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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-22879
BIORELIANCE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 52-1541583
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9900 BLACKWELL ROAD
ROCKVILLE, MARYLAND 20850
(Address of principal office) (zip code)
(Registrant's Telephone Number, Including Area Code): (301) 738-1000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 PAR VALUE
(Title of class)
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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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
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The aggregate market value of the voting stock held by nonaffiliates of
the registrant (based on the closing price of such stock as reported on
February 27, 1998 on the Nasdaq National Market was approximately
$91,715,949. There were 7,760,027 shares of common stock, $0.01 par value
per share, outstanding as of February 27, 1998.
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DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement, which is
expected to be filed with the Securities and Exchange Commission within 120
days after the end of the registrant's fiscal year, are incorporated by
reference into Part III, Items 10, 11, 12 and 13 of this report.
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TABLE OF CONTENTS
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ITEM PAGE
PART I
Item 1. Business....................................................................... 4
Item 2. Properties..................................................................... 17
Item 3. Legal Proceedings.............................................................. 18
Item 4. Submission of Matters to a Vote of Security Holders............................ 18
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters..................................................................... 20
Item 6. Selected Financial Data........................................................ 21
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 23
Item 8. Financial Statements and Supplementary Data.................................... 29
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................................... 29
PART III
Item 10. Directors and Executive Officers of the Registrant............................ 29
Item 11. Executive Compensation......................................................... 29
Item 12. Security Ownership of Certain Beneficial Owners and Management................. 29
Item 13. Certain Relationships and Related Transactions................................. 30
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............... 30
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FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. For this purpose, any statements contained herein that are not
statements of historical fact, including without limitation, certain
statements under "Item 1. Business" and "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations" and located
elsewhere herein regarding industry prospects and the Corporation's results
of operations or financial position, may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," and similar expressions are intended to
identify forward-looking statements. The important factors discussed below
under the caption "Business -- Risk Factors," among others, could cause
actual results to differ materially from those indicated by forward-looking
statements made herein and presented elsewhere by management from time to
time. Such forward-looking statements represent management's current
expectations and are inherently uncertain. Investors are warned that actual
results may differ from management's expectations.
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PART I
ITEM 1. BUSINESS
OVERVIEW
BioReliance Corporation ("BioReliance" or the "Corporation") is a
leading contract research organization ("CRO") providing nonclinical testing
and contract manufacturing services for biologics to biotechnology and
pharmaceutical companies worldwide. The Corporation provides two types of
contract services, BioTesting Services and BioManufacturing Services, each of
which spans the product cycle from early preclinical development through
licensed production. The Corporation's biotesting services include: (i)
BioSafety Testing, for assessing cell banks used to manufacture biologics,
validating purification processes for clearance of adventitious agents such
as viruses, and testing in-process and final products; (ii) Analytical
Services, for assessing the structure and stability of biologics; and (iii)
preclinical BioTrials, for conducting both in vitro ("test tube") and
short-term in vivo ("animal") studies. The Corporation's biomanufacturing
services include viral production and microbial production.
CRO INDUSTRY OVERVIEW
The CRO industry provides outsourced product development and licensed
product support services on a contract basis to pharmaceutical and
biotechnology companies. The CRO industry has evolved from providing
primarily preclinical services in the 1970s to a full service industry today
consisting of several hundred small, limited-service providers and a handful
of larger companies in four broad service sectors. These sectors are (i)
nonclinical laboratory testing focused on product characterization and
identification of potential contaminants; (ii) contract manufacturing for
clinical trials and commercial purposes; (iii) animal-based chronic
toxicology studies; and (iv) human clinical trials management. BioReliance
provides services in the first two of these categories, primarily for
biologics.
BIOLOGICS DEVELOPMENT PROCESS
Under the regulatory system of the United States, the product cycle for
new pharmaceuticals can be divided into three distinct stages: preclinical
development, clinical development and licensed product. The preclinical
development stage involves the discovery, characterization, product
formulation and biological trials necessary to prepare an Investigational New
Drug ("IND") exemption application for submission to the FDA. The IND must be
acceptable to the FDA before either a biologic or chemical drug can be tested
in humans. The second, or clinical stage of development follows a successful
IND submission and involves the activities necessary to demonstrate the
safety, tolerability, efficacy and dosage of the active substance in humans,
as well as the ability to manufacture the substance in accordance with the
FDA's Good Manufacturing Practices ("GMP") regulations. For biologics, data
from these activities are compiled in a Product License Application or, if a
specified biologic, in a Biologic License Application, and submitted to the
Center for Biologics Evaluation and Research (CBER) of the FDA requesting
approval to market the product. The third stage, or licensed product
(approved product) stage, follows FDA approval of the Product License
Application or Biologics License Application, and involves the manufacture,
distribution and clinical monitoring of the product. The licensed product
stage, during which the biologic can be marketed as a product, also involves
the development and regulatory approval of product modifications and line
extensions of the original product.
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SERVICES
BioReliance provides two broad types of contract services, BioTesting
Services and BioManufacturing Services, each of which spans the product cycle
from early preclinical development through licensed production. The
Corporation's comprehensive BioTesting Services are organized into three
divisions. These are BioSafety Testing, Analytical Services and preclinical
BioTrials. The Corporation's contract BioManufacturing Services currently
include both viral production and microbial fermentation. The only
significant CRO services not provided by BioReliance are chronic toxicology
studies and human clinical trials management.
Compared to CROs specializing in human clinical trials management,
BioReliance's involvement with clients begins at a much earlier stage of
product development, most often well before any clinical trials are
initiated. In the Corporation's experience, preclinical services lead to
increased business for later stage services, including manufacturing, by
providing an entry at the earliest stage of product development. The
Corporation provides these services to clients at every stage of product
development and manufacture, including in-process and final testing of
licensed biologics.
BIOTESTING SERVICES
BioSafety Testing
BioSafety Testing includes assessments of cell banks used to
manufacture biologics, validation of purification processes for clearance of
adventitious agents such as viruses, and testing of in-process and final
products. The Corporation pioneered biosafety testing during the development
of the first biologics, including Genentech's Activase (R) and Ortho
Pharmaceutical's Orthoclone OKT(R)3, in the early 1980s. The Corporation
believes that it has a major share of the current international market for
these services and intends to continue to increase its market share in this
rapidly expanding field.
Cell Bank Characterization. The starting point for manufacture of a biologic
is a cell bank, consisting of a large number of vials of cryopreserved cells.
Each bank must be free of any detectable biologic contaminants. BioReliance
performs all the FDA-required tests to characterize cell banks with respect
to the presence of biologic agents such as viruses, mycoplasma and bacteria.
The Corporation also confirms the species and identity of cell lines. A
biologic may not proceed to human clinical trials without these tests.
Purification Process Validation. BioReliance conducts validation of client
purification processes to determine the process' capability for clearance
(removal or inactivation) of certain biological agents such as viruses,
mycoplasma and DNA. The client typically conducts a small-scale version of
its purification process at the Corporation's facilities. A biologic product
will not be licensed if these studies are not performed. BioReliance has the
capacity to perform large studies (for example, studies involving multiple
purification steps and simultaneous testing with multiple biological agents),
and the Corporation has dedicated laboratory suites for the performance of
these studies in the United States and the United Kingdom and under
development in Germany.
In-Process and Final Product Testing. The Corporation tests the biologic
during intermediate states of manufacture (i.e., prior to purification) and
as a final purified product. Each production lot must be tested for the
presence of specified biological agents both prior to and after the
purification process. In addition, the Corporation tests the final purified
(and vialed) product, on a lot-by-lot basis to detect the presence of
microbial and other agents. This FDA-required testing currently must be
compliant with Good Laboratory
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Practices ("GLPs"). The Corporation, however, as a leader in ensuring the
quality of biologics, holds itself to the more stringent GMP requirements in
its lot release testing, which are the same requirements that must be met in
manufacturing processes. Tests are performed on each lot of a manufactured
product throughout its clinical development and commercial marketing.
Analytical Services
The Corporation's Analytical Services division was formed in 1995 in
response to clients' expressed needs for development of analytical techniques
to characterize biologics better in anticipation of new FDA regulations and
guidelines published during 1996 that permit the development and
manufacturing processes for well-characterized biologics to be streamlined.
It is an outgrowth of prior biotesting relationships with clients and
regulators.
Product Characterization and Methods Validation. The Corporation's
Analytical Services focus on protein characterization to show that a
molecule's structure meets predefined criteria. Generally, identity, purity,
concentration and molecular weight are important defining parameters. Methods
based on SDS PAGE, isoelectric focusing, N-terminal sequencing, high
performance liquid chromatography (HPLC), peptide mapping, amino acid
analysis, LC-electrospray mass spectrometry (LC-MS), and matrix assisted
laser desorption/ionization time-of-flight (MALDI-TOF) mass spectrometry
routinely are validated for clients in a GMP environment by the Corporation.
Each biologic product presents a unique set of bioanalytical
challenges. The size, shape and internal structure of the molecule determine
the methods employed to fully characterize it in a manner suitable for
regulatory submission. Generally, several different methods are required to
fully characterize a biologic molecule. For a product license submission, it
also is necessary to develop and rigorously validate each analytical method.
Formulation Development, Product Stability and Consistency Testing. The
Corporation's Analytical Services provide the full spectrum of formulation
development, stability testing and consistency testing services to client
companies. Biologics are extremely sensitive to their immediate environment,
and a suitable, stable formulation must be developed so that the product can
be administered in active form to patients. The structural uniqueness of each
product demands its own formulation -- a poor formulation can be responsible
for a reduced therapeutic effect during clinical trials. The formulation also
plays a key role in the stability of the product. Typically, several
candidate formulations are developed and the relative product stability is
compared for each formulation over an extended period of time (usually months
to years) under a variety of conditions (temperature, humidity, etc.). The
product's stability is measured by the same validated bioanalytical
techniques that are used to assess the product's structural integrity on a
lot-by-lot basis. The goal is a formulation in which the product remains
active through final packaging, inventory storage, distribution to clinical
sites and administration to patients. One of the major impacts of a
successful formulation will be to extend the shelf-life of a biologic -- an
extended shelf-life can have a significantly positive economic impact for the
client. Finally, the FDA requires that the product maintain its structural
identity and activity from lot-to-lot, throughout the product's commercial
lifetime.
BioTrials
For over twenty years, BioReliance has provided in vitro and in vivo
testing services to assess the genetic safety of pharmaceutical and chemical
products. With the advent of biotechnology, BioReliance has developed
specialized assays to assess the safety of a variety of biologic products,
from genetically
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engineered proteins to DNA plasmids used in gene therapy clinical trials. The
greatest future growth in the BioTrials division is anticipated to come from
the application of molecular biological techniques to assess chemical
carcinogenicity as described below.
In Vitro Studies. BioReliance conducts a wide array of preclinical
biological trials employing primarily in vitro ("test tube") approaches to
assess toxicological effects of biologics and other substances. These studies
include genetic safety assays for the detection of gene mutations, chromosome
damage, primary DNA damage and cell transformation. The Corporation is well
positioned in providing these services with its experienced scientific staff
and new state-of-the-art laboratory facilities. BioReliance custom designs
testing batteries and protocols to comply with international guidelines
(which are different among the United States, Europe and Japan), and these
are conducted in full compliance with GLPs. An additional in vitro service
provided by the Corporation includes the detection of infectious agents,
primarily viral, in laboratory animals used for research purposes by clients
worldwide.
In Vivo and Molecular Studies. BioReliance currently offers several types of
short-term in vivo ("animal") studies, primarily designed to refine dose
levels during the preclinical stage of product development. Motivating the
development of new in vivo services is a regulatory consensus forming in the
United States not only to reduce the duration and costs of expensive chronic
studies, but also to provide mechanistic data enabling earlier prediction of
the carcinogenic potential of a drug or chemical.
BioReliance is engaged in a contract sponsored by the National
Institute of Environmental Health Sciences (NIEHS) to determine whether tumor
formation can be induced by known carcinogens in certain strains of
transgenic mice. The advantage of such an approach would be to shorten the
"in life" portion of long-term carcinogenicity studies from two years to six
months.
Utilizing its experience in molecular biology, the Corporation believes
that it can determine and measure the initial molecular and cellular events
which culminate in tumor formation, reducing the "in life" portion of the
study further, thereby lowering the per-study cost significantly. BioReliance
expects that combining molecular detection assays with this approach will
provide a compelling economic incentive for product developers to perform
these new molecular carcinogenicity studies. The worldwide annual
expenditure for traditional chronic toxicology studies currently exceeds $1
billion. The Corporation believes that traditional chronic studies will be
at first augmented by, and then replaced with, this molecular approach if it
proves to be successful. Among CROs, BioReliance believes it has the early
technological lead for commercial development of these advanced molecular
assays.
Employing its molecular biology expertise from the emerging gene
therapy sector, the Corporation has developed a unique assay system in which
specialized small animal models are coupled with advanced polymerase chain
reaction (PCR) techniques to detect the presence of therapeutic DNA
distributed in tissues and organs throughout the body. This specialized
biodistribution study is important for gene therapy and other DNA-based
products because the "active ingredient" is a genetic element that may have
serious side effects if delivered to sites outside the target area within the
body. For developers of DNA-based products, these studies now are required by
the FDA prior to the first administration to humans in clinical trials.
BIOMANUFACTURING SERVICES
BioReliance's contract BioManufacturing Services currently include both
viral production and microbial fermentation. The Corporation has been
providing services in viral production since 1993 when it formed MAGENTA
Corporation ("MAGENTA"). The rapid progress of gene therapy products
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into Phase I/II human clinical trials and the emergence of cancer oncolytics
have fueled the significant growth of biomanufacturing revenue for the
Corporation from viral production services from 1993 to 1996. The
Corporation entered into the biomanufacturing of microbial products with its
acquisition of BIOMEVA GmbH, a contract manufacturer of microbial products
located in Heidelberg, Germany ("BIOMEVA") in July 1996. Cell banking and
biorepository services are parts of both manufacturing capabilities.
Cell Banking and Biorepository. A cell bank is a collection of cryopreserved
vials, usually several hundred in number, which is held in a frozen state (at
liquid nitrogen temperatures). Each vial contains genetically altered cells
that are used for production of the biologic product. Typically, each
biologic product will have both a Master Cell Bank ("MCB") and a Working Cell
Bank ("WCB"). As the name implies, the WCB is the bank from which frozen
vials are withdrawn, the cryopreserved cells are thawed, and the live cells
are used to seed a bioreactor vessel for culture and production of the
biologic product. The MCB is the bank from which additional WCBs are
manufactured, if needed. Since the MCB and WCB are parts of the manufacturing
process, they must be created in compliance with GMPs. BioReliance offers
this capability in both the United States and Europe. The long-term storage
of such vials is called a biorepository, which also must be maintained under
strict GMP guidelines.
Production and Production Development. Generally, biologics are manufactured
either by genetically altered mammalian cells (if the molecular structure is
complex) or genetically altered microbial cells (if the molecular structure
is relatively less complex). BioReliance offers mammalian cell culture
services to developers of viral-based products, particularly gene therapies,
viral vaccines and cancer oncolytics. In 1988, the Corporation began
pioneering assays to support the development of gene therapy products. The
Corporation has been involved in testing materials for over 70% of all gene
therapy human clinical trial protocols that have been approved by regulatory
bodies in the United States, Europe and Japan. Building on this early testing
capability, in 1993 the Corporation established an independent contract
manufacturing service for companies and research institutes developing gene
therapies, which it believes was the first of its kind. Formed as a wholly
owned subsidiary, MAGENTA drew upon the Corporation's many years of
experience in viral testing and small scale manufacturing. BioReliance now
has four GMP-compliant viral manufacturing suites in its Rockville, Maryland
headquarters and two additional suites in Stirling, United Kingdom. Combined,
these facilities have manufactured more than 60 lots of human clinical trial
material for gene therapy clinical trials in the United States, Europe and
Japan. The Corporation has specific experience in manufacturing retroviruses,
adenoviruses, adeno-associated viruses and cells as tumor vaccines. The
early-stage nature of these therapies demands that specific production
techniques are developed for each product, much the same as with other
biologic products. MAGENTA offers these production development services as
part of its manufacturing "package" to clients.
At the present time, the most advanced of MAGENTA's clients are engaged
in Phase II clinical trials. However, the Corporation's manufacturing
capacities are at the 100 liter per lot size -- more than sufficient for many
Phase III viral therapy trials. As more gene therapy and other viral products
reach Phase III and the market, and their manufacturing requires scales
beyond 100 liters, the Corporation plans to construct appropriate facilities
according to market demand.
In 1996, the Corporation expanded its biomanufacturing capabilities by
acquiring BIOMEVA, an established contract manufacturing company located in
Heidelberg, Germany. BIOMEVA has been serving clients since 1989 and offers
GMP-compliant contract fermentation services for recombinant and natural
microorganisms, with bioreactor working volumes up to 1,000 liters. The
microbial fermentation capabilities of BIOMEVA allow BioReliance to provide
manufacturing services not only to viral vector
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gene therapy companies (through MAGENTA), but also to gene therapy companies
that are employing "naked" DNA or plasmid DNA as a vector (rather than
viruses). Besides manufacturing, BIOMEVA offers scale-up and development for
production processes and provides bioanalytical testing of proteins and other
biologics.
Purification and Purification Development. Both MAGENTA and BIOMEVA provide
purification services for production clients. Similar to production services,
purification techniques must be developed on a product-by-product basis. At
the present time, MAGENTA is developing GMP-compliant chromatographic-based
techniques for the large-scale purification of viruses. These techniques will
be necessary as emerging gene therapy and other viral products progress to
Phase III clinical trials.
Final Formulation and Filling. For its viral production clients, MAGENTA
offers final formulation and filling services. Filling involves dispensing
the final purified clinical product into individual containers suitable for
shipment to the client for further processing or into formulated, individual
dosage forms suitable for administration to individual patients in a human
clinical trial. For its microbial-based production clients, BIOMEVA does not
currently offer final filling services. The bulk of BIOMEVA's business is for
large-scale production of licensed biologics, and, hence, the filling needs
are quite substantial and would require an automated filling line. It is the
intention of BioReliance to develop large-scale automated filling
capabilities for both its gene therapy and other biologics clients. Such
facilities likely will be located both in the United States and Europe.
CONTRACTUAL ARRANGEMENTS
BioReliance enters into several different types of contractual
relationships with its commercial clients. BioTesting Services contracts can
be quotations, based upon established price lists for individual services, or
work proposals, most often for larger studies composed of a variety of
services. A majority of BioSafety Testing contracts range in length from a
few weeks to several months; however, certain stability testing and lot
release testing contracts may be one to two years in length. BioManufacturing
contracts tend to be relatively longer because of the length of time required
to create and characterize cell banks, perform pilot production runs, and
produce and test the products. These contracts require a formal statement of
work and range in length from six months to over two years. Government
contracts, usually multi-year, are in formats consistent with the particular
granting agency.
Generally, service contracts may be canceled by the client upon
notice, with a partial charge commensurate with the percentage of work
completed at the time of cancellation. Although the contracts tend to be
short in duration and typically include payment of certain fees based upon
project expenditures to date, the loss of a large contract or the loss of
multiple contracts could adversely affect the Corporation's future revenue
and profitability. Contracts may be terminated for a variety of reasons,
including the client's decision to forego a particular study or to cancel a
particular product development program, the failure of a clinical trial, and
unexpected or undesired results of the product testing.
During 1997, approximately 8% of the Corporation's revenue was derived
from contracts with various governmental agencies. Most of these contracts
were for BioTesting Services. The Corporation generally performs services
under cost-plus-fixed-fee contracts, where the government agency reimburses
the Corporation for allowable costs incurred and pays the Corporation a
negotiated fixed fee, up to contract funding amounts.
A federal government contract may be modified or terminated at any time
for the convenience of the government, including for changes in requirements
or reductions in budgetary resources. If a contract
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is modified, the price of the contract would be adjusted equitably. If a
contract is terminated for convenience, the Corporation would be reimbursed
for reasonable costs plus a reasonable profit on work actually performed. In
the event that the contract would have resulted in a loss, the reimbursed
amounts would be adjusted proportionately to reflect the anticipated loss.
State governments with which the Corporation contracts have statutory or
regulatory provisions relating to government contracting that are generally
comparable to those of the federal government.
As a contractor, the Corporation believes that it has complied in all
material respects with applicable government requirements. In certain
circumstances where a contractor has not complied with the terms of a
contract or with regulations or statutes, the contractor may be debarred or
suspended from obtaining future contracts. Any such debarment or suspension
could have a material adverse effect upon the Corporation's business and
results of operations.
Due to the short duration of most of the Corporation's contracts,
BioReliance does not believe that backlog is a meaningful indicator of its
future results.
GOVERNMENT REGULATION
The FDA recently introduced new approaches to the regulation of
biologics that benefit BioReliance and many of its clients. The FDA has
published a list of "specified" biologic products that are eligible for new
guidelines reducing the complexity of the product development and licensing
process. The list of specified products includes most of the biologics now
under development by pharmaceutical and biotechnology companies; namely,
monoclonal antibodies, recombinant DNA (protein) products, synthetic
therapeutic peptides of less than 40 amino acids, and synthetic plasmid
nucleic acid therapeutics. The FDA recognizes that reliable bioanalytical
techniques now are available that enable accurate characterization of these
structurally complex products. Therefore, the FDA will forego some of its
strict adherence to manufacturing process standards for biologics if certain
validated, bioanalytical tests are performed on each lot of final product.
Specified biologics for which bioanalytical techniques have been developed,
validated and accepted by the FDA are termed "well-characterized" products by
the FDA.
The FDA will provide other important benefits and exemptions for
well-characterized products. Biologics developers now will have more
flexibility in engaging independent contract suppliers for each portion of
the manufacturing process, so long as they ensure that each contract
manufacturer employed meets manufacturing compliance requirements. In
addition, the FDA no longer requires an "Establishment License" for a
facility designated for the production of a specified, well-characterized
product. Until recently, the large-scale facility necessary for licensed
production was needed prior to product approval. The new approach enables the
use of a smaller, pilot-scale facility owned by the developer or a contract
manufacturer for the production of clinical trials materials, including those
for pivotal Phase III trials, and of licensed products. BioReliance believes
that developers of biologics will pursue CROs that understand these new
guidelines and can provide the full range of services to support the proper
characterization and documentation for biologics.
The services performed by BioReliance are subject to various regulatory
requirements designed to ensure the quality and integrity of pharmaceutical
products, primarily under the Federal Food, Drug and Cosmetic Act and
associated GLP and GMP regulations which are administered by the FDA in
accordance with current industry standards. These regulations apply to all
phases of drug manufacture, testing and record keeping, including personnel,
facilities, equipment, control of materials, processes and laboratories,
packaging, labeling and distribution. Noncompliance with GLPs or GMPs by the
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Corporation in a project could result in disqualification of data collected
by the Corporation in the project. Material violation of GLP or GMP
requirements could result in additional regulatory sanctions, and in severe
cases could result in a mandated closing of the Corporation's facilities,
which would have a material adverse effect on the Corporation's business and
results of operations.
To help assure compliance with applicable regulations, BioReliance has
established quality assurance units at its facilities that monitor ongoing
compliance by auditing test data and regularly inspecting facilities,
procedures and other GLP and GMP compliance parameters. In addition, FDA
regulations and guidelines serve as a basis for the Corporation's standard
operating procedures. Certain of the Corporation's development and testing
activities are subject to the Controlled Substances Act, administered by the
Drug Enforcement Agency ("DEA"), which regulates strictly all narcotic and
habit-forming substances. The Corporation maintains restricted-access
facilities and heightened control procedures for projects involving such
substances due to the level of security and other controls required by the
DEA. In addition to FDA regulations, the Corporation is subject to other
federal and state regulations concerning such matters as occupational safety
and health and protection of the environment.
BioReliance's activities involve the controlled use of hazardous
materials and chemicals. The Corporation is subject to foreign, federal,
state and local laws and regulations governing the use, storage, handling and
disposal of such materials and certain waste products. The risk of accidental
contamination or injury from these materials cannot be completely eliminated.
In the event of such an accident, the Corporation could be held liable for
any damages that result which could have a material adverse effect on the
Corporation's business and results of operations.
COMPETITION
The CRO industry is highly fragmented, with several hundred producers
ranging in size from one person consulting firms to full-service global drug
development corporations. The Corporation primarily competes with in-house
research departments of biotechnology and pharmaceutical companies,
universities and medical centers, and other CROs, some of which may possess
substantially greater capital, technical and other resources than the
Corporation. The Corporation's primary CRO competitors are different in each
of its service areas. For BioSafety Testing, its primary competitors are
Inveresk Research International Ltd. and Q-One Biotech Ltd.; for Analytical
Services, Tektagen, Inc. and Applied Analytical Industries, Inc.; for
BioTrials, Covance Laboratories, Inc., SRI International, Inc. and Charles
River Laboratories, Inc.; and for BioManufacturing Services, Bio-Intermediair
Europe b.v. and Q-One Biotech Ltd. As a result of competitive pressures, the
CRO industry is consolidating. This trend is likely to produce increased
competition among the larger CROs for both clients and acquisition
candidates. In addition, the CRO industry has attracted the attention of the
investment community, which could lead to heightened competition by
increasing the availability of financial resources for CROs. Increased
competition may lead to price and other forms of competition that may affect
the Corporation's margins. The Corporation believes the principal competitive
factors in its business are scientific and technological expertise,
reputation, regulatory experience, the ability to offer a full range of
biologics development services, international presence and price.
INFORMATION SYSTEMS
Although BioReliance is fundamentally a laboratory science based
business, digital information systems are an important component of the
Corporation's technological leadership. The Corporation believes that
superior information systems are essential to expanding its operations and to
providing
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innovative services to clients, for timely, accurate reporting and to enable
clients to monitor their projects better. The Corporation's customized
laboratory information management system (LIMS) is integral to daily
BioTesting operations, and a new version of the current system is in
development, based on user requirements and facilitated by new digital
technologies. The Corporation relies upon an efficient corporate order
processing system (COPS) for management of client information, beginning with
sales inquiry information and tracking activities throughout the client
service cycle. This is linked to an accounting-based management information
system (MIS) that maintains progress billing and other client account
records. All systems are oriented to the support of timely, accurate study
information and client interactions.
The Corporation is implementing ORACLE applications. The initial
implementation consists of financial modules such as general ledger,
accounts receivable and accounts payable and manufacturing inventory, as well
as order entry, sales and marketing and barcoding technology. Other modules
are scheduled for implementation in the third and fourth quarters of 1998.
The Corporation believes that the ORACLE applications will provide an
efficient business process, enhanced data security and integrity and
integrated data and communications across all of the Corporation's sites and,
importantly, with its customers.
The FDA has become increasingly sophisticated with respect to
information systems and the integrity of all forms of data incorporated into
regulatory submissions. Correspondingly, BioReliance strives to be at the
forefront of nonclinical testing laboratories in validation of hardware and
software systems. The Corporation's continuing commitment to technological
innovations and meeting changing client and regulatory requirements will
drive continuous improvement of its information systems technology,
maintaining a competitive advantage.
INSURANCE
BioReliance maintains product liability and professional errors and
omissions liability insurance, providing $13 million in coverage on a
claims-made basis. In addition, in certain circumstances the Corporation
seeks to manage its liability risk through contractual provisions with
clients requiring the Corporation to be indemnified by the client or covered
by clients' product liability insurance. In addition, in certain types of
engagements, the Corporation seeks to limit contractual liability to its
clients to the amount of fees received by the Corporation. The contractual
arrangements are subject to negotiation with clients and the terms and scope
of such indemnification, liability limitation and insurance coverage vary
from client to client and from project to project. Although many of the
Corporation's clients are large, well-capitalized companies, the financial
performance of their indemnities is not secured. Therefore, BioReliance bears
the risk that the indemnifying party may not have the financial ability to
fulfill its indemnification obligations or that liability would exceed the
amount of applicable insurance. In addition, the Corporation could be held
liable for errors and omissions in connection with the services it performs.
There can be no assurance that the Corporation's insurance coverage will be
adequate or that insurance coverage will continue to be available on terms
acceptable to the Corporation. See "Risk Factors -- Potential Liability."
EMPLOYEES
At December 31, 1997, the Corporation had 414 full-time equivalent
employees. The Corporation believes that its relations with its employees
are good. None of the Corporation's employees is represented by a union.
12
<PAGE> 13
RISK FACTORS
In addition to the other information contained in this report or
incorporated by reference herein, the following factors should be considered
carefully in evaluating the Corporation and its business.
DEPENDENCE ON OUTSOURCING FOR DEVELOPMENT OF BIOLOGICS
The Corporation's revenues are highly dependent on research,
development and manufacturing expenditures by biotechnology and
pharmaceutical companies for the development of biologics. The Corporation
has benefited to date from the growing tendency of biotechnology and
pharmaceutical companies to outsource product development projects to CROs. A
decline in the development of biologics, a general decline in research and
development expenditures by these companies, or a reduction in the
outsourcing to CROs of research and development expenditures due to
pharmaceutical industry consolidation or other factors could have a material
adverse effect on the Corporation's business and results of operations.
DEPENDENCE ON AND EFFECT OF GOVERNMENT REGULATION
The design, development, testing, manufacturing and marketing of
biotechnology and pharmaceutical products are subject to regulation by
governmental authorities, including the FDA and comparable regulatory
authorities in other countries. The Corporation's business depends in part on
strict government regulation of the drug development process, especially in
the United States. Legislation may be introduced and enacted from time to
time to modify regulations administered by the FDA governing the drug
approval process. Any significant reduction in the scope of regulatory
requirements or the introduction of simplified drug approval procedures could
have a material adverse effect on the Corporation's business and results of
operations.
All of the Corporation's testing assays are performed in conformity
with either GLP regulations or current GMP regulations. GLPs and GMPs are
parts of the FDA regulations and guidelines governing the development and
production of biologic and pharmaceutical products. Failure by the
Corporation to comply with applicable requirements could result in the
disqualification of data for client submissions to regulatory authorities and
could have a material adverse effect on the Corporation's business and
results of operations.
All facilities and manufacturing techniques used for manufacturing of
products for clinical use or for sale in the United States must be operated
in conformity with current GMP regulations. The Corporation's facilities are
subject to scheduled periodic regulatory inspections to ensure compliance
with GMP requirements. A finding that the Corporation had materially violated
GMP requirements could result in regulatory sanctions, the disqualification
of data for client submissions to regulatory authorities and a mandated
closing of the Corporation's facilities. Any such sanctions would have a
material adverse effect on the Corporation's business and results of
operations. See "Business -- Government Regulation."
RISKS ASSOCIATED WITH THE NATURE OF CONTRACTS
Most of the Corporation's contracts are short-term in duration. As a
result, the Corporation must continually replace its contracts with new
contracts to sustain its revenue. In addition, many of the Corporation's
long-term contracts may be cancelled or delayed by clients upon notice.
Contracts may be terminated for a variety of reasons, including termination
of product development, failure of products to satisfy safety requirements,
unexpected or undesired results from use of the product or the client's
13
<PAGE> 14
decision to forego a particular study. In addition, the federal government
may modify or terminate its contracts at any time for the convenience of the
government. The failure to obtain new contracts or the cancellation or delay
of existing contracts could have a material adverse effect on the
Corporation's business and results of operations.
MANAGEMENT OF GROWTH
The Corporation has experienced rapid growth over the past five years
in both its domestic and international operations. The Corporation believes
that sustained growth places a strain on operational, human and financial
resources. In order to manage its growth, the Corporation must continue to
improve its operating and administrative systems and to attract and retain
qualified management and professional, scientific and technical operating
personnel. To manage the growth of its operations outside the United States,
the Corporation must assimilate differences in international business
practices and overcome language differences. There can be no assurance that
the Corporation will be able to manage its growth effectively. Failure to
manage growth effectively could have a material adverse effect on the
Corporation's business and results of operations.
DEVELOPMENT OF MANUFACTURING CAPABILITIES
As part of its business strategy, the Corporation intends to expand its
manufacturing capabilities to allow for large-scale production of biologics.
There can be no assurance that the Corporation will be able to develop these
expanded capabilities on acceptable terms, find clients for any new
manufacturing capacity it may develop or operate any expanded manufacturing
capabilities on a profitable basis.
The establishment of additional manufacturing facilities will require
substantial additional funds and personnel and will require compliance with
extensive regulations applicable to such facilities. There can be no
assurance that such funds and personnel will be available on acceptable
terms, if at all, or that the Corporation will be able to comply with such
regulations at acceptable cost, if at all. In addition, in managing this
expansion the Corporation may encounter unforeseen regulatory, logistical or
management problems or incur unexpected operating costs. Failure or delays in
establishing these facilities, failure of market demand for these services to
develop, or the incurrence of unexpected operating costs could have a
material adverse effect on the Corporation's ability to meet its strategic
objective of providing a broad range of product development services and its
business and results of operations.
VARIATION IN QUARTERLY OPERATING RESULTS
The Corporation's results of operations historically have fluctuated on
a quarterly basis and can be expected to continue to be subject to quarterly
fluctuations. Quarterly operating results can fluctuate as a result of a
number of factors, including the commencement, delay, cancellation or
completion of contracts; the mix of services provided; seasonal slowdowns in
Europe during the summer months; the timing of start-up expenses for new
services and facilities; the timing and integration of acquisitions; and
changes in regulations related to biologics. The Corporation believes that
quarterly comparisons of its financial results are not necessarily meaningful
and should not be relied upon as an indication of future performance. In
addition, fluctuations in quarterly results could affect the market price of
the Common Stock in a manner unrelated to the longer term operating
performance of the Corporation.
14
<PAGE> 15
ACQUISITION RISKS
As part of its business strategy, the Corporation continually evaluates
new acquisition opportunities. Acquisitions involve numerous risks, including
difficulties in the assimilation of the operations and products or services
of the acquired companies, the expenses incurred in connection with the
acquisition and subsequent assimilation of operations and products or
services, the diversion of management's attention from other business
concerns, and the potential loss of key employees of the acquired company.
Acquisitions of companies outside the United States also may involve the
additional risks of assimilating differences in international business
practices and overcoming language differences. There can be no assurance that
the Corporation will complete any future acquisitions, nor that acquisitions,
if completed, will contribute favorably to the Corporation's operations and
future financial condition or be integrated successfully.
COMPETITION; INDUSTRY CONSOLIDATION
The CRO industry is highly fragmented, with several hundred providers
ranging in size from one person consulting firms to full-service global drug
development corporations. The Corporation primarily competes with in-house
research departments of biotechnology and pharmaceutical companies,
universities and medical centers, and other CROs, some of which possess
substantially greater capital, technical and other resources than the
Corporation. As a result of competitive pressures, the industry is
consolidating. This trend is likely to produce increased competition among
the larger CROs for both clients and acquisition candidates and increased
competitive pressures on smaller providers. In addition, the CRO industry has
attracted the attention of the investment community, which could lead to
heightened competition by increasing the availability of financial resources
for CROs. Increased competition may lead to price and other forms of
competition that may have a material adverse effect on the Corporation's
business and results of operations. See "Business -- Competition."
CONTROL BY EXISTING STOCKHOLDERS
As of February 27, 1998, Sidney R. Knafel, Chairman of the Board of
Directors of the Corporation, and related persons beneficially own an
aggregate of approximately 41.2% of the outstanding Common Stock (excluding
shares issuable upon the exercise of options). In addition, certain of the
Corporation's executive officers, directors and related persons beneficially
own an aggregate of approximately 43.9% of the outstanding Common Stock
(excluding shares issuable upon the exercise of options). As a result, the
Corporation's directors and executive officers and related persons may
exercise a controlling influence over the outcome of matters submitted to the
Corporation's stockholders for approval and may have the power to delay,
defer or prevent a change in control of the Corporation.
POTENTIAL LIABILITY
The Corporation formulates, tests and manufactures products intended
for use by the public. In addition, the Corporation's services include the
manufacture of biologic products to be tested in human clinical trials. Such
activities could expose the Corporation to risk of liability for personal
injury or death to persons using such products, although the Corporation does
not commercially market or sell the products to end users. The Corporation
seeks to reduce its potential liability through measures such as contractual
indemnification provisions with clients (the scope of which may vary from
client-to-client, and the performances of which are not secured) and
insurance maintained by clients. The Corporation could be materially and
adversely affected if it were required to pay damages or incur defense costs
in connection with a claim that is outside the scope of the indemnification
agreements, if the indemnity,
15
<PAGE> 16
although applicable, is not performed in accordance with its terms or if the
Corporation's liability exceeds the amount of applicable insurance or
indemnity. In addition, the Corporation could be held liable for errors and
omissions in connection with the services it performs. The Corporation
currently maintains product liability and errors and omissions insurance with
respect to these risks. There can be no assurance that the Corporation will
be able to maintain such insurance coverage on terms acceptable to the
Corporation. See "Business -- Insurance."
HAZARDOUS MATERIALS
The Corporation's activities involve the controlled use of etiologic
agents, hazardous chemicals and various radioactive materials. The
Corporation is subject to foreign, federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
such materials and certain waste products. In the event of any contamination
or injury from these materials, the Corporation could be held liable for any
damages that result, including joint and several liability under certain
statutes such as the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), and any such liability could exceed the resources
of the Corporation. Furthermore, the failure to comply with current or future
regulations could result in the imposition of substantial fines against the
Corporation, suspension of production, alteration of its manufacturing
processes or cessation of operations. There can be no assurance that the
Corporation will not be required to incur significant costs to comply with
any such laws and regulations in the future, or that such laws or regulations
or liability thereunder will not have a material adverse effect on the
Corporation's business and results of operations.
The Corporation has been identified by the U.S. Environmental
Protection Agency ("EPA") as one of several hundred potentially responsible
parties ("PRPs") under CERCLA with respect to the Ramp Industries, Inc. site
in Denver, Colorado. See "Legal Proceedings."
DEPENDENCE ON PERSONNEL
The Corporation depends on a number of key executives, including Capers
W. McDonald, its President and Chief Executive Officer. The loss of the
services of any of the Corporation's key executives could have a material
adverse effect on the Corporation's business. The Corporation also depends on
its ability to attract and retain qualified professional, scientific and
technical operating staff. There can be no assurance the Corporation will be
able to continue to attract and retain qualified staff. The Corporation's
inability to attract and retain a qualified operating staff would have a
material adverse effect on the Corporation's business and results of
operations.
EXCHANGE RATE FLUCTUATIONS
The accounts of the Corporation's international subsidiaries are
measured using local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated into United States dollars
at period-end exchange rates, and revenue and expense accounts are translated
at average monthly exchange rates. Net exchange gains and losses resulting
from such translations are excluded from net income and are accumulated in a
separate component of stockholders' equity.
Since the revenue and expenses of the Corporation's international
operations generally are denominated in local currencies, exchange rate
fluctuations between such local currencies and the United States dollar will
subject the Corporation to currency translation risk with respect to the
reported results of its foreign operations as well as to risks sometimes
associated with international operations. The Corporation derived 16% of its
revenue for 1997 from services performed outside of the United States.
16
<PAGE> 17
In addition, the Corporation may be subject to currency risk when the
Corporation's service contracts are denominated in a currency other than the
currency in which the Corporation incurs expenses related to such contracts.
There can be no assurance that the Corporation will not experience
fluctuations in financial results from the Corporation's operations outside
the United States, and there can be no assurance the Corporation will be able
to contractually or otherwise favorably reduce the currency risks associated
with its operations.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price of the Corporation's Common Stock has experienced a
high degree of volatility. The market price of the Common Stock could be
subject to wide fluctuations in response to variations in operating results
from quarter to quarter, changes in earnings estimates by analysts, market
conditions in the industry and general economic conditions. Furthermore, the
stock market has experienced significant price and volume fluctuations
unrelated to the operating performance of particular companies. These market
fluctuations may have an adverse effect on the market price of the
Corporation's Common Stock.
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, BYLAW AND OTHER PROVISIONS
Certain provisions of the Corporation's Amended and Restated
Certificate of Incorporation (the "Certificate") and Bylaws, including the
classification of the Board of Directors into three classes, could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the
Corporation. Such provisions could limit the price that certain investors
might be willing to pay in the future for shares of the Corporation's Common
Stock. Certain of such provisions allow the Corporation to issue preferred
stock with rights senior to those of the Common Stock and impose various
procedural and other requirements which could make it more difficult for
stockholders to effect certain corporate actions. In addition, the
Corporation is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("DGCL"), which restricts certain business
combinations with any "interested stockholder" and may delay, defer or
prevent a change in control of the Corporation.
ITEM 2. PROPERTIES
BioReliance's principal administrative offices are located in
Rockville, Maryland in a 10,000 square foot leased facility. The Corporation
currently leases three laboratory facilities and owns a fourth facility in
Rockville, Maryland, totaling approximately 120,000 square feet of
operational and administrative space. In addition, the Corporation leases
laboratory, manufacturing and administrative facilities of approximately
13,000 square feet in Stirling, United Kingdom, and approximately 14,000
square feet in Heidelberg, Germany. BioReliance maintains sales offices in
Boston, Massachusetts, Chicago, Illinois, and Los Angeles, California; and
European sales offices in Stirling, United Kingdom, and Heidelberg, Germany.
BioReliance completed construction of a biotesting facility near its
Heidelberg biomanufacturing facility in 1997. The Corporation has entered
into a lease for 51,000 square feet of new headquarters space in Rockville,
Maryland in which it plans to consolidate offices and laboratories from other
leased facilities during 1998. The Corporation also is expanding its viral
manufacturing capacity with the construction of a 58,000 square foot facility
which is scheduled to be available for manufacturing in the first quarter of
1999.
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<PAGE> 18
BioReliance believes that its facilities are adequate for the
Corporation's operations and that suitable additional space will be available
when needed.
See Notes 12 and 15 of Notes to Consolidated Financial Statements for
information concerning the Corporation's lease rental obligations.
ITEM 3. LEGAL PROCEEDINGS
The Corporation from time to time may be involved in various claims and
legal proceedings arising in the ordinary course of business. The Corporation
does not believe that any such claims or proceedings, individually or in the
aggregate, would have a material adverse effect on the Corporation's
financial condition or results of operations.
The Corporation has been identified by the EPA as one of several
hundred PRPs under CERCLA with respect to the Ramp Industries, Inc. site in
Denver, Colorado. Although the Corporation believes that it sent only a small
quantity of waste to this site, liability under CERCLA can exceed a PRP's pro
rata share of cleanup costs. The EPA has incurred approximately $5 million to
date to remove wastes from this site and expects to incur approximately an
additional $1.3 million to remove the remaining wastes. However, the
estimated total cleanup costs have not been determined. A joint settlement
proposal was developed in October 1997 and submitted to EPA Region VIII
representatives, who have agreed to support the proposal to Senior EPA
management and the Department of Justice. There can be no assurance at this
time that the joint settlement proposal will be accepted by the Department of
Justice. The Corporation believes that the outcome of this matter will not
have a material adverse effect on the Corporation's financial position or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the stockholders of the
Corporation during the quarter ended December 31, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages of the Corporation's executive
officers (as defined by regulations of the Securities and Exchange
Commission), the positions and offices they hold with the Corporation, their
terms as officers and their business experience. Executive officers are
elected by the Board of Directors and serve at the discretion of the Board.
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<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Capers W. McDonald ...........46 President, Chief Executive Officer and
Director
Michael R. N. Thomas .........50 Vice President, Chief Financial Officer and
Treasurer
Sherry L. Rhodes .............42 Vice President, General Counsel and
Secretary
John E. McEntire, Ph.D .......51 Vice President; President, MA BioServices,
Inc.
Brandon J. Price, Ph.D .......49 Vice President; Chief Operating Officer,
MAGENTA Corporation
Raymond F. Cosgrove, Ph.D ....50 Vice President, European Operations
Nona S. Karten ...............61 Vice President, Regulatory Affairs and
Quality Assurance
</TABLE>
Capers W. McDonald joined the Corporation as President and Chief Executive
Officer in June 1992 and has been a Director of the Corporation since August
1992. From 1989 to 1992, he served as President of Spectroscopy Imaging
Systems Corporation, a joint-venture of Siemens Medical Systems, Inc. and
Varian Associates, Inc. in California. Prior to 1989, he held senior
management positions with Hewlett-Packard Company in the Analytical Products
Group and with HP Genenchem. Mr. McDonald is a co-founder and immediate past
Chair of the Maryland Bioscience Alliance, a cooperative business association
of over 100 bioscience companies throughout the state, and is a member of the
Board of Visitors to the University of Maryland Biotechnology Institute.
During 1996, he chaired the Bioscience Industry Growth Sector Committee for
the Maryland Department of Business and Economic Development and is a
Governor-appointed member of their Partnership for Workforce Quality. He
received a S.M. in Mechanical Engineering from Massachusetts Institute of
Technology and a M.B.A. from Harvard Business School.
Michael R.N. Thomas joined the Corporation in January 1998 as Vice President,
Chief Financial Officer and Treasurer. From 1995 through 1997, Mr. Thomas
was the Vice President, Chief Financial Officer, Secretary and Treasurer of
Biosys, Inc., a developer and producer of genetically engineered pesticides.
From 1991, he served as Vice President, Chief Financial Officer and Treasurer
of Telor Ophthalmic Pharmaceuticals, Inc., a development-stage company in
ophthalmic therapeutics, and prior to that he held several international
positions with SmithKline Beecham before moving to the U.S. as Director,
Corporate Development. He is a Fellow of the Institute of Chartered
Accountants in England and Wales.
Sherry L. Rhodes joined the Corporation in December 1997 as Vice President,
General Counsel and Secretary. She previously served as Vice President and
General Counsel of I-NET, Inc., a network integration company specializing in
information technology outsourcing, which was acquired by Wang Laboratories,
Inc. in 1996. Prior to joining I-NET in 1994, she was a partner in the law
firm of Reed Smith Shaw & McClay. Ms. Rhodes holds a J.D. from the
University of Maryland School of Law and is admitted to the Bar in Maryland
and the District of Columbia.
John E. McEntire, Ph.D. joined the Corporation in September 1994 as Vice
President of the Biotechnology Group, and became President, MA BioServices,
Inc. in January 1998. From September 1993 to July 1994, Dr. McEntire served
as Director of Business Development for Applied Analytical Industries, Inc.,
an analytical testing company. From 1988 to 1993, he worked at Tektagen,
Inc., another
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<PAGE> 20
biosafety testing firm, where he became Executive Vice President for
Operations in 1992. From 1984 to 1988, he served as Vice President,
Operations and New Product Development of IMBIC Corporation, a contract
research and development services company, where he developed and patented
techniques for production, purification and synthesis of immunotherapeutic
agents. Dr. McEntire earned a M.S. in Microbiology and a Ph.D. in
Biochemistry from the University of Houston and served as a post-doctoral
fellow in cellular immunology at the University of Texas Medical Branch.
Brandon J. Price, Ph.D. joined the Corporation as Vice President, Business
Development in May 1992 and has served as Chief Operating Officer of MAGENTA
since January 1997. In 1987, he co-founded Quality Biotech, a competing
biosafety testing firm. From 1982 to 1986, he held senior management
positions with Damon Biotech and Ortho Diagnostic Systems. From 1975 to 1982,
he was an Assistant Professor of Oncology at the University of Miami Medical
School and a staff member at the Los Alamos Scientific Laboratory. Dr. Price
holds a Ph.D. in Biophysics from the University of Michigan.
Raymond F. Cosgrove, Ph.D. joined the Corporation in February 1993 as
Managing Director of BioReliance Ltd. He has served as Vice President,
European Operations since 1994 and as Director, BioReliance Holding GmbH
since 1996. From 1989 to 1993, he was Director of Business Development of
Shandon Scientific, Ltd., a manufacturer and distributor of clinical
laboratory equipment and diagnostic reagents. Dr. Cosgrove holds a Ph.D. in
Microbiology from London University.
Nona S. Karten joined the Corporation in 1976 and became Vice President,
Regulatory Affairs and Quality Assurance in 1989. She is an active member in
several United States and European quality assurance professional
organizations, including the Society of Quality Assurance, where she serves
as a member of the Board of Directors. Ms. Karten holds a M.A. in Biology
from Hunter College.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET PRICE
The Corporation's Common Stock, $.01 par value, is traded on the Nasdaq
National Market under the symbol "BREL". The following table presents, for
the periods indicated, the high and low sale prices per share of Common Stock
as reported by the Nasdaq National Market for the quarters since the
Corporation's initial public offering in July 1997.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
------------- ---- ---
<S> <C> <C>
December 31, 1997 $26.60 $18.00
September 30, 1997 (beginning July 29) $26.25 $16.50
</TABLE>
NUMBER OF STOCKHOLDERS
As of February 27, 1998, there were approximately 235 holders of record
of the Corporation's Common Stock. Based on a review of its nominee account
listings, the Corporation estimates that there are approximately 800
beneficial owners of the Corporation's Common Stock.
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<PAGE> 21
DIVIDENDS
The Corporation has never declared or paid any cash dividends on its
Common Stock, and the Corporation's existing credit facility prohibits the
payment of dividends without the prior consent of the lender. The Corporation
does not anticipate paying any cash dividends in the foreseeable future and
intends to retain future earnings for the development and expansion of its
business.
SALES OF UNREGISTERED SECURITIES
The information required by this portion of Item 5 is incorporated by
reference to Item 15 of Part II of the Registration Statement on Form S-1
(File 333-25071), filed April 11, 1997 with the Securities and Exchange
Commission.
USE OF PROCEEDS - INITIAL PUBLIC OFFERING
As of December 31, 1997, the Corporation had used approximately $1.9
million of the net proceeds from the Comporation's initial public offering
toward debt repayment and purchases of laboratory equipment and information
systems hardware and software.
At December 31, 1997, $27,554,000 of the net proceeds were invested in
short-term United States government securities, and the balance was invested
in money market funds pending the purchase of additional United States
government securities.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below for the five
years ended December 31, 1997 has been derived from the Corporation's
consolidated financial statements, audited by Price Waterhouse LLP,
independent accountants. The selected consolidated financial data set forth
below should be read in conjunction with, and are qualified by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Corporation's audited consolidated financial statements
and related notes appearing elsewhere in this Report.
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<PAGE> 22
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995 1996(1) 1997
---- ---- ---- ------- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue ................................................. $22,207 $28,094 $30,078 $37,682 $47,888
------- -------- --------- ------- --------
Cost of sales ........................................... 15,248 19,094 20,570 24,860 29,452
Selling, general and administrative expenses ............ 4,704 5,947 7,071 7,852 10,093
Research and development expenses ....................... 236 354 1,012 1,110 1,393
Nonrecurring charge ..................................... - - - 696(2)
------- -------- --------- ------- --------
Total expenses ................................. 20,188 25,395 28,653 34,518 40,938
------- -------- --------- ------- --------
Income from operations .................................. 2,019 2,699 1,425(3) 3,164 6,950
Interest and other (income) expenses, net ............... 297 439 524 816 (67)
------- -------- --------- ------- --------
Income before income taxes .............................. 1,722 2,260 901 2,348 7,017
Provision for (benefit from) income taxes ............... 62 (2,192) 243 846 2,951
------- -------- --------- ------- --------
Net income .............................................. $ 1,660 $ 4,452 $ 658 $ 1,502 $ 4,066
======= ======== ========= ======= ========
Net income per share (4):
Basic ............................................... $ 5.51 $15.46 $ 1.80 $ 4.41 $ 1.18
======= ======== ========= ======= ========
Diluted ............................................. $ 0.42 $ 0.87 $ 0.11 $ 0.26 $ 0.60
======= ======== ========= ======= ========
Weighted average common stock outstanding ............... 276 279 289 309 3,458
======= ======== ========= ======= ========
Weighted average common and common
equivalent shares outstanding (5) .................... 3,916 5,108 4,619 5,679 6,833
======= ======== ========= ======= ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
marketable securities............. $570 $1,676 $693 $2,965 $33,781
Working capital (deficit)............ (76) 5,326 4,963 5,415 38,109
Total assets ........................ 14,110 23,551 24,938 35,827 68,651
Long-term debt ...................... 810 4,694 6,189 8,982 5,434
Stockholders' equity ................ 6,928 11,452 12,121 14,091 49,795
</TABLE>
- ----------
(1) In July 1996, the Corporation acquired all of the shares of common stock
of BIOMEVA GmbH. The acquisition has been accounted for by the purchase
method and, accordingly, BIOMEVA's results of operations have been
included in the consolidated financial statements since the date of
acquisition. See Note 2 of Notes to Consolidated Financial Statements.
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<PAGE> 23
(2) Nonrecurring charge represents a charge of $0.7 million ($0.4 million
after income taxes) in connection with the settlement of a dispute with
a landlord relating to the termination of a lease. See Note 9 of Notes
to Consolidated Financial Statements.
(3) Income from operations includes the effect of $1.3 million of first-year
expenses for Analytical Services.
(4) In certain years, net income has been reduced to reflect the assumed
dividend paid to preferred stockholders. See Note 11 of Notes to
Consolidated Financial Statements.
(5) The weighted average common stock outstanding has been reduced by the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the
earnings of the Corporation. See Note 11 of Notes to Consolidated
Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the Corporation's financial
condition and results of operations should be read in conjunction with the
Corporation's consolidated financial statements and related notes thereto
included elsewhere in this report.
OVERVIEW
The Corporation recently has made significant investments to broaden
the services it offers. In 1995, to augment its BioTesting Services and in
anticipation of new FDA regulations relating to biologics, the Corporation
invested in equipment and in marketing, sales, research and development to
begin offering Analytical Services. In 1996, to complement its existing viral
manufacturing capabilities and to strengthen its European presence, the
Corporation added the capability to manufacture microbial fermentation
products by acquiring BIOMEVA GmbH, an established contract manufacturer
located in Heidelberg, Germany. The Corporation purchased BIOMEVA for an
aggregate of $3.3 million, including $3.1 million paid in cash and the
issuance of 23,333 shares of Common Stock, and accounted for the acquisition
as a purchase. In 1997, the Corporation completed its initial public
offering which raised net proceeds of $32.2 million. Specific initiatives to
invest in information management systems were commenced, as was the design
and planning for a new consolidated headquarters facility and a new
biomanufacturing facility, both in Rockville, Maryland.
The Corporation's revenue has grown from $30.1 million in 1995, and
$37.7 million in 1996, to a record $47.9 million in 1997. Net income
similarly has risen throughout this period, reaching $0.7 million in 1995,
$1.5 million in 1996, and $4.1 million in 1997.
The major components of cost of sales are labor and related fringe
benefits; facilities, primarily rent or depreciation, utilities and
maintenance; direct materials; overhead costs, such as travel, office
expenses and employee-related expenses; and subcontracted costs. Cost of
sales includes these expenses for laboratories directly providing the
services and for supporting services departments, principally regulatory
affairs, quality assurance and quality control. In order to provide new
services from time to time, the Corporation may be required to expend amounts
for labor and equipment that may have an adverse impact on margins.
23
<PAGE> 24
Selling, general and administrative expense and research and
development expense consist primarily of labor and related fringe benefits,
indirect materials and travel.
The following table sets forth, for the periods indicated, certain
income statement data as a percentage of revenue. The trends illustrated in
this table may not be indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Revenue ............................................ 100.0% 100.0% 100.0%
Cost of sales ...................................... 68.4 66.0 61.5
Selling, general and administrative ................ 23.5 20.8 21.1
Research and development ........................... 3.4 2.9 2.9
Nonrecurring charge ................................ 1.9
---- ---- ----
Total expenses ................................ 95.3 91.6 85.5
---- ---- ----
Income from operations ............................. 4.7 8.4 14.5
Interest and other expense (income), net ........... 1.7 2.2 (0.2)
---- ---- ----
Income before income taxes ......................... 3.0 6.2 14.7
Provision for income taxes ......................... 0.8 2.2 6.2
---- ---- ----
Net income ......................................... 2.2% 4.0% 8.5%
===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Revenue was $47.9 million in 1997, an increase of 27.1% over revenue of
$37.7 million in 1996, reflecting increases in both BioTesting and
BioManufacturing Services. The growth in revenue for BioTesting Services
primarily was due to volume growth in BioSafety Testing and Analytical
Services. The growth in revenue for BioManufacturing Services was due to
volume and price increases in new viral production business for MAGENTA.
BioTesting Services and BioManufacturing Services accounted for 85% and 15%,
respectively, of the Corporation's revenue in 1997.
Cost of sales was $29.5 million in 1997, an increase of 18.5% over cost
of sales of $24.9 million in 1996. As a percentage of revenue, cost of sales
decreased to 61.5% from 66.0% and gross margin increased to 38.5% from 34.0%
in 1997 compared to 1996. This improvement in gross margin primarily was
attributable to the high incremental margins contributed by growth in
revenues from Analytical and BioManufacturing Services, and more efficient
recovery of the fixed cost element of cost of sales.
Selling, general and administrative expense was $10.1 million in 1997,
an increase of 28.5% over expense of $7.9 million in 1996. The increase was
due to administrative expense associated with the initial public offering and
subsequent public status, depreciation and expensed items on information
systems, and additional administrative employees and an increase in legal and
consulting fees for which there was no corresponding expense in 1996. As a
percentage of revenue, selling, general and administrative expense increased
to 21.1% in 1997 from 20.8% in 1996.
Research and development expense was $1.4 million in 1997, an increase
of 25.5% over expense of $1.1 million in 1996. The increase primarily was
attributable to additional staff and the development of new techniques for
BioManufacturing Services.
24
<PAGE> 25
Operating income was $7.0 million in 1997, an increase of 119.7% over
operating income of $3.2 million in 1996. This increase was due to an
improvement in gross margin and the effect of the non-recurring charge in
1996 for which there was no corresponding expense in 1997, offset by
increases in selling, general and administrative and research and development
expenses.
Net interest and other income and expense was a $0.1 million benefit in
1997, compared to an expense of $0.8 million in 1996. The benefit was
primarily related to interest earnings from the initial public offering
proceeds.
The provision for income taxes was $3.0 million in 1997, compared to
a provision of $0.8 million in 1996. The effective tax rate was 42.0% in
1997 and 36.0% in 1996. The increase in the effective tax rate from 1996 to
1997 primarily was attributable to deferring the recognition of tax benefits
relating to certain net operating losses generated during 1997 until
realization is probable. These net operating losses related principally to
recent investments the Corporation has made to extend its BioTesting
capabilities in Germany.
Net income was $4.1 million in 1997, an increase of 170.7% over net
income of $1.5 million in 1996. This increase was due to improvement both in
operating margin and net interest and other income and expenses, which more
than offset the increase in income taxes.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Revenue was $37.7 million in 1996, an increase of 25.3% over revenue of
$30.1 million in 1995, reflecting increases in both BioTesting and
BioManufacturing Services. The growth in revenue for BioTesting Services
primarily was due to volume growth in BioSafety Testing and Analytical
Services. The growth in revenue for BioManufacturing Services was due to
volume and price increases in new viral production business for MAGENTA and
the inclusion of $1.8 million of revenue derived from BIOMEVA's results since
its acquisition in July 1996. BioTesting Services and BioManufacturing
Services accounted for 86% and 14%, respectively, of the Corporation's
revenue in 1996.
Cost of sales was $24.9 million in 1996, an increase of 20.9% over cost
of sales of $20.6 million in 1995. As a percentage of revenue, cost of sales
decreased to 66.0% from 68.4% and gross margin increased to 34.0% from 31.6%
in 1996 compared to 1995. This improvement in gross margin primarily was
attributable to the high incremental margins contributed by growth in
revenues from Analytical and BioManufacturing Services.
Selling, general and administrative expense was $7.9 million in 1996,
an increase of 11.0% over expense of $7.1 million in 1995. The increase was
due to additional administrative employees and increases in legal and
consulting fees, depreciation on information systems, and administrative
expense for BIOMEVA, for which there was no corresponding expense in 1995. As
a percentage of revenue, selling, general and administrative expense declined
in 1996 from 1995.
Research and development expense was $1.1 million in 1996, an increase
of 9.7% over expense of $1.0 million in 1995. The increase primarily was
attributable to development of new techniques for BioManufacturing Services.
In 1996, the Corporation incurred a nonrecurring charge against
operations of $0.7 million in connection with the Corporation's settlement of
a dispute with a landlord relating to the termination of a lease.
25
<PAGE> 26
Operating income was $3.2 million in 1996, an increase of 122.0% over
operating income of $1.4 million in 1995. This increase was due to both an
improvement in gross margin and a reduction, as a percentage of revenue, in
selling, general and administrative and research and development expenses.
Net interest and other expense was $0.8 million, an increase of 55.7%
over expense of $0.5 million in 1995. The increase was primarily related to
new borrowings to finance the acquisition of BIOMEVA.
The provision for income taxes was $0.8 million in 1996, as compared
to a provision of $0.2 million in 1995. The effective tax rate was 36.0% in
1996 and 27.0% in 1995. The increase in the effective tax rate from 1995 to
1996 primarily was attributable to 1996 income generated by BIOMEVA, which
was taxed at German rates which were higher than the United States federal
tax rate, and a lower effective tax rate in 1995 due to a decrease in the
valuation allowance for deferred tax assets as a result of improved
profitability of the Corporation's operations in the United Kingdom.
Net income was $1.5 million in 1996, an increase of 128.3% over net
income of $0.7 million in 1995. This increase was due to improvement in
operating margin, which more than offset increases in interest and other
expenses and in income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation has funded its business through cash flows from
operating activities, private placements of debt and equity securities,
long-term bank loans, capital leases and recently from the proceeds of an
initial public offering completed on August 1, 1997. At December 31, 1997,
the Corporation had cash, cash equivalents and marketable securities of $33.8
million, compared to cash, cash equivalents and marketable securities of $3.0
million and $0.7 million at December 31, 1996 and 1995, respectively.
On August 1, 1997, the Company completed its initial public offering of
2,102,014 shares of its common stock (plus an additional 297,986 shares by a
selling stockholder) at an offering price of $15.00 per share. On August 7,
1997, the underwriters exercised an option to purchase an additional 315,302
shares. The net proceeds to the Company from the public offering and the
exercise of the over-allotment option by the underwriters, after deducting
the underwriting discounts and commissions and offering expenses payable by
the Company, were approximately $32.2 million. A substantial majority of the
proceeds were invested in government and government agency securities with
original maturities of more than 90 days at the time of purchase. These
marketable securities totaled $27.6 million at December 31, 1997.
In addition to the proceeds from the initial public offering, the
Corporation generated cash flows from operations of $6.3 million during 1997,
compared to cash flows from operations of $4.5 million during 1996 and $1.6
million during 1995. Net income, as adjusted for depreciation and
amortization, deferred income taxes and other non-cash adjustments provided
$9.1 million, $4.7 million and $2.5 million in the years ended December 31,
1997, 1996, and 1995, respectively. Changes in other assets and liabilities
used $2.8 million cash in 1997 primarily from an increase in accounts
receivable primarily due to an increase in revenue, and $0.2 million in 1996
where a similar increase in accounts receivable was largely offset by a
corresponding rise in customer advances and other current liabilities.
26
<PAGE> 27
Working capital increased to $38.1 million at December 31, 1997,
compared to $5.4 million at December 31, 1996. The increase in 1997
primarily was due to the proceeds of the initial public offering.
The Corporation invested $4.2 million, $2.8 million and $4.6 million in
capital expenditures (including expenditures financed through capital leases)
during 1997, 1996 and 1995, respectively.
The Corporation financed the acquisition of BIOMEVA in July 1996 and
obtained additional funds for working capital and expansion of its business
through a promissory note with NationsBank, N.A. ("NationsBank") in the
amount of $1.8 million and a subordinated note from Sidney R. Knafel, the
Corporation's largest stockholder, in the amount of $1.9 million, which was
repaid on March 28, 1997. The NationsBank promissory note requires monthly
principal payments of $30,000, and at December 31, 1997, $1.3 million was
outstanding on the note.
In December 1994, the Corporation's existing loan agreement with
NationsBank was modified to provide term loan financing in the amount of
$4,300,000 with a maturity date of November 30, 1999 (the "Mortgage Loan").
In October 1997, the Mortgage Loan was modified and restated to release the
foreign subsidiaries from joint and several liability, to include all the
U.S. subsidiaries as joint and several makers, to release the liens created
by the first security interest in all of its tangible and intangible assets,
and to modify the interest rate terms. The Mortgage Loan is secured by a
deed of trust on the Company's facility in Rockville, Maryland. In addition
to a principal payment of $30,000 per month, the note bears interest at the
London Inter-Bank Offering Rate ("LIBOR") plus the applicable LIBOR Rate
Additional Percentage ("LIBOR Rate Option"). The LIBOR Rate Option ranged
from 1.25% to 2.0% depending on the Company achieving certain funded debt to
EBITDA ratios. At December 31, 1997, the applicable interest rate was 6.94%.
In May 1995, the Company entered into an interest rate swap agreement
whereby the variable interest rate of the Mortgage Loan was effectively
converted into debt with a fixed rate of 9.05% per annum. Amounts to be paid
or received under the interest rate swap agreement are recognized as interest
income or expense in the periods in which they accrue and are recorded in the
same category as that arising from the Mortgage Loan. This agreement expires
on November 30, 1999. The effect of the interest rate swap agreement on
interest expense was not material in 1995, 1996 or 1997.
In addition to the Mortgage Loan, the Company has entered into a
revolving loan agreement with NationsBank with a maximum available balance
not to exceed $1,000,000. Amounts to be paid include interest only on the
unpaid Principal Sum, payable monthly, and unless paid sooner, the unpaid
Principal Sum, together with unpaid accrued interest payable in full on May
31, 1998. The note bears interest at the same rate as the Mortgage Loan.
The Company has also agreed to pay a quarterly commitment fee equaling 0.25%
of the average unused portion of the revolving bank loan. At December 31,
1997, no amounts were outstanding under the facility. This line of credit
expires in May 1998.
In June 1996, the Company entered into a promissory note with
NationsBank for $1,800,000 with a maturity date of June 30, 1999 (the
"Promissory Note") and amended its loan agreement to provide for these
borrowings. In addition to a principal payment of $30,000 per month, the note
bears interest at the same rate as the Mortgage Loan. At December 31, 1997,
the interest rate was 6.94%.
The bank agreements are cross collateralized and are secured by a deed
of trust on the Corporation's facility in Rockville, Maryland. The
agreements require the Corporation to meet certain financial and restrictive
covenants, including maintaining certain tangible net worth levels and funded
debt to equity ratios.
27
<PAGE> 28
At December 31, 1997, the Corporation had formulated capital spending
plans of approximately $25 million, primarily for BioManufacturing
facilities, the consolidation of headquarter and certain BioTesting
facilities and the continuing development of computer information systems.
To the extent these plans are confirmed, if external funds are available on
favorable terms and conditions, a significant proportion of the potential
expenditure may be financed from third parties. See Notes 12 and 15 of Notes
to Financial Statements.
