<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 0-28494
MILLENNIUM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3177038
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
238 MAIN STREET, CAMBRIDGE, MA 02142
(Address of principal executive offices, including zip code)
617-679-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of shares of Common Stock, $.001 par value per share, outstanding as of
August 6, 1998 was 29,547,516.
<PAGE> 2
MILLENNIUM PHARMACEUTICALS, INC.
REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations
and Comprehensive Loss for the three and six
months ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
EXHIBIT INDEX 13
2
<PAGE> 3
Millennium Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(in thousands, except par value and shares) 1998 1997
------- -----------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 34,078 $ 69,236
Marketable securities 40,472 27,321
Due from strategic partners 10,226 778
Prepaid expenses and other current assets 3,139 4,595
--------- ---------
Total current assets 87,915 101,930
Property and equipment, net 32,953 29,030
Restricted cash and other assets 11,737 5,140
Intangible assets, net 7,062 8,413
--------- ---------
$ 139,667 $ 144,513
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,647 $ 3,165
Accrued expenses 5,203 4,294
Deferred revenue 2,507 3,053
Current portion of capital lease obligations 7,505 5,847
--------- ---------
Total current liabilities 20,862 16,359
Capital lease obligations, net of current portion 20,330 19,809
Minority interest 10,588 16,590
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.001 par value; 5,000,000 shares authorized;
none issued -- --
Common Stock, $0.001 par value: 100,000,000 shares authorized;
29,530,230 shares in 1998 and 29,169,398 shares in 1997 issued
and outstanding 30 29
Additional paid-in capital 195,372 193,254
Deferred compensation (1,373) (1,992)
Notes receivable from officers (126) (166)
Unrealized gain (loss) on marketable securities (23) (4)
Accumulated deficit (105,993) (99,366)
--------- ---------
Total stockholders' equity 87,887 91,755
--------- ---------
Total liabilities and stockholders' equity $ 139,667 $ 144,513
========= =========
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE> 4
Millennium Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations
and Comprehensive Loss (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(in thousands, except per share and share data)
- ----------------------------------------------
Revenue under strategic alliances $ 28,236 $ 13,372 $ 49,279 $ 24,328
Costs and expenses:
Research and development 28,036 18,333 50,465 29,932
General and administrative 5,927 4,514 11,838 7,863
Acquired in-process research and development
-- -- -- 83,800
Amortization of intangible assets 676 675 1,351 1,046
----------- ----------- ----------- -----------
34,639 23,522 63,654 122,641
----------- ----------- ----------- -----------
Loss from operations (6,403) (10,150) (14,375) (98,313)
Interest income 1,339 976 2,786 2,053
Interest expense (479) (303) (1,124) (636)
Minority interest 3,342 -- 6,086 --
----------- ----------- ----------- -----------
Net Loss $ (2,201) $ (9,477) $ (6,627) $ (96,896)
Unrealized gain (loss) on marketable securities 19 84 (19) (4)
----------- ----------- ----------- -----------
Comprehensive loss (2,182) (9,393) (6,646) (96,900)
=========== =========== =========== ===========
Basic and diluted net loss per share $ (0.07) $ (0.33) $ (0.23) $ (3.50)
Shares used in computing basic and diluted net
loss per share 29,500,860 28,764,467 29,396,532 27,663,696
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
Millennium Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998 1997
(in thousands) -------- --------
<S> <C> <C>
CASH USED IN OPERATIONS $(17,906) $ (5,874)
INVESTING ACTIVITIES
Purchase of property and equipment (3,004) (4,842)
Sale of marketable securities 35,785 37,805
Purchase of marketable securities (48,936) (23,487)
-------- --------
Net cash (used in) provided by investing activities (16,155) 9,476
FINANCING ACTIVITIES
Acquisition of ChemGenics, net of cash acquired -- 7,087
Net proceeds from employee stock purchases 2,134 910
Repurchase of Common Stock (15) (86)
Payments of long-term debt -- (800)
Payments of capital lease obligations (3,216) (2,210)
-------- --------
Net cash (used in) provided by financing activities (1,097) 4,901
-------- --------
(Decrease) increase in cash and cash equivalents (35,158) 8,503
Cash and cash equivalents at beginning of period 69,236 10,088
-------- --------
Cash and cash equivalents at end of period $ 34,078 $ 18,591
======== ========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital leases $ 5,395 $ 6,202
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(unaudited)
1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. 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. Interim results for the six-month period ended June 30, 1998 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on 10-K
for the fiscal year ended December 31, 1997 which was filed with the Securities
Exchange Commission on March 26, 1998.
As of January 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net loss or shareholders' equity.
Statement 130 requires unrealized gains or losses on the Company's
available-for-sale securities, which prior to adoption were reported separately
in shareholders' equity, to be included in other comprehensive income. Prior
year financial statements have been reclassified to conform to the requirements
of Statement 130.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," "intends,"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause the Company's actual
results to differ materially from those indicated by such forward-looking
statements. These factors are set forth under the caption "Factors That May
Affect Results" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, which "Factors That May Affect Results" discussion is
expressly incorporated by reference herein.
OVERVIEW
Millennium Pharmaceuticals, Inc. ("Millennium" or the "Company"), was
incorporated in January 1993 and is applying a comprehensive platform of
genomics and related technologies to pursue multiple opportunities in the
discovery and development of life-science-based products and services. Most of
the Company's activities currently are directed at the field of human
healthcare. As used herein, the terms "the Company" and "Millennium" include
the Company's subsidiaries where appropriate in the context.
RESULTS OF OPERATIONS
QUARTERS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Revenue under strategic alliances increased to $28.2 million for the
three months ended June 30, 1998 (the "1998 Quarterly Period") from $13.4
million for the three months ended June 30, 1997 (the "1997 Quarterly Period").
The increase in revenue in the 1998 Quarterly Period is due primarily to
revenue from research funding and payments for technology transfer under the
Company's alliance with Monsanto Company (the "Monsanto alliance"). The
Monsanto alliance was entered into in October 1997 and, therefore, was not in
place in the 1997 Quarterly Period.
Research and development expenses increased to $28.0 million for the
1998 Quarterly Period from $18.3 million for the 1997 Quarterly Period. The
increase was attributable primarily to increased personnel expenses as the
Company hired additional research and development personnel, increased purchases
of laboratory supplies, and increased equipment depreciation and facilities
expenses in connection with the expansion of the Company's research efforts.
General and administrative expenses increased to $5.9 million for the
1998 Quarterly Period from $4.5 million for the 1997 Quarterly Period. The
increase was attributable primarily to increased personnel expenses as the
Company hired additional management, business
7
<PAGE> 8
development and administrative personnel, and to professional fees in
connection with the further expansion of the Company's operations.
The Company's total operating expenses increased to $34.6 million for
the 1998 Quarterly Period from $23.5 million for the 1997 Quarterly Period.
Interest income was $1.3 million for the 1998 Quarterly Period and $1.0
million for the 1997 Quarterly Period. The increase resulted from an increase in
the Company's average balance of cash, cash equivalents and marketable
securities. Interest expense increased to $.5 million for the 1998 Quarterly
Period from $.3 million for the 1997 Quarterly Period due to increased capital
lease obligations.
Minority interest represents the minority shareholder interest of Eli
Lilly and Company ("Lilly") in the net loss for the 1998 Quarterly Period of the
Company's majority-owned subsidiary, Millennium BioTherapeutics, Inc. ("MBio").
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Revenue under strategic alliances increased to $49.3 million for the
six months ended June 30, 1998 (the "1998 Six Month Period") from $24.3 million
for the six months ended June 30, 1997 (the "1997 Six Month Period"). The
increase is due primarily to revenue from research funding and the achievement
of mutually agreed upon technology transfer objectives relating to the Monsanto
alliance which was not in place during the 1997 Six Month Period. In addition,
revenue relating to MBio's alliance with Lilly during the 1998 Six Month Period
increased compared to the 1997 Six Month Period. The increase in revenues under
the alliance with Lilly is primarily due to the fact that the research program
with Lilly commenced late in the 1997 Six Month Period.
Research and development expenses increased to $50.5 million for the
1998 Six Month Period from $29.9 million for the 1997 Six Month Period. The
increase was attributable primarily to increased personnel expenses as the
Company hired additional research and development personnel, increased purchases
of laboratory supplies, and increased equipment depreciation and facilities
expenses in connection with the expansion of the Company's research efforts.
General and administrative expenses increased to $11.8 million for the
1998 Six Month Period from $7.9 million for the 1997 Six Month Period. The
increase was attributable primarily to increased personnel expenses as the
Company hired additional management, business development and administrative
personnel, and to professional fees in connection with the further expansion of
the Company's operations.
The Company's total operating expenses decreased to $63.7 million for
the 1998 Six Month Period from $122.6 million for the 1997 Six Month Period. The
decrease is primarily attributable to a one-time charge of $83.8 million in the
1997 Six Month Period for acquired in-process research and development
associated with the Company's acquisition of ChemGenics Pharmaceuticals, Inc.
8
<PAGE> 9
Interest income was $2.8 million for the 1998 Six Month Period compared
to $2.1 million for the 1997 Six Month Period. The increase resulted from an
increase in the Company's average balance of cash, cash equivalents and
marketable securities. Interest expense increased to $1.1 million for the 1998
Six Month Period from $.6 million for the 1997 Six Month Period due to increased
capital lease obligations.
Minority interest represents the minority shareholder interest of Lilly
in the net loss for the 1998 Six Month Period of the Company's majority owned
subsidiary, MBio.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has recognized approximately $201.8
million of revenue under strategic alliances. As of June 30, 1998, the Company
had approximately $74.6 million in cash, cash equivalents and marketable
securities. This excludes $9.8 million of marketable securities classified as
restricted cash and other assets on the balance sheet which serve as collateral
for the Company's letters of credit.
During the six months ended June 30, 1998, the Company used $17.9
million of cash in its operations, purchased $3.0 million of property and
equipment and used cash of $3.2 million to pay capital lease obligations. In
addition, during the six months ended June 30, 1998, the Company acquired
equipment under capital leases of $5.4 million.
The Company believes that existing cash and marketable securities and
anticipated cash payments from its strategic alliances will be sufficient to
support the Company's operations for the next twelve months.
IMPACT OF YEAR 2000
Based on a recent assessment, the Company determined that it will not
be required to modify or replace significant portions of its software so that
its computer systems will function properly with respect to dates in the year
2000 and thereafter. The Company's systems are based upon technology acquired in
the last few years. Therefore, the Company presently believes that no
significant modifications to existing software are needed based on presently
available information.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1998 Annual Meeting of Stockholders was held on June 2, 1998
(the "Annual Meeting"). At the Annual Meeting, Eugene Cordes, Raju Kucherlapati
and Eric S. Lander were elected as Class II Directors for a three year term. The
other directors whose terms of office as a director continue after the meeting
are as follows: Mark J. Levin, Joshua Boger, A. Grant Heidrich and William W.
Helman.
The following is a summary of each matter voted at the meeting and the
number of votes cast for, against or withheld, and abstentions, as to each such
matter:
1. To elect three Class II Directors for the ensuing three years.
For: 22,948,522 Withheld: 15,020
2. To ratify the selection by the Board of Directors of Ernst & Young LLP as
the Company's independent auditors for 1998.
For: 22,943,092 Against: 10,850 Abstain: 9,600
10
<PAGE> 11
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The exhibits listed in the Exhibit Index are included in this report.
(b) Reports on Form 8-K
None.
11
<PAGE> 12
SIGNATURES
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.
MILLENNIUM PHARMACEUTICALS, INC.
(Registrant)
Date: August 12, 1998 By: /s/ Janet C. Bush
----------------------------------
Janet C. Bush
Vice President, Finance
(Principal Financial Officer)
Date: August 12, 1998 By: /s/ William J. Curry
----------------------------------
William J. Curry
Controller
(Principal Accounting Officer)
12
<PAGE> 13
EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly Report on
Form 10-Q:
Exhibit
No. Description
- ------- -----------
10.1 Lease dated June 12, 1998 by and between the Company and 270
Albany Street Realty Trust.
10.2 Lease dated June 17, 1998 by and between the Company and
Transamerica Business Credit Corporation.
27.1 Financial Data Schedule for the quarter ended June 30, 1998
27.2 Restated Financial Data Schedule for the quarter ended
June 30, 1997
99.1 Pages 44 through 58 of the Company's Annual Report of Form
10-K for the year ended December 31, 1997, as filed with the
Securities Exchange Commission (which are deemed filed except
to the extent that portions are not expressly incorporated by
reference herein).
13
<PAGE> 1
Exhibit 10.1
LEASE
BY AND BETWEEN
270 ALBANY STREET REALTY TRUST,
LANDLORD,
AND
MILLENNIUM PHARMACEUTICALS, INC.,
TENANT
<PAGE> 2
ARTICLE I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO.
APPROXIMATE TERM: Fifteen (15) full years from the Term Commencement
Date.
BUILDING: The entire Building at the Premises known and
numbered as 270 Albany Street, Cambridge,
Massachusetts, containing approximately 73,347 r.s.f.
as shown in Exhibit A-1 attached hereto
BUILDING ADDRESS: 270 Albany Street
Cambridge, Massachusetts
BUILDING FLOOR AREA: 73,347 rentable square feet
ANNUAL FIXED RENT RATE: Commencing on the Term Commencement Date and
continuing until the Phase II Substantial Completion
Date, $35.62 per rentable square foot, and after the
Phase II Substantial Completion Date, $38.75 per
rentable square foot, subject to adjustment as set
forth in Section 3.1(b) and Section 4.1(b) hereof.
INITIAL ESTIMATED
ANNUAL ADDITIONAL RENT $5.50 p.r.s.f.
LANDLORD: David E. Clem and David M. Roby, Trustees, 270 Albany
Street Realty Trust, u/d/t dated June 18, 1997
recorded with the Middlesex South District Registry
of Deeds in Book 27406, Page 83
LANDLORD'S ARCHITECT: DTS Shaw Associates
153 Milk Street
Boston, MA 02109
LANDLORD'S & MANAGING
AGENT'S ADDRESS: McNeil Management, Inc.
320 Norwood Park South
Norwood, MA 02062
LANDLORD'S REPRESENTATIVE: David Clem
LEASE YEAR: Each consecutive period of twelve (12) calendar
months commencing on the Commencement Date if it
occurs on the first day of a calendar month and
otherwise commencing on the first day of the month
immediately following the month in which the
Commencement Date occurs, and each anniversary of
such date, except that the first Lease Year shall
also include the period from the Commencement Date
until the first day of the following month in the
event that
<PAGE> 3
the Commencement Date does not occur on the first day
of a calendar month.
LOT: The land shown on EXHIBIT A-l and more particularly
described on EXHIBIT A-2 attached hereto.
MANAGING AGENT: McNeil Management, Inc.
OPTIONS TO EXTEND: Two (2) terms of five (5) years each
PERMITTED USES: General office, research and development, laboratory
and light manufacturing.
PREMISES: Approximately 73,347 r.s.f. of space in the Building,
as shown on EXHIBIT A.
PUBLIC LIABILITY
INSURANCE LIMITS: Bodily Injury: $5,000,000
Property Damage: $5,000,000
SCHEDULED SUBSTANTIAL
COMPLETION DATE: September 1, 1998
SCHEDULED
PHASE II SUBSTANTIAL
COMPLETION DATE: September 1, 1999
SCHEDULED TERM
COMMENCEMENT DATE: September 1, 1998
SECURITY DEPOSIT: $3,150,000 subject to the provisions of Section 10.11
hereto
TENANT: Millennium Pharmaceuticals, Inc.
TENANT'S ADDRESS 238 Main Street
(For Notice and Billing): Cambridge, MA 02139
Attention: Janet Bush, Vice President of Finance
TENANT ALLOWANCE: $5,000,000.00 for the Phase I Leasehold Improvements
and $1,000,000.00 for the Phase II Leasehold
Improvements, subject in each case to the provisions
of Section 3.1 hereof.
TENANT'S ARCHITECT To be selected by Tenant subject to Landlord's
approval, which approval shall not be unreasonably
withheld
TENANT'S PROPORTIONATE
FRACTION: 100% of the Building in which the Premises is
situated and the ratio of the total area of the
Building to the total area of the buildings on the
Lot is currently 98.4%.
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TENANT'S REPRESENTATIVE: Janet Bush, Vice President of Finance
TERM EXPIRATION DATE: Fifteen (15) years after the Commencement Date
1.2 EXHIBITS.
The Exhibits listed below in this section are incorporated in this Lease
by reference and are to be construed as a part of this Lease:
EXHIBIT A. Plan showing the Premises
EXHIBIT A-l. Plan showing the Lot
EXHIBIT A-2. Legal Description of Lot
EXHIBIT B. Base Building Improvements
EXHIBIT C. Rules and Regulations
EXHIBIT D. Description Of Phase I Plans
EXHIBIT E. Plan Submission and Construction Schedule
EXHIBIT F. INTENTIONALLY OMITTED
EXHIBIT G. Refer to Exhibit B
EXHIBIT H. Schedule of Floor Load Limits
EXHIBIT I. Landlord's Services
1.3 TABLE OF CONTENTS
Page
----
ARTICLE I - REFERENCE DATA .................................................. 1
Section 1.1 Subjects Referred To ................................. 1
Section 1.2 Exhibits.............................................. 3
Section 1.3 Table of Contents..................................... 3
ARTICLE II - PREMISES AND TERM .............................................. 5
Section 2.1 Premises ............................................. 5
Section 2.2 Term ................................................. 6
ARTICLE III - IMPROVEMENTS .................................................. 6
Section 3.1 Initial Construction ................................. 6
Section 3.2 Preparation of Premises for Occupancy................. 8
Section 3.3 General Provisions Applicable to Construction ........ 9
Section 3.4 Representatives ......................................10
ARTICLE IV - RENT............................................................11
Section 4.1 The Fixed Rent .......................................11
Section 4.2 Additional Rent ......................................11
4.2.1 Real Estate Taxes ....................................12
4.2.2 Insurance ............................................13
4.2.2.1 Insurance Taken Out by Tenant ........................13
4.2.2.2 Insurance Taken Out by Landlord ......................13
4.2.2.3 Tenant Reimbursement of Insurance Taken Out by
Landlord ............................................13
4.2.2.4 Certain Requirements Applicable to Insurance
Policies ............................................14
4.2.2.5 Waiver of Subrogation ................................14
-3-
<PAGE> 5
4.2.3 Utilities ............................................15
4.2.4 Common Area Maintenance and Expenses..................15
4.2.5 Payments on Account of Taxes, Insurance and
Utilities ...........................................17
Section 4.3 Late Payment of Rent .................................18
ARTICLE V - TENANT'S ADDITIONAL COVENANTS ...................................18
Section 5.1 Affirmative Covenants ................................18
5.1.1 Perform Obligations ..................................18
5.1.2 Occupancy and Use ....................................19
5.1.3 Repair and Maintenance ...............................19
5.1.4 Compliance with Law ..................................20
5.1.5 Tenant's Work ........................................22
5.1.6 Indemnity ............................................22
5.1.7 Landlord's Right to Enter ............................22
5.1.8 Personal Property at Tenant's Risk ...................23
5.1.9 Payment of Landlord's Cost of Enforcement ............23
5.1.10 Yield Up .............................................23
5.1.11 Estoppel Certificate .................................24
5.1.12 Landlord's Expenses Re: Consents .....................24
5.1.13 Rules and Regulations ................................24
5.1.14 Loading ..............................................24
5.1.15 Holdover .............................................24
Section 5.2 Negative Covenants ...................................25
5.2.1 Assignment and Subletting ............................25
5.2.2 Nuisance .............................................26
5.2.3 Installation, Alterations or Additions................26
ARTICLE VI - CASUALTY OR TAKING .............................................26
Section 6.1 Termination ..........................................26
Section 6.2 Restoration ..........................................27
Section 6.3 Award ................................................27
ARTICLE VII - DEFAULTS ......................................................27
Section 7.1 Events of Default ....................................27
Section 7.2 Remedies .............................................28
Section 7.3 Remedies Cumulative ..................................29
Section 7.4 Landlord's Right to Cure Defaults ....................29
Section 7.5 Effect of Waivers of Default .........................29
Section 7.6 No Accord and Satisfaction ...........................29
ARTICLE VIII - MORTGAGES ....................................................30
Section 8.1 Rights of Mortgage Holders ...........................30
Section 8.2 Subordination ....................................30
Section 8.3 Lease Amendments .....................................31
ARTICLE IX - LANDLORD'S ADDITIONAL COVENANTS ................................31
Section 9.1 Affirmative Covenants ................................31
Section 9.1.1 Perform Obligations ..................................31
-4-
<PAGE> 6
Section 9.1.2 Repairs...............................................31
Section 9.1.3 Compliance with Law ..................................32
Section 9.1.4 Indemnity.............................................32
Section 9.1.5 Estoppel Certificate .................................32
Section 9.1.6 Landlord's Title......................................33
Section 9.1.7 Utilities.............................................33
Section 9.1.8 Payment of Tenant's Cost of Enforcement ..............33
ARTICLE X - MISCELLANEOUS PROVISIONS ........................................33
Section 10.1 Notices from One Party to the Other ..................33
Section 10.2 Quiet Enjoyment.......................................33
Section 10.3 Easements; Changes to Lot Lines ......................33
Section 10.4 Leases Not To Be Recorded ............................34
Section 10.5 Bind and Inure; Limitation of Landlord's
Liability ...........................................34
Section 10.6 Acts of God ..........................................34
Section 10.7 Landlord's Default ...................................34
Section 10.8 Brokerage ............................................35
Section 10.9 Applicable Law and Construction ......................35
Section 10.10 Submission Not an Offer ..............................36
Section 10.11 Security Deposit .....................................36
Section 10.12 Options to Extend.....................................36
Section 10.13 Confidential Information .............................38
Section 10.14 Parking ..............................................38
Section 10.15 Signage ..............................................38
Section 10.16 Access ...............................................38
ARTICLE II
PREMISES AND TERM
2.1 PREMISES.
Landlord hereby leases and demises to Tenant and Tenant hereby leases
from Landlord, subject to and with the benefit of the terms, covenants,
conditions and provisions of this Lease, the Premises. Tenant shall have, as
appurtenant to the Premises, the right to use in common with others entitled
thereto (i) the common facilities on the Lot, (ii) the building service fixtures
and equipment serving the Premises, and (iii) the right to lease seventy-five
(75) parking spaces ("Tenant's Parking Spaces") at the garage at 47 Erie Street,
Cambridge, Massachusetts, upon the terms and conditions set forth in Section
10.14 hereof.
Landlord reserves the right from time to time, without material
interference with Tenant's use, (a) to install, repair, replace, use, maintain
and relocate for service to the Premises , building service fixtures and
equipment wherever located in the Building, provided, however, that the Annual
Fixed Rent, Additional Rent (as defined in Section 4.2 hereof) and other charges
payable hereunder by Tenant shall be proportionally reduced in the event that
any such installation or relocation of service materially reduces the usable
floor area of the Premises (other than a temporary reduction to accommodate
installation, repair, replacement, maintenance and relocation of such service);
and (b) to alter or relocate any common facilities, provided that in all events
(1) substitutions are in compliance with applicable zoning laws, and (2)
substitutions are substantially equivalent.
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2.2 TERM.
To have and to hold for a period (the "Term") commencing on the earlier
of (a) the date which is the later of the Scheduled Term Commencement Date or
the Phase I Substantial Completion Date and (b) the date on which Tenant
occupies all or any part of the Premises for the Permitted Uses (whichever of
said dates is appropriate being hereafter referred to as the "Commencement
Date"), and continuing until the Term Expiration Date, unless sooner terminated
as provided in Section 3.2 or in Article VI or Article VII. Tenant shall have
the right to access the Premises prior to the Commencement Date for purposes of
installing equipment and furnishings in accordance with and subject to the
provisions of Section 3.2.
ARTICLE III
IMPROVEMENTS
3.1 INITIAL CONSTRUCTION.
(a) PLANS. Landlord and Tenant have developed and approved construction
drawings and specifications specified in Exhibit D hereto (the "Phase I Complete
Plans") showing all work to be performed by Landlord for the amount specified as
the Tenant Allowance for Phase I Leasehold Improvements, except for installation
of furnishings and the installation of telephone and data outlets (which must be
performed by a qualified installer at the Tenant's direction and expense).
Landlord and Tenant shall proceed to develop and approve construction drawings
and specifications for the Phase II Leasehold Improvements (as hereinafter
defined) for the Premises (the "Phase II Complete Plans") in accordance with the
procedure set forth in Exhibit E attached hereto.
Landlord and Tenant shall initial the Phase II Complete Plans after the
same have been approved by Landlord and Tenant in accordance with said Exhibit
E. Tenant's interior furnishings, i.e., specification, coordination, supply and
installation of furniture, furnishings, telephones and movable equipment, will
be the responsibility of Tenant. Tenant's installation of furnishings shall be
coordinated with any work being performed by Landlord in such manner as to
maintain harmonious labor relations during the performance of the Phase I
Leasehold Improvements and the Phase II Leasehold Improvements, respectively,
and not to damage the Building or Lot or interfere with Building or Lot
operations. Except for installation of furnishings and the installation of
telephone and data outlets (which must be performed by a qualified installer at
the Tenant's direction and expense) all work described in the Phase I Complete
Plans and the Phase II Complete Plans (the "Phase I Leasehold Improvements" and
the "Phase II Leasehold Improvements," as applicable, and collectively, the
"Leasehold Improvements") shall be performed by Siena Construction or another
contractor designated by Landlord and reasonably approved by Tenant ("Landlord's
Contractor"). Except as set forth in Sections 3.3 and 5.1.10 hereof, all
Leasehold Improvements shall become a part of the Premises and shall be
considered to be the property of the Landlord. Notwithstanding the foregoing, at
the expiration or earlier termination of this Lease, Tenant shall be permitted
to remove all removable equipment paid for by Tenant and installed by Tenant at
Tenant's sole cost and expense.
(b) PHASE I CHANGE ORDER COSTS AND PHASE II LEASEHOLD IMPROVEMENTS
COSTS. Landlord hereby agrees to furnish Tenant with a copy of the contract for
the Phase II Leasehold Improvements for the Premises, by and between Landlord
and Landlord's Contractor, within ten (10) days after execution thereof. On or
before fifteen (15) days after Landlord and Tenant initial the Phase II Complete
Plans, Landlord shall give Tenant a notice (the "Proposed GMP Notice") setting
forth the guaranteed maximum price ("GMP") of Landlord's Contractor and
estimated cost of the work for the Phase II Leasehold Improvements, inclusive of
Landlord's Contractor's
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Fee and architectural and engineering fees, including fees incurred for Tenant's
Architect (the "Estimated Cost of the Work"). Tenant shall thereafter have the
right to approve or reject such proposed GMP by notice given to Landlord. In the
event the Tenant rejects the GMP the Tenant and the Landlord shall equally share
all costs for work of the Architect in order to make such changes to the Phase
II Complete Plans as shall be required to produce a revised GMP acceptable to
Tenant. Landlord shall neither commence, nor be required to commence, any Phase
II Leasehold Improvements until the parties have agreed upon the GMP. In the
event that Landlord and Tenant have not agreed upon the GMP for the Phase II
Leasehold Improvements on or before the date which is thirty (30) days after the
Proposed GMP Notice and Tenant does not agree in writing to compensate Landlord
for the delay in constructing the Phase II Leasehold Improvements as set forth
in this paragraph, Landlord shall have the right to withdraw the Tenant
Allowance for the Phase II Leasehold Improvements upon notice to Tenant.
