10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                to

Commission File Number: 0-27596

CONCEPTUS, INC.
(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	94-3170244 (I.R.S. Employer Identification No.)
331 East Evelyn Mountain View, CA 94041 (Address of principal executive offices)

Registrant's telephone number, including area code: (650) 962-4000

         Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:	Name of Each Exchange on Which Registered:
Common Stock, par value $0.003 per share	The NASDAQ Stock Market LLC

         Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act

Large accelerated filer o Accelerated filer ý Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

         Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý

         The aggregate market value of the shares of common stock of the Registrant held by non-affiliates as of June 30, 2008 was $268,191,755 based upon the closing price of the common stock on the Nasdaq Global Market on June 30, 2008. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

         There were 30,430,882 shares of Registrant's Common Stock issued and outstanding as of February 27, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Proxy Statement for the Registrant's 2008 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

CONCEPTUS, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

		Page
Part I.
Item 1.	Business	3
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	31
Item 3.	Legal Proceedings	32
Item 4.	Submission of Matters to a Vote of Security Holders	32
Part II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Consolidated Financial Data	34
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 8.	Consolidated Financial Statements and Supplementary Data	52
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	52
Item 9A.	Controls and Procedures	52
Item 9B.	Other Information	53
Part III.
Item 10.	Directors and Executive Officers of the Registrant	54
Item 11.	Executive Compensation	54
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	54
Item 13.	Certain Relationships and Related Transactions	54
Item 14.	Principal Accountant Fees and Services	54
Part IV.
Item 15.	Exhibits and Financial Statement Schedules	55
	Index to Consolidated Financial Statements	59
	Signatures	102

2

The following information should be read in conjunction with the Consolidated Financial Statements and the notes thereto located elsewhere in this Annual Report on Form 10-K. This report, and in particular the Management's Discussion and Analysis of Financial Condition and Results of Operations, contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this report, the words "believes," "anticipates," "intends," "expects," "plans," "should," "will," "seeks" and words of similar import identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: our limited operating and sales history; our dependence on a single product; the uncertainty of market acceptance of our product; the effects of the current crisis affecting world financial markets; dependence on obtaining and maintaining reimbursement; effectiveness and safety of our product over the long-term; our ability to obtain and maintain the necessary governmental clearances or approvals to market our product; our ability to develop and maintain proprietary aspects of our technology; our ability to manage our expansion or any acquisition; our dependence on suppliers; intense competition in the medical device industry; the inherent risk of exposure to product liability claims and product recalls and other factors referenced in "Risk Factors" and other sections of this report. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

Market, Ranking and Other Data

        This Annual Report on Form 10-K contains various estimates related to the women's healthcare, contraception and medical device markets. Some of these estimates have been included in studies published by government agencies and market research firms and some are our estimates and are based on our knowledge and experience in the markets in which we operate. Additionally, other estimates have been produced by industry analysts based on trends to date, their knowledge of technologies and markets and customer research, but these are forecasts only and are thus subject to inherent uncertainty. Our estimates have been based on information provided by customers, suppliers, trade and business organizations and other contacts in the markets in which we operate. We believe these estimates to be accurate as of the date of this report. However, this information may prove to be inaccurate because of the method by which we obtain some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in a survey of market size. As a result, you should be aware that market, ranking and other similar data included in this report, and estimates and beliefs based on that data, may not be reliable.

PART I

ITEM 1.    BUSINESS

Overview

        We develop, manufacture and market the Essure® permanent birth control system, an innovative and proprietary medical device for women that was approved for marketing in the United States in November 2002 by the U.S. Food and Drug Administration, or FDA. The Essure system uses a soft and flexible micro-insert that is delivered into a woman's fallopian tubes to provide permanent birth control by causing benign tissue in-growth that blocks the fallopian tubes. A successfully placed Essure micro-insert and the subsequent tissue growth prohibits the egg from traveling through the fallopian tubes and therefore prevents fertilization. The effectiveness rate of the Essure system is 99.80% after four years of follow-up.

3

        On January 7, 2008, we acquired all of the outstanding shares of Conceptus SAS. As a result of this transaction, Conceptus SAS became our wholly-owned subsidiary, and through it we sell Essure directly in France and use distributors to sell Essure throughout the rest of Europe. We believe the acquisition of Conceptus SAS expands our presence in international markets and will increase our revenues as we will recognize sales at end-user pricing as compared to the price at which we previously sold the Essure product directly to Conceptus SAS. Our consolidated financial statements for the year ended December 31, 2008 include the financial results of Conceptus SAS beginning from the acquisition date of January 7, 2008. Consolidated net sales for the year ended December 31, 2008 was approximately $102.0 million of which 79% were generated in the United States. For financial information about geographic areas and for segment information with respect to net sales, refer to the information set forth in Note 2—Summary of Significant Accounting Policies of our Notes to Consolidated Financial Statements.

        We were incorporated in the state of Delaware on September 18, 1992. We maintain three websites located at www.conceptus.com, www.essuremd.com and www.essure.com. We make available free of charge on or through our websites, our annual report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file or furnish such material to the Securities and Exchange Commission (SEC). Information contained on our websites is not incorporated by reference into and does not form a part of this Form 10-K.

The Essure Procedure

        The Essure procedure is typically performed in the office setting and is intended to be a less invasive and a less costly solution to tubal ligation, the leading form of birth control in the United States and worldwide. Laparoscopic tubal ligation and tubal ligation by laparotomy typically involve abdominal incisions and/or punctures, general or regional anesthesia, four to ten days of normal recovery time and the risks associated with an incisional procedure. The Essure procedure does not require cutting or penetrating the abdomen, which lowers the likelihood of post-operative pain and complications due to the incisions/punctures, and it can be performed in an outpatient setting. Currently, the majority of the Essure procedures are performed in a doctor's office using local anesthesia. General anesthesia is not typically used unless required by hospital protocol, if requested by the patient or based on the experience and comfort level of the physician. In the Pivotal trial of the Essure system, the average hysteroscopic procedure time was 13 minutes. A patient is typically discharged approximately 45 minutes after the Essure procedure. No overnight hospital stay is required. Furthermore, the Essure system is effective without drugs or hormones. There is a three-month waiting period after the procedure during which the woman must use another form of birth control while tissue in-growth occurs. At three months following the procedure, U.S. patients complete a confirmation test called a hysterosalpingogram, or HSG, which can determine whether the device was placed successfully and whether the fallopian tubes are occluded. Outside of the United States, patients are required to return for a pelvic X-ray at three months post-procedure with a subsequent HSG if device location on the initial radiographic image appears suspicious.

        We believe that the Essure system is a better alternative to tubal ligation for physicians, hospitals and payers. The Essure system is a less invasive permanent birth control option for physicians to offer to their patients; hospitals are able to utilize their facilities more cost effectively with the Essure procedure compared with tubal ligation; and payers are able to experience cost reductions resulting from the elimination of overhead and procedural costs related to anesthesia and post-operative hospital stays associated with tubal ligations. In addition, we believe the Essure procedure is superior to other non-tubal ligation permanent contraception alternatives because, unlike other device designs, the Essure procedure does not involve the use of radio frequency (RF) energy, which subjects the patient to risks of thermal injury, bowel injury and dilutional hyponatremia. Payers may also benefit from the reduction

4

of unplanned pregnancies associated with the use of temporary birth control methods. Published reports estimate that approximately 700,000 tubal ligation procedures are performed each year in the United States. We intend to capture the majority share of this market and establish the Essure procedure as the gold standard for permanent birth control. We also believe the Essure system is a solution for women whose family is complete but are using temporary birth control methods.

The Essure System

        We developed the Essure system in response to what we perceived as a market need for a permanent, less invasive and less costly solution to tubal ligation.

        The Essure micro-insert is designed to be placed into each fallopian tube during a single procedure using a hysteroscope, an instrument that allows visual examination of the cervix and uterine cavity, and our minimally invasive tubal access delivery system. The delivery system is a disposable plastic handle with a thumb-wheel that is connected to our proprietary guidewire and catheter system. The micro-insert is constructed of a stainless steel inner coil, a dynamic outer coil made from a nickel titanium alloy, called Nitinol, and a layer of polyethylene terephthalate, or polyester fibers, wound between the inner coils. An Essure micro-insert is deployed into each of the woman's fallopian tubes using a hysteroscope. Using the hysteroscope for guidance, the delivery catheter is guided through the uterus and the opening of the fallopian tube. Once the physician has properly positioned the delivery system in the fallopian tube, the physician releases the micro-insert. When released, the micro-insert automatically expands to the contours of the fallopian tube. Over a three-month time frame, the polyester fibers within the micro-insert elicit a localized, benign tissue in-growth that occludes, or blocks, the fallopian tubes, thereby preventing conception.

        We did not conduct a clinical trial to compare the Essure procedure to laparoscopic tubal ligation. We believe, however, based on current data from our Pivotal trial and published reports on laparoscopic tubal ligation, that the Essure placement procedure has the following key advantages over laparoscopic tubal ligation:

	Essure Procedure		Tubal Ligation
Procedure		Transcervical à Non- incisional		Incisional à Abdominal incision or puncture
Typical anesthesia		Local, IV sedation		General
Average hysteroscopic procedure time		13 minutes		Not Applicable
Average post-op recovery time		45 minutes		4-5 hours
Where performed		Outpatient / hospital, surgi-center or doctor's office		Inpatient / hospital or surgi-center
Average return to regular activities*		typically 24 hours		4-6 days

*

Excluding the day of procedure

        We believe that the Essure device and the Essure procedure offer the following important benefits to patients, physicians, hospitals and payers:

Benefits to patients

•

No risks associated with incisions and reduced anesthesia risks because general or regional anesthesia is not typically used;

•

No risks associated with the use of RF energy that are used by competing non-tubal ligation alternatives;

5

•

Rapid return to regular activities typically within 24 hours as compared to four to six days for laparoscopic tubal ligation;

•

Proven effectiveness, with a four-year effectiveness rate of 99.80% after four years of follow-up;

•

No risks associated with hormones used in hormone-based contraception;

•

A confirmation test is conducted to reassure patients of the effectiveness of the procedure; and

•

No recurring management of contraception usage as compared to non-permanent contraception methods, such as the birth control pill, implants and injectables.

Benefits to physicians and hospitals

•

Short and relatively easily performed procedure;

•

No risks associated with incisions, thermal injuries, bowel injuries or dilutional hyponatremia and reduced anesthesia risk because general or regional anesthesia is not typically used;

•

Procedures may be performed in a less resource-intensive environment—while Essure procedures may be performed in various settings including the physician office, hospital operating room and an ambulatory surgery center, the majority of Essure procedures now take place in physicians' offices; and

•

Elimination of costs related to the use of general or regional anesthesia and post-operative hospital stays.

Benefits to payers

•

Lower cost procedure because of reduced use of general or regional anesthesia and reduced number of post-operative hospital stays;

•

Elimination of the costs associated with an operating room because the procedure can be performed in the physician's office; and

•

Cost savings resulting from the potential to reduce unplanned pregnancies.

Patient Considerations

        There are, however, certain key factors that a woman must consider when she selects the Essure procedure.

•

Permanence.  The woman must be certain that she desires permanent birth control, because the Essure procedure is not reversible.

•

Effectiveness.  The Essure procedure is not 100% effective. We expect that a very small number of patients will report pregnancies from time to time usually due to improper placement of the Essure device, a failure to follow proper protocol by either physicians or patients and luteal phase pregnancies (pregnancies occurring prior to the Essure micro-insert placement).

•

Unsuccessful Placement Risk.  Not all women who undergo the Essure procedure will achieve successful placement of both micro-inserts. Approximately 1 out of every 7 women in the Essure Pivotal and Phase II clinical studies did not achieve successful placement of both micro-inserts during the first placement procedure. Twenty-two of these women chose to undergo a second procedure and achieved successful placement of both micro-inserts, and subsequently were able to rely on the Essure device for contraception. Further, based on the findings of a post-approval study performed in the commercial setting, approximately 1 out of every 12 women may not achieve successful placement of both micro-inserts during the first placement procedure. In June

6

2007, the FDA approved a PMA supplement for a modified delivery system. We are conducting a post-approval study to investigate the bilateral placement rate for the modified delivery system, which is expected to be similar to previous models of the Essure system.

•

Three-Month Continuation of Temporary Birth Control.  For three or more months after the Essure procedure, a temporary method of birth control must be used until the Essure Confirmation Test.

•

Essure Confirmation Test.  Three months post-procedure, U.S. patients are required to return for the Essure Confirmation Test hysterosalpingogram, or HSG, which calls for contrast dye to be injected into the uterus to confirm occlusion of both fallopian tubes and verify proper micro-insert location. Outside of the United States, patients are required to return for a pelvic X-ray at three months post-procedure with a subsequent HSG if device location on the initial radiographic image appears suspicious.

•

Removal.  Removal of the Essure micro-inserts requires surgery; and removal is not intended for procedure reversal since the Essure procedure is not reversible.

        As with all medical procedures, there are risks associated with the Essure device and the Essure procedure. Because there are no abdominal incisions or punctures and general or regional anesthesia is typically not required, the risks associated with the Essure procedure are more typical of hysteroscopic procedures and are of a lesser severity than those of procedures that require invasion of the abdominal cavity. This is typified by the minor nature of most of the adverse events reported in our clinical trials. The most frequent risk with the Essure procedure is the inability to rely on the micro-insert for contraception, due primarily to lack of micro-insert placement and less frequently to misplacement of the micro-insert. Based on data gathered in our clinical trials, adverse events, which prevented reliance on the Essure device for contraception, were reported as follows: failure to place 2 micro-inserts in first procedure (14%), initial tubal patency (3.5%), expulsion (2.2%), perforation of fallopian tube (1.8%), or other unsatisfactory device location (0.6%). All of the patients in the Pivotal and Phase II clinical studies who experienced tubal patency at the 3-month HSG were found to have bilateral occlusion at a repeat HSG performed at approximately 6 months after the Essure procedure. In addition, all of the patients in the Pivotal clinical study who chose to undergo a second Essure procedure following a micro-insert expulsion achieved successful micro-insert placement and were subsequently able to rely on the Essure system for contraception. The majority of women report mild to moderate pain immediately after the Essure procedure. The most frequent adverse events and side effects reported as a result of the hysteroscopic procedure to place the micro-inserts were as follows: cramping (29.6%), pain (12.9%), nausea/vomiting (10.8%), dizziness/fainting (8.8%) and spotting/vaginal bleeding (6.8%). Hypervolemia, an increase in blood volume, occurred in <1% of cases. During the first year of reliance on the Essure system for contraception (approximately 15 months after micro-insert placement), the following episodes were reported as at least possibly related to the Essure micro-inserts: back pain (9.0%), abdominal pain (3.8%), and dyspareunia (painful intercourse) (3.6%). All other events occurred in less than 3% of women. Of those women who reported spotting, most reported spotting for an average of three days post-procedure. Of those women who reported experiencing pain, one-third reported that pain had generally subsided after the day of the procedure.

Our Clinical Progress

        We commenced a Phase II clinical study of safety and preliminary effectiveness of the Essure device in November 1998 and a Pivotal, or Phase III, trial of the Essure device in May 2000. The number of women in whom at least one of two Essure micro-inserts was placed totaled 682 between the two clinical trials. At three month follow-up, 647 women began relying on the Essure device as a method of permanent birth control. The clinical endpoints of the study include safety, effectiveness and patient satisfaction.

7

        In April 2002, based on data from our trials, we submitted our PMA application to the FDA. In November 2002, we received formal approval from the FDA to market the Essure device in the United States.

        Based on clinical trial data, the Essure device has been demonstrated to be 99.80% effective after four years and 99.74% effective after five years of follow-up as demonstrated in a small portion of women undergoing clinical studies. Up to nine year follow up of all patients in clinical trials is currently completed. We intend to submit a PMA supplement to the FDA to update the product labeling incorporating the results of the follow-up data.

        Based on the ESS205 post-approval study, the Essure Procedure has a 94.6% first procedure bilateral placement rate. In June 2007, the FDA approved a PMA supplement for a modified delivery system. A post-approval study is being conducted to investigate the bilateral placement rate for the modified delivery system, which is expected to be similar for the newest model of the Essure system.

        In addition, the Essure procedure has proven to have high patient satisfaction in our clinical trials. Clinical data submitted to the FDA in our Annual Reports show that Phase II study patients' tolerance to wearing the Essure device up to five years was rated as "good" to "excellent" in 99% of women at all visits through January 2006. Among women from our Pivotal trial who have worn the micro-inserts up to five years, at least 99% reported their comfort with the Essure device as "good" to "excellent" at all visits. At five-year follow-up (reporting as of December 2007), 98% of women reported their overall satisfaction as "somewhat satisfied" to "very satisfied." Excluding the day of the Essure placement procedure, 92% of women in our clinical trials who were employed returned to work in one day or less.

        Data from our clinical trials are undergoing analysis, and the clinical trial statistics presented may change as longer term follow-up data from the women participating in the trials is gathered, audited and analyzed, or if the FDA requests that calculations be performed in a different manner than presented in our PMA application.

        Other investigators are also conducting studies on the Essure device; as of January 2009, we know of 172 clinical publications related to Essure and hysteroscopic sterilization.

Our Market

        Birth control use in the United States is prevalent among a majority of women of reproductive age, 15-44 years of age. According to the 2002 National Survey of Family Growth, or NSFG, conducted by the Centers of Disease Control and Prevention and the National Center for Health Statistics, a periodic survey which provides the most current available statistics on reproductive health in the United States, an estimated 62% of the 61.6 million women of reproductive age in the United States use some form of birth control. The most common method of contraception in the United States among women using birth control, according to the NSFG, was permanent birth control, including tubal ligation and vasectomy, at 36%, followed by oral contraceptives at 31%, and the male condom at 18%. Among women aged 35-44 years that use some form of birth control, female sterilization was the leading method.

        According to the NSFG, approximately 13.8 million women in the United States rely on permanent birth control methods, such as tubal ligation and vasectomy. Published reports estimate that 700,000 tubal ligation procedures are performed each year in the United States, and the prevalence increases with age and number of children. Approximately 89% of women in the United States who have had tubal ligation have birthed two or more children, according to the NSFG. According to the same source, among the women in the United States who have had tubal ligation, approximately 70% are between the ages of 35 and 44.

8

        In addition to permanent birth control procedures, the NSFG estimated that approximately 24.3 million women in the United States use temporary methods of birth control, such as oral contraceptives, condoms, implants and injectables. Included in this group, according to the same source, are approximately 7.6 million women who have two or more children, which we believe makes them more likely to consider permanent forms of birth control. We believe our market includes not only women who desire permanent birth control, but potentially also women who have completed childbearing but are using either temporary birth control methods or no birth control method at all because no viable non-incisional alternative to tubal ligation previously has been available.

        Based on data from the CDC's 2002 National Survey of Family Growth, the following chart summarizes birth control methods used by women using contraception between the ages of 30-44 in the United States:

	Age 30–34			Age 35–39			Age 40–44
Fertile women (% of U.S. women in reproductive age, within their age range)		60.8	%		47.1	%		30.4	%
Method:
Tubal ligation		28	%		41	%		50	%
Pill		31	%		19	%		11	%
Condom		17	%		16	%		12	%
Vasectomy		9	%		14	%		18	%
All others		15	%		10	%		9	%

        Worldwide, there is a larger market for permanent birth control. The most current and available report on worldwide birth control statistics is the United Nations World Contraceptive Use 2007 report on birth control methods used by reproductive couples. According to the report, 63% of women aged 15-49 years were using a form of contraception. The report indicated that tubal ligation, the leading birth control method worldwide, was used by 20% of women, followed by intrauterine devices, or IUDs, at 16%, and oral contraceptives at 9%.

        We believe that, in addition to women that have completed childbearing, the Essure procedure also appeals to women who are in search of permanent birth control and who are currently using either temporary birth control methods or no birth control method. The Essure procedure is also a good choice for women who desire permanent birth control and are not good candidates for a surgical tubal ligation, including obese women, those with multiple previous surgeries and/or contraindications to general anesthesia. During the Phase II of the clinical study for the Essure procedure, over a follow up period of five years, 99% of the women who underwent the Essure procedure and returned for follow up rated their tolerance to the implanted Essure device as "good" to "excellent." Additionally, at all Pivotal trial visits subsequent to one-week post device placement, at least 99% of the women rated their comfort as "good" to "excellent." At all Pivotal trial study visits through five years follow up, at least 95% of women rated their overall satisfaction as "somewhat satisfied" to "very satisfied." Excluding the day of the Essure placement procedure, 92% of the patients in the Pivotal trial who were employed returned to work in one day or less. The safety and recovery profile of the Essure procedure is one of the reasons that we believe it may be a preferred alternative to currently available methods of permanent birth control.

Sales and Marketing

        On November 6, 2002, we received FDA approval to market the Essure device in the United States. The achievement of this major milestone enabled us to begin an aggressive marketing and sales campaign in the United States. We are distributing the Essure device in the United States through our direct sales force.

9

        Our sales and marketing strategy is to market the Essure device primarily to gynecologists while building interest and awareness among consumers and general practitioners. Through the use of public relations and targeted advertising and targeted direct-to-consumer advertising, we intend to increase awareness of the Essure procedure among consumers, general practitioners and the broader medical community. In this regard, we conduct regional advertisements in a variety of media, including television, radio, direct mail and print. We also continue to attend meetings for the American Association of Gynecologic Laparoscopists (AAGL) and American College of Obstetricians and Gynecologists (ACOG) and women's healthcare societies. Through these programs, we hope to drive patient awareness of the Essure procedure and interest from our clinical community.

        We continue to increase the size of our sales force so as to increase our call frequency on physicians. Among other responsibilities, our sales representatives are attempting to increase penetration and utilization of the Essure procedure, as well as to facilitate the movement of the Essure procedure to the office environment.

        The Essure device is currently being marketed in multiple countries. Internationally, we are selling the Essure device through a combination of direct sales forces and distribution networks.

        Our strategy in the near term is to focus on moving physicians through three stages of usage: preceptorship, in-hospital certification and in-office. We believe the office is the best site of service for the Essure procedure because it is where the benefits are most realized, the most satisfying and comfortable place for the patient, where the physician is the most economically and logistically efficient, and it represents the lowest cost site of service to the payer or state. In addition, we will focus in the near term on direct to consumer advertising which we expect will grow the awareness of the Essure system among women and the medical community, thereby increasing the number of women who choose the Essure procedure.

Reimbursement

        Market acceptance of the Essure system depends in part upon the availability of reimbursement within prevailing healthcare payment systems. We believe that physician advocacy of our product will be required to continue to obtain reimbursement. As of December 31, 2008, we have received positive reimbursement decisions for the Essure procedure from most private insurers and from 46 of the 51 Medicaid programs in the United States. We continue to receive positive responses relating to reimbursement, which we believe will help increase the adoption of the Essure device by doctors and patients. We intend to continue our effort to educate payers of the cost-effectiveness of our product and to establish further programs to help physicians to navigate reimbursement issues. As with all healthcare plans, coverage will vary and is dependent upon the individual's specific benefit plan.

        Effective January 1, 2009, the Centers for Medicare and Medicaid Service (CMS), the Medicare Physician Fee Schedule national average payment for hysteroscopic sterilization (CPT code) is $427 when performed in a hospital (facility) and $1,862 (non-facility) when performed in a physician's office. In addition, in the CMS Final Rule for the 2009 Outpatient Prospective Payment System or OPPS, which assigns hospital outpatient reimbursement amounts, CPT 58565 maps to APC 202 which is assigned a Medicare National Average of $2,888, which under Medicare includes the cost of the implant. In 2009, the Medicare national average payment for hysteroscopic sterilization in the ambulatory surgery center is $1,535, which includes the cost of the implant. We believe these values are very favorable for the Essure procedure and will help in establishing increased utilization of the device amongst doctors.

        Effective May 15, 2008, California's state fee-for-service Medicaid program announced coverage of the Essure procedure for beneficiaries that are 21 years of age or older. Physicians may perform the Essure procedure in the physician's office, the ambulatory surgery center or the hospital outpatient department. Medi-Cal is to pay $2,282 as a global fee for an in-office procedure. We believe these

10

values are very favorable for the Essure procedure and will continue to help in establishing increased utilization for devices amongst doctors.

        Reimbursement systems vary significantly by country and sometimes by region, and reimbursement approvals must be obtained on a country-by-country basis. Many international markets have government-managed healthcare systems that determine reimbursement for new devices and procedures. In most markets, there are private insurance systems as well as government-managed systems.

        During the last several years, we received several positive responses from government and private agencies relating to reimbursement, which we believe will help us to speed up the acceptance of the Essure procedure by doctors and patients. In Europe, we are developing a strategic plan to obtain reimbursement in a number of European countries. In France, we obtained official reimbursement under certain conditions for the Essure device in February 2005 for the term of two years with the Haute Autorité de Santé, or HAS. This conditional approval required the procedure to be reserved for patients who had a potential laparoscopic risk. In addition, it required a follow up to demonstrate the safety of the Essure device, for which we conducted a multicenter study. As a result of these studies, the "Haute Autorité de Santé" lifted all the restrictions in October 2007, thereby putting the Essure procedure on an equal footing with tubal ligations. Following this decision, the Essure procedure is covered in France for all women, regardless of medical status. In addition, the CEPS in France ruled in November 2007 that the reimbursement for the Essure device will remain at the then current levels of 663 Euros for the next five years.

Manufacturing

        We have a manufacturing facility at our headquarters in Mountain View, California, which we use only for pilot-line manufacturing. We have a third-party original equipment manufacturer ("OEM") which manufactures Essure devices at their manufacturing facility located in Mexico. We are currently validating a second source OEM.

        Our agreement with our OEM provides that they will continue to use our qualified suppliers of materials and components, unless we agree otherwise. We conduct periodic quality audits of our key suppliers. Most components, including nickel titanium alloy, delivery wires, the inner release catheter tubing and stainless steel wires, are available from more than one source and we intend to qualify at least two sources for certain components. Currently, the key single source supplier component is the polyester fiber. The polyester fiber causes the necessary tissue in-growth, is made to our specifications and currently has only one qualified source supplier. However, we have accumulated a quantity of this material that exceeds our anticipated production needs for the next several years. We are in the process of qualifying a second source supplier for this fiber.

        Our manufacturing facility and our OEM's manufacturing facilities are subject to periodic inspection by regulatory authorities. Our quality management system is subject to FDA Part 820—Quality System Regulations. These regulations require that we conduct our product design, testing, manufacturing and quality control activities in conformance with these regulations and that we maintain our documentation and records of these activities in a prescribed manner. Our manufacturing facility is licensed by the California Department of Health Services, Food and Drug Branch and is registered with the FDA. In addition our manufacturing facility has received EN/ISO 13485 Quality Management Systems certification and our quality system is in compliance with the European Union Medical Device Directive 93/42/EEC, allowing us to affix the CE Mark to our products after assembling appropriate documentation. EN/ISO 13485 Quality Management Systems standards have been developed to harmonize standards for the design, manufacturing and distribution of medical devices. Quality operations have been developed to comply with worldwide regulatory requirements that companies know the standards of quality on a worldwide basis.

11

Research and Development

        Our research and development activities are performed by our product development, process engineering, intellectual property and regulatory and clinical research staff. Research and development expenses for 2008, 2007, and 2006 were approximately $6.8 million, $5.9 million, and $4.4 million, respectively. We intend to continue to focus our research and development efforts on the development of new or alternative product designs and enhancements.

Intellectual Property

        Our policy is to protect our proprietary position aggressively by, among other things, filing U.S. and foreign patent applications to protect technology, inventions and improvements that are important to the development of our business. In addition to the patent protection we have obtained in our license from Target Therapeutics, a division of Boston Scientific Corporation, we have filed device and method patents for the use of our product in new clinical applications and have pursued patents for several of our other inventions and developments. As of January 31, 2009, we had 20 U.S. patent applications, 26 U.S. issued patents pending, 29 foreign and/or international patent applications pending and 61 issued foreign patents. Our issued patents include claims relevant to transcervical fallopian tube occlusion devices and methods, guidewire manipulation, a guidewire design, fallopian tube visualization, electrosurgical instruments and a delivery mechanism for a tubal occlusion device. The pending applications describe various aspects of our proprietary tubal access platform technology, including claims specific to our Essure tubal occlusion device.

        We obtained an exclusive license in the field of reproductive physiology to technology developed by Target Therapeutics. In addition, we have granted to Target Therapeutics an exclusive license to our technology in certain fields of interventional medicine outside of reproductive physiology. Our exclusive license of Target Therapeutics' technology encompasses certain technology developed by Target Therapeutics as of February 1, 1996. We do not have any preferential rights to technology developed by Target Therapeutics after that date. The license from Target Therapeutics includes patents which relate to the design of its micro-catheters (the initial patent for which expired in June 2006), certain aspects of guidewire design and other important aspects of micro-catheter, guidewire and micro-coil technologies. In addition, should any of our Target Therapeutics technology be found to infringe upon a third party's patent rights, it may affect our ability to develop, market and sell additional products in the future. Finally, Target Therapeutics has the right to terminate our license if we materially breach the terms of the license. If the Target Therapeutics license were terminated, it might affect our ability to develop, market and sell additional products in the future.

        We believe that we are free to make and sell our product, and that our product and its intended use does not infringe any valid patent rights of any other party. However, a third party, Ovion, Inc. (a subsidiary of American Medical Systems Holdings, Inc.), or Ovion, brought to our attention a patent and certain claims from a pending patent application owned by it. Ovion indicated that it believes the claims of its patent and application cover Essure and its use. On October 23, 2003, we entered into a settlement agreement with Ovion pursuant to which we received a sole, worldwide license to Ovion's patent rights relative to the Essure system, and Ovion may not grant any additional such licenses to other parties. The settlement agreement provided for a cash payment of $2.0 million in the fourth quarter of 2003 as a prepaid royalty, and a license fee of $2.0 million payable in our common stock in equal installments in the first and second quarters of 2004. We are obligated to pay 3.25% of the accumulative revenue derived from sale of the Essure system in excess of $75.0 million as royalty for a period of ten years starting from the date of settlement. In accordance with the terms of the settlement agreement, our prepaid royalties will be fully amortized when cumulative net sales of Essure system reached $136.5 million. Prepaid royalties were fully amortized at December 31, 2007. Ovion was not granted any rights to our intellectual property pursuant to the settlement agreement. The settlement agreement was approved by the U.S. District Court for the Northern District of California on November 6, 2003.

12

        Although we have reached a settlement agreement with Ovion, we still believe that some or all of Ovion's claims should be included within our own patents, and we requested that the PTO declare an interference. An interference is a proceeding within the PTO to determine which party was the first to invent, and which party is thereby entitled to ownership of, the claims. We believe that we filed our patent applications for the Essure device before Ovion filed the application that issued as its patent, and that we are entitled to any patentable claims now appearing in their patent that cover our product. We do not know whether the PTO will declare an interference, whether we invented our product prior to Ovion's date of invention, or whether we will prevail in an interference proceeding if it is declared by the PTO. Future royalties might be avoided by a favorable interference ruling before the patent office, which might occur if interference is declared and if we are found to have priority of invention.

Government Regulations

        The research, development, manufacture, labeling and distribution of medical diagnostic and surgical devices and pharmaceutical products intended for commercial use are subject to extensive governmental regulation by the FDA in the United States and by a variety of regulatory agencies in other countries. Under the Federal Food, Drug and Cosmetic Act, known as the FD&C Act, manufacturers of medical products and devices must comply with certain regulations governing the design, testing, manufacturing, packaging, servicing and marketing of medical products.

United States Regulation

        The manufacture and sale of our product are subject to extensive regulation by numerous governmental authorities, principally the FDA as well as state agencies. In particular, the FDA regulates the research, clinical testing, manufacturing, safety, labeling, storage, record keeping, advertising, distribution, sale and promotion of medical devices in the United States. The FDA requires that all medical devices introduced to the market either be preceded by a pre-market notification clearance under Section 510(k) of the FD&C Act, or an approved PMA. A PMA application is approved when the FDA has determined that we have submitted clinical trial data and manufacturing quality assurance information to prove it is safe and effective for its labeled indications, or for devices that are not of the same type or substantially equivalent to a device in commercial distribution prior to 1976.

        The FDA imposes numerous requirements with which medical device manufacturers must comply in order to maintain regulatory approvals. FDA enforcement policy strictly prohibits the promotion of approved medical devices for uses other than those for which the device is specifically approved by the FDA. We and our OEM are required to adhere to applicable FDA and other regulations, including testing, control and documentation requirements. Ongoing compliance with the Quality Systems Regulations and other applicable regulatory requirements is monitored through periodic inspections by federal and state agencies, including the FDA and the California Department of Health Services. If we or our OEM do not comply with applicable regulatory requirements, we may be subject to warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, withdrawal of approvals and criminal prosecution, among other penalties.

        The Essure device is regulated by the FDA and received FDA PMA approval for commercialization in the United States on November 6, 2002. We received approval to commercialize the latest model of our Essure device on June 15, 2007. In July 1994, our former San Carlos facility was inspected by the California Department of Health Services, and we were subsequently granted a California medical device manufacturing license. In February 1997, our San Carlos facility was inspected by the California Department of Health Services, and we were granted a California drug manufacturing license. In March 1997, we were inspected by the FDA, with no action indicated and we became ISO 9001 certified in December 2000. In July 2002, we successfully passed another FDA inspection and, partly as a result, received our PMA approval in November 2002. Our San Carlos facility was inspected by FDA again in June 2003, which resulted in FDA483 (audit findings), which were addressed adequately. A California Department of Health Services inspection occurred in June 2008, which generated two minor findings, and resulted in a State Manufacturing License for Conceptus. In July 2008, our Mountain View facility underwent another FDA inspection and we successfully passed our inspection with no action indicated.

13

        As part of the conditions of approval, we are required to provide data annually to the FDA in order to gather long-term safety and effectiveness data on the Essure system. For the newest model of the Essure System, we are also required to conduct a post approval study in the United States to evaluate placement rates. We are required to provide information to the FDA on death or serious injuries which our medical devices have allegedly caused or with which they have been associated, as well as product malfunctions that would likely cause or contribute to death or serious injury if the malfunction were to recur. If the FDA believes that a company is not in compliance with the law or regulations, it can institute proceedings to detain or seize products, issue a recall, enjoin future violations and assess civil and criminal penalties against the company, its officers and its employees. We are also subject to regulation by the U.S. Occupational Safety and Health Administration and by other government entities. Regulations regarding the manufacture and sale of our product are subject to change. We cannot predict what impact, if any, such changes might have on our future ability to manufacture, market and distribute the Essure system.

International Regulation

        Sales of medical devices outside of the United States are subject to international regulatory requirements that vary widely from country to country. The time required to obtain clearance required by foreign countries may be longer or shorter than that required for FDA clearance, and requirements for licensing may differ significantly from FDA requirements. No assurance can be given that such foreign regulatory approvals will be granted on a timely basis, or at all. In addition, there can be no assurance that we will meet the FDA's export requirements or receive FDA export approval when such approval is necessary, or that countries to which the devices are to be exported will approve the devices for import. Our failure to meet the FDA's export requirements or obtain FDA export approval when required to do so, or to obtain approval for importation into various countries, could have a material adverse effect on our business, financial condition and results of operations.

        The European Union has promulgated rules which require manufacturers of medical products to obtain the right to affix to their products the CE Mark, an international symbol of adherence to quality assurance standards and compliance with applicable European Union Medical Device Directives. In some markets, approval to distribute is subject to compliance with local regulations such as registration with health ministries and/or particular requirements regarding labeling or distribution.

        Some countries in which we currently operate or contemplate to operate either do not currently regulate medical devices or have minimal registration requirements. However, these countries may develop more extensive regulations in the future that could delay or prevent us from marketing the Essure system in these countries.

        On February 2, 2009, we have obtained the Brazilian National Health Regulatory approval that enables us to market our product in Brazil. We believe that the Brazilian market could represent a significant market opportunity.

        On December 15, 2008, Conceptus Medical Limited ("CML") was incorporated in the United Kingdom and became a wholly owned subsidiary. CML was established to serve as our direct sales office in the United Kingdom after the termination of our distributor during the fourth quarter of 2008. We believe that the United Kingdom market supports over 60,000 cases of permanent birth control between tubal ligation and vasectomies on an annual basis. We believe the establishment of CML continues to expand our direct presence in international markets and will increase our revenues as we will recognize sales at end user pricing as compared to the price at which we previously sold to the distributor.

14

Competition

        The medical device industry is highly competitive and is characterized by rapid and significant technological change. To compete successfully, we will need to continue to demonstrate the advantages of our Essure products and technologies over well-established alternative procedures, products and technologies, and convince physicians and other healthcare decision makers of the advantages of our products and technologies. As we commercialize and market the Essure system, we expect to compete with:

•

other methods of permanent contraception, in particular tubal ligation;

•

other methods of non-permanent contraception, including devices such as intrauterine devices, or IUDs, vaginal rings, condoms and prescription drugs such as the birth control pill, injectable and implantable contraceptives and patches; and

•

other companies that may are developing permanent contraception devices that are similar to or otherwise compete with the Essure system.

        We compete against other surgical procedures for permanent birth control, mechanical devices and other contraceptive methods, including existing methods of reversible birth control for both women and men.

        As of December 31, 2008, we were aware of two companies, Hologic, Inc. and American Medical Systems, Inc. which were attempting to bring transcervical sterilization devices to the market. In January 2009, Hologic received CE marking approval for its permanent contraception system, allowing it to market its product in the 27 countries of the European Union (EU) and three of the four member states of the European Free Trade Associations (EFTA). In the United States, the PMA application for this company is currently under Food and Drug Administration (FDA) review. This company is in the process of registering its product in Canada and Australia. In February 2009, American Medical Systems announced it has decided to suspend their development efforts in the women's permanent contraception product market.

        Many of our competitors possess a larger women's health focused sales force and have access to the greater resources required to develop and market a competitive product than we do. In addition, new competition and products may arise due to consolidation within the industry and other companies may develop products that could compete with the Essure system. Our competitive position also depends on:

•

widespread awareness, acceptance and adoption of our Essure product;

•

our ability to respond promptly to medical and technological changes through the development and commercialization of new products;

•

availability of coverage and reimbursement from third-party payors, insurance companies and others for the Essure procedure;

•

the manufacture and delivery of our products in sufficient volumes on time, and accurately predicting and controlling costs associated with manufacturing, installation, warranty and maintenance of the products;

•

our ability to attract and retain qualified personnel;

•

the extent of our patent protection or our ability to otherwise develop proprietary products and processes; and

•

securing sufficient capital resources to expand our sales and marketing efforts.

15

        These and other competitive factors may render the Essure system obsolete or noncompetitive or reduce demand for the Essure system.

Product Liability and Insurance

        The manufacture and sale of medical products involve an inherent risk of exposure to product liability claims and product recalls. We currently maintain product liability insurance with coverage limits of $10.0 million per occurrence and an annual aggregate maximum of $10.0 million, which we believe is comparable to that maintained by other companies of similar size serving similar markets. However, there can be no assurance that product liability claims in connection with clinical trials or sale of our product will not exceed such insurance coverage limits, which could have a material adverse effect on us, or that such insurance will continue to be available on commercially reasonable terms or at all. Insurance is expensive and in the future may not be available on acceptable terms, if at all. A successful product liability claim or series of claims brought against us in excess of our insurance coverage or a recall of our product could have a material adverse effect on our business, financial condition and results of operations.

Employees

        As of December 31, 2008, we have 236 full-time employees, consisting of 19 in manufacturing and quality assurance and engineering, 16 in research and development, 162 in sales and marketing and 39 in general and administrative functions worldwide. We generally depend on a number of key management, sales and marketing and technical personnel. The loss of the services of one or more key employees could delay the achievement of our strategic objectives. Our success will also depend on our ability to attract and retain additional highly qualified management, sales and marketing and technical personnel to meet our growth goals. We face intense competition for qualified personnel, many of whom are often subject to competing employment offers, and we do not know whether we will be able to attract and retain such personnel.

        None of our employees are represented by a labor union or covered by a collective bargaining agreement, and we believe our employee relations are good.

ITEM 1A.    RISK FACTORS

In addition to the other information in this Form 10-K, the following factors should be considered carefully in evaluating Conceptus and our business. The risks and uncertainties described below are those that we currently believe may materially affect us. Other risks and uncertainties that we do not presently consider to be material or of which we are not presently aware, may become important factors that affect us in the future. You should not consider this list to be a complete statement of all potential risks and uncertainties.

         We are presently a one product company and if our product fails to gain market acceptance, our business will suffer.

        We are dependent on the Essure system, which is currently our only commercial product. Notwithstanding FDA approval to market the Essure system in November 2002, the Essure system is a novel product compared to other products in the contraception market, which is dominated by procedures that are well established among physicians and patients and are routinely taught to new physicians. As a result, we believe that recommendations and endorsements by physicians will be essential for market acceptance of our product. Physicians and patients may not accept our product and we may not be able to obtain their recommendations or endorsements in sufficient amounts to be profitable. We believe that physicians will not use a product unless they determine, based on clinical data and other factors, that it is an attractive alternative to other means of contraception and that it

16

offers clinical utility in a cost-effective manner. Physicians are traditionally slow to adopt new products and treatment practices, partly because of perceived liability risks. If the Essure system does not achieve significant market acceptance among physicians, patients and healthcare payers, even if reimbursement levels are sufficient and necessary U.S. and international regulatory approvals are maintained, we may fail to achieve significant revenues or sustain profitability.

         We have a limited history of operation with the Essure system, and since inception, have incurred operating losses. We may continue to incur operating losses and we may never achieve or maintain profitability.

        We have a limited history of operation with the Essure system and since our inception in 1992, we have incurred operating losses until we experienced our first operating profit for the quarter ending September 30, 2008. Our operating income (loss) was $0.9 million in fiscal year 2008, ($14.2) million in fiscal year 2007 and ($19.8) million in fiscal year 2006. We may continue to incur operating losses as we continue sales and marketing efforts worldwide and in the United States. Our operating loss will continue until sufficient revenues can be generated to offset these expenses. These losses have caused and may continue to cause our stockholders' equity and net current assets to decrease. We may not be able to generate these revenues, and we may never achieve profitability. Our failure to achieve and sustain profitability would negatively impact the market price of our common stock and our ability to satisfy our obligations in the future.

         The fluctuation of our quarterly results may adversely affect the trading price of our common stock.

        Our revenues and results of operations have in the past and will likely vary in the future from quarter to quarter due to a number of factors, many of which are outside of our control and any of which may cause our stock price to fluctuate. The primary factors that may affect us include the following:

•

the extent to which the Essure system gains market acceptance;

•

the rate at which physicians are trained to perform the Essure procedure;

•

the timing of sales of our products and services;

•

actions relating to reimbursement matters;

•

increases in sales and marketing, product development or administration expenses;

•

the rate at which we establish U.S. and international distribution or marketing partners and the degree of their success;

•

introduction of competitive products; and

•

costs related to acquisitions of technology or businesses.

        You should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance. It is likely that in some future quarters, our results of operations may be below the expectations of public market analysts and investors. In this event, the price of our common stock may fall.

         Our advertising campaigns may not be successful.

        Our advertising programs, which are aimed at increasing consumer awareness for our Essure system, are generally expensive and may have limited success, if any. We have recently increased the number and extent of these advertising programs to make more women aware of the Essure procedure. Such campaigns require consumers to make contact with an Essure trained physician, which at times may involve a referral from their primary care physician, and to then be provided information

17

regarding birth control options by the physician, be preauthorized for insurance reimbursement and then be scheduled for the procedure. Many of these steps are not within our control, and the advertising programs may not result in revenue generation commensurate with their costs.

         We may experience disruption in supply due to our dependence on our contract manufacturer to supply our commercial product requirements and our inability to obtain suppliers of certain components for our products.

        Our suppliers may encounter problems during manufacturing due to a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, equipment malfunctions, labor shortages or environmental factors. In addition, we and our third party manufacturer purchase both raw materials used in our product and finished goods from various suppliers, and we rely on a single source supplier for certain components of our product. Although we anticipate that we have adequate sources of supply and/or inventory of these components to handle our production needs for the foreseeable future, if we or our contract manufacturer are unable to secure on a timely basis sufficient quantities of the materials we depend on to manufacture our products, if we encounter delays or contractual or other difficulties in our relationships with these suppliers, or if we cannot find alternate suppliers at an acceptable cost, then the manufacture of our products may be disrupted, which could increase our costs and have a material adverse effect on our business.

         We could face intense competition, and if we are unable to compete effectively, demand for the Essure system may be reduced.

        The medical device industry is highly competitive and is characterized by rapid and significant technological change. To compete successfully, we will need to continue to demonstrate the advantages of our Essure products and technologies over well-established alternative procedures, products and technologies, and convince physicians and other healthcare decision makers of the advantages of our products and technologies. As we commercialize and market the Essure system, we expect to compete with:

•

other methods of permanent contraception, in particular tubal ligation;

•

other methods of non-permanent contraception, including devices such as intrauterine devices, or IUDs, vaginal rings, condoms and prescription drugs such as the birth control pill, injectable and implantable contraceptives and patches; and

•

other companies that may are developing permanent contraception devices that are similar to or otherwise compete with the Essure system.

        We compete against other surgical procedures for permanent birth control, mechanical devices and other contraceptive methods, including existing methods of reversible birth control for both women and men.

        As of December 31, 2008, we were aware of two companies, Hologic, Inc. and American Medical Systems, Inc. which were attempting to bring transcervical sterilization devices to the market. In January 2009, Hologic received CE marking approval for its permanent contraception system, allowing it to market its product in the 27 countries of the European Union (EU) and three of the four member states of the European Free Trade Associations (EFTA). In the United States, the PMA application for this company is currently under Food and Drug Administration (FDA) review. This company is in the process of registering its product in Canada and Australia. In February 2009, American Medical Systems announced that it has decided to suspend their development efforts in the women's permanent contraception product market.

        Many of our competitors possess a larger women's health focused sales force and have access to the greater resources required to develop and market a competitive product than we do. In addition,

18

new competition and products may arise due to consolidation within the industry and other companies may develop products that could compete with the Essure system. Our competitive position also depends on:

•

widespread awareness, acceptance and adoption of our Essure product;

•

our ability to respond promptly to medical and technological changes through the development and commercialization of new products;

•

availability of coverage and reimbursement from third-party payors, insurance companies and others for the Essure procedure;

•

the manufacture and delivery of our products in sufficient volumes on time, and accurately predicting and controlling costs associated with manufacturing, installation, warranty and maintenance of the products;

•

our ability to attract and retain qualified personnel;

•

the extent of our patent protection or our ability to otherwise develop proprietary products and processes; and

•

securing sufficient capital resources to expand our sales and marketing efforts.

        These and other competitive factors may render the Essure system obsolete or noncompetitive or reduce demand for the Essure system.

         The current crisis affecting world financial markets may adversely affect our business and prospects.

        Worldwide market acceptance of our Essure system is dependent upon the medical equipment purchasing and procurement practices of our physician customers, patient demand for our Essure System and procedures and the reimbursement of patient's medical expenses by government healthcare programs. The current economic climate may result in the purchasers of medical equipment decreasing their medical equipment purchasing and procurement activities. Additionally, constrictions in world credit markets may result in our customers having increased difficulty securing the financing necessary to purchase our products which may result in decreased sales. Widespread economic uncertainty may also result in cost-conscious consumers making fewer elective trips to their physicians and specialists which could result in reduced demand for the Essure system. Furthermore, governments around the world facing tightening budgets could move to further reduce the reimbursement rates offered by government sponsored healthcare programs. If the current economic condition results in the occurrence of any of these events, our business and prospects may be materially adversely affected.

         Recent disruptions in the financial markets could affect our ability to obtain debt financing on favorable terms or at al,.

        The U.S. credit markets have recently experienced significant dislocations and liquidity disruptions which have caused the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the debt markets, making financing terms for borrowers less attractive, and in certain cases have resulted in the unavailability of certain types of debt financing. Continued uncertainty in the credit markets may negatively impact our ability to access debt financing on favorable terms or at all.

19

         Our stock price is volatile.

        The market price of our common stock has been, and may continue to be, highly volatile. We believe that a variety of factors could cause the price of our common stock to fluctuate, perhaps substantially, including:

•

announcements and rumors of developments related to our business, including changes in reimbursement rates or regulatory requirements, proposed and completed acquisitions, or the industry in which we compete;

•

published studies and reports relating to the comparative efficacy of products and markets in which we participate;

•

quarterly fluctuations in our actual or anticipated operating results and order levels;

•

general conditions in the worldwide economy;

•

announcements of technological innovations;

•

new products or product enhancements by us or our competitors;

•

developments in patents or other intellectual property rights and litigation; and

•

developments in relationships with our customers and suppliers.

        The price of our common stock also may be adversely affected by the amount of common stock issuable upon conversion of our Convertible Notes. In addition, in recent years the stock market in general and the markets for shares of "high-tech" companies have experienced extreme price fluctuations which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price of our common stock, and the market price of our common stock may decline.

         If the effectiveness and safety of our product are not supported by long-term data, we may not achieve market acceptance and we could be subject to liability.

        In September 2005, we received FDA approval to terminate our post-approval study with physicians newly trained in performing the Essure procedure due to the positive placement data obtained to date. The purpose of the post-approval study, required by the FDA as a condition of the November 2002 approval of the Essure system, was to determine the rate of successful bilateral placements of the Essure micro-inserts at first attempt with a large number of newly trained physicians who were not part of the previous clinical studies. Although treatment of the total number of patients required by the FDA had not been completed, the data obtained provided us with the ability to request an early termination of the study. Because of the FDA ruling, the PMA Supplement submitted in March 2005 has been reclassified as a Final Report. The results of the post-approval study demonstrated an improvement in placement rates from those obtained in the Pivotal study. In November 2005, we filed a PMA supplement with the FDA in order to obtain approval to modify the Essure Physician and Patient labeling to reflect a 94.6% first procedure bilateral placement rate based on results of the post-approval study. In October 2006, we received such approval from the FDA. In March 2006, we filed a PMA supplement with the FDA in order to obtain approval for a modified delivery system and micro-insert, and new valved introducer. We received such approval from the FDA in June 2007. A post-approval study is being conducted to investigate the bilateral placement rate at first attempt for the modified delivery system and micro-insert, and is expected to be similar for the newest model of the Essure system.

20

        Nevertheless, the long-term results of using the Essure device will not be available for several years. If long-term studies or clinical experience indicate that the Essure system is less effective or less safe than our current data suggest, we may not achieve or sustain market acceptance and/or we could be subject to significant liability.

         Our future liquidity and capital requirements are uncertain.

        As we commercialize and market the Essure system on a wide scale basis, we may require additional financing and therefore, may in the future seek to raise additional funds through bank facilities, debt or equity offerings or other sources of capital. Any additional equity or debt financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants and interest expenses that will affect our financial results. Additional funding may not be available when needed or on terms acceptable to us. If we are unable to obtain additional capital, we may be required to delay, reduce the scope of or eliminate our selling and marketing activities. Our future liquidity and capital requirements will depend upon many factors, including, among others:

•

the rate of product adoption by doctors and patients;

•

obtaining government and third-party reimbursement for the Essure procedure;

•

the liquidity of private insurance systems, as well as the timeliness of payments of government management reimbursement systems;

•

our ability to improve our days sales outstanding;

•

the resources devoted to increasing manufacturing capacity to meet commercial demands;

•

the potential conversion of our outstanding convertible senior notes;

•

our ability to reduce our cost of sales;

•

the resources devoted to developing and conducting sales and marketing and distribution programs;

•

the progress and cost of product development programs; and

•

the requirement to make royalty payments subject to the Ovion-Conceptus settlement agreement.

         We, our contract manufacturer and our subcontractors may not meet regulatory quality standards applicable to our manufacturing processes, which could have an adverse effect on our business.

        As a medical device manufacturer, we are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with the FDA's Quality System Regulation (QSR) requirements, which require manufacturers of medical devices to adhere to certain good manufacturing practice regulations, including testing, quality control and documentation procedures. In addition, the federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA. Our contract manufacturer, component suppliers and other subcontractors are also required to meet certain standards applicable to their manufacturing processes.

        In April 2004, we received FDA approval to begin manufacturing the Essure product at Accellent, Inc., or Accellent, formerly named Venusa, our third-party subcontractor located in Mexico. We transitioned almost all of our internal manufacturing operations to Accellent by the end of 2004 to

21

manufacture the components and assemble our product. Similarly, we have subcontracted with Sterigenics International to handle the sterilization of our products.

        We cannot assure you that we, our contract manufacturer, component suppliers or other subcontractors will be able to maintain compliance with all regulatory requirements. The failure by us or our contract manufacturer, component suppliers or other subcontractors to achieve or maintain compliance with these requirements or quality standards may disrupt our ability to supply products sufficient to meet demand until compliance is achieved or, in the case of our contract manufacturer, component supplier or subcontractor, until a new manufacturer, supplier or subcontractor has been identified and evaluated. In addition, our failure to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could harm our business. Furthermore, we cannot assure you that if we find it necessary to engage new manufacturers, suppliers or subcontractors to satisfy our business requirements that we will be able to locate new manufacturers, suppliers or contractors who are in compliance with regulatory requirements. Our failure to do so could have a material adverse effect on our business.

         Healthcare reform may limit our return on our product.

        The levels of revenue and profitability of medical device companies may be affected by the efforts of government and third party payers to contain or reduce the costs of healthcare through various means. In the United States, there have been, and we expect that there will continue to be, a number of federal, state and private proposals to control healthcare costs. These proposals may contain measures intended to control public and private spending on healthcare, as well as to provide universal public access to the healthcare system. If enacted, these proposals may result in a substantial restructuring of the healthcare delivery system. Significant changes in the healthcare system in the United States are likely to have a substantial impact over time on the manner in which we conduct our business and could have a material adverse effect on our business, financial condition and results of operations.

         Our liquidity could be adversely impacted by adverse conditions in the financial markets.

        At December 31, 2008, we had cash and cash equivalents of $54.7 million. This available cash and cash equivalents are held in accounts at financial institutions and consist of invested cash and cash in our operating accounts. The invested cash is invested in interest bearing money market funds managed by third party financial institutions. These funds invest in direct obligations of the government of the United States and traditional money market funds. We can provide no assurances that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

        All of our cash and cash equivalents in our operating accounts are with third party financial institutions. These balances exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to cash in our operating accounts.

         Currency exchange rate fluctuations will impact our financial performance.

        Although a majority of our revenue and operating expenses is denominated in U.S. dollars, and we prepare our financial statements in U.S. dollars in accordance with U.S. GAAP, a portion of our

22

revenue and operating expenses is in foreign currencies. As a result, we are subject to currency risks that could adversely affect our operations, including:

•

risks resulting from changes in currency exchange rates and the implementation of exchange controls; and

•

limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries.

        Changes in exchange rates will result in increases or decreases in our costs and earnings, and may also affect the book value of our assets located outside the United States and the amount of our equity. Although we may seek to minimize our currency exposure by engaging in hedging transactions where we deem it appropriate, we do not know whether our efforts will be successful.

         A portion of our investment portfolio is in auction rate securities.

        As of December 31, 2008, we held approximately $48.5 million (par value) of investments consisting entirely of auction rate securities backed by federal and state student loans securities. These auction rate securities have contractual maturities ranging from 2028 through 2047. These investments have characteristics similar to short-term investments, because at pre-determined intervals, generally ranging from 20 to 30 days, there is a new auction process at which the interest rates for these securities are reset to current interest rates. At the end of each such period, we historically have either chosen to roll-over these securities or redeem the securities for cash.

        During 2008, we experienced failed auctions of our auction rate securities and there is no assurance that auctions on these securities in our investment portfolio will succeed in the future. On December 3, 2008, we accepted an offer from UBS, the fund manager with whom we hold our auction rate securities, pursuant to which UBS issued to us Series C-2 Auction Rate Securities Rights, or Rights, which allow us to sell the auction rate securities to UBS at par value during the period beginning June 30, 2010 and ending July 2, 2012. In exchange, the Company released UBS from claims that it may have for damages related to the auction rate securities (other than consequential damages), and we granted UBS the right to sell or otherwise dispose of the auction rate securities on its behalf (so long as we are paid the par value of the auction rate securities upon any disposition).

        The Rights are subject to a number of risks. Given the substantial dislocation in the financial markets and among financial services companies, we cannot assure you that UBS will ultimately have the ability to repurchase our auction rate securities at par, or at any other price during the put period described above. We will be required to periodically assess the economic ability of UBS to meet that obligation in assessing the fair value of the Rights. Moreover, if we choose to not exercise the Rights or if UBS is unable to honor the Rights, our ability to liquidate our investments in the near term may be limited, and our ability to fully recover the carrying value of our investments may be limited or non-existent. If issuers of these securities are unable to successfully close future auctions or their credit ratings deteriorate, we may in the future be required to record further impairment charges on these investments. It could take until the final maturity of the underlying notes (up to 39 years) to realize our investments' recorded value. Based on our ability to access our cash and cash equivalents, expected operating cash flows, and our other sources of cash, we do not anticipate that the current lack of liquidity on these investments will affect our ability to continue to operate our business in the ordinary course. However, we can provide no assurance as to when these investments will again become liquid or as to whether we may ultimately have to recognize additional impairment charges in our results of operations with respect to these investments.

23

         Our international operations expose us to additional operational challenges that we might not otherwise face.

        We are subject to a number of additional risks and expenses due to our international operations. Any of these risks or expenses could have a material adverse effect on our operating results. These risks and expenses include:

•

difficulties in staffing and managing operations in multiple locations as a result of, among other things, distance, language and cultural differences;

•

shipping delays;

•

protectionist laws and business practices that favor local companies;

•

difficulties in enforcing agreements with and collecting receivables from customers outside the United States;

•

difficulties and expenses related to implementing internal controls over financial reporting and disclosure controls and procedures;

•

expenses associated with customizing products for clients in foreign countries;

•

possible adverse tax consequences;

•

the inability to obtain favorable third-party reimbursements;

•

the inability to obtain required regulatory approvals;

•

governmental currency controls;

•

changes in foreign regulatory laws governing sales of medical devices;

•

failure of local laws to provide the same degree of protection against infringement of our intellectual property;

•

clone or "knock off" products;

•

political and economic changes and disruptions; and

•

contractual provisions governed by foreign laws and various trade restrictions, including U.S. prohibitions and restrictions on exports of certain products and technologies to certain nations.

         We may not maintain regulatory approvals for the Essure system, which would delay or prevent us from generating product revenues and would harm our business and force us to curtail or cease operations.

        Numerous government authorities, both in the United States and internationally, regulate the manufacture and sale of medical devices, including the Essure system. In the United States, the principal regulatory authorities are the FDA and corresponding state agencies, such as the California Department of Health Services. The process of obtaining and maintaining required regulatory clearances is lengthy, expensive and uncertain.

         If we lose FDA approval or fail to comply with existing or future regulatory requirements in the United States or internationally, it would delay or prevent us from generating further product revenues.

        Sales of medical devices outside of the United States are subject to international regulatory requirements that vary widely from country to country. The time required to obtain clearance required by foreign countries may be longer or shorter than that required for FDA clearance, and requirements for licensing may differ significantly from FDA requirements. Many countries in which we currently market or intend to market the Essure system either do not currently regulate medical devices or have

24

minimal registration requirements; however, these countries may develop more extensive regulations in the future, which could delay or prevent us from marketing the Essure system in these countries.

        The FDA and certain foreign regulatory authorities impose numerous requirements with which medical device manufacturers must comply in order to maintain regulatory approvals. FDA enforcement policy strictly prohibits the promotion of approved medical devices for uses other than those for which the device is specifically approved by the FDA. We are required to adhere to applicable FDA regulations, such as QSR, and similar regulations in other countries, which include testing, control and documentation requirements. Ongoing compliance with QSR and other applicable regulatory requirements are monitored through periodic inspections by federal and state agencies, including the FDA and the California Department of Health Services, and by comparable agencies in other countries.

        If we fail to comply with applicable regulatory requirements, we may be subject to, among other things, warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal of the government to grant pre-market clearance or pre-market approval for devices, withdrawal of approvals and criminal prosecution, any of which could negatively impact our business.

         We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and regulations and, if we are unable to fully comply with such laws, could face substantial penalties.

        Our operations may be directly or indirectly affected by various broad state and federal healthcare fraud and abuse laws. Such laws include the federal Anti-Kickback Statute and related state anti-kickback laws, which prohibit any person from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, to induce or reward either the referral of an individual, or the furnishing, purchasing, leasing or ordering of, or arranging for or recommending the furnishing, purchasing, leasing or ordering of an item or service, for which payment may be made under federal healthcare programs, such as Medicaid programs. The federal Stark law and self-referral prohibitions under analogous state laws restrict referrals by physicians and, in some instances, other healthcare providers, practitioners and professionals, to entities with which they have indirect or direct financial relationships for furnishing of designated health services. These healthcare fraud and abuse laws are subject to evolving interpretations by various state and federal enforcement and regulatory authorities. Under current interpretations of the federal false claims act and certain similar state laws, some of these laws may also be subject to enforcement in a qui tam lawsuit brought by a private party "whistleblower," with or without the intervention of the government.

        If our past or present operations are found to be in violation of these laws and not protected under a statutory exception or regulatory safe harbor provision to the applicable fraud and abuse laws, we, our officers or our employees may be subject to civil or criminal penalties, including large monetary penalties, damages, fines, imprisonment and exclusion from federal healthcare program participation, including the exclusion of our products from use in treatment of Medicaid or other federal healthcare program patients. If federal or state investigations or enforcement actions were to occur, our business and financial condition would be harmed.

         Our intellectual property rights may not provide meaningful commercial protection for our product, which could enable third parties to use our technology, or very similar technology, and could impair our ability to compete in the market.

        We rely on patent, copyright, trade secret and trademark laws to limit the ability of others to compete with us using the same or similar technology in the United States and other countries. However, as described below, these laws afford only limited protection and may not adequately protect our rights to the extent necessary to sustain any competitive advantage we may have. The laws of some

25

foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting their proprietary rights abroad. These problems can be caused by the absence of rules and methods for defending intellectual property rights.

        We will be able to protect our technology from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or are effectively maintained as trade secrets. The patent positions of companies developing medical devices, including our patent position, generally are uncertain and involve complex legal and factual questions concerning the enforceability of such patents against alleged infringement. Recent judicial decisions have established new case law and a reinterpretation of previous patent case law, and consequently we cannot assure you that historical legal standards surrounding the questions of infringement and validity will be applied in future cases. In addition, legislation may be pending in United States Congress that, if enacted in its present form, may limit the ability of medical device manufacturers in the future to obtain patents on surgical and medical procedures that are not performed by, or as a part of, devices or compositions that are themselves patentable. Our ability to protect our proprietary methods and procedures may be compromised by the enactment of this legislation or any other limitation or reduction in the patentability of medical and surgical methods and procedures. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may therefore diminish the value of our intellectual property.

        We own, or control through licenses, a variety of issued patents and pending patent applications. However, the patents on which we rely may be challenged and invalidated, and our patent applications may not result in issued patents. Moreover, our patents and patent applications may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products. We also face the risk that others may independently develop similar or alternative technologies or design around our patented technologies.

        We have taken security measures to protect our proprietary information, especially proprietary information that is not covered by patents or patent applications. These measures, however, may not provide adequate protection of our trade secrets or other proprietary information. We seek to protect our proprietary information by entering into confidentiality agreements with employees, collaborators and consultants. Nevertheless, employees, collaborators or consultants could still disclose our proprietary information and we may not be able to protect our trade secrets in a meaningful way. If we lose any employees, we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by those former employees despite the existence of a nondisclosure and confidentiality agreement and other contractual restrictions designed and intended to protect our proprietary technology. In addition, others may independently develop substantially equivalent proprietary information or techniques or otherwise gain access to our trade secrets.

        Our ability to compete effectively will depend substantially on our ability to develop and maintain proprietary aspects of our technology. Our issued patents, any future patents that may be issued as a result of our United States or foreign patent applications, or the patents under which we have license rights may not offer any degree of protection against competitive products. Any patents that may be issued or licensed to us or any of our patent applications could be challenged, invalidated or circumvented in the future.

         If we cannot operate our business without infringing third-party intellectual property rights, our prospects will suffer.

        Our success will depend in part on our ability to operate without infringing or misappropriating the proprietary rights of others. We may be exposed to future litigation by third parties based on claims that our product infringes the intellectual property rights of others. There are numerous issued patents in the medical device industry and, as described in the next risk factor, the validity and breadth of

26

medical device patents involve complex legal and factual questions for which important legal principles remain unresolved. Our competitors may assert that our product and the methods we employ may be covered by United States or foreign patents held by them. In addition, because patent applications can take many years to issue, there may be currently pending patent applications of which we are unaware that may later result in issued patents that our product may infringe. There could also be existing patents of which we are unaware that our product may inadvertently infringe. If we lose a patent infringement lawsuit, we could be prevented from selling our product unless we can obtain a license to use technology or ideas covered by that patent or are able to redesign the product to avoid infringement. A license may not be available to us on terms acceptable to us, or at all, and we may not be able to redesign our product to avoid any infringement. If we are not successful in obtaining a license or redesigning our product, we may be unable to sell our product and our business would suffer.

