AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1996
REGISTRATION NO. 333-
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
- -----------------------------------------------------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
- -----------------------------------------------------------------------------
KOS PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- -----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
FLORIDA 2834 65-0670898
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
<TABLE>
<S> <C>
DANIEL M. BELL
1001 BRICKELL BAY DRIVE, SUITE 2502, 1001 BRICKELL BAY DRIVE, SUITE 2502,
MIAMI, FL 33131 MIAMI, FL 33131
305-577-3464 305-577-3464
(ADDRESS, INCLUDING ZIP CODE, (ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE, AND TELEPHONE NUMBER, INCLUDING
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
- -----------------------------------------------------------------------------
COPIES TO:
STEVEN SONBERG, ESQ. BRUCE K. DALLAS, ESQ.
HOLLAND & KNIGHT DAVIS POLK & WARDWELL
ONE EAST BROWARD BOULEVARD, SUITE 1300 450 LEXINGTON AVENUE
FORT LAUDERDALE, FL 33301 NEW YORK NY 10017
954-525-1000 212-450-4000
TELECOPIER NO. 954-463-2030 TELECOPIER NO. 212-450-4800
- -----------------------------------------------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
- -----------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
=============================================================================
PROPOSED
MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED OFFERING PRICE (1) FEE
- -----------------------------------------------------------------------------
Common Stock, $.01 par value $40,000,000 $12,122
=============================================================================
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
<PAGE>
- -----------------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH JURISDICTION.
PROSPECTUS (Subject to Completion)
Dated December 16, 1996
Shares
[LOGO]
KOS PHARMACEUTICALS, INC.
Common Stock
- -----------------------------------------------------------------------------
All of the shares of Common Stock, par value $.01 per share (the "Common
Stock"), offered hereby are being sold by Kos Pharmaceuticals, Inc. ("Kos" or
the "Company").
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is estimated that the initial public offering price
will be between $ and $ per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. Application has been made to have the Common Stock approved
for quotation on the Nasdaq National Market under the symbol "KOSP", subject
to notice of issuance.
- -----------------------------------------------------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
- -----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
=============================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- -----------------------------------------------------------------------------
Per Share......... $ $ $
Total(3).......... $ $ $
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $ .
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase an aggregate of up to
additional shares at the Price to Public, less Underwriting Discounts and
Commissions to cover over-allotments, if any. If all such additional
shares are purchased, the total Price to Public, Underwriting Discounts
and Commissions, and Proceeds to Company will be $ , $ ,
and $ , respectively. See "Underwriting."
- -----------------------------------------------------------------------------
The Common Stock is offered by the several Underwriters named herein when,
as and if received and accepted by them, and subject to their right to reject
orders in whole or in part and subject to certain other conditions. It is
expected that delivery of certificates for the shares will be made at the
offices of Cowen & Company, New York, New York on or about , 1997.
- -----------------------------------------------------------------------------
COWEN & COMPANY
DILLON, READ & CO. INC.
SALOMON BROTHERS INC
, 1997
<PAGE>
[PICTURES TO BE FILED BY AMENDMENT]
- -----------------------------------------------------------------------------
Niaspan/registered trademark/ is a registered trademark of the Company.
- -----------------------------------------------------------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS
PROSPECTUS, INCLUDING "RISK FACTORS" HEREIN. EXCEPT AS OTHERWISE NOTED, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION.
THE COMPANY
Kos Pharmaceuticals, Inc. ("Kos", pronounced Kos, or the "Company") is
engaged primarily in the development of proprietary prescription
pharmaceutical products for the treatment of certain chronic cardiovascular
and respiratory diseases. The Company intends to manufacture its products and
to market such products directly through its own specialty sales force. The
Company's cardiovascular products under development consist of
controlled-release, once-a-day, oral dosage formulations. The Company's
respiratory products under development consist of aerosolized inhalation
formulations to be used primarily with the Company's proprietary inhalation
devices.
The Company was founded in 1988 by the former Chief Executive Officer,
Chief Operating Officer, and Director of Product Development of Key
Pharmaceuticals, Inc., which was acquired by Schering-Plough Corporation in
June 1986. The Company believes that substantial market opportunities exist
by reformulating certain approved prescription pharmaceutical products to
improve safety or patient compliance or to achieve certain other marketing
advantages. Kos believes that developing proprietary products based on
currently approved drugs, rather than new chemical entities, may reduce
regulatory and development risks. Seven of the Company's nine products under
development require NDA filings with the FDA. Developing products that
require NDA approval offers several advantages compared with generic
products, including potential for higher gross margins, limited competition
resulting from significant clinical and formulation development challenges,
and a three-year statutory barrier to generic competition.
The Company's objective is to become a fully-integrated specialty
pharmaceutical company that develops, manufactures, and markets its
proprietary products. The Company's management has significant experience in
implementing the principal elements of the Company's business strategy. These
elements consist of the following: (i) select products with unrealized
commercial potential where safety or patient compliance may be improved; (ii)
focus initially on the large, rapidly growing cardiovascular and respiratory
markets, which include many chronic diseases requiring long-term therapy;
(iii) develop proprietary formulations of currently approved pharmaceutical
compounds, which can reduce regulatory and development risks typically
associated with the development of new chemical entities; (iv) manage
internally the clinical development of its products; (v) manufacture its
products internally; (vi) market its products directly through the Company's
specialty sales force; and (vii) leverage its core competencies through
additional corporate and academic alliances.
On May 6, 1996, Kos submitted a NDA to the FDA for NIASPAN, its lead
product under development. NIASPAN is a once-a-day, oral, controlled-release
formulation of niacin for the treatment of multiple lipid disorders, which
are primary risk factors for coronary heart disease. Niacin is a water
soluble vitamin long recognized by the National Institutes of Health and the
American Heart Association as an effective pharmacological agent for the
treatment of multiple lipid disorders, including elevated LDL cholesterol,
total cholesterol, and triglycerides and low HDL cholesterol. The Company
submitted its NDA based on six clinical trials, including three
double-blinded, placebo-controlled pivotal clinical trials, involving an
aggregate of 633 NIASPAN-treated subjects at 17 sites throughout the United
States. The results of these trials produced statistically significant
changes in all major lipid components without serious treatment-related
adverse events. Treatment with NIASPAN demonstrated a 14% to 19% reduction in
LDL cholesterol, a 25% to 35% reduction in triglycerides, an increase of 22%
to 29% in HDL cholesterol, and a reduction of 24% to 29% in Lp(a). Moreover,
NIASPAN'S controlled-release formulation and dosing regimen reduced the liver
toxicity and intolerable
3
<PAGE>
side effects generally associated with currently available formulations of
niacin. There can be no assurance that the FDA will approve the Company's NDA
for NIASPAN on a timely basis, or at all.
The Company expects to launch NIASPAN in 1997, and Kos is establishing a
specialty sales force to market NIASPAN to the approximately 16,000
physicians who account for approximately 40% of the total prescriptions for
lipid-altering medications in the United States. The Company's marketing of
NIASPAN will focus on niacin's long-recognized position as first-line drug
therapy for the treatment of hyperlipidemia and on informing specialist
physicians as to the manner in which NIASPAN achieves its safety and efficacy
profile. In 1995, the market for cholesterol reducing drugs exceeded $2.0
billion in the United States and was one of the fastest growing sectors of
the cardiovascular market.
In addition to NIASPAN, Kos has three other once-a-day, controlled-release
cardiovascular products under development: (i) a combination of two currently
approved drugs for the treatment of multiple lipid disorders; (ii) a
formulation of captopril, an ACE inhibitor for hypertension; and (iii) a
branded generic form of isosorbide-5-mononitrate, a nitrate for angina. In
1995, the disease segments of the cardiovascular market for which the Company
is developing its products achieved aggregate sales in the United States of
approximately $10.2 billion.
Kos is also developing five aerosolized inhalation pharmaceutical
products, dispensed in metered-dose inhalation ("MDI") devices for the
treatment of asthma. The Company is developing a generic version of
albuterol, a beta-agonist for asthma, dispensed in a generic MDI with a CFC
propellant. Kos anticipates that it will submit an ANDA for its CFC albuterol
in 1997. Kos is also developing three non-CFC formulations using its
proprietary breath coordinated inhaler: two different inhaled steroids for
asthma, triamcinolone and flunisolide, and albuterol. In addition, the
Company is developing a proprietary breath actuated inhaler for pediatric and
geriatric use with one of its non-CFC formulations. The market for asthma
products in 1995 was $2.4 billion in the United States.
In 1996, the Company entered into certain agreements with Fuisz
Technologies, Ltd., for the development of up to six products using Fuisz'
proprietary microsphere formulation technology. Fuisz has commenced the
development of three of these products, including the Company's combination
product for treatment of multiple lipid disorders, captopril and
isosorbide-5-mononitrate; up to three other products will commence development
during 1997. The Company is also presently sponsoring basic research at Tufts
University and Boston University and intends to enter into corporate
alliances to develop products identified through these research programs.
Since its inception, the Company's operations have been funded entirely by
Michael Jaharis, one of the Company's founders and its Chairman who was
previously the Chief Executive Officer of Key Pharmaceuticals, Inc. The
Company employs 96 people, of whom 63 are in product development and 19 in
manufacturing.
The Company was incorporated in Florida on June 25, 1996, as the successor
to Kos Holdings, Inc. (formerly named Kos Pharmaceuticals, Inc.), which was
incorporated in Florida on July 1, 1988. References in this Prospectus to the
Company include the operations of its predecessor until June 30, 1996 and its
wholly-owned subsidiary, Aeropharm Technology, Inc.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered hereby ................. shares
Common Stock to be outstanding
after this offering ...................... shares(1)
Use of proceeds ............................ For research and development, recruitment of a sales force for
the anticipated commercial launch of NIASPAN, repayment of all
or a portion of a loan from Kos Investments, Inc., working capital,
and other general corporate purposes.
Proposed Nasdaq National Market symbol .... KOSP
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------------- ---------------------------
1994 1995 1996 1995 1996
------------- ------------- ------------- ------------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues ........................................... $ 22 $ 14 $ -- $ -- $ --
Operating expenses:
Research and development .......................... 6,663 8,387 13,816 3,377 2,783
General and administrative ........................ 1,619 1,614 1,772 361 760
Compensation recognized on modification of stock
option grants(2) ................................ -- -- 5,436 -- --
------------- ------------- ------------- ------------- ------------
Total operating expenses ........................... 8,282 10,001 21,024 3,738 3,543
Other income ....................................... (2) (3) -- -- --
Interest (income) expense, net ..................... 1,108 1,055 (14) (3) 22
Minority interest (3) .............................. (164) 1 16 15 --
------------- ------------- ------------- ------------- ------------
Net loss ........................................... $ (9,530) $ (11,038) $ (20,994) $ (3,720) $ (3,565)
============= ============= ============= ============= ============
Net loss per share (4) ............................. $ (0.85) $ (0.98) $ (1.87) $ (0.33) $ (0.32)
============= ============= ============= ============= ============
Weighted average common shares in computing net
loss per share(4) ................................ 11,216,750 11,216,750 11,216,750 11,216,750 11,216,750
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996 SEPTEMBER 30, 1996
---------------- ----------------------------
ACTUAL AS ADJUSTED(6)
----------- --------------
(unaudited)
<S> <C> <C> <C>
BALANCE SHEET(5):
Cash and cash equivalents ......................... $ 193 $ 205 $
Working capital (deficit) ......................... (8) (286)
Total assets ...................................... 2,281 2,360
Total debt ........................................ -- 3,405
Deficit accumulated during the development
stage(7) ........................................ (56,658) (60,223)
Shareholders' equity (deficit) .................... 1,914 (1,651)
<FN>
- ----------
(1) Excludes 3,675,000 shares of Common Stock reserved for issuance under the
Company's 1996 Stock Option Plan and 325,000 shares of Common Stock
reserved for issuance upon exercise of other outstanding options. Options
to acquire an aggregate of 2,158,000 shares of Common Stock at a weighted
average exercise price of $3.60 per share were issued and outstanding as
of September 30, 1996. Excludes shares of Common Stock issuable to
Kos Investments upon the conversion, if any, of a note representing a
loan made to the Company by Kos Investments. See "Management--Stock
Option Plan" and "Certain Transactions."
(2) Reflects a one-time, non-cash charge associated with an extension of the
exercise period for stock options granted during 1988 to 1990 to the
Company's Chief Executive Officer and two independent consultants; no
other material economic terms of these options were changed.
(3) Represents the minority shareholder's interest in Aeropharm Technology,
Inc., the Company's aerosol subsidiary, which interest was acquired by
the Company in June 1996.
(4) See Note 2 of Notes to Consolidated Financial Statements for information
concerning the computation of net loss per share.
(5) The Company has funded its operations since July 1, 1996 using the
proceeds of a loan from Kos Investments, Inc., a company that is
wholly-owned by, and serves as an investment vehicle for Michael Jaharis,
the Company's Chairman and one of its founders. As of November 30, 1996,
the Company had outstanding borrowings of $6,280,000 under such loan. See
"Use of Proceeds."
(6) Adjusted to reflect the sale of shares of Common Stock offered hereby
(at an assumed initial public offering price of $ per share) and
receipt by the Company of the estimated net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
(7) In connection with the transfer on June 30, 1996 of assets and
liabilities from Kos Holdings, Inc. to the Company, net operating loss
carry forwards amounting to approximately $51.0 million and related tax
benefits, were not transferred to the Company. See "The Company" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
</FN>
</TABLE>
5
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE COMPANY AND
ITS BUSINESS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT THE STATEMENTS IN THIS PROSPECTUS
THAT ARE NOT DESCRIPTIONS OF HISTORICAL FACTS MAY BE FORWARD-LOOKING
STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE CURRENTLY ANTICIPATED DUE TO A NUMBER OF
FACTORS, INCLUDING THOSE IDENTIFIED UNDER "RISK FACTORS," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,"
"BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS.
The Company's success depends to a significant extent on whether its lead
product, NIASPAN, is successfully commercialized. There can be no assurance
as to the successful commercialization of NIASPAN. The successful
commercialization of NIASPAN may be affected by various factors, certain of
which are set forth below.
UNCERTAINTIES RELATED TO FDA APPROVAL OF NIASPAN
The Company recently submitted a new drug application ("NDA") to the
United States Food and Drug Administration (the "FDA") for NIASPAN. The NDA
requests authorization for the Company to market NIASPAN for the treatment of
multiple lipid disorders. The FDA generally requires that the safety and
efficacy of a drug be supported by results from adequate and well-controlled
clinical trials before approval for commercial sale. If the FDA believes that
the results of the pivotal clinical trials for NIASPAN do not establish the
safety and efficacy of NIASPAN in the treatment of any or all of the
referenced indications, or if the FDA fails to accept that the long-term
patient benefits from the treatment of such indications has been established,
the Company will not receive the approvals necessary to market NIASPAN.
Failure to obtain FDA approval to market NIASPAN would have a material
adverse effect on the Company. Securing approval for less than all of the
indications set forth in the NIASPAN NDA could have a material adverse effect
on the Company. The Company may be required to conduct additional clinical
trials in order to demonstrate the safety and efficacy of NIASPAN, which
trials also may not be acceptable to the FDA. Even if acceptable to the FDA,
such additional trials may delay the FDA approval process, which could have a
material adverse effect on the Company. There can be no assurance that the
results of any of the Company's pivotal clinical trials will be satisfactory
or that NIASPAN will obtain regulatory approval for commercialization on a
timely basis, or at all, with respect to all or any of the indications for
which the Company intends to market NIASPAN.
UNCERTAINTIES RELATED TO PRODUCT DEVELOPMENT
The Company has not yet completed the development of any products and,
accordingly, has not begun to market or generate revenues from the
commercialization of products. Although the Company recently submitted a NDA
to the FDA for NIASPAN, each of its other products under development is at an
earlier stage of development. There can be no assurance that the Company will
be able to successfully formulate any of its products as planned, or that the
Company will be successful in demonstrating the safety and efficacy of such
products in human clinical trials. These trials may be costly and
time-consuming. The administration of any product the Company develops may
produce undesirable side effects that could result in the interruption, delay
or suspension of clinical trials, or the failure to obtain FDA or other
regulatory approval for any or all targeted indications. Even if regulatory
approval is secured, the Company's products under development may later
produce adverse effects that limit or prevent their widespread use or that
necessitate their withdrawal from the market.
UNCERTAINTIES RELATED TO MARKET ACCEPTANCE
If the Company receives the required regulatory approvals to market
NIASPAN, the Company's ability to successfully commercialize NIASPAN will
depend in part on the acceptance of NIASPAN by physicians and their patients.
The Company believes that intolerable flushing is one of the principal
reasons why physicians generally have been reluctant to prescribe or
recommend currently available formulations of niacin. Flushing episodes are
often characterized by facial redness, tingling or rash.
6
<PAGE>
Although most patients taking NIASPAN will sometimes flush, the formulation
and dosing regimen for NIASPAN have been designed to maximize patient
acceptance and minimize the occurrence of flushing. There can be no
assurance, however, that patients using NIASPAN will not suffer episodes of
flushing that they consider intolerable. The failure of physicians to
prescribe NIASPAN or the failure of patients to continue taking NIASPAN due
to intolerable flushing or other side effects would have a material adverse
effect on the Company. The Company believes that physicians have also been
reluctant to prescribe or recommend certain currently available formulations
of niacin because of potential liver toxicity associated with these
formulations. Although clinical trials conducted using NIASPAN demonstrated
that fewer than 1% of patients experienced clinically significant elevations
in liver enzyme levels, there can be no assurance that patients using NIASPAN
will not experience any clinically significant elevations of liver enzymes or
other side effects.
Unanticipated side effects or unfavorable publicity concerning any of the
Company's products under development or any other product incorporating
technology similar to that used in the Company's products under development
could have an adverse effect on the Company's ability to obtain regulatory
approvals; to achieve acceptance by prescribing physicians, managed care
providers or patients; and to commercialize its products, any of which could
have a material adverse effect on the Company.
PATENTS AND TRADEMARKS; INTERFERENCE; RISK OF INFRINGEMENT
The Company's ability to commercialize any of its products under
development will depend, in part, on its or its licensors' ability to obtain
patents, enforce those patents, preserve trade secrets, and operate without
infringing on the proprietary rights of third parties. In addition, the
patents for which the Company has applied relating to NIASPAN and certain
other of the Company's products under development are based on, among other
things, the timed administration of NIASPAN. If the indications treated by
NIASPAN and such other products under development could be treated using
drugs without such timed administration, the Company's patents, if issued,
would not prevent the use of such drugs for the treatment of such
indications, which would have a material adverse effect on the Company. There
can be no assurance that the patent applications licensed to or owned by the
Company will result in issued patents, that patent protection will be secured
for any particular technology, that any patents that have been or may be
issued to the Company or its licensors will be valid or enforceable or that
any patents will provide meaningful protection to the Company.
In general, the U.S. patents and patent applications owned by or licensed
to the Company are method-of-use patents that cover the timed use of certain
compounds to treat specified conditions. Composition-of-matter protection is
not available for the active ingredient in NIASPAN. The active ingredient in
NIASPAN, niacin, is currently sold in the United States and other markets for
LDL cholesterol lowering and for other uses. Even in jurisdictions where the
use of the active ingredient in NIASPAN for lowering LDL cholesterol and
other indications may be covered by the claims of a use patent licensed to
the Company, off-label sales might occur, especially if another company
markets the active ingredient at a price that is less than the price of
NIASPAN, thereby potentially reducing the sales of NIASPAN. See
"Business--Competition" and "Business--Government Regulation."
The Company has a patent application pending in the U.S. Patent and Trademark
Office ("PTO") with claims covering NIASPAN's method of use consistent with
its recommended once-a-day dosing regimen. Certain of these claims have recently
been held allowable by the PTO. The patent examiner has, however, suspended
prosecution of the Kos application and referred such application to the PTO's
Board of Appeals to determine whether an interference should be declared between
such Kos application and a method-of-use patent issued to a generic manufacturer
allegedly claiming the same dosing regimen invention. It may take up to a year
or more for the PTO's Board of Appeals to determine whether to declare such an
interference. An interference is a procedure conducted by the PTO to determine
which entity was the first to invent, provided such entity did not abandon,
suppress or conceal its invention prior to filing. The prevailing party would be
awarded the claims corresponding to the allegedly common invention, unless such
claims are held unpatentable as to both parties. Because all relevant facts
normally are not available until an interference proceeding is well underway, it
is impossible to predict which party will prevail.
7
<PAGE>
The Company believes that the generic manufacturer was not the first to
invent the once-a-day dosing regimen. Kos conceived and reduced to practice
its method-of-use more than one and one-half years before the filing date of
the generic manufacturer's patent application. The Company believes, based
principally on extensive searches of publicly available information, that the
generic manufacturer did not conceive and reduce to practice the
method-of-use in question prior to the Company's reduction to practice. Such
a reduction to practice, however, would not necessarily be made public;
consequently, it is possible that the generic manufacturer's work on the
method in question could have, in fact, been earlier than the Company's
method-of-use, while being successfully maintained in secret by the generic
manufacturer or otherwise not be known by the Company. Accordingly, no
assurance can be given as to whether the Company was in fact the first to
invent, or even if first, there can be no assurance that its priority would
not be defeated on other grounds. Moreover, resolving such an interference
action may result in substantial legal costs to the Company.
If the Company prevails in such an interference, the relevant claims of
the generic manufacturer's method-of-use patent would be invalid as applied
to NIASPAN. Alternatively, if the generic manufacturer were to prevail, the
generic manufacturer could institute an infringement action against the
Company based on the manufacturer's claim that the use of NIASPAN infringes
its patent. The Company could defeat such a claim by proving either that the
use of NIASPAN is not covered by the generic manufacturer's claims, or that
the generic manufacturer's patent is invalid or unenforceable.
The Company has begun a comprehensive invalidity study, which study may
reveal documents that impact the validity of the generic manufacturer's
patent as well as the validity of the claims contained in the Company's
patent application. If after such study is completed, the Company, with the
assistance of its patent counsel, determines that the generic manufacturer's
patent is valid and that the Company infringes the claims of such patent, the
Company could seek a license from the generic manufacturer or it could modify
NIASPAN, or its directions for use, in such a way as to avoid the generic
manufacturer's patent. Although the generic manufacturer currently markets an
over-the-counter niacin product, it does not have approval from the FDA to
market a product under its patent claims, nor is Kos aware of any NDA having
been filed for such a product. Nonetheless, there can be no assurance that a
license from the generic manufacturer would be available to Kos on acceptable
terms, if at all. If the Company were to modify NIASPAN's formulation or
dosing regimen, it could have a material adverse effect on the Company,
principally by delaying the commencement of revenue from NIASPAN and adding
clinical research costs to obtain FDA approval of such modifications.
The generic manufacturer who holds the above-referenced method-of-use
patent also owns an earlier issued formulation patent that could be alleged
to cover the Company's NIASPAN formulation. Based on an opinion from its
patent counsel, the Company believes that its niacin product does not
infringe the claims of the formulation patent, or if it were construed to
infringe, such claims would be invalid. Claim interpretation and validity,
however, must be determined by a court in the event of litigation, and there
can be no assurance that such a dispute would likely be resolved in a manner
satisfactory to the Company. The Company may not be able to afford protracted
patent litigation. In the event of adverse results from such litigation, the
Company could be precluded from selling NIASPAN unless licenses are obtained,
which licenses may not be available on acceptable terms, or at all, and the
Company could be held liable for damages, if any, arising from the challenged
activities. There also can be no assurance that the Company has identified
all patents that pose a potential risk of infringement by NIASPAN.
The patent positions of pharmaceutical and biotechnology companies are
highly uncertain and involve complex legal and factual questions. There can
be no assurance that the patents owned and licensed by the Company, or any
future patents, will prevent other companies from developing similar or
therapeutically equivalent products or that others will not be issued patents
that may prevent the sale of Company products or require licensing and the
payment of significant fees or royalties by the Company. Furthermore, there
can be no assurance that any of the Company's future products or methods will
be patentable, that such products or methods will not infringe upon the
patents of third parties, or that the Company's patents or future patents
will give the Company an exclusive position in
8
<PAGE>
the subject matter claimed by those patents. The Company may be unable to
avoid infringement of third party patents and may have to obtain a license,
defend an infringement action, or challenge the validity of the patents in
court. There can be no assurance that a license will be available to the
Company, if at all, on terms and conditions acceptable to the Company, or
that the Company will prevail in any patent litigation. Patent litigation is
costly and time consuming, and there can be no assurance that the Company
will have or will devote sufficient resources to pursue such litigation. If
the Company does not obtain a license under such patents, is found liable for
infringement or is not able to have such patents declared invalid, the
Company may be liable for significant money damages, may encounter
significant delays in bringing products to market, or may be precluded from
participating in the manufacture, use, or sale of products or methods of
treatment requiring such licenses.
The Company also relies on trade secrets and other unpatented proprietary
information in its product development activities. To the extent that the
Company relies on trade secrets and unpatented know-how to maintain its
competitive technological position, there can be no assurance that others may
not independently develop the same or similar technologies. The Company seeks
to protect trade secrets and proprietary knowledge in part through
confidentiality agreements with its employees, consultants, advisors and
collaborators. Nevertheless, these agreements may not effectively prevent
disclosure of the Company's confidential information and may not provide the
Company with an adequate remedy in the event of unauthorized disclosure of
such information. If the Company's employees, scientific consultants or
collaborators develop inventions or processes independently that may be
applicable to the Company's products under development, disputes may arise
about ownership of proprietary rights to those inventions and processes. Such
inventions and processes will not necessarily become the Company's property,
but may remain the property of those persons or their employers. Protracted
and costly litigation could be necessary to enforce and determine the scope
of the Company's proprietary rights. Failure to obtain or maintain patent and
trade secret protection, for any reason, would have a material adverse effect
on the Company. See "Business--Patents and Proprietary Rights."
The Company engages in collaborations, sponsored research agreements, and
other arrangements with academic researchers and institutions that have
received and may receive funding from U.S. government agencies. As a result
of these arrangements, the U.S. government or certain third parties may have
rights in certain inventions developed during the course of the performance
of such collaborations and agreements as required by law or such agreements.
Several legislative bills affecting patent rights have been introduced in the
United States Congress. These bills address various aspects of patent law,
including publication, patent term, re-examination subject matter and
enforceability. It is not certain whether any of these bills will be enacted
into law or what form such new laws may take. Accordingly, the effect of such
potential legislative changes on the Company's intellectual property estate
is uncertain.
LIMITED SALES AND MARKETING EXPERIENCE
The Company has not yet established a sales and marketing organization nor
has it yet marketed, distributed or sold any product. The Company intends to
market NIASPAN and the majority of its other products under development
through its own specialty sales force. Substantial resources will be required
for the Company to establish its own sales force and promote the sale of
NIASPAN and its other products under development. There can be no assurance
that the Company will be able to establish a sales and marketing organization
prior to the Company's planned launch of NIASPAN in 1997 or at all, or that
the Company will devote resources to NIASPAN or its other products under
development sufficient to achieve market acceptance. The Company's failure or
delay in establishing a marketing and sales force prior to the planned launch
of NIASPAN in 1997 or its failure to expend the resources to adequately
promote NIASPAN would have a material adverse effect on the Company. The
Company's failure to establish a marketing and sales force or its failure to
expend the resources to adequately promote any of its other products under
development could have a material adverse effect on the Company.
9
<PAGE>
COMPETITION AND TECHNOLOGICAL CHANGE
The active ingredient in NIASPAN, niacin, is available in several other
formulations, most of which do not require a prescription. Although the
Company believes that there are no currently available niacin formulations
that have been approved by the FDA specifically for once-a-day dosing, there
can be no assurance that physicians will not prescribe or recommend some of
these unapproved niacin formulations, using the NIASPAN dosing regimen, to
try to achieve the same results as NIASPAN. Substitution of other niacin
formulations for NIASPAN could have a material adverse effect on the Company.
Moreover, manufacturers of other niacin formulations could promote their
products using the NIASPAN dosing regimen and could promote the sale of their
products to treat the indications for which the Company has sought approval
to market NIASPAN. Although such promotion would be a violation of FDA
regulations, the occurrence of such practices would have a material adverse
effect on the Company. See "Business--Government Regulation" and
"Business--Competition." Moreover, many products are commercially available
for the treatment of elevated LDL cholesterol, and the manufacturers of such
products have significantly greater financial resources and sales and
manufacturing capabilities than the Company. There can be no assurance that
any products developed by the Company will be able to compete successfully
with any of those products.
Many established pharmaceutical and biotechnology companies, universities,
and other research institutions with resources significantly greater than the
Company's may develop products that directly compete with the Company's
products. Even if the Company's products under development prove to be more
effective than those developed by other entities, such other entities may be
more successful in marketing their products than the Company because of
greater financial resources, stronger sales and marketing efforts, and other
factors. These entities may succeed in developing products that are safer,
more effective or less costly than the products developed by the Company.
There can be no assurance that any products developed by the Company will be
able to compete successfully with any of those products.
GOVERNMENT REGULATION; NO ASSURANCES OF REGULATORY APPROVAL
The Company's research and development activities, preclinical studies,
clinical trials, and the manufacturing and marketing of its products are
currently subject to extensive regulation by the FDA and may in the future be
subject to foreign regulations. The drug approval process takes many years
and requires the expenditure of substantial resources. Data obtained from
preclinical and clinical activities are susceptible to varying
interpretations that could delay, limit, or prevent regulatory approval.
Although the Company may consult the FDA for guidance in developing protocols
for clinical trials, that consultation provides no assurance that the FDA
will accept the clinical trials as adequate or well-controlled or accept the
results of those trials. In addition, delays or rejections of applications
for regulatory approval may result from changes in or additions to FDA
regulations concerning the drug approval process. Similar delays may also be
encountered in foreign countries. There can be no assurance that any
regulatory review will be conducted in a timely manner or that regulatory
approvals will be obtained for any products developed by the Company,
including NIASPAN. Even if regulatory approval of a product is obtained, the
approval may be limited as to the indicated uses for which it may be promoted
or marketed. In addition, a marketed drug, its bulk chemical supplier, its
manufacturer and its manufacturing facilities are subject to continual
regulatory review and periodic inspections, and later discovery of previously
unknown problems with a product, supplier, manufacturer or facility may
result in restrictions on such products or manufacturers, which may require a
withdrawal of the product from the market. Failure to comply with the
applicable regulatory requirements can, among other things, result in fines,
suspensions of regulatory approvals, product recalls, operating restrictions
and criminal prosecution, any of which could have a material adverse effect
on the Company.
The Company's business is also subject to regulation under state, federal
and local laws, rules, regulations and policies relating to the protection of
the environment and health and safety, including those governing the use,
generation, manufacture, storage, air emission, effluent discharge, handling
and disposal of certain materials. There can be no assurance that the Company
will not be required to incur
10
<PAGE>
significant costs to comply with such environmental and health and safety
laws and regulations in the future. The Company's research and development
involves the controlled use of hazardous materials. Although the Company
believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by applicable state, federal
and local regulations, the risk of contamination or injury from these
materials cannot be completely eliminated. In the event of such contamination
or injury, the Company could be held liable for any damages that result and
any such liability could exceed the resources of the Company and materially
adversely affect the Company's business, financial condition and results of
operations. One of the Company's products under development involves the use
of chlorofluorocarbon ("CFC") propellants. The use of CFC propellants is
subject to significant U.S. and foreign regulations. Moreover, it is possible
that future international treaties or U.S. or foreign government regulations
will prohibit the use of CFC propellants. See "Business--Government
Regulation" and "Business--Respiratory Products."
DEPENDENCE ON FUISZ TECHNOLOGIES LTD. AND OTHER COLLABORATORS
The Company may rely on third parties for certain aspects of the
development of certain of its products under development. The Company has
entered into agreements with Fuisz Technologies Ltd. ("Fuisz") pursuant to
which the Company and Fuisz have agreed to collaborate in the development of
captopril, isosorbide-5-mononitrate ("IS-5-MN"), and the lipid-altering
combination product, as well as certain other products in the future. The
Company is not aware of any approved products that use Fuisz' microsphere
technology, which will be used in the future in certain of the Company's
products under development. The Company's ability to commercialize these
products will depend to a significant extent on the efforts of Fuisz, over
which the Company has no control. There can be no assurance that Fuisz will
be successful in developing any of the Company's products under development.
The failure of Fuisz to develop any of the Company's products may have a
material adverse effect on the Company. The Company may also rely on other
third parties for certain aspects of the development of the Company's
presently planned or future products. There can be no assurance that the
Company will be able to enter into future collaborative arrangements on
favorable terms, or at all. Even if the Company is successful in entering
into such collaborative agreements, there can be no assurance that any such
arrangement will be successful. The success of any such arrangement is
dependent on, among other things, the skills, experience and efforts of the
third party's employees responsible for the project, the third party's
commitment to the arrangement, and the financial condition of the third
party, all of which are beyond the control of the Company.
LIMITED MANUFACTURING EXPERIENCE; RISK OF SCALE-UP
Although the Company has manufactured sufficient quantities of certain of
its products to facilitate the conduct of human clinical trials and extensive
testing and research, the Company has no experience manufacturing products
for commercial purposes. At present, the Company manufactures clinical
materials in two manufacturing plants, both of which the Company believes
operate in substantial compliance with current Good Manufacturing Practices
("cGMP") regulations for the manufacture of pharmaceutical products. The
Company may need to further scale-up certain of its current manufacturing
processes to achieve production levels consistent with the commercial sale of
its products. Further, modifications to the facilities, systems and
procedures may be necessary to maintain compliance with cGMP regulations and
other regulations prescribed by various regulatory agencies in connection
with manufacture for commercial sale. Failure by the Company to successfully
further scale-up or modify its manufacturing process or to comply with cGMP
regulations and other regulations could delay the approval of the Company's
products under development or limit the Company's ability to meet the demand
for its products, either of which would have a material adverse effect on the
Company. Such occurrences may require the Company to acquire alternative
means of manufacturing its products, which may not be available to the
Company on a timely basis, on commercially practicable terms, or at all.
11
<PAGE>
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company has experienced negative cash flows from operations since its
inception and has funded its activities to date by capital contributions and,
since July 1, 1996, a loan from Kos Investments, Inc. (the "Investments
Loan"). Assuming successful commercial launch of NIASPAN, the Company
anticipates positive cash flows from operations in 1998. The Company
estimates that it will need $ million to fund its operations through
such date and anticipates that it will use a portion of the net proceeds of
the offering in excess of such amount to repay all or a portion of the
Investments Loan. See "Certain Transactions." The Company has expended and will
continue to be required to expend substantial funds to continue research and
development, including clinical trials of its products under development, and to
commence sales and marketing efforts if regulatory approvals are obtained.
Although the Company believes that the net proceeds of this offering (after
repayment, if any, of the Investments Loan) will be sufficient to fund the
operations of the Company for at least the next twelve months, the Company may
need or elect to raise additional capital. The Company's capital requirements
will depend on many factors, including the problems, delays, expenses and
complications frequently encountered by development stage companies; the
progress of the Company's research, development and clinical trial programs; the
costs and timing of seeking regulatory approvals of the Company's products under
development; the Company's ability to obtain such regulatory approvals; the
success of the Company's sales and marketing programs; costs in filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights; the extent and terms of any collaborative research,
manufacturing, marketing or other arrangements; and changes in economic,
regulatory or competitive conditions or the Company's planned business.
Estimates about the adequacy of funding for the Company's activities are based
on certain assumptions, including the assumption that testing and regulatory
procedures relating to the Company's products under development can be conducted
at projected costs and within projected time frames and that the Company's
NIASPAN product receives regulatory approval on a timely basis and is
successfully marketed.
To satisfy its capital requirements, the Company may seek to raise funds
in the public or private capital markets. The Company's ability to raise
additional funds in the public or private markets will be adversely affected
if the results of the Company's ongoing or future clinical trials are not
favorable or if regulatory approval for any of the Company's products under
development is not obtained. The Company may seek additional funding through
corporate collaborations and other financing vehicles. There can be no
assurance that any such funding will be available to the Company, or if
available, that it will be available on acceptable terms. If adequate funds
are not available, the Company may be required to curtail significantly one
or more of its research or development programs or it may be required to
obtain funds through arrangements with future collaborative partners or
others that may require the Company to relinquish rights to some or all of
its technologies or products under development. If the Company is successful
in obtaining additional financing, the terms of the financing may have the
effect of diluting or adversely affecting the holdings or the rights of the
holders of Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
DEPENDENCE ON SINGLE SOURCES OF SUPPLY
Some materials used in the Company's products, including the active
ingredient in NIASPAN, are currently sourced from a single qualified
supplier. Although the Company has not experienced difficulty in acquiring
materials for product development to date, no assurance can be given that
supply interruptions will not occur in the future or that the Company will
not have to obtain substitute materials, which would require additional
product validations and regulatory submissions. Any such interruption of
supply could have a material adverse effect on the Company's ability to
manufacture its products or to obtain or maintain regulatory approval of such
products.
NO ASSURANCE OF ADEQUATE THIRD-PARTY REIMBURSEMENT
The Company's ability to commercialize successfully its products under
development is dependent in part on the extent to which appropriate levels of
reimbursement for the Company's products and
12
<PAGE>
related treatments are obtained from government authorities, private health
insurers and other organizations, such as health maintenance organizations
("HMOs"). Third-party payors are increasingly challenging the pricing of
pharmaceutical products. The trend toward managed healthcare in the U.S., the
growth of organizations such as HMOs and legislative proposals to reform
healthcare and government insurance programs could significantly influence
the purchase of pharmaceutical products, resulting in lower prices and
reduced demand for the Company's products under development. Such cost
containment measures and healthcare reform could affect the Company's ability
to sell its products under development and may have a material adverse effect
on the Company. Significant uncertainty exists about the reimbursement status
of newly approved pharmaceutical products. There can be no assurance that
reimbursement in the United States or foreign countries will be available for
any of the Company's products under development, that any reimbursement
granted will be maintained or that limits on reimbursement available from
third-party payors will not reduce the demand for, or negatively affect the
price of, the Company's products under development. The unavailability or
inadequacy of third-party reimbursement for the Company's products under
development would have a material adverse effect on the Company.
RISK OF PRODUCT LIABILITY CLAIMS; NO ASSURANCE OF ADEQUATE INSURANCE
Testing, manufacturing, marketing, and selling the Company's products
under development entails a risk of product liability. Although the Company
carries clinical trial product liability insurance in the aggregate amount of
$3,000,000, there can be no assurance that the existing coverage is adequate.
Furthermore, this existing coverage may not be adequate as the Company
further develops products. If the Company receives the required regulatory
approvals and begins to sell NIASPAN or any of its other products under
development, there can be no assurance that additional liability insurance
coverage for a commercialized product will be available in the future on
acceptable terms, if at all. The Company's business could be adversely
affected by the assertion of a product liability claim, and the Company could
be rendered insolvent if it does not have sufficient financial resources to
satisfy any liability resulting from such a claim or to fund the legal
defense of such a claim.
EARLY STAGE OF DEVELOPMENT; HISTORY OF OPERATING LOSSES; UNCERTAINTY OF
FUTURE PROFITABILITY
The Company is a development stage company. It has generated no revenues
from product sales and it does not expect to generate significant revenue
from product sales for at least the next 12 months. As of September 30, 1996,
the Company's accumulated deficit was $60.2 million. In connection with the
transfer of operations from Kos Holdings, Inc. to the Company on June 30,
1996, net operating loss carry forwards amounting to approximately $51.0
million and related tax benefits remained with Kos Holdings, Inc. and were
not transferred to the Company. Consequently, the Company had no tax assets
or liabilities as of June 30, 1996. See "The Company." To date the Company
has dedicated most of its financial resources to the development of NIASPAN,
the development of other products and general and administrative expenses.
The Company expects to incur significant operating losses for at least the
next 12 months, primarily due to the expansion of its research and
development programs and the establishment of a sales and marketing
organization. The Company's ability to achieve profitability will depend,
among other things, on its successfully completing development of its
products, obtaining regulatory approvals, establishing manufacturing, sales
and marketing capabilities, achieving market acceptance for its products and
maintaining sufficient funds to finance its activities. There can be no
assurance that the Company will be able to achieve profitability or that
profitability, if achieved, can be sustained. See "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and "Business."
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent on its ability to attract and
retain highly qualified scientific and management personnel. The Company
faces intense competition for personnel from other companies, academic
institutions, government entities and other organizations. There can be no
assurance that the Company will be successful in attracting and retaining key
personnel. The loss of key
13
<PAGE>
personnel, or the inability to attract and retain the additional,
highly-skilled employees required for the expansion of the Company's
activities, could adversely affect the Company's results of operations and
its business. See "Management."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
The Company's sole shareholder, each current holder of options to acquire
Common Stock and Kos Investments, Inc., which holds a note representing a
loan to the Company, have agreed not to sell shares of Common Stock for a
period of 180 days from the date of this Prospectus. The Company has granted
certain registration rights to the Company's sole shareholder and to Kos
Investments, Inc., the holder of a note representing a loan to the Company,
which entitle such entities to cause the Company to effect three
registrations under the Securities Act of sales of shares of the Company's
Common Stock owned by such entities. By exercising these registration rights,
these entities could cause a large number of shares to be registered and
become freely tradeable without restrictions under the Securities Act (except
for those purchased in the offering by affiliates of the Company) immediately
upon the effectiveness of such registration. In addition, the Company intends
to file, after the expiration of such 180 day period, registration statements
under the Securities Act to register an aggregate of shares of
Common Stock issued or reserved for issuance under the Company's employee
benefit plans. Such sales may have an adverse effect on the market price of
the Common Stock and could impair the Company's ability to raise additional
capital. See "Shares Eligible for Future Sale" and "Underwriting."
NO PRIOR PUBLIC MARKET; POSSIBLE STOCK PRICE VOLATILITY
Prior to this offering, there has been no public market for shares of the
Common Stock. Although the Company has submitted an application to have the
Common Stock approved for quotation on the Nasdaq National Market system,
there can be no assurance that a regular trading market will develop or be
sustained after the offering. The initial public offering price for the
Common Stock will be determined by negotiations between the Company and the
representatives of the Underwriters. See "Underwriting." The stock market,
including the Nasdaq National Market, on which the Company's shares are
expected to be quoted, has from time to time experienced significant price
and volume fluctuations that may be unrelated to the operating performance of
particular companies. In addition, the market price of the Common Stock, like
the stock prices of many publicly traded pharmaceutical and biotechnology
companies, may prove to be highly volatile. Announcements of technological
innovations or new commercial products by the Company or its competitors,
developments or disputes concerning patent or proprietary rights, publicity
regarding actual or potential medical results relating to products under
development by the Company or its competitors, regulatory developments in
either the United States or foreign countries, public concern as to the
safety of pharmaceutical and biotechnology products and economic and other
external factors, as well as period-to-period fluctuations in financial
results, among other factors, may have a significant impact on the market
price of the Common Stock.
CONTROL BY EXISTING SHAREHOLDER
Upon completion of this offering, Michael Jaharis, the Chairman of the
Board of Directors of the Company and one of its founders, will beneficially own
approximately % of the outstanding Common Stock (approximately % if the
Underwriters exercise their over-allotment option in full), excluding shares of
Common Stock issuable to Kos Investments upon conversion, if any, of a note
representing a loan to the Company. Accordingly, this shareholder will be able
to control the outcome of shareholder votes, including votes concerning the
election of directors, the adoption or amendment of provisions in the Company's
Articles of Incorporation, and the approval of mergers and other significant
corporate transactions. This level of concentrated ownership by one person,
along with the factors described in "Risk Factors--Anti-Takeover Provisions,"
may have the effect of delaying or preventing a change in the management or
voting control of the Company. See "Principal Shareholders."
14
<PAGE>
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Articles of Incorporation and Bylaws,
as well as the Florida Business Corporation Act, could discourage a third
party from attempting to acquire, or make it more difficult for a third party
to acquire, control of the Company without approval of the Company's Board of
Directors. Such provisions could also limit the price that certain investors
might be willing to pay in the future for shares of the Common Stock. Certain
of such provisions allow the Board of Directors to authorize the issuance of
preferred stock with rights superior to those of the Common Stock. Moreover,
certain provisions of the Company's Articles of Incorporation or Bylaws
generally permit removal of directors only for cause by a 60% vote of the
shareholders of the Company, require a 60% vote of the shareholders to amend
the Company's Articles of Incorporation or Bylaws, require a demand of at
least 50% of the Company's shareholders to call a special meeting of
shareholders, and prohibit shareholder actions by written consent. See
"Description of Capital Stock."
DILUTION; ABSENCE OF DIVIDENDS
Purchasers of the Common Stock in the offering will experience an
immediate dilution in net tangible book value of $ (assuming an initial
public offering price per share of $ ) per share. These investors will
also experience additional dilution upon the exercise of outstanding options.
See "Dilution." The Company intends to retain earnings, if any, for use in
its business and does not anticipate paying any cash dividends in the
foreseeable future. See "Dividend Policy."
15
<PAGE>
THE COMPANY
The Company's predecessor, Kos Holdings, Inc. ("Holdings"), which was
previously named Kos Pharmaceuticals, Inc., was incorporated in Florida on
July 1, 1988 to develop prescription pharmaceutical products principally for
the cardiovascular and respiratory markets. On June 25, 1996, Kos (named
after the Greek Island where Hippocrates founded the science of medicine) was
incorporated in Florida as the successor to the business of Holdings. On June
30, 1996, all of the assets and all of the liabilities of Holdings were
transferred to the Company in exchange for shares of common stock of the
Company (the "Reorganization"). The Reorganization was accomplished in order
to transfer the assets and operations of Holdings to the Company while
preserving Holdings' net operating loss carryforwards and related tax
benefits for Holdings and for Michael Jaharis, who solely financed the
Company's operations from inception. As a result, the Company had no tax
assets or liabilities as of June 30, 1996. Kos Investments, Inc. ("Kos
Investments") is the sole shareholder of Holdings. Kos Investments is
wholly-owned by, and serves as an investment vehicle for Michael Jaharis, one
of the Company's founders and its Chairman. All references in this Prospectus
to the Company include its wholly-owned subsidiary, Aeropharm Technology,
Inc. ("Aeropharm"), and the business and operations of Holdings, its
predecessor company, until June 30, 1996.
The Company's principal executive offices are located at 1001 Brickell Bay
Drive, Suite 2502, Miami, Florida 33131, and its telephone number is (305)
577-3464.
USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Stock offered
hereby are estimated to be $ million ($ if the Underwriters'
over-allotment option is exercised in full), at an assumed initial public
offering price of $ per share and after deducting underwriting discounts
and commissions and estimated offering expenses payable by the Company. The
net proceeds are expected to be used to fund the Company's research and
development programs, to recruit a specialty sales force and to fund other
expenses relating to the commercial launch of NIASPAN, to repay all or a portion
of the Investments Loan, and for working capital and other general corporate
purposes. The Investments Loan bears interest at First Union National Bank of
Florida's prime rate commencing July 1, 1996, escalating to a rate of 1% over
such prime rate during calendar year 1997, 2% over such prime rate during
calendar year 1998, and 3% over such prime rate during calendar year 1999, until
the maturity date of June 30, 1999. These borrowings were incurred to fund the
Company's operations since July 1, 1996. See "Certain Transactions." The Company
may also use a portion of the net proceeds to acquire businesses, technologies
or products complementary to the Company's business, although the Company does
not currently have any commitment or agreement for any such acquisitions. No
material transactions of this nature are currently planned or being negotiated.
Pending application of the proceeds as described above, the Company intends to
invest the net proceeds of this offering in short-term, investment grade,
interest-bearing securities.
DIVIDEND POLICY
The Company intends to retain earnings, if any, for use in its business
and, therefore, does not anticipate paying any cash dividends in the
foreseeable future. Any future determination as to the payment of cash
dividends will be made at the discretion of the Board of Directors and will
depend upon the financial condition, capital requirements and earnings of the
Company, as well as upon other factors that the Board of Directors may deem
relevant. The Company has not paid any cash dividends since inception.
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
September 30, 1996 and (ii) on an adjusted basis to reflect receipt and
application of the estimated net proceeds, after deducting underwriting
discounts and commissions and estimated expenses payable by the Company, from
the sale of shares of Common Stock pursuant to this offering. As of
November 30, 1996, the Company's outstanding principal balance under the
Investments Loan was $6,280,000. See "Use of Proceeds" and "Certain
Transactions."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------
ACTUAL AS ADJUSTED
----------- --------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt .............................................. $ 3,405 $
Shareholders' deficit:
Common stock; $.01 par value; 50,000,000 shares authorized;
10,000,000 shares issued and outstanding, and issued and
outstanding, as adjusted (1) ............................. $ 100
Additional paid-in capital ................................. 58,472
Deficit accumulated during the development stage ........... (60,223)
----------- --------------
Total shareholders' deficit ................................. (1,651)
----------- --------------
Total capitalization ........................................ $ 1,754 $
=========== ==============
<FN>
- ----------
(1) Excludes 3,675,000 shares of Common Stock reserved for issuance under the
Company's 1996 Stock Option Plan and 325,000 shares of Common Stock
reserved for issuance upon exercise of other outstanding options. Options
to acquire an aggregate of 2,158,000 shares of Common Stock at a weighted
average exercise price of $3.60 per share were issued and outstanding as
of September 30, 1996. Excludes shares of Common Stock issuable to
Kos Investments upon the conversion, if any, of a note representing the
Investments Loan.
</FN>
</TABLE>
17
<PAGE>
DILUTION
The net tangible book value of the Company as of September 30, 1996 was
approximately $(1,651,000), or $(0.17) per share. Net tangible book value per
share represents the amount of the Company's shareholder's equity, less
intangible assets, divided by 10,000,000, the number of shares of Common
Stock outstanding as of September 30, 1996.
Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of Common Stock in
this offering and the net tangible book value per share of Common Stock
immediately after completion of this offering. After giving effect to the
sale of shares of Common Stock in this offering at the assumed initial
public offering price of $ per share and after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company, the net tangible book value of the Company as of September 30, 1996
would have been $ or $ per share. This represents an immediate
increase in net tangible book value of $ per share to the existing
shareholder and an immediate dilution in net tangible book value of $ per
share to purchasers of Common Stock in this offering, as illustrated in the
following table:
Assumed initial public offering price per share ............... $
Net tangible book value per share as of
September 30, 1996 ....................................... $(0.17)
Increase per share attributable to new investors ...........
------
Pro forma net tangible book value per share after this
offering .................................................... $
------
Dilution per share to new investors ........................... $
======
Utilizing the foregoing assumptions, the following table summarizes the
total consideration paid to the Company and the average price per share paid
by the existing shareholder and by new investors purchasing shares of the
Common Stock in this offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------------- ----------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------------- ------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Existing Shareholder.. 10,000,000 % $52,989,000 % $5.30
New Investors ........
------------- ------------- -------------- ------------- ----------------
Total .............. 100% $ 100%
============= ============= ============== =============
</TABLE>
The foregoing table excludes 3,675,000 shares of Common Stock reserved for
issuance under the Company's 1996 Stock Option Plan and 325,000 shares of
Common Stock reserved for issuance upon exercise of other outstanding options.
Options to acquire an aggregate of 2,158,000 shares of Common Stock at a
weighted average exercise price of $3.60 per share were issued and outstanding
as of September 30, 1996. See "Management--Stock Option Plan" and Note 6 of
Notes to Consolidated Financial Statements. To the extent outstanding options
are exercised, there will be future dilution to investors in this offering. See
"Management--Employee Benefit Plans--Stock Option Plan." The above information
also excludes shares of Common Stock issuable to Kos Investments upon the
conversion, if any, of the note representing the Investments Loan.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's consolidated financial
statements and related notes included elsewhere in this Prospectus. The
statement of operations data for the five years ended June 30, 1996 and the
balance sheet data at June 30, 1992, 1993, 1994, 1995 and 1996 are derived
from the financial statements and the notes thereto of the Company audited by
Arthur Andersen LLP. The selected financial data, as of and for the three
months ended September 30, 1995 and 1996, have been derived from unaudited
financial statements of the Company that, in the opinion of management,
include all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation as of and for such periods. The results of
operations for the three months ended September 30, 1996 are not necessarily
indicative of the results of operations to be expected for the entire year.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------------
1992 1993 1994 1995 1996
-------------- ------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues ....................... $ -- $ -- $ 22 $ 14 $ --
Operating expenses:
Research and development ..... 2,476 4,930 6,663 8,387 13,816
General and administrative ... 975 1,232 1,619 1,614 1,772
Compensation recognized on
modification of stock option
grants(1) ................... -- -- -- -- 5,436
-------------- ------------- ------------- ------------- -------------
Total operating expenses ... 3,451 6,162 8,282 10,001 21,024
Other income ................... (1) (1) (2) (3) --
Interest expense (income) ..... 443 585 1,108 1,055 (14)
-------------- ------------- ------------- ------------- -------------
Total other (income) expense .. 442 584 1,106 1,052 (14)
-------------- ------------- ------------- ------------- -------------
Loss before minority interest . (3,893) (6,746) (9,366) (11,039) (21,010)
Minority interest(2) ........... -- -- (164) 1 16
-------------- ------------- ------------- ------------- -------------
Net loss ....................... $ (3,893) $ (6,746) $ (9,530) $ (11,038) $ (20,994)
============== ============= ============= ============= =============
Net loss per share (3) ......... $ (0.35) $ (0.60) $ (0.85) $ (0.98) $ (1.87)
============== ============= ============= ============= =============
Weighted average common shares
in computing net loss per
share(3) ..................... 11,216,750 11,216,750 11,216,750 11,216,750 11,216,750
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JULY 1, 1988
SEPTEMBER 30, (INCEPTION) TO
---------------------------- SEPTEMBER 30,
1995 1996 1996
---------- ------------- ----------------
(unaudited)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues ....................... $ -- $ -- $ 37
Operating expenses:
Research and development ..... 3,377 2,783 41,489
General and administrative ... 361 760 9,632
Compensation recognized on
modification of stock option
grants(1) ................... -- -- 5,436
----------- ------------- ----------------
Total operating expenses .... 3,738 3,543 56,557
Other income ................... -- -- (14)
Interest expense (income) ..... (3) 22 3,569
----------- ------------- ----------------
Total other (income) expense .. (3) 22 3,555
----------- ------------- ----------------
Loss before minority interest . (3,735) (3,565) (60,075)
Minority interest(2) ........... 15 -- (148)
----------- ------------- ----------------
Net loss ....................... $ (3,720) $ (3,565) $ (60,223)
=========== ============== ================
Net loss per share (3) ......... $ (0.33) $ (0.32) $ (5.37)
=========== ============== ================
Weighted average common shares
in computing net loss per
share(3) ..................... 11,216,750 11,216,750 11,216,750
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1996
---------- ----------- ----------- ----------- ---------- -------------
(IN THOUSANDS) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET(4):
Cash and cash equivalents ...................... $ 27 $ 13 $ 18 $ 41 $ 193 $ 205
Working capital (deficit) ...................... (8,407) (15,235) (25,394) (1,129) (8) (286)
Total assets ................................... 586 686 1,574 2,355 2,281 2,360
Total debt ..................................... 8,232 14,742 24,790 -- -- 3,405
Deficit accumulated during the development
stage .......................................... (8,350) (15,096) (24,626) (35,664) (56,658) (60,223)
Shareholder's equity (deficit) ................. (7,860) (14,606) (24,136) 943 1,914 (1,651)
<FN>
- ----------
(1) Reflects a one-time, non-cash charge associated with an extension of the
exercise period for stock options granted during 1988 to 1990 to the
Company's Chief Executive Officer and two independent consultants; no
other material economic terms of these options were changed.
(2) Represents the minority shareholder's interest in Aeropharm, which
interest was acquired by the Company in June 1996.
(3) See Note 2 of Notes to Consolidated Financial Statements for information
concerning the computation of net loss per share.
(4) The Company has funded its operations since July 1, 1996 using the
proceeds of the Investments Loan. As of November 30, 1996, the Company
had outstanding borrowings of $6,280,000 under the Investments Loan. See
"Use of Proceeds."
</FN>
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
A predecessor corporation to the Company was formed in July 1988 under the
name of Kos Pharmaceuticals, Inc., principally to conduct research and
development on new formulations of existing prescription pharmaceutical
products. In June 1993, Aeropharm Technologies, Inc., a then majority-owned
subsidiary of the Company, was formed to conduct research and development
activities on aerosolized MDI products for the treatment of respiratory
diseases. During June 1996, this predecessor corporation acquired the
outstanding minority interest in Aeropharm; changed its name to Kos Holdings,
Inc.; established the Company as a wholly-owned subsidiary under the name Kos
Pharmaceuticals, Inc.; and, effective as of June 30, 1996, transferred all of
its existing assets, liabilities and intellectual property, other than
certain net operating loss carryforwards, to the Company. Accordingly, all
references in this Prospectus to the Company's business include the business
and operations of Holdings until June 30, 1996.
Since inception, the Company has been a development stage company engaged
primarily in the development of cardiovascular and respiratory pharmaceutical
products. The Company has not recorded any significant revenues since
inception and has funded its operations exclusively through equity
contributions from its sole shareholder. Through September 30, 1996, the
Company had accumulated a deficit from operations of $60.2 million. In
connection with the transfer of operations from Holdings to the Company on
June 30, 1996, net operating loss carryforwards amounting to approximately
$51.0 million and related tax benefits were retained by Holdings and not
transferred to the Company. Consequently, the Company had no deferred tax
assets or liabilities as of June 30, 1996. The Company expects to continue to
incur significant operating losses for at least the next 12 months.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
The Company's research and development expenses decreased from $3.4
million for the three months ended September 30, 1995 to $2.8 million for the
three months ended September 30, 1996. The decrease was attributable
principally to the absence in the September 1996 quarter of the clinical
trials that were completed in late 1995 in support of the filing of a NDA
during May 1996 for the Company's first product, NIASPAN. The decrease in
clinical trial costs was partially offset by an increase in personnel costs,
principally in connection with the manufacturing scale-up and by an increase
in development costs associated with various third party development
agreements. The Company expects research and development activities to
increase as personnel are added and development activities are expanded.
General and administrative expenses increased from $400,000 for the three
months ended September 30, 1995 to $800,000 for the three months ended
September 30, 1996. The increase was primarily attributable to the hiring of
additional personnel to support the Company's marketing activities and
administrative functions, and professional fees. The Company expects that its
general and administrative expenses will continue to increase in support of
its marketing efforts and research and development programs.
Since July 1, 1996, the Company has funded its operations from the
proceeds of a loan from Kos Investments, the sole shareholder of Holdings. As
of September 30, 1996, the Company had outstanding borrowings of $3.4 million
under the Investments Loan. As a result of this loan the Company had $23,000
of interest expense for the three months ended September 30, 1996 compared
with no such expense for the three months ended September 30, 1995. The
Company expects to increase the amount of such borrowings from Kos Investments,
Inc. to finance its operating activities.
The Company incurred a net loss of $3.7 million for the three months ended
September 30, 1995 compared with a net loss of $3.6 million for the three
months ended September 30, 1996. The Company expects to report substantial
losses for at least the next 12 months.
20
<PAGE>
FISCAL YEARS ENDED JUNE 30, 1995 AND 1996
The Company's research and development expenses increased from $8.4
million for the fiscal year ended June 30, 1995 to $13.8 million for the year
ended June 30, 1996. This increase was attributable primarily to licensing and
development programs, hiring of additional personnel and increased clinical
trials costs. Hiring of additional personnel principally related to
manufacturing scale-up of certain of the Company's products under development
and to support the filing of a NDA for NIASPAN.
General and administrative expenses increased from $1.6 million for the
fiscal year ended June 30, 1995 to $1.8 million for the fiscal year ended
June 30, 1996.
In June 1996, the Company recorded a one-time, non-cash charge of $5.4
million for compensation expense associated with an adjustment of the
exercise period on certain stock options granted during 1988 to 1990 to an
officer and to two independent consultants of the Company.
During December 1994, the Company transferred its existing line of credit
facility with a local bank and its accumulated borrowings to Kos Investments,
Inc., the sole shareholder of Holdings. The effect of this transfer was to
increase the Company's paid-in capital in the amount of its accumulated
borrowings, of $30.4 million, outstanding on the date of transfer. As a
result of this transfer, the Company had $1.1 million of interest expense for
the fiscal year ended June 30, 1995 compared with no such expense for the fiscal
year ended June 30, 1996.
The Company incurred a net loss of $11.0 million for the fiscal year ended
June 30, 1995 compared with $21.0 million for the fiscal year ended June 30,
1996.
FISCAL YEARS ENDED JUNE 30, 1994 AND 1995
Research and development expenses increased from $6.7 million for the
fiscal year ended June 30, 1994 to $8.4 million for the fiscal year ended
June 30, 1995. This increase was attributable principally to hiring of
additional personnel in support of the Company's clinical trial activities on
NIASPAN. Research and development expenses also were higher in 1995 because
it was the first full year of operation of the Company's aerosol research
and development facility, which was launched during 1994.
General and administrative expenses, at $1.6 million, were essentially
unchanged from 1994.
As more fully explained above, during December 1994 the Company
transferred its existing credit facility with a local bank to Kos Investments,
Inc. As a result of the timing of this transfer, interest expense decreased
approximately $50,000 from the fiscal year ended June 30, 1994 to the fiscal
year ended June 30, 1995.
Minority interest expense decreased approximately $160,000 during the
fiscal year ended June 30, 1995 principally as a result of timing differences
in equity contributions made by the Company to its then majority-owned
aerosol subsidiary.
During 1995, revenue was recognized from consulting activities conducted
by the Company's Vice President of Aerosol Research and Development. These
consulting activities were of a non-recurring nature.
As a result of the foregoing, the Company incurred a net loss of $9.5
million for the fiscal year ended June 30, 1994 compared with $11.0 million
for the fiscal year ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company financed its operations since inception until June 30, 1996
through capital contributions from Kos Investments, which totaled an
aggregate of approximately $53.0 million as of June 30, 1996. Since July 1,
1996 the Company has financed its operations from the proceeds of the
21
<PAGE>
Investments Loan, which totaled approximately $3.4 million at September 30,
1996. All or a portion of the Investments Loan will be repaid using a portion
of the net proceeds from the sale of the Common Stock offered hereby in
excess of approximately $ . At September 30, 1996, the Company's
working capital deficit totaled approximately $286,000 and cash totaled
approximately $205,000. The Company expects to continue to incur significant
costs in connection with its ongoing research and development activities and
with the establishment of its marketing capabilities.
The Company's primary uses of cash to date have been in operating
activities to fund research and development, including clinical trials, and
general and administrative expenses. As of September 30, 1996, the Company's
net investment in equipment and leasehold improvements was $2.0 million. The
Company expects that additional equipment and facilities will be needed as it
increases its research and development activities.
Although the Company anticipates that the net proceeds from the sale of
the Common Stock offered hereby, together with available cash, cash
equivalents, short-term investments and expected interest income, will be
sufficient to fund the Company's operations for the next 12 months, the
Company's future cash requirements will be substantial and will depend on
many factors, some of which are outside the control of the Company. Such
factors include the problems, delays, expenses and complications frequently
encountered by development stage companies; the progress of the Company's
research, development and clinical trial programs; the costs and timing of
seeking regulatory approvals of the Company's products under development; the
Company's ability to obtain such regulatory approvals; the success of the
Company's sales and marketing programs; costs in filing, prosecuting,
defending and enforcing any patent claims and other intellectual property
rights; the extent and terms of any collaborative research, manufacturing,
marketing or other arrangements; and changes in economic, regulatory or
competitive conditions or the Company's planned business. As a result, the
Company may need to raise substantial additional capital to fund its
operations before achieving anticipated positive cash flows from operations
in 1998, assuming the successful commercialization of NIASPAN. The Company
expects that it would seek such additional funding through public or private
equity or debt financings or through collaborations. To the extent the Company
raises additional capital by issuing equity securities, ownership dilution to
existing shareholders will result and future investors may be granted rights
superior to those of existing shareholders. There can be no assurance, however,
that additional funding will be available on acceptable terms, or at all. See
"Risk Factors--Future Capital Needs; Uncertainty of Additional Funding."
22
<PAGE>
BUSINESS
OVERVIEW
Kos Pharmaceuticals, Inc. ("Kos", pronounced Kos, or the "Company") is
engaged primarily in the development of proprietary prescription
pharmaceutical products for the treatment of certain chronic cardiovascular
and respiratory diseases. The Company intends to manufacture its products and
to market such products directly through its own specialty sales force. The
Company's cardiovascular products under development consist of
controlled-release, once-a-day, oral dosage formulations. The Company's
respiratory products under development consist of aerosolized inhalation
formulations to be used primarily with the Company's proprietary inhalation
devices.
The Company was founded in 1988 by the former Chief Executive Officer,
Chief Operating Officer and Director of Product Development of Key
Pharmaceuticals, Inc., which was acquired by Schering-Plough Corporation in
June 1986. The Company believes that substantial market opportunities exist
by reformulating certain approved prescription pharmaceutical products to
improve safety or patient compliance or to achieve certain other marketing
advantages. Kos believes that developing proprietary products based on
currently approved drugs, rather than new chemical entities ("NCEs"), may
reduce regulatory and development risks. Seven of the Company's nine products
under development require NDA filings with the FDA. Developing products that
require NDA approval offers several advantages compared with generic
products, including potential for higher gross margins, limited competition
resulting from significant clinical and formulation development challenges,
and a three-year statutory barrier to generic competition.
On May 6, 1996, Kos submitted a NDA to the FDA for NIASPAN, its first
product under development. NIASPAN is a controlled-release, once-a-day, oral
formulation of niacin for the treatment of multiple lipid disorders, which
are primary risk factors for coronary heart disease.
STRATEGY
The Company's objective is to become a fully-integrated specialty
pharmaceutical company that develops, manufactures, and markets proprietary
products directly through its own specialty sales force. The Company's
business strategy includes the following fundamental elements:
SELECT PRODUCTS WITH UNREALIZED COMMERCIAL POTENTIAL. The Company
develops products that address unmet medical needs through formulation
improvements of existing drugs or distinctive marketing efforts. Kos
believes that the safety or patient compliance associated with certain
currently marketed drugs can be improved, thus providing substantial
market opportunities with the successful development of proprietary
formulations. In addition, Kos believes that substantial market
opportunities exist that can be addressed by marketing its products
through a direct sales force that can focus on specialist physicians and
provide those physicians with scientific information regarding the
therapeutic benefits of the Company's products.
FOCUS INITIALLY ON THE CARDIOVASCULAR AND RESPIRATORY MARKETS. Kos has
initially concentrated its product development efforts on the
cardiovascular and respiratory markets because they are large and growing
rapidly and include many chronic diseases requiring long-term therapy.
Management believes that as a result of physician prescribing patterns in
these markets, a relatively small, direct sales force can effectively
market its products. The Company's management team has substantial
experience in identifying product opportunities and marketing products in
these two therapeutic categories.
DEVELOP PROPRIETARY FORMULATIONS OF CURRENTLY APPROVED PHARMACEUTICAL
COMPOUNDS. Kos believes that by developing proprietary products based on
currently approved drugs, rather than NCEs, the Company can reduce
regulatory and development risks and shorten the product development
cycle. Further, developing products that require NDA approval offers
several
23
<PAGE>
advantages compared with generic products, including the potential for
higher gross margins, limited competition resulting from significant
clinical and formulation development challenges, and a three-year
statutory barrier to generic competition. The Company's management and
scientific personnel have significant experience in formulation technology
using controlled-release and aerosolized delivery methods.
MANAGE CLINICAL DEVELOPMENT. The Company managed the extensive clinical
trials for NIASPAN, and Kos intends to continue to manage directly the
clinical development of future products. The Company believes that its
commitment to this process ensures the quality of clinical development,
allows the Company to better coordinate the regulatory objectives of
clinical trials and maximizes the marketing utility of such trials.
MANUFACTURE PRODUCTS INTERNALLY. In order to maximize the quality of
developed products, assure compliance with regulatory requirements, and
minimize costs, the Company currently intends to manufacture internally
all of its solid dose and aerosol products. Moreover, the Company believes
that certain manufacturing challenges associated with aerosol formulations
present a barrier to entry in the aerosol pharmaceutical market. The
Company's management has substantial experience in manufacturing solid
dose and aerosol products. Kos estimates that it has sufficient capacity,
with limited additional capital expenditures, to accommodate sales volume
for such products through the year 2000.
MARKET DIRECTLY THROUGH A SPECIALTY SALES FORCE. The Company intends to
market its products through a direct sales force focused on providing
education-oriented product information to selected specialist physicians.
Kos intends to market all but one of its planned products in North America
through its direct sales force. In areas outside of North America, Kos
intends initially to market certain of its products through licensing
arrangements with third parties, although it may establish direct sales
and marketing capabilities in selected areas.
LEVERAGE CORE COMPETENCIES THROUGH ALLIANCES WITH CORPORATE AND RESEARCH
PARTNERS. The Company intends to expand its product portfolio by
in-licensing existing products or technologies or entering into other
development collaborations with third parties. Kos is currently developing
three once-a-day cardiovascular products with Fuisz, using its proprietary
microsphere formulation technology. Additionally, the Company is
sponsoring basic research at Boston University and Tufts University and
intends to enter into corporate alliances to develop products identified
through these research programs. The Company intends to enter into
additional research alliances in the future.
24
<PAGE>
PRODUCTS UNDER DEVELOPMENT
Seven of the Company's nine products under development require NDA
filings. Although NDA approvals are generally associated with products
consisting of NCEs, which require extensive preclinical studies and clinical
trials, the Company's products under development consist of new formulations
of existing drugs. For products currently under development, the Company
typically will be required to perform Phase I clinical pharmacology and Phase
III safety and efficacy pivotal trials; limited preclinical toxicology
studies will also be required on some products. Compared with the development
of NCEs, the Company believes that its product development strategy generally
reduces regulatory risks and development costs and shortens overall
development time. In order to take advantage of certain market opportunities,
the Company is developing two products that require abbreviated new drug
application ("ANDA") filings. The Company has retained worldwide marketing
rights for all of the products set forth in the table below.
<TABLE>
<CAPTION>
PRODUCTS UNDER DEVELOPMENT
PRODUCT DESCRIPTION AND REGULATORY DEVELOPMENT
PRODUCT THERAPEUTIC APPLICATION FILING STATUS
------- ----------------------- ---------- ------
<S> <C> <C> <C>
CARDIOVASCULAR
Niaspan/registered Niacin for lipid altering NDA NDA submitted May 1996
trademark/
Combination Combination of two currently NDA Formulation; clinical
Product(1) approved drugs for lipid altering pharmacology expected to
commence in 1997
Isosorbide-5- Nitrate for angina ANDA Clinical pharmacology commenced
Mononitrate(1) in November 1996
Captopril(1) ACE inhibitor for hypertension NDA Formulation; clinical
pharmacology expected to
commence in 1997
RESPIRATORY (METERED-DOSE INHALERS)
Albuterol Beta-agonist for asthma ANDA Clinical validation study
(CFC) completed; clinical
pharmacology expected to
commence in 1997
Triamcinolone(2) Inhaled steroid for asthma NDA Formulation; clinical
(non-CFC) pharmacology expected to
commence in 1997
Flunisolide(2) Inhaled steroid for asthma NDA Formulation; clinical
(non-CFC) pharmacology expected to
commence in 1997
Albuterol(2) Beta-agonist for asthma NDA Formulation; clinical
(non-CFC) pharmacology expected to
commence in 1998
Confidential Unnamed compound with novel NDA Formulation; clinical
Product(3) device for treating asthma for pharmacology expected
(non-CFC) the pediatric and geriatric to commence in 1998
markets
<FN>
- ----------
(1) Being developed in collaboration with Fuisz. See "--Collaboration with Fuisz Technologies Ltd."
(2) Utilizing the Company's proprietary breath coordinated inhaler, currently under development.
(3) Utilizing the Company's proprietary breath actuated inhaler, currently under development.
</FN>
</TABLE>
25
<PAGE>
CARDIOVASCULAR PRODUCTS
The Company is developing once-a-day, controlled-release prescription
products for the treatment of lipid disorders, ischemic heart disease
(including angina), and hypertension. In 1995, such disease segments of the
cardiovascular market achieved aggregate sales in the United States of
approximately $10.2 billion.
NIASPAN
SUMMARY. NIASPAN is a once-a-day, oral, solid-dose, controlled-release
formulation of niacin for the treatment of multiple lipid disorders, a
condition typically associated with elevated cholesterol involving multiple
lipids that are primary risk factors for coronary heart disease ("CHD"). On
May 6, 1996, the Company submitted a NDA to the FDA for NIASPAN. If NIASPAN
is approved, the Company believes it will be the only once-a-day,
controlled-release niacin product approved by the FDA for the treatment of
multiple lipid disorders. The Company has conducted three double-blinded,
placebo-controlled clinical trials in which NIASPAN produced statistically
and clinically significant changes in several lipid components without
generating treatment-related serious adverse events. Moreover, in a two-year
safety study, less than 1% of patients discontinued use of NIASPAN because of
clinically significant elevations in liver enzyme levels.
LIPID-ALTERING MARKET. Clinical research since the mid-1980's has
determined that an elevated level of LDL cholesterol, a condition referred to
as hyperlipidemia, is a critical atherogenic risk factor for CHD.
Hyperlipidemia is a lipid metabolism disorder that results in excess lipids
in the blood, which can block arteries and create adverse coronary events,
such as CHD and myocardial infarction. In addition to elevated low-density
lipoprotein ("LDL") cholesterol ("bad" cholesterol), low levels of
high-density lipoprotein ("HDL") cholesterol ("good" cholesterol) and high
levels of triglycerides are risk factors for CHD according to the National
Institutes of Health ("NIH") and the American Heart Association ("AHA"). HDL
cholesterol is considered to be protective against CHD because it removes
harmful cholesterol from blood vessels and peripheral tissues. Moreover,
recent research has indicated that an elevated level of lipoprotein (a)
("Lp(a)"), a component of LDL cholesterol, may be as important an independent
risk factor for CHD as elevated total cholesterol. As a result of the
increased awareness and the prevalence of multiple lipid disorders,
lipid-altering drugs have emerged as one of the largest and fastest growing
pharmaceutical product segments. In 1995, the market for cholesterol-reducing
drugs exceeded $2 billion in the United States and $5 billion worldwide.
While the risks of multiple lipid disorders are becoming well recognized,
the condition remains significantly untreated worldwide. To address this
large unmet medical need, the NIH convened a panel of cholesterol research
experts, the National Cholesterol Education Program ("NCEP"), to establish
recommended cholesterol levels, principally total and LDL cholesterol, and to
establish other risk factors for CHD. Based on extensive research conducted
during the last 20 years, the NCEP established guidelines consisting of
recommended lipid goals and intervention criteria, such as diet and drug
therapies, for reducing the risk of heart disease and heart attack. According
to the guidelines, an estimated 52 million people in the United States have
levels of LDL cholesterol that exceed the levels recommended by the NCEP and,
approximately 13 million of these persons would require both diet and drug
therapies to achieve adequate reduction in cholesterol levels. The Company
estimates that approximately half of these 13 million people have one or more
other lipid components that are outside the levels recommended by the NIH and
the AHA. Additionally, it is estimated that as many as 30% of the 11 million
patients in the United States with confirmed CHD do not have elevated LDL
cholesterol but do have clinically deficient HDL cholesterol levels. Further,
an elevated level of Lp(a) is estimated to be present in 20% of the U.S.
adult population. The Company believes that the market for lipid-altering
drugs should grow as awareness and diagnosis of lipids, particularly those
other than LDL cholesterol, continue to increase.
When diet and exercise fail to adequately control cholesterol levels,
physicians typically prescribe lipid-altering medications. Physicians can
choose from the following four classes of medications when
26
<PAGE>
attempting to alter lipid levels: HMG CoA reductase inhibitors, or "statins"
(e.g., lovastatin); fibric acid derivatives (e.g., gemfibrozil); bile-acid
sequestrants (e.g., cholestyramine); and niacin. The statins are the most
widely prescribed lipid-altering medication, accounting for nearly $2 billion
in U.S sales in 1995 and 72% of the 35 million prescriptions for
lipid-altering medication in the United States in 1995. Generally, the
statins are highly effective in lowering total and LDL cholesterol but have
limited impact in raising HDL cholesterol or in substantially reducing
triglycerides. Gemfibrozil, the major fibric acid derivative in the U.S.,
accounted for approximately 20% of total lipid-altering prescriptions in
1995. Gemfibrozil is most commonly prescribed to reduce triglycerides and has
limited efficacy on total, LDL and HDL cholesterol. The remaining product
categories, including bile-acid sequestrants and existing preparations of
niacin, represented approximately 8% of U.S. lipid-altering prescriptions in
1995.
OVERVIEW OF NIACIN. Niacin is a water-soluble vitamin that has long been
recognized as an effective pharmacologic agent for the treatment of multiple
lipid disorders, including elevated LDL and low HDL cholesterol. In numerous
independent studies performed during the past 30 years, niacin has proven
effective in reducing total cholesterol, LDL cholesterol and triglycerides,
as well as in increasing HDL cholesterol. Additional clinical studies have
indicated that long-term treatment with niacin reduces morbidity and
mortality in patients with CHD. The NIH recommends niacin as first-line drug
therapy because of its low cost and its efficacy in altering multiple lipid
components.
Although niacin has demonstrated favorable efficacy on most major lipid
components, adverse side effects associated with currently available
preparations of niacin have prevented it from becoming widely used to treat
hyperlipidemia. Immediate-release ("IR") preparations of niacin generally are
administered three times daily and can cause multiple flushing episodes,
characterized primarily by facial redness and tingling, often accompanied by
rash. Because at least two IR niacin doses are usually taken during the
daytime, frequent flushing episodes are often embarrassing as well as
uncomfortable. Consequently, in many patients, these flushing episodes,
particularly in the daytime, result in non-compliance with the recommended
dosing regimen for the product or complete discontinuation of its use. In
order to remedy the side effects associated with IR niacin, several
manufacturers have developed sustained-release ("SR") preparations of niacin,
typically administered twice a day. Such SR preparations have not been
approved by the FDA for treatment of lipid disorders, and their
administration frequently has been associated with a high incidence of liver
toxicity. Consequently, despite its broad favorable effect on multiple lipids
and its position as the NIH's recommended first-line drug therapy for
treatment of hyperlipidemia, U.S. drug store sales of niacin were
approximately $14 million in 1995. The Company believes that a significant
opportunity exists to expand the market for niacin with an improved
formulation that maintains the compound's favorable efficacy profile while
reducing adverse events.
NIASPAN PRODUCT DEVELOPMENT. Kos has developed a controlled-release
hydrogel matrix formulation of niacin that reduces the intolerable side
effects and frequent safety problems characteristic of currently available
niacin formulations. Kos believes that it is the unique controlled-release
nature of its NIASPAN formulation in conjunction with NIASPAN's specific
dosing regimen that minimizes adverse events while maintaining niacin's
positive effect on lipids. Kos also believes the recommended dosing regimen
for NIASPAN contributes to the positive effects on lipid levels because of
the chronobiology of lipid metabolism.