If Tenant requests any change order for the Leasehold Improvements,
Landlord shall submit all such change orders with pricing to Tenant for its
review and approval. No change order for the Leasehold Improvements requested by
Tenant shall be effective unless approved by Tenant in writing, such approval
not to be unreasonably withheld or delayed. Notwithstanding the foregoing,
Tenant's review and approval shall not be required for change orders for the
Base Building Improvements (as defined in Exhibit G hereof) and such change
orders will not materially change the Base Building Improvement defined in
Exhibit G. If prior to the Commencement Date Tenant requests and approves any
change order for Phase I Leasehold Improvements and as a result thereof the cost
of the Phase I Leasehold Improvements will exceed the Tenant Allowance for Phase
I Leasehold Improvements specified herein (the "Excess Phase I Costs"), Tenant
shall elect in writing at the time of approval of any such change order to have
the Excess Phase I Costs paid from the remaining balance, if any, of the Tenant
Allowance for Phase II Leasehold Improvements or to pay the Excess Phase I Costs
in the same manner and at the same times as the TIR (as hereinafter defined). If
Tenant elects to have the Excess Phase I Costs paid from the remaining balance,
if any, of the Tenant Allowance for Phase II Leasehold Improvements (an "Excess
Cost Election"), the Tenant Allowance for Phase II Leasehold Improvements
specified herein shall be automatically reduced on a dollar-for-dollar basis and
the Annual Fixed Rent Rate shall be increased by an amount which equals (i) the
ratio of the amount of Excess Phase I Costs related to such change orders
approved by Tenant to $1,000,000.00 multiplied (ii) by $3.13. For example, if
the Excess Phase I Costs are $500,000.00, the Annual Fixed Rent Rate would
increase by $1.57 [($500,000.00 / $1,000,000.00) x $3.13] = $1.57. Any increase
in the Annual Fixed Rent Rate due to Excess Phase I Costs shall be effective on
the Commencement Date.
Tenant shall pay to Landlord as Additional Rent a sum equal to all
additional costs incurred by Landlord on account of the Excess Phase I Costs (if
Tenant does not make an Excess Cost Election) and on account of the Phase II
Leasehold Improvements (excluding, however, the Tenant Allowance for the Phase
II Leasehold Improvements but including in the costs so incurred the cost to
Landlord of Landlord's Contractor's overhead and profit equal to 10% of costs of
work not covered by the Tenant Allowance for the Phase II Leasehold
Improvements), hereinafter called "Tenant Improvement Reimbursement to Landlord"
or "TIR". Tenant shall pay to Landlord Landlord's Estimated TIR (as hereinafter
defined) as construction of the Phase II Leasehold Improvements progresses, less
retainage of 10%, within ten (10) days after submission by Landlord to Tenant of
a statement on or about the first day of each month showing construction,
engineering and design costs incurred. As used herein with respect to the Phase
II Leasehold Improvements, the term "Estimated TIR" shall mean and refer to the
difference between the Estimated Cost of the Work and the Tenant Allowance for
the Phase II Leasehold Improvements. The portion of Estimated TIR invoiced on
each monthly statement shall be equal to the product of (a) a fraction, the
numerator of which is Landlord's Estimated TIR and the denominator of which is
the Estimated Cost of the Work, multiplied by (b) the total construction,
engineering and design costs shown on each such statement. Each monthly
statement shall be
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accompanied by a certificate of Landlord's Contractor that all payments then due
to laborers, materialmen and subcontractors, less required retainage, have been
made. Landlord shall not be required to continue construction if Tenant fails to
pay timely Estimated TIR and any delay in the preparation of the Premises shall
be deemed to be a Tenant Delay for which Landlord shall have no liability. On
the Phase II Substantial Completion Date (as defined in Section 3.2 hereof)
Tenant shall pay to Landlord a sum sufficient to increase the total payments to
Landlord on account of TIR to ninety-five percent (95%) of TIR (it being
understood that actual TIR may be more or less than the Estimated TIR). The
remaining five percent (5%) retainage withheld by Tenant shall be paid by Tenant
within ten (10) days after delivery to Tenant of (i) a permanent Certificate of
Occupancy from the City of Cambridge for the Phase II Leasehold Improvements and
(ii) a certificate of Landlord's Architect and Tenant's Architect certifying
that all Punch List Items (as defined in Section 3.2 hereof) for the Phase II
Leasehold Improvements have been reasonably satisfied after consultation between
Landlord's Architect and Tenant. Landlord shall withhold from Landlord's
Contractor retainage the amount of five percent (5%) of the cost of the work
until such time as Landlord's Architect, after consultation with Tenant's
Architect, shall have delivered said certificate to Tenant (provided, however,
that Landlord may release any retainage held with respect to any supplier or
subcontractor which is finally and fully completed for the portion of the work
for which it was responsible prior to the delivery of said certificate.) All
change orders or cost overruns shall first be subject to reasonable approval by
Tenant within two (2) business days of receipt of said change order.
In addition to paying TIR as above provided, for Excess Phase I Costs
(if Tenant does not make an Excess Cost Election) and the Phase II Leasehold
Improvements Tenant shall pay an amount equal to all costs incurred by Landlord
as a result of any change orders requested by Tenant and signed by Tenant and
Landlord affecting the Complete Plans, including the cost to Landlord of
Landlord's Contractor's overhead and profit equal to 10% of those costs
exclusive of overhead and profit, but only to the extent that such change order
costs, together with all other costs incurred on account of the Phase I
Leasehold Improvements or the Phase II Leasehold Improvements, as applicable,
exceed the applicable Tenant Allowance. Amounts due and payable on account of
such change orders shall be included in the monthly statements relating to TIR
provided for above, and Tenant shall pay therefor in accordance with each such
statement within ten (10) days, and in all events by the Phase I Substantial
Completion Date or Phase II Substantial Completion Date, as applicable.
Notwithstanding the foregoing, Tenant shall not be liable for any costs incurred
by Landlord as a result of change orders relating solely to Base Building
Improvements (as defined in Exhibit G).
Notwithstanding the foregoing, Landlord shall be liable for completion
of all Base Building Improvements as set forth in Exhibit G. Landlord agrees to
consult with Tenant with respect to the design of the lobby area except with
respect to requirements to the Cambridge Historical Commission, and will
cooperate with Tenant in good faith to accommodate Tenant's reasonable comments.
Landlord shall deliver to Tenant a copy of each monthly requisition for
the Phase II Leasehold Improvements from Landlord's Contractor promptly after
Landlord's receipt of the same.
3.2 PREPARATION OF PREMISES FOR OCCUPANCY.
Landlord agrees to use reasonable efforts to have the Phase I Leasehold
Improvements, including completion of the Base Building Improvements described
in Exhibit B hereto, completed so that the Premises are ready for occupancy on
or before the Scheduled Substantial Completion Date and to have the Phase II
Leasehold Improvements completed by the Scheduled Phase II Substantial
Completion Date, which Dates shall, however, be extended for a period equal to
that of any delays due to Acts of God, or by changes ordered by Tenant in the
work, or
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by labor disputes, fire, unusual delays in deliveries, unavoidable casualties or
other causes beyond Landlord's reasonable control (collectively, "Force Majeure
Events") and by delays due to any act or neglect of Tenant, or of any employee,
agent, or separate contractor of Tenant. The Premises shall be deemed ready for
occupancy on the Phase I Substantial Completion Date (as hereinafter defined).
In no event shall the Phase I Substantial Completion Date be later than January
1, 1999 (the "Outside Completion Date"), in which case Tenant shall have the
right to terminate this Lease. As used herein, the term "Phase I Substantial
Completion Date" and "Phase II Substantial Completion Date," as applicable,
shall mean and refer to the date on which: (i) the Phase I Leasehold
Improvements or the Phase II Leasehold Improvements, as applicable, as specified
in the Phase I Complete Plans or the Phase II Complete Plans, as applicable, are
ready for occupancy as certified by Landlord's Architect and Tenant's Architect
with the exception of minor items which can be fully completed by Landlord
within thirty (30) days without material interference with Tenant and other
items which because of the season or weather or the nature of the item are not
practicable to do at the time, provided that none of said items is necessary to
make the Premises tenantable for the Permitted Uses (collectively "Punch List
Items"), (ii) a Certificate of Occupancy from the City of Cambridge (or a
Temporary Certificate of Occupancy permitting Tenant to occupy the Premises with
conditions which can be satisfied without material interference with Tenant's
use and occupancy of the Premises) shall have been obtained, (iii) the Premises
is broom clean and free of debris, and (iv) all utilities required for the use
of the Premises have been brought by Landlord to the Premises as specified in
Exhibit B; provided, however, that if Landlord is unable to complete
construction of the Premises in accordance with the foregoing on or before the
Phase I Scheduled Substantial Completion Date or the Scheduled Phase II
Substantial Completion Date, as applicable, due to delay in Tenant's compliance
with the provisions of Section 3.1 or the respective schedule set forth in
Exhibit E of this Lease, then the Premises shall be deemed ready for occupancy
no later than the date which would have been the Substantial Completion Date but
for such non-compliance.
Landlord shall permit Tenant and Tenant's contractors access for
installing equipment and furnishings in the Premises prior to the Commencement
Date if it can be done without material interference with completion of the
Phase I Leasehold Improvements.
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of any governmental authority or insurer of the Building. Either party
may inspect the work of the other at reasonable times and shall give notice of
observed defects. Landlord shall not be responsible for any loss, damage, or
injury resulting from the installation of any components, fixtures, or equipment
provided they were appropriately specified and installed in accordance with the
manufacturer's or supplier's instructions; provided, however, that Landlord
shall assign any and all contractor's, manufacturer's and supplier's warranties
with respect to all components, fixtures, or equipment, including, without
limitation, Landlord's Contractor's warranty (which shall be for a period of at
lease one [1] year) as to construction completed in connection with the Tenant
Improvements, to Tenant for the Term of this Lease, upon the expiration or
sooner termination of which such warranties shall automatically revert to
Landlord. Landlord's obligations under Section 3.1 and 3.2 shall be deemed to
have been performed on the Phase I Substantial Completion Date or the Phase II
Substantial Completion Date, as applicable, except for items which are
incomplete or do not conform with the requirements of Sections 3.1 and 3.2 and
as to which Tenant shall in either case have given written notice to Landlord
prior to such date. If Tenant does not provide such written notice prior to the
Phase I Substantial Completion Date or the Phase II Substantial Completion Date,
as applicable, a certificate of completion by a licensed architect or registered
engineer shall be conclusive evidence (exclusive of latent defects) that
Landlord has performed
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all such obligations except for items stated in such certificate to be
incomplete or not in conformity with such requirements.
Tenant will not make any alterations or additions to the Premises (other
than initial improvements made in accordance with the Complete Plans and any
other improvements consistent therewith) without Landlord's approval which
consent shall not be unreasonably withheld, conditioned or delayed. Landlord
will disapprove any alterations or additions requested by Tenant which will
delay completion of the Premises, the Building or the Leasehold Improvements,
unless Tenant shall agree (a) to pay all costs associated with such alterations,
additions and delay, (b) to extend the Scheduled Substantial Completion Date or
the Scheduled Phase II Substantial Completion Date, as applicable, for the
period of such delay, and (c) that the Annual Fixed Rent and Additional Rent
shall nonetheless begin to accrue from the date the Phase I Leasehold
Improvements or the Phase II Leasehold Improvements, as applicable, would have
been completed but for such delay. All changes and additions shall be part of
the Building except Tenant's equipment (a list of which shall be provided to
Landlord upon Commencement of the Lease) and except such items as by writing at
the time of approval the parties agree either shall be removed by Tenant on
termination of this Lease, or shall be removed or left at Tenant's election.
Notwithstanding the foregoing, the parties hereby agree that for any
non-structural alterations or additions to the Premises which do not involve
modifications to the Building operating systems and for which the cost may be
reasonably estimated to be less than $50,000 and shall be generic in form (each
a "Minor Alteration") (generic meaning that such space will be easily usable for
other tenants): (i) Landlord's prior written consent shall not be required
unless such Minor Alteration requires a building permit from the City of
Cambridge, in which case Landlord's reasonable consent shall be required, and
(ii) upon the expiration or termination of this Lease, Tenant shall readapt,
repair and restore the Premises to the condition the same were in prior to such
Minor Alteration, regardless of whether Landlord's consent was required or
obtained with respect thereto.
The parties further agree that (a) any request for consent to any
alteration or addition (including, without limitation, any Minor Alteration)
shall be accompanied by drawings and specifications in reasonable detail given
the size and scope of the proposed alteration or addition both in printed form
and on diskette in CAD format compatible and consistent with existing as-built
plans for the Building, and (b) Tenant shall furnish Landlord as-built drawings
showing any and all alterations or additions (including, without limitation, any
and all Minor Alterations) made by Tenant or any assignee, sublessee or licensee
of Tenant within 30 days after completion of the same.
3.4 REPRESENTATIVES.
Each party authorizes the other to rely in connection with their
respective rights and obligations under this Article III upon approval and other
actions on the party's behalf by Landlord's Representative in the case of
Landlord and Tenant's Representative in the case of Tenant or by any person
hereafter designated in substitution or addition by notice to the party relying.
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ARTICLE IV
RENT
4.1 FIXED RENT.
(a) MONTHLY INSTALLMENTS; DEFINITIONS. Beginning on the Commencement
Date (and beginning on the Phase II Substantial Completion Date), Tenant
covenants and agrees to pay rent to Landlord, without any offset or reduction
whatsoever (except as may be made in accordance with the express provisions of
this Lease), at the Original Address of Landlord or at such other place or to
such other person or entity as Landlord may by notice to Tenant from time to
time direct, at the respective Annual Fixed Rent Rate set forth in Article I
(and subject to adjustment in the event of an Excess Cost Election), in equal
installments equal to 1/12th of the Annual Fixed Rent Rate in advance on the
first day of each calendar month included in the Term; and for any portion of a
calendar month at the beginning or end of the Term, at that rate payable in
advance for such portion.
(b) ADJUSTMENT FOR CPI. On the later of September 1, 2003 or the
Commencement of the Sixth Lease Year and on the later of September 1, 2008 or
the Commencement of the Eleventh Lease Year (the "Adjustment Date"), the Annual
Fixed Rent Rate shall be increased by multiplying said rate by a fraction, the
numerator of which shall be the Price Index (as hereinafter defined) most
recently established prior to the Adjustment Date, and the denominator of which
shall be the Base Price Index (as hereinafter defined). As used herein, the term
"Price Index" shall mean and refer to the "Consumer Price Index for Urban Wage
Earners and Clerical Workers, for the Boston, Massachusetts area, All Items
(1982-84=100)" published by the Bureau of Labor Statistics of the United States
Department of Labor or successor or substitute index appropriately adjusted, and
the term "Base Price Index" shall mean and refer to the Price Index most
recently established prior to September 1, 1998. In the event the Price Index
(or a successor or substitute index) shall not be published for the City of
Boston, or for the months indicated above, the corresponding index for the
United States City Average (and if this is not available, a reliable
governmental or other nonpartisan publication evaluating similar or equivalent
information as used in the Price Index) shall be used. In the event the Price
Index ceases to use the 1982-84 average of 100 as the basis of calculation, or
if a substantial change is made in the terms or numbers of items contained in
the Price Index, then the Price Index shall be adjusted to the figure using the
replacement method of calculation utilized by the United States Department of
Labor. Notwithstanding the foregoing, any such increase shall not exceed four
percent (4%) per year compounded annually.
By way of example on September 1, 2003 the Monthly Base Rent
$229,209.38 x CPI @ August 1, 2003/CPI @ August 1, 1998 but in no event more
than $278,947.82 (i.e., $229,209.38 plus 4% per year compounded for five (5)
years or $229,209.38 x 1.217).
4.2 ADDITIONAL RENT.
In order that the Annual Rent Rate shall be absolutely net to Landlord
(except to the extent herein otherwise provided), Tenant covenants and agrees to
pay, as Additional Rent, without any offset or reduction whatsoever, taxes,
municipal or state betterment assessments, insurance costs, utility charges and
Annual Maintenance Charges with respect to the Premises as provided in this
Section 4.2 as follows:
As used herein, the term "Estimated Annual Additional Rent" shall mean
and refer to Landlord's estimate of the total amount of Additional Rent which
may be due from Tenant for any particular Lease Year. Landlord shall furnish
Tenant with a statement as soon as reasonably practicable after the commencement
of each Lease Year setting forth the amount of Landlord's
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Estimated Annual Additional Rent for such Lease Year. Landlord's good faith
estimate of the Estimated Annual Additional Rent for the first fiscal year of
the Term is set forth in Section 1.1 as the "Initial Estimated Annual Additional
Rent".
4.2.1 REAL ESTATE TAXES.
Tenant shall pay directly to the Landlord: (i) all taxes,
assessments to the extent due and payable (special or otherwise), levies, fees,
water and sewer rents and charges, and all other government levies and charges,
general and special, ordinary and extraordinary, foreseen and unforeseen, which
are, at any time prior to or during the Term hereof, imposed or levied upon or
assessed against (A) the Premises or the Building or a fraction of the Lot, (B)
any Fixed Rent, Additional Rent or other sum payable hereunder or (C) this
Lease, or the leasehold estate hereby created, or which arise in respect of the
operation, possession or use of the Premises or the Building or the Lot; (ii)
all gross receipts or similar taxes imposed or levied upon, assessed against or
measured by any Fixed Rent, Additional Rent or other sum payable hereunder;
(iii) all sales, value added, use and similar taxes at any time levied, assessed
or payable on account of the leasing or use of the Premises (and any such taxes
if they are levied, assessed or payable on account of the acquisition, leasing
or use of the entire Building or Tenant's Proportionate Share of Lot); and (iv)
all charges for utilities furnished to the Premises (and all charges for
utilities furnished to the entire Building or Tenant's Proportionate Share of
the Lot) which may become a lien on the Building or the Lot or the Premises
(collectively "taxes and assessments" or if singular "tax or assessment"). For
each tax or assessment period, or installment period thereof, wholly included in
the Term, all such payments shall be made by Tenant not less than five (5) days
prior to the last date on which the same may be paid without interest or
penalty, provided that Tenant receives any such invoice for payment at least
thirty (30) days before said amount is due. For any fraction of a tax or
assessment period, or installment period thereof, included in the Term at the
beginning or end thereof, Tenant shall pay to Landlord, within 20 days after
receipt of invoice therefor, the fraction of taxes and assessments so levied or
assessed or becoming payable which is allocable to such included period. At
Landlord's option, Tenant shall pay taxes and assessments in accordance with
Section 4.2.5 hereof.
In the event that Tenant requests that Landlord apply for any abatement
of, or otherwise contest, any tax or assessment, Landlord shall file such
abatement or otherwise contest such tax or assessment and shall diligently
pursue the same to completion, provided that (i) Landlord receives notice of
such request from Tenant at least 30 days prior to the last day on which such
abatement or contest may validly be made under applicable law, and (ii) the
expenses of such proceedings, including, without limitation, any penalties,
interest, late fees or charges, and attorneys' fees incurred as a result
thereof, shall be included in the Annual Maintenance Charge of the then current
fiscal year.
Nothing contained in this Lease shall, however, require Tenant to pay
any income taxes, excess profits taxes, excise taxes, franchise taxes ("Excluded
Taxes"), estate, succession, inheritance or transfer taxes, provided, however,
that if at any time during the Term the present system of ad valorem taxation of
real property shall be changed so that in lieu of the whole or any part of the
ad valorem tax on real property, there shall be assessed on Landlord a capital
levy or other tax on the gross rents received with respect to the Premises, the
Building and the Lot, or all of them, or a federal, state, county, municipal, or
other local income, franchise, excise or similar tax, assessment, levy or charge
(distinct from any now in effect) measured by or based, in whole or in part,
upon gross rents, then any and all of such taxes, assessments, levies or
charges, to the extent so measured or based ("Substitute Taxes"), shall be
payable by Tenant; provided, however, that (i) Tenant's obligation with respect
to the aforesaid Substitute Taxes shall be limited to the amount thereof as
computed at the rates that would be payable if the Premises were the only
property of Landlord, and (ii) only that portion of the Substitute Taxes in
excess of the Excluded Taxes shall be payable by Tenant. Landlord shall furnish
to Tenant a copy of any
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notice of any public, special or betterment assessment received by Landlord
concerning the Premises.
4.2.2 INSURANCE.
4.2.2.1 INSURANCE TAKEN OUT BY TENANT.
Tenant shall take out and maintain throughout the
Term the following insurance:
(a) Comprehensive liability insurance indemnifying
Landlord and Tenant against all claims and demands for (i) injury to or death of
any person or damage to or loss of property, on the Premises or walks, streets
or ways appurtenant to the Premises, or connected with the use, condition or
occupancy of any thereof unless caused by the negligence or willful misconduct
of Landlord or its servants or agents, (ii) violation of this Lease, or (iii)
any act, fault or omission, or other misconduct of Tenant or its agents,
contractors, licensees, sublessees or invitees, in amounts which shall, at the
beginning of the Term, be at least equal to the limits set forth in Section 1.1,
and, from time to time during the Term, shall be for such higher limits, if any,
as are customarily carried in the area in which the Premises are located on
property similar to the Premises and used for similar purposes; and shall be
written on the "Occurrence Basis" and include Host Liquor liability insurance;
and
(b) Worker's compensation insurance with statutory
limits covering all of the Tenant's employees working on the Premises.
4.2.2.2 INSURANCE TAKEN OUT BY LANDLORD.
Landlord shall take out and maintain throughout the
Term the following insurance:
(a) Comprehensive liability insurance for the
Building and Lot of the same nature and type as described in Section 4.2.2.1(a)
of this Lease, and with the same policy limits; and
(b) All risk, fire and casualty insurance on a
100% replacement cost basis, together with rental loss coverage and, if the
Building is located in a flood zone, flood coverage to the extent the same is
available, insuring the Building and its rental value and
(c) Insurance against loss or damage from
sprinklers and from leakage or explosions or cracking of boilers, pipes carrying
steam, or water, or both, and pipes carrying other liquids and gases, pressure
vessels or similar apparatus, in the so-called "broad form", in such amounts as
are customary and commercially reasonable for buildings in the Cambridge,
Massachusetts area which are of like kind and quality to the Building and have
laboratory uses, and insurance against such other hazards and in such amounts as
may from time to time be reasonably required by any bank, insurance company or
other lending institution holding a first mortgage on the Building and Lot.
Landlord shall have no obligation to insure Tenant's personal property
or chattels, including without limitation, Tenant's trade fixtures.
4.2.2.3 TENANT REIMBURSEMENT OF INSURANCE TAKEN OUT BY
LANDLORD.
Tenant shall from time to time reimburse Landlord
within thirty days of Landlord's invoice for Landlord's costs incurred in
providing the insurance provided pursuant
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to Section 4.2.2.2 of this Lease, equitably prorated in the case of blanket
policies to reflect the insurance coverage reasonably attributable to the
Premises and the Lot (only to the extent of Tenant's Proportionate Fraction with
respect to the Lot), and provided further that Tenant shall reimburse Landlord
for all of Landlord's costs incurred in providing such insurance which is
attributable to any special endorsement or increase in premium resulting from
the business or operations of Tenant, and any special or extraordinary risks or
hazards resulting therefrom, including without limitation, any risks or hazards
associated with the generation, storage and disposal of medical waste provided
the same is attributable to Tenant's use and that the same is not necessarily
due to other tenant's use. At Landlord's option, Tenant shall reimburse Landlord
for insurance costs in accordance with Section 4.2.5 hereof.
4.2.2.4 CERTAIN REQUIREMENTS APPLICABLE TO INSURANCE
POLICIES.
Policies for insurance provided for under the
provisions of Sections 4.2.2.2(b) and 4.2.2.2(c) shall, in case of loss, be
first payable to the holders of any mortgages on the Building and Lot under a
standard mortgagee's clause, and shall be deposited with the holder of any
mortgage or with Landlord, as Landlord may elect. All policies for insurance
required to be obtained by either party under the provisions of Section 4.2.2
shall be obtained from responsible companies qualified to do business in the
state in which the Premises are located and in good standing therein, which
companies and the amount of insurance allocated thereto shall be subject to
Landlord's reasonable approval. Each party agrees to furnish the other with
certificates of all such insurance which such party is obligated to obtain
pursuant to Section 4.2.2 prior to the beginning of the Term hereof and with
renewal certificates at least 30 days prior to the expiration of the policy they
renew. In addition, Tenant agrees to furnish Landlord with any policies of
insurance which Tenant is obligated to obtain hereunder, including any renewal
policies, upon request of any of Landlord's mortgagees (provided that Tenant may
redact from such policies any Confidential Information, as defined in
Section 10.13 hereof). Each such policy required to be maintained by Tenant
shall name Landlord and Landlord's Managing Agent as additional insureds and
shall be noncancellable with respect to the interest of Landlord, Landlord's
Managing Agent and such mortgagees without at least 30 days' prior written
notice thereto.
4.2.2.5 WAIVER OF SUBROGATION.
All insurance which is carried by either party with
respect to the Premises or to furniture, furnishings, fixtures or equipment
therein or alterations or improvements thereto, whether or not required, shall
include provisions which either designate the other party as one of the insured
or deny to the insurer acquisition by subrogation of rights of recovery against
the other party to the extent such rights have been waived by the insured party
prior to occurrence of loss or injury, insofar as, and to the extent that such
provisions may be effective without making it impossible to obtain insurance
coverage from responsible companies qualified to do business in the state in
which the Premises are located (even though extra premium may result therefrom)
and without voiding the insurance coverage in force between the insurer and the
insured party. In the event that extra premium is payable by either party as a
result of this provision, the other party shall reimburse the party paying such
premium the amount of such extra premium. If at the request of one party, this
non-subrogation provision is waived, then the obligation of reimbursement shall
cease for such period of time as such waiver shall be effective, but nothing
contained in this Section 4.2.2.5 shall derogate from or otherwise affect
releases elsewhere herein contained of either party for claims. Each party shall
be entitled to have duplicates or certificates of any policies containing such
provisions. Each party hereby waives all rights of recovery against the other
for loss or injury against which the waiving party is protected by insurance
containing said provisions, reserving, however, any rights with respect to any
excess of loss or injury over the amount recovered by such insurance. Tenant
shall not acquire as insured under any insurance carried on the Premises under
the provisions of this
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Section 4.2.2 any right to participate in the adjustment of loss or to receive
insurance proceeds and agrees upon request promptly to endorse and deliver to
Landlord any checks or other instruments in payment of loss in which Tenant is
named as payee.