         We have been, and may be in the future, a party to patent litigation, which could be expensive and divert our management's attention.

        The medical device industry has been characterized by extensive litigation regarding patents and other intellectual property rights, and companies in the industry have used intellectual property litigation to gain a competitive advantage. We may become a party to patent infringement claims and litigation or interference proceedings declared by the U.S. Patent and Trademark Office, or PTO, to determine the priority of inventions. The defense and prosecution of these matters are both costly and time consuming. We may need to commence proceedings against others to enforce our patents, to protect our trade secrets or know-how or to determine the enforceability, scope and validity of the proprietary rights of others. These proceedings would result in substantial expense to us and significant diversion of effort by our technical and management personnel.

        A third party, Ovion, Inc., or Ovion, which is now a subsidiary of American Medical Systems, or AMS, brought to our attention a patent and certain claims from a pending patent application owned by it. Ovion indicated that it believes that the claims of its patent and application cover the Essure system and its use. On October 23, 2003, we entered into a settlement agreement with Ovion pursuant to which we received a sole, worldwide license to Ovion's patent rights relative to the Essure system, and Ovion may not grant any additional such licenses to other parties. The settlement agreement provided for the payment of a royalty to Ovion that will be equal to 3.25% of the cumulative net sales of the Essure system in excess of $75.0 million for a period of no longer than ten years. In addition, the settlement agreement provided for a cash payment of $2.0 million in the fourth quarter of 2003 as a prepaid royalty, and a license fee of $2.0 million payable in our common stock in equal installments in the first and second quarters of 2004. Ovion was not granted any rights to our intellectual property pursuant to the settlement agreement. The settlement agreement was approved by the U.S. District Court for the Northern District of California on November 6, 2003.

        Although we have reached a settlement agreement with Ovion, we still believe that some or all of Ovion's claims should be included within our own patents and we have requested that the PTO declare an interference. An interference is a proceeding within the PTO to determine which party was the first to invent, and which party is thereby entitled to ownership of the claims. We believe that we filed our patent applications for the Essure system before Ovion filed the application that issued as its patent, and that we are entitled to any patentable claims now appearing in their patent that cover our product. We do not know whether the PTO will declare interference, whether we invented our product prior to Ovion's date of invention or whether we will prevail in an interference proceeding if it is declared by the PTO. If the PTO declares interference in our favor and we are found to have priority of invention, we may avoid having to pay Ovion future royalties on the sales of our product.

        An adverse determination in new litigation or interference proceedings to which we are or may become a party could subject us to significant liabilities to third parties or require us to seek licenses

27

from third parties. Although patent and intellectual property disputes in the medical device area have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. We may be unable to obtain necessary licenses on satisfactory terms, if at all. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling the Essure system.

        One of the patents included in our license from Target Therapeutics, a division of Boston Scientific Corporation, has been the subject of reexamination proceedings in the PTO and an infringement lawsuit by Target Therapeutics. We are not a party to this lawsuit. The patent is directed to variable stiffness catheters for use with guidewires, as might be used in our future products. Although the PTO reaffirmed the patent with amended claims and the lawsuit was settled, the patent could be challenged or invalidated in the future. If this patent is invalidated, our ability to prevent others from using this proprietary technology would be compromised.

         If we fail to manage any expansion or acquisition, our business could be impaired.

        We may in the future acquire one or more technologies, products or companies that complement our business, such as our recent acquisition of Conceptus SAS in France in January 2008. We may not be able to effectively integrate these into our business and any such acquisition or expansion could bring additional risks, exposures and challenges to our company. In addition, acquisitions may dilute our earnings per share, disrupt our ongoing business, distract our management and employees, increase our expenses, subject us to liabilities and increase our risk of litigation, all of which could harm our business. If we use cash to acquire technologies, products, companies or expand operations, it may divert resources otherwise available for other purposes. If we use our common stock to acquire technologies, products or companies, our stockholders may experience substantial dilution. If we fail to manage any expansion or acquisition, our business could be impaired.

         Government or third party reimbursement for the Essure procedure may not be available or may be inadequate, which could adversely affect consumer demand, limit our future product revenues and adversely affect our profitability.

        Market acceptance of the Essure system in the United States and in international markets will depend in part upon the availability of reimbursement within prevailing healthcare payment systems. Reimbursement systems in international markets vary significantly by country and sometimes by region, and reimbursement approvals must be obtained on a country-by-country basis. Many international markets have government managed healthcare systems that determine reimbursement for new devices and procedures. In most markets, there are private insurance systems as well as government managed systems. Regardless of the type of reimbursement system, we believe that physician advocacy of our product will be required to obtain reimbursement.

        Availability and extent of continued reimbursement will depend, at least in part, on the clinical and cost effectiveness of our product. We cannot assure that reimbursement for our product will continue to be available in the United States or in international markets under either government or private reimbursement systems, or that those physicians will support and advocate reimbursement for use of our product for all indications intended by us. We may be unable to obtain or maintain reimbursement in any country within a particular time frame, for a particular amount or at all, which would limit our future product revenues and delay or prevent our profitability.

        In addition, the level of reimbursement offered by prevailing healthcare payment systems may correspondingly affect the level of co-payment that is required by the patient. As an elective procedure, a patient's decision to have the Essure procedure may be impacted by a decline in overall economic conditions as patients are forced to prioritize discretionary spending.

28

         We may be exposed to product liability claims, and we have only limited insurance coverage.

        The manufacture and sale of medical products involve an inherent risk of exposure to product liability claims and product recalls. We currently maintain product liability insurance with coverage limits of $10.0 million per occurrence and an annual aggregate maximum of $10.0 million, which we believe is comparable to that maintained by other companies of similar size serving similar markets. However, we cannot assure you that product liability claims in connection with clinical trials or commercial sales of the Essure system will not exceed such insurance coverage limits or that such insurance will continue to be available on commercially reasonable terms, or at all. Insurance is expensive and in the future may not be available on acceptable terms, if at all. A successful product liability claim or series of claims brought against us in excess of our insurance coverage, or a recall of our product, could cause our stock price to fall.

         We may not be able to attract and retain additional key management, sales and marketing and technical personnel, or we may lose existing key management, sales and marketing or technical personnel, which may delay our development and marketing efforts.

        We depend on a number of key management, sales and marketing and technical personnel. The loss of the services of one or more key employees could delay the achievement of our development and marketing objectives. Our success will also depend on our ability to attract and retain additional highly qualified management, sales and marketing and technical personnel to meet our growth goals. We face intense competition for qualified personnel, many of whom are often subject to competing employment offers, and we do not know whether we will be able to attract and retain such personnel.

         We are required to recognize expense for stock-based compensation related to employee stock options and other share-based payment awards, and we cannot assure you that the expense that we are required to recognize measures accurately the value of our share-based payment awards and the recognition of this expense could cause the trading price of our common stock to decline.

        Medical technology companies like ours have a history of using broad based employee stock option programs to hire, incentivize and retain our workforce in a competitive marketplace. Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R), Share-Based Payment ("SFAS 123(R)"). SFAS 123(R) established accounting for stock-based awards exchanged for employee services. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award which is computed using the Black-Scholes option valuation model, and is recognized as expense over the employee requisite service period. The application of SFAS 123(R) requires the use of an option pricing model to determine the fair value of share-based payment awards. This determination of fair value is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors. Option pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because our employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, the existing valuation models may not provide an accurate measure of the fair value of our employee stock options. Although the fair value of employee stock options is determined in accordance with SFAS 123(R) and Staff Accounting Bulletin 107 using the Black-Scholes option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. As a result of the application of SFAS 123(R), our net losses for the fiscal years 2008, 2007, and 2006 were higher than they would have been had we not been required to adopt SFAS 123(R). This will continue to be the case for future periods. We cannot predict the effect that this adverse impact on our reported operating results will have on the trading price of our common stock. In addition, this could impact our ability to utilize

29

broad based employee stock plans to reward employees and could result in a competitive disadvantage to us in the employee marketplace.

         Future changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse unexpected revenue fluctuations and affect our reported results of operations.

        A change in accounting standards or practices or a change in existing taxation rules or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and taxation rules and varying interpretations of accounting pronouncements and taxation practice have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

         Our 2.25% convertible senior notes present certain liquidity and other risks.

        In February 2007, we issued an aggregate principal amount of $86,250,000 of our 2.25% convertible senior notes due 2027. The net share settlement feature of the notes may reduce our liquidity. If the notes are convertible, then upon conversion, holders will receive cash and, if applicable, shares of our common stock based on an initial conversion rate, subject to adjustment, of 35.8616 shares per $1,000 principal amount of notes (which represents an initial conversion price of $27.89 per share), in certain circumstances. We must settle at least a portion of our conversion obligation in cash, however we may not have sufficient funds to pay in full the cash obligation upon such conversion.

        On each of February 15, 2012, February 15, 2017 and February 15, 2022, holders of the notes may require us to purchase, for cash, all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest to, but excluding, that date. If a fundamental change occurs (as defined in the indenture governing the notes), holders of the notes may require us to repurchase, for cash, all or a portion of their notes. In addition, upon conversion of the notes, we must pay the principal return in cash. We may not have sufficient funds to pay the interest, purchase price, repurchase price or principal return when due. In addition, the terms of any borrowing agreements which we may enter into from time to time may require early repayment of borrowings under circumstances similar to those constituting a fundamental change. These agreements may also make our repurchase of notes, or the cash payment due upon conversion of the notes, an event of default under the agreements. If we fail to pay interest on the notes, to repurchase the notes or to pay the cash payment due upon conversion when required, we will be in default under the indenture for the notes. The indenture for the notes will not restrict our ability to incur in additional indebtedness. Our level of indebtedness could have important consequences on our future operations, including:

•

making it more difficult for us to meet our payment and other obligations under the notes and our other outstanding debt;

•

resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in any debt agreements that we may have, which could result in all of our debt becoming immediately due and payable;

•

reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;

•

limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; and

•

placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.

30

         Provisions in our charter documents, Delaware law and the indenture for our 2.25% convertible senior notes due 2027 could discourage an acquisition of us by a third party, even if the acquisition would be favorable to you.

        Protections against unsolicited takeovers in our rights plan, charter and bylaws may reduce or eliminate our stockholders' ability to resell their shares at a premium over market price. We have a stockholders rights plan which expires on February 27, 2012. Our rights plan may prevent an unsolicited change of control of our company. Our rights plan may adversely affect the market price of our common stock or the ability of stockholders to participate in a transaction in which they might otherwise receive a premium for their shares. In addition, the issuance of preferred stock or common stock upon exercise of rights issued under the plan could dilute the voting, liquidation and other economic rights of our stockholders and make it more difficult for a third party to acquire us.

        Our charter and bylaws contain provisions relating to issuance of preferred stock, special meetings of stockholders and advance notification procedures for stockholder proposals that could have the effect of discouraging, delaying or preventing an unsolicited change in the control of our company. Our charter provides for our board of directors to be divided into three classes of directors, serving staggered three-year terms. The classified board provision could have the effect of discouraging a third party from making a tender offer or attempting to obtain control of us.

        In addition, we are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, unless certain conditions are met. Section 203 may discourage, delay or prevent an acquisition of our company even at a price our stockholders may find attractive.

        If a "fundamental change" (as defined in the indenture governing the 2.25% convertible senior notes due 2007), occurs, holders of the notes will have the right, at their option, to require us to repurchase all or a portion of their notes. In the event of a "make-whole fundamental change (as defined in the indenture governing the notes)," we also may be required to increase the conversion rate applicable to the notes surrendered for conversion in connection with that make-whole fundamental change. In addition, the indenture for the notes prohibits us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the notes. These and other provisions, including the provisions of our charter documents and Delaware law, could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to our security holders.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

        Not applicable.

ITEM 2.    PROPERTIES

        We are headquartered in Mountain View, California where we lease a building occupying approximately 58,242 square feet of office, research and development and manufacturing space. The lease agreement has an expiration date of June 15, 2009. On December 5, 2008 we renegotiated our current lease for an additional forty-nine months. The new lease agreement has an expiration date of July 31, 2013.

        With the acquisition of Conceptus SAS on January 7, 2008, we assumed a lease of a 1,938 square foot sales office located in Versailles, France. This lease expires on March 7, 2011.

        In July 2008 we entered into a Lease Agreement for a minimal office space in the United Kingdom. This lease expires on July 16, 2009.

31

ITEM 3.    LEGAL PROCEEDINGS

        From time to time, we are involved in legal proceedings arising in the ordinary course of business. We believe there is no litigation pending that could have, individually or in the aggregate, a material adverse effect on our financial position, results of operations or cash flows.

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

        No matters were submitted to a vote of our stockholders during the fourth quarter of the fiscal year ended December 31, 2008.

PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Our common stock has been traded on the Nasdaq Global Market under the symbol CPTS since the effective date of our initial public offering on February 1, 1996. The following table presents the high and low sale prices for our common stock as reported on the Nasdaq Global Market for the period indicated.

	High		Low
Year Ended December 31, 2008:
Fourth Quarter	$	17.16	$	9.17
Third Quarter	$	20.03	$	15.81
Second Quarter	$	19.86	$	16.73
First Quarter	$	19.41	$	13.97
Year Ended December 31, 2007:
Fourth Quarter	$	22.22	$	17.87
Third Quarter	$	20.38	$	14.68
Second Quarter	$	21.95	$	17.12
First Quarter	$	23.69	$	17.71

        As of February 23, 2009, there were 116 stockholders of record and the last reported sale price of our common stock was $11.68.

        We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. We intend to retain any future earnings for reinvestment in our business. Any future determination to pay cash dividends will be at the discretion of the board of directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.

        The information under the caption "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" in Part III, Item 12 of this Annual Report on Form 10-K is incorporated herein by reference.

32

Performance Graph

        The following graph compares the five years cumulative total stockholder return for the Company's common stock, assuming reinvestment of all dividends, for the period from December 31, 2003 to December 31, 2008 to that of the Nasdaq Stock Market—U.S. Index and the Nasdaq Medical Equipment Index for the period from December 31, 2003 to December 31, 2008. The graph assumes that $100 was invested on December 31, 2003 in the Company's Common Stock and in each of the comparative indices.

33

ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

        The following table presents selected consolidated financial data of Conceptus, Inc. This historical data should be read in conjunction with the attached consolidated financial statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing in Item 7 of this report. The selected consolidated statement of operations data for the years ended December 31, 2008, 2007 and 2006 and the consolidated balance sheet data as of December 31, 2008 and 2007 are derived from our audited consolidated financial statements and the related notes, which are included elsewhere in this report. The selected consolidated statement of operations data for the years ended December 31, 2005 and 2004 and the consolidated balance sheet data as of December 31, 2006, 2005 and 2004 are derived from our audited consolidated financial statements and the related notes, which are not included in this report.

		Years Ended December 31,
		2008(1)			2007(1)			2006(1)			2005			2004
		(in thousands, except per share data)
Consolidated Statement of Operations Data:
Net sales		$	101,977		$	64,442		$	41,900		$	21,169		$	11,612
Cost of goods sold			21,650			16,682			14,027			8,396			7,112
Gross profit			80,327			47,760			27,873			12,773			4,500
Operating expenses:
	Research and development		6,788			5,875			4,366			4,264			4,067
	Selling, general and administrative		72,685			56,084			43,318			31,255			27,075
	Total operating expenses		79,473			61,959			47,684			35,519			31,142
	Operating income (loss)		854			(14,199	)		(19,811	)		(22,746	)		(26,642	)
Interest income and other expense and other expense, net			(961	)		2,567			1,324			945			573
Loss before provision for income taxes			(107	)		(11,632	)		(18,487	)		(21,801	)		(26,069	)
	Benefit from income taxes		(24	)		—			—			—			—
Net loss		$	(83	)	$	(11,632	)	$	(18,487	)	$	(21,801	)	$	(26,069	)
Basic and diluted net loss per share		$	(0.00	)	$	(0.39	)	$	(0.64	)	$	(0.82	)	$	(1.05	)
Weighted-average shares used in computing
	basic and diluted net loss per share		30,216			29,463			28,993			26,725			24,754

(1)

We adopted SFAS 123(R) on January 1, 2006 and have included employee based stock-based compensation in our results of operations in 2008, 2007 and 2006.

	December 31,
	2008			2007			2006			2005			2004
	(in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and short term investments(2)	$	54,720		$	45,150		$	25,838		$	32,492		$	32,271
Working capital		35,406			50,484			26,079			34,589			32,165
Total assets(3)		163,705			120,675			39,751			47,409			42,177
Notes payable		86,250			86,250			—			—			—
Accumulated deficit		(235,332	)		(235,249	)		(223,617	)		(205,130	)		(183,329	)
Total stockholders' equity		30,446			21,927			31,014			40,171			36,994

(2)

Includes restricted cash of $69,000 at December 31, 2005, 2004 and 2003.

(3)

Includes restricted cash of $351,000 at December 31, 2008.

34

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto located elsewhere in this report.

Overview

        We develop, manufacture and market the Essure® permanent birth control system, an innovative and proprietary medical device for women that was approved for marketing in the United States in November 2002 by the U.S. Food and Drug Administration, or FDA. The Essure system uses a soft and flexible micro-insert that is delivered into a woman's fallopian tubes to provide permanent birth control by causing a benign tissue in-growth that blocks the fallopian tubes. A successfully placed Essure micro-insert and the subsequent tissue growth prohibits the egg from traveling through the fallopian tubes and therefore prevents fertilization. The effectiveness rate of the Essure system is 99.80% after four years of follow-up.

        On January 7, 2008, we acquired all of the outstanding shares of Conceptus SAS. As a result of this transaction, Conceptus SAS became our wholly-owned subsidiary, which sells Essure directly in France and utilizes distributors to sell Essure throughout the rest of Europe. We believe the acquisition of Conceptus SAS expands our presence in international markets and will increase our revenues as we will recognize sales at end user pricing as compared to the price at which we previously sold the Essure product directly to Conceptus SAS. Our consolidated financial statements for the year ended December 31, 2008 include the financial results of Conceptus SAS beginning from the acquisition date of January 7, 2008. Consolidated net sales for the year ended December 31, 2008 were $102.0 million of which 79% were generated in the United States. For financial information about geographic areas and for segment information with respect to net sales, refer to the information set forth in Note 2 of our consolidated financial statements.

The Essure Procedure

        The Essure procedure is typically performed in the office setting and is intended to be a less invasive and a less costly solution to tubal ligation, the leading form of permanent birth control in the United States and worldwide. Laparoscopic tubal ligation and tubal ligation by laparotomy typically involve abdominal incisions and/or punctures, general or regional anesthesia, four to ten days of normal recovery time and the risks associated with an incisional procedure. The Essure procedure does not require cutting or penetrating the abdomen, which lowers the likelihood of post-operative pain due to the incisions/punctures, and it can be performed in an outpatient setting. Currently, the majority of the Essure procedures are performed using conscious sedation, such as IV sedation with a local anesthesia. General anesthesia is not typically used unless required by hospital protocol, if requested by the patient, or based on the experience and comfort level of the physician. In the Pivotal trial of the Essure system, the average hysteroscopic procedure time was 13 minutes. A patient is typically discharged approximately 45 minutes after the Essure procedure. No overnight hospital stay is required. Furthermore, the Essure system is effective without drugs or hormones. There is a three-month waiting period after the procedure during which the woman must use another form of birth control while tissue in-growth occurs. At 90 days following the procedure, U.S. patients complete a confirmation test called a hysterosalpingogram, or HSG, which can determine whether the device was placed successfully and whether the fallopian tubes are occluded. Outside of the United States, patients are required to return for a pelvic X-ray at three months post-procedure with a subsequent HSG if device location on the initial radiographic image appears suspicious.

        We believe that the Essure system is a better alternative to tubal ligation for physicians, hospitals and payers. The Essure system is a less invasive permanent birth control option for physicians to offer to their patients; hospitals are able to utilize their facilities more cost effectively with the Essure procedure compared with tubal ligation; and payers are able to experience cost reductions resulting from the elimination of overhead and procedural costs related to anesthesia and post-operative hospital

35

stays associated with tubal ligations. In addition, we believe the Essure procedure is superior to other non-tubal ligation permanent contraception alternatives because, unlike other device designs, the Essure procedure does not involve the use of radio frequency (RF) energy, which subjects the patient to risks of thermal injury, bowel injury and dilutional hyponatremia. Published reports estimate that approximately 700,000 tubal ligation procedures are performed each year in the United States. We intend to capture the majority share of this market and establish the Essure procedure as the gold standard for permanent birth control. We also believe the Essure system is a solution for women whose family is complete but are using temporary methods of birth control. In addition, payers may also benefit from the reduction of unplanned pregnancies associated with non-permanent birth control methods used by patients who have chosen to avoid the drawbacks of traditional permanent birth control methods but who may otherwise elect to use the Essure system.

Critical Accounting Estimates and Policies

        We follow accounting principles generally accepted in the United States of America, or GAAP, in preparing our financial statements. As part of this work, we must make many estimates and judgments about future events. These affect the value of the assets and liabilities, contingent assets and liabilities and revenues and expenses reported in our financial statements. We believe these estimates and judgments are reasonable and we make them in accordance with policies based on information available at the time. However, actual results could differ from our estimates and could require us to record adjustments to expenses or revenues material to our financial position and results of operations in future periods. We believe our most critical accounting policies, estimates and judgments include the following:

•

Revenue Recognition;

•

Stock-Based Compensation Expense;

•

Excess and Obsolete Inventory;

•

Allowance for Doubtful Accounts;

•

Cash Equivalents and Marketable Securities;

•

Warranty Obligation;

•

Impairment of Long-Lived Assets;

•

Debt;

•

Contingent Liabilities; and

•

Income Taxes.

Revenue Recognition

        Our revenue is primarily comprised of the sale of our Essure system. We recognize revenue in accordance with the Securities and Exchange Commission, or SEC, Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements or SAB 104. Under this standard, the following four criteria must be met in order to recognize revenue:

1.

Persuasive evidence of an arrangement exists;



2.

Delivery has occurred;



3.

Our selling price is fixed or determinable; and



4.

Collectibility is reasonably assured.

        The four revenue recognition criteria and other revenue related pronouncements are applied to our sales as described in the following paragraphs.

        We recognize revenues from our Essure system when we ship the device. We recognize revenue upon shipment of the system as we have no continuing obligations subsequent to shipment. We do not accept returns of the Essure system. We obtain written authorizations from our customers for a specified amount of product at a specified price and the price is not dependent on actual Essure procedures performed.

36

        For sales through distributors we recognize revenues upon shipment as we have no continuing obligations subsequent to shipment. Our distributors are responsible for all marketing, sales, training and warranty of the Essure device in their respective territories. Our standard terms and conditions do not provide price protection or stock rotation rights to any of our distributors. In addition, our distributor agreements do not allow the distributor to return or exchange the Essure system and the distributor is obligated to pay us for the sale regardless of their ability to resell the product.

        Additionally, we require physicians to be preceptored between 3 and 5 cases by a certified trainer before being able to perform the procedure independently. There are no revenues associated with the training activities. We do not charge a fee for the activity and no commitment arises for the physician from the preceptorship. Physician training is provided upfront and we have no obligation subsequent to the initial training. Training costs have not been significant from inception to-date.

        We assess the credit worthiness of all customers in connection with their purchases. We only recognize revenue when collectability is reasonably assured.

        Certain sales of our Essure system require delivery of additional items. These obligations are fulfilled after shipment of the Essure system, and in these cases, we recognize revenue in accordance with the multiple element accounting guidance set forth in Emerging Issues Task Force No. 00-21, Revenue Arrangements with Multiple Deliverables or EITF 00-21. When we have objective and reliable evidence of fair value of the undelivered elements we defer revenue attributable to the post-shipment obligations and recognize such revenue when the obligation is fulfilled. Otherwise we defer all revenue until all elements are delivered.

Stock-Based Compensation Expense

        Effective January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 123(R), Share-Based Payment, or SFAS 123(R), which establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award which is computed using the Black-Scholes option valuation model, and is recognized as expense over the employee requisite service period. We previously applied Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations and provided the required pro forma disclosures of SFAS No. 123, Accounting for Stock-Based Compensation.

        The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions shown in Note 2—Summary of Significant Accounting Policies of our Notes to Consolidated Financial Statements. The Black-Scholes option valuation model requires the input of highly subjective assumptions, including the expected life of the stock-based award and the stock-price volatility. The assumptions used in calculating the fair value of share-based compensation represent management's best estimates, but these estimates involve inherent uncertainties and the application of management's judgment. As a result, if other assumptions had been used, our stock-based compensation expense could have been materially different. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the share-based compensation expense could be materially different.

        The expected term of the options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free interest rate for periods equal to the estimated life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on historical volatility of our stock.

        As stock-based compensation expense recognized in the Consolidated Statement of Operations is based on awards ultimately expected to vest, it is reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience.

37

Excess and Obsolete Inventory

        Inventories are stated at the lower of cost or market, cost being determined on the first-in, first-out method. Inventory reserves are recorded when conditions indicate that the selling price may be less than the cost. Reserves for potentially excess and obsolete inventories are provided based on historical experience and current product demand. Once established, the original cost of the inventory less the related inventory reserve represents the new cost basis. Reversal of these reserves is recognized only when the related inventory has been scrapped or sold.

        As of December 31, 2008 and 2007, our reserves were approximately $0.1 million and $0.2 million, respectively.

Allowance for Doubtful Accounts

        We assess the credit worthiness of our customers on an ongoing basis in order to mitigate the risk of loss from customers not paying us. However, we account for the possibility that certain customers may not pay us by maintaining an allowance for doubtful accounts. We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by our review of their current credit information. We monitor collections and payments from our customers and maintain our allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. Our exposure to credit losses may change as we increase our receivables. Changes in customer type and mix, as well as domestic and international economic climate, will also impact potential credit losses. Despite the significant amount of analysis used to compute the required allowance, if the financial condition of our customers were to deteriorate, resulting in an impairment of our ability to make payments, additional allowances may be required. In addition, our increase in sales may result in a higher accounts receivable balance, which may require a higher balance in the allowance. As of December 31, 2008 and 2007, our allowance for doubtful accounts totaled approximately $0.5 million and $0.4 million, respectively.

Cash Equivalents and Marketable Securities

        We consider all highly liquid investments with maturity from date of purchase of three months or less to be cash equivalents. We maintain deposits with three financial institutions and invest our excess cash primarily in money market funds, commercial paper, corporate notes, municipal bonds and government securities, which bear minimal risk. Our cash and cash equivalents in our operating accounts are with third party financial institutions. At times, these balances exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to cash in our operating accounts. At December 31, 2008 long-term investments consist of auction rate securities ("ARS").

        As of December 31, 2008, we held $48.5 million (par value) in ARS backed by federal and state student loans which are variable rate debt instruments and bear interest rates that reset approximately every 20-30 days. These ARS have a contractual maturity ranging from 2028 through 2047.

        Our ARS are long-term debt instruments backed by student loans, a substantial portion of which are guaranteed by the United States government. Prior to 2008, our ARS were highly liquid, using a Dutch auction process that resets the applicable interest rate at predetermined intervals, typically every 20-30 days, to provide liquidity at par. We have experienced failed auction in 2008 on all of our ARS. The failures of these auctions do not affect the value of the collateral underlying the ARS, and we continue to earn and receive interest on our ARS at a pre-determined formula with spreads tied to particular interest rate indexes.

        In November 2008, we accepted an offer from UBS AG ("UBS"), providing us with rights related to our auction rate security rights (the "Rights"). The Rights permit us to require UBS to purchase our ARS at par value, which is defined as the price equal to the liquidation preference of the ARS plus

38

accrued but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, at its discretion, to purchase or sell our ARS at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our ARS under the Rights at par value. However, if the Rights are not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our ARS. So long as we hold our ARS, they will continue to accrue interest as determined by the auction process or the terms of the ARS if the auction process fails.

        UBS's obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

        We have accounted for the Rights as a freestanding financial instrument and elected to record the value of the Rights under the fair value option of SFAS No. 159, Establishing the Fair Value Option for Financial Assets and Liabilities. As a result, upon acceptance of the offer from UBS, we recorded approximately $5.1 million as the fair value of the Rights with a corresponding credit to other income. As a result of our elections to record the Rights at fair value, unrealized gains and losses will be included in earnings in future periods. We estimated the fair value of the Rights using the expected value that we will receive from UBS which was calculated as the difference between the anticipated recognized loss and par value of the ARS as of the option exercise date. This value was discounted by using a UBS credit default rate to account for the consideration of UBS credit risk.

        Although the Rights represent the right to sell the securities back to UBS at par, we will be required to periodically assess the economic ability of UBS to meet that obligation in assessing the fair value of the Rights. We will continue to classify the ARS as long-term investments until June 30, 2009, one year prior to the expected settlement.

        Prior to accepting the UBS offer, we recorded our ARS as available-for-sale investments. We recorded unrealized gains and losses on our available-for-sale securities, in accumulated other comprehensive income (loss) in the stockholders' equity section of our balance sheets. Such an unrealized loss did not change net income (loss) for the applicable accounting period.

        In connection with our acceptance of the UBS offer in November 2008, resulting in our right to require UBS to purchase our ARS at par value beginning on June 30, 2010, we transferred our ARS from available-for-sale to trading securities in accordance with SFAS 115. The transfer to trading securities reflects our intent to exercise our put option during the period June 30, 2010 to July 3, 2012. Prior to our agreement with UBS, our intent was to hold our ARS until we realized the par value.

        We recorded a temporary reduction in carrying value of $2.8 million for the nine months ended September 30, 2008, which was recorded as an unrealized loss in accumulated other comprehensive loss. Upon transfer to trading securities, we transferred the $2.8 million recorded as unrealized loss in accumulated other comprehensive loss and recorded an unrealized loss of $5.3 million in other expense, net in the fourth quarter of 2008, representing the difference between the par and fair value of the ARS at the date of transfer. We determined that use of a valuation model was the best available technique for measuring the fair value of our ARS. We used a trinomial discount model weighting estimated future cash flows, quality of collateral and the probability of future successful auctions occurring. In determining a discount factor for each ARS, the model weights various factors, including assessments of credit quality, duration, insurance wraps, portfolio composition, discount rates, overall capital market liquidity and comparable securities, if any.

        In the future we expect any changes in the fair value of our ARS to be materially offset in part by changes in the fair value of our put option with UBS.

        We continue to monitor the market for ARS and consider its impact (if any) on the fair market value of our investments. If the market conditions deteriorate further, we may be required to record additional unrealized losses in earnings, offset partially by corresponding increases in the put option. We believe that, based on our current cash and cash equivalents balance, the current lack of liquidity in the credit and capital markets will not have a material impact on our liquidity, cash flows or ability to fund our operations.

39

        In November 2008 we entered into a demand revolving credit line agreement with UBS, payable on demand, in an amount equal to a specified percentage of fair value of our auction rate securities at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the auction rate securities that we have pledged as security for the credit line. Additionally, under the terms of the settlement agreement, if UBS is able to sell our auction rate securities at par, proceeds would be utilized to first repay any outstanding balance under the demand revolving credit line. We are still able to sell the auction rate securities, but in such a circumstance, if we sold at less than par, we would not be entitled to recover the par value support from UBS. See Note 11—Credit Line, for more information about this line of credit, Note 3—Long-term Investment and Note 4—Fair Value Measurements of our Notes to Consolidated Financial Statements for information about the accounting treatment of our ARS.

Warranty Obligation

        We provide for the estimated cost of our product warranties at the time revenue is recognized. We record a liability for the estimated future costs associated with warranty claims, which is based upon historical experiences and our estimate of the level of future costs. Warranty costs are reflected in the statement of operations as a cost of goods sold. We expect that warranty expense will increase as and if we increase our net sales. Warranty reserve rates may change if we change manufacturing process or change our third-party manufacturing contractor. Should actual costs differ from historical experience, increases in warranty expense may be required. Warranty reserves as of December 31, 2008 and 2007 were approximately $0.3 million and $0.2 million, respectively.

Impairment of Long-Lived Assets

        We account for the impairment of long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. We evaluate the carrying value of our long-lived assets, consisting primarily of our property and equipment, the Essure license acquired from a patent litigation settlement in 2003 and intangible assets acquired in connection with our acquisition of Conceptus SAS in 2008, whenever certain events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such events or circumstances include a prolonged industry downturn, a significant decline in our market value or significant reductions in projected future cash flows.

        Significant judgments and assumptions are required in the forecast of future operating results used in the preparation of the estimated future cash flows, including profit margins, long-term forecasts of the amounts and timing of overall market growth and our percentage of that market, groupings of assets, discount rates and terminal growth rates. In addition, significant estimates and assumptions are required in the determination of the fair value of our tangible long-lived assets, including replacement cost, economic obsolescence, and the value that could be realized in orderly liquidation. Changes in these estimates could have a material adverse effect on the assessment of our long-lived assets, thereby requiring us to write down the assets. Our net long-lived assets as of December 31, 2008 and 2007 included property and equipment of $8.6 million and $5.3 million, respectively, and other identifiable intangible assets of $5.3 million and $1.2 million, respectively.

Goodwill

        Goodwill is the excess of the purchase price over the fair value of the other net assets, including customer relationship and covenant not to compete, of acquired businesses in connection with our acquisition of Conceptus SAS in 2008. Under SFAS 142, Goodwill and Other Intangible Assets, goodwill is not amortized, but is assigned to reporting units and tested for impairment annually during the fourth quarter, or whenever there is an impairment indicator. We assess goodwill impairment indicators

40

quarterly, or more frequently, if a change in circumstances or the occurrence of events suggests the remaining value may not be recoverable.

        The first step of the impairment test for goodwill compares the fair value of a reporting unit with its carrying amount, including goodwill and other indefinite lived intangible assets. If the fair value is less than the carrying amount, the second step determines the amount of the impairment by comparing the implied fair value of the goodwill with the carrying amount of that goodwill. An impairment charge is recognized only when the calculated fair value of a reporting unit, including goodwill and indefinite lived intangible assets, is less than its carrying amount. We performed an annual assessment during the fourth quarter of 2008 of our goodwill at the reporting unit level. No impairment charges have been recorded through December 31, 2008.

Debt

        We account for our convertible senior notes in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. In this regard, our convertible debt and net share settlement feature does not fall under the category of a derivative, and consequently, we classify our long term debt as a liability in our consolidated balance sheet. Our convertible hedge and our outstanding warrants are accounted as set forth by Emerging Issues Task Force 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock, through which we record the convertible hedge transaction and the warrants in additional paid in capital. Subsequent changes in fair value of the agreement are not recognized.

        In addition, we account for the cost issuance of debt in accordance with Accounting Principles Board 21, Interest on Receivables and Payables, or APB 21. Consequently, these costs were recognized as an asset and are amortized by periodic charges to income. We apply the straight-line method, which is not materially different to the effective interest method set forth by APB 21.

Contingent Liabilities

        We account for contingencies in accordance with SFAS No. 5, Accounting for Contingencies, which requires that an estimated loss from a loss contingency shall be accrued when information available prior to issuance of the financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and when the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal and income tax matters requires us to use our judgment. We believe that our accruals for these matters are adequate. Nevertheless, the actual loss from a loss contingency might differ from our estimates.

Income Taxes

        We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to affect taxable income. On January 1, 2007, we adopted the provisions of Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) which is an interpretation of SFAS No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The adoption of the provisions of FIN 48 did not have a material effect on our financial position and results of operations. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our actual current tax exposure together with assessing temporary differences that may result in deferred tax assets. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. We must assess whether it is "more likely than not" that our deferred tax assets will be recovered from future taxable income and to the extent

41

we believe that recovery is not likely, we must establish a valuation allowance. We evaluate the need for a valuation allowance for our deferred tax assets. Due to our cumulative pre-tax U.S. losses and the current uncertainty of our ability to realize our U.S. deferred tax assets, a valuation allowance in an amount equal to our U.S. deferred tax assets has been recorded.

RESULTS OF OPERATIONS

2008 results compared to 2007 (in thousands, except percentages)

	Years Ended December 31,
	2008					2007					2008- 2007 % Change
	Amount		%(a)			Amount		%(a)
Net sales	$	101,977		100	%	$	64,442		100	%		58	%
Gross profit		80,327		79	%		47,760		74	%		68	%
Research and development expenses		6,788		7	%		5,875		9	%		16	%
Selling, general and administrative expenses		72,685		71	%		56,084		87	%		30	%
Net loss		83		0	%		11,632		18	%		(99	)%

(a)

expressed as a percentage of total net sales.

Net Sales

        The following table summarizes net sales by geographic region:

	Years Ended December 31,
	2008			2007
Net sales (in thousands)	$	101,977		$	64,442
United States of America		79	%		92	%
France		13	%		7	%
Europe (other than France)		7	%		0	%
Other		1	%		1	%

        Net sales are attributed to region based on the shipping location of our customers.

        The increase in net sales of $37.5 million or 58% is the result of continued commercialization and marketing of the Essure system worldwide, and reflects the increasing numbers of physicians entering and completing training in the use of the procedure. International sales comprised 21% of our total sales in 2008, which is an increase of 345% compared to 2007, reflecting revenues realized from our acquisition of Conceptus SAS and the recognition of sales at higher end-user pricing. The net sales increase also reflects a domestic revenue increase of 35% in 2008 as compared to 2007.

        We expect our net sales for 2009 to be in the range of approximately $125.0 million to $135.0 million, which would represent 23% to 32% growth from net sales in 2008 as we continue to increase the number of physicians performing the Essure procedure. We will also continue our programs aimed at raising patient awareness of the Essure procedure, such as radio, print and television advertising. We believe our revenue growth in 2009 and beyond will be significantly influenced by how successful we are in achieving our objectives. However, as we have noted elsewhere and in the risk factors in this report, our expected revenue growth involves many risks, many of which are not entirely within our control.

42

Gross Profit

        Cost of goods sold increased by $5.0 million to $21.7 million in 2008 as compared to $16.7 million in 2007. This increase was caused by higher volumes of sales. Gross profit margin was 79% for 2008 and 74% for 2007. The year-over-year increase in gross margin is related to higher average selling prices into the European market that were achieved through the acquisition of Conceptus SAS, lower manufacturing costs associated with higher unit volume, the introduction of our third generation device and a domestic price increase implemented during the first quarter of 2008. Our gross profit margin will vary as our sales mix changes. Increases in sales of our devices through distributors in international markets will tend to decrease our overall gross profit margin.

Research and Development

        Research and development expenses increased by $0.9 million to $6.8 million in 2008 as compared to $5.9 million in 2007. As a percentage of revenues, research and development expenses for 2008 and 2007 represented 7% and 9%, respectively. Research and development expenses reflect clinical expenditures and product development, which are substantially related to the ongoing development and associated regulatory approvals of our technology. Our goal is to continue our product developments over the coming years, which is intended to result in improved ease of use and clinical performance. We expect to identify and hire additional product development and regulatory personnel in the future to staff our planned product development and clinical activities, and we expect that these costs will increase as we seek to maintain our leading position in the market for permanent female birth control.

        To support these initiatives during 2008 we increased payroll and payroll related expenditures by $0.7 million, consulting and outside service expenses by $0.7 million, project material prototypes by $0.3 million, offset by a reduction in stock compensation of $0.3 million and supplier charges of $0.3 million.

Selling, General and Administrative

        Selling, general and administrative expenses increased by $16.6 million to $72.7 million in 2008 as compared to $56.1 million in 2007. As a percentage of revenues, selling, general and administrative expenses for 2008 and 2007 represented 71% and 87%, respectively. The increases were primarily the result of the operating expenses of Conceptus SAS of $6.6 million, an increase of $6.4 million due to expansion of our U.S. field sales force, and increased domestic advertising expenditures of $4.1 million, primarily for our direct-to-consumer advertising campaign. This campaign involves television, radio and print media and is intended to drive patient awareness of the Essure procedure. In addition, fees related to audit and tax, depreciation, bank related fees, and general building maintenance increased by $1.1 million; offset by decrease in fees related to legal fees, stock compensation, professional education and bad debt by $1.6 million. We expect selling, general and administrative expenses to increase in the future as we expect to hire additional sales professionals and to increase patient awareness through our direct-to-consumer campaign in targeted markets.

Interest Income and Expense and Other Expenses, net

        Total interest income and expense and other expenses, net for 2008 was a net expense of $1.0 million as compared to net income of $2.6 million for 2007. Interest income decreased by $2.7 million primarily due to lower interest rates on the Company's investment portfolio, which consists of auction rate securities and money market accounts that are currently earning lower interest rates compared to 2007. In addition, other expenses decreased by $0.4 million primarily due to foreign exchange losses.

        Additionally, in 2008 we recorded approximately $5.1 million as the fair value of the auction rate security rights associated with a corresponding credit to other expenses, net in connection with the

43

auction rate securities settlement. We subsequently recorded approximately $5.3 million in other expense, net in the fourth quarter of 2008, representing the difference between the par and fair value of the auction rate securities at the date of transfer. See Note 3—Long-term Investments of our Notes to Consolidated Financial Statements.

Income Taxes

        We have recorded a net tax benefit of $24,000 primarily related to our foreign operations in 2008. We did not record any income tax expense in 2007.

        We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48, on January 1, 2007.

        We have not been audited by the Internal Revenue Service or any state income or franchise tax agency. As of December 31, 2008, our federal returns for the years ended 2005 through the current period and most state returns for the years ended 2004 through the current period are still open to examination. In addition, all of the net operating losses and research and development credit carry-forwards that may be used in future years are still subject to inquiry given that the statute of limitation for these items would be from the year of the utilization.

        The tax returns for Conceptus SAS for the years ended 2005 to 2007 were examined and closed by the French tax authorities. As of December 31, 2008, we also recorded approximately $0.4 million of income tax expense attributable to Conceptus SAS.

        The amount of unrecognized tax benefits at December 31, 2007, was $1.9 million, which, if ultimately recognized, will reduce our annual effective tax rate.

        We do not expect our unrecognized tax benefits to change significantly over the next 12 months. In connection with the adoption of FIN 48, we recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

2007 results compared to 2006 (in thousands, except percentages)

	Years Ended December 31,
	2007					2006					2007- 2006 % Change
	Amount		%(a)			Amount		%(a)
Net sales	$	64,442		100	%	$	41,900		100	%		54	%
Gross profit		47,760		74	%		27,873		67	%		71	%
Research and development expenses		5,875		9	%		4,366		10	%		35	%
Selling, general and administrative expenses		56,084		87	%		43,318		103	%		29	%
Net loss		11,632		18	%		18,487		44	%		(37	)%

(a)

expressed as a percentage of total net sales.

Net Sales

        The following table summarizes net sales by geographic region:

	Years Ended December 31,
	2007			2006
Net sales (in thousands)	$	64,442		$	41,900
United States of America		92	%		91	%
Europe		7	%		8	%
Other		1	%		1	%

44

        Net sales are attributed to region based on the shipping location of our customers.

        The increase in net sales of $22.5 million or 54% is the result of continued commercialization and marketing of the Essure system worldwide, and reflects the increasing numbers of physicians entering and completing training in the use of the procedure and higher utilization by trained physicians.

Gross Profit

        Cost of goods sold increased by $2.7 million to $16.7 million in 2007 as compared to $14.0 million in 2006. Gross profit increased $19.9 million to $47.8 million from $27.9 million in 2006. Our gross profit percentage was 74% and 67% for the years ended December 31, 2007 and 2006, respectively. Our gross profit increased throughout 2007 and was 76% in the fourth quarter of 2007, as compared to 69% in the fourth quarter of 2006. The improvement in gross profit percentage in 2007 was primarily the result of the decrease in costs due to our next-generation device, lower manufacturing costs associated with higher unit volume and a domestic price increase instituted during the first quarter of 2007.

Research and Development

        Research and development expenses increased by $1.5 million to $5.9 million in 2007 as compared to $4.4 million in 2006. Research and development expenses reflect clinical expenditures and product development, which are substantially related to the ongoing development and associated regulatory approvals of our technology.

Selling, General and Administrative

        Selling, general and administrative expenses increased by $12.8 million to $56.1 million in 2007 as compared to $43.3 million in 2006. The primary reason for the increases in selling, general and administrative expenses were a result of higher payroll expenditures of $5.5 million due to the expansion of our U.S. field sales force in 2007. Additionally, we incurred direct-to-consumer campaign expenses of $1.5 million, which we began to incur as direct costs in the fourth quarter of 2007. In 2007, increases in selling, general and administrative expenses were also due to higher consulting expenses of $1.4 million, higher travel expenses of $0.9 million, higher legal and professional fees and honorarium fees of $1.1 million, higher taxes and insurance of $0.5 million and higher stock-based compensation of $0.5 million.

Interest Income and Expense and Other Expenses, net

        Total interest income and expense and other expenses, net of $2.6 million increased by $1.2 million in 2007 compared to $1.3 million in 2006. The increase is due to higher interest income in 2007 due to higher cash volumes during the year as a result of investing the proceeds of our convertible senior note offering, completed in February 2007, at a rate in excess of the coupon rate.

Income Taxes

        At December 31, 2007, we evaluated the need for a valuation allowance for our deferred tax assets. Due to our cumulative pre-tax losses and the current uncertainty of our ability to realize our deferred tax assets, we recorded a valuation allowance of approximately $99.5 million.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements—Adopted

        Effective January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements ("SFAS 157") as amended by Financial Accounting Standards Board ("FASB") Staff Position SFAS 157-1, Application of

45

FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 ("FSP SFAS 157-1") and FASB Staff Position SFAS 157-2, Effective Date of FASB Statement No. 157 ("FSP SFAS 157-2"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and provides for expanded disclosure about fair value measurements. SFAS 157 applies prospectively to all other accounting pronouncements that require or permit fair value measurements. FSP SFAS 157-1 amends SFAS 157 to exclude from the scope of SFAS 157 certain leasing transactions accounted for under SFAS No. 13, Accounting for Leases. FSP SFAS 157-2 amends SFAS 157 to defer the effective date of SFAS 157 for all non-financial assets and non-financial liabilities except those that are recognized or disclosed at fair value in the financial statements on a recurring basis to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. We will adopt FSP SFAS 157-2 with our first quarter of fiscal 2009. See Note 4—Fare Value Measurements of our Notes to Consolidated Financial Statements.

        The adoption of SFAS 157 did not have a material impact on our financial condition, results of operations, or cash flows. While we continue to evaluate the impact that SFAS 157 will have on our non-financial assets and non-financial liabilities, we do not anticipate that the impact will be material to our financial condition, results of operations, or cash flows. The assets and liabilities typically recorded at fair value on a non-recurring basis to which we have not yet applied SFAS 157 due to the deferral of SFAS 157 for such items include:

•

Non-financial assets and liabilities initially measured at fair value in an acquisition or business combination, and

•

Long-lived assets measured at fair value due to an impairment assessment under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

        Effective November 2008 we adopted FASB Staff Position 157-3, Determining Fair Values of a Financial Asset When the Market for That Asset Is Not Active ("FSP FAS 157-3"). FSP FAS 157-3 clarifies the application of SFAS 157 to financial instruments in an inactive market. The adoption of FSP FAS 157-3 did not have a material impact on our financial condition, results of operations, or cash flows.

        Effective November 2008 we adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of the guidance is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The adoption of SFAS 159 did not have a material impact on our financial condition, results of operations, or cash flows since we did not elect to apply the fair value option for any of our eligible financial instruments or other items on the June 1, 2008 effective date.

Recent Accounting Pronouncements—Not Yet Adopted

        In December 2007, FASB issued Statement No. 141 (revised 2007) Business Combinations or SFAS 141(R), and Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, or SFAS 160, an amendment of Accounting Research Bulleting No. 51, or ARB 51. SFAS 141(R) will impact financial statements on the acquisition date and in subsequent periods. Some of the changes, such as the accounting for contingent consideration, will introduce more volatility into earnings and may impact our acquisition strategy. Additionally, in February 2009, FASB issued FASB Staff Positions FAS 141(R)-a, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (the "FSP"), which will amend the previsions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies in a business combination under Statement of Financial Accounting Standards

46

No. 141(R), Business Combinations FAS 141(R). SFAS 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. In addition, SFAS 141(R) will be applied prospectively and SFAS 160 will require retroactive adoption of the presentation and disclosure requirements for existing minority interests, while the remaining requirements of SFAS 160 will be applied prospectively. SFAS 141(R) and SFAS 160 are effective on January 1, 2009. We are currently evaluating the impact, if any of adopting SFAS 141(R) and SFAS 160 on our consolidated financial statements.

        In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133, or SFAS 161. SFAS 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and their effect on an entity's financial position, financial performance and cash flows. SFAS 161 will be effective in the first quarter of fiscal year 2009. We are evaluating the impact that this statement will have, if any, on our consolidated financial statements.

        In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets, or FSP 142-3. FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, Goodwill and Other Intangible Assets. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. We are evaluating the impact, if any, that FSP 142-3 will have, if any, on our consolidated financial statements.

        In May 2008, the FASP issued FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), or FSP APB 14-1, which clarifies the accounting for convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement. FSP APB 14-1 specifies that an issue of such instruments should separately account for the liability and equity components of the instruments in a manner that reflect the issuer's non-convertible debt borrowing rate which interest costs are recognized in subsequent periods. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008, and retrospective application is required for all periods presented. We will be required to record increased interest expense on our convertible debt beginning in 2009. We expect the impact on 2009 interest expense to be in the range of $4.0 million to $4.5 million.

        In June 2008, the FASB ratified EITF Issue 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock (EITF 07-5). Paragraph 11(a) of SFAS No. 133, Accounting for Derivatives and Hedging Activities, specifies that a contract that would otherwise meet the definition of derivative but is both (a) indexed to such company's own stock and (b) classified in stockholders' equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. EITF 07-05 will be effective for the first annual reporting period beginning after December 15, 2008, and early adoption is prohibited. We are currently evaluating whether the adoption of EITF 07-05 will have an impact on the accounting for our convertible senior notes.

47

LIQUIDITY AND CAPITAL RESOURCES

        We have experienced significant operating losses since inception; however, we experienced our first two profitable quarters in fiscal 2008. As of December 31, 2008, we had an accumulated deficit of $235.3 million. We have financed our operations since inception primarily through equity and debt financings.

        In December 2006, we filed a shelf Registration Statement on Form S-3, through which we may sell from time to time any combination of debt securities, common stock, preferred stock and warrants, in one or more offerings. After the sale of our senior convertible notes described below, we had $63,750,000 remaining available for sale under this shelf registration statement.

        In February 2007, we issued and sold under the shelf Registration Statement an aggregate principal amount of $86,250,000 of our 2.25% convertible senior notes due 2027. These notes bear a 2.25% interest per annum on the principal amount, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2007. Interest accrual on the notes commenced on February 12, 2007. The notes will mature on February 15, 2027, unless earlier redeemed, repurchased or purchased by us or converted.

        The notes will be convertible into cash and, if applicable, shares of our common stock based on an initial conversion rate, subject to adjustment, of 35.8616 shares per $1,000 principal amount of notes (which represents an initial conversion price of approximately $27.89 per share), in certain circumstances. Upon conversion, a holder would receive cash up to the principal amount of the note and our common stock in respect of such note's conversion value in excess of such principal amount. We may repurchase such securities from time to time.

        The notes are convertible only in the following circumstances: (1) during any calendar quarter after the quarter ended March 31, 2007 if the closing sale price of our common stock for each of 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 120% of the conversion price; (2) during the five consecutive business days immediately after any five consecutive trading day period if the average trading price per $1,000 principal amount of the notes is less than or equal to 97% of the average conversion value of the notes during such five-day period; (3) upon the occurrence of specified corporate transactions; (4) if we call the notes for redemption and (5) at anytime on or after December 15, 2011 up to and including February 15, 2012 and anytime on or after February 15, 2025. Upon a change in control or termination of trading, holders of the notes may require us to repurchase all or a portion of their notes for cash at a repurchase price equal to 100% of the principal amount, plus any accrued and unpaid interest.

        In addition, in connection with the issuance of the notes, we entered into separate convertible note hedge transactions and separate warrant transactions to reduce the potential dilution upon conversion of the notes ("Call Spread Transactions"). As a result of the Call Spread Transactions, we do not anticipate experiencing an increase in the total shares outstanding from the conversion of the notes unless the price of our common stock appreciates above $36.47 per share, effectively increasing the conversion premium to us to $36.47. We purchased call options to cover approximately 3.1 million shares of our common stock, which is the number of shares underlying the notes. In addition, we sold warrants permitting the purchasers to acquire up to approximately 3.1 million shares of our common stock.

        As of December 31, 2008, we held $48.5 million (par value) in auction rate securities ("ARS") backed by federal and state student loans which are variable rate debt instruments and bear interest rates that reset approximately every 20-30 days. These ARS have a contractual maturity ranging from 2028 through 2047.

48

        Our ARS are long-term debt instruments backed by student loans, a substantial portion of which are guaranteed by the United States government. Prior to 2008, our ARS were highly liquid, using a Dutch auction process that resets the applicable interest rate at predetermined intervals, typically every 20-30 days, to provide liquidity at par. We have experienced failed auction in 2008 on all of our ARS. The failures of these auctions do not affect the value of the collateral underlying the ARS, and we continue to earn and receive interest on our ARS at a pre-determined formula with spreads tied to particular interest rate indexes.

        In November 2008, we accepted an offer from UBS AG ("UBS"), providing us with rights related to our auction rate security rights (the "Rights"). The Rights permit us to require UBS to purchase our ARS at par value, which is defined as the price equal to the liquidation preference of the ARS plus accrued but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, in its discretion, to purchase or sell our ARS at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our ARS under the Rights at par value. However, if the Rights are not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our ARS. So long as we hold our ARS, they will continue to accrue interest as determined by the auction process or the terms of the ARS if the auction process fails.

        UBS's obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

        In November 2008 we entered into a demand revolving credit line agreement with UBS, payable on demand, in an amount equal to a specified percentage of fair value of our auction rate securities at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the auction rate securities that we have pledged as security for the credit line. Additionally, under the terms of the settlement agreement, if UBS is able to sell our auction rate securities at par, proceeds would be utilized to first repay any outstanding balance under the demand revolving credit line. We are still able to sell the auction rate securities, but in such a circumstance, if we sold at less than par, we would not be entitled to recover the par value support from UBS. See Note 11—Credit Line, for more information about this line of credit, Note 3—Long-term Investment and Note 4—Fair Value Measurements of our Notes to Consolidated Financial Statements for information about the accounting treatment of our ARS.

        In the future, depending on a variety of factors, we may need to raise additional funds through bank facilities, debt or equity offerings or other sources of capital. Additional financing may not be available when needed or on terms acceptable to us.

        As of December 31, 2008, we had cash, cash equivalents and short-term investments of $54.7 million, compared to $45.2 million at December 31, 2007. The increase of $9.5 million is primarily due to cash from operating activities and proceeds from the line of credit offset by our acquisition of Conceptus SAS in January 2008. We believe that our existing cash and cash equivalents will be sufficient to meet our cash requirements for the next twelve months.

Operating Activities

        Net cash provided by operating activities was $4.7 million in 2008 and cash used in operating activities was $7.6 million in 2007 and $8.7 million in 2006. Net cash provided by operating activities in 2008 was primarily related to:

•

Non-cash related items of $9.7 million corresponding primarily to stock based compensation and depreciation and amortization of fixed assets, debt issuance cost and intangible amortization;

49

•

Increase in accounts receivable of $1.6 million as a result of our increase in sales. We monitor our accounts receivable turnover closely to ensure that receivables are collected timely and have established a credit and collection policy to facilitate our collection process and reduce our credit loss exposure. We expect to grow our business and increase our revenues and to continue to use cash received from collection of outstanding receivables to fund our operations;

•

Net increase of other assets and other current assets of $5.1 million primarily due to prepayments for our 2009 advertising campaigns;

•

An decrease in inventories of $0.6 million;

•

A decrease in accounts payable in $1.7 million;

•

An increase in accrued compensation of $1.3 million; and

•

An increase in other accrued and long term liabilities of $1.7 million.

        We expect cash provided by operating activities in the future to increase as our revenues grow.

Investing Activities

        Net cash used in investing activities for the twelve months ended December 31, 2008 was $12.1 million, due to the sales and maturity of short-term investments of $22.1 million, offset by the purchase of Conceptus SAS, net of cash acquired of $23.0 million, purchases of investments of $5.0 million, $0.4 million for restricted cash related to our lease and capital expenditures of $5.8 million. In connection with our renewed lease agreement for our Mountain View headquarters we were required to open a long term restricted CD account in the amount of $0.4 million.

Financing Activities

        Net cash provided by financing activities in the twelve months ended December 31, 2008 was $33.8 million from the issuance of common stock for our stock option programs and proceeds from our demand revolving credit line agreement with UBS. See Note 11—Credit Line of our Notes to Consolidated Financial Statements.

Cash Requirements, Contractual Obligations and Commitments

        We have operating lease obligations on our current building facilities and automobiles used primarily by our sales personnel, worldwide. In addition, we have obligations related to our clinical trial obligations.

        The following table discloses aggregate information about our contractual obligations and the periods in which payments are due as of December 31, 2008 (in thousands):

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		Thereafter
On balance sheet
Convertible senior notes	$	86,250	$	—	$	—	$	—	$	86,250
Line of credit		29,944		29,944		—		—		—
Operating lease obligations		6,471		654		3,317		2,498		2
Clinical trial obligations		270		270		—		—		—
Interest on our convertible senior notes		35,901		1,941		3,881		3,881		26,198
Total	$	158,836	$	32,809	$	7,198	$	6,379	$	112,450

50

        In February 2007, we issued an aggregate principal amount of $86,250,000 of our 2.25% convertible senior notes due 2027. Refer to Note 10—Convertible Senior Notes of our Notes to Consolidated Financial Statements for a description of these instruments.

        The successful achievement of our business objectives may require additional financing and therefore, we may in the future seek to raise additional funds through bank facilities, debt or equity offerings or other sources of capital. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. Additional funding may not be available when needed or on terms acceptable to us. If we are unable to obtain additional capital, we may be required to delay, reduce the scope of or eliminate our sales and marketing activities. Our future liquidity and capital requirements will depend upon many factors, including, among others:

•

Resources devoted to establish sales, marketing and distribution capabilities;

•

The liquidity of auction rate securities held in our investment portfolio;

•

The rate of product adoption by doctors and patients;

•

Our determination to acquire or invest in other products, technologies and businesses;

•

The market price of our common stock as it affects the exercise of stock options and the conversion terms of our convertible debt; and

•

The insurance payer community's acceptance of and reimbursement for the Essure procedure.

Off-Balance Sheet Arrangements

        We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources as of December 31, 2008.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The following discusses our exposure to market risk related to changes in interest rates and foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results.

        Interest Rate Risk:    We have been exposed to interest rate risk through interest earned on holdings of available-for-sale and trading marketable securities. We have experienced failed auctions in 2008 of all our auction rate securities and there is no assurance that auctions on these auction rate securities in our investment portfolio will succeed in the future. As a result, our ability to liquidate our investments in the near term may be limited, and our ability to fully recover the carrying value of our investments may be limited or non-existent. An auction failure means that the parties wishing to sell securities could not carry out the transaction. If the issuers of these securities are unable to successfully close future auctions or their credit ratings deteriorate, we may be required to record further impairment charges on these investments. It could take until the final maturity of the underlying notes (up to 39 years) to realize our investments' recorded value. As of December 31, 2008 we held $48.5 million (par value) in auction rate securities which are variable rate debt instruments and bear interest rates that are due to reset approximately every 20-30 days. All of these auction rate securities were classified as long term investments in our consolidated balance sheet at December 31, 2008 with an expected maturity of greater than one year. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates. Interest rates that may affect these items in the future will depend on market conditions and may differ from the rates we have experienced in the past.

51

        Foreign Currency Exchange Risk:    Historically, all of our expenses and our revenues were typically denominated in U. S. Dollars. On January 7, 2008, we acquired all the outstanding shares of Conceptus SAS. As a result of this transaction, Conceptus SAS became a wholly owned subsidiary and its results of operations have been consolidated with our results of operations for financial reporting purposes as of the acquisition date. The functional currency of Conceptus SAS is the Euro; therefore, we are now exposed to changes in foreign exchange rates.

        We are exposed to foreign exchange rate fluctuations as we translate the financial statements of our foreign subsidiaries into U.S. Dollars in consolidation. If there is a change in foreign currency exchange rates, the translation of the foreign subsidiaries' financial statements into U.S. Dollars will lead to translation gains or losses which are recorded net as a component of accumulated other comprehensive loss. We will seek to manage our foreign exchange risk through operational means, including managing same currency revenues in relation to same currency expenses, and same currency assets in relation to same currency liabilities. In connection with the acquisition of Conceptus SAS, we had assumed a forward exchange contract to hedge U.S. Dollar-denominated estimated accounts payable in 2008. We have recorded the changes of the fair value of the hedge contract in our results of operations for the twelve months ended December 31, 2008. The hedge contract was fully utilized by December 31, 2008. In 2007, we did not enter into forward exchange contracts to hedge exposure denominated in foreign currencies or any other derivative financial instruments for trading or speculative purposes. At December 31, 2008, our intercompany receivable balance with foreign subsidiaries is $4.0 million and the potential loss in fair value resulting from a hypothetical 10 percent strengthening in the value of the U.S. dollar/Euro currency exchange rate would be approximately $0.4 million.

ITEM 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Our consolidated financial statements are set forth in this Annual Report on Form 10-K beginning on page 59.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

ITEM 9A.    CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures:

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

        As of December 31, 2008, the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

52

(b)

Management's Annual Report on Internal Control Over Financial Reporting:

        Management is responsible for establishing and maintaining adequate internal control over our financial reporting.

        Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

        (1)   Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

        (2)   Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

        (3)   Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

        Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2008 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2008.

        Our internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP, the independent registered public accounting firm who also audited our consolidated financial statements, as stated in their report which is included elsewhere herein.

(c)

Changes in Internal Control Over Financial Reporting:

        There has been no change in the company's internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Inherent Limitations of Internal Controls

        Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

ITEM 9B.    OTHER INFORMATION

        Not applicable.

53

PART III

        Certain information required by Part III is incorporated by reference from our definitive proxy statement (or Proxy Statement), for our annual meeting of stockholders to be held on June 3, 2009, which will be filed within 120 days after the end of our fiscal year pursuant to Regulation 14A, and the information included therein is incorporated by reference to the extent detailed below.

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Information required by this item, insofar as it relates to directors and officers, will be contained in our Proxy Statement in connection with our 2009 Annual Meeting of Stockholders, which we anticipate will be filed no later than 120 days after the end of our fiscal year pursuant to Regulation 14A, under the captions "Election of Directors" and "Management." Information required by this item as to compliance with Section 16(a) of the Securities Exchange Act of 1934 will be contained in the our Proxy Statement under the caption "Section 16(a) Beneficial Owner Reporting Compliance," and is hereby incorporated by reference into this report.

        We have a written code of ethics that applies to all of our employees and to our Board of Directors. A copy of the code is available on our website at www.conceptus.com.

ITEM 11.    EXECUTIVE COMPENSATION

        The information required by this item is incorporated by reference from the information under the caption "Executive Compensation" in our Proxy Statement.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The information required by this item is incorporated by reference from the information under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Securities Authorized for Issuance Under Equity Compensation Plans" in our Proxy Statement.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required by this item is incorporated by reference from the information under the caption "Certain Relationships and Related Transactions" in our Proxy Statement.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The information required by this item is incorporated by reference from the information under the caption "Principal Accountant Fees and Services" in our Proxy Statement.

54

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

The following documents are filed as part of this Report:

(1)

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2008 and 2007

Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007 and 2006

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2008, 2007and 2006

Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006

Notes to Consolidated Financial Statements

(2)

Financial Statement Schedule

The following financial statement schedule of Conceptus, Inc. for the years ended December 31, 2008, 2007 and 2006 is filed as part of this Form 10-K and should be read in conjunction with Conceptus, Inc.'s Consolidated Financial Statements.