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Although niacin's efficacy on multiple lipid components has been well
documented for many years, relatively little has been published about
niacin's mechanism of action, its complete metabolic profile, or other
elements of its pharmacology. As a result, the Company's clinical development
of NIASPAN has included extensive pharmacokinetics research, including 12
studies involving 308 healthy volunteers, as well as two pilot studies, three
pivotal trials, and a long-term open label safety study. The Company's
clinical development program, which has studied the effects of NIASPAN in
1,170 persons, is summarized in the table below.
<TABLE>
<CAPTION>
NIASPAN CLINICAL DEVELOPMENT PROGRAM
NIASPAN DOSING
SUBJECTS PERIOD STATUS
-------- ------------ ---------
<S> <C> <C> <C>
12 PHARMACOKINETIC STUDIES 308 Up to 3 wks. Completed
2 PILOT STUDIES 39 2 mos. Completed
DOUBLE-BLINDED PLACEBO
CONTROLLED PIVOTAL TRIALS:
NIASPAN 1,500 mg 76 4 mos. Completed
NIASPAN 1,000 mg and 2,000 mg 82 4 mos. Completed
NIASPAN dose escalation to 3,000 mg 87 6 mos. Completed
LONG-TERM OPEN LABEL SAFETY STUDY 728 22 mos. Ongoing
Memo:
SUBJECTS INCLUDED IN NDA 633
TOTAL NIASPAN SUBJECTS 1,170
</TABLE>
In a total of six clinical trials conducted at 17 lipid research centers
in the United States, NIASPAN has been evaluated in 633 patients with
confirmed diagnoses of hyperlipidemia. Three of these clinical trials were
double-blinded, placebo-controlled pivotal trials. In each of these studies
involving males and females ages 21 to 75, subjects were evaluated for the
percentage change from baseline in LDL cholesterol, HDL cholesterol, total
cholesterol, triglycerides, apolipoprotein B, Lp(a) and apolipoprotein A-1.
Safety endpoints included objective measurements such as liver enzyme levels
and levels of fasting glucose and uric acid as well as subjective endpoints,
such as flushing and symptoms of gastrointestinal distress. Additionally, the
Company is conducting a 22-month, open label safety study, in approximately
728 patients, of which 133 patients had completed the study before May 1996.
The results from these 133 patients were included in the Company's NDA
submission for NIASPAN. This trial included a subset of patients dosed
concomitantly with NIASPAN and a statin or bile-acid sequestrant.
No clinically significant serious adverse safety trends arose during the
clinical trials of NIASPAN. Of all patients treated with NIASPAN in the
pivotal and long-term safety trials, only four patients with normal liver
function tests at baseline showed clinically significant elevations in liver
function tests (defined as elevations greater than three times the upper
limit of normal) during treatment with NIASPAN and only two patients treated
with NIASPAN discontinued the drug because of elevations in liver function
tests. Treatment with NIASPAN revealed no significant differences compared
with placebo in the incidence of subjective adverse events with the exception
of flushing and rash. The Company believes that such flushing episodes will
be acceptable to most patients when they do occur due to the combination of
NIASPAN's formulation, its dosing regimen, and proper dose titration. See "--
Cardiovascular Products--NIASPAN--Marketing Strategy for NIASPAN."
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The following table sets forth results with respect to principal efficacy
endpoints of the Company's three double-blinded, placebo-controlled pivotal
trials and the one open label long-term safety study of NIASPAN. In these
studies, NIASPAN consistently showed clinically and statistically significant
changes (p/less than/0.001 compared with baseline) in all of the major lipids
measured, including those considered to be most important in the development
of CHD.
NIASPAN LIPID-ALTERING PROFILE (1)
PERCENTAGE CHANGE
FROM BASELINE(2)
--------------------
Total Cholesterol Decreased 11% to 12%
LDL Cholesterol Decreased 14% to 19%
HDL Cholesterol Increased 22% to 29%
Triglycerides Decreased 25% to 35%
Lp(a) Decreased 24% to 29%
- ----------
(1) Intent-to-Treat Population at 2,000 mg Once-a-Day.
(2) Statistically significant for all indicated lipids at p/less than/0.001.
Based on the results of the three double-blinded, placebo-controlled
clinical trials and the long-term safety study, Kos has filed a NDA seeking
approval for NIASPAN for the treatment of elevated total and LDL cholesterol
and elevated serum triglycerides, consistent with the FDA's standard labeling
for niacin when used as a lipid-altering agent (rather than as a nutritional
supplement). Kos believes that its clinical trial data will support the
approval of such standard labeling for NIASPAN. The Company also is seeking
approval for the treatment of isolated low HDL cholesterol and as concomitant
therapy with statins and bile-acid sequestrants to decrease total and LDL
cholesterol.
In the clinical trials performed by the Company, NIASPAN was shown to
decrease total and LDL cholesterol levels less than reported by statin
manufacturers in the 1996 Physician's Desk Reference (the "PDR"). These data
also indicate, however, that the statins are less effective than NIASPAN in
raising HDL cholesterol and lowering triglycerides. Numerous independent
clinical studies evaluating the effects of statins on Lp(a) indicate that the
statins have little or no effect on reducing Lp(a), whereas NIASPAN
significantly reduces Lp(a).
MARKETING STRATEGY FOR NIASPAN. The Company intends to market NIASPAN
directly to the specialist physicians within the cardiovascular market who
are among the leading prescribers of lipid-altering medications.
Specifically, the Company believes there are approximately 16,000 specialist
physicians, consisting primarily of cardiologists and internists, who account
for approximately 40% of the total prescriptions for lipid-altering
medications in the United States in 1995. The Company's initial sales force
is expected to consist of approximately 70 field representatives and managed
care specialists to be trained in detailing NIASPAN prior to its expected
launch in 1997. Kos estimates that it will be able to detail each of these
physicians up to six times a year with such a sales force. Kos believes that
the significant prior experience of members of its management team in
recruiting and managing specialty sales forces in this market, aided by
favorable hiring conditions in the pharmaceutical industry, will allow the
Company to have its sales force in place within the projected time frame.
Within a year following NIASPAN's launch, Kos expects to expand its direct
sales force and possibly to supplement it with a contract sales force that
will detail selected additional specialist physicians not addressed by the
Company's specialty sales force. The Company has no present plans to market
NIASPAN outside the United States.
If approved by the FDA, the marketing of NIASPAN will focus on the NIH and
AHA recommendation that niacin be used as first-line drug therapy for the
treatment of hyperlipidemia. Additionally, the Company intends to inform the
specialist physicians as to the manner in which NIASPAN achieves its safety
and efficacy profile. This marketing program will be implemented through
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<PAGE>
direct visits with selected physicians, medical journal reprints, seminars,
and clinical discussion groups. The Company also intends to educate patients
on the benefits and proper use of NIASPAN through brochures and product
sample "starter packs" to encourage proper dose titration. Information
delivered by the Company to physicians and patients will include a discussion
about the flushing side effects of NIASPAN, including the importance of
proper dose titration and adherence to the prescribed dosing regimen to
reduce this side effect. Although most patients taking NIASPAN will flush
occasionally, the Company believes that the combination of NIASPAN's
formulation, its dosing regimen, and proper dose titration should result in
an incidence of flushing episodes that are tolerable for most patients.
NIASPAN's dosing regimen provides for the drug to be taken once-a-day at
night; therefore, any flushing episodes will normally occur while the patient
is sleeping. The Company believes that flushing during the night will not
cause the discomfort or embarrassment that often accompanies the multiple
daytime flushing episodes that occur with IR niacin.
The Company expects that NIASPAN will be priced below the statins and
competitively with gemfibrozil, while retaining the gross margins typically
associated with NDA products. The Company believes that NIASPAN's relatively low
anticipated selling price combined with its favorable effects on multiple lipid
components also should make it attractive to the managed care market. The
Company plans to include a number of managed care sales specialists within its
sales force to address this market segment.
LIPID-ALTERING COMBINATION PRODUCT
In addition to NIASPAN, Kos is developing a product that consists of a
combination of two currently approved drugs for the treatment of multiple
lipid disorders. The combination product will require a NDA. The Company
believes that a once-a-day tablet combining the complementary properties of
its combination product represents an effective modality for treating
patients with multiple lipid disorders. The Company also believes that this
once-a-day product should offer significant improvements in patient
compliance compared with taking each product independently under their
recommended dosing regimens. The potential market for the combination product
consists of patients with multiple lipid disorders, including high total and
LDL cholesterol, high triglycerides or low HDL cholesterol.
The product is currently in the formulation development stage, and the
Company expects that clinical pharmacology trials will commence in 1997. By
or near the time of completion of the development of the combination product,
the patent for the one currently patented component compound will have
expired, which will enable the Company to market its combination product
following FDA approval. Although it is expected that generic versions of the
individual components will be marketed following patent expiration, the
Company believes that the positive effects of the combination product on
multiple lipid components and the convenience associated with taking one
tablet, once-a-day should support a price premium compared with any generic
versions of the individual drugs.
The combination product will be marketed by the same Kos specialty sales
force that will market NIASPAN and to essentially the same group of
physicians.
ISOSORBIDE-5-MONONITRATE
Kos is developing a once-a-day, controlled-release, oral, generic version
of IS-5-MN for the prophylactic treatment of angina pectoris. This product,
which will be a branded generic requiring an ANDA filing, is being developed
in order to provide Kos with a near-term product for the angina market and to
expand its cardiovascular product line. A formulation of IS-5-MN has been
developed and the Company began a clinical pharmacology study during November
1996. The Company intends to leverage its specialty sales force by having its
sales representatives market IS-5-MN during physician office visits while
detailing NIASPAN.
Angina pectoris is a cardiovascular related disorder that is characterized
by thoracic pain and a feeling of suffocation, most often due to anoxia (lack
of oxygen supply) to the myocardium precipitated
30
<PAGE>
by physical exertion or excitement. The treatment of angina pectoris includes
several classes of therapeutic compounds including nitrates, beta-blockers,
and calcium channel blockers. The beta-blockers and calcium channel blockers,
as well as certain forms of nitrates, are long-acting preparations most
commonly prescribed for prophylaxis of chronic angina pectoris. In 1995, U.S.
sales of nitrate products approximated $580 million. The only marketed
once-a-day mononitrate is the fastest growing product within the nitrate
segment; U.S. sales of this product grew by 260% in 1995 from 1994.
CAPTOPRIL
The Company is also developing a once-a-day, controlled-release captopril,
an angiotensin converting enzyme ("ACE") inhibitor for the treatment of
hypertension. Kos believes that its captopril formulation, for which a NDA is
required, will be the first or second once-a-day formulation of this ACE
inhibitor. At present, captopril is dosed as an IR tablet to be taken two or
three times daily. The U.S. patent on the branded product expired in the
first quarter of 1996 and there currently exist many generic forms of this
immediate-release product. The Company believes that its controlled-release,
once-a-day formulation of captopril will provide a competitive advantage
compared with the generic versions of IR captopril and this advantage will
support a modest price premium compared with generics. Captopril is currently
in the formulation development stage and the Company expects that clinical
pharmacology trials will commence in 1997.
Hypertension is a major health care problem in the United States that
accounted for almost half of all cardiovascular related physician visits in
1995. In 1995, U.S. sales of products addressing the antihypertensive disease
segment were estimated to be in excess of $5.6 billion. ACE inhibitors
constituted the second largest class of products of the antihypertensive
market, after calcium channel blockers, generating approximately $2.7 billion
in sales in the United States in 1995. In its existing two-to-three times a
day dosage forms, sales of captopril in the United States were approximately
$520 million in 1995, although 1996 sales have been trending lower because of
generic competition. Captopril accounted for approximately 13% of the 65
million prescriptions for ACE inhibitors in the United States in 1995.
RESPIRATORY PRODUCTS
The Company is developing five aerosolized inhalation pharmaceutical
products, dispensed in MDI devices, for the treatment of asthma. The
Company's management has substantial experience in formulating,
manufacturing, and marketing aerosolized products.
MARKET OVERVIEW
The respiratory market consists of the asthma and allergy segments. In
1995, the market for respiratory prescription drugs was $3.2 billion in the
United States, of which the market for asthma products was $2.4 billion.
Asthma is a complex respiratory disorder that results in troubled breathing
due to inflammation and constriction of the bronchial airways, caused by
factors including allergens, such as dust and pollen, or vigorous exercise.
Asthma is principally treated by two classes of therapeutic compounds,
bronchodilators and anti-inflammatory agents. Bronchodilators, which are used
to open constricted airways during asthma, include beta-agonists (e.g.,
albuterol), xanthines (e.g., theophylline) and anti-cholinergics (e.g.,
ipratropium). Anti-inflammatories, which include cromolyns (e.g., cromolyn
sodium) and corticosteroids (e.g., triamcinolone, beclomethasone, and
flunisolide) are used to diminish inflammation causing the asthma. Each of
these therapeutic compounds, except xanthines, is delivered primarily through
MDI devices. Drug delivery through such MDI devices is believed to be the
fastest growing form of drug delivery in the pharmaceutical industry. Kos has
focused on this mode of delivery for the asthma market because of its
efficacy and because of management's experience with formulating and
marketing aerosolized inhalation products.
Currently, most MDI products use CFC propellants. Although, due to
environmental concerns, the use of CFC propellants has been banned or
severely restricted for most worldwide commercial uses,
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<PAGE>
CFC's are still permitted in limited amounts for MDI pharmaceutical products
under an "essential use" exemption available under the Montreal Protocol on
Substances that Deplete the Ozone Layer. It is expected, however, that such
"essential use" exemptions will grow more limited and will eventually expire.
In anticipation of these future restrictions, all of the Company's proposed
MDI products, with the exception of albuterol (CFC), are being developed with
environmentally safe non-CFC propellants. See "Government Regulations."
ALBUTEROL (CFC)
The Company is developing a generic version of albuterol (CFC) to be
dispensed in a generic MDI. The Company has commenced scale-up and completed
manufacture of clinical supplies of albuterol (CFC). It has recently
completed a human clinical validation study and a pivotal clinical
pharmacology trial is expected to commence in early 1997. The Company expects
that it will submit an ANDA for its albuterol (CFC) in 1997. Kos intends to
distribute albuterol (CFC) through a generic distributor. Although the
Company's long-term strategy is to market its own branded proprietary aerosol
products using non-CFC propellants, albuterol (CFC) will provide the Company
with limited near-term revenue opportunities. Moreover, albuterol (CFC) will
enable the Company to demonstrate its aerosol formulation and manufacturing
capabilities earlier than would be possible with a non-CFC product. The
Company believes that such demonstrated aerosol capabilities might provide it
with opportunities to cross-license products or collaborate with other
pharmaceutical companies, especially outside the United States, that lack MDI
capabilities but that might desire such products. The Company has not had
discussions with any third parties regarding any possible licensing
arrangements.
Albuterol is the most widely used MDI product approved for the treatment
of asthma, accounting for nearly $680 million in sales and 26 million
prescriptions in the United States in 1995, although 1996 sales have been
trending lower because of generic competition. Kos anticipates a relatively
limited number of generic competitors for generic albuterol because of the
manufacturing challenges and the high capital costs of entering the aerosol
pharmaceutical business.
TRIAMCINOLONE (NON-CFC) WITH BREATH COORDINATED INHALER ("BCI")
Kos is developing a proprietary non-CFC formulation of triamcinolone to be
used with the Company's proprietary breath coordinated inhaler ("BCI"). This
product will require the submission of a NDA. The Company believes that its
BCI may improve the coordination of inhalation with actuation of medication,
thereby offering possible benefits in patient compliance and uniform dose
administration. Triamcinolone is a corticosteroid that is used to treat the
underlying inflammation of asthma. Triamcinolone is currently in the
formulation development stage and the Company expects clinical pharmacology
trials to commence in 1997.
Inhaled steroids are being widely prescribed because their efficacy for
prophylactic treatment is greater than that of other asthma products that can
be delivered through MDIs. Triamcinolone, marketed by only one U.S. producer,
is the largest selling of the metered-dose inhaled steroids. U.S. sales of
inhaled steroids were approximately $450 million in 1995, of which
triamcinolone accounted for $199 million.
FLUNISOLIDE (NON-CFC) WITH BCI
Kos is developing a non-CFC proprietary formulation of flunisolide to be
used with its BCI. Flunisolide is a long-acting inhaled steroid for the
treatment of asthma. The Kos formulation of flunisolide, for which a NDA is
required, is currently in development, and the Company expects clinical
pharmacology trials to commence in 1997. Flunisolide, also marketed by only
one U.S. producer, is the fastest growing inhaled steroid, with U.S. sales of
approximately $120 million in 1995, representing an increase of 40% from
1994.
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<PAGE>
OTHER MDI AND DEVICE PRODUCTS
Kos is developing a non-CFC albuterol to address environmental regulations
ultimately that will require manufacturers to phase out the CFC-based MDIs,
including the Company's generic albuterol (CFC) product. Kos is also
developing a second proprietary MDI device, a breath actuated inhaler
("BAI"). The Company's BAI operates automatically and is being developed
principally to address the difficulties in taking inhaled medication often
faced by children and the elderly. The Company intends to develop the BAI
with one of its non-CFC formulations. Clinical pharmacology trials with the
BAI are expected to commence in 1998. The Company also is developing a
proprietary inhalation dose counter designed to indicate when sufficient
doses no longer remain in the aerosol canister, thereby alerting the patient
to obtain a "refill" prescription. At present, the Company intends to use the
inhalation dose counter on all of its inhalation products with the exception
of albuterol (CFC).
COLLABORATION WITH FUISZ TECHNOLOGIES LTD.
The Company has entered into certain agreements with Fuisz, a company
engaged in the development and commercialization of drug delivery and food
applications. Pursuant to these agreements, the Company will collaborate with
Fuisz in the development of up to six products principally using Fuisz'
proprietary microsphere formulation technology. Captopril, the combination
product and IS-5-MN are currently being developed pursuant to this
collaboration with Fuisz. Fuisz also committed to collaborate on the
development of up to three other products; one of these products may be
subject to a joint venture arrangement. Kos believes that Fuisz' proprietary
microsphere technology is uniquely well-suited to overcome the particular
formulation challenges associated with the Company's combination product and
with captopril.
Under the terms of such agreements, Fuisz is responsible for formulating
each product and Kos is responsible for the remainder of the development
program. The first milestone of Fuisz' formulation work will permit Kos to
file Investigational New Drug ("IND") applications with the FDA for
subsequent pharmacokinetics and clinical studies on the products. Except for
the possible joint venture project, Kos has exclusive rights to manufacture
the formulated products and Kos retains exclusive worldwide marketing rights
upon exercising its existing option rights. On those products, Kos will pay
the development costs and pay license and development fees based on milestone
achievement. In addition, the Company will pay royalties to Fuisz based on
product sales by Kos.
SPONSORED RESEARCH
BOSTON UNIVERSITY
Kos is sponsoring basic research at Boston University focused on the role
of apolipoproteins in cardiovascular and Alzheimer's diseases. The objective
of the research program is to identify molecular agents involved so that
pharmaceutical products can be developed for the cardiovascular and
Alzheimer's indications. Patents have been filed for all of the key
discoveries related to this research, and Kos has assignment or exclusive
license rights for these patent filings. The research is being led by
Vassilis Zannis, Ph.D., Professor and Director of the Section of Molecular
Genetics of the Cardiovascular Institute at Boston University Medical Center.
Dr. Zannis is recognized as a leading expert in the research of
apolipoproteins.
TUFTS UNIVERSITY
Since 1988, Kos has also been sponsoring research at Tufts University
aimed at identifying and characterizing the pathophysiological significance
of mast cell degranulation and mast cell-derived mediators in such diseases
as migraine, irritable bowel syndrome, interstitial cystitis, and multiple
sclerosis. This research has generated one issued U.S. patent, licensed to
Kos, covering the use of inhibitors of mast cell degranulation for the
treatment of migraines as well as several other patent applications claiming
other therapeutic areas. This research is being conducted at Tufts University
School of Medicine and the New England Medical Center.
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<PAGE>
The Company's sponsorship of both research programs currently aggregates
approximately $500,000 annually. Kos intends to seek additional industry
development partners as research and development efforts increase. Kos has
exclusive worldwide rights to all compounds related to the research conducted
at both universities.
LICENSING AND OTHER ACTIVITIES
The Company intends to pursue in-licensing and other collaborative
opportunities, including in-licensing of selected products and technologies;
acquisition of complementary technologies, products or companies; product
co-marketing arrangements; joint ventures; and strategic alliances. The
Company believes that attractive collaborative opportunities exist in which
Kos may be able to leverage its competencies through such potential alliances
in order to increase revenue potential for the Company. See "Use of
Proceeds."
Many existing pharmaceutical products, or products currently under
development, may be suitable candidates for specialty promotional or
co-marketing campaigns. Kos intends to explore licensing, co-promotional and
product acquisition opportunities that can complement the Company's future
product portfolio. In addition, in situations where third-party drug delivery
technologies are complementary to the Company's drug development formulation
capabilities, the Company may pursue licensing rights for such technology.
The Company may also consider out-licensing certain of its products to third
parties.
Kos intends to explore strategic development and marketing alliances with
one or more large pharmaceutical companies to pursue new chemical entities
that may emerge from the Company's sponsored research programs.
PATENTS AND PROPRIETARY RIGHTS
The Company actively seeks, when appropriate and available, protection for
its products and proprietary information by means of United States and
foreign patents, trademarks, trade secrets and contractual arrangements.
Patent protection in the pharmaceutical field, however, can involve complex
legal and factual issues. Moreover, broad patent protection for new
formulations or new methods of use of existing chemical entities is sometimes
difficult to obtain and often of limited usefulness. Consequently, some
patents claiming new formulations or new methods of use for old drugs may not
provide meaningful protection against competition. Nevertheless, the Company
intends to seek patent protection when appropriate and available and
otherwise to rely on regulatory-related exclusivity and trade secrets to
protect certain of its products, technologies and other scientific
information. There can be no assurance, however, that any steps taken to
protect such proprietary information will be effective.
The Company has a patent application pending in the PTO with claims
covering NIASPAN's method of use consistent with its recommended once-a-day
dosing regimen. Certain of these claims have recently been held allowable by
the PTO. The patent examiner has, however, suspended prosecution of the Kos
application and referred such application to the PTO's Board of Appeals to
determine whether an interference should be declared between such Kos
application and a method-of-use patent issued to a generic manufacturer
allegedly claiming the same dosing regimen invention. It may take up to a
year or more for the PTO's Board of Appeals to determine whether to declare
such an interference. An interference is a procedure conducted by the PTO to
determine which entity was the first to invent, provided such entity did not
abandon, suppress or conceal its invention prior to filing. The prevailing
party would be awarded the claims corresponding to the allegedly common
invention, unless such claims are held unpatentable as to both parties.
Because all relevant facts normally are not available until an interference
proceeding is well underway, it is impossible to predict which party will
prevail.
The Company believes that the generic manufacturer was not the first to
invent the once-a-day dosing regimen. Kos conceived and reduced to practice
its method-of-use more than one and one-half years before the filing date of
the generic manufacturer's patent application. The Company believes, based
principally on extensive searches of publicly available information, that the
generic manufacturer
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<PAGE>
did not conceive and reduce to practice the method-of-use in question prior
to the Company's reduction to practice. Such a reduction to practice,
however, would not necessarily be made public; consequently, it is possible
that the generic manufacturer's work on the method in question could have, in
fact, been earlier than the Company's method-of-use, while being
successfully maintained in secret by the generic manufacturer or otherwise
not be known by the Company. Accordingly, no assurance can be given as to
whether the Company was in fact the first to invent, or even if first, there
can be no assurance that its priority would not be defeated on other grounds.
Moreover, resolving such an interference action may result in substantial
legal costs to the Company.
If the Company prevails in such an interference, the relevant claims of
the generic manufacturer's method-of-use patent would be invalid as applied
to NIASPAN. Alternatively, if the generic manufacturer were to prevail, the
generic manufacturer could institute an infringement action against the
Company based on the manufacturer's claim that the use of NIASPAN infringes
its patent. The Company could defeat such a claim by proving either that the
use of NIASPAN is not covered by the generic manufacturer's claims, or that
the generic manufacturer's patent is invalid or unenforceable.
The Company has begun a comprehensive invalidity study, which study may
reveal documents that impact the validity of the generic manufacturer's
patent as well as the validity of the claims contained in the Company's
patent application. If after such study is completed, the Company, with the
assistance of its patent counsel, determines that the generic manufacturer's
patent is valid and that the Company infringes the claims of such patent, the
Company could seek a license from the generic manufacturer or it could modify
NIASPAN, or its directions for use, in such a way as to avoid the generic
manufacturer's patent. Although the generic manufacturer currently markets an
over-the-counter niacin product, it does not have approval from the FDA to
market a product under its patent claims, nor is Kos aware of any NDA having
been filed for such a product. Nonetheless, there can be no assurance that a
license from the generic manufacturer would be available to Kos on acceptable
terms, if at all. If the Company were to modify NIASPAN's formulation or
dosing regimen, it could have a material adverse effect on the Company,
principally by delaying the commencement of revenue from NIASPAN and adding
clinical research costs to obtain FDA approval of such modifications.
The generic manufacturer who holds the above-referenced method-of-use
patent also owns an earlier issued formulation patent that could be alleged
to cover the Company's NIASPAN formulation. Based on an opinion from its
patent counsel, the Company believes that its niacin product does not
infringe the claims of the formulation patent, or if it were construed to
infringe, such claims would be invalid. Claim interpretation and validity,
however, must be determined by a court in the event of litigation, and there
can be no assurance that such a dispute would likely be resolved in a manner
satisfactory to the Company. The Company may not be able to afford protracted
patent litigation. In the event of adverse results from such litigation, the
Company could be precluded from selling NIASPAN unless licenses are obtained,
which licenses may not be available on acceptable terms, or at all, and the
Company could be held liable for damages, if any, arising from the challenged
activities. There also can be no assurance that the Company has identified
all patents that pose a potential risk of infringement by NIASPAN.
Various inhalation devices, technologies, and methods of use licensed
from, or assigned to Kos by, researchers and engineers engaged in development
projects or sponsored research on behalf of Kos are the subject of four
issued and one allowed U.S. patent, as well as various corresponding foreign
patents. Similar patents applied for in other foreign countries are pending
and being pursued by the Company. Six patent applications on certain of the
Company's products under development and pertaining to certain of the
sponsored research activities are pending at the PTO. The once-daily oral
products in development under Kos' agreements with Fuisz are protected by
various technology patents in the name of Fuisz.
There can be no assurance, however, that the patents owned and licensed by
the Company, or any future patents, will prevent other companies from
developing similar or therapeutically equivalent products or that others will
not be issued patents that may prevent the sale of Company products or
require licensing and the payment of significant fees or royalties by the
Company. Furthermore, there can
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<PAGE>
be no assurance that any of the Company's future products or methods will be
patentable, that such products or methods will not infringe upon the patents
of third parties, or that the Company's patents or future patents will give
the Company an exclusive position in the subject matter claimed by those
patents.
NIASPAN and Kos are the Company's principal registered trademarks,
although eight other marks have been allowed and published by the PTO. As the
Company is not yet marketing any product, none of its planned trademarks are
considered critical to the business of the Company.
MARKETING
Kos intends to market its branded proprietary products through its own
specialty sales force. A fundamental element of the Company's product
selection strategy is to focus on products where a relatively concentrated
group of specialist physicians account for a significant portion of the
prescriptions for the therapeutic indication addressed by the Company's
products. The Company believes that such specialist physicians will be the
most receptive to the patient compliance, safety, or other therapeutic
advantages that the Company's products will seek to offer. Accordingly, the
Company believes that significant market gains can be achieved with such
products through the use of a relatively small, well trained sales force
concentrating its detailing efforts on informing such specialist physicians
about the scientific basis for the therapeutic advantages of the Company's
products.
The Company does not currently have a sales force in place, but it
anticipates having an initial sales force of approximately 70 field sales
representatives and managed care specialists in place prior to the expected
launch of NIASPAN in 1997. Following the launch of NIASPAN and the approval
of additional products for marketing, the Company plans to expand
substantially its direct sales force to enable it to adequately detail such
products to the specialists in both the cardiovascular and respiratory
markets as appropriate. In particular, the Company intends to leverage its
initial NIASPAN sales force by marketing future cardiovascular products, as
they are approved, simultaneously with NIASPAN.
Following the introduction of NIASPAN, the Company expects to increase its
detailing efforts to a larger group of cardiovascular specialists and other
frequent prescribers of lipid-altering medications through the use of a
contract detail force. The Company will also consider developing its own
specialized flex-time (or part-time) sales representatives either to
supplement or replace the contract detail force. It is expected that the use
of contract and flex-time field forces will be used, in combination or alone,
by the Company in the future as other products are added to assist with new
product launches and to supplement the ongoing detail efforts of the
specialized sales force. Although the Company has had no discussions with any
such contract detail organization nor has it commenced the development of its
own flex-time sales force, the Company's management has had substantial
experience with the use of such field sales organizations to supplement
internal sales forces. See "--Cardiovascular Products--Controlled-Release
NIASPAN--Marketing Strategy for NIASPAN."
Although the Company has no present plans to market NIASPAN outside the
United States, it does expect to sell most of its other NDA products
internationally. Initially, such sales would likely be through licensing or
partnership arrangements with pharmaceutical companies in large foreign
markets. Ultimately, the Company will consider establishing its own sales
organization in selected foreign markets. To date, the Company has had no
material discussions concerning such possible arrangements with other
companies.
MANUFACTURING
In order to maximize the quality of developed products, assure compliance
with regulatory requirements, and minimize costs, the Company intends to
manufacture all of its products internally. The Company currently has
solid-dose production capability in both its Hollywood, Florida and Edison,
New Jersey facilities. Although the Company believes that both of these
facilities currently operate using current good manufacturing practices as
required by the FDA for the manufacture of product to be used in clinical
trials, both facilities will require inspection and approval by the FDA
before
36
<PAGE>
production for commercial sale can commence. The Company's Edison facility is
currently configured, and largely equipped, to manufacture aerosol inhalation
products using both CFC and non-CFC propellants. The Company estimates that
it has sufficient capacity, with limited additional capital outlays, to
accommodate sales volume for both solid-dose and aerosol products through the
year 2000.
The Company intends initially to contract the packaging of its solid-dose
and aerosol products to third parties. The Company intends to begin in-house
packaging operations once product sales volumes justify the capital
expenditures required to establish such capabilities. Certain of the
Company's raw materials are currently obtained from single sources of supply.
The Company intends, to the extent possible, to identify multiple sources for
all of its key raw materials, although an alternate source for at least one
such material will not be available because of the supplier's patent rights.
COMPETITION
The Company's products will be competing with currently existing or future
prescription pharmaceuticals and vitamins in the United States, Europe and
elsewhere. Competition among these products will be based on, among other
things, efficacy, safety, reliability, availability, price and patent
position. In addition, academic institutions, government agencies and other
public and private organizations conducting research may seek patent
protection, discover new drugs or establish collaborative arrangements for
drug research. Many of the Company's existing or potential competitors have
substantially greater financial, technical and human resources than the
Company and may be better equipped to develop, manufacture and market
products.
The Company's cardiovascular and respiratory products, when developed and
marketed, will compete in most cases with well established products
containing the same active ingredient already being marketed by medium-sized
and large pharmaceutical companies in the United States. For example, the
Company's captopril formulation will compete with several other ACE
inhibitors that are currently available, all of which have approval for
treatment of certain indications using once-a-day administration. The Company
is aware of only one other company that is in advanced development of a
once-a-day formulation of captropril. Further, the Company's triamcinolone
and flunisolide formulations each will compete with another triamcinolone and
flunisolide product, respectively, already being marketed in the United
States. Although such competing products are sold only in a CFC version, the
Company believes that the originators are developing non-CFC versions.
Moreover, there are numerous manufacturers of niacin preparations
indicated for use as vitamin supplements or, in IR form, for treatment of
hyperlipidemia. The Company is not aware that any such manufacturer is
actively pursuing an NDA for the once-a-day use of niacin as a lipid-altering
agent. The Company believes, however, that a generic manufacturer has
performed an early-stage clinical study using niacin as a once-a-day
treatment for lipid-altering.
GOVERNMENT REGULATION
The development, manufacture and potential sales of prescription
pharmaceutical products is subject to extensive regulation by U.S. and
foreign governmental authorities. In particular, pharmaceutical products are
subject to rigorous preclinical and clinical testing and to other approval
requirements by the FDA in the United States under the Federal Food, Drug and
Cosmetic Act ("FFDCA") and the Public Health Service Act and by comparable
agencies in most foreign countries.
Before testing of any agents with potential therapeutic value in healthy
human test subjects or patients may begin, stringent government requirements
for preclinical data must be satisfied. The data, obtained from studies in
several animal species, as well as from laboratory studies, are submitted in
an IND application, or its equivalent in countries outside the United States,
where clinical studies are to be conducted. The preclinical data must provide
an adequate basis for evaluating both the safety and the scientific rationale
for the initiation of clinical trials.
Clinical trials are typically conducted in three sequential phases,
although the phases may overlap. In Phase I, which frequently begins with the
initial introduction of the compound into healthy human
37
<PAGE>
subjects prior to introduction into patients, the product is tested for
safety, adverse affects, dosage, tolerance, absorption, metabolism, excretion
and other elements of clinical pharmacology. Phase II typically involves
studies in a small sample of the intended patient population to assess the
efficacy of the compound for a specific indication, to determine dose
tolerance and the optimal dose range as well as to gather additional
information relating to safety and potential adverse effects. Phase III
trials are undertaken to further evaluate clinical safety and efficacy in an
expanded patient population at geographically dispersed study sites, in order
to determine the overall risk-benefit ratio of the compound and to provide an
adequate basis for product labeling. Each trial is conducted in accordance
with certain standards under protocols that detail the objectives of the
study, the parameters to be used to monitor safety and the efficacy criteria
to be evaluated. Each protocol must be submitted to the FDA as part of the
IND.
Data from preclinical and clinical trials are submitted to the FDA as a
NDA for marketing approval and to other health authorities as a marketing
authorization application. The process of completing clinical trials for a
new drug is likely to take a number of years and require the expenditure of
substantial resources. Preparing a NDA or marketing authorization application
involves considerable data collection, verification, analysis and expense,
and there can be no assurance that approval from the FDA or any other health
authority will be granted on a timely basis, if at all. The approval process
is affected by a number of factors, primarily the risks and benefits
demonstrated in clinical trials as well as the severity of the disease and
the availability of alternative treatments. The FDA or other health
authorities may deny a NDA or marketing authorization application if the
regulatory criteria are not satisfied, or such authorities may require
additional testing or information.
Even after initial FDA or other health authority approval has been
obtained, further studies, including Phase IV post-marketing studies, may be
required to provide additional data on safety and will be required to gain
approval for the use of a product as a treatment for clinical indications
other than those for which the product was initially tested. Also, the FDA or
other regulatory authorities require post-marketing reporting to monitor the
adverse effects of the drug. Results of post-marketing programs may limit or
expand the further marketing of the products. Further, if there are any
modifications to the drug, including changes in indication, manufacturing
process or labeling or a change in manufacturing facility, an application
seeking approval of such changes must be submitted to the FDA or other
regulatory authority.
The FFDCA also provides for NDA submissions that may rely in whole or in
part on preclinical and clinical safety and efficacy data that are publicly
available or are allowed to be referenced from another NDA. The Company may
be able to utilize existing publicly available safety and efficacy data in
filing NDAs for controlled-release products when such data exist for an
approved immediate-release version of the same chemical entity. The Company
intends to utilize all relevant available data for its products under
development, where appropriate, in order to reduce preclinical and clinical
testing and overall development time. There can be no assurance, however,
that the FDA will accept such data in the Company's applications, or that
such existing data will be available or useful.
Certain amendments to the FFDCA established abbreviated application
procedures for obtaining FDA approval for generic versions of brand name
prescription drugs that are off patent or whose marketing exclusivity has
expired. Approval to manufacture and market generic drugs is obtained by
filing ANDAs. As a substitute for clinical studies, the FDA requires, among
other items, data demonstrating that the ANDA drug formulation is
bioequivalent to the previously approved brand name formulation. The
advantage of the ANDA approval is that an ANDA applicant is not required to
conduct preclinical and clinical studies to demonstrate that the product is
safe and effective for its intended use.
Whether or not FDA approval has been obtained, approval of a product by
regulatory authorities in foreign countries must be obtained prior to the
commencement of commercial sales of the product in such countries. The
requirements governing the conduct of clinical trials and product approvals
vary widely from country to country, and the time required for approval may
be longer or shorter than that required for FDA approval. Although there are
some procedures for unified filings for certain
38
<PAGE>
European countries, in general, each country at this time has its own
procedures and requirements. Further, the FDA regulates the export of
products produced in the United States and may prohibit the export even if
such products are approved for sale in other countries.
The Company's research and development involves the controlled use of
hazardous materials, chemicals, and various radioactive compounds. Although
the Company believes that its procedures for handling and disposing of those
materials comply with state and federal regulations, the risk of
contamination or injury from these materials cannot be eliminated. In the
event of such contamination or injury, the Company could be held liable for
resulting damages, which could be material to the Company's business,
financial condition and results of operations. The Company is also subject to
numerous environmental, health and workplace safety laws and regulations,
including those governing laboratory procedures, exposure to blood-borne
pathogens, and the handling of biohazardous materials. Additional federal,
state and local laws and regulations affecting the Company may be adopted in
the future. Any violation of, and the cost of compliance with, these laws and
regulations could materially and adversely affect the Company.
Completing the multitude of steps necessary prior to the commencement of
marketing requires the expenditure of considerable resources and a lengthy
period of time. Delay or failure in obtaining the required approvals,
clearances, permits or inclusions by the Company or its future corporate
partners or licensees, if any, would have a material adverse effect on the
ability of the Company to generate sales or royalty revenue. Further, the
passage and implementation of new or changed laws or regulations or the
potential impact on the Company of such actions cannot be anticipated.
One of the Company's products under development, albuterol (CFC), uses CFC
propellants. CFC propellants are ozone-depleting substances, the use of which
is restricted under the Federal Clean Air Act and the Montreal Protocol on
Substances that Deplete the Ozone Layer. The United Nations Technology and
Economic Assessment Panel (TEAP) reviews requests for specific essential use
allocations of CFCs under the Montreal Protocol and makes recommendations to
the parties, who determine the yearly bulk allocations for each country.
Recently, the Company's Essential Use Application for the use of CFCs during
1997 and 1998 was approved by TEAP and the parties to the Montreal Protocol.
Although the Company has received its requested allocation for 1997 and 1998
there can be no assurance that it will receive all or any part of its
allocation for 1999, or allocations for future years.
EMPLOYEES
As of November 1996, the Company had 96 permanent employees, of which 63
were engaged in research and development and 19 in manufacturing. No employee
is represented by a union. The Company regularly employs the services of
outside consultants with respect to regulatory, scientific, and certain
administrative and commercial matters. The Company expects to continue to
require the services of such outside consultants. The Company believes its
employee relations are good.
FACILITIES
The Company leases approximately 3,400 square feet for its executive
offices pursuant to a lease that expires in 1997. The Company leases
approximately 14,500 square feet in adjacent buildings in Hollywood, Florida,
which are used for the research and development and solid-dose manufacturing
operations. These leases expire in November 2000, assuming the Company elects
to exercise certain renewal options. An additional 5,200 square feet of
office space at the same Hollywood site is leased through July 1997. The
Company also occupies approximately 21,500 square feet of space in Edison,
New Jersey under a lease that expires in October 2003, assuming the Company
elects to exercise a five-year renewal option. The Edison, New Jersey
facility is used for research and development, solid-dose manufacturing, and
aerosol manufacturing.
LEGAL PROCEEDINGS
There are no legal proceedings pending against the Company or its
properties or to which the Company is a party.
39
<PAGE>
MANAGEMENT
The following table provides information regarding directors, executive
officers and key personnel of the Company:
DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Michael Jaharis .............. 68 Chairman of the Board of Directors
Daniel M. Bell ............... 54 President, Chief Executive Officer and
Director
Robert E. Baldini ............ 66 Vice Chairman of the Board of Directors
David J. Bova ................ 50 Senior Vice President, Product Development
John Brademas, Ph.D. ........ 69 Director Nominee(1)
Steven Jaharis, M.D. ........ 37 Director(1)(2)
Louis C. Lasagna, M.D. ...... 73 Director Nominee(1)
Mark Novitch, M.D. ........... 64 Director Nominee(2)
Frederick B. Whittemore ..... 66 Director Nominee(2)
OTHER KEY EMPLOYEES
NAME AGE POSITION
---- --- --------
Marvin F. Blanford, Pharm. D. 49 Vice President, Compliance
Eugenio A. Cefali, Ph.D. .... 38 Vice President, Clinical Pharmacology
Anthony J. Cutie, Ph.D. ..... 53 Vice President, Aerosol Research &
Development
David L. Heatherman .......... 50 Vice President, Sales & Marketing
Frederick A. Sexton .......... 37 Vice President, Technical Operations
Arthur W. Brinkmann .......... 62 Director of Human Resources
Christopher P. Kiritsy ....... 31 Director of Financial Analysis and
Business Planning
Mukesh P. Patel .............. 39 Director of Licensing
Juan F. Rodriguez ............ 29 Controller
- ----------
(1) Proposed member of the Audit Committee
(2) Proposed member of the Compensation and Stock Option Committee
MICHAEL JAHARIS, a founder of the Company, has, since its inception,
funded the operations of the Company and served as Chairman of the Board. In
this position, Mr. Jaharis has been actively involved in the development of
the Company's business strategy and in critical implementation decisions.
From 1972 until its acquisition by Schering-Plough Corporation
("Schering-Plough") in 1986, Mr. Jaharis served as the President and Chief
Executive Officer of Key Pharmaceuticals, Inc. ("Key Pharmaceuticals"). Mr.
Jaharis also serves as Chairman of Kos Investments and Kos Holdings, as
Trustee of Tufts University, and as Chairman of the Board of Overseers of
Tufts University School of Medicine.
DANIEL M. BELL, a founder of the Company, has served as a Director and as
the President and Chief Executive Officer of the Company since its inception.
Mr. Bell also serves as a director of Kos Investments and Kos Holdings and as
a director of two private companies in which Kos Investments or Michael
Jaharis is the largest shareholder. From 1983 to 1986, Mr. Bell was employed
by Key Pharmaceuticals and was serving as its Executive Vice President and
Chief Operating Officer at the time of its acquisition by Schering-Plough in
June 1986.
ROBERT E. BALDINI has served as Vice Chairman of the Board since July 1996
and as a senior marketing consultant to the Company since April 1996. In
these positions, Mr. Baldini serves as an executive officer of the Company.
In addition to performing services for the Company, Mr. Baldini serves as a
consultant to, and director of, several private pharmaceutical and medical
device companies. Mr. Baldini served Key Pharmaceuticals from 1982 to 1986 as
Senior Vice President of Sales and Marketing. Following its acquisition by
Schering-Plough, he continued with the Key Pharmaceuticals Division of
Schering-Plough until 1995, last serving as its President.
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DAVID J. BOVA, a founder of the Company, has directed the Company's
product development efforts since inception and now serves as Senior Vice
President, Product Development. Prior to the founding of Kos, Mr. Bova was at
Key Pharmaceuticals from 1981 until its acquisition by Schering-Plough; he
continued with Schering-Plough until the founding of Kos in 1988. At Key
Pharmaceuticals, he last served as the Director of Product Development. Prior
to 1981, Mr. Bova was employed by the USV pharmaceutical operation of Revlon
Healthcare.
JOHN BRADEMAS, PH.D. has been nominated to become a Director of the
Company immediately following the closing of this offering. Dr. Brademas has
been President Emeritus of New York University since 1992. Prior to 1992, he
was President of New York University for eleven years and was the U.S.
Representative in Congress for Indiana's third district for twenty-two years.
Dr. Brademas serves as a director of Texaco, Inc., NYNEX Corporation,
Scholastic, Inc., and Lowes Corporation. He is a former Chairman of the
Federal Reserve Bank of New York and a former director of the New York Stock
Exchange.
STEVEN JAHARIS, M.D. has served as a Director of the Company since its
inception. Dr. Jaharis has been a practicing physician since 1990 and
currently serves as a family practitioner at Rush Prudential H.M.O. Dr.
Jaharis is the son of Michael Jaharis.
LOUIS C. LASAGNA, M.D. has been nominated to become a Director of the
Company immediately following the closing of this offering. Dr. Lasagna has
served as the Dean of the Sackler School of Graduate Biomedical Sciences at
Tufts University since 1984. Dr. Lasagna serves as a director of Astra U.S.A.
Inc., a subsidiary of Astra AB.
MARK NOVITCH, M.D. has been nominated to become a Director of the Company
immediately following the closing of this offering. Dr. Novitch has served as
Professor of Health Care Sciences at George Washington University since 1994.
Dr. Novitch was with The Upjohn Company from 1985 to 1993, last serving as
its Vice Chairman. From 1971 to 1985, Dr. Novitch was with the FDA, serving
as Deputy Commissioner from 1981 to 1985. Dr. Novitch serves as a director of
Alteon, Inc., Guidant Corporation, Neurogen Corporation, and Calypte
Biomedical, Inc.
FREDERICK B. WHITTEMORE has been nominated to become a Director of the
Company immediately following the closing of this offering. Mr. Whittemore
has been with Morgan Stanley Group since 1958 and presently serves as
Advisory Director. Mr. Whittemore is a director of various mutual funds
organized under Morgan Stanley Asset Management, Inc. Mr. Whittemore also
serves as a director of Chesapeake Energy Corporation, PartnerRe Holdings,
Ltd., and Integon, Inc.
MARVIN F. BLANFORD, PHARM. D. joined Kos in 1996 and serves as Vice
President, Compliance. Dr. Blanford was the Director of Clinical Research for
Noven Pharmaceuticals, Inc. from 1992 to 1995. Previously joining Noven, Dr.
Blanford was vice president of a major independent clinical research
organization. Dr. Blanford also worked for Key Pharmaceuticals as a research
manager from 1981 through 1984.
EUGENIO A. CEFALI, PH.D. joined the Company in January 1994 and serves as
Vice President, Clinical Pharmacology. Dr. Cefali was responsible for
clinical pharmacology and Phase IV clinical research at Whitby
Pharmaceuticals from 1991 to 1994. Prior to 1991, Dr. Cefali was at Key
Pharmaceuticals and Schering-Plough where he was responsible for in-vivo
evaluation of certain oral sustained release and transdermal dosage forms.
ANTHONY J. CUTIE, PH.D. serves as Vice President, Aerosol Research and
Development; he has been the Chief Scientific Officer of the Company's
aerosol subsidiary since its founding in 1993. For more than 25 years, Dr.
Cutie has been an industry consultant in pharmaceutical aerosols and he has
worked with over 50 pharmaceutical companies ranging from large
multinationals to small generic companies. He has served as a consultant for
the FDA, and he has been an active member of various United States
Pharmacopia committees and two aerosol committees of the American Association
of Pharmaceutical Scientists. Dr. Cutie also serves as Professor of
Industrial Pharmacy at Long Island University.
41
<PAGE>
DAVID L. HEATHERMAN has served as Vice President, Sales and Marketing
since July 1996. Mr. Heatherman worked for Schering-Plough from 1972 to 1996
in several capacities including Senior Product Promotion Director, Regional
Sales Director, last serving as Managed Care Director.
FREDERICK A. SEXTON joined the Company in January 1996 and serves as Vice
President, Technical Operations. Prior to joining the Company, Mr. Sexton was
employed by Boehringer Ingelheim Pharmaceuticals from 1984 through 1995 in
various production and quality assurance positions involving solid-dose and
aerosol products. Prior to 1984, Mr. Sexton was employed by Ayerst
Laboratories in research and production positions.
ARTHUR W. BRINKMANN has served as Director, Human Resources since
September, 1991. Mr. Brinkmann was Director of Human Resources at Key
Pharmaceuticals and Schering-Plough from 1984 to 1989. Prior to Key
Pharmaceuticals, Mr. Brinkmann worked in human resources at Johnson & Johnson
for twenty-one years.
CHRISTOPHER P. KIRITSY joined the Company in June 1995 and serves as
Director, Financial Analysis and Business Planning. Prior to joining the
Company, Mr. Kiritsy was with the Institute of Molecular Biology, Inc., a
development stage biotechnology concern, from 1988 to 1995, where he last
served as Associate Director of Product Development.
MUKESH P. PATEL has served as Director, Licensing since July 1991. Mr.
Patel was employed by Glaxo in London, England for eleven years prior to
joining the Company, last serving as an International Licensing Executive for
Glaxo Holdings.
JUAN F. RODRIGUEZ, a certified public accountant, joined the Company in
November 1995 and serves as Controller. Prior to joining Kos, Mr. Rodriguez
was employed by the accounting firms of Rosen and Co. from 1994 to 1995 and
Arthur Andersen LLP from 1991 to 1994.
ELECTION, COMMITTEES AND COMPENSATION OF DIRECTORS
Prior to the consummation of this offering, the Company intends to
establish a Compensation and Stock Option Committee and an Audit Committee.
The Compensation and Stock Option Committee will administer the Company's
1996 Stock Option Plan (the "Option Plan") including, among other things,
determining the amount, exercise price and vesting schedule of stock options
awarded under the Option Plan. The Compensation and Stock Option Committee
will administer the Company's other compensation programs and perform such
other duties as may from time to time be determined by the Board of
Directors. The Compensation and Stock Option Committee is expected to be
comprised of Dr. Jaharis, Dr. Novitch, and Mr. Whittemore.
The Audit Committee will review the scope and results of the annual audit
of the Company's consolidated financial statements conducted by the Company's
independent accountants, the scope of other services provided by the
Company's independent accountants, proposed changes in the Company's
financial and accounting standards and principles, and the Company's policies
and procedures with respect to its internal accounting, auditing and
financing controls. The Audit Committee will also examine and consider other
matters relating to the financial affairs and accounting methods of the
Company, including selection and retention of the Company's independent
accountants. The Audit Committee is currently expected to be comprised of Dr.
Brademas, Dr. Jaharis, and Dr. Lasagna.
Each non-employee and non-consultant director of the Company, is entitled
to receive a fee of $1,000 for attendance at each meeting of the Board of
Directors. In addition, each non-employee and non-consultant director is
entitled to receive $500 for attendance at each meeting of a committee of the
Board of Directors. All directors are reimbursed for travel expenses incurred
in connection with the performance of their duties as directors.
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<PAGE>
Each non-employee and non-consultant director is entitled to receive an
option to purchase 5,000 shares of Common Stock upon their appointment to the
Board of Directors and is entitled to receive an option to purchase 3,000
shares of Common Stock annually thereafter, so long as they continue to serve
on the Board of Directors. See "Management--Stock Option Plan."
Michael Jaharis has elected not to receive fees or stock options in
connection with his serving as Chairman of the Board. Although Mr. Jaharis
has been actively involved in the development of the Company's business
strategy and in critical implementation decisions, he has never been paid
compensation by the Company for acting in such capacity. Since July 1, 1996,
however, the Company has leased an automobile for Mr. Jaharis' use.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1996, Michael Jaharis, the Company's
Chairman of the Board, and Daniel M. Bell, the Company's President and Chief
Executive Officer, participated in deliberations of the Company's Board of
Directors concerning executive officer compensation. Prior to this offering,
the Company did not have a stock option or compensation committee.
EXECUTIVE COMPENSATION
The following table summarizes the compensation during the fiscal years
ended June 30, 1996, 1995 and 1994, paid to or earned by the Company's Chief
Executive Officer and to the other executive officers of the Company whose
annual salary and bonuses exceeded $100,000 during the fiscal year ended June
30, 1996 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- --------------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(1)
- -------------------------- ------- ---------- --------- ------------ ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel M. Bell 1996 246,000 -- -- -- 750,000(2) -- 4,928
President and 1995 246,000 10,000 -- -- -- -- 1,814
Chief Executive Officer 1994 246,000 -- -- -- -- -- 890
David J. Bova 1996 185,000 25,000 -- -- -- -- 1,091
Senior Vice President, 1995 185,000 -- -- -- -- -- 726
Product Development 1994 164,167 -- -- -- -- -- 605
<FN>
- ----------
(1) Consists of life insurance premiums paid by the Company.
(2) The options originally were granted to Mr. Bell in August 1988. The
option terms were amended on June 20, 1996, to extend the expiration date
of the options from December 1996 to June 20, 2006. Other material terms
of the options, including the exercise price, were not changed. The
options are currently exercisable.
</FN>
</TABLE>
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<PAGE>
The following table contains information about stock option grants to
Named Executive Officers during the fiscal year ended June 30, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATE OF
----------------------------------------------------------------------- STOCK PRICE APPRECIATION
NUMBER OF SECURITIES % OF TOTAL OPTIONS EXERCISE OR FOR OPTION TERM(1)
UNDERLYING OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION -------------------------------------
NAME GRANTED (#) IN FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- ---- ----------------------- -------------------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel M. Bell ... 750,000(2) 41% $0.60 6/20/06 $4,800,000 $7,818,694 $12,449,964
David J. Bova ... -- -- -- -- -- -- --
<FN>
- ----------
(1) Amounts reflect hypothetical gains that could be achieved for the options
if they are exercised at the end of the option term. Those gains are
based on assumed rates of stock appreciation of 0%, 5% and 10% compounded
annually from the date the option was modified through the expiration
date. The Board of Directors estimated the fair market value of Common
Stock to be $7.00 per share on the date of such modification.
(2) The options originally were granted to Mr. Bell in August 1988. The
option terms were amended on June 20, 1996, to extend the expiration date
of the options from December 1996 to June 20, 2006. Other material terms
of the options, including the exercise price, were not changed. The
options are currently exercisable.
</FN>
</TABLE>
The following table provides information about the number and value of
options held by the Named Executive Officers at June 30, 1996:
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FY-END(#) AT FY-END($)(1)
-------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Daniel M. Bell .... 750,000 -- $4,800,000 --
David J. Bova .... 275,000 -- $1,718,750 --
<FN>
- ----------
(1) For purposes of determining the values of the options held by Named
Executive Officers, the Company has assumed that Common Stock had a value
of $7.00 per share on June 30, 1996, which is the estimated fair market
value the Board of Directors had attributed to the Common Stock on June
20, 1996, in connection with certain grants of options under the
Company's stock option plan. The option value is based on the difference
between the fair market value of the shares on June 30, 1996 and the
option exercise price per share, multiplied by the number of shares of
Common Stock subject to the option.
</FN>
</TABLE>
CONFIDENTIALITY AND INTELLECTUAL PROPERTY AGREEMENTS
Each employee of the Company has entered into a Confidentiality Agreement
that (i) prohibits the employee from disclosing confidential information
relating to the Company and (ii) provides that intellectual property
conceived by the employee during the term of employment and relating to the
business of the Company remains the exclusive property of the Company.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Daniel M. Bell dated
as of July 1, 1996. Under the agreement, Mr. Bell serves as President and
Chief Executive Officer of the Company for a term expiring on June 30, 2002,
unless earlier terminated for cause, upon the death or disability of Mr.
Bell, or, at the election of Mr. Bell, upon a change in control of the
Company. In the event that Mr. Bell is terminated without cause or upon a
change in control of the Company, Mr. Bell is entitled to receive as
severance compensation his base salary, bonus compensation and annual stock
options until the later to occur of the date thirty-six months after such
termination and June 30, 2002. The agreement provides that Mr. Bell receive
base annual compensation of $250,000 for each year during the term of the
agreement, subject to an annual increase in an amount to be determined by the
Board of Directors. Under the agreement, Mr. Bell also receives an annual
bonus and an annual stock option grant in amounts to be determined by the
Board of Directors based upon Mr. Bell's and the Company's
44
<PAGE>
performance. The agreement also provides that the Company will provide Mr.
Bell with the use of an automobile. Mr. Bell is prohibited from competing
with the Company during the term of the agreement and for two years after
termination thereof.
The Company entered into an employment agreement with David Bova dated as
of June 15, 1996, pursuant to which Mr. Bova serves as Senior Vice President
of the Company. This agreement constitutes an amendment and restatement of a
previous employment agreement with Mr. Bova, dated December 18, 1992. Under
the agreement, the term of Mr. Bova's employment terminates on December 31,
1997 unless earlier terminated for cause, upon the death or disability of Mr.
Bova, or, at the election of Mr. Bova, upon a change in control of the
Company. Notwithstanding the foregoing, the Company may exercise an option to
extend the term of the agreement for up to twenty-four additional months. The
agreement provides that Mr. Bova receive a base salary of $195,000 per year,
which amount may be increased by the Company. In the event that Mr. Bova is
terminated without cause or upon a change in control of the Company, Mr. Bova
is entitled to receive as severance compensation his base salary until
December 31, 1997. In addition, the agreement provides that Mr. Bova receive
royalties in an amount equal to one percent of the net sales of the Company's
NIASPAN product and its combination product through December 31, 2003, up to
a cap of $4,000,000. The agreement provides that, under certain enumerated
circumstances, the royalty amount may be reduced to 0.5% of net sales. The
agreement also provides that under certain specific circumstances, the
Company's obligation to pay royalties may cease upon Mr. Bova's termination
with the Company. The agreement prohibits Mr. Bova from competing with the
Company during the term of the agreement and for a period of two years after
the termination thereof.
The Company entered into a consulting agreement with Robert Baldini
effective as of April 1, 1996, pursuant to which Mr. Baldini serves as senior
marketing consultant to the Company. The term of the agreement continues for
five years. The agreement is automatically renewable for successive two year
periods unless either party provides thirty days prior written notice of its
desire not to renew. The agreement is terminable by either party upon 120
days prior written notice. The agreement prohibits Mr. Baldini from competing
with the Company during the term of the Agreement.
EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN
The Option Plan provides for the grant of both nonstatutory stock options
and stock options intended to be treated as incentive stock options within
the meaning of Section 422 of the Internal Revenue Code. The Option Plan is
intended to provide incentives to, and rewards for, certain eligible
employees, consultants and outside directors of the Company who have
contributed and will continue to contribute to the success of the Company.
The Option Plan was adopted by the Board of Directors and the shareholder of
the Company in June 1996. An aggregate of 3,675,000 shares of Common Stock
have been reserved for issuance under the Option Plan. The Company has
granted options to purchase an aggregate of 1,833,000 shares of Common Stock
under the Option Plan to employees and consultants at exercise prices ranging
from $0.60 to $7.00 per share, including stock options covering an aggregate
of 750,000 shares of Common Stock granted to one of the Company's Named
Executive Officers. The Company has also granted options to purchase an
aggregate of 325,000 shares of Common Stock outside of the Option Plan to an
employee and a consultant, including stock options covering an aggregate of
275,000 shares of Common Stock granted to one of the Company's Named
Executive Officers.
Under the Option Plan, the Compensation and Stock Option Committee of the
Board of Directors of the Company (the "Stock Option Committee") is
authorized to administer the Option Plan, including the selection of
employees and consultants of the Company to whom options may be granted. The
Stock Option Committee also determines the number of shares, the exercise
price, the term, any conditions on exercise and other terms of each option
granted to an employee or consultant. Options granted to employees or
consultants under the Option Plan become vested over a period of four years
or such shorter or longer period as may be determined by the Stock Option
Committee at the time of
45
<PAGE>
grant. The duration of an option granted to an employee or consultant under
the Option Plan is ten years from the date of grant, or such shorter or
longer period as may be determined by the Stock Option Committee at the time
of grant or as may result from the death, disability, or termination of the
employment of the employee or consultant to whom the option is granted.
The Option Plan prescribes a formula for determining the amount, price and
timing of awards of stock options to the eligible outside directors. Upon his
or her election to the Board of Directors of the Company, an eligible outside
director will receive an option to purchase 5,000 shares of the Company's
common stock. On each anniversary of his or her appointment to the Board of
Directors of the Company, an eligible outside director will receive an option
to purchase 3,000 shares of the Company's common stock. The exercise price of
each share subject to an option granted to an outside director will be the
fair market value of the Company's common stock on the later of (a) the
earlier of the date of an initial public offering of the Company's common
stock or December 31, 1996, or (b) the date the option is granted. Each
option granted to an outside director under the Option Plan becomes vested on
the first anniversary of its date of grant. The duration of an option granted
to an outside director under the Option Plan is the lesser of ten years from
the date of grant or one year from the date of the outside director's death.
The options are non-transferable other than by will or by the laws of
descent and distribution. The Option Plan may be amended at any time by the
Board of Directors, although certain amendments require shareholder approval.
The Option Plan terminates in June 2006.
401(K) PLAN
The Company's Internal Revenue Code Section 401(k) Plan, known as the Kos
Savings Plan, became effective on January 1, 1994. Each employee who has
completed at least one year of service with the Company and has attained age
21 is eligible to make pre-tax elective deferral contributions each year not
exceeding the greater of a specified statutory amount or 15 percent of the
employee's compensation for the year. An employee is always 100 percent
vested in the employee's elective deferral contributions. The Company makes
no contributions under this plan.
46
<PAGE>
CERTAIN TRANSACTIONS
During 1995 the Company acquired certain property including used
computers, laboratory equipment and supplies and certain other office
equipment and furnishings from the Institute of Molecular Biology, Inc.
("IMB"), a company controlled by Kos Investments. In the aggregate, such
purchases totaled approximately $83,500. Until June 1996, Daniel M. Bell, the
Company's President and Chief Executive Officer, also served as the Chairman
of the Board of Directors and Chief Executive Officer of IMB.
Michael Jaharis, the sole shareholder of Kos Investments, has personally
guaranteed the repayment of a loan to Kos Investments from certain financial
institutions. Prior to March 21, 1995, the Company was the primary borrower
under this loan, and therefore received the benefit of the personal guaranty
extended by Mr. Jaharis. As consideration for Mr. Jaharis's personal
guaranty, the Company agreed to pay Mr. Jaharis an annual fee of 0.25% of the
average amount outstanding under the loan during the Company's fiscal year.
The Company paid Mr. Jaharis $28,700, $147,232 and $59,693 during the fiscal
years ended June 30, 1994, 1995 and 1996, respectively. In March 1995, the
Company was released as a borrower under the loan.
The Company executed a promissory note, dated as of July 1, 1996,
representing the Investments Loan, in the aggregate principal amount of up to
$10.0 million, the proceeds of which will be used to fund the Company's
operations until the consummation of this offering. Under the terms of this
note, interest accrues on the outstanding principal amount at First Union
National Bank of Florida's prime rate commencing July 1, 1996, escalating to
a rate of 1% over such prime rate during calendar year 1997, 2% over such
prime rate during calendar year 1998, and 3% over such prime rate during
calendar year 1999 until maturity. Principal and interest under this note are
due on June 30, 1999. From time to time, at Kos Investments' option,
principal and interest outstanding under this note may be converted, in
whole or in part, into Common Stock at a conversion price per share equal to the
initial public offering price per share. As of November 30, 1996, the Company
had borrowed $6,280,000 under this note.
47
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of December 16, 1996 and as adjusted at
that date to reflect the sale of Common Stock offered by the Company hereby,
information with respect to the beneficial ownership of the Company's Common
Stock by: (i) each person known by the Company to beneficially own more than
five percent (5%) of the outstanding shares of the Company's Common Stock;
(ii) each director and director nominee of the Company; (iii) the Company's
Named Executive Officers; and (iv) all directors and executive officers as a
group. Unless otherwise indicated, each of the shareholders named in this
table: (a) has sole voting and investment power with respect to all shares of
Common Stock beneficially owned; and (b) has the same address as the Company.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED(1)
-----------------------------------------
SHARES BENEFICIALLY
BENEFICIAL OWNER OWNED(1) BEFORE THE OFFERING AFTER THE OFFERING
- --------------------------- --------------------------- -------------------- -------------------
<S> <C> <C> <C>
Michael Jaharis(2) ........ 10,000,000 100.0%
Daniel M. Bell(3) ......... 750,000 7.0%
David J. Bova(4) .......... 275,000 2.7%
Robert E. Baldini ......... -- --
John Brademas, Ph.D. ..... -- --
Steven Jaharis, M.D. ..... -- --
Louis C. Lasagna, M.D. ... -- --
Mark Novitch, M.D. ........ -- --
Frederick B. Whittemore .. -- --
All Officers and Directors
as a group (9 persons)(5) 11,025,000 100.0%
</TABLE>
- -----------------------------------------------------------------------------
(1) Shares beneficially owned and percentage of ownership are based on
10,000,000 shares of Common Stock outstanding before this offering and
shares of Common Stock outstanding after the closing. Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting and disposition power with respect to
securities.
(2) All shares are held by Kos Holdings, Inc., which is wholly owned by Kos
Investments, Inc., of which Mr. Jaharis is the sole shareholder, and with
respect to such shares Mr. Jaharis has sole voting and investment power.
Excludes shares of Common Stock issuable to Kos Investments
upon the conversion, if any, of a note representing the Investments Loan.
(3) Consists of 750,000 shares of Common Stock that may be purchased by Mr.
Bell pursuant to an option, which is currently exercisable.
(4) Consists of 275,000 shares of Common Stock that may be purchased by Mr.
Bova pursuant to an option, which is currently exercisable.
(5) Includes an aggregate of 1,025,000 shares underlying currently
exercisable options to purchase Common Stock.
48
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock having a par value of $.01 per share and 10,000,000 shares of
Preferred Stock having a par value of $.01 per share ("Preferred Stock"). As
of June 30, 1996, 10,000,000 shares of Common Stock and no shares of
Preferred Stock were outstanding. An additional 2,158,000 shares of Common
Stock may be issued upon the exercise of outstanding stock options and an
additional shares of Common Stock issuable upon conversion, if any,
of the note representing the Investments Loan.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held.
Shareholders do not have the right to cumulate their votes in elections of
directors. Accordingly, holders of a majority of the issued and outstanding
Common Stock will have the right to elect all the Company's directors and
otherwise control the affairs of the Company.
Holders of Common Stock are entitled to dividends on a pro rata basis upon
declaration of dividends by the Board of Directors. Dividends are payable
only out of funds legally available for the payment of dividends. The Board
of Directors is not required to declare dividends, and it currently expects
to retain earnings to finance the development of the Company's business. See
"Dividend Policy."
Upon a liquidation of the Company, holders of the Common Stock will be
entitled to a pro rata distribution of the assets of the Company, after
payment of all amounts owed to the Company's creditors, and subject to any
preferential amount payable to holders of Preferred Stock of the Company, if
any. Holders of Common Stock have no preemptive, subscription, conversion,
redemption or sinking fund rights.
PREFERRED STOCK
The Articles permit the Company's Board of Directors to issue shares of
Preferred Stock in one or more series and to fix the relative rights,
preferences and limitations of each series. Among such rights, preferences
and limitations are dividend rates, provisions of redemption, rights upon
liquidation, conversion privileges and voting powers. Should the Board of
Directors elect to exercise this authority, the rights and privileges of
holders of Common Stock could be made subject to the rights and privileges of
any such series of Preferred Stock. The Board of Directors of the Company
currently has no plans to issue any shares of Preferred Stock. The issuance
of Preferred Stock could have the effect of making it more difficult for a
third party to acquire, or discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company.
CERTAIN ANTI-TAKEOVER PROVISIONS INCLUDED IN THE COMPANY'S ARTICLES OF
INCORPORATION AND BYLAWS
The Articles permit removal of directors only for cause by the
shareholders of the Company at a meeting by the affirmative vote of at least
60% of the outstanding shares entitled to vote for the election of directors
(the "Voting Stock"). The Articles provide that any vacancy on the Board of
Directors may be filled only by the remaining directors then in office.
The Articles also contain provisions which require: (i) the affirmative
vote of 60% of the Voting Stock to amend the Articles of Incorporation or
Bylaws of the Company; and (ii) the demand of not less than 50% of all votes
entitled to be cast on any issue to be considered at a proposed special
meeting to call a special meeting of shareholders. In addition, the Articles
require that all shareholder action, including the election of directors, be
taken by means of a vote at a duly convened shareholders meeting and not by
use of written consents.
The Company's Bylaws establish an advance notice procedure for the
nomination of candidates for election as directors by shareholders as well as
for shareholder proposals to be considered at shareholders' meetings.
49
<PAGE>
The above-described provisions may have certain anti-takeover effects.
Such provisions, in addition to the provisions described below, may make it
more difficult for persons, without the approval of the Company's Board of
Directors, to make a tender offer or acquire substantial amounts of the
Common Stock or launch other takeover attempts that a shareholder might
consider in such shareholder's best interests, including attempts that might
result in the payment of a premium over the market price for the Common Stock
held by such shareholder.
CERTAIN PROVISIONS OF FLORIDA LAW
The Company is subject to several anti-takeover provisions under Florida
law that apply to a public corporation organized under Florida law, unless
the corporation has elected to opt out of those provisions in its articles of
incorporation or bylaws. The Company has not elected to opt out of certain of
those provisions. The Florida Business Corporation Act (the "FBCA") prohibits
the voting of shares in a publicly-held Florida corporation that are acquired
in a "control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition or
unless the acquisition is approved by the corporation's board of directors. A
"control share acquisition" is defined as an acquisition that immediately
thereafter entitles the acquiring party to vote in the election of directors
within each of the following ranges of voting power: (i) one-fifth or more
but less than one-third of such voting power (ii) one-third or more but less
than a majority of such voting power; and (iii) more than a majority of such
voting power.
The FBCA also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range
of business combinations or other extraordinary corporate transactions with
an "interested shareholder" unless (i) the transaction is approved by a
majority of disinterested directors before the person becomes an interested
shareholder, (ii) the interested shareholder has owned at least 80% of the
corporation's outstanding voting shares for at least five years or (iii) the
transaction is approved by the holders of two-thirds of the corporation's
voting shares other than those owned by the interested shareholder. An
interested shareholder is defined as a person who together with affiliates
and associates beneficially owns more than 10% of the corporation's
outstanding voting shares. The Company's Articles provide that the FBCA's
affiliated transaction voting requirements will not apply to the Company.
TRANSFER AGENT AND REGISTRAR
has been appointed the transfer agent and registrar for
the Common Stock. Its address is .
50
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have shares of
Common Stock outstanding. Of these shares, the shares offered hereby
will be freely tradeable without restriction or further registration under
the Securities Act, except for any shares purchased by an "affiliate" of the
Company (in general, a person who has a control relationship with the
Company), which shares will be subject to the resale limitations, described
below, of Rule 144 promulgated under the Securities Act. The remaining
10,000,000 shares are deemed to be "restricted securities," as that term is
defined under Rule 144, in that such shares were issued and sold by the
Company in private transactions not involving a public offering and, as such,
may only be sold pursuant to an effective registration under the Securities
Act, in compliance with the exemption provisions of Rule 144 or pursuant to
another exemption under the Securities Act (the "Restricted Shares"). The
Restricted Shares are eligible for sale under Rule 144 (subject to certain
recurring three-month volume limitations prescribed therein). The Company has
granted certain registration rights to its sole shareholder and to Kos
Investments, the holder of the note representing the Investments Loan. These
entities have "piggyback" registration rights to request that the Company
register any of their shares in the event that the Company proposes to
register any of its securities under the Securities Act. Additionally, these
entities have "demand" registration rights to have the Company prepare and
file, on three occassions, a registration statement so as to permit a public
offering and sale of their shares of Common Stock.
The existing shareholder of the Company, which will beneficially hold an
aggregate of shares of Common Stock upon consummation of this offering,
the directors and officers of the Company, who hold options to purchase an
aggregate of shares of Common Stock, and Kos Investments, Inc., the
holder of a note representing the Investments Loan, have agreed with the
Underwriters not to sell or otherwise dispose of any of those shares of
Common Stock for a period of 180 days after the date of this Prospectus
without the written consent of Cowen & Company, a Representative of the
Underwriters. Cowen & Company may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up restrictions.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated with an affiliate), who
has owned restricted shares of Common Stock beneficially for at least two
years is entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of 1% of the total number of outstanding
shares of the same class or, if the common stock is quoted on Nasdaq National
Market, the average weekly trading volume during the four calendar weeks
preceding the sale. A person who has not been an affiliate of the Company for
at least three months immediately preceding the sale and who has beneficially
owned shares of Common Stock for at least three years is entitled to sell
such shares under Rule 144 without regard to any of the limitations described
above. The Securities and Exchange Commission is currently considering a
proposal to reduce the Rule 144 holding period for restricted securities to
one year.
The Company intends to file a registration statement under the Securities
Act to register shares of Common Stock reserved for issuance under the Option
Plan, thereby permitting the resale of such shares by non-affiliates in the
public market without restriction under the Securities Act. As of ,
1996, options to purchase shares of Common Stock were outstanding under
the Option Plan.
Prior to this offering, there has been no public market for the securities
of the Company. No prediction can be made as to the effect, if any, that
public sales of shares of Common Stock or the availability of such shares for
sale will have on the market prices of the Common Stock prevailing from time
to time. Nevertheless, sales of a substantial number of shares by the
existing shareholder or by shareholders purchasing Common Stock in this
offering could have a negative effect on the market price of Common Stock and
could impair the Company's ability in the future to raise additional capital
through the sale of its equity securities.
51
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Cowen & Company, Dillon, Read & Co. Inc. and Salomon Brothers Inc have
severally agreed to purchase from the Company the following respective number
of shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus:
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
- ----------- ---------------
Cowen & Company ....................................
Dillon, Read & Co. Inc. ...........................
Salomon Brothers Inc ...............................
---------------
Total ........................................... ===============
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the
absence of any material adverse change in the Company's business and the
receipt of certain certificates, opinions and letters from the Company and
its counsel and independent auditors. The nature of the Underwriter's
obligation is such that they are committed to purchase all shares of Common
Stock offered hereby if any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page
of this Prospectus and to certain dealers at such price less a concession not
is excess of $ per share. The Underwriters may allow and such dealers may
re-allow a concession not in excess of $ per share to certain other
dealers. The Underwriters have informed the Company that they do not intend
to confirm sales to any accounts over which they exercise discretionary
authority. After the initial public offering of the shares, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
The Company has granted to the Underwriters an option, exercisable no
later than 30 days after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the initial public offering price, less
the underwriting discount, set forth on the cover page of this Prospectus, to
cover over-allotments, if any. If the Underwriters exercise their
over-allotment option, the Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof
that the number of shares of Common Stock to be purchased by each of them
shown in the foregoing table bears to the total number of shares of Common
Stock offered hereby. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of share of Common Stock
offered hereby.
Each of the Company, its sole shareholder and the Company's directors,
officers and key personnel who hold options to purchase shares of Common
Stock, holding in the aggregate 12,158,000 shares or options to purchase
shares of Common Stock, and the holder of the note representing the
Investments Loan have agreed that they will not during the period commenced
on the date hereof and ending 180 days after the date of this Prospectus,
without the prior written consent of Cowen & Company, (i) directly or
indirectly, offer, sell, assign, transfer, encumber, pledge, contract to
sell, grant an option to purchase or otherwise dispose of, other than by
operation of law, any shares of Common Stock (other than the shares offered
hereby and, in the case of the Company, in certain limited circumstances),
options, rights or warrants to acquire shares of Common Stock, or securities
convertible into or exercisable or exchangeable for shares of Common Stock
(whether such shares or any such securities are now owned or hereafter
acquired) or (ii) enter into any swap or other arrangement that transfers to
another, any of the economic consequences of ownership of the Common Stock,
whether any such
52
<PAGE>
transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing lockup would prohibit, without the prior written consent of Cowen &
Company, the sale by Mr. Jaharis of any direct or indirect interest in Kos
Investments, or by Kos Investments of any direct or indirect interest in Kos
Holdings.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to
contribute to payments the Underwriters may be required to make in respect
thereof.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be
determined by negotiation among the Company and the Representatives. The
factors to be considered in determining the initial public offering price
will be prevailing market and economic conditions, the revenues and earnings
of the Company, market valuations of other companies engaged in activities
similar to the Company, estimates of the business potential and prospects of
the Company, the present state of the Company's business operations and the
Company's management.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is being passed
upon for the Company by Holland & Knight, One East Broward Boulevard, Suite
1300, Fort Lauderdale, Florida 33301 and for the Underwriters by Davis Polk &
Wardwell, 450 Lexington Avenue, New York, New York 10017.
EXPERTS
The consolidated financial statements and schedules included in this
prospectus and this registration statement have been audited by Arthur
Andersen LLP, independent certified public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm, as experts in giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act, with respect to the securities offered
hereby. This Prospectus, which constitutes part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted in accordance with the
rules and regulations of the Commission. For further information with respect
to the Company and the securities offered hereby, reference is made to the
Registration Statement and to the exhibits and schedules thereto. Statements
made in this Prospectus as to the contents of any contract, agreement or
other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement is qualified in
its entirety by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the public
reference facilities maintained by the Commission at Judiciary Plaza, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and the Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may also be obtained
from the Public Reference Section of the Commission located at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of prescribed fees. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission with a Web site
address of http://www.sec.gov.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by the Company's independent
accountants and quarterly reports for the first three quarters of each fiscal
year containing unaudited interim financial information.
53
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Certified Public Accountants .......................................... F-2
Financial Statements:
Consolidated Balance Sheets at June 30, 1995 and 1996 and September 30, 1996 (unaudited) ... F-3
Consolidated Statements of Operations for the year ended June 30, 1994, 1995 and 1996 and
the period July 1, 1988 (inception) to June 30, 1996 and for the three months ended Septem-
ber 30, 1995 and 1996 (unaudited) and for the period from July 1, 1988 (inception) to Sep-
tember 30, 1996 (unaudited) ............................................................... F-4
Consolidated Statements of Shareholder's Equity (Deficit) for the period July 1, 1988 (in-
ception) to June 30, 1996 and the year ended June 30, 1993, 1994, 1995 and 1996 and for the
three months ended September 30, 1996 (unaudited) ......................................... F-5
Consolidated Statements of Cash Flows for the year ended June 30, 1994, 1995 and 1996 and
for the period ended July 1, 1988 (inception) to June 30, 1996 and for the three months
ended September 30, 1995 and 1996 (unaudited) and for the period from July 1, 1988 (incep-
tion) to September 30, 1996 (unaudited) ................................................... F-6
Notes to Consolidated Financial Statements .................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Kos Pharmaceuticals, Inc.:
We have audited the accompanying consolidated balance sheets of Kos
Pharmaceuticals, Inc. (a development stage corporation and wholly-owned
subsidiary of Kos Holdings, Inc.) and subsidiary as of June 30, 1995 and
1996, and the related consolidated statements of operations, shareholder's
equity and cash flows for each of the three years in the period ended June
30, 1996 and for the cumulative period from inception (July 1, 1988) to June
30, 1996. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Kos Pharmaceuticals, Inc. and subsidiary as of June 30, 1995 and 1996, and
the results of their operations and their cash flows for each of the three
years in the period ended June 30, 1996, and for the cumulative period from
inception (July 1, 1988) to June 30, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
July 15, 1996, (except with respect to the matters
discussed in Note 7, as to which the date is
November 30, 1996).
