<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-27118
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PHARMACOPEIA, INC.
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(Exact name of registrant as specified in its charter)
Delaware 33-0557266
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
CN 5350, Princeton, New Jersey 08543-5350
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(Address of principal executive offices) (Zip code)
(609) 452-3600
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days -- Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Class Outstanding at September 30, 1998
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<S> <C>
Common Stock, $.0001 par value 19,004,735
</TABLE>
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PHARMACOPEIA, INC. AND SUBSIDIARY
Form 10-Q
Table of Contents
<TABLE>
<CAPTION>
ITEM PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
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Consolidated Balance Sheets-September 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations-Three and Nine Months Ended
September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows-Nine Months Ended
September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
11-14
SIGNATURE
15
INDEX TO EXHIBITS
16
</TABLE>
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<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHARMACOPEIA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
-----------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 37,562 $ 24,609
Marketable securities 45,662 60,166
Trade receivables, net of allowance for doubtful accounts of $505
and $466, respectively 13,159 19,424
Prepaid expenses and other current assets 5,289 4,671
-----------------------------------------
Total current assets 101,672 108,870
-----------------------------------------
Non-current investments in marketable securities 12,865
Property and equipment, net 13,142 13,141
Software development costs, net 3,417 3,437
Investment in joint venture 1,013
Other assets 1,583 725
-----------------------------------------
$ 119,814 $ 140,051
=========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,593 $ 4,232
Accrued liabilities 16,898 18,294
Notes payable, current portion 1,268 1,390
Deferred revenue, current portion 24,200 29,345
-----------------------------------------
Total current liabilities 45,959 53,261
-----------------------------------------
Notes payable, long-term portion 458 1,412
Other long-term liabilities 119 440
Deferred revenue, long term 1,631 4,342
Minority interest in joint venture 1,065
Commitments
Stockholders equity:
Preferred stock, $.0001 par value; 2,000,000 shares authorized;
none issued and outstanding
Common stock, $.0001 par value; 40,000,000 shares authorized;
19,004,735 and 18,804,524 shares issued and outstanding at
September 30, 1998 and December 31, 1997, respectively 1 1
Additional paid in capital 145,304 144,440
Accumulated deficit (74,037) (62,657)
Cumulative translation adjustment (686) (1,188)
-----------------------------------------
Total stockholders' equity 70,582 80,596
-----------------------------------------
$ 119,814 $ 140,051
=========================================
</TABLE>
See accompanying notes to these unaudited financial statements.
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PHARMACOPEIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1998 1997 1998 1997
---------------------------------------- ----------------------------------
(UNAUDITED) (UNAUDITED)
Revenue:
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Contract $ 6,971 $ 5,234 $ 20,426 $16,752
Software license, service and other 12,309 10,846 36,822 33,104
Hardware 1,791 1,985 4,671 5,086
---------------------------------------- ----------------------------------
Total revenue 21,071 18,065 61,919 54,942
Cost and expenses:
Software, license and other 719 782 2,282 2,337
Hardware 1,565 1,793 3,985 4,498
Research and development:
Collaborative 5,462 3,968 14,597 12,297
Proprietary 6,722 6,358 20,687 18,325
Sales, general and administrative 9,188 7,444 26,078 21,812
Merger related costs 0 0 7,998 0
---------------------------------------- ----------------------------------
Total costs and expenses 23,656 20,345 75,627 59,269
---------------------------------------- ----------------------------------
Operating loss (2,585) (2,280) (13,708) (4,327)
Interest and other income, net 1,052 1,303 3,001 3,554
---------------------------------------- ----------------------------------
Loss before provision for income taxes (1,533) (977) (10,707) (773)
Provision for income taxes 550 547 542 1,795
---------------------------------------- ----------------------------------
Net loss $(2,083) $(1,524) $(11,249) $(2,568)
======================================== ==================================
Basic net loss per share $(0.11) $(0.08) $(0.60) $(0.14)
======================================== ==================================
Diluted net loss per share $(0.11) $(0.08) $(0.60) $(0.14)
======================================== ==================================
Weighted average shares of common stock,
outstanding-basic 18,968 18,562 18,905 18,396
Weighted average shares of common stock, and
common stock equivalents 18,968 18,562 18,905 18,396
outstanding-diluted
</TABLE>
See accompanying notes to these unaudited financial statements.
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PHARMACOPEIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
------------------------------------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(11,249) $ (2,568)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation and amortization 3,491 3,982
Equity in undistributed earnings of joint venture 1,013 (52)
Changes in assets and liabilities:
Accounts receivable 3,090 6,150
Prepaid expenses and other current assets 2,341 299
Other assets (733) 358
Accounts payable (639) 436
Accrued liabilities (1,179) (1,903)
Deferred revenue (7,771) (5,919)
Other liabilities 1,142 (218)
------------------------------------------
Net cash provided by (used in) operating
activities (10,494) 565
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (3,492) (5,426)
Capitalized software development costs 20 (1,299)
Purchase of marketable securities (49,556) (67,946)
Proceeds from maturities of marketable securities 76,925 64,933
------------------------------------------
Net cash provided by (used in) investing
activities 23,897 (9,738)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 864 4,568
Payments on notes payable (1,535) (1,143)
Increase in capital lease obligations 512
Principal payments on capital leases (155) (289)
------------------------------------------
Net cash provided by (used in) financing
activities (826) 3,648
Exchange rate effects on cash 376 (658)
------------------------------------------
Net decrease in cash and cash equivalents 12,953 (6,183)
Cash and cash equivalents, beginning of period 24,609 31,568
------------------------------------------
Cash and cash equivalents, end of period $ 37,562 $ 25,385
==========================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 323 $ 218
Income taxes $ 2,019 $ 822
</TABLE>
See accompanying notes to these unaudited financial statements.
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<PAGE>
PHARMACOPEIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE (1) -- BASIS OF PRESENTATION
The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The Company's wholly-owned subsidiary, Molecular Simulations
Incorporated, ("MSI") was acquired by the Company on June 12, 1998 (see Note 3).
All intercompany balances have been eliminated in consolidation. Interim results
are not necessarily indicative of the results that may be expected for the year.
For further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1997 and the Company's Registration Statement on Form S-4
(Registration No. 333-47475).
NOTE (2) -- BASIC NET LOSS PER SHARE
Basic net loss per share is based on net loss for the relevant period
divided by the weighted average number of common shares issued and outstanding
during the period and does not include any other potentially dilutive
securities.
NOTE (3) -- MOLECULAR SIMULATIONS INCORPORATED ACQUISITION
On June 12, 1998, the Company completed its merger with MSI. In connection
with the merger, the Company exchanged approximately 7.1 million shares of its
Common Stock for all of the issued and outstanding MSI Common Stock, MSI Class B
Common Stock and MSI Series A Convertible Preferred Stock. The Company believes
this merger qualifies as a tax-free reorganization. This merger was accounted
for as a pooling-of-interests. Accordingly, the Company's financial statements
have been restated for all periods presented to include MSI. In connection with
the transaction, the Company recorded merger related charges of approximately
$8.0 million in the second quarter of 1998. Such charges consist of transaction
costs, principally investment banking and professional fees which must be
expensed under the pooling-of-interests method of accounting.
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<PAGE>
The following table summarizes 1998 information on a separate company basis
for Pharmacopeia and MSI prior to completion of the merger.
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
APRIL 1, 1998 TO JANUARY 1, 1998 TO
JUNE 12, 1998 JUNE 12, 1998
---------------------------- ---------------------------
<S> <C> <C>
Total revenue:
Pharmacopeia $ 5,890 $12,322
MSI 6,137 20,437
Net income (loss):
Pharmacopeia $(1,362) $(3,588)
MSI (3,007) (1,483)
</TABLE>
NOTE (4) -- MARKETABLE SECURITIES
As a result of the Company's merger with MSI (see Note 3) which was
completed on June 12, 1998, the Company anticipates that it's working capital
needs may fluctuate from month to month. Accordingly, as of June 30, 1998, the
Company transferred the classification of its marketable securities from
held-to-maturity to available-for-sale. The estimated fair value of the
marketable securities approximates cost as of September 30, 1998 and, therefore,
no unrealized gains or losses existed at September 30, 1998.
NOTE (5) -- REPORTING COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130").
SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components. The adoption of SFAS No. 130 had no
impact on the Company's results of operation or stockholders' equity. SFAS No.
130 requires foreign currency gains or losses, which prior to adoption were
reported separately in stockholder's equity, to be included in other
comprehensive income. The components of comprehensive income (loss) for the
three and nine month periods ended September 30, are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net loss $(2,083) $(1,524) $(11,249) $(2,568)
Foreign currency gain (loss) 382 (129) 376 (658)
------------ -------------- ------------- -------------
Total comprehensive (loss) $(1,701) $(1,653) $(10,873) $(3,226)
============ ============== ============= =============
</TABLE>
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<PAGE>
NOTE (6) -- IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"). SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. The Company will
adopt the new requirements in conjunction with its 1998 Form 10-K. The adoption
of SFAS No. 131 will have no significant impact on the Company's financial
reporting except with respect to reporting information regarding MSI.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company's financial statements for all periods presented have been
restated to include the operations of MSI. The MSI merger was completed on June
12, 1998 and was accounted for as a pooling-of-interests. The acquisition of MSI
was completed by merging Micro Acquisition Corporation ("Micro") a wholly-owned
subsidiary of Pharmacopeia, with and into MSI, pursuant to an Agreement and Plan
of Merger and Reorganization dated as of February 4, 1998 by and among
Pharmacopeia, MSI and Micro. Upon the merger of Micro with and into MSI, each
outstanding share of MSI Common Stock, MSI Class B Common Stock and MSI Series A
Convertible Preferred Stock was converted into 0.5292 shares of Pharmacopeia
common stock.
Pharmacopeia was incorporated in March 1993 and is engaged in research and
development and chemical library production for collaborations and for its own
use. The Company's research and development has focused on efficient, cost
effective, high throughput systems for synthesizing and screening large
libraries of chemicals for new drug discovery and optimization. MSI was
incorporated in June 1994 and develops and commercializes molecular modeling,
simulation, and informatics software and services.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Contract revenue for the three and nine months ended September 30, 1998
increased to $7.0 million and $20.4 million, respectively, compared to $5.2
million and $16.8 million for the comparable periods in 1997. The three and
nine month year to year increases primarily reflect expanded efforts in the
Schering-Plough, Bristol-Myers Squibb and Novartis collaborations.
-8-
<PAGE>
Software license, service and other revenue for the three and nine months
ended September 30, 1998 increased to $12.3 million and $36.8 million,
respectively, compared to $10.8 million and $33.1 million for the three and nine
months ended September 30, 1997. The increases of $1.5 million, or 13%, and
$3.7 million, or 11%, respectively, are primarily the result of consolidating,
in 1998, the operating results of TMSI, the existing joint venture between MSI
and Teijin as a result of MSI becoming the controlling partner in the joint
venture.
Research and development expenses increased to $12.2 million and $35.3
million for the three and nine months ended September 30, 1998, respectively,
compared to $10.3 million and $30.6 million for the corresponding periods in
1997. The increases of $1.9 million, or 18% and $4.7 million, or 15%,
respectively, primarily reflect increased spending on proprietary research and
development as Pharmacopeia continues to invest in internal discovery programs,
ultra high-throughput screening, and informatics. Research and development
expenses are expected to continue to increase as the Company further expands its
activities and incurs, among other things, expenses related to additional staff
increases, increased rent for expanded facilities, and increased equipment and
reagent purchases.
Sales, general and administrative expenses increased to $9.2 million and
$26.1 million for the three and nine months ended September 30, 1998,
respectively, compared to $7.4 million and $21.8 million for the corresponding
periods in 1997. The increases of $1.8 million, or 23% and $4.3 million, or 20%,
respectively, are primarily attributable to consolidating, in 1998, the
operating results of TMSI along with increased payroll and personnel expenses as
the Company continued to hire additional sales, marketing and administrative
personnel.
Merger related costs of $8.0 million were recorded for the nine months
ended September 30, 1998 in connection with the MSI merger. Such charges consist
of transaction costs, principally investment banking and professional fees which
must be expensed under the pooling-of-interests method of accounting.
The Company had interest and other income of $1.1 million and $3.0 million
for the three and nine months ended September 30, 1998, respectively, compared
to $1.3 million and $3.6 million for the comparable periods in 1997. The
decreases of $0.2 million, or 19%, and $0.6 million, or 16%, respectively,
resulted primarily from a decrease in the average balance of cash, cash
equivalents and marketable securities.
The Company recorded a provision for income taxes of $0.6 million for the
three months ended September 30, 1998 as compared to a provision for income
taxes of $0.5 million for the three months ended September 30, 1997. The
Company recorded a provision of income taxes of $0.5 million for the nine months
ended September 30, 1998 as compared to a provision for income taxes of $1.8
million for the nine months ended September 30, 1997. The year to year favorable
tax variances are the result of the combined companies' ability to offset MSI's
taxable income with Pharmacopeia's losses during the period following the
completion of the merger.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had working capital of $55.7 million.
The Company has funded its activities through September 30, 1998 primarily
through the sale of equity securities, funding under collaborative arrangements,
and sales of software licenses and hardware.
The Company's funds are currently invested in U.S. Treasury and government
agency obligations, investment grade commercial paper and other short-term money
market instruments. As of September 30, 1998, the Company's cash and cash
equivalents totaled $37.6 million. In addition, the Company had marketable
securities of $45.7 million.
In addition, as of September 30, 1998, the Company had outstanding
commitments for construction and equipment purchases totaling $0.3 million. The
Company anticipates that its capital requirements will continue to increase at
approximately the same level over the next two years as the Company expands its
research and development activities. In connection with such expansion, the
Company expects to incur substantial expenditures for hiring additional
management and scientific and administrative personnel, and for planned
expansion and upgrading of its facilities, including acquisition of additional
equipment.
The Company has conducted a review of its products and the computer
programs that it uses internally to identify the systems that could be affected
by the "Year 2000" issue. The Company presently believes that the Year 2000
problem will not pose significant operational problems for the Company's
products that it markets commercially or the computer programs that it currently
uses internally, and that the Company will not incur significant costs as a
result of the Year 2000 problem.
The Company is in the the process of querying its customers, suppliers and
other service providers to determine whether they may experience any Year 2000
issues that may affect the Company. To date, the Company is not aware of any
such Year 2000 issue that would materially impact the Company's results of
operations, liquidity, or capital resources. However, the Company has no means
of ensuring that third parties will be Year 2000 ready. The inability of third
parties to complete their Year 2000 resolution process in a timely fashion could
materially impact the Company. The effect of non-compliance by third parties is
not determinable.
The Company anticipates that its existing capital resources will be
adequate to fund the Company's operations at least through 2000. There can be
no assurance that changes will not occur that would consume available capital
resources before such time. The Company's capital requirements depend on
numerous factors, including the ability of the Company to extend existing
collaborations and enter into additional collaborative arrangements, competing
technological and market developments, changes in the Company's existing
collaborative relationships, the cost of filing, prosecuting, defending and
enforcing patent claims and other intellectual property rights and the outcome
of related litigation, the purchase of additional capital equipment,
acquisitions of other businesses or technologies, the progress of the Company's
drug discovery programs and the progress of the Company's customers' milestone
and royalty producing activities. There can be no assurance that additional
funding, if necessary, will be available on favorable terms, if at all. The
Company's forecasts of the period of time through which its financial resources
will be adequate to support its operations is forward looking information, and
actual results could vary. The factors described earlier in this paragraph will
impact the Company's future capital requirements and the adequacy of its
available funds.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<C> <S>
3.1****** Restated Certificate of Incorporation of the Registrant.
3.3****** Bylaws of the Registrant, as amended.
3.3(a)******** Amendment to Bylaws of Pharmacopeia dated July 31, 1997.
4.3* Stockholders Rights Agreement, dated February 15, 1995.
10.1* Series A and Series B Preferred Stock Purchase Agreement, dated July 21, 1993.
10.2* Series B Preferred Stock Purchase Agreement, dated March 11, 1994.
10.3* Series C Preferred Stock Purchase Agreement, dated December 22, 1994.
10.4* Series D Preferred Stock Purchase Agreement, dated February 15, 1995.
10.5**# Amended 1994 Incentive Stock Plan.
10.5(a)*******# Amendment No. 3 to the 1994 Incentive Stock Plan dated May 9, 1997.
10.6*# 1995 Employee Stock Purchase Plan.
10.7*# 1995 Director Option Plan.
10.8*+ Library Collection Agreement, dated as of October 1, 1995, between Pharmacopeia and
Novartis Corporation.
10.9*+ Research, License, and Royalty Agreement, dated as of February 15, 1995, between
Pharmacopeia and Berlex Laboratories, Inc.
10.9(a)*******+ Amendment No. 1 to Research, License and Royalty Agreement between the Company and
Berlex Laboratories, Inc. dated November 27, 1996.
10.9(b)*******+ Amendment No. 2 to Research, License and Royalty Agreement between the Company and
Berlex Laboratories, Inc. dated June 30, 1997.
10.9(c)*********+ Amendment No.3 to Research, License and Royalty Agreement between the Company and
Berlex Laboratories, Inc. dated November 21, 1997.
10.10*+ License Agreement, dated as of October 6, 1995, among Pharmacopeia, the Trustees of
Columbia University in the City of New York and Cold Spring Harbor Laboratory.
10.11*+ Collaboration Agreement, dated as of December 22, 1994, between Pharmacopeia and
Schering Corporation and Schering-Plough, Ltd.
10.11(b)*******+ Amendment No. 2 to Collaboration Agreement and Random Library Agreement between the
Company and Schering Corporation and Schering-Plough, Ltd. dated as of April 22, 1996.
10.11(c)*******+ Amendment No. 3 to Collaboration Agreement and Random Library Agreement between the
Company and Schering Corporation and Schering-Plough, Ltd. dated as of April 21, 1997.
10.12*+ Random Library Agreement, dated as of December 22, 1994, between Pharmacopeia and
Schering Corporation and Schering-Plough, Ltd.
10.13* Lease Agreement between Pharmacopeia and Eastpark at 8A.
10.13(a)** Amendment dated as of January 22, 1996 to Lease Agreement between Pharmacopeia and
Eastpark at 8A.
10.13(b)**** Third Amendment to Lease Agreement dated March 31, 1996 between Pharmacopeia and
Eastpark at 8A.
</TABLE>
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<TABLE>
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10.14* Sublease, dated as of December 7, 1994, between Pharmacopeia and Enichem Americas, Inc.
10.15* Lease, dated as of May 2, 1994, between Pharmacopeia and College Road Associates
Limited, as amended.
10.15(a)** Lease dated as of December 1, 1995 between Pharmacopeia and College Road Associates,
as amended.
10.15(b)**** Third Execution and Modification of lease dated June 7, 1996, between Pharmacopeia and
College Road Associates Limited.
10.17*# Employment Agreement, dated October 4, 1994, between the Company and Lewis J. Shuster.
10.18*********# Employment Agreement effective November 1, 1997 between the Company and Joseph A.
Mollica, Ph.D.
10.19************# Employment Agreement, dated January 30, 1998, between the Company and Richard Walsh
10.20*# Employment Agreement, dated June 3, 1993, between the Company and John J. Baldwin,
Ph.D.
10.21*# Employment Agreement, dated December 2, 1993, between the Company and Nolan H.
Sigal, M.D., Ph.D.
10.22*# Consulting Agreement, dated April 30, 1993, between the Company and W. Clark Still,
Ph.D.
10.23* Warrant to purchase Common Stock issued to Columbia University.
10.24* Warrant to purchase Common Stock issued to Cold Spring Harbor Laboratory.
10.25**+ Collaboration Agreement effective as of December 31, 1995 between Pharmacopeia and
Bayer.
10.26**+ Random Library Agreement effective as of December 31, 1995 between Pharmacopeia and
Bayer.
10.27***********# Employment Agreement effective November 30, 1995 between Molecular Simulations
Incorporated and Michael J. Savage
10.27(a)************# Amendment No. 1 to Employment Agreement between Molecular Simulations Incorporated and
Michael J. Savage dated as of October 1, 1997
10.28***********# Employment Agreement effective November 30, 1995 between Molecular Simulations
Incorporated and Saiid Zarrabian
10.28(a)************# Amendment No. 1 to Employment Agreement between Molecular Simulations Incorporated and
Saiid Zarrabian dated as of October 1, 1997
10.30***+ Collaborative Agreement dated as of March 29, 1996 with Daiichi Pharmaceutical Co.,
Ltd.
10.30(a)*******+ Amendment No. 1 to Collaboration Agreement between the Company and Daiichi
Pharmaceutical Co., Ltd. dated April 14, 1997.
10.31****+ Research Agreement, between Pharmacopeia, Inc. and N.V. Organon dated May 31, 1996.
10.32*****# Employment Agreement, dated June 20, 1996, between the Company and Stephen A.
Spearman, Ph.D.
10.33***** Lease Agreement, dated June 21, 1996, between Pharmacopeia and South Brunswick Rental
I, Ltd.
</TABLE>
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<TABLE>
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10.34**********+ Collaboration and License Agreement between Pharmacopeia, Inc. and Bristol-Myers Squibb
Company dated November 26, 1997.
10.35************+ Joint Venture Agreement dated February 14, 1992 between Polygen Corporation and Teijin
Limited.
10.36************ Amendment No. 1 to Joint Venture Agreement dated March 30, 1998 between Teijin Limited
and Molecular Simulations Incorporated.
10.37************+ Distributorship Agreement dated April 1, 1992 between Polygen Corporation and Teijin
Molecular Simulations Incorporated
10.38************ Amendment to Distributorship Agreement dated October 17, 1994 between Molecular
Simulations Incorporated and Teijin Molecular Simulations Incorporated.
10.39************+ Amendment No. 2 to Distributorship Agreement dated September 30, 1996 between Molecular
Simulations Incorporated and Teijin Molecular Simulations Incorporated.
10.40++ Amended and Restated Distributorship Agreement, dated March 1, 1998, between Molecular
Simulations Incorporated and Teijin Molecular Simulations Incorporated
10.41 Indemnity Agreement, dated March 1, 1998, between Molecular Simulations Incorporated
and Teijin Molecular Simulations Incorporated
10.42 Lease Agreement, dated February 26, 1987, as amended, between Sorrento Tech Limited and
Biosym Technologies, Inc.
11.1* Statement re Computation of Per Share Earnings.
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule as of September 30, 1997
</TABLE>
* Incorporated by reference to the same numbered exhibit filed with the
Company's Registration Statement on Form S-1 No. 33-93460.
** Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-K for the year ended December 31, 1995.
*** Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-Q for the quarter ended March 31, 1996.
**** Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-Q for the quarter ended June 30, 1996.
***** Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-Q for the quarter ended September 30, 1996.
****** Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-K for the year ended December 31, 1996.
******* Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-Q for the quarter ended June 30, 1997.
******** Incorporated by reference to the same numbered exhibit filed with
the Company's form 10-Q for the quarter ended September 30, 1997.
********* Incorporated by reference to the same numbered exhibit filed with
the Company's Form 10-K for the year ended December 31, 1997.
********** Incorporated by reference to the same numbered exhibit filed with
the Company's Form 10-K/ A-2 for the year ended December 31, 1997.
*********** Incorporated by reference to Exhibit 10.15 and 10.16 to Molecular
Simulations Incorporated's Registration Statement on Form S-1 (Registration
No. 333-21427) listed on February 10, 1997.
************ Incorporated by reference to the same numbered exhibit filed
with the Company's Form 10-Q for the quarter ended June 30, 1998.
+ Confidential treatment granted.
++ Confidential treatment requested.
# Represents a management contract or compensatory plan or arrangement.
-13-
<PAGE>
(b) REPORTS ON FORM 8-K
None.
-14-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PHARMACOPEIA, INC.
By: /s/ LEWIS J. SHUSTER
---------------------
Lewis J. Shuster
Executive Vice President, Corporate
Development & Chief Financial Officer
(Duly Authorized Officer and Chief
Accounting Officer)
Date: November 13, 1998
-15-
<PAGE>
PHARMACOPEIA, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER Exhibit Name Page
<C> <S> <C>
10.40 Amended and Restated Distributorship Agreement, dated
March 1, 1998, between Molecular Simulations Incorporated
and Teijin Molecular Simulations Incorporated.
10.41 Indemnity Agreement, dated March 1, 1998, between
Molecular Simulations Incorporated and Teijin Molecular
Simulations Incorporated
10.42 Lease Agreement, dated February 26, 1987, as amended,
between Sorrento Tech Limited and Biosym Technologies, Inc.
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule as of September 30, 1997
</TABLE>
-16-
<PAGE>
EXHIBIT 10.40
AMENDED AND RESTATED DISTRIBUTORSHIP AGREEMENT
March 1, 1998
between
MOLECULAR SIMULATIONS INCORPORATED
and
TEIJIN MOLECULAR SIMULATIONS INCORPORATED
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. DEFINITIONS
(a) "Agreement" 2
(b) "Customer" 2
(c) "Documentation" 2
(d) "User Agreement" 2
(e) "MSI Customers" 2
(f) "Software" 2
(g) "Subdistributor" 2
(h) "Territory" 2
(i) "Trademarks" 2
2. APPOINTMENT OF AUTHORIZED DISTRIBUTOR
(a) Distributor Rights 2
(b) Limited Right to Use for Demonstration/Training/Support 3
(c) Right to Use Documentation 3
(d) Grant of Right to Distribute 3
(e) Right to Sell Consortia Membership 4
(f) Right to Sell Contract Research 4
(g) Web Sales 5
(h) General Provisions 5
(i) Exclusivity 5
3. ORDER PROCEDURE AND SHIPMENT AND DELIVERY TERMS
(a) Orders 6
(b) Shipping and Delivery 7
(c) Cancellation of Orders 7
4. PRICES AND PAYMENT TERMS
(a) Prices 7
(b) Taxes 7
(c) Payment Schedule 8
(d) Installation Fees 8
(e) Maintenance Fees 8
(f) Discounts to Subdistributors and Customers 8
(g) Hardware 8
5. OBLIGATIONS AND FUNCTIONS OF THE COMPANY 9
(a) Management and Support of Distribution 9
(b) Relationship with Subdistributors 9
(c) Adequate Company Facilities and Customer Satisfaction 9
(d) Promotion and Marketing 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(e) Contract Services 9
(f) Porting 9
(g) OEM Arrangements 10
(h) Company's General Businesslike Conduct 10
(i) Technical Support and Other Staff 10
(j) Installation 10
(k) Keeping MSI Informed 10
(l) Reports and Forecasts 10
(m) Competing Representations 10
6. OBLIGATIONS OF MSI
(a) Availability of Documentation 11
(b) Training 11
(c) Developments 11
(d) Third Party OEM Arrangements 11
(e) Maintenance Upon Termination 11
(f) Bug Fixes 11
7. WARRANTIES, DISCLAIMERS AND LIMITATIONS OF LIABILITY
(a) MSI's Warranty 12
(b) Warranty Disclaimers and Limitations 12
(c) No Warranty Pass-Through 12
(d) Limitation of Liability 12
8. INDEMNITY
(a) Proprietary Rights 13
(b) Other Indemnity 13
9. PROPRIETARY RIGHTS
(a) Ownership of Proprietary Rights 14
(b) No Modification 14
(c) Trademarks and Trade Names 14
(d) Nondisclosure and Non-Use 15
10. COMPLIANCE WITH LAWS
(a) Export Law Compliance 16
(b) Foreign Corrupt Practices Act 16
(c) Licenses and Permits 16
11. EFFECTIVE DATE, TERM, TERMINATION AND EFFECT OF
TERMINATION
(a) Effective Date 17
(b) Term 17
(c) Termination by Either Party 17
(d) Termination by MSI 17
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(e) No Other Rights Upon Termination 17
(f) Effect of Termination 17
(g) The Company's Duties Upon Termination 18
12. GENERAL TERMS 19
(a) Assignment 19
(b) Benefits and Binding Nature of Agreement 19
(c) Entire Agreement 19
(d) Force Majeure 19
(e) Notice 19
(f) Governing Law and Official Language 19
(g) Dispute Resolution 20
(h) Waiver 20
(i) Severability 21
(j) Rights and Remedies Cumulative 21
(k) No Agency - Independent Contractors 21
(l) Captions and Section References 21
(m) Counterparts 21
(n) No Limitation on Supplier MSI 21
(o) Parties Advised by Counsel -- No Interpretation Against Drafter 21
(p) Authority to Enter Into and Execute Agreement 21
</TABLE>
APPENDICES
Appendix A: Software, Consortia and Price Lists
Appendix B: MSI Standard User Agreement
Appendix C: Wire Transfer (Bank) Information
Appendix D: MSI Trademarks
Appendix E: List of WebLab Products Available From MSI's Web Page
<PAGE>
AMENDED AND RESTATED DISTRIBUTORSHIP AGREEMENT
This Amended and Restated Distributorship Agreement ("Agreement") is made
and entered into effective as of the 1st day of March, 1998, by and between
Molecular Simulations Incorporated, a Delaware corporation, having its principal
place of business at 9685 Scranton Road, San Diego, CA 92121, U.S.A. ("MSI") and
Teijin Molecular Simulations Incorporated, a corporation organized under the
laws of Japan, with its principal place of business at 1-1, Uchisaiwai-cho 2-
chome, Chiyoda-ku, Tokyo 100, Japan ("the Company").
RECITALS
A. MSI (formerly Polygen Corporation doing business as Polygen Molecular
Simulations Incorporated) and Teijin Limited, a corporation organized under the
laws of Japan with its principal office at 6-7, Minamihommachi 1-chome, Chuo-ku,
Osaka 541, Japan ("Teijin") have entered into a Joint Venture Agreement dated as
of February 14, 1992 (the "Joint Venture Agreement"), pursuant to which the
Company was organized as a joint venture corporation under the laws of Japan.
B. MSI and its subsidiaries are engaged in the design, development and
distribution of proprietary computational chemistry software products and
related documentation.
C. It was contemplated by MSI and Teijin under the Joint Venture Agreement
that the Company be appointed as MSI's exclusive distributor in the Territory
(as defined below) of the Software (as defined below).
D. On or around February 1992, MSI granted to the Company an exclusive
right to market and distribute the Software and related documentation in the
Territory, subject to the terms and conditions set forth in a distribution
agreement of that date (the "Distribution Agreement"). The Distribution
Agreement has since been amended pursuant to an Amendment to Distributorship
Agreement dated October _, 1994, and by an Amendment No. 2 to Distributorship
Agreement dated September , 1996. In consideration of the rights granted to the
Company under Amendment No.2 , , the Company paid to MSI [*].
E. MSI and Teijin now wish to amend and restate the Distributorship
Agreement in its entirety, so that the prior Distributorship Agreement shall be
superseded hereby and the agreement of the parties shall read in full as set
forth in this Agreement.
THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto agree as follows:
* CONFIDENTIAL TREATMENT REQUESTED
1
<PAGE>
AGREEMENT
1. DEFINITIONS.
For the purpose of this Agreement, the following terms shall have the
following meanings unless otherwise required by the context:
(a) "Agreement" shall mean this Amended and Restated Distributorship
---------
Agreement as it may be amended from time to time.
(b) "Customer" shall mean any third party user to whom the Company has, in
--------
accordance with the terms of this Agreement and the User Agreement, granted the
right to use the Software.
(c) "Documentation" shall mean the standard user documentation and sales
-------------
support materials which MSI has published or may publish during the term of this
Agreement.
(d) "User Agreement" shall mean a standard user agreement, a sample of
--------------
which is attached as Appendix B, pursuant to which Customers are granted by the
Company a limited right to use the Software.
(e) "MSI Customers" shall mean any third party user in the Territory to
-------------
whom MSI or MSI's agent has granted the limited right to use the Software prior
to the effective date of the Distribution Agreement.
(f) "Software" shall mean the computational chemistry software products
--------
marketed by MSI or MSI's subsidiaries and distributed hereunder, to be provided
in machine readable (object code) form, and set forth on Appendix A attached
hereto, as such Appendix A may be amended from time to time by MSI and the
Company in accordance with Section 2(a) below.
(g) "Subdistributor" shall mean any subdistributor, agent or value-added
--------------
reseller authorized by the Company to distribute the Software.
(h) "Territory" shall mean the following countries: Japan, South Korea,
---------
Taiwan, Hong Kong, China, India, Singapore, Malaysia, Australia and New Zealand.
(i) "Trademarks" shall mean any trademark which MSI owns or has the right
----------
to use as may be designated by MSI from time to time.
2. APPOINTMENT OF AUTHORIZED DISTRIBUTOR.
(a) Distributor Rights. Subject to the terms and conditions contained
------------------
herein, MSI hereby grants to the Company, and the Company hereby accepts, the
exclusive, non-transferable and indivisible right to market the Software in the
Territory during the term hereof solely for distribution to Customers located in
the Territory. The Company shall have no right to assign or
2
<PAGE>
otherwise transfer any or all of its rights under this Agreement except as may
be otherwise provided in Section 2(d) hereof with respect to the distribution to
Customers. It is the intention of the parties to amend Appendix A of this
Agreement from time to time to include within the definition of "Software" under
this Agreement, all computational chemistry software products that are developed
or marketed by MSI or its subsidiaries in the future during the term of this
Agreement, including extensions of, replacements for, or improvements of the
software products presently enumerated on Appendix A; provided, however, that
MSI may at its option exclude from "Software" and the scope of this Agreement,
software products for which it does not have distribution rights for the
Territory due to limitations or restrictions imposed by the supplier or party
providing such software products to MSI. Notwithstanding the grant of
exclusivity under this Section 2(a), MSI may, upon prior notice to the Company
distribute Software to third parties outside the Territory who will bundle the
Software with hardware and distribute those bundled products in the Territory,
provided that such bundling shall be on an OEM basis.
(b) Limited Right to Use for Demonstration/Training/Support. MSI hereby
-------------------------------------------------------
grants and the Company hereby accepts, subject to the terms and conditions
specified herein, an exclusive right, except for rights to use the Software for
demonstration and support activities that have been or may be granted by MSI to
OEM's or computer manufacturers, to use in the Territory, during the term
hereof, the Software for demonstration and technical support of the Software,
and for training of Company and Subdistributor personnel on the Software.
(c) Right to Use Documentation. MSI hereby grants and the Company hereby
--------------------------
accepts, subject to the terms and conditions specified herein, an exclusive
right, except for rights to use the Documentation for demonstration and support
activities that have been or may be granted by MSI to OEM's or computer
manufacturers, to use the Documentation in the Territory during the term hereof
for the purpose of enabling the Company to carry out its distribution and
support obligations to MSI Customers and Customers under this Agreement. The
Company may, at its expense, translate, copy and repackage the Documentation as
is necessary in connection with its distribution of the Software pursuant to
Section 2(d) hereof. All translations of the Documentation shall, pursuant to
Section 2(e)(i) hereof, include MSI copyright and other proprietary rights
notices. MSI shall retain title to and ownership of any such translations of the
Documentation.
