<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1998 Commission File No. 000-21429
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ARQULE, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 04-3221586
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(State of Incorporation) (I.R.S. Employer Identification Number)
200 BOSTON AVENUE, MEDFORD, MASSACHUSETTS 02155
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(Address of Principal Executive Offices)
(781) 395-4100
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(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
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Number of shares outstanding of the registrant's Common Stock as of November 9,
1998:
Common Stock, par value $.01 12,165,403,000 shares outstanding
<PAGE> 2
ARQULE, INC.
QUARTER ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
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Item 1 - Unaudited Condensed Financial Statements
Condensed Balance Sheet (Unaudited)
September 30, 1998 and December 31, 1997 ............... 2
Condensed Statement of Operations (Unaudited)
Three months ended September 30, 1998 and 1997
and nine months ended September 30, 1998 and 1997....... 3
Condensed Statement of Cash Flows (Unaudited)
Nine months ended September 30, 1998 and 1997........... 4
Notes to Unaudited Condensed Financial Statements.............. 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 8
PART II - OTHER INFORMATION............................................. 12
Item 2 - Use of Proceeds from Registered Securities..................... 12
Item 5 - Other Information.............................................. 12
Item 6 - Exhibits and Reports on Form 8-K............................... 13
Signatures ........................................................ 14
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ARQULE, INC.
CONDENSED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA )
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,392 $ 15,137
Marketable securities 32,661 34,145
Accounts receivable 4,818 3,133
Inventory 1,028 953
Prepaid expenses and other current assets 808 520
Notes receivable from related parties 30 30
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Total current assets 43,737 53,918
Property and equipment, net 15,957 12,654
Other assets 1,656 156
Notes receivable from related parties 174 197
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$ 61,524 $ 66,925
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 1,079 $ 1,174
Accounts payable and accrued expenses 1,477 2,804
Deferred revenue 1,963 3,917
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Total current liabilities 4,519 7,895
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Capital lease obligations 391 1,213
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Deferred revenue -- 477
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Shareholders' Equity:
Common stock, $0.01 par value; 30,000,000
shares authorized; 12,121,409 and
11,877,315 shares issued and outstanding at
September 30, 1998 and December 31,
1997, respectively 121 119
Additional paid-in capital 71,225 68,418
Accumulated deficit (14,493) (10,643)
-------- --------
56,853 57,894
Deferred compensation (239) (554)
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Total stockholders' equity 56,614 57,340
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$ 61,524 $ 66,925
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</TABLE>
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<PAGE> 4
ARQULE, INC.
CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) (UNAUDITED)
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE:
Compound development revenue $ 2,431 $ 3,814 $ 8,580 $ 8,542
Compound development
revenue -- related parties 2,161 895 7,703 2,685
-------- -------- -------- --------
Total revenue 4,592 4,709 16,283 11,227
COSTS AND EXPENSES:
Cost of revenue 1,691 2,404 5,213 5,497
Cost of revenue -- related parties 1,505 616 4,680 1,849
Research and development 3,409 1,127 7,423 2,954
Marketing, general and administrative 1,802 1,012 4,561 3,112
-------- -------- -------- --------
Total costs and expenses 8,407 5,159 21,877 13,412
-------- -------- -------- --------
Loss from operations (3,815) (450) (5,594) (2,185)
Interest income 570 811 1,882 1,958
Interest expense (38) (58) (138) (200)
-------- -------- -------- --------
Net (Loss) Income $ (3,283) $ 303 $ (3,850) $ (427)
======== ======== ======== ========
Basic net (loss) income per share $ (0.27) $ 0.03 $ (0.32) $ (0.04)
======== ======== ======== ========
Weighted average common shares outstanding 12,112 11,850 11,999 10,767
======== ======== ======== ========
Diluted net (loss) income per share $ (0.27) $ 0.02 $ (0.32) $ (0.04)
======== ======== ======== ========
Weighted average common shares
outstanding 12,112 12,911* 11,999 10,767
======== ======== ======== ========
</TABLE>
* Includes common stock and equivalents.
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<PAGE> 5
ARQULE, INC.
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
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<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Net loss $ (3,850) $ (427)
Adjustment to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 3,291 1,552
Amortization of deferred compensation 148 300
Increase in accounts receivable (1,685) (500)
Increase in inventory (75) 0
(Increase) decrease in prepaid expenses
and other current assets (288) 282
Increase in other assets (1,500) (27)
Decrease in notes receivable from related party 23 23
(Decrease) increase in accounts payable
and accrued expenses (1,327) 442
Decrease in deferred revenue (2,431) (2,032)
-------- --------
Net cash used in operating activities (7,694) (387)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale marketable securities (34,829) (52,957)
Proceeds from sale or maturity of marketable securities 36,313 8,648
Additions to property and equipment (6,594) (4,456)
-------- --------
Net cash used in investing activities (5,110) (48,765)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of capital lease obligation (917) (948)
Proceeds from issuance of common stock 2,976 21,841
-------- --------
Net cash provided by financing activities 2,059 20,893
-------- --------
Net decrease in cash and cash equivalents (10,745) (28,259)
Cash and cash equivalents, beginning of period 15,137 36,586
-------- --------
Cash and cash equivalents, end of period $ 4,392 $ 8,327
======== ========
</TABLE>
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ARQULE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed financial statements have been prepared by the
Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These
condensed financial statements should be read in conjunction with the
Company's audited financial statements and related footnotes for the year
ended December 31, 1997 thereto included in the Company's Form 10-K filed
with the Securities and Exchange Commission on March 17,1998 and the
Company's amended Annual Report on Form 10-K/A filed with the Securities
and Exchange Commission on April 17, 1998. The unaudited condensed
financial statements include, in the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary
to present fairly the financial position of the Company as of September
30, 1998, and the results of its operations for the three and nine month
periods ended September 30, 1998 and 1997. The results of operations for
such interim periods are not necessarily indicative of the results to be
achieved for the full year.
2. CASH EQUIVALENTS AND MARKETABLE SECURITIES (UNAUDITED)
The following is a summary of cash equivalents held by the Company at
September 30, 1998 and December 31, 1997 which are carried at amortized
cost approximating fair market value: (In thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
(UNAUDITED)
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<S> <C> <C>
U.S. Government Obligations $ -- $ 2,200
Corporate Notes 32,661 31,945
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$32,661 $34,145
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</TABLE>
All of the Company's marketable securities are classified as current at
September 30, 1998 and December 31, 1997 as these funds are highly liquid
and are available to meet working capital needs and to fund current
operations.
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ARQULE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTIES
In January 1998, the Company elected an individual to its Board of
Directors who is also an employee of Wyeth-Ayerst Pharmaceuticals (a
division of American Home Products). Solvay Duphar BV remains a related
party.
4. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Standards, No. 130, "Reporting Comprehensive Income" (SFAS
No. 130) and No. 131, "Disclosures About Segments of an Enterprise and
Related Information" (SFAS No. 131) effective for fiscal years beginning
after December 15, 1997. To date, the Company has not had any material
adjustments as defined by SFAS No. 130 or SFAS No. 131.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 is
effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999 (January 1, 2000 for the Company). To date, the Company has
not held derivative instruments and does not anticipate the adoption of
SFAS No. 133 will have any effect on the Company's results of operations
or its financial position.
5. AMERICAN HOME PRODUCTS $2 MILLION INVESTMENT IN ARQULE, INC.
In June 1998, through MDP Holdings, Inc., American Home Products invested
$2.0 million in the Company in accordance with the Common Stock Purchase
Agreement and the Research and License Agreement, both dated July 3,
1997.
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<PAGE> 8
ARQULE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
OVERVIEW
ArQule is engaged in the discovery and development of novel chemical
compounds with commercial potential in the pharmaceutical, biotechnology
and agrichemical industries. ArQule manufactures and delivers two types
of arrays of synthesized compounds to its pharmaceutical, biotechnology
and agrichemical partners: (i) Mapping Array(TM) compound sets, which are
arrays of novel, diverse small molecule compounds used for generating
leads and (ii) Directed Array(TM) compound sets, which are arrays of
analogs of a particular lead compound (identified from a Mapping Array
set or otherwise), synthesized for the purpose of optimizing such lead
compounds.
The Company currently generates revenue primarily from collaborative
agreements, which provide for the development and delivery of Mapping
Array(TM) and Directed Array(TM) sets. The Company's revenues to date are
primarily attributable to seven major corporate collaborations: Abbott
Laboratories; Solvay Duphar B.V.; Roche Bioscience; Monsanto Company;
American Home Products; Sankyo Ltd; and Amersham Pharmacia A.B. The
Company recognizes revenue under its corporate collaborations as related
work is performed or as arrays are delivered. Payments received from
corporate partners prior to the completion of the related work or before
array delivery are recorded as deferred revenue. License option fees are
recognized as the options are granted because such fees are nonrefundable
and the Company has no further obligations to fulfill. Technology access
fees are recognized over the length of the research and development
agreements. The Company is also entitled to receive milestone and royalty
payments if products generated under the collaborations are developed.
The Company has received one milestone and no royalty payments to date.
The Company has additionally entered into joint discovery agreements with
a number of biotechnology companies to which it has provided Mapping
Array(TM) and Directed Array(TM) sets in exchange for joint ownership
interests in any resulting drug candidates. These arrangements have not
yet yielded any significant revenue for the Company.
Quarterly variations in financial performance may be expected as levels
of revenue are dependent on expanding or continuing existing
collaborations, additional corporate collaborations, and future milestone
payments, which are inconsistent and difficult to anticipate. In
addition, the Company will continue to aggressively invest in new
technologies to expand its drug discovery capabilities. The Company also
expects that strategic opportunities will arise to broaden the Company's
participation in drug discovery and to extend the Company's proprietary
technology platform to industry segments beyond pharmaceutical and
agrochemical product discovery. Strategic investments of this nature have
the potential for enhancing longer term equity value but may result in
near term earnings fluctuations or impact profitability.
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<PAGE> 9
The Company has incurred a cumulative net loss of $14.5 million through
September 30, 1998. Losses have resulted principally from costs incurred
in research and development activities related to the Company's efforts
to develop its technologies and from the associated administrative costs
required to support those efforts. The Company's ability to achieve
profitability is dependent on its ability to market increasing levels of
functionality of its chemistry service; specifically its Mapping
Array(TM) and Directed Array(TM) programs to pharmaceutical,
biotechnology and agrichemical companies and the joint development and
commercialization of products in which it has an economic interest.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements reflecting
management's current expectations regarding the Company's future
financial performance. Such expectations are based on certain assumptions
regarding the progress of product development efforts under collaborative
agreements, the execution of new collaborative agreements and other
factors relating to the Company's growth. Such expectations may not
materialize if product development efforts are delayed or suspended, if
negotiations with potential collaborators are delayed or unsuccessful or
if other assumptions prove incorrect. See also "Important Factors
Regarding Forward-Looking Statements" described more fully in Exhibit
99.1 to the Company's Annual Report on Forms 10-K and 10-K/A for the year
ended December 31, 1997.
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<PAGE> 10
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
REVENUE. The Company's revenue for the three months ended September 30,
1998 decreased slightly from $4.7 million to $4.6 million for the same
period in 1997. Revenue was $16.3 million and $11.2 million for the nine
months ended September 30, 1998 and 1997, respectively. This year-to-date
increase is primarily due to increased compound development revenue from
work performed on and the delivery of Mapping Array(TM) and Directed
Array(TM) sets under the Company's collaborative agreements. Due to the
nature of the Company's business, quarterly fluctuations in revenue are
possible due to variable timing of the initiation and completion of
collaborative programs.
COST OF REVENUE. The Company's cost of revenue for the three months ended
September 30, 1998 increased $0.2 million to $3.2 million from $3.0
million for the same period in 1997. Cost of revenue was $9.9 million and
$7.3 million for the nine months ended September 30, 1998 and 1997,
respectively. These increases are primarily attributable to the costs of
additional facilities and scientific personnel and the necessary supplies
and overhead expenses related to the performance of the work and the
delivery of the Mapping Array(TM) and Directed Array(TM) sets pursuant to
the Company's collaborative agreements. The Company anticipates that the
aggregate cost of revenue will increase over the next several years as
its business expands.
RESEARCH AND DEVELOPMENT EXPENSES. The Company's research and development
expenses for the three months ended September 30, 1998 increased $2.3
million to $3.4 million from $1.1 million for the same period in 1997.
Research and development expenses were $7.4 million and $3.0 million for
the nine months ended September 30, 1998 and 1997, respectively. These
increases are the result of the Company's expansion of its chemical
libraries and related proprietary technologies. The Company expects
research and development spending to increase over the next several years
as the Company further expands its chemistry discovery and development
programs.
MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company's marketing,
general and administrative expenses for the three months ended September
30, 1998 increased $0.8 million to $1.8 million from $1.0 million for the
same period in 1997. Marketing, general and administrative expenses were
$4.6 million and $3.1 million for the nine months ended September 30,
1998 and 1997, respectively. These increases are primarily associated
with increased marketing and business development activities, and higher
levels of administrative support in concert with the Company's growth
during 1997. These expenses will likely increase in the aggregate in
future periods to support the projected growth of the Company.
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<PAGE> 11
NET INTEREST INCOME. The Company's net interest income for the three
months ended September 30, 1998 and 1997 was $0.5 million and $0.8
million, respectively. Net interest income was $1.7 million for the nine
months ended September 30, 1998 and 1997, respectively.
NET INCOME (LOSS). The Company's net loss for the three months ended
September 30, 1998 was $(3.3) million as compared to a net income of $0.3
for the same period in 1997. The net loss was $(3.8) million and $(0.4)
million for the nine months ended September 30, 1998 and 1997,
respectively. The net loss for 1998 is primarily attributable to
investments in new technologies in order to expand drug discovery
capabilities and the variable timing of the initiation and completion of
collaborative programs.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company held cash and cash equivalents and
marketable securities with a value of $37.0 million. The Company's
working capital at September 30, 1998 was $39.2 million. The Company has
funded operations through September 30, 1998 with sales of Common Stock,
payments from corporate collaborators, and the utilization of capital
equipment lease financing. The Company has maintained a master equipment
lease agreement since February 1994. Under the terms of this agreement,
the Company has funded certain capital expenditures through equipment
leases with terms of 42 months in duration. As of September 30, 1998, the
Company had utilized $4.5 million of the available $8.5 million available
under this financing facility.
The Company expects that its available cash and marketable securities,
together with operating revenues, investment income and equipment
financing arrangements, will be sufficient to finance its working capital
and capital requirements for the foreseeable future. The Company entered
into a lease agreement with a developer to construct a headquarters,
production and research facility with expected occupancy in late 1999.
The Company's cash requirements may vary materially from those now
planned depending upon the results of its drug discovery and development
strategies, the ability of the Company to enter into any corporate
collaborations in the future and the terms of such collaborations, the
results of research and development, the need for currently unanticipated
capital expenditures, competitive and technological advances,
acquisitions and other factors. There can be no assurance that the
Company will be able to obtain additional customers for the Company's
products and services, or that such products and services will produce
revenues adequate to fund the Company's operating expenses. The Company
may have to seek additional financing from public or private sales of its
securities, including equity securities. There can be no assurance that
additional funding will be available when needed or on acceptable terms.
YEAR 2000 COMPLIANCE
Many currently installed systems are not capable of distinguishing 21st
century dates from 20th century dates. As a result, in less than two
years, computer systems and/or software used by many companies in a very
wide variety of applications will
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<PAGE> 12
experience operating difficulties unless they are modified or upgraded to
adequately process information involving, related to or dependent upon
the century change. Significant uncertainty exists concerning the scope
and magnitude of problems associated with the century change.
The Company has established a project team to address Year 2000 risks.
The Company has also initiated various Information Technology enhancement
projects intended to improve the access and dissemination of scientific
and business information throughout the enterprise to enhance development
and operational efficiencies. As part of this initiative the Company
acquired an Enterprise Resource Financial System in late 1997 and has
implemented the major relevant components of that system during the
course of 1998, and expects the implementation to be complete during the
fourth quarter 1998. The Company expects to be in full Y2K compliance
with its internal financial systems at that time. As the costs associated
with these initiatives are part of the Company's continuing improvement
process they have been recognized as incurred.
The Company is in the data gathering phase with regard to non-financial
software and imbedded chip technology and is currently gathering data to
assess the impact of the Year 2000 on its non-financial systems such as
automated production equipment, security equipment, etc. In addition to
data gathered to date by the project team, the Company has acquired
compliance certificates and commitments from IT vendors that Y2K upgrades
will be available with Year 2000 compliance scheduled for Spring 1999.
The Company does not, at this time, have any indications that the cost of
achieving Year 2000 compliance for its non-financial systems will be
material. If the Company is unable to achieve Year 2000 compliance for
its major non-financial system, the Year 2000 could have a material
impact on the operations of the Company. Since the Company is in the
information-gathering phase, the Company does not currently have a
contingency plan in place for its internal non-financial software and
imbedded chip technology.
The Company is in the process of contacting its critical suppliers,
service providers and contractors to determine the extent to which the
Company's interface systems are vulnerable to those third parties'
failure to remedy their own Year 2000 issues. To the extent that
responses to Year 2000 readiness are unsatisfactory, the Company intends
to change suppliers, service providers or contractors to those who have
demonstrated Year 2000 readiness but the Company cannot be assured that
it will be successful in finding such alternative suppliers, service
providers and contractors. The Company does not currently have any formal
information concerning the Year 2000 compliance status of its customers
but has received indications that most of its customers are working on
Year 2000 compliance. In the event that any of the Company's significant
customers and suppliers do not successfully and timely achieve Year 2000
compliance, and the Company is unable to replace them with new customers
or alternate suppliers, the Company's business or operations could be
adversely affected.
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ARQULE, INC.
PART II - OTHER INFORMATION
Item 1 - None
Item 2 - Use of Proceeds from Registered Securities
A Registration Statement on Form S-1 (File No. 333-11105) registering
2,875,000 shares of the Company's Common Stock, filed in connection with
the Company's initial public offering (the "IPO") was declared effective
by the Securities and Exchange Commission on October 16, 1996.
Under this registration statement on October 21, 1996 and November 18,
1996, the Company and its selling shareholders sold, in aggregate, all
2,875,000 shares registered in the IPO, with an aggregate-offering price
to the public of $34.5 million. The managing underwriters of the IPO were
Hambrecht & Quist LLC, Oppenheimer & Co., Inc. and Vector Securities
International Inc.
In connection with the IPO, the Company incurred total expenses of $3.0
million, including underwriting discounts and commissions of $2.4 million
and other expenses of $0.6 million. After such expenses, the Company's
net proceeds from the IPO were $31.5 million. The amount of net offering
proceeds used by the Company as of September 30, 1998 was as follows:
approximately $16.0 million for the fixed asset additions and
approximately $1.8 million for capital lease obligations.
Item 3 and 4 - None
Item 5 - Other Information
Dr. David L. Coffen, Sr. Vice President of Chemistry, resigned effective
November 6, 1998.
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<PAGE> 14
Item 6(a) - Exhibits:
<TABLE>
<CAPTION>
Exhibits Description
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<S> <C>
10.1+ Amendment No. 1 to Research and License Agreement between the
Company and Roche Bioscience, a division of Syntex, Inc., dated as
of September 30, 1998. Filed herewith.
10.2 Resignation Agreement between Eric Gordon and the Company dated as
of September 11, 1998. Filed herewith.
10.3 Lease by and between MetroNorth Corporate Center LLC and
the Company dated as of May 29, 1998. Filed herewith.
11 Statement Regarding Computation of Unaudited Net (Loss) Income Per
Share
27 Financial Data Schedule
</TABLE>
Item 6(b) - Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
- ----------
+ Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.
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<PAGE> 15
ARQULE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
ArQule, Inc.
Date: November 13, 1998 /s/ James R. Fitzgerald, Jr.
----------------------------------------------
James R. Fitzgerald, Jr.
(Vice President, Chief Financial Officer
and Treasurer)
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<PAGE> 16
ARQULE, INC.
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10.1+ Amendment No. 1 to Research and License Agreement between the
Company and Roche Bioscience, a division of Syntex, Inc., dated as
of September 30, 1998. Filed herewith.
10.2 Resignation agreement between Eric Gordon and the Company dated as
of September 11, 1998. Filed herewith.
10.3 Lease by and between MetroNorth Corporate Center LLC and the
Company dated as of May 29, 1998. Filed herewith.
11 Statement Regarding Computation of Unaudited Net (Loss) Income Per
Share
27 Financial Data Schedule
- ----------
+ Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.
-15-
<PAGE> 1
Exhibit 10.1
AMENDMENT NO. 1 TO
RESEARCH AND LICENSE AGREEMENT
This Amendment No. 1, dated as of September 30, 1998 is between
ArQule, Inc. ("ArQule") a Delaware Corporation and Roche Bioscience, a
division of Syntex (U.S.A.) Inc. ("Roche Bioscience"), a Delaware
Corporation.
WHEREAS, ArQule and Roche Bioscience entered into a Research and
License Agreement dated September 13, 1996 (the "Agreement") under which,
among other things, ArQule performs certain research and compound
optimization activities for Roche Bioscience in exchange for payment by
Roche Bioscience of research funds, milestone payments and royalties;
WHEREAS, Roche Bioscience notified ArQule by letter dated March 31,
1993 that Roche Bioscience was exercising its right to terminate the
Directed Array Program of the Agreement effective September 30, 1998 (the
"Termination Notice") but are willing to continue the collaboration in a
different form;
WHEREAS, Roche Bioscience and ArQule have agreed to meet to discuss
the possibility of a broader collaboration between ArQule and the Roche
Group, of which Roche Bioscience is a member;
WHEREAS, Roche Bioscience; has decided to withdraw the Termination
Notice and desires instead to amend the Agreement as provided herein; and,
WHEREAS, ArQule is willing to amend certain provisions of the
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants set forth
in this Amendment No. 1, the parties hereby agree as follows:
1. Except as specifically amended by the terms hereof, the remaining terms
and provisions of the Agreement shall not be affected by this Amendment No. 1
and shall remain in full force and effect.
2. Capitalized terms utilized and not otherwise defined herein shall have
the meanings ascribed to such terms in the Agreement.
3. Roche Bioscience hereby withdraws the Termination Notice.
4. Section 1.36 of the Agreement is hereby deleted and replaced with the
following:
1.36 "Research Period" shall mean the period commencing on the
Effective Date and ending on March 31, 1999, unless extended by
mutual agreement of the parties or terminated early in accordance
with Article 11.
<PAGE> 2
5. Section 1.46 of the Agreement is hereby re-designated Section 1.50 and
the following sections are hereby added to the Agreement:
1.46 "Production Plan" means a plan developed by the parties for
the production of Proprietary Screening Array Sets by ArQule for
Roche Bioscience under the Proprietary Screening Array Program. If
necessary, the Research Committee will periodically update the
Production Plan during the performance of the Proprietary Screening
Array Program. The initial Production Plan is attached as Exhibit A
to this Amendment.
1.47 "Proprietary Screening Array Compound" means a compound that
ArQule has produced for Roche Bioscience and delivered to Roche
Bioscience under a Proprietary Screening Array Program as described
in Section 3.5 of the Agreement.
1.48 "Proprietary Screening Array Program" means a research program
in which ArQule produces Proprietary Screening Array Sets pursuant
to the Production Plan and delivers the Proprietary Screening Array
Compounds to Roche Bioscience, as further described in Section 3.5
of the Agreement.
1.49 "Proprietary Screening Array Set" means an Array synthesized
by ArQule for Roche Bioscience under the Proprietary Screening
Array Program, as described in Section 3.5 of the Agreement.
6. The following sentence is hereby added to the end of Section 2.2 of the
Agreement:
The Research Committee shall direct and administer the Proprietary
Screening, Array Program in accordance with Section 3.5.
7. The parties agree that the obligations of ArQule and Roche Bioscience
pursuant to Sections 3.1, 3.2 and 3.3 of the Agreement shall be satisfied upon
the completion by ArQule, subject to Section 3.6, of the [*] and, if requested
by Roche Bioscience, a small amount of exploratory array support for the [*].
ArQule acknowledges the payment by Roche Bioscience of the funds set forth in
Section 3.6 of the Agreement.
8. Section 3.4 of the Agreement is hereby deleted and replaced with:
3.4 TERMINATION OF DIRECTED ARRAY PROGRAM. The Directed Array
Program shall commence on the Effective Date of the Agreement and
continue until March 31, 1999, unless earlier terminated as
provided in Article 11.
9. The following sections are hereby added to the Agreement:
3.5 PROPRIETARY SCREENING ARRAY PROGRAMS.
- -----------------------------
*Confidential treatment has been requested for the marked portion.
2
<PAGE> 3
3.5.1 DESCRIPTION OF PROPRIETARY SCREENING ARRAY PROGRAM. Subject
to Section 3.6, ArQule shall produce and deliver to Roche
Bioscience the Proprietary Screening Array Set(s) set forth in the
Production Plan. Roche Bioscience shall provide the molecular cores
as specified by the Production Plan. ArQule shall produce the
Proprietary Screening Array Compounds in its AMAP(TM) parallel
synthesis system, perform quality analysis, register the
Proprietary Screening Array Compounds, and deliver the completed
Proprietary Screening Array Set(s) to Roche Bioscience as further
described in Section 3.5.3 below.
