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SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-KSB
Annual Report Under Section 13 Of The
Securities Exchange Act Of 1934
For The Year Ended June 30, 1996 Commission File No. 1-14004
XENOMETRIX, INC.
2860 Wilderness Place
Boulder, Colorado 80301
Incorporated In Delaware IRS ID # 04-3166089
Telephone: (303) 447-1773
No securities are registered under Section 12(b) of the Act. Securities
registered under Section 12(g) of the Act:
Common Stock; $0.001 par value
Warrants to purchase Common Stock
Xenometrix, Inc. (Xenometrix or the Company) has filed all reports under
Section 13 of the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements for the past 90
days.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-B will be
contained in the definitive proxy statement incorporated by reference in Part
III of this Form 10-KSB.
Xenometrix' revenue for the year ended June 30, 1996 was $671,000.
The aggregate market value of Xenometrix' voting stock held as of September 12,
1996 by nonaffiliates was $20,897,000.
2,920,947 shares of Common Stock were outstanding on September 12, 1996.
Incorporated by reference in Part III of this report is the information
contained in the Xenometrix Proxy Statement for the annual meeting of
stockholders proposed to be held November 20, 1996, which will be filed with
the Securities and Exchange Commission within 120 days after June 30, 1996.
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Table Of Contents
Item Page
Part I 1. Business 3
Glossary 17
2. Property 19
3. Legal Proceedings 19
4. Vote of Security Holders 19
Part II 5. Market for Common Stock 20
6. Management's Discussion and Analysis 20
Risk Factors 23
7. Financial Statements 28, F1
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 28
Part III 9. Directors, Executive Officers and Control Persons 28
10. Executive Compensation 28
11. Security Ownership of Certain Beneficial Owners
and Management 28
12. Certain Relationships and Related Transactions 28
Part IV 13. Exhibits and Reports on Form 8-K 29
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Part I
Item 1. Business
Except for the historical information contained herein, this Report contains
forward-looking statements that involve risks and uncertainties. Xenometrix'
actual results could differ materially from those discussed herein. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in "Business," "Risk Factors," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in this Report
and the documents incorporated herein by reference.
General
Xenometrix, Inc. (the "Company" or "Xenometrix") develops, manufactures and
sells integrated molecular information assay systems which include (i) a line
of assay kits which test the genetic response of human, bacterial and yeast
cells when exposed to various compounds, and (ii) proprietary software for
reporting and interpreting the test results.
Xenometrix also offers a contract laboratory service which allows the customer
to send its chemical compounds to Xenometrix for testing and evaluation. The
Company's scientists perform the appropriate Xenometrix assay, interpret the
test results and provide a written evaluation of the molecular response of the
compound. Xenometrix believes that introducing new customers to the Company's
molecular information assays through the use of its reference laboratory offers
significant advantages in helping customers to understand and adopt such
assays.
Xenometrix markets and sells its products to customers in the pharmaceutical,
biotechnology, chemical, food and cosmetic, and environmental industries who
have the need to test and assess the potential toxic effects and/or efficacy of
chemical compounds to be used in their products. Xenometrix also sells its
products and services to governmental agencies. Some of the Company's existing
customers include Clairol, Inc., BASF, the National Cancer Institute, Sanofi
Winthrop, Inc., Chiron Corporation, Helene Curtis, Inc., SmithKline Beecham,
Monsanto Company and The Upjohn Company.
The first of the Company's two current core technologies, the Stress Gene
Assays, represents a low-cost method for identifying the specific molecular
mechanisms underlying the cellular response to exposure to a particular
chemical. The Company's second core technology, the Genotoxicity Assays,
assesses the carcinogenic potential of a chemical compound by measuring damage
to DNA. Together these two assay systems provide information about what is
occurring at the molecular level when a living cell is exposed to a foreign
substance, including damage to cellular components, cell death, tumorigenesis,
teratogenesis, irritation and other reactions. The Xenometrix assays also
provide mechanistic information regarding how the cellular components have been
affected.
Xenometrix believes that its products and services will allow users to reduce
their testing cost by decreasing the proportion of compounds which are subject
to expensive live animal testing. Xenometrix also believes that its products
and services may have applications in the environmental sector in evaluating
relative risks of various contaminated sites.
Xenometrix has developed and continues to enhance a proprietary software system
for reporting and interpreting the results of its assays. This software
integrates the results from Xenometrix tests into a graphical presentation,
called the XenoMatrix(R), producing a unique fingerprint for each compound
which illustrates the compound's molecular response in the assays. This
Windows(R)-based, three-dimensional graphic presentation assiststhe user in
evaluating the results and implications of the assay.
Xenometrix(TM), XenoMatrix(R), AMAX(TM), Ames II(TM), CAT-Tox(TM),
CAT-Tox(D)(TM), CAT-Tox(L)(TM), Pro-Tox(TM), Pro-Tox(C)(TM), Pro-Tox(D)(TM),
Pro-Tox(E)(TM) and Yeast Del(TM) are trademarks of Xenometrix, Inc. Windows(R)
is a registered trademark of Microsoft Corporation.
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Xenometrix is also developing a proprietary database of substances previously
evaluated using the Xenometrix assays. Comparing the test results of the
compound being tested to this growing database of compounds may facilitate
improved integration, comparison and interpretation of test results.
Xenometrix estimates that approximately $4 billion is spent worldwide annually
on all phases of toxicological testing with over $600 million being spent on
toxicology testing materials. Xenometrix believes the amount of molecular
activity testing will increase as new drug and chemical compounds proliferate,
creating the need to screen combinatorial chemical and natural products
libraries, and the need to test such compounds quickly and cost effectively.
Before being used in pharmaceutical or consumer product applications or certain
chemical applications, compounds must be thoroughly tested for toxicity,
including carcinogenic, cytotoxic and teratogenic potential. Toxicological
testing is the process by which a chemical substance is evaluated to determine
whether it is likely to be toxic to humans or the environment. Toxicological
testing is a fundamental and increasingly expensive requirement in the
development of chemical compounds in the pharmaceutical, biotechnology,
chemical, consumer products and environmental industries.
Toxicology tests are performed either in vivo (in live animals) or in vitro (in
an artificial environment, such as cultured human cells). Current testing
procedures primarily rely on in vivo demonstrations of a compound's activity or
toxic effect in laboratory animals. Late stage in vivo testing is performed by
exposing live animals, such as rabbits, dogs, rats, mice or monkeys, to a
compound in order to evaluate the compound's toxic effect. The results of the
in vivo tests are then extrapolated to determine the probable effect on humans
of exposure to the compound.
Xenometrix believes that in vivo testing is time-consuming and expensive and
almost always results in the sacrifice of the specially-bred animal subjects.
Xenometrix estimates that animal toxicology test procedures typically last from
14 to 180 days and can cost hundreds of thousands of dollars for a single
pharmaceutical compound. Existing in vivo analysis is subject to increasing
scientific challenge by scientists because of the underlying premise that
toxicity observed in test animals is predictive of toxicity in humans. Many
scientists question this assumption on both theoretical and empirical bases,
and there is increasing focus on the need to understand the underlying
mechanisms of toxicity in various test animals in order to extrapolate more
reliably from one species to another, or from in vitro to in vivo. Current in
vivo assays provide little information on the molecular mechanisms of toxicity,
without which it is difficult to rationally improve the compounds being tested
or to make cross-species comparisons. In addition, there are vigorous domestic
and international political pressures to significantly reduce live animal
testing. The European Union has enacted legislation to prohibit live animal
testing in the vanities industries (cosmetics, lotions and fragrances) after
January 1, 1998. Xenometrix' current in vitro molecular activity assays
provide information on cellular response mechanisms and may avoid much of the
expense and delay associated with in vivo procedures.
Xenometrix was originally incorporated in New York in 1991 as Venmark, Ltd.,
and was reincorporated in Delaware as Xenometrix, Inc. in 1992. The Company's
executive offices are located at 2860 Wilderness Place, Boulder, Colorado,
80301. Its telephone number is (303) 447-1773.
On October 23, 1995, Xenometrix closed on its initial public offering ("IPO")
of 1,100,000 units (the "Units"), each Unit consisting of one share of common
stock (the "Common Stock"), and one warrant to purchase one share of common
stock at an exercise price of $7.0875 per share (the "Warrants"). The price
per Unit was $6.75, resulting in gross proceeds of $7,425,000. Aggregate
offering cost was approximately $1,550,000. On November 9, 1995 the IPO
underwriter exercised its over-allotment option to purchase an additional
135,900 Units at the IPO price of $6.75 per Unit. On November 14, 1995
Xenometrix closed on the sale of these additional Units, resulting in net
proceeds to the Company of approximately $800,000.
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Technology, Products and Services
Xenometrix' integrated approach to testing includes a line of molecular
information assays, contract reference laboratory services, proprietary
computer software for reporting and aiding in the interpretation of assay
results, and a growing proprietary database of previously evaluated substances.
Current Assay Product Line. Xenometrix currently offers a number of assays for
testing the biological activity of various compounds, including carcinogenic,
cytotoxic and teratogenic potential. The Xenometrix product line currently
includes two families of assays: Stress Gene Assays and Genotoxicity Assays.
Stress Gene Assays: Stress Gene Assays measure the transient activation of
various bacterial and mammalian genes in response to exposure to a test
compound. The genes monitored respond to agents such as those that cause DNA
damage, protein damage, damage to cellular structure, changes in cell growth
regulation, metal contamination and aromatic hydrocarbon exposure, among
others. By monitoring the activity of a battery of stress-responsive genes, the
effects that a new chemical compound is having on a given cell type can be
evaluated.
Table 1 shows the Company's current Stress Gene Assay product line, along with
a brief description and time (from initiation to results) for performing each
assay.
Table 1 -- Existing Stress Gene Assays
<TABLE>
<CAPTION>
Name Cell System Time
---- ----------- ----
<S> <C> <C>
Bacterial Stress Gene Assays
Pro-Tox(E)TM E.coli(1) 24 hours
Pro-Tox(C)TM E.coli 24 hours
Pro-Tox(D)TM E.coli 24 hours
Mammalian Stress Gene Assays
CAT-Tox(L)TM Human Liver(3) 24-96 hours
CAT-Tox(D)TM(2) Human Colon(4) 24-96 hours
</TABLE>
(1) Human enteric bacteria (Escherichia coli)
(2) In the stress gene assays -- Pro-Tox(D)TM and CAT-Tox(D)TM stress-genes
respond primarily to DNA damage and DNA damaging agents.
(3) The cells used in this system are human hepatoma cells (HepG2).
(4) The cells used in this system are human colon carcinoma cells (RKO).
Genotoxicity Assays: Genotoxicity Assays assess the mutagenic and carcinogenic
potential of a compound by measuring specific types of damage to DNA. Such
damage results in heritable changes in the cells.
One of Xenometrix' proprietary technologies is the AMAX(TM) family of assays.
Xenometrix believes the AMAX(TM) (Ames II(TM) Mutagenicity Assays by Xenometrix)
assays offer significant improvements over the widely-accepted original Ames
assay. Xenometrix estimates the traditional Ames assay is run 100,000 times
per year in hundreds of laboratories around the world. The AMAX(TM) product
line was introduced in March 1996, with the first shipment of product occurring
in June 1996.
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Table 2 - Existing Genotoxicity Assays
<TABLE>
<S> <C> <C>
AMAX(TM) Manual System S.typhimurium(5) 48 hours
AMAX(TM) Automated High
Throughput Configuration S.typhimurium(5) 48 hours
AMAX(TM) Automated Mutational
Spectra Configuration S.typhimurium(5) 48 hours
E. coli Trp E.coli 60 hours
Yeast DEL(TM) S.cervisciae(6) 72 hours
</TABLE>
(5) The cells used in this system are bacteria (non-pathogenic Salmonella
typhimurium)
(6) The cells used in this system are yeast (Saccharomyces cerevisciae)
Software and Databases. Xenometrix has developed and continues to refine a
system of software and databases to facilitate performing its assays and
analyzing and interpreting their results. The software creates a profile or
"fingerprint" for a compound by reporting data regarding the compound's
biological activity and toxic potential in each assay and presents a graphical
illustration of each called a XenoMatrix(R). Each compound's XenoMatrix(R)
profile for a given assay can then be compared with the profiles of well-known
and well-characterized toxic agents (taken from both in vitro and in vivo test
data), to assess a compound's relative activity and/or toxicity.
Contract Testing Services. Xenometrix provides testing services for customers
on a fee for service basis. The Company's reference laboratory services are
performed at the Company's Boulder facilities by Xenometrix employees. The
reference laboratory accepts samples from customers, performs the requested
Xenometrix assays and generates a report which contains data derived from the
assays and a full interpretation of the data by Xenometrix scientists.
Markets
Xenometrix' current and proposed products are intended to address a large
global market opportunity that is expected to grow over the next several years.
Xenometrix estimates that, on a worldwide basis, approximately $4 billion is
spent annually on all phases of toxicological testing, with over $600 million
spent on toxicity testing materials. Xenometrix is focusing its efforts on
developing and expanding the market for its products in the following
industries: pharmaceutical and biotechnology, industrial (including the
chemical, food and cosmetics industries), research and environmental
compliance. A list of some of the Company's largest existing customers in each
of such industries is set forth in the table below.
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<TABLE>
<CAPTION>
Industry Customer
- -------- --------
<S> <C>
Pharmaceutical and Biotechnology Berlex Laboratories, Inc.
Chiron Corporation
Pfizer, Inc.
Sanofi Winthrop Inc.
SmithKline Beecham
The Upjohn Company
Chemical 3M Pharmaceuticals
BASF
Monsanto Company
United States Army
Cosmetics and other Consumer Products Bausch & Lomb, Inc.
Mary Kay Inc.
Clairol, Inc.
Helene Curtis, Inc.
Environmental and Research Burlington Research, Inc.
Los Alamos National Laboratory
National Cancer Institute
National Institutes of
Environmental Health Service
</TABLE>
Pharmaceutical and Biotechnology. Xenometrix' initial efforts are focused on
toxicological and efficacy testing in the pharmaceutical and biotechnology
industries. In the United States, the Food and Drug Administration ("FDA")
requires that companies evaluate the toxicity of drugs under development before
the drugs are permitted to be evaluated for their efficacy in clinical trials.
Xenometrix believes that there are several underlying market forces affecting
the pharmaceutical and biotechnology industries which should make them
receptive to the Company's products, including: (i) pressure to reduce cost;
(ii) an increase in the number of drugs in development; (iii) the
sophistication of the scientists working in the field of drug discovery; (iv)
the need for information regarding mechanisms of biological activity (both
toxicity and efficacy); and (v) industry and public pressure to reduce the use
of live animal testing.
Xenometrix believes that the current marketing cycle for its products in the
pharmaceutical and biotechnology industries includes a fairly extensive
in-house validation process which typically takes up to six months or longer to
complete and involves the performance by the customer of comparative studies
using Xenometrix assays and existing testing methods. The lengthy evaluation
cycle is not expected to be reduced until adequate peer review and published
scientific data regarding the Company's products has been widely disseminated
and accepted within such industries.
Industrial. The industrial market includes three primary segments: the
chemical, food and cosmetics industries. The key market force in the chemical
industry is government regulation. Evaluation of toxicity is required for all
herbicides and pesticides, for most chemicals used in industrial processes, as
well as for over 300 other chemicals with known or suspected toxicity.
Although the food and cosmetics industries are less stringently regulated than
the chemical industry, they are heavily influenced by public pressure. Public
pressure is a key force in the replacement of live animal testing with in vitro
toxicity testing. The European Union has enacted legislation to prohibit live
animal testing in the vanities industries (cosmetics, lotions and fragrances)
after January 1, 1998.
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Environmental. Xenometrix believes that its products may have applications in
environmental compliance monitoring. Such testing can be broadly segmented
into (i) state and federally mandated monitoring of emissions from
manufacturing and production processes, and (ii) governmental requirements that
parties deemed "responsible" for past pollution clean up contaminated sites.
Two federal agencies, the EPA and OSHA, and various state agencies enforce
compliance with federal legislation for the protection of public health and the
environment. Government regulations covering the required remediation of
potentially hazardous sites require the reduction of contaminant levels below
"actionable" levels. Xenometrix believes that the application of the Company's
biological-based assays would facilitate the (i) determination of whether a
real biological effect is seen at actionable levels, (ii) determination of
whether mixtures of substances enhance or reduce the toxic hazard, on the basis
of biological responses as opposed to chemical analysis, and (iii) prioritizing
remediation efforts between sitesexhibiting different degrees of biological
impact.
Academic/Government Research. The academic market for molecular information
assays is diverse. Often supported through industry and government grants,
academic institutions present anotheropportunity for molecular information
testing. Research laboratories at academic institutions are viewed as a
sophisticated, low-cost alternative to contract research laboratories.
Xenometrix believes that the academic market will be receptive to the Company's
cost-effective products both because of budgetary constraints and because the
appeal of increased information regarding molecular activity mechanisms and
toxicity.
Sales and Marketing
Xenometrix provides its test systems and services on an international basis to
the pharmaceutical, biotechnology, chemical, food, cosmetic, and environmental
industries, and to contract laboratories, academic and governmental research
institutions. Xenometrix launched its first commercial products in 1994.
Since that time the Company's primary focus has shifted to increasing market
penetration of its technologies in a broad range of applications. The
long-term success of Xenometrix will require a prolonged marketing effort, as
the decision by customers to purchase and use the Company's products involves a
long sales cycle and is heavily influenced by federal and/or state government
guidelines and is therefore partially dependent upon acceptance and validation
of the Company's system by regulatory authorities. As a consequence,
Xenometrix expects that penetration of the Company's target markets will take
several years.
Sales and Distribution. Xenometrix' marketing activities are conducted on a
direct basis in the United States through five sales regions. In addition, the
Company has exclusive distributors in Japan, Switzerland, the United Kingdom,
the Benelux countries and Korea. Expansion into other international markets
will be conducted according to available resources. Technical training, support
services, advertising, industry trade show attendance, seminars and direct mail
campaigns are developed and coordinated through the Xenometrix marketing group
located in Boulder, Colorado. Xenometrix encourages its scientific personnel
to present current research at professional society meetings and conferences
and to publish articles in scientific journals in order to increase recognition
of the Company's technology, products and services in the industrial and the
scientific communities.
Contract Laboratory Service. Xenometrix offers a contract laboratory service to
its customers whereby the customer sends its chemical compounds to Xenometrix
for testing and evaluation by Xenometrix scientists. This contract laboratory
service introduces new customers to the Company's molecular assays, thereby
helping customers to understand, adopt and use this new technology. The
advantages to the customer include assurance that the assay has been properly
administered, receipt of a comprehensive interpretation of the test results,
and recommendations for further evaluation by Xenometrix' scientific staff. In
addition, the use of the contract laboratory enables Xenometrix to utilize
certain advanced molecular toxicology techniques which do not readily lend
themselves to being sold as an assay "kit".
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Manufacturing
Xenometrix manufactures and assembles its products at its facilities in
Boulder, Colorado. The assays consist of the Company's proprietary components
and components purchased from outside vendors. The Company's assays contain the
components required to perform a specific test in a reproducible and uniform
manner. Specific components typically include genetically engineered cells and
organisms, proprietary software, specialized chemical reagents, reference
manuals, other supplies and appropriate packaging. Xenometrix producesits
assays in a production process subject to quality control procedures. Materials
purchased from outsider vendors are inspected and tested by the Company's
manufacturing personnel.
The Xenometrix manufacturing process involves growing cells in controlled
environment incubators, maintaining the cells under appropriate conditions and
preparing the cells for shipment. Bacteria- and yeast-based assays include
freeze-dried cells, frozen cells or cells stabilized by matrix polymerization.
Mammalian cell-based assays include live mammalian cells immersed in a growth
medium.
Apart from the genetically engineered cells and organisms developed and
manufactured by Xenometrix and the Company's proprietary software, all of the
components of the Company's toxicology test kits are available from outside
manufacturers. Certain of these components are currently provided to Xenometrix
from a single source.
Xenometrix maintains inventory of certain components and raw materials at what
it believes to be prudent levels. Xenometrix believes that, if necessary, it
would be able to obtain alternative sources of supply of these components. Any
supply interruption, however, in a sole-sourced component or raw material could
have a material adverse effect on the Company's business when inventory is
depleted and until a new source of supply is qualified. See "Management's
Discussion and Analysis--Risk Factors--Manufacturing; Dependence on Outside
Suppliers."
Xenometrix believes that manufacturing space currently leased will be adequate
to meet anticipated demand through at least June 1998. See "Property".
Research and Development
The Xenometrix research and development strategy is focused on enhancing and
commercializing the Company's core technologies by designing, developing and
implementing new assays, enhancing the performance of existing assays,
developing automation systems for the assays, developing and improving software
used in performing the assays, and expanding the Company's proprietary
database. The research and development team also supports the reference
laboratory activities, performs assays, interprets test results, makes
recommendations for further evaluation and/or modification of test compounds
and provides customer support services. The team currently includes three
senior scientists with doctoral degrees in neurotoxicology and free radical
chemistry, microbiology, and veterinary medicine.
Assay Systems Being Considered For Development. Xenometrix is considering for
commercial development a number of new assays for assessing molecular activity,
including additional human and non-human assay systems. Certain assays would
enable the user to monitor stress gene response in living animals (in vivo).
Thus, results from in vitro tests in other Xenometrix assays which suggest a
chemical compound may be toxic, or have a unique activity, could be confirmed
by examining the target tissues of interest in whole animals exposed to a test
chemical.
In similar fashion, other assays being considered for development would enable
the user to monitor stress gene responses in human beings. This could enable
the clinician to assess the efficacy and/or toxicity of a new drug before and
during clinical trials. These assays could also play a role in choosing
appropriate subjects for clinical trials. In addition to clinical use, such
assays being considered for development may enable the monitoring of human
populations exposed to environmental or workplace hazardous substances to
assess individual biologic responses.
The decision to pursue commercial development of a given assay system is
dependent upon the availability of adequate funding, achieving satisfactory
technical progress and validation of commercial potential. Xenometrix cannot
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predict whether its resources will be sufficient to establish technical,
scientific or commercial viability of additional assays.
Competition
The Company's competition consists mainly of Contract Research Organizations
("CROs") which provide toxicology testing services on a contract basis such as
Hazelton Laboratories, Quintiles Transnational Corp., Microbiological
Associates, Inc. and Huntingdon International Holdings. In addition,
Xenometrix competes with in vitro assay manufacturers. Some competitors have
developed proprietary tests, and are selling those tests commercially. Those
competitors include InVitro International, Paracelsian Inc., Advanced Tissue
Sciences Inc., InVitro Technologies, Inc., StressGen Biotechnologies Corp. and
Microbics Corp. The Company expects that additional competitors will enter the
in vitro toxicology testing market in the future. Xenometrix believes that the
competitive factors in the molecular information testing market include (i) the
level of information provided, (ii) the time required to perform a test, and
(iii) the cost of performing such test. See "Management's Discussion and
Analysis--Risk Factors--Competition".
Patents
The Company's core technologies are licensed by Xenometrix under exclusive
license agreements with various entities. Such license agreements cover one US
and six foreign patents that have been issued and one additional patent that
has been allowed, as well as certain additional patent applications. The
patents that have been issued expire in 2008. In general, these license
agreements (i) provide for the payment of royalties on net sales of products
covered by the licensed technology, (ii) provide for certain minimum royalties,
and (iii) terminate generally upon the expiration of the last to expire patent
included in the license. If Xenometrix fails to meet its obligations under the
licenses, including payment of minimum royalties, such agreements may be
terminated by the licensors. Xenometrix is current on its obligations under its
license agreements.
The patent positions of high technology firms, including Xenometrix, are
uncertain and involve complex legal and factual questions for which important
legal principles are largely unresolved. In addition, the coverage claimed in a
patent application can be significantly reduced before a patent is issued.
Consequently, even though patent applications covering the technology licensed
by Xenometrix are being prosecuted with the U.S. and certain foreign patent
offices, there can be no assurance that any of such patent applications will
result in the issuance of patents or, if any patents are issued, that they will
provide significant proprietary protection and will not be circumvented or
invalidated. Since patent applications in the United States are maintained in
secrecy until patents issue or foreign counterparts publish, and since
publication of discoveries in scientific or patent literature often lag behind
actual discoveries, Xenometrix cannot be certain that it or any of its
licensors was the first creator of inventions covered by pending patent
applications or that it or any such licensor was the first to file patent
applications for such inventions. Moreover, Xenometrix might have to
participate in one or more interference proceedings declared by the US Patent
and Trademark Office to determine priority of invention, which could result in
substantial cost to Xenometrix, whether or not the result of such proceedings
was favorable to Xenometrix. See "Management's Discussion and Analysis--Risk
Factors-- Uncertainties Regarding Patents and Proprietary Rights."
A number of pharmaceutical and biotechnology companies and research and
academic institutions have developed technologies, filed patent applications or
received patents on various technologies that may be related to the Company's
technology. Many of these entities are larger and have significantly greater
resources than Xenometrix. Some of the technologies, applications or patents of
these entities may conflict with the Company's technologies, the patents and
patent applications licensed by Xenometrix, or the Company's patent
applications. Such conflict could limit the scope of the patents that
Xenometrix or its licensors has or may be able to obtain, or result in denial
of the Company's or its licensor's patent applications. In addition, if patents
that cover the technologies used by Xenometrix are issued to other companies,
there can be no assurance that Xenometrix would be able to license these
patents at a reasonable cost or be able to develop or obtain alternative
non-infringing technology.
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Xenometrix and its patent counsel have received communication from the holder
of a European patent alleging that the holder has certain intellectual property
rights that may impact the European sales of Xenometrix' CAT-Tox(TM) assay.
The holder has proposed a licensing agreement which Xenometrix is evaluating.
Currently Xenometrix does not have significant CAT-Tox(TM) sales in Europe. See
"Management's Discussion and Analysis--Risk Factors--Uncertainties Regarding
Patents and Proprietary Rights."
Xenometrix relies upon trade secret protection for its confidential and
proprietary information. There can be no assurance that competitors or
potential competitors of Xenometrix will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology, or that
the Company can meaningfully protect its trade secrets.
Government Regulation
The Company's toxicology testing products have applications in the
pharmaceutical, chemical, cosmetic and environmental industries. Those
industries are subject to regulation pursuant to federal, state, local and
foreign legislation, including the Food, Drug and Cosmetic Act; the
Environmental Protection Act; the Occupational Safety and Health Act; and
state, local and foreign counterparts to such acts. Certain of these
regulations require the use of toxicological testing procedures in
federally-mandated trial studies to evaluate the safety and efficacy of
products. The Company's products are currently used to supplement established
protocols for toxicity testing in the pharmaceutical, chemical, cosmetic and
environmental industries.
Xenometrix products and services do not require FDA, EPA or other regulatory
approval before they can be used by Xenometrix customers. However, Xenometrix
believes that general acceptance of the validity of its technologies will be
required before its assays supplant traditional tests used in regulatory
filings. Xenometrix is seeking to have its test systems accepted by the FDA
and other regulatory agencies as reliable indicator of molecular activity and
toxicity. Xenometrix is or may become subject to various other federal, state
and local laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing practices and the disposal of
hazardous or potentially hazardous substances.
Employees
As of September 12, 1996, Xenometrix had 33 employees, all in the United
States. None of the Company's employees is represented by a labor union and
Xenometrix has not experienced any work stoppages. Xenometrix considers its
relations with its employees to be good.
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Executive Officers, Directors and Key Employees
The management and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Edson D. de Castro 58 Chairman of the Board of Directors and
Chief Executive Officer
John H. Wheeler 49 Vice President, Sales and Marketing
Ronald L. Hendrick, CPA 50 Vice President, Chief Financial Officer
Pauline Gee, Ph.D. 41 Vice President, Research and Development
Mark B. Benjamin, Sc.D. 35 Director of Scientific Affairs
Robert L. Poley, CPA 51 Controller
Roger C. Klemm 45 Director of Manufacturing
Bruce N. Ames, Ph.D. 67 Director
Jeremy M. Levin, MD, Ph.D. 43 Director
Walter M. Lovenberg, Ph.D. 62 Director
James A. Mitarotonda 42 Director
John K. A. Prendergast, Ph.D. 42 Director
Lindsay A. Rosenwald, MD 42 Director
Randal P. Schumacher 44 Director
Ralph Z. Sorenson, D.B.A. 63 Director
Jerry A. Weisbach, Ph.D. 62 Director
</TABLE>
All Directors are elected annually and hold office until their successors are
elected and qualified, or until their earlier resignation or removal. Officers
serve at the discretion of the Board of Directors.
MR. DE CASTRO has been Chairman of the Board of Directors and Director since
June 1992. He was elected Chief Executive Officer on May 26, 1995, and had
previously served in that capacity from June to November 1992. Mr. de Castro
was one of five co-founders of Data General Corporation in 1968. From 1968 to
1989, Mr. de Castro served as its President and Chief Executive Officer, and
from 1989 to 1990, he served as its Chairman of the Board of Directors. Mr. de
Castro was a founder and Executive Committee Member of the Massachusetts High
Tech Council. Mr. de Castro is a Trustee of Boston University. From 1993 to
present, Mr. de Castro has been serving on the board of Boston Life Sciences,
Inc. Mr. de Castro received his BS in Electrical Engineering from the
University of Lowell, Lowell MA in 1960.
MR. WHEELER joined Xenometrix as Vice President, Sales and Marketing in August
1993. From 1992 to 1993, he was Director of Sales and Marketing for Research
Biochemicals Limited Partnership, selling neurochemicals to the research and
pharmaceuticals industry. From 1987 to 1992, Mr. Wheeler held numerous
positions at Charles River Laboratories, including service as Director of
Antibody Operations (1991 to 1992) and as Vice President of Sales and Marketing
(1987 to 1991). From 1974 to 1987, he held positions in sales, marketing and
business planning at Becton Dickinson Immunodiagnostics. He received his MBA
from Pace University in 1986 and his B.A. in Biology from the University of
Bridgeport, Bridgeport, CT in 1970.
MR. HENDRICK joined Xenometrix as Vice President, Chief Financial Officer in
March 1995. From 1993 to 1995, he was Vice President, Corporate Controller with
Alexander & Alexander Services, Inc. a NYSE financial services firm. From 1989
to 1993, Mr. Hendrick held various positions at the Adolph Coors Company (NASD)
including Corporate Controller, Director of Treasury Operations and President
of a Coors subsidiary in the occupational health business. He currently serves
on the board of directors of the University of Colorado Foundation and is a
former director of the Denver World Trade Center. He received his MBA in
finance from the University of Colorado and a BA in accounting from Michigan
State University. Mr. Hendrick is a Certified Public Accountant in both
Colorado and Michigan.
DR. GEE joined Xenometrix in January 1994 as Associate Lab Director and became
Vice President, Research, in July 1995. From 1989 to 1993, she was a
Biochemistry Specialist in the Department of Molecular and Cellular Bi-
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<PAGE> 13
ology at the University of California, Berkeley. From 1987 to 1989, she worked
with Dr. Philip Hanawalt as a Visiting Scholar in the Department of Biological
Sciences, Stanford University. From 1985 to 1987, she served as a Canadian
Medical Research Council Fellow in the Biochemistry Department at the
University of California, Berkeley. She received her Ph.D. in Neurotoxicology
and Free Radical Chemistry from Simon Fraser University, B.C. Canada and a
B.Sc. in Marine Biology and Human Physiology.
DR. BENJAMIN joined Xenometrix in October 1992. He completed concurrent
Postdoctoral Fellowships at both the Department of Neurobiology at the Harvard
Medical School and at the Department of Cancer Biology at the Harvard School of
Public Health in October 1992 and was a Research Associate at the University of
California, Los Angeles from 1983 to 1985. Dr. Benjamin was awarded his Sc.D.
in June 1991, from the Department of Cancer Biology at Harvard University, and
his B.Sc. (with First Class Honors) in Genetics from Queen Mary College at the
University of London.
MR. POLEY joined Xenometrix in February 1994 as Controller. From 1993 to 1994,
he served as Consulting Chief Financial Officer of Photonics Research, Inc.
From 1991 to 1993, he served as Vice President and Controller of Neodata
Corporation. From 1988 to 1991, he served as Senior Vice President and Chief
Financial Officer of Long Lines, Ltd. From 1976 to 1987, he served as Chief
Financial Officer, Secretary/Treasurer and Director (1981 to 1987) and as
Controller (1976-1981) of Basic Earth Science Systems, Inc. From 1972 to 1976,
he was with Arthur Andersen LLP, most recently as senior auditor. He received
his MSBA from the University of Denver and his BA in Communication from the
University of Kansas, and is a Certified Public Accountant.
MR. KLEMM joined the Company in September 1993. He was previously responsible
for the creation and implementation of FDA approved GMP manufacturing, and
testing, systems in the radioactive pharmaceuticals industry with North
American Chemical Corp. from 1980 to 1989 and from 1991 to 1993. From 1989 to
1991, he served as Director of Analytical Services of Celestial Seasonings,
Inc. From 1976 to 1979 he was a process analyst with Kraft Foods. Mr. Klemm
supervised the manufacture of ELISA kit components for the United States
Department of Defense and managed the start-up of a vaccine production plant in
Guadalajara for 1972 to 1976. He holds a B.Sc. in Biochemistry from the
University of Illinois.
DR. AMES has served as a Director since June 1992. He has been a Professor of
Biochemistry and Molecular Biology and a Director of the National Institute of
Environmental Health Science ("NIEHS") at the University of California,
Berkeley since 1968, and was Chairman of Biochemistry and Molecular Biology
from 1983 to 1989. In addition to membership in the National Academy of
Sciences, the Royal Swedish Academy of Sciences and the Japan Cancer
Association, he has received numerous awards, including the General Motors
Cancer Research Foundation Prize (1983) and the Tyler Prize (1985) for
environmental achievement. He serves on the board of Operon Technologies, Inc.
and on the Scientific Advisory Boards of Biolog, Pantox, and Centaur. Dr. Ames
received his BA in Chemistry from Cornell University, and his Ph.D. in
Biochemistry from the California Institute of Technology. His primary research
interest is in the processes of aging and its relationship to cancer. Dr. Ames
is one of the inventors named on the patent pending for the Ames II assay.
DR. LEVIN joined the Company's Board in March 1995. He has been President and
CEO of Cadus Pharmaceutical Corporation, which produces a yeast-based drug
discovery system, since November 1992 and Chairman since July 1996. From 1990
to 1992, he was Vice President of Corporate Development of Genzyme Corp.'s
majority-owned subsidiary, IG Laboratories, Inc. ("IG"), the largest genetics
testing company in the U.S. He joined IG in 1990 when it acquired Odyssey
Biomedical Corp., a venture-capital backed company that he founded. Before
founding Odyssey Biomedical, he was Medical Director of Focus Technologies, a
biotechnology company. Dr. Levin is a Director of the New York Biotechnology
Association. He received his Ph.D. (D.Phil.) from Oxford University, England in
1978 and MD (M.B., B.Chir.) from Cambridge University, England in 1981.
DR. LOVENBERG joined the Xenometrix Board in July 1993. He served as Executive
Vice President of Marion Merrell Dow Inc. and President of the Merrell Dow
Research Institute from 1989 to 1993 and Vice President of the Merrell Dow
Research Institute form 1986 to 1989. For over two decades, Dr. Lovenberg held
various positions with the National Institutes of Health. He has also been
President of Lovenberg Associates, Inc. since 1993. He currently serves on the
Board of Directors of Oncogene Science Inc. Dr. Lovenberg received his B.S. in
Agriculture
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<PAGE> 14
and his M.S. in Agricultural Biochemistry from Rutgers University, and his
Ph.D. in Biochemistry from George Washington University.
MR. MITAROTONDA has been a director since March 1996. He is Chairman of the
Board and Chief Executive Officer of Barington Capital Group, L.P., New York
City, the underwriter of Xenometrix' initial public offering. From 1988
through 1991, he served as Chairman of the Board and Co-Chief Executive Officer
of JMJ Management Company Inc., the general partner of Commonwealth Associates,
an investment banking, brokerage and securities trading firm. From 1984 to
1988, he was employed by D.H. Blair & Co., Inc., an investment banking,
brokerage and securities trading firm, first as a registered representative and
then as Senior Vice President/Investments. From 1981 to 1984, he was employed
by Citibank, N.A. in an executive capacity having management responsibility for
two of Citibank's business banking branches. He is a director of Vermont Teddy
Bear, Inc., Kiddie Academy, Inc. and Big Smith Brands, Inc. He graduated from
New York University Graduate School of Business Administration with a Master of
Business Administration Degree in Corporate Finance, and from Queens College,
New York with a B. A. Degree with honors in Economics. He was appointed to the
board pursuant to the Underwriting Agreement between the Company and Barington,
dated October 17, 1995.
DR. PRENDERGAST has served as a Director since the inception of Xenometrix. He
has served as Managing Director of The Castle Group, Ltd. since October 1991.
From 1988 to 1991, he was a Post-Doctoral Fellow, Department of Biochemistry
and Molecular Biology, Harvard University. Dr. Prendergast received his M.Sc.
and Ph.D. degrees from the University of New South Wales, Sydney, Australia,
and a C.S.S. in Administration and Management from Harvard University.
DR. ROSENWALD was a co-founder of Xenometrix, has served as a Director from the
Company's inception and, from July 1991 to June 1992, as Chairman of the Board
of Directors. He has been the Chairman and President of The Castle Group, Ltd.,
a New York medical venture capital firm ("Castle"), since October 1991 and the
Chairman and President of Paramount Capital, Inc., an investment banking firm,
since February 1992. In June 1994, Dr. Rosenwald founded Aries Financial
Services, Inc., a money management firm specializing in the health sciences
industry. From 1987 to September 1991, he was a Managing Director of Corporate
Finance at DH Blair and Co., Inc., ("Blair"), an investment banking firm.
Prior to joining Blair, from September 1986 to June 1987, he was a Senior
Analyst at Ladenburg Thalmann & Co., an investment banking firm. Dr. Rosenwald
received his MD from Temple University School of Medicine and his BS in Finance
from Pennsylvania State University. He is also a director of the following
publicly-traded pharmaceutical biotechnology companies: Ansan, Inc., Atlantic
Pharmaceuticals, Inc., BioCryst Pharmaceuticals, Inc., Neose Technologies,
Inc., Sparta Pharmaceuticals, Inc. and Titan Pharmaceuticals, Inc. He is also
director of a number of privately-held companies founded by Castle in
biotechnology or pharmaceutical fields.
MR. SCHUMACHER has been a director since March 1996. He is Chief Executive
Officer of Jefferson Environment, Health & Safety, Washington, DC, a consulting
firm providing its clients with corporate counseling, legislative and
regulatory representation, and facilities consultation. From 1979 to 1989 he
was Director of Health, Safety and Chemical Regulations for the Chemical
Manufacturers Association. From 1977 to 1979 he worked for Eastman Kodak
Company, assisting in both corporate and facility health, safety and
environmental programs. He received a master's degree in toxicology from the
University of Rochester and a law degree from The Catholic University of
America. He was appointed to the board pursuant to the Underwriting Agreement
between the Company and Barington, dated October 17, 1995.
DR. SORENSON has served as a Director since October 1994. Currently, he is on
leave from a position as a professor in the College of Business at the
University of Colorado at Boulder. From June 1992 to July 1993 he served as
Dean of the College of Business. From 1989 to 1992 he was Adjunct Professor at
the Harvard Business School. From 1981 to 1989, he served as Chairman,
President and CEO of Barry Wright Corporation, a diversified manufacturing
company based in Massachusetts. Dr. Sorenson currently serves as director of
Polaroid Corporation, Houghton Mifflin Company, Eaton Vance, Inc., Exabyte
Corporation, Whole Foods Market, Inc. and Sweetwater, Inc. Dr. Sorenson
received his MBA and D.B.A. from the Harvard University School of Business
Administration.