(d) Grant of Right to Distribute.
----------------------------
(i) The rights granted under this Agreement are non-transferable,
except that the Company is hereby authorized to grant rights to Customers
of the Company or to Customers of Subdistributors for use of the Software
on any appropriate platform on the terms and conditions set forth below.
Rights to use the Software may only be granted to Customers who represent
that they shall not use the Software to provide any service bureau or
consulting service to any third party, or to re-export the Software without
first obtaining written permission from MSI. Software provided to Customers
shall be in machine-readable (object) code.
3
<PAGE>
(ii) Until termination of this Agreement, the Company shall distribute
and provide the Software and Documentation to Customers pursuant only to
the terms of an User Agreement. Promptly following the execution of this
Agreement, the Company shall, at its expense, develop an User Agreement in
the Japanese language, together with an English language translation of the
same, which User Agreement shall contain terms that are substantially
equivalent to those set forth in MSI's standard UserAgreement (Appendix B
hereto). Without prejudice to the generality of the foregoing, and in
addition to such terms, the User Agreement shall expressly provide that:
(x) the User Agreement (and any related software maintenance agreement)
between the Customer and the Company shall be automatically assigned to MSI
or MSI's designee in the event of termination of this Agreement for any
reason, and (y) the terms of the User Agreement shall govern and control in
the event of any inconsistency between its terms and those of any purchase
order between the Customer and the Company. The Company shall provide MSI
with copies of its User Agreement and the English translation thereof for
MSI's written approval. The Company shall not transfer Software to a
Customer unless and until the Company shall have obtained a signed copy of
the User Agreement from the Customer, and the Company agrees to obtain
prior written approval from MSI to any modifications or changes to the pre-
approved User Agreement.
(iii) The Company agrees to use its reasonable commercial efforts to
ensure that each Customer granted a right to use the Software pursuant to
this Agreement continues to comply with the terms of the User Agreement.
The Company shall maintain adequate Customer records which may be inspected
by MSI during regular business hours upon reasonable prior written notice.
(e) Right to Sell Consortia Membership. The Company may sell to Customers
-----------------------------------
within the Territory membership rights in any of MSI's various consortia. A
list of the current consortia, along with the price of membership for each, is
included in Appendix A("Consortia"). It is the intent of the parties to amend
Appendix A from time to time to include within the definition of Consortia any
new or extended consortia that may be established or extended by MSI. The
Company agrees that it will, at its expense, develop in the Japanese language
consortium agreements which contain terms substantially equivalent to those set
forth in MSI's standard consortium agreements but which show the Company or its
subdistributors (rather than MSI) as the contracting party with Customer.
Company will ensure that all Customers wishing to participate in a consortium
sign such an agreement. Company hereby subcontracts all its rights and
obligations under the consortia agreements to MSI and MSI agrees that it will
perform all services required of Company under such agreements with Customers
provided that such obligations are no more onerous than those MSI assumes in its
standard consortia agreements.
(f) Right to Sell Contract Research. Company may enter into consulting
--------------------------------
research contracts with Customers within the Territory pursuant to which Company
will agree to perform a certain research or consulting services project for a
Customer. For purposes of this Agreement contract research shall mean the
services offered by MSI which (i) apply MSI Software to a customer research
problem or project, or (ii) develop custom software to a customer's
specifications. Company will subcontract the work to be performed under such a
contract to MSI
4
<PAGE>
if MSI accepts the work. Before entering into such a contract, however, Company
shall first have transmitted to MSI full details of Customer's proposal
including but not limited to a description of the project and the time period
within which the project must be performed. MSI will then consider the proposal
and, if it believes that it can satisfactorily and timely complete the project,
it will give Company a quote of its prices for performing the work, along with
any other conditions or qualifications which MSI believes are necessary to
enable it to complete the project. Upon receipt of the quote Company may then
enter into a research contract with the Customer on terms consistent with the
conditions and qualifications specified by MSI.
(g) Web sales. Certain of MSI's WebLab family of products are now available
---------
for sale over the worldwide internet such that Customers, both inside and
outside the Territory, may purchase rights to use such WebLab products directly
from MSI's web page. A list of such products is attached hereto as Appendix E.
Appendix E may be updated from time to time. MSI agrees that with respect to all
sales of WebLab products made to Customers within the Territory directly from
MSI's web page, MSI will pay to the Company [*]of all Fees received by MSI.
"Fee" means the price or fee that MSI actually receives when MSI makes a sale
from its web page after deducting (i) trade or quantity discounts allowed or
taken; (ii) actual credits or refunds to customers on account of any returns of
such products; (iii) any insurance, shipping or other out-of-pocket expense that
may be incurred in connection with delivery; (iv) any excise, sales, value-
added, property and use taxes; and (v) import and export duties, taxes
(including foreign withholding taxes) and surcharges. These Fees will be paid by
MSI on a quarterly basis no later than the [*] day after the end of each
calendar quarter.
(h) General Provisions. All rights granted herein shall be further subject
------------------
to the following:
(i) The Software and Documentation and any copies thereof shall in
all cases remain the exclusive property of MSI.
(ii) Except as expressly set forth in Sections 2(c) and 6(a) hereof,
the Company agrees not to copy, provide, or otherwise make available any of
the Software or Documentation, in whole or in part in any form, to any
person other than employees of the Company, Subdistributors and Customers
as provided for in this Section 2. The Company agrees to take appropriate
action by instruction, agreement, or otherwise with the Company's employees
or other persons permitted access hereunder to the Software or
Documentation to satisfy its obligations under this Agreement with respect
to the use, copying, modification, protection, and security of the Software
and Documentation.
(iii) The Company agrees not to ship any Software to any person in the
Territory which the Company knows or has reason to know, based upon
information provided to it by the Customer at the time of grant of such
right, will cause or permit the Software ultimately to be shipped or used
outside of the Territory.
(i) Exclusivity. The grant by MSI to the Company of certain "exclusive"
-----------
rights with respect to the Territory shall mean that, unless otherwise expressly
permitted herein, MSI shall
* CONFIDENTIAL TREATMENT REQUESTED
5
<PAGE>
have no right to, directly or indirectly, exercise, or permit third parties to
exercise, those rights in the Territory. This shall mean, without limitation,
that, without the express written consent of the Company, MSI:
(i) shall not itself ship any Software to any person in the
Territory; and
(ii) shall not ship any Software to any person outside of the
Territory which MSI knows or has reason to know, based upon information
provided to it by the Customer at the time of grant of such right, will
cause or permit the Software ultimately to be shipped, or used in the
Territory;
(iii) provided, however, that MSI may:
(x) grant rights to OEM or computer manufacturers to use the
Software and Documentation for demonstration and support
activities; and
(y) grant a right to third parties outside of the Territory;
provided, however, that in the event MSI grants a right to a
third party located outside of the Territory that has
subsidiaries or facilities in the Territory, and if, at the time
of entering into such transaction, MSI has a reasonable belief
that a significant level (if any) of software will be shipped
into the Territory as a consequence of such transaction, MSI and
the Company shall determine in good faith the manner in which
revenues arising from such third party transaction are to be
divided between MSI and the Company. Similarly, in the event the
Company grants a right to a third party located in the Territory
that has subsidiaries or facilities outside of the Territory, and
if, at the time of entering into such transaction, the Company
has a reasonable belief that a significant level (if any) of
software will be shipped outside of the Territory as a
consequence of such transaction, the Company and MSI shall
determine in good faith the manner in which revenues arising from
such third party transaction are to be divided between the
Company and MSI.
MSI shall cause MSI's subsidiaries to comply with the foregoing provisions
and limitations with respect to any Software which they have, directly or
indirectly, distributed to the Company hereunder.
3. ORDER PROCEDURE AND SHIPMENT AND DELIVERY TERMS.
(a) Orders. The Company shall submit written purchase orders for Software
------
in accordance with the then current order processing procedures of MSI as
designated from time to time by MSI. All purchase orders placed with MSI for
Software shall be subject to acceptance by MSI at its principal place of
business, such acceptance not to be unreasonably withheld. MSI shall use
reasonable efforts to meet the resale requirements of the Company and to make
deliveries in accordance with the delivery date on orders so accepted, but MSI
shall not be liable to the
6
<PAGE>
Company, any Subdistributor or Customer or to any other party, for MSI's delay
in delivery or failure to deliver any products that are under development by MSI
at the time an order is received.
(b) Shipping and Delivery. The following shipping and delivery procedures
---------------------
shall apply to Software and Documentation ordered by the Company from MSI
pursuant to Section 3(a) above. Deliveries shall be made F.O.B. (as defined in
Incoterms 1990, Publ. No. 460 of the International Chamber of Commerce) from
MSI's warehouse or manufacturing facility, and shall be shipped to the Company
at Hamacho-Hanacho Bldg. 4F. 2-17-8 Nihonbashi Hamacho Chuo-ku, Tokyo 103-0007
Japan. Unless the Company's order specifies the name of a carrier, MSI will
select the carrier. MSI shall bear the risk of loss until such time as a
shipment has been placed on board the carrier, at which time the risk of loss
shall be borne by the Company. Any claims for damage or loss in transit shall be
placed by the Company through the carrier. All shipments will be shipped by MSI
freight collect, or if prepaid, such freight will be subsequently billed to the
Company, and the Company will reimburse MSI for such freight in accordance with
Section 4 below. MSI reserves the right to deliver in advance of estimated
delivery dates.
(c) Cancellation of Orders. The Company may cancel any order (or part
----------------------
thereof) for Software by giving MSI written notice of such cancellation.
4. PRICES OF PRODUCTSAND PAYMENT TERMS.
(a) Price. The Company agrees to pay MSI the prices specified in MSI's
-----
price list attached to this Agreement in Appendix A (the "Price List"), as in
effect when each order is accepted by MSI, less an initial discount of [*] of
such Price List for the period ending on[*]; such discount to be re-negotiated
annually in good faith by MSI and the Company. The re-negotiated discount will
be reflected in the minutes of the Board meeting at which such discount is
agreed. Such prices are exclusive of, and the Company shall pay, all shipping
charges for each order. MSI agrees to give written notice to the Company at
least ninety (90)days in advance of the effective date of any change in its
Price List. Such changes in MSI's Price List shall be made no more frequently
than once during each calendar year, shall be made only after consultation with
the Company, and shall be commercially reasonable.
(b) Taxes. Any and all fees and other amounts due to MSI from the Company
-----
under this Agreement are exclusive of, and the Company shall pay and shall
indemnify and hold MSI harmless against (i) any liability for, any sales, use,
property, license, value added, withholding, import, excise or similar tax,
federal, state or local, U.S. and non-U.S., that may be imposed upon or with
respect to the Software products or their delivery, sale, distribution, use,
ownership or possession, and (ii) any duties, tariffs, customs, import and
related fees and charges, exclusive of taxes based on MSI's net income.
Notwithstanding the foregoing, Japanese income tax may be withheld by the
Company from the price payable to MSI pursuant to Section 4(a) hereof, so long
as such withholding is required by Japanese law. The Company shall provide MSI
with copies of tax receipts or other documents evidencing that such taxes
withheld have been paid to the Japanese tax authorities. Such evidence shall be
forwarded to MSI no later than thirty (30) days after such taxes have been paid.
* CONFIDENTIAL TREATMENT REQUESTED
7
<PAGE>
(c) Payment Schedule. MSI shall invoice the Company each time Software is
----------------
shipped in accordance with the Price List attached hereto as Appendix A. The
Company will make payment to MSI by the fifth (5th) business day of the second
month following the month in which shipments are made by MSI to the Company or
its customers.. Payment will be Japanese Yen for sales in Japan and in U.S.
dollars for sales in all other AP countries, and will be made by wire transfer
of immediately available funds to such bank account as is specified in Appendix
D attached hereto, as may be revised from time to time by MSI. For those
Customers who join any of MSI's consortia, MSI will invoice the Company at the
beginning of each work year of the term of each consortium for the price of
annual membership for each of the Company's Customers. Invoicing and payment
terms for contract research Customers will be determined by MSI and the Company
on a case by case basis, but in any event, no later than thirty (30) days after
the date the work is completed. Invoices shall be considered paid when MSI is in
receipt of such funds or upon confirmation of receipt by the bank. From and
after the date of any default of any payment due hereunder, until such default
is cured, interest shall accrue at the rate of two percent (2%) per month on
such unpaid amounts, or at the maximum rate permitted by California law, if
less.
(d) Installation Fees. The Company may not charge Customers installation
-----------------
fees except as set forth in Appendix A or as otherwise approved in writing by
MSI.
(e) Maintenance Fees. For each Software product, maintenance and updates
----------------
shall be provided by the Company, on behalf of MSI, to MSI Customers and
Customers. This maintenance service shall be provided to MSI Customers and
Customers in accordance with MSI's policies.. Unless and until the maintenance
pricing shall be adjusted by MSI in accordance with the terms of this Agreement,
the maintenance pricing to be paid to MSI for a given Software product shall
conform to the maintenance pricing schedule shown in attached Appendix A, less
an initial discount of [*] to be retained by the Company for the period ending
on [*]; such discount to be re-negotiated annually in good faith by MSI and the
Company and to be reflected in the minutes of the Board meeting at which such
discount is agreed. Unless otherwise agreed, the fee for the annual maintenance
contracts and their renewals shall be paid in advance of the effective date or
renewal date thereof (as the case may be) by the Company to MSI.
(f) Discounts to Subdistributors and Customers. Nothing contained herein
------------------------------------------
shall prevent or otherwise limit the Company's ability to grant additional
discounts to Subdistributors and/or Customers; provided, however, that all such
discounts are and shall be borne entirely by the Company or its Subdistributor.
(g) Hardware. MSI shall sell to the Company workstations manufactured by
--------
Silicon Graphics Inc. ("SGI") at [*] of the Japanese list price for the period
ending on [*]. Thereafter, MSI shall use reasonable commercial efforts to extend
or continue its existing relationships with SGI and other value-added reseller
hardware vendors in order to offer and sell such hardware to the Company at a
favorable price. The Company agrees to purchase such hardware from MSI as long
as MSI is able to offer such hardware at prices equal to or more favorable than
prices available to the Company from other sources.
* CONFIDENTIAL TREATMENT REQUESTED
8
<PAGE>
5. OBLIGATIONS AND FUNCTIONS OF THE COMPANY.
(a) Management and Support of Distribution. The Company shall be
--------------------------------------
responsible for managing and supporting the distribution of the Software in the
Territory, including the management of Subdistributors and value-added reseller
relationships.
(b) Relationship with Subdistributors. The Company may, in its reasonable
---------------------------------
discretion, appoint and authorize Subdistributors to subdistribute the Software
in the Territory. In doing so, the Company shall enter into agreements or
arrangements with such Subdistributors that maximize, and shall act to the best
interests of, the distribution and support of the Software in the Territory. The
Company shall use reasonable commercial efforts to ensure compliance by such
Subdistributors with all of the Company's obligations under this Agreement, and
at all times transact with such Subdistributors on an arms'-length basis.
(c) Adequate Company Facilities and Customer Satisfaction. The Company will
-----------------------------------------------------
establish, staff, equip and maintain such place or places of business in such
location or locations in the Territory as may be necessary to provide good
Customer service and support and marketing coverage in the Territory. The
Company shall use its best efforts to ensure Customer satisfaction including
maintaining a qualified sales force to promote the sale/distribution of the
Software.
(d) Promotion and Marketing. The Company agrees to use its best efforts to
-----------------------
market, distribute, and support the Software throughout the Territory and
further agrees that its marketing and advertising efforts will be of high
quality, in good taste, and will preserve the professional image and reputation
of MSI and the Software. The Company agrees to include in all related
advertising materials all applicable proprietary rights' notices and any other
notices of MSI as they appear on or in the Software. MSI may provide, at its
option, a reasonable amount of advertising material in English, as requested by
the Company, for use in the Company's efforts to market the Software. All such
material shall remain the property of MSI and, upon request, the Company agrees
to return same to MSI without cost to MSI. If required by Customer demand, the
Company shall translate all such materials into the Japanese language or other
language necessary for proper marketing of the Software in the Territory and
provide such materials to MSI for review. MSI shall retain title to and
ownership of any such translations. The Company agrees to refrain from making
any claim or representation concerning the Software in excess of those made by
MSI.
(e) Contract Services. The Company may enter into application contracts
-----------------
with MSI Customers or Customers whereby the Company will provide services to
address Customer problems related to the use of the Software in the Territory.
The Company may also act as MSI's agent with respect to the development or
establishment of strategic technology partner (STP) relationships with major
Customers and MSI Customers in the Territory.
(f) Porting. The Company shall act as MSI's agent with respect to
-------
establishing and managing porting contracts with computer companies in the
Territory. MSI agrees to use its best commercial efforts to supply information
necessary to complete porting that is reasonably requested by the Company.
9
<PAGE>
(g) OEM Arrangements. The Company shall endeavour to establish OEM
----------------
arrangements with third parties in the Territory, and MSI agrees to use its best
commercial efforts to supply information necessary to establish such
arrangements.
(h) Company's General Businesslike Conduct. The Company shall at all times
--------------------------------------
conduct its business in a businesslike manner and will not engage in any
deceptive, misleading, illegal or unethical business practice or any practice
that will reflect unfavorably on MSI or the Software.
(i) Technical Support and Other Staff. The Company agrees to develop,
---------------------------------
maintain and train or otherwise provide a competent technical and scientific
support organization for the Software that will be responsible for the
installation and on-site servicing of the Software, the provision of remote
telephone support services, and the provision of training and application
development to MSI Customers, Customers and Subdistributors. The Company shall
at all times have a sufficient number of competent office, sales, service and
other employees to carry out its obligations under this Agreement.
(j) Installation. The Company shall be responsible for the installation of
------------
the Software at Customers' facilities, either directly or through
Subdistributors.
(k) Keeping MSI Informed. The Company agrees to use its best efforts to
--------------------
keep MSI fully informed of all governmental, commercial and industrial
activities and plans which affect, or could affect, the Software in the
Territory. The Company shall consult with MSI regarding any advertising or trade
practice which might affect the good name, trademarks, goodwill, or reputation
of MSI or the Software.
(l) Reports and Forecasts. The Company shall furnish to MSI in English: (i)
---------------------
within eight (8) business days after the end of each calendar month, a report on
the monthly sales and distribution of the Software in the Territory for the
preceding month, identifying the Software shipped by the Company or
Subdistributors to Customers and the respective locations and contact persons of
such Customers, and showing the price and national currency involved in which
the Software was sold/distributed and for which services relating thereto were
provided, and (ii) a rolling six (6)-month forecast of sales on a monthly basis.
The Company shall also furnish MSI with such other reports as MSI may reasonably
require from time to time.
(m) Competing Representations The Company agrees that during the term of
--------------------------
this Agreement, the Company shall not develop, contract to develop, manufacture,
sell, lease or otherwise distribute or exploit in any manner any product that is
directly competitive with the Software in the Territory. For the purposes of
this Agreement, a product shall be considered to be competitive with the
Software if the sale of that product could result in lower sales of the
Software.
10
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6. OBLIGATIONS OF MSI.
(a) Availability of Documentation. MSI shall provide the Company with one
-----------------------------
(1) copy of all Documentation in the English language including sales
literature, training manuals, operator manuals, graphic materials, and other
documentation relating to the Software. The Company may translate, copy, and
repackage the Documentation as is necessary in accordance with the terms of
Section 2(c) above.
(b) Training. MSI will provide intensive training for a reasonable number
--------
of the Company's personnel at MSI's facilities in the U.S.A., for a reasonable
number of days per year. The Company shall pay all travel, living and incidental
expenses of its personnel. MSI shall also provide technical instructors for
seminars to be held in Japan on a periodic basis, subject to the availability
and reasonable schedules of such instructors. All travel, living and incidental
expenses of such instructors shall be borne by the Company.
(c) Developments. During the term of this Agreement, MSI will use
------------
reasonable commercial efforts to provide the Company with full and complete
information concerning all improvements, updates, enhancements, and
modifications to the Software and will provide the Company with such
improvements, updates, enhancements and modifications for distribution to
Customers at the same time as MSI makes any such improvement, update,
enhancement or modification generally available to its other Customers. In
addition, if there is any software product which is under development by MSI
which may be added to the definition of "Software" pursuant to Section 2(a)
hereof, MSI shall use its reasonable commercial efforts to provide the Company,
on a regular basis as it becomes available, with full and complete information
concerning such product, including, but not limited to, the projected
development and shipping schedule, beta release, documentation and other
information that would assist with pre-marketing preparation.
(d) Third Party OEM Arrangements. In the event that MSI enters into an OEM
----------------------------
arrangement with a third party relating to the manufacture and distribution of
bundled MSI software and third party hardware products (as contemplated under
Section 2(a) hereof), which arrangement includes distribution by such third
party in the Territory being served by the Company, MSI agrees to negotiate in
good faith with the Company to have the Company provide technical support for
such bundled products in the Territory (if necessary). MSI shall give advance
written notice to the Company of such OEM arrangements if support by the Company
is necessary.
(e) Maintenance Upon Termination. Upon the termination of this Agreement
----------------------------
and provided that the relevant User Agreements have been assigned to MSI or its
designee in accordance with Section 11(f)(iii) hereof, MSI shall use its best
efforts to arrange for the continued maintenance and support of MSI Customers,
Customers and the Software in the Territory.
(f) Bug Fixes. MSI will use its reasonable commercial efforts to notify the
---------
Company in writing of any outstanding bugs or other defects in the Software and
will endeavour to correct
11
<PAGE>
such bugs and defects and supply such corrections to the Company in accordance
with MSI's reasonable commercial procedures.
7. WARRANTIES, DISCLAIMERS AND LIMITATIONS OF LIABILITY.
(a) MSI's Warranty. All Software is warranted as provided in Section 5 of
--------------
the current form of MSI's standard UserAgreement attached hereto as Appendix B,
the provisions of which are made a part hereof by reference.
(b) Warranty Disclaimers and Limitations. THE WARRANTIES DESCRIBED IN 7(a)
------------------------------------
ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT. The
warranties shall apply only if MSI's examination discloses to MSI's satisfaction
that alleged defects actually exist and were not caused by misuse, unauthorized
modifications, neglect, improper installation or testing, attempts to repair, or
the like, or by accident, fire, power surge or failure, or other hazard.
(c) No Warranty Pass-Through. The Company shall not pass through to its
------------------------
Customers or any other third party the warranties made by MSI under this Section
7, shall make no other representations to its Customers or any other third party
on behalf of MSI, and shall expressly indicate to its Customers that they must
look solely to the Company in connection with any problems, warranty, claim or
other matters concerning the Software. No warranty, representation or agreement
herein shall be deemed to be made for the benefit of any Customer or any other
third party. Notwithstanding the foregoing, the Company may pass through only to
Customers only those warranties specified in Section 10 of the attached MSI
Standard Software Agreement (Appendix B hereto). Repair or replacement of code
or other items does not extend the warranty period beyond the initial warranty
period which shall begin on the date of installation of the Software at the
Customer's facilities.
(d) Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
-----------------------
ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF
PROFITS, REVENUE, DATA, OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY,
WHETHER IN AN ACTION IN CONTRACT OR TORT OR BASED ON A WARRANTY, EVEN IF THE
OTHER PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. MSI'S LIABILITY FOR ANY DAMAGES UNDER THIS AGREEMENT SHALL IN NO EVENT
EXCEED THE AMOUNTS ACTUALLY PAID BY THE COMPANY TO MSI UNDER THIS AGREEMENT.
SOME STATES AND JURISDICTIONS OUTSIDE OF THE UNITED STATES DO NOT ALLOW THE
LIMITATION OR EXCLUSION OF IMPLIED WARRANTIES, OR LIABILITY FOR INCIDENTAL OR
CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY. THE
COMPANY ACKNOWLEDGES THAT THE ALLOCATION OF RISKS AND BENEFITS UNDER THIS
AGREEMENT ARE BASED ON, AND THE PRICESUNDER THIS AGREEMENT WOULD BE GREATER IN
THE ABSENCE OF, THE LIMITATIONS DESCRIBED ABOVE.
12
<PAGE>
8. INDEMNITY.
(a) Proprietary Rights. MSI will defend the Company against a claim that
------------------
the Software furnished and used within the scope of this Agreement infringes any
third party patent, copyright or other intellectual property right ("Claim"),
and MSI will indemnify the Company for any damages finally awarded by a court of
competent jurisdiction based upon a Claim, or any amount that is paid to finally
settle a Claim, so long as MSI has approved the settlement in writing, provided
that: (i) the Company notifies MSI in writing within thirty (30) days of any
Claim, (ii) MSI has sole control of the defense and all related settlement
negotiations, and (iii) the Company provides MSI with the assistance,
information and authority necessary to perform the above. Reasonable out-of-
pocket expenses incurred by the Company in providing such assistance will be
reimbursed by MSI.
(i) Notwithstanding the foregoing, MSI shall have no liability for
any claim of patent or copyright infringement based on: (A) a modification
by the Company of the Software or the use of a superseded or altered
release of the Software if such infringement would have been avoided by the
use of current or unaltered releases of the Software that MSI provides to
Distributor, or (B) the combination, operation or use of the Software
furnished under this Agreement with products or data not furnished by MSI
if such infringement would have been avoided by the use of the Software
without such products or data.
(ii) In the event the Software is held or is believed by MSI to
infringe, MSI shall have the option, at its expense, to (A) modify the
Software to be non-infringing, (B) obtain for the Company the right to
continue using and distributing the Software, or (C) terminate this
Agreement with respect to the infringing Software and refund the fees paid
for such Software, to the extent each Customer, if any, requests a
corresponding refund, but in any event the amount of the refund shall equal
[*] multiplied by a fraction, the numerator of which shall be [*] and the
denominator of which shall be [*].
(iii) This Section 8(a) states the Company's exclusive remedy and
MSI's entire liability for any infringement.
(b) Other Indemnity. The Company shall be responsible and shall indemnify
---------------
and hold MSI harmless for any and all losses, liability or damages arising out
of or incurred in connection with (i) Company's, Subdistributors' or Customers'
marketing, distribution or use of the Software, except for valid warranty claims
under Section 7 above and valid third party infringement Claims under Section
8(a) above, and (ii) any unauthorized representation, warranty or agreement,
express or implied, made by Company, any Subdistributor or Customer to or with
any other Customers or any third party with respect to the Software.
* CONFIDENTIAL TREATMENT REQUESTED
13
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9. PROPRIETARY RIGHTS.
(a) Ownership of Proprietary Rights. MSI shall retain all of its rights,
-------------------------------
title and interest in and to and ownership of all copyrights, trademarks, trade
secrets, patents, mask works and all other industrial and intellectual property
embodied in the Software including any improvements, updates, enhancements or
modifications to the Software. Except as otherwise expressly provided in this
Agreement, the Company has no right, title or interest in the Software or any
industrial or intellectual property relating to the Software and shall not copy,
reproduce, reverse engineer, decompile, disassemble, or otherwise use, in whole
or in part, the Software. The Company shall keep each and every item to which
MSI retains title free and clear of all claims, liens, and encumbrances except
those of MSI, and any act of the Company, voluntary or involuntary, purporting
to create a claim, lien, or encumbrance on such item shall be void.
(b) No Modification. Except as required under Section 3(d) hereof, the
---------------
Company shall distribute the Software only in the form shipped by MSI, and the
Company shall not alter, modify, or change the Software or its package or use in
relation to any product or any trademark of the Company or any third parties
without the prior written consent of MSI.
(c) Trademarks and Trade Names.
--------------------------
(i) In connection with the distribution or advertising of the
Software, the Company may use such trade names or Trademarks of MSI listed
in Appendix E, as may be amended from time to time by MSI. The Company
acknowledges the validity of such Trademarks and trade names and MSI's
ownership thereof. All such marks and names and any additional marks of
which MSI may in the future be the proprietor will bear the designation
(TM) or the designation (R) as specified by MSI. The Company agrees to
submit to MSI any published material not previously reviewed by MSI
containing references to the Software for MSI's approval prior to the
publication or release of such published material, such approval shall not
be unreasonably withheld. The Company shall not challenge MSI's rights to
use the Trademarks or trade names which MSI may apply to or use in
connection with the Software. If the Company in the course of its business
in the distribution of the Software acquires any goodwill or reputation in
any of the Trademarks or trade names of MSI applied thereto, then at the
expiration or termination of this Agreement all such goodwill or reputation
automatically shall vest in MSI without any separate payment or other
consideration of any kind to the Company, and the Company agrees to take
all such actions necessary to effect such vesting.
(ii) The Company shall, at the request and expense of MSI, do such
acts or things as MSI may reasonably require for the purpose of obtaining,
maintaining, enforcing and preserving any of the Trademarks, trade names or
other proprietary rights of MSI in the Territory; provided, however, that
the Company agrees that only MSI has the right to enjoin any infringement
or registration by a third party of the trademarks, trade names or similar
rights. In the event that any unlawful copying of the Software,
infringement of MSI's rights in the Software, or infringement or
registration by a third party of the trademarks, trade names or other
property rights of MSI in the Territory comes to the
14
<PAGE>
attention of the Company, the Company shall immediately inform MSI in
writing, stating the full facts of the infringement or registration known
to it, including the identity of the suspected infringer or registrant, the
place of the asserted infringement or registration and evidence thereof.
The Company agrees to cooperate fully with MSI at the expense of MSI if MSI
sues to enjoin such infringements or to oppose or invalidate any such
registration. Notwithstanding the foregoing, in the event that MSI refuses
in writing to enjoin such infringements or to oppose or invalidate any such
registration following a written request by the Company to do so, the
Company may, at its expense, sue to enjoin or otherwise oppose any such
infringement of MSI's proprietary rights.
(iii) Except as permitted herein, the Company shall not (nor shall it
attempt to) adopt, use, or register any acronym, Trademark, trade names or
other marketing name of MSI or any confusingly similar work or symbol as
part of the Company's own name or the name of any of its affiliates or the
names of the products it markets.
(d) Nondisclosure and Non-Use.
-------------------------
(i) Without the prior written consent of the supplying party, no
receiving party, its officers, directors, agents or employees shall, in the
case of Confidential Information (as defined hereafter) of a business
nature, both during the term of this Agreement and for a period of three
(3) years after termination of this Agreement, and in the case of
Confidential Information of a technical nature, both during the term of
this Agreement and for period of ten (10) years after the termination of
this Agreement, in any manner whatsoever disclose or communicate such
information to a third party, except as legally required by a governmental
or judicial agency, and each party agrees to keep such Confidential
Information strictly confidential. For the purpose of this Agreement, the
term "Confidential Information" shall mean and include any and all
financial and other information relating to MSI's or the Company's business
and their respective relationships with Teijin, the Software, the
Documentation, information relating to the Software (including but not
limited to technical information such as design specifications,
instructions, and know-how) acquired either directly or indirectly by
either party hereunder; provided, however, that all such Confidential
Information shall be clearly marked as "confidential" and the term
"Confidential Information" shall not include any information which:
(1) has become or entered the public domain through no fault of
the receiving party; or
(2) was in the demonstrable possession of the receiving party
prior to or at the time of receipt hereunder; or
(3) was or has been obtained lawfully from a third party; or
15
<PAGE>
(4) has been independently developed by the receiving party
without violation of its obligations under this Agreement, and which
independent development is properly documented by such party.
(ii) Each party agrees, during the term of this Agreement, that it
shall not use any Confidential Information obtained from the other for any
purpose whatsoever except in a manner expressly provided for in this
Agreement. The provisions of this Section 9(d) shall survive the
termination of this Agreement.
10. COMPLIANCE WITH LAWS.
(a) Export Law Compliance. The Company understands and recognizes that the
---------------------
Software and other materials made available to it hereunder may be subject to
the export administration regulations of the United States Department of
Commerce and other United States government regulations related to the export of
technical data and equipment and products produced therefrom. The Company
represents that it is familiar with and agrees to comply with all such
regulations, including any future modifications thereof, in connection with the
distribution of the Software. The Company agrees that it will not export or re-
export outside the Territory, directly or indirectly, any Software or technical
data relating to the Software without the prior written consent of MSI and
without complying with all applicable regulations. The Company agrees to obtain
the same agreement from each of its Subdistributors and Customers. The Company
hereby agrees to indemnify and hold MSI harmless from any breach of this Section
10(a) by it, any Subdistributor and/or Customer.
(b) Foreign Corrupt Practices Act. The Company hereby agrees to refrain
-----------------------------
from making any payments to third parties which could cause MSI to violate the
U.S. Foreign Corrupt Practices Act. The Company hereby agrees to indemnify and
hold MSI harmless from any breach of this Section 10(b).
(c) Licenses and Permits. The Company shall be responsible for obtaining at
--------------------
its own expense, and shall use its best efforts to obtain, any and all required
non-U.S. governmental authorizations, including without limitation any import
licenses and foreign exchange permits. The Company shall provide proof of
compliance with required non-U.S. governmental authorization to MSI upon
request. MSI shall not be liable if any authorization is delayed, denied,
revoked, restricted or not renewed. The Company shall bear all such risks and
costs caused thereby. In addition, if this Agreement is terminated due to a
default of the Company, MSI or its designee shall be exclusively entitled, free-
of-charge, to any rights the Company may have acquired as a result of, or in,
governmental approvals, authorizations or permits. If this Agreement is
terminated due to a default of MSI, MSI shall pay the Company a reasonable sum
to be mutually agreed upon for the exclusive transfer to MSI or its designee of
any such rights the Company may have acquired as a result of, or in, said
governmental approvals, authorizations or permits. The Company agrees to use its
best efforts to effect the transfer of interest in the foregoing approvals,
authorizations or permits to MSI or to any third party so identified by MSI.
16
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11. EFFECTIVE DATE, TERM, TERMINATION AND EFFECT OF TERMINATION.
(a) Effective Date. This Agreement shall become effective on March 1, 1998
--------------
(the "Effective Date").
(b) Term. This Agreement shall commence on the Effective Date and shall
----
remain in full force and effect until the dissolution of the Company pursuant to
the terms of the Joint Venture Agreement or unless the parties otherwise agree.
(c) Termination by Either Party. Notwithstanding anything in this Agreement
---------------------------
to the contrary, either party shall have the right, in addition and without
prejudice to any other rights or remedies, to terminate this Agreement
immediately upon written notice to the other party if the other party commits
any material breach of any of the terms of this Agreement which, in the case of
a breach capable of remedy, shall not have been remedied within thirty (30) days
of the receipt by the party in default of notice specifying the breach and
requiring its remedy.