3.5.2 CONDUCT OF PROPRIETARY SCREENING ARRAY PROGRAM. Subject to
Section 3.6, ArQule shall commence and perform the Proprietary
Screening Array Program as directed by the Research Committee in
accordance with the Production Plan. With respect to each
Proprietary Screening Array Set, the Production Plan will contain
the following: (i) the constant molecular core for the Proprietary
Screening Array Set; (ii) the variable diversity elements that will
be used in the Proprietary Screening Array Set; (iii) the
appropriate number and types of compounds that each Proprietary
Screening Array Set should contain; (iv) the appropriate amount and
purity of the compounds in each Proprietary Screening Array Set;
and (v) completion criteria for a satisfactory Proprietary
Screening Array Set. ArQule reserves the right to exclude from the
Proprietary Screening Array Program any molecular cores, diversity
elements, and compounds that, prior to the time that the compound
was proposed by Roche Bioscience, was already included in a program
with a third party or an internal ArQule program. In such event,
ArQule shall notify the Research Committee as soon as possible
after Roche Bioscience proposes the compound. At the request of the
Research Committee, ArQule shall conduct limited probing reactions
to determine chemical feasibility with respect to no more than [*]
chemical cores as part of the planning process. The Production Plan
may also include an expected production and delivery schedule of
Proprietary Screening Array Set(s) by ArQule and any other issues
or items that the Research Committee determines would facilitate
the Proprietary Screening Array Program. The Proprietary Screening
Array Sets shall not include proprietary chemistries that ArQule
has licensed from third parties.
3.5.3 PROGRAM PERFORMANCE. ArQule shall have primary responsibility
for conducting the Proprietary Screening Array Program, with the
cooperation and assistance of Roche Bioscience as further specified
in the Production Plan. Roche Bioscience shall provide the
molecular cores as specified by the Production Plan. Subject to the
authority of the Research Committee, ArQule will use commercially
reasonable efforts to produce the Proprietary Screening Array
Set(s) in accordance with the Production Plan. After ArQule
synthesizes a Proprietary Screening Array Set, ArQule will analyze
selected compounds in the Proprietary Screening Array Set to
determine overall compound purity, with the results furnished to
the Research
- -----------------------------
*Confidential treatment has been requested for the marked portion.
3
<PAGE> 4
Committee. ArQule will deliver the Proprietary Screening Array
Compounds to Roche Bioscience formatted in 96-well microtiter
plates with both a paper and electronic copy of the chemical
structures and spatial address of each compound in the Proprietary
Screening Array Set. The parties anticipate that each Proprietary
Screening Array Set produced in the Proprietary Screening Array
Program will include approximately twenty (20) milligrams of each
Proprietary Screening Array Compound (subject to availability of
the component compounds provided by Roche Bioscience). However, the
Research Committee will determine the actual specifics for
implementation of the Proprietary Screening Array Program.
ArQule shall continue efforts to produce each Proprietary Screening
Array Set, as set forth in this Section 3.5.3 and subject to
Section 3.6, until the earliest to occur of (i) the Research
Committee determines that ArQule has delivered a satisfactory
Proprietary Screening Array Set in accordance with the completion
criteria in the Production Plan; (ii) the Research Committee
determines that further work is unlikely to result in production of
a Proprietary Screening Array Set that will meet the completion
criteria in the Production Plan; (iii) the end of the Research
Period; or (iv) expiration or termination of this Agreement in
accordance with Article 11.
3.5.4 RIGHTS IN PROPRIETARY SCREENING ARRAY COMPOUNDS. Roche
Bioscience shall own all right, title and interest in the
Proprietary Screening Array Compounds delivered by ArQule to Roche
Bioscience under this Article. ArQule hereby assigns, transfers and
conveys to Roche Bioscience all right, title and interest in these
Proprietary Screening Array Compounds and any intellectual property
rights therein. ArQule reserves the right to exclude from the
delivered Proprietary Screening Array Sets any compounds that were
licensed, reserved or otherwise committed to a third party or an
internal ArQule program prior to shipment to Roche Bioscience
("Committed Compounds"). ArQule will use its best efforts to
identify such Committed Compounds before they are incorporated into
the Production Plan, but in any event ArQule will identify such
Committed Compounds during the registration process before the
Committed Compounds are delivered to Roche Bioscience.
ArQule shall not use any proprietary chemical components provided
by Roche Bioscience except in the Proprietary Screening Array
Program as directed by the Research Committee. ArQule shall not
transfer such proprietary chemical components to any third party
and shall return any unused amounts to Roche Bioscience when the
Proprietary Screening Array Program is completed. Roche Bioscience
agrees that the above restrictions on proprietary chemical
components shall not apply to components that are in the public
domain or provided to ArQule by a third party that is not under
similar restrictions to Roche Bioscience.
3.6 FINAL PAYMENT FOR DIRECTED ARRAY PROGRAM AND PROPRIETARY
SCREENING ARRAY PROGRAM. In consideration of the completion of
performance by ArQule of the
4
<PAGE> 5
Directed Array Program and the performance of the Proprietary
Screening Array Program, Roche Bioscience has paid ArQule [*], and
ArQule hereby acknowledges such payment, which amount shall support
FTEs as set forth below and shall be allocated between the Directed
Array Program and the Proprietary Screening Array Program as
directed by the Research Committee. It is anticipated by the
parties that such funding will support approximately [*].
10. In Section 6.1.3 (with the heading "Roche Bioscience Patent Rights") of
the Agreement, the words "or covering a Proprietary Screening Array Compound"
are hereby added after the words "Roche Bioscience Derivative Compounds."
11. In Section 8.4 (with the heading "Publications") of the Agreement, the
words "Proprietary Screening Array Compounds" are hereby added after the words
"ArQule Derivative Compounds."
12. This Amendment No. 1 shall be governed by and construed in accordance
with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned have duly executed and
delivered this Amendment No. 1 as a sealed instrument effective as of the
date first above written.
ROCHE BIOSCIENCE, a division of ARQULE, INC.
SYNTEX (U.S.A.) INC.
By: /s/ R.L. Whiting By: /s/ Eric Gordon
------------------------------------ --------------------------
Name: R.L. Whiting Name: Eric Gordon
---------------------------------- ------------------------
Title: SVP, Head, Neurobiology Title: President and CEO
--------------------------------- -----------------------
- -----------------------------
*Confidential treatment has been requested for the marked portion.
5
<PAGE> 6
Exhibit A
Research Plan: Proprietary Screening Arrays.*
*[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE MARKED PORTION.]
6
<PAGE> 1
Exhibit 10.2
AGREEMENT
This Agreement is made and entered into as of the 11th day of
September, 1998, by and between Eric B. Gordon (hereinafter referred to as "Mr.
Gordon") residing at 2 Charles Davis Drive, Wenham, Massachusetts, and ArQule,
Inc. (hereinafter referred to as "ArQule" or the "Company"), a Delaware
corporation having a principal place of business at 200 Boston Avenue, Medford,
Massachusetts.
1. DEFINITIONS. As used in this Agreement, any reference to
"ArQule" shall at all times unless otherwise specified include, and this
Agreement shall cover, ArQule, Inc., its predecessors and successors, all of its
past, present and future shareholders, directors, officers, employees,
investors, representatives, attorneys, agents, and assigns, in their respective
capacities as such and all of its affiliates, subsidiaries, parent or
controlling corporations, and their affiliates and subsidiaries; and any
reference to "Mr. Gordon" shall at all times unless otherwise specified include
his attorneys, heirs, administrators, representatives, executors, legatees,
successors, agents and assigns.
2. EMPLOYMENT. Mr. Gordon shall resign as President and Chief
Executive Officer effective on such date as the Board of Directors of the
Company may request. Subsequent to such resignation, Mr. Gordon shall remain an
employee of ArQule at his current salary and benefit level until his resignation
as an employee is requested by the Board which shall be no earlier than January
11, 1999; provided however, the Board of Directors may terminate Mr. Gordon at
any time for Cause as such term is defined in Mr. Gordon's employment agreement
with ArQule dated May 31, 1996 (the "Employment Agreement"); provided further
that Mr. Gordon shall not be obligated to remain as an employee of ArQule after
January 11, 1999. Such period of time prior to Mr. Gordon's resignation or
termination is to be referred to as the "Transition Period". In accordance with
ArQule's current practice, as part of Mr. Gordon's current salary, Mr. Gordon
may receive certain bonuses which the Compensation Committee of the Company
determines he has earned by the achievement of certain corporate and individual
objectives in the 1998 Incentive Plan. During the Transition Period, Mr. Gordon
shall report to the Board of Directors and shall undertake the duties and
responsibilities requested of him by the Board of Directors. Upon termination of
Mr. Gordon's employment hereunder, the Company shall (i) pay Mr. Gordon a lump
sum amount equal to twelve months of Mr. Gordon's base salary (less usual taxes
and withholding) less an amount equal to Mr. Gordon's daily base salary rate
multiplied by the number of days between Mr. Gordon's resignation as President
and Chief Executive Officer and the end of the Transition Period and (ii)
provide Mr. Gordon with the benefits currently received by him in accordance
with the terms of such benefit plans for a period of twelve months or until Mr.
Gordon commences other employment. ArQule and Mr. Gordon hereby agree that if a
new President and Chief Executive Officer has not been hired by ArQule by
January 11, 1999, both parties have the option to negotiate the continuation of
Mr. Gordon's services.
3. BOARD OF DIRECTORS. During the Transition Period, Mr. Gordon
will remain a member of the Board of Directors. Upon termination of the
Transition Period, Mr. Gordon will remain on the Board of Directors, although he
agrees to resign immediately if requested to do so by a majority of the Board of
Directors. If Mr. Gordon remains a director of the Company after
<PAGE> 2
the Company's 1999 Annual Meeting of Stockholders, then Mr. Gordon shall receive
the standard compensation and benefits paid to other non-employee directors.
4. STOCK OPTIONS: Mr. Gordon has 235,103 options exercisable at
$0.80 per share which have vested as of August 13, 1998. Mr. Gordon may exercise
those options subject to the terms under which they were granted, including the
requirement that the options be exercised within three months of the termination
of Mr. Gordon's employment.
As of August 13, 1998 Mr. Gordon will have 193,717 unvested
options exercisable at $0.80 per share. These options will vest according to the
schedule set forth in Exhibit A, which shall not be later than the end of the
Transition Period. New stock option certificates representing the incentive
stock options and the nonstatutory stock options as set forth in Exhibit A
attached hereto to purchase a total of 193,717 shares of the Company's Common
Stock, with the vesting schedules in accordance with Exhibit A, will be promptly
issued to Mr. Gordon following the execution of this Agreement. Mr. Gordon may
exercise those options subject to the terms under which they were granted,
including the requirement that the options be exercised within three months of
the termination of Mr. Gordon's employment.
5. LOAN FORGIVENESS. Mr. Gordon owes the Company a loan principal
amount of $166,667 plus interest. As additional consideration, the Company shall
forgive $166,667 plus any accrued interest on January 11, 2000; provided,
however, Mr. Gordon shall pay to the Company the loan principal amount of
$166,667, plus interest, if (i) prior to January 11, 2000, Mr. Gordon breaches
this Agreement or the Employment Agreement or (ii) no later than January 8,
2000, Mr. Gordon has not delivered to ArQule a check for the withholding taxes
due on the forgiveness of $166,667 plus interest in an amount set forth in a
notice sent by the Company to Mr. Gordon no later than January 1, 2000. In order
to promptly notify Mr. Gordon pursuant to this section, Mr. Gordon further
agrees to notify ArQule if prior to January 11, 2000 he changes his residence.
6. REFERENCE. The Company will provide Mr. Gordon with a positive
verbal and/or written reference upon specific request.
7. MUTUAL GENERAL RELEASE. Effective as of the end of the
Transition Period, Mr. Gordon and the Company fully, forever, irrevocably and
unconditionally release, remise, and discharge each other from any and all
manner of claims, charges, complaints, demands, actions, causes of action,
suits, rights, debts, dues, sums of money, costs, losses, accounts, reckonings,
covenants, contracts, controversies, agreements, promises, leases, doings,
omissions, damages, executions, obligations, liabilities, and expenses
(including attorneys' fees and costs), of every kind and nature whatsoever,
whether known or unknown, either at law, in equity, or mixed, which each ever
had, nor has, or can, shall, or may have against the other, by reason of, on
account of, or arising out of any matter or thing which has happened, developed,
or occurred before the termination of the Transition Period (collectively
referred to as "Claims") including, but not in limitation of the foregoing
general terms, any Claims, asserted or unasserted, arising from his employment
with or separation from ArQule, and specifically including any Claims under any
federal or state labor, employment or discrimination laws, including but not
limited to, Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act of 1967, as amended, the Fair Labor Standards
Act of 1938, as amended, the Americans with
2
<PAGE> 3
Disabilities Act of 1992, Chapter 151B of the Massachusetts General Laws,
Sections 24A-24J of Chapter 149 of the Massachusetts General Laws, the
Massachusetts Civil Rights Act, the Massachusetts Equal Rights Law, or at common
law, except that this release shall not apply to any Claims with respect to the
obligations or agreements of the parties under this Agreement and except that
this release also shall not apply to any Claims by Mr. Gordon for
indemnification pursuant to the Company's Amended and Restated Certificate of
Incorporation or its By-Laws, a copy of which is attached to this Agreement. It
is expressly agreed and understood that this release is a General Release,
subject to the exceptions stated above. In addition, and not in limitation of
the foregoing, effective as of the end of the Transition Period, Mr. Gordon
forever releases and discharges ArQule from any liability or obligation to
reinstate or reemploy him in any capacity.
8. ANNOUNCEMENT. The Company, after notice and an opportunity to
review by Mr. Gordon, will announce that Mr. Gordon is stepping down from duties
as President and Chief Executive Officer to pursue other opportunities. Mr.
Gordon will also be given an opportunity to review the announcement to be made
upon the appointment of his successor.
9. COMPANY PROPERTY. At the end of the Transition Period, Mr.
Gordon will immediately return to ArQule all documents; reports; files;
memoranda; records; software; credit cards; door and file keys; computer access
codes; disks and instructional manuals; and any and all other Company property
that Mr. Gordon received, prepared or helped prepare in connection with his
employment with ArQule, and Mr. Gordon will not retain any copies, duplicates,
reproductions, or excerpts thereof, nor will he show or give any of the above
which at any time was in his possession to any third party who is not an ArQule
employee or consultant hired or employed by ArQule.
10. NONDISPARAGEMENT. The parties, as defined above, agree not to
make any negative or disparaging remarks about each other to any other party,
including staff, executives, Board of Directors or industry or business
contacts.
11. (a) NONDISCLOSURE OF CONFIDENTIAL OR PROPRIETARY INFORMATION.
Mr. Gordon continues to be bound by any and all agreements he has signed
protecting the Company's confidential and proprietary information and agrees
that all information, whether or not in writing, of a private, secret or
confidential nature concerning the Company's business or financial affairs that
is entitled to protection as confidential or proprietary information under
applicable law (collectively, "Proprietary Information") shall be the exclusive
property of the Company. By way of illustration but not limitation, Proprietary
Information may include inventions, products, processes, methods, techniques,
formulas, projects, plans, financial data, computer programs, research and
development activities of the Company, product and marketing plans. Mr. Gordon
further agrees that he shall not publish, disclose or otherwise make available
to any third party, other than employees of the Company, any Proprietary
Information except as expressly authorized in writing by the Company. Mr. Gordon
may make such disclosures as required by law so long as he gives the Company
reasonable notice and the opportunity to oppose the disclosure. Mr. Gordon
expressly agrees not to use such Proprietary Information for his own benefit or
for the benefit of any other person or business entity.
3
<PAGE> 4
(b) NON-COMPETITION. Notwithstanding Article 6 of the Employment
Agreement, it is understood that Mr. Gordon will be free to work for any
company, including a pharmaceutical company, whose principal activity is not the
direct sale or licensing of combinatorial chemistry technology or combinatorial
chemistry compounds similar to those sold or licensed by ArQule.
12. LEGAL, FINANCIAL PLANNING, AND EMPLOYMENT SEARCH FEES. ArQule
will reimburse Mr. Gordon up to $10,000 for attorneys' and financial planning
fees relating to the review of this Agreement, compliance with the Employment
Agreement, continuing SEC reporting and governance implications, and for other
professional fees or expenses that Mr. Gordon might incur in connection with the
termination of his employment or the search for new employment.
13. BREACH. The parties agree that in the event one party breaches
any part or parts of this Agreement, legal proceedings may be instituted against
that party for breach of contract and each party may pursue all remedies
available in law and equity.
14. AMENDMENT. This Agreement shall be binding upon the parties,
and may not be released, discharged, abandoned, supplemented, amended, changed,
or modified in any manner, orally or otherwise, except by an instrument in
writing of concurrent or subsequent date, signed by a duly authorized officer or
representative of each of the parties hereto.
15. CONSTRUCTION. The terms of this Agreement are contractual in
nature and not a mere recital. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts. Captions
herein are inserted for convenience, do not constitute a part of this Agreement,
and shall not be admissible for the purpose of proving the intent of the
parties. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument, and in pleading or proving any provision of this
Agreement it shall not be necessary to produce more than one such counterpart.
16. VALIDITY. Should any provision of this Agreement be declared
or be determined by any court of competent jurisdiction to be illegal or
invalid, the validity of the remaining parts, terms or provisions shall not be
affected thereby and said illegal or invalid part, term or provision shall be
deemed not to be a part of this Agreement.
17. WAIVER. Waiver of any provision of this Agreement, in whole or
in part, in any one instance shall not constitute a waiver of any other
provision in the same instance, nor any waiver of the same provision in another
instance, but each provision shall continue in full force and effect with
respect to any other then-existing or subsequent breach.
18. ENTIRE AGREEMENT. This Agreement and the Employment Agreement
dated May 31, 1996 contain and constitute the entire understanding and agreement
between the parties hereto respecting the subject matter thereof and supersede
and cancel all previous negotiations, agreements, commitments, and writings in
connection herewith except where expressly reaffirmed.
19. REPRESENTATIONS. Mr. Gordon and the Company affirm
that the only consideration for signing this Agreement are the terms stated
herein; that no other promises or agreements of any kind have been made to cause
either to sign this Agreement; and that each fully understands
4
<PAGE> 5
the meaning and intent of this instrument. The Company represents that the
individual signing this Agreement has authority to bind the Company.
20. ACKNOWLEDGMENTS. Mr. Gordon states and represents that he has
carefully read this Agreement, knows the contents hereof, freely and voluntarily
assents to all the terms and conditions hereof, has had an opportunity to
consult with and review this Agreement with an attorney of his choice,
understands the final and binding effect of this Agreement, and signs the same
as his own free act with the full intent of releasing ArQule from all claims to
the extent provided in Section 7 above.
Mr. Gordon further states that he understands that the General Release
contained in Section 7 of this Agreement includes a release and waiver of any
rights or claims he has or may have under the Age Discrimination in Employment
Act of 1967, as amended. He acknowledges that he has been advised in writing to
consult with an attorney prior to executing this Agreement, that he has been
given a period of at least twenty-one (21) days within which to consider whether
or not to sign this Agreement, that he has been given a period of at least seven
(7) days following his signing of this Agreement in which to revoke it, and that
the Agreement shall not become effective or enforceable until the seven (7) day
period has expired.
[Remainder of this page is intentionally left blank]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have set their hands and seals to this
Agreement as of the date written above.
/s/ Eric B. Gordon
-------------------------------------------
Eric B. Gordon
ARQULE, INC.
By: /s/ James R. Fitzgerald, Jr.
---------------------------------------
James R. Fitzgerald, Jr.
Vice President, Chief Financial Officer
6
<PAGE> 7
EXHIBIT A
VESTING OF OPTION FOR 193,717 SHARES
VESTING DATE NUMBER OF SHARES CLASSIFICATION
------------ ---------------- --------------
August 14, 1998 28,142 Incentive Stock Options
January 11, 1999 68,717 Incentive Stock Options
January 11, 1999 56,283 Incentive Stock Options
January 11, 1999 40,575 Non-qualifying Stock Options
7
<PAGE> 1
Exhibit 10.3
LEASE
by and between
METRO NORTH CORPORATE CENTER LLC
Landlord
and
ARQULE, INC.
Tenant
Dated: May 29, 1998
Premises at Metro North Corporate Center, Woburn, Massachusetts
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I - REFERENCE DATA
1.1 Subjects Referred To..............................................1
1.2 Exhibits..........................................................6
ARTICLE II - TERM; OPTION TO EXTEND
2.1 Term..............................................................6
2.2 Option to Extend Term.............................................7
2.3 Limited Waiver of Annual Fixed Rental Rate........................7
2.4 Annual Fixed Rental Rate During the Original Term.................7
2.5 Annual Fixed Rental Rate During Extended Terms....................8
ARTICLE III - PLANS AND SPECIFICATIONS; IMPROVEMENTS; PERMITS AND
APPROVALS; CONSTRUCTION
3.1 Initial Building Plans and Specifications........................10
3.2 Tenant Plans.....................................................11
3.3 Permits and Approvals; Landlord's Acquisition of Fee Title
to Initial Building Lot and Expansion Lot........................11
3.4 Landlord's Initial Building Work.................................13
3.5 Substantial Completion of Landlord's Initial Building Work.......14
3.6 Tenant's Improvements............................................15
3.7 Certain Construction Obligations of Landlord and Tenant..........15
3.8 Delivery of Security Deposit.....................................16
3.9 General Provisions Applicable to Construction....................16
3.10 Construction Representatives.....................................17
3.11 Insurance; Indemnity.............................................17
3.12 Provisions Applicable to Expansion Building......................17
3.13 Payments to Tenant On Account of Tenant Improvements.............19
ARTICLE IV - RENT
4.1 Annual Fixed Rental Rate.........................................19
4.2 Additional Rent..................................................20
4.2.1 Real Estate Taxes..........................................20
4.2.2 Insurance..................................................23
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<PAGE> 3
4.2.2.1 Insurance Taken Out by Tenant.....................23
4.2.2.2 Insurance Taken Out by Landlord...................23
4.2.2.3 Tenant Reimbursement of Insurance Taken
Out by Landlord...................................24
4.2.2.4 Certain Requirements Applicable to
Insurance Policies................................25
4.2.2.5 Waiver of Subrogation.............................25
4.2.3 Utilities..................................................26
4.2.4 Common Area Charges........................................26
4.2.5 Payments on Account of Insurance and Common
Area Charges...............................................26
4.3 Net Lease; Nonterminability By Tenant.............................27
4.4 Landlord's Repair and Maintenance Obligations;
Assignment of Warranties..........................................27
ARTICLE V - ADDITIONAL COVENANTS
5.1 Tenant's Affirmative Covenants....................................27
5.1.1 Perform Obligations........................................28
5.1.2 Use........................................................28
5.1.3 Repair and Maintenance.....................................28
5.1.4 Compliance with Law and Insurance Requirements.............28
5.1.5 Tenant's Work..............................................31
5.1.6 Indemnity..................................................31
5.1.7 Landlord's Right to Enter..................................32
5.1.8 Personal Property at Tenant's Risk.........................32
5.1.9 Payment of Cost of Enforcement.............................32
5.1.10 Yield-Up...................................................32
5.1.11 Estoppel Certificates......................................34
5.1.12 Park Restrictions..........................................34
5.1.13 Holding Over...............................................35
5.1.14 Tenant's Financial Statements..............................35
5.1.15 Landlord's Expenses Re: Consents...........................35
5.2 Tenant's Negative Covenants.......................................35
5.2.1 Assignment and Subletting..................................35
5.2.2 Overloading and Nuisance...................................36
5.2.3 Installations, Alterations or Additions....................36
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<PAGE> 4
ARTICLE VI - CASUALTY OR TAKING
6.1 Casualty....................................................37
6.1A Taking......................................................38
6.2 Restoration.................................................38
6.3 Award.......................................................39
ARTICLE VII - DEFAULTS
7.1 Events of Default...........................................40
7.2 Remedies....................................................40
7.3 Remedies Cumulative.........................................41
7.4 Landlord's Right to Cure Defaults...........................41
7.5 Effect of Waivers of Default................................42
7.6 No Accord and Satisfaction..................................42
7.7 Interest on Overdue Sums....................................42
ARTICLE VIII - MORTGAGES
8.1 Rights of Mortgage Holders..................................43
8.2 Superiority of Lease; Option to Subordinate.................43
ARTICLE IX - MISCELLANEOUS PROVISIONS
9.1 Notices from One Party to the Other.........................44
9.2 Quiet Enjoyment.............................................44
9.3 Easements; Changes to Lot Lines.............................45
9.4 Lease Not to be Recorded....................................45
9.5 Bind and Inure; Limitation of Landlord's Liability..........45
9.6 Acts of God.................................................46
9.7 Landlord's Default; Tenant's Right of Self-Help.............46
9.8 Brokerage...................................................47
9.9 Applicable Law and Construction.............................47
9.10 Submission Not an Offer.....................................48
9.11 Security Deposit............................................48
9.12 Parties Responsible for Costs of Own Obligations............48
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<PAGE> 5
ARTICLE X - OPTION TO PURCHASE; EXPANSION OPTION: FIRST OPPORTUNITY;
RIGHT OF FIRST REFUSAL
10.1 Tenant's Purchase Option....................................49
10.2 Tenant's Option to Expand...................................52
10.2.1 Definitions..........................................52
10.2.2 Exercise of Tenant's Option to Expand................55
10.2.3 Election to Execute a Separate Lease.................56
10.3 Tenant's Right of First Opportunity to Purchase.............57
10.4 Tenant's Right of First Refusal.............................58
10.5 Landlord's Right of First Opportunity.......................58
10.6 Further Rights of Mortgagees................................58
-4-
<PAGE> 6
LEASE AGREEMENT
METRO NORTH CORPORATE CENTER LLC, a Massachusetts limited liability
company (the "Landlord") hereby leases and demises to ARQULE, INC., a Delaware
corporation (the "Tenant") and Tenant hereby leases from Landlord, the Premises
(as described in Section 1.1 of this Lease) on the terms and provisions of this
Lease.