F-2
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
-------------------------------- ----------------
1995 1996 1996
--------------- --------------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................... $ 40,973 $ 193,484 $ 205,456
Prepaid expenses and other current assets .. 78,205 165,392 114,532
-------------- --------------- ----------------
Total current assets ....................... 119,178 358,876 319,988
Fixed Assets, net ............................ 2,235,456 1,921,943 2,040,140
-------------- --------------- ----------------
Total assets ............................... $ 2,354,634 $ 2,280,819 $ 2,360,128
============== =============== ================
LIABILITIES AND SHAREHOLDER'S EQUITY
(DEFICIT)
Current Liabilities:
Accounts payable .......................... $ 751,352 $ 195,299 $ 250,357
Accrued expenses ............................ 496,790 171,371 355,146
-------------- --------------- ----------------
Total current liabilities .................. 1,248,142 366,670 605,503
-------------- --------------- ----------------
Loan from Kos Investments, Inc. .............. -- -- 3,405,000
Minority Interest ............................ 163,869 -- --
-------------- --------------- ----------------
Commitments and Contingencies (Note 5)
Shareholder's Equity (Deficit):
Common stock, $.01 par value, 50,000,000
shares authorized, 10,000,000 shares issued
and outstanding ........................... 100,000 100,000 100,000
Preferred stock, $.01 par value, 10,000,000
shares authorized, none issued and
outstanding ............................... -- -- --
Additional paid-in capital .................. 36,507,000 58,472,323 58,472,323
Deficit accumulated in the development stage (35,664,377) (56,658,174) (60,222,698)
-------------- --------------- ----------------
Total shareholder's equity (deficit) ...... 942,623 1,914,149 (1,650,375)
-------------- --------------- ----------------
Total liabilities and shareholder's
equity (deficit) ......................... $ 2,354,634 $ 2,280,819 $ 2,360,128
============== =============== ================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS
HOLDINGS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
PERIOD THREE MONTHS PERIOD
FROM INCEPTION PERIOD ENDED FROM INCEPTION
FOR THE YEAR ENDED JUNE 30, (JULY 1, 1988) SEPTEMBER 30, (JULY 1, 1988)
---------------------------------------- TO JUNE 30, -------------------------- TO SEPTEMBER 30,
1994 1995 1996 1996 1995 1996 1996
------------ ------------ ------------ -------------- ------------ ------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ................... $ 22,461 $ 14,300 $ -- $ 36,761 $ -- $ -- $ 36,761
------------ ------------ ------------ ------------ ------------ ----------- -------------
Expenses:
Research and development .. 6,662,626 8,386,872 13,815,776 38,705,510 3,376,778 2,783,621 41,489,131
General and administrative 1,619,038 1,613,832 1,772,060 8,871,358 360,765 759,837 9,631,195
Compensation recognized on
modification of stock
option grant (note 6).... -- -- 5,436,000 5,436,000 -- -- 5,436,000
------------ ------------ ------------ ------------ ------------ ----------- -------------
8,281,664 10,000,704 21,023,836 53,012,868 3,737,543 3,543,458 56,556,326
------------ ------------ ------------ ------------ ------------ ----------- -------------
Other (income) expense:
Other income .............. (2,124) (3,186) -- (13,726) -- -- (13,726)
Interest (income) expense,
net 1,108,476 1,055,643 (13,860) 3,548,103 (3,443) 21,066 3,569,169
------------ ------------ ------------ ------------ ------------ ----------- -------------
Total other (income)
expense.................. 1,106,352 1,052,457 (13,860) 3,534,377 (3,443) 21,066 3,555,443
------------ ------------ ------------ ------------ ------------ ----------- -------------
Loss before minority
interest................. (9,365,555) (11,038,861) (21,009,976) (56,510,484) (3,734,100) (3,564,524) (60,075,008)
Minority interest .......... (164,401) 532 16,179 (147,690) 14,516 -- (147,690)
------------ ------------ ------------ ------------ ------------ ----------- -------------
Net loss ................. $(9,529,956) $(11,038,329) $(20,993,797) $(56,658,174) $(3,719,584) $(3,564,524) $(60,222,698)
============ ============ ============ ============ ============ =========== =============
Loss per share ............. $ (0.85) $ (0.98) $ (1.87) $ (5.05) $ (0.33) $ (0.32) $ (5.37)
============ ============ ============ ============ ============ =========== =============
Weighted average shares of
common stock outstanding.. 11,216,750 11,216,750 11,216,750 11,216,750 11,216,750 11,216,750 11,216,750
============ ============ ============ ============ ============ =========== =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL IN THE
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
----------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance from inception (July 1, 1988)
to June 30, 1992 ....................... $100,000 $ 390,000 $ (8,350,437) $ (7,860,437)
Net loss ................................. -- -- (6,745,655) (6,745,655)
---------- -------------- ---------------- --------------
Balance at June 30, 1993 ................. 100,000 390,000 (15,096,092) (14,606,092)
Net loss ................................. -- -- (9,529,956) (9,529,956)
---------- -------------- ---------------- --------------
Balance at June 30, 1994 ................. 100,000 390,000 (24,626,048) (24,136,048)
Capital contributions from Parent ....... -- 5,745,000 -- 5,745,000
Assumption of note payable by Parent .... -- 30,372,000 -- 30,372,000
Net loss ................................. -- -- (11,038,329) (11,038,329)
---------- -------------- ---------------- --------------
Balance at June 30, 1995 ................. 100,000 36,507,000 (35,664,377) 942,623
Capital contributions from Parent ....... -- 16,381,633 -- 16,381,633
Modification of options (Note 6) ........ -- 5,436,000 -- 5,436,000
Contribution of minority interest ....... -- 147,690 -- 147,690
Net loss ................................. -- -- (20,993,797) (20,993,797)
---------- -------------- ---------------- --------------
Balance at June 30, 1996 ................. 100,000 58,472,323 (56,658,174) 1,914,149
---------- -------------- ---------------- --------------
Net loss (unaudited) ..................... -- -- (3,564,524) (3,564,524)
---------- -------------- ---------------- --------------
Balance at September 30, 1996 (unaudited) $100,000 $58,472,323 $(60,222,698) $ (1,650,375)
========== ============== ================ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
PERIOD THREE MONTHS PERIOD
FROM INCEPTION PERIOD ENDED FROM INCEPTION
FOR THE YEAR ENDED JUNE 30, (JULY 1, 1988) SEPTEMBER 30, (JULY 1, 1988)
---------------------------------------- TO JUNE 30, -------------------------- TO SEPTEMBER 30,
1994 1995 1996 1996 1995 1996 1996
------------ ------------ ------------ -------------- ------------ ------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from
Operating activities:
Net loss ............. $ (9,529,956) $(11,038,329) $(20,993,797) $(56,658,174) $(3,719,584) $(3,564,524) $(60,222,698)
Adjustments to reconcile
net loss to net cash used
in operating activities--
Depreciation and amortization 260,053 409,528 522,288 1,608,977 140,832 134,399 1,743,376
Minority interest ......... 164,401 (532) (16,179) 147,690 (14,516) -- 147,690
Compensation recognized on
modification of stock option
grants .................. -- -- 5,436,000 5,436,000 -- -- 5,436,000
Changes in operating assets
and liabilities:
Prepaid expenses and other
current assets ........ (92,203) 55,729 (87,187) (165,392) (23,589) 50,860 (114,532)
Accounts payable ........ (310,472) 130,011 (556,053) 195,299 187,916 55,058 250,357
Accrued expenses ........ 514,469 362,359 (325,419) 171,371 (283,282) 183,775 355,146
------------ ------------ ------------ ------------ ----------- ----------- -------------
Net cash used in operating
activities ........... (8,993,708) (10,081,234) (16,020,347) (49,264,229) (3,712,223) (3,140,432) (52,404,661)
------------ ------------ ------------ ------------ ----------- ----------- -------------
Cash flows from
Investing activities:
Capital expenditures ..... (1,051,152) (1,223,221) (208,775) (3,530,920) (36,491) (252,596) (3,783,516)
------------ ------------ ------------ ------------ ----------- ----------- -------------
Cash flows from
Financing activities:
Proceeds from issuance
of common stock......... -- -- -- 490,000 -- -- 490,000
Capital contributions
received from Parent..... -- 5,745,000 16,381,633 22,126,633 3,730,000 -- 22,126,633
Borrowings under note
payable ................. 10,050,000 5,582,000 -- 30,372,000 -- -- 30,372,000
Borrowings under loan from
Kos Investments, Inc..... -- -- -- -- -- 3,405,000 3,405,000
------------ ------------ ------------ ------------ ----------- ----------- -------------
Net cash provided by
financing activities.. 10,050,000 11,327,000 16,381,633 52,988,633 3,730,000 3,405,000 56,393,633
------------ ------------ ------------ ------------ ----------- ----------- -------------
Net increase (decrease)
in cash............... 5,140 22,545 152,511 193,484 (18,714) 11,972 205,456
Cash and Cash Equivalents,
beginning of period ...... 13,288 18,428 40,973 -- 40,973 193,484 --
------------ ------------ ------------ ------------ ----------- ----------- -------------
Cash and Cash Equivalents,
end of period ............ $ 18,428 $ 40,973 $ 193,484 $ 193,484 $ 22,259 $ 205,456 $ 205,456
============ ============ ============ ============ =========== =========== =============
Supplemental disclosure of
cash flow information:
Interest paid ........... $ 728,537 $ 1,387,377 $ -- $ 3,476,267 $ -- $ -- $ 3,476,267
============ ============ ============ ============ =========== =========== =============
Supplemental disclosure of
noncash information:
Transfer of note payable
to parent . ........... $ -- $ 30,372,000 $ -- $ 30,372,000 $ -- $ -- $ 30,372,000
============ ============ ============ ============ =========== =========== =============
Contribution of minority
interest to paid-in
capital ............... $ -- $ -- $ 147,690 $ 147,690 $ -- $ -- $ 147,690
============ ============ ============ ============ =========== =========== =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-6
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The predecessor to Kos Pharmaceutical's, Inc. (the "Company"), Kos
Holdings, Inc. ("Holdings") was incorporated in Florida on July 1, 1988 to
develop prescription pharmaceutical products principally for the
cardiovascular and respiratory markets. On June 25, 1996, the Company was
incorporated in Florida as the successor to the business of Holdings. On June
30, 1996, all of the assets and all of the liabilities of Holdings, other
than its net operating loss carryforwards, were transferred to the Company in
exchange for shares of common stock of the Company (the "Reorganization").
The Reorganization was accomplished in order to transfer the assets and
operations of Holdings to the Company while preserving Holdings' net
operating losses and related federal tax benefits for Holdings and its sole
shareholder and one of its founders. Kos Investments, Inc. ("Investments") is
the sole shareholder of Holdings. As this transaction was between entities
under common control, the transaction was accounted for on a historical cost
basis, in a manner similar to a pooling of interests.
On June 22, 1993, Holdings and Aeropharm Technology, Inc. ("Aeropharm")
entered into a letter of intent for the purchase of a controlling interest in
Aeropharm. On February 14, 1995, the transaction was completed through a
stock purchase agreement that gave control (80% ownership) of Aeropharm to
Holdings. Holdings accounted for its investment in Aeropharm as a
consolidated subsidiary from June 22, 1993. On June 20, 1996, Holdings
acquired the minority interest in Aeropharm in exchange for options to
purchase 50,000 shares of common stock, at $7.00 per share, the estimated
fair value of the underlying shares at the date of grant. The minority
interest at the date of the exchange in the amount of $147,690, was credited
to additional paid-in capital.
On May 6, 1996, the Company submitted a New Drug Application ("NDA") to
the U.S. Food and Drug Administration ("FDA") for, NIASPAN, its first
cardiovascular product. NIASPAN is a once-a-day, oral, solid dose
controlled-release formulation of niacin for the treatment of hyperlipidemia,
a multiple lipid disorder that is a primary risk factor for coronary heart
disease. Niacin is a water soluble vitamin that has long been recognized as
an effective pharmacological agent for the treatment of multiple lipid
disorders including elevated LDL and low HDL. The Company has conducted
extensive pharmacokinetic studies and three double-blinded, placebo
controlled pivotal trials in support of the NDA filing.
The Company expects to incur substantial additional losses in the near
term primarily due to research and development activities and the
commencement of sales and marketing efforts associated with NIASPAN. To date,
the Company has not marketed any products. Future revenues, if any, are
expected to be generated from sales of products. No assurance can be given
that the Company's product development efforts will be successfully
completed, that required regulatory approvals will be obtained, that products
under development can be manufactured at acceptable cost and with appropriate
quality or that any products can be successfully marketed. The Company is
subject to a number of other risks including, but not limited to,
uncertainties related to FDA approval of NIASPAN, uncertainties related to
market acceptance, uncertainties related to patents and trademarks,
interference and risk of infringement, uncertainties related to limited sales
and marketing experience, uncertainties related to competition and
technological changes, government regulation and no assurances of regulatory
approval, dependence on Fuisz Technologies Ltd. and other collaborations,
limited manufacturing experience and risk of scale-up, future capital needs
and uncertainty of additional funding, dependence on single sources of
supply, and no assurances of adequate third party reimbursement.
Management is actively pursuing an initial public offering of its common
stock to finance operations of the Company. In addition, the Company
continuously evaluates licensing agreements, joint development agreements and
other transactions that may result in fees or revenues to the
F-7
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. GENERAL--(CONTINUED)
Company. The likelihood of the success of the Company must be considered in
light of the uncertainty caused by problems, expenses, complications and
delays frequently encountered in connection with the development of new
business ventures.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The consolidated financial statements include the results of Holdings
(prior to July 1, 1996), the Company and its subsidiary, Aeropharm. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS:
For the purpose of the consolidated statements of cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less at the time of purchase to be cash and cash equivalents. As of
June 30, 1995 and 1996, and September 30, 1996, the Company had no cash
equivalents.
MINORITY INTEREST:
Minority interest represents the minority shareholder's interest in the
shareholders' equity and net loss of Aeropharm. As of June 30, 1996, the
Company owned 100% of Aeropharm, therefore, no minority interest is
reflected.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
As of June 30, 1995 and 1996, and September 30, 1996, the carrying amount
of cash and cash equivalents, prepaid expenses and other current assets,
accounts payable and accrued expenses approximates fair value due to the
short term nature of these accounts.
CONCENTRATION OF CREDIT RISK:
The Company has no significant off balance sheet concentrations of credit
risk.
DEPRECIATION AND AMORTIZATION:
Fixed assets are stated at cost, less accumulated depreciation and
amortization. Depreciation and amortization are provided using the
straight-line method over the estimated useful lives of the assets or lease
term, if shorter, as follows:
<TABLE>
<CAPTION>
YEARS
-------------------
<S> <C>
Furniture and equipment .................... 3-7
Computer software and hardware ............. 3-5
Laboratory and manufacturing equipment .... 3-5
Leasehold improvements ..................... Life of lease
</TABLE>
RESEARCH AND DEVELOPMENT EXPENSES:
All research and development expenses are reflected in the Company's
consolidated statements of operations as incurred.
LOSS PER SHARE:
Loss per share is determined by dividing the net loss attributable to
holders of the Company's common stock by the weighted average number of
shares of common stock and dilutive common stock
F-8
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
equivalents outstanding after applying the treasury stock method. Common
stock equivalents include the impact of the issuance of options (see Note 6)
issued within one year prior to the date of the Company's initial public
offering (see Note 7) at exercise prices less than the assumed initial
offering price, whether or not the effects are antidilutive.
INTERIM FINANCIAL DATA:
In the opinion of the management of the Company, the accompanying
unaudited consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of the Company as of September 30, 1996, and the
results of operations for the three month periods ended September 30, 1995
and 1996. The results of operations and cash flows for the three month period
ended September 30, 1996 are not necessarily indicative of the results of
operations or cash flows which may be reported for the remainder of 1996.
INCOME TAXES:
The Company follows the Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," which requires, among other things,
recognition of future tax benefits measured at enacted rates attributable to
deductible temporary differences between financial statement and income tax
bases of assets and liabilities and to tax net operating loss carryforwards
to the extent that realization of said benefits is more likely than not. As
the net operating loss carryforwards, amounting to approximately $51,000,000,
as of the Reorganization were not transferred to the Company, the Company has
no deferred tax assets or liabilities as of June 30, 1996. Any operating
losses generated by the Company after June 30, 1996 will be available to
offset future net income, if any.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS:
Certain 1995 balances have been reclassified to conform to the 1996
presentation.
F-9
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
------------------------------ ----------------
1995 1996 1996
-------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and equipment ....................... $ 246,510 $ 297,131 $ 309,319
Computer software and hardware ................ 323,094 399,847 424,256
Laboratory and manufacturing equipment ....... 1,979,922 2,055,423 2,225,922
Leasehold improvements ........................ 753,389 759,289 804,789
------------- -------------- ---------------
3,302,915 3,511,690 3,764,286
Less-Accumulated depreciation and amortization (1,067,459) (1,589,747) (1,724,146)
------------- -------------- ---------------
Fixed assets, net ........................... $ 2,235,456 $ 1,921,943 $ 2,040,140
============= ============== ===============
</TABLE>
4. NOTE PAYABLE
Michael Jaharis, the sole shareholder of Investments, has personally
guaranteed the repayment of a loan to Investments from certain financial
institutions. Prior to March 21, 1995, the Company was the primary borrower
under this loan, and therefore received the benefit of the personal guaranty
extended by Mr. Jaharis. As consideration for Mr. Jaharis' personal guaranty,
the Company agreed to pay Mr. Jaharis an annual fee of 0.25% of the average
amount outstanding under the loan during the Company's fiscal year. The
Company paid Mr. Jaharis $28,700, $147,232 and $59,693 during the fiscal
years ended June 30, 1994, 1995 and 1996, respectively. In March 1995, the
Company was released as a borrower under the loan. The assumption of the note
payable to bank has been accounted for as a transfer to Investments and is
reflected as an increase in "Additional paid-in capital" in the accompanying
1995 consolidated balance sheet. As more fully discussed in Note 7,
Investments will continue to fund the operations of the Company through a
promissory note.
5. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS
The Company has entered into three employment agreements that require
future minimum payments as follows:
YEAR ENDING JUNE 30, AMOUNT
- --------------------- -----------
1997 ................................................$ 595,000
1998 ................................................ 430,000
1999 ................................................ 250,000
2000 ................................................ 250,000
2001 ................................................ 250,000
Thereafter .......................................... 250,000
-----------
$ 2,025,000
===========
Salary expense recorded under two of the agreements totaled approximately
$244,000, $302,000 and $355,000 during the years ended June 30, 1994, 1995
and 1996, respectively. In addition to the minimum salaries described above,
certain of the employment agreements entitle certain officers to royalties on
future sales, the aggregate amounts of which may not exceed $5,500,000. The
third employment agreement, which is for the President and Chief Executive
Officer, was not entered into
F-10
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
until July 1, 1996. Salary expense recorded under these agreements totaled
approximately $160,000 (unaudited) for the three months ended September 30,
1996.
LEASE COMMITMENTS
The Company has entered into various operating leases for the rental of
office space and laboratory facilities which expire through fiscal 1999.
Future minimum commitments under these agreements as of June 30, 1996 are as
follows:
YEAR ENDING JUNE 30, AMOUNT
- --------------------- -----------
1997 .................................. $ 322,304
1998 .................................. 267,133
1999 .................................. 71,557
-----------
$ 660,994
===========
As of June 30, 1995 and 1996, standby letters of credit of $157,050 and
$65,050, respectively, were issued by a bank on the Company's behalf in favor
of the lessors as collateral for the leases which the lessors have agreed to
provide to the Company.
Rent expense under operating leases during the years ended June 30, 1994,
1995 and 1996 and for the three months ended September 30, 1996 was $388,687,
$450,890, $578,122 and $111,285 (unaudited), respectively.
CONSULTING AGREEMENT
On April 1, 1996, the Company entered into a consulting agreement with the
Vice Chairman of the Board of Directors for the formulation and evaluation of
product development strategies, negotiations for product licenses and other
responsibilities. The consulting agreement provides for an initial five-year
term and will automatically renew for each successive two-year period unless
notification by either party is given. The consultant receives $75,000 as
annual compensation and is also eligible to receive stock options.
LICENSING AND JOINT VENTURE AGREEMENTS
The Company has entered into several license agreements (the "License
Agreements") with third parties (the "Licensees") for the development of
future products. Under the License Agreements, the Company is required to
make payments to the Licensees upon completion of various milestones of each
project in order to secure exclusive rights to develop, manufacture, sell
and/or sublicense future products developed through the License Agreements.
In connection with the License Agreements, the Company recorded licensing
fees expense of approximately $470,000, $449,000 and $700,000 for the years
ended June 30, 1994, 1995 and 1996, respectively, which are reflected in
"Research and development" in the accompanying consolidated statements of
operations. In order to maintain their rights under the License Agreements,
the Company is required to pay future minimum payments as follows:
F-11
<PAGE>
YEAR ENDING JUNE 30, AMOUNT
- -------------------- -------------
1997 ........................................ $ 1,009,000
1998 ........................................ 711,000
1999 ........................................ 125,000
-------------
$ 1,845,000
=============
Additionally, upon FDA approval of certain products, the Company is
obligated to pay $4,500,000 to a licensee.
The Company has also entered into a letter of intent to form a joint
venture agreement (the "Joint Venture") with a company related to the sale of
a certain product using technology provided by that company. The Company paid
$1,000,000 for the exclusive right to use the technology. Because of the
uncertainties surrounding the use of the technology, such amount has been
expensed and is included in "Research and development" in the accompanying
1996 consolidated statement of operations. Within 30 days following the
filing of a NDA to the FDA for a certain product developed by the Joint
Venture, or in the event management determines such NDA filing to be
infeasible, any party to the Joint Venture investing in excess of the other
party shall be entitled to consideration and transfer to it from the Joint
Venture for an amount not to exceed $1,250,000.
SPONSORED RESEARCH
The Company has research agreements with two universities and a research
center. The Company is primarily responsible for funding the projects, and
the university or research center is responsible for providing personnel,
equipment and facilities to conduct the research activities. The aggregate
commitment at June 30, 1996 for future payments under these agreements is
approximately $200,000 for fiscal year 1997. Expenses recorded under these
agreements totaled approximately $249,000, $379,000, $373,000 and $102,000
(unaudited) during the years ended June 30, 1994, 1995 and 1996, and for the
three months ended September 30, 1996, respectively, and are reflected in
"Research and development" in the accompanying consolidated statements of
operations.
DEVELOPMENT AGREEMENTS
The Company entered into development agreements with various third parties
during 1996. As dictated by these development agreements, the Company is
responsible for funding all required development activities. The aggregate
commitment at June 30, 1996 for future payments under these agreements is
approximately $724,000 and $200,000 for fiscal years 1997 and 1998,
respectively. Expense recorded under these agreements totaled approximately
$665,000 and $240,000 (unaudited) during the year ended June 30, 1996, and
for the three months ended September 30, 1996, respectively, and are
reflected in "Research and development" in the accompanying consolidated
statements of operations.
401(K) PLAN
The Company's Internal Revenue Code Section 401(k) Plan, known as the Kos
Savings Plan, became effective on January 1, 1994. Each employee who has
completed at least one year of service with the Company and has attained age
21 is eligible to make pre-tax elective deferral contributions each year not
exceeding the greater of a specified statutory amount or 15 percent of the
employee's compensation for the year. An employee is always 100 percent
vested in the employee's elective deferral contributions. The Company makes
no contributions under this plan.
F-12
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. STOCK OPTION PLAN
During 1996, the Board of Directors of the Company adopted the Kos
Pharmaceuticals, Inc. 1996 Stock Option Plan (the "Plan"). As of June 30,
1996, a maximum aggregate total of 4,000,000 shares of Common Stock may be
subject to stock options granted or to be granted under the Plan. All
directors, officers, employees and certain related parties of the Company
designated by the Board are eligible to receive options under the Plan. The
Plan is administered by a Committee appointed by the Board of Directors of
the Company.
Each outside director of the Company will be granted an option to purchase
5,000 shares of common stock and automatically will receive an option to
purchase an additional 3,000 shares effective on each director's anniversary
date. The exercise price of such options will be the fair market value on the
later of (a) the date of an initial public offering or December 31, 1996, or
(b) the date the option is granted. As of June 30, 1996, one director had
been granted an option to purchase 5,000 shares at an established exercise
price of $7.00 per share, which is the estimated fair market value the Board
of Directors had attributed to the common stock, as determined by an
appraiser.
The maximum term of any option is ten years from the date of grant. All
options expire within 30 days of termination of employment.
The Company has granted options to purchase an aggregate of 2,158,000
shares to employees, consultants, management and directors, including options
granted prior to the issuance of the Plan, as follows:
<TABLE>
<CAPTION>
OPTIONS GRANTED DATE OF GRANT DATE OF EXPIRATION EXERCISE PRICE
- ---------------- ----------------- ------------------- ---------------
<S> <C> <C> <C>
750,000 August 1988(a) June 2006 $0.60
35,000 January 1989(a) July 2001 1.90
75,000 February 1990(a) June 2006 0.90
275,000 December 1992 December 2002 0.75
50,000 July 1994 July 2003 3.33
973,000 June 1996 June 2006 7.00
</TABLE>
- -----------------------------------------------------------------------------
(a) During June 1996, the Company modified the terms of the original options
granted to an officer and two outside consultants. Included in the
accompanying consolidated statements of operations is $5,436,000 recorded
as compensation recognized as a result of this modification to the
existing option grants.
Exercise prices of options granted were at their estimated fair market
value as of the date of grant. No options outstanding under the Plan had been
exercised as of June 30, 1996.
7. SUBSEQUENT EVENTS
The Company intends to file a Registration Statement with the Securities
and Exchange Commission relating to an initial public offering of its common
stock. The Company will utilize the net proceeds of the offering to primarily
fund research and development programs, the initial recruitment of sales
force for the anticipated commercial launch of NIASPAN, repayment of the
short-term bridge loan, and other general corporate purposes.
On July 1, 1996, the Company executed a promissory note (the "Note") in
favor of Investments in the aggregate principal amount of up to $10.0
million, the proceeds of which will be used to fund the Company's operations
until the consummation of this offering. Under the terms of the Note,
interest accrues on the outstanding principal amount at First Union National
Bank of Florida's prime rate commencing July 1, 1996, escalating to a rate of
1% over such prime rate during calendar year 1997,
F-13
<PAGE>
KOS PHARMACEUTICALS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF KOS HOLDINGS,
INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. SUBSEQUENT EVENTS--(CONTINUED)
2% over such prime rate during calendar year 1998, and 3% over such prime
rate during calendar year 1999 until maturity. Principal and interest under
the Note is due on June 30, 1999. From time to time, at Investments'
option, principal and interest outstanding under the Note may be converted
into Common Stock at a conversion price per share equal to the initial public
offering price per share. As of November 30, 1996, the Company had borrowed
$6,280,000 under this Note.
8. RELATED PARTY TRANSACTION
During 1995 the Company acquired certain property including used
computers, laboratory equipment, laboratory supplies and certain other office
equipment and furnishings from the Institute of Molecular Biology, Inc.
("IMB"), a company controlled by Investments. In the aggregate, such
purchases totaled approximately $83,500. Until June 1996, Daniel M. Bell, the
Company's President and Chief Executive Officer, also served as the Chairman
of the Board of Directors and Chief Executive Officer of IMB.
F-14
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
and, if give or made, such information or representations must not be relied
upon as having been authorized by the Company or any of the Underwriters or
by any other person. This Prospectus does not constitute an offer to sell or
a solicitation of any offer to buy a security other than the shares of Common
Stock offered hereby, nor does it constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby to any
person in any jurisdiction in which it is unlawful to make such offer or
solicitation to such person. Neither the delivery of this Prospectus nor any
sale made hereunder shall under any circumstances create any implication that
the information contained herein is correct as of any date subsequent to the
date hereof.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 6
The Company ................................ 16
Use of Proceeds ............................ 16
Dividend Policy ............................ 17
Capitalization ............................. 17
Dilution ................................... 18
Selected Consolidated Financial Data ...... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................... 20
Business ................................... 23
Management ................................. 40
Certain Transactions ....................... 47
Principal Shareholders ..................... 48
Description of Capital Stock ............... 49
Shares Eligible for Future Sale ............ 51
Underwriting ............................... 52
Legal Matters .............................. 53
Experts .................................... 53
Additional Information ..................... 53
Index to Financial Statements .............. F-1
</TABLE>
- -----------------------------------------------------------------------------
Until , 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the shares of Common Stock, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligations of dealers to deliver a Prospectus
when acting as Underwriters and with respect to their unsold allotments or
subscriptions.
Shares
KOS PHARMACEUTICALS, INC.
Common Stock
--------------
PROSPECTUS
--------------
COWEN & COMPANY
DILLON, READ & CO. INC.
SALOMON BROTHERS INC
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth expenses and costs (other than underwriting
discounts and commissions) expected to be incurred in connection with the
issuance and distribution of the securities being registered and payable by
the Company. All amounts are estimated except for the SEC registration fee
and the NASD filing fee.
SEC REGISTRATION FEE .............. $12,122
NASD filing fee ................... 4,500
Nasdaq fees ....................... *
Transfer agent and registrar fees *
Legal fees and expenses ........... *
Representative's expenses ......... *
Accounting fees and expenses ..... *
Blue Sky fees and expenses ........ 5,000
Printing and engraving expenses .. *
Miscellaneous ..................... *
-------
Total ........................... $ *
=======
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporation Act ("FBCA") and the Company's Articles
of Incorporation provide that in certain cases, each officer and director of
the Company shall be indemnified by the Company against certain costs,
expenses and liabilities which he or she may incur in his or her capacity as
such.
The Company's Articles of Incorporation provide:
To the fullest extent permitted by the Florida Business Corporation Act,
the Corporation shall indemnify, or advance expenses to, any person made,
or threatened to be made, a party to any action, suit or proceeding by
reason of the fact that such person (a) is or was a director of the
Corporation; (b) is or was serving at the request of the Corporation as a
director of another corporation, partnership, joint venture, trust or
other enterprise (collectively, a "Business Entity"); (c) is or was an
officer of the Corporation, provided that such person is or was at the
time a director of the Corporation; or (d) is or was serving at the
request of the Corporation as an officer of another Business Entity,
provided that such person is or was at the time a director of the
Corporation or a director of such other Business Entity, serving at the
request of the Corporation. Unless otherwise expressly prohibited by the
Florida Business Corporation Act, and except as otherwise provided in the
previous sentence, the Board of Directors shall have the sole and
exclusive discretion, on such terms and conditions as it shall determine,
to indemnify, or advance expenses to, any person made, or threatened to be
made, a party to any action, suit or proceeding by reason of the fact that
such person is or was an officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as an officer,
employee or agent of another Business Entity. No person falling within the
purview of this paragraph may apply for indemnification or advancement of
expenses to any court of competent jurisdiction.
Section 607.0850 of the FBCA, "Indemnification of officers, directors,
employees and agents," provides:
(1) A corporation shall have power to indemnify any person who was or is a
party to any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he is
II-1
<PAGE>
or was a director, officer, employee, or agent of the corporation or is or
was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust,
or other enterprise against liability incurred in connection with such
proceeding, including any appeal thereof, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests
of the corporation and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination
of any proceeding by judgment, order, settlement, or conviction or upon a
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in, or not opposed to, the best interests of the
corporation or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(2) A corporation shall have power to indemnify any person, who was or is
a party to any proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses and amounts paid in settlement not exceeding, in the
judgment of the board of directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof.
Such indemnification shall be authorized if such person acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be made
under this subsection in respect of any claim, issue, or matter as to which
such person shall have been adjudged to be liable unless, and only to the
extent that, the court in which such proceeding was brought, or any other
court of competent jurisdiction, shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (1) or subsection (2), or in defense of
any claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith.
(4) Any indemnification under subsection (1) or subsection (2), unless
pursuant to a determination by a court, shall be made by the corporation only
as authorized in the specific case upon a determination that indemnification
of the director, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsection
(1) or subsection (2). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum consisting
of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of two or
more directors not at the time parties to the proceeding;
(c) By independent legal counsel;
1. Selected by the board of directors prescribed in paragraph (a) or
the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained for paragraph (1)
and the committee cannot be designated under paragraph (b), selected by
majority vote of the full board of directors (in which directors who are
parties may participate); or
(d) By the shareholders by a majority vote of a quorum consisting of
shareholders who were not parties to such proceeding or, if no such quorum is
obtainable, by a majority vote of shareholders who were not parties to such
proceeding.
II-2
<PAGE>
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of
permissibility is made by independent legal counsel, persons specified by
paragraph (4)(c) shall evaluate the reasonableness of expenses and may
authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if he is ultimately found
not to be entitled to indemnification by the corporation pursuant to this
section. Expenses incurred by other employees and agents may be paid in
advance upon such terms or conditions that the board of directors deems
appropriate.
(7) The indemnification and advancement of expenses provided pursuant to
this section are not exclusive, and a corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office. However, indemnification or advancement of expenses shall not be made
to or on behalf of any director, officer, employee, or agent if a judgment or
other final adjudication establishes that his actions, or omissions to act,
were material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his conduct was lawful or
had no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee, or agent
derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the liability
provisions of s. 607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the best interests
of the corporation in a proceeding by or in the right of the corporation to
procure a judgment in its favor or in a proceeding by or in the right of a
shareholder.
(8) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person, unless otherwise provided when authorized or
ratified.
(9) Unless the corporation's articles of incorporation provide otherwise,
notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary determination of the board or of the shareholders in the
specific case, a director, officer, employee, or agent of the corporation who
is or was a party to a proceeding may apply for indemnification or
advancement of expenses, or both, to the court conducting the proceeding, to
the circuit court, or to another court of competent jurisdiction. On receipt
of an application, the court, after giving any notice that it considers
necessary, may order indemnification and advancement of expenses, including
expenses incurred in seeking court-ordered indemnification or advancement of
expenses, if it determines that:
(a) The director, officer, employee, or agent is entitled to mandatory
indemnification under subsection (3), in which case the court shall also
order the corporation to pay the director reasonable expenses incurred in
obtaining court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the
exercise by the corporation of its power pursuant to subsection (7); or
II-3
<PAGE>
(c) The director, officer, employee, or agent is fairly and reasonably
entitled to indemnification or advancement of expenses, or both, in view of
all the relevant circumstances, regardless of whether such person met the
standard of conduct set forth in subsection (1), subsection (2), or
subsection (7).
(10) For purposes of this section, the term "corporation" includes, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so
that any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, is in
the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(11) For purposes of this section;
(a) The term "other enterprises" includes employee benefit plans;
(b) The term "expenses" includes counsel fees, including those for
appeal;
(c) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to
any employee benefit plan), and expenses actually and reasonably incurred
with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or completed
action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation" includes any
service as a director, officer, employee, or agent of the corporation that
imposes duties on such persons, including duties relating to an employee
benefit plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the corporation"
describes the actions of a person who acts in good faith and in a manner he
reasonably believes to be in the best interests of the participants and
beneficiaries of an employee benefit plan.
(12) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the last three years, the Company issued the following securities
without registration under the Securities Act:
On June 30, 1996, the Company issued 10,000,000 shares of Common Stock,
par value $.01 per share ("Common Stock"), to Kos Holdings, Inc. ("Holdings")
in exchange for all of the assets and all of the liabilities of Holdings. In
June 1996, the Company granted options to purchase an aggregate of 1,833,000
shares of Common Stock under the Company's 1996 Stock Option Plan. The shares
of Common Stock issued to Holdings and such options were issued in reliance
on the exemption from registration provided in Section 4(2) of the Securities
Act of 1933, as amended.
II-4
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement among the Company, Cowen & Company, Dillon, Read & Co. Inc., and
Salomon Brothers Inc, as Representatives of the several Underwriters.
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and Bylaws of the Company
defining the rights of holders of Common Stock of the Company
4.2* Form of Common Stock certificate of the Company
5* Opinion of Holland & Knight LLP
10.1 Employment Agreement dated as of July 1, 1996, between Daniel M. Bell and the Company
10.2 Nonqualified Stock Option Agreement by and between the Company and Daniel M. Bell dated as of June
20, 1996
10.3 Employment Agreement dated as of June 15, 1996, between David Bova and the Company
10.4 Kos Pharmaceuticals, Inc. 1996 Stock Option Plan
10.5* Licensing Agreements with Fuisz Technologies, Inc. (Confidential Treatment Requested).
10.6* Promissory Note in favor of Kos Investments
10.7 Registration Rights Agreements dated as of June 30, 1996 by and between the Company and Kos Holdings,
Inc.
10.8 Oakwood Business Center Lease, dated May 2, 1991, between STS Buildings Associates, L.P. and the
Company.
10.9 Oakwood Business Center Lease, dated May 15, 1990, between STS Buildings Associates, L.P. and the
Company.
10.10 Oakwood Business Center Lease, dated January 7, 1993, between STS Buildings Associates, L.P. and
the Company.
10.11 Modification and Extension Agreement, dated June 6, 1996, between STS Buildings Associates, L.P.
and the Company.
10.12 Assignment and Second Modification of Lease Agreement, dated June 30, 1996, by and between Oakwood
Business Center Limited Partnership and the Company.
10.13 Assignment and Second Modification of Loan Agreement, dated June 30, 1996, by and between Oakwood
Business Center Limited Partnership and the Company.
10.14 Assignment and Second Modification of Lease Agreement, dated June 30, 1996, by and between Oakwood
Business Center Limited Partnership and the Company.
10.15 Lease between Center Realty, L.P. and the Company, dated May 1993.
10.16 Third Modification of Lease Agreement, dated November 21, 1996, by and between Oakwood Business
Center Limited Partnership and the Company.
21 Subsidiaries of the Company
23.1* Consent of Holland & Knight LLP (included in Exhibit 5 above)
23.2 Consent of Arthur Andersen LLP
24 Power of Attorney (included on signature page of this Registration Statement)
27 Financial Data Schedule
99.1 Consent of John Brademas
99.2 Consent of Louis C. Lasagna
99.3 Consent of Mark Novitch
99.4 Consent of Frederick B. Whittemore
</TABLE>
- ---------------
* To be filed by amendment.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted
from the form of prospectus filed as part of a Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be a part of this Registration Statement as of the
time it was declared effective.
(2) for the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Miami, Florida on December 16, 1996.
KOS PHARMACEUTICALS, INC.
By: /s/ DANIEL M. BELL
Daniel M. Bell
President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Daniel M. Bell and Juan F. Rodriguez, and each
of them, his true and lawful attorney-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, including a
Registration Statement filed pursuant to Rule 462 under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that each of said attorneys-in-fact or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1993, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------------------------------------------
<S> <C> <C>
/s/ DANIEL M. BELL President, Chief Executive Officer December 16, 1996
- ----------------------- and Director
Daniel M. Bell (Principal Executive Officer)
/s/ MICHAEL JAHARIS Chairman of the December 16, 1996
- ----------------------- Board of Directors
Michael Jaharis
/s/ JUAN F. RODRIGUEZ Controller December 16, 1996
- ----------------------- (Principal Accounting Officer
Juan F. Rodriguez and Principal Financial Officer)
/s/ ROBERT E. BALDINI Vice Chairman of the December 16, 1996
- ----------------------- Board of Directors
Robert E. Baldini
/s/ STEVEN JAHARIS Director December 16, 1996
- -----------------------
Steven Jaharis
</TABLE>
II-7
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
KOS PHARMACEUTICALS, INC.
ARTICLE I - NAME
The name of the Corporation is Kos Pharmaceuticals, Inc.
ARTICLE II - ADDRESS
The mailing address for the Corporation is 1001 South Bayshore Drive,
Suite 2502, Miami, Florida 33131.
ARTICLE III - DURATION
The duration of the Corporation shall be perpetual.
ARTICLE IV - PURPOSE
The Corporation is organized to engage in any activity or business
permitted under the laws of the United States and the State of Florida.
ARTICLE V - INCORPORATOR
The name and address of the incorporator of this Corporation is Daniel
M. Bell, 1001 South Bayshore Drive, Suite 2502, Miami, Florida 33131.
ARTICLE VI - REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation is 1001 South
Bayshore Drive, Suite 2502, Miami, Florida 33131, and the name of the registered
agent of the Corporation at such address is Daniel M. Bell.
ARTICLE VII - CAPITAL STOCK
The total number of shares of all classes of capital stock of the
Corporation which the Corporation shall have the authority to issue is
60,000,000, of which 50,000,000 shares having a par value of $.01 per share
shall be designated as Common Stock and 10,000,000 shares having a par value of
$.01 per share shall be designated as Preferred Stock.
Shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is authorized to fix the number of shares in
each series, the designation thereof and the relative rights, preferences and
limitations of each series, and specifically, the Board of Directors is
<PAGE>
authorized to fix with respect to each series (a) the dividend rate; (b)
redeemable features, if any; (c) rights upon liquidation; (d) whether or not the
shares of such series shall be subject to a purchase, retirement or sinking fund
provision; (e) whether or not the shares of such series shall be convertible
into or exchangeable for shares of any other class and, if so, the rate of
conversion or exchange; (f) restrictions, if any, upon the payment of dividends
on common stock; (g) restrictions, if any, upon the creation of indebtedness;
(h) voting powers, if any, of the shares of each series; and (i) such other
rights, preferences and limitations as shall not be inconsistent with the laws
of the State of Florida.
ARTICLE VIII - BOARD OF DIRECTORS
(a) INITIAL DIRECTORS. The Corporation shall have 3 directors
initially. The number of directors may be either increased or decreased from
time to time as provided in the Bylaws of the Corporation. The names and
addresses of the initial directors of this Corporation are:
<TABLE>
<S> <C> <C>
Michael Jaharis Steven Jaharis Daniel M. Bell
1001 S. Bayshore Dr. Apt. 2316 Suite 2502 2800 Lake Shore Drive 1001 S. Bayshore Dr. Suite 2502
Miami, Florida 33131 Chicago, IL 60657 Miami, Florida 33131
</TABLE>
(b) REMOVAL. Subject to the rights, if any, of the holders of shares of
preferred stock then outstanding, any or all of the directors of the Corporation
may be removed from office for cause only by the shareholders of the Corporation
at any annual or special meeting of shareholders by the affirmative vote of the
holders of at least 60% of the outstanding shares of capital stock of the
Corporation generally entitled to vote for the election of directors, voting
together as a single class. Notice of any such annual or special meeting of
shareholders shall state that the removal of a director or directors for cause
is among the purposes of the meeting. Directors may not be removed by the
shareholders without cause.
(c) VACANCIES. Newly created directorships resulting from any increase
in the number of directors or any vacancy on the Board of Directors resulting
from death, resignation, disqualification, removal or other cause shall be
filled solely by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum, or by a sole remaining director.
Any director elected in accordance with the preceding sentence shall hold office
until the next annual meeting of the Shareholders of the Corporation and until
such director's successor shall have been elected and qualified. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
(d) ADVANCE NOTICE OF NOMINATIONS. Advance notice of nominations
for the election of directors, other than by the Board of Directors or a
committee thereof, shall be given within the term and in the manner provided in
the By-laws of the Corporation.
-2-
<PAGE>
ARTICLE IX - SHAREHOLDER MEETINGS
(a) ANNUAL MEETINGS. Annual meetings shall be called and conducted in
the manner provided in the By-laws of the Corporation.
(b) SPECIAL MEETINGS. Special meetings of the shareholders of the
Corporation for any purpose or purposes may be called at any time by (i) the
Chairman of the Board of Directors, the President of the Corporation or a
majority of the Board of Directors or (ii) holders of not less than 50% of all
the votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting, if such shareholders sign, date and deliver to the
Corporation's Secretary one or more written demands for the meeting describing
the purpose or purposes for which it is to be held. Special meetings of the
shareholders of the Corporation may not be called by any other person.
At any special meeting of shareholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been set
forth in the notice of such special meeting.
(c) ADVANCE NOTICE OF SHAREHOLDER PROPOSALS. Advance notice of
shareholder proposals shall be given within the term and in the manner provided
in the By-laws of the Corporation.
ARTICLE X - NO SHAREHOLDER ACTION BY WRITTEN CONSENT
Any action required or permitted to be taken at any annual or special
meeting of shareholders of the Corporation may be taken only upon the vote of
shareholders at a duly convened meeting of shareholders in accordance with these
Articles of Incorporation and the Bylaws, and may not be taken by written
consent of shareholders.
ARTICLE XI - CONTROL-SHARE ACQUISITIONS
The Corporation elects to be governed by Florida Statute Section
607.0902, as amended, relating to control-share acquisitions (the "Act"). The
Corporation is expressly authorized to the fullest extent permitted by the Act
to redeem control shares acquired in a control-share acquisition at the fair
value thereof pursuant to procedures adopted by the Board of Directors.
ARTICLE XII - AFFILIATED TRANSACTIONS
The Corporation elects not to be governed by Florida Statute Section
607.0901, as amended from time to time, concerning affiliated transactions.
ARTICLE XIII - AMENDMENTS TO ARTICLES OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal
any provision in these Articles of Incorporation in the manner now or hereafter
prescribed by statute, and all rights
-3-
<PAGE>
conferred upon the shareholders herein are subject to this reservation.
Notwithstanding anything contained in these Articles of Incorporation to the
contrary, the affirmative vote of the holders of at least 60% of the outstanding
shares of the capital stock of the Corporation then entitled to vote generally
in the election of directors, voting together as a single class shall be
required to amend these Articles of Incorporation or to adopt any provision
inconsistent therewith.
ARTICLE XIV - BY-LAWS
The Board of Directors is expressly authorized to amend, repeal or
adopt any By-law of and for the Corporation. The holders of voting stock shall
to the extent such power is at the time conferred on them by applicable law,
also have the power, by the affirmative vote of the holders of at least 60% of
the outstanding shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class, to
make, alter, amend or repeal any By-law of and for the Corporation.
ARTICLE XV - INDEMNIFICATION
To the fullest extent permitted by the Florida Business Corporation
Act, the Corporation shall indemnify, or advance expenses to, any person made,
or threatened to be made, a party to any action, suit or proceeding by reason of
the fact that such person (a) is or was a director of the Corporation; (b) is or
was serving at the request of the Corporation as a director of another
corporation, partnership, joint venture, trust or other enterprise
(collectively, a "Business Entity"); (c) is or was an officer of the
Corporation, provided that such person is or was at the time a director of the
Corporation; or (d) is or was serving at the request of the Corporation as an
officer of another Business Entity, provided that such person is or was at the
time a director of the Corporation or a director of such other Business Entity,
serving at the request of the Corporation. Unless otherwise expressly prohibited
by the Florida Business Corporation Act, and except as otherwise provided in the
previous sentence, the Board of Directors shall have the sole and exclusive
discretion, on such terms and conditions as it shall determine, to indemnify, or
advance expenses to, any person made, or threatened to be made, a party to any
action, suit or proceeding by reason of the fact that such person is or was an
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as an officer, employee or agent of another Business
Entity. No person falling within the purview of this paragraph may apply for
indemnification or advancement of expenses to any court of competent
jurisdiction.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned Incorporator has executed these
Articles of Incorporation this ______ day of June, 1996.
/s/ DANIEL M. BELL
-----------------------------
Daniel M. Bell, Incorporator
-5-
EXHIBIT 3.2
BY-LAWS
OF
KOS PHARMACEUTICALS, INC.
ARTICLE I
SHAREHOLDERS
Section 1.1 ANNUAL MEETINGS. An annual meeting of shareholders shall be
held for the election of Directors at such date, time and place either within or
without the State of Florida as may be designated by the Board of Directors from
time to time. To the extent notice has been provided in accordance with sections
1.4 and 1.12, any other proper business may be transacted at the annual meeting.
Section 1.2 SPECIAL MEETINGS. Special meetings of the shareholders of
the Corporation for any purpose or purposes may be called at any time by (i) the
Chairman of the Board of Directors, the President of the Corporation or a
majority of the Board of Directors or (ii) upon delivery of one or more written
demands for a meeting describing the purpose or purposes for the meeting and
signed and dated by the holders of not less than 50 percent of all votes
entitled to be cast on any issue proposed to be considered at such special
meeting. Special meetings of shareholders of the Corporation may not be called
by any other person or persons. At any special meeting of shareholders, only
such business shall be conducted, and only such proposals shall be acted upon,
as shall be set forth in the notice of such special meeting.
Section 1.3 SHAREHOLDER ACTION. Any action required or permitted to be
taken at any annual or special meeting of the shareholders of the Corporation
may be taken only upon the vote of shareholders at a duly convened meeting of
shareholders in accordance with the Articles of Incorporation and these By-Laws,
and may not be taken by written consent of shareholders.
Section 1.4 NOTICE OF MEETINGS. Whenever shareholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each shareholder entitled to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the shareholder at such shareholders'
addresses as they appear on the records of the Corporation.
<PAGE>
Section 1.5 ADJOURNMENTS. Any meeting of shareholders, annual or
special, may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 1.6 QUORUM. At each meeting of shareholders, except where
otherwise provided by law or the Articles of Incorporation or these By-laws, the
holders of a majority of the outstanding shares of stock entitled to vote on a
matter at the meeting, present in person or represented by proxy, shall
constitute a quorum. For purposes of the foregoing, where a separate vote by
class or classes is required for any matter, the holders of a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum to take action with respect to that vote on
that matter. Two or more classes or series of stock shall be considered a single
class if the holders thereof are entitled to vote together as a single class at
the meeting. In the absence of a quorum of the holders of any class of stock
entitled to vote on a matter, the holders of such class so present or
represented may, by majority vote, adjourn the meeting of such class from time
to time in the manner provided by Section 1.5 of these By-laws until a quorum of
such class shall be so present or represented. Shares of its own capital stock
belonging on the record date for the meeting to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
Directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
Section 1.7 ORGANIZATION. Meetings of shareholders shall be presided
over by the Chairman of the Board of Directors, if any, or in the absence of the
Chairman of the Board of Directors by the Vice Chairman of the Board of
Directors, if any, or in the absence of the Vice Chairman of the Board of
Directors by the President, or in the absence of the President, by a Vice
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary, or in the absence of the Secretary an
Assistant Secretary, shall act as secretary of the meeting, but in the absence
of the Secretary and any Assistant Secretary, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
The order of business at each such meeting shall be as determined by
the chairman of the meeting. The chairman of the meeting shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts and things as are necessary or desirable for the proper conduct of the
meeting, including, without limitation, the establishment of procedures for the
maintenance of order and safety, limitations on the time allotted to questions
or comments on the affairs of the Corporation, restrictions on entry to such
meeting after the time prescribed for the commencement thereof and the opening
and closing of the voting polls.
2
<PAGE>
Section 1.8 INSPECTORS. Prior to any meeting of stockholders, the Board
of Directors or the President shall appoint one or more inspectors to act at
such meeting and make a written report thereof and may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at the meeting of shareholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall ascertain the number of shares outstanding and the
voting power of each, determine the shares represented at the meeting and the
validity of proxies and ballots, count all votes and ballots, determine and
retain for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors and certify their determination of
the number of shares represented at the meeting and their count of all votes and
ballots. The inspectors may appoint or retain other persons to assist them in
the performance of their duties. The time of the opening and closing of the
polls for each matter upon which the shareholders will vote at a meeting shall
be announced at the meeting. No ballot, proxy or vote, nor any revocation
thereof or change thereto, shall be accepted by the inspectors after the closing
of the polls. In determining the validity and counting of proxies and ballots,
the inspectors shall be limited to an examination of the proxies, any envelopes
submitted therewith, any information provided by a shareholder who submits a
proxy by telegram, cablegram or other electronic transmission from which it can
be determined that the proxy was authorized by the shareholder, ballots and the
regular books and records of the corporation, and they may also consider other
reliable information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar persons
which represent more votes than the holder of a proxy is authorized by the
record owner to cast or more votes than the shareholder holds of record. If the
inspectors consider other reliable information for such purpose, they shall, at
the time they make their certification, specify the precise information
considered by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
Section 1.9 VOTING; PROXIES. Unless otherwise provided in the Articles
of Incorporation, each shareholder entitled to vote at any meeting of
shareholders shall be entitled to one vote for each share of stock held by such
shareholder which has voting power upon the matter in question. If the Articles
of Incorporation provides for more or less than one vote for any share on any
matter, every reference in these By-laws to a majority or other proportion of
stock shall refer to such majority or other proportion of the votes of such
stock. Each shareholder entitled to vote at a meeting of shareholders may
authorize another person or persons to act for such shareholder by proxy, but no
such proxy shall be voted or acted upon after eleven months from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power,
regardless of whether the interest with which it is coupled is an interest in
the stock itself or an interest in the Corporation generally. A shareholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary of the Corporation.
Voting at meetings
3
<PAGE>
of shareholders need not be by written ballot unless the holders of a majority
of the outstanding shares of all classes of stock entitled to vote thereon
present in person or represented by proxy at such meeting shall so determine.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of Directors. In all other matters, unless otherwise provided by law or
by the Articles of Incorporation or these Bylaws, the affirmative vote of the
holders of a majority of the shares present in person or represented by proxy at
the meeting and entitled to vote on the subject matter shall be the act of the
shareholders. Where a separate vote by class or classes is required, the
affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class or classes, except as otherwise provided by law or by the
Articles of Incorporation or these By-laws.
Section 1.10 FIXING DATE FOR DETERMINATION OF SHAREHOLDERS OF RECORD.
In order that the Corporation may determine the shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting. If no record date is
fixed by the Board of Directors, the record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
In order that the Corporation may determine the shareholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the shareholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
shareholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 1.11 LIST OF SHAREHOLDERS ENTITLED TO VOTE. The Secretary shall
prepare and make, at least ten (10) days before every meeting of shareholders, a
complete list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the
4
<PAGE>
time and place of the meeting during the whole time thereof and may be inspected
by any shareholder who is present.
Section 1.12 ADVANCE NOTICE OF SHAREHOLDER PROPOSALS. At any annual or
special meeting of shareholders, proposals by shareholders and persons nominated
for election as Directors by shareholders shall be considered only if advance
notice thereof has been timely given as provided herein and such proposals or
nominations are otherwise proper for consideration under applicable law and the
Articles of Incorporation and By-laws of the Corporation. Notice of any proposal
to be presented by any shareholder or of the name of any person to be nominated
by any shareholder for election as a Director of the Corporation at any meeting
of shareholders shall be delivered to the Secretary of the Corporation at its
principal executive office not less than sixty (60) nor more than ninety (90)
days prior to the date of the meeting; provided, however, that if the date of
the meeting is first publicly announced or disclosed (in a public filing or
otherwise) less than seventy (70) days prior to the date of the meeting, such
advance notice shall be given not more than ten (10) days after such date is
first so announced or disclosed. Public notice shall be deemed to have been
given more than seventy (70) days in advance of the annual meeting if the
Corporation shall have previously disclosed, in these By-laws or otherwise, that
the annual meeting in each year is to be held on a determinable date, unless and
until the Board of Directors determines to hold the meeting on a different date.
Any shareholder who gives notice of any such proposal shall deliver therewith
the text of the proposal to be presented and a brief written statement of the
reasons why such shareholder favors the proposal and setting forth such
shareholder's name and address, the number and class of all shares of each class
of stock of the Corporation beneficially owned by such shareholder and any
material interest of such shareholder in the proposal (other than as a
shareholder). Any shareholder desiring to nominate any person for election as a
Director of the Corporation shall deliver with such notice a statement in
writing setting forth the name of the person to be nominated, the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such person, the information regarding such person required by paragraphs
(a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any regulation
subsequently adopted by the Securities and Exchange Commission applicable to the
Corporation), such person's signed consent to serve as a Director of the
Corporation if elected, such shareholder's name and address and the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such shareholder. As used herein, shares "beneficially owned" shall mean all
shares as to which such person, together with such person's affiliates and
associates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934),
may be deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as well as all shares as to which such person,
together with such person's affiliates and associates, has the right to become
the beneficial owner pursuant to any agreement or understanding, or upon the
exercise of warrants, options or rights to convert or exchange (whether such
rights are exercisable immediately or only after the passage of time or the
occurrence of conditions). The person presiding at the meeting, in addition to
making any other determinations that may be appropriate to the conduct of the
meeting, shall determine whether such notice has been duly given and shall
direct that proposals and nominees not be considered if such notice has not been
given.
5
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 POWERS; NUMBER; QUALIFICATIONS. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law or in the Articles of
Incorporation. The Board of Directors shall consist of not less than three (3)
or more than fifteen (15) members, the number thereof to be determined from time
to time by the Board of Directors. Directors need not be shareholders. The
number of directors may be increased or decreased from time to time by action of
the Board of Directors, but no decrease shall have the effect of shortening the
term of any incumbent director.
Section 2.2 ELECTION; TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES.
Any Director may resign at any time upon written notice to the Board of
Directors or to the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. Subject to the rights, if any, of the holders of shares of
preferred stock then outstanding, any Director or the entire Board of Directors
may be removed by the shareholders of the Corporation at any annual or special
meeting of shareholders, only for cause in accordance with the provisions of the
Articles of Incorporation, by the affirmative vote of the holders of 60 percent
of the shares then generally entitled to vote at an election of Directors,
voting together as a single class. Unless otherwise provided in the Articles of
Incorporation or these By-laws, vacancies and newly created directorships
resulting from any increase in the authorized number of Directors elected by all
of the shareholders having the right to vote as a single class or from any other
cause shall be filled by a majority of the Directors then in office, although
less than a quorum, or by the sole remaining Director. Any Director elected or
appointed to fill a vacancy shall hold office until the next election of
Directors and until his or her successor is elected and qualified or until his
or her earlier resignation or removal in accordance with the Articles of
Incorporation and these By-laws.
Section 2.3 REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Florida and
at such times as the Board of Directors may from time to time determine, and if
so determined notice thereof need not be given.
Section 2.4 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Florida whenever called by the Chairman of the Board of Directors, if any, by
the Vice Chairman of the Board of Directors, if any, by the President or by any
three Directors. Reasonable notice thereof shall be given by the person or
persons calling the meeting.
Section 2.5 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE
PERMITTED. Unless otherwise restricted by the Articles of Incorporation or these
By-laws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or of
such committee, as the case may be, by means of conference telephone or similar
6
<PAGE>
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
By-law shall constitute presence in person at such meeting.
Section 2.6 QUORUM; VOTE REQUIRED FOR ACTION. Subject to the Articles
of Incorporation, at all meetings of the Board of Directors one-third of the
entire Board of Directors shall constitute a quorum for the transaction of
business. The vote of a majority of the Directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors unless the
Articles of Incorporation or these By-laws shall require a vote of a greater
number. In case at any meeting of the Board of Directors a quorum shall not be
present, the members of the Board of Directors present may adjourn the meeting
from time to time until a quorum shall be present.
Section 2.7 ORGANIZATION. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board of Directors, if any, or in the
absence of the Chairman of the Board of Directors by the Vice Chairman of the
Board of Directors, if any, or in the absence of the Vice Chairman of the Board
of Directors by the President, or in his absence by a chairman chosen at the
meeting. The Secretary, or in the absence of the Secretary an Assistant
Secretary, shall act as secretary of the meeting, but in the absence of the
Secretary and any Assistant Secretary, the chairman of the meeting may appoint
any person to act as secretary of the meeting.
Section 2.8 ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise
restricted by the Articles of Incorporation or these By-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or of such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 2.9 COMPENSATION OF DIRECTORS. Unless otherwise restricted by
the Articles of Incorporation or these By-laws, the Board of Directors shall
have the authority to fix the compensation of Directors.
ARTICLE III
COMMITTEES
Section 3.1 COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the Directors of the
Corporation. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, to the extent
provided in the resolution of the Board of Directors or in these By-laws, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such
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committee shall have the power or authority in reference to amending the
Articles of Incorporation (except that a committee may, to the extent authorized
in the resolution or resolutions providing for the issuance of shares of stock
adopted by the Board of Directors, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the shareholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the shareholders a dissolution of the Corporation or a
revocation of a dissolution or amending these By-laws; and, unless the
resolution, these By-laws or the Articles of Incorporation expressly so
provides, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, to adopt a certificate of
ownership and merger or to remove or indemnify Directors.
Section 3.2 COMMITTEE RULES. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of a provision
by the Board of Directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote of
a majority of the members present at a meeting at the time of such vote if a
quorum is then present shall be the act of such committee, and in other respects
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these By-laws.
ARTICLE IV
OFFICERS
Section 4.1 OFFICERS; ELECTION. As soon as practicable after the annual
meeting of shareholders in each year, the Board of Directors shall elect a
President, a Chief Executive Officer, and a Secretary, and it may, if it so
determines, elect from among its members a Chairman of the Board of Directors
and a Vice Chairman of the Board of Directors. The Board of Directors may also
elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or
more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and
such other officers as the Board of Directors may deem desirable or appropriate
and may give any of them such further designations or alternate titles as it
considers desirable. Any number of offices may be held by the same person unless
the Articles of Incorporation or these By-laws otherwise provide.
Section 4.2 TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Unless
otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. Any officer
may resign at any time upon written notice to the Board of Directors or to the
President or the
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Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. The Board of Directors may
remove any officer with or without cause at any time. Any such removal shall be
without prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled by the Board of Directors
at any regular or special meeting or by unanimous written consent of the Board
of Directors.
Section 4.3 POWERS AND DUTIES. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as shall be
stated in these By-laws or in a resolution of the Board of Directors which is
not inconsistent with these By-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board of Directors. The Secretary shall have the duty to record the proceedings
of the meetings of the shareholders, the Board of Directors and any committees
in a book to be kept for that purpose. The Board of Directors may require any
officer, agent or employee to give security for the faithful performance of his
or her duties.
ARTICLE V
STOCK
Section 5.1 CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or Vice Chairman of the Board of Directors, if any,
or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
representing the number of shares of stock in the Corporation owned by such
holder. If such certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
If the Corporation is authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided by law, in lieu of
the foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock a statement that the Corporation will furnish without charge to each
shareholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of
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stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
Section 5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES: ISSUANCE OF
NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to give
the Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
MISCELLANEOUS
Section 6.1 FISCAL YEAR. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 6.2 SEAL. The Corporation may have a corporate seal which shall
have the name of the Corporation inscribed thereon and shall be in such form as
may be approved from time to time by the Board of Directors. The corporate seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
in any other manner reproduced.
Section 6.3 WAIVER OF NOTICE OF MEETINGS OF SHAREHOLDERS, DIRECTORS AND
COMMITTEES. Whenever notice is required to be given by law or under any
provision of the Articles of Incorporation or these By-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the shareholders,
Directors or members of a committee of Directors need be specified in any
written waiver of notice unless so required by the Articles of Incorporation or
these By-laws.
Section 6.4 INDEMNIFICATION. The Corporation shall indemnify to the
full extent permitted by the Articles of Incorporation.
Section 6.5 INTERESTED DIRECTORS; QUORUM. No contract or transaction
between the Corporation and one or more of its Directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its Directors or officers are Directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the Director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely
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because his or her or their votes are counted for such purpose, if: (1) the
material facts as to his or her relationship or interest and as to the contract
or transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested Directors, even though the disinterested Directors be less than a
quorum; or (2) the material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof or the
shareholders. Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
Section 6.6 FORM OF RECORDS. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 6.7 AMENDMENT OF BY-LAWS. The Board of Directors is expressly
authorized to amend, repeal or adopt any By-law of and for the Corporation. The
holders of voting stock shall to the extent such power is at the time conferred
on them by applicable law, also have the power, by the affirmative vote of the
holders of at least 60% of the outstanding shares of capital stock of the
Corporation then entitled to vote generally in the election of directors, voting
together as a single class, to make, alter, amend or repeal any By-law of and
for the Corporation.
11
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of July 1, 1996, is entered into
between Kos Pharmaceuticals, Inc., a Florida corporation (the "Company"), and
Daniel M. Bell (the "Executive").
RECITALS
Executive is currently employed by the Company as a senior executive
officer and is an integral part of its management. The Board of Directors of the
Company recognizes the Executive as a key founding officer of the Company, and
consequently has approved the terms and conditions of the continued employment
of Executive as set forth herein and has authorized the execution and delivery
of this Agreement.
AGREEMENT
For and in consideration of the foregoing and of the mutual covenants
of the parties herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. EMPLOYMENT. The Company hereby employs Executive to serve in the capacities
described herein and Executive hereby accepts such employment and agrees to
perform the services described herein upon the terms and conditions hereinafter
set forth.
2. TERM. The term of Executive's employment pursuant to this Agreement shall
commence as of the date hereof and shall terminate at the close of business on
June 30, 2002, subject to earlier termination in accordance with Section 9
hereof and the other terms, provisions, and conditions set forth herein.
3. DUTIES. Executive shall serve as and have the title of the President and
Chief Executive Officer of the Company. Executive agrees to devote substantially
his entire time, energy, and skills to such employment while so employed.
4. COMPENSATION.
(a) BASE COMPENSATION. The Company shall pay Executive, and
Executive agrees to accept, base compensation at the rate of not less than
$250,000 per year in equal, monthly installments commencing as of July, 1996,
through the term of this Agreement ("Base Compensation"). The Base Compensation
specified in this Section 4(a) may be increased at any time during the term of
this Agreement in the discretion of the Board of Directors and will be reviewed
no less frequently than during the first quarter of each calendar year beginning
in 1997. No increase in the Base Compensation pursuant to this Section 4(a)
shall at any time operate as a cancellation of this Agreement; any such increase
shall operate merely as an amendment hereof, without any further action by
Executive or the Company. If any such increase or increases shall be so
authorized, all of the terms, provisions and conditions of this Agreement shall
remain in effect as herein provided,
<PAGE>
except that the Base Compensation set forth in this Section 4(a) shall be deemed
amended to set forth the higher amount of such Base Compensation to Executive.
(b) BONUS COMPENSATION. The Company shall pay Executive an
annual bonus ("Bonus Compensation") within 90 days following the end of the
calendar years ending December 31, 1996 and 1997 and following the end of each
fiscal year of the Company thereafter during the term of Executive's employment
under this Agreement. The amount of Executive's Bonus Compensation shall be
determined by the Board of Directors of the Company, after consideration of any
recommendations made by the Compensation Committee of the Board of Directors,
based upon Executive's performance and the performance of the Company during
such year. The Company recognizes that its operations will be in a developmental
stage at least through the end of the 1997 calendar year and the Company agrees
that during such period, for the purpose of determining Executive's Bonus
Compensation and Annual Stock Options, Executive's performance and the
performance of the Company shall be evaluated based upon the Company's
organizational development, the progress in the development of the Company's
products, and the development and implementation of the Company's sales and
marketing plans. After such period, Executive's performance and the performance
of the Company shall be evaluated based upon the overall performance of the
Company, including the Company's financial performance.
(c) STOCK OPTIONS. The Company shall grant Executive an annual
stock option award (the "Annual Stock Options") following each fiscal year of
the Company in amounts, at such exercise prices, and on such terms as the Board
of Directors determines, based upon the performance of the Executive and the
Company during such fiscal year.
5. FRINGE BENEFITS.
(a) GENERALLY. Executive shall be eligible for fringe benefits
pursuant to any insurance, pension or other employee fringe benefit plan
approved by the Board of Directors that now or hereafter may be made available
to employees of the Company and for which Executive will qualify according to
his eligibility under the provisions thereof; provided, however, that such
eligibility specifically does not apply to matters relating to Executive's
vacation, disability benefits, automobile allowance and compensation, which
matters shall be governed exclusively by the terms hereof.
(b) VACATION. During the term of this Agreement, Executive
shall be entitled to five (5) weeks paid vacation per calendar year and any
vacation time not taken during any calendar year shall be carried over into
subsequent calendar years; provided, however, that not more than five (5) weeks
cumulative unused vacation time may be carried over to any calendar year.
(c) AUTOMOBILE. The Company shall provide Executive with full
use of an automobile, appropriate for Executive's position and title, for
Executive's business and personal use, which automobile shall be replaced at
least every three years. The Company agrees to provide adequate insurance for
the automobile and occupants and to pay all maintenance and operating costs
appropriate or necessary to maintain such automobile in prime operating
condition.
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6. EXPENSES. During the period of his employment, Executive shall be reimbursed
for his business-related expenses incurred on behalf of the Company in
accordance with the travel and entertainment expense policy of the Company as
adopted by the Board of Directors from time to time and in effect at the time
the expense was incurred, but Executive shall be entitled to not less than
first-class for air travel. Executive agrees to maintain such records and
documentation of all such expenses to be reimbursed by the Company hereunder as
the Company shall require and in such detail as the Company may reasonably
request.
7. TERMINATION. The term of Executive's employment under this Agreement may be
terminated prior to expiration of the term provided in Section 2 hereof in
accordance with the following paragraphs. Any termination of the Executive's
employment by the Company for Cause or otherwise shall be communicated by Notice
of Termination to the Executive given in accordance with Section 14 hereof. A
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(iii) if the termination date is other than the date of receipt of such notice,
specifies the termination date, which date shall not be more than sixty (60)
calendar days after the giving of such notice. The death or disability of
Executive shall in no event be deemed a termination of employment by Executive.
(a) MUTUAL. Executive's employment under this Agreement may be
terminated upon the mutual written agreement (which may include, if so agreed to
by the Board of Directors and Executive, severance payments and/or benefits) of
the Company and Executive.
(b) DEATH. In the event of the death of Executive, the
Company may terminate Executive's employment under this Agreement.
(c) DISABILITY. If, during Executive's employment under this
Agreement, Executive shall become disabled and unable to perform his duties as
required herein ("Disability") for a consecutive period of one hundred eighty
(180) days, then the Company may, upon sixty (60) days' written notice to
Executive, terminate Executive's employment under this Agreement.
(d) CAUSE. Executive's employment under this Agreement may be
terminated by the Company, with or without Cause as herein defined upon giving
Executive sixty (60) days written notice. For purposes of this Agreement, the
term "Cause" shall mean the termination of the Executive by the Board of
Directors of the Company as a result of the existence or occurrence of one or
more of the following conditions or events:
(i) An act or acts of fraud, misappropriation,
or embezzlement on the Executive's part that result in or are intended to result
in his personal enrichment at the expense of the Company or its subsidiaries or
affiliates.
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(ii) Conviction of a felony that (a) arises
in connection with the Company's business and (b) has a material adverse effect
on the Company's business.
(iii) The Executive's willful or intentional
failure to perform his duties as required under this Agreement; provided, that
the Company shall provide Executive with written notice of such failure and
Executive shall have thirty (30) days from the date Executive receives such
notice to remedy such failure to perform.
(e) CHANGE OF CONTROL. In the event of a "Change in Control"
(as defined in this Section 7(e)), Executive may elect, at any time during the
180-day period immediately following such Change in Control, to deliver 60 days'
written notice to the Company of his termination of employment hereunder.
Termination of Executive's employment under this Agreement pursuant to the
provisions of the preceding sentence shall be deemed a termination without Cause
for purposes of Section 9 hereof and shall not be deemed to be a voluntary
resignation or termination by Executive. For purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred when:
(i) Michael Jaharis, his estate, his wife,
his lineal descendants, any trust created for the benefit of any one or more of
them during their lifetimes, or any corporation, partnership or other entity
owned fifty percent or more directly or indirectly by Michael Jaharis, or any
combination of the foregoing (x) ceases to be the largest shareholder of the
Company or (y) ceases to own at least thirty three percent or more of the stock
of the Company;
(ii) any person, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
becomes the beneficial owner of twenty-five percent or more of the stock of the
Company;
(iii) the Company is merged into any other
company that is not controlled by Michael Jaharis or substantially all of its
assets are acquired by any other company that is not controlled by Michael
Jaharis; or
(iv) three or more directors nominated by
the Board of Directors to serve as a director, each having agreed to serve in
such capacity, fail to be elected in a contested election of directors.
8. DEATH AND DISABILITY. In the event of the termination of Executive's
employment under this Agreement by reason of the Executive's death or
Disability, the Company shall pay Executive (or his heirs and/or personal
representatives): (i) Executive's Base Compensation, unused vacation
entitlement, and other benefits until June 30, 2002; and (ii) Executive's Bonus
Compensation payable under Section 4 and Executive's Annual Stock Options for
the fiscal year in which Executive's termination occurred, as if Executive had
been employed by the Company for the full fiscal year, provided that the Company
shall pay Executive's Bonus Compensation through the end of the
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Company's 1997 calendar year regardless of whether Executive is terminated for
death or Disability prior to such year.
9. SEVERANCE. In the event of the termination of Executive's employment under
this Agreement for any reason other than Executive's death or disability, the
Company shall provide the payments and benefits to Executive as indicated below:
(a) WITH CAUSE OR VOLUNTARY RESIGNATION. If Executive is
terminated for Cause (as defined in Section 7(d) of this Agreement), or if
Executive voluntarily terminates his employment by the Company, the Company
shall pay Executive, within five (5) business days after the date of
termination, Executive's Base Compensation, unused vacation entitlement and all
expenses in connection with Executive's use of the automobile under Section 5(c)
hereof through such date of termination, and the Company shall have no further
obligation to provide compensation or benefits to Executive under this
Agreement; except that, to the extent that the Company's insurance, stock option
and other benefit plans provide certain rights and benefits after an employee's
termination, Executive may continue to receive such rights and benefits in
accordance with the terms of such plans.
(b) WITHOUT CAUSE OR DUE TO CHANGE OF CONTROL. If terminated
by the Company without Cause or by the Executive as a result of a Change of
Control, Executive shall receive the Base Compensation, Bonus Compensation,
Annual Stock Options, and the other benefits under this Agreement until the
later to occur of (x) the date thirty-six (36) months from the date of such
termination and (y) June 30, 2002.
10. CONFIDENTIAL INFORMATION. Executive recognizes and acknowledges that he will
have access to certain confidential information of the Company and of
corporations with whom the Company does business, and that such information
constitutes valuable, special and unique property of the Company and such other
corporations. During the term of this Agreement and for a period of five (5)
years immediately following the date of termination of this Agreement, Executive
agrees not to disclose or use any confidential information, including without
limitation, information regarding research, developments, product designs or
specifications, manufacturing processes, "know-how," prices, suppliers,
customers, costs or any knowledge or information with respect to confidential or
trade secrets of the Company, it being understood that such confidential
information does not include information that is publicly available unless such
information became publicly available as a result of a breach of this Agreement.
Executive acknowledges and agrees that all notes, records, reports, sketches,
plans, unpublished memoranda or other documents belonging to the Company, but
held by Executive, concerning any information relating to the Company's
business, whether confidential or not, are the property of the Company and will
be promptly delivered to it upon Executive's leaving the employ of the Company.
Executive also agrees to execute such confidentiality agreements that the Board
may adopt, and may modify from time to time, as a standard form to be executed
by all employees of the Company, to the extent such standard forms are not
materially more restrictive than the provisions of this Agreement.
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11. INTELLECTUAL PROPERTY. Executive acknowledges and agrees that all
discoveries, inventions, designs, improvements, formulas, formulations, ideas,
devices, writings, publications, study protocols, study results, computer data
or programs, or other intellectual property, whether or not subject to patent or
copyright laws, which Executive shall conceive solely or jointly with others, in
the course or scope of his employment with the Company or in any way related to
the Company's business, whether during or after working hours, or with the use
of the Company's equipment, materials or facilities (collectively referred to
herein as "Intellectual Property") , shall be the sole and exclusive property of
the Company without further compensation to Executive. As used in this Section
11 and the following Section 12, it is understood that the Company's principal
"business" is developing pharmaceutical products for commercial sale, including
also medical devices and/or other drug delivery methods or technologies for
administering said pharmaceutical products. For purposes of this Agreement, any
Intellectual Property, based upon the Company's secret or confidential
information, developed within six (6) months after the termination of
Executive's employment, shall be presumed to be the property of the Company.
Executive agrees to promptly notify the Company and fully disclose the nature of
such Intellectual Property. Executive shall take such steps as are deemed
necessary to maintain complete and current records thereof, and Executive shall
assign to the Company or its designees, the entire right, title and interest in
said Intellectual Property. Further, Executive shall, at the Company's request
and expense (including reasonable compensation if Executive is no longer
employed under this Agreement), make necessary application for domestic or
foreign patents and assist in securing, defending or enforcing any such title
and right thereto.
12. NON-COMPETITION. Executive acknowledges that his services to be rendered
hereunder are of a special and unusual character that have a unique value to the
Company and the conduct of its business, the loss of which cannot adequately be
compensated by damages in an action at law. In view of the unique value to the
Company of the services of Executive for which the Company has contracted
hereunder, and because of the confidential information to be obtained by or
disclosed to Executive as herein above set forth, and as a material inducement
to the Company to enter into this Agreement and to pay and make available to
Executive the compensation and other benefits referred to herein, Executive
covenants and agrees that Executive will not, directly or indirectly, whether as
principal, agent, trustee or through the agency of any corporation, partnership,
association or agent (other than as the holder of not more than 10% of the total
outstanding stock of any company the securities of which are traded on a regular
basis on recognized securities exchanges):
(a) while employed under this Agreement and for any period
during which Executive is receiving payments from the Company (pursuant to
Section 8 hereof) following a termination as a result of Employee's Disability,
(i) work for (in any capacity, including without limitation director, officer or
employee) any other business or pharmaceutical company that competes with the
Company or (ii) recruit, or otherwise influence or attempt to induce employees
of the Company to leave the employment of the Company; and
(b) for the two-year period immediately following the
termination of this Agreement due to the expiration of the term of this
Agreement, termination of Executive for Cause, or Executive's voluntary
resignation; and for the two year period immediately following the last date
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on which Employee shall receive payments from the Company pursuant to Section 8
hereof following a termination of employment as a result of Employee's
Disability, work for a company or business (in any capacity, including without
limitation as director, officer, or employee) that is in the business of
developing any products or projects which, as of the date of such termination,
the Company sells or which were undergoing research and development or
feasibility consideration by the Company; provided that for purposes of this
Section 12 (b), products or projects under "feasibility consideration" will
consist of potential products or projects known and identified in writing at the
time of termination but not yet in active development or specifically scheduled
to enter active development at the time of termination that have either
undergone active formulation efforts and/or in vivo study within three months
prior to termination or do undergo active formulation efforts and/or in vivo
study within the six months following such termination.
Executive has carefully read and considered the provisions of Sections
10, 11, and 12 hereof and agrees that the restrictions set forth in such
sections are fair and reasonable and are reasonably required for the protection
of the interests of the Company, its officers, directors, shareholders, and
other employees, for the protection of the business of the Company, and to
ensure that Executive devotes his full-time and efforts to the business of the
Company. Executive acknowledges that he is qualified to engage in businesses
other than those that are subject to this Section 12. It is the belief of the
parties, therefore, that the best protection that can be given to the Company
that does not in any way infringe upon the rights of Executive to engage in any
unrelated businesses is to provide for the restrictions described above. In view
of the substantial harm which would result from a breach by Executive of
Sections 10, 11 and 12, the parties agree that the restrictions contained
therein shall be enforced to the maximum extent permitted by law. In the event
that any of said restrictions shall be held unenforceable by any court of
competent jurisdiction, the parties hereto agree that it is their desire that
such court shall substitute a reasonable judicially enforceable limitation in
place of any limitation deemed unenforceable and that as so modified, the
covenant shall be as fully enforceable as if it had been set forth herein by the
parties.