(d) Termination by MSI. MSI shall have the right, in addition and without
------------------
prejudice to any other rights or remedies, to terminate this Agreement:
(i) upon the termination of the Joint Venture Agreement for any
reason, unless otherwise mutually agreed between MSI and Teijin where all
the shares of the Company are acquired by either Teijin or MSI pursuant to
Section 12 of the Joint Venture Agreement; or
(ii) upon written notice at any time for breach of Section 9 hereof
(Proprietary Rights).
(e) No Other Rights Upon Termination. It is expressly understood and agreed
--------------------------------
that the rights of termination as provided in this Agreement are absolute and
that both parties hereto have considered the making of expenditures in preparing
for performance as contemplated by this Agreement and possible losses and
damages incident and resulting to them that may result in the event of its
termination. Therefore, in agreeing to said terms of termination it is with the
full knowledge of such possibilities and except as provided herein neither party
hereto shall be responsible to the other for compensation, damages or otherwise
by reason of such termination of this Agreement at any time. Further, no
payments in the nature of severance payments shall be due either party upon
termination of this Agreement at any time. Without limiting the generality of
the foregoing, the Company understands and acknowledges that any contracts or
other arrangements it enters into with any third parties with respect to the
Software will be subject and subordinate to the rights of termination set forth
in this Agreement. The Company will indemnify and hold MSI harmless from any and
all liability, loss, damages, costs or expenses incurred by MSI in connection
with claims by any such third party made because of the termination of this
Agreement.
(f) Effect of Termination. Termination or expiration of this Agreement
---------------------
shall not affect any other rights of either party which may have accrued up to
the date of such termination or expiration and the Company shall not be relieved
of any obligation for any sums due to MSI for
17
<PAGE>
the Software or services covered by purchase orders accepted prior to
termination or expiration or any confidentiality obligations of the Company
under Section 9(d) of this Agreement. Upon termination:
(i) the due date of all outstanding invoices to the Company for the
Software shall automatically be accelerated to become due and payable by
immediate wire transfer on the effective date of termination, even if
longer terms have been previously agreed to;
(ii) all orders or portions thereof remaining unshipped as of the
effective date of termination shall automatically be cancelled; and
(iii) all executed User Agreements between Customers and the Company
then in effect, and all rights and obligations thereunder, shall
immediately be assigned by the Company to MSI or its designee.
(g) The Company's Duties Upon Termination. Upon the termination or
-------------------------------------
expiration of this Agreement, the Company agrees to do the following:
(i) refrain thereafter from representing itself as a distributor of
MSI or using any trademarks or trade names of MSI;
(ii) immediately return to MSI or immediately destroy (A) all
Confidential Information of MSI including but not limited to advertising
matter and (B) all other printed material in its possession or under its
control containing or bearing any trademark or trade names of MSI;
(iii) take all appropriate steps to remove and cancel its listing in
telephone books, directories, public records or elsewhere, which state or
indicate that the Company is a distributor of MSI;
(iv) make available to MSI for a period of one (1) year for inspection
and copying all books and records of the Company that pertain to the
Company's performance of and compliance with its obligations, warranties
and representations under this Agreement; and
(v) immediately cease using the applicable Software, and certify in
writing to MSI within thirty (30) days after such termination that the
Company has either destroyed, permanently erased or returned to MSI the
Software, all related Documentation and all copies. This requirement
applies to copies in all forms, partial and complete, in all types of media
and computer memory and storage, and whether or not modified or merged into
other programs or materials.
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12. GENERAL TERMS.
(a) Assignment. Except in connection with the sale of all or substantially
----------
all of MSI's assets, or its business (by merger or otherwise), or any similar
transfer by MSI, any attempted assignment of the rights or delegation of the
obligations under this Agreement shall be void without the prior written consent
of the non-assigning or non-delegating party.
(b) Benefits and Binding Nature of Agreement. In the case of any permitted
----------------------------------------
assignment or transfer of or under this Agreement, this Agreement or the
relevant provisions shall be binding upon, and inure to the benefit of, the
successors, executors, heirs, representatives, administrators and assigns of the
parties hereto.
(c) Entire Agreement. This Agreement, together with the Appendices attached
----------------
hereto and incorporated herein by reference, embodies the final, complete and
exclusive understanding between the parties, and replaces and supersedes all
previous agreements, understandings or arrangements between the parties with
respect to its subject matter. No modification or waiver of any terms or
conditions hereof, nor any representations or warranties shall be of any force
or effect unless such modification or waiver is in writing and signed by an
authorized officer of each party hereto. It is expressly agreed that any of the
terms and conditions of the Company's purchase order or the like shall be
superseded by the terms and conditions of this Agreement.
(d) Force Majeure. Neither party shall be liable to the other for its
-------------
failure to perform any of its obligations under this Agreement, except for
payment obligations, during any period in which such performance is delayed
because rendered impracticable or impossible due to circumstances beyond its
reasonable control, including but not limited to fire, flood, earthquake,
explosion, acts of God, labor trouble or shortage, inability to obtain or
shortage of materials, equipment or transportation, insurrections, riots, war,
acts or requirements of the governments in any state, provided that the party
experiencing the delay promptly notifies the other of the delay. Any
installation, warranty, technical support, consulting services and other
services to be performed at the Company's facility may not be performed if MSI
reasonably believes conditions at such facility represent a safety or health
hazard to any MSI employee.
(e) Notice. All notices concerning this Agreement shall be written in the
------
English language and shall be deemed to have been received (i) ten (10) days
after being properly airmailed, postage prepaid, (ii) three (3) business days
after being properly sent by commercial overnight courier, or (iii) two (2)
business days after being transmitted by confirmed telecopy, in each case
addressed to the relevant party at its address first set forth in this Agreement
to the attention of Michael J. Savage, President, in the case of MSI, and to the
attention of Nobuya Kawasaki in the case of the Company.
(f) Governing Law and Official Language. This Agreement is made in
-----------------------------------
accordance with and shall be governed and construed under the laws of the State
of California, U.S.A., as applied to agreements executed and performed entirely
in California by California residents and in no event shall this Agreement be
governed by the United Nations Convention on Contracts for the International
Sale of Goods; provided, however, that the provisions of this Agreement relating
to
19
<PAGE>
dispute resolution, as set forth in Section 12(g) below, shall be governed
exclusively by the United States Arbitration Act (9 U.S.C. Section et. seq.)
notwithstanding any different or contrary provision of state law. The official
text of this Agreement and any Appendix or any notice given or accounts or
statements required by this Agreement shall be in English. In the event of any
dispute concerning the construction or meaning of this Agreement, reference
shall be made only to this Agreement as written in English and not to any other
translation into any other language.
(g) Dispute Resolution. If a dispute arises between the parties arising out
------------------
of or in relation to this Agreement, the parties shall use all reasonable
efforts to resolve the dispute through good faith discussions. The senior
management of each of MSI and the Company commits itself to respond promptly to
any such dispute. In the event that MSI and the Company are unable, after
exerting all reasonable efforts, to resolve the said dispute, the said dispute
shall be finally settled through binding arbitration on the following basis:
(i) The arbitration shall be conducted by a panel of three (3)
arbitrators under the International Arbitration Rules of the American
Arbitration Association then in force, by which each of MSI and the Company
agrees to be bound. Within thirty (30) days after notice of arbitration has
been given, each of MSI and the Company shall appoint one (1) arbitrator.
The arbitrators appointed by the parties shall then appoint a third
arbitrator, who shall serve as the presiding arbitrator.
(ii) If demand for arbitration is made by the Company, the place of
arbitration shall be San Diego, California, U.S.A, and if demand for
arbitration is made by MSI, the place of arbitration shall be Tokyo, Japan.
(iii) The language to be used in the arbitration shall be English.
(iv) Any arbitrator may be of any nationality, and need not be a
lawyer or hold any other professional status or membership.
(v) The arbitral award shall be rendered in writing, shall state the
reasons for the award, and shall be final and binding upon the parties. In
no event shall the arbitral award include a sum for punitive damages.
(vi) Judgment upon any award may be entered by any court of competent
jurisdiction, or application may be made to such a court for judicial
acceptance of the award and any appropriate order including enforcement.
(vii) Each of MSI and the Company shall bear its own expenses and
attorneys' fees in connection with the arbitration.
(h) Waiver. Any waiver (express or implied) by either party of any default
------
or breach of this Agreement shall not constitute a waiver of any other or
subsequent default or breach.
20
<PAGE>
(i) Severability. In the event that any provision of this Agreement shall
------------
be unenforceable or invalid under any applicable law or be so held by applicable
court decision, such unenforceability or invalidity shall not render this
Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted so as to best accomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.
(j) Rights and Remedies Cumulative. Except as expressly provided herein,
------------------------------
the rights and remedies provided in this Agreement shall be cumulative and not
exclusive of any other rights and remedies provided by law or otherwise.
(k) No Agency - Independent Contractors. The Company shall act as an
-----------------------------------
independent contractor under the terms of this Agreement. The Company is not,
and shall not be deemed to be, an employee, agent, partner or legal
representative of MSI for any purpose. The Company shall not be entitled to
enter into any contracts in the name of, or on behalf of MSI, nor shall the
Company be entitled to pledge the credit of MSI in any way or hold itself out as
having authority to do so.
(l) Captions and Section References. The section headings appearing in this
-------------------------------
Agreement are inserted only as a matter of convenience and in no way define,
limit, construe or describe the scope or extent of such section or in any way
affect such section.
(m) Counterparts. This Agreement may be executed in counterparts with the
------------
same force and effect as if each of the signatories had executed the same
instrument.
(n) No Limitation on Supplier MSI. Nothing in this Agreement shall be
-----------------------------
construed so as to preclude MSI from selling or otherwise marketing any of the
Software to (i) any Customer outside the Territory, (ii) any value added
reseller or original equipment manufacturers outside the Territory, or (iii) any
other distributors outside the Territory.
(o) Parties Advised by Counsel -- No Interpretation Against Drafter. This
---------------------------------------------------------------
Agreement has been negotiated between unrelated parties who are sophisticated
and knowledgeable in the matters contained in this Agreement and who have acted
in their own self interest. In addition, each party has been represented by
legal counsel. Accordingly, any rule of law, including Section 1654 of the
California Civil Code, as well as any other statute, law, ordinance, or common
law principles or other authority of any jurisdiction of similar effect, or
legal decision that would require interpretation of any ambiguities in this
Agreement against the party who has drafted it is not applicable and is hereby
waived. The provisions of this Agreement shall be interpreted in a reasonable
manner to effect the purpose of the parties, and this Agreement shall not be
interpreted or construed against any party to this Agreement because that party
or any attorney or representative for that party drafted this Agreement or
participated in the drafting of this Agreement.
(p) Authority to Enter Into and Execute Agreement. Both parties represent
---------------------------------------------
and warrant to each other that they have the right and lawful authority to enter
into this Agreement
21
<PAGE>
for the purposes herein and that there are no other outstanding agreements or
obligations inconsistent with the terms and provisions hereof.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be signed and delivered by their duly authorized representatives as of the date
first set forth herein.
MOLECULAR SIMULATIONS INCORPORATED
By: /s/Michael J. Savage
-----------------------------
Michael J. Savage,
President
TEIJIN MOLECULAR SIMULATIONS INCORPORATED
By: /s/Nobuya Kawasaki
-----------------------------
Name: Nobuya Kawasaki
Title: President & CEO
Appendix A
SOFTWARE, CONSORTIA AND PRICE LISTS
[*]
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
APPENDIX B
STANDARD USER AGREEMENT FOR MSI SOFTWARE
<PAGE>
Agreement No:_________________ Effective Date:_________________
MOLECULAR SIMULATIONS INCORPORATED
USER AGREEMENT
This user agreement ("Agreement") shall be effective on the date written above
and is between MOLECULAR SIMULATIONS INCORPORATED ("MSI"), 9685 Scranton Road,
San Diego, CA 92121 and
___________________________________________________________________("Customer"),
located at _______________________________________________________________.
Under this Agreement, (a) MSI will provide and Customer will accept a right
to use the object code version of MSI's proprietary software product(s) set
forth on Attachment A to this Agreement, and/or (b) MSI will sell Customer
certain computer equipment described in Attachment A, in each case on the terms
and conditions specified below. MSI's software product(s), together with related
documentation and components (including new releases, enhancements, and
modifications provided under warranty or maintenance, if applicable), shall be
referred to and defined as "Software." The computer equipment sold under this
Agreement, together with any operating system software installed on it, is
referred to as "Equipment."
1. TERM; PAYMENT
1.1 The right to use granted hereunder is effective upon execution of this
Agreement by Customer and MSI. The term of the right to use is perpetual unless
otherwise specified in Attachment A. The right to use shall remain in effect
for such term unless terminated by either party as set forth in Section 8.
1.2 Customer shall pay MSI the amount set forth in Attachment A within
thirty (30) days of invoice. The charges under this Agreement are exclusive of
local, state, or federal use, excise, personal property, sales or other similar
taxes or duties which may be imposed as a result of the transactions under this
Agreement. Customer shall be responsible for all such taxes and duties, except
for taxes on MSI's net income.
2. RIGHT TO USE SOFTWARE
2.1 MSI hereby grants and Customer accepts a nontransferable and non-
exclusive right to use the Software only to process the work of Customer's own
business. Customer may not use the Software to process the work of any other
party and may only use the Software at the specific location to which the
Software is delivered. For host-locked rights to use, Customer may use the
Software only on the central processing unit (the "Original CPU") originally
designated for installation, and only at the specific location to which the
Software is delivered. For floating rights to use, the Software may be accessed
by any computer that is commercially supported by MSI and within Customer's
authorized network at the specific location to which the Software is delivered,
but may not be accessed from remote sites. The Software may be used by no more
than that number of simultaneous users for which the right to use is granted,
and may not be electronically or otherwise transferred to a different physical
location. If Customer desires to use the Software for additional simultaneous
users, at another site, or on a different CPU (for host-locked right to uses),
Customer shall secure MSI's prior approval, which may be granted subject to
additional charges.
2.2 No title or ownership rights to the Software are transferred to
Customer by this Agreement, but shall remain with MSI and/or its licensors.
3. SOFTWARE MAINTENANCE
3.1 For a period of one (1) year from delivery of the Software, MSI will
provide, without charge, the services set forth in this Section 3. Thereafter,
maintenance will be provided for twelve month periods until terminated by either
party upon thirty (30) days written notice prior to the renewal date. Annual
maintenance fees are payable in advance on the anniversary date of the order.
Additional charges apply to initiate maintenance for Software that has not been
under continuous maintenance since installation.
3.2 Maintenance includes new releases, corrections, enhancements, and
improvements to the Software and related documentation. Maintenance also
includes reasonable assistance and consultation to assist Customer in resolving
problems with the use of the Software, including the verification, diagnosis,
and correction of material errors and defects in the Software. Maintenance does
not include new products sold separately by MSI.
3.3 Maintenance will be provided for the current release of the Software on
computer platforms that MSI commercially supports; prior releases shall be
maintained for twelve months following a new release.
4. EQUIPMENT
4.1 The Equipment is manufactured by third party equipment suppliers.
Delivery is F.O.B. MSI's equipment suppliers' shipment points. Title and all
risk of damage or loss to Equipment shall pass to Customer upon delivery to
carrier at MSI's equipment suppliers' shipment points. MSI retains a purchase
money security interest in Equipment delivered hereunder and in any proceeds
Customer receives from resale or lease thereof, until payment of the purchase
price to MSI. Customer agrees to execute financing statements as MSI may request
to protect its security interest. All Equipment manufacturers' software included
with the Equipment is right to used to Customer solely in accordance with such
manufacturers' standard right to use terms included with the Equipment.
5. WARRANTY AND LIMITATION OF LIABILITY
5.1 MSI warrants that it has the right to distribute the Software according
to the terms of this Agreement. MSI further warrants that, for the twelve (12)
months following delivery (the "Warranty Period"), the Software will perform
substantially in accordance with the MSI-supplied User Manual when properly
<PAGE>
operated on the designated hardware and operating system. MSI does not warrant
that operation of the Software will be error free.
5.2 MSI's sole obligation during the Warranty Period is to replace
defective Software media or materials and to use reasonable efforts to correct
any material error or defect in the Software as expeditiously as reasonably
possible. This warranty does not apply to problems arising from (i) Customer's
modification or misuse of the Software; (ii) malfunction of Customer's
equipment, operating system, or software not supplied by MSI; or (iii) attempts
to use the Software in a manner or purpose for which it was not intended.
5.3 With respect to Equipment purchased under this Agreement, any
warranties provided by the Equipment manufacturers (including all applicable
limitations thereto) are passed through to Customer if and to the extent
permitted by such warranties.
5.4 MSI MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE
SOFTWARE OR EQUIPMENT, AND DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE. MSI's LIABILITY FOR ANY LOSSES OR DAMAGES
THAT ARISE OUT OF THE PERFORMANCE OR BREACH OF THIS AGREEMENT (EXCEPT AS STATED
IN SECTION 7), WHETHER IN CONTRACT, TORT, OR OTHER FORM OF ACTION, SHALL NOT
EXCEED THE TOTAL PRICE PAID TO MSI UNDER THIS AGREEMENT. IN NO EVENT SHALL MSI
OR ITS SUPPLIERS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF GOODWILL, DATA
LOSS, BUSINESS DISRUPTION, OR COMPUTER FAILURE.
6. NON-DISCLOSURE; ALTERATIONS; COPIES
6.1 The Software is the valuable and proprietary trade secret of MSI.
Customer shall (i) maintain the confidentiality of the Software, using, at a
minimum, the same safeguards afforded its own confidential, proprietary trade
secrets; (ii) limit access to the Software to its employees and its consultants
who have confidentiality obligations to Customer; (iii) not disclose, provide,
transfer, rent, distribute, or otherwise make available any portion of the
Software to another party. Customer's non-disclosure obligation shall not apply
to information now or hereafter in the public domain through no fault of
Customer, information in the possession of Customer prior to disclosure by MSI,
information properly obtained without restriction from a third party who is not
bound by an obligation of confidentiality to MSI, or information independently
developed by Customer without reference to the Software.
6.2 Customer shall not alter, modify, adapt, translate, reverse engineer,
decompile, disassemble, or create derivative works from the Software, nor take
any other steps intended to produce a source language statement of the Software
or any part thereof without MSI's express prior written consent.
6.3 Customer is authorized to copy the Software solely for backup,
archival, and disaster recovery purposes. Customer agrees not to remove any
copyright or proprietary rights notices from the Software and to reproduce all
such notices on any copies that it makes. Customer is prohibited from copying,
in whole or in part, any Software documentation or training materials;
additional documentation is available for a separate fee.
6.4 The obligations of this Section 6 shall survive termination of this
Agreement or any right to use granted hereunder.
7. INFRINGEMENT INDEMNIFICATION
7.1 MSI shall at its expense defend Customer against any claim, and shall
indemnify and hold Customer harmless from any final judgment, that a current,
unmodified copy of the Software infringes a U.S. patent or copyright, provided
that (i) MSI is given prompt written notice of any such claim, (ii) MSI shall
have sole control of the settlement or defense of any action against Customer to
which this indemnity applies; and (iii) Customer cooperates with MSI, at MSI's
expense, in every reasonable way to facilitate such defense.
7.2 Should the use of the Software be enjoined, or should MSI desire to
minimize its liabilities hereunder, MSI shall have the right, at its sole option
and expense, to secure the right for Customer to continue use of the Software
or to replace or modify the Software to make it noninfringing. If such remedies
are not reasonably available, Customer shall be entitled to a pro rata refund
of the price paid for such Software based on a five year amortization. The
foregoing sets forth the entire liability of MSI and Customer's exclusive
remedy with respect to claims of infringement arising from Customer's use of the
Software.
8. TERMINATION
8.1 If either party breaches a material provision of this Agreement, the
other party may give written notice of default. If the breaching party fails to
cure the breach within thirty (30) days, this Agreement may be terminated
immediately by the other party. In the event that Customer has made an
unauthorized disclosure or distribution of the Software or other MSI
confidential information, this Agreement shall terminate upon written notice by
MSI.
8.2 Upon termination, Customer shall make no further use of the Software
and shall either return to MSI or destroy originals and all copies of the
Software and supporting materials. Customer shall supply an affidavit to MSI
certifying that it no longer possesses any embodiments of the Software. No
refunds or credits will be due.
9. GENERAL
9.1 Neither party may assign or transfer its rights, liabilities or
obligations under this Agreement without the prior written consent of the other,
except by operation of law in the case of merger, acquisition, or
consolidation.
9.2 All notices required hereunder shall be in writing and sent by
certified mail, express mail, or other overnight courier to the addresses
written above, or such other address as noticed to the parties.
9.3 This Agreement and any Attachments and Addenda constitute the entire
agreement between the parties with respect to the subject matter hereof
(Attachment A and any future Attachment A signed by MSI and Customer are
expressly incorporated by reference into this Agreement). There are no
representations, promises, warranties, or understandings relied upon by
Customer that are not contained herein. This Agreement may be modified only in
writing signed by both parties. Terms and conditions on any Customer purchase
order or other ordering document shall not be deemed to modify this Agreement.
Additional purchases of rights to
<PAGE>
use the Software or of Equipment by Customer without execution of another
agreement will be governed by the terms of this Agreement unless the parties
otherwise agree in writing. The failure by either party to insist upon strict
enforcement of any terms and conditions of this Agreement shall not be
construed as a waiver of the right to assert or rely upon any such terms on any
future occasion.
9.4 This Agreement shall be governed by and interpreted under the
substantive laws of the State of California. If any provision of this Agreement
is held to be unenforceable, such decision shall not affect the validity or
enforceability of any or all of the remaining provisions.
9.5 Customer agrees not to export any product supplied by MSI or any part
or direct product thereof in violation of U.S. Export Administration
regulations. In furtherance of these obligations, Customer hereby represents,
warrants and covenants that it will not use, or authorize or permit any other
person, firm, corporation or other entity to use, the Software, or make the
Software available for use, in connection with the design, development,
production, stockpiling or use of any chemical or biological weapons.
9.6 If the Software is used by Customer to obtain results that are
published in a scientific journal or other publication, Customer will
acknowledge its use of the Software with an appropriate citation, which shall
include MSI's full corporate name and the name of the Software product used.
9.7 All Software supplied by MSI to the government is provided with
restricted rights as set forth in the legends accompanying the Software.
IN WITNESS WHEREOF, THIS AGREEMENT HAS BEEN SIGNED BY DULY AUTHORIZED
REPRESENTATIVES OF CUSTOMER AND MSI.
CUSTOMER:
------------------------------------------
BY:
------------------------------------------------
NAME:
----------------------------------------------
TITLE:
---------------------------------------------
DATE:
----------------------------------------------
MOLECULAR SIMULATIONS INCORPORATED
BY:
------------------------------------------------
NAME:
----------------------------------------------
TITLE:
---------------------------------------------
DATE:
----------------------------------------------
PLEASE SIGN AND RETURN ALL COPIES; CUSTOMER COPY WILL BE RETURNED AFTER
SIGNATURE BY MSI.
<PAGE>
APPENDIX C
WIRE TRANSFER (BANK) INFORMATION
Yen payments to be remitted as follows:
Bank [*]
Branch: [*]
Account Name: [*]
Account Number: [*]
Beneficiary Inst.: For the further benefit of MSI
Dollar payments to be remitted as follows:
Bank: [*]
Branch: [*]
Account Name: [*]
Account Number: [*]
Beneficiary Inst.: For the further benefit of MSI
* CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
APPENDIX D
MSI TRADEMARKS
The Company has the following trademarks:
1. WebLab
2. Cerius and Cerius2
3. Insight and Insight II
4. CHARMm
5. Catalyst
6. Quanta
7. Discover
8. Biosym
9. X-PLOR
WebLab is a trademark for which registration applications have been filed in the
in U.S., Canada, Europe and Japan. Cerius, Insight, CHARMm, Catalyst, Discover
and Biosym are trademarks that have been registered in the U.S. Quanta is a
trademark that had been registered in the U.S., but is now a common law
trademark. X-PLOR is a registered trademark of Harvard that is licensed to the
Company.
<PAGE>
APPENDIX E
LIST OF WEBLAB PRODUCTS AVAILABE FROM MSI'S WEB PAGE
1. WebLab ViewerPro.
<PAGE>
EXHIBIT 10.41
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is made as of March 1, 1998 (the
"Effective Date"), by and between MOLECULAR SIMULATIONS INCORPORATED, a Delaware
corporation ("MSI"), and TEIJIN MOLECULAR SIMULATIONS INCORPORATED, a
corporation organised under the laws of Japan ("TMSI").
WHEREAS, in or around February 1992, MSI and TMSI entered into a
Distributorship Agreement pursuant to which MSI granted TMSI an exclusive right
to market and sublicense MSI Software in Japan. In consideration of the licenses
and rights granted to TMSI, TMSI was to pay licensing fees to MSI on a monthly
basis, calculated as a percentage of the fees received by TMSI from sublicensing
the Software. TMSI has always paid these fees to MSI net of withholding taxes
mandated by Japanese law, and
WHEREAS, MSI and TMSI have now prepared an Amended and Restated
Distributorship Agreement ("Amended Agreement") which amends the rights and
obligations of MSI and TMSI in certain respects. The parties believe that under
the terms of the Amended Agreement, TMSI will no longer be mandated by Japanese
law to withhold taxes from the payments to be made to MSI, and the parties are
filing an application before the National Tax Authority of Japan ("NTA") for a
formal opinion on this issue. Pending receipt of such opinion, TMSI will no
longer withhold taxes from payments to be made to MSI, and
WHEREAS, MSI desires to provide TMSI with certain indemnifications with
respect to the proposed change in tax withholding by TMSI.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, MSI and TMSI hereby agree as follows:
1. CESSATION OF TAX WITHHOLDING BY TMSI. Effective for transactions recorded
on or after March 1, 1998, and pursuant to the terms of the Amended Agreement,
TMSI will cease to deduct Japanese withholding tax from the payments to be made
to MSI related to applicable transactions pursuant to the terms of the Amended
Agreement.
2. INDEMNIFICATION WITH RESPECT TO TAX WITHHOLDING. Subject to the terms of
this Agreement, MSI agrees to indemnify and hold TMSI harmless against any
administrative instruction by NTA or final judicial judgment holding TMSI liable
for failure to withhold taxes on its payments to MSI. MSI will indemnify TMSI
against the full amount of the withholding taxes as well as any associated
penalties or interest that are included within the administrative instruction by
the NTA or the judgment. This indemnity is only valid if such administrative
instruction or judgment is based solely upon TMSI's failure to withhold taxes
pursuant to TMSI's compliance with the terms of Section 1 of this Agreement.
3. PROCEDURES. TMSI shall promptly notify MSI upon receipt of written notice
of any action or administrative instruction commenced against it in respect of
which indemnity may be sought
1.
<PAGE>
hereunder. MSI may participate at its own expense in the defense or settlement
of any such action. TMSI and MSI shall, based on their agreement, select a law
office reasonably reputable for tax disputes in Japan to defend themselves.
These costs and expenses shall be borne by MSI.
4. SETTLEMENT. TMSI agrees that it will not, without the prior written consent
of MSI, which consent shall not be unreasonably withheld, settle, make payments,
compromise or consent to the entry of any judgment in any pending or threatened
claim, administrative instruction, action or proceeding in respect of which
indemnification could be sought under Section 2 hereof.
5. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among
the parties hereto relating to the subject matter hereof and the provisions
hereof supersede all conflicting prior agreements and understandings relating to
the subject matter hereof.
6. GOVERNING LAW. This Agreement shall be governed by the laws of the State
of California. Any claim or controversy arising out of or related to this
Agreement or any breach hereof shall be submitted to a court of competent
jurisdiction in the State of California.
IN WITNESS WHEREOF, MSI and TMSI have caused this agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.
MOLECULAR SIMULATIONS INCORPORATED
By: /s/Michael J. Savage
--------------------
Name:
Title:
TEIJIN MOLECULAR SIMULATIONS
INCORPORATED
By: /s/Nobuya Kawasaki
-----------------------
Name: Nobuya Kawasaki
Title: President & CEO
2.
<PAGE>
EXHIBIT 10.42
BASIC LEASE PROVISIONS
----------------------
The following Basic Lease Provisions constitute a part of the
R&D Building Lease to which they are attached.
1. Landlord: Sorrento Tech Limited, a California limited
partnership.
2. Tenant: Biosym Technologies, Inc., a California corporation.
3. Premises:
(a) Rentable Area: Approximately 10,270 sq. ft. See
Definition of Rentable Area attached hereto as Exhibit
"A-3".
(b) Location: The ground floor of the west end of the
building located at the address specified in Item 3(c)
below (the "Building"), as shown on the Floor Plan of
the Premises attached hereto as Exhibit "A-1." The
Building is located in a certain real estate project
commonly known as the "Naiman Tech Center" (the
"Project"), as shown on the Site Plan of the Project
attached hereto as Exhibit "A-2."
(c) Address: 10065 Barnes Canyon Road, Suite A
San Diego, CA 92121
4. Lease Term:
(a) Initial Lease Term: Five (5) years.
(b) Option Term: Tenant shall have the option to renew and
extend the term of this Lease for one additional five
(5) year period on all the same terms and conditions of
this Lease.
5. Target Commencement Date: June 1, 1987. See Paragraph 3.1.
6. Rent:
(a) Initial Basic Annual Rent: $11,297 per month ($1.10 per
sq. ft.).
(b) Adjustments to Basic Annual Rent: The Basic Annual Rent shall be
increased annually at the rate of 5% per annum on each applicable
anniversary of the Rent Commencement Date (as defined below). The first
such increase shall occur on the first anniversary of the Rent
Commencement Date. See Paragraph 4.2(b).
(c) Additional Rent: See Article 5.
(i) Tenant's share of Building Operating Expenses:
55 .11%
(ii) Tenant's share of Project Operating Expenses: 1.70%.
(c) Rent Abatement Period: Tenant shall have a seven (7)
month Rent Abatement Period, commencing on the first day
of the first calendar month of the Lease term, and
terminating on the last day of the seventh month of the
Lease term. During this seven month period, Tenant shall
not be obligated to pay Basic Annual Rent, but shall pay
Additional Rent.
(i)
<PAGE>
(d) Rent Commencement Date:
(i) For Basic Annual Rent: February 1, 1988.
(ii) For Additional Rent: Commencement Date.
Additional Rent is defined in Article 5 as Tenant's pro
rata share of Building Operating Expenses and Project
operating Expenses.
7. Rent Deposit: $11,297, payable in cash upon execution of
this Lease and applicable to the first monthly installment of
Basic Annual Rent.
8. Security Deposit: $11,297.
9. Permitted Use: General office purposes and purposes
reasonably incidental thereto.
10. Insuring Party: Landlord.
11. Addresses for Notices:
(a) If to Landlord:
Sorrento Tech Limited
c/o The Naiman Company
9605 Scranton Road, Suite 300
San Diego, CA 92121
(b) If to Tenant:
(i) Before the Commencement Date:
Biosym Technologies, Inc.
9605 Scranton Road, Suite 101
San Diego, CA 92121
(ii) After the Commencement Date: The
Premises
12. Address for Payments to Landlord:
All payments payable to Landlord under this Lease shall
be sent to Landlord at the address specified in Item
11(a) above or such other address as Landlord may
designate from time to time.
13. Broker(s): None
Addenda: Article 21 consists of Paragraphs 21.1 through 21.3.
/s/TS /s/JN
--------- -----------
Tenant's Landlord's
Initials Initials
LAL:1618Y
022487
(ii)
<PAGE>
MEMORANDUM OF LEASE COMMENCEMENT
Whereas, Biosym Technologies, Tenant, entered into a certain lease dated
February 26, 1987 with Sorrento Tech Limited, Landlord, for the premises located
at 10065 Barnes Canyon Road.
Whereas, the parties desire to ratify the commencement date, additional rent
commencement date and basic annual rent commencement date of the term of the
said lease;
Now, THEREFORE, it is mutually agreed that:
1) The new commencement date of the lease is now
August 1, 1987 and the new expiration date shall be
July 31, 1992.
2) The new commencement date for additional rent shall be at
occupancy of the premises at 10065 Barnes Canyon Road, prior to
and until such time as Tenant takes occupancy of the 10065 Barnes
Canyon premises, Tenant shall pay all basic and additional rent
applicable to the premises which they currently occupy.
3) The new commencement date for basic annual rent shall
be April 11, 1988.
4) This instrument in no way alters, changes, modifies or
amends the lease but memorializes the agreed upon
commencement date, additional rent commencement date
and basic annual rent commencement date as pertaining
to the 10065 Barnes Canyon premises.
Dated this 29 day of June, 1987.
------
LANDLORD: TENANT:
SORRENTO TECH LTD. BIOSYM TECHNOLOGIES
By:/s/Jack Naiman By:/s/Todd Schmidt
-------------- ---------------
Jack Naiman
<PAGE>
R & D BUILDING LEASE
between
SORRENTO TECH LIMITED,
as Landlord
and
BIOSYM TECHNOLOGIES, INC.,
as Tenant
<PAGE>
R&D BUILDING LEASE
TABLE OF CONTENTS
Page
----
ARTICLE 1 Parties....................................... 1
ARTICLE 2 Premises...................................... 1
ARTICLE 3 Term.......................................... 1
ARTICLE 4 Basic Annual Rent............................. 2
ARTICLE 5 Additional Rent............................... 3
ARTICLE 6 Security Deposit.............................. 7
ARTICLE 7 Use........................................... 7
ARTICLE 8 Maintenance, Repairs and
Alterations................................ 8
ARTICLE 9 Insurance; Indemnity.......................... 10
ARTICLE 10 Damage or Destruction......................... 13
ARTICLE 11 Payment of Taxes.............................. 14
ARTICLE 12 Utilities..................................... 15
ARTICLE 13 Assignment and Subletting..................... 15
ARTICLE 14 Landlord's Access............................. 17
ARTICLE 15 Defaults; Remedies............................ 17
ARTICLE 16 Eminent Domain................................ 20
ARTICLE 17 Brokers....................................... 21
ARTICLE 18 Estoppel Certificate, Attornment
and Subordination............................ 21
ARTICLE 19 Landlord's Liability.......................... 22
ARTICLE 20 Miscellaneous Provisions...................... 23
ARTICLE 21 Addenda....................................... 25
EXHIBITS
"A-1" Floor Plan of the Premises....................
"A-2" Site Plan of the Project......................
"A-3" Definitions of Rentable Area..................
"B" Schedule of Construction Responsibilities.....
"C" Rules and Regulations.........................
"D" Estoppel Certificate..........................
"E" Parking Agreement.............................