ARTICLE I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO.
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1.
Date of this Lease: May 29, 1998.
Initial Building Lot: The parcel of land described in
Exhibit A attached hereto.
Expansion Lot: The parcel of land described in
Exhibit B attached hereto.
Lot: The Initial Building Lot and the
Expansion Lot.
Cross-Easements: Those rights and easements appurtenant
to the Initial Building Lot and the
Expansion Lot, as applicable, for
drainage facilities and, as applicable,
water and sewer and other utility lines
and in the case of the Initial Building
Lot, for certain parking spaces on the
Expansion Lot under the Cross Easement
Agreement, which is attached hereto as
Exhibit B-1 (the "Cross-Easement
Agreement"). Landlord reserves the
right to make modifications thereto,
provided that Tenant shall have prior
review and approval rights, which
approval Tenant shall not unreasonably
withhold or delay, with regard to said
modifications to the extent the same
would affect Tenant's Intended Uses of
the Initial
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Building, the Lot, or any portion thereof,
or Tenant's rights or obligations under
this Lease.
Initial Building: The three-story building to be
constructed on the Initial Building Lot
and described in Section 3.1 of this
Lease.
Expansion Building: A three-story building to be
constructed on the Expansion Lot as
provided in Section 10.2 of this Lease
and containing approximately 125,000
square feet of rentable area.
Premises: The Initial Building Lot and the
Initial Building and the Cross-Easements
and, if Tenant's Option to Expand (as
provided in Section 10.2 of this Lease) is
exercised, from and after the Expansion
Building Delivery Date, the Expansion
Building and the Expansion Lot.
Tenant Fit-Up Period: The period commencing with the Term
Commencement Date and expiring one
hundred eighty (180) days thereafter
during which Annual Fixed Rent will not
be payable as provided in Section 2.3
of this Lease.
Building: Prior to the Expansion Building
Delivery Date, the Initial Building.
From and after the Expansion Building
Delivery Date, the Initial Building and
the Expansion Building.
Original Address of Landlord: c/o National Development of New
England, 2310 Washington Street
Newton Lower Falls, Massachusetts 02162.
Original Address of Tenant: 200 Boston Avenue
Medford, Massachusetts 02155
Landlord's Construction
Representative: Bryan Clancy or John Onufrak.
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Tenant's Construction
Representative: Stephen Buia.
Security Deposit: $1,500,000.00 initially, subject to
subsequent adjustments as provided in
Section 3.8 and Section 10.2.2, to be
held by Escrow Agent in accordance with
Section 9.11.
Additional Security Deposit: 50% of the Expansion Building Annual
Fixed Rental Rate.
Completion Date for Initial
Building: April 1, 1999.
Penalty Completion Date
for Initial Building: June 1, 1999 as extended for Force
Majeure Events and Tenant Delays.
Outside Completion Date
for Initial Building: August 1, 1999 as extended for Force
Majeure Events and Tenant Delays.
Force Majeure Events: The events described in Section 9.6 of
this Lease.
Tenant Delays: As defined in Section 3.5 of this Lease.
Escrow Agent: Goulston & Storrs initially, and after
Landlord's acquisition of fee title to
the Lot, as Landlord may from
time-to-time elect, Landlord's first
mortgagee from time to time, or another
party acceptable to Landlord and
Tenant; provided, however, that Escrow
Agent shall enter into an escrow
agreement that is mutually acceptable
to Landlord, Tenant and Escrow Agent.
Term Commencement Date: The date on which all of Landlord's
Initial Building Work (as defined in
Section 3.1) is deemed to be
substantially complete pursuant to
Section 3.5. Possession of the
Premises shall be treated as delivered
to Tenant on the Term Commencement Date.
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Original Term: If the Term Commencement Date is the
first day of a calendar month, the
period beginning on the Term
Commencement Date and ending on the day
before the fifteenth (15th) anniversary
of the Term Commencement Date. If the
Term Commencement Date is a day other
than the first day of a calendar month,
the period beginning on the Term
Commencement Date and ending on the
last day of the month in which the
fifteenth (15th) anniversary of the
Term Commencement Date occurs
(whichever of the foregoing expiration
dates is applicable, the "Original Term
Expiration Date).
Extended Terms: Two (2) five (5) year periods, subject
to the provisions of Section 2.2.
Expansion Building Amount: Determined under Section 10.2.1 of this
Lease.
Expansion Building Rent Increment: Determined under Section 2.4 of this
Lease.
Expansion Building Annual
Fixed Rental Rate: Determined under Section 10.2 of this
Lease.
Expansion Building Delivery Date: The date on which the Landlord's
Expansion Building Work (as provided
for in Section 3.12 of this Lease) is
deemed to be substantially complete
pursuant to Section 3.5. Possession of
the Expansion Building shall be treated
as delivered to Tenant on the Expansion
Building Delivery Date.
Intended Uses: Office, research and development
(including RDNA, genetic, biomedical
and combinational chemistry, and animal
testing), testing laboratory, other
accessory general office and
manufacturing uses, and other related
uses.
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Common Area Charges: Common Charges payable under that
certain Declaration of Protective
Covenants referred to in Exhibit D,
subject to the provisions of Section
4.2.4 and the share of real estate
taxes allocable to the Lot 1 Exclusive
Parking Areas and the share of Drainage
Maintenance Charges, as respectively
referred to in and defined under the
Cross-Easement Agreement.
Title Exceptions: Those matters identified in Exhibit E
attached hereto.
Lease Year: (a) If the Term Commencement Date is
the first day of a calendar month, each
one year period beginning on the Term
Commencement Date and each anniversary
thereof and ending on the day before
the next succeeding such anniversary
and (b) If the Term Commencement Date
is a day other than the first day of a
calendar month, each one year period
beginning on the first day of the
calendar month immediately after the
month in which the Term Commencement
Date occurs, and each anniversary of
such day, and ending on the day before
the next succeeding such anniversary.
Appropriate pro-rations shall be made
for any partial months or other periods
prior to the commencement of the first
Lease Year.
Broker: Lynch, Murphy, Walsh & Partners.
Public Liability Insurance Limits: Bodily Injury and Property Damage:
(per occurrence) Combined Single Limit of $5,000,000, or
greater amount as reasonably required
by Landlord in accordance with Section
4.2.2.
Annual Fixed Rental Rate: Determined under Sections 2.4 and 2.5
of this Lease.
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1.2 EXHIBITS.
The Exhibits listed below in this Section are incorporated in this Lease
by reference and are to be construed as a part of this Lease:
EXHIBIT A: Depiction of Initial Building Lot.
EXHIBIT B: Depiction of Expansion Lot.
EXHIBIT B-1: Form of Instrument creating Cross-Easements
EXHIBIT C: Outline specifications (including site plan, floor
plans, building elevation and base building
specifications).
EXHIBIT D: Declaration of Protective Covenants.
EXHIBIT D-1: Form of Certificate of Confirmation and Compliance Under
Declaration of Protective Covenants.
EXHIBIT E: Title Exceptions.
EXHIBIT F: Schedule of Environmental Reports.
EXHIBIT G: Development Schedule.
EXHIBIT H: Architect's Rendering
EXHIBIT I: HVAC Specifications at Yield-Up
EXHIBIT I-1: Fixtures, Furnishings and Equipment of Tenant to be
Removed from Premises
EXHIBIT J: Terms of Subordination, Non-Disturbance and Attornment
Agreement
EXHIBIT K: Form of Notice of Lease
ARTICLE II
TERM; OPTION TO EXTEND
2.1 TERM. TO HAVE AND TO HOLD for the Original Term, beginning on the
Term Commencement Date, plus any of the two for which Tenant exercises its
option pursuant to Section 2.2.
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2.2 OPTION TO EXTEND TERM. Tenant shall have two (2) separate options to
extend the then term of this Lease for an additional five (5) year period (i.e.,
for a total, if both such options are exercised as provided herein, of ten
successive years beyond the Original Term) (each five year period being referred
to herein as an "Extended Term"), provided (i) to exercise each such option,
Tenant shall give notice in writing to Landlord of its exercise not less than
twelve (12) months prior to expiration of the Original Term or the first
Extended Term, as the case may be (the "Exercise Date"), (ii) no default
continuing beyond any applicable notice, grace or cure period in the obligations
of Tenant under this Lease shall exist at the time each such notice is given
(and all such defaults shall be fully corrected or cured, as may be applicable,
within the applicable period of grace and all interest and other costs due, if
any, to Landlord in connection therewith shall be paid in full within such
period of grace), and (iii) at the time such option is exercised Tenant is in
occupancy of the entire Premises then demised hereunder (except to the extent
that such occupancy is prevented by Casualty or Taking, and except for any
assignments, transfers, mortgages, pledges, encumbrances or sublettings
permitted by this Lease or otherwise consented to by Landlord). All of the terms
and provisions of this Lease shall be applicable during each such Extended Term
except that (i) Tenant shall have no option to extend the Term of this Lease
beyond the second Extended Term and (ii) the Annual Fixed Rental Rate for each
Extended Term shall be adjusted in accordance with Section 2.5. The word "Term"
or "term" as used herein shall mean the Original Term, plus any of the Extended
Terms as to which Tenant shall have exercised its option under this Section 2.2.
2.3 LIMITED WAIVER OF ANNUAL FIXED RATE. Provided Tenant is not in
default continuing beyond any applicable notice, grace or cure period as of the
Term Commencement Date (and all such defaults shall be fully corrected or cured,
as may be applicable, within the applicable period of grace and all interest and
other costs, if any, due to Landlord in connection therewith shall be paid in
full within such period of grace), and no default continuing beyond any
applicable notice, grace or cure period thereafter occurs on the part of Tenant
during the Tenant Fit-Up Period (and all such defaults shall be fully corrected
or cured, as may be applicable, within the applicable period of grace and all
interest and other costs due, if any, to Landlord in connection therewith shall
be paid in full within such period of grace), Landlord shall waive Tenant's
obligation to pay Annual Fixed Rental Rate in respect of the Initial Building
during the Tenant Fit-Up Period.
2.4 ANNUAL FIXED RENTAL RATE DURING THE ORIGINAL TERM. For the
Original Term of this Lease the Annual Fixed Rental Rate for the Initial
Building shall be as set forth below:
(i) For the period commencing on the Term Commencement Date (subject to
the provisions of Section 2.3, above, during the Tenant Fit-Up
Period) and ending on the day before the third anniversary of the
Term Commencement Date, the product of the Final Building Area (as
determined pursuant to Section 3.1) and Thirteen and 24/100 Dollars
($13.24) (the "First Portion Rent Rate");
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(ii) For the period commencing on the third anniversary of the Term
Commencement Date and ending on the day before the sixth anniversary
of the Term Commencement Date, the product of the Final Building
Area and Thirteen and 47/100 Dollars ($13.47) (the "Second Portion
Rent Rate");
(iii) For the period commencing on the sixth anniversary of the Term
Commencement Date and ending on the day before the ninth anniversary
of the Term Commencement Date, the product of the Final Building
Area and Fourteen and 22/100 Dollars ($14.22) (the "Third Portion
Rent Rate");
(iv) For the period commencing on the ninth anniversary of the Term
Commencement Date and ending on the day before the twelfth
anniversary of the Term Commencement Date, the product of the Final
Building Area and Fourteen and 97/100 Dollars ($14.97) (the "Fourth
Portion Rent Rate"); and
(v) For the period commencing on the twelfth anniversary of the Term
Commencement Date and ending at the expiration of the Original Term,
the product of the Final Building Area and Fifteen and 97/100
Dollars ($15.97) (the "Fifth Portion Rent Rate").
For the Original Term of this Lease, from and after the Expansion Building
Delivery Date, the Annual Fixed Rental Rate shall be increased by the Expansion
Building Rent Increment as determined in Section 10.2.1 of this Lease.
2.5 ANNUAL FIXED RENTAL RATE DURING EXTENDED TERMS. If Tenant shall
exercise its option(s) to extend the term pursuant to Section 2.3, the Annual
Fixed Rental Rate shall be adjusted, effective as of the first day of the first
Extended Term and, if applicable, the second Extended Term (each an "Adjustment
Date"), to equal 90% of the Market Rent (as hereinafter determined and defined)
as of the applicable Adjustment Date, provided that, as adjusted, Annual Fixed
Rental Rate for each Extended Term shall not be less than the product of the
Final Building Area of the Initial Building and, if Tenant has exercised its
Option to Expand in accordance with Section 10.2.2, the Expansion Building and
$13.50. "Market Rent" shall be computed as of each Adjustment Date at the then
current effective rentals being charged for newly executed leases for comparable
buildings, and improved to the extent of Landlord's Initial Building Work (as
defined in Section 3.1) in respect of the Initial Building (and if the Expansion
Building is constructed, to the extent of Landlord's Expansion Building Work) in
the Yield-Up Condition, taking into account and giving effect to, in determining
comparability, such considerations as size, location of premises, and lease term
(including, without limitation, that Tenant is required to pay for the real
estate taxes, insurance, utilities and maintenance and repair of the Premises
during the Extended Term as provided in Article IV of this Lease).
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<PAGE> 14
Landlord shall initially designate the Market Rent by notice to Tenant.
Such designation shall be made no earlier than nine (9) months before the
Exercise Date. Within thirty (30) days after the date Tenant shall have received
Landlord's designation, Tenant shall give written notice to Landlord either (i)
accepting Landlord's designation of Market Rent, (ii) rejecting Landlord's
designation of Market Rent and rescinding its notice to extend the Term in
question, or (iii) rejecting the Landlord's designation of Market Rent and
submitting the matter to arbitration in accordance with the terms hereof. If
Tenant accepts Landlord's designation, then such designation shall be the Market
Rent used to determine the Annual Fixed Rental Rate for the Extended Term in
question pursuant to the provisions of the preceding paragraph. If Tenant
rejects Landlord's designation and rescinds its notice to extend the Term in
question, Tenant shall pay rent hereunder based on the Annual Fixed Rental Rate
than in effect until the expiration date of the then current Term and Tenant
shall not have the right to extend the Term.
If Tenant rejects Landlord's designation and elects to submit the matter
to arbitration (the "Tenant's Rent Dispute Notice"), Market Rent shall be
determined by arbitrators, one to be chosen by Tenant, one to be chosen by
Landlord and a third to be selected, if necessary, as provided below. Each
arbitrator shall be a real estate counselor, appraiser, broker or comparable
real estate professional with at least ten (10) years experience in appraising
or evaluating commercial real estate in the greater Boston area. The unanimous
written decision of the two first arbitrators chosen without selection and
participation of a third arbitrator, or otherwise the written decision of a
majority of the three arbitrators chosen and selected as provided herein, shall
be conclusive and binding upon Landlord and Tenant. Landlord and Tenant shall
each notify the other of its chosen arbitrator no later than fifteen (15) days
after Tenant's Rent Dispute Notice. Unless such two arbitrators shall have
reached a unanimous decision within thirty (30) days after their designation
(the "Designation Date"), they shall so notify the then President of the Greater
Boston Real Estate Board and request him or her to select an impartial third
arbitrator within fifteen (15) days of the Designation Date, who shall have the
aforesaid qualifications, to determine Market Rent. The arbitrators shall hear
the parties and their evidence and render their decision within thirty (30) days
following the conclusion of such hearing and notify Landlord and Tenant thereof.
Each party shall pay the expense of the arbitrator it selected. The parties
shall in good faith supply such information to the arbitrators as they may
reasonably request and shall share the expense of the third arbitrator (if any)
equally. If the dispute between the parties as to Market Rent has not been
resolved before the commencement of the Extended Term in question, then Tenant
shall pay rent under the Lease in respect of the Premises based upon the Annual
Fixed Rental Rate in effect prior to the Extended Term in question until either
the agreement of the parties as to the Market Rent or the decision of the
arbitrators is final, as the case may be, at which time Tenant shall pay any
underpayment of rent to Landlord, or Landlord shall refund any overpayment of
rent to Tenant or, at Tenant's option, shall credit such overpayment to the next
payment or payments of rent due hereunder.
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Once Market Rent is determined, whether by agreement of Landlord and
Tenant or by arbitration, as aforesaid, the parties shall promptly execute a
supplement to this Lease confirming the same.
ARTICLE III
PLANS AND SPECIFICATIONS; IMPROVEMENTS; PERMITS AND APPROVALS; CONSTRUCTION
3.1 INITIAL BUILDING PLANS AND SPECIFICATIONS. Landlord and Tenant have
agreed to the base building outline specifications for the Initial Building and
site improvements, including building elevations, attached hereto as Exhibit C,
and to the architect's rendering attached hereto as Exhibit H (together, the
"Outline Specifications"). Landlord will cause to be prepared, at Landlord's
cost and expense, draft final plans and specifications for the Initial Building
and site improvements in accordance with the Outline Specifications (the "Draft
Final Plans and Specifications") and shall submit the Draft Final Plans and
Specifications to Tenant by June 15, 1998 for Tenant's approval of their
consistency with the Outline Specifications. Unless Tenant advises Landlord in
writing of any deficiencies or clarifications required in the Draft Final Plans
and Specifications within fifteen (15) days of Tenant's receipt of the Draft
Final Plans and Specifications, Tenant shall be treated as having approved the
Draft Final Plans and Specifications; if Tenant shall advise Landlord of any
such deficiencies or clarifications, Landlord shall promptly revise the Draft
Final Plans and Specifications in accordance with the Outline Specifications,
submit such revisions to Tenant within fifteen (15) days of Landlord's receipt
of deficiencies and clarifications from Tenant, and unless Tenant notifies
Landlord of any remaining deficiencies or clarifications within five (5) days of
Tenant's receipt of the revised Draft Final Plans and Specifications, Tenant
shall be treated as having approved the revised Draft Final Plans and
Specifications. To the extent the Draft Final Plans and Specifications are not
then approved or treated as approved, Landlord and Tenant shall continue to work
in good faith to resolve any remaining deficiencies or clarifications in the
Draft Final Plans and Specifications so as to cause the Draft Final Plans and
Specifications to be prepared in a form acceptable to Landlord and Tenant. Once
Tenant has approved the Draft Final Plans and Specifications as provided in this
Section 3.1, or Landlord and Tenant have each acknowledged their acceptance of
the same and, in either case, Landlord's architect has stamped the same, the
Draft Final Plans and Specifications shall be treated as the final plans and
specifications (the "Initial Building Plans and Specifications"), and one
complete set shall be delivered to Tenant promptly. Landlord's architect shall
measure the rentable area (as hereinafter defined) of the Initial Building as
depicted on the Initial Building Plans and Specifications, and certify to
Landlord and Tenant the rentable area of the Initial Building, which shall be
referred to herein as the "Final Building Area." For purposes of this Lease, the
"rentable area" of the Initial Building shall be the gross square foot area of
the Initial Building, determined by measuring, on each finished floor, the total
floor area from the interior glass lines on each finished floor, with deduction
only for the total area of atria above the first finished floor, all as measured
by Landlord's architect. Based on the plans included in the Outline
Specifications, Landlord's architect has determined that the "rentable area" of
the Initial
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Building is approximately 128,395 square feet (a total floor area of
approximately 129,112 square feet less approximately 717 square feet for the
total area of atria above the first finished floor).
The work shown on the Initial Building Plans and Specifications shall be
referred to as "Landlord's Initial Building Work."
Attached to this Lease as Exhibit G is a development schedule, which each
of Landlord and Tenant shall use diligent efforts to meet (including without
limitation Landlord's obligation to "substantially complete" [as such term is
defined in Section 3.5] Landlord's Initial Building Work on or before the
Completion Date). As the Initial Building Plans and Specifications are being
determined, Landlord and Tenant may agree on modifications to the development
schedule for the Landlord's Initial Building Work and Tenant's Improvements (as
defined in Section 3.2). Landlord shall then revise the development schedule to
reflect such agreeable modifications (if any), and deliver the revised
development schedule promptly to Tenant.
3.2 TENANT PLANS. Except for Landlord's construction of the base building
and site improvements in accordance with the Initial Building Plans and
Specifications, Tenant shall be responsible for undertaking improvements to the
Initial Building required for Tenant's occupancy of the Initial Building
("Tenant's Improvements"). Tenant's Improvements shall be constructed
substantially in accordance with the plans and specifications approved by
Landlord. Landlord's approval shall be limited to the conformity of Tenant's
plans and specifications with the requirements of applicable law, good
construction practices, and insurers, their consistency with the architectural
and structural integrity of Landlord's Initial Building Work, and with the
adaptability of the HVAC system to meet the Yield-Up Condition (as defined in
Section 5.1.10 of this Lease). Landlord has approved Tenant's use of The
Richmond Group as construction manager for Tenant's Improvements to the Initial
Building and Landlord agrees not unreasonably to withhold or delay Landlord's
approval of Tenant's architect. The preparation and review of Tenant's plans and
specifications shall, in developing from draft final to final plans and
specifications, be subject to the timing of the review periods and procedures
applicable to Landlord's plans and specifications in Section 3.1 of this Lease.
Once approved by Landlord and stamped by Tenant's architect, Tenant's plans and
specifications shall be referred to herein as "Tenant's Improvements Plans and
Specifications."
3.3 PERMITS AND APPROVALS; LANDLORD'S ACQUISITION OF FEE TITLE TO INITIAL
BUILDING LOT AND EXPANSION LOT. Landlord shall be responsible for securing the
applicable federal, state and municipal permits and approvals required to
undertake the construction of the work shown on the Initial Building Plans and
Specifications, and zoning approvals required for Tenant's Intended Uses
(collectively, "Landlord's Permits") (such zoning approvals and other permits
and approvals to the extent they may be issued without need for building plans
for the Expansion Building (other than the location of foundations) shall also
relate to the Expansion Building); Tenant shall be responsible for securing the
permits
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and approvals required to undertake the construction of the work shown on
Tenant's Improvements Plans and Specifications and otherwise required for
Tenant's occupancy of the Initial Building for the Intended Uses, including,
without limitation, any fire/safety or similar permits that are related to
Tenant's occupancy of the Premises for Tenant's Intended Uses. Each of Landlord
and Tenant will cooperate with each other in securing the permits and approvals
for which each is responsible under this Lease, with Tenant acknowledging that
its full and timely cooperation with Landlord is necessary to enable Landlord to
obtain Landlord's Permits in a timely manner, and in this connection will
furnish to Landlord in a timely manner such information, studies and reports as
Landlord's counsel may reasonably require in support and prosecution of
Landlord's Permits. Landlord and Tenant acknowledge that certain of Landlord's
Permits, i.e., the zoning special permit for Tenant's Intended Uses (the
"Special Permit"), an order of conditions under the Massachusetts Wetlands
Protection Act (the "Order of Conditions") and the creation of the Initial
Building Lot and the Expansion Lot as separate lots under the Massachusetts
Subdivision Control Law (the "ANR Endorsement"), shall be referred to in this
Lease as "Key Landlord's Permits". Tenant has approved Landlord's counsel's
description of the uses which are to be included in the application for the
Special Permit. If Landlord is unable to obtain all of Key Landlord's Permits
prior to June 15, 1998, free of appeals, then at any time thereafter, until Key
Landlord's Permits are obtained, Tenant may give Landlord notice of Tenant's
intention to terminate this Lease, and unless Landlord secures all Key
Landlord's Permits, free of appeals, prior to October 1, 1998, this Lease shall
terminate on October 1, 1998. If Landlord is unable to secure all of Key
Landlord's Permits, free of appeals, prior to October 1, 1998, then either
Landlord or Tenant may terminate this Lease by notice to the other within ten
(10) days thereafter. Tenant shall secure a permanent certificate of occupancy
for the Initial Building and the site improvements; provided, however, Tenant
shall not be obligated to do so until Landlord shall have completed such of
Landlord's Initial Building Work as is required for the issuance of a permanent
certificate of occupancy. For purposes of this Section 3.3, "free of appeals"
shall mean that all applicable periods (including the twenty-day period
following the filing of any of the Key Landlord's Permits with the Woburn City
Clerk) have expired, and no appeal has been filed within any such appeal period.