The Corporation expects to continue the foregoing and other expansions
of its operations through internal growth, geographic expansion and possibly
strategic acquisitions. The Corporation expects that such activities will be
funded from existing cash, cash equivalents and marketable securities, cash
flows from operations, bank borrowings and lease financing. Although the
Corporation has no agreements or arrangements in place with respect to any
future acquisition, there may be acquisition or other growth opportunities
that require additional external financing, and the Corporation may, from
time to time, seek to obtain funds from public or private issuances of equity
or debt securities on a strategic basis, irrespective of need. There can be
no assurances that such financing will be available on terms acceptable to
the Corporation.
Based on its current operating plan, the Corporation believes that
available liquid resources are sufficient to meet its foreseeable cash needs.
FOREIGN CURRENCY
The accounts of the Corporation's international subsidiaries are
measured using local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated into United States dollars
at period-end exchange rates, and revenue and expense accounts are translated
at average monthly exchange rates. Net exchange gains and losses resulting
from such translations are excluded from net income and are accumulated in a
separate component of stockholders' equity.
Since the revenues and expenses of the Corporation's international
operations generally are denominated in local currencies, exchange rate
fluctuations between such local currencies and the United States dollar will
subject the Corporation to currency translation risk with respect to the
reported results of its international operations as well as to risks
sometimes associated with international operations. The Corporation derived
16% of its revenue for 1997 from services performed outside of the United
States. In addition, the Corporation may be subject to currency risk when the
Corporation's service contracts are denominated in a currency other than the
currency in which the Corporation incurs expenses related to such contracts.
There can be no assurance that the Corporation will not experience
fluctuations in financial results from the Corporation's operations outside
the United States, and there can be no assurance the Corporation will be
able, contractually or otherwise, to reduce the currency risks associated
with its operations. Although, at the present time, the Corporation does not
use derivative financial instruments to manage or control foreign currency
risk, there can be no assurance that the Corporation will not use such
financial instruments in the future or that any such use will be successful
in managing or controlling foreign currency risk.
The revenue and identifiable assets attributable to the Corporation's
geographic segments are reported in Note 13 of Notes to Consolidated
Financial Statements.
28
<PAGE> 29
INFLATION
The Corporation believes the effects of inflation generally do not have
a material impact on its financial condition or results of operations.
YEAR 2000
The Corporation has assessed the impact of the Year 2000 on its
internal and external software, and has determined that any modification to
the software will not have a material impact on the Corporation or its
financial condition or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data of the
Corporation are listed in the Index to Financial Statements and Financial
Statement Schedules appearing on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 is incorporated herein by
reference to the text appearing in Part I, Item 4 of this report under the
caption "Executive Officers of the Registrant," and by reference to the
Corporation's definitive proxy statement, which is expected to be filed with
the Securities and Exchange Commission within 120 days after the close of the
Corporation's fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by
reference to the information to be set forth under the caption "Executive
Compensation" in the Corporation's definitive proxy statement, which is
expected to be filed with the Securities and Exchange Commission within 120
days after the close of the Corporation's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated herein by
reference to the information to be set forth under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the Corporation's
definitive proxy statement, which is expected to be filed with the Securities
and Exchange Commission within 120 days after the close of the Corporation's
fiscal year.
29
<PAGE> 30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated herein by
reference to the information to be set forth under the caption "Certain
Relationships and Related Transactions" in the Corporation's definitive proxy
statement, which is expected to be filed with the Securities and Exchange
Commission within 120 days after the close of the Corporation's fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The financial statements and financial statement schedule required to
be filed as part of this report are listed in the Index to Consolidated
Financial Statements elsewhere in this report, which list is incorporated
herein by reference.
EXHIBITS
The documents required to be filed as exhibits to this report under
Item 601 of Regulation S-K are listed in the Exhibit Index included elsewhere
in this report, which list is incorporated herein by reference.
REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER
The Corporation did not file any reports on Form 8-K during the quarter
ended December 31, 1997.
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in Rockville,
Maryland, on this 30th day of March, 1998.
BIORELIANCE CORPORATION
(Registrant)
By: /s/ Capers W. McDonald
----------------------------------------------------
Name: Capers W. McDonald
Title: President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Capers W. McDonald, Michael R. N. Thomas and
Sherry L. Rhodes, and each of them, as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities to sign any and all amendments to this report, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or either of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
31
<PAGE> 32
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Sidney R. Knafel Chairman of the Board March 30, 1998
-------------------------------
SIDNEY R. KNAFEL
/s/ Capers W. McDonald President, Chief March 30, 1998
------------------------------- Executive Officer and
CAPERS W. MCDONALD a Director
/s/ Michael R. N. Thomas Vice President, Chief March 30, 1998
------------------------------- Financial Officer and
MICHAEL R. N. THOMAS Treasurer (Chief Accounting
Officer)
/s/ William J. Gedale Director March 30, 1998
-------------------------------
WILLIAM J. GEDALE
/s/ Victoria Hamilton Director March 30, 1998
-------------------------------
VICTORIA HAMILTON
/s/ Gordon J. Louttit Director March 30, 1998
-------------------------------
GORDON J. LOUTTIT
/s/ Dr. Leonard Scherlis Director March 30, 1998
-------------------------------
DR. LEONARD SCHERLIS
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of BioReliance
Corporation.(1)
3.2 Bylaws of BioReliance Corporation.(1)
10.1 Amended and Restated BioReliance Corporation 1997 Incentive
Plan.
10.2 Modification Agreement - Leasehold Deed of Trust and Security
Agreement, dated as of December 1, 1994, by and among
NationsBank, N.A., Kathleen M. Malloy and Microbiological
Associates, Inc. (1)
10.4 Second Modification Agreement -- Leasehold Deed of Trust and
Security Agreement, by and among BioReliance Corporation,
Elizabeth Shore and NationsBank, N.A., dated as of October 31,
1997.
10.5 Leasehold Deed of Trust and Security Agreement, dated December
17, 1993, by and between Microbiological Associates, Inc.,
Kathleen M. Malloy, Brent H. Donnell and Maryland National
Bank.(1)
10.6 International Swap Dealers Association, Inc. Master Agreement by
and among NationsBank, N.A., Microbiological Associates, Inc.
and MAGENTA Corporation, dated as of May 10, 1995.(1)
10.7 Note Modification Agreement, dated as of October 31, 1997, by
and among NationsBank, N.A., BioReliance Corporation, MA
BioServices, Inc., MAGENTA Corporation and MAGENTA Viral
Production, Inc.
10.8 Lease Agreement dated as of December 1, 1983, by and between
Montgomery County, Maryland and Dynasciences Corp. n/k/a
BioReliance Corporation (1)
10.9 Lease Agreement, dated as of October 31, 1994, as amended
December 20, 1994, between Redgate III Limited Partnership, as
landlord, and Microbiological Associates, Inc., as tenant.(1)
10.11 Deed of Trust Note Modification Agreement dated as of October
31, 1997, by and among NationsBank, N.A., BioReliance
Corporation, MA BioServices, Inc., MAGENTA Corporation and
MAGENTA Viral Production, Inc.
10.12 Amended and Restated Replacement Loan Agreement, dated as of
October 31, 1997, among NationsBank, N.A., BioReliance
Corporation, MA BioServices, Inc., MAGENTA Corporation and
MAGENTA Viral Production, Inc.
10.13 Microbiological Associates, Inc. 1995 Non-Qualified Stock Option
Plan.(2)
10.14 MAGENTA Corporation, 1994 Incentive Stock Option Plan.(2)
10.15 Microbiological Associates, Inc., 1988 Incentive Stock Option
Plan. (2)
10.16 Lease Agreement between FP Rockledge, L.L.C. and MA BioServices,
Inc. dated as of October 16, 1997.
10.17 First Amendment to Lease Agreement between FP Rockledge, L.L.C.
and MA BioServices, Inc.
10.18 Consent of Guarantor to First Amendment to Lease Agreement.
10.19 Release and Separation Agreement, dated November 26, 1997, by
and between BioReliance Corporation and Carl C. Schwan.
10.20 Replacement Revolving Promissory Note, dated as of October 31,
1997, by and among BioReliance Corporation, MA BioServices,
Inc., MAGENTA Corporation, MAGENTA Viral Production, Inc. and
NationsBank, N.A.
10.21 Professional Services Agreement, dated as of December 2, 1997,
by and between BioReliance Corporation and Jeffrey M. Ostrove,
Ph.D.
21.1 Subsidiaries of the registrant.(1)
23.1 Consent of Price Waterhouse LLP.
24.1 Power of Attorney (included on signature page).
</TABLE>
33
<PAGE> 34
<TABLE>
<S> <C>
27.1 Financial Data Schedule.
27.2 Financial Data Schedule.
27.3 Financial Data Schedule.
27.4 Financial Data Schedule.
27.5 Financial Data Schedule.
99 Item 15, Part II of the Corporation's Registration Statement on
Form S-1 (Registration No. 333-25071), which is incorporated in
Item 5, Part II hereof by reference.
</TABLE>
- ------------
(1) Indicates an exhibit to the Corporation's Registration Statement on Form
S-1 (Registration No. 333-25071), which is incorporated herein by
reference.
(2) Indicates an exhibit to the Corporation's Registration Statement on Form
S-8 (Registration No. 333-34341).
34
<PAGE> 35
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.............................................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1995,
1996 and 1997................................................................................ F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995,
1996 and 1997................................................................................ F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1995, 1996 and 1997.......................................................................... F-6
Notes to Consolidated Financial Statements..................................................... F-7
Financial Statement Schedule:
For the Three Years Ended December 31, 1997
II - Valuation and Qualifying Accounts................................................. F-20
</TABLE>
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
F-1
<PAGE> 36
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of BioReliance Corporation
In our opinion, the consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the financial
position of BioReliance Corporation and its subsidiaries at December 31, 1997
and 1996, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Washington, D.C.
February 23, 1998
F-2
<PAGE> 37
BIORELIANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 2,965 $ 6,227
Marketable securities............................................ --- 27,554
Accounts receivable, net......................................... 13,645 15,923
Other current assets............................................. 1,204 1,827
Deferred income taxes............................................ 355 ---
------- -------
Total current assets...................................... 18,169 51,531
Property and equipment, net........................................ 14,945 15,601
Intangible assets, net............................................. 468 256
Deposits and other assets.......................................... 246 286
Deferred income taxes.............................................. 1,999 977
------- -------
Total assets.............................................. $35,827 $68,651
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................ $ 1,555 $ 1,574
Accounts payable................................................. 1,900 1,811
Accrued employee compensation and benefits....................... 2,213 2,829
Other accrued liabilities........................................ 2,160 2,302
Customer advances................................................ 4,067 3,635
Deferred income taxes............................................ 859 1,271
------- -------
Total current liabilities................................. 12,754 13,422
Long-term debt..................................................... 7,082 5,434
Note payable to stockholder........................................ 1,900 ---
------- -------
Total liabilities......................................... 21,736 18,856
------- -------
Commitments and contingencies (Note 12)
Stockholders' equity:
Convertible preferred stock, $.01 par value: 6,900,000 shares
authorized; 6,470,121 and no shares issued and outstanding... 65 ---
Common stock, $.01 par value: 15,000,000 shares authorized;
339,930 and 7,685,208 shares issued and outstanding......... 3 77
Additional paid-in capital...................................... 20,073 52,457
Accumulated deficit............................................. (6,211) (2,145)
Equity adjustment from foreign currency translation............. 161 (594)
------- -------
Total stockholders' equity............................... 14,091 49,795
------- -------
Total liabilities and stockholders' equity............... $35,827 $68,651
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 38
BIORELIANCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Revenue................................ $30,078 $37,682 $47,888
------- ------- -------
Expenses:
Cost of sales....................... 20,570 24,860 29,452
Selling, general and administrative. 7,071 7,852 10,093
Research and development............ 1,012 1,110 1,393
Nonrecurring charge................. --- 696 ---
------- ------- -------
28,653 34,518 40,938
------- ------- -------
Income from operations................. 1,425 3,164 6,950
------- ------- -------
Other (income) expense:
Interest income..................... (93) (18) (817)
Interest expense.................... 599 844 717
Other expense (income).............. 18 (10) 33
------- ------- -------
524 816 (67)
------- ------- -------
Income before income taxes............. 901 2,348 7,017
Provision for income taxes............. 243 846 2,951
------- ------- -------
Net income............................. $ 658 $ 1,502 $ 4,066
======= ======= =======
Net income per share:
Basic............................... $ 1.80 $ 4.41 $ 1.18
======= ======= =======
Diluted............................. $ 0.11 $ 0.26 $ 0.60
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 39
BIORELIANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
YEARS ENDED DECEMBER 31,
------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 658 $ 1,502 $ 4,066
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................. 1,645 2,626 2,991
Amortization of intangibles.................................. --- 92 212
Amortization of bond premiums and discounts.................. --- (173)
Loss on disposal of fixed assets............................. --- 190
Compensation element of stock option grants.................. 3 22 ---
Deferred income taxes, net................................... 174 523 1,789
Changes in assets and liabilities:
Accounts receivable, net................................. 674 (4,303) (2,259)
Other current assets..................................... (358) 37 (678)
Deposits and other assets................................ 77 (203) (89)
Accounts payable......................................... (200) 905 (94)
Accrued employee compensation and benefits............... (65) 408 615
Other accrued liabilities................................ (64) 1,031 26
Customer advances........................................ (954) 1,825 (320)
------ ------ --------
Net cash provided by operating activities........... 1,590 4,465 6,276
------ ------ --------
Cash flows from investing activities:
Purchases of marketable securities............................... --- --- (32,381)
Proceeds from the maturities of marketable securities............ --- --- 5,000
Purchases of property and equipment.............................. (1,870) (1,850) (4,201)
Acquisition of BIOMEVA GmbH, net of cash acquired................ --- (2,752) ---
------ ------ --------
Net cash used in investing activities............... (1,870) (4,602) (31,582)
------ ------ --------
Cash flows from financing activities:
Proceeds from initial public offering, net of expenses........... --- --- 32,247
Proceeds from exercise of stock options.......................... 41 34 223
Proceeds from debt............................................... --- 1,800 ---
Payments on debt................................................. (361) (539) (717)
Proceeds from (payments on) note payable to stockholder.......... --- 1,900 (1,900)
Payments on capital lease obligations............................ (382) (813) (912)
Repurchase and cancellation of treasury stock.................... --- (3) (77)
------ ------ --------
Net cash (used in) provided by financing activities. (702) 2,379 28,864
------ ------ --------
Effect of exchange rate changes on cash and cash equivalents....... (1) 30 (296)
------ ------ --------
Net (decrease) increase in cash and cash equivalents............... (983) 2,272 3,262
Cash and cash equivalents, beginning of year....................... 1,676 693 2,965
------ ------ --------
Cash and cash equivalents, end of year............................. $ 693 $ 2,965 $ 6,227
====== ====== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 40
BIORELIANCE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE EQUITY
PREFERRED STOCK COMMON STOCK ADJUSTMENT
--------------- ------------- ADDITIONAL FROM FOREIGN TOTAL
PAID-IN ACCUMULATED CURRENCY STOCKHOLDERS
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TRANSLATION EQUITY
------ ------ ------ ------ -------- -------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994............................. 6,470,121 $ 65 280,518 $ 3 $19,778 $(8,371) $ (23) $11,452
Exercise of stock options........ -- -- 16,484 -- 41 -- -- 41
Compensation element of stock
option grants.................. -- -- -- -- 3 -- -- 3
Equity adjustment from foreign
currency translation........... -- -- -- -- -- -- (33) (33)
Net income....................... -- -- -- -- -- 658 -- 658
--------- --- ------- --- ------ ------- ----- -------
BALANCE AT DECEMBER 31,
1995............................. 6,470,121 65 297,002 3 19,822 (7,713) (56) 12,121
Issuance of common stock in
Connection with acquisition.... -- -- 23,333 -- 198 -- -- 198
Exercise of stock options........ -- -- 20,647 -- 34 -- -- 34
Compensation element of stock
option grants.................. -- -- -- -- 22 -- -- 22
Stock repurchase and cancellation -- -- (1,052) -- (3) -- -- (3)
Equity adjustment from foreign
currency translation........... -- -- -- -- -- -- 217 217
Net income....................... -- -- -- -- -- 1,502 -- 1,502
--------- --- ------- --- ------ ------- ----- -------
BALANCE AT DECEMBER 31,
1996............................ 6,470,121 65 339,930 3 20,073 (6,211) 161 14,091
Issuance of common stock in
Initial Public Offering("IPO"),
net of offering costs of $1.5
million...................... -- -- 2,417,316 24 32,223 -- -- 32,247
Conversion of preferred stock,
concurrent with IPO........... (6,470,121) (65) 4,778,072 48 17 -- -- --
Exercise of stock options....... -- -- 155,922 2 221 -- -- 223
Stock repurchase and cancellation -- -- (6,032) _ (77) -- -- (77)
Equity adjustment from foreign
currency translation.......... -- -- -- -- -- -- (755) (755)
Net income...................... -- -- -- -- -- 4,066 -- 4,066
--------- --- --------- --- ------- ------- ----- -------
BALANCE AT DECEMBER 31,
1997............................ - $ - 7,685,208 $77 $52,457 $(2,145) $(594) $49,795
========= === ========= === ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 41
BIORELIANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
BioReliance Corporation (the "Corporation") is a contract research
organization providing nonclinical testing and contract manufacturing services
for biologics to biotechnology and pharmaceutical companies worldwide.
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared on the accrual
basis of accounting which is in accordance with generally accepted accounting
principles. The preparation of financial statements in conformity with
generally accepted accounting principles requires the Corporation to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of BioReliance
Corporation and its subsidiaries. All significant intercompany transactions
have been eliminated.
REVENUE RECOGNITION
Revenue recognized from commercial contracts, which are principally
fixed-price or fixed-rate, is recorded using the percentage-of-completion or
the completed-contract method, depending on the nature and duration of the
contract. Nonclinical testing services are accounted for using the
percentage-of-completion method, except for those services that are generally
completed within three days which are accounted for using the
completed-contract method. Contract manufacturing services providing for the
delivery of products are accounted for using the completed-contract method,
while all other contract manufacturing services are accounted for using the
percentage-of-completion method. Percentage-of-completion is determined using
total project costs as a cost input measure. Revenue recognized from government
contracts, which are principally cost-plus-fixed-fee, is recognized in an
amount equal to reimbursable costs plus a pro-rata portion of the earned fee.
Losses are provided for at the time at which they become known.
RESEARCH AND DEVELOPMENT
Research and development is expensed in the period in which it is incurred.
CASH AND CASH EQUIVALENTS
The Corporation classifies as cash equivalents all highly liquid
investments with an original maturity three months or less.
F-7
<PAGE> 42
MARKETABLE SECURITIES
Marketable securities comprise investments in debt securities with
original maturities of more than 90 days at the time of purchase. The
Corporation has classified its entire investment portfolio as held-to-maturity.
Held-to-maturity are those securities which the Corporation has the positive
intent and ability to hold until maturity, and are stated at amortized cost.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the respective assets.
The building is depreciated over a 20-year period. Leasehold improvements are
depreciated or amortized over the shorter of the useful life or the lease term.
Other fixed assets are depreciated or amortized over periods ranging from three
to ten years. Significant additions and betterments are capitalized.
Expenditures for maintenance and repairs are charged to operations as incurred.
INTANGIBLE ASSETS
Intangible assets consist primarily of license rights acquired in
connection with the acquisition of BIOMEVA GmbH ("BIOMEVA") in 1996 and are
amortized on a straight-line basis over three years. Accumulated amortization
at December 31, 1996 and 1997 was $92,000 and $304,000, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets are evaluated for possible impairment through a review of
undiscounted expected future cash flows. If the sum of the undiscounted
expected future cash flows is less than the carrying amount of the asset or if
changes in facts and circumstances indicate, an impairment loss is recognized.
INCOME TAXES
Deferred income taxes are recognized for the expected future tax
consequences of temporary differences by applying enacted statutory tax rates
to differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities.
NET INCOME PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
This statement replaces the presentation of primary earnings per share ("EPS")
with a presentation of basic EPS, and requires dual presentation of basic and
diluted EPS on the face of the income statement. Basic EPS excludes dilution
and is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in the earnings of
the entity. Dilutive securities are excluded from the computation in periods
in which they have an anti-dilutive effect, and net income available to common
stockholders is adjusted accordingly for the effect of cumulative dividends on
Convertible Preferred Stock. The Corporation adopted this statement during the
fourth quarter of 1997, as required. Accordingly, all prior period EPS data
has been restated as required by SFAS 128.
F-8
<PAGE> 43
In February 1998, the Securities and Exchange Commission issued Staff
Accounting Bulletin 98 ("SAB 98"). SAB 98 rescinded SAB 83, which required
common shares and common share equivalents issued or granted by the Corporation
at prices below the public offering price during the 12 months immediately
preceding the filing of the Corporation's initial Registration Statement and
through the effective date of such Registration Statement to be calculated
using the treasury stock method based upon the estimated initial public
offering price, and to be included for all periods presented regardless of
whether they are dilutive. The Corporation has adopted SAB 98 and,
accordingly, all EPS data has been restated as required.
STOCK BASED COMPENSATION POLICY
The Corporation accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," (APB No. 25) and related
interpretations. Under APB No. 25, compensation cost is measured as the
excess, if any, of the market price of the Corporation's stock at the date of
the grant over the exercise price of the option granted. Compensation cost for
stock options, if any, is recognized ratably over the vesting period. The
Corporation provides additional pro forma disclosures as required under
Statement of Financial Accounting Standards No 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123) (Note 7).
Transactions for which non-employees are issued equity instruments for
goods or services are recorded by the Corporation based upon the value of the
goods or services received or fair value of the equity instruments issued
whichever is more reliably measured.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Corporation's cash and cash equivalents,
marketable securities, accounts receivable, other current assets, deposits and
other assets, accounts payable, accrued expenses, and customer advances
approximate their carrying values due to their short-term nature. Since the
interest rates paid by the Corporation approximate current market rates, the
carrying value of its long-term debt approximates fair value.
FOREIGN CURRENCY TRANSLATION
The accounts of foreign subsidiaries are measured using local currency as
the functional currency. Assets and liabilities of these subsidiaries are
translated into U.S. dollars at period-end exchange rates, and income and
expense accounts are translated at average monthly exchange rates. Net gains
and losses resulting from such translations are excluded from net income and
are accumulated in a separate component of stockholders' equity.
(2) ACQUISITION
In July 1996, the Corporation acquired all of the shares of BIOMEVA, a
contract manufacturer of microbial products located in Heidelberg, Germany.
Total consideration for the acquisition was negotiated by the parties to be
$3.3 million, and consisted of $3.1 million paid in cash plus the issuance of
23,333 shares of the Corporation's Common Stock. The acquisition of BIOMEVA has
been accounted for by the purchase method and, accordingly the purchase price
was allocated based on the fair values of the assets and liabilities acquired.
BIOMEVA's operations have been included in the consolidated financial
statements since the date of acquisition. Intangible assets of $0.6 million
were recorded in connection with the acquisition and are being amortized on a
straight-line basis over three years. The unaudited pro forma results of
operations, assuming that the acquisition had been consummated at January 1,
1995 are as follows for the years ended December 31:
F-9
<PAGE> 44
<TABLE>
<CAPTION>
1995 1996
------- --------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Revenue....................................................... $32,287 $39,165
Net income.................................................... $ 377 $ 1,386
Net income per basic share.................................... $ 1.30 $ 4.49
Net income per diluted share.................................. $ 0.08 $ 0.24
</TABLE>
These unaudited pro forma results of operations include adjustments to
BIOMEVA's unaudited historical results of operations which provide for: (1)
additional amortization and depreciation expense relating to intangible assets
and an increase in the carrying value of property and equipment, which result
from application of purchase accounting as if the acquisition had been
consummated at January 1, 1995; and (2) a net increase in interest expense,
assuming that, as of January 1, 1995, the debt incurred by the Corporation to
finance the acquisition was outstanding and the pre-acquisition BIOMEVA debt
was repaid.
(3) MARKETABLE SECURITIES
Marketable securities consisted of the following amounts at December 31,
1997:
<TABLE>
<CAPTION>
GROSS ESTIMATED
AMORTIZED UNREALIZED MARKET
COST (LOSSES) VALUE
--------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Government and Government Agencies......... $24,957 $(2) $ 24,955
Commercial paper........................... 2,597 --- 2,597
------- --- --------
$27,554 $(2) $ 27,552
======= ==== ========
</TABLE>
All securities have maturities of one year or less.
(4) ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following amounts as of December 31:
<TABLE>
<CAPTION>
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Billed accounts receivable:
Commercial.................................................. $ 6,579 $6,678
Government.................................................. 380 506
------- -------
6,959 7,184
------- -------
Unbilled accounts receivable:
Commercial.................................................. 6,272 7,923
Government.................................................. 654 1,058
------- ------
6,926 8,981
------- ------
Less allowances for doubtful accounts and unallowable
contract costs.............................................. (240) (242)
------- -------
Accounts receivable, net...................................... $13,645 $15,923
======= =======
</TABLE>
Unbilled commercial receivables represent revenue from commercial
contracts (recorded using the percentage-of-completion method) which are not yet
billable to the client. Generally, these amounts become billable within the next
one to three months upon the attainment of a milestone or the completion of the
contract.
Unbilled government receivables represent amounts which are billed on
government contracts shortly after the end of each month, based on costs
incurred and fees earned during the month, or revenues recognized in excess of
billings on government contracts which generally become billable upon final
determination of allowable
F-10
<PAGE> 45
costs by the United States Government. Government contract costs for 1995, 1996
and 1997 are subject to final determination of allowable costs by the United
States Government. In the opinion of management, these determinations will have
no material effect on the Corporation's consolidated financial position or
results of operations.
(5) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following amounts as of December 31:
<TABLE>
<CAPTION>
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land............................................................ $1,984 $1,984
Building........................................................ 7,859 7,859
Machinery, equipment, furniture and fixtures.................... 15,095 16,511
Leasehold improvements.......................................... 2,288 2,291
Construction in progress and assets not yet placed in service... 255 1,900
------- ------
Property and equipment, at cost................................. 27,481 30,545
Less accumulated depreciation and amortization.................. (12,536) (14,944)
------- -------
Property and equipment, net..................................... $ 14,945 $ 15,601
======== ========
</TABLE>
(6) DEBT
Debt consisted of the following amounts as of December 31:
<TABLE>
<CAPTION>
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Mortgage Loan.............................................. $3,581 $3,223
Promissory Note............................................ 1,620 1,260
Note payable to stockholder................................ 1,900 ----
Capital lease obligations.................................. 3,436 2,525
------ ------
Total debt................................................. 10,537 7,008
Less current portion....................................... (1,555) (1,574)
------ ------
Long-term portion.......................................... $8,982 $5,434
====== ======
</TABLE>
BANK DEBT
In December 1993, the Corporation entered into a loan agreement with a
bank to refinance $1.6 million of outstanding indebtedness and to fund the
expansion of the Company's business. In December 1994, this loan agreement was
modified to provide term loan financing in the amount of $4,300,000 with a
maturity date of November 30, 1999 (the "Mortgage Loan"). In addition to a
principal payment of $30,000 per month, the note bears interest at the London
Inter-Bank Offering Rate ("LIBOR") plus the applicable LIBOR Rate Additional
Percentage ("LIBOR Rate Option"). The LIBOR Rate Option ranged from 1.25% to
2.0% depending on the Corporation achieving certain funded debt to EBITDA
ratios. At December 31, 1997, the interest rate was 6.94%.
In May 1995, the Corporation entered into an interest rate swap agreement
whereby the variable interest rate of the Mortgage Loan was effectively
converted into debt with a fixed rate of 9.05% per annum. Amounts to be paid or
received under the interest rate swap agreement are recognized as interest
income or expense in the periods in which they accrue and are recorded in the
same category as that arising from the Mortgage Loan. The agreement is a
straight forward contract that has no imbedded options or other terms involving
a higher level of complexity or risk. This agreement expires on November 30,
1999. The effect of the interest rate swap agreement on interest expense was
not material in 1995, 1996 or 1997.
In addition to the Mortgage Loan, the Corporation has entered into a
revolving loan agreement with the same bank with a maximum available balance
not to exceed $1,000,000. Amounts to be paid include interest only on the
unpaid Principal Sum, payable monthly, and unless paid sooner, the unpaid
Principal Sum, together with unpaid accrued
F-11
<PAGE> 46
interest payable in full on May 31, 1998. The note bears interest at the same
rate as the Mortgage Loan. The Corporation has also agreed to pay a quarterly
commitment fee equaling 0.25% of the average unused portion of the revolving
bank loan. At December 31, 1997, no amounts were outstanding under the
facility. This line of credit expires in May 1998.
In June 1996, the Corporation entered into a promissory note with the same
bank for $1,800,000 with a maturity date of June 30, 1999 (the "Promissory
Note") and amended its loan agreement to provide for these borrowings. In
addition to a principal payment of $30,000 per month, the note bears interest
at the same rate as the Mortgage Loan. At December 31, 1997, the interest rate
was 6.94%.
In July 1996, the Corporation entered into a loan agreement with its
majority stockholder for $1,900,000. This note was repaid in March 1997.
The long-term portion of the Corporation's debt, excluding capital
lease obligations (see below), is payable as follows (in thousands):
<TABLE>
<CAPTION>
Years ending December 31:
<S> <C>
1998................. $718
1999................. 3,047
-------
Total............. $ 3,765
=======
</TABLE>
The bank agreements are cross collateralized and are secured by a deed
of trust on the Corporation's facility in Rockville, Maryland. The agreements
require the Corporation to meet certain financial and restrictive covenants,
including maintaining certain tangible net worth levels and funded debt to
EBITDA ratios.
CAPITAL LEASE OBLIGATIONS
The Corporation leases land and certain equipment under noncancelable
lease agreements accounted for as capital leases. The assets underlying such
capitalized leases are included with the Corporation's owned property and
equipment, and are summarized as follows as of December 31:
<TABLE>
<CAPTION>
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land................................................... $1,984 $1,984
Machinery and equipment................................ 4,575 4,407
------ -----
Total assets at cost................................... 6,559 6,391
Less accumulated depreciation.......................... (1,921) (2,760)
------ ------
Net capitalized assets................................. $4,638 $3,631
====== ======
</TABLE>
The future minimum lease payments under capital lease obligations at
December 31, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
Years ending December 31:
<S> <C>
1998................................................................. $ 1,032
1999................................................................. 785
2000................................................................. 501
2001................................................................. 143
2002................................................................. 56
Thereafter........................................................... 723
-------
Total minimum lease payments........................................... 3,240
Less amount representing interest...................................... (715)
-------
Present value of minimum lease payments................................ 2,525
Less current portion................................................... (856)
-------
Long-term portion...................................................... $ 1,669
=======
</TABLE>
F-12
<PAGE> 47
(7) STOCKHOLDERS' EQUITY
INITIAL PUBLIC OFFERING
On August 1, 1997, the Corporation completed its initial public offering of
2,102,014 shares of its common stock (plus an additional 297,986 shares by a
selling stockholder) at an offering price of $15.00 per share. On August 7,
1997, the underwriters exercised an option to purchase an additional 315,302
shares. The net proceeds to the Corporation from the public offering and the
exercise of the over-allotment option by the underwriters, after deducting the
underwriting discounts and commissions and offering expenses payable by the
Corporation, were approximately $32.2 million. Upon the closing of the
offering, all outstanding shares of the Corporation's convertible preferred
stock were automatically converted into 4,778,072 shares of common stock.
CONVERTIBLE PREFERRED STOCK
Convertible Preferred Stock at December 31, 1996 and 1997 consisted of the
following:
Series A, $.01 par value, $100 liquidation value, 50,000 shares authorized,
20,698 and no shares issued and outstanding, respectively
Series B, $.01 par value, $3.00 liquidation value, 400,000 shares
authorized, 385,723 and no shares issued and outstanding, respectively
Series C, $.01 par value, $5.00 liquidation value, 2,450,000 shares
authorized, 2,425,438 and no shares issued and outstanding, respectively
Series D and E, $.01 par value, $1.89 liquidation value, 4,000,000 shares
authorized, 456,829 shares of Series D and no shares issued and
outstanding, respectively; and 3,181,433 shares of Series E and no
shares issued and outstanding, respectively
At August 1, 1997, each share of the preferred stock was convertible
into the following number of common shares: Series A 14.9366, Series B
(including adjustment for accumulated dividends of $1,162,000) 1.6947, Series C
1.0072, Series D 0.3772 and Series E 0.3772. Series A, B, C and D vote their
respective common share equivalents, and Series E is non-voting. Upon the
closing of the Corporation's initial public offering, all Series of Convertible
Preferred Stock outstanding were automatically converted into 4,778,072 shares
of common stock, based on the exchange ratios indicated above.
STOCK OPTION PLANS
In May 1997, and as amended in September 1997, the Board of Directors
of the Corporation approved the 1997 Incentive Plan ("the 1997 Plan"). The
1997 Plan replaced all of the Corporations's former stock option plans. Under
the terms of the 1997 Plan, the Corporation may grant or award incentive and
nonqualified stock options, stock appreciation and dividend equivalent rights,
restricted stock, performance units, and performance shares (collectively,
"Awards") to employees, officers, employee directors, consultants and advisors.
The 1997 Plan also provides for the initial and annual grant of options to each
of its non-employee directors which must be granted at an exercise price equal
to the fair market value on the date of grant and which generally are vested
after three years and have ten-year terms. These Awards are exercisable as
determined by the Corporation's compensation committee and expire no later than
ten years after the date of the grant. The exercise price of incentive stock
options must equal or exceed the fair market value of the stock on the date of
grant.
F-13
<PAGE> 48
As of December 31, 1997, 729,194 and 722,524 shares are authorized and
available for grants, respectively.
Changes in options outstanding were as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF OPTION PRICE
SHARES PER SHARE
------- ---------
<S> <C> <C>
Balance, December 31, 1994........ 684,782 $1.59
Granted......................... 141,850 2.91
Exercised....................... (16,484) 2.43
Canceled........................ (15,667) 1.96
-------
Balance, December 31, 1995........ 794,481 1.89
Granted......................... 141,066 4.77
Exercised....................... (20,647) 1.96
Canceled........................ (43,536) 2.25
-------
Balance, December 31, 1996........ 871,364 2.43
Granted......................... 34,536 12.84
Exercised....................... (155,922) 1.58
Canceled........................ (40,742) 4.49
-------
Balance, December 31, 1997........ 709,236 3.34
=======
</TABLE>
No pro forma disclosures of net income and net income per share using the
SFAS 123 fair-value based method to determine compensation expense have been
provided since the effect is not material. To determine fair value under SFAS
123, the Corporation used the Black-Scholes option-pricing model and the
following weighted-average assumptions for 1995, 1996 and 1997: a risk-free
interest rate of 6.35%, expected lives of 6 years, expected volatility of 35%,
and expected dividends of zero. The weighted average fair value of options
granted during 1995, 1996 and 1997 was $0.33, $0.60 and $1.81, respectively.
For options outstanding and exercisable at December 31, 1997, the following
number of options, range of exercise prices and weighted average exercise
prices were:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED AVERAGE
SHARES EXERCISE REMAINING SHARES WEIGHTED
RANGE OF EXERCISE PRICES OUTSTANDING PRICE CONTRACTUAL LIFE EXERCISABLE PRICE
------------------------ ----------- ----- ---------------- ----------- ----
<S> <C> <C> <C> <C> <C>
$ 0.56 - 1.50 420,943 $ 1.47 2.17 360,449 $1.48
$ 2.25 - 4.50 217,222 $ 2.76 4.56 126,880 $2.62
$ 7.50 - 9.00 54,437 $ 7.89 5.90 11,927 $7.75
$13.41 - 21.25 16,634 $ 16.53 6.43 -
------- -------
Total 709,236 $ 2.71 3.29 499,256 $1.92
======= =======
</TABLE>
F-14
<PAGE> 49
(8) INCOME TAXES
INCOME TAX PROVISION
Income before income taxes consisted of the following amounts for the years
ended December 31:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic............................. $878 $1,632 $5,839
Foreign.............................. 23 716 1,179
---- ------ -------
Income before income taxes........... $901 $2,348 $7,018
==== ====== ======
</TABLE>
The provision for income taxes consisted of the following amounts for
the years ended December 31:
<TABLE>
<CAPTION>
1995 1996 1997
----- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.............................. $64 $ -- $465
Foreign.............................. 4 323 464
State................................ 1 -- 233
---- ----- ------
Total current provision......... 69 323 1,162
---- ---- -----
Deferred:
Federal.............................. 280 540 1,116
Foreign.............................. (168) (90) 323
State................................ 62 73 350
---- ---- ---
Total deferred provisio......... 174 523 1,789
---- ---- -----
Total provision for
income taxes.................. $243 $846 $2,951
==== ==== ======
</TABLE>
The provision for income taxes differed from that which would be computed by
applying the U.S. Federal income tax rate to income before income taxes for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Federal tax at statutory rate........... 34.0% 34.0% 34.0%
State tax, net of federal benefit....... -- -- 2.2
Adjustment for foreign income taxes..... -- 4.4 (0.1)
Change in valuation allowance........... (16.8) 0.9 12.2
Effect of tax loss carryforwards........ 14.4 -- --
Charitable contribution................. --- --- (7.5)
Nondeductible expenses.................. 0.3 1.5 0.1
Other................................... (4.9) (4.8) 1.1
----- ----- -----
Provision for income taxes.............. 27.0% 36.0% 42.0%
===== ===== =====
</TABLE>
During 1997, the Corporation donated 100% of the outstanding stock of
one of its subsidiaries to a not-for-profit organization which resulted in a
permanent difference between income reported for tax purposes and financial
reporting purposes.
F-15
<PAGE> 50
DEFERRED INCOME TAXES
Deferred income taxes consisted of the following amounts as of December 31:
<TABLE>
<CAPTION>
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards......................... $ 2,371 $ 771
Accrued expenses......................................... 518 373
Tax credit carryforwards................................. 467 1,114
Other.................................................... 61 502
------- ------
Gross deferred tax assets.................................. 3,417 2,760
Valuation allowance........................................ (373) (771)
------ ------
Net deferred tax assets.................................. 3,044 1,989
------- ------
Deferred tax liabilities:
Unbilled accounts receivable............................. (1,121) (1,640)
Depreciation and amortization............................ (422) (643)
Other.................................................... (6) _
------ -------
Deferred tax liabilities................................. (1,549) (2,283)
------ -------
Deferred taxes, net........................................ $ 1,495 $ (294)
======= =======
Deferred income tax liabilities, current portion........... $ (859) $ (1,271)
Deferred income tax assets, current portion................ 355 --
Deferred income tax assets, long-term portion.............. 1,999 977
------- -------
Deferred taxes, net........................................ $ 1,495 $ (294)
======= =======
</TABLE>
The Corporation records a valuation allowance for deferred tax assets
when it is management's judgment that it is more likely than not that all or a
portion of a deferred tax asset will not be realized.
During 1997, the increase in the valuation allowance is due principally to
valuation allowances established for net operating losses in certain foreign
jurisdictions which are a result of recent investments made by the Corporation
to expand its operations.
TAX CARRYFORWARDS
At December 31, 1997, the Corporation had foreign net operating loss
carryforwards available to offset future taxable income of approximately $0.7
million and $0.4 million in the U.K. and in Germany, respectively. Additionally,
the Corporation had tax credit carryforwards of approximately $1.1 million
available to reduce future U.S. income taxes, and state net operating loss
carryforwards of approximately $4.9 million. These carryforwards do not have
an expiration period.
(9) NONRECURRING CHARGE
During 1996, the Corporation incurred a charge against operations of
$696,000 in connection with the Corporation's settlement of a dispute with a
landlord relating to the termination of a lease. This liability was included in
other accrued liabilities at December 31, 1996.
(10) RETIREMENT PLAN
The Corporation sponsors a defined-contribution retirement 401(k) plan
covering substantially all of its employees. Contributions made by the
Corporation in 1995, 1996 and 1997 equaled 50% of the voluntary employee
contributions up to a maximum of 6% of a participant's annual compensation. The
Corporation's retirement plan contributions were $228,000, $262,000 and $286,000
in 1995, 1996 and 1997, respectively.
F-16
<PAGE> 51
(11) NET INCOME PER SHARE
The following is a reconciliation between net income and net income
available to common stockholders used in the numerator for basic EPS for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1996 1997
----- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income............................................ $658 $1,502 $4,066
Assumed dividends paid to
preferred stockholders.............................. (139) (139) ---
---- ------ ------
Net income available to
common stockholders................................. $519 $1,363 $4,066
==== ====== ======
</TABLE>
The following is a reconciliation between net income available to common
stockholders and net income available per common and common equivalent
stockholders used in the numerator for diluted EPS for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1996 1997
----- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income available to
common stockholders...................................... $519 $1,363 $4,066
Assumed dividends paid to
preferred stockholders................................... --- 139 ---
--- ------ ------
Net income available to common and common
equivalent stockholders................................ $519 $1,502 $4,066
==== ====== ======
</TABLE>
The following is a reconciliation between the weighted average common
stock outstanding denominator used in basic EPS and the weighted average common
and common equivalent shares outstanding denominator used in diluted EPS for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1996 1997
----- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Weighted average common stock outstanding..................... 289 309 3,458
Preferred stock, as if converted............................. 4,124 4,759 2,723
Stock options, as if converted............................... 206 611 652
--- --- ---
Weighted average common and common equivalent
shares outstanding....................................... 4,619 5,679 6,833
===== ===== =====
</TABLE>
The Series B Convertible Preferred Stock was not included in the computation
for diluted EPS for the year ended December 31, 1995 because the accumulated
dividend exceeds the basic EPS per common share obtainable on conversion.
F-17
<PAGE> 52
(12) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Corporation leases certain facilities and equipment under noncancelable
operating leases that expire at various dates through 2017. Future minimum
lease payments under operating leases were as follows (in thousands):
<TABLE>
<CAPTION>
Years ending December 31:
<S> <C>
1998................................................... $ 1,797
1999................................................... 1,987
2000................................................... 1,675
2001................................................... 1,606
2002................................................... 1,623
Thereafter............................................. 14,069
--------
Total future minimum lease payments................. $ 22,757
========
</TABLE>
Total rent expense for all operating leases was $945,000, $1,573,000 and
$1,650,000 in 1995, 1996 and 1997, respectively.
COMMITMENTS
At December 31, 1997, the Corporation had commitments to spend $5
million for expansion of BioTesting and BioManufacturing facilities and an
additional $1.4 million for computer equipment and information systems.
LEGAL
The Corporation is involved in various claims and legal proceedings arising
in the ordinary course of business. The Corporation does not believe that such
claims or proceedings, individually or in the aggregate, will have a material
adverse effect on the Corporation's consolidated financial position or results
of operations.
The Corporation has been identified by the U.S. Environmental
Protection Agency ("EPA") as one of several hundred potentially responsible
parties ("PRPs") under CERCLA with respect to the Ramp Industries, Inc. site in
Denver, Colorado. Although the Corporation believes that it sent only a small
quantity of waste to this site, liability under CERCLA can exceed a PRP's pro
rata share of cleanup costs. The EPA has incurred approximately $5 million to
date to remove wastes from this site and expects to incur approximately an
additional $1.3 million to remove the remaining wastes. However, the estimated
total cleanup costs have not been determined. A joint settlement proposal was
developed in October 1997 and submitted to EPA Region VIII representatives, who
have agreed to support the proposal to Senior EPA management and the Department
of Justice. There can be no assurance at this time that the joint settlement
proposal will be accepted by the Department of Justice. The Corporation
believes that the outcome of this matter will not have a material adverse
effect on the Corporation's financial position or results of operations.
(13) GEOGRAPHIC SEGMENTS AND SIGNIFICANT CUSTOMERS
GEOGRAPHIC SEGMENT
The Corporation operates in one business segment, but has operations located
in the United States and Europe. Transfers between geographic areas are not
material to the Corporation's operations. The following table outlines the
Corporation's revenues, income from operations and identifiable assets by
geographic region as of or for the years ended December 31:
F-18
<PAGE> 53
<TABLE>
<CAPTION>
1995 1996 1997
----- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues
United States.................................. $26,420 $31,896 $40,183
Europe......................................... 3,658 5,786 7,705
------- ------- -------
Total....................................... $30,078 $37,682 $47,888
======= ======= =======
Income from operations
United States.................................. $1,414 $2,333 $5,692
Europe......................................... 11 831 1,258
------ ------ ------
Total....................................... $1,425 $3,164 $6,950
====== ====== ======
Identifiable assets
United States.................................. $21,038 $24,521 $56,717
Europe......................................... 3,900 11,306 11,934
----- ------ ------
Total....................................... $24,938 $35,827 $68,651
======= ======= =======
</TABLE>
SIGNIFICANT CUSTOMERS
Sales to the U.S. Government represented 13%, 10% and 8% of consolidated
revenue in 1995, 1996 and 1997, respectively.
(14) SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the year for:
Income tax payments........................................ $ 32 $ 4 $475
Interest payments.......................................... $ 563 $ 844 $713
Noncash investing and financing activities:
Equipment acquired under capital lease agreements
(Note 6)................................................ $2,735 $ 903
Details of acquisition (Note 2):
Fair value of assets acquired.............................. $3,857
Liabilities assumed........................................ (595)
Stock issued............................................... (198)
------
Cash paid.................................................. 3,064
Less cash acquired......................................... (312)
------
Net cash paid for acquisition................................ $2,752
======
</TABLE>
(15) SUBSEQUENT EVENTS (UNAUDITED)
In March 1998, the Corporation entered into certain third-party leasing and
subleasing arrangements relating to the construction of new laboratory space.
These arrangements require the Corporation to make certain net noncancelable
lease payments totaling approximately $8.5 million over the next twenty years
and to guarantee indebtedness of approximately $4.4 million. In addition, the
Company intends to incur approximately $20.0 million in leasehold improvements
and laboratory equipment relating to the new laboratory and the new
headquarters facilities.
F-19
<PAGE> 54
SCHEDULE II
<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
------------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF YEAR EXPENSES -DESCRIBE -DESCRIBE END OF YEAR
----------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Allowance for doubtful accounts.... $284,000 $ 20,000 $ --- $ 61,000(1) $243,000
Deferred tax valuation allowance... 501,000 --- --- 151,000(2) 350,000
Year Ended December 31, 1996
Allowance for doubtful accounts.... 243,000 32,000 --- 35,000(1) 240,000
Deferred tax valuation allowance... 350,000 23,000 --- --- 373,000
Year Ended December 31, 1997
Allowance for doubtful accounts.... 240,000 16,000 --- 14,000(1) 242,000
Deferred tax valuation allowance... 373,000 398,000 --- --- 771,000
</TABLE>
- ----------------------------
(1) Amounts are write-offs of uncollectible accounts receivable.
(2) Amounts represent reductions in the valuation allowance attributable to
the realization of net operating loss carryforwards.
F-20
<PAGE> 1
EXHIBIT 10.1
BIORELIANCE CORPORATION
1997 INCENTIVE PLAN
(As Adopted May 28, 1997
and Amended September 24, 1997)
<PAGE> 2
EXHIBIT 10.1
BIORELIANCE CORPORATION
1997 INCENTIVE PLAN
1. Purpose. The purpose of this Plan is to strengthen
BioReliance Corporation, a Delaware corporation (the "Company"), by providing
an incentive to its employees, officers, consultants and directors and thereby
encouraging them to devote their abilities and industry to the success of the
Company's business enterprise. It is intended that this purpose be achieved by
extending to employees, officers, consultants and directors of the Company and
its Subsidiaries a long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Nonqualified
Stock Options, Stock Appreciation Rights, Dividend Equivalent Rights,
Performance Awards and/or Restricted Stock (as each term is herein defined).
After the Effective Date of this Plan, no further awards shall be made under
any of the Former Plans. Each award outstanding under a Former Plan as of the
Effective Date of this Plan shall remain outstanding and continue to be subject
to the terms of the Former Plan and the award agreement under which such award
was granted. Each Share that is available for the granting of new awards under
either of the Former Plans as of the Effective Date of this Plan and each Share
that is the subject of an award under either of the Former Plans but is not
issued prior to the time that such award expires or otherwise terminates shall,
after the Effective Date of this Plan, not be available for the granting of
awards under either of the Former Plans, but shall instead be available for the
granting of Options under this Plan.
2. Definitions. For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a
Change in Control, the greater of (i) the highest price per Share paid to
holders of the Shares in any transaction (or series of transactions)
constituting or resulting in a Change in Control or (ii) the highest Fair
Market Value of a Share during the sixty (60) day period ending on the date of
a Change in Control.
2.2 "Affiliate" means any entity, directly or indirectly,
controlled by, controlling or under common control with the Company or any
corporation or other entity acquiring, directly or indirectly, all or
substantially all the assets and business of the Company, whether by operation
of law or otherwise.
2.3 "Agreement" means the written agreement between the
Company and an Optionee or Grantee evidencing the grant of an Option or Award
and setting forth the terms and conditions thereof.
2.4 "Award" means a grant of Restricted Stock, a Stock
Appreciation Right, a Performance Award, a Dividend Equivalent Right or any or
all of them.
- 1 -
<PAGE> 3
EXHIBIT 10.1
2.5 "Beneficial Ownership" means ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
2.6 "Beneficiary" means an individual, trust or estate
who or which, by a written designation of the Optionee or Grantee filed with
the Company by operation of law, succeeds to the rights and obligations of the
Optionee or Grantee under the Plan and an Agreement upon the Optionee's or
Grantee's death.
2.7 "Board" means the Board of Directors of the Company.
2.8 "Business Day" means any day on which the New York
Stock Exchange is open for trading.
2.9 "Cause" shall mean:
(a) for purposes of Section 6.4, (i) a willful
act which constitutes gross misconduct or fraud and which is materially
injurious to the Company or (ii) conviction of, or plea of "guilty" or "no
contest" to, a felony; and
(b) in all other cases, either (1) the definition
set forth in the employment agreement between the Optionee or Grantee and the
Company, or in absence thereof, (2) (i) intentional failure to perform
reasonably assigned duties, (ii) dishonesty or willful misconduct in the
performance of duties, (iii) involvement in a transaction in connection with
the performance of duties to the Company or any of its Subsidiaries which
transaction is adverse to the interests of the Company or any of its
Subsidiaries and which is engaged in for personal profit or (iv) willful
violation of any law, rule or regulation in connection with the performance of
duties (other than traffic violations or similar offenses). No act or failure
to act shall be considered willful unless done or omitted to be done in bad
faith and without reasonable belief that the action or omission was in the best
interest of the Company.
2.10 "Change in Capitalization" means any increase or
reduction in the number of Shares, or any change (including, without
limitation, a change in value) in the Shares or exchange of Shares for a
different number or kind of shares or other securities of the Company or
another corporation, by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, spin-off, split-up, issuance of warrants or
rights or debentures, stock dividend, stock split or reverse stock split,
property dividend, combination or exchange of shares, change in corporate
structure or substantially similar event.
2.11 A "Change in Control" shall mean the occurrence
during the term of the Plan of any of the following events; provided, however,
that the Committee, in its sole discretion, may specify a more restrictive
definition of Change in Control in any Agreement and, in such event, the
definition of Change in Control set forth in the Agreement shall apply to the
Award granted under such Agreement:
(1) An acquisition in one or more transactions
(other than directly from the Company or pursuant to options granted under this
Plan or otherwise by the
- 2 -
<PAGE> 4
EXHIBIT 10.1
Company) of any voting securities of the Company (the "Voting Securities") by
any Person (other than any member of the Knafel Family) immediately after which
such Person has Beneficial Ownership of (i) thirty percent (30%) or more of the
combined voting power of the Company's then outstanding Voting Securities and
(ii) a number of Voting Securities having combined voting power greater than
the combined voting power of the Voting Securities then Beneficially Owned by
members of the Knafel Family; provided, however, in determining whether a
Change in Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as defined below) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (A) an employee benefit plan (or a trust forming a
part thereof) maintained by (i) the Company or (ii) any Subsidiary, (B) the
Company or any Subsidiary, or (C) any Person in connection with a "Non-Control
Transaction" (as defined below);
(2) The individuals who, as of April 24, 1997,
are members of the Board (the "Incumbent Board"), cease for any reason to
constitute at least two-thirds of the Board; provided, however, that if the
election, or nomination for election by the Company's stockholders, of any new
director was approved by a vote of at least two-thirds of the Incumbent Board,
such new director shall, for purposes of the Plan, be considered as a member of
the Incumbent Board; provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest; or
(3) Approval by stockholders of the Company of:
(A) A merger, consolidation or
reorganization involving the Company, unless
(i) the stockholders of the Company
immediately before such merger, consolidation
or reorganization own, directly or
indirectly, immediately following such
merger, consolidation or reorganization, more
than fifty percent (50%) of the combined
voting power of the outstanding voting
securities of the corporation resulting from
such merger or consolidation or
reorganization (the "Surviving Corporation")
in substantially the same proportion as their
ownership of the Voting Securities
immediately before such merger, consolidation
or reorganization;
(ii) the individuals who were
members of the Incumbent Board immediately
prior to the execution of the agreement
providing for such merger, consolidation or
- 3 -
<PAGE> 5
EXHIBIT 10.1
reorganization constitute at least two-thirds
of the members of the governing board of
directors of the Surviving Corporation;
(iii) no Person (other than the
Company or any Subsidiary, any employee
benefit plan (or any trust forming a part
thereof) maintained by the Company, the
Surviving Corporation or any Subsidiary, or
any Person who, immediately prior to such
merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%)
or more of the then outstanding Voting
Securities) has Beneficial Ownership of
twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's
then outstanding voting securities; and
(iv) a transaction described in
clauses (i) through (iii) shall herein be
referred to as a "Non-Control Transaction";
(B) A complete liquidation or
dissolution of the Company; or
(C) An agreement for the sale or other
disposition of all or substantially all of the assets
of the Company to any Person (other than a transfer
to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by
reducing the number of Voting Securities outstanding, increases the
proportional number of shares beneficially owned by the Subject Person;
provided, however, that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Voting Securities
by the Company, and after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting Securities beneficially
owned by the Subject Person, then a Change in Control shall occur.
2.12 "Code" means the Internal Revenue Code of 1986, as
amended.
2.13 "Committee" means a committee, as described in
Section 3.1, appointed by the Board from time to time to administer the Plan
and to perform the functions set forth herein.
2.14 "Company" means BioReliance Corporation, a Delaware
corporation.
2.15 "Date of Grant" means the date designated by the
Committee as the date as of which it grants an Option or Award, which shall not
be earlier than the date on which the Committee approves the granting of such
Option or Award.
- 4 -
<PAGE> 6
EXHIBIT 10.1
2.16 "Director" means a director of the Company.
2.17 "Director Option" means an Option granted pursuant to
Section 6.
- 5 -
<PAGE> 7
EXHIBIT 10.1
2.18 "Disability" means:
(a) in the case of an Optionee or Grantee whose
employment with the Company or a Subsidiary is subject to the terms of an
employment agreement between such Optionee or Grantee and the Company or
Subsidiary, which employment agreement includes a definition of "Disability",
the term "Disability" as used in this Plan or any Agreement shall have the
meaning set forth in such employment agreement during the period that such
employment agreement remains in effect; and
(b) in all other cases, the term "Disability" as
used in this Plan or any Agreement shall mean a physical or mental infirmity
which impairs the Optionee's or Grantee's ability to perform substantially his
or her duties for a period of one hundred eighty (180) consecutive days.
2.19 "Disability Date" means the date which is six months
after the date on which an Optionee or Grantee is first absent from active
employment with the Company by reason of a Disability.
2.20 "Division" means any of the operating units or
divisions of the Company designated as a Division by the Committee.
2.21 "Dividend Equivalent Right" means a right to receive
all or some portion of the cash dividends that are or would be payable with
respect to Shares.
2.22 "Eligible Individual" means any director (other than
a Non-Employee Director), officer or employee of the Company or a Subsidiary,
or any consultant or advisor who is receiving cash compensation from the
Company or a Subsidiary, designated by the Committee as eligible to receive
Options or Awards subject to the conditions set forth herein.
2.23 "Employee Option" means an Option granted pursuant to
Section 5.
2.24 "Exchange Act" means the Securities Exchange Act of
1934, as amended.
2.25 "Fair Market Value" on any date means the closing
price of the Shares on such date on the principal national securities exchange
on which such Shares are listed or admitted to trading, or, if such Shares are
not so listed or admitted to trading, the closing price on such date as quoted
on the National Association of Securities Dealers Automated Quotation System or
such other market in which such prices are regularly quoted, or, if there have
been no published bid or asked quotations with respect to Shares on such date,
the Fair Market Value shall be the value established by the Board in good faith
and, in the case of an Incentive Stock Option, in accordance with Section 422
of the Code.
2.26 "Former Plans" means the Microbiological Associates,
Inc. 1988 Incentive Stock Option Plan, the Microbiological Associates, Inc.
1995 Non-Qualified Stock Option Plan, and the Magenta Corporation 1994
Incentive Stock Option Plan.
- 6 -
<PAGE> 8
EXHIBIT 10.1
2.27 "Grantee" means a person to whom an Award has been
granted under the Plan.
2.28 "Incentive Stock Option" means an Option satisfying
the requirements of Section 422 of the Code and designated by the Committee as
an Incentive Stock Option.
2.29 "Knafel Family" means (i) Sidney R. Knafel and/or
members of his "immediate family" (as defined in Rule 16a-1 promulgated under
the Exchange Act), (ii) a trust solely for the benefit of any of the
individuals referred to in clause (i) above; (iii) the guardian, conservator,
estate or other legal representative of any of the individuals referred to in
clause (i) above; and (iv) any corporation, partnership, limited liability
company or other entity all of the outstanding equity securities of which are
owned, directly or indirectly, by the individuals or entities referred to in
clause (i), (ii) or (iii) above.
2.30 "Non-Employee Director" means a director of the
Company who is a "Non-employee director" within the meaning of Rule 16b-3
promulgated under the Exchange Act.
2.31 "Nonqualified Stock Option" means an Option which is
not an Incentive Stock Option.
2.32 "Normal Retirement Date" means the date on which an
Optionee or Grantee terminates active employment with the Company on or after
attainment of age 65, but does not include termination by the Company for
Cause.
2.33 "Option" means a Nonqualified Stock Option, an
Incentive Stock Option, a Director Option, or any or all of them.
2.34 "Optionee" means a person to whom an Option has been
granted under the Plan.
2.35 "Outside Director" means a director of the Company
who is an "Outside Director" within the meaning of Section 162(m) of the Code
and the regulations promulgated thereunder.
2.36 "Parent" means any corporation which is a parent
corporation (within the meaning of Section 424(e) of the Code) with respect to
the Company.
2.37 "Performance Awards" means Performance Units,
Performance Shares or either or both of them.
2.38 "Performance Cycle" means the time period specified
by the Committee at the time Performance Awards are granted during which the
performance of the Company, a Subsidiary or a Division will be measured.
2.39 "Performance Objectives" has the meaning set forth in
Section 11.
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<PAGE> 9
EXHIBIT 10.1
2.40 "Performance Shares" means Shares issued or
transferred to an Eligible Individual under Section 11.
2.41 "Performance Units" means Performance Units granted
to an Eligible Individual under Section 11.
2.42 "Person" means "person" as such term is used for
purposes of Section 13(d) or 14(d) of the Exchange Act, including, without
limitation, any individual, firm, corporation, partnership, joint venture,
association, trust or other entity, or any group of Persons.
2.43 "Plan" means the BioReliance Corporation 1997
Incentive Plan, as amended and restated from time to time.
2.44 "Pooling Transaction" means an acquisition of the
Company in a transaction which is intended to be treated as a "pooling of
interests" under generally accepted accounting principles.
2.45 "Restricted Stock" means Shares issued or transferred
to an Eligible Individual pursuant to Section 10.
2.46 "Scientific Advisory Board" means the Scientific
Advisory Board of the Company.
2.47 "Shares" means the common stock, par value $.01 per
share, of the Company.
2.48 "Stock Appreciation Right" means a right to receive
all or some portion of the increase in the value of the Shares as provided in
Section 8 hereof.
2.49 "Subsidiary" means any corporation or other Person of
which a majority of its voting power or its equity securities or equity
interest is owned directly or indirectly by the Company.
2.50 "Successor Corporation" means a corporation, or a
parent or subsidiary thereof within the meaning of Section 424(a) of the Code,
which issues or assumes a stock option in a transaction to which Section 424(a)
of the Code applies.
2.51 "Ten-Percent Stockholder" means an Eligible
Individual, who, at the time an Incentive Stock Option is to be granted to him
or her, owns (within the meaning of Section 422(b)(6) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company, or of a Parent or a Subsidiary.
2.52 "Termination of Employment" means the later of (i) a
severance of the employer-employee relationship with the Company or (ii) the
resignation, removal or termination of an officer of the Company.
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<PAGE> 10
EXHIBIT 10.1
2.53 For the purpose of UK Approved Options, the following
terms and modifications shall apply, namely:
<TABLE>
<S> <C>
Agreement shall include an option certificate issued pursuant to Section 5.1
of the Plan.
Beneficiary shall include the Optionee's legal personal representatives or
executors (but so that, in the event of the insolvency of an
Optionee, all his UK Approved Options shall lapse).
Change in Capitalization a spin-off or other change which does not cause a variation of
share capital of the Company, shall not result in an adjustment to
the number, price or other terms of UK Approved Options, nor shall
any such adjustments be made without the prior approval of the UK
Inland Revenue.
Dividend Equivalent Right a UK Approved Option shall not carry a Dividend Equivalent Right.
Eligible Employee an employee (including a Full-Time director) of the Company or a
Subsidiary who is resident or ordinarily resident in the United
Kingdom at the Date of Grant of his Option, but excluding any
Excluded Person.
Option shall include a UK Approved Option unless otherwise stated in the
Plan.
Excluded Person any person who has (or within the preceding 12 months has had) a
material interest in the Company (if then a close company within
the meaning of Schedule 9 to the Taxes Act) or a company which is a
close company and either controls the Company or is a member of a
consortium which owns the Company.
Full-Time means required under his terms of employment to work for his
employing company or companies for at least 25 hours per week
(excluding meal breaks).
Performance Award The grant of a UK Approved Option shall not include a Performance
Award.
Stock Appreciation Right The grant of a UK Approved Option shall not include a Stock
Appreciation Right.
</TABLE>
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<PAGE> 11
EXHIBIT 10.1
<TABLE>
<S> <C>
Taxes Act Income and Corporation Taxes Act 1988 of the United Kingdom.
UK Approved Option means a non-transferable right to acquire Shares granted to an
Eligible Employee pursuant to Section 5 of the Plan and for the
time being subsisting.
</TABLE>
3. Administration.
3.1 The Plan shall be administered by the Committee,
which shall hold meetings at such times as may be necessary for the proper
administration of the Plan. The Committee shall keep minutes of its meetings.
A quorum shall consist of not fewer than two members of the Committee and a
majority of a quorum may authorize any action. Any decision or determination
reduced to writing and signed by a majority of all of the members of the
Committee shall be as fully effective as if made by a majority vote at a
meeting duly called and held. The Committee shall consist of at least two (2)
directors of the Company and may consist of the entire Board; provided,
however, that (A) if the Committee consists of less than the entire Board, each
member shall be a Non-employee Director and (B) to the extent necessary for any
Option or Award intended to qualify as performance-based compensation under
Section 162(m) of the Code to so qualify, each member of the Committee, whether
or not it consists of the entire Board, shall be an Outside Director. No
member of the Committee shall be liable for any action, failure to act,
determination or interpretation made in good faith with respect to this Plan or
any transaction hereunder, except for liability arising from his or her own
willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the Committee
for all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.
3.2 Subject to the express terms and conditions set forth
herein, the Committee shall have the power from time to time to:
(a) determine those Eligible Individuals to whom
Employee Options shall be granted under the Plan and the number of such
Employee Options to be granted and to prescribe the terms and conditions (which
need not be identical) of each such Employee Option, including the purchase
price per Share subject to each Employee Option, and make any amendment or
modification to any applicable Agreement consistent with the terms of the Plan;
- 10 -
<PAGE> 12
EXHIBIT 10.1
(b) select those Eligible Individuals to whom
Awards shall be granted under the Plan and to determine the number of Stock
Appreciation Rights, Performance Awards, Shares of Restricted Stock and/or
Dividend Equivalent Rights to be granted pursuant to each Award, the terms and
conditions of each Award, including the restrictions or Performance Objectives
relating to Awards and the maximum value of any Award, and make any amendment
or modification to any Agreement consistent with the terms of the Plan;
(c) accelerate an Employee Option or Award and to
waive restrictive conditions for an Employee Option or Award (including,
without limitation, any forfeiture conditions), in such circumstances as the
Committee deems appropriate, subject to any express limitations of the Plan,
including, without limitation, Section 16(b); provided, however, that nothing
in this Section 3.2(c) shall be construed to limit the Committee's authority
under other provisions of the Plan. In the case of any acceleration of an
Employee Option or Award after the attainment of the applicable Performance
Objective(s), the amount payable shall be discounted to its present value using
an interest rate equal to Moody's Average Corporate Bond Yield for the month
preceding the month in which such acceleration occurs. This paragraph shall
not apply in respect of a UK Approved Option.
(d) to construe and interpret the Plan and the
Options and Awards granted hereunder and to establish, amend and revoke rules
and regulations for the administration of the Plan, including, without
limitation, correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the extent
it shall deem necessary or advisable so that the Plan complies with applicable
law including Rule 16b-3 under the Exchange Act and the Code to the extent
applicable, and otherwise to make the Plan fully effective. All decisions and
determinations by the Committee in the exercise of this power shall be final,
binding and conclusive upon the Company, its Subsidiaries, the Optionees and
Grantees, and all other persons having any interest therein;
(e) to determine the duration and purposes for
leaves of absence which may be granted to an Optionee or Grantee on an
individual basis without constituting a termination of employment or service
for purposes of the Plan;
(f) to exercise its sole discretion with respect
to the powers and rights granted to it as set forth in the Plan; and
(g) generally, to exercise such powers and to
perform such acts as are deemed necessary or advisable to promote the best
interests of the Company with respect to the Plan.
4. Stock Subject to the Plan.
4.1 The maximum number of Shares that may be made the
subject of Options and Awards granted under the Plan is 500,000 Shares, plus
the aggregate number of Shares that would have been available for new awards
under the Former Plans after the
- 11 -
<PAGE> 13
EXHIBIT 10.1
Effective Date of this Plan (but for the prospective termination of the Former
Plans), including the Shares that were available for new grants under each of
the Former Plans as of the Effective Date of this Plan and the Shares that are
subject to awards granted under either of the Former Plans which Shares are not
issued prior to the expiration or other termination of such awards (including
Shares subject to awards that expire or terminate after the expiration of the
term of a Former Plan); provided, however, that in the aggregate, not more than
one-third of the number of allotted Shares may be made the subject of
Restricted Stock Awards under Section 10 of the Plan; and provided, further,
that the aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options granted under the Plan become exercisable for the first
time by an Optionee during any calendar year shall not exceed $100,000. Upon a
Change in Capitalization, the maximum number of Shares referred to in the
preceding sentence shall be adjusted in number and kind pursuant to Section 13.