LAL:1618Y
022487
<PAGE>
R & D BUILDING LEASE
--------------------
ARTICLE 1: PARTIES
This R & D BUILDIN1G LEASE (the "Lease"), dated for reference
purposes only as of the 26 day of February 1987, is made by and
between SORRENTO TECH LIMITED, a California limited partnership (the
"Landlord"), and BIOSYM TECHNOLOGIES, INC., a California corporation
(the "Tenant"), on the terms and conditions stated below in this
Lease and in the foregoing Basic Lease Provisions.
ARTICLE 2: PREMISES
Subject to all the terms and conditions of this Lease, Landlord
hereby leases and demises to Tenant and Tenant hires from Landlord
the "Premises" for the term and at the rental provided below in this
Lease. The Premises are more particularly described in Item 3 of
the Basic Lease Provisions. The Premises consist of the ground
floor of the west end of the Building. The Rentable Area of the
Premises shall, therefore, be computed pursuant to Paragraph l(a) of
Exhibit "A3" hereto.
ARTICLE 3: TERM
3.1 Commencement Date.
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(a) General. Subject to all the terms and conditions of
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this Article 3, the term of this Lease shall be as specified in Item
4(a) of the Basic Lease Provisions, unless earlier terminated or
extended as provided below in this Lease. The parties intend that
the Lease term shall commence on the Target Commencement Date
specified in Item 5 of the Basic Lease Provisions. The date on
which the Lease term actually commences is referred to as the
"Commencement Date." The Commencement Date shall be determined as
provided below in subparagraph (b).
(b) Definition. The term of this Lease shall commence on
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the first to occur of: (1) the date on which Landlord substantially
completes construction of the Tenant Improvements (as defined in the
Schedule of Construction Responsibilities attached hereto as Exhibit
"B"), or (2) the date on which Landlord would have substantially
completed construction of the Tenant Improvements but for delays
caused by Tenant. If Tenant takes possession of or commences use of
the Premises (or any portion thereof) for any purpose, including
construction, before the Commencement Date, the term of this Lease
shall not commence, but such occupancy shall be subject to all the
terms and conditions of this Lease and Tenant shall be obligated to
pay all items of rent under this Lease from the date Tenant takes
possession or commences use of the affected portion of the
Premises. If Tenant takes possession of or commences use of the
Premises before the Commencement Date, Tenant shall execute an Early
Entry Indemnity Agreement in form and substance reasonably
satisfactory to Landlord. Landlord shall be deemed to have
substantially completed construction of the Tenant Improvements when
Landlord has substantially completed construction of the Tenant
Improvements in accordance with the Schedule of Construction
Responsibilities (Exhibit "B") and a certificate of occupancy has
been issued for the Premises. Landlord shall give Tenant thirty
(30) days' prior written notice of the date on which Landlord
reasonably expects substantial completion of construction of the
Tenant improvements to occur.
(c) Tenant's Delay. If construction of the Tenant
--------------
Improvements is delayed or postponed by Tenant's Delay (as
hereinafter defined), the start of the term of this Lease shall be
adjusted to reflect the actual amount of Tenant's Delay. To
illustrate, if the total amount of Tenant's Delay were five days and
substantial completion of construction of the Tenant Improvements
were to occur on April 15, 1987, the Lease term would commence on
April 10, 1987. Tenant's Delay shall be the amount of delay or time
<PAGE>
lost as a result of Tenant's failure to adhere to the time table set
forth in the Schedule of Approvals contained in the Schedule of
Construction Responsibilities (Exhibit "B").
3.2 Effect of Delay in Commencement. Notwithstanding the
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Target Commencement Date, if for any reason the Commencement Date
occurs after the Target Commencement Date, Landlord shall not be
subject to any liability therefor, nor shall such failure affect the
validity of this Lease or the obligations of Tenant under this Lease
or extend the term of the Lease. Tenant's obligation to pay rent
shall be measured from the Commencement Date; provided, however,
that if the Commencement Date has not occurred within sixty (60)
days after the Target Commencement Date for reasons other than
Tenant's Delay, Tenant may, at Tenant's option, by written notice
sent to Landlord within ten (10) days after the end of said 60-day
period (or such longer period as the parties may mutually agree),
cancel this Lease. If Tenant so cancels this Lease, the parties
shall be discharged from all obligations hereunder.
3.3 Option to Extend or Renew.
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(a) Grant of Option. Subject to all the terms and
---------------
conditions of this Lease, Tenant shall have the right (the "Option")
to extend the term of this Lease for the additional period specified
in Item 4(b) of the Basic Lease Provisions by sending written notice
to such effect to Landlord not later than one hundred eighty (180)
days before the expiration of the initial term. Failure to timely
send such notice shall constitute a waiver of all remaining rights
under the Option and Tenant shall have no right to exercise the
Option with respect to any future option term. Each renewal or
extension of the term of this Lease shall be on all the terms and
conditions of this Lease; provided, however, that the Basic Annual
Rent payable during each option term shall be determined as provided
in subparagraph (b) below. Notwithstanding anything in this
Paragraph 3.3 to the contrary, Tenant shall have no right to
exercise the Option if (1) Tenant is in default under this Lease
either at the time the Option is exercised or at the time any option
term is scheduled to commence; (2) Tenant is not in possession of at
least seventy-five percent (75.0%) of the Rentable Area of the
Premises either at the time the Option is exercised or the time any
option term is scheduled to commence; or (3) Tenant has assigned
this Lease in whole or in part or sublet more than twenty-five
percent (25.0%) of the Rentable Area of the Premises.
(b) Determination of New Basic Annual Rent. If Tenant
-------------------------------------
exercises the Option, the Basic Annual Rent payable during the
option term shall be increased at the same rate and with the same
frequency as during the initial term. The first increase in the
Basic Annual Rent shall take place on the first day of the first
year of the option term.
ARTICLE 4: BASIC ANNUAL RENT
4.1 Initial Basic Annual Rent. Subject to increase as
-------------------------
provided below, Tenant shall pay to Landlord as rental for the
Premises "Basic Annual Rent" in the amount specified in Item 6 of
the Basic Lease Provisions. The initial amount of the Basic Annual
Rent shall be as specified in Item 6(a) of the Basic Lease
Provisions. The Basic Annual Rent shall be payable in equal monthly
installments, in advance, without deduction or offset, on the first
day of each month during the term of this Lease, including any
extension or renewal thereof. The date on which the first
installment of Basic Annual Rent is due and payable is hereafter
referred to as the "Rent Commencement Date." Unless otherwise
specified, the Rent Commencement Date shall be the first day of the
first month following the Commencement Date. The first installment
of Basic Annual Rent shall include any Basic Annual Rent accrued
during any partial month between the Commencement Date and the Rent
Commencement Date.
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4.2 Increases in Basic Annual Rent.
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(a) General. The Basic Annual Rent shall be increased at the times and in
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the amounts provided below in this Paragraph 4.2.
(b) Computation of Increase. The Basic Annual Rent shall
-----------------------
be adjusted at the times specified in Item 6(b) of the Basic Lease
Provisions. The date on which the Basic Annual Rent is adjusted is
hereafter referred to as the "Rental Adjustment Date." The rate of
the increase in the Basic Annual Rent (hereafter referred to as the
"Rental Adjustment Percentage") shall be as specified in Item 6(b)
of the Basic Lease Provisions. Each such increase in the Basic
Annual Rent shall take effect on the applicable Rental Adjustment
Date. The amount of each increase in the Basic Annual Rent shall be
equal to the Basic Annual Rent (the "Reference Rent") payable during
the twelve (12) month period immediately preceding the applicable
Rental Adjustment Date multiplied by the Rent Adjustment
Percentage. The new Basic Annual Rent shall be equal to the sum of
(1) the Reference Rent and (2) the amount of the increase in the
Basic Annual Rent computed as specified in the preceding sentence.
In no event shall the Basic Annual Rent payable during any 12-month
period be less than the Basic Annual Rent payable during the
immediately preceding 12-month period.
4.3 Miscellaneous. The Basic Annual Rent, the Additional Rent and all other
-------------
amounts required to be paid by Tenant under this Lease
are sometimes collectively referred to as, and shall constitute,
"rent." The Basic Annual Rent for any period during the term hereof
which is for less than one (1) month shall be a pro rata portion of
the monthly installment then due. The Basic Annual Rent shall be
payable in lawful money of the United States to Landlord at the
address stated below or to such other persons or at such other
places as Landlord may designate in writing.
ARTICLE 5: ADDITIONAL RENT
5.1 Definition of "Additional Rent." In addition to the Basic
------------------------------
Annual Rent specified in Article 4, Tenant shall pay to Landlord as
"Additional Rent" Tenant's pro rata share of Building Operating
Expenses (as hereafter defined) and Project Operating Expenses (as
hereafter defined). Tenant's share of Building Operating Expenses
shall be equal to the ratio of the Rentable Area of the Premises to
ninety-five percent (95.0%) of the total Rentable Area of the
Building. Tenant's share of Project Operating Expenses shall be
equal to the ratio of the Rentable Area of the Premises to
ninety-five percent (95.0%) of the total Rentable Area of the
Project. The Rentable Areas of the Building and the Project are
specified in Exhibit A-3. Initially, Tenant's share of Building
Operating Expenses and Project Operating Expenses shall be as
specified in Items 6(c)(i) and 6(c)(ii), respectively, of the Basic
Lease Provisions.
5.2 Definition of "Building Operating Expenses." The term
------------------------------------------
"Building Operating Expenses" as used herein shall include all costs
of operation and maintenance of the Building, as determined by
generally accepted accounting practices consistently applied, and
shall include the following costs by way of illustration but not limitation:
real property taxes (as defined below); Landlord's
personal property taxes; costs and expenses in contesting the amount
or validity of any property tax by appropriate proceedings; water
and sewer charges; insurance premiums; license, permit, and
inspection fees; heat; gas; light; power; water; steam; janitorial
and security services; labor; salaries; air conditioning;
landscaping; supplies; materials; equipment; tools; the cost of any
capital improvements made to the Building by Landlord that reduce
operating expenses or that are required under any governmental law
or regulation not applicable to the Building or not in effect at the
time it was constructed (such cost to be amortized over such
reasonable period as Landlord shall determine with a return on
capital at the rate paid by Landlord on funds borrowed for the
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<PAGE>
purpose of constructing such capital improvements); property
management costs; and any increases in the amount of the interest
that Landlord is required to pay to its initial permanent lender in
accordance with the terms and provisions of the note evidencing Landlord's
initial permanent financing for the Building (or if
Landlord has not then closed its initial permanent financing for the
Building, then under the note evidencing Landlord's initial
permanent financing for the Building), in the event such note
contains provisions for variable interest rates (provided, however,
that in interpreting whether or not such note contains provisions
for variable interest rates, it is agreed that if the interest rate
is fixed but such lender is entitled to any participation in the
gross or net income, revenue or cash flow from the operation of the
Building, such participation shall cause the note to be construed to
be a variable interest rate note, and payments required of Landlord
to such lender due to the provisions of such participation agreement
shall be construed to be increased payments of interest).
Notwithstanding anything in this Paragraph 5.2 to the contrary, it
is agreed that the following items shall not be included as part of
Building Operating Expenses: the cost of any Tenant Improvements
constructed in the Building; brokerage commissions; leasing and
marketing costs; costs reimbursable by insurance or third parties;
executive salaries; depreciation on the Building or other capital
improvements; and, except as expressly provided above, depreciation
on equipment located in the Building.
5.3 Definition of "Project Operating Expenses" and Other
----------------------------------------------------
Terms.
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(a) Project Operating Expenses. The term "Project Operating Expenses"
--------------------------
shall include all costs of operation and maintenance of the Common Areas (as
hereafter defined), as
determined by generally accepted accounting practices consistently applied, and
shall include the following costs by way of
illustration but not limitation: general maintenance and repairs;
pest control; resurfacing, painting, restriping, cleaning and
sweeping of parking areas; trash removal; maintenance and repair of
sidewalks, curbs and signs in the Project which tenants and/or
occupants of the Project are not obligated to repair; irrigation
systems; landscaping; painting; electrical, water, gas and other
utilities; directional signs and other traffic markers and devices;
maintenance and repair of any fire protection systems for the
Project; lighting systems; storm drainage systems and any other
utility systems; real property taxes; Landlord's personal property
taxes; the cost and expense of contesting the amount or validity of
any real property tax by appropriate means; the cost of any capital
improvements made to the Common Areas by Landlord that reduce
operating expenses or that are required under any governmental law
or regulation not applicable to the Project or not in effect at the
time it was constructed (such cost to be amortized over such
reasonable period as Landlord shall determine with a return on
capital at the rate paid by Landlord on funds borrowed for the
purpose of constructing such capital improvements); any increases in
the amount of the interest that Landlord is required to pay to its
initial permanent lender in accordance with the terms and provisions
of the note evidencing Landlord's initial permanent financing for
the Common Areas of the Project (or if Landlord has not then closed
its initial permanent financing for the Common Areas of the Project,
then under the note evidencing Landlord's initial permanent
financing of the Common Areas of the Project) in the event such note
contains provisions for variable interest rates (provided, however,
that in interpreting whether or not such note contains provisions
for variable interest rates, it is agreed that if the interest rate
is fixed but such lender is entitled to any participation in the
gross or net income, revenue or cash flow from the operation of the
Common Areas of the Project, such participation shall cause the note
to be construed to be a variable interest rate note, and payments
required of Landlord to such lender due to the provisions of such
participation agreement shall be construed to be increased payments
of interest), regular and special assessments imposed by the
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<PAGE>
Lusk/Mira Mesa industrial Park Association, a California non-profit
corporation; police and fire protection services; depreciation and
maintenance on operating machinery and equipment used in the
maintenance and repair of the Common Areas (if owned) and rental
paid for such machinery and equipment used in the maintenance and
repair of the Common Areas (if rented); rental for electric and
service rooms based upon the average rate in the Project; any
parking charges, surcharges or any other costs levied or assessed by
local, state or federal government agencies in connection with the
use of parking facilities; property management costs; the cost of
maintaining and operating the Common Area Facilities (as hereafter
defined), including without limitation all utility expenses and
salaries of all personnel employed by Landlord in the Common Area
Facilities. Such costs and expenses shall not include any allowance
for depreciation of the Common Area Facilities or other improvements
located in the Common Areas. Landlord may cause any or all of the
services described above to be provided by an independent contractor
or contractors.
(b) Common Area Facilities. The term "Common Area
----------------------
Facilities" sha11 include, without limitation, any swimming pools, spas, tennis
and racquetball courts, saunas, locker rooms, exercise rooms, restaurants and
other facilities available for general use by tenants/occupants of the Project.
(c) Common Areas. The term "Common Areas" shall include
------------
all areas within the Project outside the exterior boundaries of
buildings (other than the Common Area Facilities) now or hereafter
situated thereon, including, but not limited to, streets, driveways,
parking areas, parking structures, truckways, delivery passages,
loading docks, sidewalks, ramps, open and closed courts, landscaped
and planted areas, exterior stairways, bus stops, retaining and
decorative walls and planters, the Common Area Facilities, and other
areas provided by Landlord and/or other owners of portions of the
Project for the common use of Landlord, such other owners and/or the
occupants of the Project, their employees, customers and invitees.
Landlord reserves the right to make changes at any time and from
time to time in the size, shape, location, number and extent of the
Common Areas, or any of them, and no such change shall entitle the
Tenant to any abatement of rent.
5.4 Definition of Real Property Taxes.
---------------------------------
(a) General. As used in this Lease, the term "real property taxes" shall
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include any form of general or special assessment, license fee, commercial
rental tax, levy, penalty, or
tax (other than inheritance or estate taxes), unforeseen as well as
foreseen, imposed by any authority having the direct or indirect
power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other
improvement district thereof, as against any legal or equitable
interest of Landlord in the Premises or in the Building and/or the
Project, as against Landlord's right to rent or other income
therefrom, or as against Landlord's business of leasing the Premises
or any tax imposed in substitution, partially or totally, of any tax
previously included within the definition of real property taxes, or
any additional tax the nature of which was previously included
within the definition of real property tax.
(b) Inclusions. The definition of "real property taxes"
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set forth in subparagraph (a) includes without limitation:
(1) Any tax on Landlord's "right" to rent or "right"
to other income from the Premises or as against Landlord's business
of leasing the Premises.
(2) Any assessment, tax, fee, levy or charge in
substitution, partially or totally, of any assessment, tax, fee,
levy or charge previously included within the definition of real
property taxes, it being acknowledged by Tenant and Landlord that
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<PAGE>
Proposition 13 was adopted by the voters of the State of California
in the June 1978 Election and that assessments, taxes, fees, levies
and charges may be imposed by governmental agencies for such
services as fire protection, street, sidewalk and road maintenance,
refuse removal and for other public improvements, services or
benefits formerly provided without charge to property owners or
occupants. It is the intention of Tenant and Landlord that all such
new and increased assessments, taxes, fees, levies and charges be
included within the definition of "real property taxes" for the
purposes of this Lease.
(3) Any assessment, tax, fee, levy or charge
allocable to or measured by the area of the Premises or the rent
payable hereunder, including, without limitation, any gross income
tax or excise tax levied by the state, city or federal government,
or any political subdivision thereof, with respect to the
possession, leasing, operating, management, maintenance, alteration,
repair, use or occupancy by Tenant of the Premises, or any portion
thereof.
(4) Any assessment, tax, fee, levy or charge upon
this transaction or any document to which Tenant is a party,
creating or transferring an interest or an estate in the Premises.
(c) Exclusions. Notwithstanding any provision of this
----------
Paragraph 5.4 expressed or implied to the contrary, "real property
taxes" shall not include Landlord's federal or state income,
franchise, inheritance or estate taxes.
5.5 Payment of Additional Rent.
--------------------------
(a) Time of Payment. Tenant shall pay Additional Rent in
---------------
monthly installments, in advance, at the same time monthly
installments of Basic Annual Rent are payable. Tenant shall be
obligated to pay Additional Rent from the Commencement Date,
notwithstanding any delay in Tenant's obligation to start paying
Basic Annual Rent. Prior to the Commencement Date and the beginning
of each calendar year thereafter, Landlord shall give Tenant a
written estimate of Building and Project Operating Expenses for the
ensuing calendar year or portion thereof. If, during the course of
any calendar year, it appears that Landlord's estimate of Building
and Project Operating Expenses was too low, Landlord may revise its
written estimate. Tenant shall pay the then current estimated
amount to Landlord as Additional Rent, in equal monthly
installments, in advance. Within thirty (30) days after receipt of
the accountant's determination, referred to in Article 5.5(c), the
parties shall make any payment or allowance necessary to adjust
Tenant's estimated payment to Tenant's actual proportionate share as
shown by the accountant's determination. Any amount due Tenant
shall be credited against installments next coming due under this
Article 5.
(b) Adjustments for Direct Payments. Notwithstanding anything to the
-------------------------------
contrary contained in this Article 5, as to each specific category of expense
which one or more tenants of the Building or the Project either pays directly to
third parties or specifically reimburses to Landlord (for example, separately
metered utilities, separately contracted janitorial service, property taxes
directly reimbursed to Landlord, etc.) such tenant(s)' payments with respect
thereto shall not be included in Building Operating Expenses and/or Project
Operating Expenses, as the same may be, for purposes of this Article 5. Tenant's
share of each such category of expenses shall be adjusted by excluding from the
denominator thereof the Rentable Area of all such tenants paying such category
of expenses directly to third parties or reimbursing same directly to Landlord.
(c) Annual Determination. Annual and other determinations of Building
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and Project Operating Expenses shall be made reasonably and in good faith by
Landlord by reference to competitive market conditions as to the cost of the
items included as part of such expenses. Tenant shall have the right, after
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<PAGE>
reasonable notice, to inspect Landlord's books and records relating
to such expenses at reasonable times at Landlord's principal place
of business. The annual determination of Building and Project
Operating Expenses shall be made and certified by an independent
certified public accountant designated by Landlord. A copy of the
determination shall be made available to Tenant upon request. The
independent accountant's determination shall be final and binding
upon Landlord and Tenant.
(d) On Termination. Even though the Lease term has
--------------
expired and Tenant has vacated the Premises, if Tenant has not paid
all Additional Rent payable by Tenant under this Lease attributable
to a period before the termination of this Lease, Tenant shall
immediately pay any amount due from Tenant upon receipt of written
notice from Landlord. In the event of a termination of this Lease
resulting in Tenant's overpayment of Additional Rent, Landlord shall
promptly reimburse Tenant the amount of any overpayment.
ARTICLE 6: SECURITY DEPOSIT
6.1 Purpose. In addition to the Rent Deposit specified in
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Item 7 of the Basic Lease Provisions, Tenant has deposited with
Landlord the sum specified in Item 8 of the Basic Lease Provisions,
receipt of which is hereby acknowledged, as security for the full
performance of the obligations of Tenant to Landlord under this
Lease. If Tenant shall be in default with respect to the payment of
any item of rent or any other covenant contained herein, Landlord
may use or retain all or any part of said security deposit for the
payment of any rent or any other sum in default, or for the payment
of any amount which Landlord may spend or may become obligated to
spend by reason of Tenant's default. If any portion of said
security deposit be applied or used, Tenant shall, within five (5)
days after written notice thereof, deposit an additional amount with
Landlord sufficient to restore said security deposit to its original
amount as specified in Item 8 of the Basic Lease Provisions and
Tenant's failure to do so shall constitute a material breach of this
Lease. If Tenant is not in default at the termination of this
Lease, Landlord shall return said security deposit to Tenant within
thirty (30) days after termination of this Lease, less any amounts
required to restore the Premises to good condition and repair,
including damage resulting from the removal by Tenant of its trade
fixtures or equipment.
6.2 Landlord's Obligations. Landlord's obligation with
----------------------
respect to any security deposit is that of a debtor and not as a
trustee, consequently such sums may be commingled with rental
receipts or dissipated and no interest shall accrue thereon. In the
event of the sale of the real property of which the Premises
constitute a part, Landlord or its agent shall pay over to
Landlord's successor in interest the sums held as security or
advance rent and notify Tenant in writing setting forth the details
of such transfer, including the successor's name and address. Upon
such written notification, Tenant shall have no further claim
against Landlord in that regard. In the event of foreclosure by any
mortgagee against Landlord's interest in the Premises or the Lease,
Landlord shall continue to be liable for any security deposit and
any such mortgagee shall have no liability or responsibility
therefor.
ARTICLE 7: USE
7.1 Permitted Use. The Premises shall be used and occupied
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only for the purposes specified in Item 9 of the Basic Lease
Provisions, subject, however, to any recorded covenants, conditions
and restrictions for Lusk/Mira Mesa Industrial Park (the "C,C&R's")
and applicable governmental rules and regulations; provided,
however, that, in no event shall any use of the Premises involve any
hazardous or dangerous activity not covered by the forms of
insurance required to be maintained under this Lease.
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<PAGE>
7.2 Compliance with Law.
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(a) Warranties by Landlord. Landlord warrants to Tenant
----------------------
that the Premises, in their existing state as of the date of this
Lease and at the Commencement Date, but without regard to the use
for which Tenant will use the Premises, do not violate any
applicable building code regulation or ordinance. Landlord also
warrants that the Premises shall be in good condition as of the
Commencement Date, improved in accordance with the agreement of the
parties with respect to the construction of Tenant Improvements, as
set forth in the Schedule of Construction Responsibilities (Exhibit
B). In the event that it is determined that this Warranty has been
violated, then it shall be the obligation of Landlord, after written
notice from Tenant, to promptly, at Landlord's sole cost and
expense, rectify any such violation in the event that Tenant does
not give to Landlord written notice of the violation of this
warranty within one (1) year after the Commencement Date, it shall
be conclusively deemed that, such violation did not exist and the
correction of the same shall be the obligation of Tenant; provided,
however, that as to latent defects which are not discoverable by
reasonable diligence on the part of Tenant during said one-year
period, it is agreed that Landlord shall be responsible for
correcting such undiscoverable latent defects during the one-year
period beginning on the date Tenant discovers or should have
reasonably discovered any such latent defect.
(b) Tenant's Duties. Tenant shall, at Tenant's expense,
---------------
comply promptly with all applicable statutes, ordinances, rules,
regulations, orders, restrictions of record, and requirements in
effect during the term or any part of the term of this Lease
regulating the use by Tenant of the Premises. Tenant shall not use
nor permit the use of the Premises in any manner that will create
waste or a nuisance. Tenant shall comply with the Rules and
Regulations attached hereto as Exhibit "C" and with the C,C&R's.
7.3 Condition of Premises. Tenant hereby accepts the
---------------------
Premises in their condition existing as of the date of the execution
hereof, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the
use of the Premises, and accepts this Lease subject thereto and to
all matters disclosed thereby and by any exhibits attached hereto.
Tenant acknowledges that neither Landlord nor Landlord's agent has
made any representation or warranty as to the suitability of the
Premises for the conduct of Tenant's business. The taking of
possession of the Premises by Tenant shall conclusively establish
that the Premises were at such times in good and sanitary order,
condition and repair.
ARTICLE 8: MAINTENANCE, REPAIRS AND ALTERATIONS
8.1 Tenant's Obligations. Tenant shall, at Tenant's sole cost
--------------------
and expense, keep the Premises and every part thereof in good
condition and repair (except as provided in Paragraph 8.2 with
respect to Landlord's maintenance obligations), including without
limitation all decorating, remodeling, alteration and painting
required by Tenant during the term of this Lease. Tenant will pay
for any repairs to the Premises, the Building or the Project made
necessary by any negligence or carelessness of Tenant or its
assignees, subtenants, employees or their respective agents or other
persons permitted in the Building or the Project by Tenant, or any
of them, and will maintain the Premises in a safe, clean, neat and
sanitary condition. Notwithstanding anything in this Lease to the
contrary, Tenant shall be responsible for replacing any glass that
may be broken or removed at the direction of or by any negligence or
carelessness of Tenant or its assignees, subtenants, employees or
their respective agents or other persons permitted in the Building
or the Project by Tenant. Landlord is not liable to repair any
leaks in the roof of the Building or other damage to the Building
resulting from penetrations of the Building's roof made by or at the
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<PAGE>
request of Tenant, unless such penetration is made by Landlord's
contractor before the Commencement Date.
8.2 Landlord's Obligations.
----------------------
(a) Scope of Responsibility. Subject to Paragraph 8.1,
------------------------
Landlord shall make all necessary repairs to the roof, exterior and
interior demising walls, exterior doors, windows (but not glass),
corridors and other common areas of the Building, the Common Area
Facilities and the Common Areas. Landlord shall keep the Building
and the Project in a safe, clean and neat condition, and use
reasonable efforts to keep all equipment in the Building, such as
elevators, plumbing, and heating, air conditioning and ventilation
("HVAC") equipment, in good condition and repair. Landlord shall also
maintain and repair all structural parts of the Building, which
structural parts include, without limitation, certain items listed
above in this subparagraph (a) and the foundations, subflooring,
unexposed electrical, plumbing and sewage systems, including those
portions of the said systems lying outside the Premises, and gutters
and downspouts on the Building. There shall be no abatement of rent and
no liability of Landlord by reason of any injury to or interference
with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building (or
fixtures, appurtenances and equipment therein) or the Project. Tenant
specifically waives the right to make repairs at Landlord's expense
under Section 1942 of the California Civil Code or any other law,
statute or ordinance now or hereafter in effect, subject, however, to
subparagraph (b) below.
(b) Corrective Action by Tenant. Tenant shall promptly
---------------------------
notify Landlord in writing of any repairs which Landlord is
obligated to effect under subsection (a). Landlord shall promptly
effect such repairs, taking into account whether or not the nature
of the problem presents a hazard or emergency. If Landlord fails to
effect such repairs within thirty (30) days after written notice
from Tenant, Tenant may make the repairs itself in a commercially
reasonable manner. If Tenant does so, Landlord shall reimburse
Tenant for the cost of the repairs within fifteen (15) days after
receipt of a reasonably detailed invoice from Tenant. If Landlord
fails to reimburse Tenant within said 15-day period, interest shall
accrue on the unpaid balance at the rate of interest specified in
Paragraph 15.4(b) below from the date of disbursement by Tenant to
the date of reimbursement by Landlord; provided, however, that no
interest shall accrue on any disputed portion of an invoice from
Tenant if Landlord notifies Tenant of a good faith dispute about
such invoice within said 15-day period. Upon resolution of such
dispute, interest shall accrue on the amount ultimately determined
owing to Tenant in accordance with the above provisions.
8.3 Surrender. On the last day of the term hereof, or on any
---------
earlier termination, Tenant shall surrender the Premises to Landlord
in the same condition as when received, broom clean, ordinary wear
and tear excepted. Tenant shall repair any damage to the Premises
occasioned by the removal of Tenant's trade fixtures, furnishings
and equipment, which repair shall include the patching and filling
of holes in floors and walls and repair of structural damage.
8.4 Landlord's Rights. if Tenant fails to perform Tenant's
-----------------
obligations under this Article 8, Landlord may at its option (but
shall not be required to) enter upon the Premises, after reasonable
notice to Tenant under the circumstances, and put the same in good
order, condition and repair, and the cost thereof, together with
interest thereon at the rate specified below in Paragraph 15.4 (Late
Charges and Interest on Delinquent Payments) shall immediately
become due and payable as Additional Rent. Landlord shall have the
right, at any time, to change the arrangement and/or location of
entrances or passageways, doors and doorways, and corridors,
elevators, stairs, toilets, or other public parts of the Building
and the configuration of the Common Areas and, upon giving Tenant
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reasonable notice thereof, to change the name, number or designation
by which the Building and/or the Project is commonly known.
8.5 Alterations and Additions.
-------------------------
(a) Procedure for Making Alterations. After the
--------------------------------
Commencement Date Tenant shall not, without Landlord's prior written
consent, make or permit any alterations, improvements, additions, or
Utility Installations (as hereafter defined) in, on or about the
Premises, except for non-structural alterations, exceeding Five
Thousand Dollars ($5,000) in cost in each instance. As used in this
Paragraph 8.5, the term "Utility Installation" shall mean bus
ducting, power panels, wiring, fluorescent fixtures, space heaters,
conduits, air conditioning equipment and plumbing. Landlord may
require that Tenant remove any or all of said alterations,
improvements, additions, or Utility Installations at the expiration
of the Lease term, and restore the Premises to their prior
condition, ordinary wear and tear excepted. Landlord may also
require Tenant to provide Landlord, at Tenant's sole cost and
expense, a lien and completion bond, in an amount equal to one
hundred fifty percent (150%) of the estimated cost of such
improvements, to insure Landlord against any liability for
mechanics' and materialman's liens and to insure completion of the
work. Should Tenant make any alterations, improvements, additions
or Utility Installations without the prior approval of Landlord,
Landlord may require that Tenant remove any or all of the same.
(b) Conditions to Landlord's Approval. Any alterations,
---------------------------------
improvements, additions or Utility Installations in or about the
Premises that Tenant shall desire to make and which requires the
consent of Landlord shall be presented to Landlord in written form,
with detailed plans for the proposed work. If Landlord shall give
its consent thereto, the consent shall be deemed conditioned upon
Tenant's (1) acquiring a permit to do so from appropriate
governmental agencies, (2) furnishing of a copy thereof to Landlord
prior to the commencement of the work and (3) complying with all
conditions of said permit in a prompt and expeditious manner.
(c) Lien Free Construction. Tenant shall pay when due
----------------------
all claims for labor or materials furnished or alleged to have been
furnished to or for Tenant at or for use in the Premises, which
claims are or may be secured by any mechanics' or materialman's 1ien
against the Premises or any interest therein. Tenant shall give
Landlord not less than ten (10) days' prior written notice of the
commencement of any work in the Premises. Landlord shall have the
right to post notices of non-responsibility in or on the Premises as
provided by law. If Tenant shall, in good faith, contest the
validity of any such lien, claim or demand, then Tenant shall, at
its sole expense, defend itself and Landlord against the same and
shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Landlord or the
Premises, upon the condition that if Landlord shall require, Tenant
shall furnish Landlord with a surety bond satisfactory to Landlord
in an amount equal to such contested lien, claim or demand
indemnifying Landlord against liability for the same and holding the
Premises free from the effect of such lien or claim. In addition,
Landlord may require Tenant to pay Landlord's reasonable attorneys'
fees and costs incurred by Landlord in participating in such action.
(d) Ownership Upon Expiration of Lease. Unless Landlord
----------------------------------
requires their removal, all alterations, improvements, additions and
Utility Installations (whether or not such Utility Installations
constitute trade fixtures of Tenant) which may be made on the
Premises shall become the property of Landlord and remain upon and
be surrendered with the Premises at the expiration of the Lease term.
ARTICLE 9: INSURANCE; INDEMNITY
9.1 Insuring Party. As used in this Article 9, the term
--------------
"insuring party" shall mean the party designated in Item 10 of the
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Basic Lease Provisions who has the obligation to obtain the Property
Insurance required hereunder. Whether the insuring party is
Landlord or Tenant, Tenant shall, as additional rent for the
Premises, pay the cost of all insurance required hereunder. If
Landlord is the insuring party, Tenant shall pay the cost of the
insurance so obtained by Landlord as Additional Rent.
9.2 Liability Insurance. Tenant shall, at Tenant's expense,
-------------------
obtain and keep in force during the term of this Lease a policy of
Combined Single Limit, Bodily Injury and Property Damage Insurance
insuring Landlord and Tenant against any liability arising out of
the ownership, use, occupancy or maintenance of the Premises and all
areas appurtenant thereto. Such insurance shall be a combined
single limit policy in an amount not less than Three Million Dollars
($3,000,000) for personal injury and Five Hundred Thousand Dollars
($500,000) property damage. The liability policy shall contain
cross liability endorsements and shall insure performance by Tenant
of the indemnity provisions of this Article 9. The limits of said
insurance shall not, however, limit the liability of Tenant
hereunder. If Tenant shall fail to procure and maintain said
insurance, Landlord may, but shall not be required to, procure and
maintain the same, but at the expense of Tenant. Not more
frequently than every three (3) years, if, in the reasonable opinion
of Landlord, the amount of liability insurance required hereunder is
not adequate, upon receipt from Landlord of a reasonably detailed
explanation of the rationale for increasing such liability insurance
coverage, Tenant shall increase said insurance coverage as required
by Landlord; provided, however, that in no event shall the amount of
the liability insurance increase be more than fifty percent (50%)
greater than the amount thereof during the preceding three (3) years
of the term of this Lease. However, the failure of Landlord to
require any additional insurance coverage shall not be deemed to
relieve Tenant from any obligations under this Lease.