13. REMEDIES. The provisions of sections 10, 11 and 12 of this Agreement shall
survive the termination of this Agreement as set forth therein, regardless of
the circumstances or reasons for such termination, and inure to the benefit of
the Company. The restrictions set forth in Sections 10, 11 and 12 are considered
to be reasonable for the purposes of protecting the business of the Company. The
Company and Executive acknowledge that the Company would be irreparably harmed
and that monetary damages would not provide an adequate remedy to the Company if
the covenants contained in Sections 10, 11 and 12 were not complied with in
accordance with their terms. Accordingly, Executive agrees that the Company
shall be entitled to injunctive and other equitable relief to secure the
enforcement of these provisions, in addition to any other remedy which may be
available to the Company, and that the Company shall be entitled to receive from
Executive reimbursement for reasonable attorneys' fees and expenses incurred by
the Company in enforcing these provisions.
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14. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail to
the addresses below or to such other address as either party shall designate by
written notice to the other:
IF TO THE EXECUTIVE: To the address set forth below his signature on
the signature page hereof.
IF TO THE COMPANY:
Kos Pharmaceuticals, Inc.
1001 S. Bayshore Drive
Suite 2502
Miami, FL 33131
Attention: Chairman of the Board
15. ENTIRE AGREEMENT; MODIFICATION.
(a) This Agreement contains the entire agreement of the
Company and Executive, and the Company and Executive hereby acknowledge and
agree that this Agreement supersedes any prior statements, writings, promises,
understandings or commitments, including, without limitation, the agreements and
obligations relating to Executive's employment by the Company set forth in the
Letter Agreement dated June 8, 1988 (the "Old Agreement") between Executive and
Michael Jaharis, Jr. (on behalf of the Company). The parties hereto agree (i)
that the Old Agreement is hereby terminated and canceled in its entirety, and
shall be of no further force and effect, except as the Old Agreement relates to
the grant of Stock Options to the Executive.
(b) No future oral statements, promises or commitments with
respect to the subject matter hereof, or other purported modification hereof,
shall be binding upon the parties hereto unless the same is reduced to writing
and signed by each party hereto.
16. ASSIGNMENT. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. The Executive may not assign his rights and
obligations under this Agreement.
17. FULL SETTLEMENT. The Executive shall not be obligated to seek other
employment by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement. The amounts payable to Executive under
this Agreement shall not be reduced by any compensation payable to Executive
from employment by another employer after the date of Executive's termination
provided such employment does not violate the terms of Section 12 hereof. The
Company agrees to pay all legal fees and expenses which the Executive may
reasonably incur as a result of any contest by the Executive or the Company or
others of the validity or enforceability of, or liability under any provision of
this Agreement or any guarantee of performance thereof, in each case plus
interest, provided that the Executive is the prevailing party in any such
contest. If the Executive is not the prevailing party each party shall pay its
own legal fees and expenses except that
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if such contest is the result of a claimed breach of Section 10, 11 or 12, and
the Company shall be the prevailing party, the Executive shall pay the
reasonable legal fees and expenses of the Company. The determination of the
prevailing party in any contest shall be made by the tribunal which shall
resolve such contest, or by the parties if such contest is settled without
resort to any such tribunal.
18. MISCELLANEOUS.
(a) This agreement shall be subject to and governed by the
laws of the State of Florida, without regard to the conflicts of laws principles
thereof.
(b) The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or the interpretation
of this Agreement.
(c) The failure of any party to enforce any provision of this
Agreement shall in no manner affect the right to enforce the same, and the
waiver by any party of any breach of any provision of this Agreement shall not
be construed to be a waiver by such party of any succeeding breach of such
provision or a waiver by such party of any breach of any other provision.
(d) All written notices required in this Agreement shall be
sent postage prepaid by certified or registered mail, return receipt requested.
(e) In the event any one or more of the provisions of this
Agreement shall for any reason be held invalid, illegal or unenforceable, the
remaining provisions of this Agreement shall be unimpaired, and the invalid,
illegal or unenforceable provision shall be replaced by a mutually acceptable
valid, and enforceable provision which comes closest to the intent of the
parties.
(f) This Agreement may be executed in any number of
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
REMAINDER OF PAGE LEFT BLANK INTENTIONALLY
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.
KOS PHARMACEUTICALS, INC.
By: /s/ MICHAEL JAHARIS
---------------------------------------
Its: Chairman
EXECUTIVE
/s/ DANIEL M. BELL
----------------------------------------
Daniel M. Bell
100 Casuarina Concourse
Coral Gables, Florida 33143
10
EXHIBIT 10.2
KOS PHARMACEUTICALS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement (the "Agreement"), effective
as of June 20, 1996, is made by and between Kos Pharmaceuticals, Inc., a Florida
corporation (the "Company"), and Daniel M. Bell, (the "Recipient").
WHEREAS, the Company wishes to grant an option to purchase shares of
the Company's common stock to the Recipient pursuant to the terms of the Kos
Pharmaceuticals, Inc. 1996 Stock Option Plan (the "Plan").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
1. GRANT OF OPTION. In consideration of service to the Company and for
other good and valuable consideration, the Company grants to the Recipient an
option to purchase 750,000 shares of the Company's common stock in accordance
with the terms and conditions of the Plan and this Agreement (the "Option").
2. OPTION PRICE. The purchase price of the shares of stock covered
by the Option shall be $0.60 per share.
3. ADJUSTMENTS IN OPTION.
(a) Subject to the limitation of subsection 3(b) below, in the
event that the outstanding shares of stock subject to the Option are changed
into or exchanged for a different number or kind of shares of the Company or
other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend or combination
of shares, the shares subject to the Option and the price per share shall be
equitably adjusted to reflect such changes. Such adjustment in the Option shall
be made without change in the total price applicable to the unexercised portion
of the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary corresponding
adjustment in the Option price per share. Any such adjustment made by the
Committee shall be final and binding upon the Recipient, the Company and all
other interested persons.
(b) The provisions of subsection 3(a) above shall not result
in any adjustment of either the number of shares subject to the Option or the
price per share in the event of any merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or any
other similar transaction on or before July 15, 1996.
4. PERSON ELIGIBLE TO EXERCISE OPTION. During the lifetime of the
Recipient, only the Recipient may exercise the Option or any portion thereof.
After the death of the Recipient, any exercisable portion of the Option may,
prior to the time when the Option becomes unexercisable under the terms of the
Plan, be exercised by the Recipient's personal representative or by any other
<PAGE>
person empowered to do so under the Recipient's will, trust or under then
applicable laws of descent and distribution.
5. MANNER OF EXERCISE. The Option, or any portion thereof, may be
exercised only in accordance with the terms of the Plan and solely by delivery
to the Secretary of the Company of all of the following items prior to the time
when the Option or such portion becomes unexercisable under the terms of the
Plan:
(a) Notice in writing signed by the Recipient or the other
person then entitled to exercise the Option or portion thereof, stating that the
Option or portion thereof is thereby exercised, such notice complying with all
applicable rules (if any) established by the Committee;
(b) Full payment (in cash or by cashiers' or certified check)
for the shares with respect to which the Option or portion thereof is exercised;
(c) Full payment (in cash or by cashiers' or certified check)
upon demand an amount sufficient to satisfy any federal (including FICA and FUTA
amounts), state, and/or local withholding tax requirements at the time the
Recipient or his beneficiary recognizes income for federal, state, and/or local
tax purposes as the result of the receipt of Shares pursuant to the exercise of
the Option or portion thereof;
(d) A bona fide written representation and agreement, in a
form satisfactory to the Committee, signed by the Recipient or other person then
entitled to exercise the Option or portion thereof, stating that the shares of
stock are being acquired for his own account, for investment and without any
present intention of distributing or reselling said shares or any of them except
as may be permitted under the Securities Act of 1933, as amended (the "Act"),
and then applicable rules and regulations thereunder, and that the Recipient or
other person then entitled to exercise such Option or portion will indemnify the
Company against and hold it free and harmless from any loss, damage, expense or
liability resulting to the Company if any sale or distribution of the shares by
such person is contrary to the representation and agreement referred to above.
The Committee may, in its absolute discretion, take whatever additional actions
it deems appropriate to ensure the observance and performance of such
representations and agreement and to effect compliance with all federal and
state securities laws or regulations. Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on an Option exercise
does not violate the Act and may issue stop-transfer orders covering such
shares. The written representations and agreement referred to in the first
sentence of this subsection (d), however, shall not be required if the shares to
be issued pursuant to such exercise have been registered under the Act, and such
registration is then effective in respect of such shares; and
(e) In the event the Option or any portion thereof shall be
exercised pursuant to Section 4 of the Agreement by any person or persons other
than the Recipient, appropriate proof, satisfactory to the Committee, of the
right of such person or persons to exercise the Option.
6. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The shares of stock
deliverable upon the exercise of the Option, or any portion thereof, may be
either previously authorized but unissued
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shares or issued shares which have been reacquired by the Company. Such shares
shall be fully paid and nonassessable.
7. RIGHTS OF SHAREHOLDERS. The Recipient shall not be, nor have any of
the rights or privileges of, a shareholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company to
the Recipient.
8. VESTING AND EXERCISABILITY. The Recipient's interest in the
Option shall be 100 percent vested as of the Date of Grant. Notwithstanding the
vested percentage of the Recipient's interest in the Option, the Option may not
be exercised unless and until an Initial Public Offering occurs.
9. DURATION OF OPTION. Except as specified below, the Option shall
expire on July 1, 2006. Notwithstanding the foregoing, the Option may expire
prior to July 1, 2006, in the following circumstances:
(a) In the case of the Recipient's death or disability, the
Recipient's termination of employment by reason of a change of control pursuant
to an employment agreement (if any) with the Company, the Company's termination
of the Recipient's employment or affiliation with the Company without cause, or
the expiration of the Recipient's employment agreement (if any) with the
Company, the Option shall expire on July 1, 2006.
(b) If the Recipient's employment or affiliation with the
Company terminates as a result of his retirement at age sixty-five, the Option
will expire on July 1, 2006.
(c) If the Recipient voluntarily ceases employment or
affiliation with the Company for any reason other than death, disability, a
change of control pursuant to an employment agreement (if any) with the Company,
or retirement (as described in subsection 9(b) above), the Option shall expire
thirty days following the last day that the Recipient is employed by or
affiliated with the Company. After the last day that the Recipient is employed
by or affiliated with the Company, the Option may be exercised only for the
number of Shares for which it could have been exercised on such last day
pursuant to Section 8 of the Agreement, subject to any adjustment under Section
3 of the Agreement.
(d) Notwithstanding any provisions set forth above in this
Section 9, if the Recipient shall (i) commit any act of malfeasance or
wrongdoing affecting the Company or its affiliates, (ii) breach any covenant not
to compete or employment agreement with the Company or any affiliate, or (iii)
engage in conduct that would warrant the Recipient's discharge for cause, any
unexercised part of the Option shall expire immediately upon the earlier of the
occurrence of such event or the last day the Recipient is employed by the
Company.
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<PAGE>
10. CHANGE IN CONTROL. Contingent upon the occurrence of a Change in
Control, the Board of Directors of the Company may, but is not required to, take
one or more of the following actions:
(a) terminate the Option effective upon the date of the Change
in Control and make, within ninety days after the date of the Change in Control,
a cash payment to the Recipient equal to the difference between the exercise
price of the Option and the fair market value of the shares that would have been
subject to the terminated Option on the date of the Change in Control; or
(b) accelerate the expiration of the Option to a date not
earlier than the fifteenth day after the Change in Control.
11. ADMINISTRATION. The Committee shall have the power to interpret
this Agreement and to adopt such rules for the administration, interpretation
and application of the Agreement as are consistent herewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Recipient, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Agreement or any similar
agreement to which the Company is a party.
12. OPTIONS NOT TRANSFERABLE. Neither the Option nor any interest or
right therein or part thereof shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition is voluntary or involuntary or by operation of law, by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy) and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 12 shall
not prevent transfers by will or by the applicable laws of descent and
distribution.
13. OPTION SHARE TRANSFER RESTRICTIONS.
(a) Without the prior written consent of the Company, for a
period of 180 days following the date of an Initial Public Offering, an Option
Holder may not (i) directly or indirectly offer, sell, assign, transfer,
encumber, pledge, contract to sell, grant an option to purchase or otherwise
dispose of, other than by operation of law, any Option Shares, or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of Option Shares, whether
any such transaction described in this subsection clauses (i) or (ii) above is
to be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The Company may place legends and/or stop-transfer orders with the
transfer agent of any Option Shares in order to give effect to this subsection
13(a).
(b) Subject to subsection 13(a) above, an Option Shareholder
may Dispose Of Option Shares only if either (i) a registration statement
pertaining to such Option Shares has been
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filed with and declared effective by the Securities and Exchange Commission and
remains effective on the date the Option Shareholder Disposes Of such Option
Shares, or (ii) an exemption from the registration requirements of applicable
securities laws is available.
14. SHARES TO BE RESERVED. The Company shall at all times during the
term of the Option reserve and keep available such number of shares of stock as
will be sufficient to satisfy the requirements of this Agreement.
15. NOTICES. Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its Secretary and
any notice to be given to the Recipient shall be addressed to him at the address
given beneath his signature below. By a notice given pursuant to this Section
15, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Recipient shall,
if the Recipient is then deceased, be given to the Recipient's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 15. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope
addressed as aforesaid, deposited (with postage prepaid) in a United States
postal receptacle.
16. TITLES. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.
17. INCORPORATION OF PLAN BY REFERENCE. The Option is granted in
accordance with the terms and conditions of the Plan, the terms of which are
incorporated herein by reference, and the Agreement shall in all respects be
interpreted in accordance with the Plan. Any term used in the Agreement that is
not otherwise defined in the Agreement shall have the meaning assigned to it by
the Plan.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the date first written above.
KOS PHARMACEUTICALS, INC.
By: /s/ MICHAEL JAHARIS
-------------------------------------
Title: CHAIRMAN
-----------------------------------
RECIPIENT
/s/ DANIEL M. BELL
----------------------------------------
Daniel M. Bell
5
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of June 15, 1996, is entered
into between KOS PHARMACEUTICALS, INC., a Florida corporation (the "Company"),
and David J. Bova (the "Executive").
RECITALS
1. The Company desires to employ the Executive in the capacities
described herein; and
2. A principal inducement of the Company entering into this Agreement
is the employment of Executive by reason of his unique qualifications,
knowledge, skill and ability in managing product development, clinical testing
and regulatory affairs, and a principal inducement for Executive entering into
this Agreement is the opportunity to further enhance such skills by working for
the Company in such capacity in accordance with the terms of this Agreement; and
3. The Executive and the Company previously entered into an Employment
Agreement, dated December 18, 1992 ("1992 Agreement"), which they each now
desire to amend in certain respects. Such amendments are incorporated into this
Agreement, which supersedes and replaces in its entirety the 1992 Agreement.
Upon the execution of this Agreement by the Executive and the Company, the 1992
Agreement shall be deemed terminated and of no further force and effect.
AGREEMENT
For and in consideration of the foregoing and of the mutual covenants
of the parties herein contained and hereinafter set forth, the parties agree-as
follows:
1. EMPLOYMENT. The Company hereby employs Executive to serve in the
capacities described herein and Executive hereby accepts such
employment and agrees to perform the services described herein upon the
terms and conditions hereinafter set forth.
2. TERM. The term of this Agreement shall commence as of the date hereof
and shall terminate at the close of business on December 31, 1997,
subject to earlier termination in accordance with Section 9 hereof and
the other terms, provisions, and conditions set forth herein.
Notwithstanding the foregoing, the Company, upon delivery of written
notice to the Executive by September 30, 1997, shall have the option to
extend this Agreement for up to twenty-four additional months.
<PAGE>
3. DUTIES AND TITLE.
(a) DUTIES. Executive shall devote his full business
time and efforts to, and shall have project
management responsibility for, (i) the Company's
product development efforts including, as required or
appropriate, formulation development, manufacturing
scale-up, pharmacology and clinical testing, and
regulatory matters relating to such projects; (ii)
feasibility investigation of potential new products
or projects as requested by the Chief Executive
Officer or the Chief Operating Officer of the Company
(collectively referred to herein as "Management"),
and (iii) such other duties as are ordinarily
attended to by individuals employed in the capacities
described herein, as requested by Management.
(b) TITLE. Executive shall have the title of Senior Vice
President, Product Development. Executive's title,
however, may be modified in the future as required by
organizational needs in the discretion of Management,
except that at no time shall the Executive's title be
less than that of Vice President of Product
Development, nor shall Executive's duties be less
than those indicated in Section 3(a) above.
4. COMPENSATION.
(a) BASE COMPENSATION. The Company shall pay Executive,
and Executive agrees to accept, base compensation at
the rate of not less than $195,000 per year in equal,
monthly installments commencing as of July, 1996,
through the term of this Agreement ("Base
Compensation"). The Base Compensation specified in
this Section 4(a) may be increased at any time during
the term of this Agreement in the discretion of
Management and will be reviewed no less frequently
than during the first quarter of each calendar year
beginning in 1997. No increase in the Base
Compensation pursuant to this Section 4 (a) shall at
any time operate as a cancellation of this Agreement;
any such increase shall operate merely as an
amendment hereof, without any further action by
Executive or the Company. If any such increase or
increases shall be so authorized, all of the terms,
provisions and conditions of this Agreement shall
remain in effect as herein provided, except that the
Base Compensation set forth in this Section 4(a)
shall be deemed amended to set forth the higher
amount of such Base Compensation to Executive.
(b) SUPPLEMENTAL COMPENSATION. During the term of this
Agreement and for up to December 31, 2003, the
Company shall pay Executive supplemental compensation
("Royalties") equal to 1% of Net Sales (as
hereinafter defined) of the Company of Niaspan(R) and
Nicostatin(R), or products
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currently planned under the names Niaspan(R) and
Nicostatin(R), approved by the U.S. Food and Drug
Administration (the "FDA") pursuant to new drug
applications. The aggregate maximum amount of
Royalties payable pursuant to this Agreement shall be
subject to a cap of $4,000,000. The Company's
obligation to pay Royalties shall immediately cease
upon the occurrence of either of the following prior
to the expiration of the term of this Agreement
pursuant to Section 2 hereof: (i) the Company's
termination of the Executive for "Cause" (as such
term is used in Section 7 hereof), or (ii) the
Executive's voluntary resignation. If the Executive's
employment with the Company terminates for any reason
other than the reasons designated in the preceding
sentence, the amount of the Royalties payable by the
Company shall continue at 1% of Net Sales through the
expiration of the term of this Agreement pursuant to
Section 2 hereof and thereafter be reduced to 0.5% of
Net Sales. "Net Sales" shall mean the gross sales,
royalties or fees actually received or accrued by the
Company, less returns and allowances granted,
packing, insurance, invoiced transportation charges,
sales, use and other similar taxes and excise duties
imposed on the transaction, and value added taxes,
customs duties and other imposts not ultimately
recovered by the Company. Royalties (up to the
maximum aggregate amount of $4,000,000 in Royalty
payments) shall be paid annually within 30 days
following the audited financial results of the year
during which such Royalties were earned, but in no
event later than June 30 of such year. The payment of
Royalties hereunder shall not be deemed to impart to
the Executive any ownership or other rights of any
nature relating to any product of the Company.
(c) STOCK OPTION GRANT. The Company has granted a stock
option to the Executive in the form of Exhibit A
hereto.
5. FRINGE BENEFITS.
(a) VACATION. During the term of this Agreement,
Executive shall be entitled to four weeks paid
vacation per year. In any calendar year, Executive
shall be entitled to carry over from the previous
year (and only from the previous year) up to two
weeks of unused vacation from that prior year.
(b) OTHER. Executive shall be eligible for other fringe
benefits pursuant to any insurance, pension or other
employee fringe benefit plan approved by the Board of
Directors that now or hereafter may be made available
to employees of the Company and for which Executive
will qualify according to his eligibility under the
provisions thereof; provided, however, that such
eligibility specifically does not apply to matters
relating to Executive's
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vacation, disability benefits and compensation, which
matters shall be governed exclusively by the terms
hereof.
6. EXPENSES. During the period of his employment, Executive shall be
reimbursed for his business-related expenses incurred on behalf of the
Company in accordance with the travel and entertainment expense policy
of the Company as adopted by the Board of Directors from time to time
and in effect at the time the expense was incurred, but not less than
first-class for domestic air travel and business-class for
international air travel unless the financial conditions of the Company
deteriorate significantly following the date of this Agreement.
Executive agrees to maintain such records and documentation of all such
expenses to be reimbursed by the Company hereunder as the Company shall
require and in such detail as the Company may reasonably request.
7. TERMINATION. The term of this Agreement may be terminated prior to
expiration of the term provided in Section 2 hereof in accordance with
the following paragraphs:
(a) MUTUAL. This Agreement may be terminated upon the
mutual written agreement (which may include, if so
agreed to by the Board of Directors and Executive,
severance payments and/or benefits) of the Company
and Executive.
(b) DEATH. In the event of the death of Executive, this
Agreement shall automatically terminate.
(c) DISABILITY. If, during the effective period of this
Agreement, Executive shall become disabled and unable
to perform his duties on a full-time basis as
required herein ("Disability"), and (i) for a
consecutive period of one hundred eighty (180) days
(the "Disability Period", the first day of which is
referred to herein as the "Disability Date")
Executive is unable to perform his duties on a
full-time basis, or (ii) in the opinion a qualified
physician fully informed of the circumstances, there
is no prospect of Executive being able to perform his
duties on a full-time basis for the remainder of the
Disability Period, then the Company may, upon thirty
(30) days' written notice to Executive, terminate
this Agreement.
(d) CAUSE. This Agreement may be terminated by the
Company, with or without Cause as herein defined; any
such termination to become effective immediately upon
delivery of notice to Executive. For purposes of this
Agreement, the term "Cause" shall mean the
termination of the Executive by the Board of
Directors of the Company as a result of the existence
or occurrence of one or more of the following
conditions or events:
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(i) Any material intentional breach of the
terms of this Agreement by Executive;
(ii) Substantial and continuing neglect or
inattention by Executive of or to the
duties described in Section 3 hereof.
(iii) Fraud or other willful misconduct or
gross negligence of Executive in
connection with the performance of such
duties.
(iv) The refusal of Executive to perform any
of the duties to perform any of the
duties described in Section 3 hereof, or
elsewhere in the Agreement; and
(v) Conviction of Executive for any felony
or for any crime involving moral
turpitude or violation of the securities
laws.
(e) CHANGE OF CONTROL. In the event of a "Change in
Control" (as defined in this Section 7(e)), Executive
may elect, at any time after the 180-day period
immediately following such Change in Control but
prior to the first anniversary of such change in
Control, to deliver 60 days' written notice to the
Company of his termination of employment hereunder.
Termination of this Agreement pursuant to the
provisions of the preceding sentence shall be deemed
a termination without Cause for purposes of Section 9
hereof. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred when:
(i) if (a) any person (or group of persons
acting in concert) not affiliated with
the shareholders of the Company as of the
date of execution hereof acquires direct
or indirect ownership of 50% or more of
the combine voting power of the then
outstanding voting securities of the
Company, or (b) during any period of two
consecutive years, the individuals (or
any successors to such individuals if
nominated by any shareholder of the
Company as of the date of execution
hereof) who at the beginning of such
period constitute the Board of Directors
of the Company cease for any reason to
constitute at least a majority thereof,
or (c) the shareholders of the Company
approve any consolidation or merger of
the Company in which the Company is not
the surviving corporation, or approve any
sale, lease, exchange or other transfer
(in one transaction or a series of
related transactions) of all, or
substantially all, the assets of the
Company, other than a merger or transfer
in which no shareholder (or group of
shareholders acting in concert) of the
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successor corporation has a greater
percentage interest in the successor
corporation than the aggregate percentage
interest in the successor corporation
held by those individuals who were
shareholders of the Company as of the
date of execution of this Agreement;
and
(ii) if Michael Jaharis is neither the
Chairman of the Board or Chief Executive
Officer of the Company or any successor
to the rights and obligations of the
Company under this Agreement.
8. DEATH AND DISABILITY. In the event of termination of this Agreement by
reason of the Executive's death or disability, the Company shall
provide the payments and benefits to Executive as indicated below:
(a) TERMINATION DUE TO DEATH. In the event of Executive's
death, (i) any Royalty Payments otherwise payable to
Executive by the Company pursuant to Section 4(b)
shall be paid to Executive's estate; and (ii) certain
stock options granted pursuant to Exhibit A hereto
may become property of Executive's estate in
accordance with Exhibit A.
(b) DISABILITY PAYMENTS. In the event of Executive's
Disability (as defined in Section 7(c)), in addition
to the payment of any Royalty Payments otherwise
payable to Executive by the Company pursuant to
Section 4(b), Executive shall receive payments from
the Company in the following amounts for the
following periods; provided, however, that all such
payments, except for any Royalty Payments payable
pursuant to Section 4(b), shall terminate on December
31, 1997:
(i) For the six-month period immediately
following the Disability Date, Executive
shall receive 100% of the Base
Compensation he would have otherwise
received as an active employee;
(ii) For the six-month period immediately
following termination of the period
described in subsection (i) above,
Executive shall receive 66-2/3% of the
Base Compensation he would have otherwise
received as an active employee; and
(iii) For the six-month period immediately
following termination of the period
described in subsection (Iii) above,
Executive shall
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receive 50% of the Base Compensation he
would have otherwise received as an
active employee.
To the extent that the Company provides disability insurance to
Executive, any payments received by Executive pursuant to such Company
provided insurance shall be offset against, and thereby reduce, the
Company's obligation under this Section 8(b). To the extent that,
following Executive's termination for disability, he obtains employment
elsewhere (as an employee, executive, consultant, contractor, etc.) and
the Company's payments under this Section 8(b), when added to
Executive's income from such other employment, exceeds the Base
Compensation Executive was receiving at the time of his termination for
Disability, Executive has the duty to so notify the Company and the
Company may reduce its payments under this Section 8(b) by the amount
of such excess.
9. SEVERANCE. In the event of termination of this Agreement for any
reason other than Executive's death or disability, the Company shall
provide the payments and benefits to Executive as indicated below:
(a) WITH CAUSE. If Executive is terminated for Cause (as
defined in Section 7(d) of this Agreement), or if
Executive voluntarily terminates his employment by
the Company, Executive shall no longer be entitled to
receive any payments, including, without limitation,
base compensation, supplemental compensation
(Royalties) or any then-unpaid portion of any signing
bonus, after the date of such termination.
(b) WITHOUT CAUSE OR DUE TO CHANGE OF CONTROL. If
terminated by the Company without Cause or by the
Executive as a result of a Change of Control, (i)
Executive shall receive the Base Compensation he was
receiving at the time of termination until the
earlier to occur of (x) the date twenty-four (24)
months from the date of such termination and (y)
December 31, 1997; (ii) certain stock options shall
vest in accordance with the provisions of Exhibit A;
and (iii) Executive shall receive any supplemental
compensation (Royalties) otherwise payable to
Executive by the Company pursuant to Section 4(b)
hereof.
(c) OTHER EMPLOYMENT. If severance is paid to Executive
pursuant to this Section 9, regardless of the reason
for termination, and Executive obtains employment
elsewhere (as an employee, manager, consultant,
contractor, etc.) and the Company's severance
payments, when added to Executive's income from such
other employment, exceeds the Base Compensation
Executive was receiving at the time of his
termination, Executive has the duty to so notify the
Company and the Company may reduce its severance
payments by the amount of such excess.
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(d) ENTIRE OBLIGATION. In the event of a termination
pursuant to Section 7(d), the severance payments
described in this Section 9 shall constitute the
entire obligation of the Company to Executive and
full settlement of any claim under law or in equity
that Executive might otherwise assert against the
Company or its shareholders, directors, officers,
employees or agents because of such termination.
(e) BENEFITS. All benefits not mandated by law to be
continued will cease upon termination of this
Agreement for any reason, except that where severance
payments are continued and for so long as such
payments are continued, the Company shall pay the
same portion of the cost of Executive's then existing
Company-provided medical insurance as the severance
payments bear to Executive's Base Compensation at the
time of termination, provided (i) Executive chooses
to continue such coverage after termination including
paying his portion (if any) of such costs and (ii) if
Executive obtains employment elsewhere with at least
comparable medical coverage, the Company's obligation
to continue such payments ceases.
10. CONFIDENTIAL INFORMATION. Executive recognizes and acknowledges that
he will have access to certain confidential information of the Company
and of corporations with whom the Company does business, and that such
information constitutes valuable, special and unique property of the
Company and such other corporations. During the term of this Agreement
and for a period of five (5) years immediately following the date of
termination of this Agreement (and for such period thereafter, if any,
as Executive continues to receive Royalties pursuant to Section 4(b)
hereof), Executive agrees not to disclose or use any confidential
information, including without limitation, information regarding
research, developments, product designs or specifications,
manufacturing processes, "know-how," prices, suppliers, customers,
costs or any knowledge or information with respect to confidential or
trade secrets of the Company, it being understood that such
confidential information does not include information that is publicly
available unless such information became publicly available as a result
of a breach of this Agreement. Executive acknowledges and agrees that
all notes, records, reports, sketches, plans, unpublished memoranda or
other documents belonging to the Company, but held by Executive,
concerning any information relating to the Company's business, whether
confidential or not, are the property of the Company and will be
promptly delivered to it upon Executive's leaving the employ of the
Company. Executive also agrees to execute such confidentiality
agreements that the Board may adopt, and may modify from time to time,
as a standard form to be executed by all employees of the Company, to
the extent such standard forms are not materially more restrictive than
the provisions of this Agreement.
11. INTELLECTUAL PROPERTY. Executive acknowledges and agrees that all
discoveries, inventions, designs, improvements, formulas, formulations,
ideas, devices, writings, publications, study protocols, study results,
computer data or programs, or other
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intellectual property, whether or not subject to patent or copyright
laws, which Executive shall conceive solely or jointly with others, in
the course or scope of his employment with the Company or in any way
related to the Company's business, whether during or after working
hours, or with the use of the Company's equipment, materials or
facilities (collectively referred to herein as "Intellectual
Property"), shall be the sole and exclusive property of the Company
without further compensation to Executive. As used in this Section 11
and the following Section 12, it is understood that the Company's
principal "business" is developing pharmaceutical products for
commercial sale, including also medical devices and/or other drug
delivery methods or technologies for administering said pharmaceutical
products. For purposes of this Agreement, any Intellectual Property,
based upon the Company's secret or confidential information, developed
within six (6) months after the termination of Executive's employment,
shall be presumed to be the property of the Company. Executive agrees
to promptly notify the Company and fully disclose the nature of such
Intellectual Property. Executive shall take such steps as are deemed
necessary to maintain complete and current records thereof, and
Executive shall assign to the Company or its designates, the entire
right, title and interest in said Intellectual Property. Further,
Executive shall, at the Company's request and expense (including
reasonable compensation if Executive is no longer employed under this
Agreement), make necessary application for domestic or foreign patents
and assist in securing, defending or enforcing any such title and right
thereto.
12. NON-COMPETITION. Executive acknowledges that his services to be
rendered hereunder are of a special and unusual character that have a
unique value to the Company and the conduct of its business, the loss
of which cannot adequately be compensated by damages in an action at
law. In view of the unique value to the Company of the services of
Executive for which the Company has contracted hereunder, and because
of the confidential information to be obtained by or disclosed to
Executive as herein above set forth, and as a material inducement to
the Company to enter into this Agreement and to pay and make available
to Executive the compensation and other benefits referred to herein,
Executive covenants and agrees that Executive will not, directly or
indirectly, whether as principal, agent, trustee or through the agency
of any corporation, partnership, association or agent (other than as
the holder of not more than 5% of the total outstanding stock of any
company the securities of which are traded on a regular basis on
recognized securities exchanges):
(a) while employed under this Agreement (i) work for
(in any capacity, including without limitation
director, officer or employee) any other
pharmaceutical company, or otherwise work for or
engage in any business which is engaged in
substantially the same business as the Company, (ii)
become an officer, director or employee of any
corporation or a member or employee of any
partnership or an owner or employee of any other
business that engages in substantially the same
business as the Company, (iii) recruit, or otherwise
influence or attempt to induce employees of the
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Company to leave the employment of the Company, or
(iv) participate in any non-competitive businesses
except for those involving limited personal time
and/or energies of the Executive that have been
approved in advance in writing by the Chief Executive
Officer of the Company;
(b) for the two-year period immediately following any
termination of this Agreement (and for such period
thereafter, if any, as Executive continues to receive
Royalties pursuant to Section 4(b) hereof), except
for a termination pursuant to Section 7(e) hereof, in
which case such period shall be six months, develop
or assist in the development of any products or
projects which, as of the date of such termination,
the Company sells or which were undergoing research
and development or feasibility consideration by the
Company; provided that for purposes of this Section
12 (b), products or projects under "feasibility
consideration" will consist of potential products or
projects known and identified in writing at the time
of termination but not yet in active development or
specifically scheduled to enter active development at
the time of termination that have either undergone
active formulation efforts and/or in vivo study
within three months prior to termination or do
undergo active formulation efforts and/or in vivo
study within the six months following such
termination; and
(c) in the event that, prior to the earlier to occur of
(x) the third anniversary of the date of this
Agreement and (y) the one year anniversary of the
date of submission to the Food and Drug
Administration of a New Drug Application for the
product Niaspan(R), this Agreement is terminated (i)
by the Company for Cause, or (ii) by Executive other
than pursuant to Section 7(e) hereof, engage, for a
period of one year from the date of any such
termination, in the development of any drug
formulation or drug delivery system, or in any other
activities relating to the development of any drug of
any type, which drug formulation, delivery system or
drug could reasonably be expected to be distributed
in any geographic vicinity in which the Company has a
reasonable expectation at the time of termination of
this Agreement of distributing products in the
foreseeable future.
Executive has carefully read and considered the provisions of Sections
10, 11, and 12 hereof and agrees that the restrictions set forth in
such sections are fair and reasonable and are reasonably required for
the protection of the interests of the Company, its officers,
directors, shareholders, and other employees, for the protection of the
business of the Company, and to ensure that Executive devotes his
full-time and efforts to the business of the Company. Executive
acknowledges that he is qualified to engage in businesses other than
those that are subject to this Section 12. It is the belief of the
parties, therefore, that the best protection that can be given to the
Company that does not in any way infringe upon the rights of Executive
to engage in any unrelated businesses is to provide for the
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restrictions described above. In view of the substantial harm which
would result from a breach by Executive of Sections 10, 11 and 12, the
parties agree that the restrictions contained therein shall be enforced
to the maximum extent permitted by law. In the event that any of said
restrictions shall be held unenforceable by any court of competent
jurisdiction, the parties hereto agree that it is their desire that
such court shall substitute a reasonable judicially enforceable
limitation in place of any limitation deemed unenforceable and that as
so modified, the covenant shall be as fully enforceable as if it had
been set forth herein by the parties.
13. REMEDIES. The provisions of sections 10, 11 and 12 of this Agreement
shall survive the termination of this Agreement as set forth therein,
regardless of the circumstances or reasons for such termination, and
inure to the benefit of the Company. The restrictions set forth in
Sections 10, 11 and 12 are considered to be reasonable for the purposes
of protecting the business of the Company. The Company and Executive
acknowledge that the Company would be irreparably harmed and that
monetary damages would not provide an adequate remedy to the Company if
the covenants contained in Sections 10, 11 and 12 were not complied
with in accordance with their terms. Accordingly, Executive agrees that
the Company shall be entitled to injunctive and other equitable relief
to secure the enforcement of these provisions, in addition to any other
remedy which may be available to the Company, and that the Company
shall be entitled to receive from Executive reimbursement for
reasonable attorneys' fees and expenses incurred by the Company in
enforcing these provisions.
14. PUBLICATIONS. The Executive shall have the right to publish articles
concerning his work in the appropriate scientific/technical
publications, provided that such articles (i) are not inconsistent with
the Company's business objectives or the Executive's confidentiality
obligations under Section 10, (ii) are reviewed in advance by
Management, and (iii) acknowledge the Company's role in such work. The
Executive also shall be given credit for his contributions to the
Company's product development achievements in the Company's
publications and presentations.
15. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered
mail to the addresses below or to such other address as either party
shall designate by written notice to the other:
IF TO THE EXECUTIVE: To the address set forth below his signature on
the signature page hereof.
IF TO THE COMPANY:
Kos Pharmaceuticals, Inc.
1001 S. Bayshore Drive
Suite 2502
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Miami, FL 33131
Attention: Chief Executive Officer
16. ENTIRE AGREEMENT; MODIFICATION.
(a) This Agreement contains the entire agreement of the
Company and Executive, and the company and Executive
hereby acknowledge and agree that this Agreement
supersedes any prior statements, writings, promises,
understandings or commitments, including, without
limitation, the agreements and obligations set forth
in the Letter Agreement dated June 8, 1988 (the "Old
Agreement") between Executive and Michael Jaharis,
Jr. (on behalf of the Company), the stock option
granted to Executive by letter from the Company,
dated August 1, 1988 (the "Old Option"), and the 1992
Agreement. The parties hereto agree (i) that the Old
Agreement and the Old option are each hereby
terminated and canceled in their respective
entireties, and shall be of no further force and
effect, (ii) that the stock option grant provided by
Appendix B of the 1992 Agreement is hereby amended
and restated in the form of Appendix A hereto, (iii)
that the grant and acceptance of the stock option
provided by Appendix B of the 1992 Agreement is
hereby reaffirmed, and (iv) that each party agrees be
bound by the terms and conditions of the amended and
restated stock option grant set forth in Appendix A
hereto.
(b) No future oral statements, promises or commitments
with respect to the subject matter hereof, or other
purported modification hereof, shall be binding upon
the parties hereto unless the same is reduced to
writing and signed by each party hereto.
17. ASSIGNMENT. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. The Executive may not assign his
rights and obligations under this Agreement.
18. MISCELLANEOUS.
(a) This agreement shall be subject to and governed by
the laws of the State of Florida, without regard to
the conflicts of laws principles thereof.
(b) The section headings contained herein are for
reference purposes only and shall not in any way
affect the meaning or the interpretation of this
Agreement.
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(c) The failure of any party to enforce any provision of
this Agreement shall in no manner affect the right to
enforce the same, and the waiver by any party of any
breach of any provision of this Agreement shall not
be construed to be a waiver by such party of any
succeeding breach of such provision or a waiver by
such party of any breach of any other provision.
(d) All written notices required in this Agreement shall
be sent postage prepaid by certified or registered
mail, return receipt requested.
(e) In the event any one or more of the provisions of
this Agreement shall for any reason be held invalid,
illegal or unenforceable, the remaining provisions of
this Agreement shall be unimpaired, and the invalid,
illegal or unenforceable provision shall be replaced
by a mutually acceptable valid, and enforceable
provision which comes closest to the intent of the
parties.
(f) This Agreement may be executed in any number of
counterparts, each of which shall constitute an
original and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.
KOS PHARMACEUTICALS, INC.
By: /s/ DANIEL M. BELL
----------------------------------------
Daniel M. Bell
President And Chief Executive Officer
EXECUTIVE
/s/ DAVID J. BOVA
-------------------------------------------
David J. Bova
1201 South Ocean Drive
Hollywood, Florida 33019
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Exhibit A
KOS PHARMACEUTICALS, INC.
AMENDED AND RESTATED STOCK OPTION GRANT TO
AND AGREEMENT WITH DAVID J. BOVA
1. PURPOSE. The purpose of this amended and restated grant and agreement
(the "Grant") is to incorporate certain historical information into the
terms of the grant on December 18, 1992, to David J. Bova (the
"Executive") of an option to acquire shares of the common stock of KOS
Pharmaceuticals, Inc., a Florida corporation (the "Company"). The
purpose of the grant of the stock option continues to be, under the
terms and conditions described herein, to provide, among other things, a
means for this key founding officer of the Company to acquire a sizable
ownership interest in the Company, thereby (i) motivating and
encouraging him to continue his undivided efforts on the Company's
behalf, to cooperate and work with other members of management and
employees of the Company to promote and sustain the overall best
interests of the Company, and to continue his employment relationship
with the Company; and (ii) increasing his personal economic interest in
the continued success and progress of the Company.
2. EFFECTIVE DATE. This Grant became effective (the "Effective Date")
December 18, 1992, having been approved by the Board of Directors as
part of an Employment Agreement between the Company and the Executive
executed on that date ("1992 Employment Agreement"). The 1992
Employment Agreement has been replaced by a new employment agreement
between the Company and the Executive ("1996 Employment Agreement"), to
which this Grant is attached as Exhibit A. Capitalized terms used
herein but not defined have the meaning ascribed to them in the 1996
Employment Agreement.
3. SECURITIES SUBJECT TO THE GRANT; RESERVATION. This Grant conveys to
the Executive the option to acquire certain shares of common stock of
the Company, under the terms and conditions described herein, provided
that in the event that there is more than one authorized class of common
stock, including one or more classes with superior voting rights to
other classes, the Board of Directors may in its sole discretion
stipulate the class or classes of authorized common stock to be issued
upon exercise of the option, including stipulating those classes with
lesser voting rights and, if more than one class is so stipulated, the
extent to which the option may be exercised for each respective class;
provided, however, that the stipulation of such class or classes shall
not serve to diminish the total ownership interest (including the right
to dividends), expressed as a percentage of aggregate common shares
outstanding, to which the Executive is entitled by this Grant. The Board
of Directors shall take all such action as may be necessary to assure
that a sufficient number of shares of common stock shall be reserved for
issuance upon exercise of the Option prior to the first exercise
thereof.
4. OPTION GRANT. The option hereby granted ("Option") entitles Executive
to acquire 275,000 shares of the stock of the Company, subject to the
vesting provisions of Section 5 below, at an exercise price of $0.75 per
share.
<PAGE>
5. VESTING. When used herein, the term "vesting" or "vested" shall refer
to that portion of the Option that, without further conditions, may be
exercised in the sole discretion of the Executive or his estate subject
only to the exercise provisions of Section 6 below. Upon the effective
date of the 1996 Employment Agreement, 100 percent of the Option shall
be vested.
6. EXERCISE PERIOD. The Option may be exercised, in whole or in part,
in accordance with the procedures set forth in Section 10 hereof,
subject to the following terms, conditions and limitations:
(a) EXERCISE DURING EMPLOYMENT. For so long as the
Executive is a full-time employee of the Company, the
Option or any portion thereof may be exercised at any
time during the period beginning December 1, 1995
and, and ending seven years later.
(b) EXERCISE FOLLOWING TERMINATION. In the event the
Executive's full-time employment with the Company
terminates, the unexercised portion of the Option
must be exercised within the following time periods
or they expire:
(i) If, prior to the expiration of the term
of the 1996 Employment Agreement pursuant
to Section 2 of the 1996 Employment
Agreement, termination is by the
Executive for any reason other than
death, disability, or a Change of Control
or by the Company for Cause, the
unexercised portion of the Option must be
exercised within 90 days of termination;
(ii) In the event of any termination not
covered by subsection 6(b)(i) above, the
unexercised portion of the Option must be
exercised before the first anniversary of
such termination.
(c) EXERCISE UPON SALE OR MERGER. In the event of a
sale or merger of the Company with an unaffiliated
entity before the Company has had a "Substantial
Public Offering" as defined below, the Board of
Directors may, in its sole discretion, upon written
notice to Executive, accelerate the exercise periods
otherwise provided herein to a date immediately prior
to or simultaneous with the date of such sale or
merger. For purposes of this Grant, a "Substantial
Public Offering" shall mean a public offering of
shares of common stock of the Company on a firmly
underwritten basis, pursuant to a registration
statement on Forms S-1, S-2, or S-3 (or a similar
form of general application prescribed by the
Securities and Exchange Commission) filed under the
Securities Act of 1933, as amended, in which the
Company receives net proceeds of at least Twenty Five
Million Dollars ($25,000,000).
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7. ANTI-DILUTION ADJUSTMENT. Subsequent to the Effective Date, the Board
of Directors may make appropriate adjustments in the number of shares
granted hereunder to give effect to changes made in the number of
outstanding shares, without diluting the percentage ownership
represented by the Option, as a result of (i) a recapitalization,
reclassification, stock dividend, stock split, or other relevant
changes; or (ii) additional capital investments in the Company by the
shareholders of the Company as of the date of execution of the 1996
Employment Agreement, if such investments are made before and are not
related to investments of new equity capital in the Company by persons
or entities not affiliated with such shareholders. Notwithstanding the
foregoing, this Section 7 shall not result in any adjustment of either
the number of shares subject to the Option or the price per share in
the event of any merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares,
or any other similar transaction on or before July 15, 1996.
8. REPURCHASE OF STOCK ACQUIRED UPON EXERCISE. The provisions of this
Section 8 shall apply only if (i) the Executive is no longer a
full-time employee of the Company and (ii) a registration statement
pertaining to the shares to be issued upon exercise of the Option has
not been filed with and declared effective by the Securities and
Exchange Commission.
(a) COMPANY OPTION. The company shall have the right to
repurchase all or any portion of the shares of common
stock held by the Executive (or his personal
representative or estate) acquired upon the exercise
of this option. such repurchase by the Company shall
be at the price and on the terms and conditions set
forth in Sections 8(c) and (d) below. The Company may
exercise this right by delivering written notice (a
"Notice") to the Executive prior to the later to
occur of (i) the date one year after the termination
date of Executive's full-time employment with the
Company, and (ii) the date one year after the date
Executive acquired the shares which are to be
repurchased.
(b) EXECUTIVE'S OPTION. The Executive (or his personal
representative or estate) shall have the right to
require the Company to repurchase all or any portion
of the shares of common stock acquired upon the
exercise of this option at the price and on the terms
and conditions set forth in sections 8(c) and (d)
below. The Executive may exercise this right by
delivering Notice to the Company at any time after
the six-month anniversary of his termination of
full-time employment with the Company and before the
later to occur of (i) the date one year after his
termination of full-time employment with the Company,
and (ii) the date one year after the date Executive
acquired the shares which are to be repurchased.
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(c) REPURCHASE PRICE. The price per share at which
shares shall be repurchased and sold pursuant to
this Section 8 shall be as follows:
(i) If the termination of full-time
employment was by reason of the
Executive's death or disability, because
of a Change of Control, or by the Company
without Cause, the repurchase price per
share shall be the price per share
actually paid for the last equity
investment from an investor not
affiliated with the shareholders of the
Company as of the date of Execution of
the 1996 Employment Agreement (the "Last
Price"), plus interest from the closing
date of the transaction in which the Last
Price was paid until the Notice date at
an annual rate of 20%, provided that
there was such a Last Price actually
paid. If there was not such a Last Price
actually paid, the repurchase price shall
be the fair market value per share of the
stock as determined in the good faith
judgment of the Board of Directors, of a
national firm of certified public
accountants selected by the Board, or of
an investment banking firm selected by
the Board.
(ii) If the termination of full-time
employment was by the Executive other
than by reason of death, disability, or a
Change of Control or by the Company for
Cause, the repurchase price shall be the
higher of a Last Price if there was one
or the exercise price plus interest at an
annual rate of 6% from the vesting date
of the option that was exercised to
acquire the shares until the earlier of
the Notice date or the date of the
Company's first FDA approval to market
Niaspan(R)or Nicostatin(R), or products
currently planned under the names
Niaspan(R)and Nicostatin(R), with the
interest rate increasing to 18% from the
date of such FDA approval if before the
Notice date, until such Notice date.
(d) CLOSING. The closing of the repurchase and sale of
common stock pursuant to this Section 8 shall take
place at the corporate offices of the Company at a
date and time agreed upon by the Company and the
Executive (or his estate or personal representative)
but in no event shall such closing take place more
than 30 days after the Notice is delivered. At the
closing, the Company shall deliver to the Executive
(or his estate or personal representative) a Company
check for the repurchase price, and the Executive
shall deliver the stock certificates representing the
shares to be sold, duly endorsed and with all
requisite transfer stamps affixed thereto.
9. EXERCISE PROCEDURE. The Option may be exercised, in whole or in part,
by the Executive notifying the Company in writing specifying the number
of shares with respect
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to which he wishes to exercise the Option or portion thereof and
delivering the exercise price in full, and any withholding amounts that
may be required for taxes or other items, to the Company. No shares
shall be delivered pursuant to the exercise of an option until payment
in full of the exercise price and required withholding is received by
the Company.
10. TAX LIABILITY. The granting and subsequent exercise of the Option
may create a tax liability for the Executive. It is the Executive's
sole responsibility, without any recourse to the Company, to determine
whether such liability, if any, may exist and to settle such
liabilities as they come due without recourse to the Company.
Notwithstanding this lack of recourse to the Company, however, the
Company is entitled to collect from the Executive any withholding taxes
or other similar items that may be required of the Company because of
the elections the Executive may make with respect to the Option.
11. NONTRANSFERABILITY OF OPTION. The Option may not be pledged, assigned,
or otherwise actually or contingently transferred by the Executive
except by will or the laws of descent and distribution, During the
lifetime of the Executive, the Option may be exercised only by the
Executive.
12. RESTRICTIVE LEGEND ON STOCK. Certificates representing shares of common
stock issued upon the exercise of the Option bear a legend declaring,
if applicable, that such shares (i) have not been registered under the
Securities Act of 1933, as amended, and (ii) are subject to certain
rights of repurchase.
13. TERMINATION OF OPTION.
(e) Notwithstanding any other provision of this Grant,
neither the Executive or his estate will be required
to exercise any or all portions of the Option if he
(or his estate) chooses not to do so for any reason.
In those circumstances, however, where the terms
specified above indicate that the option is required
to be exercised at a particular time, failure to do
so by the Executive (or his estate) will result in
the immediate cancellation of all unexercised
portions of the Option, and the Company will have no
further obligations with respect to those unexercised
portions of the Option.
(f) other than as provided in Section 14(a) above, the
Option shall terminate (i) when and to the extent
that they have it has been exercised, and (ii) in the
case of the unexercised the unexercised portion of
the Option, at the end of the applicable exercise
period.
8. REPLACEMENT OF PRIOR OPTIONS. Upon the effective date of this Grant,
it replaces and terminates the options granted to the Executive on
August 1, 1988, and cancels all obligations of the Company pursuant to
that August 1, 1988 Grant.
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed effective as of the Effective Date.
KOS PHARMACEUTICALS, INC.
/s/ DANIEL M. BELL
----------------------------------
By: DANIEL M. BELL
Its: President
I hereby reaffirm my acceptance of the Option granted on December 18,
1992, in accordance with and subject to the terms and conditions of the Amended
and Restated Stock Option Grant and Agreement set forth above, and agree to be
bound thereby.
Date Accepted: June 15, 1996.
/s/ DAVID J. BOVA
----------------------------
David J. Bova
6
EXHIBIT 10.4
KOS PHARMACEUTICALS, INC.
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Kos Pharmaceuticals, Inc. 1996 Stock
Option Plan (the "Plan") is two-fold. First, the Plan will further the interest
of Kos Pharmaceuticals, Inc., a Florida corporation (the "Company"), any
subsidiaries it may have and its shareholders by providing incentives in the
form of stock option grants to key employees who contribute materially to the
success and profitability of the Company. The grants shall recognize and reward
outstanding individual performances and contributions and shall give such
persons a proprietary interest in the Company, thus enhancing their personal
interest in the Company's continued success and progress. This program shall
also assist the Company and any subsidiaries it may have in attracting and
retaining key persons. Second, the Plan will provide the Company flexibility and
the means to reward directors and other non-employees who render valuable
contributions to the Company.
2. DEFINITIONS. The following definitions shall apply to this Plan:
(A) "AGREEMENT" means a written agreement entered into between
the Company and a Recipient that embodies the terms and restrictions of the
Option granted to the Recipient.
(B) "BOARD" means the board of directors of the Company.
(C) "CHANGE IN CONTROL" occurs when (i) Michael Jaharis, his
estate, his wife, his lineal descendants, any trust created for the benefit of
any one or more of them during their lifetimes, or any corporation, partnership
or other entity owned fifty percent or more directly or indirectly by Michael
Jaharis, or any combination of the foregoing ceases to be the largest
shareholder of the Company, (ii) any person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the
beneficial owner of thirty-three percent or more of the stock of the Company,
(iii) the Company is merged into any other company that is not controlled by
Michael Jaharis or substantially all of its assets are acquired by any other
company that is not controlled by Michael Jaharis, or (iv) three or more
directors nominated by the Board to serve as a director, each having agreed to
serve in such capacity, fail to be elected in a contested election of directors.
(D) "CODE" means the Internal Revenue Code of 1986, as
amended.
(E) "COMMITTEE" means a committee appointed by the Board
in accordance with Section 3 of the Plan.
(F) "COMMON STOCK" means the Common Stock, par value $.01 per
share, of the Company or such other class of shares or securities to which the
Plan may apply pursuant to Section 12 of the Plan.
(G) "COMPANY" means Kos Pharmaceuticals, Inc..
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(H) "DATE OF GRANT" means the date on which the Option is
granted.
(I) "DISPOSE OF" means pledge, hypothecate, give, assign,
encumber, sell, grant an option with respect to, or otherwise transfer, to any
party whether or not such party is a shareholder of the Company.
(J) "ELIGIBLE PERSON" means any person who performs or has in
the past performed services for the Company or any direct or indirect partially
or wholly owned subsidiary thereof, whether as a director, officer, employee,
consultant or other independent contractor, and any person who performs services
relating to the Company in his or her capacity as an employee or independent
contractor of a corporation or other entity that provides services for the
Company.
(K) "EMPLOYEE" means any person employed on an hourly or
salaried basis by the Company or any parent or Subsidiary of the Company that
now exists or hereafter is organized or acquired by or acquires the Company.
(L) "FAIR MARKET VALUE" means the fair market value of the
Common Stock. If the Common Stock is not publicly traded on the date as of which
fair market value is being determined, the Board shall determine the fair market
value of the Shares using such factors as the Board considers relevant, such as
the price at which recent sales have been made, the book value of the Common
Stock, and the Company's current and projected earnings. In determining the fair
market value of the Shares, the Board may, but is not required to, utilize
information from or opinions of outside advisors. If the Common Stock is
publicly traded on the date as of which fair market value is being determined,
the fair market value is the average of the high and low sale prices of the
Common Stock as reported by the National Association of Securities Dealer
Automated Quotations ("NASDAQ") on that date, if the Common Stock is listed on a
stock exchange, the average of the high and low sale prices of the Common Stock
on that date, as reported in THE WALL STREET JOURNAL. If trading in the stock or
a price quotation does not occur on the date as of which fair market value is
being determined, the next preceding date on which the stock was traded or a
price was quoted shall determine the fair market value.
(M) "INCENTIVE STOCK OPTION" means a stock option granted
pursuant to either this Plan or any other plan of the Company that satisfies the
requirements of Section 422 of the Code and Section 13 of the Plan and that
entitles the Recipient to purchase stock of the Company or in a corporation that
at the time of grant of the option was a parent or subsidiary of the Company or
a predecessor corporation of any such corporation. If the requirements of
Section 13 of the Plan are in conflict with any other provision of the Plan with
respect to an Incentive Stock Option, the provisions of Section 13 of the Plan
shall control.
(N) "INITIAL PUBLIC OFFERING" means an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Securities Act
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of 1933, as amended, covering the offer and sale of the Company's common stock
for the account of the Company.
(O) "OPTION" means a stock option granted pursuant to the
Plan. Each Option shall be a nonqualified stock option unless expressly
designated as an Incentive Stock Option by the Committee in establishing the
terms of the Option at grant.
(P) "OPTION SHAREHOLDER" shall mean a Recipient who has
exercised his or her Option.
(Q) "OPTION SHARES" means Shares issued upon exercise
of an Option.
(R) "PLAN" means this Kos Pharmaceuticals, Inc. 1996
Stock Option Plan.
(S) "RECIPIENT" means a person who receives an Option.
(T) "SHARE" means a share of the Common Stock, as
adjusted in accordance with Section 12 of the Plan.
(U) "SUBSIDIARY" means any corporation fifty percent or more
of the voting securities of which are owned directly or indirectly by the
Company at any time during the existence of this Plan.
3. ADMINISTRATION. This Plan shall be administered by a Committee
appointed by the Board; provided however, that commencing on the date on which
the Company first registers any class of its securities under Section 12 of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Committee
shall be comprised of not fewer than two members who shall be "disinterested
persons" within the meaning of Rule 16b-3 under the 1934 Act, and "outside
directors" within the meaning of Section 162(m) of the Code and the regulations
thereunder. The Committee shall have authority to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the Plan, to
prescribe the form of any agreement or instrument executed in connection
herewith, and to make all other determinations necessary or advisable for the
administration of the Plan. All such interpretations, rules, regulations and
determinations shall be conclusive and binding on all persons and for all
purposes. A majority of the full Committee constitutes a quorum for purposes of
administering the Plan, and all determinations of the Committee shall be made by
a majority of the members present at a meeting at which a quorum is present or
by the unanimous, written consent of the Committee. Notwithstanding the
foregoing, neither the Board nor the Committee shall have any discretion with
respect to Options granted to Outside Directors pursuant to subsection 5(b) of
the Plan.
4. SHARES SUBJECT TO PLAN. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares that may be subject to Options
under the Plan shall be 4,000,000. If an Option should expire or become
unexercisable for any reason without having been
3
<PAGE>
exercised, the unpurchased Shares that were subject to the Option shall, unless
the Plan has then terminated, be available for other Options under the Plan.
5. OPTION GRANTS.
(A) DISCRETIONARY GRANTS. Any Eligible Person that the
Committee in its sole and absolute discretion designates is eligible to receive
an Option under this Plan. The Committee's award of an Option to a Recipient in
any year does not require the Committee to award an Option to that Recipient in
any other year. Furthermore, the Committee may award different Options to
different Recipients and has full discretion to choose whether to grant Options
to any eligible person. The Committee may consider such factors as it deems
pertinent in selecting Recipients and in determining the amount of their
Options, including, without limitation, (i) the financial condition of the
Company or its Subsidiaries; (ii) expected profits for the current or future
years; (iii) the contributions of a prospective Recipient to the profitability
and success of the Company or its Subsidiaries; and (iv) the adequacy of the
prospective Recipient's other compensation. Recipients may include persons to
whom stock, stock options, stock appreciation rights, or other benefits
previously were granted under this or another plan of the Company or any
Subsidiary, whether or not the previously granted benefits have been fully
exercised or vested.
(B) OUTSIDE DIRECTORS' GRANTS.
(1) INITIAL GRANTS. Effective on the dates set
forth below, each category of Outside Director of the Company described below
shall be automatically granted an Option to purchase five thousand (5,000)
shares of Common Stock:
A. for any Outside Director serving
on the Board at the Effective Date, the Effective Date;
B. for any Outside Director elected
by the shareholders of the Company subsequent to the Effective Date, the date of
such Outside Director's election to the Board; and
C. for any Outside Director appointed
by the Board subsequent to the Effective Date, the time such Outside Director's
appointment to the Board becomes effective.
(2) ANNUAL GRANTS. Each Outside Director shall
automatically be granted, effective each anniversary of his appointment to the
Board, an Option to purchase three thousand (3,000) shares of Common Stock.
(3) EXERCISE PRICE. The exercise price of each
Share subject to an Option granted to an Outside Director shall be the Fair
Market Value of the Common Stock on
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the date the Option is granted.
(4) EXERCISE OF OPTIONS. All Options granted
to an Outside Director shall become exercisable on the first anniversary of the
Date of Grant and may be exercised by the Outside Director for a period of ten
(10) years from the Date of Grant PROVIDED, however, that in the event of the
death of an Outside Director, the Option shall be exercisable only within the
twelve (12) months next succeeding the date of death, and then only (i) by the
executor or administrator of the Outside Director's estate or by the person or
persons to whom the Outside Director's rights under the Option shall pass by the
Outside Director's will or the laws of descent and distribution, and (ii) if and
to the extent that the Outside Director was entitled to exercise the Option at
the date of the Outside Director's death, provided that in no event shall the
Option be exercisable more than ten (10) years after the Date of Grant.
(C) NO RIGHT OF EMPLOYMENT. A Recipient's right, if any, to
continue to serve the Company and its Subsidiaries as an officer, Employee, or
otherwise shall not be enlarged or otherwise affected by his designation as a
Recipient under this Plan, and such designation shall not in any way restrict
the right of the Company or any Subsidiary, as the case may be, to terminate at
any time the employment or affiliation of any Recipient.
6. OPTION REQUIREMENTS. Each Option granted to a Recipient
under subsection 5(a) of the Plan shall contain such provisions as the Committee
at the Date of Grant shall deem appropriate. Each Option granted to a Recipient
shall satisfy the following requirements:
(A) WRITTEN AGREEMENT. Each Option granted to a Recipient
shall be evidenced by an Agreement. The terms of the Agreement need not be
identical for different Recipients. The Agreement shall include a description of
the substance of each of the requirements in this Section 6 with respect to that
particular Option.
(B) NUMBER OF SHARES. Each Agreement shall specify the
number of Shares that may be purchased by exercise of the Option.
(C) EXERCISE PRICE. Unless provided otherwise by the
Committee, with the approval of a majority of the Board, in establishing the
terms of the Option at grant, the exercise price of each Share subject to an
Option shall not be less than the Fair Market Value of the Share on the Option's
Date of Grant.
(D) DURATION OF OPTION. Each Option granted to a Recipient
shall expire on the tenth anniversary of its Date of Grant, or at such earlier
or later date as is set by the Committee in establishing the terms of the Option
at grant, or at such later date as is set by the Committee subsequent to the
Date of Grant but prior to the tenth anniversary of the Date of Grant. If the
Recipient's employment or affiliation with the Company terminates before the
expiration date of an Option, the Options owned by the Recipient shall expire on
the earlier of the date stated in this
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<PAGE>
subsection or the date stated in following subsections of this Section.
Furthermore, expiration of an Option may be accelerated under subsection 6(g) of
the Plan.
(E) VESTING OF OPTION AND EXERCISABILITY. Unless otherwise
provided for by the Committee in establishing the terms of the Option at grant,
a Recipient's interest in the Option shall vest according to the schedule
described in this subsection 6(e) and shall be exercisable as to not more than
the vested percentage of the Shares subject to the Option at any point in time.
To the extent an Option is either unexercisable or unexercised, the unexercised
portion shall accumulate until the Option both becomes exercisable and is
exercised, subject to the provisions of subsection 6(d) of the Plan. Each Option
granted under the Plan shall become vested according to the following schedule
based on the anniversary of the Date of Grant:
ANNIVERSARY OF DATE OF GRANT PERCENT VESTED
---------------------------- --------------
Prior to 1st anniversary 0%
1st 25%
2nd 50%
3rd 75%
4th 100%
The Committee, in its sole and absolute discretion, may accelerate the vesting
of any Option at any time.
(F) DEATH OR TERMINATION OF SERVICE OR AFFILIATION.
(1) In the case of the death of the Recipient,
all Options held by the Recipient shall expire on the one year anniversary of
the Recipient's death, or if earlier, the date specified in subsection 6(d),
unless the Committee sets an earlier or later expiration date in establishing
the terms of the Options at grant or a later expiration date subsequent to the
Date of Grant but prior to the one year anniversary of the Recipient's death.
(2) If the Recipient ceases employment or
affiliation with the Company as a result of his retirement at age sixty-five,
each Option held by the Recipient shall expire on the tenth anniversary of its
Date of Grant, or at such earlier or later date as is set by the Committee in
establishing the terms of the Option at grant, or at such later date as is set
by the Committee subsequent to the Date of Grant but prior to the tenth
anniversary of the Date of Grant. The Option may be exercised only for the
number of Shares for which it could have been exercised on such termination date
pursuant to subsection 6(e), subject to any adjustment under Section 12 of the
Plan.
(3) If the Recipient ceases employment or
affiliation with the Company for any reason other than death or retirement, all
Options held by the Recipient shall expire thirty days following the last day
that the Recipient is employed by or affiliated with the Company, or at such
6
<PAGE>
earlier or later date as is set by the Committee in establishing the terms of
the Option at grant, or at such later date as is set by the Committee subsequent
to the date of grant but prior to the thirtieth day following the last day the
Recipient is employed by or affiliated with the Company. The Option may be
exercised only for the number of Shares for which it could have been exercised
on such termination date pursuant to subsection 6(e), subject to any adjustment
under Section 12 of the Plan. Notwithstanding any provisions set forth herein or
in the Plan, if the Recipient shall (i) commit any act of malfeasance or
wrongdoing affecting the Company or any parent or Subsidiary, (ii) breach any
covenant not to compete or employment agreement with the Company or any parent
or Subsidiary, or (iii) engage in conduct that would warrant the Recipient's
discharge for cause, any unexercised part of the Option shall lapse immediately
upon the earlier of the occurrence of such event or the last day the Recipient
is employed by or affiliated with the Company.
(G) CHANGE IN CONTROL. Contingent upon the occurrence
of a Change in Control, the Board may, but is not required to, take one or more
of the following actions:
(1) accelerate the vesting of any Option;
(2) terminate all Options outstanding under
the Plan effective upon the date of the Change in Control and make, within
ninety days after the date of the Change in Control, a cash payment to the
Recipient equal to the difference between the Exercise Price and the Fair Market
Value of the vested but unexercised Shares subject to the terminated Option on
the date of the Change in Control; or
(3) accelerate the expiration of the Options
to a date not earlier than the fifteenth day after the date of the Change in
Control.
(H) CONDITIONS REQUIRED FOR EXERCISE. Options granted to
Recipients under the Plan shall be exercisable only to the extent they are
vested according to subsection 6(e) of the Plan. Furthermore, each Option
granted under the Plan is exercisable only if the issuance of Shares pursuant to
the exercise would be in compliance with applicable securities laws, as
contemplated by Section 10 of the Plan. The Committee may provide for additional
conditions for the exercise of any Option in establishing the terms of the
Option at grant.
7. METHOD OF EXERCISE. Subject to the requirements of subsections 6(e)
and 6(f) of the Plan, an Option granted under this Plan may be exercised in
whole or in part. An Option granted under this Plan shall be deemed exercised
when the person entitled to exercise the Option (a) delivers written notice to
the Chief Executive Officer of the Company (or his designee) of the decision to
exercise, (b) concurrently tenders to the Company full payment for the Shares to
be purchased pursuant to the exercise, (c) remits to the Company in cash upon
demand an amount sufficient to satisfy any federal (including FICA and FUTA
amounts), state, and/or local withholding tax requirements at the time the
Recipient or his beneficiary recognizes income for federal, state, and/or local
tax purposes as the result of the receipt of Shares pursuant to the Plan and (d)
complies with such other reasonable requirements as the Committee establishes
pursuant to Section 10 of the Plan.
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Payment for Shares with respect to which an Option is exercised may be made in
cash, or by certified check or wholly or partially in the form of Common Stock
having a Fair Market Value on the date of exercise equal to the exercise price.
No person shall have the rights of a shareholder with respect to Shares subject
to an Option granted under this Plan until a certificate or certificates for the
Shares have been delivered to him. An Option granted under this Plan may not be
exercised in increments of less than one hundred Shares, or, if less, one
hundred percent of the full number of Shares as to which it can be exercised. A
partial exercise of an Option shall not affect the holder's right to exercise
the Option from time to time in accordance with this Plan as to the remaining
Shares subject to the Option.
8. OPTION SHARE TRANSFER RESTRICTIONS AND REPURCHASE RIGHTS. The
Committee may, in establishing the terms of an Option at grant, create (a)
restrictions on the ability of the Recipient to transfer Option Shares to any
person other than the Company, and (b) rights of the Company to repurchase
Option Shares, prior to the date on which a registration statement pertaining to
the Shares to be issued upon exercise of the Option has been filed with and
declared effective by the Securities and Exchange Commission.
9. DESIGNATION OF BENEFICIARY. Each Recipient shall designate in the
Agreement he executes a beneficiary to receive Options awarded hereunder in the
event of both his death prior to full exercise of such Options and a delay of
the expiration date of such Options in accordance with subsection 6(f) of the
Plan; provided, that if no such beneficiary is designated or if the beneficiary
so designated does not survive the Recipient, the estate of such Recipient shall
be deemed to be his beneficiary. Recipients may, by written notice to the
Committee, change the beneficiary designated in any outstanding Agreements.
10. TAXES; COMPLIANCE WITH LAW; APPROVAL OF REGULATORY BODIES; LEGENDS.
The Company shall have the right to withhold from payments otherwise due and
owing to the Recipient (or his beneficiary) or to require the Recipient (or his
beneficiary) to remit to the Company in cash upon demand an amount sufficient to
satisfy any federal (including FICA and FUTA amounts), state, and/or local
withholding tax requirements at the time the Recipient (or his beneficiary)
recognizes income for federal, state, and/or local tax purposes as the result of
the receipt of Shares pursuant to the Plan as a condition to the issuance of
Shares upon Option exercise (whether to the Recipient or to his beneficiary).
Options are exercisable, and Shares can be delivered under this Plan,
only in compliance with all applicable federal and state laws and regulations
and the rules of all stock exchanges on which the Company's stock is listed at
any time. Any certificate issued to evidence Shares issued under the Plan may
bear such legends and statements, and shall be subject to such transfer
restrictions, as the Committee deems advisable to assure compliance with federal
and state laws and regulations and with the requirements of this Section 10 and
to reflect the provisions of Section 8 of the Plan. No Option may be exercised,
and Shares may not be issued under this Plan, until the Company has obtained the
consent or approval of every regulatory body, federal or state, having
jurisdiction over such matters as the Committee deems advisable.
8
<PAGE>
Each person who acquires the right to exercise an Option or to
ownership of Shares by bequest or inheritance may be required by the Committee
to furnish reasonable evidence of ownership of the Option as a condition to his
exercise of the Option. In addition, the Committee may require such consents and
releases of taxing authorities as the Committee deems advisable.
With respect to persons subject to Section 16 of the 1934 Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 under the 1934 Act or its successor under the 1934 Act.
To the extent any provision of the Plan or action by the Plan administrators
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Plan administrators.
11. ASSIGNABILITY. An Option granted under this Plan is not
transferable except by will or the laws of descent and distribution. During the
lifetime of a Recipient, all rights of the Options are exercisable only by the
Recipient.
12. ADJUSTMENT UPON CHANGE OF SHARES. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or exchange of
shares, stock split, stock dividend, rights offering, or other expansion or
contraction of the Common Stock of the Company occurs, the number and class of
Shares for which Options are authorized to be granted under this Plan, the
number and class of Shares then subject to Options previously granted to
Recipients under this Plan, and the price per Share payable upon exercise of
each Option outstanding under this Plan shall be equitably adjusted by the
Committee to reflect such changes. To the extent deemed equitable and
appropriate by the Board, subject to any required action by shareholders, in any
merger, consolidation, reorganization, liquidation or dissolution, any Option
granted under the Plan shall pertain to the securities and other property to
which a holder of the number of Shares of stock covered by the Option would have
been entitled to receive in connection with such event.
13. INCENTIVE STOCK OPTION REQUIREMENTS. Notwithstanding any other
provision of the Plan, the following requirements apply to each Incentive Stock
Option granted pursuant to the Plan.
(A) Only Employees of the Company shall be eligible to
receive grants of Incentive Stock Options.
(B) The written agreement that evidences an Option grant shall
state whether the Option is an Incentive Stock Option.
(C) The exercise price of each Share subject to an Incentive
Stock Option shall equal the Fair Market Value of the Share on the Option's Date
of Grant.
(D) Each Incentive Stock Option shall expire no later than
the earliest of:
(1) the tenth anniversary of the Option's Date
of Grant;
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(2) the one year anniversary of the Recipient's
death; or
(3) ninety days following the termination of
the Recipient's employment or affiliation with the Company.
(E) An Incentive Stock Option granted to an individual who, on
the Date of Grant, owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of either the Company or any
parent or Subsidiary, shall be granted at an exercise price of 110 percent of
Fair Market Value on the Date of Grant and shall be exercisable only during the
five-year period immediately following the Date of Grant. In calculating stock
ownership of any person, the attribution rules of Code Section 424(d) shall
apply. Furthermore, in calculating stock ownership, any stock that the
individual may purchase under outstanding options shall not be considered.
(F) The aggregate Fair Market Value determined on the Date of
Grant, of stock in the Company with respect to which any Incentive Stock Options
under the Plan and all other plans of the Company or its Subsidiaries (within
the meaning of Section 422(b) of the Code) may become exercisable by any
individual for the first time in any calendar year shall not exceed $100,000.
14. LIABILITY OF THE COMPANY. The Company, its parent and any
Subsidiary that is in existence or hereafter comes into existence shall not be
liable to any person for any tax consequences expected but not realized by a
Recipient or other person due to the exercise of an Option.
15. AMENDMENT AND TERMINATION OF PLAN. The Board may alter, amend, or
terminate this Plan from time to time without approval of the shareholders.
However, without the approval of the shareholders, no amendment shall be
effective that:
(A) materially increases the benefits accruing to Recipients
under the Plan;
(B) increases the aggregate number of Shares that may be
delivered upon the exercise of Options granted under the Plan;
(C) materially modifies the eligibility requirements for
participation in the Plan;
(D) amends, modifies or deletes subsection 5(b) of the Plan;
or
(E) amends the requirements of subsections (a) through (c)
of this Section 15.
In addition, subsection 5(b) of the Plan may not be amended more frequently than
once every six months, except to comply with changes to the Code, the Employee
Retirement Income Security Act of 1974, or the rules promulgated thereunder. Any
amendment, whether with or without the approval of shareholders, that alters the
terms or provisions of an Option granted before the amendment (unless the
alteration is expressly permitted under this Plan) shall be effective only with
the consent of the Recipient to whom the Option was granted or the holder
currently entitled to exercise it.
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16. EXPENSES OF PLAN. The Company shall bear the expenses of
administering the Plan.
17. DURATION OF PLAN. Options may be granted under this Plan
only during the ten years immediately following the effective date of this Plan.
18. APPLICABLE LAW. The validity, interpretation, and
enforcement of this Plan are governed in all respects by the laws of Florida
and the United States of America.
19. EFFECTIVE DATE. The effective date of this Plan shall be
the earlier of (a) the date on which the Board adopts the Plan or (b) the date
on which the Shareholders approve the Plan.
11
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into effective as of June 30, 1996, by and between Kos Pharmaceuticals,
Inc., a Florida corporation (the "Company") and Kos Holdings, Inc., a Florida
corporation ("Holdings").
RECITALS
Holdings has acquired 10,000,000 shares (the "Shares") of the Company's
common stock, par value $.01 per share (the "Common Stock"), under the terms of
an Assignment and Assumption Agreement dated as of June 30, 1996 between the
Company and Holdings (the "Assignment Agreement"). Pursuant to the Assignment
Agreement, the Company has agreed to grant Holdings certain registration rights
in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
1. DEFINITIONS. The following terms shall have the meanings
set forth below:
a. "COMMISSION" means the Securities and Exchange
Commission, or any other Federal agency at the time administering the Federal
securities laws.
b. "CUTBACK REGISTRATION" means any registration in connection
with an underwritten public offering in which the managing underwriter advises
the Company that marketing factors require a limitation of the number of the
Company's securities to be underwritten in such public offering (including a
limitation to zero).
c. "1933 ACT" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
d. "1934 ACT" means the Securities Exchange Act of 1934 or any
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
e. "REGISTRATION STATEMENT" means a registration statement
filed by the Company with the Commission for a public offering and sale of
securities of the Company (other than any registration statement that effects
the Company's initial public offering, any registration statement on Form S-4 or
Form S-8, or their successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation or entity).
f. "REGISTRATION EXPENSES" means the expenses described
in Section 4.
<PAGE>
g. "REGISTRABLE SHARES" means all of the Shares, and any other
shares of Common Stock or other securities of the Company or any other issuer
issued or issuable in respect of such Shares (because of stock splits, stock
dividends, reclassifications, recapitalizations, mergers, combinations or
similar events, if applicable); PROVIDED, HOWEVER, that the Shares which are
Registrable Shares shall cease to be Registrable Shares upon any sale or
transfer of such shares pursuant to a Registration Statement, Section 4(1) of
the 1933 Act, Rule 144 under the 1933 Act or otherwise, except that the Shares
which are Registrable Shares shall remain Registrable Shares notwithstanding any
transfer of the Shares by Holdings to Michael Jaharis (the "Shareholder") or any
of his affiliates or by the Shareholder or such affiliates to any member of the
Shareholder's immediate family or to a trust established for the benefit of the
Shareholder or any family member of the Shareholder or to any corporation or
other entity which is wholly owned by the Shareholder, such affiliates, such
family members, or such trusts (Shareholder, such affiliates, such family
members such trusts and such entities referred to herein collectively as
"Permitted Transferees"). As a condition to effecting any registration pursuant
to this Agreement, the Company may require that Holdings or any Permitted
Transferees, on whose behalf a registration hereunder is being effected, execute
an agreement further acknowledging their obligations under Section 7 of this
Agreement. All references in this Agreement to the term "Holdings" shall be read
to include any Permitted Transferee that owns or holds any Registrable Shares.
2. REGISTRATION RIGHTS.
a. REQUESTED REGISTRATION.
i. Subject to the other provisions of this
Agreement, Holdings shall have the right (a "Request Right") to require the
Company to effect three registrations with respect to the Registrable Shares
(each such registration being a "Requested Registration"). (The Company is
required to effect a total of only three Requested Registrations pursuant to
this Section 2(a) notwithstanding that Registrable Shares may have been
transferred to one or more Permitted Transferees.) To effect a Requested
Registration, Holdings shall make a written request (a "Request Notice") to the
Company which shall describe in detail the contemplated sale of Registerable
Securities, including the number of Registerable Securities to be registered.
The Company shall be entitled to include in any Requested Registration shares of
Common Stock to be sold by holders of either Common Stock or rights to acquire
Common Stock to whom the Company has previously granted or in the future does
grant any registration rights and shares of Common Stock to be sold by the
Company for its own account, provided that such inclusion shall not limit the
number of Registrable Shares included in such Registration Statement.
ii. Holdings may revoke its Request Notice in
the event of a Cutback Registration that would limit the total number of
Registrable Shares that can be sold pursuant to such Requested Registration to a
number that is less than 90% of the number of Holding's Registrable Shares
specified to be sold in the Request Notice.
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iii. The Company shall, as soon as practicable,
but in no event more than 120 days after receipt of a Request Notice, file a
Registration Statement covering the Registrable Shares to be included in the
registration requested by such Request Notice and cause such Registration
Statement to become effective as soon as practicable thereafter.
b. PIGGYBACK REGISTRATION.
i. At any time and from time to time after
the date of this Agreement, whenever the Company proposes to file a Registration
Statement, the Company will prior to such filing give written notice to Holdings
of its intention to do so and, upon the written request of Holdings given within
fifteen (15) days after the Company provides such notice, the Company shall use
its good faith efforts to cause all Registrable Shares which the Company has
been requested by Holdings to register to be registered under the 1933 Act to
the extent necessary to permit their sale or other disposition in accordance
with the intended methods of distribution specified in the request of Holdings;
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Section 2.b. without obligation to
Holdings.
ii. In connection with any registration under
Section 2.b. involving an underwritten offering of the Company's securities, the
Company shall not be required to include any Registrable Shares in such
underwriting unless Holdings accepts the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it, and then only in
such quantity as will not, in the sole discretion of the underwriters,
jeopardize the success of the offering by the Company. If in the sole discretion
of the managing underwriter or underwriters the registration of all, or part of,
the Registrable Shares which Holdings has requested to be included would
adversely affect such public offering, then the Company shall be required to
include in the underwriting only that number of Registrable Shares, if any,
which the managing underwriter or underwriters believe may be sold without
causing such adverse effect. If the number of Registrable Shares to be included
in the underwriting in accordance with the foregoing is less than the total
number of shares which Holdings has requested to be included, then Holdings
shall participate in the underwriting pro rata based upon its total ownership of
Registrable Shares compared to the total number of shares held by affiliates of
the Company for which registration has been requested whether or not such shares
are the subject of separate agreements with the Company concerning registration
rights.