If Landlord has not acquired fee title to the Initial Building Lot and
Expansion Lot on or before July 1, 1998, then, at any time thereafter (subject
to the extension hereinafter provided) prior to Landlord's acquisition of such
fee title, Tenant may, on notice to Landlord, elect to terminate this Lease. In
the event of such termination and in the event Landlord's failure to acquire fee
title to the Initial Building Lot and Expansion Lot is due to reasons other than
either (i) the failure of the Seller of the Initial Building Lot and Expansion
Lot to deliver good and clear record and marketable title thereto, (ii) the
occurrence of a release of hazardous substances on the Premises exceeding
reportable quantities under applicable law, or (iii) the seller of the Initial
Building Lot and Expansion Lot defaults in any of its material obligations to
Landlord, Landlord shall pay to Tenant the sum of $150,000.00; otherwise,
Landlord shall have no liability to Tenant in connection with Tenant's election
to terminate. In the event Landlord advises Tenant that the seller of the
Initial Building Lot and Expansion Lot has elected to extend the time for
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the closing thereof in order to cure defects in title necessary to deliver good
and clear record and marketable title, Landlord shall extend the original time
for closing by no more than thirty (30) days, and shall notify Tenant in writing
of such extension within three (3) days of such election by the seller. Tenant's
right to terminate this Lease shall not arise until after the expiration of such
extension period (not to exceed thirty days), and the failure of the Landlord to
acquire fee title to the Initial Building Lot and Expansion Lot during or at the
conclusion of such extension period.
3.4 LANDLORD'S INITIAL BUILDING WORK. Provided Landlord obtains Landlord's
Permits and Tenant has not terminated this Lease as provided in Section 3.3,
Landlord shall construct the Initial Building in accordance with the Initial
Building Plans and Specifications without material deviation therefrom subject
to Change Orders (as hereinafter defined in this Section 3.4). Except for the
completion of Landlord's Initial Building Work in accordance with the
requirements of this Lease, the Initial Building shall be leased to Tenant in
"as is" condition, provided, however, that Landlord shall be obligated to repair
any deficiencies in construction of Landlord's Initial Building Work as provided
in Section 3.7 of this Lease.
Landlord shall bear all costs and expenses of Landlord's Initial Building
Work, except only that Tenant shall pay for Change Orders (as hereinafter
defined) as permitted hereunder and not arising out of the act or omission of
Landlord or any of Landlord's employees, servants, licensees, invitees,
contractors, affiliates, agents, or consultants (together, the "Landlord's
Parties"). Landlord represents that it has the capacity to effect financial
arrangements to enable Landlord to complete Landlord's Initial Building Work, to
pay to Tenant Tenant's Allowance in accordance with Section 3.14, and to
otherwise enable Landlord to fulfill all of its obligations under this Lease.
After the commencement of construction of the Initial Building, Landlord shall
furnish to Tenant, at Tenant's request, a copy of the portions of Landlord's
financing commitment for construction of the Initial Building confirming the
availability of construction financing therefor. Tenant agrees to observe any
reasonable limitations on dissemination thereof to others that Landlord may
impose.
Tenant shall have the right to request changes to the Initial Building
Plans and Specifications as Landlord's Initial Building Work progresses by
notice to Landlord from time to time ("Change Orders"). Any Change Order not
arising out of the act or omission of the Landlord or the Landlord's Parties
shall be subject to Landlord's approval, which shall not be unreasonably
withheld or delayed. If any Change Order not arising out of the act or omission
of the Landlord or the Landlord's Parties increases the cost of construction or
delays the completion of the Landlord's Initial Building Work and causes an
increase in the cost of construction of or interest payable by Landlord, then
Tenant shall pay the amount of such increase ("Change Order Increase")
calculated by adding (a) the "Cost of Work" for such Change Order as defined in
American Institute of Architects Document A111 (1987 Edition), and (b)
Landlord's contractor's overhead and profit in the total amount equal to six and
one-half percent (6.5%) of such cost. Tenant shall pay to Landlord Change Order
Increases within thirty (30) days after Tenant's
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receipt of Landlord's invoices therefor, which payments shall be based on the
proportion of the Change Order work covered by such invoice that has been
completed by Landlord, less ten percent (10%) of such amount. Amounts retained
by Tenant shall be paid to Landlord upon substantial completion of Landlord's
Initial Building Work. Tenant shall in no event be responsible for any costs or
delays associated with Change Orders arising out of the act or omission of
Landlord or Landlord's Parties.
3.5 SUBSTANTIAL COMPLETION OF LANDLORD'S INITIAL BUILDING WORK. Landlord
agrees to use reasonable and diligent efforts to achieve "substantial
completion" of Landlord's Initial Building Work at least thirty (30) days prior
to the Completion Date specified in Section 1.1. Without limiting any other
provision of this Section 3.5, the time for substantial completion of Landlord's
Initial Building Work shall be extended only as follows: (a) for delays
occasioned by the issuance of Change Orders except to the extent such Change
Orders arise out of the act of omission of Landlord or Landlord's Parties, or
(b) for delays in Landlord's (or its contractors') completing or undertaking
construction that are caused by the action or inaction of Tenant, provided,
however, that Landlord shall notify Tenant in writing of such action or inaction
by Tenant, and Tenant shall fail to correct such action or inaction within two
(2) days of Tenant's receipt of such notice (collectively, (a) and (b) are
hereinafter referred to as "Tenant Delays"); or (c) delays caused by Force
Majeure Events. A delay shall be deemed to have been avoidable if, to the extent
reasonable measures, i.e., without the incurring of any premiums therefor, can
be undertaken together with regular work required of the Landlord's contractor
under its contract with Landlord which would reduce or eliminate a delay in the
progress of Landlord's Initial Building Work without causing necessary delay in
the completion of such regular work.
Landlord's Initial Building Work shall be deemed "substantially complete"
on the date on which (a) the Initial Building is delivered to Tenant
weather-tight, and all work specified in the Initial Building Plans and
Specifications has been completed in accordance therewith without material
deviation therefrom subject to Change Orders except for (i) minor so-called
punchlist items that are not necessary to be completed for a permanent
certificate of occupancy, and which Landlord can complete within thirty (30)
days without material interference with the completion of work necessary to
construct Tenant's Improvements in the Initial Building, and (ii) items which
because of the season or weather or the nature of the items are not practicable
to complete at the time and are not necessary to be completed for a temporary
certificate of occupancy, and (b) Landlord shall have delivered a certificate to
Tenant from Landlord's architect stating that such Work has been substantially
completed as aforesaid, provided, however, if substantial completion is delayed
solely by reason of Tenant's Delays, substantial completion shall be deemed to
have occurred on the date it would otherwise have been achieved, but for such
Tenant Delays.
In the event Landlord's Initial Building Work shall not be substantially
completed by the Penalty Completion Date specified in Section 1.1 (as and to the
extent such Penalty Completion Date may be extended by Tenant Delays and delays
caused by Force Majeure
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Events), then, once the Term does commence and rent begins to be due, Tenant
shall receive a credit against the initial and succeeding payments of Annual
Fixed Rental Rate due hereunder, until such credit is fully exhausted, equal to
one day's Annual Fixed Rental Rate allocable to the Initial Building for each
day from the Penalty Completion Date (as so extended) until the date that
Landlord's Initial Building Work is substantially completed.
In the event Landlord's Initial Building Work shall not be substantially
completed by the Outside Completion Date specified in Section 1.1 (as and to the
extent such Outside Completion Date may be extended by Tenant Delays and delays
caused by Force Majeure Events), Tenant may at any time thereafter, but prior to
Landlord's Initial Building Work being substantially completed, notify Landlord
of Tenant's election to terminate this Lease. Tenant shall give Landlord no less
than thirty (30) days' prior notice of Tenant's intention to terminate this
Lease before notifying Landlord of Tenant's election to terminate this Lease; it
being understood and agreed, however, that Tenant may give notice of such
intention as early as thirty (30) days prior to the Outside Completion Date as
extended by Tenant Delays and delays caused by Force Majeure Events.
3.6 TENANT'S IMPROVEMENTS. Promptly after substantial completion of
Landlord's Initial Building Work (or, prior thereto, to the extent the same can
be coordinated with Landlord's Initial Building Work as described in Section
3.7), Tenant shall, at Tenant's cost and expense, construct Tenant's
Improvements in accordance with Tenant's Improvement Plans and Specifications
without material deviation therefrom subject to change orders therein to which
Landlord consents, which consent shall not be unreasonably withheld or delayed.
Construction of Tenant's Improvements shall be undertaken with due diligence so
as not to delay the issuance of a certificate of occupancy for the Initial
Building.
3.7 CERTAIN CONSTRUCTION OBLIGATIONS OF LANDLORD AND TENANT. (a) With
respect to Landlord's Initial Building Work, Landlord warrants that: (i) all
materials and equipment used for or incorporated into Landlord's Initial
Building Work will be of first quality and new unless otherwise required or
permitted under the Initial Building Plans and Specifications; (ii) the
Landlord's Initial Building Work will be free from material defects not inherent
in the quality so required or permitted; (iii) Landlord's Initial Building Work
will conform with the requirements of the Initial Building Plans and
Specifications without material deviation therefrom; and (iv) subject to the
requirements of law applicable thereto, water shall be provided to the Premises
by a municipally-maintained twelve-inch main, sewer service shall be provided to
the Premises by an eight-inch, municipally-maintained, gravity-fed main, and
natural gas shall be provided to the Premises by either BostonGas or Colonial
Gas Company. Work not so conforming with these requirements shall be considered
defective. Landlord shall remedy any defects in workmanship or materials or
equipment performed or supplied by Landlord as part of the Initial Building Work
of which Landlord is given notice within one (1) year following the Term
Commencement Date.
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(b) Landlord and Tenant recognize that as the prosecution of Landlord's
Initial Building Work progresses, Tenant may wish to begin portions of Tenant's
Improvements and Landlord and Tenant agree that, to the extent Tenant's entry on
the Premises for these purposes can be coordinated without risk of material
interruption or delay to Landlord, Tenant shall have the right to enter onto the
Premises for these purposes. Each of Landlord and Tenant shall be responsible to
the other for any damage, in the case of Landlord, Landlord or Landlord's
contractor may cause to the Tenant's Improvements (as the same may have been
installed in the Initial Building) and, in the case of Tenant, any damage that
Tenant or Tenant's contractors may cause to the Initial Building Work.
(c) Landlord shall deliver the Initial Building to the extent of
Landlord's Initial Building Work in compliance with the requirements of all
applicable laws, ordinances, rules, regulations and orders, including without
limitation all requirements of the Americans with Disabilities Act of 1990, as
amended; free of asbestos, toxic substances, and hazardous substances (as
defined in Section 5.1.4) and equipped with all safety appliances and devices
required by law or otherwise; Tenant shall complete Tenant's Improvements in
compliance with such requirements, free of asbestos and such other substances
and equipped with such appliances and devices.
3.8 DELIVERY OF SECURITY DEPOSIT. Concurrently with Tenant's execution and
delivery of this Lease, and execution by Landlord, Tenant and Escrow Agent of a
mutually acceptable escrow agreement, Tenant shall pay to Escrow Agent, the sum
of Seven Hundred Fifty Thousand Dollars ($750,000.00) and at the time Landlord
gives Tenant notice that Landlord has acquired fee title to the Initial Building
Lot and Expansion Lot and has commenced construction activities on the Initial
Building Lot, Tenant shall pay to the Escrow Agent an additional sum of Seven
Hundred Fifty Thousand Dollars ($750,000.00), each of which shall be treated as
part of the Security Deposit under Section 9.11 of this Lease. The Escrow Agent
shall pay over such funds to Landlord or, if required by Landlord's first
mortgagee or required by Landlord, to Landlord's first mortgagee (upon prior
written notice to Tenant of such payment) on the Term Commencement Date, which
funds shall continue to be held by Landlord or Landlord's first mortgagee as a
Security Deposit under the terms of this Lease. Provided Tenant is not in
default under this Lease beyond the expiration of any applicable notice, grace
and cure period (and such defaults shall be fully corrected or cured, as may be
applicable, within the applicable period of grace and all interest and other
costs, if any, due to Landlord in connection therewith shall be paid in full
within such period of grace), and subject to the provisions of Section 10.2.2 of
this Lease, the Security Deposit shall be reduced to Seven Hundred Fifty
Thousand Dollars ($750,000.00) on the third anniversary of the Term Commencement
Date and reduced to Five Hundred Thousand Dollars ($500,000.00) on the ninth
anniversary of the Term Commencement Date.
3.9 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION. All construction work
required or permitted by this Lease, whether by Landlord or by Tenant, shall be
done in a good and workmanlike manner and in compliance with all applicable laws
and all lawful ordinances, regulations and orders of governmental authority and
insurers of the Initial
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Building and Tenant shall observe and perform the requirements of Section 5.1.5
in respect of Tenant's Improvements. The party performing such work shall be
responsible to obtain all permits and approvals required therefor as provided in
Section 3.3 of this Lease. Either party may inspect the work of the other at
reasonable times and with reasonable advance notice to the other and give notice
of observed defects, and the other party shall then investigate the matter and
make any necessary corrections. Within fifteen (15) days after Landlord
substantially completes Landlord's Initial Building Work, Landlord, Tenant and
their respective agents shall together thoroughly inspect such work and compile
a punchlist of all incomplete and defective items. Landlord shall complete and
correct any such punchlist items within thirty (30) days after preparation of
the punchlist, in accordance with the Initial Building Plans and Specifications,
except that items which cannot be completed within thirty (30) days due to the
seasonal or weather constraints or because given the nature of the items, it is
not practicable to do them at the time, shall be completed as soon as possible.
3.10 CONSTRUCTION REPRESENTATIVES. Each party authorizes the other to rely
in connection with plans and construction upon approval and other actions on the
party's behalf by any Construction Representatives of the party named in Section
1.1 or any person hereafter designated in substitution or addition by written
notice to the party relying thereon.
3.11 INSURANCE; INDEMNITY. Either party performing any construction on the
Premises shall maintain commercial general liability insurance covering such
construction in amounts at least equal to the public liability insurance limits
set forth in Section 1.1. Such insurance held by Landlord's contractor shall
name Landlord, Tenant and Landlord's mortgagee, as additional insureds, and such
insurance held by Tenant's contractor shall name Tenant, Landlord and, if
requested by Landlord, Landlord's mortgagee as additional insureds. The party
performing such construction shall further cause its contractors and
subcontractors to maintain worker's compensation insurance with statutory limits
covering all of their employees working on the Premises or otherwise involved in
such construction, and employer's liability insurance with a minimum limit per
accident or disease of $500,000. The party performing such work shall further
defend with counsel approved by the other party (which approval shall not be
unreasonably withheld or delayed), indemnify and save harmless the other party
from and against all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees), causes of action, suits, claims, demands or
judgments of any nature arising out of such work, except to the extent caused by
the negligent or wrongful acts or omissions of the other party or its employees,
servants, agents, contractors, licensees and invitees. The party performing such
work shall cause such indemnity obligation to be insured under its
aforementioned commercial general liability insurance policy.
3.12 PROVISIONS APPLICABLE TO EXPANSION BUILDING. Unless Landlord or
Tenant elects to execute a Separate Lease for the Expansion Building under
Section 10.2.3 of this Lease, upon Tenant's exercise of Tenant's Option to
Expand (as provided in Section 10.2.2), the foregoing provisions of this ARTICLE
III shall be applicable to the
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preparation of the plans and specifications, the obtaining of Landlord's
Permits, Landlord's construction and Tenant's construction for and posting of
the Additional Security Deposit Amount as part of the Security Deposit (subject
to the provision of the next following paragraph) in respect of the Expansion
Building and each provision thereof shall be construed as if the term "Expansion
Building" were substituted for "Initial Building," the term "Landlord's
Expansion Building Work" were substituted for "Landlord's Initial Building
Work", and the term "Expansion Building Delivery Date" were substituted for
"Term Commencement Date;" except that the date by which Landlord shall obtain
Landlord's Permits shall be modified as Landlord shall in good faith determine
within thirty (30) days following Landlord's receipt of Tenant's Expansion
Option Notice (as defined in Section 10.2 of this Lease), and the "Completion
Date for the Expansion Building" shall be the 365th day (and the Penalty
Completion Date for the Expansion Building and the Outside Completion Date for
the Expansion Building shall be 425 days and 485 days, respectively) following
the date on which Landlord and Tenant acknowledge, in writing, their agreement
on a building program for the Expansion Building and the budget therefor,
subject only to extensions resulting from Force Majeure Events and Tenant's
Delays. On or before September 1, 2000, Tenant shall give Landlord notice (the
"Preliminary Expansion Notice") of Tenant's request for Landlord to prepare, at
Landlord's cost and expense, draft outline specifications for the Expansion
Building and site improvements, and the budget therefor (together, the
"Expansion Building Outline Specifications and Budget"). Provided Tenant is not
then in default under this Lease beyond the expiration of any applicable notice,
grace or cure period (and such defaults shall be fully corrected or cured, as
may be applicable, within the applicable period of grace and all interest and
other costs, if any, due to Landlord in connection therewith shall be paid in
full within such period of grace), Landlord and Tenant agree, promptly after
Tenant gives Landlord the Preliminary Expansion Notice, to work in good faith in
developing mutually acceptable Expansion Building Outline Specifications and
Budget. Landlord shall deliver the Expansion Building Outline Specifications and
Budget to Tenant within thirty (30) days following Landlord's receipt of
Tenant's Preliminary Expansion Notice. If Landlord and Tenant reach agreement on
the Expansion Building Outline Specifications and Budget prior to December 1,
2000, Tenant shall give Landlord Tenant's Expansion Option Notice on or before
December 1, 2000 in accordance with Section 10.2.2 hereof; if, despite their
good faith efforts, Landlord and Tenant do not reach such agreement on or before
December 1, 2000, Tenant may elect to purchase the Initial Building, Initial Lot
and Expansion Lot in accordance with Section 10.1 by providing Landlord written
notice thereof on or prior to December 1, 2000, which notice shall designate a
closing date no earlier than January 1, 2001, and no later than April 1, 2001.
The parties agree that Tenant's delivery of the Preliminary Expansion Notice to
Landlord shall not obligate Tenant to exercise Tenant's Option to Expand unless,
on or before December 1, 2000, Tenant and Landlord develop mutually acceptable
Expansion Building Outline Specifications and Budget and Tenant delivers
Tenant's Expansion Option Notice to Landlord in accordance with Section 10.2.2
hereof.
Within thirty (30) days of Landlord's receipt of Tenant's Option to
Expand, either Landlord or Tenant (unless Landlord has elected to finance the
Expansion Building with
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the same lender providing financing for the Initial Building), on notice to the
other, may elect to execute a Separate Lease for the Expansion Building and the
Expansion Lot (as defined and provided for in Section 10.2.3 of this Lease). If
neither Landlord nor Tenant exercises the election to execute a Separate Lease
for the Expansion Building and the Expansion Lot, Tenant's sole remedy for
Landlord's failure to substantially complete the Expansion Building prior to (a)
the Penalty Completion Date for the Expansion Building and (b) the Outside
Completion Date for the Expansion Building shall be limited (in the case of (a))
to a credit against the portion of the Annual Fixed Rent that is the Expansion
Building Rent Increment, and (in the case of (b)) to termination of the Lease
with respect to the Expansion Building and the Expansion Lot.
3.13 PAYMENTS TO TENANT ON ACCOUNT OF TENANT IMPROVEMENTS. Provided (a)
Tenant is not then in default of the Lease beyond applicable notice, grace and
cure periods, (b) Tenant furnishes to Landlord (i) statements from The Richmond
Group (whom Tenant plans to retain to manage the design and construction of
Tenant's Improvements and whom Landlord has approved) and the contractors and
subcontractors for Tenant's Improvements that they have been paid in full and
reasonable evidence that none of them shall have filed any liens in respect of
the Premises or, (ii) if requested by Landlord's mortgagee, lien waivers
executed by The Richmond Group and said contractors and subcontractors in form
and substance reasonably acceptable to Landlord's mortgagee, (c) The Tenant
Fit-Up Period has expired and Tenant has commenced to pay the Annual Fixed Rent
(subject to the provisions of Section 2.3 hereof during the Tenant Fit-Up
Period) and (d) Tenant's architect shall furnish to Landlord and Landlord's
mortgagee a certificate certifying that Tenant's Improvements have been
completed substantially in accordance with Tenant's Improvement Plans and
Specifications, and comply with applicable code requirements, Landlord shall pay
to Tenant an allowance on account of all hard and soft costs for construction of
Tenant's Improvements in the Initial Building based on the product of the Final
Building Area and Seventeen and 23/100 Dollars ($17.23) (the "Tenant's
Allowance") which, at Landlord's election shall be paid in a lump sum upon
fulfillment of the foregoing conditions and the issuance of a permanent
certificate of occupancy.
ARTICLE IV
RENT
4.1 ANNUAL FIXED RENTAL RATE. Tenant covenants and agrees to pay rent
("Annual Fixed Rental Rate" or "Annual Fixed Rent") to Landlord at the original
Address of Landlord or at such other place or to such other person or entity as
Landlord may by written notice to Tenant from time to time direct, at the Annual
Fixed Rental Rate set forth in Article II, in equal installments equal to 1/12th
of the Annual Fixed Rental Rate in advance on the first day of each calendar
month included in the Term; and for any portion of a calendar month at the
beginning of the Term, at that rate payable in advance prorated for such
portion.
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4.2 ADDITIONAL RENT. In order that the Annual Fixed Rental shall be
absolutely net to Landlord, Tenant covenants and agrees to pay, as Additional
Rent, taxes, municipal or state betterment assessments, insurance costs, utility
charges and Common Area Charges with respect to the Premises as provided in this
Section 4.2 as follows:
4.2.1 REAL ESTATE TAXES. Tenant shall pay to the Landlord (or
directly to the appropriate governmental authority or agency if Tenant is
assessed directly): (i) all taxes, assessments (special or otherwise), levies,
fees, water and sewer rents and charges, and all other government levies and
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, which are allocable to the term hereof, imposed or levied upon or
specifically assessed against (A) the Lot or Building, (B) any Annual Fixed
Rental Rate, Additional Rent or other sum payable hereunder or (C) this Lease,
or the leasehold estate hereby created, or which arise in respect of the
operation, possession or use of the Premises; (ii) all gross receipts or similar
taxes specifically imposed or levied upon, assessed against or measured by any
Annual Fixed Rental Rate, Additional Rent or other sum payable hereunder; (iii)
all sales, value added, use and similar taxes at any time specifically levied,
assessed or payable on account of the acquisition, leasing or use of the
Premises; and (iv) all charges for utilities furnished to the Premises which may
become a lien on the Building or Lot (collectively "taxes and assessments" or if
singular "tax or assessment"), but excluding all taxes and assessments
associated with the State and Municipal Transportation and Infrastructure
Improvements (as hereinafter defined), and any general income, sales, gross
receipts, value added, estate, transfer or similar taxes which happen to cover,
among many items, rentals, leaseholds and properties. Landlord agrees that
Tenant may apply to the appropriate governmental authority or agency to have
taxes and assessments assessed directly to Tenant, and Landlord shall cooperate
with Tenant completing such applications and documentation necessary to effect
such direct assessment.
Landlord shall be responsible for payment of all taxes and assessments
directly imposed on the Premises for the construction of the Massachusetts
Highway Department's proposed interchange to be located off of Interstate 93,
the proposed Massachusetts Port Authority Regional Transportation Center, and
the proposed extension and improvement of Commerce Way to be completed by the
City of Woburn (which is intended to include roadway access to Metro North
Corporate Center, and a connection to Presidential Way) (collectively, the
"State and Municipal Transportation and Infrastructure Improvements").
For purposes of this Section 4.2.1, the Lot shall not include the
Expansion Lot prior to September 1, 1999 and if Tenant does not exercise
Tenant's Option to Expand, from and after December 1, 2000, the term Lot shall
not include the Expansion Lot. Real estate paid in respect of the Expansion Lot
during such period shall be referred to as the "Expansion Lot Taxes."
If Tenant exercises Tenant's Option to Expand, provided Tenant is not then
in default under this Lease continuing beyond applicable notice, grace and cure
periods,
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Landlord shall pay to Tenant an amount equal to the Expansion Lot Taxes on the
Expansion Building Delivery Date.
For each tax or assessment period, or installment period thereof, wholly
included in the Term, all such payments shall be made by Tenant by the later of
(a) ten (10) days (or three (3) days, if Tenant is assessed directly) prior to
the last date on which the same may be paid without interest or penalty, or (b)
fifteen (15) days after Tenant's receipt of Landlord's invoice therefor (if
Landlord is assessed directly). For any fraction of a tax or assessment period,
or installment period thereof, included in the term at the beginning or end
thereof, Tenant shall pay to Landlord, within thirty (30) days after receipt of
Landlord's invoice therefor, the fraction of taxes and assessments so levied or
assessed against Landlord or becoming payable which is allocable to such
included period. If Tenant shall be in default under this Lease beyond
applicable notice, grace and cure periods, or if required by Landlord's
mortgagee, Tenant shall make payments monthly on account of taxes as Landlord
may direct so long as such taxes are assessed directly against Landlord.
