used by us. Thus, any statement of potential fees payable by us under each agreement is subject to a high degree of potential variation from the amounts indicated herein.

Our business strategy includes the establishment of research collaborations to support and supplement our discovery, pre-clinical and clinical research and development phases of the product commercialization cycle, as well as the implementation of long-term strategic partnerships with major pharmaceutical and biotechnology companies and interventional cardiology and medical device companies, to support clinical trials and product commercialization activities, including product manufacturing, marketing and distribution.

Schering Agreement

We entered into an agreement with Schering covering the transfer or license of certain assets and technology relating to (i) methods of gene therapy for the treatment of cardiovascular disease (including methods for the delivery of genes to the heart or vasculature and the use of angiogenic and/or non-angiogenic genes for the potential treatment of diseases of the heart or vasculature); (ii) therapeutic genes that include fibroblast growth factors (including FGF-4); insulin-like growth factors (including IGF-I); and potentially other related biologics (including mutant eNOS); and (3) other technology and know-how, including manufacturing and formulation technology, as well as data relating to the clinical development of Generx and corresponding FDA regulatory matters. Under this agreement, we paid Schering a $4 million up front fee in October 2005 and would be required to pay a $10 million milestone payment upon the first commercial sale of each resulting product. We also may be obligated to pay the following royalties to Schering: (i) 5% on net sales of an FGF-4 based product such as Generx, or (ii) 4% on net sales of other products developed based on technology transferred to us by Schering. We are also obligated to reimburse Schering for patent expenses, including the expenses of any interference or other proceedings, accrued on or after April 1, 2005 in connection with the transferred technologies.

University of California License Agreement

In September 1995, Collateral Therapeutics entered into an agreement with the Regents of the University of California (Regents) pursuant to which the Regents granted to Collateral Therapeutics an exclusive license (with the right to sublicense) in the United States, and in foreign countries where the respective patent rights exist, to certain technology relating to angiogenic gene therapy, based on scientific discovery research conducted at a laboratory at the University of California. In June 1997, Collateral Therapeutics and the Regents entered into an exclusive license agreement (with the right to sublicense) in the United States, and in foreign countries where the respective patent rights exist, for certain technology relating to angiogenic gene therapy for congestive heart failure.

As part of the Schering transaction, we acquired Collateral Therapeutics’ rights and corresponding obligations under the September 1995 agreement, which in connection with the Schering transaction was amended, among other things, to include the technology previously covered by the June 1997 agreement. The agreement as amended may be canceled by us at any time on 60 days’ notice, following which we would continue to be responsible only for obligations and liabilities accrued before termination. Under the agreement, we are obligated to pay (1) an annual royalty fee of 2% based on net sales of products incorporating the technology licensed under the agreement, and (2) a minimum annual royalty fee (which may be offset against the

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net sales-based royalty fee) of $150,000 for 2009, $200,000 for 2010, $250,000 for 2011, $300,000 for 2012, $400,000 for 2013 and $500,000 for 2014 and thereafter. We also are obligated to reimburse the Regents for ongoing patent expenses incurred in connection with the licensed technologies. We are obligated to make milestone payments to the Regents of $100,000 payable on the earlier to occur of the beginning of new Phase II clinical trials in the United States or June 30, 2006, and $200,000, payable on the earlier to occur of the beginning of Phase II/III clinical trials in the United States or December 31, 2008.

The above agreement provides us with exclusive rights (subject to any license rights of the U.S. government) to develop and commercialize technology covered by patent applications that have been filed in the United States and in foreign countries. Under the terms of the agreement, we are required to diligently proceed with the development and commercialization of the products covered by the licensed patents. To demonstrate our diligence, we are required to attain certain developmental milestones on or before deadlines set forth in the licenses. If and after we receive marketing approval of the products, we will be required to market the products in the United States within six months thereafter. If there is a material breach of any of these agreements, which material breach remains uncured for 60 days, the breached agreement could be terminated by the Regents.

New York University Research and License Agreement

In March 1997, Collateral Therapeutics entered into an agreement with New York University (NYU) pursuant to which NYU granted to Collateral Therapeutics an exclusive worldwide license (with the right to sublicense) to certain technology covering development, manufacture, use and sale of gene therapy products based on FGF-4 for the treatment of coronary artery disease, peripheral vascular disease and congestive heart failure. This agreement was also assumed by us in connection with the Schering transaction and amended in certain respects pursuant to an agreement with NYU. Upon assumption, this agreement as amended provides us with exclusive rights in such fields to develop and commercialize technology covered by the issued patent and patent applications that have been filed in the United States and in foreign countries. Pursuant to the agreement, we are obligated to pay NYU license fees through the completion of the first full year of sales of licensed product equal to $50,000 per year. We also are obligated to reimburse NYU for ongoing patent expenses incurred in connection with the licensed technologies. Should licensed products under the agreement reach the stage of filing of a product license application (PLA) and PLA approval or foreign equivalent thereof, we could be obligated to pay up to an aggregate amount of approximately $1.8 million for each product in milestone payments. In addition, beginning in the year in which we complete one full year of sales of licensed products and continuing thereafter until the agreement terminates or expires, we could also be obligated to pay annual royalty fees equal to the greater of $500,000 or 3% on net sales of products incorporating the technology licensed under the agreement. Under the license agreement, we are required to pursue development and commercialization of the licensed products. If there is a material breach of this agreement that remains uncured for 60 days (or 30 days in the case of unpaid amounts due), the breached agreement could be terminated by NYU.

Yale University License Agreement

In September 2000, Schering entered into an agreement with Yale University pursuant to which Yale University granted to Schering an exclusive worldwide license (with the right to sublicense) to certain technology covering development, manufacture, use and sale of gene therapy products based on a phosphomimetic mutant of human endothelial nitric oxide synthase (eNOS) for the treatment of all cardiovascular diseases. As part of the Schering transaction, we assumed this agreement with Yale University and as such will be obligated to pay an annual license fee of $15,000, and make certain milestone payments during the development of the licensed products as follows: (i) $150,000 upon filing the first investigational new drug application for the first licensed product in any one of the United States, Japan or a country in the European Union; (ii) $825,000 upon treating the first patient in the second clinical trial in any one of the United States, Japan or a country in the European Union; (iii) $900,000 upon filing first Biologics License Application (BLA) or new drug application in the United States; (iv) $1.5 million upon the first commercial sale of a licensed product; and (v) $3 million upon first $10 million in net sales. If we achieve sales of licensed products, we would

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be required to pay a minimum royalty of $50,000 per year that is credited to an annual sales royalty equal to 4% of the first $250 million of net sales, 5% of the next $250 million of net sales and 6% of net sales in excess of $500 million. Under the terms of this agreement, we are obligated to reimburse Yale University for ongoing patent expenses incurred in connection with the licensed technologies. If there is a material breach of this agreement that remains uncured for 60 days, the breached agreement could be terminated by Yale.

SurModics License Agreement

In connection with the Innercool Therapies acquisition, a Master License Agreement with SurModics, Inc., dated December 1, 1999, was assigned to and assumed by Innercool Therapies, Inc. (SurModics License). Pursuant to the terms of the SurModics License, SurModics grants to Innercool a worldwide license with respect to medical products that are surface-treated with photo-reactive polyvinylpyrrolidone, photo-reactive heparin, diphoto diquat (photo-reactive crosslinking compound) or any combination of such photo-reactive reagents, under SurModics’ trade secrets and other technical information relating to the surface-treatment of medical devices and which SurModics has the right to transmit to others, as well as certain patent applications and patents. In connection with the SurModics License, Innercool is obligated to pay SurModics a royalty equal to the greater of: (A) earned royalties calculated as a percentage of net sales of licensed products sold in each calendar year (the percentage used in each calculation during each calendar year is based on the cumulative net sales of licensed product in the calendar year as follows: 2.5% on the first $15 million of net sales; 2.25% on the next $15 million; and 2.00% on net sales over $30 million); or (B) quarterly minimum royalties that increase on an annual basis. Quarterly minimum royalties for 2006 are $20,000. In addition, Innercool grants to SurModics a noncancelable, nonexclusive, sublicensable, worldwide license to make, have made, use and sell products and processes covered by any Innercool latent reactive chemical patent, to the extent such manufacture, sale or use is covered by any claim of any patent that SurModics has the right to license or may have licensed to others, and SurModics agrees to pay to Innercool five percent (5%) of the royalties SurModics receives from its sublicensees based on sales of products that but for such sublicenses would infringe Innercool’s patents. Each license granted under the SurModics License extends until expiration of the last to expire patent rights covering the applicable product or for 15 years following the first bona fide commercial sale of such product, whichever is longer. The SurModics License may be terminated by Innercool upon 90 days’ advance notice and by SurModics in the event of any material breach or default by Innercool upon 30 days’ advance notice.

Employees

As of March 24, 2006, Cardium employed approximately 14 full-time employees. Innercool Therapies, Inc., our wholly-owned subsidiary, employed approximately 15 full-time employees, as well as one temporary and one part-time employee. We expect to hire approximately 26 additional employees during the next 12 months. Our employees are not represented by a collective bargaining agreement and we have not experienced any work stoppages as a result of labor disputes. We believe our relationship with our employees is good. We also rely on various consultants and advisors to provide services to us.

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ITEM 2. DESCRIPTION OF PROPERTY

The table below summarizes our facilities. We believe our facilities are adequate to meet our operating requirements for the foreseeable future.

Location	Nature of Use	Square Feet		How Held		Monthly Base Rent			Lease Expiration Date
3611 Valley Centre Drive Suite 525 San Diego, CA USA	Corporate headquarters (Principal executive offices)	5,727		Leased		$	21,500	(1)	October 31, 2007	(2)
3931 Sorrento Valley Blvd. San Diego, CA USA(3)	Office, Research and Development and Related Uses	24,000	(4)	Leased	(5)	$	25,200	(6)	October 31, 2007

⁽¹⁾ Monthly base rent during the first year of the lease. Monthly base rent increases to approximately $22,335 in the second year of the lease. In addition to base rent, we are also required to pay our proportionate share of operating and tax expenses for the office park in which our space is located.

⁽²⁾ The lease contains two options, the first for an additional term of one year and the second for an additional term of two years. The second option is subject to a third party right of first refusal.

⁽³⁾ This facility is used by Innercool Therapies, Inc., our wholly-owned subsidiary.

⁽⁴⁾ Approximately 6,602 square feet are subleased to a third party.

⁽⁵⁾ The lease was assigned to and assumed by Innercool Therapies in March 2006 in connection with the Innercool acquisition described under Item 1 above.

⁽⁶⁾ In addition to base rent, we are also obligated to pay the landlord’s operating expenses associated with the facility. We receive approximately $7,262 in offsetting monthly rent from the third party sublessee plus the sublessee’s pro rate share of the landlord’s operating expenses.

We do not intend to invest directly in real estate, real estate mortgages or interests in real estate. We have an investment policy that governs the investment of any surplus funds we may have from time to time. Under this policy, we may invest in certain securities that meet the credit and maturity requirements set forth in the policy, including securities of federal agencies, corporate obligations, municipal notes and money market funds. An investment in such securities may result in an indirect investment in real estate, real estate mortgages or interests in real estate.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to intellectual property, employment, tax, regulation, contract or other matters. The resolution of these matters as they arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources.

As of March 28, 2006, neither Cardium nor its subsidiaries were a party to any material pending legal proceeding nor was any of their property the subject of any material pending legal proceeding other than patent proceedings and related matters. We anticipate, however, that we will be regularly engaged in various patent prosecution and related matters in connection with the technology we develop and/or license, including the technologies described in Item 1 above. For example, we, and previously Collateral Therapeutics, have assisted the University of California, as the licensor, in an interference proceeding involving the University of California’s technology for cardiovascular gene therapy (filed by Hammond et al.) and a pending patent application filed by Jeffrey Leiden et al. (a U.S. counterpart of international application PCT/US93/11133, which published as WO94/11506). In March 2006, we reported that a panel of Administrative Patent Judges of the U.S. Board of Patent Appeals and Interferences (BPAI) issued a final judgment against the Leiden applicants, ordering

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that the interference count (representing the claims in dispute) be awarded to Hammond, and that Leiden et al. be held not entitled to any patent containing claims corresponding to those in the interference. However, the patent applicant, Arch Development Corporation, which had licensed the technology to Boston Scientific Corporation, has appealed the decision against them. In a related matter, Collateral Therapeutics, with our assistance, successfully opposed a European counterpart to the Leiden PCT application (EP-B-668913), which led to a decision to revoke the patent grant in Europe. Although the patentee, Arch Development Corporation, subsequently appealed the adverse decision, a ruling following appeal to the European Patent Office’s Technical Board of Appeal has now been rendered and the European patent grant to Arch (which had been licensed to Boston Scientific) has now been revoked. If the interference, opposition or other adverse proceedings were ultimately to be decided adversely, we could be compelled to seek a license to the Leiden technology, which may not be available on terms that we find commercially reasonable. In addition, such proceedings, even if decided in our favor, involve a lengthy process, are subject to appeal, and typically result in substantial costs and diversion of resources. In connection with our acquisition of the licensed technologies from Schering AG, we were obligated to reimburse them for any patent expenses (including interference or other proceedings) that continued to be borne by them for activities from April 1, 2005 forward.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We did not submit any matters to our stockholders for a vote during the fourth quarter ended December 31, 2005.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock trades on both the Over-the-Counter Bulletin Board (OTCBB) and the Pink Sheets under the symbol “CDTP.” Below are the high and low closing prices of our common stock as reported by Nasdaq for each quarter of the years ended December 31, 2005 and 2004:

	2005				2004
	High		Low		High		Low
First Quarter	$	0.15	$	0.15	$	0.55	$	0.25
Second Quarter	$	0.46	$	0.15	$	0.35	$	0.30
Third Quarter	$	1.51	$	0.46	$	0.30	$	0.25
Fourth Quarter	$	2.35	$	0.61	$	0.26	$	0.15

The information above reflects inter-dealer prices, without retail mark-up, mark down or commissions, may not represent actual transactions and should not be deemed to reflect an established public trading market for our common stock. The high and low closing prices shown are for shares of common stock of Aries Ventures before the reverse merger with Cardium in October 2005, with the exception of the high closing price for the fourth quarter of 2005, which occurred after the reverse merger. Until February 27, 2006, our common stock traded solely on the Pink Sheets.

Holders

As of March 13, 2006, there were approximately 361 stockholders of record of our common stock.

Dividends

During the last two years ended December 31, 2005 and 2004, no dividends were declared or paid on our common stock. We do not anticipate paying a dividend in the foreseeable future, as we are in our development stage and expect to sustain losses over the next several years. To the extent we do have earnings, we intend to retain any earnings to help provide funds for the development of our product candidates, the implementation of our business strategy and for our future growth.

In preparation for and in connection with the reverse merger between Aries Ventures and Cardium in October 2005, a one-time, non-dividend, cash distribution of approximately $0.43 per share was made to the stockholders of record holding, immediately prior to the close of the reverse merger, approximately two million shares of common stock of Aries Ventures.

Recent Sales of Unregistered Securities

Other than as previously reported on our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2005, during the years ended December 31, 2005, 2004 and 2003, we did not sell any unregistered securities.

Repurchases

During the fourth quarter of 2005, we did not repurchase any shares of our common stock, nor were any repurchases made on our behalf.

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ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following is a discussion of our intended plan of operation during the next 12 months. You should carefully review the risks described under this Item 6 and elsewhere in this report, which identify certain important factors that could cause our future financial condition and results of operations to vary.

Plan of Operation

Building upon our core products and product candidates, our strategic goal is to develop a portfolio of medical products at various stages of development and secure additional financial resources to commercialize these products in a timely and effective manner. The key elements of our strategy are to:

• initiate a late-stage clinical study (AGENT-5) for Generx;

• seek to accelerate the development and sales of Innercool’s Celsius Control System and, at the same time, broaden and expand our therapeutic hypothermia technology into other medical indications and applications;

• leverage our financial resources and focused corporate infrastructure through the use of contract manufacturers to produce clinical supplies and a contract research organization to manage or assist planned clinical studies;

• advance the pre-clinical development of Corgentin and potentially seek partnering opportunities for the Corgentin and Genvascor product candidates;

• seek to broaden and expand our product base and financial resources through other corporate development transactions in an attempt to enhance stockholder value, which could include acquiring other companies or product opportunities and/or securing additional capital; and

• seek to monetize the economic value of our product portfolio by establishing strategic collaborations at appropriate valuation inflection points.

We recognize that the practical realities of developing therapeutic products in the current regulatory environment require sizable financial investment. In view of this, we plan to pursue clinical development strategies intended to facilitate collaborations and partnerships for joint development of our products at appropriate valuation inflection points during their clinical development cycle. In the future, we plan to aggressively seek access to other therapeutics and/or medical device opportunities, as well as medical-related technologies, to further strengthen and broaden our portfolio, and will consider the opportunistic acquisition of other companies having financial and development resources that offer the potential to enhance our near and long-term stockholder value.

In October 2005, we completed a private placement of our common stock that resulted in net proceeds to the Company of more than $25,000,000. As a result, we believe that we have sufficient funds available to satisfy our current cash requirements over the next 12 months.

More detailed information about our products, product candidates and our intended efforts to develop our products is included under Item 1 of this report.

Off-Balance Sheet Arrangements

As of December 31, 2005, we did not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.

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Critical Accounting Policies and Estimates

Our financial statements included under Item 7 in this report have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the amounts reported in our financial statements and their accompanying notes. We have identified certain policies that we believe are important to the portrayal of our financial condition and results of operations. These policies require the application of significant judgment by our management. We base our estimates on our historical experience, industry standards, and various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. An adverse effect on our financial condition, changes in financial condition, and results of operations could occur if circumstances change that alter the various assumptions or conditions used in such estimates or assumptions. Our significant accounting policies are described in the notes to our financial statements.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share Based Payment” (SFAS 123R), a revision to SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS 123R supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement of Cash Flows.” SFAS 123R requires that we measure the cost of employee services received in exchange for equity awards based on the grant date fair value of the awards. The cost will be recognized as compensation expense over the vesting period of the awards. We are required to adopt SFAS 123R effective for annual periods beginning after December 15, 2005. Under this method, we will begin recognizing compensation cost for equity-based compensation for all new or modified grants after the date of adoption. In addition, we will recognize the unvested portion of the grant date fair value of awards issued before adoption based on the fair values previously calculated for disclosure purposes over the remaining vesting period of the outstanding options and warrants. The adoption of SFAS 123R will have an impact on our financial statements whereby we will record a charge to earnings for the fair value of stock options over the vesting period.

Risks

You should carefully consider the risks described below, as well as the other information in this report, when evaluating our business and future prospects. If any of the following risks actually occur, our business, financial condition and results of operations could be seriously harmed. In that event, the market price of our common stock could decline and you could lose all or a portion of the value of your investment in our common stock.

We are a development stage company formed in December 2003. We have incurred losses since inception and expect to incur significant net losses in the foreseeable future and may never become profitable.

Due to the development stage of our business, our development and start-up costs, including significant amounts we expect to spend on research and development activities and clinical trials for Generx and other product candidates, and our lack of substantial revenues during our development stage, you should expect that we will sustain operating losses, which may be substantial, in the early years of operation. A large portion of our expenses are fixed, including expenses related to facilities, equipment and personnel. As a result, we expect our net losses from operations to continue for at least the next five years. Our ability to generate revenues and become profitable will depend on our ability, alone or with potential collaborators, to timely, efficiently and successfully complete the development of our product candidates, successfully complete pre-clinical and clinical tests, obtain necessary regulatory approvals, and manufacture and market our product candidates. There can be no assurance that any such events will occur or that we will ever become profitable. Even if we do achieve profitability, we cannot predict the level of such profitability. If we sustain losses over an extended period of time, we may be unable to continue our business.

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Our business prospects are difficult to evaluate because we are a new company.

Because we have a short operating history, it may be difficult for you to assess our growth, partnering and earnings potential. It is likely we will face many of the difficulties that companies in the early stages of their development often face. These include, among others: limited financial resources; developing and marketing a new product for which a market is not yet established and may never become established; delays in reaching our goals; challenges related to the development, approval and acceptance of a new technology or product; lack of revenues and cash flow; high start-up and development costs; competition from larger, more established companies; and difficultly recruiting qualified employees for management and other positions.

We will likely face these and other difficulties in the future, some of which may be beyond our control. If we are unable to successfully address these difficulties as they arise, our future growth and earnings will be negatively affected. We cannot be certain that our business strategy will be successful or that we will successfully address any problems that may arise.

We will need substantial additional capital to develop our products and for our future operations. If we are unable to obtain the funds necessary to do so, we may need to delay, scale back or eliminate our product development or may be unable to continue our business.

To conduct the costly and time-consuming research, pre-clinical and clinical testing necessary to obtain regulatory approvals and bring our products to market will require a commitment of substantial funds in excess of our current capital. Our future capital requirements will depend on many factors, including, among others: the progress of our research and development programs, including our current programs as well as any new programs we elect to undertake; the progress, scope and results of our pre-clinical and clinical testing; the time and cost involved in obtaining regulatory approvals; the cost of manufacturing our products and product candidates; the cost of prosecuting, defending and enforcing patent claims and other intellectual property rights; competing technological and market developments; and our ability to establish and maintain collaborative and other arrangements with third parties to assist in bringing our products to market and the cost of such arrangements.

We will need to raise substantial additional capital to fund our future operations. We cannot be certain that additional financing will be available on acceptable terms, or at all. In recent years, it has been difficult for companies to raise capital due to a variety of factors, which may or may not continue. To the extent we raise additional capital through the sale of equity securities or we issue securities in connection with an acquisition or other transaction, the ownership position of existing stockholders could be substantially diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common stock. Fluctuating interest rates could also increase the costs of any debt financing we may obtain.

Our failure to successfully address ongoing liquidity requirements would have a material adverse effect on our business. If we are unable to obtain additional capital on acceptable terms when needed, we may need to take actions that harm our business and our ability to achieve cash flow in the future, including possibly surrendering our rights to some technologies or product opportunities, delaying our clinical trials or curtailing or ceasing operations.

In March 2006, we acquired the assets and business of Innercool Therapies, Inc. and may, in the future, pursue acquisitions of other companies that, if not successful, could adversely affect our business, financial condition and results of operations.

On March 8, 2006, we completed our acquisition of the assets and business of Innercool Therapies, Inc., a medical technology company focused on the emerging field of therapeutic hypothermia. Innercool’s business is subject to all of the operational risks that normally arise for a medical technology company, including those related to regulatory approvals and clinical studies, acceptance of technology, competing technology, intellectual property rights, profitability, suppliers and third party collaborators, adverse publicity, litigation, and personnel.

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In the future, we may pursue additional acquisitions of other companies as part of our strategy focused on the acceleration of our growth and development as a means to building long-term stockholder value. Acquisitions, including the Innercool acquisition, involve numerous risks, including:

• our limited experience in evaluating and completing acquisitions;

• the potential need to issue convertible debt or equity securities to complete an acquisition, which would dilute our stockholders and could adversely affect the market price of our common stock;

• potential difficulties related to integrating the technology, products, personnel and operations of the acquired company;

• requirements of significant capital infusions in circumstances under which the acquired business, its products and/or technologies may not generate sufficient revenue to offset acquisition costs or ongoing expenses;

• failure to operate as a combined organization utilizing common information and communication systems, operating procedures, financial controls and human resources practices;

• disruptions to our ongoing business, diversion of resources, increases in our expenses and distraction of management’s attention from the normal daily operations of our business;

• entering markets in which we have no or limited prior direct experience and where competitors in such markets have stronger market positions;

• the potential to negatively impact our results of operations because an acquisition may require us to incur large one-time charges to earnings, amortize or write down amounts related to goodwill and other intangible assets, or incur or assume substantial debt or liabilities, or cause adverse tax consequences, substantial depreciation or deferred compensation charges;

• an uncertain sales and earnings stream from the acquired company;

• potential loss of key employees of the acquired company; and

• disruptions to our relationships with existing collaborators who could be competitive with the acquired business.

There can be no assurance that our acquisition of the assets and business of Innercool Therapies or other acquisitions that we may pursue will be successful. If we pursue an acquisition but are not successful in completing it, or if we complete an acquisition but are not successful in integrating the acquired company’s employees, products or operations successfully, our business, financial position or results of operations could be adversely affected.

If our right to use any intellectual property we license from third parties is terminated or adversely affected, our financial condition, operations or ability to develop and commercialize our product candidates may be harmed.

We substantially rely on licenses to use certain technologies that are material to our operations. We do not own the patents, patent applications and other intellectual property rights that underlie the licenses we have acquired or may acquire in the future. We rely on our licensors to properly prosecute and enforce the patents, file patent applications and prevent infringement of those patents and patent applications. The licenses and other intellectual property rights we acquire may or may not provide us with exclusive rights. To the extent we do not have exclusive rights, others may license the same technology and may develop the technology more successfully or may develop products similar to ours and that compete with our products. Even if we are provided with exclusive rights, the scope of our rights under our licenses may be subject to dispute by our licensors or third parties. Our licenses also contain milestones that we must meet and/or minimum royalty or other payments that we must make to maintain the licenses. There is no assurance that we will be able to meet such milestones and/or make such payments. Our licenses may be terminated if we fail to meet applicable milestones or make applicable payments.

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We are an early stage company and, other than Innercool’s Celsius Control System, have no other products available for sale or use. Our product candidates require additional research, development, testing and regulatory approvals before marketing. We may be unable to develop, obtain regulatory approval or market any of our product candidates or expand the market of our existing product and technology. If our product candidates are delayed or fail, our financial condition will be negatively affected, and we may have to curtail or cease our operations.

We are in the early stage of product development and, other than Innercool’s Celsius Control System acquired in March 2006, currently do not sell any other products and may not have any other products commercially available for several years, if at all. Our product candidates, including the expansion of our therapeutic hypothermia technology into other medical indications and applications, require additional research and development, clinical testing and regulatory clearances before we can market them. There are many reasons that our products and product candidates may fail or not advance beyond clinical testing, including the possibility that:

• our products and product candidates may be ineffective, unsafe or associated with unacceptable side effects;

• our product candidates may fail to receive necessary regulatory approvals or otherwise fail to meet applicable regulatory standards;

• our product candidates may be too expensive to develop, manufacture or market;

• physicians, patients, third-party payers or the medical community in general may not accept or use our proposed products;

• our potential collaborators may withdraw support for or otherwise impair the development and commercialization of our products or product candidates;

• other parties may hold or acquire proprietary rights that could prevent us or our potential collaborators from developing or marketing our products or product candidates; or

• others may develop equivalent, superior or less expensive products.

In addition, our product candidates are subject to the risks of failure inherent in the development of gene therapy and other products based on innovative technologies. As a result, we are not able to predict whether our research, development and testing activities will result in any commercially viable products or applications. If our product candidates are delayed or we fail to successfully develop and commercialize our product candidates, or if we are unable to expand the market of our existing product or its related technology, our financial condition may be negatively affected, and we may have to curtail or cease our operations.

We may experience delays in our clinical trials that could adversely affect our financial results and our commercial prospects.

To obtain regulatory approvals for new products or expand indications for existing ones, we must, among other requirements, complete clinical trials showing that our product candidates are safe and effective for a particular indication. We plan to submit a protocol to the FDA in 2006 and plan to conduct verbal and written communications with the FDA to continue to evaluate our Generx product candidate. We plan on initiating our clinical trials in 2006 but there is no assurance we will be able to do so as the timing of the commencement of the trial may be dependent on, among other things, FDA reviews and other factors outside of our control. Furthermore, there can be no assurance that our clinical trials will in fact demonstrate that our products are safe or effective.

Additionally, we may not be able to identify or recruit a significant number of acceptable patients or may experience delays in enrolling patients into clinical trials for our products. The FDA or we may suspend our clinical trials at any time if either believes that we are exposing the subjects participating in the trials to

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unacceptable health risks. The FDA or institutional review boards and/or institutional biosafety committees at the medical institutions and healthcare facilities where we sponsor clinical trials may suspend any trial indefinitely if they find deficiencies in the conduct of the trials.

Product development costs to us and our potential collaborators will increase if we have delays in testing or approvals or if we need to perform more or larger clinical trials than planned. We expect to continue to rely on third party clinical investigators at medical institutions and healthcare facilities to conduct our clinical trials, and, as a result, we may face additional delaying factors outside of our control. Significant delays may adversely affect our financial results and the commercial prospects for our product candidates and delay our ability to become profitable.

If we cannot successfully complete the clinical trial process for our product candidates, we will not be able to market them. Even successful clinical trials may not result in a marketable product and may not be entirely indicative of a product’s safety or efficacy.

Our Celsius Control System acquired from Innercool Therapies has received FDA 510(k) clearance for certain specified indications but we may elect to pursue other indications, which would generally require that we or collaborators conduct additional clinical studies and/or testing. Our Generx product candidate is currently in the clinical stage. Other product candidates are in the pre-clinical stage and there can be no assurance they will ever advance to clinical trials. For product candidates that advance to clinical testing, we cannot be certain that we or a collaborator will successfully complete the clinical trials necessary to receive regulatory product approvals. This process is lengthy and expensive. To obtain regulatory approvals, we or a collaborative partner must demonstrate through pre-clinical studies and clinical trials that our product candidates are safe and effective for use in at least one medical indication.

Many factors, known and unknown, can adversely affect clinical trials and the ability to evaluate a product’s efficacy. For example, clinical trials are often conducted with patients who have the most advanced stages of disease. During the course of treatment, these patients can die or suffer other adverse events for reasons that may or may not be related to the proposed product being tested. For instance, as reported in December 1999, the death of a patient enrolled in the Phase 1/2 trial for Generx, which occurred approximately five months after the one-time product administration, was determined to have been unlikely to be causally related to the therapy. Our clinical trials may also be adversely impacted by patient deaths or problems that occur in other trials. However, even if unrelated to our product, such events can nevertheless adversely impact our clinical trials. As a result, our ability to ultimately develop and market the products and obtain revenues would suffer.

Deaths and other adverse events that occur in the conduct of clinical trials may result in an increase in governmental regulation or litigation, and could result in delays or halts being imposed upon clinical trials including our own. In addition, patients involved in clinical trials such as ours often have unknown as well as known health risks and pre-existing conditions. An adverse event may therefore appear to have been caused or exacerbated by the administration of study product, even if it was not actually related. Such consequences can also increase the risk that any potential adverse event in our trial could give rise to claims for damages against us, or could cause further delays or halt our clinical trial, any of which results would negatively affect us. In addition, fears regarding the potential consequences of gene therapy trials or the conduct of such trials could dissuade investigators or patients from participating in our trials, which could substantially delay or prevent our product development efforts.

Even promising results in pre-clinical studies and initial clinical trials do not ensure successful results in later clinical trials, which test broader human use of our products. Many companies in our industry have suffered significant setbacks in advanced clinical trials, despite promising results in earlier trials. Even successful clinical trials may not result in a marketable product or be indicative of the efficacy or safety of a product. Many factors or variables could affect the results of clinical trials and cause them to appear more promising than they may otherwise be. Product candidates that successfully complete clinical trials could ultimately be found to be unsafe or ineffective.

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In addition, our ability to complete clinical trials depends on many factors, including obtaining adequate clinical supplies and having a sufficient rate of patient recruitment. For example, patient recruitment is a function of many factors, including: the size of the patient population; the proximity of patients to clinical sites; the eligibility criteria for the trial; the perceptions of investigators and patients regarding safety; and the availability of other treatment options. Even if patients are successfully recruited, we cannot be sure they will complete the treatment process. Delays in patient enrollment or treatment in clinical trials may result in increased costs, program delays or both.

With respect to markets in other countries, we or a partner will also be subject to regulatory requirements governing clinical trials in those countries. Even if we complete clinical trials, we may not be able to submit a marketing application. If we submit an application, the regulatory authorities may not review or approve it in a timely manner, if at all.

Our technologies and product candidates may have unacceptable side effects that could delay or prevent product approval.

Possible side effects of therapeutic technologies may be serious and life-threatening. The occurrence of any unacceptable side effects during or after pre-clinical and clinical testing of our product candidates could delay or prevent approval of our products and our revenues would suffer. For example, possible serious side effects of viral vector-based gene transfer include viral infections resulting from contamination with replication-competent viruses and inflammation or other injury to the heart or other parts of the body. In addition, the development or worsening of cancer in a patient may be a perceived or actual side effect of gene therapy technologies such as our own. Furthermore, there is a possibility of side effects or decreased effectiveness associated with an immune response toward any viral vector or gene used in gene therapy. The possibility of such response may increase if there is a need to deliver the viral vector more than once.

Because we cannot predict whether or when we will obtain regulatory approval to commercialize our product candidates, we cannot predict the timing of any future revenue from these product candidates. To our knowledge, the FDA has not yet approved any gene therapy products.

Other than our Innercool Celsius Control System, we cannot commercialize any of our product candidates to generate revenue until the appropriate regulatory authorities have reviewed and approved the applications for our product candidates. We cannot assure you that the regulatory agencies will complete their review processes in a timely manner or that we will obtain regulatory approval for any product candidate we or our potential collaborators develop. Satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure of substantial resources. Regulatory approval processes outside the United States include all or many of the risks associated with the FDA approval process and potentially others as well. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action or changes in FDA policy during the period of product development, clinical trials and FDA regulatory review.

Our technologies and product candidates are unproven and they may fail to gain market acceptance.

Our future depends on the success of our technologies and product candidates. Gene-based therapy and endovascular temperature control therapy are new and rapidly evolving medial approaches that have not been shown to be effective on a widespread basis. Biotechnology and pharmaceutical companies have successfully developed and commercialized only a limited number of gene-based products to date. In addition, no gene therapy product has received regulatory approval in the United States. Our product candidates, and the technology underlying them, are new and unproven and there is no guarantee that health care providers or patients will be interested in our products. Our success will depend in part on our ability to demonstrate the clinical benefits, reliability, safety and cost effectiveness of our product candidates and technology, as well as on our ability to continue to develop our product candidates to respond to competitive and technological changes. If

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the market does not accept our products or product candidates, when and if we are able to commercialize them, we may never become profitable. It is difficult to predict the future growth of our business, if any, and the size of the market for our product candidates because the market and technology are continually evolving. There can be no assurance that our technologies and product candidates will prove superior to technologies and products that may currently be available or may become available in the future or that our technologies or research and development activities will result in any commercially profitable products.

We may not successfully establish and maintain collaborative and licensing arrangements, which could adversely affect our ability to develop and commercialize our product candidates.

Our strategy for the development, testing, manufacturing and commercialization of our product candidates generally relies on establishing and maintaining collaborations with corporate partners, licensors and other third parties. For example, we have licenses from New York University and the University of California relating to the use and delivery of our Generx product candidates for the treatment of vascular disease, as well as a relationship with Schering AG Group (Germany) regarding the transfer of information about certain manufacturing and regulatory matters concerning our product candidates. We may not be able to maintain or expand these licenses and collaborations or establish additional licensing and collaboration arrangements necessary to develop and commercialize our product candidates. Even if we are able to maintain or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and may contain provisions that will restrict our ability to develop, test and market our product candidates. Any failure to maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects, financial condition or ability to develop and commercialize our product candidates.

We expect to rely at least in part on third party collaborators to perform a number of activities relating to the development and commercialization of our product candidates, including the manufacture of product materials, the design and conduct of clinical trials, and potentially the obtaining of regulatory approvals and the marketing and distribution of any successfully developed products. Our collaborative partners also may have or acquire rights to control aspects of our product development and clinical programs. As a result, we may not be able to conduct these programs in the manner or on the time schedule we currently contemplate. In addition, if any of these collaborative partners withdraw support for our programs or product candidates or otherwise impair their development, our business could be negatively affected. To the extent we undertake any of these activities internally, our expenses may increase.

In addition, our success depends on the performance of our collaborators of their responsibilities under their arrangements with us. Our existing or potential collaborators may not perform their obligations in a timely fashion or in a manner satisfactory to us.

We will rely on third parties to manufacture our product candidates. There can be no guarantee that we can obtain sufficient and acceptable quantities of our product candidates on acceptable terms, which may delay or impair our ability to develop, test and market such products.

Our business strategy relies on third parties to manufacture and produce our products and product candidates and the catheters used to deliver the products in accordance with good manufacturing practices established by the FDA. For example, we recently entered into a Production Service Agreement with Molecular Medicine Bioservices, Inc. pursuant to which Molecular Medicine will manufacture our lead product candidate, Generx, for late-stage clinical development. These third party manufacturers are subject to extensive government regulation and must receive FDA approval before they can produce clinical material or commercial product.

Our products and product candidates may be in competition with other products for access to these facilities and may be subject to delays in manufacture if third parties give other products greater priority than our products. These third parties also may not deliver sufficient quantities of our products, manufacture our products in accordance with specifications, or comply with applicable government regulations. Successful large-scale

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manufacturing of gene-based therapy products has been accomplished by very few companies, and it is anticipated that significant process development changes will be necessary for the commercial process.

Additionally, if the manufactured products fail to perform as specified, our business and reputation could be severely impacted. Our product materials will be produced by a third party collaborator, and we have entered into a manufacturing agreement for the production of additional product materials for anticipated clinical trials and initial commercial use. If any manufacturing agreement is terminated or any third party collaborator experiences a significant problem that could result in a delay or interruption in the supply of product materials to us, there are very few contract manufacturers who currently have the capability to produce our product candidates on acceptable terms, or on a timely and cost-effective basis. There can be no assurance that manufacturers on whom we depend will be able to successfully produce our products or product candidates on acceptable terms, or on a timely or cost- effective basis. There can also be no assurance that manufacturers will be able to manufacture our products in accordance with our product specifications. We must have sufficient and acceptable quantities of our product materials to conduct our clinical trials and to market our product candidates, if and when such products have been approved by the FDA for marketing. If we are unable to obtain sufficient and acceptable quantities of our product material, we may be required to delay the clinical testing and marketing of our products.

If we do not comply with applicable regulatory requirements in the manufacture and distribution of our products and product candidates, we may incur penalties that may inhibit our ability to commercialize our products and adversely affect our revenue.

Our failure or the failure of our potential collaborators or third party manufacturers to comply with applicable FDA or other regulatory requirements including manufacturing, quality control, labeling, safety surveillance, promoting and reporting may result in criminal prosecution, civil penalties, recall or seizure of our products, total or partial suspension of production or an injunction, as well as other regulatory action against our products, product candidates or us. Discovery of previously unknown problems with a product, supplier, manufacturer or facility may result in restrictions on the sale of our products, including a withdrawal of such products from the market. The occurrence of any of these events would negatively impact our business and results of operations.

If we are unable to create and maintain sales, marketing and distribution capabilities or enter into agreements with third parties to perform those functions, we will not be able to commercialize our product candidates or market our products.

We currently have limited sales, marketing and distribution capabilities in connection with our Innercool products and none with respect to our other product candidates, which are not yet approved for marketing. Therefore, to commercialize our other product candidates, if and when such products have been approved and are ready for marketing, we expect either to collaborate with third parties to perform these functions or develop them internally.

We have little experience in developing, training or managing a sales force and will incur substantial additional expenses if we are forced to market future products directly. Developing a marketing and sales force is also time consuming and could delay launch of new products or expansion of existing product sales. We expect that we will need to develop additional marketing and sales personnel, and/or work with outside providers, in order to achieve increased sales of our Innercool products. In addition, we will compete with many companies that currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete successfully against these companies.

If we are unable to attract and retain key personnel and advisors, it may adversely affect our ability to obtain financing, pursue collaborations or develop or market our products or product candidates.

Our future success depends on our ability to attract, retain and motivate highly qualified management and scientific and regulatory personnel and advisors, as well as production, marketing and sales personnel in

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connection with our Innercool products. To pursue our business strategy, we will need to hire or otherwise engage qualified scientific personnel and managers, including personnel with expertise in clinical trials, government regulation and manufacturing and other areas. Competition for qualified personnel is intense among companies, academic institutions and other organizations. If we are unable to attract and retain key personnel and advisors, it may negatively affect our ability to successfully develop, test, commercialize and market our products and product candidates.

We will use hazardous and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.

Our products and processes will involve the controlled storage, use and disposal of certain hazardous and biological materials and waste products. We and our suppliers and other collaborators are subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of materials and waste products. Even if we and these suppliers and collaborators comply with the standards prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be completely eliminated. In the event of an accident, we could be held liable for any damages that result, and any liability could exceed the limits or fall outside the coverage of any insurance we may obtain and exceed our financial resources. We may not be able to maintain insurance on acceptable terms, or at all. We may incur significant costs to comply with current or future environmental laws and regulations.

To the extent we enter markets outside the United States, our business will be subject to political, economic, legal and social risks in those markets, which could adversely affect our business.

There are significant regulatory and legal barriers in markets outside the United States that we must overcome to the extent we enter or attempt to enter markets in countries other than the United States. We will be subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience difficulties adapting to new cultures, business customs and legal systems. Any sales and operations outside the United States, including those associated with our Innercool products, would be subject to political, economic and social uncertainties including, among others:

• changes and limits in import and export controls;

• increases in custom duties and tariffs;

• changes in currency exchange rates;

• economic and political instability;

• changes in government regulations and laws;

• absence in some jurisdictions of effective laws to protect our intellectual property rights; and

• currency transfer and other restrictions and regulations that may limit our ability to sell certain products or repatriate profits to the United States.

Any changes related to these and other factors could adversely affect our business to the extent we enter markets outside the United States.

Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.

Ethical, social and legal concerns about gene therapy and genetic research could result in additional regulations restricting or prohibiting our products and processes we may use. More restrictive government regulations or negative public opinion may have a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates.

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We are subject to significant government regulation with respect to our products and product candidates. Compliance with government regulation can be a costly and time-consuming process, with no assurance of ultimate regulatory approval. If these approvals are not obtained, we will not be able to sell our product candidates. To our knowledge, the FDA has not yet approved any gene therapy products.

We and our collaborators are subject to extensive and rigorous government regulation in the United States and abroad. The FDA, the National Institute of Health and comparable agencies in foreign countries impose many requirements on the introduction of new pharmaceutical products and/or medical devices through lengthy and detailed clinical testing procedures and other costly and time consuming compliance procedures. These requirements vary widely from country to country and make it difficult to estimate when our biologic product candidates will be commercially available, if at all. In addition, DNA-based therapies such as those being developed by us are relatively new and are only beginning to be tested in humans. Regulatory authorities may require us or our potential collaborators to demonstrate that our products are improved treatments relative to other therapies or may significantly modify the requirements governing gene therapies, which could result in regulatory delays or rejections. If we are delayed or fail to obtain required approvals for our product candidates, our operations and financial condition would be damaged. Neither we nor our potential commercialization partners may sell our products without applicable regulatory approvals. Numerous regulations in the United States and abroad also govern the manufacturing, safety, labeling, storage, record keeping, reporting and marketing of our products and product candidates. Compliance with these regulatory requirements is time consuming and expensive. If we fail to comply with regulatory requirements, either before approval or in marketing our products after approval, we could be subject to regulatory or judicial enforcement actions. These actions could result in withdrawal of existing approvals, product recalls, injunctions, civil penalties, criminal prosecution, and enhanced exposure to product liabilities.

We cannot assure you that our product candidates will prove safe and effective in clinical trials and will meet all of the applicable regulatory requirements needed to receive regulatory approval. We or a partner will need to conduct significant research, pre-clinical testing and clinical trials before we can file product approval applications with the FDA and similar regulatory authorities in other countries or seek expansion of existing indications such as those associated with our Innercool products. Preclinical testing and clinical trials are long, expensive and uncertain processes. We may spend several years completing our testing for any particular product candidate, and failure can occur at any stage.

Even if we achieve positive results in early clinical trials, these results do not necessarily predict final results. A number of companies in the pharmaceutical and medical device industries have suffered significant setbacks in advanced clinical trials, even after achieving positive results in earlier trials. Negative or inconclusive results or adverse medical events during a clinical trial could cause the FDA or us to terminate a clinical trial or require that we repeat a clinical trial.

We face intense competition and must cope with rapid technological change, which may adversely affect our financial condition and/or our ability to successfully commercialize and/or market our products and product candidates.

Our competitors and potential competitors include large pharmaceutical and medical device companies and more established biotechnology companies. These companies have significantly greater financial and other resources and greater expertise than us in research and development, manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals and marketing. This may make it easier for them to respond more quickly than us to new or changing opportunities, technologies or market needs. Small companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical companies or through acquisition or development of intellectual property rights. Our larger competitors may be able to devote greater resources to research and development, marketing, distribution and other activities that could provide them with a competitive advantage. Many of these competitors operate large, well-funded research and development programs and have significant products approved or in development. Our potential competitors also include academic institutions, governmental agencies and other public and private research organizations that

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conduct research, seek patent protection and establish collaborative arrangements for product and clinical development and marketing.

We are engaged in DNA-based therapy and endovascular temperature control therapy. Our industry is characterized by extensive research and development, rapid technological change, frequent innovations and new product introductions, and evolving industry standards. Existing products and therapies to treat vascular and cardiovascular disease, including drugs and surgical procedures, as well as competitive approaches to temperature control therapy, will compete directly or indirectly with the products that we are seeking to develop and market. In addition, our competitors may develop more effective or more affordable products, or achieve earlier patent protection or product commercialization and market penetration than us. As these competitors develop their technologies, they may develop proprietary positions that prevent us from successfully commercializing our future products. To be successful, we must be able to adapt to rapidly changing technologies by continually enhancing our products and introducing new products. If we are unable to adapt, products and technologies developed by our competitors may render our products and product candidates uneconomical or obsolete, and we may not be successful in marketing our products and product candidates against competitors. We may never be able to capture and maintain the market share necessary for growth and profitability and there is no guarantee we will be able to compete successfully against current or future competitors.

Changes and reforms in the health care system or reimbursement policies may adversely affect the sale of our products and future products or our ability to obtain an adequate level of reimbursement or acceptable prices for our products or future products.

Other than Innercool’s Celsius Control System, we currently have no products approved for marketing. Our ability to earn sufficient returns on our products and future products, if and when such products are approved and ready for marketing, will depend in part on the extent to which reimbursement for our products and related treatments will be available from government health administration authorities, private health coverage insurers, managed care organizations and other third-party payers. If we fail to obtain appropriate reimbursement, it could prevent us from successfully commercializing and marketing our products and future products.

There have been and continue to be efforts by governmental and third-party payers to contain or reduce the costs of health care through various means, including limiting coverage and the level of reimbursement. We expect that there will continue to be a number of legislative proposals to implement government controls and other reforms to limit coverage and reimbursement. The announcement of these proposals or reforms could impair our ability to raise capital. The adoption of these proposals or reforms could impair our operations and financial condition.

Additionally, third-party payers, including Medicare, are increasingly challenging the price of medical products and services and are limiting the reimbursement levels offered to consumers for these medical products and services. If purchasers or users of our products or future products are not able to obtain adequate reimbursement from third-party payers for the cost of using the products, they may forego or reduce their use. Significant uncertainty exists as to the reimbursement status of newly approved health care products, including gene therapy and therapeutic hypothermia treatments, and whether adequate third-party coverage will be available.

If our products and product candidates are not effectively protected by valid, issued patents or if we are not otherwise able to protect our proprietary information, it could harm our business.

The success of our operations will depend in part on our ability and that of our licensors to: obtain patent protection for our gene therapy, therapeutic genes and/or gene-delivery methods, endovascular temperature control devices and procedures, and other methods or components on which we rely both in the United States and in other countries with substantial markets; defend patents once obtained; maintain trade secrets and operate without infringing upon the patents and proprietary rights of others; and obtain appropriate licenses upon

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reasonable terms to patents or proprietary rights held by others that are necessary or useful to us in commercializing our technology, both in the United States and in other countries with substantial markets.

If we are not able to maintain adequate patent protection for our products and product candidates, we may be unable to prevent our competitors from using our technology or technology that we license.

The patent positions of the technologies being developed by us and our collaborators involve complex legal and factual uncertainties. As a result, we cannot be certain that we or our collaborators will be able to obtain adequate patent protection for our products or product candidates. There can be no assurance that (i) any patents will be issued from any pending or future patent applications of ours or our collaborators; (ii) the scope of any patent protection will be sufficient to provide us with competitive advantages; (iii) any patents obtained by us or our collaborators will be held valid if subsequently challenged; or (iv) others will not claim rights in or ownership of the patents and other proprietary rights we or our collaborators may hold. Unauthorized parties may try to copy aspects of our products and technologies or obtain and use information we consider proprietary. Policing the unauthorized use of our proprietary rights is difficult. We cannot guarantee that no harm or threat will be made to our or our collaborators’ intellectual property. In addition, changes in, or different interpretations of, patent laws in the United States and other countries may also adversely affect the scope of our patent protection and our competitive situation.

Due to the significant time lag between the filing of patent applications and the publication of such patents, we cannot be certain that our licensors were the first to file the patent applications we license or, even if they were the first to file, also were the first to invent, particularly with regards to patent rights in the United States. In addition, a number of pharmaceutical and biotechnology companies and research and academic institutions have developed technologies, filed patent applications or received patents on various technologies that may be related to our operations. Some of these technologies, applications or patents may conflict with our or our licensors’ technologies or patent applications. A conflict could limit the scope of the patents, if any, that we or our licensors may be able to obtain or result in denial of our or our licensors’ patent applications. If patents that cover our activities are issued to other companies, we may not be able to develop or obtain alternative technology.

Patents issued and patent applications filed internationally relating to gene therapy, temperature control therapy, and other of our technologies are numerous, and we cannot assure you that current and potential competitors or other third parties have not filed or received, or will not file or receive applications in the future for patents or obtain additional proprietary rights relating to products or processes used or proposed to be used by us.

Additionally, there is certain subject matter that is patentable in the United States but not generally patentable outside of the United States. Differences in what constitutes patentable subject matter in various countries may limit the protection we can obtain outside of the United States. For example, methods of treating humans are not patentable in many countries outside of the United States. These and other issues may prevent us from obtaining patent protection outside of the United States, which would have a material adverse effect on our business, financial condition and results of operations.

We may be subject to costly claims, and, if we are unsuccessful in resolving conflicts regarding patent rights, we may be prevented from developing, commercializing or marketing our products and/ or product candidates.

There has been, and will likely continue to be, substantial litigation regarding patent and other intellectual property rights in the biotechnology industry. As the biotechnology industry expands and more patents are issued, the risk increases that our processes, technology, products and product candidates may give rise to claims that they infringe on the patents of others. Others could bring legal actions against us claiming damages and seeking to stop clinical testing, manufacturing and marketing of the affected product or use of the affected process. Litigation may be necessary to enforce our or our licensors’ proprietary rights or to determine the

35

enforceability, scope and validity of the proprietary rights of others. If we become involved in litigation, it could be costly and divert our efforts and resources. In addition, if any of our competitors file patent applications in the United States claiming technology also invented by us or our licensors, we may need to participate in interference proceedings held by the U.S. Patent and Trademark Office to determine priority of invention and the right to a patent for the technology. Like litigation, interference proceedings can be lengthy and often result in substantial costs and diversion of resources.

For example, we, and previously Collateral Therapeutics, have assisted the University of California, as the licensor, in an interference proceeding involving the University of California’s technology for cardiovascular gene therapy (filed by Hammond et al.) and a pending patent application filed by Jeffrey Leiden et al. (a U.S. counterpart of international application PCT/US93/11133, which published as WO94/11506). In March 2006, we reported that a panel of Administrative Patent Judges of the U.S. Board of Patent Appeals and Interferences (BPAI) issued a final judgment against the Leiden applicants, ordering that the interference count (representing the claims in dispute) be awarded to Hammond, and that Leiden et al. be held not entitled to any patent containing claims corresponding to those in the interference. However, the patent applicant, Arch Development Corporation, which had licensed the technology to Boston Scientific Corporation, has appealed the decision against them. In a related matter, Collateral Therapeutics, with our assistance, successfully opposed a European counterpart to the Leiden PCT application (EP-B-668913), which led to a decision to revoke the patent grant in Europe. Although the patentee, Arch Development Corporation, subsequently appealed the adverse decision, a ruling following appeal to the European Patent Office’s Technical Board of Appeal has now been rendered and the European patent grant to Arch (which had been licensed to Boston Scientific) has now been revoked. If the interference, opposition or other adverse proceedings were ultimately to be decided adversely, we could be compelled to seek a license to the Leiden technology, which may not be available on terms that we find commercially reasonable. In addition, such proceedings, even if decided in our favor, involve a lengthy process, are subject to appeal, and typically result in substantial costs and diversion of resources.