3. REGISTRATION PROCEDURES. When the Company is required by
the provisions of this Agreement to effect the registration of any of the
Registrable Shares under the 1933 Act, the Company shall:
a. file with the Commission a Registration Statement
with respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;
b. prepare and file with the Commission any amendments and
supplements to the Registration Statement and the prospectus included in the
Registration Statement as may be necessary
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to keep the Registration Statement effective until the earlier to occur of (i)
such time as all Registrable Shares included therein have been sold or (ii) the
expiration of two years;
c. furnish to Holdings such reasonable numbers of copies of
the prospectus, including a preliminary prospectus and any amended or
supplemental prospectus, in conformity with the requirements of the 1933 Act,
and such other documents as Holdings may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by Holdings; and
d. use its best efforts to register or qualify the Registrable
Shares covered by the Registration Statement under the securities or Blue Sky
laws of such states as Holdings shall reasonably request, and do any and all
other acts and things that may be necessary or desirable to enable Holdings to
consummate the public sale or other disposition of the Registrable Shares owned
by Holdings in such jurisdiction; PROVIDED, HOWEVER, that the Company shall not
be required in connection with this Section 3 to qualify as a foreign
corporation in any jurisdiction nor register or qualify the securities in any
state which as a condition to such registration or qualification would impose
material restrictions or other material conditions on the Company or any of its
officers, directors or shareholders (including with respect to any shares held
by such persons or entities) unless such restrictions or other conditions are
approved by the party adversely affected.
If the Company advises Holdings that any preliminary or final
prospectus is no longer in compliance with the requirements of the 1933 Act, or
that at such time it is otherwise a violation of any applicable securities laws
to offer or sell securities pursuant to a preliminary or final prospectus,
Holdings shall immediately cease offering or selling the Registrable Securities
and, if requested, return all old prospectus to the Company. Holdings may
recommence offers and sales of Registrable Securities upon receipt from the
Company of an amended prospectus, if applicable, or receipt of ratification from
the Company that the offer and sale of Registrable Securities may resume.
4. ALLOCATION OF EXPENSES. The Company will pay all Registration
Expenses of all registrations under this Agreement. The term "Registration
Expenses" shall mean all expenses incurred by the Company in complying with this
Agreement, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and disbursements of counsel for
the Company, state Blue Sky fees and expenses, and the expense of any special
audits incident to or required by any such registration, but excluding
underwriting discounts and selling commissions attributable to the Registrable
Shares and the fees and expenses of Holdings' own counsel and accountants, which
shall be borne by Holdings.
5. INFORMATION BY HOLDINGS. Holdings shall promptly furnish to the
Company such information regarding Holdings and the distribution proposed
by Holdings as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
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6. "LOCK-UP" AGREEMENT. If requested by the Company or an underwriter
or both in connection with an underwritten offering of Common Stock or other
securities of the Company, Holdings shall agree not to sell or otherwise
transfer or dispose of any Registrable Shares or other securities of the Company
held by Holdings for a specified period of time before and/or after the
effective date of a Registration Statement, provided that the same request shall
have been made of other holders of the Company's Common Stock or other
securities (including affiliates of the Company) and such other holders have
complied with such request. Such agreement shall be in writing in a form
satisfactory to the Company and any such underwriter. The Company may impose
stop transfer instructions with respect to the Registrable Shares or other
securities subject to the foregoing restriction until the end of the lock-up
period.
7. INDEMNIFICATION.
a. BY THE COMPANY. In the event of any registration of any of
the Registrable Shares under the 1933 Act pursuant to this Agreement, the
Company will indemnify and hold harmless the sellers of such Registrable Shares
against any losses, claims, damages or liabilities, joint or several, to which
such sellers may become subject under the 1933 Act, 1934 Act, state securities
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
of any material fact contained in any Registration Statement under which such
Registrable Shares were registered under the 1933 Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of or are
based upon the omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and the Company will
reimburse such sellers for any legal or any other expenses reasonably incurred
by such sellers in connection with investigating and defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon any untrue statement or
omission made in such Registration Statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company by or on behalf of such
sellers, specifically for use in the preparation thereof, or as a result of the
failure of such sellers, or any agent of such sellers, to deliver any amendments
and supplements to any Registration Statement and the prospectus included in any
such Registration Statement (provided such amended or supplemental prospectus
has been delivered to sellers or their agent).
b. BY SELLERS OF REGISTRABLE SHARES. In the event of any
registration of any of the Registrable Shares under the 1933 Act pursuant to
this Agreement, each seller of Registrable Shares, severally and not jointly,
will indemnify and hold harmless the Company, each of its directors and officers
and each underwriter (if any) and each person, if any, who controls the Company
or any such underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Company, such directors and officers, underwriter or controlling person may
become subject under the 1933 Act, 1934 Act, state securities laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise
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out of or are based upon any untrue statement of a material fact contained in
any Registration Statement under which such Registrable Shares were registered
under the 1933 Act, any preliminary prospectus or final prospectus contained in
the Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and each seller of Registrable Shares will
reimburse the Company, each of its directors and officers, each underwriter and
each controlling person, severally and not jointly, for any legal or other
expenses reasonably incurred by the Company, each director and officer, each
underwriter and each controlling person in connection with investigating and
defending any such loss, claim, damage, liability or action, if the statement or
omission was made in reliance upon and in conformity with information furnished
to the Company by or on behalf of such seller, specifically for use in
connection with the preparation of such Registration Statement, prospectus,
amendment or supplement.
c. CLAIMS. Each party entitled to indemnification under this
Section 7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; PROVIDED, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 7. The Indemnified
Party may participate in such defense at such party's expense. No Indemnifying
Party, in the defense of any such claim or litigation, except with the consent
of the Indemnified Party, shall consent to entry of any judgment or enter into
any settlement, which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation.
8. MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed
in all respects by the laws of the state of Florida.
b. SUCCESSORS AND ASSIGNS. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
c. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a written instrument
signed by the Company and Holdings.
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d. NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or nationally
recognized courier addressed as follows:
If to Holdings:
Attention:
If to the Company:
Kos Pharmaceuticals, Inc.
1001 S. Bayshore Drive
Suite 2502
Miami, Florida 33131
Facsimile No. (305) 577-4596
Attention: Daniel M. Bell, President
or at such other address as a party shall have furnished to the other party in
writing. All such notices and other written communications shall be effective on
the earlier of the date of mailing or delivery.
e. SEPARABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
f. TITLES AND SUBTITLES. The titles of the paragraphs
and subparagraphs of this Agreement are for convenience of reference only and
are not to be considered in construing this Agreement.
g. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be an original, and all of which
together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
KOS PHARMACEUTICALS, INC, a Florida
corporation.
By:/s/ DANIEL M. BELL
-------------------------------------
Daniel M. Bell, President
KOS HOLDINGS, INC., a Florida corporation.
By:
--------------------------------------
8
LEASE AGREEMENT
1. PARTIES
THIS LEASE AGREEMENT made this 2nd day of May, 1991, by and between STS
Buildings Associates, L.P., whose address is 777 South Flagler Drive, Phillips
Point, West Tower, Suite 1400, West Palm Beach, FL 33401, hereinafter referred
to as LANDLORD, and KOS PHARMACEUTICALS, INC., a Florida corporation whose
address is 1001 South Bayshore Drive, Suite 2502, Miami, FL 33131, hereinafter
referred to as TENANT.
WITNESSETH
2. DEMISED PREMISES
LANDLORD hereby demises and leases unto TENANT, and TENANT hereby
leases from LANDLORD, those certain premises situated in the County of Broward,
State of Florida, identified as
Suite 150
Two Oakwood Boulevard
Hollywood, Florida 33020
(hereinafter referred to as either the "Demised Premises" or "Premises") of that
certain building known as Oakwood Business Center Phase II, (the "Building")
located at Two Oakwood Boulevard, Hollywood, Florida 33020, which Demised
premises are outlined in red on the plan attached hereto and marked Exhibit "A".
The "Rentable Area of the Premises" is hereby stipulated and mutually agreed to
by the parties to be FOUR THOUSAND TWO HUNDRED NINETY TWO (4,292) square feet,
whether the same should be more or less as a result of completion of the
Premises by Landlord for occupancy or for any other reason. The "Rentable Area
of the Building" in which the Premises are located is hereby stipulated and
mutually agreed to by the parties to be FIFTY ONE THOUSAND SEVEN HUNDRED TWELVE
(51,712) square feet.
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3. TERM
Landlord will notify Tenant ten (10) days prior to completion of
Demised Premises and the Term of this Lease will commence ten (10) days after
completion of Demised Premises which completion shall be evidenced by a
Certificate of Occupancy and shall end (unless sooner terminated as hereinafter
provided) five (5) years after the last day of the first month of the term of
this Lease. The parties hereto agree to execute, within thirty (30) days after
the COMMENCEMENT DATE hereof, Supplement I to this Lease, in the form attached
hereto, fixing the definite dates of commencement and expiration of the term of
this Lease. By occupying the Demised Premises as a TENANT, or by installing
fixtures or equipment or by performing finishing work, TENANT shall be deemed to
have accepted the Demised Premises "AS IS" and to have acknowledged that the
Demised Premises are in the condition required by this Lease, excepting
conditions that cannot be observed or known about prior to occupancy up to a
period of four (4) months after issuance of Certificate of Occupancy, latent
defects or omissions in LANDLORD'S construction.
4. TENANT'S PLANS AND SPECIFICATIONS:
TENANT agrees to cooperate with the LANDLORD in preparing plans and
specifications covering all work to be done by or for TENANT (as provided in
Exhibit "B" of this Lease captioned "Leasehold Improvements") in the Demised
Premises. Such plans and specifications shall be prepared at LANDLORD'S sole
expense by a duly licensed architect or engineer selected by LANDLORD, in such
detail as LANDLORD may reasonably require, and TENANT agrees that no work shall
commence on any of the aforesaid Leasehold Improvements until LANDLORD and
TENANT have approved such plans and specifications in writing, which plans and
specifications when so approved shall be designated Exhibit "B" and attached
hereto and made a part hereof by reference. TENANT shall schedule and complete a
meeting with LANDLORD'S architect for the purpose of providing any information,
including TENANT'S finish schedule, required by LANDLORD'S architect in order
for him to prepare the plans and specifications. Such meeting shall be scheduled
by TENANT not later than ten (10) days from the date of such request by
LANDLORD. TENANT also agrees to cause its review of the plans and specifications
provided by LANDLORD to be completed and any comments thereon to be provided to
LANDLORD within ten (10) days from delivery of same by LANDLORD to TENANT.
TENANT shall furnish TENANT's finishing specifications within twenty (20) days
from the date TENANT and LANDLORD agree upon final plans and specifications for
the
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Demised Premises. In the event that TENANT fails to perform its obligations
within the time period set forth herein, then TENANT shall be deemed to have
approved the plans and specifications submitted to TENANT for review and TENANT
shall have no further time to approve same. LANDLORD and TENANT agree to
cooperate with each other in good faith to finalize the plans and specifications
and finishing specifications for the Demised Premises, all of which shall be
subject to the approval of both LANDLORD and TENANT, which approval shall be
granted in good faith and which shall not be unreasonably withheld.
Any changes to TENANT's plans and specifications requested by TENANT,
after same have been approved in their final form by LANDLORD and TENANT, shall
be subject to LANDLORD's approval and, if LANDLORD so approves same, TENANT
shall pay any extra costs that my be incurred by LANDLORD as a result of such
change immediately upon request therefor.
In the event that TENANT fails to act promptly or in good faith with
regard to plans and specifications in accordance with the schedules set forth in
this paragraph, LANDLORD at its option may cancel this Lease by giving written
notice thereof to TENANT within ten (10) days of the expiration of any such
schedule.
5. BASE RENT
The Annual Base Rent shall be FORTY SEVEN THOUSAND ONE HUNDRED TWENTY
SIX AND 16/100 ($47,126.16) DOLLARS and shall be paid by TENANT to LANDLORD at
its principal office or that of its agent or at any other place hereafter
designated in writing by LANDLORD, in equal monthly installments of THREE
THOUSAND NINE HUNDRED TWENTY SEVEN and 18/100 ($3,927.18) DOLLARS, on or before
the first day of each month during the term hereof.
The first month's Base Rent shall be paid simultaneously with execution
of this Lease, receipt of which is hereby acknowledged by LANDLORD. On the
Commencement Date, TENANT shall pay a pro rata amount of rent, if any, for the
period from the Commencement Date to the first day of the next calendar month.
TENANT shall promptly pay any and all Rent due hereunder at the times and at the
address for LANDLORD stated above. TENANT shall promptly pay charges for work
performed on order of TENANT and any other charges that accrue under this Lease.
If any part of the Rent or other charges shall remain due and unpaid for five
(5) days after the same become due and payable, LANDLORD shall have the option
(in
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addition to all other rights and remedies available to it by law and in equity)
of assessing against TENANT a "late charge" equal to five (5) cents for every
dollar of Rent which is past due, which late charge assessment shall be deemed
to be Additional Rent. The term Annual Base Rent may hereinafter by referred to
as "Base Rent", "Annual Base Rent", or "Rent".
LANDLORD shall have the option to assess a charge against TENANT, if
any of TENANT's payment checks shall be returned to LANDLORD marked "NSF" for
insufficient funds, in the amount of $25.00. Additionally, if at any time during
the Term of this Lease, including any extensions or option terms, LANDLORD shall
receive any two payment checks from TENANT returned to LANDLORD marked "NSF"
then LANDLORD may demand that TENANT make the balance of its rental payments by
cashier's check.
TENANT may be instructed by LANDLORD to make rental payments to a "lock
box", at Southeast Bank or such other institution as LANDLORD may designate. Due
to the nature of the handling of such payments, those which LANDLORD would
normally not accept under the below circumstances may be deposited in LANDLORD's
account anyway.
Therefore, in the event that the payment made by TENANT is in an amount
which is less than what is due or, in the event that TENANT has received a
statutory notice and failed to comply with its demands and/or litigation is
pending concerning TENANT's nonpayment of rent or as a result of other defaults
by TENANT under the Lease, then, notwithstanding the fact that the rental
payment received may be deposited in LANDLORD's "lockbox" at Southeast Bank or
such other institution utilized for this purpose by LANDLORD, same SHALL NOT BE
DEEMED ACCEPTED unless and until the default which is the subject of the above
actions is cured to the satisfaction of the LANDLORD and as provided under the
Lease and Florida law. Such DEPOSITED BUT UNACCEPTED RENTAL PAYMENT(S) will be
refunded to TENANT on a LANDLORD issued check within a reasonable time after
such deposit is made. Such deposit of TENANT's check, under the above
circumstances, shall in no way prejudice LANDLORD's rights under Florida law
and/or the Lease.
6. ADDITIONAL RENT
(A) In addition to Base Rent, TENANT shall, for each calendar year or
portion thereof, pay to LANDLORD "Additional Rent" equal to "TENANT's
Proportionate Share" (as hereinafter defined) of the aggregate of "Operating
Expenses" (as hereinafter defined) for the
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Building and Premises, "Insurance" (as hereinafter defined), and "Taxes" (as
hereinafter defined) for the applicable calendar year.
(i) "TENANT's Proportionate Share" shall mean the percentage
which the then current Rentable Area of the Premises bears to the total
Rentable Area of the Building, which share is hereby stipulated and
agreed to be 8.3%.
(ii) "Taxes" shall mean all impositions, taxes, assessments
(special or otherwise) and other governmental liens or charges of any
and every kind, nature and sort whatsoever, ordinary and extraordinary,
foreseen and unforeseen, and substitutes therefor (except only
LANDLORD's income taxes) attributable in any manner to the Building and
the land upon which it is situated or which is used in conjunction with
the Building (the "Land"), or any part thereof, or any use thereof, or
any equipment, fixtures or other facility located therein or thereon or
used in conjunction therewith, and including all costs incurred by
LANDLORD in contesting same and/or negotiating with public authorities
as to same. If the Building and/or Land is for any reason included
along with properties in a particular tax bill, then LANDLORD shall
equitably apportion the tax billed among all properties covered by the
particular tax bill.
(iii) "Insurance" shall mean the cost to LANDLORD of all
casualty (including all extended coverages), liability, flood, hazard,
workmen's compensation, rent loss, and other insurance maintained by
LANDLORD, in LANDLORD's sole discretion, on the Building and Land
and/or LANDLORD's personal property used in connection therewith.
(iv) "Operating Expenses" shall mean the total cost and
expense incurred in operating, repairing and maintaining the Building
and Land, excluding only Taxes and Insurance. Operating Expenses shall
include, without limitation, window cleaning, pest control, inspection
and maintenance of fire and alarm and protection systems, community
association fees (if any), gardening and landscaping, the cost of
repairs and maintenance of the Building, parking area surfacing and
striping, lighting, equipment, sanitary control, removal of trash,
rubbish, garbage and other refuse, sewerage facilities, utility lines
and drainage facilities, water, sewer, electric and other utilities not
directly paid for by tenants of the Building, painting, depreciation of
machinery and equipment used in such maintenance, the cost of
management and administration and the cost of personnel to implement
services and to police the Building and Land. Operating
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Expenses shall not include any cost or expense for which LANDLORD is
entitled to be reimbursed by an insurance company or any other tenant
of the Building.
Operating Expenses also shall not include any cost or expense for
replacement of elevators/escalators, initial cost of interior and
exterior landscaping, contributions to local civic organizations,
income or corporate taxes, capital gains taxes, inheritance taxes and
any other taxes personally owned by the owner, structural repairs and
replacements (for example, exterior walls, roof, foundation), and
repairs due to faulty workmanship or inherent structural defects.
(v) On the Commencement Date, LANDLORD shall submit to TENANT
a statement of the estimated monthly Additional Rent for the calendar
year in which the Commencement Date occurs, and TENANT shall pay same
on a monthly basis in advance, together with payments of Base Rent.
TENANT shall continue to make said monthly payments of Additional Rent
until notified by LANDLORD of a change thereof. The estimated monthly
Additional Rent billed to TENANT may be changed from time to time by
LANDLORD based upon the prior year's actual statements or LANDLORD's
anticipated costs. By April 1st of each calendar year during the Term
and by the April 1st immediately following the expiration or earlier
termination of the Term, LANDLORD shall deliver to TENANT a statement
showing the actual total of Taxes, Insurance and Operating Expenses for
the prior calendar year and TENANT's Proportionate Share thereof. In
the event the total of the monthly payments of estimated Additional
Rent which TENANT has made for the prior calendar year shall be less
than TENANT's actual Additional Rent due for said calendar year, then
TENANT shall pay the difference in a lump sum together with the next
installment of Base Rent, and TENANT shall concurrently pay the
difference between the aggregate of monthly payments made in the then
current calendar year and the amount of monthly payments which are then
calculated as monthly Additional Rent for the then current calendar
year based on the prior calendar year's actual amounts. Any overpayment
by TENANT shall be credited towards Additional Rent next coming due
under this Lease. Even though the Term has expired and TENANT has
vacated the Premises, when the final determination is made as to
TENANT's Proportionate Share of said Additional Rent for the year in
which this Lease terminates, TENANT shall, within ten (10) days
following receipt of the annual statement, pay any amount necessary
based on such actual amounts for the
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last calendar year, to the extent said amount is over $10,000.00 Tenant
shall have the right to pay said amount over a twelve (12) month period
on a monthly basis, and conversely, any overpayment made shall,
together with the rendering of the annual statement, be rebated by
LANDLORD to TENANT.
TENANT expressly agrees that LANDLORD, at LANDLORD's sole
discretion, may apply the Security Deposit (as hereinafter defined) in
full of partial satisfaction of any Additional Rent due for any part of
the Term, including the final months, which application may follow the
termination of this Lease. If said Security Deposit is greater than the
amount of any such Additional Rent and there are no other sums or
amounts owed LANDLORD by TENANT by reason of any other terms,
provisions, covenants or conditions of this Lease, then LANDLORD shall
refund the balance of said Security Deposit to TENANT as provided in
Section 5 below. LANDLORD shall not be required to first apply said
Security Deposit to such Additional Rent if there are any other sums or
amounts owed LANDLORD by TENANT by reason of any other terms, provision
covenants or conditions of this Lease.
Additional Rent for the first calendar year and final calendar
year during the Term, if partial calendar years, shall be calculated as
if TENANT were occupying the Leased Premises for the entire calendar
year, but shall be due only in respect to those months included within
the Term of this Lease. Any Additional Rent for any partial month of
occupancy at the end of the Term of this Lease will be prorated, such
proration to be based on the actual number of days in said partial
month.
TENANT shall have the right, within thirty (30) days after
receipt by TENANT of any annual statement, to inspect LANDLORD's books
and records, showing Operating Expenses, Insurance and Taxes for the
calendar year covered by said statement at LANDLORD's office, during
normal business hours, after five (5) days' prior written notice. Each
annual statement shall become final and conclusive between the parties,
their successors and assigns as to the matters set forth therein,
unless LANDLORD receives written objections with respect thereto within
said thirty (30) day period. Anything herein to the contrary
notwithstanding, TENANT shall not delay or withhold payments of any
balance shown to be due pursuant to a statement rendered by LANDLORD to
TENANT because of any objection which TENANT may raise with respect
thereto.
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Notwithstanding the fact that the Premises may only be used
for the purpose set forth in Section 8 (crossed out) hereof, if, due to
TENANT's use, LANDLORD's insurance premiums exceed standard premiums,
then TENANT shall, upon receipt of appropriate invoices from LANDLORD,
reimburse LANDLORD for such increase in premiums. It is understood and
agreed between the parties hereto that any such increase in premiums
shall be considered as Rent due and shall be included in any lien for
Rent. TENANT shall comply with any and all requirements of LANDLORD's
insuror(s).
7. SALES TAX
TENANT also agrees to pay LANDLORD any sales or use tax or excise tax
imposed or levied against the Rent, Additional Rent, or any other charge or
payment required hereunder to be made by TENANT which has been imposed or levied
by any governmental body having jurisdiction thereover, payable with each
installment of rent. Such sales tax to be paid by TENANT shall be deemed to be
Additional Rent due and payable by TENANT hereunder.
8. (Omitted)
9. USE
TENANT shall use and occupy the Demised Premises only for general
office use and analytical and formulation laboratories and for no other purpose,
under the name or style of Kos Pharmaceuticals, Inc. Such use shall be in
accordance with all applicable federal, state and local laws, ordinances, rules
and regulations.
10. SURRENDER AND HOLDOVER
TENANT agrees at the expiration of the term to surrender the Demised
Premises and everything belonging to or in connection therewith in good
condition, reasonable wear and tear excepted; and to remove all signs,
advertisements and rubbish from the said Demised Premises; and if TENANT fails
to do so, then TENANT hereby expressly authorizes LANDLORD, as agent of TENANT,
to remove such rubbish and make such repairs as may be necessary to restore the
Demised Premises to such condition, at the expense of TENANT.
IF TENANT retains possession of the Demised premises or any part
thereof after the termination of this Lease, TENANT shall pay LANDLORD rent at
double the rate payable for the year immediately proceeding said holdover,
computed on a monthly basis, for the time TENANT thus remains in possession. The
provisions of this paragraph do not waive
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LANDLORD's rights of re-entry or any other right hereunder. Any retention of the
Demised Premises after termination of this Lease or any extension thereof shall
be considered as a month to month holdover unless otherwise agreed to in writing
by the parties hereto.
11. ASSIGNMENT AND SUBLETTING
TENANT shall not assign, transfer, mortgage, pledge, or otherwise
encumber or dispose of this Lease or sublet the Premises or any part thereof, or
permit the Premises to be occupied by other persons unless prior consent in
writing is given by Landlord which consent shall not be unreasonably withheld.
12. SUCCESSORS AND ASSIGNS
All rights, obligations and liabilities herein given to, or imposed
upon, the respective parties hereto shall extend to and bind the several and
respective heirs, executors, administrators, successors, permitted subtenants
and permitted assigns of said parties, subject to the provisions of Paragraph
10, and if there shall be more than one TENANT, they shall all be bound jointly
and severally by the terms, covenants, and agreements herein and the word
"TENANT" shall be deemed and taken to mean each and every person or party
mentioned as a TENANT herein, be the same one or more; and if there shall be
more than one TENANT, any notice required or permitted by the terms of this
Lease may be given by or to any one thereof, and shall have the same force and
effect as if given by or to all thereof. No rights, however, shall inure to the
benefit of any assignee of TENANT or sublessee of the Premises unless the
assignment to such assignee or sublet of the Premises has been consented to by
LANDLORD in writing as aforesaid.
13. SUBORDINATION, ATTORNMENT, & ESTOPPEL
If the Premises are at any time subject to a ground lease, underlying
lease or mortgage, and if TENANT has received written notice of same from the
landlord thereunder or the holder thereof, as the case may be (each of said
landlords and mortgage holders being referred to hereinafter as a "LANDLORD's
Mortgagee"), in any instance in which TENANT gives notice to LANDLORD alleging
default by LANDLORD hereunder, TENANT will also simultaneously give a copy of
such notice to each LANDLORD's Mortgagee, and each LANDLORD's Mortgagee shall
have the right (but not the obligation) to cure or remedy such default during
the period that is permitted to LANDLORD hereunder, plus an additional period of
forty-five (45) days, and TENANT shall accept such curative or remedial action
(if any) taken by
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LANDLORD's Mortgagee with the same effect as if such action had been taken by
LANDLORD.
This Lease is and shall be prior to any encumbrance recorded after the
date of this Lease affecting the Building, other improvements, and land of which
the Demised Premises are a part. If, however, a lender requires that this Lease
shall be subordinate to any encumbrance, this Lease shall be subordinate to such
encumbrance, if Landlord first obtains from the lender a written agreement that
provides substantially the following: "As long as Tenant is not in default under
this Lease no foreclosure of, deed given in lieu of foreclosure of, or sale
under the encumbrance, and no steps or procedures taken under the encumbrance,
shall affect Tenant's rights under this Lease and the Lease shall remain in full
force and effect for the full Term thereof".
TENANT shall deliver to LANDLORD or to its mortgagee, auditors or
prospective purchaser, or the owner of the fee, when requested by LANDLORD, a
certificate stating the main provisions of this Lease and to the effect that
this Lease is in full force and effect and that LANDLORD is not in default
therein, and stating specifically any exceptions thereto. Failure to give such a
certificate within fifteen (15) days after written request shall be conclusive
evidence that the Lease is in full force and effect the LANDLORD is not in
default and TENANT shall be estopped from asserting any defaults known to TENANT
at the time.
14. DEFAULT BY TENANT
A. Any one or more of the following events shall be deemed to be a
default by
TENANT:
(1) Failure to pay any installment of Rent, Additional Rent, or
pay any other change or amount to be paid by TENANT under
this Lease when due,
(2) Failure to comply with any term, provision or covenant of
this Lease other than the covenants to pay rent,
(3) If TENANT or Surety becomes insolvent, makes a transfer in
Fraud of Creditors, makes an Assignment for the Benefit of
Creditors, or a Receiver be appointed to take possession of
the Demised Premises, the assets of the TENANT or the
Surety,
(4) If TENANT does any act which creates a lien on the Demised
Premises or the land on which the Demised Premises are
located.
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B. Prior to LANDLORD's availing itself of any of the remedies
hereinafter set forth, LANDLORD shall give the following written
notices:
(1) In the case of a default under subparagraph A (1) five (5)
days notice to cure said default, which period shall include
the three (3) day statutory notice. The giving of Statutory
Notice shall not be deemed an election of remedies.
(2) In the case of a default under subparagraphs A (2), A (3),
or A (4), ten (10) days notice to cure said default.
C. In addition to any other remedies provided by law, the following
remedies are available to LANDLORD at its option and may be
applied cumulatively or individually:
(1) Terminate this Lease by notice in writing in which event
this Lease shall end automatically by its own limitation and
TENANT shall immediately surrender the Demised Premises. In
this case, TENANT shall pay LANDLORD all sums due as of the
date of termination. TENANT hereby waives any rights of
redemption TENANT may have in the Demised Premises.
(2) Re-enter and take possession of the Demised Premises holding
the same for the account of TENANT, in which case, the
entire amount of base rent for the term of this Lease, plus
other charges enumerated in this Lease for the remainder of
the term, plus any costs of reletting including
rehabilitation and brokerage costs, less an amount equal to
the base monthly rent multiplied by the number of months
remaining on the term of this Lease for which the Demised
Premises are relet, if any, shall be immediately due and
payable. TENANT hereby waives any claim TENANT may have to
rent obtained in reletting in excess of that required to be
paid by TENANT. Acceptance of surrender shall be by written
notice only and the acceptance of keys or changing of the
locks shall not be deemed an acceptance of surrender of the
Demised Premises.
(3) Without prejudice to any present or future right of
possession, bring an action in law or in equity to collect
rent and other charges due, for general or special damages,
to restrain any violation of any term, provision or covenant
of this Lease and/or to foreclose or protect any security
interest or lien arising out of
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this Lease, a separate agreement between the parties
covering property within the Demised Premises, operation of
law, or by statute.
(4) In any litigation arising out of TENANT's default under the
terms of this Lease, the prevailing party shall be entitled
to its costs and payment of a reasonable attorney's fee.
Delinquent rent shall bear interest at eighteen (18%)
percent per annum, or at the highest rate permitted by the
usury laws of the State of Florida, whichever rate is less.
15. (Omitted)
16. SEVERABILITY AND WAIVER
No waiver by LANDLORD of any provision hereof shall be deemed to have
been made unless such waiver be in writing signed by LANDLORD. The failure of
LANDLORD to insist upon the strict performance of any of the covenants or
conditions of this Lease, or to exercise any option herein conferred, shall not
be construed as waiving or relinquishing for the future any such covenants,
conditions or options, but the same shall continue and remain in full force and
effect. No payment by TENANT of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than on account of the stipulated rent.
If any clause or provision of this Lease is illegal or unenforceable under
present and future laws, then and in the event, the remainder of this Lease
shall not be affected thereby.
17. EMINENT DOMAIN
If the Demised Premises are totally taken, or partly taken so as to
render the Demised Premises totally untenantable for the purposes herein leased,
by any legally constituted authority for any public use or purpose, then, in
either event, this Lease shall terminate as of the date of said taking. If a
part of the Demised Premises is taken, but the Demised Premises are not rendered
totally untenantable, then this Lease shall remain in full force and effect,
except that the rent hereunder shall be reduced in proportion to the amount of
the Demised Premises so taken.
Nothing contained herein shall be construed to prevent Tenant from
making a separate claim for damages against the condemning or taking authority
for damages suffered by Tenant based upon the taking of Tenant's leasehold
improvements which were installed at Tenant's cost, personal property,
interruption of business, moving expenses or any other damages available under
applicable law. Nothing contained herein shall diminish LANDLORD's award from
the condemning authority.
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18. DAMAGE AND DESTRUCTION
In the event the Premises shall be destroyed or so damaged or injured
by fire or other casualty during the Term whereby the same shall be rendered
untenantable, then LANDLORD shall have the right, but not the obligation, to
render such Premises tenantable by making repairs thereto within one hundred
eighty (180) days from receipt of insurance proceeds in the event of an insured
loss or from the date of the casualty in the event of an uninsured loss. If said
premises are not rendered tenantable by LANDLORD within said one hundred twenty
(120) day period, it shall be optional with either party hereto to cancel this
Lease, and in the event of such cancellation, the Rent shall be paid only to the
date of such fire or casualty. The cancellation herein mentioned shall be
evidenced in writing. During any time that the Demised Premises are untenantable
due to causes set forth in the Section, a just and fair proportion of Base Rent
and Additional Rent shall be abated. Notwithstanding the foregoing, should the
cause of such damage, destruction or injury to the Premises originate from the
Premises or occur by reason of the misfeasance or negligence of TENANT or any
employee, agent, licensee, patron or invitee of TENANT ("TENANT Damage"), TENANT
shall not have the right to cancel this Lease, and no abatement of Base Rent
shall occur. In the event of said TENANT Damage, LANDLORD shall have the right,
but not the obligation, to render the Premises tenantable. If LANDLORD elects to
repair said TENANT Damage and render the Premises tenantable, all insurance
proceeds available pursuant to this Lease shall be paid to LANDLORD, and the
balance of the cost of such repairs shall be paid by TENANT within five (5) days
following demand therefor as Additional Rent. If LANDLORD elects not to repair
such TENANT Damage, TENANT shall make such repairs and shall be entitled to any
insurance proceeds received in respect to the cost thereof.
19. INDEMNITY
TENANT and Landlord agree to hold each other harmless from and defend
each other against any and all claims or liability for any injury or damage to
any person or property whatsoever, occurring in the Demised Premises, the
parking area and grounds, or any public areas of the building of which the
Demised Premises are a part, when such injury or damage shall be caused in part
or in whole by the negligence of TENANT or Landlord or their employees, agents,
contractors or invitees.
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20. WAIVER OF CLAIMS AND SUBROGATION
Unless caused by their gross negligence LANDLORD and LANDLORD's
employees, agents or invitees shall not be liable for, and TENANT hereby
releases all claims for, damage to person or property sustained by TENANT, or
any person claiming through TENANT or any person claiming directly, resulting
from fire, accident, or any cause whatsoever in or upon the Demised Premises or
the building of which the Demised Premises are a part. TENANT hereby agrees to
give LANDLORD prompt written notice of any accident, fire or damage occurring on
or to the Demised Premises.
LANDLORD and TENANT agree that in the event the Demised Premises or its
contents are damaged or destroyed by fire or other insured casualty, the rights,
if any, of either party against the other with respect to such damage or
destruction are waived; and that all policies of fire and/or extended coverage
or other insurance covering the Demised Premises or its contents shall contain a
clause or endorsement providing in substance that the insurance shall not be
prejudiced if the assureds have waived right of recovery from any person or
persons prior to the date of loss or damage, if any.
21. ADDITIONAL CONSTRUCTION
LANDLORD hereby reserve the right at any time and from time to time to
make alterations or additions to, and to build additional stories on, the
building of which the Demised Premises are a part, and to build adjoining the
same. LANDLORD also reserves the right to construct other buildings or to add to
other buildings or to change the configuration and location of landscaping,
parking or other improvements and to permit others to do so.
22. LANDLORD'S ENTRY FOR REPAIR AND TO RE-LET
TENANT will permit LANDLORD to erect, use and maintain pipes and
conduits in and through the Demised Premises. Upon giving reasonable notice to
TENANT except in case of emergency. LANDLORD or its agents shall at all
reasonable times have the right to enter upon the Demised Premises to examine
the same and to show them to prospective purchasers or tenants of the Building,
and to make such decorations, repairs, alterations, improvements or additions as
LANDLORD may deem necessary or desirable, and shall be allowed to take all
material into and upon said Demised Premises that my be required therefor,
without the same constituting an eviction of TENANT in whole or in part and the
Rent reserved shall in no wise abate while said decorations, repairs,
alterations, improvements or additions are being made, by
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reason of loss or interruption of the business of TENANT because of the
prosecution of any such work. During the six (6) months prior to the expiration
of the term of this Lease, LANDLORD may exhibit the Demised Premises to
prospective tenants, and place upon same the usual notices "To Let" or "For
Sale", which notices TENANT shall permit to remain thereon without molestation.
LANDLORD shall have the right to change the arrangement and/or location of the
parking areas and ground and any public areas of the building of which the
Demised Premises are a part, and after reasonable notice, to change the name,
number of designation by which the building is commonly known. Nothing herein
contained, however, shall be deemed or construed to impose upon LANDLORD any
obligation, responsibility or liability whatsoever, for the care, supervision or
repair of the building or any part thereof, other than as herein provided.
23. ALTERATIONS BY TENANT
TENANT shall make no alterations, decorations, additions or
improvements in or to the Demised Premises without LANDLORD's prior written
consent, which consent shall not be withheld unreasonably, and then only by
contractors or mechanics approved by LANDLORD. All alternation, additions or
improvements upon the Demised Premises made by either party shall, unless
LANDLORD elects otherwise, become its property, and shall remain upon and be
surrendered with said Demised premises as a part thereof, at the end of the term
hereof, unless LANDLORD, at its option, shall require its removal from the
Demised Premises and the restoration by TENANT of the said Demised premises to
its former condition.
24. REPAIRS BY TENANT
TENANT shall take good card of the Demised Premises and shall, at
TENANT's own cost and expense, make all repairs in the Demised Premises and, at
the termination of this Lease, shall surrender the Demised Premises in good
condition, reasonable wear and tear excepted. If TENANT fails to make such
repairs, LANDLORD may, at LANDLORD's option and at TENANT's expense, repair all
damage or injury to the Demised Premises caused by TENANT, or TENANT's
employees, agents, or invitees.
25. MECHANIC'S LIENS
TENANT is prohibited from subjecting the Demised Premises or the
building of which they are a part or the land upon which they are located, or
any part thereof or any interest of LANDLORD therein to any mechanic's lien.
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If any mechanic's lien shall at any time be filed against the Demised
Premises or the building of which they are a part or the land upon which they
are located or any part thereof or any interest of LANDLORD therein, or any
encumbrance, charge, mortgage, conditional bill of sale, title retention, or
security agreement be filed against the Demised Premises or the building of
which they are a part of the land upon which they are located or any part
thereof or any interest of LANDLORD therein, by reason of any work, labor or
services, or materials or equipment furnished to or for TENANT, TENANT, within
ten (10) days after notice of the filing thereof, or such shorter period not
less than five (5) days as may be required by the holder of any mortgage to
which this Lease is subject and subordinate, will cause the same to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction, or otherwise. If TENANT shall fail to cause such encumbrance,
charge, etc., to be discharged within the period aforesaid then, in addition to
any other right or remedy, LANDLORD may, but shall not be obligated to,
discharge the same whether by paying the amount claimed to be due or by
procuring the discharge of such lien by deposit or by bonding proceedings, and
in any such event, LANDLORD shall be entitled, if LANDLORD so elects, to compel
the prosecution of an action for the foreclosure of such lien by the lienor and
to pay the amount of the judgment in favor of the lienor with interest, costs,
and allowances. Any amounts so paid by LANDLORD and all costs and expenses
incurred by LANDLORD in connection therewith, together with interest thereon at
the highest legal rate from the respective dates of LANDLORD's making of the
payment or incurring of the cost and expense, shall constitute Additional Rent
payable by TENANT under this Lease and shall be paid to LANDLORD by TENANT on
demand. Nothing herein contained shall obligate TENANT to pay or discharge any
lien created LANDLORD.
Nothing in this Lease contained shall be deemed or construed in any way
as constituting the consent or request of LANDLORD, express or implied by
inference or otherwise, to any contractor, subcontractor, laborer, or
materialman for the performance of any labor or the furnishing of any labor or
the furnishing of any materials for any specific improvements, alteration to or
repair of the Demised Premises or any part thereof, nor as giving TENANT any
right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to the filing
of any lien against the Demised Premises or the building of which they are a
part or the land upon which they are located, or any part thereof or any
interest of LANDLORD therein.
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26. REPAIRS BY LANDLORD
LANDLORD shall have no duty to TENANT to make any repairs or
improvements to the Demised Premises except structural repairs necessary for
safety and tenantability, and then only if not brought about by any act or
negligence, of TENANT, or TENANT's employees, agents, or invitees. LANDLORD
shall not be liable to TENANT for any damage caused to TENANT or TENANT's
property due to the building or any part of appurtenances thereof being
improperly constructed or being or becoming out of repair so long as same are
not caused by negligence of Landlord, its agents, contractors or employees.
TENANT agrees to report immediately in writing to LANDLORD any defective
condition in or about the Demised Premises known to TENANT, and failure to so
report shall make TENANT liable to LANDLORD for any expense or damage to
LANDLORD resulting from such defective condition. Unless caused by Landlord's
gross negligence, LANDLORD shall not be liable for any damage to any property in
said Demised Premises which result from LANDLORD's failure to make said
structural repairs. Structural repairs are herein defined as being limited to
foundation, supporting structure, roof and floor slab.
27. TENANT PARKING
(A) NON-EXCLUSIVE RIGHT TO PARK AUTOMOBILES: Indicated by the shading
on Exhibit "A" are the "Parking Areas" of the Building which will
be available to LANDLORD, TENANT, other tenants of the Building,
and their respective employees, customers, guests and invitees for
the parking of vehicles. TENANT shall have the right to park, in
the Parking Areas only, no more the sixteen (16) vehicles in
addition to the vehicles permitted under the Lease Agreement for
Two Oakwood Boulevard, Suite 140, Hollywood, Florida 33020.
(B) LANDLORD'S REGULATION OF PARKING AT THE BUSINESS CENTER: The
parking of vehicles anywhere, except in strict accordance with
Subsection 25(A) above, and the parking of inoperable vehicles are
strictly prohibited and shall be deemed defaults of TENANT without
the necessity of LANDLORD's giving of notice to TENANT of such
default. In addition to all other rights and remedies reserved in
this Lease and available at law or in equity, LANDLORD shall have
the right, in the event of such default, to tow improperly parked
vehicles without notice to TENANT or the owner of said vehicle,
and TENANT shall reimburse LANDLORD for the cost thereof upon
presentation of an invoice therefor. Tenant shall indemnify and
hold
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LANDLORD harmless against any loss, damage, claim or action
suffered by LANDLORD in connection with the towing of any vehicle
parked by any employee, agent, customer, invitee, licensee or
guest of TENANT. LANDLORD shall have the right to institute and
maintain whatever procedures LANDLORD deems necessary or desirable
to regulate the parking of vehicles. Such procedures may include,
but are not to be limited to, requiring TENANT and its employees,
customers, guests, and invitees to display parking decals on
parked vehicles, or requiring that TENANT supply LANDLORD with the
license plate numbers of parked vehicles, and the levying of fines
against TENANT for improperly parked vehicles. TENANT shall
enforce LANDLORD's parking procedures with respect to TENANT's
employees, guests, customers and licensees.
28. COMPLIANCE WITH LAW BY TENANT
TENANT agrees not to do or permit anything to be done in or about the
Demised Premises, which might in any way conflict with any law, ordinance, rule
or regulation affecting the use and occupancy of the Demised Premises, which are
now in effect or may hereafter be enacted by any governmental agency or any
public authority, or in any way obstruct or interfere with the rights of other
tenants of the building, or injure or annoy them, nor use or allow the use of
the Demised Premises for any improper, immoral or objectionable purpose.
29. TIME OF THE ESSENCE
It is understood and agreed between the parties hereto that time is of
the essence of this Lease.
30. NOTICES
All notices required under this Lease shall be in writing. Any notice
by LANDLORD to TENANT shall be deemed to be duly given if either delivered
personally to TENANT at the Demised Premises or when mailed by certified mail,
addressed to TENANT at the Demised Premises. Any notice by TENANT to LANDLORD
shall be deemed duly given if sent by certified mail to LANDLORD at 777 South
Flagler Drive, Phillips Point, West Tower, Suite 1400, West Palm Beach. FL 33401
(or at such other address as may hereafter be designated by LANDLORD).
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31. SCOPE AND INTERPRETATION OF THE AGREEMENT
This Lease shall be considered to be the only agreement between the
parties hereto pertaining to the Demised Premises. All negotiations and oral
agreements acceptable to both parties are included herein. The laws of the State
of Florida shall govern the validity, interpretation, performance and
enforcement of this Lease.
32. CAPTIONS
Any heading preceding the text of the several paragraphs and
subparagraphs hereof are inserted solely for convenience of reference and shall
not constitute a part of this Lease, nor shall they affect its meaning or
construction.
33. RECORDING
TENANT shall not record this Lease or a short form or memorandum
thereof without LANDLORD's prior written consent and joinder in such instrument,
provided, however, that TENANT shall, at LANDLORD's request, enter into the
Short Form Lease Agreement attached hereto as SUPPLEMENT I to this lease, which
Short Form Lease Agreement LANDLORD, but not TENANT, shall have the right to
record in the Public Records of the County in which the Demised Premises are
located.
34. INCREASED BASE RENT
Annually, the rent shall be increased by five (5%) percent of the
preceding year's Base Rental.
35. INSURANCE
(A) COVERAGE: TENANT shall maintain, at its expense, throughout the
Term, for the benefit of LANDLORD and LANDLORD's Mortgagees, the
following insurance coverages:
(i) comprehensive general liability insurance for bodily injury
and property damage to protect both LANDLORD and TENANT
against damage, costs and attorneys' fees arising out of
accidents of any kind occurring on or about the Premises or
the Building of not less than Three Million and No/100
($3,000,000.00);
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(ii) fire and extended casualty insurance with sufficient coverage
to reimburse the loss of all the TENANT'S improvements to the
Premises, and all the TENANT'S fixtures, equipment, personal
property and inventory;
(iii) plate glass insurance to protect both LANDLORD and TENANT
covering the replacement value of all plate glass in or about
the Premises; and
(iv) appropriate worker's compensation and any and all other
insurance required by law.
(B) ADDITIONAL INSUREDS: All insurance, except the Worker's Compensation
coverage which shall include a waiver of subrogation against the
LANDLORD and LANDLORD'S Mortgagees, required by Subsection 33(A) above,
shall name LANDLORD and LANDLORD'S Mortgagees as additional insureds
and shall be written by a company or companies qualified to do business
in Florida and reasonably acceptable to LANDLORD. A certificate showing
such insurance in force and naming LANDLORD and LANDLORD'S Mortgagees
as additional insureds or waiver of subrogation for Worker's
Compensation shall be delivered to LANDLORD prior to the Commencement
Date, and such insurance and updated certificates or renewal policies
shall be delivered to LANDLORD no fewer than thirty (30) days prior to
the expiration of the then existing policies. No policy shall be
canceled or subject to reduction in coverage or other change without at
least 30 days' advance written notice to LANDLORD. No acceptance or
approval of any insurance by LANDLORD shall relieve or release TENANT
from any liability, duty or obligation under this Lease. Whenever any
part of the Premises shall have been damaged or destroyed by fire or
other casualty or any other incident or accident has accrued which
gives rise to a potential claim under an insurance policy to be
maintained by TENANT under this Section 33, TENANT shall promptly make
proof of loss in accordance with the terms of the applicable insurance
policies and shall promptly prosecute all valid claims which may have
arisen against the insurers based upon any such casualty, incident or
accident. TENANT SHALL give LANDLORD written notice of any potential
claim within five (5) days following the date TENANT acquires actual
notice thereof.
(C) WAIVER OF SUBROGATION: LANDLORD and TENANT each waive any right of
recovery against the other for any loss to the extent that such claim
is covered by valid and collectible insurance carried for the benefit
of the party entitled to make such claim and
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<PAGE>
provided the insurer pays such claim. The foregoing waiver shall not
apply if the policy of insurance covering such loss would be
invalidated by the operation of said waiver.
(D) TENANT shall not do or permit anything to be done or bring into or keep
on or permit anything to be brought into or kept on the Demised
Premises which shall increase the rate of insurance on the building of
which the Demised Premises are a part. If, by reason of the failure of
TENANT to comply with the terms of this Lease, or by reason of TENANT'S
occupancy (even though permitted or contemplated by this Lease), the
insurance rate shall at any time be higher than it would be otherwise,
TENANT shall reimburse LANDLORD for all increases in insurance premiums
charged because of such violation or occupancy by TENANT.
36. PUBLIC UTILITIES
TENANT shall pay for all utilities, used or consumed in or upon the
Demised Premises, and all sewer charges, as and when the charges therefor shall
become due and payable, and TENANT shall pay any garbage or trash collection fee
imposed by any governmental authority.
37. SIGNS
TENANT will not exhibit, inscribe, paint, or affix any sign,
advertisement, notice or other lettering on any part of the outside of the
Demised Premises or of the Building of which the Demised Premises are a part, or
inside the Demised Premises if visible from the outside, without first obtaining
LANDLORD's written approval thereof; and TENANT further agrees to maintain such
sign, lettering, etc., as may be approved in good condition and repair at all
times. TENANT will not attach any awning, antenna or other projection to the
roof or the outside wall of the Demised Premises or the building of which the
Demised Premises are a part.
TENANT shall not install any drapes, curtains, blinds or any other
window covering, or overlay of any type, texture, fiber, material or the like on
any window, door or other aperture located at or within the Demised Premises,
without the express written consent of LANDLORD.
38. CONSTRUCTION
Subject to delays caused by Tenant, Landlord will within ninety (90)
days after LANDLORD'S receipt and Landlord's and Tenant's approval of the plans
and specifications described in Section 4 hereof, cause the construction of
TENANT's improvements to commence and be built in substantial compliance with
the plans and specification prepared in accordance
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with Section 4 incorporating in such construction all items of work described in
EXHIBIT B, B-1 and B-2. Landlord shall grant Tenant one day's base rental credit
for each day after the expiration of the above ninety (90) day period (or as
same my be adjusted due to Tenant-caused delays) until the Landlord's work in
the Demised Premises is substantially complete as provided in this Lease.
LANDLORD agrees that it will provide, install or construct, at no
expense to TENANT, those standard building items described in Exhibit B attached
hereto and made a part hereof. Any and all expense for building items which are
in addition to or are in substitution for the standard building items
specifically enumerated in Exhibit B, which LANDLORD is to provide, install or
construct in the Demised Premises on TENANT'S behalf, shall be paid for by
TENANT within thirty (30) days after receipt of an invoice(s) therefor from
LANDLORD. Payment from TENANT of such costs shall not operate, expressly or
impliedly, to create in TENANT any interest in the Demised Premises beyond the
leasehold interest granted hereby.
Should the work performed by LANDLORD for TENANT at TENANT'S sole cost
and expense including any change orders exceed the lesser of the equivalent of
one-month Base Rent or the sum of $3,000.00, then TENANT shall pay to LANDLORD
said cost within fifteen days of receipt of invoice for the same but in any
event prior to TENANT taking possession of the Demised Premises. In no event,
however, shall the Commencement Date of the Lease be adjusted by reason of
non-payment of said cost.
39. RADON GAS
Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
40. INTEREST ON PAST DUE AMOUNTS
All Rent payable hereunder shall bear interest at the highest rate
permitted by law from the due date until the date actually paid.
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41. EXCULPATION
Neither LANDLORD nor any general or limited partner of LANDLORD (nor
any direct or indirect partner, incorporator, shareholder, trustee, officer or
director, disclosed or undisclosed, past present or future of a partner of
LANDLORD) shall be personally liable for any liability or obligation of LANDLORD
to TENANT in connection with this Lease. TENANT will look solely to the interest
of LANDLORD in the Premises to satisfy any claims TENANT may have against
LANDLORD with respect to such liabilities and obligations.
42. HAZARDOUS AND TOXIC SUBSTANCES
In addition to, and not by way of limitation of the provisions of
Section 26 above, TENANT hereby covenants with LANDLORD and represents and
warrants to LANDLORD as follows:
(A) TENANT, at its sole cost and expense, will strictly comply with any
and all applicable federal, state and local environmental laws, rules,
regulations, permits and orders affecting Demised Premises and/or the business
operation of TENANT conducted on the Demised Premises and/or the business
operation of TENANT conducted on the Demised Premises, relating to the
generation, recycling, reuse, sale, storage, handling, transport, or presence of
any "Hazardous Materials" on the Demised Premises without LANDLORD'S express
prior written consent, which consent LANDLORD may exercise in its sole
discretion. As used in this Section, the term "Hazardous Material(s)" shall mean
any substances defined as or included in the definition of "hazardous
substances," hazardous wastes," "hazardous materials," "toxic substances,"
"contaminants" or other pollution under any applicable environmental laws.
Notwithstanding anything to the contrary contained herein, LANDLORD'S consent to
any action by TENANT shall not operate to relieve TENANT of the obligation to
comply with all the provisions of this Section 40. TENANT will not permit or
allow, and will take all actions necessary to avoid, the occurrence of any
spills of Hazardous Materials on or off the Demised Premises as a result of any
construction on, or use of, the Demised Premises. TENANT shall promptly advise
LANDLORD in writing immediately upon becoming aware of (i) the existence of any
spills, releases or discharges of Hazardous Materials that occur on or onto the
Demised Premises, or off the Demised Premises, and of any existing or threatened
violation of this Section 40; (ii) any and all enforcement, cleanup, removal or
other governmental or regulatory actions instituted, completed or threatened by
any governmental authority with respect to the Demised Premises from time to
time under any applicable environmental laws;
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<PAGE>
(iii) any and all claims made or threatened by any non-governmental party
against TENANT or the Demised Premises relating to damage, contribution, cost
recovery, compensation, loss or injury resulting from any Hazardous Materials or
any violation of applicable environmental laws; and (iv) TENANT'S discovery of
any occurrence of condition on any real property adjoining or in the immediate
vicinity of the Demised Premises that could cause the Demised Premises or any
part thereof to be subject to any restrictions on the ownership, occupancy,
transferability or use of the Demised Premises under any environmental laws.
(B) Without LANDLORD's prior written consent, TENANT shall not enter
into any settlement, consent or compromise with respect to any "Environmental
Claim(s)" (as hereinafter defined); provided, however, that LANDLORD'S prior
consent shall not be necessary for TENANT to take any remedial action if ordered
by a court of competent jurisdiction or if the presence of Hazardous Materials
at the Demised Premises poses an immediate, significant threat to the health,
safety or welfare of any individual or otherwise requires an immediate remedial
response. As used in this Section, "Environmental Claim(s)," shall mean any
claim(s) or cause(s) of action resulting from the failure of TENANT or the
Demised Premises to comply with any environmental law relating to Hazardous
Materials, industrial hygiene or environmental conditions. In any event, TENANT
shall promptly notify LANDLORD of any action so taken.
(C) At all times during the Term of this Lease and any renewals or
extensions hereof, TENANT, at its sole cost and expense, shall comply with any
and all applicable laws, regulations, ordinances, permits and orders regulating
the type and quantity of waste that may be discharged into the sanitary sewer
system serving the Demised Premises, including, but not limited to, all rules,
regulations, permits, and orders of any governmental agency or authority having
jurisdiction, or its successor. TENANT agrees to limit its discharges of waste
into the sanitary sewer system to "Domestic Waste Water", as such terms defined
by Rule 17-6.030 (22) of the Florida Administrative Code, as amended from time
to time, or as the term may be defined by other laws, regulations, ordinances,
permits or orders presently in effect or hereafter enacted, as such laws,
regulations, ordinances, permits or orders may be amended from time to time. In
no event, however, shall Domestic Waste Water be construed to mean or include
any "Non-Domestic Waste Water" that has undergone "Pre-treatment" as the latter
term is defined in Rule 17-6.030 (63) of the Florida Administrative Code or as
defined by other laws, regulations, ordinances, orders or permits presently in
effect or hereafter enacted, as such laws, regulations, ordinances, orders or
permits presently in effect or hereafter enacted, as such laws, regulations,
ordinances, orders or permits may be amended from time to time.
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<PAGE>
(D) TENANT agrees that LANDLORD and LANDLORD'S agent and independent
contractors may enter and inspect the Demised Premises at any reasonable time,
and from time to time, to verify that TENANT's operations on the Demised
Premises do not violate any of the provisions of this Section 40 and that they
comply with any and all applicable environmental laws. At LANDLORD'S option,
LANDLORD may obtain, from time to time, reports from licensed professional
engineers or other environmental scientists with experience in environmental
investigations and may require TENANT to permit such licensed professional
engineers or other environmental scientists to conduct complete and thorough
on-site inspections of the Demised Premises, including, without limitation,
sampling and analysis of the soil surface water, groundwater and air, to
determine whether TENANT is in compliance with the provisions of the Section and
all environmental laws. TENANT and its agents shall cooperate with LANDLORD and
its agents in connection with the conduct of such investigations. In the event,
an inspection from a licensed environmental engineer or other environmental
scientist indicates that TENANT is in default under this Section 40, TENANT
shall, immediately upon demand, reimburse LANDLORD for all costs and expenses of
such investigations; moreover, LANDLORD may, at its option, undertake such steps
as it deems necessary to cure such default and to bring the Demised Premises
into compliance with the terms of this Section, and TENANT shall, immediately
upon demand, reimburse LANDLORD for all costs and expenses incurred in curing
such default and bringing the Demised Premises into compliance with the terms of
this Section.
(E) TENANT hereby indemnifies and holds LANDLORD harmless from and
against any and all claims, demand, damages, losses, liens, liabilities,
penalties, fines, lawsuits and other proceedings, costs, and expenses
(including, without limitation, reasonable attorneys' fees and costs at trial
and all appellate levels), arising directly or indirectly from, or in any way
connected with: (i) the presence, or use, generation, treatment or storage on,
under or about the Demised Premises of any Hazardous Materials on the Demised
Premises, or the disposal or release of Hazardous Materials on the Demised
Premises, whether or not expressly approved by LANDLORD in writing, (ii) the
presence of any Hazardous Materials off the Demised Premises, whether or not
expressly approved by LANDLORD in writing, (iii) the presence of any Hazardous
Materials off the Demised Premises as the result of any use of the Demised
Premises, (iv) any violation or alleged violation of any environmental law,
including, but not limited to, violations of the Federal Comprehensive
Environmental Response Compensation and Liability
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Act of 1980 and regulations promulgated thereunder, as the same may be amended
from time to time, (v) the costs of any necessary inspection, audit, cleanup or
detoxification of the Demised Premises under any environmental laws, and the
preparation and implementation of any closure, remedial or other required plans,
consent orders, license applications or the like, or (vi) any default by TENANT
under this Section 40. All sums paid and costs incurred by LANDLORD with respect
to any Environmental Claim or any other matter indemnified against hereunder
shall be due and payable by TENANT immediately upon demand. If, after demand,
TENANT fails to pay any sums due pursuant to this indemnification, such sums
shall bear interest at the highest rate then permitted by applicable law, from
the date so paid or incurred by LANDLORD until LANDLORD is reimbursed by TENANT.
The indemnification contained herein shall survive the termination of the
leasehold estate created hereby and any assignment by LANDLORD of its rights
under this Lease.
(F) The foregoing Subsections 40(A) through 40(E) and this Subsection
40(F) shall apply with equal force and effect to TENANT's use and occupancy of
the Building. Any provision of this Lease to the contrary notwithstanding, any
breach of the covenants, representations or warranties contained in this Section
40 shall constitute a default under this Lease and shall entitle LANDLORD, in
addition to LANDLORD'S other rights and remedies available at law, in equity or
under this Lease, to immediately terminate this Lease.
43. RELOCATION OF TENANT
LANDLORD expressly reserves the right at LANDLORD'S sole cost and
expense to remove TENANT from the Demised Premises and to relocate TENANT in
some other space of LANDLORD'S choosing of approximately the same dimensions and
size within the Oakwood Business Center, which other space shall be improved and
decorated by LANDLORD, at LANDLORD'S expense, to the same degree as the Demised
Premises are improved immediately prior to the relocation. LANDLORD shall have
the right, in LANDLORD'S sole discretion, to use such decorations and materials
from the existing Demised Premises, or other materials so that the space in
which TENANT is relocated shall be comparable in its interior design and
decoration to the Demised Premises from which TENANT is removed. Nothing herein
contained shall be construed to relieve TENANT or imply that TENANT is relieved
of the liability for, or obligation to pay, any Additional Rent due by reason of
the provisions of Section 6 of this Lease, the provisions of which Sections
shall be applied to the space in which TENANT is relocated on the same basis as
said provisions of which Section shall be applied to the space in
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<PAGE>
which TENANT is relocated on the same basis as said provisions were applied to
the Demised Premises from which TENANT is removed. TENANT agrees that LANDLORD'S
exercise of its election to remove and relocate TENANT shall not terminate this
Lease or release TENANT, in whole or in part, from TENANT'S obligations to pay
Rent and perform the covenants and agreements hereunder for the full Term. In
the case Landlord exercised its rights under this paragraph, Tenant may at its
option cancel this Lease upon thirty (30) days written notice to Landlord,
instead of relocating as provided herein.
44. OWNER'S/TENANTS' ASSOCIATION
TENANT agrees that in the event an owner's and/or tenants' association
(the "Association") is formed for the Oakwood Business Center, then TENANT shall
become a member and shall maintain a membership therein, and TENANT agrees that
it shall be responsible for its share of the expenses thereof based on the
amount per square foot of rentable area in the Demised Premises, as same may be
determined from time to time by a majority vote of the members of the
Association, and TENANT agrees that it shall comply with such determination. In
the event the Association is formed, TENANT agrees that it shall abide by its
charter, by-laws and rules and regulations, same being subject to reasonable
approval by Tenant.
Additionally, TENANT hereby agrees to fully comply with the Rules and
Regulations of the Building attached hereto and incorporated herein by this
reference as Exhibit "E".
45. EMPLOYMENT OPTION CREDIT: TENANT may, at its option, receive a credit
against their Base Rent if, for any calendar year by January 30 of the
applicable calendar year, TENANT shall have employed one or more full-time (30
hours or more per week) residents of the subdivision of Liberia for said
calendar year. The credit received shall be equal to a reduction in the Base
rent of $.50 per square foot of the Demised Premises per full-time Liberia
employee, in no event, however, shall the total credit exceed $3,000 per
calendar year ("Employment Option Credit"). TENANT shall be eligible for the
Employment Option Credit only at the end of the applicable calendar year and
shall not be entitled to any Base Rent reductions during the applicable calendar
year. TENANT shall also not be entitled to any of the Employment Option Credit
for employment of less than a full calendar year (except for employment in
January thereof). TENANT must provide to LANDLORD proof of full-time employment
(for example, in the form of a W-2 form for each said employee) for each Liberia
resident for the entire calendar year (except for the period up to January 30)
as well as proof of residency for each Liberia employee. Upon satisfactory proof
of same to LANDLORD, LANDLORD shall allow TENANT the Employment Option Credit
which shall be applied Against the next calendar year's Base Rent, on a monthly
pro rata basis, with the applicable Employment Option Credit amount divided into
twelve equal reduction amounts and applied against each monthly installment of
the subsequent calendar year's Base Rent.
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Tenant may elect eligibility for the Employment Option Credit for
subsequent calendar years or may elect not to pursue eligibility, at TENANT'S
sole option. TENANT'S failure to pursue eligibility for any given calendar year
shall not prejudice TENANT from pursuing eligibility in any subsequent calendar
year. The Employment Option Credit shall run through the term of this Lease and
any extensions, option, renewals, and modification thereto.
46 ADDITIONAL PROVISIONS
Insofar as the following additional provisions, if any, conflict with
any of the foregoing provisions, the following additional provisions, if any,
shall prevail:
DELETIONS: To the extent that any provision in this Lease has been deleted by
strike out or otherwise crossing out such preprinted provision, such deleted
provision shall be construed to have never been included in the Lease or to have
been a part thereof ab initio
IN WITTNESS WHEREOF, the parties hereto have duly executed this Lease
the day and year hereinafter set forth.
Executed this 2ND day of May 1991.
Signed, sealed and delivered in the LANDLORD
in the presence of:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
/s/ By: /s/
- ----------------------------------- -----------------------------------
Its Senior Vice President
/s/ By: /s/
- ----------------------------------- -----------------------------------
As to Landlord Its Secretary
Executed this 30th day of April 1991.
Signed, sealed and delivered in the TENANT
in the presence of:
KOS PHARMACEUTICALS, INC.,
a Florida corporation
/s/ JO ANN HORTSMAN By: /s/ DANIEL M. BELL
- ----------------------------------- -----------------------------------
Its President
/s/ LAURA BONITTO Attest: /s/ DANIEL M. BELL
- ----------------------------------- -----------------------------------
As to Tenant Its Secretary
(Corporate Seal)
28
<PAGE>
RIDER TO LEASE BY AND BETWEEN
STS BUILDINGS ASSOCIATES, L.P. AND
KOS PHARMACEUTICALS, INC.
THIS RIDER IS A PART OF THE ABOVE DESCRIBED LEASE AGREEMENT. IN THE EVENT OF ANY
CONFLICT BETWEEN THE PROVISIONS OF THIS RIDER AND THOSE OF ANY OTHER PART OF
THIS LEASE, THE PROVISIONS OF THIS RIDER SHALL CONTROL.
1. RENTAL CREDIT:
As an inducement to and as consideration for Tenant's execution of this
Lease Agreement Tenant shall be granted use and occupancy of the Premises
for the first two (2) months of the Lease Term without having to pay Base
Rent therefor. Notwithstanding this rental credit, the CPI adjustment to
Base Rent shall be without regard to the rental credit and shall be made
as if full Base Rent was paid.
2. CANCELLATION OPTION:
Tenant may cancel this Lease effective upon the commencement of the fourth
(4th) year of the Lease term by giving six (6) months prior written notice
to Landlord. Upon exercising said option to cancel, Tenant shall pay to
Landlord as reimbursement the unamortized portion of the base rental
credit of $7,854.36 and the unamortized portion of the improvement
allowance of $123,321.00. Said reimbursement shall be paid to Landlord
within thirty (30) days of Tenant's notice to Landlord of its intention to
exercise Tenant's cancellation option.
3. SECURITY DEPOSIT:
Tenant, as principal, shall deliver to Landlord upon completion of working
drawings referred to in Paragraph 4 of this Lease an unconditional,
irrevocable Letter of Credit in the amount of ONE HUNDRED TEN THOUSAND AND
NO/100 ($110,000.00) DOLLARS payable to and in favor or Landlord as
Security Deposit for the full and faithful performance by Tenant of all
the terms, covenants and conditions of this Lease upon Tenant's part to be
performed, which Letter of Credit shall be returned at the expiration of
each Lease Year and replaced by Tenant with a new letter of Credit with
the same terms as the original Letter of Credit except that the amount
shall decrease by twenty (20%) percent annually until the expiration of
the term herein, provided Tenant has fully and faithfully carried out all
of the said terms, covenants and conditions on Tenant's part to be
performed. In the event of a bonafide sale, subject to this Lease,
Landlord shall have the right to transfer the security to the buyer for
the benefit of Tenant and Landlord shall be considered released by Tenant
from all liability for the term of such security; and Tenant agrees to
look solely to the new landlord for the return of the said security, and
it is agreed that this shall apply to every transfer or assignment made of
the security to a new landlord.
IN WITTNESS WHEREOF, the parties hereto have signed, sealed and
delivered this Lease on the day and year first above written.
WITNESSES: STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
/s/ By: /s/
- ----------------------------------- -----------------------------------
Vice President
/s/ By: /s/
- ----------------------------------- -----------------------------------
As to Landlord Secretary
Kos Pharmaceuticals, Inc.
a Florida corporation
/s/ JO ANN HORTSMAN By: /s/ DANIEL M. BELL
- ----------------------------------- -----------------------------------
Its President
/s/ LAURA BONITTO Attest: /s/ DANIEL M. BELL
- ----------------------------------- -----------------------------------
As to Tenant Its Secretary
(Corporate Seal)
<PAGE>
EXHIBIT A
(DRAWING)
<PAGE>
EXHIBIT "B"
LEASEHOLD IMPROVEMENTS
Landlord shall build Tenant's interior improvements in the Demised
Premises in accordance with final plans and specifications to be prepared by
Landlord's architect and approved by Landlord and Tenant. Said final plans and
specifications shall be made a part of this Lease as Exhibit C. Said final plans
and specifications shall be prepared in accordance with the space plan attached
hereto as Exhibit B-1 and Exhibit B-2 "Construction Items. "Substantial
Completion" of said improvements shall be evidenced by Landlord's written
notification to Tenant that said improvements have been substantially completed.
By taking possession of the Premises following said notification, Tenant shall
be deemed to have acknowledged and agreed that Landlord's improvements to the
Premises were made in accordance with this Exhibit "B" and that improvements
required by this Exhibit "B" have been substantially completed. All other
improvements to be made to the Premises which are necessary for the conduct of
Tenant's business in the Premises shall be made by Tenant, at Tenant's sole cost
and expense, subject to Tenant's obligation to obtain prior written consent of
Landlord to said improvements, which consent shall not be unreasonably withheld.
<PAGE>
EXHIBIT B-1
SPACE PLANS
(TO BE ATTACHED)
<PAGE>
EXHIBIT B-2
CONSTRUCTION MATERIALS
FLOORING TREATMENT:
1. Carpet at office areas to match existing flooring at office areas,
Phase I. If existing color is not available, Tenant to select from
Landlord's available samples.
2. Vinyl flooring at Lounge area to match existing flooring at Kitchen
area, Phase I. If existing color is not available, tenant to select
from landlord's available samples.
3. Restrooms to receive vinyl flooring to tenant's choice from
landlord's samples.
4. Floors in Formulation Lab, Secondary Lab, Workrooms 1 and 2 receive
two (2) coats gray stain to match existing in warehouse area, Phase
I.
WINDOW TREATMENT:
1. All interior storefront windows to receive building standard
horizontal mini-blinds.
ELECTRIC:
1. All assumptions on tenant's electrical requirement is based on
information provided by tenant and noted on plans. The electrical
service will provide for a minimum of 185.2 amps during peak loads
for the equipment in the Formulation Lab and Workrooms 1 and 2 to
operate simultaneously during scale up runs. This electric service is
exclusive of electric allocated to air conditioning, lighting and 110
volt outlets in work or office areas.
2. Final electrical connections from disconnects to tenant's equipment
are not included in estimate and is tenant's responsibility at
tenant's sole cost.
3. Electrical outlets, light switches, emergency lights, and exit lights
as required and indicated on plans. All receptacles and switches in
Formulation Lab and Workroom 1 and 2 to be moisture proof.
PLUMBING:
1. P.V.C. compressed air lines will be connected to existing system in
Phase I and stubbed out at the Formulation Lab and Workroom 1 and 2.
2. Plumbing stub out for Eye Wash at Formulation Lab will be provided.
3. Plumbing for 1/2" hose station will be stubbed out for hot and cold
water at the Formulation Lab.
4. Sink at Formulation Lab will be provided by tenant and installed by
landlord and will include hot and cold water.
5. Six inch (6") floor drains at Formulation Lab and Workroom 1. The
slab will be slopped 1" below lowest point of the room to drain in a
6' 0" diameter perimeter.
AIR CONDITIONING:
1. Air conditioning estimate includes approximately twenty (20) tons.
2. Formulation Lab, Workrooms 1 and 2 will be on a separate a/c unit.
3. Power dampers and thermostats to be installed at Workrooms 1 and 2
allowing them to be separately zoned from Formulation Lab.
CEILING TREATMENT:
1. 2' x 4' Armstrong Cortega Acoustical Tile in a metal grid throughout,
including the secondary lab area. The exception is the Formulation
Lab and Workrooms 1 and 2 which will be of moisture resistant, vinyl
covered drywall and panels in an aluminum grid.
2. Explosion blow out panel and metal ducting required by machinery in
Formulation lab not included in estimate and is tenant's
responsibility and at tenant's sole cost.
<PAGE>
EXHIBIT B-2
CONSTRUCTION MATERIALS
(PAGE 2)
3. Landlord shall provide and install a roof jack required by Tenant's
machinery at Tenant's sole cost.
PAINTING:
1. All walls in individual offices to be painted with two (2) coats of
flat vinyl paint of tenant's choice from landlord's building standard
selections.
2. Hallway, Lunchroom and Bathrooms to be painted with two (2) coats of
semi-gloss latex paint of tenant's choice from landlord's samples.
3. All doors and trim to be painted with two (2) coats semi-gloss oil
paint of tenant's choice from landlord's samples.
4. All walls in Formulation Lab and Workrooms 1 and 2 to be painted with
a washable epoxy paint.
5. Walls in the secondary lab to receive two (2) coats of semi-gloss
latex paint of tenant's choice from landlord's sample.
6. All doors and trim match existing in Phase I, unless otherwise noted
on plans. If existing colors are available, tenant to select from
landlord's available samples.
PHONE/COMPUTERS:
1. Landlord shall provide empty phone box with a 1/2" conduit and CRT
box with a 3/4" conduit stubbed out above the ceiling. Tenant is
responsible for the wiring, finish plates and any equipment. Tenant
to utilize existing phone board in Phase I.
MILLWORK:
1. 6' mica partitions will be located between the sink and toilet in the
bathrooms.
LIGHTING:
1. 2' x 4' four-bulb fluorescent light fixtures as required and
indicated on space plans. All light fixtures in Formulation Lab and
Workroom 1 and 2 will be moisture resistant.
ROOF PENETRATIONS:
1. A 39" diameter circular roof penetration and duct for a blow out
vent in the fluid bed processor, a 10" diameter roof penetration and
duct for 22 KW blower and a 2' x 2' roof penetration and duct for
heat exchanger will be installed.
DOORS:
1. All interior doors at office area are 36" solid core doors in steel
door frames. The door between the Kitchen/Lounge area and the
Secondary Lab will have a safety glass panel, approximately 2'W x
4'H in size.
PARTITIONS:
1. All interior partitions of metal studs with 1/2" drywall partition on
both sides.
STRUCTURAL:
1. Landlord shall provide necessary structural supports for an
approximate 400 pound, 32" x 36", 22 KW Blower to be mounted above
the roof. Exact location to be determined by structural
considerations and shall be coordinated by Landlord with Tenant in
the field. Installation of blower and necessary hookups shall be the
responsibility of Tenant and Tenant's sole cost.
<PAGE>
EXHIBIT B-2
CONSTRUCTION MATERIALS
(PAGE 3)
WALL PENETRATIONS:
1. Landlord shall be responsible for all work associated with the
openings at the demising wall between Phase I and Phase II. Landlord
shall not proceed with said work without written authorization by
Tenant. Landlord and Tenant shall coordinate scheduling.
<PAGE>
EXHIBIT C
PLANS AND SPECIFICATIONS
(Intentionally Left Blank)
<PAGE>
EXHIBIT E
RULES OF THE BUSINESS CENTER
In addition to the terms, covenants, and conditions of the Lease,
Tenant shall comply, and Tenant shall cause the Premises to comply with the
following:
A. PARKING: Parking of automobiles, trucks and other vehicles shall be
restricted to areas designated for such purpose by Landlord.
Landlord reserves the right to remove by towing any vehicle which is
obstructing any door or driveway, obstructing other parked vehicles, parked in a
restricted area, or is otherwise improperly parked. All towing expenses shall be
paid by the vehicle owner.
Each vehicle owner shall be responsible for any damage to Landlord's
or any third party's property caused by the operation or parking of such
vehicle.
Parking both during and after normal business hours shall conform and
comply with all laws, ordinances and regulations of any agency or any regulatory
authority.
Repairs to, and maintenance of, vehicles on any part of the Business
Center visible outside Tenant's Premises (including washing and waxing) is
prohibited.
B. OUTDOOR STORAGE: Tenant shall not store any materials, supplies,
equipment or other property outside the Premises or in trailers, whether
attached to or detached from a driving unit, nor shall any such tractor/trailer
be parked within the Business Center for more than twenty-four (24) continuous
hours.
C. HAZARDOUS WASTE: Tenant shall not generate, store, handle or use
any hazardous effluent, material or substances in excess of lawful standards, or
prohibited by code, anywhere in the Business Center.
D. Tenant, it's officers, agents, servants, guests, invitees,
licensees and employees shall not block or obstruct any of the entries,
passages, doors or hallways in the Business Center nor place, empty or throw any
rubbish, litter, trash or material of any nature into such areas, or permit such
areas to be used at any time except for the ingress or egress of Tenant, its
agents, employees, visitors or invitees.
E. Landlord will not be responsible for lost or stolen personal
property, equipment, money or any article taken from the Premises or any other
part of the Business Center, regardless of how or when such loss occurs.
F. Tenant, its officers, agents, servants or employees shall not use
any part of the Premises or the Business Center for housing, lodging or sleeping
purposes without the prior written consent of Landlord.
G. Tenant shall not permit the operation of any musical or
sound-producing instruments or devices which may be heard outside the Premises.
H. The plumbing facilities shall not be used for any purpose other
than that for which they are constructed, and no foreign substances of any kind
shall be thrown therein, and the expense of any breakage, stoppage or damage
resulting from a violation of this provision shall be borne by Tenant.
I. All contractors and/or technicians performing work for Tenant
within the Premises shall be approved by Landlord before commencing work. This
shall apply to, but shall not be limited to, installation of telephones,
telegraph equipment, electrical devices and attachments, and all installations
affecting floors, walls, windows, doors, ceilings, equipment or any other
physical feature of the Premises.
J. Canvassing, soliciting and peddling in the Industrial Park,
including, without limitation, the distribution of any handbills or other
advertising matter in automobiles parked in the Business Center, is prohibited,
and each Tenant shall cooperate to prevent the same. In this respect, Tenant
shall promptly report any such activities to Landlord.
E-1
<PAGE>
K. In the event Tenant must dispose of crates, boxes or other refuse
which will not fit into office wastepaper baskets, it will be the responsibility
of Tenant to dispose of same in the waste dumpsters provided by Landlord, broken
down into the smallest and most reasonably compact components. In no event shall
Tenant set such items in areas of the Industrial Park other than within Tenant's
own Premises for disposal.
L. If the Premises should become invested with vermin, Tenant at its
sole cost and expense, shall cause the Premises to be exterminated at such time,
and from time to time, to the satisfaction of Landlord.
M. Tenant shall not install any antenna or aerial wires, radio or
television equipment, inside or outside of the Premises without Landlord's prior
written approval and upon such reasonable terms and conditions as may be
specified by Landlord in each and every instance.
E-2
<PAGE>
SUPPLEMENT I to LEASE Dated ___________________________________- Between
________________________________________________________________________
__________________________________________________________, (LANDLORD)
and ____________________________________________________________________
_________________________________________________________, (TENANT).
PURSUANT to the provisions of the above-referenced Lease, LANDLORD and
TENANT, intending to be legally bound hereby, agree that the term of the said
Lease commenced on the ____ day of _______________, 199__, shall end on the ____
day of __________________, 199__, at Midnight, unless sooner terminated or
extended as therein provided.
IN WITTNESS WHEREOF, the parties hereto have duly executed this
SUPPLEMENT I to said Lease the day and year hereinafter set forth.
Executed this ____ day of
________ 199__.
Signed, sealed and delivered in the LANDLORD
in the presence of:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
- ----------------------------------- By: --------------------------------
Its Senior Vice President
- ----------------------------------- By: --------------------------------
As to Landlord Its Secretary
Executed this ___ day of
_________ 199__.
Signed, sealed and delivered in the TENANT (If Corporation)
in the presence of:
- ----------------------------------- By: --------------------------------
Its President
- ----------------------------------- Attest: /s/ -------------------------
As to Tenant Its Secretary
(Corporate Seal)
Executed this ___ day of
_________ 199__.
Signed, sealed and delivered in the TENANT
in the presence of: (If Individuals or an Unincorporated
Identity)
------------------------------------
------------------------------------
- ----------------------------------- By: --------------------------------
------------------------------------
As to TENANT
SUPPLEMENT 1
THIS IS A FORM ONLY - NOT TO BE EXECUTIED
<PAGE>
SUPPLEMENT I TO LEASE Dated May 2, 1991 Between STS BUILDINGS
ASSOCIATES, L.P., (LANDLORD) and KOS PHARMACEUTICALS, INC. (TENANT).