9.3 Property Insurance.
------------------
(a) General Requirements. The insuring party shall
--------------------
obtain and keep in force during the term of this Lease a policy or
policies of insurance covering loss or damage to the Premises, in
the amount of the full replacement value thereof, as the same may
exist from time to time, against all perils included within the
classification of fire, extended coverage, vandalism, malicious
mischief, special extended perils (all risk), sprinkler leakage,
earthquake sprinkler leakage, with "inflation guard" or agreed
amount endorsement, and any other perils which Landlord deems
necessary. Said insurance shall provide for payment of loss
thereunder to Landlord or to the holders of any mortgages or deeds
of trust encumbering the Premises. Tenant shall also obtain and
keep in force during the term of this Lease a policy of business
interruption insurance in an amount equal to the Basic Annual Rent
and the Additional Rent for a period of at least twelve (12) months,
with loss payable to Landlord. If such insurance coverage has a
deductible clause, Tenant shall be liable for the deductible amount;
provided, however, that the amount of such deductible clause shall
not exceed One Thousand Dollars ($1,000). Tenant shall deliver to
Landlord a certificate of such business interruption insurance.
(b) Contents Insurance. Tenant shall be solely
------------------
responsible for insuring all contents of the Premises, including
Tenant's furniture, fixtures, and equipment and improvements
installed by Tenant.
(c) Increases in Coverage. Not more frequently than each
---------------------
three (3) years during the term of this Lease, if, in the opinion of
Landlord or the insuring party's insurance carrier, the amount of
property insurance required hereunder is not adequate, the insuring
party shall increase said insurance coverage. Such increase may,
however, be more frequent than each three (3) years if required by
the insurance carrier in order to maintain insurance for the full
replacement cost of the Premises.
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9.4 Insurance Policies.
------------------
(a) Requirements. Insurance policies required under this
------------
Article 9 shall be issued by companies holding a "General
Policyholder's Rating" of B+ or better, as set forth in the most
current issue of Best's Insurance Guide. The insuring party shall
----------------------
deliver to the other party copies of the policies of such insurance or
certificates evidencing the existence and amounts of such insurance
with loss payable clauses satisfactory to Landlord. No such policy
shall be cancellable or subject to reduction of coverage or other
modification except after thirty (30) days' prior written notice to
Landlord. If Landlord is the insuring party, Landlord shall name
Tenant as an additional insured under the policies procured by
Landlord in its capacity as the insuring party. Any certificates of
insurance provided by Tenant shall add as additional insureds (but
---
not "named insureds") Landlord and each of its partners, affiliates,
- --------------------
directors, agents and employees and shall expressly provide that the
interest of Landlord therein shall not be affected by any breach by
Tenant of any policy provision. Insurance maintained by Tenant
under this Article 9 shall be the primary insurance as respects
Landlord (and any other additional insureds designated by Landlord)
and not contributory with any other available insurance. Any
certificates of insurance procured by Tenant evidencing the
liability insurance coverage required under Paragraph 9.2 (Liability
Insurance) shall contain an endorsement providing, in substance,
that "such insurance as is afforded hereby for the benefit of
Landlord shall be primary and any insurance carried by Landlord
shall be excess and not contributory."
(b) Miscellaneous. If Tenant is the insuring party
-------------
Tenant shall, within ten (10) days prior to the expiration of such
policies, furnish Landlord with renewals or "binders" thereof, or
Landlord may order such insurance and charge the cost thereof to
Tenant, which amount shall be payable by Tenant upon demand. Tenant
shall not do or permit to be done anything which shall invalidate
the insurance policies required under Paragraph 9.3 (Property
Insurance). If Tenant does or permits to be done anything which
shall increase the cost of the insurance policies required under
Paragraph 9.3, then Tenant shall forthwith, upon Landlord's demand,
reimburse Landlord for any additional premiums attributable to any
act or omission or operation of Tenant causing such increase in the
cost of the insurance. If Landlord is the insuring party, and if
the insurance policies maintained hereunder cover other improvements
in addition to the Premises, Landlord shall deliver to Tenant a
written statement setting forth the amount of any such insurance
cost increase and showing in reasonable detail the manner in which
it has been computed.
9.5 Waiver of Subrogation. Tenant and Landlord each hereby
---------------------
waive any and all rights of recovery against the other, or against
the officers, employees, agents and representatives of the other,
for loss of or damage to such waiving party or its property or the
property of others under its control to the extent that such loss or
damage is insured against under any insurance policy in force at the
time of such loss or damages. The insuring party shall, upon
obtaining the policies of insurance required hereunder, give notice
to the insurance carrier or carriers that the foregoing mutual
waiver of subrogation is contained in this Lease.
9.6 Indemnity. Tenant shall indemnify and hold Landlord
---------
harmless from and against any and all claims arising from Tenant's
use of the Premises, or from the conduct of Tenant's business or
from any activity, work or things done, permitted or suffered by
Tenant in or about the Premises or elsewhere and shall further
indemnify and hold harmless Landlord from and against any and all
claims arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the terms of this
Lease, or arising from any negligence of Tenant, or any of Tenant's
agents, contractors, or employees, and from and against all costs,
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attorneys' fees, expenses and liabilities incurred in the defense of
any such claim or any action or proceeding brought thereon; and in
case any action or proceeding be brought against Landlord by reason
of any such claim, Tenant upon notice from Landlord shall defend the
same at Tenant's expense by counsel satisfactory to Landlord.
Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons, in,
upon or about the Premises arising from any cause and Tenant hereby
waives all claims in respect thereof against Landlord; provided,
however, that nothing in this Lease shall relieve Landlord from
liability for (a) breach of this Lease by Landlord, (b) its
negligence or willful misconduct or omissions, or (c) the negligence
or willful misconduct or omissions of its employees and agents.
9.7 Exemption of Landlord from Liability. Tenant hereby
------------------------------------
agrees that Landlord shall not be liable for injury to Tenant's
business or any loss of income therefrom or for damage to the goods,
wares, merchandise or other property of Tenant, Tenant's employees,
invitees, customers, or any other person in or about the Premises,
nor shall Landlord be liable for injury to the person of Tenant,
Tenant's employees, agents or contractors, whether such damage or
injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause, whether
the said damage or injury results from conditions arising upon the
Premises or upon other portions of the Buildings of which the
Premises are a part, or from other sources or places, and regardless
of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant; provided, however,
that nothing in this Lease shall relieve Landlord from liability for
(a) breach of this Lease by Landlord, (b) its negligence or willful
misconduct or omissions or (c) the negligence or willful misconduct
or omissions of its employees and agents. Landlord shall not be
liable for any damages arising from any act or neglect of any other
tenant, if any, of the Building, the Project or of any subtenant of Tenant.
ARTICLE 10: DAMAGE OR DESTRUCTION
10.1 Reconstruction. If the Premises are damaged or destroyed
--------------
during the term of this Lease, Landlord shall, except as hereinafter
provided, diligently repair or rebuild them to substantially the
condition in which they existed immediately prior to such damage or
destruction; provided, however, that Tenant shall repair any damage
which is estimated in good faith by Landlord to be under Five
Thousand Dollars ($5,000). Landlord shall reimburse Tenant upon
demand for expenses incurred by Tenant in such repair work.
10.2 Rent Abatement. Basic Annual Rent, but not Additional
--------------
Rent, shall be abated proportionately; provided, however, that if
the damage or destruction is not caused by or the result of Tenant's
acts, omissions or willful misconduct (or that of its agents,
employees or invitees), all rent shall abate as of the date on which
payments under the policy of business interruption insurance
required to be maintained by Tenant under Paragraph 9.3(a) cease (or
in the event Tenant fails to procure such insurance, on the date
such payments would have ceased had Tenant obtained such
insurance). Such rent abatement shall be in proportion to the ratio
of the portion of the Premises rendered unusable to the total
Rentable Area of the Premises. Such abatement shall continue for
the period commencing with such damage or destruction and ending
with substantial completion by Landlord of the work or repair or
reconstruction which Landlord is obligated or undertakes to do. If
it is determined that continuation of Tenant's business is not
practical pending reconstruction, Basic Annual Rent due and payable
hereunder shall abate until reconstruction is substantially
completed or until business is totally or partially resumed,
whichever is the earlier.
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<PAGE>
10.3 Excessive Damage or Destruction. If the Premises are
-------------------------------
damaged or destroyed to the extent that Landlord determines that
they cannot, with reasonable diligence, be fully repaired or
restored by Landlord within one hundred eighty (180) days after the
date of the damage or destruction, either Landlord or Tenant shall
have the right to terminate this Lease. Landlord shall determine
whether the Premises can be fully repaired or restored within said
180 day period, and Landlord's determination shall be conclusive on
Tenant. Landlord shall send Tenant written notice of Landlord's
determination within thirty (30) days after the date of the damage
or destruction. If Landlord determines that the Premises can be
fully repaired or restored within said 180-day period, or if it is
determined that such repair or restoration cannot be made within
said period but neither party elects to terminate this Lease within
thirty (30) days after the date of said determination, this Lease
shall remain in full force and effect and Landlord shall diligently
repair and restore the damage as soon as reasonably possible.
10.4 Uninsured Casualty. Notwithstanding anything in this
------------------
Lease to the contrary, in the event of damage to or destruction of
all or any portion of the Premises which is not fully covered by the
insurance proceeds received by Landlord or which has not been
insured under the insurance policies required under Article 9,
Landlord may terminate this Lease by written notice to Tenant, given
within thirty (30) days after the date of notice to Landlord that
said damage or destruction is not so covered. If Landlord does not
elect to terminate this Lease, this Lease shall remain in full force
and effect and the Premises shall be repaired and rebuilt in
accordance with the provisions for repair set forth in Paragraph
10.1 (Reconstruction).
10.5 Waiver. With respect to any destruction which Landlord is
------
obligated to repair or may elect to repair under the terms of this
Article 10, Tenant hereby waives all right to terminate this Lease
pursuant to rights otherwise presently or hereafter accorded by law
to tenants, except as expressly otherwise provided herein.
10.6 Damage Near End of Term. If the Premises are destroyed or
-----------------------
damaged such that the reasonable cost of repair would exceed
Twenty-five Thousand Dollars ($25,000.00) during the last twelve
(12) months of the term of this Lease, Landlord may, at Landlord's
option, cancel and terminate this Lease as of the date of occurrence
of such damage by giving written notice to Tenant of Landlord's
election to do so within thirty (30) days after the date of
occurrence of such damage.
ARTICLE 11: TAXES ON TENANT'S PROPERTY
11.1 Tenant's Obligation. Tenant shall be liable for and shall
-------------------
pay ten (10) days before delinquency all taxes, levies and
assessments levied against any personal property or trade fixtures
placed by Tenant in or about the Premises. If any such taxes,
levies and assessments on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property or if
the assessed value of the Building or the Project is increased by
the inclusion therein of a value placed upon such personal property
or trade fixtures of Tenant and if Landlord pays the taxes, levies
and assessments based upon such increased assessment, which Landlord
shall have the right to do regardless of validity thereof, but only
under proper protest if requested by Tenant, Tenant shall, upon
demand, repay to Landlord the taxes, levies and assessments so
levied against Landlord, or the proportion of such taxes, levies and
assessments resulting from such increase in the assessment; provided
that, in any such event Tenant shall have the right, in the name of
Landlord and with Landlord's full cooperation but without any cost
to Landlord, to bring suit in any court of competent jurisdiction to
recover the amount of any such taxes, levies and assessments so paid
under protest, any amount so recovered to belong to Tenant.
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11.2 Additional Taxes Payable by Tenant. If the Tenant
----------------------------------
Improvements in the Premises, whether installed and/or paid for by
Landlord or Tenant and whether or not affixed to the real property
so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which tenant
improvements conforming to Landlord's "building standard" in other
space in the Building are assessed, then the real property taxes
levied against Landlord or the property by reason of such excess
assessed valuation shall be deemed to be taxes levied against
personal property of Tenant and shall be governed by the provisions
of Paragraph 11.1. If the records of the County Assessor are
available and sufficiently detailed to serve as a basis for
determining whether said Tenant Improvements are assessed at a
higher valuation than Landlord's "building standard," such records
shall be binding on both Landlord and Tenant; otherwise the actual
cost of construction shall be the basis for such determination.
ARTICLE 12: UTILITIES
Tenant shall be solely responsible for and shall promptly pay
for all water, gas, heat, light, power, telephone and other
utilities and services supplied to the Premises, together with any
taxes thereon. Landlord shall not be responsible for providing any
utilities or services to Tenant. If any such services are not
separately metered to Tenant, Tenant shall pay as Additional Rent,
its pro rata share thereof as provided above. Landlord shall not be
liable to Tenant for interruption in or curtailment of any utility
service, nor shall any such interruption or curtailment constitute a
constructive eviction or grounds for rental abatement in whole or in
part hereunder.
ARTICLE 13: ASSIGNMENT AND SUBLETTING
13.1 Landlord's Consent Required. Tenant shall not voluntarily
---------------------------
or involuntarily assign, sublet, mortgage, or otherwise encumber all
or any portion of its interest in this Lease or in the Premises
without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld, and any such attempted
assignment, subletting, mortgage or other encumbrance without such
consent shall be null and void and of no effect.
13.2 No Release of Tenant. No permitted assignment,
--------------------
subletting, mortgage or other encumbrance of Tenant's interest in
this Lease shall relieve Tenant of its obligation to pay the rent
and to perform all of the 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 of this Lease or to be a consent to any subletting,
assignment, mortgage or other encumbrance. Consent to one sublease,
assignment, mortgage or other encumbrance shall not be deemed to
constitute consent to any subsequent subletting, assignment,
mortgage or other encumbrance.
13.3 Notice to Landlord. If Tenant desires at any time to
------------------
assign this Lease or to sublet the Premises or any portion thereof,
it shall first notify Landlord of its desire to do so and shall send
Landlord a written notice (the "Transfer Notice"), specifying (a)
the name of the proposed subtenant or assignee; (b) the nature of
the proposed subtenant's or assignee's business to be carried on in
the Premises; (c) all the terms and provisions of the proposed
sublease or assignment; and (d) such financial information as
Landlord may reasonably request concerning the proposed subtenant or
assignee.
13.4 Landlord's Option. At any time within thirty (30) days
-----------------
after Landlord's receipt of the Transfer Notice, Landlord may by
written notice to tenant elect (a) to sublease the Premises or the
portion thereof so proposed to be subleased by Tenant, or to take an
assignment of Tenant's leasehold estate hereunder, or such part
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thereof as shall be specified in said notice, on the same terms
stated in this Lease and in turn sublease or assign to the proposed
subtenant or assignee on the same terms as those offered by Tenant
to the proposed subtenant or assignee, as the case may be; or (b) to
terminate this Lease as to the portion (including all) of the
Premises so proposed to be subleased or assigned, with a
proportionate abatement in the rent payable hereunder. If Landlord
does not exercise any option set forth in this Paragraph 13.4 within
said thirty (30) day period, Tenant may thereafter within ninety
days (90) after the expiration of said 30-day period enter into a
valid assignment or sublease of the Premises or portion thereof,
upon the terms and conditions set forth in the Transfer Notice. If
Tenant does not do so within ninety (90) days after the date of the
Transfer Notice, any assignment or sublease shall be deemed a new
transaction and will require a new Transfer Notice in compliance
with Paragraph 13.3 (Notice to Landlord).
13.5 Involuntary Transfers. If this Lease is assigned to any
---------------------
person or entity pursuant to the provisions of the Bankruptcy Code,
11 U.S.C. (S)101 et seq. (the "Bankruptcy Code"), any and all monies
-- ---
or other consideration payable or otherwise to be delivered in
connection with such assignment shall be paid or delivered to
Landlord, shall be the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the
meaning of the Bankruptcy Code. Any and all monies or other
consideration constituting Landlord's property under the preceding
sentence not paid or delivered to Landlord shall be held in trust
for the benefit of Landlord and be promptly paid or delivered to
Landlord. Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed
without further act or deed to have assumed all of the obligations
arising under this Lease on and after the date of such assignment.
Any such assignee shall upon demand execute and deliver to Landlord
an instrument confirming such assumption.
13.6 Related Matters.
---------------
(a) No Merger. The voluntary or other surrender of this
---------
Lease by Tenant or a mutual cancellation hereof shall not work a
merger, and shall at the option of Landlord, terminate all or any
existing subleases or subtenancies or shall operate as an assignment
to Landlord of such subleases or subtenancies.
(b) Transfer of Stock. If Tenant is a corporation which,
-----------------
under the then current guidelines published by the Commissioner of
Corporations of the State of California, is not deemed a public
corporation, or is an unincorporated association or partnership, the
transfer, assignment or hypothecation of any stock or interest in
such corporation, association or partnership in the aggregate in
excess of twenty-five percent (25%) shall be deemed an assignment
within the meaning and provisions of this Article 13.
(c) Reimbursement of Costs. Tenant agrees to pay
----------------------
Landlord Three Hundred Dollars ($300.00) to reimburse Landlord for
Landlord's reasonable costs and attorneys' fees incurred in
conjunction with the processing and documentation of any such
requested assignment, subletting, transfer, change of ownership or
hypothecation of this Lease or Tenant's interest in and to the
Premises.
(d) Excess Rent. In the event that an assignment or
-----------
sublease, which is otherwise permitted under the terms of this
Lease, results in the payment of rent by the occupant in excess of
the Basic Annual Rent imposed on Tenant hereunder, then fifty
percent (50.0%) of such excess rent shall be paid to Landlord as
rent hereunder. Tenant shall furnish Landlord with whatever
information Landlord may reasonably require to determine whether
such excess rent may be payable.
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ARTICLE 14: LANDLORD'S ACCESS
Landlord and Landlord's agents shall have the right to enter the
Premises at reasonable times, upon twenty-four (24) hours notice
(except in the case of an emergency or the performance of routine
maintenance or repair work), for the purpose of inspecting the same,
showing the same to prospective purchasers, or lenders, or lessees,
and making such alterations, repairs, improvements or additions to
the Premises or to the Building of which they are a part as Landlord
may deem necessary or desirable. Landlord may at any time place on
or about the Premises any ordinary "For Sale" signs and Landlord may
at any time during the last one hundred twenty (120) days of the
term hereof place on or about the Premises any ordinary "For Lease"
signs. Notwithstanding anything in this Lease, including the Rules
and Regulations (Exhibit C), to the contrary, it is agreed that
Tenant may install its own locks on the computer equipment room in
the Premises and that Landlord shall have no right to access to such
computer equipment room, except in an emergency. Tenant agrees that
Landlord shall not be liable for any damages or injury resulting
from Landlord's being denied access to such computer equipment room.
ARTICLE 15: DEFAULTS; REMEDIES
15.1 Events of Defaults. The occurrence of any one or more of
------------------
the following events shall constitute a material default and breach
of this Lease by Tenant:
(a) Vacation or Abandonment. The vacating or abandonment
-----------------------
of the Premises by Tenant.
(b) Late Payment. The failure by Tenant to make any
------------
payment of rent or any other payment required to be made by Tenant
hereunder, as and when due, where such failure shall continue for a
period of five (5) days after said payment is due.
(c) Non-Performance. The failure by Tenant to observe or
---------------
perform any of the covenants, conditions or provisions of this Lease
to be observed or performed by Tenant (other than those involving
payment of money), where such failure shall continue for a period of
thirty (30) days after written notice from Landlord to Tenant;
provided, however, that if the nature of Tenant's default is such
that more than thirty (30) days are reasonably required for its
cure, then Tenant shall not be deemed to be in default if Tenant
commenced such cure within said thirty (30) day period and
thereafter diligently pursues such cure to completion.
(d) Insolvency. The occurrence of any of the following
----------
events of insolvency:
(1) Assignment. The making by Tenant of any general
----------
assignment, or general arrangement for the benefit of creditors;
(2) Bankruptcy. The filing by or against Tenant of
----------
a petition to have Tenant adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of an involuntary petition filed against
Tenant, the same is dismissed within thirty (30) days);
(3) Receivership. The appointment of a trustee or
------------
receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where
possession is not restored to Tenant within thirty (30) days; or
(4) Attachment. The attachment, execution or other
----------
judicial seizure of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within thirty (30) days.
(e) Misrepresentation. The discovery by Landlord that
-----------------
any financial statement given to Landlord by Tenant, any assignee of
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Tenant, any subtenant of Tenant, any successor in interest of Tenant
or any guarantor of Tenant's obligations hereunder, and any of them, was
materially false.
15.2 Remedies. In the event of any default or breach by Tenant
--------
under this Lease within the meaning of Paragraph 15.1 (Events of
Default) Landlord may at any time thereafter, with or without notice
or demand and without limiting Landlord in the exercise of any right
or remedy which Landlord may have by reason of such default or
breach, exercise the remedies listed below in this Paragraph 15.2
and such other remedies Landlord may have at law or in equity. If
Tenant causes or threatens to cause a breach of any of the
covenants, agreements, terms or conditions contained in this Lease,
Landlord shall be entitled to obtain all sums held by Tenant, by any
trustee or in any account provided for herein, to enjoin such breach
or threatened breach, and to invoke any right and remedy allowed at
law or in equity or by statute or otherwise as though re-entry,
summary proceedings and other remedies were not provided for in this
Lease.
(a) Termination by Landlord. Landlord shall have the right to
-----------------------
terminate Tenant's right to possession of the Premises by any lawful means,
in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. In the event that
Landlord shall elect to so terminate the Lease, then Landlord may recover
from Tenant:
(1) The worth at the time of award of any unpaid rent
which had been earned at the time of such termination; plus
(2) The worth at the time of award of the amount by
which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such
rental loss Tenant proves reasonably could have been reasonably
avoided; plus
(3) The worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time
of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; plus
(4) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to
perform his obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom; and
(5) At Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from
time to time by applicable California law.
(b) Definitions. As used in subparagraphs (a)(1) and
-----------
(a)(2) above, the "worth at the time of award" is computed by
allowing interest at the maximum rate permitted under applicable
law. As used in subparagraph (a)(iii) above, the "worth at the time
of award" is computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%).
(c) Re-Entry. In the event of any such default by
--------
Tenant, Landlord shall also have the right, with or without
terminating this Lease, to re-enter the Premises and remove all
persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for
the account of Tenant.
(d) Reletting Premises. In the event of the vacation or
------------------
abandonment of the Premises by Tenant or in the event that Landlord
shall elect to re-enter as provided above or shall take possession
of the Premises pursuant to legal proceeding or pursuant to any
notice provided by law, then if Landlord does not elect to terminate
this Lease as provided in this Paragraph 15.2, Landlord may from
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time to time, without terminating this Lease, either recover all
rental as it becomes due or relet the Premises or any part thereof
for such term or terms and at such rental or rentals and upon such
other terms and conditions as Landlord in its sole discretion may
deem advisable with the right to make alterations and repairs to the
Premises.
(e) Application of Proceeds of Reletting. In the event
------------------------------------
that Landlord shall elect to so relet, then rentals received by
Landlord from such reletting shall be applied: first, to the payment
of any indebtedness other than rent due hereunder from Tenant to
Landlord, second, to the payment of any cost of such reletting;
third, to the payment of the cost of any alterations and repairs to
the Premises; fourth, to the payment of rent due and unpaid
hereunder; and the residue, if any, shall be held by Landlord and
applied to payment of future rent hereunder. If upon any reletting
Landlord should receive less rent than the amount due from Tenant
under this Lease, then Tenant shall pay any deficiency to Landlord
immediately upon demand therefor by Landlord. Such deficiency shall
be calculated and paid monthly. Tenant shall also pay to Landlord
as soon as ascertained, any costs and expenses incurred by Landlord
in such reletting or in making such alterations and repairs not
covered by the rentals received from such reletting.
(f) Conditions for Termination. No re-entry or taking
--------------------------
possession of the Premises by Landlord pursuant to this Paragraph
15.2 shall be construed as an election to terminate this Lease
unless a written notice of such intention be given to Tenant or
unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by
Landlord because of any default by Tenant, Landlord may at any time
after such reletting elect to terminate this Lease for any such
default.
(g) Cumulative Remedies. Each right and remedy of
-------------------
Landlord provided for in this Lease shall be cumulative and shall be
in addition to every other right or remedy provided for in this
Lease or now or hereafter existing at law or in equity or by statute
or otherwise. 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 now or hereafter existing at law or in equity or by
statute or otherwise, shall not preclude the simultaneous or later
exercise by Landlord of any or all other rights or remedies provided
for in this Lease or now or hereafter existing at law or in equity
or by statute or otherwise.
(h) No Waiver. No failure by Landlord to insist upon the
---------
strict performance of any term hereof or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full
or partial payment of rent during the continuance of any such
breach, shall constitute a waiver of any such breach or of any such
term. Efforts by Landlord to mitigate the damages caused by
Tenant's breach of this Lease shall not be construed to be a waiver
of Landlord's right to recover damages under this Paragraph 15.2.
Nothing in this Paragraph 15.2 affects the right of Landlord to
indemnification by Tenant in accordance with Paragraph 9.6 for
liability arising prior to the termination of this Lease for
personal injuries or property damage.
15.3 Default by Landlord. Landlord shall not be in default
-------------------
under this Lease unless Landlord fails to perform obligations
required of Landlord within a reasonable time, but in no event later
than thirty (30) days after written notice by Tenant to Landlord and
to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been
furnished to Tenant in writing, specifying in reasonable detail how
Landlord has failed to perform such obligations; provided, however,
that if the nature of Landlord's obligation is such that more than
thirty (30) days are required for performance then Landlord shall
not be in default if Landlord commences performance within such
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thirty (30) day period and thereafter diligently prosecutes the same
to completion.
15.4 Late Charges and Interest on Delinquent Payments.
-------------------------------------------------
(a) Late Charges. Tenant hereby acknowledges that late
------------
payment by Tenant to Landlord of rent and other sums due hereunder
will cause Landlord to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and
accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum
due from Tenant shall not be received by Landlord or Landlord's
designee within ten (10) days after such amount shall be due, Tenant
shall pay to Landlord a late charge equal to six percent (6.0%) of
such overdue amount; provided, however, that in no event shall the
amount of such late charge exceed Two Hundred Fifty Dollars ($250).
The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of
late payment by Tenant. Acceptance of such late charge by Landlord
shall in no event constitute a waiver of Tenant's default with
respect to such overdue amount, nor prevent Landlord from exercising
any of the other rights and remedies granted hereunder.
(b) Interest on Past-Due Obligations. Except as
--------------------------------
expressly herein provided, any amount due Landlord not paid within
ten (10) business days after written notice shall bear interest at
the maximum rate permitted under applicable law. Payment of such
interest shall not excuse or cure any default by Tenant under this
Lease; provided, however, that interest shall not be payable on late
charges incurred by Tenant. The parties agree that the payment of
late charges and the payment of interest provided for in this
Paragraph 15.4 are distinct and separate from one another in that
the payment of interest is to compensate Landlord for the use of
Landlord's money by Tenant, while the payment of late charges is to
compensate Landlord for the additional administrative expense
incurred by Landlord in handling and processing delinquent payments.
ARTICLE 16: EMINENT DOMAIN
16.1 Total Condemnation. If the whole of the Premises is
------------------
acquired or condemned by eminent domain, inversely condemned or sold
in lieu of condemnation, for any public or quasi-public use or
purpose ("condemned"), then the Lease term shall terminate as of the
date of title vesting in such proceeding and the rent shall be
adjusted to the date of termination. Tenant shall immediately
notify Landlord of any such occurrence.
16.2 Partial Condemnation. If any part of the Premises is
--------------------
partially condemned, and such partial condemnation renders the
Premises unusable for the business of the Tenant, then the term of
this Lease shall terminate as of the date of title vesting in such
proceeding and Rent shall be adjusted to the date of termination.
If such condemnation is not extensive enough to render the Premises
unusable for the business of Tenant, then Landlord shall promptly
restore the Premises to a condition comparable to its condition
immediately prior to such condemnation proceeds recovered by
Landlord less the portion thereof lost in such condemnation, and
this Lease shall continue in full force and effect except that after
the date of such title vesting the Basic Annual Rent shall be
reduced in proportion that the floor area taken bears to the total
Rentable Area of the Premises. If any parking areas are condemned,
Landlord has the option, but not the obligation, to supply Tenant
with alternative parking.
16.3 Landlord's Award. If the Premises are wholly or partially
----------------
condemned, then, subject to the provisions of Paragraph 16.4
(Tenant's Award), Landlord shall be entitled to the entire award
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paid for such condemnation, and Tenant waives any right or claim in
any part thereof from the Landlord or the condemning authority.
16.4 Tenant's Award. Tenant shall have the right to claim and
--------------
recover from the condemning authority, but not from Landlord, such
compensation as may be separately awarded or recoverable by Tenant's
own right on account of any and all costs or loss (including loss of
business) to which Tenant might be put in removing Tenant's
merchandise, furniture, fixtures, leasehold improvements and
equipment to a new location.
16.5 Temporary Condemnation. If the whole or any part of the
----------------------
Premises shall be condemned for any temporary public or quasi-public
use or purpose, this Lease shall remain in effect and Tenant shall
be entitled to receive for itself such portion or portions of any
award made for such use with respect to the period of the taking
which is within the term. If a temporary condemnation remains in
force at the expiration or earlier termination of this Lease, Tenant
shall pay to Landlord a sum equal to the reasonable cost of
performing any obligations required of Tenant by this Lease with
respect to the surrender of the Premises, including, without
limitation, repairs and maintenance required, and upon such payment
Tenant shall be excused from any such obligations. If a temporary
condemnation is for an established period which extends beyond the
term, this Lease shall terminate as of the date of occupancy by the
condemning authority, and the damages shall be as provided in
Paragraphs 16.3 and 16.4 and Basic Annual Rent shall be adjusted to
the date of occupancy.
16.6 Notice and Execution. Landlord shall, immediately upon
--------------------
service of process in connection with any condemnation or potential
condemnation, give Tenant notice in writing thereof. Tenant shall
immediately execute and deliver to the Landlord all instruments that
may be required to effect the provisions of this Article 16.
ARTICLE 17: BROKERS
Tenant warrants that it has had no dealings with any real estate
broker or agents in connection with the negotiation of this Lease
and the Sublease, excepting only the broker identified in Item 13 of
the Basic Lease Provisions, and it knows no other real estate broker
or agent who is entitled to a commission in connection with this
Lease. Landlord shall pay any commission due such broker.
ARTICLE 18: ESTOPPEL CERTIFICATE,
ATTORNMENT AND SUBORDINATION
18.1 Estoppel Certificate. Tenant shall at any time upon not
--------------------
less than ten (10) business days' prior written notice from Landlord
execute, acknowledge and deliver to Landlord an Estoppel Certificate
substantially in the form attached hereto as Exhibit "D." Any
Estoppel Certificate executed by Tenant may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such Estoppel Certificate within such
time shall conclusively establish that (a) this Lease is in full
force and effect, without modification except as may be represented
by Landlord; (b) there are no uncured defaults in Landlord's
performance, and (c) not more than one month's rent has been paid in
advance. Such failure by Tenant, if willful, may, at Landlord's
option, be treated by Landlord as a material default by Tenant under
this Lease. If Landlord desires to finance or refinance the
Premises, or any part thereof, Tenant hereby agrees to deliver to
any lender designated by Landlord such financial statements of
Tenant and such other information about Tenant as may be reasonably
required by such lender. Such statements shall include the past
three (3) years' financial statements of Tenant. All such financial
statements shall be received in confidence and shall be used only
for the purposes herein set forth.
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18.2 Subordination
-------------
(a) Priority of Lease. This Lease, at Landlord's option,
-----------------
shall be subordinate to any ground lease, mortgage, deed of trust,
or any other hypothecation for security now or hereafter placed upon
the real property of which the Premises are a part and to any and
all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Tenant's right to quiet
possession of the Premises shall not be disturbed if Tenant is not
in default and so long as Tenant shall pay the rent and observe and
perform all of the provisions of this Lease, unless this Lease is
otherwise terminated pursuant to its terms. If any mortgagee,
trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give
written notice thereof to Tenant, this Lease shall be deemed prior
to such mortgage, deed of trust, or ground lease, whether this Lease
is dated prior or subsequent to the date of said mortgage, deed of
trust or ground lease or the date of recording thereof.
(b) Execution of Documents. Tenant agrees to execute any
----------------------
documents required to effectuate such subordination or to make this
Lease prior to the lien of any mortgage, deed of trust or ground
lease, as the case may be, and failing to do so within ten (10) days
after written demand, does hereby make, constitute and irrevocably
appoint Landlord as Tenant's attorney in fact and in Tenant's name,
place and stead, to do so.
18.3 Attornment. Tenant shall, in the event any proceedings
----------
are brought for the foreclosure of, or in the event of exercise of
the power of sale under, any mortgage or deed of trust made by the
Landlord, its successors or assigns, encumbering the Premises, or
any part thereof, if any, and if so requested, attorn to the
purchaser upon such foreclosure or sale or upon any grant of a deed
in lieu of foreclosure and recognize such purchaser as the Landlord
under this Lease.
ARTICLE 19: LANDLORD'S LIABILITY
19.1 Scope of Liability. If Landlord is a limited partnership,
------------------
it is understood and agreed that any claims by Tenant shall be
limited to the assets of such limited partnership. Tenant also
expressly waives any and all rights to proceed against the
individual partners or the officers, directors or shareholders of
any corporate partner in such limited partnership, except to the
extent of such partners' interests in such limited partnership.
19.2 Transfer by Landlord; Landlord's Liability.
------------------------------------------
(a) Landlord shall have the right to assign, hypothecate
or otherwise transfer this Lease and Landlord's interest hereunder
at any time at Landlord's option.
(b) The term "Landlord" as used herein shall mean only the
owner or owners at the time in question of the fee title or a
Tenant's interest in a ground lease of the Premises, and except as
expressly provided in Article 15, in the event of any transfer of
such title or interest, Landlord herein named (and in case of any
subsequent transfers the then grantor) shall be relieved from and
after the date of such transfer of all liability as respects
Landlord's obligations thereafter to be performed, provided that any,
funds in the hands of Landlord or the then grantor at the time of
such transfer, in which Tenant has an interest, shall be delivered
to the grantee. The obligations contained in this Lease to be
performed by Landlord shall, subject as aforesaid, be binding on
Landlord's successors and assigns, only during their respective
periods of ownership.
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ARTICLE 20: MISCELLANEOUS PROVISIONS
20.1 Use of Common Areas; Parking. Tenant shall have the
----------------------------
non-exclusive right, in common with others, to the use of the Common
Areas and common entrances, lobbies, elevators, ramps, drives,
stairs, and similar access and serviceways, parking areas and the
other common facilities in and adjacent to the Building and the
Project, subject to such nondiscriminatory rules and regulations as
may be adopted by the Landlord. Tenant shall have the right to
designate thirty-five (35) reserved parking spaces in the parking
areas for its exclusive use, and will do so in writing to Landlord
within 120 days of the execution of this Lease.