DR. WEISBACH has served as a Director of Xenometrix since December 1994. He is
a former Vice President of Warner-Lambert Company and President, Pharmaceutical
Research Division, where, from 1979 to 1987, he was responsible for all
pharmaceutical research and development activities of Warner-Lambert. Prior to
joining Warner-Lambert in 1979, Dr. Weisbach served at Smith Kline and French
Laboratories from 1960 to 1979, where he was
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<PAGE> 15
Vice President, Research from 1977 to 1979. From 1988 to 1994, he served as
Director of Technology Transfer and Adjunct Professor at Rockefeller
University. Currently, Dr. Weisbach is a member of the Board of Directors of
Hybridon, Inc., Cima Labs and Neose Pharmaceuticals, Inc. and a member of the
Scientific Advisory Boards of Magainin Pharmaceuticals and Chemgenics, Inc.
Dr. Weisbach received his Ph.D. in Chemistry from Harvard University.
The Company has agreed for the five-year period commencing upon consummation of
the Offering, at the request of the Underwriter, to nominate and use its best
efforts (including the solicitation of proxies) to elect two designees of the
Underwriter to the Board of Directors of the Company. Mr. Mitarotonda and Mr.
Schumacher are the two designees.
Scientific Advisory Board
A group of scientists serve as the Company's Scientific Advisory Board. The
Scientific Advisory Board provides Xenometrix with specific expertise in
molecular mechanisms and toxicology and other areas relevant to the product
development efforts now underway at the Company. All members of the Scientific
Advisory Board are paid a per-meeting consulting fee and have been granted
stock options exercisable for Common Stock.
The Scientific Advisory Board meets approximately once each year for two day
meetings with the Xenometrix scientific personnel and management to discuss the
Company's present research and development activities and long-term strategies.
In addition, the members of the Scientific Advisory Board are available to
Xenometrix on an informal basis on issues of their particular expertise. The
Scientific Advisory Board's duties include reviewing and evaluating the
Company's research programs, advising the Company with respect to technical
matters in fields in which the Company is involved, offering introductions to
corporations potentially interested in strategic partnerships or product
testing, and recommending personnel to the Company. Most of the members of the
Scientific Advisory Board are employed by entities other than Xenometrix and
may have commitments to or consulting contracts with other entities that may
limit their availability to Xenometrix. See "Management's Discussion and
Analysis -- Risk Factors -- Possible Conflicting Obligations of Scientific
Advisors."
BRUCE N. AMES, Ph.D., Professor of Biochemistry and Molecular Biology and
Director, NIEHS, Environmental Health Science Center, University of California,
Berkeley.
JACK H. DEAN, Ph.D., President, Sanofi Research Division, Sanofi Winthrop, Inc.
Dr. Dean came to Sanofi Winthrop in 1988 as Director of the Department of
Toxicology and was appointed Vice President, Drug Safety Assessment, worldwide
in 1989. Dr. Dean's research interests include the immunotoxicity of drugs and
models for defining toxicity at a cellular and molecular level. Dr. Dean is
also President-elect of the Society of Toxicology.
JOHN L. EMMERSON, Ph.D., retired at the end of 1994 as a Distinguished Lilly
Research Scholar after 33 years with Eli Lilly & Company. Dr. Emmerson is a
past president of the Society of Toxicology. Dr. Emmerson has over 25 years of
extensive experience in national and international regulatory affairs as well
as broad experience in drug development.
SPENCER B. FARR, Ph.D., was a founder of Xenometrix and served as the Company's
President and Chief Executive Officer from 1993 to May 1995 and as a director
from 1993 to August 1996. From 1992 to 1993, he was an Associate Professor of
Toxicology at the University of New Mexico. From 1992 to the present, Dr. Farr
has been Adjunct Assistant Professor of Toxicology at Harvard University, and
from 1990 to the present, a member of the Center for Environmental Health
Sciences at the Massachusetts Institute of Technology. From 1989 to 1992, he
was an Assistant Professor of Toxicology at Harvard University.
PHILIP HANAWALT, Ph.D., Chairman, Department of Biology, Stanford University.
Dr. Hanawalt's research focuses on DNA damage and repair.
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<PAGE> 16
HOWARD L. LIBER, Ph.D., Associate Professor, Department of Cancer Biology,
Harvard School of Public Health, Harvard University. Dr. Liber is involved in
the study of mutagenesis and was instrumental in the development of the TK6
human in vitro mutagenesis assay.
JOHN B. LITTLE, MD, Simmons Professor of Radiobiology, Department of Cancer
Biology, Harvard School of Public Health, Harvard University. Dr. Little's
research emphasis is on the health effects of radiation exposure, including
mutagenesis, DNA recombination and programmed cell death.
JAMES T. MACGREGOR, Ph.D., Director of Toxicology, SRI International. Dr.
MacGregor manages the SRI International Toxicology Program, an internationally
recognized research and testing program that studies areas of mammalian
toxicology, biochemical toxicology and pharmacology, and cellular and genetic
toxicology.
ROBERT SCHIESTL, Ph.D., Assistant Professor, Department of Molecular and
Cellular Toxicology, Harvard School of Public Health, Harvard University. Dr.
Schiestl's work focuses on DNA damage and repair, and specifically on
developing toxicology assays. He is an inventor named on several of the patents
licensed by the Company.
STEVEN TANNENBAUM, Ph.D., Professor, Department of Toxicology, Massachusetts
Institute of Technology. Dr. Tannenbaum's expertise lies in the study of
environmental and occupational carcinogenesis.
ARMEN H. TASHJIAN, MD, Vice-Chairman of the Scientific Advisory Board and
Chairman, Department of Molecular and Cellular Toxicology, Harvard School of
Public Health, Harvard University. Dr. Tashjian's expertise extends to many
areas of in vivo and in vitro toxicology. His more recent work has focused on
hormones and bone resorption.
GERALD WOGAN, Ph.D., Chairman, Department of Toxicology, Massachusetts
Institute of Technology. Dr. Wogan's work includes the study of carcinogen
metabolism and the use of biomarkers to determine carcinogen exposures.
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<PAGE> 17
Glossary of Terms
Assay -- An analysis of (or analytical process designed to examine) the
composition, characteristics or strengths of a substance.
Carcinogenic -- Capable of causing or contributing to the incidence of
cancerous tumors (in humans or test organisms).
Carcinogenicity -- The degree to which an agent is capable of causing cancer.
Cell line -- A population of cells derived from a single precursor cell, having
the characteristic of continuous growth under appropriate conditions. Such
lines are often called "immortal" because of this capacity, and may be infected
with a virus, or contain foreign genes which confer this capacity.
Cellular -- Pertaining to the cell, the plant or animal structure containing
genetic material. The cell is the basic unit of all organisms.
Cytotoxic -- Capable of causing the death of a cell.
DNA -- Deoxyribonucleic acid. A polynucleotide having a specific sequence of
deoxyribonucleotide units, and serving as the carrier of genetic information
essential for life.
ELISA (Enzyme Linked ImmunoSorbant Assay) -- A system for detecting and
quantifying proteins, using antibodies.
Endpoint -- A specific measurement determined to reflect a quantitative or
qualitative change. Examples of endpoints in toxicology include percentage of
cells surviving, numbers of tumors, amount of mutation, degree of inflammation,
and level of gene expression.
Gene -- The fundamental physical unit of heredity. A linear series of
deoxyribonucleotides encoding a specific protein, protein part, or function.
Genotoxicity Assays -- Assay systems designed to detect and quantify damage
caused to the genetic material (DNA) of a test organism.
In vitro -- Outside of the living body, in an artificial environment.
In vivo -- In the living body of a plant or animal.
Induction -- A measurable increase in the activity of a specific gene in
response to a change in the cellular environment or an exposure.
Matrix Polymerization - The repeated linkage of small molecules in a large
molecule(s) in a three dimensional structure.
Mechanisms of toxicity -- The processes through which a foreign agent exerts a
toxicological effect on an organism. May include, but is not restricted to,
damage caused to cellular components, or metabolic activities which become
disturbed.
Molecular -- Pertaining to molecules, the smallest physical unit of an element
or compound. In this context referring to events which occur at the level of
biochemical reactions affecting microscopic and submicroscopic processes.
Mutagenicity -- The degree to which an agent is capable of causing a change in
the genetic material (DNA).
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<PAGE> 18
Recombination -- The joining of genes, sets or parts of genes, or parts of
chromosomes into new combinations. Occurs either as a biological process such
as programming of the body's immune system, through laboratory manipulation, or
as a consequence of damage to DNA.
Stress Gene Assays -- Assay systems developed by Xenometrix Inc. to assess the
effects of substances on cells by measuring the activity of specific
"stress-responsive" genes in these cells.
Stress-responsive genes -- Genes whose activity is in some part regulated by
"stresses" or changes in the environment, such as the presence of a toxin, or
toxin-caused damage.
Teratogenesis -- The formation of structural or functional anomalies in live
offspring during early stages of development.
Toxicity -- The degree to which a substance exerts deleterious effects.
Toxicology -- The study of toxic substances, their structures and properties,
and their effects on the various biochemical and genetic processes in living
plants and organisms.
Tumorigenesis -- The formation of tumors.
XenoMatrix(R) -- A graphical representation, in the form of a histogram, of
data collected from Xenometrix assays.
18
<PAGE> 19
Item 2
Property
The Company's executive offices, research laboratories, manufacturing
operations and ancillary operations are located in Boulder, Colorado in a
15,000 square foot facility. In conjunction with the execution of a lease for a
new facility, Xenometrix entered into an agreement with its current landlord
enabling Xenometrix to terminate its existing lease when the new facility is
ready for occupancy.
In July 1996, Xenometrix entered into an agreement to lease approximately
22,700 square feet in Boulder, Colorado and plans to relocate its operations to
the new facility as soon as practicable. The lease is for a six-year period,
with two optional renewal periods of three years each.
Item 3
Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 4
Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter
ended June 1996.
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<PAGE> 20
Part II
Item 5
Market for Common Stock
Xenometrix' Units were sold in the IPO on October 23, 1995 for $6.75 per Unit.
The Units began trading on the NASDAQ SmallCap Market and the Boston Stock
Exchange immediately. There was no market for the Common Stock until the Units
were split into the Common Stock and the Warrants on April 15, 1996. The
Common Stock trades on NASDAQ under the symbol XENO and on the Boston Stock
Exchange under the symbol XEN. For the quarter ended June 30, 1996 the
reported bid prices for the Common Stock on the NASDAQ SmallCap Market were:
High--9 45/64; Low--8. Such bid prices reflect interdealer quotations, without
retail markup, markdown or commission, and do not necessarily represent actual
transactions.
As of September 12, 1996 there were 152 holders of record of the Common Stock.
Xenometrix expects that it will retain any available earnings generated by its
operations for the development and growth of its business and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. Any future determination as to dividend policy will be made at the
discretion of the Board of Directors of Xenometrix and will depend on a number
of factors, including the future earnings, capital requirements, financial
condition and business prospects of Xenometrix and other factors.
Item 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Except for the historical information contained herein, this Discussion and
Analysis contains forward-looking statements that involve risks and
uncertainties. Xenometrix' actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Business" and "Risk
Factors" in this Report and the documents incorporated herein by reference.
The following discussion of the results of operations and financial condition
should be read in conjunction with the Company's audited Financial Statements
and Notes thereto appearing elsewhere in this Report.
Overview
Xenometrix was formed in July 1991 to develop and market a line of molecular
information assay systems. Since its inception, Xenometrix has been engaged in
research and development activities and organizational efforts, including the
development of its initial products, recruiting its scientific and management
personnel, validating its technology, establishing marketing and manufacturing
capabilities and raising capital.
Xenometrix commenced commercial manufacturing and sales in 1994. Xenometrix
has been unprofitable since inception and expects to incur additional operating
losses through at least the year ending June 1997. There can be no assurance
that Xenometrix will achieve profitability thereafter.
Xenometrix expects to incur substantial operating expense in the future to
support its research and development cost, expand its sales and marketing
capabilities and organization, acquire new technology, expand its work force,
purchase equipment and for other general corporate purposes. The Company's
results of operations may vary significantly from quarter to quarter during
this period.
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<PAGE> 21
Results of Operations
Comparison of Years Ended June 30, 1996 and June 30, 1995. Net Sales and
Services. Net sales and services for the year ended June 1996, increased 31%
to $671,000 from $514,000 for the prior year, primarily due to increased
contract laboratory service revenue and expanded market penetration.
Gross Profit. Gross profit increased to $122,000, or 18% of revenue, for the
year ended June 1996, from $25,000, or 5% of revenue, in the prior year,
reflecting efficiencies associated with increased sales volume.
Research and Development Expense. Research and development expense for the
year ended June 1996 decreased 25% to $1,123,000 from $1,492,000 for the prior
year, primarily because of: 1) personnel and other expense reductions which
were effected prior to the Company's IPO to conserve financial resources; and
2) a portion of the research and development resources were utilized in the
year ended June 1996 to perform contract lab services for customers, and were
thus charged to cost of revenue.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the year ended June 1996 increased by 29% to
$2,489,000 from $1,927,000 for the prior year primarily as a result of the
purchase of directors and officers liability insurance, increased sales and
marketing activity and compensation for senior executives brought into the
management team.
Other Income. Xenometrix earned $116,000 of grant income in the year ended
June 1995 on two grants which were completed by June 1995. There were no such
income-producing grants in the year ended June 1996. Xenometrix has obtained a
new Phase I SBIR grant which commenced in July 1996. Interest income for the
year ended June 1996 increased 171% to $138,000 from $51,000 for the prior year
because of interest earned on the investment of the net proceeds of Xenometrix'
IPO.
Extraordinary Item: Early Extinguishment of Debt Issuance Cost. On August 31,
1995 Xenometrix closed on a private sale of $1,000,000 of one-year 10% Senior
Secured Promissory Notes (the Notes). The Notes were repaid out of the
proceeds of the IPO. The cost of issuing the Notes was capitalized and was
being amortized over the one-year life of the notes. The $115,000 unamortized
debt issuance cost was written off when the debt was repaid.
Net Loss. The net loss the year ended June 1996 was $3,467,000, compared with
a net loss of $3,227,000 for the prior year.
Comparison of Years Ended June 30, 1995 and June 30, 1994. Net Sales and
Services. Net sales and services for the year ended June 1995 increased by
447% to $514,000 from $94,000 for the prior year due to expanded sales and
marketing activity, introduction of new products and increased customer
acceptance.
Gross Profit. Gross profit increased to $25,000, or 5% of revenue, for the
year ended June 1995, from a negative $2,000, or 2% of revenue, in the prior
year, reflecting efficiencies associated with the Company's increased sales
volume.
Research and Development Expense. Research and development expense for the
year ended June 1995 increased 2% to $1,492,000 from $1,465,000 for the prior
year as a result of increased expenses related to the Company's expanded new
product development activities.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the year ended June 1995 increased 1% to $1,927,000
from $1,914,000 for the prior year.
Other Income. Interest income for the year ended June 1995 increased 4% to
$51,000 from $49,000 for the comparable period of the prior year. The increase
resulted from slightly higher rates earned in the year ended June 1995. Grant
income for the year ended June 1995 decreased 19% to $116,000 from $144,000 in
the prior year, reflecting completion of the work funded by grants prior to the
end of the year ended June 1995.
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Net Loss. The net loss for the year ended June 1995 was $3,227,000, compared
with a net loss of $3,188,000 in the prior year.
Liquidity and Capital Resources
Financing Activity. On October 23, 1995, Xenometrix closed on its IPO of
1,100,000 Units, each Unit consisting of one share of common stock, and one
warrant to purchase one share of common stock at an exercise price of $7.0875
per share. The price per Unit was $6.75, resulting in gross proceeds of
$7,425,000. Aggregate offering cost was approximately $1,550,000.
On November 9, 1995 the IPO underwriter exercised its over-allotment option to
purchase an additional 135,900 Units at the IPO price of $6.75 per Unit. On
November 14, 1995 Xenometrix closed on the sale of these Units, resulting in
net proceeds to the Company of approximately $800,000.
Other. At June 30, 1996, the Company's cash and cash equivalents were
$3,290,000, compared to $489,000 a year earlier. During the year ended June
1996, $3,430,000 was used to fund the Company's operations, $198,000 was
invested in patents, and $223,000 was invested in equipment and leasehold
improvements. See Statement of Cash Flows included in the Financial Statements
included herein.
In July 1996 Xenometrix entered into an agreement with another company with
calls for that company to pay Xenometrix $700,000 upon the termination of the
Xenometrix lease with its current landlord and $360,000 payable in six
quarterly installments beginning September 30, 1996 (the "Lease Termination
Payments").
Xenometrix has incurred an accumulated deficit of approximately $11,491,000
since inception and expects to continue to incur losses through at least the
year ending June 1997. Xenometrix estimates that its existing capital
resources, together with the Lease Termination Payments , will be adequate to
maintain its current and planned operations through June 1997. However, no
assurance can be given that changes will not occur that would consume available
capital resources before such time. Xenometrix' future capital requirements
may be substantial and will depend on, and could increase as a result of, many
factors, including the pace of growth, if any, in sales and services, progress
of Xenometrix' research and development programs, the cost of continuing
validation of Xenometrix' molecular information assays and other prospective
technology, the cost involved in filing, prosecuting and enforcing patent
claims, payments received under prospective collaborative agreements,
agreements for and changes in collaborative research relationships, the cost
associated with commercialization of its products, the cost and availability of
third party financing for capital expenditures, and legal and administrative
expense.
Based on current plans, Xenometrix will need to raise additional capital in
order to continue its operations following the current fiscal year. Xenometrix
is currently exploring options for raising additional capital. There can be no
assurance that additional financing will be available on satisfactory terms or
at all. If Xenometrix is unable to obtain additional financing, it will be
required to curtail or discontinue operations. See "--Risk Factors--Future
Capital Needs."
22
<PAGE> 23
Risk Factors
The following risk factors should be read in conjunction with information
appearing elsewhere in this report.
Limited Operating History; History of Operating Losses; Uncertainty of Future.
Xenometrix has a limited operating history and is in the early stage of
commercializing its products. As of June 30, 1996, Xenometrix had incurred
cumulative net losses of $11,491,000. The losses resulted principally from
research, product development, and administrative and selling expense during
the initial phases of the Company's operations. Xenometrix has yet to generate
sufficient revenue to achieve profitability in its operations and there can be
no assurance that Xenometrix will be able to do so in the future. The Company's
ability to achieve and maintain profitability depends in part on its ability to
successfully market, sell and support its products and services. There can be
no assurance when, or if, any of the Company's current or future products will
be commercially successful or that Xenometrix will be able to operate
profitably in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements
included herein.
Future Capital Needs. Xenometrix anticipates that its existing capital
resources and anticipated equipment financing, will be adequate to satisfy its
operating and capital requirements through June 1997. However, the following
factors could prevent the Company from having such adequate capital resources:
lower than anticipated revenue, unanticipated expenses, the lack of
availability of anticipated equipment financing or unacceptable rates for such
financing. Changes in the Company's business or business plan could affect the
Company's capital requirements. The Company's future capital requirements will
depend on many factors, including the cost of manufacturing and marketing
activities, its ability to market its products successfully, the size of its
research and development programs and competing technological and market
developments. There can be no assurance that Xenometrix will perform to its
business plan. Based on current plans, Xenometrix will need to raise
additional capital in order to continue its operations following the current
fiscal year. Xenometrix is currently exploring options for raising additional
capital. There can be no assurance that additional financing will be available
on satisfactory terms or at all or that existing stockholders will not suffer
substantial dilution as a result of subsequent financings. If Xenometrix is
unable to obtain additional financing, it will be required to curtail or
discontinue operations.
Fluctuations in Operating Results. Xenometrix' operating results may vary
significantly from quarter to quarter or year to year, depending on factors
such as the timing of product development and commercialization programs of the
Company's customers, the timing of increased research and development and sales
and marketing expenses, the timing and size of orders and the introduction of
new products by Xenometrix. The Company's current and planned expense levels
are based in part on its expectations as to future revenue. Consequently,
revenue or profit may vary significantly from quarter to quarter or year to
year and revenue or profit in any period will not necessarily be predictive of
results in subsequent periods.
Uncertainties Regarding Product Development and Technological Change. Rapid
technological developments are expected to continue in the fields of molecular
response assessment and toxicology testing. Xenometrix believes that its future
success will depend upon its ability to develop, manufacture and market
products and services which meet changing customer needs and to successfully
anticipate or respond to technological changes on a cost effective and timely
basis. Although Xenometrix is considering a number of new products for
commercial development, such development depends upon the Company's ability to
obtain adequate funding, make satisfactory technical progress and validate the
commercial potential of such products. There can be no assurance that any of
the products currently being researched and developed will be successfully
developed, that technological changes will not render the Company's products
obsolete or that Xenometrix will be able to keep pace with technological
developments.
Uncertainties Regarding Patents and Proprietary Rights. The Company's core
technologies are licensed by Xenometrix under exclusive license agreements with
various entities. Such license agreements cover one US and six foreign patents
that have been issued and one additional patent that has been allowed, as well
as certain additional patent applications. The patents that have been issued
expire in 2008. In general, these license agreements (i) provide for the
payment of royalties on net sales of products covered by the licensed
technology, (ii) provide for certain minimum royalties, and (iii) terminate
generally upon the expiration of the last to expire patent in-
23
<PAGE> 24
cluded in the license. If Xenometrix fails to meet its obligations under the
licenses, including payment of minimum royalties, such agreements may be
terminated by the licensors.
The patent positions of high technology firms, including Xenometrix, are
uncertain and involve complex legal and factual questions for which important
legal principles are largely unresolved. In addition, the coverage claimed in a
patent application can be significantly reduced before a patent is issued.
Consequently, even though patent applications covering the technology licensed
by Xenometrix are being prosecuted with the U.S. and certain foreign patent
offices, there can be no assurance that any of such patent applications will
result in the issuance of patents or, if any patents are issued, that they will
provide significant proprietary protection and will not be circumvented or
invalidated. Since patent applications in the United States are maintained in
secrecy until patents issue or foreign counterparts publish, and since
publication of discoveries in scientific or patent literature often lag behind
actual discoveries, Xenometrix cannot be certain that it or any of its
licensors was the first creator of inventions covered by pending patent
applications or that it or any such licensor was the first to file patent
applications for such inventions. Moreover, Xenometrix might have to
participate in one or more interference proceedings declared by the US Patent
and Trademark Office to determine priority of invention, which could result in
substantial cost to Xenometrix, whether or not the result of such proceedings
was favorable to Xenometrix.
A number of pharmaceutical and biotechnology companies and research and
academic institutions have developed technologies, filed patent applications or
received patents on various technologies that may be related to the Company's
technology. Many of these entities are larger and have significantly greater
resources than Xenometrix. Some of the technologies, applications or patents of
these entities may conflict with the Company's technologies, the patents and
patent applications licensed by Xenometrix, or the Company's patent
applications. Such conflict could limit the scope of the patents that
Xenometrix or its licensors has or may be able to obtain, or result in denial
of the Company's or its licensor's patent applications. In addition, if patents
that cover the technologies used by Xenometrix are issued to other companies,
there can be no assurance that Xenometrix would be able to license these
patents at a reasonable cost or be able to develop or obtain alternative
non-infringing technology. Xenometrix and its patent counsel have received
communication from the holder of a European patent alleging that the holder has
certain intellectual property rights that may impact the European sales of
Xenometrix' CAT-Tox(TM) assay. The holder has proposed a licensing agreement
which Xenometrix is evaluating. Currently Xenometrix does not have
significant CAT-Tox(TM) sales in Europe.
Xenometrix relies upon trade secret protection for its confidential and
proprietary information. There can be no assurance that competitors or
potential competitors of Xenometrix will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology, or that
the Company can meaningfully protect its trade secrets.
Uncertainty of Market Acceptance. In order for Xenometrix to achieve broad
market acceptance of its assay systems in toxicology applications, Xenometrix
must demonstrate to its customer base that its assays are useful supplements to
existing toxicology testing technology. There can be no assurance that the
Company's existing or future products will be commercially accepted. The
Company's targeted customer base may not change its established testing methods
and may not make the necessary investment to purchase the Company's products.
If market acceptance of the Company's products does not develop, the Company's
prospects would be materially adversely affected.
Uncertainty of Product Validation For Toxicity Testing. Pharmaceutical,
biotechnology, chemical and personal care companies generally rely upon
well-established testing procedures, many of which are well known to and
accepted by the FDA, EPA or other regulatory agencies. In order for Xenometrix
to achieve broad market acceptance of its assay systems, Xenometrix must
educate its customer base regarding its products and demonstrate that the
Company's products measure activity and/or toxicity with equal or greater
reliability than existing methods, or that Xenometrix' assays add significantly
to the data generated using existing assays, so that the customers can, in
turn, obtain acceptance of the data generated by its systems in filings made by
such customers with regulatory agencies. To do so, Xenometrix must demonstrate
that its molecular information assays predict either animal or human
toxicological risk or the known carcinogenic activity of a wide range of
chemical classes. If the Company
24
<PAGE> 25
is not able to successfully validate its assays, its prospects would be
materially adversely affected. See "Business - Sales and Marketing."
Limited Marketing Experience. Xenometrix has limited experience in marketing
and selling its products and services and will have to further develop its
marketing and sales capabilities and establish a network of international
distributors. There can be no assurance that Xenometrix will be able to
establish adequate marketing and sales capability. In addition, Xenometrix
intends to market its products overseas. Overseas marketing may present greater
risks to Xenometrix, in certain respects, than domestic marketing because of,
among other considerations, the Company's more extensive reliance on third
parties to market its products, possible currency fluctuations and possible
adverse impacts from legal or political changes in foreign countries.
Dependence Upon Key Personnel. Xenometrix depends on the services of certain
key personnel, particularly those of Edson D. de Castro, its Chief Executive
Officer, John H. Wheeler, its Vice President for Sales and Marketing, Ronald L.
Hendrick, its Chief Financial Officer and Pauline Gee, its Vice President for
Research and Development. Xenometrix does not maintain key man insurance
policies on the lives of any of its executives. Xenometrix believes that the
loss of the services of any of these executives could have a material adverse
effect on the Company. See Item 9,"Directors, Executive Officers and Control
Persons."
Xenometrix may seek to hire additional personnel. Competition among
pharmaceutical and biotechnology companies for qualified employees is intense,
and the loss of any such qualified employees, or an inability to attract,
retain and motivate any additional highly skilled employees necessary for the
expansion of the Company's activities, could have a material adverse effect on
Xenometrix. There can be no assurance that Xenometrix will be able to retain
its existing personnel or to attract additional qualified employees.
Possible Conflicting Obligations of Scientific Advisors. Most of the Company's
scientific advisors are employed on a full-time basis by employers other than
Xenometrix and some have consulting or other advisory arrangements with other
entities which may conflict or compete with their obligations to Xenometrix.
There can be no assurance that the scientific advisors will not participate in
research or ventures which, if successful, would result in products or services
which directly compete with the Company's products and services. See "Business
- -- Scientific Advisory Board."
Competition. The Company's competition consists mainly of Contract Research
Organizations ("CROs") which provide toxicology testing services on a contract
basis such as Hazelton Laboratories, Quintiles Transnational Corp.,
Microbiological Associates, Inc. and Huntingdon International Holdings. In
addition, Xenometrix competes with in vitro assay manufacturers. Some
competitors have developed proprietary tests, and are selling those tests
commercially. Those competitors include InVitro International, Paracelsian
Inc., Advanced Tissue Sciences Inc., InVitro Technologies, Inc., StressGen
Biotechnologies Corp. and Microbics Corp. The Company expects that additional
competitors will enter the in vitro toxicology testing market in the future.
Xenometrix believes that the competitive factors in the molecular information
testing market include (i) the level of information provided, (ii) the time
required to perform a test, and (iii) the cost of performing such test.
Manufacturing; Dependence on Outside Suppliers. Although Xenometrix has
produced quantities of certain of its products for limited initial sales, it
has no experience in manufacturing its products in large commercial quantities,
and there can be no assurance that it will be able to make a successful
transition to large-scale commercial production or manufacture its products at
a commercially viable cost.
Certain key components and raw materials used in the manufacturing of the
Company's products are currently provided by single source vendors.
Interruption in the supply of a sole-sourced raw material could have a material
adverse effect on the Company's ability to manufacture products until a new
source of supply were qualified and, as a result, could have a material adverse
effect on the Company's business. In addition, an uncorrected impurity or
supplier's variation in a raw material, either unknown to Xenometrix or
incompatible with the Company's manufacturing process, could have a material
adverse effect on the Company's ability to manufacture products
25
<PAGE> 26
and/or the performance of the product. Also, because Xenometrix is a small
customer of many of its suppliers, there can be no assurance that suppliers
will devote adequate resources to supplying the Company's needs.
Xenometrix' CAT-ToxTM assay systems require a continuous supply of Enzyme
Linked ImmunoSorbant Assay (ELISA) components, which are a fundamental part of
each assay kit. The ELISA is the detection system for the CAT protein produced
in response to stress. ELISA detection is a function of specific polyclonal
antibodies developed to find and immobilize all CAT protein produced. Any
technical problem with the supply or performance of this ELISA kit could have
an adverse effect on the Company's ability to provide the CAT-Tox assay system
to its customers.
Risk of Contamination. Xenometrix relies heavily on the maintenance and
distribution of mammalian, bacterial and yeast cells for the manufacturing of
its various products. Although rare, contamination of cell culture,
particularly mammalian culture, by the introduction of agents such as molds,
mycoplasma or bacteria is a risk associated with these processes. It is
possible for assays to perform aberrantly as a consequence of undetected
contamination. If such contamination were to be detected, Xenometrix might be
required to halt production of particular assay(s) in order to establish the
cause and eliminate such contamination. Xenometrix has established quality
control standards for minimizing the potential for contamination, and for
effectively eliminating contamination after it is detected, but cannot
guarantee that such contamination will not occur.
Hazardous Materials. Xenometrix' research and development involves the
controlled use of hazardous materials, chemicals and various radioactive
compounds. Although Xenometrix believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by state
and federal regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. Although Xenometrix maintains
workers' compensation and liability insurance, there can be no assurance that
in the event of such an accident, Xenometrix would not be held liable for any
damages that result, that the Company's insurance coverage would be adequate to
cover such liabilities or that any such excess liability would not exceed the
resources of Xenometrix. The Company may incur substantial cost for compliance
with environmental regulations if Xenometrix expands its manufacturing
capacity.
Government Regulation. Although the Company's products are not currently
subject to regulation by any governmental agencies, the Company's targeted
customer base is highly regulated. For example, in the United States, the FDA
requires that companies evaluate the toxicity of drugs under development before
the drugs may be evaluated for their efficacy in humans. Although the FDA does
not specifically prescribe the specific toxicology tests which must be
performed, any material change in regulatory requirements may make it more
difficult for Xenometrix to sell its toxicology testing products to customers.
See "Business -- Government Regulation."
Product Liability; Availability of Insurance. Although Xenometrix has obtained
product liability insurance, there can be no assurance that it will be able to
maintain such insurance on acceptable terms or that insurance will provide
adequate coverage against potential liabilities.
NASDAQ and Boston Stock Exchange, Delisting. The trading of the Company's stock
in the NASDAQ Small-Cap Market and on the Boston Stock Exchange is conditioned
upon Xenometrix maintaining certain asset, capital and surplus, earnings and
stock price tests. To maintain eligibility for trading on the NASDAQ Small-Cap
Market, Xenometrix is required to maintain total assets in excess of
$2,000,000, capital and surplus in excess of $1,000,000, and (subject to
certain exceptions) a bid price of $1 per share. To maintain eligibility on the
Boston Stock Exchange, Xenometrix is required, among other matters, to maintain
total net tangible assets in excess of $1,000,000. If Xenometrix fails any of
the tests, the Common Stock and Warrants may be delisted from trading in the
NASDAQ Small-Cap Market or on the Boston Stock Exchange. The effects of
delisting include the limited release of the market prices of the Company's
securities and limited news coverage of Xenometrix. Delisting may restrict
investors' interest in the Company's securities and materially adversely affect
the trading market and prices for such securities and the Company's ability to
issue additional securities or to secure additional financing. In addition to
the risk of volatility of stock prices and possible delisting, low price stocks
are subject to the additional risks of additional federal and state regulatory
requirements and the potential loss of effective trading markets. In
particular, if the Common Stock or Warrants were delisted from trading in the
NASDAQ Small-Cap
26
<PAGE> 27
Market and the trading price of the Common Stock was less than $5 per share,
the Common Stock and Warrants could be subject to Rule 15g-9 under the
Securities Exchange Act of 1934, as amended, which, among other things,
requires that broker/dealers satisfy special sales practice requirements,
including making individualized written suitability determinations and
receiving any purchaser's written consent prior to any transaction. If the
Company's securities could also be deemed penny stocks under the Securities
Enforcement and Penny Stock Reform Act of 1990, additional disclosure would be
required in connection with trades in the Company's securities, including the
delivery of a disclosure schedule explaining the nature and risks of the penny
stock market. Such requirements could severely limit the liquidity of the
Company's securities and the ability of purchasers in the Offering to sell
their securities in the secondary market.
27
<PAGE> 28
Item 7
Financial Statements
The financial statements begin on page F1.
Item 8
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
Part III
Items 9 through 12
The information contained in the Xenometrix Proxy Statement for the annual
meeting of stockholders proposed to be held November 20, 1996, under the
headings, "Election of Directors", "Executive Officers", "Executive
Compensation", "Certain Relationships and Related Transactions" and "Principal
Stockholders" is incorporated herein by reference. The Proxy Statement will be
filed with the Securities and Exchange Commission within 120 days after June
30, 1996.
28
<PAGE> 29
Part IV
Item 13
Exhibits and Reports of Form 8-K
Reports on Form 8-K
Xenometrix filed no reports on Form 8-K during the quarter ended June 1996.
Exhibits
Exhibit
Number Description of Document
------- -----------------------
3.1+ Certificate of Incorporation of the Registrant, filed
with the Secretary of State of Delaware on June 15,
1992.
3.2+ Certificate of Merger of the Registrant filed with
the Secretary of State of Delaware on July 29, 1992.
3.3+ Certificate of Amendment of Certificate of
Incorporation of the Registrant with regard to the
reverse stock split.
3.4+ Amended and Restated By-Laws of the Registrant.
3.5+ Certificate of Amendment of Certificate of
Incorporation of the with regard to the addition of
Article XII.
3.6+ Certificate of Elimination of the 5% Cumulative
Convertible Series A Preferred Stock of the Registrant.
3.7+ Certificate of Elimination of the 5% Cumulative
Convertible Series B Preferred Stock of the Registrant.
3.8+ Certificate of Amendment of Certificate of
Incorporation of the Registrant with regard to the
reduction of the number of the Registrant's authorized
shares.
3.9+ Amendment to the Amended and Restated By-laws of the
Registrant as approved by the Registrant's Board of
Directors on September 12th, 1995 and September 27th,
1995.
4.1+ Certificate representing shares of Common Stock.
4.2+ Warrant.
4.3+ Warrant Agreement.
10.1+ Form of Indemnity Agreement between the Registrant and
its directors and executive officers.
10.2+ Employment Agreement, dated as of October 5, 1995,
between the Registrant and Edson D. de Castro.
10.3+ Employment Agreement, dated as of October 5, 1995,
between the Registrant and John H. Wheeler.
10.4+ Employment Agreement, dated as of October 5, 1995,
between the Registrant and Ronald L. Hendrick.
10.5+ Employment Agreement, dated as of October 5, 1995,
between the Registrant and Pauline Gee.
10.6+ Consulting Agreement, dated as of May 25, 1995, between
the Registrant and Spencer B. Farr.
10.7+ Amended and Restated Option Plan.
10.8+ 1993 Non-Employee Directors Stock Option Plan of the
Registrant.
10.9+ Form of Proprietary Information and Inventions Agreement
between the Registrant and each of its employees.
29
<PAGE> 30
10.10+ Voting Agreement, dated as of December 2, 1994, among
the Registrant and certain of its stockholders.
10.11+ Registration Rights Agreement, dated as of December
31, 1991, between the Registrant and certain of its
stockholders.
10.12+ Form of Subscription and Preferred Stock Purchase
Agreement between the Registrant and each purchaser
of shares of its 5% Cumulative Convertible Series A
Preferred Stock.
10.13+ Form of Warrant for the Purchase of shares of 5%
Cumulative Convertible Series A Preferred Stock of
the Registrant.
10.14+ Form of Preferred Stock Purchase Agreement among the
Registrant and the purchasers of shares of its 5%
Cumulative Convertible Series B Preferred Stock.
10.15+ Form of Amendment No. 2 to Subscription and Preferred
Stock Purchase Agreement among the Registrant and the
purchasers of shares of its 5% Cumulative Convertible
Series A Preferred Stock.
10.16+** Exclusive License Agreement, effective October 1,
1994, between the Regents of the University of
California and the Registrant.
10.17+** License Agreement, effective January 18, 1992,
between the President and Fellows of Harvard College
and the Registrant.
10.18+** License Agreement, dated May 27, 1992, among
GeneBioMed, Inc., Robert Schiestl and Venmark Ltd.
10.19+ Lease Agreement, dated January 8, 1993, between
Wilderness Place, Ltd. and the Registrant.
10.20+ Exchange Agreement, dated as of January 31, 1993,
between D.H. Blair Holdings, Inc. and the Registrant.
10.21+ Amendment to Preferred Stock Purchase Agreement,
dated as of May 6, 1994, among the Registrant and the
purchasers of Shares of its 5% Cumulative Convertible
Series B Preferred Stock.
10.22* License Agreement dated January 1, 1996 between
Stanford University and the Registrant.
10.23*** License Agreement datedJune 4, 1996 between The
Wistar Institute and the Registrant.
10.24 Lease dated July 1, 1996 between Flatirons
Cottonwood, Inc. and the Registrant.
10.25 Lease Termination Agreement effective July 1996
between Wilderness Place, Ltd. and the Registrant.
10.26 Lease Takeover Agreement effective July 1996 between
Nexstar Pharmaceuticals, Inc. and the Registrant.
23.1 Consent of Price Waterhouse LLP.
27.1 Summary Financial Information Schedule.
- --------------------
+ Incorporated herein by reference from Xenometrix' Form SB-2 Registration
Statement, Registration No. 33-96636-D, dated October 17, 1995.
*Incorporated herein by reference from Xenometrix' Form 10-QSB for the quarter
ended December 31, 1995.
** Portions of these exhibits have been granted confidentiality by the
Securities and Exchange Commission.
*** Xenometrix is applying for confidential treatment with respect to portions
of this exhibit.
30
<PAGE> 31
Signatures
Pursuant to Section 13 of the Securities Exchange Act of 1934, Xenometrix
caused this report to be signed on its behalf.
XENOMETRIX, INC.
/s/ Edson D. de Castro
September 27, 1996 Edson D. de Castro
Chairman of the Board and
Chief Executive Officer
Pursuant to the Exchange Act, this report has been signed on behalf of
Xenometrix and in the capacities indicated.