PURSUANT to the provisions of the above-referenced Lease, LANDLORD and
TENANT, intending to be legally bound hereby, agree that the Term of said Lease
commenced on the 26th day of September, 1991, and shall end on the 30th day of
September, 1996 at Midnight, unless sooner terminated or extended as therein
provided.
IN WHITNESS WHEREOF, the parties hereto have duly executed this
SUPPLEMENT I to said Lease the day and year hereinafter set forth.
Executed this 10th day of
December 1991.
Signed, sealed and delivered in the LANDLORD
in the presence of:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
/s/ ILLEGIBLE By: /s/ ILLEGIBLE
- ----------------------------------- --------------------------------
Its Senior Vice President
/s/ ILLEGIBLE By: /s/ ILLEGIBLE
- ----------------------------------- --------------------------------
As to Landlord Its Secretary
Executed this 15th day of
November 1991.
Signed, sealed and delivered in the TENANT
in the presence of:
KOS PHARMACEUTICALS, INC.,
/s/ PAMELA GREGORY By: /s/ DANIEL M. BELL
- ----------------------------------- --------------------------------
Its President
/s/ LAURA BONITTO Attest: /S/ DAVID BOVA
- ----------------------------------- --------------------------------
As to Tenant Its Asst. Secretary
E-2
LEASE AGREEMENT
1. PARTIES
THIS LEASE AGREEMENT made this 15th day of May, 1990, by and between
STS Buildings Associates, L.P., whose address is 777 South Flagler Drive,
Phillips Point, West Tower, Suite 1400, West Palm Beach, FL 33401, hereinafter
referred to as LANDLORD, and Kos Pharmaceuticals, Inc., a Florida corporation
whose address is 801 Brickell Avenue, Miami, FL 33131, hereinafter referred to
as TENANT.
WITNESSETH
2. DEMISED PREMISES
LANDLORD hereby demises and leases unto TENANT, and TENANT hereby
leases from LANDLORD, those certain premises situated in the County of Broward,
State of Florida, identified as
Suite 140
Two Oakwood Boulevard
Hollywood, Florida 33020
(hereinafter referred to as either the "Demised Premises" or "Premises") of that
certain building known as Oakwood Business Center Phase II, (the "Building")
located at Two Oakwood Boulevard, Hollywood, Florida 33020, which Demised
premises are outlined in red on the plan attached hereto and marked Exhibit "A".
The "Rentable Area of the Premises" is hereby stipulated and mutually agreed to
by the parties to be Four Thousand Four Hundred Ninety (4,490) square feet,
whether the same should be more or less as a result of completion of the
Premises by Landlord for occupancy or for any other reason. The "Rentable Area
of the Building" in which the Premises are located is hereby stipulated and
mutually agreed to by the parties to be Fifty One Thousand Seven Hundred Twelve
(51,712) square feet.
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3. TERM
Landlord will notify Tenant ten (10) days prior to completion of
Demised Premises and the Term of this Lease will commence ten (10) days after
completion of Demised Premises and shall end (unless sooner terminated as
hereinafter provided) five (5) years after the last day of the first month of
the term of this Lease. The parties hereto agree to execute, within thirty (30)
days after the COMMENCEMENT DATE hereof, Supplement I to this Lease, in the form
attached hereto, fixing the definite dates of commencement and expiration of the
term of this Lease. By occupying the Demised Premises as a TENANT, or by
installing fixtures or equipment or by performing finishing work, TENANT shall
be deemed to have accepted the Demised Premises "AS IS" and to have acknowledged
that the Demised Premises are in the condition required by this Lease, excepting
conditions that cannot be observed or known about prior to occupancy up to a
period of four (4) months after issuance of Certificate of Occupancy, latent
defects or omissions in LANDLORD'S construction.
4. TENANT'S PLANS AND SPECIFICATIONS:
TENANT agrees to cooperate with the LANDLORD in preparing plans and
specifications covering all work to be done by or for TENANT (as provided in
Exhibit "B" of this Lease captioned "Leasehold Improvements") in the Demised
Premises. Such plans and specifications shall be prepared at LANDLORD'S sole
expense by a duly licensed architect or engineer selected by LANDLORD, in such
detail as LANDLORD may reasonably require, and TENANT agrees that no work shall
commence on any of the aforesaid Leasehold Improvements until LANDLORD and
TENANT have approved such plans and specifications in writing, which plans and
specifications when so approved shall be designated Exhibit "B" and attached
hereto and made a part hereof by reference. TENANT shall schedule and complete a
meeting with LANDLORD'S architect for the purpose of providing any information,
including TENANT'S finish schedule, required by LANDLORD'S architect in order
for him to prepare the plans and specifications. Such meeting shall be scheduled
by TENANT not later than ten (10) days from the date of such request by
LANDLORD. TENANT also agrees to cause its review of the plans and specifications
provided by LANDLORD to be completed and any comments thereon to be provided to
LANDLORD within ten (10) days from delivery of same by LANDLORD to TENANT.
TENANT shall furnish TENANT's finishing specifications within twenty (20) days
from the date TENANT and LANDLORD agree upon final plans and specifications for
the Demised Premises. In the event that TENANT fails to perform its obligations
within the time
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<PAGE>
period set forth herein, then TENANT shall be deemed to have approved the plans
and specifications submitted to TENANT for review and TENANT shall have no
further time to approve same. LANDLORD and TENANT agree to cooperate with each
other in good faith to finalize the plans and specifications and finishing
specifications for the Demised Premises, all of which shall be subject to the
approval of both LANDLORD and TENANT, which approval shall be granted in good
faith and which shall not be unreasonably withheld.
Any changes to TENANT's plans and specifications requested by TENANT,
after same have been approved in their final form by LANDLORD and TENANT, shall
be subject to LANDLORD's approval and, if LANDLORD so approves same, TENANT
shall pay any extra costs that my be incurred by LANDLORD as a result of such
change immediately upon request therefor.
In the event that TENANT fails to act promptly or in good faith with
regard to plans and specifications in accordance with the schedules set forth in
this paragraph, LANDLORD at its option may cancel this Lease by giving written
notice thereof to TENANT within ten (10) days of the expiration of any such
schedule.
5. BASE RENT
The annual Base Rent shall be Forty Nine Thousand Three Hundred Eight
and 60/100 ($49,308.60) DOLLARS and shall be paid by TENANT to LANDLORD at its
principal office or that of its agent or at any other place hereafter designated
in writing by LANDLORD, in equal monthly installments of Four Thousand One
Hundred Nine and 05/100 ($4,109.05) DOLLARS, on or before the first day of each
month during the term hereof.
The first month's Base Rent shall be paid simultaneously with execution
of this Lease, receipt of which is hereby acknowledged by LANDLORD. On the
Commencement Date, TENANT shall pay a pro rata amount of rent, if any, for the
period from the Commencement Date to the first day of the next calendar month.
TENANT shall promptly pay any and all Rent due hereunder at the times and at the
address for LANDLORD stated above. TENANT shall promptly pay charges for work
performed on order of TENANT and any other charges that accrue under this Lease.
If any part of the Rent or other charges shall remain due and unpaid for five
(5) days after the same become due and payable, LANDLORD shall have the option
(in addition to all other rights and remedies available to it by law and in
equity) of assessing against TENANT a "late charge" equal to five (5) cents for
every dollar of Rent which is past due, which
3
<PAGE>
late charge assessment shall be deemed to be Additional Rent. The term Annual
Base Rent may hereinafter by referred to as "Base Rent", "Annual Base Rent", or
"Rent".
LANDLORD shall have the option to assess a charge against TENANT, if
any of TENANT's payment checks shall be returned to LANDLORD marked "NSF" for
insufficient funds, in the amount of $25.00. Additionally, if at any time during
the Term of this Lease, including any extensions or option terms, LANDLORD shall
receive any two payment checks from TENANT returned to LANDLORD marked "NSF"
then LANDLORD may demand that TENANT make the balance of its rental payments by
cashier's check.
TENANT may be instructed by LANDLORD to make rental payments to a "lock
box", at Southeast Bank or such other institution as LANDLORD may designate. Due
to the nature of the handling of such payments, those which LANDLORD would
normally not accept under the below circumstances may be deposited in LANDLORD's
account anyway.
Therefore, in the event that the payment made by TENANT is in an amount
which is less than what is due or, in the event that TENANT has received a
statutory notice and failed to comply with its demands and/or litigation is
pending concerning TENANT's nonpayment of rent or as a result of other defaults
by TENANT under the Lease, then, notwithstanding the fact that the rental
payment received may be deposited in LANDLORD's "lockbox" at Southeast Bank or
such other institution utilized for this purpose by LANDLORD, same SHALL NOT BE
DEEMED ACCEPTED unless and until the default which is the subject of the above
actions is cured to the satisfaction of the LANDLORD and as provided under the
Lease and Florida law. Such DEPOSITED BUT UNACCENTED RENTAL PAYMENT(S) will be
refunded to TENANT on a LANDLORD issued check within a reasonable time after
such deposit is made. Such deposit of TENANT's check, under the above
circumstances, shall in no way prejudice LANDLORD's rights under Florida law
and/or the Lease.
6. ADDITIONAL RENT
(A) In addition to Base Rent, TENANT shall, for each calendar year or
portion thereof, pay to LANDLORD "additional Rent" equal to "TENANT's
Proportionate Share" (as hereinafter defined) of the aggregate of "(Operating
Expenses" (as hereinafter defined) for the Building and Premises, "Insurance"
(as hereinafter defined), and "Taxes" (as hereinafter defined) for the
applicable calendar year.
4
<PAGE>
(i) "TENANT's Proportionate Share" shall mean the percentage
which the then current Rentable Area of the Premises bears to the total
Rentable Area of the Building, which share is hereby stipulated and
agreed to be 8.7%.
(ii) "Taxes" shall mean all impositions, taxes, assessments
(special or otherwise) and other governmental liens or charges of any
and every kind, nature and sort whatsoever, ordinary and extraordinary,
foreseen and unforeseen, and substitutes therefor (except only
LANDLORD's income taxes) attributable in any manner to the Building and
the land upon which it is situated or which is used in conjunction with
the Building (the "Land"), or any part thereof, or any use thereof, or
any equipment, fixtures or other facility located therein or thereon or
used in conjunction therewith, and including all costs incurred by
LANDLORD in contesting same and/or negotiating with public authorities
as to same. If the Building and/or Land is for any reason included
along with properties in a particular tax bill, then LANDLORD shall
equitably apportion the tax billed among all properties covered by the
particular tax bill.
(iii) "Insurance" shall mean the cost to LANDLORD of all
casualty (including all extended coverages), liability, flood, hazard,
workmen's compensation, rent loss, and other insurance maintained by
LANDLORD, in LANDLORD's sole discretion, on the Building and Land
and/or LANDLORD's personal property used in connection therewith.
(iv) "Operating Expenses" shall mean the total cost and
expense incurred in operating, repairing and maintaining the Building
and Land, excluding only Taxes and Insurance. Operating Expenses shall
include, without limitation, window cleaning, pest control, inspection
and maintenance of fire and alarm and protection systems, community
association fees (if any), gardening and landscaping, the cost of
repairs and maintenance of the Building, parking area surfacing and
striping, lighting, equipment, sanitary control, removal of trash,
rubbish, garbage and other refuse, sewerage facilities, utility lines
and drainage facilities, water, sewer, electric and other utilities not
directly paid for by tenants of the Building, painting, depreciation of
machinery and equipment used in such maintenance, the cost of
management and administration and the cost of personnel to implement
services and to police the Building and Land. Operating Expenses shall
not include any cost or expense for which LANDLORD is entitled to be
reimbursed by an insurance company or any other tenant of the Building.
5
<PAGE>
Operating Expenses also shall not include any cost or expense for
replacement of elevators/escalators, initial cost of interior and
exterior landscaping, contributions to local civic organizations,
income or corporate taxes, capital gains taxes, inheritance taxes and
any other taxes personally owned by the owner, structural repairs and
replacements (for example, exterior walls, roof, foundation), and
repairs due to faulty workmanship or inherent structural defects.
(v) On the Commencement Date, LANDLORD shall submit to TENANT
a statement of the estimated monthly Additional Rent for the calendar
year in which the Commencement Date occurs, and TENANT shall pay same
on a monthly basis in advance, together with payments of Base Rent.
TENANT shall continue to make said monthly payments of Additional Rent
until notified by LANDLORD of a change thereof. The estimated monthly
Additional Rent billed to TENANT may be changed from time to time by
LANDLORD based upon the prior year's actual statements or LANDLORD's
anticipated costs. By April 1st of each calendar year during the Term
and by the April 1st immediately following the expiration or earlier
termination of the Term, LANDLORD shall deliver to TENANT a statement
showing the actual total of Taxes, Insurance and Operating Expenses for
the prior calendar year and TENANT's Proportionate Share thereof. In
the event the total of the monthly payments of estimated Additional
Rent which TENANT has made for the prior calendar year shall be less
than TENANT's actual Additional Rent due for said calendar year, then
TENANT shall pay the difference in a lump sum together with the next
installment of Base Rent, and TENANT shall concurrently pay the
difference between the aggregate of monthly payments made in the then
current calendar year and the amount of monthly payments which are then
calculated as monthly Additional Rent for the then current calendar
year based on the prior calendar year's actual amounts. Any overpayment
by TENANT shall be credited towards Additional Rent next coming due
under this Lease. Even though the Term has expired and TENANT has
vacated the Premises, when the final determination is made as to
TENANT's Proportionate Share of said Additional Rent for the year in
which this Lease terminates, TENANT shall, within ten (10) days
following receipt of the annual statement, pay any amount necessary
based on such actual amounts for the last calendar year, to the extent
said amount is over $10,000.00 Tenant shall have the right to pay said
amount over a twelve (12) month period on a monthly basis, and
6
<PAGE>
conversely, any overpayment made shall, together with the rendering of
the annual statement, be rebated by LANDLORD to TENANT.
TENANT expressly agrees that LANDLORD, at LANDLORD's sole
discretion, may apply the Security Deposit (as hereinafter defined) in
full of partial satisfaction of any Additional Rent due for any part of
the Term, including the final months, which application may follow the
termination of this Lease. If said Security Deposit is greater than the
amount of any such Additional Rent and there are no other sums or
amounts owed LANDLORD by TENANT by reason of any other terms,
provisions, covenants or conditions of this Lease, then LANDLORD shall
refund the balance of said Security Deposit to TENANT as provided in
Section 5 below. LANDLORD shall not be required to first apply said
Security Deposit to such Additional Rent if there are any other sums or
amounts owed LANDLORD by TENANT by reason of any other terms, provision
covenants or conditions of this Lease.
Additional Rent for the first calendar year and final calendar
year during the Term, if partial calendar years, shall be calculated as
if TENANT were occupying the Leased Premises for the entire calendar
year, but shall be due only in respect to those months included within
the Term of this Lease. Any Additional Rent for any partial month of
occupancy at the end of the Term of this Lease will be prorated, such
proration to be based on the actual number of days in said partial
month.
TENANT shall have the right, within thirty (30) days after
receipt by TENANT of any annual statement, to inspect LANDLORD's books
and records, showing Operating Expenses, Insurance and Taxes for the
calendar year covered by said statement at LANDLORD's office, during
normal business hours, after five (5) days' prior written notice. Each
annual statement shall become final and conclusive between the parties,
their successors and assigns as to the matters set forth therein,
unless LANDLORD receives written objections with respect thereto within
said thirty (30) day period. Anything herein to the contrary
notwithstanding, TENANT shall not delay or withhold payments of any
balance shown to be due pursuant to a statement rendered by LANDLORD to
TENANT because of any objection which TENANT may raise with respect
thereto.
Notwithstanding the fact that the Premises may only be used
for the purpose set forth in Section 8 (crossed off) hereof, if, due to
TENANT's use, LANDLORD's
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<PAGE>
insurance premiums exceed standard premiums, then TENANT shall, upon
receipt of appropriate invoices from LANDLORD, reimburse LANDLORD for
such increase in premiums. It is understood and agreed between the
parties hereto that any such increase in premiums shall be considered
as Rent due and shall be included in any lien for Rent. TENANT shall
comply with any and all requirements of LANDLORD's insuror(s).
7. SALES TAX
TENANT also agrees to pay LANDLORD any sales or use tax or excise tax
imposed or levied against the Rent, Additional Rent, or any other charge or
payment required hereunder to be made by TENANT which has been imposed or levied
by any governmental body having jurisdiction thereover, payable with each
installment of rent. Such sales tax to be paid by TENANT shall be deemed to be
Additional Rent due and payable by TENANT hereunder.
8. (Omitted)
9. USE
TENANT shall use and occupy the Demised Premises only for general
office use and analytical and formulation laboratories and for no other purpose,
under the name or style of Kos Pharmaceuticals. Such use shall be in accordance
with all applicable federal, state and local laws, ordinances, rules and
regulations.
10. SURRENDER AND HOLDOVER
TENANT agrees at the expiration of the term to surrender the Demised
Premises and everything belonging to or in connection therewith in good
condition, reasonable wear and tear excepted; and to remove all signs,
advertisements and rubbish from the said Demised Premises; and if TENANT fails
to do so, then TENANT hereby expressly authorizes LANDLORD, as agent of TENANT,
to remove such rubbish and make such repairs as may be necessary to restore the
Demised Premises to such condition, at the expense of TENANT.
IF TENANT retains possession of the Demised premises or any part
thereof after the termination of this Lease, TENANT shall pay LANDLORD rent at
double the rate payable for the year immediately proceeding said holdover,
computed on a monthly basis, for the time TENANT thus remains in possession. The
provisions of this paragraph do not waive LANDLORD's rights of re-entry or any
other right hereunder. Any retention of the Demised
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<PAGE>
Premises after termination of this Lease or any extension thereof shall be
considered as a month to month holdover unless otherwise agreed to in writing by
the parties hereto.
11. ASSIGNMENT AND SUBLETTING
TENANT shall not assign, transfer, mortgage, pledge, or otherwise
encumber or dispose of this Lease or sublet the Premises or any part thereof, or
permit the Premises to be occupied by other persons unless prior consent in
writing is given by Landlord which consent shall not be unreasonably withheld.
12. SUCCESSORS AND ASSIGNS
All rights, obligations and liabilities herein given to, or imposed
upon, the respective parties hereto shall extend to and bind the several and
respective heirs, executors, administrators, successors, permitted subtenants
and permitted assigns of said parties, subject to the provisions of Paragraph
10, and if there shall be more than one TENANT, they shall all be bound jointly
and severally by the terms, covenants, and agreements herein and the word
"TENANT" shall be deemed and taken to mean each and every person or party
mentioned as a TENANT herein, be the same one or more; and if there shall be
more than one TENANT, any notice required or permitted by the terms of this
Lease may be given by or to any one thereof, and shall have the same force and
effect as if given by or to all thereof. No rights, however, shall inure to the
benefit of any assignee of TENANT or sublessee of the Premises unless the
assignment to such assignee or sublet of the Premises has been consented to by
LANDLORD in writing as aforesaid.
13. SUBORDINATION, ATTORNMENT, & ESTOPPEL
If the Premises are at any time subject to a ground lease, underlying
lease or mortgage, and if TENANT has received written notice of same from the
landlord thereunder or the holder thereof, as the case may be (each of said
landlords and mortgage holders being referred to hereinafter as a "LANDLORD's
Mortgagee"), in any instance in which TENANT gives notice to LANDLORD alleging
default by LANDLORD hereunder, TENANT will also simultaneously give a copy of
such notice to each LANDLORD's Mortgagee, and each LANDLORD's Mortgagee shall
have the right (but not the obligation) to cure or remedy such default during
the period that is permitted to LANDLORD hereunder, plus an additional period of
forty-five (45) days, and TENANT shall accept such curative or remedial action
(if any) taken by LANDLORD's Mortgagee with the same effect as if such action
had been taken by LANDLORD.
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This Lease is and shall be prior to any encumbrance recorded after the
date of this Lease affecting the Building, other improvements, and land of which
the Demised Premises are a part. If, however, a lender requires that this Lease
shall be subordinate to any encumbrance, this Lease shall be subordinate to such
encumbrance, if LANDLORD first obtains from the lender a written agreement that
provides substantially the following: "As long as TENANT is not in default under
this Lease no foreclosure of, deed given in lieu of foreclosure of, or sale
under the encumbrance, and no steps or procedures taken under the encumbrance,
shall affect TENANT's rights under this Lease and the Lease shall remain in full
force and effect for the full Term thereof".
TENANT shall deliver to LANDLORD or to its mortgagee, auditors or
prospective purchaser, or the owner of the fee, when requested by LANDLORD, a
certificate stating the main provisions of this Lease and to the effect that
this Lease is in full force and effect and that LANDLORD is not in default
therein, and stating specifically any exceptions thereto. Failure to give such a
certificate within fifteen (15) days after written request shall be conclusive
evidence that the Lease is in full force and effect and LANDLORD is not in
default and TENANT shall be estopped from asserting any defaults known to TENANT
at that time.
14. DEFAULT BY TENANT
A. Any one or more of the following events shall be deemed to be
a default by
TENANT:
(1) Failure to pay any installment of Rent, Additional Rent, or
pay any other charge or amount to be paid by TENANT under
this Lease when due,
(2) Failure to comply with any term, provision or covenant of
this Lease other than the covenants to pay rent,
(3) If TENANT or Surety becomes insolvent, makes a transfer in
Fraud of Creditors, makes an Assignment for the Benefit of
Creditors, or a Receiver be appointed to take possession of
the Demised Premises, the assets of the TENANT or the
Surety,
(4) If TENANT does any act which creates a lien on the Demised
Premises or the land on which the Demised Premises are
located.
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B. Prior to LANDLORD's availing itself of any of the remedies
hereinafter set forth, LANDLORD shall give the following
written notices:
(1) In the case of a default under subparagraph A (1) five (5)
days notice to cure said default, which period shall include
the three (3) day statutory notice. The giving of Statutory
Notice shall not be deemed an election of remedies.
(2) In the case of a default under subparagraphs A (2), A (3),
or A (4), ten (10) days notice to cure said default.
C. In addition to any other remedies provided by law, the following
remedies are available to LANDLORD at its option and may be
applied cumulatively or individually:
(1) Terminate this Lease by notice in writing in which event
this Lease shall end automatically by its own limitation and
TENANT shall immediately surrender the Demised Premises. In
this case, TENANT shall pay LANDLORD all sums due as of the
date of termination. TENANT hereby waives any rights of
redemption TENANT may have in the Demised Premises.
(2) Re-enter and take possession of the Demised Premises holding
the same for the account of TENANT, in which case, the
entire amount of base rent for the term of this Lease, plus
other charges enumerated in this Lease for the remainder of
the term, plus any costs of reletting including
rehabilitation and brokerage costs, less an amount equal to
the base monthly rent multiplied by the number of months
remaining on the term of this Lease for which the Demised
Premises are relet, if any, shall be immediately due and
payable. TENANT hereby waives any claim TENANT may have to
rent obtained in reletting in excess of that required to be
paid by TENANT. Acceptance of surrender shall be by written
notice only and the acceptance of keys or changing of the
locks shall not be deemed an acceptance of surrender of the
Demised Premises.
(3) Without prejudice to any present or future right of
possession, bring an action in law or in equity to collect
rent and other charges due, for general or special damages,
to restrain any violation of any term, provision or covenant
of this Lease and/or to foreclose or protect any security
interest or lien arising out of
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this Lease, a separate agreement between the parties
covering property within the Demised Premises, operation of
law, or by statute.
(4) In any litigation arising out of TENANT's default under the
terms of this Lease, the prevailing party shall be entitled
to its costs and payment of a reasonable attorney's fee.
Delinquent rent shall bear interest at eighteen (18%)
percent per annum, or at the highest rate permitted by the
usury laws of the State of Florida, whichever rate is less.
15. (Omitted)
16. SEVERABILITY AND WAIVER
No waiver by LANDLORD of any provision hereof shall be deemed to have
been made unless such waiver be in writing signed by LANDLORD. The failure of
LANDLORD to insist upon the strict performance of any of the covenants or
conditions of this Lease, or to exercise any option herein conferred, shall not
be construed as waiving or relinquishing for the future any such covenants,
conditions or options, but the same shall continue and remain in full force and
effect. No payment by TENANT of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than on account of the stipulated rent.
If any clause or provision of this Lease is illegal or unenforceable under
present and future laws, then and in the event, the remainder of this Lease
shall not be affected thereby.
17. EMINENT DOMAIN
If the Demised Premises are totally taken, or partly taken so as to
render the Demised Premises totally untenantable for the purposes herein leased,
by any legally constituted authority for any public use or purpose, then, in
either event, this lease shall terminate as of the date of said taking. If a
part of the Demised Premises is taken, but the Demised Premises are not rendered
totally untenantable, then this Lease shall remain in full force and effect,
except that the rent hereunder shall be reduced in proportion to the amount of
the Demised Premises so taken.
Nothing contained herein shall be construed to prevent TENANT from
making a separate claim for damages against the condemning or taking authority
for damages suffered by TENANT based upon the taking of TENANT's leasehold
improvements which were installed at TENANT's cost, personal property,
interruption of business, moving expenses or any other damages available under
applicable law. Nothing contained herein shall diminish LANDLORD's award from
the condemning authority.
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18. DAMAGE AND DESTRUCTION
In the event the Premises shall be destroyed or so damaged or injured
by fire or other casualty during the Term whereby the same shall be rendered
untenantable, then LANDLORD shall have the right, but not the obligation, to
render such Premises tenantable by making repairs thereto within one hundred
eighty (180) days from receipt of insurance proceeds in the event of an insured
loss or from the date of the casualty in the event of an uninsured loss. If said
premises are not rendered tenantable by LANDLORD within said one hundred twenty
(120) day period, it shall be optional with either party hereto to cancel this
Lease, and in the event of such cancellation, the Rent shall be paid only to the
date of such fire or casualty. The cancellation herein mentioned shall be
evidenced in writing. During any time that the Demised Premises are untenantable
due to causes set forth in the Section, a just and fair proportion of Base Rent
and Additional Rent shall be abated. Notwithstanding the foregoing, should the
cause of such damage, destruction or injury to the Premises originate from the
Premises or occur by reason of the misfeasance or negligence of TENANT or any
employee, agent, licensee, patron or invitee of TENANT ("TENANT Damage"), TENANT
shall not have the right to cancel this Lease, and no abatement of Base Rent
shall occur. In the event of said TENANT Damage, LANDLORD shall have the right,
but not the obligation, to render the Premises tenantable. If LANDLORD elects to
repair said TENANT Damage and render the Premises tenantable, all insurance
proceeds available pursuant to this Lease shall be paid to LANDLORD, and the
balance of the cost of such repairs shall be paid by TENANT within five (5) days
following demand therefor as Additional Rent. If LANDLORD elects not to repair
such TENANT Damage, TENANT shall make such repairs and shall be entitled to any
insurance proceeds received in respect to the cost thereof.
19. INDEMNITY
TENANT and LANDLORD agree to hold each other harmless from and defend
each other against any and all claims or liability for any injury or damage to
any person or property whatsoever, occurring in the Demised Premises, the
parking area and grounds, or any public areas of the building of which the
Demised Premises are a part, when such injury or damage shall be caused in part
or in whole by the negligence of TENANT or LANDLORD, or their employees, agents,
contractors or invitees.
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20. WAIVER OF CLAIMS AND SUBROGATION
Unless caused by their gross negligence LANDLORD and LANDLORD's
employees, agents or invitees shall not be liable for, and TENANT hereby
releases all claims for, damage to person or property sustained by TENANT, or
any person claiming through TENANT or any person claiming directly, resulting
from fire, accident, or any cause whatsoever in or upon the Demised Premises or
the building of which the Demised Premises are a part. TENANT hereby agrees to
give LANDLORD prompt written notice of any accident, fire or damage occurring on
or to the Demised Premises.
LANDLORD and TENANT agree that in the event the Demised Premises or its
contents are damaged or destroyed by fire or other insured casualty, the rights,
if any, of either party against the other with respect to such damage or
destruction are waived; and that all policies of fire and/or extended coverage
or other insurance covering the Demised premises or its contents shall contain a
clause or endorsement providing in substance that the insurance shall not be
prejudiced if the assureds have waived right of recovery from any person or
persons prior to the date of loss or damage, if any.
21. ADDITIONAL CONSTRUCTION
LANDLORD hereby reserve the right at any time and from time to time to
make alterations or additions to, and to build additional stories on, the
building of which the Demised Premises are a part, and to build adjoining the
same. LANDLORD also reserves the right to construct other buildings or to add to
other buildings or to change the configuration and location of landscaping,
parking or other improvements and to permit others to do so.
22. LANDLORD'S ENTRY FOR REPAIR AND TO RE-LET
TENANT will permit LANDLORD to erect, use and maintain pipes and
conduits in and through the Demised Premises. Upon giving reasonable notice to
TENANT except in case of emergency. LANDLORD or its agents shall at all
reasonable times have the right to enter upon the Demised Premises to examine
the same and to show them to prospective purchasers or tenants of the Building,
and to make such decorations, repairs, alterations, improvements or additions as
LANDLORD may deem necessary or desirable, and shall be allowed to take all
material into and upon said Demised Premises that my be required therefor,
without the same constituting an eviction of TENANT in whole or in part and the
Rent reserved shall in no wise abate while said decorations, repairs,
alterations, improvements or additions are being made, by
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reason of loss or interruption of the business of TENANT because of the
prosecution of any such work. During the six (6) months prior to the expiration
of the term of this Lease, LANDLORD may exhibit the Demised Premises to
prospective tenants, and place upon same the usual notices "To Let" or "For
Sale", which notices TENANT shall permit to remain thereon without molestation.
LANDLORD shall have the right to change the arrangement and/or location of the
parking areas and ground and any public areas of the building of which the
Demised Premises are a part, and after reasonable notice, to change the name,
number of designation by which the building is commonly known. Nothing herein
contained, however, shall be deemed or construed to impose upon LANDLORD any
obligation, responsibility or liability whatsoever, for the care, supervision or
repair of the building or any part thereof, other than as herein provided.
23. ALTERATIONS BY TENANT
TENANT shall make no alterations, decorations, additions or
improvements in or to the Demised Premises without LANDLORD's prior written
consent, which consent shall not be withheld unreasonably, and then only by
contractors or mechanics approved by LANDLORD. All alternation, additions or
improvements upon the Demised Premises made by either party shall, unless
LANDLORD elects otherwise, become its property, and shall remain upon and be
surrendered with said Demised premises as a part thereof, at the end of the term
hereof, unless LANDLORD, at its option, shall require its removal from the
Demised Premises and the restoration by TENANT of the said Demised premises to
its former condition.
24. REPAIRS BY TENANT
TENANT shall take good care of the Demised Premises and shall, at
TENANT's own cost and expense, make all repairs in the Demised Premises and, at
the termination of this Lease, shall surrender the Demised Premises in good
condition, reasonable wear and tear excepted. If TENANT fails to make such
repairs, LANDLORD may, at LANDLORD's option and at TENANT's expense, repair all
damage or injury to the Demised Premises caused by TENANT, or TENANT's
employees, agents, or invitees.
25. MECHANIC'S LIENS
TENANT is prohibited from subjecting the Demised Premises or the
building of which they are a part or the land upon which they are located, or
any part thereof or any interest of LANDLORD therein to any mechanic's lien.
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If any mechanic's lien shall at any time be filed against the Demised
Premises or the building of which they are a part or the land upon which they
are located or any part thereof or any interest of LANDLORD therein, or any
encumbrance, charge, mortgage, conditional bill of sale, title retention, or
security agreement be filed against the Demised Premises or the building of
which they are a part or the land upon which they are located or any part
thereof or any interest of LANDLORD therein, by reason of any work, labor or
services, or materials or equipment furnished to or for TENANT, TENANT, within
ten (10) days after notice of the filing thereof, or such shorter period not
less than five (5) days as may be required by the holder of any mortgage to
which this Lease is subject and subordinate, will cause the same to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction, or otherwise. If TENANT shall fail to cause such encumbrance,
charge, etc., to be discharged within the period aforesaid then, in addition to
any other right or remedy, LANDLORD may, but shall not be obligated to,
discharge the same whether by paying the amount claimed to be due or by
procuring the discharge of such lien by deposit or by bonding proceedings, and
in any such event, LANDLORD shall be entitled, if LANDLORD so elects, to compel
the prosecution of an action for the foreclosure of such lien by the lienor and
to pay the amount of the judgment in favor of the lienor with interest, costs,
and allowances. Any amounts so paid by LANDLORD and all costs and expenses
incurred by LANDLORD in connection therewith, together with interest thereon at
the highest legal rate from the respective dates of LANDLORD's making of the
payment or incurring of the cost and expense, shall constitute Additional Rent
payable by TENANT under this Lease and shall be paid to LANDLORD by TENANT on
demand. Nothing herein contained shall obligate TENANT to pay or discharge any
lien created LANDLORD.
Nothing in this Lease contained shall be deemed or construed in any way
as constituting the consent or request of LANDLORD, express or implied by
inference or otherwise, to any contractor, subcontractor, laborer, or
materialman for the performance of any labor or the furnishing of any labor or
the furnishing of any materials for any specific improvements, alteration to or
repair of the Demised Premises or any part thereof, nor as giving TENANT any
right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to the filing
of any lien against the Demised Premises or the building of which they are a
part or the land upon which they are located, or any part thereof or any
interest of LANDLORD therein.
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26. REPAIRS BY LANDLORD
LANDLORD shall have no duty to TENANT to make any repairs or
improvements to the Demised Premises except structural repairs necessary for
safety and tenantability, and then only if not brought about by any act or
negligence of TENANT, or TENANT's employees, agents, or invitees. LANDLORD shall
not be liable to TENANT for any damage caused to TENANT or TENANT's property due
to the building or any part of appurtenances thereof being improperly
constructed or being or becoming out of repair so long as same are not caused by
negligence of LANDLORD, its agents, contractors or employees. TENANT agrees to
report immediately in writing to LANDLORD any defective condition in or about
the Demised Premises known to TENANT, and failure to so report shall make TENANT
liable to LANDLORD for any expense or damage to LANDLORD resulting from such
defective condition. Unless caused by LANDLORD's gross negligence, LANDLORD
shall not be liable for any damage to any property in said Demised Premises
which result from LANDLORD's failure to make said structural repairs. Structural
repairs are herein defined as being limited to foundation, supporting structure,
roof and floor slab.
27. TENANT PARKING
(A) NON-EXCLUSIVE RIGHT TO PARK AUTOMOBILES: Indicated by the shading
on Exhibit "A" are the "Parking Areas" of the Building which will
be available to LANDLORD, TENANT, other tenants of the Building,
and their respective employees, customers, guests and invitees for
the parking of vehicles. TENANT shall have the right to park, in
the Parking Areas only, no more the sixteen (16) vehicles.
(B) LANDLORD'S REGULATION OF PARKING AT THE BUSINESS CENTER: The
parking of vehicles anywhere, except in strict accordance with
Subsection 24(A) above, and the parking of inoperable vehicles are
strictly prohibited and shall be deemed defaults of TENANT without
the necessity of LANDLORD's giving of notice to TENANT of such
default. In addition to all other rights and remedies reserved in
this Lease and available at law or in equity, LANDLORD shall have
the right, in the event of such default, to tow improperly parked
vehicles without notice to TENANT or the owner of said vehicle,
and TENANT shall reimburse LANDLORD for the cost thereof upon
presentation of an invoice therefor. Tenant shall indemnify and
hold LANDLORD harmless against any loss, damage, claim or action
suffered by LANDLORD in connection with the towing of any vehicle
parked by any employee,
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agent, customer, invitee, licensee or guest of TENANT. LANDLORD
shall have the right to institute and maintain whatever procedures
LANDLORD deems necessary or desirable to regulate the parking of
vehicles. Such procedures may include, but are not to be limited
to, requiring TENANT and its employees, customers, guests, and
invitees to display parking decals on parked vehicles, or
requiring that TENANT supply LANDLORD with the license plate
numbers of parked vehicles, and the levying of fines against
TENANT for improperly parked vehicles. TENANT shall enforce
LANDLORD's parking procedures with respect to TENANT's employees,
guests, customers and licensees.
28. COMPLIANCE WITH LAW BY TENANT
TENANT agrees not to do or permit anything to be done in or about the
Demised Premises, which might in any way conflict with any law, ordinance, rule
or regulation affecting the use and occupancy of the Demised Premises, which are
now in effect or may hereafter be enacted by any governmental agency or any
public authority, or in any way obstruct or interfere with the rights of other
tenants of the building, or injure or annoy them, nor use or allow the use of
the Demised Premises for any improper, immoral or objectionable purpose.
29. TIME OF THE ESSENCE
It is understood and agreed between the parties hereto that time is of
the essence of this Lease.
30. NOTICES
All notices required under this Lease shall be in writing. Any notice
by LANDLORD to TENANT shall be deemed to be duly given if either delivered
personally to TENANT at the Demised Premises or when mailed by certified mail,
addressed to TENANT at the Demised Premises. Any notice by TENANT to LANDLORD
shall be deemed duly given if sent by certified mail to LANDLORD at 777 South
Flagler Drive, Phillips Point, West Tower, Suite 1400, West Palm Beach, FL 33401
(or at such other address as may hereafter be designated by LANDLORD).
31. SCOPE AND INTERPRETATION OF THE AGREEMENT
This Lease shall be considered to be the only agreement between the
parties hereto pertaining to the Demised Premises. All negotiations and oral
agreements acceptable to both
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parties are included herein. The laws of the State of Florida shall govern the
validity, interpretation, performance and enforcement of this Lease.
32. CAPTIONS
Any headings preceding the text of the several paragraphs and
subparagraphs hereof are inserted solely for convenience of reference and shall
not constitute a part of this Lease, nor shall they affect its meaning or
construction.
33. RECORDING
TENANT shall not record this Lease or a short form or memorandum
thereof without LANDLORD's prior written consent and joinder in such instrument,
provided, however, that TENANT shall, at LANDLORD's request, enter into the
Short Form Lease Agreement attached hereto as SUPPLEMENT I to this lease, which
Short Form Lease Agreement LANDLORD, but not TENANT, shall have the right to
record in the Public Records of the County in which the Demised Premises are
located.
34. INCREASED BASE RENT
Annually, the rent shall be increased by five (5%) percent of the
preceding year's Base Rental.
35. INSURANCE
(A) COVERAGE: TENANT shall maintain, at its expense, throughout the
Term, for the benefit of LANDLORD and LANDLORD's Mortgagees, the
following insurance coverages:
(i) comprehensive general liability insurance for bodily
injury and property damage to protect both LANDLORD and
TENANT against damage, costs and Attorneys' fees arising
out of accidents of any kind occurring on or about the
Premises or the Building of not less than Three Million and
No/100 Dollars ($3,000,000.00);
(ii) fire and extended casualty insurance with sufficient
coverage to reimburse the loss of all the TENANT'S
improvements to the Premises, and all the TENANT'S
fixtures, equipment, personal property and inventory;
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(iii) plate glass insurance to protect both LANDLORD and TENANT
covering the replacement value of all plate glass in or
about the Premises; and
(iv) appropriate worker's compensation and any and all other
insurance required by law.
(B) ADDITIONAL INSUREDS: All insurance, except the Worker's Compensation
coverage which shall include a waiver of subrogation against the
LANDLORD and LANDLORD'S Mortgagees, required by Subsection 32(A) above,
shall name LANDLORD and LANDLORD'S Mortgagees as additional insureds
and shall be written by a company or companies qualified to do business
in Florida and reasonably acceptable to LANDLORD. A certificate showing
such insurance in force and naming LANDLORD and LANDLORD'S Mortgagees
as additional insureds or waiver of subrogation for Worker's
Compensation shall be delivered to LANDLORD prior to the Commencement
Date, and such insurance and updated certificates or renewal policies
shall be delivered to LANDLORD no fewer than thirty (30) days prior to
the expiration of the then existing policies. No policy shall be
canceled or subject to reduction in coverage or other change without at
least 30 days' advance written notice to LANDLORD. No acceptance or
approval of any insurance by LANDLORD shall relieve or release TENANT
from any liability, duty or obligation under this Lease. Whenever any
part of the Premises shall have been damaged or destroyed by fire or
other casualty or any other incident or accident has accrued which
gives rise to a potential claim under an insurance policy to be
maintained by TENANT under this Section 32, TENANT shall promptly make
proof of loss in accordance with the terms of the applicable insurance
policies and shall promptly prosecute all valid claims which may have
arisen against the insurers based upon any such casualty, incident or
accident. TENANT SHALL give LANDLORD written notice of any potential
claim within five (5) days following the date TENANT acquires actual
notice thereof.
(C) WAIVER OF SUBROGATION: LANDLORD and TENANT each waive any right of
recovery against the other for any loss to the extent that such claim
is covered by valid and collectible insurance carried for the benefit
of the party entitled to make such claim and provided the insurer pays
such claim. The foregoing waiver shall not apply if the policy of
insurance covering such loss would be invalidated by the operation of
said waiver.
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(D) TENANT shall not do or permit anything to be done or bring into or keep
on or permit anything to be brought into or kept on the Demised
Premises which shall increase the rate of insurance on the building of
which the Demised Premises are a part. If, by reason of the failure of
TENANT to comply with the terms of this Lease, or by reason of TENANT'S
occupancy (even though permitted or contemplated by this Lease), the
insurance rate shall at any time be higher than it would be otherwise,
TENANT shall reimburse LANDLORD for all increases in insurance premiums
charged because of such violation or occupancy by TENANT.
36. PUBLIC UTILITIES
TENANT shall pay for all utilities, used or consumed in or upon the
Demised Premises, and all sewer charges, as and when the charges therefor shall
become due and payable, and TENANT shall pay any garbage or trash collection fee
imposed by any governmental authority.
37. SIGNS
TENANT will not exhibit, inscribe, paint, or affix any sign,
advertisement, notice or other lettering on any part of the outside of the
Demised Premises or of the Building of which the Demised Premises are a part, or
inside the Demised Premises if visible from the outside, without first obtaining
LANDLORD's written approval thereof; and TENANT further agrees to maintain such
sign, lettering, etc., as may be approved in good condition and repair at all
times. TENANT will not attach any awning, antenna or other projection to the
roof or the outside wall of the Demised Premises or the building of which the
Demised Premises are a part.
TENANT shall not install any drapes, curtains, blinds or any other
window covering, or overlay of any type, texture, fiber, material or the like on
any window, door or other aperture located at or within the Demised Premises,
without the express written consent of LANDLORD.
38. CONSTRUCTION
Within a reasonable time after LANDLORD'S receipt and approval of the
plans and specifications described in Section 4 hereof, LANDLORD will apply for
any building permit(s) which shall be required and within a reasonable time
after the issuance thereof cause the construction of TENANT's improvements to
commence and be built in substantial compliance with the plans and specification
prepared in accordance with Section 4 incorporating in such construction all
items of work described in EXHIBIT B.
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LANDLORD agrees that it will provide, install or construct, at no
expense to TENANT, those standard building items described in Exhibit B attached
hereto and made a part hereof. Any and all expense for building items which are
in addition to or are in substitution for the standard building items
specifically enumerated in Exhibit B, which LANDLORD is to provide, install or
construct in the Demised Premises on TENANT'S behalf, shall be paid for by
TENANT within thirty (30) days after receipt of an invoice(s) therefor from
LANDLORD. Payment from TENANT of such costs shall not operate, expressly or
impliedly, to create in TENANT any interest in the Demised Premises beyond the
leasehold interest granted hereby.
Should the work performed by LANDLORD for TENANT at TENANT'S sole cost
and expense including any change orders exceed the lesser of the equivalent of
one-month Base Rent or the sum of $3,000.00, then TENANT shall pay to LANDLORD
said cost within fifteen days of receipt of invoice for same but in any event
prior to TENANT taking possession of the Demised Premises. In no event, however,
shall the Commencement Date of the Lease be adjusted by reason of non-payment of
said cost.
39. RADON GAS
Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
40. INTEREST ON PAST DUE AMOUNTS
All Rent payable hereunder shall bear interest at the highest rate
permitted by law from the due date until the date actually paid.
41. EXCULPATION
Neither LANDLORD nor any general or limited partner of LANDLORD (nor
any direct or indirect partner, incorporator, shareholder, trustee, officer or
director, disclosed or undisclosed, past present or future of a partner of
LANDLORD) shall be personally liable for any liability or obligation of LANDLORD
to TENANT in connection with this Lease. TENANT will look solely to the interest
of LANDLORD in the Premises to satisfy any claims TENANT may have against
LANDLORD with respect to such liabilities and obligations.
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42. HAZARDOUS AND TOXIC SUBSTANCES
In addition to, and not by way of limitation of the provisions of
Section 25 above, TENANT hereby covenants with LANDLORD and represents and
warrants to LANDLORD as follows:
(A) TENANT, at its sole cost and expense, will strictly comply with any
and all applicable federal, state and local environmental laws, rules,
regulations, permits and orders affecting Demised Premises and/or the business
operation of TENANT conducted on the Demised Premises and/or the business
operation of TENANT conducted on the Demised Premises, relating to the
generation, recycling, reuse, sale, storage, handling, transport, or presence of
any "Hazardous Materials" on the Demised Premises without LANDLORD'S express
prior written consent, which consent LANDLORD may exercise in its sole
discretion. As used in this Section, the term "Hazardous Material(s)" shall mean
any substances defined as or included in the definition of "hazardous
substances," hazardous wastes," "hazardous materials," "toxic substances,"
"contaminants" or other pollution under any applicable environmental laws.
Notwithstanding anything to the contrary contained herein, LANDLORD'S consent to
any action by TENANT shall not operate to relieve TENANT of the obligation to
comply with all the provisions of this Section 38. TENANT will not permit or
allow, and will take all actions necessary to avoid, the occurrence of any
spills of Hazardous Materials on or off the Demised Premises as a result of any
construction on, or use of, the Demised Premises. TENANT shall promptly advise
LANDLORD in writing immediately upon becoming aware of (i) the existence of any
spills, releases or discharges of Hazardous Materials that occur on or onto the
Demised Premises, or off the Demised Premises, and of any existing or threatened
violation of this Section 38; (ii) any and all enforcement, cleanup, removal or
other governmental or regulatory actions instituted, completed or threatened by
any governmental authority with respect to the Demised Premises from time to
time under any applicable environmental laws; (iii) any and all claims made or
threatened by any non-governmental party against TENANT or the Demised Premises
relating to damage, contribution, cost recovery, compensation, loss or injury
resulting from any Hazardous Materials or any violation of applicable
environmental laws; and (iv) TENANT'S discovery of any occurrence of condition
on any real property adjoining or in the immediate vicinity of the Demised
Premises that could cause the Demised Premises or any part thereof to be subject
to any restrictions on the ownership, occupancy, transferability or use of the
Demised Premises under any environmental laws.
23
<PAGE>
(B) Without LANDLORD's prior written consent, TENANT shall not enter
into any settlement, consent or compromise with respect to any "Environmental
Claim(s)" (as hereinafter defined); provided, however, that LANDLORD'S prior
consent shall not be necessary for TENANT to take any remedial action if ordered
by a court of competent jurisdiction or if the presence of Hazardous Materials
at the Demised Premises poses an immediate, significant threat to the health,
safety or welfare of any individual or otherwise requires an immediate remedial
response. As used in this Section, "Environmental Claim(s)," shall mean any
claim(s) or cause(s) of action resulting from the failure of TENANT or the
Demised Premises to comply with any environmental law relating to Hazardous
Materials, industrial hygiene or environmental conditions. In any event, TENANT
shall promptly notify LANDLORD of any action so taken.
(C) At all times during the Term of this Lease and any renewals or
extensions hereof, TENANT, at its sole cost and expense, shall comply with any
and all applicable laws, regulations, ordinances, permits and orders regulating
the type and quantity of waste that may be discharged into the sanitary sewer
system serving the Demised Premises, including, but not limited to, all rules,
regulations, permits, and orders of any governmental agency or authority having
jurisdiction, or its successor. TENANT agrees to limit its discharges of waste
into the sanitary sewer system to "Domestic Waste Water", as such terms defined
by Rule 17-6.030 (22) of the Florida Administrative Code, as amended from time
to time, or as the term may be defined by other laws, regulations, ordinances,
permits or orders presently in effect or hereafter enacted, as such laws,
regulations, ordinances, permits or orders may be amended from time to time. In
no event, however, shall Domestic Waste Water be construed to mean or include
any "Non-Domestic Waste Water" that has undergone "Pre-treatment" as the latter
term is defined in Rule 17-6.030 (63) of the Florida Administrative Code or as
defined by other laws, regulations, ordinances, orders or permits presently in
effect or hereafter enacted, as such laws, regulations, ordinances, orders or
permits may be amended from time to time.
(D) TENANT agrees that LANDLORD and LANDLORD'S agents and independent
contractors may enter and inspect the Demised Premises at any reasonable time,
and from time to time, to verify that TENANT's operations on the Demised
Premises do not violate any of the provisions of this Section 38 and that they
comply with any and all applicable environmental laws. At LANDLORD'S option,
LANDLORD may obtain, from time to time, reports from licensed professional
engineers or other environmental scientists with experience in environmental
investigations and may require TENANT to permit such licensed professional
24
<PAGE>
engineers or other environmental scientists to conduct complete and thorough
on-site inspections of the Demised Premises, including, without limitation,
sampling and analysis of the soil surface water, groundwater and air, to
determine whether TENANT is in compliance with the provisions of the Section and
all environmental laws. TENANT and its agents shall cooperate with LANDLORD and
its agents in connection with the conduct of such investigations. In the event,
an inspection from a licensed environmental engineer or other environmental
scientist indicates that TENANT is in default under this Section 38, TENANT
shall, immediately upon demand, reimburse LANDLORD for all costs and expenses of
such investigations; moreover, LANDLORD may, at its option, undertake such steps
as it deems necessary to cure such default and to bring the Demised Premises
into compliance with the terms of this Section, and TENANT shall, immediately
upon demand, reimburse LANDLORD for all costs and expenses incurred in curing
such default and bringing the Demised Premises into compliance with the terms of
this Section.
(E) TENANT hereby indemnifies and holds LANDLORD harmless from and
against any and all claims, demand, damages, losses, liens, liabilities,
penalties, fines, lawsuits and other proceedings, costs, and expenses
(including, without limitation, reasonable attorneys' fees and costs at trial
and all appellate levels), arising directly or indirectly from, or in any way
connected with: (i) the presence, or use, generation, treatment or storage on,
under or about the Demised Premises of any Hazardous Materials on the Demised
Premises, or the disposal or release of Hazardous Materials on the Demised
Premises, whether or not expressly approved by LANDLORD in writing, (ii) the
presence of any Hazardous Materials off the Demised Premises, whether or not
expressly approved by LANDLORD in writing, (iii) the presence of any Hazardous
Materials off the Demised Premises as the result of any use of the Demised
Premises, (iv) any violation or alleged violation of any environmental law,
including, but not limited to, violations of the Federal Comprehensive
Environmental Response Compensation and Liability Act of 1980 and regulations
promulgated thereunder, as the same may be amended from time to time, (v) the
costs of any necessary inspection, audit, cleanup or detoxification of the
Demised Premises under any environmental laws, and the preparation and
implementation of any closure, remedial or other required plans, consent orders,
license applications or the like, or (vi) any default by TENANT under this
Section 38. All sums paid and costs incurred by LANDLORD with respect to any
Environmental Claim or any other matter indemnified against hereunder shall be
due and payable by TENANT immediately upon demand. If, after demand, TENANT
fails to
25
<PAGE>
pay any sums due pursuant to this indemnification, such sums shall bear
interest at the highest rate then permitted by applicable law, from the date so
paid or incurred by LANDLORD until LANDLORD is reimbursed by TENANT. The
indemnification contained herein shall survive the termination of the leasehold
estate created hereby and any assignment by LANDLORD of its rights under this
Lease.
(F) The foregoing Subsections 38(A) through 38(E) and this Subsection
38(F) shall apply with equal force and effect to TENANT's use and occupancy of
the Building. Any provision of this Lease to the contrary notwithstanding, any
breach of the covenants, representations or warranties contained in this Section
38 shall constitute a default under this Lease and shall entitle LANDLORD, in
addition to LANDLORD'S other rights and remedies available at law, in equity or
under this Lease, to immediately terminate this Lease.
43. RELOCATION OF TENANT
LANDLORD expressly reserves the right at LANDLORD'S sole cost and
expense to remove TENANT from the Demised Premises and to relocate TENANT in
some other space of LANDLORD'S choosing of approximately the same dimensions and
size within the Oakwood Business Center, which other space shall be improved and
decorated by LANDLORD, at LANDLORD'S expense, to the same degree as the Demised
Premises are improved immediately prior to the relocation. LANDLORD shall have
the right, in LANDLORD'S sole discretion, to use such decorations and materials
from the existing Demised Premises, or other materials so that the space in
which TENANT is relocated shall be comparable in its interior design and
decoration to the Demised Premises from which TENANT is removed. Nothing herein
contained shall be construed to relieve TENANT or imply that TENANT is relieved
of the liability for, or obligation to pay, any Additional Rent due by reason of
the provisions of Section 6 of this Lease, the provisions of which Sections
shall be applied to the space in which TENANT is relocated on the same basis as
said provisions of which Section shall be applied to the space in which TENANT
is relocated on the same basis as said provisions were applied to the Demised
Premises from which TENANT is removed. TENANT agrees that LANDLORD'S exercise of
its election to remove and relocate TENANT shall not terminate this Lease or
release TENANT, in whole or in part, from TENANT'S obligations to pay Rent and
perform the covenants and agreements hereunder for the full Term. In the case
LANDLORD exercised its rights under this paragraph, TENANT may at its option
cancel this Lease upon thirty (30) days written notice to LANDLORD, instead of
relocating as provided herein.
26
<PAGE>
44. OWNER'S/TENANTS' ASSOCIATION
TENANT agrees that in the event an owner's and/or tenants' association
(the "Association") is formed for the Oakwood Business Center, then TENANT shall
become a member and shall maintain a membership therein, and TENANT agrees that
it shall be responsible for its share of the expenses thereof based on the
amount per square foot of rentable area in the Demised Premises, as same may be
determined from time to time by a majority vote of the members of the
Association, and TENANT agrees that it shall comply with such determination. In
the event the Association is formed, TENANT agrees that it shall abide by its
charter, by-laws and rules and regulations, same being subject to reasonable
approval by TENANT.
Additionally, TENANT hereby agrees to fully comply with the Rules and
Regulations of the Building attached hereto and incorporated herein by this
reference as Exhibit "E".
45. ADDITIONAL PROVISIONS
Insofar as the following additional provisions, if any, conflict with
any of the foregoing provisions, the following additional provisions, if any,
shall prevail:
A. DELETIONS: To the extent that any provision in this Lease has been
deleted by strike out or otherwise crossing out such preprinted
provision, such deleted provision shall be construed to have never
been included in the Lease or to have been a part thereof ab
initio.
27
<PAGE>
IN WITTNESS WHEREOF, the parties hereto have duly executed this Lease the day
and year hereinafter set forth.
Executed this 15th day of May 1990.
Signed, sealed and delivered LANDLORD
in the presence of:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
/S/ By: /S/
- ------------------------------ -------------------------------
Its Senior Vice President
/S/ By: /S/
- ------------------------------ -------------------------------
As to Landlord Its Secretary
Executed this 10th day of May 1990.
Signed, sealed and delivered TENANT
in the presence of:
KOS PHARMACEUTICALS, INC.,
a Florida corporation
/S/ SUSAN BALANDIS By: /S/ DANIEL M. BELL
- ------------------------------ -------------------------------
Its President
/S/ LAURA BONITTO Attest: /S/ DAVID J. BOVA
- ------------------------------ -------------------------------
As to Tenant Its Secretary
(Corporate Seal)
28
<PAGE>
RIDER TO LEASE BY AND BETWEEN
STS BUILDINGS ASSOCIATES, L.P. AND
KOS PHARMACEUTICALS, INC.
THIS RIDER IS A PART OF THE ABOVE DESCRIBED LEASE AGREEMENT. IN THE EVENT OF ANY
CONFLICT BETWEEN THE PROVISIONS OF THIS RIDER AND THOSE OF ANY OTHER PART OF
THIS LEASE, THE PROVISIONS OF THIS RIDER SHALL CONTROL.
1. RENTAL CREDIT:
As an inducement to and as consideration for Tenant's execution of this
Lease Agreement Tenant shall be granted use and occupancy of the
Premises for the first two (2) months of the Lease Term without having
to pay Base Rent therefor. Notwithstanding this rental credit, the CPI
adjustment to Base Rent shall be without regard to the rental credit
and shall be made as if full Base Rent was paid.
2. CANCELLATION OPTION:
Tenant may cancel this Lease effective upon the commencement of the
fourth (4th) year of the Lease term by giving six (6) months prior
written notice to Landlord. Upon exercising said option to cancel,
Tenant shall pay to Landlord as reimbursement the unamortized portion
of the base rental credit of $8,218.10 and the unamortized portion of
the improvement allowance of $125,136.00. Said reimbursement shall be
paid to Landlord within thirty (30) days of Tenant's notice to Landlord
of its intention to exercise Tenant's cancellation option.
3. ADDITIONAL SECURITY DEPOSIT:
Tenant, as principal, shall deliver to Landlord upon completion of
working drawings referred to in Paragraph 4 of this Lease an
unconditional, irrevocable Letter of Credit in the amount of ONE
HUNDRED TEN THOUSAND AND NO/100 ($110,000.00) DOLLARS payable to and in
favor or Landlord as Security Deposit for the full and faithful
performance by Tenant of all the terms, covenants and conditions of
this Lease upon Tenant's part to be performed, which Letter of Credit
shall be returned at the expiration of each Lease Year and replaced by
Tenant with a new Letter of Credit with the same terms as the original
Letter of Credit except that the amount shall decrease by twenty (20%)
percent annually until the expiration of the term herein, provided
Tenant has fully and faithfully carried out all of the said terms,
covenants and conditions on Tenant's part to be performed. In the event
of a bonafide sale, subject to this Lease, Landlord shall have the
right to transfer the security to the buyer for the benefit of Tenant
and Landlord shall be considered released by Tenant from all liability
for the term of such security; and Tenant agrees to look solely to the
new landlord for the return of the said security, and it is agreed that
this shall apply to every transfer or assignment made of the security
to a new landlord.
1
<PAGE>
IN WITTNESS WHEREOF, the parties hereto have duly executed this Lease
the day and year hereinafter set forth.
Executed this 15th day of May 1990.
Signed, sealed and delivered LANDLORD
in the presence of:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
/S/ By: /S/
- ------------------------------ -------------------------------
Its Senior Vice President
/S/ By: /S/
- ------------------------------ -------------------------------
As to Landlord Its Secretary
Executed this 10th day of May 1990.
Signed, sealed and delivered TENANT
in the presence of:
KOS PHARMACEUTICALS, INC.,
a Florida corporation
/S/ PAMELA GREGORY By: /S/ DANIEL M. BELL
- ------------------------------ -------------------------------
Its President
/S/ SUSAN BALANDIS Attest: /S/ DAVID BOVA
- ------------------------------ -------------------------------
As to Tenant Its Secretary
(Corporate Seal)
2
<PAGE>
SUPPLEMENT 1 to LEASE Dated ___________________________________- Between
________________________________________________________________________
__________________________________________________________, (LANDLORD)
and ____________________________________________________________________
_________________________________________________________, (TENANT).
PURSUANT to the provisons of the above-referenced Lease, LANDLORD and
TENANT, intending to be legally bound hereby, agree that the tem of the said
Lease commenced on the ____ day of _______________, 199__, shall end on the ____
day of __________________, 199__, at Midnight, unless sooner terminated or
extended as therein provided.
IN WITTNESS WHEREOF, the parties hereto have duly executed this
SUPPLEMENT I the day and year hereinafter set forth.
<TABLE>
<S> <C>
Executed this ____ day of ________ 199__.
Signed, sealed and delivered LANDLORD
in the presence of:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
By:
- ------------------------------ -------------------------------
Its
By:
- ------------------------------ -------------------------------
As to Landlord Its
Executed this ___ day of _________ 199__.
Signed, sealed and delivered TENANT (If Corporation)
in the presence of:
By:
- ------------------------------ -------------------------------
Its President
Attest: /S
- ------------------------------ -------------------------------
As to Tenant Its Secretary
(Corporate Seal)
Executed this ___ day of _________ 199__.
Signed, sealed and delivered TENANT
in the presence of: (If Individuals or an Unincorporated Identity)
------------------------------
-------------------------------
By:
- ------------------------------ -------------------------------
As to TENANT
</TABLE>
SUPPLEMENT 1
THIS IS A FORM ONLY - NOT TO BE EXECUTIED
<PAGE>
EXHIBIT A
(Drawing)
<PAGE>
EXHIBIT "B"
LEASEHOLD IMPROVEMENTS
Landlord shall build Tenant's interior improvements in the Demised
Premises in accordance with final plans and specifications to be prepared by
Landlord's architect and approved by Landlord and Tenant. Said final plans and
specifications shall be made a part of this Lease as Exhibit C. Said final plans
and specifications shall be prepared in accordance with the space plan attached
hereto as Exhibit B-1 and Exhibit B-2 "Construction Items. "Substantial
Completion" of said improvements shall be evidenced by Landlord's written
notification to Tenant that said improvements have been substantially completed.
By taking possession of the Premises following said notification, Tenant shall
be deemed to have acknowledged and agreed that Landlord's improvements to the
Premises were made in accordance with this Exhibit "B" and that improvements
required by this Exhibit "B" have been substantially completed. All other
improvements to be made to the Premises which are necessary for the conduct of
Tenant's business in the Premises shall be made by Tenant, at Tenant's sole cost
and expense, subject to Tenant's obligation to obtain prior written consent of
Landlord to said improvements, which consent shall not be unreasonably withheld.
<PAGE>
EXHIBIT B-1
FLOOR PLAN (DRAWING)
<PAGE>
EXHIBIT B-2
CONSTRUCTION MATERIALS
1) CABINETS:
Kitchen Cabinets and work top at the Analytical Laboratory of plywood
construction.
2) DOORS:
All interior doors are solid core doors in steel door frames.
3) PARTITIONS:
All interior partitions of metal studs with drywall both sides.
4) CEILING TREATMENT:
2' x 4' Armstrong Cortega Acoustical Tile in a metal grid throughout
including the warehouse area. The exception is the Formulation Lab ceiling
which is of moisture- resistant drywall.
5) FLOORING TREATMENT:
Carpet at general office areas by "Wellco, Forum II Vogue", commercial
grade. Loop weave or cut ply to be KOS Pharmaceutical's choice.
Vinyl flooring at the men's room, women's room and the Analytical
Laboratory.
6) PAINTING:
All interior partitions to be painted with two coats of latex paint. All
interior doors to be painted with two coats of enamel paint. The
Formulation Lab to be painted with two coats of epoxy paint.
7) WINDOW TREATMENT:
All exterior storefront windows to receive horizontal mini blinds.
8) AIR CONDITIONING:
The entire space including the warehouse space is air conditioned.
9) PLUMBING:
a) Floor Drains throughout the Formulation Laboratory.
b) Men's bathroom and women's bathroom.
c) Kitchen sink.
d) Utility sinks at Analytical Laboratory and at the janitors closet.
e) Faucet at warehouse.
f) Stub outs and fitting for steam lines, compressor lines and vacuum
lines.
10) ELECTRICAL:
a) Florescent light fixtures throughout office and warehouse.
b) Includes dust-proof light fixtures at the Formulation Laboratory.
c) Duplex outlets, phone boxes, light switches, emergency lights and exit
lights as required or as indicated on Exhibit B-1.
d) Includes four 220-bolt outlets at the Formulation Laboratory as
indicated on Exhibit B-1.
e) Includes four 110-volt outlets at the Formulation Laboratory.
<PAGE>
EXHIBIT C
PLANS AND SPECIFICATIONS
(Intentionally Left Blank)
<PAGE>
EXHIBIT "E"
RULES OF THE BUSINESS CENTER
In addition to the terms, covenants, and conditions of the Lease,
Tenant shall comply, and Tenant shall cause the Premises to comply with the
following:
A. PARKING: Parking of automobiles, trucks and other vehicles shall
be restricted to areas designated for such purpose by Landlord.
Landlord reserves the right to remove by towing any vehicle which is
obstructing any door or driveway, obstructing other parked vehicles, parked in a
restricted area, or is otherwise improperly parked. All towing expenses shall be
paid by the vehicle owner.
Each vehicle owner shall be responsible for any damage to Landlord's
or any third party's property caused by the operation or parking of such
vehicle.
Parking both during and after normal business hours shall conform and
comply with all laws, ordinances and regulations of any agency or any regulatory
authority.
Repairs to, and maintenance of, vehicles on any part of the Business
Center visible outside Tenant's Premises (including washing and waxing) is
prohibited.
B. OUTDOOR STORAGE: Tenant shall not store any materials, supplies,
equipment or other property outside the Premises or in trailers, whether
attached to or detached from a driving unit, nor shall any such tractor/trailer
be parked within the Business Center for more than twenty-four (24) continuous
hours.
C. HAZARDOUS WASTE: Tenant shall not generate, store, handle or use
any hazardous effluent, material or substances in excess of lawful standards, or
prohibited by code, anywhere in the Business Center.
D. Tenant, it's officers, agents, servants, guests, invitees,
licensees and employees shall not block or obstruct any of the entries,
passages, doors or hallways in the Business Center nor place, empty or throw any
rubbish, litter, trash or material of any nature into such areas, or permit such
areas to be used at any time except for the ingress or egress of Tenant, its
agents, employees, visitors or invitees.
E. Landlord will not be responsible for lost or stolen personal
property, equipment, money or any article taken from the Premises or any other
part of the Business Center, regardless of how or when such loss occurs.
F. Tenant, its officers, agents, servants or employees shall not use
any part of the Premises or the Business Center for housing, lodging or sleeping
purposes without the prior written consent of Landlord.
G. Tenant shall not permit the operation of any musical or
sound-producing instruments or devices which may be heard outside the Premises.
H. The plumbing facilities shall not be used for any purpose other
than that for which they are constructed, and no foreign substances of any kind
shall be thrown therein, and the expense of any breakage, stoppage or damage
resulting from a violation of this provision shall be borne by Tenant.
I. All contractors and/or technicians performing work for Tenant
within the Premises shall be approved by Landlord before commencing work. This
shall apply to, but shall not be limited to, installation of telephones,
telegraph equipment, electrical devices and attachments, and all installations
affecting floors, walls, windows, doors, ceilings, equipment or any other
physical feature of the Premises.
J. Canvassing, soliciting and peddling in the Industrial Park,
including, without limitation, the distribution of any handbills or other
advertising matter in automobiles parked in the Business Center, is prohibited,
and each Tenant shall cooperate to prevent the same. In this respect, Tenant
shall promptly report any such activities to Landlord.
E-1
<PAGE>
K. In the event Tenant must dispose of crates, boxes or other refuse
which will not fit into office wastepaper baskets, it will be the responsibility
of Tenant to dispose of same in the waste dumpsters provided by Landlord, broken
down into the smallest and most reasonably compact components. In no event shall
Tenant set such items in areas of the Industrial Park other than within Tenant's
own Premises for disposal.
L. If the Premises should become invested with vermin, Tenant at its
sole cost and expense, shall cause the Premises to be exterminated at such time,
and from time to time, to the satisfaction of Landlord.
M. Tenant shall not install any antenna or aerial wires, radio or
television equipment, inside or outside of the Premises without Landlord's prior
written approval and upon such reasonable terms and conditions as may be
specified by Landlord in each and every instance.
E-2
<PAGE>
FIRST MODIFICATION OF LEASE AGREEMENT
THIS FIRST MODIFICATION OF LEASE AGREEMENT, Made this 15th day of July,
1991, by and between STS BUILDINGS ASSOCIATES, L.P., a Delaware limited
partnership, hereinafter referred to as LANDLORD, and KOS PHARMACEUTICALS, INC.,
a Florida corporation, hereinafter referred to as TENANT.
WITNESSETH:
WHEREAS, the parties hereto did heretofore the 15th day of May, 1990,
enter into a certain Lease Agreement for the Demised Premises located at Suite
140, Two Oakwood Boulevard, Hollywood, Florida 33020.
WHEREAS, the parties hereto desire to modify said Lease Agreement upon
certain terms and conditions as more fully set forth hereinafter, effective upon
execution of this First Modification of Lease Agreement.
NOW, THEREFORE, in consideration of the promises, covenants and
undertakings hereinafter set forth and for other good and valuable
considerations, the parties hereto agree as follows:
1. Tenant shall have the option to extend the Term of the Lease
Agreement described herein to expire effective upon the Expiration Date of that
Lease Agreement dated May 2, 1991 duly executed by both LANDLORD and the TENANT
for space located at Suite 150, Two Oakwood Boulevard, Hollywood, Florida 33020.
Tenant shall give Landlord notice of its intent to exercise said option one
hundreds eighty (180) days prior to the Expiration Date of said Lease Agreement.
In the event TENANT exercises this extension option, Base Rental shall be
determined in accordance with Paragraph 31 of the Lease Agreement.
2. EMPLOYMENT OPTION CREDIT: TENANT may, at its option, receive a
credit against their Base Rent if, for any calendar year by January 30 of the
applicable calendar year, TENANT shall have employed one or more full-time (30
hours or more per week) residents of the subdivision of Liberia for said
calendar year. The credit received shall be equal to a reduction in the Base
rent of $.50 per square foot of the Demised Premises per full-time Liberia
employee, in no event, however, shall the total credit exceed $3,000 per
calendar year ("Employment Option Credit"). TENANT shall be eligible for the
Employment Option Credit only at the end of the applicable calendar year and
shall not be entitled to any Base Rent reductions during the applicable calendar
year. TENANT shall also not be entitled to any of the Employment Option Credit
for employment of less than a full calendar year (except for employment in
January thereof). TENANT must provide to LANDLORD proof of full-time employment
(for example, in the form of a W-2 form for each said employee) for each Liberia
resident for the entire calendar year (except for the period up to January 30)
as well as proof of residency for each Liberia employee. Upon satisfactory proof
of same to LANDLORD, LANDLORD shall allow TENANT the Employment Option Credit
which shall be applied against the next calendar year's Base Rent, on a monthly
pro rata basis, with the applicable Employment Option Credit amount divided into
twelve equal reduction amounts and applied against each monthly installment of
the subsequent calendar year's Base Rent.
Tenant may elect eligibility for the Employment Option Credit for
subsequent calendar years or may elect not to pursue eligibility, at TENANT'S
sole option. TENANT'S failure to pursue eligibility for any given calendar year
shall not prejudice TENANT from pursuing eligibility in any subsequent calendar
year. The Employment Option Credit shall run through the term of this Lease and
any extensions, option, renewals and modification thereto.
<PAGE>
3. Except as modified hereby all of the terms, provisions and
conditions of the original Lease Agreement of May 15, 1990 shall remain in full
force and effect and hereby ratified and confirmed by the parties.
IN WITTNESS WHEREOF, the parties hereto have duly executed this Lease the day
and year hereinafter set forth.
WITNESSES: LANDLORD:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
/S/ ILLEGIBLE By: /S/ ROGER LEBLANC
- ------------------------------ -------------------------------
Roger LeBlanc, Sr. Vice President
/S/ ILLEGIBLE By: /S/ THEODORE R. STOTZER
- ------------------------------ -------------------------------
As to Landlord Theodore R. Stotzer, Secretary
WITNESSES: TENANT
KOS PHARMACEUTICALS, INC.,
a Florida corporation
/S/ PAMELA GREGORY By: /S/ DANIEL M. BELL
- ------------------------------ -------------------------------
Its President
/S/ LAURA BONITTO Attest: /S/ DANIEL M. BELL
- ------------------------------ -------------------------------
As to Tenant Its Secretary
(Corporate Seal)
1
<PAGE>
SUPPLEMENT I TO LEASE Dated March 15, 1990 Between STS BUILDINGS
ASSOCIATES, L.P., (LANDLORD) and KOS PHARMACEUTICALS, INC. (TENANT).
PURSUANT to the provisions of the above-referenced Lease, LANDLORD and
TENANT, intending to be legally bound hereby, agree that the Term of said Lease
commenced on the 19th day of November, 1990, and shall end on the 30th day of
November, 1995 at Midnight, unless sooner terminated or extended as therein
provided.
IN WHITNESS WHEREOF, the parties hereto have duly executed this
SUPPLEMENT I to said Lease the day and year hereinafter set forth.
Executed this 19th day of February 1991.
Signed, sealed and delivered LANDLORD
in the presence of:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
/S/ ILLEGIBLE By: /S/ ROGER LEBLANC
- ------------------------------ -------------------------------
Its Senior Vice President
/S/ ILLEGIBLE By: /S/ THEODORE R. STOTZER
- ------------------------------ -------------------------------
As to Landlord Its Secretary
Executed this 7th day of February 1991.
Signed, sealed and delivered TENANT
in the presence of:
KOS PHARMACEUTICALS, INC.,
a Florida corporation
/S/ LAURA BONITTO By: /S/ DANIEL M. BELL
- ------------------------------ -------------------------------
Its President
Attest:
- ------------------------------ -------------------------------
As to Tenant Its
(Corporate Seal)
1
LEASE AGREEMENT
1. PARTIES
THIS LEASE AGREEMENT made this 7h day of January, 1993, by and between STS
Buildings Associates, L.P., a Delaware limited partnership, whose address is 200
South Park Road, Suite 200, Hollywood, Florida 33021, hereinafter referred to as
LANDLORD, and KOS PHARMACEUTICALS, INC., a Florida corporation whose address is
1001 South Bayshore Drive, Suite 2502, Miami, Florida 33131, hereinafter
referred to as TENANT.
WITNESSETH
2. DEMISED PREMISES
LANDLORD hereby demises and leases unto TENANT, and TENANT hereby leases
from LANDLORD, those certain premises situated in the County of Broward, State
of Florida, identified as
Suite 50
One Oakwood Boulevard
Hollywood, Florida 33020
(hereinafter referred to as either the "Demised Premises" or "Premises") of that
certain building known as Oakwood Business Center Building I, (the "Building")
located at One Oakwood Boulevard, Hollywood, Florida 33020, which Demised
premises are outlined in red on the plan attached hereto and marked Exhibit "A".
The "Rentable Area of the Premises" is hereby stipulated and mutually agreed to
by the parties to be FIVE THOUSAND SEVEN HUNDRED FIFTY (5,750) square feet,
whether the same should be more or less as a result of completion of the
Premises by Landlord for occupancy or for any other reason. The "Rentable Area
of the Building" in which the Premises are located is hereby stipulated and
mutually agreed to by the parties to be Sixty Three Thousand One Hundred Eighty
One (63,181) square feet.
3. TERM
Landlord will notify Tenant ten (10) days prior to completion of Demised
Premises and the Term of this Lease will commence ten (10) days after completion
of Demised Premises which completion shall be evident by a Certificate of
Occupancy and shall end (unless sooner terminated as hereinafter provided) four
(4) years after the last day of the first month of the term
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of this Lease. The parties hereto agree to execute, within thirty (30) days
after the COMMENCEMENT DATE hereof, Supplement I to this Lease, in the form
attached hereto, fixing the definite dates of commencement and expiration of the
term of this Lease. By occupying the Demised Premises as a TENANT, or by
installing fixtures or equipment or by performing finishing work, TENANT shall
be deemed to have accepted the Demised Premises "AS IS" and to have acknowledged
that the Demised Premises are in the condition required by this Lease, excepting
conditions that cannot be observed or known about prior to occupancy up to a
period of four (4) months after issuance of Certificate of Occupancy, latent
defects or omissions in LANDLORD'S construction.
4. TENANT'S PLANS AND SPECIFICATIONS:
TENANT agrees to cooperate with the LANDLORD in preparing plans and
specifications covering all work to be done by or for TENANT (as provided in
Exhibit "B" of this Lease captioned "Leasehold Improvements") in the Demised
Premises. Such plans and specifications shall be prepared at LANDLORD'S sole
expense by a duly licensed architect or engineer selected by LANDLORD, in such
detail as LANDLORD may reasonably require, and TENANT agrees that no work shall
commence on any of the aforesaid Leasehold Improvements until LANDLORD and
TENANT have approved such plans and specifications in writing, which plans and
specifications when so approved shall be designated Exhibit "C" and attached
hereto and made a part hereof by reference ("Plans and Specification"). TENANT
shall schedule and complete a meeting with LANDLORD'S architect for the purpose
of providing any information, including TENANT'S finish schedule, required by
LANDLORD'S architect in order for him to prepare the Plans and Specifications.
Such meeting shall be scheduled by TENANT not later than ten (10) days from the
date of such request by LANDLORD. TENANT also agrees to cause its review of the
Plans and Specifications provided by LANDLORD to be completed and any comments
thereon to be provided to LANDLORD within ten (10) days from delivery of same by
LANDLORD to TENANT. TENANT shall furnish TENANT's finishing specifications
within twenty (20) days from the date TENANT and LANDLORD agree upon final Plans
and Specifications for the Demised Premises. In the event that TENANT fails to
perform its obligations within the time period set forth herein, then TENANT
shall be deemed to have approved the Plans and Specifications submitted to
TENANT for review and TENANT shall have no further time to approve same.
LANDLORD and TENANT agree to cooperate with each other in good faith to finalize
the Plans and Specifications and finishing specifications for the
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Demised Premises, all of which shall be subject to the approval of both LANDLORD
and TENANT, which approval shall be granted in good faith and which shall not be
unreasonably withheld.
Any changes to TENANT's Plans and Specifications requested by TENANT, after
same have been approved in their final form by LANDLORD and TENANT, shall be
subject to LANDLORD's approval and, if LANDLORD so approves same, TENANT shall
pay any and all extra costs that my be incurred by LANDLORD as a result of such
change immediately upon LANDLORD'S request therefor.
In the event that TENANT fails to act promptly or in good faith with regard
to Plans and Specifications in accordance with the schedules set forth in this
paragraph, LANDLORD at its option may cancel this Lease by giving written notice
thereof to TENANT within ten (10) days of the expiration of any such schedule.
5. BASE RENT
The Annual Base Rent shall be THIRTY SEVEN THOUSAND THREE HUNDRED FOUR AND
96/100 DOLLARS ($37,374.96) and shall be paid by TENANT to LANDLORD at its
principal office or that of its agent or at any other place hereafter designated
in writing by LANDLORD, in equal monthly installments of Three Thousand One
Hundred Fourteen and 58/100 DOLLARS ($3,114.58), on or before the first day of
each month during the term hereof.