As more potentially competing patent applications are filed, and as more patents are actually issued, in the fields of gene therapy or therapeutic hypothermia or in other fields in which we may become involved and with respect to component methods or compositions that we may employ, the risk increases that we or our licensors may be subjected to litigation or other proceedings that claim damages or seek to stop our marketing, product development or commercialization efforts. Even if such patent applications or patents are ultimately proven to be invalid, unenforceable or non-infringed, such proceedings are generally expensive and time consuming and could consume a significant portion of our resources and substantially impair our marketing and product development efforts.

If there were an adverse outcome of any litigation or interference proceeding, we could have a potential liability for significant damages. In addition, we could be required to obtain a license to continue to make or market the affected product or use the affected process. Costs of a license may be substantial and could include ongoing royalties. We may not be able to obtain such a license on acceptable terms, or at all.

We may not have adequate protection for our unpatented proprietary information, which could adversely affect our competitive position.

We will substantially rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. However, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. To protect our trade secrets, we may enter into confidentiality agreements with employees, consultants and potential collaborators. However, these agreements may not provide meaningful protection of our trade secrets or adequate remedies in the event of unauthorized use or disclosure of such information. Likewise, our trade secrets or know-how may become known through other means or be independently discovered by our competitors. Any of these events could prevent us from developing or commercializing our product candidates.

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We face the risk of product liability claims, which could adversely affect our business and financial condition.

Our operations will expose us to product liability risks that are inherent in the testing, manufacturing and marketing of biotechnology and medical device products. Failure to obtain sufficient product liability insurance or otherwise protect against product liability claims could prevent or delay the commercialization or marketing of our products or product candidates or negatively affect our financial condition. Regardless of the merit or eventual outcome, product liability claims may result in withdrawal of product candidates from clinical trials, costs of litigation, damage to our reputation, substantial monetary awards to plaintiffs and decreased demand for products.

Product liability may result from harm to patients using our products, a complication that was either not communicated as a potential side-effect or was more extreme than communicated. We will require all patients enrolled in our clinical trials to sign consents, which explain the risks involved with participating in the trial. The consents, however, provide only a limited level of protection, and product liability insurance will be required. Additionally, we will indemnify the clinical centers and related parties in connection with losses they may incur through their involvement in the clinical trials. We may not be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities.

The price of our common stock is expected to be volatile and an investment in our common stock could decline in value.

The market price of our common stock, and the market prices for securities of pharmaceutical, medical device and biotechnology companies in general, are expected to be highly volatile. The following factors, in addition to other risk factors described in this report, and the potentially low volume of trades in our common stock, may have a significant impact on the market price of our common stock, some of which are beyond our control:

• actual or anticipated variations in operating results;

• developments concerning any research and development, clinical trials, manufacturing, and marketing collaborations;

• our announcement of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

• announcements of technological innovations;

• new products or services that we or our competitors offer;

• the initiation, conduct and/or outcome of intellectual property and/or litigation matters;

• changes in financial estimates by securities analysts;

• conditions or trends in bio-pharmaceutical or other healthcare industries;

• global unrest, terrorist activities, and economic and other external factors;

• regulatory developments in the United States and other countries;

• changes in the economic performance and/or market valuations of other biotechnology and medical device companies;

• additions or departures of key personnel; and

• sales or other transactions involving our common stock.

The stock market in general has recently experienced relatively large price and volume fluctuations. In particular, market prices of securities of biotechnology and medical device companies have experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of the common stock, which could cause a decline in the value of the common stock. Prospective investors should also be aware that price volatility may be worse if the trading volume of the common stock is low.

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ITEM 7. FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Cardium Therapeutics, Inc.

We have audited the accompanying balance sheet of Cardium Therapeutics, Inc. (“Cardium”) (a development stage company) as of December 31, 2005, and the related statements of operations, stockholders’ equity, and cash flows for the each of the years ended December 31, 2005 and 2004 and for the period from December 22, 2003 (date of inception) through December 31, 2005. These financial statements are the responsibility of Cardium’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Cardium is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Cardium’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cardium Therapeutics, Inc. (a development stage company) as of December 31, 2005, and the results of its operations and its cash flows for each of the years ended December 31, 2005 and 2004 and for the period from December 22, 2003 (date of inception) through December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/    MARCUM & KLIEGMAN LLP

New York, New York

March 10, 2006

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CARDIUM THERAPEUTICS, INC.

(a development stage company)

BALANCE SHEET

December 31, 2005

Assets
Current assets:
Cash and cash equivalents	$	21,787,869
Prepaid expenses		170,082
Total current assets		21,957,951
Property and equipment, net		372,197
Deposits		21,476
Total assets	$	22,351,624
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	162,869
Accrued liabilities		450,639
Total liabilities		613,508
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000,000 shares authorized; 29,249,801 shares issued and outstanding		2,924
Additional paid-in capital		27,180,847
Deficit accumulated during development stage		(5,445,655	)
Total stockholders’ equity		21,738,116
Total liabilities and stockholders’ equity	$	22,351,624

See accompanying notes, which are an integral part of these financial statements.

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CARDIUM THERAPEUTICS, INC.

(a development stage company)

STATEMENTS OF OPERATIONS

	Year Ended December 31,						Period from December 22, 2003 (Inception) to December 31, 2005
	2005			2004
Operating Expenses
Purchased technology	$	(4,000,000	)	$	—		$	(4,000,000	)
General and administrative		(1,588,288	)		(3,961	)		(1,592,249	)
Total operating expenses		(5,588,288	)		(3,961	)		(5,592,249	)
Interest income		146,594			—			146,594
Net loss	$	(5,441,694	)	$	(3,961	)	$	(5,445,655	)
Loss Per Common Share
Net loss per common share—basic and diluted	$	(0.54	)	$	(0.00	)
Weighted average shares outstanding—basic and diluted		9,992,426			1,700,000

See accompanying notes, which are an integral part of these financial statements.

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CARDIUM THERAPEUTICS, INC.

(a development stage company)

STATEMENT OF STOCKHOLDERS’ EQUITY

	Common Stock*			Additional Paid-In Capital		Stock Subscription Receivable			Deficit Accumulated During Development Stage			Total Stockholders’ Equity
	Shares	Amount
Balance, December 22, 2003 (inception)	—	$	—	$	—	$	—		$	—		$	—
Sale of common stock (December 31, 2003; $0.01 per share)	1,700,000		170		16,830		(17,000	)		—			—
Balance, December 31, 2003	1,700,000		170		16,830		(17,000	)		—			—
Proceeds from subscription receivable	—		—		—		17,000			—			17,000
Net loss	—		—		—		—			(3,961	)		(3,961	)
Balance, December 31, 2004	1,700,000		170		16,830		—			(3,961	)		13,039
Issuance of common stock for services and reimbursement of expenses (April 1, 2005, $0.01 per share)	3,800,000		380		37,620		—			—			38,000
Issuance of common stock for services and reimbursement of expenses (May 20, 2005, $0.01 per share)	350,000		35		3,465		—			—			3,500
Issuance of common stock for cash (July 1, 2005, $0.01 per share)	2,000,000		200		19,800		—			—			20,000
Issuance of common stock to stockholders of Aries Ventures Inc. (October 20, 2005, $0.73 per share)	2,032,226		203		1,499,797		—			—			1,500,000
Issuance of common stock for Officer loan (October 20, 2005, $1.50 per share)	41,924		4		62,878		—			—			62,882
Issuance of common stock for cash (October 20, 2005, $1.50 per share (net of fees of $0.18 per share))	19,325,651		1,932		25,540,457		—			—			25,542,389
Net loss	—		—		—		—			(5,441,694	)		(5,441,694	)
Balance, December 31, 2005	29,249,801	$	2,924	$	27,180,847	$	—		$	(5,445,655	)	$	21,738,116

* The par value of common stock and the additional paid-in capital have been adjusted to reflect the change in par value from $0.001 to $0.0001 on May 20, 2005.

See accompanying notes, which are an integral part of these financial statements.

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CARDIUM THERAPEUTICS, INC.

(a development stage company)

STATEMENTS OF CASH FLOWS

	Year Ended December 31,						Period from December 22, 2003 (Inception) To December 31, 2005
	2005			2004
Cash Flows From Operating Activities
Net loss	$	(5,441,694	)	$	(3,961	)	$	(5,445,655	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		11,646			—			11,646
Common stock issued for services and reimbursement of expenses		41,500			—			41,500
Changes in operating assets and liabilities:
Prepaid expenses		(170,082	)		—			(170,082	)
Deposits		(21,476	)		—			(21,476	)
Accounts payable		162,869			—			162,869
Accrued liabilities		450,639			—			450,639
Net cash used in operating activities		(4,966,598	)		(3,961	)		(4,970,559	)
Cash Flows From Investing Activities
Purchase of property and equipment		(383,843	)		—			(383,843	)
Cash Flows From Financing Activities
Proceeds from officer loan		62,882			—			62,882
Cash acquired in merger with Aries Ventures Inc.		1,500,000			—			1,500,000
Proceeds from the sale of common stock		25,562,389			17,000			25,579,389
Net cash provided by financing activities		27,125,271			17,000			27,142,271
Net increase in cash		21,774,830			13,039			21,787,869
Cash at beginning of year		13,039			—			—
Cash and cash equivalents at end of year	$	21,787,869		$	13,039		$	21,787,869
Non-Cash Activity
Subscription receivable for common shares	$	—		$	—		$	17,000
Common stock issued for services	$	62,882		$	—		$	—

See accompanying notes, which are an integral part of these financial statements.

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CARDIUM THERAPEUTICS, INC.

(a development stage company)

NOTES TO FINANCIAL STATEMENTS

Note 1. Organization

Cardium Therapeutics, Inc. (“Cardium”) was organized in Delaware in December 2003. We are a medical technology company primarily focused on the development, manufacture and sale of innovative products for cardiovascular and related indications, which are leading healthcare priorities for adults in the United States, Europe and elsewhere. In October 2005, we acquired a portfolio of biologic growth factors and related delivery techniques from the Schering AG Group, Germany, which we plan to develop as cardiovascular-directed growth factor therapeutics for various interventional cardiology applications, including potential treatments for ischemic heart disease. In March 2006, we acquired the technologies and products of Innercool Therapies, Inc., a medical technology company in the emerging field of therapeutic hypothermia, whose systems and products are designed to rapidly and controllably cool the body in order to reduce cell death and damage following acute ischemic events such as cardiac arrest and stroke, and to potentially lessen or prevent associated injuries such as adverse neurologic outcomes. Innercool Therapies is operated as a wholly-owned subsidiary of Cardium.

We are a development stage company in the initial stage of our operations. We have yet to generate positive cash flows from operations, and until commercially viable products are developed and regulatory approvals obtained, we are totally dependent on debt and equity funding to finance our operations. Before October 2005, cash requirements were funded by loans from executive officers. In October 2005, we closed a private placement of 19,325,651 shares of our common stock at a purchase price of $1.50 per share and received net proceeds of $25,542,389. In connection with the offering, we completed a reverse merger, whereby Cardium merged with Aries Ventures Inc. (“Aries”), a publicly traded company (see Note 9 ). As a result of these transactions, the stockholders of Cardium became the controlling stockholders of Aries. Accordingly, the acquisition of Cardium by Aries was a reverse merger. The historical financial results before the reverse merger on October 20, 2005, are those of Cardium. Aries’ results of operations are included in Cardium’s financial results beginning October 20, 2005.

In January 2006, Aries was merged with and into Cardium, with Cardium as the surviving entity and the successor issuer to Aries. As a result, we are now in our present form a publicly-traded, Delaware corporation named Cardium Therapeutics, Inc.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

Our principal activities are expected to focus on the commercialization of our licensed technologies. The accompanying financial statements have been prepared in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 7, “Development Stage Enterprises.”

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts payable, and accrued liabilities approximate fair value due to the short-term maturities of such investments.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial

43

statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents, substantially all of which are invested in short-term commercial paper, includes all highly-liquid investments with an original maturity of three months or less at the date of purchase. We attempt to reduce our credit risk by investing our cash and cash equivalents with major banks and financial institutions located primarily in the United States. At times, cash balances held at financial institutions may exceed federally-insured limits.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Property and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets (three years for computer equipment and five years for furniture and fixtures).

Research and Development

In accordance with SFAS No. 2, “Research and Development Expenses,” research and development costs are expensed as incurred. Research and development expenses are expected to consist of purchased technology, purchased research and development rights and outside services for research and development activities associated with product development. In accordance with SFAS No. 2, the cost to purchase such technology and research and development rights are required to be charged to expense if there is currently no alternative future use for this technology and, therefore, no separate economic value.

Income Taxes

We account for income taxes under SFAS No. 109, “Accounting for Income Taxes.” SFAS No. 109 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities, and for the expected future tax benefit to be derived primarily from tax loss carryforwards. We have established a valuation allowance related to the benefits of net operating losses for which utilization in future periods is uncertain. We believe it is more likely than not that we will not realize the benefits of these deductible differences in the near future and, therefore, a valuation allowance has been recorded to offset future tax benefits.

We have federal net operating losses available to offset future taxable income, which, if not used, will expire in 2024. No provision for income taxes has been recorded in the financial statements as a result of such operating losses. Any benefit for income taxes as a result of the use of net operating losses will likely be limited as a result of cumulative changes in stock ownership.

Loss Per Common Share

We compute earnings per share in accordance with SFAS No. 128, “Earnings Per Share.” SFAS No. 128 requires dual presentation of basic and diluted earnings per share.

Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding, plus the issuance of common shares, if dilutive, resulting from the exercise of outstanding stock options and warrants. These potentially dilutive securities were not included in the calculation of loss per share for the years ended December 31, 2005 and 2004, because we incurred a loss during such periods and thus their inclusion would have been anti-dilutive. Accordingly, basic and

44

diluted loss per common share are the same for all periods presented. The common stock issued and outstanding with respect to the stockholders of Aries Ventures have been included since October 20, 2005, the effective date of the reverse merger.

Potentially dilutive securities consisted of outstanding stock options and warrants to acquire 4,951,818 shares as of December 31, 2005, and 0 shares as of December 31, 2004.

Stock-Based Compensation

We adopted the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation,” for stock options and similar equity instruments (collectively, “Options”) issued to employees, and continue to apply the intrinsic value based method of accounting for options issued to employees prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issues to Employees,” rather than the fair value based method of accounting prescribed by SFAS No. 123. We account for equity instruments issued to non-employees for goods or services in accordance with the provisions of SFAS No. 123 and the Emerging Issues Task Force (“EITF”) Issue No. 96-18, which require that such transactions be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured.

In December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, to provide an alternative method of transition to SFAS No. 123’s fair value method of accounting for stock based employee compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. We follow the disclosure only provisions of SFAS No. 123 that require disclosure of pro forma effects on net income (loss) as if the fair value method of accounting prescribed by SFAS No. 123 had been adopted, as well as certain other information.

The Black-Scholes option valuation model was used to estimate the fair value of the options granted during the years ended December 31, 2005 and 2004. The model includes subjective input assumptions that can materially affect the fair value estimates. The model was developed for use in estimating the fair market value of options that have no vesting restrictions and are fully transferable. The expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the options granted.

The table below shows what our net loss and net loss per common share would have been had compensation cost for stock options granted been determined under SFAS No. 123:

	2005			2004
Net loss, as reported	$	(5,441,694	)	$	(3,961	)
Add: compensation expense included in net loss		—			—
Less: compensation expense pursuant to SFAS No. 123		(29,083	)		—
Pro forma net loss	$	(5,470,777	)	$	(3,961	)
Pro forma net loss per common share (basic and diluted)	$	(0.55	)	$	(0.00	)

The fair value of the stock options granted for 2005 were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate 4.5%; dividend yield of 0%; stock price volatility of 60%; and expected life of 4.5 years.

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Recent Accounting Pronouncements

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share Based Payment” (SFAS 123R), a revision to SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS 123R supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement of Cash Flows.” SFAS 123R requires that we measure the cost of employee services received in exchange for equity awards based on the grant date fair value of the awards. The cost will be recognized as compensation expense over the vesting period of the awards. We are required to adopt SFAS 123R effective for annual periods beginning after December 15, 2005. Under this method, we will begin recognizing compensation cost for equity-based compensation for all new or modified grants after the date of adoption. In addition, we will recognize the unvested portion of the grant date fair value of awards issued before adoption based on the fair values previously calculated for disclosure purposes over the remaining vesting period of the outstanding options and warrants. The adoption of SFAS 123R will have an impact on the financial statements whereby we will record a charge to earnings for the fair value of stock options over the vesting period.

Note 3. Property and Equipment

Property and equipment consisted of the following as of December 31, 2005:

Computer and telecommunication equipment	$	162,946
Office furniture and fixtures		220,897
	$	383,843
Less: accumulated depreciation and amortization		(11,646	)
Total	$	372,197

Depreciation of property and equipment totaled $11,646 for the year ended December 31, 2005 and $0 for the year ended December 31, 2004.

Note 4. Accrued Liabilities

Accrued liabilities consisted of the following at December 31, 2005:

Accrued legal fees	$	340,000
Accrued consulting and payroll		110,639
Total	$	450,639

Note 5. Purchase of Technology from Schering AG Group (Germany)

In October 2005, we completed a transaction with Schering AG Group (Germany) and related licensors, including the University of California, New York University and Yale University, for the transfer or license of certain assets and technology relating to (i) methods of gene therapy for the treatment of cardiovascular disease (including methods for the delivery of genes to the heart or vasculature and the use of angiogenic and/or non-angiogenic genes for the potential treatment of diseases of the heart or vasculature); (ii) therapeutic genes that include fibroblast growth factors (including FGF-4); insulin-like growth factors (including IGF-I); and potentially other related biologics (including mutant eNOS); and (3) other technology and know-how, including manufacturing and formulation technology, as well as data relating to the clinical development of Generx and corresponding FDA regulatory matters. Under the terms of the transaction, we paid Schering a $4 million fee, and will pay a $10 million milestone payment upon the first commercial sale of each resulting product. We also are obligated to pay the following royalties to Schering: (i) 5% on net sales of an FGF-4 based product such as Generx, or (ii) 4% on net sales of other products developed based on technology transferred to Cardium by Schering. In addition, we were obligated to reimburse Schering for certain patent expenses in connection with the

46

transferred technologies. These expenses are estimated to be approximately $340,000 at December 31, 2005, and have been recorded in our accrued liabilities.

Note 6. Commitments and Contingencies

Operating Leases

Effective November 1, 2005, we entered into a two year lease for our principal executive offices. The lease contains two options, the first for an additional term of one year and the second for an additional term of two years. The second option is subject to a third party right of first refusal. During the first year of the lease, the monthly installment of base rent is approximately $21,500, which amount will increase to approximately $22,335 in the second year of the lease. In addition to base rent, we also are required to pay our proportionate share of operating and tax expenses for the office park in which our space is located.

Future annual minimum rental payments under the lease are as follows:

Year Ending December 31,
2006	$	259,000
2007		223,000
Total	$	482,000

Rent expense was $42,953 for the year ended December 31, 2005, and $0 for the year ended December 31, 2004.

Employment Agreements

Effective October 20, 2005, in connection with the transaction described in Note 9 below, the two co-founders of Cardium entered into two-year employment agreements with the Company. Their combined base annual compensation under the agreements is $675,000. They are each entitled to a severance benefit if they are terminated without cause in an amount equal to the greater of one year’s annual salary or the salary payable on the remaining term of the employment agreement at the time of termination.

Since November 2005, a stockholder has been providing consulting services to the Company pursuant to a Consulting Services Agreement. Under the agreement, the stockholder is paid consulting fees of $8,333 per month. The agreement may be terminated by either party at any time.

Note 7. Income Taxes

As of December 31, 2005, we had federal net operating loss carryforwards of approximately $76,900,000 expiring in various years through 2024, portions of which may be used to offset future taxable income, if any. We have a deferred tax asset arising from such operating losses for which a full valuation allowance has been established due to the uncertainty as to their realizability in future periods.

We acquired $71,500,000 of this federal net operating loss carryforward through the reverse merger with Aries Ventures Inc. Due to the restrictions imposed by the Internal Revenue Code of 1986, as amended, regarding substantial changes in ownership of companies with loss carryforwards, the utilization of our federal net operating loss carryforwards will likely be substantially limited as a result of cumulative changes in stock ownership.

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Our net deferred tax assets (using a federal corporate income rate of approximately 34%) consisted of the following:

	December 31,
	2005			2004
Deferred tax assets:
Operating loss carryforwards	$	28,828,000		$	—
Less: Valuation allowance		(28,828,000	)		—
Net deferred tax assets	$	—		$	—

As a result of our significant operating loss carryforwards and the corresponding valuation allowance, no income tax benefit has been recorded at December 31, 2005 and 2004. The provision for income taxes using the statutory federal tax rate as compared to our effective tax rate is summarized as follows:

	December 31,
	2005		2004
Tax benefit at statutory rate	(34.0	)%	(34.0	)%
State income taxes	(8.8	)%	(8.8	)%
Adjustments to change in valuation allowance	42.8		42.8
	—		—

Note 8. Stockholders’ Equity

Common Stock

Cardium was incorporated in Delaware on December 22, 2003. On December 31, 2003, we sold 1,700,000 shares of our common stock to our founders and executives for $17,000. On April 1, 2005, we issued an additional 3,800,000 shares of our common stock (of which 3,650,000 shares were issued to our co-founders and the remainder was issued to another employee of Cardium), in exchange for services and reimbursement of expenses valued at $38,000.

On May 19, 2005, our Board of Directors and stockholders approved an increase in our authorized shares of common stock from 5,500,000 shares to 100,000,000 shares and a change in the par value of our shares of common stock from $0.001 to $0.0001.

On May 20, 2005, we issued 350,000 shares of our common stock to our co-founders in exchange for services and reimbursement of expenses valued at $3,500. On July 1, 2005, we sold 2,000,000 shares of our common stock for $20,000 to one of our founders.

On October 20, 2005, we completed a reverse merger with Aries Ventures Inc., a publicly-traded “shell” company, whereby a newly formed and wholly-owned subsidiary of Aries Ventures was merged with and into Cardium. At the time of the reverse merger, Cardium had 7,850,000 shares of its common stock outstanding and Aries Ventures had 2,032,226 shares of its common stock outstanding. In connection with the reverse merger, a three year warrant to purchase 400,000 shares of our common stock at an exercise price of $1.75 per share was issued to an Aries stockholder who held of record or beneficially more than 45% of the outstanding common stock of Aries before the reverse merger, as consideration for such stockholder’s agreement not to sell any of such stockholder’s shares for a specified period of time.

Concurrently with the reverse merger, we closed a private placement of 19,325,651 shares of common stock at a purchase price of $1.50 per share and received net proceeds of $25,542,389. Investors who invested at least $1,000,000 in shares of common stock received a three-year warrant to buy 10% of the number of shares of

48

common stock purchased in the private placement, at an exercise price of $1.75 per share. Warrants to purchase 424,263 shares of common stock, in the aggregate, were issued to such investors.

In October 2005, one of our executive officers was issued 41,924 shares of our common stock as repayment for advances totaling $62,882 that had been made to fund our early start-up costs.

2005 Equity Incentive Plan

We have an equity incentive plan established in 2005 under which 5,665,856 shares of our common have been reserved for issuance to employees, non-employee directors and consultants of the Company. In November 2005, options to purchase 2,095,000 shares of our common stock, in the aggregate, were granted under the plan. The options vest over three years, have an exercise price of $1.95 per share, and a term of ten years.

The following table summarizes the option activity under our 2005 Equity Incentive Plan.

	Number of Options	Exercise Price		Remaining Contractual Life (in years)
Balance outstanding, December 31, 2004	—	$	—	—
Options issued	2,095,000		1.95	10
Options exercised	—		—	—
Options expired	—		—	—
Balance outstanding, December 31, 2005	2,095,000	$	1.95	10
Options exercisable at December 31, 2005	—	$	—	10

Warrants

The following table summarizes the warrant activity for the years ended December 31, 2005 and 2004.

	Number of Warrants	Exercise Price		Remaining Contractual Life (in years)
Balance outstanding, December 31, 2003	—	$	—	—
Warrants issued	—		—	—
Warrants exercised	—		—	—
Warrants expired	—		—	—
Warrants cancelled	—		—	—
Balance outstanding, December 31, 2004	—		—	—
Warrants issued	2,856,818	$	1.50-1.75	3-5
Warrants exercised	—		—	—
Warrants expired	—		—	—
Warrants cancelled	—		—	—
Balance outstanding, December 31, 2005	2,856,818	$	1.50-1.75	3-5
Warrants exercisable at December 31, 2005	2,856,818	$	1.50-1.75	3-5

Note 9. Reverse Merger Transaction

On October 20, 2005, we completed a reverse merger with Aries Ventures Inc., a publicly-traded “shell” company, whereby a newly formed and wholly-owned subsidiary of Aries Ventures was merger with and into

49

Cardium. For financial reporting purposes, Cardium was the acquirer in the merger and the merger was accounted for as a reverse merger. At the time of the reverse merger, Cardium had 7,850,000 shares of its common stock outstanding and Aries Ventures had 2,032,226 shares of its common stock outstanding.

Concurrently with the reverse merger, we closed a private placement of 19,325,651 shares of common stock at a purchase price of $1.50 per share and received net proceeds of $25,542,389. Investors who invested at least $1,000,000 in shares of common stock received a three-year warrant to buy 10% of the number of shares of common stock purchased in the private placement, at an exercise price of $1.75 per share. Warrants to purchase 424,263 shares of common stock, in the aggregate, were issued to such investors.

In connection with the private placement, we incurred selling commissions, marketing allowances and management fees payable to the placement agent totaling approximately $3,049,000, and legal, accounting and other fees and expenses totaling approximately $397,000. In addition, five-year warrants to purchase 2,032,555 shares of our common stock were issued to the placement agent at an exercise price of $1.50 per share.

Note 10. Subsequent Events

In January 2006, our stockholders approved an increase in our authorized capital stock from 100,000,000 shares of common stock to 240,000,000 shares (200,000,000 shares of common stock and 40,000,000 shares of preferred stock).

Upon joining our Board of Directors in January 2006, each non-employee director received an option under our 2005 Equity Incentive Plan to buy 100,000 shares of our common stock, vesting over a four year period, with an exercise price equal to $2.75 per share, and a ten year term. In addition, an executive vice president hired in January 2006 received options under our 2005 Equity Incentive Plan to buy 500,000 shares of our common stock, vesting over four years, with a ten year term and an exercise price of $2.75 per share.

On March 8, 2006, Cardium, through its newly-formed, wholly-owned subsidiary, Innercool Therapies, Inc., a Delaware corporation, acquired substantially all of the assets and the business of Innercool Therapies, Inc., an unaffiliated California corporation, then in the development stage, engaged in the business of researching, developing, manufacturing, marketing, selling and distributing products and services related to endovascular temperature control therapy. As partial consideration therefore, Cardium issued to the seller 2,500,000 shares of Cardium’s common stock. In addition, as part of the acquisition, Cardium agreed to (i) deliver to the seller $5,000,000 in cash or shares of Cardium’s common stock, at Cardium’s election, if net sales revenue from certain of Innercool’s products acquired in the acquisition equals or exceeds $20,000,000 in any one calendar year beginning with 2006 and ending December 31, 2011; (ii) assume certain liabilities of Innercool Therapies in the aggregate amount of approximately $580,000; and (iii) pay certain transaction costs associated with the acquisition and amounts that may be payable to former employees of the seller for accrued and unpaid vacation estimated, in the aggregate, to be approximately $170,000, as well as certain audit fees and expenses. The last reported sale price for Cardium’s common stock before the close of the Innercool transaction was $2.35 per share.

As part of the acquisition, Cardium, through its wholly-owned Innercool subsidiary, acquired all of the rights and assumed all of the obligations of the seller under the terms of a lease for approximately 24,000 square feet in San Diego, California, and a sublease of approximately 6,602 square feet of such facilities to an unaffiliated third party. The base monthly rent under the lease is $25,200, plus the payment of the landlord’s operating expenses. The monthly base rent payable to Innercool under the terms of the sublease is approximately $7,262, plus sublessee’s pro rata share of landlord’s operating expenses. The lease and the sublease both expire October 31, 2007.

Also assigned to and assumed by Cardium’s Innercool subsidiary in connection with the above described acquisition was a Master License Agreement with SurModics, Inc. Pursuant to the terms of the license, SurModics grants to Innercool a worldwide license with respect to medical products that are surface-treated with

50

photo-reactive polyvinylpyrrolidone, photo-reactive heparin, diphoto diquat (photo-reactive crosslinking compound) or any combination of such photo-reactive reagents, under SurModics’ trade secrets and other technical information relating to the surface-treatment of medical devices and which SurModics has the right to transmit to others, as well as certain patent applications and patents. In connection with the license, Innercool is obligated to pay SurModics a royalty equal to the greater of: (A) earned royalties calculated as a percentage of net sales of licensed products sold in each calendar year (the percentage used in each calculation during each calendar year is based on the cumulative net sales of licensed product in the calendar year as follows: 2.5% on the first $15 million of net sales; 2.25% on the next $15 million; and 2.00% on net sales over $30 million); or (B) quarterly minimum royalties that increase on an annual basis. Quarterly minimum royalties for 2006 are $20,000. In addition, Innercool grants to SurModics a noncancelable, nonexclusive, sublicensable, worldwide license to make, have made, use and sell products and processes covered by any Innercool latent reactive chemical patent, to the extent such manufacture, sale or use is covered by any claim of any patent that SurModics has the right to license or may have licensed to others, and SurModics agrees to pay to Innercool five percent (5%) of the royalties SurModics receives from its sublicensees based on sales of products that but for such sublicenses would infringe Innercool’s patents.

Effective March 8, 2006, in connection with the above described acquisition, Cardium’s Innercool subsidiary entered into a three year employment agreement with a former executive officer of the seller for an annual base salary of initially $266,000, and bonus compensation of up to 40% of base salary. If he is terminated without cause or if he terminates his employment for good reason, he is entitled to a severance benefit in an amount equal to one year’s base salary and a pro rata share of any bonus that he would have otherwise been eligible to receive during such one year.

In March 2006, in connection with our acquisition of the business of Innercool Therapies, Inc., we issued warrants to purchase up to 700,000 shares of our common stock, in the aggregate, to approximately fifteen individuals who were previously employees of Innercool Therapies and who were retained as employees or consultants of Cardium or its subsidiaries, at an exercise price of $2.35, with a ten year term, and vesting over a three year period.

Also in connection with our acquisition of the business of Innercool Therapies, Inc., we expect to file a post-effective amendment to our resale registration statement on Form SB-2, as previously amended on February 10, 2006, to reflect the acquisition transaction, as well as the assets acquired from Innercool. The selling stockholders named in the resale registration statement may not resell any shares pursuant to the registration statement until the post-effective amendment is declared effective by the Securities and Exchange Commission.

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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES

We maintain certain disclosure controls and procedures. They are designed to help ensure that material information is: (1) gathered and communicated to our management, including our principal executive and financial officers, on a timely basis; and (2) recorded, processed, summarized, reported and filed with the Securities and Exchange Commission as required under the Securities Exchange Act of 1934, as amended.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2005. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective for their intended purpose described above. There were no changes to our internal controls during the fourth quarter ended December 31, 2005 that have materially affected, or that are reasonably likely to materially affect, our internal controls.

ITEM 8B. OTHER INFORMATION

None.

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PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Our Directors and Executive Officers

Our Board of Directors is responsible for the overall management of the Company and elects the executive officers of the Company who are responsible for administering our day-to-day operations. The Board of Directors is divided into three classes, designated Class I, Class II and Class III. Members of each class are elected to serve for a three-year term. The three-year terms of the members of each class are staggered, so that each year the members of a different class are due to be elected at our annual meeting of stockholders. The Class I directors are serving a term that will expire at our next annual meeting of stockholders to be held on June 6, 2007. The Class II directors are serving a term that will expire at the next annual meeting thereafter, and the Class III directors are serving a term that will expire at the next annual meeting thereafter.

The name, age, position and business experience of each of our directors and executive officers, and other significant employees of Cardium and its subsidiaries, are shown below.

Christopher J. Reinhard (Age 52)

Chairman of the Board (Class III Director), Chief Executive Officer, President and Treasurer

Mr. Reinhard is a co-founder of Cardium and has served as a director and the Chief Executive Officer, President and Treasurer of Cardium since its inception in December 2003. Mr. Reinhard has also served as a director and the Chief Executive Officer, President and Treasurer of Aries Ventures, Inc., our wholly-owned subsidiary, since its inception in January 2006, and as a director and the Chief Executive Officer and Treasurer of Innercool Therapies, Inc., a wholly-owned subsidiary, since March 2006. Previously, he served as a director and the Chief Executive Officer, President and Treasurer of Aries Ventures Inc. from October 20, 2005 through its merger with Cardium in January 2006. He also served as Chief Financial Officer of Aries Ventures Inc. from October 20, 2005 to November 16, 2005. For the past nine years, Mr. Reinhard has focused on the commercial development of cardiovascular growth factor therapeutics. Before founding Cardium, he was a co-founder of Collateral Therapeutics, Inc., a former Nasdaq listed public company, and served as a director (from 1995) and President (from 1999) of Collateral Therapeutics until the completion of its acquisition by Schering AG Group (Germany) in 2002. He continued as Chief Executive of Collateral Therapeutics through December 2004. Mr. Reinhard played a major role in effecting Collateral Therapeutics’ initial public offering led by Bear Stearns & Co. in 1998, and the sale of Collateral Therapeutics to Schering. Mr. Reinhard has also been Executive Chairman (since 2004) of Artes Medical, Inc., a privately-held specialty pharmaceutical and medical device company. Previously, Mr. Reinhard was Vice President and Managing Director of the Henley Group, a publicly-traded diversified industrial and manufacturing group, and Vice President of various public and private companies created by the Henley Group through spin-out transactions, including Fisher Scientific Group, a leading international distributor of laboratory equipment and test apparatus for the scientific community, Instrumentation Laboratory and IMED Corporation, a medical device company. Mr. Reinhard received a B.S. in Finance and an M.B.A. from Babson College.

Tyler M. Dylan, Ph.D., J.D. (Age 44)

Director (Class II), Chief Business Officer, General Counsel, Executive Vice President and Secretary

Dr. Dylan is a co-founder of Cardium and has served as a director and the General Counsel, Executive Vice President and Secretary of Cardium since its inception in December 2003, and as the Chief Business Officer of Cardium since May 2005. Dr. Dylan has also served as a director and the Chief Business Officer, General Counsel, Executive Vice President and Secretary of Aries Ventures, Inc., our wholly-owned subsidiary, since its inception in January 2006, and of Innercool Therapies, Inc., also a wholly-owned subsidiary, since March 2006. Previously, he served as the Chief Business Officer, General Counsel, Executive Vice President and Secretary of

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Aries Ventures Inc. from October 20, 2005 through its merger with Cardium in January 2006. Dr. Dylan has focused on the development of cardiovascular growth factor therapeutics for the last seven years. He served as General Counsel (from 1998) and Vice President (from 1999) of Collateral Therapeutics until the completion of its acquisition by Schering in 2002. He continued as an executive officer of Collateral Therapeutics until October 2003. Dr. Dylan played a major role in developing Collateral Therapeutics’ intellectual property portfolio, in furthering its business development efforts and in advancing the company toward and through its acquisition by Schering. In addition to his work with Collateral Therapeutics, Dr. Dylan has advised both privately-held and publicly-traded companies that are developing, partnering or commercializing technology-based products. Before joining Collateral Therapeutics, Dr. Dylan was a partner of the international law firm of Morrison & Foerster LLP. In his law firm practice, Dr. Dylan focused on the development, acquisition and enforcement of intellectual property rights, as well as related business and transactional issues. He also has worked with both researchers and business management in the biotech and pharmaceutical industries. Dr. Dylan received a B.Sc. in Molecular Biology from McGill University, Montreal, Canada, a Ph.D. in Biology from the University of California, San Diego, where he performed research at the Center for Molecular Genetics, and a J.D. from the University of California, Berkeley.

Dennis M. Mulroy (Age 51)

Chief Financial Officer

Mr. Mulroy has been the Chief Financial Officer of Cardium since November 2005, and has served as a director and the Chief Financial Officer of Aries Ventures, Inc., our wholly-owned subsidiary, since its inception in January 2006, and of Innercool Therapies, Inc., also a wholly-owned subsidiary, since March 2006. He was also the Chief Financial Officer of Aries Ventures Inc. from November 2005 through its merger with Cardium in January 2006. Before joining Cardium, Mr. Mulroy was Chief Financial Officer of Molecular Imaging Corporation, a publicly-traded diagnostic services company (January 2004-November 2005), SeraCare Life Sciences, Inc., a publicly-traded company (November 2001-June 2003), Bioceutix Inc. (January 2001-November 2001) and Bidland Systems, Inc. (July 2000-December 2000). Mr. Mulroy also was employed with Ernst & Young in San Diego, California and is a Certified Public Accountant in the State of California. He received his degree in Business Administration with an emphasis in Accounting from the University of San Diego.

Randall Moreadith, M.D., Ph.D. (Age 52)

Executive Vice President and Chief Medical Officer

Dr. Moreadith has been an Executive Vice President and the Chief Medical Officer of Cardium since January 2006. Before joining Cardium, Dr. Moreadith served as Chief Medical Officer of Renovis, Inc., a publicly-traded pharmaceutical company, from August 2004 to December 2005. He was a co-founder of ThromboGenics Ltd., a company focused on biotherapeutics for the treatment of vascular diseases, including acute ischemic stroke, and served as the company’s President and Chief Operating Officer from December 1998 to December 2003. From April 1996 to February 1997, Dr. Moreadith served as Principal Medical Officer of Quintiles, Inc., and was also a co-founder of the Cardiovascular Therapeutics Group. He received a B.S. in Biology and Chemistry from North Carolina State University, an M.D. from Duke University and a Ph.D. in Biochemistry from Johns Hopkins University, and was a Howard Hughes Medical Institute Postdoctoral Fellow in Genetics at Harvard Medical School. His faculty appointments include the University of Texas Southwestern Medical Center where he was an Established Investigator of the American Heart Association.

Edward William Gabrielson, M.D. (Age 53)

Director (Class I)

Dr. Gabrielson has served as a director of Cardium since January 2006. He has more than 25 years of experience as a physician and faculty member at Johns Hopkins University. Currently, Dr. Gabrielson is a Professor of Pathology and Oncology at Johns Hopkins University School of Medicine, and Professor of Environmental Health Sciences at the Johns Hopkins University Bloomberg School of Public Health. He is also

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an attending physician at the Johns Hopkins Hospital and Bayview Medical Center. Dr. Gabrielson received his Bachelor of Science in Biology and Chemistry from the University of Illinois and an M.D. from Northwestern University Medical School.

Murray Hunter Hutchison (Age 67)

Director (Class III)

Mr. Hutchison has served as a director of Cardium since January 2006. He served 24 years as Chief Executive Officer and Chairman of International Technology Corp., a large publicly-traded diversified environmental engineering firm, until his retirement in 1996. Since his retirement, Mr. Hutchison has been self-employed with his business activities involving primarily the management of an investment portfolio. Mr. Hutchison currently serves as a director of Jack in the Box, Inc., a publicly-traded fast food restaurant chain, and as a director of Cadiz, Inc., a publicly-traded company focused on land acquisition and water development activities, and has served on the audit committee of several publicly-traded companies. Mr. Hutchison holds a B.S. in Economics and Foreign Trade.

Gerald J. Lewis (Age 72)

Director (Class II)

Justice Lewis has served as a director of Cardium since January 2006. He served on a number of courts in the California judicial system, and retired from the Court of Appeal in 1987. He has served as an arbitrator or mediator on a large number of cases and was Of Counsel to Latham & Watkins from 1987 to 1997. He has been a director of several publicly-traded companies, including Henley Manufacturing, Wheelabrator Technologies, Fisher Scientific International, California Coastal Properties and General Chemical Group, and was Chairman of the audit committee of several of these companies. Since 2000, Justice Lewis has been a director of Invesco Mutual Funds, which became the AIM Mutual Funds in 2003.

Lon Edward Otremba (Age 49)

Director (Class I)

Mr. Otremba has served as a director of Cardium since January 2006. He is the Principal Managing Partner of Lon E. Otremba, Strategic and Operational Management Advisory, a management advisory firm. Previously, Mr. Otremba was Chief Executive Officer (September 2003-August 2005) and a director (September 2003-July 2005) of Muzak, LLC; Executive Vice President (2001-2003) of Time Warner; and President and a director (1997-2000) of Mail.com (now Easy Link Services Corp.). He currently sits on the board of a non-profit, independent school in Roslyn, New York.

Ronald I. Simon, Ph.D. (Age 67)

Director (Class III)

Dr. Simon has served as a director of Cardium since January 2006 and is currently a financial consultant to various businesses. Since 2003, Dr. Simon has been a Director of WFS Financial Inc., a publicly-traded financial services company. Formerly, he was a director of Collateral Therapeutics from 1998 until its acquisition by Schering in 2002. From 1995 through 2002, Dr. Simon was a director of SoftNet Systems, Inc., and since 2002, has been a director of its successor company, American Independence Corp., a holding company engaged principally in the health insurance and reinsurance business. He was a director of BDI Investment Corporation, a closely held regulated investment company, from February 2003 until its liquidation in early 2005 and served as Chief Financial Officer for Wingcast, LLC, a developer of automotive telematics from 2001 to 2002. During 2001, Dr. Simon served as Acting Chairman, Chief Executive Officer and Chief Financial Officer for SoftNet Systems, Inc. He also served as Executive Vice President and Chief Financial Officer of Western Water Company from 1997 to 2000, and a director of Western Water Company from 1999 through 2001. Dr. Simon was Managing Director—Chief Financial Officer of The Henley Group from 1986 to 1990. Dr. Simon earned a

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B.A. from Harvard University, an M.A. from Columbia University, and a Ph.D. from Columbia University Graduate School of Business.

Michael Magers (Age 57)

President and Chief Operating Officer of Innercool

Mr. Magers has been the President and Chief Operating Officer of Innercool since March 2006. Previously, he served as the President and Chief Operating Officer of Post Cooling Corporation (previously Innercool Therapies, Inc.) from 1998 through the completion of Cardium’s acquisition of its business in March 2006. He has more than 30 years’ experience in the research, development, manufacturing and marketing of innovative medical devices. Mr. Magers was Vice President, Research & Development of Mallinckrodt (Tyco) (1994-1998), Director of Technology of Ohmeda – Medical Devices Division (1990-1994), and Vice President, Technology of Baxter Edwards Critical Care Division (1976-1990). Mr. Magers has an M.S. in Engineering and an M.B.A. in Finance and Marketing from the University of California, Irvine.

Board Committees

The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating Committee. Membership on each committee is limited to independent directors as defined under the listing standards of the Nasdaq Stock Market. In addition, members of the Audit Committee also meet the independence standards for audit committee members adopted by the SEC. The members of our Board committees are as follows:

Audit Committee	Compensation Committee	Nominating Committee
Ronald I. Simon (Chairman)*	Gerald J. Lewis (Chairman)	Murray H. Hutchison (Chairman)
Murray H. Hutchison*	Murray H. Hutchison	Edward W. Gabrielson
Gerald J. Lewis	Ronald I. Simon	Lon E. Otremba

* The Board of Directors has determined that Mr. Hutchison and Dr. Simon are each an “audit committee financial expert” as defined by applicable rules adopted by the SEC.

Audit Committee. The general function of the Audit Committee is to oversee the accounting and financial reporting processes of the Company and the audits of our financial statements. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the accounting, reporting and financial practices of the Company, including the integrity of our financial statements and disclosures; the surveillance of administration and financial controls and our compliance with legal and regulatory requirements; the qualification, independence and performance of our independent auditing firm; and the performance of our internal audit function and control procedures. The Audit Committee is responsible for reviewing and recommending matters to the Board of Directors, but has no authority to make final decisions except as set forth in its charter. The Audit Committee has the sole authority to appoint, determine funding for, and oversee our independent auditing firm.

Compensation Committee. The members of our Compensation Committee are Justice Lewis (Chairman), and Messrs. Hutchison and Simon. Among other things, the Compensation Committee administers our 2005 Equity Incentive Plan in connection with grants of awards to employees or consultants other than officers and directors, and recommends to the Board the amount of compensation to be paid or awarded to our directors, officers and certain other personnel including salary, bonuses, stock option grants, other cash or stock awards under our incentive compensation plans as in effect from time to time, retirement and other compensation.

Nominating Committee. The members of our Nominating Committee are Mr. Hutchison (Chairman), Dr. Gabrielson and Mr. Otremba. The purpose of the Nominating Committee is to assist the Board of Directors in identifying qualified individuals to become members of the Board and in determining the composition of the Board and its various committees. The Nominating Committee periodically reviews the qualifications and independence of directors, selects candidates as nominees for election as directors, recommends directors to

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serve on the various committees of the Board, reviews director compensation and benefits, and oversees the self-assessment process of each of the committees of the Board of Directors.

The Nominating Committee considers director nominee recommendations from a variety of sources, including nominees recommended by stockholders. Persons recommended by stockholders will be evaluated on the same basis as persons suggested by others. Stockholder recommendations may be made in accordance with our Stockholder Communications Policy described below.

Stockholder Communications with Directors

The Board of Directors has adopted a Stockholder Communications Policy to provide a process by which our stockholders may communicate with the Board. Under the policy, stockholders may communicate with the Board of Directors as a whole, with the independent directors, with a committee of the Board, or with a particular director. Stockholders wishing to communicate directly with our Board of Directors may do so by mail addressed to the Company at 3611 Valley Centre Drive, Suite 525, San Diego, California, 92130, Attn: Corporate Secretary. The envelope must contain a clear notation indicating that the enclosed letter is a “Stockholder-Board Communication” or “Stockholder-Director Communication.” All such letters must identify the author as a stockholder of the Company and clearly state whether the intended recipients are all members of the Board of Directors, all independent directors, all members of a committee of the Board, or certain specified individual directors. The Corporate Secretary will review the communications received from stockholders at the above designated address on a regular basis and if they are relevant to the Company’s operations and policies, will copy and forward the communications to the appropriate director or directors as expeditiously as reasonably practicable. By way of example, communications that are unduly hostile, threatening, obscene, illegal or similarly inappropriate will not be forwarded to any director. Matters deemed to be trivial in the sole discretion of the Corporate Secretary will be delivered to the appropriate director or directors at the next regularly scheduled meeting of the Board of Directors. The Corporate Secretary will periodically provide the Board with a summary of all communications received that were not forwarded and will make those communications available to any director upon request. The Board of Directors will determine whether any communications sent to the Board should be properly addressed by the entire Board or a committee thereof and whether a response to the communication is warranted.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and any person who owns more than 10% of our common stock, to file with the Securities and Exchange Commission initial reports of ownership of our common stock within 10 days of becoming a director, executive officer or greater than 10% stockholder, and reports of changes in ownership of our common stock before the end of the second business day following the day on which a transaction resulting in a change of ownership occurs. Directors, executive officers and greater than 10% stockholders are required by SEC regulations to provide us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on our review of the copies of such reports provided to us and certain written representations that no other reports were required, during the fiscal year ended December 31, 2005, all Section 16(a) filing requirements applicable to our directors, executive officers and greater than 10% stockholders were complied with and there were no delinquent filers.

Code of Ethics

We have adopted a Code of Ethics that applies to all of our executive officers. A copy of our Code of Ethics is available on our website at www.cardiumthx.com. A copy also will be provided, free of charge, upon written request to the Company at 3611 Valley Centre Drive, Suite 525 San Diego, California 92130, Attn: Chief Business Officer.

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ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

Except as noted, the following table shows the compensation earned by or paid or awarded to our named executive officers for all services rendered by them in all capacities to Cardium and its subsidiaries during each of the last three fiscal years ended December 31. For the purpose of the information provided under this Item 10, our named executive officers include our Chief Executive Officer and any other executive officer whose total salary and bonus for the applicable fiscal year exceeded $100,000.

			Annual Compensation						Long-Term Compensation
Name and Principal Position	Fiscal Year		Salary ($)		Bonus ($)			Other Annual Compensation ($)(4)	Securities Underlying Options (#)	All Other Compensation ($)(5)
Robert Weingarten(1) Former President and Chief Financial Officer of Aries Ventures Inc.	2005 2004 2003	(2) (2) (2)	$	18,000 60,000 60,000	$	50,000 —   —	(3)	—   —   —	—   —   —		—   —   —
Christopher J. Reinhard Chief Executive Officer, President and Treasurer	2005 2004 2003		$	54,519 —   —		—   —   —		—   —   —	—   —   —	$	1,000 —   —

⁽¹⁾ All compensation shown for Mr. Weingarten was paid by Aries Ventures Inc. before its reverse merger with Cardium in October 2005.

⁽²⁾ Refers to Aries Ventures’ fiscal year ended September 30.

⁽³⁾ Mr. Weingarten’s bonus was recorded as a liability on Aries Ventures’ books as of September 30, 2005, but was not paid until October 2005.

⁽⁴⁾ Includes annual compensation not properly categorized as salary or bonus, such as perquisites and other personal benefits, unless the total amount of such compensation is the lesser of either $50,000 or 10% of the total of annual salary and bonus.

⁽⁵⁾ Includes premiums paid by the Company for term life insurance and long-term disability.

Option Grants, Aggregated Option Exercises and Fiscal Year End Option Values

No options were granted to or exercised by our named executive officers during the fiscal year ended December 31, 2005, and none of our named executive officers held any options as of December 31, 2005.

Employment Agreements with Named Executive Officers

Effective as of October 20, 2005, the Company entered into a two-year employment agreement with Mr. Reinhard pursuant to which Mr. Reinhard will receive an annual salary of $350,000. Mr. Reinhard may also receive certain employee benefits available generally to all employees or specifically to executives, including bonus and/or incentive equity compensation in a manner and at a level determined from time to time by the Board of Directors. Under the terms of his employment agreement, Mr. Reinhard will be entitled to a severance benefit, including standard employee benefits available to other executive officers, if he is terminated by the Company without cause in an amount equal to the greater of one year’s annual salary or the salary payable on the remaining term of the employment agreement at the time of termination. In addition, upon a change of control or termination by the Company without cause, any and all then outstanding options held by Mr. Reinhard shall become fully exercisable and remain so for the remaining term of the option.

Director Compensation

Each non-employee director receives an annual retention fee of $24,000, payable quarterly, and members of the Audit Committee receive an additional annual fee of $10,000 for their service on the Audit Committee.

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Directors appointed during a term year may receive a proportional amount of the annual retention fee for that year. Options and other equity awards may be granted to directors on a discretionary basis. Upon joining the Board of Directors, each non-employee director received an option under our 2005 Equity Incentive Plan to buy 100,000 shares of our common stock, vesting over a four year period, with an exercise price equal to $2.75 per share (the last reported sale price of our common stock on the date of grant), and a ten year term. Neither Mr. Reinhard nor Dr. Dylan receive any additional compensation for serving as a director. Directors are reimbursed for travel and other expenses incurred in connection with attending Board and committee meetings. Mr. Weingarten, a former director of Aries Ventures Inc., received a retention fee of $10,000 for serving as a member of the Board of Directors of Aries Ventures from and after its reverse merger with Cardium in October 2005 until our annual meeting of stockholders held in January 2006.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes equity compensation plans approved by stockholders and equity compensation plans that were not approved by stockholders as of December 31, 2005.