/s/ Edson D. de Castro Chairman of the Board and
Edson D. de Castro Chief Executive Officer September 27, 1996
/s/ Ronald L. Hendrick Vice President and Chief
Ronald L. Hendrick Financial Officer September 27, 1996
/s/ Robert L. Poley
Robert L. Poley Controller September 27, 1996
Bruce N. Ames, Ph.D. Director September 27, 1996
/s/ Jeremy M. Levin
Jeremy M. Levin, MD, Ph.D. Director September 27, 1996
/s/ Walter M. Lovenberg
Walter M. Lovenberg, Ph.D. Director September 27, 1996
/s/ James Mitarotonda
James Mitarotonda Director September 27, 1996
/s/ John K. A. Prendergast
John K. A. Prendergast, Ph.D. Director September 27, 1996
31
<PAGE> 32
/s/ Lindsay A. Rosenwald
Lindsay A. Rosenwald, MD Director September 27, 1996
/s/ Randal P. Schumacher
Randal P. Schumacher Director September 27, 1996
/s/ Ralph Z. Sorenson
Ralph Z. Sorenson, DBA. Director September 27, 1996
/s/ Jerry A. Weisbach
Jerry A. Weisbach, Ph.D. Director September 27, 1996
32
<PAGE> 33
XENOMETRIX, INC.
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants .............................................. F-2
Balance Sheet as of June 30, 1996 and 1995 ..................................... F-3
Statement of Operations for the Years Ended June 30, 1996 and 1995 ............. F-4
Statement of Stockholders' Equity for the Years Ended June 30, 1996 and 1995.... F-5
Statement of Cash Flows for the Years Ended June 30, 1996 and 1995 ............. F-6
Notes to Financial Statements .................................................. F-7
</TABLE>
F-1
<PAGE> 34
Report of Independent Accountants
To the Board of Directors and
Stockholders of Xenometrix, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of cash flows and of changes in stockholders' equity present
fairly, in all material respects, the financial position of Xenometrix, Inc.
(the "Company") at June 30, 1996 and 1995, and the results of its operations
and its cash flows for each of the years then ended in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Boulder, Colorado
September 23, 1996
F-2
<PAGE> 35
XENOMETRIX, INC.
Balance Sheet
Assets
<TABLE>
<CAPTION>
June 30,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash and cash equivalents ...................................... $ 3,290,000 $ 489,000
Accounts receivable, net of $12,000 and $10,000 allowance for
doubtful accounts in 1996 and 1995, respectively ........... 137,000 109,000
Inventory ...................................................... 146,000 94,000
Deposits and prepaid expense ................................... 172,000 55,000
------------ ------------
Total current assets ................................. 3,745,000 747,000
Property and equipment, net .................................... 335,000 231,000
Patents, net of accumulated amortization of $179,000 in
1996 and $110,000 in 1995 .................................. 377,000 301,000
------------ ------------
$ 4,457,000 $ 1,279,000
============ ============
Liabilities And Stockholders' Equity
Accounts payable ............................................... $ 279,000 $ 412,000
Accrued liabilities ............................................ 210,000 209,000
------------ ------------
Total current liabilities ............................ 489,000 621,000
------------ ------------
Commitments and Contingencies (Note 4)
Stockholders' Equity:
Convertible preferred stock, Series A -$0.001 par value; no and
5,000,000 shares authorized, no and 4,255,000 shares issued
and outstanding at June 30, 1996 and 1995, respectively ..... 4,000
Convertible preferred stock, Series B -$0.001 par value; no and
3,543,000 shares authorized, no and 3,543,000 shares issued
and outstanding at June 30, 1996 and 1995, respectively ..... 4,000
Preferred stock -$0.001 par value, 5,000,000 shares
authorized; no shares issued and outstanding at June 30, 1996
Common stock -- $0.001 par value; 20,000,000 shares
authorized, 2,912,000 and 551,000 shares issued and
outstanding at June 30, 1996 and 1995, respectively ......... 3,000 1,000
Additional paid-in capital ..................................... 15,456,000 8,673,000
Accumulated deficit ............................................ (11,491,000) (8,024,000)
------------ ------------
Total stockholders' equity ........................... 3,968,000 658,000
------------ ------------
$ 4,457,000 $ 1,279,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 36
XENOMETRIX, INC.
Statement of Operations
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------
1996 1995
------------ -----------
<S> <C> <C>
Net sales and services........................................................ $ 671,000 $ 514,000
Cost of sales and services.................................................... 549,000 489,000
------------ -----------
Gross profit................................................................ 122,000 25,000
------------ -----------
Research and development...................................................... 1,123,000 1,492,000
Selling, general and administrative........................................... 2,489,000 1,927,000
------------ -----------
Total operating expense 3,612,000 3,419,000
------------ -----------
Operating loss................................................................ (3,490,000) (3,394,000)
Grant income................................................................ 116,000
Interest income, net........................................................ 138,000 51,000
------------ -----------
Loss before extraordinary item...................................... (3,352,000) (3,227,000)
Extraordinary item--Early extinguishment of debt issuance cost................ (115,000)
------------ -----------
Net loss............................................................ $ (3,467,000) $(3,227,000)
============ ===========
Loss per common share:
Loss before extraordinary item...................................... $ (1.55) $ (4.24)
Extraordinary item.................................................. (0.05)
------------ -----------
Net loss............................................................ $ (1.60) $ (4.24)
=========== ===========
Shares used in calculating per share data..................................... 2,165,000 761,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 37
XENOMETRIX, INC.
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Convertible
Common Stock Preferred Stock Additional
------------ --------------- paid-in Accumulated
Shares Amount Shares Amount capital deficit Total
---------- ------ ---------- ------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994............ 548,000 $1,000 5,355,000 $5,000 $ 6,631,000 $(4,797,000) $1,840,000
Stock options exercised............. 1,000 4,000 4,000
Common stock issued to acquire
technology license................ 2,000 14,000 14,000
Series B preferred stock issued for
cash, net of stock issuance cost.. 1,483,000 2,000 2,025,000 2,027,000
Series B preferred stock issued to
meet antidilution provisions...... 960,000 1,000 (1,000)
Net loss............................ (3,227,000) (3,227,000)
--------- -------- ---------- -------- ----------- ---------- ---------
Balance at June 30, 1995............ 551,000 1,000 7,798,000 8,000 8,673,000 (8,024,000) 658,000
Stock options exercised............. 9,000 33,000 33,000
Net proceeds of initial public 1,236,000 1,000 6,676,000 6,677,000
offering.........................
Conversion of Preferred Stock to
Common Stock...................... 1,116,000 1,000 (7,798,000) (8,000) 7,000
Grant of common stock option for
consulting services............... 67,000 67,000
Net loss............................ (3,467,000) (3,467,000)
--------- --------- ---------- -------- ----------- ------------ ----------
Balance at June 30, 1996............ 2,912,000 $3,000 0 $ 0 $15,456,000 $(11,491,000) $3,968,000
========= ========= ========== ======== =========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 38
XENOMETRIX, INC.
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................................ $(3,467,000) $(3,227,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................. 251,000 237,000
Provision for doubtful accounts............................................... 19,000 10,000
Early extinguishment of debt issuance cost.................................... 115,000
Changes in assets and liabilities:
Accounts receivable........................................................ (47,000) 1,000
Inventory.................................................................. (52,000) 21,000
Deposits and prepaid expense............................................... (117,000) (33,000)
Accounts payable and accrued liabilities................................... (132,000) 344,000
----------- ----------
Net cash used in operating activities......................................... (3,430,000) (2,647,000)
----------- ----------
Cash flows from investing activities:
Capital expenditures............................................................ (223,000) (29,000)
Patent acquisition cost......................................................... (198,000) (153,000)
----------- ----------
Net cash used in investing activities......................................... (421,000) (182,000)
----------- ----------
Cash flows from financing activities:
Net proceeds from issuance of senior secured promissory notes................... 875,000
Repayment of senior subordinated notes.......................................... (1,000,000)
Net proceeds from issuance of common stock...................................... 6,777,000 4,000
Net proceeds from issuance of convertible preferred stock....................... 2,027,000
----------- ----------
Net cash provided by financing activities..................................... 6,652,000 2,031,000
----------- ----------
Net increase (decrease) in cash................................................. 2,801,000 (798,000)
Cash and cash equivalents at beginning of year.................................. 489,000 1,287,000
----------- -----------
Cash and cash equivalents at end of year........................................ $3,290,000 $489,000
=========== ===========
Non-cash transactions:
Common stock issued to acquire technology license............................. $14,000
===========
Common stock option issued for consulting services ........................... $67,000
===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE> 39
XENOMETRIX, INC.
Notes To Financial Statements
1. Organization And Summary Of Significant Accounting Policies
Xenometrix, Inc. ("Xenometrix" or the "Company"), a Delaware corporation, is
primarily engaged in the manufacture, marketing, sales and related research and
development of molecular information assays. The Company also offers its
customers a contract laboratory service whereby the customer sends its chemical
compounds to Xenometrix for testing and evaluation. The assays assess the
genetic response of human and bacterial cells when exposed to various
compounds. Xenometrix was incorporated on July 24, 1991.
Financial Condition
At June 30, 1996, Xenometrix had an accumulated deficit of $11,491,000 and has
incurred losses subsequent to June 30, 1996. It also has significant future
cash requirements related to the further development of its manufacturing
operations, products and sales organization. Management believes that the cash
on hand and the cash to be provided by the subsequent transaction reported in
Note 8 will be sufficient to meet those requirements through June 30, 1997.
Based on current plans, Xenometrix will need to raise additional capital in
order to continue its operations following the current fiscal year. Xenometrix
is currently exploring options for raising additional capital. There can be no
assurance that additional financing will be available on satisfactory terms or
at all. If Xenometrix is unable to obtain additional financing, it will be
required to curtail or discontinue operations.
Revenue Recognition, Concentration of Credit Risk and Concentration of Materials
Supply
Revenue from product sales is recognized upon shipment. Contract reference
laboratory service revenue is recognized upon completion of such services in
accordance with contract terms. Revenue from product development is recognized
as such services are performed.
Xenometrix sells its products and services primarily to companies in the
pharmaceutical, chemical, biotechnology, cosmetics and processed foods
industries as well as to governmental agencies, which means receivables are
concentrated in these sectors. The market for the molecular biological products
and services sold by Xenometrix is to a limited number of customers. In the
year ended June 1996, two customers accounted for 13% and 12% of sales,
respectively. Export sales accounted for 18% of total sales, with 12% in
Switzerland and the remaining 6% from Canada and several European and Asian
countries. During the year ended June 1995, no individual customer and no
single country outside the United States accounted for 10% or more of total
sales.
Certain key components and raw materials used in the manufacturing of
Xenometrix' products are currently provided by single source vendors. Although
Xenometrix believes that alternative sources for such components and raw
materials are available, an interruption in the supply of a sole-sourced raw
material could have a material adverse effect on Xenometrix' ability to
manufacture products until a new source of supply were qualified and, as a
result, could have a material adverse effect on the Company's business.
Grant Income
During the year ended June 1995, Xenometrix completed two research grants from
United States government agencies. These best efforts grants funded certain
research expenditures incurred by Xenometrix. Xenometrix records grant related
expenses when incurred and simultaneously recognizes grant income to the extent
the expenses are reimbursable under the terms of the grants. Xenometrix had no
grant income in the year ended June 30, 1996.
Research and Development Cost
Research and development cost is expensed as incurred.
F-7
<PAGE> 40
Net Loss Per Common Share
For the year ended June 1996, net loss per common share is computed using the
weighted average number of shares of common stock outstanding. Common
equivalent shares from certain stock options, warrants and convertible
preferred stock are excluded from the computation as their effect is
antidilutive. For the year ended June 1995, the weighted average number of
shares outstanding has been retroactively adjusted using the treasury stock
method to reflect issuances of common stock, convertible debt, and grants of
options and warrants with exercise or conversion prices below the initial
public offering (IPO) price of $6.75 that were issued one year prior to the IPO
in October 1995. Shares of convertible preferred stock that converted into
shares of common stock upon the closing of the IPO are included in the
calculation of net loss per common share for both years (using the as-converted
method) from the original date of issuance.
Statement of Cash Flows
Xenometrix considers all highly liquid investments, purchased with a maturity
of three months or less, to be cash equivalents.
Inventory
Inventory is stated at the lower of cost or market and is computed using the
first-in, first-out method. Inventory is primarily comprised of raw materials
at June 30, 1996 and 1995.
Depreciation and Amortization
Depreciation and amortization is computed using the straight-line method over
the estimated useful lives of the respective assets, which ranges from three to
seven years. Leasehold improvements are amortized over the shorter of the
estimated asset life or the term of the lease. Maintenance and repairs are
expensed as incurred.
Patent Cost
The cost of obtaining patents on the Company's technology is capitalized as
incurred. Amortization of that cost is computed using the straight-line method
over the estimated useful lives of five years.
Reclassifications
Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of management's estimates. Actual
results could vary from the estimates used.
F-8
<PAGE> 41
2. Property And Equipment
Property and equipment is stated at cost and is comprised of the following:
<TABLE>
<CAPTION>
June 30,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Laboratory equipment ............................... $ 393,000 $ 234,000
Leasehold improvements ............................. 154,000 152,000
Computer equipment and software .................... 169,000 128,000
Office equipment and furniture ..................... 53,000 52,000
--------- ---------
769,000 566,000
Less accumulated depreciation and amortization ..... (434,000) (335,000)
--------- ---------
$ 335,000 $ 231,000
</TABLE>
3. Commitments And Contingencies
Leasing Arrangements
Xenometrix leases certain of its facilities under non-cancelable operating
leases. Future minimum lease payments under such leases at June 30, 1996,
including the lease described in Note 8, are as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
<S> <C>
1997 ......................................................... $ 289,000
1998 ......................................................... 239,000
1999 ......................................................... 237,000
2000 ......................................................... 236,000
2001 ......................................................... 232,000
Thereafter .......................................................... 246,000
----------
$1,479,000
</TABLE>
Rent expense for the years ended June 1996 and 1995 was approximately $141,000
and $101,000, respectively.
Royalty Agreements
Xenometrix is obligated to pay certain royalties on sales of testing kits or
services pursuant to various technology licenses. Certain of these royalties
are paid to entities that are affiliated with a former director and a current
officer of the Company. During the years ended June 1996 and 1995, Xenometrix
paid $61,000 and $25,000, respectively, to the affiliated entities.
4. Senior Secured Debt
On August 31, 1995, Xenometrix issued 10% Senior Secured Promissory Notes
("Notes") in the aggregate amount of $1,000,000 and recorded the Notes at a
discount to be amortized over their term. The Notes were payable upon the
earlier of one year or consummation of an initial public offering. At the close
of the IPO Xenometrix recorded an extraordinary charge of $115,000 to the
operations of the year ended June 1996, representing unamortized debt issuance
cost upon the early retirement of the Notes. In connection with the issuance of
the Notes, Xenometrix issued warrants to purchase 200,000 shares of Xenometrix
common stock (Note 6).
F-9
<PAGE> 42
5. Capital Stock, Stock Options And Warrants
Convertible Preferred Stock
All the outstanding Series A and Series B convertible preferred stock at June
30, 1995, was converted into approximately 1,116,000 shares of common stock
immediately prior to the Company's IPO in October 1995. Upon conversion, all
accrued and unpaid dividends, whether or not declared, were canceled.
Common Stock
In August 1995, the Company's Board of Directors authorized and the
Shareholders subsequently approved a 11-to-1 reverse stock split which was
effected immediately prior to the IPO.
On October 23, 1995, Xenometrix closed on its IPO of 1,100,000 units (the
"Units"), each Unit consisting of one share of common stock, and one warrant to
purchase one share of common stock at an exercise price of $7.0875 per share.
The price per Unit was $6.75, resulting in gross proceeds of $7,425,000.
Aggregate offering cost was approximately $1,550,000.
On November 9, 1995, the IPO underwriter exercised its over-allotment option to
purchase an additional 135,900 Units at the IPO price of $6.75 per Unit. On
November 14, 1995 Xenometrix closed on the sale of these Units, resulting in
net proceeds to Xenometrix of approximately $800,000.
Stock Options
Xenometrix has two stock option plans; an Employee Stock Option Plan ("Employee
Plan") and a Non-Employee Directors Stock Option Plan ("Director Plan").
Pursuant to the Employee Plan and the Director Plan, stock options may be
granted to purchase up to 339,045 and 150,000 shares, respectively, of common
stock. The stock options are generally granted at an exercise price not less
than the fair market value of the common stock on the date of grant, as
determined by the Board of Directors. Options granted generally vest over
forty-eight months and expire ten years after the date of grant.
Stock option transactions are summarized below:
<TABLE>
<CAPTION>
Employee Plan Director Plan
--------------------- ----------------------
Shares Price Shares Price
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Outstanding at June 30, 1994.................... 54,531 $0.11 - $4.73 36,363 $4.73
Granted......................................... 10,455 4.73 18,182 4.73
Exercised....................................... (409) 4.73
Forfeited....................................... (10,727) 4.40 - 4.73 (9,091) 4.73
------- ------------- ------ -------------
Outstanding at June 30, 1995.................... 53,850 $0.11- $4.73 45,454 $4.73
Granted......................................... 150,088 4.73 - 9.25 46,140 4.73 - 7.45
Exercised....................................... (6,949) 2.75 - 4.73
Forfeited....................................... (13,262) 4.73 (4,549) 4.73
------- ------------- ------ -------------
Outstanding at June 30, 1996.................... 183,727 $0.11 - $9.25 87,045 $4.73 - $7.45
======= ============= ====== =============
Available for issue, June 30, 1996 144,695 62,955
======= ======
Exercisable, June 30, 1996 30,297 $0.11 - $6.75 31,044 $4.73 - $7.45
======= ============= ====== =============
</TABLE>
The weighted average exercise prices of options outstanding under the Employee
Plan and Director Plan at June 30, 1996 were $4.74 and $5.20, respectively.
F-10
<PAGE> 43
In addition to the above options, Xenometrix granted options to outside parties
as consideration for certain services rendered. In September 1995, an option to
purchase 10,000 shares of common stock at a price of $.01 per share was granted
to an individual as compensation for financial consulting services rendered in
connection with the formation of capital. In October 1995, in connection with
the Company's IPO, options to purchase 110,000 units (consisting of one common
share of stock and a warrant to purchase an additional share for $7.0875) at a
price of $11.14 per unit were granted as part of the underwriter's
compensation. These options expire in October 2000.
Stock Warrants
In the year ended June 1993, Xenometrix issued warrants to affiliates of a
director and stockholder as a part of the consideration for the placement of
the Company's Series A Preferred Stock, which, after giving effect to the
Company's conversion of preferred to common stock, are exercisable for the
purchase of 56,192 shares of common stock at a price of $13.20 per share until
November 1997. Additional warrants to purchase up to 18,182 shares of common
stock at a price of $8.40 per share were issued to the same parties in August
1995, in consideration for the cancellation of a private placement agreement.
These warrants expire in August 2000.
Xenometrix issued warrants in connection with the Notes discussed in Note 5.
The warrants are exercisable until October 2000 for the purchase of 200,000
shares of Xenometrix common stock at a price of $4.05 per share. Holders of
these warrants are entitled to "demand" and "piggyback" registration rights
with respect to the common stock issuable upon the exercise of these warrants.
In connection with its IPO, Xenometrix issued 1,235,900 warrants to purchase
newly issued common stock at a price of $7.0875 per share, until October 17,
2000. For these warrants to be exercisable, Xenometrix must maintain a current
registration statement with the Securities and Exchange Commission and
qualification with or approval from various state securities agencies. The
warrants are callable by Xenometrix after the public price of a share of
Xenometrix common stock is $13.50 or higher for 20 consecutive business days.
6. Income Taxes
At June 30, 1996, Xenometrix had net operating loss carryforwards for federal
income tax purposes of approximately $10,730,000. Annual utilization of the
loss carryforwards is subject to significant limitations due to historical
changes in Xenometrix' ownership. Future changes in ownership could further
reduce the annual availability of these benefits. If unused, the carryforwards
will expire beginning in 2007.
The tax effects of significant items comprising the Company's deferred taxes are
as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------
1996 1995
----------- ---------
<S> <C> <C>
Deferred tax assets
Net operating loss carry-forwards ...... $ 4,200,000 $ 2,890,000
Patent, start-up and organizational cost 110,000 190,000
Other temporary differences, net ....... 150,000 40,000
----------- -----------
4,460,000 3,120,000
Valuation allowance .................... (4,460,000) (3,120,000)
----------- -----------
Net deferred tax assets .................. $ 0 $ 0
=========== ===========
</TABLE>
Deferred tax assets have been reduced to zero by a valuation allowance based on
current evidence which indicates that it is currently not considered likely
that these benefits will be realized. The valuation allowance increased by
$1,340,000 during the year ended June 30, 1996, primarily due to additional
losses for which no tax benefit was recorded.
F-11
<PAGE> 44
7. Other Related Party Transactions
Xenometrix has entered into a registration rights agreement (the "Registration
Rights Agreement") with a director of Xenometrix and certain associates of the
director, each of whom own Common Stock (collectively, the "Rights Holders").
The Rights Holders will have the right, on one occasion, for a period of five
years from December 31, 1991, to cause Xenometrix to use its best efforts to
register the Rights Holders' shares of Common Stock under the Securities Act at
the expense of Xenometrix, subject to certain restrictions (a "Demand
Registration"). In order for the Rights Holders to effect a Demand
Registration, the Registration Rights Agreement requires that the holders of
more than 50% of the total shares of Common Stock held by the Rights Holders
request such Demand Registration. Under the Registration Rights Agreement, the
Rights Holders shall also have the right, on two occasions, but not more than
five years from December 31, 1991, to include their shares of Common Stock in
registration statements filed by Xenometrix under the Securities Act at the
expense of Xenometrix, subject to certain restrictions, including underwriter
cut-backs.
Xenometrix has had agreements with three members of its Board of Directors,
under which they provide certain scientific, managerial and marketing
consulting services to Xenometrix. During the years ended June 1996 and 1995,
Xenometrix paid $102,000 and $11,100 for those services, respectively.
8. Subsequent Events
In July 1996, Xenometrix entered into an agreement to lease approximately
22,700 square feet in an existing building in Boulder, Colorado. Xenometrix
plans to move its entire operations to this new facility as soon as the
necessary tenant finish work can be completed. The lease is for a six-year
period, with two optional renewal periods of three years each. The new landlord
has agreed to pay up to $204,000 of tenant finish cost incurred by Xenometrix
in outfitting the facility to meet its needs.
In conjunction with the foregoing transaction, Xenometrix entered into a lease
termination agreement with its current landlord enabling Xenometrix to
terminate its existing lease when the new facility is ready for occupancy.
In addition, Xenometrix entered into an agreement with another company whereby
such company will pay Xenometrix certain consideration for relinquishing its
current lease enabling such company to enter into a new lease on this space.
The agreement calls for such company to pay Xenometrix $700,000 upon Xenometrix
termination of its existing lease, $360,000 payable in six quarterly
installments beginning approximately September 30, 1996 and continuing through
December 1997, and reimbursement of actual moving expenses incurred, up to
$18,000.
F-12
<PAGE> 45
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1+ Certificate of Incorporation of the Registrant, filed
with the Secretary of State of Delaware on June 15,
1992.
3.2+ Certificate of Merger of the Registrant filed with
the Secretary of State of Delaware on July 29, 1992.
3.3+ Certificate of Amendment of Certificate of
Incorporation of the Registrant with regard to the
reverse stock split.
3.4+ Amended and Restated By-Laws of the Registrant.
3.5+ Certificate of Amendment of Certificate of
Incorporation of the with regard to the addition of
Article XII.
3.6+ Certificate of Elimination of the 5% Cumulative
Convertible Series A Preferred Stock of the Registrant.
3.7+ Certificate of Elimination of the 5% Cumulative
Convertible Series B Preferred Stock of the Registrant.
3.8+ Certificate of Amendment of Certificate of
Incorporation of the Registrant with regard to the
reduction of the number of the Registrant's authorized
shares.
3.9+ Amendment to the Amended and Restated By-laws of the
Registrant as approved by the Registrant's Board of
Directors on September 12th, 1995 and September 27th,
1995.
4.1+ Certificate representing shares of Common Stock.
4.2+ Warrant.
4.3+ Warrant Agreement.
10.1+ Form of Indemnity Agreement between the Registrant and
its directors and executive officers.
10.2+ Employment Agreement, dated as of October 5, 1995,
between the Registrant and Edson D. de Castro.
10.3+ Employment Agreement, dated as of October 5, 1995,
between the Registrant and John H. Wheeler.
10.4+ Employment Agreement, dated as of October 5, 1995,
between the Registrant and Ronald L. Hendrick.
10.5+ Employment Agreement, dated as of October 5, 1995,
between the Registrant and Pauline Gee.
10.6+ Consulting Agreement, dated as of May 25, 1995, between
the Registrant and Spencer B. Farr.
10.7+ Amended and Restated Option Plan.
10.8+ 1993 Non-Employee Directors Stock Option Plan of the
Registrant.
10.9+ Form of Proprietary Information and Inventions Agreement
between the Registrant and each of its employees.
</TABLE>
<PAGE> 46
<TABLE>
<S> <C>
10.10+ Voting Agreement, dated as of December 2, 1994, among
the Registrant and certain of its stockholders.
10.11+ Registration Rights Agreement, dated as of December
31, 1991, between the Registrant and certain of its
stockholders.
10.12+ Form of Subscription and Preferred Stock Purchase
Agreement between the Registrant and each purchaser
of shares of its 5% Cumulative Convertible Series A
Preferred Stock.
10.13+ Form of Warrant for the Purchase of shares of 5%
Cumulative Convertible Series A Preferred Stock of
the Registrant.
10.14+ Form of Preferred Stock Purchase Agreement among the
Registrant and the purchasers of shares of its 5%
Cumulative Convertible Series B Preferred Stock.
10.15+ Form of Amendment No. 2 to Subscription and Preferred
Stock Purchase Agreement among the Registrant and the
purchasers of shares of its 5% Cumulative Convertible
Series A Preferred Stock.
10.16+** Exclusive License Agreement, effective October 1,
1994, between the Regents of the University of
California and the Registrant.
10.17+** License Agreement, effective January 18, 1992,
between the President and Fellows of Harvard College
and the Registrant.
10.18+** License Agreement, dated May 27, 1992, among
GeneBioMed, Inc., Robert Schiestl and Venmark Ltd.
10.19+ Lease Agreement, dated January 8, 1993, between
Wilderness Place, Ltd. and the Registrant.
10.20+ Exchange Agreement, dated as of January 31, 1993,
between D.H. Blair Holdings, Inc. and the Registrant.
10.21+ Amendment to Preferred Stock Purchase Agreement,
dated as of May 6, 1994, among the Registrant and the
purchasers of Shares of its 5% Cumulative Convertible
Series B Preferred Stock.
10.22* License Agreement dated January 1, 1996 between
Stanford University and the Registrant.
10.23*** License Agreement datedJune 4, 1996 between The
Wistar Institute and the Registrant.
10.24 Lease dated July 1, 1996 between Flatirons
Cottonwood, Inc. and the Registrant.
10.25 Lease Termination Agreement effective July 1996
between Wilderness Place, Ltd. and the Registrant.
10.26 Lease Takeover Agreement effective July 1996 between
Nexstar Pharmaceuticals, Inc. and the Registrant.
23.1 Consent of Price Waterhouse LLP.
27.1 Summary Financial Information Schedule.
</TABLE>
- ----------------------
+ Incorporated herein by reference from Xenometrix' Form SB-2 Registration
Statement, Registration No. 33-96636-D, dated October 17, 1995.
*Incorporated herein by reference from Xenometrix' Form 10-QSB for the quarter
ended December 31, 1995.
** Portions of these exhibits have been granted confidentiality by the
Securities and Exchange Commission.
*** Xenometrix is applying for confidential treatment with respect to portions
of this exhibit.
<PAGE> 1
Exhibit 10.23
CELL LINE HEP G2 and HEP 3B AGREEMENT BETWEEN
XENOMETRIX, INC.
AND
THE WISTAR INSTITUTE
<PAGE> 2
TABLE OF CONTENTS
(Not part of the License Agreement)
Background
<TABLE>
<S> <C> <C>
ARTICLE I - Definitions
1.01 Affiliate................................................1
1.02 Bankruptcy Event.........................................1
1.03 Calendar Quarter.........................................1
1.04 Cell Lines...............................................2
1.05 Effective Date...........................................2
1.06 Federal Government Interest..............................2
1.07 Licensed Field...........................................2
1.08 Licensed Patents.........................................2
1.09 Licensed Product(s)......................................2
1.10 Licensed Territory.......................................2
1.11 Net Sales Value..........................................2
1.12 Non-Patented Products....................................2
1.13 Person(s)................................................2
1.14 Patented Product(s)......................................3
1.15 Sales(s).................................................3
1.16 Valid Claim..............................................3
ARTICLE II - Grant of License
2.01 Grant of License.........................................3
2.02 Reporting Requirements...................................3
2.03 Federal Government Interest..............................3
ARTICLE III - Bailment and Supply of Cell Lines
and Technology
3.01 Title, Bailment and Supply...............................3
3.02 Disposal of Cell Line(s).................................4
ARTICLE IV - Fees, Royalties and Payments
4.01 License Fee..............................................4
4.02 Past Use Consideration
4.03 Royalties................................................4
4.04 License Maintenance Fee..................................4
4.05 Sales Among Affiliates...................................4
4.06 Sales to Federal Government..............................5
4.07 Payments.................................................5
4.08 Royalty Reports; Inspection..............................5
</TABLE>
ii
<PAGE> 3
TABLE OF CONTENTS (continued)
(Not part of the License Agreement)
ARTICLE V - Limitation of Liability;
No Warranties; Indemnification
<TABLE>
<S> <C> <C>
5.01 Representations of Licensor..............................5
5.02 Representations of Licensee..............................6
5.03 Limitation of Liability..................................6
5.04 No Warranties............................................6
5.05 Indemnification..........................................6
5.06 Insurance................................................7
ARTICLE VI - Confidentiality
6.01 Confidentiality..........................................7
6.02 Publicity................................................7
6.03 Use of Name..............................................8
ARTICLE VII - Termination
7.01 Term.....................................................8
7.02 Default..................................................8
7.03 Public Health and Other Concerns.........................8
7.04 Insolvency...............................................8
7.05 Termination by Licensee..................................9
7.06 No Waiver................................................9
7.07 Rights Upon Termination..................................9
7.08 Provisions Surviving Termination.........................9
ARTICLE VII - Miscellaneous
8.01 Compliance with Laws.....................................9
8.02 Arbitration..............................................9
8.03 Notices..................................................9
8.04 No Waiver...............................................10
8.05 Governing Law...........................................10
8.06 Entire Agreement........................................10
8.07 No Assignment...........................................10
8.08 Headings................................................10
8.09 Construction............................................10
8.10 Counterparts............................................11
</TABLE>
iii
<PAGE> 4
THIS LICENSE AGREEMENT (the "Agreement") is made as of the 4th day of
June, 1996, between THE WISTAR INSTITUTE OF ANATOMY AND BIOLOGY, a Pennsylvania
nonprofit corporation located at 3601 Spruce Street, Philadelphia, Pennsylvania
19104 ("Licensor"), and XENOMETRIX, INC., a Delaware corporation located at
2860 Wilderness Place, Boulder, Colorado 80301 ("Licensee").
The background of this Agreement is as follows:
(A) Licensor has developed the patented cell lines known as "HEP G2 and
HEP 3B" (hereinafter defined as the "Cell Lines");
(B) Licensee is interested in obtaining a non-exclusive license to
commercially exploit the Cell Lines, and has the expertise and financial and
technical resources to develop and market products derived from or
incorporating the Cell Lines; and
(C) Licensor is prepared to grand such a license pursuant to the terms and
conditions herein set forth.
NOW, THEREFORE, in consideration of the promises and mutual convenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I - DEFINITIONS
The following terms, as used herein, shall have the following meanings:
1.01 "Affiliate", with respect to a party hereto, shall mean a person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such party, and "control" shall mean the ownership of over 50% of the
outstanding voting shares of a person, or the right to receive over 50% of the
profits or earnings of a person, or the right to control the policy decisions
of a person.
1.02 "Bankruptcy Event" shall mean, with respect to any person, either (a) such
person shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall take
any corporate action to authorize any of the foregoing; or (b) an involuntary
case or other proceeding shall be commenced against such person seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official or it or any substantial portion of its property, and
such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of sixty (60) days; or an order for relief shall be entered
against such person under federal bankruptcy laws as now or hereafter in
effect.
1.03 "Calendar Quarter" shall mean each three-month period, or any portion
thereof, beginning on January 1, April 1, July 1 and October 1 of each year.
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1.04 "Cell Lines" shall mean the human hepatoma cell lines designated HEP G2
and HEP 3B as described in U.S. Patent No. 4,393,133 and given ATCC Nos. HB
8065 and HB 8064, respectively, by the American Type Culture Collection, and
any progeny or derivatives including subcloned cells, transformed cells and any
other altered form derived from HEP G2 or HEP 3B and constituting the
functional equivalent of HEP G2 or HEP 3B.
1.05 "Effective Date" shall mean the first date when both Licensor and Licensee
have executed this Agreement and Licensee has paid the fees specified in
Sections 4.01 hereof.
1.06 "Federal Government Interest" shall mean all rights of the Federal
Government in inventions funded, at least in part, with federal monies as
defined in the Patent and Trademark Amendments Act of 1980, as amended by Title
V of P.L. 98-620 and any other amendments to such Act hereafter made or
successor legislation hereafter enacted and any regulations issued under such
legislation.
1.07 "Licensed Field" shall mean research, drug screening, diagnostic and
toxicological testing only. No use involving the administration to or treatment
of humans, or the therapeutic treatment of animals, is allowed.
1.08 "Licensed Patents" means U.S. Patent No. 4,393,133 and any continuations,
continuations-in-part, extensions, divisions, substitutions or additions to
such patent and all foreign counterparts thereof, listed in Appendix A, hereto,
as may be amended from time to time by mutual agreement of Licensor and
Licensee.
1.09 "Licensed Product(s)" shall mean and include all Patented Product(s) and
all Non-Patented Products.
1.10 "Licensed Territory" shall mean all countries of the world.
1.11 "Net Sales Value" shall mean (a) in the case of arm's length sales to
unaffiliated buyers, the gross amount actually charged by Licensee for a
Licensed Product after allowing deductions for sales and use tax, the legal
incidence of which is on Licensee, freight allowances, custom duties and trade,
quantity and cash discounts actually allowed and (b) in all other cases
(including cases of use), the price which would have been realized from an
unaffiliated buyer of a Licensed Product in an arm's length sale; provided,
however that such price of a Licensed Product shall not be less than the
complete cost (including all direct, indirect and overhead costs) of
manufacture and distribution of such Licensed Product, plus the usual profit
mark-up of Licensee in sales to unaffiliated buyers.
1.12 "Non-Patented Product(s)" shall mean and include all services or products,
the manufacturer, composition, use, sale or other disposition of which is based
on or derived from the Cell Lines, but which are not subject to a Valid Claim
of the Licensed Patents or which, i) in whole or in part, are identified,
discovered or developed by use of the Cell Lines by Licensee or its Affiliates
and ii) are used, sold or otherwise disposed of by Licensee or its Affiliates
and which are not otherwise subject to a Valid Claim of the Licensed Patents.
1.13 "Person(s)" shall mean any corporation, partnership, joint venture, or any
other entity or any natural person.
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1.14 "Patented Product(s)" shall mean and include all services or products the
manufacture, composition, use, sale or other disposition of which is subject to
a Valid Claim of the Licensed Patents, or which, i) in whole or in part, are
identified, discovered or developed by use or practice of the Licensed Patents
by Licensee or its Affiliates and ii) are used, sold or otherwise disposed of
by Licensee or its Affiliates, which use or practice would infringe a Valid
Claim of the Licensed Patents but for the license granted herein.
1.15 "Sale(s)," or any variation thereof shall mean the sale, assignment, lease
or other revenue generating disposition of a License Product by Licensee. A
Licensed Product shall be deemed to have been sold for the purposes of
calculating royalties under Article IV hereof upon the first to occur of the
following: (i) the transfer of title in the Licensed Product from Licensee to a
third party; or (ii) shipment of the Licensed Product from the manufacturing
facilities of Licensee to a third party.
1.16 "Valid Claim" shall mean a claim of i) a patent application included in
the Licensed Patents that has been neither abandoned nor pending for more than
seven (7) years or ii) an issued Licensed Patent that has not been withdrawn,
canceled or disclaimed or held invalid by a court or governmental authority of
competent jurisdiction in an unappealed or unappealable decision no longer
subject to discretionary review (for example, by way of writ of certiorari) or
other review.
ARTICLE II - GRANT OF LICENSE
2.01 Grant of License. Subject to the Federal Government Interest, and the
other terms and conditions herein stated, Licensor hereby grants to Licensee,
and Licensee hereby accepts a non-exclusive license to use the Cell Line and to
practice under the Licensed Patents to make, have made, use and sell Licensed
Products in the Licensed Field in the Licensed Territory. No rights to
sublicense are granted hereunder to Licensee.
2.02 Reporting Requirements. Licensee shall provide Licensor with written
reports at such intervals (regular and upon material developments) and in
sufficient detail as shall be reasonable and necessary to keep Licensor fully
informed regarding the commercial development of each Licensed Product.
Initially, the regular reports shall be provided every six months under this
Agreement. Licensor may request in writing that the regular written reports be
provided by Licensee more or less frequently, provided that Licensor may not
request regular reports be provided more often than quarterly. Subsequent to
the first commercial Sale of each Licensed Product by Licensee, such reports
are no longer required for that Licensed Product.
2.03 Federal Government Interest. Licensee acknowledges that in accordance
with the Federal Government Interest, the United States Government retains
certain rights in inventions funded in whole or in part under any contract,
grant, or similar agreement with a Federal agency. The license granted under
this Article II is expressly subject to all such rights.
ARTICLE III - BAILMENT AND SUPPLY OF CELL LINE
AND TECHNOLOGY
3.01 Title, Bailment and Supply. Title to the Cell Lines shall remain with
Licensor until U.S. Patent No. 4,393,133 expires. Licensor shall not be
responsible for supplying, and shall not supply, samples of the Cell Lines
licensed hereunder. Licensee shall obtain samples of the Cell Lines from the
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American Type Culture Collection in Rockville, Maryland. Licensee acknowledges
that it will hold the Cell Lines obtained hereunder as a bailee of such Cell
Lines and that such Cell Lines shall remain the sole property of the Licensor.
Licensee shall acquire no title to the Cell Lines by virtue of such bailment,
until such expiration.
3.02 Disposal of Cell Line(s). Subject to Licensee's right to dispose of
completed Licensed Products under Section 7.07 hereof, all supplies of the Cell
Lines held by licensee shall, at Licensor's option, be returned to Licensor or
destroyed by Licensee upon termination of this Agreement or whenever Licensee
ceases using them to make or have made Licensed Products. Licensee shall
provide Licensor with written assurance of such destruction of the Cell Lines.
ARTICLE IV - FEES, ROYALTIES AND PAYMENTS
4.01 License Fee. In consideration of the license granted hereunder and upon
execution of this Agreement, Licensee shall pay to Licensor a nonrefundable
license fee of dollars. This license fee shall be in addition to
the royalties and other compensation payable or deliverable pursuant to this
Agreement and shall not be credited against or otherwise reduce royalties or
other compensation.