Schedule II—Valuation and Qualifying Accounts

Other schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

(3)

Exhibits (numbered in accordance with Item 601 of Regulation S-K)

Exhibit Number			Description
	3.1		Amended and Restated Certificate of Incorporation of Registrant. Incorporated by reference to the Registrant's Registration Statement on Form SB-2, as amended (File No. 33-99890-LA), which became effective on February 1, 1996.
	3.2		Certificate of Amendment to Amended and Restated Certificate of Incorporation of Registrant. Incorporated by reference to the Registrant's Registration Statement on Form S-3 (File No. 333-89266) filed on June 4, 2002.
	3.3		Amended and Restated Bylaws of Registrant. Incorporated by reference to Exhibit 3.1 of the Registrant's Form 8-K filed on December 18, 2008.
	3.4		Amendment No. 1 to Amended and Restated Bylaws of Registrant. Incorporated by reference to Exhibit 3.2 of the Registrant's Form 8-K filed on April 23, 2008.
	4.1		Indenture between Conceptus, Inc. and Wells Fargo, National Association, dated February 12, 2007. Incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K filed on February 12, 2007.
	4.2		Supplemental Indenture No. 1, including the Form of 2.25% Convertible Senior Notes due 2027, between Conceptus, Inc. and Wells Fargo, National Association, dated February 12, 2007. Incorporated by reference to Exhibit 4.2 to the Registrant's Form 8-K filed on February 12, 2007.
	10.1		Form of Indemnification Agreement for directors and officers.
	10.2	*	Amended and Restated 1993 Stock Plan. Incorporated by reference to Exhibit 10.31 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.

55

Exhibit Number			Description
	10.3	*	1995 Employee Stock Purchase Plan. Incorporated by reference to the Registrant's Registration Statement on Form SB-2, as amended (File No. 33-99890-LA), which became effective on February 1, 1996.
	10.4	*	1995 Directors' Stock Option Plan. Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
	10.5	*	Eighth Amended and Restated 2001 Equity Incentive Plan. Incorporated by reference to the Registrant's Definitive Proxy Statement on Schedule 14A filed on April 24, 2006.
	10.6	*	Amended and Restated 2002 Non-Qualified Stock Option Plan. Incorporated by reference to Exhibit 10.7 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2002.
	10.7	*	Form of Senior Management Amended and Restated Change of Control Agreement. Incorporated by reference to Exhibit 10.7 of the Registrant's Report on Form 10-K for the year ended December 31, 2004.
	10.8	*	Change of Control Agreement dated as of April 27, 2004 by and between Registrant and Gregory Lichtwardt. Incorporated by reference to Exhibit 10.8 of the Registrant's Report on Form 10-K for the year ended December 31, 2004.
	10.9	*	Amended and Restated Change of Control Agreement dated as of December 14, 2007 by and between Registrant and Kathryn A. Tunstall. Incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 8-K filed on December 17, 2007.
	10.10		License Agreement dated December 28, 1992 between the Registrant and Target Therapeutics Inc. Incorporated by reference to the Registrant's Registration Statement on Form SB-2, as amended (File No. 33-99890-LA), which became effective on February 1, 1996.
	10.11		Settlement and License Agreement between Ovion, Inc., William S. Tremulis and Jeffrey P. Callister and Conceptus, Inc. dated November 6, 2003. Incorporated by reference to Exhibit 10.30 of the Registrant's Amendment to its Annual Report on Form 10-K/A for the year ended December 31, 2003.
	10.12		Sublease Agreement for the premises located at 331 East Evelyn, Mountain View, California. Incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
	10.13		Landlord Consent to Sublease for the premises located at 331 East Evelyn, Mountain View, California. Incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
	10.14		Amended and Restated Preferred Shares Rights Agreement, dated as of February 26, 2007, between the Registrant and Mellon Shareholder Services, L.L.C., including the Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B and C, respectively. Incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 8-K filed on February 23, 2007.
	10.15	+	Exclusive U.S. Co-Promotion Agreement, dated as of October 30, 2003, by and between the Registrant and Gynecare Worldwide Division of Ethicon, Inc. Incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 8-K filed on March 1, 2004.
	10.16	+	Amended Share Purchase and Amended Call Option Agreement, dated as of January 17, 2004, by and between Mr. Yves Guillemain d'Echon et al. and the Registrant. Incorporated by reference to Exhibit 10.2 of the Registrant's Report on Form 8-K filed on March 1, 2004.

56

Exhibit Number			Description
	10.17	+	Supplier Agreement dated November 7, 2005 between the Registrant and Accellent Corp. Incorporated by reference to Exhibit 10.34 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005.
	10.18	*	Letter Agreement by and between the Company and Gregory E. Lichtwardt dated November 12, 2003. Incorporated by reference to Exhibit 10.29 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2003.
	10.19	*	Employment Agreement between Mark M. Sieczkarek and Conceptus, Inc. executed September 30, 2004. Incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 8-K filed on October 5, 2004.
	10.20	*	Letter Agreement between Ric Cote and Conceptus, Inc. executed March 25, 2004. Incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on 10-Q for the Quarter Ended March 31, 2004.
	10.21	*	Employment Commencement Nonstatutory Stock Option Agreement between Ric Cote and Conceptus, Inc. executed April 5, 2004. Incorporated by reference to Exhibit 4.2 of the Registrant's Registration Statement on Form S-8 filed on June 29, 2004.
	10.22	*	Stand-Alone Restricted Stock Purchase Agreement between Ric Cote and Conceptus, Inc. executed April 5, 2004. Incorporated by reference to Exhibit 4.3 of the Registrant's Registration Statement on Form S-8 filed on June 29, 2004.
	10.23	*	Relocation Expense Agreement dated October 28, 2005 between the Registrant and Ulric Cote. Incorporated by reference to Exhibit 10.40 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005.
	10.24		Form of Stock Appreciation Right Agreement under Conceptus, Inc. Amended and Restated 2001 Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on February 6, 2007.
	10.25		Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under Conceptus, Inc. Amended and Restated 2001 Equity Incentive Plan. Incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed on February 6, 2007.
	10.26		First Amendment, dated February 27, 2007, to Share Purchase and Call Option Agreement, dated as of January 17, 2004, by and between Mr. Yves Guillemain d'Echon et al. and the Registrant. Incorporated by reference to Exhibit 10.28 to the Registrant's Form 10-K for the year ended December 31, 2006.
	10.27		Second Amendment, dated November 17, 2007, to Share Purchase and Call Option Agreement, dated as of January 17, 2004, by and between Mr. Yves Guillemain d'Echon et al. and the Registrant. Incorporated by reference to Exhibit 10.1 to the Registrant's Report on Form 8-K, filed on November 21, 2007.
	10.28		First Amendment, dated February 27, 2007, to Conceptus SAS Distribution Agreement, dated as of January 17, 2004, by and between Conceptus SAS and the Registrant. Incorporated by reference to Exhibit 10.29 to the Registrant's Form 10-K for the year ended December 31, 2006.
	10.29		Confirmation of Convertible Bond Hedge Transaction, dated February 6, 2007, by and between the Registrant and UBS AG, London Branch. Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on February 12, 2007.
	10.30		Confirmation of Convertible Bond Hedge Transaction, dated February 6, 2007, by and between the Registrant and Societe Generale. Incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed on February 12, 2007.

57

Exhibit Number			Description
	10.31		Confirmation of Issuer Warrant Transaction, dated February 6, 2007, by and between the Registrant and UBS AG, London Branch. Incorporated by reference to Exhibit 10.3 to the Registrant's Form 8-K filed on February 12, 2007.
	10.32		Confirmation of Issuer Warrant Transaction, dated February 6, 2007, by and between the Registrant and Societe Generale. Incorporated by reference to Exhibit 10.4 to the Registrant's Form 8-K filed on February 12, 2007.
	10.34	*	Stock Appreciation Right Agreement, by and between the Registrant and Spencer Roeck, dated October 10, 2007. Incorporated by reference to Exhibit 10.1 to the Registrant's Form S-8 filed on December 4, 2007.
	10.35		Lease Agreement for the premises located at 331 East Evelyn, Mountain View, California.
	10.36		Credit Line Account Application and Agreement for Organization and Business and Addendum.
	10.37		Share Purchase Agreement by and among Conceptus, Inc., Conceptus SAS and the Sellers party thereto, dated January 7, 2008. Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on January 11, 2008.
	10.38		Eleventh Amended and Restated 2001 Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K filed on October 6, 2008.
	14.1		Code of Ethics. Incorporated by reference to Exhibit 14.1 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2003.
	21		List of Conceptus subsidiaries.
	23.1		Consent of Independent Registered Public Accounting Firm.
	24.1		Power of Attorney (See signature page to this Report).
	31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*

Management contract or compensatory plan or arrangement.

+

Confidential treatment has been requested with respect to certain portions of this Exhibit by order from the Securities and Exchange Commission or requested.

58

CONCEPTUS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	60
Consolidated Balance Sheets, December 31, 2008 and 2007	61
Consolidated Statements of Operations for Years Ended December 31, 2008, 2007 and 2006	62
Consolidated Statements of Stockholders' Equity for Years Ended December 31, 2008, 2007 and 2006	63
Consolidated Statements of Cash Flows for Years Ended December 31, 2008, 2007 and 2006	64
Notes to Consolidated Financial Statements	65

59

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Conceptus, Inc.

        In our opinion, the consolidated financial statements listed in the index under Item 15(a) (1) present fairly, in all material respects, the financial position of Conceptus, Inc. and its subsidiaries at December 31, 2008 and December 31, 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a) (2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose California
March 13, 2009

60

ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS

CONCEPTUS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

				December 31,
				2008			2007
Assets
	Current assets:
		Cash and cash equivalents		$	54,720		$	28,450
		Short-term investments			—			16,700
		Accounts receivable, net of allowance for doubtful accounts of $478 and $431 at December 31, 2008 and 2007, respectively			14,377			11,903
		Inventories			3,829			2,418
		Prepaids			7,478			2,598
		Other current assets			1,617			673
	Total current assets				82,021			62,742
	Property and equipment, net				8,635			5,312
	Goodwill				17,105			—
	Intangible assets, net				5,287			1,164
	Debt issuance costs				1,935			2,555
	Long-term investments				43,177			48,800
	Put option				5,144			—
	Restricted cash				351			—
	Other assets				50			102
Total assets				$	163,705		$	120,675
Liabilities and stockholders' equity
	Current liabilities:
		Accounts payable		$	3,869		$	4,744
		Accrued compensation			6,762			3,175
		Line of credit			29,944			—
		Interest payable			733			733
		Deferred tax liability			1,442			—
		Other accrued liabilities			3,865			3,606
	Total current liabilities				46,615			12,258
	Notes payable				86,250			86,250
	Other accrued liabilities				394			240
	Total liabilities				133,259			98,748
	Commitments and contingencies (Note 9)
	Stockholders' equity:
		Preferred stock:
			$0.003 par value, authorized 3,000,000 shares; no shares issued or outstanding at December 31, 2008 and 2007		—			—
		Common stock and additional paid-in capital:
			$0.003 par value, 50,000,000 shares authorized, 30,494,686 and 29,916,643 shares issued and 30,416,823 and 29,838,780 shares outstanding at December 31, 2008 and 2007, respectively		266,576			257,176
		Accumulated deficit			(235,332	)		(235,249	)
		Accumulated other comprehensive loss			(798	)		—
		Treasury Stock, 77,863 , at cost, at December 31, 2008 and 2007, respectively			—			—
	Total stockholders' equity				30,446			21,927
Total liabilities and stockholders' equity				$	163,705		$	120,675

The accompanying notes are an integral part of these consolidated financial statements

61

CONCEPTUS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

		Years Ended December 31,
		2008			2007			2006
Net sales		$	101,977		$	64,442		$	41,900
Cost of goods sold			21,650			16,682			14,027
Gross profit			80,327			47,760			27,873
Operating expenses:
	Research and development		6,788			5,875			4,366
	Selling, general and administrative		72,685			56,084			43,318
Total operating expenses			79,473			61,959			47,684
Operating income (loss)			854			(14,199	)		(19,811	)
Interest income and expense and other expense, net:
	Interest income		2,150			4,852			1,346
	Interest expense		(2,740	)		(2,285	)		(22	)
	Other expense, net		(371	)		—			—
Total interest income and expense and other expense, net			(961	)		2,567			1,324
Loss before benefit from income taxes			(107	)		(11,632	)		(18,487	)
	Benefit from income taxes		(24	)		—			—
Net loss		$	(83	)	$	(11,632	)	$	(18,487	)
Basic and diluted net loss per share		$	(0.00	)	$	(0.39	)	$	(0.64	)
Weighted-average shares used in computing basic and diluted net loss per share			30,216			29,463			28,993

The accompanying notes are an integral part of these consolidated financial statements

62

CONCEPTUS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share amounts)

	Common Stock & Additional Paid-In Capital
										Accumulated Other Comprehensive Loss
							Deferred Stock-Based Compensation						Accumulated Deficit			Total Stockholders' Equity
	Shares			Amount
Balances as of December 31, 2005		29,051,804			246,359			(1,058	)		—			(205,130	)		40,171
Issuance of common stock for cash upon exercise of options		290,700			2,872			—			—			—			2,872
Issuance of common stock for cash from employee stock purchase plan		94,009			514			—			—			—			514
Reversal of overpayment on stock issuance costs		—			8			—			—			—			8
Stock-based compensation for consultants' services		—			292			—			—			—			292
Grants of restricted stock to employees and directors		28,500			—			—			—			—			—
Stock-based compensation related to restricted stock, SSR/SAR and stock option grants		—			4,351			—			—			—			4,351
Stock-based compensation related to employee stock purchase plan		—			235			—			—			—			235
Deferred stock-based compensation related to restricted stock grants		—			—			1,058			—			—			1,058
Cancellation of restricted stock awards		(184,000	)		—			—			—			—			—
Purchases of treasury stock		(13,889	)		—			—			—			—			—
Treasury stock issuances		3,421			—			—			—			—			—
Net loss		—			—			—			—			(18,487	)		(18,487	)
Balances as of December 31, 2006		29,270,545			254,631			—			—			(223,617	)		31,014
Issuance of common stock for cash upon exercise of options		360,427			3,319			—			—			—			3,319
Issuance of common stock for cash from employee stock purchase plan		82,217			1,126			—			—			—			1,126
Issuance of common stock upon exercise of SAR's		1,957			—			—			—			—			—
Stock-based compensation for consultants' services		—			243			—			—			—			243
Stock-based compensation related to restricted stock, restricted stock units, SAR's and stock option grants		—			5,941			—			—			—			5,941
Stock-based compensation related to employee stock purchase plan		—			309												309
Issuance of common stock upon payment of bonus					219												219
Issuance of common stock from restricted stock awards		113,166			(68	)		—			—			—			(68	)
Treasury stock issuances		10,468			133			—			—			—			133
Issuance of debt		—			(8,677	)		—			—			—			(8,677	)
Net loss		—			—			—			—			(11,632	)		(11,632	)
Balances as of December 31, 2007		29,838,780			257,176			—			—			(235,249	)		21,927
Issuance of common stock for cash upon exercise of options		378,267			3,100			—			—			—			3,100
Issuance of common stock for cash from employee stock purchase plan		61,144			871			—			—			—			871
Issuance of common stock upon exercise of SAR's		5,253			(9	)		—			—			—			(9	)
Stock-based compensation for consultants' services		—			183			—			—			—			183
Stock-based compensation related to restricted stock, restricted stock units, SAR's and stock option grants		—			5,145			—			—			—			5,145
Stock-based compensation related to employee stock purchase plan		—			280												280
Issuance of common stock from restricted stock awards		133,379			(170	)		—			—			—			(170	)
Accumulated other comprehensive loss		—			—			—			(798	)		—			(798	)
Net loss		—			—			—			—			(83	)		(83	)
Balances as of December 31, 2008		30,416,823			266,576			—			(798	)		(235,332	)		30,446

The accompanying notes are an integral part of these consolidated financial statements

63

CONCEPTUS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

			Years Ended December 31,
			2008			2007			2006
Cash flows from operating activities
Net loss			$	(83	)	$	(11,632	)	$	(18,487	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Depreciation and amortization of property, plant and equipment			2,939			1,534			1,191
	Amortization of debt issuance costs			619			542			—
	Amortization of intangibles			782			186			200
	Gain on put option			(5,144	)		—			—
	Unrealized loss on trading securities			5,273			—			—
	Stock-based compensation expense			5,667			6,493			6,154
	Loss on retirement of fixed assets			48			61			4
	Changes in operating assets and liabilities, net of acquisition:
		Accounts receivable		(1,673	)		(4,927	)		(2,457	)
		Inventories		559			(1,808	)		2,782
		Other current assets		(5,198	)		(2,207	)		46
		Other assets		102			894			607
		Accounts payable		(1,735	)		1,163			105
		Accrued compensation		1,333			(515	)		639
		Deferred tax liability		(417	)		—			—
		Other accrued and long term liabilities		1,670			2,653			537
Net cash provided by (used in) operating activities				4,742			(7,563	)		(8,679	)
Cash flows from investing activities
	Purchase of Conceptus SAS, net of cash acquired			(22,978	)		—			—
	Purchase of investments			(5,000	)		(88,600	)		(21,950	)
	Sales & maturities of investments			22,050			45,700			19,200
	Restricted cash			(351	)		—			69
	Capital expenditures			(5,781	)		(3,311	)		(1,369	)
Net cash used in investing activities				(12,060	)		(46,211	)		(4,050	)
Cash flows from financing activities
	Proceeds from line of credit			30,000			—			—
	Proceeds from issuance of long term debt			—			86,250			—
	Repayment of loan			(56	)		—			—
	Payment of debt issuance costs			—			(3,097	)		—
	Purchase of call options on convertible senior notes			—			(19,372	)		—
	Proceeds from issuance of warrants			—			10,695			—
	Issuance of common stock under company stock plans			3,792			4,510			3,386
	Reversal of overpayment on stock issuance costs			—			—			8
Net cash provided by financing activities				33,736			78,986			3,394
Effect of exchange rate changes on cash and cash equivalents				(148	)		—			—
Net increase (decrease) in cash and cash equivalents				26,270			25,212			(9,335	)
Cash and cash equivalents at beginning of year				28,450			3,238			12,573
Cash and cash equivalents at end of year			$	54,720		$	28,450		$	3,238
Supplemental information:
	Cash paid for:
		Interest	$	1,941		$	986		$	22

The accompanying notes are an integral part of these consolidated financial statements

64

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization, Ownership and Business

        Conceptus, Inc. ("we" or "us" or "our") was incorporated in the state of Delaware on September 18, 1992 to design, develop and market minimally invasive devices for reproductive medical applications. We develop, manufacture and market the Essure permanent birth control system, an innovative and proprietary medical device for women that was approved for marketing in the United States in November 2002 by the U.S. Food and Drug Administration, or FDA. The Essure system uses a soft and flexible micro-insert that is delivered into a woman's fallopian tubes to provide permanent birth control by causing benign tissue in-growth that blocks the fallopian tubes. A successfully placed Essure micro-insert and the subsequent tissue growth prohibits the egg from traveling through the fallopian tubes and therefore prevents fertilization. The effectiveness rate of the Essure system is 99.80% after four years of follow-up. Our catheter systems are based on technology initially developed and used by Target Therapeutics, Inc. ("Target"), a business unit of Boston Scientific Corporation ("BSC"), and licensed exclusively to Conceptus in the field of reproductive physiology.

        We have a limited history of operations and have incurred significant operating losses since inception. In December 2006, we filed a Registration Statement on Form S-3, through which we may sell from time to time any combination of debt securities, common stock, preferred stock and warrants, in one or more offerings, with an initial offering price not to exceed $150,000,000. In February 2007, we issued an aggregate principal amount of $86,250,000 of our 2.25% convertible senior notes due 2027. If the notes are converted, then upon conversion, holders will receive cash and, if applicable, shares of our common stock based on an initial conversion rate, subject to adjustment, of 35.8616 shares per $1,000 principal amount of notes (which represents an initial conversion price of $27.89 per share), in certain circumstances. Upon conversion, a holder would receive cash up to the principal amount of the note and our common stock in respect of such note's conversion value in excess of such principal amount. This net share settlement feature of the notes would reduce our liquidity, and we may not have sufficient funds to pay in full the cash obligation upon such conversion. In the future, depending upon a variety of factors, we may need to raise additional funds through bank facilities, debt or equity offerings or other sources of capital. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve covenants that restrict us. Additional funding may not be available when needed or on terms acceptable to us. If we are unable to obtain additional capital, we may be required to delay, reduce the scope of or eliminate our research and development programs or reduce our sales and marketing activities.

2. Summary of Significant Accounting Policies

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The primary estimates underlying our financial statements include the write-off of obsolete and slow moving inventory, allowance for doubtful accounts receivable, product warranty, the fair value of our investment portfolio, assumptions regarding variables used in calculating the fair value of our equity awards, impairment of goodwill, intangibles and other long-lived assets, income taxes and contingent liabilities. Actual results could differ from those estimates.

65

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Principles of Consolidation

        The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated.

Functional Currency

        On January 7, 2008 we acquired Conceptus SAS, which sells to customers in France and all of Europe. Our condensed consolidated financial statements for the twelve months ended December 31, 2008 include the financial results of Conceptus SAS starting on January 7, 2008. Sales by Conceptus SAS are denominated in Euros. In preparing our consolidated financial statements, we are required to translate the financial statements of Conceptus SAS from the currency in which they keep their accounting records into U.S. Dollars. Conceptus SAS maintains its accounting records in the functional currency which is also its respective local currency, the Euro. The functional currency is determined based on management's judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billing, financing, payroll and other expenditures would be considered the functional currency, but any dependency upon the parent and the nature of the subsidiary's operations must also be considered. Since the functional currency of Conceptus SAS has been determined to be the Euro, any gain or loss associated with the translation of Conceptus SAS' financial statements into U.S. Dollars is included as a component of stockholders' equity, in accumulated other comprehensive loss. If in the future we determine that there has been a change in the functional currency of Conceptus SAS from its local currency to the U.S. Dollar, any translation gains or losses arising after the date of change would be included within our statement of operations.

Goodwill and Other Intangible Assets

        Goodwill is the excess of the purchase price over the fair value of the other net assets, including customer relationship and covenant not to compete, of acquired businesses. Under SFAS 142, Goodwill and Other Intangible Assets, goodwill and other intangible assets with indefinite lives are not amortized, but are assigned to reporting units and tested for impairment annually, or whenever there is an impairment indicator. We operate as one reporting unit engaged in developing, manufacturing, and marketing medical devices. We assess goodwill impairment indicators quarterly, or more frequently, if a change in circumstances or the occurrence of events suggests the remaining value may not be recoverable. Intangible assets that are not deemed to have an indefinite life are amortized over their estimated useful lives.

        The first step of the impairment test for goodwill compares the fair value of a reporting unit with its carrying amount, including goodwill and other indefinite lived intangible assets. If the fair value is less than the carrying amount, the second step determines the amount of the impairment by comparing the implied fair value of the goodwill with the carrying amount of that goodwill. An impairment charge is recognized only when the calculated fair value of a reporting unit, including goodwill and indefinite lived intangible assets, is less than its carrying amount. We performed an annual assessment during the fourth quarter of 2008 of our goodwill at the reporting unit level. No impairment charges have been recorded through December 31, 2008.

        Other intangible assets include customer relationships and non-compete agreements. They are amortized using the straight-line method over their respective estimated useful lives.

66

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Impairment of Long-Lived Assets

        We account for the impairment of long-lived assets in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." We evaluate the carrying value of our long-lived assets, consisting primarily of our property and equipment, the Essure license acquired from a patent litigation settlement in 2003 and intangible assets acquired in connection with our acquisition of Conceptus SAS in 2008 whenever certain events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such events or circumstances include a prolonged industry downturn, a significant decline in our market value or significant reductions in projected future cash flows.

        Significant judgments and assumptions are required in the forecast of future operating results used in the preparation of the estimated future cash flows, including profit margins, long-term forecasts of the amounts and timing of overall market growth and our percentage of that market, groupings of assets, discount rates and terminal growth rates. In addition, significant estimates and assumptions are required in the determination of the fair value of our tangible long-lived assets, including replacement cost, economic obsolescence, and the value that could be realized in orderly liquidation. Changes in these estimates could have a material adverse effect on the assessment of our long-lived assets, thereby requiring us to write down the assets. Our net long-lived assets as of December 31, 2008 and 2007 included property and equipment of $8.6 million, and $5.3 million, respectively, and other identifiable intangible assets of $5.3 million, and $1.2 million, respectively.

Concentration of Credit Risk and Other Risks and Uncertainties

        We invest cash that is not required for immediate operating needs principally in a diversified portfolio of financial instruments issued by institutions with strong credit ratings. We consider all highly liquid investments with maturity from date of purchase of three months or less to be cash equivalents. We maintain deposits with three financial institutions and invest our excess cash primarily in money market funds, commercial paper, corporate notes, municipal bonds and government securities, which bear minimal risk. Our cash and cash equivalents in our operating accounts are with third party financial institutions. At times, these balances exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to cash in our operating accounts. At December 31, 2008 long-term investments consist of auction rate securities ("ARS").

        Our net sales to date consist mainly of product revenues from physicians, hospitals and distributors located worldwide. We do not require collateral and provide for estimated credit losses based on customer credit assessment.

        We assess the credit worthiness of our customers on an ongoing basis in order to mitigate the risk of loss from customers not paying us. However, we account for the possibility that certain customers may not pay us by maintaining an allowance for doubtful accounts. We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by our review of their current credit information. We monitor collections and payments from our customers and maintain our allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. As of

67

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

December 31, 2008 and 2007, our allowance for doubtful accounts totaled approximately $0.5 million and $0.4 million, respectively.

        For the years ended December 31, 2008, 2007, and 2006 we had no customers that accounted for greater than 10% of our net sales. We had no customers who had an outstanding accounts receivable balance greater than 10% of our total gross outstanding accounts receivable as of December 31, 2008; however, we had one such customer as of December 31, 2007, that accounted for 19% of the total accounts receivable.

        We are a one-product company and our only product, the Essure device, received approval from the United States Food and Drug Administration ("FDA") in November 2002. Internationally, we were approved to affix the CE Mark to the Essure procedure in February 2001. In addition, we received clearance in November 2001 from Health Canada to market the Essure device in that country. We cannot be assured that necessary approvals or clearances will be obtained in other countries. If we are denied approval or clearance or if approval or clearance is delayed or withdrawn, we may suffer a material adverse impact.

        We are subject to risks characteristic of the medical device industry, including but not limited to uncertainty of market acceptance of products, reimbursement from insurance carriers and government agencies, compliance with government regulations and protection of proprietary technology, product liability and the need to obtain additional financing. Certain components that meet our requirements are available only from a limited number of suppliers. The rapid rate of technological change and the necessity of developing and manufacturing products with short life cycles may intensify these risks. The inability to obtain components as required or to develop alternative sources, if and as required in the future, could result in delays or reductions in product shipments, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Cash, Cash Equivalents and Investments

        We consider all highly liquid investments with maturity from date of purchase of three months or less to be cash equivalents. We maintain deposits with three financial institutions and invest our excess cash primarily in money market funds, commercial paper, corporate notes, municipal bonds and government securities, which bear minimal risk. Our cash and cash equivalents in our operating accounts are with third party financial institutions. At times, these balances exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to cash in our operating accounts. At December 31, 2008 long-term investments consist of auction rate securities ("ARS").

        As of December 31, 2008, we held $48.5 million (par value) in ARS backed by federal and state student loans which are variable rate debt instruments and bear interest rates that reset approximately every 20-30 days. These ARS have a contractual maturity ranging from 2028 through 2047.

        Our ARS are long-term debt instruments backed by student loans, a substantial portion of which are guaranteed by the United States government. Prior to 2008, our ARS were highly liquid, using a Dutch auction process that resets the applicable interest rate at predetermined intervals, typically every 20-30 days, to provide liquidity at par. We have experienced failed auction in 2008 on all of our ARS. The failures of these auctions do not affect the value of the collateral underlying the ARS, and we continue to earn and receive interest on our ARS at a pre-determined formula with spreads tied to particular interest rate indexes.

68

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

        In November 2008, we accepted an offer from UBS AG ("UBS"), providing us with rights related to our auction rate security rights (the "Rights"). The Rights permit us to require UBS to purchase our ARS at par value, which is defined as the price equal to the liquidation preference of the ARS plus accrued but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, in its discretion, to purchase or sell our ARS at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our ARS under the Rights at par value. However, if the Rights are not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our ARS. So long as we hold our ARS, they will continue to accrue interest as determined by the auction process or the terms of the ARS if the auction process fails.

        UBS's obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

        We have accounted for the Rights as a freestanding financial instrument and elected to record the value of the Rights under the fair value option of SFAS No. 159. As a result, upon acceptance of the offer from UBS, we recorded approximately $5.1 million as the fair value of the Rights with a corresponding credit to other expense, net. As a result of our elections to record the Rights at fair value, unrealized gains and losses will be included in earnings in future periods. We estimated the fair value of the Rights using the expected value that we will receive from UBS which was calculated as the difference between the anticipated recognized loss and par value of the ARS as of the option exercise date. This value was discounted by using a UBS credit default rate to account for the consideration of UBS credit risk.

        Although the Rights represent the right to sell the securities back to UBS at par, we will be required to periodically assess the economic ability of UBS to meet that obligation in assessing the fair value of the Rights. We will continue to classify the ARS as long-term investments until June 30, 2009, one year prior to the expected settlement.

        Prior to accepting the UBS offer, we recorded our ARS as available-for-sale investments. We recorded unrealized gains and losses on our available-for-sale securities, in accumulated other comprehensive income (loss) in the stockholders' equity section of our balance sheets. Such an unrealized loss did not change net income (loss) for the applicable accounting period.

        In connection with our acceptance of the UBS offer in November 2008, resulting in our right to require UBS to purchase our ARS at par value beginning on June 30, 2010, we transferred our ARS from available-for-sale to trading securities in accordance with SFAS 115. The transfer to trading securities reflects our intent to exercise our put option during the period June 30, 2010 to July 3, 2012. Prior to our agreement with UBS, our intent was to hold our ARS until we realized the par value.

        We recorded a temporary reduction in carrying value of $2.8 million for the nine months ended September 30, 2008, which was recorded as an unrealized loss in accumulated other comprehensive loss. Upon transfer to trading securities, we transferred the $2.8 million recorded as unrealized loss in accumulated other comprehensive loss and recorded an unrealized loss of $5.3 million in other expense, net in the fourth quarter of 2008, representing the difference between the par and fair value of the ARS at the date of transfer. We determined that use of a valuation model was the best available technique for measuring the fair value of our ARS. We used a trinomial discount model weighting

69

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

estimated future cash flows, quality of collateral and the probability of future successful auctions occurring. In determining a discount factor for each ARS, the model weights various factors, including assessments of credit quality, duration, insurance wraps, portfolio composition, discount rates, overall capital market liquidity and comparable securities, if any.

        In November 2008 we entered into a demand revolving credit line agreement with UBS, payable on demand, in an amount equal to a specified percentage of fair value of our auction rate securities at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the auction rate securities that we have pledged as security for the credit line. Additionally, under the terms of the settlement agreement, if UBS is able to sell our auction rate securities at par, proceeds would be utilized to first repay any outstanding balance under the demand revolving credit line. We are still able to sell the auction rate securities, but in such a circumstance, if we sold at less than par, we would not be entitled to recover the par value support from UBS. See Note 11—Line of Credit, Note 3—Long-term Investment and Note 4—Fair Value Measurements.

Inventories

        Inventories are stated at the lower of cost or market. Cost is based on actual costs computed on a first-in, first-out basis. Write-offs for potentially excess and obsolete inventory are made based on our analysis of inventory levels and future sales forecast.

Property and Equipment

        Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment are calculated using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the related assets.

        External direct costs of material and services consumed in website development during the application development stage are capitalized. Capitalized website costs are amortized using the straight-line method over the estimated useful life of three years. Maintenance and repairs are charged to operations as incurred. These costs were not significant for the years 2008 and 2007.

Fair Value of Financial Instruments

        For financial instruments consisting of cash and cash equivalents, short-term investments, accounts receivable, accounts payable, demand revolving credit line and accrued liabilities included in our financial statements, the carrying amounts approximate fair value due to their short maturities.

Warranty

        We offer warranties on our product and record a liability for the estimated future costs associated with warranty claims, which is based upon historical experience and our estimate of the level of future costs. Warranty costs are reflected in the statement of operations as a cost of goods sold. A

70

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

reconciliation of the changes in our warranty liability for the years ended December 31, 2008 and 2007 (in thousands):

	As of December 31,
	2008			2007
Balance at the beginning of the period	$	208		$	209
Accruals for warranties issued during the period		350			441
Settlements made in kind during the period		(286	)		(442	)
Balance at the end of the period	$	272		$	208

Revenue Recognition

        Our revenue is primarily comprised of the sale of our Essure system. We recognize revenue in accordance with the Securities and Exchange Commission, or SEC, Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements", or SAB 104. Under this standard, the following four criteria must be met in order to recognize revenue:

1.

Persuasive evidence of an arrangement exists;



2.

Delivery has occurred;



3.

Our selling price is fixed or determinable; and



4.

Collectability is reasonably assured.

        The four revenue recognition criteria and other revenue related pronouncements are applied to our sales as described in the following paragraphs.

        We recognize revenues from our Essure system when we ship the device. We recognize revenue upon shipment of the system as we have no continuing obligations subsequent to shipment. We do not accept returns of the Essure system. We obtain written authorizations from our customers for a specified amount of product at a specified price and the price is not dependent on actual Essure procedures performed.

        For sales through distributors we recognize revenues upon shipment as we have no continuing obligations subsequent to shipment. Our distributors are responsible for all marketing, sales, training and warranty for the Essure device in their respective territories. Our standard terms and conditions do not provide price protection or stock rotation rights to any of our distributors. In addition, our distributor agreements do not allow the distributor to return or exchange the Essure system and the distributor is obligated to pay us for the sale regardless of their ability to resell the product.

        Additionally, we require physicians to be preceptored between 3 and 5 cases by a certified trainer before being able to perform the procedure independently. There are no revenues associated with the training activities. We do not charge a fee for the activity and no commitment arises for the physician from the preceptorship. Physician training is provided upfront and we have no obligation subsequent to the initial training. Training costs have not been significant from inception to-date.

71

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

        We assess the credit worthiness of all customers in connection with their purchases. We only recognize revenue when collectability is reasonably assured.

        Certain sales of our Essure system require delivery of additional items. These obligations are fulfilled after shipment of the Essure system, and in these cases, we recognize revenue in accordance with the multiple element accounting guidance set forth in Emerging Issues Task Force No. 00-21, "Revenue Arrangements with Multiple Deliverables" or EITF 00-21. When we have objective and reliable evidence of fair value of the undelivered elements we defer revenue attributable to the post-shipment obligations and recognize such revenue when the obligation is fulfilled. Otherwise we defer all revenue until all elements are delivered.

Research and Development

        Research and development expenses reflect clinical expenditures and product development, which are substantially related to the ongoing development and associated regulatory approvals of our technology. Research and development costs are expensed as incurred.

Advertising Costs

        Advertising production costs are recorded as expense as incurred. Costs of communicating advertising are recorded as expense as advertising space or airtime is used. All other advertising costs are expensed as incurred. Total advertising expenses were approximately $7.2 million, $2.1 million and $0.8 million in the years ended December 31, 2008, 2007, and 2006, respectively.

Reclassifications

        Certain amounts in prior fiscal years have been reclassified to conform with the presentation adopted in the current fiscal year.

Stock-Based Compensation

        Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R), "Share-Based Payment," using the modified prospective transition method. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized on a straight line basis as expense over the employee requisite service period, which is generally the vesting period.

        Net loss for the years ended December 31, 2008, 2007 and 2006 included stock-based compensation expense under SFAS 123(R) of $5.5 million, $6.3 million and $5.9 million, respectively, which consisted of stock-based compensation expense of $4.8 million, $5.4 million and $4.4 million, respectively, related to employee stock options, employee stock purchase plan and stock appreciation rights and stock-based compensation expense of approximately $0.7 million, $0.9 million and $1.4 million, respectively, related to employee restricted stock and restricted stock units.

        Awards to consultants:    During the fiscal year ended December 31, 2008, we did not grant any stock awards to consultants. During the fiscal year ended December 31, 2007, we granted 5,000 shares of common stock to one consultant. In accordance with EITF 96-18 "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services," we have recorded compensation expense related to these stock options. We re-measure the

72

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

fair value of the options as they vest and recognize changes in fair value as expense in the period. We recorded stock based compensation expense of approximately $0.2 million during the year ended December 31, 2008 and 2007 and approximately $0.3 million during the year ended December 31, 2006 in connection with our grants to consultants.

        The following table sets forth the total stock-based compensation expense resulting from stock options, stock awards, non-employee stock options, stock appreciation rights and the Employee Stock Purchase Plan (the "Plan") included in the Consolidated Statements of Operations (in thousands):

	Years Ended December 31,
	2008		2007		2006
Cost of goods sold	$	46	$	27	$	128
Research and development		238		565		656
Selling, general and administrative		5,383		5,901		5,370
Total stock-based compensation expense	$	5,667	$	6,493	$	6,154

        No income tax benefit has been recognized relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options.

        Stock Options and Stock Appreciation Rights:    During the year ended December 31, 2008, we granted 1,026,910 stock options and stock appreciation rights, with an estimated total grant-date fair value of approximately $7.6 million and a grant date weighted-average fair value of $7.40 per share. We recorded approximately $4.5 million of stock based compensation expense for stock options and stock appreciation rights during the year ended December 31, 2008.

        As of December 31, 2008, there was $9.4 million of unrecognized stock-based compensation cost related to stock options and stock appreciation rights. This cost is expected to be recognized over a weighted-average amortization period of 2.7 years.

        During the year ended December 31, 2007, we granted 1,019,490 stock options and stock appreciation rights, with an estimated total grant-date fair value of approximately $7.6 million and a grant date weighted-average fair value of $7.42 per share. We recorded approximately $5.1 million of stock based compensation expense for stock options and stock appreciation rights during the year ended December 31, 2007.

        Employee Stock Purchase Plan (ESPP):    The compensation cost in connection with the ESPP for the year ended December 31, 2008 was approximately $0.3 million. The grant date weighted-average fair value was $5.18 per share. The compensation cost in connection with the plan for the year ended December 31, 2007 was approximately $0.3 million. The grant date weighted-average fair value was $5.11 per share.

        Restricted Shares and Restricted Stock Units:    During the year ended December 31, 2008 we granted 61,710 restricted stock units, with an estimated total grant date fair value of approximately $1.0 million and a grant date weighted average fair value of $16.75. This stock compensation is being recorded as compensation expense on a straight-line basis over the vesting periods of the underlying stock awards. During the years ended December 31, 2008 and 2007, we recorded approximately $0.7 million and $0.9 million, respectively, of such compensation expense.

73

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

        As of December 31, 2008, there was $1.2 million of unrecognized stock-based compensation related to nonvested restricted stock awards and restricted stock units. This cost is expected to be recognized over a weighted-average amortization period of 2.6 years.

Valuation assumptions

        The fair value of stock-based awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the years ended December 31, 2008 and 2007:

	Years Ended December 31,
	2008						2007						2006
	Stock Option and Stock Appreciation Right Plans			Employee Stock Purchase Plan			Stock Option and Stock Appreciation Right Plans			Employee Stock Purchase Plan			Stock Option and Stock Appreciation Right Plans			Employee Stock Purchase Plan
Expected term (in years)		4.55			0.50			3.57			0.67			3.66			0.61
Average risk-free interest rate		2.73	%		2.01	%		4.55	%		4.82	%		4.78	%		5.08	%
Average volatility factor		47.3	%		42.7	%		47.8	%		41.2	%		53.7	%		45.0	%
Dividend yield		—			—			—			—			—			—

        Expected Term:    Our expected term represents the period for which our stock-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards and vesting schedules.

        Expected Volatility:    We used historical volatility based on the expected term of the awards, which is consistent with our assessment that the historical volatility for such period is more representative of future stock price trends than any other type of volatility.

        Expected Dividends:    We have not paid and do not anticipate paying any dividends in the near future.

        Risk-Free Interest Rate:    We base the risk-free interest rate on the U.S. Treasury yield curve in effect at the time of grant based on the expected term of the underlying option.

        As stock-based compensation expense recognized in the Consolidated Statement of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience.

        Refer to Note 12—Incentive and Stock Plans, for a description of our awards.

Income Taxes

        We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to affect taxable income. On January 1, 2007, we adopted the provisions of Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes

74

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(FIN 48) which is an interpretation of SFAS No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The adoption of the provisions of FIN 48 did not have a material effect on our financial position and results of operations. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our actual current tax exposure together with assessing temporary differences that may result in deferred tax assets. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. We must assess whether it is "more likely than not" that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. We evaluate the need for a valuation allowance for our deferred tax assets. Due to our cumulative pre-tax U.S. losses and the current uncertainty of our ability to realize our U.S. deferred tax assets, a valuation allowance in an amount equal to our U.S. deferred tax assets has been recorded.

Net Loss per Share

        Basic net loss per share excludes any potential dilutive effects of options, unvested restricted shares and restricted stock units and common stock shares subject to repurchase. Diluted net loss per share includes the impact of potentially dilutive securities. In net loss periods presented, basic and diluted net loss per share are both computed using the weighted average number of common shares outstanding.

        The following table provides a reconciliation of weighted-average number of common shares outstanding to the weighted-average number of common shares outstanding used in computing basic and diluted net loss per common share (in thousands):

			2008			2007			2006
Numerator:
Numerator for diluted earnings per share—Net loss available to common stockholders			$	(83	)	$	(11,632	)	$	(18,487	)
Denominator:
Denominator for basic earnings per share—Weighted-average number of common shares outstanding				30,226			29,497			29,251
		Less: weighted-average unvested and restricted common shares		10			34			258
	Weighted-average number of common shares outstanding used in computing basic and dilutive net loss per common share			30,216			29,463			28,993

75

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

        The following outstanding equity awards and securities, which could potentially dilute basic net loss per share in the future were excluded from the computation of diluted net loss per share, as their effect would have been antidilutive (in thousands):

	At December 31,
	2008		2007		2006
Outstanding options and SARs		4,234		3,996		3,499
Restricted stock		4		17		78
Restricted stock units		102		191		255
Employee stock purchase plan		—		—		27
Warrants issued in connection with our convertible notes		3,093		3,093		—
		7,433		7,297		3,859

        In February 2007, we issued an aggregate principal amount of $86.3 million of our 2.25% convertible senior notes due 2027 are not included in the calculation of net loss per share because their effect is anti-dilutive. In addition, our senior convertible notes were excluded from the diluted net income per share calculation in 2008 and 2007 because the conversion price was greater than the average market price of our stock during the period.

Segment Information and Sales by Geographic Region

        We operate in one business segment, which encompasses all geographical regions. We use one measurement of profitability and do not segregate our business for internal reporting.

        Net sales by geographic region, based on shipping location of our customer, are as follows (in thousands, except percentages):

	Years Ended December 31,
	2008			2007
Net sales (in thousands)	$	101,977		$	64,442
United States of America		79	%		92	%
France		13	%		7	%
Europe (other than France)		7	%		0	%
Other		1	%		1	%

Comprehensive Loss

        Comprehensive loss generally represents all changes in stockholders' equity except those resulting from investments or contributions by stockholders. Our comprehensive loss consists of cumulative

76

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

translation adjustments. A summary of the comprehensive loss for the periods indicated is as follows (in thousands):

		At December 31
		2008			2007			2006
Net loss		$	(83	)	$	(11,632	)	$	(18,487	)
Other comprehensive loss
	Foreign currency translation adjustment, net of tax		(798	)		—			—
Comprehensive loss		$	(881	)	$	(11,632	)	$	(18,487	)

        The balances of each component of accumulated other comprehensive loss, net of taxes, as of December 31, 2008, 2007 and 2006 consist of the following (in thousands):

		Foreign Currency Translation			Accumulated Other Comprehensive Loss
Balance as of December 31, 2006		$	—		$	—
	Net change during the twelve month period		—			—
Balance as of December 31, 2007			—			—
	Net change during the twelve month period		(798	)		(798	)
Balance as of December 31, 2008		$	(798	)	$	(798	)

Recent Accounting Pronouncements—Adopted

        Effective January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements ("SFAS 157") as amended by Financial Accounting Standards Board ("FASB") Staff Position SFAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 ("FSP SFAS 157-1") and FASB Staff Position SFAS 157-2, Effective Date of FASB Statement No. 157 ("FSP SFAS 157-2"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and provides for expanded disclosure about fair value measurements. SFAS 157 applies prospectively to all other accounting pronouncements that require or permit fair value measurements. FSP SFAS 157-1 amends SFAS 157 to exclude from the scope of SFAS 157 certain leasing transactions accounted for under SFAS No. 13, Accounting for Leases. FSP SFAS 157-2 amends SFAS 157 to defer the effective date of SFAS 157 for all non-financial assets and non-financial liabilities except those that are recognized or disclosed at fair value in the financial statements on a recurring basis to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. We will adopt FSP SFAS 157-2 with our first quarter of fiscal 2009. See Note 4—Fair Value Measurements.

        The adoption of SFAS 157 did not have a material impact on our financial condition, results of operations, or cash flows. While we continue to evaluate the impact that SFAS 157 will have on our non-financial assets and non-financial liabilities, we do not anticipate that the impact will be material to our financial condition, results of operations, or cash flows. The assets and liabilities typically recorded

77

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

at fair value on a non-recurring basis to which we have not yet applied SFAS 157 due to the deferral of SFAS 157 for such items include:

•

Non-financial assets and liabilities initially measured at fair value in an acquisition or business combination, and

•

Long-lived assets measured at fair value due to an impairment assessment under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

        Effective November 2008 we adopted FASB Staff Position 157-3, Determining Fair Values of a Financial Asset When the Market for That Asset Is Not Active ("FSP FAS 157-3"). FSP FAS 157-3 clarifies the application of SFAS 157 to financial instruments in an inactive market. The adoption of FSP FAS 157-3 did not have a material impact on our financial condition, results of operations, or cash flows.

        Effective November 2008, we adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of the guidance is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The adoption of SFAS 159 did not have a material impact on our financial condition, results of operations, or cash flows since we did not elect to apply the fair value option for any of our eligible financial instruments or other items on the June 1, 2008 effective date.

Recent Accounting Pronouncements—Not Yet Adopted

        In December 2007, FASB issued Statement No. 141 (revised 2007) Business Combinations or SFAS 141(R), and Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, or SFAS 160, an amendment of Accounting Research Bulleting No. 51, or ARB 51. SFAS 141(R) will impact financial statements on the acquisition date and in subsequent periods. Some of the changes, such as the accounting for contingent consideration, will introduce more volatility into earnings and may impact our acquisition strategy. Additionally, in February 2009, FASB issued FASB Staff Positions FAS 141(R)-a, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (the "FSP"), which will amend the previsions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies in a business combination under Statement of Financial Accounting Standards No. 141(R), Business Combinations FAS 141(R). SFAS 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. In addition, SFAS 141(R) will be applied prospectively and SFAS 160 will require retroactive adoption of the presentation and disclosure requirements for existing minority interests, while the remaining requirements of SFAS 160 will be applied prospectively. SFAS 141(R) and SFAS 160 are effective on January 1, 2009. We are currently evaluating the impact, if any of adopting SFAS 141(R) and SFAS 160 on our consolidated financial statements.

        In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133, or SFAS 161. SFAS 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and their effect on an entity's financial position, financial performance and cash flows. SFAS 161 will be effective in the first quarter of fiscal

78

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

year 2009. We are evaluating the impact that this statement will have, if any, on our consolidated financial statements.

        In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets, or FSP 142-3. FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, Goodwill and Other Intangible Assets. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. We are evaluating the impact, if any, that FSP 142-3 will have, if any, on our consolidated financial statements.

        In May 2008, the FASP issued FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), or FSP APB 14-1, which clarifies the accounting for convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement. FSP APB 14-1 specifies that an issue of such instruments should separately account for the liability and equity components of the instruments in a manner that reflect the issuer's non-convertible debt borrowing rate which interest costs are recognized in subsequent periods. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008, and retrospective application is required for all periods presented. We will be required to record increased interest expense on our convertible debt beginning in 2009 which we expect will have a material impact on our consolidated financial statements.

        In June 2008, the FASB ratified EITF Issue 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock (EITF 07-5). Paragraph 11(a) of SFAS No. 133, Accounting for Derivatives and Hedging Activities, specifies that a contract that would otherwise meet the definition of derivative but is both (a) indexed to such company's own stock and (b) classified in stockholders' equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. EITF 07-05 will be effective for the first annual reporting period beginning after December 15, 2008, and early adoption is prohibited. We are currently evaluating whether the adoption of EITF 07-05 will have an impact on the accounting for our convertible senior notes.

3. Long-term investments

        As of December 31, 2008, we held $48.5 million (par value) in auction rate securities ("ARS") backed by federal and state student loans which are variable rate debt instruments and bear interest rates that reset approximately every 20-30 days. These ARS have a contractual maturity ranging from 2028 through 2047.

        Our ARS are long-term debt instruments backed by student loans, a substantial portion of which are guaranteed by the United States government. Prior to 2008, our ARS were highly liquid, using a Dutch auction process that resets the applicable interest rate at predetermined intervals, typically every 20-30 days, to provide liquidity at par. We have experienced failed auction in 2008 on all of our ARS. The failures of these auctions do not affect the value of the collateral underlying the ARS, and we continue to earn and receive interest on our ARS at a pre-determined formula with spreads tied to particular interest rate indexes.

79

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Long-term investments (Continued)

        In November 2008, we accepted an offer from UBS AG ("UBS"), providing us with rights related to our auction rate security rights (the "Rights"). The Rights permit us to require UBS to purchase our ARS at par value, which is defined as the price equal to the liquidation preference of the ARS plus accrued but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, in its discretion, to purchase or sell our ARS at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our ARS under the Rights at par value. However, if the Rights are not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our ARS. So long as we hold our ARS, they will continue to accrue interest as determined by the auction process or the terms of the ARS if the auction process fails.

        UBS's obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

        We have accounted for the Rights as a freestanding financial instrument and elected to record the value of the Rights under the fair value option of SFAS No. 159. As a result, upon acceptance of the offer from UBS, we recorded approximately $5.1 million as the fair value of the Rights with a corresponding credit to other expense, net. As a result of our elections to record the Rights at fair value, unrealized gains and losses will be included in earnings in future periods. We estimated the fair value of the Rights using the expected value that we will receive from UBS which was calculated as the difference between the anticipated recognized loss and par value of the ARS as of the option exercise date. This value was discounted by using a UBS credit default rate to account for the consideration of UBS credit risk.

        Although the Rights represent the right to sell the securities back to UBS at par, we will be required to periodically assess the economic ability of UBS to meet that obligation in assessing the fair value of the Rights. We will continue to classify the ARS as long-term investments until June 30, 2009, one year prior to the expected settlement.

        Prior to accepting the UBS offer, we recorded our ARS as available-for-sale investments. We recorded unrealized gains and losses on our available-for-sale securities, in accumulated other comprehensive income (loss) in the stockholders' equity section of our balance sheets. Such an unrealized loss did not change net income (loss) for the applicable accounting period.

        In connection with our acceptance of the UBS offer in November 2008, resulting in our right to require UBS to purchase our ARS at par value beginning on June 30, 2010, we transferred our ARS from available-for-sale to trading securities in accordance with SFAS 115. The transfer to trading securities reflects our intent to exercise our put option during the period June 30, 2010 to July 3, 2012. Prior to our agreement with UBS, our intent was to hold our ARS until we realized the par value.

        We recorded a temporary reduction in carrying value of $2.8 million for the nine months ended September 30, 2008, which was recorded as an unrealized loss in accumulated other comprehensive loss. Upon transfer to trading securities, we transferred the $2.8 million recorded as unrealized loss in accumulated other comprehensive loss and recorded an unrealized loss of $5.3 million in other expense, net in the fourth quarter of 2008, representing the difference between the par and fair value of the ARS at the date of transfer. We determined that use of a valuation model was the best available technique for measuring the fair value of our ARS. We used a trinomial discount model weighting estimated future cash flows, quality of collateral and the probability of future successful auctions

80

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Long-term investments (Continued)

occurring. In determining a discount factor for each ARS, the model weights various factors, including assessments of credit quality, duration, insurance wraps, portfolio composition, discount rates, overall capital market liquidity and comparable securities, if any.

        In November 2008 we entered into a demand revolving credit line agreement with UBS, payable on demand, in an amount equal to a specified percentage of fair value of our auction rate securities at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the auction rate securities that we have pledged as security for the credit line. Additionally, under the terms of the settlement agreement, if UBS is able to sell our auction rate securities at par, proceeds would be utilized to first repay any outstanding balance under the demand revolving credit line. We are still able to sell the auction rate securities, but in such a circumstance, if we sold at less than par, we would not be entitled to recover the par value support from UBS. See Note 11—Credit Line.

4. Fair Value Measurements

        On January 1, 2008, we adopted the methods of fair value as described in SFAS 157 to value our financial assets and liabilities. As defined in SFAS 157, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, SFAS 157 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

        Our cash and cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with a reasonable level of price transparency. As of December 31, 2008, our Level 1 instruments are solely comprised of our investments in money market funds.

        As a result of continued auction failures, quoted prices for our ARS did not exist as of December 31, 2008 and, accordingly, we concluded that Level 1 inputs were not available for these assets. Brokerage statements received from our broker/dealer that held our ARS included their estimated market value as of December 31, 2008. Our broker/dealer valued our auction rate securities at 83% of par. We made inquiries relative to the measurements utilized to derive the estimated market values quoted on our brokerage statements, but the broker/dealer declined to provide detailed information relating to their valuation methodologies. Due to the lack of transparency into the methodologies used to determine the estimated market values, we concluded that estimated market values provided on our brokerage statements did not constitute valid inputs and thus we did not utilize them in measuring the fair value of these ARS as of December 31, 2008.

81

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Fair Value Measurements (Continued)

        We determined that use of a valuation model was the best available technique for measuring the fair value of our ARS. We used a trinomial discount model weighting estimated future cash flows, quality of collateral and the probability of future successful auctions occurring. While our valuation model was based on both Level 2 (credit quality and interest rates) and Level 3 inputs, we determined that the Level 3 inputs were the most significant to the overall fair value measurement of these assets, particularly the estimates of expected periods of illiquidity. In determining a discount factor for each ARS, the model weights various factors, including assessments of credit quality, duration, insurance wraps, portfolio composition, discount rates, overall capital market liquidity and comparable securities, if any.

        The put option is a free standing asset separate from the ARS, and represents our contractual right to require our broker, UBS, to purchase our ARS at par value during the period of June 30, 2010 through July 2, 2012. See Note 3—Long-term Investments.

        Assets and liabilities measured at fair value on a recurring basis at December 31, 2008 are as follows:

				Fair Value Measurements at Reporting Data
		December 31 2008		Active Markets for Identical Instruments Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
	Money market fund	$	47,170	$	47,170	$	—	$	—
	Auction rate securities		43,177		—		—		43,177
	Put option		5,144		—		—		5,144
Total assets		$	95,491	$	47,170	$	—	$	48,321

        The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis, excluding accrued interest components, using significant unobservable inputs (Level 3) for the twelve months ended December 31, 2008:

		Put Option		Auction Rate Securities			Total
Balance at December 31, 2007		$	—	$	—		$	—
	Transfers from Level 2 to Level 3		—		48,800			48,800
	Sales of auction rate securities		—		(350	)		(350	)
	Impairment of auction rate securities(1)		—		(5,273	)		(5,273	)
	Issuance of put option		5,144		—			5,144
Balance at December 31, 2008		$	5,144	$	43,177		$	48,321

(1)

Total unrealized losses booked in other comprehensive loss for the nine months ended September 31, 2008 was $2.8 million. This amount was transferred to earnings in November 2008. Unrealized loss of $5.3 million, which represents the decline in the fair value of the ARS, was included in earnings in the twelve months ended December 31, 2008. In November 2008 we transferred our ARS from available-for-sale to trading

82

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Fair Value Measurements (Continued)

securities in accordance with SFAS 115. The transfer to trading securities reflects our intent to exercise our current put option during the period June 30, 2010 to July 3, 2012. Prior to our agreement with UBS, our intent was to hold our ARS until we realized par value.

5. Business Combination

        On January 7, 2008, we acquired all of the outstanding shares of Conceptus SAS on the Closing Date. As a result of this transaction, Conceptus SAS became our wholly owned subsidiary and its results of operations are consolidated with our results of operations starting on January 7, 2008. We believe the acquisition of Conceptus SAS expands our presence in international markets and will increase our revenues as we will recognize sales at end user pricing as compared to the price at which we previously sold the Essure product directly to Conceptus SAS. Our consolidated financial statements include the financial results of Conceptus SAS beginning from the acquisition date of January 7, 2008.

        The total purchase price of $22.5 million included $24.4 million in cash consideration and $0.3 million in direct transaction costs, less a reduction to the purchase price of $2.2 million as explained below. On February 27, 2007, we entered into an amendment to the Share Purchase and Call Option Agreement with Conceptus SAS and into an amendment to the Distribution Agreement with Conceptus SAS. Pursuant to the amendment to the Share Purchase and Call Option Agreement, we agreed not to exercise the call option to acquire Conceptus SAS in 2007 and agreed to exercise our call option to acquire SAS sometime between January 1, 2008 and January 2, 2009 subject to the satisfaction of certain closing conditions. Pursuant to the amendment to the Distribution Agreement, Conceptus SAS agreed to increase the price they pay to us for the Essure product. The difference in price of product under the revised Distribution Agreement compared to the previous agreement was recorded as a current liability in our consolidated balance sheet prior to the acquisition. The balance of this current liability of $2.2 million on the date of acquisition was recorded as a reduction of the purchase price of Conceptus SAS.

        The aggregate Conceptus SAS purchase price of $22.5 million was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The estimate of the excess of purchase price over the fair value of net tangible assets acquired was allocated to identifiable intangible assets with the remainder as goodwill. The following table summarizes the

83

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Business Combination (Continued)

allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values on the date of acquisition:

(in thousands):
Cash acquired		$	1,689
Inventory			1,816
Accounts receivable			3,270
Deferred tax asset			328
Other tangible assets acquired			396
Amortizable intangible assets:
	Customer relationships		5,024
	Covenant not to compete		71
Goodwill			17,807
Liabilities assumed			(7,952	)
Total		$	22,449

        The amortizable intangible assets have useful lives for customer relationships of 9 years and for the covenant not to compete of 3 years. No amounts have been allocated to in-process research and development and approximately $17.8 million has been allocated to goodwill. Goodwill was recorded based on the residual purchase price after allocating the purchase price to the fair market value of tangible and intangible assets acquired less liabilities assumed. The goodwill arising from the acquisition is not deductible for tax purposes.

        The unaudited pro forma information set forth below represents the net sales, net loss and earnings per share of the Company including Conceptus SAS as if the acquisition were effective as of the beginning of fiscal 2007, after giving effect to certain adjustments, including the amortization of Conceptus SAS acquisition related intangibles and the elimination of preacquisition intercompany profits. The operating results for the period from January 1, 2008 to January 7, 2008 (the Closing Date) and for the comparable period of fiscal 2007 were not readily available and were not considered practical to obtain. The unaudited pro forma financial information does not necessarily reflect the results of operations that would have occurred had the combined businesses constituted a single entity during such period, and is not necessarily indicative of results which may be obtained in the future (in thousands, except per share amounts):

	Years Ended December 31,
(unaudited)	2007			2006
Pro forma total net sales	$	74,395		$	49,060
Pro forma net loss	$	(9,917	)	$	(17,692	)
Pro forma net loss per share basic and diluted	$	(0.34	)	$	(0.61	)
Pro forma weighted average basic and diluted shares		29,463			28,993

84

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Goodwill and Intangible Assets

        The changes in carrying amount of goodwill for 2008 and 2007 are as follows:

	Years Ended December 31,
(in thousands)	2008			2007
Goodwill, beginning of period	$	—		$	—
Adjustments to goodwill from acquisitions		17,807			—
Effect of currency translation		(702	)		—
Goodwill, end of period	$	17,105		$	—

        The goodwill during the current period relates to the acquisition of Conceptus SAS.

        Definite-lived intangibles are being amortized over periods ranging from 3 to 9 years.

        The following table provides additional information concerning intangible assets:

			December 31, 2008
(in thousands)	Weighted avg remaining life (years)		Gross carrying amount		Accumulated amortization			Effect of currency translation			Net book value
Customer relationships		8.0	$	5,024	$	(555	)	$	(188	)	$	4,281
Covenant not to compete		2.0		71		(23	)		(2	)		46
Licenses		4.7		2,020		(1,060	)		—			960
Total intangibles			$	7,115	$	(1,638	)	$	(190	)	$	5,287

			December 31, 2007
(in thousands)	Weighted avg remaining life (years)		Gross carrying amount		Accumulated amortization			Effect of currency translation		Net book value
Licenses		5.7		2,020		(856	)		—		1,164
Total intangibles			$	2,020	$	(856	)	$	—	$	1,164

        The following discloses expected aggregate amortization expense for currently-owned intangible assets (in thousands) for 2009 through 2017:

Year	Expected
2009	$	760
2010		760
2011		736
2012		734
2013		686
Thereafter		1,611

85

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Inventories

        Inventories are stated at the lower of cost or market. Cost is based on actual costs computed on a first-in, first-out basis. The components of inventories consist of the following (in thousands):

	December 31,
	2008		2007
Raw materials	$	230	$	177
Work-in-progress		1,225		1,356
Finished goods		2,374		885
Total	$	3,829	$	2,418

8. Property and Equipment

        The components of property and equipment consist of the following (in thousands):

	December 31,
	2008			2007
Equipment, tooling and furniture and fixtures	$	10,408		$	5,882
Software		3,277			3,278
Leasehold improvements		1,039			896
Machinery		833			1,008
		15,557			11,064
Less: accumulated depreciation and amortization		(6,922	)		(5,752	)
Property and equipment, net	$	8,635		$	5,312

        Property and equipment depreciation and amortization expenses for the years 2008, 2007 and 2006 were approximately $2.9 million, $1.5 million, and $1.2 million, respectively.

9. Commitments and Contingencies

Leases

        On December 5, 2008 we renegotiated our current Lease Agreement for our 58,242 square foot headquarters located in Mountain View, California. The lease will commence on July 1, 2009 and the term on the lease is for forty-nine months. We are recognizing the rent expense on a straight-line basis over the life of the lease. In connection with this lease we were required to open a long term restricted CD account for $0.4 million, which is classified as "restricted cash" on our balance sheet. This restricted cash accounts earns a nominal interest rate.

        With the acquisition of Conceptus SAS on January 7, 2008 we assumed a lease of a 1,938 square foot sales office located in Versailles, France. This lease expires on March 7, 2011. See Note 5—Business Combinations.

        In July 2008 we entered into a Lease Agreement for minimal office space in the United Kingdom. This lease expires on July 16, 2009. See Note 16—Establishment of Foreign Subsidiary.

86

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Commitments and Contingencies (Continued)

        In addition to the lease agreements for the facilities we have certain operating leases on automobiles, and copiers, worldwide. These leases have terms expiring from March 2009 through February 2014. Expenses for all leases were approximately $2.3 million, $1.5 million and $0.6 million for the years ended December 31, 2008, 2007 and 2006, respectively.

        Aggregate future minimum annual lease commitments under all leases are as follows (in thousands):

2009	$	654
2010		1,687
2011		1,630
2012		1,577
2013		921
Thereafter		2
Total operating lease obligations	$	6,471

Commitments

        We enter into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, generally the business partners or customers, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to our products. The term of these indemnification agreements is generally perpetual after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these agreements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements is minimal.

        We have entered into indemnification agreements with our directors and officers that may require us to indemnify our directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of a culpable nature; to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified; and to make good faith determination whether or not it is practicable for us to obtain directors and officers insurance. We currently have directors and officers insurance.

        In addition, we have commitments related to our clinical trial obligations, as follows (in thousands):

2009	$	270
Total clinical trial obligations	$	270

Contingencies

        From time to time, we may have certain contingent liabilities that arise in the ordinary course of our business activities. We account for contingent liabilities when it is probable that future expenditures

87

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Commitments and Contingencies (Continued)

will be made and such expenditures can be reasonable estimated. At December 31, 2008 we had no material outstanding contingencies.

10. Convertible Senior Notes

        In February 2007, we issued an aggregate principal amount of $86.3 million of our 2.25% convertible senior notes due 2027. These notes bear a 2.25% interest per annum on the principal amount, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2007.