	(a)	(b)		(c)
Plan Category	Number of securities to be issued upon exercise of outstanding options and rights	Weighted-average exercise price of outstanding options and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by stockholders	2,095,000	$	1.95	3,570,856
Equity compensation plans not approved by stockholders	—		—	—
Total	2,095,000	$	1.95	3,570,856

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Stock Holdings of Certain Owners and Management

The following table sets forth information on the beneficial ownership of our common stock by executive officers and directors, as well as stockholders who are known by us to own beneficially more than 5% of our common stock, as of March 28, 2006:

Name of Beneficial Owner	Number of Shares and Nature of Beneficial Ownership(1)		Percent of Common Stock Outstanding(2)
Christopher J. Reinhard Director, Chief Executive Officer, President and Treasurer	2,953,258		9.30	%
Tyler M. Dylan, Ph.D., J.D. Chief Business Officer, Executive Vice President, General Counsel and Secretary	2,550,000		8.03	%
Dr. Gabor M. Rubanyi Scientific Advisor	2,000,000		6.30	%
Dennis Mulroy Chief Financial Officer	0		0.00	%
Randall Moreadith, M.D., Ph.D. Executive Vice President and Chief Medical Officer	0		0.00	%
Michael Magers President and Chief Operating Officer of Innercool	0		0.00	%
Edward W. Gabrielson Director	41,666	(3)	Less than 1	%
Murray H. Hutchison Director	8,332	(3)	Less than 1	%
Gerald J. Lewis Director	41,666	(3)	Less than 1	%
Lon E. Otremba Director	41,666	(3)	Less than 1	%
Ronald I. Simon Director	8,332	(3)	Less than 1	%
All directors and executive officers as a group (ten persons)	5,644,920	(4)	17.76	%

⁽¹⁾ A person is considered to beneficially own any shares: (i) over which the person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through the exercise of stock options or warrants). Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

⁽²⁾ As of March 28, 2006, there were 31,749,801 shares of our common stock outstanding.

⁽³⁾ Includes 4,166 shares underlying options that are exercisable and an additional 4,166 shares underlying options that will become exercisable within 60 days.

⁽⁴⁾ Includes 20,830 shares underlying options that are exercisable and an additional 20,830 shares underlying options that will become exercisable within 60 days.

From time to time, the number of our shares held in the “street name” accounts of various securities dealers for the benefit of their clients or in centralized securities depositories may exceed 5% of the total shares of our common stock outstanding.

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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In October 2005, Mr. Reinhard was issued 41,924 shares of our common stock as repayment for advances totaling $62,882 that had been made to fund our early start-up costs.

From November 2005 until March 2006, Dr. Gabor Rubanyi provided consulting services to the Company under the terms of a Consulting Services Agreement. Dr. Rubanyi was paid a consulting fee of $8,333 per month. In March 2006, Dr. Rubanyi became an employee and a Scientific Advisor of Cardium.

In March 2006, Cardium, through its newly-formed, wholly-owned subsidiary, Innercool Therapies, Inc., a Delaware corporation, acquired substantially all of the assets and the business of Innercool Therapies, Inc., an unaffiliated California corporation engaged in the business of researching, developing, manufacturing, marketing, selling and distributing products and services related to endovascular temperature control therapy. As partial consideration therefore, Cardium issued to the seller 2,500,000 shares of Cardium’s common stock. In addition, as part of the acquisition, Cardium agreed to deliver to the seller $5,000,000 in cash or shares of Cardium’s common stock, at Cardium’s election, if net sales revenue from certain of Innercool’s products acquired in the acquisition equals or exceeds $20,000,000 in any one calendar year beginning with 2006 and ending December 31, 2011. Michael Magers, the President and Chief Operating Officer of Cardium’s Innercool subsidiary and the former President and Chief Operating Officer of the seller, may receive up to 3.52% of the 2,500,000 shares delivered to the seller, subject to certain escrow and holding requirements applicable to such shares, and 3.52% of the amount payable if the net sales revenue milestones are accomplished.

ITEM 13. EXHIBITS

The following exhibit index shows those exhibits filed with this report and those incorporated by reference:

EXHIBIT INDEX

Exhibit Number	Description	Incorporated By Reference To
2.1	Agreement and Plan of Merger dated as of October 19, 2005 and effective as of October 20, 2005, by and among Aries Ventures Inc., Aries Acquisition Corporation and Cardium Therapeutics, Inc.	Exhibit 2.1 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
2.2	Certificate of Merger of Domestic Corporation as filed with the Delaware Secretary of State on October 20, 2005	Exhibit 2.1 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
2.3	Agreement and Plan of Merger dated January 17, 2006, between Aries Ventures Inc. and Cardium Therapeutics, Inc.	Exhibit 2.4 of our Registration Statement on Form SB-2 (File No. 333-131104), filed with the commission on January 18, 2006
2.4	Certificate of Merger, as filed with the Delaware Secretary of State on January 17, 2006	Exhibit 2.5 of our Registration Statement on Form SB-2 (File No. 333-131104), filed with the commission on January 18, 2006
3(i)	Second Amended and Restated Certificate of Incorporation of Cardium Therapeutics, Inc. as filed with the Delaware Secretary of State on January 13, 2006	Exhibit 3(i) of our Registration Statement on Form SB-2 (File No. 333-131104), filed with the commission on January 18, 2006
3(ii)	Amended and Restated Bylaws of Cardium Therapeutics, Inc. as adopted on January 12, 2006	Exhibit 3(ii) of our Registration Statement on Form SB-2 (File No. 333-131104), filed with the commission on January 18, 2006

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Exhibit Number	Description	Incorporated By Reference To
4.1	Form of Warrant issued to National Securities Corporation as Placement Agent	Exhibit 4.1 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
4.2	Form of Warrant issued to Lead Investors and Mark Zucker	Exhibit 4.2 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
4.3	Form of Lock-Up Agreement executed by officers, directors and employees of Cardium Therapeutics, Inc.	Exhibit 4.3 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
4.4	Form of Warrant issued to employees and consultants of Innercool Therapies, Inc.	Exhibit 4.1 of our Current Report on Form 8-K dated March 8, 2006, filed with the commission on March 14, 2006
4.5	Form of Common Stock Certificate for Cardium Therapeutics, Inc.	Filed herewith
10.1	Transfer, Consent to Transfer, Amendment and Assignment of License Agreement effective as of August 31, 2005, by and among New York University, Collateral Therapeutics, Inc. and Cardium Therapeutics, Inc.	Exhibit 10.1 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.2	Transfer, Consent to Transfer, Amendment and Assignment of License Agreement effective as of August 31, 2005, by and among Yale University, Schering Aktiengesellschaft and Cardium Therapeutics, Inc.	Exhibit 10.2 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.3	Transfer, Consent to Transfer, Amendment and Assignment of License Agreement effective as of July 31, 2005, by and among the Regents of the University of California, Collateral Therapeutics, Inc. and Cardium Therapeutics, Inc.	Exhibit 10.3 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.4	Transfer, Consent to Transfer, Amendment and Assignment of License Agreement effective as of July 31, 2005, by and among the Regents of the University of California, Collateral Therapeutics, Inc. and Cardium Therapeutics, Inc.	Exhibit 10.4 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.5	Technology Transfer Agreement effective as of October 13, 2005, by and among Schering AG, Berlex, Inc., Collateral Therapeutics, Inc. and Cardium Therapeutics, Inc.	Exhibit 10.5 of Aries’ Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.6	Amendment to the Exclusive License Agreement for “Angiogenesis Gene Therapy” effective as of October 20, 2005, between the Regents of the University of California and Cardium Therapeutics, Inc.	Exhibit 10.6 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.7	Amendment to License Agreement effective as of October 20, 2005, by and between New York University and Cardium Therapeutics, Inc.	Exhibit 10.7 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005

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Exhibit Number	Description	Incorporated By Reference To
10.8	Second Amendment to Exclusive License Agreement effective as of October 20, 2005, by and between Yale University and Cardium Therapeutics, Inc.	Exhibit 10.8 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.9	2005 Equity Incentive Plan as adopted effective as of October 20, 2005*	Exhibit 10.9 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.10	Employment Agreement dated as of October 20, 2005 by and between Aries Ventures Inc. and Christopher Reinhard*	Exhibit 10.10 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.11	Employment Agreement dated as of October 20, 2005 by and between Aries Ventures Inc. and Tyler Dylan*	Exhibit 10.11 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.12	Office Lease between Cardium and Kilroy Realty, L.P. dated as of September 30, 2005 and commencing on November 1, 2005	Exhibit 10.12 of our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2005, filed with the commission on December 22, 2005
10.13	Yale Exclusive License Agreement between Yale University and Schering Aktiengesellschaft dated September 8, 2000	Exhibit 10.13 of our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2005, filed with the commission on December 22, 2005
10.14	Research and License Agreement between New York University and Collateral Therapeutics, Inc. dated March 24, 1997 (with amendments dated April 28, 1998 and March 24, 2000)	Exhibit 10.14 of our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2005, filed with the commission on December 22, 2005
10.15	Exclusive License Agreement for “Angiogenesis Gene Therapy” between the Regents of the University of California and Collateral Therapeutics, Inc. dated as of September 27, 1995 (with amendments dated September 19, 1996, June 30, 1997, March 11, 1999 and February 8, 2000)	Exhibit 10.15 of our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2005, filed with the commission on December 22, 2005
10.16	Placement Agency Agreement dated July 1, 2005 by and between Cardium Therapeutics, Inc. and National Securities Corporation	Exhibit 1.1 of our Current Report on Form 8-K dated October 20, 2005, filed with the commission on October 26, 2005
10.17	Asset Purchase Agreement dated as of March 8, 2006, by and among Cardium Therapeutics, Inc., Innercool Therapies, Inc. (a Delaware corporation), and Innercool Therapies, Inc. (a California corporation) (without schedules)	Exhibit 10.1 of our Current Report on Form 8-K dated March 8, 2006, filed with the commission on March 14, 2006
10.18	Production Service Agreement effective as of January 24, 2006, by and between Molecular Medicine Bioservices, Inc. and Cardium Therapeutics, Inc.	Filed herewith
10.19	Executive Employment Agreement dated March 8, 2006 by and between Innercool Therapies, Inc. and Michael Magers*	Filed herewith

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Exhibit Number	Description	Incorporated By Reference To
10.20	Master License Agreement effective as of December 1, 1999, by and between SurModics, Inc. and Innercool Therapies, Inc.	Filed herewith
10.21	Lease dated August 12, 1997, by and between R.G. Harris Co., and Elizabeth G. Harris, Henry K. Workman and Don C. Sherwood, Trustees of the Harris Family Revocable Trust (as landlord) and Copper Mountain Networks, Inc. (as tenant)	Filed herewith
10.22	Lease Amendment No. 1 effective as of August 1, 1999, by and among R.G. Harris Co., and Elizabeth G. Harris, Henry K. Workman and Don C. Sherwood, Trustees of the Harris Family Revocable Trust (as landlord), Copper Mountain Networks, Inc. (as tenant), and Neurothermia, Inc. (as assignee)	Filed herewith
10.23	Assignment, Assumption and Consent effective as of October 2, 1999, by and among Copper Mountain Networks, Inc., Neurothermia, Inc., and R.G. Harris Co., and Elizabeth G. Harris, Henry K. Workman and Don C. Sherwood, Trustees of the Harris Family Revocable Trust	Filed herewith
10.24	Lease Amendment No. 2 effective as of October 16, 2002, by and between E.G. Sirrah, LLC, as successor-in-interest to R.G. Harris Co., and Elizabeth G. Harris, Henry K. Workman and Don C. Sherwood, Trustees of the Harris Family Revocable Trust, and Innercool Therapies, Inc. (formerly known as Neurothermia, Inc.)	Filed herewith
10.25	Sublease dated August 30, 2005, by and between Innercool Therapies, Inc., and Acadia Pharmaceuticals Inc.	Filed herewith
21	Subsidiaries of Cardium Therapeutics, Inc.	Filed herewith
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer	Filed herewith
32	Section 1350 Certification	Filed herewith

* Indicates management contract or compensatory plan or arrangement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

Marcum & Kliegman LLP has been our independent auditor since May 31, 2005. During the year ended December 31, 2005, Marcum & Kliegman performed an audit of our financial statements for the year ended December 31, 2004 and of the financial statements of Aries Ventures Inc. for its fiscal year ended September 30,

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2005. The table below shows the aggregate fees billed by Marcum & Kliegman during the year ended December 31, 2005, for professional services rendered for the audit of our annual financial statements, certain interim reviews of our financial statements, and other services provided in connection with our statutory and regulatory filings.

Before the reverse merger between Cardium and Aries Ventures in October 2005, Weinberg & Company, P.A. served as the independent auditor of Aries Ventures. The table below reflects the aggregate fees billed by Weinberg & Company for professional services rendered for the audit of the annual financial statements of Aries Ventures Inc. for its fiscal year ended September 30, 2004, the reviews of the financial statements included in the Quarterly Reports of Aries Ventures on Form 10-QSB during its fiscal years ended September 30, 2005 and 2004, and other services provided in connection with the statutory and regulatory filings of Aries Ventures for its fiscal years ended September 30, 2005 and 2004, and for the period from October 1, 2005 through December 31, 2005.

	Weinberg & Company, P.A.			Marcum & Kliegman LLP			Total
2005	$	11,000	(1)	$	154,275	(3)	$	165,275
2004	$	22,000	(2)	$	0		$	22,000

⁽¹⁾ For the period October 1, 2004 through December 31, 2005.

⁽²⁾ For the period October 1, 2003 through September 30, 2004.

⁽³⁾ For the year ended December 31, 2005.

Audit-Related Fees

There were no fees billed to the Company during its last two fiscal years by either Marcum & Kliegman LLP or Weinberg & Company, P.A. for assurance and related services reasonably related to the performance of the audit or review of our financial statements that are not included under “Audit Fees” above.

Tax Fees

There were no fees billed to the Company during its last two fiscal years by either Marcum & Kliegman LLP or Weinberg & Company, P.A. for professional services for tax compliance, tax advice or tax planning.

All Other Fees

There were no fees billed to the Company during its last two fiscal years by either Marcum & Kliegman LLP or Weinberg & Company, P.A. for products and services provided during the last two fiscal years.

Pre-Approval Policies and Procedures

On January 18, 2006, the Audit Committee approved its charter, which contains certain policies and procedures under which all audit and non-audit services performed by our auditors must be approved in advance by the Audit Committee. Under these policies and procedures, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by our auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee. In granting both general and specific pre-approval, the Audit Committee will consider whether such services are consistent with the rules of the Securities and Exchange Commission on auditor independence. The Audit Committee will also consider whether the auditors are best positioned to provide the most effective and efficient service, for reasons such as familiarity with our business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance our ability to manage or control risk or improve audit quality. The term of any general pre-approval will be 12 months, unless the Audit Committee determines otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by our auditors without obtaining specific pre-approval from the Audit Committee.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Cardium Therapeutics, Inc., the registrant, caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 31, 2006

CARDIUM THERAPEUTICS, INC.
By:	/s/    CHRISTOPHER J. REINHARD
	Christopher J. Reinhard, Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of Cardium Therapeutics, Inc., in the capacities and on the dates indicated.

Signature	Title	Date
/S/    CHRISTOPHER J. REINHARD         (Christopher J. Reinhard)	Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)	March 31, 2006
/S/    DENNIS M. MULROY         (Dennis M. Mulroy)	Chief Financial Officer (principal financial officer and principal accounting officer)	March 31, 2006
/S/    TYLER M. DYLAN         (Tyler M. Dylan)	Director	March 31, 2006
/S/    EDWARD WILLIAM GABRIELSON         (Edward William Gabrielson)	Director	March 31, 2006
/S/    MURRAY HUNTER HUTCHISON         (Murray Hunter Hutchison)	Director	March 31, 2006
/S/    GERALD J. LEWIS         (Gerald J. Lewis)	Director	March 31, 2006
/S/    LON EDWARD OTREMBA         (Lon Edward Otremba)	Director	March 31, 2006
/S/    RONALD I. SIMON         (Ronald I. Simon)	Director	March 31, 2006

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EX-4.5

Exhibit 4.5

Number

Shares

COMMON STOCK

COMMON STOCK

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

CUSIP 141916 10 6

THIS CERTIFIES THAT

SEE REVERSE FOR STATEMENTS RELATING TO RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS,

IF ANY SPECIMEN COUNTERSIGNED AND REGISTERED: COMPUTERSHARE TURST COMPANY, N.A.

(Denver Colorado)

TRANSFER AGENT AND REGISTRAR

BY

AUTHORIZED SIGNATURE

IS THE RECORD HOLDER OF

FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.0001 PAR VALUE, OF

CARDIUM THERAPEUTICS, INC.

Transferable on the books of the Corporation by the holder hereof in person or by a duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

Dated

PRESIDENT

SECRETARY

The Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Such requests shall be made to the Corporation’s Secretary at the principal office of the Corporation.

KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM - as tenants in common

TEN ENT - as tenants by the entireties

JT TEN - as joint tenants with right of survivorship and not as tenants in common

UNIF GIFT MIN ACT - Custodian

(Cust) (Minor)

under Uniform Gift to Minors Act (State)

UNIF TRF MIN ACT - Custodian (until age)

under Uniform Transfers (Minor)

to Minors Act

(State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

Shares of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint

Attorney to transfer the said stock on the books on the within named Corporation with full power of substitution in the premises.

Dated

NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFCATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed

By

THE SIGNATURES(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

EX-10.18

Exhibit 10.18

PRODUCTION SERVICE AGREEMENT

THIS PRODUCTION SERVICE AGREEMENT (the “Agreement”), entered into and effective this 24^th day of January 2006 (the “Effective Date”), is by and between MOLECULAR MEDICINE BIOSERVICES, INC. (“MOLECULAR MEDICINE” or “MMB”), located at 1890 Rutherford Road, Suite 200, Carlsbad, CA 92008 and CARDIUM THERAPEUTICS (“SPONSOR”) located at 3611 Valley Centre Drive, Suite #525, San Diego, CA 92130.

INTENDING TO BE LEGALLY BOUND, the parties agree as follows:

1. Projects.

MOLECULAR MEDICINE will perform development and manufacturing services for SPONSOR under one or more projects (each, a “Project”). Each Project shall be governed by this Agreement, together with the following documentation:

a. the “Scope of Work” for such Project, attached as Exhibit A (including without limitation specifications for finished Product (“Product Specifications”));

b. the “Price and Payment Schedule” for such Project, attached as Exhibit B;

c. the “Work Schedule” for such Project, attached as Exhibit C;

together with all other exhibits and attachments hereto, all as may be amended from time to time.

The parties acknowledge that from time to time SPONSOR may request MOLECULAR MEDICINE to undertake additional or revised projects involving production services. In such event, the parties shall agree upon new or revised Exhibits A, B, and C for each project, with such exhibits to reference this Agreement. Except as set forth in such new or revised exhibits (individually and collectively “Exhibits”), all other terms and conditions of this Agreement, together with all other exhibits, shall apply to such projects.

MOLECULAR MEDICINE will perform each Project with due care (as would be applicable to an agent to be delivered to human subjects), and in accordance with the applicable Exhibits and with current Good Manufacturing Practices as set forth in US 21 CFR Parts 210 and 211 applicable to pilot scale facilities and 21 CFR Part 600 applicable to biologics (it being understood that an insubstantial or immaterial incident or deviation from such standards shall not by itself be deemed a breach of MOLECULAR MEDICINE’s obligations hereunder and that the parties will work in good faith to resolve any such incident or deviation pursuant to the Quality Agreement under Section 3.5 below), and in accordance with (i) all applicable laws and (ii) all governmental regulations applicable to the performance of the Project by MOLECULAR MEDICINE (especially all rules and/or regulations applicable to the manufacture of products for clinical use) ((i) and (ii) being individually and collectively referred to as “Laws”).

2. Definitions. As used herein, the following capitalized terms shall have the meanings set forth below:

2.1 Certificate(s) of Compliance: Certificate(s) issued by MOLECULAR MEDICINE upon completion of the Project, reporting the Technical Specifications measured by

1

MOLECULAR MEDICINE for the specific Product produced under the Project. The Certificate of Compliance will be in the form attached as Exhibit D, or in such other form as may be agreed to in writing between SPONSOR and MOLECULAR MEDICINE.

2.2 MMB Technology: All of MOLECULAR MEDICINE’s confidential and proprietary know-how, techniques, processes and other technology, whether or not patentable or copyrightable, and associated intellectual property relating to the manufacture of viral vector product (in each case that is owned by MOLECULAR MEDICINE).

2.3 Product: Finished product to be produced by MOLECULAR MEDICINE in accordance with the Product Specifications as described in the Scope of Work.

2.4 Production Records: All documentation, records, required retain samples, batch records, specifications, databases or other work product generated by MOLECULAR MEDICINE during and in connection with the Project, whether recorded in writing, electronically, or otherwise.

2.5 Project Completion: Has the meaning set forth in Section 4.1.

2.6 Project Run: Actual performance of activities by MOLECULAR MEDICINE in order to complete the Project.

2.7 Project Equipment: All equipment necessary to perform the Project and deliver the finished Product. Project Equipment that is specified in the Scope of Work as to be supplied by SPONSOR or that SPONSOR requires MOLECULAR MEDICINE to obtain for the Project is referred to as “Sponsor Equipment.”

2.8 Project Materials: All cell lines, viral seed stock, compounds, materials, supplies or other substances necessary to perform the Project and deliver the finished Product. Those Project Materials that are specified in the Scope of Work as to be supplied by SPONSOR, or that SPONSOR requires MOLECULAR MEDICINE to obtain for the Project pursuant to Section 3.1.1, are referred to as “Sponsor Materials.”

2.9 Quality Agreement: The quality agreement between MOLECULAR MEDICINE and SPONSOR in the form attached hereto as Exhibit E, as it may be amended from time to time.

2.10 Sponsor Technology: All of SPONSOR’s confidential and proprietary know-how, techniques, processes and other technology, whether or not patentable or copyrightable, and associated intellectual property that relate to the Product and/or methods for its production, including without limitation the Technology Transfer Package to be provided by Sponsor to MOLECULAR MEDICINE as further described in Exhibit A.

2.11 Standard Terms and Conditions of Storage: MOLECULAR MEDICINE’s Standard Terms and Conditions of Storage, attached as Exhibit F, as they may be amended from time to time.

2.12 Start Order: Written authorization from SPONSOR for MOLECULAR MEDICINE to commence Project Run, in the form attached hereto as Exhibit G.

2.13 Technical Specifications: Technical Specifications for the finished Product as measured by MOLECULAR MEDICINE and reported by it in the Certificate of Compliance.

3. Project Procedures.

3.1 Project Materials and Equipment.

3.1.1 SPONSOR shall provide MOLECULAR MEDICINE with sufficient quantities of Sponsor Materials (and, if applicable, Sponsor Equipment) necessary to perform the Project and deliver the Product, including sufficient and comprehensive data as may be required by MOLECULAR MEDICINE concerning handling, stability, storage and safety requirements. If SPONSOR requires MOLECULAR MEDICINE to acquire special Project Materials or Project Equipment, such materials and equipment shall be considered Sponsor Materials and Sponsor Equipment, and shall (following Sponsor’s

2

written approval of any items to be purchased on behalf of Sponsor) be charged to the account of SPONSOR at their actual cost, as additions to the fees set forth in the Price and Payment Schedule.

3.1.2 Unless otherwise specified and provided by SPONSOR (or obtained at the behest of SPONSOR), MOLECULAR MEDICINE will use the standard Project Materials and Project Equipment that it uses in the ordinary course of its business to perform the Project, provided that such standard materials and equipment are suitable for furnishing the Product and are in compliance with the Exhibits, Product Specifications, and applicable Laws and requirements.

3.1.3 Except as specifically agreed by the parties, or unless prohibited by law or regulation, any remaining supplies of Sponsor Materials or any Sponsor Equipment shall be returned to SPONSOR upon completion of the Project. Any Sponsor Materials or Sponsor Equipment that is not returned to the SPONSOR shall be held, subject to the Standard Terms and Conditions of Storage, and subject to MOLECULAR MEDICINE’s standard storage fees.

3.2 Timetable.

3.2.1 Work Schedule. MOLECULAR MEDICINE will commence the Project Run only upon receipt of a Start Order duly signed by an authorized officer of SPONSOR (which shall be any one of the following: its Vice President Manufacturing and Technical Operations, its Chief Business Officer and its President). In the case of Molecular Medicine, the authorized officers with respect to the Agreement shall be any one of the following: its Vice President of Operations, Chief Financial Officer and its President. Once MOLECULAR MEDICINE receives the Start Order, it will apply commercially reasonable best efforts to complete the Project in accordance with the Work Schedule, it being understood that as long as MOLECULAR MEDICINE makes such efforts, MOLECULAR MEDICINE’s failure to meet the Work Schedule shall not constitute a default by MOLECULAR MEDICINE of its obligations hereunder. MOLECULAR MEDICINE will notify SPONSOR if it determines there are likely to be substantial changes in the proposed start or completion dates of the Project.

3.2.2 Sponsor’s Cancellation or Delay. SPONSOR acknowledges that in order to undertake the Project, MOLECULAR MEDICINE will reserve for the benefit of SPONSOR certain resources, including Project Materials, Project Equipment, personnel availability, facility capacity and storage space. Accordingly, in the event that SPONSOR cancels or delays the Project, then as long as MOLECULAR MEDICINE is in compliance with the Work Schedule, SPONSOR will be obligated to pay the applicable cancellation or delay fees set forth in the Price and Payment Schedule. In addition, the Project will be subject to the termination provisions set forth in Section 23.4.

3.2.3 Changes. SPONSOR may request reasonable changes in the Scope of Work and/or the targeted Technical or Product Specifications prior to Project Completion (as defined in Section 4.1). To be effective, all such proposed changes, including changes in the price and projected completion date of the Project, shall be described in writing by authorized representatives of both MOLECULAR MEDICINE and SPONSOR and signed by both parties. Unless otherwise agreed to by MOLECULAR MEDICINE and SPONSOR, changes that cause any delay in the Project will subject SPONSOR to the applicable delay fees set forth in the Price and Payment Schedule.

3.3 Regulatory Testing Requirements. If, during the course of conducting this Project, the regulatory testing requirements covering the Product materially change such that additional expense would be incurred by MOLECULAR MEDICINE to satisfy the terms of this Agreement, then MOLECULAR MEDICINE will apprise SPONSOR of the additional expenses to be incurred and those expenses will be the responsibility of the SPONSOR.

3.4 Facility Visits. MOLECULAR MEDICINE shall permit SPONSOR’S representatives to visit MOLECULAR MEDICINE’s facilities during normal working hours (Monday through Friday 9 am to 5 pm), upon reasonable notice (no less than three days prior) and with reasonable

3

frequency to observe the Project’s progress, to discuss the Project with individuals performing the Project and/or appropriate officials of MOLECULAR MEDICINE, and to inspect and/or obtain copies of all records (including without limitation Production Records) relevant to the Project. Facility visits shall also be permitted during the Production Records retention period described in Section 5.5.

3.5 Quality Agreement. During the Project, MOLECULAR MEDICINE and SPONSOR shall follow the quality control procedures set forth in the Quality Agreement attached hereto as Exhibit E.

4. Project Completion.

4.1 Notice and Delivery. The Project is deemed completed (“Project Completion”) when MOLECULAR MEDICINE gives a notice under the Scope of Work consisting of (a) notice to SPONSOR that quality assurance review of Product has been completed by MOLECULAR MEDICINE and (b) issuance of a Certificate of Compliance or Development Report (confirming among other things that the Product is in compliance with the Product Specifications, and is ready for shipping as directed by Sponsor). Such notice shall be delivered by overnight courier. Risk of loss for the Product shall be the responsibility of SPONSOR upon release of Product from MOLECULAR MEDICINE’S premises (FOB shipping point) to a shipper selected and approved by SPONSOR. SPONSOR acknowledges and agrees that it is SPONSOR’s sole responsibility to determine for itself that such shipper is commercially reliable and that it carries insurance in accordance with standards that are acceptable to SPONSOR. SPONSOR must acknowledge receipt of notice of Project Completion to an authorized representative of MOLECULAR MEDICINE within ten (10) business days of formal notification by MOLECULAR MEDICINE. If MOLECULAR MEDICINE does not receive an acknowledgement of notice of Project Completion with such period, then Product will be subject to MOLECULAR MEDICINE’s then current Standard Terms and Conditions Of Storage and its standard group storage fees.

4.2 Product Storage. MOLECULAR MEDICINE agrees to hold SPONSOR’s Product for up to 30 days after SPONSOR’s acknowledgement of Project Completion or 45 days after MOLECULAR MEDICINE’s notice to SPONSOR of Project Completion, whichever is shorter. Product held at MOLECULAR MEDICINE beyond the foregoing Product storage intervals shall be subject to MOLECULAR MEDICINE’s then current Standard Terms and Conditions of Storage and its standard group storage fees.

5. Technology Transfer; Inventions; Ownership of Production Records.

5.1 Technology Transfer by Sponsor and Limited License. In order to enable MOLECULAR MEDICINE to perform the Project, SPONSOR will disclose to MOLECULAR MEDICINE the Sponsor Technology and hereby grants to MOLECULAR MEDICINE a limited, non-exclusive license in and to Sponsor Technology that is disclosed to MOLECULAR MEDICINE, for the sole purpose of performing the Project. Except to the extent set forth in the foregoing, this Agreement confers no license or intellectual property rights to MOLECULAR MEDICINE by SPONSOR for any SPONSOR-related intellectual property existing prior to undertaking the Project.

5.2 Inventions.

5.2.1 Product Inventions from Sponsor’s Technology. In performing the Project and in applying Sponsor’s Technology to the development and manufacture of the Product, MOLECULAR MEDICINE may develop ideas, know-how, inventions, techniques, improvements and other technology, whether or not patentable or copyrightable, and associated intellectual property (collectively “Inventions”) relating to the Product and its manufacture. All such Inventions that arise solely or principally from the application of Sponsor’s Technology (including without limitation the performance of the Project as outlined by SPONSOR and/or its personnel), or that relate exclusively to the Product are referred to as “Product Inventions.” MOLECULAR MEDICINE agrees that all Product Inventions are the exclusive property of SPONSOR and constitute Proprietary Information of SPONSOR.

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5.2.2 Process Inventions from MMB Technology. From time to time, with the approval of SPONSOR as set out in the Scope of Work or as otherwise agreed to during the Project Run, MOLECULAR MEDICINE may apply some of the MMB Technology to the development and manufacture of the Product. In doing so, MOLECULAR MEDICINE may develop Inventions that relate to the MMB Technology. All such Inventions that arise from the application of the MMB Technology to the manufacture of the Product are referred to as “Process Inventions.” SPONSOR agrees that all Process Inventions that are invented solely or principally by MOLECULAR MEDICINE and that do not arise from or comprise SPONSOR’s Technology or information or ideas provided by SPONSOR’s personnel, are the exclusive property of MOLECULAR MEDICINE and constitute Propriety Information of MOLECULAR MEDICINE.

5.3 Grant Backs by MOLECULAR MEDICINE. In order to enable SPONSOR to utilize both Product Inventions and Process Inventions resulting from MOLECULAR MEDICINE’s performance of the Project:

5.3.1.1 MOLECULAR MEDICINE hereby assigns to SPONSOR all right, title and interest in and to any and all Product Inventions.

5.3.1.2 MOLECULAR MEDICINE hereby agrees to grant to SPONSOR a non-exclusive license, with the limited right to sub-license as described below, to any and all Process Inventions made, conceived and/or reduced to practice by MOLECULAR MEDICINE during the course of, and/or resulting from, the performance of the Project, provided that SPONSOR’s use of such Process Inventions relates directly and exclusively to the manufacture of the Product. SPONSOR’s license right under this clause shall not extend to inventions, processes or technology that are developed by MOLECULAR MEDICINE prior to its undertaking the Project or that is not related directly and exclusively to the manufacture of the Product. Upon providing MOLECULAR MEDICINE with prior written notice of the name and address of the sublicensee and subject to such sublicensee’s written agreement to be bound by the confidentiality provisions of Section 6 below, SPONSOR may sublicense its rights under this clause only to such identified sublicensee(s).

5.4 Other Applicable Law. Except as expressly set forth herein to the contrary, with respect to any Inventions arising from the Project, US patent laws will be followed (including without limitation such laws as may be applicable to joint inventorship and ownership).

5.5 Production Records. All Production Records generated by MOLECULAR MEDICINE in the course of the Project shall be the property of MOLECULAR MEDICINE and constitute Proprietary Information of MOLECULAR MEDICINE. All Production Records shall be maintained by MOLECULAR MEDICINE for the benefit of SPONSOR during the term of this Agreement. SPONSOR shall have access to (and be provided with a copy of upon request) Production Records produced in connection with the Project in order to review the data relating to the production of the Product. Unless otherwise agreed between the parties, upon completion of the Project, MOLECULAR MEDICINE shall store and maintain all Production Records in accordance with all applicable legal and regulatory requirements for a period of five (5) years (or such shorter period as may be permitted by law). After the expiration of the applicable retention period, SPONSOR will pay MOLECULAR MEDICINE, in advance, its then-current standard annual storage fee for the retention of such Production Records. If for any reason the fee is not paid (e.g. SPONSOR cannot be located, SPONSOR has not responded, etc.), MOLECULAR MEDICINE may dispose of the Production Records as it sees fit (after reasonable efforts to apprise Sponsor of any impending disposal). It shall be SPONSOR’s responsibility to ensure that MOLECULAR MEDICINE has a current address for SPONSOR.

6. Confidentiality. During the performance of the Project, during the period of any permissible license or sub-license under Section 5 above, and continuing until the later of (i) the date five (5) years after the termination or expiration of this Agreement and (ii) the date of termination of any

5

such license or sub-license, each party shall treat the trade secrets and other proprietary or confidential information disclosed to such party (the “Receiving Party”) by the other party (the “Disclosing Party”) under this Agreement and marked by the Disclosing Party as confidential, as the proprietary and confidential information of the Disclosing Party (“Proprietary Information”), and shall maintain all Proprietary Information in strict trust and confidence and shall not disclose any Proprietary Information to any third party or use any Proprietary Information except as may otherwise be authorized in this Agreement or by the Disclosing Party’s prior written consent. For purposes of this Agreement (but without limitation) (i) Proprietary Information of the SPONSOR shall include all Product Inventions described in Section 5, and (ii) Proprietary Information of MOLECULAR MEDICINE shall include all Production Records and all Process Inventions described in Section 5.

Notwithstanding any other provision of this Agreement, the Receiving Party shall have no liability or obligation to the Disclosing Party for, nor be in any way restricted in, its disclosure of or use of any information that:

a) is already known to the Receiving Party at the time of the Disclosing Party’s disclosure;

b) is or becomes publicly known by any means other than through a wrongful act or omission of the Receiving Party, its employees or agents;

c) is received from a third party entitled to make such a transfer without violating an obligation of confidentiality;

d) is independently developed by or for the Receiving Party;

e) is disclosed in response to an order of a court or other governmental body or regulatory authority with competent jurisdiction over the Receiving Party; or is otherwise required to be disclosed by law or governmental regulation.

7. Use of Names. Neither party shall use the name of the other party or its employees in any advertising or sales promotion materials or in any publication without such other party’s prior written consent. Notwithstanding the foregoing, SPONSOR may identify MOLECULAR MEDICINE as the source of Product to be produced under the Agreement, and each party may identify the other party with regards to the Product in any regulatory submission associated with the Project without prior written consent.

8. Regulatory Issues: SPONSOR acknowledges that MOLECULAR MEDICINE’s manufacturing technology, as well as any technology licensed to MOLECULAR MEDICINE from third parties, and any information related respectively thereto that is filed with the FDA or other health regulatory authorities in countries other than the United States, is of crucial importance to MOLECULAR MEDICINE and to such licensing parties, as well as to all other sponsors benefiting from MOLECULAR MEDICINE’s technology. Such information includes all process related Biologic (Type II) Master Files and Facility (Type V) Drug Master Files. To assist in preserving the integrity and value of such technology, SPONSOR agrees that it will not unreasonably, on its own initiative, analyze or engage in any research of such technology that may be reasonably expected to raise safety concerns with the FDA regarding the use of such technology in the Project. If SPONSOR reasonably believes that such a study is necessary, SPONSOR shall also apprise and consult with MOLECULAR MEDICINE before engaging in such a study. SPONSOR further agrees to promptly notify MOLECULAR MEDICINE of any and all communications and/or concerns expressed by the FDA or any other health regulatory authority relating to the manufacture of the Product including MOLECULAR MEDICINE’s manufacturing technology, and agrees to consult with MOLECULAR MEDICINE to resolve any such concerns with the FDA or such other authority. MOLECULAR MEDICINE agrees to provide SPONSOR with letters of cross-reference to all Master Files as appropriate to facilitate SPONSOR’s use of Product and/or to address any related concerns of FDA or such other authority. Non-compliance with the obligation to consult with MOLECULAR MEDICINE to resolve such concerns with the FDA by SPONSOR shall constitute a material breach of SPONSOR’s obligations under this Agreement, permitting MOLECULAR MEDICINE at its sole discretion to terminate immediately all or part of this Agreement pursuant to Section 23.3, in addition to such other rights that MOLECULAR MEDICINE may have under law.

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9. Limited Warranty. Upon the issuance of a Certificate of Compliance, MOLECULAR MEDICINE shall be deemed to warrant only that: (i) it has performed the Project with due care in accordance with the Scope of Work, current Good Manufacturing Practices, and all applicable federal and state laws, rules and regulations, and (ii) the Product conforms to the Technical Specifications reported in the Certificate of Compliance. This limited warranty is specific to SPONSOR and does not extend to any licensee or sublicensee under Section 5 above, or to any other party. Any claim by SPONSOR for a breach of such warranty shall be made in writing to MOLECULAR MEDICINE on or before the first anniversary of the date that SPONSOR is notified that Product is complete. The sole remedy of SPONSOR for breach of this warranty shall be for MOLECULAR MEDICINE to perform the Project again, or (if practicable) to perform again such portions of the Project as maybe required to correct the deficiency. MOLECULAR MEDICINE SHALL NOT BE RESPONSIBLE FOR GENETIC ALTERATIONS, INCLUDING THE FORMATION OF REPLICATION-COMPETENT VIRUSES (SUCH AS REPLICATION-COMPETENT ADENOVIRUS OR REPLICATION-COMPETENT RETROVIRUS) THAT OCCUR DURING PRODUCTION OF THE PRODUCT. SUCH GENETIC ALTERATIONS SHALL NOT BE THE BASIS FOR A WARRANTY CLAIM BY SPONSOR. UNDER NO CIRCUMSTANCES SHALL MOLECULAR MEDICINE BE LIABLE UNDER THIS LIMITED WARRANTY TO SPONSOR OR ANY THIRD PARTY CLAIMING BY OR THROUGH SPONSOR FOR ANY CONSEQUENTIAL, SPECIAL, OR OTHER DAMAGES, AND THE WARRANTY SET FORTH HEREIN IS IN LIEU OF ANY AND ALL OTHER WARRANTIES, WHETHER EXPLICIT OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. MOLECULAR MEDICINE’S LIABILITY TO SPONSOR FOR DAMAGES OR LOSSES CAUSED TO SPONSOR AS A RESULT OF THE BREACH OF ANY TERMS AND CONDITIONS CONTAINED HEREIN (INCLUDING ANY EXHIBITS) SHALL IN NO EVENT EXCEED THE FEE PAID BY SPONSOR TO MOLECULAR MEDICINE IN CONNECTION WITH THE PROJECT.

10. Indemnification.

10.1 Indemnification by SPONSOR. SPONSOR shall defend, indemnify and hold harmless MOLECULAR MEDICINE, its directors, officers, employees and agents (collectively the “Molecular Medicine Indemnitees”) from and against any and all liability, loss, expense (including reasonable attorneys’ fees), or third party claims for injury or damages (collectively, “Liabilities”) arising out of the manufacture, sale or use of the Product, provided that SPONSOR shall have no obligation to indemnify the Molecular Medicine Indemnitees for any portion of a Liability that arises from the negligence or willful misconduct of the Molecular Medicine Indemnitees or from the failure of the Molecular Medicine Indemnitees to perform the Project in compliance with applicable Laws.

10.2 Indemnification by MOLECULAR MEDICINE. Except as limited by Section 9 above, MOLECULAR MEDICINE shall defend, indemnify and hold harmless SPONSOR, its officers, directors, employees and agents (collectively the “Sponsor’s Indemnitees”) from and against any and all Liabilities arising solely out of the negligence or willful misconduct of the MOLECULAR MEDICINE Indemnitees, provided that MOLECULAR MEDICINE shall have no obligation to indemnify the Sponsor’s Indemnitees for any portion of a Liability that arises from the negligence or willful misconduct of the Sponsor’s Indemnitees.

10.3 Notification. The obligation of either party to indemnify the other pursuant to this Agreement shall be contingent upon timely notification by the indemnitee to the indemnitor of any claims, suit or service of process; control by the indemnitor over the conduct and disposition of any claim, demand or suit; and cooperation by the indemnitee in the defense of the demand or suit.

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11. Payment Terms. SPONSOR agrees to pay promptly all fees and expenses in accordance with the terms set forth in the applicable Price and Payment Schedule. Unless otherwise agreed to in the Price and Payment Schedule, all payments shall be due within thirty (30) days of the date of invoice. Failure to timely pay any of such amounts for any Project shall constitute a material breach of SPONSOR’s obligations under this Agreement, permitting MOLECULAR MEDICINE at its sole discretion to terminate (upon ten (10) days prior written notice to SPONSOR) all or part of this Agreement with respect to any or all Projects pursuant to Section 23.3, to withhold delivery of Product, to suspend any or all Project Runs, and to exercise such other rights that MOLECULAR MEDICINE may have under this Agreement or otherwise under law.

12. Compliance with Law. SPONSOR will not use, transport, store, or dispose of the Product in a manner inconsistent with (a) laws, regulations, rules or ordinances applicable to the Product, including without limitation, all applicable requirements and procedures of the United States Food and Drug Administration, or (b) health and safety standards and procedures generally used in the industry. SPONSOR shall obtain assurance of compliance with the preceding sentence from any of its affiliates, agents, assignees, or licensees who use, transport, store, or dispose of the Product.

13. Excused Performance. Except for payment obligations, neither party shall be responsible for failure or delay in performance of its obligations under or in connection with this Agreement due to causes beyond its reasonable control, including but not limited to acts of God, governmental actions, fire, smoke, labor difficulty, shortages, war, revolution, civil disturbances, terrorism, sabotage, blockade, embargo, explosion, transportation problems, interruptions of power or of communication, failure of suppliers or subcontractors, or natural disasters. SPONSOR acknowledges that it is SPONSOR’s responsibility to obtain its own insurance coverage for the foregoing events. SPONSOR acknowledges that after the occurrence of any of the foregoing events, (i) MOLECULAR MEDICINE may be unable to suspend the Product Run and therefore may be forced to restart the Product Run, and (ii) MOLECULAR MEDICINE may be unable to limit, suspend, or terminate any outstanding financial commitments for which SPONSOR shall be held responsible. SPONSOR shall reimburse MOLECULAR MEDICINE for all additional costs incurred by MOLECULAR MEDICINE as a result of its inability to suspend the Product Run or to suspend or cancel outstanding financial obligations, to the extent that such additional costs are not otherwise covered by MOLECULAR MEDICINE’s business interruption insurance, and MOLECULAR MEDICINE shall apply commercially reasonable best efforts to continue and/or redo affected portions of the Project.

14. Assignment. This agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors, assigns, legal representatives and heirs. Either party may assign or transfer its rights and obligations under this Agreement to a successor to all or substantially all of its assets or business relating to this Agreement, whether by sale, merger, operation of law or otherwise, upon written notice to the other party; provided, however, that such written notice shall be provided by at least 90 days prior to any proposed transfer by MOLECULAR MEDICINE, and that MOLECULAR MEDICINE shall have no right to assign or otherwise transfer its obligations hereunder to any proposed successor that is located outside of the United States or that is materially less qualified, experienced or capable (than MOLECULAR MEDICINE) of satisfying all of MOLECULAR MEDICINE’s obligations hereunder.

15. Independent Contractors. Nothing in this Agreement shall be construed to create any relationship between MOLECULAR MEDICINE and SPONSOR other than that of independent contracting parties. Neither party shall have any right, power, or authority to assume, create or incur an expense, liability, or obligation, express or implied, on behalf of the other.

16. Waiver. No waiver by either party of any breach of any provision hereof shall constitute a waiver of any other breach of that or any provision of this Agreement.

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17. Severability. If any part, term or provision of this Agreement is determined to be invalid or unenforceable, the remainder of the Agreement shall not be affected and shall remain in full force and effect.

18. Choice of Law. This Agreement shall be governed by the laws of the State of California, regardless of the choice of law provisions of California or any other jurisdiction.

19. Exhibits and Schedules. All exhibits and schedules attached hereto are hereby incorporated in and made a part of this Agreement as if fully set forth herein.

20. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

21. Entire Agreement. This Agreement contains the final, complete and exclusive agreement of the parties relative to the subject matter hereof and supersedes all prior and contemporaneous understandings and agreements relating to its subject matter. This Agreement (including any Exhibits and schedules) may not be changed, modified, amended or supplemented except by a written instrument signed by authorized officers of both parties (as noted above).

22. Non-solicitation and non-hire. SPONSOR agrees not to solicit or hire personnel from MOLECULAR MEDICINE for production, process development, testing or manufacturing of viral vectors or vaccines or of other biopharmaceuticals for a period of two (2) years after completion of Project unless agreed to in writing by MOLECULAR MEDICINE.

23. Term and Termination. The term of this Agreement is from the Effective Date through the completion of the Project described in the Scope of Work, unless extended upon the agreement of the parties.

23.1 Termination by SPONSOR. SPONSOR may terminate this AGREEMENT at any time for any reason, or no reason, upon sixty (60) days written notice. Upon receipt of notice of termination from SPONSOR, MOLECULAR MEDICINE shall use its best efforts to limit or terminate any outstanding financial commitments for which SPONSOR shall be held responsible. SPONSOR shall reimburse MOLECULAR MEDICINE for all costs incurred by it for services set forth in the Work Schedule performed by MOLECULAR MEDICINE prior to the effective date of termination, including all noncancellable obligations. If SPONSOR terminates the Agreement under this Section 23.1, then in addition to any reimbursable expenses provided for above, SPONSOR shall pay all cancellation fees for all outstanding Projects in the amounts set forth in the relevant Price and Payment Schedules.

23.2 Termination by MOLECULAR MEDICINE. MOLECULAR MEDICINE may terminate this AGREEMENT at any time for any reason, or no reason, upon one hundred eighty (180) days’ written notice. Upon giving notice of such termination, MOLECULAR MEDICINE shall use its best efforts to (at SPONSOR’s election): (i) complete portions of the Project which can be completed prior to the proposed effective date of termination; and/or (ii) limit or terminate any outstanding financial commitments for which SPONSOR shall be held responsible. SPONSOR shall reimburse MOLECULAR MEDICINE for all costs incurred by it for services set forth in Exhibit A performed by MOLECULAR MEDICINE prior to the effective date of termination, including all noncancellable obligations.

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23.3 Termination for Material Breach. Either party shall have the right to terminate this Agreement upon written notice to the other party if, after receiving written notice of a material breach of this Agreement, the other party fails to cure such breach within (i) ten (10) days from the date of such notice concerning a breach of any payment obligation, or (ii) thirty (30) days from the date of such notice pertaining to all other breaches. If any party breaches the same provision of this Agreement more than two (2) times during any twelve (12) month period (each breach being not cured within the time limits noted), the final such breach shall constitute grounds for termination and no cure period shall apply. If MOLECULAR MEDICINE terminates this Agreement pursuant to this Section 23.3 due to SPONSOR’s breach, then (i) SPONSOR shall reimburse MOLECULAR MEDICINE for all costs incurred by it for services set forth in the Work Schedule performed by MOLECULAR MEDICINE prior to the effective date of termination, including all noncancellable obligations, and (ii) SPONSOR shall pay all cancellation fees for all outstanding Projects in the amounts set forth in the relevant Price and Payment Schedules. If SPONSOR terminates this Agreement pursuant to this Section 23.3 due to MOLECULAR MEDICINE’s breach, it shall not be obligated for payment of cancellation fees, but shall remain obligated for all reimbursable expenses described above.

23.4 Termination of a Project for Delay. MOLECULAR MEDICINE may terminate a specific Project at any time upon thirty (30) days notice if Project Completion has not occurred by the date that is two (2) years from the date of this Agreement (or, as applicable, from the date of the Scope of Work for the Project), for whatever reason; provided, that if the sole cause of the delay is MOLECULAR MEDICINE’s action or inaction, then the two-year period referred to above shall be extended for the period of the delay caused by MOLECULAR MEDICINE. Upon giving notice of such termination, MOLECULAR MEDICINE shall use its best efforts to limit or terminate any outstanding financial commitments for which SPONSOR shall be held responsible. SPONSOR shall reimburse MOLECULAR MEDICINE for all costs incurred by it for services set forth in Exhibit A performed by MOLECULAR MEDICINE prior to the effective date of termination, including all noncancellable obligations. In addition, SPONSOR will be obligated to pay any applicable cancellation or delay fees required to be paid for that Project in the amounts set forth in the Price and Payment Schedule.

23.5 Surviving Obligations. Termination or expiration of this Agreement shall not affect any accrued rights of either party. The terms of Sections 2, 3.1, 3.2.2, 3.2.3, 3.3, 3.4, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14 (to the extent assigned at the time of termination or expiration), 17, 18, 19, 21, 22, 23, and 24 of this Agreement shall survive termination of this Agreement.

23.6 Notice. Notice of termination shall be in writing, delivered to the terminated party by registered mail or by overnight delivery service as provided in Section 24.

23.7 Right of Set-off. Upon either (i) the occurrence and during the continuance of any material default by SPONSOR or (ii) the termination of this Agreement for any reason, MOLECULAR MEDICINE is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits held at any time by MOLECULAR MEDICINE for the credit or account of SPONSOR for any and all Projects (as well as any indebtedness at any time owing by MOLECULAR MEDICINE to SPONSOR) against any and all of the obligations of SPONSOR for any and all Projects now or hereafter existing under this Agreement. MOLECULAR MEDICINE agrees to notify SPONSOR promptly after any such set-off and application, provided, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of MOLECULAR MEDICINE under this Section are in addition to other rights and remedies that MOLECULAR MEDICINE may have.

24. Notices. All notices required or permitted to be given under this Agreement shall be in writing and shall be (a) mailed by registered or certified first-class mail, return receipt requested, (b) mailed by Federal Express or other overnight delivery service, (c) transmitted by facsimile, or (d) delivered personally. Such notices will be deemed to have been sufficiently given for all purposes (i) five (5) days after mailing by registered first class mail, (ii) two (2) days after sending by overnight delivery service, (iii) the same day if sent by facsimile transmission with electronic

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confirmation of transmission if transmission is confirmed during the recipient’s normal business hours, or otherwise on the recipient’s next business day, or (iv) immediately if personally delivered. Unless otherwise specified in writing, any notices will be sent to the following addresses:

If to MOLECULAR MEDICINE:	MOLECULAR MEDICINE BIOSERVICES, INC.
	1890 Rutherford Road, Suite 200
	Carlsbad, CA 92008
	Attention: Marian Ernst
	Fax: (760) 918-0076
If to SPONSOR:	CARDIUM THERAPEUTICS
	3611 Valley Centre Drive
	Suite #525
	San Diego, CA 92130
	Attention: Vice President Manufacturing and
	Technical Operations or President
	Fax: 858-436-1001

[Signature page follows.]

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

MOLECULAR MEDICINE BIOSERVICES, INC.
By:	/s/ David M. Backer	1-18-06
Name:	David M. Backer	Date
President
CARDIUM THERAPEUTICS, INC.
By:	/s/ Tyler M. Dylan	Jan. 19, 2006
Name:	Tyler M. Dylan	Date
Title	Chief Business Officer

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MOLECULAR MEDICINE BIOSERVICES, INC.