The Company shall reserve for the purposes of the Plan, out of its authorized
but unissued Shares or out of Shares held in the Company's treasury, or partly
out of each, such number of Shares as shall be determined by the Board.
4.2 Upon the granting of an Option or an Award, the
number of Shares available under Section 4.1 for the granting of further
Options and Awards shall be reduced as follows:
(a) In connection with the granting of an Option
or an Award (other than the granting of a Performance Unit denominated in
dollars), the number of Shares shall be reduced by the number of Shares in
respect of which the Option or Award is granted or denominated.
(b) In connection with the granting of a
Performance Unit denominated in dollars, the number of Shares shall be reduced
by an amount equal to the quotient of (i) the dollar amount in which the
Performance Unit is denominated, divided by (ii) the Fair Market Value of a
Share on the date the Performance Unit is granted.
4.3 Whenever any outstanding Option or Award or portion
thereof expires, is canceled or is otherwise terminated for any reason without
having been exercised or payment having been made in respect of the entire
Option or Award (including any outstanding Options under any of the Former
Plans), the Shares allocable to the expired, canceled or otherwise terminated
portion of the Option or Award may again be the subject of Options or Awards
granted hereunder.
5. Option Grants for Eligible Individuals.
5.1 Authority of Committee. Subject to the provisions of
the Plan, the Committee shall have full and final authority to select those
Eligible Individuals who will receive Employee Options, and the terms and
conditions of the grant to such Eligible Individuals shall be set forth in an
Agreement. The terms and conditions of UK Approved Options shall be set forth
in a certificate executed as a deed by the Company and UK Approved Options may
only be granted to Eligible Employees.
- 12 -
<PAGE> 14
EXHIBIT 10.1
5.2 Purchase Price. The purchase price (which may be
greater than, less than or equal to the Fair Market Value on the Date of Grant)
or the manner in which the purchase price is to be determined for Shares under
each Employee Option shall be determined by the Committee and set forth in the
Agreement; provided, however, that the purchase price per Share under each
Incentive Stock Option shall not be less than 100% of the Fair Market Value of
a Share on the Date of Grant (110% in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder).
(a) The purchase price of a Share under a UK
Approved Option shall be not less than:
(i) its market value as determined by
the Committee in accordance with the provisions of Part VIII of the Taxation of
Chargeable Gains Act 1992 of the United Kingdom and approved prior to the grant
of the related UK Approved Option by the Shares Valuation Division of the UK
Inland Revenue; or
(ii) its nominal amount
or (when applicable) such price as from time to time adjusted pursuant to the
Plan.
(b) No UK Approved Option shall be granted under
this Plan to an Eligible Employee if the aggregate purchase price of the Shares
comprised therein, when added to the aggregate of the amounts for which shares
of the Company may be acquired under any subsisting UK Approved Options granted
to him under the Plan or any other scheme (not being a savings-related share
option scheme) approved under Schedule 9 to the Taxes Act and established by
the Company or a Subsidiary, would exceed, or further exceed, pounds sterling
30,000 or such other limit as may apply from time to time under paragraph 28 of
Schedule 9 to the Taxes Act (the "Limit"). For the purposes of determining
whether an Option is subject to the Limit, Options which fell to be treated
under the provisions of Section 115 of the Finance Act 1996 of the United
Kingdom as unapproved options shall be treated as having been granted under a
scheme other than one which is approved under Schedule 9 to the Taxes Act.
5.3 Maximum Duration. Employee Options granted hereunder
shall be for such term as the Committee shall determine, provided that an
Incentive Stock Option shall not be exercisable after the expiration of ten
(10) years from the date it is granted (five (5) years in the case of an
Incentive Stock Option granted to a Ten-Percent Stockholder) and a Nonqualified
Stock Option shall not be exercisable after the expiration of ten (10) years
from the Date of Grant. The Committee may, subsequent to the granting of any
Employee Option (other than a UK Approved Option), extend the term thereof, but
in no event shall the term as so extended exceed the maximum term provided for
in the preceding sentence.
5.4 Exercisability. Subject to Sections 5.5 and 7.3,
each Employee Option shall become exercisable in such installments (which need
not be equal) and at such times as may be designated by the Committee and set
forth in the Agreement. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time
- 13 -
<PAGE> 15
EXHIBIT 10.1
after becoming exercisable, but not later than the date the Employee Option
expires. No UK Approved Option shall become exercisable in any circumstances
by an Optionee who is at the time of such intended exercise an Excluded Person.
5.5 Termination. Except as provided in Section 12, and
unless otherwise provided by the Committee, in its sole discretion, in the
applicable Agreement, the following provisions shall apply to Employee Options
upon a Termination of Employment:
(a) Subject to Section 5.3 and save as provided in
Section 5.5(d), unless otherwise determined by the Committee at the time of
grant (and set forth in the applicable Agreement) or at a later date, except in
the case of Disability, retirement on or after the Optionee's Normal Retirement
Date and death as provided in Sections 5.5(b) and 5.5(c) below, if an Optionee
of an Employee Option has a Termination of Employment with the Company or a
Subsidiary, any unexercised Employee Option held by such Optionee shall expire
ninety (90) days after the Optionee has a Termination of Employment for any
reason other than a termination for Cause, and such Employee Option may only be
exercised by the Optionee or his or her Beneficiary to the extent that the
Employee Option or a portion thereof was exercisable on the date of Termination
of Employment; provided, however, that no Employee Option may be exercised
after the expiration date specified for the particular Employee Option in the
Employee Option grant. If the Optionee's Termination of Employment arises as a
result of a termination for Cause, then, unless the Committee determines
otherwise at the time of the Termination of Employment, any unexercised Options
held by such Optionee shall terminate and expire concurrently with the
Optionee's Termination of Employment.
(b) Subject to Section 5.3, unless otherwise determined
by the Committee at the time of grant (and set forth in the applicable
Agreement) or at a later date, if an Optionee becomes disabled within the
meaning of Section 2.18 hereof or retires on or after the Optionee's Normal
Retirement Date, any unexercised Employee Option held by such disabled or
retired Optionee shall expire one (1) year after the Disability Date or date of
Termination of Employment by reason of retirement, as the case may be, and such
Option may only be exercised by the Optionee or his or her Beneficiary to the
extent that the Employee Option or a portion thereof was exercisable on the
Disability Date or the date of Termination of Employment by reason of
retirement, as the case may be; provided, however, no Employee Option may be
exercised after the expiration date specified for the particular Employee
Option in the Employee Option grant.
(c) Subject to Section 5.3, unless otherwise determined
by the Committee at the time of grant (and set forth in the applicable
Agreement) or at a later date, if an Optionee dies while still employed by the
Company, the Options which the Optionee was entitled to exercise on the date of
the Optionee's death may be exercised at any time after the Optionee's death by
the Optionee's Beneficiary; provided, however, that no Option may be exercised
after the earlier of: (i) one (1) year after the Optionee's death or (ii) the
expiration date specified for the particular Option in the Option Agreement.
If an Optionee dies after his or her Termination of Employment, then the
Options which the Optionee was entitled to
- 14 -
<PAGE> 16
EXHIBIT 10.1
exercise on the date of the Optionee's death may be exercised by his or her
Beneficiary within the period specified in Sections 5.5(a) or 5.5(b), as the
case may be.
(d) Subject to Section 5.3, upon an Optionee's
Termination of Employment following a Change in Control, each Option held by
the Optionee that was exercisable as of the date of such Termination of
Employment shall remain exercisable for a period ending not before the earlier
of (A) the first anniversary of the Termination of Employment or (B) the
expiration of the stated term of the Option.
5.6 Modification. No modification of an Employee Option
shall adversely alter or impair any rights or obligations under the Employee
Option without the Optionee's consent.
6. Option Grants for Non-Employee Directors and Scientific
Advisory Board Members.
6.1 Grant. Director Options shall be granted (i) to
Non-Employee Directors who become members of the Board after April 24, 1997
upon election or appointment, (ii) to all Non-Employee Directors who are
members of the Board, (iii) to members of the Scientific Advisory Board who
become members of the Scientific Advisory Board after April 24, 1997 upon
election or appointment and (iv) to all members of the Scientific Advisory
Board as follows:
(a) Initial Grant. Each Non-Employee Director
who becomes a Director after April 24, 1997 shall, upon becoming a Director, be
granted a Director Option in respect of 2,000 Shares and each member of the
Scientific Advisory Board who becomes a member of the Scientific Advisory Board
after April 24, 1997 shall, upon becoming a member of the Scientific Advisory
Board, be granted a Director Option in respect of 1,000 Shares.
(b) Annual Grant. Each Non-Employee Director
shall be granted a Director Option in respect of 1,000 Shares annually on the
first Business Day on or after January 1 of each calendar year that the Plan is
in effect provided that the Non-Employee Director is a Director on such date
and each member of the Scientific Advisory Board shall be granted a Director
Option in respect of 500 Shares annually on the first Business Day on or after
January 1 of each calendar year that the Plan is in effect provided that the
member of the Scientific Advisory Board is a member on such date; provided,
however, that a Director or member of the Scientific Advisory Board shall not
be entitled to receive an annual grant pursuant to this Section 6.1(b) for the
calendar year in which such Director or member of the Scientific Advisory Board
is first elected or appointed to the Board or to the Scientific Advisory Board,
as the case may be.
All Director Options shall be evidenced by an Agreement
containing such other terms and conditions not inconsistent with the provisions
of this Plan as determined by the Board; provided, however, that such terms
shall not vary the price, amount or timing
- 15 -
<PAGE> 17
EXHIBIT 10.1
of Director Options provided under this Section 6, including provisions dealing
with vesting, forfeiture and termination of such Director Options.
6.2 Purchase Price. The purchase price for Shares under
each Director Option shall be equal to 100% of the Fair Market Value of such
Shares on the Date of Grant.
6.3 Vesting. Subject to Sections 6.4 and 7.3, each
Director Option shall become fully vested and exercisable with respect to 100%
of the Shares subject thereto on the third anniversary of the Date of Grant;
provided, however, that the Optionee continues to serve as a Director or member
of the Scientific Advisory Board as of such date. If an Optionee ceases to
serve as a Director or member of the Scientific Advisory Board for any reason,
the Optionee shall have no rights with respect to any Director Option which has
not then vested pursuant to the preceding sentence and the Optionee shall
automatically forfeit any Director Option which remains unvested.
6.4 Duration. Each Director Option shall terminate on
the date which is the tenth anniversary of the Date of Grant, unless terminated
earlier as follows:
(a) If an Optionee's service as a Director or
member of the Scientific Advisory Board terminates for any reason other than
Disability, death or Cause, the Optionee may for a period of three (3) months
after such termination exercise his or her Option to the extent, and only to
the extent, that such Option or portion thereof was vested and exercisable as
of the date the Optionee's service as a Director or member of the Scientific
Advisory Board terminated, after which time the Option shall automatically
terminate in full.
(b) If an Optionee's service as a Director or
member of the Scientific Advisory Board terminates by reason of the Optionee's
resignation or removal due to Disability, the Optionee may, for a period of one
(1) year after such termination, exercise his or her Option to the extent, and
only to the extent, that such Option or portion thereof was vested and
exercisable, as of the date the Optionee's service as Director or member of the
Scientific Advisory Board terminated, after which time the Option shall
automatically terminate in full.
(c) If an Optionee's service as a Director or
member of the Scientific Advisory Board terminates for Cause, the Option
granted to the Optionee hereunder shall immediately terminate in full and no
rights thereunder may be exercised.
(d) If an Optionee dies while a Director or
member of the Scientific Advisory Board or within three (3) months after
termination of service as a Director or member of the Scientific Advisory Board
as described in clause (a) of this Section 6.4 or within twelve (12) months
after termination of service as a Director or member of the Scientific Advisory
Board as described in clause (b) of this Section 6.4, the Option granted to the
Optionee may be exercised at any time within twelve (12) months after the
Optionee's death by the person or persons to whom such rights under the Option
shall pass by will, or by the laws of descent or distribution, after which time
the Option shall terminate in full; provided, however, that an Option may be
exercised to the extent, and only to the extent, that
- 16 -
<PAGE> 18
EXHIBIT 10.1
the Option or portion thereof was exercisable on the date of death or earlier
termination of the Optionee's services as a Director or member of the
Scientific Advisory Board.
(e) In the event an Optionee's service as a
Director or member of the Scientific Advisory Board of the Company is
terminated by the Company following a Change in Control, each Option held by
the Optionee that was exercisable as of the date of termination of the
Optionee's employment or service shall remain exercisable for a period ending
not before the earlier of (A) the first anniversary of the termination of the
Optionee's service as a Director or member of the Scientific Advisory Board or
(B) the expiration of the stated term of the Option.
7. Terms and Conditions Applicable to All Options.
7.1 Method of Exercise.
(a) The exercise of an Option shall be made only
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
Shares to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid, as determined by the Committee in its sole discretion, in either
of the following forms (or any combination thereof): (i) cash or (ii) the
transfer of Shares to the Company upon such terms and conditions as determined
by the Committee. In addition, both Employee Options and Director Options may
be exercised through a registered broker-dealer pursuant to such cashless
exercise procedures (other than Share withholding) which are, from time to
time, deemed acceptable by the Committee. Any Shares transferred to the
Company (or withheld upon exercise) as payment of the purchase price under an
Option shall be valued at their Fair Market Value on the day preceding the date
of exercise of such Option. The Optionee shall deliver the Agreement
evidencing the Option to the Secretary of the Company who shall endorse thereon
a notation of such exercise and return such Agreement to the Optionee. No
fractional Shares (or cash in lieu thereof) shall be issued upon exercise of an
Option and the number of Shares that may be purchased upon exercise shall be
rounded to the nearest number of whole Shares. Notwithstanding anything to the
contrary contained herein, payment on exercise of UK Approved Options shall be
made only in cash.
(b) If the Fair Market Value of the Shares with
respect to which the Option is being exercised exceeds the exercise price of
such Option, an Optionee may, instead of exercising an Option as provided in
Section 7.1(a), request that the Committee authorize payment to the Optionee of
the difference between the Fair Market Value of part or all of the Shares which
are the subject of the Option and the exercise price of the Option, such
difference to be determined as of the date the Committee receives the request
from the Optionee. The Committee, in its sole discretion, may grant or deny
such a request from an Optionee with respect to part or all of the Shares as to
which the Option is then exercisable and, to the extent granted, shall direct
the Company to make the payment to the Optionee either in cash or in Shares or
in any combination thereof; provided, however, that payment in
- 17 -
<PAGE> 19
EXHIBIT 10.1
Shares shall be made based upon the Fair Market Value of Shares as of the date
the Committee received the request from the Optionee. An Option shall be
deemed to have been exercised and shall be canceled to the extent that the
Committee grants a request pursuant to this Section 7.1(b). The provisions of
this paragraph shall not apply to holders of UK Approved Options.
7.2 Rights of Optionees. No Optionee shall be deemed for
any purpose to be the owner of any Shares subject to any Option unless and
until (i) the Option shall have been exercised pursuant to the terms thereof,
(ii) the Company shall have issued and delivered Shares to the Optionee, and
(iii) the Optionee's name shall have been entered as a stockholder of record on
the books of the Company. Thereupon, the Optionee shall have full voting,
dividend and other ownership rights with respect to such Shares, subject to
such terms and conditions as may be set forth in the applicable Agreement. The
preceding sentence shall not apply to any Optionee holding a UK Approved
Option. If under the terms of a resolution passed or an announcement made by
the Company prior to the date of exercise of a UK Approved Option, a dividend
is to be or is proposed to be paid to holders of Shares by reference to a
record date after such date of exercise, any Shares to be issued upon such
exercise of a UK Approved Option will not rank for such dividend. Subject as
aforesaid, the Shares so to be issued shall be identical and rank pari passu in
all respects with the fully paid Shares then in issue.
7.3 Effect of Change in Control. In the event of a
Change in Control, all Options outstanding on the date of such Change in
Control shall become immediately and fully exercisable. In addition, to the
extent set forth in an Agreement evidencing the grant of an Employee Option, an
Optionee will be permitted to surrender to the Company for cancellation within
sixty (60) days after such Change in Control any Employee Option or portion of
an Employee Option to the extent not yet exercised and the Optionee will be
entitled to receive a cash payment in an amount equal to the excess, if any, of
(x) (A) in the case of a Nonqualified Stock Option, the greater of (1) the Fair
Market Value, on the date preceding the date of surrender, of the Shares
subject to the Employee Option or portion thereof surrendered or (2) the
Adjusted Fair Market Value of the Shares subject to the Employee Option or
portion thereof surrendered or (B) in the case of an Incentive Stock Option,
the Fair Market Value, on the date preceding the date of surrender, of the
Shares subject to the Employee Option or portion thereof surrendered, over (y)
the aggregate purchase price for such Shares under the Employee Option or
portion thereof surrendered.
8. Stock Appreciation Rights. The Committee may in its
sole discretion, either alone or in connection with the grant of an Employee
Option, grant Stock Appreciation Rights in accordance with the Plan, the terms
and conditions of which shall be set forth in an Agreement. If granted in
connection with an Option, a Stock Appreciation Right shall cover the same
Shares covered by the Option (or such lesser number of Shares as the Committee
may determine) and shall, except as provided in this Section 8, be subject to
the same terms and conditions as the related Option.
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EXHIBIT 10.1
8.1 Time of Grant. A Stock Appreciation Right may be
granted (i) at any time if unrelated to an Option, or (ii) if related to an
Option, either at the time of grant, or at any time thereafter during the term
of the Option.
8.2 Stock Appreciation Right Related to an Option.
(a) Exercise. Subject to Section 8.8, a Stock
Appreciation Right granted in connection with an Option shall be exercisable at
such time or times and only to the extent that the related Options are
exercisable (including, without limitation, exercisability upon Termination of
Employment), and will not be transferable except to the extent the related
Option may be transferable. A Stock Appreciation Right granted in connection
with an Incentive Stock Option shall be exercisable only if the Fair Market
Value of a Share on the date of exercise exceeds the purchase price specified
in the related Incentive Stock Option Agreement.
(b) Treatment of Related Options and Stock
Appreciation Rights Upon Exercise. Upon the exercise of a Stock Appreciation
Right granted in connection with an Option, the Option shall be canceled to the
extent of the number of Shares as to which the Stock Appreciation Right is
exercised, and upon the exercise of an Option granted in connection with a
Stock Appreciation Right, the Stock Appreciation Right shall be canceled to the
extent of the number of Shares as to which the Option is exercised or
surrendered.
8.3 Stock Appreciation Right Unrelated to an Option.
(a) Terms. Stock Appreciation Rights unrelated
to Options shall contain such terms and conditions as to exercisability
(subject to Sections 8.3(b) and 8.8), vesting and duration as the Committee
shall determine, but in no event shall they have a term of greater than ten
(10) years.
(b) Termination. Except as provided in Section
8.8 and subject to Section 8.3(a), and unless otherwise provided by the
Committee, in its sole discretion, in the applicable Agreement, upon a
Grantee's Termination of Employment, a Stock Appreciation Right shall be
exercisable by the Grantee to the same extent that an Employee Option would be
exercisable by an Optionee upon the Optionee's Termination of Employment under
the provisions of Sections 5.5(a) through (d); provided, however, no Stock
Appreciation Right may be exercised after the expiration date specified for the
particular Stock Appreciation Right in the applicable Agreement.
8.4 Amount Payable. Upon exercise of a Stock
Appreciation Right, the Grantee shall be entitled to receive an amount
determined by multiplying (x) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
(A) in the case of a Stock Appreciation Right related to an Option, the per
Share purchase price under the related option or (B) in the case of a Stock
Appreciation Right unrelated to an Option, the Fair Market Value of a Share on
the date the Stock Appreciation Right was granted, by (y) the number of Shares
as to which the Stock Appreciation Right is being exercised. Notwithstanding
the foregoing, the Committee may
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EXHIBIT 10.1
limit in any manner the amount payable with respect to any Stock Appreciation
Right by including such a limit in the Agreement evidencing the Stock
Appreciation Right at the time it is granted.
8.5 Method of Exercise. Stock Appreciation Rights shall
be exercised by a Grantee only by a written notice delivered in person or by
mail to the Secretary of the Company at the Company's principal executive
office, specifying the number of Shares with respect to which the Stock
Appreciation Right is being exercised. If requested by the Committee, the
Grantee shall deliver the Agreement evidencing the Stock Appreciation Right
being exercised and the Agreement evidencing any related Option to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such Agreement to the Grantee.
8.6 Form of Payment. Payment of the amount determined
under Section 8.4 may be made in the sole discretion of the Committee solely in
whole Shares in a number determined at their Fair Market Value on the date
preceding the date of exercise of the Stock Appreciation Right, or solely in
cash, or in a combination of cash and Shares. If the Committee decides to make
full payment in Shares and the amount payable results in a fractional Share,
payment for the fractional Share will be made in cash.
8.7 Modification. No modification of an Award shall
adversely alter or impair any rights or obligations under the Agreement without
the Grantee's consent.
8.8 Effect of Change in Control. In the event of a
Change in Control, all Stock Appreciation Rights shall become immediately and
fully exercisable. In addition, to the extent set forth in an Agreement
evidencing the grant of a Stock Appreciation Right (but not with respect to any
Stock Appreciation Right granted in connection with an Incentive Stock Option),
a Grantee will be permitted to surrender to the Company for cancellation within
sixty (60) days after such Change in Control any Stock Appreciation Right or
portion of a Stock Appreciation Right to the extent not yet exercised and the
Grantee will be entitled to receive a payment from the Company in cash or
Shares, in either case, with a value equal to the excess, if any, of (A) the
Adjusted Fair Market Value, on the date preceding the date of exercise, of the
Shares over (B) the aggregate Fair Market Value, on the date the Stock
Appreciation was granted, of the Shares subject to the Stock Appreciation Right
or portion thereof exercised.
9. Dividend Equivalent Rights. Dividend Equivalent
Rights may be granted to Eligible Individuals in tandem with an Option or
Award. The terms and conditions (including, without limitation, terms and
conditions relating to a Change in Control) applicable to each Dividend
Equivalent Right shall be specified in the Agreement under which the Dividend
Equivalent Right is granted. Amounts payable in respect of Dividend Equivalent
Rights may be payable currently or deferred until the lapsing of restrictions
on such Dividend Equivalent Rights or until the vesting, exercise, payment,
settlement or other lapse of restrictions on the Option or Award to which the
Dividend Equivalent Rights relate. In the event that the amount payable in
respect of Dividend
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EXHIBIT 10.1
Equivalent Rights are to be deferred, the Committee shall determine whether
such amounts are to be held in cash or reinvested in Shares or deemed
(notionally) to be reinvested in Shares. If amounts payable in respect of
Dividend Equivalent Rights are to be held in cash, there may be credited at the
end of each year (or portion thereof) interest on the amount of the account at
the beginning of the year at a rate per annum as the Committee, in its sole
discretion, may determine. Dividend Equivalent Rights may be settled in cash
or Shares or a combination thereof, in a single installment or multiple
installments. With respect to Dividend Equivalent Rights granted in tandem with
an Option, the Agreement may provide that the Optionee may elect to have
amounts payable in respect of such Dividend Equivalent Rights applied against
the exercise price of such Option. To the extent necessary for any Dividend
Equivalent Right intended to qualify as performance-based compensation under
Section 162(m) of the Code to so qualify, the terms and conditions of the
Dividend Equivalent Right shall be such that payment of the Dividend Equivalent
Right is contingent upon the attainment of specified Performance Objectives
within the Performance Cycle, as provided for in Section 11, and such Dividend
Equivalent Right shall be treated as a Performance Award for purposes of
Sections 11 and 16(b).
10. Restricted Stock.
10.1 Grant. The Committee may grant Awards to Eligible
Individuals of Restricted Stock, which shall be evidenced by an Agreement
between the Company and the Grantee. Each Agreement shall contain such
restrictions, terms and conditions as the Committee may, in its sole
discretion, determine and (without limiting the generality of the foregoing)
such Agreements may require that an appropriate legend be placed on Share
certificates. Awards of Restricted Stock shall be subject to the terms and
provisions set forth below in this Section 10.
10.2 Rights of Grantee. Shares of Restricted Stock
granted pursuant to an Award hereunder shall be issued in the name of the
Grantee as soon as reasonably practicable after the Date of Grant provided that
the Grantee has executed an Agreement evidencing the Award, the appropriate
blank stock powers and, in the sole discretion of the Committee, an escrow
agreement and any other documents which the Committee may require as a
condition to the issuance of such Shares. If a Grantee shall fail to execute
the Agreement evidencing a Restricted Stock Award, the appropriate blank stock
powers and, in the sole discretion of the Committee, an escrow agreement and
any other documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award shall
be null and void. At the sole discretion of the Committee, Shares issued in
connection with a Restricted Stock Award shall be deposited together with the
stock powers with an escrow agent (which may be the Company) designated by the
Committee. Unless the Committee determines otherwise and as set forth in the
Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall
have all of the rights of a stockholder with respect to such Shares, including
the right to vote the Shares and to receive all dividends or other
distributions paid or made with respect to the Shares.
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EXHIBIT 10.1
10.3 Non-transferability. Until all restrictions upon the
Shares of Restricted Stock awarded to a Grantee shall have lapsed in the manner
set forth in Section 10.4, such Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated, nor
shall they be delivered to the Grantee.
10.4 Lapse of Restrictions.
(a) Generally. Subject to Section 10.4(b),
restrictions upon Shares of Restricted Stock awarded hereunder shall lapse at
such time or times and on such terms and conditions as the Committee may
determine. The Agreement evidencing the Award shall set forth any such
restrictions.
(b) Effect of Change in Control. Unless the
Committee shall determine otherwise at the time of the grant of an Award of
Restricted Stock, the restrictions upon Shares of Restricted Stock shall lapse
upon a Change in Control. The Agreement evidencing the Award shall set forth
any such provisions.
10.5 Terms of Restricted Stock.
(a) Forfeiture of Restricted Stock. Subject to
Sections 10.4(b) and 10.5(b), all Restricted Stock shall be forfeited and
returned to the Company and all rights of the Grantee with respect to such
Restricted Stock shall terminate unless the Grantee continues in the service of
the Company as an employee until the expiration of the forfeiture period for
such Restricted Stock and satisfies any and all other conditions set forth in
the Agreement. The Committee, in its sole discretion, shall determine the
forfeiture period (which may, but need not, lapse in installments) and any
other terms and conditions applicable with respect to any Restricted Stock
Award.
(b) Waiver of Forfeiture Period. Notwithstanding
anything contained in this Section 10 to the contrary, the Committee may, in
its sole discretion, waive the forfeiture period and any other conditions set
forth in any Agreement under appropriate circumstances (including, without
limitation, the death, Disability or retirement of the Grantee or a material
change in circumstances arising after the Date of Grant) and subject to such
terms and conditions (including, without limitation, forfeiture of a
proportionate number of the Restricted Stock) as the Committee shall deem
appropriate, provided that the Grantee shall at that time have completed at
least one (1) year of employment after the Date of Grant.
10.6 Modification or Substitution. Subject to the terms
of the Plan, including, without limitation, Section 16(b), the Committee may
modify outstanding Awards of Restricted Stock or accept the surrender of
outstanding Shares of Restricted Stock (to the extent the restrictions on such
Shares have not yet lapsed) and grant new Awards in substitution for them.
Notwithstanding the foregoing, no modification of an Award shall adversely
alter or impair any rights or obligations under the Agreement without the
Grantee's consent.
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EXHIBIT 10.1
10.7 Treatment of Dividends. At the time an Award of
Shares of Restricted Stock is granted, the Committee may, in its sole
discretion, determine that the payment to the Grantee of dividends, or a
specified portion thereof, declared or paid on such Shares by the Company shall
be (i) deferred until the lapsing of the restrictions imposed upon such Shares
and (ii) held by the Company for the account of the Grantee until such time.
In the event that dividends are to be deferred, the Committee shall determine
whether such dividends are to be reinvested in Shares (which shall be held as
additional Shares of Restricted Stock) or held in cash. If deferred dividends
are to be held in cash, there may be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its sole discretion, may
determine. Payment of deferred dividends in respect of Shares of Restricted
Stock (whether held in cash or as additional Shares of Restricted Stock),
together with interest accrued thereon, if any, shall be made upon the lapsing
of restrictions imposed on the Shares in respect of which the deferred
dividends were paid, and any dividends deferred (together with any interest
accrued thereon) in respect of any Shares of Restricted Stock shall be
forfeited upon the forfeiture of such Shares.
10.8 Delivery of Shares. Upon the lapse of the
restrictions on Shares of Restricted Stock, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.
11. Performance Awards.
11.1 (a) Performance Objectives. Performance
Objectives for Performance Awards may be expressed in terms of (i) earnings per
Share, (ii) Share price, (iii) pre-tax profits, (iv) net earnings, (v) return
on equity or assets, (vi) revenues, (vii) EBITDA, (viii) market share or market
penetration or (ix) any combination of the foregoing, and may be determined
before or after accounting changes, special charges, foreign currency effects,
acquisitions, divestitures or other extraordinary events. Performance
Objectives may be in respect of the performance of the Company and its
Subsidiaries (which may be on a consolidated basis), a Subsidiary or a
Division. Performance Objectives may be absolute or relative and may be
expressed in terms of a progression within a specified range. The Performance
Objectives with respect to a Performance Cycle shall be established in writing
by the Committee by the earlier of (i) the date on which a quarter of the
Performance Cycle has elapsed or (ii) the date which is ninety (90) days after
the commencement of the Performance Cycle, and in any event, while the
performance relating to the Performance Objectives remains substantially
uncertain.
(b) Determination of Performance. Prior to the
vesting, payment, settlement or lapsing of any restrictions with respect to any
Performance Award made to a Grantee who is subject to Section 162(m) of the
Code, the Committee shall certify in writing that the applicable Performance
Objectives have been satisfied.
11.2 Performance Units. The Committee, in its sole
discretion, may grant Awards of Performance Units to Eligible Individuals, the
terms and conditions of which shall
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EXHIBIT 10.1
be set forth in an Agreement between the Company and the Grantee. Performance
Units shall be denominated in Shares or dollars and, contingent upon the
attainment of specified Performance Objectives within the Performance Cycle,
represent the right to receive payment as provided in Section 11.2(b) depending
on the level of Performance Objective attainment. Each Agreement shall specify
the number of Performance Units to which it relates, the Performance Objectives
which must be satisfied in order for the Performance Units to vest and the
Performance Cycle within which such Performance Objectives must be satisfied.
(a) Vesting and Forfeiture. Subject to Sections
11.1(b) and 11.4, a Grantee shall become vested with respect to the Performance
Units to the extent that the Performance Objectives set forth in the Agreement
are satisfied for the Performance Cycle.
(b) Payment of Awards. Payment to Grantees in
respect of vested Performance Units shall be made as soon as practicable after
the last day of the Performance Cycle to which such Award relates unless the
Agreement evidencing the Award provides for the deferral of payment, in which
event the terms and conditions of the deferral shall be set forth in the
Agreement. Subject to Section 11.4, such payments may be made entirely in
Shares valued at their Fair Market Value as of the last day of the applicable
Performance Cycle or such other date specified by the Committee, entirely in
cash, or in such combination of Shares and cash as the Committee in its sole
discretion shall determine at any time prior to such payment.
11.3 Performance Shares. The Committee, in its sole
discretion, may grant Awards of Performance Shares to Eligible Individuals, the
terms and conditions of which shall be set forth in an Agreement between the
Company and the Grantee. Each Agreement may require that an appropriate legend
be placed on Share certificates. Awards of Performance Shares shall be subject
to the following terms and provisions:
(a) Rights of Grantee. The Committee shall
provide at the time an Award of Performance Shares is made the time or times at
which the actual Shares represented by such Award shall be issued in the name
of the Grantee; provided, however, that no Performance Shares shall be issued
until the Grantee has executed an Agreement evidencing the Award, the
appropriate blank stock powers and, in the sole discretion of the Committee, an
escrow agreement and any other documents which the Committee may require as a
condition to the issuance of such Performance Shares. If a Grantee shall fail
to execute the Agreement evidencing an Award of Performance Shares, the
appropriate blank stock powers and, in the sole discretion of the Committee, an
escrow agreement and any other documents which the Committee may require within
the time period prescribed by the Committee at the time the Award is granted,
the Award shall be null and void. At the sole discretion of the Committee,
Shares issued in connection with an Award of Performance Shares shall be
deposited together with the stock powers with an escrow agent (which may be the
Company) designated by the Committee. Except as restricted by the terms of the
Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall
have, in the sole discretion of the Committee, all of the rights of a
stockholder with respect to such
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EXHIBIT 10.1
Shares, including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares.
(b) Non-transferability. Until any restrictions
upon the Performance Shares awarded to a Grantee shall have lapsed in the
manner set forth in Sections 11.3(c) or 11.4, such Performance Shares shall not
be sold, transferred or otherwise disposed of and shall not be pledged or
otherwise hypothecated, nor shall they be delivered to the Grantee. The
Committee may also impose such other restrictions and conditions on the
Performance Shares, if any, as it deems appropriate.
(c) Lapse of Restrictions. Subject to Sections
11.1(b) and 11.4, restrictions upon Performance Shares awarded hereunder shall
lapse and such Performance Shares shall become vested at such time or times and
on such terms, conditions and satisfaction of Performance Objectives as the
Committee may, in its sole discretion, determine at the time an Award is
granted.
(d) Treatment of Dividends. At the time the
Award of Performance Shares is granted, the Committee may, in its sole
discretion, determine that the payment to the Grantee of dividends, or a
specified portion thereof, declared or paid on actual Shares represented by
such Award which have been issued by the Company to the Grantee shall be (i)
deferred until the lapsing of the restrictions imposed upon such Performance
Shares and (ii) held by the Company for the account of the Grantee until such
time. In the event that dividends are to be deferred, the Committee shall
determine whether such dividends are to be reinvested in Shares (which shall be
held as additional Performance Shares) or held in cash. If deferred dividends
are to be held in cash, there may be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its sole discretion, may
determine. Payment of deferred dividends in respect of Performance Shares
(whether held in cash or in additional Performance Shares), together with
interest accrued thereon, if any, shall be made upon the lapsing of
restrictions imposed on the Performance Shares in respect of which the deferred
dividends were paid, and any dividends deferred (together with any interest
accrued thereon) in respect of any Performance Shares shall be forfeited upon
the forfeiture of such Performance Shares.
(e) Delivery of Shares. Upon the lapse of the
restrictions on Performance Shares awarded the Committee shall cause a stock
certificate to be delivered to the Grantee, free of all restrictions hereunder.
11.4 Effect of Change in Control. In the event of a
Change in Control:
(a) With respect to Performance Units, unless
otherwise determined by the Committee, the Grantee shall (i) become vested in
all Performance Units and (ii) be entitled to receive in respect of all
Performance Units which become vested as a result of a Change in Control a cash
payment within ten (10) Business Days after such Change in Control in an amount
as determined by the Committee at the time of the Award of such Performance
Unit and as set forth in the Agreement.
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EXHIBIT 10.1
(b) With respect to Performance Shares, unless
otherwise determined by the Committee, restrictions shall lapse immediately on
all Performance Shares.
(c) The Agreements evidencing Performance Shares
and Performance Units shall provide for the treatment of such Awards (or
portions thereof) which do not become vested as the result of a Change in
Control, including, without limitation, provisions for the adjustment of
applicable Performance Objectives.
11.5 Termination. Except as provided in Section 12,
and unless otherwise provided by the Committee, in its sole discretion, in the
applicable Agreement, the following provisions shall apply to Performance
Awards upon a Termination of Employment:
(a) Termination of Employment. Except as
provided in Sections 11.5(b) and (d), in the case of a Grantee's Termination of
Employment prior to the end of a Performance Cycle, the Grantee will not be
entitled to any Performance Awards, and any Performance Shares shall be
forfeited.
(b) Disability, Retirement or Death. Unless
otherwise provided by the Committee, in its sole discretion, in the Agreement,
if a Grantee's Disability Date or Termination of Employment by reason of
retirement on or after the Grantee's Normal Retirement Date or death occurs
following at least twelve months of participation in any Performance Cycle, but
prior to the end of a Performance Cycle, the Grantee or such Grantee's
Beneficiary, as the case may be, shall be entitled to receive a pro-rata share
of his or her Performance Award as determined under Subsection (c).
(c) Pro-Rata Payment.
(i) Performance Units. With respect to
Performance Units, the amount of any payment made to a Grantee (or Beneficiary)
under circumstances described in Section 11.5(b) will be the amount determined
by multiplying the amount of the Performance Units payable in Shares or dollars
which would have been earned, determined at the end of the Performance Cycle,
had such employment not been terminated, by a fraction, the numerator of which
is the number of whole months such Grantee was employed during the Performance
Cycle, and the denominator of which is the total number of months of the
Performance Cycle. Any such payment shall be made as soon as practicable after
the end of the respective Performance Cycle, and shall relate to attainment of
Performance Objectives over the entire Performance Cycle.
(ii) Performance Shares. With respect to
Performance Shares, the amount of Performance Shares held by a Grantee (or
Beneficiary) with respect to which restrictions shall lapse under circumstances
described in Section 11.5(b) will be the amount determined by multiplying the
amount of the Performance Shares with respect to which restrictions would have
lapsed, determined at the end of the Performance Cycle, had such employment not
been terminated, by a fraction, the numerator of which is the number of
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EXHIBIT 10.1
whole months such Grantee was employed during the Performance Cycle, and the
denominator of which is the total number of months of the Performance Cycle.
The Committee shall determine the amount of Performance Shares with respect to
which restrictions shall lapse under this Section 11.5(c)(ii) as soon as
practicable after the end of the respective Performance Cycle, and such
determination shall relate to attainment of Performance Objectives over the
entire Performance Cycle. At that time, all Performance Shares relating to
that Performance Cycle with respect to which restrictions shall not lapse shall
be forfeited.
(d) Other Events. Notwithstanding anything to
the contrary in this Section 11, the Committee may, in its sole discretion,
determine to pay all or any portion of a Performance Award to a Grantee who has
terminated employment prior to the end of a Performance Cycle under certain
circumstances (including, without limitation, a material change in
circumstances arising after the Date of Grant) and subject to such terms and
conditions that the Grantee shall have completed, at his or her Termination of
Employment, at least one year of employment after the Date of Grant.
11.6 Modification or Substitution. Subject to the terms
of the Plan, including, without limitation, Section 16(b), the Committee may
modify outstanding Performance Awards or accept the surrender of outstanding
Performance Awards and grant new Performance Awards in substitution for them.
Notwithstanding the foregoing, no modification of a Performance Award shall
adversely alter or impair any rights or obligations under the Agreement without
the Grantee's consent.
12. Employment Agreement Governs Termination of Employment. An
employment agreement, if applicable, between an Optionee or Grantee and the
Company shall govern with respect to the terms and conditions applicable to
such Option or Award upon a termination or change in the status of the
employment of the Optionee or Grantee, to the extent that such employment
agreement provides for terms and conditions that differ from the terms and
conditions provided for in the applicable Agreement or the Plan; provided,
however, that to the extent necessary for an Option or Award intended to
qualify as performance-based compensation under Section 162(m) of the Code to
so qualify, the terms of the applicable Agreement or the Plan shall govern the
Option or Award; and, provided further, that the Committee shall have reviewed
and, in its sole discretion, approved the employment agreement.
13. Adjustment Upon Changes in Capitalization.
(a) In the event of a Change in Capitalization, the
Committee shall conclusively determine the appropriate adjustments, if any, to
(i) the maximum number and class of Shares or other stock or securities with
respect to which Options or Awards may be granted under the Plan, (ii) the
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted to any Eligible Individual during any
calendar year, (iii) the number and class of Shares or other stock or
securities which are subject to outstanding Options or Awards granted under the
Plan and the purchase
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EXHIBIT 10.1
price therefor, if applicable, (iv) the number and class of Shares or other
securities in respect of which Director Options are to be granted under Section
6 and (v) the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a
Grantee of an Award shall be entitled to, or an Optionee shall be entitled to
exercise an Option with respect to, new, additional or different shares of
stock or securities, such new, additional or different shares shall thereupon
be subject to all of the conditions, restrictions and performance criteria
which were applicable to the Shares subject to the Award or Option, as the case
may be, prior to such Change in Capitalization.
14. Effect of Certain Transactions. Subject to Sections 7.3,
8.8, 10.4(b) and 11.4 or as otherwise provided in an Agreement, in the event of
(i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Plan and the Options and
Awards issued hereunder shall continue in effect in accordance with their
respective terms, except that following a Transaction each Optionee and Grantee
shall be entitled to receive in respect of each Share subject to any
outstanding Options or Awards, as the case may be, upon exercise of any Option
or payment or transfer in respect of any Award, the same number and kind of
stock, securities, cash, property or other consideration that each holder of a
Share was entitled to receive in the Transaction in respect of a Share;
provided, however, that such stock, securities, cash, property, or other
consideration shall remain subject to all of the conditions, restrictions and
performance criteria which were applicable to the Options and Awards prior to
such Transaction.
15. Limitation on Transfer. Subject to any limitations on
transferability specifically provided for elsewhere in the Plan, the rights and
interest of an Optionee or Grantee in any Option or Award may not be assigned
or transferred other than by will or the laws of descent and distribution or,
in the Committee's sole discretion, pursuant to a domestic relations order
(within the meaning of Exchange Act Rule 16a-12). During the lifetime of an
Optionee or Grantee, and except as the preceding sentence provides, only the
Optionee or Grantee personally may exercise rights under the Plan. Except as
otherwise specifically provided in the Plan, the Beneficiary of an Optionee or
Grantee may exercise the rights of the Optionee or Grantee only to the extent
they were exercisable under the Plan at the date of the death of the Optionee
or Grantee and are otherwise currently exercisable.
16. Interpretation. Following the required registration of any
equity security of the Company pursuant to Section 12 of the Exchange Act:
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<PAGE> 30
EXHIBIT 10.1
(a) The Plan is intended to comply with Rule 16b-3
promulgated under the Exchange Act and the Committee shall interpret and
administer the provisions of the Plan or any Agreement in a manner consistent
therewith. Any provisions inconsistent with such Rule shall be inoperative and
shall not affect the validity of the Plan.
(b) Unless otherwise expressly stated in the relevant
Agreement, each Option, Stock Appreciation Right and Performance Award granted
under the Plan is intended to be performance-based compensation within the
meaning of Section 162(m)(4)(C) of the Code (except that, in the event of a
Change in Control, payment of Performance Awards to a Grantee who remains a
"covered employee" with respect to such payment within the meaning of Section
162(m)(3) of the Code may not qualify as performance-based compensation). The
Committee shall not be entitled to exercise any discretion otherwise authorized
hereunder with respect to such Options or Awards if the ability to exercise
such discretion or the exercise of such discretion itself would cause the
compensation attributable to such Options or Awards to fail to qualify as
performance-based compensation. Notwithstanding anything to the contrary in the
Plan, the provisions of the Plan may at any time be bifurcated by the Board or
the Committee in any manner so that certain provisions of the Plan or any
Performance Award intended (or required in order) to satisfy the applicable
requirements of Section 162(m) of the Code are only applicable to persons whose
compensation is subject to Section 162(m).
(c) UK Approved Options are intended to comply with
Schedule 9 to the Taxes Act, and in particular, but without limitation, with
paragraphs 10 to 14 thereof, and the Plan shall, except were inconsistent with
the subject or context, be interpreted accordingly.
17. Pooling Transactions. Notwithstanding anything
contained in the Plan or any Agreement to the contrary, in the event of a
Change in Control which is also intended to constitute a Pooling Transaction,
the Committee shall take such actions, if any, as are specifically recommended
by an independent accounting firm retained by the Company to the extent
reasonably necessary in order to assure that the Pooling Transaction will
qualify as such, including, without limitation, (i) deferring the vesting,
exercise, payment, settlement or lapsing of restrictions with respect to any
Option or Award, (ii) providing that the payment or settlement in respect of
any Option or Award be made in the form of cash, Shares or securities of a
successor or acquirer of the Company, or a combination of the foregoing, and
(iii) providing for the extension of the term of any Option or Award to the
extent necessary to accommodate the foregoing, but not beyond the maximum term
permitted for any Option or Award.
18. Effective Date, Termination and Amendment of the
Plan. The effective date of this Plan shall be the date the Plan is adopted
by the Board, subject only to the approval by the affirmative vote of the
holders of a majority of the securities of the Company present, or represented,
and entitled to vote at a meeting of stockholders duly held in accordance with
the applicable laws of the State of Delaware within twelve (12) months of the
adoption of the Plan by the Board.
- 29 -
<PAGE> 31
EXHIBIT 10.1
The Plan shall terminate on the day preceding the tenth
anniversary of the date of its adoption by the Board and no Option or Award may
be granted thereafter. The Board may sooner terminate the Plan and the Board
may at any time and from time to time amend, modify or suspend the Plan;
provided, however, that: (a) no such amendment, modification, suspension or
termination shall impair or adversely alter any Options or Awards theretofore
granted under the Plan, except with the consent of the Optionee or Grantee, nor
shall any amendment, modification, suspension or termination deprive any
Optionee or Grantee of any Shares which he or she may have acquired through or
as a result of the Plan; and (b) to the extent necessary under applicable law,
no amendment shall be effective unless approved by the stockholders of the
Company in accordance with applicable law.
No alteration shall be made to provisions of the Plan relating
to UK Approved Options without the prior written approval of the UK Inland
Revenue.
19. Non-Exclusivity of the Plan. The adoption of the Plan by
the Board shall not be construed as amending, modifying or rescinding any
previously approved incentive arrangement or as creating any limitations on the
power of the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
20. Limitation of Liability. As illustrative of the limitations
of liability of the Company, but not intended to be exhaustive thereof, nothing
in the Plan shall be construed to:
(i) give any person any right to be granted an
Option or Award other than at the sole discretion of the
Committee;
(ii) give any person any rights whatsoever with
respect to Shares except as specifically provided in the Plan;
(iii) limit in any way the right of the Company to
terminate the employment of any person at any time; or
(iv) be evidence of any agreement or
understanding, expressed or implied, that the Company will
employ any person at any particular rate of compensation or
for any particular period of time.
21. Regulations and Other Approvals; Governing Law.
21.1 Except as to matters of federal law, the Plan and the
rights of all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of Delaware without giving effect to
conflicts of laws principles thereof.
21.2 The obligation of the Company to sell or deliver
Shares with respect to Options and Awards granted under the Plan shall be
subject to all applicable laws, rules and
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<PAGE> 32
EXHIBIT 10.1
regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
21.3 The Board may make such changes as may be necessary
or appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock
Options the tax benefits under the applicable provisions of the Code and
regulations promulgated thereunder.
The Board may make such changes as may be necessary or
appropriate to obtain or maintain the approval of the provisions of the Plan
relating to UK Approved Options by the UK Inland Revenue.
21.4 Each Option and Award is subject to the requirement
that, if at any time the Committee determines, in its sole discretion, that the
listing, registration or qualification of Shares issuable pursuant to the Plan
is required by any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.
21.5 Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Shares shall be restricted
against transfer to the extent required by the Securities Act and Rule 144 or
other regulations thereunder. The Committee may require any individual
receiving Shares pursuant to an Option or Award granted under the Plan, as a
condition precedent to receipt of such Shares, to represent and warrant to the
Company in writing that the Shares acquired by such individual are acquired
without a view to any distribution thereof and will not be sold or transferred
other than pursuant to an effective registration thereof under said Act or
pursuant to an exemption applicable under the Securities Act or the rules and
regulations promulgated thereunder. The certificates evidencing any of such
Shares shall be appropriately amended to reflect their status as restricted
securities as aforesaid.
22. Miscellaneous.
22.1 Multiple Agreements. The terms of each Option or
Award may differ from other Options or Awards granted under the Plan at the
same time, or at some other time. The Committee may also grant more than one
Option or Award to a given Eligible Individual during the term of the Plan,
either in addition to, or in substitution for, one or more Options or Awards
previously granted to that Eligible Individual.
22.2 Withholding of Taxes.
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<PAGE> 33
EXHIBIT 10.1
(a) At such times as an Optionee or Grantee
recognizes taxable income in connection with the receipt of Shares or cash
hereunder (a "Taxable Event"), the Optionee or Grantee shall pay to the Company
an amount equal to the federal, state and local income taxes and other amounts
as may be required by law to be withheld by the Company in connection with the
Taxable Event (the "Withholding Taxes") prior to the issuance, or release from
escrow, of such Shares or the payment of such cash. The Company shall have the
right to deduct from any payment of cash to an Optionee or Grantee an amount
equal to the Withholding Taxes in satisfaction of the obligation to pay
Withholding Taxes. In satisfaction of the obligation to pay Withholding Taxes
to the Company, the Optionee or Grantee may make a written election (the "Tax
Election"), which may be accepted or rejected in the sole discretion of the
Committee, to have withheld a portion of the Shares then issuable to him or her
having an aggregate Fair Market Value equal to the Withholding Taxes.
(b) If an Optionee makes a disposition, within
the meaning of Section 424(c) of the Code and regulations promulgated
thereunder, of any Share or Shares issued to such Optionee pursuant to the
exercise of an Incentive Stock Option within the two-year period commencing on
the day after the date of the grant or within the one-year period commencing on
the day after the date of transfer of such Share or Shares to the Optionee
pursuant to such exercise, the Optionee shall, within ten (10) Business Days of
such disposition, notify the Company thereof, by delivery of written notice to
the Company at its principal executive office.
22.3 Power of Attorney given by UK Employees. The
following provisions shall apply only to Options and Awards granted to
UK-resident or ordinarily resident Employees.
(a) It shall be a condition of all Options (which
term shall for the purposes of paragraphs 22.3 (a) through (d) exclude UK
Approved Options which retain approval from the UK Inland Revenue under
Schedule 9 to the Taxes Act) and Awards granted to UK Employees and a condition
precedent to the vesting, exercisability, or release for consideration, of all
such Options and Awards that, if the vesting, exercise, or release for
consideration gives rise to a liability of the Company or any Subsidiary (the
"Relevant Body") under Section 203F of the Taxes Act or otherwise pursuant to
the United Kingdom's Pay As You Earn ("PAYE") system (or any other similar
withholding tax system in any other applicable jurisdiction), the Relevant Body
shall (to the extent permitted by English law) be entitled to withhold from
such Grantee's or Optionee's salary or other payments due to him, and/or the
Grantee or Optionee shall be required to pay to the Relevant Body, as a
condition of such vesting, exercise or release, the amount which the Relevant
Body is required to pay to the UK Inland Revenue (or other relevant taxing
authority).
(b) Any payment by the Grantee or Optionee shall
be made within such period as the Relevant Body shall notify to him. The
Company may refuse to permit (a) the vesting or exercise of any Option or Award
or (b) the release of any Option or Award for consideration if any such payment
is not satisfied by the Grantee or Optionee within such period as shall have
been notified to him.
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<PAGE> 34
EXHIBIT 10.1
(c) Alternatively, if the Committee so decides in
its absolute discretion, the PAYE or other taxation liability falling upon any
Relevant Body may be satisfied by (a) the Company not releasing to the Grantee
or Optionee concerned such number of Shares (which expression shall for this
purpose include other shares or securities to be issued upon such vesting or
exercise) or (b) deducting from any consideration for the release of an Option
or Award such monetary amount as shall in either case equal in value the amount
required to be paid to the Inland Revenue (or other relevant taxing authority),
together (where relevant) with any commission or similar costs associated with
or to be incurred upon the disposal of any such Shares to fund such tax
liability.
(d) Each holder of an Option or an Award under
the Plan hereby appoints any Director of the Company or a Subsidiary as his
attorney for the purpose of signing, in the name and on behalf of such holder,
any documents required to implement the foregoing (including, without prejudice
to the generality of the foregoing, the right to sell Shares not so released as
aforesaid).
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<PAGE> 1
EXHIBIT 10.4
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NOTE TO CLERK: THIS IS A SUPPLEMENTAL INSTRUMENT OF WRITING AS DEFINED IN
SECTION 12-101(g), REAL PROPERTY ARTICLE, ANNOTATED CODE OF MARYLAND (1994
REPL. VOL.) WHICH IS EXEMPT FROM RECORDATION TAX PURSUANT TO SECTION 12-108(e)
OF THE AFORESAID CODE.
- -------------------------------------------------------------------------------
SECOND MODIFICATION AGREEMENT - LEASEHOLD
DEED OF TRUST AND SECURITY AGREEMENT
THIS SECOND MODIFICATION AGREEMENT - LEASEHOLD DEED OF TRUST AND
SECURITY AGREEMENT (this "Amendment") is made as of the 31st day of October,
1997, by and among BIORELIANCE CORPORATION, a corporation organized and in good
standing under the laws of State of Delaware, successor in interest to and
formerly know of record as MICROBIOLOGICAL ASSOCIATES, INC., (the "Grantor"),
ELIZABETH F. SHORE, as trustee (the "Trustee") and NATIONSBANK, N.A., a
national banking association successor-in-interest to MARYLAND NATIONAL BANK, a
national banking association (the "Beneficiary").
RECITALS
A. The Beneficiary has made a line of credit converting into a
term loan (the "Loan") in the original principal amount of Three Million
Dollars ($3,000,000), which Loan is evidenced by that certain Deed of Trust
Note dated December 17, 1993 from the Grantor and Microbiological Associates
International Limited, which name has been changed to BioReliance Limited
("MAL"), which Deed of Trust Note was amended by that certain First Loan
Modification Agreement (the "First Loan Modification Agreement") dated May 31,
1994 by and among the Beneficiary, the Grantor, MAL, MAGENTA Corporation and
Magenta Services, Ltd., which among other things added Magenta Corporation and
Magenta Services, Ltd. as joint and several co-makers to the Deed of Trust
Note, which Deed of Trust Note was further amended by that certain Second Loan
<PAGE> 2
EXHIBIT 10.4
Modification Agreement dated September 30, 1994 by and among the Grantor, MAL,
MAGENTA Corporation ("Magenta"), Magenta Services, Ltd. ("Magenta Services")
and the Beneficiary, and which Deed of Trust Note was amended and restated in
its entirety pursuant to the provisions of that certain Third Loan Modification
Agreement dated as of December 1, 1994, by and among the Grantor, MAL, Magenta,
Magenta Services and the Beneficiary, which among other things, increased the
maximum principal amount of the Loan from Three Million Dollars ($3,000,000) to
Four Million Three Hundred Thousand Dollars ($4,300,000) and which Deed of
Trust Note is being further amended by that certain Deed of Trust Note
Modification Agreement of even date herewith by and among the Grantor, MA
BioServices, Inc., Magenta and Magenta Viral Production, Inc. (collectively,
the "Borrowers") and the Beneficiary (the Deed of Trust Note as amended and
restated from time to time, is hereinafter called, the "Note").
B. The Loan is secured by that certain Leasehold Deed of Trust
and Security Agreement dated December 17, 1993 from the Grantor to the trustees
named therein for the benefit of the Beneficiary, which Leasehold Deed of Trust
and Security Agreement was recorded December 20, 1993, among the Land Records
for Montgomery County, Maryland in Liber 12140, at folio 779, and which
Leasehold Deed of Trust and Security Agreement was amended by that certain
Modification Agreement-Leasehold Deed of Trust and Security Agreement dated
December 1, 1994 by and among the Grantor, the trustees named therein and the
Beneficiary (the Leasehold Deed of Trust and Security Agreement as amended is
hereinafter called the "Deed of Trust").
C. The Borrowers and the Beneficiary have entered into that
certain Amended and Restated Replacement Loan Agreement of even date herewith
(the "Restated Loan Agreement"), which among other things, replaces and
consolidates that certain First Amended and Restated Loan
2
<PAGE> 3
EXHIBIT 10.4
Agreement (the "Original Loan Agreement") dated December 1, 1994, by and among
the Grantor, MAL, Magenta, Magenta Services and the Lender, which Original Loan
Agreement was amended by that certain Modification of Loan Agreement dated
April 25, 1995, by and among the Grantor, MAL, Magenta, Magenta Services and
the Lender, which Original Loan Agreement was further amended by that certain
Modification of Loan Agreement dated August 7, 1995 by and among the Grantor,
MAL, Magenta, Magenta Services and the Lender, which Original Loan Agreement
was further amended by that certain Modification of Loan Agreement dated
January 18, 1996, by and among the Grantor, MAL, Magenta, Magenta Services and
the Lender, which Original Loan Agreement was further amended by that certain
Modification of Loan Agreement dated May 31, 1996 by and among the Grantor,
MAL, Magenta, Magenta Services and the Lender, and which Original Loan
Agreement was further modified by that certain Second Modification of Loan
Agreement dated June 27, 1996, by and among the Grantor, MAL, Magenta, Magenta
Services and the Lender, which among other things, obligated the Grantor to
cause MA Holding, GmbH, a German company ("MA Holding") to become an additional
maker on the Loan (the Original Loan Agreement, as thereafter amended, is
hereinafter called the "Loan Agreement").
D. The Borrowers have requested and the Beneficiary has agreed
that the provisions of the Restated Loan Agreement shall apply to the Loan and
have agreed to amend or delete certain provisions of the Deed of Trust to
conform with the terms and provisions of the Restated Loan Agreement, all as
more fully described herein.
NOW, THEREFORE, this Amendment, witnesseth that for Five
Dollars ($5.00) and other good and valuable consideration payable to each of
the parties by the other parties, the parties hereby agree as follows:
3
<PAGE> 4
EXHIBIT 10.4
1. Definitions. The following definition is added to Article 1
of the Deed of Trust:
Borrower - each of the Grantor, MA BioServices, Inc., MAGENTA
Corporation and Magenta Viral Production, Inc. and collectively, the
Borrowers.
The definition of "Loan Documents" is hereby amended and restated in
its entirety as follows:
Loan Documents - This Leasehold Deed of Trust, the Restated
Loan Agreement, the Note, and any other instrument, agreement or
document previously, simultaneously or hereafter executed and
delivered by any Borrower evidencing, securing in connection with the
Obligations, this Leasehold Deed of Trust, the Restated Loan Agreement
and the Note.
2. Representations and Warranties.
(a) Sections Deleted in their Entirety. Sections 3.1
(Organization, etc.), 3.2 (Validity of Loan Instruments), 3.3 (Other
Information), 3.5 (Taxes), 3.6 (Litigation) and 3.7 (Not a Joint Venture) of
the Deed of Trust are hereby deleted in their entirety.
(b) Section Amended and Restated in its Entirety. Section 3.9
(No Hazardous Materials) is hereby amended and restated in its entirety as
follows:
3.9 No Hazardous Materials. The Grantor has investigated
the previous ownership and use of the Mortgaged Property, in a manner
consistent with good commercial practice, to determine whether past or
current activities have been conducted which might involve the use or
disposal of Hazardous Materials. To the best of Grantor's knowledge
and belief, no Hazardous Materials are located on, above, below or
within the Mortgaged Property, except as are used in the normal course
of the Grantor's business. To the best of Grantor's knowledge and
belief, the Mortgaged Property has never been used as a manufacturing
or storage site for Hazardous Materials, other than reasonable
quantities of Hazardous Materials manufactured or stored in the normal
course of business in compliance with Environmental Regulations. To
the best of Grantor's knowledge and belief, the Mortgaged Property has
never been used as a dump site for Hazardous Materials, nor is the
Mortgaged Property contaminated by any Hazardous Materials. To the
best of the Grantor's knowledge and belief, no property adjoining the
Land has ever been used as a manufacturing, storage or dump site for
Hazardous Materials, nor is any other adjoining property contaminated
by Hazardous Materials.
4
<PAGE> 5
EXHIBIT 10.4
3. Affirmative Covenants.
(a) Sections Deleted in their Entirety. Sections 4.1
(Existence), 4.2 (Compliance with Laws), 4.9 (Contest of Tax Assessments,
Etc.), 4.11 (Performance of the Commitment), 4.14 (Maintenance of Books and
Records), 4.19 (Broker's Commission and Other Costs), 4.20 (Knowledge of
Grantor) and 4.21 (Amendments to Organizational Documents) of the Deed of Trust
are hereby deleted in their entirety.
(b) Sections Amended and Restated in their Entirety. Sections
4.3 (Payment of Impositions), 4.4 (Repairs and Waste), 4.15 (Survey of
Independent Inspector) and 4.25 (Notification of Proceedings) are hereby
amended and restated in their entirety as follows:
4.3 Payment of Impositions. Grantor will duly pay and
discharge, or cause to be paid and discharged, the Impositions, such
Impositions or installments thereof to be paid not later than the due
date thereof or the day any fine, penalty, interest or cost may be
added thereto or imposed by law for the non-payment thereof (if such
day is used to determine the due date of the respective item);
provided, however, that if, by law, any Imposition may at the option
of Grantor be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Grantor may exercise
the option to pay the same in such installments, and further provided,
however, that Grantor shall not be required to pay any Impositions,
the payment of which is being contested in good faith and by proper
proceedings and for which the Grantor has set aside adequate reserves.
Grantor will, upon the request of the Beneficiary, deliver to the
Beneficiary from time to time receipts evidencing the payment of all
such Impositions.
4.4 Repairs and Waste. Grantor will keep the Mortgaged
Property in good operating condition (reasonable wear and tear
excepted); make all proper repairs, renewals, replacements, additions
and improvements thereto needed to maintain the Mortgaged Property in
good operating condition. Grantor will not commit any waste upon the
Mortgaged Property or make or permit any change in the use of the
Mortgaged Property which will in any material way increase any
ordinary fire or other hazard risk arising out of the operation
thereof.
4.15 Surveys. If at any time after the date hereof,
Grantor makes improvements to the Property which affect the building
wall lines of any of the Improvements now or hereafter on the
Property, at the Beneficiary's request, the Grantor shall at its
expense promptly furnish the Beneficiary with a survey of the
Property, with a current certification
5
<PAGE> 6
EXHIBIT 10.4
to the Beneficiary by a registered land surveyor of the jurisdiction
in which the Land is located.
4.25 Notification of Proceedings. Grantor hereby
covenants that it will promptly notify Beneficiary in writing as soon
as it has knowledge of any pending or impending actions, suits,
proceedings at law or in equity before or by any governmental
authority or, of any order, writ, injunction, decree or demand of any
governmental authority, which would have a material adverse effect on
the Mortgaged Property, the Lease, or the validity, enforceability or
priority of this Leasehold Deed of Trust.
(c) Sections Amended. Subsection (c) of Section 4.6
(Performance of Lease) is hereby amended and restated as follows:
(c) Grantor will not release, surrender or terminate the
Lease without the prior written consent of Beneficiary, which consent
will not be unreasonably withheld, provided that prior to such
release, surrender or termination, Grantor provides Beneficiary with
substitute collateral acceptable to the Beneficiary in all material
respects, having a value, as determined by the Beneficiary, equivalent
to the Mortgaged Property, nor without the Beneficiary's prior written
consent will the Grantor modify the Lease, including, without
limitation, modifying the Lease to reduce the terms of the Lease,
increase the rentals payable thereunder or alter the provisions of the
Lease related to renewals or grace periods.
The first sentence of Section 4.12 (Deposits for Impositions and Insurance
Premiums) is hereby amended and restated as follows:
Upon the occurrence of an Event of Default, in order to assure the
payment of Impositions and insurance premiums payable with respect to
the Mortgaged Property as and when the same shall become due and
payable:
Section 4.24 (Advance by Beneficiary) is hereby amended to delete all
references set forth therein to Section 4.2.
Except as modified hereby, Sections 4.6, 4.12 and 4.24 shall remain unchanged.
4. Negative Covenants.
(a) Section Deleted in its Entirety. Section 5.4 (Due on Sale
or Future Encumbrances) is hereby deleted in its entirety.
6
<PAGE> 7
EXHIBIT 10.4
(b) Sections Amended and Restated in their Entirety. Sections
5.1 (Use Violations), 5.2 (Alterations and Waste), 5.3 (Replacement of Fixtures
and Personalty), and 5.5 (Mechanic's Liens) are hereby amended and restated in
their entirety as follows:
5.1 Use Violations. Grantor will not use the Mortgaged
Property or any part thereof or allow the same to be used or occupied
for any purposes not approved by Beneficiary in its reasonable
discretion, or for any unlawful purpose or in material violation of
any certificate of occupancy or other permit or certificate, or of any
law ordinance or regulation, or any restrictions or reservations
covering or affecting the use or occupancy thereof, except where such
violations would not, in the aggregate have a material adverse effect
on the Mortgaged Property, or suffer any act to be done or any
condition to exist on the Mortgaged Property, or any part thereof or
any article to be brought thereon, which may be dangerous, unless
safeguarded as required by law or which may in law constitute a
nuisance, public or private, or which may make void or voidable any
insurance then in force or required by the terms of this Leasehold
Deed of Trust to be in force with respect thereto.
5.2 Alterations and Waste. Grantor will not commit or
knowingly permit any waste or the Mortgaged Property or any part
thereof (reasonable wear and tear excepted) or make or permit to be
made any demolition, alterations or additions to the Mortgaged
property that would in the aggregate have a materially adverse effect
on the value of, or the current use of, the Mortgaged Property.
5.3 Replacement of Fixtures and Personalty. Grantor will
not permit any of the Fixtures or Personalty to be removed from the
Property, if such removal taken as a whole would have a material
adverse effect on the value of, or the current use of, the Mortgaged
Property, unless such Fixtures or Personalty are promptly replaced by
articles of equal suitability or value, owned by Grantor, free and
clear of any liens or security interest other than as permitted in
this Leasehold Deed of Trust and the Loan Documents. By such removal
and replacement, Grantor shall be deemed to have subjected the
replacement property to the lien of this Leasehold Deed of Trust.
5.5 Mechanic's Liens Grantor will not permit any
mechanic's or materialman's lien to be filed against the Mortgage
Property or any part thereof which shall not have been bonded or
otherwise removed within thirty (30) days after filing, unless the
Grantor at its own expense is contesting by appropriate legal
proceedings, promptly initiated and
7
<PAGE> 8
EXHIBIT 10.4
conducted in good faith and with due diligence, the amount or validity
of any such mechanic's or materialman's lien, and provided that
neither the Mortgaged Property nor any part thereof or interest
thereunder will be in danger of being sold, forfeited, or, terminated,
canceled or lost and Grantor shall have set aside adequate reserves
with respect thereto.
5. Events of Default.
(a) Sections Deleted in their Entirety. Sections 6.3, (False
Representation) 6.4 (Judgment), 6.5 (Receiver), 6.6 (Bankruptcy), 6.10
(Appointment of a Receiver), 6.11 (Dissolution), 6.12 (Guarantor), 6.14
(Mechanic's Lien), 6.16 (Environmental Regulations) of the Deed of Trust are
hereby deleted in their entirety.