4.2.3 UTILITIES.
Tenant shall pay directly to the proper authorities charged with
the collection thereof all charges for water, sewer, gas, electricity, telephone
and other utilities or services used or consumed on the Premises, whether called
charge, tax, assessment, fee or otherwise, including, without limitation, water
and sewer use charges and taxes, if any, all such charges to be paid as the same
from time to time become due. Upon Tenant's request, Landlord shall install
separate meters to measure Tenant's consumption of any utility servicing the
Premises. If Tenant is not charged directly by the respective utility for any of
such utilities or services, Tenant shall from time to time, within 20 days of
receipt of Landlord's invoice therefor, pay to Landlord the total of such
charges for the Building and Lot, provided that if said utilities or services
are provided to less than all of the rentable space on the Lot , Tenant shall
pay its share of said charges based upon the actual consumption shown on any
separate meter for such utility or service, and, in the event there is no such
separate meter, based upon the area of the Premises relative to the area of the
entire space to which utilities are provided, or such greater or lesser amount
required, in Landlord's reasonable judgment, by Tenant's disproportionate use of
utilities, and provided further that, at Landlord's option, all such charges
shall be payable by Tenant in accordance with Section 4.2.5. Without limitation
of the foregoing, in the event of a Casualty or Taking, if Landlord's Architect
and Tenant's Architect reasonably determines that the Base Building utilities as
shown in Exhibit B hereto will not be repaired or restored so as to be available
within ninety (90) days after the occurrence of such Casualty or Taking, then
Tenant shall have the right to terminate this Lease by notice given within 30
days after the date of such determination. All of the utilities shall be
installed in the Building and the Premises in accordance with Exhibit B attached
hereto.
4.2.4 COMMON AREA MAINTENANCE AND EXPENSES.
Landlord shall use reasonable efforts to maintain the common
areas of the Lot and (Landlord and Tenant will cooperate to determine who will
be responsible for providing services required to operate the Building or to
maintain the Lot , as contemplated in Exhibit I, except to the extent repairs or
maintenance are required due to Tenant's negligence or willful misconduct (in
which case Tenant shall promptly effect such repairs or maintenance or, at
Landlord's option, Landlord may effect such repairs or maintenance and charge
the entire cost thereof to Tenant as Additional Rent). Notwithstanding the
foregoing, it is expressly understood and agreed that Landlord shall have no
liability or responsibility for the storage, containment or disposal of any
hazardous or medical waste generated, stored or contained by Tenant, Tenant
hereby agreeing to store, contain and dispose of any and all such hazardous or
medical waste at Tenant's sole cost and expense in accordance with the
provisions of Article V hereof. Tenant shall pay to Landlord as Additional Rent
the Annual Maintenance Charge computed and payable as follows:
(1) The Annual Maintenance Charge shall be equal to the sum
of the Annual Lot Maintenance Charge and the Annual Building
Maintenance and Operation Charge as hereinafter defined.
(a) The Annual Lot Maintenance Charge shall be equal to
the product obtained by multiplying (x) the costs incurred by
Landlord during the fiscal year (as hereinafter defined) for
which the Annual Maintenance Charge is being computed (the
"Current Fiscal Year") in providing Lot maintenance, including
without limitation landscaping, street lighting, security (if
required, in Landlord's judgment), maintenance and snow plowing,
maintenance of Lot signage,
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maintenance of utilities, commercially reasonable management fees
and reasonable amortization of equipment to the extent used for
Lot maintenance, by (y) a fraction whose numerator is the
Premises Floor Area, as built, and whose denominator is the gross
floor area of the buildings located on the Lot at the end of the
Current Fiscal Year.
(b) The Annual Building Maintenance and Operation Charge
shall be equal to Tenant's Proportionate Fraction of the
reasonable costs incurred by Landlord during the Current Fiscal
Year in providing Building maintenance, including without
limitation repair, maintenance and cleaning of common facilities
in the Building, and maintenance and repairing of all common
heating, plumbing, electrical, air conditioning and mechanical
fixtures and equipment serving the Building or the Premises and
not for other tenant's use, elevators, trash dumpster rental,
trash removal, recycling, performance of such other tasks as
Tenant shall request and Landlord shall agree to perform,
commercially reasonable management fees (exclusive of leasing and
sale commissions, fees paid in connection with tenant improvement
costs, and such other fees or commissions paid in connection with
the leasing, releasing, extension or renewal of leases for the
Building or the Lot) and reasonable amortization of equipment to
the extent used for the Building maintenance.
Notwithstanding the foregoing, in the event that any capital
repair, improvement or replacement to the common areas and facilities of the
Building and the Lot has a useful life of over one year (as determined in
accordance with generally accepted accounting practices consistently applied),
then only the amortized cost of such repair, improvement or replacement over
said useful life shall be included in the Annual Lot Maintenance Charge or the
Annual Building Maintenance Charge, as applicable.
Tenant shall make payments on account of the Annual Maintenance
Charge monthly in advance on the first day of each calendar month during the
Term. At the beginning of every fiscal year, Landlord shall deliver to Tenant
its reasonable estimate of the Annual Maintenance Charge (the "Estimated Annual
Maintenance Charge") for the said fiscal year which estimate may include a
reasonable contingency of up to 5%, and Tenant shall make payments on account of
the Annual Maintenance Charge monthly in advance on the first day of each
calendar month during the Term in the amount of one-twelfth of the Estimated
Annual Maintenance Charge. Landlord reserves the right to reasonably re-estimate
and modify the Estimated Annual Maintenance Charge by notice to Tenant once
annually on or about July 1 of each Lease Year (the "Additional Rent Adjustment
Date"), and Tenant's payments shall thereupon be adjusted accordingly. Not later
than sixty (60) days after the end of each fiscal year during the Term and after
Lease termination, Landlord shall render a statement ("Landlord's Statement") in
reasonable detail and according to generally accepted accounting practices
certified by Landlord and showing for the preceding fiscal year or fraction
thereof, as the case may be, the actual Annual Maintenance Charges for the said
fiscal year or fraction thereof, and thereupon any balance owed by Tenant or
excess paid by Tenant under this Section shall be paid to Landlord, or credited
to Tenant, as the case may be, on the next rent payment date or refunded if the
Term has ended and Tenant is not then in default (or if Tenant is in default,
then any excess over that necessary to cure said default shall be returned to
Tenant). Landlord shall furnish Tenant with copies of all reasonable
documentation and records for the Annual Maintenance Charges for any fiscal year
upon Tenant's request for the same; provided, however, that Landlord shall not
be required to furnish such copies for any fiscal year if Tenant has not
requested such copies within two (2) years after the expiration of such fiscal
year.
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Tenant shall have the right to conduct an audit of Landlord's records
relating to Maintenance Charges. If the Tenant's audit indicates that there is
an error greater than five percent (5%), then Landlord shall reimburse Tenant
for the cost of said audit.
For purposes of this Lease, the first "fiscal year" shall be the
annual period commencing on the Commencement Date and ending on December 31 of
the year in which the Commencement Date occurs; subsequently, the term "fiscal
year" shall mean each consecutive annual period thereafter, commencing on the
day following the end of the preceding fiscal year. Landlord shall have the
right from time to time to change the periods of accounting under this Section
4.2.4 to any annual period other than a fiscal year, and upon any such change
all items referred to in this Section shall be appropriately apportioned. In all
Landlord's Statements rendered under this Section, amounts for periods partially
within and partially without the accounting periods shall be appropriately
apportioned, and any items which are not determinable at the time of a
Landlord's Statement shall be included therein on the basis of Landlord's
estimate, and with respect thereto Landlord shall render promptly after
determination a supplemental Landlord's Statement, and appropriate adjustment
shall be made according thereto. All of Landlord's Statements shall be prepared
on an accrual basis of accounting.
Notwithstanding any other provision of this Section 4.2.4, if the
Term expires or is terminated as of a date other than the last day of a fiscal
year, then for such fraction of a fiscal year at the end of the Term, Tenant's
last payment to Landlord under this Section 4.2.4 shall be made on the basis of
Landlord's best estimate of the items otherwise includable in Landlord's
Statement and shall be made on or before the later of (a) 10 days after Landlord
delivers such estimate to Tenant or (b) the last day of the Term. Landlord shall
thereafter prepare a Landlord's Statement showing the actual Annual Maintenance
Charge for such fiscal year, as herein above provided, and an appropriate
payment or refund shall thereafter promptly be made upon submission of such
Landlord's Statement to Tenant.
Notwithstanding the foregoing, Landlord hereby agrees that access
to the Premises, HVAC service and all other utilities shall be available to
Tenant 24 hours per day, seven (7) days per week, subject to the provisions
hereof with respect to loss or interruption of utilities and other services.
4.2.5 PAYMENTS ON ACCOUNT OF TAXES, INSURANCE AND UTILITIES.
Tenant shall make payments on account of the Annual Tax,
Insurance and Utility Charge (as hereinafter defined) monthly in advance on the
first day of each calendar month during the Term, which payments shall initially
be in the amount of the sum of the Initial Tax Charge, the Initial Insurance
Charge and the Initial Utility Charge (the "Estimated Initial Tax, Insurance and
Utility Charges"). At the beginning of every fiscal year, Landlord shall deliver
to Tenant its reasonable estimate of the Annual Tax, Insurance and Utility
Charge ("the Estimated Annual Tax, Insurance and Utility Charge") for said
fiscal year, and, in lieu of payments of one twelfth of the Estimated Initial
Tax, Insurance and Utility Charge, Tenant shall make payments on account of the
Annual Tax, Insurance and Utility Charge monthly in advance on the first day of
each calendar month during the Term in the amount of one-twelfth of the
Estimated Annual Tax, Insurance and Utility Charge. Landlord reserves the right
to reasonably re-estimate and modify the Estimated Annual Tax, Insurance and
Utility Charge by notice to Tenant once annually on the Additional Rent
Adjustment Date (as defined in Section 4.2.4 hereof), and Tenant's payments
shall thereupon be adjusted accordingly.
Not later than sixty (60) days after the end of each fiscal year
during the Term and after Lease termination, Landlord shall render a statement
in reasonable detail and according to generally accepted accounting practices
certified by Landlord and showing for the preceding fiscal year or fraction
thereof, as the case may be, the actual Annual Tax, Insurance and Utility
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Charge for the said fiscal year or fraction thereof, and thereupon any balance
owed by Tenant or excess paid by Tenant under this Section shall be paid to
Landlord, or credited to Tenant, as the case may be, on the next rent payment
date or refunded if the Term has ended and provided Tenant is not then in
default, or if Tenant is in default, then any excess over that necessary to cure
the default shall be returned to Tenant. As used herein, the term "Annual Tax,
Insurance and Utility Charge" shall mean and refer to the amount of funds paid
by Tenant pursuant to Section 4.2.1, 4.2.2 and 4.2.3 for the fiscal year in
question for costs actually incurred by Landlord (without any mark-up for
Landlord's overhead or profit). All payments under this Section shall to the
extent thereof relieve Tenant of its obligations under said Sections 4.2.1,
4.2.2 and 4.2.3 hereof.
Landlord shall have the right from time to time to change the
periods of accounting under this Section 4.2.5 to any annual period other than a
fiscal year, and upon any such change all items referred to in this Section
shall be appropriately apportioned. In all Landlord's annual statements rendered
under this Section, amounts for periods partially within and partially without
the accounting periods shall be appropriately apportioned, and any items which
are not determinable at the time of such a statement shall be included therein
on the basis of Landlord's estimate, and with respect thereto Landlord shall
render promptly after determination a supplemental statement, and an appropriate
adjustment shall be made according thereto. All of landlord's statements under
this Section shall be prepared on an accrual basis of accounting.
Notwithstanding any other provision of this Section 4.2.5, if the
Term expires or is terminated as of a date other than the last day of a fiscal
year, then for such fraction of a fiscal year at the end of the Term, Tenant's
last payment to Landlord under this Section 4.2.5 shall be made on the basis of
Landlord's best estimate of the items otherwise includable in the annual
statement rendered by Landlord under this Section and shall be made on or before
the later of (a) 10 days after Landlord delivers such estimate to Tenant or (b)
the last day of the Term, with an appropriate payment or refund to be made upon
submission of Landlord's statement.
4.3 LATE PAYMENT OF RENT.
If any installment of rent is paid after the date the same was due after
applicable grace and cure periods, it shall bear interest from the due date at
the prime commercial rate of BankBoston, as it may be adjusted from time to
time, plus 4% per annum, but in no event more than the highest rate of interest
allowed by applicable law. Any amounts due under this Section 4.3 shall be
Additional Rent.
ARTICLE V
TENANT'S ADDITIONAL COVENANTS
5.1 AFFIRMATIVE COVENANTS.
Tenant covenants at its expense at all times during the Term and for
such further time as Tenant occupies the Premises or any part thereof:
5.1.1 PERFORM OBLIGATIONS.
To perform promptly all of the obligations of Tenant set forth in
this Lease; and to pay when due the Fixed Rent and Additional Rent and all
charges, rates and other sums which by the terms of this Lease are to be paid by
Tenant.
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5.1.2 OCCUPANCY AND USE.
To use and occupy the Premises only for the Permitted Uses, and
from time to time to procure all licenses and permits necessary therefor at
Tenant's sole expense. Landlord covenants to Tenant that as of the date of
execution of this Lease, the Building is in compliance with the City of
Cambridge zoning laws and state and local building laws, ordinances and
regulations, and that the Permitted Use is an allowed use under the City of
Cambridge zoning laws.
Without limitation, Tenant shall strictly comply with all
federal, state, and municipal laws, ordinances, and regulations governing the
use of Tenant's laboratory, scientific experimentation and the generation,
storage, containment and disposal of medical waste. Tenant shall be solely
responsible for procuring and complying at all times with any and all necessary
permits directly relating or incident to: the conduct of its office and research
activities on the demised premises; its scientific experimentation,
transportation, storage, handling, use and disposal of any chemical or
radioactive or bacteriological or pathological substances or organisms or other
hazardous wastes or environmentally dangerous substances or materials or medical
waste. Within ten (10) days of a request by Landlord, which request shall be
made not more than once during each period of twelve (12) consecutive months
during the Term hereof, unless otherwise requested by any mortgagee of Landlord,
Tenant shall furnish Landlord with copies of all such permits which Tenant
possesses or has obtained together with a certificate certifying that such
permits are all of the permits which Tenant possesses or has obtained with
respect to the Premises. Tenant shall be entitled to redact any Confidential
Information from the copies of such permits and accompanying certificates of
Tenant. Tenant shall promptly give notice to Landlord of any warnings or
violations relative to the above received from any federal, state, or municipal
agency or by any court of law and shall promptly cure the conditions causing any
such violations. Tenant shall not be deemed to be in default of its obligations
under the preceding sentence to promptly cure any condition causing any such
violation in the event that, in lieu of such cure, Tenant shall contest the
validity of such violation by appellate or other proceedings permitted under
applicable law, provided that: (i) any such contest is made reasonably and in
good faith, (ii) Tenant makes provisions, including, without limitation, posting
bond(s) or giving other security, reasonably acceptable to Landlord to protect
Landlord, the Building and the Lot from any liability, costs, damages or
expenses arising in connection with such violation and failure to cure, (iii)
Tenant shall agree to indemnify, defend (with counsel reasonably acceptable to
Landlord) and hold Landlord harmless from and against any and all liability,
costs, damages, or expenses arising in connection with such condition and/or
violation, (iv) Tenant shall promptly cure any violation in the event that its
appeal of such violation is overruled or rejected without further appeal
permitted, and (v) Tenant shall certify to Landlord's satisfaction that Tenant's
decision to delay such cure shall not result in any actual or threatened bodily
injury or property damage to Landlord, any tenant or occupant of the Building or
the Lot, or any other person or entity. Landlord agrees that any Confidential
Information gained or obtained by Landlord pursuant to this Section 5.1.2 shall
be kept confidential in accordance with Section 10.13 hereof.
5.1.3 REPAIR AND MAINTENANCE.
Except as otherwise provided in Article VI, to keep the Premises
including, without limitation, all fixtures and equipment now or hereafter on
the Premises, or exclusively serving the Premises, but excluding the exterior
(exclusive of glass and doors) and structural elements of the Building, the
Building's systems and the grounds and parking lot, which Landlord shall
maintain and repair unless such repairs are required because of Tenant's willful
misconduct or negligence, in good order, condition and repair and at least as
good order, condition and repair as they are in on the Commencement Date or may
be put in during the Term, reasonable use and wear only excepted; to keep in a
safe, secure and sanitary condition all
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trash and rubbish temporarily stored at the Premises; and to make all repairs
and replacements and to do all other work necessary for the foregoing purposes
whether the same may be ordinary or extraordinary, foreseen or unforeseen.
Tenant shall secure, pay for and keep in force contracts with appropriate and
reputable service companies providing for regular and emergency maintenance of
the heating and air-conditioning systems and copies of such contracts shall be
furnished to Landlord; provided, however, that it is agreed that Tenant shall be
responsible only for the repair and maintenance of the heating and
air-conditioning systems and the components thereof located within or
exclusively serving the Premises. Notwithstanding the foregoing, Landlord and
Tenant shall cooperate with one another to determine which party will be
responsible for services required to operate the Building. It is further agreed
that the exception of reasonable use and wear shall not apply so as to permit
Tenant to keep the Premises in anything less than suitable, tenantlike, and
efficient and usable condition considering the nature of the Premises and the
use reasonably made thereof, or in less than good and tenantlike repair.
5.1.4 COMPLIANCE WITH LAW.
To make all repairs, alterations, additions or replacements to
the Premises required by any law or ordinance or any order or regulation of any
public authority other than major capital repairs, alterations, additions or
replacements to the foundations and structural elements of the Building which
are not required because of Tenant's failure to comply with the Provisions of
Article 5.1.3 hereof; to keep the Premises equipped with all safety appliances
necessary for Tenant's use of the Premises; to pay all municipal, county, or
state taxes assessed against the leasehold interest hereunder, or against
personal property of any kind on or about the Premises; and to comply with the
orders and regulations of all governmental authorities with respect to zoning,
building, fire, health and other codes, regulations, ordinances or laws
applicable to the Premises.
The Tenant shall not use, generate, manufacture, produce, handle,
store, release, discharge or dispose of in, on, under or about the Premises or
transport to or from the Premises, or allow its employees, agents, contractors,
invitees or any other person or entity to do so, any oil, hazardous or toxic
materials or hazardous or toxic wastes or medical waste (collectively,
"hazardous materials") except to the extent that the following conditions
regarding the use, generation, manufacture, production, handling, storing,
releasing, discharging, disposal or transport (individually or collectively, the
"Use") of hazardous materials shall be satisfied: (i) the Use shall be directly
related to the operation of Tenant's business as permitted herein, (ii) Tenant
shall first provide Landlord with the list of the types and quantities of such
proposed hazardous materials which Tenant is required to furnish to the
applicable governmental authorities for purposes of compliance with the Resource
Conservation and Recovery Act, as amended (42 U.S.C. 9601, et seq.) (the "RCRA
List") (or, in the event that the RCRA List ceases to be required to be filed
under such law, a list containing the same information required to be listed on
the RCRA List as of the date hereof), and shall update such list as necessary
for continuing accuracy, and such other information reasonably satisfactory to
Landlord as Landlord may reasonably require concerning such Use, and (iii) such
Use shall be in strict compliance (at Tenant's expense) with all applicable
laws, regulations, licenses and permits. Landlord hereby covenants and agrees
that the information contained in any list, or update thereof, referred to in
the foregoing clause (ii) shall be kept confidential in accordance with Section
10.13 hereof. Notwithstanding the foregoing, Tenant hereby agrees to consult and
coordinate with Landlord prior to transporting any hazardous materials to or
from the Premises whenever (i) such transportation is not of the kind regularly
made during the ordinary course of business by a person or entity operating a
laboratory facility for the Permitted Uses or (ii) Tenant has reason to believe
that such transportation may result in a public demonstration, protest or other
similar disturbance at the Building or the Lot. If the transportation,
generation, manufacture, production, handling, release, storage, use or disposal
of any hazardous materials anywhere on the Premises in connection with the
Tenant's use of the Premises results in (1) contamination of the soil,
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surface or ground water or (2) loss or damage to person(s) or property, then
Tenant agrees to respond in accordance with the following paragraph:
Tenant agrees (i) to notify Landlord immediately of any
contamination, claim of contamination, loss or damage, (ii) to
consult with Landlord regarding Tenant's action to resolve said
contamination, claim of contamination or loss or damage, (iii) to
clean up the contamination in full compliance with all applicable
statutes, regulations and standards, and (iv) to indemnify,
defend (with counsel reasonably acceptable to Landlord) and hold
Landlord harmless from and against any claims, suits, causes of
action, costs and fees, including attorneys' fees, arising from
or connected with any such contamination, claim of contamination,
loss or damage. No consent or approval of Landlord shall in any
way be construed as imposing upon Landlord any liability for the
means, methods, or manner of removal, containment or other
compliance with applicable law for and with respect to the
foregoing.
Tenant shall promptly notify Landlord upon Tenant's receipt of
any inquiry, notice, or threat to give notice by any government authority or any
other third party with respect to any hazardous materials. Notwithstanding the
foregoing, Tenant shall not be liable to Landlord hereunder for any
contamination, claim of contamination, loss or damage arising in connection with
hazardous materials to the extent the same is the result of (A) hazardous
materials existing in the Building and the Lot prior to Tenant's use or
occupancy of the Premises, (B) migration of hazardous materials from any site
onto the Lot not caused by Tenant, (C) the generation, manufacture, production,
handling, release, storage, use or disposal of any hazardous materials at the
Building or the Lot by Landlord, any other tenant or occupant, or any so-called
"midnight dumpers" or (D) the Use (as defined above in this Section) by any
party other than Tenant of hazardous materials at the Building or the Lot.
Tenant's indemnification obligations under this Section shall survive the
expiration or earlier termination of this lease.
Prior to vacating the Premises at the expiration of the term
hereof, Tenant at its sole cost and expense shall provide Landlord with an
environmental audit with respect to Tenant's actions at the Premises by a
qualified environmental engineering firm reasonably satisfactory to Landlord,
which audit shall include reasonable subsurface testing if a preliminary review
suggests Tenant may have contaminated the same. The aforesaid environmental
audit shall affirmatively certify that the Premises are free from any and all
contaminants, pollutants, radioactive materials, hazardous wastes or materials,
medical waste, bacteriological agents or organisms which would render the
Premises in violation of M.G.L. c. 21E, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9602 et seq., or any other applicable laws, rules, regulations or orders, as
they may be amended or supplemented by administrative regulations, from time to
time. Landlord has delivered to Tenant at Tenant's request, a Phase I
Environmental Site Assessment for the Building and the Lot prepared by Haley &
Aldrich dated June, 1997 , which Landlord obtained in connection with Landlord's
acquisition of the Building and the Lot. Landlord makes no representations
regarding the content of the information contained in the report and has agreed
to provide the same to Tenant as a courtesy only.
Nothing herein contained shall be construed to limit or impair
Tenant's obligation to comply with any law, code, rule or regulation which
requires Tenant to notify any governmental authority or any other person
concerning the Use (as defined above in this Section) of hazardous materials by
Tenant at the Premises.
Tenant agrees that, with respect to improvements to the Premises
subsequent to the Initial Tenant Improvements, it shall be responsible for
compliance with the Americans with
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Disabilities Act (42 U.S.C. 12101 et seq.) and the regulations and Accessibility
Guidelines for Buildings and Facilities issued pursuant thereto (collectively,
the "ADA Requirements"). Landlord shall be responsible for compliance of the
Initial Tenant Improvements and the Building with the ADA Requirements.
Tenant covenants and agrees that its use of the Premises shall
not cause a discharge of more than 5,250 gallons per day from the Premises of
sanitary (non-industrial) sewage. Discharges in excess of that amount, and any
discharge of industrial sewage or waste, shall only be permitted if Tenant, at
its sole expense, shall have obtained all necessary permits and licenses
therefor, including without limitation permits from state and local authorities
having jurisdiction thereof.
5.1.5 TENANT'S WORK.
To procure at Tenant's sole expense all necessary permits and
licenses before undertaking any work on the Premises; to do all such work in
compliance with the applicable provisions of Sections 3.3 and 5.2.3 hereof; to
do all such work in a good and workmanlike manner employing materials of good
quality and so as to conform with all applicable zoning, environmental,
building, fire, health and other codes, regulations, ordinances and laws and the
ADA Requirements; to furnish to Landlord prior to the commencement of any work
for which the cost may reasonably be estimated to exceed $750,000.00, a bond or
other security acceptable to Landlord assuring that any work commenced or
continued by Tenant will be completed in accordance with specifications approved
in advance in writing by Landlord; to keep the Premises at all times free of
liens for labor and materials; to employ for such work one or more responsible
contractors whose labor will work without interference with other labor working
on the Premises; to require such contractors employed by Tenant to carry
worker's compensation insurance in accordance with statutory requirements and
comprehensive public liability insurance covering any general contractors on or
about the Premises in amounts that at least equal the limits set forth in
Section 1.1 and to submit certificates evidencing such coverage to Landlord
prior to the commencement of such work and to save Landlord harmless and
indemnified from all injury, loss, claims or damage to any person or property
occasioned by or growing out of such work.
5.1.6 INDEMNITY.
To defend, with counsel approved by Landlord, all actions against
Landlord, any partner, trustee, stockholder, officer, director, employee or
beneficiary of Landlord, holders of mortgages secured by the Premises or the
Building and Lot and any other party having an interest in the Premises
("Indemnified Parties") with respect to, and to pay, protect, indemnify and save
harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees and expenses), causes of action, suits, claims,
demands or judgments of any nature arising from (i) injury to or death of any
person, or damage to or loss of property, on the Premises or on adjoining
sidewalks, streets or ways appurtenant to the Premises and connected with the
use or occupancy thereof by Tenant or its agents, contractors, licensees,
employees, sublessees or invitees, unless and to the extent caused by the
negligence or willful misconduct of Landlord or its servants or agents, (ii)
violation of this Lease by Tenant or its agents, contractors, licensees,
employees, sublessees or invitees, or (iii) any act, fault, omission, or other
misconduct of Tenant or its agents, contractors, licensees, employees,
sublessees or invitees.
5.1.7 LANDLORD'S RIGHT TO ENTER.
To permit Landlord and its agents to enter into the Premises at
reasonable times and upon at least 24 hours advance notice (except in case of
emergency in which event no prior
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notice shall be required) to examine the Premises, make such repairs and
replacements as Landlord may elect, without however, any obligation to do so
except as may be otherwise expressly set forth in this Lease, and show the
Premises to prospective purchasers and lenders, and, during the last twelve
months of the Term, to show the Premises to prospective tenants. Landlord's
right to enter the Premises in accordance with the foregoing shall be subject to
Landlord's obligations pursuant to Section 10.13 hereof. Notwithstanding the
foregoing, Landlord agrees that in the event that Landlord shows the Premises to
any prospective purchaser or tenant, Landlord shall: (i) provide at least three
(3) days' notice to Tenant identifying the prospective purchaser or tenant, (ii)
only show the Premises to such purchaser or tenant if Landlord believes in good
faith that such person or entity is a bona fide prospective purchaser or tenant,
(iii) conduct such showing in compliance with such reasonable requests and
instructions as Tenant may make for purposes of protecting Tenant's Confidential
Information.