PRODUCTION SERVICE AGREEMENT

EXHIBITS

Exhibit A	Scope of Work
Exhibit B	Price and Payment Schedule
Exhibit C	Work Schedule
Exhibit D	Form of Certificate of Compliance
Exhibit E	Form of Start Order
Exhibit F	Standard Terms and Conditions of Storage
Exhibit G	Quality Agreement

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EXHIBIT A-SCOPE OF WORK

1. Technical Transfer For Production

1.1. Technical Transfer Package: Sponsor will supply Molecular Medicine with technical information (the “Technical Transfer Package”) as previously employed for the production of FGF4. The Technical Transfer Package should include but is not limited to:

Ÿ	Batch Production Records
Ÿ	Raw Material List (Vendor/PN)
Ÿ	Supplies (Vendor/PN)
Ÿ	Equipment List (Vendor/Model Number
Ÿ	Receiving Specifications Materials and Supplies
Ÿ	Intermediate Preparations and Specifications (Buffers;
Ÿ	Summary Data From 2 Runs For In process Testing
Ÿ	Summary Data From 2 Runs For Final Vector Product
Ÿ	Draft Work Schedule
Ÿ	Analysis of Waste Generation per Process Step

Upon receipt of the Technical Transfer Package, the Molecular Medicine Project Team will evaluate information and initiate generation of receiving specifications for raw material and supplies, determine initial time frames for receipt of materials-supplies-equipment, and requirements for Installation Qualification-Calibration-Certification as needed for equipment. The Project Team will identify areas in which additional information is required.

1.2. Raw Materials: Molecular Medicine will require the source (vendor), part number, grade (as applicable), and receiving specification currently used for each material called out in the technical transfer package. If a vendor Certificate of Analysis is available, please include. Quality Assurance will develop an internal receiving specification consistent with the information supplied. In the event information is inconsistent with Molecular Medicine requirements or does not meet criteria for CGMP compliance, further discussion will be required. Critical components such as filters, media, and serum should be process qualified prior to use.

Final receiving specifications must be reviewed and approved by both parties.

1.3. Supplies: Molecular Medicine will require to the extent available, the source (vendor), part number, grade (as applicable), and receiving specification currently used for each supply called out in the Technical Transfer package. If a vendor Certificate of Analysis is available, please include. Quality Assurance will develop an internal receiving specification consistent with the information supplied. In the event information is inconsistent with Molecular Medicine requirements or does not meet criteria for CGMP compliance, further discussion will be required.

Final receiving specifications must be reviewed and approved by both parties.

1.4. Equipment: The following is an assessment of the general equipment list provided by Sponsor and includes those pieces that would need to be purchased. Equipment costs are not included in any other cost for services or goods.

See Following Page for Table 1 – Equipment List

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EXHIBIT A – SCOPE OF WORK

Table 1 – General Equipment List for Production

Item	Vendor	Model No.
15L (10L Working Volume) Bioreactor	Applikon	TBD
DCU Controller	Braun	TBD
1 L Column	GE	TBD
BioCAD Sprint Chromatography Workstation		TBD
Column Selector	Scout	TBD
Plate and Frame UF System	Centramate	TBD

1.5. Project I: Documentation: All information provided in the Technical Transfer Package in the form of Batch Production Records (BPRs) and Receiving Specifications will be converted to the Molecular Medicine format by Quality Assurance. All Molecular Medicine master documents will require review and approval from appropriate authorizing Sponsor Technical and Quality representatives.

1.5.1. Receiving Specifications: It is recommended that Sponsor provide a copy of an acceptable Certificate of Analysis for all raw materials and supplies (as available) in addition to an established receiving specification.

1.5.2. Master Batch Production Records (BPRs): All BPRs will be generated and handled within the Molecular Medicine change control system. All requests for change (typographical, technical, or otherwise) must be made in writing.

1.5.3. Standard Operating Procedures (SOPs): The technical transfer package will be evaluated for additional SOP requirements beyond those currently active at Molecular Medicine. This may include but is not limited to items such as the operation of project specific equipment.

The Technical Transfer is complete upon generation of all receiving specifications, Master Batch Production Records, and Standard Operating Procedures. Some draft documents may be used for Technical Transfer Run #1 and is subject to the approval of both Molecular Medicine and Sponsor Quality Assurance and Technical representatives.

1.6. Flow Diagram:

1.6.1. Flow Diagram 1 shows an overview of the projects defined in this Scope of Work.

1.6.2. Flow Diagram 2 shows the process flow diagram for production as described by Sponsor.

See following pages for “Process Flow Diagrams”.

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EXHIBIT A – SCOPE OF WORK

Flow Diagram 1: Project Overview

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EXHIBIT A – SCOPE OF WORK

Flow Diagram 2: Production Process Flow Diagram

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EXHIBIT A – SCOPE OF WORK

1.7. Process Description: This proposal is based upon the process for production as described by SPONSOR.

Table 2: Technical Transfer Data Package Preparation Costs

Activity	Estimated Cost		Timing
Data Package Transfer	$	80,000	4-6 weeks

1.8. Project II: Technical Transfer Run(s): Molecular Medicine will perform at least one Technical Transfer Run at the 10L scale using the Sponsor-supplied Master Viral Bank to ultimately yield clinical grade bulk drug product (BDP). Yield and purity targets for the initial Technical Transfer Run will be “For Information Purposes” only. All in-process data resulting from the run will be evaluated with existing in-process data for process verification and consistency purposes. All work performed for the Technical Transfer Run will occur in the Process Development facility located in Carlsbad, CA. Estimated time for completion of the Technical Transfer Run is 5-6 weeks from laboratory start to laboratory completion.

1.8.1. Operability Review: An Operability Review of the draft documentation will be scheduled at Molecular Medicine to review the feasibility, accuracy, and completeness of the draft documentation used during the initial Technical Transfer Run. The Operability Review should include Quality and Technical representatives from both Molecular Medicine and Sponsor. Modifications to the documentation resulting from the Operability Review will be incorporated into the BPRs as needed and prior to the laboratory initiation of the cGMP production run. A review and analysis of in-process and final product data will be performed during this period. This is a decision point within the program. This proposal assumes no additional studies are required prior to initiation of subsequent Technical Transfer Runs, should they be required.

1.9. Project III: CGMP Production Run: Molecular Medicine will perform one (1) 10L GMP Production run using the Sponsor’s MVB to yield clinical grade bulk drug product (BDP) and verify the technical transfer process. All GMP runs will be performed in accordance with the process confirmed and resulting from the technical transfer process and analysis of data from the Technical Transfer Run(s). All work performed for this production will occur in the MOLECULAR MEDICINE cGMP multi-product facility (Carlsbad, CA) with approved Batch Production Records (BPRs). Batch Production Records must be reviewed and approved by a Quality and Technical representative of Sponsor prior to use. Costs per cGMP Production Runs do not include fill/finish.

Table 3: Costs for Technical Transfer Run(s) and cGMP Run(s)

Scale	Location	Cost		Duration	Report	Documentation Fees
10L Bioreactor, First Technical Transfer Run	PD Lab	$	265,000	(a.)	Final Report	$	10,000
10L Bioreactor, Subsequent Runs	cGMP	$	345,000	(a.)	Certificate of Compliance	$	10,000

(a.) As per Exhibit C timeline.

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EXHIBIT A – SCOPE OF WORK

1.10. Project IV: Qualification for Final Product Fill (Media Fills): Molecular Medicine will perform three (3) media fills to qualify the fill process for SPONSOR’s Gene Therapy Product as outlined in Project IV. Qualification will occur upon successful completion of these simulation runs as defined by the media fill batch production records. MOLECULAR MEDICINE and SPONSOR agree that the following is applicable to Project IV as outlined below:

1.10.1. All batch records are to be approved by SPONSOR prior to initiation of media or product fill. Batch records will include authorizing signatures from both technical and quality groups.

1.10.2. MOLECULAR MEDICINE will write and SPONSOR will (if acceptable) approve all batch records in a timely manner.

1.10.3. MOLECULAR MEDICINE will perform services under cGMP, including appropriate training of personnel, validation of personnel for product fills, and environmental monitoring.

1.10.4. Completion of a fill project at MOLECULAR MEDICINE will result in Quality Assurance issuing a Certificate of Compliance to SPONSOR.

1.10.5. The media fills will be performed with the intent to qualify:

1.10.5.1. The Class 1000 fill suite in Molecular Medicine’s multi-product facility as the fill room environment during the qualified fill period. Qualification of the suite expires in six months.

1.10.5.2. A fill team consisting of a fill operator, stopper operator and a checking operator. Each role will be served by each individual during each of the three media fills, resulting in a team qualified for any or all roles of the process. At least two finishing operators will be present during the fill. Qualification of personnel expires in six months.

1.10.5.3. The fill process as defined and approved by SPONSOR at Molecular Medicine for the Gene Therapy product.

1.10.5.4. Fill run of up to 2000 units per run.

1.10.6. Environmental monitoring data will be provided to SPONSOR to demonstrate and support room performance and equivalence.

1.10.7. All vialing components to be utilized for Project IV must be cleaned/depyrogenated/steam sterilized and tested for sterility and endotoxin prior to their use in the GMP facility. SPONSOR is to provide components to MOLECULAR MEDICINE or provide ordering information so that MOLECULAR MEDICINE may order the components. The costs for the components are the responsibility of the SPONSOR.

1.10.7.1. Prior to the initiation of Project IV, MOLECULAR MEDICINE will manage the process and timelines for sending all vialing components to an outside laboratory for processing. At the conclusion of these services, the processed components will be delivered to MOLECULAR MEDICINE with appropriate documentation and certificates of sterility and depyrogenation. The SPONSOR is responsible for all related costs and will be invoiced by MOLECULAR MEDICINE.

Table 4: Costs for Media Fill Qualifications

Fill Activity	Units/dose	Cost per Fill		Documentation Fee
Media Fill #1	2000	$	25,000		N/A
Media Fill #2	2000	$	25,000		N/A
Media Fill #3	2000	$	25,000		$5,000 (For all three)
Total Costs:				$	80,000

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EXHIBIT A – SCOPE OF WORK

2. Assay Transfer and Qualification for Testing: Sections 2.1 – 2.4 provide a general description for the activities associated with assay transfer.

Quality Control Assays (In-House)

Assay	MMB In-House Assays	Assay Transfer Capability
Bioburden	QCT007	N/A
Endotoxin	QCP028	N/A
SDS-PAGE	QCT044	N/A
pH	QCP022	N/A
Particle Count (OD)	QCT046	N/A
Particle Count (HPLC)	QCT041	N/A
Titer (Plaque Assay)	QCT016	N/A

Current Quality Control assay test methods or protocols are listed above as MMB In-house Assays. A technical transfer of a client-specific protocol may be performed for any assay currently in-house at Molecular Medicine. Additional fees may apply (which fees will not exceed those charged to other Molecular Medicine clients for substantially equivalent services).

2.1. Qualification Protocol: Upon receipt of a Sponsor assay test method or protocol, Molecular Medicine Quality Assurance will develop an Assay Qualification Protocol. The final protocol must be reviewed and approved by Sponsor and Molecular Medicine Quality and Technical representatives.

2.2. Internal Reference Standard: It is assumed that Sponsor will provide internal reference standards as appropriate for Qualification. If a reference standard is not available, Molecular Medicine and Sponsor will agree in advance as to the appropriate standard for use in assay qualification.

2.3. Assay Qualification: Molecular Medicine Quality Control will execute the approved Assay Qualification Protocol. Sponsor may have personnel on site during this qualification period if desired. Upon completion, all data will be forwarded to Quality Assurance for review.

2.4. Final Report: Quality Assurance will review the resulting data and issue a Final Report for acceptance and approval by Sponsor upon successful completion of the protocol.

3. CGMP Production:

3.1. Process Flow Diagram for Proposed Manufacturing: This proposal is based upon the process for production as described by SPONSOR.

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3.2. Project V: Final Product Fill (Placebo and two Product Fills): Each final product fill is performed using a semi-automated closed hand fill system (Watson-Marlow 505D1 pump). The following table defines capacity and cost schedule for Final Product Fills:

Table 5: Capacity and Cost for Final Product/Placebo Fills

Day	Dose Fill	Units/dose	Cost per Fill		Documentation Fee
1	Placebo	500	$	45,000	$	5,000
2	Final Product #1	1500		Included in Production		Included in Production
3	Final Product #2	1500	$	45,000	$	5,000

4. In-process Testing: Molecular Medicine performs in-process testing throughout the various manufacturing stages for the purpose of monitoring production. These tests are performed in accordance with defined internal SOPs and results are reviewed on a real-time basis. These test results are not generally intended for final release and should not be reported as such unless otherwise agreed to in writing. The following tests are performed in Quality Control for monitoring purposes:

Molecular Medicine Quality Control Assays

Assay	Method	Assay Reference
Endotoxin	LAL	QCP028
Bioburden Testing		QCT007
Mycoplasma Testing	Gen-Probe Assay	QCT017
Particle Analysis	OD260	QCT046
Particle Analysis	HPLC	QCT04 1
Infectious Titer	Plaque Assay	QCT016

Sponsor’s requirement for product specific in-process testing is included in GMP costs for each production run and subsequent dose fill. The technical transfer costs for each assay is separate and described in Section 2.0: Assay Transfer.

5. Final Release Testing: Molecular Medicine will assist Sponsor with Final Release Testing activities as defined below.

Sponsor commits to and is responsible for:

a) Defining a prescribed testing regimen and applicable sample types consistent with the requirements of the Sponsor IND and corresponding product specifications (“Product Specifications,” to be provided by Sponsor).

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EXHIBIT A – SCOPE OF WORK

b) Determining the Third party testing facility or facilities in which all release testing assays will be performed by.

c) All costs incurred as a result of release testing performed. Review and approval of sample submission form(s) required for release testing.

In addition to Molecular Medicine’s obligations to provide clinical grade bulk drug product and final product fill material in accordance with Product Specifications and current Good Manufacturing Practice (cGMP), Molecular Medicine commits to and is responsible for:

a) Incorporating the defined sampling plan into the Master Batch Production Records in advance of the manufacturing run.

b) Assuring all required samples are taken as defined in advance and per approved Master Batch Production Records.

c) Samples will be appropriately labeled and stored.

d) Preparation of all paperwork required for sample submission to third party testing facility.

e) Scheduling of samples with third party testing facility or facilities to assure prompt initiation of tests.

f) Assure all final reports are forwarded to Sponsor.

6. Documentation: Each production lot from Sponsor is characterized by a full set of approved Batch Production Records (BPR). Upon each lot review, QA will issue a Certificate of Compliance (as shown in Exhibit D) to the Sponsor. Molecular Medicine will also provide to Sponsor the following Regulatory Support Package as described below for each CGMP Lot:

a) Certificate of Compliance upon final QC/QA review for each lot manufactured.

b) One (1) complete set of completed batch production records.

c) Environmental Monitoring Data (Further Define w/ Sponsor as to requirements)

d) Letters Of Authorization to the Sponsor IND with the Food and Drug Administration for the Molecular Medicine Type V Facility Master File, and

e) Vendor Certificates of Analysis for all critical components such as filters, media, and buffers.

f) Sponsor may define additional lot file requirements in advance.

7. Shipping: Shipping: Molecular Medicine will provide up to three (3) IATA certified shipping containers and dry ice (per lot) for viral shipments originating from Molecular Medicine. Sponsor is responsible for selecting and designating a commercially reliable shipper. Sponsor is solely responsible for all charges incurred with each shipment and shall provide Molecular Medicine with an established account number with the selected shipper for billing of each shipment.

8. Storage: Molecular Medicine agrees to hold Sponsor’s Product pursuant to Section 4.2 of the Production Service Agreement and the Standard Terms and Conditions of Storage referred to therein.

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EXHIBIT B-PRICE AND PAYMENT SCHEDULE

Price and Payment Schedule 1: Technical Transfer (Documentation Package) and Fill Qualification

(This pricing expires on March 30, 2006)

Parameter	Payment Schedule 1	Total Cost
Technical Transfer (Project I)	1.      Contract Initiation Fee – 50% of Technical Transfer Document Preparation and Fill Qualification Costs. Due within 10 days of contract signature.	$	77,500
	2.      Technical Transfer Document Preparation – Completion Defined By Completion of Receiving Specifications/SOPs/Draft BPRs	$	40,000
Fill Qualification (Project IV)	3.      Media Fill Qualification – Completion Defined by completion of three media fills and issuance of Final Report	$	37,500
Documentation Fees	4.      Documentation Fee for Media Fill Qualification: Invoiced upon issuance of Final Report	$	5,000
Total Cost For Tech Transfer Document Preparation and Media Fill Qualifications:		$	160,000

The above Price and Payment Schedule represents costs associated with one-time up-front activities required to transfer and qualify the Sponsor Production Process. These activities define and qualify all subsequent GMP manufacturing activities.

Assumptions to Proposal

1. This proposal does not include the purchase of equipment and Project Materials required for this process. Molecular Medicine would need all relevant equipment as indicated in Section 1.4 and all Project Materials to be acquired or transferred to the facility for the purposes of this completing this project. Costs as detailed above do NOT reflect equipment or Project Material costs, which shall be for the account of Sponsor. All Project costs to be borne by Sponsor that are not as pre-specified herein shall be pre-approved by Sponsor.

2. It is recommended that upon receipt of a more complete equipment list, both parties develop a strategy for the most efficient approach to address the equipment needs.

3. Technical Transfer (Price and Payment Schedule 1) and Manufacturing Cost (Price and Payment Schedule 2) are estimated based on information received to date. Detailed cost models will be developed upon receipt of a detailed Technical Transfer Package. Costs as outlined are an estimate of the number of buffers required, length of time for cell expansion, purification materials, etc. Actual cost may be adjusted upon receipt of this information.

4. This proposal does not include the purchase of vialing components (vials, stoppers and seals), nor the required processing (sterilization and depyrogenation) of the components. Molecular Medicine will facilitate the procurement of the vialing components as well as the processing, which shall be performed by a third party. Sponsor will be responsible for all costs associated with the components and their processing.

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EXHIBIT B-PRICE AND PAYMENT SCHEDULE

Price and Payment Schedule 2: Technical Transfer Run, cGMP Production and Fill/Finish

Parameter	Payment Schedule 2	Total Cost
GMP Production	1.      Contract Initiation Fee – 30% of GMP Production and Fill Costs Due Within 10 Days of Contract Signature	$	210,000
Technical Transfer Run	2.      Technical Transfer Run Completion Defined by Laboratory Completion of BDS and issuance of Final Report	$	185,500
GMP Production	3.      GMP Production Completion Defined by Laboratory Completion, QA Review and issuance of Certificate of Compliance	$	241,500
Placebo Fill	4.      Placebo Fill Completion Defined by Laboratory Completion, QA Review and issuance of Certificate of Compliance	$	31,500
Final Product Fill	5.      Final Product Fill Completion Defined by Laboratory Completion, QA Review and issuance of Certificate of Compliance
	4.1 Fill #1		N/C
	4.2 Fill #2	$	31,500
Documentation Fees:	6.      Documentation Fees: Invoiced upon issuance of Certificate of Analysis or Final Report (TTR)
	5.1 Technical Transfer Run	$	10,000
	5.2 cGMP Production	$	10,000
	5.3 Placebo Fill	$	5,000
	5.4 Fill #1		N/C
	5.5 Fill #2	$	5,000
Total Costs For GMP Production and Filling:		$	730,000

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EXHIBIT B-PRICE AND PAYMENT SCHEDULE

Additional Terms and Conditions to Price and Payment Schedule

1. Molecular Medicine reserves the right to review and amend pricing should additional project requirements substantially impact costs provided, however, that pricing shall not be increased by an amount that exceeds the actual increase in costs.

2. Sponsor and Molecular Medicine must agree to any changes to the Scope of Work in writing and in the format of an Amendment to the Agreement.

3. Except where elsewhere specified, all invoices are due for receipt at Molecular Medicine BioServices NET 30 DAYS. 1.5% per month will be assessed on overdue balances. In no case does the assessment of past-due invoice charges affect the parties rights of termination under the Production Service Agreement.

4. Adjustments to payment terms must be made in writing and signed off by the Chief Financial Officer or equivalent authority at Molecular Medicine BioServices, Inc.

5. The following Delay/Cancellation Fee Schedule applies to any cancellation of the Project and to any Sponsor-caused delays to the agreed schedule, including delays resulting from changes to a confirmed scheduled project:

Timeframe to Laboratory Start	Delay		Cancellation
> 90 days	0		20	%
61 – 90 days	15	%	40	%
31 -60 days	20	%	60	%
15 – 30 days	25	%	80	%
8 –14 days	40	%	90	%
£7 days	50	%	100	%
Run in process	*See Comment Below		100	%

* Any request to hold materials in-process at a specific stage within the manufacturing process will result in an invoice for the pro-rated value consistent with the in-process material on hold.

6. Molecular Medicine standard group storage fees shall apply pursuant to Section 4 of the Production Service Agreement. Such standard estimated storage fees are provided below:

Unit	Fee/Unit (Quarterly)		Fee/Unit (Annually)
EachBox (£1.5mL vials)*	$	150.00	$	500.00
Each Box (>1.5mL£5mL vials)**	$	275.00	$	1,000.00
1/4 shelf/1 rack	$	2,775.00	$	11,000.00
1/2 shelf	$	5,525.00	$	22,000.00
1 shelf	$	11,025.00	$	44,000.00

* Up to 100 vials/box; 22 boxes/rack; 4 racks/shelf

** Up to 100 vials/box; 12 boxes/rack; 4 racks/shelf

The above Price and Payment Schedules 1 and 2 and the Delay/Cancellation Fee Schedule have been reviewed and accepted.

Sponsor Authorizing Signature/Title

___________

Date

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EXHIBIT C- WORK SCHEDULE

Work Schedule and Estimated Timeline

Molecular Medicine provides the following estimated timeline, which is subject to change to the extent required by performance of the Project. Molecular Medicine shall promptly consult with Sponsor in the event that any material changes are expected to impact the work schedule or estimated timeline. (NOTE: This sample time-line, although aggressive, assumes a linear approach to scheduling. It may be possible that some production activities be scheduled in an over-lapping fashion utilizing the facility more efficiently, saving time and resources. This is an option for further discussion.)

Red text indicates sponsor-driven activities.

Project I: Technical Transfer Document and Materials Preparation

ID	i	Task Name	Duration	Start	Finish	Qtr 1, 2006
						Jan	Feb	Mar
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22		Technical Transfer Preparation Sign Contract Documentation Review Batch Production Records Review Equipment List Prepare Item Specifications Review Raw Materials List Review Testing Data Conversion of Documents to MMB format Review of Documents by Sponsor Raw Material Preparation Purchase Materials Receive Raw Materials QC Testing Test Release Raw Materials Training MMB Employees to Berlex (TBD) Equipment Preparation Receive Equipment Equipment SOP Generation Install and Verify Operational (IQ/IQ)	66 days 1 day 28 days 5 days 5 days 14 days 5 days 1 day 21 days 7 days 28 days 7 days 7 days 7 days 7 days 2 days 2 days 60 days 28 days 60 days 14 days	1/9/06 1/9/06 1/10/06 1/10/06 1/10/06 1/10/06 1/10/06 1/10/06 1/10/06 1/31/06 2/7/06 2/7/06 2/14/06 2/21/06 2/28/06 2/8/06 2/8/06 1/15/06 1/15/06 1/15/06 2/12/06	3/15/06 1/9/06 2/6/06 1/14/06 1/14/06 1/23/06 1/14/06 1/10/06 1/30/06 2/6/06 3/6/06 2/13/06 2/20/06 2/27/06 3/6/06 2/9/06 2/9/06 3/15/06 2/11/06 3/15/06 2/25/06

Project IV: Media Fill Qualifications and Component Preparation

ID	i	Task Name	Duration	Start	Finish	Qtr 1, 2006			Qtr 2, 2006
						Jan	Feb	Mar	Apr	May
23 24 25 26 27 28 29 30 31		Component Preparation and Media Fill Qualification Order Components (11,000) Processing of Components (Outsourced) Media Fill Qualification & Placebo Fill Media Fill #1 Media Fill #2 Media Fill #3 Final Report Placebo Fill	119 days 14 days 45 days 53 days 1 day 1 day 1 day 21 days 1 day	1/10/06 1/10/06 1/24/06 3/17/06 3/17/06 3/25/06 4/2/06 4/3/06 5/8/06	5/8/06 1/23/0 6 3/9/06 5/8/06 3/17/06 3/25/06 4/2/06 4/23/06 5/8/06

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EXHIBIT C-WORK SCHEDULE

Project II: Technical Transfer Run

ID	i	Task Name	Duration	Start	Finish	2006		Qtr 2,
						Feb	Mar	Apr
32 33 34 35 36 37 38 39 40 41 42 49 50 51 52		Technical Transfer Run(10L Bioreactor) (PD) Production Thaw Sponsor-Provided 293 Cells Cell Expansion Virus Expansion Bioreactor Seed /Expansion Infection Harvest/Concentration Purification Formulation Fill (TBD) Testing/Review In-Process Testing (MMB) MMB Review and Issuance of Final Report Sponsor Review	57 days 28 days 1 day 21 days 2 days 1 day 2 days 1 day 1 day 1 day 1 day 28 days 14 days 7 days 7 days	2/28/06 2/28/06 2/25/06 3/1/06 3/20/06 3/22/06 3/23/06 3/23/06 3/26/06 3/27/06 3/28/06 3/29/06 3/29/06 4/12/06 4/19/06	4/25/06 3/27/06 2/28/06 3/21/06 3/21/06 3/22/06 3/24/06 3/25/06 3/26/06 3/27/06 3/28/06 4/25/06 4/11/06 4/18/06 4/25/06

Project III and V: GMP Clinical Production and Fill of Final Product

ID	i	Task Name	Duration	Start	Finish		Qtr2, 2006			Qtr 3,
						Mar	Apr	May	Jun	Jul
53 54 55 56 57 58 59 60 61 62 63 64 65 72 79 80 81 82		GMP Clinical Run (10L Bioreactor) Equipment Transfer from PD Space to GMP Suite IQ/IQ Production Thaw Sponsor-Provided 293 Cells Cell Expansion Virus Expansion Bioreactor Seed / Expansion Infection Harvest/Concentration Purification Formulation Fill #1 Fill #2 Testing/Review In-Process Testing (MMB) MMB Review and Issuance of C of C Third Party Testing (Outsourced)	101 days 7 days 14 days 28 days 1 day 21 days 2 days 1 day 2 days 1 day 1 day 1 day 1 day 1 day 43 days 14 days 7 days 42 days	3/28/06 3/28/06 4/4/06 4/26/06 4/26/06 4/27/06 5/16/06 5/18/06 5/19/06 5/21/06 5/22/06 5/23/06 5/24/06 5/25/06 5/25/06 5/25/06 6/8/06 5/26/06	7/6/06 4/3/06 4/17/06 5/23/06 4/26/06 5/17/06 5/17/06 5/18/06 5/20/06 5/21/06 5/22/06 5/23/06 5/24/06 5/25/06 7/6/06 6/7/06 6/14/06 7/6/06

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EXHIBIT C-WORK SCHEDULE

ADDITIONAL CONDITIONS TO ALL WORK SCHEDULES:

It is recognized that biological processes do not always perform to a precise number of days. Therefore, the party responsible for timeline extensions or delays is as follows:

1. Molecular Medicine is responsible for project extensions or delay due to their manufacturing equipment.

2. Molecular Medicine is responsible for complete execution of manufacturing methods as outlined in approved batch production records. Molecular Medicine is responsible for project extensions or delays due to inaccurate execution of the manufacturing methods as outlined in the batch production records.

3. Sponsor is responsible for project extensions or delay due to their manufacturing equipment.

4. Sponsor is responsible for project extensions or delays due to lack of critical information or materials in a timely manner to Molecular Medicine as agreed to in advance.

5. Sponsor is responsible for project extensions or delays caused by variable performance of raw materials specified in advance.

6. Sponsor is responsible for project extensions or delays caused by variable performance of critical production parameters previously defined by Sponsor.

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EXHIBIT D – FORM OF CERTIFICATE OF COMPLIANCE (SAMPLE COC)

CERTIFICATE OF COMPLIANCE (Sample)

SPONSOR:	Date:
	SPONSOR
	Contact:
	Client Code:	MM-134

Product:

MOLECULAR MEDICINE Manufacturing and Quality Assurance have reviewed the following Batch Production Records documenting the manufacture of the above product:

Part Number	Version	Name	Lot Number
TBD
TBD
TBD

The following criteria have been met based on the review of the Batch Production Records and related Facility and Quality Control Records.

¨ Batch Production Records were properly utilized, were reviewed after use by responsible Manufacturing and Quality Assurance staff, and all lot deviations have been reviewed, justified and approved.

¨ All components utilized in production met specified requirements prior to use.

¨ All materials were manufactured in qualified facilities utilizing standardized, documented and (where and when appropriate) validated equipment, utilities, and manufacturing processes.

¨ Representative samples of each finished lot were subjected to the following required testing and have met specifications (including without limitation the Product Specifications); this data has been reviewed and approved by Quality Control and Quality Assurance.

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EXHIBIT D-FORM OF CERTIFICATE OF COMPLIANCE (SAMPLE COC)

TEST	METHOD	REFERENCE	SPECIFICATION	RESULT
Bioburden			No Growth
Mycoplasma			Negative
Endotoxin			<10EU/ml
Particles			Report
Volume			Report

THESE DATA ARE FOR PRODUCT CERTIFICATION ONLY AND ARE NOT A SUBSTITUTE FOR FINAL PRODUCT RELEASE TESTING

¨ Any unexplained discrepancies or the failure to meet any of the specifications have been thoroughly investigated, documented, resolved and approved by Quality Assurance and are considered to have no adverse affect on the safety, identity, strength, quality of purity of the lot. ¨ No unexplained discrepancies or failure to meet any of the specifications.

MOLECULAR MEDICINE certifies that the (Product) was made according to Good Manufacturing Practice Regulations as applicable to pilot scale facilities.

(Name)	Date
Quality Assurance
Molecular Medicine BioServices, Inc.

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EXHIBIT E – TERMS AND CONDITIONS OF STORAGE

1. Storage Services. Molecular Medicine BioServices, Inc. (“MMB” or the “Company”) will provide storage services to the “Sponsor” referenced above under the following Terms and Conditions of Storage (the “Terms & Conditions”). These Terms & Conditions are the Standard Terms and Conditions of Storage that are referred to in the Production Service Agreement referenced above between MMB and such Sponsor (together with all exhibits thereto, the “PSA”). These Terms & Conditions are an exhibit to and form part of the PSA. By entering into the PSA, the Sponsor agrees to be bound by these Terms & Conditions, including any future modifications to the Terms & Conditions that are adopted and communicated to Sponsor by MMB.

2. Delivery of Stored Materials. Sponsor will deliver (or, as applicable, hereby directs MMB to store) all materials, supplies and products intended to be stored with MMB under the PSA (collectively, the “Stored Materials”) at the times and in accordance with the procedures set forth in the Scope of Work that is attached to the PSA (the “PSA Scope of Work”). All Stored Materials will be delivered in containers that are customary in the industry, that are adequately designed to maintain the viability of the materials contained therein and to prevent cross-contamination, and that meet any other specifications that may be agreed to in writing by MMB and Sponsor, whether in the PSA Scope of Work or otherwise. All Stored Materials delivered to MMB will be accompanied by a completed deposit form in the form attached hereto, together with any other information relevant to the storage of the Stored Materials, such as source of Stored Materials, lot number, grade and/or such other specifications as may be required in the Scope of Work or by written mutual agreement of MMB and Sponsor. MMB shall have the right, in its sole discretion, to refuse to store any Stored Materials that do not meet the foregoing requirements. In no event will MMB be responsible for any loss or contamination resulting from Sponsor’s failure to meet such delivery requirements, nothwithstanding the fact that MMB may have accepted Stored Materials that do not meet the foregoing requirements.

Sponsor understands and agrees that MMB cannot assume responsibility for the safety or quality of any Stored Materials that were not originally processed by MMB or that have been removed from MMB’s control and later returned by MMB. Sponsor acknowledges and agrees in that either of such events, the sole responsibility of MMB is limited to the storage of such Stored Materials under conditions specified in the relevant deposit order.

3. Storage Conditions. MMB will store the Stored Materials in the containers specified in the relevant deposit form, and at the temperature and under the other conditions that are specified in the deposit form and that are agreed to by MMB. MMB will store the Stored Materials in accordance with current Good Manufacturing Practices as set forth in US 21 CFR Parts 210 and 211 applicable to pilot scale facilities and 21 CFR Part 600 applicable to biological products.

4. Term. MMB’s obligation to provide storage services under these Terms and Conditions shall take effect on the effective date of the PSA and shall remain effective until the earlier of the Termination Date set forth in Section 6 and the termination date of the PSA. Upon the termination of the PSA, Sponsor may renew MMB’s storage services for successive annual periods by providing written notice of such renewal to MMB no later than thirty (30) days prior to the termination of the PSA. Each annual renewal period shall renew automatically, commencing on January 1 and ending on December 31 of each year, except that the initial renewal period will commence on the termination date of the PSA and end on December 31 of that year, with storage fees for the initial period prorated accordingly. The initial term and subsequent renewal periods are each referred to herein as a “Storage Period.“

5. Storage Fees. During the effective period of the PSA, Sponsor shall pay all storage fees in the amounts and at the times set forth in the Price and Payment Schedule of the PSA. Thereafter, Sponsor shall pay in advance the fee for each annual Storage Period in amounts set forth in MMB’s then current standard storage fee schedule. All invoices are payable in United States dollars. All payments must be made via cash or check. Sponsor shall be responsible for costs associated with MMB’s collection of sums due and owing to it pursuant to these Terms & Conditions including, without limitation, reasonable attorneys’ fees and expenses, collection agency fees, and court costs.

6. Termination. Notwithstanding any other provisions herein, MMB’s obligations to provide storage services to Sponsor shall terminate upon the happening of any of the following events (each, a “Termination Event”):

(a) Termination or expiration of the PSA for any reason without the Sponsor having elected to renew for an annual storage term;

(b) Written instruction of Sponsor directing MMB to transfer all Stored Materials to another storage facility;

(c) Written instruction of Sponsor directing MMB to destroy all Stored Materials;

(d) Failure of Sponsor to pay any storage fee within ten (10) days after the date of any notice of delinquency from MMB to Sponsor, it being understood that termination for such non-payment shall not excuse Sponsor of its obligation to pay delinquent fees;

(e) Termination by Sponsor of MMB’s storage services after thirty (30) days written notice of termination to MMB;

(f) Termination by MMB of MMB’s storage services after thirty (30) days written notice of termination to Sponsor.

Upon the occurrence of any Termination Event, all obligations of MMB for storage of Sponsor’s Stored Materials shall cease. Sponsor shall make arrangements for release, destruction or other disposition of any remaining Stored Materials within thirty (30) days. IF SPONSOR FAILS TO MAKE SUCH ARRANGEMENTS WITHIN SUCH TIME PERIOD, THE STORED MATERIALS WILL BE DEEMED ABANDONED AND MMB MAY, AT ITS SOLE DISCRETION, DESTROY ALL STORED MATERIALS REMAINING IN STORAGE WITH MMB. MMB ACCEPTS NO RESPONSIBILITY FOR LOSS OF STORED MATERIALS DESTROYED BY MMB BECAUSE OF SPONSOR’S ABANDONMENT. There shall be no refund of storage fees upon termination of MMB’s storage services pursuant to paragraphs (a) – (e) above. A pro-rata refund of storage fees shall be paid by MMB to Sponsor if MMB terminates its storage services pursuant to paragraph (f) of this Section 6.

7. Delivery of Stored Materials. In the event that MMB is directed by Sponsor to deliver any Stored Materials to any person, risk of loss for the Stored Materials shall be the responsibility of Sponsor upon release of the Stored Materials from MMB’s premises (FOB shipping point) to a shipper that has been selected and approved by Sponsor. Sponsor shall have the obligation and the sole responsibility to ensure to its own satisfaction that such carrier carries adequate insurance.

8. Excused Performance. MMB shall not be responsible for any damage or destruction of the Stored Materials due to causes beyond its reasonable control, including but not limited to acts of God, governmental actions, fire, smoke, labor difficulty, shortages, war, revolution, civil disturbances, terrorism, sabotage, blockade, embargo, explosion, transportation problems, interruptions of power or of communications, failure of suppliers or subcontractors, or natural disasters.

9. Limitation of Liability. SPONSOR ACKNOWLEDGES THAT THERE ARE INHERENT RISKS IN THE PROCESS OF FREEZING AND THAWING THE STORED MATERIALS AND AGREES THAT MMB SHALL NOT BE LIABLE FOR ANY LOSS, DAMAGE, OR DESTRUCTION OF THE STORED MATERIALS AS LONG AS MMB HAS COMPLIED WITH THE STORAGE CONDITIONS SET FORTH IN SECTION 3. THE PARTIES ACKNOWLEDGE AND AGREE THAT IN THE EVENT OF LOSS, DAMAGE OR DESTRUCTION OF THE STORED MATERIALS FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT LIMITATION, AS A RESULT OF MMB’S NEGLIGENCE OR ITS BREACH OF THESE TERMS & CONDITIONS, SPONSOR’S REMEDY SHALL BE LIMITED TO THE STORAGE FEE PAID BY SPONSOR FOR THE STORAGE PERIOD IN WHICH SUCH LOSS, DAMAGE OR DESTRUCTION OCCURRED. IN NO EVENT SHALL MMB BE LIABLE FOR ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS OR LOSS OF BUSINESS, WHETHER FORESEEABLE OR NOT), OCCASIONED BY ANY BREACH UNDER THESE TERMS & CONDITIONS OR ANY OTHER CAUSE OR CLAIM WHATSOEVER, WHETHER BASED ON NEGLIGENCE OR OTHERWISE. SPONSOR’S FAILURE TO ASSERT A CLAIM IN WRITING WITHIN THIRTY (30) DAYS OF MMB’S NOTICE TO SPONSOR OF THE LOSS, DAMAGE OR DESTRUCTION OF STORED MATERIALS SHALL BE DEEMED TO BE SPONSOR’S ABSOLUTE AND UNEQUIVOCAL WAIVER OF ANY AND ALL CLAIMS RELATING TO SUCH LOSS, DAMAGE OR DESTRUCTION. SPONSOR WARRANTS THAT IT CARRIES PROPERTY INSURANCE FOR THE FULL REPLACEMENT VALUE OF THE STORED MATERIALS.

10. Indemnification. Sponsor shall defend, indemnify and hold harmless MMB, its directors, officers, employees and agents (collectively the “MMB Indemnitees”) from and against any and all liability, loss, expense (including reasonable attorneys’ fees), or third party claims for injury or damages (collectively, “Liabilities”) arising out of the MMB’s storage of the Stored Materials, provided that Sponsor shall have no obligation to indemnify the MMB Indemnitees for any portion of a Liability that arises from the negligence or willful misconduct of the MMB Indemnitees or from their breach of these Terms & Conditions.

11. Assignment. Except in connection with a permitted assignment under the PSA, Sponsor may not assign its rights or obligations under these Terms & Conditions, whether in whole or in part, to any third party without MMB’s prior written approval, which approval may be withheld by MMB in its sole discretion.

12. General. These Terms & Conditions shall be construed in accordance with the laws of the State of California without regard to conflict of laws principles. These Terms & Conditions and the applicable provisions of the PSA set forth the entire agreement of the parties with respect to the providing of storage services by MMB. Sponsor’s execution of the PSA constitutes Sponsor’s acceptance of and agreement to these Terms & Conditions in their entirety. In the event of a conflict between the PSA and these Terms & Conditions, the terms herein shall govern. Each provision of these Terms & Conditions shall be construed as separable and divisible from every other provision and that the enforceability of any one provision shall not limit the enforceability of any other provision(s) hereof. The section headings contained in these Terms & Conditions are for reference purposes only and shall not affect the meaning or interpretation hereof. No waiver by MMB or Sponsor of any default of the other hereunder shall be deemed to be a waiver of any subsequent default. These Terms & Conditions shall remain in effect until modified by MMB, which modifications shall take effect when communicated by MMB to Sponsor.

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EXHIBIT F: FORM OF PROJECT START ORDER

Project Start Order (Sample)                        

Client	Contract Name
Client Code	Project Name
Client Contact	LN or DEV no.

1. Project Type (circle appropriate Type)

Name	Use of Product	Type of Report	Manufacturing Site	Records
PD	None	Data Only	PD	Notebook
Pilot or Tech Transfer	Animal	Development Report	PD	Draft Batch Records
Shakedown or Clinical	Animal/Human	CofC	GMP	Batch Records
Fill & Finish	Human	CofC	GMP	Batch Records

2. Materials

¨ All materials necessary are in-house

¨ The following critical materials still need to be received (attached)

3. Equipment

¨ All equipment necessary is in-house

¨ The following critical pieces of equipment still need to be received (attached)

4. Timeline*

Thaw date: week of             /            /200    

Harvest date: week of             /            /200    

Fill date: week of             /            /200    

* All scheduling dates are based on information provided above in collaboration with Sponsor and the known capacity available at Molecular Medicine BioServices. SPONSOR acknowledges that project delays by SPONSOR after signature of this Project Start Order will result in delay fees as provided in the Contract. SPONSOR acknowledges that project cancellations by SPONSOR after signature of this Project Start Order will result in cancellation fees as provided in the Contract.

I hereby direct Molecular Medicine BioServices to hard schedule the project described above.

SPONSOR
By:	(SAMPLE)
Name:		Date

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EX-10.19

Exhibit 10.19

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”), dated March 8th, 2006 (“Effective Date”), is between Innercool Therapies, Inc., a Delaware corporation (the “Company”) and Mike Magers (“Executive”).

1. POSITION, RESPONSIBILITIES, AND TERM

a. Position. Executive is employed by the Company to render services to the Company in the positions of President and Chief Operating Officer. As President of the Company, which is a wholly-owned subsidiary of Cardium Therapeutics, Inc. (“Parent Company”), Executive shall report operationally to the President of Parent Company. Executive shall perform such duties and responsibilities as are normally related to such positions in accordance with the standards of the industry and any additional duties now or hereafter assigned to Executive by the Company. Executive shall abide by the rules, regulations, and practices as adopted or modified from time to time in the Company’s sole discretion.

b. Other Activities. Except upon the prior written consent of the Company, Executive will not, during the Term (as defined below) of this Agreement, engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that interferes with Executive’s duties and responsibilities hereunder or create a conflict of interest with the Company. Executive has identified on Attachment A certain defined Other Activities that are represented to not interfere with Executive’s duties and responsibilities hereunder or to create a conflict of interest with the Company, and the Company hereby consents to such activities provided they do not so interfere or create a conflict of interest.

c. No Conflict. Executive represents and warrants that Executive’s execution of this Agreement, Executive’s employment with the Company, and the performance of Executive’s proposed duties under this Agreement shall not violate any obligations Executive may have to any other employer, person or entity, including any obligations with respect to proprietary or confidential information of any other person or entity.

d. Term of Employment. Executive shall be retained by the Company to perform the services set forth in this Agreement commencing on the Effective Date and ending upon the earlier of: (i) three (3) years after the Effective Date of this Agreement (“Initial Term”); or (ii) the date upon which Executive’s employment is terminated in accordance with Section 3. This Agreement shall be automatically renewed for additional one (1) year terms (each an “Extension Term”) upon the expiration of the Initial Term and each Extension Term, unless either party gives the other party a written notice of termination not less than thirty (30) days prior to the date of expiration of the Initial Term or any Extension Term (together, the Initial Term and all Extension Terms are referred to herein as the “Term”).

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2. COMPENSATION AND BENEFITS

a. Base Salary. In consideration of the services to be rendered under this Agreement, the Company shall pay Executive a salary at the rate of Two Hundred and Sixty-Six Thousand Dollars ($266,000) per year (“Base Salary”). The Base Salary shall be paid in accordance with the Company’s normal payroll practices. Executive’s Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be adjusted in the sole discretion of the Company.

b. Warrants. In further consideration of the services to be rendered under this Agreement, the Company shall grant to Executive a stock purchase warrant (the “Warrant”) exercisable into up to Two Hundred Fifty Thousand (250,000) shares of Common Stock of Cardium Therapeutics, Inc., a Delaware corporation and the parent entity of the Company, pursuant to the terms of the Warrant Agreement attached hereto as Exhibit A and incorporated herein by this reference. Executive’s entitlement to receive the shares of Common Stock underlying the Warrant is conditioned on Executive’s execution of the Warrant Agreement.

c. Bonus. Executive will be eligible to participate in an executive incentive compensation program to be administered by the Company’s Board of Directors. The amounts payable thereunder will be based on the Company’s overall performance as well as Executive’s specific performance. Based on such performance, Executive incentive bonus may be up to a maximum 40% of Executive’s Base Salary (“Bonus”) and will be paid within two-and-one-half months of the end of the year in which it is earned.

d. Benefits. In further consideration of the services to be rendered under this Agreement, Executive shall be eligible to participate in health benefits and paid time off benefits generally made available by the Company to its employees in accordance with the applicable benefit plans, and as may be amended from time to time in the Company’s sole discretion; provided that with respect to the calculation of Executive’s paid time off benefits, Executive will be credited with five (5) years of prior service and will also be entitled take an additional four days per year as “floating holidays”.

3. AT-WILL EMPLOYMENT

The employment of Executive shall be “at-will” at all times. The Company or Executive may terminate Executive’s employment with the Company at any time, without any advance notice, for any reason or no reason at all, notwithstanding anything to the contrary contained in or arising from any statements, policies or practices of the Company relating to the employment, discipline or termination of its employees. Following the termination of Executive’s employment, the Company shall pay to Executive all compensation to which Executive is entitled up through the date of termination, subject to any other rights or remedies of the Company under law. Thereafter, all obligations of the Company under this Agreement shall cease other than those set forth in Section 4.

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4. COMPANY TERMINATION OBLIGATIONS

a. Termination by Company Without Cause or by Executive for Good Reason. If the Company terminates Executive’s employment without Cause (as defined below) or Executive terminates his employment for Good Reason (as defined below), Executive will receive severance benefits as follows: (i) continued payment of Base Salary (at the rate then in effect for Base Salary) for twelve (12) months, payable according to the Company’s normal payroll practices (“Severance Period”); (ii) payment of a pro rata share of the Bonus which Executive would have been eligible to receive during the Severance Period, payable according to the Company’s normal payroll practices; (iii) acceleration of the Warrant (such that any unvested shares shall become fully vested and immediately exercisable in the same manner and timing as provided for accelerated vesting in a Change of Control, as described under Section 7(d) of the Warrant Agreement); and (iv) the Company will pay for continuation health benefits for twelve (12) months pursuant to COBRA provided Executive completes all necessary documentation in a timely manner to receive such benefits (collectively “Severance Benefits”). Executive’s eligibility to receive the Severance Benefits is conditioned on Executive having first signed a general release of all known and unknown claims against the Company. All other obligations of the Company under this Agreement shall cease upon the termination of Executive’s employment for any reason.

i. Cause. For purposes of this Agreement, “Cause” shall mean: (i) Executive commits a crime involving dishonesty, breach of trust, or physical harm to any person; (ii) Executive engages in conduct that is in bad faith and injurious to the Company, including but not limited to, misappropriation of trade secrets, fraud or embezzlement; (iii) Executive materially breaches this Agreement (and, if such breach is curable, has failed to cure such breach following a 14-day notice period); (iv) Executive refuses to implement or follow a lawful policy of the Company or a directive of the Company that is reasonably consistent with Executive’s duties and responsibilities; or (v) Executive engages in misfeasance or malfeasance demonstrated by Executive’s failure to perform Executive’s job duties diligently and professionally.

ii. Good Reason. For purposes of this Agreement, “Good Reason” means (i) the diminution of Executive’s duties in any material respect which continues for more than thirty (30) days following written notice by Executive of his objection to such diminution, (ii) assignment to Executive of duties inconsistent in any material respect with Executive’s position (including status, offices, titles and reporting requirements (such as a termination of Executive’s direct reporting relationship to the President or CEO of Cardium Therapeutics), (iii) the Company moves Executive’s principal place of employment outside of San Diego County, California; or (iv) a “Change in Control”.

iii. Change of Control. For purposes of this Agreement, “Change of Control” shall mean a change in ownership or control of the Company effected through a merger, consolidation or acquisition by any person or related group of persons (other than an acquisition by the Company or by a Company-sponsored employee benefit plan or by a person or persons

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that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of securities possessing more than fifty percent of the total combined voting power of the outstanding securities of the Company.

b. Termination Due to Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death or if Executive becomes Disabled. Executive shall be deemed Disabled if Executive is unable for medical reasons to perform his essential job duties for ninety (90) days in a twelve (12) month period. If Executive’s employment is terminated by the Company due to Executive’s death or Disability, Executive will receive the benefits already due to him under Section 2. All other obligations of the Company under this Agreement shall cease upon termination of this Agreement for any reason.

c. Termination by Company Without Cause Following Change In Control During Term. In addition to the benefits set forth in Section 4(a) above, if the Company terminates Executive’s employment without Cause following a Change in Control during the Term of this Agreement, Executive will be eligible to become immediately vested in all Warrants granted to Executive pursuant to Section2 (b) above (“Accelerated Vesting”). Executive’s eligibility to receive the Accelerated Vesting is conditioned on Executive having first signed a general release of all known and unknown claims against the Company. All other obligations of the Company under this Agreement shall cease upon the termination of Executive’s employment for any reason.

d. 409A Tax Issues. Notwithstanding any other provision of this Agreement whatsoever, the Company, in its sole discretion and without Executive’s consent, may amend or modify this Agreement in any manner to provide for the application and effects of Section 409A of the Code (relating to deferred compensation arrangements) and any related regulatory or administrative guidance issued by the Internal Revenue Service. The Company shall have the authority to delay the payment of any benefits payable under this Agreement to the extent it deems necessary or appropriate to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to certain “key employees” of certain publicly-traded companies) and in such event, any such amount to which Executive would otherwise be entitled during the six (6) month period immediately following Executive’s separation from service will be paid on the first business day following the expiration of such six (6) month period.

5. EXECUTIVE TERMINATION OBLIGATIONS

a. Return of Property. Executive agrees that all property (including without limitation all equipment, tangible proprietary information, documents, records, notes, contracts and computer-generated materials) furnished to or created or prepared by Executive incident to Executive’s employment belongs to the Company and shall be promptly returned to the Company upon termination of Executive’s employment.

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b. Resignation and Cooperation. Upon termination of Executive’s employment, Executive shall be deemed to have resigned from all offices and directorships then held with the Company. Following any termination of employment, Executive shall reasonably cooperate with the Company in the winding up of pending work on behalf of the Company and the orderly transfer of work to other employees. Executive shall also reasonably cooperate with the Company in the defense of any action brought by any third party against the Company that relates to Executive’s employment by the Company.

c. Continuing Obligations. Executive understands and agrees that Executive’s obligations under Sections 6 and 7 herein (including Exhibits B and C) shall survive the termination of Executive’s employment for any reason and the termination of this Agreement.

6. INVENTIONS AND PROPRIETARY INFORMATION

Executive agrees to sign and be bound by the terms of the Employee Proprietary Information and Inventions Agreement, which is attached as Exhibit B (“Proprietary Information Agreement”).

7. ARBITRATION

Executive agrees to sign and be bound by the terms of the Arbitration Agreement, which is attached as Exhibit C.

8. AMENDMENTS; WAIVERS; REMEDIES

This Agreement may not be amended or waived except by a writing signed by Executive and by a duly authorized representative of the Company other than Executive. Failure to exercise any right under this Agreement shall not constitute a waiver of such right. Any waiver of any breach of this Agreement shall not operate as a waiver of any subsequent breaches. All rights or remedies specified for a party herein shall be cumulative and in addition to all other rights and remedies of the party hereunder or under applicable law.

9. ASSIGNMENT; BINDING EFFECT

a. Assignment. The performance of Executive is personal hereunder, and Executive agrees that Executive shall have no right to assign and shall not assign or purport to assign any rights or obligations under this Agreement. This Agreement may be assigned or transferred by the Company; and nothing in this Agreement shall prevent the consolidation, merger or sale of the Company or a sale of any or all or substantially all of its assets.

b. Binding Effect. Subject to the foregoing restriction on assignment by Executive, this Agreement shall inure to the benefit of and be binding upon each of the parties; the affiliates, officers, directors, agents, successors and assigns of the Company; and the heirs, devisees, spouses, legal representatives and successors of Executive.