(b) Sections Amended and Restated in their Entirety. Sections
6.1 (Payment of Indebtedness), 6.2 (Performance of Obligations) and 6.15
(Default Under the Lease) are hereby amended and restated in their entirety as
follows:
6.1 Payment of Indebtedness. Grantor shall fail to make
any payment of the Indebtedness, when and as the same shall become due
and payable and such failure shall continue for a period of fifteen
(15) banking days.
6.2 Performance of Obligations. Grantor shall
default in the due observance or performance of any of the Obligations
and such default shall continue uncured for thirty (30) days after
notice thereof shall have been given to Grantor by the Beneficiary.
6.15 Default Under the Lease. The occurrence of any Event
of Default under the Lease or any event which with the giving of
notice or the passage of time could constitute an Event of Default
under the Lease.
(c) Section Added. The following Section is added to the Deed
of Trust immediately after Section 6.16 as Section 6.17:
6.17 Due on Sale. Without the prior written consent of
the Beneficiary, the Mortgaged Property is sold, conveyed, assigned,
or otherwise transferred, except sales, conveyances, assignments or
transfers to Subsidiaries of the Grantor which are taken subject
8
<PAGE> 9
EXHIBIT 10.4
to the lien of this Leasehold Deed of Trust, or the Grantor grants a
security interest, mortgage, pledge, lien, encumbrance, charge on, all
or any part of, or any interest in the title to the Mortgaged
Property.
6. Assignment of Leases and Rents. Section Amended and Restated
in its Entirety. Section 9.3 (No Third-Party Assignment) of the Deed of Trust
is hereby amended and restated in its entirety as follows:
9.3 No Third-Party Assignment. Grantor will not assign,
permit subletting (except assignments and subleases to Subsidiaries of
the Grantor) (unless the right is expressly reserved by the tenant) or
otherwise encumber future rental payments under the Leases or in and
to the Rents to third parties, nor will Grantor anticipate for more
than one (1) month any rents that may become collectible under such
Leases.
7. Miscellaneous Provisions.
(a) Section Deleted in its Entirety. Section 10.25 (Time of
Essence) is hereby deleted in its entirety.
(b) Sections Amended and Restated in their Entirety.
Sections 10.1 and 10.23 of the Deed of Trust are hereby amended and restated in
their entirety as follows:
10.1 Loan Expenses. Grantor shall pay all reasonable costs
and expenses in connection with the performance of the Loan Documents,
including (but not limited to) fees and disbursements of its and
Beneficiary's counsel, recording costs and expenses, stamp and other
taxes, surveys, appraisals and policies of title insurance, physical
damage insurance and liability insurance.
10.23 Inconsistencies Among the Loan Documents. In the event
of any conflict between the terms of the Deed of Trust, as modified by
this Amendment and the terms of the Restated Loan Agreement, the terms
of the Restated Loan Agreement shall prevail.
8. Environmental Concerns. Section 11.0 of the Deed of Trust is
hereby amended and restated in its entirety as follows:
11.0 Compliance. Grantor will not use or permit any
other party to use any Hazardous Materials on the Mortgaged Property,
except such Hazardous Materials as are used in the Grantor's normal
course of business in material compliance with all applicable
9
<PAGE> 10
EXHIBIT 10.4
laws, regulations and statutes. In the event the Beneficiary ever has
any reason to believe that any Hazardous Materials are or may be
located on, or may otherwise affect, the Mortgaged Property, in
violation of this covenant, or if any claim is made or threatened
against the Grantor or the Mortgaged Property with respect to any
Environmental Regulations, Grantor agrees to permit Beneficiary, its
agents, contractors and employees to enter and inspect the Mortgaged
Property upon three (3) days prior written notice for the purposed of
conducting an environmental investigation and audit (including taking
physical samples) to insure that Grantor is complying with this
covenant. Grantor will promptly provide Beneficiary, its agents,
contractors, employees and representatives with access to and copies
of any and all data and documents in Grantor's possession relating to
or dealing with any Hazardous Materials used, generated, manufactured,
stored or disposed of on, under or about the Mortgaged Property.
For purposes of Section 11.2 of the Deed of Trust, Beneficiary hereby
acknowledges that it has been advised of the Ramp Industries matter described
in that certain Registration Statement on Form S-1 (Registration No. 333-25011)
as amended, and as filed with the Securities and Exchange Commission.
9. Additional Representations and Warranties. The Grantor hereby
represents and warrants that:
(a) The Deed of Trust, as modified by this Amendment, is
the Grantor's valid, binding and enforceable obligation and constitutes a first
lien on the Grantor's leasehold interest in the Property;
(b) The Grantor has no present claims, actions, causes of
action, defenses, counterclaims or setoffs of any kind or nature which they can
assert against the Beneficiary in connection with the making, closing,
administration, collection and/or enforcement by the Beneficiary of the
Obligations, the Deed of Trust or any related agreement. In the event that the
Grantor has any present claims, actions or causes of action, defenses,
counterclaims or setoffs of any kind or nature which it may now assert against
the Beneficiary in connection with the making,
10
<PAGE> 11
EXHIBIT 10.4
closing, administration, collection and/or enforcement by the Beneficiary by
the Obligations, the Deed of Trust or any related agreements, which occurred
prior to the date of this Amendment then by executing this Amendment they have
forever irrevocably waived and relinquished them.
10. Confirmation. Except as expressly modified hereby, the Deed
of Trust as previously modified, is hereby ratified and confirmed in all
respects and shall remain in full force and effect. The parties hereto
acknowledge that the Trustee is executing this Amendment for the sole purpose
of consenting to the terms hereof. The Restated Loan Agreement shall be one of
the "Loan Documents" for all purposes of the Deed of Trust.
11. Counterparts. This Amendment may be executed in any number of
multiple counterparts, each of which shall be deemed an original hereof and all
of which when taken together shall constitute one and the same instrument.
12. Further Assurances. The Grantor shall execute and deliver
such additional documents and instruments and perform such further acts as may
be requested by the Beneficiary from time to time to confirm the provisions of
this Amendment, to carry out more effectively the purposes of the Amendment, or
to confirm the priority of the lien created by the Deed of Trust, as modified
by this Amendment, on any property, rights or interest encumbered or intended
to be encumbered by the Deed of Trust, as modified by this Amendment.
13. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF THIS
AMENDMENT, THE DEED OF TRUST, THE LOAN DOCUMENTS OR ANY RELATED INSTRUMENTS,
AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN
ALLEGED TORT, SHALL BE DETERMINED BY BINDING
11
<PAGE> 12
EXHIBIT 10.4
ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
ARBITRATION OF COMMERCIAL DISPUTES OF ENDISPUTE, INC., D/B/A J.A.M.S./ENDISPUTE
("J.A.M.S.") AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF AN
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
INSTRUMENT, AMENDMENT OR DOCUMENT MAY BRING ANY ACTION, INCLUDING A SUMMARY OR
EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO
WHICH THIS INSTRUMENT, AMENDMENT OR DOCUMENT RELATES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
MONTGOMERY COUNTY, MARYLAND AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR. IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO EXTEND THE COMMENCING OF SUCH HEARING FOR AN ADDITIONAL SIXTY
(60) DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS INSTRUMENT, AMENDMENT
OR DOCUMENT SHALL BE DEEMED TO: (I) LIMIT THE APPLICABILITY
12
<PAGE> 13
EXHIBIT 10.4
OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS INSTRUMENT, AMENDMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE
BENEFICIARY OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. Section 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE
BENEFICIARY: (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO)
SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL,
OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT
NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE BENEFICIARY MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON
SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING
OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AMENDMENT OR DOCUMENT. NEITHER THE EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF ANY ACTION FOR FORECLOSURE OR FOR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
14. Notices. From and after the date of this Amendment, all
notices to the Grantor and the Beneficiary under the Deed of Trust shall be
given to such parties in the manner and at the addresses set forth in the
Restated Loan Agreement.
13
<PAGE> 14
EXHIBIT 10.4
15. Severability. If any provision of this Amendment is held to
be invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Amendment and the same provision as applied under the
circumstances shall remain in full force and effect and shall be liberally
construed in favor of the Beneficiary in order to affect the intent of this
Amendment.
16. Governing Law and Captions. This Amendment shall be governed
and construed in accordance with the laws of the State of Maryland. The
headings used in this Amendment are for the convenience of the parties only and
shall not be used in interpreting and construing the meaning of this Amendment.
WITNESS the signatures and seals of the parties hereto as of the day
and year first above written:
GRANTOR:
WITNESS/ATTEST: BIORELIANCE CORPORATION
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
BENEFICIARY:
NATIONSBANK, N.A.
By: (SEAL)
- ------------------------------ ----------------------------
Elizabeth F. Shore
Vice President
WITNESS: TRUSTEE:
(SEAL)
- ------------------------------ -------------------------------
Elizabeth F. Shore, as Trustee
14
<PAGE> 15
EXHIBIT 10.4
STATE/COMMONWEALTH OF _________________,
CITY/COUNTY OF ________________, TO WIT:
I HEREBY CERTIFY, that on this _____ day of _____, 1997, before me,
the undersigned Notary Public of said State/Commonwealth, personally appeared
_______________________, who acknowledged himself to be the ______________ of
BioReliance Corporation, a Delaware corporation known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument, and
acknowledged that he executed the same for the purposes therein contained as
the duly authorized __________________ of said corporation by signing the name
of the corporation by himself as ________________.
WITNESS my hand and Notarial Seal.
--------------------------------------
Notary Public
My Commission Expires: _______________.
STATE/COMMONWEALTH OF ___________,
CITY/COUNTY OF _____________ , TO WIT:
I HEREBY CERTIFY, that on this _____ day of October, 1997, before me,
the undersigned Notary Public of said State/Commonwealth, personally appeared
Elizabeth F. Shore, known to me (or satisfactorily proven) to be a person whose
name is subscribed to the within instrument, and acknowledged that he executed
the same for the purposes therein contained.
WITNESS my hand and Notarial Seal.
--------------------------------------
Notary Public
15
<PAGE> 16
EXHIBIT 10.4
STATE/COMMONWEALTH OF ___________,
CITY/COUNTY OF ____________ , TO WIT:
I HEREBY CERTIFY, that on this _____ day of October, 1997, before me,
the undersigned Notary Public of said State/Commonwealth, personally appeared
Elizabeth F. Shore, who acknowledged herself to be a Vice President of
NATIONSBANK, N.A. known to me (or satisfactorily proven) to be a person whose
name is subscribed to the within instrument, and acknowledged that she executed
the same for the purposes therein contained as the duly authorized Vice
President of said national association signing the name of the national
association by herself as Vice President.
WITNESS my hand and Notarial Seal.
---------------------------------
Notary Public
My Commission Expires:
THE UNDERSIGNED, a member in good standing of the Bar of the Court of
Appeals of Maryland, hereby certifies that the within instrument was prepared
by him.
------------------------------
Richard M. Pollak
16
<PAGE> 17
EXHIBIT 10.4
Grantee's Address:
c/o NationsBank, N.A.
6610 Rockledge Drive, Third Floor
Bethesda, Maryland 20817
Attn: Elizabeth F. Shore
Commercial Banking
Property Address:
9900 Blackwell Road
Rockville, Maryland 20850
Title Insurer:
Chicago Title Insurance Company
17
<PAGE> 1
EXHIBIT 10.7
NOTE MODIFICATION AGREEMENT
THIS NOTE MODIFICATION AGREEMENT (this "Agreement") is made this 31st
day of October, 1997, by and among BIORELIANCE CORPORATION, a corporation
organized and in good standing under the laws of the State of Delaware,
successor in interest to Microbiological Associates, Inc. (the "Company"), MA
BIOSERVICES, INC., a corporation organized and in good standing under the laws
of the State of Delaware ("MA BioServices"), MAGENTA CORPORATION., a
corporation organized and in good standing under the laws of the State of
Delaware ("Magenta") and MAGENTA VIRAL PRODUCTION, INC., a corporation
organized and in good standing under the laws of the State of Delaware
("Magenta Viral"; together with the Company and MA BioServices, each a
"Borrower" and collectively, the "Borrowers") and NATIONSBANK, N.A., successor
in interest to Maryland National Bank, each a national banking association, its
successors and assigns, (the "Lender").
INTRODUCTORY STATEMENT
A. The Lender has made a loan (the "Loan") in the original
principal amount of One Million Eight Hundred Thousand Dollars ($1,800,000),
which Loan is evidenced by that certain Promissory Note dated June 27, 1996,
from the Company, BioReliance, Limited, a corporation organized and existing
under the laws of Scotland, formerly known as Microbiological Associates
Limited, Microbiological Associates International Limited and ("MAL"), Magenta
Corporation ("Magenta"), and Magenta Services, Ltd., a corporation organized
and existing under the laws of Scotland ("Magenta Services") in favor of the
Lender, and which Promissory Note was amended and restated in its entirety
pursuant to the provisions of that certain Amended and Restated Promissory Note
dated September 19, 1996 in the principal amount of One Million Eight Hundred
Thousand Dollars ($1,800,000), from the Company, MAL, Magenta and Magenta
Services in favor of the Lender (the Promissory Note as amended and restated in
its entirety is hereinafter called, the "Note");
B. The Loan is currently governed by the provisions of that
certain First Amended and Restated Loan Agreement (the "Original Loan
Agreement") dated December 1, 1994, by and among the Company, MAL, Magenta,
Magenta Services and the Lender, which Original Loan Agreement was amended by
that certain Modification of Loan Agreement dated April 25, 1995, by and among
the Company, MAL, Magenta, Magenta Services and the Lender, which Original Loan
Agreement was further amended by that certain Modification of Loan Agreement
dated August 7, 1995 by and among the Company, MAL, Magenta, Magenta Services
and the Lender, which Original Loan Agreement was further amended by that
certain Modification of Loan Agreement dated January 18, 1996, by and among the
Company, MAL, Magenta, Magenta Services and the Lender, which Original Loan
Agreement was further amended by that certain Modification of Loan Agreement
dated May 31, 1996 by and among the Company, MAL, Magenta, Magenta Services and
the Lender, and which Original Loan Agreement was further modified by that
certain Second Modification of Loan Agreement dated June 27, 1996, by and among
the Company, MAL, Magenta, Magenta Services and the Lender, which among other
things, obligated the Company to cause MA Holding, GmbH, a German Company ("MA
Holding") to become an additional maker on the Loan (the Original Loan
Agreement, as thereafter amended, is hereinafter called the "Loan Agreement").
<PAGE> 2
EXHIBIT 10.7
C. The Loan was secured by, among other things, the collateral
described in that certain Security Agreement dated December 17, 1993, by and
among the Company, MAL and the Lender, as amended by the First Loan
Modification Agreement, which among other things, added Magenta and Magenta
Services as parties to the Security Agreement and encumbered their respective
assets as provided for therein (the Security Agreement as the same may be
amended from time to time is hereinafter called the "Security Agreement").
D. The Borrowers have requested and the Lender has agreed to (i)
release MAL, MA Holding, and Magenta Services (the "Released Parties") from
joint and several liability under the Note, (ii) add MA BioServices and
Magenta Viral as joint and several makers to the Note, (iii) release the
collateral described in the Security Agreement, and (iv) amend and restate in
its entirety the Loan Agreement upon the terms and subject to the conditions
set forth in that certain Amended and Restated Replacement Loan of even date
herewith by and among the Borrowers and the Lender (as the same may be amended
from time to time, the "Restated Loan Agreement").
E. In order to induce the Lender to enter into the Restated Loan
Agreement, the parties hereto have agreed to execute and deliver this Agreement
to modify the terms of repayment of the Loan as hereinafter more particularly
set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and for the sum of
One Dollar ($1.00) and other good and valuable consideration, the receipt and
sufficiency whereof are hereby acknowledged, the parties hereto, for
themselves, their respective heirs, personal representatives, successors and
assigns do hereby mutually covenant and agree as follows:
1. Incorporation of Recitals. The parties hereto acknowledge and
agree that the recitals hereinabove set forth are true and correct in all
respects and that the same are incorporated herein and made a part hereof.
2. Outstanding Obligations. The parties hereto acknowledge and
agree (a) that the outstanding principal balance of the Note as of the date
hereof is $_______________ (the "Principal Sum"), (b) that interest on the
unpaid principal balance of the Note has been paid through _____________, 1997,
and (c) that the unpaid principal balance of the Note, together with accrued
and unpaid interest thereon, is due and owing subject to the terms of repayment
hereinafter set forth, without defense or offset.
3. Continuation of Loan Terms. Except as otherwise expressly set
forth below, the outstanding principal balance of the Note shall continue to
bear interest and to be repaid on the terms and subject to the conditions set
forth in the Note and the other documents evidencing and securing the Loan
(this Agreement, the Note, the Restated Loan Agreement and all such other
documents, whether currently existing or hereafter executed, and all
modifications thereto, extensions or renewals thereof and substitutions
therefor being hereinafter collectively referred to as the "Loan Documents").
2
<PAGE> 3
EXHIBIT 10.7
All capitalized terms used but not defined in this Agreement shall have the
meaning given to such terms in the Loan Documents.
4. Interest. Commencing as of the _____ day of November, 1997,
until all sums due under the Loan shall be repaid in full, the unpaid principal
balance of the Note shall bear interest at a rate which is at all times equal
to the fluctuating at the LIBOR Rate (as hereinafter defined), plus the
applicable LIBOR Rate Additional Percentage (the "LIBOR Rate Option").
(1) For purposes hereof, the "LIBOR Rate Additional
Percentage" shall mean the percentages applicable to the Loan in accordance
with the following:
(i) If the ratio of Funded Debt divided
by EBITDA is equal to or greater than 2.5 to 1.0, the LIBOR Rate
Additional Percentage shall be two percent (2.00%);
(ii) If the ratio of Funded Debt divided
by EBITDA is less than 2.5 to 1.0, but equal to or greater than 2.0 to
1.0, the LIBOR Rate Additional Percentage shall be one and three
quarters percent (1.75%);
(iii) If the ratio of Funded Debt divided
by EBITDA is less than 2.0 to 1.0, but equal to or greater than 1.5 to
1.0 the LIBOR Rate Additional Percentage shall be one and one half
percent (1.5%); and
(iv) If the ratio of Funded Debt divided
by EBITDA is less than 1.5 to 1.0, the LIBOR Rate Additional
Percentage shall be one and one quarter percent (1.25%)
(2) The initial the LIBOR Rate Additional Percentage
shall be one and one-quarter percent (1.25%). Thereafter, the applicable LIBOR
Rate Additional Percentage for all Advances shall be calculated and adjusted
quarterly, based on the quarterly financial statements of the Borrowers
required to be submitted to the Lender pursuant to Section 5.1(c) of the
Restated Loan Agreement, commencing with the statements for the quarter ending
September 30, 1997. Such quarterly changes shall be effective commencing five
(5) Banking Days after submission by the Borrowers of the required financial
statements; it being understood, however, that in the event the quarterly
financial statements are not submitted when due, the LIBOR Rate Additional
Percentage shall be two percent (2.00%), until such financial statements are
submitted as required, at which time, the LIBOR Rate Additional Percentage (for
the balance of the quarterly period) shall be determined as set forth above.
For purposes of the Note, "Funded Debt" and "EBITDA" shall each be determined
based on the consolidated quarterly financial statements of the Borrowers and
shall have the meanings set forth in the Restated Loan Agreement.
(3) For purposes hereof, the "LIBOR Rate" shall mean a
fluctuating rate equal to the daily London Interbank Offered Rate for thirty
(30) day U.S. Dollar deposits as quoted by the Lender as of 11:00 A.M.
(Washington, D.C. time), which rate shall be adjusted for any Federal Reserve
Board reserve requirements imposed upon the Lender from time to time.
3
<PAGE> 4
EXHIBIT 10.7
(4) The Borrowers shall pay to the Lender, as additional
interest, the following sums, at the time and in the manner hereinafter set
forth:
i) if, due to either: (i) the
introduction of or any change (including, without limitation, any change by way
of imposition or increase of reserve requirements) in or in the interpretation
of any law or regulation or (ii) the compliance by the Lender with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to the Lender of agreeing to make or making, funding or maintaining
advances of all or a portion of the Principal Sum, then the Borrowers shall
from time to time, upon demand by the Lender, pay to the Lender additional
amounts to indemnify the Lender against any such increased costs. A
certificate as to the amount of such increased costs submitted to the Borrowers
by the Lender shall be conclusive. It shall be deemed, for purposes of
computing any increased costs pursuant to this Section, that (i) the making and
maintaining of advances of the Principal Sum which accrue interest based on the
LIBOR Rate have been made by the Lender from its office in London, England and
(ii) the funding of each Advance of the Principal Sum by the Lender which
accrues interest based on the LIBOR Rate has been made through the London
Interbank Market. Such additional cost shall be payable hereunder at the time
and in the manner that interest is payable hereunder for such costs incurred
since the last interest payment;
ii) the Borrowers shall also pay to the
Lender at the time and in the manner that interest is payable hereunder for
each advance, the cost since the last interest payment date, as determined in
good faith by the Lender, of complying, in connection with such advance during
such interest period, with any reserve, special deposit or similar requirement
(including but not limited to reserve requirements under Federal Reserve
Regulation D) imposed or deemed applicable against any assets held by or
deposits or accounts in or with or credit extended by the Lender, or the office
of the Lender in London, England, by any United States governmental authority
charged with the administration of such requirements. Each notification as to
the amount of such cost, delivered to the Borrowers by the Lender shall, in the
absence of manifest error, be conclusive as to the amount of such cost. It
shall be deemed for purposes of computing cost pursuant to the above provision
that the making and maintaining of each advance which accrues interest based on
the LIBOR Rate has been made by the Lender through its office in London,
England.
(5) In respect to any interest rate election hereunder
and any transactions contemplated hereby, the Borrowers authorize the Lender to
accept, rely upon, act upon and comply with, any verbal or written
instructions, requests, confirmations and orders of _______________ or
_______________ on behalf of the Borrowers. The Borrowers acknowledge and
agree that the transmission between the Borrowers and the Lender of any such
instructions, requests, confirmations and orders involves the possibility of
errors, omissions, mistakes and discrepancies and agrees to adopt such internal
measures and operational procedures to protect its interests. By reason
thereof, the Borrowers hereby assume all risk of loss and responsibility for,
releases and discharges the Lender from any and all responsibility or liability
for, and agrees to indemnify, reimburse on demand and hold the Lender harmless
from, any and all claims, actions, damages, losses, liability and expenses by
reason of, arising out of or in any way connected with or related to, (i) the
Lender's
4
<PAGE> 5
EXHIBIT 10.7
acceptance, reliance and actions upon, compliance with or observation of any
such instructions, requests, confirmations or orders, and (ii) any such errors,
omissions, mistakes and discrepancies, except those caused by the Lender's
gross negligence or willful misconduct.
(6) All interest payable under the terms of the Note
shall be calculated on the basis of a 360-day year and the actual number of
days elapsed.
5. Assumption of Obligations. MA BioServices and Magenta Viral
each promises and agrees to perform each and all of the covenants, agreements
and obligations in the Note, to be performed by the Company and Magenta at the
times, in the manner and in all respects as provided therein, and to be bound
by each and all of the terms and provisions of the Loan Documents including,
but not limited to the Note, as though each Loan Document had originally been
jointly and severally made by the Company, Magenta, MA BioServices and Magenta
Viral. All of the Borrowers shall remain jointly and severally liable for the
performance of each and all of the covenants, agreements and obligations in the
Loan Documents to be performed by the Borrowers. All references in the Note to
the "Undersigned" or to the "Borrower" or the "Borrowers" shall hereafter be
deemed to include MA BioServices and Magenta Viral.
6. Releases. The Lender, for itself, its successors and assigns
hereby releases each of the Released Parties from any and all liability on
account of the Loan, the Note and the Loan Documents. This release shall be
binding upon the Lender and its successors and assigns and shall inure to the
benefit of the Released Parties and their respective present and former
employees, agents, successors and assigns.
7. Confession of Judgment. All provisions in the Note providing
for confession of judgment against the Borrowers are hereby deleted in their
entirety.
8. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF THIS
AGREEMENT, THE LOAN DOCUMENTS OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR ARBITRATION OF COMMERCIAL DISPUTES OF ENDISPUTE, INC., D/B/A
J.A.M.S./ENDISPUTE ("J.A.M.S.") AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF AN INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING ANY ACTION, INCLUDING
A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS INSTRUMENT, AGREEMENT OR DOCUMENT RELATES IN ANY COURT
HAVING JURISDICTION OVER SUCH ACTION.
5
<PAGE> 6
EXHIBIT 10.7
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
MONTGOMERY COUNTY, MARYLAND AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR. IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO EXTEND THE COMMENCING OF SUCH HEARING FOR AN ADDITIONAL SIXTY
(60) DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS INSTRUMENT, AGREEMENT
OR DOCUMENT SHALL BE DEEMED TO: (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE LENDER OF THE
PROTECTION AFFORDED TO IT BY 12 U.S.C. Section 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE LENDER: (A) TO EXERCISE
SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE
AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE
RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE LENDER MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR
DOCUMENT. NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF ANY ACTION FOR FORECLOSURE OR FOR PROVISIONAL OR ANCILLARY
REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE
CLAIMANT IN SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
9. Expenses. In consideration of the Lender's agreement to
modify the Loan, the Borrowers covenant and agree to pay all other reasonable
fees, costs, charges and expenses incurred by the Lender in connection with the
preparation of this Agreement and the modification of the Loan, including
without limitation, the Lender's reasonable attorneys fees and all recording
costs.
10. Events of Default. The events of default specifically
enumerated in the Note are hereby amended and replaced with the following
enumerated events of default, and the occurrence of any of the following events
shall constitute an event of default and shall entitle the Lender to exercise
all rights and remedies provided in the Note, as well as all other rights and
remedies provided to the Lender under the terms of any of the other Loan
Documents as a result of the occurrence of the same:
6
<PAGE> 7
EXHIBIT 10.7
(a) The Borrowers shall fail to make any payment of
principal or interest within fifteen (15) Banking Days of when due on the Note,
or on any other promissory note or other obligation payable by any of the
Borrowers to the Lender;
(b) The Borrowers shall fail to comply with the terms of
any covenant or agreement contained herein and such failure remains uncured for
thirty (30) days after notice thereof; or
(c) An event of default (as described or defined therein)
shall occur under any of the Loan Documents, and such event of default is not
cured within any applicable grace period provided therein.
11. Release of Claims. The Borrowers for themselves and for each
of their respective successors and assigns, hereby release and waive any and
all claims and/or defenses they now may have against the Lender and its
successors and assigns on account of any occurrence relating to the Loan, the
Loan Documents which accrued prior to the date hereof, including, but not
limited to, any claim that the Lender (a) breached any obligation to the
Borrowers in connection with the Loan, (b) was or is in any way involved with
the Borrowers as a partner, joint venturer, or in any other capacity whatsoever
other than as a lender, (c) failed to fund any portion of the Loan or any other
sums as required under any document or agreement in reference thereto, or (d)
failed to timely respond to any offers to cure any defaults under any document
or agreement executed by the Borrowers, or any third party or parties in favor
of the Lender. This release and waiver shall be effective as of the date of
this Agreement and shall be binding upon the Borrowers and each of their
respective successors and assigns, and shall inure to the benefit of the Lender
and its successors and assigns. The term "Lender" as used herein shall
include, but shall not be limited to, its present and former officers,
directors, employees, agents and attorneys.
12. Continuing Agreements; Novation. Except as expressly modified
hereby, the parties hereto ratify and confirm each and every provision of the
Note and each of the other Loan Documents as if the same were set forth herein.
In the event that any of the terms and conditions in the Note or in any of the
other Loan Documents conflict in any way with the terms and provisions hereof,
the terms and provisions hereof shall prevail. The parties hereto covenant and
agree that the execution of this Agreement is not intended to and shall not
cause or result in a novation with regard to the Note and/or the other Loan
Documents and that the existing indebtedness of the Borrowers to the Lender
evidenced by the Note is continuing, without interruption, and has not been
discharged by a new agreement.
13. Entire Agreement. NO STATEMENTS, AGREEMENTS OR
REPRESENTATIONS, ORAL OR WRITTEN, WHICH MAY HAVE BEEN MADE TO ANY OF THE
BORROWERS OR TO ANY EMPLOYEE OR AGENT OF ANY OF THE BORROWERS, EITHER BY THE
LENDER OR BY ANY EMPLOYEE, AGENT OR BROKER ACTING ON THE LENDER'S BEHALF, WITH
RESPECT TO THE MODIFICATION OF THE LOAN, SHALL BE OF ANY FORCE OR EFFECT,
EXCEPT TO THE EXTENT STATED IN THIS AGREEMENT, AND ALL PRIOR AGREEMENTS AND
REPRESENTATIONS WITH RESPECT TO THE MODIFICATION OF THE LOAN ARE MERGED HEREIN.
7
<PAGE> 8
EXHIBIT 10.7
14. Captions. The captions herein set forth are for convenience
only and shall not be deemed to define, limit or describe the scope or intent
of this Agreement.
15. Governing Law. The provisions of this Agreement shall be
construed, interpreted and enforced in accordance with the laws of the State of
Maryland as the same may be in effect from time to time.
16. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original. It
shall not be necessary that the signature of, or on behalf of, each party, or
that the signatures of the persons required to bind any party, appear on more
than one counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the date first above written.
WITNESS/ATTEST: BIORELIANCE CORPORATION
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MA BIOSERVICES, INC.
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MAGENTA CORPORATION
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MAGENTA VIRAL PRODUCTION, INC.
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
8
<PAGE> 9
EXHIBIT 10.7
WITNESS: NATIONSBANK, N.A.
By: (SEAL)
- ------------------------------ --------------------------
Elizabeth F. Shore
Vice President
9
<PAGE> 1
EXHIBIT 10.11
DEED OF TRUST NOTE MODIFICATION AGREEMENT
THIS DEED OF TRUST NOTE MODIFICATION AGREEMENT (this "Agreement") is
made this 31st day of October, 1997, by and among BIORELIANCE CORPORATION, a
corporation organized and in good standing under the laws of the State of
Delaware, successor in interest to Microbiological Associates, Inc. (the
"Company"), MA BIOSERVICES, INC., a corporation organized and in good standing
under the laws of the State of Delaware ("MA BioServices"), MAGENTA
CORPORATION, a corporation organized and in good standing under the laws of
the State of Delaware ("Magenta") and MAGENTA VIRAL PRODUCTION, INC., a
corporation organized and in good standing under the laws of the State of
Delaware ("Magenta Viral"; together with the Company and MA BioServices, each a
"Borrower" and collectively, the "Borrowers") and NATIONSBANK, N.A., successor
in interest to Maryland National Bank, each a national banking association, its
successors and assigns, (the "Lender").
INTRODUCTORY STATEMENT
A. The Lender has made a loan (the "Loan") in the original
principal amount of Three Million Dollars ($3,000,000) to the Company and
Microbiological Associates International Limited, which changed its name to
BioReliance Limited ("MAL") pursuant to the terms of a Deed of Trust Note
dated December 17, 1993 from the Borrower and MAL, which Deed of Trust Note was
amended by that certain First Loan Modification Agreement (the "First Loan
Modification Agreement") dated May 31, 1994 by and among the Lender, the
Company, MAL, Magenta and Magenta Services, which among other things added
Magenta and Magenta Services as joint and several co-makers to the Deed of
Trust Note, which Deed of Trust Note was further amended by that certain Second
Loan Modification Agreement dated September 30, 1994 by and among the Company,
MAL, Magenta, Magenta Services and the Lender, and which Deed of Trust Note was
amended and restated in its entirety pursuant to the provisions of that certain
Third Loan Modification Agreement dated as of December 1, 1994, by and among
the Company, MAL, Magenta, Magenta Services and the Lender, which among other
things, increased the maximum principal amount of the Loan from Three Million
Dollars ($3,000,000) to Four Million Three Hundred Thousand Dollars
($4,300,000) (the Deed of Trust Note as amended and restated from time to
time, is hereinafter called, the "Note"); and
B. The Loan is currently governed by the provisions of that
certain First Amended and Restated Loan Agreement (the "Original Loan
Agreement") dated December 1, 1994, by and among the Company, MAL, Magenta,
Magenta Services and the Lender, which Original Loan Agreement was amended by
that certain Modification of Loan Agreement dated April 25, 1995, by and among
the Company, MAL, Magenta, Magenta Services and the Lender, which Original Loan
Agreement was further amended by that certain Modification of Loan Agreement
dated August 7, 1995 by and among the Company, MAL, Magenta, Magenta Services
and the Lender, which Original Loan Agreement was further amended by that
certain Modification of Loan Agreement dated January 18, 1996, by and among the
Company, MAL, Magenta, Magenta Services and the Lender, which Original Loan
Agreement was further amended by that certain Modification of Loan Agreement
<PAGE> 2
EXHIBIT 10.11
dated May 31, 1996 by and among the Company, MAL, Magenta, Magenta Services and
the Lender, and which Original Loan Agreement was further modified by that
certain Second Modification of Loan Agreement dated June 27, 1996, by and among
the Company, MAL, Magenta, Magenta Services and the Lender, which among other
things, obligated the Company to cause MA Holding, GmbH, a German Company ("MA
Holding") to become an additional maker on the Loan (the Original Loan
Agreement, as thereafter amended, is hereinafter called the "Loan Agreement").
C. The Loan was secured by, among other things, the collateral
described in that certain Security Agreement dated December 17, 1993, by and
among the Company, MAL and the Lender, as amended by the First Loan
Modification Agreement, which among other things, added Magenta and Magenta
Services as parties to the Security Agreement and encumbered their respective
assets as provided for therein (the "Security Agreement").
D. The Loan is secured by, among other things, the Company's
leasehold interest in the property described (the "Property") in that certain
Leasehold Deed of Trust and Security Agreement dated December 17, 1993 from the
Company to the trustees named therein for the benefit of the Lender, which
Leasehold Deed of Trust and Security Agreement was recorded December 20, 1993,
among the Land Records for Montgomery County, Maryland in Liber 12140, at folio
779, and which Leasehold Deed of Trust and Security Agreement was amended by
that certain Modification Agreement-Leasehold Deed of Trust and Security
Agreement dated December 1, 1994 by and among the Company, the trustees named
therein and the Lender (the Leasehold Deed of Trust and Security Agreement as
amended is hereinafter called the "Deed of Trust").
E. The Borrowers have requested and the Lender has agreed to (i)
release MAL, MA Holding, and Magenta Services (the "Released Parties") from
joint and several liability under the Note, (ii) add MA BioServices and
Magenta Viral as joint and several makers to the Note, (iii) release the
collateral described in the Security Agreement, and (iv) amend and restate in
its entirety the Loan Agreement upon the terms and subject to the conditions
set forth in that certain Amended and Restated Replacement Loan Agreement of
even date herewith by and among the Borrowers and the Lender (as the same may
be amended from time to time, the "Restated Loan Agreement").
F. On this date the Company continues to be the leasehold owner
of the Property and the Borrowers acknowledge and agree that the Deed of Trust
constitutes a valid and subsisting first lien on the Company's leasehold
interest in the Property for the entire outstanding principal balance of the
Note and interest thereon, all in accordance with the terms, covenants,
conditions and warranties of the Deed of Trust and the Note secured thereby,
and that all of the other provisions of the same are in full force and effect.
G. In order to induce the Lender to enter into the Restated Loan
Agreement and upon the express condition that the lien of the Deed of Trust
remains a valid and subsisting first lien on the Company's leasehold interest
in the Property and that the execution and delivery of this Agreement shall
not impair the lien thereof, the parties hereto have agreed to execute and
deliver this Agreement to modify the terms of repayment of the Loan as
hereinafter more particularly set forth.
2
<PAGE> 3
EXHIBIT 10.11
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and for the sum of
One Dollar ($1.00) and other good and valuable consideration, the receipt and
sufficiency whereof are hereby acknowledged, the parties hereto, for
themselves, their respective heirs, personal representatives, successors and
assigns do hereby mutually covenant and agree as follows:
1. Incorporation of Recitals. The parties hereto acknowledge and
agree that the recitals hereinabove set forth are true and correct in all
respects and that the same are incorporated herein and made a part hereof.
2. Outstanding Obligations. The parties hereto acknowledge and
agree (a) that the outstanding principal balance of the Note as of the date
hereof is $_______________ (the "Principal Sum"), (b) that interest on the
unpaid principal balance of the Note has been paid through _____________, 1997,
and (c) that the unpaid principal balance of the Note, together with accrued
and unpaid interest thereon, is due and owing subject to the terms of repayment
hereinafter set forth, without defense or offset.
3. Confirmation of Lien. The Borrowers hereby acknowledge and
agree that the Property is and shall remain in all respects subject to the
lien, charge and encumbrance of the Deed of Trust, and nothing herein
contained, and nothing done pursuant hereto, shall adversely affect or be
construed to adversely affect the lien, charge or encumbrance of, or warranty
of title in, or conveyance effected by the Deed of Trust, or the priority
thereof over other liens, charges, encumbrances or conveyances, or to release
or adversely affect the liability of any party or parties whomsoever who may
now or hereafter be liable under or on account of the Loan or any of the Loan
Documents (as hereinafter defined), nor shall anything herein contained or done
in pursuance hereof adversely affect or be construed to adversely affect any
other security or instrument held by the Lender as security for or evidence of
the indebtedness evidenced and secured thereby.
4. Continuation of Loan Terms. Except as otherwise expressly set
forth below, the outstanding principal balance of the Note shall continue to
bear interest and to be repaid on the terms and subject to the conditions set
forth in the Note and the other documents evidencing and securing the Loan
(this Agreement, the Note, the Deed of Trust, the Restated Loan Agreement and
all such other documents, whether currently existing or hereafter executed, and
all modifications thereto, extensions or renewals thereof and substitutions
therefor being hereinafter collectively referred to as the "Loan Documents").
All capitalized terms used but not defined in this Agreement shall have the
meaning given to such terms in the Loan Documents.
5. Interest. Commencing as of the _____ day of November, 1997,
until all sums due under the Loan shall be repaid in full, the unpaid principal
balance of the Note shall bear interest at a rate which is at all times equal
to the fluctuating at the LIBOR Rate (as hereinafter defined), plus the
applicable LIBOR Rate Additional Percentage (the "LIBOR Rate Option").
3
<PAGE> 4
EXHIBIT 10.11
(1) For purposes hereof, the "LIBOR Rate Additional
Percentage" shall mean the percentages applicable to the Loan in accordance
with the following:
(i) If the ratio of Funded Debt divided
by EBITDA is equal to or greater than 2.5 to 1.0, the LIBOR Rate
Additional Percentage shall be two percent (2.00%);
(ii) If the ratio of Funded Debt divided
by EBITDA is less than 2.5 to 1.0, but equal to or greater than 2.0 to
1.0, the LIBOR Rate Additional Percentage shall be one and three
quarters percent (1.75%);
(iii) If the ratio of Funded Debt divided
by EBITDA is less than 2.0 to 1.0, but equal to or greater than 1.5 to
1.0 the LIBOR Rate Additional Percentage shall be one and one half
percent (1.5%); and
(iv) If the ratio of Funded Debt divided
by EBITDA is less than 1.5 to 1.0, the LIBOR Rate Additional
Percentage shall be one and one quarter percent (1.25%)
(2) The initial the LIBOR Rate Additional Percentage
shall be one and one-quarter percent (1.25%). Thereafter, the applicable LIBOR
Rate Additional Percentage for all Advances shall be calculated and adjusted
quarterly, based on the quarterly financial statements of the Borrowers
required to be submitted to the Lender pursuant to Section 5.1(c) of the
Restated Loan Agreement, commencing with the statements for the quarter ending
September 30, 1997. Such quarterly changes shall be effective commencing five
(5) Banking Days after submission by the Borrowers of the required financial
statements; it being understood, however, that in the event the quarterly
financial statements are not submitted when due, the LIBOR Rate Additional
Percentage shall be two percent (2.00%), until such financial statements are
submitted as required, at which time, the LIBOR Rate Additional Percentage (for
the balance of the quarterly period) shall be determined as set forth above.
For purposes of the Note, "Funded Debt" and "EBITDA" shall each be determined
based on the consolidated quarterly financial statements of the Borrowers and
shall have the meanings set forth in the Restated Loan Agreement.
(3) For purposes hereof, the "LIBOR Rate" shall mean a
fluctuating rate equal to the daily London Interbank Offered Rate for thirty
(30) day U.S Dollar deposits as quoted by the Lender as of 11:00 A.M.
(Washington, D.C. time), which rate shall be adjusted for any Federal Reserve
Board reserve requirements imposed upon the Lender from time to time.
(4) The Borrowers shall pay to the Lender, as additional
interest, the following sums, at the time and in the manner hereinafter set
forth:
i) if, due to either: (i) the
introduction of or any change (including, without limitation, any change by way
of imposition or increase of reserve requirements) in or in the interpretation
of any law or regulation or (ii) the compliance by the Lender with any
guideline or request from any central bank or other governmental authority
(whether or not having
4
<PAGE> 5
EXHIBIT 10.11
the force of law), there shall be any increase in the cost to the Lender of
agreeing to make or making, funding or maintaining advances of all or a portion
of the Principal Sum, then the Borrowers shall from time to time, upon demand
by the Lender, pay to the Lender additional amounts to indemnify the Lender
against any such increased costs. A certificate as to the amount of such
increased costs submitted to the Borrowers by the Lender shall be conclusive.
It shall be deemed, for purposes of computing any increased costs pursuant to
this Section, that (i) the making and maintaining of advances of the Principal
Sum which accrue interest based on the LIBOR Rate have been made by the Lender
from its office in London, England and (ii) the funding of each Advance of the
Principal Sum by the Lender which accrues interest based on the LIBOR Rate has
been made through the London Interbank Market. Such additional cost shall be
payable hereunder at the time and in the manner that interest is payable
hereunder for such costs incurred since the last interest payment;
ii) the Borrowers shall also pay to the
Lender at the time and in the manner that interest is payable hereunder for
each advance, the cost since the last interest payment date, as determined in
good faith by the Lender, of complying, in connection with such advance during
such interest period, with any reserve, special deposit or similar requirement
(including but not limited to reserve requirements under Federal Reserve
Regulation D) imposed or deemed applicable against any assets held by or
deposits or accounts in or with or credit extended by the Lender, or the office
of the Lender in London, England, by any United States governmental authority
charged with the administration of such requirements. Each notification as to
the amount of such cost, delivered to the Borrowers by the Lender shall, in the
absence of manifest error, be conclusive as to the amount of such cost. It
shall be deemed for purposes of computing cost pursuant to the above provision
that the making and maintaining of each advance which accrues interest based on
the LIBOR Rate has been made by the Lender through its office in London,
England.
(5) In respect to any interest rate election hereunder
and any transactions contemplated hereby, the Borrowers authorize the Lender to
accept, rely upon, act upon and comply with, any verbal or written
instructions, requests, confirmations and orders of _______________ or
_______________ on behalf of the Borrowers. The Borrowers acknowledge and
agree that the transmission between the Borrowers and the Lender of any such
instructions, requests, confirmations and orders involves the possibility of
errors, omissions, mistakes and discrepancies and agrees to adopt such internal
measures and operational procedures to protect its interests. By reason
thereof, the Borrowers hereby assume all risk of loss and responsibility for,
releases and discharges the Lender from any and all responsibility or liability
for, and agrees to indemnify, reimburse on demand and hold the Lender harmless
from, any and all claims, actions, damages, losses, liability and expenses by
reason of, arising out of or in any way connected with or related to, (i) the
Lender's acceptance, reliance and actions upon, compliance with or observation
of any such instructions, requests, confirmations or orders, and (ii) any such
errors, omissions, mistakes and discrepancies, except those caused by the
Lender's gross negligence or willful misconduct.
(6) All interest payable under the terms of the Note
shall be calculated on the basis of a 360-day year and the actual number of
days elapsed.
5
<PAGE> 6
EXHIBIT 10.11
6. Assumption of Obligations. MA BioServices and Magenta Viral
each promises and agrees to perform each and all of the covenants, agreements
and obligations in the Note, to be performed by the Company and Magenta at the
times, in the manner and in all respects as provided therein, and to be bound
by each and all of the terms and provisions of the Loan Documents including,
but not limited to the Note, as though each Loan Document had originally been
jointly and severally made by the Company, Magenta, MA BioServices and Magenta
Viral. All of the Borrowers shall remain jointly and severally liable for the
performance of each and all of the covenants, agreements and obligations in the
Loan Documents to be performed by the Borrowers. All references in the Note to
the "Undersigned" or to the "Borrower" or the "Borrowers" shall hereafter be
deemed to include MA BioServices and Magenta Viral.
7. Releases. The Lender, for itself, its successors and assigns
hereby releases each of each of the Released Parties from any and all liability
on account of the Loan, the Note and the Loan Documents. This release shall be
binding upon the Lender and its successors and assigns and shall inure to the
benefit of the Released Parties and their respective present and former
employees, agents, successors and assigns.
8. Confession of Judgment. Paragraph Number 11 of the Note
providing for confession of judgment against the Borrowers is hereby deleted
in its entirety.
9. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF THIS
AGREEMENT, THE LOAN DOCUMENTS, OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR ARBITRATION OF COMMERCIAL DISPUTES OF ENDISPUTE, INC., D/B/A
J.A.M.S./ENDISPUTE ("J.A.M.S.") AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF AN INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING ANY ACTION, INCLUDING
A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS INSTRUMENT, AGREEMENT OR DOCUMENT RELATES IN ANY COURT
HAVING JURISDICTION OVER SUCH ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
MONTGOMERY COUNTY, MARYLAND AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR. IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO
6
<PAGE> 7
EXHIBIT 10.11
EXTEND THE COMMENCING OF SUCH HEARING FOR AN ADDITIONAL SIXTY (60) DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS INSTRUMENT, AGREEMENT
OR DOCUMENT SHALL BE DEEMED TO: (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE LENDER OF THE
PROTECTION AFFORDED TO IT BY 12 U.S.C. Section 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE LENDER: (A) TO EXERCISE
SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE
AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE
RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE LENDER MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR
DOCUMENT. NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF ANY ACTION FOR FORECLOSURE OR FOR PROVISIONAL OR ANCILLARY
REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE
CLAIMANT IN SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
10. Expenses. In consideration of the Lender's agreement to
modify the Loan, the Borrowers covenant and agree to pay all other reasonable
fees, costs, charges and expenses incurred by the Lender in connection with the
preparation of this Agreement and the modification of the Loan, including
without limitation, the Lender's reasonable attorneys fees and all recording
costs.
11. Events of Default. The events of default specifically
enumerated in the Note are hereby amended and replaced with the following
enumerated events of default, and the occurrence of any of the following events
shall constitute an event of default and shall entitle the Lender to exercise
all rights and remedies provided in the Note and the Deed of Trust, as well as
all other rights and remedies provided to the Lender under the terms of any of
the other Loan Documents as a result of the occurrence of the same:
(a) The Borrowers shall fail to make any payment of
principal or interest within fifteen (15) Banking Days of when due on the Note,
or on any other promissory note or other obligation payable by any of the
Borrowers to the Lender;
(b) The Borrowers shall fail to comply with the terms of
any covenant or agreement contained herein and such failure remains uncured for
thirty (30) days after notice thereof; or
7
<PAGE> 8
EXHIBIT 10.11
(c) An event of default (as described or defined therein)
shall occur under any of the Loan Documents, and such event of default is not
cured within any applicable grace period provided therein.
12. Release of Claims. The Borrowers for themselves and for each
of their respective successors and assigns, hereby release and waive any and
all claims and/or defenses they now may have against the Lender and its
successors and assigns on account of any occurrence relating to the Loan, the
Loan Documents and/or the Property which accrued prior to the date hereof,
including, but not limited to, any claim that the Lender (a) breached any
obligation to the Borrowers in connection with the Loan, (b) was or is in any
way involved with the Borrowers as a partner, joint venturer, or in any other
capacity whatsoever other than as a lender, (c) failed to fund any portion of
the Loan or any other sums as required under any document or agreement in
reference thereto, or (d) failed to timely respond to any offers to cure any
defaults under any document or agreement executed by the Borrowers, or any
third party or parties in favor of the Lender. This release and waiver shall
be effective as of the date of this Agreement and shall be binding upon the
Borrowers and each of their respective successors and assigns, and shall inure
to the benefit of the Lender and its successors and assigns. The term "Lender"
as used herein shall include, but shall not be limited to, its present and
former officers, directors, employees, agents and attorneys.
13. Continuing Agreements; Novation. Except as expressly modified
hereby, the parties hereto ratify and confirm each and every provision of the
Note, the Deed of Trust and each of the other Loan Documents as if the same
were set forth herein. In the event that any of the terms and conditions in
the Note or in any of the other Loan Documents conflict in any way with the
terms and provisions hereof, the terms and provisions of the Restated Loan
Agreement shall prevail. The parties hereto covenant and agree that the
execution of this Agreement is not intended to and shall not cause or result in
a novation with regard to the Note, the Deed of Trust and/or the other Loan
Documents and that the existing indebtedness of the Borrowers to the Lender
evidenced by the Note is continuing, without interruption, and has not been
discharged by a new agreement.
14. ENTIRE AGREEMENT. NO STATEMENTS, AGREEMENTS OR
REPRESENTATIONS, ORAL OR WRITTEN, WHICH MAY HAVE BEEN MADE TO ANY OF THE
BORROWERS OR TO ANY EMPLOYEE OR AGENT OF ANY OF THE BORROWERS, EITHER BY THE
LENDER OR BY ANY EMPLOYEE, AGENT OR BROKER ACTING ON THE LENDER'S BEHALF, WITH
RESPECT TO THE MODIFICATION OF THE LOAN, SHALL BE OF ANY FORCE OR EFFECT,
EXCEPT TO THE EXTENT STATED IN THIS AGREEMENT, AND ALL PRIOR AGREEMENTS AND
REPRESENTATIONS WITH RESPECT TO THE MODIFICATION OF THE LOAN ARE MERGED HEREIN.
15. Captions. The captions herein set forth are for convenience
only and shall not be deemed to define, limit or describe the scope or intent
of this Agreement.
16. Governing Law. The provisions of this Agreement shall be
construed, interpreted and enforced in accordance with the laws of the State of
Maryland as the same may be in effect from time to time.
8
<PAGE> 9
EXHIBIT 10.11
17. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original. It
shall not be necessary that the signature of, or on behalf of, each party, or
that the signatures of the persons required to bind any party, appear on more
than one counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the date first above written.
WITNESS/ATTEST: BIORELIANCE CORPORATION
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MA BIOSERVICES, INC.
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MAGENTA CORPORATION
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MAGENTA VIRAL PRODUCTION, INC.
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS: NATIONSBANK, N.A.
By: (SEAL)
- ------------------------------ --------------------------
Elizabeth F. Shore
Vice President
9
<PAGE> 1
EXHIBIT 10.12
AMENDED AND RESTATED REPLACEMENT
LOAN AGREEMENT
THIS AMENDED AND RESTATED REPLACEMENT LOAN AGREEMENT (the "Agreement")
is made this 31st day of October 1997, by and among BIORELIANCE CORPORATION, a
corporation organized and in good standing under the laws of the State of
Delaware, successor in interest to Microbiological Associates, Inc. (the
"Company"), MA BIOSERVICES, INC., a corporation organized and in good standing
under the laws of the State of Delaware ("MA BioServices"), MAGENTA
CORPORATION, a corporation organized and in good standing under the laws of the
State of Delaware ("Magenta") and MAGENTA VIRAL PRODUCTION, INC., a corporation
organized and in good standing under the laws of the State of Delaware
("Magenta Viral"; together with the Company, MA BioServices and Magenta, each a
"Borrower" and collectively, the "Borrowers") and NATIONSBANK, N.A., successor
in interest to Maryland National Bank, each a national banking association, its
successors and assigns, (the "Lender").
RECITALS
A. The Lender has made certain loans described as:
(a) a term loan ("Loan No. 1") in the original principal
amount of One Million Eight Hundred Thousand Dollars ($1,800,000),
which Loan No. 1 is evidenced by that certain Promissory Note dated
June 27, 1996, from the Company, BioReliance Limited, a corporation
organized and existing under the laws of Scotland, formerly known as
Microbiological Associates Limited and as Microbiological Associates
International, Ltd. ("MAL"), Magenta and Magenta Services, Ltd., a
corporation organized and existing under the laws of Scotland
("Magenta Services") in favor of the Lender, and which Promissory Note
was amended and restated in its entirety pursuant to the provisions of
that certain Amended and Restated Promissory Note dated September 19,
1996 in the principal amount of One Million Eight Hundred Thousand
Dollars ($1,800,000), from the Company, MAL, Magenta and Magenta
Services in favor of the Lender (the Promissory Note as amended and
restated in its entirety is hereinafter called, "Note No. 1");
(b) a line of credit which was converted to a term loan
("Loan No. 2") in the original principal amount of Three Million
Dollars ($3,000,000), which Loan No. 2 is evidenced by that certain
Deed of Trust Note dated December 17, 1993 from the Company and MAL,
which Deed of Trust Note was amended by that certain First Loan
Modification Agreement (the "First Loan Modification Agreement") dated
May 31, 1994 by and among the Lender, the Company, MAL, Magenta and
Magenta Services, which among other things, added Magenta and Magenta
Services as joint and several co-makers to the Deed of Trust Note,
which Deed of Trust Note was further amended by that certain Second
Loan Modification Agreement dated September 30, 1994 by and among the
Company, MAL,
<PAGE> 2
EXHIBIT 10.12
Magenta, Magenta Services and the Lender, and which Deed of Trust Note
was amended and restated in its entirety pursuant to the provisions of
that certain Third Loan Modification Agreement dated as of December 1,
1994, by and among the Company, MAL, Magenta, Magenta Services and the
Lender, which among other things, increased the maximum principal
amount of Loan No. 2 from Three Million Dollars ($3,000,000) to Four
Million Three Hundred Thousand Dollars ($4,300,000) (the Deed of
Trust Note as amended and restated from time to time, is hereinafter
called, "Note No. 2"); and
(c) a line of credit ("Loan No. 3") in the maximum
principal amount of One Million Dollars ($1,000,000), which Loan No. 3
is evidenced by that certain Promissory Note dated December 1, 1994 in
the original principal amount of One Million Dollars ($1,000,0000)
from the Company, MAL, Magenta and Magenta Services in favor of the
Lender, and which Promissory was modified and extended by that certain
Note Modification and Extension Agreement dated November 30, 1995 by
and among the Company, MAL, Magenta, Magenta Services and the Lender,
which Note was further modified and extended by that certain Note
Modification and Extension Agreement dated as of May 31, 1996 by and
among the Company, MAL, Magenta, Magenta Services and the Lender, and
which Promissory Note as amended was amended and restated in its
entirety pursuant to the provisions of that certain Amended and
Restated Promissory Note dated June 10, 1997, and which Promissory
Note as further amended was amended and restated in its entirety
pursuant to the provisions of that certain Amended and Restated
Promissory Note dated August 31, 1997, and which Promissory Note is
being amended and restated in its entirety pursuant to that certain
Amended and Restated Promissory Note of even date herewith (the
"Replacement Revolving Note") in the maximum principal amount of One
Million Dollars ($1,000,000) from the Borrowers in favor of the Lender
(the Promissory Note as amended and restated from time to time is
hereinafter called "Note No. 3").
B. Loan No. 1, Loan No. 2 and Loan No. 3 (the "Loans") are
currently governed by the provisions of that certain First Amended and Restated
Loan Agreement (the "Original Loan Agreement") dated December 1, 1994, by and
among the Company, MAL, Magenta, Magenta Services and the Lender, which
Original Loan Agreement was amended by that certain Modification of Loan
Agreement dated April 25, 1995, by and among the Company, MAL, Magenta, Magenta
Services and the Lender, which Original Loan Agreement was further amended by
that certain Modification of Loan Agreement dated August 7, 1995 by and among
the Company, MAL, Magenta, Magenta Services and the Lender, which Original
Loan Agreement was further amended by that certain Modification of Loan
Agreement dated January 18, 1996, by and among the Company, MAL, Magenta,
Magenta Services and the Lender, which Original Loan Agreement was further
amended by that certain Modification of Loan Agreement dated May 31, 1996 by
and among the Company, MAL, Magenta, Magenta Services and the Lender, and which
Original Loan Agreement was further modified by that certain Second
Modification of Loan Agreement dated June 27, 1996, by and among the Company,
MAL, Magenta, Magenta Services and the Lender, which among other things,
obligated the Company to cause MA Holding GmbH, (formerly known as
Microbiological Associates Holding, GmbH), a German company ("MA Holding") to
become an
2
<PAGE> 3
EXHIBIT 10.12
additional maker on the Loans (the Original Loan Agreement, as thereafter
amended, is hereinafter called the "Loan Agreement").
C. The Loans were secured by, among other things, the collateral
described in that certain Security Agreement dated December 17, 1993, by and
among the Company, MAL and the Lender, as amended by the First Loan
Modification Agreement, which among other things, added Magenta and Magenta
Services as parties to the Security Agreement and encumbered their respective
assets as provided for therein (the Security Agreement as the same may be
amended from time to time is hereinafter called the "Security Agreement").
D. Loan No. 2 is further secured by, among other things, that
certain Leasehold Deed of Trust and Security Agreement dated December 17, 1993
from the Company to the trustees named therein for the benefit of the Lender,
which Leasehold Deed of Trust and Security Agreement was recorded December 20,
1993, among the Land Records for Montgomery County, Maryland in Liber 12140, at
folio 779, and which Leasehold Deed of Trust and Security Agreement was amended
by that certain Modification Agreement-Leasehold Deed of Trust and Security
Agreement dated December 1, 1994 by and among the Company, the trustees named
therein and the Lender and recorded December 1, 1994 among the Land Records for
Montgomery County, Maryland (the Leasehold Deed of Trust and Security Agreement
as amended is hereinafter called the "Deed of Trust").
E. The Borrowers have requested and the Lender has agreed to (i)
release MAL, MA Holding and Magenta Services from joint and several liability
under Note No.1, Note No.2 and Note No.3 (collectively, the "Notes"), (ii) add
MA BioServices and Magenta Viral as joint and several makers to the Notes,
(iii) release the liens created by the Security Agreement and (iv) amend and
restate in its entirety the Loan Agreement upon the terms and subject to the
conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrowers and the
Lender hereby agree that the Loan Agreement is hereby restated in its entirety
as follows:
I. DEFINITIONS As used in this Agreement, the terms defined in the
Preamble and Recitals hereto shall have the respective meanings specified
therein, and the following terms shall have the following meanings:
"Banking Day" shall mean any day that is not a Saturday, Sunday or
banking holiday in the State of Maryland.
"Collateral" means the property of any Borrower which is described in
the Security Agreement, including specifically, but without limitation: (a) all
amounts now and in the future owed
3
<PAGE> 4
EXHIBIT 10.12
by the Lender or any affiliate of the Lender to the Borrowers and/or on deposit
in any account maintained by the Borrowers with the Lender or any affiliate of
the Lender; (b) all present and future substitutions, replacements,
appurtenances, accessories and accessions relating to any of the Collateral;
(c) all books, records, computer programs, other software, computer files and
diskettes or computer hardware and rights under any and all licenses to use
computer programs, software, files and hardware; (d) all proceeds (cash and
noncash, including insurance proceeds) and products of all Collateral in any
form whatsoever; and (e) all accounts, chattel paper, instruments, inventory ,
equipment, general intangibles, fixtures and other goods or property purchased
or acquired with the cash and/or non-cash proceeds of the Collateral.
"Event of Default" means any of the events specified in Section VII
hereof.
"Excluded Subsidiaries" has the meaning set forth in Section 6.6
hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Indebtedness" shall mean all items which would properly be included
in the liability section of a balance sheet as at the date as of which
"indebtedness" is to be determined, including, but not by way of limitation,
deposit liabilities.
"Loan Documents" shall mean this Agreement, the Notes, the Deed of
Trust, as amended by the Deed of Trust Modification, the Line of Credit
Replacement Note, the Deed of Trust Note Modification, the Term Note
Modification, and any other instrument, agreement or document previously,
simultaneously or hereafter executed and delivered by any Borrower, by any
Released Party and/or any other person, singularly or jointly with any other
person, evidencing, securing in connection with the Obligations, this
Agreement, the Notes, the Deed of Trust, as amended by the Deed of Trust
Modification, the Line of Credit Replacement Note, the Deed of Trust Note
Modification, the Term Note Modification, but not including the Security
Agreement.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Company and
its Subsidiaries taken as a whole or (ii) the ability of the Borrowers to repay
the Obligations or otherwise perform their obligations under the Loan
Documents.
"Notes" means Note No.1, Note No.2 and Note No.3 and any and all
amendments thereto and modifications and revisions therein.
"Obligations" as used in this Agreement means all of the obligations
for payment evidenced by the Loan Documents and all of the obligations to
perform and comply with all of the terms, covenants, conditions, stipulations
and agreements contained in the Loan Documents and all other obligations of any
Borrower to the Lender, whether now existing or hereafter created, whether
direct or contingent.
4
<PAGE> 5
EXHIBIT 10.12
"Person" shall include natural persons, corporations (which shall be
deemed to include business trusts), limited liability companies, associations,
companies, partnerships and joint ventures.
"Released Party" means each of MAL, MA Holding and Magenta Services
(collectively, "Released Parties").
"Subsidiary" or "Subsidiaries" means any corporation(s) or other
entity, more than fifty percent (50%) of the voting shares or other ownership
interests of which are owned directly or indirectly by any Borrower or by one
or more Subsidiaries of any Borrower or a combination thereof.
"Wholly Owned Subsidiary" means any Subsidiary or Subsidiaries, all or
substantially all of whose shares of stock of all classes or other ownership
interests of which are owned directly or indirectly by the Company or another
Wholly Owned Subsidiary of the Company or a combination thereof.
Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not defined, shall have the respective meanings
given to them under GAAP. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
section, subsection, schedule and exhibit references are references to sections
or subsections of, or schedules or exhibits to, as the case may be, this
Agreement unless otherwise specified. As used herein, the singular number
shall include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may
require. Reference to any one or more of the Loan Documents and any of the
Loan Documents shall mean the same as the foregoing may from time to time be
amended, restated, substituted, extended, renewed, supplemented or otherwise
modified.
II. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, each Borrower
represents and warrants to the Lender, and shall be deemed to represent and
warrant to the Lender as of the date any of the Obligations are created, that:
Section II.1. Recitals. The above Recitals are true and correct in
all material respects and that the same are incorporated herein and made a part
hereof by reference.
Section II.2. Subsidiaries. As of the date hereof, the Company has
the Subsidiaries listed on EXHIBIT A attached hereto and made a part hereof and
no others, except for subsidiaries organized or acquired after the date hereof
in accordance with Section 6.6 of this Agreement, or such subsidiaries that
have assets which, when taken as a whole, are not material. Each Subsidiary is
a
5
<PAGE> 6
EXHIBIT 10.12
Wholly Owned Subsidiary except as shown on EXHIBIT A, which correctly indicates
the nature and amount of the Company's ownership interests therein.
Section II.3. Good Standing. Each of the Borrowers (a) is a
corporation duly organized, existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has the corporate power to own its
property and to carry on its business as now being conducted, and (c) is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned by it therein or in which the transaction
of its business makes such qualification necessary, except where the failure to
be so qualified would not have in the aggregate a Material Adverse Effect.
Section II.4. Power and Authority. Each of the Borrowers has full
power and authority to execute and deliver this Agreement and each of the other
Loan Documents executed and delivered by it, to make the borrowing hereunder,
and to incur the Obligations, all of which have been duly authorized by all
proper and necessary corporate action. No consent or approval of stockholders
or of any public authority is required as a condition to the validity or
enforceability of this Agreement or any of the other Loan Documents executed
and delivered by any of the Borrowers, except where the failure to obtain such
consents or approvals would not have in the aggregate a Material Adverse
Effect.
Section II.5. Binding Agreements. This Agreement and each of the
other Loan Documents executed and delivered by the Borrowers have been properly
executed by each Borrower, constitute valid and legally binding obligations of
each Borrower, and are fully enforceable against each Borrower in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity.
Section II.6. Litigation. There are no proceedings pending or, to
the Borrowers' knowledge, threatened against any of the Borrowers before any
court or administrative agency which if determined adversely to the interests
of the Borrowers would have in the aggregate a Material Adverse Effect.
Section II.7. No Conflicting Agreements. There is (a) no charter,
by-law or preference stock provision of any Borrower and no provision of any
existing mortgage, indenture, contract or agreement binding on any Borrower or
affecting its property, and (b) to the knowledge of any Borrower, no provision
of law or order of court binding upon any Borrower, which would conflict with
or in any way prevent the execution, delivery, or performance of the terms of
this Agreement or of any of the other Loan Documents executed and delivered by
any Borrower, or which would be violated as a result of such execution,
delivery or performance, except such conflicts or violations that would not in
the aggregate have a Material Adverse Effect.
Section II.8. Financial Condition. The financial statements of the
Company previously delivered to the Lender, are complete and correct and, in
the opinion of the Company, fairly present the financial condition of the
Company and its Subsidiaries on a consolidated basis as of the date
6
<PAGE> 7
EXHIBIT 10.12
thereof and have been prepared in accordance with GAAP applied on a consistent
basis as at the dates thereof and throughout the period involved (except that
quarterly financial statements may be subject to ordinary year-end
adjustments). There has been no material adverse change in the financial
condition or operations of any Borrower since the date of the most recent
balance sheet included in such financial statements.
Section II.9. Taxes. Each Borrower has filed or has caused to have
been filed all federal, state and local tax returns which, to the knowledge of
such Borrower, are required to be filed ( except where the failure to file any
such return would not in the aggregate have a Material Adverse Effect) and has
paid or caused to have been paid all taxes as shown on such returns or on any
assessment received by it, to the extent that such taxes have become due,
unless and to the extent only that such taxes, assessments and governmental
charges are currently being contested in good faith and by appropriate
proceedings by such Borrower and adequate reserves therefor have been
established as required under GAAP.
Section II.10. Compliance With Law. The Borrowers are not in
violation of any law, ordinance, governmental rule or regulation to which they
are subject, and each Borrower has obtained any and all licenses, permits,
franchises or other governmental authorizations necessary for the ownership of
its properties and the conduct of its business (except where such violation of
law, ordinance, governmental rule or regulation or failure to obtain licenses,
permits, franchises or other authorizations, would not in the aggregate have a
Material Adverse Effect).
Section II.11. Title to Properties. Except for liens created in the
normal course of business on personal property of the Borrowers, each Borrower
has (i) in the case of owned and real property, good and marketable fee title
to, and (ii) in the case of owned personal property, good and valid title to,
and (iii) in the case of leased real or personal property, valid and
enforceable leasehold interests (as the case may be) in all of its properties
(except as permitted pursuant to Section 6.1, or where the failure to have such
title or ownership interest in such property, would not in the aggregate have
a Material Adverse Effect).