Landlord shall provide Tenant with copies of all tax and assessment bills
on the Premises promptly upon Landlord's receipt thereof. As long as Tenant pays
Landlord all amounts due from Tenant for taxes and assessments under this
Section 4.2.1 or Section 4.2.5, Landlord shall pay all taxes and assessments to
the applicable government authorities before or on the dates due, and shall
promptly provide to Tenant evidence of such payment.
With respect to taxes and assessments which may lawfully be paid in
installments, for the purpose of this Section 4.2.1, taxes and assessments in
any period shall include only such portion of the same which is payable within
such period and any interest payable thereon computed (whether or not such is
the case) as if Landlord had elected to pay the same over the longest period
permitted by law.
Nothing contained in this Lease shall, however, require Tenant to pay any
income taxes, excess profits taxes, excise taxes, franchise taxes, estate,
succession, inheritance or transfer taxes of Landlord or any other party,
provided, however, that if at any time during the term the present system of ad
valorem taxation of real property shall be changed so that in lieu of the whole
or any part of the ad valorem tax on real property, there shall be assessed on
Landlord a capital levy or other tax on the gross rents received with respect to
the Lot and Building, or both, or a federal, state, county, municipal, or other
local income, franchise, excise or similar tax, assessment, levy or charge
(distinct from any now in effect) measured by or based, in whole or in part,
upon gross rents, then any and all of such taxes, assessments, levies or
charges, to the extent so measured or based ("Substitute Taxes"), shall be
payable by Tenant; provided, however, Tenant's obligation with respect to the
aforesaid Substitute Taxes shall be limited to the amount thereof as computed at
the rates that would be payable if the Premises were the only property of
Landlord. Landlord shall furnish to Tenant a copy of any notice of any public,
special or betterment assessment
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received by Landlord concerning the Premises and charged to Tenant hereunder
promptly upon Landlord's receipt thereof.
If Landlord shall obtain any abatement or refund on account of any real
estate taxes as to which Tenant shall have paid payments hereunder, Landlord
shall promptly refund to Tenant Tenant's portion of any such abatement or
refund, after deducting therefrom the reasonable costs and expenses incurred by
Landlord in obtaining such abatement or refund.
For so long as taxes are assessed directly against Landlord, if at least
twenty (20) days prior to the last day for filing an application for abatement
of taxes or assessments for any tax year, Tenant shall give notice to Landlord
that it desires to file an application for abatement of such taxes and
assessments or to otherwise contest the assessed valuation of the Lot and
Building for such tax year, and if within ten (10) days after the receipt of
such notice, Landlord does not give notice back to Tenant that Landlord shall
itself file such application or commence such contest, then Tenant shall have
the right either in its own name or in the name of Landlord but at its own cost
and expense to-file such application or commence such contest. If within ten
(10) days after receipt by Landlord of such notice from Tenant, Landlord shall
give Tenant notice that Landlord shall itself file such application or commence
such contest, then Landlord shall do so prior to the expiration of the time for
the filing of the same at its own cost and expense. In any event, if any
abatement by whomever prosecuted shall be obtained, the cost and expense of
obtaining the same shall be the first charge upon such abatement and shall be
reimbursed to the party expending the same from the proceeds thereof, prior to
any other distribution. If Tenant shall file an application for abatement or
commence such contest pursuant to the provisions of this paragraph, Tenant shall
prosecute the same to final determination with reasonable diligence and shall
not, without Landlord's consent (which shall not be unreasonably withheld),
settle, compromise or discontinue the same except that Tenant may discontinue
the prosecution of the same at any time after giving Landlord notice thereof and
a reasonable opportunity to assume prosecution of the same. If Landlord shall
file an application for abatement or commence such contest, Landlord shall
prosecute the same to final determination with reasonable diligence and shall
not without Tenant's consent (which shall not be unreasonably withheld), settle,
compromise, or discontinue the same except that Landlord may discontinue the
prosecution of the same at any time after giving Tenant notice thereof and a
reasonable opportunity to assume prosecution of the same. If either party shall
file an application for an abatement or commence such contest, the other will
cooperate and furnish any pertinent information in its files reasonably required
by the prosecuting party. In every case, any abatement, refund, rebate or credit
received shall be paid first to the party which prosecuted such abatement in the
amount of the costs and expenses expended by it in such connection, and the
balance to each party in the proportion that it paid the tax or assessment being
abated, refunded, rebated or credited. Landlord shall pay any sums due to Tenant
from any abatement after receipt of the same even if this Lease shall have
expired. Tenant shall timely pay all sums payable under this Lease in respect of
taxes and assessments notwithstanding the pendency of an abatement proceeding or
any such contest.
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4.2.2 INSURANCE.
4.2.2.1 INSURANCE TAKEN OUT BY TENANT. Tenant shall take out
and maintain throughout the Term the insurance listed in this Section 4.2.2.1
and may, at its election on no less than sixty (60) day's notice to Landlord,
take out and maintain any or all of the insurance listed in Section 4.2.2.2
(other than that listed in Section 4.2.2.2 (b)) beginning on the date Tenant
obtains a permanent certificate of occupancy for the Initial Building (or the
Expansion Building, as the case may be) and continuing throughout the remainder
of the Term:
(a) Commercial general liability insurance indemnifying
Landlord and Tenant, and if Landlord shall elect, Landlord's mortgagees, against
all claims and demands for any injury to person or property which may be claimed
to have occurred on the Premises or on the sidewalk or ways immediately
adjoining the Premises (including, without limitation, the main access
driveway), in amounts which shall, at the beginning of the Term, be at least
equal to the limits set forth in Section 1.1, and, from time to time during the
Term, shall be for such higher limits, if any, as are reasonably required by
Landlord; provided, however, that such increases shall not be required more than
biannually, shall not be required if comparable landlords of comparable
buildings do not require such increases, and shall not exceed those amounts then
customarily carried on properties similar to the Premises in the greater Boston
area; and
(b) Worker's compensation insurance with statutory limits
covering all of Tenant's employees working at the Premises.
4.2.2.2 INSURANCE TAKEN OUT BY LANDLORD. Landlord shall take
out and maintain the following insurance on the Premises until Tenant shall
obtain a permanent certificate of occupancy for the Initial Building (or the
Expansion Building, as the case may be) and, to the extent Tenant shall elect
not to take out and maintain any such insurance upon obtaining said permanent
certificate of occupancy, throughout the Term hereof:
(a) Direct risk of physical loss (all risk) insurance
which shall in no event be less than 100% replacement value of the Premises (in
the Yield-Up Condition) together with rental loss coverage in an amount equal to
one year's Annual Fixed Rental Rate and estimated additional rent, and, if the
Premises are in a flood hazard area and Landlord so elects, flood coverage to
the extent the same is available, insuring the Initial Building and its rental
value (and, if Tenant exercises Tenant's Option to Expand and once Tenant
obtains a permanent certificate of occupancy for the Expansion Building, the
Expansion Building and its rental value) and Tenant's Improvements, with a
replacement cost coverage endorsement and agreed value endorsement, together
with deductibles reasonably determined by Landlord and comparable to deductibles
then customarily carried on properties similar to the Premises in the greater
Boston area; and
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(b) During any period that construction or renovations are
being performed at the Premises by Landlord, the insurance required in (a),
above, shall be written on a builder's risk, completed value, non-reporting
form, meeting all of the terms set forth in (a), above, and covering the total
value of the Landlord's Initial Building Work (and, if applicable, Landlord's
Expansion Building Work) and Tenant's Improvements being performed on or at the
Premises, and the value of materials and equipment being furnished in connection
therewith.
(c) Insurance against loss or damage from sprinklers and
from leakage or explosions or cracking of boilers, pipes carrying steam or
water, or both, pressure vessels or similar apparatus (to the extent that any of
the foregoing are present in the Premises), in the so-called "broad form", in
such amounts and with such deductibles as Landlord may reasonably determine, and
insurance against such other hazards and in such amounts as may from time to
time be required by a bank, insurance company or other lending institution
holding a mortgage on the Building and/or Lot.
Landlord shall have no obligation to insure Tenant's personal property or
chattels, including without limitation, Tenant's trade fixtures.
4.2.2.3 TENANT REIMBURSEMENT OF INSURANCE TAKEN OUT BY
LANDLORD. Tenant shall from time to time reimburse Landlord within ten (10) days
of Tenant's receipt of Landlord's invoice for the premiums for the insurance
carried by Landlord pursuant to Section 4.2.2.2 of this Lease, equitably
prorated in the case of blanket policies to reflect the insurance coverage
reasonably attributable to the Premises (for which Landlord shall obtain and
provide to Tenant, at Landlord's expense, an endorsement that specifically sets
forth the coverage amount attributable to the Premises); provided that Tenant
shall reimburse Landlord for all of Landlord's reasonable costs incurred in
providing such insurance which is attributable to any special endorsement or
increase in premium resulting from the business or operations of Tenant, and any
special or extraordinary risks or hazards resulting therefrom.
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4.2.2.4 CERTAIN REQUIREMENTS APPLICABLE TO INSURANCE POLICIES.
Policies for insurance provided for under the provisions of Sections 4.2.2.2(a)
and 4.2.2.2(b) shall have a deductible not in excess of $25,000 (or such other
amount as Landlord's mortgagee may reasonably require), and shall, in case of
loss, be first payable to the holders of any mortgages on the fee simple
interest in the Building and/or Lot under a standard mortgagee's clause, and
shall be deposited with the holder of any mortgage or with Landlord, as Landlord
may elect. If Tenant elects to maintain insurance under Section 4.2.2.2, above,
Landlord (and, if required, Landlord's mortgagee) shall be named as an insured
party in all such policies issued therefor. All policies for insurance required
under the provisions of Section 4.2.2 shall be obtained from responsible
companies qualified to do business in the Commonwealth of Massachusetts and in
good standing therein, having a Best's Insurance Rating of at least "A minus"
and a financial size category of at least "VIII", which companies and the amount
of insurance allocated thereto shall be subject to Landlord's approval (which
approval shall not be unreasonably withheld or delayed). All policies for
insurance required hereunder shall also state that any loss will be payable in
accordance with such policy, notwithstanding any act or omission of either
Landlord or Tenant. Tenant agrees to furnish Landlord with copies of policies
(or insurance company certificates thereof if the policy has not been issued by
the insurer, provided that a copy of such policy shall be furnished to Landlord
as soon as the same is issued) of all such insurance which Tenant is obligated
to obtain pursuant to Section 4.2.2.1 and which Tenant elects to obtain pursuant
to Section 4.2.2.2 prior to the beginning of the Term hereof and of each renewal
policy at least thirty (30) days prior to the expiration of the policy it
renews. Each such policy shall be noncancelable with respect to the interest of
Landlord and such mortgagees without at least twenty (20) days, prior written
notice thereto. If requested by the other of them, Tenant and Landlord shall
provide to the other from time to time certificates and copies of the insurance
which each is obligated to or elects to carry pursuant to the terms hereof.
4.2.2.5 WAIVER OF SUBROGATION. All insurance (other than
liability insurance) which is carried by either party with respect to the
Premises or to furniture, furnishings, fixtures or equipment therein or
alterations or improvements thereto, whether or not required, shall include
provisions which either designate the other party as one of the insured or deny
to the insurer acquisition by subrogation of rights of recovery against the
other party to the extent such rights have been waived by the insured party
prior to occurrence of loss or injury, insofar as, and to the extent that such
provisions may be effective without making it impossible to obtain insurance
coverage from responsible companies described in Section 4.2.2.4 (even though
extra premium may result therefrom) and without voiding the insurance coverage
in force between the insurer and the insured party. Each party shall be entitled
to have duplicates or certificates of any policies containing such provisions.
Each party hereby waives all rights of recovery against the other for loss or
injury against which the waiving party is protected by insurance containing said
provisions. Tenant hereby releases Landlord from any claims for damages to
Tenant's Improvements not insured under Section 4.2.2.2(a).
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4.2.3 UTILITIES. Upon substantial completion of the Initial Building
(and, if Tenant has exercised Tenant's Option to Expand, the Expansion
Building), Tenant shall pay directly to the proper authorities charged with the
collection thereof all charges for water, sewer, gas, electricity, telephone and
other utilities or services used or consumed on the Premises, whether called
charge, tax, assessment, fee or otherwise, including, without limitation, water
and sewer use charges and taxes, if any, all such charges to be paid as the same
from time to time become due; otherwise, prior to substantial completion of the
Initial Building or Expansion Building, as the case may be, Landlord shall be
responsible for such payments. If Tenant is not charged directly by the
respective utility for any of such utilities or services, Tenant shall from time
to time, within ten (10) days of receipt of Landlord's reasonably documented
invoice therefor, pay to Landlord such charges. Tenant shall make its own
arrangements for such utilities and Landlord shall be under no obligation to
furnish any utilities to the Premises subsequent to substantial completion of
the Initial Building (or the Expansion Building, as the case may be) by
Landlord, and shall not be liable for any interruption or failure in the supply
of any such utilities to the Premises; provided, however, that such failure or
interruption does not arise out of any willful act of Landlord or any of
Landlord's Parties. Tenant will, when reasonably requested by Landlord, furnish
Landlord with copies of Tenant's utilities and maintenance logs.
4.2.4 COMMON AREA CHARGES. At the beginning of every calendar year
and at the commencement of the Term, Landlord shall deliver to Tenant its good
faith estimate of the Common Area Charges for such year, and Tenant shall make
such monthly payments based on that amount. As soon as practicable after the end
of each calendar year (and not later than April 30 of each year), Landlord shall
render a statement showing for the preceding calendar year or fraction thereof,
as the case may be, the actual annual maintenance expenses for such year or
fraction, and thereupon any balance owed by Tenant or excess paid by Tenant
under this Section shall be paid to Landlord or credited to Tenant, as the case
may be, on the next rent payment date. In no event shall Tenant pay Common Area
Charges in excess of $.10 per square foot of rentable area of the Initial
Building (and, if Tenant has exercised Tenant's Option to Expand, the Expansion
Building) for charges under the Declaration of Protective Covenants. Tenant
shall have the right, upon reasonable advance notice to Landlord, to audit
Landlord's books and records relating to Common Area Charges.
4.2.5 PAYMENTS ON ACCOUNT OF INSURANCE AND COMMON AREA CHARGES.
Tenant shall pay to Landlord as Additional Rent, the Common Area Charges and the
insurance premiums due on account of the insurance to be maintained by Landlord
under this Lease, such payments shall be due from Tenant within thirty (30) days
of Landlord transmitting invoices therefor showing the amount in question and
the date on which the same are payable to, as may be applicable, the parties to
whom Common Area Charges are due or insurance premiums are due.
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4.3 NET LEASE; NONTERMINABILITY BY TENANT
(a) This Lease is a triple net lease and the Annual Fixed Rental Rate,
the Additional Rent and all other amounts payable hereunder to or on behalf of
Landlord shall be paid without notice or demand and without setoff, abatement,
suspension, deferment, reduction or deduction except as provided hereunder or by
operation of law, and Landlord shall have no obligations in respect of the
Premises or Tenant, except as otherwise expressly provided herein.
(b) This Lease shall not terminate, nor shall Tenant have any right to
terminate this Lease, nor shall the obligations and liabilities of Tenant set
forth herein be otherwise affected, except as otherwise expressly provided
herein or by operation of law or by final decree or final judgment of any court
having jurisdiction.
4.4 LANDLORD'S REPAIR AND MAINTENANCE OBLIGATIONS; ASSIGNMENT OF
WARRANTIES. Subject to the provision of Article VI of this Lease, Landlord
covenants, at its sole expense at all times during the Term to keep in good
order, condition and repair the structural components and foundation of the
Initial Building (and, if Tenant exercises Tenant's Option to Expand, the
Expansion Building), and the structural components of the roof of the Initial
Building (and the Expansion Building, as the case may be). Landlord shall assign
to Tenant or cause to have assigned to Tenant all of the manufacturer's
warranties and guarantees obtained by Landlord in connection with Landlord's
Initial Building Work (and Landlord's Expansion Building Work, as the case may
be) to the extent they may relate to periods of the Term or portions of the
Landlord's Initial Building (or the Expansion Building) for which Landlord does
NOT have responsibility under this Section 4.4 or Section 3.7 of this Lease.
Landlord shall not be responsible for damage to the Premises resulting from the
negligence or other acts or omissions of Tenant or Tenant's employees, servants,
agents, contractors, licensees, affiliates, consultants or invitees ("Tenant's
Negligence"), Tenant hereby agreeing to perform at Tenant's expense any repair
or maintenance to the Premises made necessary by Tenant's Negligence; provided,
however, that if such damage to the Premises results from a Casualty (as defined
in Section 6.1) caused by Tenant's Negligence, Landlord shall repair, maintain
or restore the Premises or portion thereof in accordance with and to the extent
required by Article VI.
ARTICLE V
ADDITIONAL COVENANTS
5.1 TENANT'S AFFIRMATIVE COVENANTS. Tenant covenants at its expense at
all times during the Term and for such further time as Tenant occupies the
Premises or any part thereof:
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5.1.1 PERFORM OBLIGATIONS. To perform promptly all of the
obligations of Tenant set forth in this Lease; and to pay when due the Annual
Fixed Rental Rate and Additional Rent and all charges, rates and other sums
which by the terms of this Lease are to be paid by Tenant.
5.1.2 USE. To use the Premises only for the Intended Uses, and from
time to time to procure all licenses and permits necessary therefor (except for
Landlord's Permits) at Tenant's sole expense and to provide copies thereof to
Landlord.
5.1.3 REPAIR AND MAINTENANCE. To keep and maintain the Premises in
good order, condition and repair, including, without limitation, the roof of the
Initial Building (and the Expansion Building, as the case may be), but not the
structural components thereof, the heating, ventilating, plumbing, electrical,
air-conditioning, lighting, interior mechanical systems, and all doors, door
frames, and door openers, and all windows, frames and plate glass and the
parking areas, driveways, landscaping and the utility facilities located on and
serving the Premises and prior to the Expansion Lot being made a part of the
Premises, located in the Lot 1 Exclusive Parking Areas (as defined and referred
to in the Cross-Easement Agreement) on the Expansion Lot in accordance with the
standards set forth in the Cross-Easement Agreement, except for (a) reasonable
use and wear, (b) damage resulting from Casualty or Taking (which shall instead
be governed by Article VI), (c) portions of the Premises that Landlord is
obligated to repair and maintain in accordance with Section 4.4, and (d) damage
resulting from the negligent or other acts or omissions of Landlord or
Landlord's Parties ("Landlord's Negligence") (Landlord hereby agreeing, subject
to the waiver of subrogation provisions of Section 4.2.2.5 and in the case of a
Casualty or Taking subject to the provisions of Article VI, to perform at
Landlord's sole expense any repair or maintenance to the Premises made necessary
by Landlord's Negligence); to keep in a safe, secure and sanitary condition all
trash and rubbish temporarily stored at the Premises; to arrange for and be
responsible for all of the costs of a trash and rubbish removal service in
connection with Tenant's use of the Premises; and to make all interior and
exterior repairs and replacements (which shall not include replacements of the
structural components, foundation, or structural components of the roof of the
Initial Building and/or Expansion Building, as the case may be), which are
required to keep the Premises in good order, condition and repair as required
hereunder, and to do all other work necessary for the foregoing purposes whether
the same may be ordinary or extraordinary, foreseen or unforeseen. The exception
of reasonable use and wear shall not apply so as to permit Tenant to keep the
Premises in anything less than suitable, tenant-like, and efficient and usable
condition and repair considering the nature of the Premises and the use
reasonably made thereof.
5.1.4 COMPLIANCE WITH LAW AND INSURANCE REQUIREMENTS. To make all repairs,
alterations, additions or replacements to the Premises required by any law or
ordinance or any order or regulation of any public authority other than to (a)
the structural components and foundation of the Premises, and (b) structural
components of the roof; to keep the Premises equipped with all safety appliances
so required; to pay all municipal, county, or state taxes assessed against the
leasehold interest hereunder, or against personal property
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of any kind on or about the Premises; not to dump, flush, or in any way
introduce any hazardous substances or any other toxic substances into the
septic, sewage or other waste disposal system serving the Premises except in
compliance with a valid sewer use permit; not to generate, store or dispose of
hazardous substances in or on the Premises or dispose of hazardous substances
from the Premises (including any discharge to the sewer system serving the
Premises) except for use, storage, generation and off-site disposal of hazardous
substances normally attendant to Tenant's manufacturing, research and
development processes in compliance with the Resource Conservation and Recovery
Act of 1976, as amended, 42 U.S.C. ss.6901 et seq., the Massachusetts Hazardous
Waste Management Act, M.G.L. c. 21C, as amended, the Massachusetts Oil and
Hazardous Material Release Prevention and Response Act, M.G.L. c. 21E, as
amended, and all other applicable codes, regulations, ordinances and laws; to
notify Landlord of any incident which would require the filing of a notice under
applicable law; to provide Landlord, from time-to-time upon Landlord's
reasonable request, a list of hazardous substances which Tenant uses or stores
on the Premises, subject to such confidentiality, proprietary information and
trade secret assurances as Tenant may reasonably impose on Landlord, and without
further disclosure of such records and information to third parties other than
holders of mortgages on the Premises; and to comply with the orders and
regulations of all governmental authorities with respect to zoning, building,
fire, health and other codes, regulations, ordinances or laws applicable to
Tenant's specific use of the Premises, except that Tenant may defer compliance
so long as the validity of any such law, ordinance, order or regulation shall be
contested by Tenant in good faith and by appropriate legal proceedings, if
Tenant first gives Landlord appropriate assurance against any loss, cost or
expense on account thereof. The term "hazardous substances" as used in this
paragraph shall mean "hazardous substances" as defined in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.9601 and regulations adopted pursuant to said Act.
Landlord acknowledges that the Initial Building Lot and the Expansion
Building Lot are located adjacent to the Industri-plex Superfund site. Tenant
acknowledges the conclusions set forth in the environmental reports (identified
in Exhibit E attached hereto) and, in reliance on such environmental reports,
acknowledges that there has been no visual evidence of oil or hazardous
substances releases on the Lot, and further acknowledges that Tenant's Intended
Uses will include the generation and storage of hazardous substances on the
Premises. Without limitation of any of Tenant's obligations under this Lease in
respect of the Premises or Landlord, Tenant agrees to indemnify, defend with
counsel acceptable to Landlord and hold harmless Landlord, all of Landlord's
mortgagees and their respective officers, directors, principals, agents and
employees from and against all loss, cost or damage that any of them may incur
or be liable for in connection with any condition on the Premises or arising on
the Premises relating to the release or threat of release of hazardous
substances in respect of the Premises and directly attributable to the act,
omission or neglect of Tenant or any of Tenant's employees, agents, independent
contractors or invitees, including, without limitation, any condition not in
conformity with the requirements of applicable law.
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Tenant agrees promptly to provide copies to Landlord of any notice that
Tenant may receive from or give to any governmental authority or any other party
in respect of any release or threat of release of hazardous substances in
respect of the Premises. Landlord and Landlord's environmental consultants shall
have the right from time-to-time to enter the Premises, subject to Landlord's
obligations under Section 5.1.7, to undertake an assessment thereof to determine
whether any release or threat of release of hazardous substances has occurred,
and Tenant shall cooperate with Landlord (which cooperation shall not include
Tenant's expenditure of money to third parties) in undertaking such assessment,
including, without limitation, providing copies of such reports and such other
information as Landlord or its consultant may reasonably request, but subject to
such confidentiality, proprietary information and trade secret assurances as
Tenant may reasonably impose on Landlord, and without further disclosure of such
records and information to third parties; provided, however, Tenant may elect to
undertake such assessment using its own consultants if satisfactory to Landlord
and the holders of mortgages on the Premises and said consultants shall provide
to Landlord and such holders such assessment and a reliance letter from such
consultants regarding the aforesaid without additional charges beyond those
which Landlord would have incurred if Landlord's consultant had undertaken said
assessment. Tenant shall promptly correct any such condition if (a) such
condition does not comply with the requirements of applicable law or permits or
approvals, (b) such condition was caused by the act, omission, or neglect of
Tenant or any of Tenant's employees, agents, independent contractors or
invitees, and (c) Landlord gives written notice of such condition to Tenant
(with Tenant recognizing that Landlord shall have no duty to Tenant to conduct
such assessment or to give such notice to Tenant) in accordance with the
Massachusetts Contingency Plan and the requirements of any other applicable law.