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10. NOTICES

All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered: (a) by hand; (b) by a nationally recognized overnight courier service; or (c) by United States first class registered or certified mail, return receipt requested, to the principal address of the other party. The date of notice shall be deemed to be the earlier of (i) actual receipt of notice by any permitted means, or (ii) five business days following dispatch by overnight delivery service or the United States Mail. Executive shall be obligated to notify the Company in writing of any change in Executive’s address. Notice of change of address shall be effective only when done in accordance with this paragraph.

11. SEVERABILITY

If any provision of this Agreement shall be held by a court or arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. In the event that the time period or scope of any provision is declared by a court or arbitrator of competent jurisdiction to exceed the maximum time period or scope that such court or arbitrator deems enforceable, then such court or arbitrator shall reduce the time period or scope to the maximum time period or scope permitted by law.

12. TAXES

All amounts paid under this Agreement (including without limitation Base Salary and Severance) shall be paid less all applicable state and federal tax withholdings and any other withholdings required by any applicable jurisdiction.

13. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of California.

14. INTERPRETATION

This Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party. Sections and section headings contained in this Agreement are for reference

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purposes only, and shall not affect in any manner the meaning or interpretation of this Agreement. Whenever the context requires, references to the singular shall include the plural and the plural the singular.

15. OBLIGATIONS SURVIVE TERMINATION OF EMPLOYMENT

Executive agrees that any and all of Executive’s obligations under this Agreement, including but not limited to Exhibits B and C, shall survive the termination of employment and the termination of this Agreement.

16. COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement, but all of which together shall constitute one and the same instrument.

17. AUTHORITY

Each party represents and warrants that such party has the right, power and authority to enter into and execute this Agreement and to perform and discharge all of the obligations hereunder; and that this Agreement constitutes the valid and legally binding agreement and obligation of such party and is enforceable in accordance with its terms.

18. ENTIRE AGREEMENT

This Agreement (including Exhibits A, B, and C) is intended to be the final, complete, and exclusive statement of the terms of Executive’s employment by the Company and may not be contradicted by evidence of any prior or contemporaneous statements or agreements. To the extent that the practices, policies or procedures of the Company, now or in the future, apply to Executive and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control. Executive hereby acknowledges that any prior employment agreement Executive had with Intercool Therapies, Inc., a California corporation (“Prior Employment Agreement”), has been terminated, the Company has no obligations to Executive under any Prior Employment Agreement, and Executive hereby waives, releases, and will not assert any claims against the Company based on any Prior Employment Agreement.

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19. EXECUTIVE ACKNOWLEDGEMENT

EXECUTIVE ACKNOWLEDGES EXECUTIVE HAS HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL CONCERNING THIS AGREEMENT, THAT EXECUTIVE HAS READ AND UNDERSTANDS THE AGREEMENT, THAT EXECUTIVE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT EXECUTIVE HAS ENTERED INTO IT FREELY BASED ON EXECUTIVE’S OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.

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

INNERCOOL THERAPIES, INC.
(a Delaware Corporation)
By: Tyler M. Dylan
Its: Chief Business Officer	Executive
Dated:	Dated:

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EXHIBIT A

WARRANT AGREEMENT

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EXHIBIT B

EMPLOYEE PROPRIETARY INFORMATION

AND INVENTIONS AGREEMENT

Date:                                  

The following confirms an agreement between Innercool Therapies Inc., a Delaware corporation (the “Company”), and me, which is a material part of the consideration for my employment by the Company:

1. I understand that the Company possesses and will possess Proprietary Information that is important to its business. For purposes of this Agreement, “Proprietary Information” is information that was or will be developed, created, or discovered by or on behalf of the Company, or which became or will become known by, or was or is conveyed to the Company, which has commercial value in the Company’s business. “Proprietary Information” includes, but is not limited to, information about algorithms, mask works, trade secrets, cell lines, reagents, antibodies, computer programs, designs, technology, ideas, know-how, processes, formulas, compositions, data, techniques, improvements, inventions (whether patentable or not), works of authorship, business and product development plans, the salaries and terms of compensation of other employees, customers and other information concerning the Company’s actual or anticipated business, research or development, or which is received in confidence by or for the Company from any other person. I understand that my employment creates a relationship of confidence and trust between the Company and me with respect to Proprietary Information.

2. I understand that the Company possesses or will possess “Company Materials” that are important to its business. For purposes of this Agreement, “Company Materials” are documents or other media or tangible items that contain or embody Proprietary Information or any other information concerning the business, operations or plans of the Company, whether such documents have been prepared by others or by me. “Company Materials” include, but are not limited to, blueprints, drawings, photographs, charts, graphs, notebooks, customer lists, computer disks, tapes or printouts, sound recordings and other printed, typewritten or handwritten documents, as well as samples, prototypes, models, products and the like.

3. In consideration of my employment by the Company and the compensation received by me from the Company from time to time, I hereby agree as follows:

a. All Proprietary Information and all title, patents, patent rights, copyrights, mask work rights, trade secret rights, and other intellectual property and rights anywhere in the world (collectively “Rights”) in connection therewith shall be the sole property of the Company. I hereby assign to the Company any Rights I may have or acquire in such Proprietary Information. At all times, both during my employment by the Company and after its

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termination, I will keep in confidence and trust and will not use or disclose any Proprietary Information or anything relating to it without the prior written consent of an officer of the Company. Disclosure restrictions of this Agreement shall not apply to any information that I can document is generally known to the public through no fault of mine. In addition, nothing contained herein will prohibit me from disclosing to anyone the amount of my wages.

b. All Company Materials shall be the sole property of the Company. I agree that during my employment by the Company, I will not remove any Company Materials from the business premises of the Company or deliver any Company Materials to any person or entity outside the Company, except that I may on occasion utilize Company Materials in my home solely in the performance of the duties of my employment. I further agree that, immediately upon the termination of my employment by the Company or by me for any reason, or during my employment if so requested by the Company, I will return all Company Materials, apparatus, equipment and other physical property, and any reproduction of such property, excepting only (i) my personal copies of records relating to my compensation; (ii) my personal copies of any materials previously distributed generally to shareholders of the Company; and (iii) my copy of this Agreement.

c. I will promptly disclose in writing to my immediate supervisor or to any alternative person as designated by the Company all “Inventions” (which term includes improvements, inventions, works of authorship, trade secrets, technology, computer programs, formulas, compositions, ideas, designs, processes, techniques, know-how and data, whether or not patentable) made or conceived or reduced to practice or developed by me, either alone or jointly with others, during the term of my employment. Upon receipt of a written request from the Company, I will also disclose to the President of the Company Inventions conceived, reduced to practice, or developed by me within six (6) months of the termination of my employment with the Company; such disclosures shall be received by the Company in confidence (to the extent they are not assigned in paragraph 3(d) below and do not extend the assignment made in paragraph 3(d) below). I will not disclose Inventions covered by paragraph 3(d) to any person outside the Company unless I am requested to do so by management personnel of the Company.

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d. I agree that all Inventions that I make, conceive, reduce to practice or develop (in whole or in part, either alone or jointly with others) during my employment shall be the sole property of the Company to the maximum extent permitted by Section 2870 of the California Labor Code, a copy of which is attached, and I hereby assign such Inventions and all Rights therein to the Company. No assignment in this Agreement shall extend to inventions, the assignment of which is prohibited by Labor Code section 2870. The Company shall be the sole owner of all Rights in connection therewith.

e. I agree to perform, during and after my employment, all acts deemed necessary or desirable by the Company to permit and assist it, at the Company’s expense, in evidencing, perfecting, obtaining, maintaining, defending, and enforcing Rights and/or my assignment with respect to such Inventions in any and all countries. Such acts may include, but are not limited to, execution of documents and assistance or cooperation in legal proceedings. I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agents and attorneys-in-fact to act for and in my behalf and instead of me, to execute and file any documents and to do all other lawfully permitted acts to further the above purposes with the same legal force and effect as if executed by me.

f. Any assignment of copyright hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights” (collectively “Moral Rights”). To the extent such Moral Rights cannot be assigned under applicable law and to the extent the following is allowed by the laws in the various countries where Moral Rights exist, I hereby waive such Moral Rights and consent to any action of the Company that would violate such Moral Rights in the absence of such consent. I will confirm any such waivers and consents from time to time as requested by the Company.

g. I have attached hereto a complete list of all existing Inventions to which I claim ownership as of the date of this Agreement and that I desire to specifically clarify are not subject to this Agreement, and I acknowledge and agree that such list is complete. If no such list is attached to this Agreement, I represent that I have no such Inventions at the time of signing this Agreement.

h. During the term of my employment and for one (1) year thereafter, I will not encourage or solicit any employee or consultant of the Company to leave the Company for any reason. However, this obligation shall not affect any responsibility I may have as an employee of the Company with respect to the bona fide hiring and firing of Company personnel.

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i. I agree that during my employment with the Company I will not engage in any employment, business, or activity that is in any way competitive with the business or any proposed business of the Company, and I will not assist any other person or organization in competing with the Company or in preparing to engage in competition with the business or any proposed business of the Company. The provisions of this paragraph shall apply both during normal working hours and at all other times including, but not limited to, nights, weekends and vacation time while I am employed by the Company.

j. I represent that my performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict herewith or in conflict with my employment with the Company.

4. I represent that my performance of the terms of this Agreement and as an employee of the Company does not and will not breach any agreement to keep in confidence proprietary information, knowledge, or data acquired by me in confidence or in trust prior to becoming an employee of the Company, and I will not improperly use or disclose to the Company, or induce the Company to use or disclose, any confidential or proprietary information or material belonging to any previous employer or others. I will not bring into the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person.

5. I agree that this Agreement is not an employment contract and that I have the right to resign and the Company has the right to terminate my employment at any time, for any reason, with or without cause.

6. I agree that this Agreement does not purport to set forth all of the terms and conditions of my employment, and that as an employee of the Company I have obligations to the Company that are not set forth in this Agreement.

7. I agree that my obligations under paragraphs 3(a) through 3(f) and paragraph 3(h) of this Agreement shall continue in effect after termination of my employment, regardless of the reason or reasons for termination, and whether such termination is voluntary or involuntary on my part, and that the Company is entitled to communicate my obligations under this Agreement to any future employer or potential employer of mine.

8. I agree that any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of California without regard to the conflict of law provisions thereof. I further agree that if one or more provisions of this Agreement are held to be illegal or unenforceable under applicable California law, such

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illegal or unenforceable portion(s) shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and shall be enforceable in accordance with its terms.

9. This Agreement shall be effective as of the date I execute this Agreement and shall be binding upon me, my heirs, executors, assigns, and administrators and shall inure to the benefit of the Company, its subsidiaries, successors and assigns.

10. This Agreement can only be modified by a subsequent written agreement executed by the President of Cardium Therapeutics, Inc..

11. I acknowledge that I have been advised to, and have had an opportunity to, consult with my own attorney in connection with this Agreement.

I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS THAT IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE UNDERSTANDING THAT ONE COUNTERPART WILL BE RETAINED BY THE COMPANY AND THE OTHER COUNTERPART WILL BE RETAINED BY ME.

Employee’s Signature	Date
Printed Name

Accepted and Agreed to:

INNERCOOL THERAPIES, INC.

(a Delaware Corporation)

By: Tyler M. Dylan

Its: Chief Scientific Officer

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ATTACHMENT A

To: Innercool Therapies, Inc.

1. The following is a complete list of Inventions relevant to the subject matter of my employment by Innercool Therapies, Inc. (the “Company”) that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my employment by the Company that I desire to clarify are not subject to the Company’s Proprietary Information and Inventions Agreement.

No Inventions

See below:

Additional sheets attached

2. I propose to bring to my employment the following materials and documents of a former employer:

No materials or documents

See below:

3. Other Activities:

a. I have a Consulting Agreement in place with Tyco, Inc. (Mallinckrodt Medical) for defense of their patent suit.

b. I provide advice and assistance to CardioSync, Inc.

Employee’s Signature	Date
Printed Name

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ATTACHMENT B

Section 2870 Employment Agreements; Assignment of Rights

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for his employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

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EXHIBIT C

ARBITRATION AGREEMENT

The Company and Executive hereby agree that, to the fullest extent permitted by law, any and all claims or controversies between them (or between Executive and any present or former officer, director, agent, or employee of the Company or any parent, subsidiary, or other entity affiliated with the Company) relating in any manner to the employment or the termination of employment of Executive shall be resolved by final and binding arbitration. Except as specifically provided herein, any arbitration proceeding shall be conducted in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“the AAA Rules”).

Claims subject to arbitration shall include, without limitation: contract claims, tort claims, claims relating to compensation and warrants, as well as claims based on any federal, state, or local law, statute, or regulation, including but not limited to any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the California Fair Employment and Housing Act. However, claims for unemployment benefits, workers’ compensation claims, and claims under the National Labor Relations Act shall not be subject to arbitration.

A neutral and impartial arbitrator shall be chosen by mutual agreement of the parties; however, if the parties are unable to agree upon an arbitrator within a reasonable period of time, then a neutral and impartial arbitrator shall be appointed in accordance with the arbitrator nomination and selection procedure set forth in the AAA Rules. The arbitrator shall prepare a written decision containing the essential findings and conclusions on which the award is based so as to ensure meaningful judicial review of the decision. The arbitrator shall apply the same substantive law, with the same statutes of limitations and same remedies, that would apply if the claims were brought in a court of law. The arbitrator shall have the authority to rule on a motion to dismiss and/or summary judgment by either party, and the arbitrator shall apply the standards governing such motions under the California Code of Civil Procedure.

Either the Company or Executive may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Otherwise, neither party shall initiate or prosecute any lawsuit of claim in any way related to any arbitrable claim, including without limitation any claim as to the making, existence, validity, or enforceability of the agreement to arbitrate. Nothing in this Agreement, however, precludes a party from filing an administrative charge before an agency that has jurisdiction over an arbitrable claim. Moreover, nothing in this Agreement prohibits either party from seeking provisional relief pursuant to Section 1281.8 of the California Code of Civil Procedure.

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All arbitration hearings under this Agreement shall be conducted in San Diego, California, unless otherwise agreed by the parties. The arbitration provisions of this Arbitration Agreement shall be governed by the Federal Arbitration Act. In all other respects, this Arbitration Agreement shall be construed in accordance with the laws of the State of California, without reference to conflicts of law principles.

Each party shall pay its own costs and attorney’s fees, unless a party prevails on a statutory claim, and the statute provides that the prevailing party is entitled to payment of its attorneys’ fees. In that case, the arbitrator may award reasonable attorneys’ fees and costs to the prevailing party as provided by law. The Company agrees to pay the costs and fees of the arbitrator, to the extent required by law.

If any provision of this Agreement shall be held by a court or the arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. The parties’ obligations under this Agreement shall survive the termination of Executive’s employment with the Company and the expiration of this Agreement.

The Company and Executive understand and agree that this Arbitration Agreement contains a full and complete statement of any agreements and understandings regarding resolution of disputes between the parties, and the parties agree that this Arbitration Agreement supersedes all previous agreements, whether written or oral, express or implied, relating to the subjects covered in this agreement. The parties also agree that the terms of this Arbitration Agreement cannot be revoked or modified except in a written document signed by both Executive and an officer of the Company.

THE PARTIES ALSO UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A WAIVER OF THEIR RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS AGREEMENT. THE PARTIES AGREE THAT NONE OF THOSE CLAIMS OR CONTROVERSIES SHALL BE RESOLVED BY A JURY TRIAL.

THE PARTIES FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH THEIR LEGAL COUNSEL AND HAVE AVAILED THEMSELVES OF THAT OPPORTUNITY TO THE EXTENT THEY WISH TO DO SO.

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INNERCOOL THERAPIES, INC.
(a Delaware Corporation)
By: Tyler M. Dylan
Its: Chief Business Officer	Executive
Dated:	Dated:

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EX-10.20

Exhibit 10.20

MASTER LICENSE AGREEMENT

THIS AGREEMENT by and between SurModics, Inc., a corporation of the State of Minnesota, which has an office at 9924 West 74th Street, Eden Prairie, MN 55344, (hereinafter referred to as SURMODICS), and Innercool Therapies, Inc., a corporation of the State of California, which has an office at 3931 Sorrento Valley Blvd., San Diego, CA 92121 (hereinafter referred to as INNERCOOL).

WHEREAS, SURMODICS is engaged in biological, chemical and technical research and has developed a body of technology and know-how, including reagents, processes and devices which the parties believe will improve the performance of various products and processes of INNERCOOL.

WHEREAS, the technology of SURMODICS includes confidential information (including trade secrets and other know-how) which is proprietary to SURMODICS and SURMODICS is in the process of securing patent coverage for certain items of its technology, and continues to maintain the confidentiality of other portions of its technology.

WHEREAS, INNERCOOL (formerly known as Del Mar Medical Technologies) and SURMODICS are parties to a Mutual Confidential Disclosure Agreement dated December 18, 1998 (“Prior Disclosure Agreement”);

WHEREAS, INNERCOOL may desire to acquire additional licenses under SURMODICS’ know-how and patent rights, such licenses to be added to this Master Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below and for other good and valuable consideration of which receipt is acknowledged, the parties agree as follows:

1. DEFINITIONS

The following definitions apply to this Agreement and to all addenda thereto:

a. “Affiliate” means any entity which owns at least 50% of, is at least 50% owned by, or is under common (at least 50%) ownership with INNERCOOL.

b. “Effective Date” means the date upon which this Agreement is fully executed.

c. “Know-how” means SURMODICS’ trade secrets and other technical information relating to the surface-treatment of medical devices and which SURMODICS has the right to transmit to others. Know-how includes but is not limited to information contained in pending patent applications of Patent Rights and information that is Confidential Information as defined in Paragraph 13.

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d. “Licensed Products” means each of the separately sold Medical Products specifically described in Attachment Bl, B2, and so forth, and which:

i. but for the license granted herein the manufacture, use or sale would infringe (or a surface treatment process employed to produce a product or a reagent used in such process would infringe) any claim of Patent Rights, or

ii. are produced through the use of SURMODICS’ Know-how.

e. “Licensed Product Effective Date” for each license granted herein shall mean the date specified in the respective Attachment Bl, B2, and so forth.

f. “Manufacturer” means a non-Affiliate third party which manufactures Licensed Products for INNERCOOL pursuant to a separate agreement with INNERCOOL, and subject to the execution by the Manufacturer and SURMODICS of the document entitled “Manufacturer Agreement and SurModics’ Consent” attached hereto as Attachment C.

g. “Medical Products” means products that are specifically described and defined in Attachment B1, B2, and so forth.

h. “Net Sales” means the total actual billing for sales of Licensed Products, less the following deductions where they are applicable with respect to such billings and when separately shown on invoices:

i. discounts actually allowed and taken;

ii. any customs, duties, taxes or other governmental excise or charge upon or measured by the production, sale, transportation, delivery or use of Licensed Product and actually paid by INNERCOOL;

iii. amounts allowed or credited on rejections or returns;

iv. transportation charges prepaid or allowed.

Notwithstanding the above, if any Licensed Product is sold both separately and as an integral part of a combination product containing one or more integral components in addition to that Licensed Product, then Net Sales of that Licensed Product resulting from sales of that combination product will be calculated by multiplying the Net Sales for the combination product as calculated above by the fraction A/B where A is the invoice price of the Licensed Product as sold separately and B is the invoice price of the combination product.

A Licensed Product shall be considered sold when it is shipped or when it is invoiced, whichever is earlier. To assure SURMODICS the full royalty payment contemplated in this Agreement, INNERCOOL agrees that in the event any Licensed Product is sold to an

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Affiliate for purposes of resale, Earned Royalties for that Licensed Product shall be computed upon the selling price at which such Licensed Product would ordinarily be sold to a non-Affiliate, rather than on the selling price of INNERCOOL to the Affiliate.

i. “Patent Rights” means the patent application(s) and patent(s) identified in Attachment A hereof, together with all foreign counterparts, divisions, and continuation applications based thereon, any patent issuing on any of said applications, and any reissues or extensions based on any of such patents.

j. “Valid Claim” means a claim of Patent Rights that has not been held invalid or unenforceable by a court of competent jurisdiction beyond possibility of appeal, or which has not expired due to non-payment of maintenance fees beyond possibility of reinstatement based on unintentional delay.

2. LICENSE

a. With respect to the Licensed Product defined in each of Attachments B1, B2, and so forth, SURMODICS grants to INNERCOOL, a separate worldwide license under SURMODICS’ Patent Rights and Know-how to make, have made for it by a Manufacturer as defined herein, use and sell that Licensed Product. The license granted herein is expressly limited to the specific Licensed Products defined herein, and does not include the right to sublicense. Additional terms of each license are set out in the respective Attachments Bl, B2, and so forth. To the extent of any inconsistency between the terms set forth in the text of this Agreement and the terms set forth in Attachments Bl, B2, and so forth, the terms set forth in the text of this Agreement shall be controlling. Each such license shall be effective as of its Licensed Product Effective Date.

b. Subject to the limited license granted herein, SURMODICS shall retain all rights to the Patent Rights and Know-how. SURMODICS shall retain the right to use Patent Rights and Know-how for its own research purposes.

c. INNERCOOL shall notify SURMODICS, in advance and in writing, of any change in the location of the production of a Licensed Product or any new location to be used for the production of a Licensed Product.

3. LICENSE FEES

For each license granted by SURMODICS, INNERCOOL shall pay to SURMODICS a License Fee as set out in the respective Attachment Bl, B2, and so forth.

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4. ROYALTIES

For each license granted herein, INNERCOOL shall pay to SURMODICS a royalty for each quarter calendar year during the term of this License Agreement which will be the greater of the royalties of Paragraphs 4(a) or 4(b).

a. Earned Royalties shall be calculated as provided for in the respective Attachment Bl, B2, and so forth. No more than one Earned Royalty shall be paid by INNERCOOL for any Licensed Product. However, if any Licensed Product is covered by more than one Attachment B1, B2, and so forth, then the Earned Royalty rate shall be the highest rate specified for such Licensed Product.

b. Minimum Royalties shall be paid for each Licensed Product as provided for in the respective Attachment Bl, B2, and so forth.

5. ROYALTY PAYMENTS, REPORTS, RECORDS

a. During the term of this Agreement, and for each license granted hereunder, INNERCOOL will make written reports and payments to SURMODICS within thirty (30) days after the last day of each calendar quarter ending March 31, June 30, September 30, and December 31. Each such report shall state the Net Sales, unit volumes, Earned Royalty, corrections of error in prior royalty payments, and data and calculations used by INNERCOOL to determine such payments for each of the licenses corresponding to the respective Attachments B1, B2, and so forth. Each report shall be accompanied by payment in full of the royalty due SURMODICS for that quarter. The December 31 quarterly report shall also include a summary progress report regarding INNERCOOL’s relevant developmental, manufacturing scale-up, regulatory affairs, and marketing activities with respect to all Licensed Products along with a summary forecast of projected sales of Licensed Products and a nonbinding forecast of reagent usage for the next calendar year.

b. INNERCOOL will maintain, for a period of five (5) years following each sale of Licensed Product, true and accurate records supporting the reports and payments made under this Agreement. SURMODICS shall have the right to carry out an audit of such records no more frequently than once per calendar year by a certified public accountant of its choice. Such accountant shall have reasonable access to INNERCOOL’s offices and the relevant records, files and books of account, and such accountant shall have the right to examine any other records reasonably necessary to determine the accuracy of the calculations provided by INNERCOOL under Paragraph 5(a). Such audit shall be at SURMODICS’ expense except that if an underpayment error is found for any twelve month period that exceeds 5% of the payment made to SURMODICS for that period, then INNERCOOL will bear the cost of such audit.

c. All royalties on sales of each Licensed Product to be paid to SURMODICS by INNERCOOL under this Agreement shall be paid in U.S. Dollars to SURMODICS in the

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United States. For the purpose of calculating Earned Royalties on sales outside the United States for any calendar quarter, INNERCOOL shall utilize the average rate of exchange on the last business day of that calendar quarter as quoted in the Wall Street Journal.

d. Any sum required under U.S. tax laws (or the tax laws of any other government) to be withheld by INNERCOOL from payment for the account of SURMODICS shall be promptly paid by INNERCOOL for and on behalf of SURMODICS to the appropriate tax authorities, and INNERCOOL shall furnish SURMODICS with official tax receipts or other appropriate evidence issued by the appropriate tax authorities sufficient to enable SURMODICS to support a claim for income tax credit in respect to any sum so withheld.

6. DEVELOPMENT FEES

INNERCOOL agrees to pay SURMODICS for development efforts (“Development Fees”) while working on INNERCOOL’s products at SURMODICS’ then standard hourly rate for development efforts provided, however, that such development effort is pursuant to a mutually agreed upon project plan. SURMODICS’ standard hourly rate includes direct labor costs plus direct labor overhead. SURMODICS shall additionally charge direct materials plus direct materials overhead of fifteen percent (15%). Direct materials may include expenses such as travel and special equipment, but only as mutually agreed upon in writing. SURMODICS shall invoice INNERCOOL monthly for such Development Fees and payment shall be made within thirty (30) days thereafter.

Notwithstanding the above, SURMODICS will not charge INNERCOOL for the initial disclosure of such Know-how. Such initial disclosure of Know-how shall include the preparation and delivery to INNERCOOL of a ‘Technology Transfer Document” which shall contain information relating to the procedures and techniques used by SURMODICS to coat such Licensed Product. SURMODICS will provide up to two days of training in the use of SURMODICS’ coating procedures covered in the Technology Transfer Document. Such training shall be at SURMODICS’ facility and be offered to a reasonable number (three or less) of INNERCOOL employees who will be using or implementing such coating procedures. Travel and accommodations for such INNERCOOL employees will be at INNERCOOL’s expense. At INNERCOOL’s request, SURMODICS will send a coating engineer to the INNERCOOL manufacturing facility or to one designated Manufacturer facility in the United States for up to two days to review the production line, advise on reagent handling and to provide other advice that may assist INNERCOOL in the implementation of the coating process into INNERCOOL’s manufacturing process. Travel and accommodations for such SURMODICS employee will be at SURMODICS’ expense.

7. TERM

a. Unless earlier terminated, each license herein granted shall begin upon the Licensed Product Effective Date set out in the respective Attachment Bl, B2, and so forth, and shall

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extend for each Licensed Product so licensed until expiration of the last to expire patent of Patent Rights that covers that product or for a period of fifteen (15) years following the first bona fide commercial sale of such Licensed Product, whichever is longer.

b. Upon expiration of the full term of the license granted herein for any Licensed Product, and upon full payment by INNERCOOL to SURMODICS of any monies due under this Agreement, the license with respect to Know-how licensed herein for that Licensed Product shall be deemed paid up and non-exclusive (if any such license was exclusive), and SURMODICS may negotiate additional license agreements with any other party for SURMODICS’ surface modifications.

8. PATENTS

a. INNERCOOL shall see to it that all Licensed Products sold by INNERCOOL shall be appropriately marked with the applicable patent numbers, in conformity with applicable law.

b. SURMODICS recognizes that it is an objective of INNERCOOL to obtain patents on technology that it develops concerning chemicals having latent reactive groups and their uses. INNERCOOL recognizes that a vital part of SURMODICS’ business involves the licensing of others under SURMODICS’ patents and know-how to make, use and sell products, and that it is an objective of SURMODICS to enable its present and future licensees to exploit patent licenses from SURMODICS to produce and sell products without interference from any patent that INNERCOOL might obtain. A purpose of this Paragraph 8(b) is to establish a system under which each party may accomplish its respective objective.

i. “INNERCOOL Latent Reactive Chemical Patents” (INNERCOOL LRC Patents) means patents which (a) claim inventions conceived or first reduced to practice during the term of this Agreement solely by one or more INNERCOOL employees or others who are required to assign inventions to INNERCOOL, and (b) claim inventions relating to chemical species having photo-reactive or other latent reactive groups for the purpose of bonding chemicals such as synthetic polymers and biologically active materials onto surfaces or into matrices or to other molecules, the use of such chemical species, or the products resulting from such use, and (c) which could be infringed by the manufacture, use or sale of any product or process covered by any claim of any patent that SURMODICS has the right to license to others or may have licensed to others.

ii. During the term of this Agreement, INNERCOOL will provide SURMODICS with a copy of each proposed patent application for a INNERCOOL LRC Patent, and SURMODICS will provide comments concerning such application, including comments regarding inclusion of SURMODICS’ Confidential Information, prior work done by SURMODICS in connection with the claimed invention, and the state

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of the art. No application for an INNERCOOL LRC Patent shall be made without SURMODICS’ prior written permission. If SURMODICS can fairly show that it had substantial knowledge of the invention of any INNERCOOL LRC Patent application before receiving from INNERCOOL that patent application, SURMODICS shall promptly notify INNERCOOL and the parties shall cooperate in comparing records of conception of that invention to determine in good faith which party was the earliest to conceive the invention.

iii. SURMODICS shall have and is hereby granted a noncancelable, nonexclusive, worldwide license, with the right to sublicense, to make, have made for it, use and sell products and processes covered by each INNERCOOL LRC Patent to the extent that such manufacture, use or sale also is covered by any claim of any patent that SURMODICS has the right to license to others or may have licensed to others. If INNERCOOL was the earliest to conceive the invention of that patent, then the license granted to SURMODICS, and SURMODICS’ right to sublicense, shall exclude the right to manufacture, use or sell Medical Products.

iv. In return for such license, SURMODICS will pay INNERCOOL a total of five percent (5%) of the royalties (regardless of the number of INNERCOOL LRC Patents that are licensed to SURMODICS or the number of licenses involved) that SURMODICS receives from its sublicensees based on sales by its sublicensees of products that but for such sublicenses would infringe any Valid Claim of INNERCOOL LRC Patents. Notwithstanding the above, if SURMODICS was the earliest to conceive the invention of any INNERCOOL LRC Patent, then the license granted to SURMODICS shall be considered paid-up.

c. The parties agree to execute and exchange upon request such documents as may be necessary or desirable to carry out the provisions of Paragraph 8(b).

d. Notwithstanding the provisions of Paragraph 12(c), in the event that any third party infringes or threatens to infringe the Patent Rights, a party shall notify the other party in writing of such infringement which becomes known to it and the parties shall discuss together by whom and what action shall be taken, if any. This paragraph shall not obligate either party to undertake, join in, or fund any litigation. Either party shall undertake to provide the other party with any documents or other reasonable, non-financial assistance, as may be required should the other party choose to undertake, join in, or fund any litigation.

9. ALLOCATION OF ROYALTIES

It is agreed that royalties payable under the applicable Attachment B shall be allocated seventy percent (70%) to Know-how licensed herein and thirty percent (30%) to Patent Rights licensed herein. The Earned Royalty rate with respect to any Licensed Product shall be prospectively reduced to seventy percent (70%) of the Earned Royalty rate set out in Paragraph 4(a) and the respective Attachments Bl, B2, and so forth, to the extent that and

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during the term that neither the manufacture, nor the use, nor the sale of that specific Licensed Product (or a surface treatment process or a reagent used in such process) is covered by any Valid Claim of Patent Rights. The provisions of this Paragraph 9 shall not apply to payment of Minimum Royalties as provided in Paragraph 4(b) and the respective Attachments Bl, B2, and so forth.

10. TERMINATION

a. For each license granted herein:

i. INNERCOOL shall have the right to terminate the respective Attachment B1, B2, and so forth, under which such license was granted, but only in its entirety, at any time upon ninety (90) days advance written notice. Upon termination of such license, INNERCOOL shall have no further rights under Patent Rights or Know-how. However, INNERCOOL shall be allowed to sell any inventory of Licensed Products existing at the time of termination for a period of twelve (12) months thereafter (thereafter destroying any remaining inventory), provided INNERCOOL accounts for such sales of inventory and pays SURMODICS the appropriate Earned Royalty for such sales as set out in Paragraph 4(a) of this Agreement.

ii. SURMODICS may terminate this Agreement in whole or with respect to any license granted herein upon thirty (30) days written notice for any material breach or default by INNERCOOL, including without limitation, failure to comply with the confidentiality provisions of Paragraph 13, failure to make reports and payments when due, failure to pay Minimum Royalties, and withholding or notice of intent to withhold any royalties provided for in this Agreement. Said termination under this Paragraph 10(a)(ii) shall become effective at the end of the thirty (30) day period unless during that period INNERCOOL shall first cure such breach or default.

iii. Upon termination of any license under any of the provisions of this Paragraph 10, but subject to the provisions of Paragraph l0(a)(i), referring to the sale of inventory, INNERCOOL shall cease making, having made for it, using and selling the Licensed Products of such license that are produced through the use of SURMODICS’ Know-how. SURMODICS shall have the right to seek equitable relief to enforce the provisions of this Paragraph 10(a)(iii).

b. Either party may terminate this Agreement if the other party hereto is involved in insolvency, dissolution, bankruptcy or receivership proceedings affecting the operation of its business.

c. Notwithstanding the provisions of Paragraph 20, failure of INNERCOOL to initiate bona fide commercial sales of any Licensed Product by the date set out for that Licensed Product in the respective Attachment B1, B2, and so forth, to this Agreement shall permit SURMODICS to terminate the license for that Licensed Product upon thirty (30) days written notice at any time prior to the date INNERCOOL begins bona fide commercial sales of that Licensed Product.

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d. In the event that all licenses granted herein are terminated, SURMODICS shall have the right to terminate this Agreement in its entirety upon written notice.

11. CONTINUING OBLIGATIONS SUBSEQUENT TO TERMINATION

a. Upon any termination of this Agreement or any of the licenses granted herein, the following rights and obligations shall continue to the degree necessary to permit their complete fulfillment or discharge:

i. SURMODICS’ right to receive and INNERCOOL’s obligation to pay royalties to the extent owed; and

ii. INNERCOOL’s obligation to maintain records and SURMODICS’ right to audit under Paragraph 5, with respect to sales made and to be made under Paragraph 10(a)(i); and

iii. Any cause of action or claim of either party, accrued or to accrue, because of any breach or default by the other party; and

iv. The parties’ obligation to maintain confidentiality under Paragraph 13; and

v. INNERCOOL’s obligation to forebear from use of SURMODICS’ Know-how as provided in Paragraph 10(a)(iii); and

vi. The parties’ obligations under Paragraph 8(b), with respect to filing patent applications and under Paragraph 8(b) and Attachment Bl - Paragraph 7 with respect to the payment of royalties on issued patents.

b. Within thirty (30) days of the date of termination of this Agreement, each party shall return to the other party all copies of documents and other materials containing or disclosing any of the other party’s Confidential Information; provided, however, that each party shall be entitled to retain one copy of such Confidential Information for archival purposes only.

12. REPRESENTATIONS AND WARRANTIES

a. Each party warrants to the other that it has not accepted and will not accept commitments or restrictions with respect to its rights or obligations under this Agreement which will materially affect the value of the rights granted by SURMODICS nor the obligations undertaken by INNERCOOL.

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b. Each party has the full and unrestricted right to enter into this Agreement.

c. Nothing in this Agreement shall be construed as:

i. A warranty or representation by SURMODICS as to the validity or scope of any Patent Rights; or

ii. A warranty or representation that anything made, used, sold, or otherwise disposed of, or any process practiced, under any License granted in this Agreement is or will be free from infringement of patents of third persons; or

iii. A requirement that SURMODICS file any patent application, secure any patent, or maintain any patent in force; or

iv. An obligation to bring or prosecute actions or suits against third parties for infringement of any patent; or

v. An obligation to furnish any manufacturing or technical information not encompassed within Know-how; or

vi. Conferring any right on either party to use in advertising, publicity, or otherwise any trademark or trade name of the other; or

vii. Granting by implication, estoppel, or otherwise any licenses or rights under patents or other proprietary information of SURMODICS other than those included within Patent Rights and Know-how.

d. WITH RESPECT TO PHOTO-REACTIVE REAGENTS SUPPLIED AT ANY TIME BY SURMODICS, SURMODICS DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE. NOTWITHSTANDING ANYTHING TO THE CONTRARY, SURMODICS SHALL NOT BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXTRAORDINARY OR PUNITIVE DAMAGES OF ANY DESCRIPTION, WHETHER FOR DAMAGE TO REPUTATION OR GOODWILL, LOST PROFITS, CLAIMS OF THIRD PARTIES OR OTHERWISE, WHETHER SUCH ASSERTED DAMAGE PURPORTS TO BE BASED ON WARRANTY OR GUARANTEE, INDEMNITY OR OTHER CONTRACT, CONTRIBUTION, NEGLIGENCE OR OTHER TORT, OR OTHERWISE.

e. SURMODICS does not make any representations, extend any warranties of any kind, either express or implied, or assume any responsibilities whatever with respect to use, sale, or other disposition by INNERCOOL or its vendees or transferees of Licensed Products incorporating or made by use of the Patent Rights and Know-how licensed under this Agreement.

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f. INNERCOOL represents that it will take action to reasonably bring to market and to sell Licensed Product throughout INNERCOOL’s world-wide marketing territory during the term of this Agreement. Failure to adequately promote and market Licensed Product may, at SURMODICS’ option, be interpreted as a material breach or default of this Agreement. SURMODICS expects INNERCOOL to demonstrate appropriate product development activities, participate in clinical trials, submit appropriate regulatory or governmental filings for appropriate marketing clearances, integrate the Licensed Product into INNERCOOL’s manufacturing operations, educate appropriate sales and marketing staff, and introduce and actively market the Licensed Product upon completion of product development and obtaining appropriate regulatory approvals.

13. CONFIDENTIALITY

a. Each party agrees to retain in confidence all Know-how and other information received from the other, including without limitation, information required to be maintained in confidence under prototype development or manufacturing scale-up or post scale-up relationships between the parties, for a period of fifteen (15) years from the date of disclosure or five (5) years from the date of termination of this Agreement, whichever is longer. Each party agrees not to disclose any of such Know-how or other information to third parties nor to use the same except in accordance with this Agreement. Each party’s obligation of non-disclosure and non-use shall not apply to information which:

i. at the time of its disclosure to the receiving party is available to the public;

ii. after disclosure becomes available to the public through no fault of the receiving party;

iii. the receiving party can show was in its possession at the time of disclosure to it by the other;

iv. the receiving party can show was received by it from a third party without breach of a confidential obligation; or

v. the receiving party is compelled by application of law or legal process to divulge, but the receiving party shall provide the disclosing party with advance written notice before divulging the information to enable the disclosing party to seek a protective order or employ other means to preserve the confidential nature of that information.

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Even after any of such information becomes available to the public, each party shall not disclose without the other’s prior written approval the fact that such information was furnished by or originated with the other.

b. For the purpose of this entire Paragraph 13, Know-how or other information which is specific shall not be deemed to be within any of the specified exceptions merely because it is embraced by more general information in such exception. In addition, any combination of features shall not be deemed to be within any of the specified exceptions merely because individual features are in such exception, but only if the combination itself and its principle of operation are in such exception.

c. Notwithstanding the above, INNERCOOL specifically agrees that it will not disclose to any Affiliates or other third party any of SURMODICS’ Know-how relating to the manufacture of SURMODICS’ chemical reagents, the precise chemical composition of such reagents, how such reagents are tested, how they are quality controlled, and any other specific information concerning the production of such reagents.

d. The provisions of this entire Paragraph 13 shall survive termination of this Agreement for any reason.

e. Nothing herein shall in any way affect the obligations of the parties under any prior secrecy or confidential disclosure agreements, including the Prior Disclosure Agreement, which obligations shall continue in accordance with the terms of each such agreement to the extent not inconsistent with the present Agreement.

14. ASSIGNMENT

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns. Either party may assign its rights and obligations under this Agreement to a financially responsible third party, but only in connection with a complete transfer to the third party of the business to which this Agreement pertains. The assigning party will so inform the other party to this Agreement without delay of any assignment made in accordance with the conditions of this Agreement. This Agreement shall not otherwise be assignable by either party without the prior written consent of the other party. Any and all assignments of this Agreement or any interest therein not made in accordance with this paragraph shall be void.

15. GOVERNMENT APPROVAL

INNERCOOL shall have the sole responsibility, at INNERCOOL’s sole expense, for obtaining any government approvals that may be required for the investigation or marketing of Licensed Products.

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16. PRODUCT LIABILITY

INNERCOOL will defend and indemnify SURMODICS against all losses, liabilities, lawsuits, claims, expenses (including attorney’s fees), costs, and judgments incurred through personal injury, property damage, or other claims of third parties, arising from the design, manufacture, use, or sale of Licensed Products, except which are proximately caused solely by SURMODICS’ negligent conduct.

17. NO WAIVER

Any waiver of any term or condition of this Agreement by either party shall not operate as a waiver of any other or continued breach of such term or condition, or any other term or condition, nor shall any failure to enforce a provision hereof operate as a waiver of such provision or of any other provision hereof.

18. NOTICES

All communications or other notices required or permitted under this Agreement shall be in writing and shall be deemed to be given when personally delivered, or when mailed by registered or certified mail, postage prepaid, and addressed as follows:

If to SURMODICS:

License Administration

SurModics, Inc.

9924 West 74th Street

Eden Prairie, MN 55344

If to INNERCOOL:

License Administration

Innercool Therapies, Inc.

3931 Sorrento Valley Blvd.

San Diego, CA 92121

Either party shall have the right to change the person and/or address to which notices hereunder shall be given, by notice to the other party in the manner set out above.

19. CAPTIONS

The captions and headings of this Agreement are for convenience only and shall in no way limit or otherwise affect any of the terms or provisions contained herein.

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20. FORCE MAJEURE

Neither party shall be liable for failure to perform as required by any provisions of this Agreement where such failure results from a cause beyond such party’s reasonable control such as acts of God, regulation or other acts of civil or military authority, required approval(s) of government bodies, fires, strikes, floods, epidemics, quarantine restrictions, riot, delays in transportation and inabilities to obtain necessary labor, materials, or manufacturing facilities. In the event of any delay attributable to any of the foregoing causes, the time for performance affected thereby shall be extended for a period equal to the time lost by reason of such delay. The cumulative effect of all such delays under this Paragraph 20 shall not exceed one (1) year.

21. NO AGENCY

Nothing in this Agreement authorizes either SURMODICS or INNERCOOL to act as agent for the other as to any matter, or to make any representations to any third party indicating or implying the existence of any such agency relationship. SURMODICS and INNERCOOL shall each refrain from any such representations. The relationship between SURMODICS and INNERCOOL is that of independent contractors.

22. SEVERABILITY

Should any provision of this Agreement, or the application thereof, to any extent be held invalid or unenforceable, the remainder of this Agreement and the application thereof other than such invalid or unenforceable provisions shall not be affected thereby and shall continue valid and enforceable to the fullest extent permitted by law or equity.

23. GOVERNING LAW

This Agreement shall for all purposes be governed and interpreted in accordance with the laws of the State of Minnesota, except for its conflict of laws provisions.

24. ARBITRATION

a. In the event of any dispute concerning this Agreement, including its interpretation, performance, breach or termination, the procedures of this Paragraph 24 shall apply; provided, however, that either party shall have the unrestricted right at any time to seek a court injunction prohibiting the other party from making unauthorized disclosure or use of Confidential Information as provided for in Paragraph 13 or unauthorized use of SURMODICS’ Know-how as provided for in Paragraph 10(a)(iii).

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b. Both parties will use good faith and reasonable efforts to resolve any dispute informally and as soon as practical. If any such dispute is not resolved informally within a reasonable period, then an officer from each party, having authority to resolve the dispute, will meet at a mutually agreeable time and place to attempt to resolve the dispute.

c. If the parties are unable to resolve a dispute as provided immediately above, either party may submit the dispute for resolution by mandatory, binding arbitration in the city of Minneapolis, MN (or such other place as the parties may mutually agree) under the auspices of the American Arbitration Association under its Commercial Arbitration Rules. Each party shall select one independent, qualified arbitrator and the two arbitrators so selected shall then select a third arbitrator in accordance with the Commercial Rules. Each party reserves the right to object to any individual arbitrator (no matter by whom chosen) who has been employed by or affiliated with a competing organization.

d. The arbitrators, who shall act by majority vote, shall be empowered to decree any and all relief of an equitable nature, including but not limited to temporary restraining orders, temporary injunctions, and/or permanent injunctions, and shall also be able to award damages, with or without an accounting of costs. Judgment on the award rendered by the arbitrator(s) may be entered into any court having jurisdiction thereof. Each party shall bear its own costs and divide other reasonable arbitrator costs equally.

25. ENTIRE AGREEMENT

This Agreement, together with the Prior Disclosure Agreement and all addenda, attachments, and writings required or contemplated hereby, constitutes the entire agreement between the parties with respect to the Licenses granted herein, and no party shall be liable or bound to the other in any manner by any warranties, representations or guarantees except as specifically set forth herein. This Agreement shall not be altered or otherwise amended except by an instrument in writing signed by both parties.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date last written below.

SurModics, Inc.	Innercool Therapies, Inc.
/s/ Walter H. Diers Jr	/s/ John Dobak
Signature	Signature
Walter H. Diers Jr	John Dobak
Printed Name	Printed Name
Vice President	CEO
Title	Title
1 December 1999	11/29/99
Date	Date

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ATTACHMENT A

SurModics, Inc. U.S. Patents (may be listed under previous name, BSI Corporation)

1. METHOD OF IMPROVING THE BIOCOMPATIBILITY OF SOLID SURFACES

U.S. Patent No. 4,973,493 issued 11/27/90

2. BIOCOMPATIBLE COATINGS FOR SOLID SURFACES

U.S. Patent No. 4,979,959 issued 12/25/90

3. PREPARATION OF POLYMERIC SURFACES VIA COVALENTLY ATTACHING POLYMERS

U.S. Patent No. 5,002,582 issued 3/26/91

4. BIOMOLECULE ATTACHMENT TO HYDROPHOBIC SURFACES

U.S. Patent No. 5,217,492 issued 6/8/93

5. METHOD OF BIOMOLECULE ATTACHMENT TO HYDROPHOBIC SURFACES

U.S. Patent No. 5,258,041 issued 11/2/93

6. BIOCOMPATIBLE DEVICE WITH COVALENTLY BONDED BIOCOMPATIBLE AGENT

U.S. Patent No. 5,263,992 issued 11/23/93

7. RESTRAINED MULTIFUNCTIONAL REAGENT FOR SURFACE MODIFICATION

U.S. Patent No. 5,414,075 issued 5/9/95

8. SUBSTRATE SURFACE PREPARATION

U.S. Patent No. 5,512,329 issued 4/30/96

9. PREPARATION OF CROSSLINKED MATRICES CONTAINING COVALENTLY IMMOBILIZED CHEMICAL SPECIES AND UNBOUND RELEASABLE CHEMICAL SPECIES

U.S. Patent No. 5,563,056 issued 10/08/96

10. RESTRAINED MULTIFUNCTIONAL REAGENT FOR SURFACE MODIFICATION

U.S. Patent No. 5,637,460 issued 6/10/97

11. PHOTOACTIVATABLE WATER SOLUBLE CROSSLINKING AGENTS CONTAINING AN ONIUM GROUP

U.S. Patent No. 5,714,360 issued 02/03/98

16

SurModics, Inc. U.S. Patent Applications (may be listed under previous name, BSI Corporation)

1. VIRUS INACTIVATING COATINGS

Filed 6/7/95

2. METHOD AND IMPLANTABLE ARTICLE FOR PROMOTING ENDOTHELIALIZATION

Filed 5/26/95

SurModics, Inc. Foreign Patents (may be listed under previous name, BSI Corporation)

1. IMPROVEMENT OF THE BIOCOMPATIBILITY OF SOLID SURFACES

Canadian Patent No. 1305068, issued 7/14/92

Australian Patent No. 615637, issued 10/16/87

EPO Patent No. 0326579, issued 1/11/95

2. BIOMOLECULE ATTACHED TO A SOLID SURFACE BY MEANS OF A SPACER AND METHODS OF ATTACHING BIOMOLECULES TO SURFACES

Canadian Patent No. 1335721, issued 5/30/95

SurModics, Inc. Foreign Patent Applications (may be listed under previous name, BSI Corporation)

1. BIOCOMPATIBLE COATINGS

Filed in Canada, Europe, Japan, Denmark, and Norway

2. PREPARATION OF POLYMERIC SURFACES

Filed in Canada, Europe, Japan, Denmark, and Norway

3. IMMOBILIZATION OF CHEMICAL SPECIES IN CROSSLINKED MATRICES

Filed in Canada, Europe, Australia, Japan

4. IMPROVEMENT OF THE BIOCOMPATIBILITY OF SOLID SURFACES

Filed in Japan

5. RESTRAINED MULTIFUNCTIONAL REAGENTS FOR SURFACE MODIFICATION

Filed in Canada, Europe, Australia and Japan

17

ATTACHMENT B1

Heating/Cooling Catheter

1. MEDICAL PRODUCTS

“Medical Products” means a single-use, temporary (less than 7 days) catheter placed within the vascular system that is designed, labeled and approved (as may be required by appropriate governmental authority prior to sale) for the purpose of in situ heating or cooling of blood. For the avoidance of doubt, such catheters shall not be designed, labeled or approved for the purpose of infusing or delivering any therapeutic or embolic agents or for the delivery or placement of permanently implantable therapeutic devices (including embolic devices), while the distal tip of such catheter resides at or above the common carotid artery. For purposes of this Attachment B1, saline solutions and contrast media (for placement or diagnostic purposes) are not considered therapeutic agents.

2. LICENSED PRODUCT

“Licensed Products” means Medical Products which are surface-treated with photo-reactive polyvinylpyrrolidone, photo-reactive heparin, diphoto diquat (photo-reactive crosslinking compound) or any combination of these photo-reactive reagents.

3. GRANT OF LICENSE

The license granted under this Attachment is non-exclusive.

4. LICENSE FEES

INNERCOOL will pay to SURMODICS a total of $50,000 in nonrefundable License Fees for this Attachment due according to the following schedule:

$25,000 upon execution of this Attachment.

$25,000 upon first commercial sale of Licensed Product or two years from the date of execution of this Attachment, whichever is earlier.

5. ROYALTY PAYMENTS

INNERCOOL shall pay to SURMODICS a royalty, for the Patent Rights and Know-how license granted herein, which will be the greater of Paragraphs 5(a) or 5(b) as follows:

a. Earned Royalties calculated as a percentage of Net Sales ($U.S.) of Licensed Products sold in each calendar year. The percentage to be used in each calculation during each calendar year shall be based upon the cumulative Net Sales of Licensed Product in the calendar year as follows:

18

Net Sales in Each Calendar Year	Earned Royalty Rate
On the first $15,000,000	2.50	%
On the next $15,000,000	2.25	%
On Net Sales over $30,000,000	2.00	%

b. Quarterly Minimum Royalties for all Attachment B1 Licensed Products during the periods specified as follows:

Minimum Royalty Periods	Quarterly Minimum Royalty
January 1, 2002 to December 31, 2002	$	5,000
January 1, 2003 to December 31, 2003	$	10,000
January 1, 2004 to December 31, 2004	$	20,000

For the quarter calendar year commencing with January 1, 2005, and each year thereafter, the quarter calendar year Minimum Royalty shall be the prior year’s quarterly Minimum Royalty adjusted by a percentage equal to the percentage change in the “Consumer Price Index For All Urban Consumers” for the prior calendar year as reported by the U.S. Department of Labor.

6. PERFORMANCE

a. Failure of INNERCOOL to begin bona fide commercial sales by January 1, 2003, of a Licensed Product as defined in this Attachment, shall permit SURMODICS to terminate the license for that Licensed Product upon thirty (30) days written notice at any time prior to the date INNERCOOL begins bona-fide commercial sales of that Licensed Product.

b. If, after January 1, 2003, there are four (4) consecutive quarters in which INNERCOOL fails to generate Earned Royalties under Paragraph 5(a) of this Attachment then upon thirty (30) days written notice given to INNERCOOL, the license granted herein shall, at SURMODICS’ option, be terminated.