        The notes will mature on February 15, 2027, unless earlier redeemed, repurchased or purchased by us or converted, and are convertible into cash and, if applicable, shares of our common stock based on an initial conversion rate, subject to adjustment, of 35.8616 shares per $1,000 principal amount of notes (which represents an initial conversion price of approximately $27.89 per share), in certain circumstances. Upon conversion, a holder would receive cash up to the principal amount of the note and our common stock in respect of such note's conversion value in excess of such principal amount. The notes are convertible only in the following circumstances: (1) if the closing sale price of our common stock exceeds 120% of the conversion price during a period as defined in the indenture; (2) if the average trading price per $1,000 principal amount of the notes is less than or equal to 97% of the average conversion value of the notes during a period as defined in the indenture; (3) upon the occurrence of specified corporate transactions; (4) if we call the notes for redemption and (5) at any time on or after December 15, 2011 up to and including February 15, 2012 and anytime on or after February 15, 2025. Upon a change in control or termination of trading, holders of the notes may require us to repurchase all or a portion of their notes for cash at a repurchase price equal to 100% of the principal amount, plus any accrued and unpaid interest. We may not have sufficient funds to pay the interest, purchase price, repurchase price or principal return when conversion is triggered or a note becomes payable under the above terms.

        In connection with the sale and issuance of the notes we incurred debt issuance costs of $3.1 million which is being amortized to interest expense over a five year period.

        We concluded that the embedded stock conversion option is not considered a derivative under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, or SFAS 133, because the embedded stock conversion option would be recorded in stockholders' equity if it were a freestanding instrument per Emerging Issues Task Force EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock, or EITF 00-19. We concluded that the notes are accounted for similar to traditional convertible debt (that is, as a combined instrument) because the embedded stock conversion option meets the requirements of EITF No. 00-19, including the provisions contained in paragraphs 12-32 of EITF 00-19. Accordingly, the embedded stock conversion option is not separated as a derivative.

88

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Convertible Senior Notes (Continued)

        In connection with the offering, we entered into convertible note hedge transactions with affiliates of the initial purchasers. These transactions are intended to reduce the potential dilution to our Company's stockholders upon any future conversion of the notes. The call options, which cost an aggregate $19.4 million, were recorded as a reduction of additional paid-in capital. We also entered into warrant transactions concurrently with the offering, pursuant to which we sold warrants to purchase approximately 3.1 million shares of our common stock to the same counterparties that entered into the convertible note hedge transactions. The convertible note hedge and warrant transactions effectively increased the conversion price of the convertible notes to approximately $36.47 per share of our common stock. Proceeds received from the issuance of the warrants totaled approximately $10.7 million and were recorded as an addition to additional paid-in capital.

        EITF 00-19 provides that contracts are initially classified as equity if (1) the contract requires physical settlement or net-share settlement, or (2) the contract gives the company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The settlement terms of our purchased call options and sold warrant contracts require net-share settlement. Based on the guidance in EITF 00-19 and SFAS 133, the purchased call option contracts were recorded as a reduction of equity and the warrants were recorded as an addition to equity as of the trade date. SFAS 133 states that a reporting entity shall not consider contracts to be derivative instruments if the contract issued or held by the reporting entity is both indexed to its own stock and classified in stockholders' equity in its statement of financial position. We concluded the purchased call option contracts and the warrant contracts should be accounted for in stockholders' equity.

11. Credit Line

        In November 2008 we entered into a demand revolving credit line agreement with UBS, payable on demand, in an amount equal to a specified percentage of fair value of our auction rate securities at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the auction rate securities that we have pledged as security for the credit line. Additionally, under the terms of the settlement agreement, if UBS is able to sell our auction rate securities at par, proceeds would be utilized to first repay any outstanding balance under the demand revolving credit line. We are still able to sell the auction rate securities, but in such a circumstance, if we sold at less than par, we would not be entitled to recover the par value support from UBS See Note 3—Long-term Investments.

12. Incentive and Stock Plans

Employee Stock Purchase Plan

        In November 1995, the Board of Directors adopted the Employee Stock Purchase Plan (ESPP). The ESPP became effective November 29, 1995. At that time, 200,000 shares were reserved for issuance under the ESPP. The ESPP permits participants to purchase common stock through payroll deductions of up to 10% of an employee's annual base earnings. The purchase price per share is equal to 85% of the fair market value per share on the participant's entry date into the offering period or, if lower, 85% of the fair market value per share on the semi-annual purchase date. In March 2004, the Board of Directors approved an amendment to the ESPP to increase the number of shares of common stock reserved for issuance by 150,000 shares. The stockholders approved this amendment in June 2004, to be effective July 1, 2004. In March 2006, the Board of Directors approved an amendment to the

89

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Incentive and Stock Plans (Continued)

ESPP to increase the number of shares of Common Stock reserved for issuance by 160,000 shares. This amendment was approved by the stockholders in June 2006. In April 2008, the Board of Directors approved an amendment to the ESPP to increase the number of shares of Common Stock reserved for issuance by 150,000 shares. This amendment was approved by the stockholders in June 2008. As of December 31, 2008, 486,641 shares had been issued under the ESPP and 173,359 shares were available for future issuance.

Company Stock Option Plans

        In August 2002, the Board of Directors approved the 2002 Non-Qualified Stock Option Plan ("2002 Plan") and amendments to the 2002 Plan were approved by the Board in March 2003. Under the Amended and Restated 2002 Plan, non-qualified stock options and stock purchase rights may be granted only to the following classes of persons: (i) except as provided in (ii) below, consultants and employees who are not our officers or directors, and (ii) newly hired employees (including employees who will become our officers or directors) and who have not previously been employed by us and with respect to whom options are to be granted as an inducement essential to such employees' entering into employment contracts with us. The 2002 Plan was enacted to address the increased hiring done during the second half of 2002, primarily in our U.S. sales, professional education and marketing functions. The maximum aggregate number of shares that may be issued upon exercise of options or stock purchase rights is 1,500,000 shares. In December 2005, the Board of Directors approved an amendment and restatement of the 2002 Plan to provide a fair market value established upon the closing price on the day of the grant rather than the previous trading day. This amendment became effective immediately after approval and did not require stockholder approval.

        Under the terms of the 2002 Plan, options may be granted with different vesting terms from time to time and all options under the 2002 Plan expire ten years after grant. The options may include provisions permitting exercise of the option prior to full vesting. In 2008, there were no shares that were exercised prior to full vesting.

        In March 2001, the Board of Directors approved the 2001 Equity Incentive Plan ("2001 Plan") allowing granting of stock options and restricted stock to employees, directors and consultants. The 2001 Plan provides for the grant of options, restricted stock, stock appreciation rights, performance share awards, dividend equivalents awards, stock payment awards, stock purchase rights and restricted stock unit awards to our employees, directors and consultants. The 2001 Plan was originally adopted by the Board of Directors on March 21, 2001 with a total of 1,000,000 shares of common stock reserved for issuance thereunder, and was approved by the stockholders in May 2001. In March 2002, the Board of Directors approved an amendment and restatement of the 2001 Plan to increase the shares reserved for issuance thereunder by an additional 1,000,000 shares, bringing the aggregate number reserved for issuance to 2,000,000 shares of common stock, and to provide for automatic grants of non-qualified stock options to non-employee directors as had been provided under the 1995 Director's Stock Option Plan. The stockholders approved this amendment and restatement in May 2002. In April 2003, the Board of Directors approved the Second Amended and Restated 2001 Plan to increase the size of the formula grants to non-employee directors and to prohibit repricing. The stockholders approved this amendment and restatement in June 2003. In March 2004, the Board of Directors approved the Third Amended and Restated 2001 Plan to reduce the size of the automatic grants of stock options to non-employee directors and to provide for automatic grants of restricted stock to non-employee directors and to increase the shares of Common Stock reserved for issuance thereunder by an

90

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Incentive and Stock Plans (Continued)

additional 500,000 shares, bringing the aggregate number reserved for issuance to 2,500,000 shares of common stock. The stockholders approved this amendment and restatement in June 2004. In November 2004, the Board of Directors approved the Fourth Amended and Restated 2001 Plan to provide for the grant of restricted stock units and stock appreciation rights. In January 2005, the Board of Directors approved the Fifth Amended and Restated 2001 Plan to provide for a change in the number of shares to be automatically granted to non-employee directors under the plan. In December 2005, the Board of Directors approved the Sixth Amended and Restated 2001 Plan to establish that the price of future grants be based on the closing price of our stock on the date of grant, rather than the previous trading day. In February 2006, the Board of Directors approved the Seventh Amended and Restated 2001 Plan to provide for the increase the annual grant of restricted stock for directors from 2,000 shares to 2,500 shares. In April 2006, the Board of Directors approved the amendment to the Eighth Amended and Restated 2001 Plan to increase the shares of Common Stock reserved for issuance thereunder by an additional 1,500,000 shares, bringing the aggregate number reserved for issuance to 4,000,000 shares of Common Stock. This amendment was approved by the stockholders in June 2006. In June 2008, the Board of Directors approved the Tenth Amended and Restated 2001 Plan to provide for the increase the number of shares of Common Stock reserved for issuance thereunder by an additional 1,500,000 shares, bringing the aggregate number reserved for issuance to 5,500,000 shares of common stock. This amendment was approved by the stockholders in June 2008.

        Under the terms of the 2001 Plan, incentive stock options may be granted only to employees with exercise prices not less than the fair market value of the common stock on the date of grant. Stock options and stock appreciation rights may be granted with different vesting terms from time to time but generally provide for vesting of at least 20% of the total number of shares per year. All options and stock appreciation rights under the 2001 Plan expire ten years after grant, and five years in the case of a grant to a 10% stockholder. Stock appreciation rights are to be settled in stock. Stock options may include provisions permitting exercise of the option prior to full vesting. To the extent that the aggregate fair market value of the shares subject to a holder's incentive stock options exceeds $100,000, the excess options will be treated as non-qualified stock options.

        On November 29, 1995, the Board of Directors approved the 1995 Director's Stock Option Plan (the "Directors' Plan"), which allows the granting of options for up to 100,000 shares of common stock to outside directors. Stock options may be granted to outside directors with exercise prices of not less than fair market value. The options expire ten years from date of grant. Options granted under the Directors' Plan vest over one or three years. The options are only exercisable while the outside director remains a director.

        In July 1993, the Board of Directors adopted the 1993 Stock Plan (the "1993 Plan"), and amendments to the 1993 Plan were adopted by the Board of Directors in March 1994, May 1995, October 1995, February 1997 and April 2000 and approved by the stockholders in March 1994, January 1996, May 1997 and May 2000 to allow granting of options up to 3,075,000 shares of common stock in the aggregate. Stock options granted under the 1993 Plan may be either incentive stock options or non-qualified stock options and can be granted to employees, distributors, consultants and directors. Incentive stock options may be granted to employees with exercise prices of no less than the fair market value and non-qualified options may be granted at exercise prices of no less than 85% of the fair market value of the common stock on the date of grant, as determined by the Board of Directors. The options expire no more than 10 years after the date of grant. Options may be granted with different vesting terms from time to time but generally provide for vesting of at least 25% of the total

91

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Incentive and Stock Plans (Continued)

number of shares per year. The options may include provisions permitting exercise of the option prior to full vesting. Any unvested shares so purchased shall be subject to repurchase by us at the original exercise price of the option. Such repurchase rights generally lapse at a minimum rate of 25% per year from the date the option was granted. As of December 31, 2008, there were no shares that are subject to repurchase.

        In April 2004, the Board of Directors approved a nonqualified stock option grant for 125,000 shares of our common stock and a grant of 36,000 shares of restricted stock for Mr. Ulric E. Cote as a stand-alone inducement grant in connection with his initial commencement of employment with us as Vice President, Sales. In October 2007, the Board of Directors approved a stock appreciation right grant of 100,000 shares of our common stock for Mr. Spencer Roeck as a stand-alone inducement grant in connection with his initial commencement of employment with us as Vice President of International. In March 2008, the Board of Directors approved a stock appreciation right grant of 100,000 shares of our common stock for Mr. Todd Sloan as a stand-alone inducement grant in connection with his initial commencement of employment with us as Vice President of Strategic and Professional Marketing. Stockholder approval was not required for any of these grants.

        As of December 31, 2008, 112,147 shares remained as available for grant under the 2002 Plan, 1,690,321 shares remained as available for grant under the 2001 Plan, no shares remained available for grant under the 1993 Plan and no shares remained available for grant under the Director's Plan.

92

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Incentive and Stock Plans (Continued)

        A summary of the activity of our 1993, 2001 and 2002 Plans, the 1995 Directors' Plan and stand alone grant activity is as follows:

					Awards Outstanding
		Shares Available For Grant			Awards Outstanding			Weighted- Average Exercise Price
Balance at December 31, 2005			704,312			3,513,751		$	10.62
	Additional authorized		1,500,000			—			—
	Options granted		(604,500	)		604,500			15.00
	Restricted stock awards and restricted stock units granted		(291,999	)		291,999			—
	Restricted stock awards issued		—			(28,500	)		—
	Options exercised(a)		—			(294,121	)		9.77
	Options cancelled and expired(b)		206,699			(314,717	)		13.53
	Restricted stock awards and restricted stock units cancelled		192,710			(192,710	)		—
	Restricted stock awards expired		(24,000	)		184,000			—
	Shares repurchased		13,889			—			—
Balance at December 31, 2006			1,697,111			3,764,202			11.18
	Additional authorized(c)		225,000			—			—
	Options granted(c)		(1,024,490	)		1,024,490			18.57
	Restricted stock awards and restricted stock units granted		(60,550	)		60,550			—
	Restricted stock units issued		—			(116,721	)		—
	Options exercised(d)		—			(370,731	)		9.31
	Stock appreciation rights exercised(d)		5,912			(8,033	)		14.42
	Options cancelled and expired		159,505			(159,505	)		14.85
	Restricted stock awards and restricted stock units cancelled		8,062			(8,062	)		—
Balance at December 31, 2007			1,010,550			4,186,190			11.60
	Additional authorized(e)		1,600,000			—			—
	Options granted(e)		(1,026,910	)		1,026,910			17.47
	Restricted stock awards and restricted stock units granted		(61,710	)		61,710			—
	Restricted stock units issued		—			(142,789	)		—
	Options exercised		—			(378,267	)		8.20
	Stock appreciation rights exercised		8,571			(52,025	)		17.30
	Options cancelled and expired(f)		260,453			(357,932	)		17.21
	Restricted stock awards and restricted stock units cancelled		11,514			(7,625	)		—
Balance at December 31, 2008			1,802,468			4,336,172		$	12.62

(a)

Includes treasury stock issuances of 3,421 shares.

(b)

Includes stand-alone inducement plan cancellations of 83,334 shares.

(c)

Includes stand-alone inducement grants of stock appreciation rights of 225,000 shares.

(d)

Includes treasury stock issuances of 10,468 shares.

(e)

Includes stand-alone inducement grants of SARS of 100,000 shares.

(f)

Includes stand-alone inducement plan cancellation of 93,750 shares.

93

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Incentive and Stock Plans (Continued)

        A summary of the activity for the year ended December 31, 2008 of stock options and stock appreciation rights is as follows:

	Options and Stock Appreciation Rights Outstanding			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Balance outstanding at December 31, 2007		3,995,634		$	13.10
Grants		1,026,910			17.47
Exercises		(430,292	)		9.30
Cancelled and expired		(357,932	)		17.21
Balance outstanding at December 31, 2008		4,234,320			14.20	$	9,701,062
Exercisable at December 31, 2008		2,879,009		$	12.62	$	9,529,039

        The following table summarizes information about stock options outstanding and exercisable at December 31, 2008:

	Options Outstanding						Options Vested and Exercisable
			Weighted Average Contractual Remaining Life (years)
Range of Exercise Prices	Options Outstanding				Weighted Average Exercise Price		Options Vested and Exercisable		Weighted Average Exercise Price
$1.75–$8.94		516,621		5.21	$	7.52		508,997	$	7.52
$9.00–$9.76		83,061		3.36		9.35		83,061		9.35
$9.95–$9.95		630,000		4.29		9.95		630,000		9.95
$9.96–$13.11		435,827		5.08		12.44		426,918		12.45
$13.29–$14.76		643,349		5.26		14.15		541,196		14.10
$14.92–$17.54		481,335		8.17		16.58		148,524		16.04
$17.74–$17.74		443,889		9.14		17.74		92,471		17.74
$17.97–$17.97		61,868		9.42		17.97		—		0.00
$18.06–$18.06		437,364		8.10		18.06		192,062		18.06
$18.24–$22.93		501,006		7.32		19.54		255,780		19.69
$1.75–$22.93		4,234,320		6.39	$	14.20		2,879,009	$	12.62

        The weighted average exercise price for options vested and exercisable at December 31, 2007 was $11.60 per share.

        We granted zero and 5,000 shares of common stock to consultants in 2008 and 2007, respectively. In 2006 we did not grant any shares to consultants.

94

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Incentive and Stock Plans (Continued)

Restricted Stock

        Restricted stock award and restricted stock unit activity for the year ended December 31, 2008, is as follows:

	Shares and Units			Weighted- Average Grant Date Fair Value
Nonvested stock outstanding at December 31, 2007		207,942		$	18.35
Grants		61,710			16.75
Vested		(152,453	)		16.62
Cancellations		(11,514	)		15.00
Nonvested stock outstanding at December 31, 2008		105,685		$	16.26

Retirement Savings Plan

        Under our retirement savings plan ("401K Plan"), employees may elect to defer up to 15% of their total compensation, not to exceed the amount allowed by applicable Internal Revenue Service regulations. There were no employer contributions to the 401K Plan for the years ended 2008, 2007 and 2006.

13. Stockholder's Equity

        Pursuant to our certificate of incorporation, the Board of Directors will have the authority, without further action by the stockholders, to issue up to 3,000,000 shares of preferred stock, in one or more series. Our Board of Directors shall determine the rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of any series.

        As part of the settlement agreement with Ovion Inc., we were required to pay $2.0 million in common stock for a license fee. The obligation was paid in equal installments in January and April 2004 for a total of 177,595 shares of common stock. See Note 15—Legal Proceedings

        In 2006, we repurchased 13,889 shares of restricted common stock at par value in accordance with the terms of restricted stock agreements. These shares, net of treasury stock grants of 10,468 shares in 2007 and 3,421 shares in 2006 are recorded as treasury stock. No income tax benefit has been recognized relating to stock-based compensation expense and no tax benefit has been realized from exercised stock options.

95

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Income Taxes

        The provision for income taxes consists of the following (in thousands):

		Years Ended December 31,
		2008			2007		2006
Current
	U.S. Federal	$	—		$	—	$	—
	State & local		—			—		—
	Foreign		393			—		—
Deferred
	U.S. Federal		—			—		—
	State & local		—			—		—
	Foreign		(417	)		—		—
Income tax benefit		$	(24	)	$	—	$	—

        As of December 31, 2008, we had net operating loss carryforwards for federal and state income tax purposes of approximately $205.7 million and $119.8 million, respectively. The net operating loss carryforwards excludes $5.6 million which relates to stock option deductions that will be recognized through additional paid in capital when utilized. As such, these deductions are not reflected in our deferred tax assets. If not utilized, these carryforwards will begin to expire starting in 2009. In addition, at December 31, 2008 we had both federal and state research credit carryforwards of approximately $2.6 million and $2.7 million, respectively. If not utilized the federal tax carryforward will begin to expire in 2009 while the California credit can be carried forward indefinitely. Utilization of the net operating losses and credits may be subject to a substantial annual limitation due to the ownership change provisions of the Internal Revenue Code of 1986, as amended. The annual limitation may result in the expiration of net operating losses and credits before utilization and in the event we have a change of ownership, utilization of the carryforwards could be restricted.

        We account for income taxes under the asset and liability method set forth by SFAS No. 109 "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax basis of assets and liabilities.

        Deferred income taxes reflect the net effect of tax carryforward and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.

96

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Income Taxes (Continued)

        Significant components of our deferred tax assets and liabilities as of December 31, 2008 and December 31, 2007 are as follows (in thousands):

		Years Ended December 31,
		2008			2007
Current deferred tax assets:
	Other—net	$	3,300		$	3,400
Total current deferred tax assets			3,300			3,400
Net current deferred tax assets:
	Net operating loss carryforwards		76,900			77,300
	Research credits		4,400			4,400
	Capitalized research and development		5,900			6,900
	Interest		7,500			7,500
Total non-current deferred tax assets			94,700			96,100
Total deferred tax assets			98,000			99,500
	Less: valuation allowance		(97,700	)		(99,500	)
Net deferred tax assets			300			—
Non current deferred tax liability:
	Intangible assets		(1,400	)		—
Net non-current deferred tax liability		$	(1,100	)	$	—

        Because of our lack of U.S. earnings history and anticipated future losses, the U.S. deferred tax assets have been offset by a valuation allowance. The increase (decrease) in the valuation allowance was approximately $(1.8) million, $14.6 million and $5.5 million during 2008, 2007 and 2006, respectively. Included in the valuation allowance is approximately $7.6 million of deferred tax assets that when recognized will be a credit to additional paid in capital.

        We revised our 2007 tax footnote to record additional deferred tax assets of approximately $12.1 million for future tax benefits related to interest deductions of Convertible Senior Notes and for the state net operating losses that were not properly recorded in previous periods. These additional deferred taxes are offset by a corresponding increase in the valuation allowance, and are not material to any of the 2008, 2007 and 2006 interim or full year consolidated financial statements. The revision has no effect on our income statement, earnings per share, balance sheet, statement of cash flows, or statement of equity for any period presented.

97

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Income Taxes (Continued)

        The reconciliation between our effective tax rate on income from continuing operations and the statutory tax rate is as follows (in thousands):

	Years Ended December 31,
	2008			2007			2006
U.S. federal statutory income tax rate	$	(36	)	$	(3,945	)	$	(6,286	)
Foreign tax		731			—			—
State tax		—			231			—
Permanent items		129			(27	)		(69	)
Stock based compensation		(6	)		1,390			693
Valuation allowance		(842	)		2,351			5,662
Total income taxes	$	(24	)	$	—		$	—

        We adopted the provisions of FIN 48 on January 1, 2007. We file income tax returns in the U.S. and in various state jurisdictions with varying statutes of limitations. We have not been audited by the Internal Revenue Service or any state income or franchise tax agency. As of December 31, 2008, our federal returns for the years ended 2005 through the current period and most state returns for the years ended 2004 through the current period are still open to examination. In addition, all of the net operating losses and research and development credit carryforwards that may be used in future years are still subject to adjustment. The tax returns for our newly acquired French subsidiary for the years ended 2005 to 2007 were examined and closed by the French tax authorities. As of December 31, 2008, we also recorded approximately $0.4 million of income tax expense related to uncertain tax position attributable to our French subsidiary.

        A reconciliation of the change in our unrecognized tax benefits ("UTB") is as follows (in thousands):

	Federal and State Tax			Foreign Tax		Federal Tax Benefit of State Income Tax UTBs		Unrecognized Income Tax Benefits- Net of Federal Benefit of State UTBs
Balance at January 1, 2007	$	—		$	—	$	—	$	—
Increases for tax positions during 2007		2,271			—		357		1,914
Balance at December 31, 2007		2,271			—		357		1,914
Increases for tax positions related to current year		—			393		—		393
Decreases related to expiration / lapse of statute of limitations		(46	)		—		—		(46	)
Balance at December 31, 2008	$	2,225		$	393	$	357	$	2,261

        If the $2.3 million of unrecognized income tax benefits is recognized, approximately $0.4 million would decrease the effective tax rate in the period in which each of the benefits is recognized. The remaining amount would be offset by the reversal of related deferred tax assets on which a valuation allowance is placed.

98

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Income Taxes (Continued)

        We do not expect our unrecognized tax benefits to change significantly over the next 12 months. In connection with the adoption of FIN 48, the Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

        U.S. income taxes have not been provided on undistributed earnings of the French subsidiary. Those earnings are considered to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, the Company may be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries.

15. Legal Proceedings

        A third party, Ovion, Inc. ("Ovion"), brought to our attention a patent and certain claims from a pending patent application owned by it. Ovion indicated it believed that the claims of its patent and application covered the Essure system and its use. On October 23, 2003, we entered into a settlement agreement with Ovion pursuant to which we received a sole, worldwide license to Ovion's patent rights relative to the Essure system, and Ovion may not grant any additional such licenses to other parties. The settlement agreement provided for a cash payment of $2.0 million in the fourth quarter of 2003 as a prepaid royalty, and a license fee of $2.0 million payable in our common stock in equal installments in the first and second quarters of 2004. In addition, the settlement agreement provided for the payment of a royalty to Ovion that will be equal to 3.25% of the cumulative net sales of the Essure system in excess of $75.0 million for a period of no longer than ten years. In accordance with the terms of the settlement agreement, our prepaid royalties were fully amortized when cumulative net sales of Essure system reached $136.5 million. As of December 31, 2007, the prepaid royalties were fully amortized to cost of goods. Ovion was not granted any rights to our intellectual property pursuant to the settlement agreement. The settlement agreement was approved by the U.S. District Court for the Northern District of California on November 6, 2003.

        Despite the settlement agreement with Ovion, we believe that some or all of Ovion's claims should be included within our own patents and, therefore, requested that the Patent and Trademark Office ("PTO") declare an interference, which represents a proceeding within the PTO to determine which party was the first to invent and which party is thereby entitled to ownership of the claims. We believe that we filed our patent applications for the Essure device before Ovion filed the application that issued as its patent and that we are entitled to any patentable claims now appearing in their patent that cover the Essure product. We have no knowledge whether the PTO will declare an interference, whether we invented our product prior to Ovion's date of invention, or whether we will prevail in an interference proceeding if it is declared by the PTO. Future royalties might be avoided by a favorable interference ruling before the patent office, which might occur if interference is declared and if we are found to have priority of invention.

        From time to time, we are involved in legal proceedings arising in the ordinary course of business. We believe there is no other litigation pending that could have, individually or in the aggregate, a material adverse effect on our financial position and results of operations or cash flows.

16. Establishment of Foreign Subsidiary

        On December 15, 2008 Conceptus Medical Limited ("CML") was incorporated in the United Kingdom and became a subsidiary. CML was established to serve as our direct sales office in the United Kingdom after the termination of our distributor agreement during the fourth quarter of 2008. We believe the establishment of CML continues to expand our direct presence in international markets and will increase our revenues as we will recognize sales at end user pricing as compared to the price at which we previously sold to the distributor.

99

CONCEPTUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. Quarterly Information (unaudited)

Supplementary Data

Quarterly Results of Operations (Unaudited)

		Three Months Ended
		December 31, 2008			September 30, 2008			June 30, 2008			March 31, 2008			December 31, 2007			September 30, 2007			June 30, 2007			March 31, 2007
Net Sales		$	28,525		$	26,645		$	25,680		$	21,127		$	18,563		$	16,430		$	15,669		$	13,780
Cost of goods sold			5,919			5,090			5,196			5,445			4,422			4,317			4,238			3,705
Gross profit			22,606			21,555			20,484			15,682			14,141			12,113			11,431			10,075
Operating expenses:
	Research and development		1,602			1,611			1,644			1,931			1,659			1,513			1,061			1,642
	Selling, general and administrative		16,139			16,363			20,081			20,102			15,986			13,917			13,172			13,009
	Total operating expenses		17,741			17,974			21,725			22,033			17,645			15,430			14,233			14,651
Operating income (loss)			4,865			3,581			(1,241	)		(6,351	)		(3,504	)		(3,317	)		(2,802	)		(4,576	)
Interest income and expense and other expense, net			(241	)		(493	)		(199	)		(28	)		747			682			662			476
Net income (loss) before provision for income taxes			4,624			3,088			(1,440	)		(6,379	)		(2,757	)		(2,635	)		(2,140	)		(4,100	)
Provision for (Benefit from) income taxes			(305	)		113			168			0			—			—			—			—
Net income (loss)			4,929			2,975			(1,608	)		(6,379	)		(2,757	)		(2,635	)		(2,140	)		(4,100	)
Basic income (loss) per share		$	0.16		$	0.10		$	(0.05	)	$	(0.21	)	$	(0.09	)	$	(0.09	)	$	(0.07	)	$	(0.14	)
Diluted income (loss) per share		$	0.16		$	0.10		$	(0.05	)	$	(0.21	)	$	(0.09	)	$	(0.09	)	$	(0.07	)	$	(0.14	)
Weighted average shares used in computing basic net income (loss) per share			30,362			30,342			30,217			29,935			29,634			29,525			29,420			29,260
Weighted average shares used in computing diluted net income (loss) per share			30,874			31,207			30,217			29,935			29,634			29,525			29,420			29,260

100

Conceptus, Inc.

Schedule II
Schedule of Valuation and Qualifying Accounts
(In thousands)

		Balance at Beginning of Period		Additions		Deductions		Balance at End of Period
Allowance for doubtful accounts:
	Year ended December 31, 2006	$	106	$	61	$	—	$	167
	Year ended December 31, 2007		167		264		—		431
	Year ended December 31, 2008		431		74		27		478

101

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Mountain View, California on this 13th day of March 2009.

CONCEPTUS, INC.
By:	/s/ MARK M. SIECZKAREK, Mark M. Sieczkarek President and Chief Executive Officer

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark Sieczkarek and Gregory E. Lichtwardt, his or her attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ MARK M. SIECZKAREK Mark M. Sieczkarek	President, Chief Executive Officer and Director (Principal Executive Officer)	March 13, 2009
/s/ GREGORY E. LICHTWARDT Gregory E. Lichtwardt	Executive Vice President, Treasurer and Chief Financial Officer	March 13, 2009
/s/ JOHN BISHOP John Bishop	Director	March 13, 2009
/s/ THOMAS F. BONADIO Thomas F. Bonadio	Director	March 13, 2009
/s/ PAUL A. LAVIOLETTE Paul A. Laviolette	Director	March 13, 2009
/s/ ROBERT V. TONI Robert V. Toni	Director	March 13, 2009
/s/ KATHRYN A. TUNSTALL Kathryn A. Tunstall	Director	March 13, 2009
/s/ PETER L. WILSON Peter L. Wilson	Director	March 13, 2009

102

EXHIBIT INDEX

Exhibit Number		Description
	10.1	Form of Indemnification Agreement for directors and officers.
	10.35	Lease agreement for the premises located at 331 East Evelyn, Mountain View, California.
	10.36	Credit Line Account Application and Agreement for Organization and Business and Addendum.
	21.0	List of Conceptus subsidiaries.
	23.1	Consent of Independent Registered Public Accounting Firm.
	24.1	Power of Attorney (See signature page of this Report).
	31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

103

EX-10.1

Exhibit 10.1

INDEMNITY AGREEMENT

This Indemnity Agreement (“Agreement”) is made as of ____________ , 20[__] by and between Conceptus, Inc., a Delaware corporation (the “Company”), and __________  _______ (“Indemnitee”).

RECITALS

WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities.  Although the furnishing of such insurance has been a customary and widespread practice among U.S.-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions.  At the same time, directors, officers and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself.  The Amended and Restated By-laws (the “By-laws”) of the Company require indemnification of the officers and directors of the Company.  Indemnitee may also be entitled to indemnification pursuant to applicable provisions of the Delaware General Corporation Law (the “DGCL”).  The By-laws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

WHEREAS, this Agreement is a supplement to and in furtherance of the By-laws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;

1

WHEREAS, Indemnitee does not regard the protection available under the Company’s By-laws and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity.  Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

1.Services to the Company.  Indemnitee will serve or continue to serve as an officer, director or key employee of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his resignation.

2.Definitions.  As used in this Agreement:

(a)References to “agent” shall mean any person who is or was a director, officer, or employee of the Company or a subsidiary of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, fiduciary or other official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.

(b)The terms “Beneficial Owner” and “Beneficial Ownership” shall have the meanings set forth in Rule 13d-3 promulgated under the Exchange Act (as defined below) as in effect on the date hereof.

(c)A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

(i)Acquisition of Stock by Third Party.  Any  Person (as defined below) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors, unless (1) the change in the relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors, or (2) such acquisition was approved in advance by the Continuing Directors (as defined below) and such acquisition would not constitute a Change in Control under part (iii) of this definition;

(ii)Change in Board of Directors.  Individuals who, as of the date hereof,  constitute the Board, and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors on the date hereof or whose election for nomination for election was previously so approved (collectively, the “Continuing Directors”), cease for any reason to constitute at least a majority of the members of the Board;

(iii)Corporate Transactions.  The effective date of a reorganization, merger or consolidation of the Company (a “Business Combination”), in each case, unless,

2

following such Business Combination:  (1) all or substantially all of the individuals and entities who were the Beneficial Owners of securities entitled to vote generally in the election of directors immediately prior to such Business Combination beneficially own, directly or indirectly, more than 51% of the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more Subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the securities entitled to vote generally in the election of directors; (2) no Person (excluding any corporation resulting from such Business Combination) is the Beneficial Owner, directly or indirectly, of twenty percent (20%) or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of such corporation except to the extent that such ownership existed prior to the Business Combination; and (3) at least a majority of the Board of Directors of the corporation resulting from such Business Combination were Continuing Directors at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination;

(iv)Liquidation.  The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement or series of agreements for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than factoring the Company’s current receivables or escrows due (or, if such approval is not required, the decision by the Board to proceed with such a liquidation, sale, or disposition in one transaction or a series of related transactions); or

(v)Other Events.  There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.

(d)“Corporate Status” describes the status of a person who is or was a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of the Company or of any other Enterprise (as defined below) which such person is or was serving at the request of the Company.

(e)“Delaware Court” shall mean the Court of Chancery of the State of Delaware.

(f)“Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding (as defined below) in respect of which indemnification is sought by Indemnitee.

(g)“Enterprise” shall mean the Company and any other corporation, constituent  corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which the Company (or any of its wholly owned subsidiaries) is a party, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of

3

which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent.

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

(i)“Expenses” shall include attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding (as defined below).  Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding (as defined below), including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent.  Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(j)References to “fines” shall include any excise tax assessed on Indemnitee with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

(k)“Independent Counsel” shall mean a law firm or a member of a law firm that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements); or (ii) any other party to the Proceeding (as defined below) giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(l)The term “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act as in effect on the date hereof; provided, however, that “Person” shall exclude:  (i) the Company; (ii) any Subsidiaries (as defined below) of the Company; (iii) any employment benefit plan of the Company or of a Subsidiary (as defined below) of the Company or of any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; and (iv) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Subsidiary (as defined below) of the Company or of a corporation owned

4

directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

(m)A “Potential Change in Control” shall be deemed to have occurred if (i) the Company enters into an agreement or arrangement, the consummation of which would result in the occurrence of a Change in Control; (ii) any Person or the Company publicly announces an intention to take or consider taking actions which if consummated would constitute a Change in Control; (iii) any Person who becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 5% or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors increases his Beneficial Ownership of such securities by 5% or more over the percentage so owned by such Person on the date hereof; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

(n)The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative nature, in which Indemnitee was, is or will be involved as a party or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action (or failure to act) taken by him or of any action (or failure to act) on his part while acting as a director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of any other Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement.

(o)The term “Subsidiary,” with respect to any Person, shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by that Person.

3.Indemnity in Third-Party Proceedings.  The Company shall indemnify and hold harmless Indemnitee in accordance with the provisions of this Section 3 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor.  Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding, had no reasonable cause to believe that his conduct was unlawful.

4.Indemnity in Proceedings by or in the Right of the Company.  The Company shall indemnify and hold harmless Indemnitee in accordance with the provisions of this Section 4 if

5

Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding by or in the right of the Company to procure a judgment in its favor.  Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company.  No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that any court in which the Proceeding was brought or the Delaware Court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

5.Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify and hold harmless Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith.  If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify and hold harmless Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter.  If the Indemnitee is not wholly successful in such Proceeding, the Company also shall indemnify and hold harmless Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful.  For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

6.Indemnification For Expenses of a Witness.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified and held harmless against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

7.Additional Indemnification.

(a)Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify and hold harmless Indemnitee if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the Proceeding.  No indemnity shall be made under this Section 7(a) on account of Indemnitee’s conduct which constitutes a breach of Indemnitee’s duty of loyalty to the Company or its stockholders or is an

6

act or omission not in good faith or which involves intentional misconduct or a knowing violation of the law.

(b)Notwithstanding any limitation in Sections 3, 4, 5 or 7(a), the Company shall indemnify and hold harmless Indemnitee if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the Proceeding.

8.Contribution in the Event of Joint Liability.

(a)To the fullest extent permissible under applicable law, if the indemnification and hold harmless rights provided for in this Agreement are unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying and holding harmless Indemnitee, shall pay, in the first instance, the entire amount incurred by Indemnitee, whether for judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee.

(b)The Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

(c)The Company hereby agrees to fully indemnify and hold harmless Indemnitee from any claims for contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.

9.Exclusions.  Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

(a)for which payment has actually been received by or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount actually received under any insurance policy, contract, agreement, other indemnity provision or otherwise;

(b)for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law; or

(c)except as otherwise provided in Sections 14(e)-(f) hereof, prior to a Change in Control, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the

7

Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation; or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

10.Advances of Expenses; Defense of Claim.

(a)Notwithstanding any provision of this Agreement to the contrary, and to the fullest extent permitted by applicable law, the Company shall advance the Expenses incurred by Indemnitee (or reasonably expected by Indemnitee to be incurred by Indemnitee within three months) in connection with any Proceeding within ten (10) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding.  Advances shall be unsecured and interest free.  Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.  Advances shall include any and all reasonable Expenses incurred pursuing a Proceeding to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed.  The Indemnitee shall qualify for advances, to the fullest extent permitted by applicable law, solely upon the execution and delivery to the Company of an undertaking providing that the Indemnitee undertakes to repay the advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Bylaws of the Company, applicable law or otherwise.  This Section 10(a) shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9.

(b)The Company will be entitled to participate in the Proceeding at its own expense.

(c)The Company shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, fine, penalty or limitation on the Indemnitee without the Indemnitee’s prior written consent.

11.Procedure for Notification and Application for Indemnification.

(a)Indemnitee agrees to notify promptly the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder.  The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement, or otherwise.

(b)Indemnitee may deliver to the Company a written application to indemnify and hold harmless Indemnitee in accordance with this Agreement.  Such application(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in his or her sole discretion.  Following such a written application for indemnification by Indemnitee, the Indemnitee’s entitlement to indemnification shall be determined according to Section 12(a) of this Agreement.

8

12.Procedure Upon Application for Indemnification.

(a)A determination, if required by applicable law, with respect to Indemnitee’s entitlement to indemnification shall be made in the specific case by one of the following methods, which shall be at the election of Indemnitee:  (i) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board; or (ii) by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee.  The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied.  If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination.  Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination.  Any costs or Expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(b)In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a) hereof, the Independent Counsel shall be selected as provided in this Section 12(b).  The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement.  If the Independent Counsel is selected by the Board, the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement.  In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as Independent Counsel.  If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit.  If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 11(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware Court, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 12(a) hereof.  Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14(a) 

9

of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(c)The Company agrees to pay the reasonable fees and expenses of Independent Counsel and to fully indemnify and hold harmless such Independent Counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

13.Presumptions and Effect of Certain Proceedings.

(a)In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(b) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.  Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b)If the person, persons or entity empowered or selected under Section 12 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a final judicial determination that any or all such indemnification is expressly prohibited under applicable law; provided, however, that such 30-day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto.

(c)The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

10

(d)For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected by the Enterprise.  The provisions of this Section 13(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.

(e)The knowledge and/or actions, or failure to act, of any other director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

14.Remedies of Indemnitee.

(a)In the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by applicable law, is not timely made pursuant to Section 10 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 12(a) of this Agreement within thirty (30) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5, 6, 7 or the last sentence of Section 12(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) a contribution payment is not made in a timely manner pursuant to Section 8 of this Agreement, or (vi) payment of indemnification pursuant to Section 3 or 4 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court to such indemnification, contribution or advancement of Expenses.  Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association.  Except as set forth herein, the provisions of Delaware law (without regard to its conflict of laws rules) shall apply to any such arbitration.  The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b)In the event that a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination.  In any judicial proceeding or arbitration commenced pursuant to this Section 14, Indemnitee shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 12(a) of this Agreement adverse to Indemnitee for any purpose.  If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 14, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 10 until a final determination is made with

11

respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).

(c)If a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification; or (ii) a prohibition of such indemnification under applicable law.

(d)The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

(e)The Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by Indemnitee, shall (within ten (10) days after the Company’s receipt of such written request) advance to Indemnitee, to the fullest extent permitted by applicable law, such Expenses which are incurred by Indemnitee in connection with any judicial proceeding or arbitration brought by Indemnitee (i) to enforce his rights under, or to recover damages for breach of, this Agreement or any other indemnification, advancement or contribution agreement or provision of the Company’s Bylaws now or hereafter in effect; or (ii) for recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance, contribution or insurance recovery, as the case may be.

(f)Interest shall be paid by the Company to Indemnitee at the legal rate under Delaware law for amounts which the Company indemnifies or is obliged to indemnify for the period commencing with the date on which Indemnitee requests indemnification, contribution,  reimbursement or advancement of any Expenses and ending with the date on which such payment is made to Indemnitee by the Company.

15.Establishment of Trust.  In the event of a Potential Change in Control, the Company shall, upon written request by Indemnitee, create a “Trust” for the benefit of Indemnitee and from time to time upon written request of Indemnitee shall fund such Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for, participating in or defending any Proceedings, and any and all judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such judgments, fines penalties and amounts paid in settlement) in connection with any and all Proceedings from time to time actually paid or claimed, reasonably anticipated or proposed to be paid.  The trustee of the Trust (the “Trustee”) shall be a bank or trust company or other individual or entity chosen by the Indemnitee and reasonably acceptable to the Company.  Nothing in this Section 15 shall relieve the Company of any of its obligations under this Agreement.  The amount or amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by mutual agreement of the Indemnitee and the Company or, if the Company and the Indemnitee are unable to reach such an agreement, by

12

Independent Counsel selected in accordance with Section 12(b) of this Agreement. The terms of the Trust shall provide that, except upon the consent of both the Indemnitee and the Company, upon a Change in Control:  (a) the Trust shall not be revoked, or the principal thereof invaded, without the written consent of the Indemnitee; (b) the Trustee shall advance, to the fullest extent permitted by applicable law, within two (2) business days of a request by the Indemnitee and upon the execution and delivery to the Company of an undertaking providing that the Indemnitee undertakes to repay the advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company, any and all Expenses to the Indemnitee; (c) the Trust shall continue to be funded by the Company in accordance with the funding obligations set forth above; (d) the Trustee shall promptly pay to the Indemnitee all amounts for which the Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise; and (e) all unexpended funds in such Trust shall revert to the Company upon mutual agreement by the Indemnitee and the Company or, if the Indemnitee and the Company are unable to reach such an agreement, by Independent Counsel selected in accordance with Section 12(b) of this Agreement, that the Indemnitee has been fully indemnified under the terms of this Agreement.  The Trust shall be governed by Delaware law (without regard to its conflicts of laws rules) and the Trustee shall consent to the exclusive jurisdiction of the Delaware Court in accordance with Section 23 of this Agreement.

16.Security.  Notwithstanding anything herein to the contrary, to the extent requested by the Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to the Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral.  Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.

17.Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

(a)The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise.  No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal.  To the extent that a change in applicable law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s Bylaws or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b)The DGCL and the Company’s Bylaws permit the Company to purchase and maintain insurance or furnish similar protection or make other arrangements including, but not limited to, providing a trust fund, letter of credit, or surety bond (“Indemnification

13

Arrangements”) on behalf of Indemnitee against any liability asserted against him or incurred by or on behalf of him or in such capacity as a director, officer, employee or agent of the Company, or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability under the provisions of this Agreement or under the DGCL, as it may then be in effect.  The purchase, establishment, and maintenance of any such Indemnification Arrangement shall not in any way limit or affect the rights and obligations of the Company or of the Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and the Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such Indemnification Arrangement.

(c)To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, trustees, partners, managing members, fiduciaries, employees, or agents of the Company or of any other Enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, trustee, partner, managing member, fiduciary, employee or agent under such policy or policies.  If, at the time the Company receives notice from any source of a Proceeding as to which Indemnitee is a party or a participant (as a witness or otherwise), the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(d)In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee from any insurance policy purchased by the Company, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. In no event, however, shall the Company or any other person have any right of recovery through subrogation or otherwise against Indemnitee or any insurance policy purchased or maintained by Indemnitee.

(e)The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such Enterprise.

18.Duration of Agreement.  All agreements and obligations of the Company contained herein shall continue during the period Indemnitee serves as a director or officer of the Company or as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee serves at the request of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement) by reason of his Corporate Status, whether or not he is acting in any such capacity at

14

the time any liability or expense is incurred for which indemnification can be provided under this Agreement.

19.Severability.  If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever:  (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

20.Enforcement and Binding Effect.

(a)The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director, officer or key employee of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer or key employee of the Company.

(b)Without limiting any of the rights of Indemnitee under the Bylaws of the Company as they may be amended from time to time, this Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

(c)The indemnification and advancement of expenses provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise at the Company’s request, and shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

(d)The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

15

(e)The Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm.  Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled.  The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith.  The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of such a bond or undertaking.

21.Modification and Waiver.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

22.Notices.  All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) if delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third (3rd) business day after the date on which it is so mailed:

(a)If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide in writing to the Company.

(b)If to the Company, to:

Conceptus, Inc.

331 East Evelyn Avenue

Mountain View, California 94041

or to any other address as may have been furnished to Indemnitee in writing by the Company.

23.Applicable Law and Consent to Jurisdiction.  This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules.  Except with respect to any arbitration commenced by Indemnitee pursuant to Section 14(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States of America or any court in any other country; (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement; (c) appoint irrevocably, to the extent such party is not a resident of the State of Delaware, RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King Streets,

16

Wilmington, Delaware 19801 as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware; (d) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court; and (e) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum, or is subject (in whole or in part) to a jury trial.

24.Identical Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.  Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

25.Miscellaneous.  Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.  The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

CONCEPTUS, INC.	INDEMNITEE
By:
Name:	Name:
Title:	Address:

17

EX-10.35

Exhibit 10.35

LEASE

SFERS REAL ESTATE CORP. U,
a Delaware corporation,

Landlord,

and

CONCEPTUS, INC.,
a Delaware corporation,

Tenant

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048

TABLE OF CONTENTS

		page
1.	USE AND RESTRICTIONS ON USE	1
2.	TERM	2
3.	RENT	2
4.	RENT ADJUSTMENTS	3
5.	SECURITY DEPOSIT	7
6.	ALTERATIONS	7
7.	REPAIR	8
8.	LIENS	9
9.	ASSIGNMENT AND SUBLETTING	9
10.	INDEMNIFICATION	12
11.	INSURANCE	13
12.	WAIVER OF SUBROGATION	13
13.	SERVICES AND UTILITIES	13
14.	HOLDING OVER	14
15.	SUBORDINATION	14
16.	RULES AND REGULATIONS	15
17.	REENTRY BY LANDLORD	15
18.	DEFAULT	15
19.	REMEDIES	16
20.	TENANT’S BANKRUPTCY OR INSOLVENCY	18
21.	QUIET ENJOYMENT	18
22.	CASUALTY	18
23.	EMINENT DOMAIN	20
24.	SALE BY LANDLORD	20
25.	ESTOPPEL CERTIFICATES	20
26.	SURRENDER OF PREMISES	20
27.	NOTICES	21
28.	TAXES PAYABLE BY TENANT	21
29.	RELOCATION OF TENANT [INTENTIONALLY OMITTED]	21
30.	DEFINED TERMS AND HEADINGS	22
31.	TENANT’S AUTHORITY	22
32.	FINANCIAL STATEMENTS AND CREDIT REPORTS	22
33.	COMMISSIONS	23
34.	TIME AND APPLICABLE LAW	23
35.	SUCCESSORS AND ASSIGNS	23
36.	ENTIRE AGREEMENT	23
37.	EXAMINATION NOT OPTION	23

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 i

38.	RECORDATION	23
39.	OPTION TO RENEW	23
40.	ROOF SPACE FOR DISH/ANTENNA	25
41.	SIGNAGE	26
42.	EMERGENCY GENERATOR (WITH TANK)	27
43.	LETTER OF CREDIT	28
44.	RIGHT OF FIRST OFFER	30
45.	LIMITATION OF LANDLORD’S LIABILITY	32

EXHIBIT A - FLOOR PLAN DEPICTING THE PREMISES

EXHIBIT A-l - SITE PLAN

EXHIBIT A-2 - DEPICTION OF VISITOR PARKING SPACES

EXHIBIT B - TENANT ALTERATIONS

EXHIBIT C - COMMENCEMENT DATE MEMORANDUM

EXHIBIT D - RULES AND REGULATIONS

EXHIBIT E - FORM OF LETTER OF CREDIT

EXHIBIT F - INTENTIONALLY OMITTED

EXHIBIT G - APPROVED HAZAROUS MATERIALS

EXHIBIT H - FORM OF LANDLORD CONSENT TO SUBLEASE

EXHIBIT I - FORM OF SUBORDINATION, NONDISURBANCE AND ATTORNMENT AGREEMENT

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 ii

MULTI-TENANT INDUSTRIAL NET LEASE

REFERENCE PAGES

BUILDING:		Mountain View Corporate Center 331 East Evelyn Avenue Mountain View, California 94039
LANDLORD:		SFERS REAL ESTATE CORP. U, a Delaware corporation
LANDLORD’S ADDRESS:		c/o RREEF Management Company 1310 Tully Road, Suite 110 San Jose, California 95122
WIRE INSTRUCTIONS AND/OR ADDRESS FOR RENT PAYMENT:		SFERS Real Estate Corp. U Dept. #44631 P.O. Box 44000 San Francisco, California 94144
LEASE REFERENCE DATE:		December 5, 2008
TENANT:		CONCEPTUS, INC., a Delaware corporation
TENANT’S NOTICE ADDRESS:
	(a)   As of beginning of Term:	The Premises
	(b)   Prior to beginning of Term (if different):	The Premises
PREMISES ADDRESS:		331 East Evelyn Drive Mountain View, California 94039 With a copy of default notices to: Reed Smith LLP Two Embarcadero Center, Suite 2200 San Francisco, California 94111 Attention: Charles H. Seaman, Esq. If any additional person listed above fails to receive the copy of the notice of Tenant default, the validity of the notice served on Tenant shall not be affected thereby.
PREMISES RENTABLE AREA:		Approximately 58,242 sq. ft. (for outline of Premises see Exhibit A)
USE:		Subject to Section 1.1 of this Lease, research, development, marketing, engineering, assembly and distribution for a medical device operation and general office use.
COMMENCEMENT DATE:		July 1, 2009
TERM OF LEASE:		Forty-nine (49) months beginning on the Commencement Date and ending on the Termination Date.

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 iii

TERMINATION DATE: July 31, 2013

ANNUAL RENT and MONTHLY INSTALLMENT OF
RENT (Article 3):

Period		Rentable Square	Annual Rent	Annual Rent	Monthly Installment
from	through	Footage	Per Square Foot		of Rent
7/1/2009	7/31/2010	58,242	$24.00	$1,514,292.00**	$116,484.00*
8/1/2010	7/31/2011	58,242	$25.32	$1,474,687.44	$122,890.62
8/1/2011	7/31/2012	58,242	$26.04	$1,516,621.68	$126,385.14
8/1/2012	7/31/2013	58,242	$26.88	$1,565,544.96	$130,462.08

*Monthly Installment of Rent for the first six (6) full calendar months of the Term is subject to abatement pursuant to Section

3.3 of the Lease.

**Figure calculated based on thirteen (13) months

INITIAL ESTIMATED MONTHLY INSTALLMENT OF RENT ADJUSTMENTS (Article 4):	$27,373.74
TENANT’S PROPORTIONATE SHARE:	21.79% of the project of which the Building is a part 91.31% of the Building
TENANT’S PROPORTIONATE SHARE FOR PARKING:	4 parking spaces per 1,000 rentable square feet of the Premises, which, based upon the total square footage of the Premises as of the date of this Lease, equals 233 parking spaces which shall be provided at no cost to Tenant during the Term and any extensions thereto.
SECURITY DEPOSIT:	None
ASSIGNMENT/SUBLETTING FEE:	$1,000.00
REAL ESTATE BROKERS:	Cornish & Carey Commercial (“Landlord’s Broker”), representing Landlord and Jones Lang LaSalle, representing Tenant
TENANT’S SIC CODE:	3842
LETTER OF CREDIT:	$350,000.00, as further described in Article 43

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 iv

AMORTIZATION RATE: N/A

The Reference Pages information is incorporated into and made a part of the Lease. In the event of any conflict between any Reference Pages information and the Lease, the Lease shall control. The Lease includes Exhibits A through F, all of which are made a part of the Lease.

IN WITNESS WHEREOF, Landlord and Tenant have entered into the Lease as of the Lease Reference Date set forth above.

LANDLORD:					TENANT:
SFERS REAL ESTATE CORP. U,					CONCEPTUS, INC.,
a Delaware corporation					a Delaware corporation
By:		RREEF Management Company, a Delaware corporation, its Authorized Agent
By:	/s/ Stephen J. George				By:	/s/ Gregory E. Lichtwardt
Name:				Stephen J. George	Name:				Gregory E. Lichtwardt
Title:			Regional Director		Title:		Executive Vice President
Dated:				12/9/08	Dated:			12.5.08

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 v

LEASE

By this Lease Landlord leases to Tenant and Tenant leases from Landlord the Premises in the Building as set forth and described on the Reference Pages. The Premises are depicted on the floor plan attached hereto as Exhibit A, and the Building is depicted on the site plan attached hereto as Exhibit A-1. The Reference Pages, including all terms defined thereon, are incorporated as part of this Lease.

1.USE AND RESTRICTIONS ON USE.

1.1         The Premises are to be used solely for the purposes set forth on the Reference Pages; provided, however, that Landlord shall not unreasonably withhold consent to any reasonable modification to such permitted use so long as the same complies with applicable Regulations (as defined below) and is otherwise reasonably consistent with the general uses at the project of which the Building is a part. Tenant shall not do or permit anything to be done in or about the Premises which will in any way unreasonably obstruct or interfere with the rights of other tenants or occupants of the Building or injure, annoy, or disturb them, or allow the Premises to be used for any improper, immoral, unlawful, or objectionable purpose, or commit any waste. Tenant shall not do, permit or suffer in, on, or about the Premises the sale of any alcoholic liquor without the written consent of Landlord first obtained. Tenant shall comply with all federal, state and city laws, codes, ordinances, rules and regulations (collectively, “Regulations”) applicable to the use of the Premises and its occupancy and shall promptly comply with all governmental orders and directions for the correction, prevention and abatement of any violations in the Building or appurtenant land, caused or permitted by, or resulting from the specific use by, Tenant, or in or upon, or in connection with, the Premises, all at Tenant’s sole expense. Tenant shall not do or permit anything to be done on or about the Premises or bring or keep anything into the Premises which will in any way increase the rate of, invalidate or prevent the procuring of any insurance protecting against loss or damage to the Building or any of its contents by fire or other casualty or against liability for damage to property or injury to persons in or about the Building or any part thereof. Except to the extent properly included in Expenses (or except to the extent any other party has the obligation to perform the same), Landlord shall be responsible for correcting and for the cost of correcting any violations of Regulations with respect to the common areas of the Building. Notwithstanding the foregoing, Landlord shall have the right to contest any alleged violation in good faith, including, without limitation, the right to apply for and obtain a waiver or deferment of compliance, the right to assert any and all defenses allowed by Regulations and the right to appeal any decisions, judgments or rulings to the fullest extent permitted by Regulations. Landlord, after the exhaustion of any and all rights to appeal or contest, will make all repairs, additions, alterations or improvements necessary to comply with the terms of any final order or judgment.

1.2         Tenant shall not, and shall not direct, suffer or permit any of its agents, contractors, employees, licensees or invitees (collectively, the “Tenant Entities”) to at any time handle, use, manufacture, store or dispose of in or about the Premises or the Building any (collectively, “Hazardous Materials”) flammables, explosives, radioactive materials, hazardous wastes or materials, toxic wastes or materials, or other similar substances, petroleum products or derivatives or any substance subject to regulation by or under any federal, state and local laws and ordinances relating to the protection of the environment or the keeping, use or disposition of environmentally hazardous materials, substances, or wastes, presently in effect or hereafter adopted, all amendments to any of them, and all rules and regulations issued pursuant to any of such laws or ordinances (collectively, “Environmental Laws”), nor shall Tenant suffer or permit any Hazardous Materials to be used in any manner not fully in compliance with all Environmental Laws, in the Premises or the Building and appurtenant land or allow the environment to become contaminated with any Hazardous Materials. Notwithstanding the foregoing, Tenant may handle, store, use or dispose of products containing small quantities of Hazardous Materials (such as aerosol cans containing insecticides, toner for copiers, paints, paint remover and the like) to the extent customary and necessary for the use of the Premises for general office purposes (including small quantities of paint or typical construction materials used in connection with Alterations performed by or for the benefit of Tenant within the Premises in accordance with the terms of this Lease and applicable Regulations); provided that Tenant shall always handle, store, use, and dispose of any such Hazardous Materials in a safe and lawful manner and never allow such Hazardous Materials to contaminate the Premises, Building and appurtenant land or the environment. Landlord hereby approves the Hazardous Materials listed, and in the quantities set forth, on Exhibit G to the Lease, so long as Tenant complies with the terms and conditions of this Lease respecting the Handling of such approved Hazardous Materials. Tenant shall protect, defend, indemnify and hold each and all of the Landlord Entities (as defined in Article 30) harmless from and against any and all loss, claims, liability or costs (including court costs and attorney’s fees) incurred by reason of any actual or asserted failure of Tenant to fully comply with all applicable Environmental Laws, or the presence, handling, use or disposition in or from the Premises of any Hazardous Materials by Tenant or any Tenant Entity (even though permissible under all applicable Environmental Laws or the provisions of this Lease), or by reason of any actual or asserted failure of Tenant to keep, observe, or perform any provision of this Section 1.2. As of the date hereof, Landlord has not received written notice from any governmental agencies that the Building is in violation of any Environmental Laws. Further, to Landlord’s actual knowledge, there are no Hazardous Materials at the

10/31/01 CA MTIN
Revised 9/09/05
586764.v1: 028481/048 1

Building other than small quantities of Hazardous Materials (such as aerosol cans containing insecticides, toner for copiers, paints, paint remover and the like) to the extent customary and necessary for the use of the Premises for general office purposes. For purposes of this Section, “Landlord’s actual knowledge” shall be deemed to mean and limited to the current actual knowledge of Steven Heidger, property manager for the Building, at the time of execution of this Lease and not any implied, imputed, or constructive knowledge of said individual or of Landlord or any parties related to or comprising Landlord and without any independent investigation or inquiry having been made or any implied duty to investigate or make any inquiries; it being understood and agreed that such individual shall have no personal liability in any manner whatsoever hereunder or otherwise related to the transactions contemplated hereby.

1.3         Tenant and the Tenant Entities will be entitled to the non-exclusive use of the common areas of the Building as they exist from time to time during the Term, including the parking facilities (which shall be at no cost to Tenant during the initial Term), subject to Landlord’s rules and regulations regarding such use. However, in no event will Tenant or the Tenant Entities park more vehicles in the parking facilities than Tenant’s Proportionate Share of the total parking spaces available for common use. The foregoing shall not be deemed to provide Tenant with an exclusive right to any parking spaces or any guaranty of the availability of any particular parking spaces or any specific number of parking spaces. Lessee shall be allotted six (6) designated visitor parking spaces, as depicted on the site plan attached hereto as Exhibit A-2, provided that such designated spaces shall be inclusive of and not in addition to Tenant’s Proportionate Share of the total parking spaces available for common use. Landlord shall not allot to any other tenant of the Building or of the project in which the Building is located (the “Project”) the right to use parking spaces in excess of such tenant’s proportionate share of the total parking spaces available for common use.

2.TERM.

2.1         The Term of this Lease shall begin on the date (“Commencement Date”) as shown on the Reference Pages as the Commencement Date, and shall terminate on the date (“Termination Date”) as shown on the Reference Pages as the Termination Date, unless sooner terminated by the provisions of this Lease. Tenant shall, at Landlord’s request, execute and deliver a memorandum agreement provided by Landlord in the form of Exhibit C attached hereto, setting forth the actual Commencement Date, Termination Date and, if necessary, a revised rent schedule. Should Tenant fail to do so within thirty (30) days after Landlord’s request, the information set forth in such memorandum provided by Landlord shall be conclusively presumed to be agreed and correct.

2.2         Tenant is currently in possession of the Premises, as subtenant, pursuant to the terms of that certain Sublease dated June ___, 2002 (sic) (the “Sublease”) between Tenant and Cadence Design Systems, Inc., a California corporation (as successor in interest to Verisity Design, Inc., a California corporation) (“Sublessor”), as sublessor, which Sublease, and the underlying primary lease between Landlord and Sublessor dated April 14, 2004 as the same may be amended (the “Primary Lease”), are scheduled to expire by their terms on June 30, 2009. In the event the Primary Lease terminates prior to June 30, 2009, the Commencement Date shall be accelerated to the date immediately following the date of such termination (provided that the Termination Date of this Lease shall remain July 31, 2013), and the terms and conditions of this Lease shall be in full force and effect as of such date except that the Term shall be extended to include the period commencing upon the accelerated Commencement Date through and including June 30, 2009 (the “Advance Term”. The Monthly Installment of Rent in effect for the Advance Term shall be equal to the amount of Base Rent (as such term is defined in the Sublease) in effect for such period (as the same may increase during the Advance Term as provided in the Sublease), and during the Advance Term, Tenant shall pay to Landlord Subtenant’s Share of Pass Through Costs and Other Charges (as such terms are defined in Section 4 of the Sublease). Landlord shall provide notice to Tenant if the Primary Lease terminates prior to June 30, 2009.

3.RENT.

3.1         Tenant agrees to pay to Landlord the Annual Rent in effect from time to time by paying the Monthly Installment of Rent then in effect on or before the first day of each full calendar month during the Term, except that the seventh (7th) full calendar month’s Monthly Installment of Rent (subject to the Abated Monthly Installment of Rent, as defined below), and Tenant’s Proportionate Share of Expenses and Taxes for the first full calendar month of the Term shall be paid upon the execution of this Lease. The Monthly Installment of Rent in effect at any time shall be one-twelfth (1/12) of the Annual Rent in effect at such time. Rent for any period during the Term which is less than a full month shall be a prorated portion of the Monthly Installment of Rent based upon the number of days in such month. Said rent shall be paid to Landlord, without deduction or offset (except as may be expressly authorized herein) and without notice or demand, at the Rent Payment Address, as set forth on the Reference Pages, or to such other person or at such other place as Landlord may from time to time designate in writing. If more than two (2) monetary Events of Default occur, Landlord may require by

10/31/01 CA MTIN
Revised 9/09/05
586764.v1: 028481/048 2

notice to Tenant that all subsequent rent payments be made by an automatic payment from Tenant’s bank account to Landlord’s account, without cost to Landlord. Tenant must implement such automatic payment system prior to the next scheduled rent payment or within ten (10) days after Landlord’s notice, whichever is later. Unless specified in this Lease to the contrary, all amounts and sums payable by Tenant to Landlord pursuant to this Lease shall be deemed additional rent.

3.2         Tenant recognizes that late payment of any rent or other sum due under this Lease will result in administrative expense to Landlord, the extent of which additional expense is extremely difficult and economically impractical to ascertain. Tenant therefore agrees that if rent or any other sum is not paid when due and payable pursuant to this Lease, a late charge shall be imposed in an amount equal to the greater of: (a) Fifty Dollars ($50.00), or (b) five percent (5%) of the unpaid rent or other payment; provided, however, that the foregoing late charge shall not apply to the first such late payment in any twelve (12) month period of the Term of this Lease or any extension thereto until following written notice to Tenant and the expiration of five (5) days thereafter without cure. The amount of the late charge to be paid by Tenant shall be reassessed and added to Tenant’s obligation for each successive month until paid. The provisions of this Section 3.2 in no way relieve Tenant of the obligation to pay rent or other payments on or before the date on which they are due, nor do the terms of this Section 3.2 in any way affect Landlord’s remedies pursuant to Article 19 of this Lease in the event said rent or other payment is unpaid after date due.

3.3         Notwithstanding anything in this Lease to the contrary, so long as Tenant is not in default under this Lease beyond applicable notice and cure periods, Tenant shall be entitled to an abatement of Monthly Installment of Rent with respect to the Premises, as originally described in this Lease, in the amount of $116,484.00 per month for the first six (6) full calendar months of the initial Term. The maximum total amount of Monthly Installment of Rent abated with respect to the Premises in accordance with the foregoing shall equal $698,904.00 (the “Abated Monthly Installment of Rent”). If Tenant defaults under this Lease at any time during the Term and fails to cure such default within any applicable cure period under this Lease, then all unamortized Abated Monthly Installment of Rent (i.e. based upon the amortization of the Abated Monthly Installment of Rent in equal monthly amounts, without interest, during the period commencing on the Commencement Date and ending on the original Termination Date) shall immediately become due and payable. Only Monthly Installment of Rent shall be abated pursuant to this Section, as more particularly described herein, and Tenant’s Proportionate Share of Expenses Insurance and Taxes and all other rent and other costs and charges specified in this Lease shall remain as due and payable pursuant to the provisions of this Lease

4.RENT ADJUSTMENTS.