4.02 Past Use Consideration. In full and complete satisfaction for the use by
Licensee of the Cell Lines prior to the date hereof, Licensee shall pay to
Licensor % of Net Sales of all Licensed Products sold prior to the
Effective Date. Such payment for past use shall be made to Licensor no later
than thirty (30) days after the Effective Date hereof.
4.03 Royalties. In further consideration of the license granted hereunder,
Licensee shall pay to Licensor a royalty of i) % of the Net Sales Value
of all Patented Products; and, ii) % of the Net Sales of all
Non-Patented Products.
For the purpose of establishing the royalty rate for a Licensed Product sold
after expiration of an applicable Licensed Patent, the parties agree that any
Licensed Product manufactured before expiration of the Licensed Patent shall be
considered a Patented Product, and the royalty rate on the sale of such Patent
Product shall be the standard royalty rate for sales of Patented Products as
set forth in this Section 4.03.
4.04 License Maintenance Fee. Licensee shall pay to Licensor a non-refundable
annual fee to maintain the license rights granted under this Agreement
("License Maintenance Fee"). The amount and date of payment of each License
Maintenance Fees is as follows:
<TABLE>
<CAPTION>
Calendar Year
-------------
<S> <C>
$ Beginning January 1, 1997
$ Beginning January 1, 1998; and
$ Beginning January 1 of each calendar year thereafter
</TABLE>
License Maintenance Fees shall be available for credit against royalties only
for the year in which such License Maintenance Fee is paid and shall not be
available for credit in any other year.
4.05 Sales Among Affiliates. Sales between and among Licensee and its
Affiliates which are intended for resale shall not be subject to royalty, but
in such cases royalties shall accrue and be
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calculated on the basis of Sales or other dispositions by any such Affiliate of
Licensed Products to a non-Affiliate in accordance with Section 4.03.
4.06 Sales to Federal Government. To the extent required by the Federal
Government Interest, Sales by Licensee to the United States Government shall
not be subject to royalty.
4.07 Payments. Liability for royalties on Licensed Products manufactured by
Licensee shall accrue when a Licensed Product is sold, used or otherwise
disposed of, subject to Section 4.05 hereof, provided that, if a partial
payment is made, a royalty will accrue pro rata to such partial payment.
Royalties which have accrued in any Calendar Quarter shall be payable within
sixty (60) days after the end of such Calendar Quarter, except that royalties
on Sales made prior to the Effective Date shall be due and payable within
thirty (30) days of the Effective Date as provided in Section 4.02 hereof. Any
royalties not paid to Licensor when due hereunder shall bear interest from the
due date until the date payment is made at the rate of interest announced by
Chase Manhattan Bank, New York, New York, to be its "prime rate" as such "prime
rate" is in effect from time to time. Payments shall be deemed paid as of the
days on which they are received by Licensor. All payments under this Agreement
shall be made in United States dollars by check payable to "The Wistar
Institute of Anatomy and Biology."
4.08 Royalty Reports; Inspection. Each royalty payment shall be accompanied by
a report for the applicable period setting forth, in reasonable detail, the
Licensed Products sold, used, or otherwise disposed of, Net Sales Values
thereof, any amounts of royalties from Licensee remaining to be paid on Sales
of Licensed Products previously sold, and the amount of any credits taken for
the corresponding quarter. Licensee shall keep, and shall cause its Affiliates
to keep, accurate records and books of account of all Licensed Products sold.
Upon ten(10) days prior written notice to Licensee and during normal business
hours, but not more frequently than quarterly, the Licensor's internal
accountant or an independent auditor paid for and selected by Licensor (which
selection shall be with the reasonable consent of the Licensee) may inspect
such books and records of Licensee, and its Affiliates at their respective
facilities for a three-year period immediately preceding the date of inspection
to verify the correctness of the reports given to Licensor under this Section
4.08. If Licensor determines that Licensee has underpaid amounts due hereunder
by the greater of $1,000 or 10% or more, Licensee shall pay all reasonable
costs of the audit and the right of inspection shall extend to books and
records for periods prior to such three (3) year period. Nothing contained in
this Section 4.08 shall shorten the period established by any applicable
statute of limitations.
ARTICLE V - LIMITATION OF LIABILITY;
NO WARRANTIES; INDEMNIFICATION
5.01 Representations and Warrants of Licensor. Licensor represents and
warrants to Licensee that (a) this Agreement when executed and delivered by
Licensor, will be the legal, valid and binding obligation of Licensor,
enforceable against Licensor in accordance with its terms; and, (b) to the best
of its knowledge, Licensor has the right to enter into this Agreement and to
grant the licenses provided herein.
Licensor represents and warrants to Licensee that to the best of its knowledge
none of the Cell Lines infringe upon any patent, trade secret or any other
intellectual property rights belonging to any third party, and that no claims
of any such patent infringement or violation of any trade secret or
intellectual property rights have been alleged by any third party. The
representation made by Licensor herein is based on conversations with members
of Licensor's Business Development Office. Licensor has made
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no independent or additional investigation, examination or review of the
matters which are the subject of this representation.
5.02 Representations and Warranties of Licensee. Licensee represents and
warrants to Licensor as follows:
(a) Licensee is a corporation, duly organized, validly existing and in
good standing under the laws of Delaware and has all requisite corporate power
and authority to execute, deliver and perform this Agreement;
(b) this Agreement when executed and delivered by Licensee, will be the
legal, valid and binding obligation of Licensee, enforceable against Licensee
in accordance with its terms;
(c) the execution, delivery and performance of this Agreement by Licensee
does not conflict with, or constitute a breach or default under, (i) the
charter documents of Licensee, (ii) any law, order, judgment or governmental
rule or regulation applicable to Licensee, or (iii) any provision of any
material agreement, contract, commitment or instrument to which Licensee is a
party; and the execution, delivery and performance of this Agreement by
Licensee does not require the consent, approval or authorization of, or notice,
declaration, filing or registration with, any governmental or regulatory
authority.
5.03 Limitation of Liability. LICENSOR SHALL NOT BE LIABLE TO LICENSEE, ITS
SUCCESSORS, ASSIGNS, OR AFFILIATES FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS,
INTERRUPTION OF BUSINESS, NOR FOR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF
ANY KIND WHETHER UNDER THIS AGREEMENT, EVEN IF LICENSOR HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH LOSS.
5.04 No Warranties. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 5.01 HEREOF,
LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO THE CELL LINES OR ANY MATERIALS DERIVED THEREFROM, THE LICENSED
PATENTS, ANY TECHNICAL INFORMATION OR ANY LICENSED PRODUCTS. BY WAY OF EXAMPLE
BUT NOT LIMITATION, LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES OF
COMMERCIAL UTILITY, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, OR
THAT THE USE OF THE CELL LINES, THE LICENSED PATENTS, OR THE TECHNICAL
INFORMATION WILL NOT INFRINGE ANY PATENT COPYRIGHT TRADEMARK OR OTHER
PROPRIETARY OR PROPERTY RIGHTS OF OTHERS. LICENSOR SHALL NOT BE HELD TO ANY
LIABILITY WITH RESPECT TO ANY CLAIM BY A THIRD PARTY ON ACCOUNT OF, OR ARISING
FROM, THE USE OF THE CELL LINES, THE LICENSED PATENTS, OR THE MANUFACTURE, USE
OR SALE OF ANY LICENSED PRODUCTS.
5.05 Indemnification. Licensee will defend, indemnify and hold Licensor, its
managers, directors, officers, agents and employees (collectively the
"Indemnified Parties") harmless from any and all liability, loss, damage, claim
or expense (including attorney's fees) (collectively the "Indemnified Losses")
arising out of this Agreement or any use, manufacture, promotion, Sale or other
disposition by Licensee, its Affiliates, vendors, or customers of any Licensed
Product. As an example, and in no way limiting the generality of the
foregoing, Licensee will indemnify and hold Licensor harmless against any and
all Indemnified Losses resulting from the use by a third party of Licensed
Products manufactured, sold or disposed of by Licensee, or its Affiliates
including product liability claims, or
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resulting from a claim by a third party that Licensee's, or its Affiliate's
manufacture, use, Sale or other disposition of Cell Lines or any Licensed
Product infringes or violates any patent or intellectual property rights of
such third party. Licensee agrees to pay promptly to Licensor the amount of
any damages to which the foregoing indemnity relates. Licensee shall not be
required to defend, indemnify and hold harmless the Indemnified Parties against
Indemnified Losses caused by Licensor's gross negligence or willful misconduct.
The indemnification rights of Licensor contained herein are in addition to all
rights which Licensor may have at law or in equity or otherwise.
5.06 Insurance. Licensee shall maintain comprehensive general liability
insurance, and product liability insurance in amounts not less than $1,000,000
per incident and $3,000,000 in the aggregate. Licensee shall maintain such
coverage with a third party commercial insurance carrier(s) rated A or better
in Best's Insurance Directory. Licensee shall instruct its insurance carriers
providing such coverage to notify Licensor in writing, in advance, of any
material change in coverage provided by such carrier. To the extent Licensee
is awarded a business interruption insurance award which provides for lost
profits, Licensee shall pay to Licensor reasonable royalties for the period of
the award which payment shall be based upon projections of Sales of Licensed
Products and the history of royalties paid hereunder for such Sales.
ARTICLE VI - CONFIDENTIALITY
6.01 Confidentiality. For ten years from the date of this Agreement Licensee
shall keep confidential and, except as is necessary for the proper performance
of Licensee's obligations and exercise of Licensee's rights hereunder, shall
not disclose to any third party or use any technical information heretofore and
hereafter supplied by Licensor, provided, however, that the foregoing
obligation of confidentiality shall not apply to:
(a) technical information which is generally available to the public or
which, subsequent to the receipt thereof, becomes available to the public
through no act or failure to act by Licensee;
(b) technical information which is known to the Licensee (other than as a
result of this Agreement) at the time of receipt thereof from the Licensor;
(c) technical information which is lawfully disclosed to Licensee by a
third party or entity having no obligation to Licensor to maintain the
confidentiality thereof, or information lawfully disclosed by a third person or
entity on a non-confidential basis; or
(d) technical information which is required by law to be disclosed.
In addition, disclosure may be made to governmental agencies to the extent
required or desirable to secure governmental approval for the marketing of
Licensed Products or to file patent applications, taking appropriate
precautions to protect the confidentiality and use of such technical
information.
6.02 Publicity. Except as provided by this Agreement or as required by law,
neither party shall originate any publicity, news release or other public
announcement, written or oral, whether to the public press or stockholders or
otherwise, relating to this Agreement, any amendment hereto or performance
hereunder or the existence of an arrangement between the parties without the
prior written approval of the other party, which approval shall not be
unreasonably withheld. In any such publicity, Licensee shall give reasonable
credit or recognition to Licensor for its role in development
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of the Cell Line. Notwithstanding the foregoing review requirements, Licensor
hereby consents to references to "The Wistar Institute of Anatomy and Biology"
in such private placement memoranda and other documents to the extent
reasonably required for compliance with federal and state security laws by
Licensee or as required to obtain regulatory approvals for Licensed Product(s).
Licensee shall furnish promptly to Licensor copies of all such documents which
make reference to Licensor prior to submission of such documents to any third
party or entity.
6.02 Use of Name. The use of the name of either party by the other party, or
any variation thereof, in connection with the advertising or Sale of Licensed
Product(s) is expressly prohibited, without the written consent of the party
whose name is to be used.
ARTICLE VII- TERM AND TERMINATION
7.01 Term. The term of this Agreement and the rights and licenses granted
hereunder shall commence on the Effective Date and shall continue, subject to
earlier termination under this Article VII, the longer of i) the expiration of
the last to expire of the Licensed Patents, or ii) a period of ten (10) years
from the Effective Date.
7.02 Default.
(a) If Licensee shall at any time default in the payment of any royalty,
or the making of any report hereunder, or shall commit any breach of any
covenant or agreement herein contained or shall make any false report, and
shall fail to remedy any such default or breach within sixty (60) days after
receipt by Licensee of written notice thereof by Licensor, Licensor may, at its
option, cancel this Agreement and revoke the rights and licenses herein
granted, by notice in writing to such effect, but such act shall not prejudice
the right of Licensor to recover any royalty or other sums due to the time of
such cancellation, it being understood, however, that if within sixty (60) days
after receipt of any such notice Licensee shall have rectified its default,
then the rights and licenses herein granted shall remain in force as if no
breach or default had occurred on the part of Licensee.
(b) If Licensor shall at any time be in default or shall commit any
breach of any covenant herein contained, and shall fail to remedy such default
or breach within (60) days after receipt by Licensor of written notice thereof
by Licensee, Licensee may, at its option, cancel this Agreement, surrender the
licenses herein granted, and incur no further obligation hereunder, without
prejudice to any rights of Licensee which have accrued prior to cancellation,
it being understood, however, that if within sixty (60) days after receipt of
any such notice, Licensor shall have rectified its default, then the rights and
licenses herein granted shall remain in force as if no breach or default had
occurred on the part of Licensor.
7.03 Public Health and Other Concerns. If Licensee shall at any time and in
any manner knowingly deal with Licensed Product in a manner that violates the
laws, regulations or similar legal authority in any jurisdiction, including but
not limited to the public health or environmental requirements relating to the
subject matter hereof or the disposition of Licensed Product, this license
shall immediately terminate with respect to any such Licensed Product and any
such jurisdiction, but shall continue with respect to all other Licensed
Products, and jurisdictions.
7.04 Insolvency. If Licensee becomes subject to a Bankruptcy Event, then this
Agreement and licenses herein granted shall thereupon automatically terminate.
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7.05 Termination by Licensee. Licensee may terminate this Agreement for any
reason by providing Licensor with six (6) months prior written notice of its
intent to terminate. Notwithstanding the foregoing, Licensee may not terminate
this Agreement as long as Licensee, or an Affiliate, is using the Cell Lines to
make, have made, use and sell Licensed Products.
7.06 No Waiver. The right of either party to terminate this agreement as
hereinabove provided shall not be affected in any way by its waiver of, or
failure to take action with respect to, any previous failure to perform
hereunder.
7.07 Rights Upon termination. Upon termination of the Agreement under Sections
7.02(b) or 7.05 hereof, Licensee shall have the right, for six(6) months
following such date of termination, to dispose of Licensed Products completed
or substantially completed on the date of termination and to complete orders,
outstanding on such date of termination, for Licensed Products. Royalties
shall be paid to Licensor with respect to such permitted Sales of Licensed
Products following such date of termination as though such termination had not
occurred. Subject to Licensee's right hereunder to dispose of completed
Licensed Products, Licensee shall promptly surrender to Licensor all technical
information in tangible form upon expiration or termination of the license
under this Agreement, and shall return or destroy the Cell Lines as provided in
Section 3.02 hereof. If Licensee gives notice under Section 7.05, Licensee
shall have no further obligation to pay annual fees under Section 4.04 which
accrue after such notice date.
7.08 Provisions Surviving Termination. Licensee's obligations to pay any
royalties accrued but unpaid prior to termination shall survive termination of
this Agreement. In addition, Articles V and VI and Sections 7.07, 7.08, 8.02,
8.03, and 8.05 shall survive termination of this Agreement.
ARTICLE VIII - MISCELLANEOUS
8.01 Compliance with Laws. Licensee shall comply with all prevailing laws,
rules, and regulations pertaining to the development, testing, manufacturing,
marketing, and import or export of the Licensed Products, and the use of the
Cell Lines in connection therewith.
8.02 Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be referred to a panel of three (3)
arbitrators, one chosen by each of the parties and the third selected by the
two chosen by the parties and shall be settled by arbitration by such panel.
Such arbitration shall take place in Philadelphia, Pennsylvania, shall be
governed by the United States Arbitration Act, 9 U.S.C. 1 et seq., and shall
be in accordance with the Rules of the American Arbitration Association. The
decision of the arbitrators shall be final and binding and any party may apply
for judgment upon the award rendered by the arbitrators in the United States
District Court for the Eastern District of Pennsylvania. Each party shall pay
its own expenses of arbitration and the expense of the arbitrator shall be
equally shared, provided that the arbitrator(s) may assess as part of their
award all or any part of the arbitration expenses of one party (including
reasonable attorneys fees) against the other party.
8.03 Notices. All notices, documents, statements, reports, payments, and other
writings required or permitted to be given by the terms of this Agreement shall
be sent either by prepaid, registered or certified mail, telegram,
telefacsimile, telex, or express mail, properly addressed to Licensor and to
Licensee at the following addresses:
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If to Licensor:
The Wistar Institute of Anatomy and Biology
3601 Spruce Street
Philadelphia, PA 19104-4268
Attn: Executive Vice President for Administration
with a copy to :
General Counsel, at the above address
If to Licensee:
Xenometrix, Inc.
2860 Wilderness Place
Boulder, CO 80301
Attn: President & CEO
or at such other address as one party hereto may from time to time designate by
notice in writing to the other. Each notice shall be deemed to be given upon
receipt.
8.04 No Waiver. A waiver by either party of a breach or violation of any
provision of this Agreement will not constitute or be construed as a waiver of
any other breach or violation of this Agreement.
8.05 Governing Law. To the extent not in conflict with Federal substantive
law, this Agreement and its covenants, promises and agreements contained herein
shall be interpreted with respect to substantive matters in accordance with the
laws of the Commonwealth of Pennsylvania. Anything herein to the contrary
notwithstanding, this Agreement is made specifically subject to the Patent and
Trademark Amendments Act of 1980, P.L. 96-517, as amended by Title V of P.L.
98-620 and any other amendments to such Act hereafter made or successor
legislation and any regulations thereunder.
8.06 Entire Agreement. This Agreement embodies the entire understanding of the
parties relating to the subject matter hereof and supersedes all prior
understandings and agreements. No modification or amendment of this Agreement
shall be valid or binding except by a written document signed by duly
authorized representative of both parties.
8.07 No Assignment. The rights of Licensee under this Agreement may not be
assigned, and the duties of Licensee under this Agreement may not be delegated,
without prior written consent of Licensor, which consent shall not be
unreasonably withheld.
8.08 Headings. Any headings and captions used in this Agreement are for
convenience of reference only and are not a part of this Agreement.
8.09 Construction. The parties acknowledge that this Agreement has been the
subject of full opportunity for negotiation and amendment and that the party
who has taken the role of drafter shall not suffer any adverse construction of
any terms or language of this Agreement because of such role.
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8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and such
counterparts together shall constitute on agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this License
Agreement as the date first above written.
LICENSOR: LICENSEE:
Representing Licensor: Representing Licensee:
/s/ Ira Brind /s/ Ronald L. Hendrick
- ---------------------- ----------------------
Ira Brind Ronald L. Hendrick
President Vice President & CFO
Date: June 12, 1996 Date: June 4, 1996
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APPENDIX A
LICENSED PATENTS
"Human Hepatoma Derived Cell Line Process for Preparation Thereof and Uses
Therefor"
<TABLE>
<CAPTION>
Country/Region Patent Number Filing Date Issue Date Expiration Date
-------------- ------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
1. United States 4,393,133 June 12, 1980 July 12, 1983 July 13, 2000
2. United Kingdom 2,089,370 June 10, 1981 Sept. 5, 1984 June 11, 2001
3. Canada 1,193,210 June 10, 1981 Sept. 10, 1985 Sept. 11, 2002
4. Switzerland 657,456 June 10, 1981 Aug. 29, 1986 June 11, 2001
5. Italy 1,171,297 June 10, 1981 Jan. 10, 1987 June 11, 2001
6. EPO 53,165 June 10, 1981 May 6, 1987 June 11, 2001
7. France 53,165 June 10, 1981 May 6, 1987 June 11, 2001
8. Austria 391,145 June 10, 1981 Feb. 15, 1990 Feb 16, 2008
9. Japan 1,727,258 Feb. 10, 1982 Feb. 27, 1992 June 11, 2001
10. Germany 31 52 113 June 10, 1981 June 9, 1994 June 11, 2001
</TABLE>
12
<PAGE> 1
Exhibit 10.24
LEASE
This Lease (the "Lease") is entered into effective as of the 1st
day of July, 1996, between Flatirons Cottonwood, Inc., a Delaware corporation,
by LaSalle Advisors Limited, a Delaware limited partnership, as Advisor to
Public Employees' Retirement Association of Colorado, the sole shareholder of
Flatirons Cottonwood, Inc. ("Landlord"), and the tenant named in Section 1.4
below ("Tenant"). In consideration of the covenants set forth herein, Landlord
hereby leases to the Tenant and Tenant hereby hires from Landlord, the premises
described in Section 1.7 of this Lease ("Demised Premises") which are located
at 2425 55th Street, Boulder, Colorado 80301, upon the conditions set forth
below, and it is agreed that each of the terms, covenants, provisions and
agreements hereinafter specified shall be a condition.
ARTICLE 1
(FUNDAMENTAL LEASE PROVISIONS)
1.1 Date of Lease: July 1, 1996.
1.2 Development Rentable Area: 170,978 square feet.
1.3 Landlord: Flatirons Cottonwood, Inc., a Delaware corporation.
1.4 Tenant: Xenometrix, Inc., a Delaware corporation
1.5 Trade Name (if any): None.
1.6 Guarantor (if any): None.
1.7 Demised Premises: A portion of Floor One and
Floor Two as shown hatched in black on the plan attached
hereto as Exhibit A and made a part hereof, to be known as
Suite 200 in the office building located at 2425 55th Street,
Boulder, Colorado (the "Building").
1.8 Demised Premises Rentable Area: 22,694 square
feet; 14,611 square feet on the First Floor and 8,083 square
feet on the Second Floor.
1.9 Lease Term: 73 months, beginning July 1, 1996
(the "Commencement Date") and ending July 31, 2002.
1.10 Option(s) to Renew: 2 renewal periods of 3 years
each. See Addendum.
1.11 Minimum Rent: At an annual rate of $226,940,
payable in monthly installments of $18,911.67. Minimum Rent
to be calculated at $10.00 per rentable square foot of leased
space and adjusted as provided in Article 3.
<PAGE> 2
1.12 Additional Rent: Tenant shall pay as Additional
Rent Tenant's Percentage of all Operating Costs, the cost of
any utilities supplied by Landlord to the Demised Premises,
and any other amounts owed by Tenant hereunder. The current
estimate of Operating Costs for the Project, as of the date
hereof, is $3.80 per square foot. Landlord reserves the right
to change this estimate at any time.
1.13 Use of Premises: General office, lab, warehouse,
manufacturing, biotechnological research and development,
including, without limitation, toxicology reference lab, and
any other uses agreed to by Landlord in writing ("Permitted
Uses"). Landlord agrees that Tenant may keep at the Demised
Premises rats and mice, and any other laboratory animals which
the Landlord, in its discretion, has agreed in a writing
separate from this Lease may be allowed for use in connection
with the activities described in this Section 1.13, provided
such animals are housed, handled and disposed of in accordance
with applicable federal, state and local laws and regulations,
including, without limitation, laws and regulations
promulgated by the National Institute of Health, and provided,
further, that Flatiron Industrial Park Company, or its
successor ("FIPCO"), shall have consented to such laboratory
animals.
1.14 Addresses for Notice:
To Tenant prior to Xenometrix, Inc.
taking occupancy: 2860 Wilderness Place
Boulder, Colorado 80301
To Tenant after Xenometrix, Inc.
taking occupancy: 2425 55th Street, Suite 200
Boulder, Colorado 80301
To Landlord: Flatirons Cottonwood, Inc.
c/o Trammell Crow Company
7535 East Hampden Avenue, Suite 650
Denver, Colorado 80231-4845
1.15 Security Deposit: $18,911.67
1.16 Tenant's Percentage: 13.27%
1.17 The Project: The land, improvements and buildings, including, with
out limitation, the Building, known as Flatiron Park West.
1.18 Broker(s): James C. Fisher
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Colorado Group
3434 47th Street, Suite 220
Boulder, Colorado 80301
Dan Hendrick
Irwin & Hendrick, Ltd.
2299 Pearl Street, Suite 400
Boulder, Colorado 80302
1.19 Addendum: This Lease has one (1) Addendum annexed.
ARTICLE 2
(LEASE OF DEMISED PREMISES)
2.1 Lease of Demised Premises Landlord hereby leases to Tenant, and
Tenant hereby hires from Landlord, the Demised Premises.
2.2 Term. The term of this Lease shall be for the term specified in
Section 1.9 and shall commence on the Commencement Date set forth in Section
1.9.
2.3 Common Areas. The portions of the Project designated by Landlord
from time to time for the common use of all tenants, including, hallways,
restrooms, stairs, entrances, sidewalks, parking, loading areas, curbs,
landscaping and other improvements, shall constitute the "Common Area." The
Common Area of the Building is depicted on the diagram attached as Exhibit A
hereto. At least four of the parking spaces adjacent to the entryway to the
Demised Premises shall be marked conspicuously with the word "Visitors," in
addition to any obligation of Landlord to provide handicapped parking adjacent
to such entryway. Landlord shall not unreasonably withhold its consent to
construction of additional bicycle racks by Tenant in the Common Area adjacent
to the Building to accommodate Tenant's employees who bicycle to work. Any
such additional bicycle racks shall be removed and the Common Area restored by
Tenant upon termination of the Lease, or, at Landlord's option exercised in
accordance with Section 7.3 of the Lease, shall become the property of
Landlord. The Common Area shall be operated and maintained in such a manner as
Landlord, in its sole discretion, shall determine but, in any event, consistent
with comparable office/light industrial buildings in the Boulder, Colorado
area. The Landlord reserves the right to reconfigure or change the Common Area
(provided, however, Landlord shall not change the Common Area located in or
immediately adjacent to the Building in a manner which substantially interferes
with Tenant's use of the Demised Premises), and to close portions of the Common
Area from time to time for repairs, to prevent accrual of public rights
therein, or for any other purpose. Landlord shall have the right to assign
parking spaces to specific tenants and to restrict parking areas to customer
parking only. Tenant and its employees, customers and invitees shall have a
non-exclusive right to use the Common Area as it exists from time to time with
other tenants and any other persons permitted by Landlord to use the same,
subject to reasonable rules and regulations governing use of the
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Common Area which Landlord may prescribe.
2.4 Delay in Commencement. If, for any reason, Landlord cannot deliver
possession of the Demised Premises to Tenant on the Commencement Date, Landlord
shall not be liable to Tenant for such failure, nor shall it extend the term of
this Lease, but in such case Tenant shall not be obligated to pay rent or any
other charges pursuant to this Lease until possession is delivered to Tenant;
provided, however, that if Landlord shall not have delivered possession of the
Demised Premises to Tenant within 60 days following the Commencement Date,
Tenant, at its option and by written notice delivered to Landlord within ten
days thereafter, may cancel this Lease, in which event the parties shall be
discharged from all obligations hereunder. If Tenant, with the prior written
consent of Landlord, occupies the Demised Premises prior to the Commencement
Date, such occupancy shall be subject to the terms hereof but shall not advance
the termination date, and Tenant shall pay Minimum Rent and Additional Rent
commencing with the date of such occupancy.
2.5 Condition of Premises. Neither Landlord nor Landlord's agents have
made any representations or promises with respect to the Building, the Project,
or the Demised Premises except as expressly set forth in this Lease. The
taking of possession of the Demised Premises by Tenant shall be conclusive
evidence, as against Tenant, that Tenant accepts the same "as is" in their
condition existing as of the Commencement Date, and that the Demised Premises
were in good and satisfactory order, condition and repair at the time such
possession was so taken; provided; however, any latent defects in the Demised
Premises of which Tenant notifies Landlord in writing within 60 days following
the Commencement Date shall be excluded from Tenant's acceptance of the Demised
Premises and Landlord promptly shall repair such latent defects at its own cost
and expense upon receipt of Tenant's notice. Defects caused by Tenant's Work
(as defined in the Addendum to this Lease) shall not be considered latent
defects for purposes of the preceding sentence.
2.6 Quiet Enjoyment. Landlord covenants and agrees with Tenant that,
upon Tenant's payment of rent and observance and performance of all of the
terms, covenants, conditions, provisions and agreements of this Lease on
Tenant's part to be observed or performed, Tenant shall have quiet possession
of the Demised Premises for the term aforesaid, subject, however, to the terms
of this Lease and of any ground leases, underlying leases, mortgages and deeds
of trust affecting all or any portion of the Building or the Project.
2.7 Landlord's Representations and Warranties. Landlord represents and
warrants to Tenant the following, as of the Commencement Date:
(a) The Demised Premises are not subject to any ground lease,
mortgage or deed of trust;
(b) The party executing this Lease on behalf of Landlord has
full power and authority to enter into this Lease on behalf of Landlord
and to bind
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<PAGE> 5
Landlord to the terms of this Lease;
(c) To the extent of Landlord's actual knowledge, Landlord has not
received any notice that the Demised Premises fail in any material
respect to comply with governmental laws, statutes, ordinances, codes,
orders, directives, rules and regulations in effect as of the
Commencement Date except for (i) variances from zoning code and Project
PUD requirements for which authorization has been obtained from the City
of Boulder, and (ii) modifications and improvements necessary to bring
the Demised Premises into compliance with handicapped accessibility
requirements, including those mandated by the Americans with Disabilities
Act;
(d) To the extentof Landlord's actual knowledge, the Demised
Premises are served by water, sewer, gas, electrical and telephone
utility services in amounts as are typically necessary for general
office/light industrial use and occupancy; and
(e) To the extent of Landlord's actual knowledge, there are no
material defects or deferred maintenance items in any of the structural
components of the Building or other Common Areas.
ARTICLE 3
(RENT)
3.1 Rent. Tenant shall pay Landlord the Minimum Rent specified in
Section 1.11 on the first day of each calendar month during the term of this
Lease in lawful money of the United States in equal monthly installments
without demand in advance at the address of Landlord specified in Section 1.14
or such other place as Landlord may designate, without any set off or deduction
whatsoever. Minimum Rent shall be adjusted as provided in Section 3.2 below.
Installments of Minimum Rent for the first and last months of the term hereof
shall be prorated based upon the number of days during each of said months that
the Lease is in effect.
3.2 Rent Adjustment. Minimum Rent will be increased on each September
1 (commencing September 1, 1997) during the primary term of this Lease and any
renewal period by an amount equal to the percentage increase, if any, in the
United States Department of Labor Bureau of Labor Statistics, Consumer Price
Index -- U.S. City Average, All Items and Major Group Figures for All Urban
Consumers (1982-84=100) (the "CPI"). The average of the monthly CPIs for each
of the twelve months of the full calendar year in which this Lease commences
shall be the "Base Index." If the CPI for August in any calendar year during
the term of this Lease is greater than the Base Index, then the Minimum Rent in
Section 3.1 payable on the next September 1 (without regard to any adjustments
under this section) shall be multiplied by the percentage difference between
the CPI for July and the Base Index and the product shall be added to the
Minimum Rent in Section 3.1, effective as of September 1. The adjusted prior
year's Minimum Rent will be payable until it is readjusted pursuant to the
terms of
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<PAGE> 6
this Lease. If the CPI no longer is available, Landlord shall substitute an
index published by a reliable governmental or financial authority which
evaluates the purchasing power of the consumer dollar. No adjustment shall be
made due to any revision which may be made to the CPI for any month. Tenant's
obligation to pay Minimum Rent as adjusted by this Section 3.2 shall continue
through the expiration of the term of this Lease and any renewal period and
will survive any earlier termination of this Lease which arises from Tenant's
default.
3.3 Rent Adjustment Statement. On or before September 30 of each year
during the term of this Lease and any renewal period, Landlord shall use best
efforts to provide Tenant with a statement containing the Base Index, the CPI
for the preceding month of August and the adjustment to Minimum Rent calculated
in accordance with Section 3.2. Landlord's delay or failure to provide such
statement or to compute or bill for the adjustment prior to September 30 will
not impair the continuing obligation of Tenant to pay rent adjustments. If
such written notice is not given in September, Tenant will continue making
monthly payments based on the prior year's Minimum Rent. Tenant shall remit to
Landlord within ten days of its receipt of any statement of rent adjustment,
the difference between the Minimum Rent paid to date by Tenant in the current
calendar year and the amount due to Landlord in accordance with the rent
adjustment (without interest or any late charge), and thereafter Tenant shall
pay Landlord Minimum Rent according to the adjustment.
3.4 Interest on Delinquent Rent. The time of payment of Minimum Rent,
Additional Rent and any other amounts due hereunder is of the essence in this
Lease. In addition to all other remedies available to Landlord, all sums
payable hereunder shall bear interest at an annual rate equal to two percent
(2%) over the prime rate of interest announced publicly by Norwest Bank Denver,
N.A. in Denver, Colorado (or any successor to that bank) from time to time (but
in no event in excess of the maximum rate of interest permitted by law) after
the due date until paid in full, but the payment of such interest shall not
excuse or cure any default by Tenant under this Lease. Failure to collect or
charge interest in connection with any one or more delinquent payments shall
not constitute a waiver of Landlord's right to charge or collect interest in
connection with any other or similar payment.
3.5 Late Charge. In the event Tenant fails to pay Minimum Rent,
Additional Rent or any other amount due hereunder within ten days of the date
such payment is due, Tenant acknowledges that Landlord will incur additional
administrative expenses, the amount of which will be difficult, if not
impossible, to determine. Accordingly, Landlord shall be entitled to assess
Tenant a one-time late charge of five percent (5%) of the amount of the payment
for each delinquent payment.
ARTICLE 4
(OPERATING COSTS)
4.1 Payment of Costs. In addition to Minimum Rent adjusted as provided
in
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<PAGE> 7
Article 3, beginning on the Commencement Date, Tenant will pay as Additional
Rent Tenant's Percentage of Operating Costs paid, payable or incurred by
Landlord in each calendar year or partial calendar year during the term of this
Lease and any renewal period.
4.2 Definition. As used in this Lease, the term "Operating Costs" means
the sum of all costs and expenses of whatever kind or nature incurred in
managing, operating, maintaining, administering, over-hauling and repairing the
Project, in respect of a calendar year, including, but not limited to, the
following:
(a) All taxes and assessments, government impositions and
surcharges upon or with respect to the Project imposed by federal,
state or local governments, including real estate taxes and
assessments, gross receipts taxes regarding rentals and other
payments under this Lease, and other business taxes imposed
regarding this Lease, but not including income, franchise, capital
stock, estate or inheritance taxes. If, because of any change in
the method of taxation of real estate, any tax or assessment is
imposed upon Landlord, the Project, or the rents or income
therefrom, in substitution for or in lieu of any tax or assessment
which would otherwise be a real estate tax or assessment, such
other tax or assessment shall be included in the determination of
Operating Costs;
(b) The cost of building supplies and materials;
(c) The costs of utilities used or consumed in the Project
such as propane, butane, natural gas, steam, electricity, solar
energy, and fuel oil;
(d) The costs of water and sewer service, and providing
heating, ventilation, and cooling to the Project, including the
costs of maintaining and repairing the heating, air conditioning
and mechanical systems of the Project;
(e) Costs of janitorial service for Common Areas and general
maintenance and repair of the Project;
(f) The cost of landscaping, snow and ice removal, and
maintenance, repair, patching, paving and striping of parking and
exterior areas;
(g) The cost of insurance required to be maintained by
Landlord pursuant to this Lease, any other insurance which Landlord
may elect to obtain with respect to the operation or ownership of
the Project, including fire and extended coverage, public liability
insurance and all risk insurance (if Landlord decides to carry any
of them) and the part of any claim required to be paid under the
deductible portion of any insurance policy (which deductible shall
not exceed $50,000), but Tenant will have no interest in such
insurance or the proceeds of such insurance;
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<PAGE> 8
(h) Labor costs incurred in the operation, maintenance and
repair of the Project, including wages and any fringe benefits,
worker's compensation, disability insurance and payroll taxes of
persons and companies;
(i) The costs of installation, maintenance and replacement of
exterior signs, removal of trash, rubbish and refuse, recycling,
window washing, pest control, interior and exterior painting;
(j) Payments made under any easement, operating agreement,
license, restrictive covenant, or any instrument pertaining to the
payment or sharing of costs among property owners;
(k) The cost of installing, maintaining and operating any fire
detection, fire prevention, lighting, or security systems or any
communications systems which are necessary or incident to operation
of life safety systems;
(l) The cost of required licenses and permits;
(m) The cost of traffic control and policing;
(n) The cost of maintenance and repair of the roof and on-site
water, sanitary sewer and storm sewer lines;
(o) General overhead and administrative charges, professional
manage-ment fees, and the cost of management personnel and
supervision in amounts which are no greater than customarily
charged or incurred for office/light industrial buildings in the
Boulder, Colorado area, and costs of supplying any on-site manager
with office equipment and supplies;
(p) The cost of architectural, engineering, space planning,
legal, accounting, bookkeeping and inspection professionals and
consultants engaged in connection with the Project (but excluding
such costs to the extent they are incurred in connection with
leasing specific space to tenants);
(q) The costs of any capital improvements or structural
repairs to or replacements in the Project that reduce Operating
Costs, which costs will be amortized over the useful life of the
capital improvement, structural repair or replacement; however,
the annual amortization amount will not exceed the reduction in
Operating Costs actually achieved for the relevant year and the
amortization schedule will be extended accordingly, if necessary;
(r) Any costs incurred by Landlord for any capital improvement
or
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<PAGE> 9
other charges to the Project required by any change in the laws,
ordinances, rules, regulations or otherwise which were not in
effect at the time initial construction of the Project was
completed, required by any governmental or quasi-governmental
authority having jurisdiction over the Project, which costs will be
amortized over the useful life of the capital improvement or other
charges;
(s) To the extent they are non-capital in nature, the cost of
repairs, replacements, alterations and their construction, which
replace items included in the Project as a part of the standard
building construction;
(t) The cost of any other items incurred or paid by Landlord
in the ownership, management, operation, maintenance,
administration, overhaul and repair of the Project, provided such
cost is of a type typically incurred or paid with respect to
projects similar to the Project.
The fact that it is listed specifically in the foregoing definition of
Operating Costs shall not be deemed to impose on Landlord an obligation to
supply a particular service to the Project or incur a particular expense on
behalf of the Project, it being understood that the only services Landlord
shall be required to provide to Tenant hereunder are those expressly provided
for in this Lease. Notwithstanding anything in the foregoing definition of
Operating Costs to the contrary, Operating Costs shall not include any of the
following:
(i) Any ground lease rental;
(ii) Depreciation, amortization and other non-cash expenditures;
(iii) Interest payments, principal, points, fees and other payments and
charges for borrowed money;
(iv) Costs incurred for repairs or other items to the extent Landlord
is reimbursed by insurance proceeds or third parties;
(v) Costs of capital improvements and repairs except as provided in
subparagraphs (q), (r) and (s) above;
(vi) Costs for sculpture, paintings, or other objects of art;
(vii) Costs incurred with respect to the installation, renovation,
improvement or decorating of space to be leased by other actual or
potential tenants or occupants of the Project;
(viii) Marketing costs, including, without limitation, leasing
commissions, attorneys' fees, and space planning costs, and other
costs and expenses incurred in connection with leasing of any
portion of the Project;
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<PAGE> 10
(ix) The cost of any service performed by an affiliate of Landlord or
the manager of the Project to the extent such cost is in excess of
the cost that would be paid to an unaffiliated, third-party
provider of a similar service;
(x) Expenses in connection with services or other benefits which are
not offered to Tenant, or for which Tenant is charged directly but
which are provided to another tenant or occupant of the Project,
or for which Landlord is reimbursed by another occupant or tenant;
(xi) Any fines, penalties, judgments, court costs, attorneys' fees and
litigation expenses incurred by Landlord due to the violation by
Landlord of any law or regulation or the terms and conditions of
any lease, contract or other obligation;
(xii) Except as provided in subparagraph (r) above, costs incurred due to
the violation or alleged violation by the Project of any law or
regulation which is in effect on the date of this Lease;
(xiii) Any types of utility services (including, without limitation,
water, gas, electricity, sewer and telephone) that at any time
during the Lease Term are separately metered or contracted for and
paid for by Tenant directly, to the extent serving any portions of
the Project except the Common Area;
(xiv) Any latent defects in the Demised Premises required to be repaired
by Landlord under Section 2.5.