7. ADDITIONAL LICENSE

With respect to patentable inventions related to Medical Products, exclusive of surface modifications, conceived or first reduced to practice during the term of this Attachment Bl solely by SURMODICS employees, SURMODICS hereby agrees to provide INNERCOOL with a non-exclusive, worldwide license to make, have made for it by a Manufacturer as defined herein, use and sell products and processes covered by such patent. Such license provides no rights to sublicense. In return for such license, any such patent shall be considered a part of Patent Rights. Such license, and INNERCOOL’s obligation to pay royalties thereunder, shall survive termination of this Agreement, except termination for breach by INNERCOOL of royalty obligations hereunder.

19

8. OTHER

SURMODICS represents that it currently owns no other or further patents or patent applications not included in Patent Rights that would be infringed by the manufacture, use, offer for sale or sale of the Licensed Products of this Attachment B1.

The Licensed Product Effective Date of this Attachment shall be the date last written below or the date on which SURMODICS receives all payments due upon execution of this Attachment, whichever is later.

SurModics, Inc.	Innercool Therapies, Inc.
/s/ Walter H. Diers Jr	/s/ John Dobak
Signature	Signature
Walter H. Diers Jr	John Dobak
Printed Name	Printed Name
Vice President	CEO
Title	Title
1 December 1999	11/29/99
Date	Date

20

ATTACHMENT C

Manufacturer Agreement and SurModics’ Consent

                                                                                                                                                            (“Manufacturer”) which is located at

________________________________________________________________________________________________________________________________________________

states, that it has read and understands the Master License Agreement between SurModics, Inc. (“SURMODICS”) and Innercool Therapies, Inc. (“INNERCOOL”), and that it desires to manufacture Licensed Product as permitted in that Master License Agreement. In return for SURMODICS’ consent to manufacture Licensed Product solely for sale by INNERCOOL, and for other valuable consideration of which receipt and sufficiency are acknowledged, Manufacturer agrees with SURMODICS that Manufacturer shall faithfully carry out and be bound by the obligations imposed on INNERCOOL, including, without limitation, Paragraphs 8, 10, 11, 13, 14, 16 and 24 of the Master License Agreement, to the extent applicable to Manufacturer’s activities.

Manufacturer further agrees:

1. SURMODICS confidential information and SURMODICS Know-how will be provided only to employees with the above identified facility who have a need to know such information for the specific purpose of manufacturing Licensed Products.

2. Photo-reactive chemical compounds manufactured by SURMODICS shall not be transferred by Manufacturer to any other facility of Manufacturer without the express written permission of SURMODICS.

3. Employees of Manufacturer will make no attempt to reverse engineer, in whole or in part, any confidential information (including photo-reactive compounds) of SURMODICS.

This Agreement shall be effective upon the last date written below, and shall terminate automatically and without notice upon the termination or expiration of the relevant license under the Master License Agreement.

Consented to by SurModics, Inc.	Agreed to by Manufacturer
Signature	Signature
Printed Name	Printed Name
Title	Title
Date	Date

21

EX-10.21

Exhibit 10.21

LEASE

BY AND BETWEEN

R. G. Harris Co., and Elizabeth G. Harris, Henry K. Workman and

Don C. Sherwood, Trustees of the Harris Family Revocable Trust

as Landlord

and

Copper Mountain Networks, Inc.,

as Tenant

August 12, 1997

TABLE OF CONTENTS

		Page
ARTICLE 1.	REFERENCE	1
1.1	References	1
Article 2.	LEASED PREMISES, TERM AND POSSESSION	2
2.1	Demise Of Leased Premises	2
2.2	Right To Use Outside Areas	2
2.3	Lease Commencement Date And Lease Term	2
2.4	Delivery Of Possession	3
2.5	Acceptance Of Possession; Tenant Improvement Allowance	3
2.6	Surrender Of Possession	3
ARTICLE 3.	RENT, SECURITY DEPOSIT AND CREDIT ENHANCEMENTS	3
3.1	Base Monthly Rent	3
3.2	Additional Rent	3
3.3		3
3.4	Payment Of Rent	4
3.5	Prepaid Rent	4
3.6	Security Deposit	4
3.7	Credit Enhancement	4
ARTICLE 4.	USE OF LEASED PREMISES AND OUTSIDE AREA	4
4.1	Permitted Use	4
4.2	General Limitations On Use	4
4.3	Signs	4
4.4	Compliance With Laws And Private Restrictions	4
4.5	Compliance With Insurance Requirements	4
4.6	Landlord’s Right To Enter	5
4.7	Use Of Outside Areas	5
4.8	Rules And Regulations	5
ARTICLE 5.	REPAIRS, MAINTENANCE, SERVICES AND UTILITIES	5
5.1	Repair And Maintenance	5
	(a)     Tenant’s Obligations	5
	(b)     Landlord’s Obligation	5
5.2	Utilities	5
5.3	Limitation Of Landlord’s Liability	5
ARTICLE 6.	ALTERATIONS AND IMPROVEMENTS	6
6.1	By Tenant	6
6.2	Ownership Of Improvements	6
6.3	Liens	6
ARTICLE 7.	ASSIGNMENT AND SUBLETTING BY TENANT	6
7.1	By Tenant	6
7.2	Merger Or Reorganization	6
7.3	Landlord’s Election	6
7.4	Conditions To Landlord’s Consent	7
7.5	Effect Of Landlord’s Consent	7
ARTICLE 8.	LIMITATION ON LANDLORD’S LIABILITY AND INDEMNITY	7
8.1	Limitation On Landlord’s Liability And Release	7
8.2	Tenant’s Indemnification Of Landlord	7
ARTICLE 9.	INSURANCE	7
9.1	Tenant’s Insurance	7
9.2	Landlord’s Insurance	8
9.3	Mutual Waiver Of Subrogation	8
ARTICLE 10.	DAMAGE To LEASED PREMISES	8
10.1	Landlord’s Duty To Restore	8
10.2	Landlord’s Right To Terminate	8
10.3	Tenant’s Right To Terminate	9
10.4	Tenant’s Waiver	9
10.5	Abatement Of Rent	9
ARTICLE 11.	CONDEMNATION	9
11.1	Tenant’s Right To Terminate	9

i.

TABLE OF CONTENTS

(continued)

		Page
11.2	Landlord’s Right To Terminate	9
11.3	Restoration	9
11.4	Temporary Taking	9
11.5	Division Of Condemnation Award	9
11.6	Abatement Of Rent	10
11.7	Taking Defined	10
ARTICLE 12.	DEFAULT AND REMEDIES	10
12.1	Events Of Tenant’s Default	10
12.2	Landlord’s Remedies	10
12.3	Landlord’s Default And Tenant’s Remedies	11
12.4	Tenant’s Waiver	11
ARTICLE 13.	GENERAL PROVISIONS	11
13.1	Taxes On Tenant’s Property	11
13.2	Holding Over	11
13.3	Subordination To Mortgages	11
13.4	Tenant’s Attornment Upon Foreclosure	11
13.5	Estoppel Certificate	12
13.6	Transfer By Landlord	12
13.7	Force Majeure	12
13.8	Notices	12
13.9	Attorneys’ Fees	12
13.10	Definitions	12
	(a)        Real Property Taxes	12
	(b)        Landlord’s Insurance Costs	12
	(c)        Property Maintenance Costs	13
	(d)        Property Operating Expenses	13
	(e)        Law	13
	(f)        Lender	13
	(g)        Private Restrictions	13
	(h)        Rent	13
13.11	General Waivers	13
13.12	Miscellaneous	13
ARTICLE 14.	CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT	14
14.1	Corporate Authority	14
14.2	Brokerage Commissions	14
14.3	Entire Agreement	14
ARTICLE 15.	OPTIONS To EXTEND	14
ARTICLE 16.	HAZARDOUS MATERIAL	15
16.1	(Insert to follow)	15
16.2	(Insert to follow)	15

ii.

LEASE

THIS LEASE, dated August 12, 1997 for references purposes only, is made by and between R. G. HARRIS CO., a California corporation, as to an undivided 72.6568 percent interest, and, Elizabeth G. Harris, Henry K. Workman, and Don C. Sherwood, as trustees of the Harris Family Revocable Trust, as to an undivided 27.3432 percent interest (collectively, “Landlord”) and COPPER MOUNTAIN NETWORKS, INC., a California corporation (“Tenant”), to be effective and binding upon the parties as of the date the last of the designated signatories to this Lease shall have executed this Lease (the “Effective Date of this Lease”).

ARTICLE 1.

REFERENCE

1.1 References. All references in this Lease to the following terms shall have the following meaning or refer to the respective address, person, date, time period, amount, percentage, calendar year or fiscal year as below set forth:

Tenant’s Address for Notices:	Copper Mountain Networks, Inc. 3931 Sorrento Valley Blvd. San Diego, California Attention: Joseph Lynch
Landlord’s Address for Notices:	R.G. Harris Co. Harris Family Revocable Trust P.O. Box 2882 31479 Pacific Coast Highway Malibu, California 90265 Attention: Henry Workman 310 456-5591 Assignment
Landlord’s Representative:	Don C. Sherwood, Esq. Sherwood and Hardgrove Suite 240 11990 San Vicente Boulevard Los Angeles, California 90049-5004
Phone Number:	(310) 826-2625
Intended Commencement Date:	November 1, 1997
Amended Term:	four (4) years
Lease Expiration Date:	four (4) Years from the Lease Commencement Date, unless earlier terminated by Landlord in accordance with the terms of this Lease, or extended by Tenant pursuant to Article 15, and subject to termination by Tenant pursuant to Paragraph 2.3.
Options to Renew:	one (1) option to renew for a term of two (2) years.
First Month’s Prepaid Rent:	$20,400
Tenant’s Security Deposit:	$20,400
Credit Enhancement:	$100,000 letter of credit (initially)
Tenant Improvement Allowance:	$72,000
Tenant’s Required Liability Coverage:	$2,000,000 Combined Single Limit
Broker(s):	The Irving Hughes Group, Inc.
Property:	That certain real property situated in the City of San Diego, County of San Diego, State of California, as presently improved with one building, which real property is shown on the Site Plan attached hereto as Exhibit “A” and is commonly known as or otherwise described as 3931 Sorrento Valley Blvd., San Diego, California.

Building:	That certain Building within the Property in which the Leased Premises are located, which Building is shown outlined on Exhibit “A” hereto.
Outside Areas:	The “Outside Areas” shall mean all areas within the Property which are located outside the Building, such as pedestrian walkways, parking areas, landscaped area, open areas and enclosed trash disposal areas.
Leased Premises:	All the interior space within the Building, consisting of approximately 24,000 square feet and, for purposes of this Lease, agreed to contain said number of square feet, together with the parking rights described in this Paragraph 1.1. The parties agree that irrespective of the actual square footage of the Building, the Building shall be conclusively deemed to consist of 24,000 square feet for all purposes of this Lease and there shall be no further adjustment of any rent payable hereunder if the actual square footage of the Building is greater than or less than 24,000 square feet. The Leased Premises are commonly known as or otherwise described as 3931 Sorrento Valley Blvd., San Diego, California.
Parking:	Exclusive use of the south half of the existing parking lot, from south of the existing fire lane to the property boundary, as indicated on Exhibit A.
Base Monthly Rent:	The term “Base Monthly Rent” shall mean the following:
	$20,400 per month from the Lease Commencement Date for a period of twelve (12) months. At the end of such 12 month period, and at each anniversary of the Lease Commencement Date, Base Monthly Rent shall be increased by 4% per annum compounded annually. Thus, as of each adjustment date, the base monthly rent in effect immediately prior to such adjustment shall be increased by 4% as of the following day.
Use:	office, research and development, light assembly, engineering and other related legal uses
Exhibits:	The term “Exhibits” shall mean the Exhibits of this Lease which are described as follows:
	Exhibit “A” - Site Plan showing the Property and delineating the Building in which the Leased Premises are located.
	Exhibit “B” - Hazardous Substances permitted pursuant to Paragraph 16.1.

ARTICLE 2.

LEASED PREMISES, TERM AND POSSESSION

2.1 Demise Of Leased Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord for the Lease Term and upon the terms and subject to the conditions of this Lease, that certain interior space described in Article 1 as the Leased Premises. Tenant’s lease of the Leased Premises, together with the appurtenant right to use the Outside Areas as described in Paragraph 2.2 below, shall be conditioned upon and be subject to the continuing compliance by Tenant with (i) all the terms and conditions of this Lease, (ii) all Laws governing the use of the Leased Premises and the Property, (iii) all Private Restrictions, easements and other matters now of public record respecting the use of the Leased Premises and Property, and (iv) all reasonable rules and regulations from time to time established by Landlord.

2.2 Right To Use Outside Areas. As an appurtenant right to Tenant’s right to the use and occupancy of the Leased Premises, Tenant shall have the right to use the Outside Areas in conjunction with its use of the Leased Premises solely for the purposes for which they were designated and intended and for no other purposes whatsoever. In that regard, Tenant shall not be entitled to use the Outside Areas for storage.

2.3 Lease Commencement Date And Lease Term. Subject to Paragraph 2.4 below, the term of this Lease shall begin, and the Lease Commencement Date shall be deemed to have occurred, on the Intended Commencement Date, as set forth in Article 1 (the “Lease Commencement Date”). The term of this Lease shall in all events end

2.

on the Lease Expiration Date (as set forth in Article 1). The Lease Term shall be that period of time commencing on the Lease Commencement Date and ending on the Lease Expiration Date (the “Lease Term”). In addition, Tenant shall have a one-time option to terminate this Lease effective at the end of the third year of the Lease Term, in the event that Tenant desires to lease additional space, and Landlord is unable to provide such additional space which is acceptable to Tenant (the “Termination Option”). The Termination Option may be exercised by written notice to Landlord given not less than six (6) months prior to the third anniversary of the Lease Commencement Date and payment by Tenant of a lease termination fee in the amount of $45,000 at the time of such written notice.

2.4 Delivery of Possession. Landlord shall deliver to Tenant possession of the Leased Premises immediately upon execution of this Lease. Tenant shall be entitled to occupy the Leased Premises prior to the Lease Commencement Date, and such occupancy shall be subject to all of the provisions of this Lease; provided, however, that Tenant’s obligation to pay Base Rent shall not commence until the Lease Commencement Date. Such early possession shall not advance the Lease Expiration Date.

2.5 Acceptance Of Possession; Tenant Improvement Allowance. Landlord agrees that as of the Lease Commencement Date, the following are or will be in good working order; the roof (structure and membrane), foundation, structural elements, truck doors and all existing plumbing, lighting, heating, ventilating and air conditioning systems and other systems serving the Leased Premises. Landlord agrees to provide Tenant with the Tenant Improvement Allowance. Tenant may use the Tenant Improvement Allowance to make improvements and installations to the Leased Premises, and Landlord shall pay the Tenant Improvement Allowance to Tenant upon presentation by Tenant of (i) invoices evidencing the work done or installations made, (ii) proof of payment by Tenant of such invoices, and (iii) appropriate lien waivers from contractors. In the event that Tenant fails to use the Tenant Improvement Allowance within thirty days of the Lease Commencement Date. Landlord shall credit the Tenant Improvement Allowance (or so much of it as may then remain) against Base Monthly Rent or other sums due from Tenant hereunder. All improvements made pursuant to this paragraph 2.5 shall be subject to the provisions of paragraph 6.1.

2.6 Surrender Of Possession. Immediately prior to the expiration or upon the sooner termination of this Lease, Tenant shall remove all of Tenant’s signs from the exterior of the Building and shall remove all of Tenant’s equipment, trade fixtures, furniture, supplies, wall decorations and other personal property from within the Leased Premises, the Building and the Outside Areas, and shall vacate and surrender the Leased Premises, the Building, the Outside Areas and the Property to Landlord in the same condition, broom clean, as existed at the Lease Commencement Date, renevable wear and tear excepted. Tenant shall repair all damage to the Leased Premises, the exterior of the Building and the Outside Areas caused by Tenant’s removal of Tenant’s property. Additionally, to the extent that Landlord shall have notified Tenant in writing at the time the improvements were completed that it desired to have certain improvements removed at the expiration or sooner termination of the Lease, Tenant shall, upon the expiration or sooner termination of the Lease, remove any such improvements constructed or installed by Tenant and repair all damage caused by such removal.

ARTICLE 3.

RENT, SECURITY DEPOSIT AND CREDIT ENHANCEMENTS

3.1 Base Monthly Rent. Commencing on the Lease Commencement Date and continuing throughout the Lease Term. Tenant shall pay to Landlord, without prior demand therefor, in advance on the first day of each calendar month, the amount set forth as “Base Monthly Rent” in Article 1 (the “Base Monthly Rent”).

3.2 Additional Rent. Commencing on the possession of the Leased Premises is delivered to Tenant, and continuing throughout the Lease Term, in addition to the Base Monthly Rent and to the extent not required by Landlord to be contracted for and paid directly by Tenant, Tenant shall pay to Landlord as additional rent (the “Additional Rent”) the following amounts:

(a) An amount equal to all Property Operating Expenses (as defined in Article 13) incurred by Landlord. Landlord may estimate the amount of Property Operating Expenses for any lease year, and Tenant shall be required to pay 1/12 of such estimated amount on the first day of each calendar month of such lease year. Within 60 days of the end of such lease year, Landlord shall determine the actual amount of such lease year’s Property Operating Expenses. If the actual amount of such Property Operating Expenses exceeds the amount paid by Tenant in such lease year, Tenant shall pay Landlord the shortage with the next installment of Base Monthly Rent. If the actual amount of such Property Operating Expenses is less than the amount paid by Tenant in such lease year, Tenant shall be entitled to a credit against future Base Monthly Rent or Additional Rent or to a refund of any such excess upon termination of this Lease. Tenant shall have the right to reasonably audit Landlord’s calculation of Property Operating Expenses.

(b) Any other charges or reimbursements due Landlord from Tenant pursuant to the terms of this Lease.

3.3 If any installment of Base Monthly Rent or Additional Rent is not received by Landlord from Tenant within ten calendar days after the same becomes due, Tenant shall pay to Landlord a late charge in an amount equal to the amount equal to 6% of the Base Monthly Rent or the Additional Rent not so paid. In addition, Tenant Shall also pay Landlord Interest on any Base Monthly Rent or Additional Rent not paid when due, at an interest rate equal to the maximum rate allowed by law, from the date such amount is due, until such amount is paid in full.

3.

3.4 Payment Of Rent. Except as specifically provided otherwise in this Lease, all rent shall be paid in lawful money of the United States, without any abatement, reduction or offset for any reason whatsoever, to Landlord at such address as Landlord may designate from time to time. Tenant’s obligation to pay Base Monthly Rent and all Additional Rent shall be appropriately prorated at the commencement and expiration of the Lease Term. The failure by Tenant to pay any Additional Rent as required pursuant to this Lease when due shall be treated the same as a failure by Tenant to pay Base Monthly Rent when due, and Landlord shall have the same rights and remedies against Tenant as Landlord would have had Tenant failed to pay the Base Monthly Rent when due.

3.5 Prepaid Rent. Tenant shall, upon execution of this Lease, pay to Landlord the amount set forth in Article 1 as “First Month’s Prepaid Rent” as prepayment of rent for credit against the first payment of Base Monthly Rent due hereunder.

3.6 Security Deposit. Tenant has deposited with Landlord the amount set forth in Article 1 as the “Security Deposit” and provided the letter of credit described in Paragraph 3.7 below, as security for the performance by Tenant of the terms of this Lease to be performed by Tenant, and not as prepayment of rent. Landlord may apply such portion or portions of the Security Deposit as are reasonably necessary for the following purposes: (i) to remedy any default by Tenant in the payment of Base Monthly Rent or Additional Rent or a late charge or interest on defaulted rent, or any other monetary payment obligation of Tenant under this Lease; (ii) to remedy any other default of Tenant. In the event the Security Deposit or any portion thereof is so used, Tenant shall pay to Landlord, promptly upon demand, an amount in cash sufficient to restore the Security Deposit to the full original sum. Tenant shall not be entitled to any interest on the Security Deposit. If Landlord transfers the Building or the Property during the Lease Term, Landlord may pay the Security Deposit to any subsequent owner in conformity with the provisions of Section 1950.7 of the California Civil Code and/or any successor statute, in which event the transferring landlord shall be released from all liability for the return of the Security Deposit.

3.7 Credit Enhancement. Tenant shall provide Landlord with an irrevocable standby letter of credit in form reasonably satisfactory to Landlord from an issuer reasonably satisfactory to Landlord in the initial amount of $100,000 as additional security for the performance by Tenant of its obligations under this Lease. The face amount of such letter of credit may be reduced annually by $25,000 on each anniversary of the Commencement Date, provided only that Tenant is not then in material default of its obligations under this Lease.

ARTICLE 4.

USE OF LEASED PREMISES AND OUTSIDE AREA

4.1 Permitted Use. Tenant shall be entitled to use the Leased Premises solely for the “Permitted Use” as set forth in Article 1 and for no other purpose whatsoever.

4.2 General Limitations On Use. Tenant shall not do or permit anything to be done in or about the Leased Premises, the Building, the Outside Areas or the Property which does or could (i) jeopardize the structural integrity of the Building or (ii) cause damage to any part of the Leased Premises, the Building, the Outside Areas or the Property. Tenant shall not operate any equipment within the Leased Premises which does or could (i) injure, vibrate or shake the Leased Premises or the Building, (ii) damage or overload of any electrical, plumbing, heating, ventilating or air conditioning systems within or servicing the Leased Premises or the Building. Tenant shall not drain or discharge any fluids in the landscaped areas or across the paved areas of the Property. Tenant shall not use any of the Outside Areas for the storage of its materials, supplies, inventory or equipment and all such materials, supplies, inventory or equipment shall at all times be stored within the Leased Premises. Tenant shall not commit nor permit to be committed any waste in or about the Leased Premises, the Building, the Outside Areas or the Property.

4.3 Signs. Tenant may install in the Leased Premises such signage as it shall desire, subject only to compliance with all applicable Laws and Restrictions, and subject to having obtained Landlord’s consent to such signage, which Landlord agrees not to unreasonably withhold, delay or condition. Tenant shall remove all of Tenant’s signs, repair any damage caused thereby, and restore the surface upon which the sign was affixed to its original condition, all to Landlord’s reasonable satisfaction, upon the termination of this Lease.

4.4 Compliance With Laws And Private Restrictions. Tenant shall abide by and shall promptly observe and comply with, at its sole cost and expense, all Laws and Private Restrictions respecting the use and occupancy of the Leased Premises, the Building, the Outside Areas or the Property including, without limitation, all Laws governing the use and/or disposal of hazardous materials; provided, however, that Tenant shall not be responsible for contamination of the Leased Premises by hazardous materials existing as of the date the Lease Premises are delivered to Tenant unless caused by Tenant, nor shall Tenant be required to make any capital repairs or improvements to the Leased Premises unless such capital repairs or replacements are required by a governmental authority as the direct result of Tenant’s particular use of the Premises. Tenant’s obligation hereunder shall survive the termination of this Lease.

4.5 Compliance With Insurance Requirements. Tenant shall comply with all requirements of any insurance company, insurance underwriter, or Board of Fire Underwriters which are necessary to maintain, at standard rates, the insurance coverages covering the Leased Premises or the Property carried by either Landlord or Tenant pursuant to this Lease.

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4.6 Landlord’s Right To Enter. Landlord and its agents shall have the right to enter the Leased Premises during normal business hours after giving Tenant reasonable notice and subject to Tenant’s reasonable security measures for the purpose of (i) inspecting the same; (ii) showing the Leased Premises to prospective purchasers, mortgagees or, during the last six (6) months of the Lease Term, tenants; (iii) performing any of Landlord’s obligations hereunder; (iv) posting notices of nonresponsibility (and for such purposes Tenant shall provide Landlord at least thirty days’ prior written notice of any work to be performed on the Leased Premises). Landlord shall also have the right to enter the Leased Premises at any time, in case of emergency. Any entry into the Leased Premises obtained by Landlord in accordance with this paragraph shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Leased Premises, or an eviction, actual or constructive of Tenant from the Leased Premises or any portion thereof.

4.7 Use Of Outside Areas. Tenant, in its use of the Outside Areas, shall at all times keep the Outside Areas in a safe condition free and clear of all debris, trash (except within existing enclosed trash areas), inoperable vehicles and the like.

4.8 Rules And Regulations. In the event Tenant is no longer the sole tenant of the Leased Premises, Landlord shall have the right from time to time to establish reasonable rules and regulations and/or amendments or additions thereto respecting the use of the Leased Premises and the Outside Areas for the care and orderly management of the Property.

ARTICLE 5.

REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

5.1 Repair And Maintenance. Subject to the provisions of Article 10, the parties shall have the following obligations and responsibilities with respect to the repair and maintenance of the Leased Premises, the Building, the Outside Areas, and the Property.

(a) Tenant’s Obligations. Subject to the obligations of Landlord contained in subsection (b) below, Tenant shall, at all times during the Lease Term and at its sole cost and expense, maintain in good order, condition and repair the Leased Premises and every part thereof including (i) all interior walls, floors and ceilings, (ii) all electrical wiring, conduits, connectors and fixtures, (iii) all plumbing, pipes, sinks, toilets, faucets and drains, and (iv) all lighting fixtures, bulbs and lamps and (v) the roof membrane, exterior (but not loadbearing) walls, interior windows and doors, (vi) all landscaping and other improvements to the Outside Areas, and (vii) all building systems. If Tenant shall fail to perform the required maintenance or fail to make repairs required of it pursuant to this paragraph within a reasonable period of time following notice from Landlord to do so, then Landlord may, at its election and without waiving any other remedy it may otherwise have under this Lease or at law, perform such maintenance or make such repairs and charge to Tenant, as Additional Rent, the costs so incurred by Landlord for same.

(b) Landlord’s Obligation. Landlord, at Landlord’s sole cost (and not to be included as a Property Operating Expense or Property Maintenance Cost) shall, at all times during the Lease Term, maintain in good condition and repair the foundation, roof structure, load-bearing walls, exterior windows, exterior doors and all structural elements of the Building. Landlord shall also be responsible for the cost to remediate any code violations of the existing Building or improvements, before Tenant makes its Tenant Improvements. Notwithstanding the foregoing, unless such damage is covered by insurance carried by either party or required to be carried by Landlord under this lease, Tenant shall be responsible for all damage to the Leased Premises caused by Tenant, or Tenant’s agents, employees, contractors or invitees.

5.2 Utilities. Tenant shall pay all charges for water, gas, electricity and storm and sanitary sewer services supplied to the Leased Premises at Tenant’s request or for its benefit.

5.3 Limitation Of Landlord’s Liability. Landlord shall not be liable to Tenant for injury to Tenant, its employees, agents, invitees or contractors, damage to Tenant’s property or loss of Tenant’s business or profits, nor shall Tenant be entitled to terminate this Lease or to any reduction in or abatement of rent by reason of any failure, interruption, rationing or other curtailment in the supply of water, electric current, gas or other utility service to the Leased Premises from any cause, other than Landlord’s negligence, willful misconduct or breach of this Lease.

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ARTICLE 6.

ALTERATIONS AND IMPROVEMENTS

6.1 By Tenant. Tenant shall not make any alterations to or modifications of the Leased Premises or construct any improvements within the Leased Premises until Landlord shall have first approved, in writing, the plans and specifications therefor, which approval may not be unreasonably withheld, delayed or conditioned. All such modifications, alterations or improvements, once so approved, shall be made, constructed or installed by Tenant at Tenant’s expense (including all permit fees and governmental charges related thereto), using a licensed contractor in substantial compliance with the Landlord-approved plans and specifications therefor. All work undertaken by Tenant shall be done in accordance with all Laws and in a good and workmanlike manner using new materials of good quality. Tenant shall not commence the making of any such modifications or alterations or the construction of any such improvements until (i) all required governmental approvals and permits shall have been obtained, (ii) all requirements regarding insurance imposed by this Lease have been satisfied and (iii) Tenant shall have given Landlord at lease five business days prior written notice of its intention to commence such work so that Landlord may post and file notices of non-responsibility. In no event shall Tenant make any modification, alterations or improvements whatsoever to the Outside Areas or the exterior or structural components of the Building. Notwithstanding the foregoing, Tenant, without Landlord’s prior written consent, shall be permitted to make non- structural alterations to the Building, provided that: (a) such alterations do not exceed $10,000 individually or $100,000 in the aggregate, (b) Tenant shall timely provide Landlord with notice of the proposed improvements including such details as Landlord may reasonably request regarding the proposed improvements and their estimated cost and (c) Tenant shall, upon Landlord’s request, remove the alteration at the termination of the Lease and restore the Leased Premises to their condition existing prior to such alteration. Tenant agrees to provide landlord with copies of plans for all material improvements or alterations to the Leased Premises, regardless of whether or not Landlord’s consent to such improvements or alterations is required hereunder.

6.2 Ownership Of Improvements. All modifications, alterations and improvements made or added to the Leased Premises by Tenant (other than Tenant’s inventory, equipment, movable furniture, wall decorations and trade fixtures) shall be deemed real property and a part of the Leased Premises, but shall remain the property of Tenant during the Lease Term. At the expiration or sooner termination of this Lease, all such modifications, alterations and improvements (other than Tenant’s inventory, equipment, movable furniture, wall decorations and trade fixtures), shall automatically become the property of Landlord and shall be surrendered to Landlord as part of the Leased Premises as required pursuant to Article 2.

6.3 Liens. Tenant shall keep the Property and every part thereof free from any lien, and shall pay when due all bills arising out of any work performed, materials furnished, or obligations incurred by Tenant, its agents, employees or contractors relating to the Property. If any such claim of lien is recorded against Tenant’s interest in this Lease, the Property or any part thereof, Tenant shall bond against, discharge or otherwise cause such lien to be entirely released within thirty (30) days after the same has been recorded. Tenant further agrees to indemnify and hold harmless any hypothecation or security device now or hereafter placed upon the Leased Premises, relative to any liens or claim of liens recorded against Tenant’s interest in this Lease, the Property or any part thereof, arising out of or relating to any work performed, materials furnished or obligations incurred by Tenant, its agents, employees or contractors.

ARTICLE 7.

ASSIGNMENT AND SUBLETTING BY TENANT

7.1 By Tenant. Tenant shall not sublet the Leased Premises or any portion thereof or assign its interest in this Lease, whether voluntarily or by operation of Law, without Landlord’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Any attempted subletting or assignment without Landlord’s prior written consent, at Landlord’s election, shall constitute a default by Tenant under the terms of this Lease. The acceptance of rent by Landlord from any person or entity other than Tenant, or the acceptance of rent by Landlord from Tenant with knowledge of a violation of the provisions of this paragraph, shall not be deemed to be a waiver by Landlord of any provision of this Article or this Lease or to be a consent to any subletting by Tenant or any assignment of Tenant’s interest in this Lease. Any sublease of the entire Building shall terminate Tenant’s Extension Option pursuant to Article 15.

7.2 Merger Or Reorganization. If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, the sale or other transfer of the capital stock of Tenant or the sale of substantially all the assets of Tenant, shall not be deemed an assignment of Tenant’s interest in this Lease. Notwithstanding the foregoing, a transfer of greater than 50% of the ownership interest of Tenant shall be deemed to be an assignment of this Lease, except in the case where such transfer is in connection with a public offering of Tenant’s securities or the merger or consolidation of Tenant in a transaction where the surviving entity or its affiliates are a company of greater net worth than Tenant. If Tenant is a partnership, a withdrawal or change, voluntary, involuntary or by operation of Law, of any general partner, or the dissolution of the partnership, shall not be deemed an assignment of Tenant’s interest in this Lease.

7.3 Landlord’s Election. If Tenant shall desire to assign its interest under the Lease or to sublet the Leased Premises, Tenant must first notify Landlord, in writing, of its intent to so assign or sublet, at least ten (10) days in advance of the date it intends to so assign its interest in this Lease or sublet the Leased Premises, specifying in detail the terms of such proposed assignment or subletting, including the name of the proposed assignee or

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sublessee, the property assignee’s or sublessee’s intended use of the Leased Premises, current financial statements (including a balance sheet, income statement and statement of cash flow, all prepared in accordance with generally accepted accounting principles) of such proposed assignee or sublessee, the form of documents to be used in effectuating such assignment or subletting and such other information as Landlord may reasonably request. Landlord shall have a period of ten (10) business days following receipt of such notice and the required information within which to do one of the following: (i) consent to such requested assignment or subletting subject to Tenant’s compliance with the conditions set forth in Paragraph 7.4 below, or (ii) refuse to so consent to such requested assignment or subletting, provided that such consent shall not be unreasonably withheld, delayed or conditioned.

7.4 Conditions To Landlord’s Consent. If Landlord elects to consent to such requested assignment or subletting, such consent shall be expressly conditioned upon the occurrence of each of the following conditions:

(a) Landlord having approved in form and substance the assignment or sublease agreement and any ancillary documents, which approval shall not be unreasonably withheld by Landlord if the requirements of this Article 7 are otherwise complied with.

(b) Each such sublessee or assignee having agreed, in writing satisfactory to Landlord and its counsel and for the benefit of Landlord, to assume, to be bound by, and to perform the obligations of this Lease to be performed by Tenant which relate to space being subleased.

(c) Tenant having reimbursed to Landlord all reasonable costs and reasonable attorneys’ fees incurred by Landlord in conjunction with the processing and documentation of any such requested subletting or assignment (not to exceed $500 per request).

(d) Tenant having delivered to Landlord a complete and fully-executed duplicate original of such sublease agreement or assignment agreement (as applicable) and all related agreements.

7.5 Effect Of Landlord’s Consent. No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its personal and primary obligation to pay rent and to perform all of the other obligations to be performed by Tenant hereunder. Consent by Landlord to one or more assignments of Tenant’s interest in this Lease or to one or more sublettings of the Leased Premises shall not be deemed to be a consent to my subsequent assignment or subletting.

ARTICLE 8.

LIMITATION ON LANDLORD’S LIABILITY AND INDEMNITY

8.1 Limitation On Landlord’s Liability And Release. Landlord shall not be liable to Tenant for, and Tenant hereby releases Landlord and its partners, principals, members, officers, agents, employees, lenders, attorneys, and consultants from, any and all liability, whether in contract, tort or on any other basis, for any injury to or any damage sustained by Tenant, Tenant’s agents, employees or contractors resulting from the Leased Premises, the Building, the Property or the Outside Areas, except that Tenant does not so release Landlord from such liability to the extent such damage was proximately caused by Landlord’s negligence, willful misconduct, or breach of this lease.

8.2 Tenant’s Indemnification Of Landlord. Tenant shall defend with counsel reasonably satisfactory to Landlord any claims made or legal actions filed or threatened against Landlord with respect to the violation of any Law, or the death, bodily injury, personal injury or property damage suffered by any third party occurring within the Leased Premises (including the Outside Areas and all other parts of the Leased Premises) or resulting from Tenant’s use or occupancy of the Leased Premises, the Building or the Outside Areas, and Tenant shall indemnify and hold Landlord, Landlord’s partners, principals, members, employees, agents and contractors harmless from any loss liability, penalties, or expense resulting therefrom, except to the extent proximately caused by the negligence or willful misconduct of Landlord or the breach by Landlord of this lease. This indemnity agreement shall survive the date of the expiration or sooner termination of this Lease.

ARTICLE 9.

INSURANCE

9.1 Tenant’s Insurance. Tenant shall maintain insurance complying with all of the following:

(a) Tenant shall procure, pay for and keep in full force and effect, at all times during the Lease Term, the following:

(i) Comprehensive general liability insurance insuring Tenant against liability for personal injury, bodily injury, death and damage to property occurring within the Leased Premises, or resulting from Tenant’s use or occupancy of the Leased Premises, the Building, the Outside Areas or the Property, or resulting from Tenant’s activities in or about the Leased Premises or the Property, with coverage in an amount equal to Tenant’s Required Liability Coverage (as set forth in Article 1), which insurance shall contain a “broad form liability” endorsement insuring Tenant’s performance of Tenant’s obligations to indemnify Landlord as contained in this Lease.

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(ii) Fire and property damage insurance in so-called “fire and extended coverage” form insuring Tenant against loss from physical damage to Tenant’s personal property, inventory, trade fixtures and improvements within the Leased Premises with coverage for the full actual replacement cost thereof;

(iii) Workers’ compensation insurance and any other employee benefit insurance sufficient to comply with all laws; and

(iv) With respect to making of alterations or the construction of improvements or the like undertaken by Tenant, contingent liability and builder’s risk insurance, in an amount and with coverage reasonably satisfactory to Landlord.

(b) Each policy of liability insurance required to be carried by Tenant pursuant to this paragraph or actually carried by Tenant with respect to the Leased Premises or the Property: (i) shall, except with respect to insurance required by subparagraph (a)(iii) above, name Landlord, and such others as are designated by Landlord, as additional insureds; (ii) shall be primary insurance providing that the insurer shall be liable for the full amount of the loss, up to and including the total amount of liability set forth in the declaration of coverage, without the right of contribution from or prior payment by any other insurance coverage of Landlord; (iii) shall be in a form satisfactory to Landlord; (iv) shall be carried with companies reasonably acceptable to Landlord with Best’s ratings of at least A and XI; (v) shall provide that such policy shall not be subject to cancellation, lapse or change except after at least thirty days prior written notice to Landlord, and (vi) shall contain a so-called “severability” or “cross liability” endorsement. Each policy of property insurance maintained by Tenant with respect to the Leased Premises or the Property or any property therein (i) shall provide that such policy shall not be subject to cancellation, lapse or change except after at least thirty days prior written notice to Landlord and (ii) shall contain a waiver and/or a permission to waive by the insurer of any right of subrogation against Landlord, its partners, principals, members, officers, employees, agents and contractors, which might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its partners, principals, members, officers, employees, agents and contractors.

(c) Prior to the time Tenant or any of its contractors enters the Leased Premises, Tenant shall deliver to Landlord, with respect to each policy of insurance required to be carried by Tenant pursuant to this Article, a copy of such policy (appropriately authenticated by the insurer as having been issued, premium paid) or a certificate of the insurer certifying in form satisfactory to Landlord that a policy has been issued, premium paid, providing the coverage required by this Paragraph and containing the provisions specified herein. With respect to each renewal or replacement of any such insurance, the requirements of this Paragraph must be complied with not less than thirty days prior to the expiration or cancellation of the policies being renewed or replaced.

9.2 Landlord’s Insurance. With respect to insurance maintained by Landlord:

(a) Landlord shall maintain, as the minimum coverage required of it by this Lease, fire and property damage insurance in so-called “fire and extended coverage” form insuring Landlord (and such others as Landlord may designate) against loss from physical damage to the Building with coverage of not less than one hundred percent (100%) of the full actual replacement cost thereof and against loss of rents for a period of not less than six months. Such fire and property damage insurance, at Landlord’s election but without any requirements on Landlord’s behalf to do so, (i) may be written in so-called “all risk” form, excluding only those perils commonly excluded from such coverage by Landlord’s then property damage insurer; (ii) may provide coverage for physical damage to the improvements so insured for up to the entire full actual replacement cost thereof; and/or (iii) may be endorsed to cover loss or damage caused by any additional perils against which Landlord may elect to insure. Notwithstanding the foregoing, if Landlord elects to carry earthquake or flood insurance. Landlord may pass through to Tenant as a Property Operating Expense only reasonable premiums for such coverages if such coverages are available at commercially reasonable rates and purchased by other owners of similar properties in the area of the Leased Premises. Under no circumstances, however, shall Tenant be required to pay or reimburse to Landlord the amount of any deductibles for such coverages or for premiums for flood or earthquake coverage exceeding $ 4,000 per year. Landlord shall not be required to cause such insurance to cover any of Tenant’s personal property, inventory, and trade fixtures, or any modifications, alterations or improvements made or constructed by Tenant to or within the Leased Premises. Landlord shall use commercially reasonable efforts to obtain such insurance at competitive rates.

(b) Landlord shall maintain comprehensive general liability insurance insuring Landlord (and such others as are designated by Landlord) against liability for personal injury, bodily injury, death, and damage to property occurring in, on or about, or resulting from the use or occupancy of the Property, or any portion thereof, with combined single limit coverage of at least Two Million Dollars ($2,000,000). Landlord may carry such greater coverage as Landlord or Landlord’s Lender, insurance broker, advisor or counsel may from time to time determine is reasonably necessary for the adequate protection of Landlord and the Property.

(c) Landlord may maintain any other insurance which in the opinion of its insurance broker, advisor or legal counsel is prudent in carry under the given circumstances, provided such insurance is commonly carried by owners of property similarly situated and operating under similar circumstances.

9.3 Mutual Waiver Of Subrogation. Landlord hereby releases Tenant, and Tenant hereby releases Landlord and its respective partners, principals, members, officers, agents, employees and servants, from any and all liability for loss, damage or injury to the property of the other in or about the Leased Premises or the Property which is caused by or results from a peril or event or happening which is covered by insurance actually carried and in force

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at the time of the loss by the party sustaining such loss; provided, however, that such waiver shall be effective only to the extent permitted by the insurance covering such loss and to the extent such insurance is not prejudiced thereby.

ARTICLE 10.

DAMAGE TO LEASED PREMISES

10.1 Landlord’s Duty To Restore. If the Leased Premises, the Building or the Outside Area are damaged by any peril after the Effective Date of this Lease, Landlord shall restore the same, as and when required by this paragraph, unless this Lease is terminated by Landlord pursuant to Paragraph 10.2 or by Tenant pursuant to Paragraph 10.3. If this Lease is not so terminated, then upon the issuance of all necessary governmental permits, Landlord shall commence and diligently prosecute to completion the restoration of the Leased Premises, the Building or the Outside Area, as the case may be, to the extent then allowed by law, to substantially the same condition in which it existed as of the Lease Commencement Date and Tenant shall restore any improvements made by it to the Leased Premises and its trade fixtures. Notwithstanding the foregoing, Landlord shall have no obligation to restore any Improvements made by Tenant to the Leased Premises or any of Tenant’s personal property, inventory or trade fixtures.

10.2 Landlord’s Right To Terminate. Landlord shall have the option to terminate this Lease in the event any of the following occurs, which option may be exercised only by delivery to Tenant of a written notice of election to terminate within thirty days after the date of such damage or destruction:

(a) The Building is damaged by any peril covered by valid and collectible insurance actually carried by Landlord and in force at the time of such damage or destruction (an “insured peril”) to such an extent that the estimated cost to restore the Building exceeds the lesser of (i) the insurance proceeds available from insurance actually carried by Landlord unless Tenant agrees to pay the difference between the cost of restoration and the amount of available insurance proceeds, or (ii) fifty percent of the then actual replacement cost thereof;

(b) The Building is damaged by an uninsured peril, which peril Landlord was not required to insure against pursuant to the provisions of Article 9 of this Lease.

(c) The Building is damaged by any peril and, because of the laws then in force, the Building (i) cannot be restored at reasonable cost or (ii) if restored, cannot be used for the same use being made thereof before such damage.

10.3 Tenant’s Right To Terminate. If the Leased Premises, the Building or the Outside Area are damaged by any peril and Landlord does not elect to terminate this Lease or is not entitled to terminate this Lease pursuant to this Article, then as soon as reasonably practicable, Landlord shall furnish Tenant with the written opinion of Landlord’s architect or construction consultant as to when the restoration work required of Landlord may be complete. Tenant shall have the option to terminate this Lease in the event any of the following occurs, which option may be exercised only by delivery to Landlord of a written notice of election to terminate within thirty (30) days after Tenant receives from Landlord the estimate of the time needed to complete such restoration:

(a) If the time estimated to substantially complete the restoration exceeds six (6) months from and after the date the architect’s or construction consultant’s written opinion is delivered; or

(b) If the damage occurred within twelve (12) months of the last day of the Lease Term and the time estimated to substantially complete the restoration exceeds ninety (90) days from and after the date such restoration is commenced.

10.4 Tenant’s Waiver. Landlord and Tenant agree that the provisions of Paragraph 10.4 above, captioned “Tenant’s Right To Terminate”, are intended to supersede and replace the provisions contained in California Civil Code, Section 1932, Subdivision 2, and California Civil Code, Section 1934, and accordingly. Tenant hereby waives the provisions of such Civil Code Sections and the provisions of any successor Civil Code Sections or similar laws hereinafter enacted.

10.5 Abatement Of Rent. In the event of damage to the Leased Premises which does not result in the termination of this Lease, the Base Monthly Rent and any Additional Rent shall be temporarily abated during the period of damage in proportion in the degree to which Tenant’s use of the Leased Premises is impaired by such damage, unless such damage results from the willful act of Tenant, Tenant’s employees or agents.

ARTICLE 11.

CONDEMNATION

11.1 Tenant’s Right To Terminate. Except as otherwise provided in Paragraph 11.4 below regarding temporary takings. Tenant shall have the option to terminate this Lease by notice given within thirty (30) days of a taking, if, as a result of any taking, (i) all of the Leased Premises is taken, or (ii) twenty-five percent (25%) or more of the Leased Premises is taken and the part of the Leased Premises that remains cannot, within a reasonable period of time, be made suitable for the continued operation of Tenant’s business. Tenant must exercise such option

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within a reasonable period of time, to be effective on the later to occur of (i) the date that possession of that portion of the Leased Premises that is condemned is taken by the condemnor or (ii) the date Tenant vacated the Leased Premises.

11.2 Landlord’s Right To Terminate. Except as otherwise provided in Paragraph 11.4 below regarding temporary takings, Landlord shall have the option to terminate this Lease by notice given within thirty (30) days of a taking, if, as a result of any taking (i) all of the Leased Premises is taken, (ii) twenty-five percent (25%) or more of the Leased Premises is taken and the part of the Leased Premises that remains cannot, within a reasonable period of time, be made reasonably suitable for the continued operation of Tenant’s business, or (iii) because of the laws then in force, the Leased Premises may not be used for the same use being made before such taking, whether or not restored as required by Paragraph 11.3 below. Any such option to terminate by Landlord must be exercised within a reasonable period of time, to be effective as of the date possession is taken by the condemnor.

11.3 Restoration. If any part of the Leased Premises or the Building is taken and this Lease is not terminated, then Landlord shall, to the extent not prohibited by laws then in force, repair any damage occasioned thereby to the remainder thereof to a condition reasonably suitable for Tenant’s continued operations and otherwise, to the extent practicable, in the manner and to the extent provided in Paragraph 10.1 and Tenant shall repair, as necessary, any improvements installed by it in the Leased Premises or trade fixture damaged by such taking.

11.4 Temporary Taking. If a portion of the Leased Premises is temporarily taken for a period of six months or less and such period does not extend beyond the Lease Expiration Date, this Lease shall remain in effect. If any portion of the Leased Premises is temporarily taken for a period which exceeds six months or which extends beyond the Lease Expiration Date, then the rights of Landlord and Tenant shall be determined in accordance with Paragraphs 11.1 and 11.2 above.

11.5 Division Of Condemnation Award. Any award made for any taking of the Property, the Building, or the Leased Premises, or any portion thereof, or the leasehold interest, shall belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of its right, title and interest in any such award; provided, however, that Tenant shall be entitled to receive any portion of the award that is made specifically (i) for the taking of personal property, inventory or trade fixtures belonging to Tenant, (ii) for the interruption of Tenant’s business or its moving costs, or (iii) for the unamortized value of any leasehold improvements installed and paid for by Tenant, amortized over a four-year period. The rights of Landlord and Tenant regarding any condemnation shall be determined as provided in this Article, and each party hereby waives the provisions of Section 1265.130 of the California Code of Civil Procedure, and the provisions of any similar law hereinafter enacted, allowing either party to petition the Supreme Court to terminate this Lease and/or otherwise allocate condemnation awards between Landlord and Tenant in the event of a taking of the Leased Premises.

11.6 Abatement Of Rent. In the event of a taking of the Leased Premises which does not result in a termination of this Lease (including a temporary taking), then, as of the date possession is taken by the condemning authority, the Base Monthly Rent shall be reduced in the same proportion that the area of that part of the Leased Premises so taken (less any addition to the area of the Leased Premises by reason of any reconstruction) bears to the area of the Leased Premises immediately prior to such taking.

11.7 Taking Defined. The term “taking” or “taken” as used in this Article 11 shall mean any transfer or conveyance of all or any portion of the Property to a public or quasi-public agency or other entity having the power of eminent domain pursuant to or as a result of the exercise of such power by such an agency, including any inverse condemnation and/or any sale or transfer by Landlord of all or any portion of the Property to such an agency under threat of condemnation or the exercise of such power.

ARTICLE 12.

DEFAULT AND REMEDIES

12.1 Events Of Tenant’s Default. Tenant shall be in default of its obligations under this Lease if any of the following events occur:

(a) Tenant shall have failed to pay Base Monthly Rent or any Additional Rent when due, which failure has continued for five days following written notice from Landlord; or

(b) Tenant shall have failed to perform any term, covenant or condition of this Lease (except those requiring the payment of Base Monthly Rent or Additional Rent, which failures shall be governed by subparagraph (a) above) within thirty (30) days after written notice from Landlord to Tenant specifying the nature of such failure and requesting Tenant to perform same (provided that, if longer than thirty days is reasonably required in order to perform such term, covenant or condition. Tenant shall have such longer period provided that Tenant has commenced to cure such failure and is diligently prosecuting such cure to completion).

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12.2 Landlord’s Remedies. In the event of any default by Tenant, Landlord shall have the following remedies, in addition to all other rights and remedies provided by law or otherwise provided in this Lease, to which Landlord may resort cumulatively, or in the alternative:

(a) Landlord may, at Landlord’s election, keep this Lease in effect and enforce, by an action at law or in equity, all of its rights and remedies under this Lease including, without limitation, (i) the right to recover the rent and other sums as they become due by appropriate legal action, (ii) the right to make payments required by Tenant, or perform Tenant’s obligations and be reimbursed by Tenant for the cost thereof with interest at the then maximum rate of interest not prohibited by law from the date the sum is paid by Landlord until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive relief and specific performance to prevent Tenant from violating the terms of this Lease and/or to compel Tenant to perform its obligations under this Lease, as the case may be.

(b) Landlord may, at Landlord’s election, terminate this Lease by giving Tenant written notice of termination, in which event this Lease shall terminate on the date set forth for termination in such notice. Any termination under this subparagraph shall not relieve Tenant from its obligation to pay to Landlord all Base Monthly Rent and Additional Rent then or thereafter due, or any other sums due or thereafter accruing to Landlord, or from any claim against Tenant for damages previously accrued or then or thereafter accruing. In no event shall any one or more of the following actions by Landlord, in the absence of a written election by Landlord to terminate this Lease constitute a termination of this Lease:

(i) Appointment of a receiver or keeper in order to protect Landlord’s interest hereunder;

(ii) Consent to any subletting of the Leased Premises or assignment of this Lease by Tenant, whether pursuant to the provisions hereof or otherwise; or

(iii) Any reasonable action taken by Landlord or its partners, principals, members, officers, agents, employees, or servants, which is intended to mitigate the adverse effects of any breach of this Lease by Tenant, including, without limitation, any action taken to maintain and preserve the Leased Premises or any action taken to relet the Leased Premises or any portion thereof for the account at Tenant and in the name of Tenant.

(c) In the event Landlord terminates this Lease, Landlord shall be entitled, at Landlord’s election, to the rights and remedies provided in California Civil Code Section 1951.2, as in effect on the Effective Date of this Lease. For purposes of computing damages pursuant to Section 1951.2, an interest rate equal to the maximum rate of interest not prohibited by law shall be used where permitted. Such damages shall include, without limitation:

(i) The worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably - avoided, computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco, at the time of award plus one percent; and

(ii) Any other amount reasonably necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease, or which in the ordinary course of things would be likely to result therefrom, including without limitation, the following: (i) expenses for cleaning, repairing or restoring the Leased Premises, (ii) broker’s fees allocable to the remainder of the term of this Lease, advertising costs and other expenses of reletting the Leased Premises; (iii) expenses incurred in removing, disposing of and/or storing my of Tenant’s personal property, inventory or trade fixtures remaining therein; (iv) reasonable attorney’s fees, expert witness fees, court costs and other reasonable expenses incurred by Landlord (but not limited to taxable costs) in retaking possession of the Leased Premises, establishing damages hereunder, and releasing the Leased Premises; and (v) any other expenses, costs or damages otherwise reasonably incurred or suffered as a result of Tenant’s default.