The first month's Base Rent shall be paid simultaneously with execution of
this Lease, receipt of which is hereby acknowledged by LANDLORD. On the
Commencement Date, TENANT shall pay a pro rata amount of rent, if any, for the
period from the Commencement Date to the first day of the next calendar month.
TENANT shall promptly pay any and all Rent due hereunder at the times and at the
address for LANDLORD stated above. TENANT shall promptly pay charges for work
performed on order of TENANT and any other charges that accrue under this Lease.
If any part of the Rent or other charges shall remain due and unpaid for five
(5) days after the same become due and payable, LANDLORD shall have the option
(in addition to all other rights and remedies available to it by law and in
equity) of assessing against TENANT a "late charge" equal to five (5) cents for
every dollar of Rent which is past due, which late charge assessment shall be
deemed to be Additional Rent. The term Annual Base Rent may hereinafter by
referred to as "Base Rent", "Annual Base Rent", or "Rent".
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LANDLORD shall have the option to assess a charge against TENANT, if any of
TENANT's payment checks shall be returned to LANDLORD marked "NSF" for
insufficient funds, in the amount of $25.00. Additionally, if at any time during
the Term of this Lease, including any extensions or option terms, LANDLORD shall
receive any two payment checks from TENANT returned to LANDLORD marked "NSF"
then LANDLORD may demand that TENANT make the balance of its rental payments by
cashier's check.
TENANT may be instructed by LANDLORD to make rental payments to a "lock
box", at Southeast Bank or such other institution as LANDLORD may designate. Due
to the nature of the handling of such payments, those which LANDLORD would
normally not accept under the below circumstances may be deposited in LANDLORD's
account anyway.
Therefore, in the event that the payment made by TENANT is in an amount
which is less than what is due or, in the event that TENANT has received a
statutory notice and failed to comply with its demands and/or litigation is
pending concerning TENANT's nonpayment of rent or as a result of other defaults
by TENANT under the Lease, then, notwithstanding the fact that the rental
payment received may be deposited in LANDLORD's "lockbox" at Southeast Bank or
such other institution utilized for this purpose by LANDLORD, same SHALL NOT BE
DEEMED ACCEPTED unless and until the default which is the subject of the above
actions is cured to the satisfaction of the LANDLORD and as provided under the
Lease and Florida law. Such DEPOSITED BUT UNACCEPTED RENTAL PAYMENT(S) will be
refunded to TENANT on a LANDLORD issued check within a reasonable time after
such deposit is made. Such deposit of TENANT's check, under the above
circumstances, shall in no way prejudice LANDLORD's rights under Florida law
and/or the Lease.
6. ADDITIONAL RENT
(A) In Addition to Base Rent, TENANT shall, for each calendar year or
portion thereof, pay to LANDLORD "Additional Rent" equal to "TENANT's
Proportionate Share" (as hereinafter defined) of the aggregate of "Operating
Expenses" (as hereinafter defined) for the Building and Premises, "Insurance"
(as hereinafter defined), and "Taxes" (as hereinafter defined) for the
applicable calendar year.
(i) "TENANT's Proportionate Share" shall mean the percentage which the
then current Rentable Area of the Premises bears to the total Rentable Area
of the Building, which share is hereby stipulated and agreed to be 9.1%.
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(ii) "Taxes" shall mean all impositions, taxes, assessments (special or
otherwise) and other governmental liens or charges of any and every kind,
nature and sort whatsoever, ordinary and extraordinary, foreseen and
unforeseen, and substitutes therefor (except only LANDLORD's income taxes)
attributable in any manner to the Building and the land upon which it is
situated or which is used in conjunction with the Building (the "Land"), or
any part thereof, or any use thereof, or any equipment, fixtures or other
facility located therein or thereon or used in conjunction therewith, and
including all costs incurred by LANDLORD in contesting same and/or
negotiating with public authorities as to same. If the Building and/or Land
is for any reason included along with properties in a particular tax bill,
then LANDLORD shall equitably apportion the tax billed among all properties
covered by the particular tax bill.
(iii) "Insurance" shall mean the cost to LANDLORD of all casualty
(including all extended coverages), liability, flood, hazard, workmen's
compensation, rent loss, and other insurance maintained by LANDLORD, in
LANDLORD's sole discretion, on the Building and Land and/or LANDLORD's
personal property used in connection therewith.
(iv) "Operating Expenses" shall mean the total cost and expense
incurred in operating, repairing and maintaining the Building and Land,
excluding only Taxes and Insurance. Operating Expenses shall include,
without limitation, window cleaning, pest control, inspection and
maintenance of fire and alarm and protection systems, community association
fees (if any), gardening and landscaping, the cost of repairs and
maintenance of the Building, parking area surfacing and striping, lighting,
equipment, sanitary control, removal of trash, rubbish, garbage and other
refuse, sewerage facilities, utility lines and drainage facilities, water,
sewer, electric and other utilities not directly paid for by tenants of the
Building, painting, depreciation of machinery and equipment used in such
maintenance, the cost of management and administration and the cost of
personnel to implement services and to police the Building and Land.
Operating Expenses shall not include any cost or expense for which LANDLORD
is entitled to be reimbursed by an insurance company or any other tenant of
the Building.
Operating Expenses also shall not include any cost or expense for
replacement of elevators/escalators, initial cost of interior and exterior
landscaping, contributions to local civic organizations, income or
corporate taxes, capital gains taxes, inheritance
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taxes and any other taxes personally owned by the owner, structural repairs and
replacements (for example, exterior walls, roof, foundation), and repairs due to
faulty workmanship or inherent structural defects.
(v) On the Commencement Date, LANDLORD shall submit to TENANT a
statement of the estimated monthly Additional Rent for the calendar year in
which the Commencement Date occurs, and TENANT shall pay same on a monthly
basis in advance, together with payments of Base Rent. TENANT shall
continue to make said monthly payments of Additional Rent until notified by
LANDLORD of a change thereof. The estimated monthly Additional Rent billed
to TENANT may be changed from time to time by LANDLORD based upon the prior
year's actual statements or LANDLORD's anticipated costs. By April 1st of
each calendar year during the Term and by the April 1st immediately
following the expiration or earlier termination of the Term, LANDLORD shall
deliver to TENANT a statement showing the actual total of Taxes, Insurance
and Operating Expenses for the prior calendar year and TENANT's
Proportionate Share thereof. In the event the total of the monthly payments
of estimated Additional Rent which TENANT has made for the prior calendar
year shall be less than TENANT's actual Additional Rent due for said
calendar year, then TENANT shall pay the difference in a lump sum together
with the next installment of Base Rent, and TENANT shall concurrently pay
the difference between the aggregate of monthly payments made in the then
current calendar year and the amount of monthly payments which are then
calculated as monthly Additional Rent for the then current calendar year
based on the prior calendar year's actual amounts. Any overpayment by
TENANT shall be credited towards Additional Rent next coming due under this
Lease. Even though the Term has expired and TENANT has vacated the
Premises, when the final determination is made as to TENANT's Proportionate
Share of said Additional Rent for the year in which this Lease terminates,
TENANT shall, within ten (10) days following receipt of the annual
statement, pay any amount necessary based on such actual amounts for the
last calendar year, to the extent said amount is over $10,000.00 Tenant
shall have the right to pay said amount over a twelve (12) month period on
a monthly basis, and conversely, any overpayment made shall, together with
the rendering of the annual statement, be rebated by LANDLORD to TENANT.
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TENANT expressly agrees that LANDLORD, at LANDLORD's sole discretion,
may apply the Security Deposit (as hereinafter defined) in full of partial
satisfaction of any Additional Rent due for any part of the Term, including
the final months, which application may follow the termination of this
Lease. If said Security Deposit is greater than the amount of any such
Additional Rent and there are no other sums or amounts owed LANDLORD by
TENANT by reason of any other terms, provisions, covenants or conditions of
this Lease, then LANDLORD shall refund the balance of said Security Deposit
to TENANT as provided in Section 5 below. LANDLORD shall not be required to
first apply said Security Deposit to such Additional Rent if there are any
other sums or amounts owed LANDLORD by TENANT by reason of any other terms,
provision covenants or conditions of this Lease.
Additional Rent for the first calendar year and final calendar year
during the Term, if partial calendar years, shall be calculated as if
TENANT were occupying the Leased Premises for the entire calendar year, but
shall be due only in respect to those months included within the Term of
this Lease. Any Additional Rent for any partial month of occupancy at the
end of the Term of this Lease will be prorated, such proration to be based
on the actual number of days in said partial month.
TENANT shall have the right, within thirty (30) days after receipt by
TENANT of any annual statement, to inspect LANDLORD's books and records,
showing Operating Expenses, Insurance and Taxes for the calendar year
covered by said statement at LANDLORD's office, during normal business
hours, after five (5) days' prior written notice. Each annual statement
shall become final and conclusive between the parties, their successors and
assigns as to the matters set forth therein, unless LANDLORD receives
written objections with respect thereto within said thirty (30) day period.
Anything herein to the contrary notwithstanding, TENANT shall not delay or
withhold payments of any balance shown to be due pursuant to a statement
rendered by LANDLORD to TENANT because of any objection which TENANT may
raise with respect thereto.
Notwithstanding the fact that the Premises may only be used for the
purpose set forth in Section 8 (crossed out) hereof, if, due to TENANT's
use, LANDLORD's insurance premiums exceed standard premiums, then TENANT
shall, upon receipt of appropriate invoices from LANDLORD, reimburse
LANDLORD for such increase in
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premiums. It is understood and agreed between the parties hereto that any
such increase in premiums shall be considered as Rent due and shall be included
in any lien for Rent. TENANT shall comply with any and all requirements of
LANDLORD's insuror(s).
7. SALES TAX
TENANT also agrees to pay LANDLORD any sales or use tax or excise tax
imposed or levied against the Rent, Additional Rent, or any other charge or
payment required hereunder to be made by TENANT which has been imposed or levied
by any governmental body having jurisdiction thereover, payable with each
installment of rent. Such sales tax to be paid by TENANT shall be deemed to be
Additional Rent due and payable by TENANT hereunder.
8. (Omitted)
9. USE
TENANT shall use and occupy the Demised Premises only for general office
use and analytical and formulation laboratories and storage and for no other
purpose, under the name or style of Kos Pharmaceuticals, Inc. Such use shall be
in accordance with all applicable federal, state and local laws, ordinances,
rules and regulations.
10. SURRENDER AND HOLDOVER
TENANT agrees at the expiration of the term to surrender the Demised
Premises and everything belonging to or in connection therewith in good
condition, reasonable wear and tear excepted; and to remove all signs,
advertisements and rubbish from the said Demised Premises; and if TENANT fails
to do so, then TENANT hereby expressly authorizes LANDLORD, as agent of TENANT,
to remove such rubbish and make such repairs as may be necessary to restore the
Demised Premises to such condition, at the expense of TENANT.
IF TENANT retains possession of the Demised Premises or any part thereof
after the termination of this Lease, TENANT shall pay LANDLORD rent at double
the rate payable for the year immediately proceeding said holdover, computed on
a monthly basis, for the time TENANT thus remains in possession. The provisions
of this paragraph do not waive LANDLORD's rights of re-entry or any other right
hereunder. Any retention of the Demised Premises after termination of this Lease
or any extension thereof shall be considered as a month to month holdover unless
otherwise agreed to in writing by the parties hereto.
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11. ASSIGNMENT AND SUBLETTING
TENANT shall not assign, transfer, mortgage, pledge, or otherwise encumber
or dispose of this Lease or sublet the Premises or any part thereof, or permit
the Premises to be occupied by other persons unless prior consent in writing is
given by LANDLORD which consent shall not be unreasonably withheld. In the event
of an approved assignment or sublease the assignee or sublessee shall not be
permitted to further sublet or assign without first obtaining LANDLORD'S prior
written consent thereto as above provided. Any rental payments or other
compensation received by TENANT from an assignee or sublessee which are in
excess of rental payments or other charges due from TENANT to LANDLORD under the
Lease (or any portion thereof on a prorata basis in the event of a sublease) for
the Demised Premises so sublet or assigned shall be due and shall be paid to
LANDLORD.
In the event of an assignment of sublease, the TENANT shall remain liable
for the performance of all the obligations on the part of Tenant to be performed
under this Lease Agreement.
12. SUCCESSORS AND ASSIGNS
All rights, obligations and liabilities herein given to, or imposed upon,
the respective parties hereto shall extend to and bind the several and
respective heirs, executors, administrators, successors, permitted subtenants
and permitted assigns of said parties, subject to the provisions of Paragraph
10, and if there shall be more than one TENANT, they shall all be bound jointly
and severally by the terms, covenants, and agreements herein and the word
"TENANT" shall be deemed and taken to mean each and every person or party
mentioned as a TENANT herein, be the same one or more; and if there shall be
more than one TENANT, any notice required or permitted by the terms of this
Lease may be given by or to any one thereof, and shall have the same force and
effect as if given by or to all thereof. No rights, however, shall inure to the
benefit of any assignee of TENANT or sublessee of the Premises unless the
assignment to such assignee or sublet of the Premises has been consented to by
LANDLORD in writing as aforesaid.
13. SUBORDINATION, ATTORNMENT, & ESTOPPEL
If the Premises are at any time subject to a ground lease, underlying lease
or mortgage, and if TENANT has received written notice of same from the landlord
thereunder or the holder thereof, as the case may be (each of said landlord's
and mortgage holders being referred to hereinafter as a "LANDLORD's Mortgagee"),
in any instance in which TENANT gives notice to
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LANDLORD alleging default by LANDLORD hereunder, TENANT will also simultaneously
give a copy of such notice to each LANDLORD's Mortgagee, and each LANDLORD's
Mortgagee shall have the right (but not the obligation) to cure or remedy such
default during the period that is permitted to LANDLORD hereunder, plus an
additional period of forty-five (45) days, and TENANT shall accept such curative
or remedial action (if any) taken by LANDLORD's Mortgagee with the same effect
as if such action had been taken by LANDLORD.
This Lease is and shall be prior to any encumbrance recorded after the date
of this Lease affecting the Building, other improvements, and land of which the
Demised Premises are a part. If, however, a lender requires that this Lease
shall be subordinate to any encumbrance, this Lease shall be subordinate to such
encumbrance, if Landlord first obtains from the lender a written agreement that
provides substantially the following: "As long as Tenant is not in default under
this Lease no foreclose of, deed given in lieu of foreclosure of, or sale under
the encumbrance, and no steps or procedures taken under the encumbrance, shall
affect Tenant's rights under this Lease and the Lease shall remain in full force
and effect for the full Term thereof."
As of the date hereof, the current mortgagee is Citicorp Real Estate, Inc.
Unless otherwise notified by mortgagee, any and all such notices described under
this Paragraph shall be sent to: Citicorp, Real Estate, Inc., 400 Perimeter
Center Terrace, N.E., Suite 600, Atlanta, Georgia 30346.
TENANT shall deliver to LANDLORD or to its mortgagee, auditors or
prospective purchaser, or the owner of the fee, when requested by LANDLORD, a
certificate stating the main provisions of this Lease and to the effect that
this Lease is in full force and effect and the LANDLORD is not in default
therein, and stating specifically any exceptions thereto. Failure to give such a
certificate within fifteen (15) days after written request shall be conclusive
evidence that the Lease is in full force and effect and LANDLORD is not in
default and TENANT shall be estopped from asserting any defaults known to TENANT
at that time.
14. DEFAULT BY TENANT
A. Any one or more of the following events shall be deemed to be a
default by
TENANT:
(1) Failure to pay any installment of Rent, Additional Rent, or
pay any other change or amount to be paid by TENANT under
this Lease when due,
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(2) Failure to comply with any term, provision or covenant of
this Lease other than the covenants to pay rent,
(3) If TENANT or Surety becomes insolvent, makes a transfer in
Fraud of Creditors, makes an Assignment for the Benefit of
Creditors, or a Receiver be appointed to take possession of
the Demised Premises, the assets of the TENANT or the
Surety,
(4) If TENANT does any act which creates a lien on the Demised
Premises or the land on which the Demised Premises are
located.
B. Prior to LANDLORD's availing itself of any of the remedies
hereinafter set forth, LANDLORD shall give the following written
notices:
(1) In the case of a default under subparagraph A (1) five (5)
days notice to cure said default, which period shall include
the three (3) day statutory notice. The giving of Statutory
Notice shall not be deemed an election of remedies.
(2) In the case of a default under subparagraphs A (2), A (3),
or A (4), ten (10) days notice to cure said default which
period shall include the three (3) day statutory notice.
C. In addition to any other remedies provided by law, the following
remedies are available to LANDLORD at its option and may be
applied cumulatively or individually:
(1) Terminate this Lease by notice in writing in which event
this Lease shall end automatically by its own limitation and
TENANT shall immediately surrender the Demised Premises. In
this case, TENANT shall pay LANDLORD all sums due as of the
date of termination. TENANT hereby waives any rights of
redemption TENANT may have in the Demised Premises.
(2) Re-enter and take possession of the Demised Premises holding
the same for the account of TENANT, in which case, the
entire amount of base rent for the term of this Lease, plus
other charges enumerated in this Lease for the remainder of
the term, plus any costs of reletting including
rehabilitation and brokerage costs, less an amount equal to
the base monthly rent multiplied by the number of months
remaining on the term of this Lease for which the Demised
Premises are relet, if any, shall be immediately due and
payable.
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TENANT hereby waives any claim TENANT may have to rent
obtained in reletting in excess of that required to be paid
by TENANT. Acceptance of surrender shall be by written
notice only and the acceptance of keys or changing of the
locks shall not be deemed an acceptance of surrender of the
Demised Premises.
(3) Without prejudice to any present or future right of
possession, bring an action in law or in equity to collect
rent and other charges due, for general or special damages,
to restrain any violation of any term, provision or covenant
of this Lease and/or to foreclose or protect any security
interest or lien arising out of this Lease, a separate
agreement between the parties covering property within the
Demised Premises, operation of law, or by statute.
(4) In any litigation arising out of TENANT's default under the
terms of this Lease, the prevailing party shall be entitled
to its costs and payment of a reasonable attorney's fee.
Delinquent rent shall bear interest at eighteen (18%)
percent per annum, or at the highest rate permitted by the
usury laws of the State of Florida, whichever rate is less.
15. (Omitted)
16. SEVERABILITY AND WAIVER
No waiver by LANDLORD of any provision hereof shall be deemed to have been
made unless such waiver be in writing signed by LANDLORD. The failure of
LANDLORD to insist upon the strict performance of any of the covenants or
conditions of this Lease, or to exercise any option herein conferred, shall not
be construed as waiving or relinquishing for the future any such covenants,
conditions or options, but the same shall continue and remain in full force and
effect. No payment by TENANT of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than on account of the stipulated rent.
If any clause or provision of this Lease is illegal or unenforceable under
present and future laws, then and in the event, the remainder of this Lease
shall not be affected thereby.
17. EMINENT DOMAIN
If the Demised Premises are totally taken, or partly taken so as to render
the Demised Premises totally untenantable for the purposes herein leased, by any
legally constituted authority for any public use or purpose, then, in either
event, this Lease shall terminate as of the date of
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said taking. If a part of the Demised Premises is taken, but the Demised
Premises are not rendered totally untenantable, then this Lease shall remain in
full force and effect, except that the rent hereunder shall be reduced in
proportion to the amount of the Demised Premises so taken.
Nothing contained herein shall be construed to prevent TENANT from making a
separate claim for damages against the condemning or taking authority for
damages suffered by TENANT based upon the taking of TENANT's leasehold
improvements which were installed at TENANT's cost, personal property,
interruption of business, moving expenses or any other damages available under
applicable law. Nothing contained herein shall diminish LANDLORD's award from
the condemning authority.
18. DAMAGE AND DESTRUCTION
In the event the Premises shall be destroyed or so damaged or injured by
fire or other casualty during the Term whereby the same shall be rendered
untenantable, then LANDLORD shall have the right, but not the obligation, to
render such Premises tenantable by making repairs thereto within one hundred
eighty (180) days from receipt of insurance proceeds in the event of an insured
loss or from the date of the casualty in the event of an uninsured loss. If said
Premises are not rendered tenantable by LANDLORD within said one hundred twenty
(120) day period, it shall be optional with either party hereto to cancel this
Lease, and in the event of such cancellation, the Rent shall be paid only to the
date of such fire or casualty. The cancellation herein mentioned shall be
evidenced in writing. During any time that the Demised Premises are untenantable
due to causes set forth in the Section, a just and fair proportion of Base Rent
and Additional Rent shall be abated. Notwithstanding the foregoing, should the
cause of such damage, destruction or injury to the Premises originate from the
Premises or occur by reason of the misfeasance or negligence of TENANT or any
employee, agent, licensee, patron or invitee of TENANT ("TENANT Damage"), TENANT
shall not have the right to cancel this Lease, and no abatement of Base Rent
shall occur. In the event of said TENANT Damage, LANDLORD shall have the right,
but not the obligation, to render the Premises tenantable. If LANDLORD elects to
repair said TENANT Damage and render the Premises tenantable, all insurance
proceeds available pursuant to this Lease shall be paid to LANDLORD, and the
balance of the cost of such repairs shall be paid by TENANT within five (5) days
following demand therefor as Additional Rent. If LANDLORD elects not to repair
such TENANT Damage, TENANT shall make such repairs and shall be entitled to any
insurance proceeds received in respect to the cost thereof.
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19. INDEMNITY
TENANT agrees to hold LANDLORD harmless from and defend LANDLORD against
any and all claims or liability for any injury or damage to any person or
property whatsoever, occurring in the Demised Premises, the parking area and
grounds, or any public areas of the building of which the Demised Premises are a
part, when such injury or damage shall be caused in part or in whole by the
negligence of TENANT or TENANT'S, employees, agents, contractors or invitees.
LANDLORD agrees to hold TENANT harmless from and defend TENANT against any
and all claims or liability for any injury or damage to any person or property
whatsoever, occurring in the Demised Premises, the parking areas and grounds, or
any public areas of the building of which the Demised Premises are a part, when
such injury or damage shall be caused in part or in whole by the negligence of
LANDLORD, or LANDLORD'S employees, agents, contractors or invitees.
20. WAIVER OF CLAIMS AND SUBROGATION
Unless caused by their gross negligence, LANDLORD and LANDLORD's employees,
agents or invitees shall not be liable for, and TENANT hereby releases all
claims for, damage to person or property sustained by TENANT, or any person
claiming through TENANT or any person claiming directly, resulting from fire,
accident, or any cause whatsoever in or upon the Demised Premises or the
building of which the Demised Premises are a part. TENANT hereby agrees to give
LANDLORD prompt written notice of any accident, fire or damage occurring on or
to the Demised Premises.
LANDLORD and TENANT agree that in the event the Demised Premises or its
contents are damaged or destroyed by fire or other insured casualty, the rights,
if any, of either party against the other with respect to such damage or
destruction are waived; and that all policies of fire and/or extended coverage
or other insurance covering the Demised premises or its contents shall contain a
clause or endorsement providing in substance that the insurance shall not be
prejudiced if the assureds have waived right of recovery from any person or
persons prior to the date of loss or damage, if any.
21. ADDITIONAL CONSTRUCTION
LANDLORD hereby reserve the right at any time and from time to time to make
alterations or additions to, and to build additional stories on, the building of
which the Demised
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Premises are a part, and to build adjoining the same. LANDLORD also reserves the
right to construct other buildings or to add to other buildings or to change the
configuration and location of landscaping, parking or other improvements and to
permit others to do so.
22. LANDLORD'S ENTRY FOR REPAIR AND TO RE-LET
TENANT will permit LANDLORD to erect, use and maintain pipes and conduits
in and through the Demised Premises. Upon giving reasonable notice to TENANT
except in case of emergency. LANDLORD or its agents shall at all reasonable
times have the right to enter upon the Demised Premises to examine the same and
to show them to prospective purchasers or tenants of the Building, and to make
such decorations, repairs, alterations, improvements or additions as LANDLORD
may deem necessary or desirable, and shall be allowed to take all material into
and upon said Demised Premises that my be required therefor, without the same
constituting an eviction of TENANT in whole or in part and the Rent reserved
shall in no wise abate while said decorations, repairs, alterations,
improvements or additions are being made, by reason of loss or interruption of
the business of TENANT because of the prosecution of any such work. During the
six (6) months prior to the expiration of the term of this Lease, LANDLORD may
exhibit the Demised Premises to prospective tenants, and place upon same the
usual notices "To Let" or "For Sale", which notices TENANT shall permit to
remain thereon without molestation. LANDLORD shall have the right to change the
arrangement and/or location of the parking areas and ground and any public areas
of the building of which the Demised Premises are a part, and after reasonable
notice, to change the name, number of designation by which the building is
commonly known. Nothing herein contained, however, shall be deemed or construed
to impose upon LANDLORD any obligation, responsibility or liability whatsoever,
for the care, supervision or repair of the building or any part thereof, other
than as herein provided.
23. ALTERATIONS BY TENANT
TENANT shall make no alterations, decorations, additions or improvements in
or to the Demised Premises without LANDLORD's prior written consent, which
consent shall not be withheld unreasonably, and then only by contractors or
mechanics approved by LANDLORD. All alternation, additions or improvements upon
the Demised Premises made by either party shall, unless LANDLORD elects
otherwise, become its property, and shall remain upon and be surrendered with
said Demised premises as a part thereof, at the end of the term hereof, unless
LANDLORD, at its option, shall require its removal from the Demised Premises and
the restoration by TENANT of the said Demised Premises to its former condition.
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24. REPAIRS BY TENANT
TENANT shall take good card of the Demised Premises and shall, at TENANT's
own cost and expense, make all repairs in the Demised Premises and, at the
termination of this Lease, shall surrender the Demised Premises in good
condition, reasonable wear and tear excepted. If TENANT fails to make such
repairs, LANDLORD may, at LANDLORD's option and at TENANT's expense, repair all
damage or injury to the Demised Premises caused by TENANT, or TENANT's
employees, agents, or invitees.
25. MECHANIC'S LIENS
TENANT is prohibited from subjecting the Demised Premises or the building
of which they are a part or the land upon which they are located, or any part
thereof or any interest of LANDLORD therein to any mechanic's lien.
If any mechanic's lien shall at any time be filed against the Demised
Premises or the building of which they are a part or the land upon which they
are located or any part thereof or any interest of LANDLORD therein, or any
encumbrance, charge, mortgage, conditional bill of sale, title retention, or
security agreement be filed against the Demised Premises or the building of
which they are a part of the land upon which they are located or any part
thereof or any interest of LANDLORD therein, by reason of any work, labor or
services, or materials or equipment furnished to or for TENANT, TENANT, within
ten (10) days after notice of the filing thereof, or such shorter period not
less than five (5) days as may be required by the holder of any mortgage to
which this Lease is subject and subordinate, will cause the same to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction, or otherwise. If TENANT shall fail to cause such encumbrance,
charge, etc., to be discharged within the period aforesaid then, in addition to
any other right or remedy, LANDLORD may, but shall not be obligated to,
discharge the same whether by paying the amount claimed to be due or by
procuring the discharge of such lien by deposit or by bonding proceedings, and
in any such event, LANDLORD shall be entitled, if LANDLORD so elects, to compel
the prosecution of an action for the foreclosure of such lien by the lienor and
to pay the amount of the judgment in favor of the lienor with interest, costs,
and allowances. Any amounts so paid by LANDLORD and all costs and expenses
incurred by LANDLORD in connection therewith, together with interest thereon at
the highest legal rate from the respective dates of LANDLORD's making of the
payment or incurring of the cost and expense, shall constitute Additional Rent
payable by
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TENANT under this Lease and shall be paid to LANDLORD by TENANT on demand.
Nothing herein contained shall obligate TENANT to pay or discharge any lien
created LANDLORD.
Nothing in this Lease contained shall be deemed or construed in any way as
constituting the consent or request of LANDLORD, express or implied by inference
or otherwise, to any contractor, subcontractor, laborer, or materialman for the
performance of any labor or the furnishing of any labor or the furnishing of any
materials for any specific improvements, alteration to or repair of the Demised
Premises or any part thereof, nor as giving TENANT any right, power, or
authority to contract for or permit the rendering of any services or the
furnishing of any materials that would give rise to the filing of any lien
against the Demised Premises or the building of which they are a part or the
land upon which they are located, or any part thereof or any interest of
LANDLORD therein.
26. REPAIRS BY LANDLORD
LANDLORD shall have no duty to TENANT to make any repairs or improvements
to the Demised Premises except structural repairs necessary for safety and
tenantability, and then only if not brought about by any act or negligence, of
TENANT, or TENANT's employees, agents, or invitees. LANDLORD shall not be liable
to TENANT for any damage caused to TENANT or TENANT's property due to the
building or any part of appurtenances thereof being improperly constructed or
being or becoming out of repair so long as same are not caused by negligence of
Landlord, its agents, contractors or employees. TENANT agrees to report
immediately in writing to LANDLORD any defective condition in or about the
Demised Premises known to TENANT, and failure to so report shall make TENANT
liable to LANDLORD for any expense or damage to LANDLORD resulting from such
defective condition. Unless caused by Landlord's gross negligence, LANDLORD
shall not be liable for any damage to any property in said Demised Premises
which result from LANDLORD's failure to make said structural repairs. Structural
repairs are herein defined as being limited to foundation, supporting structure,
roof and floor slab.
27. TENANT PARKING
(A) NON-EXCLUSIVE RIGHT TO PARK AUTOMOBILES: Indicated by the shading on
Exhibit "A" are the "Parking Areas" of the Building which will be
available to LANDLORD, TENANT, other tenants of the Building, and their
respective employees, customers, guests and invitees for the parking of
vehicles. TENANT shall have the right to
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park, in the Parking Areas only, no more the twenty (20) vehicles in
addition to the vehicles permitted under the Lease Agreement for Two
Oakwood Boulevard, Suite 140, Hollywood, Florida 33020.
(B) LANDLORD'S REGULATION OF PARKING AT THE BUSINESS CENTER: The parking of
vehicles anywhere, except in strict accordance with Subsection 25(A)
above, and the parking of inoperable vehicles are strictly prohibited
and shall be deemed defaults of TENANT without the necessity of
LANDLORD's giving of notice to TENANT of such default. In addition to
all other rights and remedies reserved in this Lease and available at
law or in equity, LANDLORD shall have the right, in the event of such
default, to tow improperly parked vehicles without notice to TENANT or
the owner of said vehicle, and TENANT shall reimburse LANDLORD for the
cost thereof upon presentation of an invoice therefor. Tenant shall
indemnify and hold LANDLORD harmless against any loss, damage, claim or
action suffered by LANDLORD in connection with the towing of any
vehicle parked by any employee, agent, customer, invitee, licensee or
guest of TENANT. LANDLORD shall have the right to institute and
maintain whatever procedures LANDLORD deems necessary or desirable to
regulate the parking of vehicles. Such procedures may include, but are
not to be limited to, requiring TENANT and its employees, customers,
guests, and invitees to display parking decals on parked vehicles, or
requiring that TENANT supply LANDLORD with the license plate numbers of
parked vehicles, and the levying of fines against TENANT for improperly
parked vehicles. TENANT shall enforce LANDLORD's parking procedures
with respect to TENANT's employees, guests, customers and licensees.
28. COMPLIANCE WITH LAW BY TENANT
TENANT agrees not to do or permit anything to be done in or about the
Demised Premises, which might in any way conflict with any law, ordinance, rule
or regulation affecting the use and occupancy of the Demised Premises, which are
now in effect or may hereafter be enacted by any governmental agency or any
public authority, or in any way obstruct or interfere with the rights of other
tenants of the building, or injure or annoy them, nor use or allow the use of
the Demised Premises for any improper, immoral or objectionable purpose.
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29. TIME OF THE ESSENCE
It is understood and agreed between the parties hereto that time is of the
essence of this Lease.
30. NOTICES
All notices required under this Lease shall be in writing. Any notice by
LANDLORD to TENANT shall be deemed to be duly given if either delivered
personally to TENANT at the Demised Premises or when mailed by certified mail,
addressed to TENANT at the Demised Premises. Any notice by TENANT to LANDLORD
shall be deemed duly given if sent by certified mail to LANDLORD at 200 South
Park Road, Suite 200, Hollywood, Florida 33021 (or at such other address as may
hereafter be designated by LANDLORD).
31. SCOPE AND INTERPRETATION OF THE AGREEMENT
This Lease shall be considered to be the only agreement between the parties
hereto pertaining to the Demised Premises. All negotiations and oral agreements
acceptable to both parties are included herein. The laws of the State of Florida
shall govern the validity, interpretation, performance and enforcement of this
Lease.
32. CAPTIONS
Any heading preceding the text of the several paragraphs and subparagraphs
hereof are inserted solely for convenience of reference and shall not constitute
a part of this Lease, nor shall they affect its meaning or construction.
33. RECORDING
TENANT shall not record this Lease or a short form or memorandum thereof
without LANDLORD's prior written consent and joinder in such instrument,
provided, however, that TENANT shall, at LANDLORD's request, enter into the
Short Form Lease Agreement attached hereto as SUPPLEMENT I to this lease, which
Short Form Lease Agreement LANDLORD, but not TENANT, shall have the right to
record in the Public Records of the County in which the Demised Premises are
located.
34. INCREASED BASE RENT
Annually, the Base Rent shall be increased by five (5%) percent of the
preceding year's Base Rental.
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35. INSURANCE
(A) COVERAGE: TENANT shall maintain, at its expense, throughout the Term,
for the benefit of LANDLORD and LANDLORD's Mortgagees, the following
insurance coverages:
(i) general liability insurance for bodily injury and property damage
to protect both LANDLORD and TENANT against damage, costs and
attorney's fees arising out of accidents of any kind occurring on
or about the Premises or the Building of not less than Three
Million and No/100 ($3,000,000.00);
(ii) fire and extended casualty insurance with sufficient coverage to
reimburse the loss of all the TENANT'S improvements to the
Premises, and all the TENANT'S fixtures, equipment, personal
property and inventory;
(iii) plate glass insurance to protect both LANDLORD and TENANT
covering the replacement value of all plate glass in or about the
Premises; and
(iv) appropriate worker's compensation and any and all other insurance
required by law.
(B) ADDITIONAL INSUREDS: All insurance, except the Worker's Compensation
coverage which shall include a waiver of subrogation against the
LANDLORD and LANDLORD'S Mortgagees, required by Subsection 33(A) above,
shall name LANDLORD and LANDLORD'S Mortgagees as additional insureds
and shall be written by a company or companies qualified to do business
in Florida and reasonably acceptable to LANDLORD. A certificate showing
such insurance in force and naming LANDLORD and LANDLORD'S Mortgagees
as additional insureds or waiver of subrogation for Worker's
Compensation shall be delivered to LANDLORD prior to the Commencement
Date, and such insurance and updated certificates or renewal policies
shall be delivered to LANDLORD no fewer than thirty (30) days prior to
the expiration of the then existing policies. No policy shall be
canceled or subject to reduction in coverage or other change without at
least 30 days' advance written notice to LANDLORD. No acceptance or
approval of any insurance by LANDLORD shall relieve or release TENANT
from any liability, duty or obligation under this Lease. Whenever any
part of the Premises shall have been damaged or destroyed by fire or
other casualty or any other incident or accident has accrued which
gives rise to a potential claim under an insurance policy to
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be maintained by TENANT under this Section 33, TENANT shall promptly
make proof of loss in accordance with the terms of the applicable
insurance policies and shall promptly prosecute all valid claims which
may have arisen against the insurers based upon any such casualty,
incident or accident. TENANT SHALL give LANDLORD written notice of any
potential claim within five (5) days following the date TENANT acquires
actual notice thereof.
(C) WAIVER OF SUBROGATION: LANDLORD and TENANT each waive any right of
recovery against the other for any loss to the extent that such claim
is covered by valid and collectible insurance carried for the benefit
of the party entitled to make such claim and provided the insurer pays
such claim. The foregoing waiver shall not apply if the policy of
insurance covering such loss would be invalidated by the operation of
said waiver.
(D) TENANT shall not do or permit anything to be done or bring into or keep
on or permit anything to be brought into or kept on the Demised
Premises which shall increase the rate of insurance on the building of
which the Demised Premises are a part. If, by reason of the failure of
TENANT to comply with the terms of this Lease, or by reason of TENANT'S
occupancy (even though permitted or contemplated by this Lease), the
insurance rate shall at any time be higher than it would be otherwise,
TENANT shall reimburse LANDLORD for all increases in insurance premiums
charged because of such violation or occupancy by TENANT.
36. PUBLIC UTILITIES
TENANT shall pay for all utilities, used or consumed in or upon the Demised
Premises, and all sewer charges, as and when the charges therefor shall become
due and payable, and TENANT shall pay any garbage or trash collection fee
imposed by any governmental authority.
37. SIGNS
TENANT will not exhibit, inscribe, paint, or affix any sign, advertisement,
notice or other lettering on any part of the outside of the Demised Premises or
of the Building of which the Demised Premises are a part, or inside the Demised
Premises if visible from the outside, without first obtaining LANDLORD's written
approval thereof; and TENANT further agrees to maintain such sign, lettering,
etc., as may be approved in good condition and repair at all times. TENANT will
not attach any awning, antenna or other projection to the roof or the outside
wall of the Demised Premises or the building of which the Demised Premises are a
part.
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TENANT shall not install any drapes, curtains, blinds or any other window
covering, or overlay of any type, texture, fiber, material or the like on any
window, door or other aperture located at or within the Demised Premises,
without the express written consent of LANDLORD.
38. CONSTRUCTION
Subject to delays caused by Tenant, Landlord will within ninety (90) days
after Landlord's receipt and Landlord's and Tenant's approval of the Plans and
Specifications described in Section 4 hereof, cause the construction of TENANT'S
improvements to commence and be built in substantial compliance with the Plans
and Specifications, incorporating in such construction all items of work
described in EXHIBIT B, B-1, and B-2 and C. Landlord shall grant Tenant one (1)
day's base rental credit for each day after the expiration of the above ninety
(90) day period (or as same may be adjusted due to Tenant-caused delays) until
the Landlord's Work in the Demised Premises is substantially complete as
provided in this Lease.
LANDLORD agrees that it will provide, install or construct, at no expense
to TENANT, those standard building items described in Exhibit C attached hereto
and made a part hereof. Any and all expense for building items which are in
addition to or are in substitution for the standard building items specifically
enumerated in Exhibit C, which LANDLORD is to provide, install or construct in
the Demised Premises on TENANT'S behalf, shall be paid for by TENANT within
thirty (30) days after receipt of an invoice(s) therefor from LANDLORD. Payment
from TENANT of such costs shall not operate, expressly or impliedly, to create
in TENANT any interest in the Demised Premises beyond the leasehold interest
granted hereby.
Should the work performed by LANDLORD for TENANT at TENANT'S sole cost and
expense including any change orders exceed the lesser of the equivalent of
one-month Base Rent or the sum of $3,000.00, then TENANT shall pay to LANDLORD
said cost within fifteen (15) days of receipt of invoice for same but in any
event prior to TENANT taking possession of the Demised Premises. In no event,
however, shall the Commencement Date of the Lease be adjusted by reason of
non-payment of said cost.
39. RADON GAS
Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in
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Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit.
40. INTEREST ON PAST DUE AMOUNTS
All Rent payable hereunder shall bear interest at the highest rate
permitted by law from the due date until the date actually paid.
41. EXCULPATION
Neither LANDLORD nor any general or limited partner of LANDLORD (nor any
direct or indirect partner, incorporator, shareholder, trustee, officer or
director, disclosed or undisclosed, past present or future of a partner of
LANDLORD) shall be personally liable for any liability or obligation of LANDLORD
to TENANT in connection with this Lease. TENANT will look solely to the interest
of LANDLORD in the Premises to satisfy any claims TENANT may have against
LANDLORD with respect to such liabilities and obligations.
42. HAZARDOUS AND TOXIC SUBSTANCES
In addition to, and not by way of limitation of the provisions of Section
26 above, TENANT hereby covenants with LANDLORD and represents and warrants to
LANDLORD as follows:
(A) TENANT, at its sole cost and expense, will strictly comply with any and
all applicable federal, state and local environmental laws, rules, regulations,
permits and orders affecting Demised Premises and/or the business operation of
TENANT conducted on the Demised Premises and/or the business operation of TENANT
conducted on the Demised Premises, relating to the generation, recycling, reuse,
sale, storage, handling, transport, or presence of any "Hazardous Materials" (as
hereinafter defined) on the Demised Premises whether now in effect or as may be
promulgated or amended from time to time (collectively, the "Environmental
Laws"). Tenant will not permit or allow the generation, manufacture, recycling,
reuse, sale, storage, handling, transport, or presence of any Hazardous
Materials on the Premises without LANDLORD'S express prior written consent,
which consent LANDLORD may exercise in its sole discretion. As used in this
Section, the term "Hazardous Material(s)" shall mean any substances defined as
or included in the definition of "hazardous substances," hazardous wastes,"
"hazardous materials," "toxic substances," "contaminants" or other pollution
under any applicable Environmental Laws. Notwithstanding anything to the
contrary contained herein, LANDLORD'S consent to any action by TENANT shall not
operate to relieve TENANT of the
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obligation to comply with all the provisions of this Section 40. TENANT will not
permit or allow, and will take all actions necessary to avoid, the occurrence of
any spills of Hazardous Materials on or off the Demised Premises as a result of
any construction on, or use of, the Demised Premises. TENANT shall promptly
advise LANDLORD in writing immediately upon becoming aware of (i) the existence
of any spills, releases or discharges of Hazardous Materials that occur on or
onto the Demised Premises, or off the Demised Premises, and of any existing or
threatened violation of this Section 40; (ii) any and all enforcement, cleanup,
removal or other governmental or regulatory actions instituted, completed or
threatened by any governmental authority with respect to the Demised Premises
from time to time under any applicable Environmental Laws; (iii) any and all
claims made or threatened by any non-governmental party against TENANT or the
Demised Premises relating to damage, contribution, cost recovery, compensation,
loss or injury resulting from any Hazardous Materials or any violation of
applicable Environmental Laws; and (iv) TENANT'S discovery of any occurrence of
condition on any real property adjoining or in the immediate vicinity of the
Demised Premises that could cause the Demised Premises or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
of the Demised Premises under any Environmental Laws.
(B) Without LANDLORD's prior written consent, TENANT shall not enter into
any settlement, consent or compromise with respect to any "Environmental
Claim(s)" (as hereinafter defined); provided, however, that LANDLORD'S prior
consent shall not be necessary for TENANT to take any remedial action if ordered
by a court of competent jurisdiction or if the presence of Hazardous Materials
at the Demised Premises poses an immediate, significant threat to the health,
safety or welfare of any individual or otherwise requires an immediate remedial
response. As used in this Section, "Environmental Claim(s)," shall mean any
claim(s) or cause(s) of action resulting from the failure of TENANT or the
Demised Premises to comply with any Environmental Law relating to Hazardous
Materials, industrial hygiene or environmental conditions. In any event, TENANT
shall promptly notify LANDLORD of any action so taken.
(C) At all times during the Term of this Lease and any renewals or
extensions hereof, TENANT, at its sole cost and expense, shall comply with any
and all applicable laws, regulations, ordinances, permits and orders regulating
the type and quantity of waste that may be discharged into the sanitary sewer
system serving the Demised Premises, including, but not
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limited to, all rules, regulations, permits, and orders of any governmental
agency or authority having jurisdiction, or its successor. TENANT agrees to
limit its discharges of waste into the sanitary sewer system to "Domestic Waste
Water", as such terms defined by Rule 17-6.030 (22) of the Florida
Administrative Code, as amended from time to time, or as the term may be defined
by other laws, regulations, ordinances, permits or orders presently in effect or
hereafter enacted, as such laws, regulations, ordinances, permits or orders may
be amended from time to time. In no event, however, shall Domestic Waste Water
be construed to mean or include any "Non-Domestic Waste Water" that has
undergone "Pre-treatment" as the latter term is defined in Rule 17-6.030 (63) of
the Florida Administrative Code or as defined by other laws, regulations,
ordinances, orders or permits presently in effect or hereafter enacted, as such
laws, regulations, ordinances, orders or permits may be amended from time to
time.
(D) TENANT agrees that LANDLORD and LANDLORD'S agents and independent
contractors may enter and inspect the Demised Premises at any reasonable time,
and from time to time, to verify that TENANT's operations on the Demised
Premises do not violate any of the provisions of this Section 40 and that they
comply with any and all applicable Environmental Laws. At LANDLORD'S option,
LANDLORD may obtain, from time to time, reports from licensed professional
engineers or other environmental scientists with experience in environmental
investigations and may require TENANT to permit such licensed professional
engineers or other environmental scientists to conduct complete and thorough
on-site inspections of the Demised Premises, including, without limitation,
sampling and analysis of the soil surface water, groundwater and air, to
determine whether TENANT is in compliance with the provisions of the Section and
all Environmental Laws. TENANT and its agents shall cooperate with LANDLORD and
its agents in connection with the conduct of such investigations. In the event,
an inspection from a licensed environmental engineer or other environmental
scientist indicates that TENANT is in default under this Section 40, TENANT
shall, immediately upon demand, reimburse LANDLORD for all costs and expenses of
such investigations; moreover, LANDLORD may, at its option, undertake such steps
as it deems necessary to cure such default and to bring the Demised Premises
into compliance with the terms of this Section, and TENANT shall, immediately
upon demand, reimburse LANDLORD for all costs and expenses incurred in curing
such default and bringing the Demised Premises into compliance with the terms of
this Section.
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(E) TENANT hereby indemnifies and holds LANDLORD harmless from and against
any and all claims, demand, damages, losses, liens, liabilities, penalties,
fines, lawsuits and other proceedings, costs, and expenses (including, without
limitation, reasonable attorneys' fees and costs at trial and all appellate
levels), arising directly or indirectly from, or in any way connected with: (i)
the presence, or use, generation, treatment or storage on, under or about the
Demised Premises of any Hazardous Materials on the Demised Premises, or the
disposal or release of Hazardous Materials on the Demised Premises, whether or
not expressly approved by LANDLORD in writing, (ii) the presence of any
Hazardous Materials off the Demised Premises, whether or not expressly approved
by LANDLORD in writing, (iii) the presence of any Hazardous Materials off the
Demised Premises as the result of any use of the Demised Premises, (iv) any
violation or alleged violation of any Environmental Law, including, but not
limited to, violations of the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980 and regulations promulgated thereunder,
as the same may be amended from time to time, (v) the costs of any necessary
inspection, audit, cleanup or detoxification of the Demised Premises under any
Environmental Laws, and the preparation and implementation of any closure,
remedial or other required plans, consent orders, license applications or the
like, or (vi) any default by TENANT under this Section 40. All sums paid and
costs incurred by LANDLORD with respect to any Environmental Claim or any other
matter indemnified against hereunder shall be due and payable by TENANT
immediately upon demand. If, after demand, TENANT fails to pay any sums due
pursuant to this indemnification, such sums shall bear interest at the highest
rate then permitted by applicable law, from the date so paid or incurred by
LANDLORD until LANDLORD is reimbursed by TENANT. The indemnification contained
herein shall survive the termination of the leasehold estate created hereby and
any assignment by LANDLORD of its rights under this Lease.
(F) The foregoing Subsections 40(A) through 40(E) and this Subsection 40(F)
shall apply with equal force and effect to TENANT's use and occupancy of the
Building. Any provision of this Lease to the contrary notwithstanding, any
breach of the covenants, representations or warranties contained in this Section
40 shall constitute a default under this Lease and shall entitle LANDLORD, in
addition to LANDLORD'S other rights and remedies available at law, in equity or
under this Lease, to immediately terminate this Lease.
In additional to the foregoing, Tenant is hereby given notice that
Section 403.727, Florida Statues provides for penalties for improper disposal of
Hazardous Materials.
26
<PAGE>
43. RELOCATION OF TENANT
LANDLORD expressly reserves the right at LANDLORD'S sole cost and expense
to remove TENANT from the Demised Premises and to relocate TENANT in some other
space of LANDLORD'S choosing of approximately the same dimensions and size
within the Oakwood Business Center, which other space shall be improved and
decorated by LANDLORD, at LANDLORD'S expense, to the same degree as the Demised
Premises are improved immediately prior to the relocation. LANDLORD shall have
the right, in LANDLORD'S sole discretion, to use such decorations and materials
from the existing Demised Premises, or other materials so that the space in
which TENANT is relocated shall be comparable in its interior design and
decoration to the Demised Premises from which TENANT is removed. Nothing herein
contained shall be construed to relieve TENANT or imply that TENANT is relieved
of the liability for, or obligation to pay, any Additional Rent due by reason of
the provisions of Section 6 of this Lease, the provisions of which Section shall
be applied to the space in which TENANT is relocated on the same basis as said
provisions of which Section shall be applied to the space in which TENANT is
relocated on the same basis as said provisions were applied to the Demised
Premises from which TENANT is removed. TENANT agrees that LANDLORD'S exercise of
its election to remove and relocate TENANT shall not terminate this Lease or
release TENANT, in whole or in part, from TENANT'S obligations to pay Rent and
perform the covenants and agreements hereunder for the full Term. In the case
Landlord exercised its rights under this paragraph, Tenant may at its option
cancel this Lease upon thirty (30) days written notice to Landlord, instead of
relocating as provided herein.
44. OWNER'S/TENANTS' ASSOCIATION
TENANT agrees that in the event an owner's and/or tenants' association (the
"Association") is formed for the Oakwood Business Center, then TENANT shall
become a member and shall maintain a membership therein, and TENANT agrees that
it shall be responsible for its share of the expenses thereof based on the
amount per square foot of rentable area in the Demised Premises, as same may be
determined from time to time by a majority vote of the members of the
Association, and TENANT agrees that it shall comply with such determination. In
the event the Association is formed, TENANT agrees that it shall abide by its
charter, by-laws and rules and regulations, same being subject to reasonable
approval by Tenant.
Additionally, TENANT hereby agrees to fully comply with the Rules and
Regulations of the Building attached hereto and incorporated herein by this
reference as Exhibit "E".
27
<PAGE>
45. EMPLOYMENT OPTION CREDIT: TENANT may, at its option, receive a credit
against their Base Rent if, for any calendar year by January 30 of the
applicable calendar year, TENANT shall have employed one or more full-time (30
hours or more per week) residents of the subdivision of Liberia for said
calendar year. The credit received shall be equal to a reduction in the Base
rent of $.50 per square foot of the Demised Premises per full-time Liberia
employee, in no event, however, shall the total credit exceed $3,000 per
calendar year ("Employment Option Credit"). TENANT shall be eligible for the
Employment Option Credit only at the end of the applicable calendar year and
shall not be entitled to any Base Rent reductions during the applicable calendar
year. TENANT shall also not be entitled to any of the Employment Option Credit
for employment of less than a full calendar year (except for employment in
January thereof). TENANT must provide to LANDLORD proof of full-time employment
(for example, in the form of a W-2 form for each said employee) for each Liberia
resident for the entire calendar year (except for the period up to January 30)
as well as proof of residency for each Liberia employee. Upon satisfactory proof
of same to LANDLORD, LANDLORD shall allow TENANT the Employment Option Credit
which shall be applied Against the next calendar year's Base Rent, on a monthly
pro rata basis, with the applicable Employment Option Credit amount divided into
twelve equal reduction amounts and applied against each monthly installment of
the subsequent calendar year's Base Rent.
Tenant may elect eligibility for the Employment Option Credit for
subsequent calendar years or may elect not to pursue eligibility, at TENANT'S
sole option. TENANT'S failure to pursue eligibility for any given calendar year
shall not prejudice TENANT from pursuing eligibility in any subsequent calendar
year. The Employment Option Credit shall run through the term of this Lease and
any extensions, option, renewals, and modification thereto.
46. ADDITIONAL PROVISIONS
Insofar as the following additional provisions, if any, conflict with any
of the foregoing provisions, the following additional provisions, if any, shall
prevail:
A. DELETIONS: To the extent that any provision in this Lease has been
deleted by strike out or otherwise crossing out such preprinted
provision, such deleted provision shall be construed to have never
been included in the Lease or to have been a part thereof ab
initio.
B. HEATING, VENTILATION AND AIR CONDITIONING MAINTENANCE: Tenant
shall be responsible for the preventative and routine maintenance
of the heating, ventilation and air conditioning systems and the
cost thereof. Tenant agrees to enter into a Preventative
Maintenance Agreement with a reputable service firm to provide
said maintenance during the term of the Lease.
28
<PAGE>
IN WITTNESS WHEREOF, the parties hereto have duly executed this
Lease the day and year hereinafter set forth.
Executed this 7th day of January 1993.
Signed, sealed and delivered in the LANDLORD
in the presence of:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
By: /s/ ROGER LEBLANC
- -------------------- ----------------------------------
Roger LeBlanc, Sr. Vice President
By: /s/ THEODORE R. STOTZER
- -------------------- ----------------------------------
As to Landlord Theodore R. Stotzer, Secretary
Executed this 5th day of January 1993.
Signed, sealed and delivered in the TENANT
in the presence of:
KOS PHARMACEUTICALS, INC.,
a Florida corporation
/s/ LAURA BONITTO By: /s/ DANIEL M. BELL
- ----------------------- ---------------------------------
Its President
/s/ PAMELA GREGORY Attest:
- ----------------------- --------------------------------
As to Tenant
(Corporate Seal)
1
<PAGE>
SUPPLEMENT I to LEASE Dated ___________________________________- Between
________________________________________________________________________
__________________________________________________________, (LANDLORD)
and ____________________________________________________________________
_________________________________________________________, (TENANT).
PURSUANT to the provisons of the above-referenced Lease, LANDLORD and
TENANT, intending to be legally bound hereby, agree that the tem of the said
Lease commenced on the ____ day of _______________, 199__, shall end on the ____
day of __________________, 199__, at Midnight, unless sooner terminated or
extended as therein provided.
IN WITTNESS WHEREOF, the parties hereto have duly executed this
SUPPLEMENT I the day and year hereinafter set forth.
Executed this ____ day of ______ 199__.
Signed, sealed and delivered in the LANDLORD
in the presence of:
STS BUILDING ASSOCIATES, L.P.,
a Delaware limited partnership
By: Hollywood STS Associates, L.P.,
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
By:
------------------------------------
Its
By:
------------------------------------
As to Landlord Its
Executed this ___ day of _______ 199__.
Signed, sealed and delivered in the TENANT (If Corporation)
in the presence of:
By:
------------------------------------
Its President
Attest: /s/_______________________
As to Tenant Its Secretary
(Corporate Seal)
Executed this ___ day of _______ 199__.
Signed, sealed and delivered in the TENANT
in the presence of: (If Individuals or an Unincorporated
Identity)
___________________________
___________________________
___________________________ By: ________________________
____________________________
As to TENANT
SUPPLEMENT 1
THIS IS A FORM ONLY - NOT TO BE EXECUTIED
-----------------------------------------
<PAGE>
EXHIBIT A
DEMISED PREMISES (DRAWING)
<PAGE>
EXHIBIT "B"
LEASEHOLD IMPROVEMENTS
Landlord shall build Tenant's interior improvements in the Demised
Premises in accordance with final plans and specifications to be prepared by
Landlord's architect and approved by Landlord and Tenant. Said final plans and
specifications shall be made a part of this Lease as Exhibit C. Said final plans
and specifications shall be prepared in accordance with the space plan attached
hereto as Exhibit B-1 and Exhibit B-2 "Construction Items. "Substantial
Completion" of said improvements shall be evidenced by Landlord's written
notification to Tenant that said improvements have been substantially completed.
By taking possession of the Premises following said notification, Tenant shall
be deemed to have acknowledged and agreed that Landlord's improvements to the
Premises were made in accordance with this Exhibit "B" and that improvements
required by this Exhibit "B" have been substantially completed. All other
improvements to be made to the Premises which are necessary for the conduct of
Tenant's business in the Premises shall be made by Tenant, at Tenant's sole cost
and expense, subject to Tenant's obligation to obtain prior written consent of
Landlord to said improvements, which consent shall not be unreasonably withheld.
<PAGE>
EXHIBIT B-1
SPACE PLANS (DRAWING)
<PAGE>
EXHIBIT B-2
CONSTRUCTION MATERIALS
FLOORING TREATMENT:
1) Existing carpet at office area will be vacuumed, but shall otherwise
remain in "As-Is" condition.
2) Warehouse/Storage Area floors will be broom swept.
3) Bathrooms will receive new vinyl tile flooring of Tenant's choice from
Landlord's samples.
WINDOW TREATMENT:
1) Exterior storefront windows with existing horizontal mini-blinds to b
cleaned but otherwise will remain "As-Is".
ELECTRICAL SERVICE:
1) 600 AMP disconnect with a separate meter to be installed at warehouse
area
2) Existing electrical outlets and switches to remain "As-Is". Existing
electrical conduit to be connected to existing 200 AMP subpanel at
warehouse area.
3) Emergency lights and exit lights to be installed as required by code.
AIR CONDITIONING:
1) Existing air conditioning units will be serviced and delivered in
operational condition but otherwise will be in "As-Is" condition.
Existing ducting and diffusors will remain "As-Is".
PLUMBING:
1) Two (2) bathrooms installed as required by code as shown on Exhibit
B-1.
CEILING TREATMENT:
1) Existing 2' x 4' acoustical tile ceiling to remain in "As-Is"
condition.
PAINTING:
1) There will be no painting in the Premises. All new construction will be
delivered taped and ready for paint. All existing walls to remain in
"As-Is" condition.
LIGHTING:
1) Existing lighting to remain in "As-Is" condition.
PARTITIONS:
1) A new demising wall to be constructed as indicated on Exhibit B-1.
SUITE ENTRY:
1) To be installed by LANDLORD as shown on Exhibit B-1.
<PAGE>
EXHIBIT C
PLANS AND SPECIFICATIONS
(Intentionally Left Page)
<PAGE>
EXHIBIT E
RULES OF THE BUSINESS CENTER
In addition to the terms, covenants, and conditions of the Lease,
Tenant shall comply, and Tenant shall cause the Premises to comply with the
following:
A. PARKING: Parking of automobiles, trucks and other vehicles shall be
restricted to areas designated for such purpose by Landlord.
Landlord reserves the right to remove by towing any vehicle which is
obstructing any door or driveway, obstructing other parked vehicles, parked in a
restricted area, or is otherwise improperly parked. All towing expenses shall be
paid by Tenant or the vehicle owner.
Each vehicle owner shall be responsible for any damage to Landlord's or
any third party's property caused by the operation or parking of such vehicle.
Parking both during and after normal business hours shall conform and
comply with all laws, ordinances and regulations of any agency or any regulatory
authority.
Repairs to, and maintenance of, vehicles on any part of the Business
Center visible outside Tenant's Premises (including washing and waxing) is
prohibited.
B. OUTDOOR STORAGE: Tenant shall not store any materials, supplies,
equipment or other property outside the Premises or in trailers, whether
attached to or detached from a driving unit, nor shall any such tractor/trailer
be parked within the Business Center for more than twenty-four (24) continuous
hours.
C. HAZARDOUS WASTE: Tenant shall not generate, store, handle or use any
hazardous effluent, material or substances in excess of lawful standards, or
prohibited by code, anywhere in the Business Center.
D. Tenant, it's officers, agents, servants, guests, invitees, licensees
and employees shall not block or obstruct any of the entries, passages, doors or
hallways in the Business Center nor place, empty or throw any rubbish, litter,
trash or material of any nature into such areas, or permit such areas to be used
at any time except for the ingress or egress of Tenant, its agents, employees,
visitors or invitees.
E. Landlord will not be responsible for lost or stolen personal property,
equipment, money or any article taken from the Premises or any other part of the
Business Center, regardless of how or when such loss occurs.
F. Tenant, its officers, agents, servants or employees shall not use any
part of the Premises or the Business Center for housing, lodging or sleeping
purposes without the prior written consent of Landlord.
G. Tenant shall not permit the operation of any musical or sound-producing
instruments or devices which may be heard outside the Premises.
H. The plumbing facilities shall not be used for any purpose other than
that for which they are constructed, and no foreign substances of any kind shall
be thrown therein, and the expense of any breakage, stoppage or damage resulting
from a violation of this provision shall be borne by Tenant.
I. All contractors and/or technicians performing work for Tenant within
the Premises shall be approved by Landlord before commencing work. This shall
apply to, but shall not be limited to, installation of telephones, telegraph
equipment, electrical devices and attachments, and all installations affecting
floors, walls, windows, doors, ceilings, equipment or any other physical feature
of the Premises.
J. Canvassing, soliciting and peddling in the Industrial Park, including,
without limitation, the distribution of any handbills or other advertising
matter in automobiles parked in the Business Center, is prohibited, and each
Tenant shall cooperate to prevent the same. In this respect, Tenant shall
promptly report any such activities to Landlord.
E-1
<PAGE>
K. In the event Tenant must dispose of crates, boxes or other refuse which
will not fit into office wastepaper baskets, it will be the responsibility of
Tenant to dispose of same in the waste dumpsters provided by Landlord, broken
down into the smallest and most reasonably compact components. In no event shall
Tenant set such items in areas of the Industrial Park other than within Tenant's
own Premises for disposal.
L. If the Premises should become invested with vermin, Tenant at its sole
cost and expense, shall cause the Premises to be exterminated at such time, and
from time to time, to the satisfaction of Landlord.
M. Tenant shall not install any antenna or aerial wires, radio or
television equipment, inside or outside of the Premises without Landlord's prior
written approval and upon such reasonable terms and conditions as may be
specified by Landlord in each and every instance.
EXHIBIT 10.11
MODIFICATION AND EXTENSION AGREEMENT
This agreement is made this 6th day of June, 1996, by and between STS
Buildings Associates, L.P., a Delaware Limited Partnership, having its office at
200 South Park Road, Hollywood, FL 33021 [herein "LANDLORD"] and Kos
Pharmaceuticals, Inc., a Florida Corporation, having its office at 1001 South
Bayshore Drive, Suite 2502, Miami, Florida 33131 [herein "TENANT"].
RECITALS
WHEREAS, TENANT has entered into three (3) separate Leases with
LANDLORD and with respect to the demised premise(s) hereinafter identified; and,
WHEREAS, LANDLORD and TENANT have agreed to certain lease(s)
modifications herein provided; and,
WHEREAS, the current Leases between LANDLORD and TENANT are described
as (i) Lease, dated January 7, 1993, Suite 50, One Oakwood Boulevard, Hollywood
Florida; (ii) Lease, dated May 15, 1990, Suite 140, Two Oakwood Boulevard,
Hollywood Florida; (iii) Lease, dated May 2, 1991, Suite 150, Two Oakwood
Boulevard, Hollywood Florida; and,
WHEREAS, presently the Lease for Suite 140 terminates November 30th
1995; the Lease for Suite 150 terminates September 30, 1996; and the Lease for
Suite 50 terminates May 31, 1997.
THEREFORE, know all men by these presence that for $10.00 and other
good and valuable considerations, the parties hereby agree as follows:
1. The recitals and matters set forth above are incorporated
herein as if fully stated.
<PAGE>
2. The Lease for Suite 140 is hereby modified to provide for an
extended lease term and termination date as of November 30, 1996. During the
Lease term from and after December 1, 1995, the Base Rent shall be $10.50 per
square foot, commencing December 1, 1995. In addition to the Base Rent, TENANT
shall pay all Additional Rent and all other expenses under the terms of the
Lease.
3. The Lease for Suite 150, which has a current lease term and
termination date of September 30, 1996, is hereby modified to provide for a
termination date as of November 30, 1996. All other terms of the Lease including
Base Rent and Additional Rent (subject to adjustment and increase) are hereby
ratified and confirmed except as expressly modified herein.
4. (A) The Lease for Suite 50, which has a present lease term and
termination date of May 31, 1997, is hereby modified to provide for a
termination date of October 31, 1996 and further to provide for one option to
renew for a nine (9) month period from November 1, 1996 to July 31, 1997. In the
event TENANT elects to exercise the option to renew, i.e., to July 31, 1997 it
shall provide Landlord a 90 day advance written notice, i.e., on or before July
31, 1996.
4. (B) MODIFICATION OF "DEMISED PREMISES"/SUITE 50 AND LEASE
AGREEMENT TO PROVIDE FOR "EXPANSION AREA" - "FIRST MODIFICATION"
The Parties hereto desire to modify the Lease Agreement for
Suite 50 upon certain terms and conditions as more fully set forth hereinafter.
i. CONFLICTS: In the event of a conflict between
any of the terms, conditions and/or provisions of this
First Modification and any of the terms,
<PAGE>
conditions and/or provisions of the Lease Agreement, the
terms conditions and/or provisions of this First Modification
shall prevail.
ii. DEFINED TERMS: Except as otherwise provided in
this First Modification, all defined terms shall have the
meanings such defined terms have in the Lease Agreement.
iii. MODIFICATIONS:
a. EFFECTIVE DATE: Notwithstanding the fact that
Landlord and Tenant have executed this Modification on the
day and year first above written, the changes to the Lease
as described herein shall be effective upon execution of
this First Modification ("EFFECTIVE DATE") for all purposes.
b. TERM: The Term of the Lease Agreement as hereby
modified shall expire upon October 31, 1996, unless extended
by the "Option to Extend Term as provided herein.
c. DEMISED PREMISES: The "Rentable Area of the Premises" is
hereby stipulated and mutually agreed to by the parties to be
increased by TWO THOUSAND (2,000) square feet (hereinafter
referred to as "Expansion Area"), said Expansion Area to be
identified as Suites 210 and 212 and outlined in red on
Exhibit "A", attached hereto. The total rentable area of the
Demised Premises shall be SEVEN THOUSAND SEVEN HUNDRED FIFTY
(7,750) square feet, (hereinafter referred to as
<PAGE>
"Demised Premises"). The term Premises or Demised Premises
in the Lease shall, as of the date of the First
Modification, be deemed to include the Expansion Area.
d. CONSTRUCTION: TENANT acknowledges and agrees
that LANDLORD will not be making any improvements to the
Expansion Area and that TENANT is accepting the same in
their "As-Is, Where-Is" condition.
e. ANNUAL BASE RENT: Effective March 1, 1996 the Annual Base
Rent shall be SIXTY SIX THOUSAND EIGHT HUNDRED THIRTY NINE
AND 54/100 DOLLARS ($66,839.54), and shall be paid by TENANT
to LANDLORD at its principal office or that of its agent or
at any other place hereafter designated in writing by
Landlord, in equal monthly installments of FIVE THOUSAND FIVE
HUNDRED SIXTY NINE AND 96/100 DOLLARS ($5,569.96) on or
before the first day of each month during the term hereof as
same shall be adjusted in accordance with this Lease.
f. RENTAL CREDIT: Tenant shall be granted a Rental
Credit in the amount of TWO THOUSAND FORTY ONE AND 66/100
DOLLARS ($2,041.66), which Rental Credit shall be applied
towards Tenant's Rent next due and payable under the Lease.
<PAGE>
g. ADDITIONAL RENT: TENANT's Proportionate Share
as described in Section 6(A)(i) of the Lease Agreement is
hereby stipulated and mutually agreed to be increased to
12.27%.
h. RENT DURING EXTENSION PERIOD: Should Tenant choose to
renew the Term for a nine (9) month period, provided Tenant
is not in default under this Lease, and further provided
TENANT gives LANDLORD ninety (90) days prior written notice
of TENANT's election to renew the Lease Term, Tenant shall be
entitled to extend the Term hereof for nine (9) months (the
"Extension Period") and rent during said Extension Period
shall be paid as follows: Annual Base Rent for the Extension
Period shall be SIXTY NINE THOUSAND TWO HUNDRED SIXTY FOUR
AND NO/100 DOLLARS shall be paid by TENANT to LANDLORD at its
principal office or that of its agent or at any other place
hereafter designated in writing by LANDLORD, in equal monthly
installments of FIVE THOUSAND SEVEN HUNDRED SEVENTY TWO AND
NO/100 ($5,772.00) DOLLARS, on or before the first day of
each month during the Extension Period. All other terms and
conditions of the Lease as modified by this First
Modification of Lease shall continue to be in full force and
effect.
iv. RATIFICATION AND CONFIRMATION: Except as
specifically modified hereby, all of the terms, provision
and conditions of the Lease of
<PAGE>
January 7, 1993, shall remain in full force and effect and
are hereby ratified and confirmed.
5. Notwithstanding the Lease(s) modified termination date(s) November
30, 1996 for Suite 140 and Suite 150, and as further provided in paragraphs 2
and 3 above, TENANT shall have the right at its option(s) to extend said
Lease(s) terms (140 and 150) for two successive option periods, each for a 6
month "Option Term", commencing December 1, 1996. [herein "Second Extension and
Third Extension"]. TENANT in order to effect a Second Extension and/or Third
Extension shall be required to provide written notice to LANDLORD not less than
60 nor more than 90 days prior to November 30, 1996 and if extended for a 3rd
Extension prior to March 1997. Said notice shall specify the term of the Second
Extension, i.e., (the 6 month period) and similarly, if exercised for the Third
Extension. During said Second and/or Third Extension, TENANT shall continue to
pay full rent on Suite 150 (as provided by the present Lease) and the modified
Base Rent on Suite 140 of $10.50 per square foot.
6. LANDLORD and TENANT have met and have inspected the current tenant
improvements and the demised premises of Suites 140 and 150. TENANT acknowledges
the requirements under the respective Lease(s) to return the demised premise(s)
to the condition as it existed at the time of the Lease(s). Notwithstanding
however, LANDLORD and TENANT hereby mutually agree with respect to the following
specific requirements by TENANT upon vacating the premises at the Lease(s) and
with respect to the tenant improvements. With respect to the Lease(s)
obligation(s) the responsibility of the TENANT shall be limited as follows:
<PAGE>
(i) SUITE 140 - TWO OAKWOOD BOULEVARD
ANALYTICAL LAB
A) Remove three (3) compartment sinks, cut off all plumbing
lines to the wall and cap the face plates.
B) Remove eye wash, cut off all plumbing lines to the wall
and cap with face plates.
FORMULATION LAB
A) Cover floor drains at all rooms. Remove existing flooring
and level floors as necessary with concrete.
(i) SUITE 150 - TWO OAKWOOD BOULEVARD
WORKROOM AND SECOND FLOOR FORMULATION LAB:
A) Remove beams/floor curbs at entries to Workroom #1 and #2
and Formulation Lab.
B) Remove and cap floor drains at Workroom #2 and Formulation
Lab. Remove existing flooring and level floors as
necessary with concrete.
C) Remove sink and water supplies and cut off plumbing at wall
and cap with face plate.
D) Remove all vents and cap above ceiling. Repair all ceilings.
BLOW OUT PANEL/VENT:
A) To be capped above ceiling with repairs made to ceiling.
GENERAL NOTES:
A) Tenant shall remove all special equipment and shall remove
and/or cap off all related electrical, mechanical and plumbing
to the wall with face plates. All penetrations at drywall
partitions to be patched and finished.
7. TENANT and LANDLORD hereby ratify and confirm the present terms and
conditions of the respective leases for Suite 50, 140 and 150 except as
otherwise modified herein.
8. TENANT hereby acknowledges that it has no present set off,
recoupment or claim against LANDLORD and that LANDLORD is in full compliance
with all terms and conditions of each respective Lease.
<PAGE>
9. TENANT, in further consideration of the agreements herein
contained, hereby specifically releases and waives any claims, past or present,
which TENANT has, if any, against LANDLORD and this Agreement shall operate as a
full and complete General Release of Landlord for any purported claims whether
asserted, known or unknown, as of the date hereof. TENANT hereby further
covenants, warrants and represents that it shall continue to perform its duties
and obligations under the Leases except as modified herein.
WITNESSES:
STS BUILDING ASSOCIATES, L.P.
a Delaware limited partnership
By: Hollywood STS Associates, L.P.
Its: General Partner
By: Hollywood, Inc. (Del.)
Its: General Partner
/s/ ILLEGIBLE By: /s/ ILLEGIBLE
--------------------- --------------------------------------------
Vice President
/s/ ILLEGIBLE By: /s/ ILLEGIBLE
--------------------- --------------------------------------------
As to Landlord Secretary
KOS PHARMACEUTICALS, INC.
a Florida corporation
/s/ CAROLYN M. LEMAIRE By: /S/ DANIEL M. BELL
------------------ ---------------------
Its President
/s/ LAURA BONITTO Attest: /s/ JUAN F. RODRIGUEZ
------------------ -----------------------------
Its Assistant Controller
(CORPORATE SEAL)
EXHIBIT 10.12
ASSIGNMENT AND SECOND MODIFICATION OF LEASE AGREEMENT
THIS ASSIGNMENT AND SECOND MODIFICATION OF LEASE AGREEMENT
("Modification"), Made this 30th day of June, 1996, by and between OAKWOOD
BUSINESS CENTER LIMITED PARTNERSHIP, a Delaware limited partnership, as
successor to STS Buildings Associates, L.P., a Delaware limited partnership,
(hereinafter referred to as "LANDLORD"), KOS HOLDINGS, INC., a Florida
corporation, (formerly Kos Pharmaceuticals, Inc.) (hereinafter referred to as
"ASSIGNOR") and KOS PHARMACEUTICALS, INC., a Florida corporation, which is a
wholly owned subsidiary of KOS Holdings, Inc. hereinafter referred to as
"ASSIGNEE".
WITNESSETH:
WHEREAS, STS Building Associates, L.P. and KOS Pharmaceuticals, Inc.,
did heretofore on the 2nd day of May, 1991 enter into a certain Lease Agreement
for premises located at Two Oakwood Boulevard, SUITE 150, Hollywood, Florida
33020; which said Lease Agreement was amended by that Modification and Extension
Agreement dated June 6, 1996, (collectively sometimes hereinafter the "Lease
Agreement"); and
WHEREAS, Assignor and Assignee have represented to Landlord that KOS
Pharmaceuticals, Inc. changed its name to KOS Holdings, Inc., and that
thereafter KOS Holdings, Inc., formed a wholly-owned subsidiary known as KOS
Pharmaceuticals, Inc., the proposed Assignee herein, and based solely upon such
representations, Landlord herein agrees as follows; and
WHEREAS, the parties hereto desire to further modify said Lease
Agreement upon certain terms and conditions as more fully set forth hereinafter.
NOW, THEREFORE, in consideration of the promises, covenants and
undertakings hereinafter set forth and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. RECITATIONS: The foregoing recitations are true and correct and are
incorporated herein by this reference.
2. CONFLICTS: In the event of a conflict between any of the terms,
conditions and/or provisions of this Modification and any of the terms,
conditions and/or provisions of the Lease Agreement, the terms, conditions
and/or provisions of this Modification shall prevail.
3. DEFINED TERMS: Except as otherwise provided in this Modification,
all defined terms shall have the meanings such defined terms have in the Lease
Agreement.
4. TERM: The Termination Date of the Lease Agreement as set forth in
Section 3 of the Lease Agreement and modified in Section 3 of the Modification
and Extension Agreement dated June 6, 1996, shall be further modified to provide
for a Termination Date of November 30, 1998.
5. BASE RENT: The Annual Base Rent as set forth in Section 5 of the
Lease Agreement shall be paid as follows:
PERIOD PERIOD ANNUAL MONTHLY
COMMENCING ENDING BASE RENT BASE RENT
- ---------- ------ --------- ---------
10/1/96 11/30/96 $60,173.88 $5,014.49
12/1/96 11/30/97 $63,178.32 $5,264.86
12/1/97 11/30/98 $66,311.40 $5,525.95
6. OPTION TO EXTEND THE LEASE TERM: Tenant shall have the option with
one hundred and twenty (120) days prior written notice to Landlord to extend the
Term of the Lease for a period of time not less then twelve (12) months nor
longer than twenty-four (24) months ("Option Term"). The Base Rent for the
Option Term shall be as follows:
<PAGE>
PERIOD PERIOD ANNUAL MONTHLY
COMMENCING ENDING BASE RENT BASE RENT
- ---------- ------ --------- ---------
12/1/98 11/30/99 $68,963.88 $5,746.99
12/1/99 11/30/00 $71,441.64 $5,953.47
7. USE: Provided Assignee obtains and pays for all applicable licenses,
permits, approvals and zoning/land use variances/changes, then Assignee shall be
allowed to conduct commercial manufacturing in the Demised Premises in addition
to the other uses set forth under the Lease Agreement.
8. CONSTRUCTION: Landlord agrees to allow Tenant to make interior
improvements to the Demised Premises. Said improvements shall be built in
substantial compliance with the plans and specifications described in Exhibit
"A" attached hereto. All work shall be performed by Tenant and at Tenant's sole
cost and expense.
Landlord and Tenant agree that upon Tenant's vacating and
Demised Premises and upon Landlord's written request, Tenant shall be
responsible for returning the Demised Premises to the condition as requested by
Landlord which shall include as follows:
(a) VENTS/EXHAUST DUCTS: Remove all vents and exhaust ducts and cap at
roof. Repair dropped ceiling as necessary.
(b) PLUMBING: (1) Cut off all plumbing at partitions, cap and cover
with face plate (2) cap and cover all floor drains.
(c) FLOORING: (1) Remove all raised flooring and beams at lab area and
return to original concrete flooring grade.
(d) ELECTRIC: Cap all electric connections at partitions and cover with
face plate.
(e) PARTITIONS: Patch all damaged drywall partitions and repaint
accordingly.
9. ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT: Assignor for and in
consideration of the sum of Ten and No/100 ($10.00) Dollars and the
considerations set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged has transferred and
assigned, and by these presents does transfer and assign unto Assignee that
certain Lease Agreement between Assignor, as "Lessee", and Landlord as "Lessor",
dated May 2, 1991, as amended or modified, for certain Premises located at Suite
150, One Oakwood Boulevard, Hollywood, Florida 33020 ("Premises" or "Demised
Premises"), together with all of the rights, interests and deposits of Assignor
thereunder,
Assignee hereby assumes and agrees to observe and perform each and
every duty and obligation on the part of the "Lessee" to be observed and
performed pursuant to said Lease, and Assignee recognizes and attorns to
Landlord and "Lessor" under the Lease Agreement.
Landlord hereby acknowledges and consents to this Assignment of Lease
from Assignor to Assignee and to the assumption by Assignee of the "Leasee's"
duties and obligations thereunder.
Nothing contained herein shall release, relieve or in any manner modify
the duties and obligations of Assignor under the Lease Agreement, and Assignor
shall remain fully liable for the payment and performance of each and every duty
and obligation on the part of the "Lessee" to be observed and performed pursuant
to the Lease Agreement, whether accruing prior to or subsequent to this
Modification.
The consent by Landlord to this Modification shall not constitute a
waiver of the necessity for such consent to any subsequent assignment.
Assignor hereby represents and warrants to Assignee as follows:
A. That Assignor and Landlord agree that Assignor has not deposited a
Security with Landlord.
2
<PAGE>
B. That the Lease has not been modified or amended in any way except as
set forth above and a true and correct copy of the Lease Agreement is attached
hereto.
C. That Assignor has made no prior outstanding transfer, assignment,
hypothecation or pledge of the Lease Agreement, except as indicated herein.
10. RATIFICATION AND CONFIRMATION: Except as specifically modified and
assigned hereby , all of the terms, provisions and conditions of the Lease
Agreement of May 2nd, 1991, as extended and amended (or modified), shall remain
in full force and effect and are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Modification
of Lease Agreement the day and year first above written.