Landlord covenants and agrees that Tenant's Percentage of Operating Costs
described under subparagraph (r) above shall not exceed $2,000 in any calendar
year throughout the Lease Term. Accounting for Operating Costs shall be in
accordance with generally accepted property management principles, consistently
applied.
4.3 Estimated Payments. Beginning on the Commencement Date and
continuing throughout the term of this Lease, Tenant shall pay to Landlord on
the first day of each month an amount equal to 1/12 of the product of Tenant's
Percentage multiplied by Estimated Operating Costs (as defined below) for such
calendar year. "Estimated Operating Costs" for any calendar year means
Landlord's estimate of such Operating Costs which will be subject to revision
as provided in Sections 4.5 and 4.6 below. For any partial calendar year
during the term of this Lease, Estimated Operating Costs will be calculated on
a full-year basis. During December of each year or as soon after each December
as practicable, Landlord will give Tenant a written notice of Estimated
Operating Costs for the ensuing calendar year and Tenant immediately will begin
paying Tenant's Percentage of Estimated Operating Costs based upon this
calculation. If such written notice is not given in December, Tenant will
continue making
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<PAGE> 11
monthly payments based on the prior year's Estimated Operating Costs until the
first day of the month after which such revised notice is given. In the month
in which Tenant first makes a payment based upon the revised Estimated
Operating Costs, Tenant will pay to Landlord for each month which has elapsed
since December the difference between the amount payable based on the revised
estimate and the amount payable based on the prior year's estimate (without
interest or late charges). If, at any time, it reasonably appears to Landlord
that actual Operating Costs will vary from the Estimated Operating Costs for
such calendar year, Landlord, by 30 days' prior written notice to Tenant, may
revise the Estimated Operating Costs and subsequent payments by Tenant in such
calendar year will be adjusted accordingly.
4.4 Annual Settlement. Within 90 days after the end of each calendar
year or as soon after such 90-day period as practicable, Landlord will deliver
to Tenant a statement of amounts payable under Section 4.1 for such calendar
year prepared on behalf of and certified by Landlord. Such certified statement
will be final and binding upon Landlord and Tenant unless Tenant objects to it
in a writing delivered to Landlord within 30 days after it is given to Tenant.
If such statement shows an amount owing by Tenant that is less than the
Estimated Operating Costs previously paid by Tenant for such calendar year, the
excess will be held by Landlord and credited against the next payment of rent;
however, if the term has ended and Tenant was not in default at its end,
Landlord will refund the excess to Tenant within 30 days thereafter. If such
statement shows an amount owing by Tenant that is more than the Estimated
Operating Costs previously paid by Tenant for such calendar year, Tenant shall
pay the deficiency (without interest or late charge) to Landlord within 30 days
after the delivery of such statement. Tenant may review Landlord's records of
the Operating Costs at Tenant's sole cost and expense, at the place Landlord
normally maintains such records during Landlord's normal business hours upon
reasonable advance written notice.
Tenant shall have thirty (30) days to object to the statement delivered by
Landlord, under this Section 4.4, by giving written notice of such objection
to Landlord. If, within thirty (30) days after Tenant delivers notice of
objection to Landlord, the parties have been unable to agree as to the proper
amounts to be shown on the statement, then the dispute shall be referred to a
Certified Public Accounting firm selected by Landlord and reasonably acceptable
to Tenant to determine the proper amounts. If the determination shows that
Tenant has not been overcharged for Operating Costs or has been overcharged by
an amount of five percent (5%) or less, Tenant shall pay the expenses involved
in such determination. If the determination shows an overcharge in the amount
of Operating Costs owed by Tenant of more than five percent (5%), Landlord
shall pay the expenses involved in such determination. Unless Tenant provides
Landlord with a written notice of objection within thirty (30) days following
its receipt of the statement of amounts payable under this Section 4.4, Tenant
shall be deemed to have consented to the costs and expenses shown on the
statement and thereafter waived its right to dispute such items or their
amounts.
4.5 Final Proration. If this Lease ends on a day other than the last
day of a calendar year, the amount of increase (if any) in the Operating Costs
payable by Tenant
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applicable to the calendar year in which this Lease ends will be calculated on
the basis of the number of days of the term falling within such calendar year,
and Tenant's obligation to pay any increase or Landlord's obligation to refund
any overage will survive the expiration or other termination of this Lease.
4.6 No Representation. Tenant acknowledges that Landlord has not made
any representation or given Tenant any assurance as to the amount or
approximate amount of Operating Costs for any calendar year during the term of
this Lease and any renewal period. In Section 1.12 Landlord has advised Tenant
of the current estimate.
4.7 Additional Rent. Amounts payable by Tenant according to this
Article 4 constitute Additional Rent, without deduction or offset. If Tenant
fails to pay any amounts due pursuant to this Article 4, Landlord shall have
available to it all of the rights and remedies applicable to Tenant's failure
to pay Minimum Rent.
ARTICLE 5
(OCCUPANCY)
5.1 Use. Tenant shall use and occupy the Demised Premises for the
purpose set forth in of Section 1.13 and for no other purpose. The Demised
Premises shall not be used for any auction, fire, bankruptcy or distress sale
without the prior written consent of Landlord. The character of the occupancy
of the Demised Premises, as restricted by this Article and as further
restricted by Articles 6 and 17 and any of the Rules and Regulations attached
to this Lease, or hereafter adopted, is an additional consideration and
inducement for the granting of this Lease. If Tenant shall vacate the Demised
Premises at any time during the initial term of this Lease or any renewal
period, Tenant shall pay for any increase in any property insurance premium for
coverage of the Project which results from the Demised Premises being vacant.
5.2 Compliance with Law. Tenant shall not use or occupy, or permit any
portion of the Demised Premises to be used or occupied, in violation of any
law, ordinance, order, rule, regulation, certificate of occupancy or other
governmental requirement or any recorded restriction, or for any activity or in
any manner deemed to be hazardous on account of fire or other hazards, or any
high risk activity that would in any way violate, suspend, void or increase the
rate of fire, liability or any other insurance of any kind at any time carried
by Landlord. Any increase in the cost of such insurance attributable to
Tenant's activities, property or improvements in the Demised Premises or
Tenant's failure to perform and observe its obligations under this Lease, shall
be payable by Tenant to Landlord on demand. Tenant, at its own expense, shall
comply with all laws, ordinances, orders, rules, regulations and other
governmental requirements now or hereafter relating to the use, condition or
occupancy of the Demised Premises and all rules, orders, regulations and
requirements of the board of fire underwriters, the Insurance Services Office
or any other similar body having jurisdiction over the Building. Tenant shall
not do or permit to be done any act or thing upon the Demised Premises which
shall or is reasonably likely to subject Landlord to any liability or
responsibility for injury
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to any person or persons or to any property by reason of any business or
operation being carried on upon the Demised Premises or for any other reason,
and Tenant hereby indemnifies Landlord against any such liability or
responsibility. Tenant shall not place a load upon any floor of the Demised
Premises exceeding the floor load per square foot area which such floor was
designed to carry and which is allowed by law. Business machines and
mechanical equipment shall be placed and maintained by Tenant at Tenant's
expense in settings sufficient in Landlord's reasonable judgment to absorb and
prevent vibration, noise and annoyance.
5.3 Food, Beverages and Odors. Tenant shall not conduct any restaurant,
luncheonette or cafeteria for the sale or service of food or beverages to its
employees or to others (other than providing employees with a lunchroom which
may include a stove, microwave, coffee bar, refrigerator, sink and dishwasher),
or cause or permit any odors of cooking or other processes or any unusual or
objectionable odors to emanate from the Demised Premises. Tenant will not
install or permit the installation or use of any vending machine except by such
persons and in such manner as are approved by Landlord, which approval shall
not be unreasonably withheld or delayed.
5.4 Waste. Tenant shall not commit, suffer or permit any waste, damage,
or injury to the Demised Premises or the Project or the fixtures or equipment
located therein, nor shall Tenant conduct any dangerous, nauseous, or offensive
trade, business or other activity (other than the Permitted Uses) in the
Demised Premises.
5.5 Signs. Tenant shall not install, paint, display, inscribe, place or
affix any sign, picture, advertisement, notice, lettering or direction in the
interior of the Demised Premises which is visible from the outside of the
Demised Premises, without Landlord's prior written consent. All of Tenant's
exterior signs and identifications will conform to the design criteria outlined
by Landlord and shall comply with all applicable laws, rules or regulations
governing same. Tenant agrees to keep all exterior signs in good condition and
repair and agrees to keep such signs lighted during those hours from time to
time required by Landlord in accordance with Landlord's Rules and Regulations.
Landlord specifically approves the signage described in Exhibit B attached
hereto and made a part hereof, provided that FIPCO also has approved such
signage.
ARTICLE 6
(ASSIGNMENT AND SUBLETTING)
6.1 Assignment, Mortgage, Subletting. Neither Tenant nor Tenant's legal
representatives, successors or assigns shall voluntarily or involuntarily
assign, mortgage or encumber this Lease, or sublet or use or occupy or permit
the Demised Premises or any part thereof to be used or occupied by others,
without the written consent of Landlord, in each instance, which consent shall
not be unreasonably withheld or delayed by Landlord. It shall be reasonable
for Landlord to refuse to consent to an assignment of this Lease or subletting
of the Demised Premises to any person or entity which fails to meet Landlord's
standard requirements
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for tenant creditworthiness and financial condition, or which involves a
proposed use for the Demised Premises which Landlord deems incompatible with
its current tenant mix or otherwise unsatisfactory. Any assignment,
encumbrance, or sublease without Landlord's consent shall be voidable and shall
constitute a default hereunder.
6.2 Procedure for Assignment. Tenant will notify Landlord in writing of
any interest in this Lease which Tenant wishes to assign or any portion of the
Demised Premises which Tenant wishes to sublet or permit others to occupy.
Such notice shall specify the terms and conditions of such transaction and
shall be accompanied by any information Landlord reasonably may require with
respect to the proposed assignee, sublessee or occupant. Upon receipt of such
notice and information, Landlord shall have the right, in its reasonable
discretion, subject to Section 6.1 above, to either consent to such assignment,
subletting, or occupancy, or refuse to consent to such assignment, subletting
or occupancy. In the event Landlord consents to such assignment, subletting or
occupancy, Landlord shall be paid fifty percent (50%) of the amount by which
the rent or other consideration paid by the assignee, sublessee or occupant to
Tenant, less the sum of any broker fees and commissions and tenant finish costs
incurred by Tenant in connection with the assignment or subletting, exceeds the
Minimum Rent, as adjusted, and Additional Rent. Tenant shall reimburse
Landlord for Landlord's expenses, including attorneys' fees, incurred in
connection with the review and documentation of any transfer of the Demised
Premises or this Lease for which Landlord's consent is requested, whether or
not Landlord's consent is granted.
6.3 No Release of Tenant. Regardless of Landlord's consent, no
subletting or assignment or occupancy of the Demised Premises by others shall
release Tenant of Tenant's obligation or alter the primary liability of Tenant
to pay the rent and to perform all other obligations to be performed by Tenant
hereunder. The acceptance of rent by Landlord from any other person shall not
be deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee or sublessee
of Tenant or any successor to Tenant, in the performance of any of the terms
hereof, Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against said assignee, sublessee or successor. Landlord
may consent to subsequent assignments or subletting of this Lease or amendments
or modifications to this Lease with assignees, sublessees or successors of
Tenant, without notifying Tenant, or any successor of Tenant, and without
obtaining its or their consent thereto and such action shall not relieve Tenant
of liability under this Lease.
ARTICLE 7
(ALTERATIONS)
7.1 Alterations. Tenant shall make no alterations, installations,
additions or improvements in or to the Demised Premises without first obtaining
the written consent of Landlord. Such consent shall not be unreasonably
withheld or delayed. Tenant understands that Landlord's consent will be
conditioned on Tenant's compliance with Landlord's reasonable
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<PAGE> 15
requirements in effect at the time permission is requested, which requirements
will include, but not be limited to, Landlord's approval of plans,
specifications, contractors, insurance, and hours of construction. Tenant will
be required to reimburse Landlord as Additional Rent for Landlord's actual,
out-of-pocket costs, if any, incurred to supervise Tenant's contractor and any
other costs incurred by Landlord, such as, but not limited to, trash removal
and utilities, resulting from Tenant's alterations. Prior to the commencement
of any work in or about the Demised Premises by Tenant's contractors, Tenant
shall on request deliver to Landlord certificates issued by applicable
insurance companies evidencing that workmen's compensation, public liability
and property damage insurance, all in amounts and with companies and on forms
reasonably satisfactory to Landlord, are in force and effect and maintained by
all contractors and subcontractors engaged by Tenant to perform such work. Each
such certificate shall provide that it may not be canceled without ten days'
prior written notice to Landlord. Upon completion of such work, Tenant shall
provide Landlord with as-built plans and specifications and with lien releases
from every person who supplied labor or materials for the work. All work done
by Tenant shall be performed in full compliance with all laws, rules, orders,
ordinances, directions, regulations and requirements of all governmental
agencies, offices, departments, bureaus and boards having jurisdiction of the
Project, and in full compliance with the rules, orders, directions, regulations
and requirements of the Insurance Services Office and of any similar body.
7.2 Notice. Before commencing any work, Tenant shall give Landlord at
least five days' written notice of the proposed commencement of such work.
Preceding and during the course of such work, Tenant shall post and keep posted
in conspicuous places on the Demised Premises such notice as Landlord shall
prepare as may be permitted by law to protect Landlord from having its interest
in the Demised Premises made subject to a mechanic's lien, and, upon Landlord's
request, Tenant shall secure, at Tenant's own cost and expense, a completion
and lien indemnity bond or other security reasonably satisfactory to Landlord
for any alteration work consented to by Landlord which exceeds $5,000 in total
cost. Any mechanic's lien filed against the Demised Premises, the Building or
the Project for work claimed to have been done for, or materials claimed to
have been furnished to, Tenant, shall be discharged by Tenant, by bond or
otherwise, within 30 days after the filing thereof, at the cost and expense of
Tenant.
7.3 Title to Improvements. All alterations, additions or improvements
upon the Demised Premises made by either Landlord or Tenant which are fixtures
of the realty, including, without limiting the generality of the foregoing, all
paneling, partitions, railings, and the like, unless Landlord elects otherwise
(which election shall be made by giving a written notice pursuant to the
provisions of Article 25 below not less than three days prior to the expiration
or other termination of this Lease or, upon Tenant's written request, at the
time Landlord's consent to any additional improvements of or alterations to the
Demised Premises is sought by Tenant), shall become the property of Landlord,
and shall remain upon and be surrendered with the Demised Premises, as a part
of the Demised Premises, at the end of the term of this Lease. If Tenant shall
be required to remove any fixtures or other property from the Demised Premises,
Tenant shall fully repair or any damage arising from such removal. Tenant's
obligation to perform and observe this covenant shall survive the expiration or
other termination
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of this Lease.
Landlord hereby agrees that any fixtures or other equipment installed by
Tenant which fall under the categories set forth on Exhibit C ("Tenant's
Equipment") shall not become the property of Landlord under this Section 7.3 or
otherwise under this Lease, but shall remain the property of Tenant.
Notwithstanding anything to the contrary in this Lease, Tenant shall have the
right to install Tenant's Equipment at any time during the Lease Term. Tenant
shall have the right to remove Tenant's Equipment upon the expiration or other
termination of this Lease, so long as Tenant repairs any damage to the Demised
Premises caused by such removal.
ARTICLE 8
(REPAIRS)
8.1 Tenant's Repairs. Tenant shall take good care of the Demised
Premises and fixtures therein and shall make all repairs, maintenance and
replacements in and about Demised Premises necessary to preserve them in good
order and condition equal to the condition of the Demised Premises on the
Commencement Date, subject to ordinary wear and tear and casualty loss, with
respect to which Article 12 shall apply. Tenant shall make, at its sole
expense, repairs to any special equipment or systems installed by Tenant or by
Landlord on Tenant's behalf. All repairs required under this section shall be
made only by contractors and mechanics approved by Landlord, which approval
shall not be unreasonably withheld or delayed. If Tenant fails to perform any
of its obligations under this Article 8 following receipt of a written demand
therefor by Landlord, Landlord may, but shall not be obligated to, perform any
of such obligations and Tenant shall pay the cost of same promptly to Landlord
within ten days of Tenant's receipt of Landlord's written demand therefor.
8.2 Window and Floor Coverings. Tenant shall take good care of any and
all floor and window coverings installed at any time in any portion of the
Demised Premises, and Tenant shall make, as and when needed, all repairs in and
to the said coverings and shampoo and/or clean any of said coverings as
necessary to preserve them in good order, condition and appearance. Upon the
expiration or other termination of this Lease, Tenant shall surrender said
coverings to Landlord in good order, condition and repair, ordinary wear and
tear and casualty loss, with respect to which Article 12 shall apply, excepted.
8.3 Landlord's Repairs. Except as otherwise provided in this Lease,
Landlord shall maintain and repair the mechanical, plumbing, heating, air
conditioning, ventilation and electrical equipment and systems, the Common
Area, and the elevators, roof, foundation and exterior walls, and other
structural elements of the Building and shall make structural repairs within
the Demised Premises arising from ordinary wear and tear or through causes over
which Tenant has no control, all of which repairs, except as provided in
Section 2.5 and Section 4.2, shall constitute Operating Costs. Except to the
extent covered by property insurance proceeds made available to Landlord,
Tenant, at its expense, shall repair any damage or injury to the Demised
Premises, or to the Building or to its fixtures, appurtenances or equipment or
to any of
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the Project done by Tenant or Tenant's agents, servants, employees,
contractors, visitors or licensees, or caused by moving property of Tenant in
or out of the Building, or resulting from the carelessness, negligence, or
improper conduct of Tenant or Tenant's agents, servants, employees,
contractors, visitors or licensees.
8.4 No Rent Abatement. There shall be no allowance to Tenant for a
diminution of rental value, and no liability on the part of Landlord by reason
of inconvenience, annoyance, or injury to business arising from the making of,
or the failure to make, any repairs, alterations, additions or improvements in
or to any portion of the Demised Premises or the Project, or in or to fixtures,
appurtenances or equipment contained therein, and in no event shall Landlord be
responsible for any consequential damages arising or alleged to have arisen
from any such event. Tenant hereby waives all rights under any law in
existence during the term of this Lease authorizing a tenant to make repairs at
the expense of a landlord or to terminate a lease upon the complete or partial
destruction of the leased premises.
ARTICLE 9
(INSURANCE)
9.1 Landlord's Insurance Coverage. Landlord shall maintain public
liability insurance, hazard insurance on the Building and such other insurance
coverage as it reasonably deems necessary, the cost of which shall be included
in Operating Costs. Tenant acknowledges that it has no right to receive any
proceeds from any such insurance policies carried by Landlord and that such
insurance is for the sole benefit of Landlord. Landlord shall not be
responsible for insuring any alterations, installations or other improvements
made by Tenant to the Demised Premises or any personal property of Tenant.
Upon Tenant's written request, made not more frequently than twice every
12-month period, Landlord shall inform Tenant of the insurance coverages and
amounts maintained by Landlord with respect to the Project. Landlord shall
have the right to change its insurance coverages and amounts, from time to
time, without notifying Tenant of such changes, and any information provided by
Landlord to Tenant in accordance with the preceding sentence shall not
constitute a warranty or covenant by Landlord that certain coverages or amounts
of insurance will remain in effect.
9.2 Tenant's Insurance Coverage. Tenant agrees, at Tenant's sole cost
and expense, to carry and maintain (i) public liability insurance, including
bodily injury and property damage, personal injury and contractual liability
with respect to all claims, demands, or actions by any person, firm or
corporation, in any way arising from, related to, or connected with, the
conduct and operation of Tenant's business or use of the Premises (such
policies shall be written on a comprehensive basis, with limits of not less
than $1,000,000.00 and such higher limits as the mortgagees of Landlord may
require or as Landlord reasonably may require from time to time, and include
contractual liability coverage for performance by Tenant of the indemnities set
forth in this Lease); (ii) fire and extended coverage insurance, including
endorsements for vandalism, malicious mischief, theft and sprinkler leakage,
covering all of Tenant's property and Landlord's property in the Demised
Premises, including, but not limited to, furniture, fittings,
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installations, alterations, additions, partitions, fixtures, merchandise and
anything in the nature of a leasehold improvement in an amount equal to the
full replacement cost of such property without deduction for depreciation;
(iii) insurance coverage against loss or damage by boiler or internal explosion
by boilers, if applicable, in an amount not less than $1,000,000.00; (iv)
standard form workers' compensation and employees' liability insurance in
amounts as required by an applicable governmental agency or authority; (v)
plate glass insurance in an amount not less than the full replacement costs of
any such glass breakage; (vi) comprehensive automobile liability insurance
policy insuring all owned, non-owned and hired vehicles used in the conduct of
Tenant's business and operated upon or parked on the Project with limits of
liability of not less than $1,000,000.00 each person and $1,000,000.00 each
occurrence for bodily injury and $500,000.00 each occurrence for property
damage; and (vii) business interruption insurance and any other form or forms
of insurance as the Landlord or its mortgagees may reasonably require from time
to time in form, in amounts and for insurance risks against which a prudent
tenant would protect itself.
9.3 Form of Policies. All policies of public liability and property
insurance, other than property insurance covering property owned by Tenant not
required to be surrendered to Landlord upon expiration of this Lease, which
Tenant is obligated to maintain according to this Lease shall name Landlord as
an additional insured. Tenant shall deliver to Landlord a copy of all such
policies or certificates of insurance (including, in any case, documentation
naming Landlord as an additional insured) and evidence of payment of all
premiums for any such policies prior to Tenant's occupancy of the Demised
Premises and from time to time during the Lease term, at least 30 days prior to
the expiration of the term of each such policy. All policies of public
liability and property insurance maintained by Tenant also shall contain a
provision that Landlord, although named as an additional insured, shall
nevertheless be entitled to recover under such policies for any loss sustained
by Landlord, its agents and employees as a result of the acts or omissions of
Tenant. Such public liability and property insurance policies also shall be
written as primary policies, not contributing with and not in excess of
coverage that Landlord may carry. All policies required to be maintained by
Tenant shall provide that they may not be terminated or amended except after 30
days' prior written notice to Landlord.
9.4 Waiver of Subrogation. Landlord and Tenant waive any and all rights
to recover against each other and their respective officers, members,
employees, agents and representatives for any loss or damage to such waiving
party arising from any cause to the extent covered by any valid and collectible
insurance required to be carried by such party pursuant to this Article 9 or
any other insurance actually carried by such party to the extent of the
proceeds paid under such insurance. Such waiver shall be effective only with
respect to loss or damage occurring during such time as Landlord's and Tenant's
policies shall be in force and effect and so long as it does not adversely
affect or impair such policies or prejudice the right of the releasing party to
recover under such policies. Landlord and Tenant shall cause their respective
insurers to issue appropriate waiver of subrogation rights endorsements to all
policies of insurance carried in connection with the Demise Premises and any
personal property located thereon.
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9.5 Landlord's Liability. Landlord and Landlord's agents shall not be
liable for, and Tenant waives all claims for damage to person or property
occurring in or about the Project resulting from, falling plaster, explosions,
flood, sprinkling devices, defective wiring, excessive heat or cold, frost,
broken glass, steam, gas, electricity, snow, wind, hail, water, broken or
leaking pipes or plumbing fixtures, earthquake, war, civil disorder, strike or
from any other cause of any nature. Neither Landlord nor Landlord's agents
shall be liable for any injury or damage caused by other tenants or parties in
the Building, by construction of any private, public or quasi-public work, or
by any repairs, alterations, injuries or accidents in or about the Project or
adjacent premises; nor shall Landlord be liable for any latent defect in the
Building except as provided in Section 2.5 or for interference with light or
other incorporeal hereditaments. All property belonging to Tenant or any
occupant of the Demised Premises shall be at the risk of Tenant or such person
only, and Landlord shall not be liable for damage thereto or theft or
misappropriation thereof not caused by the gross negligence or willful
misconduct of Landlord, or its employees or agents.
9.6 Tenant's Indemnification. Tenant hereby indemnifies and holds
harmless Landlord from and against any and all claims, liabilities damages,
losses, costs, and expenses (including reasonable attorneys' fees) arising out
of (i) the conduct of Tenant's business in the Demised Premises, (ii) any
breach or default by Tenant of the covenants, terms and conditions contained in
this Lease, or (iii) any negligent act or omission by, or the intentional
misconduct of, Tenant, its agents, contractors, servants, employees, invitees
or licensees. Tenant shall give prompt notice to Landlord in case of fire or
accident to or defect in the Building or any of its fixtures, appurtenances or
equipment or any other portion of the Project of which Tenant becomes aware.
ARTICLE 10
(SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT)
10.1 Subordination. It is agreed that this Lease may, at the option of
Landlord, be made subordinate to any ground or underlying leases, mortgages, or
deeds of trust which may now or hereafter affect the real property of which the
Demised Premises form a part and that Tenant, or Tenant's
successors-in-interest, will execute and deliver upon the demand of Landlord
any and all instruments reasonably requested by Landlord subordinating in the
manner requested by Landlord this Lease to such lease, mortgage or deed of
trust.
10.2 Attornment. Tenant agrees that, at the option of the landlord under
any ground lease hereafter affecting the real property of which the Demised
Premises form a part, Tenant shall attorn to said landlord in the event of the
termination or cancellation of such ground lease and if requested by said
landlord, Tenant shall enter into a new lease with said landlord (or a
successor ground lessee designated by said landlord) for the balance of the
term then remaining under this Lease upon the same terms and conditions as
those herein provided.
10.3 Mortgages. In the event of a foreclosure or exercise of power of a
sale
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under any mortgage or deed of trust now or hereafter affecting the real
property of which the Demised Premises form a part, the holder of any such
mortgage or deed of trust (or purchaser at any sale pursuant thereto) shall
have the option of (i) treating this Lease as being subordinate to said
mortgage or deed of trust in which case this Lease shall be extinguished at the
conclusion of the judicial or public trustee foreclosure absent a redemption,
(ii) requiring Tenant to attorn to such holder or purchaser, and to enter into
a new lease with such holder or purchaser (as landlord) for the balance of the
term then remaining under this Lease upon the same terms and conditions as
those provided in this Lease, or (iii) electing that this Lease become or
remain, as the case may be, superior to said mortgage or deed of trust;
provided, that, in no event shall such holder or purchaser (x) be liable for
the act or omission of any prior Landlord, or (y) be subject to any offsets or
defenses which Tenant may have against any prior Landlord, or (z) be bound by
any payment of Minimum or Additional Rent which Tenant might have paid for more
than one month in advance to any prior Landlord. Any attornment pursuant to
this Article 10 shall occur automatically but Tenant, upon request and without
cost to Landlord, shall execute and deliver any and all instruments reasonably
desired by such holder or purchaser evidencing such attornment to any said
mortgage, deed of trust or ground lease.
10.4 Non-Disturbance. Notwithstanding the foregoing provisions of this
Article 10, Tenant's use and occupancy of the Demised Premises shall not be
disturbed so long as Tenant faithfully performs all of its obligations under
this Lease. Any instrument of subordination requested by Landlord shall
confirm the nondisturbance provided for in the preceding sentence.
ARTICLE 11
(RULES AND REGULATIONS)
11.1 Compliance with Rules. Tenant and Tenant's agents, servants,
employees, contractors, visitors and licensees shall observe faithfully and
comply strictly with the Rules and Regulations attached as Exhibit D and made a
part of this Lease, and such other and further reasonable Rules and Regulations
as Landlord or Landlord's agents may from time to time adopt for application to
all tenants of the Project. Notice of any additional Rules or Regulations
shall be given in accordance with the provisions of Article 25 below. Landlord
shall not be liable to Tenant for any violation of said Rules and Regulations,
or the breach of any term, covenant, condition, provision, or agreement in any
lease, by any other tenant or other party.
ARTICLE 12
(DAMAGE OR DESTRUCTION)
12.1 Damage. If the Demised Premises shall be damaged by fire or other
cause, the damages shall be repaired by and at the expense of Landlord to the
extent insurance proceeds are available therefor unless Landlord elects not to
repair as hereinafter provided. No liability shall accrue for any delay in
repairing the Demised Premises which may arise by reason of adjustment of
insurance on the part of Landlord or Tenant or for delay on account of "labor
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troubles," or for any other cause beyond Landlord's control.
12.2 Right to Terminate Lease. Landlord may elect to terminate this
Lease if the Building or the Demised Premises are (i) destroyed or
substantially damaged by casualty not covered by insurance, (ii) destroyed or
rendered untenable to an extent in excess of twenty-five percent (25%) of the
rentable area of the Building or the Demised Premises, or (iii) damaged to such
extent that the remaining term of this Lease is not sufficient to amortize the
costs of reconstruction thereof. Should Landlord elect to terminate this
Lease, it shall give written notice of such election to Tenant within 90 days
after the occurrence of such casualty. The term of this Lease shall expire
upon the third day after such notice is given and Tenant shall vacate the
Demised Premises and surrender the same to Landlord.
Tenant may elect to terminate this Lease, (x) at any time during the term
of this Lease, if the Demised Premises are destroyed or rendered untenable to
an extent that Landlord, in Landlord's reasonable determination, can not repair
the same within 180 days after the occurrence of such destruction or
untenability, or, (y) during the last year of the term of this Lease excluding
any unexercised renewal options, if twenty-five percent (25%) or more of the
Demised Premises are rendered untenable for Tenant's use. If Tenant wishes to
exercise its option to terminate under (y) above, Tenant must give written
notice of termination to Landlord within 30 days following the occurrence of
the casualty and the Lease shall expire upon the day of such notice. If Tenant
wishes to exercise its option under (x) above, Tenant must give written notice
of termination to Landlord within 30 days following Tenant's receipt of a
written notice from Landlord indicating Landlord has determined it cannot
reasonably repair or restore the Demised Premises within the 180-day period
(which notice, if such be the case, Landlord shall give Tenant within 120 days
after the casualty), and the Lease shall terminate upon the day of Tenant's
notice.
12.3 Obligations of Tenant. Tenant agrees that, during any period of
reconstruction or repair, it will continue the operation of its business within
the Demised Premises to the extent practicable. Tenant also shall proceed with
reasonable diligence, at its sole cost and expense, to rebuild, repair, restore
and replace any furnishings, fixtures, equipment, merchandise and other
property belonging to Tenant. Tenant agrees that, in the event of damage or
destruction to the leasehold improvements or Landlord's property in the Demised
Premises covered by insurance required to be taken out by Tenant pursuant to
this Lease, Tenant shall repair, restore or replace such leasehold improvements
or property at Tenant's expense. In the event of damage or destruction of the
Building or Demised Premises entitling the Landlord to terminate this Lease
pursuant to this Article 12, Tenant shall pay to Landlord all of its insurance
proceeds relating to the leasehold improvements and Landlord's property in the
Demised Premises (but, in any event, not including Tenant's Equipment) and
surrender to Landlord, in accordance with the provisions of this Lease, such
leasehold improvements and such property in the Demised Premises.
12.4 Abatement of Rent. If Landlord charges for rent loss insurance as
an item
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of Operating Costs under this Lease, the Minimum Rent and Additional Rent
payable by Tenant under this Lease shall be proportionately reduced to the
extent that the Demised Premises or any part thereof are thereby rendered
untenable from the date of the casualty until five days after completion by
Landlord of the repairs to the Demised Premises or until termination of this
Lease.
ARTICLE 13
(EMINENT DOMAIN)
13.1 Eminent Domain. In the event the entire Demised Premises shall be
appropriated or taken under the power of eminent domain by any public or
quasi-public authority, this Lease shall terminate and expire as of the date of
such taking. In the event more than twenty-five percent (25%) of the rentable
area of the Demised Premises is taken under the power of eminent domain by any
public or quasi-public authority, or if more than twenty-five percent (25%) of
the total land area in the Project is taken, then the Landlord shall have the
right to terminate this Lease, effective as of the date possession is delivered
to the condemning authority, by giving Tenant written notice of such
termination within 60 days after the taking of possession by such public or
quasi-public authority. Subject to the Landlord's right of termination, Tenant
shall have the right to terminate this Lease upon written notice to Landlord
after the date of such taking, if more than thirty-five percent (35%) of the
total rentable area of the Demised Premises is taken under the power of eminent
domain, or if more than forty-five percent (45%) of the total land area of the
Project is so taken.
Notwithstanding the foregoing, if any portion of the Demised Premises or
the Project is taken so that it becomes reasonably impractical for Tenant to
continue the operation of Tenant's business in the Demised Premises, then
Tenant shall have the right to terminate this Lease by written notice to
Landlord. If Tenant so elects, this Lease shall terminate on the date
possession of the Demised Premises or the Project or portion thereof is taken.
13.2 Damages. All compensation awarded for any taking (or the proceeds
of any private sale in lieu thereof) of the Demised Premises or the Project
shall be the property of Landlord and Tenant hereby assigns its interest in any
such award to Landlord; provided, however, Landlord shall have no interest in
and Tenant shall be entitled to any award or portion thereof for the taking of
Tenant's Equipment and other Tenant property or for Tenant's moving expenses,
if a separate award for such items is made to Tenant or such award is part of
the award to Landlord; provided further, however, nothing contained in this
Lease shall be deemed to obligate Landlord to offer evidence or otherwise seek
recovery from the condemning authority for damages suffered or to be suffered
by Tenant as a result the taking, in any condemnation proceeding, court action
or negotiations with the condemning authority.
13.3 Restoration. If this Lease is not terminated as a result of any
condemnation or taking, Tenant shall remain in that portion of the Demised
Premises which shall not have been appropriated or taken as herein provided,
and Landlord agrees, at Landlord's sole cost and expense, as soon as reasonably
possible, to restore the remaining portion of the Demised
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Premises to a complete unit of like quality and character as existed prior to
such appropriation or taking; and thereafter, the Minimum Rent and Additional
Rent provided for herein shall be adjusted on an equitable basis, taking into
account the relative value of the portion taken as compared to the portion
remaining. In the event that no part of the Demised Premises is taken,
Landlord agrees to restore and repair any remaining part of the Project and
where there is no taking of the Demised Premises, there shall be no reduction
in the Minimum Rent or Additional Rent hereunder.
ARTICLE 14
(UTILITIES AND SERVICES)
14.1 Installation and Use. Subject to Section 14.4 below, Landlord shall
obtain from utility providers all utilities (including water, gas, electricity,
sanitary sewer, storm sewer, and telephone supplied to or serving the Demised
Premises) necessary to operate the Common Areas and to provide hot and cold
running water, sanitary sewer and HVAC to the Demised Premises in amounts and
quality consistent with comparable office/light industrial buildings in the
Boulder, Colorado area, the cost of which shall be included in Operating Costs
pursuant to Section 4.2(d). Tenant shall obtain from the utility provider and
pay for separately metered electricity, gas and telephone service to the
Demised Premises.
14.2 Use and Payment. Tenant shall use the utilities (including water,
gas, electricity, sewer and telephone supplied to or serving the Demised
Premises) in accordance with Landlord's Rules and Regulations and the rules and
regulations of the public utility company or the governmental agency supplying
the same. Except as otherwise provided herein, Landlord shall not be
responsible for providing any meters or other devices for the measurement of
utilities supplied to the Demised Premises. Tenant shall pay for all utilities
used or consumed in the Demised Premises.
14.3 Utility Services by Landlord. Landlord, at any time at Landlord's
sole option and upon not less than 30 days' prior written notice to Tenant, may
discontinue furnishing any utility Landlord is furnishing hereunder to the
Demised Premises, and in such case, Tenant shall contract with the public
utility company or governmental agency supplying such utility service for the
purchase and obtaining by Tenant of such utility directly from such company or
agency, provided, however, Landlord shall not discontinue any such utility
service until an alternative utility service is available. In the event any of
Tenant's utility charges are not separately metered, Tenant shall pay its
proportionate share of such charges, as Additional Rent, upon written notice
thereof from Landlord to Tenant.
14.4 Interruption of Service. Landlord shall not be liable to Tenant or
any other person for any damages or injury to person or property, including,
without limitation, damages for injury to or loss of Tenant's business,
resulting from interruption, curtailment or cessation of any utility service,
air conditioning, heat, snow removal or parking nor shall the same entitle
Tenant to any abatement of Rent or be deemed an eviction of Tenant in whole or
in part.
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14.5 Excessive Use. If Tenant uses amounts of water or sanitary sewer or
other unmetered utilities materially in excess of other tenants of the Project,
Landlord may install a meter and thereby measure Tenant's water or other
utility consumption for all purposes. Tenant shall pay Landlord for the cost
of the meter and the cost of the installation thereof, and, throughout the
duration of Tenant's occupancy, Tenant shall keep the meter in good working
order and repair at Tenant's own cost and expense, in default of which Landlord
may cause such meter to be replaced or repaired and collect the cost thereof
from Tenant as Additional Rent. Tenant agrees to pay for water, sanitary sewer
or other utility consumed, as shown on the meter, as and when bills are
rendered, and on default in making such payment, Landlord may pay such charges
and collect the same from Tenant. At all times Tenant's use of electric
current shall never exceed the capacity of the feeders to the Building or the
risers or wiring installation; provided, however, Tenant shall have the right
to make such alterations as may be necessary to increase such capacity subject
to Section 5.2 and Article 7 hereof.
14.6 Plumbing. Tenant shall at all times maintain at its own cost and
expense all plumbing facilities and related equipment within the Demised
Premises in good order, condition and repair to the satisfaction of Landlord.
Tenant hereby indemnifies Landlord against any and all claims, liabilities,
losses, damages, costs and expenses whatsoever (including, but not limited to,
attorneys' fees and expenses) whether suffered by Landlord or other occupants
or persons in the Building, arising out of the Tenant's failure to maintain
such facilities or equipment. Nothing in this Section 4.6 shall be construed
to confer upon Tenant the right to install any plumbing facilities without the
prior consent of Landlord, which consent shall not be unreasonably be withheld
or delayed. If Landlord does consent, Landlord shall be entitled to charge
Tenant for any increase in charges for water and sanitary sewer service which
results from such installation.
14.7 Cessation of Services. Landlord reserves the right to stop service
of plumbing, heating, ventilating, air conditioning and electric or other
mechanical systems, or cleaning services, when necessary, by reason of accident
or emergency or of inspection, repairs, alterations, additions or improvements
which in the reasonable judgment of Landlord are desirable or necessary to be
made, until same shall have been completed, and shall further have no
responsibility or liability for failure to supply any such services in such
instance.
14.8 Supplementary HVAC System. If Tenant installs supplementary HVAC
beyond the standard for the Building, Tenant shall pay for the cost of such
supplementary HVAC, including, without limitation, the cost of operating,
maintaining, repairing and replacing the same. If Tenant installs or uses gas
in addition to the gas provided for HVAC for the Project, such additional gas
shall be separately metered and Tenant shall pay for the cost of the same. Any
supplementary HVAC mounted on the exterior of the Building or installed in the
Common Area adjacent to the Building must comply with the restrictive covenants
recorded against the Project and must be approved by FIPCO.