4.1For the purpose of this Article 4, the following terms are defined as follows:

4.1.1       Lease Year:  Each fiscal year (as determined by Landlord from time to time) falling partly or wholly within the Term.

4.1.2       Expenses:  All costs of operation, maintenance, repair, replacement and management of the Building (including the amount of any credits which Landlord may grant to particular tenants of the Building in lieu of providing any standard services or paying any standard costs described in this Section 4.1.2 for similar tenants), as determined in accordance with generally accepted accounting principles, including the following costs by way of illustration, but not limitation: water and sewer charges; insurance charges of or relating to all insurance policies and endorsements deemed by Landlord to be reasonably necessary or desirable and relating in any manner to the protection, preservation, or operation of the Building or any part thereof; utility costs, including, but not limited to, the cost of heat, light, power, steam, gas; waste disposal; the cost of janitorial services; the cost of security and alarm services (including any central station signaling system); costs of cleaning, repairing, replacing and maintaining the common areas, including parking and landscaping, window cleaning costs; labor costs; costs and expenses of managing the Building including management and/or administrative fees (provided, that in no event shall the management and administrative fees for the Building (expressed as a percentage of gross receipts for the Building and the Project) exceed three percent (3%)); air conditioning maintenance costs; elevator maintenance fees and supplies; material costs; equipment costs including the cost of maintenance, repair and service agreements and rental and leasing costs; purchase costs of equipment; current rental and leasing costs of items which would be capital items if purchased; tool costs; licenses, permits and inspection fees; wages and salaries; employee benefits and payroll taxes; accounting and legal fees; any sales, use or service taxes incurred in connection therewith. In addition, Landlord shall be entitled to recover, as additional rent (which, along with any other capital expenditures constituting Expenses, Landlord may either include in Expenses orcause to be billed to Tenant along with Expenses and Taxes but as a separate item), Tenant’s Proportionate Share of: (i) an allocable portion of the cost of capital improvement items which are reasonably calculated to reduce operating expenses (Notwithstanding the foregoing, the portion of the annual amortized costs to be included in Expenses in any calendar year with respect to a capital improvement which is intended to reduce expenses

10/31/01 CA MTIN
Revised 9/09/05
586764.v1: 028481/048 3

or improve the operating efficiency of the project or Building shall equal the lesser of: (a) such annual amortized costs; and (b) the projected annual amortized reduction in expenses for that portion of the amortization period of the capital improvement which falls within the Term (based on the total cost savings for such period, as reasonably estimated by Landlord); (ii) the cost of fire sprinklers and suppression systems and other life safety systems; and (iii) other capital expenses which are required under any Regulations in effect and as interpreted and enforced after the date of this Lease; but the costs described in this sentence shall be amortized over the reasonably useful life of such expenditures in accordance with such reasonably useful life and amortization schedules as shall be determined by Landlord in accordance with generally accepted accounting principles, with interest on the unamortized amount at one percent (1%) in excess of the Wall Street Journal prime lending rate announced from time to time. Landlord agrees to act in a commercially reasonable manner in incurring Expenses, taking into consideration the class and the quality of the Building. Notwithstanding the foregoing, Expenses shall not include depreciation or amortization of the Building or equipment in the Building except as provided herein, loan principal payments, costs of alterations of tenants’ premises, leasing commissions, interest expenses on long-term borrowings or advertising costs.

The following items are also excluded from Expenses and in no event shall Tenant have any obligation to perform, pay directly or reimburse Landlord for any of the following except to the extent expressly provided herein:

(a)Sums paid to subsidiaries or other affiliates of Landlord for services on or to the Building and/or Premises, but only to the extent that the costs of such services exceed the competitive cost for such services rendered by persons or entities of similar skill, competence and experience.

(b)Attorney’s fees and other expenses incurred in connection with negotiations or disputes with prospective tenants or tenants or other occupants of the Building.

(c)Costs in connection with leasing space in the Building, including brokerage commissions, brochures and marketing supplies, legal fees in negotiating and preparing lease documents.

(d)Principal payments of mortgage and other non-operating debts of Landlord.

(e)Salaries or fringe benefits of employees whose time is not spent directly and solely in the operation of the Building, provided that if any employee performs services in connection with the Building and other buildings, costs associated with such employee may be proportionately included in Expenses based on the percentage of time such employee spends in connection with the operation, maintenance and management of the Building.

(f)Ground lease rental.

(g)   Any “tenant allowances”, “tenant concessions” and other costs or expenses incurred in fixturing, furnishing, renovating or otherwise improving, decorating or redecorating space for tenants or other occupants of the Building, or vacant leaseable space in the Building, except in connection with general maintenance and repairs provided to the tenants of the Building in general.

(h)Marketing costs, including leasing commissions, attorneys’ fees in connection with the negotiation and preparation or enforcement of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, and other costs and expenses incurred in connection with lease, sublease and/or assignment negotiations and transactions with present or prospective tenants or other occupants of the Building.

(i)The cost or expense of any services or benefits provided generally to other tenants in the Building and not provided or available to Tenant.

(j)Interest (except for the amortization of capital improvements and/or deferred maintenance items and except to the extent incurred as a result of any act or omission of Tenant).

10/31/01 CA MTIN
Revised 9/09/05
586764.v1: 028481/048 4

(k)Except as specifically provided in Section 4.1.2, any capital improvement costs.

(l)Advertising and promotional expenditures.

(m)Fines, costs or penalties incurred as a result and to the extent of a violation by Landlord of any applicable Regulations and fines, costs or penalties incurred as a result and to the extent of any late payment made by Landlord.

(n)Any fines, penalties or interest resulting from the active negligence or willful misconduct of the Landlord or its agents, contractors, employees or other tenants.

(o)Landlord’s charitable and political contributions.

(p)All bad debt loss, rent loss, or reserves for bad debt or rent loss.

(q)Reserves not spent by Landlord by the end of the calendar year for which Expenses are paid.

(r)All costs associated with the operation of the business of the entity which constitutes “Landlord” (as distinguished from the costs of operating, maintaining, repairing and managing the Building) including, but not limited to, Landlord’s or Landlord’s managing agent’s general corporate overhead and general administrative expenses.

(s)Costs incurred by Landlord for the repair of damage to the Building, to the extent that Landlord is reimbursed for such costs by insurance proceeds, contractor warranties, guarantees, judgments or other third party sources.

(t)The cost of operating any commercial concession which is operated by Landlord in the Building, including, without limitation, any compensation paid to clerks, attendants or other persons operating such commercial concessions on behalf of Landlord, but only to the extent revenues from any such commercial concessions exceed such costs and compensation.

(u)Any cost or expense related to removal, cleaning, abatement or remediation of “hazardous materials” existing as of the date of this Lease in or about the Building or the common areas, except to the extent such removal, cleaning, abatement or remediation is related to the general repair and maintenance of the Building or the common areas.

(v)Any expenses for which Landlord is entitled to receive reimbursement (other than through Expenses).

(w)The cost of complying with any Regulations in effect (and as interpreted and enforced) on the date of this Lease, provided that if any portion of the Building that was in compliance with all applicable Regulations on the date Tenant took possession of the Premises becomes out of compliance due to normal wear and tear, the cost of bringing such portion of the Building into compliance shall be included in Expenses unless otherwise excluded pursuant to the terms hereof.

4.1.3      Taxes: Real estate taxes and any other taxes, charges and assessments which are levied with respect to the Building or the land appurtenant to the Building, or with respect to any improvements, fixtures and equipment or other property of Landlord, real or personal, located in the Building and used in connection with the operation of the Building and said land, any payments to any ground lessor in reimbursement of tax payments made by such lessor; and all fees, expenses and costs incurred by Landlord in investigating, protesting, contesting or in any way seeking to reduce or avoid increase in any assessments, levies or the tax rate pertaining to any Taxes to be paid by Landlord in any Lease Year. Taxes shall not include any corporate franchise, or estate, inheritance or net income tax, or tax imposed upon any transfer by Landlord of its interest in this Lease or the Building or any taxes to be paid by Tenant pursuant to Article 28. Further, Taxes shall exclude the portion of any increase in real estate taxes to the extent attributable to any other tenant in the Building for alterations, additions or improvements to such tenant’s premises but only to the extent that such increase is clearly ascertainable and attributable solely to such other tenant. If an assessment of Taxes is payable in installments, regardless of whether Landlord pays such amount in one lump sum or elects to pay in installments, Taxes shall include the amount of the installment and any interest due and payable over the time period of installments are paid or would have been paid during the Term (as the same may be extended) had Landlord elected to pay such Taxes in installments. Notwithstanding anything to the contrary set forth in this Lease, in the event that during the Term Landlord receives any credit or rebate on Taxes from the Santa

10/31/01 CA MTIN
Revised 9/09/05
586764.v1: 028481/048 5

Clara County Office of the Assessor with respect to the Premises to the extent applicable to the Term or portion thereof and of which Tenant has paid Tenant’s Proportionate Share, Tenant shall be entitled to a credit against future installments of Tenant’s Proportionate Share of Taxes (or, if no such Taxes are due from Tenant at the time that Landlord would credit Tenant pursuant to this sentence, to Tenant’s Proportionate Share of Expenses) payable by Tenant under the Lease, as amended hereby, or, at Landlord’s option, a refund, in each case in the amount of such credit or rebate, after first deducting Landlord’s costs and expenses in obtaining such credit or rebate, if any.

4.2         Tenant shall pay as additional rent for each Lease Year Tenant’s Proportionate Share of Expenses and Taxes incurred for such Lease Year.

4.3         The annual determination of Expenses shall be made by Landlord and shall be binding upon Landlord and Tenant, subject to the provisions of this Section 4.3. Landlord shall use reasonable efforts to furnish the statement of actual Expenses on or before June 1 of the calendar year immediately following the calendar year to which the statement applies. During the Term, Tenant may review, at Tenant’s sole cost and expense, the books and records supporting such determination in an office of Landlord, or Landlord’s agent, during normal business hours, upon giving Landlord five (5) days advance written notice within one hundred twenty (120) days after receipt of such determination, but in no event more often than once in any one (1) year period, subject to execution of a confidentiality agreement acceptable to Landlord, and provided that if Tenant utilizes an independent accountant to perform such review it shall be one which is reasonably acceptable to Landlord, is not compensated on a contingency basis and is also subject to such confidentiality agreement. If Landlord and Tenant determine that Expenses for the Building for the year in question were less than stated by more than five percent (5%), Landlord, within forty-five (45) days after its receipt of paid invoices therefore from Tenant, shall reimburse Tenant for the reasonable amounts paid by Tenant to its third party accountant in connection with such review by Tenant. If Tenant fails to object to Landlord’s determination of Expenses within one hundred twenty (120) days after receipt, or if any such objection fails to state with specificity the reason for the objection, Tenant shall be deemed to have approved such determination and shall have no further right to object to or contest such determination. In the event that during all or any portion of any Lease Year, the Building is not fully rented and occupied Landlord shall make an appropriate adjustment in occupancy-related Expenses for such year for the purpose of avoiding distortion of the amount of such Expenses to be attributed to Tenant by reason of variation in total occupancy of the Building, by employing consistent and sound accounting and management principles to determine Expenses that would have been paid or incurred by Landlord had the Building been at least ninety-five percent (95%) rented and occupied, and the amount so determined shall be deemed to have been Expenses for such Lease Year. In no event shall Landlord be entitled to a reimbursement from tenants for Expenses and Taxes in excess of one hundred percent (100%) of the costs actually paid or incurred by Landlord in any applicable calendar year.

4.4         Prior to the actual determination thereof for a Lease Year, Landlord shall from time to time estimate Tenant’s liability for Expenses and/or Taxes under Section 4.2, Article 6 and Article 28 for the Lease Year or portion thereof. Landlord shall use commercially reasonable efforts to give Tenant written notification of the amount of such estimate within thirty (30) days after the end of any Lease Year and Tenant agrees that it will pay, by increase of its Monthly Installments of Rent due in such Lease Year, additional rent in the amount of such estimate. Any such increased rate of Monthly Installments of Rent pursuant to this Section 4.4 shall remain in effect until further written notification to Tenant pursuant hereto.

4.5         When the above mentioned actual determination of Tenant’s liability for Expenses and/or Taxes is made for any Lease Year and when Tenant is so notified in writing, then:

4.5.1       If the total additional rent Tenant actually paid pursuant to Section 4.3 on account of Expenses and/or Taxes for the Lease Year is less than Tenant’s liability for Expenses and/or Taxes, then Tenant shall pay such deficiency to Landlord as additional rent in one lump sum within thirty (30) days of receipt of Landlord’s bill therefor; and

4.5.2       If the total additional rent Tenant actually paid pursuant to Section 4.3 on account of Expenses and/or Taxes for the Lease Year is more than Tenant’s liability for Expenses and/or Taxes, then Landlord shall refund the difference to Tenant, or at Tenant’s option, credit the difference against the then next due Monthly Installment of Rent payments to be made by Tenant under this Lease.

4.6         If the Commencement Date is other than January 1 or if the Termination Date is other than December 51, Tenant’s liability for Expenses and Taxes for the Lease Year in which said Date occurs shall be prorated based upon a three hundred sixty-five (365) day year.

10/31/01 CA MTIN
Revised 9/09/05
586764.v1: 028481/048 6

5.             SECURITY DEPOSIT. Tenant shall deposit the Security Deposit, if any, with Landlord upon the execution of this Lease. As of the date of this Lease, there is no Security Deposit. Said sum shall be held by Landlord as security for the faithful performance by Tenant of all the terms, covenants and conditions of this Lease to be kept and performed by Tenant and not as an advance rental deposit or as a measure of Landlord’s damage in case of Tenant’s default. If Tenant defaults beyond any applicable notice and cure period with respect to any provision of this Lease, Landlord may use any part of the Security Deposit for the payment of any rent or any other sum in default, or for the payment of any amount which Landlord reasonably may spend or become obligated to spend by reason of Tenant’s default, or to compensate Landlord for any other actual loss or damage which Landlord may suffer by reason of Tenant’s default. If any portion is so used, Tenant shall within five (5) days after written demand therefor, deposit with Landlord an amount sufficient to restore the Security Deposit to its original amount and Tenant’s failure to do so shall be a material breach of this Lease. Except to such extent, if any, as shall be required by law, Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on such deposit. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, the Security Deposit or any balance thereof shall be returned to Tenant at such time after termination of this Lease when Landlord shall have determined that all of Tenant’s obligations under this Lease have been fulfilled. Notwithstanding anything to the contrary contained herein or in Article 23 hereof, Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code, or any similar or successor Regulations or other laws now or hereinafter in effect.

6.ALTERATIONS.

6.1           Tenant shall not make or suffer to be made any alterations, additions, or improvements, including, but not limited to, the attachment of any fixtures or equipment in, on, or to the Premises or any part thereof or the making of any improvements as required by Article 7, without the prior written consent of Landlord. When applying for such consent, Tenant shall, if requested by Landlord, furnish complete plans and specifications for such alterations, additions and improvements. Landlord’s consent shall not be unreasonably withheld, conditioned or delayed with respect to alterations which (i) are not structural in nature, (ii) are not visible from the exterior of the Building, and (iii) do not affect or require modification of the Building’s electrical, mechanical, plumbing, HVAC or other systems or have an immaterial affect or impact upon the Building’s electrical, mechanical, plumbing, HVAC or other systems such as rebalancing of the heating, ventilating and air conditioning system. In addition, Tenant shall have the right to perform, with prior written notice to but without Landlord’s consent, any alteration, addition, or improvement that satisfies all of the following criteria (a “Cosmetic Alteration”): (1) is of a cosmetic nature such as painting, wallpapering, hanging pictures and installing carpeting; (2) is not visible from the exterior of the Premises or Building; (3) will not affect the systems or structure of the Building; (4) costs less than $250,000.00 in the aggregate during any twelve (12) month period of the Term of this Lease, and (5) does not require work to be performed inside the walls or above the ceiling of the Premises. However, even though consent is not required, the performance of Cosmetic Alterations shall be subject to all of the other provisions of this Article 6.

6.2         In the event Landlord consents to the making of any such alteration, addition or improvement by Tenant, the same shall be made by using either Landlord’s contractor or at Tenant’s option, by a contractor selected by Tenant and reasonably approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed), but in either event at Tenant’s sole cost and expense. If Tenant shall employ any contractor other than Landlord’s contractor and such other contractor or any subcontractor of such other contractor shall employ any non-union labor or supplier, Tenant shall be responsible for and hold Landlord harmless from any and all delays, damages and extra costs suffered by Landlord as a result of any dispute with any labor unions concerning the wage, hours, terms or conditions of the employment of any such labor. In any event Landlord may charge Tenant a construction management fee not to exceed three percent (3%) of the cost of such work to cover its overhead as it relates to such proposed work, plus third-party costs actually incurred by Landlord in connection with the proposed work and the design thereof, with all such amounts being due thirty (30) days after Landlord’s demand. Notwithstanding the foregoing, no construction management fee shall be due in connection with the construction of the Initial Alterations.

6.3         All alterations, additions or improvements proposed by Tenant shall be constructed in accordance with all Regulations, using Building standard materials where applicable, and Tenant shall, prior to construction, provide the additional insurance required under Article 11 in such case, and also all such assurances to Landlord as Landlord shall reasonably require to assure payment of the costs thereof, including but not limited to, notices of non-responsibility, waivers of lien, surety company performance bonds and funded construction escrows and to protect Landlord and the Building and appurtenant land against any loss from any mechanic’s, materialmen’s or other liens; provided, however, that Landlord shall only be entitled to require Tenant to provide to Landlord a lien and completion bond as such reasonable assurance in connection with any alterations, improvements or additions to the Premises in the event that following Landlord’s evaluation of Tenant’s then-current financial condition and performance history, Landlord determines in its good faith, prudent business

10/31/01 CA MTIN
Revised 9/09/05
586764.v1: 028481/048 7

judgment that the same is reasonably and prudently required. Landlord shall not require a lien and completion bond in connection with the Initial Alterations (defined in Exhibit B). Tenant shall pay in addition to any sums due pursuant to Article 4, any increase in real estate taxes attributable to any such alteration, addition or improvement for so long, during the Term, as such increase is ascertainable; at Landlord’s election said sums shall be paid in the same way as sums due under Article 4. In the event that following Landlord’s evaluation of Tenant’s then-current financial condition and performance history, Landlord determines in its good faith, prudent business judgment that the same is reasonably and prudently required, Landlord may, as a condition to its consent to any particular alterations or improvements, require Tenant to deposit with Landlord the amount reasonably estimated by Landlord as sufficient to cover the cost of removing such alterations or improvements and restoring the Premises, to the extent required under Section 26.2.

6.4         Notwithstanding anything to the contrary contained herein, so long as Tenant’s written request for consent for a proposed alteration or improvements contains the following statement in large, bold and capped font “PURSUANT TO ARTICLE 6 OF THE LEASE, IF LANDLORD CONSENTS TO THE SUBJECT ALTERATION, LANDLORD SHALL NOTIFY TENANT IN WRITING WHETHER OR NOT LANDLORD WILL REQUIRE SUCH ALTERATION TO BE REMOVED AT THE EXPIRATION OR EARLIER TERMINATION OF THE LEASE.”, at the time Landlord gives its consent for any alterations or improvements, if it so does, Tenant shall also be notified whether or not Landlord will require that such alterations or improvements be removed upon the expiration or earlier termination of this Lease. Notwithstanding anything to the contrary contained in this Lease (but subject to the terms and conditions of Section 26 of this Lease), at the expiration or earlier termination of this Lease and otherwise in accordance with Article 26 hereof, Tenant shall be required to remove all alterations or improvements made to the Premises except for any such alterations or improvements which Landlord expressly indicates or is deemed to have indicated shall not be required to be removed from the Premises by Tenant. If Tenant’s written notice strictly complies with the foregoing and if Landlord fails to so notify Tenant within twenty (20) days of Landlord’s receipt of such notice whether Tenant shall be required to remove the subject alterations or improvements at the expiration or earlier termination of this Lease, it shall be assumed that Landlord shall require the removal of the subject alterations or improvements.

7.REPAIR.

7.1         Landlord shall have no obligation to alter, remodel, improve, repair, decorate or paint the Premises, except as specified in Exhibit B and in Section 7.4 below, and except that Landlord shall repair and maintain the structural portions of the Building, including the basic plumbing, air conditioning, life safety, heating and electrical systems installed or furnished by Landlord. In addition, Landlord shall also maintain the common areas of the Building and the Building systems generally servicing the common areas of the Building (including, without limitation, any heating, ventilating and air conditioning units); provided, however, that the costs and expenses associated with the foregoing shall be a part of Expenses and subject to the terms and conditions of Article 4 of this Lease. It is hereby understood and agreed that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant, except as specifically set forth in this Lease. Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need of such repairs or maintenance is given to Landlord by Tenant.

7.2         Tenant shall, at its own cost and expense, keep and maintain all parts of the Premises and such portion of the Building and improvements as are within the exclusive control of Tenant and not otherwise expressly Landlord’s obligation pursuant to Section 7.1 in good condition excepting damage by fire, or other casualty or condemnation, promptly making all necessary repairs and replacements, whether ordinary or extraordinary, with materials and workmanship of the same character, kind and quality as the original (including, but not limited to, repair and replacement of all fixtures installed by Tenant, water heaters serving the Premises, windows, glass and plate glass, doors, skylights, any special office entries, interior walls and finish work, floors and floor coverings, heating and air conditioning systems serving the Premises, electrical systems and fixtures, sprinkler systems, dock boards, truck doors, dock bumpers, plumbing work and fixtures, and performance of regular removal of trash and debris). Tenant as part of its obligations hereunder shall keep the Premises in a clean and sanitary condition. Tenant shall use commercially reasonable efforts to keep all such parts of the Premises from falling temporarily out of repair, and upon termination of this Lease in any way Tenant will yield up the Premises to Landlord in good condition and repair, loss by fire or other casualty or condemnation excepted (but not excepting any damage to glass). Subject to Article 12 below, Tenant shall, at its own cost and expense, repair any damage to the Premises or the Building resulting from and/or caused in whole or in part by the negligence or misconduct of Tenant, its agents, employees, contractors, invitees, or any other person entering upon the Premises as a result of Tenant’s business activities or caused by Tenant’s default hereunder.

10/31/01 CA MTIN
Revised 9/09/05
586764.v1: 028481/048 8

7.3Except as provided in Article 22 or otherwise expressly provided in this Lease, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or to fixtures, appurtenances and equipment in the Building. Tenant hereby waives any and all rights under and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code, or any similar or successor Regulations or other laws now or hereinafter in effect.

7.4Subject to the terms and conditions of this Section 7.4, Landlord and Tenant acknowledge and agree that Landlord, at its sole cost and expense (which shall not be included in Expenses), shall install similar and new (and not refurbished) heating and air conditioning system and equipment to service the Premises (collectively, the “HVAC Unit”) prior to the Commencement Date. Upon completion of installation, the HVAC Unit shall be properly functioning, including, without limitation, the associated thermostats located within the Premises shall be operational. Prior to the Commencement Date, Landlord shall ensure that the HVAC Unit will have sufficient capacity and be tested and balanced to meet office building standards, as reasonably determined by Landlord. Tenant shall cooperate with Landlord and its contractors and shall provide reasonable access to Landlord and to its contractors to the Premises to the extent necessary to perform all work and installation services to install the HVAC Unit, as reasonably determined by Landlord. Tenant shall remove all personal property, furniture, fixtures and equipment from the portion of the Premises reasonably necessary to enable Landlord to perform the installation of the HVAC Unit. Failure by Tenant to so remove such property and provide such reasonable access to Landlord after receiving three (3) days prior written notice from Landlord shall be deemed a delay by Tenant. The foregoing shall in no event modify or otherwise alter Tenant’s responsibility to pay Monthly Installment of Rent and Tenant’s Proportionate Share of Expenses and Taxes, including, without limitation, its share of the costs and expenses associated with repair and maintenance of any heating, ventilation and air conditioning systems which serve the Building (including the HVAC Unit) and which are included in Expenses. As of the date of this Lease, Landlord has entered into and, subject to the terms hereof, shall maintain, a regularly scheduled preventive maintenance/service contract with respect to the HVAC Unit servicing the Premises and the Building. The cost of such contract and any service shall be either reimbursed by Tenant as additional rent (if such contract and/or service respects the Premises) or shall be included in Expenses (if such contract and/or service respects the Building). Tenant shall, at Landlord’s request at any time during the Term and at Tenant’s own cost and expense, enter into a regularly scheduled preventive maintenance/service contract based on market terms with a maintenance contractor reasonably approved by Landlord for servicing all heating and air conditioning systems and equipment serving the Premises (and a copy thereof shall be furnished to Landlord). In the event that Landlord so requires Tenant to maintain a regularly scheduled preventive maintenance/service contract, such contract must include all services reasonably suggested by the equipment manufacturer in the operation/maintenance manual and must become effective within thirty (30) days of the date Landlord notifies Tenant of such requirement. Should Tenant fail to do so following such requirement by Landlord, Landlord may, upon written notice to Tenant, maintain the current service contract or enter into such a maintenance/ service contract on behalf of Tenant or perform the work and in either case, charge Tenant the cost thereof along with a reasonable percentage for Landlord’s overhead.

8.LIENS. Tenant shall keep the Premises, the Building and appurtenant land and Tenant’s leasehold interest in the Premises free from any liens arising out of any services, work or materials performed, furnished, or contracted for by Tenant, or obligations incurred by Tenant. In the event that Tenant fails, within ten (10) days following the imposition of any such lien, to either cause the same to be released of record or provide Landlord with insurance against the same issued by a major title insurance company or such other protection against the same as Landlord shall accept (such failure to constitute an Event of Default), Landlord shall have the right to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith shall be payable to it by Tenant within five (5) days of Landlord’s demand.

9.ASSIGNMENT AND SUBLETTING.

9.1Tenant shall not have the right to assign or pledge this Lease or to sublet the whole or any part of the Premises whether voluntarily or by operation of law, or permit the use or occupancy of the Premises by anyone other than Tenant, and shall not make, suffer or permit such assignment, subleasing or occupancy without the prior written consent of Landlord, such consent not to be unreasonably withheld, conditioned or delayed and said restrictions shall be binding upon any and all assignees of this Lease and subtenants of the Premises. In the event Tenant desires to sublet, or permit such occupancy of, the Premises, or any portion thereof, or assign this Lease, Tenant shall give written notice thereof to Landlord at least thirty (30) days but no more than one hundred twenty (120) days prior to the proposed commencement date of such subletting or assignment, which notice shall set forth the name of the proposed subtenant or assignee, the relevant terms of any sublease or assignment and copies of financial reports and other relevant financial information of the proposed subtenant

10/31/01 CA MTIN	9
Revised 9/09/05
586764.v1: 028481/048

or assignee and Landlord shall respond to Tenant’s request for such assignment or subletting within ten (10) business days after receipt of Tenant’s written notice.

9.2Notwithstanding any assignment or subletting, permitted or otherwise, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent specified in this Lease and for compliance with all of its other obligations under the terms, provisions and covenants of this Lease. Upon the occurrence of an Event of Default, if the Premises or any part of them are then assigned or sublet, Landlord, in addition to any other remedies provided in this Lease or provided by law, may, at its option, collect directly from such assignee or subtenant all rents due and becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord from Tenant under this Lease, and no such collection shall be construed to constitute a novation or release of Tenant from the further performance of Tenant’s obligations under this Lease.

9.3In addition to Landlord’s right to approve of any subtenant or assignee, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this Lease, or in the case of a proposed subletting of less than the entire Premises, to recapture the portion of the Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised, if at all, by Landlord giving Tenant written notice given by Landlord to Tenant within thirty (30) days following Landlord’s receipt of Tenant’s written notice as required above. However, if Tenant notifies Landlord, within five (5) days after receipt of Landlord’s termination notice, that Tenant is rescinding its proposed assignment or sublease, the termination notice shall be void and this Lease shall continue in full force and effect. Notwithstanding the above, if Landlord would be entitled to terminate this Lease with respect to all or any portion of the Premises in connection with a proposed assignment or sublet, Tenant, prior to entering into a sublet or assignment, shall have the right to advise Landlord (the “Prior Notice”) of its intention to sublet the Premises or assign this Lease. In the Prior Notice, Tenant shall describe whether Tenant intends to assign its interest under the Lease or whether Tenant intends to sublease all or a portion of the Premises (and the portion of the Premises Tenant intends to sublease), and the expected effective date of the proposed assignment or sublease. Landlord, by providing notice within forty-five (45) days after receipt of the Prior Notice, shall have the right to terminate this Lease, effective as of the effective date set forth in the Prior Notice, with respect to the Premises, if Tenant intends to assign its interest under the Lease, or with respect to the space that Tenant intends to sublet if Tenant intends to sublease all or a portion of the Premises. If Landlord fails to exercise its right to terminate within forty-five (45) days after the Prior Notice, and if Tenant, within six (6) months after the expiration of the 45-day period, enters into the type of assignment or sublease described in its Prior Notice with respect to the portion of the Premises described in the Prior Notice, then Landlord shall not have the right to cancel and terminate this Lease with respect to such portion of the Premises in connection with such Transfer. If this Lease shall be terminated with respect to the entire Premises pursuant to this Section, the Term of this Lease shall end on the date stated in Tenant’s notice as the effective date of the sublease or assignment as if that date had been originally fixed in this Lease for the expiration of the Term. If Landlord recaptures under this Section only a portion of the Premises, the rent to be paid from time to time during the unexpired Term shall abate proportionately based on the proportion by which the approximate square footage of the remaining portion of the Premises shall be less than that of the Premises as of the date immediately prior to such recapture. Tenant shall, at Tenant’s own cost and expense, discharge in full any outstanding commission obligation which may be due and owing as a result of any proposed assignment or subletting, whether or not the Premises are recaptured pursuant to this Section 9.3 and rented by Landlord to the proposed tenant or any other tenant.

9.4In the event that Tenant sells, sublets, assigns or transfers this Lease (except in the case of a Permitted Transfer (as defined below), Tenant shall pay to Landlord as additional rent an amount equal to fifty percent (50%) of any Increased Rent (as defined below), less the Costs Component (as defined below), when and as such Increased Rent is actually received by Tenant. As used in this Section, “Increased Rent” shall mean the excess of (i) all rent and other consideration which Tenant is entitled to receive by reason of any sale, sublease, assignment or other transfer of this Lease, over (ii) the rent otherwise payable by Tenant under this Lease at such time. For purposes of the foregoing, any consideration received by Tenant in form other than cash shall be valued at its fair market value as determined by Landlord in good faith. The “Costs Component” is that amount which, if paid monthly, would fully amortize on a straight-line basis, over the entire period for which Tenant is to receive Increased Rent, the reasonable costs incurred by Tenant for leasing commissions, legal fees and tenant improvements in connection with such sublease, assignment or other transfer.

9.5Notwithstanding any other provision hereof, it shall be considered reasonable for Landlord to withhold its consent to any assignment of this Lease or sublease of any portion of the Premises if at the time of either Tenant’s notice of the proposed assignment or sublease or the proposed commencement date thereof, there shall exist any uncured default of Tenant or matter which will become a default of Tenant with passage of time unless cured, or if the proposed assignee or sublessee is an entity: (a) with which Landlord is already in negotiation; (b) is already an occupant of the Building unless Landlord is unable to provide the amount of space required by such occupant; (c) is a governmental agency (unless there are

10/31/01 CA MTIN	10
Revised 9/09/05
586764.v1: 028481/048

other comparable government tenants then occupying space in the Building); (d) is incompatible with the character of occupancy of the Building; (e) with which the payment for the sublease or assignment is determined in whole or in part based upon its net income or profits; or (f) would subject the Premises to a use which would: (i) involve increased personnel or wear upon the Building; (ii) violate any exclusive right granted to another tenant of the Building (and Landlord shall use commercially reasonable efforts to provide Tenant with notice of any such exclusive rights and as of the date of this Lease, to the best of Landlord’s knowledge, there are no existing exclusive rights granted at the Building); (iii) require any material addition to or modification of the Premises or the Building in order to comply with building code or other governmental requirements (unless Tenant agrees to pay the cost thereof); or, (iv) involve a violation of Section 1.2. Tenant expressly agrees that for the purposes of any statutory or other requirement of reasonableness on the part of Landlord, Landlord’s refusal to consent to any assignment or sublease for any of the reasons described in this Section 9.5, shall be conclusively deemed to be reasonable.

9.6Upon any request to assign or sublet, Tenant will pay to Landlord (a) the Assignment/Subletting Fee plus, (b) on demand, a sum equal to all of Landlord’s costs, including reasonable attorney’s fees, incurred in investigating and considering any proposed or purported assignment or pledge of this Lease or sublease of any of the Premises (the “Review Reimbursement”), regardless of whether Landlord shall consent to, refuse consent, or determine that Landlord’s consent is not required for, such assignment, pledge or sublease. Except as otherwise expressly provided herein, the Review Reimbursement shall not exceed $2,000.00 (the “Cap”). Any purported sale, assignment, mortgage, transfer of this Lease or subletting which does not comply with the provisions of this Article 9 shall be void. If: (a)Tenant fails to execute Landlord’s standard form of consent (which is attached hereto as Exhibit H) without any changes to this Lease, without material changes to the consent and without material negotiation of the consent, and (b) Landlord shall notify Tenant that the Review Reimbursement shall exceed the Cap as a result of such changes and/or negotiation, and (c) Tenant elects to proceed with such changes and/or negotiation, then the Cap shall not apply and Tenant shall pay to Landlord the Assignment/Subletting Fee plus the Review Reimbursement in full.  The foregoing shall in no event be deemed to be a right of Tenant to rescind its written notice to Landlord requesting consent to a transfer of this Lease or a sublease of all or a portion of the Premises as provided in Section 9.1. In the event that Tenant fails to notify Landlord of its election as provided in subsection (c) above within three (3) business days following Landlord’s notice to Tenant of the excess described in subsection (b) above, then Tenant shall be deemed to have elected proceed with any such changes and/or negotiation and the Cap shall not apply.

9.7If Tenant is a corporation, limited liability company, partnership or trust, any transfer or transfers of or change or changes within any twelve (12) month period in the number of the outstanding voting shares of the corporation or limited liability company, the general partnership interests in the partnership or the identity of the persons or entities controlling the activities of such partnership or trust resulting in the persons or entities owning or controlling a majority of such shares, partnership interests or activities of such partnership or trust at the beginning of such period no longer having such ownership or control shall be regarded as equivalent to an assignment of this Lease to the persons or entities acquiring such ownership or control (any of the foregoing shall be a “deemed transfer” for purposes of this Section 9.7) and shall be subject to all the provisions of this Article 9 to the same extent and for all intents and purposes as though such an assignment. In the event of the foregoing and so long as this Lease is not modified in any respect and there is no modification of the rental obligations of the resulting “Tenant” following a deemed transfer, there shall be no Increased Rent in connection with a deemed transfer and Landlord’s right to terminate this Lease as provided in 9.3 shall not apply to a deemed transfer. Notwithstanding anything to the contrary in this Lease, the transfer of outstanding capital stock or other listed equity interests, or the purchase of outstanding capital stock or other listed equity interests, or the purchase of equity interests issued in an initial public offering of stock, through the “over-the-counter” market or any recognized national or international securities exchange shall not be included in determining whether control has been transferred.

9.8So long as Tenant is not entering into the Permitted Transfer (as defined below) for the purpose of avoiding or otherwise circumventing the remaining terms of this Article 9, Tenant may assign its entire interest under this Lease, or sublet all or any portion(s) of the Premises, without the consent of Landlord, to (a) an affiliate, subsidiary, or parent of Tenant, or a corporation, partnership or other legal entity wholly owned by Tenant (collectively, an “Affiliated Party”), or (b) a successor to Tenant by purchase, merger, consolidation or reorganization, provided that all of the following conditions are satisfied (each such transfer a “Permitted Transfer” and any such assignee or sublessee of a Permitted Transfer, a “Permitted Transferee”): (i) Tenant is not in default under this Lease beyond applicable notice and cure periods; (ii) the Permitted Use does not allow the Premises to be used for retail purposes; (iii) Tenant shall give Landlord written notice at least thirty (30) days prior to the effective date of the proposed Permitted Transfer (provided that, if prohibited by confidentiality in connection with a proposed purchase, merger, consolidation or reorganization, then Tenant shall give written notice to Landlord within thirty (30) days after the effective date of the proposed purchase, merger, consolidation or reorganization); (iv) with respect to a proposed Permitted Transfer to an Affiliated Party, Tenant continues to have a net worth equal to or greater than Tenant’s net worth at the date of this Lease; and (v) with respect to a purchase, merger, consolidation or

10/31/01 CA MTIN	11
Revised 9/09/05
586764.v1: 028481/048

reorganization or any Permitted Transfer which results in Tenant ceasing to exist as a separate legal entity, (A) Tenant’s successor shall own all or substantially all of the assets of Tenant, and (B) Tenant’s successor shall have a net worth which is at least equal to the greater of Tenant’s net worth at the date of this Lease. Tenant’s notice to Landlord shall include information and documentation showing that each of the above conditions has been satisfied. If requested by Landlord, Tenant’s successor shall sign a commercially reasonable form of assumption agreement. As used herein, (1) “parent” shall mean a company which owns a majority of Tenant’s voting equity; (2) “subsidiary” shall mean an entity wholly owned by Tenant or at least fifty-one percent (51%) of whose voting equity is owned by Tenant; and (3) “affiliate” shall mean an entity controlled, controlling or under common control with Tenant.

9.9Notwithstanding anything in this Article 9 or in the Lease to the contrary, and so long as Tenant shall not receive profits in connection with the same, Tenant shall have the right to permit the Premises to be used by employees of companies to which Tenant is providing products or services, or with which Tenant is collaborating in the development or provision of products or services without the prior consent of Landlord, or independent contractors providing services to Tenant as part of Tenant’s normal and customary business operations, provided that in no event shall the total space used by such persons (referred to herein as the “Permitted Users”) exceed fifteen percent (15%) of the rentable square footage of the Premises in the aggregate and further provided that Tenant does not separately demise such space and the Permitted Users utilize, in common with Tenant, one common entryway to the Premises as well as certain shared central services, such as reception, photocopying and the like. Tenant shall provide Landlord with the name of each Permitted User at least ten (10) days prior to the date on which such Permitted User(s) occupies a portion of the Premises; provided, however, that, concurrently with Tenant’s execution of this Lease, Tenant shall provide to Landlord a list of the Permitted Users which will occupy a portion of the Premises as of the Commencement Date. In no event shall Tenant allow any Permitted User to use the Premises for a purpose other than the permitted use defined in Article 1 of the Lease or to otherwise use the Premises in violation of any of the terms and conditions of this Lease or any of the Rule and Regulations of the Building. A violation of any of the foregoing by any Permitted User which is not cured within the applicable cure period shall be considered to be an Event of Default by Tenant hereunder. In addition, Tenant hereby agrees to indemnify Landlord for the acts and omissions of any Permitted Users (including such Permitted User’s agent, employees, contractors, customers and invitees) in accordance with the terms and conditions of the Lease and to cause any insurance to be maintained by Tenant under the Lease to be extended to cover the acts and omissions of the Permitted Users (including such Permitted User’s agent, employees, contractors, customers and invitees) while in the Building. In no event shall the occupancy of any portion of the Premises by Permitted Users be deemed to create a landlord/tenant relationship between Landlord and such Permitted Users, and, in all instances, Tenant shall be considered the sole tenant under the Lease notwithstanding the occupancy of any portion of the Premises by the Permitted Users. In the event that Tenant desires to enter into a sublease for a walled off, separately demised portion of the Premises with a Permitted User, Tenant shall provide Landlord with a copy of such sublease for approval in accordance with the terms of this Lease. The parties hereto acknowledge and agree Tenant’s desire to allow a Permitted User to use a portion of the Premises in accordance with the terms and conditions hereof is for purposes of cost sharing only and that Tenant does not intend nor shall Tenant be entitled to any profit or excess rents in excess of Monthly Installment of Rent paid to Tenant in connection with any Permitted User’s use of a portion of the Premises. Accordingly, Tenant hereby agrees that the foregoing shall in no event affect Landlord’s right to participate in bonus or excess rent as provided in Section 9.4 of this Lease. Notwithstanding the foregoing, any such bonus or excess rent received by Tenant shall exclude commercially reasonable reimbursements received by Tenant from a Permitted User for shared use of the following: photocopy machines, telephone equipment (including facsimile lines), office supplies, library usage, administrative staff and other related items in connection with the Permitted Use of the Premises. Tenant shall provide written itemization of such reimbursements within fifteen (15) days following Landlord’s written request therefore.

10.INDEMNIFICATION. None of the Landlord Entities shall be liable and Tenant hereby waives all claims against them for any damage to any property or any injury to any person in or about the Premises or the Building by or from any cause whatsoever (including without limiting the foregoing, rain or water leakage of any character from the roof, windows, walls, basement, pipes, plumbing works or appliances, the Building not being in good condition or repair, gas, fire, oil, electricity or theft), except to the extent caused by or arising from the active negligence or willful misconduct of Landlord or its agents, employees or contractors. Except to the extent caused by the active negligence or willful misconduct of Landlord and not covered by insurance required of Tenant by the terms of this Lease, Tenant shall protect, indemnify and hold the Landlord Entities harmless from and against any and all loss, claims, liability or costs (including court costs and reasonable attorney’s fees) incurred by reason of (a) subject to Article 12, any damage to any property (including but not limited to property of any Landlord Entity) or any injury (including but not limited to death) to any person occurring in, on or about the Premises or the Building to the extent that such injury or damage shall be caused by or arise from any actual or alleged act, neglect, fault, or omission by or of Tenant or any Tenant Entity to meet any standards imposed by any duty with respect to the injury or damage; (b) the conduct or management of any work or thing whatsoever done by the Tenant in or about the Premises or from transactions of the Tenant concerning the Premises; (c) Tenant’s actual or asserted failure to comply with

10/31/01 CA MTIN	12
Revised 9/09/05
586764.v1: 028481/048

any and all Regulations applicable to the condition or use of the Premises or its occupancy; or (d) any breach or default on the part of Tenant in the performance of any covenant or agreement on the part of the Tenant to be performed pursuant to this Lease. Landlord shall protect, indemnify and hold Tenant harmless from and against any and all loss, claims, liability or costs (including court costs and attorney’s fees) incurred by reason of any damage to any property (including but not limited to property of Tenant) or any injury (including but not limited to death) to any person occurring in, on or about the Building to the extent that such injury or damage shall be caused by or arise from the breach or default of this Lease by Landlord and/or by the active negligence or willful misconduct of Landlord or any of Landlord’s agents or employees and not covered by insurance required of Tenant by the terms of this Lease. The provisions of this Article shall survive the termination of this Lease with respect to any claims or liability accruing prior to such termination.

11.INSURANCE.

11.1Tenant shall keep in force throughout the Term: (a) a Commercial General Liability insurance policy or policies to protect the Landlord Entities against any liability to the public or to any invitee of Tenant or a Landlord Entity incidental to the use of or resulting from any accident occurring in or upon the Premises with a limit of not less than $1,000,000 per occurrence and not less than $2,000,000 in the annual aggregate, or such larger amount as Landlord may prudently require from time to time, covering bodily injury and property damage liability and $1,000,000 products/completed operations aggregate; (b) Business Auto Liability covering owned, non-owned and hired vehicles with a limit of not less than $1,000,000 per accident; (c) Worker’s Compensation Insurance with limits as required by statute and Employers Liability with limits of $500,000 each accident, $500,000 disease policy limit, $500,000 disease—each employee; (d) All Risk or Special Form coverage protecting Tenant against loss of or damage to Tenant’s alterations, additions, improvements, carpeting, floor coverings, panelings, decorations, fixtures, inventory and other business personal property situated in or about the Premises to the full replacement value of the property so insured; and, (e) Business Interruption Insurance with limit of liability representing loss of at least approximately six (6) months of income.

11.2The aforesaid policies shall (a) be provided at Tenant’s expense; (b) name the Landlord Entities as additional insureds (General Liability) and loss payee (Property—Special Form); (c) be issued by an insurance company with a minimum Best’s rating of “A-:VII” during the Term; and (d) provide that said insurance shall not be canceled unless thirty (30) days prior written notice (ten days for non-payment of premium) shall have been given to Landlord; a certificate of Liability insurance on ACORD Form 25 and a certificate of Property insurance on ACORD Form 28 shall be delivered to Landlord by Tenant upon the Commencement Date and at least thirty (30) days prior to each renewal of said insurance.

11.3Whenever Tenant shall undertake any alterations, additions or improvements in, to or about the Premises (“Work”) the aforesaid insurance protection must extend to and include injuries to persons and damage to property arising in connection with such Work, without limitation including liability under any applicable structural work act, and such other insurance as Landlord shall reasonably require; and the policies of or certificates evidencing such insurance must be delivered to Landlord prior to the commencement of any such Work.

11.4Landlord shall keep in force throughout the Term Commercial General Liability Insurance and All Risk or Special Form coverage insuring the Landlord and the Building, in such amounts and with such deductibles as Landlord determines from time to time in accordance with sound and reasonable risk management principles. The cost of all such insurance is included in Expenses.

12.WAIVER OF SUBROGATION. So long as their respective insurers so permit, Tenant and Landlord hereby mutually waive their respective rights of recovery against each other for any loss insured (or required to be insured pursuant to this Lease) by fire, extended coverage, All Risks or other insurance now or hereafter existing for the benefit of the respective party but only to the extent of the net insurance proceeds payable under such policies. Each party shall obtain any special endorsements required by their insurer to evidence compliance with the aforementioned waiver.

13.SERVICES AND UTILITIES. Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, sprinkler system charges and other utilities and services used on or from the Premises, together with any taxes, penalties, and surcharges or the like pertaining thereto and any maintenance charges for utilities. Tenant shall furnish all electric light bulbs, tubes and ballasts, battery packs for emergency lighting and fire extinguishers. If any such services are not separately metered to Tenant, Tenant shall pay such proportion of all actual charges jointly metered with other premises as reasonably determined by Landlord without any mark-up or other increase by Landlord. Any such charges paid by Landlord and assessed against Tenant shall be immediately payable to Landlord on demand and shall be additional rent hereunder. Tenant will not, without the written consent of Landlord, contract with a utility provider to service the Premises with any utility, including, but not limited to, telecommunications, electricity, water, sewer or gas, which is not previously providing such

10/31/01 CA MTIN	13
Revised 9/09/05
586764.v1: 028481/048

service to other tenants in the Building. Landlord shall in no event be liable for any interruption or failure of utility services on or to the Premises. Tenant shall have access to the Building for Tenant and its employees twenty-four (24) hours per day, seven (7) days per week, subject to the terms of this Lease and such security or monitoring systems as Landlord may reasonably impose, including, without limitation, sign-in procedures and/or presentation of identification cards to the extent applicable.

14.HOLDING OVER. Tenant shall pay Landlord for each day Tenant retains possession of the Premises or part of them after termination of this Lease by lapse of time or otherwise at the rate (“Holdover Rate”) which shall be One Hundred Fifty Percent (150%) of the amount of the Annual Rent for the last period prior to the date of such termination plus all Tenant’s Proportionate Share of Expenses and Taxes under Article 4 prorated on a daily basis. If Landlord gives notice to Tenant of Landlord’s election to such effect, such holding over shall constitute renewal of this Lease for a period from month to month or one (1) year, whichever shall be specified in such notice, in either case at the Holdover Rate, but if the Landlord does not so elect, no such renewal shall result notwithstanding acceptance by Landlord of any sums due hereunder after such termination; and instead, a tenancy at sufferance at the Holdover Rate shall be deemed to have been created. In addition to the payment of the amounts provided above, if Tenant fails to vacate the Premises within fifteen (15) days after Landlord notifies Tenant that Landlord has entered into a lease for the Premises or has received a bona fide offer to lease the Premises, and that Landlord will be unable to deliver possession, or perform improvements, due to Tenant’s holdover, then Tenant shall be liable to Landlord for all damages that Landlord suffers from the holdover. In any event, no provision of this Article 4 shall be deemed to waive Landlord’s right of reentry or any other right under this Lease or at law.

15.SUBORDINATION. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, this Lease shall be subject and subordinate at all times to ground or underlying leases and to the lien of any mortgages or deeds of trust now or hereafter placed on, against or affecting the Building, Landlord’s interest or estate in the Building, or any ground or underlying lease; provided, however, that if the lessor, mortgagee, trustee, or holder of any such mortgage or deed of trust elects to have Tenant’s interest in this Lease be superior to any such instrument, then, by notice to Tenant, this Lease shall be deemed superior, whether this Lease was executed before or after said instrument. Notwithstanding the foregoing, Tenant covenants and agrees to execute and deliver within ten (10) business days of Landlord’s request such further commercially reasonable instruments evidencing such subordination or superiority of this Lease as may be required by Landlord. Notwithstanding the foregoing, upon written request by Tenant, Landlord will use reasonable efforts to obtain a non-disturbance, subordination and attornment agreement from Landlord’s then current mortgagee on such mortgagee’s then current standard form of agreement. “Reasonable efforts” of Landlord shall not require Landlord to incur any cost, expense or liability to obtain such agreement, it being agreed that Tenant shall be responsible for any fee or review costs charged by the mortgagee. Upon request of Landlord, Tenant will execute the mortgagee’s form of non-disturbance, subordination and attornment agreement and return the same to Landlord for execution by the mortgagee. Landlord’s failure to obtain a non-disturbance, subordination and attornment agreement for Tenant shall have no effect on the rights, obligations and liabilities of Landlord and Tenant or be considered to be a default by Landlord hereunder.

Notwithstanding the foregoing in this Article to the contrary, as a condition precedent to the future subordination of this Lease to a future mortgage, deed of trust or ground or underlying lessor, Landlord shall be required to provide Tenant with a non-disturbance, subordination, and attornment agreement in favor of Tenant from any mortgagee, beneficiary or ground or underlying lessor who comes into existence after the Commencement Date. Such non-disturbance, subordination, and attornment agreement in favor of Tenant shall provide that, so long as Tenant is paying the rent due under the Lease and is not otherwise in default under the Lease beyond any applicable cure period, its right to possession and the other terms of the Lease shall remain in full force and effect. Such non-disturbance, subordination, and attornment agreement may include other commercially reasonable provisions in favor of the mortgagee, beneficiary or ground or underlying lessor, including, without limitation, additional time on behalf of the mortgagee, beneficiary or ground or underlying lessor to cure defaults of the Landlord and provide that (a) neither mortgagee, beneficiary or ground or underlying lessor nor any successor-in-interest thereto shall be bound by (i) any payment of the monthly Installment of Rent, additional rent, or other sum due under this Lease for more than 1 month in advance or (ii) any amendment or modification of the Lease made without the express written consent of mortgagee, beneficiary or ground or underlying lessor or any successor-in-interest thereto; (b) neither mortgagee, beneficiary, ground or underlying lessor nor any successor-in-interest thereto will be liable for (i) any act or omission or warranties of any prior landlord (including Landlord), (ii) the breach of any warranties or obligations relating to construction of improvements on the property upon which the Building is located or any tenant finish work performed or to have been performed by any prior landlord (including Landlord), or (iii) the return of any security deposit, except to the extent such deposits have been received by mortgagee, beneficiary or ground or underlying lessor, as the case may be; and (c) neither mortgagee, beneficiary or ground or underlying lessor nor any successor-in-interest thereto shall be subject to any offsets or defenses which Tenant might have against any prior landlord (including Landlord).

10/31/01 CA MTIN	14
Revised 9/09/05
586764.v1: 028481/048

Within thirty (30) days following Tenant’s execution of this Lease, Tenant shall execute a non-disturbance, subordination and attornment agreement with the current lender with an interest encumbering the Building (“Lender”) which agreement shall be substantially in accordance with Exhibit G attached hereto (the “SNDA”) and return the same to Landlord for execution by Lender. Landlord shall provide to Tenant, or cause Lender to provide to Tenant, a fully executed SNDA within sixty (60) days following the date Tenant delivers to Landlord the SNDA executed by Tenant. In the event that Tenant desires to modify or otherwise negotiate the form of SNDA, Tenant shall be liable for all costs and expenses associated therewith.

16.RULES AND REGULATIONS. Tenant shall faithfully observe and comply with all the rules and regulations as set forth in Exhibit D to this Lease and all reasonable and non-discriminatory modifications of and additions to them from time to time put into effect by Landlord. The rules and regulations shall be generally applicable, and generally applied in a non-discriminatory manner to all tenants of the Building; however Landlord shall not be responsible to Tenant for the non-performance by any other tenant or occupant of the Building of any such rules and regulations.

17.REENTRY BY LANDLORD.

17.1Landlord reserves and shall at all times have the right to re-enter the Premises to inspect the same, to supply janitor service and any other service to be provided by Landlord to Tenant under this Lease, to show said Premises to prospective purchasers, mortgagees or tenants, and to alter, improve or repair the Premises and any portion of the Building, without abatement of rent, and may for that purpose erect, use and maintain scaffolding, pipes, conduits and other necessary structures and open any wall, ceiling or floor in and through the Building and Premises where reasonably required by the character of the work to be performed, provided entrance to the Premises shall not be blocked thereby, and further provided that the business of Tenant shall not be interfered with unreasonably. Landlord agrees that except in the event (a) Tenant is in monetary or material non-monetary default beyond any applicable notice and cure periods under the Lease, which may result in a termination of the Lease, (b) Landlord and Tenant are negotiating for or have agreed to an early termination of the Lease, or (c) Landlord and Tenant otherwise mutually agree to the contrary, Landlord shall not show the Premises to prospective tenants except during the last nine (9) months of the Term of the Lease. Notwithstanding the foregoing, except (i) to the extent requested by Tenant, (ii) in connection with scheduled maintenance programs, and/or (iii) in the event of an emergency, Landlord shall provide to Tenant reasonable prior notice (either written or oral) before Landlord enters the Premises to perform any repairs therein and shall use reasonable efforts to exercise such entry rights accompanied by a representative of Tenant, provided that such a representative is made available to Landlord at the time that Landlord requires entry to the Premises. Landlord shall have the right at any time to change the arrangement and/or locations of entrances, or passageways, doors and doorways, and corridors, windows, elevators, stairs, toilets or other public parts of the Building and to change the name, number or designation by which the Building is commonly known; provided, however, such modifications shall not interfere with Tenant’s use of or access to the Premises. In the event that Landlord damages any portion of any wall or wall covering, ceiling, or floor or floor covering within the Premises, Landlord shall repair or replace the damaged portion to match the original as nearly as commercially reasonable but shall not be required to repair or replace more than the portion actually damaged. Subject to the last sentence of this Section 17.1, Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned by any action of Landlord authorized by this Article 17. Notwithstanding the foregoing, except in emergency situations, as determined by Landlord, Landlord shall exercise reasonable efforts to perform any entry into the Premises in a manner that is reasonably designed to minimize interference with the operation of Tenant’s business in the Premises.

17.2For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in the Premises, excluding Tenant’s vaults and safes or special security areas (designated in advance), and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency to obtain entry to any portion of the Premises. As to any portion to which access cannot be had by means of a key or keys in Landlord’s possession, Landlord is authorized to gain access by such means as Landlord shall elect and the cost of repairing any damage occurring in doing so shall be borne by Tenant and paid to Landlord within five (5) days of Landlord’s demand.

18.DEFAULT.

18.1Except as otherwise provided in Article 20, the following events shall be deemed to be Events of Default under this Lease:

18.1.1Tenant shall fail to pay when due any sum of money becoming due to be paid to Landlord under this Lease, whether such sum be any installment of the rent reserved by this Lease, any other amount treated as additional

10/31/01 CA MTIN	15
Revised 9/09/05
586764.v1: 028481/048

rent under this Lease, or any other payment or reimbursement to Landlord required by this Lease, whether or not treated as additional rent under this Lease, and such failure shall continue for a period of five (5) days after written notice that such payment was not made when due, but if any such notice shall be given, for the twelve (12) month period commencing with the date of such notice, the failure to pay within five (5) days after due any additional sum of money becoming due to be paid to Landlord under this Lease during such period shall be an Event of Default, without notice.

18.1.2Tenant shall fail to comply with any term, provision or covenant of this Lease which is not provided for in another Section of this Article and shall not cure such failure within thirty (30) days (forthwith, if the failure involves a hazardous condition) after written notice of such failure to Tenant provided, however, that such failure shall not be an event of default if such failure could not reasonably be cured during such thirty (30) day period, Tenant has commenced the cure within such thirty (30) day period and thereafter is diligently pursuing such cure to completion, but the total aggregate cure period shall not exceed ninety (90) days.

18.1.3Tenant shall fail to vacate the Premises immediately upon termination of this Lease, by lapse of time or otherwise, or upon termination of Tenant’s right to possession only.

18.1.4Tenant shall become insolvent, admit in writing its inability to pay its debts generally as they become due, file a petition in bankruptcy or a petition to take advantage of any insolvency statute, make an assignment for the benefit of creditors, make a transfer in fraud of creditors, apply for or consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable law or statute of the United States or any state thereof.

18.1.5A court of competent jurisdiction shall enter an order, judgment or decree adjudicating Tenant bankrupt, or appointing a receiver of Tenant, or of the whole or any substantial part of its property, without the consent of Tenant, or approving a petition filed against Tenant seeking reorganization or arrangement of Tenant under the bankruptcy laws of the United States, as now in effect or hereafter amended, or any state thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of entry thereof.

19.REMEDIES.

19.1Upon the occurrence of any Event or Events of Default under this Lease, whether enumerated in Article 18 or not, Landlord shall have the option to pursue any one or more of the following remedies without any notice (except as expressly prescribed herein) or demand whatsoever (and without limiting the generality of the foregoing, Tenant hereby specifically waives notice and demand for payment of rent or other obligations and waives any and all other notices or demand requirements imposed by applicable law):

19.1.1Terminate this Lease and Tenant’s right to possession of the Premises and recover from Tenant an award of damages equal to the sum of the following:

19.1.1.1The Worth at the Time of Award of the unpaid rent which had been earned at the time of termination;

19.1.1.2The Worth at the Time of Award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rent loss that Tenant affirmatively proves could have been reasonably avoided;

19.1.1.3The 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 rent loss that Tenant affirmatively proves could be reasonably avoided;

19.1.1.4Any other amount necessary to compensate Landlord for all the detriment either 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; and

19.1.1.5All such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time under applicable law.

10/31/01 CA MTIN	16
Revised 9/09/05
586764.v1: 028481/048

The “Worth at the Time of Award” of the amounts referred to in parts 19.1.1.1 and 19.1.1.2 above, shall be computed by allowing interest at the lesser of a per annum rate equal to: (i) the greatest per annum rate of interest permitted from time to time under applicable law, or (ii) the Prime Rate plus 5%. For purposes hereof, the “Prime Rate” shall be the per annum interest rate publicly announced as its prime or base rate by a federally insured bank selected by Landlord in the State of California. The “Worth at the Time of Award” of the amount referred to in part 19.1.1.3, above, shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1%;

19.1.2Employ the remedy described in California Civil Code § 1951.4 (Landlord may continue this Lease in effect after Tenant’s breach and abandonment and recover rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations); or

19.1.3Notwithstanding Landlord’s exercise of the remedy described in California Civil Code § 1951.4 in respect of an Event or Events of Default, at such time thereafter as Landlord may elect in writing, to terminate this Lease and Tenant’s right to possession of the Premises and recover an award of damages as provided above in Section 19.1.1.

19.2The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such rent. No waiver by Landlord of any breach hereof shall be effective unless such waiver is in writing and signed by Landlord.

19.3TENANT HEREBY WAIVES ANY AND ALL RIGHTS CONFERRED BY SECTION 3275 OF THE CIVIL CODE OF CALIFORNIA AND BY SECTIONS 1174 (c) AND 1179 OF THE CODE OF CIVIL PROCEDURE OF CALIFORNIA AND ANY AND ALL OTHER REGULATIONS AND RULES OF LAW FROM TIME TO TIME IN EFFECT DURING THE TERM PROVIDING THAT TENANT SHALL HAVE ANY RIGHT TO REDEEM, REINSTATE OR RESTORE THIS LEASE FOLLOWING ITS TERMINATION BY REASON OF TENANT’S BREACH. LANDLORD AND TENANT EACH HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATING TO THIS LEASE.

19.4No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing by agreement, applicable law or in equity. In addition to other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by applicable law, to injunctive relief, or to a decree compelling performance of any of the covenants, agreements, conditions or provisions of this Lease, or to any other remedy allowed to Landlord at law or in equity. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an Event of Default shall not be deemed or construed to constitute a waiver of such Event of Default.

19.5This Article 19 shall be enforceable to the maximum extent such enforcement is not prohibited by applicable law, and the unenforceability of any portion thereof shall not thereby render unenforceable any other portion..

19.6If more than two (2) Events of Default occur during the Term or any renewal thereof, Tenant’s renewal options, expansion options, purchase options and rights of first offer and/or refusal, if any are provided for in this Lease, shall be null and void.

19.7If, on account of any breach or default by Tenant in Tenant’s obligations under the terms and conditions of this Lease, it shall become necessary or appropriate for Landlord to employ or consult with an attorney or collection agency concerning or to enforce or defend any of Landlord’s rights or remedies arising under this Lease or to collect any sums due from Tenant, Tenant agrees to pay all costs and fees so incurred by Landlord, including, without limitation, reasonable attorneys’ fees and costs. TENANT EXPRESSLY WAIVES ANY RIGHT TO: (A) TRIAL BY JURY; AND (B) SERVICE OF ANY NOTICE REQUIRED BY ANY PRESENT OR FUTURE LAW OR ORDINANCE APPLICABLE TO LANDLORDS OR TENANTS BUT NOT REQUIRED BY THE TERMS OF THIS LEASE. If either party participates in an action against the other party arising out of or in connection with this Lease or any covenants or obligations hereunder, then the prevailing party shall be entitled to have or recover from the other party, upon demand, all reasonable attorneys’ fees, costs and expenses, including, without limitation, court costs, filing fees, recording costs, and all other costs and expenses incurred in connection therewith.

19.8Upon the occurrence of an Event of Default, Landlord may (but shall not be obligated to) cure such default at Tenant’s sole expense. Without limiting the generality of the foregoing, Landlord may, at Landlord’s option, enter into

10/31/01 CA MTIN	17
Revised 9/09/05
586764.v1: 028481/048

and upon the Premises if Landlord determines in its reasonable discretion that Tenant is not acting within a commercially reasonable time to maintain, repair or replace anything for which Tenant is responsible under this Lease or to otherwise effect compliance with its obligations under this Lease and correct the same, without being deemed in any manner guilty of trespass, eviction or forcible entry and detainer and without incurring any liability for any damage or interruption of Tenant’s business resulting therefrom and Tenant agrees to reimburse Landlord within five (5) days of Landlord’s demand as additional rent, for any expenses which Landlord may incur in thus effecting compliance with Tenant’s obligations under this Lease, plus interest from the date of expenditure by Landlord at the Wall Street Journal prime rate.

20.TENANT’S BANKRUPTCY OR INSOLVENCY.

20.1If at any time and for so long as Tenant shall be subjected to the provisions of the United States Bankruptcy Code or other law of the United States or any state thereof for the protection of debtors as in effect at such time (each a “Debtor’s Law”):

20.1.1Tenant, Tenant as debtor-in-possession, and any trustee or receiver of Tenant’s assets (each a “Tenant’s Representative”) shall have no greater right to assume or assign this Lease or any interest in this Lease, or to sublease any of the Premises than accorded to Tenant in Article 9, except to the extent Landlord shall be required to permit such assumption, assignment or sublease by the provisions of such Debtor’s Law. Without limitation of the generality of the foregoing, any right of any Tenant’s Representative to assume or assign this Lease or to sublease any of the Premises shall be subject to the conditions that:

20.1.1.1Such Debtor’s Law shall provide to Tenant’s Representative a right of assumption of this Lease which Tenant’s Representative shall have timely exercised and Tenant’s Representative shall have fully cured any default of Tenant under this Lease.