5.1.8 PERSONAL PROPERTY AT TENANT'S RISK.
All of the furnishings, fixtures, equipment, effects and property
of every kind, nature and description owned or leased by Tenant ("Tenants
Property") or by any person claiming by, through or under Tenant which, during
the continuance of this Lease or any occupancy of the Premises by Tenant or
anyone claiming under Tenant, may be on the Premises, shall, as between the
parties, be at the sole risk and hazard of Tenant and if the whole or any part
thereof shall be destroyed or damaged by fire, water or otherwise, or by the
leakage or bursting of water pipes, steam pipes, or other pipes, by theft or
from any other cause, no part of said loss or damage is to be charged to or to
be borne by Landlord, except that Landlord shall in no event be indemnified or
held harmless or exonerated from any liability to Tenant or to any other person,
for any injury, loss, damage or liability to the extent (i) such injury, loss,
damage or liability is the result of the negligence or willful misconduct of
Landlord, its contractors, agents or employees, or (ii) such indemnification,
agreement to hold harmless or exoneration is prohibited by law.
5.1.9 PAYMENT OF LANDLORD'S COST OF ENFORCEMENT.
To pay on demand Landlord's expenses, including reasonable
attorney's fees, incurred in enforcing any obligation of Tenant under this Lease
or in curing any default by Tenant under this Lease as provided in Section 7.4.
5.1.10 YIELD UP.
Subject to Article III hereof, at the expiration of the Term or
earlier termination of this Lease: to surrender all keys to the Premises; to
remove all of its trade fixtures and personal property in the Premises; to
remove such installations and improvements made by Tenant as Landlord may
request and all Tenant's signs wherever located; to repair all damage caused by
such removal and to yield up the Premises (including all installations and
improvements made by Tenant except for trade fixtures and such of said
installations or improvements as Landlord shall request Tenant to remove),
broom-clean and in the same good order and repair in which Tenant is obliged to
keep and maintain the Premises by the provisions of this Lease. Subject to
Section 3.3 hereof, any property required to be removed and not so removed shall
be deemed abandoned and may be removed and disposed of by Landlord in such
manner as Landlord shall determine and Tenant shall pay Landlord the entire cost
and expense incurred by Landlord in effecting such removal and disposition and
in making any incidental repairs and replacements to the Premises and for use
and occupancy during the period after the expiration of the Term and prior to
Tenant's performance of its obligations under this Section 5.1.10. Tenant shall
further indemnify Landlord against all loss, cost and damage resulting from
Tenant's failure and delay in surrendering the Premises as above provided.
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5.1.11 ESTOPPEL CERTIFICATE.
Upon not less than 10 days' prior notice by Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing certifying that this
Lease is unmodified and in full force and effect and that except as stated
therein Tenant has no knowledge of any defenses, offsets or counterclaims
against its obligations to pay the Fixed Rent and Additional Rent and any other
charges and to perform its other covenants under this Lease (or, if there have
been any modifications that the Lease is in full force and effect as modified
and stating the modifications and, if there are any defenses, offsets or
counterclaims, setting them forth in reasonable detail), the dates to which the
Fixed Rent and Additional Rent and other charges have been paid and a statement
that, to the best of Tenant's knowledge, Landlord is not in default hereunder
(or if in default, the nature of such default, in reasonable detail) and such
other matters reasonably required by Landlord or any prospective purchaser or
mortgagee of the Premises. Any such statement delivered pursuant to this Section
5.1.11 may be relied upon by any prospective purchaser or mortgagee of the
Premises, or any prospective assignee of any such mortgage.
5.1.12 LANDLORD'S EXPENSES RE: CONSENTS.
To reimburse Landlord promptly on demand for all reasonable legal
expenses incurred by Landlord in connection with all requests by Tenant for
consent or approval under this Lease. Notwithstanding the foregoing, Tenant
shall not be liable for any reasonable legal expenses incurred by Landlord for
the first two (2) such requests made by Tenant during each period of twelve (12)
consecutive calendar months during the Term.
5.1.13 RULES AND REGULATIONS.
To comply with the Rules and Regulations set forth in Exhibit C,
as the same may be reasonably amended from time to time by Landlord to provide
for the beneficial operation of the Building and/or Lot, provided that such
amendments do not materially interfere with Tenant's right of use and enjoyment
of the Premises pursuant to this Lease, it being understood that, subject to the
provisions of Section 10.2 hereof, Landlord shall not be liable to Tenant for
the failure of other tenants of the Building or the Lot to conform to such Rules
and Regulations.
5.1.14 LOADING.
Not to place Tenant's Property, as defined in Section 5.1.8, upon
the Premises so as to exceed the floor load limits set forth in EXHIBIT H
attached hereto and not to move any safe, vault or other heavy equipment in,
about or out of the Premises except in such manner and at such times as Landlord
shall in each instance approve; Tenant's business machines and mechanical
equipment which cause vibration or noise that may be transmitted to the Building
structure or to any other leased space in the Building shall be placed or
maintained by Tenant in settings of cork, rubber, spring, or other types of
vibration eliminators sufficient to reduce such vibration or noise to a level
reasonably acceptable to Landlord.
5.1.15 HOLDOVER.
To pay to Landlord (i) the greater of twice (a) the then fair
market rent as reasonably determined by Landlord or (b) the total of the Fixed
Rent, Additional Rent, and all other payments then payable hereunder, for the
period that Tenant shall retain possession of the Premises or any part thereof
after the termination of this Lease, whether by lapse of time or otherwise, and
(ii) all damages sustained by Landlord on account thereof; provided, however,
that any payments made by Tenant under the foregoing clause (i) in excess of the
then fair market rent for the Premises as so reasonably determined by Landlord
shall be applied against
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any damages under the foregoing clause (ii). The provisions of this subsection
shall not operate as a waiver by Landlord of the right of re-entry provided in
this Lease.
5.2 NEGATIVE COVENANTS.
Tenant covenants at all times during the Term and for such further time
as Tenant occupies the Premises or any part thereof:
5.2.1 ASSIGNMENT AND SUBLETTING.
Not without the prior written consent of Landlord to assign this
Lease, to make any sublease, or to permit occupancy of the Premises or any part
thereof by anyone other than Tenant, voluntarily or by operation of law, except
as hereinafter provided; as Additional Rent, to reimburse Landlord promptly for
reasonable legal and other expenses incurred by Landlord in connection with any
request by Tenant for consent to assignment or subletting (subject to the
provisions of Section 5.1.12 hereof); no assignment or subletting shall affect
the continuing primary liability of Tenant (which, following assignment, shall
be joint and several with the assignee); no consent to any of the foregoing in a
specific instance shall operate as a waiver in any subsequent instance.
Landlord's consent to any proposed assignment or subletting is required as to
the terms and conditions thereof. In addition, as to any assignee (but not as to
any sublessee) Landlord's consent shall be required as to the reasonable
creditworthiness of the proposed assignee in view of market conditions then
prevailing for leases having terms and conditions comparable to this Lease.
Landlord's consent to any assignment or subletting by Tenant shall not be
unreasonably withheld, provided that Tenant is not then in default beyond
applicable grace and cure periods under this Lease. If Tenant requests
Landlord's consent to assign this Lease or to sublet the entire Premises for
substantially all of the then remaining Term, Landlord shall have the option,
exercisable by written notice to Tenant given within 10 days after receipt of
such request, to terminate this Lease as of the date of commencement the
proposed sublease or assignment; provided, however, that Tenant shall have the
right to rescind any such request in the event Landlord elects to so terminate
this Lease by notice given to Landlord within five (5) days after the date of
such termination notice from Landlord, in which event such termination notice
shall be of no further force or effect.
If, at any time during the Term of this Lease, Tenant is:
(i) a corporation or a trust (whether or not having shares of
beneficial interest) and there shall occur any change in the identity of any of
the persons then having power to participate in the election or appointment of
the directors, trustees or other persons exercising like functions and managing
the affairs of Tenant; or
(ii) a partnership or association or otherwise not a natural
person (and is not a corporation or a trust) and there shall occur any change in
the identity of any of the persons who then are members of such partnership or
association or who comprise Tenant;
Tenant shall so notify Landlord and Landlord may terminate this Lease by notice
to Tenant given within 90 days thereafter if, in Landlord's reasonable judgment,
the credit of Tenant is thereby impaired. This paragraph shall not apply if the
initial Tenant named herein is a corporation and the outstanding voting stock
thereof is listed on a recognized securities exchange.
Notwithstanding the foregoing provisions of this Section 5.2.1,
Tenant may assign this Lease or sublet any portion of the Premises without
Landlord's consent to (i) any successor of Tenant resulting from a merger or
consolidation of Tenant s (ii) any Affiliate of Tenant (as hereinafter defined)
whose net worth is equal to or greater than the net worth of Tenant as of the
date hereof, or (iii) sublet any portion of the Premises to any subsidiary of
Tenant provided that
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tenant holds the majority of the Controlling Shares of such subsidiary and
Tenant remains primarily liable under this Lease, provided that Tenant provides
Landlord notice within thirty (30) days after such assignment or subletting
pursuant to any of the foregoing clauses (i), (ii) or (iii). As used herein, the
term "Affiliate of Tenant" shall mean and refer to any entity controlled by,
controlling or under common control with Tenant.
In the event that any assignee or subtenant pays to Tenant any
amounts in excess of the Fixed Rent, Additional Rent, and all other payments
then payable hereunder, or pro rata portion thereof on a square footage basis
for any portion of the Premises (such excess being hereinafter referred to as
"Sublease Profits"), Tenant shall promptly pay fifty percent (50%) of said
Sublease Profits to Landlord as and when received by Tenant after deduction of
Tenant's Sublease Costs (as hereinafter defined). The term "Sublease Costs"
shall mean and refer to Tenant's reasonable legal, brokerage, construction costs
and expenses incurred in good faith in view of the size and expected term of any
applicable sublease or assignment and the unamortized cost of Tenant's build out
expenses and the financing of such construction. Sublease Costs shall be
amortized over the term of the applicable sublease or assignment.
5.2.2 NUISANCE.
Not to injure, deface or otherwise harm the Premises; nor commit
any nuisance; nor permit the emission of any noise, vibration or odor which is
contrary to any law or ordinance; nor make, allow or suffer any waste; nor make
any use of the Premises which is improper, offensive or contrary to any law or
ordinance or which will invalidate any of Landlord's insurance.
5.2.3 INSTALLATION, ALTERATIONS OR ADDITIONS.
Subject to the provisions of Section 3.3 and Section 5.1.5
hereof, not to make any installations, alterations, or additions in, to or on
the Premises (including, without limitation, buildings, lawns, planted areas,
walks, roadways, parking and loading areas, but expressly excluding the initial
improvements made in accordance with Complete Plans approved by Landlord and
Tenant, and any other improvements consistent therewith, provided the same are
approved by Landlord, such approval not to be unreasonably withheld or delayed)
nor to permit the making of any apertures in the walls, partitions, ceilings or
floors without on each occasion obtaining the prior written consent of Landlord
and then only pursuant to plans and specifications approved by Landlord in
advance in each instance. Notwithstanding the foregoing, Tenant may make
non-structural improvements, installations, alterations or additions to the
Premises which do not exceed the sum of $50,000.00 without the prior approval or
Consent of the Landlord.
ARTICLE VI
CASUALTY OR TAKING
6.1 TERMINATION.
In case during the period which is two (2) years prior to the expiration
of the Term all or any substantial part of the Premises or of the Building or of
the Lot or any one or more of them shall be taken by any public authority or for
any public use, or shall be destroyed or damaged by fire or casualty, or by the
action of any public authority, or Landlord receives compensable damage by
reason of anything lawfully done in pursuance of public or other authority,
(hereinafter referred to as the "Casualty or Taking"), then this Lease may be
terminated at the election of Landlord or Tenant. Such election, which may be
made notwithstanding the fact that
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Landlord's entire interest may have been divested, shall be made by the giving
of notice by Landlord to Tenant or Tenant to Landlord within 30 days after the
Casualty or Taking.
6.2 RESTORATION.
If either party does not exercise said election (or is not entitled to
exercise said election in the case of a Casualty or Taking occurring more than
two (2) years prior to the expiration of the Term of this Lease), this Lease
shall continue in force and a just proportion of the rent reserved, according to
the nature and extent of the damages sustained by the Premises, shall be abated
from the date of the Casualty or Taking until the Premises, or what may remain
thereof, shall be put by Landlord in proper condition for the Permitted Uses
subject to zoning and building laws or ordinances then in existence, which,
unless Landlord has exercised its option to terminate pursuant to Section 6.1,
Landlord covenants to do with reasonable diligence at Landlord's expense.
Notwithstanding the foregoing, in the event that Landlord's Architect
reasonably determines that the Premises will not be repaired or restored (to the
extent permitted by the net proceeds of insurance recovered or damages awarded
from such Casualty or Taking) within one year after the occurrence of such
Casualty or Taking then Tenant shall have the right to terminate this Lease by
notice given within thirty (30) days after the date of such determination.
6.3 AWARD.
Irrespective of the form in which recovery may be had by law, all rights
to damages or compensation shall belong to Landlord in all cases except as set
forth below in this Section 6.3. Tenant hereby grants to Landlord all of
Tenant's rights to such damages and compensation and covenants to deliver such
further assignments thereof as Landlord may from time to time request. It is
agreed and understood, however, that Landlord does not reserve to itself, and
Tenant does not assign to Landlord, any damages payable for (i) movable trade
fixtures installed by Tenant or anybody claiming under Tenant, at its own cost
and expense, or other personal property of Tenant, or (ii) relocation expenses
or damages for loss of business (in excess of any such damages attributable to
the value of this lease) recoverable by Tenant from such authority in a separate
action.
ARTICLE VII
DEFAULTS
7.1 EVENTS OF DEFAULT.
(a) If Tenant shall default in the performance of any of its obligations
to pay the Fixed Rent or Additional Rent hereunder for more than five (5)
business days after notice thereof twice during any twelve (12) month period, or
if within 30 days after notice from Landlord to Tenant specifying any other
default or defaults Tenant has not commenced to cure the default or defaults so
specified or has not thereafter diligently pursued such cure to completion, or
(b) if any assignment for the benefit of creditors shall be made by Tenant, or
by any guarantor of Tenant, or (c) if Tenant's leasehold interest shall be taken
on execution or other process of law in any action against Tenant, or (d) if a
lien or other involuntary encumbrance is filed against Tenant's leasehold
interest, and is not discharged or bonded over within thirty (30) days
thereafter, or (e) if a petition is filed by Tenant or any guarantor of Tenant
for liquidation, or for reorganization or an arrangement or any other relief
under any provision of the Bankruptcy Code as then in force and effect, or (f)
if an involuntary petition under any of the provisions of said Bankruptcy Code
is filed against Tenant or any guarantor of Tenant and such involuntary petition
is not dismissed within ninety (90) days thereafter, or (g) if Tenant fails to
maintain the insurance
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required under Section 4.2.2.1 hereof, then, and in any of such cases, Landlord
and the agents and servants of Landlord lawfully may, in addition to and not in
derogation of any remedies for any preceding breach of covenant, immediately or
at any time thereafter prior to the curing of such default and without demand or
notice, at Landlord's election, do any one or more of the following: (1) give
Tenant written notice stating that the Lease is terminated, effective upon the
giving of such notice or upon a date stated in such notice, as Landlord may
elect, in which event the Lease shall be irrevocably extinguished and terminated
as stated in such notice without any further action, or (2) with or without
process of law, in a lawful manner and without illegal force, enter and
repossess the Premises as of Landlord's former estate, and expel Tenant and
those claiming through or under Tenant, and remove its and their effects,
without being guilty of trespass, in which event the Lease shall be irrevocably
extinguished and terminated at the time of such entry, or (3) pursue any other
rights or remedies permitted by law. Any such termination of the Lease shall be
without prejudice to any remedies which might otherwise be used for arrears of
rent or prior breach of covenant, and in the event of such termination Tenant
shall remain liable under this Lease as hereinafter provided. Tenant hereby
waives all statutory rights of redemption and Landlord, without notice to
Tenant, may store Tenant's effects, and those of any person claiming through or
under Tenant, at the expense and risk of Tenant, and, if Landlord so elects, may
sell such effects at public auction or private sale and apply the net proceeds
to the payment of all sums due to Landlord from Tenant, if any, and pay over the
balance, if any, to Tenant.
7.2 REMEDIES.
In the event that this Lease is terminated under any of the provisions
contained in Section 7.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the excess of the total rent reserved for the residue of the Term
over the fair market rental value of the Premises for said residue of the Term.
In calculating the rent reserved there shall be included, in addition to the
Fixed Rent and Additional Rent, the value of all other considerations agreed to
be paid or performed by Tenant during said residue. Tenant further covenants (as
additional and cumulative obligations) after any such termination to pay
punctually to Landlord all the sums and to perform all the obligations which
Tenant covenants in this Lease to pay and to perform in the same manner and to
the same extent and at the same time as if this Lease had not been terminated.
In calculating the amounts to be paid by Tenant pursuant to the next preceding
sentence Tenant shall be credited with any amount paid to Landlord as
compensation as in this Section 7.2 provided and also with the net proceeds of
any rent obtained by Landlord by reletting the Premises, after deducting all of
the Landlord's reasonable expenses in connection with such reletting, including,
without limitation, all repossession costs, brokerage commissions, fees for
legal services and expenses of preparing the Premises for such reletting, it
being agreed by Tenant that Landlord may (i) relet the Premises or any part or
parts thereof, for a term or terms which may at Landlord's option be equal to or
less than or exceed the period which would otherwise have constituted the
balance of the Term and may grant such concessions and free rent as Landlord in
its reasonable judgment considers advisable or necessary to relet the same and
(ii) make such alterations, repairs and decorations in the Premises as Landlord
in its reasonable judgment considers advisable or necessary to relet the same,
and no action of Landlord in accordance with the foregoing or failure to relet
or to collect rent under reletting shall operate or be construed to release or
reduce Tenant's liability as aforesaid. Landlord shall be required to use
reasonable efforts to relet the Premises.
In lieu of any other damages or indemnity and in lieu of full recovery
by Landlord of all sums payable under all the foregoing provisions of this
Section 7.2, Landlord, at its sole election, may by notice to Tenant, at any
time after this Lease is terminated under any of the provisions contained in
Section 7.1 or is otherwise terminated for breach of any obligation of Tenant
and before such full recovery, elect to recover, and Tenant shall thereupon pay,
as liquidated damages, an amount equal to the aggregate of the Fixed Rent and
Additional Rent accrued in the
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three (3) months ended next prior to such termination, plus the amount of rent
of any kind accrued and unpaid at the time of termination and less the amount of
any recovery by Landlord under the foregoing provisions of this Section 7.2 up
to the time of payment of such liquidated damages.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove for and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.
7.3 REMEDIES CUMULATIVE.
Any and all rights and remedies which either Landlord or Tenant may have
under this Lease, and at law and equity, shall be cumulative and shall not be
deemed inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted by law.
7.4 LANDLORD'S RIGHT TO CURE DEFAULTS.
Landlord may, but shall not be obligated to, cure, at any time,
following thirty (30) days' prior notice to Tenant, except in cases of emergency
when no notice shall be required, any default by Tenant under this Lease; and
whenever Landlord so elects, all costs and expenses incurred by Landlord,
including reasonable attorneys' fees, in curing a default shall be paid by
Tenant to Landlord as Additional Rent on demand, together with interest thereon
at the rate provided in Section 4.3 from the date of payment by Landlord to the
date of payment by Tenant.
7.5 EFFECT OF WAIVERS OF DEFAULT.
Any consent or permission by Landlord or Tenant to any act or omission
by the other party which otherwise would be a breach of any covenant or
condition herein, or any waiver by Landlord or Tenant of the breach of any
covenant or condition herein by the other party, shall not in any way be held or
construed (unless expressly so declared) to operate so as to impair the
continuing obligation of any covenant or condition herein, or otherwise, except
as to the specific instance, operate to permit similar acts or omissions.
The failure of Landlord or Tenant to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease by the other party shall not be deemed a waiver of such violation nor
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of an original violation. The receipt by
Landlord, or the payment by Tenant, as the case may be, of rent with knowledge
of the breach of any covenant of this Lease shall not be deemed to have been a
waiver of such breach by Landlord or Tenant, as the case may be. No consent or
waiver, express or implied, by Landlord or Tenant, as the case may be, to or of
any breach of any agreement or duty shall be construed as a waiver or consent to
or of any other breach of the same or any other agreement or duty.
7.6 NO ACCORD AND SATISFACTION.
No acceptance by Landlord of a lesser sum than the Fixed Rent,
Additional Rent or any other charge then due shall be deemed to be other than on
account of the earliest installment of such rent or charge due, unless Landlord
elects by notice to Tenant to credit such sum against the most recent
installment due, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent or other charge be deemed an
accord and
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satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or pursue any other
remedy in this Lease provided.
ARTICLE VIII
MORTGAGES
8.1 RIGHTS OF MORTGAGE HOLDERS.
The word "mortgage" as used herein includes mortgages, deeds of trust or
other similar instruments evidencing other voluntary liens or encumbrances, and
modifications, consolidations, extensions, renewals, replacements and
substitutes thereof. The word "holder" shall mean a mortgagee, and any
subsequent holder or holders of a mortgage. Until the holder of a mortgage shall
enter and take possession of the Premises for the purpose of foreclosure, such
holder shall have only such rights of Landlord as are necessary to preserve the
integrity of this Lease as security. Upon entry and taking possession of the
Premises for the purpose of foreclosure, such holder shall have all the rights
of Landlord. Notwithstanding any other provision of this Lease to the contrary,
including without limitation Section 10.5, no such holder of a mortgage shall be
liable either as mortgagee or as assignee to perform, or be liable in damages
for failure to perform, any of the obligations of Landlord unless and until such
holder shall enter and take possession of the Premises for the purpose of
foreclosure. Upon entry for the purpose of foreclosure, such holder shall be
liable to perform all of the obligations of Landlord (except for the obligations
under Article III), subject to and with the benefit of the provisions of
Section 10.5, provided that a discontinuance of any foreclosure proceeding shall
be deemed a conveyance under said provisions to the owner of the equity of the
Premises. No Fixed Rent, Additional Rent or any other charge shall be paid more
than 10 days prior to the due dates thereof and payments made in violation of
this provision shall (except to the extent that such payments are actually
received by a mortgagee in possession or in the process of foreclosing its
mortgage) be a nullity as against such mortgagee and Tenant shall be liable for
the amount of such payments to such mortgagee.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a holder of a mortgage (including, without
limitation, the covenants and agreements contained in this Section 8.1)
constitute a continuing offer to any person, corporation or other entity, which
by accepting a mortgage subject to this Lease, assumes the obligations herein
set forth with respect to such holder; such holder is hereby constituted a party
of this Lease as an obligee hereunder to the same extent as though its name were
written hereon as such; and such holder shall be entitled to enforce such
provisions in its own name. Tenant agrees on request of Landlord to execute and
deliver from time to time any agreement which may be necessary to implement the
provisions of this Section 8.1.
8.2 SUBORDINATION.
This Lease is subject and subordinate to any mortgage now on the
Building, if any, and shall be, at the mortgagee's election, subject and
subordinate to any mortgage hereafter on the Building and to each advance made
or hereafter to be made under any mortgage, and to all renewals, modifications,
consolidations, replacements and extensions thereof and all substitutions
therefor; provided, however, such mortgagee shall not disturb Tenant's
possession hereunder or rights hereunder in the event of a foreclosure by
Mortgagee except to the extent permitted hereunder pursuant to an Event of
Default by Tenant. This Section 8.2 shall be self-operative and no further
instrument of subordination shall be required, but if such subordination
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is in writing, then such mortgagee shall execute a non-disturbance and
attornment agreement in favor of Tenant in form acceptable to such mortgagee. In
confirmation of such subordination, Tenant shall execute and deliver promptly an
estoppel certificate concerning this Lease and Tenant's tenancy in form
reasonably acceptable to such mortgagee. Tenant hereby irrevocably appoints
Landlord as attorney-in-fact for Tenant (such appointment being coupled with an
interest) with full power and authority to execute and deliver in the name and
on behalf of Tenant any such certificate which Tenant fails so to execute and
deliver within ten (10) business days after written request and presentation by
Landlord or such mortgagee. Landlord represents that as of the date hereof,
there is no mortgage, ground lease or superior lien on the Building or the
Premises.
8.3 LEASE AMENDMENTS.
Tenant agrees not to unreasonably withhold its agreement to make such
changes in this Lease as may be reasonably required by the holder of any
mortgage of which the Premises are a part, or any institution which may purchase
all or a substantial part of Landlord's interest in the Premises, provided that
such changes may not increase the Fixed Rent or other payments due hereunder or
otherwise materially affect the obligations or rights of Tenant hereunder, and
provided further that such changes do not (i) materially interfere with Tenant's
right of use and enjoyment of the Premises pursuant to this Lease, (ii) limit,
impair or delay Tenant's rights to sublease or assign all or any portion of this
Lease pursuant to Section 5.2.1 hereof, (iii) limit, impair or delay Tenant's
right to obtain a reduction or abatement of rent pursuant to Section 3.2 or
Section 6.2, (iv) limit, impair or delay Tenant's right to terminate this Lease
pursuant to Section 3.2 or Section 6.2, or (v) otherwise unreasonably limit,
impair or delay Tenant's rights hereunder.
ARTICLE IX
LANDLORD'S ADDITIONAL COVENANTS
9.1 AFFIRMATIVE COVENANTS.
Landlord covenants at all times during the Term:
9.1.1 PERFORM OBLIGATIONS.
To perform promptly all of the obligations of Landlord set forth
in this Lease, including, without limitation, furnishing, through Landlord's
employees or independent contractors, the services (the cost of which is to be
included in the Annual Maintenance Charge) listed in Exhibit I.
9.1.2 REPAIRS.
Except as otherwise provided in Article VI, to make such repairs
(the cost of which is to be included in the Annual Maintenance Charge) to the
roof, exterior walls, exterior windows and waterproofing, floor slabs, other
structural components and common areas and facilities of the Building as may be
necessary to keep them in good, serviceable condition. Without limitation of the
foregoing, Landlord shall be responsible for the maintenance and repair of the
heating and air-conditioning systems and the components thereof serving the
Building, except for such systems and the components thereof as are located
within the Premises or exclusively serve the Premises (as provided in
Section 5.1.3 hereof).
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Notwithstanding the foregoing, Landlord shall only be responsible
for maintenance, service and repair of Base Building utilities and services as
shown on Exhibit B hereto.