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ARTICLE 15
(ACCESS)
15.1 Access for Repairs. Tenant shall permit Landlord to use and
maintain pipes, conduits and other facilities in and through the Demised
Premises. Landlord and Landlord's agents shall have the right to enter the
Demised Premises at all times, to examine the same and to make such repairs,
alterations, additions, and improvements as Landlord reasonably may deem
necessary or desirable, and Landlord shall be allowed to take all material into
and upon the Demised Premises that may be required therefor without the same
constituting an eviction of Tenant in whole or in part, and the rent shall in
no wise abate while such repairs, alterations, additions or improvements are
being made, by reason of inconvenience, annoyance or injury to the business of
Tenant because of the prosecution of any such work, or otherwise.
15.2 Access to Show or Renovate. Landlord and Landlord's agents may
inspect the Demised Premises at any time and may show the Demised Premises at
any time to prospective mortgagees, and purchasers of the Building and other
persons with a business interest therein. During the last six months of the
Lease term, including any exercised renewal options, Landlord and Landlord's
agents may show the Demised Premises to prospective tenants. If, during the
last month of the term, Tenant shall have removed all or substantially all of
Tenant's property therefrom, Landlord immediately may enter and alter, renovate
and redecorate the Demised Premises, without elimination or abatement of rent
or other compensation, and such acts shall have no effect upon this Lease.
15.3 Conditions of Entry. If Tenant shall not be personally present to
open and permit an entry into the Demised Premises at any time when, for any
reason, an entry shall be necessary or permissible under this Lease, Landlord
or Landlord's agents may enter the same by a master key, or, in the case of an
emergency, may forcibly enter the Demised Premises, without rendering Landlord
or such agents liable therefor (if during such entry Landlord or Landlord's
agents shall accord reasonable care to Tenant's property), and without in any
manner affecting the obligations, terms, covenants, conditions, provisions or
agreements of this Lease. Landlord shall have the right to change the
arrangement and location of entrances and passageways, doors and doorways, and
corridors, stairs, toilets, and other Common Areas subject to Section 2.3
above, and after reasonable notice, to change the name, number and designation
by which the Building is commonly known. Nothing contained in this Article 15,
however, shall be deemed or construed to impose upon Landlord any obligation,
responsibility or liability whatsoever for the care, supervision or repair of
the Building or any part thereof, other than as otherwise provided in this
Lease.
15.4 Minimizing Interference. Notwithstanding any provision in this
Lease to the contrary, Landlord shall use reasonable efforts to minimize
interference with Tenant's business in the Demised Premises in entering the
Demised Premises or performing any repairs, alterations, additions or
improvements affecting the Demised Premises. Except in the case of an
emergency, Landlord shall give Tenant 24 hours' notice prior to entering the
Demised Premises
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and shall consult with Tenant in order to determine means and methods of
minimizing interference with Tenant's business prior to entering the Demised
Premises, performing any repairs, alterations, additions or improvements
affecting the Demised Premises, or curtailing any utility or other services to
the Demised Premises.
ARTICLE 16
(CERTIFICATES OF OCCUPANCY)
16.1 Certificates of Occupancy. Tenant shall not at any time use or
occupy the Demised Premises in violation of the certificates of occupancy
issued for the Building, and, in the event that any department of the city or
county in which the Building is located, or of the State of Colorado, shall
hereafter at any time contend or declare that the Demised Premises are used for
a purpose which is in violation of such certificate or certificates of
occupancy, Tenant shall, upon five days' notice from Landlord or any
governmental agency, immediately discontinue such use of the Demised Premises.
Failure by Tenant to discontinue such use after such notice shall be considered
a default under this Lease, and Landlord shall have the right to terminate this
Lease immediately, and, in addition thereto, shall have the right to exercise
any and all rights and privileges and remedies given to Landlord by and
pursuant to the provisions of Article 19 below. The statement in this Lease of
the nature of the business to be conducted by Tenant in the Demised Premises
shall not be deemed or construed to constitute a representation or guaranty by
Landlord that such business is lawful or permissible under any certificate of
occupancy issued for the Building, or otherwise permitted by law.
ARTICLE 17
(LIFE SAFETY SYSTEMS)
17.1 Life Safety Systems. If there now is or hereafter shall be
installed in the Building a sprinkler system, heat, or smoke detection system
or any other so-called life-safety system and any such system or any of its
appliances shall be damaged or injured or not in proper working order by reason
of any act or omission of Tenant, Tenant's agents, servants, employees,
contractors, visitors, or licensees, Tenant shall forthwith restore the same to
good working condition. If Landlord's insurer, or any bureau, department or
official of the state, county or city government, or any governmental authority
having jurisdiction, requires or recommends that any changes, modifications,
alterations, or additional equipment be made or supplied in or to any such
system by reason of Tenant's particular business (other than general office or
light industrial use) or the location of partitions, trade fixtures, or other
contents of the Demised Premises, or if any such changes, modifications,
alterations or additional equipment become necessary to prevent the imposition
of a penalty or charge against the full allowance for any such system in the
insurance rate as fixed by said governmental authority or by Landlord's
insurance company, Tenant shall, at Tenant's expense, promptly make and supply
such changes, modifications, alterations or additional equipment.
ARTICLE 18
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(BANKRUPTCY)
18.1 Bankruptcy Prior to Term. If at any time prior to the Commencement
Date, there shall be filed by or against Tenant (and, if against Tenant, not
dismissed within 60 days thereafter) in any court pursuant to any statute
either of the United States or of any state a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or
trustee or conservator of all or a portion of Tenant's property, or if Tenant
makes an assignment for the benefit of creditors, this Lease shall ipso facto
be canceled and terminated, and in such event neither Tenant nor any person
claiming through or under Tenant or by virtue of any statute or of an order of
any court shall be entitled to possession of the Demised Premises; and
Landlord, in addition to the other rights and remedies given by Section 18.3
below or by virtue of any other provision in this Lease contained or by virtue
of any statute or rule of law, may retain as damages any rent, security deposit
or moneys received by it from Tenant or others on behalf of Tenant.
18.2 Bankruptcy During Term. If at any time during the term of this
Lease there shall be filed by or against Tenant (and, if against Tenant, not
dismissed within 60 days thereafter) in any court pursuant to any statute
either of the United States or of any state a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or
trustee or conservator of all or a portion of Tenant's property, or if Tenant
makes an assignment for the benefit of creditors, this Lease, at the option of
Landlord exercised within a reasonable time after notice of the happening of
any one or more of such events, may be canceled and terminated, and in such
event neither Tenant nor any person claiming through or under Tenant or by
virtue of any statute or of an order of any court shall be entitled to
possession or to remain in possession of the Demised Premises, but shall
forthwith quit and surrender the Demised Premises, and Landlord, in addition to
the other rights and remedies granted by Section 18.3 below or by virtue of any
other provision in this Lease contained or by virtue of any statute or rule of
law, may retain as damages any rent and any security deposit or moneys received
by it from Tenant or others on behalf of Tenant.
18.3 Measure of Damages. In the event of the termination of this Lease
pursuant to Sections 18.1 or 18.2 of this Article, Landlord shall be entitled
to the same rights and remedies as those set forth in Articles 19 and in
Article 21 of this Lease.
18.4 Other Remedies. Upon the occurrence of any of the events specified
in this Article, if Landlord shall not choose to exercise, or by law shall not
be able to exercise, its rights hereunder to terminate this Lease, then, in
addition to any other rights of Landlord provided hereunder or by law, (i)
Landlord shall not be obligated to provide Tenant with any of the services
specified in this Lease, unless Landlord has received compensation in advance
for such services, and the parties agree that Landlord's estimate of the
compensation required with respect to such services shall control, and (ii)
neither Tenant, as debtor-in-possession, nor any trustee or other person
(hereinafter collectively called the "Assuming Tenant") shall be entitled to
assume this Lease unless, on or before the date of such assumption, the
Assuming Tenant (x) cures, or provides adequate assurance that the latter will
promptly cure, any existing default
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under this Lease, (y) compensates, or provides adequate assurance that the
Assuming Tenant will promptly compensate, Landlord for any pecuniary loss
(including, without limitation, attorneys' fees and disbursements) resulting
from such default, and (z) provides adequate assurance of future performance
under this Lease; it being covenanted and agreed by the parties that, for such
purposes, any cure or compensation shall be effected by the immediate payment
of any monetary default or any required compensation, or the immediate
correction or bonding of any nonmonetary default, and "adequate assurance" of
future performance shall be effected by the establishment of an escrow fund for
the amount at issue or by bonding, it being covenanted and agreed by Landlord
and Tenant that the foregoing provision is a material part of the consideration
for this Lease.
ARTICLE 19
(DEFAULT)
19.1 Events of Default. The occurrence of any one or more of the
following events shall constitute a default under this Lease ("Event of
Default"):
(a) Tenant shall fail to pay any installment of Minimum Rent,
Additional Rent or any other sum payable by Tenant pursuant to this
Lease and such failure shall continue for a period of five (5) days
following written notice thereof from Landlord; provided, however,
in the event that Tenant fails to make any such payment when due on
more than three (3) occasions during any 12-month period during
this Lease, including any renewal period, no further notice shall
be required, and any subsequent failure by Tenant to make any such
payment within five (5) days after the day when due shall
constitute a material default under this Lease;
(b) Tenant shall fail to perform or observe any other term,
covenant, condition, provision or agreement of this Lease, where
such failure shall continue for a period of fifteen (15) days after
written notice thereof from Landlord to Tenant; provided, however,
that if the nature of Tenant's noncompliance is such that more than
fifteen (15) days are reasonably required for its cure, then Tenant
shall not be deemed to be in default if Tenant commences such cure
within said fifteen (15)-day period and thereafter diligently
prosecutes such cure to completion;
(c) Any execution or attachment shall be issued against Tenant
or a substantial portion of Tenant's property located on the
Demised Premises;
(d) The Demised Premises shall be taken or occupied or by
someone other than Tenant without compliance with the provisions of
Article 6 above;
(e) Tenant assigns or otherwise transfers substantially all of
the assets
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used in connection with the business conducted in the Demised
Premises without compliance with the provisions of Article 6 above
(for purposes of this subparagraph (e), any pledge of Tenant's
assets to secure financing shall not constitute an assignment or
transfer);
(f) Tenant or any agent or employee of Tenant makes any
statement or omits to make any statement so as to materially
mislead Landlord with regard to Tenant's financial condition or
ability to perform its covenants and obligations under this Lease;
or
(g) Tenant shall cease to exist as a corporation, limited
liability company or partnership or shall be otherwise dissolved or
liquidated or shall make a transfer in fraud of creditors.
ARTICLE 20
(REMEDIES)
20.1 Landlord's Remedies. If any Event of Default set forth in Article
19 occurs, then Landlord shall have the right, at its election:
(a) To give Tenant written notice of Landlord's intent to
terminate this Lease on the earliest date permitted by law or on
any later date specified in such notice, in which case Tenant's
right to possession of the Demised Premises will cease and this
Lease will be terminated, except as to Tenant's liability, as if
the expiration of the term fixed in such notice were the end of
the term;
(b) Without further demand or notice, to reenter and take
possession of the Demised Premises or any part of the Demised
Premises, repossess the same, expel Tenant and those claiming
through or under Tenant, and remove the effects of both or either,
using such force for such purposes as may be necessary, without
being liable for prosecution, without being deemed guilty of any
manner of trespass, and without prejudice to any remedies for
arrears of rent or other amounts payable under this Lease or as a
result of any preceding breach of covenants or conditions; or
(c) Without further demand or notice, to cure any Event of
Default and to charge Tenant for the cost of effecting such cure,
including, without limitation, reasonable attorneys' fees and
interest on the amount so advanced at the rate set forth in Section
3.4, provided that Landlord will have no obligation to cure any
such Even of Default of Tenant.
Should Landlord elect to reenter as provided in subsection (b), or
should Landlord take possession pursuant to legal proceedings or pursuant to
any notice provided by law,
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Landlord may, from time to time, without terminating this Lease, relet the
Premises or any part of the Demised Premises in Landlord's or Tenant's name,
but for the account of Tenant, for such term or terms (which may be greater or
less than the period which would otherwise have constituted the balance of the
term) and on such conditions and upon such other terms (which may include
concessions of free rent and alteration and repair of the Demised Premises) as
Landlord, in its reasonable discretion, may determine, and Landlord may collect
and receive the rent. Landlord will in no way be responsible or liable for any
failure to relet the Demised Premises, or any part of the Demised Premises, or
for any failure to collect any rent due upon such reletting, except to the
extent Tenant proves that Landlord's actions in connection therewith are
commercially unreasonable. Neither reentry and taking possession of the
Demised Premises by Landlord, nor the change of any locks or security devices
in the Demised Premises, nor appointment of a receiver upon initiative of
Landlord to protect Landlord's interest under this Lease, shall constitute an
election on Landlord's part to terminate this Lease unless a written notice of
such intention is given to Tenant. No written notice from Landlord under this
section or under a forcible or unlawful entry and detainer statute or similar
law will constitute an election by Landlord to terminate this Lease unless such
notice specifically so states. Landlord reserves the right following any such
reentry or reletting to exercise its right to terminate this Lease by giving
Tenant such written notice, in which event this Lease will terminate as
specified in such notice. As used in this Lease, the terms "reenter,"
"reentry," "take possession," "repossess" and "repossession" are not restricted
to their technical legal meanings.
20.2 Certain Damages. In the event that Landlord does not elect to
terminate this Lease as permitted in Section 20.1(a), but on the contrary
elects to take possession as provided in Section 20.1, Tenant shall pay to
Landlord Minimum Rent, Additional Rent and other sums as provided in this Lease
that would be payable under this Lease if such repossession had not occurred,
less the net proceeds, if any, of any reletting of the Demised Premises after
deducting all of Landlord's expenses in connection with such reletting,
including, without limitation, all repossession costs, brokerage commissions,
attorneys' fees, expenses of employees, alteration and repair costs, and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Demised
Premises covered by such new lease include other premises not part of the
Demised Premises, a fair apportionment of the rent received from such reletting
and the expenses incurred in connection with such reletting as provided in this
section will be made in determining the net proceeds from such reletting, and
any rent concessions will be equally apportioned over the term of the new
lease. Tenant will pay such rent and other sums to Landlord monthly on the day
on which the Minimum Rent and Additional Rent would have been payable under the
Lease if possession had not been retaken, and Landlord will be entitled to
receive such rent and other sums from Tenant on each such day.
20.3 Continuing Liability After Termination. If this Lease is terminated
on account of the occurrence of an Event of Default, Tenant shall remain liable
to Landlord for damages in an amount equal to Minimum Rent, Additional Rent and
other amounts that would have been owing by Tenant for the balance of the term,
had this Lease not been terminated, less
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the net proceeds, if any, of any reletting of the Premises by Landlord
subsequent to such termination, after deducting all of Landlord's expenses in
connection with such reletting, including, without limitation, the expenses
enumerated in Section 20.2. Landlord shall be entitled to collect such damages
from Tenant monthly on the day on which Minimum Rent and other amounts would
have been payable under this Lease if this Lease had not been terminated, and
Landlord shall be entitled to receive such Minimum Rent, Additional Rent and
other amounts from Tenant on each such day. Alternatively, at the option of
Landlord, in the event this Lease is so terminated, Landlord will be entitled
to recover against Tenant as damages for loss of the bargain and not as a
penalty:
(a) The worth at the time of award of the unpaid Minimum Rent,
Additional Rent, late charges and other sums due hereunder that had been
earned at the time of termination;
(b) The worth at the time of award of the amount by which the unpaid
Minimum Rent, Additional Rent, late charges and other sums that would have
been earned after termination until the time of award exceeds the amount of
such rental loss that Tenant proves could have been reasonably avoided;
(c) The worth at the time of award of the amount by which the unpaid
Minimum Rent, Additional Rent, late charges and other sums which would have
been owing for the balance of the term of this Lease (had the same not been so
terminated by Landlord) after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided;
(d) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.
The "worth at the time of award" of the amounts referred to in
clauses (a) and (b) above is computed by adding interest at the per annum rate
described in Section 3.4 in effect on the date on which this Lease is
terminated from the date of termination until the time of the award. The
"worth at the time of award" of the amount referred to in clause (c) above is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of Topeka, Kansas at the time of award plus one percent (1%).
20.4 Cumulative Remedies. Any suit or suits for the recovery of the
amounts and damages set forth in Sections 20.2 and 20.3 may be brought by
Landlord, from time to time, at Landlord's election, and nothing in this Lease
will be deemed to require Landlord to await the date upon which this Lease or
the term would have expired had there occurred no Event of Default. Each right
and remedy provided for in this Lease is cumulative and is in addition to every
other right or remedy provided for in this Lease or now or after the
Commencement Date existing at law or in equity or by statute or otherwise, and
the exercise or beginning of the exercise by Landlord of any one or more of the
rights or remedies provided for in this Lease or
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now or after the Commencement Date existing at law or in equity or by statute
or otherwise will not preclude the simultaneous or later exercise by Landlord
of any and all other rights or remedies. All costs and expenses incurred by
Landlord in collecting any amounts and damages owing by Tenant pursuant to the
provisions of this Lease, or in connection with the appointment of a receiver
for the Demised Premises, or to enforce any provision of this Lease, including
reasonable attorneys' fees from the date any such matter is turned over to an
attorney, whether or not one or more actions are commenced by Landlord, also
will be recoverable by Landlord from Tenant.
20.5 Redemption. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future law in the event of
Tenant's being evicted or dispossessed for any cause, or in the event of
Landlord's obtaining possession of the Demised Premises, by reason of the
violation by Tenant of any of the terms, covenants, conditions, provisions or
agreements of this Lease, or otherwise.
20.6 Fees and Expenses. If Tenant shall default in the performance of
any obligation on Tenant's part to be performed under this Lease, Landlord may
immediately, or at any time thereafter, without notice, perform the same for
the account of Tenant. If Landlord at any time is compelled to pay or elects
to pay any sum of money or do any act which will require the payment of any sum
of money (including, but not limited to, employment of attorneys or incurring
of costs), by reason of the failure of Tenant to comply with any term,
covenant, condition, provision or agreement hereof, or, if Landlord is
compelled to incur or elects to incur any expense (including but not limited to
reasonable attorneys' fees in instituting prosecuting or defending any action
or proceeding, regardless of whether such action or proceeding proceeds to
judgment) by reason of any default of Tenant hereunder, the sum or sums so paid
by Landlord with interest at the rate set forth in Section 3.4 and costs and
damages shall be due from Tenant to Landlord promptly upon demand by Landlord.
ARTICLE 21
(END OF TERM)
21.1 Condition of Premises. Upon the expiration or other termination of
this Lease, Tenant shall quit and surrender to Landlord the Demised Premises,
broom clean, in as good order, condition and repair as they were in on the
Commencement Date, ordinary wear and tear excepted. Subject to Landlord's
rights under Section 7.3 above, Tenant shall remove all property of Tenant, as
directed by Landlord. Any property left on the Demised Premises at the
expiration or other termination of this Lease, or after Landlord commences the
exercise of any of its remedies provided in Article 20 above following
occurrence of any of the Events of Default set forth in Article 19 above, may,
at the option of Landlord following ten days' written notice to Tenant given in
the manner provided in Section 25.1, either be deemed abandoned or be placed in
storage at a public warehouse in the name of and for the account of and at the
expense and risk of Tenant. If such property is not claimed by Tenant within
ten days after such expiration, termination, or exercise of any remedy by
Landlord following the occurrence of an Event of
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Default, it may be sold or otherwise disposed of by Landlord and any costs
incurred by Landlord in connection with such sale or disposition shall be paid
by Tenant immediately upon demand therefor by Landlord. Tenant expressly
releases Landlord of and from any and all claims and liability for damage to or
loss of property left by Tenant upon the Demised Premises at the expiration or
other termination of this Lease, and Tenant hereby indemnifies Landlord against
any and all claims and liabilities with respect thereto.
21.2 Holding Over. Should Tenant hold over after the termination of this
Lease, whether such termination occurs by lapse of time or otherwise, such
tenancy shall not constitute a renewal hereof but shall be from month to month
only, subject to all terms provided herein as may be applicable; provided,
however, during any such holdover period, Tenant shall pay Minimum Rent at one
hundred fifty percent (150%) of the rate payable for the month immediately
preceding termination of this Lease, in addition to Additional Rent and all
other sums due and payable under this Lease. This Section 21.2 shall not limit
or waive Landlord's right of reentry or any other right hereunder.
21.3 Holdover Without Consent. In the event Tenant holds over without
Landlord's consent, Tenant shall be responsible to Landlord for all damage
(including, but not limited to, the loss of rent) which Landlord shall suffer
by reason thereof, and Tenant hereby indemnifies Landlord against any and all
claims made by any succeeding tenant against Landlord, resulting from delay by
Landlord in delivering possession of the Demised Premises to such succeeding
tenant due to Tenant's unauthorized holdover. Tenant's obligation to observe
or perform all of the terms, covenants, conditions, provisions and agreements
of this Article shall survive the expiration or other termination of this
Lease.
21.4 Termination. In the event that this Lease terminates for any reason
(including but not limited to termination by Landlord) prior to its natural
expiration date, such termination will effect the termination of any and all
agreements for the extension of this Lease (whether expressed in an option,
exercised or not, or collateral document or otherwise). Any right herein
contained on the part of Landlord to terminate this Lease shall continue during
any extension hereof.
ARTICLE 22
(SURRENDER, WAIVER AND INTEGRATION)
22.1 Surrender. No act or thing done by Landlord or Landlord's agents
during the term hereby demised shall be deemed an acceptance of a surrender of
the Demised Premises, and no agreement to accept such surrender shall be valid
unless it is set forth in a writing signed by Landlord. No employee of
Landlord or Landlord's agents shall have any power to accept the keys of the
Demised Premises prior to the termination of this Lease. The delivery of keys
to any employee of Landlord or Landlord's agents shall not operate as a
termination of this Lease or as a surrender of the Demised Premises.
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22.2 No Waiver. The failure of Landlord to seek redress for violation of,
or to insist upon the strict performance of, any term, covenant, condition,
provision or agreement of this Lease or any of the Rules and Regulations
attached to this Lease or hereafter adopted by Landlord, shall not prevent a
subsequent act, which would have originally constituted a violation, from
having all the force and effect of an original violation. The receipt by
Landlord of rent or other sums with knowledge of the breach of any term,
covenant, condition, provision or agreement of this Lease shall not be deemed a
waiver of such breach. The failure of Landlord to enforce any of the Rules and
Regulations attached to this Lease, or hereafter adopted, against Tenant or any
other tenant in the Building shall not be deemed a waiver of any such Rule and
Regulation. No provision of this Lease shall be deemed to have been waived by
Landlord or Tenant, unless such waiver is contained in a writing signed by the
party making the waiver. No payment by Tenant or receipt by Landlord of a
lesser amount than the rent herein stipulated shall be deemed to be other than
on account of the earliest stipulated rent, nor shall any endorsement, legend
or statement on any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy in this Lease provided.
22.3 Integration. This Lease contains the entire agreement between the
parties, and recites the entire consideration given and accepted by the
parties. Any agreement hereafter made shall be ineffective to change, modify,
waive or discharge it in whole or in part unless such agreement is in writing
and signed by the party against whom enforcement of the change, modification,
waiver or discharge is sought.
ARTICLE 23
(JURY TRIAL)
23.1 Waiver of Jury Trial. The respective parties hereto hereby waive
trial by jury in any action, proceeding or counterclaim brought by either of
the parties against the other on any matter whatsoever arising out of, or in
any way connected with, this Lease, the relationship of Landlord and Tenant,
Tenant's use or occupancy of the Demised Premises, any claim of injury or
damage to property or person, or the enforcement of any remedy under any
statute, emergency or otherwise.
ARTICLE 24
(LANDLORD'S DEFAULT)
24.1 Landlord. Landlord shall not be deemed to have defaulted under or
breached any term, covenant, condition, provision, or agreement of this Lease
unless Tenant shall have given Landlord a written notice describing the alleged
default or breach with particularity and Landlord thereafter shall have failed
to cure the default within 30 days following its receipt of the notice;
provided, that if the default is of a nature which cannot reasonably be cured
within such period, Landlord shall not be in default if it commences to cure
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the default or breach within the 30-day period and diligently pursues
completion of same. In the event of any default or breach by Landlord
hereunder and expiration of the cure period without cure of such default or
breach, Tenant agrees that its exclusive remedy shall be an action for damages,
and Tenant shall have no right to terminate the Lease.
24.2 Force Majeure. Notwithstanding the above Section 24.1, in the event
either Landlord or Tenant is unable to perform any of its duties or fulfill any
of its covenants or obligations under this Lease (except, in Tenant's case,
obligation to pay rent and other charges as and when they become due Landlord)
as a result of causes beyond the control and without the fault or negligence of
the party failing to perform, such as for, but not limited to, acts of God,
fire, flood, war, governmental controls, material shortages, and labor strikes,
fuel or energy shortages, government preemptions or curtailment, riots and
civil disturbances, then, the nonperforming party shall not be deemed to be in
default under the terms of this Lease during the continuance of such events
which rendered it unable to perform and such additional time thereafter as is
reasonably necessary to enable the nonperforming party to resume performance of
its duties and obligations under this Lease. During such time, Tenant shall be
entitled to no offset or abatement (except for such abatement as and when
specifically provided in this Lease) of rents or other charges due under this
Lease.
ARTICLE 25
(NOTICE)
25.1 Notice. Any notice, demand or other communication required or
permitted to be given to Landlord hereunder shall be in writing and shall be
deemed given and received immediately when hand-delivered, or three days after
it is deposited in the U.S. Mail, postage prepaid, marked certified or
registered mail, addressed to Landlord at the address provided in Section 1.14
above. Any notice, demand or other communication required or permitted to be
given to Tenant hereunder shall be in writing and shall be deemed given and
received immediately, if left at the Demised Premises addressed to Tenant at
any time prior to Landlord's receipt of a written notice from Tenant indicating
Tenant has vacated the Demised Premises and providing Landlord with a new
address for Tenant, or three days following its deposit into the U.S. Mail,
postage prepaid, marked certified or registered mail, addressed to Tenant at
the address provided in Section 1.14 above or, after Tenant has notified
Landlord it has vacated the Demised Premises, at the address set forth in the
written notice indicating the Demised Premises have been vacated. Nothing
contained in this Section 25 shall alter or impair Landlord's right to post the
Demised Premises in order to give a three-day notice to quit under the Colorado
Revised Statutes.
ARTICLE 26
(SECURITY)
26.1 Security Deposit. Tenant has deposited with Landlord the sum
specified in Section 1.15 as security for the faithful performance and
observance by Tenant of all of the
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terms, covenants, conditions, provisions and agreements of this Lease. Tenant
shall not be entitled to interest on such security deposit, and Landlord shall
not be obligated to hold such deposit as a separate fund, but may commingle it
with other funds. In the event Tenant defaults in respect of any of the terms,
covenants, conditions, provisions or agreements of this Lease, including, but
not limited to, the payment of rent or other sums due hereunder, Landlord may
use, apply or retain the whole or any part of the security so deposited to the
extent required for the payment of any rent or any other sums as to which
Tenant is in default, or for any sum which Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the
terms, covenants, conditions, provisions or agreements of this Lease. Tenant,
upon demand by Landlord, will forthwith replenish the security deposit or any
portion thereof so used or applied by Landlord.
26.2 Return of Deposit. In the event that Tenant shall fully and
faithfully comply with all of the terms, covenants, conditions, provisions and
agreements of this Lease, including, without limitation, Tenant delivers entire
possession of the Demised Premises to Landlord and pays Minimum Rent,
Additional Rent and all other sums due under this Lease, the security deposit,
without interest, shall be returned to Tenant within 60 days after the date the
Lease terminated.
26.3 Transfer of Project. In the event of a sale of the Project and/or
Building or leasing of the Project and/or the entire Building, or the sale of
such leasehold, Landlord shall have the right to transfer the security deposit
to the transferee or lessee, and, upon assumption of this Lease and
acknowledgment of receipt of such security deposit by such transferee or
lessee, Landlord shall thereupon be released by Tenant from all liability for
the return of such security deposit; and the provisions hereof shall apply to
every transfer or assignment made of the security deposit to a new landlord.
Tenant shall not assign or encumber or attempt to assign or encumber the
security deposit, and neither Landlord nor its successors or assigns shall be
bound by any such assignment, encumbrance, attempted assignment or attempted
encumbrance. In the event of the termination of any ground lease or
foreclosure of any fee or leasehold mortgage or deed of trust (or conveyance in
lieu thereof) now or hereafter affecting the real property of which the Demised
Premises form a part, Tenant shall look to the new landlord for the return of
said security deposit if said security deposit is transferred to the new
landlord.
ARTICLE 27
(TRANSFER BY LANDLORD AND LANDLORD'S LIABILITY)
27.1 Transfer of Landlord's Interest. In the event of a transfer sale,
conveyance, or assignment by Landlord of Landlord's interest in the Project
(other than a transfer for security purposes only), and assumption by the
assignee or transferee of Landlord's obligations under this Lease, Landlord
shall be relieved from and after the date specified in any notice to Tenant of
such transfer or assignment of all of Landlord's obligations and liabilities
accruing under this Lease thereafter and Tenant agrees to took only to such
assignee or transferee of Landlord's interest for performance of Landlord's
obligations under this Lease.
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27.2 Limited Liability of Landlord. Landlord (and in case Landlord shall
be a joint venture, partnership, limited liability company, tenancy in common,
association, or other form of joint ownership, the partners, members or
cotenants of any such form of joint ownership) shall have absolutely no
personal liability arising from or in connection with this Lease in the event
of a breach or default by Landlord of any of its obligations. Tenant shall
look solely to the equity of the Landlord in the Project at the time of the
breach or default (or if the interest of Landlord is a leasehold interest at
that time, Tenant shall look solely to such leasehold interest) for
satisfaction of any remedies of Tenant. Such exculpation of liability shall be
absolute and without exception.
ARTICLE 28
(ENVIRONMENTAL COVENANTS)
28.1 Definition of Hazardous Materials. For purposes of this Lease,
"Hazardous Materials" means any explosives, radioactive materials, hazardous
wastes, or hazardous substances, including, without limitation, substances
defined as "hazardous substances" or "hazardous wastes" or "solid wastes" in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended 42 U.S.C. Section Section 9601-9657; the Hazardous Materials
Transportation Act of 1975, 49 U.S.C. Section Section 1801-1812; the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section Section 6901-6987; or
any other federal, state, or local statue, law, ordinance, code, rule,
regulation, order, or decree regulating, relating to, or imposing liability or
standards of conduct concerning hazardous materials, wastes, or substances now
or at any time hereafter in effect (collectively, "Hazardous Materials Laws").
28.2 Hazardous Materials Covenant. Tenant will not cause or permit the
storage, use, generation, or disposition of any Hazardous Materials in, on, or
about the Demised Premises or the Project by Tenant, its agents, employees, or
contractors other than in compliance with all Hazardous Materials Laws. Tenant
will not permit the Demised Premises to be used or operated in a manner that
may cause the Demised Premises or the Project to be contaminated by any
Hazardous Materials in violation of any Hazardous Materials Laws. Tenant will
advise Landlord in writing within 24 hours of when Tenant becomes aware of (i)
any and all enforcement, cleanup, remedial, removal, or other governmental or
regulatory actions instituted, completed, or threatened pursuant to any
Hazardous Materials Laws relating to any Hazardous Materials affecting the
Demised Premises of which Tenant becomes aware, and (ii) all claims made or
threatened by any third party against Tenant, Landlord, or the Demised Premises
relating to damage, contribution, cost recovery, compensation, loss, or injury
resulting from any Hazardous Materials on or about the Demised Premises of
which Tenant becomes aware. Without Landlord's prior written consent, Tenant
will not take any response action or enter into any agreements, or settlements
in response to the presence of any Hazardous Materials in, on, or about the
Demised Premises.
28.3 Tenant's Indemnity. Tenant will be solely responsible for and will
defend,
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indemnify and hold Landlord, its agents, and employees harmless from and
against all claims, costs, and liabilities, including attorneys' fees and
costs, arising out of or in connection with Tenant's breach of its obligations
in this Article 28. Tenant will be solely responsible for and will defend,
indemnify, and hold Landlord, its agents, and employees harmless from and
against any and all claims, costs, and liabilities, including attorneys' fees
and costs, arising out of or in connection with the removal, remediation, and
restoration work and materials necessary to return the Demised Premises and any
other property of whatever nature located on the Project to the condition they
would have been in the absence of Tenant's Hazardous Materials on the Demised
Premises. Tenant's obligations under this Article 28 will survive the
expiration or other termination of this Lease.
28.4 Landlord's Indemnity. Landlord represents and warrants to Tenant, to
the extent of Landlord's actual knowledge, that as of the date of this Lease:
(a) No Hazardous Materials are being generated, used, treated,
stored or disposed of on, in or under the Demised Premises;
(b) Landlord has received no notice of, and is not aware of,
any actual violation of any Hazardous Materials Laws affecting the
Demised Premises or the Project, or any activity conducted on the
Demised Premises or the Project, other than any violations which
may arise from the activities of Syntex Chemicals, Inc., or
affiliates of Syntex Chemicals; and
(c) No action or proceeding is pending before or appealable
from any court, quasi-judicial body or administrative agency
relating to the enforcement of any Hazardous Materials Laws
affecting the Demised Premises or the Project, or any activity
conducted on the Demised Premises or the Project, other than
actions and proceedings involving Syntex Chemicals, Inc., or
affiliates of Syntex Chemicals.
Landlord will be solely responsible for and will defend, indemnify and hold
Tenant, its agents and employees harmless from and against all claims, costs,
and liabilities, including attorneys' fees and costs, arising out of or in
connection with any claim that any of the matters represented and warranted by
Landlord in this Section 28.4 are inaccurate or untrue. Landlord's obligations
under this Section 28.4 will survive the expiration or other termination of
this Lease.
ARTICLE 29
(TENANT'S TAXES)
29.1 Personal Property Taxes. Tenant shall pay prior to delinquency all
taxes assessed against and levied upon the trade fixtures, furnishings,
equipment and all other personal property of Tenant contained in the Demised
Premises. If any of Tenant's personal property is assessed with Landlord's
real property, Tenant shall pay to Landlord the taxes attributable to
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Tenant's property within ten days following Tenant's receipt of a written
demand therefor from Landlord. Tenant will use reasonable commercial efforts
to have any of Tenant's Equipment upon which a building permit fee is assessed,
either in connection with the Tenant's Work described in the Addendum to this
Lease or any subsequent alterations to the Demised Premises, identified on
Tenant's personal property tax return.
29.2 Sales and Withholding Tax Reporting. Tenant shall timely pay all
federal, state and local taxes applicable to Tenant and Tenant's business
before the same are delinquent, including, without limitation, all income
taxes, withholding taxes for employees, and state and local sales and use
taxes, to the extent the foregoing may result in a lien against the Demised
Premises or any property of Landlord.
29.3 Exemption of Premises from Tax Lien. Pursuant to and for purposes
of Colo. Rev. Stat. Section 39-26-117(1)(b) and Section 39-26-205(3), as
amended from time to time, the Demised Premises, any other part of the Project
used by Tenant, and all of the business fixtures, alterations, installations,
additions and improvements made to or installed in the Demised Premises
(whether constructed by, for or at the expense of Landlord or Tenant) other
than Tenant's Equipment, and any equipment owned by Landlord and used by
Tenant, all of which are, and shall be deemed to be, property owned by Landlord
and all of which Landlord hereby leases to Tenant, shall be exempt from any
lien for sales and use taxes otherwise imposed by the taxing authorities of the
State of Colorado. Pursuant to Colo. Rev. Stat. Section 39-22-604(7)(c), as
amended from time to time, the Demised Premises and any other part of the
Project used by Tenant and all of the business fixtures, alterations,
installations, additions and improvements made to or installed in the Demised
Premises (whether constructed by, for or at the expense of Landlord or Tenant)
other than Tenant's Equipment, and any equipment owned by Landlord and used by
Tenant, all of which are, and shall be deemed to be, property owned by Landlord
and all of which Landlord hereby leases to Tenant, shall be exempt from any
lien for withholding taxes otherwise imposed by the taxing authorities of the
State of Colorado. In furtherance of obtaining such exemptions from the date
of execution of this Lease, upon the request of Landlord, Tenant shall execute
a memorandum of this Lease for filing with the Colorado Department of Revenue,
such memorandum to be in the form as may be prescribed by the Department of
Revenue.
ARTICLE 30
(MISCELLANEOUS)
30.1 Plans. Any plan attached to and made part of this Lease, except as
otherwise specifically provided, is used solely for the purpose of identifying
or designating the Demised Premises, and to the extent any markings,
measurements, dimensions or notes of any kind contained thereon conflict with
any of the terms, covenants, conditions, provisions or agreements of this
Lease, such other terms, covenants, provisions or agreements shall govern.
30.2 Broker. Tenant represents that Tenant has dealt directly with (and
only with) any broker listed in Section 1.18 as broker in connection with this
Lease and that, insofar
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as Tenant is aware, no other broker negotiated this Lease or is entitled to
any commission in connection with it. Tenant hereby indemnifies and holds
harmless Landlord from and against any liability loss or damage (including
attorneys' fees) arising of any misrepresentation by Tenant contained in this
Section 30.3. Landlord will pay all commissions and other amounts owing to the
brokers listed in Section 1.18 in connection with this Lease. Landlord shall
indemnify and hold Tenant harmless from and against any claims, liabilities,
damages and costs arising out of any claims made by such brokers or by any
other broker with which Landlord has dealt in connection with this Lease.
30.3 Binding Effect. All of the terms, conditions, provisions and
agreements of this Lease shall be deemed to be covenants. The covenants
contained in this Lease shall bind and inure to the benefit of Landlord and
Tenant and their respective legal representatives and successors, and, except
as otherwise provided in this Lease, their assigns. This Lease is offered to
Tenant for signature by Tenant, and this Lease shall not be binding upon
Landlord unless and until such time as Landlord shall have executed and
delivered the same to Tenant.
30.4 Act of Tenant. If a partnership or more than one legal person is at
any time Tenant, (i) each partner and each legal person is jointly and
severally liable for the keeping, observing and performing of all of the terms,
covenants, conditions, provisions and agreements of this Lease to be kept,
observed or performed by Tenant, and (ii) the term "Tenant" as used in this
Lease shall mean and include each of them jointly and severally, and the act of
or notice from, or notice or refund to, or the signature of, any one or more of
them, with respect to the tenancy or this Lease, including but not limited to,
any renewal, extension, expiration, termination or modification of this Lease,
shall be binding upon each and all of the persons executing this Lease as
Tenant with the same force and effect as if each and all of them had so acted
or so given or received such notice or refund or so signed. Termination of a
Tenant which is a partnership shall be deemed to be an assignment jointly to
all of the partners, who shall thereafter be governed by the next preceding
clauses (i) and (ii) hereof just as if each and all such former partners
initially had signed this Lease as individuals.
30.5 Headings. Article and Section headings are used herein for
convenience of reference only. Such headings do not constitute part of this
Lease and may not be used to define or limit the scope or intent of this Lease
or any of its provisions.
30.6 Construction. The language in all parts of this Lease shall be
construed according to its normal and usual meaning and not strictly for or
against either Landlord or Tenant, regardless of whether Landlord or Tenant, or
Landlord's or Tenant's legal representative, drafted this Lease or any
provision hereof.
30.7 Severability. In the event any term, covenant, condition, provision
or agreement herein contained is held to be invalid or unenforceable by any
court of competent jurisdiction, the invalidity of any such term, covenant,
condition, provision or agreement shall in no way affect the validity or
enforceability any other term, covenant, condition, provision or agreement
herein contained.