12.3 Landlord’s Default And Tenant’s Remedies. Landlord shall not be in default hereunder unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event later than thirty (30) days after written notice by Tenant specifying wherein Landlord has failed to perform such obligation; provided that if the nature of Landlord’s obligation is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently pursues the same to completion. In the event of Landlord’s default, Tenant may then proceed in equity or at law to compel Landlord to perform its obligations and/or to recover damages proximately caused by such failure to perform (except as and to the extent Tenant has waived its right to damages as provided in this Lease).

12.4 Tenant’s Waiver. Landlord and Tenant agree that the provisions of Paragraph 12.3 above are intended to supersede and replace the provisions of California Civil Code Sections 1932(1), 1941 and 1942, and accordingly, Tenant hereby waives the provisions of California Civil Code Sections 1932(1), 1941 and 1942 and/or any similar or successor law regarding Tenant’s right to terminate this Lease or to make repairs and deduct the expenses of such repairs from the rent due under this Lease.

ARTICLE 13.

GENERAL PROVISIONS

13.1 Taxes On Tenant’s Property. Tenant shall pay before delinquency any and all taxes, assessments, license fees, use fees, permit fees and public charges of whatever nature or description levied, assessed or imposed against Tenant by a governmental agency arising out of, caused by reason of or based upon Tenant’s estate in this Lease,

11.

Tenant’s ownership of property, improvements made by Tenant to the Leased Premises or the Outside Areas. If any such taxes, assessments, fees or public charges are levied against Landlord, Landlord’s property, the Building or the Property, Landlord shall have the right to require Tenant to pay such taxes.

13.2 Holding Over. This Lease shall terminate without further notice on the Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant after expiration of the Lease Term shall neither constitute a renewal nor extension of this Lease nor give Tenant any rights in or to the Leased Premises except as expressly provided in this Paragraph. Any such holding over to which Landlord has consented shall be construed to be a tenancy from month to month, on the same terms and conditions herein specified insofar as applicable.

13.3 Subordination To Mortgages. This Lease is subject to and subordinate to all ground leases, mortgages and deeds of trust which affect the Building or the Property and which are of public record as of the Effective Date of this Lease, and to all renewals, modifications, consolidations, replacements and extensions thereof. However, if the lessor under any such ground lease or any lender holding any such mortgage or deed of trust shall advise Landlord that it desires or requires this Lease to be made prior and superior thereto, then; upon written request of Landlord to Tenant, Tenant shall promptly execute, acknowledge and deliver any and all customary or reasonable documents or instruments which Landlord and such lessor or lender deems necessary or desirable to make this Lease prior thereto. Tenant hereby consents to Landlord’s ground leasing the land underlying the Building or the Property and/or encumbering the Building or the Property as security for future loans on such terms as Landlord shall desire, all of which future ground leases, mortgages or deeds of trust shall be subject to and subordinate to this Lease. However, if any lessor under any such future ground lease or any lender holding such future mortgage or deed of trust shall desire or require that this Lease be made subject to and subordinate to such future ground lease, mortgage or deed of trust, then Tenant agrees, within ten days after Landlord’s written request therefor, to execute, acknowledge and deliver to Landlord any and all documents or instruments requested by Landlord or by such lessor or lender as may be necessary or proper to assure the subordination of this Lease to such future ground lease, mortgage or deed of trust, but only if such lessor or lender agrees to recognize Tenant’s rights under this Lease and agrees not to disturb Tenant’s quiet possession of the Leased Premises so long as Tenant is not in default under this Lease. If Landlord assigns the Lease as security for a loan, Tenant agrees to execute such documents as are reasonably requested by the lender and to provide reasonable provisions in the Lease protecting such lender’s security interest which are customarily required by institutional lenders making loans secured by a deed of trust.

13.4 Tenant’s Attornment Upon Foreclosure. Tenant shall, upon request, attorn (i) to any purchaser of the Building or the Property at any foreclosure sale or private sale conducted pursuant to any security instruments encumbering the Building or the Property, (ii) to any grantee or transferee designated in any deed given in lieu of foreclosure of any security interest encumbering the Building or the Property, or (iii) to the lessor under an underlying ground lease of the land underlying the Building or the Property, should such ground lease be terminated; provided that such purchaser, grantee or lessor recognizes Tenant’s rights under this Lease.

13.5 Estoppel Certificate. Tenant will, following any request by Landlord, promptly execute and deliver to Landlord an estoppel certificate (i) certifying that this Lease is unmodified and in full force and effect, or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect, (ii) stating the date to which the rent and other charges are paid in advance, if any, (iii) acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (iv) certifying such other information about this Lease as may be reasonably requested by Landlord, its Lender or prospective lenders, investors or purchasers of the Building or the Property.

13.6 Transfer By Landlord. Landlord and its successors in interest shall have the right to transfer their interest in the Building, the Property, or any portion thereof it any time and to any person or entity. In the event of any such transfer, the Landlord originally named herein (and in the case of any subsequent transfer, the transferor), from the date of such transfer, (i) shall be automatically relieved, without any further act by any person or entity, of all liability for the performance of the obligations of the Landlord hereunder which may accrue after the date of such transfer and (ii) shall be relieved of all liability for the performance of the obligations of the Landlord hereunder which have accrued before the date of transfer if its transferee agrees to assume and perform all such prior obligations of the Landlord hereunder. Tenant shall attorn to any such transferee. After the date of any such transfer, the term “Landlord” as used herein shall mean the transferee of such interest in the Building or the Property.

13.7 Force Majeure. The obligations of each of the parties under this Lease (other than the obligations to pay money) shall be temporarily excused if such party is prevented or delayed in performing such obligations by reason of any strikes, lockouts or labor disputes; government restrictions, regulations, controls, action or inaction; civil commotion: or extraordinary weather, fire or other acts of God.

13.8 Notices. Any notice required or desired to be given by a party regarding this Lease shall be in writing and shall be personally served, or in lieu of personal service may be given by reputable overnight courier service, postage prepaid, addressed to the other party as follows:

If to Landlord:	R.G. Harris Company
	P.O. Box 2882
	31479 Pacific Coast Highway
	Malibu, California 90265
	Attention: Henry Workman

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with a copy to:	Sherwood and Hardgrove
	Suite 240
	11990 San Vicente Boulevard
	Los Angeles, California 90049-5004
	Attention: Don C. Sherwood
If to Tenant:	Copper Mountain Networks, Inc.
	3931 Sorrento Valley Blvd.
	San Diego, California
	Attention: Joseph Lynch
with a copy to:	Cooley Godward LLP
	Five Palo Alto Square
	3000 El Camino Real
	Palo Alto, California 94306
	Attention: Toni Pryor Wise

Any notice given in accordance with the foregoing shall be deemed received upon actual receipt or refusal to accept delivery.

13.9 Attorneys’ Fees. In the event any party shall bring any action, arbitration proceeding or legal proceeding alleging a breach of any provision of this Lease, to recover rent, to terminate this Lease, or to enforce, protect, determine or establish any term or covenant of this Lease or rights or duties hereunder of either party, the prevailing party shall be entitled to recover from the non-prevailing party as a part of such action or proceeding, or in a separate action for that purpose brought within one year from the determination of such proceeding, reasonable attorneys’ fees, expert witness fees, court costs and other reasonable expenses incurred by the prevailing party.

13.10 Definitions. Any term that is given a special meaning by any provision in this Lease shall, unless otherwise specifically stated, have such meaning wherever used in this Lease or in any Addenda or amendment hereto. In addition to the terms defined in Article 1, the following terms shall have the following meanings:

(a) Real Property Taxes. The term “Real Property Tax” or “Real Property Taxes” shall each mean (i) all taxes, assessments, levies and other charges of any kind or nature whatsoever, general and special, foreseen and unforeseen (including all installments of principal and interest required to pay any general or special assessments for public improvements and any increases resulting from reassessments caused by any change in ownership or new construction), now or hereafter imposed by any governmental or quasi-governmental authority or special district having the direct or indirect power to tax or levy assessments, which are levied or assessed for whatever reason against the Property or any portion thereof, or Landlord’s interest herein, or the fixtures, equipment and other property of Landlord that is an, integral part of the Property and located thereon, or Landlord’s business of owning, leasing or managing the Property or the gross receipts, income or rentals from the Property, and (ii) all charges, levies or fees imposed by any governmental authority against Landlord by reason of or based upon the use of or number of parking spaces within the Property, the amount of public services or public utilities used or consumed (e.g. water, gas, electricity, sewage or waste water disposal) at the Property, the number of person employed by tenants of the Property, the size (whether measured in area, volume, number of tenants or whatever) or the value of the Property, or the type of use or uses conducted within the Property. If any Real Property Tax is partly based upon property or rents unrelated to the Property, then only that part of such Real Property Tax that is fairly allocable to the Property shall be included within the meaning of the terms “Real Property Tax” or “Real Property Taxes.” Notwithstanding the foregoing, the terms “Real Property Tax” or “Real Property Taxes” shall not include estate, inheritance, transfer, gift or franchise taxes of Landlord or the federal or state income tax imposed on Landlord’s income from all sources.

(b) Landlord’s Insurance Costs. The term “Landlord’s Insurance Costs” shall mean the costs to Landlord to carry and maintain the policies of fire and property damage insurance for the Building and the Property and general liability and any other insurance required or permitted to be carried by Landlord pursuant to Article 9.

(c) Property Maintenance Costs. The term “Property Maintenance Costs” shall mean all costs and expenses (except Landlord’s Insurance Costs and Real Property Taxes) paid or incurred by Landlord in protecting, operating, maintaining, repairing, replacing and preserving the Property and all parts thereof, including without limitation, (i) professional management fees (not exceeding 2 ¹/2% of the amount of Base Monthly Rent, if such fees are paid to Landlord or an affiliate or agent of Landlord, (ii) the amortizing portion of any costs incurred by Landlord in the making of any modifications, alterations or improvements required by any governmental authority as set forth in Article 6, which are so amortized during the Lease Term, and (iii) such other costs as may be paid or incurred with respect to operating, maintaining, and preserving the Property, such as repairing and painting the exterior surfaces, of the Building, repairing, replacing, and resurfacing paved areas, repairing and replacing structural parts of the Building, and repairing and replacing when necessary, electrical, plumbing, heating, ventilating and air conditioning systems serving the Building. Notwithstanding the foregoing, Property Maintenance Costs shall not include the costs of environmental remediation or costs attributable to the tenancy of others at the Property, or Landlord’s repair and maintenance obligations pursuant to paragraph 5.1(b).

All capital items determined in accordance with generally accepted accounting principles (excluding in any case items which are Landlord’s obligations under paragraph 5.1(b)), shall be amortized over their useful life and included as a Property Operating Expense.

13.

(d) Property Operating Expenses. The term “Property Operating Expenses” shall mean and include all Real Property Taxes, plus all Landlord’s Insurance Costs, plus all Property Maintenance Costs.

(e) Law. The term “Law” shall mean any judicial decisions and any statute, constitution, ordinance, resolution, regulation, rule, administrative order, or other requirements of any municipal, county, state, federal, or other governmental agency or authority having jurisdiction over the parties to this Lease, the Leased Premises, the Building or the Property, or any of them, in effect either at the Effective Date of this Lease or at any time during the Lease Term, including, without limitation, any regulation, order, or policy of any quasi-official entity or body (e.g. a board of fire examiners or a public utility or special district).

(f) Lender. The term “Lender” shall mean the holder of any promissory note or other evidence of indebtedness secured by the Property or any portion thereof.

(g) Private Restrictions. The term “Private Restrictions” shall mean (as they may exist from time to time) any and all covenants, conditions and restrictions, private agreements, easements, and any other recorded documents or instruments affecting the use of the Property, the Building, the Leased Premises, or the Outside Areas.

(h) Rent. The term “Rent” shall mean collectively Base Monthly Rent and all Additional Rent.

13.11 General Waivers. One party’s consent to or approval of any act by the other party requiring the first party’s consent or approval shall not be deemed to waive or render unnecessary the first party’s consent to or approval of any subsequent similar act by the other party. No waiver of any provision hereof, or any waiver of any breach of any provision hereof, shall be effective unless in writing and signed by the waiving party. The receipt by Landlord of any rent or payment with or without knowledge of the breach of any other provision hereof shall not be deemed a waiver of any such breach. No delay or omission in the exercise of any right or remedy accruing to either party upon any breach by the other party under this Lease shall impair such right or remedy or be construed as a waiver of any such breach theretofore or thereafter occurring. The waiver by either party of any breach of any provision of this Lease shall not be deemed to be a waiver of any subsequent breach of the same or any other provisions herein contained.

13.12 Miscellaneous. Should any provisions of this Lease prove to be invalid or illegal, such invalidity or illegality shall in no way affect, impair or invalidate any other provisions hereof, and such remaining provisions shall remain in full force and effect. Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor. Any copy of this Lease which is executed by the parties shall be deemed an original for all purposes. This Lease shall, subject to the provisions regarding assignment, apply to and bind the respective heirs, successors, executors, administrators and assigns of Landlord and Tenant. The term “party’ shall mean Landlord or Tenant as the context implies. If Tenant consists of more than one person or entity, then all members of Tenant shall be jointly and severally liable hereunder. This Lease shall be construed and enforced in accordance with the Laws of the State in which the Leased Premises are located. The captions in this Lease are for convenience only and shall not be construed in the construction or interpretation of any provision hereof. When the context of this Lease requires, the neuter gender includes the masculine, the feminine, a partnership, corporation, limited liability company, joint venture, or other form of business entity, and the singular includes the plural. The terms “must,” “shall,” “will,” and “agree” are mandatory. The term “may” is permissive. When a party is required to do something by this Lease, it shall do so at its sole cost and expense without right of reimbursement from the other party unless specific provision is made therefor. Landlord and Tenant shall both be deemed to have drafted this Lease, and the rule of construction that a document is to be construed against the drafting party shall not be employed in the construction or interpretation of this Lease.

ARTICLE 14.

CORPORATE AUTHORITY,

BROKERS AND ENTIRE AGREEMENT

14.1 Corporate Authority. If Tenant is a corporation, each individual executing this Lease on behalf of such corporation represents and warrants that Tenant has the full right and legal authority to enter into this Lease, and that he or she is duly authorized to execute and deliver this Lease on behalf of Tenant in accordance with its terms.

14.2 Brokerage Commissions. Landlord and Tenant each represent, warrant and agree that it has not had any dealings with any real estate broker(s), leasing agent(s), finder(s) or salesmen, other than the Brokers (as named in Article 1) with respect to the lease by it of the Leased Premises pursuant to this Lease, and that it will indemnify, defend with competent counsel, and hold the other harmless from any liability for the payment of any real estate brokerage commissions, leasing commissions or finder’s fees claimed by any other real estate broker(s), leasing agent(s), finder(s), or salesmen to be earned or due and payable by reason of its agreement or promise (implied or otherwise) to pay such a commission or finder’s fee by reason of its leasing the Leased Premises pursuant to this Lease. Landlord agrees to assume all obligations and responsibility with respect to payment of the Brokers and to indemnify, defend and hold Tenant harmless therefrom. Landlord shall pay Broker a commission equal to 3% of the Base Monthly Rent payable during the second, third and fourth year of this Lease. Such commission shall be paid 50% upon execution of this Lease by Landlord and Tenant and 50% upon the Lease Commencement Date. No further commission shall be due as the result of any exercise of option rights by the Tenant.

14.3 Entire Agreement. This Lease and the Exhibits (as described in Article 1), which Exhibits are by this reference incorporated herein, constitute the entire agreement between the parties, and there are no other agreements, understandings or representations between the parties relating to the lease by Landlord of the Leased Premises to Tenant, except as expressed herein.

14.

ARTICLE 15.

OPTIONS TO EXTEND

15.1 Subject to the condition set forth in clause (b) below, Tenant shall have the option to extend the term of this Lease (“Extension Option”) for a period of two (2) years from the expiration of the fourth year of the Lease Term (the “Extension Period”), subject to the following conditions:

(a) The Extension Option shall be exercised, if at all, by notice of exercise given to Landlord by Tenant not less than nine (9) months prior to the expiration of the fourth year of the Lease Term; and

(b) Tenant is not in material default under any of the terms, covenants or conditions of this Lease, either at the time Tenant exercises the Extension Option or on the commencement date of the Extension Period.

15.2 In the event the Extension Option is exercised in a timely fashion, the Lease shall be extended for a period of two (2) years upon all of the terms and conditions of this Lease, provided that the Base Monthly Rent for each extension period shall be equal to ninety-five percent (95%) of the “Fair Market Rent” for the Leased Premises. For purposes hereof, “Fair Market Rent” shall mean the Base Monthly Rent determined pursuant to the process described below.

15.3 Within 15 days after receipt of Tenant’s notice of exercise, Landlord shall notify Tenant in writing of Landlord’s estimate of the Base Monthly Rent for the applicable extension period, based on the provisions of Paragraph 15.2 above. The parties shall have 15 days to meet and agree on the amount of Base Monthly Rent. If the parties are unable to so agree within such period, Tenant shall have the right either to (i) accept Landlord’s statement of Base Monthly Rent as the Base Monthly Rent for the applicable extension period; or (ii) elect to arbitrate Landlord’s estimate of Fair Market Rent, such arbitration to be conducted pursuant to the provisions hereof. If Tenant elects arbitration, the arbitration shall be concluded within 60 days after the date of Tenant’s election, subject to extension for an additional 30-day period if a third arbitrator is required and does not act in a timely manner.

15.4 The parties shall each select a person to act as the arbitrator on its behalf within fifteen days of delivery by Tenant to Landlord of its election to arbitrate. Each arbitrator shall be qualified as a real estate appraiser with at least ten years’ experience and familiar with the Fair Market Rent of similar industrial, research and development, or office space in the vicinity of the Property used for a use similar to that of the Leased Premises. If either party fails to notify the other of the appointment of its arbitrator, within or by the time above specified, then the arbitrator appointed by the one party shall be the arbitrator to determine the issue. In the event that two arbitrators are chosen pursuant to Paragraph, the arbitrators so chosen shall, within 15 days after the second arbitrator is appointed determine the Fair Market Rent. If the two arbitrators shall be unable to agree upon a determination of Fair Market Rent within such 15-day period, they, themselves, shall appoint a third arbitrator, who shall be a competent and impartial person with qualifications similar to those required of the first two arbitrators pursuant to. In the event they are unable to agree upon such appointment within seven days after expiration of such 15-day period, the third arbitrator shall be selected by the parties themselves, if they can agree thereon, within a further period of 15 days. If the parties do not so agree, then either party, on behalf of both, may request appointment of such a qualified person by the then American Arbitration Association or any judge of the Superior Court of San Diego county, acting in his or her private and not in his or her official capacity. The three arbitrators shall determine the Fair Market Rent of the Leased Premises within 15 days after the appointment of the third arbitrator. Each party shall pay the fee and expenses of its respective arbitrator and both shall share the fee and expenses of the third arbitrator.

ARTICLE 16.

HAZARDOUS MATERIAL

16.1 Other then those listed on Exhibit B and reasonable amounts of those materials commonly used for office and janitorial uses and petroleum products in vehicles, all of which have been preapproved by Landlord, Tenant shall not cause or permit any Hazardous Substances (as hereinafter defined) to be used, stored, generated or disposed of on or in the Leased Premises or the Property by Tenant, Tenant’s agents, employees, contractors or invitees, without first obtaining Landlord’s written consent. If Hazardous Substances are used, stored, generated or disposed of on or in the Leased Premises or the Property except as permitted above, or if the Leased Premises or the Property become contaminated in any manner for which Tenant is legally liable, Tenant shall indemnity and hold harmless the Landlord from any and all claims, damages, fines, judgments, penalties, costs, liabilities or losses (including without limitation, a decrease in value of the Leased Premises and the Property, damages due to loss or restriction of rentable or usable space, or any damages due to adverse impact on marketing of the leased Premises and the Property, and any and all sums paid for settlement of claims, attorneys fees, consultant and expert fees) arising as a result of such contamination by Tenant. This indemnification includes without limitation, any and all costs incurred due to any investigation of the site or any cleanup, removal or restoration mandated by a federal, state or local agency or political subdivision. Without limitation of the foregoing, if Tenant causes or permits the presence of any Hazardous Substance on the Leased Premises or the Property and such results in contamination, Tenant shall promptly, at its sole expense, take any and all necessary actions required by any regulatory agency having jurisdiction over the property to remediate the condition of the Leased Premises and the Property. Tenant shall first obtain Landlord’s written approval for any such remedial action.

15.

16.2 As used herein the term “Hazardous Substance” means any substance which is toxic, ignitible, reactive or corrosive and which is regulated by any local government, the State of California or the United States government. “Hazardous Substance” includes any and all material or substances which are defined as “hazardous waste”, “extremely hazardous waste” or a “hazardous substance” pursuant to state, federal or local governmental law. “Hazardous Substance” includes, but is not restricted to asbestos, polychlorobiphinyls (“PCB’s”) and petroleum.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the respective dates below set forth with the intent to be legally bound thereby as of the Effective Date of this Lease first above set forth.

	LANDLORD:
	R. G. Harris Co., a California corporation
Dated: 8/13/97	By:	/s/ [ILLEGIBLE]
	Title:	President
		/s/ Elizabeth G. Harris
		Elizabeth G. Harris, Trustee of the Harris Family Revocable Trust
		/s/ Henry K. Workman
		Henry K. Workman, Trustee of the Harris Family Revocable Trust
		/s/ Don C.Sherwood
		Don C.Sherwood, Trustee of the Harris Family Revocable Trust
	TENANT:
	Copper Mountain Networks, Inc., a California corporation
Dated: 8-12-97	By:	/s/ Joe Lynch
	Title:	V.P. Operations

16.

EXHIBIT A

SITE PLAN

17.

Exhibit B

HAZARDOUS SUBSTANCES

None.

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STANDARD INDUSTRIAL SUBLEASE

American Industrial Real Estate Association

1. Parties. This Sublease, dated, for reference purposes only, December 1, 1997, is made by, between Copper Mountain Networks Inc., a California corporation (herein called “Sublessor”) and Vidimedix Corp., a Texas corporation (herein called “Sublessee”)

2. Premises. Sublessor hereby subleases to Sublessee and Sublessee hereby subleases from Sublessor for the term, at the rental, and upon at the conditions set forth herein, that certain real property situated in the County of San Diego State of California commonly known as 3931 Sorrento Valley Blvd. and described as a portion of said building comprised of approximately 6935 rentable square feet and located at the northwest end of building.

Said real property. Including the land and all improvements thereon, is hereinafter called the “Premises”.

3. Term.

3.1 Term. The term of this Sublease shall be for 17 months commencing on December 1, 1997 and ending on April 30, 1999. unless sooner terminated pursuant to any provision hereof.

3.2 Delay in Commencement. Notwithstanding said commencement date; if for any reason Sublessor cannot deliver possession of Premises to Sublessee on said date, Sublessor shall not be subject to any liability therefore, nor shall such failure affect the validity of this Lease the obligations of Sublessee hereunder or extend the term hereof, but in such case Sublessee shall not be obligated to pay rent until possession of the Premises is tendered to Sublessee; provided, however, that if Sublessor shall not have delivered possession of the Premises within sixty days from said commencement date. Sublessee may, at Sublessee’s option, by notice in writing to Sublessor within ten (10) days thereafter, * this Sublease, in which event the parties shall be discharged from all obligations thereunder. If Sublessee occupies the Premises prior to commencement date, such occupancy shall be subject to all provisions hereof, such occupancy shall not advance the termination date Sublessee shall pay rent for such period at the initial monthly rates set forth below.

4. Rent. Sublessee shall pay to Sublessor as rent for the Premises equal monthly payments of $7,282.00. In advance, on 1st day of each month of the term hereof. Sublessee shall pay Sublessor upon the execution hereof $7,282.00 as rent for December 1997. See Paragraph 13. Rent for any period during the term hereof which is for less than one month shall be a prorata portion of the monthly installment. Rent shall be payable in lawful money of the United States to Sublessor at the address stated herein or to such other persons or at such other places as Sublessee may designate in writing.

5. Security Deposit. Sublessee shall deposit with Sublessor upon execution hereof $21,845.00 as security for Sublessee’s ** performance of Sublessee’s obligations hereunder. If Sublessee fails to pay rent or other charges due hereunder, or otherwise defaults with rent to any provision of this Sublease. Sublessor may use, apply or retain all or any portion of said deposit for the payment of any rent or other charges default or for the payment of any other sum to which Sublessor may become obligated by reason of Sublessee’s default, or to compensate Sublessor for any loss or damage which Sublessor may suffer thereby. If Sublessor so uses or applies all or any portion of said deposit. Sublessee shall ** ten (10) days after written demand therefore deposit cash with Sublessor in an amount sufficient to restore said deposit to me full and hereinabove stated and Sublessee’s failure to do so shall be a material breach of this Sublease. Sublessor shall not be required to keep said * separate from its general accounts. If Sublessee performs all of Sublessee’s obligations hereunder, said deposit, or so much thereof as ** theretofore been applied by Sublessor, shall be returned, without payment of interest or other increment for its use to Sublessee (or at Sublessee option, to the last assignee. If any, of Sublessee’s interest hereunder) at the expiration of the term hereof, and after Sublessee has vacated Premises. No trust relationship is created herein between Sublessor and Sublessee with respect to said Security Deposit.

6. Use.

6.1 Use. The Premises shall be used and occupied only for general office use for telecommunications company and for no other purpose.

6.2 Compliance with Law.

(a) Sublessor warrants to Sublessee that the Premises, in its existing state, but without regard to the use for which Sublessee will use Premises, does not violate any applicable building code regulation or ordinance at the time that this Sublease is executed. In the event that it is determined that this warranty has been violated, then it shall be the obligation of the Sublessor, after written notice from Sublessee, to promptly, at Sublessors cost and expense, rectify any such violation. In the event that Sublessee does not give to Sublessor written notice of the violation of this warranty ** year from the commencement of the term of this Sublease, it shall be conclusively deemed that such violation did not exist and the correction of these Shall be the obligation of the Sublessee.

(b) Except as provided in paragraph 6.2(a), Sublessee shall, at Sublessee’s expanse, comply promptly with all applicable ** ordinances, rules, regulations, orders, restrictions of record, and requirements in effect during the term or any part of the term hereof regular use by Sublessee of the Premises. Sublessee shall not use or permit the use of the Premises in any manner that will tend to create waste nuisance or, if there shall be more then one tenant of the building containing the Premises, which shall tend to disturb such other tenants.

6.3 Condition of Premises. Except as provided in paragraph 6.2(a) Sublessee hereby accepts the Premises in their condition existing as date of the execution hereof, subject to all applicable zoning, municipal, county and state laws, ordinances, and regulations governing and regard the use of the Premises, and accepts this Sublease subject thereto and to all matters disclosed thereby and by any exhibits attached the Sublessee acknowledges that neither Sublessor nor Sublessor’s agents have made any representation or warranty as to the suitability Premises for the conduct of Sublessee’s business.

7. Master Lease.

7.1 Sublessor is the lessee of the Premises by virtue of a lease, hereinafter referred to as the “Master Lease”, a copy of which is attached marked Exhibit, dated August 12, 1997 wherein RG Harris Company is the lessor, hereinafter referred to as the “Master Lessor”.

7.2 This Sublease is and shall be at all times subject and subordinate to the Master Lease.

7.3 The terms, conditions and respective obligations of Sublessor and Sublessee to each other under this Sublease shall be the term conditions of the Master Lease except for those provisions of the Master Lease which are directly contradicted by this Sublease in which every terms of this Sublease document shall control over the Master Lease. Therefore, for the purposes of this Sublease, wherever in the Master Lease word “Lessor” is used it shall be deemed to mean the Sublessor herein and wherever in the Master Lease the word “Lessee” is used ** deemed to mean the Sublessee herein.

7.4 During the term of this Sublease and for all periods subsequent for obligations which have arisen prior to the termination of this ** Sublessee does hereby expressly assume and agree to perform and comply with, for the benefit of Sublessor and Master Lessor, each and Obligation of Sublessor under the Master Lease except or the following paragraphs which are excluded therefrom: See paragraph **

EXHIBIT C

7.5 The obligations that Sublessee has assumed under paragraph 7.4 hereof are hereinafter referred to as the “Sublessee’s Assume Obligations”. The obligations that Sublessee has not assumed under paragraph 7.4 hereof are hereinafter referred to as the “Sublessor’s Remain Obligations”.

7.6 Sublessee shall hold Sublessor free and harmless of and from all liability, judgments, costs, damages, claims or demands, include reasonable attorneys fees, arising out of Sublessee’s failure to comply with of perform Sublessee’s Assumed Obligations.

7.7 Sublessor agrees to maintain the Master Lease during the entire term of this Sublease, subject, however, to any earlier termination of Master Lease without the fault of the Sublessor, and to comply with or perform Sublessor’s Remaining Obligations and to hold Sublessee free and harmless of and from all liability, judgments, costs, damages, claims or demands arising out of Sublessor’s failure to comply with or perform Sublessor’s Remaining Obligations.

7.8 Sublessor represents to Sublessee that the Master Lease is in full force and effect and that no default exists on the part of any party to the Master Lease.

8. Assignment of Sublease and Default.

8.1 Sublessor hereby assigns and transfers to Master Lessor the Sublessor’s interest in this Sublease and all rentals and income arise therefrom, subject however to terms of Paragraph 8.2 hereof.

8.2 Master Lessor, by executing this document, agrees that until a default shall occur in the performance of Sublessor’s Obligations under Master Lease, that Sublessor may receive, collect and enjoy the rents accruing under this Sublease. However, if Sublessor shall default in performance of its obligations to Master Lessor then Master Lessor may, at its option, receive and collect, directly from Sublessee, all rent owing and to be owed under this Sublease, Master Lessor shall not, by reason of this assignment of the Sublease nor by reason of the collection of the rents from the Sublessee, be deemed liable to Sublessee for any failure of the Sublessor to perform and comply with Sublessor’s Remaining Obligations.

8.3 Sublessor hereby irrevocably authorizes and directs Sublessee, upon receipt of any written notice from the Master Lessor stating that default exists in the performance of Sublessor’s obligations under the Master Lease, to pay to Master Lessor the rents due and to become due ** the Sublease. Sublessor agrees that Sublessee shall have the right to rely upon any such statement and request from Master Lessor, and if Sublessee shall pay such rents to Master Lessor without any obligation or right to inquire as to whether such default exists and notwithstanding a notice from or claim from Sublessor to the contrary and Sublessor shall have no right or claim against Sublessee for any such rents so paid ** Sublessee.

8.4 No changes or modifications shall be made to this Sublease without the consent of Master Lessor.

9. Consent of Master Lessor.

9.1 In the event that the Master Lease requires that Sublessor obtain the consent of Master Lessor to any subletting by Sublessor then its the Sublease shall not be effective unless, within 10 days of the date hereof. Master Lessor signs this Sublease thereby giving its consent to its Subletting.

9.2 In the event that the obligations of the Sublessor under the Master Lease have been guaranteed by third parties then this Sublease, nor Master Lessor’s consent, shall not be effective unless, within 10 days of the date hereof, said guarantors sign (this Sublease thereby giving guarantor consent to this Sublease and the terms thereof.

9.3 In the event that Master Lessor does give such consent then:

(a) Such consent will not release Sublessor of its obligations or alter the primary liability of Sublessor to pay the rent and perform and comp** with all of the obligations of Sublessor to be performed under the Lease.

(b) The acceptance of rent by Master Lessor from Sublessee or any one else liable under the Master Lease shall not be deemed a waiver ** Master Lessor of any provisions of the Master Lease.

(c) The consent to this Sublease shall not constitute a consent to any subsequent subletting or assignment.

(d) In the event of any default of Sublessor under the Master Lease, Master Lessor may proceed directly against Sublessor, any guarantor or any one else liable under the Master Lease or this Sublease without first exhausting Master Lessor’s remedies against any other person or ent** liable thereon to Master Lessor.

(e) Master Lessor may consent to subsequent sublettings and assignments of the Master Lease or this Sublease or any amendments or modifications thereto without notifying Sublessor nor any one else liable under the Master Lease and without obtaining their consent and such action shall not relieve such persons from liability.

(f) In the event that Sublessor shall default in its obligations under the Master Lease, then Master Lessor, at its option and without being obligated to do so, may require Sublessee to attorn to Master Lessor in which event Master Lessor shall undertake the obligations of under this Sublease from the time of the exercise of said option to termination of this Sublease but Master Lessor shall not be liable for any prepared rents nor any security deposit paid by Sublessee, nor shall Master Lessor be liable for any other defaults of the Sublessor under the Sublease.

9.4 The signatures of the Master Lessor and any Guarantors of Sublessor at the end of this document shall constitute their consent to the term of this Sublease.

9.5 Master Lessor acknowledges that, to the best of Master Lessor’s knowledge, no default presently exists under the Master Lease of obligations to be performed by Sublessor and that the Master Lease is in full force and effect.

9.6 In the event that Sublessor defaults under its obligations to be performed under the Master Lease by Sublessor. Master Lessor agrees to *** to Sublessee a copy of any such notice of default. Sublessee shall have the right to cure any default of Sublessor described in any notice of default within ten days after service of such notice of default on Sublessee. If such default is cured by Subleasee then Sublessee shall have the right of reimbursement and offset from and against Sublessor.

10. Brokers Fee.

10.1 Upon execution hereof by all parties. Sublessor shall pay to Business Real Estate Brokerage Company a licensed real estate broker, (herein called “Broker”), a fee as set forth in a separate agreement between Sublessor and Broker, or in the event there is no separate agreement between Sublessor and Broker, the sum of $7,427.00* for brokerage services rendered by Broker to Sublessor in

this transaction. * to be split on a 50/50 basis with The Sanda Company

10.2 Sublessor agrees that if Sublessee exercises any option or right of first refusal granted by Sublessor herein, or any option or right substantially similar thereto, either to extend the term of this Sublease, to renew this Sublease, to purchase the Premises, or to lease or purchase adjacent property which Sublessor may own or in which Sublessor has an interest, or if Broker is the procuring cause of any lease, sublease, or sale pertaining to the Premises or any adjacent property which Sublessor may own or in which Sublessor has an interest, then as to any of said transactions Sublessor shall pay to Broker a fee, in cash, in accordance with the schedule of Broker in effect at the time of the execution of this Sublease. Notwithstanding the foregoing Sublessor’s obligation under this Paragraph 10.2 is limited to a transaction in which Sublessor is acting as a sublessor, lessor or seller.

10.3 Master Lessor agrees, by its consent to this Sublease, that if Sublessee shall exercise any option or right of first refusal granted to Sublessee by Master Lessor in connection with this Sublease, or any option or right substantially similar thereto, either to extend the Master Lease, to renew the Master Lease, to purchase the Premises or any part thereof, or to lease or purchase adjacent properly which Master Lessor may own or in which Master Lessor has an interest, or if Broker is the procuring cause of any other lease or sale entered into between Sublessee and Master Lessor pertaining to the Premises, any part thereof or any adjacent property which Master Lessor owns or in which it has an interest then as to any of said transactions Master Lessor shall pay to Broker a fee, in cash, in accordance with the schedule of Broker in effect at the time of its consent to this Sublease.

10.4 Any fee due from Sublessor or Master Lessor hereunder shall be due and payable upon the exercise of any option to extend or renew, as to any extension or renewal: upon the execution of any new lease, as to a new lease transaction or the exercise of a right of first refusal to lease; or at the close of escrow, as to the exercise of any option to purchase or other sale transaction.

10.5 Any transferee of Sublessor’s interest in this Sublease, or of Master Lessor’s interest in the Master Lease, by accepting an assignment thereof shall be deemed to have assumed the respective obligations of Sublessor or Master Lessor under this Paragraph 10. Broker shall be deemed to be a third-party beneficiary of this paragraph 10.

11. Attorney’s fees (If any party or the Broker named herein brings an action to enforce the terms hereof or to declare rights hereunder, the prevailing party in any such action, on trial and appeal, shall be entitled to his reasonable attorney’s fees to be paid by the losing party as fixed by the Court. The provision of this paragraph shall inure to the benefit of the Broker named herein who seeks to enforce a right hereunder.

12. Additional Provisions. (If there are no additional provisions draw a line from this point to the next printed word after the space left here. If the additional provisions place the same here.)

Addendum to Standard Industrial Sublease, paragraphs 13 through 25, exhibits A and B.

If this Sublease has been filled in it has been prepared for submission to your attorney for his approval. No representation or recommendation is mode by the real estate broker or its agents or employees as to the legal sufficiency, legal effect, or tax consequences of this Sublease or the transaction relating thereto.

Executed at San Diego, Calif.		Copper Mountain Networks Inc.
on (date)	_____________	By	/s/ Joe Lynch
address	3931 Sorrento Valley Blvd.	By	Joe Lynch, V.P. Operations
	San Diego CA 92121 attn: Joe Lynch		“Sublessor” (Corporate Seal)
Executed at	San Diego, Calif.	Vidimedix Corporation
on (date)	Nov. 8, 1997	By	/s/ Philip W. Faris Jr.
address	12707 HIGH BLUFF DR., Site 200	By	Philip W. Faris Jr., President & CEO
	SAN DIEGO, CA 92130	“Sublessee” (Corporate Seal)
Executed at		RG Harris Co., Harris Family Revocable Trust
on		By
address	31479 Pacific Coast Hwy	By
	PO Box 2882
	Malibu, CA 90265
	Attn: Henry Workman	“Master Lessor” (Corporate Seal)
Executed at
on
address
			“Guarantors”

For these forms call the American Industrial Real Estate Association, (213) 687-8777

ADDENDUM TO SUB-LEASE DATED DECEMBER 1, 1997 BETWEEN COPPER MOUNTAIN NETWORKS, INC. AS SUBLESSOR AND VIDIDMEDIX CORPORATION AS SUBLESSEE FOR THE APPROXIMATELY 6,935 SQUARE FOOT OFFICE / R&D PREMISES LOCATED IN A PORTION OF THE BUILDING AT 3931 SORRENTO VALLEY BOULEVARD, SAN DIEGO CALIFORNIA, 92126.

13. PREPAID RENT / SECURITY DEPOSIT: Upon Sublease execution, Sublessee to provide Sublessor with a check in the amount of $29,127 which represents first month’s rent of $7,282; a standard security deposit equal to $7,282 and an additional security deposit of $14,564 which will be applied towards rent due during the last two (2) months of the Sublease term.

14. UTILITIES / JANITORIAL: This Sublease is a full service sublease pursuant to which Sublessee will only be responsible for rent as set forth in Section 4, security system fees as set forth in Section 18 and janitorial expenses which Sublessee will pay for directly. Sublessor will pay at its sole cost all other expenses associated with the Premises including, without limitation, utilities, Property Operating Expenses (as defined in the Master Lease) and expenses associated with the repair and maintenance of the Premises (unless such expenses are necessitated by the gross negligence or willful misconduct of Sublessee or its employees, agents or officers).”

15. CONDITION OF PREMISES: Sublessee to take the Premises in “as is” condition, with the exception of the following items:

a) All existing HVAC, electrical, plumbing, lighting and building systems to be in good working order.

b) Sublessor to deliver the Premises in broom-clean condition.

c) Sublessor at Sublessor’s cost to have a phone room constructed per the floor plan in Exhibit A.

d) Sublessor to provide 60 phone jacks to the phone room which it will construct at its sole cost, and as shown in Exhibit A. Sublessor to bear the cost of running phone lines to the private offices and to one location in the open area. Sublessee to be responsible for all other distribution of wiring.

e) Sublessor agrees to reconnect all Category “5” wiring to private offices in the Premises and to one location in the open area portion of Premises as shown in Exhibit A. Sublessee to be responsible for all other distribution of such wiring.

16. EARLY TERMINATION OF SUBLEASE: Sublessor may have a one (1) time option to unilaterally terminate the Sublease after the fourteenth (14^th) month of the Sublease term providing that Sublessor does the following:

a) Sublessor must provides to Sublessee at least 153 days prior written notice (not later than September 1, 1998) that it is exercising its right to terminate the Sublease at the end of the 14^th month, and;

b) Pays to Sublessee a cancellation fee of $10,000 per month, pro-rated for the time remaining on the Sublease term, with a maximum fee to Sublessor of $30,000. The parties agree that such amount is a reasonable sum to compensate Sublessor for the damages it wound incur, which damages are impracticable to estimate as a result of such early termination.

c) If after receiving written notice from Sublessor of its intent to terminate early, Sublessee at Sublessee’s option may terminate the lease no less than 30 days from its receipt of written notice, in which case Sublessor will pay Sublessee the amounts described in subsections 16(b) and 16(d).

d) Reimburses Sublessee $21,845 (subject to the provisions contained in paragraph 5 (Security Deposit) of the Sublease.

17. DELAY IN COMMENCEMENT: In paragraph 3.2 of the Sublease, in line 4, “sixty (60) days” shall be deleted and replaced with “ten (10) days”. In line 5, “ten (10) days shall be deleted and replaced with “five (5)” days.

18. SECURITY SYSTEM: Sublessor shall provide Sublessee with service from the existing security system and shall submit invoices to Sublessee for the actual costs of the security system relating to the Premises. Sublessee will promptly pay such invoices provided, however, Sublessee will not be obligated to pay in excess of $50 per month for the security system service.

19. FIRST RIGHT OF REFUSAL TO EXTEND LEASE: Provided that Sublessor does not exercised its early termination right set forth in Section 16 above, Sublessee shall be given the first right of refusal to renew or extend the Sublease term, for a term commensurate with the term of the Master Lease and any extensions thereof. Terms and conditions of any extension period subject to mutual agreement among the parties.

20. BUILDING SIGNAGE: Sublessor will display its sign and temporary banners on the north end of the building facing Vista Sorrento Parkway and at the entry to its Premises. Sublessee shall be allowed to display its sign on the north end of the building facing Vista Sorrento Parkway and at the entrance to its Premises to the extent its signage does not conflict with Sublessor’s signage and subject to prior approval of Sublessor, and subject to any consent required by Master Lessor in the Master Lease and any approval required by the city of San Diego.

21. PARKING: Sublessor to be entitled to 28 parking spaces on an unreserved and un-exclusive basis.

22. SUBLESSOR’S OBLIGATIONS: Sublessor shall fully perform all of its obligations under the Master Lease to the extent Sublessee has not expressly agreed to perform such obligations under the Sublease. Sublessor, with respect to the obligations of Master Lessor under the Master Lease, shall use Sublessor’s diligent good faith efforts to cause Master Lessor to perform such obligations for the benefit of Sublessee.

23. ASSIGNMENT OF RIGHTS: Sublessor hereby assigns to Sublessee all warranties given and indemnities made by Master Lessor to Sublessor under the Master Lease which would reduce Sublessee’s obligations hereunder, and shall cooperate with Sublessee to enforce all such warranties and indemnities.

24. HAZARDOUS MATERIALS: To the best knowledge of Sublessor, no hazardous materials, other than normal cleaning materials, petroleum products in vehicles, etc., as defined by federal, state or local laws, are present in or about the Premises and no action, proceeding, or claim is pending or threatened concerning any hazardous materials or pursuant to any laws. Sublessor shall indemnify, defend, protect and hold Sublessee, its agents, officers, directors and shareholders, harmless from and against all claims, actions, losses, costs, damages, liabilities (including, without limitation, sums paid in settlement of claims), and expenses (including, without limitation, reasonable attorneys’ and consultants’ fees, investigation fees and litigation expenses), due to Sublessor’s release or emission of hazardous materials in or about the Premises. Sublessee shall indemnify, defend, protect and hold Sublessor, its agents, officers, directors and shareholders, harmless from and against all claims, actions, losses, costs, damages, liabilities (including, without limitation, sums paid in settlement of claims), and expenses (including, without limitation, reasonable attorneys’ and consultants’ fees, investigation fees and litigation expenses) due to Sublessee’s release or emission of Hazardous Materials in or about the Premises.

25. MISCELLANEOUS CHANGES TO SUBLEASE: The Sublease Agreement shall be modified by the following miscellaneous changes:

Paragraph 2: At the end of the inserted language: “the northwest end of building” insert: “as shown on Exhibit A attached hereto.”

Paragraph 5: In the second to the last line of this paragraph after the words: “at the expiration”, insert the words: “or early termination”.

Paragraph 7.3: In the first line after the words: “under this Sublease shall”, replace the word “be” with the word “include”.

In the second to the last line of this paragraph the words “Lessor” and “Lessee” shall be deleted and replaced with the words “Landlord” and “Tenant” respectively.

Paragraph 7.4: In the third line after the words: “the Master Lease”, insert the words: “as such obligations relate to the Premises”.

In the blank lines provided as the end of this paragraph, insert the following: “Sections 1.1, 2.1, 2.3 and 2.4, Article 3 (except subparagraphs 3.3 and 3.4 with respect to Base Monthly Rent only), Sections 5.1(a), 5.2,”.

Paragraph 7.7: In the second to the last line of this paragraph after the words: “damages, claims or demands”, insert the words: “including reasonable attorneys’ fees and costs of suit”.

/s/ JL	/s/ PWF
SUBLESSOR’S	SUBLESSEE’S
INITIALS	INITIALS

EXHIBIT “A”

VIDIMEDIX CORPORATION

3931 SORRENTO VALLEY BLVD.

SAN DIEGO, CA

6935 SQUARE FEET

COOPER ROBERTS & CO.

628 BROADWAY SUITE 1000

SAN DIEGO CA 92101

619/233.3847

First Amendment to Sublease for 3931 Sorrento Valley Boulevard, San

Diego, California

Through an Assignment of the August 12, 1997 Master Lease for the Building at 3931 Sorrento Valley Road, San Diego, California, 92121, Neurothermia, Inc., a California corporation (“Assignee”), has assumed all of the rights and responsibilities from Copper Mountain Networks Inc., a California corporation, “Tenant” under such Master Lease and “Sublessor” under the December 1, 1997 Sublease with VidiMedix Corporation, a Texas corporation, the “Sublessee” under such Sublease. As a result of such Assignment Assignee hereby assumes the obligations of Sublessor in such Sublease. In order to further extend the Sublease, Assignee and Sublessee hereby agree to the following:

Term: Sublessee and Assignee hereby extend this Sublease through December 31, 2000 at the monthly Rent of $7,767.20, effective October 1, 1999.

Mutual Termination Right: On an ongoing basis at anytime after January 1, 2000 either party may serve the other party written notice of its Right to Terminate the Sublease. The effective date of termination must be at least four (4) months after the date that such written notice is given. In the event that neither party exercises the Right to Terminate then the Sublease shall continue until the December 31, 2000 expiration date.

Extension: The Sublease may be extended beyond the December 31, 2000 Expiration Date only by written mutual agreement.

Condition of Subleased Premises: Other than Assignee spending up to $5,000 to remedy an HVAC supply problem to the Subleased Premises by installing an additional HVAC unit to the Building, the Premises are accepted by Sublessee in their “as is” condition.

Commissions: There shall be no commissions paid by either party to The Irving Hughes Group, Inc. or any other broker regarding the extension of the Sublease.

Except as set forth herein, all of the terms and conditions of the Sublease remain unmodified and in full force and effect.

NEUROTHERMIA, INC.		VIDIMEDIX CORPORATION
By:	/s/ [Illegible]	By:	/s/ Philip W. Faris Jr.
Title:	VP OPERATIONS	Title:	President
Date:	7/15/99	Date:	7/15/99

SUBTENANT ESTOPPEL CERTIFICATE

This certificate is given to NEUROTHERMIA, INC., a California corporation (“Assignee”), in connection with the assignment of the interest of Copper Mountain Networks, Inc., a Delaware corporation (“Assignor”) in that certain Standard Industrial Sublease, dated December 1, 1997, between Assignee and the undersigned (“Subtenant”) relating to certain subleased premises located at 3931 Sorrento Valley Boulevard in San Diego, California (the “Subleased Premises”), as required by Section 13.5 of the Master Lease, as incorporated into the terms and conditions of the Sublease by Section 7.3 thereof. Subtenant hereby certifies as follows:

1. The undersigned is the Subtenant under the Sublease. Pursuant to the Sublease, Subtenant has subleased all of the Subleased Premises described in the Sublease and is in possession of the Subleased Premises.

2. The current fixed monthly rent is $7,282.00 payable monthly in advance. The next installment of rent in the amount is due on August 1, 1999. No rent has been prepaid by Subtenant except for current month, and Subtenant agrees not to pay rent more than one month in advance at any time. Subtenant has paid Assignor a security deposit of $21,845.00 pursuant to the terms of the Sublease.

3. The Sublease has been duly executed and delivered by, is a binding obligation of Subtenant and is in full force and effect. The Sublease is the entire agreement between Assignor and Subtenant pertaining to the Subleased Premises. There are no amendments, modifications, supplement, arrangements, side letters or understandings, oral or written, of any sort between Assignor and Subtenant, modifying, amending, altering, supplementing or changing the terms of the Sublease other than those described in Section 1 above.

4. To the best of Subtenant’s knowledge, all obligations of Assignor under the Sublease have been performed, and no event has occurred and no condition exists that, with the giving of notice or lapse of time or both, would constitute a default by Assignor under the Sublease. There are no offsets or defenses that Subtenant has against the full enforcement of the Sublease by Assignor, and Subtenant has no claims or causes of action against Assignor.

5. Subtenant is not in any respect in default under the Sublease and has not assigned, transferred or hypothecated the Sublease or any interest therein or subleased or consented to any further subletting of all or any portion of the Subleased Premises.

7. Subtenant has procured and maintained all insurance required of Subtenant by the Sublease and all premiums for such insurance have been paid.

8. Subtenant is not engaged in, nor does Subtenant permit, any use or occupancy of the Premises for the handling, manufacturing, treatment, storage, use, transportation, spillage, leakage, dumping, discharge or disposal (whether legal or illegal and whether accidental or intentional) of any hazardous substances, materials or wastes or any wastes regulated by any Federal, state or local law.

EXHIBIT D

9. Subtenant is not insolvent and is able to pay its debts as they mature, Subtenant has not declared bankruptcy or filed a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts. Subtenant has no present intentions of doing so, no such proceeding has been commenced against Subtenant seeking such relief and Subtenant has no knowledge that any such proceeding is threatened.

10. Subtenant has no notice of any assignment of the Sublease by the Assignor to anyone other than the Assignee, or any assignment, hypothecation or pledge of rents accruing under the Sublease by the Assignor (except to the Master Lessor set forth in the Master Lease, in accordance with the terms and conditions of the Master Lease).

11. The person executing the Subtenant Estoppel Certificate is authorized by Subtenant to do so and execution hereof is the binding act of Subtenant enforceable against Subtenant.

This Subtenant Estoppel Certificate is made to Assignee in connection with the prospective assignment of Assignor’s interest in the Sublease and the Subleased Premises. This Subtenant Estoppel Certificate may be relied on by Assignee in connection with such assignment.

Dated: July 14, 1999

SUBTENANT:
VIDIMEDIX, INC., a Texas corporation
By:	/s/ PHILIP W. FARIS, JR
Name:	PHILIP W. FARIS, JR
Its:	CEO

EXHIBIT D

2

EX-10.22

Exhibit 10.22

LEASE AMENDMENT NO. 1

This Lease Amendment No. 1 (hereinafter referred to as the “Amendment”) is entered into as of August 1, 1999 (the “Effective Date”) by and between R. G. HARRIS CO. and ELIZABETH G. HARRIS, HENRY K. WORKMAN and DON C. SHERWOOD, TRUSTEES OF THE HARRIS FAMILY REVOCABLE TRUST (collectively “Landlord”), COPPER MOUNTAIN NETWORKS, INC., a California corporation (“Tenant”), and NEUROTHERMIA, INC., a California corporation (“Assignee”), and is made with reference to the following facts:

A. Landlord and Tenant previously executed a written lease (the “Lease”) dated August 12, 1997 of and to those certain premises in San Diego, California, commonly known as and located at 3931 Sorrento Valley Boulevard (the “Premises”).