Executed this ___day of _____________ 1996.
WITNESSES: LANDLORD
OAKWOOD BUSINESS CENTER LIMITED PARTNERSHIP,
a Delaware Limited partnership
By: OBC Genpar, Inc.
Its: General Partner
__________________________ By:____________________________________
Its:
__________________________
As to LANDLORD
Executed this ___ day of _____________ 1996.
WITNESSESS: ASSIGNOR
KOS HOLDINGS, INC.,
a Florida corporation
/S/ CAROLYN LEMAIRE By:/S/ KATHRYN JAHARIS
- -------------------- -----------------------------------------
Name: Kathryn Jaharis
Title: President
/S/ LAURA BONITTO Attest:/S/ JUAN F. RODRIGUEZ
- ------------------ ----------------------
As to TENANT Name: Juan F. Rodriguez
Title: Controller
(CORPORATE SEAL)
3
<PAGE>
Executed this ___day of _____________ 199__.
WITNESSES: ASSIGNEE
KOS PHARMACEUTICALS, INC.,
a wholly owned subsidiary of
Kos Holdings, Inc.
/S/ CAROLYN LEMAIRE By:/S/ DANIEL M. BELL
- -------------------- -------------------------------
Name: Daniel M. Bell
Title: President
/S/ LAURA BONITTO Attest: /S/ JUAN F. RODRIGUEZ
- -------------------- ----------------------
As to TENANT Name: Juan F. Rodriguez
Title: Controller
(CORPORATE SEAL)
4
EXHIBIT 10.13
ASSIGNMENT AND SECOND MODIFICATION OF LEASE AGREEMENT
THIS ASSIGNMENT AND SECOND MODIFICATION OF LEASE AGREEMENT
("Modification"), Made this 30th day of June, 1996, by and between OAKWOOD
BUSINESS CENTER LIMITED PARTNERSHIP, a Delaware limited partnership, as
successor to STS Buildings Associates, L.P., a Delaware limited partnership,
(hereinafter referred to as "LANDLORD"), KOS HOLDINGS, INC., a Florida
corporation, (formerly Kos Pharmaceuticals, Inc.) (hereinafter referred to as
"ASSIGNOR") and KOS PHARMACEUTICALS, INC., a Florida corporation, which is a
wholly owned subsidiary of KOS Holdings, Inc. hereinafter referred to as
"ASSIGNEE".
WITNESSETH:
WHEREAS, STS Building Associates, L.P. and KOS Pharmaceuticals, Inc.,
did heretofore on the 15th day of May, 1990 enter into a certain Lease Agreement
for premises located at Two Oakwood Boulevard, SUITE 140, Hollywood, Florida
33020; which said Lease Agreement was amended by that Modification and Extension
Agreement dated June 6, 1996 (collectively sometimes hereinafter the "Lease
Agreement"); and
WHEREAS, Assignor and Assignee have represented to Landlord that KOS
Pharmaceuticals, Inc. changed its name to KOS Holdings, Inc., and that
thereafter KOS Holdings, Inc., formed a wholly-owned subsidiary known as KOS
Pharmaceuticals, Inc., the proposed Assignee herein, and based solely upon such
representations, Landlord herein agrees as follows; and
WHEREAS, the parties hereto desire to further modify said Lease
Agreement upon certain terms and conditions as more fully set forth hereinafter.
NOW, THEREFORE, in consideration of the promises, covenants and
undertakings hereinafter set forth and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. RECITATIONS: The foregoing recitations are true and correct and are
incorporated herein by this reference.
2. CONFLICTS: In the event of a conflict between any of the terms,
conditions and/or provisions of this Modification and any of the terms,
conditions and/or provisions of the Lease Agreement, the terms, conditions
and/or provisions of this Modification shall prevail.
3. DEFINED TERMS: Except as otherwise provided in this Modification,
all defined terms shall have the meanings such defined terms have in the Lease
Agreement.
4. TERM: The Termination Date of the Lease Agreement as set forth in
Section 3 of the Lease Agreement and modified in Section 2 of the Modification
and Extension Agreement dated June 6, 1996, shall be further modified to provide
for a Termination Date of November 30, 1998.
5. BASE RENT: The Annual Base Rent as set forth in Section 5 of the
Lease Agreement shall be paid as follows:
PERIOD PERIOD ANNUAL MONTHLY
COMMENCING ENDING BASE RENT BASE RENT
- ---------- ------ --------- ---------
Current thru 11/30/96 $47,145.00 $3,928.75
12/1/96 11/30/97 $49,479.84 $4,123.32
12/1/97 11/30/98 $51,949.32 $4,329.11
6. OPTION TO EXTEND THE LEASE TERM: Tenant shall have the option with
one hundred and twenty (120) days prior written notice to Landlord to extend the
Term of the Lease for a period of time not less then twelve (12) months nor
longer than twenty-four (24) months ("Option Term"). The Base Rent for the
Option Term shall be as follows:
<PAGE>
PERIOD PERIOD ANNUAL MONTHLY
COMMENCING ENDING BASE RENT BASE RENT
- ---------- ------ --------- ---------
12/1/98 11/30/99 $54,027.27 $4,502.27
12/1/99 11/30/00 $56,188.36 $4,682.36
7. USE: Provided Assignee obtains and pays for all applicable licenses,
permits, approvals and zoning/land use variances/changes, then Assignee shall be
allowed to conduct commercial manufacturing in the Demised Premises in addition
to the other uses set forth under the Lease Agreement.
8. CONSTRUCTION: Landlord agrees to allow Tenant to make interior
improvements to the Demised Premises. Said improvements shall be built in
substantial compliance with the plans and specifications described in Exhibit
"A" attached hereto. All work shall be performed by Tenant and at Tenant's sole
cost and expense.
Landlord and Tenant agree that upon Tenant's vacating and
Demised Premises and upon Landlord's written request, Tenant shall be
responsible for returning the Demised Premises to the condition as requested by
Landlord which shall include as follows:
(a) VENTS/EXHAUST DUCTS: Remove all vents and exhaust ducts and cap at
roof. Repair dropped ceiling as necessary.
(b) PLUMBING: (1) Cut off all plumbing at partitions, cap and cover
with face plate (2) cap and cover all floor drains.
(c) FLOORING: (1) Remove all raised flooring and beams at lab area and
return to original concrete flooring grade.
(d) ELECTRIC: Cap all electric connections at partitions and cover with
face plate.
(e) PARTITIONS: Patch all damaged drywall partitions and repaint
accordingly.
9. ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT: Assignor for and in
consideration of the sum of Ten and No/100 ($10.00) Dollars and the
considerations set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged has transferred and
assigned, and by these presents does transfer and assign unto Assignee that
certain Lease Agreement between Assignor, as "Lessee", and Landlord as "Lessor",
dated May 15, 1990 for certain Premises located at Suite 140, Two Oakwood
Boulevard, Hollywood, Florida 33020 ("Premises" or "Demised Premises"), together
with all of the rights, interests and deposits of Assignor thereunder,
Assignee hereby assumes and agrees to observe and perform each and
every duty and obligation on the part of the "Lessee" to be observed and
performed pursuant to said Lease, and Assignee recognized and attorns to
Landlord and "Lessor" under the Lease Agreement.
Landlord hereby acknowledges and consents to this Assignment of Lease
from Assignor to Assignee and to the assumption by Assignee of the "Leasee's"
duties and obligations thereunder.
Nothing contained herein shall release, relieve or in any manner modify
the duties and obligations of Assignor under the Lease Agreement, and Assignor
shall remain fully liable for the payment and performance of each and every duty
and obligation on the part of the "Lessee" to be observed and performed pursuant
to the Lease Agreement, whether accruing prior to or subsequent to this
Modification.
The consent by Landlord to this Modification shall not constitute a
waiver of the necessity for such consent to any subsequent assignment.
Assignor hereby represents and warrants to Assignee as follows:
A. That Assignor and Landlord agree that Assignor has not deposited a
Security with Landlord.
2
<PAGE>
B. That the Lease has not been modified or amended in any way except as
set forth above and a true and correct copy of the Lease Agreement is attached
hereto.
C. That Assignor has made no prior outstanding transfer, assignment,
hypothecation or pledge of the Lease, except as indicated herein.
10. RATIFICATION AND CONFIRMATION: Except as specifically modified and
assigned hereby , all of the terms, provisions and conditions of the Lease
Agreement of May 15th, 1990, as amended or modified, shall remain in full force
and effect and are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Modification
of Lease Agreement the day and year first above written.
Executed this ___day of _____________ 1996.
WITNESSES: LANDLORD
OAKWOOD BUSINESS CENTER LIMITED PARTNERSHIP,
a Delaware Limited partnership
By: OBC Genpar, Inc.
Its: General Partner
__________________________ By:____________________________________
Its:
__________________________
As to LANDLORD
Executed this ___ day of _____________ 1996.
WITNESSESS: ASSIGNOR
KOS PHARMACEUTICALS, INC.,
a Florida corporation
/S/ CAROLYN LEMAIRE By:/S/ KATHRYN JAHARIS
- -------------------- -----------------------------------------
Name: Kathryn Jaharis
Title: President
/S/ LAURA BONITTO Attest:/S/ JUAN F. RODRIGUEZ
- ------------------ ----------------------
As to TENANT Name: Juan F. Rodriguez
Title: Controller
(CORPORATE SEAL)
Executed this 30th day of June 1996.
WITNESSES: ASSIGNEE
KOS PHARMACEUTICALS, INC.,
a wholly owned subsidiary of
Kos Holdings, Inc.
/S/ CAROLYN LEMAIRE By:/S/ DANIEL M. BELL
- -------------------- -------------------------------
Name: Daniel M. Bell
Title: President
/S/ LAURA BONITTO Attest: /S/ JUAN F. RODRIGUEZ
- -------------------- ----------------------
As to TENANT Name: Juan F. Rodriguez
Title: Controller
(CORPORATE SEAL)
3
EXHIBIT 10.14
ASSIGNMENT AND SECOND MODIFICATION OF LEASE AGREEMENT
THIS ASSIGNMENT AND SECOND MODIFICATION OF LEASE AGREEMENT
("Modification"), Made this 30th day of June, 1996, by and between OAKWOOD
BUSINESS CENTER LIMITED PARTNERSHIP, a Delaware limited partnership, as
successor to STS Buildings Associates, L.P., a Delaware limited partnership,
(hereinafter referred to as "LANDLORD"), KOS HOLDINGS, INC., a Florida
corporation, (formerly Kos Pharmaceuticals, Inc.) (hereinafter referred to as
"ASSIGNOR") and KOS PHARMACEUTICALS, INC., a Florida corporation, which is a
wholly owned subsidiary of KOS Holdings, Inc. hereinafter referred to as
"ASSIGNEE".
WITNESSETH:
WHEREAS, STS Building Associates, L.P. and KOS Pharmaceuticals, Inc.,
did heretofore on the 7th day of January 1993 enter into a certain Lease
Agreement for premises located at Two Oakwood Boulevard, SUITE 50, Hollywood,
Florida 33020; which said Lease Agreement was amended by that Modification and
Extension Agreement dated June 6, 1996 (collectively sometimes hereinafter the
"Lease Agreement"); and
WHEREAS, Assignor and Assignee have represented to Landlord that KOS
Pharmaceuticals, Inc. changed its name to KOS Holdings, Inc., and that
thereafter KOS Holdings, Inc., formed a wholly-owned subsidiary known as KOS
Pharmaceuticals, Inc., the proposed Assignee herein, and based solely upon such
representations, Landlord herein agrees as follows; and
WHEREAS, the parties hereto desire to further modify said Lease
Agreement upon certain terms and conditions as more fully set forth hereinafter.
NOW, THEREFORE, in consideration of the promises, covenants and
undertakings hereinafter set forth and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. RECITATIONS: The foregoing recitations are true and correct and are
incorporated herein by this reference.
2. CONFLICTS: In the event of a conflict between any of the terms,
conditions and/or provisions of this Modification and any of the terms,
conditions and/or provisions of the Lease Agreement, the terms, conditions
and/or provisions of this Modification shall prevail.
3. DEFINED TERMS: Except as otherwise provided in this Modification,
all defined terms shall have the meanings such defined terms have in the Lease
Agreement.
4. DEMISED PREMISES: The Demised Premises as set forth in Section 1 of
the Lease Agreement as modified in Section 4(b)iii of the Modification and
Extension Agreement to 7,750 square feet, shall be further modified, effective
August 1, 1997, to be FIVE THOUSAND SEVEN HUNDRED AND FIFTY (5,750) square feet
as outlined in the attached Exhibit "B".
5. TERM: The Termination Date of the Lease Agreement as set forth in
Section 3 of the Lease Agreement and modified in Section 4(a) of the
Modification and Extension Agreement dated June 6, 1996, shall be further
modified to provide for a Termination Date of November 30, 1998.
6. BASE RENT: The Annual Base Rent as set forth in Section 5 of the
Lease Agreement shall be paid as follows:
PERIOD PERIOD ANNUAL MONTHLY
COMMENCING ENDING BASE RENT BASE RENT
- ---------- ------ --------- ---------
Current 10/31/96 $68,839.52 $5,569.96
11/1/96 7/31/97 $69,285.00 $5,773.75
8/1/97 11/30/97 $51,405.00 $4,283.75
12/1/97 11/30/98 $53,475.00 $4,456.25
<PAGE>
7. OPTION TO EXTEND THE LEASE TERM: Tenant shall have the option with
one hundred and twenty (120) days prior written notice to Landlord to extend the
Term of the Lease for a period of time not less then twelve (12) months nor
longer than twenty-four (24) months ("Option Term"). The Base Rent for the
Option Term shall be as follows:
PERIOD PERIOD ANNUAL MONTHLY
COMMENCING ENDING BASE RENT BASE RENT
- ---------- ------ --------- ---------
12/1/98 11/30/99 $55,614.00 $4,634.50
12/1/99 11/30/00 $57,838.56 $4,819.88
8. USE: Provided Assignee obtains and pays for all applicable licenses,
permits, approvals and zoning/land use variances/changes, then Assignee shall be
allowed to conduct commercial manufacturing in the Demised Premises in addition
to the other use set forth under the Lease Agreement.
9. CONSTRUCTION: Landlord agrees to allow Tenant to make interior
improvements to the Demised Premises. Said improvements shall be built in
substantial compliance with the plans and specifications described in Exhibit
"A" attached hereto. All work shall be performed by Tenant and at Tenant's sole
cost and expense.
Landlord and Tenant agree that upon Tenant's vacating and
Demised Premises and upon Landlord's written request, Tenant shall be
responsible for returning the Demised Premises to the condition as requested by
Landlord which shall include as follows:
(a) VENTS/EXHAUST DUCTS: Remove all vents and exhaust ducts and cap at
roof. Repair dropped ceiling as necessary.
(b) PLUMBING: (1) Cut off all plumbing at partitions, cap and cover
with face plate (2) cap and cover all floor drains.
(c) FLOORING: (1) Remove all raised flooring and beams at lab area and
return to original concrete flooring grade.
(d) ELECTRIC: Cap all electric connections at partitions and cover with
face plate.
(e) PARTITIONS: Patch all damaged drywall partitions and repaint
accordingly.
10. ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT: Assignor for and in
consideration of the sum of Ten and No/100 ($10.00) Dollars and the
considerations set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged has transferred and
assigned, and by these presents does transfer and assign unto Assignee that
certain Lease Agreement between Assignor, as "Lessee", and Landlord as "Lessor",
dated January 7th, 1993, as amended or modified, for certain Premises located at
Suite 50 One Oakwood Boulevard, Hollywood, Florida 33020 ("Premises" or "Demised
Premises"), together with all of the rights, interests and deposits of Assignor
thereunder,
Assignee hereby assumes and agrees to observe and perform each and
every duty and obligation on the part of the "Lessee" to be observed and
performed pursuant to said Lease, and Assignee recognizes and attorns to
Landlord and "Lessor" under the Lease Agreement.
Landlord hereby acknowledges and consents to this Assignment of
Lease from Assignor to Assignee and to the assumption by Assignee of the
"Leasee's" duties and obligations thereunder.
Nothing contained herein shall release, relieve or in any manner
modify the duties and obligations of Assignor under the Lease Agreement, and
Assignor shall remain fully liable for the payment and performance of each and
every duty and obligation on the part of the "Lessee" to be observed and
performed pursuant to the Lease Agreement, whether accruing prior to or
subsequent to this Modification.
The consent by Landlord to this Modification shall not constitute
a waiver of the necessity for such consent to any subsequent assignment.
2
<PAGE>
Assignor hereby represents and warrants to Assignee as follows:
A. That Assignor and Landlord agree that Assignor has not
deposited a Security with Landlord.
B. That the Lease has not been modified or amended in any way
except as set forth above and a true and correct copy of the Lease Agreement is
attached hereto.
C. That Assignor has made no prior outstanding transfer,
assignment, hypothecation or pledge of the Lease Agreement, except as indicated
herein.
11. ADDITIONAL RENT: Effective August 1, 1997, Tenant's Proportionate
Share as set forth in Section 4(b)iii(g) of the Extension and Modification of
Lease Agreement shall be modified to 9.1%.
12. RATIFICATION AND CONFIRMATION: Except as specifically modified and
assigned hereby , all of the terms, provisions and conditions of the Lease
Agreement of January 7th, 1993, as amended or modified, shall remain in full
force and effect and are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Modification
of Lease Agreement the day and year first above written.
Executed this ___day of _____________ 1996.
WITNESSES: LANDLORD
OAKWOOD BUSINESS CENTER LIMITED PARTNERSHIP,
a Delaware Limited partnership
By: OBC Genpar, Inc.
Its: General Partner
__________________________ By:____________________________________
Its:
__________________________
As to LANDLORD
Executed this ___ day of _____________ 1996.
WITNESSESS: ASSIGNOR
KOS HOLDINGS, INC.,
a Florida corporation
/S/ CAROLYN LEMAIRE By:/S/ KATHRYN JAHARIS
- -------------------- -----------------------------------------
Name: Kathryn Jaharis
Title: President
/S/ LAURA BONITTO Attest:/S/ JUAN F. RODRIGUEZ
- ------------------ ----------------------
As to TENANT Name: Juan F. Rodriguez
Title: Controller
(CORPORATE SEAL)
3
<PAGE>
Executed this ___day of _____________ 1996.
WITNESSES: ASSIGNOR
KOS PHARMACEUTICALS, INC.,
a wholly owned subsidiary of
Kos Holdings, Inc.
/S/ CAROLYN LEMAIRE By:/S/ DANIEL M. BELL
- -------------------- -------------------------------
Name: Daniel M. Bell
Title: President
/S/ LAURA BONITTO Attest: /S/ JUAN F. RODRIGUEZ
- -------------------- ----------------------
As to TENANT Name: Juan F. Rodriguez
Title: Controller
(CORPORATE SEAL)
4
LEASE
BETWEEN
CENTER REALTY, L.P.
AND
KOS PHARMACEUTICALS
<PAGE>
DATE OF LEASE: MAY, 1993
LANDLORD: CENTER REALTY, L.P.
A New Jersey Limited Partnership
NOTICE ADDRESS: 300 Raritan Center Parkway
P.O. Box 7815
Edison, New Jersey 08818-7815
TENANT: KOS PHARMACEUTICALS, INC.
NOTICE ADDRESS: 2 Oakwood Boulevard, Suite 150
Hollywood, Florida 33020
FEDERAL ID#:
SIC:
BILLING ADDRESS: 2 Oakwood Boulevard, Suite 150
Hollywood, Florida 33020
CONTACT PERSON: David Bova
PHONE #: 305-920-7200
FAX #: 305-920-7272
REAL ESTATE BROKER: Archie Schwartz & Co.
PREMISES: Referenced on "Exhibit A"
SIZE: Approximately 16,922 square feet
of gross space
LOCATION: 18 Mayfield Avenue
Campus Plaza IX
Raritan Center Business Park
Edison, New Jersey
USE OF PREMISES: Office, warehouse, and pharmaceutical
laboratory
TERM: Initial occupancy during the
completion of work specified on
"Exhibit A" hereto, and thereafter
five (5) years.
BEGINNING DATE: July 1, 1993
ENDING DATE:
BASE MONTHLY RENT: $1,000.00 per month net for the
Initial Occupancy Area, consisting of
approximately 3, 043 square feet, as
shown on "Exhibit A", until
completion of work in the remaining
area of the Premises as specified on
"Exhibit A" hereto. Upon completion
of the above referenced work
specified on "Exhibit A", $5,640.66
per month net for sixty (60) months.
<PAGE>
ADDITIONAL RENT: 7% as to the Initial Occupancy Area
until completion of the work in the
remaining area of the Premises
specified on "Exhibit A" and then
upon the completion of such work, as
to the entire Premises, 39% of the
total additional rent expenses for
Campus Plaza IX as set forth in this
Lease. The Landlord represents that
the Initial Occupancy Area and the
Premises constitute 7% and 39%
respectively of the building referred
to as Campus Plaza IX of which said
areas are a part.
SECURITY DEPOSIT: $16,922.00, and, in addition, the
Tenant shall provide the Landlord
with a bank letter of credit in the
amount of 5/6 of the construction
costs renewed continuously until such
costs have been fully paid by the
Tenant in accordance with "Exhibit
A".
The Landlord hereby leases the Premises to the Tenant, and the Tenant hereby
leases the Premises from the Landlord, in accordance with the terms of this
Lease, which consists of 13 pages and 3 exhibits.
WITNESS/ATTEST: LANDLORD/CENTER REALTY, L.P.
By: Federal Business Centers, Inc.
Corporate General Partner
/s/ /s/ PETER VISCEGLIA
- ------------------------- -------------------------------------
By: By: Peter Visceglia
President
WITNESS/ATTEST: TENANT/KOS PHARMACEUTICALS, INC.
/s/ DAVID J. BOVA /s/ DANIEL M. BELL
- -------------------------- -------------------------------------
By: David J. Bova By: Daniel M. Bell
Vice President President
ii
<PAGE>
TABLE OF CONTENTS
-----------------
CLAUSES PAGE
- -------------------------------------------------------------------------------
1. BASE RENT........................................................... 1
2. ADDITIONAL RENT..................................................... 1
3. LATE RENT........................................................... 2
4. ELECTRICITY AND GAS................................................. 2
5. SECURITY DEPOSIT.................................................... 2
6. LIABILITY INSURANCE................................................. 2
7. REAL ESTATE COMMISSION.............................................. 3
8. QUIET ENJOYMENT..................................................... 3
9. AVAILABILITY OF PREMISES............................................ 3
10. USE OF PREMISES..................................................... 4
11. ACCESS TO PREMISES.................................................. 5
12. LANDLORD'S REPAIRS.................................................. 5
13. TENANT'S REPAIRS.................................................... 5
14. ALTERATIONS......................................................... 6
15. SIGNS............................................................... 6
16. CASUALTY............................................................ 7
17. ASSIGNMENT AND SUBLETTING........................................... 7
18. MORTGAGES........................................................... 9
19. RECORDING........................................................... 9
20. CONDEMNATION........................................................ 9
21. RELOCATION.......................................................... 9
22. RETURN OF PREMISES.................................................. 10
23. COMPLIANCE WITH ENVIRONMENTAL LAWS.................................. 10
24. RELEASE AND INDEMNIFICATION......................................... 11
25. DEFAULT............................................................. 12
26. NOTICE AND CONSENT.................................................. 14
27. SEVERABILITY........................................................ 14
28. SPACE EXPANSION OPTION.............................................. 14
29. TERM EXTENSION OPTION.............................................. 15
30. GOVERNING LAW....................................................... 15
31. BINDING EFFECT OF LEASE............................................. 15
32. ENTIRE AGREEMENT.................................................... 15
EXHIBITS
- --------
A. PLAN OF PREMISES AND SPECIFICATIONS..................... EXHIBIT A
B. ADDITIONAL RENT EXPENSES................................ EXHIBIT B
C. GROUNDS AND LANDSCAPE MAINTENANCE PROGRAM............... EXHIBIT C
III
<PAGE>
1. BASE RENT
Upon signing this Lease, the Tenant shall pay the base rent due for the Initial
Occupancy Area as set forth hereinbefore. After the first month of the Tenant's
occupancy, the Tenant shall pay base rent for the Initial Occupancy Area on a
monthly basis, in advance, on the first day of each month until the completion
of work specified on "Exhibit A", at which time the Tenant shall pay the rent
for the entire Premises as set forth hereinabove until the end of the Term. Base
rent shall be payable without prior demand and without abatement, deduction, or
setoff.
2. ADDITIONAL RENT
On a monthly basis, the Tenant shall pay its percentage of the additional rent
expenses for the following items related to the Premises:
(a) municipal real estate taxes,
(b) property casualty insurance for the replacement value of the
building,
(c) fire sprinkler standby charges,
(d) central station fire sprinkler water monitoring system,
(e) annual fire sprinkler system tests,
(f) full maintenance, repair, and replacement service for the heating,
ventilating, and air-conditioning system, in accordance with the
manufacturer's recommendations,
(g) common road snow removal,
(h) grounds cleaning and landscape maintenance in accordance with the
program described in "Exhibit C",
(i) domestic water, including lawn sprinkler water, (unless the
Premises are served by a separate meter in which case the Tenant
shall have the meter listed in its own name, shall arrange for
direct billing, and shall make direct payment),
(j) sewer charges,
(k) maintenance and electricity for outside lighting,
(l) assessments, if any, for municipal improvements related to the
building, and
(m) parking lot and sidewalk snow removal.
The Tenant's percentage of all additional rent expenses, other than municipal
real estate taxes, is based on the total gross square footage of the Premises in
relation to the total gross square footage of the building containing the
Premises.
In the case of municipal real estate taxes, the Tenant shall pay its pro rata
share of: a) taxes for office space within the building, if the Premises contain
any office space, b) taxes for warehouse space within the building, if the
Premises contain any warehouse space, c) taxes for land (the ratio of land area
to improvement area is three to one), and d) taxes for any special assessments
related exclusively to the Premises. The Landlord shall have the exclusive
right, but not the obligation, to contest or appeal any assessment.
An estimate of the Tenant's monthly additional rent expenses is attached hereto
as "Exhibit B". The Landlord shall adjust additional rent expenses on at least
an annual basis, in accordance with actual expenses incurred.
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Upon signing this Lease, the Tenant shall pay the additional rent due for the
Initial Occupancy Area as set forth hereinbefore. After the first month of the
Tenant's occupancy, the Tenant shall pay additional rent as set forth
hereinbefore on a monthly basis, in advance, on the first day of each month
until completion of the work specified on "Exhibit A", at which time the Tenant
shall pay the rent for the entire Premises as set forth hereinbefore until the
end of the Term. Additional rent shall be payable without prior demand and
without abatement, deduction, recoupment, or setoff.
3. LATE RENT
If the Landlord does not receive payment for base rent or additional rent by the
tenth day of the month, during which payment is due, then the Tenant shall pay
an amount, equal to two percent (2%) of the payment due, as additional rent for
the month during which payment is due, and an amount, equal to two percent (2%)
of the original payment due, as additional rent for each month thereafter during
which payment remains outstanding beyond the first day of the month.
4. ELECTRICITY AND GAS
The Tenant shall have meters listed in its own name, shall arrange for direct
billing, and shall make direct payment for the following: (a) electricity for
the Premises, unless the Landlord supplies a submeter, in which case the Tenant
shall pay the charges for electricity to the Landlord as additional rent, (b)
gas, and (c) any other utility or service used by the Tenant. The Landlord shall
have the right, but not the obligation, to act on behalf of the Tenant to have
the electric and gas meters listed in the Tenant's name.
5. SECURITY DEPOSIT
Upon signing this Lease, the Tenant shall pay the security deposit, if any, to
the Landlord. During the Term, the security deposit shall be kept with the
Landlord's general funds and shall not be applied by the Tenant to any base rent
or additional rent. Within thirty (30) days after the end of the Term, the
Landlord shall return the security deposit to the Tenant, without any interest,
excluding any amount applied by the Landlord to any base rent or additional rent
which is outstanding at that time.
6. LIABILITY INSURANCE
The Tenant, at its own expense, shall obtain and maintain a broad form,
comprehensive or commercial general liability insurance policy, including
contractual liability coverage. The policy shall apply to claims arising upon or
in connection with the Premises or the steps, sidewalks, parking areas, or
landscaped areas which immediately adjoin and serve the Premises. The policy
shall have a combined single limit no less than three million dollars
($3,000,000.00) without any deductible. Every five (5) years after the beginning
of the Term, the Landlord may require a reasonable increase of this limit.
The Tenant, at its own expense, shall also obtain and maintain an all-risk legal
liability insurance policy, if applicable, for the personal property of others
which is in the care, custody, and control of the Tenant.
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Both insurance policies shall name the Landlord as an additional insured. Both
policies shall be primary policies; they shall not contribute with or be in
excess of any insurance policy maintained by the Landlord. Both policies shall
provide coverage on an occurrence basis. Both policies shall provide that the
insurance company shall notify the Landlord at least thirty (30) days in advance
of the effective date of any modification or termination of the policies. Both
policies shall be issued by an insurance company authorized to do business in
New Jersey with a minimum A.M. Best rating of A15.
Before the beginning of the Term, and from time to time thereafter when the
insurance policies are renewed or replaced, the Tenant shall provide the
Landlord with a certificate of insurance which states that the policies in
effect are in compliance with the terms of this Lease.
7. REAL ESTATE COMMISSION
The Landlord and the Tenant represent to each other that neither of them has
consulted or negotiated with any real estate broker, salesperson, or finder with
regard to the Premises or this Lease, except for the real estate broker set
forth in this Lease. The Landlord shall pay the commission to the real estate
broker set forth in this Lease.
The Landlord shall defend, indemnify, and hold the Tenant harmless from any
claims for fees or commissions from anyone with whom the Landlord has dealt with
regard to the Premises or this Lease. The Tenant shall defend, indemnify, and
hold the Landlord harmless from any claims for fees or commissions from anyone
with whom the Tenant has dealt with regard to the Premises or this Lease, except
for the real estate broker set forth in this Lease.
8. QUIET ENJOYMENT
The Landlord shall give quiet enjoyment of the Premises to the Tenant so long as
the Tenant is not in default under the terms of the Lease.
9. AVAILABILITY OF PREMISES
The Tenant shall occupy the Initial Occupancy Area as referenced on "Exhibit A"
on the beginning date as agreed between the Landlord and the Tenant, subject to
confirmation by separate letter. The remaining area of the Premises shall be
available for occupancy when the same are in accordance with the plan and
specifications referenced on "Exhibit A", except for normal punch list items and
the Tenant pays the costs therefor due as provided for in "Exhibit A". The
Tenant shall notify the Landlord of all punch list items within thirty (30) days
of the date on which the Tenant first occupies the Premises. The Landlord shall
remedy all punch list items as soon as reasonably possible.
If the Premises are available for occupancy before the scheduled beginning date
of the Term set forth in this Lease, and if the Tenant takes possession of the
Premises before the scheduled beginning date, then the beginning date shall be
deemed to be changed to the actual date of occupancy, and the scheduled ending
date shall remain as set forth in this Lease. If the Premises are available for
occupancy as of the
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scheduled beginning date, then the scheduled beginning date and the scheduled
ending date shall remain as set forth in this Lease. If the Premises are not
available for occupancy by the scheduled beginning date, then the beginning date
shall be deemed to be changed to the actual date of availability, and the
scheduled ending date shall be deemed to be changed to the date which is five
(5) years after the last day of the month during which the Premises become
available for occupancy.
10. USE OF PREMISES
The Tenant shall only use the Premises for the purpose set forth in this Lease.
The Tenant, at its own expense, shall:
a) comply with all federal, state, county, and municipal laws,
ordinances, rules, and regulations related to the Tenant's
business and the Tenant's specific use of the Premises;
b) use the Premises in a safe manner;
c) keep nothing which is dangerous or explosive or which might
increase the risk of fire or other casualty at the Premises,
except for quantities of such materials which are essential to the
Tenant's business;
d) comply with all reasonable requirements of the Landlord's property
casualty insurance carrier;
e) provide fire extinguishers and "No Smoking" signs in accordance
with reasonable instructions from the Landlord's property casualty
insurance carrier;
f) use the Premises without causing an increase of the Landlord's
property casualty insurance rates or pay the amount of any
increase caused by the Tenant's use of the Premises as additional
rent;
g) use the Premises without causing a termination of the Landlord's
property casualty insurance policy;
h) use the Premises without causing any liens to affect the Premises;
i) maintain the Premises in a neat, clean condition, free of trash
and vermin;
j) keep the walkways, driving aisles, parking areas, and landscaped
areas, which surround and serve the Premises, free of trash and
free of goods, except for a trash dumpster which may be located at
the rear of the parking areas;
k) keep all trash within tied bags within a covered dumpster or
container;
l) keep no animals at the Premises;
m) use only equipment which does not damage warehouse area floors;
n) use the Premises without disturbing the possession or quiet
enjoyment of any other tenant;
o) keep all vehicles related to its business from parking on the
street; p) keep all vehicles related to its business from parking
on the railroad tracks, except during reasonable periods used to
load or unload goods without impeding railroad traffic;
q) park all vehicles related to its business in the parking areas for
the building in accordance with reasonable, nondiscriminatory
regulations established from time to time by the Landlord;
r) shall not maintain, repair, or wash any vehicles at the Premises,
except for material handling equipment; and
s) use the Premises in accordance with reasonable, nondiscriminatory
regulations established from time to time by the Landlord.
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11. ACCESS TO PREMISES
After providing the Tenant with reasonable advance verbal or written notice, the
Landlord or its agents may enter the Premises during normal business hours to:
(a) inspect the Premises, (b) show the Premises to other persons, or (c)
maintain or repair the Premises or the building. The Landlord or its agents may
enter the Premises at any time in response to an emergency. The Premises shall
only have locks which can be opened by the Landlord's master key.
12. LANDLORD'S REPAIRS
During the first twelve (12) months of the Term, if any defect or damage arises
in the condition of any part of the Premises (excluding any broken glass), then
the Landlord, at its own expense, shall promptly repair or replace the defective
or damaged part of the Premises, unless the Tenant, its employees, its agents,
or its invitees caused the defect or damage. All mechanical systems shall be in
good working order at the beginning of the Term.
After the first twelve (12) months of the Terms, if any defect or damage arises
in the condition of any of the following parts of the Premises: (a) foundation,
(b) floor, (c) outside paved area, (d) exterior walls, (e) roof, or (f) heating,
ventilation, and air-conditioning system, then the Landlord, at its own expense,
shall promptly repair or replace the defective or damaged part of the Premises,
unless the Tenant, its employees, its agents, or its invitee caused the defect
or damage.
The Tenant shall promptly notify the Landlord of any defect or damage in the
condition of any part of the Premises which the Landlord is obligated to repair
or replace under the terms of this clause. The quality of all workmanship used
to make repairs and replacements shall be equal to or better than the quality of
the original workmanship. The materials used shall be identical to the original
materials, unless identical materials are unavailable in which case the
materials shall be of equal or better quality.
13. TENANT'S REPAIRS
During the first twelve (12) months of the Term, the Tenant, at its own expense,
shall promptly replace any broken glass.
After the first twelve (12) months of the Term, if any defect or damage arises
in the condition of any part of the Premises, which the Landlord is not
specifically obligated to repair or replace under the terms of this Lease, then
the Tenant, at its own expense, shall promptly repair or replace the defective
or damaged part of the Premises. After the first twelve (12) months of the Term,
the Landlord shall assign and provide the Tenant with any guarantee or warranty,
which the Landlord has obtained from a third party, related to a part of the
Premises which the Tenant is obligated to repair or replace under the terms of
this clause. The Tenant's obligations under the terms of this clause shall
include, without limitation, repairs or replacements related to the following
parts of the Premises: (a) water system, (b) plumbing system, (c) sewer system,
(d) fire sprinkler system, (e) electric system, (f) lighting system, (g) gas
system, (h) windows, (I) window frames, (j) doors, (k) door frames, (l) loading
dock bumpers and seals, (m) interior partition walls, and (n) interior office
ceilings.
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During the entire Term or any period of occupancy, if the Tenant, its employees,
its agents, or its invitees cause any defect or damage to any part of the
Premises, then the Tenant, at its own expense, shall promptly repair or replace
the defective or damaged part of the Premises.
The Tenant shall promptly notify the Landlord of any defect or damage in the
condition of any part of the Premises which the Tenant is obligated to repair or
replace under the terms of this clause. The quality of all workmanship used to
make repairs and replacements shall be equal to or better than the quality of
the original workmanship. The materials used shall be identical to the original
materials, unless identical materials are unavailable in which case the
materials shall be of equal or better quality.
For the purposes of this paragraph, the Premises shall mean only the area
between the floor and the ceiling, including any roof mounted installations
which service the Premises, and the interior demising walls, inclusive of
windows, which area is occupied by the Tenant, and the Tenant's repair
obligations as indicated herein relate only to those systems within the
Premises.
14. ALTERATIONS
The Tenant shall not make any alterations, additions, or improvements to the
Premises without the Landlord's prior written consent which shall not be
unreasonably withheld or delayed.
The Tenant, at its own expense, shall obtain all necessary permits and provide
the Landlord with copies before beginning any work. All work shall be performed
by contractors designated by the Landlord. All materials used shall be identical
to the original materials used to construct the Premises, unless identical
materials are unavailable in which case the materials shall be of equal or
better quality. The Tenant, at its own expense, shall obtain a new certificate
of occupancy or a certificate of approval, if necessary, upon completion of any
work and shall thereafter provide the Landlord with a copy.
At the end of the Term, or upon the rightful termination of this Lease, based on
written instructions from the Landlord, the Tenant, at its own expense, shall
either: (a) leave any alterations, additions, or improvements at the Premises,
in which case they shall be the property of the Landlord or (b) remove any
alterations, additions, or improvements, and restore the Premises to their
original condition, excluding normal wear and tear.
The Tenant shall promptly notify the Landlord of any lien or mechanic's notice
of intention filed by a third party in relation to work or materials for the
Tenant's alterations, additions, or improvements. The Tenant, at its own
expense, shall have any such lien or mechanic's notice of intention discharged
or bonded within thirty (30) days from the date on which the Tenant receives
notice of the filing.
The Tenant shall indemnify and hold the Landlord harmless from any damage, loss,
liability, or expense related to the Tenant's failure to comply with the terms
of this clause.
15. SIGNS
The Tenant shall not install any sign on the roof or on the outside surface of
the building walls. If the Landlord has established a uniform sign program for
the building, then the Tenant shall only install signs
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in accordance with that program. If the Landlord has not established a uniform
sign program, then the Tenant shall not install any sign without the Landlord's
prior written consent which shall not be unreasonably withheld or delayed. The
Tenant, at its own expense, shall obtain all necessary permits and shall provide
the Landlord with copies before making any installation.
16. CASUALTY
The Landlord shall obtain and maintain property casualty insurance for the
replacement value of the building, excluding any alterations, additions, or
improvements made by the Tenant.
The Tenant shall promptly notify the Landlord of any fire or casualty at the
Premises. If a fire or casualty destroys all or part of the Premises, then the
Landlord's obligation to restore the Premises and the Tenant's obligation to pay
rent shall be determined in accordance with the terms of this clause.
If the Premises can be restored within ninety (90) days from the date of the
casualty, then the Landlord, at its own expense, shall restore the Premises,
excluding any alterations, additions, or improvements made by the Tenant.
If the Premises cannot be restored within ninety (90) days from the date of the
casualty, then the Landlord may terminate this Lease by giving notice within
thirty (30) days from the date of the casualty. If the Lease is terminated, then
the Landlord shall not restore the Premises for the Tenant, the Tenant shall
promptly vacate the Premises, and the Tenant shall only pay base rent and
additional rent due through the date of the casualty. If the Lease is not
terminated, then the Landlord, at its own expense, shall restore the Premises,
including the improvements made by the Landlord for the Tenant as specified on
"Exhibit A"; but excluding any alterations, additions, or improvements made by
the Tenant.
During any restoration, if the Tenant is able to use part of the Premises, then
the Tenant shall pay base rent and additional rent for the usable part of the
Premises on a pro-rata basis from the date of the casualty until the date on
which the Premises are completely usable.
If the building is completely destroyed, then this Lease shall end as of the
date of the casualty.
The Tenant shall not be liable to the Landlord's property casualty insurance
company by way of subrogation or otherwise for any destruction of the Premises
or the building, except in the case of a fire or casualty caused by the Tenant's
gross negligence, intentional misconduct, or intentional breach of this Lease.
17. ASSIGNMENT AND SUBLETTING
The terms of this clause shall apply every time that an assignment arises by
operation of law and every time that the Tenant desires to make any of the
following agreements:
a) an assignment of all or part of this Lease;
b) a sublease of all or part of the Premises; or
c) an agreement allowing a third party to use or occupy all or part
of the Premises.
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If an assignment arises by operation of law, or if the Tenant desires to make
any of the above-described agreements, then the Tenant shall provide the
Landlord with all of the following information in writing:
a) an explanation of the circumstances of the assignment by operation
of law or the complete terms of the proposed agreement;
b) the standard industrial classification number(s) applicable to the
proposed assignee, sublessee, or third party user,
c) a description of any hazardous wastes or hazardous substances, as
defined under N.J.S.A. 13:1K-8 or N.J.S.A. 58:10-23.11b, and the
related regulations, to be used, handled, or stored at the
Premises by the proposed assignee, sublessee, or third party user;
and
d) any other reasonably requested information about the assignment by
operation of law, the proposed agreement, or the proposed
assignee, sublessee, or third party user.
The Landlord shall respond, in writing, to the Tenant's request related to the
proposed assignee, sublessee, or third party user within fourteen (14) days
after the Tenant provides the above-described information.
If the proposed assignee, sublessee, or third party user does not have a
standard industrial classification number subject to N.J.S.A. 13:1K-6 ET SEQ.
("ECRA"), and if no hazardous substances or hazardous wastes, as defined under
N.J.S.A. 13:1K-8 or N.J.S.A. 58:10-23.11b, and the related regulations, are to
be used, handled, or stored at the Premises by the proposed assignee, sublessee,
or third party user, then the Landlord shall either (a) consent, (b) reasonably
withhold its consent, or (c) terminate this Lease per the terms of this clause.
The Landlord hereby gives its approval to an assignment of this Lease, if made
by the Tenant, to Aeropharm, Inc. The Tenant shall give the Landlord notice of
such assignment, if made.
If, however, the proposed assignee, sublessee, or third party user has a
standard industrial classification number subject to N.J.S.A. 13:1K-6 ET SEQ.
("ECRA"), and if no hazardous substances or hazardous wastes, as defined under
N.J.S.A. 13:1K-8 or N.J.S.A. 58:10-23.11b, and the related regulations, are to
be used, handled, or stored at the Premises by the proposed assignee, sublessee,
or third party user, then the Landlord, in its sole discretion, which may be
reasonable or unreasonable, shall either (a) consent, (b) withhold its consent,
or (c) terminate this Lease per the terms of this clause.
The Tenant shall not permit any assignee, sublessee, or third party user to use
or take possession of all or part of the Premises, unless the Landlord has
consented in writing. In addition, before any assignment by operation of law or
any proposed agreement takes effect, the Tenant, at its own expense, shall
either comply with N.J.S.A. 13:1K-6 ET SEQ.
("ECRA"), if applicable, or obtain approval of a nonapplicability application.
By consenting to any assignment by operation of law or any proposed agreement,
the Landlord shall not be releasing the Tenant from any of its obligations under
the terms of this Lease.
Consent to any one assignment by operation of law or any one proposed agreement
shall not be deemed to be consent to any subsequent assignment by operation of
law or any subsequent proposed agreement and shall not be deemed to be a waiver
of any of the terms of this clause.
If the Landlord exercises its right of termination under the terms of this
clause, and if an assignment by
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operation of law or a proposed agreement applies to all of the Premises, then
the Landlord may terminate this Lease for all of the Premises. If, however, an
assignment by operation of law or a proposed agreement only applies to part of
the Premises, then the Landlord may terminate this Lease for that part of the
Premises covered by the assignment by operation of law or the proposed
agreement, in which case the amount of base rent and the Tenant's share of
additional rent shall be prorated. Any termination shall be effective sixty (60)
days from the date on which the Tenant receives the Landlord's notice of
termination. If the Landlord terminates this Lease for all of the Premises, then
the Landlord may lease all or part of the Premises and/or any other space
directly to the proposed assignee, sublessee, or third party user. If the
Landlord terminates this Lease for part of the Premises, then the Landlord may
lease that part of the Premises and/or any other space directly to the proposed
assignee, sublessee, or third party user.
If the Landlord exercise its right of termination under the terms of this
clause, then, within fourteen (14) days of the Landlord's notice of termination,
the Tenant may withdraw its request related to a proposed assignee, sublessee,
or third party user, by sending a written notice of withdrawal to the Landlord,
in which case the Tenant's request and the Landlord's termination with respect
thereto shall be void.
18. MORTGAGES
Any existing or future mortgage made by the Landlord shall have priority over
this Lease. Upon receipt of notice from the Tenant, the Landlord, however, shall
try to obtain an agreement from any future mortgagee, indicating that the
mortgagee shall not disturb the Tenant's possession of the Premises so long as
the Tenant is in strict compliance with the terms of this Lease. Upon request,
the Tenant shall promptly provide the Landlord's mortgagee with all reasonably
requested information and representations in writing.
19. RECORDING
The Tenant shall not record this Lease or any other document related to this
Lease or the Premises.
20. CONDEMNATION
If all or part of the Premises is taken, on a permanent or a temporary basis,
through a condemnation proceeding under the right of eminent domain, then the
Landlord shall receive the entire payment from the condemner for the taking of
the Premises. The Tenant, however, may make a claim against the condemner for
relocation expenses so long as such claim does not reduce the condemner's
payment to the Landlord. The Tenant waives all other claims against the Landlord
and the condemner on account of the taking of the Premises.
21. RELOCATION
The Landlord may relocate the Tenant to relocation premises within the Raritan
Center Business Park after providing the Tenant with a notice of relocation
twelve (12) months in advance of the relocation
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date. The relocation premises shall be substantially similar to the Premises and
shall contain substantially the same improvements which exist at the Premises as
of the relocation date. The quality of all workmanship and materials used at the
relocation premises shall be equal to or better than the quality of the
workmanship and materials used at the Premises. The Landlord shall pay all of
the reasonable costs of relocating the Tenant's personal property.
Anything to the contrary notwithstanding, no relocation shall occur within the
first twelve months or the last twelve months of the Lease without the Tenant's
consent.
22. RETURN OF PREMISES
By the end of the Term, or upon the rightful termination of this Lease, the
Tenant, at its own expense, shall return the Premises to the Landlord in the
same condition as at the beginning of the Term, excluding normal wear and tear.
The Tenant shall perform all acts necessary to comply with the terms of this
clause, including, without limitation: (a) removing all of the Tenant's
property, including all of the Tenant's signs, (b) removing, in accordance with
the Landlord's written instructions, alterations, additions, or improvements
made by the Tenant, (c) removing, in accordance with the Landlord's written
instructions, paint used on the windows, doors, or warehouse area floors and
restoring their surfaces, (d) removing all rack bolts and restoring all affected
surfaces, (e) removing all rubber from the warehouse area floors and restoring
the surface, (f) repairing all interior partition walls, (g) removing all trash,
and (h) leaving the Premises in a broom clean condition.
If the Term ends, or if this Lease is rightfully terminated, and if the Tenant
has not substantially complied with the terms of this clause, then the Tenant
shall continue to pay additional rent and fair market value base rent, which
base rent shall be no less than the base rent set forth in this Lease, until the
Tenant effects compliance, without any right to possession of the Premises.
If the Tenant leaves any property at the Premises after the end of the Term or
after the rightful termination of this Lease, then such property shall be deemed
to be abandoned. The Landlord may store, use, sell, or dispose of the abandoned
property. The Tenant shall pay all expenses related to the abandoned property as
additional rent.
23. COMPLIANCE WITH ENVIRONMENTAL LAWS
The Tenant represents, to the best of the Tenant's knowledge, that the Standard
Industrial Classification ("SIC") number set forth in this Lease is the only SIC
number applicable to the Tenant. The Tenant shall promptly notify the Landlord
if that SIC number becomes inapplicable or if another SIC number becomes
applicable.
The Tenant shall not bring or keep any hazardous substances or hazardous wastes,
as defined under the provisions of N.J.S.A. 13: 1K-8 and N.J.S.A. 58:10-23.11b
and the related regulations, at the Premises.
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If N.J.S.A. 13:1K-6 ET SEQ. ("ECRA") is applicable to the Premises due to the
Tenant's actions or due to the expiration or rightful termination of this Lease,
then the Tenant, at its own expense, shall comply with ECRA and effect all steps
necessary to obtain approval of a negative declaration or a completed cleanup.
The Tenant, however, shall not be responsible for any cleanup costs related to
any environmental contamination caused before the beginning of the Term or
caused by the Landlord at any time. If ECRA is not applicable to the Premises
due to the Tenant's actions or due to the expiration or rightful termination of
this Lease, then, by the end of the Term, or upon any rightful termination of
this Lease, the Tenant, at its own expense, shall obtain approval of a
nonapplicability application. The Tenant shall begin the process of complying
with the terms of this clause no later than six (6) months prior to the
expiration of the Term. The Tenant shall promptly provide the Landlord with
copies of all communications to and from the New Jersey Department of
Environmental Protection.
If the Term ends, or if this Lease is rightfully terminated, and if the Landlord
cannot use, lease, demolish, or improve the Premises because the Tenant has not
complied with ECRA, as required under the terms of this clause previously set
forth, or is in the process of complying with ECRA, as required under the terms
of this clause previously set forth, then the Tenant shall continue to pay
additional rent and fair market value base rent, which base rent shall be no
less than the base rent set forth in this Lease, until the Tenant effects
compliance, without any right to possession of the Premises.
If any lien, imposed under the provisions of N.J.S.A. 58:10-23.11 ET SEQ. or
imposed under the provisions of 42 U.S.C. 9601 ET SEQ., affects the Premises due
to the act or neglect of the Tenant, then the Tenant shall have such lien
removed within thirty (30) days from the date on which the Tenant receives
notice of the lien.
The Tenant shall defend, indemnify, and hold the Landlord harmless from any
claim, damage, loss, liability, or expense related to the Tenant's failure to
comply with the terms of this clause. The Tenant's obligations under the terms
of this clause shall survive the termination or expiration of this Lease.
24. RELEASE AND INDEMNIFICATION
A. The Tenant releases the Landlord and agrees to defend, indemnify, and hold
the Landlord harmless from any claim by any person for any injury, death,
damage, loss, liability, or expense which (1) arises upon, about, or in
connection with the Premises, (2) arises due to an occurrence during the Term or
any period of occupancy by the Tenant, and (3) arises due to any of the
following causes or events:
a) a delay in completing the Premises or in obtaining a certificate
of occupancy for the Premises;
b) a delay in the delivery of possession of the Premises caused by an
existing occupant at the Premises;
c) the defective or damaged condition of any part of the Premises or
the building;
d) the stoppage, malfunction, or breakdown of any of the systems
serving the Premises or the building, including, without
limitation, the water system, the plumbing system, the sewer
system, the drainage system, the
11 of 15
<PAGE>
sprinkler system, the electric system, the lighting system, the
gas system, or the heating, ventilating, and air-conditioning
system;
e) the stoppage or reduction of any utility service;
f) the active or passive, ordinary negligence of any person,
including the Landlord, its employees, and its agents, except as
specifically set forth in paragraph B of this clause;
g) the gross negligence of any person, except for the Landlord, its
employees, or its agents;
h) the intentional misconduct or criminal act of any person, except
for the Landlord and except for the Landlord's employees or agents
acting upon the Landlord's instructions;
i) an Act of God, force majeure, or weather condition, including,
without limitation, temperature, dampness, wind, rain, lightening,
sleet, snow, hail, ice, flood, tornado, hurricane, or earthquake;
or
j) falling objects, water, steam fire, smoke, explosion, vermin,
strike, riot, insurrection, public enemy, or war.
B) Notwithstanding anything to the contrary contained in this clause, the
Tenant's agreement to defend, indemnify, and hold the Landlord harmless shall
not apply to the sole ordinary negligence of the Landlord, its employees, or its
agents, as such sole ordinary negligence relates to any obligation of the
Landlord, per this Lease, to construct, alter, repair, maintain, or service the
Premises, the building, or the steps, sidewalks, parking areas, or landscaped
areas which immediately adjoin and serve the Premises. In all other instances of
the ordinary negligence of the Landlord, its employees, or its agents, the
Tenant's agreement to defend, indemnify, and hold the Landlord harmless shall be
limited to three (3) million dollars ($3,000,m000.00) per occurrence.
C) The Tenant's release and the Tenant's agreement to defend, indemnify, and
hold the Landlord harmless shall apply to all damages and expenses, including,
without limitation, nominal damages, direct damages, compensatory damages,
CONSEQUENTIAL DAMAGES, special damages, lost profits, incidental damages, fines,
penalties, punitive damages, attorneys' fees, court costs, costs of suit,
arbitration costs, and interest.
D) The Tenant's obligations under the terms of this clause shall survive the
termination or expiration of this Lease.
E) The Landlord shall not be liable, by way of subrogation or otherwise, to any
insurance company insuring the Tenant, and the Tenant hereby waives any such
insurance company's right of recovery against the Landlord. All of the Tenant's
insurance policies shall contain an endorsement waiving the insurer's
subrogation rights against the Landlord.
25. DEFAULT
If the Tenant does not strictly comply with all of the terms of this Lease, then
the Tenant shall be in default. In addition, the Tenant shall be in default if:
a) the Tenant makes an assignment for the benefit of creditors, b) the Tenant is
decreed insolvent or bankrupt according to law, or c) a receiver is appointed
for the Tenant.
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<PAGE>
If the Tenant is in default, then the Landlord may send a written notice of
default to the Tenant, indicating why the Tenant is not in strict compliance
with the terms of this Lease. After receiving a notice of default, the Tenant
shall cure any monetary default or any non-monetary default within five (5)
days. If, however, a non-monetary default cannot be cured within five (5) days,
then the Tenant shall begin to cure the default within five (5) days and shall
continue to diligently cure the default thereafter. If the Tenant does not
perform within five (5) days after receiving a notice of default, then the
Landlord may cure any default on behalf of the Tenant, in which case the cost of
curing shall be payable as additional rent. In addition, the Landlord shall have
a right to suspend performance of its obligations under the terms of this Lease,
shall have a right of re-entry, shall have a right of termination, and shall
have all other remedies available under the law.
If the Tenant has been in non-monetary default for the same reason on two (2)
occasions during any twelve (12) month period during the Term, and if the Tenant
is in default for the same reason on any subsequent occasion at any time during
the Term, then, regardless of any cure, the Landlord shall have a right to
suspend performance of its obligations under the terms of this Lease, shall have
a right of re-entry, shall have a right of termination, and shall have all other
remedies available under the law.
If the Tenant wrongfully occupies any property owned by the Landlord or its
affiliated companies, other than the Premises, then the Tenant shall be in
default and shall pay additional rent and fair market value base rent, which
base rent shall be no less than the base rent set forth in this Lease, for the
property wrongfully occupied for the period of occupancy.
If the Tenant is in monetary default and has vacated the Premises before the end
of the Term, or if the Landlord obtains a judgment for possession of the
Premises against the Tenant before the end of the Term, then the Landlord shall
try to reasonably re-rent the Premises. The Tenant shall continue to pay base
rent and additional rent to the Landlord until the beginning date of a new lease
for the Premises or until the end of the Term, whichever comes first.
If the Landlord re-rents the Premises before the end of the Term, then, as of
the beginning date of the new lease for the Premises, the Tenant shall pay the
following costs as additional rent: a) reasonable administrative costs incurred
to advertise and show the Premises and incurred to make the new lease, b)
reasonable costs incurred to prepare the Premises for the new tenant, and c)
reasonable real estate commissions paid to a broker for finding the new tenant.
These costs shall be prorated for the remainder of the Term of this Lease in
relation to the term of the new lease.
If the Landlord re-rents the Premises for a monthly base rent amount which is
lower than the base rent amount due under the terms of this Lease, then, as of
the beginning date of the new lease, the Tenant shall pay for the entire
deficiency which will exist for the remainder of the Term. If the Landlord
re-rents the Premises for a monthly base rent amount which is higher than the
base rent amount due under the terms of this Lease, then the Tenant shall not
receive any credit for the surplus toward the rent and additional rent due
through the beginning date of the new lease.
The Landlord and the Tenant shall resolve any claim or controversy related to
this Lease or to the Premises through a binding arbitration proceeding in
Edison, New Jersey in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, except that the Landlord shall have the right
to pursue a summary dispossession action or a distraint action in the Superior
Court of New
13 of 15
<PAGE>
Jersey according to the laws of New Jersey. The Superior Court of New Jersey may
enter judgment upon any decision rendered through arbitration.
The Tenant shall pay all of the Landlord's reasonable costs of enforcing the
terms of this Lease as additional rent, including, without limitation,
reasonable attorneys' fees and disbursements, arbitration costs, and court
costs.
If the Tenant is in default, then the Landlord's delay in sending a notice of
default, the Landlord's delay in starting an arbitration proceeding or a court
action against the Tenant, or the Landlord's acceptance of rent shall not be a
waiver of the default and shall not prevent the Landlord from enforcing the
terms of this Lease.
All of the Landlord's remedies set forth in this clause are cumulative and are
not exclusive of any other remedies available under the law.
26. NOTICE AND CONSENT
Except as specifically set forth in this Lease, all notices and consents given
under the terms of this Lease shall: (a) be in writing, (b) be sent by certified
mail, return receipt requested, be sent by a reputable overnight delivery
service, or hand delivered to the addresses for notices set forth in this Lease,
and (c) be deemed to have been given upon receipt. By giving notice, the
Landlord or the Tenant may hereafter designate different or additional addresses
for their respective notices.
27. SEVERABILITY
If any part of this Lease is contrary to law or otherwise unenforceable, then
the remainder of this Lease shall remain in effect.
28. SPACE EXPANSION OPTION
The Landlord grants the Tenant an option to lease the area shown as Space
Expansion Area on "Exhibit A". This option may only be exercised during the
first year of the Term and shall obligate the Tenant for such area under the
terms and conditions of this Lease pro rata for the remainder of the Term
thereof. To exercise this option, the Tenant must strictly comply with the
following conditions: (a) be in strict compliance with all of its obligations
under the terms of the Lease on the date of exercising this option and on the
date of taking possession of the Space Expansion Area, and (b) give written
notice to the Landlord no later than thirty (30) days in advance of taking
possession of the Space Expansion Area, indicating the Tenant's unequivocal and
unconditional intention to exercise this option. If the Tenant does not strictly
comply with the aforesaid conditions, then the Tenant shall not have exercised
this option. If either party rightfully terminates this Lease, or if the notice
deadline passes before the Tenant exercises this option, then this option shall
automatically and immediately be void and shall have no further effect.
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<PAGE>
29. TERM EXTENSION OPTION
The landlord grants the Tenant an option to extend the Term of the Lease for the
Premises for an additional five (5) year extension period. To exercise this
option, the Tenant must strictly comply with the following conditions: (a) be in
strict compliance with all of its obligations under the terms of the Lease on
the date of exercising this option and on the date of the beginning of the
extension period, and (b) give written notice to the Landlord no later than six
(6) months in advance of the beginning of the extension period, indicating the
Tenant's unequivocal and unconditional intention to exercise this option. If the
Tenant does not strictly comply with the aforesaid conditions, then the Tenant
shall not have exercised this option. If either party rightfully terminates this
Lease, or if the notice deadline passes before the Tenant exercises this option,
then this option shall automatically and immediately be void and shall have no
further effect.
The base net rent for the Premises during the extension period shall be the
"prevailing market rate for comparable space," per the terms of this clause. For
the purpose of this clause, the "prevailing market rental rate for comparable
space" shall mean the average of net rent charged by the Landlord or its related
companies for comparable warehouse space and office space, whichever is
applicable, in buildings comparable to the building which contains the Premises,
within Raritan Center Business Park, on a per square foot basis in the last
three comparable leases made by the Landlord and a new tenant represented by a
real estate broker for a term of at least three years, but not more than five
years, within the twelve month period immediately preceding the date which is
five (5) months in advance of the beginning of the extension period.
During the extension period, the Landlord and the Tenant shall comply with all
of the terms of the Lease and any supplemental agreements, in effect, except
that the terms related to base net rent and the Term of the Lease shall be
deemed to be amended to be consistent with the exercise of this option.
30. GOVERNING LAW
The terms of this Lease shall be governed, interpreted, and construed according
to the laws of New Jersey.
31. BINDING EFFECT OF LEASE
This Lease binds the Landlord and all parties which rightfully succeed to its
rights or take its place. This Lease binds the Tenant and all parties which
rightfully succeed to its rights or take its place with the Landlord's consent
in accordance with the terms of this Lease.
32. ENTIRE AGREEMENT
This Lease contains the entire agreement made by the Landlord and the Tenant.
The terms of this Lease shall not be changed or amended, except by the terms of
a subsequent written agreement signed by the Landlord and the Tenant.
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<PAGE>
EXHIBIT A
TO LEASE BETWEEN CENTER REALTY, L.P.
AND KOS PHARMACEUTICALS, INC.
The Premises and the specifications related thereto are shown on the plan(s)
entitled
AVAILABLE SPACE AT 18 MAYFIELD AVENUE IN CAMPUS 9, prepared by David Cochran,
dated October 5, 1992, with the latest revision date of June 17, 1993.
The Landlord, at the Tenant's expense, shall perform construction per the above
referenced plans. The total cost for the construction if $249,350.00. The Tenant
shall reimburse the Landlord for the cost of construction as follows:
1) $41,558.34 previously paid to the Landlord on August 16, 1993
2) $83,116.68 to be paid on October 15, 1993
3) $41,558.34 to be paid on December 1, 1993
4) $41,558.34 to be paid on February 1, 1994, and
5) $41,558.34 to be paid on April 1, 1994.
<PAGE>
EXHIBIT B
TO LEASE AGREEMENT BETWEEN CENTER REALTY, L.P.
AND KOS PHARMACEUTICALS, INC.
ITEM MONTHLY CHARGE
- ---- --------------
(a) municipal real estate taxes, $1,537.00
(b) property casualty insurance, 155.00
(c) fire sprinkler standby charges, 86.00
(d) central station fire sprinkler water 45.00
monitoring system,
(e) fire sprinkler system testing, 5.00
(f) full maintenance, repair, and replacement for 329.22
the heating, ventilating, and air-conditioning
system \star\,
(g) common road snow removal, 23.00
(h) grounds cleaning and landscape maintenance, 282.00
(i) domestic water, including lawn sprinkler water, 55.00
(j) sewer charges, 39.00
(k) parking lot and sidewalk snow removal. 34.00
--------------
TOTAL MONTHLY ADDITIONAL RENT $2,590.22
==============
\star\ Maintenance includes replacement of pre-filters quarter annually and the
HEPA filters annually in the laboratory space and includes annual service of the
equipment in the office and warehouse areas. In addition, emergency repair
service will be provided as needed on call during the Term.
\bullet\ This total represents an estimate as of May, 1993 of 39% of the total
monthly additional rent charges related to Campus Plaza IX as set forth
in clause 2 of the Lease.
<PAGE>
EXHIBIT C
TO LEASE BETWEEN CENTER REALTY, L.P.
AND KOS PHARMACEUTICALS, INC.
LANDSCAPE AND GROUNDS MAINTENANCE PROGRAM
FOR THE BUILDING CONTAINING THE PREMISES
AND COMMON AREAS WITHIN THE RARITAN CENTER BUSINESS PARK
1. LAWN:
MOWING: Turf areas shall be mowed to the
height of 21/2inches with a standard
rotary mower. Mowing heights may be
increased to 3 inches in the summer
to reduce the total stress on the
turf areas.
Mowing will be accomplished
approximately 35 times during the
period between April 1 and November
30.
FERTILIZATION: All turf areas shall be fertilized
in the spring and summer at the rate
of 1 pound of nitrogen per 1000
square feet and in the late fall
with a Weed and Feed at 2.0 pounds
nitrogen per 1000 square feet.
LIMING: All turf areas shall be limed once
during the year at the rate of 50
pounds per 1000 square feet.
WEED CONTROL: A pre-emergent crabgrass weed
control shall be applied once in the
early spring.
INSECT CONTROL: Grub and chinch bug control shall be
applied, as needed.
RE-SEEDING: Re-seeding and thatch removal shall
be accomplished as needed. Seeding
shall be at the rate of five (5)
pounds per 1000 square feet.
2. SIDEWALKS AND CURBS:
CLEAN-UP: Clippings and other organic debris
will be blown off the sidewalks
after each mowing.
EDGING: Edging of sidewalks shall be
performed every other mowing.
WEED CONTROL: Weed control along the curb and rail
line shall be accomplished with a
chemical called Round up or its
equivalent.
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<PAGE>
3. TREES AND SHRUBS:
TRIMMING: Trimming around the trees and shrub
beds will be performed using an
herbicide and/or a mechanical
device.
PRUNING: All trees and shrubs shall be pruned
as needed.
FERTILIZATION: Fertilization for trees shall be
performed using Ross Daniels 16-10-
9 or equivalent tree spikes.
WEED CONTROL: Shrub beds shall be weeded every
other mowing. A pre-emergent
herbicide will be applied to all
beds in the spring.
Broad leaf weed control shall be
applied.
RE-MULCHING: A top dressing of shredded bark
mulch shall be applied to the shrub
beds.
REPLACEMENT: As necessary.
4. SEASONAL CLEANINGS:
SPRING: Spring clean-up shall be
accomplished in early April to
remove all debris that has
accumulated during the winter.
FALL: All clean-up shall be accomplished
to remove leaves and debris that
have accumulated on the turf and in
the shrub beds.
5. STREETS AND PARKING LOTS:
Parking lots and streets will be
regularly swept with an FMC street
sweeper.
Removal of heavy or constant trash
or debris resulting from the
Tenant's operation is not included
in this program and shall be billed
separately.
6. IRRIGATION SYSTEM:
The system shall be started at the
beginning of the season and flushed
at the end of the season. Heads
shall be repaired and replaced as
necessary.
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<PAGE>
3/15/95 5:00 PM
SPACE EXPANSION AGREEMENT
-------------------------
DATE: MARCH, 1995
LANDLORD: CENTER REALTY, L.P.
A New Jersey Limited Partnership
300 Raritan Center Parkway
P.O. Box 7815
Edison, New Jersey 08818-7815
TENANT: KOS PHARMACEUTICALS, INC.
A Florida Corporation
2 Oakwood Boulevard
Suite 150
Hollywood, FL 33020
SIC Number
EXISTING PREMISES: Approximately 16,922 square feet of
gross space
Campus Plaza IX 18
Mayfield Avenue Raritan Center
Business Park Edison, New Jersey
ADDITIONAL PREMISES: Approximately 4,433 square feet of
gross space
Campus Plaza IX Raritan
Center Business Park Edison, New
Jersey Referenced on "Exhibit A"
TOTAL BASE NET RENT FOR
THE COMBINATION OF THE
EXISTING PREMISES AND
THE ADDITIONAL PREMISES: $7,118.33 per month net
TOTAL PERCENTAGE OF
ADDITIONAL RENT FOR THE
COMBINATION OF THE
EXISTING PREMISES AND THE
ADDITIONAL PREMISES: 48.6% of the total additional rent
expenses for Campus Plaza IX as set
forth in Clause 2 of the Lease dated
May, 1993
PRIOR AGREEMENT(S)
IN EFFECT: Lease dated May, 1993
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<PAGE>
The Landlord and the Tenant hereby agree to the terms of this Agreement.
1. The Tenant is presently occupying the Existing Premises under the
terms of the Lease.
2. On or about June 1, 1995, the Landlord, at the Tenant's expense,
shall prepare the Additional Premises per the plan and specifications referenced
on "Exhibit A" and shall obtain a Certificate of Occupancy for the Additional
Premises. Upon the completion of all conditions necessary for the issuance of a
Certificate of Occupancy, the Tenant shall lease the Additional Premises per the
terms of this Agreement.
3. Beginning as of the later of June 1, 1995, or the date of the
completion of all conditions necessary for the issuance of a Certificate of
Occupancy for the Additional Premises, through the end of the Term on October
31, 1998, the Tenant shall pay the Total Base Net Rent, and the Total Percentage
of Additional Rent per the terms of Clause 2 of the Lease dated May, 1993, for
the Combination of the Existing Premises and the Additional Premises as set
forth above. The Tenant's percentage of additional rent expenses shall be
forty-eight and six-tenths percent (48.6%) of the additional rent expenses
incurred for the building containing the Additional Premises. An estimate of the
additional rent expenses for the Combination of the Existing Premises and the
Additional Premises is attached hereto as "Exhibit B".
4. The total cost for construction is $249,150.00. The Tenant shall
reimburse the Landlord for the total cost of preparing the Additional Premises
($249,150.00) as follows:
$49,830.00 to be paid within one (1) month of completion;
$49,830.00 to be paid within three (3) months of completion;
$49,830.00 to be paid within five (5) months of completion;
$49,830.00 to be paid within seven (7) months of completion;
$49,830.00 to be paid within nine (9) months of completion;
5. Except as specifically set forth herein, all of the other terms of
the Prior Agreement(s) shall remain in effect and shall apply to the Additional
Premises.
6. This Agreement binds the Landlord and all parties which rightfully
succeed to its rights or take its place. This Agreement binds the Tenant and all
parties which rightfully succeed to its rights or take its place with the
Landlord's consent in accordance with the terms of the Lease.
7. This Agreement contains the entire agreement made by the Landlord
and the Tenant. The terms of this Agreement shall not be changed or amended,
except by the terms of a subsequent written agreement signed by the Landlord and
the Tenant.
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<PAGE>
WITNESS/ATTEST: LANDLORD/CENTER REALTY, L.P.
By: Federal Business Centers, Inc.
General partner
/s/ ILLEGIBLE /s/ PETER VISCEGLIA
------------------------- ---------------------------------------
By: Peter Visceglia
President
WINESS/ATTEST: TENANT/KOS PHARMACEUTICALS, INC.
/s/ MARK M. SIECZKAREK /s/ DANIEL M. BELL
------------------------- ---------------------------------------
By: Daniel Bell
President
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<PAGE>
EXHIBIT A
TO SPACE EXPANSION AGREEMENT BETWEEN
CENTER REALTY, L.P.
AND
KOS PHARMACEUTICALS, INC.
The Premises and the specifications related thereto are shown on the plan(s)
entitled PROPOSED EXPANSION FOR KOS 18 MAYFIELD AVENUE IN CAMPUS 9 prepared by
David Cochran, dated February 9, 1995, with the latest revision date of March
14, 1995.
<PAGE>
EXHIBIT B
TO SPACE EXPANSION AGREEMENT BETWEEN
CENTER REALTY, L.P.
AND
KOS PHARMACEUTICALS, INC.
- -------------------------------------------------------------------------------
ITEM MONTHLY
AMOUNT
- -------------------------------------------------------------------------------
a) MUNICIPAL REAL ESTATE TAXES $1,762.00
- -------------------------------------------------------------------------------
b) PROPERTY CASUALTY INSURANCE 89.00
- -------------------------------------------------------------------------------
c) FIRE SPRINKLER STANDBY CHARGES 125.00
- -------------------------------------------------------------------------------
d) CENTRAL STATION FIRE SPRINKLER WATER MONITORING SYSTEM 53.00
- -------------------------------------------------------------------------------
e) FIRE SPRINKLER SYSTEM TESTING 18.00
- -------------------------------------------------------------------------------
f) ROUTINE MAINTENANCE AND SERVICE FOR THE HEATING, AIR-
CONDITIONING, AND VENTILATING SYSTEM
- -------------------------------------------------------------------------------
g) COMMON ROAD SNOW REMOVAL 36.00
- -------------------------------------------------------------------------------
h) GROUNDS CLEANING AND LANDSCAPE MAINTENANCE 356.00
- -------------------------------------------------------------------------------
i) DOMESTIC WATER, INCLUDING LAWN SPRINKLER WATER 89.00
- -------------------------------------------------------------------------------
j) SEWER CHARGES 54.00
- -------------------------------------------------------------------------------
k) MAINTENANCE AND ELECTRICITY FOR OUTSIDE LIGHTING 36.00
- -------------------------------------------------------------------------------
l) PARKING LOT AND SIDEWALK SNOW REMOVAL 125.00
- -------------------------------------------------------------------------------
TOTAL $3,161.00
- -------------------------------------------------------------------------------
This total represents an estimate as of February, 1995 of 48.6% of the total
monthly additional rent expenses related to Campus Plaza IX as set forth in
Clause 2 of the Lease dated May, 1993.
EXHIBIT 10.16
THIRD MODIFICATION OF LEASE AGREEMENT
THIS THIRD MODIFICATION OF LEASE AGREEMENT ("Modification"), Made this
21st day of November, 1996, by and between OAKWOOD BUSINESS CENTER LIMITED
PARTNERSHIP, a Delaware limited partnership, as successor to STS Buildings
Associates, L.P., a Delaware limited partnership, (hereinafter referred to as
"LANDLORD"), and KOS PHARMACEUTICALS, INC., a Florida corporation, hereinafter
referred to as "TENANT".
WITNESSETH:
WHEREAS, LANDLORD and TENANT did heretofore on the 7th day of January
1993 enter into a certain Lease Agreement for premises located at One Oakwood
Boulevard, SUITE 50, Hollywood, Florida 33020; which said Lease Agreement was
amended by that Modification and Extension Agreement dated June 6, 1996, which
said Lease Agreement was modified by that Assignment and Modification of Lease
Agreement dated July 1, 1996 (collectively sometimes hereinafter the "Lease
Agreement"); and
WHEREAS, the parties hereto desire to further modify said Lease
Agreement upon certain terms and conditions as more fully set forth hereinafter.
NOW, THEREFORE, in consideration of the promises, covenants and
undertakings hereinafter set forth and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
RECITATIONS: The foregoing recitations are true and correct and are
incorporated herein by this reference.
CONFLICTS: In the event of a conflict between any of the terms,
conditions and/or provisions of this Modification and any of the terms,
conditions and/or provisions of the Lease Agreement, the terms, conditions
and/or provisions of this Modification shall prevail.
DEFINED TERMS: Except as otherwise provided in this Modification, all
defined terms shall have the meanings such defined terms have in the Lease
Agreement.
DEMISED PREMISES: Effective December 1, 1996 the area of the Demised
Premises shall be increased from 7,750 square feet to TEN THOUSAND NINE HUNDRED
AND EIGHTY-SEVEN (10,987) square feet to include Suite 218 as outlined in red on
Exhibit "A" attached hereto. Effective August 1, 1997, the area of the Demised
Premises shall be decreased to FIVE THOUSAND SEVEN HUNDRED AND FIFTY (5,750)
square feet and TENANT shall vacate Suites 210, 212, and 218, as outlined in
blue on Exhibit "A" attached hereto, as provided for in the Lease Assignment and
Second Modification of Lease Agreement.
BASE RENT: The Annual Base Rent as set forth in Section 5 of the Lease
Agreement as subsequently modified, shall be further modified as follows:
PERIOD PERIOD ANNUAL MONTHLY
COMMENCING ENDING BASE RENT BASE RENT
- ---------- ------ --------- ---------
12/1/96 7/31/97 $ 106,510.56 $8,875.88
8/1/97 11/30/97 $ 51,405.00 $4,283.75
12/1/97 11/30/98 $ 53,475.00 $4,456.25
ADDITIONAL RENT: Effective December 1, 1996, TENANT'S Proportionate
Share as set forth in Section 4(b)iii(g) of the Extension and Modification of
Lease Agreement shall be increased from 12.27% to 17.4%. Effective August 1,
1997, TENANT'S Proportionate Share shall be decreased to 9.1%.
CONSTRUCTION: LANDLORD agrees to allow TENANT to make interior
improvements to Suite 218 of the Demised Premises. Said improvements shall be
built in substantial compliance with the plans described in Exhibit "B" attached
hereto. All work shall be performed by TENANT and at TENANT'S sole cost and
expense.
<PAGE>
RATIFICATION AND CONFIRMATION: Except as specifically modified and
assigned hereby, all of the terms, provisions and conditions of the Lease
Agreement of January 7th, 1993, as amended or modified, shall remain in full
force and effect and are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Modification
of Lease Agreement the day and year first above written.
Executed this ___ day of _____________
1996.
WITNESSES: LANDLORD
OAKWOOD BUSINESS CENTER
LIMITED PARTNERSHIP,
a Delaware limited partnership
By: OBC Genpar, Inc.
Its: General Partner
By:
- ----------------------------------- --------------------------------
Its:
- -----------------------------------
As to LANDLORD
Executed this 21 day of November 1996.
WITNESSESS: TENANT:
KOS PHARMACEUTICALS, INC.,
a wholly owned subsidiary of
Kos Holdings, Inc.
/S/ CAROLYN M. LEMAIRE By:/S/ DANIEL M. BELL
- ----------------------------------- --------------------------------
Name: Daniel M. Bell
- -----------------------------------
Title: President
/S/ LAURA BONITTO Attest: /S/ JUAN F. RODRIGUEZ
- ----------------------------------- ---------------------------
As to TENANT Name: Juan F. Rodriguez
Title: Controller
(CORPORATE SEAL)
2
<PAGE>
EXHIBIT "A"
Diagram
3
<PAGE>
EXHIBIT "B"
Diagram
4
EXHIBIT 21
SUBSIDIARIES OF KOS PHARMACEUTICALS, INC
NAME JURISDICTION OF INCORPORATION
- ---- -----------------------------
Aeropharm Technology, Inc. Delaware
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
As independent certified public accountants, we hereby consent to the use
of our report (and to all references to our Firm) included in or made a part
of this registration statement.
ARTHUR ANDERSEN LLP
Miami, Florida,
December 16, 1996
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EXHIBIT 99.1
CONSENT
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"1933 Act"), the undersigned hereby consents to all references to him in the S-1
Registration Statement of Kos Pharmaceuticals, Inc., including under the caption
"Management," pursuant to the 1933 Act.
December 13, 1996
/S/ JOHN BRADEMAS
----------------------------
EXHIBIT 99.2
CONSENT
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"1933 Act"), the undersigned hereby consents to all references to him in the S-1
Registration Statement of Kos Pharmaceuticals, Inc., including under the caption
"Management," pursuant to the 1933 Act.
December 13, 1996
/S/ LOUIS C. LASAGNA
----------------------------
EXHIBIT 99.3
CONSENT
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"1933 Act"), the undersigned hereby consents to all references to him in the S-1
Registration Statement of Kos Pharmaceuticals, Inc., including under the caption
"Management," pursuant to the 1933 Act.
December 13, 1996
/S/ MARK NOVITCH
----------------------------
EXHIBIT 99.4
CONSENT
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"1933 Act"), the undersigned hereby consents to all references to him in the S-1
Registration Statement of Kos Pharmaceuticals, Inc., including under the caption
"Management," pursuant to the 1933 Act.
December 13, 1996
/S/ FREDERICK B. WHITTEMORE
----------------------------