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30.8 Security. Landlord shall not be obligated to provide or maintain
any security patrol or security system. However, if Landlord decides to
provide such patrol or system, the cost thereof shall be included in Operating
Costs as defined in Article 4 above. Landlord shall not be responsible for the
quality of any such patrol or system which may be provided hereunder or for any
damage or injury to Tenant, its employees, invitees or others due to the
defect, failure, action or inaction of such patrol or system.
30.9 Parking. Intentionally deleted.
30.10 Storage. Any basement storage space or other storage space at any
time demised to Tenant hereunder shall be used exclusively for storage.
Notwithstanding any other provision of this Lease to the contrary, (i) only
such ventilation and heating will be furnished by Landlord as will, in
Landlord's judgment, be adequate for use of said space for storage, (ii) no
cleaning, water or air conditioning will be furnished therefor, and (iii) only
such electricity will be furnished thereto as will, in Landlord's judgment, be
adequate to light said space as storage space.
30.11 Time. Time is of the essence with respect to the performance of
each and every provision of this Lease. In the event the last day for
performance of any act required or permitted under this Lease falls on a
Saturday, Sunday, or holiday, the time for such performance will be extended to
the next succeeding business day. Each time period under this Lease will
exclude the first day and include the last day of such period.
30.12 No Recording. Neither this Lease, nor any notice or memorandum
regarding the terms hereof shall be recorded by Tenant. Any such unauthorized
recording shall give Landlord the right to declare a breach of this Lease and
pursue the remedies provided herein.
30.13 Name Change. If the name of Tenant or any successor or assign
shall be changed during the term of this Lease, such party shall promptly
notify Landlord thereof, which notice shall be accompanied by a certified copy
of the document effectuating such change of name.
30.14 Estoppel. Tenant shall at any time and from time to time upon not
less than ten days' prior notice from Landlord, execute, acknowledge and
deliver to Landlord a statement in writing certifying to those facts related to
this Lease for which certification reasonably has been requested by Landlord or
by any current or prospective purchaser, mortgagee or beneficiary under a deed
of trust, including, without limitation, (i) that this Lease is unmodified and
in full force and effect (or, if modified, adequately identifying such
modification and certifying that this Lease, as so modified, is in full force
and effect), (ii) the dates to which the Minimum Rent, Additional Rent and
other charges have been paid, (iii) whether there is any
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default by Tenant or, to the knowledge of Tenant, by Landlord, in the
performance of any term, covenant, condition, provision or agreement contained
in this Lease, and (iv) whether there are any setoffs, defenses or
counterclaims against enforcement of the obligations to be performed under this
Lease and, if there are, specifying each such default, setoff, defense or
counterclaim. Any such statement may be relied upon conclusively by any
prospective purchaser or lessee or encumbrancer of the Demised Premises or of
all or any portion of the Building or the Project. Tenant's failure to certify
such statement within such ten-day period shall be conclusive upon Tenant that
this Lease is in full force and effect, without modification except as may be
represented by Landlord, that there are no uncured defaults in Landlord's
performance, and that not more than one month's Minimum and Additional Rent has
been paid in advance.
30.15 Publicity and Advertisement. Landlord and Tenant agree that neither
party or their agents, employees, or brokers, will issue or authorize the
issuance of any press release, publicity, or information concerning the details
of this Lease, without the prior written consent of the other party.
Notwithstanding the foregoing, either party shall have the right to disclose
information regarding this Lease and the identity of parties hereto without the
consent of the other party (a) in any circumstance where such disclosure is
required by law, including, without limitation, securities laws to which the
disclosing party is subject, (b) pursuant to a subpoena issued by any
government organization or agency or an order entered by a court having
competent jurisdiction, and (c) to actual or potential lenders or investors to
whom such disclosure would be appropriate, but only if prior to such
disclosure, the disclosing party first obtains a written agreement from such
lender or investor to keep such information confidential.
30.16 Choice of Law. This Lease shall be governed by, and interpreted in
accordance with, the laws of the State of Colorado, without giving effect to
conflicts of law principles.
30.17 Days. References herein to "days" shall be deemed to refer to
calendar and not business days, unless the context clearly indicates otherwise.
30.18 Incorporation of Exhibits. Any addendum, rider or exhibit annexed
hereto is made a part hereof. See attached Addendum for additional provisions.
See attached Addendum for additional provisions.
LANDLORD:
FLATIRONS COTTONWOOD, INC.,
a Delaware corporation
By: LaSalle
Advisors Limited, a Delaware limited
partnership, as Advisor to Public Employees'
Retirement Association of Colorado, the sole
shareholder of Flatirons Cottonwood, Inc.
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By: /s/ James P. Creighton
------------------------
Name: James P. Creighton
Its: Principal
TENANT:
XENOMETRIX, INC., a Delaware corporation
By: /s/ Ronald L. Hendrick
-----------------------
Name: Ronald L. Hendrick
Its: V.P. and C.F.O.
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EXHIBIT A
(DEPICTION OF DEMISED PREMISES)
<PAGE> 45
EXHIBIT B
SIGNAGE
[GRAPHIC DEPICTING XENOMETRIX SIGN]
<PAGE> 46
EXHIBIT C
TENANT'S EQUIPMENT
DESCRIPTION
Autoclaves
Walk-in cold rooms
Glassware dryers
Glassware washers
Biological Safety Cabinets
Ice makers
Chemical fume hoods
Self-contained mobile warm rooms
Case-work cabinet modules
Chem Surf counter tops
All gas, vacuum, electrical and plumbing fixtures in casework
Descriptions subject to change upon mutual agreement of Landlord and Tenant as
plans are finalized and additional equipment is obtained.
<PAGE> 47
EXHIBIT D
RULES AND REGULATIONS
The rules and regulations set forth in this Exhibit D shall be and hereby
are made a part of the lease to which they are attached. Whenever the term
"Tenant" is used in these rules and regulations, it shall be deemed to include
Tenant, its employees or agents and any other persons permitted by Tenant to
occupy or enter the Demised Premises. The following rules and regulations may
from time to time be modified by Landlord in Landlord's sole discretion.
1. OBSTRUCTION. The sidewalks, entries passages, stairways, and other
parts of the Building available for use by Tenant in common with others shall
be controlled by Landlord and shall not be obstructed by Tenant or used for any
purpose other than ingress or egress to and from the Demised Premises. Tenant
shall not place any item in any of such locations, whether or not any such item
constitutes an obstruction, without the prior written consent of Landlord.
Landlord shall have the right to remove any obstruction or any such item
without notice to Tenant and at the expense of Tenant.
2. DELIVERIES. Tenant shall insure that all deliveries of supplies to
the Demised Premises shall be made only at the delivery area designated by
Landlord, if any, and only during the ordinary business hours. Tenant shall
insure that the streets, roads and parking areas in the general vicinity of the
Building are not used for deliveries to the Demised Premises if not designated
as "Loading Zones." If any person delivering supplies to Tenant damages any
part of the Building, Tenant shall pay to Landlord upon demand the amount
required to repair such damage.
3. MOVING. Furniture, trade fixtures and equipment shall be moved in or
out of the Building only during such hours and in such manner as may be
prescribed by Landlord. Landlord shall have the right to approve or
disapprove, in its reasonable discretion, the movers or moving company employed
by Tenant. If Tenant s movers damage any part of the Building, Tenant shall
pay to Land lord upon demand the amount required to repair such damage.
4. RESERVED AREAS. Tenant shall not use any utility area, truck loading
area, or other area reserved for special use in conducting business, without
the prior written consent of Landlord. Tenant shall use such areas only for
the specific purposes for which Landlord's consent to use these areas has been
given.
5. HEAVY ARTICLES. Tenant shall not place a load upon any floor of the
Demised Premises exceeding the floor load per square foot area for which such
floor was designed and which is allowed by law or which may, in the reasonable
opinion of Landlord, constitute a hazard to or may damage the Building. Tenant
will pay the fees of the structural engineer of the Building if structural
engineering advice is necessary in planning the positioning
<PAGE> 48
of heavy loads. Business machines and mechanical equipment shall be placed and
maintained by Tenant at Tenant's expense in settings sufficient to absorb and
prevent vibration, noise and annoyance. Safes and other heavy equipment, the
weight of which will not constitute a hazard or damage the Building or its
equipment, shall be moved into, from or about the Building only during such
hours and in such manner as shall be prescribed by Landlord.
6. NUISANCE. Tenant shall not do or permit anything to be done in the
Demised Premises, or bring or keep anything therein which would in any way
constitute a nuisance or waste, or obstruct or interfere with the rights of
other tenants of the Building, or in any way injure or annoy them, or conflict
with the laws relating to fire, or with any regulations of the fire department,
or with any insurance policy upon the Building or any part thereof, or conflict
with any of the rules or ordinances of any government authority having
jurisdiction over the Building. Tenant shall not cause or permit any odors of
cooking or other processes, or any unusual or other objectionable odors, to
emanate from the Demised Premises.
7. LOCKS AND KEYS FOR PREMISES. A reasonable number of keys to the
Demised Premises and to the toilet rooms if locked by Landlord will be
furnished by Landlord, and Tenant shall not have any duplicate key made. No
additional lock or locks shall be placed by Tenant on any door in the building
and no existing lock shall be changed unless written consent of Landlord shall
first have been obtained. At the termination of this tenancy Tenant shall
promptly return to Landlord all keys to the Demised Premises and toilet rooms.
8. USE OF WATER FIXTURES. Water closets and other water fixtures shall
not be used for any purpose other than that for which they are intended, and
any damage resulting to such fixtures from misuse on the part of Tenant shall
be paid for by Tenant. No person shall waste water by tying back or wedging
the faucets or in any other manner.
9. NO ANIMALS: EXCESSIVE NOISE. No animals (except "seeing-eye" dogs
accompanied by their owners) shall be allowed in the Demised Premises except
for laboratory animals which Landlord has agreed in writing may be allowed. No
person shall disturb the occupants of this or adjoining buildings or space by
the use of any radio, loudspeaker or musical instrument or by the making of
loud or improper noises.
10. BICYCLES. Bicycles or other vehicles shall not be permitted anywhere
inside or on the sidewalks outside of the Building, except in those areas
designated by Landlord for bicycle parking, if any.
11. TRASH. All trash, refuse, and waste materials shall be stored by
Tenant in adequate containers and regularly removed from the Demised Premises
at Tenant's expense. These containers shall not be visible to the general
public and shall not constitute a health or fire hazard or nuisance. Landlord
shall, however, provide trash containers and removal services to the Building,
the expense of which shall be paid by Tenant to the extent of its proportionate
share.
<PAGE> 49
12. HAZARDOUS OPERATIONS AND ITEMS. Tenant shall not install or operate
any steam or gas engine or boiler, or carry on any mechanical business in the
Demised Premises without Landlord's prior written consent, which consent may be
withheld in Landlord's absolute discretion. The use of oil, gas or flammable
liquids for heating, lighting or any other purpose is expressly prohibited.
Tenant shall not bring or permit to be brought or kept in or on the Demised
Premises any flammable, combustible or explosive fluid, material, chemical or
substance.
13. HOURS FOR REPAIRS, MAINTENANCE AND ALTERATIONS. Any repairs,
maintenance and alterations required or permitted to be done by Tenant under
the Lease shall be done only during the ordinary business hours.
14. NO DEFACING OF PREMISES. Except as permitted by Landlord, Tenant
shall not mark upon, paint signs upon, cut, drill into, drive nails or screws
into, or in any way deface the walls, ceilings, partitions or floors of the
Demised Premises or of the Building, and any defacement, damage or injury
caused by Tenant shall be paid for by Tenant.
15. NO SOLICITATION, ETC. Tenant shall not engage in or permit any
canvassing, soliciting, peddling, parading, picketing or demonstrating or
distributing of any circular, booklet, handbill, placard, leaflet or other
material in any part of the Building, including, but not limited to, any
sidewalks, corridors, halls and lobbies.
16. CAPTIONS. The captions for each of these rules and regulations is
added as a matter of convenience only and shall be considered of no effect in
the construction of any provision or provisions of these rules and regulations.
<PAGE> 50
TABLE OF CONTENTS
ARTICLE 1 (Fundamental Lease Provisions)....................................1
ARTICLE 2 (Lease of Demised Premises).......................................3
2.1 Lease of Demised Premises....................................3
2.2 Term.........................................................3
2.3 Common Areas.................................................3
2.4 Delay in Commencement........................................4
2.5 Condition of Premises........................................4
2.6 Quiet Enjoyment..............................................4
2.7 Landlord's Representations and Warranties....................4
ARTICLE 3 (Rent)............................................................5
3.1 Rent.........................................................5
3.2 Rent Adjustment..............................................5
3.3 Rent Adjustment Statement....................................6
3.4 Interest on Delinquent Rent..................................6
3.5 Late Charge..................................................6
ARTICLE 4 (Operating Costs).................................................6
4.1 Payment of Costs.............................................6
4.2 Definition...................................................7
4.3 Estimated Payments..........................................10
4.4 Annual Settlement...........................................11
4.5 Final Proration.............................................11
4.6 No Representation...........................................12
4.7 Additional Rent.............................................12
ARTICLE 5 (Occupancy)......................................................12
5.1 Use.........................................................12
5.2 Compliance with Law.........................................12
5.3 Food, Beverages and Odors...................................13
5.4 Waste.......................................................13
5.5 Signs.......................................................13
ARTICLE 6 (Assignment and Subletting)......................................13
6.1 Assignment, Mortgage, Subletting............................13
6.2 Procedure for Assignment....................................14
6.3 No Release of Tenant........................................14
<PAGE> 51
ARTICLE 7 (Alterations)....................................................14
7.1 Alterations.................................................14
7.2 Notice......................................................15
7.3 Title to Improvements.......................................15
ARTICLE 8 (Repairs)........................................................16
8.1 Tenant's Repairs............................................16
8.2 Window and Floor Coverings..................................16
8.3 Landlord's Repairs..........................................16
8.4 No Rent Abatement...........................................17
ARTICLE 9 (Insurance)......................................................17
9.1 Landlord's Insurance Coverage...............................17
9.2 Tenant's Insurance Coverage.................................17
9.3 Form of Policies............................................18
9.4 Waiver of Subrogation.......................................18
9.5 Landlord's Liability........................................19
9.6 Tenant's Indemnification....................................19
ARTICLE 10 (Subordination, Non-Disturbance and Attornment)................19
10.1 Subordination...............................................19
10.2 Attornment..................................................19
10.3 Mortgages...................................................19
10.4 Non-Disturbance.............................................20
ARTICLE 11 (Rules and Regulations).........................................20
11.1 Compliance with Rules.......................................20
ARTICLE 12 (Damage or Destruction).........................................20
12.1 Damage......................................................20
12.2 Right to Terminate Lease....................................21
12.3 Obligations of Tenant.......................................21
12.4 Abatement of Rent...........................................21
ARTICLE 13 (Eminent Domain)................................................22
13.1 Eminent Domain..............................................22
13.2 Damages.....................................................22
13.3 Restoration.................................................22
ARTICLE 14 (Utilities and Services)........................................23
14.1 Installation and Use........................................23
14.2 Use and Payment.............................................23
<PAGE> 52
14.3 Utility Services by Landlord................................23
14.4 Interruption of Service.....................................23
14.5 Excessive Use...............................................24
14.6 Plumbing....................................................24
14.7 Cessation of Services.......................................24
14.8 Supplementary HVAC System...................................24
ARTICLE 15 (Access)........................................................25
15.1 Access for Repairs..........................................25
15.2 Access to Show or Renovate..................................25
15.3 Conditions of Entry.........................................25
15 4 Minimizing Interference.....................................25
ARTICLE 16 (Certificates of Occupancy).....................................26
16.1 Certificates of Occupancy...................................26
ARTICLE 17 (Life Safety Systems)...........................................26
17.1 Life Safety Systems.........................................26
ARTICLE 18 (Bankruptcy)....................................................26
18.1 Bankruptcy Prior to Term....................................27
18.2 Bankruptcy During Term......................................27
18.3 Measure of Damages..........................................27
18.4 Other Remedies..............................................27
ARTICLE 19 (Default).......................................................28
19.1 Events of Default...........................................28
ARTICLE 20 (Remedies)......................................................29
20.1 Landlord's Remedies.........................................29
20.2 Certain Damages.............................................30
20.3 Continuing Liability After Termination......................30
20.4 Cumulative Remedies.........................................31
20.5 Redemption..................................................32
20.6 Fees and Expenses...........................................32
ARTICLE 21 (End of Term)...................................................32
21.1 Condition of Premises.......................................32
21.2 Holding Over................................................33
21.3 Holdover Without Consent....................................33
21.4 Termination.................................................33
ARTICLE 22 (Surrender, Waiver and Integration).............................33
22.1 Surrender...................................................33
<PAGE> 53
22.2 No Waiver...................................................34
22.3 Integration.................................................34
ARTICLE 23 (Jury Trial)....................................................34
23.1 Waiver of Jury Trial........................................34
ARTICLE 24 (Landlord's Default)............................................34
24.1 Landlord....................................................34
24.2 Force Majeure...............................................35
ARTICLE 25 (Notice)........................................................35
25.1 Notice......................................................35
ARTICLE 26 (Security)......................................................35
26.1 Security Deposit............................................35
26.2 Return of Deposit...........................................36
26.3 Transfer of Project.........................................36
ARTICLE 27 (Transfer by Landlord and Landlord's Liability).................36
27.1 Transfer of Landlord's Interest.............................36
27.2 Limited Liability of Landlord...............................37
ARTICLE 28 (Environmental Covenants).......................................37
28.1 Definition of Hazardous Materials...........................37
28.2 Hazardous Materials Covenant................................37
28.3 Tenant's Indemnity..........................................37
28.4 Landlord's Indemnity........................................38
ARTICLE 29 (Tenant's Taxes)................................................38
29.1 Personal Property Taxes.....................................38
29.2 Sales and Withholding Tax Reporting.........................39
29.3 Exemption of Premises from Tax Lien.........................39
ARTICLE 30 (Miscellaneous).................................................39
30.1 Plans.......................................................39
30.2 Broker......................................................39
30.3 Binding Effect..............................................40
30.4 Act of Tenant...............................................40
30.5 Headings....................................................40
30.6 Construction................................................40
30.7 Severability................................................40
30.8 Security....................................................41
30.9 Parking.....................................................41
<PAGE> 54
30.10 Storage...................................................41
30.11 Time......................................................41
30.12 No Recording..............................................41
30.13 Name Change...............................................41
30.14 Estoppel..................................................41
30.15 Publicity and Advertisement...............................42
30.16 Choice of Law.............................................42
30.17 Days......................................................42
30.18 Incorporation of Exhibits.................................42
<PAGE> 55
ADDENDUM TO
LEASE DATED JULY 1, 1996 (THE "LEASE")
BETWEEN FLATIRONS COTTONWOOD, INC.
AND XENOMETRIX, INC.
This Addendum is annexed to and constitutes a part of that certain Lease
described above. In the event of a conflict between this Addendum and the
provisions set forth in the Lease, the terms of this Addendum shall control.
In all other respects, the terms and conditions of the Lease are republished
and reaffirmed hereby. Capitalize terms not defined herein shall have the
meanings ascribed to them in the Lease.
A. Rent for July through August, 1996. Notwithstanding any provision to
the contrary contained in the Lease, Tenant shall not be obligated to pay to
Landlord Minimum Rent or Additional Rent prior to September 1, 1996. Tenant
shall pay for any utilities serving the Demised Premises and for Tenant's
janitorial services during period prior to September 1.
B. Renewal Options.
(1) Options. Provided there is then no uncured default
by Tenant under the terms of the Lease, and provided,
further, that the original Tenant, Xenometrix, Inc.,
continues to occupy the Demised Premises, as Tenant, and the
Lease shall not have been assigned, or the Demised Premises
sublet, by Xenometrix, Inc. (with or without Landlord's
consent), then Tenant shall have two successive options to
renew the Lease for two additional terms of three years each
on the same terms and conditions in effect during the primary
term of the Lease, except that (a) Minimum Rent for the first
year of the first renewal period shall be the greater of
Minimum Rent determined in accordance with subparagraph (3)
below, or $12 per square foot, (b) Minimum Rent for the first
year of the second renewal period shall be the greater of
Minimum Rent determined in accordance with subparagraph (3)
below or $13 per square foot, and (c) Minimum Rent for the
second and third years of each renewal period shall be
adjusted in accordance with Section 3.2 of the Lease using as
the Base Index for the renewal period, the average of the
monthly CPIs for each of the twelve months of the full
calendar year in which such renewal period commences.
(2) Notice to Determine Rent. No more than eight months
nor less than six months prior to the last day of the then
current term of the Lease, Tenant shall be entitled to give
to Landlord notice of its desire to establish Minimum Rent
for the first year of the renewal period for the Demised
Premises (a "Minimum Rent Determination Notice").
<PAGE> 56
(3) Amount of Rent. Upon Landlord's receipt of a
Minimum Rent Determination Notice, Landlord shall inform
Tenant, in writing, of Landlord's determination of the fair
market rental for the first year of the applicable renewal
period. If Landlord has not received written objection from
Tenant within 15 days of the date of such notification, it
shall be deemed that Tenant's Minimum Rent for the first year
of the renewal period shall be the amount determined by
Landlord, if Tenant chooses to exercise its renewal option.
If Tenant disagrees with Landlord's determination of the fair
market rental, Tenant shall notify Landlord in writing within
15 days from Tenant's receipt of Landlord's determination.
Tenant's notification shall advise Landlord of the exact
amount of the fair market rental as determined by Tenant.
If Landlord rejects Tenant's suggested fair market
rental and a compromise cannot be negotiated by the parties
within 15 days after Tenant submits its suggested fair market
rental, then the fair market rental shall be determined by an
independent appraisal conducted as set forth below. Within
30 days after the written notice of a suggested fair market
rental from Tenant, the parties shall mutually choose an
impartial arbitrator, who shall be a real estate leasing
broker having at least five years' experience in the Boulder,
Colorado commercial real estate market, to finally determine
fair market rental. Both parties shall each submit a
suggested determination of fair market rental to the
arbitrator (which my differ from the amounts previously
suggested by the parties), and within 30 days of the
arbitrator's selection, the arbitrator shall only select
either Landlord's or Tenant's determination of fair market
rental, and such selection by the arbitrator shall be the
final determination of fair market rental and shall be
binding on both parties. If the parties are unable to agree
on the selection of an arbitrator, then the arbitrator shall
be appointed by the American Arbitration Association acting
through its office nearest the Demised Premises. All cost of
arbitration shall be paid by the Tenant, regardless of
whether Tenant's determination of fair market rental is
selected by the arbitrator. The term "fair market rental"
shall mean the amount of rent expressed in dollars and cents
per square foot of Rentable Area in the Demised Premises,
established as the base or minimum annual rent per square
foot to be charged for similar lease renewals for
office/light industrial space, for terms of three years, for
a comparable use and age in the Boulder Metropolitan Area,
but shall not include any increase in rent which might be
obtained for the Demised Premises solely as a result of the
wet lab improvements installed by Tenant. Minimum Rent for
the second and third year of the renewal period shall be
adjusted in accordance with Section 3.2 of the Lease, as
<PAGE> 57
modified by subparagraph (1) above.
(4) Exercise of Option. Within ten days following final
determination of fair market rental in accordance with
subparagraph (3) above, Tenant shall give Landlord written
notice if it wishes to exercise the option granted in
subparagraph (1). If Tenant fails to notify Landlord in
accordance with this subparagraph (4), Tenant shall be deemed
to have waived its option to renew the Lease and the Lease
shall expire at 11:59 p.m. on the last day of the initial
term or first renewal period, whichever is applicable.
C. Tenant Finish.
(1) Tenant shall be required to make the improvements to the Demised
Premises described on Attachment 1 attached hereto ("Tenants Work"). Tenant's
Work shall create finished ceilings, walls and floor surfaces as well as
complete HVAC, lighting, electrical and fire protection systems. All plans and
specifications for construction of Tenant's Work (the "Plans and
Specifications") including, without limitation, architectural, mechanical,
plumbing and electrical drawings and layout plans shall be subject to
Landlord's prior written approval, which approval shall not be withheld or
delayed unreasonably. Landlord shall use commercially reasonable efforts to
approve or disapprove Tenant's Plans and Specifications within ten business
days of Landlord's receipt of same. If Landlord rejects such Plans and
Specifications, Landlord shall state the reasons for rejection whereupon Tenant
shall revise the Plans and Specifications based upon Landlord's reasons for
rejection and resubmit them to Landlord. Upon Landlord's approval of the Plans
and Specifications, they shall be clearly marked "Approved and Issued for
Construction" and initialed by Tenant and Landlord. Any changes in the
approved Plans and Specifications may be made only pursuant to a written
request by Tenant which has been approved by Landlord as set forth above.
(2) Tenant shall appoint and employ, solely at Tenant's expense,
subject to paragraph C(6) below, a contractor that is reasonably acceptable to
Landlord, as general contractor ("Tenant's General Contractor") to carry out
the work to be performed by Tenant hereunder. Landlord hereby approves the
general contractors listed on Attachment 2 hereto. As used herein, the term
"Tenant's Contractors" shall mean all persons, including, without limitation,
Tenant's General Contractor and all subcontractors of Tenant's General
Contractor who provide services, labor, skills, materials, or other items in
connection with Tenant's Work. Prior to selecting Tenant's Contractors, Tenant
shall obtain bids for Tenant's Work from such contractors and submit the bids
to Landlord. Landlord shall have the right to receive copies of bids submitted
by Tenant under this paragraph C(2), but shall have no right to approve or
disapprove the bids. If Landlord requests, Tenant's General Contractor or
Tenant's Contractors shall furnish Landlord with a payment and performance bond
satisfactory to Landlord. Tenant and Tenant's Contractors shall obtain and
keep in force such insurance as Landlord reasonably shall require, in such
amounts, on such forms and with such insurance
<PAGE> 58
companies as Landlord reasonably shall require or approve. In all events such
insurance shall include builder's risk insurance, workmen's compensation
insurance, and comprehensive general public liability insurance and, for
Tenant's General Contractor, architects and engineers only, errors and
omissions insurance. All such insurance policies shall name Landlord as an
additional insured, and contain an agreement by the insurer to give Landlord
not less than thirty (30) days prior written notice of any changes and/or the
intention of the insurer to cancel the policies.
(3) Construction of Tenant's Work shall be done in accordance with
the following criteria:
(a) the work shall be done as expeditiously as possible in good
workmanlike manner and with new materials, except that
Tenant's Equipment installed in the Demised Premises may
include Tenant's existing property or other used property
so long as any such property continues to comply with all
applicable performance and safety standards such as those
promulgated by the National Fire Prevention Association,
Underwriter's Laboratories and ANSI;
(b) the work shall be done only in accordance with the approved
Plans and Specifications;
(c) the work shall be done only after Tenant has obtained all
bonds, permits, approvals, licenses and insurance policies
required by this lease or by any governmental,
quasi-governmental or regulatory authority having
jurisdiction over the Demised Premises.
(d) the work shall comply with all applicable laws, rules,
regulations, ordinances and codes, including without
limitation, building and fire safety codes. Landlord's
approval of the Plans and Specifications shall not be
deemed a statement of compliance with such laws, rules,
regulations, ordinances and codes;
(e) storage of Tenant's Contractors' construction materials,
tools and equipment shall be confined within the Demised
Premises and in other areas designed for such purposes by
Landlord. If Landlord assigns space outside the Demised
Premises for such purposes, subject to prior notice,
reasonable under the circumstances, Tenant shall promptly
move, or cause Tenant's Contractors' to move, such
construction materials, tools and equipment to such space
<PAGE> 59
from time to time and Landlord shall have the right to
eliminate or change the location of any such space. In no
event shall any materials or debris be stored in the public
areas of the Building. Tenant's Contractors shall not run
pipes, wires, conduits or the like over or through, and
shall not work in, areas outside the Demised Premises
except as provided in the Plans and Specifications, or as
otherwise directed or permitted by Landlord.
(f) the work shall be done in compliance with such reasonable
rules and regulations as Landlord may make and amend from
time to time;
(g) the work shall be subject to the reasonable supervision and
coordination of Landlord;
(h) Tenant's Contractors shall keep the Demised Premises neat
and clean and be responsible for their own trash removal
and shall not use the building's trash receptacles; and
(i) the work shall not disturb or interfere with any pipes,
wires, conduits and the like running through the Demised
Premises and serving other parts of the Building except as
provided in the Plans and Specifications, or otherwise with
the prior written approval of Landlord.
(4) All of the provisions of this Lease relating to or applicable to
work in the Demised Premises by or for Tenant, including, without limitation,
Article 7, shall be fully applicable to Tenant's Work performed hereunder.
Tenant shall be responsible for any damage to the Demised Premises, the
Building or the Project resulting from or in connection with Tenant's Work and
all repairs of such damage shall be solely at Tenant's expense. Tenant shall
indemnify and hold Landlord harmless from and against any and all claims made
by third parties against Landlord, its agents, servants and employees based
upon acts or omissions of Tenant or Tenant's Contractors. Tenant shall also
indemnify and hold Landlord harmless from any damage to Landlord for faulty or
defective work done by Tenant or Tenant's Contractors.
(5) Tenant's failure to timely and diligently perform any of its
obligations under this paragraph D shall constitute a default of Tenant under
the Lease and shall entitle Landlord to exercise its rights and remedies
hereunder.
(6) Landlord agrees to reimburse Tenant for up to $204,246 of the
costs of Tenant's Work subject to the following terms and conditions. Tenant
shall be entitled to submit to Landlord, no more frequently than once each
month, a written request for
<PAGE> 60
reimbursement accompanied by canceled checks, written invoices and any other
documentation reasonably required by Landlord demonstrating reimbursable costs
of Tenant's Work which have been incurred and paid by Tenant. Landlord shall
pay Tenant the amount of any reimbursable costs for Tenant's Work within 30
days following its receipt of a request therefor from Tenant, up to a maximum
amount of reimbursement of $204,246. "Costs" of Tenant's Work, for purposes of
this paragraph, shall mean verified, reasonable, out of pocket costs incurred
by Tenant for materials, labor, equipment rental, supervision, architectural
and engineering fees and expenses, General Contractor fees and overhead,
construction manager services, and permits and taxes.
D. Letter of Credit. Contemporaneous with its execution of this
Lease, Tenant shall deliver to Landlord an unconditional, irrevocable letter of
credit in the initial amount of $204,246 in the form of Attachment 3 hereto and
issued by a financial institution reasonably acceptable to Landlord (the
"Letter of Credit"). The Letter of Credit (or one more substitutions therefor
or renewals thereof) shall remain in effect throughout the primary term of this
Lease, provided that the amount which Landlord shall be entitled to draw under
the Letter of Credit shall be reduced on each anniversary of the Commencement
Date to the amounts set forth on Attachment 4 attached hereto. The Letter of
Credit is given to Landlord as financial assurance for Tenant's timely
performance of its obligations of this Lease, and may be drawn upon by Landlord
to pay any amounts owed by Tenant to Landlord under the Lease following the
occurrence of an Event of Default. The Letter of Credit shall be able to be
drawn in the Denver Metropolitan Area. Any draw made by Landlord under the
Letter of Credit, or application of Letter of Credit proceeds to amounts owed
by Tenant, shall not operate to cure any Event of Default which has occurred
under the Lease.
E. Notification. Landlord agrees to notify Tenant if and when
additional space becomes available in the Building; provided, however,
Landlord's failure to so notify Tenant shall not constitute a default by
Landlord under the Lease or entitle Tenant to exercise any remedy. Any lease
for additional space in the Building between Landlord and Tenant shall be on
terms mutually acceptable to the parties and negotiated at the time the space
becomes available. Nothing contained herein shall obligate Landlord to
negotiate with Tenant for or offer additional space in the Building to Tenant,
prior to leasing such space to a third party.
F. Dock. During the term of this Lease, Tenant shall have use of the
loading dock attached to the Building without payment of rent therefor. Such
use shall be exclusive until such time as Landlord, in its sole discretion,
elects to terminate such exclusive right by giving written notice to Tenant.
Landlord shall give Tenant at least 90 days' prior written notice of any
revocation of Tenant's exclusive right to use the dock. Tenant's right to use
the dock shall be subject to Tenant's compliance with the covenants, conditions
and restrictions recorded against the Project. During such time as Tenant has
exclusive use of the loading dock, Tenant shall be responsible for repairing
and maintaining the dock at Tenant's sole cost and expense. At such time, if
ever, that Tenant's use of the dock becomes non-exclusive, Landlord shall
repair and maintain the dock as part of the Common Area, the expense of which
shall constitute an
<PAGE> 61
Operating Cost.
G. Access. Tenant shall have access to the Demised Premises 24 hours
per day, seven days per week, during the term of the Lease.
H. Biomedical Wastes. Tenant shall comply with all federal, state and
local statutes, ordinances, rules and regulations governing the generation,
handling, packaging, storage and disposal of biomedical wastes, medical wastes,
solid wastes, etiologic agents, infectious agents, laboratory cultures or
wastes, biological wastes, pathological wastes, tissue, organ and blood
samples, and other similar materials (collectively called "Biomedical Wastes"
for purposes of this paragraph H). Prior to commencing operation of its
business in the Demised Premises, Tenant shall supply Landlord with a copy of
its written disposal procedures for Biomedical Wastes. Tenant shall be
prohibited from disposing or releasing any Biomedical Wastes into the air,
ground, or water or sewer systems of the Project in violation of any federal,
state or local statute, ordinance, rule, regulation or other law. Tenant shall
not incinerate Biomedical Wastes at the Demised Premises. Tenant shall be
solely responsible for and shall defend, indemnify and hold Landlord, its
agents and employees harmless from and against all claims, costs and
liabilities, including attorneys' fees and costs, arising out of, or in
connection with, Tenant's breach of its obligations contained in this paragraph
H. Tenant will be solely responsible for and will defend, indemnify, and hold
Landlord, its agents, and employees harmless from and against any and all
claims, costs and liabilities, including attorneys' fees and costs, arising out
of, or in connection with, the removal, remediation, and restoration work and
materials necessary to remove and properly dispose of any of Tenant's
Biomedical Wastes and remediate or restore the Demised Premises and any other
property of whatever nature located on the Project to their condition existing
prior to the appearance of Tenant's Biomedical Wastes. Tenant's obligations
under this paragraph H will survive the expiration or other termination of the
Lease.
Upon termination of this Lease or Tenant's vacating the Demised
Premises, whichever event shall first occur, Landlord may, but shall not be
required to, obtain an environmental inspection or audit of the Demised
Premises from an environmental consulting firm selected by Landlord and
reasonably acceptable to Tenant, to verify Tenant's compliance with the
environmental provisions of the Lease (including this paragraph H) and to
ensure no radioactive materials which exceed background radiation levels for
the Boulder, Colorado area or other Hazardous Materials remain at the Demised
Premises. Tenant shall reimburse Landlord for the cost of such environmental
inspection or audit up to an amount of $1,500. In the event Landlord agrees to
a change in the Permitted Uses defined in Section 1.13, Landlord shall be
entitled to increase Tenant's
<PAGE> 62
reimbursement for the cost of any environmental inspection or audit obtained
under this paragraph to an amount which exceeds $1,500.
LANDLORD:
FLATIRONS COTTONWOOD, INC.,
a Delaware corporation
By: LaSalle Advisors Limited, a Delaware
limited partnership, as Advisor to
Public Employees' Retirement
Association of Colorado, the sole
shareholder of Flatirons Cottonwood,
Inc.
By: /s/ James P. Creighton
------------------------
Name: James P. Creighton
Its: Principal
TENANT:
XENOMETRIX, INC., a Delaware corporation
By: /s/ Ronald L. Hendrick
-----------------------
Name: Ronald L. Hendrick
Its: V.P. and C.F.O.
<PAGE> 63
ATTACHMENT 1
TENANT'S WORK
[DIAGRAM OF BUILDING]
<PAGE> 64
ATTACHMENT 2
LIST OF APPROVED GENERAL CONTRACTORS
TO BE PROVIDED BY TENANT
TAYLOR BALL
5775 Flatiron Parkway, Suite 115
Boulder, CO 80301
Tel: 303-440-4220
Quinlan Construction, Inc.
5540 Central Avenue
Boulder, CO 80301
Tel: 303-442-0202
Neenan Archistruction
The Neenan Company
Eighteenth Street Atrium
1621 18th Street, Suite 250
Denver, CO 80202
Tel: 303-291-1815
Provident Construction
2121 South Oneida
Suite 257
Denver, CO 80224
Tel: 303-759-2535
<PAGE> 65
ATTACHMENT 3
LETTER OF CREDIT
NORWEST BANK COLORADO, NA
LETTER OF CREDIT DEPARTMENT
1740 BROADWAY
ONE NORWEST CENTER
DENVER, CO 80274-8685
TELEX NUMBER 168118 NBI DVR
SWIFT ADDRESS: NWNBUS55
PHONE (303) 863-6424, FAX (303) 863-4898
IRREVOCABLE STANDBY LETTER OF CREDIT
OUR REFERENCE NUMBER: %LCNBR
JULY 01, 1996
BENEFICIARY:
FLATIRONS COTTONWOOD INC.
C/O TRAMMELL CROW COMPANY
7573 EAST HAMPDEN AVE.
SUITE 650
DENVER, CO 80231-4845
GENTLEMEN;
AT THE REQUEST OF: NEXSTAR PHARMACEUTICALS, INC.
2860 WILDERNESS PLACE
BOULDER, CO 80301
AND FOR THE ACCOUNT OF : SAME
WE HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER %LCNBR WHICH IS
AVAILABLE BY PAYMENT AGAINST BENEFICIARY'S
DRAFT(S) AT SIGHT, DRAWN ON NORWEST BANK COLORADO, NATIONAL ASSOCIATION.
THIS CREDIT IS FOR AN AGGREGATE AMOUNT NOT TO EXCEED A TOTAL OF U.S. DOLLAR
204,246.00 (TWO HUNDRED FOUR THOUSAND TWO HUNDRED FORTY SIX AND NO/100 USDLRS).
DRAFTS SUBMITTED MUST BE ACCOMPANIED BY THE FOLLOWING DOCUMENTS:
<PAGE> 66
1. BENEFICIARY'S SIGNED STATEMENT PURPORTEDLY SIGNED BY AN AUTHORIZED
SIGNER STATING: "THE AMOUNT PRESENTED BY THE DRAFT ACCOMPANYING THIS STATEMENT
IS THE AMOUNT OWED TO FLATIRONS COTTONWOOD, INC., A DELAWARE CORPORATION ON
ACCOUNT OF AN EVENT OF DEFAULT AS DEFINED IN THE LEASE DATED JULY 1996 BY AND
BETWEEN FLATIRONS COTTONWOOD, INC. AS LANDLORD AND XENOMETRIX AS TENANT. THIS
DRAW IS PURSUANT TO A LETTER OF CREDIT ESTABLISHED BY NEXSTAR PHARMACEUTICALS,
INC."
2. THIS ORIGINAL LETTER OF CREDIT FOR ENDORSEMENT.
SPECIAL CONDITIONS:
PARTIAL DRAWINGS ARE PERMITTED.