9.1.3 COMPLIANCE WITH LAW.
To make all repairs, alterations, additions or replacements to
the Building or the Lot (the costs of which are to be included in the Annual
Maintenance Charge) required by any law, ordinance or order or regulation of any
public authority including repairs, alterations, additions or replacements to
the foundations and structural elements of the Building, except as required
because of Tenant's failure to comply with the provisions of Section 5.1.3
hereof; to keep the Building equipped with all safety appliances so required
(the costs of which are to be included in the Annual Maintenance Charge);
subject to Section 4.2.1, to pay all municipal, county, or state taxes assessed
against the Building or the Lot, or against Landlord's personal property of any
kind on or about the Building or the Lot; and to comply with the orders and
regulations of all governmental authorities with respect to zoning, building,
fire, health and other codes, regulations, ordinances or laws applicable to the
Building or the Lot, including the ADA Requirements (as defined in Section 5.1.4
hereof) and any codes, regulations, ordinances or laws relating to hazardous
materials (as defined in Section 5.1.4), subject to, and without limitation of,
Tenant's obligations with respect to such codes, regulations, ordinances or
laws. The costs incurred by Landlord in connection with the foregoing compliance
obligations (to the extent required due to a change in law) shall be included in
the Annual Maintenance Charge. All of the foregoing covenants and obligations
are subject to, and without limitation of, all of Tenant's obligations under
this Lease, including, without limitation, those set forth in Sections 4.2 and
5.1.4.
9.1.4 INDEMNITY.
To defend, with counsel reasonably approved by Tenant, all
actions against Tenant, any partner, trustee, stockholder, officer, director,
employee or beneficiary of Tenant ("Tenant's Indemnified Parties") with respect
to, and to pay, protect, indemnify and save harmless, to the extent permitted by
law, all Tenant's Indemnified Parties from and against, any and all liabilities,
losses, damages, costs, expenses (including reasonable attorneys' fees and
expenses), causes of action, suits, claims, demands or judgments of any nature
arising from (i) injury to or death of any person, or damage to or loss of
property, on the Premises or on adjoining sidewalks, streets or ways appurtenant
to the Premises and not connected with the use or occupancy thereof by Tenant or
its agents, contractors, licensees, employees, sublessees or invitees, unless
and to the extent caused by the negligence or willful misconduct of Tenant or
its servants or agents, (ii) violation of this Lease by Landlord or its agents,
contractors, licensees, employees, sublessees or invitees, or (iii) any act,
fault, omission, or other misconduct of Landlord or its agents, contractors,
licensees, employees, sublessees or invitees.
9.1.5 ESTOPPEL CERTIFICATE.
Upon not less than 10 days' prior notice by Tenant, to execute,
acknowledge and deliver to Tenant a statement in writing certifying that this
Lease is unmodified and in full force and effect and that except as stated
therein Landlord has no knowledge of any defenses, offsets or counterclaims
against its obligations under this Lease (or, if there have been any
modifications that the Lease is in full force and effect as modified and stating
the modifications and, if there are any defenses, offsets or counterclaims,
setting them forth in reasonable detail), the dates to which the Fixed Rent and
Additional Rent and other charges have been paid and a statement that, to the
best of Landlord's knowledge, Tenant is not in default hereunder (or if in
default, the nature of such default, in reasonable detail) and such other
matters reasonably required by Tenant or any
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prospective assignee of Tenant. Any such statement delivered pursuant to this
Section 9.1.5 may be relied upon by any prospective assignee.
9.1.6 LANDLORD'S TITLE.
Landlord has delivered to Tenant a copy of Landlord's owner's
policy of title insurance (the "Policy") with respect to the Lot. Landlord has
no knowledge of any changes in the status of the title since the date of the
Policy.
9.1.7 UTILITIES.
Utilities shall be installed in the Building and the Premises in
accordance with Exhibit B hereto.
9.1.8 PAYMENT OF TENANT'S COST OF ENFORCEMENT.
To pay on demand Tenant's expenses, including reasonable
attorney's fees, incurred in enforcing any obligation of Landlord under this
Lease.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 NOTICES FROM ONE PARTY TO THE OTHER.
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at the Original Address of Tenant or such other
address as Tenant shall have last designated by notice in writing to Landlord
and, if to Landlord, at Landlord's Address or such other address as Landlord
shall have last designated by notice in writing to Tenant. Any notice shall be
deemed duly given if mailed to such address postage prepaid, registered or
certified mail, return receipt requested, two (2) days after deposit with the
U.S. Postal Service, or if delivered by a recognized courier service (e.g.
Federal Express) when delivered by such courier service, or if delivered to such
address by hand, when so delivered.
10.2 QUIET ENJOYMENT.
Landlord agrees that upon Tenant's paying the rent and performing and
observing the terms, covenants, conditions and provisions on its part to be
performed and observed, Tenant shall and may peaceably and quietly have, hold
and enjoy the Premises during the Term without any manner of hindrance or
molestation from Landlord or anyone claiming under Landlord, subject, however,
to the terms of this Lease.
10.3 EASEMENTS; CHANGES TO LOT LINES.
Landlord reserves the right, from time to time, to grant easements
affecting the Premises or the Building or the Lot and to change or alter
existing boundaries of the Lot for purpose of developing and using the Lot so
long as such easements or such changes or alterations to existing boundaries of
the Lot do not materially interfere with Tenant's use of the Premises, and to
enter upon the Premises for purposes of constructing and maintaining any pipes,
wires and other facilities serving any portion of the Lot or of the Building,
subject to the terms of Section 5.1.7 and Section 10.13 hereof.
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10.4 LEASE NOT TO BE RECORDED.
Neither party shall record this Lease. Both parties shall execute and
deliver a notice of this Lease in such form, if any, as may be permitted by
applicable statute. If this Lease is terminated before the Term Expiration Date
the parties shall execute, deliver and record an instrument acknowledging such
fact and the actual date of termination of this Lease, and Tenant hereby
appoints Landlord its attorney-in-fact, coupled with an interest, with full
power of substitution to execute such instrument.
10.5 BIND AND INURE; LIMITATION OF LANDLORD'S LIABILITY.
The obligations of this Lease shall run with the land, and this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. No owner of the Premises shall be liable
under this Lease except for breaches of Landlord's obligations occurring while
owner of the Premises except to the extent (i) disclosed on an estoppel
certificate or (ii) the acquiror did not seek an estoppel certificate. The
obligations of Landlord shall be binding upon the assets of Landlord which
comprise the Building and the Lot but not upon other assets of Landlord. No
member, partner, trustee, stockholder, officer, director, employee or
beneficiary (or the members, partners, trustees, stockholders, officers,
directors or employees of any such beneficiary) of Landlord shall be personally
liable under this Lease and Tenant shall look solely to Landlord's interest in
the Building and the Lot in pursuit of its remedies upon an event of default
hereunder, and the general assets of the partners, trustees, stockholders,
officers, employees or beneficiaries (and the partners, trustees, stockholders,
officers, directors or employees of any such beneficiary) of Landlord shall not
be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Tenant; provided that the foregoing provisions
of this sentence shall not constitute a waiver of any obligation evidenced by
this Lease and provided further that the foregoing provisions of this sentence
shall not limit the right of Tenant to name Landlord or any individual partner
or trustee thereof as a party defendant in any action or suit in connection with
this Lease so long as no personal money judgment shall be asked for or taken
against any individual partner, trustee, stockholder, officer, employee or
beneficiary of Landlord.
10.6 ACTS OF GOD.
In any case where either party hereto is required to do any act, delays
caused by or resulting from the occurrence of one or more Force Majeure Events
shall not be counted in determining the time during which work shall be
completed, except for the Outside Completion Date, whether such time be
designated by a fixed date, a fixed time or a "reasonable time", and such time
shall be deemed to be extended by the period of such delay.
10.7 LANDLORD'S DEFAULT.
Landlord shall not be deemed to be in default in the performance of any
of its obligations hereunder unless it shall fail to perform such obligations
and such failure shall continue for a period of thirty (30) days following
receipt of notice from Tenant or such additional time as is reasonably required
to correct any such default after notice has been given by Tenant to Landlord
specifying the nature of Landlord's alleged default provided Landlord commences
such cure within thirty (30) days and proceeds diligently thereafter until such
cure is completed. Landlord shall not be liable in any event for incidental or
consequential damages to Tenant by reason of any default by Landlord hereunder,
whether or not Landlord is notified that such damages may occur. Except as
expressly set forth in Section 3.2 and Section 6.2 hereof, Tenant shall have no
right to terminate this Lease for any default by Landlord hereunder and no
right, for any such default, to offset or counterclaim against any rent due
hereunder.
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Notwithstanding the foregoing, if any repairs to the Premises or any
maintenance, cleaning, or lighting of the common areas of the Building or the
Lot, are not performed by Landlord or the Premises any time after the
Substantial Completion Date and within thirty (30) days after notice from Tenant
(or such longer period as may be reasonably required in the event that any such
repair, maintenance, cleaning or lighting cannot be completed within said thirty
(30) day period), Tenant shall have the right to perform such obligation of
Landlord. If Tenant performs any such obligation of Landlord, Landlord shall pay
to Tenant the reasonable cost thereof within thirty (30) days after notice from
Tenant, provided, however, that in no event shall Tenant have the right to
offset or deduct the amount thereof against any payment of rent due hereunder.
If an emergency occurs where a repair is required to be done immediately
in order to avoid imminent danger to persons or material damage to the Premises,
Tenant shall have the right to self-help consistent with the immediately
preceding grammatical paragraph of this Section 10.7 after giving Landlord only
such notice as is reasonable under the circumstances, provided, however, that
formal notice shall be promptly given thereafter. However, the right of
self-help afforded to Tenant in this Section 10.7 shall be carefully and
judiciously exercised by Tenant, it being understood and agreed that except in
the case of an emergency, Landlord shall be given sufficient opportunity to take
the action required of Landlord to avoid such default, in order to avoid any
conflict with respect to whether or not self-help should have been availed of by
Tenant, or with respect to the reasonableness of the expenses incurred by
Tenant.
10.8 BROKERAGE.
Each party warrants and represents to the other party that it has had no
dealings with any broker or agent in connection with this Lease other than Lynch
Murphy Walsh & Partners ("Broker") and covenants to defend with counsel
reasonably approved by such other party, hold harmless and indemnify such other
party from and against any and all cost, expense or liability arising from any
breach of the foregoing warranty and representation. Landlord shall pay all such
fees to the Broker.
10.9 APPLICABLE LAW AND CONSTRUCTION.
This Lease shall be governed by and construed in accordance with the
laws of the state in which the Premises are located. If any term, covenant,
condition or provision of this Lease or the application thereof to any person or
circumstances shall be declared invalid, or unenforceable by the final ruling of
a court of competent jurisdiction having final review, the remaining terms,
covenants, conditions and provisions of this Lease and their application to
persons or circumstances shall not be affected thereby and shall continue to be
enforced and recognized as valid agreements of the parties, and in the place of
such invalid or unenforceable provision, there shall be substituted a like, but
valid and enforceable provision which comports to the findings of the aforesaid
court and most nearly accomplishes the original intention of the parties.
There are no prior oral or written agreements between Landlord and
Tenant affecting this Lease. This Lease may be amended, and the provisions
hereof may be waived or modified, only by instruments in writing executed by
Landlord and Tenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors, administrators, successors and assigns, and those
claiming through or under them respectively. If
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there be more than one tenant the obligations imposed by this Lease upon Tenant
shall be joint and several.
10.10 SUBMISSION NOT AN OFFER.
The submission of a draft of this Lease or a summary of some or all of
its provisions does not constitute an offer to lease or demise the Premises, it
being understood and agreed that neither Landlord nor Tenant shall be legally
bound with respect to the leasing of the Premises unless and until this Lease
has been executed by both Landlord and Tenant and a fully executed copy
delivered to each of them.
10.11 SECURITY DEPOSIT.
Within seven (7) days of execution by Tenant of this Lease, Tenant shall
deliver to Landlord an irrevocable and unconditional standby letter of credit
(the "Letter of Credit") naming Landlord as beneficiary thereof in the full
amount of the Security Deposit set forth in Article I hereof in a form
reasonably acceptable to Landlord, which shall secure the performance by Tenant
of all obligations on the part of Tenant hereunder. The issuer of the Letter of
Credit shall be a banking institution with at least a rating of A and otherwise
reasonably acceptable to Landlord. Although Landlord shall only have the right
to draw under the Letter of Credit in the event of a default as set forth
herein, under the terms of the Letter of Credit, the sole condition to
Landlord's draw upon the Letter of Credit shall be presentment to the issuer
thereof, prior to or on the expiration date of the Letter of Credit, of a demand
for payment. The Letter of Credit shall be self-renewing from year to year
during the term of this Lease so as to expire no earlier than thirty (30) days
following the Lease expiration date and shall contain such other customary terms
as Landlord requires in its reasonable discretion, including, but not limited
to, a provision that the Letter of Credit is transferable to Landlord's
successors and assigns and a provision which allows the Landlord to make
multiple draws on the Letter of Credit, up to the stated amount thereof. If
Landlord receives any draw on the Letter of Credit, Tenant, within fifteen (15)
days after the date of such draw, shall cause the issuer of the Letter of Credit
to restore the amount which may be drawn on the Letter of Credit to the full
amount of the Security Deposit. For and during the Term, Landlord shall have the
irrevocable right, without further notice or approval of Tenant but not the
obligation from time to time without prejudice to any other remedy Landlord may
have on account thereof, to apply the Security Deposit or any portion thereof or
interest thereon, to Landlord's damage resulting from any default after
applicable grace and cure periods by Tenant. On termination of the Term, the
Security Deposit, or the portion thereof then held by Landlord shall be returned
to Tenant, beyond the amount necessary to cure the breach of any provision of
this Lease by Tenant. If all or any part of the Security Deposit is applied to
an obligation of Tenant hereunder, Tenant shall immediately upon request by
Landlord restore the Security Deposit to its original amount. Tenant shall not
have the right to call upon Landlord to apply all or any part of the Security
Deposit to cure any default or fulfill any obligation of Tenant, but such use
shall be solely in the discretion of Landlord. Upon any conveyance by Landlord
of its interest under this Lease, the Security Deposit shall be delivered by
Landlord to Landlord's grantee or transferee. Upon any such delivery, Tenant
hereby releases Landlord herein named of any and all liability with respect to
the Security Deposit, its application and return, and Tenant agrees to look
solely to such grantee or transferee. It is further understood that this
provision shall also apply to subsequent grantees and transferees.
10.12 OPTIONS TO EXTEND.
(a) Tenant shall have two (2) options to extend the Term of this Lease
(the "Options to Extend") for successive periods of five (5) years each (the
"Extension Periods"), subject to and on the terms set forth herein. Tenant may
only exercise the Options to Extend with respect to the entire Premises. If
Tenant shall desire to exercise any Option to Extend, it shall give Landlord a
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notice (the "Inquiry Notice") of such desire not later than twelve (12) months
prior to the expiration of the Initial Term of this Lease or the preceding
Extension Period, as the case may be Thereafter, the Fair Market Rent (as
defined in Subsection (c) below) for the applicable Extension Period shall be
determined in accordance with Subsection (d) below. After the applicable Fair
Market Rent has been so determined, Tenant shall exercise each Option to Extend
by giving Landlord notice (the "Exercise Notice") of its election to do so not
later than nine (9) months prior to the expiration of the Initial Term of this
Lease, or the preceding Extension Period, as the case may be. If Tenant fails to
timely give either the Inquiry Notice or the Exercise Notice to Landlord with
respect to any Option to Extend, Tenant shall be conclusively deemed to have
waived such Option to Extend hereunder.
(b) Notwithstanding any contrary provision of this Lease, at the sole
election of Landlord, each Option to Extend and any exercise by Tenant thereof
shall be void and of no force or effect unless on the dates Tenant gives
Landlord its Inquiry Notice and Exercise Notice for each Option to Extend and on
the date of commencement of the each Extension Period (i) this Lease is in full
force and effect, and (ii) there is no Event of Default of Tenant under this
Lease.
(c) All of the terms, provisions, covenants, and conditions of this
Lease shall continue to apply during each Extension Period, except that the
Annual Fixed Rent Rate during each Extension Period (the "Extension Rent") shall
be equal to the fair market rent for the Premises determined as of the date
twelve (12) months prior to expiration of the Initial Term or the preceding
Extension Period, as the case may be, in accordance with the procedure set forth
in Subsection (d) below (the "Fair Market Rent").
(d) The Fair Market Rent for each Extension Period shall be determined
as follows: Within five (5) days after Tenant gives Landlord its Inquiry Notice
with respect to any Option to Extend, Landlord shall give Tenant notice of
Landlord's determination of the Fair Market Rent for the applicable Extension
Period. Within ten (10) days after Tenant receives such notice, Tenant shall
notify Landlord of its agreement with or objection to Landlord's determination
of the Fair Market Rent, whereupon the Fair Market Rent shall be determined by
arbitration conducted in the manner set forth below. If Tenant does not notify
Landlord within such ten (10) day period of Tenant's agreement with or objection
to Landlord's determination of the Fair Market Rent, then the Fair Market Rent
for the applicable Extension Period shall be deemed to be Landlord's
determination of the Fair Market Rent as set forth in the notice from Landlord
described in this subsection.
(e) If Tenant notifies Landlord of Tenant's objection to Landlord's
determination of Fair Market Rent under the preceding subsection, such notice
shall also set forth a request for arbitration and Tenant's appointment of a
commercial real estate broker having at least ten (10) years experience in the
commercial leasing market in the City of Cambridge, Massachusetts and MAI
approved (an "Arbitrator"). Within five (5) days thereafter, Landlord shall by
notice to Tenant appoint a second Arbitrator. Each Arbitrator shall be advised
to determine the Fair Market Rent for the applicable Extension Period within
thirty (30) days after Landlord's appointment of the second Arbitrator. On or
before the expiration of such thirty (30) day period, the two Arbitrators shall
confer to compare their respective determinations of the Fair Market Rent. If
the difference between the amounts so determined by the two Arbitrators is less
than or equal to ten percent (10%) of the lower of said amounts then the final
determination of the Fair Market Rent shall be equal to the average of said
amounts. If such difference between said amounts is greater than ten percent
(10%), then the two arbitrators shall have ten (10) days thereafter to appoint a
third Arbitrator (the "Third Arbitrator"), who shall be instructed to determine
the Fair Market Rent for the applicable Extension Period within ten (10) days
after its appointment by selecting one of the amounts determined by the other
two Arbitrators. Each party shall bear the cost of the Arbitrator selected by
such party. The cost for the Third Arbitrator, if any, shall be shared equally
by Landlord and Tenant.
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10.13 CONFIDENTIAL INFORMATION.
Landlord hereby agrees that any and all knowledge, information, data,
materials, trade secrets, and other work product of a confidential nature
gained, obtained, derived, produced, generated or otherwise acquired by Landlord
with respect to Tenant's business (collectively "Confidential Information")
shall be kept confidential. Landlord shall use diligent efforts to ensure that
no Confidential Information is revealed, divulged, communicated, related, or
described to any person or entity without the written consent of Tenant, except
as may be required by applicable law.
10.14 PARKING.
Tenant shall be obligated to pay as Additional Rent monthly, the then
fair market value (estimated to be $140.00 per space per month in calendar year
1998) for each of the 75 parking spaces to be leased to Tenant located at the
garage (the "Garage") at 47 Erie Street, Cambridge, Massachusetts, to be owned
or controlled by Landlord or an affiliate of Landlord, which parking spaces may
only be utilized by Tenant's employees, visitors, sublesees or assignees,
visiting or working at the Premises. In the event Landlord is unable to provide
said parking spaces in the Garage, Landlord shall be required to provide
alternate parking spaces in a location acceptable to Tenant in its reasonable
discretion. Failure by Landlord to provide said parking spaces shall be a
Landlord's Default.
10.15 SIGNAGE.
Tenant shall be permitted, at its sole cost and expense, to install and
maintain signs on the exterior of the Building, provided that: (i) the size,
location, quality, color and style of such signs shall be subject to Landlord's
approval, such approval not to be unreasonably withheld or delayed, and (ii)
such signs shall be subject to limitations of applicable law, including, without
limitation, the Cambridge Zoning By-Law, as amended from time to time. Tenant
shall secure all permits necessary for the installation of such signs at its
sole cost and expense. Upon the expiration or sooner termination of the Term of
this Lease, Tenant shall remove such signs and repair any damage resulting
therefrom at Tenant's sole cost and expense.
10.16 ACCESS.
Tenant shall have exclusive access to the Building and the Premises
shown on Exhibit A attached hereto. Tenant shall have access to the Building 24
hours a day, 7 days per week and 365 days a year. Normal hours of operation of
the Building are Monday through Friday, 8:00 a.m. to 6:00 p.m.
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WITNESS the execution hereof under seal as of this 12th day of June,
1998.
LANDLORD:
/s/ David E. Clem
___________________________________________
David E. Clem, Trustee and not individually
/s/ David M. Roby
___________________________________________
David M. Roby, Trustee and not individually
TENANT: MILLENNIUM PHARMACEUTICALS, INC.
By:
/s/ Janet C. Bush
_______________________________________
Janet C. Bush
Vice President, Finance
Its:
hereunto duly authorized
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EXHIBIT B
BASE BUILDING IMPROVEMENTS
GENERAL
The base building is designed to provide services for seven tenants, four
tenants at ground floor, two at first floor, and one on second floor.
FIRE PROTECTION
The tenant space is completely sprinklered, the system is based on ordinary
hazard and a 10' x 10' grid with upright sprinklers. The tenant shall
reconfigure sprinklers in order to meet their space and requirements.
PLUMBING
The domestic water and non-potable water system varies from 80 psi at ground
floor to 55 psi at penthouse level.
Tenant plumbing provisions have been made in (6 ) equally spaced shafts.
Provisions made at each shaft location on each floor as follows:
- 4" acid waste capped connection
- 4" vent waste capped connection.
Provisions made at (3) shafts per floor are as follows:
- 4" acid waste capped connection
- 4" vent waste capped connection
- 2" natural gas valved and capped connection
- 2" cold water valved and capped connection
- 2" non-potable cold water valved and capped.
Seven independent acid waste and vent systems have been designed. These systems
shall terminate in the Ground Floor Mechanical Room. 300 SF of this Ground Floor
Mechanical Room space has been allocated for seven PH neutralization systems.
HVAC
(3) 24,000 CFM air handling units, (2) 150 ton chillers, (2) 3000 MBH boilers
all located in Penthouse which serve (5) equally spaced shafts.
Provisions made at each shaft are as follows:
At Ground Floor
- 6600 CFM ducted supply
- 6600 CFM ducted return
- (2) 900 CFM, 12" diameter ducts for fume hood exhaust with capped
connections at roof and floor served
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EXHIBIT B Page 2
- 1-1/2" chilled water supply and return for supplemental cooling
(13 gpm) with valved and capped connections
- 1" hot water supply and return (2 GPM) valved and capped
connections.
At First Floor:
- 4000 CFM ducted supply.
- 2200 CFM ducted return.
- (2) 900 CFM, 12" diameter ducts for fume hood exhaust with capped
connections at roof and floor served.
- 1" hot water and return (2 GPM) valved and capped connections.
At Second Floor:
- 4000 CFM ducted supply.
- 2200 CFM ducted return.
- (2) 900 CFM, 12" diameter fume hood exhaust with capped connections
at roof and floor served.
- 1" hot water and return (2 GPM) valved and capped connections.
At each floor, perimeter fin tube heating is provided.
At Penthouse level, approximately 1500 SF is allocated for tenant use (i.e for
additional air handling unit, chiller, or similar equipment).
ELECTRICAL
At each floor, the tenant shall be provided with (2) electrical closets and (1)
telephone closet. Each electrical closet has (1) 400 AMP main circuit breaker,
277/480 volt, 3 phase, 4 wire distribution panelboard. Space is allocated for
two 112.5kVA transformers and two 400 amp main circuit breaker, 120/208 volt, 3
phase, 4 wire panelboards within each closet. The telephone closet has been
provided with one backboard.
<PAGE> 43
EXHIBIT C
RULES AND REGULATIONS
1. The entrances, lobbies, elevators, sidewalks, and stairways of the
Building shall not be encumbered or obstructed by Tenant, Tenant's
agents, servants, employees, licensees or visitors or used by them for
any purposes other than ingress or egress to and from the Building.
2. Landlord reserves the right to have Landlord's structural engineer
review Tenant's floor loads on the Building.
3. Tenant, or the employees, agents, servants, visitors or licensees of
Tenant shall not at any time place, leave or discard any rubbish, paper,
articles, or objects of any kind whatsoever outside of the Building.
Bicycles shall not be permitted in the Building except in designated
areas.
4. Tenant shall not place objects against glass partitions or doors or
windows which would be unsightly from the exterior of the Building and
will promptly remove the same upon notice from Landlord.
5. Tenant shall not make noises, cause disturbances, create vibrations,
odors or noxious fumes or use or operate any electric or electrical
devices or other devices that emit sound waves or that would interfere
with the operation of any device or equipment or radio or television
broadcasting or reception from outside the Building, or with the
operation of roads or highways in the vicinity of the Building and shall
not place or install any projections, antennae, aerials, or similar
devices inside or outside of the Building, without the prior written
approval of Landlord.
6. Tenant shall not: (a) use the Building for lodging, or for any immoral
or illegal purposes; (b) use the Building to engage in the manufacture
or sale of spirituous, fermented, intoxicating or alcoholic beverages in
the Building; (c) use the Building to engage in the manufacture or sale
of, or permit the use of, any illegal drugs in the Building.
7. No awning or other projections shall be attached to the outside walls or
windows. No curtains, blinds, shades, screens or signs other than those
furnished by Landlord shall be attached to, hung in, or used in
connection with any exterior window or door of the Building without
prior written consent of Landlord, such consent not to be unreasonably
withheld.
8. No sign, advertisement, object, notice or other lettering, except as set
forth in Section 10.15 of the Lease, shall be exhibited, inscribed,
painted or affixed on any part of the outside or inside of the Building
if visible from outside of the Building.
9. Door keys for doors in the Building will be furnished on the
Commencement Date by Landlord. If Tenant shall affix additional locks on
doors then Tenant shall furnish Landlord with copies of keys for said
locks.
10. Tenant shall cooperate and participate in all reasonable security
programs affecting the Building.
<PAGE> 44
EXHIBIT C Page 2
11. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other
means of entry to its space in the Building closed and secured.
12. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and
no sweepings, rubbish, rags, or other substances shall be thrown
therein.
13. Discharge of industrial sewage shall only be permitted if Tenant, at its
sole expense, shall have obtained all necessary permits and licenses
therefor, including without limitation permits from state and local
authorities having jurisdiction thereof.
14. Except as permitted under Article III of the Lease, Tenant shall not
mark, paint, drill into, or in any way deface any part of the Building
or Premises. No boring, driving of nails or screws, cutting or stringing
of wires shall be permitted except with the prior written consent of
Landlord not to be unreasonably withheld, and as Landlord may direct.
Tenant shall not install any resilient tile or similar floor covering in
the Premises except with the prior written approval of Landlord not to
be unreasonably withheld. The use of cement or other similar adhesive
material is expressly prohibited.
15. Building employees shall not be required to perform, and shall not be
requested by any tenant or occupant to perform, any work outside of
their regular duties, unless under specific instructions from the office
of the Managing Agent of the Building.