B. Concurrently herewith Tenant is assigning all of its right, title and interest in the Lease to Assignee, Assignee is assuming all of the duties and obligations of Tenant under the Lease and Landlord is consenting to the assignment. Landlord, Tenant and Assignee wish to amend the Lease in several respects, including, without limitation (i) expanding the use clause, (ii) extending the term of the Lease, (iii) revising the rent payable by Assignee under the Lease, and (iv) affirming, ratifying and confirming the Lease in all other particulars.

NOW, THEREFORE, in consideration of the terms, covenants and conditions of the Lease and this Amendment, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. The term of the Lease is hereby extended for an additional two (2) year period from October 31, 2001 to October 31, 2003.

EXHIBIT A

1

2. The “Use” clause set forth in Section 1.1 of the Lease is hereby deleted and the following is substituted in its place and stead:

“Use: Office, research and development, light assembly, small machine shop that is related to Tenant’s other uses of the Leased Premises, engineering and other related legal uses.”

3. The “Base Monthly Rent” clause set forth in Section 1.1 of the Lease is hereby deleted and the following is substituted in its place and stead:

“Base Monthly Rent: The term “Base Monthly Rent” shall mean the following:

October 1, 1999 - October 31, 1999	21,216.00
November 1, 1999 - October 31, 2000	22,064.64
November 1, 2000 - October 31, 2001	22,947.23
November 1, 2001 - October 31, 2002	26,400.00
November 1, 2002 - October 31, 2003	27,600.00

4. Landlord acknowledges that all existing improvements within the Leased Premises were approved by Landlord pursuant to the provisions of Section 6.1 of the Lease and that the existing improvements will remain as a part of the Leased Premises and

2

will not be removed at the expiration or sooner termination of the Lease. Assignee agrees, at Assignee’s sole cost and expense, to undertake any and all improvements to the bathrooms at the Leased Premises (with the exception of the bathroom improvements in the portion thereof currently subleased) in order to comply with all current ADA requirements, and to construct such improvements promptly upon taking possession of the Leased Premises. The construction of any improvements, alterations or modifications of the Leased Premises by Assignee will only be made in accordance with the provisions of Section 6.1 of the Lease. Landlord may only require the removal of such improvements by Assignee if Assignee is so notified in writing at the time the improvements are consented to in writing by Landlord rather than upon completion of the improvements as provided in Section 2.6 of the Lease.

5. Assignee and Landlord agree that Assignee may use Biostruct and Ninteman Construction and/or J. B. Riha Corp. as contractors for construction of its improvements, alterations or modifications.

6. Landlord, at Landlord’s expense, shall repair the exterior concrete walkways that have been damaged by tree roots and will trim and/or remove any such tree roots, as necessary, and cause such walkways to comply with the regulations and requirements of the Americans With Disabilities Act.

7. Subject to the provisions of the Lease and compliance with all applicable laws, ordinances and governmental

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regulations, Assignee may install a sign on the building top of the Leased Premises subject to Landlord’s written approval which will not be unreasonably withheld, delayed or conditioned. Any such approved signage shall be removed by Assignee at the expiration or earlier termination of the Lease and Assignee, at Assignee’s expense, shall pay for the cost of repair of all damage resulting from the installation of such signage and the cost of restoring the roof to the condition that it was in prior to the installation of such signage.

8. The letter of credit referred to in Section 3.7 of the Lease shall be cancelled only after the delivery by Assignee to Landlord of an irrevocable standby letter of credit in a form reasonably satisfactory to Landlord from an issuer reasonably satisfactory to Landlord in the initial amount of $100,000 as additional security for the performance by Assignee of its obligations under this Lease. Such letter of credit shall be delivered by Assignee concurrent with the execution of this Amendment. Additionally, Landlord shall deliver to Assignor the original irrevocable standby letter of credit No. SVB97IS0758 dated October 31, 1997 along with an executed letter addressed to Silicon Valley Bank releasing such right. Landlord may draw down funds from the letter of credit as may be necessary to cure any default by Assignee in the payment of any sums or amounts due under the Lease or for any purpose for which the security deposit may be applied pursuant to Section 3.6 of the Lease. Provided Assignee has not been in default of any of its obligations under

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the Lease, the face amount of such letter of credit may be reduced annually by $25,000 on November 1st of each year commencing November 1, 2000.

9. That certain Standard Industrial Sublease dated December 1, 1997 (the “Sublease”) by and between Tenant, as sublessor, and VidiMedix Corp., a Texas corporation as sublessee, relative to approximately 6,935 rentable square feet of the Leased Premises as more specifically described therein, shall remain in full force and effect and Assignee shall assume all obligations and succeed to all right, title and interest in the Sublease, as successor sublessor.

10. Exhibit “B” of the Lease is deleted in its entirety and Exhibit “B” to this Amendment shall be substituted in its place and stead. The use of such Hazardous Material by Assignee shall be in conformance with all applicable laws and shall be subject to all of the provisions of Article 16 of the Lease.

11. The “Termination Option” referred to in Section 2.3 of the Lease shall be deleted in its entirety.

12. Section 13.8 of the Lease shall be supplemented with the addition of the following address for Assignee for the purposes of receipt of notice regarding the Lease:

Neurothermia, Inc.,

a California corporation

3931 Sorrento Valley Boulevard

San Diego, California 92121

Attn: Vice President Operations

13. Article 15 of the Lease is hereby deleted in its entirety.

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14. The effectiveness of this Lease Amendment No. 1 and the Assignment, Assumption and Consent being executed concurrently herewith and the delivery of the related letter of credit by Assignee concurrently herewith is conditioned upon Landlord being able to obtain from all lenders of record a Non-Disturbance Agreement in a form reasonably acceptable to Assignee on or before July 30, 1999. In the event that Landlord is unable to obtain such a Non-Disturbance Agreement in a form reasonably acceptable to Assignee from all lenders of record on or before July 30, 1999, this Lease Amendment No. 1 and the Assignment, Assumption and Consent executed concurrently herewith shall be null and void and of no force or effect and the rights and obligations of the parties shall be determined as if such documents had never been entered into by the parties hereto.

15. All the terms, covenants and conditions of the Lease, except as specifically modified herein, shall remain in full force and effect.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the Effective Date.

TENANT:		LANDLORD:
COPPER MOUNTAIN NETWORKS, INC., a California corporation		R. G. Harris Co., a California corporation
By:		By:
Title:	President	Title:	President
By:
Title:	Secretary	Elizabeth G. Harris, Trustee of Harris Family Revocable Trust
		Henry K. Workman, Trustee of the Harris Family Revocable Trust
ASSIGNEE:
NEUROTHERMIA, INC.,
a California corporation		Don C. Sherwood, Trustee of the Harris Family Revocable Trust
By:
Title:	President
By:
Title:	Secretary

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EX-10.23

Exhibit 10.23

ASSIGNMENT, ASSUMPTION AND CONSENT

1. Assignment of Lease

FOR A VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, the undersigned COPPER MOUNTAIN NETWORKS, INC., a California corporation (“Assignor”) hereby assigns and transfers to NEUROTHERMIA, INC., a California corporation (“Assignee”), all of Assignor’s right, title and interest in and under that certain lease (the “Lease”) with a Lease Reference Date of August 12, 1997 by and between Assignor and R. G. HARRIS CO. and ELIZABETH G. HARRIS, HENRY K. WORKMAN and DON C. SHERWOOD, TRUSTEES OF THE HARRIS FAMILY REVOCABLE TRUST (“Landlord”), covering those certain premises (the “Premises”) located at 3931 Sorrento Valley Blvd., San Diego, California, as more particularly described in the Lease and that certain Sublease with VidiMedix Corporation dated December 1, 1997.

This assignment is made in connection with an agreement by and between Assignor and Assignee and in connection therewith, the undersigned:

(a) Agrees that the effectiveness of this assignment and the Assumption of Lease provided for herein are subject to the consent of Landlord; which consent is predicated upon satisfaction of the conditions set forth in Section 3 hereof.

(b) Assignor shall be released from Assignor’s liability for any of the obligations of the tenant under the Lease arising or occurring after the Effective Date.

(c) Assignor warrants that as of the Effective Date specified below there will be no uncured default on the part of Assignor pursuant to the Lease and agrees to indemnify and defend Assignee against any claims arising out of such a claimed default.

(d) Assignor shall deliver possession of the Premises to Assignee on or before August 2, 1999 (the “Date of Delivery”) but Assignor shall continue to pay all rent and the other sums due Landlord under the Lease until the Effective Date, as defined hereinbelow, except that Assignee shall pay utilities, janitorial and shall maintain insurance for the Premises from the Date of Delivery. In the event that the Date of Delivery occurs after August 2, 1999, Assignor shall reimburse Assignee for all rent and the other sums due Landlord subsequent to October 1, 1999, equal to the number of days that the Date of Delivery is delayed.

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(e) Assignor agrees that if Assignee spends at least $30,000.00 on tenant improvement construction, (including construction necessary to bring the existing bathrooms in that portion of the Premises not currently subleased into ADA compliance) then Assignor shall contribute $20,000.00 towards Assignee’s tenant improvement costs. If Assignee spends at least $40,000.00 on tenant improvement construction, (including construction necessary to bring the existing bathrooms in that portion of the Premises not currently subleased into ADA compliance) then Assignor shall contribute $30,000.00 toward Assignee’s tenant improvement costs (“Assignor’s Contribution”). Assignor shall deliver fifty percent (50%) of Assignor’s Contribution upon submission to Assignor by Assignee of an accepted bid for the tenant improvement construction. Assignor shall deliver the remaining portion of Assignor’s Contribution upon completion of the work and submission to Assignor by Assignee of copies of paid invoices showing the total amount expended for the tenant improvement construction. In no event shall Assignor’s Contribution exceed $30,000.00. Assignee shall be responsible for all other tenant improvement costs and Landlord shall have no responsibility therefor except as otherwise specifically provided in the Lease. Assignor hereby releases to Assignee any and all of Assignor’s claims to any prepayment or deposit held by any person or entity relating to the Premises or any leasehold improvements (including, without limitation, any utility deposits, performance and/or completion bonds, and the like). All such sums shall be held by such person or entity for the benefit of Assignee, subject to the provisions of the applicable agreement requiring such prepayment or deposit. Additionally, Assignor shall convey to Assignee prior to the Date of Delivery the full amount of the Security Deposit held by Assignor pursuant to the Sublease, in the amount of $21,845.00, which shall be held by Assignee in accordance with the terms and conditions of Section 5 of the Sublease.

(f) Assignor represents that to the best of its knowledge, the Premises and all building systems are in good working order and in good cosmetic condition. As of the date hereof and the Date of Delivery, Assignor represents and warrants that to the best of its knowledge: (a) Assignor is lawfully possessed of the lessee’s interest in and to the Lease and all of the improvements and alterations made by or for Assignor to the Premises, including, but not limited to, those certain furnishings, trade fixtures and equipment that will remain in the Premises after the Date of Delivery pursuant to the terms of the Lease, if any (the “Personal Property”), and the sublessor’s interest in and to that certain sublease with Vidimedix Corp. (the “Sublease”), which is in full force and effect and, to the best of Assignor’s knowledge, pursuant to which, the subtenant thereunder has no claim to any offset, defense or abatement of any amounts payable pursuant to such Sublease; (b) Assignor has the right and authority to assign its interest in the Lease, the

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Personal Property and the Sublease to Assignee (subject to the terms of the Lease and the Sublease); (c) the copy of the Lease attached hereto as Exhibit “B” is a true, full and correct copy of the Lease and the same has not been modified except as set forth herein; (d) the copy of the Sublease attached hereto as Exhibit “C” is a true, full and correct copy of the Sublease and the same has not been modified; (e) the Lease and the Sublease are in full force and effect; (f) Assignor is not in default under the Lease and, to the best of Assignor’s knowledge, Landlord is not in default thereunder, and Assignor is not aware of any event or existing condition which, with the giving of notice and/or the passage of time, would constitute such a default; (g) Assignor is not in default under the Sublease and, to the best of Assignor’s knowledge, Vidimedix Corp. (“Sublessee”) is not in default thereunder, and Assignor is not aware of any event or existing condition which, with the giving of notice and/or the passage of time, would constitute such a default; (h) Assignor’s interest in the Lease, the leasehold improvements (including without limitation the Personal Property), and the Sublease shall be delivered to Assignee free and clear of all liens, encumbrances and creditor’s rights held by any party claiming by, through or under Assignor, and (i) the Premises, and all portions thereof that Assignor is obligated to repair and maintain under the Lease, and the Personal Property, are in good operating condition and repair and, to the best of Assignor’s knowledge, free of any Hazardous Materials. Within two (2) weeks prior to the Date of Delivery, Assignor shall obtain from Sublessee and provide to Assignee an executed Estoppel Certificate from Sublessee in the form of Exhibit “D” attached hereto. Within forty-five (45) days following the Date of Delivery, Assignor shall, at Assignor’s sole cost and expense, remove all of its signage from the building in which the Premises are located and from any monuments of the surrounding property and restore any and all damage arising from such removal. If Assignor fails to timely remove its signage and repair such damages, Assignee shall have the right, but without any obligation, to remove such signage and perform such restoration work, and Assignor shall be obligated to reimburse Assignee for any actual and reasonable amount expended by Assignee in performing such work of removal and restoration within fifteen (15) days following delivery of written evidence of such payment by Assignee.

As between Assignor and Assignee, Assignor hereby assigns the Lease and Sublease to Assignee, and shall be responsible for the performance of all obligations of the tenant under the Lease and the sublessor under the Sublease that accrued prior to the Date of Delivery (with the exception of Assignor’s obligations to be performed after the date of Delivery as expressly set forth herein), for all liabilities arising from Assignor’s particular use of the Premises to the extent arising prior to the Date of Delivery and for all claims, costs, expenses and liabilities

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relating to Assignor’s material breach of any term, condition, covenant or agreement of the Lease or the Sublease to be performed by Assignor prior to the Date of Delivery, and Assignor agrees to indemnify and hold harmless Assignee from any claims, losses, costs or expenses (including reasonable counsel fees) suffered or incurred by Assignee arising out of or resulting from any failure by Assignor to perform any such obligations. To the extent Assignee is billed or otherwise becomes obligated to pay any amount attributable to any period prior to the Date of Delivery relating to the Lease, the Sublease, the Personal Property or the Premises, Assignor shall reimburse Assignee for such amounts no later than fifteen (15) days after delivery of written evidence that such amounts are attributable to such period of Assignor’s responsibility and have been paid by Assignee.

(g) Acknowledges that Assignor has read the disclaimer set forth in Section 4 and the general provisions set forth in Section 5 of this instrument and executes this instrument with full knowledge and acceptance of such sections, both of which are incorporated herein, including, but not limited to, Assignor’s consent to the terms and conditions of Lease Amendment No. 1, which shall amend the Lease with respect to this assignment.

(h) Concurrently with the execution of this Assignment, Assumption and Consent, Assignor shall pay to Landlord the sum of $500.00 toward Landlord’s attorneys’ fees and costs pursuant to Section 7.4(c) of the Lease.

(i) Upon execution of this Assignment, Assumption and Consent, Assignor shall pay to Assignee the sum of $21,845.00, which represents the Subtenant’s Security Deposit currently on deposit with Assignor.

(j) Upon the Effective Date, Assignor shall pay to Assignee its pro rata share of all rent received by Assignor from Subtenant for the month of October 1999.

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The effective date (“Effective Date”) of this Assignment, Assumption and Consent shall be October 2, 1999.

EXECUTED this 16^th day of July, 1999.

ASSIGNOR:		COPPER MOUNTAIN NETWORKS, INC.,
		a California corporation
		By	/s/ [Illegible]
			President
		By	/s/ [Illegible]
			Secretary
	Address:	10145 Pacific Heights Blvd, Suite 100
		San Diego, Ca 92121

2. Assumption of Lease

Assignee hereby accepts the foregoing assignment and assumes and agrees to be bound by and perform all obligations of the tenant pursuant to the Lease and this Assignment, Assumption and Consent arising on or after the Effective Date and to abide by all of the terms, provisions, covenants and conditions of the Lease and this Assignment, Assumption and Consent, including but not limited to those providing for the payment of Base Monthly Rent, Property Operating Expenses, additional rent and other charges.

As between Assignor and Assignee, Assignee hereby assumes the Sublease and shall be responsible for the performance of all obligations of the tenant under the Lease and the sublessor under the Sublease accruing from and after the Effective Date, for all liabilities arising from Assignee’s use of the Premises to the extent arising from and after the Date of Delivery and for all claims, costs, expenses and liabilities relating to Assignee’s material breach of any term, condition, covenant or agreement of the Lease or the Sublease to be performed by Assignee from and after the Date of Delivery, and Assignee agrees to indemnify, defend and hold harmless Assignor from any claims, losses, costs or expenses (including reasonable counsel fees) suffered or incurred by Assignor arising out of or resulting from any failure by Assignee to perform any such obligations.

The undersigned acknowledges and agrees that:

(a) Assignee has inspected the Premises and the building of which it forms a part and has received and read a copy of the Lease and is assuming the obligations of tenant pursuant to the Lease based upon Assignee’s own investigation and not upon any statements or representations of or on behalf of Assignor or Landlord.

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(b) In connection with the within transaction, no person has had any authority to make any representations on behalf of Landlord or Assignor except Landlord and Assignor concerning the Premises and/or the building of which it forms a part and such representations, if any, have not been relied upon by the undersigned.

(c) The effectiveness of this Assumption and the Assignment of Lease provided for herein are subject to the consent of Landlord, which consent is predicated upon satisfaction of the conditions set forth in Sections 3 and 5 of this instrument.

(d) There may be no further assignment or transfer of the Lease or subletting of the Premises, or any portion thereof, except upon the written consent of Landlord and/or as otherwise provided in the Lease.

(e) Except as provided in Amendment No. 1 to the Lease incorporated herein by Paragraph 5 hereof, there may be no change in the use of the Premises and no remodeling of or alterations to the Premises without, in each instance, the prior written consent of Landlord and in conformance with the terms of the Lease.

(f) Assignee agrees to save, indemnify, defend and hold Assignor harmless from and on account of any claims, demands, actions, losses, expenses and liabilities (including attorneys’ fees) of Assignor under the Lease or Sublease, arising after the Date of Delivery, and on account of, or arising out of, the obligations and liabilities of the Assignor so assumed by Assignee hereunder.

(g) Upon execution of this Assignment, Assumption and Consent, Assignee shall pay to Assignor the sum of $20,400.00 which represents Assignor’s Security Deposit currently on deposit with Landlord.

(h) Assignee has read the disclaimer set forth in Section 4 and the general provisions set forth in Section 5 of this instrument and executes this instrument with full knowledge and acceptance of such sections, both of which are incorporated herein.

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EXECUTED this 15^th day of July, 1999.

ASSIGNEE:	NEUROTHERMIA, INC.,
	a California corporation
	By	/s/ John Dobak
	Its	President
	By	/s/ [Illegible]
	Its	Secretary

3. Consent to Assignment

Landlord hereby consents to the foregoing Assignment and Assumption in accordance with the Lease by and between Landlord and Assignor. It is understood and agreed that:

(a) The foregoing consent is not a waiver of Landlord’s right to consent to or impose restrictions upon any future assignment or subletting.

The undersigned Landlord does hereby certify that (1) the copy of the Lease attached hereto as Exhibit “B” is a true, full and correct copy of the Lease and the Lease has not been modified or amended in any way; (2) the Lease is in full force and effect, and, to the best of Landlord’s knowledge, (i) neither party is in default thereunder, and (ii) nor do any circumstances exist which, upon notice and/or expiration of any applicable grace period, would constitute a default thereunder; (3) the payment of rent and all other amounts payable by Assignor under the Lease is current through the month of June, 1999;. and (5) the Landlord shall not require any of the leasehold improvements made in and to the Premises (excluding Personal Property which may be removed without permanent damage to the Premises), made by or on behalf of the Assignor or Sublessee as of the date hereof to be altered or removed by the holder of the lessee’s interest in and to the Lease upon the expiration or earlier termination of the Lease. Further, the undersigned Landlord does hereby represent and warrant that the Landlord holds record title to the premises demised under the Lease and that the Lease is subject to no underlying ground lease.

(b) Landlord releases Assignor from any liability for any of the obligations of the tenant under the Lease arising or occuring after the Effective Date.

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(c) Landlord holds no security or other deposit for or on behalf of Assignor except the sum of $20,400.00 and such security or other deposit shall be retained by Landlord and returned to Assignee in accordance with Section 3.6 of the Lease. Landlord shall have no liability to Assignor subsequent to the Effective Date relative to any such security deposit. Landlord hereby acknowledges Assignor’s release to Assignee of any and all of Assignor’s claims to any prepayment or deposit held by Landlord relating to the Premises or leasehold improvements (including, without limitation, any utility deposits, performance and/or completion bonds, and the like). All prepayments and deposits held by Landlord pursuant, to the Lease shall be held by Landlord for the benefit of Assignee, subject to the provisions of the Lease requiring such prepayment or deposit.

(d) The foregoing consent does not include a consent to the transfer of any renewal, extension or expansion rights, or any other special privileges or rights granted to tenant pursuant to the Lease, if any, and all such rights and privileges shall terminate upon the Effective Date.

(e) On October 1, 1999, Landlord shall pay a leasing commission of $9,720.00 to The Irving Hughes Group, Inc. and on January 1, 2000, Landlord shall pay an additional leasing commission of $9,720.00 to The Irving Hughes Group, Inc.

This consent shall become effective only upon the execution of a copy of this instrument by each party hereto and delivery of such fully executed copy to Landlord.

EXECUTED as of this 15^th day of July, 1999.

LANDLORD:
R. G. Harris Co., a California corporation
By:	/s/ [Illegible]
Title:	President
/s/ Elizabeth G. Harris
Elizabeth G. Harris, Trustee of the Harris Family Revocable Trust
/s/ Henry K. Workman
Henry K. Workman, Trustee of the Harris Family Revocable Trust
/s/ Don C. Sherwood
Don C. Sherwood, Trustee of the Harris Family Revocable Trust

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4. Disclaimer

THE ASSIGNOR AND ASSIGNEE NAMED IN SECTIONS 1 AND 2 OF THIS INSTRUMENT EACH ACKNOWLEDGE THAT THE LEASE MAY PROVIDE FOR THE PAYMENT OF ADDITIONAL RENT PERIODICALLY ON AN ESTIMATED BASIS (INCLUDING PROPERTY OPERATING EXPENSES) WITH ADJUSTMENT TO ACTUAL AMOUNTS DUE AS SPECIFIED IN THE LEASE. NOTWITHSTANDING ANY ESTIMATE OR ALLOCATION OF SUCH AMOUNTS PROVIDED BY LANDLORD TO ASSIGNOR AND ASSIGNEE TO FACILITATE THE TRANSFER PROVIDED FOR HEREIN, ASSIGNOR AND ASSIGNEE UNDERSTAND AND ACKNOWLEDGE THAT (1) ANY SUCH ESTIMATE OR ALLOCATION IS ONLY AN ESTIMATE BY LANDLORD AND IS NOT INTENDED AS AND SHALL NOT BE CONSTRUED AS A LIMITATION OR CEILING UPON THE ACTUAL AMOUNTS WHICH MAY BE DUE, (2) AS RESPECTS LANDLORD, ASSIGNEE SHALL BE SOLELY RESPONSIBLE FOR ANY ADDITIONAL AMOUNTS OF ADDITIONAL RENT DUE TO LANDLORD BY VIRTUE OF SUCH ADJUSTMENTS AND SHALL BE SOLELY ENTITLED TO ANY REFUNDS OR CREDITS RESULTING FROM SUCH ADJUSTMENTS AND (3) ANY PRORATION OF ANY SUCH AMOUNTS BETWEEN ASSIGNOR AND ASSIGNEE SHALL BE STRICTLY BETWEEN THEM, AND LANDLORD NEED NOT BE CONCERNED THEREWITH.

5. General Provisions

(a) If any party hereto commences any action against any other party hereto arising out of or in connection with this instrument, or the Lease, the prevailing party or parties shall be entitled to recover from the losing party or parties reasonable attorneys’ fees as determined by the court as well as costs of suit.

(b) Any notice, demand, request, consent, approval or communication that any party hereto desires or is required to give to any other party or parties hereto shall be in writing and either served personally or sent by prepaid, first class mail properly addressed and deposited in the State of California to the address appearing below the signatures of each party hereto. Notice shall be deemed communicated three business days after the time of mailing if mailed as provided in this paragraph.

(c) Except as otherwise provided herein, Assignor and Assignee agree that Landlord has no liability for any fees or commissions to any real estate broker or agent in connection with the assignment and assumption of the Lease. All such fees and commissions shall be the responsibility of Assignor and Assignee.

(d) This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors in interest.

(e) In the event of any conflict between the terms of this instrument and the terms of the Lease, the terms of the Lease shall control.

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(f) This Assignment, Assumption and Consent is conditioned upon Assignee’s and Landlord’s subsequent execution of Lease Amendment No. 1, a copy of which is attached hereto as Exhibit “A”. In the event that Landlord and Assignee fail to execute Lease Amendment No. 1 on or before July 30, 1999, and unless Landlord and Assignee agree otherwise in writing, this Assignment, Assumption and Consent shall become null and void and none of the parties hereto shall have any continuing obligation hereunder.

(g) Prior to the Date of Delivery, the Assignee’s address for all notices and other communications under the Lease shall be:

NEUROTHERMIA, INC.

6199 Cornerstone Court East, Suite 106

San Diego, CA 92121

Attn: Vice President Operations

and following the Date of Delivery, the Assignee’s address for all notices and other communications under the Lease shall be:

NEUROTHERMIA, INC.

3931 Sorrento Valley Boulevard

San Diego, CA 92121

Attn: Vice President Operations

with a copy in each case to:

Brobeck, Phleger & Harrison, LLP

550 West C Street, Suite 1300

San Diego, CA 92101

Attn: W. Scott Biel, Esq.

(h) As an inducement to enter into this Assignment and the attached Amendment, each of Assignor, Assignee and Landlord represents and warrants to the other that, except for David Marino of The Irving Hughes Group, Inc. (the “Broker”), such party has had no dealings with any real estate broker or other person in respect to this Assignment or the attached Amendment. Each of the parties shall indemnify and hold harmless the others from and against all damages or claims that may be asserted by any person with whom the indemnifying party has purportedly dealt. As between Assignor and Assignee, Assignor acknowledges and agrees that Assignor shall pay all fees due to the Broker arising out of this Assignment. Landlord acknowledges and agrees that Assignee shall have no obligation to pay any fees due to the Broker arising out of the attached Amendment unless Assignee has otherwise agreed with the Broker.

(i) This instrument shall be construed and interpreted in accordance with the laws of the State of California.

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(j) This instrument may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement after each party has executed such a counterpart.

ASSIGNOR:		LANDLORD:
COPPER MOUNTAIN NETWORKS, INC., a California corporation		R. G. Harris Co., a California corporation
By:	/s/ [Illegible]	By:	/s/ [Illegible]
Title:	President	Title:	President
By:	/s/ [Illegible]	/s/ Elizabeth G. Harris
Title:	Secretary	Elizabeth G. Harris, Trustee of the Harris Family Revocable Trust
ASSIGNEE:		/s/ Henry K. Workman Henry K. Workman, Trustee of the Harris Family Revocable Trust
NEUROTHERMIA INC., a California corporation		/s/ Don C. Sherwood Don C. Sherwood, Trustee of the Harris Family Revocable Trust
By:	/s/ John Dobak
Title:	President
By:	/s/ [Illegible]
Title:	Secretary

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EX-10.24

Exhibit 10.24

LEASE AMENDMENT NO. 2

This Lease Amendment No. 2 (hereinafter referred to as the “ Amendment”) is entered into as of October 16, 2002, by and between E.G. SIRRAH, LLC, a California limited liability company (“Landlord”), as successor-in-interest to R.G. HARRIS CO. and ELIZABETH G. HARRIS, HENRY K. WORKMAN and DON C. SHERWOOD, TRUSTEES OF THE HARRIS FAMILY REVOCABLE TRUST (collectively “Original Landlord”), and INNERCOOL THERAPIES, INC., a California corporation formerly known as NEUROTHERMIA, INC., (“Tenant”), and is made with reference to the following facts:

A. Original Landlord and COPPER MOUNTAIN NETWORKS, Inc., a California corporation (“Original Tenant”) previously executed a written lease dated August 12, 1997 (the “Original Lease”) of and to those certain premises in San Diego, California, commonly known as and located at 3931 Sorrento Valley Boulevard (the “Premises”).

B. Effective as of October 2, 1999, Original Tenant assigned all of its right, title and interest in the Original Lease to Tenant, Tenant assumed all of the duties and obligations of Original Tenant under the Original Lease and Landlord consented to the assignment and released Original Tenant from any liability for any of the tenant’s obligations under the Original Lease occurring after the effective date of said assignment. The Original Lease was amended by that certain Lease Amendment No. 1 dated as of August 1, 1999 (“First Amendment”) whereby Original Landlord, Original

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Tenant and Tenant amended the Lease in several respects, including, without limitation (i) extending the term of the Original Lease, (ii) expanding the use clause of the Original Lease, (iii) revising the rent schedule payable by Assignee under the Original Lease, (iv) accepting the existing improvements as part of the Premises to be surrendered by Tenant, and (v) revising the letter of credit obligations under the Original Lease. The Original Lease as amended by the First Amendment is hereinafter referred to as the “Lease.”

C. Landlord and Tenant now desire to further amend the Lease as set forth in this Amendment, including, without limitation (i) extending the term of the Lease, (ii) establishing the rent payable during the extended term, (iii) providing Tenant with an improvement allowance to refurbish the Premises, and (iii) revising the letter of credit obligations under the Lease.

NOW, THEREFORE, in consideration of the terms, covenants and conditions of the Lease and the Amendment, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1. Defined Terms. All capitalized terms not defined herein shall have them meanings set forth in the Lease, as amended.

2. Term. The term of the Lease is hereby extended for an additional four (4) year period from October 31, 2003 to October 31, 2007.

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3. Rent. The “Base Monthly Rent” clause set forth in Section 1.1 of the Lease is hereby deleted and the following is substituted in its place and stead: The term “Base Monthly Rent” shall mean the following:

November 1, 2002 – October 31, 2003	$	22,800 NNN
November 1, 2003 – October 31, 2004	$	24,000 NNN
November 1, 2004 – October 31, 2005	$	24,000 NNN
November 1, 2005 – October 31, 2006	$	25,200 NNN
November 1, 2006 – October 31, 2007	$	25,200 NNN

4. Tenant Improvement Allowance. Landlord shall provide to Tenant a tenant improvement allowance of One Hundred Thousand Dollars ($100,000), which Tenant may use to make improvements to the Premises (the “Refurbishment Allowance”), which shall be subject to Landlord’s approval. Landlord’s approval rights and obligations with respect to such improvements shall be consistent with the terms and conditions set forth in Section 6.1 of the Lease, and such improvements shall not include trade fixtures or personal property. The construction of any improvements, alterations or modifications of the Premises by Assignee shall be made in accordance with the provisions of Section 6.1 of the Lease. The terms and conditions of Section 2.5 of the Lease relating to the payment of the Tenant Improvement Allowance shall be applicable to payment of the Refurbishment Allowance payable hereunder, except that the second to the last sentence of Section 2.5 is hereby deleted. Tenant shall be required to incur the improvement costs and fees to be reimbursed by Landlord pursuant to the Refurbishment Allowance by October 31, 2005, and to the extent that Tenant has not incurred such improvements costs and fees by such deadline (or has not submitted invoices evidencing the expenditure of such costs and fees within sixty (60) days following such date), any unused portion of the Refurbishment Allowance shall cease to be available to Tenant for reimbursement and Landlord shall have no liability to Tenant for any costs or fees of improvements incurred by tenant after such deadline. Contrary to the terms of Section 2.6 of the Lease, Landlord may only require the removal of such improvements by Assignee if Assignee is so notified in writing at the time the improvements are consented to in writing by Landlord.

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5. Letter of Credit. Provided Tenant has not been in default of any of its obligations under the Lease beyond all applicable notice and cure periods set forth therein, the amount of the letter of credit referred to in Section 3.7 of the Lease shall be reduced as of October 31, 2002 to $25,000, and Tenant may provide Landlord with a replacement letter of credit in such amount as of such date, and such letter of credit shall be eliminated entirely as of October 31, 2003.

6. Broker’s Commission. Upon mutual execution of this Second Amendment to Lease, Landlord shall pay a leasing commission to Irving Hughes for the procurement of this Second Amendment to Lease of three percent (3%) for the value of the Basic Monthly Rent beginning with November 1, 2003 through October 31, 2007. Tenant and Landlord warrant to one another that they have had no dealings with any broker or agent in connection with this Second Amendment other than Irving Hughes and each of them, respectively, covenants to pay, hold harmless and indemnify the other party from and against any and all costs, expense or liability for any compensation, commissions and charges claimed by any broker or agent pursuant to any claimed representation of the indemnifying party other than Irving Hughes with respect to this Second Amendment of Lease or the negotiation thereof, or arising from a breach of the foregoing warranty.

7. Ratification. The Lease as amended by this Second Amendment embodies the entire agreement between the parties relative to the subject matter hereof, and there are no other oral or written agreements between the parties; nor any representations made by either party relative to the subject matter hereof, which are not expressly set forth herein. The effectiveness of this Second Amendment is expressly conditioned upon the ratification hereof by Tenant’s board of directors on or before November 30, 2002, and none of the terms hereof or obligations hereunder shall be effective (including, but not limited to, the reduction in rent payable by Tenant or of the letter of credit held by Landlord) unless and until this Second Amendment is so ratified by Tenant’s board. If Tenant’s board of directors so ratifies this Second Amendment,

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(1) it shall be deemed incorporated in the Lease by reference as of the date of this Second Amendment first set forth above, (2) any rent payment by Tenant prior to such ratification shall be adjusted to reflect such retroactive effect, and (3) the amount of the letter of credit shall be immediately reduced pursuant to Section 5 above. If Tenant delivers notice to Landlord by November 30, 2002 that Tenant’s board of directors has refused to ratify this Second Amendment, it shall become null and void as of the date of such notice and the Lease shall continue in full force and effect and unaffected by this Second Amendment. Except as herein specifically amended, the Lease and all of the terms, covenants and provisions thereof are hereby ratified and reaffirmed and shall remain in full force and effect. In the event of any inconsistencies between this Second Amendment and the Lease, the terms and provisions of this Second Amendment shall govern and take precedence

8. Counterparts. This Second Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall comprise but a single instrument. Delivery of an executed counterpart of a signature page to this Second Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Second Amendment.

IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment effective as of the Effective Date.

LANDLORD:		TENANT:
E.G. SIRRAH, LLC,		INNERCOOL THERAPIES, INC.,
a California limited liability company		a California Corporation
By:	/s/ Henry K. Workman, Jr	By:	/s/ John Dobak
	Henry K. Workman, Jr	Title:	President
	Managing Member
		By:	/s/ [Illegible]
		Title:	Secretary

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EX-10.25

Exhibit 10.25

SUBLEASE

1. PARTIES.

This Sublease, dated August 30, 2005 is made between Innercool Therapies, Inc., formerly known as Neurothermia, Inc. (“Sublessor”), and ACADIA Pharmaceuticals Inc. (“Sublessee”).

2. MASTER LEASE.

By way of an assignment, Sublessor is the lessee under a written lease dated August 12, 1997 (“Lease Agreement”), as amended by the Assignment, Assumption and Consent with an effective date of October 2, 1999, Lease Amendment No. 1 dated as of October 2, 1999 and Lease Amendment No. 2 dated as of October 16, 2002 (collectively, the “Master Lease”), wherein Trustees of the Harris Family Revocable Trust (“Lessor”) leased to Sublessor the real property located in the City of San Diego, County of San Diego, State of California, described as: 3931 Sorrento Valley Boulevard, San Diego, California, 92121 (“Master Premises”). The Assignment, Assumption and Consent (“Assignment Agreement”) was entered into by and between Copper Mountain Networks, Inc. and Neurothermia, Inc. having an Effective Date of October 2, 1999.

3. PREMISES.

Sublessor hereby subleases to Sublessee on the terms and conditions set forth in this Sublease the following portion of the Master Premises: approximately 6,602 rentable square feet in a portion of the Building (the “Premises”) as shown on Exhibit “A.” The Suite address for the Premises shall be Suite B. For the Sublease Term, Sublessor also grants to Sublessee an irrevocable license to enter and use shared areas in the IT/Telephone and Utilities rooms, identified on Exhibit A as “Shared Area”. Without limiting Sublessee’s rights with respect to the Shared Area, Sublessee may enter the Shared Area to install and maintain equipment in and to the Shared Area. Sublessor shall maintain the Shared Area for its current use and function.

4. WARRANTY BY SUBLESSOR.

Sublessor warrants and represents to Sublessee that the Master Lease is in full force and effect and that Sublessor is not now, and as of the commencement of the Term hereof will not be, in default or breach of any of the provisions of the Master Lease, and that Sublessor has no knowledge of any claim by Lessor, as defined in the Master Lease, that Sublessor is in default or breach of any of the provisions of the Master Lease. Attached hereto as Exhibit “B” is a full and correct copy of the Master Lease.

1.

5. TERM.

The Sublease Term shall commence (the “Commencement Date”) upon Lessor’s consent to this Sublease and delivery of possession of the Premises to Sublessee, estimated to be September 1, 2005. The actual Commencement Date shall be confirmed in writing between Sublessor and Sublessee when all prerequisite events have occurred. The Sublease shall expire coterminous with the Master Lease on October 31, 2007.

6. RENT.

The triple net Rent (referred to herein as “Base Rent”) for the Sublease Term shall be $1.10 per rentable square foot and shall remain flat for the Term, (i.e., the rent shall be approximately $7,262.20 per month).

Rent shall be made payable to Innercool Therapies at 3931 Sorrento Valley Boulevard, San Diego, CA 92121 by the first of each month. Any payment of Rent shall be delinquent if not received by the Sublessor by the first day of the month. If payment is not received before the close of normal business hours on the fifth day of the month, Sublessee agrees to pay, upon Sublessor’s written demand, a late fee as provided in the Master Lease, and any such failure shall be a default, subject to the terms of the Master Lease as incorporated herein.

7. ADDITIONAL PROVISIONS:

a) Tenant Improvements: Sublessee shall fund, at its sole cost and expense, all tenant improvements which Sublessee elects to install in order to improve the Premises, provided, however, Sublessee must submit all plans and construction costs to Sublessor and Lessor for approval prior to commencing the improvement pursuant to Article 6 of the Lease Agreement. Sublessee may construct a conduit (in accordance with the specifications set forth in Exhibit B hereto) between the Premises and 3911 Sorrento Valley Boulevard, solely to provide connectivity for the Sublessee’s phone, computer and other information technology needs.

b) Use: The Premises may be used for general office, biomedical research and development, manufacturing and such other uses as permitted under existing zoning.

2.

c) Furniture, Fixtures and Equipment: All fixed improvements previously made by Sublessor including, but not limited to, power drops, security system wiring, card access door readers, IT wiring, all furniture and systems furniture shall remain in place for Sublessee’s use during the Term without charge. All artwork shall be removed by Sublessor.

d) Utilities and HVAC: Sublessee shall be responsible for monthly utilities in the amount of $.15 per rentable square foot. The monthly utilities shall be approximately $990.30 per month, which shall be payable to Sublessor by the first of each month. Sublessee shall also be responsible for its share of the costs of Sublessor’s maintenance of utility equipment serving the Premises, including all HVAC equipment. Any payment of monthly utilities shall be delinquent if not received by the Sublessor by the fifth day of the month, and Sublessee agrees to pay, upon Sublessor’s written demand, a late fee as provided in the Master Lease, and any such failure shall be a default, subject to the terms of the Master Lease as incorporated herein.

e) Taxes, Insurance & Common Area Costs: Sublessee shall be responsible for its prorata share of taxes, insurance, and common area costs (“Operating Expenses”) payable by Sublessor under the Master Lease. The total cost is currently estimated at $4,990.00 per month, and Sublessee shall be responsible for 30% of this, or $1,497.00 per month, which shall be payable to Sublessor by the first of each month. Any payment of estimated Operating Expenses shall be delinquent if not received by the Sublessor by the fifth day of the month, and Sublessee agrees to pay, upon Sublessor’s written demand, a late fee as provided in the Master Lease, and any such failure shall be a default, subject to the terms of the Master Lease as incorporated herein. Upon any reconciliation of Property Operating Expenses under the Master Lease, Sublessor and Sublessee shall perform a comparable reconciliation hereunder as provided in Paragraph 3.2 of the Master Lease.

f) Termination Right: In the event that by December 31, 2005, Sublessee is unable to reach a commercially reasonable agreement on a lease extension with Sublessee’s current landlord for the premises located at 3911 Sorrento Valley Boulevard, San Diego, CA 92121, Sublessee shall have a right to terminate this Sublease following not less than thirty (30) days prior written notice to Sublessor. Should Sublessee exercise such right, Sublessee shall pay a release payment equal to the security deposit to Sublessor within thirty (30) days of such notice.

3.

g) Parking: Sublessee shall be entitled to 28 parking spaces for the Sublease Term and extensions thereof.

h) Signage: Sublessee shall have the right to install, at its sole cost and expense, standard directional signage per Paragraph 4.3 of the Lease Agreement and Paragraph 7 of the Lease Agreement No. 1.

i) Right Regarding Additional Space: Should additional portions of the Master Premises become available during the Sublease Term, then Sublessor shall not offer or lease such space to any third party not affiliated with Sublessor without first offering, in writing, to lease such space to Sublessee at then market terms for such space and Sublessee having waived such right. Sublessee shall have 10 days to exercise or waive such offer after receiving written notice from Sublessor. If the parties are unable to agree as to market terms within 30 days following the exercise of Sublessee’s right, then either party may elect to submit such determination to arbitration. If Sublessee fails to exercise its right to additional space, then Sublessor shall have the right to sublease such space to any third party on terms that are not materially more favorable to the sublessee than those negotiated with Sublessee.

j) Security: Sublessor shall provide their own security system.

k) Building Warranty: Sublessor shall deliver the Premises to Sublessee with all HVAC, electrical lighting and plumbing serving the Premises in good working order on the Commencement Date, but Sublessee is otherwise accepting the Premises as-is.

l) Subleasing and Assignment: Pursuant to Article 7 of the Lease Agreement.

m) Maintenance: Sublessor shall be responsible for HVAC maintenance contracts and all other maintenance obligations for the Premises pursuant to Paragraph 5.1(a) of the Lease Agreement. Sublessee shall provide its own janitorial services.

n) Advanced Rent/Security Deposit: Upon Sublease execution and delivery of Sublease, Sublessee shall deliver a check for the first month’s rent (i.e. $7,262.20) and the deposit equal to three (3) month’s Rent (i.e., $21,786.60) (referred to herein as “Security Deposit”) for a total of $29,048.80.

4.

o) Hazardous Materials: Pursuant to Article 16 of the Master Lease.

8. OTHER PROVISIONS OF SUBLEASE.

All applicable terms and conditions of the Master Lease are incorporated into and made a part of this Sublease as if Sublessor were the Lessor thereunder, Sublessee the Lessee thereunder, and the Premises the Master Premises. Sublessee assumes and agrees to perform the Lessee’s obligations under the Master Lease during the Term to the extent that such obligations are applicable to the Premises and the Sublease Term, except that the obligation to pay rent to Lessor under the Master Lease shall be considered performed by Sublessee to the extent and in the amount rent is paid to Sublessor in accordance with Section 6 of this Sublease. Neither Sublessor or Sublessee shall commit or suffer any act or omission that will violate any of the provisions of the Master Lease. Notwithstanding the foregoing, the following provisions of the Master Lease are not incorporated herein: Lease Agreement Paragraph 3.7; Lease Amendment No. 1, Paragraphs 3, 5, 8, and 9; and Amendment No. 2, Sections 3, 4, 5, and 6.

9. ATTORNEYS’ FEES.

If Sublessor or Sublessee shall commence legal action against the other arising out of or in connection with this Sublease, the prevailing party shall be entitled to recover its costs of suit and reasonable attorneys’ fees.

10. AGENCY DISCLOSURE.

Sublessor and Sublessee each warrant that they have dealt with no other real estate broker in connection with this transaction except Irving Hughes, who represents both Sublessor and Sublessee. Sublessor and Sublessee hereby confirm that they were timely advised of the dual representation and that they consent to the same, and that they do not expect Irving Hughes to disclose to either of them the confidential information of the other party.

11. COMMISSION.

Upon execution of this Sublease, and consent thereto by Lessor, Sublessor shall pay Irving Hughes a real estate brokerage commission of five and a half percent (5.5%) of the aggregate rent payable under this Sublease over the Sublease Term. Sublessor shall pay such commission upon all required executions of this Sublease and consent by Lessor and after the expiration of the termination right set forth in Paragraph 7(f) hereof.

5.

12. NOTICES.

All notices, demands, requests, consents, approvals or communications which may or are to be required or permitted to be given by any party or parties hereto hereunder shall be in writing and deemed communicated at the time of hand-delivery or three (3) business days after time of mailing. All notices notices, demands, requests, consents, approvals or communications by the Sublessor to Sublessee shall be mailed or hand-delivered to the Sublessee at the Premises, or to such other place as Sublessee may from time to time designate in a notice to the Sublessor. All notices and demands by the Sublessee to Sublessor shall be mailed or hand-delivered to the Sublessor at the address set forth above, and to such other person or place as the Sublessor may from time to time designate in a notice to the Sublessee.

13. SUBLESSEE PROTECTIONS.

a) Sublessor hereby represents and warrants to Sublessee that (i) Sublessor is the tenant under the Master Lease and, to the best of Sublessor’s knowledge, there is no other party who could claim any right, title or interest as tenant under the Master Lease, and (ii) Sublessor has the authority and has obtained all requisite approvals to enter into this Sublease.

b) Sublessor covenants and agrees with Sublessee that upon Sublessee paying the rent reserved in this Sublease and observing and performing all of the other obligations of Sublessee hereunder, Sublessee shall peaceably and quietly enjoy the Premises during the Sublease Term.

c) Sublessor shall (i) pay, when and as due, all rent and other charges payable by Sublessor to Lessor under the Master Lease, and (ii) perform all other obligations of Sublessor as the tenant under the Master Lease which are not assumed by Sublessee hereunder (collectively, “Sublessor’s Master Lease Obligations”). For example (and not by way of limitation), Sublessor shall at all times keep in full force and effect all insurance required of Sublessor as Lessee under the Master Lease. If Sublessor shall fail to perform Sublessor’s Master Lease Obligations in a timely manner and such failure causes Sublessor to be in default of the Master Lease, Sublessor shall advise Sublessee of such default and, Sublessee may, upon written notice to Sublessor, cure the default and receive reimbursement from Sublessor for the actual, reasonable costs of such cure within fifteen (15) business days of furnishing proof of payment to Sublessor.

6.

d) Sublessor agrees that it will not amend the Master Lease to increase the obligations of or to decrease the rights of or services to, Sublessee, nor voluntarily terminate without cause as provided in the Master Lease with respect to the Premises, except upon prior written notice to and consent of Sublessee, which consent may not be unreasonably withheld. Sublessor agrees that it will not voluntarily terminate the Master Lease for cause as provided in the Master Lease with respect to the Premises, except upon prior written notice to Sublessee.

e) Sublessor shall indemnify, protect, defend with counsel reasonably acceptable to Sublessee and hold Sublessee harmless from and against any and all claims, liabilities, judgments, causes of action, damages, costs and expenses (including reasonable attorneys’ and experts’ fees) (collectively referred to herein as “Claims”) to the extent such Claims arise from Sublessor’s default under the Master Lease.

f) Sublessor grants to Sublessee the right, so long as Sublessee is not in default, to receive all of the services and benefits with respect to the subleased Master Premises which are to be provided by Lessor under the Master Lease for the subleased term. In the event of any default or failure of such performance by Lessor, Sublessor agrees that it will, upon notice from Sublessee, make demand upon Lessor to perform its obligations under the Master Lease. Sublessor, however, shall have no obligation to sue the Lessor on Sublessee’s behalf or to terminate the Master Lease as a result of any such default or failure by Lessor.

14. SUBLESSOR’S PROTECTIONS.

a) Sublessee hereby represents and warrants to Sublessor that Sublessoee has the authority and has obtained all requisite approvals to enter into this Sublease.

b) Sublessee shall indemnify, protect, defend with counsel reasonably acceptable to Sublessor and hold Sublessor harmless from any claims in accordance with Paragraph 8.2 of the Master Lease.

7.

Executed and effective on August 30, 2005 at 3931 Sorrento Valley Boulevard, San Diego, CA 92121.

SUBLESSOR:		SUBLESSEE:
By:	Innercool Therapies, Inc.	By:	ACADIA Pharmaceuticals Inc. a Delaware corporation
Name:	Michael Magers	Name:	[Illegible]
Title:	President & COO	Title:	[Illegible]
Date:	8/31/05	Date:	8/30/05

LESSOR:

E. G. SIRRAH, LLC,

a California limited liability company

Name:

Title:

Date:

8.

Exhibit A

Exhibit B

ACADIA PHARMACEUTICALS

Building 3911 to Bldg 3931 connectivity – Main point of Contact to Main Point of Contact (MPOC to MPOC)

Provide and install, Bldg 3911:

4” PVC Conduit from Ceiling to Floor in MPOC;

Pull boxes connected to new PVC – ceiling & floor;

Glass panel replacement on Building Door-wall;

Outside Bldg 3911 to Bldg 3931 (see description below);

Provide and install as appropriate: Schedule USA/DigAlert for utilities I.D., 4” PVC conduit, connectors, radius bends, sawcut, core, concrete slurry; all equipment necessary for installation performance, traffic control not provided by customer.

(l) Stoop-Bldg 3911

Remove lower glass, install panel with 4” Sked80 PVC to floor mounted pull box, route PVC along outside concrete wall to terrace base.

(2) Terrace-3911

Excavate to (min) 24”, continue install 4” S80 PVC, refill trench with native material.

(3) Driveway

Sawcut, excavate to 24”, continue install 4” S80 PVC, refill, cap to match existing surface with concrete slurry.

(4) Terrace-3931

Excavate to (min) 24”, continue install 4” S80 PVC, refill trench with native material.

(5) Stoop-Bldg 3931

Sawcut, excavate, core hole (inside floor), continue install 4” S80 PVC to terminate at 2” above floor level inside existing IDF, refill trench, cap to match existing surface.

EX-21

Exhibit 21

List of Subsidiaries of

Cardium Therapeutics, Inc., a Delaware corporation

Name of Subsidiary	State or other Jurisdiction of Incorporation or Organization and Formation Date
Aries Ventures, Inc.	Delaware, USA (formed January 24, 2006)
Innercool Therapies, Inc.	Delaware, USA (formed February 27, 2006)

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to

Rule 13a-14(a)/15d-14(a)

I, Christopher J. Reinhard, Chief Executive Officer of Cardium Therapeutics, Inc., certify that:

1. I have reviewed this Annual Report on Form 10-KSB of Cardium Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: March 30, 2006

/s/ Christopher J. Reinhard

Christopher J. Reinhard,

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to

Rule 13a-14(a)/15d-14(a)

I, Dennis M. Mulroy, Chief Financial Officer of Cardium Therapeutics, Inc., certify that:

1. I have reviewed this Annual Report on Form 10-KSB of Cardium Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: March 30, 2006

/s/ Dennis M. Mulroy

Dennis M. Mulroy,

Chief Financial Officer

EX-32

Exhibit 32

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Cardium Therapeutics, Inc., a Delaware corporation, does hereby certify, to such officer’s knowledge, that the Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005 of Cardium Therapeutics, Inc. fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Cardium Therapeutics, Inc.

Date: March 30, 2006	/s/ Christopher J. Reinhard
	Christopher J. Reinhard, Chief Executive Officer
Date: March 30, 2006	/s/ Dennis M. Mulroy
	Dennis M. Mulroy, Chief Financial Officer

The foregoing certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-KSB or as a separate disclosure document.