THIS LETTER OF CREDIT IS TRANSFERABLE ONLY BY NORWEST BANK COLORADO,
NATIONAL ASSOCIATION UPON RECEIPT OF OUR COMPLETED TRANSFER FORM AND ORIGINAL
LETTER OF CREDIT FOR ENDORSEMENT. ADVICE OF COMPLETED TRANSFER WILL BE
FORWARDED TO APPROPRIATE PARTIES. ALL CHARGES CONNECTED TO THE TRANSFER ARE
FOR THE ACCOUNT OF THE BENEFICIARY. TRANSFER CHARGE .25 PERCENT OF TRANSFERRED
AMOUNT, MINIMUM USD 125.00. THIS LETTER OF CREDIT IS TRANSFERABLE IN WHOLE
ONLY.
EXPIRES AT OUR COUNTERS AT 3:00 PM DENVER TIME ON JULY 31, 2002.
ALL DRAFTS MUST BE MARKED: DRAWN UNDER NORWEST BANK COLORADO, NATIONAL
ASSOCIATION, IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER %LCNBR.
WE HEREBY AGREE TO HONOR EACH DRAFT DRAWN AND IN COMPLIANCE WITH THE TERMS OF
THIS CREDIT IF DULY PRESENTED (TOGETHER WITH THE DOCUMENTS AS SPECIFIED) TO
NORWEST BANK COLORADO, NA, 1740 BROADWAY, ATTN: LETTER OF CREDIT DEPARTMENT,
DENVER, CO 80274-8685 ON OR BEFORE THE EXPIRY DATE.
THIS CREDIT IS ISSUED SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION NO. 500.
FOR INFORMATION PURPOSES ONLY:
THE DRAWINGS HEREUNDER SHALL NOT, IN THE AGGREGATE EXCEED THE STATED AMOUNT,
AND EACH DRAWING SHALL REDUCE THE AMOUNT AVAILABLE UNDER THIS LETTER OF CREDIT.
<PAGE> 67
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
BY:
- ---------------------------- -----------------------------
(AUTHORIZED SIGNATURE) (AUTHORIZED SIGNATURE)
**********************************************************************
THIS EXAMPLE IS BEING PROVIDED AS AN ACCOMMODATION UPON REQUEST AND IS
DELIVERED WITHOUT REPRESENTATION OR WARRANTY.
(LETTER 207 --06/25/96)
THIS EXAMPLE IS APPROVED BY:
AUTHORIZED SIGNER(S) FOR:
DATE:
- ---------------------------------------- -----------------------
DATE:
- ---------------------------------------- -----------------------
<PAGE> 68
ATTACHMENT 4
<TABLE>
<CAPTION>
Date Letter of Credit Amount
---- -----------------------
<S> <C>
July 1, 1996 $204,246.00
July 1, 1997 $171,125.03
July 1, 1998 $138,004.06
July 1, 1999 $104,883.09
July 1, 2000 $ 71,762.12
July 1, 2001 $ 38,641.23
July 1, 2002 $ 5,520.27
</TABLE>
<PAGE> 1
Exhibit 10.25
LEASE TERMINATION AGREEMENT
THIS LEASE TERMINATION AGREEMENT (this "Agreement") is made and entered
into by and between WILDERNESS PLACE, LTD., a Colorado limited partnership
("Landlord") and XENOMETRIX, INC., a Delaware corporation ("Xenometrix").
Recitals
A. Landlord and Xenometrix entered into an Industrial Real Estate Lease
(the "Xenometrix Lease"), dated January 8, 1993, with respect to certain
premises (the "Property") located at 2860 Wilderness Place, Boulder, Colorado
(the "Project").
B. NeXstar Pharmaceuticals, Inc., a Delaware corporation ("NeXstar") is
another tenant of Landlord which currently occupies all of the Project except
the Property. NeXstar has approached Xenometrix and Landlord with a request
that NeXstar be permitted to take over the Property from Xenometrix.
C. Xenometrix and Landlord enter into this agreement to set forth the
terms and conditions upon which they will agree to terminate the Xenometrix
Lease in order to permit NeXstar to take over the Property.
D. The consideration for this Agreement is the mutual promises and
warranties set forth in this Agreement, the New NeXstar Lease (as defined
below) and the Takeover Agreement (as defined below).
Agreement
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Landlord and Xenometrix hereby agree as follows:
1. Landlord's Representation and Warranty. Landlord represents and
warrants to Xenometrix that (a) Landlord is the sole owner of the Property and
the lessor's interest in the Xenometrix Lease, and (b) the Xenometrix Lease is
not now the subject of any assignment, for security or otherwise, to a
mortgagee or other third party, except an assignment for security to the lender
holding a first priority deed of trust on the Project (the "First Mortgagee").
2. Effective Date. The "Effective Date" shall mean the date of the
occurrence of the last of the four Conditions, as hereinafter defined.
<PAGE> 2
3. Conditions. The "Conditions" shall mean all of the following:
(a) New Space. Xenometrix enters into a lease or other arrangement for
space to replace the Property ("New Space"), in form and substance satisfactory
to Xenometrix in its sole discretion.
(b) New Property Lease. Landlord and NeXstar enter into a lease for the
Property (the "New NeXstar Lease"), in form and substance satisfactory to
Landlord in its sole discretion.
(c) Xenometrix Agreement. Xenometrix and NeXstar enter into an agreement
regarding the terms and conditions for the take over of the Property (the
"Takeover Agreement"), in form and substance satisfactory to Xenometrix in its
sole discretion.
(d) Consent of First Mortgagee. Landlord obtains the First Mortgagee's
consent to this Agreement.
4. Notice of Satisfaction of Conditions. Xenometrix shall give notice to
Landlord of the occurrence of each of the Conditions described in Section 3(a)
and Section 3(c), within three business days after such occurrence. Landlord
shall give notice to Xenometrix of the occurrence of each of the Conditions
described in Section 3(b) and Section 3(d), within three business days after
such occurrence. Xenometrix and Landlord each shall keep the other reasonably
informed with respect to progress towards the satisfaction of the Conditions
and notify the other if it appears that any of the Conditions will not be
satisfied, but neither party shall have any liability to the other with respect
to the frequency or adequacy of such information.
5. Termination of this Agreement. If all of the Conditions do not occur
on or prior to July 31, 1996, then the Xenometrix Lease shall continue in full
force and effect and this Agreement shall be null and void.
6. Termination of Xenometrix Lease. If all of the Conditions occur on or
prior to July 31, 1996, then this Agreement shall continue in full force and
effect and the Xenometrix Lease (including, without limitation, all rights of
first refusal and rights to extend the term contained therein) shall be
terminated as of the Termination Date, as hereinafter defined .
7. Termination Date. The "Termination Date" shall mean the date
designated as such in a notice given by Xenometrix to Landlord, which notice
shall be given no more than 120 days after the Effective Date and no less than
five days prior to the Termination Date. The Termination Date shall be no
later than November 15, 1996. Prior to the Termination Date, the Xenometrix
Lease shall remain in full force and effect, unmodified except as expressly
provided in this Agreement.
-2-
<PAGE> 3
8. Progress Notices. The parties anticipate that the Termination Date
will be September 15, 1996; however, the date designated pursuant to Section 7
hereof shall be the actual Termination Date. From and after the Effective
Date, upon the request of Landlord, Xenometrix agrees to give to Landlord
periodic reports on the progress of construction of the New Space in order that
Landlord will have a better idea of the likely timing of the Termination Date,
but Xenometrix shall have no liability to Landlord with respect to the
timeliness or adequacy of such information.
9. Surrender; Removal of Xenometrix Property. After the Effective Date
and on or prior to the Termination Date, Xenometrix shall vacate the Property
and surrender the Property to Landlord, broom clean and in the condition
existing on the date of this Agreement except for ordinary wear and tear to
the Termination Date. Landlord shall not require Xenometrix to remove any
alterations, additions or improvements (whether or not made with Landlord's
consent) made prior to the date hereof. All alterations, additions and
improvements not removed by Xenometrix on or prior to the Termination Date
shall become Landlord's property. Xenometrix shall have the right to remove
from the Property (a) all of its machinery, equipment and furnishings, and (b)
all of the fixtures described on Exhibit A attached hereto. Xenometrix shall
repair, at Xenometrix' expense, any damage to the Property caused by the
removal of any such machinery, equipment, furnishings and fixtures.
Notwithstanding the preceding sentence, Xenometrix shall not be obligated to
repair any portion of the Property which is intended to be renovated pursuant
to the terms of the New NeXstar Lease. This Section 9 shall supersede any
conflicting provisions of the Xenometrix Lease.
10. Environmental Condition. On or before the Termination Date,
Xenometrix shall (a) properly remove from the Property all biological and
radioactive materials which Xenometrix brought onto the Property and any other
environmentally hazardous materials which Xenometrix brought onto the Property,
and (b) leave the Property free from any biological or radiological or other
contamination caused by Xenometrix. Xenometrix shall indemnify and hold
Landlord harmless from any loss, cost, claim or expense, including, without
limitation, attorneys fees, arising out of the failure to do so. Landlord
shall have the right to enforce the covenant and indemnity in this Section 10
following the Termination Date, but only to the extent it makes a claim, which
identifies a specific environmental problem arising out of the violation by
Xenometrix of the first sentence of this Section 10, prior to the earlier of
the date which is 60 days after the Termination Date or the date on which
NeXstar begins to conduct any of its business operations at the Property.
Prior to the Termination Date, Xenometrix will cause an environmental
inspection to be done for the Property, in accordance with the proposal set
forth on Exhibit B attached hereto. The cost of such audit shall be paid for
by Xenometrix. Xenometrix will deliver the results of such audit to Landlord
within five (5) days after Xenometrix' receipt thereof.
11. Proration of Rent. Xenometrix shall be liable for rent under the
Xenometrix Lease, including without limitation Base Rent and other charges
payable under Article 4 of the Xenometrix Lease, to and including the
Termination Date, but not thereafter. Within ten days
-3-
<PAGE> 4
after the Termination Date, Landlord shall refund to Xenometrix any rent paid
in advance attributable to the period after the Termination Date. To the extent
any rent is based on estimates and the actual amount payable under the
Xenometrix Lease cannot be determined until after the Termination Date, (a) the
proration in the preceding sentence shall be made based upon such estimate; (b)
Landlord shall calculate the actual amounts payable by Xenometrix and furnish
to Xenometrix a copy of such calculation as soon as such actual amounts can be
determined; (c) Xenometrix shall remain liable for and shall pay to Landlord
within ten days after invoice any amount not previously paid on account of such
rent; and (d) Landlord shall remain liable for and shall repay to Xenometrix
within ten days after such actual amounts are determined, any amount previously
paid by Xenometrix in excess of the actual amounts payable by Xenometrix.
12. Takeover Agreement. Notwithstanding any provision of the Xenometrix
Lease to the contrary, Landlord shall have no right to any sums payable by
NeXstar to Xenometrix under the Takeover Agreement or otherwise with respect to
the Property.
13. Release. The following release shall be effective as of midnight on
the Termination Date:
Except with respect to the repair obligation in Section 9 of this
Agreement, the obligations of Xenometrix in Section 10 of this Agreement
and the payment obligations of Xenometrix in Section 11 of this
Agreement, Landlord, for itself and for its agents, partners,
predecessors, successors, assigns, affiliates, and related entities,
hereby fully and finally releases, and forever discharges, Xenometrix and
its employees, agents, attorneys, officers, directors, shareholders,
representatives, predecessors, successors, affiliates, assigns and
related entities (collectively, the "Released Parties") from each and
every cause of action, claim, contract, loss of every kind and nature
whatsoever, now existing or hereafter occurring, known and unknown, at
law and in equity, which Landlord may have against the Released Parties
or any of them, including but not limited to any claims and obligations
arising directly or indirectly out of the Xenometrix Lease or the
Property.
14. Consent. Landlord shall use its best efforts to obtain the First
Mortgagee's consent to this Agreement.
15. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed given when a copy thereof is actually delivered, by
hand, by commercial courier, by successful facsimile transmission, or by
certified or registered mail, return receipt requested, to the parties at the
following address:
-4-
<PAGE> 5
a. If to Landlord:
Wilderness Place, Ltd.
2101 31st Street
Denver, Colorado 80216
Fax No. (303) 292-4853
b. If to Xenometrix:
Xenometrix, Inc.
2860 Wilderness Place
Boulder, Colorado 80301
Attention: Ronald Hendrick
Fax No. (303) 447-1758
or at such other address as any party shall request by a notice given pursuant
to this Section.
16. Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties relating to the subject matter hereof and
supersedes all prior negotiations, understandings, offers, correspondence,
stipulations, and agreements (except the Xenometrix Lease), all of which are
incorporated herein and are hereby rendered null and void.
17. Amendment. This Agreement may not be amended or modified except by
written instrument executed by both Landlord and Xenometrix.
18. Confidentiality. Neither party shall make any public release or
disclosure of this Agreement or information relating to the transaction
contemplated hereunder without the prior written approval of the other party,
except that each party may make any disclosures required by applicable law,
including U.S. securities laws.
19. Binding Effect. The terms and conditions contained in this Agreement
shall inure to the benefit of, and be binding upon, the respective successors
and assigns of the parties.
20. Governing Law. The law of the State of Colorado will govern all
questions concerning the construction, validity and interpretation of this
Agreement and the performance of the obligations imposed by this Agreement.
21. Warranty of Authority. The undersigned warrant and represent that
they are authorized to execute this Agreement.
22. Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and will not be
deemed to limit,
-5-
<PAGE> 6
characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced and construed
as if no caption had been used in this Agreement.
23. Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party but all such counterparts taken together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
dates indicated below.
LANDLORD:
WILDERNESS PLACE, LTD., a Colorado limited
partnership
By: Woods Two Venture Group, Ltd.,
a Colorado Limited Partnership,
General Partner
By: The Charles P. Woods Corporation,
a Colorado Corporation, General Partner
By: /s/ Charles Woods
----------------------------
Charles Woods
Title: President
XENOMETRIX:
XENOMETRIX, INC., a Delaware corporation
By: /s/ Ronald L. Hendrick
----------------------------
Ronald L. Hendrick
Title: V.P. & C.F.O.
-6-
<PAGE> 7
Exhibit A
to
Termination Agreement
Xenometrix Fixtures to be Removed from the Property
<TABLE>
<CAPTION>
DESCRIPTION QUANTITY LOCATION(S)
<S> <C> <C>
Scott paper towel dispenser 10 varied
Dual skullery sink 1 mfg.
Barnstead H2O purifier 1 mfg.
Premier phone system 1 comm.
Premier phones 26 varied
GE 22V switch 2 mfg.
Chain link fence all varied
Artic cold room 1 receiving
Dual stainless sink & fixtures 4 varied
Fume hoods 4 varied
Blowers 2 interstitial
Sanifresh soap dispenser 7 varied
Regency security system 1 comm.
Haws eye wash station 2 lab
Elkay drinking fountain 1 lab
Single stainless sink with fixtures 3 lab
Book shelves 1 library
Shelving attached all varied
Fire extinguishers 4 varied
HEPA filters ceiling grid type 2 tissue culture
10" stainless dual sinks w/fixtures 1 glassware
Casework all varied
Cubicle panels all varied
</TABLE>
A-1
<PAGE> 8
Exhibit B
to
Termination Agreement
(Environmental Audit Proposal)
(See Attached)
B-1
<PAGE> 9
[STOLLER LETTERHEAD]
June 10, 1996
Mr. Reed Farr
Facilities Manager/Purchasing
Xenometrix
2860 Wilderness Place
Boulder, CO 80301
Subject: Proposal for Exit Audit
Dear Reed,
Stoller is pleased to submit this proposal for conducting an exit audit at your
facility located at 2860 Wilderness Place, as you requested last week, for the
fixed price cost of $1,250. Stoller has auditors experienced in conducting
various types of environmental assessments, audits and inspections.
The scope of work will include performing an environmental due-diligence
assessment at the Xenometrix facility located at 2860 Wilderness Place in
Boulder. The purpose will be to provide an audit package for your landlord to
review to ensure that there are no environmental issues associated with your
occupancy of the building. The assessment will include the following elements:
o Site Reconnaissance: a physical site walk-through to identify possible
environmental hazards. Also includes interviews with facility managers
and employees to determine environmental management practices.
o Records review to ensure compliance with applicable environmental permits
and recordkeeping requirements.
o Observation of Xenometrix final close-out sampling of the facility.
Additionally, Stoller personnel will obtain quality assurance swipe
samples. We assume that Xenometrix can provide analysis of the swipe
sampling media. If Xenometrix requests that a third party complete the
analysis, these charges will be passed directly on to Xenometrix with no
Stoller mark-up. The fixed price quote does not include analysis of swipe
samples taken by Stoller personnel.
o Final Written Report: provides analysis pertaining to environmental risk.
Ms. Denise Gelston, Stoller's Manager of Air Programs, will serve as Stoller's
project manager and auditor. Other Stoller personnel are available to provide
additional support as necessary.
We are available to start work immediately upon receiving your authorization.
We will provide
B-2
<PAGE> 10
you with an assessment report one week after conducting the site visit.
We're looking forward to working with Xenometrix on this project. If you have
any questions, feel free to call me at 546-4381.
Sincerely,
/s/ Denise Gelston
- -------------------
Denise Gelston
Manager, Air Programs
cc: Susan Serreze
Jim Moran
B-3
<PAGE> 1
Exhibit 10.26
TAKEOVER AGREEMENT
THIS TAKEOVER AGREEMENT (this "Agreement") is made and entered into by and
between NEXSTAR PHARMACEUTICALS, INC., a Delaware corporation ("NeXstar") and
XENOMETRIX, INC., a Delaware corporation ("Xenometrix").
Recitals
A. Project; Landlord. NeXstar and Xenometrix are currently tenants of a
certain building located at 2860 Wilderness Place, Boulder, Colorado (the
"Project"), which is owned by Wilderness Place, Ltd., a Colorado limited
partnership ("Landlord"). Xenometrix is currently leasing a portion of the
Project (the "Property") from Landlord pursuant to an Industrial Real Estate
Lease (the "Xenometrix Lease"), dated January 8, 1993, and NeXstar is leasing
the remainder of the Project. According to Landlord, the Xenometrix Lease has
been assigned for security to the lender holding a first priority deed of trust
on the Project (the "First Mortgagee").
B. Basic Transaction. NeXstar is in need of additional office space and
desires to occupy the entire Project. Xenometrix is willing, subject to the
terms and conditions of this Agreement, to terminate the Xenometrix Lease so
that NeXstar can enter into a Lease with Landlord for the Property.
C. Consideration. The consideration for this Agreement is the mutual
promises and covenants set forth in this Agreement, the New NeXstar Lease (as
defined below), and the Termination Agreement (as defined below).
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Xenometrix and NeXstar hereby agree as follows:
Agreement
1. Effective Date. The "Effective Date" shall mean the date of the
occurrence of the last of the four Conditions, as hereinafter defined.
2. Conditions. The "Conditions" shall mean all of the following:
(a) Termination Agreement. Xenometrix and Landlord enter into an
agreement which provides for the termination of the Xenometrix Lease, in form
and substance satisfactory to Xenometrix in its sole discretion (the
"Termination Agreement").
(b) New Space Lease. Xenometrix enters into a lease or other
arrangement for space to replace the Property ("New Space"), in form and
substance satisfactory to Xenometrix in its sole discretion (the "New Space
Lease").
<PAGE> 2
(c) New NeXstar Lease. Landlord and NeXstar enter into a lease for the
Property (the "New NeXstar Lease"), in form and substance satisfactory to
NeXstar in its sole discretion.
(d) Consent of First Mortgagee. Landlord obtains the First Mortgagee's
consent to the Termination Agreement.
3. Notice of Satisfaction of Conditions. Xenometrix shall give notice to
NeXstar of the occurrence of each of the Conditions described in Section 3(a)
and Section 3(b), within three business days after such occurrence. NeXstar
shall give notice to Xenometrix of the occurrence of the Condition described in
Section 3(c), within three business days after such occurrence. Xenometrix
shall give notice to NeXstar of the occurrence of the Condition described in
Section 3(d) within three business days after Xenometrix receives notice of
such occurrence from Landlord. Xenometrix and NeXstar each shall keep the
other reasonably informed with respect to progress towards the satisfaction of
the Conditions and notify the other if it appears that any of the Conditions
will not be satisfied, but neither party shall have any liability to the other
with respect to the frequency or adequacy of such information.
4. Termination of this Agreement. If all of the Conditions do not occur
on or prior to July 31, 1996, then this Agreement shall be null and void.
5. Termination Date. The "Termination Date" shall mean the date
designated as such in a notice given by Xenometrix to NeXstar, which notice
shall be given no more than 120 days after the Effective Date and no less than
five days prior to the Termination Date. The Termination Date shall be no
later than November 15, 1996.
6. Progress Notices. The parties anticipate that the Termination Date
will be September 15, 1996; however, the date designated pursuant to Section 5
hereof shall be the actual Termination Date. From and after the Effective
Date, upon the request of NeXstar, Xenometrix agrees to give to NeXstar
periodic reports on the progress of construction of the New Space in order that
NeXstar will have a better idea of the likely timing of the Termination Date,
but shall have no liability to NeXstar with respect to the timeliness or
adequacy of such information.
7. Payment. NeXstar agrees to make the following payments to Xenometrix:
(a) $360,000, payable in six quarterly installments of $60,000 each,
beginning on the later of the Termination Date or September 30, 1996 and
continuing on the last day of each calendar quarter thereafter (December
31, March 31, June 30, and September 30) through the fourth quarter of
1997.
(b) Reimbursement of Xenometrix' actual costs for relocating to the
New Space, up to a maximum of $18,000. Payment by NeXstar under this
Section 7(b) shall
-2-
<PAGE> 3
be made within ten (10) business days after NeXstar receives an invoice
and copies of receipts for such costs from Xenometrix.
(c) $700,000 to pay toward Xenometrix' costs for leasehold
improvements in the New Space. Payment by NeXstar under this Section
7(c) shall be made within ten business days after the Termination Date.
8. Letter of Credit. NeXstar agrees to furnish to the Landlord for the
New Space (the "New Space Landlord"), and maintain until July 31, 2002, an
irrevocable letter of credit (the "Letter of Credit"), in the initial amount of
$204,246, issued by Norwest Bank and on the terms and conditions as required
under the New Space Lease as provided in Exhibit A attached hereto. The amount
available to be drawn under the Letter of Credit may be reduced on the dates
set forth on Attachment 4 hereto, or at any time thereafter, to the amounts set
forth on Attachment 4 attached hereto opposite such dates. In addition:
(a) If the New Space Landlord draws against the Letter of Credit on
account of a default or alleged default by Xenometrix under the New Space
Lease, Xenometrix shall reimburse NeXstar for the amount of such draw to
the extent that NeXstar is not reimbursed by the New Space Landlord.
Such reimbursement shall be made within five business days after such
draw by the New Space Landlord. If such reimbursement is not made by
either the New Space Landlord or Xenometrix within five business days
after such draw, Xenometrix shall pay NeXstar interest on the amount
outstanding, with such interest to be calculated from the date of such
draw at a rate equal to the lesser of (1) the maximum rate permitted by
law or (2) the U.S. prime rate as listed in the Wall Street Journal on
the date of the draw plus 2%.
(b) If at any time Xenometrix receives any funds drawn by the New
Space Landlord under the Letter of Credit which have not previously been
reimbursed to NeXstar, it shall remit the same to NeXstar within five
business days after receipt. If at any time NeXstar receives any funds
on account of the Letter of Credit previously reimbursed to NeXstar by
Xenometrix, NeXstar shall remit the same to Xenometrix within five
business days after receipt.
(c) Xenometrix agrees to fulfill its obligations pursuant to the New
Space Lease and not to commit any default pursuant to the terms of the
New Space Lease.
(d) Xenometrix shall use its best efforts to notify NeXstar as soon
as possible after the New Space Landlord claims any default by Xenometrix
under the New Space Lease or threatens to draw on the Letter of Credit
and, in any event, within 48 hours after Xenometrix receives any notice
of default under the New Space Lease from the New Space Landlord,
Xenometrix shall deliver a copy thereof to NeXstar.
(e) Other than NeXstar's specific obligations to provide the Letter
of Credit as
-3-
<PAGE> 4
set forth in this Agreement, NeXstar shall have no obligations to the New
Space Landlord in connection with the matters set forth in this Agreement
and NeXstar makes no guarantee to the New Space Landlord in connection
with any of Xenometrix's obligations.
9. Surrender of Property. After the Effective Date and on or prior to the
Termination Date, Xenometrix shall vacate the Property and surrender the
Property to Landlord, broom clean and in the condition existing on the date of
the Termination Agreement except for ordinary wear and tear to the Termination
Date. The Termination Agreement shall provide as follows:
Landlord shall not require Xenometrix to remove any alterations,
additions or improvements (whether or not made with Landlord's consent)
made prior to the date of the Termination Agreement. All alterations,
additions and improvements not removed by Xenometrix on or prior to the
Termination Date shall become Landlord's property. Xenometrix shall have
the right to remove from the Property (a) all of its machinery, equipment
and furnishings, and (b) all of the fixtures described on Exhibit B
attached hereto. Xenometrix shall repair, at Xenometrix' expense, any
damage to the Property caused by the removal of any such machinery,
equipment, furnishings and fixtures. Notwithstanding the preceding
sentence, Xenometrix shall not be obligated to repair any portion of the
Property which is intended to be renovated pursuant to the terms of the
New NeXstar Lease. This section shall supersede any conflicting
provisions of the Xenometrix Lease.
In addition, Xenometrix shall do any legally required radioactive and biohazard
decommissioning as follows: Xenometrix shall submit its plan for such
decommissioning to the State of Colorado Department of Health, with a copy to
NeXstar, on or before July 15, 1996. Promptly after receipt of approval from
such Department, Xenometrix shall notify NeXstar and promptly implement such
plan in accordance with such approval and in the manner required by law.
10. Representation and Warranty by Xenometrix. As a material inducement
to NeXstar to enter into this Agreement, Xenometrix represents and warrants
that:
(a) It is a corporation, duly organized and validly existing under
the laws of the State of Delaware, and it has all of the requisite power
and authority to enter into this Agreement and perform its obligations
hereunder.
(b) The execution, delivery and performance of this Agreement have
been duly authorized by all appropriate corporate action.
(c) Subject to entry into the Termination Agreement, neither this
Agreement nor the consummation of the transactions contemplated hereunder
will result in any breach of or contravention of any contract or
obligation to which it is a party.
-4-
<PAGE> 5
11. Representation and Warranty of NeXstar. As a material inducement to
Xenometrix to enter into this Agreement, NeXstar represents and warrants that:
(a) It is a corporation, duly organized and validly existing under
the laws of the State of Delaware, and it has all of the requisite power
and authority to enter into this Agreement and perform its obligations
hereunder.
(b) The execution, delivery and performance of this Agreement have
been duly authorized by all appropriate corporate action.
(c) Subject to entry into the New NeXstar Lease, neither this
Agreement nor the consummation of the transactions contemplated hereunder
will result in any breach of or contravention of any contract or
obligation to which it is a party.
12. Environmental Condition. On or before the Termination Date,
Xenometrix shall (a) properly remove from the Property all biological and
radioactive materials which Xenometrix brought onto the Property and any other
environmentally hazardous materials which Xenometrix brought onto the Property,
and (b) leave the Property free from any biological or radiological or other
contamination caused by Xenometrix. Xenometrix shall indemnify and hold
NeXstar harmless from any loss, cost, claim or expense, including, without
limitation, attorneys fees, arising out of the failure to do so. NeXstar shall
have the right to enforce the covenant and indemnity in this Section 12
following the Termination Date, but only to the extent it makes a claim, which
identifies a specific environmental problem arising out of the violation by
Xenometrix of the first sentence of this Section 12, prior to the earlier of
the date which is 60 days after the Termination Date or the date on which
NeXstar begins to conduct any of its business operations at the Property.
13. Expenses. Each party will be responsible for its own expenses
(including but not limited to legal, accounting and other professional fees,
brokerage commissions, and finders fees) incurred in connection with this
Agreement and the transactions contemplated hereunder. The parties agree to
indemnify and hold each other harmless from any claims for costs or expenses
covered under this Section 13.
14. Entire Agreement. This Agreement contains the entire agreement
between the parties and supersedes any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter hereof.
15. Amendment and Waiver. This Agreement may be amended, or any provision
of this Agreement may be waived, provided that any such amendment or waiver
will be binding only if such amendment or waiver is set forth in a writing
executed by both parties hereto. No course of dealing between or among any
persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
-5-
<PAGE> 6
obligations of any person under or by reason of this Agreement.
16. Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered, sent
by overnight delivery service, or mailed by first class mail, return receipt
requested, and addressed as follows:
If to NeXstar: NeXstar Pharmaceuticals, Inc.
2860 Wilderness Place
Boulder, CO 80301
Attn: Mike Hart
Fax No. (303) 444-0672
If to Xenometrix: Xenometrix, Inc.
2860 Wilderness Place
Boulder, CO 80301
Attn: Ronald Hendrick
Fax No. (303) 447-1758
or such other address as a party may have previously given notice pursuant to
this Section 16.
17. Binding Agreement; Assignment. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by either party without the prior written consent of the other party.
18. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
19. Dispute Resolution. The parties will use their good faith best
efforts to resolve any disputes that may arise between them in connection with
this Agreement or their performance hereunder. In the event the parties are
unable to resolve any such dispute by negotiation, the dispute shall be
submitted to binding arbitration before a single arbitrator in Boulder,
Colorado in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The arbitrator shall award the prevailing party its
reasonable costs incurred in connection with the arbitration, including,
without limitation, attorney fees and expert witness fees, in addition to any
other damages or relief. The decision of the arbitrator shall be final, binding
and not subject to appeal, and shall be enforceable by any court of competent
jurisdiction. The provisions of this section shall not apply with respect to
the payment
-6-
<PAGE> 7
obligations of NeXstar in Section 7 of this Agreement or of Xenometrix in
Section 8(a) of this Agreement. The prevailing party shall be entitled to
reasonable costs incurred in connection with the enforcement of such payment
obligations, including, without limitation, attorney fees and expert witness
fees.
20. Governing Law. The law of the State of Colorado will govern all
questions concerning the construction, validity and interpretation of this
Agreement and the performance of the obligations imposed by this Agreement.
21. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party.
22. Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced and construed
as if no caption had been used in this Agreement.
23. Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party but all such counterparts taken together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
NEXSTAR PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/ Michael E. Hart
-----------------------
Michael E. Hart
Title: V.P. C.F.O.
XENOMETRIX, INC., a Delaware
corporation
By: /s/ Ronald L. Hendrick
-----------------------
Ronald L. Hendrick
Title: V.P. & C.F.O.
-7-
<PAGE> 8
Exhibit A
to
Takeover Agreement
Letter of Credit Terms
Letter of Credit. Contemporaneous with its execution of this Lease,
Tenant shall deliver to Landlord an unconditional, irrevocable letter of credit
in the initial amount of $204,246 in the form of Attachment 3 hereto and issued
by a financial institution reasonably acceptable to Landlord (the "Letter of
Credit"). The Letter of Credit (or one more substitutions therefor or renewals
thereof) shall remain in effect throughout the primary term of this Lease,
provided that the amount which Landlord shall be entitled to draw under the
Letter of Credit shall be reduced on each anniversary of the Commencement Date
to the amounts set forth on Attachment 4 attached hereto. The Letter of Credit
is given to Landlord as financial assurance for Tenant's timely performance of
its obligations of this Lease, and may be drawn upon by Landlord to pay any
amounts owed by Tenant to Landlord under the Lease following the occurrence of
an Event of Default. The Letter of Credit shall be able to be drawn in the
Denver Metropolitan Area. Any draw made by Landlord under the Letter of
Credit, or application of Letter of Credit proceeds to amounts owed by Tenant,
shall not operate to cure any Event of Default which has occurred under the
Lease.
<PAGE> 9
Exhibit B
to
Takeover Agreement
Xenometrix Fixtures to be Removed from the Property
<TABLE>
<CAPTION>
DESCRIPTION QUANTITY LOCATION(S)
<S> <C> <C>
Scott paper towel dispenser 10 varied
Dual skullery sink 1 mfg.
Barnstead H2O purifier 1 mfg.
Premier phone system 1 comm.
Premier phones 26 varied
GE 22V switch 2 mfg.
Chain link fence all varied
Artic cold room 1 receiving
Dual stainless sink & fixtures 4 varied
Fume hoods 4 varied
Blowers 2 interstitial
Sanifresh soap dispenser 7 varied
Regency security system 1 comm.
Haws eye wash station 2 lab
Elkay drinking fountain 1 lab
Single stainless sink with fixtures 3 lab
Book shelves 1 library
Shelving attached all varied
Fire extinguishers 4 varied
HEPA filters ceiling grid type 2 tissue culture
10" stainless dual sinks w/fixtures 1 glassware
Casework all varied
Cubicle panels all varied
</TABLE>
<PAGE> 10
ATTACHMENT 3
LETTER OF CREDIT
NORWEST BANK COLORADO, NA
LETTER OF CREDIT DEPARTMENT
1740 BROADWAY
ONE NORWEST CENTER
DENVER, CO 80274-8685
TELEX NUMBER 168118 NBI DVR
SWIFT ADDRESS: NWNBUS55
PHONE (303) 863-6424, FAX (303) 863-4898
IRREVOCABLE STANDBY LETTER OF CREDIT
OUR REFERENCE NUMBER: %LCNBR
JULY 01, 1996
BENEFICIARY:
FLATIRONS COTTONWOOD INC.
C/O TRAMMELL CROW COMPANY
7573 EAST HAMPDEN AVE.
SUITE 650
DENVER, CO 80231-4845
GENTLEMEN;
AT THE REQUEST OF: NEXSTAR PHARMACEUTICALS, INC.
2860 WILDERNESS PLACE
BOULDER, CO 80301
AND FOR THE ACCOUNT OF : SAME
WE HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER %LCNBR WHICH IS
AVAILABLE BY PAYMENT AGAINST BENEFICIARY'S
DRAFT(S) AT SIGHT, DRAWN ON NORWEST BANK COLORADO, NATIONAL ASSOCIATION.
THIS CREDIT IS FOR AN AGGREGATE AMOUNT NOT TO EXCEED A TOTAL OF U.S. DOLLAR
204,246.00 (TWO HUNDRED FOUR THOUSAND TWO HUNDRED FORTY SIX AND NO/100 USDLRS).
DRAFTS SUBMITTED MUST BE ACCOMPANIED BY THE FOLLOWING DOCUMENTS:
<PAGE> 11
1. BENEFICIARY'S SIGNED STATEMENT PURPORTEDLY SIGNED BY AN AUTHORIZED
SIGNER STATING: "THE AMOUNT PRESENTED BY THE DRAFT ACCOMPANYING THIS STATEMENT
IS THE AMOUNT OWED TO FLATIRONS COTTONWOOD, INC., A DELAWARE CORPORATION ON
ACCOUNT OF AN EVENT OF DEFAULT AS DEFINED IN THE LEASE DATED JULY 1996 BY AND
BETWEEN FLATIRONS COTTONWOOD, INC. AS LANDLORD AND XENOMETRIX AS TENANT. THIS
DRAW IS PURSUANT TO A LETTER OF CREDIT ESTABLISHED BY NEXSTAR PHARMACEUTICALS,
INC."
2. THIS ORIGINAL LETTER OF CREDIT FOR ENDORSEMENT.
SPECIAL CONDITIONS:
PARTIAL DRAWINGS ARE PERMITTED.
THIS LETTER OF CREDIT IS TRANSFERABLE ONLY BY NORWEST BANK COLORADO,
NATIONAL ASSOCIATION UPON RECEIPT OF OUR COMPLETED TRANSFER FORM AND ORIGINAL
LETTER OF CREDIT FOR ENDORSEMENT. ADVICE OF COMPLETED TRANSFER WILL BE
FORWARDED TO APPROPRIATE PARTIES. ALL CHARGES CONNECTED TO THE TRANSFER ARE
FOR THE ACCOUNT OF THE BENEFICIARY. TRANSFER CHARGE .25 PERCENT OF TRANSFERRED
AMOUNT, MINIMUM USD 125.00. THIS LETTER OF CREDIT IS TRANSFERABLE IN WHOLE
ONLY.
EXPIRES AT OUR COUNTERS AT 3:00 PM DENVER TIME ON JULY 31, 2002.
ALL DRAFTS MUST BE MARKED: DRAWN UNDER NORWEST BANK COLORADO, NATIONAL
ASSOCIATION, IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER %LCNBR.
WE HEREBY AGREE TO HONOR EACH DRAFT DRAWN AND IN COMPLIANCE WITH THE TERMS OF
THIS CREDIT IF DULY PRESENTED (TOGETHER WITH THE DOCUMENTS AS SPECIFIED) TO
NORWEST BANK COLORADO, NA, 1740 BROADWAY, ATTN: LETTER OF CREDIT DEPARTMENT,
DENVER, CO 80274-8685 ON OR BEFORE THE EXPIRY DATE.
THIS CREDIT IS ISSUED SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION NO. 500.
FOR INFORMATION PURPOSES ONLY:
THE DRAWINGS HEREUNDER SHALL NOT, IN THE AGGREGATE EXCEED THE STATED AMOUNT,
AND EACH DRAWING SHALL REDUCE THE AMOUNT AVAILABLE UNDER THIS LETTER OF CREDIT.
<PAGE> 12
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
BY:
- ---------------------------- -----------------------------
(AUTHORIZED SIGNATURE) (AUTHORIZED SIGNATURE)
**********************************************************************
THIS EXAMPLE IS BEING PROVIDED AS AN ACCOMODATION UPON REQUEST AND IS DELIVERED
WITHOUT REPRESENTATION OR WARRANTY.
(LETTER 207 --06/25/96)
THIS EXAMPLE IS APPROVED BY:
AUTHORIZED SIGNER(S) FOR:
DATE:
- ---------------------------------------- --------------
DATE:
- ---------------------------------------- --------------
<PAGE> 13
ATTACHMENT 4
<TABLE>
<CAPTION>
Date Letter of Credit Amount
---- -----------------------
<S> <C>
July 1, 1996 $204,246.00
July 1, 1997 $171,125.03
July 1, 1998 $138,004.06
July 1, 1999 $104,883.09
July 1, 2000 $71,762.12
July 1, 2001 $38,641.23
July 1, 2002 $5,520.27
</TABLE>
<PAGE> 1
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form SB-2 (No. 33-96636-D)
and the Registration Statement on Form S-8 (No. 33-80889) of Xenometrix, Inc.
of our report dated September 23, 1996 appearing on page F-2 of this Form
10-KSB.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boulder, Colorado
September 23, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information extracted from the
consolidated balance sheet as of June 30, 1996 and the consolidated statement of
operations for the twelve months ended June 30, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,290
<SECURITIES> 0
<RECEIVABLES> 149
<ALLOWANCES> 12
<INVENTORY> 146
<CURRENT-ASSETS> 3,745
<PP&E> 769
<DEPRECIATION> 434
<TOTAL-ASSETS> 4457
<CURRENT-LIABILITIES> 489
<BONDS> 0
0
0
<COMMON> 3
<OTHER-SE> 3,965
<TOTAL-LIABILITY-AND-EQUITY> 4,457
<SALES> 671
<TOTAL-REVENUES> 671
<CGS> 549
<TOTAL-COSTS> 549
<OTHER-EXPENSES> 3,593
<LOSS-PROVISION> 19
<INTEREST-EXPENSE> (138)
<INCOME-PRETAX> (3,352)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,352)
<DISCONTINUED> 0
<EXTRAORDINARY> (115)
<CHANGES> 0
<NET-INCOME> (3,467)
<EPS-PRIMARY> (1.60)
<EPS-DILUTED> 0
</TABLE>