Section II.12. Tradename. The Borrowers utilize no tradenames in the
conduct of their businesses, except for the names GenePro, Magenta, Biomeva and
MA BioServices, and such other tradenames that are immaterial to the conduct of
their businesses, and will promptly advise the Lender of any future tradenames
that are material to the conduct of their businesses.
Section II.13. Margin Stock. None of the proceeds of any of the
Loans will be used, directly or indirectly, by any Borrower for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any "margin
security" within the meaning of Regulation G (12 CFR Part 207), or "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System (herein called "margin security" and
"margin stock") or for any other purpose which might make the transactions
contemplated herein a "purpose credit" within the meaning of said Regulation G
or Regulation U, or cause this Agreement to violate any other regulation of the
Board of
7
<PAGE> 8
EXHIBIT 10.12
Governors of the Federal Reserve System or the Securities Exchange Act of 1934
or the Small Business Investment Act of 1958, as amended, or any rules or
regulations promulgated under any of such statutes.
Section II.14. ERISA. With respect to any "pension plan" as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974
("ERISA"), which plan is now or previously has been maintained or contributed
to by the Borrower and/or by any member ("Commonly Controlled Entity") of a
group of trades or businesses which includes any Borrower and which is under
common control within the meaning of Sections 414(b) and/or (c) of the Internal
Revenue Code of 1986 ("Code"), that, except where there would be in the
aggregate no Material Adverse Effect: (a) no "accumulated funding deficiency"
as defined in Code Section 412 or ERISA Section 302 has occurred, whether or
not that accumulated funding deficiency has been waived; (b) no "reportable
event" as defined in ERISA Section 4043 has occurred; (c) no termination of any
plan subject to Title IV of ERISA has occurred; (d) neither any Borrower nor
any Commonly Controlled Entity has incurred a "complete withdrawal" within the
meaning of ERISA Section 4203 from any multiemployer plan; (e) neither any
Borrower nor any Commonly Controlled Entity has incurred a "partial withdrawal"
within the meaning of ERISA Section 4205 with respect to any multiemployer
plan; (f) no multiemployer plan to which any Borrower or any Commonly
Controlled Entity has an obligation to contribute is in "reorganization" within
the meaning of ERISA Section 4241 nor has notice been received by any Borrower
or any Commonly Controlled Entity that such a multiemployer plan will be placed
in "reorganization". Each Borrower represents and warrants to the Lender with
respect to any pension plan which any Borrower and/or any Commonly Controlled
Entity maintains or contributes to, either now or in the future, that except
where there would be in the aggregate no Material Adverse Effect: (a) such
bonding as is required under ERISA Section 412 will be maintained; (b) as soon
as practicable and in any event within fifteen (15) days after any Borrower or
any Commonly Controlled Entity knows or has reason to know that a "reportable
event" has occurred or is likely to occur, such Borrower will deliver to the
Lender a certificate signed by its chief financial officer setting forth the
details of such "reportable event"; (c) neither any Borrower nor any Commonly
Controlled Entity will: (i) engage in or permit any "prohibited transaction"
(as defined in ERISA Section 406 or Code Section 4975) to occur; (ii) cause any
"accumulated funding deficiency" as defined in ERISA Section 302 and/or Code
Section 412; (iii) terminate any pension plan in a manner which could result in
the imposition of a lien on the property of any Borrower pursuant to ERISA
Section 4068; (iv) terminate or consent to the termination of any multiemployer
plan; (v) incur a complete or partial withdrawal with respect to any
multiemployer plan within the meaning of ERISA Sections 4203 and 4205; and (d)
within fifteen (15) days after notice is received by any Borrower or any
Commonly Controlled Entity that any multiemployer plan has been or will be
placed in "reorganization" within the meaning of ERISA Section 4241, each
Borrower will notify the Lender to that effect. Upon the Lender's request,
each Borrower will deliver to the Lender a copy of the most recent actuarial
report, financial statements and annual report completed with respect to any
"defined benefit plan", as defined in ERISA Section 3(35).
Section II.15. Governmental Consent. Neither the nature of any
Borrower or of its business or properties, nor any relationship between any
Borrower and any other entity or person, nor any circumstance in connection
with the making of the Loan, or the offer, issue, sale or delivery of the
8
<PAGE> 9
EXHIBIT 10.12
Notes is such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority, on the part of
any Borrower, as a condition to the execution and delivery of this Agreement or
any of the other Loan Documents, the borrowing of the principal amount of the
Loans or the offer, issue, sale or delivery of the Notes, unless the failure to
obtain such consents, approvals, authorizations, filings, registrations and
qualifications would not in the aggregate have a Material Adverse Effect.
Section II.16. Full Disclosure. The financial statements referred to
in this Part IV do not, nor does this Agreement, nor do any written statements
furnished by any Borrower to the Lender in connection with the making of this
Agreement or any of the Loans, contain any untrue statement of material fact or
omit a material fact necessary to make the statements contained therein or
herein in light of the circumstances under which they were made not misleading,
it being understood and agreed that any budgets, forecasts or projections as to
future events delivered by any Borrower pursuant to this Agreement shall not be
viewed as facts for the purposes of this provision.
Section II.17. Patents and Trademarks. Each Borrower owns or
possesses all of the patents, trademarks, service marks, trade names,
copyrights and licenses and all rights with respect thereto which such Borrower
considers necessary for the present and planned future operation of its
business, without any material conflict with the rights of any other person,
except where the failure to own or possess patents, trademarks, service marks,
trade names, copyrights and licenses would not in the aggregate have a
Material Adverse Effect.
Section II.18. Environmental Laws. Except to the extent that
there could not be a Material Adverse Effect: (a) each Borrower has obtained or
will obtain all permits, licenses and other authorizations ("Environmental
Authorizations") which are required under any and all applicable federal,
state, local and foreign statutes, ordinances, codes, laws and regulations
relating to the environment or the release of any materials into the
environment that are applicable to the Borrowers ("Environmental Laws") and has
delivered or will cause to be delivered copies of such permits, licenses and
other authorizations to the Lender; (b) each Borrower is and will remain in
compliance with the terms and conditions of all such material permits, licenses
and authorizations, and is and will remain in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
Law or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder and
binding on such Borrower; (c) no notice, notification, demand, request for
information, citation, summons or order has been issued, no compliant has been
filed, no penalty has been assessed and no investigation or review is pending
or to any Borrower's knowledge threatened by any governmental or other entity
(i) with respect to any alleged failure by any Borrower to have any
Environmental Authorization required in connection with the conduct of the
business of any Borrower; (ii) with respect to any generation, treatment,
storage, recycling, transportation, disposal, or any release as defined in 42
U.S.C. Section 9601(22) 10 ("Release") on, at, under, about or from any
property or facility now, or in the past, owned, leased or operated by any
Borrower of any substance regulated under any Environmental Laws ("Hazardous
Materials"); or (iii) with respect to any arrangement by Borrower for disposal,
treatment or transport
9
<PAGE> 10
EXHIBIT 10.12
of any Hazardous Material, except as disclosed with respect to Ramp Industries
in the certain Registration Statement on Form S-1 (Registration No. 333-25011)
as amended, and as filed with the Securities and Exchange Commission; (d) no
oral or written notification of a Release of a Hazardous Material has been
filed or made by or on behalf of any Borrower and no property or facility now
or previously owned, leased or operated by any Borrower is listed or proposed
for listing on the National Priorities List under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, or
on any similar state list of sites requiring investigation or clean-up; (e)
there are no material liens arising under or pursuant to any Environmental Laws
on any of the real property or properties owned or leased by any Borrower and
no governmental actions have been taken or are in process which would subject
any of such properties to such liens such that any Borrower would be required
to place any notice or restriction relating to the presence of Hazardous
Materials at any property owned by it in any deed of such property; and (f)
there are no Hazardous Materials present on, in, at, under or about any real
property or properties, owned or leased by any Borrower in amounts or
concentrations or under circumstances other than those that are used in any
Borrower's business and stored, kept and used in material compliance with all
Environmental Laws.
Section II.19. No Default. There is no Event of Default (as
hereinafter defined) and no event has occurred and no condition exists which
with the giving of notice or the passage of time would constitute an Event of
Default.
Section II.20. Solvency. The fair saleable value of the assets
(including goodwill minus disposition costs) of the Borrowers, taken as a
whole, exceeds the fair value of their liabilities; the assets of the
Borrowers, taken as a whole, do not constitute unreasonably small capital for
the Borrowers to carry out their business after the transactions contemplated
by this Agreement; and the Borrowers are able to pay their debts (including
trade debts) as they mature.
III. ASSUMPTION OF OBLIGATIONS, RELEASES AND AGREEMENT NOT TO ENCUMBER.
Section III.1. Assumption of Obligations. MA BioServices and
Magenta Viral each promises and agrees to perform each and all of the
covenants, agreements and obligations in the Loan Documents, including, but not
limited to the Notes, to be performed by the Company and Magenta at the times,
in the manner and in all respects as provided therein, and to be bound by each
and all of the terms and provisions of the Loan Documents including, but not
limited to the Notes, as though each Loan Document had originally been jointly
and severally made by the Company, Magenta, MA BioServices and Magenta Viral.
All of the Borrowers shall remain jointly and severally liable for the
performance of each and all of the covenants, agreements and obligations in the
Loan Documents to be performed by the Borrowers. All references in any of the
Loan Documents to the "Borrower" or the "Borrowers" shall hereafter be deemed
to include MA BioServices and Magenta Viral.
Section III.2. Releases. The Lender, for itself, its successors and
assigns hereby releases each of the Released Parties from any and all liability
on account of the Loans, the Notes and the
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EXHIBIT 10.12
Loan Documents. This release shall be effective as of the date on which the
Conditions Precedent in Article IV hereof have been satisfied or waived by the
Lender and shall be binding upon the Lender and its successors and assigns and
shall inure to the benefit of the Released Parties and their respective present
and former employees, agents, successors and assigns. In addition, the Lender
hereby releases all of the Collateral from the lien and effect of the Security
Agreement. In furtherance of this release, the Lender will execute and deliver
to the Borrowers, such UCC-3 (Termination Statements) as the Borrowers may
request to terminate the Lender's existing lien on the Collateral.
Section III.3. Agreement Not to Encumber. Each Borrower understands
and agrees that, except as otherwise permitted in Section 6.1 of this
Agreement, it may not now or hereafter create, incur, assume or suffer to
exist any Lien on any of its property or assets, whether now owned or hereafter
acquired, or enter into any agreement, document, instrument or other
arrangement (except with or in favor of the Lender, or with the Lender's
consent) with any Person which directly or indirectly prohibits or has the
effect of prohibiting any Borrower from creating liens upon any of any
Borrower's properties or assets.
IV. CONDITIONS PRECEDENT. This Agreement shall become effective on the
date the Lender receives the following documents, each of which shall be
satisfactory in form and substance to the Lender:
(a)(a) The Replacement Revolving Promissory Note issued and
delivered by the Borrowers in the form of EXHIBIT B attached hereto and
incorporated herein by reference, payable to the order of the Lender in the
maximum principal amount of One Million Dollars ($1,000,000) (the "Line of
Credit Replacement Note");
(b)(b) The Deed of Trust Note Modification Agreement issued
and delivered by and among the Borrowers and the Lender in the form of EXHIBIT
D attached hereto and incorporated herein by reference (the "Deed of Trust
Note Modification");
(c)(c) The Note Modification Agreement issued and delivered
by and among the Borrowers and the Lender in the form of EXHIBIT E attached
hereto and incorporated herein by reference (the "Term Note Modification
Agreement");
(d) A Second Modification Agreement - Leasehold Deed of
Trust and Security Agreement by and among the Company, the trustees named
therein and the Lender, in the form of EXHIBIT F attached hereto and
incorporated herein by reference (the "Deed of Trust Modification");
(e) The Lender shall have received a certificate dated as
of the date hereof by the Secretary or Assistant Secretary of MA BioServices
covering:
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EXHIBIT 10.12
(i) true and complete copies of MA BioServices'
corporate charter, bylaws, and all amendments thereto;
(ii) true and complete copies of the resolutions
of MA BioServices' Board of Directors authorizing (a) the execution, delivery
and performance of the Loan Documents and (b) the borrowings by MA BioServices
under the Loan Documents;
(iii) the incumbency, authority and signatures of the
officers of MA BioServices authorized to sign this Agreement and the other Loan
Documents to which MA BioServices is a party.
(f) Such other information, instruments, opinions,
documents, certificates and reports as the Lender may deem necessary.
V. AFFIRMATIVE COVENANTS OF EACH BORROWER
Until payment in full and the performance of all of the Obligations,
the Company or where applicable, each Borrower, shall:
Section V.1. Financial Statements. Furnish to the Lender:
(a) Annual Statements and Certificates. As soon as
available but in no event more than one hundred twenty (120) days after the
close of each of the Company's fiscal years, (i) a copy of the consolidated and
consolidating financial statement relating to the Company and its Subsidiaries
in reasonable detail satisfactory to the Lender, prepared in accordance with
GAAP and certified by an independent certified public accountant satisfactory
to the Lender, which financial statement shall include a balance sheet and
related income statement as at the end of such fiscal year, provided, however,
that delivery pursuant to clause (d) below of the Annual Report on Form 10-K of
the Company for such fiscal year (within one hundred twenty (120) days after
the close of each of the Company's fiscal years), filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of this
clause (a).
(b) Annual Opinion of Accountant. As soon as available
but in no event more than one hundred eighty (180) days after the close of each
of the Company's fiscal years, a letter or opinion of the independent certified
public accountant who examined the annual financial statement relating to the
Company and its Subsidiaries, stating whether anything in such certified public
accountant's examination has revealed the occurrence of an event which
constitutes an Event of Default or which would constitute an Event of Default
with the giving of notice or the lapse of time or both, and, if so, stating the
facts with respect thereto.
(c) Quarterly Statements and Certificates. As soon as
available but in no event more than sixty (60) days after the close of each of
the Company's fiscal quarters, consolidated and consolidating balance sheets of
the Company and its Subsidiaries as at the close of such period and
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EXHIBIT 10.12
consolidated and consolidating income and expense statements for such period,
certified by the principal financial officer of the Company, provided, however,
that delivery pursuant to clause (d) below of the Quarterly Report on Form 10-Q
of the Company for such fiscal quarter (within sixty (60) days after the close
of each of the Company's fiscal quarters) filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this clause
(c).
(d) Reports to SEC and to Stockholders. The Company
will furnish to the Lender, promptly upon the filing or making thereof, at
least one (l) copy of all financial statements, reports, notices and proxy
statements sent by the Company to its stockholders, and of all regular and
other reports filed by the Company with any securities exchange or with the
Securities and Exchange Commission.
(e) Additional Reports and Information. With reasonable
promptness, such additional information, reports or statements as the Lender
may from time to time reasonably request.
Section V.2. Tangible Net Worth. Maintain a consolidated
Tangible Net Worth of not less than $13,600,000 as of fiscal year end 1997 and
as of each fiscal year end thereafter. "Tangible Net Worth" shall mean the
excess of shareholder's equity, less all intangible assets.
Section V.3. Funded Debt to EBITDA. Maintain a ratio of Funded
Debt to EBITDA not greater than 2.5 to 1.0 as of the end of each fiscal
quarter, based on the four (4) quarter period ending on such date. For
purposes hereof, "Funded Debt" shall mean all senior debt, including any and
all capitalized lease obligations and all contingent liabilities of any
Borrower. For purposes hereof, "EBITDA" shall mean earnings before interest,
taxes, depreciation and amortization, all as determined in accordance with
GAAP and all as determined on a consolidated basis for the twelve (12) month
period then ending.
Section V.4. Profitability. The Borrowers will not as of the end
of each fiscal year, on a consolidated basis have any Operating Losses. For
purposes hereof, "Operating Losses" shall mean net income of the Borrowers,
before income taxes.
Section V.5. Taxes and Claims. Pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or any of its
income or properties prior to the date on which penalties attach thereto, and
all lawful claims which, if unpaid, might become a lien or charge upon any of
its properties; provided, however, the Borrowers shall not be required to pay
any such tax, assessment, charge, levy or claim, the payment of which is being
contested in good faith and by proper proceedings, or where the failure to pay
or discharge such tax, assessment, charge, levy or claim would not in the
aggregate have a Material Adverse Effect.
Section V.6. Corporate Existence. Except as otherwise permitted
under Section 2.3 of this Agreement, maintain its legal existence in good
standing in the jurisdiction in which it is incorporated and in each
jurisdiction where it is required to register or qualify to do business.
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EXHIBIT 10.12
Section V.7. Compliance with Laws. Comply with all applicable
federal, state and local laws, rules and regulations to which it is subject,
except where the failure to comply would not in the aggregate have a Material
Adverse Effect.
Section V.8. Governmental Regulation. Promptly notify the Lender
in the event that any Borrower receives any written notice, claim or demand
from any governmental agency which alleges that any Borrower is in violation of
any of the terms of, or has failed to comply with any applicable order issued
pursuant to any federal or state statute regulating its operation and business,
including, but not limited to, the Occupational Safety and Health Act (except
for any violation or failure which would not in the aggregate have a Material
Adverse Effect).
Section V.9. Litigation. Give prompt notice in writing, with a
detailed description to the Lender, of all litigation and of all proceedings
before any court or any governmental or regulatory agency affecting any
Borrower which, if adversely decided, would in the aggregate have a Material
Adverse Effect.
Section V.10. Insurance. Maintain insurance with insurance
companies on such of its properties, in such amounts and against such risks as
is customarily maintained by similar businesses operating in the same vicinity;
maintain general public liability insurance against claims for personal injury,
death or property damage in such amounts as are commercially reasonable and
worker's compensation insurance in statutory amounts with such companies as are
licensed to do business in the state requiring the same.
Section V.11. Maintenance of Properties. Keep and maintain its
properties, whether owned in fee or otherwise, or leased, in good operating
condition (reasonable wear and tear excepted); make all proper repairs,
renewals, replacements, additions and improvements thereto needed to maintain
such properties in good operating condition, (unless the Borrowers determine in
good faith that the continued maintenance of any of its properties is no longer
economically desirable and the failure to maintain such properties would not in
the aggregate have a Material Adverse Effect); comply with the provisions of
all leases to which it is party or under which it occupies property so as to
prevent any loss or forfeiture thereof or thereunder; and comply with all laws,
rules, regulations and orders applicable to its properties or business or any
part thereof, except where the failure to comply when, considered in the
aggregate, would not have a Material Adverse Effect.
Section V.12. Books and Records. (a) Keep and maintain accurate
books and records and (b) permit any person designated by the Lender to enter
the premises of any Borrower and examine, audit and inspect the books and
records at any reasonable time and from time to time without notice, provided,
however, that prior to the occurrence and continuance of any Event of Default
hereunder, the Lender will provide the Borrowers with reasonable notice prior
to any such examination, audit or inspection. Each Borrower will permit any
Person designated by the Lender to enter the premises of any Borrower and
examine, audit and inspect the books and records at any reasonable time and
from time to time without notice, at the Borrowers' expense, provided, however,
that prior to the occurrence and continuance of any Event of Default hereunder,
the Lender will provide the
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EXHIBIT 10.12
Borrowers with reasonable notice prior to any such examination, audit or
inspection, and further provided, that the Lender shall not request such audits
at the Borrowers' expense (which expense will not exceed $5,000 per audit) more
frequently then once per calendar year, unless an Event of Default shall have
occurred hereunder and be continuing in which event the Lender may request
audits more frequently at the Borrowers' joint and several expense.
Section V.13. ERISA. Maintain at all times such bonding as is
required by ERISA. As soon as practicable and in any event within thirty (30)
days after it knows or has reason to know that, with respect to any plan, a
"reportable event" has occurred, the Borrowers will deliver to the Lender a
certificate signed by its chief financial officer setting forth the details of
such "reportable event".
Section V.14. Appraisal. The Lender may demand a reappraisal of the
property subject to the lien of the Deed of Trust, no more frequently than
once per thirty six (36) month period elapsing during the term of the Loan, as
extended from time to time.
Section V.15. Environmental Audits. At the request of the Lender,
incur the cost of environmental assessments or audits not more than once in any
three year period (except in the event any Borrower fails to comply with any
Environmental Laws, in which case the Lender shall be entitled to request such
assessments or audits as it deems reasonable and prudent), to be conducted by
independent environmental audit or assessment firms selected by the Lender and
reasonably acceptable to the Borrowers.
Section V.16. Loan Agreement. The Borrowers agree that from and
after the effective date of this Agreement, all references in any of the Loan
Documents to the "Loan Agreement" shall be deemed to refer to this Agreement.
VI. NEGATIVE COVENANTS OF BORROWERS
Until payment in full and the performance of all of the Obligations,
without the prior written consent of the Lender, which consent will not be
unreasonably withheld, the Borrowers will not directly or indirectly:
Section VI.1. Mortgages and Pledges. Create, incur, assume or
suffer to exist any mortgage, pledge, lien or other material encumbrance of any
kind upon, or any security interest in, any of its property or assets ("Lien"),
whether now owned or hereafter acquired, except (a) Liens for taxes not
delinquent or being contested in good faith and by appropriate proceedings, (b)
Liens in connection with worker's compensation, unemployment insurance or other
social security obligations, (c) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of business, (d) mechanics', worker's,
materialmen's, landlords', carriers', or other like Liens arising in the
ordinary course of business with respect to obligations which are not due or
which are being contested in good faith, and which do not violate the terms of
the Deed of Trust, (e) any Lien created in connection with the refinancing of
indebtedness in
15
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EXHIBIT 10.12
existence on the date hereof and any Liens securing any extension, renewal or
replacement of obligations secured by any such Lien, (f) the assumption of any
Lien in any property hereafter acquired by virtue of any Acquisition, existing
at the time of such Acquisition; provided, however, that (i) the indebtedness
secured by any such Lien so created, assumed or existing shall not exceed the
fair market value of the property covered thereby to the entity acquiring the
same, (ii) each such Lien shall attach only to the property so acquired, (iii)
that such Lien interest shall not secure any working capital indebtedness, (g)
any purchase money mortgage, or purchase money security interest in any
property, or interest therein created or assumed contemporaneously with the
purchase of such property, or interest therein, to secure or provide for the
payment or financing of any part of the purchase price thereof; provided,
however, that (i) the indebtedness secured by such purchase money mortgage or
security interest shall not exceed one hundred percent (100%) of cost of the
property covered thereby (ii) each such purchase money mortgage or purchase
money security interest shall attach only to the property so purchased, (iii)
the purchase of such property or interest therein to which any such purchase
money mortgage or purchase money security interest relates shall not result in
a default under any other provision of this Agreement or any Loan Document, and
(h) any Liens not otherwise covered by clauses (a) through (g) above, in an
aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000).
Section VI.2. Method of Accounting. Change the method of accounting
employed in the preparation of the financial statements dated December 31,
1996, except in accordance with GAAP.
Section VI.3. Merger or Acquisition. Acquire all or substantially all
the assets, outstanding stock or any other or additional interest in, any
Person or merge with any Person (each an "Acquisition" and collectively, the
"Acquisitions"), unless, each of the following conditions are met: (a) the
acquired entity (the "Target") is a going concern, unless the total cash
consideration paid for the Acquisition is less than or equal to $500,000; (b)
the Company is the controlling corporation; (c) total cash consideration paid
for any Acquisition does not exceed Ten Million Dollars ($10,000,000) in the
aggregate in any fiscal year; and (d) after giving affect to the Acquisition,
the Borrowers' shall not be in default under this Agreement or any of the Loan
Documents provided, however, that nothing in this Section 6.3 shall be
construed to prohibit any Borrower from undertaking a joint venture that
complies with subsections (a), (c) and (d) of this Section, provided, further,
that notwithstanding anything in this Agreement to the contrary, the Company
and/or any of the Borrowers may, merge with or into, consolidate with, be
liquidated or dissolved into the Company, any Borrower, or any other
Subsidiary, provided that such Subsidiary becomes a party to this Agreement and
a co-obligor of the Loans. Any Acquisition not in compliance with the
conditions set forth above, shall be subject to the Lender's prior approval,
which approval shall be in the Lender's sole but reasonable discretion. All
Targets which are headquartered in the United States which survive an
Acquisition, where the total cash consideration equals or exceeds Five Million
Dollars ($5,000,000) will, at the Borrowers' expense, be added as a co-obligor
of the Loans.
Section VI.4. Advances and Loans. Except as otherwise permitted
herein, lend money, give credit or make advances to any Person, including,
without limitation, officers, directors, employees,
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EXHIBIT 10.12
Subsidiaries and affiliates of the Company, unless such loan, credit or advance
is approved by a majority of disinterested directors.
Section VI.5. Investments. Except as permitted under Section 6.3 of
this Agreement, purchase or acquire the obligations or stock of, or any other
or additional interest in, any Person, except (a) obligations, stock or
interest of any Person that is or, as a result of such Acquisition, becomes a
Subsidiary, (b) publicly traded stock in excess of any amounts permitted by
law, (c) general obligations of, or obligations unconditionally guaranteed as
to principal and interest by, the United States of America, (d) bonds,
debentures, participation certificates or notes issued by any agency or
corporation which is or may hereafter be created by Act of the Congress of the
United States as an agency or instrumentality thereof, (e) Public Housing
Bonds, Temporary Notes or Preliminary Loan Notes, fully secured by contracts
with the United States, (f) certificates of deposit with maturities of one (1)
year or less from the date of acquisition thereof, or money market accounts
maintained with, the Lender or any other domestic commercial bank having
capital and surplus in excess of One Hundred Million Dollars ($100,000,000.00)
or such other domestic financial institutions or domestic brokerage houses to
the extent disclosed to, and approved by, the Lender, and (g) commercial paper
of a domestic issuer rated at least either A-1 by Standard & Poor's Corporation
or P-1 by Moody's Investors Service, Inc. with maturities of six (6) months or
less from the date of acquisition.
Section VI.6. Subsidiaries. Create or acquire any Subsidiaries other
than the Subsidiaries existing as of the date hereof and listed on EXHIBIT A,
or created pursuant to an Acquisition under Section 6.3 of this Agreement,
unless such Subsidiaries do not own any material assets or such Subsidiaries
are added as a co-makers of the Loans. Notwithstanding the foregoing, it is
understood and agreed that the Lender will not require any of the Released
Parties or MAL, MA Holding, MA BioServices GmbH and BIOMEVA GmbH or any
Subsidiary of the foregoing (the "Excluded Subsidiaries") to either pledge any
of their respective assets to secure the Loans or to be added as co-makers of
the Loans, and the Borrowers each jointly and severally agree not to transfer,
sell or assign any assets, other than in the ordinary course of business, to
any of the Excluded Subsidiaries in excess of Two Million Dollars ($2,000,000)
in the aggregate in any fiscal year.
Section VI.7. Stock of Subsidiaries. Sell or otherwise dispose of
any shares of capital stock of any Subsidiary which taken in the aggregate are
in a material amount (except in connection with a merger or consolidation of
any solvent Wholly Owned Subsidiary into the Company or with another solvent
Wholly Owned Subsidiary or the dissolution of any Subsidiary).
Section VI.8. ERISA Compliance. Unless it would not in the aggregate
have a Material Adverse Effect, (a) Engage in any "prohibited transaction" (as
defined in Section 406 or Section 203(a) of ERISA), incur any "accumulated
funding deficiency" (as defined in Section 302 of ERISA) whether or not waived,
or terminate any pension plan in a manner which could result in the imposition
of a lien on the property of any Borrower pursuant to Section 4068 of ERISA,
(b) "terminate", as that term is defined in ERISA, any multiemployer plan to
which any Borrower or any trade or business (whether or not incorporated),
which is under common control (as defined in the
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EXHIBIT 10.12
Code) and of which any Borrower is a part (a "Commonly Controlled Entity"), has
an obligation to contribute, (c) "withdraw", as that term is defined in ERISA,
from any multiemployer plan to which any Borrower or any Commonly Controlled
Entity had an obligation to contribute, (d) "partially withdraw", as that term
is defined in ERISA, from any multiemployer plan to which any Borrower or any
Commonly Controlled Entity had an obligation to contribute, or (e) fail to
notify the Lender that notice has been received from the administrator of any
multiemployer plan to which any Borrower or any Commonly Controlled Entity has
an obligation to contribute that any such plan will be placed in
"reorganization".
Section VI.9. Sale and Leaseback. Directly or indirectly enter into
any arrangement to sell or transfer all or any material part of its fixed
assets then owned by it and thereupon or within one year thereafter rent or
lease the assets so sold or transferred.
Section VI.10. Line of Business. Enter into any lines or areas of
business substantially different from the business activities in which it is
presently engaged.
VII0 EVENTS OF DEFAULT
The occurrence of one or more of the following events shall be "Events
of Default" under this Agreement, and the terms "Event of Default" or "default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
Section VII.1. Failure to Pay. The Borrowers shall fail to make any
payment of principal or interest on any of the Obligations, when and as the
same shall become due and payable and such failure shall continue for a period
of fifteen (15) Banking Days.
Section VII.2. Breach of Representations and Warranties. Any
representation or warranty made herein or in any report, certificate, opinion
(including any opinion of counsel for any Borrower), financial statement or
other instrument furnished in connection with the Obligations or with the
execution and delivery of any of the Loan Documents, shall prove to have been
false or misleading when made in any material respect.
Section VII.3. Certain Defaults. Any Borrower shall default in the
due observance or performance of any of its obligations under Sections 5.2 or
5.3 or Section VI of this Agreement.
Section VII.4. Other Defaults. Any Borrower shall default in the due
observance or performance of any other term, covenant or agreement herein
contained and such default shall continue uncured for thirty (30) days after
notice thereof shall have been given to such Borrower by the Lender.
Section VII.5. Default Under Other Loan Documents. An event of
default shall occur under any of the other Loan Documents, and such event of
default is not cured within any applicable grace period provided therein.
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EXHIBIT 10.12
Section VII.6. Receiver; Bankruptcy. Any Borrower shall (a) apply
for or consent to the appointment of a receiver, trustee or liquidator for
itself or any of its property, (b) admit in writing its inability to pay its
debts as they mature, (c) make a general assignment for the benefit of
creditors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary
petition in bankruptcy or a petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation
law or statute, or an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law or if corporate action
shall be taken by any Borrower for the purposes of effecting any of the
foregoing, or (f) by any act indicate its consent to, approval of or
acquiescence in any such proceeding or the appointment of any receiver of or
trustee for any of its property, or suffer any such receivership, trusteeship
or proceeding to continue undischarged for a period of sixty (60) days.
Section VII.7. Judgment. Unless adequately insured in the opinion of
the Lender, the entry of a final judgment for the payment of money involving
more than $500,000 in excess of any amounts covered by insurance against any
Borrower and the failure by any Borrower to discharge the same, or cause it to
be discharged or vacated, within sixty (60) days from the date of the order,
decree or process under which or pursuant to which such judgment was entered,
or to secure a stay of execution pending appeal of such judgment.
Section VII.8. Default Under Other Borrowings. Default shall be made
with respect to any evidence of indebtedness or liability for borrowed money
(other than the Loan) having a principal amount in excess of $1,000,000 or any
operating or capital lease having a value in excess of $1,000,000 if the effect
of such default is to accelerate the maturity of such evidence of indebtedness
or liability.
Section VII.9. Material Adverse Change. If a material adverse change
has occurred in the financial condition of any Borrower from the financial
condition set forth in the financial statements dated December 31, 1996.
VIII0 RIGHTS AND REMEDIES UPON DEFAULT
Section VIII.1. Demand; Acceleration. The occurrence or
non-occurrence of an Event of Default under this Agreement shall in no way
affect or condition the right of the Lender to demand payment at any time of
any of the Obligations which are payable on demand regardless of whether or not
an Event of Default has occurred. Upon the occurrence of an Event of Default,
and in every such event and at any time thereafter, the Lender may declare the
Obligations due and payable, without presentment, demand, protest, or any
notice of any kind, all of which are hereby expressly waived, anything
contained herein or in any of the other Loan Documents to the contrary
notwithstanding.
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EXHIBIT 10.12
Section VIII.2. Performance by Lender. If any Borrower shall fail to
pay the Obligations or otherwise fail to perform, observe or comply with any of
the material conditions, covenants, terms, stipulations or agreements contained
in this Agreement or any of the other Loan Documents, the Lender without notice
to or demand upon the Borrowers and without waiving or releasing any of the
Obligations or any Event of Default, may (but shall be under no obligation to)
at any time thereafter make such payment or perform such act for the account
and at the expense of the Borrowers, and may enter upon the premises of each
Borrower for that purpose and take all such action thereon as the Lender may
consider necessary or appropriate for such purpose. All sums so paid or
advanced by the Lender and all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred in connection
therewith (the "Expense Payments") together with interest thereon from the date
of payment, advance or incurring until paid in full at the rate of one percent
(l%) per annum in excess of the then current highest interest rate payable
under the Notes shall be paid by the Borrowers to the Lender on demand and
shall constitute and become a part of the Obligations.
Section VIII.3. Other Remedies. Upon the occurrence of an Event of
Default (and in addition to all of its rights, powers and remedies under this
Agreement), the Lender shall have all of the rights and remedies under
applicable laws, and the Lender is authorized to offset and apply to all or any
part of the Obligations all moneys, credits and other property of any nature
whatsoever of any Borrower now or at any time hereafter in the possession of,
in transit to or from, under the control or custody of, or on deposit with, the
Lender.
IX0 MISCELLANEOUS
Section IX.1. Notices. All notices, certificates or other
communications hereunder shall be deemed given when received, if given by hand
or courier, or by certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Lender: NationsBank, N.A.
6610 Rockledge Drive
Third Floor
Bethesda, Maryland 20817
Attn: Elizabeth F. Shore
Mail Stop MD ________
With a copy to: Ober, Kaler, Grimes & Shriver, P.C.
1401 H Street, N.W.
Suite 500
Washington, D.C. 20005
Attn: Richard M. Pollak, Esq.
if to the Borrowers: BioReliance Corporation
20
<PAGE> 21
EXHIBIT 10.12
9900 Blackwell Road
Rockville, Maryland 20850
Attn: Carl C. Schwan, Senior Vice
President
21
<PAGE> 22
EXHIBIT 10.12
With a copy to: Fried, Frank, Harris Shriver &
Jacobson
1001 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20004
Attn: Andrew P. Varney, Esq.
Section IX.2. Remedies, etc. Cumulative. Each right, power and
remedy of the Lender as provided for in this Agreement or in any of the other
Loan Documents or now or hereafter existing at law or in equity or by statute
or otherwise shall be cumulative and concurrent and shall be in addition to
every other right, power or remedy provided for in this Agreement or in any of
the other Loan Documents or now or hereafter existing at law or in equity, by
statute or otherwise, and the exercise or beginning of the exercise by the
Lender of any one or more of such rights, powers or remedies shall not preclude
the simultaneous or later exercise by the Lender of any or all such other
rights, powers or remedies. In order to entitle the Lender to exercise any
remedy reserved to it herein, it shall not be necessary to give any notice,
other than such notice as may be expressly required in this Agreement.
Section IX.3. No Waiver of Rights by the Lender. No failure or delay
by the Lender to insist upon the strict performance of any term, condition,
covenant or agreement of this Agreement or of any of the other Loan Documents,
or to exercise any right, power or remedy consequent upon a breach thereof,
shall constitute a waiver of any such term, condition, covenant or agreement or
of any such breach or preclude the Lender from exercising any such right, power
or remedy at any later time or times. By accepting payment after the due date
of any amount payable under this Agreement or under any of the other Loan
Documents, the Lender shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under this Agreement or
under any of the other Loan Documents, or to declare a default for failure to
effect such prompt payment of any such other amount.
Section IX.4. Acknowledgments. The Borrowers hereby confirm to the
Lender the enforceability and validity of each of the Loan Documents. In
addition, the Borrowers hereby agree to the execution and delivery of this
Agreement and the terms and provisions, covenants or agreements contained in
this Agreement shall not in any manner , impair, lessen, modify, waive or
otherwise limit the liability and obligations of the Borrowers under the terms
of any of the Loan Documents, except as otherwise specifically set forth in
this Agreement. The Borrowers issue, remake, ratify and confirm the
representations, warranties and covenants contained in the Loan Documents.
Nothing in this Agreement shall be deemed to waive any defaults existing under
any of the Loan Documents as of the date hereof.
Section IX.5. Right of Contribution. The Borrowers and the Lender
agree that on and after the date hereof, each Borrower (an "Entitled Borrower")
shall be entitled to contribution from each other Borrower to the extent, if
any, that (a) an Entitled Borrower incurs any Obligations in excess of such
Entitled Borrowers Net Valuation (as hereinafter defined) or (b) the
Obligations incurred by such Entitled Borrower would leave such Entitled
Borrower with an unreasonably small amount of
22
<PAGE> 23
EXHIBIT 10.12
capital to enable the Entitled Borrower to operate the business in which it is
engaged, and/or the Obligations incurred by such Entitled Borrower prevent such
Entitled Borrower from paying its debts as such debts mature; provided,
however, that such right of contribution shall be subordinated to the payment
of the Obligations and may not be exercised by any Borrower until all of the
Obligations have been paid in full. Nothing in this Section shall be deemed to
in any manner impair the joint and several liability of each Borrower for any
and all of the Obligations. The provisions of this Section shall be in addition
to and shall in no manner limit any other rights of contribution available to
any Borrower. The term "Net Valuation" as used in this Section means the amount
by which (1) an Entitled Borrower's property at a fair valuation exceeds (2)
such Entitled Borrower's debts.
Section IX.6. ENTIRE AGREEMENT. NO STATEMENTS, AGREEMENTS OR
REPRESENTATIONS, ORAL OR WRITTEN, WHICH MAY HAVE BEEN MADE TO ANY OF THE
BORROWERS OR TO ANY EMPLOYEE OR AGENT OF ANY OF THE BORROWERS, EITHER BY THE
LENDER OR BY ANY EMPLOYEE, AGENT OR BROKER ACTING ON THE LENDER'S BEHALF, WITH
RESPECT TO THE MODIFICATION OF THE LOAN, SHALL BE OF ANY FORCE OR EFFECT,
EXCEPT TO THE EXTENT STATED IN THIS AGREEMENT, AND ALL PRIOR AGREEMENTS AND
REPRESENTATIONS WITH RESPECT TO THE MODIFICATION OF THE LOAN ARE MERGED HEREIN.
Section IX.7. Survival of Agreement; Successors and Assigns. All
covenants, agreements, representations and warranties made by the Borrowers
herein and in any certificate, in the Loan Documents and in any other
instruments or documents delivered pursuant hereto shall survive the making by
the Lender of the Loans and the execution and delivery of the Notes, and shall
continue in full force and effect so long as any of the Obligations are
outstanding and unpaid. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises and agreements by or on
behalf of the Borrowers, which are contained in this Agreement shall inure to
the benefit of the successors and assigns of the Lender, and all covenants,
promises and agreements by or on behalf of the Lender which are contained in
this Agreement shall inure to the benefit of the permitted successors and
permitted assigns of the Borrowers, but this Agreement may not be assigned by
the Borrowers without the prior written consent of the Lender.
Section IX.8. Expenses. The Borrowers agree to pay all reasonable
out-of-pocket expenses of the Lender (including the reasonable fees and
expenses of its legal counsel) in connection with the preparation of this
Agreement, the recordation of all financing statements and such other
instruments as may be required by the Lender subsequent to the execution of
this Agreement to secure the Obligations (including any and all recordation tax
and other costs and taxes incident to recording), the enforcement of any
provision of this Agreement and the collection of the Obligations. The
Borrowers agree to indemnify and save harmless the Lender for any liability
resulting from the failure to pay any required recordation tax, transfer taxes,
recording costs or any other expenses incurred by the Lender in connection with
the Obligations. The provisions of this Section shall survive the execution
and delivery of this Agreement and the repayment of the Obligations. The
23
<PAGE> 24
EXHIBIT 10.12
Borrowers further agree to reimburse the Lender upon demand for all reasonable
out-of-pocket expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in enforcing any of the Obligations or any
security therefor, which agreement shall survive the termination of this
Agreement and the repayment of the Obligations.
Section IX.9. Counterparts. This Agreement may be executed in any
number of multiple counterparts, each of which shall be deemed an original
hereof and all of which when taken together shall constitute one and the same
instrument. It shall not be necessary that the signature of, or on behalf of,
each party, or that the signature of the persons required to bind any party,
appear on more than one counterpart.
Section IX.10. Governing Law. This Agreement and all of the other
Loan Documents shall be governed by, and construed in accordance with the laws
of the State of Maryland.
Section IX.11. Modifications. No modification or waiver of any
provision of this Agreement or of any of the other Loan Documents, nor consent
to any departure by the Borrowers therefrom, shall in any event be effective
unless the same shall be in writing, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
No notice to or demand on the Borrowers in any case shall entitle the Borrowers
to any other or further notice or demand in the same, similar or other
circumstance. This Agreement amends and restates in its entirety the Original
Loan Agreement.
Section IX.12. Illegality. If fulfillment of any provision hereof or
any transaction related hereto or to any of the other Loan Documents, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provisions herein contained other than the provisions hereof pertaining to
repayment of the Obligations operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such clause or provision
only shall be void, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect; and if such
provision pertains to repayment of the Obligations, then, at the option of the
Lender, all of the Obligations of the Borrowers to the Lender shall become
immediately due and payable.
Section IX.13. Headings. The headings in this Agreement are for
convenience only and shall not limit or otherwise affect any of the terms
hereof.
Section IX.14. Liability of the Lender. The Borrowers hereby agree
that the Lender shall not be chargeable for any negligence, mistake, act or
omission of any accountant, examiner, agency or attorney employed by the Lender
(except for the willful misconduct of any person, corporation, partnership or
other entity employed by the Lender) in making examinations, investigations or
collections.
24
<PAGE> 25
EXHIBIT 10.12
SECTION IX.15. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR
AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF
THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR ARBITRATION OF COMMERCIAL DISPUTES OF ENDISPUTE, INC., D/B/A
J.A.M.S./ENDISPUTE ("J.A.M.S.") AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF AN INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING ANY ACTION, INCLUDING
A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS INSTRUMENT, AGREEMENT OR DOCUMENT RELATES IN ANY COURT
HAVING JURISDICTION OVER SUCH ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
MONTGOMERY COUNTY, MARYLAND AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR. IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO EXTEND THE COMMENCING OF SUCH HEARING FOR AN ADDITIONAL SIXTY
(60) DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS INSTRUMENT, AGREEMENT
OR DOCUMENT SHALL BE DEEMED TO: (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE LENDER OF THE
PROTECTION AFFORDED TO IT BY 12 U.S.C. Section 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE LENDER: (A) TO EXERCISE
SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE
AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE
RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE LENDER MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR
DOCUMENT. NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF ANY ACTION FOR
25
<PAGE> 26
EXHIBIT 10.12
FORECLOSURE OR FOR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER
OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN SUCH ACTION, TO ARBITRATE
THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.
WITNESS/ATTEST: BIORELIANCE CORPORATION
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MA BIOSERVICES, INC.
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MAGENTA CORPORATION
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MAGENTA VIRAL PRODUCTION, INC.
By: (SEAL)
- ------------------------------ --------------------------
Name:
Title:
WITNESS: NATIONSBANK, N.A.
By: (SEAL)
- ------------------------------ --------------------------
Elizabeth F. Shore
Vice President
26
<PAGE> 27
EXHIBIT 10.12
EXHIBITS
A. Subsidiaries
B. Replacement Promissory Note
C. Locations of Business
D. Deed of Trust Note Modification Agreement
E. Note Modification Agreement
F. Second Modification Agreement - Leasehold Deed of Trust
<PAGE> 28
EXHIBIT 10.12
EXHIBIT A
SUBSIDIARIES
<TABLE>
<CAPTION>
Chief Executive Officer Ownership Interest
Name or Managing Director of Borrower
- ---- --------------------- ------------------
<S> <C> <C>
MA BioServices, Inc. Capers W. McDonald wholly-owned
MAGENTA Corporation Capers W. McDonald wholly-owned
MAGENTA Viral Productions, Inc. Capers W. McDonald wholly-owned
BioReliance Limited Raymond F. Cosgrove wholly-owned
MAGENTA Services Ltd. Raymond F. Cosgrove wholly-owned
MA Holding GmbH Raymond F. Cosgrove wholly-owned
MA BioServices GmbH Hans Peter Kneubuhl wholly-owned
BIOMEVA GmbH Hans Peter Kneubuhl wholly-owned
</TABLE>
<PAGE> 29
EXHIBIT 10.12
EXHIBIT B
[REPLACEMENT PROMISSORY NOTE]
<PAGE> 30
EXHIBIT 10.12
EXHIBIT C
PLACES OF BUSINESS
MA BioServices' Chief Executive Office is:
9900 Blackwell Road
Rockville, MD 20850
MA BioServices has other places of business at the following addresses:
N/A
Magenta Viral's Chief Executive Office is:
9900 Blackwell Road
Rockville, MD 20850
Magenta Viral has other places of business at the following addresses:
N/A
<PAGE> 1
EXHIBIT 10.16
* * * * * * * * * * * *
LEASE AGREEMENT
Between
FP ROCKLEDGE, L.L.C.,
a Maryland limited liability company
("Landlord")
And
MA BIOSERVICES, INC.
a Delaware corporation
("Tenant")
* * * * * * * * * * * *
<PAGE> 2
EXHIBIT 10.16
LEASE AGREEMENT
BASIC LEASE INFORMATION
Landlord: FP ROCKLEDGE, L.L.C., its successors and assigns
Tenant: MA BIOSERVICES, INC., a Delaware corporation
Guarantor: BIORELIANCE CORP., a Delaware corporation
Building: The building (the "Building") to be constructed on
the land (the "Land") described on Exhibit B
hereto and known as Lot Z in the Shady Grove Life
Sciences Center, Montgomery County, Maryland, as
more particularly outlined and labeled in Exhibit
"A" to the Lease, as the same may be modified from
time to time during the term of the Lease.
Premises: The premises located on the 1st, 2nd and 3rd
floors of the Building, as more fully described in
Section 1.2 of the Lease, and shown in the floor
plans attached as Exhibit A-1 to the Lease.
Expansion Space: Approximately 8,500 square feet on the third floor
of the Building and shown on the plan attached as
Exhibit A-2 to the Lease subject to adjustment in
accordance with Section 1.2.
Rent Commencement Date: The earlier of (i) Tenant's beneficial occupancy
of all of the Premises or of the 1st and 2nd
floors of the Premises (Tenant shall not take
occupancy of less than the entire 1st and 2nd
floors); and (ii) the date of Substantial
Completion of the Building for purposes of rent
commencement (as set forth in the Work Agreement
attached hereto as Exhibit "D") ("Substantial
Completion"); provided, however, if Substantial
Completion under (ii) above occurs prior to
Tenant's beneficial occupancy under (i) above,
then in such event the Rent Commencement Date
shall be the later of (A) Substantial Completion
of the Building; or (B) August 31, 1998.
Term: From the Rent Commencement Date through the last
day of the 180th full month following the month in
which the Rent
i
<PAGE> 3
EXHIBIT 10.16
Commencement Date occurs.
Rentable Area of the 48,500 square feet, subject to adjustment pursuant
Building: to Section 1.2 of the Lease.
Rentable Area of the 40,000 square feet, subject to adjustment pursuant
Premises: to Section 1.2 of the Lease.
Tenant's Proportionate 82.47%, (computed by dividing the Rentable Area of
Share: the Premises by the Rentable Area of the Building
and multiplying the resulting quotient to the
second decimal place by one hundred), subject to
adjustment pursuant to Sections 1.2 and 6.4 of the
Lease. In the event that prior to the date of
Substantial Completion Tenant occupies the 1st and
2nd floors only of the Premises, Tenant's
Proportionate Share shall be 64.95% until the date
of Substantial Completion whereupon it shall be
82.47%, in each case subject to adjustment
pursuant to Sections 1.2 and 6.4 of the Lease.
Annual Base Rental: $540,000 per year ($45,000 per month) subject to
adjustment pursuant to Sections 1.2 and 5.2 of the
Lease, which amount for the initial Lease Year
shall be the product of $13.50 multiplied by the
Rentable Area of the Premises. In the event that
prior to the date of Substantial Completion Tenant
occupies the 1st and 2nd floors only of the
Premises, the Annual Base Rental shall be
$425,250.00 per year ($35,437.50 per month) until
the date of Substantial Completion, whereupon
Annual Base Rental shall be in the amount first
set forth in this paragraph, subject to adjustment
pursuant to Sections 1.2 and 5.2 of the Lease.
Security Deposit: $70,000.00
Lease Year: The 12-month period beginning on the first day of
the first full month following the Rent
Commencement Date, and each anniversary thereof.
Landlord's Address for FP Rockledge, L.L.C.
Notices: c/o The Foulger Pratt Companies
1335 Piccard Drive, Suite 400
Rockville, Maryland 20850
Attention: Clayton F. Foulger
ii
<PAGE> 4
EXHIBIT 10.16
With a copy to:
Michael Abrams
Rockledge Realty Partners
Three Bethesda Metro Center
Suite 700
Bethesda, MD 20814
With a copy to:
Linowes and Blocher LLP
1010 Wayne Avenue
Suite 1000
Silver Spring, Maryland 20910
Attention: Richard M. Zeidman, Esquire
Tenant's Address for MA BioServices, Inc.
Notices: 9900 Blackwell Road
Rockville, Maryland 20850
Attention: Chief Financial Officer
With a copy to:
Shulman, Rogers, Gandal, Pordy & Ecker, P.A.
11921 Rockville Pike
Suite 300
Rockville, Maryland 20852
Attention: Lawrence A. Shulman, Esquire
Broker(s): The Carey Winston Company, representing Landlord.
Cooperating Broker:
None
Exhibits:
Exhibit A Plat of the Land
Exhibit A-1 Floor Plan of the Premises
Exhibit A-2 Expansion Space
Exhibit B Legal Description of the Land
Exhibit C Cleaning Specifications
Exhibit D Work Agreement
Exhibit D-1 Method of Measurement
iii
<PAGE> 5
EXHIBIT 10.16
Exhibit E Rules and Regulations
Exhibit F Certification of Rent Commencement Date
Exhibit G Form of Subordination, Attornment and Non-Disturbance
Agreement
Exhibit H Restrictive Covenant
Exhibit I Terms and Conditions for Equipment Installed on Roof
Exhibit J Tenant's Exterior Sign Specifications
Exhibit K Guaranty of Lease
The foregoing Basic Lease Information is hereby incorporated into and made a
part of the Lease Agreement ("the Lease"). Each reference in the Lease to
any information and definitions contained in the Basic Lease Information
shall mean and refer to the information and definitions hereinabove set
forth. If there is any conflict between the terms of the Lease and the
foregoing Basic Lease Information, the terms of the Lease shall prevail.
iv
<PAGE> 6
EXHIBIT 10.16
<TABLE>
<CAPTION>
TABLE OF CONTENTS
LEASE AGREEMENT
<S> <C>
BASIC LEASE INFORMATION......................................................i
ARTICLE 1 PREMISES....................................................1
ARTICLE 2 TERM........................................................2
ARTICLE 3 LEASEHOLD IMPROVEMENTS......................................5
ARTICLE 4 ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT...........5
ARTICLE 5 RENTAL......................................................5
ARTICLE 6 OPERATING COSTS.............................................7
ARTICLE 7 SERVICES BY LANDLORD.......................................12
ARTICLE 8 UTILITIES..................................................13
ARTICLE 9 USE........................................................15
ARTICLE 10 LAWS, ORDINANCES, AND REQUIREMENTS OF PUBLIC...............15
ARTICLE 11 OBSERVANCE OF RULES AND REGULATIONS........................20
ARTICLE 12 ALTERATIONS; EQUIPMENT.....................................20
ARTICLE 13 LIENS......................................................22
ARTICLE 14 REPAIRS; DAMAGE BY TENANT..................................22
ARTICLE 15 INSURANCE..................................................23
ARTICLE 16 DAMAGE BY FIRE OR OTHER CASUALTY...........................26
ARTICLE 17 CONDEMNATION...............................................28
</TABLE>
v
<PAGE> 7
EXHIBIT 10.16
<TABLE>
<S> <C>
ARTICLE 18 ASSIGNMENT AND SUBLETTING..................................30
ARTICLE 19 WAIVER OF CLAIMS; INDEMNIFICATION..........................34
ARTICLE 20 SURRENDER OF THE PREMISES..................................35
ARTICLE 21 ESTOPPEL CERTIFICATES......................................37
ARTICLE 22 SUBORDINATION..............................................37
ARTICLE 23 DEFAULT AND REMEDIES.......................................39
</TABLE>
vi
<PAGE> 8
EXHIBIT 10.16
<TABLE>
<CAPTION>
TABLE OF CONTENTS
LEASE AGREEMENT
<S> <C>
ARTICLE 24 WAIVER BY TENANT...........................................42
ARTICLE 25 SECURITY DEPOSIT/REPAYMENT OF ADVANCES.....................42
ARTICLE 26 [INTENTIONALLY OMITTED]....................................42
ARTICLE 27 ATTORNEYS' FEES AND LEGAL EXPENSES.........................43
ARTICLE 28 NOTICES....................................................43
ARTICLE 29 PARKING....................................................43
ARTICLE 30 EXPANSION OPTION...........................................44
ARTICLE 31 MISCELLANEOUS..............................................46
ARTICLE 32 RESTRICTIVE COVENANT.......................................49
ARTICLE 33 BUILDING SIGNAGE...........................................50
</TABLE>
vii
<PAGE> 9
EXHIBIT 10.16
LEASE AGREEMENT BETWEEN
FP ROCKLEDGE, L.L.C., ("LANDLORD")
and
MA BIOSERVICES, INC., (TENANT")
THIS LEASE, dated and effective this _____ day of October, 1997, is
made between Landlord and Tenant.
ARTICLE 1
PREMISES
Section 1.1 Landlord leases to Tenant, and Tenant leases from
Landlord, for the Term (as defined below) and subject to the provisions
hereof, to each of which Landlord and Tenant mutually agree, the Premises,
together with the right to use, in common with others, the lobby, entrances,
stairs, elevators, and other public areas of the Building (the "Common
Areas").
(a) The Rentable Area of the Premises is approximately as stated in
the Basic Lease Information; provided, however that Landlord shall, upon
completion of the Premises, cause precise measurements of the Building and
the Premises to be made by the Building architect, in accordance with the
Washington D.C. Association of Realtors Standard Method of Measurement
attached as Exhibit D-1 hereto, except as otherwise provided in the first
paragraph of Exhibit D-1. The Building architect shall promptly deliver a
certificate of the precise Rentable Area of the Building and the precise
Rentable Area of the Premises to Landlord and Tenant, and the Rentable Area
of the Premises and Tenant's Proportionate Share shall be adjusted upward or
downward accordingly. The Rentable Area of the Building and the Rentable
Area of the Premises, as finally determined pursuant to this Section 1.2, and
the Annual Base Rental and Tenant's Proportionate Share based thereon, shall
be set forth in the Certification of Rent Commencement Date to be executed by
the parties pursuant to Section 2.3 hereof.
(b) The Rentable Area of the Premises determined pursuant to this
Section 1.2 shall be used as the basis for the computation of all items of
Rental (as hereinafter defined), including Annual Base Rental, Tenant's Basic
Costs (as hereinafter defined) and Tenant's Utility Costs (as hereinafter
defined), and each such item shall be recomputed, if necessary, based on such
Rentable Area of the Premises.
(c) The Rentable Area of the Building is subject to change from time
to time in connection with changes to the Building and/or to the premises of
other tenants thereof. At the request of Landlord, accompanied by a
certificate from the Building architect of the Rentable Area of the Premises
and the Rentable Area of the Building, Tenant shall, from time to time,
execute instruments confirming the Rentable Area of the Premises and the
Rentable Area of the Building.
<PAGE> 10
EXHIBIT 10.16
ARTICLE 2
TERM
Section 2.1 The term of this Lease (the "Term") shall begin on
the Rent Commencement Date and, unless sooner terminated, the Term shall end
at one minute prior to midnight (i.e., at 11:59 p.m.) on the last day of the
180th full month following the Rent Commencement Date.
Section 2.2 Provided that Tenant performs all of Tenant's
obligations under this Lease, including the payment of Rental, Tenant shall,
during the Term, enjoy the Premises without disturbance from Landlord or any
other persons claiming under or acting by or through Landlord, subject,
however, to the terms of this Lease.
Section 2.3 Landlord shall notify Tenant of the Rent Commencement
Date, as such date is determined in accordance with the terms set forth in
the Basic Lease Information, and within fifteen (15) days after delivery of
such notice Landlord and Tenant shall execute a written instrument
substantially in the form of Exhibit F, attached hereto, confirming such date
as the Rent Commencement Date. Any failure of the parties to execute such
written instrument shall not affect the validity of the Rent Commencement
Date as determined as aforesaid.
Section 2.4 Subject to the provisions of Section 2.4(d), Tenant
shall have the right (the "Renewal Option") to renew or extend the Term for
one (1) additional period of five (5) years (the "First Renewal Period") and
at the end of the First Renewal Period, for one (1) additional period of five
(5) years (the Second Renewal Period) (collectively, the First Renewal Period
and the Second Renewal Period are hereinafter called the "Renewal
Period[s]"). The Renewal Option shall be exercisable by Tenant by giving
written notice of the exercise thereof to Landlord at least nine (9) months
prior to the expiration of the initial Term or the First Renewal Period, as
the case may be. The Renewal Option may not be exercised for any Renewal
Period for less than all space in the Building then leased by Tenant,
including Expansion Space.
(a) In the event that Tenant exercises the Renewal Option in
accordance with the provisions hereof, then the Term shall be extended for
the First Renewal Period or the Second Renewal Period, as the case may be.
Except as otherwise expressly provided herein, the Renewal Periods shall be
upon the same terms, covenants and conditions as set forth herein with
respect to the immediately preceding Term. All references in this Lease to
the Term shall be construed to mean the initial Term and the Renewal Periods
unless the context clearly indicates that another meaning is intended. For
purposes of this Lease, no distinction is made between the terms "extend" and
"renew," or any variations thereof.
(b) The Annual Base Rental for the Premises payable pursuant to
Article 5 hereof for the first Lease Year during each of the Renewal Periods
shall be ninety-five percent (95%) of the Fair Market Rental Rate (as defined
below) of the Premises as of the commencement of the applicable Renewal
Period.
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EXHIBIT 10.16
(c) Landlord and Tenant shall employ the procedure and timetable
described below for the purpose of computing the Fair Market Rental Rate of
the Demised Premises and the Base Annual Rental properly payable during the
first lease year of each Renewal Period:
(i) Not later than the one hundred seventieth (170th) day
prior to the expiration of the initial Term or the First Renewal Period, as
applicable (the "Expiration"), Landlord shall deliver to Tenant notice of its
proposed Annual Base Rental for the Premises during the first Lease Year of
the forthcoming Renewal Period.
(ii) Not later than the one hundred sixty-fifth (165th) day
prior to Expiration. Tenant shall send to Landlord notice of its proposed
Annual Base Rental for the Premises.
(iii) In the event the parties negotiate and agree to an Annual
Base Rental and have executed a written agreement establishing same on or
before the one hundred fifty-fifth (155th) day prior to Expiration, then said
Annual Base Rental shall be binding upon the parties commencing with the
first Lease Year of the forthcoming Renewal Period.
(iv) In the event the parties have failed to execute such an
agreement by said date, then Tenant shall engage an appraiser, who is a
member of the American Institute of Real Estate Appraisers (a "MAI
Appraiser"), on or before the one hundred thirty-fifth (135th) day prior to
Expiration, and shall notify the Landlord thereof. In the event Tenant does
not engage a MAI Appraiser as required above, then the Annual Base Rental
last proposed by the Landlord shall be deemed the Annual Base Rental for the
first Lease Year of the forthcoming Renewal Period.
(v) Not later than the one hundred fifteenth (115th) day prior
to Expiration, Tenant shall deliver to Landlord a copy of its appraiser's
determination of the Fair Market Rental Rate as aforesaid. In the event
Tenant does not deliver a copy as aforesaid, then the Annual Base Rental last
proposed by Landlord shall be deemed the Annual Base Rental for the first
Lease Year of the forthcoming Renewal Period.
(vi) In the event the parties negotiate and agree to an Annual
Base Rental, and have executed a written agreement establishing same on or
before the one hundredth (100th) day prior to Expiration, then said Annual
Base Rental shall be binding upon the parties commencing with the first Lease
Year of the forthcoming Renewal Period.
(vii) In the event the parties have failed to execute such an
agreement by said date, then Landlord shall engage a MAI Appraiser, on or
before the ninety-fifth (95th) day prior to Expiration, and shall notify the
Tenant thereof. In the event Landlord does not engage a MAI appraiser as
required above, then the Annual Base Rental proposed by Tenant's appraiser
shall be deemed the Annual Base Rental for the first Lease Year of the
forthcoming Renewal Period.
(viii) No later than seventy-fifth (75th) day prior to
Expiration, Landlord shall deliver to Tenant a copy of its appraiser's
determination of the Fair Market Rental Rate as aforesaid. In the event
Landlord does not deliver a copy as aforesaid, then the Annual Base Rental
last proposed by Tenant's appraiser shall be deemed the Annual Base Rental
for the first Lease Year of the forthcoming Renewal Period.
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EXHIBIT 10.16
(ix) In the event the parties negotiate and agree to an Annual
Base Rental, and have executed a written agreement establishing same on or
before the seventieth (70th) day prior to Expiration, then said Annual Base
Rental shall be binding upon the parties commencing with the first Lease Year
of the forthcoming Renewal Period.
(x) In the event the parties have failed to execute such an
agreement by said date, then the two (2) MAI Appraisers shall choose a third
MAI Appraiser and notify Landlord and Tenant of such choice. Each party
shall bear the cost of its appointed MAI Appraiser and shall share equally
the cost of the third MAI Appraiser. In the event that said two (2) MAI
Appraisers cannot agree on the choice of a third MAI Appraiser and notify the
parties thereof by the sixty-fifth (65th) day prior to Expiration, then the
President of the Montgomery County Board of Realtors shall chose a third MAI
Appraiser on or before the fifty-fifth (55th) day prior to Expiration.
(xi) Not later than the forty-fifth (45th) day prior to
Expiration, the third appraiser shall determine the Fair Market Rental Rate
of the Premises, by selecting as such Fair Market Rental Rate either (i) the
Fair Market Rental Rate proposed by Tenant's MAI Appraiser or (ii) the Fair
Market Rental Rate proposed by Landlord's MAI Appraiser and submitting such
determination to each party in writing. Based on said third MAI Appraiser's
determination, Landlord and Tenant shall promptly thereafter execute a
written agreement establishing the aforesaid Annual Base Rental, which rent
shall be binding upon the parties commencing with the first Lease Year of the
forthcoming Renewal Period.
(xii) During each of the second, third, fourth and fifth Lease
Years of each Renewal Period, the Annual Base Rental shall be adjusted in the
same manner as described in Section 5.2 of this Lease.
(d) The Renewal Option referred to in this Section 2.4 may not be
exercised by Tenant if, at the time specified in Section 2.4(a) for
exercising such option and at commencement of the applicable Renewal Period,
(i) this Lease shall not be in full force and effect, or (ii) an event of
default (as described in Article 23) shall have occurred and shall be
continuing, or (iii) Tenant occupies less than fifty percent (50%) of the
Rentable Area of the Premises and does not demonstrate to the reasonable
satisfaction of Landlord an intent to occupy at least fifty percent (50%) of
the Rentable Area of the Premises within two (2) years following the
commencement of such Renewal Period and for the remainder of such Renewal
Period, unless such requirement is waived in writing by Landlord. If Tenant
shall fail to exercise the Renewal Option during the time or in the manner
provided in this Section 2.4 for the exercise thereof, or if at the time
specified for the exercise of such Renewal Option Tenant shall not be
entitled to exercise such option because of the provisions of this Section
2.4, then, and in either event, such Renewal Option shall be absolutely void
and of no force and effect.
(e) For purposes of this Lease, the term "Fair Market Rental Rate"
means the fair market rental rate of the Premises that would be agreed upon
between a landlord and a tenant entering into a new Lease in a comparable
Building of comparable age, assuming the following: (i) the landlord and
tenant are typically motivated; (ii) the landlord and tenant are well
informed
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EXHIBIT 10.16
and well advised and each is acting in what it considers its own best interest;
(iii) the Premises are not improved with any Project Upgrades in excess of the
Improvement Allowance, or any Tenant Specialty Items (all as defined in the Work
Agreement attached hereto as Exhibit D); (iv) the Premises will be used as
office and laboratory space; (v) in the event the Premises have been destroyed
or damaged by fire or other casualty, the Base Building Improvements, and the
Project Upgrades up to the amount of the Improvement Allowance (all as defined
in Exhibit D) have been fully restored; (v) the Premises are to be let with
vacant possession and subject to the provisions of this Lease for a five-year
term (taking into account the provisions of this Lease, including the Tenant's
obligation to pay for Tenant's Basic Costs and Tenant's Utility Costs); and (vi)
taking into account market rents then being charged for comparable space in
other similar buildings in comparable locations and in the North Rockville,
Shady Grove area.
ARTICLE 3
LEASEHOLD IMPROVEMENTS
The terms and provisions of Exhibit D (the "Work Agreement") shall
govern the construction and installation of all Base Building Improvements,
Project Upgrades and Tenant Specialty Items (as such terms are defined in
Exhibit D).
ARTICLE 4
ACCEPTANCE OF THE PREMISES AND
BUILDING BY TENANT
Taking possession of the Premises by Tenant, for beneficial use and
occupancy, shall be conclusive evidence that Tenant: (a) accepts the
Premises as suitable for the purposes for which they are leased; (b) accepts
the Building and every part and appurtenance thereof as being in a good and
satisfactory condition, except for punch list items; and (c) accepts the
Premises in "As Is" condition and waives any defects in the Premises or the
Building, except punch list items and latent defects. Tenant shall not
occupy or use the Premises prior to the Rent Commencement Date without
Landlord's prior consent and, unless all provisions of the Lease shall be in
full force and effect
ARTICLE 5
RENTAL
Section 5.1 Commencing on the Rent Commencement Date, Tenant
shall pay to Landlord monthly, in advance, without demand, on the first day
of each calendar month during each Lease Year, an annual rental in an amount
equal to one-twelfth (1/12) of the Annual Base Rental specified in the Basic
Lease Information, subject to adjustment as provided in Sections 1.2 and 5.2
hereof (the "Annual Base Rental"). The first monthly installment of Annual
Base Rental shall be payable in advance by Tenant on the date of execution of
this Lease. If the Rent
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EXHIBIT 10.16
Commencement Date is a date other than the first day of a calendar month, then
the monthly installment of Rental (defined below) for the period from the Rent
Commencement Date to the first day of the next month for the first month for
which rent is owing, being a fractional month, shall be appropriately prorated.