20.2 Severability. The invalidity of any provision of this
------------
Lease as determined by a court of competent jurisdiction, shall in
no way affect the validity of any other provision hereof.
20.3 Time of Essence. Time is of the essence of each and every
---------------
provision of this Lease.
20.4 Captions. Article and paragraph captions are used for
--------
convenience of reference and are not a part of this Lease.
20.5 Incorporation of Prior Agreements; Amendments. This Lease
---------------------------------------------
contains all agreements of the parties with respect to any matter
mentioned herein. No prior agreement or understanding pertaining to
any such matter shall be effective. This Lease may be modified in
writing only, signed by the parties in interest at the time of the
modification. Except as otherwise stated in this Lease, Tenant
hereby acknowledges that neither any real estate broker listed in
Item 13 of the Basic Lease Provisions hereof nor any cooperating
broker on this transaction nor the Landlord or any employees or
agents of any of said persons has made any oral or written
warranties or representations to Tenant relative to the condition or
use by Tenant of the Premises. Tenant acknowledges that Tenant
assumes all responsibility regarding the effect of and the necessity
of complying with (a) the Occupational Safety Health Act and all
similar or successor state and federal statutes and (b) all other
applicable laws and regulations in force during the term of this
Lease, except as otherwise specifically stated in this Lease.
20.6 Notices. Any notice required or permitted to be given
-------
under this Lease shall be in writing and may be given by personal
delivery or by certified mail, and if given personally or by mail,
shall be deemed sufficiently given if addressed to Tenant or to
Landlord at the addresses specified in Item 11 of the Basic Lease
Provisions. Either party may by notice to the other specify a
different address for notice purposes except that upon Tenant's
taking possession of the Premises, the Premises shall constitute
Tenant's address for notice purposes. A copy of all notices
required or permitted to be given to Landlord hereunder shall be
concurrently transmitted to such party or parties at such addresses
as Landlord may from time to time hereafter designate by notice to
Tenant.
20.7 Waivers. No waiver by one party of any provision hereof
-------
shall be deemed a waiver of any other provision hereof or of any
subsequent breach by the other party of the same or any other
provision. A party's consent to or approval of any act shall not be
deemed to render unnecessary the obtaining of that party's consent
to or approval of any subsequent act by the other party. The
acceptance of rent hereunder by Landlord shall not be a waiver of
any preceding breach by Tenant of any provision hereof, other than
the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent.
20.8 Recording. Tenant shall not record this Lease or a short
---------
form memorandum thereof without Landlord's prior written consent,
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and such recordation shall, at the option of Landlord, constitute a
non-curable default by Tenant under this Lease.
20.9 Holding Over. If Tenant remains in possession of the
------------
Premises or any part thereof after the expiration of the term hereof
without the express written consent of Landlord, such occupancy
shall be a tenancy from month to month at a rental in an amount
equal to one hundred twenty-five percent (125.0%) of the Basic
Annual Rent then payable, plus all other charges payable hereunder,
and upon all the terms hereof applicable to a month-to-month tenancy.
20.10 Cumulative Remedies. No remedy or election hereunder
-------------------
shall be deemed exclusive but shall, wherever possible, be
cumulative with all other remedies at law or in equity.
20.11 Covenants and Conditions. Each provision of this Lease
------------------------
to be performed by Tenant shall be deemed both a covenant and a
condition.
20.12 Binding Effect; Choice of Law. Subject to any provisions
-----------------------------
hereof restricting assignment or subletting by Tenant and subject to
Article 19 (Landlord's Liability), this Lease shall bind the
parties, their personal representatives, successors and assigns.
This Lease shall be governed by and construed in accordance with the
laws of the State of California.
20.13 Attorneys' Fees. If either party brings an action to
---------------
enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to
its reasonable attorneys' fees to be paid by the losing party as
fixed by the court.
20.14 Signs and Auctions. Tenant shall not place any sign upon
------------------
the Premises or conduct any auction thereon without Landlord's prior
written consent.
20.15 Corporate Authority. If Tenant is a corporation, each
-------------------
individual executing this Lease on behalf of said corporation
represents and warrants that he is duly authorized to execute and
deliver this Lease on behalf of said corporation, in accordance with
a duly adopted resolution of the Board of Directors of said
corporation or in accordance with the Bylaws of said corporation,
and that this Lease is binding upon said corporation in accordance
with its terms. If Tenant is a corporation Tenant shall within
thirty (30) days after execution of this Lease, deliver to Landlord
a certified copy of a resolution of the Board of Directors of said
corporation authorizing or ratifying the execution of this Lease.
20.16 Consents. Wherever in this Lease the consent of one
--------
party is required to an act of the other party, such consent shall
not be unreasonably withheld.
20.17 Guarantor. In the event that there is a guarantor of
---------
this Lease, said guarantor shall have the same obligations as Tenant
under Paragraph 18.1 (Estoppel Certificate) and 20.15 (Consents) of
this Lease.
20.18 Quiet Possession. Subject to Tenant's paying the Basic
----------------
Annual Rent and other items of rent reserved hereunder and observing
and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall
have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
20.19 Force Majeure.
-------------
(a) Events of Force Majeure. Notwithstanding anything to
-----------------------
the contrary contained in this Lease, each party shall be excused
from performing any obligation or undertaking provided in this
Lease, and any delay in the performance of any obligation under this
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Lease shall be excused, so long as the performance of such
obligation is prevented, delayed, retarded, hindered or prohibited
by any act of God, such as earthquake, flood, inclement weather or
other action of the elements; fire; explosion; war; invasion; civil
insurrection; riot; mob violence; sabotage; malicious mischief;
inability to procure or unavailability of or general shortage of
labor, equipment, facilities, materials or supplies in the open
market; general inability to obtain transportation; moratorium on
the payment of financial obligations; lockouts (by persons other
than the party invoking the benefits of this provision); strike or
other action of labor unions or trade organizations; condemnation;
pending litigation or appeal thereof or therefrom; laws or orders of
any governmental authority whatever, whether civil, military, naval,
environmental, municipal, state or federal authority; or any other
cause (financial inability excepted), whether similar or dissimilar
to the foregoing, which is not reasonably within the control of the
party invoking the benefits of this Paragraph (hereafter, "event of
force majeure").
(b) Notices. Any Party (the "affected party") whose
-------
performance under this Lease is prevented or delayed by the
occurrence of any event of force majeure shall notify the other
party (the "other party") in writing of the occurrence of the event
of force majeure and the cessation of the same within fifteen (15)
days after such occurrence or cessation. The failure to so notify
the other party shall be deemed to constitute a waiver of the
benefits of this Paragraph. Each day of delay due to the occurrence
of an event of force majeure shall result in one day's extension of
the time for performance by the affected party. If such an
extension of time is granted to the affected party, the time for
performance by the other party shall be extended to the same extent.
(c) Excessive Delay. Notwithstanding anything in this
---------------
Paragraph to the contrary, if the cumulative amount of any delay(s)
permitted or excused by reason of the occurrence(s) of an event of
force majeure exceeds six (6) months, the other party shall have the
right to cancel and terminate this Lease without penalty at any time
by sending the affected party written notice to such effect.
ARTICLE 21: ADDENDA
21.1 Effect of Addenda. The provisions of this Article 21, if
-----------------
any, shall supersede and override any other provision in this Lease
to the extent the same are inconsistent. This Article 21 shall
consist of this Paragraph 21.1 and the following paragraphs which
are also identified in Item 14 of the Basic Lease Provisions as
being part of this Article 21.
21.2 Expansion Space. One year after the Rent Commencement
---------------
Date, provided Tenant is not in default under any of the terms or
conditions of this Lease, Landlord agrees that Tenant shall have the
right to relocate to other space in the Project or other space
located in the City of San Diego which is owned by Landlord or The
Naiman Company (the "New Space") on the following terms and
conditions:
(1) The New Space shall be at least fifty percent (50.0%)
larger than the Premises;
(2) Tenant provides Landlord with a sixty (60) day written
notice of Tenant's desire to relocate to the New Space;
(3) Any and all costs of both Landlord and Tenant, including
without limitation legal fees incurred by Landlord in drafting a new
lease for the New Space (which legal fees shall not exceed $1,000),
all of Tenant's moving and relocation expenses and any brokerage
commissions that may become payable to third parties by reason of
Tenant's relocation shall be paid solely by Tenant;
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<PAGE>
(4) Tenant continues to make payment of all items of rent, both
Basic Annual Rent and Additional Rent, and any other payment
required to be made under the Lease until Tenant is released from
liability under this Lease;
(5) The rent for the New Space shall be equal to the greater of
(i) the Basic Annual Rent then payable under this Lease or (ii) the
then current rental rate for the building or project in which the
New Space is located as published in Landlord's schedule of rental
rates;
(6) Tenant executes a new lease on terms and conditions
reasonably acceptable to Landlord; and
(7) Effective as of the commencement date of the lease for the
New Space, Tenant shall be released from liability under this Lease,
except for liabilities or obligations arising from or relating to
events or circumstances occurring prior to such date.
21.3 Right of First Refusal. If, during the term of the Lease
----------------------
Landlord decides to lease additional space in the Building to a
third party, Landlord shall send written notice to such effect to
Tenant. Tenant shall have the right of first refusal to lease the
space described in such notice on the same terms and conditions
offered to the third party. Tenant shall exercise its right of
first refusal within two business days of receipt of such notice.
Failure to timely exercise such right of first refusal shall
constitute a waiver of the right of first refusal under this Lease.
IN WITNESS WHEREOF, the parties hereto have executed this R&D
Building Lease at the place and on the date specified immediately
adjacent to their respective signatures below.
LANDLORD:
Executed at San Diego, California on February __, 1987.
SORRENTO TECH LIMITED, a
California limited partnership
By:/s/Jack Naiman
--------------------
Jack Naiman,
Title: General Partner
TENANT:
Executed at San Diego, California on February 26, 1987.
BIOSYM TECHNOLOGIES, INC., a
California corporation
By: /s/Todd Schmidt
-----------------------------
Title: /s/
--------------------------
By: /s/ Arnie Hagler
-----------------------------
Title: CEO
--------------------------
LAL: 1618Y
022487
-26-
<PAGE>
FLOOR PLAN OF THE PREMISES
--------------------------
[to be provided]
EXHIBIT "A-1"
<PAGE>
SITE PLAN OF THE PROJECT
------------------------
EXHIBIT "A-2"
<PAGE>
DEFINITION OF RENTABLE AREA
---------------------------
1. Definition. The term "Rentable Area" as used in this
----------
R&D Building Lease shall mean:
(a) Single Tenant Floor. As to each floor of each
-------------------
building in the Project on which the entire space rentable to a
tenant is or will be leased to one tenant (hereinafter referred
to as "single Tenant Floor"), Rentable Area shall be the entire
area bounded by the inside surface of the four exterior glass
walls (or the inside surface of the permanent exterior wall
where there is no glass) on such floor, including all areas
used for elevator lobbies, corridors, special stairways, or
elevators, common restrooms (if any), mechanical rooms,
electrical rooms and telephone closets without deduction for
columns and other structural portions of each building or
vertical penetrations that are included for the special use of
a tenant, but excluding the area contained within the exterior
walls of each building's stairs, fire towers, vertical ducts,
elevator shafts, flues, vents, stacks and pipe shafts.
Rentable Area for a Single Tenant Floor shall include a prorata
portion of any ground floor elevator lobby areas.
(b) Multi-Tenant Floor. As to each floor of each
------------------
building in the Project on which space is or will be leased to
more than one tenant (hereinafter referred to as "Multi-Tenant
Floor"), Rentable Area attributable to each such tenant shall
be the total of (1) the entire area included within the
premises covered by such tenant's lease, being the area bounded
by the inside surface of any exterior glass walls (or the
inside surface of the permanent exterior walls where there
is no glass) bounding such premises, the exterior of all walls
separating such premises from any public corridors or other
public areas on such floor, and the centerline of all walls
separating such premises from other areas leased or to be
leased to other tenants on such floor, and (2) a pro rata
portion of the area covered by the elevator lobbies, corridors,
common restrooms (if any), mechanical rooms, electrical rooms
and telephone closets situated on such floor and on the ground
floor of a building (but only to the extent any of the same
serve all tenants of the building).
2. Certification. Landlord's architect shall determine
-------------
the Rentable Area of each tenant's premises and such
determination shall be binding and conclusive. A certified
copy of such determination shall be delivered to Landlord and
each tenant. Landlord reserves the right to have its architect
redetermine the Rentable Areas of the Premises, the Building
and/or the Project from time to time during the term of this
Lease. A certified copy of any such redetermination shall be
delivered to Landlord and each affected tenant. In the event
of any such redetermination, each tenant's share of Building
Operating Expenses or Project Operating Expenses, as the case
may be, shall be recomputed.
3. Rentable Area of Building. Total Rentable Area of
-------------------------
the building is approximately 19,617 square feet.
4. Rentable Area of Project. Total Rentable Area of the
------------------------
Project is 635,000 sq. ft.
EXHIBIT "A-3"
Page 1 of 1
<PAGE>
SCHEDULE OF CONSTRUCTION RESPONSIBILITIES
1. Construction of Tenant Improvements. Landlord shall
-----------------------------------
construct certain improvements (the "Tenant Improvements") in
the Premises. The Tenant Improvements shall consist of all
interior improvements constructed in the Building which are not
part of The Building's structure or shell and shall include by
way of illustration, floor coverings, interior partitions,
doors, ceilings, lighting fixtures, wall coverings, electrical
and telephone outlets and fire sprinklers. The Tenant
Improvements shall be constructed in accordance with plans and
specifications prepared by Landlord's architect and approved by
Landlord and Tenant. Landlord's architect shall prepare such
plans and specifications in accordance with a space plan for
the Premises prepared by Landlord's space planning firm and
approved by Tenant as provided in Paragraph 4 below. Landlord
shall pay for up to twenty (20) hours of such space planning
work and the amount so paid by Landlord shall not be included
as part of Landlord's Maximum Contribution (as defined below).
As of the date of signing this Lease, Tenant has used more than
20 hours of space planning time. It is understood and agreed
that the Tenant Improvements shall be constructed in all
portions of the Premises to a level acceptable to Landlord.
Landlord's contractor shall construct the Tenant Improvements.
2. Payment of Construction Costs. The term
-----------------------------
"Construction Costs" shall mean and include the cost and
expense of constructing the Tenant Improvements, including
without limitation the cost of labor and materials, space
planning and architectural fees, the cost of moving Tenant's
current HVAC equipment to the Premises, and the cost of any
governmental permits and fees. Landlord shall pay a portion of
the Construction Costs not to exceed Fifteen Dollars ($15.00)
per sq. ft. of Rentable Area in the Premises ("Landlord's
Maximum Contribution"). Tenant shall be solely responsible for
paying any Construction Costs in excess of Landlord's Maximum
Contribution. Before starting construction, Landlord shall
provide Tenant with a written estimate of the Construction
Costs. Tenant shall have the right to approve such estimate as
provided in Paragraph 4 below. If Tenant disapproves of such
cost estimate and the plans and specifications for the Tenant
Improvements are changed as a result, the time expended in
revising the plans and specifications and obtaining new cost
estimates shall be included as part of Tenant's Delay.
3. Performance of Construction Work. Landlord shall
--------------------------------
cause to be obtained all necessary approvals and permits from
all governmental agencies having authority over construction of
the Tenant Improvements. All work performed by Landlord's
contractor shall be done in a good and workmanlike manner in
accordance with the approved plans and specifications.
EXHIBIT "B"
Page 1 of 2
<PAGE>
4. Schedule of Approvals.
----------------------
(a) Tenant shall approve the matters listed in the
"Event" column below by the corresponding time specified in the
"Time" column as follows:
Event Time
----
(1) Space Plan Approval Date February 27, 1987
(2) Deadline for Tenant's Five (5) days after receipt
approval of working draw- of working drawings and
ings and specifications specifications
(3) Deadline for Tenant's Three (3) days
approval of Construction after receipt of cost
Costs estimate from Landlord
(b) If Tenant fails to approve such matters by the times
indicated, the delay in obtaining Tenant's approval shall be
included as part of Tenant's Delay.
EXHIBIT "B"
Page 2 of 2
<PAGE>
RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF
----------------------------------------------------
R&D BUILDING LEASE
------------------
1. No sign, placard, picture, advertisement, name or
notice shall be inscribed, displayed or printed or affixed on
or to any part of the Building without the written consent of
Landlord, first had and obtained, and Landlord shall have the
right to remove any such sign, placard, picture, advertisement,
name or notice without notice to and at the expense of Tenant.
All signs or lettering on doors shall conform to Landlord's
sign criteria for the Building. Tenant shall not place
anything or allow anything to be placed near the glass of any
window, door, partition or wall which may appear unsightly from
outside the Premises.
2. Tenant shall not alter any lock or install any new or
additional locks or any bolts on any door of the Premises.
3. Toilet rooms, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which
they were constructed and no foreign substance of any kind
whatsoever shall be thrown therein, and the expense of any
breakage, stoppage or damage resulting from the violation of
this rule shall be borne by Tenant or those employees or
invitees of Tenant who shall have caused it.
4. Tenant shall not use, keep or permit to be used or
kept, any foul or noxious gas or substance in the Premises, or
permit or suffer the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors and/or
vibrations, or interfere in any way with other tenants or those
having business therein, nor shall any animals or birds be
brought in or kept in or about the Premises or the Building.
5. Tenant shall not use or keep in the Premises any
inflammable or combustible fluid or material, including, but
not limited to, kerosene or gasoline. Tenant shall not use any
method of heating or air conditioning other than that supplied
by Landlord.
6. Upon the termination of its tenancy, Tenant shall
deliver to Landlord the keys for all offices, rooms and toilet
rooms which shall have been furnished to Tenant or which Tenant
shall have had made, and in the event of loss of any keys so
furnished, shall pay Landlord therefor.
7. Tenant shall not lay linoleum, tile, carpet or any
other similar floor covering so that the same shall be affixed
to the floor of the Premises in any manner except as approved
by Landlord. The expense of repairing any damage resulting
from a violation of this rule or removal of any floor covering
shall be borne by Tenant, or by the contractors, employees or
invitees of Tenant who caused the damage.
8. Landlord reserves the right to exclude or expel from
the Buildings any person who, in the judgment of Landlord, is
intoxicated or under the influence of liquor or drugs, or who
shall in any manner do any act in violation of any of the rules
and regulations of the Building.
9. Landlord shall have the right, exercisable without
notice and without liability to Tenant, to change the name and
the street address of the Building of which the Premises are a
part.
EXHIBIT "C"
Page 1 of 2
<PAGE>
10. Tenant shall not disturb, solicit, or canvas any
occupant of The Building and shall cooperate to prevent same.
11. Without the written consent of Landlord, Tenant shall
not use the name of the Building or the Project in connection
with or in promotion or advertising the business of Tenant
except as Tenant's address.
12. The word "Building" as used herein means the building
occupied by Tenant pursuant to the R&D Building Lease to which
this Exhibit C is attached.
13. Landlord reserves the right to promulgate reasonable
rules and regulations relating to the use of parking areas,
including assignment of specific parking areas by number, and
such limitations as may in the opinion of Landlord be necessary
and desirable. Tenant and Tenant's employees shall park their
cars only in those portions of the parking areas designated by
Landlord for employee parking.
14. All exterior window coverings, whether curtains,
blinds or otherwise, used by Tenant shall be approved in
writing by Landlord. Landlord intends that all window
coverings in the Project be uniform and standard in color,
texture and appearance and Tenant shall have no right to
deviate from or change the exterior window coverings approved
by Landlord.
EXHIBIT "C"
Page 2 of 2
<PAGE>
ESTOPPEL CERTIFICATE
Statement of Tenant Release
Date: , 19
------------------------------------------ --
Re: Address:
----------------------------------------
----------------------------------------
For Premises in:
--------------------------------------
--------------------------------------
Gentlemen:
It is our understanding that you have made certain
commitments to the Landlord of the subject premises and, as a
condition thereof, have required this certification by the
undersigned.
The undersigned, as Tenant under that certain Office Lease
dated __________________, 19___, made and entered into
between Sorrento Tech Limited, as Landlord, and the
undersigned, as Tenant, hereby ratified said Lease and
certified that the undersigned has accepted possession and
entered into occupancy of the Premises described in said Lease
and the minimum rental in the monthly amount of $ ______________
was payable from that or an earlier date; that said Lease is in
full force and effect and has not been assigned, modified,
supplemented or amended in any way; that the same represents
the entire agreement between the parties as to the leasing;
that the terms of said Lease to be performed by the Landlord
have been fully satisfied, including without limitation, that
the improvements and space required to be furnished according
to said Lease have been completed in all respects, that
Landlord has fulfilled all of its duties of an inducement
nature, that all required contributions by Landlord to Tenant
on account of Tenant's improvements have been paid and
received; and that on this date there are no existing defenses
or offsets which the undersigned has against the enforcement of
said Lease by Landlord; that rental has not been paid in
advance except as provided by the Lease terms, and that
security in the sum of $ ________ has been deposited with
Landlord; and that all minimum rental due as of this date has
been paid.
Very truly yours,
__________________________________
__________________________________
TENANT
EXHIBIT "D"
<PAGE>
PARKING AGREEMENT
Subject to compliance with the following Rules and
Regulations, so long as the Lease to which this Parking
Agreement is attached remains in effect, Tenant or persons
designated by Tenant shall be entitled to park, on a
non-exclusive basis, in the Project parking facilities, and on
surface parking areas located on the Project.
All persons utilizing the Project parking facilities shall
comply with this Parking Agreement. The following Rules and
Regulations are in effect until Landlord notifies Tenant of any
change. Landlord reserves the right to modify and/or adopt
such other reasonable and non-discriminatory rules and
regulations for the Project parking as it deems necessary.
Landlord may refuse to permit any person who violates this
Parking Agreement to park in the Project parking facilities.
Any violation of this Parking Agreement shall subject the
violator's car to removal from the Project parking facilities
at the violator's expense.
Rules and Regulations
1. Cars must be parked entirely within the stall lines
painted on the floor.
2. All directional signs and arrows must be observed.
3. The speed limit shall be 5 miles per hour.
4. Parking is prohibited:
(a) In areas not striped for parking,
(b) In fire lanes,
(c) Where "no parking" signs are posted,
(d) In cross-hatched areas, or
(e) In such other areas as may be designated by
Landlord.
5. Every parker is required to park and lock his or her
own car. All responsibility for damage to cars or
persons is assumed by the parker.
6. No more than one vehicle may be parked in any one
parking space. Washing, waxing, cleaning or servicing
of any vehicle by a parker and/or his agents is
prohibited.
7. Tenant shall acquaint all its officers and employees
with these Rules and Regulations.
EXHIBIT "E"
CJM: 1665G
P: 0049G
080984
<PAGE>
FIRST AMENDMENT OF LEASE
------------------------
This First Amendment of Lease is between SORRENTO TECH LIMITED ("Landlord")
and BIOSYM TECHNOLOGIES, INC. ("Tenant").
Recitals:
---------
A. On February 26, 1997, Landlord and Tenant entered into a lease
agreement for approximately 10,270 square feet in the Naiman Tech Center at
10065 Barnes Canyon Road, San Diego, California ("New Premises").
B. Pursuant to the terms of said lease agreement, the Target Commencement Date
of the New Premises was June 1, 1987, and the Rent Commencement Date for
Initial Basic Annual Rent is February 1, 1988.
The parties hereto wish to amend the lease agreement as follows:
1. The term "Target Commencement Date" shall be deleted from the lease
agreement. Paragraphs 3.1(a) - (c), paragraph 3.2, and paragraphs 4(a) and (b)
of Exhibit "B" to the lease agreement shall be deleted in their entirety. The
term "Commencement Date" as used in the lease agreement shall mean October 1,
1987, provided Landlord delivers possession of the premises to Tenant, pursuant
to approved plans and specifications, no later than November 1, 1987. For each
day that Landlord delivers possession of the premises to Tenant after November
1, 1987, one day shall be added to the "Commencement Date" and Rent Commencement
Date for Initial Basic Annual Rent as defined herein. By way of example only, if
the Landlord delivers possession to Tenant on October 15, 1987, the
"Commencement Date" remains October 1, 1987, and the Rent Commencement Date for
Initial Basic Annual Rent remains May 1, 1988. If the Landlord delivers
possession to Tenant on November 5, 1987, the "Commencement Date" shall be
October 5, 1987, and the Rent Commencement Date for Initial Basic Annual Rent
shall be May 5, 1988.
2. The Rent Commencement Date for Initial Basic Annual Rent shall be May
1, 1988, subject to modification as set forth in paragraph 1 hereof and further
subject to modification as follows:
The cost of all Tenant Improvements in excess of Landlord's Maximum
Contribution shall be credited against the seven (7) month Rent Abatement Period
provided in paragraph 6(c) of the Basic Lease Provisions. Landlord estimates
such excess to be in the amount of Forty-nine Thousand Two Hundred Eighty-seven
Dollars ($49,287.00) pursuant to approved plans and specifica-tions. Such credit
shall be in lieu of a cash payment required by Tenant to pay for Construction
Costs in excess of Landlord's Maximum Contribution. By way of example, if the
monthly basic rent is
<PAGE>
Eleven Thousand Two Hundred Ninety-seven Dollars ($11,297.00) and the total
excess Construction Costs of Tenant Improvements is Forty-nine Thousand Two
Hundred Eighty-seven Dollars ($49,287.00), the credit against rent abatement is
4.36 months, or 4 months and 11 days ($49,287.00 divided by $11,297.00).
Therefore, the reduced Rent Abatement Period shall commence on October 1, 1987,
and continue for 2.64 months or 2 months and 20 days. Rent payable for a partial
month shall be prorated based on a 30-day month. The cost of Tenant Improve-
ments in excess of Landlord's Maximum Contribution may increase or decrease
pursuant to written change orders executed by Landlord and Tenant and the credit
against the Rent Abatement Period may therefore increase or decrease.
3. Tenant shall continue to pay all amounts due under the terms of its
existing lease agreement for 9605 Scranton Road pursuant to the terms of the
Lease Termination Agreement between Landlord and Tenant dated September 10,
1987.
4. Landlord shall construct the System #1, Basic System Wall in the New
Premises as outlined in a letter to Tenant from Landlord dated August 5, 1987.
The total cost to Tenant of said Basic System Wall shall be no more than Fifty-
five Thousand Five Hundred Thirty-nine Dollars ($55, 539.00).*
4.1 Notwithstanding paragraph 8.5(d) of the lease agreement, Tenant
may remove the System #1, Basic System Wall from the New Premises and the same
shall remain the property of Tenant upon termination or expiration of the lease
agreement.
5. Except as specifically amended herein, all the terms of the lease
agreement, including defined terms, shall remain unchanged and in full force and
effect.
6. This Amendment of Lease may be executed in counter-parts, each of which
shall be deemed an original but all of which shall constitute one and the same
instrument.
7. This Amendment of Lease supersedes all prior lease negotiations,
understandings, amendments or modifications, whether written or verbal, with
respect to the subject matter hereof.
Landlord:
Executed at San Diego, California, on September 15, 1987.
------------
SORRENTO TECH LIMITED, a
California Limited Partnership
By:
/s/Jack Naiman
---------------------------------
Jack Naiman, General Partner
-2-
<PAGE>
AMENDMENT NO. 2 TO R & D BUILDING LEASE
BETWEEN
SORRENTO TECH LIMITED
AND
BIOSYM TECHNOLOGIES, INC.
This AMENDMENT NO. 2 to R & D BUILDING LEASE ("Amendment No. 2") is made
this 31st day of July 1988, by and between SORRENTO TECH LIMITED, a California
limited partnership ("Landlord") and BIOSYM TECHNOLOGIES, INC., a California
corporation ("Tenant").
RECITALS
--------
A. Landlord and Tenant are parties to a certain R & D Building Lease
dated February 26, 1987, as amended by that certain First Amendment of Lease
dated September 15, 1987 (collectively, the "Lease"). Under the Lease, Tenant is
leasing from Landlord approximately 10,270 square feet of space (the "Original
Premises")in a building (the "Building") owned by Landlord and located at 10065
Barnes Canyon Road, Suite A, City of San Diego, San Diego County, California
92121. The Original Premises and the Building are more particularly described in
the Lease.
B. The purpose of this Amendment No. 2 is to amend the Lease in order
to reflect the parties' agreement concerning (i) the leasing by Landlord to
Tenant of the Additional Premises (as defined below) pursuant to the terms and
conditions of that certain proposal letter dated June 30, 1988 from Landlord to
Tenant and (ii) Landlord's grant of a right of first refusal to Tenant with
regard to Tenant's leasing of the remaining space in the Building.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above Recitals and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
do hereby agree as follows:
1.1 Addition of New Article 22. A new Article 22 is hereby added to
--------------------------
the Lease to read as follows:
ARTICLE 22: ADDITIONAL PREMISES
22.1 Lease of Additional Premises. Landlord hereby leases to Tenant
----------------------------
and Tenant hereby leases from Landlord the "Additional Premises" on all the
terms and conditions of the Lease, except as otherwise expressly provided in
this Article 22. The Additional Premises are more particularly described in
Subparagraph 22.1(a) below.
(a) Additional Premises. The Additional
-------------------
Premises shall consist of the following:
<PAGE>
(1) Rentable Area: Approximately 6,000 sq. ft.
--------------
(2) Location. That certain 6,000 square feet
--------
immediately adjacent to and contiguous with the Premises as shown on the Floor
Plan of the Premises attached to the Lease as Exhibit "A-1."
(3) Address: 10055 Barnes Canyon Road, San Diego, CA
-------
92121.
(b) Term: The lease term (the "Expansion Lease Term") for the
----
Additional Premises shall commence on the "Expansion Commencement Date" (as
defined in Paragraph 22.2 below). Notwithstanding anything to this Lease to the
contrary, the Lease term for the Premises and the Expansion Lease Term shall
terminate as of July 31, 1992.
(c) Target Expansion Commencement Date. The Target Expansion
----------------------------------
Commencement Date is October 1, 1988.
(d) Rent.
----
(1) Basic Annual Rent. The base monthly rent (the "Base
-----------------
Monthly Rent") for the Additional Premises shall be $1.00 triple-net ("NNN") per
square foot per month. Notwithstanding the foregoing, the Base Monthly Rent for
the first twelve months of Tenant's occupancy of the Additional Premises shall
be as follows:
Month Rental Rate
----- -----------
Months 1-4 $-0- per sq. ft.
Months 5-8 $0.30 NNN per sq.ft.
Months 9-12 $0.50 NNN per sq.ft.
(2) Building and Project Operating Expenses: Building
----------------------------------------
Operating Expenses and Project Operating Expenses as provided by Paragraph 6(c)
of the Basic Lease Provisions shall accrue and be payable by Tenant for the
Additional Premises beginning on the Expansion Commencement Date.
(3) Adjustment to Base Monthly Rent: The Base Monthly
--------------------------------
Rent shall be increased annually at the rates specified in Paragraph 6(b) of the
Basic Lease Provisions on each successive anniversary of the Expansion Rent
Commencement Date as defined by Paragraph 22.1(d)(4) below, commencing on the
first anniversary of the Expansion Rent Commencement Date.
(4) Expansion Rent Commencement Date: Base Monthly Rent
---------------------------------
shall commence on the first calendar day (the "Expansion Rent Commencement
Date") of the fifth month after the Expansion Commencement Date.
(e) Security Deposit. Prior to the construction of the
----------------
Expansion Tenant Improvements (as defined in Paragraph 22.2(b) below). Tenant
shall pay
-2-
<PAGE>
to the Landlord the sum of $6,000 as a security deposit for the Additional
Premises.
22.2 Expansion Commencement Date.
---------------------------
(a) General. Subject to all terms and conditions
-------
of this Paragraph 22.2, the Expansion Lease Term shall be as specified in
Paragraph 22.1(b) above unless earlier terminated or extended as provided
in the Lease. The parties intend that the Expansion Lease Term shall
commence on the Target Expansion Commencement Date. The date on which the
Expansion Lease Term actually commences is referred to as the "Expansion
Commencement Date."
(b) Definition. The Expansion Commencement
----------
Date shall be the date which is the first to occur of: (1) the date on
which Landlord substantially completes construction of the tenant
improvements for the Additional Premises (the "Expansion Tenant
Improvements") and a certificate of occupancy is issued for the
Additional Premises by the City of San Diego or (2) the date on which
Landlord would have substantially completed construction of the Expansion
Tenant Improvements but for Tenant's Delay (as defined below). If Tenant
takes possession of or commences use of the Additional Premises (or any
portion thereof) for any purpose, including construction, before the
Expansion Commencement Date, the Expansion Lease Term shall not commence,
but such occupancy shall be subject to all the terms and conditions of
the Lease and Tenant shall be obligated to pay all items of rent under
the Lease from the date Tenant takes possession or commences use of the
affected portion of the Additional Premises.
(c) Tenants Delay. If construction of the
-------------
Expansion Tenant Improvements is delayed or postponed by any delay caused
by Tenant ("Tenant's Delay"), the Expansion Commencement Date shall be
adjusted in accordance with the provisions of Paragraph 22.2(b)(2) above
by the actual number of days by which Landlord`s substantial completion
of the Expansion Tenant Improvements is delayed due to Tenant's delay.
(d) Effect of Delay in Expansion Commencement
-----------------------------------------
Date. Notwithstanding the Target Expansion Commencement Date, if for
-----
any reason the Expansion Commencement Date occurs after the Target
Expansion Commencement Date, Landlord shall not be subject to any
liability therefor, nor shall such failure affect the validity of the
Lease or the obligations of Tenant under the Lease or extend the Lease
Term for the Premises or the Expansion Lease Term. Tenant's obligations
to pay the Base Monthly Rent shall be measured from the Expansion
Commencement Date.
(e) Construction of Expansion Tenant Improvements.
----------------------------------------------
The Expansion Tenant Improvements shall be constructed by Landlord in
accordance with plans and specifications approved by Landlord and Tenant.
The Expansion Tenant Improvements shall
-3-
<PAGE>
include the construction of certain interior improvements for use by
Tenant in the course of its business. Landlord shall contribute a total
of $20.00 per square foot ("Landlord`s Maximum Contribution") toward the
cost of the Expansion Tenant Improvements. In the event the cost of the
Expansion Tenant Improvements is less than Landlord`s Maximum
Contribution, the difference shall be credited toward Tenant's first
rental payments. Conversely, in the event the cost of the Expansion
Tenant Improvements exceeds Landlord`s Maximum Contribution, the
difference shall be paid by Tenant as the construction of the Expansion
Tenant Improvements progresses, with the balance to be paid to Landlord
by Tenant prior to Tenant's taking occupancy of the Additional Premises.