20.1.1.2Tenant’s Representative or the proposed assignee, as the case shall be, shall have deposited with Landlord as security for the timely payment of rent an amount equal to the larger of: (a) three (3) months’ rent and other monetary charges accruing under this Lease; and (b) any sum specified in Article 5; and shall have provided Landlord with adequate other assurance of the future performance of the obligations of the Tenant under this Lease. Without limitation, such assurances shall include, at least, in the case of assumption of this Lease, demonstration to the satisfaction of the Landlord that Tenant’s Representative has and will continue to have sufficient unencumbered assets after the payment of all secured obligations and administrative expenses to assure Landlord that Tenant’s Representative will have sufficient funds to fulfill the obligations of Tenant under this Lease; and, in the case of assignment, submission of current financial statements of the proposed assignee, audited by an independent certified public accountant reasonably acceptable to Landlord and showing a net worth and working capital in amounts determined by Landlord to be sufficient to assure the future performance by such assignee of all of the Tenant’s obligations under this Lease.

20.1.1.3The assumption or any contemplated assignment of this Lease or subleasing any part of the Premises, as shall be the case, will not breach any provision in any other lease, mortgage, financing agreement or other agreement by which Landlord is bound.

20.1.1.4Landlord shall have, or would have had absent the Debtor’s Law, no right under Article 9 to refuse consent to the proposed assignment or sublease by reason of the identity or nature of the proposed assignee or sublessee or the proposed use of the Premises concerned.

21.QUIET ENJOYMENT. Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant, while paying the rental and performing its other covenants and agreements contained in this Lease, shall peaceably and quietly have, hold and enjoy the Premises for the Term without hindrance or molestation from Landlord, or any person validly claiming by or through Landlord, subject to the terms and provisions of this Lease. Landlord shall not be liable for any interference or disturbance by other tenants or third persons not validly claiming by or through Landlord, nor shall Tenant be released from any of the obligations of this Lease because of such interference or disturbance.

22.CASUALTY.

22.1In the event the Premises or the Building are damaged by fire or other cause and in Landlord’s reasonable estimation such damage can be materially restored within two hundred thirty (230) days following the date of the casualty, Landlord shall forthwith repair the same and this Lease shall remain in full force and effect, except that Tenant shall be entitled to a proportionate abatement in rent from the date of such damage. Such abatement of rent shall be made pro rata in

10/31/01 CA MTIN	18
Revised 9/09/05
586764.v1: 028481/048

accordance with the extent to which the damage and the making of such repairs shall interfere with the use and occupancy by Tenant of the Premises from time to time. Within forty-five (45) days from the date of such damage, Landlord shall notify Tenant, in writing, of Landlord’s reasonable estimation of the length of time within which material restoration can be made, and Landlord’s determination shall be binding on Tenant. For purposes of this Lease, the Building or Premises shall be deemed “materially restored” if they are in such condition as would not prevent or materially interfere with Tenant’s use of the Premises for the purpose for which it was being used immediately before such damage.

22.2If such repairs cannot, in Landlord’s reasonable estimation, be made within two hundred thirty (230) days following the date of the casualty, Landlord and Tenant shall each have the option of giving the other, at any time within sixty (60) days after Landlord’s notice of estimated restoration time, notice terminating this Lease as of the date of such damage. In the event of the giving of such notice, this Lease shall expire and all interest of the Tenant in the Premises shall terminate as of the date of such damage as if such date had been originally fixed in this Lease for the expiration of the Term. In the event that neither Landlord nor Tenant exercises its option to terminate this Lease, then Landlord shall repair or restore such damage, this Lease continuing in full force and effect, and the rent hereunder shall be proportionately abated as provided in Section 22.1.

22.3Landlord shall not be required to repair or replace any damage or loss by or from fire or other cause to any panelings, decorations, partitions, additions, railings, ceilings, floor coverings, office fixtures or any other property or improvements installed on the Premises by, or belonging to, Tenant. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or Premises shall be for the sole benefit of the party carrying such insurance and under its sole control.

22.4In the event that Landlord should fail to complete such repairs and material restoration within sixty (60) days after the date estimated by Landlord therefor as extended by this Section 22.4, Tenant may at its option and as its sole remedy terminate this Lease by delivering written notice to Landlord, within fifteen (15) days after the expiration of said period of time, whereupon this Lease shall end on the date of such notice or such later date fixed in such notice as if the date of such notice was the date originally fixed in this Lease for the expiration of the Term; provided, however, that if construction is delayed because of changes, deletions or additions in construction requested by Tenant, strikes, lockouts, casualties, Acts of God, war, material or labor shortages, government regulation or control or other causes beyond the reasonable control of Landlord, the period for restoration, repair or rebuilding shall be extended for the reasonable amount of time Landlord is so delayed.

22.5Notwithstanding anything to the contrary contained in this Article: (a) Landlord shall not have any obligation whatsoever to repair, reconstruct, or restore the Premises when the damages resulting from any casualty covered by the provisions of this Article 22 occur during the last twelve (12) months of the Term or any extension thereof, but if Landlord determines not to repair such damages Landlord shall notify Tenant and if such damages shall render any material portion of the Premises untenantable Tenant shall have the right to terminate this Lease by notice to Landlord within fifteen (15) days after receipt of Landlord’s notice; and (b) in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises or Building requires that any insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon this Lease shall end on the date of such damage as if the date of such damage were the date originally fixed in this Lease for the expiration of the Term. Notwithstanding the foregoing, Landlord will not be entitled to terminate this Lease solely because the casualty occurs during the last twelve (12) months of the then current Term if Tenant has an exercisable right to renew or extend the Term pursuant to Article 39 of this Lease, and Tenant, within ten (10) days after receipt of Landlord’s notice of termination, validly exercises such right. The foregoing shall not prohibit Landlord from exercising its right to terminate for any of the other reasons set forth herein. In addition to Landlord’s and Tenant’s right to terminate as provided herein, Tenant shall have the right to terminate this Lease if: (i) a material portion of the Premises is rendered untenantable by fire or other casualty and Landlord’s completion estimate described in Section 22.1 provides that such damage cannot reasonably be repaired (as determined by Landlord) within sixty (60) days after Landlord’s receipt of all required permits to restore the Premises; (ii) there is less than one (1) year of the Term remaining on the date of such casualty; (iii) the casualty was not caused by the negligence or willful misconduct of Tenant or any Tenant Entities; and (iii) Tenant provides Landlord with written notice of its intent to terminate within thirty (30) days after the date of Landlord’s completion estimate.

22.6In the event of any damage or destruction to the Building or Premises by any peril covered by the provisions of this Article 22, it shall be Tenant’s responsibility to properly secure the Premises and upon notice from Landlord to remove forthwith, at its sole cost and expense, such portion of all of the property belonging to Tenant or its licensees from such portion or all of the Building or Premises as Landlord shall request.

10/31/01 CA MTIN	19
Revised 9/09/05
586764.v1: 028481/048

22.7Tenant hereby waives any and all rights under and benefits of Sections 1932(2) and 1933(4) of the California Civil Code, or any similar or successor Regulations or other laws now or hereinafter in effect.

23.EMINENT DOMAIN. If all or any substantial part of the Premises shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain, or conveyance in lieu of such appropriation, either party to this Lease shall have the right, at its option, of giving the other, at any time within thirty (30) days after such taking, notice terminating this Lease, except that Tenant may only terminate this Lease by reason of taking or appropriation, if such taking or appropriation shall be so substantial as to materially interfere with Tenant’s use and occupancy of the Premises. If neither party to this Lease shall so elect to terminate this Lease, the Monthly Installments of Rent and Tenant’s Proportionate Share of Expenses and Taxes thereafter to be paid shall be proportionately adjusted on a fair and equitable basis under the circumstances. Tenant’s obligation to pay Monthly Installment of Rent and Tenant’s Proportionate Share of Expenses and Taxes will abate on a proportionate basis with respect to that portion of the Premises remaining after the taking or appropriation that Tenant is unable to use during Landlord’s restoration for the period of time that Tenant is unable to use such portion of the Premises. In addition to the rights of Landlord above, if any substantial part of the Building shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof, and regardless of whether the Premises or any part thereof are so taken or appropriated, Landlord shall have the right, at its sole option, to terminate this Lease. Landlord shall be entitled to any and all income, rent, award, or any interest whatsoever in or upon any such sum, which may be paid or made in connection with any such public or quasi-public use or purpose, and Tenant hereby assigns to Landlord any interest it may have in or claim to all or any part of such sums, other than any separate award which may be made with respect to Tenant’s trade fixtures, loss of profits and goodwill, and moving expenses; Tenant shall make no claim for the value of any unexpired Term. Tenant hereby waives any and all rights under and benefits of Section 1265.130 of the California Code of Civil Procedure, or any similar or successor Regulations or other laws now or hereinafter in effect.

24.SALE BY LANDLORD. In event of a sale or conveyance by Landlord of the Building, the same shall operate to release Landlord from any future liability upon any of the covenants or conditions, expressed or implied, contained in this Lease in favor of Tenant, and in such event Tenant agrees to look solely to the responsibility of the successor in interest of Landlord in and to this Lease, provided that, any successor pursuant to a voluntary, third-party transfer (but not as part of an involuntary transfer resulting from a foreclosure or deed in lieu thereof) shall have assumed Landlord’s obligations under this Lease either by contractual obligation, assumption agreement or by operation of law, and further provided that Landlord and its successors, as the case may be, shall remain liable after their respective periods of ownership with respect to any sums due in connection with a breach or default by such party that arose during such period of ownership by such party. Except as set forth in this Article 24, this Lease shall not be affected by any such sale and Tenant agrees to attorn to the purchaser or assignee. If any security has been given by Tenant to secure the faithful performance of any of the covenants of this Lease, Landlord may transfer or deliver said security, as such, to Landlord’s successor in interest and thereupon Landlord shall be discharged from any further liability with regard to said security.

25.ESTOPPEL CERTIFICATES. Within ten (10) business days following any written request which Landlord may make from time to time, Tenant shall execute and deliver to Landlord or mortgagee or prospective mortgagee a sworn statement certifying: (a) the date of commencement of this Lease; (b) the fact that this Lease is unmodified and in full force and effect (or, if there have been modifications to this Lease, that this Lease is in full force and effect, as modified, and stating the date and nature of such modifications); (c) the date to which the rent and other sums payable under this Lease have been paid; (d) the fact that to Tenant’s actual knowledge, after due investigation, there are no current defaults under this Lease by either Landlord or Tenant except as specified in Tenant’s statement; and (e) such other factual matters as may be reasonably requested by Landlord. Landlord and Tenant intend that any statement delivered pursuant to this Article 25 may be relied upon by any mortgagee, beneficiary or purchaser, and Tenant shall be liable for all loss, cost or expense resulting from the failure of any sale or funding of any loan caused by any material misstatement contained in such estoppel certificate. Tenant irrevocably agrees that if Tenant fails to execute and deliver such certificate within such ten (10) business day period Landlord or Landlord’s beneficiary or agent may execute and deliver such certificate on Tenant’s behalf, and that such certificate shall be fully binding on Tenant.

26.SURRENDER OF PREMISES.

26.1Tenant shall arrange to meet Landlord for two (2) joint inspections of the Premises, the first to occur at least thirty (30) days (but no more than sixty (60) days) before the last day of the Term, and the second to occur not later than forty-eight (48) hours after Tenant has vacated the Premises. In the event of Tenant’s failure to arrange such joint inspections and/or participate in either such inspection, Landlord’s inspection at or after Tenant’s vacating the Premises shall be conclusively deemed correct for purposes of determining Tenant’s responsibility for repairs and restoration.

10/31/01 CA MTIN	20
Revised 9/09/05
586764.v1: 028481/048

26.2All alterations, additions, and improvements in, on, or to the Premises made or installed by or for Tenant, including, without limitation, carpeting (collectively, “Alterations”), shall be and remain the property of Tenant during the Term. Upon the expiration or sooner termination of the Term, all Alterations (excluding trade fixtures) shall become a part of the realty and shall belong to Landlord without compensation, and title shall pass to Landlord under this Lease as by a bill of sale. At the end of the Term or any renewal of the Term or other sooner termination of this Lease, Tenant will peaceably deliver up to Landlord possession of the Premises, together with all Alterations by whomsoever made, in the same conditions received or first installed, broom clean and free of all debris, excepting only ordinary wear and tear and damage by fire or other casualty and condemnation. Notwithstanding the foregoing, subject to Section 6.4, if Landlord elects by notice given to Tenant at least twenty (20) days prior to expiration of the Term, Tenant shall, at Tenant’s sole cost, remove any Alterations, including carpeting, so designated by Landlord’s notice, and repair any damage caused by such removal; provided, however, that Tenant shall not be required to remove any alterations or improvements made to the Premises under the Primary Lease nor shall Tenant be required to remove the Sublease Alterations as set forth in that certain Consent to Sublease dated July 11, 2005 by and among Landlord, as landlord, Sublessor as sublandlord and Tenant as subtenant. Tenant must, at Tenant’s sole cost, remove upon termination of this Lease, any and all of Tenant’s furniture, furnishings, equipment, movable partitions of less than full height from floor to ceiling and other trade fixtures and personal property, as well as all data/telecommunications cabling and wiring installed by or on behalf of Tenant, whether inside walls, under any raised floor or above any ceiling (collectively, “Personalty”). Personalty not so removed shall be deemed abandoned by the Tenant and title to the same shall thereupon pass to Landlord under this Lease as by a bill of sale, but Tenant shall remain responsible for the cost of removal and disposal of such Personalty, as well as any damage caused by such removal. If Tenant fails to remove any Alterations which Tenant is required to be remove pursuant to terms of this Lease and/or any Personalty from the Premises on or before the Termination Date, Landlord may remove and dispose of such Alterations and/or Personalty, as the case may be, and repair the Premises as aforesaid, and Tenant shall pay to Landlord upon demand, as additional rent hereunder, the cost of such removal and repair.

26.3All obligations of Tenant under this Lease not fully performed as of the expiration or earlier termination of the Term shall survive the expiration or earlier termination of the Term. Upon the expiration or earlier termination of the Term, Tenant shall pay to Landlord the amount, as estimated by Landlord, necessary to repair and restore the Premises as provided in this Lease and/or to discharge Tenant’s obligation for unpaid amounts due or to become due to Landlord. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant, with Tenant being liable for any additional costs upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied. Any otherwise unused Security Deposit shall be credited against the amount payable by Tenant under this Lease.

27.NOTICES. Any notice or document required or permitted to be delivered under this Lease shall be addressed to the intended recipient, by fully prepaid registered or certified United States Mail return receipt requested, or by reputable independent contract delivery service furnishing a written record of attempted or actual delivery, and shall be deemed to be delivered when tendered for delivery to the addressee at its address set forth on the Reference Pages, or at such other address as it has then last specified by written notice delivered in accordance with this Article 27, or if to Tenant at either its aforesaid address or its last known registered office or home of a general partner or individual owner, whether or not actually accepted or received by the addressee. Any such notice or document may also be personally delivered if a receipt is signed by and received from, the individual, if any, named in Tenant’s Notice Address.

28.TAXES PAYABLE BY TENANT. In addition to rent and other charges to be paid by Tenant under this Lease, Tenant shall reimburse to Landlord, upon demand, any and all taxes payable by Landlord (other than net income taxes) whether or not now customary or within the contemplation of the parties to this Lease: (a) upon, allocable to, or measured by or on the gross or net rent payable under this Lease, including without limitation any gross income tax or excise tax levied by the State, any political subdivision thereof, or the Federal Government with respect to the receipt of such rent (except that any such tax in effect on the Commencement Date shall be included in Taxes); (b) upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy of the Premises or any portion thereof, including any sales, use or service tax imposed as a result thereof; (c) upon or measured by the Tenant’s gross receipts or payroll or the value of Tenant’s equipment, furniture, fixtures and other personal property of Tenant or leasehold improvements, alterations or additions located in the Premises; or (d) upon this transaction or any document to which Tenant is a party creating or transferring any interest of Tenant in this Lease or the Premises. In addition to the foregoing, Tenant agrees to pay, before delinquency, any and all taxes levied or assessed against Tenant and which become payable during the term hereof upon Tenant’s equipment, furniture, fixtures and other personal property of Tenant located in the Premises.

29.RELOCATION OF TENANT. [Intentionally Omitted]

10/31/01 CA MTIN	21
Revised 9/09/05
586764.v1: 028481/048

30.DEFINED TERMS AND HEADINGS. The Article headings shown in this Lease are for convenience of reference and shall in no way define, increase, limit or describe the scope or intent of any provision of this Lease. Any indemnification or insurance of Landlord shall apply to and inure to the benefit of all the following “Landlord Entities”, being Landlord, Landlord’s investment manager, and the trustees, boards of directors, officers, general partners, beneficiaries, stockholders, employees and agents of each of them. Any option granted to Landlord shall also include or be exercisable by Landlord’s trustee, beneficiary, agents and employees, as the case may be. In any case where this Lease is signed by more than one person, the obligations under this Lease shall be joint and several. The terms “Tenant” and “Landlord” or any pronoun used in place thereof shall indicate and include the masculine or feminine, the singular or plural number, individuals, firms or corporations, and their and each of their respective successors, executors, administrators and permitted assigns, according to the context hereof. The term “rentable area” shall mean the rentable area of the Premises or the Building as calculated by the Landlord on the basis of the plans and specifications of the Building including a proportionate share of any common areas. Tenant and Landlord hereby accept and agree to be bound by the figures for the rentable square footage of the Premises and Tenant’s Proportionate Share shown on the Reference Pages; however, Landlord may adjust either or both figures if there is manifest error, addition or subtraction to the Building or any business park or complex of which the Building is a part, or any remeasurement of the Building; provided however that Tenant’s Proportionate Share shall only be adjusted if any such remeasurement occurs as a result of a change in the common area that affects the load factor for the Building or if a new, formal version of the American National Standard Institute/BOMA Method of Floor Measurement for office space, as promulgated by the Building Owners and Managers Association (commonly known as BOMA ANSI-Z-65.1-1996) is issued and in any event, Landlord shall not make any such adjustment under this Lease during the initial Term of this Lease. In the event of any such remeasurement, the Monthly Installment of Rent and Tenant’s Proportionate Share shall in no event be increased during the initial Term of this Lease solely as a result of any such remeasurement. The term “Building” refers to the structure in which the Premises are located and the common areas (parking lots, sidewalks, landscaping, etc.) appurtenant thereto. If the Building is part of a larger complex of structures, the term “Building” may include the entire complex, where appropriate (such as shared Expenses or Taxes) and subject to Landlord’s reasonable discretion.

31.TENANT’S AUTHORITY.

31.1If Tenant signs as a corporation, partnership, trust or other legal entity each of the persons executing this Lease on behalf of Tenant represents and warrants that Tenant has been and is qualified to do business in the state in which the Building is located, that the entity has full right and authority to enter into this Lease, and that all persons signing on behalf of the entity were authorized to do so by appropriate actions. Tenant agrees to deliver to Landlord, simultaneously with the delivery of this Lease, a corporate resolution, proof of due authorization by partners, opinion of counsel or other appropriate documentation reasonably acceptable to Landlord evidencing the due authorization of Tenant to enter into this Lease.

31.2Tenant hereby represents and warrants that neither Tenant, nor any persons or entities holding any legal or beneficial interest whatsoever in Tenant, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: “List of Specially Designated Nationals and Blocked Persons.” If the foregoing representation is untrue at any time during the Term, an Event of Default will be deemed to have occurred, without the necessity of notice to Tenant.

32.FINANCIAL STATEMENTS AND CREDIT REPORTS. At Landlord’s request, Tenant shall deliver to Landlord a copy, certified by an officer of Tenant as being a true and correct copy, of Tenant’s most recent audited financial statement, or, if unaudited, certified by Tenant’s chief financial officer as being true, complete and correct in all material respects. Tenant hereby authorizes Landlord to obtain one or more credit reports on Tenant at any time, and shall execute such further authorizations as Landlord may reasonably require in order to obtain a credit report. Notwithstanding the foregoing, Landlord shall not request financial statements more than once in each consecutive one (1) year period during the Term unless (i) Tenant is in default, (ii) Landlord reasonably believes that there has been an adverse change in Tenant’s financial position since the last financial statement provided to Landlord, or (iii) requested (a) in connection with a proposed sale or transfer of the Building by Landlord, or (b) by an investor of Landlord, any Landlord Entity or any lender or proposed lender of Landlord or any Landlord Entity. Notwithstanding the requirements set forth above in this Article 32, so long as Tenant is a publicly traded company on an “over-the-counter” market or any recognized national or international securities exchange, the above described requirement that Tenant deliver to Landlord Tenant’s financial statements and related

10/31/01 CA MTIN	22
Revised 9/09/05
586764.v1: 028481/048

information shall not apply so long as Tenant’s current public annual report (in compliance with applicable securities laws) for such applicable year is available to Landlord in the public domain.

33.COMMISSIONS. Each of the parties represents and warrants to the other that it has not dealt with any broker or finder in connection with this Lease, except as described on the Reference Pages. Landlord shall pay a brokerage commission to Landlord’s Broker pursuant to a separate written agreement with Landlord’s Broker. Tenant shall indemnify and hold Landlord and Landlord Entities harmless from all claims of any other brokers claiming to have represented Tenant in connection with this Lease. Landlord agrees to indemnify and hold Tenant and Tenant Entities harmless from all claims of any other brokers claiming to have represented Landlord in connection with this Lease.

34.TIME AND APPLICABLE LAW. Time is of the essence of this Lease and all of its provisions. This Lease shall in all respects be governed by the laws of the state in which the Building is located.

35.SUCCESSORS AND ASSIGNS. Subject to the provisions of Article 9, the terms, covenants and conditions contained in this Lease shall be binding upon and inure to the benefit of the heirs, successors, executors, administrators and assigns of the parties to this Lease.

36.ENTIRE AGREEMENT. This Lease, together with its exhibits, contains all agreements of the parties to this Lease and supersedes any previous negotiations. There have been no representations made by the Landlord or any of its representatives or understandings made between the parties other than those set forth in this Lease and its exhibits. This Lease may not be modified except by a written instrument duly executed by the parties to this Lease.

37.EXAMINATION NOT OPTION. Submission of this Lease shall not be deemed to be a reservation of the Premises. Landlord shall not be bound by this Lease until it has received a copy of this Lease duly executed by Tenant and has delivered to Tenant a copy of this Lease duly executed by Landlord, and until such delivery Landlord reserves the right to exhibit and lease the Premises to other prospective tenants. Notwithstanding anything contained in this Lease to the contrary, Landlord may withhold delivery of possession of the Premises from Tenant until such time as Tenant has paid to Landlord any security deposit required by Article 5, the first month’s rent as set forth in Article 3 and any sum owed pursuant to this Lease.

38.RECORDATION. Tenant shall not record or register this Lease or a short form memorandum hereof without the prior written consent of Landlord, and then shall pay all charges and taxes incident such recording or registration.

39.OPTION TO RENEW. Provided this Lease is in full force and effect and Tenant is not in default beyond applicable notice and cure periods under any of the other terms and conditions of this Lease at the time of notification or commencement, Tenant shall have one (1) option to renew (the “Renewal Option”) this Lease for a term of three (3) years (the “Renewal Term”), for the portion of the Premises being leased by Tenant as of the date the Renewal Term is to commence, on the same terms and conditions set forth in this Lease, except as modified by the terms, covenants and conditions as set forth below:

39.1If Tenant elects to exercise the Renewal Option, then Tenant shall provide Landlord with written notice no earlier than the date which is three hundred sixty-five (365) days prior to the expiration of the Term of this Lease but no later than the date which is two hundred seventy (270) days prior to the expiration of the Term of this Lease. If Tenant fails to provide such notice, Tenant shall have no further or additional right to extend or renew the Term of this Lease.

39.2The Annual Rent and Monthly Installment of Rent in effect at the expiration of the Term of this Lease shall be increased to reflect the Prevailing Market (as defined in Section 39.9) rate. Landlord shall advise Tenant of the new Annual Rent and Monthly Installment of Rent for the Premises no later than thirty (30) days after receipt of Tenant’s written request therefor. Said request shall be made no earlier than thirty (30) days prior to the first date on which Tenant may exercise its Renewal Option under this Article 39. Said notification of the new Annual Rent and Monthly Installment of Rent may include a provision for its escalation to provide for a change in the Prevailing Market rate between the time of notification and the commencement of the Renewal Term. Notwithstanding anything to the contrary set forth herein, in no event shall the rate of the Annual Rent and Monthly Installment of Rent for the Renewal Term be less than the rate of the Annual Rent and Monthly Installment of Rent in the preceding period (the “Minimum Renewal Rental Rate”).

39.3If Tenant and Landlord are unable to agree on a mutually acceptable Annual Rent and Monthly Installment of Rent for the Renewal Term not later than sixty (60) days prior to the expiration of the Term, then Landlord and Tenant, within five (5) days after such date, shall each simultaneously submit to the other, in a sealed envelope, its good faith

10/31/01 CA MTIN	23
Revised 9/09/05
586764.v1: 028481/048

estimate of the Prevailing Market rate for the Premises during the Renewal Term (collectively referred to as the “Estimates”), subject to the terms of Section 39.5 below regarding the Minimum Renewal Rental Rate. If the higher of such Estimates is not more than one hundred five percent (105%) of the lower of such Estimates, then the Prevailing Market rate shall be the average of the two Estimates. If the Prevailing Market rate is not established by the exchange of Estimates, then, within seven (7) days after the exchange of Estimates, Landlord and Tenant shall each select an appraiser to determine which of the two Estimates most closely reflects the Prevailing Market rate for the Premises during the Renewal Term. Each appraiser so selected shall be certified as an MAI appraiser or as an ASA appraiser and shall have had at least five (5) years experience within the previous ten (10) years as a real estate appraiser working in Mountain View, California, with working knowledge of current rental rates and practices. For purposes hereof, an “MAI” appraiser means an individual who holds an MAI designation conferred by, and is an independent member of, the American Institute of Real Estate Appraisers (or its successor organization, or in the event there is no successor organization, the organization and designation most similar), and an “ASA” appraiser means an individual who holds the Senior Member designation conferred by, and is an independent member of, the American Society of Appraisers (or its successor organization, or, in the event there is no successor organization, the organization and designation most similar).

39.4Upon selection, Landlord’s and Tenant’s appraisers shall work together in good faith to agree upon which of the two Estimates most closely reflects the Prevailing Market rate for the Premises. The Estimate chosen by such appraisers shall be binding on both Landlord and Tenant, subject to the terms of Section 39.5 below regarding the Minimum Renewal Rental Rate. If either Landlord or Tenant fails to appoint an appraiser within the seven (7) day period referred to above, the appraiser appointed by the other party shall be the sole appraiser for the purposes hereof. If the two appraisers cannot agree upon which of the two Estimates most closely reflects the Prevailing Market rate within twenty (20) days after their appointment, then, within ten (10) days after the expiration of such twenty (20) day period, the two appraisers shall select a third appraiser meeting the aforementioned criteria. Once the third appraiser (i.e., the arbitrator) has been selected as provided for above, then, as soon thereafter as practicable but in any case within fourteen (14) days, the arbitrator shall make his or her determination of which of the two Estimates most closely reflects the Prevailing Market rate and such Estimate shall be binding on both Landlord and Tenant as the Prevailing Market rate for the Premises, subject to the terms of Section 39.5 below regarding the Minimum Renewal Rental Rate. If the arbitrator believes that expert advice would materially assist him or her, he or she may retain one or more qualified persons to provide such expert advice. The parties shall share equally in the costs of the arbitrator and of any experts retained by the arbitrator. Any fees of any appraiser, counsel or experts engaged directly by Landlord or Tenant, however, shall be borne by the party retaining such appraiser, counsel or expert.

39.5Intentionally omitted.

39.6If the Prevailing Market rate has not been determined by the commencement date of the Renewal Term, Tenant shall pay Monthly Installments of Rent upon the terms and conditions in effect during the last month of the initial Term until such time as the Prevailing Market rate has been determined. Upon such determination, the Annual Rent and Monthly Installments of Rent for the Premises shall be retroactively adjusted to the commencement of such Renewal Term for the Premises.

39.7This Renewal Option is not transferable; the parties hereto acknowledge and agree that they intend that the aforesaid option to renew this Lease shall be “personal” to Tenant and any Permitted Transferee (as defined in Section 9.8 of this Lease) as set forth above and that in no event will any assignee or sublessee have any rights to exercise the aforesaid option to renew.

39.8If the Renewal Option is validly exercised or if Tenant fails to validly exercise the Renewal Option, Tenant shall have no further right to extend the term of this Lease.

39.9For purposes of this Renewal Option, “Prevailing Market” shall mean the arms length fair market annual rental rate per rentable square foot under renewal leases and amendments entered into on or about the date on which the Prevailing Market is being determined hereunder for space comparable to the Premises in the Building and buildings comparable to the Building in the same rental market in the Mountain View, California area as of the date the Renewal Term is to commence, taking into account the specific provisions of this Lease which will remain constant. The determination of Prevailing Market shall take into account any material economic differences between the terms of this Lease and any comparison lease or amendment, such as rent abatements, construction costs and other concessions and the manner, if any, in which the landlord under any such lease is reimbursed for operating expenses and taxes. The determination of Prevailing Market shall also take into consideration any reasonably anticipated changes in the Prevailing Market rate from the time such Prevailing Market rate is being determined and the time such Prevailing Market rate will become effective under this Lease.

10/31/01 CA MTIN	24
Revised 9/09/05
586764.v1: 028481/048

40.ROOF SPACE FOR DISH/ANTENNA.

40.1During the initial Term and any extension thereof, Tenant, at no cost or expense during the Term, shall have the right to lease space on the roof of the Building for the purpose of installing (in accordance with Article 6 of this Lease), operating and maintaining a dish/antenna or other communication device (the “Dish/Antenna”) to be approved by Landlord. The location of the space on the roof to be leased by Tenant is referred to herein as the “Roof Space”. Landlord reserves the right at its sole expense to relocate the Roof Space as reasonably necessary during the Term. Landlord’s designation shall take into account Tenant’s use of the Dish/Antenna. Notwithstanding the foregoing, Tenant’s right to install the Dish/Antenna shall be subject to the approval rights of Landlord and Landlord’s architect and/or engineer, which approvals shall not be unreasonably withheld, conditioned or delayed, with respect to the plans and specifications of the Dish/Antenna, the manner in which the Dish/Antenna is attached to the roof of the Building and the manner in which any cables are run to and from the Dish/Antenna. The precise specifications and a general description of the Dish/Antenna, or any replacements thereof, along with all documents Landlord reasonably requires to review the installation of the Dish/Antenna (the “Plans and Specifications”) shall be submitted to Landlord for Landlord’s written approval no later than twenty (20) days before Tenant commences to install the Dish/Antenna. Tenant shall be solely responsible for obtaining and maintaining all necessary governmental and regulatory approvals and for the cost of installing, operating, maintaining and removing the Dish/Antenna. Tenant shall notify Landlord upon completion of the installation of the Dish/Antenna. If Landlord determines that the Dish/Antenna equipment does not comply with the approved Plans and Specifications, that the Building has been damaged during installation of the Dish/Antenna or that the installation was defective, Landlord shall notify Tenant in writing of any noncompliance or detected problems and Tenant immediately shall cure the defects. If the Tenant fails to immediately cure the defects, Tenant shall pay to Landlord upon demand the cost, as reasonably determined by Landlord, of correcting any defects and repairing any damage to the Building caused by such installation. If at any time Landlord, in its sole discretion, deems it necessary, Tenant shall provide and install, at Tenant’s reasonable cost and expense, appropriate aesthetic screening, reasonably satisfactory to Landlord, for the Dish/Antenna (the “Aesthetic Screening”).

40.2Landlord agrees that Tenant, upon reasonable prior written notice to Landlord, shall have access to the roof of the Building and the Roof Space for the purpose of installing, maintaining, repairing and removing the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, all of which shall be performed by Tenant or Tenant’s authorized representative or contractors, which shall be approved by Landlord, at Tenant’s sole cost and risk. It is agreed, however, that only authorized engineers, employees or properly authorized contractors of Tenant, FCC (defined below) inspectors, or persons under their direct supervision will be permitted to have access to the roof of the Building and the Roof Space. Tenant further agrees to exercise firm control over the people requiring access to the roof of the Building and the Roof Space in order to keep to a minimum the number of people having access to the roof of the Building and the Roof Space and the frequency of their visits. It is further understood and agreed that the installation, maintenance, operation and removal of the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, is not permitted to damage the Building or the roof thereof, or interfere with the use of the Building and roof by Landlord. Tenant agrees to be responsible for any damage caused to the roof or any other part of the Building, which may be caused by Tenant or any Tenant Entity.

40.3Tenant agrees to install and maintain only equipment of types and frequencies which will not cause unreasonable interference to Landlord or any other tenant of the Building. In the event Tenant’s equipment causes such interference, Tenant will change the frequency on which it transmits and/or receives and take any other steps necessary to eliminate the interference. If said interference cannot be eliminated within a reasonable period of time, in the judgment of Landlord, then Tenant agrees to remove the Dish/Antenna from the Roof Space. Landlord shall make commercially reasonable efforts to ensure that any new equipment installed on the roofs by other tenants or users does not have frequencies which causes unreasonable interference to Tenant’s Dish/Antenna. Tenant shall, at its sole cost and expense, and at its sole risk, install, operate and maintain the Dish/Antenna in a good and workmanlike manner, and in compliance with all Building, electric, communication, and safety codes, ordinances, standards, regulations and requirements, now in effect or hereafter promulgated, of the Federal Government, including, without limitation, the Federal Communications Commission (the “FCC”), the Federal Aviation Administration (“FAA”) or any successor agency of either the FCC or FAA having jurisdiction over radio or telecommunications, and of the state, city and county in which the Building is located. Under this Lease, the Landlord and its agents assume no responsibility for the licensing, operation and/or maintenance of Tenant’s equipment. Tenant has the responsibility of carrying out the terms of its FCC license in all respects. The Dish/Antenna shall be connected to Landlord’s power supply in strict compliance with all applicable Building, electrical, fire and safety codes. Neither Landlord nor any Landlord Entity shall be liable to Tenant for any stoppages or shortages of electrical power furnished to the Dish/Antenna or the Roof Space because of any act, omission or requirement of the public utility serving the Building, or the act or omission of any other tenant, invitee or licensee or their respective agents, employees or contractors, or for any other cause beyond the reasonable control of Landlord, and Tenant shall not be entitled to any rental abatement for any such stoppage or shortage of electrical power. Neither Landlord any Landlord Entity shall have any responsibility or

10/31/01 CA MTIN	25
Revised 9/09/05
586764.v1: 028481/048

liability for the conduct or safety of any of Tenant’s representatives, repair, maintenance and engineering personnel while in or on any part of the Building or the Roof Space.

40.4The Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, shall remain the personal property of Tenant, and shall be removed by Tenant at its own expense at the expiration or earlier termination of this Lease or Tenant’s right to possession hereunder. Tenant shall repair any damage caused by such removal, including the patching of any holes to match, as closely as possible, the color surrounding the area where the equipment and appurtenances were attached. Tenant agrees to maintain all of the Tenant’s equipment placed on or about the roof or in any other part of the Building in proper operating condition and maintain same in satisfactory condition as to appearance and safety in Landlord’s sole discretion. Such maintenance and operation shall be performed in a manner to avoid any unreasonable interference with any other tenants or Landlord. Tenant agrees that at all times during the Term, it will keep the roof of the Building and the Roof Space free of all trash or waste materials produced by Tenant or Tenant’s agents, employees or contractors.

40.5In light of the specialized nature of the Dish/Antenna, Tenant shall be permitted to utilize the services of its choice for installation, operation, removal and repair of the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, subject to the reasonable approval of Landlord. Notwithstanding the foregoing, Tenant must provide Landlord with prior written notice of any such installation, removal or repair and coordinate such work with Landlord in order to avoid voiding or otherwise adversely affecting any warranties granted to Landlord with respect to the roof. If necessary, Tenant, at its sole cost and expense, shall retain any contractor having a then existing warranty in effect on the roof to perform such work (to the extent that it involves the roof), or, at Tenant’s option, to perform such work in conjunction with Tenant’s contractor. In the event the Landlord contemplates roof repairs that could affect Tenant’s Dish/Antenna, or which may result in an interruption of the Tenant’s telecommunication service, Landlord shall formally notify Tenant at least thirty (30) days in advance (except in cases of an emergency) prior to the commencement of such contemplated work in order to allow Tenant to make other arrangements for such service.

40.6Tenant shall not allow any provider of telecommunication, video, data or related services (“Communication Services”) to locate any equipment on the roof of the Building or in the Roof Space for any purpose whatsoever, nor may Tenant use the Roof Space and/or Dish/Antenna to provide Communication Services to an unaffiliated tenant, occupant or licensee of another building, or to facilitate the provision of Communication Services on behalf of another Communication Services provider to an unaffiliated tenant, occupant or licensee of the Building or any other building. Tenant acknowledges that Landlord may at some time establish a standard license agreement (the “License Agreement”) with respect to the use of roof space by tenants of the Building. Tenant, upon request of Landlord, shall enter into such License Agreement with Landlord provided that such agreement does not materially or adversely alter the rights of Tenant hereunder with respect to the Roof Space. Tenant specifically acknowledges and agrees that the terms and conditions of Article 10 of this Lease shall apply with full force and effect to the Roof Space and any other portions of the roof accessed or utilized by Tenant, its representatives, agents, employees or contractors.

40.7If Tenant defaults under any of the terms and conditions of this Section or this Lease, and Tenant fails to cure said default within the time allowed by Article 18 of this Lease, Landlord shall be permitted to exercise all remedies provided under the terms of this Lease, including removing the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, and restoring the Building and the Roof Space to the condition that existed prior to the installation of the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any. If Landlord removes the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, as a result of an uncured default, Tenant shall be liable for all costs and expenses Landlord incurs in removing the Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, and repairing any damage to the Building, the roof of the Building and the Roof Space caused by the installation, operation or maintenance of the Dish/Antenna, the appurtenances, and the Aesthetic Screening, if any. Tenant’s rights pursuant to this Article 40 are personal to the named Tenant under this Lease and assignees or subtenant consented to by Landlord pursuant to Article 9 above, and are not otherwise transferable.

41.SIGNAGE.

41.1During the Term and any extension thereof and provided that Tenant leases and occupies the Premises, Tenant shall continue to have the right to have its name on the Building’s monument sign located on East Evelyn (the “Monument Sign”), subject to the terms of this Section 41.1. Landlord shall not charge a separate fee to Tenant for the right to have its name on the Monument Sign. The design, size and color of the signage with Tenant’s name to be included on the Monument Sign, and the manner in which it is attached to the Monument Sign, shall comply with all applicable Regulations and shall be subject to the approval of Landlord and all applicable governmental authorities. Landlord acknowledges that it approves the existing Monument Sign. Tenant, at its cost, shall be responsible for the maintenance, repair or replacement of

10/31/01 CA MTIN	26
Revised 9/09/05
586764.v1: 028481/048

Tenant’s signage on the Monument Sign, which shall be maintained in a manner reasonably satisfactory to Landlord. Although the Monument Sign will be maintained by Landlord, Tenant shall pay its proportionate share of the cost of any maintenance and repair associated with the Monument Sign. Upon expiration or earlier termination of this Lease or Tenant’s right to possession of or to lease the Premises, or if Tenant ceases to occupy the Premises and during such period of nonoccupancy fails to pay rent hereunder, Landlord, at Tenant’s cost, payable as additional rent within five (5) business days after demand therefor, shall have the right to remove Tenant’s signage from the Monument Sign and restore the Monument Sign to the condition it was in prior to installation of Tenant’s signage thereon, ordinary wear and tear excepted. The rights provided in this Section 41.1 shall be non-transferable unless otherwise agreed by Landlord in writing.

41.2During the Term and any extension thereof and provided that Tenant leases and occupies the Premises, Tenant, at Tenant’s sole cost, but subject to governmental approvals, shall continue to have the one exclusive sign located near the top of the exterior wall of the Building on the East side of the Building (i.e., the side of the Building which faces Highway 237) (the “Building Signage”). Tne design, size, color and exact location of the Building Signage shall comply with all applicable Regulations and shall be subject to the approval of all applicable governmental authorities and Landlord’s prior written approval. Such right to Building Signage is subject to the following terms and conditions:

41.2.1Tenant shall periodically inspect the Building Signage to identify any conditions that are in need of maintenance or repair. Tenant shall provide Landlord with notice of any such conditions and Landlord shall make any such repairs within a reasonable period of time following the receipt of such notice. All sums paid by Landlord and all expenses incurred by it in connection with such repairs shall be payable to Landlord by Tenant within ten (10) business days of Landlord’s demand. Tenant shall be responsible for any electrical energy used in connection with the Building Signage. Notwithstanding the foregoing, Tenant shall not be liable for any fee in connection with Tenant’s right to display the Building Signage in accordance with the Lease. At Landlord’s option, Tenant’s right to the Building Signage may be revoked and terminated upon occurrence of any of the following events:

41.2.1.1Tenant shall be in default under this Lease beyond any applicable cure period.

41.2.1.2Tenant does not occupy the Premises.

41.2.1.3This Lease shall terminate or otherwise no longer be in effect.

Upon the expiration or earlier termination of this Lease or at such other time that Tenant’s signage rights are terminated pursuant to the terms hereof, if Tenant fails to remove the Building Signage and repair the Building in accordance with the terms of this Lease, Landlord shall cause the Building Signage to be removed from the Building and the Building to be repaired and restored to the condition which existed prior to the installation of the Building Signage (including, if necessary, the replacement of any precast concrete panels), all at the sole cost and expense of Tenant and otherwise in accordance with this Lease, without further notice from Landlord notwithstanding anything to the contrary contained in this Lease. Tenant shall pay all costs and expenses for such removal and restoration within five (5) business days following delivery of an invoice therefor. The rights provided in this Section 41.2 shall be non-transferable, except in connection with an assignment of this Lease approved by Landlord, a Permitted Transfer, or as otherwise agreed by Landlord in writing in its sole discretion.

42.EMERGENCY GENERATOR (WITH TANK).

42.1Tenant, subject to Landlord’s review and approval of Tenant’s plans therefor, shall have the right to install a 300 kilowatt supplemental generator (the “Generator”) and an above ground fuel tank (the “Tank”) to provide emergency additional electrical capacity to the Premises during the Term. Tenant’s plans for the Generator and the Tank shall include a secondary containment system to protect against and contain any release of hazardous materials. The Generator and the Tank shall be placed at a location mutually and reasonably acceptable to Landlord and Tenant (the “Generator Area”). Notwithstanding the foregoing, Tenant’s right to install the Generator and the Tank shall be subject to Landlord’s approval of the manner in which the Generator and the Tank is installed, the manner in which any fuel pipe is installed, the manner in which any ventilation and exhaust systems are installed, the manner in which any cables are run to and from the Generator to the Premises and the measures that will be taken to eliminate any vibrations or sound disturbances from the operation of the Generator, including, without limitation, any necessary two (2) hour rated enclosures or sound installation. Landlord shall have the right to require an acceptable enclosure to hide or disguise the existence of the Generator and the Tank and to minimize any adverse effect that the installation of the Generator and the Tank may have on the appearance of the Building and the real property and project in which the Building is located (collectively, the “Project”). Tenant shall be solely responsible for obtaining all necessary governmental and regulatory approvals and for the cost of installing, operating, maintaining and removing the Generator and the Tank. Tenant shall not install or operate the Generator or the Tank until

10/31/01 CA MTIN	27
Revised 9/09/05
586764.v1: 028481/048

Tenant has obtained and submitted to Landlord copies of all required governmental permits, licenses and authorizations necessary for the installation and operation of the Generator and the Tank. In addition to, and without limiting Tenant’s obligations under this Lease, Tenant shall comply with all applicable environmental and fire prevention Regulations pertaining to Tenant’s use of the Generator Area. Tenant shall also be responsible for the cost of all utilities consumed in the operation of the Generator and the Tank. Notwithstanding anything herein to the contrary, if after installation, Tenant removes the Generator or the Tank from the Generator Area for reasons other than the repair and replacement of the Generator, Tenant’s right to install and maintain the Generator and the Tank and to use the Generator Area shall be null and void.

42.2Tenant shall be responsible for assuring that the installation, maintenance, operation and removal of the Generator and the Tank shall in no way damage any portion of the Building or Project. To the maximum extent permitted by Regulations, the Generator and the Tank and all appurtenances in the Generator Area shall be at the sole risk of Tenant, and Landlord shall have no liability to Tenant if the Generator, the Tank or any appurtenances installations are damaged for any reason. Tenant agrees to be responsible for any damage caused to the Building or Project in connection with the installation, maintenance, operation or removal of the Generator and, in accordance with the terms of Article 10 of this Lease, to indemnify, defend and hold Landlord and the Landlord Entities harmless from all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including, without limitation, reasonable architects’ and attorneys’ fees (if and to the extent permitted by Regulations), which may be imposed upon, incurred by, or asserted against Landlord or any of the Landlord Entities in connection with the installation, maintenance, operation or removal of the Generator and the Tank, including, without limitation, any environmental and hazardous materials claims. In addition to, and without limiting Tenant’s obligations under this Lease, Tenant covenants and agrees that the installation and use of the Generator and the Tank and appurtenances shall not adversely affect the insurance coverage for the Building. If for any reason, the installation or use of the Generator, the Tank and/or the appurtenances shall result in an increase in the amount of the premiums for such coverage, then Tenant shall be liable for the full amount of any such increase.

42.3Tenant shall be responsible for the installation, operation, cleanliness, maintenance and removal of the Generator and the Tank and the appurtenances, all of which shall remain the personal property of Tenant, and shall be removed by Tenant at its own expense at the expiration or earlier termination of this Lease. Tenant shall repair any damage caused by such removal, including the patching of any holes to match, as closely as possible, the color surrounding the area where the Generator, Tank and appurtenances were attached. Such maintenance and operation shall be performed in a manner to avoid any unreasonable interference with any other tenants or Landlord. Tenant shall take the Generator Area “as is” in the condition in which the Generator Area is in as of the Commencement Date, without any obligation on the part of Landlord to prepare or construct the Generator Area for Tenant’s use or occupancy. Without limiting the foregoing, Landlord makes no warranties or representations to Tenant as to the suitability of the Generator Area for the installation and operation of the Generator or the Tank. Tenant shall have no right to make any changes, alterations, additions, decorations or other improvements to the Generator Area without Landlord’s prior written consent. Tenant agrees to maintain the Generator and the Tank, including without limitation, any enclosure installed around the Generator and the Tank in good condition and repair. Tenant shall be responsible for performing any maintenance and improvements to any enclosure surrounding the Generator and the Tank so as to keep such enclosure in good condition.

42.4Tenant, upon prior notice to Landlord and subject to the rules and regulations enacted by Landlord, shall have access to the Generator and the Tank and its surrounding area for the purpose of installing, repairing, maintaining and removing said Generator and the Tank. Tenant shall only test the Generator at a time mutually agreed to in writing by Landlord and Tenant in advance. Tenant shall be permitted to use the Generator Area solely for the maintenance and operation of the Generator and the Tank, and the Generator, Tank and Generator Area are solely for the benefit of Tenant. All electricity generated by the Generator may only be consumed by Tenant in the Premises. Landlord shall have no obligation to provide any services, including, without limitation, electric current, to the Generator Area. Tenant shall have no right to sublet the Generator Area or to assign its interest hereunder.

42.5Notwithstanding anything to the contrary contained herein, if at any time during the Term Landlord determines in its sole but bona fide business judgment, that the Generator, Tank and/or any appurtenances interfere with the operations of the Building or the operations of any of the occupants of the Building, then Tenant shall, upon notice from Landlord, cease any further operation of the Generator and Tank. From and after such notice by Landlord, Tenant shall have no further right to operate the Generator or Tank unless and until Tenant shall have redesigned and modified the Generator, Tank and/or installations in a manner approved by Landlord, provided however, that Landlord’s approval of such redesign and modification shall constitute the mere permission to operate the Generator and the Tank, which permission shall in no event be construed to abrogate or diminish Landlord’s rights or Tenant’s obligations under this Article 42 or this Lease.

43.LETTER OF CREDIT. Concurrent with Tenant’s execution and delivery of this Lease to Landlord, Tenant shall deliver to Landlord, as collateral for the full performance by Tenant of all of its obligations under this Lease and for all losses

10/31/01 CA MTIN	28
Revised 9/09/05
586764.v1: 028481/048

and damages Landlord may suffer as a result of Tenant’s failure to comply with one or more provisions of this Lease, including, but not limited to, any post lease termination damages under section 1951.2 of the California Civil Code, an Irrevocable Standby Letter of Credit (the “Letter of Credit”) in the amount of Three Hundred Fifty Thousand Dollars ($350,000.00). The following terms and conditions shall apply to the Letter of Credit:

43.1The Letter of Credit shall be in favor of Landlord, shall be issued by a bank acceptable to Landlord with a Standard & Poors rating of “A” or better, shall comply with all of the terms and conditions of this Article and shall otherwise be in the form attached hereto as Exhibit E.

43.2The Letter of Credit or any replacement Letter of Credit shall be irrevocable for the term thereof and shall automatically renew on a year to year basis until a period ending not earlier than two months subsequent to the Termination Date (the “LOC Expiration Date”) without any action whatsoever on the part of Landlord; provided that the issuing bank shall have the right not to renew the Letter of Credit by giving written notice to Landlord not less than sixty (60) days prior to the expiration of the then current term of the Letter of Credit that it does not intend to renew the Letter of Credit. Tenant understands that the election by the issuing bank not to renew the Letter of Credit shall not, in any event, diminish the obligation of Tenant to deposit the Security Deposit or maintain such an irrevocable Letter of Credit in favor of Landlord through the LOC Expiration Date.

43.3Landlord, or its then managing agent, upon the occurrence of an Event of Default, or as otherwise specifically agreed by Landlord and Tenant pursuant to this Lease or any amendment hereof, without prejudice to any other remedy provided in this Lease or by Regulations, shall have the right from time to time to make one or more draws on the Letter of Credit and use all or part of the proceeds in accordance with Section 43.4 below. In addition, if Tenant fails to furnish a renewal or replacement letter of credit complying with all of the provisions of this Article 43 at least sixty (60) days prior to the stated expiration date of the Letter of Credit then held by Landlord, Landlord may draw upon such Letter of Credit and hold the proceeds thereof (and such proceeds need not be segregated) in accordance with the terms of this Article 43. Funds may be drawn down on the Letter of Credit upon presentation to the issuing bank of Landlord’s (or Landlord’s then managing agent’s) certification set forth in Exhibit E.

43.4Tenant acknowledges and agrees (and the Letter of Credit shall so state) that the Letter of Credit shall be honored by the issuing bank without inquiry as to the truth of the statements set forth in such draw request and regardless of whether the Tenant disputes the content of such statement. The proceeds of the Letter of Credit shall constitute Landlord’s sole and separate property (and not Tenant’s property or the property of Tenant’s bankruptcy estate) and Landlord may immediately upon any draw (and without notice to Tenant) apply or offset the proceeds of the Letter of Credit: (a) against any rent or other amounts payable by Tenant under this Lease that is not paid when due; (b) against all losses and damages that Landlord has suffered or that Landlord reasonably estimates that it may suffer as a result of Tenant’s failure to comply with one or more provisions of this Lease, including any damages arising under Section 1951.2 of the California Civil Code following termination of this Lease; (c) against any costs incurred by Landlord in connection with this Lease (including reasonable attorneys’ fees); and (d) against any other amount that Landlord may spend or become obligated to spend by reason of Tenant’s default. Provided Tenant has performed all of its obligations under this Lease, Landlord agrees to pay to Tenant within sixty (60) days after the LOC Expiration Date the amount of any proceeds of the Letter of Credit received by Landlord and not applied as allowed above; provided, that if prior to the LOC Expiration Date a voluntary petition is filed by Tenant or any guarantor, or an involuntary petition is filed against Tenant or any Guarantor by any of Tenant’s or guarantor’s creditors, under the Federal Bankruptcy Code, then Landlord shall not be obligated to make such payment in the amount of the unused Letter of Credit proceeds until either all preference issues relating to payments under this Lease have been resolved in such bankruptcy or reorganization case or such bankruptcy or reorganization case has been dismissed, in each case pursuant to a final court order not subject to appeal or any stay pending appeal.

43.5If, as result of any application or use by Landlord of all or any part of the Letter of Credit, the amount of the Letter of Credit shall be less than the amount set forth in this Article 43, Tenant shall, within five (5) days thereafter, provide Landlord with additional letter(s) of credit in an amount equal to the deficiency (or a replacement letter of credit in the total amount required pursuant to this Article 43), and any such additional (or replacement) letter of credit shall comply with all of the provisions of this Article 43, and if Tenant, fails to comply with the foregoing, notwithstanding anything to the contrary contained in this Lease, the same shall constitute an incurable Event of Default by Tenant. Tenant further covenants and warrants that it will neither assign nor encumber the Letter of Credit or any part thereof and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance.

43.6Landlord may, at any time and without notice to Tenant and without first obtaining Tenant’s consent thereto, transfer all or any portion of its interest in and to the Letter of Credit to another party, person or entity, including

10/31/01 CA MTIN	29
Revised 9/09/05
586764.v1: 028481/048

Landlord’s mortgagee and/or to have the Letter of Credit reissued in the name of Landlord’s mortgagee. If Landlord transfers its interest in the Building and transfers the Letter of Credit (or any proceeds thereof then held by Landlord) in whole or in part to the transferee, Landlord shall, without any further agreement between the parties hereto, thereupon be released by Tenant from all liability therefor. The provisions hereof shall apply to every transfer or assignment of all or any part of the Letter of Credit to a new landlord. In connection with any such transfer of the Letter of Credit by Landlord, Tenant shall, at Tenant’s sole cost and expense, execute and submit to the issuer of the Letter of Credit such applications, documents and instruments as may be necessary to effectuate such transfer. Tenant shall be responsible for paying the issuer’s transfer and processing fees in connection with any transfer of the Letter of Credit and, if Landlord advances any such fees (without having any obligation to do so), Tenant shall reimburse Landlord for any such transfer or processing fees within ten (10) days after Landlord’s written request therefor.

43.7If the Letter of Credit expires earlier than the LOC Expiration Date, or the issuing bank notifies Landlord that it shall not renew the Letter of Credit, Landlord shall accept a renewal thereof or substitute letter credit (such renewal or substitute Letter of Credit to be in effect not later than sixty (60) days prior to the expiration thereof), irrevocable and automatically renewable through the LOC Expiration Date upon the same terms as the expiring Letter of Credit or upon such other terms as may be acceptable to Landlord. However, if (a) the Letter of Credit is not timely renewed, or (b) a substitute Letter of Credit, complying with all of the terms and conditions of this paragraph is not timely received, Landlord may present such Letter of Credit to the issuing bank, and the entire sum so obtained shall be paid to Landlord, to be held by Landlord in accordance with Article 5 of this Lease. Notwithstanding the foregoing, Landlord shall be entitled to receive from Tenant all attorneys’ fees and costs incurred in connection with the review of any proposed substitute Letter of Credit pursuant to this Section.

43.8Landlord and Tenant (a) acknowledge and agree that in no event or circumstance shall the Letter of Credit or any renewal thereof or substitute therefor or any proceeds thereof be deemed to be or treated as a “security deposit” under any Regulation applicable to security deposits in the commercial context including Section 1950.7 of the California Civil Code, as such section now exist or as may be hereafter amended or succeeded (“Security Deposit Laws”), (b) acknowledge and agree that the Letter of Credit (including any renewal thereof or substitute therefor or any proceeds thereof) is not intended to serve as a security deposit, and the Security Deposit Laws shall have no applicability or relevancy thereto, and (c) waive any and all rights, duties and obligations either party may now or, in the future, will have relating to or arising from the Security Deposit Laws. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code and all other provisions of Regulations, now or hereafter in effect, which (i) establish the time frame by which Landlord must refund a security deposit under a lease, and/or (ii) provide that Landlord may claim from the security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums specified above in this Section 43.8 and/or those sums reasonably necessary to compensate Landlord for any loss or damage caused by Tenant’s breach of this Lease or the acts or omission of Tenant or any other Tenant Entities, including any damages Landlord suffers following termination of this Lease.

43.9Provided no Event of Default has occurred hereunder in the twelve (12) month period prior to the First LOC Reduction (defined below) and in the twelve (12) month period prior to the Second LOC Reduction (defined below), and no less than thirty (30) days prior to each requested letter of credit reduction date, Tenant may reduce the amount of Letter of Credit so that the new Letter of Credit amounts will be as follows: (i) $240,000.00 effective as of July 1, 2010 (the “First LOC Reduction”); and (ii) $130,000.00 effective as of July 1, 2011 (the “Second LOC Reduction”). If Tenant is not entitled to reduce the amount of the Letter of Credit as of a particular reduction effective date due to Tenant’s failure to timely pay all rent and other amounts payable pursuant to this Lease during the required periods specified above, then any subsequent reduction(s) Tenant is entitled to hereunder shall be reduced by the amount of the reduction Tenant would have been entitled to had Tenant timely paid all rent and other amounts payable pursuant to this Lease. Notwithstanding anything to the contrary contained herein, if Tenant has been in default under this Lease at any time prior to the effective date of any reduction of the amount of the Letter of Credit and Tenant has failed to cure such default within any applicable cure period, then Tenant shall have no further right to reduce the amount of the Letter of Credit as described herein. Any reduction in the Letter of Credit amount shall be accomplished by Tenant providing Landlord with a substitute Letter of Credit in the reduced amount, which substitute Letter of Credit shall comply with the requirements of this Article 43.

44.RIGHT OF FIRST OFFER.

44.1Provided Tenant is not then in uncured default under the terms, covenants and conditions of this Lease, and so long as Landlord at the time is the owner of the building in which the Offer Space (as defined below) is located, Tenant shall have the one time right of offer (the “Offer Right”) to lease that certain space which is the first (1st) and second (2nd) floors of the building located at 321 East Evelyn Avenue, Mountain View, California and comprising approximately 36,255

10/31/01 CA MTIN	30
Revised 9/09/05
586764.v1: 028481/048

rentable square feet (“Offer Space”), subject to the existing rights of Savi Technology, Inc. and Teneros, Inc. (and each of their successors or permitted transferees), effective at such time as the subject Offer Space is vacated by the prior occupant (including any subtenant). In such event, Landlord shall give written notice to Tenant of the availability of the subject Offer Space and the terms and conditions on which Landlord intends to offer it to the public and Tenant shall have a period of five (5) days in which to exercise Tenant’s Offer Right to lease the entire subject Offer Space only pursuant to the terms and conditions contained in Landlord’s notice, failing which Landlord may lease the subject Offer Space to any third party on whatever basis Landlord desires, and Tenant shall have no further rights with respect to such subject Offer Space. If Tenant exercises its Offer Right for the Offer Space in accordance with the terms and conditions of this Article 44, effective as of the date Landlord delivers the subject Offer Space, such Offer Space shall automatically be included within the Premises and subject to all the terms and conditions of this Lease (provided that Landlord may in its discretion elect to prepare a separate lease for the Offer Space provided that the terms and conditions of such separate lease shall be the same as this Lease (subject to the terms and conditions in this Article 44), except as set forth in Landlord’s notice and as follows:

44.1.1Tenant’s Proportionate Share shall be recalculated, using the total square footage of the Premises, as increased by the subject Offer Space, as the case may be.

44.1.2the Offer Space shall be leased on an “as is” basis and Landlord shall have no obligation to improve the Offer Space or grant Tenant any improvement allowance thereon except as may be provided in Landlord’s written notice of the Offer Right to Tenant.

44.1.3Tenant shall, prior to the beginning of the term for the subject Offer Space, as the case may be, execute a written memorandum or amendment confirming the inclusion of the subject Offer Space and the Monthly Installment of Rent and Annual Rent applicable thereto.

44.2Tenant shall have no such Offer Right with respect to the subject Offer Space, as the case may be, and
Landlord need not provide Tenant with a written notice of the same, if:

44.2.1Tenant is in default under this Lease at the time that Landlord would otherwise deliver its written notice of the subject Offer Right as described above; or

44.2.2More than 50% of the Premises is sublet at the time Landlord would otherwise deliver its written notice of the subject Offer Right as described above; or

44.2.3this Lease has been assigned (other than to a Permitted Transferee) prior to the date Landlord would otherwise deliver its written notice of the subject Offer Right as described above; or

44.2.4Tenant is not occupying the Premises on the date Landlord would otherwise deliver its written notice of the Offer Right as described above; or

44.2.5the subject Offer Space is not intended for the exclusive use of Tenant during the Term; or

44.2.6the existing tenant in the subject Offer Space is interested in extending or renewing its lease for such Offer Space or entering into a new lease for such Offer Space.

44.3If Landlord is delayed delivering possession of the subject Offer Space due to the holdover or unlawful possession of such space by any party, Landlord shall use reasonable efforts to obtain possession of such space, and the commencement of the term for the subject Offer Space shall be postponed until the date Landlord delivers possession of the subject Offer Space to Tenant free from occupancy by any party.

44.4The rights of Tenant hereunder with respect to the Offer Space shall terminate on the earlier to occur of: (i) eight (8) calendar months prior to the expiration of the Term of this Lease (subject to Tenant’s right to extend the same pursuant to Article 39 of this Lease); (ii) the date Landlord would have provided Tenant written notice of the Offer Right as described herein above if Tenant had not been in violation of one or more of the conditions set forth in Section 44.2 above; and (iii) Tenant’s failure to exercise its Offer Right within the five (5) day period provided in Section 44.1 above.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CA MTIN	31
Revised 9/09/05
586764.v1: 028481/048

45.LIMITATION OF LANDLORD’S LIABILITY. Redress for any claim against Landlord under this Lease shall be limited to and enforceable only against and to the extent of Landlord’s interest in the Building in which the Premises is located. The obligations of Landlord under this Lease are not intended to be and shall not be personally binding on, nor shall any resort be had to the private properties of, any of its or its investment manager’s trustees, directors, officers, partners, beneficiaries, members, stockholders, employees, or agents, and in no case shall Landlord be liable to Tenant hereunder for any lost profits, damage to business, or any form of special, indirect or consequential damages. For purposes hereof, “Landlord’s interest in the Building” shall include rents due from tenants, insurance proceeds, and proceeds from condemnation or eminent domain proceedings (prior to the distribution of same to any partner or shareholder of Landlord or any other third party).

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the Lease Reference Date set forth in the Reference Pages of this Lease.

LANDLORD:	TENANT:
SFERS REAL ESTATE CORP. U,	CONCEPTUS, INC.,
a Delaware corporation	a Delaware corporation

By: RREEF Management Company, a Delaware
corporation, its Authorized Agent

By:	/s/ Stephen J. George		By:	/s/ Gregory E. Lichtwardt
Name: Stephen J. George			Name:			Gregory E. Lichtwardt
Title: Regional Director			Title:		Executive Vice President
Dated:		12/9/08	Dated:			12.5.08

10/31/01 CA MTIN	32
Revised 9/09/05
586764.v1: 028481/048

EXHIBIT A – FLOOR PLAN DEPICTING THE PREMISES

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

Exhibit A is intended only to show the general layout of the Premises as of the beginning of the Term of the Lease. It does not in any way supersede any of Landlord’s rights set forth in Article 17 of the Lease with respect to arrangements and/or locations of public parts of the Building and changes in such arrangements and/or locations. It is not to be scaled; any measurements or distances shown should be taken as approximate.

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 A-1

EXHIBIT A – FLOOR PLAN DEPICTING THE PREMISES (con’t)

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 A-2

EXHIBIT A-l – SITE PLAN

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

Exhibit A-l is intended only to show the general location of the Building and/or the project of which the Building is a part as of the beginning of the Term of the Lease. It does not in any way supersede any of Landlord’s rights set forth in Article 17 of the Lease with respect to arrangements and/or locations of public parts of the Building and changes in such arrangements and/or locations. It is not to be scaled; any measurements or distances shown should be taken as approximate.

Mountain View Corporate Center

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 A-3

EXHIBIT A-2 – DEPICTION OF VISITOR PARKING SPACES

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

Exhibit A-2 is intended only to show the general layout of the Visitor Parking Spaces as of the beginning of the Term of the Lease. It does not in anyway supersede any of Landlord’s rights set forth in Article 17 with respect to arrangements and/or locations of public parts of the Building and changes in such arrangements and/or locations. It is not to be scaled; any measurements or distances shown should be taken as approximate.