If the Lease terminates on a date other than the last day of a calendar month,
then the monthly installment of Rental for the last month for which rent is
owing, being a fractional month, shall be appropriately prorated. The
installment of Annual Base Rental due for the first month of the Term has been
deposited with Landlord by Tenant contemporaneously with the execution hereof.
Section 5.2 Beginning the first day of the second (2nd) Lease
Year and continuing each Lease Year thereafter, the Annual Base Rental
payable by Tenant shall be increased to an amount equal to the product
obtained by multiplying (i) the Annual Base Rental for the previous Lease
Year by (ii) one hundred three percent (103%).
Section 5.3 All Rental shall be paid to Landlord by Tenant when
due, without abatement (except as otherwise set forth in this Lease),
deduction, offset, recoupment or counterclaims, in lawful money of the United
States, at Landlord's Address for Notices as specified in the Basic Lease
Information, or such other place as Landlord may from time to time
designate. The term "Rental" or "rent" as used herein means the then
applicable Annual Base Rental, Tenant's Basic Costs, Tenant's Utility Costs,
any charges for special services, and all other rent and other sums,
including without limitation all sums to be paid by Tenant to Landlord
pursuant to the Work Agreement (whether characterized as rent or otherwise)
payable by Tenant under this Lease, (including, without limitation, any sums,
whether characterized as rent or otherwise, payable by any assignee or
subtenant of Tenant pursuant to the terms of Article 18). All past due
amounts of Rental, including, without limitation, any and all payments to be
made by Tenant pursuant to this Article 5 and Articles 6 and 8 which are not
paid within ten (10) days after the due date thereof, shall bear interest
from the date due until paid at a rate per annum equal to five percent (5%)
above the prime rate (the "Prime Rate") publicly announced by NationsBank,
N.A., from time to time, and all such interest shall be payable to Landlord
on demand; provided, however, that any interest payable pursuant to this
Section 5.3 shall never exceed the Highest Lawful Rate. The term "Highest
Lawful Rate" as used herein shall mean the maximum rate of interest from time
to time permitted to be charged under applicable law to Tenant with respect
to the indebtedness for which such interest is charged under this Lease. In
addition to such interest charge, if Tenant fails to pay in full any amount
of Annual Base Rental within ten (10) days after the due date thereof (except
that such ten (10) days shall commence on the date notice is sent to Tenant
no more than two (2) times in any twelve (12) month period) or any amount of
Rental other than Annual Base Rental within three (3) days after receipt of
written notice from Landlord that the same is overdue, Tenant shall also pay
to Landlord on demand a late payment service charge (to cover Landlord's
administrative and overhead expenses of processing late payments) equal to
five percent (5%) of such unpaid amount for each and every calendar month or
part thereof after the due date that such amount has not been paid to
Landlord.
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EXHIBIT 10.16
ARTICLE 6
OPERATING COSTS
Section 6.1 Throughout the Term, Tenant shall pay to Landlord
Tenant's Proportionate Share of the Basic Costs (as defined in Section 6.2)
incurred by Landlord during such Lease Year ("Tenant's Basic Costs").
Tenant's obligation to pay Tenant's Basic Costs shall be determined as
follows:
(a) Before the beginning of the first Lease Year and thereafter
before the beginning of each Lease Year during the Term, Landlord shall
furnish Tenant with Landlord's estimate of the amount of Tenant's Basic Costs
for such Lease Year. By the first day of each month during each Lease Year,
commencing with the first Lease Year following the Rent Commencement Date,
Tenant shall pay 1/12 of Landlord's estimate of Tenant's Basic Costs for such
Lease Year.
(b) (i) Within the first sixty (60) days of each Lease Year during
the Term (beginning with the second Lease Year), or as soon thereafter as is
reasonably practical, Landlord shall furnish to Tenant a detailed statement,
certified by Landlord to be correct ("Expense Statement ") of the actual amount
of Tenant's Basic Costs for the previous Lease Year.
(i) Within thirty (30) days after the delivery of the Expense
Statement, Tenant shall make a lump sum payment to Landlord equal to the
amount, if any, by which the actual amount of Tenant's Basic Costs exceeds
the amount that Tenant has paid toward the estimated amount of Tenant's Basic
Costs for such previous Lease Year. Tenant's obligation under this
subsection shall survive the expiration or sooner termination of this Lease.
(ii) If the actual amount of Tenant's Basic Costs is less than
the amount Tenant has paid toward the estimated amount of Tenant's Basic
Costs for such previous Lease Year, Landlord shall refund the excess to
Tenant within thirty (30) days after the issuance of the Expense Statement
or, at Landlord's option, Landlord shall apply such amount to the next
payments of Rental due hereunder. Landlord's obligation under this
subsection shall survive the expiration or sooner termination of this Lease.
(iii) The effect of the reconciliation payment or adjustment
pursuant to (ii) or (iii) above is that Tenant shall pay the actual amount of
Tenant's Basic Costs for each Lease Year during the Term.
(c) If the Rent Commencement Date occurs on a date other than the
first day of a Lease Year, or the Term ends on a date other than the last day
of a Lease Year, then the actual amount of Tenant's Basic Costs incurred
during the Lease Year in which the Rent Commencement Date or the last day of
the Term, as applicable, occurs (as the same may be adjusted pursuant to the
penultimate paragraph of Section 6.2) shall be computed and an appropriate
proration shall be made so that Tenant pays that portion of Tenant's Basic
Costs incurred during such Lease Year determined by reference to a fraction,
the numerator of which is the number of days during such Lease Year that are
included in the Term, and the denominator of which is the number of days in
such Lease Year.
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EXHIBIT 10.16
(d) Within sixty (60) days after delivery of an Expense Statement,
Tenant shall have the right to notify Landlord if it intends to examine
Landlord's books and records with respect to such Expense Statement. If
Tenant so notifies Landlord, then Tenant and its representatives shall have
the right, at Tenant's expense, during normal business hours for a period of
30 days after Tenant's notice, to examine Landlord's books and records
relating to Basic Costs for the previous Lease Year. Tenant shall notify
Landlord within such 30-day period if it disputes such Expense Statement
setting forth the reasons therefor (a "Notice of Dispute"). If Tenant either
(i) fails to notify Landlord of its intention to examine Landlord's books and
records within sixty (60) days after delivery of an Expense Statement, or
(ii) fails to give Landlord a Notice of Dispute within the 30-day period of
examination hereinabove referred to, then Tenant shall be deemed to have
accepted such Expense Statement for all purposes hereunder. If Landlord
shall have overstated Tenant's obligation for Tenant's Basic Costs for any
Lease Year, Landlord shall promptly refund such excess. If Landlord shall
have overstated Tenant's obligation for Tenant's Basic Costs for any Lease
Year by more than four percent (4%), then Landlord shall reimburse Tenant for
the reasonable costs of Tenant's examination of Landlord's books and records.
Section 6.2 As used herein, "Basic Costs" means all expenses,
costs, and disbursements of every kind which Landlord incurs in connection
with the operation, repair, and maintenance of the Building, computed on an
accrual basis. All Basic Costs shall be determined according to generally
accepted accounting principles. Basic Costs shall include, but are not
limited to, the following:
(a) Wages, salaries, and fees of all personnel or entities
(exclusive of any of Landlord's personnel above the rank of Building Manager)
directly engaged in the operation, repair, maintenance, or security of the
Building, including taxes, insurance, and benefits relating thereto.
(b) The cost of all supplies and materials used in the operation,
repair, security, and maintenance of the Building.
(c) The cost of all maintenance, janitorial, security, and service
agreements for the Building and the equipment therein, including, without
limitation, alarm service, sprinkler service, water treatment services,
janitorial services, window cleaning, service of electrical and mechanical
components, rubbish removal, elevator maintenance, extermination service,
plumbing service, and landscaping.
(d) The cost of all insurance relating to the Building for which
Landlord is responsible hereunder or which Landlord reasonably considers
necessary or appropriate for the operation of the Building, including,
without limitation, the cost of property, casualty and liability insurance
applicable to the Building and personal property used in the maintenance,
operation, repair, and security of the Building, and the cost of rental
insurance in such amounts as will reimburse Landlord for all losses of
earnings and other income attributable to such perils as are insured against
by Landlord.
(e) Taxes (as defined in and in accordance with the terms of Section
6.6).
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EXHIBIT 10.16
(f) The cost of repairs and maintenance of the Building.
(g) The cost of capital improvement items (i) which partially reduce
operating costs for the general benefit of the Building's tenants, or (ii)
which are necessary to comply with a statute, rule, regulation, or directive
promulgated by any governmental authority after the date of this Lease,
together with interest on the unamortized cost at the actual rate financed or
at the rate which would have been payable to a lender had the capital
improvement item been financed, as the case may be. All such costs shall be
amortized over the reasonable life of the capital investment items, with the
reasonable life and amortization schedule being determined by Landlord in
accordance with generally accepted accounting principles in accordance with
the reasonable life and amortization or depreciation schedule permitted under
the Internal Revenue Code.
(h) Landlord's central accounting costs, together with all
accountants' salaries and fees incurred for the preparation of Expense
Statements or to reduce Basic Costs.
(i) A three percent (3%) management fee (based on gross rental
income) fee by personnel or entities selected by Landlord to manage the
Building which may be an affiliate of Landlord (whether or not paid) to
manage the Building.
(j) Legal and appraisal fees relating to the operation, repair, or
maintenance of the Building, including legal fees incurred in order to reduce
Basic Costs and, without limitation, expert witness fees incurred by Landlord
and the costs of the filing, institution, and/or prosecution of any
application or proceeding filed or instituted by Landlord in order to reduce
the taxes included in Basic Costs.
(k) The aggregate of all utility costs incurred by Landlord,
including without limitation the amount of credits not attributable to usage
by other tenants of the Building, given to Tenant in accordance with Section
8.1(a) hereof, in connection with the operation, maintenance and repair of
the Building and the Land including, without limitation, costs of water,
power, fuel, heating, lighting, air conditioning, and ventilating and fees of
engineers or electrical consulting firms engaged to do work relating to such
utility costs or the determination thereof (collectively, "Utility Costs").
Section 6.3 Notwithstanding anything in Section 6.2 to the
contrary, Basic Costs shall not include:
(a) any of the Project Upgrades or any tenant work, painting or
decorating for space leased to other tenants of the Building, and any
alterations, painting or decorating performed for Tenant or other tenants of
the Building after the initial occupancy thereby;
(b) legal and other professional fees incurred in connection with
disputes with tenants and preparation and negotiation of leases and other
agreements with other tenants, prospective tenants, mortgagees, purchasers
and other parties that are unrelated to the operation, repair or maintenance
of the Building;
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EXHIBIT 10.16
(c) interest and amortization of indebtedness or any costs of
financing or refinancing, depreciation, or ground rent (other than any amount
payable by Landlord for real estate taxes, insurance, or repairs or other
items of Basic Costs under any ground lease, to the extent such amounts are
otherwise included in Basic Costs under Sections 6.2 and 6.3 hereunder) or
any costs incurred in connection with a transfer, sale or other disposition
of the Building, the Land, or any interest of the Landlord therein;
(d) compensation paid to any employees of Landlord above the rank of
Building Manager (other than the management fee referred to in Section 6.2);
(e) leasing commissions and marketing, advertising and promotional
expenses;
(f) costs of improving, painting or decorating any space occupied by
Landlord or any of its employees or affiliates in the Building;
(g) The cost of any work performed for, or service or utility
furnished to, any tenant at such tenant's cost, for which a specified charge
is made by Landlord;
(h) any dues or subscriptions to any entities or organizations;
(i) costs of any special services or repairs provided or rendered to
a tenant of the Building which are not provided or rendered generally to the
other tenants thereof;
(j) expenses of a capital nature, including without limitation
capital improvements, capital repairs, capital equipment and capital tools,
all as determined in accordance with generally accepted accounting
principles, consistently applied, in each case except as are expressly
included in Basic Costs under Section 6.2(g);
(k) costs of replacing or otherwise correcting defects in the
initial construction of the Building or the Building's parking facilities;
(l) any expenses for repairs or maintenance which are recovered
under warranties or service contracts;
(m) the cost of any item paid to any entity or person related to or
affiliated with Landlord to the extent such cost exceeds the amount payable
for such services at the then-existing market rates to unrelated parties or
entities;
(n) costs of additional insurance premiums for the Building due to
any tenant's operations in such tenant's premises;
(o) the cost of repairs or replacements incurred by reason of fire
or other casualty;
(p) any other costs or expenses for which Landlord actually receives
reimbursement from any source (other than amounts paid by tenants of the
Building for their proportionate shares of Basic Costs), including, without
limitation, insurance proceeds and condemnation awards.
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EXHIBIT 10.16
Section 6.4 In the event of any increase or decrease in the
Rentable Area of the Building and/or the Premises, then, effective as of the
date of any such change (the "Rentable Area Change Date"), Tenant's
Proportionate Share shall be recalculated in accordance with Section 1.2
hereof. In the event Tenant's Proportionate Share is recalculated pursuant
to this Section 6.4, the computation of Basic Costs as provided in Section
6.2 of this Lease shall not be altered; rather, the reconciliation payments
for Tenant's Basic Costs pursuant to Section 6.1(b) for the Lease Year in
which such change occurs shall be computed to reflect the recalculation of
Tenant's Proportionate Share effective as of the Rentable Area Change Date.
Section 6.5 Notwithstanding anything to the contrary herein, the
Basic Costs (exclusive of Utility Costs, Taxes and insurance premiums) in any
Lease Year, commencing with the second Lease Year, shall not exceed one
hundred five percent (105%) of the Basic Costs (exclusive of Utility Costs,
Taxes and insurance premiums) for the immediately preceding Lease Year.
Section 6.6
(a) The term "Taxes" means the total of all taxes, assessments and
governmental charges, general and special, ordinary and extraordinary,
foreseen and unforeseen, including assessments for public improvements and
betterments, assessed, levied or imposed with respect to the Land , the
Building or any part thereof, including any assessments pending or proposed
as of the Rent Commencement Date and any other taxes, fees, charges and
governmental impositions, duties and charges of every kind and nature which
are or may during the Lease Term and any Renewal Period, be charged, levied,
assessed or imposed upon, or become a lien or liens upon the Lease, the
Building or any part thereof under or as a result of any present or future
laws, ordinances, or regulations of the state, county or city government or
of any other municipal agencies or lawful authority whatsoever. The
foregoing and following provisions notwithstanding, Taxes shall not include
any liens established in connection with Landlord's construction of the
Building or any part thereof, or any income, inheritance, franchise, transfer
or recordation taxes.
(b) If, at any time during the Lease Term, the present method of
taxation shall be changed so that in lieu of the whole or any part of any
taxes, assessments or governmental charges levied, assessed or imposed on
real estate and the improvements thereon, there shall be levied, assessed or
imposed on Landlord a capital levy or other tax directly on the rents
received therefrom and/or a tax, assessment, levy or charge measured by or
based, in whole or in part, upon such rents for the Premises, then all such
taxes, assessments, levies or charges, or the part thereof so measured or
based, shall be deemed to be included within the term "Taxes" for the
purposes hereof.
(c) In addition to Taxes, Tenant shall pay, during the Lease Term
and any Renewal Period, all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall have its personal property taxed separately from the Premises.
If any such personal property taxes for which Tenant is liable are levied or
assessed against Landlord or the Premises and if Landlord elects to pay the
same or if the assessed value
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EXHIBIT 10.16
of the Lease is increased by inclusion of such personal property, and Landlord
elects to pay such taxes based on such increase, Tenant shall pay Landlord on
demand such taxes or such increased part of such taxes, as Rental.
(d) Upon the written request of Tenant, Landlord shall contest any
Taxes of which Tenant is obligated to pay its Proportionate Share. In such
event, except as provided below, all reasonable out-of-pocket expenses
incurred by Landlord in attempting to obtain a reduction in Taxes shall be
included in the Basic Costs; provided, however, that Tenant shall be entitled
to instruct Landlord to retain a professional to prosecute such appeal only
on a contingent fee basis, such fee to be subject to Tenant's reasonable
approval. Taxes which are being contested shall nevertheless be included in
Basic Costs. If Landlord shall receive a refund of any part of the Taxes,
Landlord shall promptly pay Tenant its Proportionate Share of such refund,
less any such contingent fee, which fee shall not be included in the Basic
Costs or Taxes.
ARTICLE 7
SERVICES BY LANDLORD
Section 7.1 While Tenant is occupying the Premises, Landlord
shall furnish the Premises with: (a) passenger elevator service in common
with other tenants of the Building, which currently includes: passenger
elevators serving the Building's three floors; provided, however, that, so
long as Landlord maintains at least one elevator operating at all times,
Landlord may reasonably limit the number of elevators to be operated after
Normal Business Hours (as defined below), on Saturdays, Sundays, and
holidays, and during periods of construction or for safety or maintenance
purposes; (b) janitorial cleaning services substantially as set forth in
Exhibit C, attached hereto and made a part hereof; (c) replacement, as
necessary, of all building standard lamps and ballasts and light fixtures
within the Premises; and (d) the services provided for in Sections 7.2 and
8.3. If Tenant requires services which are not specified herein and Landlord
provides such services to Tenant, Tenant will pay to Landlord upon demand, as
additional Rental, Landlord's charges for providing such services as
described in Section 31.1 hereof.
Section 7.2 Landlord shall:
(i) provide Tenant, its employees and invitees prompt access (in a
manner consistent with a first-class building in the State of Maryland) into
the Building and the Premises twenty-four (24) hours each day, seven (7) days
per week;
(ii) furnish a directory of the names and locations of its tenants in
the lobby of the Building. The initial listing of the name and suite number
of Tenant and as many other listings as Tenant reasonably requires shall be
furnished without charge. The subsequent listings of additional names or
room numbers and changes or revisions of listings shall be made by Landlord
at the cost of Tenant; and
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EXHIBIT 10.16
(iii) provide limited access control in the form of an electronic card
key system for the Building during other than Normal Business Hours.
Landlord, however, shall have no liability to Tenant, its employees, agents,
invitees or licensees for losses due to theft or burglary, or for damages
done by unauthorized persons on the Premises, and neither shall Landlord be
required to insure against any such losses.
Section 7.3 Nothing contained in this Article 7 shall preclude
Landlord from including in Basic Costs (pursuant to Section 6.2) any of the
costs and expenses referred to in this Article 7 to the extent the same are
within the definition of Basic Costs.
ARTICLE 8
UTILITIES
Section 8.1
(a) All Building utilities shall be metered to Tenant and Landlord
shall credit Tenant monthly in an amount to be determined for utility costs
which are not attributable to Tenant's usage (the "Credit"). In the case of
electricity and the "Building HVAC" (hereinafter defined), such mutual
agreement shall be based upon the following procedure: (i) "check meters"
shall be installed by Landlord for each space under lease to tenants other
than Tenant, and (ii) an estimate shall be prepared by Landlord concerning
the consumption of electricity attributable to the Common Areas; and (iii) in
the event that Tenant disagrees with such determination of consumption not
attributable to Tenant's usage, Tenant shall have the right to have Landlord
conduct or have conducted a survey of electricity consumption by Tenant, by
other tenants of the Building and with respect to the Common Areas. The
results of such survey shall be determinative in computing such monthly
credit. If the results of such survey indicate a plus or minus variance from
Landlord's determination of consumption of less than ten percent (10%),
Tenant shall pay all of the costs and expenses related to the conduct of such
survey. The amount of the Credit for all other utilities shall be as
determined by survey. Tenant shall not install or operate in the Premises
any equipment or other machinery that, in the aggregate, will cause Tenant to
use more than 2235 amps of electricity (the "Premises' Standard Electrical
Capacity"), without: (i) obtaining the prior written consent of Landlord,
who shall not unreasonably withhold its consent but may condition its consent
upon the payment by Tenant of additional Rental for additional wiring or
other expenses resulting therefrom, (ii) securing all necessary permits from
governmental authorities and utility companies and furnishing copies thereof
to Landlord, and (iii) complying with all other requirements reasonably
imposed by Landlord.
(b) If Tenant's equipment shall result in electrical demand in
excess of the Premises' Standard Electrical Capacity, Landlord shall have the
right, in its sole discretion, to install additional transformers,
distribution panels, wiring and other applicable equipment at the expense of
Tenant. None of the equipment so installed shall be deemed to be Tenant's
personal property.
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EXHIBIT 10.16
Section 8.2 While Tenant is occupying the Premises and is not in
default under this Lease, Landlord shall make available to Tenant the
following services: (a) potable water at those points of supply provided for
normal lavatory use by tenants in the Building, and in the executive suite
bathrooms, lunchroom and laboratory sinks in the Premises; (b) heating,
ventilating, and/or air conditioning in the Premises on business days from
8:00 a.m. to 7:00 p.m. (except holidays), at temperatures no less than 67
degrees Fahrenheit and no more than 77 degrees Fahrenheit in the office space
in the Premises, and not less than 69 degrees Fahrenheit and no more than 75
degrees Fahrenheit in the laboratory space in the Premises (the "Building
HVAC"); and (c) electricity to the first (1st) and second (2nd) floors of the
Premises and electric lighting for such floors and for common and public
areas and special service areas of the Building in the manner and to the
extent customarily provided in first-class buildings in Washington, D.C., all
of which services shall be provided to Tenant by Landlord and paid for by
Tenant as part of Tenant's Utility Costs. With respect to heating and/or air
conditioning, if Tenant requires air conditioning or heating in the Premises
outside the hours and days specified above, Landlord shall be obligated to
furnish such additional services only upon prior written notice from Tenant
given prior to noon of the previous business day. Tenant shall pay for any
such additional services requested by Tenant and furnished by Landlord at the
rate and in an amount equal to Landlord's actual cost of providing such
additional services, which amount shall include the expenses and costs
incurred by Landlord for any engineer and similar personnel engaged to
provide, and/or engaged during the period Landlord provides, such additional
services. Whenever machines or equipment that generate an increase in heat
or otherwise affect the air conditioning system are used in the Premises by
Tenant which affect the temperature or humidity otherwise maintained by the
air conditioning system, Landlord will have the right to install supplemental
air conditioning units in the Premises, and the full cost thereof, including
the cost of installation, operation, use, and maintenance, will be paid by
Tenant to Landlord on demand. Landlord shall have the right during the Term,
upon reasonable notice to Tenant, to enter the Premises to install meters and
conduct other tests and inspections to determine Tenant's use of water,
heating, ventilation, and/or air conditioning.
Section 8.3 Failure to furnish, or any stoppage of, the services
provided for in Article 7 above and this Article 8 resulting from any cause
will not make Landlord liable in any respect for damages to either person,
property, or business, nor be construed as an eviction of Tenant, nor entitle
Tenant to any abatement of rent, nor relieve Tenant from its obligations
under this Lease, except as hereinafter set forth in this Section 8.3.
Should any malfunction of the Building improvements or facilities occur,
Landlord will repair such malfunction promptly with reasonable diligence, but
Tenant will have no claim for rebate, abatement of rent, or damages because
of malfunctions or any interruptions in service, except as follows. In the
event that (i) electricity and/or heating or air conditioning (in season) of
the Premises, shall not be furnished for more than three (3) consecutive
business days, and (ii) Tenant, in its reasonable business judgment,
determines that it is unable to use and occupy the Premises (or any part
thereof) as a result thereof, then the Annual Base Rent Tenant is obligated
to pay hereunder shall abate with respect to that part of the Premises which
Tenant does not use and occupy, commencing on the fourth (4th) such day until
the date on which such services and utilities are restored, unless the
failure to furnish such services and utilities is caused by Tenant's acts or
omissions.
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EXHIBIT 10.16
Section 8.4 Tenant shall pay, during the Lease Term and any
Renewal Periods, for Tenant's consumption of any separately metered utilities
to the Premises directly to the utility companies when and as such charges
and costs become due. Tenant shall promptly change the name of the account
with each utility company having a meter separately serving the Premises, to
Tenant's name, so that Tenant shall be solely liable for all costs, charges
and meters for the Premises for utility consumption during the Lease Term and
any Renewal Period. Tenant shall pay Landlord for any submetered utilities,
at the rate charged by the local utility company, within fifteen (15) days
after receipt of an invoice therefor from Landlord, which invoice shall be
accompanied by a copy of the bill for the Building from the local utility
company. As used herein, "utilities" shall mean the electric current, gas,
water, sewer, cable and telephone and other utilities serving the Premises.
If Tenant defaults in payment of any charges for utilities, and such failure
continues for more than ten (10) days after Tenant's receipt of written
notice thereof from Landlord, Landlord may, at its option pay the same on
Tenant's account, and Tenant shall promptly reimburse Landlord together with
interest on such amount from the date of Landlord's invoice in accordance
with Section 5.3 hereof.
Section 8.5 It is understood and agreed that Tenant will have a
supplemental heating, ventilating and air conditioning system serving the
computer room in the Premises. Tenant shall have the right to install a
generator outside of the Building, in a location approved by Montgomery
County, as shown on the Plans for the Project Upgrades. It is understood and
agreed that Tenant will install air handling equipment on the roof of the
Building and in connection therewith shall comply with all of the provisions
of Exhibit I attached hereto. Throughout the Term of this Lease and any
Renewal Periods, Tenant shall have the right, in common with Landlord, to the
use of the roof of the Building for such air handling equipment. In
addition, Landlord shall provide Tenant with adequate space in the Building's
mechanical room for Tenant's air handling equipment.
ARTICLE 9
USE
The Premises shall be used only for general office use, and laboratory
space not to exceed 8,100 square feet, except with Landlord's prior written
consent, which consent shall not be unreasonably withheld, in accordance with
all applicable laws, rules, and regulations and for no other purpose. Tenant
agrees to use and maintain the Premises in a clean, safe, lawful, and proper
manner.
ARTICLE 10
LAWS, ORDINANCES, AND REQUIREMENTS OF PUBLIC
AUTHORITIES AND ENVIRONMENTAL COMPLIANCE
Section 10.1 Tenant shall, at its sole expense, (i) comply
with all laws, orders, ordinances, and regulations of Federal, state, county,
municipal, and other authorities having
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EXHIBIT 10.16
jurisdiction over the Premises ("Legal Requirements") relating to Tenant's use
and occupancy of the Premises, (ii) comply with any direction made pursuant to
law by any public officers requiring abatement of any nuisance or which imposes
upon Landlord or Tenant any duty or obligation arising from Tenant's occupancy
or use of the Premises or from conditions which have been created by or at the
insistence of Tenant (hereinafter "Legal Directive"), and (iii) indemnify
Landlord and hold Landlord harmless from any loss, cost, claim, or expense which
Landlord may incur or suffer by reason of Tenant's failure to comply with its
obligations under clauses (i) or (ii) above. If Tenant receives notice of any
such direction or of violation of any such law, order, ordinance, or regulation,
it shall promptly notify Landlord thereof and provide Landlord with a copy of
each written Legal Directive and each written response thereto. Landlord shall,
at its sole expense, comply with all Legal Requirements which are unrelated to
Tenant's use and occupancy of the Premises, and shall indemnify Tenant and hold
Tenant harmless from any loss, cost, claim or expense which Tenant may incur or
suffer by reason of Landlord's failure to comply with any such Legal
Requirement.
Section 10.2 Tenant shall not do, or permit anything to be
done in the Premises, or keep or suffer to be kept anything therein which
will in any way obstruct or interfere with the rights of the Landlord or of
the other occupants of the Building, or in any other way injure or annoy the
Landlord or the other occupants, or subject the Landlord to any liability for
injury to persons or damage to property. Tenant shall, at Tenant's sole cost
and expense, promptly comply with (i) all rules, regulations, and
requirements of the local Board of Fire Underwriters Rating Bureau or other
fire insurance rating organization for the area in which the Premises are
situated and of the Landlord's insurers, pertaining to the Premises, or to
fire preventive, warning and extinguishing apparatus and (ii) all directives,
rules and regulations of the fire marshal, health officer, building inspector
and other proper officers of the governmental agencies having jurisdiction
over the Premises. In the event that Tenant shall fail to comply with any of
the aforesaid laws, rules, regulations, requirements and recommendations,
Landlord or its agents may, after thirty (30) days prior written notice (or
sooner in an emergency) to Tenant and an opportunity to cure, enter the
Premises and take all such action and perform all such work as may be
necessary in order to cause compliance under this Section 10.2 and Tenant
agrees to reimburse Landlord promptly upon demand for any expense incurred by
Landlord in taking such action or performing such work together with interest
from the date of Landlord's invoice in accordance with Section 5.3 hereof.
Section 10.3 Hazardous Materials
(a) Landlord has heretofore delivered to Tenant, and Tenant has
reviewed, that certain Report of Phase I Environmental Site Assessment dated
September 4, 1997, prepared by Law Engineering and Environmental Services,
Inc. with respect to the Land (the "First Report"). Within one hundred
twenty (120) days prior to the Rent Commencement Date, Landlord shall employ
an independent engineer or engineering firm, which engineer or firm shall be
mutually acceptable to Landlord and Tenant, specializing in testing for the
presence of Hazardous Materials (as defined in Section 10.3(f) hereof)
contamination (the "Engineer") and Landlord shall authorize the Engineer to
conduct all necessary tests, including without limitation testing of
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EXHIBIT 10.16
all underground tanks (if any), to determine if any Hazardous Materials
contamination other than as disclosed by the First Report exists on or about the
Building or the Land. The cost of the testing described in the preceding
sentence shall be paid by Landlord. Landlord shall cause the Engineer to deliver
a copy of the Engineer's report concerning the results of tests performed
pursuant hereto (the "Second Report") to Landlord and Tenant no later than
ninety (90) days prior to the Rent Commencement Date. If the Engineer's report
states that no Hazardous Materials contamination other than as disclosed by the
First Report exists, then the Landlord shall cause the Engineer to execute and
deliver to Landlord and Tenant a certificate in form and substance customarily
utilized in the industry for similar purposes, which certifies to both Landlord
and Tenant that no Hazardous Materials contamination other than as disclosed by
the First Report exists. If the Engineer's report states that any Hazardous
Materials contamination other than as disclosed by the First Report exists, then
Landlord shall, within thirty (30) days after receipt of the Engineer's report,
commence, or cause the commencement of, the removal, treatment and disposal of
all such previously undisclosed hazardous wastes, hazardous substances or
hazardous materials which shall be the sole responsibility of Landlord, provided
that Landlord shall employ environmental consultants and contractors reasonably
acceptable to Tenant. Landlord shall diligently prosecute the removal, treatment
and disposal of all such Hazardous Materials and shall complete the same prior
to the Rent Commencement Date. If the removal of such contamination is not
complete by the Rent Commencement Date set forth in the Basic Lease Information,
then the Rent Commencement Date shall be postponed until completion of the
removal of such contamination, unless otherwise agreed in writing by Tenant.
Upon completion of the removal of such contamination, Landlord shall cause the
Engineer to certify, at Landlord's sole expense (including without limitation
the need for additional testing), that no Hazardous Materials contamination
other than as disclosed by the First Report exists.
(b) During the term of this Lease, Tenant shall comply with all
Environmental Laws and Environmental Permits (each as defined in Section
10.3(f) hereof) applicable to the operation or use of the Premises, will
cause all other persons occupying or using the Premises to comply with all
such Environmental Laws and Environmental Permits, and will immediately pay
or cause to be paid all costs and expenses incurred by reason of such
compliance.
(c) Tenant shall not generate, use, treat, store, handle, release or
dispose of, or permit the generation, use, treatment, storage, handling,
release or disposal of Hazardous Materials (as defined in Section 10.3(f)
hereof) on the Premises, or transport or permit the transportation of
Hazardous Materials to or from the Premises except for limited quantities
used or stored at the Premises and required in connection with Tenant's
business operations or the routine operation and maintenance of the Premises,
and then only in compliance with all applicable Environmental Laws and
Environmental Permits.
(d) Tenant agrees to defend, indemnify and hold harmless Landlord,
its members, agents, employees, contractors, successors and assigns
(collectively, the "Landlord Indemnitees") from and against all obligations
(including removal and remedial actions), losses, claims, suits, judgments,
liabilities, penalties, damages, costs and expenses (including reasonable
attorneys' and consultants' fees and expenses) of any kind or nature
whatsoever that may at any time be incurred by, imposed on or asserted
against such Landlord Indemnitees directly or indirectly
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EXHIBIT 10.16
based on, or arising or resulting from (a) the alleged (by parties other than
Landlord) or actual presence of Hazardous Materials on the Building or the Land
which is caused by Tenant's business operations in the Premises and (b) any
Environmental Claim relating to Hazardous Materials brought into or produced in
the Premises by Tenant as part of Tenant's business operations. Landlord agrees
to defend, indemnify and hold harmless Tenant, its agents, employees,
contractors, successors and assigns (collectively, the "Tenant Indemnitiees")
from and against all obligations (including removal and remedial actions),
losses, claims, suits, judgments, liabilities, penalties, damages), costs and
expenses including reasonable attorneys' and consultants' fees and expenses of
any kind or nature whatsoever that may at any time be incurred by, imposed on or
asserted against such Tenant Indemnitiees directly or indirectly based on, or
arising or resulting from (a) the actual or alleged presence of Hazardous
Materials not disclosed in the First Report and by the Second Report if not
remediated on the Building or the Land on the Rent Commencement Date or which is
caused by Landlord, and (b) any Environmental Claim relating in any way to
Landlord's operation or use of the Building or the Land unless relating to
matters disclosed in the First Report and by the Second Report if not
remediated. If Landlord and Tenant are unable to agree upon whether the presence
of any Hazardous Materials on the Land or the Building was caused by Tenant's
business operations in the Premises, or relates to Landlord's operation or use
of the Building or Land, as the case may be, then Landlord and Tenant shall
jointly employ a mutually acceptable independent engineer or engineering firm,
specializing in testing for the presence of Hazardous Materials contamination,
to determine the cause of such Hazardous Materials contamination, which
determination shall be binding on the parties. The parties shall share equally
the fees of such engineer or engineering firm. In the event it shall be
determined that the presence of such Hazardous Materials on the Land or Building
which had been alleged to have been caused by Tenant's business operations in
the Premises was in fact primarily caused by the actions of Landlord or another
tenant in the Building, then as to such particular Hazardous Materials incident,
Tenant's indemnity obligations shall cease and Landlord shall reimburse Tenant
its out-of-pocket costs and expenses incurred with respect to such incident
under this Section 10.3(d).
(e) Upon written notice from Landlord to Tenant, not later than
ninety (90) days prior to (i) the expiration or termination of this Lease; or
(ii) such other time as Tenant may vacate the Premises, whichever is earlier
(the "Termination Date"), Tenant shall employ an independent engineer or
engineering firm, which engineer or firm shall be mutually acceptable to
Landlord and Tenant, specializing in testing for the presence of Hazardous
Materials contamination (the "Engineer") and Tenant shall authorize the
Engineer to conduct all necessary tests, including without limitation testing
of all underground tanks (if any), to determine if any Hazardous Materials
contamination other than as disclosed by the First Report, and by the Second
Report if not remediated, exists on or about the Premises. The cost of the
testing described in the preceding sentence shall be paid by Tenant. Tenant
shall cause the Engineer to deliver a copy of the Engineer's report
concerning the results of tests performed pursuant hereto to Landlord and
Tenant no later than thirty (30) days prior to the Termination Date. If the
Engineer's report states that no Hazardous Materials contamination other than as
disclosed by the First Report, and by the Second Report if not remediated,
exists, then the Tenant shall cause the Engineer to execute and deliver to
Landlord and Tenant a certificate in form and substance customarily utilized in
the industry for similar purposes, which certifies to both Landlord and Tenant
that no Hazardous
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EXHIBIT 10.16
Materials contamination other than as disclosed by the First Report, and by the
Second Report if not remediated, exists. If the Engineer's report states that
any Hazardous Materials contamination other than as disclosed by the First
Report, and by the Second Report if not remediated, exists, then Tenant shall,
within thirty (30) days after receipt of the Engineer's report, commence, or
cause the commencement of, the removal, treatment and disposal of all hazardous
wastes, hazardous substances or hazardous materials not disclosed by the First
Report, and by the Second Report if not remediated, which shall be the sole
responsibility of Tenant, provided that Tenant shall employ environmental
consultants and contractors reasonably acceptable to Landlord. Tenant shall
diligently prosecute the removal, treatment and disposal of all Hazardous
Materials not disclosed by the First Report, and by the Second Report if not
remediated, and upon completion of the removal of such contamination, Tenant
shall cause the Engineer to certify, at Tenant's sole expense (including without
limitation the need for additional testing), that no Hazardous Materials
contamination other than as disclosed by the First Report, and by the Second
Report, if not remediated, exists; provided however, that unless Engineer
determines that such Hazardous Materials contamination originated primarily from
Tenant's business operations in the Premises or from Hazardous Materials brought
into or produced in the Premises by Tenant as part of Tenant's business
operations, Tenant shall have no obligation to prosecute the removal, treatment
and disposal of any such Hazardous Materials.
(f) As used herein, the following terms shall have the following
meanings: "Hazardous Materials" means (i) petroleum or petroleum products,
natural or synthetic gas; (ii) any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants," "contaminants" or "pollutants," or
words of similar import, under any applicable Environmental Law; and (iii)
any other substance exposure which is now or may hereafter be regulated by
any governmental authority. "Environmental Law" means any federal, state or
local statute, law, rule, regulation, ordinance, code, policy or rule of common
law now or hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety
or Hazardous Materials, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C.
Sections 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
Sections 1801 et seq.; the Clean Water Act, 33 U.S.C. Sections 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.; the Clean Air
Act, 42 U.S.C. Sections 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Sections 300f et seq.; the Atomic Energy Act, 42 U.S.C. Sections 2011 et seq.;
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136 et
seq.; the Occupational Safety and Health Act, 29 U.S.C. Sections 651 et seq.
"Environmental Claims" means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations, proceedings, consent orders or
consent agreements relating in any way to any Environmental Law or any
Environmental Permit, including without limitation (i) any and all Environmental
Claims by governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law and (ii) any and all Environmental Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief
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EXHIBIT 10.16
resulting from Hazardous Materials or arising from alleged injury or threat of
injury to health, safety or the environment. "Environmental Permits" means all
permits, approvals, identification numbers, licenses and other authorizations
required under any applicable Environmental Law.
(g) The provisions of this Section 10.3 shall survive the expiration
or sooner termination of this Lease for a period of twelve (12) months except
for the provisions of Section 10.3(d), which shall survive indefinitely.
ARTICLE 11
OBSERVANCE OF RULES AND REGULATIONS
Tenant and its servants, employees, agents, visitors, and licensees
shall observe faithfully and comply with the rules and regulations attached
to this Lease as Exhibit E ("Rules and Regulations"). Landlord shall at all
times have the right to make reasonable changes in and additions to such
Rules and Regulations. Provided that Landlord shall enforce the Rules and
Regulations in a non-discriminatory manner, any failure by Landlord to
enforce any of the Rules and Regulations now or hereafter in effect, either
against Tenant or any other tenant in the Building, shall not constitute a
waiver of any such Rules and Regulations. Landlord shall not be liable to
Tenant for the failure or refusal by any other tenant, guest, invitee,
visitor, or occupant of the Building to comply with any of the Rules and
Regulations.
ARTICLE 12
ALTERATIONS; EQUIPMENT
Section 12.1 Tenant shall not make or permit to be made to
the Premises any structural alterations, or any alterations which materially
affect Building utility systems, or alterations which cost more than
Twenty-five Thousand Dollars ($25,000.00) (collectively, "Substantial
Alterations"), without the prior written consent of Landlord both as to
whether the alterations may be made and as to how and when they will be made,
which consent shall not be unreasonably withheld, conditioned or delayed.
Any alterations shall be made at Tenant's expense, by its contractors and
subcontractors. Any Substantial Alterations shall be made in accordance with
complete plans and specifications approved in advance in writing by Landlord,
and only after Tenant: (i) has obtained all necessary permits from
governmental authorities having jurisdiction and has furnished copies thereof
to Landlord, (ii) has submitted to Landlord an architect's certificate that
such alterations will conform to all Legal Requirements, and (iii) has
complied with all other requirements reasonably imposed by Landlord,
including without limitation any requirements due to the underwriting
guidelines of Landlord's insurance carriers. At Tenant's expense, Landlord
shall join in submitting Tenant's plans for any necessary governmental
approval, if required by applicable law. Landlord's consent to any
alterations and approval of any plans and specifications constitutes approval
of no more than the concept of these alterations and not a representation or
warranty with respect to the quality or functioning of
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EXHIBIT 10.16
such alterations, plans and specifications. Tenant shall promptly provide
Landlord with "as built" drawings for all such alterations not requiring
Landlord's prior written consent.
Section 12.2 In the event Landlord approves Tenant alterations pursuant
to the terms of this Article 12, or in the event such approval is not required,
Tenant shall be and is solely responsible for such alterations and for the
proper integration thereof with the Building, the Building's systems and
existing conditions. All alterations shall be made at Tenant's expense by
contractors which have been approved by Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed. All such construction,
alterations, and maintenance work done by or for Tenant shall (i) be performed
in a such manner as to maintain harmonious labor relations, (ii) not alter the
exterior appearance of the Building or the common and public areas thereof,
(iii) not affect the structure or the safety of the Building, (iv) comply with
all building, safety, fire, plumbing, electrical, and other codes and
governmental and insurance requirements, (v) not result in any usage more than
ten percent (10%) in excess of building standard of water, electricity, gas,
heating, ventilating, or air conditioning (either during or after such work),
unless prior written arrangements reasonably satisfactory to Landlord are made
with respect thereto, (vi) be completed promptly and in a good and workerlike
manner, (vii) be performed in compliance with Article 13 hereof, and (viii) not
unreasonably interfere with the use and occupancy of the Building by any other
tenant or occupant.
Section 12.3 Following completion of any Substantial Alterations, at
Landlord's request, Tenant (i) shall deliver to Landlord a certificate signed by
Tenant stating that such alterations have been completed in accordance with the
plans and specifications previously delivered to Landlord and (ii) either shall
deliver to Landlord a complete set of "as built" plans showing such alterations
or shall reimburse Landlord for any expense incurred by Landlord in causing the
Building plans to be modified to reflect the alterations. Tenant hereby agrees
to indemnify and hold Landlord harmless against and from any and all claims,
damages, costs, and fines arising out of or connected with such alterations.
Section 12.4 Tenant shall take all necessary steps to insure
that no mechanic's or materialmen's liens are filed against the Premises, the
Building or the Land as a result of any alterations made by the Tenant. If
any mechanic's lien is filed, Tenant shall discharge the lien within ten (10)
days after receipt of written notice thereof, at Tenant's expense, by paying
off or bonding the lien.
Section 12.5 If any Substantial Alterations are made without
the prior written consent of Landlord, or which do not conform to plans and
specifications approved by Landlord or to other conditions imposed by
Landlord pursuant to this Article, Landlord may, in its sole discretion,
correct or remove such alterations at Tenant's expense.
Section 12.6 No alterations or Project Upgrades (as defined
in Exhibit D), or installed by or for Tenant in or to the Premises shall be
removed by Tenant during the Term except in accordance with Section 20.2.
Section 12.7 Business machines and equipment belonging to
Tenant, which cause noise or vibration that may be transmitted to any part of
the Building to such a degree as to be
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EXHIBIT 10.16
objectionable to Landlord or to any tenant or occupant of the Building, shall be
installed and maintained by Tenant at Tenant's expense on devices that eliminate
the noise and vibration. Tenant shall not place any load upon the floor of the
Premises which exceeds the per square foot load the floor was designed to carry.
ARTICLE 13
LIENS
Tenant shall keep the Premises and the Building free from any liens
arising from any work performed, materials furnished, or obligations incurred
by or at the request of Tenant. All persons either contracting with Tenant
or furnishing or rendering labor and materials to Tenant shall be notified in
writing by Tenant that they must look only to Tenant for payment, and a copy
of every such writing shall be promptly provided by Tenant to Landlord upon
Landlord's request. Nothing contained in this Lease shall be construed as
Landlord's consent to any contractor, subcontractor, laborer, or materialman
for the performance of any labor or the furnishing of any materials for any
specific improvement, alteration, or repair of or to the Premises or the
Building, nor as giving Tenant any right to contract for, or permit the
performance of, any services or the furnishing of any materials that would
result in any liens against the Premises or the Building. If any lien is
filed against the Premises or Tenant's leasehold interest therein or if any
lien is filed against the Building which arises out of any purported act or
agreement of Tenant, Tenant shall discharge the same within ten (10) days
after receipt of written notice thereof by payment, filing of the bond
required by law, or otherwise. If Tenant fails to discharge such lien within
such period, then, in addition to any other right or remedy of Landlord,
Landlord may, at its election, discharge the lien by paying the amount
claimed to be due, by obtaining the discharge by deposit with a court or a
title company, or by bonding. Tenant shall pay on demand any amount paid by
Landlord for the discharge or satisfaction of any such lien and all
reasonable attorneys' fees and other reasonable costs and expenses of
Landlord incurred in defending any such action or in obtaining the discharge
of such lien, together with all necessary disbursements in connection
therewith.
ARTICLE 14
REPAIRS; DAMAGE BY TENANT
Section 14.1 Except for those parts of the Premises which
Landlord is obligated to maintain under Section 14.2, Tenant shall keep the
Premises and every part thereof in good condition and repair at all times
during the Term and at Tenant's sole cost and expense. If Tenant fails to
commence such repairs within fifteen (15) days after receipt of written
notice of the necessity therefor from Landlord, and thereafter diligently
pursue the same to completion, Landlord, at its option, may make such
repairs, and Tenant shall pay Landlord on demand Landlord's actual costs in
making such repairs plus fifteen percent (15%) for Landlord's overhead.
Notwithstanding the foregoing, Tenant shall have no obligation to maintain or
repair any portion of the Building which is not part of the Premises;
provided, however, that Tenant
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EXHIBIT 10.16
shall reimburse Landlord for any actual costs incurred for maintenance or repair
of any such portion of the Building if such maintenance or repair is
necessitated by the acts or omissions of Tenant plus fifteen percent (15%) for
Landlord's overhead. At the end of the Term, Tenant shall surrender to Landlord
the Premises and all alterations, additions, and improvements thereto subject to
the provisions of Article 20 hereof. Landlord has no obligation and has made no
promise to alter, remodel, improve, repair, redecorate, or paint the Premises or
any part thereof except as specifically set forth in this Lease, including the
Exhibits hereto. No representations respecting the condition of the Premises or
the Building have been made by Landlord to Tenant except as specifically set
forth in this Lease, including the Exhibits hereto.
Section 14.2
(a) Subject to the other provisions of this Lease imposing
obligations in this respect upon Tenant and subject to the provisions of
Articles 16 and 17 hereof, Landlord shall repair, replace, and maintain in
good condition (i) the external and structural parts of the Building,
including the roof and the foundations, (ii) all Common Areas, and (iii) the
HVAC, mechanical, electrical, and plumbing systems of the Building, exclusive
of systems, if any, specially installed by or on behalf of Tenant.
(b) Nothing contained in this Section 14.2 shall preclude Landlord
from including in Basic Costs (pursuant to Sections 6.2 and 6.3) any of the
costs and expenses referred to herein to the extent the same are within the
definition of Basic Costs.
(c) If Landlord refuses or neglects to promptly commence and
complete repairs or maintenance to the Building necessary to satisfy the
provisions of this Section 14.2, Tenant may, after fifteen (15) days written
notice to Landlord (or such longer period as may be reasonably required to
complete such repairs, provided that Landlord commences the same promptly
after receipt of Tenant's notice and thereafter diligently proceeds with the
same), but shall not be required to, make and complete such repairs or
maintenance and Landlord shall pay the cost therefor to Tenant upon demand.
Section 14.3 Except as otherwise expressly provided in this
Lease, all injury, breakage and damage to the Land, the Building or the
Premises, caused by any act or omission of Tenant shall be repaired by and at
the sole expense of Tenant, except Landlord shall have the right, at its
option, to make any such repairs to any portions of the Building except the
third (3rd) floor of the Premises, and to charge Tenant for all costs and
expenses incurred in connection therewith as additional Rental payable within
ten (10) days after the rendering of a bill therefor. Tenant shall notify
Landlord promptly of any injury, breakage or damage to the Land, the
Building, or the Premises caused by Tenant.
ARTICLE 15
INSURANCE
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EXHIBIT 10.16
Section 15.1 During the Term, Tenant, at its sole cost and expense,
shall obtain and keep in force the following insurance:
(a) All-Risk (Special Perils) Insurance upon property of every
description and kind located in the Premises and owned by Tenant or for which
Tenant is legally liable or which is installed by or on behalf of Tenant,
including, without limitation, furniture, fittings, installations,
furnishings, movable trade fixtures, and personal property, but excluding
Project Upgrades (as defined in Exhibit D) and alterations installed by
Tenant pursuant to Article 12, in an amount equal to the full replacement
cost thereof.. Landlord will not be required to carry insurance of any kind
on any Tenant's fixtures, equipment, or improvements (other than the Project
Upgrades and alterations installed by Tenant pursuant to Article 12) under
this Lease, and Landlord shall not be obligated to repair any damage thereto
or replace the same.
(b) Commercial general liability insurance coverage, including
personal injury, bodily injury, property damage, operations hazard,
contractual liability coverage, in limits not less than $3,000,000 inclusive;
limits may be purchased in a combination of commercial general liability and
excess liability and/or umbrella liability policies. All such insurance
policies shall name Tenant as named insured thereunder and shall name
Landlord and, if requested by Landlord, Landlord's mortgagees and/or ground
or primary lessors as additional insureds thereunder, all as their respective
interests may appear.
(c) Worker's Compensation and Employer's Liability insurance as
required by law and business interruption insurance, all in form and amount
satisfactory to Landlord.
(d) Any other form or forms of insurance that Landlord or Landlord's
mortgagee, may reasonably require from time to time in form, in amounts, and
for insurance risks against which a prudent tenant of comparable size and in
a comparable business would protect itself including, without limitation,
biotechnology professional liability insurance and pollution liability
insurance coverages.
Section 15.2 All insurance policies required to be maintained by
Tenant under this Lease must: (i) be issued by insurance companies approved by
Landlord, in its reasonable discretion; (ii) be in form and have content
satisfactory to Landlord; (iii) be written as primary policy coverage; (iv)
contain an express waiver of any right of subrogation in the property and
general liability policies, by the insurance company against Landlord, the
Mortgagees and the Landlord's and the Mortgagees' employees and agents; (v)
contain an undertaking by the insurers to notify Landlord and Landlord's
mortgagees (and, if applicable, Landlord's ground or primary lessors) in
writing, not less than fifteen (15) days before any material adverse change,
reduction in coverage, cancellation, non-renewal or other termination thereof.
Tenant shall deliver to Landlord certificates of each such policy and any
renewal policy, together with evidence of payment of all applicable premiums, at
least ten (10) days before the Rent Commencement Date and at least ten (10) days
before the renewal of any policies.
Section 15.3 During the Term, Landlord shall insure the Building,
including the Project Upgrades and alterations installed by Tenant pursuant to
Article 12 (but excluding any property Tenant is obligated to insure under
Section 15.1 hereof), with a reputable insurance company
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EXHIBIT 10.16
authorized to do business in the State of Maryland against damage with All-Risk
(Special Perils) insurance in an amount not less than 90% of the then
replacement cost and commercial general liability insurance with limits of not
less than $3,000,000; limits may be purchased in a combination of commercial
general liability and excess liability and/or umbrella liability policies.
Landlord may, but shall not be obligated to, obtain and carry any other form or
forms of insurance as it or Landlord's mortgagees may reasonably determine
advisable. All insurance policies required to be maintained by Landlord under
this Lease must (i) name Tenant as an additional insured; (ii) be written as
primary policy coverage; (iii) contain an express waiver of any right of
subrogation in the property and general liability policies, by the insurance
company against Tenant and its employees and agents; and (iv) contain an
undertaking by the insurers to notify Tenant in writing, not less than fifteen
(15) days before any material adverse change, reduction in coverage,
cancellation, non-renewal or other termination thereof. Landlord shall deliver
to Tenant certificates of each such policy and any renewal policy, together with
evidence of payment of all applicable premiums, at least ten (10) days before
the Rent Commencement Date and at least ten (10) days before the renewal of any
policies. Notwithstanding any contribution by Tenant to the cost of insurance
premiums as provided herein, Tenant acknowledges that it has no right to receive
any proceeds from any insurance policies carried by Landlord, except as follows.
In the event that this Lease is terminated pursuant to Article 16, then Tenant
shall be entitled to receive, from Landlord's insurance proceeds, an amount
equal to the replacement cost of the Project Upgrades (as defined in Exhibit D)
in excess of Ten Dollars ($10.00) per square foot of Rentable Area of the
Premises, and the replacement cost of any alterations made by Tenant to the
Premises. This provision shall survive the expiration or sooner termination of
this Lease pursuant to Article 16.
Section 15.4 If Tenant's occupancy or business in or on the Premises,
whether or not Landlord has consented to the same, results in any increase in
premiums for the insurance carried by Landlord with respect to the Building,
Tenant shall pay any such increase in premiums as additional Rental within ten
(10) days after being billed therefor by Landlord, provided that all other
building tenants are also required to pay any insurance premium increases
resulting from their use of their premises. In determining whether increased
premiums are a result of Tenant's use of the Premises, a schedule issued by the
organization computing the insurance rate on the Building or the Project
Upgrades showing the various components of such rate shall be conclusive
evidence of the several items and charges which make up such increased premiums.
Tenant shall promptly comply with all reasonable requirements of the insurance
authority or any present or future insurer relating to the Premises. If any of
Landlord's insurance policies shall be cancelled or cancellation shall be
threatened (in writing by the insurance company) or the coverage thereunder
reduced or threatened (in writing by the insurance company) to be reduced in any
way because of the use of the Premises or any part thereof by Tenant or any
assignee or subtenant of Tenant or by anyone Tenant permits on the Premises and
if Tenant fails to remedy the condition giving rise to such cancellation,
threatened (in writing by the insurance company) cancellation, reduction of
coverage, or threatened (in writing by the insurance company) reduction of
coverage within 48 hours after notice thereof, Landlord may, at its option,
enter upon the Premises and attempt to remedy such condition, and Tenant shall
promptly pay the cost thereof to Landlord as additional Rental; provided,
however, that in lieu of remedying such condition, Tenant may, at its option,
obtain another insurance policy for Landlord from an
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EXHIBIT 10.16
insurance company reasonably acceptable to Landlord (the premiums for which
shall be paid by Landlord and included in Basic Costs), so long as Tenant
reimburses Landlord directly for any premiums for such policy in excess of the
premiums for Landlord's cancelled policy. In the event Tenant is unable to
obtain replacement insurance at least ten (10) days prior to the cancellation or
reduction of Landlord's insurance, then in that event Tenant will immediately
cease and desist from keeping, using, selling, or offering for sale in or upon
the Premises any article which may be prohibited by any insurance policy in
force covering the Building and the Project Upgrades. Landlord shall not be
liable for any damage or injury caused to any property of Tenant or of others
located on the Premises resulting from such entry, unless such damage or injury
is caused by the willful or wanton acts or omissions of Landlord, its agents,
employees or contractors. If Landlord is unable, or elects not, to remedy such
condition or if Tenant fails to maintain any insurance required by this Lease,
then in either such event Landlord shall have all of the remedies provided for
in this Lease in the event of a default by Tenant.
Section 15.5 Landlord and Tenant shall not be liable or responsible for,
and each hereby releases the other, the partners, employees, officers, directors
and agents of the other from any and all liability and responsibility to the
other, or any person claiming by, through or under the Landlord or Tenant, by
way of subrogation or otherwise, any damage or loss to their respective property
due to hazards covered (or which should be covered) by policies of insurance
obtained (or which should be or have been obtained) pursuant to this Lease to
the extent of the damage or loss covered (or which should have been covered)
thereby, assuming that any deductible shall be deemed to be insurance coverage.
ARTICLE 16
DAMAGE BY FIRE OR OTHER CASUALTY
Section 16.1 Tenant shall immediately notify Landlord of any
damage by any casualty to the Premises or Building. If the Building or the
Premises shall be damaged by any casualty, and if this Lease shall not have
been terminated pursuant to this Article 16, Landlord shall repair said
damage and restore and rebuild the Building and/or the Premises (including
the Project Upgrades, as defined in Exhibit D) as soon as reasonably
practicable after said damage occurs, subject to Landlord's receipt of
available insurance proceeds and the consent of any mortgagee of Landlord to
the application of such insurance proceeds to the restoration of such damage,
and the Rental payable hereunder shall be abated from the date of such
casualty until said damage has been restored in proportion to the extent that
the Premises are rendered unusable for the normal conduct of the business
then conducted on the Premises. Landlord covenants to use best efforts to
obtain the agreement of its mortgagee from time to time, such agreement to be
contained in the loan documents evidencing and securing its loan, to allow
the application of insurance proceeds to the restoration of Promises or
Building in accordance with the terms hereof, subject however, to such
mortgagees conditions and requirements for the disbursement of proceeds,
including, without limitation, the implementation of customary construction,
and disbursement procedures.
Section 16.2 [INTENTIONALLY OMITTED]
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EXHIBIT 10.16
Section 16.3 If (i) the Building and/or the Premises shall
be so damaged by casualty to such extent that the Premises are rendered
unusable for the normal conduct of Tenant's business then conducted on the
Premises and the Landlord estimates that the Building and/or Premises
(including the Project Upgrades) cannot be substantially repaired within
eighteen (18) months after the date of the casualty or (ii) Landlord, despite
its best efforts is unable , within ninety (90) days after the date of the
casualty, to obtain the use of the insurance proceeds for restoration of
damage and the consent of its mortgagee, (and Landlord does not nevertheless
agree to fully repair and restore the Building and/or the Premises), Tenant
or Landlord may terminate this Lease by notice to the other given within
thirty (30) days of Tenant's receipt of a copy of Landlord's notice and this
Lease shall terminate; provided, however, that the provisions of this Lease
which are designated to cover matters of termination and the period
thereafter shall survive the termination of this Lease. Additionally, if the
repairs which are estimated to be substantially completed by the end of such
eighteen (18) months are in fact not completed within eighteen (18) months,
then Tenant or Landlord may terminate this Lease from and after the end of
such eighteen (18) months period by written notice to the other within thirty
(30) days after the expiration of such eighteen (18) month period. The
foregoing and notwithstanding, in the event Landlord or Tenant exercises its
right of termination pursuant to the terms of this Section 16.3, Tenant shall
have the one time right, exercisable by written notice to Landlord within
thirty (30) days after receipt of Landlord or Tenant's notice of termination,
to purchase Land and the Building at a purchase price equal to the greater of
(i) the fair market value of the Land and the Building as determined in
accordance with the appraisal procedure set forth in Section 2.4(c) hereof,
for the determination of fair market rental rate and modifying such
procedures to apply to the determination of the fair market value of the Land
and the Building; or (ii) the outstanding principal balance of any loan that
encumbers the Premises together with any accrued unpaid interest, penalties,
costs and expenses due and owing to such mortgagee as of the date of
settlement of such purchase. Landlord shall use commercially reasonable
efforts to cause its mortgagee from time to time to provide Tenant with
notice of any material default, and Landlord shall provide Tenant with notice
of any material default by Landlord under its mortgage loan documents.
Settlement under such purchase option, shall be consummated within thirty
(30) days after determination of the fair market value of the land and the
building, the parties shall prorate all customary adjustment as of the date
of settlement; provided that Tenant shall be responsible for the payment of
100% of any State and/or County transfer and recordation taxes applicable to
such sale and title shall be conveyed without encumbrances by special
warranty deed. If the Purchase Price is the outstanding balance of any loan
that encumbers the Premises, Landlord at settlement shall assign to Tenant
all insurance proceeds payable in connection with such casualty to the extent
of the positive difference between the fair market value determination above
and the balance paid to Landlord's mortgagee, with any excess proceeds being
paid to Landlord. In the event Tenant fails to timely provide written notice
of its exercise of such purchase option or if settlement is not consummated
within the aforesaid thirty (30) day period, time being of the essence, this
purchase option shall lapse and shall be of no further force and effect and
this Lease shall be deemed terminated as otherwise provided in this Section
16.3.
Section 16.4 If Landlord is obligated to repair the Premises
or Building after any casualty pursuant to this Article 16, following receipt
of available insurance proceeds and any required mortgagee approval Landlord
shall diligently commence and continuously prosecute
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EXHIBIT 10.16
such repair to completion and shall provide Tenant with monthly progress reports
concerning such repairs.
Section 16.5 If the Building or the Premises, or any substantial
portion thereof, is substantially destroyed by fire or other cause at any time
during the last twelve (12) months of the Term (as the same may have been
extended), either Landlord or Tenant may terminate this Lease upon written
notice to the other given within sixty (60) days after the date of such
destruction; provided, however, that those provisions of this Lease which are
designated to cover matters of termination and the period thereafter shall
survive the termination hereof. For purposes of this Section 16.5, the Building
or Premises shall be deemed "substantially destroyed" if at least twenty-five
percent (25%) of the Rentable Area of the Building or the Rentable Area of the
Premises, as the case may be, is rendered unusable by such fire or other cause.
Section 16.6 Except for any abatement of Rental expressly
set forth in this Article 16, no damages, compensation, or claim shall be
payable by Landlord for inconvenience, loss of business, or annoyance arising
from any repair or restoration of any portion of the Premises, the Project
Upgrades, or the Building. Landlord shall use reasonable efforts to have
such repairs made promptly so as not to unnecessarily interfere with Tenant's
occupancy.
Section 16.7 The provisions of this Article shall be
considered an express agreement governing any case of damage or destruction
of the Building, the Project Upgrades or the Premises by fire or other
casualty.
Section 16.8 In the event of the termination of this Lease
pursuant to the provisions of Sections 16.2, 16.3, or 16.5, this Lease, the
Term, and the estate hereby granted shall expire as of the date of such
termination in the same manner and with the same effect as if it were the
date set for the normal expiration of the Term, and Rental shall be abated as
of the date of termination.
ARTICLE 17
CONDEMNATION
Section 17.1 In the event the whole or substantially the whole of the
Building and/or the Premises is taken or condemned for any public purpose, this
Lease shall terminate as of the date of such taking; provided, however, that
those provisions of this Lease which are designated to cover matters of
termination and the period thereafter shall survive the termination hereof.
Section 17.2 In the event that more than twenty-five percent (25%) of
the Building shall be taken or condemned for any public purpose (whether or not
such taking includes any portion of the Premises), which taking, in Landlord's
reasonable judgment, shall interfere materially with Landlord's use and
operation of the Building or is such that Landlord reasonably determines that
the Building cannot be restored to usefulness in an economically feasible
manner, then Landlord shall have the option to terminate this Lease effective as
of the date specified by Landlord in its notice of termination; provided,
however, that those provisions of this Lease which are
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EXHIBIT 10.16
designated to cover matters of termination and the period thereafter shall
survive the termination hereof. In the event that more than twenty-five
percent (25%) of the Premises shall be taken or condemned for any public
purpose, which taking, in Tenant's reasonable judgment, shall interfere
materially with Tenant's use of the Premises for its business operations,
then Tenant shall have the option to terminate this Lease effective as of the
date specified by Tenant in its notice of termination; provided however, that
those provisions of this Lease which are designated to cover matters of
termination and the period thereafter shall survive the termination hereof.
Section 17.3 In the event that a portion, but less than
substantially the whole, of the Premises should be taken or condemned for any
public purpose, then this Lease shall terminate as of the date of such taking
as to the portion of the Premises so taken, and, unless Landlord or Tenant
exercises its option to terminate this Lease pursuant to Section 17.2, this
Lease shall remain in full force and effect as to the remainder of the
Premises. In such event, the Annual Base Rental attributable to the Premises
will be diminished by an amount representing the part of such amount properly
applicable to the portion of the Premises so taken. Further, in such event,
Tenant's Proportionate Share shall be recomputed based upon the remaining
Rentable Area in the Premises and in the Building.
Section 17.4 In the event of the termination of this Lease
pursuant to the provisions of Sections 17.1, 17.2, or 17.3, this Lease, the
Term, and the estate hereby granted shall expire as of the date of such
termination in the same manner and with the same effect as if that were the
date set for the normal expiration of the Term, and Rental shall be abated as
of the date of termination. The provisions of this Section 17.4 shall apply
in the same manner to any partial termination of this Lease pursuant to the
provisions of this Article 17.
Section 17.5 If Landlord is obligated to repair the Premises
or the Building after any taking or condemnation pursuant to this Article 17,
subject to receipt of adequate condemnation proceeds, Landlord shall
diligently and continuously prosecute such repair to completion.
Section 17.6 Except as otherwise provided in this Section
17.6 and Section 17.7 below, Landlord shall be entitled to receive the entire
award in any condemnation proceeding or action for taking, without deduction
therefrom for any estate vested in Tenant by this Lease, provided that
nothing herein contained shall prohibit Tenant from seeking severance damages
or moving expenses or the value of its fixtures in the Premises, so long as
such awards do not in any manner reduce the award payable to Landlord.
Landlord shall pay to Tenant, from Landlord's award, the portion of such
award which is attributable to the unamortized value (based upon
straight-line amortization over fifteen (15) years), if any, of the Project
Upgrades (as defined in Exhibit D) in excess of Ten Dollars ($10.00) per
square foot of Rentable Area of the Premises, and to the unamortized value
(based upon straight-line amortization over a life equal to the period from
the date such alterations were made to the end of the then current Term), if
any, of any alterations made by Tenant to the Premises. This provision shall
survive the expiration or sooner termination of this Lease.
Section 17.7 If the temporary use or occupancy of all or any
part of the Premises shall be condemned or taken for any public or
quasi-public use during the Term, this Lease shall be
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EXHIBIT 10.16
and remain unaffected by such condemnation or taking, and Tenant shall
continue to pay in full the Rental payable hereunder for any period during
such temporary use or occupancy during the Term (less any amount paid to
Landlord from any escrow fund described in the last sentence of this Section
17.7). In the event of any such condemnation or taking, Tenant shall be
entitled to appear, claim, prove, and receive the portion of the award for
such taking that represents compensation for use or occupancy of the Premises
during the Term, and Landlord shall be entitled to appear, claim, prove, and
receive the portions of the award that represent the cost of restoration of
the Premises and the use or occupancy of the Premises after the end of the
Term. Any award to which Tenant is entitled under this Section 17.7 shall be
deposited in escrow with a bank or other institution approved by Landlord and
Tenant and held as security for the performance of all obligations of Tenant
hereunder. Except as modified by this Section 17.7, such deposit shall be
treated as a Security Deposit hereunder to which the provisions of Article 25
hereof shall apply. Such deposit shall be invested in an interest-bearing
account, money market fund, or other liquid investment approved by Landlord
and Tenant, and any interest or earnings thereon shall be paid to Tenant so
long as Tenant is not in default under this Lease. Such escrow fund shall be
disbursed in equal monthly installments over the period of months during the
Term which has been taken by the condemning authority: first, to Landlord
towards the payment of any Rental due for such month and the excess, if any,
to Tenant.