22.3 Right of First Refusal. Provided Tenant is not
-----------------------
in default under the terms of the Lease, Tenant shall have the right of
first refusal to lease approximately 3,347 sq. ft. of remaining unleased
space (the "Vacant Space") in the building. Landlord shall notify Tenant
in writing no later than five (5) business days following Landlord's
receipt of any bona fide offer to lease the Vacant Space to a third
party. Such written notice shall specify the terms of said offer, and
Tenant shall have five (5) business days after receipt of such written
notice within which to exercise its right of first refusal by providing
written notice to Landlord of Tenant's intent to lease the Vacant Space
upon the same terms and conditions offered by the third party.
1.2 Security Deposit and Additional Rent. It is understood
-------------------------------------
and agreed that as additional consideration for this Amendment No. 2 Tenant has
paid to Landlord the sum of $11.297 representing the Security Deposit payable to
Landlord by Tenant as provided by Paragraph 8 of the Base Lease Provisions.
Tenant has also paid to Landlord the sum of $18,890 representing accrued
Building Operating Expenses and Project Operating Expenses applicable to the
Original Premises as provided by Paragraph 6(c) of the Basic Lease Provisions.
1.3 Effect of Amendment. Terms used in this Amendment
-------------------
No. 2 with initial capital letters are defined terms which shall have the same
meaning ascribed to them in the Lease, unless the context of this Amendment No.
2 expressly provides otherwise. Except as amended by this Amendment No. 2, the
Lease shall remain in full force and effect as to both the Original Premises and
the Additional Premises. In the event of a conflict between provisions of the
Lease and those of this Amendment No. 2, this Amendment No. 2 shall control.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO.
2 to R & D BUILDING LEASE, as of the date first above written.
"LANDLORD" "TENANT"
SORRENTO TECH LIMITED, BIOSYM TECHNOLOGIES, INC.
a California limited a California corporation
partnership
By: /s/Jack Naiman By: /s/Don Miller
---------------------- -----------------------------
Title: General Partner Title: Vice President, Finance
--------------------------
By: /s/Arnie Hagler
Title: Chairman
--------------------------
-5-
<PAGE>
AMENDMENT NO. 3 TO R & D BUILDING LEASE
BETWEEN
SORRENTO TECH LIMITED
AND
BIOSYM TECHNOLOGIES, INC.
This AMENDMENT NO. 3 TO R & D BUILDING LEASE ("Amendment No. 3") is made
this 28th day of July 1989, by and between SORRENTO TECH LIMITED, a California
limited partnership ("Landlord"), and BIOSYM TECHNOLOGIES, INC., a California
corporation ("Tenant").
RECITALS
--------
A. Landlord and Tenant are parties to a certain R & D Building Lease dated
February 26, 1987, as amended by (1) a certain First Amendment of Lease dated
September 15, 1987 and (2) a certain Amendment No. 2 to R & D Building Lease
dated July 31, 1998 (collectively, the "Lease"). Under the Lease, Tenant is
leasing from Landlord approximately 16,270 square feet of space (the "Original
Premises") in a building (the "Building") owned by Landlord and located at 10065
Barnes Canyon Road, Suite A, City of San Diego, San Diego County, California
92121. The Original Premises and the Building are more particularly described
in the Lease.
B. The purpose of this Amendment No. 3 is to amend the Lease in order to
reflect the parties' agreement concerning the leasing by Landlord to Tenant of
the Expansion Premises (as defined below) pursuant to Tenant's right of first
refusal to lease the Vacant Space (as defined in the Lease).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above Recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
1.1 Addition of New Article 23. A new Article 23 is hereby added to
--------------------------
the Lease to read as follows:
ARTICLE 23: EXPANSION PREMISES
23.1 Lease of Expansion Premises. Pursuant to Paragraph 22.3 of the
---------------------------
Lease, Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Vacant Space on all the terms and conditions of the Lease,
except as otherwise expressly provided in this Article 23. For purposes of
this Amendment, the Vacant Space shall be referred to as the "Expansion
Premises." The Expansion Premises are more particularly described in
Paragraph 23.1(a) below.
(a) Expansion Premises. The Additional Premises shall consist of
------------------
the following:
(1) Rentable Area: Approximately 3,347 sq. ft.
<PAGE>
(2) Location: That certain 3,347 square feet adjacent to and
--------
contiguous with the Original Premises as shown on the Floor Plan of the
Original Premises attached to the Lease as Exhibit "A-1."
(3) Address: 10065 Barnes Canyon Road, San Diego, California
-------
92121.
(b) Term. The Lease term (the "Expansion Lease Term") for the
----
Expansion Premises shall commence on the "Expansion Commencement Date"
(as defined in Paragraph 23.2 below). Notwithstanding anything in
this Lease to the contrary, the Lease term for the Original Premises and
the Expansion Lease Term shall terminate as of July 31, 1992.
(c) Target Expansion Commencement Date. The Target Expansion
-----------------------------------
Commencement Date is October 1, 1989.
(d) Rent.
----
(1) Basic Annual Rent: The Basic Annual Rent for the Expansion
-----------------
Premises shall be $1.00 triple-net (NNN) per square foot per month. The
Basic Annual Rent for the Expansion Premises shall be payable beginning on
the Expansion Rent Commencement Date (as defined in Paragraph 23.1(d) (4)
below.) Beginning July 1, 1998, the Basic Annual Rent for the Original
Premises shall be $1.00 triple-net (NNN) per square foot per month.
(2) Building and Project Operating Expenses: Building Operated
---------------------------------------
Expenses and Project Operating Expenses as provided under Article 5 of the
Lease shall accrue and be payable by Tenant for the Original Premises
beginning on the Expansion Commencement Date.
(3) Adjustments to Base Monthly Rent: The Base Monthly Rent for
--------------------------------
the Expansion Premises shall be increased annually at the rates specified in
Paragraph 6(b) of the Basic Lease Provisions of the Lease on each successive
anniversary of the Expansion Rent Commencement Date as defined by
Paragraph 23.1(d) (4) below, commencing on the first anniversary of the
Expansion Rent Commencement Date.
(4) Expansion Commencement Date: Basic Annual Rent for the
---------------------------
Expansion Premises shall commence on the first calendar day (the "Expansion
Rent Commencement Date") of the fifth month after the Expansion Commencement
-----
Date.
23.2 Expansion Commencement Date.
---------------------------
(a) General. Subject to all the terms and conditions of this
-------
Paragraph 23.2, the Expansion Lease Term shall be as specified in Paragraph
23.1(b) above, unless earlier terminated or extended as provided in the
Lease. The parties intend that the Expansion Lease Term shall commence on
the Target Expansion Commencement Date. The date on which the Expansion
Lease Term
-2-
<PAGE>
actually commences is referred to as the "Expansion Commencement Date."
(b) Definition. The Expansion Commencement Date shall be the date
----------
which is the first to occur of: (1) the date which Landlord substantially
completes construction of the tenant improvements for the Expansion Premises
(the "Expansion Tenant Improvements") or (2) the date on which Landlord
would have substantially completed construction of the Expansion Tenant
Improvements but for Tenant's Delay (as defined below). If Tenant takes
possession of or commences use of the Expansion Premises (or any portion
thereof) for any purpose, including construction, before the Expansion
Commencement Date, the Expansion Lease Term shall not commence, but such
occupancy shall be subject to all the terms and conditions of the Lease and
Tenant shall be obligated to pay all items of rent under the Lease from the
date Tenant takes possession or commences use of the affected portion of the
Expansion Premises.
(c) Tenant's Delay. If construction of the Expansion Tenant
--------------
Improvements is delayed or postponed by any delay caused by Tenant
("Tenant's Delay"), the Expansion Commencement Date shall be adjusted in
accordance with the provisions of Paragraph 23.2(b) (2) above by
the actual number of days by which Landlord's substantial completion of the
Expansion Tenant Improvements is delayed due to Tenant's Delay.
(d) Effect of Delay in Expansion Commencement Date.
----------------------------------------------
Notwithstanding the Target Expansion Commencement Date, if for any reason
the Expansion Commencement Date occurs after the Target Expansion
Commencement Date, Landlord shall not be subject to any liability therefor,
nor shall such failure affect the validity of the Lease or the obligations
of Tenant under the Lease or extend the Lease Term for the Premises or the
Expansion Lease Term. Tenant's obligation to pay Basic Annual Rent shall be
measured from the Expansion Commencement Date.
(e) Construction of Expansion Tenant Improvements. The
---------------------------------------------
Expansion Tenant Improvements shall be construed by Landlord in accordance
with plans and specifications approved by Landlord and Tenant. The
Expansion Tenant Improvements shall include the construction of certain
interior improvements for use by Tenant in the course of its business.
Landlord shall contribute a total of $20.00 per square foot
("Landlord's Maximum Contribution") toward the cost of the Expansion
Tenant Improvements. In the event the cost of the Expansion Tenant
Improvements is less than Landlord's Maximum Contribution, the difference
shall be credited toward Tenant's first rental payment. Conversely, in the
event the cost of the Expansion Tenant Improvements exceeds Landlord's
Maximum Contribution, the difference shall be paid
-3-
<PAGE>
by Tenant as the construction of the Expansion Tenant Improvements
progresses, with the balance to be paid to Landlord by Tenant prior to
Tenant's taking occupancy of the Additional Premises.
1.2 Security Deposit. It is understood and agreed that Tenant shall pay to
----------------
Landlord upon execution of this Amendment No. 3, the sum of $3,347 representing
the Security Deposit for the Expansion Premises payable to Landlord by Tenant.
1.3 Effect of Amendment. Terms used in this Amendment No. 3 with
-------------------
initial capital letters are defined terms which shall have the same meaning
ascribed to them in the Lease, unless the context of this Amendment No. 3
expressly provides otherwise. Except as amended by this Amendment No. 3, the
Lease shall remain in full force and effect as to both the Original Premises and
the Expansion Premises. In the event of a conflict between the provisions
of the Lease and those of this Amendment No. 3, this Amendment No. 3 shall
control.
IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 3 TO
R & D BUILDING LEASE, as of the date first written above.
"LANDLORD" "TENANT"
SORRENTO TECH LIMITED BIOSYM TECHNOLOGIES, INC.,
a California Limited a California corporation
partnership
By: /s/Jack Naiman By: /s/Don Miller
----------------- ----------------
Jack Naiman
General Partner Title: Vice President, Finance
--------------------------
By: /s/Robert Enoch
------------------
Title: President and Chief
----------------------
Operating Officer
----------------------
-4-
<PAGE>
AMENDMENT NO. 4 TO R & D BUILDING LEASE
BETWEEN
SORRENTO TECH LIMITED
AND
BIOSYM TECHNOLOGIES, INC.
This Amendment No. 4 to R & D BUILDING LEASE ("Amendment
No. 4") is made this 26th day of November 1990, by and between
SORRENTO TECH LIMITED, a California limited partnership
("Landlord") and BIOSYM TECHNOLOGIES, INC., a California
corporation ("Tenant").
RECITALS
--------
A. Landlord and Tenant are parties to a certain R & D
Building Lease dated February 26, 1987, as amended by (1) a
certain First Amendment of Lease dated September 15, 1987, (2)
a certain Amendment No. 2 dated July 31, 1988, and (3) a
certain Amendment No. 3 dated July 28, 1989 (collectively, the
"Lease"). Under the Lease, Tenant is leasing from Landlord
approximately 19,617 square feet of space (the "Original
Premises")in a building (the "Building") owned by Landlord
and located at 10065 Barnes Canyon Road, Suite A, City of San
Diego, San Diego County, California 92121. The Original
Premises and the Building are more particularly described in
the Lease.
B. The purpose of this Amendment No. 4 is to amend the
Lease in order to reflect the parties' agreement concerning
the leasing by Landlord to Tenant of Additional Premises (as
defined below).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above Recitals and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do
hereby agree as follows:
1.1 Addition of New Article 24. A new Article 24 is
--------------------------
hereby added to the Lease to read as follows:
ARTICLE 24: ADDITIONAL PREMISES
24.1 Lease of Additional Premises. Landlord hereby
----------------------------
leases to Tenant and Tenant hereby leases from Landlord the
"Additional Premises" on all the terms and conditions of the
Lease, except as otherwise expressly provided in this Article
24. The Additional Premises are more particularly described
in Paragraph 24.1 (a) below.
(a) Additional Premises. The Additional Premises shall
-------------------
consist of the following:
(1) Rentable Area: Approximately 1,520 square feet.
-------------
(2) Location. That certain 1,520 square feet known as
--------
Suite E and F within the building located at 10055 Barnes
Canyon Road.
(3) Address: 10055 Barnes Canyon Road, San Diego,
-------
California 92121.
(b) Term: The Lease term (the "Additional Premises Lease
----
Term") for the Additional Premises shall commence on the
"Additional Premises Commencement Date" (as defined in
paragraph 24.2 below). Notwithstanding anything to this Lease
to the contrary, the Lease term for the Original Premises
shall terminate on July 31, 1992. The Lease Term for the
Additional Premises
-1-
<PAGE>
contained in this Amendment No. 4 shall terminate as of April
7, 1991.
(c) Additional Premises Commencement Date. The Additional
-------------------------------------
Premises Commencement Date is October 8, 1990.
(d) Rent.
----
(1) Basic Annual Rent. The Basic Annual Rent for the
-----------------
Additional Premises shall be $0.99 triple-net (NNN) per square
foot per month. The Basic Annual Rent for the Additional
Premises shall be payable beginning on the Additional Premises
Commencement Date (as defined in Paragraph 24.2 below).
(2) Building and Project Operating Expenses: Building
---------------------------------------
Operating Expenses and Project Operating Expenses as provided
under Article 5 of the Lease shall accrue and be payable by
Tenant for the Additional Premises beginning on the Additional
Premises Commencement Date.
(3) Adjustment to Base Monthly Rent: The Base Monthly
-------------------------------
Rent for the Additional Premises shall be increased annually
at the rates specified in Paragraph 6(b) of the Basic Lease
Provisions of the Lease on each successive anniversary of the
Additional Premises Rent Commencement Date as defined by
Paragraph 24.2 below, commencing on the first anniversary of
the Additional Premises Rent Commencement Date.
24.2 Additional Premises Commencement Date.
-------------------------------------
(a) General. Subject to all terms and conditions of
-------
this Paragraph 24.2, the Additional Premises Lease Term shall
be as specified in Paragraph 24.1 above, unless earlier
terminated or extended as provided in the Lease. The parties
intend that the Additional Premises Lease Term shall commence
on the Additional Premises Commencement Date.
1.2 Effect of Amendment. Terms used in this Amendment No.
-------------------
4 with initial capital letters are defined terms which shall
have the same meaning ascribed to them in the Lease, unless
the context of this Amendment No. 4 expressly provides
otherwise. Except as amended by this Amendment No. 4, the
Lease shall remain in full force and effect as to both the
Original Premises, the Expansion Premises and the Additional
Premises. In the event of a conflict between provisions of
the Lease and those of this Amendment No. 4, this Amendment
No. 4 shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
AMENDMENT NO. 4 to R & D BUILDING LEASE, as of the date first
written above.
"LANDLORD" "TENANT"
SORRENTO TECH LIMITED, BIOSYM TECHNOLOGIES, INC.
a California limited a California corporation
partnership
By: /s/Jack Naiman By: /s/Todd Schmidt
------------------- --------------------
Title: Vice President
-----------------
By:
--------------------
Title:
-----------------
-2-
<PAGE>
AMENDMENT NO. 5 TO R & D BUILDING LEASE
BETWEEN
SORRENTO TECH LIMITED
AND
BIOSYM TECHNOLOGIES, INC.
This Amendment No. 5 to R & D BUILDING LEASE ("Amendment No. 5")
is made this 7th day of May 1991, by and between SORRENTO TECH
LIMITED, a California limited partnership ("Landlord") and BIOSYM
TECHNOLOGIES, INC., a California corporation ("Tenant").
RECITALS
--------
A. Landlord and Tenant are parties to a certain R & D Building
Lease dated February 26, 1987, as amended by (1) a certain First
Amendment of Lease dated September 15, 1987, (2) a certain Amendment
No. 2 dated July 31, 1988, and (3) a certain Amendment No. 3 dated
July 28, 1989 and (4) a certain Amendment No. 4 dated November 26,
1990 (collectively, the "Lease"). Under the Lease, Tenant is leasing
from Landlord approximately 19,617 square feet of space (the
"Original Premises")in a building (the "Building") owned by Landlord
and located at 10065 Barnes Canyon Road, Suite A, and approximately
1,520 square feet of space in a building owned by Landlord located
at 10055 Barnes Canyon Road, Suites E and F, City of San Diego, San
Diego County, California 92121. The Original Premises and the
Building are more particularly described in the Lease.
B. The purpose of this Amendment No. 5 is to amend the Lease in
order to reflect the parties' agreement concerning the leasing by
Landlord to Tenant of Additional Premises (as defined below).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above Recitals and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties do hereby agree as
follows:
1.1 Article 24. A new Article 24 is hereby amended as follows:
----------
(a) Extension of Termination Date for Additional Premises Suites
------------------------------------------------------------
E and F. The Lease Term for the 1,520 square feet in Suites E and F
-------
as outlined in Amendment No. 4 to the Lease shall be extended and
shall terminate as of October 8, 1991.
(b) Basic Annual Rent. The Basic Annual Rent for the
-----------------
Additional Premises Suites E and F shall be $0.99 triple-net (NNN)
per square foot per month for the extension period.
1.2 Addition of New Article 25: A new Article 25 is hereby
--------------------------
added to the Lease to read as follows:
<PAGE>
ARTICLE 25 ADDITIONAL PREMISES - SUITES G AND H
25.1 Lease of Additional Premises Suites G and H. Landlord
-------------------------------------------
hereby leases to Tenant and Tenant hereby leases from Landlord the
"Additional Premises" on all the terms and conditions of the Lease,
except as otherwise expressly provided in this Article 25. The
Additional Premises are more particularly described in Paragraph
25.1 (a), as described below..
(a) Additional Premises. The Additional Premises shall
-------------------
consist of the following:
(1) Rentable Area: Approximately 1,453 square feet.
-------------
(2) Location: That certain 1,453 square feet known as
--------
Suite G and H within the building located at 10055 Barnes Canyon
Road.
(b) Additional Premises Commencement Date. The Additional
-------------------------------------
Premises Commencement Date is April 15, 1991.
(c) Rent.
----
(1) Basic Annual Rent. The Basic Annual Rent for the
-----------------
Additional Premises Suites G and H shall be $0.99 triple-net (NNN)
per square foot per month. The Basic Annual Rent for the Additional
Premises shall be payable beginning on the Additional Premises Rent
Commencement Date (as defined below).
(2) Building and Project Operating Expenses: Building
---------------------------------------
Operating Expenses and Project Operating Expenses as provided under
Article 5 of the Lease shall accrue and be payable by Tenant for the
Additional Premises beginning on the Additional Premises
Commencement Date.
(b) Term. The Lease term (the "Additional Premises Lease
----
Term") for the Additional Premises shall commence on the "Additional
Premises Commencement Date" (as defined in paragraph 25.2 below).
Notwithstanding anything in this Lease to the contrary, the Lease
term for the Original Premises shall terminate on July 31, 1992. The
Lease Term for the Additional Premises Suites E and F shall be
extended to terminate as of October 8, 1991. The Lease Term for the
Additional Premises Suites G and H shall terminate as of October 31,
1991.
25.2 Additional Premises Commencement Date.
-------------------------------------
(a) General. Subject to all terms and conditions of
-------
this Paragraph 25.2, the Additional Premises Lease Term shall be as
specified in Paragraph 25.1 above, unless earlier terminated or
extended as provided in the Lease. The parties intend that the
Additional Premises Lease Term shall commence on the Additional
Premises Commencement Date.
-2-
<PAGE>
1.2 Effect of Amendment. Terms used in this Amendment No. 5
-------------------
with initial capital letters are defined terms which shall have the
same meaning ascribed to them in the Lease, unless the context of
this Amendment No. 5 expressly provides otherwise. Except as amended
by this Amendment No. 5, the Lease shall remain in full force and
effect as to both the Original Premises, the Expansion Premises and
the Additional Premises. In the event of a conflict between
provisions of the Lease and those of this Amendment No. 5, this
Amendment No. 5 shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
AMENDMENT NO. 5 to R & D BUILDING LEASE, as of the date first
written above.
LANDLORD
Dated: May 7, 1991 SORRENTO TECH LIMITED
---------------- a California limited partnership
By: The Walters Management Co., Inc.
Court Appoint Receiver
By: /s/John Alioto
-------------------------------------
Its: Senior Vice President
------------------------------------
TENANT: BIOSYM TECHNOLOGIES, INC.
a California corporation
Dated: May 7, 1991
---------------- By: /s/Todd Schmidt
-------------------------------------
Name: Todd Schmidt
-----------------------------------
Title: Vice President
----------------------------------
-3-
<PAGE>
AMENDMENT NO. 6 TO R & D BUILDING LEASE
BETWEEN
SORRENTO TECH LIMITED
AND
BIOSYM TECHNOLOGIES, INC.
This Amendment No. 6 to R & D BUILDING LEASE ("Amendment No. 6") is made
this 17th day of July 1991, by and between SORRENTO TECH LIMITED, a California
limited partnership ("Landlord") and BIOSYM TECHNOLOGIES, INC., a California
corporation ("Tenant").
RECITALS
--------
A. Landlord and Tenant are parties to a certain R & D Building Lease
dated February 26, 1987, as amended by (1) a certain First Amendment of Lease
dated September 15, 1987, (2) Amendment No. 2 dated July 31, 1988, (3) Amendment
No. 3 dated July 28, 1989, (4) Amendment No. 4 dated November 26, 1990, and (5)
Amendment No. 5 dated May 7, 1991 (collectively, the "Lease"). Under the Lease,
Tenant is leasing from Landlord approximately 19,617 square feet of space (the
"Original Premises") in a building (the "Building") owned by Landlord and
located at 10065 Barnes Canyon Road, and approximately 2,973 square feet of
space in a building owned by Landlord located at 10055 Barnes Canyon Road,
Suites E, F, G & H, City of San Diego, San Diego County, California 92121.
The Original Premises and the Buildings are more particularly described in the
Lease.
B. The purpose of this Amendment No. 6 is to amend the Lease in order
to reflect the parties' agreement concerning the leasing by Landlord to Tenant
of Additional Premises (as defined below).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above Recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
1.1 Articles 24 and 25. Articles 24 and 25 are hereby amended as follows:
------------------
(a) Extension of Termination Date for Additional Premises Suites E, F, G
--------------------------------------------------------------------
and H. The Lease Term for the 2,973 square feet in Suites E, F, G and H at
- ------
10055 Barnes Canyon Road is hereby extended and shall terminate as of December
31, 1991.
(b) Option to Extend. Tenant shall have the option to extend the lease
----------------
term on a month-to-month basis upon thirty (30) days written notification
through July 31, 1992, which is co-terminus with the lease for the Original
Premises.
1
<PAGE>
(c) Basic Annual Rent. The Basic Annual Rent for Suites E, F, G and H
-----------------
shall be $0.75 triple-net (NNN) per square foot per month for the extension
period and for any month-to-month extension.
1.2 Addition of New Article 26. A new Article 26 is hereby added to the
--------------------------
Lease to read as follows:
ARTICLE 26: ADDITIONAL PREMISES - 9725 Scranton Road
26.1 Lease of Additional Premises. Landlord hereby leases to Tenant and
----------------------------
Tenant hereby leases from Landlord the "Additional Premises" on all the terms
and conditions of the Lease, except as otherwise expressly provided in this
Article 26. The Additional Premises are more particularly described in
Paragraph 26.1 (a), as described below.
(a) Additional Premises. The Additional Premises shall consist of the
-------------------
following:
(1) Rentable Area: Approximately 4,762 square feet.
-------------
(2) Location: That certain 4,762 square feet at 9725 Scranton
--------
Road, known as Building 3 within the Naiman Tech Center.
(b) Additional Premises Commencement Date. The Additional Premises
-------------------------------------
Commencement Date is July 8, 1991.
(c) Rent.
-----
(1) Basic Annual Rent. The Basic Annual Rent for the Additional
-----------------
Premises shall be $0.75 triple-net (NNN) per square foot per month. The Basic
Annual Rent for the Additional Premises shall be payable beginning on the
Additional Premises Rent Commencement Date (as defined below).
(2) Building and Project Operating Expenses and Utilities: Building
-----------------------------------------------------
Operating Expenses and Project Operating Expenses as provided under Article 5
of the Lease shall accrue and be payable by Tenant for the Additional Premises
beginning on the Additional Premises Commencement Date. Tenant shall make
necessary arrangements with San Diego Gas & Electric for service to the
Additional Premises.
(d) Term: The lease term (the "Additional Premises Lease Term") for the
----
Additional Premises shall commence on the "Additional Premises Commencement
Date" (as defined in paragraph 26.2 below). Notwithstanding anything in this
Lease to the contrary, the Lease term for the Original Premises shall terminate
on July 31, 1992. The Lease Term for the Additional Premises shall terminate as
of December 31, 1991.
(e) Option to Extend. Tenant shall have the option to extend the lease
----------------
term on a month-to-month basis upon thirty (30) days written notification
through July 31, 1992, which is co-terminus with the lease
2
<PAGE>
for the Original Premises.
26.2 Additional Premises Commencement Date.
-------------------------------------
(a) General. Subject to all terms and conditions of this Paragraph
-------
26.2, the Additional Premises Lease Term shall be as specified in Paragraph
26.1 above, unless earlier terminated or extended as provided in the Lease. The
parties intend that the Additional Premises Lease Term shall commence on the
Additional Premises Commencement Date.
1.3 Effect of Amendment. Terms used in this Amendment No. 6 with initial
-------------------
capital letters are defined terms which shall have the same meaning ascribed to
them in the Lease, unless the context of this Amendment No. 6 expressly provides
otherwise. Except as amended by this Amendment No. 6, the Lease shall remain in
full force and effect as to both the Original Premises, the Expansion Premises
and the Additional Premises. In the event of a conflict between provisions of
the Lease and those of this Amendment No. 6, this Amendment No. 6 shall
control.
IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 6
to R & D BUILDING LEASE, as of the date first written above.
LANDLORD:
Dated: July 17, 1991 SORRENTO TECH LIMITED,
------- a California limited partnership
By: The Walters Management Co., Inc.
Court Appoint Receiver
By: /s/William Borsari
-------------------------
Its: President
-------------------------
TENANT:
Dated: July 3, 1991 BIOSYM TECHNOLOGIES, INC.,
------ a California corporation
By: /s/Todd Schmidt
------------------------
Name: Todd Schmidt
----------------------
3
<PAGE>
AMENDMENT NO. 7 to R & D BUILDING LEASE
BETWEEN
SORRENTO TECH LIMITED
AND
BIOSYM TECHNOLOGIES, INC.
This Amendment No. 7 to R & D BUILDING LEASE ("AMENDMENT NO. 7")is made this
9th day of September 1991, by and between SORRENTO TECH LIMITED, a California
corporation ("Tenant").
RECITALS
--------
A. Landlord and Tenant are parties to a certain R & D Building Lease dated
February 26, 1987, as amended by (1) a certain First Amendment of Lease dated
September 15, 1987, (2) Amendment No. 2 dated July 31, 1988, (3) Amendment No. 3
dated July 28, 1989, (4) Amendment No. 4 dated November 26, 1990, (5) Amendment
No. 5 dated May 7, 1991, and(6) Amendment No.6 dated July 17, 1991
(collectively, the "Lease"). Under the Lease, Tenant is leasing from Landlord
approximately 19,617 square feet of space (the "Original Premises") in a
building (the "Building") owned by Landlord and located at 10065 Barnes Canyon
Road, approximately 2,973 square feet of spaced in a building owned by Landlord
located at 10055 Barnes Canyon Road, Suites E, F, G & H, and approximately 4,762
square feet of space in a building owned by Landlord located at 9725 Scranton
Road, City of San Diego, San Diego County, California 92121. The Original
Premises and the Buildings are more particularly described in the Lease.
B. The purpose of this Amendment No. 7 is to amend the Lease in order to
reflect the parties' agreement concerning the leasing by Landlord to Tenant of
Additional Premises (as defined below).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above Recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
1.1 Articles 26. Articles 26 is hereby amended as follows:
-----------
ARTICLE 26: ADDITIONAL PREMISES - 9725 Scranton Road
26.1 Lease of Additional Premises. Landlord hereby leases to Tenant and
----------------------------
Tenant hereby leases from Landlord the "Additional Premises" on all the terms
and conditions of the Lease, except as otherwise expressly provided in this
Article 26. The Additional Premises are more particularly described in
paragraph 26.1 (a), as described below.
1
<PAGE>
(a) Additional Premises. The additional Premises shall consist of the
-------------------
following:
(1) Rentable Area: Approximately 2,218 square feet.
-------------
(2) Location. That certain 2,218 square feet at 9725 Scranton Road,
--------
known as Building 3 within the Naiman Tech Center.
(b) Additional Premises Commencement Date. The additional premises
-------------------------------------
Commencement Date is September 1, 1991.
(c) Rent.
----
(1) Basic Annual Rent. The Basic Annual Rent for the Additional
-----------------
Premises shall be $0.75 triple-net(NNN) per square foot per month. The Basic
Annual Rent for the Additional Premises shall be payable beginning on the
Additional premises Rent Commencement Date (as defined below).
(2) Building and Project Operating Expenses and Utilities: Building
------------------------------------------- ---------
Operating Expenses and Project Operating Expenses as provided under Article 5 of
the Lease shall accrue and be payable by Tenant for the Additional Premises
beginning on the Additional Premises Commencement Date. Tenant shall make
necessary arrangements with San Diego Gas & Electric for service to the
Additional Premises.
(d) Term: The lease terms (the "Additional premises Lease Term") for
----
the Additional Premises shall commence on the "Additional Premises Commencement
Date" (as defined in paragraph 26.2 below). Notwithstanding anything in this
Lease to the contrary, the Lease term for the Original Premises shall terminate
on July 31, 1992. The Lease Term for the Additional Premises shall terminate as
of December 31, 1991.
(e) Option to Extend. Tenant shall have the option to extend the lease
----------------
term on a month-to-month basis upon thirty (30) days written notification
through July 31, 1992, which is co-terminus with the lease for the Original
Premises.
26.2 Additional Premises Commencement Date.
-------------------------------------
(a) General. Subject to all terms and conditions of this Paragraph
-------
26.2, the Additional Premises Lease Term shall be as specified in Paragraph 26.1
above, unless earlier terminated or extended as provided in the Lease. The
parties intend that the Additional Premises Lease Term shall commence on the
Additional Premises Commencement Date.
1.3 Effect of Amendment. Terms used in this Amendment No. 7 with
-------------------
initial capital letters are defined terms which shall have the same meaning
ascribed to them in the Lease, unless the context of this Amendment No. 7
expressly provides otherwise. Except as amended by this Amendment No. 7, the
Lease shall remain in full force and effect
2
<PAGE>
as to both the Original Premises, the Expansion Premises and the Additional
Premises. In the event of a conflict between provisions of the Lease and those
of this Amendment No. 7, this Amendment No. 7 shall control.
LANDLORD:
Dated: 9/5 , 1991 SORRENTO TECH LIMITED,
------ a California limited partnership
By: The Walters Management Co. Inc.
Court Appoint Receiver
By: /s/William Borsari
-------------------------
Its: President
------------------------
TENANT:
Dated: 8/9 , 1991 BIOSYM TECHNOLOGIES, INC.,
------ a California corporation
By: /s/Kelly B. Cole
-------------------------
Name: Kelly B. Cole
-----------------------
Title: Manager, Purchasing and
-----------------------
Facilities
-----------
3
<PAGE>
AMENDMENT NO. 8
to
R & D BUILDING LEASE
between
SORRENTO TECH LIMITED
and
BIOSYM TECHNOLOGIES, INC.
This Amendment No. 8 to R & D BUILDING LEASE ("Amendment No. 8") is made
this 6th day of September, 1991, by and between SORRENTO TECH LIMITED, a
California limited partnership ("Landlord"), and BIOSYM TECHNOLOGIES, INC., a
California corporation ("Tenant"), with reference to the facts set forth in the
Recitals below.
RECITALS
--------
A. Landlord and Tenant are parties to a certain R & D Building Lease
dated February 26, 1987, as amended by (1) a certain First Amendment of Lease
dated September 15, 1987; (2) a certain Amendment No. 2 to R & D Building Lease
dated July 31, 1988; (3) a certain Amendment No. 3 to R & D Building Lease dated
July 28, 1989; (4) a certain Amendment No. 4 to R & D Building Lease dated
November 26, 1990; (5) a certain Amendment No. 5 to R & D Building Lease dated
May 7, 1991; (6) a certain Amendment No. 6 to R & D Building Lease dated July
17, 1991; and (7) a certain Amendment No. 7 to R & D Building Lease dated August
____, 1991 (collectively, the "Lease"). Under the Lease, Tenant is leasing from
Landlord approximately 29,570 square feet of space (the "Existing Premises")
consisting of (i) approximately 19,617 square feet of space in a building
located at 10065 Barnes Canyon Road, (ii) approximately 2,973 square feet of
space in a building located at 10055 Barnes Canyon Road, Suites E, F, G & H in
the City of San Diego; and (iii) approximately 6,980 square feet of space in a
building owned by Landlord located at 9725 Scranton Road, in the City of San
Diego, San Diego County, California 92121. The Existing Premises are more
particularly described in the Lease.
B. The purpose of this Amendment No. 8 is to amend the Lease in order to
reflect the parties' agreement concerning the relocation of Tenant to and the
leasing by Landlord to Tenant of the New Premises and the surrender of the
Existing Premises to Landlord.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the Recitals above, the mutual
covenants and conditions below and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1.1 Relocation to the New Premises. Subject to the terms and conditions
------------------------------
below, Landlord shall relocate Tenant to the New Premises (as more fully
described below) identified as the first and second
-1-
<PAGE>
floors of the building (the "New Building") located at 9685 Scranton Road, San
Diego, California 92121.
1.2 New Basic Lease Provisions. Paragraphs 3(a), (b) and (c), 4(a), 5,
--------------------------
6(a), (b) (c) and (d), 8, 11 and 13 of the Basic Lease Provisions for the Lease
are deleted in their entirety and substituted with the following:
3. Premises:
--------
(a) Rentable Area: Approximately 51,635 sq. ft. See the
Definition of Rentable Area attached as Exhibit "A-3."