16. In the event of any conflict between the provisions of this EXHIBIT C
and the provisions of the Lease, the provisions of the Lease shall
govern.
<PAGE> 45
EXHIBIT D
PHASE I PLANS
The plans and specifications described in the three-page attachment hereto
prepared by Siena Construction Corporation entitled "Project #09757 270 Albany
Street Fitout."
<PAGE> 46
EXHIBIT E
BRIEF OUTLINE OF DESIGN AND CONSTRUCTION PROCESS
PHASE II
Receive final space program* ____________, 1998
Initial layout review with MPI* ____________, 199__
Receive equipment listing* ____________, 199__
Schematic sign-off approval* ____________, 199__
CAD shells to consultants* ____________, 199__
Early release package* ____________, 199__
Design development approval* ____________, 199__
Full construction documents* ____________, 199__
Occupancy Permit September 1, 1999
*Tenant shall provide to Landlord proposed dates with respect to these items for
Landlord's approval, which approval shall not be unreasonably withheld.
<PAGE> 47
EXHIBIT F
INTENTIONALLY OMITTED
<PAGE> 48
EXHIBIT G
REFER TO EXHIBIT B OF THIS LEASE.
<PAGE> 49
EXHIBIT H
SCHEDULE OF FLOOR LOAD LIMITS
Lower Level: 100 pounds per square feet (psf).
First Floor (including new entry and loading dock areas): 100 psf.
Second Floor: 100 psf.
Penthouse Floor: 70 psf.
<PAGE> 50
EXHIBIT I
LANDLORD'S SERVICES
I. EXTERIOR MAINTENANCE
Landlord shall keep the Lot and Common Areas of the Building clean and
free of debris.
Landlord shall keep the sidewalks, driveways and parking areas
reasonably clear of snow and ice.
Landlord shall maintain the exterior landscaping, lighting, parking
areas, exterior roof, slab, foundation, exterior doors and windows, and
sidewalks of the Building and the Lot in good repair and condition
consistent with facilities of the size and quality of the Building and
the Lot in the Cambridge, Massachusetts area.
II. MECHANICAL, ELECTRICAL AND PLUMBING
Subject to the provisions of Section 5.1.3 of the Lease, Landlord shall
maintain in good repair and condition the mechanical, electrical and
plumbing systems for the Building.
III. PRIORITY
In the event of any conflict between the provisions of this Exhibit I
and the provisions of the Lease, the provisions of the Lease shall
govern.
IV. PARKING LOT SECURITY
Landlord agrees to provide security for the parking lot should be the
same become necessary in its reasonable discretion.
V. CLEANING
Landlord shall keep clean and neat the public areas of the Building and
Lot, including, without limitation, the restrooms.
<PAGE> 1
Exhibit 10.2
Customer No. 1133
MASTER LEASE AGREEMENT
Lessor: TRANSAMERICA BUSINESS CREDIT CORPORATION
RIVERWAY II
WEST OFFICE TOWER
WEST HIGGINS
ROSEMONT, ILLINOIS 60018
Lessee: MILLENNIUM PHARMACEUTICALS, INC.
238 MAIN ST.
CAMBRIDGE, MASSACHUSETTS 02142
The lessor pursuant to this Master Lease Agreement ("Agreement") dated as of
June 17, 1998, is Transamerica Business Credit Corporation ("Lessor"). All
equipment and leasehold improvements, together with all present and future
additions, parts, accessories, attachments, substitutions, repairs,
improvements, and replacements thereof or thereto, which are the subject of a
Lease (as defined in the next sentence) shall be referred to as "Equipment."
Simultaneous with the execution and delivery of this Agreement, the parties are
entering into, and subsequently may enter into one or more Lease Schedules
(each, a "Schedule") which refer to and incorporate by reference this Agreement,
each of which constitutes a lease (each, a "Lease") for the Equipment specified
therein. Additional details pertaining to each Lease are specified in the
applicable Schedule. Each Schedule that the parties hereafter enter into shall
constitute a Lease. Lessor has no obligation to enter into any additional leases
with, or extend any future financing to, Lessee.
1. LEASE. Subject to and upon all of the terms and conditions of this
Agreement and each Schedule, Lessor hereby agrees to lease to Lessee and Lessee
hereby agrees to lease from Lessor the Equipment for the Term (as defined in
Paragraph 2 below) thereof. The timing and financial scope of Lessor's
obligation to enter into Leases hereunder are limited as set forth in the
Commitment Letter executed by Lessor and Lessee, dated as of May 7, 1998 and
attached hereto as Exhibit A (the "Commitment Letter").
2. TERM. Each Lease shall be effective and the term of each Lease ("Term")
shall commence on the commencement date specified in the applicable Schedule
and, unless sooner terminated (as hereinafter provided), shall expire at the end
of the term specified in such Schedule; provided, however, that obligations due
to be performed by Lessee during the Term shall continue until they have been
performed in full. Schedules will only be executed after the delivery of the
Equipment to Lessee or upon completion of deliveries of items of such Equipment
with aggregate cost of not less than $75,000.
3. RENT. Lessee shall pay as rent to Lessor, for use of the Equipment
during the Term or Renewal Term (as defined in Paragraph 8), rental payments
equal to the sum of all rental payments including, without limitation, security
deposits, advance rents, and interim rents payable in the amounts and on the
dates specified in the applicable Schedule ("Rent"). If any Rent or other amount
payable by Lessee is not paid within five days after the day on which it becomes
payable, Lessee will pay on demand, as a late charge, an amount equal to 5% of
such unpaid Rent or other amount but only to the extent permitted by applicable
law. All payments provided for herein shall be payable to Lessor at its address
specified above, or at any other place designated by Lessor.
4. LEASE NOT CANCELABLE; LESSEE'S OBLIGATIONS ABSOLUTE. No Lease may be
canceled or terminated except as expressly provided herein. Lessee's obligation
to pay all Rent due or to become due hereunder shall be absolute and
unconditional and shall not be subject to any delay, reduction, set-off,
defense, counterclaim, or recoupment for any reason whatsoever, including any
failure of the Equipment or any representations by the manufacturer or the
vendor thereof. If the Equipment is unsatisfactory for any reason, Lessee shall
make any claim solely against the manufacturer or the vendor thereof and shall,
nevertheless, pay Lessor all Rent payable hereunder.
<PAGE> 2
5. SELECTION AND USE OF EQUIPMENT. Lessee agrees that it shall be
responsible for the selection and use of, and results obtained from, the
Equipment and any other associated equipment or services.
6. WARRANTIES. WITH RESPECT TO THE EQUIPMENT OR LEASEHOLD IMPROVEMENTS,
LESSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE
EQUIPMENT OR ITS MERCHANTABILITY, SUITABILITY, QUALITY, OR FITNESS FOR A
PARTICULAR PURPOSE, AND HEREBY DISCLAIMS ANY SUCH WARRANTY. LESSEE SPECIFICALLY
WAIVES ALL RIGHTS TO MAKE A CLAIM AGAINST LESSOR FOR BREACH OF ANY WARRANTY
WHATSOEVER. LESSEE LEASES THE EQUIPMENT "AS IS." IN NO EVENT SHALL LESSOR HAVE
ANY LIABILITY, NOR SHALL LESSEE HAVE ANY REMEDY AGAINST LESSOR, FOR ANY
LIABILITY, CLAIM, LOSS, DAMAGE, OR EXPENSE CAUSED DIRECTLY OR INDIRECTLY BY THE
EQUIPMENT OR ANY DEFICIENCY OR DEFECT THEREOF OR THE OPERATION, MAINTENANCE, OR
REPAIR THEREOF OR ANY CONSEQUENTIAL DAMAGES AS THAT TERM IS USED IN SECTION
2-719(3) OF THE MODEL UNIFORM COMMERCIAL CODE, AS AMENDED FROM TIME TO TIME
("UCC"). Lessor grants to Lessee, for the sole purpose of prosecuting a claim,
the benefits of any and all warranties made available by the manufacturer or the
vendor of the Equipment to the extent assignable.
7. DELIVERY. Lessor hereby appoints Lessee as Lessor's agent for the sole
and limited purpose of accepting delivery of the Equipment from each vendor
thereof. Lessee shall pay any and all delivery and installation charges. Lessor
shall not be liable to Lessee for any delay in, or failure of, delivery of the
Equipment.
8. RENEWAL. So long as no Event of Default or event which, with the giving
of notice, the passage of time, or both, would constitute an Event of Default,
shall have occurred and be continuing, or the Lessee shall not have exercised
its purchase option under Paragraph 9 hereof, each Lease will automatically
renew for a term specified in the applicable Schedule (the "Renewal Term") on
the terms and conditions of this Agreement or as set forth in such Schedule;
provided, however, that Obligations due to be performed by the Lessee during the
Renewal Term shall continue until they have been performed in full.
9. PURCHASE OPTION. So long as no Event of Default or event which, with the
giving of notice, the passage of time, or both, would constitute an Event of
Default, shall have occurred and be continuing, Lessee may, upon written notice
to Lessor received at least ninety days before the expiration of a Term,
purchase all, but not less than all, the Equipment covered by the applicable
Lease on the date specified therefor in the applicable Schedule ("Purchase
Date"). The purchase price for such Equipment shall be its fair market value as
set forth in the applicable Schedule determined on an "In-place, In-use" basis,
as mutually agreed by Lessor and Lessee, or, if they cannot agree, as determined
by an independent appraiser selected by Lessor and approved by Lessee, which
approval will not be unreasonably delayed or withheld. Lessee shall pay the cost
of any such appraisal. So long as no Event of Default or event which, with the
giving of notice, the passage of time, or both, would constitute an Event of
Default shall have occurred and be continuing, Lessee may, upon written notice
to Lessor received at least ninety days prior to the expiration of the Renewal
Term, purchase all, but not less than all, the Equipment covered by the
applicable Schedule by the last date of the Renewal Term (the "Alternative
Purchase Date") at a purchase price equal to its then fair market value on an
"In-place, In-use" basis. On the Purchase Date or the Alternative Purchase Date,
as the case may be, for any Equipment, Lessee shall pay to Lessor the purchase
price, together with all sales and other taxes applicable to the transfer of the
Equipment and any other amount payable and arising hereunder, in immediately
available funds, whereupon Lessor shall transfer to Lessee, without recourse or
warranty of any kind, express or implied, all of Lessor's right, title, and
interest in and to such Equipment on an "As Is, Where Is" basis together with
all remaining and transferrable warranties from vendors.
10. OWNERSHIP; INSPECTION; MARKING; FINANCING STATEMENTS. Lessee shall
affix to the Equipment any labels supplied by Lessor indicating ownership of
such Equipment. The Equipment is and shall be the sole property of Lessor.
Lessee shall have no right, title, or interest therein, except as lessee under a
Lease. The Equipment is and shall at all times be and remain personal property
and shall not become a fixture. Lessee shall obtain and record such instruments
and take such steps as may be reasonably necessary to prevent any person from
acquiring any rights in the Equipment by reason of the Equipment being claimed
or deemed to be real property. Upon request by Lessor, Lessee shall use
commercially reasonable efforts to obtain and deliver to Lessor
2
<PAGE> 3
valid and effective waivers, in recordable form, by the owners, landlords, and
mortgagees of the real property upon which the Equipment is located or
certificates of Lessee that it is the owner of such real property or that such
real property is neither leased nor mortgaged. Lessee shall make the Equipment
and its maintenance records available for inspection by Lessor at reasonable
times and upon reasonable notice. Lessee shall execute and deliver to Lessor for
filing any UCC financing statements or similar documents Lessor may reasonably
request.
11. EQUIPMENT USE. Lessee agrees that the Equipment will be operated by
competent, qualified personnel in connection with Lessee's business for the
purpose for which the Equipment was designed and in all material respects in
accordance with applicable operating instructions, laws, and government
regulations, and that Lessee shall use all reasonable precautions to prevent
loss or damage to the Equipment from fire and other hazards. Lessee shall use
commercially reasonable efforts to procure and maintain in effect all orders,
licenses, certificates, permits, approvals, and consents required by federal,
state, or local laws or by any governmental body, agency, or authority in
connection with the delivery, installation, use, and operation of the Equipment.
12. MAINTENANCE. Lessee, at its sole cost and expense, shall keep the
Equipment in a suitable environment as specified by the manufacturer's
guidelines or the equivalent, shall meet all applicable recertification
requirements, and shall maintain the Equipment in its original condition and
working order, ordinary wear and tear excepted. At the reasonable request of
Lessor, Lessee shall furnish all proof of maintenance.
13. ALTERATION; MODIFICATIONS; PARTS. Lessee may alter or modify the
Equipment only with the prior written consent of Lessor. Any alteration shall be
removed and the Equipment restored to its normal, unaltered condition at
Lessee's expense (without damaging the Equipment's originally intended function
or its value) prior to its return to Lessor. Any part installed in connection
with warranty or maintenance service or which cannot be removed in accordance
with the preceding sentence shall be the property of Lessor.
14. RETURN OF EQUIPMENT. Except for Equipment that has suffered a Casualty
Loss (as defined in Paragraph 15 below) and is not required to be repaired
pursuant to Paragraph 15 below or Equipment purchased by Lessee pursuant to
Paragraph 9 above, upon the expiration of the Renewal Term of a Lease, or upon
demand by Lessor pursuant to Paragraph 22 below, Lessee shall contact Lessor for
shipping instructions and, at Lessee's own risk, immediately return the
Equipment, freight prepaid, to a location in the continental United States
specified by Lessor. At the time of such return to Lessor, the Equipment shall
(i) be in the operating order, repair, and condition as required by or specified
in the original specifications and warranties of each manufacturer and vendor
thereof, ordinary wear and tear excepted, (ii) meet all applicable
recertification requirements, and (iii) be capable of being promptly assembled
and operated by a third party purchaser or third party lessee without further
repair, replacement, alterations, or improvements, and in accordance and
compliance with any and all statutes, laws, ordinances, rules, and regulations
of any governmental authority or any political subdivision thereof applicable to
the use and operation of the Equipment. Except as otherwise provided under
Paragraph 9 hereof, at least ninety days before the expiration of the Renewal
Term, Lessee shall give Lessor notice of its intent to return the Equipment at
the end of such Renewal Term. During the ninety-day period prior to the end of a
Term or the Renewal Term, Lessor and its prospective purchasers or lessees shall
have, upon not less than two business days' prior notice to Lessee and during
normal business hours, or at any time and without prior notice upon the
occurrence and continuance of an Event of Default, the right of access to the
premises on which the Equipment is located to inspect the Equipment, and Lessee
shall cooperate in all other respects with Lessor's remarketing of the
Equipment. The provisions of this Paragraph 14 are of the essence of the Lease,
and upon application to any court of equity having jurisdiction in the premises,
Lessor shall be entitled to a decree against Lessee requiring specific
performance of the covenants of Lessee set forth in this Paragraph 14. If Lessee
fails to return the Equipment when required, the terms and conditions of the
Lease shall continue to be applicable and Lessee shall continue to pay Rent
until the Equipment is received by Lessor.
15. CASUALTY INSURANCE; LOSS OR DAMAGE. Lessee will maintain, at its own
expense, liability and property damage insurance relating to the Equipment,
insuring against such risks as are customarily insured against on the type of
equipment leased hereunder by businesses in which Lessee is engaged in such
amounts, in such form, and with insurers satisfactory to Lessor; provided,
however, that the amount of insurance against damage or loss shall not be less
than the greater of (a) the replacement value of the Equipment and (b) the
stipulated loss value of the Equipment specified in the applicable Schedule
("Stipulated Loss Value"). Each
3
<PAGE> 4
liability insurance policy shall provide coverage (including, without
limitation, personal injury coverage) of not less than $1,000,000 for each
occurrence, and shall name Lessor as an additional insured; and each property
damage policy shall name Lessor as sole loss payee and all policies shall
contain a clause requiring the insurer to give Lessor at least thirty days'
prior written notice of any alteration in the terms or cancellation of the
policy. Lessee shall upon request furnish to Lessor a copy of each insurance
policy (with endorsements) or other evidence satisfactory to Lessor that the
required insurance coverage is in effect; provided, however, Lessor shall have
no duty to ascertain the existence of or to examine the insurance policies to
advise Lessee if the insurance coverage does not comply with the requirements of
this Paragraph. If Lessee fails to insure the Equipment as required, Lessor
shall have the right but not the obligation to obtain such insurance, and the
cost of the insurance shall be for the account of Lessee due as part of the next
due Rent. Lessee consents to Lessor's release, upon its failure to obtain
appropriate insurance coverage, of any and all information necessary to obtain
insurance with respect to the Equipment or Lessor's interest therein.
Until the Equipment is returned to and received by Lessor as provided in
Paragraph 14 above, Lessee shall bear the entire risk of theft or destruction
of, or damage to, the Equipment including, without limitation, any condemnation,
seizure, or requisition of title or use ("Casualty Loss"). No Casualty Loss
shall relieve Lessee from its obligations to pay Rent except as provided in
clause (b) below. When any Casualty Loss occurs, Lessee shall immediately notify
Lessor and, at the option of Lessor, shall promptly (a) place such Equipment in
good repair and working order; or (b) pay Lessor an amount equal to the
Stipulated Loss Value of such Equipment and all other amounts (excluding Rent)
payable by Lessee hereunder, together with a late charge on such amounts at a
rate per annum equal to the rate imputed in the Rent payments hereunder from the
date of the Casualty Loss through the date of payment of such amounts, whereupon
Lessor shall transfer to Lessee, without recourse or warranty (express or
implied), all of Lessor's interest, if any, in and to such Equipment on an "AS
IS, WHERE IS" basis. The proceeds of any insurance payable with respect to the
Equipment shall be applied, at the option of Lessor in the event of default by
Lessee, but otherwise at the Lessee's option, either towards (i) repair of the
Equipment or (ii) payment of any of Lessee's obligations hereunder. Lessee
hereby appoints Lessor as Lessee's attorney-in-fact to make claim for, receive
payment of, and execute and endorse all documents, checks or drafts issued with
respect to any Casualty Loss under any insurance policy relating to the
Equipment.
16. TAXES. Lessee shall pay when due, and indemnify and hold Lessor
harmless from, all sales, use, excise, and other taxes, charges, and fees
(including, without limitation, income, franchise, business and occupation,
gross receipts, licensing, registration, titling, personal property, stamp and
interest equalization taxes, levies, imposts, duties, charges, or withholdings
of any nature), and any fines, penalties, or interest thereon, imposed or levied
by any governmental body, agency, or tax authority upon or in connection with
the Equipment during the Term or any Renewal Term, its purchase, ownership,
delivery, leasing, possession, use, or relocation of the Equipment or otherwise
in connection with the transactions contemplated by each Lease or the Rent
thereunder, excluding taxes on or measured by the net income of Lessor. Upon
request, Lessee will provide proof of payment. Unless Lessor elects otherwise,
Lessee will pay all property taxes on the Equipment during the Term or any
Renewal Term. Lessee shall timely prepare and file all reports and returns which
are required to be made with respect to any obligation of Lessee under this
Paragraph 16. Lessee shall, to the extent permitted by law, cause all billings
of such fees, taxes, levies, imposts, duties, withholdings, and governmental
charges to be made to Lessor in care of Lessee. Upon request, Lessee will
provide Lessor with copies of all such billings.
17. LESSOR'S PAYMENT. If Lessee fails to perform its obligations under
Paragraph 15 or 16 above, or Paragraph 23 below, Lessor shall have the right to
substitute performance, in which case Lessee shall immediately reimburse Lessor
therefor.
18. GENERAL INDEMNITY. Each Lease is a net lease. Therefore, Lessee shall
indemnify Lessor and its successors and assigns against, and hold Lessor and its
successors and assigns harmless from, any and all claims, actions, damages,
obligations, liabilities, and all costs and expenses, including, without
limitation, legal fees incurred by Lessor or its successors and assigns arising
out of each Lease including, without limitation, the purchase, ownership,
delivery, lease, possession, maintenance, condition, use, or return of the
Equipment, or arising by operation of law, except that Lessee shall not be
liable for any claims, actions, damages, obligations, and costs and expenses
determined by an United States District Court to have occurred as a result of
the gross negligence or willful misconduct of Lessor or its successors and
assigns. Lessee agrees that upon written notice by Lessor (which notice Lessor
will use its best efforts to provide within five (5) days after having
4
<PAGE> 5
knowledge) of the assertion of any claim, action, damage, obligation, liability,
or lien which is subject to indemnification hereunder, Lessee shall assume full
responsibility for the defense thereof, provided that Lessor's failure to give
such notice shall not limit or otherwise affect its rights hereunder, except to
the extent that Lessee shall have been materially prejudiced as a result of such
failure or delay. Lessor shall not agree to settle or compromise any claim
without the consent of the Lessee. Any payment pursuant to this Paragraph
(except for any payment of Rent) shall be of such amount as shall be necessary
so that, after payment of any taxes required to be paid thereon by Lessor,
including taxes on or measured by the net income of Lessor, the balance will
equal the amount due hereunder. The provisions of this Paragraph with regard to
matters arising during a Lease shall survive the expiration or termination of
such Lease.
19. ASSIGNMENT BY LESSEE. Lessee shall not, without the prior written
consent of Lessor which will not by unreasonably withheld, (a) assign, transfer,
pledge, or otherwise dispose of any Lease or Equipment, or any interest therein;
(b) sublease or lend any Equipment or permit it to be used by anyone other than
Lessee and its employees; or (c) move any Equipment from the location specified
for it in the applicable Schedule, except that Lessee may move Equipment to
another location within the United States provided that Lessee has delivered to
Lessor (A) prior written notice thereof and (B) duly executed financing
statements and other agreements and instruments (all in form and substance
satisfactory to Lessor) necessary or, in the opinion of the Lessor, desirable to
protect Lessor's interest in such Equipment. Notwithstanding anything to the
contrary in the immediately preceding sentence, Lessee may keep any Equipment
consisting of motor vehicles or rolling stock at any location in the United
States. Notwithstanding the foregoing, Lessee may sublease Equipment having an
Equipment Cost of up to $3,000,000 to Millennium BioTherapeutics, Inc., and/or
any wholly owned subsidiaries, provided that such sublease in no way diminishes
Lessee's obligations hereunder.
20. ASSIGNMENT BY LESSOR. Lessor may assign its interest or grant a
security interest in any Lease and the Equipment individually or together, in
whole or in part. If Lessee is given written notice of any such assignment, it
shall immediately make all payments of Rent and other amounts hereunder directly
to such assignee. Each such assignee shall have all of the rights of Lessor
under each Lease assigned to it. Lessee shall not assert against any such
assignee any set-off, defense, or counterclaim that Lessee may have against
Lessor or any other person.
21. DEFAULT; NO WAIVER. Lessee or any guarantor of any or all of the
obligations of Lessee hereunder (together with Lessee, the "Lease Parties")
shall be in default under each Lease upon the occurrence of any of the following
events (each, an "Event of Default"): (a) Lessee fails to pay within five days
of when due any amount required to be paid by Lessee under or in connection with
any Lease; (b) any of the Lease Parties fails to perform any other provision
under or in connection with a Lease or violates any of the covenants or
agreements of such Lease Party under or in connection with a Lease; (c) any
representation made or financial information delivered or furnished by any of
the Lease Parties under or in connection with a Lease shall prove to have been
inaccurate in any material respect when made; (d) any of the Lease Parties makes
an assignment for the benefit of creditors, whether voluntary or involuntary, or
consents to the appointment of a trustee or receiver, or if either shall be
appointed for any of the Lease Parties or for a substantial part of its property
without its consent and, in the case of any such involuntary proceeding, such
proceeding remains undismissed or unstayed for forty-five days following the
commencement thereof; (e) any petition or proceeding is filed by or against any
of the Lease Parties under any Federal or State bankruptcy or insolvency code or
similar law and, in the case of any such involuntary petition or proceeding,
such petition or proceeding remains undismissed or unstayed for forty-five days
following the filing or commencement thereof, or any of the Lease Parties takes
any action authorizing any such petition or proceeding; (f) any of the Lease
Parties fails to pay when due any indebtedness for borrowed money or under
conditional sales or installment sales contracts or similar agreements, leases,
or obligations evidenced by bonds, debentures, notes, or other similar
agreements or instruments to any creditor (including Lessor under any other
agreement) after any and all applicable cure periods therefor shall have
elapsed; (g) any material judgment shall be rendered against any of the Lease
Parties which shall remain unpaid or unstayed for a period of sixty days; (h)
any of the Lease Parties shall dissolve, liquidate, wind up or cease its
business, sell or otherwise dispose of all or substantially all of its assets,
or make any material change in its lines of business; (i) any of the Lease
Parties shall amend or modify its name, unless such Lease Party delivers to
Lessor, thirty days prior to any such proposed amendment or modification,
written notice of such amendment or modification and within ten days before such
amendment or modification delivers executed financing statements (in form and
substance satisfactory to the Lessor); (j) any of the Lease Parties shall merge
or consolidate with any other entity or make any material change in
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<PAGE> 6
its capital structure, in each case without Lessor's prior written consent,
which shall not be unreasonably withheld; (k) any of the Lease Parties shall
suffer any loss or suspension of any material license, permit, or other right or
asset necessary to the profitable conduct of its business, fail generally to pay
its debts as they mature, or call a meeting of its creditors for purposes of
compromising its debts; (l) any of the Lease Parties shall deny or disaffirm its
obligations hereunder or under any of the documents delivered in connection
herewith; (m) there is a change, other than a change which results from the sale
of newly issued securities to investors, in more than 35% of the ownership of
any equity interests of the Lessee on the date hereof or more than 35% of such
interests become subject to any contractual, judicial or statutory lien, charge,
security interest, or encumbrance; or (n) any of the Lease Parties suffers a
material adverse change in the business, prospects, operations, results of
operations, assets, liabilities, or condition (financial or otherwise).