ARTICLE 18
ASSIGNMENT AND SUBLETTING
Section 18.1 Tenant shall not assign this Lease, or sublease
or transfer all or any portion of the Premises without the prior written
consent of Landlord, which consent shall not be unreasonably withheld as to
subletting or assignment; provided, however, that Landlord shall not be
deemed to have unreasonably withheld its consent to a proposed assignment,
sublease or transfer of any or all of the Premises if such consent is
withheld because: (i) Tenant is then in default of this Lease, following
applicable notice and the expiration of applicable cure periods, or an event
has occurred which, with the giving of notice or passage of time, or both,
would constitute a default hereunder (unless such occurrence shall be cured
prior to the commencement date of the proposed sublease or assignment); or
(ii) any notice of termination of this Lease or termination of Tenant's
rights under this Lease shall have been validly given; or (iii)(a) either the
portion of the Premises which Tenant proposed to sublease, or the remaining
portion of the Premises, or the means of ingress and egress to either the
portion of the Premises which Tenant proposed to sublease or the remaining
portion of the Premises, or (iii)(b) the proposed use of the Premises or any
portion thereof by the proposed assignee or subtenant will violate any Legal
Requirement or would not conform with the use provisions set forth in Article
9 of this Lease; or (iv) in the reasonable judgment of Landlord, the proposed
assignee or subtenant is of a character or reputation or is engaged in a
business which would be harmful to the image and reputation of the Building
or Landlord, or the proposed assignee is not financially capable of
performing its obligations under the terms of this Lease; or (v) the proposed
assignee or subtenant is a governmental entity (or subdivision or agency
thereof) or is an occupant of the Building for whom Landlord has available
for lease space similar in size and otherwise reasonably
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EXHIBIT 10.16
comparable to that which Tenant is proposing to assign or sublease to such
occupant of the Building and such occupant of the Building would accept the
space being offered by Landlord if the space which Tenant is offering were
not available; or (vi) notwithstanding Tenant's continuing primary liability
under this Lease, as set forth in this Section 18.1, the assignee fails to
assume all of the obligations of Tenant under this Lease, or the sublessee
fails to agree to be subject to all the terms and conditions of this Lease.
Tenant understands and acknowledges that the foregoing are merely examples of
reasons for which Landlord may withhold its consent and shall not be deemed
exclusive of any permitted reasons for Landlord to withhold its consent,
whether similar or dissimilar to the foregoing examples. Tenant agrees that
all advertising by Tenant or on Tenant's behalf with respect to the
assignment of this Lease or the subletting of all or any part of the Premises
must be approved in writing by Landlord prior to publication. In the event
of any such assignment or subletting consented to by Landlord or any
assignment, sublease or transfer not requiring Landlord's consent, Tenant
shall remain fully and primarily liable for the payment of rent due under
this Lease and for the performance of all the covenants, agreements, terms,
conditions and provisions under this Lease.
Section 18.2 The term "assign" or "assignment" shall mean and refer to:
(a) an assignment by Tenant of its rights and obligations under this
Lease;
(b) an imposition (whether or not consensual) of a lien, mortgage or
encumbrance upon Tenant's interest in this Lease;
(c) an arrangement which allows the use and occupancy of the
Premises by any person or entity other than Tenant;
Section 18.3 In addition to the restrictions set forth in
Section 18.1, Tenant may not assign this Lease, nor sublet or transfer (or
permit occupancy or use of) all or any portion of the Premises for a term of
more than four (4) years or for the balance of the final Renewal Period if
less than four (4) years, without giving Landlord thirty (30) days prior
written notice thereof, which notice shall contain in reasonably sufficient
detail the terms on which Tenant seeks to assign or sublet. For thirty (30)
days following receipt of said notice, Landlord shall have the right,
exercisable by sending notice to Tenant, to recapture from Tenant for the
balance of the Term of this Lease (i) all of the Premises in the event Tenant
notified Landlord of its desire to assign this Lease, or (ii) so much of the
Premises as Tenant intends to sublet or transfer in the event Tenant notified
Landlord of its desire to sublet or transfer the Premises or permit another
to make use thereof. In the event Landlord does not exercise the aforesaid
right within said thirty (30) days, Tenant may attempt for a period of one
hundred eighty (180) days from the last day of said thirty (30)-day period to
sublet or transfer or permit use of this Lease or such space on the terms set
forth in the aforementioned notice and in accordance with the terms of
Sections 18.1 and 18.4. Upon the termination of said one hundred eighty
(180)-day period, Tenant may not assign this Lease, nor sublet or transfer
(or permit occupancy or use of) all or any portion of the Premises, except in
accordance with the terms of this Section 18.3, including Tenant's notice
obligation and Landlord's right of recapture. In the event that Tenant
defaults hereunder, Tenant
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EXHIBIT 10.16
hereby assigns to Landlord the Rental due from any assignee or subtenant and
hereby authorizes each such party to pay said Rental to Landlord.
Section 18.4 In addition to the requirements set forth in
Section 18.3, no subletting or transfer or assignment of all or a portion of
the Premises requiring Landlord's consent shall be effective unless and until
Landlord shall have received, at least thirty (30) days prior to the proposed
commencement date of such subletting, transfer or assignment (i) a written
request from Tenant for the proposed subletting, transfer or assignment, (ii)
full and complete information concerning the identity and business activities
of the proposed sublessee or assignee, (iii) such financial information
concerning the proposed sublessee or assignee as Landlord shall reasonably
request after notification by Tenant of the proposed subletting or transfer
or assignment, and (iv) a copy of the proposed sublease or assignment, which
shall be in form and substance acceptable to Landlord in its reasonable
discretion. No consent by Landlord to a subletting or transfer or assignment
shall be effective unless such consent shall be in writing. Landlord agrees
to respond to any request by Tenant for subletting or assignment within
fifteen (15) days following receipt of a request therefor, which period may
be extended by Landlord to twenty (20) days if Landlord is not reasonably
able to respond within the original fifteen (15)-day period and so notifies
Tenant within such original fifteen (15)-day period. A failure by Landlord
to respond to any such request within such fifteen (15) or, if extended,
twenty (20) day period shall be deemed written consent by Landlord to such
request for subletting, transfer or assignment, as the case may be.
Section 18.5 In the event Tenant assigns or transfers or
sublets all or a portion of the Premises to a third party, then (i) fifty
percent (50%) of any "Excess Rents" (hereinafter defined) that are paid by
such third party for the right to occupy the Premises shall be paid by Tenant
to Landlord on a monthly basis as additional Rental and (ii) Tenant shall be
responsible for all reasonable costs and expenses, including reasonable
attorneys' fees, incurred by Landlord in connection with any proposed or
purported assignment or sublease. As used herein, the term "Excess Rents"
means the rental amounts paid by the assignee or subtenant for the right to
occupy the Premises, reduced by (i) the Rental then in effect for the portion
of the Premises assigned or sublet, (ii) the aforesaid Landlord expenses and,
(iii) the reasonable expenses incurred by Tenant in connection with such
assignment or subletting, including without limitation, leasing commissions,
attorneys' fees and costs of improving the assigned or sublet space for the
assignee or subtenant, the portion of the cost of any alterations or
improvements made, at Tenant's expense, to the portion of the Premises
assigned or sublet, which is attributable to the period of the assignee's or
Subtenant's occupancy. With respect to an assignment "rental amounts paid by
the assignee for the right to occupy the Premises" shall mean any rental
amounts plus (whether in addition thereto or in substitution thereof) any and
all consideration received for the assignment of this Lease (but not for any
personal property or other assets which may be transferred by Tenant to the
assignee). The failure of Tenant to remit fifty percent (50%) of any such
Excess Rents to Landlord shall be a default hereunder.
Section 18.6 The consent by Landlord to any assignment or
subletting shall neither be construed as a waiver release of Tenant from any
covenant or obligation of Tenant under this Lease, nor as relieving Tenant
from giving Landlord the aforesaid thirty (30) days notice of, or
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EXHIBIT 10.16
from obtaining the consent of Landlord to, any further assignment or
subletting. The collection or acceptance of Rental from any such assignee or
subtenant shall not constitute a waiver or release of Tenant from any
covenant or obligation of Tenant under this Lease, except as expressly agreed
by Landlord in writing.
Section 18.7 Landlord (and any successor or affiliate of
Landlord) may freely sell, assign or transfer all or any portion of its
interest in this Lease or the Premises, the Building or the Land and, in the
event of any such sale, assignment or transfer, shall be relieved of any and
all obligations under this Lease from and after the date of the sale,
assignment or transfer, provided that the purchaser, assignee or transferee
agrees to assume the obligations of Landlord hereunder. From and after said
date, Tenant shall be bound to such purchaser, assignee or other transferee,
as the case may be, as though the latter had been the original Landlord
hereunder.
Section 18.8 Notwithstanding anything to the contrary
contained herein, and without prejudice to Landlord's right to require a
written assumption from each assignee, any person or entity to whom this
Lease is assigned including, without limitation, assignees pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. Paragraph 101 et seq. (the
"Bankruptcy Code") shall automatically be deemed, by acceptance of such
assignment or by taking actual or constructive possession of the Premises,
to have assumed all obligations of Tenant arising under this Lease effective
as of the earlier of the date of such assignment or the date on which the
assignee obtains possession of the Premises. In the event this Lease is
assigned to any person or entity pursuant to the provisions of the Bankruptcy
Code, any and all monies or other consideration payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord and shall remain the exclusive property of Landlord and not
constitute the property of Tenant or Tenant's estate within the meaning of
the Bankruptcy Code. In the event of any default described in subsection
23(a)(iv) below, in order to provide Landlord with the assurances
contemplated by the Bankruptcy Code, in connection with any assignment and
assumption of this Lease Tenant must fulfill the following obligations, in
addition to any other reasonable obligations that Landlord may require,
before any assumption of this Lease is effective: (i) all defaults under
subsection (a) of Section 23 of this Lease must be cured within ten (10) days
after the date of assumption; (ii) all other defaults under Section 28 of
this Lease other than under subsection (a)(iv) of Section 28 must be cured
within fifteen (15) days after the date of assumption; (iii) all actual
monetary losses incurred by Landlord (including, but not limited to,
reasonable attorneys' fees) must be paid to Landlord within ten (10) days
after the date of assumption; and (iv) Landlord must receive within ten (10)
days after the date of assumption a security deposit in the amount of six (6)
months Annual Base Rental (using the Annual Base Rental in effect for the
first full month immediately following the assumption) and an advance
prepayment of Annual Base Rental in the amount of three (3) months Annual
Base Rental (using the Annual Base Rental in effect for the first full month
immediately following the assumption), both sums to be held by Landlord and
deemed to be rent under this Lease for the purposes of the Bankruptcy Code as
amended and from time to time in effect. In the event this Lease is assumed
in accordance with the requirements of the Bankruptcy Code and this Lease,
and is subsequently assigned, then, in addition to any other reasonable
obligations that Landlord may require and in order to provide Landlord with
the assurances contemplated by the Bankruptcy Code, Landlord shall be
provided with (i) a financial statement of the proposed
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EXHIBIT 10.16
assignee prepared in accordance with generally accepted accounting principles
consistently applied, though on a cash basis, which reveals a net worth in an
amount sufficient, in Landlord's reasonable judgment, to assure the future
performance by the proposed assignee of Tenant's obligations under this Lease;
or (ii) a written guaranty by one or more guarantors with financial ability
sufficient to assure the future performance of Tenant's obligations under this
Lease, such guaranty to be in form and content satisfactory to Landlord and to
cover the performance of all of Tenant's obligations under this Lease.
Section 18.9 Notwithstanding any other provision of this
Article 18 to the contrary, (i) Tenant shall have the right to assign this
Lease, or sublease or transfer all or any portion of the Premises to an
"Affiliate" provided none of the conditions set forth in Section 18.1 (i),
(ii), (iii)(b) and (vi) then exist (as used herein, "Affiliate" means an
entity controlling, controlled by or under common control with Tenant);
(ii) Landlord's consent shall not be required in the event that Tenant merges
into or consolidates with another entity, or upon the sale of all of the
stock or substantially all of the stock or assets of Tenant to a party who
expressly assumes the obligations of Tenant under this Lease, provided that
Tenant shall give Landlord prompt written notice of any such assignment. The
provisions of Sections 18.3 and 18.5 shall not apply in the case of either of
the foregoing.
ARTICLE 19
WAIVER OF CLAIMS; INDEMNIFICATION
Section 19.1 Tenant waives all claims against Landlord for
damage to any property or injury to, or death of, any person in, upon, or
about the Premises arising at any time and from any cause other than by
reason of the willful or wanton acts or omissions of Landlord, its agents,
employees or contractors. Tenant shall indemnify Landlord and shall hold
Landlord harmless from any damage to any property or injury to, or death of,
any person arising from (i) any occurrence in or at the Premises, or the use
and/or occupancy of the Premises, and/or the operations in or at the Premises
of and by the Tenant and/or Guarantor, their respective agents, employees,
representatives, contractors, or invitees, (ii) the business conducted by
Tenant and/or by Guarantor, in the Premises, (iii) any act or omission of
Tenant and/or by Guarantor, or their respective employees, agents,
contractors or invitees, and (iv) any breach or default by Tenant in the
observance or performance of its covenants and obligations under this Lease,
in each case except such as is caused by the willful or wanton acts or
omissions of Landlord, its agents, employees or contractors. Without
limiting the generality of the foregoing, Landlord shall not be liable for
any injury or damage to persons or property in the Premises resulting from
fire, explosion, falling plaster, steam, gas, electricity, water, rain,
flood, snow, or leaks from any part of the Premises or from the pipes,
appliances, equipment, plumbing works, roof, or subsurface of any floor or
ceiling, or from the street or any other place, or by dampness, or by any
other cause whatsoever, unless caused by the willful or wanton acts or
omissions of Landlord, its agents, employees or contractors. Landlord shall
not be liable for any such damage to persons or property in the Premises
caused by other tenants or persons in the Building or by occupants of
adjacent property thereto or by the public, or caused by any private, public,
or quasi-public
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EXHIBIT 10.16
construction or other work, including, but not limited to, any construction,
modification, or operation of underground, ground-level, or pedestrian
tunnels, bridges, walkways, or similar items. Tenant's foregoing indemnity
obligation shall include reasonable attorneys' fees, investigation costs, and
all other reasonable costs and expenses incurred by Landlord from the first
notice that any claim or demand has been made or may be made.
Section 19.2 Landlord shall indemnify Tenant and shall hold
Tenant harmless from any damage to any property or injury to, or death of,
any person arising from (i) any occurrence in or at the Building or the
Building's parking facilities, or the use of the Building or the parking
facilities by Landlord or its agents, employees, representatives, contractors
or invitees, (ii) any act or omission of Landlord or its employees, agents,
contractors or invitees, and (iii) any breach or default by Landlord in the
observance or performance of its covenants and obligations under this Lease,
in each case except such as is caused by the willful or wanton acts or
omissions of Tenant, its agents, employees or contractors.
Section 19.3 The provisions of this Article 19 shall survive
the termination of this Lease with respect to any damage, injury, or death
occurring before such termination. If Landlord is made a party to any
litigation commenced by Tenant or because of any act or omission by Tenant or
relating to this Lease or to the Premises, and provided that in any such
litigation Landlord is not finally adjudicated to be at fault, then Tenant
shall pay all costs and expenses, including reasonable attorneys' fees and
court costs, incurred by or imposed upon Landlord because of any such
litigation, and the amount of all such costs and expenses, including
reasonable attorneys' fees and court costs, shall be a demand obligation
owing by Tenant to Landlord. Tenant shall have the right, at Tenant's sole
cost and expense, to participate in the defense of any such action or
proceeding brought in connection with any claim against Landlord by a third
party. Tenant may retain attorneys for such purposes. If Tenant is made a
party to any litigation commenced by Landlord or because of any act or
omission by Landlord or relating to this Lease or to the Premises, the
Building or the Parking Facilities (hereinafter defined), and provided that
in any such litigation Tenant is not finally adjudicated to be at fault, then
Landlord shall pay all costs and expenses, including reasonable attorneys'
fees and court costs, incurred by or imposed upon Tenant because of any such
litigation, and the amount of all such costs and expenses, including
reasonable attorneys' fees and court costs, shall be a demand obligation
owing by Landlord to Tenant. Landlord shall have the right, at Landlord's
sole cost and expense, to participate in the defense of any such action or
proceeding brought in connection with any claim against Tenant by a third
party. Landlord may retain attorneys for such purposes.
ARTICLE 20
SURRENDER OF THE PREMISES
Section 20.1 Upon the expiration of the Term or other termination
of this Lease for any cause whatsoever, Tenant shall peacefully vacate the
Premises in as good order and condition as the same were at the beginning of the
Term or may thereafter have been improved by Landlord or Tenant, reasonable use
and wear thereof and damage to the Premises or the Project Upgrades
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EXHIBIT 10.16
by fire or other casualty or condemnation only excepted. In the event that
Tenant continues in possession of the Premises after the termination of this
Lease, whether the termination occurs by lapse of time or otherwise, such
holding over, unless otherwise agreed to by Landlord in writing, shall
constitute and be construed as a tenancy at will at a monthly Rental (for each
month or partial month Tenant holds over) equal to 125% of the monthly Rental
payable by Tenant during the immediately prior calendar month of the Term and
shall be subject to all of the other terms set forth herein except any right to
renew this Lease, but the foregoing shall not constitute a consent by Landlord
to such holding over and shall not prevent Landlord from exercising any of its
remedies under this Lease or applicable law by reason of such holding over.
Tenant shall be liable to Landlord for all damage which Landlord suffers because
of any holding over by Tenant, and Tenant shall indemnify Landlord against all
claims made by any other tenant or prospective tenant against Landlord resulting
from delay by Landlord in delivering possession of the Premises to such other
tenant or prospective tenant.
Section 20.2
(a) Tenant shall remove, at Tenant's expense, all of its furniture,
furnishings, personal property, and movable equipment and trade fixtures by
the last day of the Term and shall promptly repair all damage done to the
Premises or the Building by such removal. Any items not so removed by the
last day of the Term shall be deemed abandoned and shall thereupon, at
Landlord's election, become the property of Landlord.
(b) Except as provided in Section 20.2(a), Tenant shall not remove
any alteration made by Tenant or any of the Project Upgrades at the
expiration of the Term without Landlord's consent. Any and all Project
Upgrades and alterations to the Premises shall become the property of
Landlord upon termination of this Lease (except for movable equipment or
furniture owned by Tenant and removed pursuant to the terms of Section
20.2(a)).
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EXHIBIT 10.16
ARTICLE 21
ESTOPPEL CERTIFICATES
Tenant agrees to furnish no later than fifteen (15) days after a
request therefor by Landlord, or the holder or proposed or prospective holder
of any deed of trust or mortgage covering the Building, the Land, or any
interest of Landlord therein or any purchaser of Landlord's interest in the
Building, a certificate signed by Tenant certifying (to the extent same is
true) that this Lease is in full force and effect and unmodified; that the
Term has commenced and the full Rental is then accruing hereunder; that
Tenant has accepted possession of the Premises and that any improvements
required by the terms of this Lease to be made by Landlord have been
completed to the satisfaction of Tenant; that no Rental under this Lease has
been paid more than thirty (30) days in advance of its due date; that the
address for notices to be sent to Tenant is as set forth in this Lease (or
has been changed by notice duly given and is as set forth in the
certificate); that Tenant, as of the date of such certificate, has no
knowledge of any charge, lien, or claim of offset under this Lease or
otherwise against Rentals or other charges due or to become due hereunder;
that Tenant has no knowledge of any default by Landlord then existing under
this Lease; and such other matters as may be reasonably requested by Landlord
or any such holder or proposed or prospective holder of such deed of trust,
or mortgage or purchaser. If Tenant is unable to so certify as to one or
more of the foregoing items, Tenant shall specify its reason therefor in the
certificate. Any such certificate may be relied upon by any prospective
purchaser, mortgagee, or any beneficiary or proposed or prospective holder
under any deed of trust on the Building or the Land or any part thereof.
Landlord agrees to furnish periodically, when reasonably requested in writing
by Tenant or a prospective assignee of Tenant's interest in this Lease,
certificates signed by Landlord containing substantially the same information
as described above. Any such certificate may be relied upon by any
prospective assignee of Tenant's interest in this Lease.
ARTICLE 22
SUBORDINATION
Section 22.1 Subject to Tenant's receipt of a Subordination,
Attornment and Non-Disturbance Agreement, substantially in the form of
Exhibit G hereto from the holder of each such Superior Instrument, this Lease
shall be subject and subordinate to all present and future deeds of trust,
mortgages, or other security instruments (collectively, "Superior
Instruments") which may from time to time during the Term cover the Building
and/or the Land, or any interest of Landlord therein, and to any advances
made on the security thereof, and to any refinancings, increases, renewals,
modifications, consolidations, replacements, and extensions of any such
future Superior Instruments. Subject to Tenant's receipt of a Subordination,
Attornment and Non-Disturbance Agreement as hereinabove set forth, upon
demand, Tenant shall execute, acknowledge, and deliver to Landlord any
further instruments and certificates evidencing such subordination as
Landlord or the holder of any Superior Instrument may reasonably request.
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EXHIBIT 10.16
Section 22.2 Notwithstanding the generality of the foregoing provisions
of Section 22.1 hereof, any holder of a Superior Instrument shall have the
right, unilaterally, at any time, to subordinate fully or partially any such
Superior Instrument to this Lease on such terms and subject to such conditions
as such holder of a Superior Instrument may consider appropriate. Upon request,
Tenant shall execute an instrument confirming any such full or partial
subordination by any holder of a Superior Instrument. At any time, before or
after the institution of any proceedings for the foreclosure of any Superior
Instrument, and/or sale of the Building under any Superior Instrument, or upon
the termination of any ground lease, Tenant shall attorn to such purchaser upon
any such sale or the grantee under any deed in lieu of such foreclosure or to
any ground lessor in the event of a termination of a ground lease, as the case
may be, and shall recognize each such purchaser, grantee, or ground lessor, as
the case may be, as Landlord under this Lease. Tenant hereby waives the right,
if any, to elect to terminate this Lease or to surrender possession of the
Premises in the event of the judicial or non-judicial foreclosure of any deed of
trust, mortgage, or security agreement (or any transfer in lieu thereof) or
termination of a ground lease. The foregoing agreement of Tenant to attorn shall
survive any such foreclosure sale, trustee's sale, or conveyance in lieu
thereof. Tenant shall, upon demand at any time, before or after any such
foreclosure sale, trustee's sale, or conveyance in lieu thereof, or termination
of a ground lease, execute, acknowledge, and deliver to Landlord's mortgagee or
holder of any Superior Instrument or any successor thereof or any then owner of
the Building or to the ground lessor (as the case may be) any written
instruments and certificates evidencing such attornment as such mortgagee,
successor, owner, or ground lessor may reasonably require.
Section 22.3 Should any ground lease be terminated, or any
Superior Instrument be foreclosed, the liability of the mortgagee, trustee,
or purchaser, as the case may be, as "Landlord" hereunder, shall exist only
with respect to the acts or omissions of such person or entity occurring
while it was the owner of the Land and/or Building. Further, Tenant agrees
that any mortgagee, trustee, or purchaser shall not be liable for (i) any
Rental paid more than thirty (30) days in advance of its due date; (ii) any
amendment or modification of this Lease without the prior written approval of
mortgagee, trustee, or purchaser unless such amendment or modification shall
not materially impair the security of such mortgagee, trustee or purchaser or
the value of the Property; or (iii) any default by or any claim against any
prior Landlord.
Section 22.4 If there is ever a ground lease, Landlord shall
provide to Tenant an agreement from the holder of each ground lease on the
Land and/or the Building a non-disturbance agreement, providing that so long
as Tenant is not in default beyond any applicable cure period in the payment
of Rental or any other material covenant or condition of this Lease, (i) its
rights as Tenant hereunder shall not be affected or terminated, (ii) its
possession of the Premises shall not be disturbed, (iii) no action or
proceeding shall be commenced to remove or evict Tenant, and (iv) the Lease
shall at all times continue in full force and effect notwithstanding the
termination or expiration of such ground lease prior to the expiration or
termination of this Lease.
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EXHIBIT 10.16
ARTICLE 23
DEFAULT AND REMEDIES
Section 23.1 The occurrence of any one or more of the
following events shall constitute an event of default under this Lease: (a)
if Tenant shall fail to pay any Rental or other sums payable by Tenant
hereunder, including without limitation all sums to be paid to Landlord
pursuant to the Work Agreement, as and when such Rental or other sums become
due and payable and such failure shall continue for more than five (5) days
after notice; (b) if Tenant shall fail to perform or observe any covenant or
obligation hereunder or any of the Rules and Regulations and such failure
shall continue for more than ten (10) days after notice; or, if such failure
cannot be corrected within such 10-day period, if Tenant does not commence to
correct same within said 10-day period and thereafter diligently prosecute
the correction of same to completion; (c) if any petition is filed by or
against Tenant or any guarantor of Tenant's obligations under this Lease
under any section or chapter of the present or any future Federal Bankruptcy
Code or under any similar law or statute of the United States or any state
thereof (which, in the case of an involuntary proceeding, is not permanently
discharged, dismissed, stayed, or vacated, as the case may be, within sixty
(60) days of its commencement), or if any order for relief shall be entered
against Tenant or any guarantor of Tenant's obligations under this Lease in
proceedings filed under any section or chapter of the present or any future
Federal Bankruptcy Code or under any similar law or statute of the United
States or any state thereof; (d) if Tenant or any guarantor of Tenant's
obligations under this Lease becomes insolvent or makes a transfer in fraud
of creditors; (e) if Tenant or any guarantor of Tenant's obligations under
this Lease makes an assignment for the benefit of creditors; (f) if a
receiver, custodian, or trustee is appointed for Tenant or any guarantor of
Tenant's obligations under this Lease or for any of the assets of Tenant or
any guarantor of Tenant's obligations under this Lease, which appointment is
not vacated within sixty (60) days of the date of such appointment; or (g) if
Tenant shall fail or refuse to move into or take possession of the Premises
within thirty (30) days after the Rent Commencement Date.
Section 23.2
(a) If an event of default occurs, Landlord shall have the right to
pursue any one or more of the following remedies in addition to all other
rights or remedies provided herein or at law or in equity:
(i) Landlord may terminate this Lease or without terminating
this Lease, terminate Tenant's right of possession and forthwith repossess
the Premises by peaceable entry, detainer suit or other legal process without
liability for trespass or conversion and be entitled to recover as damages a
sum of money equal to the total of (A) the cost of recovering the Premises,
(B) the unpaid Rental due and payable at the time of termination, plus
interest thereon at the rate hereinafter specified from the due date, and any
other sum of money owed by Tenant to Landlord; and (C) the balance of the
Rental payable by Tenant pursuant to this Lease for the remainder of the
Term, as such may have been extended, if at all, such balance to be payable
without discount to present value as follows: (i) In the event such
termination of this Lease or of Tenant's right of possession, as the case may
be ("Termination") occurs between the effective
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EXHIBIT 10.16
date of this Lease and the end of the one hundred twentieth (120th) month
following the Rent Commencement Date, Tenant shall be obligated to pay to
Landlord promptly upon Termination an amount equal to the Rental payable by
Tenant for and with respect to the twenty-four (24)-month period following
the date of Termination. Additionally, (1) in the event Termination occurs
within the first sixty (60) months following the Rent Commencement Date then,
on the first day of the thirteenth (13th) month immediately following the
Termination, and on each anniversary thereof during the Term (collectively,
"Payment Dates"), respectively, Tenant shall pay to Landlord a lump sum
amount equal to the Rental payable by Tenant for and with respect to the
twelve (12)-month period commencing twelve (12) months following such Payment
Date; or (2) in the event that such Termination occurs subsequent to the
sixtieth (60th) month following the Rent Commencement Date and prior to the
end of the one hundred twentieth (120th) month following the Rent
Commencement Date, on the first day of the twenty-fifth (25th) month
immediately following the Termination, and on each anniversary thereof during
the Term (collectively, "Alternative Payment Dates"), respectively, Tenant
shall pay to Landlord a lump sum amount equal to the Rental payable by Tenant
for and with respect to the twelve (12)-month period commencing on such
Alternative Payment Date; or (ii) In the event that such Termination occurs
subsequent to the one hundred twentieth (120th) month following the Rent
Commencement Date, Tenant shall be obligated to pay to Landlord promptly upon
the Termination and every twelve (12) months thereafter during the Term
(collectively, "Later Payment Dates"), respectively, a lump sum amount equal
to the Rental payable by Tenant for and with respect to the twelve (12)-month
period immediately following such Later Payment Date. Landlord shall use
commercially reasonable efforts to relet the Premises for such rent and upon
such terms as shall be satisfactory to Landlord following such an event of
default, during the remainder of the Term as such may have been extended, if
at all. In the event Landlord relets all or any portion of the Premises for
all or any portion of the remainder of the Term, the rentals and other sums
actually received by Landlord from any such reletting, less the costs and
expenses of decorations, repairs, changes, improvements, alterations and
additions of and to the Premises that may be necessary or convenient, and the
expense of such reletting, including but not limited to brokerage and/or
finder commissions, and the expense of the collection of the rent accruing
therefrom ("Net Rental", since the last payment made by Tenant to Landlord
pursuant to this Section 23.2(a)(i)(C), shall be credited to the next such
payment required to be made by Tenant to Landlord pursuant to this Section
23.2(a)(i); provided, however, that in the event Termination occurs between
the sixtieth (60th) and one hundred twentieth (120th) month following the
Rent Commencement Date, and thereafter, during the first twelve months
following the Termination, Landlord relets all or any part of the Premises,
the Net Rental received by Landlord by reason of such reletting with respect
to periods during the first twenty-four months following Termination shall be
credited against the payment to be made hereunder by Tenant on the first
Alternative Payment Date, and the portion of such Net Rental for such period
in excess of the amount of such credit, if any, shall promptly thereafter be
refunded to Tenant up to the amount previously paid by Tenant.
(ii) Landlord may terminate this Lease or, without termination
this Lease, terminate Tenant's right of possession and forthwith repossess
the Premises by peaceable entry and detainer suit or other legal process
without liability for trespass or conversion, without demand or notice of any
kind to Tenant and without terminating this Lease, in which event
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EXHIBIT 10.16
Landlord shall use commercially reasonable efforts to relet the same for the
account of Tenant for such rent and upon such terms as shall be satisfactory
to Landlord. For the purpose of such reletting, Landlord is authorized to
decorate or to make any repairs, changes, alterations, or additions in or to
the Premises that may be necessary or convenient. If Landlord exercises the
remedies provided in this subparagraph, Tenant shall pay to Landlord, and
Landlord shall be entitled to recover from Tenant, an amount equal to the
total of the following: (A) unpaid Rental, plus interest at the rate
hereinafter provided, owing under this Lease for all periods of time that the
Premises are not relet; plus (B) the cost of recovering possession, and all
of the costs and expenses of such decorations, repairs, changes, alterations,
and additions, and the expense of such reletting and of the collection of the
rent accruing therefrom to satisfy the rent provided for in this Lease to be
paid; plus (C) any deficiency in the rentals and other sums actually received
by Landlord from any such reletting from the Rental required to be paid under
this Lease with respect to the periods the Premises are so relet, and Tenant
shall satisfy and pay any such deficiency upon demand therefor from time to
time. Tenant agrees that Landlord may file suit to recover any sums falling
due under the terms of this subparagraph from time to time; and that no
delivery or recovery of any portion due Landlord hereunder shall be a defense
in any action to recover any amount not theretofore reduced to judgment in
favor of Landlord, nor shall such reletting be construed as an election on
the part of Landlord to terminate this Lease unless a written notice of such
intention be given to Tenant by Landlord. Notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect to terminate
this Lease for such previous default.
(iii) Apply to any rents, damages, or other sums of money owed
by Tenant any security deposit and/or any advance rent applicable to any time
period after the occurrence of the default and any sums which would then or
thereafter otherwise be due from Landlord to Tenant.
Section 23.3 No act or thing done by Landlord or its agents
during the Term shall constitute an acceptance of an attempted surrender of
the Premises, and no agreement to accept a surrender of the Premises shall be
valid unless made in writing and signed by Landlord. No re-entry or taking
possession of the Premises by Landlord shall constitute an election by
Landlord to terminate this Lease, unless a written notice of such intention
is given to Tenant. Notwithstanding any such reletting or re-entry or taking
possession, Landlord may at any time thereafter terminate this Lease for a
previous default. Landlord's acceptance of Rental following an event of
default hereunder shall not be construed as a waiver of such event of
default. No waiver by Landlord or Tenant of any breach of this Lease shall
constitute a waiver of any other violation or breach of any of the terms
hereof. Forbearance by Landlord or Tenant to enforce one or more of the
remedies herein provided upon a breach hereof shall not constitute a waiver
of any other breach of the Lease.
Section 23.4 No provision of this Lease shall be deemed to
have been waived by Landlord or Tenant unless such waiver is in writing and
signed by such party. Nor shall any custom or practice which may evolve
between the parties in the administration of the terms of this Lease be
construed to waive or lessen Landlord's or Tenant's right to insist upon
strict performance of the terms of this Lease. The rights granted to
Landlord and Tenant in this Lease shall be cumulative of every other right or
remedy which Landlord or Tenant may otherwise have
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EXHIBIT 10.16
at law or in equity or by statute, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
ARTICLE 24
WAIVER BY TENANT
To the extent permitted by applicable law, Tenant for itself and all
claiming by, through, and under it, including creditors of all kinds, waives
each and every right and privilege which it or any of them may have under any
present or future constitution, statute, or rule of law to receive a notice
to quit or other similar notice or to redeem the Premises or to continue to
occupy the Premises under this Lease or otherwise after termination of
Tenant's right of occupancy by either an order or judgment of any court, any
legal process or writ, under the terms of this Lease, or after the
termination of the Term as herein provided.
ARTICLE 25
SECURITY DEPOSIT/REPAYMENT OF ADVANCES
On the date hereof, Tenant shall pay Landlord in cash the Security
Deposit as set forth in the Basic Lease Information as security for the
performance of Tenant's obligations under this Lease. The Security Deposit
shall not constitute an advance payment of Rental or a measure of Landlord's
damages upon a breach of this Lease by Tenant or upon termination of this
Lease. Landlord may, without prejudice to any other remedy, use the Security
Deposit to the extent necessary to remedy any default in the payment of
Rental or to satisfy any other obligation of Tenant hereunder, and Tenant
shall promptly, on demand, restore the Security Deposit to its original
amount. If Landlord transfers its interest in the Premises during the Term,
Landlord may assign the Security Deposit to the transferee who shall then
become obligated to Tenant for its return pursuant to the terms of this
Lease, and thereafter Landlord shall have no further liability for its
return. The Security Deposit shall bear interest at NationsBank, N.A.'s
passbook savings rate. Provided that an event of default by Tenant has not
theretofore occurred, Landlord shall apply the Security Deposit to the
monthly installments of Annual Base Rental due on the first day of the
thirty-seventh (37th) and thirty-eight (38th) months following the
Commencement Date. Tenant shall pay the balance of such monthly installment
for such thirty-eight (38th) month. Provided that Tenant is not then in
default, Landlord shall return the then balance, if any, of the Security
Deposit, and any accrued interest thereon, to Tenant within thirty (30) days
after the expiration or sooner termination of the Term of this Lease. On the
date hereof, Landlord shall refund to Tenant $104,919.60, being the aggregate
amount of funds advanced by Tenant for certain construction soft costs.
ARTICLE 26
[INTENTIONALLY OMITTED]
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EXHIBIT 10.16
ARTICLE 27
ATTORNEYS' FEES AND LEGAL EXPENSES
In any action or proceeding brought by either party against the other
under this Lease, the prevailing party shall be entitled to recover from the
other party reasonable attorneys' fees, investigation costs, fees of experts,
and other reasonable legal expenses and court costs incurred by such party in
such action or proceeding.
ARTICLE 28
NOTICES
Section 28.1 Any notice or demand, consent, approval or
disapproval, or statement (collectively called "Notices") required or
permitted to be given by the terms and provisions of this Lease, or by any
law or governmental regulation, shall be in writing (unless otherwise
specified herein) and, unless otherwise required by such law or regulation,
shall be personally delivered or sent by United States mail postage prepaid
as registered or certified mail, return receipt requested, or sent by a
nationally recognized reputable overnight courier. Any Notice shall be
addressed to Landlord or Tenant, as applicable, at its address specified in
the Basic Lease Information, as said address may be changed from time to time
as hereinafter provided. By giving the other party at least ten (10) days'
prior written notice, either party may, by Notice given as above provided,
designate a different address or addresses for Notices.
Section 28.2 Any Notice shall be deemed given (i) as of the
date of delivery as indicated by affidavit in case of personal delivery or by
the return receipt in the case of mailing or by a signed or initialed receipt
in the case of delivery by overnight courier or (ii) in the event of failure
to deliver by reason of changed address of which no Notice had been given or
refusal to accept delivery, as of the date of such failure as indicated by
affidavit or on the return receipt or by notice of the postal service, as the
case may be.
ARTICLE 29
PARKING
Section 29.1 Landlord shall provide the Tenant 2.9 parking
spaces for each 1,000 square feet of space leased and occupied to Tenant;
such parking spaces to be located in the surface parking lot adjacent to the
Building ("Parking Facilities").
Section 29.2 If all or any portion of the Parking Facilities
shall be damaged or rendered unusable by fire or other casualty or any taking
pursuant to eminent domain proceeding (or deed in lieu thereof), and as a
result thereof Landlord is unable to make available to Tenant the parking
provided for herein, then the number of cars which Tenant shall be entitled
to park
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EXHIBIT 10.16
hereunder shall be proportionately reduced so that the number of cars which
Tenant may park in the Parking Facilities after the casualty or condemnation
in question shall bear the same ratio to the total number of cars which can
be parked at such time as the number of cars Tenant had the right to park
prior to such casualty or condemnation bore to the aggregate number of cars
which could be parked at that time. If more than ten percent (10%) of the
Parking Facilities (i) shall be damaged or rendered unusable by fire or other
casualty or (ii) shall be rendered unusable by any taking pursuant to eminent
domain proceeding (or deed in lieu thereof) and such damaged or condemned
parking spaces cannot be restored or replaced on the Land or land adjacent to
the Land and/or by the "Center Spaces" (hereinafter defined) within one
hundred eighty (180) days of such fire or other casualty or such taking, then
Tenant, at its option, may terminate this Lease by not less than sixty (60)
days written notice to Landlord. In seeking to replace any such destroyed or
condemned parking spaces, Landlord may replace such parking spaces with any
parking spaces contained within the Shady Grove Life Sciences Center,
including any property owned or occupied by Tenant, to the extent that it can
locate or create parking spaces in addition to the number of spaces otherwise
required by applicable code requirements (the "Center Spaces"). Landlord
shall provide van service to and from the parking facilities not on or
adjacent to the Premises which are being utilized by Tenant's employees.
Upon Landlord's request, Tenant shall grant an easement to Landlord to
construct parking facilities on Tenant's land immediately adjacent to the
Premises and Landlord shall have the right to construct parking facilities on
any other land immediately adjacent to the Premises provided it obtains
appropriate easements from the owner(s) of such property. Such parking
facilities constructed by Landlord on adjacent land shall be deemed to be
"Parking Facilities" for purposes of this Section 29.2.
ARTICLE 30
EXPANSION OPTION
(a) If at any time during the term of the Lease and any applicable
Renewal Period ("Refusal Period"), Landlord prepares a proposal pertaining to
all or a portion of the Expansion Space which Landlord is prepared to offer
as a lease proposal to a third party, then Landlord, prior to sending the
proposal to the prospective tenant, shall send a written notice (the "Offer
Notice") to Tenant of such proposal. The Offer Notice shall set forth in
reasonable detail the size or portion of the Expansion Space subject to the
proposal and shall contain (or be deemed to contain) an offer to Tenant to
lease the portion of the Expansion Space subject to the proposal, for the
then-remaining Term of this Lease (including any optional Renewal Periods, on
the terms and conditions set forth in this Article 30. Tenant may elect to
accept the Offer Notice, by giving written notice to Landlord of its election
not more than ten (10) business days after receipt by Tenant of the Offer
Notice. Any election by Tenant shall be irrevocable.
(b) In the event Tenant responds within the ten (10) business day
period and elects the proposal set forth in the Offer Notice, then this Lease
shall automatically be amended to include within the Premises the portion of
the Expansion Space subject to the Offer Notice. Within thirty (30) days
after Tenant's exercise of its option as to all or any part of the Expansion
Space, Landlord and Tenant shall execute an amendment to this Lease
confirming such exercise and
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EXHIBIT 10.16
demise of such Expansion Space. The Tenant's obligation to pay rent for the
Expansion Space shall commence on the date on which Landlord delivers
possession of such Expansion Space to Tenant, with all improvements thereto
substantially complete.
(c) A failure by Tenant to respond within such ten (10) business day
period, or Tenant's election not to accept an Offer Notice, shall extinguish
Tenant's expansion option in that (but not any subsequent) instance, so that
Landlord shall not be required to reoffer to Tenant the Expansion Space
described in Landlord's Offer Notice until such space becomes available for
reletting after Landlord has leased such space. The expansion option granted
by this Article 30 shall continue throughout the Refusal Period
notwithstanding any failure by Tenant to exercise such expansion option in
any one or more instances.
(d) Any Expansion Space leased by Tenant pursuant to this Article 30
shall be leased for the same per-square-foot Annual Base Rent as is then
payable hereunder for the Premises (and subject to the same 3% annual
increases in such Annual Base Rent, which annual increase shall also be made
at the commencement of each Lease Year), and upon all of the terms and
conditions set forth in this Lease applicable to the Premises except as
otherwise set forth in this Section 30(d). Landlord shall improve such space
in accordance with plans and specifications prepared by Tenant and approved
by Landlord (which approval shall not be unreasonably withheld, conditioned
or delayed), in accordance with the requirements applicable to Project
Upgrades in the Work Agreement attached hereto as Exhibit D; provided,
however, that the Improvement Allowance provided by Landlord for such space
shall be the unamortized portion, as of the lease commencement date for such
space, of the Ten Dollar ($10.00) per square foot of Rentable Area
Improvement Allowance provided in such Work Agreement, amortized on a
straight-line basis over the fifteen (15) year Lease Term. There shall be no
Improvement Allowance for any Expansion Space leased by Tenant during any
Renewal Period.
(e) The foregoing notwithstanding, in no event shall Landlord enter
into a lease with any party other than Tenant for more than 3,500 square feet
of the Expansion Space (the "Short Term Space") which is adjacent to the
Premises, for a term in excess of five (5) calendar years (inclusive of
renewal options) commencing on the commencement date of such lease, or for
any other Expansion Space for a term in excess of seven (7) calendar years
(inclusive of renewal options) commencing on the commencement date of such
lease. The Short Term Space shall be contiguous to the Premises and shall be
outlined as an exhibit to this Lease to be attached hereto by amendment as of
the Rent Commencement Date.
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EXHIBIT 10.16
ARTICLE 31
MISCELLANEOUS
Section 31.1 Where this Lease requires Tenant to pay or to
reimburse directly Landlord for any item, unless otherwise expressly provided
in this Lease, such payment or reimbursement will be the actual costs
incurred therefor by Landlord, including a reasonable allocation of
Landlord's overhead, administrative and related costs, and a reasonable fee
to Landlord associated with the service in question. Failure to pay any such
amounts shall be considered as a failure to pay Rental, and, as a result,
Landlord shall be entitled to all applicable rights and remedies. Where this
Lease requires Landlord to pay or to reimburse directly Tenant for any item,
unless otherwise expressly provided in this Lease, such payment or
reimbursement will be the amount of the actual costs incurred therefor by
Tenant, including a reasonable allocation of Tenant's overhead,
administrative and related costs.
Section 31.2 Landlord recognizes the Broker (as set forth in
the Basic Lease Information) as the sole broker procuring this Lease and
shall pay the Broker a commission therefor in accordance with a separate
written agreement. Landlord and Tenant each represent and warrant to the
other that, except for the Broker set forth in the Basic Lease Information,
neither of them has employed any broker in carrying on the negotiations
relative to this Lease. Landlord and Tenant shall each indemnify and hold
harmless the other from and against any claim or claims for brokerage or
other commissions arising from or out of any breach of the foregoing
representation and warranty. Landlord and Tenant recognize that the
exclusive leasing representative is entitled to the payment of a commission
under certain circumstances for services rendered in that negotiation and
obtaining of this Lease, and Landlord has agreed to pay such commission
pursuant to separate agreement by and between Landlord and the Broker.
Section 31.3 As used herein, "business days" means Monday
through Friday (except holidays); "Normal Business Hours" means 8:00 a.m. to
6:00 p.m. on business days; and "holidays" means January 1st, Martin Luther
King, Jr. Day, Presidents' Day, Memorial Day, July 4th, Labor Day,
Thanksgiving and the Friday after Thanksgiving, and Christmas.
Section 31.4 Every agreement contained in this Lease is, and
shall be construed as, a separate and independent agreement. If any term of
this Lease or the application thereof to any person or circumstances shall be
invalid and unenforceable, the remainder of this Lease, or the application of
such term to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected.
Section 31.5 There shall be no merger of this Lease or of
the leasehold estate hereby created with the fee estate in the Premises or
any part thereof by reason of the fact that the same person may acquire or
hold, directly or indirectly, this Lease or the leasehold estate hereby
created or any interest in this Lease or in such leasehold estate as well as
the fee estate in the Premises or any interest in such fee estate. In the
event of a voluntary or other surrender of this
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EXHIBIT 10.16
Lease or a mutual cancellation hereof, Landlord may, at its option, terminate
all subleases or treat such surrender or cancellation as an assignment of
such subleases.
Section 31.6 Any and all covenants, undertakings, and
agreements herein made on the part of Landlord are made and intended not as
personal covenants, undertakings, and agreements of any member, director,
officer, employee, shareholder, or holder or owner of any interest in
Landlord or any affiliate of Landlord (collectively "Landlord's Affiliates")
or for the purpose of binding Landlord's Affiliates personally or the assets
of Landlord's Affiliates except their interest in the Land, Building, and
Premises and Landlord's equity in any insurance proceeds or condemnation
awards with respect to the Land, Building and/or Premises, but are made and
intended for the purpose of binding only the Landlord's interest from time to
time in the Land, Building, and Premises. No personal liability or personal
responsibility is assumed by, nor shall at any time be asserted or
enforceable against, Landlord's Affiliates or their agent or agents,
beneficiaries, partners, or their respective heirs, legal representatives,
successors, and assigns on account of this Lease or on account of any
covenant, undertaking, or agreement of Landlord in this Lease contained, all
such liability being specifically waived by Tenant.
Section 31.7 Whenever a period of time is herein prescribed
for action to be taken by Landlord or Tenant, such party shall not be liable
or responsible for, and there shall be excluded from the computation for any
such period of time, any delays due to strikes, riots, acts of God, shortages
of labor or materials, war, governmental laws, regulations, or restrictions,
or any other cause of any kind whatsoever which is beyond the reasonable
control of such party.
Section 31.8 The article headings contained in this Lease
are for convenience only and shall not enlarge or limit the scope or meaning
of the various and several articles hereof. Words of any gender used in this
Lease shall include any other gender, and words in the singular number shall
be held to include the plural, unless the context otherwise requires.
Section 31.9 If there is more than one Tenant, the
obligations hereunder imposed upon Tenant shall be joint and several, and all
agreements and covenants herein contained shall be binding upon the
respective heirs, personal representatives, successors, and, to the extent
permitted under this Lease, assigns of the parties hereto.
Section 31.10 Neither Landlord nor Landlord's agents or
brokers have made any representations or promises with respect to the
Premises or the Building except as herein expressly set forth, and all
reliance with respect to any representations or promises is based solely on
those contained herein. No rights, easements, or licenses are acquired by
Tenant under this Lease by implication or otherwise except as expressly set
forth in this Lease.
Section 31.11 This Lease sets forth the entire agreement
between the parties and cancels all prior negotiations, arrangements,
brochures, agreements, and understandings, if any, between Landlord and
Tenant regarding the subject matter of this Lease. No amendment or
modification of this Lease shall be binding or valid unless expressed in a
writing executed by both parties hereto.
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EXHIBIT 10.16
Section 31.12 The submission of this Lease to Tenant shall
not be construed as an offer, nor shall Tenant have any rights with respect
thereto unless Landlord executes a copy of this Lease and delivers the same
to Tenant.
Section 31.13 Each of the persons executing this Lease on
behalf of Tenant represents and warrants that he or she is an officer or
partner of Tenant, that Tenant has complied with all applicable laws, rules,
and governmental regulations relative to its right to do business in the
State of Maryland, that Tenant has the full right and authority to enter into
this Lease, and that all persons signing on behalf of the Tenant were
authorized to do so by any and all necessary or appropriate corporate or
partnership actions.
Section 31.14 Each of the persons executing this Lease on
behalf of Landlord represents and warrants that Landlord has complied with
all applicable laws, rules, and governmental regulations relative to its
right to do business in the State of Maryland, that such entity has the full
right and authority to enter into this Lease, and that all persons signing on
behalf of Landlord were authorized to do so by any and all necessary or
appropriate corporate or partnership actions.
Section 31.15 If, in connection with obtaining debt or equity
financing for the Building (including a sale/leaseback), any lender, investor
shall request reasonable modifications to this Lease as a condition to such
financing, Tenant will not unreasonably withhold, delay, or defer its consent
thereto, provided that such modifications do not materially increase the
obligations of Tenant hereunder or materially adversely affect either the
leasehold interest hereby created or Tenant's use and enjoyment of the
Premises or materially reduce Tenant's rights under this Lease.
Section 31.16 This Lease shall be governed by and construed
under the laws of the State of Maryland. Any action brought to enforce or
interpret this Lease shall be brought in the court of appropriate
jurisdiction in the State of Maryland. Should any provision of this Lease
require judicial interpretation, it is agreed that the court interpreting or
considering same shall not apply the presumption that the terms hereof shall
be more strictly construed against a party by reason of the rule or
conclusion that a document should be construed more strictly against the
party who itself or through its agent prepared the same, it being agreed that
all parties hereto have participated in the preparation of this Lease and
that legal counsel was consulted by each party hereto before the execution of
this Lease.
Section 31.17 Any elimination or shutting off of light, air,
or view by any structure which may be erected on lands adjacent to the
Building shall in no way affect this Lease or impose any liability on
Landlord.
Section 31.18 Upon reasonable notice to Tenant, except in the
case of an emergency, Landlord, its agents or employees, shall have the right
to enter the Premises at all reasonable times (a) to make inspections or to
make repairs to the Premises or repairs to other premises as Landlord may
deem necessary, (b) to exhibit the Premises to prospective tenants,
prospective purchasers of the Building and/or the Land, and any existing or
prospective lender or holder of (or beneficiary under) security interest in
the Building or Land or any Superior Instrument, and (c) for any purpose
whatsoever relating to the safety, protection, or preservation of the
Building,
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EXHIBIT 10.16
provided, in each case, that Landlord shall use reasonable efforts to
minimize interference with Tenant's business operations in the Premises.
Section 31.19 The exhibits referred to in the Basic Lease
Information are by this reference incorporated fully herein. The term "this
Lease" shall be considered to include all such exhibits.
Section 31.20 LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY
IN AND IN RESPECT OF IN ANY AND EVERY ACTION, PROCEEDING, CLAIM (WHETHER OR
NOT DENOMINATED, A CLAIM, COUNTERCLAIM, CROSS-CLAIM, OFF-SET OR THE LIKE)
BROUGHT OR ASSERTED BY EITHER AGAINST THE OTHER WITH RESPECT TO ANY MATTER
ARISING OUT OF, UNDER, OR CONNECTED WITH THIS LEASE.
Section 31.21 Nothing contained in this Lease shall be deemed
to create a partnership or joint venture between Landlord and Tenant or to
create any other relationship between the parties other than that of Landlord
and Tenant.
Section 31.22 The provisions of this Lease shall inure to the
benefit of and are binding upon Landlord, Tenant, and the successors and
assigns of each.
Section 31.23 Tenant hereby waives any and all rights of
redemption or restoration of the operation of this Lease conferred by any
present or future law, statute or otherwise upon the expiration or sooner
termination of the Term, the entry of final unappealable judgment for
recovery of possession through any action or proceeding, or Landlord's
obtaining possession of the Premises under the terms of this Lease.
Section 31.24 The term "Landlord," as used in this Lease,
means only the owner for the time being of the Building, so that, in the
event of any sale of the Building, the seller shall be, and hereby is,
entirely freed and relieved of all covenants and obligations of the Landlord
hereunder, not theretofore accrued, and it shall be deemed and construed,
without further agreement between the parties or between the parties and the
purchaser of the Building, that such purchaser has assumed and agreed to
carry out any and all covenants and obligations of the Landlord hereunder.
ARTICLE 32
RESTRICTIVE COVENANT
Tenant is the ground lessee of a certain parcel of land located
adjacent to Land and which is leased from Montgomery County, Maryland
pursuant to a certain Ground Lease dated December 20, 1983 ("Lot H/H-1").
Tenant acknowledges that approximately 21,000 square feet of commercial floor
area ratio density ("FAR Density") required for the development and
construction of the Building is required to be transferred from Lot H/H-1 to
Lot Z and therefor
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EXHIBIT 10.16
cannot be developed on Lot H/H-1. In furtherance of the foregoing, Tenant
acknowledges and agrees:
(i) that from and after the date of Lease, the density
development on Lot H/H-1 shall be restricted to not more than 77,000; and
(ii) to join in and support the transfer of such density from
Lot H/H-1 to Lot Z and upon request to execute any and all applications,
plats, permits and other instruments as may be necessary to implement the
permanent irrevocable transfer of such density from Lot H/H-1 to Lot Z; and
(iii) that simultaneously with the execution this Lease,
Landlord and Tenant and any mortgagees of Tenant's interest in Lot H/H-1,
shall execute and record a restrictive covenant against Lot H/H-1 in the form
of Exhibit "H" to this Lease (the "Restrictive Covenant") to limit the
density on Lot H/H-1 as aforesaid. Montgomery County shall join in execution
of the Restrictive Covenant for the purposes of subjecting its fee interest
in Lot H/H-1 to the operation and effect of Restrictive Covenant. Tenant
agrees to grant, execute or join in any and all instruments that may be
required to further evidence, confirm or clarify the terms of the Restrictive
Covenant.
ARTICLE 33
BUILDING SIGNAGE
(a) Subject to the requirements of this Section 33, Tenant, at
Tenant's sole cost and expense, shall have the right to install signage to
display Tenant's name on the exterior of the third (3rd) floor of the
Building, in a location selected by Tenant facing Blackwell Road or
Broschart, and to cause electricity to be brought to said signage. The plans
and specifications for such sign and any other signs Tenant intends to
install in or on the Building (at Tenant's sole cost and expense) are
attached hereto as Exhibit J and made a part hereof. After construction and
prior to installation of said signs, Tenant shall present the same to
Landlord for its written approval, which approval shall not be withheld so
long as the signs conform fully to the plans and specifications set forth in
Exhibit J. Tenant shall install its approved signs at a time mutually agreed
upon by Landlord and Tenant, it being understood and agreed that Landlord
shall have the right to supervise such installation. Tenant, at Tenant's
sole cost and expense, shall obtain all necessary permits for such signage
and otherwise ensure that all such signage complies with all requirements of
applicable laws, ordinances and regulations.
(b) Throughout the term of this Lease, Tenant shall pay for all
electricity consumed by said sign, and shall maintain said sign in good
condition and repair. Upon the expiration or termination of the Term of this
Lease, Tenant, at its expense, shall remove such sign and repair any damage
to the Building resulting therefrom.
EXECUTED under seal as of the date first written above in the Basic
Lease Information.
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EXHIBIT 10.16
[SIGNATURE PAGE FOLLOWS]
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EXHIBIT 10.16
LANDLORD
WITNESS/ATTEST: FP ROCKLEDGE, L.L.C.
By
- -------------------------------- --------------------------------------
Name: Name:
--------------------------- --------------------------------
Title: [Assistant] Secretary Title:
--------------------------------
[Corporate Seal]
TENANT
WITNESS/ATTEST: MA BIOSERVICES, INC.
By
- -------------------------------- --------------------------------------
Name: Name:
--------------------------- --------------------------------
Title: [Assistant] Secretary Title:
--------------------------------
[Corporate Seal]
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EXHIBIT 10.16
EXHIBIT A
PLAT OF THE LAND
A-1
<PAGE> 62
EXHIBIT 10.16
EXHIBIT A-1
FLOOR PLAN OF THE PREMISES
A-1-1
<PAGE> 63
EXHIBIT 10.16
EXHIBIT A-2
EXPANSION SPACE
A-2-1
<PAGE> 64
EXHIBIT 10.16
EXHIBIT B
LEGAL DESCRIPTION OF THE LAND
B-1
<PAGE> 65
EXHIBIT 10.16
EXHIBIT C
CLEANING SPECIFICATIONS
C-1
<PAGE> 66
EXHIBIT 10.16
EXHIBIT D
WORK AGREEMENT
D-1
<PAGE> 67
EXHIBIT 10.16
EXHIBIT D-1
METHOD OF MEASUREMENT
The Rentable Area of the Premises and the Rentable Area of the Building
are to be determined based upon The Washington, D.C. Association of Realtors,
Inc. Standard Method of Measurement dated January 1, 1989, a copy of which is
attached hereto, except that any shafts necessitated by the buildout of the
Premises shall be included in both the Rentable of the Premises and the
Rentable Area of the Building.
D-1-1
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EXHIBIT 10.16
EXHIBIT E
RULES AND REGULATIONS
1. Sidewalks, doorways, entrances, vestibules, halls, stairways,
courts, elevators, and similar areas shall not be obstructed or encumbered by
tenants or their officers, agents, servants, or employees or used for any
purpose other than ingress and egress to and from the Premises and for going
from one part of the Building to another part of the Building. Landlord
shall have reasonable control over the use and operation of the public
portions of the Building and the facilities furnished for the common use of
the tenants, in such manner as Landlord deems best for the benefit of the
tenants generally. Landlord reserves the right to control, operate,
restrict, and regulate the use of the Common Areas, public facilities, and
any facilities furnished for the common use of the tenants in such manner as
it reasonably deems best for the benefit of the tenants, including but not
limited to the allocation of elevators for delivery service and the right to
designate which Building entrances shall be used for deliveries.
2. Plumbing fixtures and appliances shall be used only for the
purposes for which constructed, and no sweepings, rubbish, rags, or other
unsuitable material shall be thrown or placed therein. The cost of repairing
any stoppage or damage resulting to any such fixtures or appliances from
misuse on the part of a tenant or such tenant's officers, agents, servants,
employees, visitors, or licensees shall be paid by such tenant.
3. Landlord shall have the right to prohibit any advertising or
identifying sign by Tenant which, in the reasonable judgment of Landlord,
impairs the appearance, reputation, or desirability of the Building as a
first-class Building. No signs, posters, advertisements, or notices shall be
inscribed, painted, affixed, or displayed on any exterior window, exterior
door, or other exterior part of the Building, except of such color, size, and
style and in such places as shall be first approved in writing by Landlord.
Further, approved signs shall be inscribed, painted, or affixed at Tenant's
sole cost. If any such sign, poster, advertisement, or notice is exhibited
without the required approval, Landlord or the Building manager shall have
the right to remove the same and the tenant exhibiting the same shall be
liable for any and all expenses incurred by Landlord or the Building manager
by said removal.
4. The Premises shall not be used for conducting any barter, trade,
or exchange of goods or sale through promotional give-away gimmicks or by any
business involving the sale of second-hand goods, insurance salvage stock, or
fire sale stock, and the Premises shall not be used for any auction or
pawnshop business, fire sale, bankruptcy sale, going-out-of-business sale,
moving sale, bulk sale, or any other business which, because of merchandising
methods or otherwise, would tend to lower the first-class character of the
Building. The use of its premises by any tenant shall not be changed without
the prior written approval of Landlord.
5. Tenants shall not place a load upon any floor of the Premises
which exceeds the floor load per square foot which such floor was designed to
carry or which is allowed by applicable building codes. Landlord may
prescribe the weight and position of all safes and heavy
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installations which any tenant desires to place in the Building so as to
properly distribute the weight thereof. All damage done to the Building by
the improper placing of heavy items which overstress the floor will be
repaired at the sole expense of the tenant responsible.
6. If Tenant shall request Landlord to perform any work on the
Premises or the Property, Tenant shall make such request at the management
office for the Building. Tenant shall not request employees of Landlord to
perform any work or do anything outside of their regular duties, unless under
special instructions from Landlord.
7. The doors leading to the corridor or main halls shall be kept
closed during business hours except as they may be used for ingress or
egress. All entrance doors in Tenant's Premises shall be kept locked when
not in use.
8. Tenant, before closing and leaving its Premises at any time,
shall see that all lights are turned off.
9. Each tenant shall cooperate with Building employees in keeping
its premises neat and clean.
10. Nothing, including mats and trash, shall be placed, swept, or
thrown into the corridors, halls, elevator shafts, stairways, or other common
or public areas. No tenant shall throw anything out of the doors or windows
or down the corridors or stairs of the Building.
11. No birds, animals (except seeing eye dogs), reptiles or small
fish shall be brought into or kept in or about the Premises or the Building.
12. No tenant shall make, or permit to be made, any disturbing
noises nor disturb or interfere with occupants of this or neighboring
buildings or premises, whether by the use of any musical instrument, radio,
or in any other way.
13. Tenant shall not cause or permit any odors of cooking or other
processes or any unusual or objectionable odors to be produced upon or to
emanate from its Premises which would annoy other tenants or create a public
or private nuisance. No cooking shall be done in Tenant's Premises except
for a household microwave oven or as is expressly permitted in the Lease or
otherwise consented to in writing by Landlord.
14. Tenants, employees, agents, or anyone else who desires to enter
or leave the Building after Normal Business Hours may be required to provide
appropriate identification and to sign in upon entry and departure, giving
such person's destination within the Building and such person's time of
arrival and departure. Landlord reserves the right to exclude from the
Building at all times any person who is not known or does not properly
identify himself or herself to the Building management or watchman on duty.
15. Nothing shall be done or permitted in the Premises, and nothing
shall be brought into, installed, or kept in or about the Premises, which
would impair or interfere with any of the HVAC, plumbing, electrical, or
structural components of the Building or the services of the
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Building or the proper and economic heating, cleaning, or other services of
the Building or the Premises. No inflammable, combustible, or explosive
fluid, chemical, or substance shall be brought or kept in the Building except
those that are routinely used for standard office equipment or are otherwise
used in Tenant's normal business operations.
16. Landlord has the right to evacuate the Building in the event of
emergency or catastrophe or for the purpose of holding a reasonable number of
fire drills.
17. Landlord reserves the right to rescind, alter, waive, or add any
rule or regulation at any time prescribed for the Building when Landlord
reasonably deems it necessary or desirable for the reputation, safety,
character, security, care, appearance, or interests of the Building; the
preservation of good order therein; the operation or maintenance of the
Building or the equipment thereof; or the comfort of tenants or others in the
Building. No rescission, alteration, waiver, or addition of any rule or
regulation with respect to one tenant shall operate as a rescission,
alteration, or waiver in respect of any other tenant. Landlord may, upon
request by any tenant, waive compliance by such tenant with any of the
foregoing Rules and Regulations, provided that (i) no waiver shall be
effective unless signed by Landlord or Landlord's authorized agent; (ii) any
such waiver shall not relieve such tenant from the obligation to comply with
such rule or regulation in the future unless expressly consented to by
Landlord; and (iii) no waiver granted to any tenant shall relieve any other
tenant from the obligation of complying with the foregoing Rules and
Regulations, unless such other tenant has received a similar waiver in
writing from Landlord.
18. No bicycles or vehicles of any kind shall be brought into or
kept in or about the Premises.
19. Except for locks and bolts and similar security devices
installed by Tenant and approved by Landlord, which approval shall not be
unreasonably withheld, to control access to and from the Premises, or
installed by Tenant to control access to specific areas of the Premises, no
locks or bolts of any kind shall be placed upon any of the entrances to the
Premises, nor shall any changes be made in existing locks or the mechanisms
thereof, and Tenant shall at all times provide Landlord a key and other means
required to gain access to any system and/or facility of the Building located
within the Premises. Landlord shall not enter the Premises except in an
emergency unless accompanied by one of Tenant's employees. Tenant shall
provide the other tenants of the Building with security cards and readers,
integrated with Tenant's security system, at Tenant's actual cost, including
maintenance charges. Each tenant shall, upon the termination of its tenancy,
return to Tenant all keys or security system cards and readers either
furnished to or otherwise procured by such tenant, and in the event of the
loss of any such items, such tenant shall pay to Tenant the cost of replacing
the same.
20. Any contract of any kind with any supplier of water, waxing, rug
shampooing, lamp servicing, cleaning of electrical fixtures, removal of waste
papers, rubbish, or garbage, or any other cleaning, janitorial, or like
service entered into by Tenant, shall be terminated by Tenant upon the
written request of Landlord based upon Landlord's reasonable determination
that such contractor is disruptive or otherwise detrimental to the Building.
Further, no vending machine of any kind shall be installed in the Building or
on or about the Premises without the
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prior written consent of Landlord, which consent shall not be unreasonably
withheld. Tenant shall notify Landlord or the Building manager of any person
employed by it to do janitorial work within the Premises, except for
full-time employees of Tenant, prior to such person's commencing work, and
such person shall, while in the Building and outside of the Premises, comply
with all instructions issued by Landlord or its representatives. No tenant
shall pay any employees of Landlord or Landlord's agent to perform any work
or services in the Premises or the Building.
21. Canvassing, soliciting, and peddling in the Building is
prohibited and each tenant shall cooperate to prevent the same.
22. No hand truck or similar vehicle except those equipped with
rubber tires and rubber side guards shall be used in the public or common
areas of the Building, either by any tenant or by others, in the delivery or
receipt of merchandise.
23. Except while loading and unloading vehicles, there shall be no
parking of vehicles or other obstructions placed in the loading dock area.
24. Landlord hereby reserves to itself any and all rights not
granted to Tenant hereunder, including but not limited to the following
rights which are reserved to Landlord for its purposes in operating the
Building:
a. the exclusive right to use of the name of the Building for
all purposes, except that Tenant may use the name as its business address and
for no other purposes;
b. the right to change the address of the Building without
incurring any liability to Tenant for so doing; provided, however, that
Landlord shall reimburse Tenant for the cost of replacing any unused
stationery and business cards;
26. A directory will be placed by Landlord, at Landlord's own
expense, in the Building. No other directories shall be permitted.