If such assessment discloses any such release that exceeds reportable quantities
under applicable law and was caused by the act or omission of Tenant or any of
its employees, agents, contractors, or invitees, Tenant shall promptly reimburse
Landlord for all costs and expense Landlord may incur in undertaking such
assessment as Additional Rent. Any failure of Tenant to give copies of notices
to Landlord as aforesaid, to correct any such condition within thirty (30) days
of notice thereof from Landlord (or such lesser period of time as may be
required by applicable law, or such additional time as may be permitted under
applicable law and required by Tenant under the circumstances) or to reimburse
Landlord promptly for the cost and expense of all such assessment shall
constitute a default of Tenant under this Lease.
Tenant shall comply promptly with the reasonable recommendations of any
insurer which may be applicable to the Premises, by reason of Tenant's use
thereof; provided, however, that such recommendations do not unreasonably
interfere with Tenant's Intended Uses. In no event shall any activity be
conducted by Tenant on the Premises which may give rise to any cancellation of
any insurance policy or make any insurance unobtainable.
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5.1.5 TENANT'S WORK. To procure at Tenant's sole expense all
necessary permits and licenses before undertaking any work on the Premises
(except for Landlord's Permits); to do all such work in compliance with the
applicable provisions of Sections 3.9 and 5.2.3 hereof; to do all such work in a
good and workmanlike manner employing materials of good quality and so as to
conform with all applicable zoning, building, fire, health and other codes,
regulations, ordinances and laws; in situations where Landlord shall determine
it appropriate to require the same, to furnish to Landlord prior to the
commencement of any such work, payment, performance and lien bonds issued by
bonding companies acceptable to Landlord with a dual obligee bond in favor of
Landlord and the holder of mortgages on the Premises; to keep the Premises at
all times free of liens for labor and materials, and to discharge or bond over
such liens forthwith after notice thereof from Landlord; to employ for such work
only contractors approved by Landlord which approval shall not be unreasonably
withheld; to require all contractors employed by Tenant to carry worker's
compensation insurance in accordance with statutory requirements and commercial
general liability insurance covering such contractors on or about the Premises
in amounts that at least equal the limits set forth in Section 1.1 and to submit
certificates evidencing such coverage to Landlord prior to the commencement of
such work; and to save Landlord harmless and indemnified from all injury, loss,
claims or damage to any person or property due to such work (provided, however,
that Tenant shall not be required to indemnify and save Landlord harmless from
Landlord's Negligence) and to furnish to Landlord statements from all
contractors and subcontractors certifying payment in full of any obligation owed
to them in respect of work undertaken on the Premises. In all cases where plans
are prepared for any work to be done by Tenant, Tenant shall furnish copies of
the same to Landlord no less than fifteen (15) days prior to the date on which
Tenant shall commence work in the Premises and in all such cases, Tenant shall
provide to Landlord as-built plans in respect of such work promptly after Tenant
completes the same.
5.1.6 INDEMNITY. To defend, with counsel approved by Landlord (which
approval shall not be unreasonably withheld or delayed), all actions against
Landlord, any partner, trustee, stockholder, officer, director, employee,
beneficiary or member or manager of Landlord, holders of mortgages secured by
the Building and/or Lot and any other party having an interest in the Premises
("Indemnified Parties") with respect to, and to pay, protect, indemnify and save
harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees), causes of action, suits, claims, demands or
judgments of any nature arising from (i) injury to or death of any person, or
damage to or loss of property, on or about the Premises, or connected with the
use, condition or occupancy thereof except to the extent caused by Landlord's
Negligence, (ii) violation of this Lease by Tenant, or (iii) any wrongful act,
fault, wrongful omission, or other misconduct of Tenant or its agents,
contractors, licensees, sublessees or invitees. Nothing in this Section 5.1.6,
however, shall derogate from the effectiveness of insurance required to be
maintained by Tenant under this Lease naming Landlord as an insured. This
Section 5.1.6 is further subject to the waiver of subrogation provisions in
Section 4.2.2.5.
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5.1.7 LANDLORD'S RIGHT TO ENTER. To permit Landlord and its agents
to enter into the Premises at reasonable times and upon reasonable advance
notice to examine the Premises, make such repairs and replacements as Landlord
may be entitled to make under this Lease, without however, any obligation to do
so except as provided in this Lease, make investigations as expressly provided
in Section 5.1.4, to view the Premises for Tenant's compliance with Tenant's
obligations under this Lease, and show the Premises to prospective purchasers
and lenders, and, during the last twelve (12) months of the Term or earlier if
Tenant shall be in default under this Lease beyond applicable notice, grace and
cure periods, to show the Premises to prospective tenants and to keep affixed in
suitable places notices of availability of the Premises. Landlord's exercise of
its right of access to the Premises as provided in this Lease (including,
without limitation, this Section 5.1.7, the third paragraph of Section 5.1.4 and
Section 9.3) shall be subject to the following: (a) Landlord shall not
unreasonably interfere with Tenant's business activities, (b) Landlord shall
indemnify and hold harmless Tenant from and against all loss, cost and expense
resulting from Landlord's Negligence in the course of exercise of such right,
(c) Landlord shall, except in the case of an emergency, enter the Premises only
when accompanied by a representative of Tenant, in order to ensure the continued
confidentiality of Tenant's business materials, and (d) Landlord shall adhere to
such safety, security, confidentiality, proprietary information and trade secret
rules and guidelines as Tenant may reasonably impose.
5.1.8 PERSONAL PROPERTY AT TENANT'S RISK. All of the furnishings,
fixtures, equipment, effects and property of every kind, nature and description
of Tenant and of all persons claiming by, through or under Tenant which, during
the continuance of this Lease or any occupancy of the Premises by Tenant or
anyone claiming under Tenant, may be on the Premises, shall, as between the
parties, be at the sole risk and hazard of Tenant and if the whole or any part
thereof shall be destroyed or damaged by fire, water or otherwise, or by the
leakage or bursting of water pipes, steam pipes, or other pipes, by theft or
from any other cause, no part of said loss or damage is to be charged to or to
be borne by Landlord, except that Landlord shall in no event be indemnified or
held harmless or exonerated from any liability to Tenant or to any other person,
for any injury, loss, damage or liability resulting from Landlord's Negligence.
Tenant shall insure Tenant's personal property.
5.1.9 PAYMENT OF COST OF ENFORCEMENT. To pay on demand Landlord's
expenses, including reasonable attorney's fees, incurred in successfully
enforcing any obligation of Tenant under this Lease continuing beyond applicable
notice, grace and cure periods or in curing any default by Tenant under this
Lease as provided in Section 7.4. Similarly, Landlord shall pay on demand
Tenant's expenses, including reasonable attorneys' fees, incurred in
successfully enforcing any obligation of Landlord under this Lease.
5.1.10 YIELD-UP. Landlord and Tenant acknowledge that Tenant shall
design (subject to Landlord's approval as provided in Section 3.2 of this Lease)
and install the HVAC system serving the Premises. Tenant agrees that, incident
to Tenant's yield-up
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of the Premises to Landlord, Tenant shall, prior to the expiration of the Term,
make alterations to the HVAC system such that the HVAC system conforms to the
specifications listed in Exhibit I attached hereto. At the expiration of the
Term or earlier termination of this Lease, Tenant shall surrender all keys to
the Premises, remove all of its trade fixtures and personal property in the
Premises (including the furnishings, fixtures and equipment set forth in Exhibit
I-1, attached hereto, subject to Landlord's Right of First Opportunity, as
defined below, and Exhibit I), remove such installations and improvements made
by Tenant as Landlord may request (provided that in the case of Tenant's
Improvements in the Initial Building and the Expansion Building and any
subsequent installation or improvement made by Tenant other than Minor
Improvements, Landlord must have made such request in writing at the time
Landlord approved the plans therefor), and all Tenant's signs wherever located,
to repair all damage caused by such removal and to yield-up the Premises in
broom-clean condition and in the same good order and repair in which Tenant is
obliged to keep and maintain the Premises by the provisions of this Lease
(except for reasonable wear and tear, damage by Casualty and Taking and damage
resulting from Landlord's Negligence). The yield-up of the Premises in
accordance with the foregoing provisions of this Section 5.1.10 shall be
referred to as the "Yield-Up Condition." Landlord and Tenant shall conduct an
inspection of the Premises prior to the end of the Term to facilitate Landlord's
identification of the items to be removed under this Section 5.1.10. Any
property not so removed or any property not purchased by Landlord in accordance
with Landlord's Right of First Opportunity that remains on or at the Premises
shall be deemed abandoned and may be removed and disposed of by Landlord in such
manner as Landlord shall determine and Tenant shall pay Landlord the entire
reasonable cost and expense incurred by it in effecting such removal and
disposition and in making any incidental repairs and replacements to the
Premises and for use and occupancy during the period after the expiration of the
Term and prior to Tenant's performance of its obligations under this Section
5.1.10.
Upon at least thirty (30) days prior to the expiration or earlier
termination of this Lease, Tenant shall notify Landlord of its intention to sell
or dispose of the items listed in Exhibit I-1, attached hereto, which are not
subject to equipment or other financing by a third party (the "Tenant's FF&E",
which shall not include the items listed on Exhibit I) and the terms on which
the Tenant intends to sell or dispose of each of the same (the "Sale Offer").
Landlord shall have twenty (20) days after receipt of the Sale Offer within
which to accept any such Sale Offer ("Landlord's Right of First Opportunity").
Failure of Landlord to so accept any such Sale Offer within such twenty (20) day
period shall constitute and be deemed Landlord's rejection of such Sale Offer.
If Landlord accepts such Sale Offer within such twenty (20) day period, then
Landlord and Tenant shall attempt in good faith to conclude Landlord's purchase
of the same upon expiration of the Term. If Landlord does not accept the Sale
Offer within such twenty (20) day period, or if after accepting any such Sale
Offer within such twenty (20) day period, Landlord and Tenant in good faith are
unable to close such purchase, then Tenant shall be free to sell Tenant's FF&E
at a price which is not less than ninety-five percent (95%) of the purchase
price offered in the Sale Offer. Tenant may not sell Tenant's to any party for
less than 95% of the price offered to Landlord in the Sale Offer or on other
terms and conditions
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substantially more beneficial to buyer than those offered to Landlord in the
Sale Offer, without re-offering Tenant's FF&E to Landlord at such reduced price
and/or better terms, as applicable, by written notice (the "Reduced Offer"),
whereupon Landlord shall have ten (10) days to accept the Reduced Offer or, if
Landlord shall fail within such ten (10) day period to accept the Reduced Offer,
or if Landlord shall accept the Reduced Offer, but shall fail to complete such
purchase pursuant to such terms and provisions after it has accepted the Reduced
Offer, Tenant shall be free to sell Tenant's FF&E to any other party in the same
manner as aforesaid. Tenant agrees also to advise Landlord in writing of any
other items which Tenant desires to abandon and which Tenant would otherwise be
obligated to removed under this Lease ("Tenant's Surplus FF&E") and Landlord
shall advise Tenant within a twenty (20) day period whether Landlord consents to
Tenant's abandonment of all or any part of Tenant's Surplus FF&E on the
Premises; if Landlord does not consent, Tenant shall remove the items
constituting Tenant's Surplus FF&E in accordance with the terms of this Lease
otherwise governing the same. The rights of Landlord under this paragraph shall
be subordinate to any security interest which Tenant is authorized under the
Lease to place on Tenant's FF&E and Tenant's Surplus FF&E.
5.1.11 ESTOPPEL CERTIFICATES. Upon not less than ten (10) business
days' prior notice by Landlord, to execute, acknowledge and deliver to Landlord
a statement in writing certifying that this Lease is unmodified and in full
force and effect and that except as stated therein Tenant has no knowledge of
any defenses, offsets or counterclaims against its obligations to pay the Annual
Fixed Rental Rate and Additional Rent and any other charges and to perform its
other covenants under this Lease (or, if there have been any modifications that
the same is in full force and effect as modified and stating the modifications
and, if there are any defenses, offsets or counterclaims, setting them forth in
reasonable detail), the dates to which the Annual Fixed Rental Rate and
Additional Rent and other charges have been paid and a statement that Landlord
is not in default hereunder beyond applicable notice, grace and cure periods (or
if in default beyond applicable notice, grace and cure periods, the nature of
such default, in reasonable detail). Any such statement delivered pursuant to
this Section 5.1.11 may be relied upon by any prospective purchaser or mortgagee
of the Premises, or any prospective assignee of any such mortgage.
5.1.12 PARK RESTRICTIONS. To comply with the restrictions and
covenants set forth in Exhibit D, as the same may be reasonably amended from
time to time by Landlord; provided, however, that such amendments shall not
interfere with Tenant's Intended Uses or increase any amounts due under this
Lease or otherwise.
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5.1.13 HOLDING OVER. Tenant covenants that it will vacate the
Premises immediately upon the expiration or sooner termination of this Lease. If
Tenant retains possession of the Premises or any part thereof after the
termination of the Term without Landlord's express consent, Tenant shall be
treated as a tenant at sufferance and shall pay Landlord rent at 150% of the
amounts payable during the last Lease Year preceding expiration or termination
of the Term. The provisions of this Section do not exclude Landlord's rights of
re-entry or any other right hereunder, including without limitation, the right
to refuse 150% of the monthly rent and instead to remove Tenant through summary
proceedings for holding over beyond the expiration of the Term of this Lease.
5.1.14 TENANT'S FINANCIAL STATEMENTS. If Tenant ceases to be a
publicly traded company, following Landlord's request therefor, but not more
often than quarterly, Tenant shall furnish Landlord with its financial
statements, including, without limitation, annual audited balance sheet and
statements of profit and loss; provided, however, that Landlord shall not
disclose such information to third parties (other than Landlord's current or
prospective mortgagee or prospective purchasers) without Tenant's prior written
approval, which approval shall not be unreasonably withheld or delayed.
5.1.15 LANDLORD'S EXPENSES RE: CONSENTS. To reimburse Landlord
promptly for all reasonable out-of-pocket expenses incurred by Landlord in
reviewing requests by Tenant for consent or approval of alterations or
installations in the Premises.
5.2 TENANT'S NEGATIVE COVENANTS. Tenant covenants at all times during
the Term and for such further time as Tenant occupies the Premises or any part
thereof:
5.2.1 ASSIGNMENT AND SUBLETTING. Not to assign, transfer, mortgage
or pledge this Lease, or to sublease (which term shall be deemed to include the
granting of concessions and licenses and the like, but nothing herein shall
prohibit the installation of customary vending machines) all or any part of the
Premises or suffer or permit this Lease or the leasehold estate hereby created
or any other rights arising under this Lease to be assigned, transferred or
encumbered, in whole or in part, whether voluntarily, or by operation of law, or
permit the occupancy of the Premises by anyone other than Tenant, without
Landlord's prior written consent, which consent shall not be unreasonably
withheld or delayed. Landlord acknowledges that Tenant may, from time to time,
desire to grant Tenant's lender(s) a security interest in the equipment and
furnishings that Tenant may install or maintain in the Premises and that
Landlord will not withhold its approval to the granting of such security
interest provided that (i) no such security interest shall encumber any fixture
or other equipment that Tenant is not entitled under the terms of this Lease to
remove at the expiration of the Term nor any element of the HVAC system which,
in the absence of Tenant's surrender of the Premises in the Yield-Up Condition,
would be necessary for the HVAC system installed by Tenant to be fully
operational as designed and (ii) the terms of any such approval shall be
acceptable to Landlord's mortgagee(s) of the Premises and reasonably acceptable
to Landlord. Any attempted assignment, transfer, mortgage, pledge, sublease or
other encumbrance, except with prior written approval thereof from Landlord,
shall be void. No assignment, transfer, mortgage,
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sublease or other encumbrance, whether or not approved or permitted to be made
without Landlord's consent under the next following paragraph of this Section
5.2.1, and no indulgence granted by Landlord to any assignee or sublessee, shall
in any way impair the continuing primary liability (which after an assignment
shall be joint and several with the assignee) of Tenant hereunder, and no
approval in a particular instance shall be deemed to be a waiver of the
obligation to obtain Landlord's approval in any other case.
Notwithstanding the preceding paragraph, Landlord agrees that Tenant may,
without Landlord's consent, (a) sublease all or any portion of the Premises or
(b) assign this Lease to any corporation, person or entity directly or
indirectly controlling or controlled by, or under common control with, Tenant
(an "Affiliate of Tenant") or to any successor by merger, consolidation or
acquisition of all or substantially all of the assets of Tenant, provided that,
in the case of an assignment to an Affiliate of Tenant or to a successor by
merger, consolidation or acquisition of all or substantially all of the assets
of Tenant, such assignee shall have a net worth and working capital sufficient
to enable such assignee to meet Tenant's financial obligations hereunder.
5.2.2 OVERLOADING AND NUISANCE. Not to injure, overload, deface or
otherwise harm the Premises; nor commit any nuisance; nor permit the emission of
any objectionable noise, vibration or odor; nor make, allow or suffer any waste;
nor make any use of the Premises which is improper, offensive or contrary to any
law or ordinance or which will invalidate any of Landlord's or Tenant's
insurance required hereunder.
5.2.3 INSTALLATIONS, ALTERATIONS OR ADDITIONS. Not to make any
installations, alterations or additions in, to or on the Premises which would
affect the structural or architectural integrity of the Premises without
obtaining the prior written consent of Landlord, which installations,
alterations and additions shall be completed pursuant to plans and
specifications approved by Landlord in advance, which consent and approval shall
not be unreasonably withheld or delayed; provided, however, that installations,
alterations or improvements performed by Tenant in or at the Initial Building
(or the Expansion Building, as the case may be) subsequent to Tenant's
completion of Tenant's Improvements therein shall not require such prior consent
and approval of Landlord if such installations, alterations or improvements
would not (a) adversely affect the structural or architectural integrity of the
Initial Building (or the Expansion Building, as the case may be) (e.g., interior
renovations), (b) involve penetration of the roof or walls of the Building in
question, (c) adversely impact any Building system or the capacity of utilities
serving the Building in question, and (d) exceed $250,000 to construct (the
"Minor Improvements").
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ARTICLE VI
CASUALTY OR TAKING
6.1 CASUALTY. In case during the Term the Premises shall be damaged by
fire or casualty (the "Casualty"), Landlord shall cause the Premises to be
restored to their condition immediately prior to the occurrence of such
Casualty, reasonable wear and tear excepted; provided, however, that if Landlord
reasonably determines that the net proceeds of insurance recovered for such
damage are not adequate to restore the Premises to their condition immediately
prior to the occurrence of such Casualty, Landlord shall so notify Tenant in
writing within forty-five (45) days following the occurrence of the Casualty
(the "Restoration Determination Notice"). Within thirty (30) days following
Tenant's receipt of the Restoration Determination Notice such notice from
Landlord, Tenant may elect (a) to require Landlord to restore the Premises to
their condition immediately prior to the occurrence of such Casualty, reasonable
wear and tear excepted, and (b) to pay the difference between the net proceeds
of insurance recovered and the total cost of restoration (the "Tenant's
Deficiency Election"). If Tenant does not give Landlord notice of Tenant's
Deficiency Election within such thirty (30) day period, Landlord may elect under
this Section 6.1 not to restore, in which case this Lease shall be terminated on
the thirtieth (30th) day following the date on which Landlord notifies Tenant in
writing of such election. The provisions of Section 6.2 shall be applicable to
the restoration of the Premises and adjustments to Annual Fixed Rental Rate and
other charges hereunder on account of such Casualty. For purposes of this Lease,
the phrase "restored to their condition immediately prior to the occurrence of
such Casualty" (or in the case of a "Taking" (as hereinafter defined, such a
"Taking")) shall mean, in the case of the Initial Building, Landlord's Initial
Building Work and in the case of the Expansion Building, Landlord's Expansion
Building Work without, in either case, the restoration of the portion of
Tenant's Improvements (other than to the extent of the Yield-Up Condition), in
respect of which Tenant acknowledges that Tenant, and not Landlord, bears the
risk of loss in respect of such Casualty (or such Taking).
If Tenant makes Tenant's Deficiency Election, Tenant shall promptly
deposit with Landlord's mortgagee the amount reasonably estimated by Landlord's
mortgagee to fund the estimated cost of the total restoration of the Premises to
their condition immediately prior to the occurrence of the Casualty, reasonable
wear and tear excepted, after application of the net proceeds of insurance
recovered (the "Reconstruction Fund"). Tenant shall have the right to approve
the construction contact for the restoration of the Premises, which approval
shall not be unreasonably withheld or delayed. Landlord's mortgagee shall
advance proceeds from the Reconstruction Fund, as needed, to prosecute the
restoration as herein provided, and any funds remaining in the Reconstruction
Fund after final completion and payment in full of all of the costs of
restoration shall be repaid to Tenant. If there is a shortfall in the funding
for such restoration, Tenant shall promptly deposit the required additional
funds in the Reconstruction Fund after Tenant's receipt of notice from Landlord
or Landlord's mortgagee stating the amount of the required additional funds and
a description of the restoration work related thereto, and failure to do
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so continuing for ten (10) days after written notice from Landlord to Tenant
designating such failure shall constitute a failure to pay Annual Fixed Rent
under this Lease.
If Tenant makes Tenant's Deficiency Election, Landlord shall provide
Tenant an estimate promptly from Cranshaw Construction or another contractor
reasonably acceptable to Tenant of the time required to complete such
restoration not to exceed, in any event, two hundred seventy (270) days from the
date of Tenant's Deficiency Election.
Landlord shall commence diligent efforts for restoration of the Premises
within thirty (30) days of the date of Landlord's receipt of Tenant's Deficiency
Election and deposit with Landlord's mortgagee of the Reconstruction Fund. In
the event that Landlord shall not complete such restoration within two hundred
seventy (270) days following the date on which Tenant's Deficiency Election (as
such period may be extended by reason of the occurrence of Force Majeure Events)
(the "Restoration Period"), Tenant shall have the right to terminate this Lease
exercisable by notice during the thirty (30) day period following the expiration
of the Restoration Period if such restoration has not then been completed.
6.1A. TAKING. In case during the Term the entire Premises shall be taken
by any public authority or for any public use or destroyed by the action of any
public authority (a "Taking"), this Lease shall terminate, and the parties'
obligations hereunder shall cease. If during the Term there is a Taking of more
than twenty-five percent (25%) of the Premises, then Landlord shall have the
election, to be exercised by notice thereof to Tenant given within thirty (30)
days after Landlord's receipt of notice of such Taking, to terminate this Lease.
If Landlord does not elect to terminate, then the provisions of Section 6.2
shall be applicable to the restoration of the Premises and adjustments to Annual
Fixed Rental Rate and other charges hereunder on account of such Taking.
Termination under either Section 6.1 or this Section 6.1A shall be effective as
of the effective date of the Taking or the occurrence of the Casualty, as may be
applicable.
6.2 RESTORATION. If Landlord does not exercise the election to terminate
provided in Section 6.1 or Section 6.1A, as may be applicable, this Lease shall
continue in force and a just proportion of the Annual Fixed Rental Rate and
other charges hereunder, according to the nature and extent of the damages
sustained, as may be applicable, to Landlord's Initial Building Work and
Landlord's Expansion Building Work, shall be abated from the date of Casualty or
Taking until Landlord shall have substantially completed the restoration of the
Premises, as provided under this Article VI. The Net Proceeds of such Casualty
or Taking applicable to the Premises shall be made available to Landlord and
Landlord shall complete such restoration with reasonable diligence at Landlord's
expense, and the Premises shall be put by Landlord in a condition as nearly as
practicable to their condition immediately prior to such Casualty or Taking,
subject to zoning and building laws or ordinances then in existence, provided
that Landlord's obligations with respect to restoration shall not require
Landlord to expend more than the net proceeds of insurance recovered or damages
awarded for such Casualty or Taking (with Tenant having the right to fund any
"deficiency" in the manner and on the terms
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provided in Section 6.1), and shall be subject to the terms of any
subordination, non-disturbance and attornment agreement entered into by
Landlord, Tenant and any mortgagee of Landlord which is then in force and
effect; Tenant shall be responsible for the restoration of Tenant's Improvements
to the extent of Yield-Up Condition with reasonable diligence and at Tenant's
expense. "Net proceeds of insurance recovered or damages awarded" refers to the
gross amount of such insurance (plus any deductible) or damages less the
reasonable expenses of Landlord in connection with the collection of the same,
including without limitation, reasonable fees and expenses for legal and
appraisal services. If Landlord proceeds with restoration of the Premises under
this Article VI, nothing in this Article VI shall preclude Tenant from repairing
or restoring Tenant's Improvements.
6.3 AWARD. Irrespective of the form in which recovery may be had, all
rights to damages for all such Takings, subject to the allocation provisions
sets forth below, shall belong to Landlord in all cases; provided, however, that
Tenant shall have the right to pursue any separate claim to which it is entitled
for its trade fixtures and moving and relocation expenses. Landlord and Tenant
agree that the Net Proceeds of the damages treated as belonging to Landlord
under this Section 6.3 (except to the extent utilized for restoration) shall be
allocated as follows: first, to Landlord in the amount equal to the then fair
market value of the Premises in the Yield-Up Condition (free of mortgages) but
not in excess of the then outstanding amount of Landlord's then mortgage(s) on
the fee simple interest in the Premises; second, to Tenant in the amount of the
then unamortized (determined on a straight-line basis over the Original Term of
this Lease) cost of Tenant's Improvements (exclusive of Tenant's property not
encompassed within such Taking) (except to the extent the same are treated as
trade fixtures and a separate award is made on account thereof to Tenant); and
third, to Landlord in the amount of the balance of the Net Proceeds. The
procedures for the determination of Market Rent under Section 2.5 of this Lease
shall be applicable to the determination of the fair market value of the
Premises.