22. REMEDIES. Upon the occurrence and continuation of an Event of Default,
Lessor shall have the right, in its sole discretion, to exercise any one or more
of the following remedies: (a) terminate each Lease; (b) declare any and all
Rent and other amounts then due and any and all Rent and other amounts to become
due under each Lease (collectively, the "Lease Obligations") immediately due and
payable; (c) take possession of any or all items of Equipment, wherever located,
without demand, notice, court order, or other process of law, and without
liability for entry to Lessee's premises, for damage to Lessee's property, or
otherwise; (d) demand that Lessee immediately return any or all Equipment to
Lessor in accordance with Paragraph 14 above, and, for each day that Lessee
shall fail to return any item of Equipment, Lessor may demand an amount equal to
the Rent payable for such Equipment in accordance with Paragraph 14 above and to
the extent Lessor has not collected the amounts set forth in (b) above; (e)
lease, sell, or otherwise dispose of the Equipment in a commercially reasonable
manner, with or without notice and on public or private bid; (f) recover the
following amounts (reduced by any payments actively made under (b) and (d)
above) from the Lessee (as damages, including reimbursement of costs and
expenses, liquidated for all purposes and not as a penalty): (i) all costs and
expenses of Lessor reimbursable to it hereunder, including, without limitation,
expenses of disposition of the Equipment, legal fees, and all other amounts
specified in Paragraph 23 below; (ii) an amount equal to the sum of (A) any
accrued and unpaid Rent through the later of (1) the date of the applicable
default, (2) the date that Lessor has obtained possession of the Equipment, or
(3) such other date as Lessee has made an effective tender of possession of the
Equipment to Lessor (the "Default Date") and (B) if Lessor resells or re-lets
the Equipment, Rent at the periodic rate provided for in each Lease for the
additional period that it takes Lessor to resell or re-let all of the Equipment;
(iii) the present value of all future Rent reserved in the Leases and contracted
to be paid over the unexpired Term of the Leases discounted at five percent
compound interest; (iv) the reversionary value of the Equipment as of the
expiration of the Term of the applicable Lease as set forth on the applicable
Schedule; and (v) any indebtedness for Lessee's indemnity under Paragraph 18
above, plus a late charge at the rate specified in Paragraph 3 above, less the
amount received by Lessor, if any, upon sale or re-let of the Equipment; and (g)
exercise any other right or remedy to recover damages or enforce the terms of
the Leases. Upon the occurrence and continuance of an Event of Default or an
event which with the giving of notice or the passage of time, or both, would
result in an Event of Default, Lessor shall have the right, whether or not
Lessor has made any demand or the obligations of Lessee hereunder have matured,
to appropriate and apply to the payment of the obligations of Lessee hereunder
all security deposits and other deposits (general or special, time or demand,
provisional or final) now or hereafter held by and other indebtedness or
property now or hereafter owing by Lessor to Lessee. Lessor may pursue any other
rights or remedies available at law or in equity, including, without limitation,
rights or remedies seeking damages, specific performance, and injunctive relief.
Any failure of Lessor to require strict performance by Lessee, or any waiver by
Lessor of any provision hereunder or under any Schedule, shall not be construed
as a consent or waiver of any other breach of the same or of any other
provision. Any amendment or waiver of any provision hereof or under any Schedule
or consent to any departure by Lessee herefrom or therefrom shall be in writing
and signed by Lessor.
No right or remedy is exclusive of any other provided herein or permitted
by law or equity. All such rights and remedies shall be cumulative and may be
enforced concurrently or individually from time to time.
23. LESSOR'S EXPENSE. Lessee shall pay Lessor on demand all costs and
expenses (including reasonable legal fees and expenses) incurred in connection
with the preparation, execution and delivery of this Agreement and any other
agreements and transactions contemplated hereby and all costs and expenses in
protecting and enforcing Lessor's rights and interests in each Lease and the
equipment, including, without limitation, legal, collection, and remarketing
fees and expenses incured by Lessor in enforcing the terms, conditions, or
provisions of each Lease or upon the occurrence and continuation of an Event of
Default.
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<PAGE> 7
24. LESSEE'S WAIVERS. To the extent permitted by applicable law, Lessee
hereby waives any and all rights and remedies conferred upon a lessee by
Sections 2A-508 through 2A-522 of the UCC. To the extent permitted by applicable
law, Lessee also hereby waives any rights now or hereafter conferred by statute
or otherwise which may require Lessor to sell, lease, or otherwise use any
Equipment in mitigation of Lessor's damages as set forth in Paragraph 22 above
or which may otherwise limit or modify any of Lessor's rights or remedies under
Paragraph 22. Any action by Lessee against Lessor for any default by Lessor
under any Lease shall be commenced within one year after the last day of the
later of the Term or Renewal Term.
25. NOTICES; ADMINISTRATION. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to Lessor, then to Transamerica Technology Finance Division,
76 Batterson Park Road, Farmington, Connecticut 06032, Attention: Assistant Vice
President, Lease Administration, with a copy to Lessor at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal
Department, if to Lessee, then to Millennium Pharmaceuticals, Inc., 238 Main
St., Cambridge, Massachusetts 02142, Attention: Vice President of Finance or
such other address as shall be designated by Lessee or Lessor to the other
party. All such notices and correspondence shall be effective when received.
26. REPRESENTATIONS. Lessee represents and warrants to Lessor that (a)
Lessee is duly organized, validly existing, and in good standing under the laws
of the State of its incorporation; (b) the execution, delivery, and performance
by Lessee of this Agreement are within Lessee's powers, have been duly
authorized by all necessary action, and do not and will not contravene (i)
Lessee's organizational documents or (ii) any law, regulation, rule, or
contractual restriction binding on or affecting Lessee; (c) no authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution, delivery, and
performance by Lessee of this Agreement; (d) each Lease constitutes the legal,
valid, and binding obligations of Lessee enforceable against Lessee in
accordance with its terms; (e) the cost of each item of Equipment does not
exceed the fair and usual price for such type of equipment purchased in like
quantity and reflects all discounts, rebates, and allowances for the Equipment
(including, without limitation, discounts for advertising, prompt payment,
testing, or other services) given to the Lessee by the manufacturer, supplier,
or any other person; and (f) all information supplied by Lessee to Lessor in
connection herewith is correct in all material respects and does not omit any
material statement necessary to insure that the information supplied is not
misleading.
27. FURTHER ASSURANCES. Lessee, upon the request of Lessor, will execute,
acknowledge, record, or file, as the case may be, such further documents and do
such further acts as may be reasonably necessary, desirable, or proper to carry
out more effectively the purposes of this Agreement. Lessee hereby appoints
Lessor as its attorney-in-fact to execute on behalf of Lessee and authorizes
Lessor to file without Lessee's signature any UCC financing statements and
amendments Lessor deems advisable.
28. FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as soon as
available, but not later than 120 days after the end of each fiscal year of
Lessee and its consolidated subsidiaries, the consolidated balance sheet, income
statement, and statements of cash flows and shareholders equity for Lessee and
its consolidated subsidiaries (the "Financial Statements") for such year,
reported on by independent certified public accountants without an adverse
qualification; and (b) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters in any fiscal year of Lessee
and its consolidated subsidiaries, the Financial Statements for such fiscal
quarter, together with a certification duly executed by a responsible officer of
Lessee that such Financial Statements have been prepared in accordance with
generally accepted accounting principles and are fairly stated in all material
respects (subject to normal year-end audit adjustments). Lessee shall also
deliver to Lessor as soon as available copies of all press releases and other
similar communications issued by Lessee.
29. PARTIAL EARLY TERMINATION. So long as no Event of Default or event
which, with the giving of notice, the passage of time, or both, would constitute
an Event of Default, shall have occurred and be continuing, Lessee may terminate
one or more Leases with respect to up to an aggregate of $3,000,000 of Equipment
Cost at any time after the end of the 18th month of the Term if, in Lessee's
reasonable judgment, the specific items of Equipment subject to such termination
become obsolete or are no longer needed by Lessee. At the
7
<PAGE> 8
date of such early termination, Lessee shall pay to Lessor an amount equal to
the then outstanding principal balance of such Lease (calculated as if the Lease
were an amortizing loan) plus 2% of such outstanding balance.
30. CANCELLATION. So long as no Event of Default or event which, with the
giving of notice, the passage of time, or both, would constitute an Event of
Default, shall have occurred and be continuing, Lessee may cancel the Leases as
to all (but not less than all) of the Equipment as of the end of the 36th month
of the Term. At the date of such cancellation Lessee shall (i) pay an amount
equal to 55% of the Equipment Cost plus all Rent and other sums due and unpaid
as of that date including the Rent payment due on that date and (ii) return the
Equipment to Lessor.
31. CONSENT TO JURISDICTION. Lessee irrevocably submits to the jurisdiction
of any Illinois state or federal court sitting in Illinois for any action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, and Lessee irrevocably agrees that all claims in respect of
any such action or proceeding may be heard and determined in such Illinois state
or federal court.
32. WAIVER OF JURY TRIAL. LESSEE AND LESSOR IRREVOCABLY WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
33. FINANCE LEASE. Lessee and Lessor agree that each Lease is a "Finance
Lease" as defined by Section 2A-103(g) of the UCC. Lessee acknowledges that
Lessee has reviewed and approved each written Supply Contract (as defined by UCC
2A-103(y)) covering Equipment purchased from each "Supplier" (as defined by UCC
2A-103(x)) thereof.
34. NO AGENCY. Lessee acknowledges and agrees that neither the manufacturer
or supplier, nor any salesman, representative, or other agent of the
manufacturer or supplier, is an agent of Lessor. No salesman, representative, or
agent of the manufacturer or supplier is authorized to waive or alter any term
or condition of this Agreement or any Schedule and no representation as to the
Equipment or any other matter by the manufacturer or supplier shall in any way
affect Lessee's duty to pay Rent and perform its other obligations as set forth
in this Agreement or any Schedule.
35. SPECIAL TAX INDEMNIFICATION. Lessee acknowledges that Lessor, in
determining the Rent due hereunder, has assumed that certain tax benefits as are
provided to an owner of property under the Internal Revenue Code of 1986, as
amended (the "Code"), and under applicable state tax law, including, without
limitation, depreciation deductions under Section 168(b) of the Code, and
deductions under Section 163 of the Code in an amount at least equal to the
amount of interest paid or accrued by Lessor with respect to any indebtedness
incurred by Lessor in financing its purchase of the Equipment, are available to
Lessor as a result of the lease of the Equipment. In the event Lessor is unable
to obtain such tax benefits as a result of an act or omission of Lessee, is
required to include in income any amount other than the Rent, or is required to
recognize income in respect of the Rent earlier than anticipated pursuant to
this Agreement, Lessee shall pay Lessor additional rent ("Additional Rent") in a
lump sum in an amount needed to provide Lessor with the same after-tax yield and
after-tax cash flow as would have been realized by Lessor had Lessor (i) been
able to obtain such tax benefits, (ii) not been required to include any amount
in income other than the Rent, and (iii) not been required to recognize income
in respect of the Rent earlier than anticipated pursuant to this Agreement. The
Additional Rent shall be computed by Lessor, which computation shall be binding
on Lessee. The Additional Rent shall be due immediately upon written notice by
Lessor to Lessee of Lessor's inability to obtain tax benefits, the inclusion of
any amount in income other than the Rent or the recognition of income in respect
of the Rent earlier than anticipated pursuant to this Agreement. The provisions
of this Paragraph 35 shall survive the termination of this Agreement.
36. GOVERNING LAW; SEVERABILITY. EACH LEASE SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. IF ANY PROVISION SHALL BE HELD TO BE INVALID OR UNENFORCEABLE, THE
VALIDITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS SHALL NOT IN ANY WAY BE
AFFECTED OR IMPAIRED.
LESSEE ACKNOWLEDGES THAT LESSEE HAS READ THIS AGREEMENT AND THE SCHEDULE
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<PAGE> 9
HERETO, UNDERSTANDS THEM, AND AGREES TO BE BOUND BY THEIR TERMS AND CONDITIONS.
FURTHER, LESSEE AND LESSOR AGREE THAT THIS AGREEMENT, THE SCHEDULES DELIVERED IN
CONNECTION HEREWITH FROM TIME TO TIME, AND THE COMMITMENT LETTER ARE THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES,
SUPERSEDING ALL PROPOSALS OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ALL OTHER
COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF. SHOULD
THERE EXIST ANY INCONSISTENCY BETWEEN THE TERMS OF THE COMMITMENT LETTER AND
THIS AGREEMENT, THE TERMS OF THIS AGREEMENT SHALL PREVAIL.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed by their duly authorized officers as of the date
first written above.
MILLENNIUM PHARMACEUTICALS, INC.
By: /s/ Janet C. Bush
------------------------------------
Name: Janet C. Bush
Title: Vice President, Finance
Federal Tax ID: 04-3177038
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Gary P. Moro
------------------------------------
Name: Gary P. Moro
Title: Vice President
Form1
9
<PAGE> 10
[TRANSAMERICA BUSINESS CREDIT LETTERHEAD]
May 7, 1998
Exhibit A
Ms. Janet C. Bush
Vice President of Finance
Millennium Pharmaceuticals Inc.
238 Main St.
Cambridge, MA 02142
Dear Janet:
Transamerica Business Credit Corporation - Technology Finance Division
("Lessor") is pleased to offer this commitment (this "Commitment") to lease the
equipment described below to Millennium Pharmaceuticals, Inc. ("Lessee"). This
Commitment supercedes all prior correspondence, proposals, and oral or other
communications relating to leasing arrangements between Lessor and Lessee.
The outline of this offer is as follows:
LESSEE: Millennium Pharmaceuticals Inc.
LESSOR: Transamerica Business Credit Corporation -
Technology Finance Division, or any of its
affiliates, successors or assigns.
EQUIPMENT: Laboratory, computer and office equipment and
leasehold improvements (all equipment subject to
Lessor's approval prior to funding), including
without limitation, all additions, improvements,
replacements, repairs, appurtenances,
substitutions, and attachments thereto and all
proceeds thereof ("Equipment").
EQUIPMENT COST: Not to exceed $15,000,000, of which up to
$2,500,000 may be for leasehold improvements.
EQUIPMENT LOCATION: Cambridge, MA
ANTICIPATED DELIVERY: March 1, 1998 - February 28, 1999
LEASE TERM
COMMENCEMENT: Upon delivery of the Equipment or upon each
completion of deliveries of items of Equipment
with aggregate cost of not less than $75,000, but
no later than February 28, 1999.
TERM: From each Lease Term Commencement until 60 months
from the first day of the month next following or
coincident with that Lease Term Commencement.
<PAGE> 11
MONTHLY RENT: Monthly Rent equal to 2.0198% of Equipment Cost
will be payable monthly in advance. First month's
rent will be due and payable on or before each
Lease Term Commencement.
ADJUSTMENT TO The Lessor reserves the right to increase or
MONTHLY RENT: decrease the Monthly Rent as of the date of each
Lease Term Commencement proportionally to the
change in the weekly average of the interest rates
of like-term U.S. Treasury Securities from the
week ending February 13, 1998 to the week
preceding the date of each Lease Term
Commencement, as published in the Wall Street
Journal. On the date of each Lease Term
Commencement, the Monthly Rent will be calculated
and fixed for the Term. The actual schedule of
Monthly Rent will be provided to the Lessee after
each Lease Term Commencement.
INTERIM RENT: Interim Rent will accrue from each Lease Term
Commencement until the next following first day of
a month (unless the Lease Term Commencement is on
the first day of a month). Interim Rent will be at
the daily equivalent of the currently adjusted
Monthly Rent Payment.
NET LEASE: The lease will be a net lease containing the usual
provisions in the Lessor's lease agreements and
such other or different provisions that are agreed
to by the parties. The Lessee will be responsible
for maintenance, insurance, taxes, and all other
costs and expenses.
TAXES: Sales or use taxes will be added to the Equipment
Cost or collected on the gross rentals, as
appropriate.
INSURANCE: Prior to any delivery of Equipment, the Lessee
will furnish confirmation of insurance acceptable
to the Lessor covering the Equipment including
primary, all risk, physical damage, property
damage and bodily injury with appropriate loss
payee and additional insured endorsements in favor
of the Lessor.
PURCHASE OPTION: The Lessee will have the option to purchase all
(but not less than all) the Equipment at the
expiration of the term of the lease for 10% of the
Equipment Cost, plus applicable sales and other
taxes.
AUTOMATIC RENEWAL: In the event the Lessee does not exercise the
Purchase Option described above, the lease will
automatically renew for a term of one year with
Monthly Rentals equal to 1.25% of Equipment Cost
payable monthly in advance. At the expiration of
the renewal period, the Lessee will have the
option to purchase all (but not less than all) the
Equipment for its then current Fair Market Value,
plus applicable sales and other taxes.
EARLY TERMINATION: Lessee may terminate the lease with respect to up
to $3,000,000 of Equipment Cost at any time after
the end of the 18th month of the lease if, in
Lessee's reasonable judgment, the specific items
of equipment subject to such termination become
obsolete or are no longer needed by Lessee. At the
date of such early termination, Lessee shall pay
to Lessor an amount equal
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<PAGE> 12
to the then outstanding principal balance of the
lease (calculated as if the lease were an
amortizing loan) plus 2% of such outstanding
balance.
CANCELLATION OPTION: Lessee may cancel the lease as to all (but not
less than all) of the equipment as of the end of
the 36th month of the lease. At the date of
cancellation Lessee shall pay a cancellation value
equal to 55% of the Equipment Cost plus all rent
and other sums due and unpaid as of that date
including the rent payment due on that date and
shall return the Equipment to Lessor.
ADDITIONAL COVENANTS: There will be no actual or threatened conflict
with, or violation of, any regulatory statute,
standard or role relating to the Lessee, its
present or future operations, or the Equipment.
All information supplied by the Lessee will be
correct and will not omit any statement necessary
to make the information supplied not be
misleading. There will be no material breach of
the representations and warranties of the Lessee
in the lease. The representations will include
that the Equipment Cost of each item of the
Equipment does not exceed the fair and usual
price for like quantity purchased of such item and
reflects all discounts, rebates and allowances for
the Equipment given to Lessee by the manufacturer,
supplier or anyone else including, without
limitation, discounts for advertising, prompt
payment, testing or other services.
SUBLEASE: Lessee will be permitted to sublease up to
$3,000,000 of equipment to Millennium
BioTherapeutics, Inc., provided that Lessee
remains fully obligated for all amounts due
hereunder.
CONDITIONS PRECEDENT TO
EACH LEASE TERM
COMMENCEMENT:
1. No material adverse change in the
financial condition, operation or
prospects of the Lessee prior to
funding. The Lessor reserves its right
to rescind any unused portion of its
commitment in the event of a material
adverse change in the financial or
business standing of the Lessee.
2. Completion of the documentation and
final terms of the proposed financing
satisfactory to Lessor and Lessor's
counsel.
3. Results of all due diligence, including
lien, judgment and tax searches other
matters Lessor may request shall be
satisfactory in all respects to Lessor
and Lessor's counsel.
4. Receipt by Lessor of duly executed Lease
documentation in form and substance
satisfactory to Lessor and its counsel.
5. Lessor shall receive title and a valid
and perfected first priority lien and
security interest in all Equipment
acquired through the use of the proposed
lease line and Lessor shall have
received satisfactory evidence that
there are no liens on any Equipment
except as expressly permitted herein.
FEES AND EXPENSES: The Lessee will be responsible for the Lessor's
reasonable expenses in connection with the
transaction, whether or not it closes.
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<PAGE> 13
LAW: This letter and the proposed Lease are intended to
be governed by and construed in accordance with
Illinois law without regard to its conflict of law
provisions.
INDEMNITY: Lessee agrees to indemnify and to hold harmless
Lessor, and its officers, directors and employees
against all claims, damages, liabilities and
expenses which may be incurred by or asserted
against any such person in connection with or
arising out of this letter and the transactions
contemplated hereby, other than claims, damages,
liability, and expense resulting from such
person's gross negligence or willful misconduct.
CONFIDENTIALITY: This letter is delivered to you with the
understanding that neither it nor its substance
shall be disclosed publicly or privately to any
third person except those who are in a
confidential relationship to you (such as your
legal counsel and accountants), or where the same
is required by law and then only on the basis that
it not be further disclosed, which conditions
Lessee and its agents agree to be bound by upon
acceptance of this letter.
Without limiting the generality of the foregoing,
none of such persons shall use or refer to Lessor
or to any affiliate name in any disclosures made
in connection with any of the transactions without
Lessor's prior written consent.
Upon completion of the initial takedown by Lessor
and Lessee, the Lessee will no longer be required
to obtain Lessor's prior written consent to
disclose the transaction contemplated hereby. In
addition, the Lessee agrees to provide camera
ready artwork of typestyles and logos of the
Lessee for use in promotional material by the
Lessor.
CONDITIONS OF This Commitment Letter is intended to be a summary
ACCEPTANCE: of the most important elements of the agreement to
enter into a leasing transaction with Lessee, and
it is subject to all requirements and conditions
contained in Lease documentation proposed by
Lessor or its counsel in the course of closing the
Lease described herein. Not every provision that
imposes duties, obligations, burdens, or
limitations on Lessee is contained herein, but
shall be contained in the final Lease
documentation satisfactory to Lessor and its
counsel.
EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY SUIT, ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATED TO THIS LETTER OR THE
TRANSACTION DESCRIBED IN THIS LETTER.
APPLICATION FEE: The $75,000 Application Fee previously paid by
Lessee shall be first applied to the costs and
expenses of the Lessor in connection with the
transaction, and any remainder shall be applied
pro-rata to the second month's rent due under each
Lease.
PROPOSAL EXPIRATION: This proposal shall expire on May 14, 1998, unless
prior thereto either
4
<PAGE> 14
extended in writing by the Lessor or accepted as
provided below by the Lessee.
Should you have any questions, please call me. If you wish to accept this
Commitment, please so indicate by signing and returning the enclosed duplicate
Copy of this letter to me by May 14, 1998.
Yours truly,
Transamerica Business Credit Corporation -
Technology Finance Division
By: /s/ Gerald A. Michaud
Accepted this 13th day of May, 1998 ----------------------------------
Millennium Pharmaceuticals Inc. Gerald A. Michaud
Senior Vice President - Marketing
By: /s/ Janet Bush
----------------------
Title: VP Finance
-------------------
5
<PAGE> 1
Exhibit 99.1
As of March 1, 1998, the Company and its subsidiaries had approximately
520 full-time employees, of whom approximately 145 hold Ph.D. or M.D. degrees
and approximately 120 hold other advanced degrees, approximately 390 are engaged
in research and development activities and approximately 130 are engaged in
business development, finance, operations support and administration. The
Company and its subsidiaries currently plan to hire up to approximately 200
additional employees by the end of 1998.
FACTORS THAT MAY AFFECT RESULTS
This Annual Report on Form 10-K contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects,"
"intends," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements. Those factors include, without limitation, those set
forth below and elsewhere in this Annual Report on Form 10-K.
UNCERTAINTIES RELATING TO TECHNOLOGICAL APPROACHES; RISKS RELATED TO
PRODUCT DEVELOPMENT. To date, the Company has not developed or commercialized
any products or services based on its genomics and related technologies. The
Company's lead programs and development focus have been primarily directed to
complex polygenic and multifactorial diseases in the field of human healthcare.
There is limited scientific understanding generally relating to the role of
genes in these diseases and relatively few products and services based on gene
discoveries have been developed and commercialized. There can be no assurance
that the Company's technological approach to gene identification and target
validation will consistently enable the Company to successfully identify and
characterize genes that predispose individuals to diseases.
Any therapeutic and diagnostic products and services based on the
Company's gene discoveries which may in the future be developed by the Company
or any of its current and future strategic partners will require significant
research, development, testing and regulatory approvals prior to
commercialization. The development of these products and services will be
subject to the risks of failure inherent in the development of products and
services based on new technologies. These risks include the possibilities that
any products or services based on these technologies will be found to be
ineffective, unreliable or unsafe, or otherwise fail to receive necessary
regulatory approvals; that products or services, if safe and effective, will be
difficult to manufacture on a large scale or will be uneconomical to market;
that proprietary rights of third parties will preclude the Company or its
strategic partners from
-44-
<PAGE> 2
marketing products or services; and that third parties will market superior or
equivalent products or services.
Accordingly, even if the Company is successful in identifying genes
associated with specific diseases, there can be no assurance that its gene
discoveries will lead to the development of therapeutic and diagnostic products
and services capable of addressing these diseases. The failure to successfully
commercialize products based on Company-discovered genes would have a material
adverse effect on the Company's business, financial condition and operating
results.
HISTORY OF OPERATING LOSSES; ANTICIPATION OF FUTURE LOSSES; UNCERTAINTY OF
ADDITIONAL FUNDING. To date, substantially all of the Company's revenues have
resulted from payments from strategic partners. The Company has not yet
generated any therapeutic or diagnostic products or services which have entered
preclinical studies or generated any revenue from therapeutic or diagnostic
product or service sales. The Company anticipates that it will be a number of
years, if ever, before it will recognize revenue from therapeutic or diagnostic
product or service sales or royalties.
As of December 31, 1997, the Company had an accumulated deficit of
approximately $99,366,000 (including a non-recurring charge of $83,800,000 for
acquired in-process research and development related to the acquisition of
ChemGenics). Even if the Company succeeds in developing a therapeutic or
diagnostic product or service, the Company expects to incur losses for at least
the next several years and that such losses are likely to increase as the
Company expands its infrastructure and its research and development activities.
To achieve profitability, the Company, alone or with others, must successfully
develop therapeutic or diagnostic products or services, conduct clinical trials,
obtain required regulatory approvals and successfully manufacture, market and
sell such therapeutic or diagnostic products or services. The time required to
reach commercial revenue and profitability is highly uncertain and there can be
no assurance that the Company will be able to achieve any such revenue and
profitability on a sustained basis, if at all.
The Company's approach of applying a comprehensive platform of genomics
and related technologies in the discovery of life-science based products and
services has required that Millennium establish a substantial scientific
infrastructure. The Company has consumed substantial amounts of cash to date and
expects capital and operating expenditures to increase over the next several
years as it expands its infrastructure and its research and development
activities.
The Company believes that existing cash and investment securities and
anticipated cash flow from existing strategic alliances will be sufficient to
support the Company's operations through at least 1999. The Company's actual
future capital requirements, however, will depend on many factors, including
progress of its
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development and discovery programs, the number and breadth of these programs,
achievement of milestones under strategic alliance arrangements, the ability of
the Company to establish and maintain additional strategic alliance and
licensing arrangements, and the progress of the development efforts of the
Company's strategic partners. Other factors that may affect the Company's future
capital requirements include the level of the Company's activities relating to
commercialization rights it has retained in its strategic alliance arrangements,
competing technological and market developments, costs associated with acquiring
rights to technologies developed outside the Company, costs associated with
facility expansion, costs associated with collection of patient information and
DNA samples, costs involved in enforcing patent claims and other intellectual
property rights and the costs and timing of regulatory approvals.
The Company expects that it will require significant additional financing
in the future, which it may seek to raise through public or private equity
offerings, debt financings or additional strategic alliance and licensing
arrangements. Such additional financing may not be available when needed, or may
not be available on terms favorable to the Company or its stockholders. To the
extent the Company raises additional capital by issuing equity securities,
ownership dilution to stockholders will result. To the extent that the Company
raises additional funds through strategic alliance and licensing arrangements,
the Company may be required to relinquish rights to certain of its technologies
or product candidates, or to grant licenses on terms that are not favorable to
the Company, either of which could have a material adverse effect on the
Company's business, financial condition and results of operations. In the event
that adequate funds are not available, the Company's business would be adversely
affected.
RELIANCE ON STRATEGIC PARTNERS. The Company's strategy for development and
commercialization of therapeutic and diagnostic products and services based upon
its gene discoveries depends upon the formation of various strategic alliances,
such as the Company's strategic alliances with Roche, Lilly, Astra, AHP, Pfizer
and Monsanto. There can be no assurance that the Company will be able to
establish additional strategic alliance or licensing arrangements necessary to
develop and commercialize products and services based upon the Company's
discovery and development programs, that any such arrangements or licenses will
be on terms favorable to the Company or that the current or any future strategic
alliances or licensing arrangements ultimately will be successful.