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 A-4

EXHIBIT B – TENANT ALTERATIONS

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

1.            Tenant, following the delivery of the Premises by Landlord and the full and final execution and delivery of the Lease to which this Exhibit B is attached and all prepaid rent, the Security Deposit, and insurance certificates required under the Lease, shall have the right to perform alterations and improvements in the Premises (the “Initial Alterations”). Notwithstanding the foregoing, Tenant and its contractors shall not have the right to perform Initial Alterations in the Premises unless and until Tenant has complied with all of the terms and conditions of Article 6 of the Lease, including, without limitation, approval by Landlord of the final plans for the Initial Alterations and the contractors to be retained by Tenant to perform such Initial Alterations. Tenant shall be responsible for all elements of the design of Tenant’s plans (including, without limitation, compliance with law, functionality of design, the structural integrity of the design, the configuration of the Premises and the placement of Tenant’s furniture, appliances and equipment), and Landlord’s approval of Tenant’s plans shall in no event relieve Tenant of the responsibility for such design. Landlord’s approval of the contractors to perform the Initial Alterations shall not be unreasonably withheld. The parties agree that Landlord’s approval of the general contractor to perform the Initial Alterations shall not be considered to be unreasonably withheld if any such general contractor (i) does not have trade references reasonably acceptable to Landlord, (ii) does not maintain insurance as required pursuant to the terms of the Lease, (iii) does not have the ability to be bonded for the work in an amount of no less than 150% of the total estimated cost of the Initial Alterations, (iv) does not provide current financial statements reasonably acceptable to Landlord, or (v) is not licensed as a contractor in the state/municipality in which the Premises is located. Tenant acknowledges the foregoing is not intended to be an exclusive list of the reasons why Landlord may reasonably withhold its consent to a general contractor.

2.            Tenant agrees to accept the Premises in its “as-is” condition and configuration, it being agreed that Landlord shall not be required to perform any work or incur any costs in connection with the construction or demolition of any improvements in the Premises. This Exhibit B shall not be deemed applicable to any additional space added to the Premises at any time or from time to time, whether by any options under the Lease or otherwise, or to any portion of the original Premises or any additions to the Premises in the event of a renewal or extension of the original Term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or supplement to the Lease.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 B-1

EXHIBIT C – COMMENCEMENT DATE MEMORANDUM

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

COMMENCEMENT DATE MEMORANDUM

THIS MEMORANDUM, made as of      , 20       , by and between SFERS REAL ESTATE CORP. U, a Delaware corporation (“Landlord”) and CONCEPTUS, INC., a Delaware corporation (“Tenant”).

Recitals:

A.          Landlord and Tenant are parties to that certain Lease, dated for reference December 5, 2008 (the “Lease”) for certain premises (the “Premises”) consisting of approximately 58,242 rentable square feet at the Project commonly known as Mountain View Corporate Center.

B.           Tenant is in possession of the Premises and the Term of the Lease has commenced.

C.           Landlord and Tenant desire to enter into this Memorandum confirming the Commencement Date, the Termination Date and other matters under the Lease.

NOW, THEREFORE, Landlord and Tenant agree as follows:

1.            The actual Commencement Date is            .

2.            The actual Termination Date is          .

3.            The schedule of the Annual Rent and the Monthly Installment of Rent set forth on the Reference Pages is deleted in its entirety, and the following is substituted therefor:

[insert rent schedule]

4.            Capitalized terms not defined herein shall have the same meaning as set forth in the Lease.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written.

LANDLORD:	TENANT:
SFERS REAL ESTATE CORP. U, a Delaware corporation	CONCEPTUS, INC., a Delaware corporation

By:	RREEF Management Company, a
	Delaware corporation, its Authorized Agent

By:	DO NOT SIGN	By:	DO NOT SIGN
Name:		Name:
Title:		Title:
Dated:		Dated:

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 C-1

EXHIBIT D – RULES AND REGULATIONS

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

1.            No sign, placard, picture, advertisement, name or notice (collectively referred to as “Signs”) shall be installed or displayed on any part of the outside of the Building without the prior written consent of the Landlord which consent shall be in Landlord’s sole discretion. All approved Signs shall be printed, painted, affixed or inscribed at Tenant’s expense by a person or vendor approved by Landlord and shall be removed by Tenant at Tenant’s expense upon vacating the Premises. Landlord shall have the right to remove any Sign installed or displayed in violation of this rule at Tenant’s expense and without notice.

2.            If Landlord objects in writing to any curtains, blinds, shades or screens attached to or hung in or used in connection with any window or door of the Premises or Building, Tenant shall immediately discontinue such use. No awning shall be permitted on any part of the Premises. Tenant shall not place anything or allow anything to be placed against or near any glass partitions or doors or windows which may appear unsightly, in the opinion of Landlord, from outside the Premises.

3.            Tenant shall not alter any lock or other access device or install a new or additional lock or access device or bolt on any door of its Premises without the prior written consent of Landlord. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys or other means of access to all doors.

4.            If Tenant requires telephone, data, burglar alarm or similar service, the cost of purchasing, installing and maintaining such service shall be borne solely by Tenant. No boring or cutting for wires will be allowed without the prior written consent of Landlord. Landlord shall direct electricians as to where and how telephone, data, and electrical wires are to be introduced or installed. The location of burglar alarms, telephones, call boxes or other office equipment affixed to the Premises shall be subject to the prior written approval of Landlord.

5.            Tenant shall not place a load upon any floor of its Premises, including mezzanine area, if any, which exceeds the load per square foot that such floor was designed to carry and that is allowed by law. Heavy objects shall stand on such platforms as determined by Landlord to be necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such equipment or other property from any cause, and all damage done to the Building by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant.

6.            Tenant shall not install any radio or television antenna, satellite dish, loudspeaker or other device on the roof or exterior walls of the Building without Landlord’s prior written consent which consent shall be in Landlord’s sole discretion.

7.            Tenant shall not mark, drive nails, screw or drill into the partitions, woodwork, plaster or drywall (except for pictures and general office uses) or in any way deface the Premises or any part thereof.  Tenant shall not affix any floor covering to the floor of the Premises or paint or seal any floors in any manner except as approved by Landlord. Tenant shall repair any damage resulting from noncompliance with this rule.

8.            No cooking shall be done or permitted on the Premises, except that Underwriters’ Laboratory approved microwave ovens or equipment for brewing coffee, tea, hot chocolate and similar beverages shall be permitted, provided that such equipment and use is in accordance with all applicable Regulations.

9.            Tenant shall not use any hand trucks except those equipped with the rubber tires and side guards, and may use such other material-handling equipment as Landlord may approve. Tenant shall not bring any other vehicles of any kind into the Building. Forklifts which operate on asphalt areas shall only use tires that do not damage the asphalt.

10.          Tenant shall not use the name of the Building or any photograph or other likeness of the Building in connection with or in promoting or advertising Tenant’s business except that Tenant may include the Building name in Tenant’s address. Landlord shall have the right, exercisable without notice and without liability to any tenant, to change the name and address of the Building.

11.          All trash and refuse shall be contained in suitable receptacles at locations approved by Landlord. Tenant shall not place in the trash receptacles any personal trash or material that cannot be disposed of in the ordinary and customary manner of removing such trash without violation of any law or ordinance governing such disposal.

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 D-1

12.         Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governing authority.

13.          Tenant assumes all responsibility for securing and protecting its Premises and its contents including keeping doors locked and other means of entry to the Premises closed.

14.          Tenant shall not use any method of heating or air conditioning other than that supplied by Landlord without Landlord’s prior written consent.

15.          No person shall go on the roof without Landlord’s permission.

16.          Tenant shall not permit any animals, other than seeing-eye dogs, to be brought or kept in or about the Premises or any common area of the property.

17.          Tenant shall not permit any motor vehicles to be washed or mechanical work or maintenance of motor vehicles to be performed on any portion of the Premises or parking lot.

18.          These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premises in the Building. Landlord may waive any one or more of these Rules and Regulations for the benefit of any tenant or tenants, and any such waiver by Landlord shall not be construed as a waiver of such Rules and Regulations for any or all tenants.

19.          Landlord reserves the right to make such other and reasonable rules and regulations as in its judgment may from time to time be needed for safety and security, for care and cleanliness of the Building and for the preservation of good order in and about the Building. Tenant agrees to abide by all such rules and regulations herein stated and any additional rules and regulations which are adopted. Tenant shall be responsible for the observance of all of the foregoing rules by Tenant’s employees, agents, clients, customers, invitees and guests.

20.          Any toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown into them. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose employees or invitees, shall have caused it.

21.          Tenant shall not permit smoking or carrying of lighted cigarettes or cigars in areas reasonably designated by Landlord or any applicable governmental agencies as non-smoking areas.

22.          Any directory of the Building or project of which the Building is a part (“Project Area”), if provided, will be exclusively for the display of the name and location of tenants only and Landlord reserves the right to charge for the use thereof and to exclude any other names.

23.          Canvassing, soliciting, distribution of handbills or any other written material in the Building or Project Area is prohibited and each tenant shall cooperate to prevent the same. No tenant shall solicit business from other tenants or permit the sale of any goods or merchandise in the Building or Project Area without the written consent of Landlord.

24.          Any equipment belonging to Tenant which causes noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building shall be placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate the noise or vibration.

25.          Driveways, sidewalks, halls, passages, exits, entrances and stairways (“Access Areas”) shall not be obstructed by tenants or used by tenants for any purpose other than for ingress to and egress from their respective premises. Access areas are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation and interests of the Building or its tenants.

26.          Landlord reserves the right to designate the use of parking areas and spaces. Tenant shall not park in visitor, reserved, or unauthorized parking areas. Tenant and Tenant’s guests shall park between designated parking lines only and shall not park motor vehicles in those areas designated by Landlord for loading and unloading. Vehicles in violation of the above shall be subject to being towed at the vehicle owner’s expense. Vehicles parked overnight without prior written

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 D-2

consent of the Landlord shall be deemed abandoned and shall be subject to being towed at vehicle owner’s expense. Tenant will from time to time, upon the request of Landlord, supply Landlord with a list of license plate numbers of vehicles owned or operated by its employees or agents.

27.          No trucks, tractors or similar vehicles can be parked anywhere other than in Tenant’s own truck dock area. Tractor-trailers which must be unhooked or parked with dolly wheels beyond the concrete loading areas must use steel plates or wood blocks under the dolly wheels to prevent damage to the asphalt paving surfaces. No parking or storing of such trailers will be permitted in the parking areas or on streets adjacent thereto.

28.          During periods of loading and unloading, Tenant shall not unreasonably interfere with traffic flow and loading and unloading areas of other tenants. All products, materials or goods must be stored within the Tenant’s Premises and not in any exterior areas, including, but not limited to, exterior dock platforms, against the exterior of the Building, parking areas and driveway areas. Tenant agrees to keep the exterior of the Premises clean and free of nails, wood, pallets, packing materials, barrels and any other debris produced from their operation.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 D-3

EXHIBIT E – FORM OF LETTER OF CREDIT

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

IRREVOCABLE LETTER OF CREDIT

SFERS REAL ESTATE CORP. U	Letter of Credit No.
A Delaware Corporation	Date: December 5, 2008
C/O RREEF Management Company	Expiration Date: September 30, 2010
1310 Tully Road, Suite 110
San Jose, California 95122

Attention:                                                          

Ladies and Gentlemen:

At the request and for the account of Conceptus, Inc., 331 E Evelyn Ave, Mountain View, CA 94041 (“Applicant”), we hereby establish our Irrevocable Letter of Credit in your favor in the amount of Three Hundred Fifty Thousand and 00/100 United States Dollars (US$350,000.00) available with us at our above office by payment of your draft(s) drawn on us at sight accompanied by your signed and dated statement purportedly signed by an authorized representative or signatory of the beneficiary of Wells Fargo Bank Letter of Credit No.             (“Beneficiary”) worded as follows with the instructions in brackets therein complied with:

“This draw in the amount of [Insert Amount of Draft Which Accompanies Statement in Words] U.S. Dollars ($[Insert Amount of Draft Which Accompanies Statement in Figures]) under your Irrevocable Standby Letter of Credit No.                                (the “Wells Credit”) represents funds due and owing to us pursuant to the terms of that certain lease December 5, 2008 by and between Conceptus, Inc., a Delaware corporation, as tenant, and SFERS REAL ESTATE CORP. U, a Delaware corporation (as such lease may be amended, restated or replaced) and/or any amendment to the lease or any other agreement between such parties related to the lease.”

It is a condition of this Irrevocable Standby Letter of Credit that it will be considered automatically renewed for a one year period upon the expiration date set forth above and upon each anniversary of such date, unless at least 60 days prior to such expiration date or applicable anniversary thereof, we notify you in writing, by certified mail return receipt requested or by recognized overnight courier service, that we elect not to so renew this Irrevocable Standby Letter of Credit: RREEF Property Management, 875 North Michigan Ave., 41st Floor, Chicago, IL 60611, Attn: John Marconnect by registered mail or express courier that we elect not to extend the expiration date of this Letter of Credit beyond the date specified in such notice. Upon our sending you such notice of the non-extension of the expiration date of this Letter of Credit, you may also draw under this Letter of Credit by presentation to us at our above address, on or before the expiration date specified in such notice, of your draft drawn on us at sight accompanied by a signed and dated statement purportedly signed by an authorized representative or signatory of Beneficiary worded as follows with the instructions in brackets therein complied with:

“We are in receipt of your notice that you have elected not to renew Wells Fargo Bank, N.A. Letter of Credit No.                         and the applicant has failed to provide us with an acceptable substitute irrevocable standby letter of credit in accordance with the terms of that certain lease dated December 5, 2008 by and between the beneficiary, as landlord, and the applicant, as tenant, as amended or modified from time to time, and/or any amendment to the lease or any other agreement between such parties related to the lease.”

10/31/01 CA MTIN Revised 9/09/05 586764.v1: 028481/048 E-1

Partial and multiple drawings are permitted under this Letter of Credit.

Each draft must be marked “Drawn under Wells Fargo Bank, N.A. Letter of Credit No.                    .”

Each draft must also be accompanied by the original of this Letter of Credit for our endorsement on this Letter of Credit of our payment of such draft.

If any instructions accompanying a drawing under this Letter of Credit request that payment is to be made by transfer to an account with us or at another bank, we and/or such other bank may rely on an account number specified in such instructions even if the number identifies a person or entity different from the intended payee.

Notwithstanding any provision in the UCP (as hereinafter defined) to the contrary, this Letter of Credit is transferable one or more times by the Beneficiary, but in each instance to a single transferee and only in the full amount available to be drawn under the Letter of Credit at the time of such transfer. Any such transfer may be affected only through ourselves and only upon presentation to us at our above-specified office of a duly executed instrument of transfer in the format attached hereto as Exhibit A together with the original of this Letter of Credit. Any transfer of this Letter of Credit may not change the place of expiration of this Letter of Credit from our above-specified office. Each transfer shall be evidenced by our endorsement on the reverse of the original of this Letter of Credit, and we shall deliver the original of this Letter of Credit so endorsed to the transferee. All charges in connection with any transfer of this Letter of Credit are for the Applicant’s account. However, any request for transfer is not contingent upon the Applicant’s ability to pay our transfer fee.

Except as otherwise provided in this Letter of Credit, this Letter of Credit is subject to the Uniform Customs and Practice For Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600 (the “UCP”), and engages us in accordance therewith. Without limiting any other express provisions of this Letter of Credit that may be in conflict with (and in which event shall supersede) the provisions of the UCP, the last three sentences of Article 10(c) of the UCP are hereby excluded.

Very truly yours
WELLS FARGO BANK, N.A.
BY:
	(AUTHORIZED SIGNATURE)

10/31/01 CA MTIN Revised 9/09/05 586764.v1: 028481/048 E-2

Exhibit A

Wells Fargo Bank, N.A.

Letter of Credit No.                           

Date:                                 

Wells Fargo Bank, N.A.

Trade Services Division, Northern California

One Front Street, 21st Floor

San Francisco, California 94111

Subject: Your Letter of Credit No.

Ladies and Gentlemen:

For value received, we hereby irrevocably assign and transfer all our rights under the above-captioned Letter of Credit, as heretofore and hereafter amended, extended or increased, to:

[insert name of transferee]

[insert address]

By this transfer, all of our rights in the Letter of Credit are transferred to the transferee, and the transferee shall have sole rights as beneficiary under the Letter of Credit, including sole rights relating to any amendments, whether increases or extensions or other amendments, and whether now existing or hereafter made. You are hereby irrevocably instructed to advise future amendment(s) of the Letter of Credit to the transferee without our consent or notice to us.

Enclosed are the original Letter of Credit and the original of all amendments to this date. Please notify the transferee of this transfer and of the terms and conditions of the Letter of Credit as transferred. This transfer will not become effective until the transferee is so notified.

Very truly yours,

[insert name of transferor]

By:                                                                  

Name:                                                             

Title:                                                               

[CORPORATE NOTARY PAGE ATTACHED]

10/31/01 CA MTIN Revised 9/09/05 586764.v1: 028481/048 E-3

STATE OF CALIFORNIA              )

                                                                            )

COUNTY OF                                                     )ss:

On __________________, 200_, before me,___________________________, Notary Public, personally appeared ______________________________, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Notary Public

end format

Agreed to and accepted by:

APPLICANT

10/31/01 CA MTIN Revised 9/09/05 586764.v1: 028481/048 E-4

EXHIBIT F – INTENTIONALLY OMITTED

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CA MTIN Revised 9/09/05 586764.v1: 028481/048 F-1

EXHIBIT G – APPROVED HAZARDOUS MATERIALS

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

Chemical Name	Conceptus Part Number
Isopropyl Alcohol 100%	100041
Isopropyl Alcohol 70%	100177
Alconox Detergent	100762
Hydrophilic Coating Solution	101481
Cross Linker Hydrophilic	101482
Neutralizer Kester #5760	100763
Flux #2	E2114
Sulfamic Acid	100809
Neutralizer – NaHC03	100932
TriSodium Phosphate	100964
Hydrogen Peroxide	100810
Loctite UV Cure 3211	101338
Loctite LiteCure 3321	101334

Revision		Release
Level	ECO#	Date	Originators Name	Change Request
A	7701	05/16/07	M. Margone	Initial Release
B	7707	06/06/07	M. Margone	Add part number for 100% Isopropyl Alcohol and add new part numbers for Hydrophilic Coating Solution and Cross Linker Hydrophilic

10/31/01 CA MTIN Revised 9/09/05 586764.v1: 028481/048 G-1

EXHIBIT H – FORM OF LANDLORD CONSENT TO SUBLEASE

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

LANDLORD CONSENT TO SUBLEASE

THIS LANDLORD CONSENT TO SUBLEASE (“Consent Agreement”) is entered into as of                                ,                , by and among                                                                                          (“Landlord”),                                                                            (“Sublandlord”), and                                                                          (“Subtenant”).

RECITALS:

A.Landlord, as landlord, and Sublandlord, as tenant, are parties to that certain lease agreement dated                                       , (as the same may have been amended, the “Lease”) pursuant to which Landlord has leased to Sublandlord certain premises containing approximately                                     rentable square feet (the “Premises”) of the building commonly known as located at                                                                          (the “Building”).

B.Sublandlord and Subtenant have entered into (or are about to enter into) that certain sublease agreement dated as of                                     attached hereto as Exhibit A (the “Sublease”) pursuant to which Sublandlord has agreed to sublease to Subtenant certain premises described as follows:                                              , California comprising                              rentable square feet (the “Sublet Premises”) constituting all or a part of the Premises.

C.Sublandlord and Subtenant have requested Landlord’s consent to the Sublease.

D.Landlord has agreed to give such consent upon the terms and conditions contained in this Consent Agreement.

NOW THEREFORE, in consideration of the foregoing preambles which by this reference are incorporated herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord hereby consents to the Sublease subject to the following terms and conditions, all of which are hereby acknowledged and agreed to by Sublandlord and Subtenant:

1.Sublease Agreement. Sublandlord and Subtenant hereby represent that a true and complete copy of the Sublease is attached hereto and made a part hereof as Exhibit A, and Sublandlord and Subtenant agree that the Sublease with respect to Landlord and/or the Sublet Premises shall not be modified without Landlord’s prior written consent, which consent shall not be unreasonably withheld.

2.Representations. Sublandlord hereby represents and warrants that Sublandlord (i) has full power and authority to sublease the Sublet Premises to Subtenant, (ii) has not transferred or conveyed its interest in the Lease to any person or entity collaterally or otherwise, and (iii) has full power and authority to enter into the Sublease and this Consent Agreement. Subtenant hereby represents and warrants that Subtenant has full power and authority to enter into the Sublease and this Consent Agreement.

3.Indemnity and Insurance. Subtenant hereby assumes, with respect to Landlord, all of the indemnity and insurance obligations of the Sublandlord under the Lease with respect to the Sublet Premises, provided that the foregoing shall not be construed as relieving or releasing Sublandlord from any such obligations. Notwithstanding the foregoing, to the extent the same is legally permissable, Sublandlord may satisfy such insurance obligation for itself and on behalf of Subtenant.

4.No Release. Nothing contained in the Sublease or this Consent Agreement shall be construed as relieving or releasing Sublandlord from any of its obligations under the Lease, it being expressly understood and agreed that Sublandlord shall remain liable for such obligations notwithstanding anything contained in the Sublease or this Consent Agreement or any subsequent assignment(s), sublease(s) or transfer(s) of the interest of the tenant under the Lease. Sublandlord shall be responsible for the collection of all rent due it from Subtenant, and for the performance of all the other terms and conditions of the Sublease, it being understood that Landlord is not a party to the Sublease and, notwithstanding anything to the contrary contained in the Sublease, is not bound by any terms, provisions, representations or warranties

10/31/01 CA MTIN Revised 9/09/05 586764.v1: 028481/048 H-1

contained in the Sublease and is not obligated to Sublandlord or Subtenant for any of the duties and obligations contained therein.

5.Administrative Fee. Upon Sublandlord’s execution and delivery of this Consent Agreement, Sublandlord shall pay to Landlord the sum of $                                     in consideration for Landlord’s review of the Sublease and the preparation and delivery of this Consent Agreement and shall deliver such amount to Landlord concurrent with Sublandlord’s delivery of the executed Consent Agreement.

6.No Transfer. Subtenant shall not further sublease the Sublet Premises, assign its interest as the Subtenant under the Sublease or otherwise transfer its interest in the Sublet Premises or the Sublease to any person or entity without the written consent of Landlord, which consent Landlord shall not unreasonably withhold.

7.Lease. The parties agree that the Sublease is subject and subordinate to the terms of the Lease, and all terms of the Lease, other than Sublandlord’s obligation to pay Monthly Installments of Rent, are incorporated into the Sublease. In no event shall the Sublease or this Consent Agreement be construed as granting or conferring upon the Sublandlord or the Subtenant any greater rights than those contained in the Lease nor shall there be any diminution of the rights and privileges of the Landlord under the Lease, nor shall the Lease be deemed modified in any respect. Without limiting the scope of the preceding sentence, any construction or alterations performed in or to the Sublet Premises shall be performed with Landlord’s prior written approval and in accordance with the terms and conditions of the Lease. It is hereby acknowledged and agreed that any provisions in the Sublease which limit the manner in which Sublandlord may amend the Lease are binding only upon Sublandlord and Subtenant as between such parties. Landlord shall not be bound in any manner by such provisions and may rely upon Sublandlord’s execution of any agreements amending or terminating the Lease subsequent to the date hereof notwithstanding any contrary provisions in the Sublease.

8.Parking and Services. Any parking rights granted to Subtenant pursuant to the Sublease shall be satisfied out of the parking rights, if any, granted to Sublandlord under the Lease. Sublandlord hereby authorizes Subtenant, as agent for Sublandlord, to obtain services and materials for or related to the Sublet Premises, and Sublandlord agrees to pay for such services and materials as additional Rent under the Lease upon written demand from Landlord. However, as a convenience to Sublandlord, Landlord may bill Subtenant directly for such services and materials, or any portion thereof, in which event Subtenant shall pay for the services and materials so billed upon written demand, provided that such billing shall not relieve Sublandlord from its primary obligation to pay for such services and materials.

9.Attornment. If the Lease or Sublandlord’s right to possession thereunder terminates for any reason prior to expiration of the Sublease, Subtenant agrees, at the written election of Landlord, to attorn to Landlord upon the then executory terms and conditions of the Sublease for the remainder of the term of the Sublease. In the event of any such election by Landlord, Landlord will not be (a) liable for any rent paid by Subtenant to Sublandlord more than one month in advance, or any security deposit paid by Subtenant to Sublandlord, unless same has been transferred to Landlord by Sublandlord; (b) liable for any act or omission of Sublandlord under the Lease, Sublease or any other agreement between Sublandlord and Subtenant or for any default of Sublandlord under any such documents which occurred prior to the effective date of the attornment; (c) subject to any defenses or offsets that Subtenant may have against Sublandlord which arose prior to the effective date of the attornment; (d) bound by any changes or modifications made to the Sublease without the written consent of Landlord, (e) obligated in any manner with respect to the transfer, delivery, use or condition of any furniture, equipment or other personal property in the Sublet Premises which Sublandord agreed would be transferred to Subtenant or which Sublandlord agreed could be used by the Subtenant during the term of the Sublease, or (f) liable for the payment of any improvement allowance, or any other payment, credit, offset or amount due from Sublandlord to Subtenant under the Sublease. If Landlord does not elect to have Subtenant attorn to Landlord as described above, the Sublease and all rights of Subtenant in the Sublet Premises shall terminate upon the date of termination of the Lease or Sublandlord’s right to possession thereunder. The terms of this Section 9 supercede any contrary provisions in the Sublease.

10.Payments Under the Sublease. If at any time Sublandlord is in default under the terms of the Lease, Landlord shall have the right to contact Subtenant and require Subtenant to pay all rent due under the Sublease directly to Landlord until such time as Sublandlord has cured such default. Subtenant agrees to pay such sums directly to Landlord if requested by Landlord, and Sublandlord agrees that any such sums paid by Subtenant shall be deemed applied against any sums owed by Subtenant under the Sublease. Any such sums received by Landlord from Subtenant shall be received by Landlord on behalf of Sublandlord and shall be applied by Landlord to any sums past due under the Lease, in such order of priority as required under the Lease or, if the Lease is silent in such regard, then in such order of priority as Landlord deems appropriate. The receipt of such funds by Landlord shall in no manner be deemed to create a direct lease or sublease between Landlord and Subtenant. If Subtenant fails to deliver its Sublease payments directly to Landlord as required herein following receipt of written notice from Landlord as described above, then Landlord shall have the right to remove any signage of

10/31/01 CA MTIN Revised 9/09/05 586764.v1: 028481/048 H-2

Subtenant, at Subtenant’s cost, located outside the Premises or in the Building lobby or elsewhere in the Building and to pursue any other rights or remedies available to Landlord at law or in equity.

11.Excess Rent. If Landlord is entitled to any excess rent from Sublandlord pursuant to the terms of the Lease, then, in addition to all rent otherwise payable by Sublandlord to Landlord under the Lease, Sublandlord shall also pay to Landlord the portion of the excess rent to which Landlord is entitled under the Lease, in the manner described in the Lease. Landlord’s failure to bill Sublandlord for, or to otherwise collect, such sums shall in no manner be deemed a waiver by Landlord of its right to collect such sums in accordance with the Lease.

12.Sublandlord Notice Address. If Sublandlord is subleasing the entire Premises or otherwise vacating the Premises, Sublandlord’s new address for notices to Sublandlord under the Lease shall be as follows:                                                                      ; and if no address is filled in at the preceding blank (or if a post office box address is used for the preceding blank), then Landlord may continue to send notices to Sublandlord at the address(es) provided in, and in accordance with the terms of, the Lease.

13.Authority. Each signatory of this Consent Agreement represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.

14.Limitation Of Landlord’s Liability. Redress for any claim against Landlord under this Consent Agreement shall be limited to and enforceable only against and to the extent of Landlord’s interest in the building of which the Sublet Premises is a part. The obligations of Landlord under this Consent Agreement, if any, are not intended to be and shall not be personally binding on, nor shall any resort be had to the private properties of, any of its or its investment manager’s trustees, directors, officers, partners, beneficiaries, members, stockholders, employees, or agents, and in no case shall Landlord be liable to Sublandlord and/or Subtenant hereunder for any lost profits, damage to business, or any form of special, indirect or consequential damages.

IN WITNESS WHEREOF, Landlord, Sublandlord and Subtenant have executed this Consent Agreement as of the date set forth above.

LANDLORD:

______________________________________________________________

________________________

By:         RREEF Management Company, a Delaware corporation,
its Property Manager

By:      _________________________________

Name: _________________

Title:    District Manager

10/31/01 CA MTIN Revised 9/09/05 586764.v1: 028481/048 H-3

EXHIBIT I – FORM OF SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT

attached to and made a part of the Lease bearing the

Lease Reference Date of December 5, 2008 between

SFERS REAL ESTATE CORP. U, a Delaware corporation, as Landlord and

CONCEPTUS, INC., a Delaware corporation, as Tenant

SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT

This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (“Agreement”) is entered into as of this ___day of November, 2008, by and among CONCEPTUS INCORPORATED, a _________ corporation (“Tenant”), SUMITOMO MITSUI BANKING CORPORATION (“Agent”) and SFERS REAL ESTATE CORP. U (“Landlord”).

A.Pursuant to a lease dated ____________, 2008 (the “Lease”) between Landlord and Tenant, Tenant is a tenant of a certain building (the “Building”) on that certain real property described on Exhibit A annexed hereto located in Mountain View, State of California (the “Land”). Borrower’s interest in the Building and the Land shall be referred to herein as “Property”). The Property is part of a larger complex (“Complex”) known as the Mountain View Corporate Center.

B.Agent is Administrative Agent on behalf of Lenders party to a Loan Agreement dated as of November 1, 2002 (the “Loan Agreement”) with respect to, among other things, making a Loan to Landlord in the amount of $28,000,000.00 with interest thereon, evidenced by a certain Promissory Note secured by, among other things, a Mortgage, Assignment of Leases and Security Agreement (the “Mortgage”) constituting a valid lien upon the Property, and secured by an Assignment of Landlord’s interest in the Lease as more particularly set forth in a certain Assignment of Leases and Rents.

C.As a condition precedent to obtaining the Loan, Agent has required that Landlord and Tenant make certain agreements with Agent with respect to the Lease for the benefit of the Lenders party to the Loan Agreement.

NOW, THEREFORE, in consideration of the foregoing facts and mutual covenants contained herein, the parties hereto do hereby agree as follows:

1.Assignment. Tenant hereby acknowledges and agrees that it has notice that the Lease and the rent and all other sums due thereunder have been assigned or are to be assigned to Agent as security for the obligations secured by the Mortgage and consents to such assignment. In the event Agent gives written notice to Tenant of the occurrence of an Event of Default under the Mortgage and demands that Tenant pay its sums due under the Lease directly to Agent, Tenant shall honor such demand and pay such sums due under the Lease directly to Agent or as otherwise directed pursuant to such notice. In complying with these provisions, Tenant shall be entitled to rely solely upon the notices given by Agent and Landlord hereby permits said direct payments to be made and further agrees to indemnify and hold Tenant harmless from and against any and all loss, claim, damage or liability arising out of Tenants compliance with such notice. Tenant shall be entitled to full credit under the Lease for any rents paid to Agent in accordance with the provisions of this Paragraph to the same extent as if such rents were paid directly to Landlord.

2.Subordination. Subject to the terms hereof and by its execution hereof Tenant acknowledges that the Mortgage in favor of Agent, and any renewals, modifications, consolidations, replacements and extensions thereof shall remain a lien on the Property until such time when fully paid or otherwise disposed of pursuant to the terms thereof prior and superior to the Lease (including specifically, without limitation, any option to purchase or rights of first refusal affecting the Property, or any portion thereof contained therein), the leasehold estate created thereby and Tenant’s right, title and interest in the Property as if the Mortgage had been executed, delivered and duly recorded in the appropriate land records prior to the execution and delivery of the Lease.

3.Attornment. If the interest of Landlord in the Property and under the Lease shall be acquired by Agent by reason of foreclosure of the Mortgage or any other act or proceeding(s) made or brought to enforce the rights of the Agent, including, but not limited to, by deed in lieu of foreclosure or as a result of any other means, then the Lease and all terms therein, and the rights of Tenant thereunder, shall continue in full force and effect and shall not be altered, terminated, or disturbed, except in accordance with the terms of the Lease, and Tenant shall be bound to Agent and Agent shall be bound to

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 I-1

Tenant, subject to the terms hereof under all of the terms, covenants and conditions of the Lease for the balance of the terms, and any renewals thereof with the same force and effect as if the Agent were the Landlord under the Lease. In the event Agent acquires the interest of Landlord, Tenant hereby agrees to attorn to Agent as his landlord, said attornment to be effective and self-operative without the execution of any other instruments on the part of either party hereto, immediately upon Agent succeeding to the interest of Landlord under the Lease with written notice of same being delivered to Tenant. Upon receipt by Tenant of said written notice from Agent that Agent has succeeded to the interest of Landlord under the Lease, Tenant will make all payments of monetary obligations due by Tenant under the Lease at the address provided by Agent in the notice. Tenant agrees, however, upon the election of and written demand by Agent within sixty (60) days after Agent receives title to Property, to execute an instrument in confirmation of the foregoing provisions, satisfactory to Agent and Tenant, in which Tenant shall acknowledge this agreement to attorn which shall set forth the terms and conditions hereof and shall not be deemed or construed, in any way, as expanding or modifying Tenant’s obligations as tenant under the Lease, except where specifically set forth herein.

4.Nondisturbance. If it becomes necessary to foreclose the Mortgage, Agent will not terminate the Lease nor join Tenant in summary or foreclosure proceedings so long as Tenant is not in default under any of the terms, covenants or conditions of said Lease beyond applicable grace periods after notice thereof or if in default, the same shall be cured. If Agent shall succeed to the interests of Landlord under the Lease, Agent shall be bound to the Tenant under all of the terms, covenant and conditions of the Lease, and Agent agrees to recognize Tenant and further agrees that Tenant shall not be disturbed in its possession or use, of the Property, said nondisturbance to be effective and self-operative without the execution of any other instrument(s) on the part of either party hereto, immediately upon Agent succeeding to the interest of Landlord under the Lease, of the Property for any reason other than one which would entitle Landlord to terminate the lease under its terms or would cause, without any further action by Landlord, the termination of the Lease or would entitle Landlord to dispossess Tenant from the Property. Tenant shall, from and after Agent’s succession to the interests of Landlord under the Lease, have the same remedies against Agent for the breach of any provision contained in the Lease that Tenant might have had under the Lease against Landlord if Agent had not succeeded to the interests of Landlord under the Lease, provided further, however, that Agent except as expressly set forth in the Lease shall not be:

a.personally liable for any acts or omissions of any prior landlord (including, but not limited to, Landlord); or

b.subject to any offsets or defenses which Tenant may have against any prior landlord (including, but not limited to, Landlord); or

c.liable for any consequential damages attributable to any acts or omissions of any prior landlord (including, but not limited to, Landlord); or

d.obligated to give Tenant a credit for or acknowledge any rent or any other sums not delivered to Agent which Tenant has paid to Landlord in excess of the rent due under the Lease at the time Agent gave Tenant notice of its succession to the Landlord’s interest; provided however, that Agent shall be bound by any estimated monthly payments on account of additional rent which Tenant is required to pay to any holder of Landlord’s interest under the Lease in accordance with the provisions of the Lease; or

e.liable for the repayment of any monies paid by Tenant under the Lease except that Agent as a successor to Landlord shall be liable for the repayment of a security deposit if payable to Tenant and Landlord fails to pay even if Agent as successor to Landlord has not received the security deposit; or

f.obligated to commence or complete any construction or contribute toward construction or installation of any improvements required under the Lease, or expand or rehabilitate existing improvements thereon, or restore improvements following any casualty not required to be insured under the Lease or pay the costs of any restoration in excess of the proceeds recovered under any insurance required to be carried under the Lease, provided however that: (i) Agent shall cause to be applied to restoration required under the Lease all proceeds of casualty insurance received by or under the control of Agent and (ii) nothing herein shall relieve agent from its obligation to fund the balance of Allowance or the Additional Allowance, to the extent that the same have not been fully funded by the Landlord prior to the time that Agent succeeds Landlord as the holder of Landlord’s interest under the Lease; or

g.liable for any damages or other relief attributable to any latent or patent defects in construction; or

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 I-2

h.liable for any costs or expenses related to any indemnification provided by any prior landlord (including, but not limited to, Landlord) with respect to the presence or clean-up of any hazardous substances or materials in, on, under or about the leased premises; or

i.obligated to enforce any restriction on competition beyond the Building or

j.bound by any amendment or modification of the Lease made without its consent and knowledge, which consent shall not be unreasonably withheld, and which consent shall not be required with respect to amendments which ratify the exercise by Tenant of its rights under the Lease (e.g. the exercise of Tenant’s renewal option).

Additionally, in such event, Tenant shall be bound to Agent, and Agent shall be bound to Tenant, subject to the terms hereof under all of the terms, covenants and conditions of the Lease, and Agent and Tenant shall, from and after Agent’s succession to the interest of Landlord under the Lease, have the same remedies against each other for the breach of any provision contained in the Lease that they might have had under the Lease against each other if Agent were the original Landlord under the Lease.

5.Limitations on Liability. Neither this Agreement, the Assignment, nor anything to the contrary in the Lease shall, prior to the date (“Succession Date”) which is the earlier to occur of: (i) the date that Agent first takes title to the Property, or (ii) the date that Agent first takes possession of the Property, operate to give rise to or create any responsibility or liability for the control, care, management or repair of the Property upon Agent, or impose responsibility for the carrying out by Agent of any of the covenants, terms and conditions of the Lease, or constitute Agent a “mortgagee in possession,” nor shall said instrument operate to make Agent responsible or liable for any waste committed on the Property by any person whatsoever, or for any dangerous or defective condition of the Property, or for any negligence in the management, upkeep, repair or control of the Property resulting in loss, injury or death to any tenant, licensee, invoice, guest, employee, agent or stranger unless Agent becomes Landlord. In the event Agent becomes substitute landlord, Agent may assign its interest as substitute landlord without notice to, the consent of or the assumption of any liability to any other party hereto, so long as Landlord’s obligations under the Lease and this Agreement, are fully assumed by said Assignee, who shall be deemed by Agent to be a commercially reasonable Assignee, provided however that Agent as successor Landlord shall be responsible for the performance of continuing obligations of Landlord existing after such acquisition.

Anything herein or in the Lease to the contrary notwithstanding, in the event that Agent shall acquire title to the leased premises, Agent shall have no obligation, nor incur any liability beyond the then-existing interest, if any, of Agent in the Complex and Tenant shall look exclusively to such interest of Agent in the Complex for the payment and discharge of any obligations imposed upon Agent hereunder or under the Lease, and Agent is hereby released and relieved of any other liability hereunder and under the Lease. As regards Agent, Tenant shall look solely to the estate or interest owned by Agent in the Complex and Tenant will not collect or attempt to collect any judgment out of any other assets of Agent. By executing this Agreement, Landlord specifically acknowledges and agrees that nothing contained in this Section shall impair, limit, affect, lessen, abrogate or otherwise modify the obligations of Landlord to Tenant under the Lease. Agent’s interest (as such term is used herein) in the leased premises shall include Agent’s equity in the Complex, rents, protests and issues from the leased premises and proceeds from casualty or condemnation affecting the Complex.

6.Warranties and Representations. Tenant hereby warrants, represents, covenants and agrees to and with Agent:

a.not to alter or modify the Lease except as provided in Section 4(j) hereof, or cancel, terminate or surrender Lease, except as provided therein or herein;

b.after the date hereof (except as otherwise expressly provided in the Lease), not to enter into any agreement with Landlord, its successors or assigns, which grants any concession with respect to the Lease or which reduces the rent called for thereunder without the express written consent of Agent;

c.after the date hereof (except as otherwise expressly provided in the Lease), not to create any offset or claims against rents, or prepay rent more than thirty (30) days in advance;

d.that Tenant is now lessee of the leasehold estate created by the Lease and shall not hereafter assign the Lease except as permitted by the terms of the Lease;

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 I-3

e.to promptly certify in writing to Agent, in connection with any proposed assignment of the Mortgage, whether or not, to the knowledge of Tenant, any default on the part of Landlord is claimed to exist under the Lease, and what any such claimed default factually involves; and

f.not to voluntarily subordinate the Lease to any other lien or encumbrance without Agent’s prior written consent (except as otherwise expressly provided in the Lease).

7.No Waiver. Notwithstanding any other provision of this Agreement, where Agent acquires Landlord’s interest in and possession of the Premises and a Landlord default has occurred and is continuing, Tenant shall not be considered as having waived its rights to require that Agent remedy such default it the Landlord default continues after the Succession Date. In that case, Agent shall have no liability for Landlord’s default as it applies to the period before the Succession Date, but shall be liable for any failure to cure such continuing default thereafter, provided only that Agent receives the benefit of any notice and cure period required by the Lease or hereunder. Without limiting the foregoing, nothing herein shall relieve Agent of its obligation to perform any maintenance or repairs required to be performed by Landlord after the Succession Date based upon the fact that the need for such maintenance or repairs first arose prior to the Succession Date.

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

9.Notice and Cure. In the event that Landlord shall default in the performance or observance of any of the terms, conditions or agreement in the Lease, Tenant shall give written notice thereof to Agent and Agent shall have the right but not the obligation) to cure such default. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in the Lease, then the Agent, provided such is not a failure to provide Essential Services or access to the Premises for which Tenant may exercise self-help, shall have an additional thirty (30) days within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary to cure such default shall be granted if within such thirty (30) days Agent has commenced and is diligently pursuing the remedies necessary to cure such default (including, but not limited to, commencement of foreclosure proceedings, if necessary to effect such cure), in which event the Lease shall not be terminated while such remedies are being so diligently pursued. Specifically preserved hereby are any rights Tenant may have to cure in the event of an emergency, or otherwise, and to set-off and deduct the cost of same from rent, as may be provided in the Lease; provided prior written notice of the exercise of such rights is delivered to Agent, and it is expressly understood by Lender that Agent’s permission is not, in any way, required.

10.Binding Effect; Definitions. The provisions of this Agreement shall be covenants running with the Property, and shall be binding upon and inure to the benefit of the respective parties hereto and their respective heirs, legatees, executors, administrators, beneficiaries, successors and assigns, including without limitation (a) any person who shall obtain, directly or by assignment or conveyance, any interest in the Mortgage, (b) any transferee; or (c) any person who shall obtain any interest in the Property, whether through foreclosure or otherwise. Furthermore, the provisions of this Agreement shall be binding upon any guarantor of Tenants obligations under the Lease. As used herein the term “Tenant” shall include Tenant, its successors and assigns; the words “foreclosures and “foreclosure sale” as used herein shall be deemed to include the acquisition of Landlord’s estate in the Property by voluntary deed (or assignment) in lieu of foreclosure; and the word “Agent” shall include Agent herein specifically named in its capacity as Administrative Agent under the Credit Agreement and any successor Administrative Agent thereunder, and anyone who shall have succeeded to Landlord’s interest in the Property by, through or under foreclosure of the Mortgage.

11.Entire Agreement. This Agreement shall be the whole and only agreement between the parties hereto with regard to the subordination of the Lease and leasehold interest of Tenant to the Mortgage in favor of Agent, and, with respect to Agent and Tenant only, shall supersede and cancel any prior agreements as to such, or any, subordination, including, but not limited to, those provisions, if any, contained in the Lease, which provide for the subordination of the lease and leasehold interest of Tenant to a deed or deeds of trust or to a mortgage or mortgages to be thereafter executed, and shall not be modified or amended except writing signed by all parties hereto.

12.Consideration. Tenant declares, agrees and acknowledges that it intentionally and unconditionally waives, relinquishes and subordinates the Lease and leasehold interest in favor of the lien of the Mortgage above mentioned to the extent set forth in this Agreement, and, in consideration of this waiver, relinquishment and subordination, specific loans and advances are being and will be made and, as part and parcel thereof specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment and subordination.

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 I-4

13.Invalidity or Unenforceability. If any term, covenants or condition of this Agreement other than the effectiveness of the non-disturbance intention is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

14.Number and Gender. The use of the neuter gender in this Agreement shall be deemed to include any other gender, and, words in the singular number shall be held to include the plural, when the sense requires.

15.Notice. Any notice required or allowed by this Agreement shall be in writing and shall be (i) hand-delivered, effective upon receipt, or (ii) sent by United States Express Mail or by private overnight courier, effective upon receipt, or (iii) served by certified mail, postage prepaid, return receipt requested, deemed effective on the day of actual delivery as shown by the addressee’s return receipt or the expiration of three (3) business days after the date of mailing, whichever is the earlier in time; addressed to the party intended to receive the same at the address set forth below:

If to Tenant:

Conceptus Incorporated

331 East Evelyn Avenue

Mountain View, California 94041

If to Landlord:

SFERS Real Estate Corp. U

1310 Tully Road, Suite 110

San Jose, California 95122

If to Agent:

Sumitomo Mitsui Banking Corporation

277 Park Avenue

New York, New York 10172

The parties may, by written notice to the others, designate a different mailing address for notices.

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

AGENT:	SUMITOMO MITSUI BANKING
	CORPORATION, as Administrative Agent
Date:
	By:
	Name:
	Title:

TENANT:	CONCEPTUS INCORPORATED, a
	Delaware corporation
Date:
	By:
	Name:
	Title:

LANDLORD:	SFERS REAL ESTATE CORP. U
	By:	RREEF MANAGEMENT COMPANY, a
Date:		Delaware corporation, its Authorized Agent
		By:
		Date:
		Title:

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 I-5

STATE OF NEW YORK

, ss , 2008

Then personally appeared the above-named __________________________ of SUMITOMO MITSUI BANKING CORPORATION, and acknowledged the foregoing instrument to be the free act and deed of such corporation, before me.

Notary Public

My commission expires:

STATE OF CALIFORNIA	)
	)              ss.
COUNTY OF	)

On ___________, 2008, before me, __________________________________, Notary Public, personally appeared ____________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature

STATE OF CALIFORNIA	)
	)                ss.
COUNTY OF	)

On ____________, 2008, before me, _________________________________, Notary Public, personally appeared ___________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature

10/31/01 CA MTIN
Revised 9/09/05
586764.vl: 028481/048 I-6

EX-10.36

Exhibit 10.36

					UBS Bank USA
						Variable Credit Line Account Number: (if applicable)
Credit Line Account Application and Agreement for Organizations and Businesses						Fixed Credit Line Account Number: (if applicable)
						SS# / TIN
				HB					Internal Use Only
For Internal Use Only
Variable Credit Line Account at UBS Bank USA
CONCEPTUS INC
Fixed Credit Line Account at UBS Bank USA
Collateral Account(s) at UBS Financial Services Inc.
Insert the information below for each UBS Financial Services Inc. account to be pledged to secure the Borrower’s credit line.
Full Collateral (Securities) Account Title							Branch	Account Number			FA#
1)        CONCEPTUS INC
2)
3)
4)
5)
6)
Credit Line Account
Select the type of credit line account:
Variable Credit Line Account
Fixed Credit Line Account
Both
If you do not indicate your preference you will be deemed to have selected the “Both” option.
Account Ownership		Select the Organization/Business Structure:
Is this entity / organization a business that provides commercial goods or services (i.e., an operating entity)?   Yes       o  No		Corporation   Corp- Subchapter ‘S’   Limited Liability Company (LLC)   Limited Liability Partnership (LLP)   Limited Liability-Limited	Fed Charter-Credit Union   Foundation-not for profit   Endowment-not for profit   State Charter-S&L Bank							Fed Charter-Trust Co.   Govt Agency-Federal   Govt Agency-Local Ent   Govt Agency-State
		Partnership (LLLP)	State Charter-Savings Bank
Any changes or corrections to the information on this application must be initialed by you.		Sole Proprietorship   Partnership-General   Partnership-Limited   Association   Partnership-Invest Club   Invest Club Membership	State Charter-Comm Bank   State Charter-Trust Co.   State Charter-Credit Union   State Charter-Indus Loan   Fed Charter-Savings Assoc   Fed Charter-Nat’l Bank

Borrower Information
This section should be completed by the Organization/Business.
Borrower
Organization / Business Name CONCEPTUS INC					Location of Address
Organization/Business is (please complete each item that applies):					Business - Primary			Other ( please specify )
1)       Incorporated	Unincorporated
2)       For Profit	Not For Profit				Street Address (If a P.O. Box, complete the Additional Address Information on page 4.):
Industry Group (e.g., Construction, Service, etc.):					331 E. Evelyn Avenue
Health Care & Social Asst.
						City:	State:		ZIP:
Is the Organization/Business publicly listed?		No     o  Yes;    specify:				Mountain View	CA		94041-1530
						USA
						Business Telephone Number:
Exchange (NYSE, AMEX, or NASDAQ)				Ticker Symbol
Place of Formation / Incorporation
USA (if formed/incorporated, specify			Delaware
State):
Other (specify)
TIN:	Date of Incorporation / Establishment:

©2008 UBS Bank USA. All rights reserved.

Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

Borrower Financial and Ownership Information

Annual Income:

Liquid Assets:

Is the Borrower an officer or member of the board of directors of UBS AG, its subsidiaries or affiliates?*

Net Worth

Fiscal Year End (indicate month)

oYes     o     No     If yes, please specify:

Do you receive a substantial amount of your revenue/wealth (over 50%) (trade/export) from a country outside of the United States?

Subsidiary or Affiliate

Employee Name and SS#

oYes     o     No     If yes specify:

Is the Borrower an immediate family member of an executive officer or member of the board of directors of UBS AG? Immediate family member means a spouse or any other relative residing in the Borrower’s household to whom the Borrower lends financial support.

Country(ies):

Does the Borrower own 10% or more of the shares of any publicly traded company? oYes     o     No     If yes, please specify company and%:

oYes     o     No     If yes, please specify:

Subsidiary or Affiliate

Employee Name and SS#

%

Will any of the loan proceeds be used to repay any debt or obligation owed to, or purchase an asset from, UBS AG or its subsidiaries or affiliates? oYes     o     No     If yes, please specify:

Are any of the Borrowers, business owners or directors/principal officers a control person of UBS AG or its subsidiaries or affiliates?*

Subsidiary or Affiliate

oYes     o     No     If yes, please specify company and%:

%

*For purposes these questions, “control” means a person or entity that either (a) owns, controls or has the power to vote 25% or more of any class of voting securities, (b) has the ability to control the election of the majority of the directors of a company, or (c) has the power to exercise a controlling influence over management policies. A person or entity is presumed to have control of a company if the person or entity owns, controls or has the power to vote 10% or more of any class of voting securities of the company and (i) the person is an executive officer or director of the company or (ii) no other person has a greater percentage of that class of voting securities.

Principal Officer/Beneficial Owner

Complete this section for the Principal Officer(s) of the borrower, or beneficial owner for an LLC. To include additional principal officers please photocopy this page and submit it with the application.

Principal Officer Name

SS#

Principal Officer Name

SS#

Gregory E Lichtwardt

Mark Sieczkarek

Country of Citizenship:

Date of Birth

Country of Citizenship:

Date of Birth

xUSA

o

Other (specify)

x     USA

o

Other (specify)

Passport/CEDULA and Green Card#: (If non-U.S. and no SS# specified)

Passport/CEDULA and Green Card#: (If non-U.S. and no SS# specified)

/

/

Passport/CEDULA Country of Issuance:

Passport/CEDULA Country of Issuance:

USA

USA

Street Address:

Street Address:

331 E. Evelyn Avenue

331 E. Evelyn Avenue

City:

State:

ZIP

City:

State:

ZIP

Mountain View

CA

94041-1530

Mountain View

CA

94041-1530

USA

USA

Telephone Number:

Telephone Number:

2

©2008 UBS Bank USA. All rights reserved.

Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
Credit Line Account Features			Internal Use Only

Check Writing		Alternate Mailing Address for Checks
If you would like to receive Credit Line checks for your credit line account,		Print the mailing address for the delivery of checks if different from the
please enroll below:		address on the checks:
	Check here if you would like Credit Line checks.
Checks will be in the name of the Borrower.
Please print the address that you would like to appear on your checks.
		Wire Instructions for Loan Payment:(In US Dollars)
		Bank Name: UBS AG
		Wire System Address: ABA 026007993
		For Further Credit to the Account of: UBS Bank USA
		Account Number:
		For the Benefit of: Full Name
		Account Number:
Alternate Mailing Address for Checks
Print the mailing address for the delivery of checks if different from the
address on the checks:
UBS Credit Corp Wire Instructions are as follows:
UBS AG
ABA # 026007993
A/C #
A/C Name:

Senior Political Affiliation

Are you, any authorized signatories, beneficial owners, trustees, powers of attorney or other individuals with authority to effect transactions, or any of their immediate family members or close associates a:

I)	Current U.S. political official (as defined in section B below)?				o  No     o  Yes;    complete:
	A) Political Official’s Name:
	B) Current Position:		o  President	o  Vice President		o  US Cabinet Member
			o  Speaker of the House of Representatives			o  Supreme Court Justice
			o  Chairman of the Joint Chiefs of Staff			o  Ambassador
	C) Relationship to Client(s):		o  Self	o  Immediate family member		o  Close associate
			o  Associated with business or trust
II)	Current or former Senior non-U.S. political official, non-U.S. Religious Group/Organization, or Senior/Influential						o  No    o  Yes;   complete:
	representative of a non-U.S. Religious Group/Organization?
		Political Official’s Name:
		Current or Former Position:
		Relationship to Client(s):	o  Self	o  Immediate family member		o  Close associate
			o  Associated with business or trust

3 ©2008 UBS Bank USA. All rights reserved. Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

Duplicate Party Addendum
Complete this section for each Duplicate Party to receive a duplicate credit line account statement.
		Internal Location Code (UBS Financial Services Inc. Use Only)
Name:		Country of Citizenship:
		o    USA      o    Other (specify):
Street Address:		City:	State:	ZIP:
Additional Address Information
If the Borrower’s mailing address is a P.O. Box please provide a legal residence address below.
First Name:	Last Name:	Street Address:
Location of Address:
o     Business - Primary
o     Business - Secondary		City:	State:	ZIP:
o     Other (Specify):

4 ©2008 UBS Bank USA. All rights reserved. Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

Borrower Agreement

BY SIGNING BELOW, THE BORROWER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT:

AThe Borrower has received and read a copy of this Borrower Agreement, the attached Credit Line Account Application and Agreement (including the Credit Line Agreement following this Borrower Agreement) and the Loan Disclosure Statement explaining the risk factors that the Borrower should consider before obtaining a loan secured by the Borrower’s securities account. The Borrower agrees to be bound by the terms and conditions contained in the Credit Line Account Application and Agreement (including the Credit Line Agreement following this Borrower Agreement) (which terms and conditions are incorporated by reference). Capitalized terms used in this Borrower Agreement have the meanings set forth in the Credit Line Agreement. BTHE BORROWER UNDERSTANDS AND AGREES THAT UBS BANK USA MAY DEMAND FULL OR PARTIAL PAYMENT OF THE CREDIT LINE OBLIGATIONS, AT ITS SOLE OPTION AND WITHOUT CAUSE, AT ANY TIME, AND THAT NEITHER FIXED RATE ADVANCES NOR VARIABLE RATE ADVANCES ARE EXTENDED FOR ANY SPECIFIC TERM OR DURATION. THE BORROWER UNDERSTANDS AND AGREES THAT ALL ADVANCES ARE SUBJECT TO COLLATERAL MAINTENANCE REQUIREMENTS. THE BORROWER UNDERSTANDS THAT UBS BANK USA MAY, AT ANY TIME, IN ITS DISCRETION, TERMINATE AND CANCEL THE CREDIT LINE REGARDLESS OF WHETHER OR NOT AN EVENT HAS OCCURRED. CUNLESS DISCLOSED IN WRITING TO UBS BANK USA AT THE TIME OF THIS AGREEMENT, AND APPROVED BY UBS BANK USA, THE BORROWER AGREES NOT TO USE THE PROCEEDS OF ANY ADVANCE EITHER TO PURCHASE, CARRY OR TRADE IN SECURITIES OR TO REPAY ANY DEBT (I) USED TO PURCHASE, CARRY OR TRADE IN SECURITIES OR (II) TO ANY AFFILIATE OF UBS BANK USA. THE BORROWER WILL BE DEEMED TO REPEAT THIS AGREEMENT EACH TIME THE BORROWER REQUESTS AN ADVANCE. DTHE BORROWER UNDERSTANDS THAT BORROWING USING SECURITIES AS COLLATERAL ENTAILS RISKS. SHOULD THE VALUE OF THE SECURITIES IN THE COLLATERAL ACCOUNT DECLINE BELOW THE REQUIRED COLLATERAL MAINTENANCE REQUIREMENTS, UBS BANK USA MAY REQUIRE THAT THE BORROWER POST ADDITIONAL COLLATERAL, REPAY PART OR ALL OF THE BORROWER’S LOAN AND/OR SELL THE BORROWER’S SECURITIES. ANY REQUIRED LIQUIDATIONS MAY INTERRUPT THE BORROWER’S LONG-TERM INVESTMENT STRATEGIES AND MAY RESULT IN ADVERSE TAX CONSEQUENCES. ENeither UBS Bank USA nor UBS Financial Services Inc. provides legal or tax advice and nothing herein shall be construed as providing legal or tax advice. FUpon execution of this Credit Line Account Application and Agreement, the Borrower declares that all of the information requested in the Application and supplied by the Borrower is true and accurate and further agrees to promptly notify UBS Bank USA in writing of any material changes to any or all of the information contained in the Application including information relating to the Borrower’s financial situation. GSubject to any applicable financial privacy laws and regulations, data regarding the Borrower and the Borrower’s securities accounts may be shared with UBS Bank USA affiliates. Subject to any applicable financial privacy laws and regulations, the Borrower requests that UBS Bank USA share such personal financial data with non-affiliates of UBS Bank USA as is necessary or advisable to effect, administer or enforce, or to service, process or maintain, all transactions and accounts contemplated by this Agreement. HThe Borrower authorizes UBS Bank USA and UBS Financial Services Inc. to obtain a credit report or other credit references concerning the Borrower (including making verbal or written inquiries concerning credit history) or to otherwise verify or update credit information given to UBS Bank USA at any time. The Borrower authorizes the release of this credit report or other credit information to UBS Bank USA affiliates as it deems necessary or advisable to effect, administer or enforce, or to service, process or maintain all transactions and accounts contemplated by this Agreement, and for the purpose of offering additional products, from time to time, to the Borrower. The Borrower authorizes UBS Bank USA to exchange Borrower information with any party it reasonably believes is conducting a legitimate credit inquiry in accordance with the Fair Credit Reporting Act. UBS Bank USA may also share credit or other transactional experience with the Borrower’s designated UBS Financial Services Inc. Financial Advisor or other parties designated by the Borrower. IUBS Bank USA is subject to examination by various federal, state and self-regulatory organizations and the books and records maintained by UBS Bank USA are subject to inspection and subpoena by these regulators and by federal, state, and local law enforcement officials. The Borrower also acknowledges that such regulators and officials may, pursuant to treaty or other arrangements, in turn disclose such information to the officials or regulators of other countries, and that U.S. courts may be required to compel UBS Bank USA to disclose such information to the officials or regulators of other countries. The Borrower agrees that UBS Bank USA may disclose to such regulators and officials information about the Borrower and transactions in the credit line account or other accounts at UBS Bank USA without notice to the Borrower. In addition, UBS Bank USA may in the context of a private dispute be required by subpoena or other judicial process to disclose information or produce documentation related to the Borrower, the credit line account or other accounts at UBS Bank USA. The Borrower acknowledges and agrees that UBS Bank USA reserves the right, in its sole discretion, to respond to subpoenas and judicial process as it deems appropriate. JTo help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. When the Borrower opens an account with UBS Bank USA, UBS Bank USA will ask for the Borrower’s name, address, and other information that will allow UBS Bank USA to identify the Borrower. UBS Bank USA may also ask to see other identifying documents. UBS Financial Services Inc. and UBS Bank USA are firmly committed to compliance with all applicable laws, rules and regulations, including those related to combating money laundering. The Borrower understands and agrees that the Borrower must take all necessary steps to comply with the anti-money laundering laws, rules and regulations of the Borrower’s country of origin, country of residence and the situs of the Borrower’s transaction. KUBS Bank USA and its affiliates will act as creditors and, accordingly, their interests may be inconsistent with, and potentially adverse to, the Borrower’s interests. As a lender and consistent with normal lending practice, UBS Bank USA may take any steps necessary to perfect its interest in the Credit Line, issue a call for additional collateral or force the sale of the Borrower’s securities if the Borrower’s actions or inactions call the Borrower’s creditworthiness into question. Neither UBS Bank USA nor UBS Financial Services Inc. will act as Client’s investment advisor with respect to any liquidation. In fact UBS Bank USA will act as a creditor and UBS Financial Services Inc. will act as a securities intermediary. LThe Borrower understands that, if the Collateral Account is a managed account with UBS Financial Services Inc., (i) in addition to any fees payable to UBS Financial Services Inc. in connection with the Borrower’s managed account, interest will be payable to the Bank on an amount advanced to the Borrower in connection with the Credit Line Account, and (ii) the performance of the managed account might not exceed the managed account fees and the interest expense payable to the Bank in which case the Borrower’s overall rate of return will be less than the costs associated with the managed account. MUBS Bank USA may provide copies of all credit line account statements to UBS Financial Services Inc. and to any Guarantor. The Borrower acknowledges and agrees that UBS Bank USA may share any and all information regarding the Borrower and the Borrower’s accounts at UBS Bank USA with UBS Financial Services Inc. UBS Financial Services Inc. may provide copies of all statements and confirmations concerning each Collateral Account to UBS Bank USA at such times and in such manner as UBS Bank USA may request and may share with UBS Bank USA any and all information regarding the Borrower and the Borrower’s accounts with UBS Financial Services Inc.

IN WITNESS WHEREOF, the undersigned (“Borrower”) has signed this Agreement, or has caused this Agreement to be signed in its name by its duly authorized
representatives, as of the date indicated below.	DATE:

Name of Borrower: CONCEPTUS INC

By:		Title: Chief Financial Officer/CFO
	(Signature of Authorized Signatory of Borrower)* Gregory E Lichtwardt	(Title of Authorized Signatory of Borrower)
By:		Title: President and CEO
	(Signature of Authorized Signatory of Borrower)* Mark Sieczkarek	(Title of Authorized Signatory of Borrower)

The authorized signatory of the Borrower must be one of the Authorized Persons designated on the applicable UBS Bank USA supplemental form excecuted by the Borrower (e.g., the Supplemental Corporate Resolution Form (HP Form)).

5 ©2008 UBS Bank USA. All rights reserved. Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

Credit Line Agreement - Demand Facility

THIS CREDIT LINE AGREEMENT (as it may be amended, supplemented or otherwise modified from time to time, this “Agreement”) is made by and between the party or parties signing as the Borrower on the Application to which this Agreement is attached (together and individually, the “Borrower”) and UBS Bank USA (the “Bank”) and, together with the Application, establishes the terms and conditions that will govern the uncommitted demand loan facility made available to the Borrower by the Bank. This Agreement becomes effective upon the earlier of (i) notice from the Bank (which notice may be oral or written) to the Borrower that the Credit Line has been approved and (ii) the Bank making an Advance to the Borrower.