In the case of a Taking which permanently reduces the Premises, the Annual
Fixed Rental Rate and other charges due hereunder shall be equitably abated or
adjusted for the balance of the Term.
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ARTICLE VII
DEFAULTS
7.1 EVENTS OF DEFAULT. (a) If Tenant shall default in the performance of
any of its obligations to pay the Annual Fixed Rental Rate or Additional Rent
(or any installment thereof) hereunder and if such default shall continue for
ten (10) days after written notice from Landlord designating such default or (b)
if within thirty (30) days after written notice from Landlord to Tenant
specifying any other default or defaults Tenant has not commenced diligently to
correct the default or defaults so specified or does not thereafter diligently
prosecute such correction to completion, or (c) if any assignment for the
benefit of creditors shall be made by Tenant, or (d) if Tenant's leasehold
interest shall be taken on execution or other process of law in any action
against Tenant, or (e) if a lien or other involuntary encumbrance is filed
against Tenant's leasehold interest, and is not discharged or bonded within
forty-five (45) days thereafter, or (f) if a petition is filed by Tenant for
liquidation, or for reorganization or an arrangement or any other relief under
any provision of the Bankruptcy Code as then in force and affect, or (g) if an
involuntary petition under any of the provisions of said Bankruptcy Code is
filed against Tenant and such involuntary petition is not dismissed within sixty
(60) days thereafter, then, and in any of such cases, Landlord and the agents
and servants of Landlord lawfully may, in addition to and not in derogation of
any remedies for any preceding breach of covenant, immediately or at any time
thereafter and without demand or notice and with or without process of law
(forcibly, if necessary, to the extent permitted by law) enter into and upon the
Premises or any part thereof in the name of the whole, or mail a notice of
termination addressed to Tenant, and repossess the same as of Landlord's former
estate and expel Tenant and those claiming through or under Tenant and remove
its and their effects (forcibly, if necessary, to the extent permitted by law)
without being deemed guilty of any manner of trespass and without prejudice to
any remedies which might otherwise be used for arrears of rent or prior breach
of covenant, and upon such entry or mailing as aforesaid this Lease shall
terminate, and Landlord, without notice to Tenant, may store Tenant's effects,
and those of any person claiming through or under Tenant at the expense and risk
of Tenant, and, if Landlord so elects, may sell such effects at public auction
or private sale and apply the net proceeds to the payment of all sums due to
Landlord from Tenant, if any, and pay over the balance, if any, to Tenant.
7.2 REMEDIES. In the event that this Lease is terminated under any of the
provisions contained in Section 7.1, Tenant covenants to pay forthwith to
Landlord, as compensation, the excess of the total rent reserved for the residue
of the Term over the fair market rental value of the Premises for the residue of
the Term, which shall be calculated on a net present value basis. In calculating
the rent reserved there shall be included, in addition to the Annual Fixed
Rental Rate and Additional Rent, the value of all other considerations agreed to
be paid or performed by Tenant during the residue. Tenant further covenants as
additional and cumulative obligations after any such termination to pay
punctually to Landlord all the sums and to perform all the obligations which
Tenant covenants in this Lease to pay and to perform in the same manner and to
the same extent and at the same time as if this Lease had not been terminated.
In calculating the amounts
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to be paid by Tenant pursuant to the preceding sentence, Tenant shall be
credited with any amount paid to Landlord as compensation as provided in this
Section 7.2, and also with the net proceeds of any rent obtained by Landlord by
reletting the Premises, after deducting all Landlord's reasonable expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, fees for legal services and expenses of preparing
the Premises for such reletting, it being agreed that Landlord shall use
reasonable efforts to (i) relet the Premises or any part or parts thereof for a
term or terms which may at Landlord's option be equal to or less than or exceed
the period which would otherwise have constituted the balance of the Term
hereof, which may include granting such concessions and free rent as Landlord in
its reasonable judgment considers advisable or necessary to relet the same and
(ii) make such alterations, repairs and decorations in the Premises as Landlord
in its reasonable judgment considers advisable or necessary to relet the same,
and no action of Landlord in accordance with the foregoing or failure to relet
or to collect rent under reletting shall operate or be construed to release or
reduce Tenant's liability as aforesaid.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.
7.3 REMEDIES CUMULATIVE. Except as otherwise expressly provided herein,
any and all rights and remedies which either party may have under this Lease,
and at law and equity, shall be cumulative and shall not be deemed inconsistent
with each other, and any two or more of all such rights and remedies may be
exercised at the same time insofar as permitted by law.
7.4 LANDLORD'S RIGHT TO CURE DEFAULTS. Landlord may, but shall not be
obligated to, cure, at any time following notice to Tenant and expiration of all
applicable cure, notice and grace periods (except in cases of emergency, in
which case only such notice, if any, as may be reasonable under the
circumstances need be given), any default by Tenant under this Lease; and
whenever Landlord so elects, all reasonable costs and expenses incurred by
Landlord, including reasonable attorneys' fees, in curing a default shall be
paid by Tenant to Landlord as Additional Rent on demand, together with interest
thereon at the rate provided in Section 7.7 from the date of payment by Landlord
to the date of payment by Tenant.
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7.5 EFFECT OF WAIVERS OF DEFAULT. Any consent or permission by either
party to any act or omission which otherwise would be a breach of any covenant
or condition herein, or any waiver by either party of the breach of any covenant
or condition herein, shall not in any way be held or construed (unless expressly
so declared) to operate so as to impair the continuing obligation of any
covenant or condition herein, or otherwise, except as to the specific instance,
operate to permit similar acts or omissions.
The failure of either party to seek redress for violation of, or to insist
upon the strict performance of, any covenant or condition of this Lease shall
not be deemed a waiver of such violation nor prevent a subsequent act, which
would have originally constituted a violation, from having all the force and
effect of an original violation. The receipt by Landlord of rent with knowledge
of the breach of any covenant of this Lease shall not be deemed to have been a
waiver of such breach by Landlord. No consent or waiver, express or implied, by
either party to or of any breach of any agreement or duty shall be construed as
a waiver or consent to or of any other breach of the same or any other agreement
or duty.
7.6 NO ACCORD AND SATISFACTION. No acceptance by Landlord of a lesser sum
than the Annual Fixed Rental Rate, Additional Rent or any other charge then due
shall be deemed to be other than on account of the earliest installment of such
rent or charge due, unless Landlord elects by notice to Tenant to credit such
sum against the most recent installment due, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as rent
or other charge be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy provided in this Lease.
7.7 INTEREST ON OVERDUE SUMS. If Tenant fails to pay any installment of
Annual Fixed Rental Rate, Additional Rent and other charges payable by Tenant to
Landlord within five (5) business days after the due date thereof (without
regard to any requirement of notice from Landlord or any period of grace allowed
to Tenant under this Lease before Landlord is allowed to exercise any remedy on
account thereof), the amount so unpaid shall bear interest at an annual rate
(the "Delinquency Rate") equal to three percent (3%) in excess of the Base Rate
of BankBoston, N.A., so-called, (or if BankBoston, N.A. shall cease to exist,
then three percent (3%) in excess of the prime rate of the then largest
commercial bank in Boston) from time to time in effect or, if such rate is in
excess of any maximum interest rate permissible under applicable law, the
Delinquency Rate shall be the maximum interest rate permissible under applicable
law, commencing with the due date and continuing through the day preceding the
date on which payment of such delinquent payment with interest thereon is paid.
Similarly, if Landlord fails to pay any amount payable to Tenant by Landlord
within three (3) business days after the due date thereof, the amount so unpaid
shall bear interest at the Delinquency Rate, commencing with the due date and
continuing through the date preceding the date on which payment of such
delinquent payment with interest thereon is paid.
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ARTICLE VIII
MORTGAGES
8.1 RIGHTS OF MORTGAGE HOLDERS. The word "mortgage" as used herein
includes mortgages, deeds of trust or other similar instruments evidencing other
voluntary liens or encumbrances, and modifications, consolidations, extensions,
renewals, replacements and substitutes thereof. The word "holder" shall mean a
mortgagee, and any subsequent holder or holders of a mortgage.
No Annual Fixed Rental Rate, Additional Rent or any other charge shall be
made in advance of amounts due for the then current month or the next succeeding
month, and payments made in violation of this provision shall (except to the
extent that such payments are actually received by a mortgagee in possession or
in the process of foreclosing its mortgage) be a nullity as against such
mortgagee and Tenant shall be liable for the amount of such payments to such
mortgagee.
In the event of any act or omission by Landlord which would give Tenant
the right to terminate this Lease or to claim a partial or total eviction,
Tenant shall not exercise any such right (a) until it shall have given notice,
by certified or registered mail, of such act or omission to the holder of any
mortgage encumbering the Premises whose name and address shall have been
furnished to Tenant in writing, at the last address so furnished, and (b) unless
Landlord or such holder shall have failed to commence to remedy such act or
omission within thirty days after such notice or thereafter diligently to
prosecute such remedy to completion.
In the event any proceedings are brought for the foreclosure of, or in the
event of exercise of the power of sale under, any mortgage now or hereafter
encumbering the Premises, or any part thereof, Tenant shall attorn to the
purchaser upon such foreclosure or sale or upon any grant of a deed in lieu of
foreclosure and recognize such purchaser as Landlord under this Lease if so
requested by such purchaser, so long as such purchaser recognizes all of
Tenant's rights under this Lease (subject to the limitations set forth in
Section 8.2(a), (b) and (c) of this Lease).
8.2 SUPERIORITY OF LEASE; OPTION TO SUBORDINATE. Unless Landlord exercises
the option set forth below in this Section 8.2, this Lease shall be superior to
and shall not be subordinate to any mortgage on the Premises. Landlord shall
have the option to subordinate this Lease to any mortgage of the Premises
provided that the holder of record thereof enters into an agreement with Tenant,
in such holder's customary form (which agreement shall include the provisions
set forth in Exhibit J, attached hereto, and subject to such reasonable
modifications to such holder's customary form as Tenant's counsel may request)
by the terms of which such holder will agree (a) to recognize the rights of
Tenant under this Lease and not to disturb Tenant's possession of the Premises
so long as Tenant is not in default of its obligations hereunder beyond
applicable notice, grace and cure periods, (b) to perform Landlord's obligations
hereunder arising on and after the date of such holder's acquisition of title;
provided, however, that the obligation of Landlord to
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construct the Initial Building (and, if Tenant has exercised its Option to
Expand in accordance with Section 10.2.2 hereof, the Expansion Building) or to
make the payment under Section 3.13 shall not be binding on such holder beyond
the funds allocated for such purposes in the budget for the loan and subject to
the remedies reserved to such holder under the loan documents executed by
Landlord in connection with such loan, the repayment of which the mortgage of
the Premises is given as security; and (c) to accept Tenant as tenant of the
Premises under the terms and conditions of this Lease in the event of
acquisition of title by such holder through foreclosure proceedings or
otherwise, and Tenant will agree to recognize the holder of such mortgage as
Landlord in such event, and which agreement shall be made expressly to bind and
inure to the benefit of the successors and assigns of Tenant and of the holder
and upon anyone purchasing said Premises at any foreclosure sale. Tenant and
Landlord agree to execute and deliver any appropriate and mutually acceptable
instruments necessary to carry out the agreements contained in this Section 8.2.
Any such mortgage to which this Lease shall be subordinated may contain such
terms, provisions and conditions as the holder deems usual or customary; subject
to the provisions of Exhibit J.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 NOTICES FROM ONE PARTY TO THE OTHER. All notices and other
communications required or permitted hereunder shall be in writing and
addressed, if to Tenant, at the Original Address of Tenant or such other address
as Tenant shall have last designated by notice in writing to Landlord (with a
copy to Palmer & Dodge LLP, One Beacon Street, Boston, Massachusetts 02108,
Attention: Michael Lytton, Esq.) and, if to Landlord, at the Original Address of
Landlord or such other address as Landlord shall have last designated by notice
in writing to Tenant. Any notice shall be given by mailing to such address
postage prepaid, registered or certified mail, return receipt requested or by
delivery by a nationally-recognized overnight delivery service which provides
delivery receipts, or delivered to such address by hand. Any notice shall be
effective upon receipt or tender of delivery.
9.2 QUIET ENJOYMENT. Landlord agrees that upon Tenant's paying the rent
and performing and observing the terms, covenants, conditions and provisions on
its part to be performed and observed, Tenant shall and may peaceably and
quietly have, hold and enjoy the Premises during the Term without any manner of
hindrance or molestation from Landlord or anyone claiming under Landlord,
subject, however, to the terms of this Lease.
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9.3 EASEMENTS; CHANGES TO LOT LINES. Landlord reserves the right, from
time to time, to grant easements affecting the Premises and to change or alter
existing boundaries of the Lot (including the Initial Building Lot and the
Expansion Lot) for purposes of developing and using remaining properties in
Metro North Corporate Center so long as proposed plans for such easements,
changes and alterations shall be approved in advance by Tenant, such easements
or such changes or alterations to existing boundaries of the Lot do not
unreasonably interfere with Tenant's Intended Uses or materially reduce the
Premises or the parking areas on the Premises (i.e., at least 464 spaces for the
Initial Building, and 718 spaces for the Initial Building and the Expansion
Building in the aggregate), and to enter upon the Premises at reasonable times
for purposes of constructing and maintaining any pipes, wires and other
facilities serving any portion of Metro North Corporate Center or of the
Building, provided that Landlord's entry shall be in accordance with the
requirements of Section 5.1.7.
9.4 LEASE NOT TO BE RECORDED. Tenant agrees that it will not record this
Lease. Both parties shall, upon the request of either, execute, deliver and
record a Notice of Lease in the form attached hereto as Exhibit K, with such
modifications as may be permitted by applicable statute, or otherwise agreed to
by the parties. If this Lease is terminated before the originally scheduled
expiration of the Term, the parties shall execute, deliver and record an
instrument acknowledging such fact and the actual date of termination of this
Lease, and Tenant hereby appoints Landlord its attorney-in-fact, coupled with an
interest, with full power of substitution to execute such instrument.
9.5 BIND AND INURE; LIMITATION OF LANDLORD'S LIABILITY. The obligations of
this Lease shall run with the land, and this Lease shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. No owner of the Premises shall be liable under this Lease except for
breaches of Landlord's obligations occurring while owner of the Premises,
provided, however, that (a) any successor Landlord shall be obligated to cure
any repair or maintenance default of a prior Landlord which shall be continuing
upon acquisition of the Premises by such successor Landlord and (b) any
successor Landlord (other than a mortgagee or a person acquiring title on
foreclosure or conveyance in lieu of foreclosure) shall be obligated to cure any
payment default of a prior Landlord which shall be continuing upon acquisition
of the Premises by such successor Landlord, unless [in the case of both (a) and
(b)] such successor Landlord shall have requested an estoppel certificate from
Tenant pursuant to Section 5.1.11 and Tenant either did not provide such
estoppel certificate or failed to disclose such default therein if Tenant had
actual knowledge of such default. Landlord shall provide Tenant with the name
and address of the proposed purchaser or its attorney so that Tenant may provide
updated estoppel certificates between the time of delivery of the original
estoppel certificate and the closing of such purchase. The obligations of
Landlord shall be binding upon the assets of Landlord which comprise the
Premises or any portion thereof, but not upon other assets of Landlord. No
individual partner, trustee, stockholder, officer, director, employee,
beneficiary, member or manager of Landlord shall be personally liable under this
Lease and Tenant shall look solely to Landlord's interest in the Premises
(including any rents and profits) therefrom arising after enforcement is sought,
or arising
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prior to enforcement to the extent the latter have not been distributed or used
by Landlord) in pursuit of its remedies upon an Event of Default under Section
7.1, and the assets of Landlord and its partners, trustees, stockholders,
officers, employees, beneficiaries, members or managers of Landlord shall not be
subject to levy, execution or other enforcement procedure for the satisfaction
of the remedies of Tenant; provided that the foregoing provisions of this
sentence shall not constitute a waiver of any obligation evidenced by this Lease
and provided further that the foregoing provisions of this sentence shall not
limit the right of Tenant to name Landlord or any partner or trustee thereof as
party defendant in any action or suit in connection with this Lease so long as
no personal money judgment shall be asked for or taken against any partner,
trustee, stockholder, officer, employee beneficiary, member or manager of
Landlord.
9.6 ACTS OF GOD. In any case where either party hereto is required to do
any act, then, except where specifically provided in this Lease to the contrary,
delays caused by or resulting from acts of God, war, civil commotion, fire,
flood or other casualty, government regulations, moratoria, unusually severe
weather, or other causes beyond such party's reasonable control which are
unrelated to labor difficulties and shortages of labor, materials or equipment
shall not be counted in determining the time during which such act shall be
completed, whether such time be designated by a fixed date, a fixed time or a
"reasonable time", and such time shall be deemed to be extended by the period of
such delay.
9.7 LANDLORD'S DEFAULT; TENANT'S RIGHT OF SELF-HELP. Landlord shall not be
deemed to be in default in the performance of any of its obligations hereunder
unless it shall fail to perform such obligations and unless within thirty (30)
days after notice from Tenant to Landlord specifying such default Landlord has
not commenced diligently to correct the default so specified or has not
thereafter diligently pursued such correction to completion. Except only as
specifically otherwise provided in this Lease, Tenant shall have no right, for
any default by Landlord, to offset or counterclaim against any rent due
hereunder.
If, after the Initial Building is substantially completed (and in respect
of the Expansion Building, after the Expansion Building is substantially
completed) by reason of any failure which is not due to any act or omission of
Tenant or any employee, agent, contractor, licensee, or invitee of Tenant,
Tenant's use and enjoyment of the Premises materially is impaired by reason of
Landlord's failure to comply with its obligations under this Lease, then Tenant
may give Landlord and all holders of mortgages on the Premises written notice
thereof, and if Landlord or any said holder (if such holder shall elect to do
so) shall fail to begin correction of such condition by a date which is thirty
(30) days after Landlord's receipt of such notice, Tenant shall have the right,
but shall not be required, to perform such repair or restoration work as is
reasonably necessary to cure the condition. In the event of the proper exercise
of such right of self-help by Tenant in accordance with the provisions of this
paragraph, Landlord agrees to pay Tenant, within thirty (30) days of billing,
the reasonable costs incurred by Tenant in curing such condition or, in the
event Landlord fails to so reimburse Tenant within such thirty-day period,
Tenant shall have the
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right to offset said amounts against Tenant's Annual Fixed Rent obligations
next-coming due hereunder, but only to the extent that the same is not required
to pay the then monthly installment of debt service under all loans secured by
mortgages of the Premises.
9.8 BROKERAGE. Each of Tenant and Landlord warrants and represents to the
other that it has had no dealings with any broker or agent in connection with
this Lease other than the Broker(s) set forth in Article I and covenants to
defend with counsel approved by the other, hold harmless and indemnify the other
from and against any and all cost, expense or liability for any compensation,
commissions and charges claimed by any broker or agent other than the Broker(s)
set forth in Article I with respect to its dealings in connection with this
Lease or the negotiation thereof.
9.9 APPLICABLE LAW AND CONSTRUCTION. This Lease shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts. If
any term, covenant, condition or provision of this Lease or the application
thereof to any person or circumstances shall be declared invalid or
unenforceable by the final ruling of a court of competent jurisdiction having
final review, the remaining terms, covenants, conditions and provisions of this
Lease and their application persons or circumstances shall not be affected
thereby and shall continue to be enforced and recognized as valid agreements of
the parties, and in the place of such invalid or unenforceable provision, there
shall be substituted a like, but valid and enforceable provision which comport
to the findings of the aforesaid court and most nearly accomplishes the original
intention of the parties.
There are no prior oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by Landlord and
Tenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors, administrators, successors and assigns, and those
holding title or claiming through or under them respectively. If there be more
than one tenant the obligations imposed by this Lease upon Tenant shall be joint
and several.
Time is of the essence with respect to all terms and conditions of this
Agreement.
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9.10 SUBMISSION NOT AN OFFER. The submission of a draft of this Lease or a
salary of some or all of its provisions does not constitute an offer to lease or
demise the Premises, it being understood and agreed that neither Landlord nor
Tenant shall be legally bound with respect to the leasing of the Premises unless
and until this Lease has been executed by both Landlord and Tenant and a fully
executed copy delivered.
9.11 SECURITY DEPOSIT. The Security Deposit will be held as security for
and during the Term, which deposit shall be reduced as provided in this Lease,
provided Tenant is not then in default of this Lease continuing beyond
applicable notice, grace and cure periods (and all such defaults shall be fully
corrected or cured, as may be applicable, within the applicable period of grace
and all interest and other costs, if any, due to landlord in connection
therewith shall be paid in full within such period of grace). The Security
Deposit shall be held in a separate federally insured interest-bearing money
market account or certificate of deposit, and the interest earned thereon shall
be paid to Tenant annually. If all or any part of the Security Deposit is
applied to an obligation of Tenant hereunder, Tenant shall immediately upon
request by Landlord restore the Security Deposit to its original amount (as the
same may have been reduced as provided under this Lease). Landlord shall provide
Tenant with written notice prior to the application of any part of the Security
Deposit to any obligation of Tenant hereunder. Provided that Landlord gives
Tenant notice of the name of such grantee or transferee, upon any assignment by
Landlord of its interest under this Lease, conditionally or otherwise, the
Security Deposit may be delivered by Landlord to Landlord's grantee or
transferee (including Landlord's mortgagee), but only if required by such
grantee or transferee. Provided that the entire Security Deposit is delivered to
Landlord's grantee or transferee, and Tenant receives written confirmation of
receipt of the Security Deposit by such Landlord's grantee or transferee, Tenant
hereby releases Landlord herein named of any and all liability with respect to
the Security Deposit, its application and return, and Tenant agrees to look
solely to such grantee or transferee named in said notice to Tenant. It is
further understood that this provision shall also apply to subsequent grantees
and transferees. The provisions relating to Landlord's right to apply the
Security Deposit (as long as the same is held by the Escrow Agent) are set forth
in a separate agreement of even date by and among Landlord, Tenant and the
Escrow Agent. Provided Tenant is not then in default continuing beyond
applicable notice, grace and cure periods (and all such defaults shall be fully
corrected or cured, as may be applicable, within the applicable period of grace
and all interest and other costs, if any, due to landlord in connection
therewith shall be paid in full within such period of grace) and has delivered
possession of the Premises to Landlord in the Yield-Up Condition (as defined in
Section 5.1.10 of this Lease), the Security Deposit (to the extent not applied
as provided hereunder) shall be repaid to Tenant at the expiration of the Term
(as the same has been extended) or the earlier expiration of this Lease within
ten (10) days of such expiration date.
9.12 PARTIES RESPONSIBLE FOR COSTS OF OWN OBLIGATIONS. Except where
specifically provided herein to the contrary, each party shall bear all costs
and expenses of performing its obligations under this Lease.
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ARTICLE X
OPTION TO PURCHASE; EXPANSION OPTION; FIRST OPPORTUNITY; RIGHT OF FIRST REFUSAL
10.1 TENANT'S PURCHASE OPTION. Tenant shall have the right and option (the
"Purchase Option"), exercisable only after the occurrence of the Term
Commencement Date and prior to the third anniversary of the Term Commencement
Date (the "Option Period") to purchase (a) the Premises (including the Expansion
Lot if Tenant's Option to Expand shall have been exercised) or (b) if Tenant's
Option to Expand shall not have been exercised, the Premises and, subject to
clause (d) below, the Expansion Lot (in either event, the "Property") from
Landlord for the purchase price and upon the terms and conditions hereinafter
set forth provided that each of the following conditions precedent shall first
have been satisfied, any one or more of which may be waived in writing by
Landlord in its sole discretion:
(a) Tenant shall have given Landlord notice (the "Purchase Option
Notice") of Tenant's exercise of such Purchase Option within the Option Period
designating a closing date no earlier than fifteen (15) business days and no
later than ninety (90) business days (and if the Purchase Option is exercised
after December 1, 2000, no later than forty-five (45) business days) following
the date on which Tenant gives Landlord the Purchase Option Notice;
(b) Both at the time of the giving of the Purchase Option Notice and at
all times after the giving of the Purchase Option Notice, up to and including
the date of closing of the purchase of the property, Tenant is not then in
default continuing beyond applicable notice, grace, and cure periods (and all
such defaults shall be fully corrected or cured, as may be applicable, within
the applicable period of grace and all interest and other costs, if any, due to
landlord in connection therewith shall be paid in full within such period of
grace);
(c) The Purchase Option Notice shall be accompanied by payment of a
deposit in an amount equal to ten percent (10%) of the Purchase Price (as
hereinafter defined) (the "Deposit") made payable to Escrow Agent; and
(d) If the Purchase Option Notice is given subsequent to December 1,
2000, Landlord shall have the election to exclude the Expansion Lot if Tenant
has not elected to purchase following Landlord's Disposition Notice (as defined
below) the Premises and the Expansion Lot in accordance with the last paragraph
of this Section 10.1.