In certain of its strategic alliances, the Company is dependent on its
strategic partners for the preclinical study, clinical development, regulatory
approval, manufacturing, marketing and sale of therapeutic and diagnostic
products and services based on the results of these collaborative programs. The
agreements with these strategic partners allow them significant discretion in
electing whether to pursue any of these activities. The Company cannot control
the amount and timing of resources its strategic partners devote to the
Company's discovery and
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<PAGE> 4
development programs or to the potential products or services which may result
from these programs. If any of the Company's strategic partners were to breach
or terminate its agreement with the Company or otherwise fail to conduct its
collaborative activities successfully in a timely manner, the Company's
discovery and development programs, including the preclinical or clinical
development or commercialization of products or services, would be delayed or
terminated. Any such delay or termination could have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company relies on its strategic partners for significant funding in
support of the Company's discovery and development programs. See " --
Significant Customers." The Company could be required to devote additional
internal resources to its product and service development, or scale back or
terminate certain development programs or seek alternative collaborative
partners, if funding from one or more of its collaborative programs were reduced
or terminated.
Disputes may arise in the future with respect to the ownership of rights
to any technology developed with strategic partners. These and other possible
disagreements between strategic partners and the Company could lead to delays in
the collaborative research, development or commercialization of certain products
and services, or could require or result in litigation or arbitration, which
could be time-consuming and expensive, in which case it would have a material
adverse effect on the Company's business, financial condition and results of
operations.
Recently there have been a significant number of consolidations among
pharmaceutical companies. Any such consolidation involving a company with which
the Company is collaborating could result in the diminution or termination of,
or delays in, the development or commercialization of products or research
programs under one or more of the Company's strategic alliances.
In each of its strategic alliances, the Company generally agrees not to
conduct certain research and development, independently or with any commercial
third party, that is in the same field as the research and development conducted
under the alliance agreement. Consequently, these arrangements may have the
effect of limiting the areas of research and development the Company may pursue,
either alone or with others. The Company's strategic partners, however, may
develop, either alone or with others, products and services that are similar to
or competitive with the products and services that are the subject of the
Company's collaborations with such partners. Competing products and services,
either developed by a strategic partner or to which the strategic partner has
rights, may result in the partner withdrawing financial and related support for
the Company's product and service candidates, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
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All of the Company's strategic alliance agreements are subject to
termination under various circumstances. Each strategic partner has the right to
terminate its agreement with the Company (while maintaining rights and licenses
to certain Company discoveries) should the Company fail to meet certain
performance criteria specified in the relevant strategic alliance agreement.
Certain of the Company's strategic alliance agreements provide that, upon
expiration of a specified period after commencement of the agreement, its
strategic partner has the right to terminate the agreement on short notice
without cause. Certain of the Company's strategic alliance agreements have
initial terms that expire in the next 12 months, including its strategic
alliance agreements with Astra (expiring in December 1998), Pfizer (expiring in
December 1998), Roche (expiring in March 1999) and Lilly in the area of oncology
(expiring in April 1999). There can be no assurance that the Company will be
able to successfully negotiate a continuation of such agreements, if it seeks to
do so. The termination or non-renewal of any strategic alliance could have a
material adverse effect on the Company's business, financial condition and
results of operations.
RISKS ASSOCIATED WITH ESTABLISHMENT OF DIVISIONS AND SUBSIDIARIES.
Millennium has adopted a strategy of establishing business divisions and
subsidiaries in order to pursue multiple business opportunities and increase its
capabilities and involvement in the later stages of drug discovery and
development. In 1997, the Company organized MPharma, its pharmaceutical
division, and three subsidiaries, MBio, MPMx and MInfo. The Company does not
hold all of the equity in one of these subsidiaries and anticipates that there
will be minority stockholders in other subsidiaries in the future.
Millennium has sought to develop both informal and formal relationships
between and among subsidiaries and divisions to provide each unit within the
overall group with access to the assets and capabilities of the overall group
that are relevant to the business of the particular unit. However, conflicts
could arise in the future between or among Millennium and its divisions and
subsidiaries with respect to, among other things, future business opportunities
and the sharing of technologies, facilities, administrative services or other
resources.
Certain officers and directors of the Company, including Mark Levin, Chief
Executive Officer and Chairman of the Board of Directors of the Company, and
Steven Holtzman, Chief Business Officer of the Company, currently serve as
directors of each of the subsidiaries. Mr. Levin also serves as the President of
MBio. The Company's present executive officers and managers may assume other
positions within Millennium's current or future subsidiaries, causing them to be
unavailable to serve the Company or to reduce the amount of time they devote to
the affairs of the Company. Furthermore, members of the Board of Directors of
Millennium and the officers of Millennium who are also affiliated with one or
more of the subsidiaries will be required to consider not only the short-term
and long-term impact of operating decisions on the Company, but also the impact
of such decisions on the subsidiaries. In some cases, the impact of such
decisions could be disadvantageous
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<PAGE> 6
to the Company or to any or all of the subsidiaries. Conflicts which may arise
among the Company and such divisions or subsidiaries could have a material
adverse effect on the Company's business, financial condition or results of
operations.
EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH. The Company recently has
significantly increased the scale of its operations to support the expansion of
its disease research programs and its strategic alliances, including expansion
due to the acquisition of ChemGenics in February 1997, the organization during
1997 of three new subsidiaries, MBio, MPMx and MInfo, and the initiation of a
major strategic alliance with Monsanto in October 1997. This expansion has
included the hiring of a significant number of additional personnel. As of March
1, 1998, the Company and its subsidiaries had approximately 520 full-time
employees, an increase of 160 employees since March 1, 1997. The Company plans
to hire up to approximately 200 new employees by the end of 1998. In addition to
hiring new employees, the Company's growth has and will require the acquisition
of significant amounts of additional equipment, including software and
informatics resources, and the leasing of additional facilities.
The Company's growth has resulted in an increase in responsibilities
placed upon the Company's management and has placed added pressures on the
Company's operational and financial systems. The Company's ability to manage
such growth effectively will depend upon its ability to broaden its management
team and to attract, hire and retain skilled employees. The Company's success
will also depend on the ability of its officers and key employees to continue to
implement and improve its operational, management information and financial
control systems and to expand, train and manage its employee base. Inability to
manage growth effectively could have a material adverse effect on the Company's
business, financial condition and operating results.
INTENSE SCIENTIFIC AND COMMERCIAL COMPETITION. The field of genomics is
highly competitive. Competitors of the Company in the genomics area include,
among others, public companies, private biotechnology and diagnostic companies
and major pharmaceutical companies. Universities and other research
institutions, including those receiving funding from the federally funded Human
Genome Project, also compete with Millennium. A number of entities are
attempting to rapidly identify and patent randomly sequenced genes and gene
fragments, typically without specific knowledge of the function of such genes or
gene fragments. In addition, certain other entities are pursing a gene
identification, characterization and product development strategy based on
positional cloning and other genomics technologies.
Many of the organizations competing against the Company have greater
capital resources, research and development staffs and facilities, and greater
experience in drug discovery and development, obtaining regulatory approvals and
product manufacturing and greater marketing capabilities than the Company. The
Company's competitors may discover, characterize or develop therapeutic or
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diagnostic products or services for important genes in advance of Millennium or
may make discoveries which render non-competitive or obsolete the products or
services that the Company or its strategic alliance partners may seek to
develop, any of which could have a material adverse effect on any related
Millennium disease research program. The Company expects competition to
intensify in genomics research as technical advances in the field are made and
become more widely known.
Generally, the Company's strategic alliance agreements do not restrict the
strategic partner from pursuing competing development efforts. Any product
candidate of the Company, therefore, may be subject to competition with a
potential product under development by a strategic partner.
PATENTS AND PROPRIETARY RIGHTS; THIRD PARTY RIGHTS. The Company's
commercial success will depend in part on obtaining patent protection on gene
discoveries and on products, methods and services based on such discoveries. As
of March 1, 1998, Millennium and its subsidiaries had more than 200 pending
United States and foreign patent applications and seven issued United States
patents. The patent positions of pharmaceutical, biopharmaceutical and
biotechnology companies, including Millennium, are generally uncertain and
involve complex legal and factual questions. There can be no assurance that any
of the Company's pending patent applications will result in issued patents, that
the Company will develop additional proprietary technologies that are
patentable, that any patents issued to the Company or its strategic partners
will provide a basis for commercially viable products or will provide the
Company with any competitive advantages or will not be challenged by third
parties, or that the patents of others will not have an adverse effect on the
ability of the Company to do business. In addition, patent law relating to the
scope of claims in the technology fields in which the Company operates is still
evolving. The degree of future protection for the Company's proprietary rights,
therefore, is uncertain. Furthermore, there can be no assurance that others will
not independently develop similar or alternative technologies, duplicate any of
the Company's technologies, or design around the patented technologies developed
by the Company. In addition, the Company could incur substantial costs in
litigation if it is required to defend itself in patent suits brought by third
parties or if it initiates such suits.
The Company has applied for patent protection for novel genes, partial
gene sequences ("ESTs") of novel genes and novel uses for known genes identified
through its research programs. There is substantial uncertainty regarding the
patentability of ESTs or full-length genes absent biological data demonstrating
functional relevance. Based on recent technological advances in gene sequencing
technology, a number of groups other than the Company are attempting to rapidly
identify ESTs and full-length genes, the functions of which have not been
characterized. Washington University, for example, is currently identifying ESTs
through partial sequencing pursuant to funding provided by Merck & Co., Inc.,
and depositing the ESTs identified in a public database. The public availability
of EST information prior to the time the Company applies for patent protection
on a
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<PAGE> 8
corresponding full-length gene could adversely affect the Company's ability to
obtain patent protection with respect to such gene. To the extent any patents
issue to other parties on such partial or full-length genes, the risk increases
that the potential products and processes of the Company or its strategic
partners may give rise to claims of patent infringement.
Others may have filed and in the future are likely to file patent
applications covering genes or gene products that are similar or identical to
those of the Company. No assurance can be given that any such patent application
will not have priority over patent applications filed by the Company. Any legal
action against the Company or its strategic partners claiming damages and
seeking to enjoin commercial activities relating to the affected products and
processes could, in addition to subjecting the Company to potential liability
for damages, require the Company or its strategic partner to obtain a license in
order to continue to manufacture or market the affected products and processes.
There can be no assurance that the Company or its strategic partners would
prevail in any such action or that any license required under any such patent
would be made available on commercially acceptable terms, if at all. The Company
believes that there may be significant litigation in the industry regarding
patent and other intellectual property rights. If the Company becomes involved
in such litigation, it could consume a substantial portion of the Company's
managerial and financial resources.
There is substantial uncertainty concerning whether human clinical data
will be required for issuance of patents for human therapeutics. If such data is
required, the Company's ability to obtain patent protection could be delayed or
otherwise adversely affected. Although the United States Patent and Trademark
Office ("USPTO") issued new utility guidelines in July 1995 that address the
requirements for demonstrating utility for biotechnology inventions,
particularly for inventions relating to human therapeutics, utility will be
determined on a case-by-case basis. Moreover, there can be no assurance that the
USPTO's position will not change with respect to what is required to establish
utility for gene sequences and products and methods based on such sequences.
Furthermore, the enactment of the legislation implementing the General Agreement
on Trade and Tariffs has resulted in certain changes to United States patent
laws that became effective on June 8, 1995. Most notably, the term of patent
protection for patent applications filed on or after June 8, 1995 is no longer a
period of seventeen years from the date of grant. The new term of United States
patents will commence on the date of issuance and terminate twenty years from
the earliest effective filing date of the application. Because the time from
filing to issuance of biotechnology patent applications is often more than three
years, a twenty-year term from the effective date of filing may result in a
substantially shortened term of patent protection, which may adversely impact
the Company's patent position. If this change results in a shorter period of
patent coverage, the Company's business could be adversely affected to the
extent that the duration and level of the royalties it is entitled to receive
from its strategic partners is based on the existence of a valid patent.
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<PAGE> 9
The Company relies upon trade secret protection for its confidential and
proprietary information. The Company believes that it has developed proprietary
technology for use in gene discovery and characterization, including proprietary
genetic marker sets, proprietary software (including proprietary software for
the capture, storage and analysis of DNA and protein sequence data) and an
integrated informatics system. The Company has not sought patent protection for
these technologies. In addition, the Company has developed databases of
proprietary gene sequences and biological information which are updated on an
ongoing basis. The Company has taken security measures to protect its data and
continues to explore ways to further enhance the security for its data. There
can be no assurance, however, that such measures will provide adequate
protection for the Company's trade secrets or other proprietary information.
While the Company requires employees, academic collaborators and consultants to
enter into confidentiality agreements, there can be no assurance that
proprietary information will not be disclosed, that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets or disclose
such technology, or that the Company can meaningfully protect its trade secrets.
The Company's academic collaborators have certain rights to publish data
and information in which the Company has rights. While the Company believes that
the limitations on publication of data developed by its collaborators pursuant
to its collaboration agreements will be sufficient to permit the Company to
apply for patent protection, there is considerable pressure on academic
institutions to publish discoveries in the genetics and genomics fields. There
can be no assurance that such publication would not affect the Company's ability
to obtain patent protection for some inventions in which it may have an
interest.
The Company is party to various license agreements which give it rights to
use certain technologies in its research and development processes. There can be
no assurance that the Company will be able to continue to license such
technology on commercially reasonable terms, if at all. Failure by the Company
to maintain rights to such technology could have a material adverse effect on
the Company's business, financial condition and results of operations.
UNCERTAINTY OF GOVERNMENT REGULATORY APPROVALS. The FDA and comparable
agencies in foreign countries impose substantial requirements upon the
manufacturing and marketing of human therapeutic, diagnostic and vaccine
products and services such as those proposed to be developed by the Company or
its strategic alliance partners. The process of obtaining FDA and other required
regulatory approvals is lengthy and expensive. The time required for FDA and
other approvals is uncertain and typically takes a number of years, depending on
the complexity and novelty of the product. The Company and/or its strategic
alliance partners may encounter significant delays or excessive costs in their
efforts to secure necessary approvals or licenses.
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<PAGE> 10
Because certain of the products likely to result from the Company's
research and development programs involve the application of new technologies
and may be based on a new therapeutic approach, such products may be subject to
substantial additional review by various governmental regulatory authorities
and, as a result, regulatory approvals may be obtained more slowly than for
products using more conventional technologies. For example, proposals to conduct
clinical research involving gene therapy at institutions supported by the
National Institutes of Health ("NIH") must be approved by the Recombinant DNA
Advisory Committee ("RAC") and the NIH. In addition, the U.S. Government has
recently established a working group to assess whether additional regulations in
the area of genetic testing may be appropriate, which could result in further
regulation.
There can be no assurance that FDA or other approvals will be obtained in
a timely manner, if at all. Any delay in obtaining, or the failure to obtain,
such approvals could materially adversely affect the Company's ability to
generate product or service or royalty revenues. Even if FDA or other approvals
are obtained, the marketing and manufacturing of diagnostic and therapeutic
products are subject to continuing FDA and other regulatory review. Later
discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on the product or manufacturer, including
withdrawal of the product from the market. Additional governmental regulations
may be promulgated which could delay regulatory approval of the Company's or a
strategic partner's potential products. The Company cannot predict the impact of
adverse governmental regulations which might arise from future legislative or
administrative action.
The Company's research and development activities involve the controlled
use of hazardous materials, chemicals and various radioactive materials. The
Company is subject to federal, state and local laws and regulations governing
the use, storage, handling and disposal of such materials and certain waste
products. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by federal,
state and local laws and regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that result
and any liability could exceed the resources of the Company.
UNCERTAINTY ASSOCIATED WITH PRECLINICAL AND CLINICAL TESTING. The grant of
regulatory approval for the commercial sale of any of the Company's potential
products will depend in part on the Company and/or its strategic alliance
partner successfully conducting extensive preclinical and clinical testing to
demonstrate the product's safety and efficacy in humans. The Company has limited
experience in conducting preclinical and clinical development activities.
Neither the Company nor any strategic alliance partner has submitted an IND to
the FDA for any product candidate under development by the Company.
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<PAGE> 11
The results of preclinical studies by the Company and/or its strategic
alliance partners may be inconclusive and may not be indicative of results that
will be obtained in human clinical trials. In addition, results attained in
early human clinical trials relating to the products under development by the
Company may not be indicative of results that will be obtained in later clinical
trials. As results of particular preclinical studies and clinical trials are
received, the Company and/or its strategic alliance partners may abandon
projects which they might otherwise have believed to be promising.
There can be no assurance that the Company will be permitted to undertake
and complete human clinical trials of any of the Company's potential products,
either in the U.S. or elsewhere. If such trials are permitted, there can be no
assurance that the products under development will not have undesirable side
effect or other characteristics that may prevent them from being approved or
limit their commercial use if approved. Clinical testing is very expensive, and
the Company and/or its strategic alliance partners will have to devote
substantial resources for the payment of clinical trial expenses.
In certain circumstances the Company may rely, in part, on its strategic
alliance partners, academic institutions and on clinical research organizations
to conduct and monitor certain clinical trials. There can be no assurance that
such entities will conduct the clinical trials successfully. Furthermore, the
Company will have less control over such trials than if the Company were the
sole sponsor thereof. As a result, there can be no assurance that these trials
will commence or be completed as planned. Failure to commence or complete any of
its planned clinical trials could have a material adverse effect on the
Company's business, financial condition or results of operations.
ABSENCE OF SALES AND MARKETING EXPERIENCE; LIMITED MANUFACTURING
CAPABILITY. Although Millennium plans to rely significantly on strategic
alliance partners for the marketing and distribution of its products and
services, the Company may market and sell certain of its products and services
directly and may engage in certain other marketing activities in collaboration
with its strategic alliance partners. The Company has no experience in sales,
marketing or distribution. The Company does not expect to establish a direct
sales capability until such time as it has one or more products or services in
development which are approaching marketing approval.
To the extent the Company enters into marketing or distribution
arrangements with strategic alliance partners, any revenues the Company receives
will depend upon the efforts of third parties. There can be no assurance that
any third party would market the Company's products and services successfully or
that any third-party collaboration would be on terms favorable to the Company.
If any marketing partner did not market a product or service successfully, the
Company's business would be materially adversely affected. If Millennium's plan
to rely on
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<PAGE> 12
strategic alliance partners for significant aspects of marketing and selling the
Company's products were unsuccessful for any reason, Millennium would need to
recruit and train a marketing and sales force which would entail the incurrence
of significant additional costs.
There can be no assurance that the Company would be able to attract and
build a sufficient marketing staff or sales force, that the cost of establishing
such a marketing staff or sales force would be justifiable in light of any
product or service revenues or that the Company's direct sales and marketing
efforts would be successful. In addition, if the Company succeeds in bringing
one or more products or services to market, it may compete with other companies
that currently have extensive and well-funded marketing and sales operations.
There can be no assurance that the Company's marketing and sales efforts would
enable it to compete successfully against such other companies.
The Company lacks commercial-scale facilities to manufacture any products
under development in accordance with current Good Manufacturing Practices
("GMP") requirements prescribed by the FDA. The Company expects to be dependent
on third party manufacturers or collaborative partners for all of its clinical
trials and commercial production of products. In the event that the Company were
unable to obtain contract manufacturing, it may not be able to commercialize its
products. Where third-party arrangements are established, the Company will
depend upon such third parties to perform their obligations in a timely manner.
There can be no assurance that third parties depended upon by the Company would
perform and any failures by third parties could delay clinical trial development
or the submission of products for regulatory approval, impair the Company's
ability to commercialize its products as planned and deliver products on a
timely basis, or otherwise impair the Company's competitive position, which
could have a material adverse effect on the Company' business, financial
condition or result or operation.
If the Company determined to develop its own manufacturing capabilities,
it would need to recruit qualified personnel and build or lease the requisite
facilities and equipment because it has no experience in manufacturing on a
commercial scale and no facilities or equipment therefor. There can be no
assurance that Millennium would be able to successfully develop its own
manufacturing capabilities in a cost-effective or timely manner. In addition,
the manufacture of any products by the Company is subject to regulation by the
FDA and comparable agencies in foreign countries. Delay in complying or failure
to comply with such manufacturing requirements could materially adversely affect
the marketing of the Company's products and the Company's business, financial
condition and results of operations.
AVAILABILITY OF, AND COMPETITION FOR, FAMILY RESOURCES. The Company's gene
identification strategy includes genetic studies of families and populations
prone to particular diseases. These studies are based upon statistical analyses
of disease inheritance patterns and require the collection of large numbers of
DNA samples
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<PAGE> 13
from affected individuals, their families and other suitable populations. The
Company is dependent upon collaborations with a number of academic centers for
the identification of donor populations and the collection and supply of the DNA
samples used in its human disease gene research programs. The availability of
DNA samples from large, family-based or other suitable populations is therefore
critical to the Company's ability to discover the genes responsible for human
diseases through human genetic approaches. The competition for these resources
is intense and certain of the Company's competitors have obtained rights to
significantly more family resources than the Company. There can be no assurance
that the Company will be able to obtain access to DNA samples necessary to
support its human gene discovery programs and any material lack of availability
of such DNA samples would have an adverse effect on the Company's business.
ATTRACTION AND RETENTION OF KEY EMPLOYEES AND CONSULTANTS. The Company is
highly dependent on the principal members of its management and scientific
staff, none of whom is bound by a long-term employment agreement with the
Company. The loss of services of any of these personnel could impede
significantly the achievement of the Company's development objectives and could
have a material adverse effect on the Company's business, financial condition
and operating results. Furthermore, recruiting and retaining qualified
scientific personnel to perform research and development work in the future will
also be critical to the Company's success. There is intense competition among
pharmaceutical and health care companies, universities and nonprofit research
institutions for experienced scientists, and there can be no assurance that the
Company will be able to attract and retain personnel on acceptable terms.
In addition, the Company relies on its scientific advisors to assist the
Company in formulating its discovery and developing strategy. All of the
scientific advisors are employed by employers other than the Company and have
commitments to other entities that may limit their availability to the Company.
Some of the Company's scientific advisors also consult for companies that may be
competitors of the Company.
DEPENDENCE ON RESEARCH COLLABORATORS AND SCIENTIFIC ADVISORS. The Company
has relationships with collaborators at academic and other institutions who
conduct research at the Company's request. Such collaborators are not employees
of the Company. All of Millennium's consultants are employed by employers other
than the Company and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to the Company.
As a result, the Company has limited control over their activities and, except
as otherwise required by its collaboration and consulting agreements, can expect
only limited amounts of their time to be dedicated to the Company's activities.
The Company's ability to discover genes involved in human disease and
commercialize products based on those discoveries may depend in part on
continued collaborations with researchers at academic and other institutions.
There can be no assurance that the Company will be
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<PAGE> 14
able to negotiate additional acceptable collaborations with collaborators at
academic and other institutions or that its existing collaborations will be
successful.
The Company's research collaborators and scientific advisors sign
agreements which provide for confidentiality of the Company's proprietary
information and results of studies. There can be no assurance, however, that the
Company will be able to maintain the confidentiality of its technology and other
confidential information in connection with every collaboration, and any
unauthorized dissemination of the Company's confidential information could have
an adverse effect on the Company's business.
UNCERTAINTY OF THERAPEUTIC AND DIAGNOSTIC PRICING, REIMBURSEMENT AND
RELATED MATTERS. The Company's business, financial condition and results of
operations may be materially adversely affected by the continuing efforts of
government and third party payors to contain or reduce the costs of health care
through various means. For example, in certain foreign markets pricing and
profitability of prescription pharmaceuticals are subject to government control.
In the United States, the Company expects that there will continue to be a
number of federal and state proposals to implement similar government control.
In addition, increasing emphasis on managed care in the United States will
continue to put pressure on the pricing of therapeutic and diagnostic products
and services. Cost control initiatives could decrease the price that the Company
or any of its strategic partners receives for any therapeutic and diagnostic
products or services in the future and have a material adverse effect on the
Company's business, financial condition and results of operations. Further, to
the extent that cost control initiatives have a material adverse effect on the
Company's strategic partners, the Company's ability to commercialize its
products and to realize royalties may be adversely affected.
The ability of the Company and any strategic partner to commercialize
therapeutic and diagnostic products and services may depend in part on the
extent to which reimbursement for the products and services will be available
from government and health administration authorities, private health insurers
and other third party payors. Significant uncertainty exists as to the
reimbursement status of newly approved health care products and services. Third
party payors, including Medicare, increasingly are challenging the prices
charged for medical products and services. Government and other third party
payors are increasingly attempting to contain health care costs by limiting both
coverage and the level of reimbursement for new therapeutic and diagnostic
products and services and by refusing in some cases to provide coverage for uses
of approved products for disease indications for which the FDA has not granted
labeling approval. There can be no assurance that any third party insurance
coverage will be available to patients for any products and services discovered
and developed by the Company or its strategic partners. If adequate coverage and
reimbursement levels are not provided by government and other third party payors
for the Company's products and services, the market acceptance of these products
and services may be reduced, which may have a
-57-
<PAGE> 15
material adverse effect on the Company's business, financial condition and
results of operations.
PRODUCT LIABILITY EXPOSURE. Clinical trials, manufacturing, marketing and
sale of any of the Company's or its strategic partners' potential therapeutic
products may expose the Company to liability claims from the use of such
therapeutic products. The Company currently does not carry product liability
insurance. There can be no assurance that the Company or its strategic partners
will be able to obtain such insurance or, if obtained, that sufficient coverage
can be acquired at a reasonable cost. An inability to obtain sufficient
insurance coverage at an acceptable cost or otherwise to protect against
potential product liability claims could prevent or inhibit the
commercialization of therapeutic products developed by the Company or its
strategic partners. A product liability claim or recall could have a material
adverse effect on the business or financial condition of the Company. While
under certain circumstances the Company is entitled to be indemnified against
losses by its strategic partners, there can be no assurance that this
indemnification would be available or adequate should any such claim arise.
RISKS ASSOCIATED WITH ACQUISITIONS. As part of its business strategy, the
Company may from time to time acquire assets and businesses principally relating
to or complementary to its operations, including for the purpose of acquiring
specific technology. Any acquisitions by the Company will be accompanied by the
risks commonly encountered in acquisitions of companies. Such risks include,
among other things, potential exposure to unknown liabilities of acquired
companies or to acquisition costs and expenses exceeding amounts anticipated for
such purposes, the difficulty and expense of assimilating the operations,
acquired technology and personnel of the acquired businesses, the potential
disruption of the Company's ongoing business and diversion of management time
and attention, and the potential failure to achieve anticipated financial,
operating and strategic benefits from such acquisitions.
In order to finance any such acquisition, it may be necessary for the
Company to raise additional funds through public or private financing. Such
financing, if available at all, may be on terms which are not favorable in the
Company, and, in the case of equity financings, may result in dilution to the
Company's stockholders.
There can be no assurance that the Company would be successful in
overcoming these risks or any other problems encountered in connection with any
such acquisitions. If the Company is unsuccessful in doing so, its business,
financial condition and results of operations could be materially and adversely
affected.
ITEM 2. PROPERTIES
The Company's facilities currently consist of an aggregate of
approximately 242,000 square feet of office, research and laboratory space and
an animal facility in
-58-
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