1)Definitions -“Advance” means any Fixed Rate Advance or Variable Rate Advance made by the Bank pursuant to this Agreement. -“Advance Advice” means a written or electronic notice by the Bank, sent to the Borrower, the Borrower’s financial advisor at UBS Financial Services Inc. or any other party designated by the Borrower to receive the notice, confirming that a requested Advance will be a Fixed Rate Advance and specifying the amount, fixed rate of interest and Interest Period for the Fixed Rate Advance. -“Application” means the Credit Line Account Application and Agreement that the Borrower has completed and submitted to the Bank and into which this Agreement is incorporated by reference. -“Approved Amount” means the maximum principal amount of Advances that is permitted to be outstanding under the Credit Line at any time, as specified in writing by the Bank. -“Breakage Costs” and “Breakage Fee” have the meanings specified in Section 6(b). -“Business Day” means a day on which both of the Bank and UBS Financial Services Inc. are open for business. For notices and determinations of LIBOR, Business Day must also be a day for trading by and between banks in U.S. dollar deposits in the London interbank market. -“Collateral” has the meaning specified in Section 8(a). -“Collateral Account” means, individually and collectively, each account of the Borrower or Pledgor at UBS Financial Services Inc. or UBS International Inc., as applicable, that is either identified as a Collateral Account on the Application to which this Agreement is attached or subsequently identified as a Collateral Account by the Borrower or Pledgor, either directly or indirectly through the Borrower’s or Pledgor’s UBS Financial Services Inc. financial advisor, together with all successors to those identified accounts, irrespective of whether the successor account bears a different name or account number. -“Credit Line” has the meaning specified in Section 2(a). -“Credit Line Account” means each Fixed Rate Account and each Variable Rate Account of the Borrower that is established by the Bank in connection with this Agreement and either identified on the Application or subsequently identified as a Credit Line Account by the Bank by notice to the Borrower, together with all successors to those identified accounts, irrespective of whether any successor account bears a different name or account number. -“Credit Line Obligations” means, at any time of determination, the aggregate of the outstanding principal amounts of all Advances, together with all accrued but unpaid interest on the outstanding principal amounts, any and all fees or other charges payable in connection with the Advances and any costs of collection (including reasonable attorneys’ fees) and other amounts payable by the Borrower under this Agreement, and any and all other present or future obligations of the Borrower and the other respective Loan Parties under this Agreement and the related agreements, whether absolute or contingent, whether or not due or mature. -“Event” means any of the events listed in Section 10. -“Fixed Rate Advance” means any advance made under the Credit Line that accrues interest at a fixed rate. -“Guarantor” means any party who guaranties the payment and performance of the Credit Line Obligations. -“Guaranty Agreement” means an agreement pursuant to which a Guarantor agrees to guaranty payment of the Credit Line Obligations. -“Interest Period” means, for a Fixed Rate Advance, the number of days, weeks or months requested by the Borrower and confirmed in the Advance Advice relating to the Fixed Rate Advance, commencing on the date of (i) the extension of the Fixed Rate Advance or (ii) any renewal of the Fixed Rate Advance and, in each case, ending on the last day of the period. If the last day is not a Business Day, then the Interest Period will end on the immediately succeeding Business Day. If the last Business Day would fall in the next calendar month, the Interest Period will end on the immediately preceding Business Day. Each monthly or longer Interest Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) will end on the last Business Day of the appropriate calendar month. -“Joint Borrower” has the meaning specified in Section 7(a). -“LIBOR” means, as of any date of determination for Variable Rate Advances, the prevailing London Interbank Offered Rate for deposits in U.S. dollars having a maturity of 30 days as published in The Wall Street Journal “Money Rates” Table on the date of the Advance. If the rate ceases to be regularly published by The Wall Street Journal, LIBOR will be determined by the Bank in its sole and absolute discretion. For any day that is not a Business Day, LIBOR will be the applicable LIBOR in effect immediately prior to that day. -“Loan Party” means each Borrower, Guarantor and Pledgor, each in their respective capacities under this Agreement or any related agreement. -“Person” means any natural person, company, corporation, firm, partnership, joint venture, limited liability company or limited liability partnership, association, organization or any other legal entity. -“Pledgor” means each Person who pledges to the Bank any Collateral to secure the Credit Line Obligations (or to secure the obligations of any Guarantor with respect to the guaranty of the Credit Line Obligations). Pledgors will include (i) each Borrower who pledges Collateral to secure the Credit Line Obligations, (ii) each Guarantor who has pledged collateral to secure the Credit Line Obligations or its obligations under a Guaranty Agreement, (iii) any spouse of a Borrower who executes a spouse’s pledge and consent agreement with respect to a jointly held collateral account, (iv) any other joint account holder who executes a joint account holder pledge and consent agreement with respect to a jointly held

6 ©2008 UBS Bank USA. All rights reserved. Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

collateral account, and (v) any other Person who executes a pledge agreement with respect to the Credit Line. -“Premier Credit Line” means any Credit Line with an Approved Amount equal to or greater than $100,000. -“Prime Credit Line” means any Credit Line with an Approved Amount less than $100,000. -“Prime Rate” means the floating “Prime Rate” as published in The Wall Street Journal “Money Rates” Table from time to time. The Prime Rate will change as and when the Prime Rate as published in The Wall Street Journal changes. In the event that The Wall Street Journal does not publish a Prime Rate, the Prime Rate will be the rate as determined by the Bank in its sole and absolute discretion. -“Securities Intermediary” has the meaning specified in Section 9. -“UBS Bank USA Fixed Funding Rate” means, as of any date of determination for Fixed Rate Advances, an internally computed rate established from time-to-time by the Bank, in its sole discretion, based upon the LIBOR swap curve for a corresponding period as well as the Bank’s assessment of other lending rates charged in the financial markets. -“UBS Financial Services Inc.” means UBS Financial Services Inc. and its successors. -“UBS-I” means UBS International Inc. and its successors. -“Variable Rate Advance” means any advance made under the Credit Line that accrues interest at a variable rate.” 2)Establishment of Credit Line; Termination a)Upon the effectiveness of this Agreement, the Bank establishes an UNCOMMITTED, DEMAND revolving line of credit (the “Credit Line”) in an amount up to the Approved Amount. The Bank may, from time to time upon request of the Borrower, without obligation and in its sole and absolute discretion, authorize and make one or more Advances to the Borrower. The Borrower acknowledges that the Bank has no obligation to make any Advances to the Borrower. The Bank may carry each Variable Rate Advance in a Variable Rate Account and may carry each Fixed Rate Advance in a Fixed Rate Account, but all Advances will constitute extensions of credit pursuant to a single Credit Line. The Approved Amount will be determined, and may be adjusted from time to time, by the Bank in its sole and absolute discretion. b)THE BORROWER AND EACH OTHER LOAN PARTY UNDERSTAND AND AGREE THAT THE BANK MAY DEMAND FULL OR PARTIAL PAYMENT OF THE CREDIT LINE OBLIGATIONS, AT ITS SOLE AND ABSOLUTE DISCRETION AND WITHOUT CAUSE, AT ANY TIME, AND THAT NEITHER FIXED RATE ADVANCES NOR VARIABLE RATE ADVANCES ARE EXTENDED FOR ANY SPECIFIC TERM OR DURATION. c)UNLESS DISCLOSED IN WRITING TO THE BANK AT THE TIME OF THE APPLICATION, AND APPROVED BY THE BANK, THE BORROWER AGREES NOT TO USE THE PROCEEDS OF ANY ADVANCE EITHER TO PURCHASE, CARRY OR TRADE IN SECURITIES OR TO REPAY ANY DEBT (I) USED TO PURCHASE, CARRY OR TRADE IN SECURITIES OR (II) TO ANY AFFILIATE OF THE BANK. THE BORROWER WILL BE DEEMED TO REPEAT THE AGREEMENT IN THIS SECTION 2(C) EACH TIME IT REQUESTS AN ADVANCE. d)Prior to the first Advance under the Credit Line, the Borrower must sign and deliver to the Bank a Federal Reserve Form U-1 and all other documentation as the Bank may require. The Borrower acknowledges that neither the Bank nor any of its affiliates has advised the Borrower in any manner regarding the purposes for which the Credit Line will be used. e)The Borrower consents and agrees that, in connection with establishing the Credit Line Account, approving any Advances to the Borrower or for any other purpose associated with the Credit Line, the Bank may obtain a consumer or other credit report from a credit reporting agency relating to the Borrower’s credit history. Upon request by the Borrower, the Bank will inform the Borrower: (i) whether or not a consumer or other credit report was requested; and (ii) if so, the name and address of the consumer or other credit reporting agency that furnished the report. f)The Borrower understands that the Bank will, directly or indirectly, pay a portion of the interest that it receives to the Borrower’s financial advisor at UBS Financial Services Inc. or one of its affiliates. To the extent permitted by applicable law, the Bank may also charge the Borrower fees for establishing and servicing the Credit Line Account. g)Following each month in which there is activity in the Borrower’s Credit Line Account in amounts greater than $1, the Borrower will receive an account statement showing the new balance, the amount of any new Advances, year to date interest charges, payments and other charges and credits that have been registered or posted to the Credit Line Account. h)Each of the Loan Parties understands and agrees that the Bank may, at any time, in its sole and absolute discretion, terminate and cancel the Credit Line regardless of whether or not an Event has occurred. In the event the Bank terminates and cancels the Credit Line the Credit Line Obligations shall be immediately due and payable in full. If the Credit Line Obligations are not paid in full, the Bank shall have the right, at its option, to exercise any or all of its remedies described in Section 10 of this Agreement. 3)Terms of Advances a)Advances made under this Agreement will be available to the Borrower in the form, and pursuant to procedures, as are established from time to time by the Bank in its sole and absolute discretion. The Borrower and each Loan Party agree to promptly provide all documents, financial or other information in connection with any Advance as the Bank may request. Advances will be made by wire transfer of funds to an account as specified in writing by the Borrower or by any other method agreed upon by the Bank and the Borrower. The Borrower acknowledges and agrees that the Bank will not make any Advance to the Borrower unless the collateral maintenance requirements that are established by the Bank in its sole and absolute discretion have been satisfied. b)Each Advance made under a Premier Credit Line will be a Variable Rate Advance unless otherwise designated as a Fixed Rate Advance in an Advance Advice sent by the Bank to the Borrower. The Bank will not designate any Advance as a Fixed Rate Advance unless it has been requested to do so by the Borrower (acting directly or indirectly through the Borrower’s UBS Financial Services Inc. financial advisor or other agent designated by the Borrower and acceptable to the Bank). Each Advance Advice will be conclusive and binding upon the Borrower, absent manifest error, unless the Borrower otherwise notifies the Bank in writing no later than the close of business, New York time, on the third Business Day after the Advance Advice is received by the Borrower.

7 ©2008 UBS Bank USA. All rights reserved. Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

c)Each Advance made under a Prime Credit Line will be a Variable Advance. d)Unless otherwise agreed by the Bank: (i) all Fixed Rate Advances must be in an amount of at least $100,000; and (ii) all Variable Rate Advances taken by wire transfer must be in an amount of at least $2,500. If the Borrower is a natural person, the initial Variable Rate Advance under the Credit Line must be in an amount equal to at least $25,001 (the “Initial Advance Requirement”). If the initial Advance requested by the Borrower is made in the form of a check drawn on the Credit Line that does not satisfy the Initial Advance Requirement, then, in addition to and not in limitation of the Bank’s rights, remedies, powers or privileges under this Agreement or applicable law, the Bank may, in its sole and absolute discretion: (i)pay the check drawn by the Borrower if, prior to paying that check, the Bank makes another Advance to the Borrower, which Advance shall be in an amount not less than $25,001; or (ii)pay the check drawn by the Borrower; or (iii)decline to pay (bounce) the check. If the Bank elects option (ii), no interest shall accrue on the amount of the Advance made by paying the check, and the amount of that Advance shall be due and payable to the Bank immediately (with or without demand by the Bank). 4)Interest a)Each Fixed Rate Advance will bear interest at a fixed rate and for the Interest Period each as specified in the related Advance Advice. The rate of interest payable on each Fixed Rate Advance will be determined by adding a percentage rate to the UBS Bank USA Fixed Funding Rate, as of the date that the fixed rate is determined. b)Each Variable Rate Advance under a Premier Credit Line will bear interest at a variable rate equal to LIBOR, adjusted daily, plus the percentage rate that (unless otherwise specified by the Bank in writing) is shown on Schedule I below for the Approved Amount of the Credit Line. For Premier Credit Lines, the rate of interest payable on Variable Rate Advances is subject to change without notice in accordance with fluctuations in LIBOR and in the Approved Amount. On each day that LIBOR changes or the Approved Amount crosses one of the thresholds that is indicated on Schedule I (or that is otherwise specified by the Bank in writing), the interest rate on all Variable Rate Advances will change accordingly. c)Each Variable Rate Advance under a Prime Credit Line will bear interest at a variable rate equal to the Prime Rate, adjusted daily, plus the percentage rate that (unless otherwise specified by the Bank in writing) is shown on the attached Schedule II and that corresponds to the aggregate principal amount outstanding under the Prime Credit Line on that day. For Prime Credit Lines, the rate of interest payable on Variable Rate Advances is subject to change without notice in accordance with fluctuations in the Prime Rate and in the aggregate amount outstanding under the Prime Credit Line. On each date that the Prime Rate changes or the aggregate principal amount outstanding under the Prime Credit Line crosses one of the thresholds that is indicated on Schedule II (or that is otherwise specified by the Bank in writing), the interest rate on all Variable Rate Advances will change accordingly. 5)Payments a)Each Fixed Rate Advance will be due and payable in full ON DEMAND or, if not earlier demanded by the Bank, on the last day of the applicable Interest Period. Any Fixed Rate Advance as to which the Bank has not made a demand for payment and that is not paid in full or renewed, which renewal is in the sole and absolute discretion of the Bank, (pursuant to procedures as may be established by the Bank) as another Fixed Rate Advance on or before the last day of its Interest Period, will be automatically renewed on that date as a U.S. dollar denominated, Variable Rate Advance in an amount (based, in the case of any conversion of a non-U.S. dollar denominated Fixed Rate Advance, upon the applicable, spot currency exchange rate as of the maturity date, as determined by the Bank) equal to the unpaid principal balance of the Fixed Rate Advance plus any accrued but unpaid interest on the Fixed Rate Advance, which Variable Rate Advance will then accrue additional interest at a variable rate as provided in this Agreement. b)Each Variable Rate Advance will be due and payable ON DEMAND. c)The Borrower promises to pay the outstanding principal amount of each Advance, together with all accrued but unpaid interest on each Advance, any and all fees or other charges payable in connection with each Advance, on the date the principal amount becomes due (whether by reason of demand, the occurrence of a stated maturity date, by reason of acceleration or otherwise). The Borrower further promises to pay interest in respect of the unpaid principal balance of each Advance from the date the Advance is made until it is paid in full. All interest will be computed on the basis of the number of days elapsed and a 360-day year. Interest on each Advance will be payable in arrears as follows: (i)for Fixed Rate Advances - on the last day of the Interest Period (or if the Interest Period is longer than three months, on the last day of each three month period following the date of the Advance) and on each date that all or any portion of the principal amount of the Fixed Rate Advance becomes due or is paid; and (ii)for Variable Rate Advances - on the twenty-second day of each month other than December, and on the thirty-first day of December, and on each date that all or any portion of the principal amount of the Variable Rate Advance becomes due or is paid. To the extent permitted by law, and without limiting any of the Bank’s other rights and remedies under the Agreement, interest charges on any Advance that are not paid when due will be treated as principal and will accrue interest at a variable rate from the date the payment of interest was due until it is repaid in full. d)All payments of principal, interest or other amounts payable under this Agreement will be made in immediately available funds and in the same currency in which the Advance was made, which unless otherwise agreed by the Bank, will be U.S. dollars. UBS Financial Services Inc. or UBS International Inc., as applicable, may act as collecting and servicing agent for the Bank for the Advances. All payments will be made by wire transfer of funds to an account specified by the Bank or by another method agreed upon by the Bank and the Borrower. Upon receipt of all payments, the Bank will credit the same to the Credit Line Account. The Bank shall apply the proceeds of any payments in the following order; first to any Breakage Costs, Breakage Fee, other fees, costs of collection and expenses, second to the outstanding principal amount of the related Advance and third to accrued interest. e)All payments must be made to the Bank free and clear of any and all present and future taxes (including withholding taxes), levies, imposts, duties, deductions, fees, liabilities and similar charges other than those imposed on the overall net income of the Bank. If so requested by the Bank, the Borrower will deliver to the Bank the original or a certified copy of each receipt evidencing payment of any taxes or, if no taxes are payable in respect of any payment

8 ©2008 UBS Bank USA. All rights reserved. Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

under this Agreement, a certificate from each appropriate taxing authority, or an opinion of counsel in form and substance and from counsel acceptable to the Bank in its sole and absolute discretion, in either case stating that the payment is exempt from or not subject to taxes. If any taxes or other charges are required to be withheld or deducted from any amount payable by the Borrower under this Agreement, the amount payable will be increased to the amount which, after deduction from the increased amount of all taxes and other charges required to be withheld or deducted from the amount payable, will yield to the Bank the amount stated to be payable under this Agreement. If any of the taxes or charges are paid by the Bank, the Borrower will reimburse the Bank on demand for the payments, together with all interest and penalties that may be imposed by any governmental agency. None of the Bank, UBS Financial Services Inc., UBS-I or their respective employees has provided or will provide legal advice to the Borrower or any Loan Party regarding compliance with (or the implications of the Credit Line and the related guaranties and pledges under) the laws (including tax laws) of the jurisdiction of the Borrower or any Loan Party or any other jurisdiction. The Borrower and each Loan Party are and shall be solely responsible for, and the Bank shall have no responsibility for, the compliance by the Loan Parties with any and all reporting and other requirements arising under any applicable laws. f)In no event will the total interest and fees, if any, charged under this Agreement exceed the maximum interest rate or total fees permitted by law. In the event any excess interest or fees are collected, the same will be refunded or credited to the Borrower. If the amount of interest payable by the Borrower for any period is reduced pursuant to this Section 5(f), the amount of interest payable for each succeeding period will be increased to the maximum rate permitted by law until the amount of the reduction has been received by the Bank. 6)Prepayments; Breakage Charges a)The Borrower may repay any Variable Rate Advance at any time, in whole or in part, without penalty. b)The Borrower may repay any Fixed Rate Advance, in whole or in part. The Borrower agrees to reimburse the Bank, immediately upon demand, for any loss or cost (“Breakage Costs”) that the Bank notifies the Borrower has been incurred by the Bank as a result of (i) any payment of the principal of a Fixed Rate Advance before the expiration of the Interest Period for the Fixed Rate Advance (whether voluntarily, as a result of acceleration, demand or otherwise), or (ii) the Customer’s failure to take any Fixed Rate Advance on the date agreed upon, including any loss or cost (including loss of profit or margin) connected with the Bank’s re-employment of the amount so prepaid or of those funds acquired by the Bank to fund the Advance not taken on the agreed upon date. Breakage Costs will be calculated by determining the differential between the stated rate of interest (as determined in accordance with Section 4(a) of the Agreement) for the Fixed Rate Advance and prevailing LIBOR and multiplying the differential by the sum of the outstanding principal amount of the Fixed Rate Advance (or the principal amount of Fixed Rate Advance not taken by the Borrower) multiplied by the actual number of days remaining in the Interest Period for the Fixed Rate Advance (based upon a 360-day year). The Borrower also agrees to promptly pay to the Bank an administrative fee (“Breakage Fee”) in connection with any permitted or required prepayment. The Breakage Fee will be calculated by multiplying the outstanding principal amount of the Fixed Rate Advance (or the principal amount of Fixed Rate Advance not taken by the Borrower) by two basis points (0.02%) (with a minimum Breakage Fee of $100.00). Any written notice from the Bank as to the amount of the loss or cost will be conclusive absent manifest error. 7)Joint Credit Line Account Agreement; Suspension and Cancellation a)If more than one Person is signing this Agreement as the “Borrower”, each party (a “Joint Borrower”) will be jointly and severally liable for the Credit Line Obligations, regardless of any change in business relations, divorce, legal separation, or other legal proceedings or in any agreement that may affect liabilities between the parties. Except as provided below for the reinstatement of a suspended or cancelled Credit Line, and unless otherwise agreed by the Bank in writing, the Bank may rely on, and each Joint Borrower will be responsible for, requests for Advances, directions, instructions and other information provided to the Bank by any Joint Borrower. b)Any Joint Borrower may request the Bank to suspend or cancel the Credit Line by sending the Bank a written notice of the request addressed to the Bank at the address shown on the Borrower’s periodic Credit Line Account statements. Any notice will become effective three Business Days after the date that the Bank receives it, and each Joint Borrower will continue to be responsible for paying: (i) the Credit Line Obligations as of the effective date of the notice, and (ii) all Advances that any Joint Borrower has requested but that have not yet become part of the Credit Line Obligations as of the effective date of the notice. No notice will release or in any other way affect the Bank’s interest in the Collateral. All subsequent requests to reinstate credit privileges must be signed by all Joint Borrowers comprising the Borrower, including the Joint Borrower requesting the suspension of credit privileges. Any reinstatement will be granted or denied in the sole and absolute discretion of the Bank. c)All Credit Line Obligations will become immediately due and payable in full as of the effective date of any suspension or cancellation of the Credit Line. The borrower will be responsible for the payment of all charges incurred on the Advances after the effective date. The Bank will not release any Loan Party from any of the obligations under this Agreement or any related agreement until the Credit Line Obligations have been paid in full and this Agreement has been terminated. 8)Collateral; Grant of Security Interest; Set-off a)To secure payment or performance of the Credit Line Obligations, the Borrower assigns, transfers and pledges to the Bank, and grants to the Bank a first priority lien and security interest in the following assets and rights of the Borrower, wherever located and whether owned now or acquired or arising in the future: (i) each Collateral Account; (ii) any and all money, credit balances, certificated and uncertificated securities, security entitlements, commodity contracts, certificates of deposit, instruments, documents, partnership interests, general intangibles, financial assets and other investment property now or in the future credited to or carried, held or maintained in any Collateral Account; (iii) any and all over-the- counter options, futures, foreign exchange, swap or similar contracts between the Borrower and either UBS Financial Services Inc. or any of its affiliates; (iv) any and all accounts of the Borrower at the Bank or any of its affiliates; (v) any and all supporting obligations and other rights ancillary or attributable to, or arising in any way in connection with, any of the foregoing; and (vi) any and all interest, dividends, distributions and other proceeds of any of the foregoing, including proceeds of proceeds (collectively, the “Collateral”). b)The Borrower and if applicable, any Pledgor on the Collateral Account, will take all actions reasonably requested by the Bank to evidence, maintain and perfect the Bank’s first priority security interest in, and to enable the Bank to obtain control over, the Collateral and any additional collateral pledged by the Pledgors, including but not limited to making, executing, recording and delivering to the Bank (and authorizes the Bank to file, without

9 ©2008 UBS Bank USA. All rights reserved. Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

the signature of the Borrower and any Pledgor where permitted by applicable law) financing statements and amendments thereto, control agreements, notices, assignments, listings, powers, consents and other documents regarding the Collateral and the Bank’s security interest in the Collateral in such jurisdiction and in a form as the Bank reasonably may require. Each Loan Party irrevocably authorizes and appoints each of the Bank and UBS Financial Services Inc., as collateral agent, to act as their agent and attorney-in-fact to file any documents or to execute any documents in their name, with or without designation of authority. Each Loan Party acknowledges that it will be obligated in respect of the documentation as if it had executed the documentation itself. c)The Borrower (and, if applicable, any other Pledgor on the Collateral Account) agrees to maintain in a Collateral Account, at all times, Collateral having an aggregate lending value as specified by the Bank from time to time. d)The Bank’s sole duty for the custody, safe keeping and physical preservation of any Collateral in its possession will be to deal with the Collateral in the same manner as the Bank deals with similar property for its own account. The Borrower (and, if applicable, any other Pledgor on the Collateral Account) agrees that the Bank will have no responsibility to act on any notice of corporate actions or events provided to holders of securities or other investment property included in the Collateral. The Borrower (and, if applicable, any other Pledgor on the Collateral Account) agrees to (i) notify the Bank promptly upon receipt of any communication to holders of the investment property disclosing or proposing any stock split, stock dividend, extraordinary cash dividend, spin-off or other corporate action or event as a result of which the Borrower or Pledgor would receive securities, cash (other than ordinary cash dividends) or other assets in respect of the investment property, and (ii) immediately upon receipt by the Borrower or Pledgor of any of these assets, cause them to be credited to a Collateral Account or deliver them to or as directed by the Bank as additional Collateral. e)The Borrower (and, if applicable, any other Pledgor on the Collateral Account) agrees that all principal, interest, dividends, distributions, premiums or other income and other payments received by the Bank or credited to the Collateral Account in respect of any Collateral may be held by the Bank as additional Collateral or applied by the Bank to the Credit Line Obligations. The Bank may create a security interest in any of the Collateral and may, at any time and at its option, transfer any securities or other investment property constituting Collateral to a securities account maintained in its name or cause any Collateral Account to be redesignated or renamed in the name of the Bank. f)The Borrower (and, if applicable, any other Pledgor on the Collateral Account) agrees that if a Collateral Account has margin features, the margin features will be removed by UBS Financial Services Inc. or UBS International Inc., as applicable, so long as there is no outstanding margin debit in the Collateral Account. g)If the Collateral Account permits cash withdrawals in the form of check writing, access card charges, bill payment and/ or electronic funds transfer services (for example, Resource Management Account®, Business Services Account BSA®, certain Basic Investment Accounts and certain accounts enrolled in UBS Financial Services Inc. Investment Consulting Services programs), the Borrower (and, if applicable, any other Pledgor on the Collateral Account) agrees that the “Withdrawal Limit” for the Collateral Account, as described in the documentation governing the account will be reduced on an ongoing basis so that the aggregate lending value of the Collateral remaining in the Collateral Account following the withdrawal may not be less than the amount required pursuant to Section 8(c). h)In addition to the Bank’s security interest, the Borrower (and, if applicable, any other Pledgor on the Collateral Account) agrees that the Bank will at all times have a right to set off any or all of the Credit Line Obligations at or after the time at which they become due, whether upon demand, at a stated maturity date, by acceleration or otherwise, against all securities, cash, deposits or other property in the possession of or at any time in any account maintained with the Bank or any of its affiliates by or for the benefit of the Borrower, whether carried individually or jointly with others. This right is in addition to, and not in limitation of, any right the Bank may have at law or otherwise. i)The Bank reserves the right to disapprove any Collateral and to require the Borrower at any time to deposit into the Borrower’s Collateral Account additional Collateral in the amount as the Bank requests or to substitute new or additional Collateral for any Collateral that has previously been deposited in the Collateral Account. 9)Control For the purpose of giving the Bank control over each Collateral Account and in order to perfect the Bank’s security interests in the Collateral, the Borrower and each Pledgor on the applicable Collateral Account consents to compliance by UBS Financial Services Inc., UBS-I or any other securities intermediary (in any case, the “Securities Intermediary”) maintaining a Collateral Account with entitlement orders and instructions from the Bank (or from any assignee or successor of the Bank) regarding the Collateral Account and any financial assets or other property held therein without the further consent of the Borrower or any other Pledgor on the applicable Collateral Account. Without limiting the foregoing, the Borrower and each Pledgor on the Collateral Account acknowledges, consents and agrees that, pursuant to a control agreement entered into between the Bank and the Securities Intermediary: a)The Securities Intermediary will comply with entitlement orders originated by the Bank regarding any Collateral Account without further consent from the Borrower or any Pledgor. The Securities Intermediary will treat all assets credited to a Collateral Account, including money and credit balances, as financial assets for purposes of Article 8 of the Uniform Commercial Code. b)In order to enable the Borrower and any Pledgor on the applicable Collateral Account to trade financial assets that are from time to time credited to a Collateral Account, the Securities Intermediary may comply with entitlement orders originated by the Borrower or any Pledgor on the applicable Collateral Account (or if so agreed by the Bank, by an investment adviser designated by the Borrower or any Pledgor on the applicable Collateral Account and acceptable to the Bank and the Securities Intermediary) regarding the Collateral Account, but only until the time that the Bank notifies the Securities Intermediary, that the Bank is asserting exclusive control over the Collateral Account. After the Securities Intermediary has received a notice of exclusive control and has had a reasonable opportunity to comply, it will no longer comply with entitlement orders originated by the Borrower or any Pledgor (or by any investment adviser designated by the Borrower or any Pledgor) concerning the Collateral Account. Notwithstanding the foregoing, however, and irrespective of whether it has received any notice of exclusive control, the Securities Intermediary will not comply with any entitlement order originated by the Borrower or any Pledgor (or by any investment adviser designated by the Borrower or any Pledgor) to withdraw any financial assets from a Collateral Account or to pay any money, free credit balance or other amount owing on a Collateral Account (other than cash withdrawals and payments not exceeding the “Withdrawal Limit” as contemplated in Section 8 (g)) without the prior consent of the Bank.

10 ©2008 UBS Bank USA. All rights reserved. Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

10)Remedies a)If any of the following events (each, an “Event”) occurs: (i)the Borrower fails to pay any amount due under this Agreement; (ii)the Borrower and/or any other relevant Loan Party fails to maintain sufficient Collateral in a Collateral Account as required by the Bank or any Guarantor fails to maintain collateral as required by the Bank under its Guaranty Agreement; (iii)the Borrower or any other Loan Party breaches or fails to perform any other covenant, agreement, term or condition that is applicable to it under this Agreement or any related agreement, or any representation or other statement of the Borrower (or any Loan Party) in this Agreement or in any related agreement is incorrect in any material respect when made or deemed made; (iv)the Borrower or any other Loan Party dies or is declared (by appropriate authority) incompetent or of unsound mind or is indicted or convicted of any crime or, if not an individual, ceases to exist; (v)   any voluntary or involuntary proceeding for bankruptcy, reorganization, dissolution or liquidation or similar action is commenced by or against the Borrower or any other Loan Party, or a trustee in bankruptcy, receiver, conservator or rehabilitator is appointed, or an assignment for the benefit of creditors is made, with respect to the Borrower or any other Loan Party or its property; (vi)the Borrower or any Loan Party is insolvent, unable to pay its debts as they fall due, stops, suspends or threatens to stop or suspend payment of all or a material part of its debts, begins negotiations or takes any proceeding or other step with a view to readjustment, rescheduling or deferral of all or any part of its indebtedness, which it would or might otherwise be unable to pay when due, or proposes or makes a general assignment or an arrangement or composition with or for the benefit of its creditors; (vii)  a Collateral Account (or any account in which collateral provided by a Loan Party is maintained) or any portion thereof is terminated, attached or subjected to a levy; (viii) the Borrower or any Loan Party fails to provide promptly all financial and other information as the Bank may request from time to time; (ix)any indebtedness of the Borrower or any other Loan Party in respect of borrowed money (including indebtedness guarantied by the Borrower or any other Loan Party) or in respect of any swap, forward, cap, floor, collar, option or other derivative transaction, repurchase or similar transaction or any combination of these transactions is not paid when due, or any event or condition causes the indebtedness to become, or permits the holder to declare the indebtedness to be, due and payable prior to its stated maturity; (x)final judgment for the payment of money is rendered against Borrower (or any Loan Party) and, within thirty days from the entry of judgment, has not been discharged or stayed pending appeal or has not been discharged within thirty days from the entry of a final order of affirmance on appeal; (xi)any legal proceeding is instituted or any other event occurs or condition exists that in the Bank’s judgment calls into question (A) the validity or binding effect of this Agreement or any related agreement or any of the Borrower’s (or any other Loan Party’s) obligations under this Agreement or under any related agreement or (B) the ability of the Borrower (or any Loan Party) to perform its obligations under this Agreement, or under any related agreement; or (xii)  the Bank otherwise deems itself or its security interest in the Collateral insecure or the Bank believes in good faith that the prospect of payment or other performance by any Loan Party is impaired. then, the Credit Line Obligations will become immediately due and payable (without demand) and the Bank may, in its sole and absolute discretion, liquidate, withdraw or sell all or any part of the Collateral and apply the same, as well as the proceeds of any liquidation or sale, to any amounts owed to the Bank, including any applicable Breakage Costs and Breakage Fee. The Bank will not be liable to any Loan Party in any way for any adverse consequences (for tax effect or otherwise) resulting from the liquidation of appreciated Collateral. Without limiting the generality of the foregoing, the sale may be made in the Bank’s sole and absolute discretion by public sale on any exchange or market where business is then usually transacted or by private sale, and the Bank may be the purchaser at any public or private sale. Any Collateral that may decline speedily in value or that customarily is sold on a recognized exchange or market may be sold without providing any Loan Party with prior notice of the sale. Each Loan Party agrees that, for all other Collateral, two calendar days notice to the Loan Party, sent to its last address shown in the Bank’s account records, will be deemed reasonable notice of the time and place of any public sale or time after which any private sale or other disposition of the Collateral may occur. Any amounts due and not paid on any Advance following an Event will bear interest from the day following the Event until fully paid at a rate per annum equal to the interest rate applicable to the Advance immediately prior to the Event plus 2.00%. In addition to the Bank’s rights under this Agreement, the Bank will have the right to exercise any one or more of the rights and remedies of a secured creditor under the Utah Uniform Commercial Code, as then in effect, or under any other applicable law. b)Nothing contained in this Section 10 will limit the right of the Bank to demand full or partial payment of the Credit Line Obligations, in its sole and absolute discretion and without cause, at any time, whether or not an Event has occurred and is continuing. c)All rights and remedies of the Bank under this Agreement are cumulative and are in addition to all other rights and remedies that the Bank may have at law or equity or under any other contract or other writing for the enforcement of the security interest herein or the collection of any amount due under this Agreement. d)Any non-exercise of rights, remedies and powers by the Bank under this Agreement and the other documents delivered in connection with this Agreement shall not be construed as a waiver of any rights, remedies and powers. The Bank fully reserves its rights to invoke any of its rights, remedies and powers at any time it may deem appropriate. 11)Representations, Warranties and Covenants by the Loan Parties Each Borrower and each other Loan Party (if applicable) makes the following representations, warranties and covenants (and each Borrower will be deemed to have repeated each representation and warranty each time a Borrower requests an Advance) to the Bank:

11 ©2008 UBS Bank USA. All rights reserved. Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

a)Except for the Bank’s rights under this Agreement and the rights of the Securities Intermediary under any account agreement, the Borrower and each relevant Pledgor owns the Collateral, free of any interest, lien or security interest in favor of any third party and free of any impediment to transfer; b)Each Loan Party: (i) if a natural Person, is of the age of majority; (ii) is authorized to execute and deliver this Agreement and to perform its obligations under this Agreement and any related agreement; (iii) is not an employee benefit plan, as that term is defined by the Employee Retirement Income Security Act of 1974, or an Individual Retirement Credit Line Account (and none of the Collateral is an asset of a plan or account); and (iv) unless the Loan Party advises the Bank to the contrary, in writing, and provides the Bank with a letter of approval, where required, from its employer, is not an employee or member of any exchange or of any corporation or firm engaged in the business of dealing, either as a broker or as principal, in securities, bills of exchange, acceptances or other forms of commercial paper; c)Neither the Borrower nor any Pledgor on the Collateral Account has pledged or will pledge the Collateral or grant a security interest in the Collateral to any party other than the Bank or the Securities Intermediary, or has permitted or will permit the Collateral to become subject to any liens or encumbrances (other than those of the Bank and the Securities Intermediary), during the term of this Agreement; d)No Loan Party is in default under any material contract, judgment, decree or order to which it is a party or by which it or its properties may be bound; e)Each Loan Party has duly filed all tax and information returns required to be filed and has paid all taxes, fees, assessments and other governmental charges or levies that have become due and payable, except to the extent such taxes or other charges are being contested in good faith and are adequately reserved against in accordance with GAAP. f)The Borrower and each relevant Pledgor (i) is and at all times will continue to be the legal and beneficial owner of all assets held in or credited to any Collateral Account or otherwise included in the Collateral, and (ii) does not hold any assets held in or credited to any Collateral Account or otherwise included in the Collateral in trust or subject to any contractual or other restrictions on use that would prevent the use of such assets to (a) repay the Bank or (b) be pledged as Collateral in favor of the Bank. The provisions of this Section 11 will survive the termination of this Agreement or any related agreement and the repayment of the Credit Line Obligations. 12)Indemnification; Limitation on Liability of the Bank and the Securities Intermediary Borrower agrees to indemnify and hold harmless the Bank and the Securities Intermediary, their affiliates and their respective directors, officers, agents and employees against any and all claims, causes of action, liabilities, lawsuits, demands and damages, for example, any and all court costs and reasonable attorneys fees, in any way relating to or arising out of or in connection with this Agreement, except to the extent caused by the Bank’s or Securities Intermediary’s breach of its obligations under this Agreement. Neither the Bank nor the Securities Intermediary will be liable to any party for any consequential damages arising out of any act or omission by either of them with respect to this Agreement or any Advance or Collateral Account. The provisions of this Section 12 will survive the termination of this Agreement or any related agreement and the repayment of the Credit Line Obligations. 13)Acceptance of Application and Agreement; Applicable Law THIS APPLICATION AND AGREEMENT WILL BE RECEIVED AND ACCEPTED BY BANK IN THE STATE OF UTAH, OR IF THIS APPLICATION AND AGREEMENT IS DELIVERED TO BANK’S AGENT, UBS FINANCIAL SERVICES INC., IT WILL BE RECEIVED AND ACCEPTED WHEN RECEIVED BY UBS FINANCIAL SERVICES INC.’S UNDERWRITING DEPARTMENT. DELIVERY OF THE APPLICATION AND AGREEMENT TO THE BORROWER’S FINANCIAL ADVISOR AT UBS FINANCIAL SERVICES INC. WILL NOT BE CONSIDERED RECEIPT OR ACCEPTANCE BY BANK. ALL DECISIONS MADE BY BANK REGARDING THE CREDIT LINE WILL BE MADE IN UTAH. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF UTAH APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY IN THE STATE OF UTAH AND, IN CONNECTION WITH THE CHOICE OF LAW GOVERNING INTEREST, THE FEDERAL LAWS OF THE UNITED STATES, EXCEPT THAT WITH RESPECT TO THE COLLATERAL ACCOUNT AND THE BANK’S SECURITY INTEREST THEREIN, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, THE NEW YORK UNIFORM COMMERCIAL CODE, AND FOR PURPOSES OF THIS AGREEMENT, THE COLLATERAL ACCOUNT AND THE BANK’S SECURITY INTEREST THEREIN, THE JURISDICTION OF UBS FINANCIAL SERVICES INC. AND UBS-I SHALL BE DEEMED TO BE THE STATE OF NEW YORK. 14)Assignment This Agreement may not be assigned by the Borrower without the prior written consent of the Bank. This Agreement will be binding upon and inure to the benefit of the heirs, successors and permitted assigns of the Borrower. The Bank may assign this Agreement, and this Agreement will inure to the benefit of the Bank’s successors and assigns. 15)Amendment This Agreement may be amended only by the Bank, including, but not limited to, (i) the addition or deletion of any provision of this Agreement and (ii) the amendment of the (x) “Spread Over LIBOR/UBS Bank USA Fixed Funding Rate” in Schedule I or (y) “Spread Over Prime” in Schedule II to this Agreement, at any time by sending written notice, signed by an authorized officer of the Bank, of an amendment to the Borrower. The amendment shall be effective as of the date established by the Bank. This Agreement may not be amended orally. The Borrower or the Bank may waive compliance with any provision of this Agreement, but any waiver must be in writing and will not be deemed to be a waiver of any other provision of this Agreement. The provisions of this Agreement constitute the entire agreement between the Bank and the Borrower with respect to the subject matter hereof and supersede all prior or contemporaneous agreements, proposals, understandings and representations, written or oral, between the parties with respect to the subject matter hereof. 16)Severability If any provision of this Agreement is held to be invalid, illegal, void or unenforceable, by reason of any law, rule, administrative order or judicial or arbitral decision, the determination will not affect the validity of the remaining provisions of this Agreement. 17)Choice of Forum; Waiver of Jury Trial a)ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY JUDGMENT ENTERED BY ANY COURT REGARDING THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT WILL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE

	©2008 UBS Bank USA. All rights reserved.
12	Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

THIRD JUDICIAL DISTRICT COURT FOR THE STATE OF UTAH OR IN THE UNITED STATES DISTRICT COURT FOR THE STATE OF UTAH. EACH OF THE LOAN PARTIES IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE THIRD JUDICIAL DISTRICT COURT FOR THE STATE OF UTAH AND OF THE UNITED STATES DISTRICT COURT FOR THE STATE OF UTAH FOR THE PURPOSE OF ANY SUCH ACTION OR PROCEEDING AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTION OR PROCEEDING. EACH OF THE LOAN PARTIES IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE NOW OR IN THE FUTURE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. b)EACH OF THE LOAN PARTIES (FOR ITSELF, ANYONE CLAIMING THROUGH IT OR IN ITS NAME, AND ON BEHALF OF ITS EQUITY HOLDERS) IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY REGARDING ANY CLAIM BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. c)Any arbitration proceeding between the Borrower (or any other Loan Party) and the Securities Intermediary, regardless of whether or not based on circumstances related to any court proceedings between the Bank and the Borrower (or the other Loan Party), will not provide a basis for any stay of the court proceedings. d)Nothing in this Section 17 will be deemed to alter any agreement to arbitrate any controversies which may arise between the Borrower (or any other Loan Party) and UBS Financial Services Inc. or its predecessors, and any claims between the Borrower or the Loan Party, as applicable, and UBS Financial Services Inc. or its employees (whether or not they have acted as agents of the Bank) will be arbitrated as provided in any agreement between the Borrower or the Loan Party, as applicable, and UBS Financial Services Inc. 18)State Specific Provisions and Disclosures a)For residents of Ohio: The Ohio laws against discrimination require that all creditors make credit equally available to all creditworthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio civil rights commission administers compliance with this law. b)For residents of Oregon: NOTICE TO BORROWER: DO NOT SIGN THIS AGREEMENT BEFORE YOU READ IT. THIS AGREEMENT PROVIDES FOR THE PAYMENT OF A PENALTY IF YOU WISH TO REPAY A FIXED RATE ADVANCE PRIOR TO THE DATE PROVIDED FOR REPAYMENT IN THE AGREEMENT. c)For residents of Vermont: NOTICE TO BORROWER: THE ADVANCES MADE UNDER THIS AGREEMENT ARE DEMAND LOANS AND SO MAY BE COLLECTED BY THE LENDER AT ANY TIME. A NEW LOAN MUTUALLY AGREED UPON AND SUBSEQUENTLY ISSUED MAY CARRY A HIGHER OR LOWER RATE OF INTEREST. NOTICE TO JOINT BORROWER: YOUR SIGNATURE ON THE AGREEMENT MEANS THAT YOU ARE EQUALLY LIABLE FOR REPAYMENT OF THIS LOAN. IF THE BORROWER DOES NOT PAY, THE LENDER HAS A LEGAL RIGHT TO COLLECT FROM YOU. d)For residents of California: (i)    Any person, whether married, unmarried, or separated, may apply for separate credit. (ii)   As required by law, you are notified that a negative credit report reflecting on your credit record may be submitted to a credit reporting agency if you fail to fulfill the terms of your credit obligations. (iii)  The Borrower will notify the Bank, within a reasonable time, of any change in the Borrower’s name, address, or employment. (iv)  The Borrower will not attempt to obtain any Advance if the Borrower knows that the Borrower’s credit privileges under the Credit Line have been terminated or suspended. (v)   The Borrower will notify the Bank by telephone, telegraph, letter, or any other reasonable means that an unauthorized use of the Credit Line has occurred or may occur as the result of the loss or theft of a credit card or other instrument identifying the Credit Line, within a reasonable time after the Borrower’s discovery of the loss or theft, and will reasonably assist the Bank in determining the facts and circumstances relating to any unauthorized use of the Credit Line. 19)Account Agreement Each Loan Party acknowledges and agrees that this Agreement supplements their account agreement(s) with the Securities Intermediary relating to the Collateral Account and, if applicable, any related account management agreement(s) between the Loan Party and the Securities Intermediary. In the event of a conflict between the terms of this Agreement and any other agreement between the Loan Party and the Securities Intermediary, the terms of this Agreement will prevail. 20)Notices Unless otherwise required by law, all notices to a Loan Party may be oral or in writing, in the Bank’s discretion, and if in writing, delivered or mailed by the United States mail, or by overnight carrier or by telecopy to the address of the Loan Party shown on the records of the Bank. Each Loan Party agrees to send notices to the Bank, in writing, at such address as provided by the Bank from time to time.

	©2008 UBS Bank USA. All rights reserved.
13	Sign and date the application on page 5

	UBS Bank USA
		Variable Credit Line Account Number: (if applicable)
Credit Line Agreement		Fixed Credit Line Account Number: (if applicable)
		SS# / TIN
			Internal Use Only

Schedule I to UBS Bank USA Credit Line Agreement

Schedule of Percentage Spreads Over LIBOR or the UBS Bank USA Fixed

Funding Rate, as applicable

Aggregate Approved Amount	Spread Over LIBOR/UBS Bank
	USA Fixed Funding Rate
$100,000 to $249,999	5.00%
$250,000 to $499,999	3.00%
$500,000 to $999,999	2.00%
$1,000,000 to $2,499,999	1.75%
$2,500,000 to $4,999,999	1 .50%
$5,000,000 and over	1 .25%

Schedule II to UBS Bank USA Credit Line Agreement

Schedule of Percentage Spreads Over Prime

Outstanding Amount under Credit Line	Spread Over Prime
$0 to $49,999	3.50%
$50,000 to $99,999	3.00%

NOTICE TO CO-SIGNER (Traduccion en Ingles Se Requiere Por La Ley)

You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn’t pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.

You may have to pay to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.

The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.

This notice is not the contract that makes you liable for the debt.

AVISO PARA EL FIADOR (Spanish Translation Required By Law)

Se le esta pidiendo que garantice esta deuda. Pienselo con cuidado antes de ponerse de acuerdo. Si la persona que ha pedido este prestamo no paga la deuda, usted tendra que pagarla. Este seguro de que usted podra pagar si sea obligado a pagarla y de que usted desea aceptar la responsabilidad.

Si la persona que ha pedido el prestamo no paga la deuda, es posible que usted tenga que pagar la suma total de la deuda, mas los cargos por tardarse en el pago o el costo de cobranza, lo cual aumenta el total de esta suma.

El acreedor (financiero) puede cobrarle a usted sin, primeramente, tratar de cobrarle al deudor. Los mismos metodos de cobranza que pueden usarse contra el deudor, podran usarse contra usted, tales como presentar una demanda en corte, quitar parte de su sueldo, etc. Si alguna vez no se cumpla con la obligacion de pagar esta deuda, se puede incluir esa informacion en la historia de credito de usted.

Este aviso no es el contrato mismo en que se le echa a usted la responsabilidad de la deuda.

	©2008 UBS Bank USA. All rights reserved.
14	Sign and date the application on page 5

UBS Bank USA

	KU
ADDENDUM TO CREDIT LINE ACCOUNT APPLICATION AND AGREEMENT

Credit Line Account	Account Number
CONCEPTUS INC
Collateral Account	Account Number
CONCEPTUS INC

This Addendum (this “Addendum”) is attached to, incorporated by reference into and is fully a part of the Credit Line Account Application and Agreement between UBS Bank USA (the "Bank”) and the borrower named in the signature area below (the “Borrower”), dated as of the date hereof (as amended or otherwise modified from time to time, the “Agreement”). This Addendum and the Agreement shall not become effective and binding upon the Bank until this Addendum has been executed by the Borrower and accepted by the Bank at its home office. Any conflict between the terms of the Agreement and this Addendum shall be resolved in accordance with the terms of this Addendum. Defined terms used herein to have the respective meanings set forth in the Agreement unless otherwise defined in this Addendum.

A.The Bank, UBS Financial Services Inc. and the Borrower each acknowledge and agree that:

Definitions

1.The Agreement is amended by adding the following definitions in Section 1:

“·	“Additional Payments” has the meaning specified in Section 5 g).
·	“ARS Collateral” means any and all Collateral consisting of Auction Rate Securities.
·	“ARS Payments” has the meaning specified in Section 5 g).
·	“Auction Rate Securities” means any and all securities determined by the Bank, in its sole and absolute discretion, as being commonly referred to as “Auction Rate Securities,” which, for greater certainty, include, without limitation, debt securities on which the interest rate payable is periodically re-set by an auction process and/or equity securities on which any dividend payable is periodically re-set by an auction process.
·	“Taxable SLARC Maximum Auction Rate” means the applicable “reset rate,” “maximum auction rate” or other similar rate as may be specified in the prospectus or other documentation governing any applicable Taxable Student Loan Auction Rate Securities as representing the failed auction rate or similar rate payable on such Auction Rate Securities, in each case expressed as a per-annum rate and as calculated in the Bank’s sole and absolute discretion.
·	“Taxable Student Loan Auction Rate Securities” means any and all Auction Rate Securities Collateral consisting of securities determined by the Bank, in its sole and absolute discretion, as being commonly referred to as “Student Loan Auction Rate Securities” and on which the interest or dividend rate paid or payable to the Borrower by the issuer of such securities is taxable to the Borrower.”

Terms of Advances

2.The Agreement is amended by adding the following as Section 3 e):

“The Borrower acknowledges that the Bank will not make an Advance against the ARS Collateral in amounts equal to the fair market or par value of the ARS Collateral unless the Borrower arranges for another person or entity to provide additional collateral or assurances on terms and conditions satisfactory to the Bank. In requesting an Approved Amount equal to the par value of the ARS Collateral, the Borrower has arranged for UBS Financial Services Inc. to provide, directly or through a third party, the pledge of additional collateral and/or assurances to the Bank so that the Bank will consider making Advances from time to time in accordance with the terms of this Agreement and in amounts equal to, in the aggregate, the par value of the ARS Collateral at the date of an Advance. In addition, the Borrower, the Bank and UBS Financial Services Inc. acknowledge and agree that if (a) the Bank is repaid all of the Credit Line Obligations due to the Bank under the Agreement and this Addendum and (b) as part of such repayment, the Bank realizes on the additional collateral and/or assurances pledged or otherwise provided by UBS Financial Services and/or any such third party to the Bank, then the Agreement shall not terminate and the Bank shall automatically assign to UBS Financial Services Inc. and any such third party, and UBS Financial Services Inc. and any such third party shall automatically assume and be subrogated to, all of the Bank’s rights, claims and interest in and under the Agreement and this Addendum, including without limitation, the security interest in the Collateral, including without limitation the ARS Collateral, granted the Bank under the Agreement and this Addendum (further including, without limitation, interest, dividends, distributions, premiums, other income and payments received in respect of any and all such Collateral) to the extent of the amount that the Bank has realized on all or any part of the additional collateral and/or assurances pledged or otherwise provided by UBS Financial Services and/or any such third party to the Bank in order to effect the repayment of the Credit Line Obligations due to the Bank under the Agreement. Upon such automatic assignment and subrogation, UBS Financial Services Inc. and any such third party shall be entitled to directly exercise any and all rights and remedies afforded the Bank under the Agreement, this Addendum and any and all other documents and agreements entered into in connection with the Agreement and/or this Addendum.”

1 of 5

	Credit Line Account Number
		CP

Interest

3.The Agreement is amended by adding the following as a new Section 4 d), Section 4 e) and Section 4 f):

“d)	Notwithstanding anything to the contrary in this Agreement, and subject to the provisions of Sections 4 e) and f) of this Agreement, the interest rate charged on any and all outstanding Variable Rate Advances shall be the lesser of (i) the amount prescribed by Sections 4 a), b), or c) of this Agreement, as applicable, and (ii) the then applicable weighted average rate of interest or dividend rate paid to the Borrower by the issuer of the ARS Collateral.
e)	The Bank and the Borrower acknowledge and agree that the Bank shall be entitled to determine or adjust, at any time and from time to time, the interest rate payable by the Borrower to the Bank on all or any part of the outstanding Variable Rate Advances to reflect any changes in the composition of the ARS Collateral, to address any inability to determine interest rates, or for any other reason that, in the Bank’s sole and absolute discretion, is necessary to give effect to the intent of the provisions of this Agreement, including, without limitation, this Section 4 (it being acknowledged and agreed that the provisions of this Section 4 are intended to cause the interest payable by the Borrower under this Agreement to equal the interest or dividend rate payable to the Borrower by the issuer of any ARS Collateral) and any and all such adjustments by the Bank hereunder shall be conclusive and binding on the Bank and the Borrower absent manifest error.
f)	If and to the extent that any or all of the ARS Collateral consists of Taxable Student Loan Auction Rate Securities, then notwithstanding anything to the contrary in this Agreement, when calculating such weighted average interest rate, the interest rate paid to the Borrower with respect to such Taxable Student Loan Auction Rate Securities shall be deemed to be equal to (i) for the period from the date of this Addendum through and including January 21, 2009, the applicable coupon rate(s) and (ii) from January 22, 2009 and thereafter, the then applicable Taxable SLARC Maximum Auction Rate, for, and to the extent of, such Taxable Student Loan Auction Rate Securities. The Borrower will be charged interest on the Loan in months in which the Borrower does not receive interest on the Taxable Student Loan Auction Rate Securities.”

Payments

4.The Agreement is amended by adding the following as Section 5 g):

“The Borrower will make additional payments (“Additional Payments”) as follows:

· The proceeds of any liquidation, redemption, sale or other disposition of all or part of the ARS Collateral will be automatically transferred to the Bank as payments. The amount of these payments will be determined by the proceeds received in the Collateral Account, and may be as much as the total Credit Line Obligations.

· All other interest, dividends, distributions, premiums, other income and payments that are received in the Collateral Account in respect of any ARS Collateral will be automatically transferred to the Bank as payments. These are referred to as “ARS Payments.” The amount of each ARS Payment will vary, based on the proceeds received in the Collateral Account. The Bank estimates that the ARS Payments will range from zero to fifteen ($15.00) dollars per month per $1,000 in par value of Pledged ARS. The Bank will notify the Borrower at least ten (10) days in advance of any ARS Payment that falls outside of this range. If the Borrower would prefer to have advance notice of each payment to be made to Advances, the Borrower may cancel ARS Payments as described below.

· The Borrower agrees that any cash, check or other deposit (other than a deposit of securities) made to the Collateral Account is an individual authorization to have such amount transferred to the Bank as a payment. The amount of each payment is the amount of the deposit.

Each Additional Payment will be applied, as of the date received by the Bank, in the manner set forth in the last sentence of Section 5 d). The Borrower acknowledges that neither the Bank nor UBS Financial Services Inc. sets or arranges for any schedule of Additional Payments. Instead, Additional Payments will be transferred automatically from the Collateral Account whenever amounts are received in the Collateral Account, generally on the second Business Day after receipt.

The Borrower may elect to stop ARS Payments at any time, and this election will cancel all ARS Payments that would occur three (3) Business Days or more after the Bank receives such notice. If the Borrower stops ARS Payments, the Borrower will continue to be obligated to pay principal, interest, and other amounts pursuant to the Agreement. If the Borrower elects to cancel ARS Payments, all other Additional Payments will be cancelled. Cancelling ARS Payments and Additional Payments may result in higher interest charges by the Bank because amounts received in the Collateral Account will not be automatically transferred and credited. Any amounts received in the Collateral Account will remain in the Collateral Account unless the Bank permits you to withdraw all or part of such amounts. Your notice to cancel must be sent to: Attention: Head of Credit Risk Monitoring, UBS Bank USA, 299 South Main Street, Suite 2275, Salt Lake City, Utah 84111, or call (801) 741-0310.

Important Disclosure About Required Payments. If Additional Payments are sufficient to pay all accrued interest on Advances on or before a due date, then the Borrower need not make an additional interest payment. Excess Additional Payments will be applied against principal. However, if Additional Payments are not sufficient to pay all accrued interest on Advances on or before a due date, then the Bank may, in its sole discretion (1) capitalize unpaid interest as an additional Advance, or (2) require the Borrower to make payment of all accrued and unpaid interest.”

2 of 5

	Credit Line Account Number
		CP

Remedies

5.The Agreement is amended by adding the following as Section 10 e):

“The Borrower agrees that in the event the Bank determines to liquidate or sell any Collateral, the Bank shall, to the fullest extent permitted by applicable law, have the right to do so in any manner, including, without limitation, the sale of Collateral individually or in a block, for cash or for credit, in a public or private sale, with or without public notice, through the use of sealed bids or otherwise, with the aid of any advisor or agent who may be an affiliate of the Bank or in any other manner as the Bank in its sole discretion shall choose. The Borrower acknowledges that the price the Bank obtains for Collateral in the Bank’s chosen method of sale may be lower than might be otherwise obtained in another method of sale, and the Borrower hereby agrees that any such sale shall not be considered to be not commercially reasonable solely because of such lower price. The Borrower understands that there may not be a liquid market for the Collateral and that, as a result, the price received for the Collateral upon liquidation or sale by the Bank may be substantially less than the Borrower paid for such Collateral or than the last market value available for it, if any. The Borrower further agrees that any sale by the Bank shall not be considered to be not commercially reasonable solely because there are few (including only one) or no third parties who submit bids or otherwise offer to buy the Collateral. The Borrower understands that the Bank’s sale of any of the Collateral may be subject to various state and federal property and/or securities laws and regulations, and that compliance with such laws and regulations may result in delays and/or a lower price being obtained for the Collateral. The Borrower agrees that the Bank shall have the right to restrict any prospective purchasers to those who, in the Bank’s sole discretion, the Bank deems to be qualified. The Borrower acknowledges that the Bank shall have sole authority to determine, without limitation, the time, place, method of advertisement and manner of sale and that the Bank may delay or adjourn any such sale in its sole discretion. The Borrower expressly authorizes the Bank to take any action with respect to the Collateral as the Bank deems necessary or advisable to facilitate any liquidation or sale, and the Borrower agrees that the Bank shall not be held liable for taking or failing to take any such action, regardless if a greater price may have been obtained for the Collateral if such action was or was not taken, as applicable. The Borrower hereby waives, to the fullest extent permitted by law, any legal right of appraisal, notice, valuation, stay, extension, moratorium or redemption that the Borrower would otherwise have with respect to a sale of the Collateral.”

Representations, Warranties and Covenants by the Loan Parties

6.The Agreement is amended by adding the following as Section 11 g):

“g) If at any time there are Credit Line Obligations outstanding under the Credit Line, then in connection with any ARS Collateral, if at any time any such ARS Collateral may be sold, exchanged, redeemed, transferred or otherwise conveyed by the Borrower for gross proceeds that are, in the aggregate, not less than the par value of such Auction Rate Securities to any party, including, without limitation, to UBS Financial Services Inc. and/or any of its affiliates (any such sale, exchange, redemption, transfer or conveyance referred to herein as an “ARS Liquidation”), the Borrower agrees (i) to immediately effect such ARS Liquidation to the extent necessary to satisfy all Credit Line Obligations in full and (ii) that the proceeds of any such ARS Liquidation so effected shall be immediately and automatically used to pay down any and all such outstanding Credit Line Obligations to the extent of such proceeds. The Borrower hereby acknowledges and agrees with the Bank and directs UBS Financial Services Inc. that to the extent permitted by applicable law, this Section 11 g) shall constitute an irrevocable instruction, direction and standing sell order to UBS Financial Services Inc. to effect an ARS Liquidation to the extent it is possible to do so at any time during the term of this Agreement. The Borrower further agrees with the Bank and UBS Financial Services Inc. to execute and deliver to the Bank and/or UBS Financial Services Inc. such further documents and agreements as may be necessary in the sole and absolute discretion of the Bank and/or UBS Financial Services Inc. to effect the foregoing irrevocable instruction, direction and standing sell order.”

Waivers

7.The Agreement is amended by adding the following as Section 21:

“The Borrower hereby (i) acknowledges and admits its indebtedness and obligations to the Bank under the Agreement; and (ii) acknowledges, admits and agrees that it has no and shall assert no defenses, offsets, counterclaims or claims in respect of its obligations under the Agreement, in each case notwithstanding any claim or asserted claim that it may have, or purport to have, against any affiliate of the Bank.”

Schedules I and II

8.	a)	Schedule I of the Agreement is amended in its entirety to read as follows:
		$25,001 to $499,999	2.750%
		$500,000 to $999,999	1.750%
		$1,000,000 to $4,999,999	1.500%
		$5,000,000 and over	1.250%
	b)	Schedule II of the Agreement is deleted in its entirety and replaced with: “[Intentionally Deleted].”

3 of 5

	Credit Line Account Number
		CP

No Fixed Rate Advances/Prime Credit Lines

9.The Bank and the Borrower acknowledge and agree that notwithstanding anything to the contrary in the Agreement: (a) the Borrower shall not request and the Bank shall not make a Fixed Rate Advance; and (b) there shall be no Prime Credit Line facilities available under the Agreement.

Alternative Financing

10.If at any time the Bank exercises its right of demand under Section 5 a), Section 5 b) and Section 10 b) of the Loan Agreement for any reason other than (i) the occurrence of an Event under Sections 10 a) (iv), (v), (vii), (ix) (if and to the extent any indebtedness specified thereunder is to the Bank or any of the Bank’s affiliates), or (xi) of the Agreement; or (ii) in connection with any termination for cause by UBS Financial Services Inc. of the overall customer relationship between UBS Financial Services Inc. and the Borrower or its affiliates, then UBS Financial Services Inc. shall, or shall cause one or more of its affiliates, to provide as soon as reasonably possible, alternative financing on substantially the same terms and conditions as those under the Agreement and the Bank agrees that the Agreement shall remain in full force and effect until such time as such alternative financing has been established.

Margin Calls; Interest Payments

11.Notwithstanding anything to the contrary in the Agreement, the Bank and the Borrower acknowledge and agree that UBS Financial Services Inc. or any affiliate thereof may, in its sole and absolute discretion, elect to: (i) provide additional collateral to the Bank in the form of United States Treasury Securities if and to the extent that the Borrower does not maintain in a Collateral Account, Collateral having an aggregate lending value as specified by the Bank from time to time; and/or (ii) satisfy any and all amounts of accrued and unpaid interest that are otherwise due and payable by the Borrower to the Bank under the Agreement, to the extent that the amount of any Additional Payments under the Agreement are insufficient to satisfy any and all such amounts.

Collateral Account Features

12.Section 8 f) of the Agreement is deleted in its entirety and replaced with the following:

“If a Collateral Account has margin features, the margin features will be removed by UBS Financial Services Inc. or UBS International Inc., as applicable, so long as there is no outstanding margin debit in the Collateral Account. If a Collateral Account has Resource Management Account® or Business Services Account BSA® features, such as check writing, cards, bill payment, or electronic funds transfer services, all such features shall be removed by UBS Financial Services Inc. or UBS International Inc., as applicable.”

No Credit Line Checks

13.The Bank and the Borrower acknowledge and agree that notwithstanding anything to the contrary in the Agreement, the Credit Line shall not have Credit Line checks.

Headings

14.The headings of each of Section of this Addendum is for descriptive purposes only and shall not be deemed to modify or qualify the terms, conditions, rights or obligations described in such Section.

B.This Addendum may be signed in multiple original counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

[Signature page(s) follows]

4 of 5

	Credit Line Account Number
		CP

IN WITNESS WHEREOF, each of the parties has signed this Addendum pursuant to due and proper authority as of the date set forth below.

	Gregory E Lichtwardt, Chief Financial Officer/
Date	CFO	Signature
	Print Name and Title
	Mark Sieczkarek, President and CEO
Date	Print Name and Title	Signature

UBS BANK USA
By:
Name:
Title:
By:
Name:
Title:
UBS FINANCIAL SERVICES INC.
By:
Name:
Title:
By:
Name:
Title:
Date:	, 2008

5 of 5

EX-21

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 21

CONCEPTUS, INC.

LIST OF SUBSIDIARIES

As of December 31, 2008

Foreign Subsidiary	Jurisdiction in Which Incorporated or Organized
Conceptus SAS	France
Conceptus Medical Limited	United Kingdom

QuickLinks

Exhibit 21

CONCEPTUS, INC. LIST OF SUBSIDIARIES As of December 31, 2008

EX-23.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

        We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-139455) and Form S-8 (No. 333-152180, No. 333-150030, No. 333-147826, No. 333-144673, No. 333-137010, No. 333-134428, No. 333-116960, No. 333-116959, No. 333-105553, No. 333-97369, No. 333-63070, No. 333-42656, No. 333-04186, and No. 333-30111) of Conceptus, Inc. of our report dated March 13, 2009 relating to the consolidated financial statements, financial statement schedule, and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California
March 13, 2009

QuickLinks

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

EX-31.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.1

CERTIFICATIONS

I, Mark Sieczkarek, certify that:

1.

I have reviewed this report on Form 10-K of Conceptus, Inc., a Delaware corporation;

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 registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusion 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

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant'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 registrant'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 registrant's internal control over financial reporting.

Date: March 13, 2009

/s/ MARK M. SIECZKAREK
Mark M. Sieczkarek
President and Chief Executive Officer

QuickLinks

Exhibit 31.1

CERTIFICATIONS

EX-31.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.2

I, Gregory E. Lichtwardt, certify that:

1.

I have reviewed this report on Form 10-K of Conceptus, Inc., a Delaware corporation;

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 registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusion 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

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant'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 registrant'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 registrant's internal control over financial reporting.

Date: March 13, 2009

/s/ GREGORY E. LICHTWARDT
Gregory E. Lichtwardt
Executive Vice President, Treasurer and Chief
Financial Officer

QuickLinks

Exhibit 31.2

EX-32.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 32.1

Certification of Chief Executive Officer

        Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Conceptus, Inc., a Delaware corporation (the "Company") hereby certifies, to such officer's knowledge, that:

        (i)    the accompanying Annual Report on Form 10-K of the Company for the twelve months ended December 31, 2008 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

        (ii)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 13, 2009

/s/ MARK M. SIECZKAREK

Mark M. Sieczkarek

President and Chief Executive Officer

QuickLinks

Exhibit 32.1

Certification of Chief Executive Officer

EX-32.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 32.2

Certification of Chief Financial Officer

        Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Conceptus, Inc., a Delaware corporation (the "Company") hereby certifies, to such officer's knowledge, that:

        (i)    the accompanying Annual Report on Form 10-K of the Company for twelve months ended December 31, 2008 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

        (ii)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 13, 2009

/s/ GREGORY E. LICHTWARDT

Gregory E. Lichtwardt

Executive Vice President, Treasurer and
Chief Financial Officer

QuickLinks

Exhibit 32.2

Certification of Chief Financial Officer