The purchase price for the Property shall be the sum of (a) the product of
the Final Building Area and One Hundred Forty-One and 75/100 Dollars ($141.75),
(the "Initial Building Amount"), (b) the Lot Value (as defined in Section 10.2)
unless Landlord elects to exclude the Expansion Lot under clause (d) and (c) one
hundred fifteen percent (115%) of the Total Expansion Costs (as defined in
Section 10.2.1) if the Tenant has exercised its Option to Expand in accordance
with Section 10.2.2 and the Expansion Building is
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completed (the "Purchase Price"); if the Expansion Building has not been
completed, there shall be a holdback in an amount equal to 110% of the amount
estimated by Landlord's architect as necessary for final completion of any
portion of Landlord's Initial Building Work not then completed (which
percentage, upon substantial completion of the Initial Building, shall be
increased to 150% of the cost to complete punchlist items, or such higher amount
as may be required under Landlord's construction contract). The Purchase Price,
as adjusted by other applicable prorations, shall, at Landlord's election, be
paid by certified check or by wire transfer of good federal funds to an account
designated by Landlord. At closing, Landlord shall convey all of its right,
title and interest in the Property to Tenant by a duly executed and acknowledged
Massachusetts form Quitclaim Deed, subject only to the Title Exceptions and such
other claims, encumbrances, restrictions, easements and other defects in title
as may have been created or approved by Tenant, but free and clear of all
mortgages, liens, easements, claims, restrictions, encumbrances and defects in
title created by the Landlord.
If Tenant exercises the Purchase Option, Tenant shall have a period of
thirty (30) days after the giving of a Purchase Option Notice (the "Title
Approval Period") within which to examine and either approve or disapprove title
to the Property, except that Tenant does hereby approve the Title Exceptions and
the Cross Easements (with any changes therein requiring Tenant's approval as
previously approved in writing by Tenant) (the Title Exceptions, the Cross
Easements with changes as aforesaid, and any other matters of title which are
approved by, or not objected to by, Tenant within the Title Approval Period are
hereinafter collectively called the "Property Permitted Title Exceptions"). If,
within the Title Approval Period, Tenant objects to any title defects, Tenant
shall give Landlord written notice thereof and Landlord shall have fifteen (15)
days after receipt of such notice within which to elect to cure any such new
title objections. Failure to give such notice shall constitute approval by
Tenant of all matters of title existing as of the end of the Title Approval
Period. Landlord will, at closing of the sale of the Property, discharge, or
make customary arrangements for the discharge after closing, of any mortgage
placed on the Property by Landlord and will bond off or discharge any lien
securing a liquidated amount filed against the Property after acquisition
thereof by Tenant as a result of the action of Landlord or the fault of
Landlord. Landlord will also expend up to $100,000.00 in the aggregate to cure
any title defect which first arises after the date of the Purchase Option
Notice. Except as expressly provided herein, Landlord will have no obligation to
cure or expend any money to cure any other title defects to which Tenant may
object. If Landlord does not elect to cure any title defect which it is not
otherwise obligated to cure hereunder, or, after electing to cure the same, is
unable to do so, Tenant shall have the right, exercisable within ten (10) days
after receipt of notice by Landlord of such election, either to proceed with the
closing contemplated by the Purchase Option without adjustment or reduction in
the purchase price on account thereof, or not to proceed with the closing. If
Tenant elects to proceed with the closing, Tenant shall accept the Property in
"as is" condition as of the date of such election. Taxes will be prorated in
accordance with normal custom and Landlord will be responsible for all
Massachusetts deed stamp taxes and transfer taxes applicable on the date of this
Lease. At closing, the Premises shall be conveyed to Tenant in "as is" condition
as of the date of
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Tenant's election to proceed with the closing, and Tenant shall release Landlord
from all loss, cost, damages, fines, penalties, liabilities and other claims
(collectively, the "Claims") arising out of, or related to, the discharge,
existence or release of hazardous substances onto, under or from the Property
that is caused by Tenant or those claiming by, through or under Tenant which
exist as of the date of the Purchase Option Notice, whether known or unknown.
From and after December 1, 2000 (if Tenant has not theretofore exercised
the Purchase Option), Landlord may notify Tenant of the terms on which Landlord
intends either to market the Expansion Lot for sale or to develop and lease the
building(s) to be constructed on the Expansion Lot (the "Landlord's Disposition
Notice"). Landlord shall include with the Landlord's Disposition Notice the
price and other material terms on which Landlord intends to sell the Expansion
Lot or, alternatively, anticipated rent from the development on the Expansion
Lot which Landlord intends to construct and lease on the Expansion Lot (the
"Landlord's Disposition Terms"). If Tenant then desires to acquire or lease the
Expansion Lot, Tenant shall give Landlord notice of Tenant's interest (the
"Tenant's Interest Notice") within ten (10) days of Tenant's receipt of
Landlord's Disposition Notice. Provided Tenant timely gives Tenant's Interest
Notice to Landlord, Landlord and Tenant agree to negotiate terms on which Tenant
might then acquire or lease the Expansion Lot, in good faith, for a period of
twenty (20) days following delivery of Tenant's Interest Notice (the
"Disposition Period"). If, within the Disposition Period, Landlord and Tenant
are unable to reach agreement for the sale or lease of the Expansion Lot to
Tenant (in connection with Tenant's purchase of the Premises), Tenant may,
within five (5) days following the expiration of the Disposition Period, elect
to exercise the Purchase Option by giving Landlord the Purchase Option Notice in
which event the foregoing provisions of this Section 10.1 shall be applicable
thereto; such election shall be Tenant's sole right in the event Landlord and
Tenant do not conclude an agreement for the sale or lease of the Expansion Lot
to Tenant during the Disposition Period. If Tenant does not give the Purchase
Option Notice to Landlord within such five (5) day period or Tenant does not
give the Tenant's Interest Notice within such ten (10) day period, Landlord may
at any time thereafter sell the Expansion Lot or consummate a lease thereof free
of the Purchase Option provided, however, in the case of a sale of the Expansion
Lot, the price paid therefor shall not be less than ninety-five percent (95%) of
the price contained in Landlord's Disposition Notice. In the event the Landlord
does not consummate such sale on such terms and desires to sell the property at
a price which is less than any percent of the price contained in Landlord's
Disposition Notice prior to the expiration of the period in which the Purchase
Option may be exercised, Tenant shall give Landlord a new Landlord's Disposition
Notice and the procedure set forth above shall be applicable to the terms
proposed in such new Landlord's Disposition Notice. The failure of Tenant to
give the Tenant's Interest Notice or the Purchase Option Notice shall not affect
Tenant's right to exercise the Purchase Option prior to the third anniversary of
the Term Commencement Date in respect of the Initial Lot and the Initial
Building.
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10.2 TENANT'S OPTION TO EXPAND
10.2.1 Definitions:
"Base Constant" shall mean the annual constant percentage required,
assuming an interest rate equal to the sum of the Treasury Yield and the Yield
Spread, to fully amortize a principal amount based on a level monthly payment of
principal and interest over a twenty-five (25) year period.
"Expansion" shall mean the Expansion Lot, Expansion Building and any
activities or construction required to connect or integrate with the Initial
Building Lot and Initial Building.
"Expansion Building Annual Fixed Rental Rate" shall mean the greater of
(a) the product of Twelve Dollars ($12.00) and the Final Building Area of the
Expansion Building and (b) the amount obtained by multiplying the Rent
Percentage Factor (as hereinafter defined) by the Total Expansion Costs.
"Expansion Building Rent Increment" shall mean the Expansion Building
Annual Fixed Rental Rate PLUS, for the balance of the Original Term during which
Portion Rent Rate adjustments subsequently occur (as provided in Section 2.4,
above), at the time of each adjustment under Section 2.4 there will be an
increase in the Expansion Building Annual Fixed Rental Rate, computed as
follows: as to each adjustment, the product of the Final Building Area
determined for the Expansion Building and the dollar amount of the increase in
the per square foot rent from the immediately prior adjustment in the Portion
Rent Rate to the current adjustment in the Portion Rent Rate. Such adjustments
shall be cumulative so that, as each adjustment occurs, the increase to the
Expansion Building Annual Fixed Rental Rate shall be in addition to all previous
increases. For example, if the adjustment is from the Third Portion Rent Rate to
the Fourth Portion Rent Rate, the product of the increase of $0.75 ($14.97 -
$14.22) and the Final Building Area determined for the Expansion Building would
be added to Expansion Building Annual Fixed Rental Rate and all prior
adjustments on account of increases in Portion Rent Rates following the
Expansion Building Delivery Date.
"Lot Value" shall mean Two Million Three Hundred Twelve Thousand
Dollars ($2,312,000.00).
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"Rent Percentage Factor" shall mean the product of the Base Constant and
the Yield (expressed as a percent). By way of illustration, but not limitation,
the Rent Percentage Factor would be calculated as follows were certain
assumptions applicable:
Given:Yield = 120%
Yield Spread = 2%
Assume: Treasury Yield = 6%
Illustrative Computation:
Treasury Yield + Yield Spread = interest rate to be used in determining
Base Constant
Treasury Yield [6%] + Yield Spread [2%] = 8%
Base Constant = 9.27 [constant necessary to amortize 8% loan over 25 years]
Base Constant X Yield = Rent Percentage Factor
Base Constant [.0927 (expressed as %) X Yield [120%] = Rent Percentage
Factor [11.124%]
"Total Expansion Costs" shall mean all hard and soft costs and expenses
reflected in a budget for the Expansion Building (based on the Expansion
Building Plans and Specifications) approved in advance by Tenant and incurred or
paid by Landlord (or any affiliate of Landlord) in connection with the planning,
design, development, engineering, permitting and construction of the Expansion
and all appurtenant on site and off-site improvements related thereto, excluding
all work previously performed by Landlord on or at the Expansion Lot in
connection with the Initial Building Work, and all costs incurred therefor, but
including the Lot Value and, without limitation, the following: (i) all earth
work, site work, grading, paving, curbing, driveways, walkways, parking areas,
landscaping and site improvement work related to the Expansion; (ii) all
architectural, consulting, space planning, permitting and engineering costs,
attributable to the Expansion (including, without limitation, inspection
service, engineering, and legal costs, outside construction consultants costs
and linkage and mitigation payments); (iii) the cost of construction materials,
labor and permits related to the construction of the Expansion and the cost of
all bonds related thereto; (v) all title insurance premiums, survey costs, sewer
extension costs, engineering fees and the like related to the Expansion; (iv)
all costs of extending utilities to the Expansion and all costs of all drainage
systems for the Expansion; (v) all costs and expenses incurred in connection
with obtaining of construction and permanent financing for the Expansion
including, without limitation, appraisal fees, commitment fees, points,
extension fees, mortgage brokerage fees, fees for interest rate protection
agreements required by lenders and the like; (vi) all costs and expenses
incurred in connection with obtaining all insurance, bonds and permit fees and
services related to
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the development and construction of the Expansion and improvements and utilities
related thereto; (vii) all reasonable attorneys' fees, including both the
Landlord's and any lender's attorneys' fees relating to: closing of construction
and permanent loans, permits and approvals, negotiation of architectural and
construction contracts and the like in connection with the Expansion or in
defense of any claims relating to the Expansion except those arising out of
Landlord's Negligence; (viii) all interest which accrues or is paid under any
construction loan for (or allocable to) the Expansion through the Expansion
Building Delivery Date; (ix) all real estate taxes and other reasonable carrying
charges allocable to the Expansion from the date of acquisition of the Expansion
by Landlord or any affiliate thereof through the commencement date of the
Expansion (to the extent not paid by Tenant); (x) the cost of refund to Tenant
of Expansion Lot Taxes; (xi) a lease commission related to the Expansion to
Lynch, Murphy and Walsh at their standard schedule, but no greater than $5.00
per square foot of leasable area; (xii) a developer's fee of three percent (3%)
of hard construction costs included in the ; (xiii) the cost to purchase an
interest rate cap consistent with the Base Constant for a term loan for the
Expansion Building; and (xiv) other reasonable costs and expenses incurred or
paid by Landlord related to the development, permitting or construction of the
Expansion; except for purposes of computing Total Expansion Costs, Landlord's
contractor's overhead and profit shall not exceed six and one-half percent
(6.5%) percent of those hard construction costs included in the "Cost of Work"
as defined in American Institute of Architects Document A111 (1987 Edition).
Tenant shall have access to the books and records of Landlord to confirm the
accuracy of the details supporting Change Orders.
Change Orders and Tenant Delays in respect of the Expansion Building shall
be administered and paid in the manner provided in Section 3.4 of this Lease in
respect of the Initial Building.
"Treasury Yield" shall mean the annual rate of interest on U.S. Treasury
Bills with a ten (10) year maturity determined on an averaged basis for the
ninety (90) day period prior to the date on which Tenant gives the Expansion
Option Notice.
"Yield" shall mean one hundred twenty percent (120%).
"Yield Spread" shall mean two percent (2%).
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10.2.2 EXERCISE OF TENANT'S OPTION TO EXPAND. Provided this Lease
has not been terminated, Tenant shall have the right and option (the "Tenant's
Option to Expand") which said right shall be exercisable only by notice given to
Landlord on or prior to December 1, 2000 to lease the Expansion for the balance
of the Term rent and upon the terms and conditions hereinafter set forth
provided that each of the following conditions precedent shall first have been
satisfied (all of which conditions are solely for the benefit of Landlord), any
one or more of which may be waived in writing by Landlord:
(a) Tenant shall give Landlord notice (the "Expansion Option
Notice") of Tenant's exercise of such Option to Expand on or before December 1,
2000;
(b) At the time of giving the Expansion Option Notice and at all
times after the Expansion Option Notice up to and including the Expansion
Building Delivery Date, there shall exist no default beyond applicable notice,
grace and cure periods on the part of Tenant under this Lease (and all such
defaults shall be fully corrected or cured, as may be applicable, within the
applicable period of grace and all interest and other costs, if any, due to
landlord in connection therewith shall be paid in full within such period of
grace).
(c) At the time of giving the Expansion Option Notice and at all
times thereafter through the Expansion Building Delivery Date, Tenant shall not
have assigned or transferred any rights under this Lease, except to an assignee,
transferee or sublessee consented to by Landlord under Section 5.2.1 of this
Lease, or permitted without Landlord's consent under said Section 5.2.1.
(d) The Security Deposit shall be increased by the Additional
Security Deposit Amount.
The Additional Security Deposit shall be payable as follows: fifty percent
(50%) thereof shall be due and payable upon Tenant's exercise of Tenant's Option
to Expand, and the balance shall be due and payable thereafter on the
commencement of construction activities on the Expansion Building Lot. The
Additional Security Deposit shall be subject to reduction in the proportions
applicable to the original Security Deposit and on the same terms and
conditions; provided, however, that the first reduction shall occur on the third
anniversary of the Expansion Building Delivery Date, and the subsequent
reduction shall occur on the ninth anniversary of the Expansion Building
Delivery Date, subject, in all cases, to the provisions of the immediately
following paragraph of this Section 10.2.2.
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<PAGE> 61
Notwithstanding any other provision herein contained, the aggregate amount
held as a Security Deposit under this Lease upon Tenant's exercise of Tenant's
Option to Expand shall not be less than One Million Dollars ($1,000,000) nor
more than the amount required to be maintained hereunder. If Tenant's net worth
does not exceed Forty-Five Million Dollars ($45,000,000) and the value of
Tenant's current assets does not exceed Ten Million Dollars ($10,000,000) (as
the terms "net worth" and "value of current assets" are defined and determined
in accordance with generally accepted accounting principles), the aggregate
amount of Tenant's Security Deposit shall not be more than One Million Five
Hundred Thousand Dollars ($1,500,000). If either Landlord or Tenant elects to
execute a Separate Lease for the Expansion Building under Section 10.2.3 below,
Landlord shall be entitled to determine the portion of the Security Deposit
allocable to the Expansion Building and the portion of the Security Deposit (as
to both the remaining balance of the original Security Deposit and the
Additional Security Deposit) to be allocable to Tenant's obligations under this
Lease following the execution and delivery of the Separate Lease for the
Expansion Building. Upon the reasonable request of Landlord or Landlord's
mortgagee, Tenant agrees to acknowledge the amount of each portion of the
Security Deposit allocated by Landlord to the Initial Building and Initial Lot
and to the Expansion Building and Expansion Lot.
Reference is made to Section 3.12 of this Lease for other provisions
applicable to Tenant's Option to Expand.
If Tenant shall fail to properly exercise the Option to Expand on or prior
to December 1, 2000, in accordance with the terms to the Lease of this Section
10.2.2, time being of the essence, the Option to Expand and all the terms and
provisions of this Section 10.2 shall be void and of no further force or effect.
For the Original Term of this Lease, from and after the Expansion Building
Delivery Date, the Annual Fixed Rental Rate shall be increased by the Expansion
Building Rent Increment as determined in Section 10.2.1, above.
10.2.3 ELECTION TO EXECUTE A SEPARATE LEASE. In the event Tenant
exercises the Option to Expand, Landlord or Tenant shall have the election to
require the other to execute and deliver a separate lease with Landlord for the
Expansion Building and the Expansion Lot (the "Separate Lease"). The Separate
Lease shall be on the same terms and conditions as are set forth in this Lease,
including the provisions for the preparation of plans and specifications for the
Expansion, Tenant's responsibility for Tenant's Improvements and the like, all
in a manner consistent with Section 3.12 of this Lease, except that the Term of
the Lease, including the renewal terms, shall be coterminous with those set
forth in this Lease and Annual Fixed Rental Rate shall be equal to the Expansion
Building Rent Increment. Landlord and Tenant shall proceed in good faith,
promptly after Landlord or Tenant elects to require Tenant to execute and
deliver the Separate Lease to complete the negotiation and execution and
delivery of the Separate Lease.
-56-
<PAGE> 62
10.3 TENANT'S RIGHT OF FIRST OPPORTUNITY TO PURCHASE. If Tenant does not
exercise its Purchase Option or otherwise elects to purchase the Initial
Building, Initial Lot and Expansion Building in accordance with Section 3.12,
then Landlord will not during the Term of this Lease as it may be extended in
accordance with Section 2.2 (the "First Opportunity Period") sell the Premises
to a third party without first complying with the following (the "First
Opportunity Rights"):
(a) Landlord will not sell the Premises to a third party unless it first
gives Tenant written notice of its intention to sell or attempt to sell (other
than the solicitation of offers) the Premises and setting forth terms and
conditions upon which it would be willing to sell (a "Sale Offer") the Premises
to Tenant; and
(b) Tenant will have thirty (30) days after receipt of a Sale Offer
within which to accept any such Sale Offer. Failure of Tenant to accept any such
Sale Offer within such thirty (30) day period shall constitute and be deemed a
rejection of such Sale Offer . If Tenant accepts such Sale Offer within such
thirty (30) day period, then Landlord and Tenant shall in good faith attempt to
enter into a final purchase agreement within thirty (30) days after Tenant's
acceptance of the Sale Offer. If Tenant does not accept such Sale Offer within
such thirty (30) day period, or, if after accepting any such Sale Offer within
such thirty (30) day period, Tenant fails to enter into a final purchase
agreement within the following thirty (30) day period in form and substance
satisfactory to all parties, then Landlord shall be free to sell the Premises at
a price which is not less than ninety-five percent (95%) of the purchase price
offered to Tenant in the Sale Offer. Landlord may not sell the Premises to any
party for less than 95% of the price offered to Tenant in the Sale Offer or on
other terms and conditions substantially more beneficial to buyer than those
offered to Tenant in the Sale Offer, without re-offering the Premises to Tenant
at such reduced price and/or better terms, as applicable, by written notice (the
"Reduced Offer"), whereupon Tenant shall have thirty (30) days to accept the
Reduced Offer. If Tenant shall fail within such thirty (30) day period to accept
the Reduced Offer or if Tenant shall accept the Reduced Offer but shall fail to
complete such purchase pursuant to such terms and provisions after it shall have
accepted the Reduced Offer, Landlord shall be free to sell the Premises to any
other party in the same manner as aforesaid.
-57-
<PAGE> 63
10.4 TENANT'S RIGHT OF FIRST REFUSAL. If, prior to the expiration of the
Option Period (as defined in Section 10.1 of this Lease), Landlord shall receive
an offer to purchase the Premises and Landlord desires to accept such offer (the
"Landlord's Offer"), Landlord shall give written notice of the terms of
Landlord's Offer and Landlord's desire to accept Landlord's Offer to Tenant (the
"Landlord's Offer Notice"). If Tenant desires to acquire the Premises on the
terms and conditions in Landlord's Offer Notice, Tenant shall give Landlord
notice thereof (the "Tenant's Acceptance Notice") within thirty (30) days of the
date on which Landlord gives Tenant Landlord's Offer Notice and Landlord and
Tenant shall promptly enter into a purchase and sale agreement in accordance
with the terms and conditions of Landlord's Offer Notice; if Tenant does not
give Tenant's Acceptance Notice to Landlord within such thirty (30) day period,
Landlord shall be entitled to accept Landlord's Offer and consummate the sale of
the Premises free of Tenant's rights under this Section 10.4.
10.5 LANDLORD'S RIGHT OF FIRST OPPORTUNITY. If Tenant acquires the
Premises in the exercise of the foregoing rights and Landlord or any affiliate
(i.e., any partnership, limited liability company or other entity, either as
holder of record title or beneficiary thereof, in which National Development
Associates of New England Limited Partnership is the managing general partner or
manager or in which a partnership, limited liability company or other entity of
which National Development Associates of New England Limited Partnership is the
managing general partner or manager has an interest) of Landlord continues to
own land in Metro North Corporate Center, for so long as Landlord or any
affiliate of Landlord continues to own any such land, Landlord shall have a
right of first opportunity to purchase the Premises if Tenant shall determine to
sell the Premises subject to the same terms and conditions as shall be
applicable to Tenant's Right of First Opportunity to Purchase under Section 10.3
of this Lease. The provisions of this Section 10.5 shall continue to run to and
be for the benefit of Landlord as specifically named in this Lease
notwithstanding the assignment of this Lease to the party named in Landlord's
Offer Notice.
10.6 FURTHER RIGHTS OF MORTGAGEES. Tenant acknowledges and agrees that
Tenant's Purchase Option (contained in Section 10.1 of this Lease), Tenant's
Option to Expand (contained in Section 10.2 of this Lease) Tenant's Right of
First Opportunity to Purchase (contained in Section 10.3), and Tenant's Right of
First Refusal (contained in Section 10.4) shall be subject to and subordinate to
the right of any holder of a mortgage on the Lot, but only to the extent such
holder provides Tenant with non-disturbance protections in accordance with
Section 8.2.
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<PAGE> 64
WITNESS the execution hereof under seal as of the day and year first above
written.
Tenant:
ARQULE, INC.
By: /s/ James R. Fitzgerald, Jr.
----------------------------------------
Its Treasurer
Landlord:
METRO NORTH CORPORATE CENTER LLC
By: NDNE Realty, Inc.
By: /s/ Thomas M. Alperin
----------------------------------------
Its President hereunto duly authorized
-59-
<PAGE> 1
EXHIBIT 11
ARQULE, INC.
STATEMENT REGARDING COMPUTATION OF UNAUDITED NET (LOSS) INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) $ (3,283) $ 303 $ (3,850) $ (427)
======== ======= ======== ========
Weighted average shares outstanding:
Common stock 12,112 11,850 11,999 10,767
Weighted average common shares outstanding 12,112 11,850 11,999 10,767
======== ======= ======== ========
Basic net (loss) income per share $ (0.27) $ 0.03 $ (0.32) $ (0.04)
======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) $ (3,283) $ 303 $ (3,850) $ (427)
======== ======= ======== ========
Weighted average shares outstanding:
Common stock 12,112 11,850 11,999 10,767
Common stock equivalents -- 1,061 -- --
Weighted average common shares and equivalents
outstanding 12,112 12,911 11,999 10,767
======== ======= ======== ========
Diluted net (loss) income per share $ (0.27) $ 0.02 $ (0.32) $ (0.04)
======== ======= ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 4,392
<SECURITIES> 32,661
<RECEIVABLES> 4,818
<ALLOWANCES> 0
<INVENTORY> 1,028
<CURRENT-ASSETS> 43,737
<PP&E> 23,696
<DEPRECIATION> 7,739
<TOTAL-ASSETS> 61,524
<CURRENT-LIABILITIES> 4,519
<BONDS> 0
0
0
<COMMON> 121
<OTHER-SE> 56,493
<TOTAL-LIABILITY-AND-EQUITY> 61,524
<SALES> 16,283
<TOTAL-REVENUES> 16,283
<CGS> 9,893
<TOTAL-COSTS> 21,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,744
<INCOME-PRETAX> (3,850)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,850)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,850)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