(b) Location: The first and second floors of the
existing building located at 9685 Scranton Road (commonly known as
"Building 3D"), San Diego, California (the "New Premises"), as shown
on the Floor Plan of the Premises attached as Exhibit "A-1." The New
Premises are located in a certain real estate project commonly known
as the Naiman Tech Center (the "Project"), as shown on the Site Plan
of the Project attached as Exhibit "A-2."
(c) Address: 9685 Scranton Road, San Diego, California
92121.
4. Lease Term: The Lease Term shall be eight (8) years
----------
beginning on the Commencement Date.
5. Commencement Date: The Commencement Date shall be the
-----------------
date which the Tenant Improvements are substantially completed subject
only to certain "punch list" items and minor adjustments.
"Substantial completion," for purposes of this Section 5, shall mean
Landlord's architect or project manager has certified that the Tenant
Improvements have been substantially completed and the City of San
Diego Building Inspection Department has made its final inspection and
approval of the Tenant Improvements. Landlord shall complete all
"punch list" items and minor adjustments not later than ninety (90)
days after substantial completion of the Tenant Improvements. In the
event the Tenant
-2-
<PAGE>
Improvements shall not be substantially completed on or before May 1,
1992, Tenant shall have the right to terminate this Amendment No. 8
and, upon such termination, the parties shall have no further
obligations hereunder.
6. Rent:
----
(a) New Premises. Basic Annual Rent for the New premises
------------
shall be payable beginning on the Commencement Date as follows:
<TABLE>
<CAPTION>
Lease $(NNN)per Basic Annual Rent
Period Sq. Ft. (NNN) per Month
- ------------------------------- -------------------------------- --------------------------------
<S> <C> <C>
Months 1-12 $0.30 $15,490.50
Months 13-24 $0.50 $25,817.50
Months 25-36 $0.70 $36,144.50
Months 37-48 $0.75 $38,726.25
Months 49-60 $0.80 $41,308.00
Months 61-72 $0.85 $43,889.75
Months 73-84 $0.95 $49,053.25
Months 85-96 $1.00 $51,635.00
</TABLE>
(c) Additional Rent: Tenant shall pay, as Additional Rent
---------------
during the entire Lease Term, Tenant's share of Building Operating
Expenses and Project Operating Expenses as provided in Article 5 of
the Lease. Tenant's share of Building Operating Expenses shall be 100%
and Tenant's share of Project Operating Expenses shall be 8.56%.
Notwithstanding the foregoing, combined Building and Project Operating
Expenses shall not exceed $.24 per square foot per month for the first
three (3) years of the Lease Term. Thereafter, (i) increases in
Building Operating Expenses shall not exceed four percent (4%) per
annum, and (ii) increases in Project Operating Expenses shall not
exceed four percent (4%) per annum. Upon written request, Landlord
shall provide Tenant with an Operating Expenses projection.
(d) Utilities: Tenant shall have the sole responsibility to
---------
secure utilities services for the New Premises. Tenant shall make
necessary arrangements with San Diego Gas & Electric Company to (i)
supply utilities for (ii) bill Tenant separately utilities. shall make
necessary the New Premises and for all such arrangements with San
Diego Gas & Electric Company to (i) supply utilities for the New
Premises and (ii) bill Tenant separately for all such utilities.
-3-
<PAGE>
8. Security Deposit: Upon execution of this Amendment No. 8, Tenant
----------------
shall pay $17,049 to Landlord to increase the Security Deposit to
$37,694.
11. Addresses for Notices:
---------------------
(a) If to Landlord:
Sorrento Tech Limited
c/o Naiman Tech Center
9605 Scranton Road, Suite 102
San Diego, CA 92121
Attn: Property Management
(b) If to Tenant:
Biosym Technologies, Inc.
9685 Scranton Road
San Diego, CA 92121
Attn: Accounts Payable
13. Broker: Grubb & Ellis (Steve Scott)
8880 Rio San Diego Dr., #200
San Diego, CA 92108
Broker commissions payable to Grubb & Ellis or to The Walters
Management Co. shall be paid by Landlord. Landlord and Tenant represent
and warrant that they are unaware of any additional brokerage
commissions or fees payable to any other broker for the subject
transaction.
1.3 Tenant Improvement Allowance. Exhibit "B" to the Lease shall be
----------------------------
deleted in its entirety and shall be replaced by this Section 1.3 and Exhibit
"B" attached to this Amendment. Landlord shall construct certain tenant
improvements (the "Tenant Improvements") in the Premises, pursuant to this
Section 1.3 and the attached Exhibit "B". Landlord shall provide Tenant with
a tenant improvement allowance (the "Allowance") of $21.50 per square foot.
The terms and conditions of the Allowance are more fully set forth in Exhibit
"B". The Allowance shall include the cost of space planning, plans, permits
and other fees associated with the Tenant Improvements. Landlord has approved
the firm Krommenhoek, McKeown & Associates to prepare the space plans. If
Tenant does not use all of the Allowance, Basic Annual Rent for the New
Premises shall be reduced by $0.0125 per square foot per month for each unused
$1.00 throughout the Lease Term or pro rata part thereof. As more fully set
forth in Exhibit "B", the Tenant Improvements shall be constructed by Landlord's
contractor in accordance with plans and specifications prepared by Tenant's
architect and approved by Landlord and Tenant. The Tenant Improvements shall be
constructed in accordance with all applicable government codes, regulations
and permits.
-4-
<PAGE>
1.4 First Right of Refusal for Expansion Space. Pursuant to the terms and
------------------------------------------
conditions of this Section 1.4 and Exhibit "C" attached to this Amendment,
Landlord shall grant Tenant a right of first refusal to lease adjacent space in
Building 3 (the "Expansion Space") during the Lease Term. The Expansion Space is
more fully described in Exhibit "C." Tenant's right of refusal shall remain
effective provided such rights have not been previously granted to tenants
located in Building 3 as of the Commencement Date as to Torrey Science
Technologies and as of the date of this Amendment No. 8 as to all other parties.
Landlord shall notify Tenant in writing within thirty (30) days after the
Expansion Space (or portion thereof) becomes legally available to lease, or at
Landlord's option, such earlier time as Landlord shall be in a position to
estimate when the Expansion Space will be legally available to lease, advising
Tenant of such estimated date. Expansion Space shall be "available" only to the
extent it is not subject to expansion, extension, first offer, first refusal and
any other rights of other tenants in the Building as of the Commencement Date as
to Torrey Science Technologies and as of the date of this Amendment No. 8 as to
all other parties. Tenant shall then have the right of first refusal (in the
event that Tenant is not then in default under the Lease, with any applicable
cure period having expired), exercisable by written notice to Landlord within
ten (10) business days thereafter, to add any such available space to the New
Premises immediately as it may become available. Any such available space shall
be leased to Tenant at the Prevailing Rental Rate (as defined in Exhibit "C")
for a term coterminous with the balance of the Lease Term remaining on Tenant's
lease of the New Premises (or such shorter term as may be necessary to prevent
any conflict with such other tenants' rights to such space).
1.5 Signage. Tenant may erect building top signage, entry door signage,
-------
and directory signage (collectively, "Signage"). Signage shall conform to the
Naiman Tech Center sign standards, the provisions of the City of San Diego
Municipal Code relating to signage, and the Lusk Mira Mesa CC&Rs.
1.6 Parking. Landlord shall provide Tenant with three and one half (3.5)
-------
parking spaces per one thousand (1,000) usable square foot of the New Premises.
Landlord shall not charge Tenant a parking fee for such parking privileges.
1.7 Reduction of Rent for Existing Premises. Subject to the terms and
---------------------------------------
conditions of this Amendment, upon execution of this Amendment No. 8, Landlord
shall reduce (the "Reduction") Tenant's obligation to pay rent under the Lease
for the Existing Premises to $0.70 per square foot per month for the entire
Existing Premises and any interim expansion space that Tenant may occupy prior
to Tenant's occupancy of the New Premises. The Reduction shall be for the period
commencing on the date hereof until the Commencement Date. Tenant shall continue
paying all Building and Project Operating Expenses for the New Premises,
including without limitation, janitorial and utility expenses.
-5-
<PAGE>
1.8 Amendment No. 8 Contingent Upon Relocation of Other Tenants. This
-----------------------------------------------------------
Amendment No. 8 is subject to and contingent upon Landlord's ability to relocate
the existing tenants of the New Premises in the New Building to alternate
locations within the Naiman Tech Center. In the event the existing tenant in
the New Premises has not executed a lease amendment or other relocation
agreement to Tenant's reasonable satisfaction on or before September 6, 1991,
Tenant shall have the right to terminate this Amendment No. 8, provided Tenant
shall exercise its right to terminate this Amendment No. 8 on or before
September 20, 1991.
1.9 Quiet Enjoyment. Landlord covenants and agrees that Tenant, upon
---------------
making all of Tenant's payments as and when due under the Lease, and upon
performing, observing and keeping the covenants, agreements and conditions of
this Lease on its part to be kept, shall peaceably and quietly hold, occupy and
enjoy the New Premises during the term of this Lease subject to the terms and
provisions of this Lease.
1.10 Option to Renew.
---------------
(a) Grant of Option. Subject to all of the terms and conditions of the
---------------
Lease as amended by this Amendment No. 8, Tenant shall have the right (the
"Option") to extend the Lease Term for one (1) additional term of five (5) years
(the "Option Term") by sending written notice to such effect to Landlord not
later than one hundred eighty (180) days prior to the expiration of the Lease
Term. Failure to timely send such notice shall constitute a waiver of all
remaining rights as to the Option and Tenant shall have no right to exercise the
Option. The extension of the Lease Term shall be on all of the same terms and
conditions of the Lease as amended by this Amendment No. 8, provided that Basic
Annual Rent payable during the Option Term shall be determined as provided in
Section 1.10(b) below. Notwithstanding anything in this Section 1.10 to the
contrary, Tenant shall have no right to exercise the Option if (i) Tenant is in
default under this Lease either at the time the Option is exercised or at the
time the Option Term is scheduled to commence; (ii) Tenant is not in possession
of at least seventy- five percent (75%) of the Rentable Area of the New Premises
either at the time the Option is exercised or at the time the Option Term is
scheduled to commence; or (iii) Tenant has assigned this Lease in whole or in
part or sublet more than twenty-five percent (25%) of the Rentable Area of the
Premises either at the time the Option is exercised or at the time the Option
Term is scheduled to commence.
(b) Rent During Option Term. Provided Tenant shall validly exercise the
-----------------------
Option, the Basic Annual Rent payable during the Option Term shall be the fair
market rent for the New Premises for the entire Option Term (e.g., fair market
value for the base year subject to annual increases at a fixed rate over the
five-year term). In the event the parties are unable to
-6-
<PAGE>
agree on the Basic Annual Rent for the Option Term within sixty (60)days after
the exercise of the Option by Tenant, either party may request that the fair
market rent for the New Premises during the Option Term be determined by
appraisal as provided below. Each party shall select a disinterested member of
the American Institute of Real Estate Appraisers ("MAI Appraiser(s)") with at
least five years of experience in appraising fair market rent in the San Diego
market. Each party shall designate an appraiser within seven (7) days after such
60-day period. In the event that either party shall fail to designate an MAI
Appraiser designate within such 7-day period, the appraiser selected by the
other party shall be the sole appraiser to determine the fair market rent. Upon
the designation of the MAI Appraisers, the appraiser shall have seven (7) days
in which to designate a third MAI Appraiser. If the two appraisers are unable to
agree on a third appraiser, either party may request the President of the
Executive Committee of the San Diego Chapter of the American Institute of Real
Estate Appraisers to appoint such third MAI Appraiser. The three appraisers
shall each appraise the fair market rent for the entire Option Term taking into
account appropriate indicators of the value of the leasehold interest and shall
report their findings to Landlord and Tenant in writing. If the appraisers fail
to deliver a determination of the fair market rent within thirty (30) days after
the appointment of the third appraiser, either party may dismiss the appraisers
and reinitiate the appraisal procedure set forth above. In recognition that the
fair market rent of the New Premises during the Option Term may not be
determined until after the commencement of the Option Term, Tenant shall pay, as
Basic Annual Rent for the New Premises until the fair market rent for the New
Premises is determined, the amount of Basic Annual Rent then in effect under the
Lease. In the event the fair market rent for the New Premises during the Option
Term is determined to be greater than such amount, Tenant shall pay Landlord,
within thirty (30) days after written request, the difference between the amount
required by such determination of the fair market rent for the New Premises
during the Option Term, and the amount previously paid by Tenant for the New
Premises during the Option Term.
1.11 Non-Disturbance. The parties agree that the effect of this Amendment
---------------
No. 8 is contingent upon receipt of a non- disturbance agreement recognizing
Tenant's interest in the Lease from HomeFed Bank in a form acceptable to Tenant
(or other similar instrument) on or before September 6, 1991. In the event such
non-disturbance agreement (or similar instrument) is not received by Tenant on
or before September 6, 1991, Tenant shall have the right to terminate this
Amendment No. 8, provided that Tenant shall exercise its right to terminate this
Amendment No. 8 on or before September 20, 1991.
1.12 Effect of Amendment. Terms used in this Amendment No. 8 with
-------------------
initial capital letters are defined terms which shall have the same meaning
ascribed to them in the Lease, unless the
-7-
<PAGE>
context of this Amendment No. 8 expressly provides otherwise. Except as amended
by this Amendment No. 8, the Lease shall remain in full force and effect as to
the New Premises. In the event of a conflict between provisions of the Lease and
those of this Amendment No. 8, this Amendment No. 8 shall control.
IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 8
to R & D BUILDING LEASE, as of the date first written above.
"LANDLORD:"
Dated: 9/5 , 1991 SORRENTO TECH LIMITED,
----- a California limited partnership
By: The Walters Management Co.,
Inc., as Court-Appointed
Receiver
By: /s/William Borsari
------------------
Name: William Borsari
---------------
Title: President
---------
"TENANT:"
Dated: August 23, 1991 BIOSYM TECHNOLOGIES, INC.,
--------- a California corporation
By: /s/Todd Schmidt
---------------
Name: Todd Schmidt
------------
Title: Vice President
--------------
-8-
<PAGE>
EXHIBIT "A-1"
FLOOR PLAN OF THE PREMISES
--------------------------
[Diagram appears here]
<PAGE>
EXHIBIT "A-2"
SITE PLAN OF THE PROJECT
------------------------
[Diagram appears here]
<PAGE>
EXHIBIT "A-3"
DEFINITION OF RENTABLE AREA
---------------------------
1. Definition. The term "Rentable Area" as used in this Lease shall
----------
mean:
a. Single Tenant Floor. As to each floor of each building in the Project
-------------------
on which the entire space rentable to a tenant is or will be leased to one
tenant (hereinafter referred to as "Single Tenant Floor"), Rentable Area shall
be the entire area bounded by the inside surface of the four exterior glass
walls (or the inside surface of the permanent exterior wall where there is no
glass) on such floor, including all areas used for elevator lobbies, corridors,
special stairways, or elevators, common restrooms (if any), mechanical rooms,
electrical rooms and telephone closets without deduction for columns and other
structural portions of each building or vertical penetrations that are included
for the special use of a tenant, but excluding the area contained within the
exterior walls of each building's stairs, fire towers, vertical ducts, elevator
shafts, flues, vents, stacks and pipe shafts. Rentable Area for a Single Tenant
Floor shall include a pro rata portion of any ground floor elevator lobby areas.
b. Multi-Tenant Floor. As to each floor of each building in the Project
------------------
on which space is or will be leased to more than one tenant (hereinafter
referred to as "Multi-Tenant Floor"), Rentable Area attributable to each such
tenant shall be the total of (1) the entire area included within the premises
covered by such tenant's lease, being the area bounded by the inside surface of
any exterior glass walls (or the inside surface of the permanent exterior walls
where there is no glass) bounding such premises, the exterior of all walls
separating such premises from any public corridors or other public areas on such
floor, and the centerline of all walls separating such premises from other areas
leased or to be leased to other tenants on such floor, and (2) a pro rata
portion of the area covered by the elevator lobbies, corridors, common restrooms
(if any), mechanical rooms, electrical rooms and telephone closets situated on
such floor and on the ground floor of a building (but only to the extent any of
the same serve all tenants of the building).
2. Certification. Landlord's architect shall determine the Rentable
-------------
Area of each tenant's premises and such determination shall be binding and
conclusive. A certified copy of such determination shall be delivered to
Landlord and each tenant. Landlord reserves the right to have its architect
redetermine the Rentable Areas of the Premises, the Building and/or the Project
from time to time during the Initial Term and, if extended, any option term of
this Lease. A certified copy of any such redetermination shall be delivered to
Landlord and each affected tenant.
<PAGE>
EXHIBIT "B"
TENANT IMPROVEMENT ALLOWANCE MEMORANDUM
---------------------------------------
In addition to the mutual covenants contained in the Lease, Landlord and
Tenant further mutually agree as follows:
1. Tenant Improvement Allowance. Landlord shall pay $21.50 per square
----------------------------
foot of Usable Area (as defined below) in the Premises (the "Allowance") for the
work to be performed by Tenant and Landlord under this Tenant Improvement
Allowance Memorandum (the "Memorandum"). Such work shall include the
construction of the tenant improvements described below and the preparation of
all space plans, working drawings, plans for such construction and building
permits and fees associated with such work.
2. Plans and Specifications for the Premises.
-----------------------------------------
a. Tenant shall prepare detailed space plans and specifications and
working drawings for the Premises which shall include, but not be limited to,
locations of doors, partitioning, reflected ceiling, electrical fixtures,
outlets and switches, telephone outlets, plumbing fixtures, extraordinary floor
loads, and other special requirements. Tenant shall coordinate and develop such
space plans and working drawings and shall use its reasonable best efforts to
obtain all required governmental permits ("Permits") on or before the dates set
forth in the Schedule of Approvals below. Landlord shall use its reasonable best
efforts to assist Tenant in obtaining the Permits. Tenant shall have the right
to apply the Allowance to the payment of its contractors for the preparation of
space plans, specifications and working drawings and to applicable governmental
entities for permit applications, provided (i) Tenant shall first deliver to
landlord invoices or receipts from such contractors or completed applications
for Permits to governmental entities and (ii) payment of the same shall be made
in a timely manner by Landlord directly to such contractors and governmental
entities. Landlord shall be entitled in all respects to rely upon all plans,
drawings and information supplied by Tenant. The Tenant improvement work to be
done pursuant to such plans and specifications shall be referred to as the
"Tenant Improvements."
b. Tenant's plans and specifications shall not be in conflict with the
building codes for the city of San Diego or with insurance regulations for a
fire resistive Type I building. All plans and specifications shall be in a form
satisfactory to appropriate governmental authorities responsible for issuing
permits and licenses required for construction.
3. Definition of Usable Area. The term Usable Area shall mean the
-------------------------
Rentable Area of the Premises (as defined in Exhibit "A-3"), less the area of
elevator lobbies, public restrooms, mechanical rooms, electrical rooms,
telephone closets and other
<PAGE>
common areas of the Building and vertical penetrations not constructed or
provided for the special use of Tenant.
4. Work at Tenant's Cost and Expense. After Tenant has performed its
---------------------------------
obligations under Sections 7(a), (c) and (e) below, Landlord shall cause the
Tenant Improvements to be installed by Landlord's contractor, but at Tenant's
sole cost and expense, subject only to Landlord's paying the Allowance set forth
above. Prior to commencing any Tenant Improvements, Landlord shall submit to
Tenant a written cost estimate of the Tenant Improvements by the date specified
in Section 7(d) below and Tenant shall approve or disapprove such cost estimate
by the date specified in Section 7(e) below. In the event Tenant disapproves the
cost estimate, Landlord shall resubmit revised cost estimates until Tenant shall
approve the same. In the event Tenant shall not approve Landlord's revised cost
estimates, if any, on or before November 1, 1991, either party shall have the
right to terminate this Amendment No. 8. Tenant shall have the right, upon
reasonable advance notice, to audit Landlord's records which relate specifically
to the Tenant Improvements. After approval by Tenant, Landlord's contractor
shall then proceed with constructing the Tenant Improvements. At the time
specified in Paragraph 7(f), Tenant shall pay Landlord, in full, the amount of
such cost less the Allowance. In the event the total cost of the Tenant
Improvements shall be less than the Allowance, such amount shall be credited
against Tenant's first installment of Basic Annual Rent for the New Premises.
5. Building Standard Materials. The following items are Building Standard
---------------------------
and must be used in order to maintain the Building's integrity. These items are
exterior window blinds, suite entry and interior doors and hardware, acoustical
ceilings, suite plaques and directory strips, HVAC and electrical systems, metal
studs and carpeting. However, Tenant may request different materials or require
work different from or in addition to the Building Standard. In such event any
materials, drawings, plans or specifications requested shall be subject to the
written approval of Landlord. Such approval shall not be unreasonably withheld
or delayed.
6. Completion and Rent Commencement Date. It is understood that
-------------------------------------
Tenant shall be liable for the delay and increased cost, if any, in completing
the Tenant Improvements if caused by any event listed in Sections 6(a), (b) and
(c). It is further understood that the Commencement Date shall not be affected
by any such delay on the part of Tenant. Neither the Commencement Date nor the
obligation to pay rent as set forth in Section 4.1 of the Lease and in the new
Item 6 incorporated into the Basic Lease Provisions by this Amendment No. 8
shall be delayed by any of the following:
a. Tenant's failure to approve or furnish its space plans and
specifications, working drawings and to apply for and diligently pursue
obtaining the Permits by the times specified in the Schedule of Approvals,
below, or
b. Delays of any nature, whether or not within Tenant's control,
resulting from Tenant's decision to use any materials, finishes or installations
other than Building Standard, provided Landlord shall promptly notify Tenant of
any anticipated delay due to Tenant's selection of non-building standing
materials, or
<PAGE>
c. A delay in construction of the Tenant Improvements as a result of
Tenant's failure to approve written costs of such Tenant Improvements in
accordance the Sections 4 and 5 above.
d. Any change requested by Tenant in the scope of Tenant Improvements
approved and contracted for by Landlord.
Notwithstanding anything in this Amendment No. 8 to the contrary, either party
shall have the right to terminate the Lease in the event a building permit for
the Tenant Improvements shall not be obtained on or prior to February 14, 1992,
provided such terminating party shall not be the cause of any delay in obtaining
a building permit.
7. Schedule of Approvals.
----------------------
Event
-----
Event Time
----- ----
a. "Space Plan Approval September 9, 1991
Date;" i.e., submittal
of preliminary plans
and specifications for
Tenant Improvements
and electrical and
HVAC requirements by
Tenant
b. Approval of Tenant's September 16, 1991
preliminary plans by
Landlord
<PAGE>
c. Deadline for Tenant's October 22, 1991
submittal of final
space plans and
working drawings,
including electrical
and HVAC requirements
and completion of
applications for
Permits by Tenant
d. Submission of cost November 4, 1991
estimate for Tenant
Improvements by
Landlord
e. Deadline for Tenant's November 11, 1991
approval for Landlord's
cost estimate for
Tenant Improvements
f. Deadline for payment Prior to the
of Tenant's share of Commencement Date
cost of Tenant
Improvements
<PAGE>
Exhibit "C"
RIGHT OF FIRST REFUSAL
----------------------
During the Lease Term, Tenant shall have a right of
first refusal to lease the space adjacent to the New Premises
shown on the floor plan attached hereto as Schedule 1, and known
as (i) building 3, Suite B, containing approximately 16,670
square feet of rentable area; and (ii) Building 3, Suite A
containing approximately 11,590 square feet of rentable area (the
"Expansion Space") prior to the Expansion Space being offered to
any person or entity not then occupying the Expansion Space in
its "then as is" condition, when the same becomes legally
available to lease, on the same terms and provisions then in
effect under the Lease, except that the rental rate for the
Expansion Space shall be increased to reflect the prevailing
Rental Rate. "Prevailing Rental Rate" means the average per
square foot rental rate per month for all leases for comparable
space and approximately the same number of months, executed by
existing tenants in the Project for space expansions during the
immediately preceding 24-month period prior to the date upon
which such Prevailing Rental Rate is to become effective and
payable under the terms of this Lease. If no such comparable
space has been leased during such twenty-four (24) month period,
the rental rates used for purposes of this provision shall be
adjusted to the amounts Landlord would have used had leases for
such comparable space been entered. In all cases, such rates
shall be determined without regard to any free rent periods,
tenant improvement allowances, takeover lease obligations, or
other economic incentives; provided, however, that any such
economic incentives generally provided by Landlord in such com-
parable expansion leases shall also be provided to Tenant.
Landlord shall notify Tenant in writing within thirty
(30) days after the Expansion Space (or portion thereof) becomes
legally available to lease, or at Landlord's option, such earlier
time as Landlord shall be in a position to estimate when the
Expansion Space will be legally available to lease, advising
Tenant of such estimated date. Tenant shall then have ten (10)
business days in which to notify Landlord in writing exercising
Tenant's right of first refusal to lease the Expansion Space on
the terms described above. If Tenant exercises the right of
first refusal to lease the Expansion Space, such lease shall
commence the later of sixty (60) days after Tenant's notice
exercising the right of first refusal, or the date the Expansion
Space is available for occupancy, and shall continue for the
duration of the term of the Lease. After Tenant validly
exercises the right of first refusal provided herein, the parties
shall execute an amendment to the Lease, adding the Expansion
Space, or a new lease for the Expansion Space, or such other
documentation as Landlord shall require, promptly after Landlord
shall prepare the same, in order to confirm the leasing of the
Expansion Space to Tenant, but an otherwise valid exercise of the
<PAGE>
right of first refusal contained herein shall be fully effec-
tive, whether or not such confirmatory documentation is executed.
If the parties are unable to agree on the Prevailing
Rental Rate within sixty (60) days after the commencement of the
lease for the Expansion Space, either party may request that the
Prevailing Rental Rate be determined by arbitration under the
Commercial Arbitration Rules of the American Arbitration
Association then in effect. In recognition that the Prevailing
Rental Rate may not be determined until after the commencement
of the lease for the Expansion Space, Tenant shall pay, as Rent
for the Expansion space, until the Prevailing Rental Rate is
determined, the amount of Rent then in effect under the Lease on
a per rentable square foot basis (including Rental, and all other
charges). Under no circumstances shall Rent under the Lease ever
be less than such amount of Rent then in effect under the Lease,
on a per rentable square foot basis, regardless of the Prevailing
Rental Rate, as determined in accordance with the foregoing
provisions. If the Prevailing Rental Rate is determined to be
greater than such amount, Tenant shall pay Landlord, within
thirty (30) days after written request therefor, the difference
between the amount required by such determination of the
Prevailing Rental Rate, and the amount theretofore paid by Tenant
for the Expansion Space.
If Tenant shall fail to exercise such right of first
refusal, after notice by Landlord of the availability of the
Expansion Space, as provided herein, such right of first refusal
shall be deemed to have lapsed and expired, and shall be of no
further force or effect. Landlord may thereafter freely lease
all or a portion of the Expansion Space to any other party, at
any time, on any terms, in Landlord's sole discretion.
Notwithstanding the foregoing, if the Expansion Space is
currently legally available to lease, the parties shall be deemed
to have agreed that the right of first refusal granted herein
shall only apply after the Expansion Space has been leased, and
thereafter becomes available to lease. If the Expansion Space
is currently not legally available to lease, the foregoing right
of first refusal shall be subject to the existing tenants or
occupants thereof renewing their existing leases and/or
exercising any options to extend, and in all events is subject
and subordinate to any other rights of any other person or entity
to lease the Expansion Space, if such rights have already been
granted prior to the date of this Lease.
If Tenant shall exercise the right of first refusal
granted herein, Landlord does not guarantee that the Expansion
Space will be available on the commencement date for the lease
thereof, if the then existing occupants of the Expansion Space
shall hold-over, or for any other reason beyond Landlord's
reasonable control. In such event, rent with respect to the
Expansion Space shall be abated until Landlord legally delivers
the same to Tenant, as Tenant's sole recourse. Tenant's exercise
of such right of first refusal shall not operate to cure any
default by Tenant of any of the terms of provisions in the Lease
nor to extinguish or impair any rights or remedies of Landlord
arising by virtue of such default. The right of first refusal
herein shall, at Landlord's election, be null and void, if Tenant
is in default under the Lease on the date Tenant exercises its
rights hereunder or at any time thereafter and prior to commencement
of the Lease for the Expansion Space. If the lease
<PAGE>
or Tenant's right to possession of the New Premises shall
terminate in any manner whatsoever before Tenant shall exercise
the right herein provided, or if Tenant shall have subleased or
assigned all or any portion of the New Premises, then immediately
upon such termination, sublease or assignment, the right of first
refusal to lease the Expansion Space herein granted shall
simultaneously terminate and become null and void. Such right
of first refusal is personal to Tenant. Under no circumstances
whatsoever shall the assignee under a complete or partial
assignment of the Lease, or a subtenant under a sublease of the
Premises, have any right to exercise the right of first refusal
granted herein. Tenant agrees that time is of the essence of
this provision.
<PAGE>
EXHIBIT "C"
EXPANSION SPACE
---------------
[Diagram appears here]
<PAGE>
AMENDMENT NO. 9 TO R & D BUILDING LEASE
BETWEEN
SORRENTO TECH LIMITED
AND
BIOSYM TECHNOLOGIES, INC.
This Amendment No. 9 to R & D BUILDING LEASE ("Amendment No. 8") is made
this 20 day of April 1992, by and between SORRENTO TECH LIMITED, a California
limited partnership ("Landlord") and BIOSYM TECHNOLOGIES, INC., a California
corporation ("Tenant").
RECITALS
--------
A. Landlord and Tenant are parties to a certain R&D Building Lease dated
February 26, 1987, as amended by (1) a certain First Amendment of Lease dated
September 15, 1987, (2) Amendment No. 2 dated July 31, 1988, (3) Amendment No. 3
dated July 28, 1989, (4) Amendment No. 4 dated November 26, 1990, (5) Amendment
No. 5 dated May 7, 1991, (6) Amendment No. 6 dated July 17, 1991, (7) Amendment
No. 7 dated _______, 1991 and Amendment No. 8 dated September 6, 1991
(collectively, the "Lease"). Under the Lease, Tenant is leasing from Landlord
approximately 19,617 square feet of space (the "Original Premises") in a
building (the "Building") located at 10065 Barnes Canyon Road; approximately
2,973 square feet of space in a building located at 10055 Barnes Canyon Road,
Suites E, F,G & H; and approximately 6,980 square feet of space in a building
owned by Landlord located at 9725 Scranton Road, City of San Diego, San Diego
County, California 92121.
In addition certain modifications to the lease plus additional space was added
per Amendment No. 8. The Original Premises and the Buildings are more
particularly described in the Lease.
B. The purpose of this Amendment No. 9 is to amend the Lease in order to
reflect the parties' agreement concerning the leasing by Landlord to Tenant of
New Premises (as defined below).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above Recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
1.1 Landlord agrees to lease, on a temporary basis, additional space
located at 9725 Scranton Road under the same terms and conditions as specified
in Amendment No. 8.
1
<PAGE>
1. PREMISES:
--------
(a) Rentable Area: +1,160 sq. ft. See Definition of Rentable Area
attached to the Lease as Exhibit "A-3."
(b) Location: The first floor of the existing building located at
9725 Scranton Road, San Diego, California, as shown on the Floor Plan of the
premises attached hereto as Exhibit "A-1." The New Premises located in a
certain real estate project commonly known as the Naiman Tech Center (the
"Project"), as shown on the Site Plan of the Project attached to the Lease as
Exhibit "A-2."
2. Lease Term: March 1, 1992.
-----------
3. Target Commencement Date: October 24, 1991.
------------------------
4. Rent:
----
(a) The initial Basic Monthly Rent shall be $.70/sf.
5. Security Deposit: None
-----------------
6. Addresses for Notices:
---------------------
(a) If to Landlord:
Sorrento Tech Limited
c/o Naiman Tech Center
9605 Scranton Road, Suite 102
San Diego, CA 92121
(b) If to Tenant:
Biosym Technologies, Inc.
9685 Scranton Road
San Diego, CA 92121
7. Broker: None.
------
8. Tenant Improvement Allowance: None.
----------------------------
1.2 Effect of Amendment. Terms used in this Amendment No. 9 with initial
-------------------
capital letters are defined terms which shall have the same meaning ascribed to
them in the Lease, unless the context of this Amendment No. 9 expressly provides
otherwise. Except as amended
2
<PAGE>
by this Amendment No. 9, the Lease shall remain in full force and effect as to
both the Original Premises, the Expansion Premises and the Additional Premises.
In the event of a conflict between provisions of the Lease and those of this
Amendment No. 9, this Amendment No. 9 shall control.
IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO. 9
to R&D BUILDING LEASE, as of the date first written above.
LANDLORD:
Dated: April 20, 1992 SORRENTO TECH LIMITED
a California limited partnership
By: The Walters Management Co. Inc.
Court Appoint Receiver
By: /s/ William Borsari
----------------------
Title: President
-------------------
TENANT:
Dated: April 20, 1992 BIOSYM TECHNOLOGIES, INC.,
a California corporation
By: /s/ Todd Schmidt
---------------------------
Title: Vice President - Finance
------------------------
3
<PAGE>
Attachment A
[Diagram appears here]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 37,562
<SECURITIES> 45,662
<RECEIVABLES> 13,664
<ALLOWANCES> (505)
<INVENTORY> 0
<CURRENT-ASSETS> 101,672
<PP&E> 25,757
<DEPRECIATION> (12,615)
<TOTAL-ASSETS> 119,814
<CURRENT-LIABILITIES> 45,959
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 70,581
<TOTAL-LIABILITY-AND-EQUITY> 119,814
<SALES> 41,493
<TOTAL-REVENUES> 61,919
<CGS> 0
<TOTAL-COSTS> 20,864
<OTHER-EXPENSES> 54,763
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 242
<INCOME-PRETAX> (10,707)
<INCOME-TAX> 542
<INCOME-CONTINUING> (11,249)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,249)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> (.60)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 25,385
<SECURITIES> 56,610
<RECEIVABLES> 10,591
<ALLOWANCES> (563)
<INVENTORY> 0
<CURRENT-ASSETS> 96,436
<PP&E> 20,610
<DEPRECIATION> (8,098)
<TOTAL-ASSETS> 124,843
<CURRENT-LIABILITIES> 42,495
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 77,258
<TOTAL-LIABILITY-AND-EQUITY> 124,843
<SALES> 38,190
<TOTAL-REVENUES> 54,942
<CGS> 0
<TOTAL-COSTS> 19,132
<OTHER-EXPENSES> 40,137
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218
<INCOME-PRETAX> (773)
<INCOME-TAX> 1,795
<INCOME-CONTINUING> (2,568)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,568)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