27. Tenants shall not do anything, or permit anything to be done, in
or about the Building, or bring or keep anything therein, that will in any
way obstruct or interfere with the rights of, or otherwise injure or annoy,
other tenants.
28. Should a tenant require telegraphic, telephonic, annunciator, or
any other communication service, Landlord will direct the electricians and
installers where and how the wires are to be introduced and placed, and none
shall be introduced or placed except as Landlord shall direct.
29. Business machines and mechanical equipment belonging to a tenant
which cause noise and/or vibration that may be transmitted to the structure
of the Building or to any leased space so as to be objectionable to Landlord
or any tenants in or occupants of the Building shall be placed and maintained
by such tenant, at such tenant's expense, in settings of cork, rubber, or
spring-type noise and/or vibration eliminators sufficient to eliminate
vibration and/or noise.
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EXHIBIT 10.16
30. If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business, Tenant, before occupying the
Premises, shall procure and maintain such license or permit and submit it for
Landlord's inspection. Tenant shall at all times comply with the terms of
any such license or permit.
31. In order that the Building can and will maintain a uniform
appearance to those persons outside of the Building, each tenant occupying
the perimeter area of the Building shall (a) use only building-standard
lighting in areas where lighting is visible from the outside of the Building
and (b) use only building-standard blinds in window areas which are visible
from the outside of the Building. Tenant shall not install or maintain any
blinds, curtains, or any other window covering on windows of the Premises
unless approved in advance by Landlord.
32. Tenant shall keep all portions of the Premises which are visible
from outside the Premises in a tasteful, neat, and orderly condition
characteristic of first-class professional offices. No desks, bookcases, file
cabinets, or other furniture shall be placed against the windows of the
Premises.
33. In the event of any conflict or inconsistency between the terms
and provisions of these Rules and Regulations, as now or hereafter in effect,
and the terms and provisions of the Lease to which these Rules and
Regulations are attached, the terms and provisions of such Lease shall
prevail.
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EXHIBIT 10.16
EXHIBIT F
DECLARATION BY LANDLORD AND TENANT
AS TO LEASE COMMENCEMENT DATE
THIS DECLARATION is hereby attached to and made a part of the Lease
dated the ___ day of ___________, 19__, entered into by and between FP
Rockledge, L.L.C., as Landlord, and MA BioServices, Inc., as Tenant. All
terms used in this Declaration have the same meaning as they have in the
Lease.
1. Landlord and Tenant do hereby declare that possession of the
Premises was accepted by Tenant on the _____ of _____________, 19__;
2. As of the date hereof, the Lease is in full force and effect,
and Landlord has fulfilled all of its obligations under the Lease required to
be fulfilled by Landlord on or prior to said date; and
3. The Lease Commencement Date is hereby established to be
_____________, 19___.
4. The Rentable Area of the Building is _______ square feet.
5. The Rentable Area of the Premises is _____ square feet.
6. The Annual Base Rental for the first Lease Year is $_______ per
year ($______ per month).
7. Tenant's initial Proportionate Share is _______%.
WITNESS/ATTEST: LANDLORD:
FP ROCKLEDGE, L.L.C.
By
- -------------------------------- --------------------------------------
Name: Name:
--------------------------- --------------------------------
Title: Title:
-------------------------- --------------------------------
WITNESS/ATTEST: TENANT:
MA BIOSERVICES, INC.
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EXHIBIT 10.16
By
- -------------------------------- --------------------------------------
Name: Name:
--------------------------- --------------------------------
Title: Title:
-------------------------- -------------------------------
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EXHIBIT 10.16
EXHIBIT G
FORM OF SUBORDINATION, ATTORNMENT,
AND NON-DISTURBANCE AGREEMENT
THIS SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT
(hereinafter referred to as this "Agreement"), made this ___ day of
_____________, 19__, by and among ___________ ___________________________, a
____________________ organized and existing under the law of the State of
_________________, having an address at c/o
___________________________________ (hereinafter referred to as the
"Lender"), _________________, Trustee and _____________________________,
Trustee, both having a business address at ______________________________
(hereinafter referred to collectively as the "Trustees"), a
______________________ organized and existing under the law of the State of
_____________________, having an address at
____________________________________ (hereinafter referred to as the
"Landlord"), and ___________________________________, a ___________________
organized and existing under the law of the State of ______________, having
an address at _______________________________________________ (hereinafter
referred to as the "Tenant"),
WITNESSETH, THAT WHEREAS the Landlord and the Tenant have entered into
a lease (hereinafter referred to as the "Lease") dated ____________, 19__, by
which the Landlord has leased to the Tenant certain premises (hereinafter
referred to as the "Leased Premises") as further described in the Lease and
located on a portion of that land, situate and lying in ____________ County,
_____________________ which is described in Exhibit A attached hereto and
made a part hereof (hereinafter referred to as the "Property"); and
WHEREAS, the Trustees are trustees under a Deed of Trust and Security
Agreement (hereinafter referred to as the "Deed of Trust") of even date
herewith intended to be recorded among the Land Records of the said County
from the Landlord to the Trustees, securing a loan made by the Lender to the
Landlord, covering the Property (including the Leased Premises); and
WHEREAS, the Tenant has agreed that the Lease shall be and is subject
and subordinate to the lien of the Deed of Trust, provided that the Tenant is
assured that the Lease and the Tenant's rights thereunder will not be
terminated by any foreclosure proceeding brought under the provisions of the
Deed of Trust.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual entry into this
Agreement by the parties hereto, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged by
each party hereto, and anything contained in the provisions of the Lease to
the contrary notwithstanding, the parties hereto hereby agree as follows:
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EXHIBIT 10.16
Section . Subordination. The Lease is and shall be subject and
subordinate to the lien, operation and effect of the Deed of Trust and all
renewals, modifications, consolidations, replacements, increases and
extensions thereof.
Section . Effect of Foreclosure.
2.1. Foreclosure under Deed of Trust. If any foreclosure
proceeding is brought under the provisions of the Deed of Trust,
2.1.1. (a) provided that the Tenant is not then in
default under the Lease beyond any applicable cure period, such proceeding
shall not operate to terminate the Lease or the Tenant's rights thereunder,
and (b) the Lender, for itself and its heirs, personal representatives,
successors and assigns shall not terminate the Lease or the Tenant's rights
thereunder, or disturb the Tenant in its possession of the Leased Premises,
provided that the Tenant is not then in default beyond any applicable cure
period under the Lease and continues to pay the rent and otherwise to perform
its obligations hereunder and under the provisions of the Lease; but
2.1.2. neither the Lender nor any purchaser at such
foreclosure shall be
(a) liable for any breach, act or omission of the
Landlord or any other person under the Lease,
(b) subject to any offset or defense which the Tenant may
have against the Landlord or any other person under the Lease,
(c) bound by any payment of rent made by the Tenant to
the Landlord or any other person for a period beyond the month during which
such foreclosure proceeding is ratified,
(d) bound by any amendment or modification of the Lease
made without the Lender's express, written consent thereto, unless such
amendment or modification shall not materially impair the Lender's security
or the value of the Property,
(e) bound by any notice given by the Tenant to the
Landlord pursuant to the provisions of the Lease or otherwise, unless and
until a copy of it is given to the Lender, or
(f) liable for any security deposit or other payment made
under the Lease, unless both (i) the Landlord has actually delivered it in
cash to the Lender or such purchaser, as the case may be, and (ii) it has
been specifically identified, and accepted by the Lender or such purchaser,
as the case may be, as such and for such purpose.
2.1.3. in such event, the Lender shall cause the
Trustees to sell the Leased Premises subject to the operation and effect of
the Lease.
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EXHIBIT 10.16
2.2. Foreclosure under other instruments or liens.
2.2.1. The Tenant shall not, without first obtaining
the Lender's express, written consent thereto, subordinate the Lease or any
of the Tenant's right, title and interest in and to the Leased Premises
thereunder to the lien of any mortgage, deed of trust, other security
agreement or other instrument other than the Deed of Trust.
2.2.2. If any foreclosure proceeding is brought by any
person under any instrument or lien (other than that of the Deed of Trust)
against the Landlord's estate in the Leased Premises (whether or not (a) the
Lender has consented to such instrument or lien, or (b) the Lease is
subordinate thereto), the Tenant shall promptly attorn to the purchaser in
such foreclosure proceeding, upon all of the terms, covenants and conditions
of the Lease, provided that such purchaser agrees with the Tenant in writing
to recognize the Tenant's rights under the Lease for the original term and
the term of any renewal thereof permitted the Tenant by the provisions of the
Lease, so long as the Tenant continues to pay the rent and otherwise to
perform its obligations hereunder and under the provisions of the Lease.
2.3. Attornment to persons owning or controlling Leased
Premises. The Tenant shall
2.3.1. attorn to (a) the Lender whenever the Lender is
in possession of the Leased Premises; (b) any receiver appointed by or for
the Lender in any action to take possession of the Leased Premises; and (c)
any party hereafter acquiring title to the Leased Premises while the Lease
remains in effect, and
2.3.2. execute and deliver to the Lender, promptly on
its receipt of a written request therefor from the Lender or the Trustees, an
appropriate agreement of attornment thereunder confirming that the Tenant is
and then remains bound under all of the terms, covenants and conditions of
the Lease.
2.4. Deed in Lieu of Foreclosure. If the Lender elects to
accept from the Landlord a deed in lieu of foreclosure, the provisions of
Section 2.1.1 and 2.1.2 hereof shall apply.
Section 3. Election by Lender. If the Lender, pursuant to the
provisions of an Assignment of Leases and Rents of even date herewith, from
the Landlord to the Lender, and covering the Property (a copy of which will
be furnished to the Tenant by the Landlord within ten (10) days from the date
hereof), elects to require the Tenant to pay to the Lender the rent and other
charges payable by the Tenant under the provisions of the Lease, then (unless
and until the Lender cancels such election by written notice to the Tenant).
3.1. the Tenant shall be similarly bound to the Lender and shall
similarly attorn to the Lender as its landlord, and
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EXHIBIT 10.16
3.2. the Lender shall accept such attornment, upon the terms set
forth in the provisions of paragraphs 2.1.1 and 2.1.2, and provided that the
conditions precedent set forth therein are satisfied at the time of such
election.
Section 4. Landlord's Defaults.
4.1. Notices to Landlord. Anything contained in the provisions
of the Lease to the contrary notwithstanding, the Tenant shall provide to the
Lender a copy of each notice of default or termination (or other matters
which would materially impair the Lender's security) which the Tenant may
from time to time serve upon the Landlord pursuant to the provisions of the
Lease or otherwise in connection therewith, and no such notice given to the
Landlord as to such matters shall be effective unless such copy is provided
to the Lender.
4.2. Opportunity to Cure. Before the Lease is terminated or any
of the Landlord's rights thereunder or in connection therewith are forfeited
or adversely affected because of any default by the Landlord thereunder, the
Tenant shall give express, written notice of such default to the Lender. The
Lender, following such notice, shall have the right, but not the obligation,
to cure any such default within (a) fifteen (15) days if such default may be
cured upon the payment of money, or (b) thirty (30) days for any other
default, unless the cure requires the Lender to obtain possession of the
Leased Premises. If Lender's cure of the default requires the Lender to
obtain possession of the Leased Premises, the thirty (30) day period shall
not commence until Lender acquires possession of the Leased Premises, so long
as the Lender proceeds promptly to acquire possession of the Leased Premises
with due diligence, by foreclosure or otherwise. All payments so made, and
all things so done and performed, by the Lender shall be as effective to
prevent the Landlord's rights from being forfeited or adversely affected
because of such default as if it had been done and performed by the Landlord.
Section 5. Amendment of Lease. The Landlord and the Tenant hereby
agree that the provisions of the Lease are hereby amended by the insertion
therein of the following sentence:
The Tenant shall not, without the prior
written consent of [Lender] or its successors and
assigns, as beneficiary under a Deed of Trust and
Security Agreement covering the leased premises,
subordinate this Lease to the lien of any mortgage,
deed of trust or encumbrance other than the said
Deed of Trust and Security Agreement.
Section 6. Acknowledgment of assignment of Lease. The Tenant hereby
acknowledges that the Lease has been or will be assigned by the Landlord to
the Lender by the Assignment of Leases and Rents, and agrees that from and
after the date hereof, unless the Lender has first consented thereto
expressly and in writing, the Tenant will (a) pay no rent under the Lease
more than thirty (30) days before its due date, (b) except as may be
expressly permitted by the provisions of the Lease, pay such rent when due,
without any deduction, set off or counterclaim whatsoever, and (c) not
surrender its leasehold estate or consent to the modification of the terms of
the Lease or to the Landlord's termination thereof.
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EXHIBIT 10.16
Section 7. General.
7.1. Effectiveness. This Agreement shall become effective upon
and only upon its execution and delivery by each party hereto. Nothing
contained in this Agreement shall in any way impair or affect the lien
created by the Deed of Trust, except as specifically set forth herein.
7.2. Complete understanding. This Agreement represents the
complete understanding among the parties hereto as to the subject matter
hereof, and supersedes all prior negotiations, representations, guaranties,
warranties, promises, statements or agreements, either written or oral, among
them as to the same.
7.3. Amendment. This Agreement may be amended by and only by an
instrument executed and delivered by each party hereto.
7.4. Waiver. No party hereto shall be deemed to have waived the
exercise of any right which it holds hereunder unless such waiver is made
expressly and in writing (and no delay or omission by any party hereto in
exercising any such right shall be deemed a waiver of its future exercise).
No such waiver made as to any instance involving the exercise of any such
right shall be deemed a waiver as to any other such instance, or any other
such right.
7.5. Applicable Law. This Agreement shall be given effect and
construed by application of the law of the State of Maryland.
7.6. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns hereunder; provided,
however, that in the event of the assignment or transfer of the interest of
the Lender hereunder, under the Deed of Trust, and under that certain Deed of
Trust Note by and between the Lender and the Landlord of even date therewith,
all obligations and liabilities of the Lender under this Agreement shall
terminate and thereupon all such obligations and liabilities shall be the
responsibility of the party to whom the Lender's interest is assigned or
transferred; and provided further that the interest of the Tenant under this
Agreement may not be assigned or transferred.
7.7. Satisfaction of Lease Terms. The Tenant agrees that this
Agreement satisfies any condition or requirement in the Lease relating to the
granting of a non-disturbance agreement.
7.8. Limitation of Liability. Anything herein or in the Lease
to the contrary notwithstanding, in the event that the Lender shall acquire
title to the Leased Premises or the Property, the Lender shall have no
obligation, nor incur any liability, beyond the Lender's then interest, if
any, in the Leased Premises and the Tenant shall look exclusively to such
interest of the Lender, if any, in the Leased Premises for the payment and
discharge of any obligations imposed upon the Lender hereunder or under the
Lease, and the Lender is hereby released or relieved of any other obligations
hereunder and under the Lease. The Tenant agrees that with respect to any
money judgment which may be obtained or secured by Tenant against the Lender,
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EXHIBIT 10.16
the Tenant shall look solely to the estate or interest owned by the Lender in
the Leased Premises or the Property, or any portion thereof, or interest
therein, and Landlord's equity in any insurance proceeds or condemnation
awards received by Lender with respect to the Property, and will not collect
or attempt to collect any such judgment out of any other assets of the Lender.
7.9. Landlord's Agreement. The Landlord, as the grantor under
the Deed of Trust, agrees for itself and its successors and assigns, that (i)
the within Agreement does not (a) constitute a waiver by the Landlord of any
of its rights under the Deed of Trust and/or (b) in any way release the
Lender from its obligation to comply with the terms, provisions, conditions,
covenants, agreements and clauses of the Deed of Trust, (ii) the provisions
of the Deed of Trust remain in full force and effect and must be complied
with by the Landlord, and (iii) in the event of a default under the Deed of
Trust, the Tenant may pay all rent and all other sums due under the Lease to
the Lender as provided in the within Agreement.
IN WITNESS WHEREOF, each party hereto has executed and ensealed this
Agreement or caused it to be executed and ensealed on its behalf by its duly
authorized representatives, the day and year first above written.
[SIGNATURES TO BE ADDED]
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EXHIBIT 10.16
EXHIBIT H
RESTRICTIVE COVENANT
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EXHIBIT I
TERMS AND CONDITIONS FOR EQUIPMENT INSTALLED ON ROOF
The following are the terms and conditions under which Tenant shall
have the right, during the term of the Lease, to install, maintain and
operate air handling equipment (the "Equipment") on the roof of the Building.
1. TERMS AND CONDITIONS TO ROOF ACCESS.
Tenant's right to install, maintain and operate the Equipment on the
roof of the Building is subject to the following terms and conditions:
a. Tenant has provided, and Landlord has approved, the plans and
specifications of the Equipment and the proposed installation and
placement of the Equipment. The approved plans and specifications of
the Equipment and the installation and placement thereof are
attached hereto as Exhibit I-A.
b. Landlord hereby agrees to install the Equipment on the roof of the
Building, at Tenant's expense in accordance with the plans and
specifications attached hereto as Exhibit "I-A" and the terms and
conditions of this Agreement.
c. The roof of the Building shall be a twenty (20)-year bonded roof.
Landlord, at Tenant's expense, shall seal any roof penetration
caused by the installation of the Equipment. Tenant, at its expense,
shall seal any roof penetration caused by the maintenance, or
removal of the Equipment. Landlord and Tenant shall use Landlord's
roof contractor to seal such penetrations, provided that such
contractor charges a reasonable market price for such work. Landlord
shall be responsible for all roof repairs necessitated by the
installation of the Equipment, including any roof repairs which
would have been covered by a warranty lost by reason of the same.
Tenant shall be responsible for all roof repairs necessitated by the
maintenance or removal of the Equipment, including any roof repairs
which would have been covered by a warranty lost by reason of the
same. Landlord shall inspect any maintenance of the Equipment, and
shall give Tenant written notice of any deficiencies in the same.
d. Subject to subparagraph 1.i, Landlord shall have the right to cause
Tenant to relocate the Equipment if required by applicable law.
Landlord shall have the right to perform maintenance and repairs on
the roof and shall use reasonable efforts to avoid disrupting
Tenant's operation of the Equipment. In the event Landlord causes
damage to the Equipment as a result of its performing maintenance
and/or repairs on the roof, Tenant shall cause the Equipment to be
repaired at Landlord's expense. Landlord shall pay the cost of such
repairs within fifteen (15) days after receipt of an invoice
therefor. Landlord shall give Tenant
I-1
<PAGE> 83
EXHIBIT 10.16
reasonable written notice of any repairs, maintenance or other
activities which may affect the operation of the Equipment, and
shall comply with Tenant's reasonable requirements in performing any
such repairs, maintenance or other activities.
e. Tenant shall be responsible for compliance of the Equipment with all
applicable laws and regulations and ordinances, zoning laws, and
Building insurance requirements. Tenant acknowledges that Landlord
has made no representations or warranties to Tenant that the
Equipment is permitted under applicable zoning ordinances. Tenant
shall furnish evidence to Landlord of the compliance of the
Equipment with the applicable zoning ordinances and laws and
regulations prior to and following installation.
f. In the event the installation or maintenance of the Equipment
affects other portions of the Building, including common areas and
space leased to other tenants, Landlord shall have the right to
approve all such work.
g. At the expiration or earlier termination of the Lease, Tenant may,
at its option, remove the Equipment at its expense, provided that
Tenant shall repair any resulting damage to the roof in a manner
reasonably satisfactory to Landlord. If at any other time Tenant
desires to remove the Equipment from the roof, Tenant shall hire a
contractor approved in advance in writing by Landlord, which
approval shall not be unreasonably withheld, to remove the
Equipment. Tenant shall be responsible for repairing all damages
that may occur to the roof and/or the Building and/or to the
property of other tenants due to such removal, at its own cost and
expense.
h. The plans and specifications attached hereto as Exhibit I-A show all
equipment and structures anticipated to be placed on the roof of the
Building as of the date of this Lease. Tenant shall have the right
to place antennas, satellite dishes and other communications
equipment (collectively, "Antennas") on the roof of the Building,
provided that Tenant complies with the provisions of subparagraphs
1.a through 1.g and paragraph 2 of this Exhibit I, as modified by
this subparagraph 1.h, in the installation, use, maintenance and
removal of such Antennas. The requirements of subparagraphs 1.a.
through 1.g of this Exhibit I shall be modified as follows with
respect to the installation, use, maintenance and removal of the
Antennas:
(i) Tenant, at its expense, shall install the Antennas on the roof
of the Building, in accordance with the plans and
specifications approved in advance by Landlord, which approval
shall not be unreasonably withheld, conditioned or delayed.
(ii) The Antennas shall be installed by a contractor approved in
advance by Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed. Such contractor must obtain
such insurance as may be reasonably required by Landlord. Upon
Landlord's approval of a contractor, Tenant shall present
Landlord with such contractor's insurance
I-2
<PAGE> 84
EXHIBIT 10.16
coverages for Landlord's reasonable approval. Such contractor
shall then obtain and maintain any additional insurance
coverages that may be reasonably required by Landlord. Failure
of the contractor to obtain and maintain such insurance after
reasonable notice shall be an event of default under the
Lease. Landlord shall inspect the installation and any
maintenance of the Antennas, and shall give Tenant written
notice of any deficiencies in the same.
(iii) Tenant, at its expense, shall seal any roof penetration caused
by the installation, maintenance or removal of the Antennas.
Tenant shall be responsible for all roof repairs necessitated
by the installation, maintenance or removal of the Antennas,
including any roof repairs which would have been covered by a
warranty lost by reason of the same.
(iv) At the expiration or earlier termination of the Lease, Tenant
shall remove the Antennas at its expense, and shall repair any
resulting damage to the roof in a manner reasonably
satisfactory to Landlord.
i. Landlord shall not install, or permit the installation of, any
satellite dishes or antennas, on the roof of the Building (other
than the equipment and structures shown on the attached Exhibit I-A
and any Antennas installed by Tenant) without Tenant's reasonable
prior written consent. The location of any such equipment on the
roof shall be subject to Tenant's reasonable approval. Tenant shall
have the right to cause Landlord to relocate any such equipment, at
Tenant's expense, in the event that in Tenant's reasonable
determination, the operation of such equipment interferes with the
use of the Equipment, the Antennas or any other equipment now or
hereafter installed by Tenant on the roof of the Building.
j. Landlord shall restrict access to the roof of the Building to
maintenance personnel and other individuals with a legitimate
purpose for being on the roof.
2. INDEMNIFICATION
Tenant hereby agrees to indemnify, defend and hold harmless Landlord
and any subsidiary or affiliate of Landlord and the officers, directors,
members, shareholders, partners, employees, managers, independent
contractors, attorneys and agents of any of the foregoing (collectively, the
"Indemnitees") from and against any and all claims, demands, causes of
action, judgments, losses, damages, costs and expenses (including reasonable
attorneys' fees and costs and litigation expenses) arising from or relating
to the Tenant's maintenance and/or operation of the Equipment or Tenant's
breach of any of the provisions of this Exhibit I. Upon notice from
Landlord, Tenant shall defend any such claim, demand, action or proceeding at
Tenant's sole cost and expense by counsel satisfactory to Landlord at its
sole discretion. The provisions of this paragraph are in addition to any
other indemnification provisions contained in the Lease and shall survive the
expiration or sooner termination of the Lease.
I-3
<PAGE> 85
EXHIBIT 10.16
EXHIBIT I-A
PLANS AND SPECIFICATIONS FOR EQUIPMENT ON ROOF
I-A-1
<PAGE> 86
EXHIBIT 10.16
EXHIBIT A
INSURANCE REQUIREMENTS
Prior to the commencement of any work by a contractor or agent of Tenant,
Tenant shall deliver to Landlord a Certificate of Insurance evidencing that
the following insurances are in full force and effect:
1. All worker's compensation or similar insurance required with
respect to employees who are employed in connection with the
performance of such work;
2. General Liability insurance, including bodily injury, personal
injury, and property damage liability, in connection with such
contractor's or agent's business and operations in the amount of
not less than Three Million Dollars ($3,000,000.00) for injury or
death of one or more persons arising out of any one accident or
occurrence;
3. Comprehensive automobile liability insurance for all owned, hired
and non-owned vehicles, with minimum limits of One Million
Dollars ($1,000,000.00) combined single limits per occurrence for
bodily injury and property damage liability; and
4. Such other or additional insurance as Landlord may reasonably
deem appropriate;
5. Each policy shall:
a. provide thirty (30) days written notice of cancellation to
Landlord;
b. include Landlord as an additional insured;
c. waive subrogation against Landlord; and
d. provide that the policy is primary and non-contributory
with any policy of Landlord.
A-1
<PAGE> 87
EXHIBIT 10.16
EXHIBIT J
TENANT'S EXTERIOR SIGN SPECIFICATIONS
J-1
<PAGE> 88
EXHIBIT 10.16
EXHIBIT K
GUARANTY OF LEASE
FOR VALUE RECEIVED, and in consideration for, and as an inducement
to FP ROCKLEDGE, L.L.C. to enter into a lease (the "Lease") as "Landlord"
with MA BIOSERVICES, INC. as "Tenant," the undersigned, whether one or more,
jointly and severally do hereby unconditionally guarantee to Landlord (i) the
punctual and full payment of all rents of every kind, additional rents and
all other charges, including without limitation all sums to be paid by Tenant
to Landlord pursuant to the Work Agreement which is a part of the Lease, to
be paid by Tenant under the Lease and (ii) the full and timely performance
and observance of all the covenants, conditions, and agreements to be
performed and observed by Tenant under the Lease. The undersigned shall
indemnify, defend and hold harmless Landlord and its affiliates from any
loss, damages or costs (including, without limitation, the fees of Landlord's
attorneys and court costs) arising out of any failure to pay the aforesaid
rents and other charges or the failure to perform any of the aforesaid
covenants, conditions and agreements under the Lease. The undersigned
further expressly agree that the validity of this Guaranty of Lease and the
obligations of the undersigned hereunder shall in no way be terminated,
affected or impaired by reason of any forbearances, settlements or
compromises between Landlord and Tenant or the invalidity or unenforceability
of the Lease for any reason whatsoever or by the relief of Tenant from any of
Tenant's obligations under the Lease by operation of law or otherwise,
including, without limitation of the generality of the foregoing, the
rejection or assignment of the Lease in connection with proceedings under any
present or future provision of the federal Bankruptcy Act, or any similar law
or statute of the United States or any state thereof.
The undersigned further covenant and agree that this Guaranty of Lease
shall be and remain in full force and effect as to any renewal, modification
or extension of the Lease, whether or not known to or approved by the
undersigned, and that no subletting, assignment or other transfer of the
Lease, or any interest therein, or any such renewal, modification, or
extension, shall operate to extinguish or diminish the liability of the
undersigned hereunder. In the event of any termination of the Lease by
Landlord, the undersigned's liability hereunder shall not be terminated, but
the undersigned shall be and remain fully liable for all damages, costs,
expenses and other claims which may arise under or in connection with the
Lease. If the undersigned shall, directly or indirectly, advance any sums to
Tenant, such sums and indebtedness shall be subordinate in all respects to
the amounts then and thereafter due and owing by the Tenant under the Lease.
Wherever reference is made to the liability of Tenant in the Lease, such
reference shall be deemed likewise to refer to the undersigned, jointly and
severally, with Tenant. The liability of the undersigned for the obligations
of Tenant under the Lease shall be primary, absolute and unconditional. In
any right of action which shall accrue to Landlord under the Lease, Landlord
may, at Landlord's option, proceed against any one or more of the undersigned
and/or Tenant, jointly or severally, and may proceed against any one or more
of the undersigned without having demanded performance of, commenced any
action against or having obtained any judgment
K-1
<PAGE> 89
EXHIBIT 10.16
against Tenant. The undersigned hereby waive any obligation on the part of
Landlord to enforce or seek to enforce the terms of the Lease against Tenant
as a condition to Landlord's right to proceed against the undersigned
hereunder. The undersigned hereby expressly waive: (i) notice of acceptance
of this Guaranty of Lease and of presentment, demand and protest; (ii) notice
of any default hereunder or under the Lease and all indulgences; (iii) demand
for observance, performance or enforcement of any terms or provisions of this
Guaranty of Lease or of the Lease; and (iv) all other notices and demands
otherwise required by law which the undersigned may lawfully waive. This
Guaranty of Lease is a guaranty of payment and not a guaranty of collection.
The undersigned agree that in the event this Guaranty of Lease shall be
enforced by suit or otherwise, the undersigned will reimburse the Landlord,
upon demand, for all expenses incurred in connection therewith, including,
without limitation, reasonable attorneys' fees.
The undersigned hereby waive, to the maximum extent permitted by law,
all defenses available to a guarantor or surety, whether the waiver is
specifically herein enumerated or not, including, without limitation, any
statute of limitations affecting the enforcement of this Guaranty of Lease,
and any right of set-off or compensation against amounts due under this
Guaranty of Lease.
THE UNDERSIGNED HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY OF LEASE OR ANY
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS
OF THE UNDERSIGNED OR LANDLORD ARISING OUT OF OR RELATED IN ANY MANNER WITH
THIS GUARANTY OF LEASE (INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND
OR CANCEL THIS GUARANTY OF LEASE OR ANY CLAIMS OR DEFENSES ASSERTING THAT
THIS GUARANTY OF LEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR
VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LANDLORD TO ENTER AND
ACCEPT THE LEASE.
The undersigned hereby assign to Landlord any rights the undersigned may have
to file a claim and proof of claim in any bankruptcy or similar proceeding of
Tenant and any awards or payments thereon to which the undersigned would
otherwise be entitled.
It is further agreed that all of the terms and provisions hereof shall
inure to the benefit of and may be enforced by the respective heirs,
executors, successors and assigns of Landlord and the holder of any mortgage
to which the Lease may be subject and subordinate from time to time, and
shall be binding upon the respective heirs, executors, successors and assigns
of the undersigned. Landlord may, without notice, assign this Guaranty of
Lease, and no such assignment shall diminish the undersigned's liability
under this Guaranty of Lease.
In the event more than one person or entity executes this Guaranty of
Lease, the liability of such signatories hereunder shall be joint and
several. In the event only one person or entity executes this Guaranty of
Lease, all provisions hereof which refer to more than one guarantor
K-2
<PAGE> 90
EXHIBIT 10.16
shall be automatically modified to refer to only one guarantor, and otherwise
this Guaranty of Lease shall remain unmodified and in full force and effect.
It is understood that other agreements similar to this Guaranty of Lease
may, at Landlord's sole option and discretion, be executed by other persons
with respect to the Lease. This Guaranty of Lease shall be cumulative of any
such agreements and the liabilities and obligations of the undersigned
hereunder shall in no event be affected or diminished by reason of such other
agreements. Moreover, in the event Landlord obtains the signature of more
than one guarantor on this Guaranty of Lease or obtains additional guarantee
agreements, or both, the undersigned agree that Landlord, in Landlord's sole
discretion, may (i) compound or settle with any one or more of the guarantors
for such consideration as Landlord may deem proper, and (ii) release one or
more of the guarantors from liability. The undersigned further agree that no
such action shall impair the rights of Landlord to enforce the Lease against
any remaining guarantor or guarantors, including the undersigned.
The undersigned agree to execute and deliver to Landlord, from time to
time, upon five (5) days notice from Landlord, a certificate addressed to
Landlord, any mortgagee or prospective mortgagee, or any prospective
purchaser, certifying (i) that this Guaranty of Lease is unmodified and in
full force and effect and (ii) to such other matters as Landlord may
reasonably request. The undersigned further agree that upon request by
Landlord from time to time, the undersigned shall furnish Landlord, within
five (5) days of receipt of such request, with a copy of the undersigned's
most recent annual financial statements. The undersigned represents and
warrants that all financial statements, records and information furnished by
the undersigned to Landlord in connection with this Guaranty of Lease are
true, correct and complete in all respects.
If any provision of this Guaranty of Lease or the application thereof to
any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, the remainder of this Guaranty of Lease and the
application of that provision to other provisions or circumstances shall not
be affected but rather shall be enforced to the fullest extent permitted by
law.
If the undersigned is a corporation (including any form of professional
association), then each individual executing or attesting this Guaranty of
Lease on behalf of such corporation covenants, warrants and represents that
he or she is duly authorized to execute or attest and deliver this Guaranty
of Lease on behalf of such corporation. If the undersigned is a partnership
(general or limited) or limited liability company, then each individual
executing this Guaranty of Lease on behalf of the partnership or company
hereby covenants, warrants and represents that he or she is duly authorized
to execute and deliver this Guaranty of Lease on behalf of the partnership or
company in accordance with the partnership agreement or membership agreement,
as the case may be, or an amendment thereto, now in effect.
This Guaranty of Lease shall be governed by the laws of the State of
Maryland, and shall be performed in all respects in Montgomery County,
Maryland.
EXECUTED UNDER SEAL as of the ______ day of August, 1997.
K-3
<PAGE> 91
EXHIBIT 10.16
GUARANTOR:
BIORELIANCE CORP., a Delaware corporation
By: [SEAL]
--------------------------------
Name:
------------------------------
Title:
-----------------------------
K-4
<PAGE> 1
EXHIBIT 10.17
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (the "Amendment"), entered into as of
the __ day of ________, 1998, by and between FP ROCKLEDGE, L.L.C., a Maryland
limited liability company ("Landlord") and MA BIOSERVICES, INC., a Delaware
corporation, ("Tenant").
RECITALS:
R1. Landlord and Tenant have entered into a certain Lease Agreement dated as of
October 16, 1997 (the "Prime Lease") for the lease by Tenant from Landlord of
certain Premises, as more particularly defined in the Prime Lease.
R2. Landlord and Tenant desire to modify and amend the Prime Lease to provide
for Tenant's leasing of one hundred percent (100%) of the Expansion Space,
subject to and in accordance with the terms of this Amendment. All defined
terms utilized herein shall have the same meaning as set forth in the Prime
Lease.
NOW, THEREFORE, in consideration of the foregoing Recitals and for other good
and valuable consideration, the receipt and sufficiency of which the parties
hereto do hereby acknowledge, Landlord and Tenant hereby agree as follows:
1. Lease. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, for the Term subject to the terms and provisions of the Prime Lease,
as modified herein, the Expansion Space, containing 8,500 square feet.
2. Rent. Tenant's obligation to pay Annual Base Rental with respect to the
Expansion Space shall commence on the earlier of (i) twelve (12) months after
the Rent Commencement Date; or (ii) upon the physical location of personnel in
all or any portion of the Expansion Space by Tenant for the performance of
laboratory and/or office functions (excluding incidental storage use). In the
event Tenant initially occupies less than all of the Expansion Space, the
Annual Base Rental shall be calculated on a per-square-foot basis at the rate
of $13.50 per square foot for the Expansion Space occupied. The foregoing
notwithstanding, commencing on the Rent Commencement Date, Tenant shall be
obligated to pay all of the Basic Costs applicable to the Expansion Space in
accordance with the terms of the Lease.
3. Improvement Allowance. Paragraph 1(b) of Exhibit "D" to the Lease ("Work
Agreement") is hereby modified to increase the Improvement Allowance by an
additional One Hundred Twenty-Seven Thousand Five Hundred and No/100 Dollars
($127,500.00)
<PAGE> 2
EXHIBIT 10.17
($15.00 per square foot of the Expansion Space), which amount shall be funded
as part of the Improvements Allowance subject to and in accordance with the
terms of the Work Agreement.
4. Miscellaneous. All other terms and conditions of the Prime Lease will
continue in full force and effect. To the extent of any inconsistency between
the terms of this Amendment to the terms and conditions of the Prime Lease, the
terms and conditions of this Amendment shall govern.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of the
day and year first above written.
LANDLORD
--------
WITNESS/ATTEST: FP ROCKLEDGE, L.L.C.
By
- ------------------------------ --------------------------------
Name: Name:
------------------------- -----------------------------
Title: [Assistant] Secretary Title:
----------------------------
[Seal]
TENANT
------
WITNESS/ATTEST: MA BIOSERVICES, INC.
By
- ------------------------------ --------------------------------
Name: Name:
------------------------- -----------------------------
Title: [Assistant] Secretary Title:
----------------------------
[Seal]
2
<PAGE> 1
EXHIBIT 10.18
CONSENT OF GUARANTOR
The undersigned BIORELIANCE CORP., a Delaware corporation, Guarantor,
has executed a certain Guaranty of Lease dated October 16, 1997 (the
"Guaranty") guaranteeing the obligations of MA BIOSERVICES, INC., a Delaware
corporation, under a certain Lease Agreement (the "Lease") with FP ROCKLEDGE,
L.L.C., a Maryland limited liability company, dated October 16, 1997. The Lease
has been amended by a certain First Amendment to Lease Agreement dated February
12, 1998.
The Guarantor hereby executes this Consent of Guarantor acknowledging
the terms of the First Amendment to Lease Agreement and hereby confirms that
the Guaranty is in full force and effect with respect to the Lease as amended,
and all references in the Guaranty to the Lease shall be deemed to include the
Lease as amended by the First Amendment to Lease Agreement.
WITNESS the following seal as of the day and year first above written.
BIORELIANCE CORP.,
a Delaware corporation
By: /s/ MICHAEL R.N. THOMAS
------------------------
Michael R.N. Thomas
Vice President and CFO
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 10.19
RELEASE AND SEPARATION AGREEMENT
This Agreement, effective this 26th day of November, 1997 by and
between BioReliance Corporation and all its subsidiary companies, including MA
BioServices, Inc., (together referred herein as, "the Corporation" or "MA") and
Carl C. Schwan ("Schwan") in connection with (1) Schwan's voluntary resignation
of employment (2) a separation payment, and benefits, and (3) a release of all
claims.
1. ENDING OF EMPLOYMENT.
1.1 The parties agree that, upon execution of this Agreement, Schwan
voluntarily will tender his resignation as Chief Financial Officer with the
following effective date: "January 31, 1998, or any date prior to this on
which another Chief Financial Officer is engaged by the Corporation and assumes
the concomitant responsibilities, whichever date occurs earlier". Schwan shall
terminate as an employee on January 31, 1998 (the "Termination Date"). By
mutual written agreement, Schwan and the Corporation may extend the Termination
Date for any period of time. Schwan agrees to provide cooperation and
professional conduct until the Termination Date, including, but not limited to,
(a) continuing as Chief Financial Officer ("CFO") until the effective date of
resignation from that position with a focus on finance, accounting and treasury
responsibilities, (b) maintaining a policy that all contacts with investors,
analysts, financial community contacts, and other like persons will be the
responsibilities of the President and CEO of the Corporation, except for
routine contacts with banks and cash managers, and (c) cooperating with and
facilitating the realignment of administrative responsibilities for the
facilities, engineering and purchasing departments to the Vice President of
Human Resources, and of contracts and other legal responsibilities to the Vice
President and General Counsel.
1.2 Through his Termination Date, MA agrees to continue to pay Schwan at
his current salary, less all applicable taxes and other appropriate deductions,
on MA's regular bi-weekly payroll basis. MA also will continue to provide
Schwan with his current medical benefits during this same period, so long as
Schwan continues to pay his current employee contribution toward those medical
benefits. Eligibility to extend group health coverage beyond January 31, 1998,
for Schwan or any dependents may be exercised by signing the applicable COBRA
agreement. The Corporation shall provide the approved Company match to
individual 401(k) plan contributions made through December 31, 1997. Schwan
may, at his election, continue voluntary individual contributions to the 401(k)
plan through the Termination Date; however, no Company match will be made for
1998 contributions, if any. Schwan will continue accruing Paid Personal Leave
(PPL) through the Termination Date.
1.3 Schwan will provide consulting services to the Corporation for the
purpose
<PAGE> 2
EXHIBIT 10.19
of accomplishing a smooth transition of obligations from Schwan to the new
Chief Financial Officer and to facilitate the Corporation's filing of its
Annual Report, its report on Form 10-K, its proxy materials, and matters
related thereto. Such services shall be provided on the terms and conditions
set forth in the Professional Services Agreement attached hereto as Exhibit A.
The term of consulting services shall be from February 1, 1998 through April
15, 1998.
2. BONUS AND OPTIONS.
2.1 If Schwan performs his obligations under Section 1.1, hereof, MA will
pay Schwan a 10% annual bonus for 1997, without appraisal, on the Corporation's
regular schedule.
2.2 If Schwan performs his obligations under Section 1.1 and 1.3 hereof,
Schwan will fully vest all Incentive Stock Options previously granted and not
vested on the schedule set forth on Exhibit B hereto and will retain all rights
and obligations pertaining thereto.
3. ADDITIONAL OBLIGATIONS. All internal disclosures and any
public announcements relating to the circumstances surrounding Schwan's
voluntary resignation will be developed jointly with Schwan and will be at the
discretion, permission and direction of the President and CEO of the
Corporation; provided, however, that the Company shall be permitted to make any
filings that may be required by law or regulations, including the filing of
this Agreement with appropriate governmental agencies.
4. RELEASE. Schwan acknowledges that, absent this Agreement, he
has no right or entitlement to any separation payment and benefits, including
accelerated vesting of any Incentive Stock Options, or to a separation
allowance in any particular amount. In consideration of the payment to him of
the monies and other benefits set forth herein, Schwan hereby releases and
discharges the Corporation, it agents, employees, successors, assigns,
corporate parent, affiliates, officers, and directors, and each of them, from
any and all real or pretended claims, demands, rights, liabilities, damages,
injuries of causes of action whatsoever, known or unknown, including but not
limited to, claims and demands relating to salary, compensation, pension or
retirement plans (except as to rights which already may have vested, which
rights are specifically reserved hereunder), bonuses, incentive compensation,
commissions of any other form of compensation or perquisite, personal injury,
bodily injury, defamation, unlawful interference with contract rights or
business advantage, and any claims under the Age Discrimination in Employment
Act of 1967, or under any other federal, state, or local law prohibiting
employment discrimination (including, but not limited to, Schwan's right to
make a claim in his own right or through a suit brought by a third party on his
behalf), and any or all claims which he ever had or now has directly or
indirectly, arising out of his employment
2
<PAGE> 3
EXHIBIT 10.19
relationship with MA or the ending of that employment relationship with MA, and
all said rights, actions, claims, demands, judgements, and executions are
hereby satisfied in full, terminated and forever discharged.
By granting this Release, Schwan acknowledges that this Agreement in
no way constitutes an admission by the Corporation of any violation of law,
breach of contract or any wrongdoing whatsoever towards him.
5. CONFIDENTIALITY. By signing below, Schwan acknowledges his
ongoing and continuing obligation to abide by the confidentiality and trade
secrets agreement that he executed on June 16, 1993, and to, among other
things, keep secret or confidential, and not to utilize in any manner or
disclose to third parties, any proprietary and confidential information of the
Corporation, which may have been made available to him or came into his
possession during the period of his employment with MA. Schwan also agrees
that he shall not make any defamatory or disparaging remarks or comments about
the Corporation, its agents, employees, successors, assigns, corporate parent,
affiliates, officers, and directors to third parties or to former, present, or
prospective customers, clients, vendors, business associates or anyone else in
the industry, and shall not unlawfully interfere with the business advantage or
contracts of the Corporation, its successors, assigns, corporate parent, and
affiliates. The Corporation agrees that it shall not make any defamatory or
disparaging remarks or comments about Schwan.
6. ACKNOWLEDGMENT. By signing below, Schwan acknowledges that he
has read the foregoing Release and Separation Agreement; that he has had a
right to consult an attorney, and has been encouraged by the Corporation to
review this Agreement with an attorney; that he has been given a period of not
less than 21 days in which to consider this Agreement; that he understands it;
and that he accepts and agrees to all of the provisions contained herein.
Schwan understands that this Agreement sets forth the entire understanding of
the parties, and he acknowledges that he has not relied upon any other
representations or promises in entering into this Agreement.
7. REVOCATION. Schwan may revoke this Agreement at any time
during the seven days immediately following his execution of the Agreement,
after which time the Agreement shall be irrevocable and enforceable in any
court of competent jurisdiction. In the event that Schwan exercises his right
to revoke during the seven-day period, any sums previously paid pursuant to the
terms of this Agreement shall be returned to MA.
3
<PAGE> 4
EXHIBIT 10.19
8. ENTIRE AGREEMENT. This Agreement (together with the documents
attached hereto as exhibits and any document or agreements specifically
contemplated hereby) supersedes all prior discussions and agreements of the
parties hereto (and their affiliates) with respect to the subject matter hereof
(including, without limitation, the Release and Separation Agreement between
the parties hereto and signed as of October 14, 1997 which is hereby expressly
acknowledgment to be null and void) and contains the entire understanding of
the parties with respect to the subject matter hereof.
9. GOVERNING LAW. This Agreement shall be interpreted pursuant
to the laws of the State of Maryland.
4
<PAGE> 5
EXHIBIT 10.19
BioReliance Corporation
By:
------------------------
Capers W. McDonald
President and CEO
State of Maryland
County
- ---------------------
Sworn to and subscribed before me this
day of , 1997
------- --------------------------
- ------------------------------------------------
Notary Public
My Commission Expires:
-------------------------
------------------------
Carl C. Schwan
State of Maryland
County
- -------------------------------
Sworn to and subscribed before me this
day of , 1997
------- --------------------------
- ------------------------------------------------
Notary Public
My Commission Expires:
-------------------------
5
<PAGE> 6
EXHIBIT 10.19
Exhibit B
SCHEDULE OF VESTING FOR CARL SCHWAN
As of December 31, 1997, if Schwan has continued to perform his obligations
under Section 1.1 through that date:
741 Shares @ $1.50
133 Shares @ $.5625
333 Shares @ $2.25
2,166 Shares @ $3.00
As of January 31, 1998, if Schwan has continued to perform his obligations
under Section 1.1 through that date:
741 Shares @ $1.50
133 Shares @ $.5625
333 Shares @ $2.25
2,166 Shares @ $3.00
As of April 15, 1998, if Schwan has continued to perform his obligation under
Section 1.3 through that date:
741 Shares @ $1.50
134 Shares @ $.5625
334 Shares @ $2.25
2,167 Shares @ $3.00
Any vested options held by Mr. Schwan must be exercised within 90 days after
the termination date of employment in accordance with the Company's stock
plans.
The intent of this Exhibit B is that Carl Schwan became fully vested in all
options granted to him prior to the date hereof if the obligations described
herein have been met.
6
<PAGE> 1
EXHIBIT 10.20
REPLACEMENT REVOLVING
PROMISSORY NOTE
$1,000,000 Rockville, Maryland
October 31, 1997
FOR VALUE RECEIVED, BIORELIANCE CORPORATION, a corporation organized and in
good standing under the laws of the State of Delaware, successor in interest to
Microbiological Associates, Inc. (the "Company"), MA BIOSERVICES, INC., a
corporation organized and in good standing under the laws of the State of
Delaware ("MA BioServices"), MAGENTA CORPORATION, a corporation organized and
in good standing under the laws of the State of Delaware ("Magenta") and
MAGENTA VIRAL PRODUCTION, INC., a corporation organized and in good standing
under the laws of the State of Delaware ("Magenta Viral"; together with the
Company, MA BioServices and Magenta, each a "Borrower" and collectively, the
"Borrowers"), jointly and severally, promise to pay to the order of
NATIONSBANK, N.A., a national banking association, its successors and assigns
(the "Lender"), the principal sum of ONE MILLION DOLLARS ($1,000,000) (the
"Principal Sum"), or so much thereof as has been or may be advanced or
readvanced to or for the account of the Borrowers pursuant to the terms and
conditions of the Loan Agreement (as hereinafter defined), together with
interest thereon at the rate or rates hereinafter provided, in accordance with
the following:
1. INTEREST. Commencing as of the date hereof and continuing until
repayment in full of all sums due hereunder, the unpaid Principal Sum shall
bear interest at the LIBOR Rate (as hereinafter defined), plus the applicable
LIBOR Rate Additional Percentage (the "LIBOR Rate Option").
<PAGE> 2
EXHIBIT 10.20
(a) For purposes hereof, the "LIBOR Rate Additional
Percentage" shall mean the percentages applicable to this Note in accordance
with the following:
(i) If the ratio of Funded Debt divided
by EBITDA is equal to or greater than 2.5 to 1.0, the LIBOR Rate
Additional Percentage shall be two percent (2.00%);
(ii) If the ratio of Funded Debt divided
by EBITDA is less than 2.5 to 1.0, but equal to or greater than 2.0 to
1.0, the LIBOR Rate Additional Percentage shall be one and three
quarters percent (1.75%);
(iii) If the ratio of Funded Debt divided
by EBITDA is less than 2.0 to 1.0, but equal to or greater than 1.5 to
1.0 the LIBOR Rate Additional Percentage shall be one and one half
percent (1.5%); and
(iv) If the ratio of Funded Debt divided
by EBITDA is less than 1.5 to 1.0, the LIBOR Rate Additional
Percentage shall be one and one quarter percent (1.25%)
(b) The initial LIBOR Rate Additional Percentage shall be
one and one-quarter percent (1.25%). Thereafter, the applicable LIBOR Rate
Additional Percentage for all Advances shall be calculated and adjusted
quarterly, based on the quarterly financial statements of the Borrowers
required to be submitted to the Lender pursuant to Section 5.1(c) of the Loan
Agreement, commencing with the statements for the quarter ending September 30,
1997. Such quarterly changes shall be effective commencing five (5) Banking
Days after submission by the Borrowers of the required financial statements; it
being understood, however, that in the event the quarterly financial statements
are not submitted when due, the LIBOR Rate
2
<PAGE> 3
EXHIBIT 10.20
Additional Percentage shall be two percent (2.00%), until such financial
statements are submitted as required, at which time, the LIBOR Rate Additional
Percentage (for the balance of the quarterly period) shall be determined as set
forth above. For purposes of this Note, "Funded Debt" and "EBITDA" shall each
be determined based on the consolidated quarterly financial statements of the
Borrowers and shall have the meanings set forth in the Loan Agreement.
(c) For purposes hereof, the "LIBOR Rate" shall mean a
fluctuating rate equal to the daily London Interbank Offered Rate for thirty
(30) day U.S. Dollar deposits as quoted by the Lender as of 11:00 A.M.
(Washington, D.C. time), which rate shall be adjusted for any Federal Reserve
Board reserve requirements imposed upon the Lender from time to time.
(d) The Borrowers shall pay to the Lender, as additional
interest, the following sums, at the time and in the manner hereinafter set
forth:
(A) if, due to either: (i) the
introduction of or any change (including, without limitation, any change by way
of imposition or increase of reserve requirements) in or in the interpretation
of any law or regulation or (ii) the compliance by the Lender with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to the Lender of agreeing to make or making, funding or maintaining
advances of all or a portion of the Principal Sum, then the Borrowers shall
from time to time, upon demand by the Lender, pay to the Lender additional
amounts to indemnify the Lender against any such increased costs. A
certificate as to the amount of such increased costs submitted to the Borrowers
by the Lender shall in the absence of manifest error be conclusive. It shall
be deemed, for purposes of computing any increased costs pursuant to this
Section, that (i) the making and maintaining of advances of the Principal Sum
which accrue interest based on the LIBOR Rate have been made by the Lender from
its office in London, England and (ii) the funding of each
3
<PAGE> 4
EXHIBIT 10.20
Advance of the Principal Sum by the Lender which accrues interest based on the
LIBOR Rate has been made through the London Interbank Market. Such additional
cost shall be payable hereunder at the time and in the manner that interest is
payable hereunder for such costs incurred since the last interest payment;
(B) the Borrowers shall also pay to the
Lender at the time and in the manner that interest is payable hereunder for
each advance, the cost since the last interest payment date, as determined in
good faith by the Lender, of complying, in connection with such advance during
such interest period, with any reserve, special deposit or similar requirement
(including but not limited to reserve requirements under Federal Reserve
Regulation D) imposed or deemed applicable against any assets held by or
deposits or accounts in or with or credit extended by the Lender, or the office
of the Lender in London, England, by any United States governmental authority
charged with the administration of such requirements. Each notification as to
the amount of such cost, delivered to the Borrowers by the Lender shall, in the
absence of manifest error, be conclusive as to the amount of such cost. It
shall be deemed for purposes of computing cost pursuant to the above provision
that the making and maintaining of each advance which accrues interest based on
the LIBOR Rate has been made by the Lender through its office in London,
England.
(e) In respect to any interest rate election hereunder
and any transactions contemplated hereby, the Borrowers authorize the Lender to
accept, rely upon, act upon and comply with, any verbal or written
instructions, requests, confirmations and orders of
_________________________________ or ____________________________________ on
behalf of the Borrowers. The Borrowers acknowledge and agree that the
transmission between the
4
<PAGE> 5
EXHIBIT 10.20
Borrowers and the Lender of any such instructions, requests, confirmations and
orders involves the possibility of errors, omissions, mistakes and
discrepancies and agrees to adopt such internal measures and operational
procedures to protect its interests. By reason thereof, the Borrowers hereby
assume all risk of loss and responsibility for, releases and discharges the
Lender from any and all responsibility or liability for, and agrees to
indemnify, reimburse on demand and hold the Lender harmless from, any and all
claims, actions, damages, losses, liability and expenses by reason of, arising
out of or in any way connected with or related to, (i) the Lender's acceptance,
reliance and actions upon, compliance with or observation of any such
instructions, requests, confirmations or orders, and (ii) any such errors,
omissions, mistakes and discrepancies, except those caused by the Lender's
gross negligence or willful misconduct.
(f) All interest payable under the terms of this Note
shall be calculated on the basis of a 360-day year and the actual number of
days elapsed.
2. PAYMENTS AND MATURITY. The unpaid Principal Sum, together
with interest thereon at the rate or rates provided above, shall be payable as
follows:
(a) Interest only on the unpaid Principal Sum shall be
due and payable monthly, commencing November 30, 1997 and on the last day of
each month thereafter to maturity; and
(b) Unless sooner paid, the unpaid Principal Sum,
together with interest accrued and unpaid thereon, shall be due and payable in
full on May 31, 1998.
The fact that the balance hereunder may be reduced to zero from time
to time pursuant to the Loan Agreement will not affect the continuing validity
of this Note or the Loan Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.
5
<PAGE> 6
EXHIBIT 10.20
3. DEFAULT INTEREST. Upon the occurrence of an Event of Default
(as hereinafter defined), the unpaid Principal Sum shall bear interest
thereafter at a rate five percent (5.0%) per annum in excess of the LIBOR Rate
until such Event of Default is cured.
4. LATE CHARGES. If the Borrowers shall fail to make any payment
under the terms of this Note within fifteen (15) days after the date such
payment is due, the Borrowers shall pay to the Lender on demand a late charge
equal to three percent (3%) of such payment.
5. COMMITMENT FEE. The Borrowers jointly and severally agree to
pay to the Lender on the first day of every third calendar month hereafter
commencing after the date of this Note a commitment fee (computed on the basis
of a year consisting of three hundred and sixty (360) days for the actual
number of days elapsed) of one quarter of one percent (.25%) per annum on the
daily average of the unused amount of this Note during such period.
6. APPLICATION AND PLACE OF PAYMENTS. All payments, made on
account of this Note shall be applied first to the payment of any late charge
then due hereunder, second to the payment of accrued and unpaid interest then
due hereunder, and the remainder, if any, shall be applied to the unpaid
Principal Sum. All payments on account of this Note shall be paid in lawful
money of the United States of America in immediately available funds during
regular business hours of the Lender at its principal office in Rockville,
Maryland or at such other times and places as the Lender may at any time and
from time to time designate in writing to the Borrowers.
7. LOAN AGREEMENT AND OTHER LOAN DOCUMENTS. This Note is the
"Line of Credit Replacement Note" described in that certain Amended and
Restated Replacement Loan Agreement of even date herewith by and among the
Borrowers and the Lender (the Amended and Restated Replacement Loan Agreement,
as thereafter amended, is hereinafter called the "Loan Agreement").
6
<PAGE> 7
EXHIBIT 10.20
This Note amends and restates in its entirety that certain Amended and Restated
Promissory Note dated August 31, 1997 in the maximum principal amount of One
Million Dollars ($1,000,000) from the Company, MA BioServices, and Magenta in
favor of the Lender (as amended from time to time, the "Original Note"). It
is expressly agreed that the indebtedness evidenced by the Original Note has
not been extinguished or discharged hereby. The Borrowers agree that the
execution of this Agreement is not intended to and shall not cause or result in
a novation with respect to the Original Note. The indebtedness evidenced by
this Note is included within the meaning of the term "Obligations" as defined
in the Loan Agreement. The term "Loan Documents" as used in this Note shall
mean collectively this Note, the Loan Agreement and any other instrument,
agreement, or document previously, simultaneously, or hereafter executed and
delivered by the Borrowers and/or any other person, singularly or jointly with
any other person, evidencing, securing, guaranteeing, or in connection with the
Principal Sum, this Note and/or the Loan Agreement. All capitalized terms used
herein and not otherwise defined shall have the meanings given to such terms in
the Loan Agreement.
8. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an "Event
of Default" and collectively, the "Events of Default") under the terms of this
Note:
(a) The failure of the Borrowers to pay to the Lender
when due any and all amounts payable by the Borrowers to the Lender under the
terms of this Note and such failure shall continue for a period of fifteen (15)
Banking Days; or
(b) The occurrence of an event of default (as defined
therein) under the terms and conditions of any of the other Loan Documents.
7
<PAGE> 8
EXHIBIT 10.20
9. REMEDIES. Upon the occurrence of an Event of Default, at the
option of the Lender, all amounts payable by the Borrowers to the Lender under
the terms of this Note shall immediately become due and payable by the
Borrowers to the Lender without notice to the Borrowers or any other person,
and the Lender shall have all of the rights, powers, and remedies available
under the terms of this Note, any of the other Loan Documents and all
applicable laws. The Borrowers and all endorsers, guarantors, and other
parties who may now or in the future be primarily or secondarily liable for the
payment of the indebtedness evidenced by this Note hereby severally waive
presentment, protest and demand, notice of protest, notice of demand and of
dishonor and non-payment of this Note and expressly agree that this Note or
any payment hereunder may be extended from time to time without in any way
affecting the liability of the Borrowers, guarantors and endorsers.
Until such time as the Lender is not committed to extend further
credit to the Borrowers and all Obligations of the Borrowers to the Lender have
been indefeasibly paid in full in cash, and subject to and not in limitation of
the provisions set forth in the next following paragraph below, no Borrower
shall have any right of subrogation (whether contractual, arising under the
Bankruptcy Code or otherwise), reimbursement or contribution from any Borrower
or any guarantor, nor any right of recourse to its security for any of the
debts and obligations of any Borrower which are the subject of this Note.
Except as otherwise expressly permitted by the Loan Agreement, any and all
present and future debts and obligations of any Borrower to any other Borrower
are hereby subordinated to the full payment and performance of all present and
future debts and obligations to the Lender under this Note and the Loan
Agreement and the Loan Documents, provided, however, notwithstanding anything
set forth in this Note to the contrary, prior to the occurrence of a payment
8
<PAGE> 9
EXHIBIT 10.20
Default, the Borrowers shall be permitted to make payments on account of any of
such present and future debts and obligations from time to time in accordance
with the terms thereof.
Each Borrower further agrees that, if any payment made by any Borrower
or any other person is applied to this Note and is at any time annulled, set
aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of any property
hereafter securing this Note is required to be returned by the Lender to any
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, such Borrower, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, such Borrower's liability hereunder (and any lien, security interest
or other collateral securing such liability) shall be and remain in full force
and effect, as fully as if such payment had never been made, or, if prior
thereto any such lien, security interest or other collateral hereafter securing
such Borrower's liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender, this Note (and such lien, security
interest or other collateral) shall be reinstated in full force and effect, and
such prior cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligations of such Borrower in respect of the
amount of such payment (or any lien, security interest or other collateral
securing such obligation).
The JOINT AND SEVERAL obligations of each Borrower under this Note
shall be absolute, irrevocable and unconditional and shall remain in full force
and effect until the outstanding principal of and interest on this Note and all
other Obligations or amounts due hereunder and under the Loan Agreement and the
Loan Documents shall have been indefeasibly paid in full in cash in accordance
with the terms thereof and this Note shall have been canceled.
9
<PAGE> 10
EXHIBIT 10.20
10. EXPENSES. The Borrowers, jointly and severally, promise to
pay to the Lender on demand by the Lender all reasonable costs and expenses
incurred by the Lender in connection with the collection and enforcement of
this Note, including, without limitation, reasonable attorneys' fees and
expenses and all court costs.
11. NOTICES. Any notice, request, or demand to or upon the
Borrowers or the Lender shall be deemed to have been properly given or made
when delivered in accordance with Section 9.1 of the Loan Agreement.
12. MISCELLANEOUS. Each right, power, and remedy of the Lender as
provided for in this Note or any of the other Loan Documents, or now or
hereafter existing under any applicable law or otherwise shall be cumulative
and concurrent and shall be in addition to every other right, power, or remedy
provided for in this Note or any of the other Loan Documents or now or
hereafter existing under any applicable law, and the exercise or beginning of
the exercise by the Lender of any one or more of such rights, powers, or
remedies shall not preclude the simultaneous or later exercise by the Lender of
any or all such other rights, powers, or remedies. No failure or delay by the
Lender to insist upon the strict performance of any term, condition, covenant,
or agreement of this Note or any of the other Loan Documents, or to exercise
any right, power, or remedy consequent upon a breach thereof, shall constitute
a waiver of any such term, condition, covenant, or agreement or of any such
breach, or preclude the Lender from exercising any such right, power, or remedy
at a later time or times. By accepting payment after the due date of any
amount payable under the terms of this Note, the Lender shall not be deemed to
waive the right either to require prompt payment when due of all other amounts
payable under the terms of this Note or to declare an Event of Default for the
failure
10
<PAGE> 11
EXHIBIT 10.20
to effect such prompt payment of any such other amount. No course of dealing
or conduct shall be effective to amend, modify, waive, release, or change any
provisions of this Note.
13. PARTIAL INVALIDITY. In the event any provision of this Note
(or any part of any provision) is held by a court of competent jurisdiction to
be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision (or
remaining part of the affected provision) of this Note; but this Note shall be
construed as if such invalid, illegal, or unenforceable provision (or part
thereof) had not been contained in this Note, but only to the extent it is
invalid, illegal, or unenforceable.
14. CAPTIONS. The captions herein set forth are for convenience
only and shall not be deemed to define, limit, or describe the scope or intent
of this Note.
15. APPLICABLE LAW. Each of the Borrowers acknowledges and agrees
that this Note shall be governed by the laws of the State of Maryland, even
though for the convenience and at the request of the Borrowers, this Note may
be executed elsewhere.
16. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF THIS NOTE, THE
LOAN DOCUMENTS OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING
ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
ARBITRATION OF COMMERCIAL DISPUTES OF ENDISPUTE, INC., D/B/A J.A.M.S./ENDISPUTE
("J.A.M.S.") AND THE "SPECIAL RULES" SET FORTH BELOW. IN
11
<PAGE> 12
EXHIBIT 10.20
THE EVENT OF AN INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS NOTE, AGREEMENT OR DOCUMENT MAY BRING ANY ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS NOTE, AGREEMENT OR DOCUMENT RELATES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
MONTGOMERY COUNTY, MARYLAND AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR. IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO EXTEND THE COMMENCING OF SUCH HEARING FOR AN ADDITIONAL SIXTY
(60) DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS NOTE, AGREEMENT OR
DOCUMENT SHALL BE DEEMED TO: (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
NOTE, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE LENDER OF THE
PROTECTION AFFORDED TO IT BY 12 U.S.C. SECTION 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE
12
<PAGE> 13
EXHIBIT 10.20
LENDER: (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF,
OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED
TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER.
THE LENDER MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE
PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS NOTE, AGREEMENT
OR DOCUMENT. NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF ANY ACTION FOR FORECLOSURE OR FOR PROVISIONAL OR ANCILLARY
REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE
CLAIMANT IN SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
13
<PAGE> 14
EXHIBIT 10.20
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under seal by their duly authorized officers as of the date first written
above.
<TABLE>
<S> <C>
WITNESS/ATTEST: BIORELIANCE CORPORATION
By: (SEAL)
------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MA BIOSERVICES, INC.
By: (SEAL)
------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MAGENTA CORPORATION
By: (SEAL)
------------------------------ --------------------------
Name:
Title:
WITNESS/ATTEST: MAGENTA VIRAL PRODUCTION, INC.
By: (SEAL)
------------------------------ --------------------------
Name:
Title:
</TABLE>
14
<PAGE> 1
EXHIBIT 10.21
PROFESSIONAL SERVICES AGREEMENT
BETWEEN
BIORELIANCE CORPORATION
AND
JEFFREY M. OSTROVE, PH.D.
THIS AGREEMENT is entered into as of the 2nd day of December, 1997 by
and between BioReliance Corporation ("BioReliance" or the "Corporation"), a
Delaware Corporation, with principal offices located at 9900 Blackwell Road,
Rockville, Maryland 20850, U.S.A., and Jeffrey M. Ostrove, Ph.D. ("Dr.
Ostrove"), North Potomac, Maryland.
WITNESSETH
WHEREAS, BioReliance has established a corporate Scientific Advisory
Board ("SAB") to explore the current and future scientific direction of the
Corporation; and
WHEREAS, BioReliance has determined that SAB membership should be
comprised of non-employee scientific advisors; and
WHEREAS, BioReliance desires to have Dr. Ostrove join the SAB as a
non-employee scientific advisor; and
WHEREAS, Dr. Ostrove desires to join the SAB as a non-employee
scientific advisor;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Dr. Ostrove and BioReliance agree as follows:
1. SCOPE OF WORK
Subject to the terms and conditions hereinafter provided, BioReliance
engages Dr. Ostrove for the furnishing of professional services in support of
the BioReliance SAB. These services shall include, but not be limited to:
a. Evaluation of current scientific issues of interest to
BioReliance.
b. Assisting in the development of BioReliance's long-range
plans.
c. Reviewing and evaluating the strategic growth plans of
BioReliance.
d. Assisting in the establishment of BioReliance's future
scientific direction.
<PAGE> 2
e. Attending periodic SAB meetings.
Dr. Ostrove will exercise his best efforts in providing BioReliance these
services.
2. PERIOD OF PERFORMANCE
This Agreement shall commence on January 1, 1998 and shall terminate on
December 31, 2001, unless extended by mutual agreement.
3. CONSIDERATION AND PAYMENT TERMS
As compensation for the services provided hereunder, from and after
January 1, 2000, BioReliance shall pay Dr. Ostrove the following:
a. An annual fee of two thousand dollars ($2,000) to be paid in
January of each year of service (the "Annual Fee").
b. A fee of one thousand five hundred dollars ($1,500) per SAB
meeting attended (the "Attendance Fee").
As further incentive to Dr. Ostrove to exercise his best efforts, from
and after January 1, 2000 Dr. Ostrove shall be granted an option for 500 shares
annually (the "Annual Grant") on the first business day on or after January 1 of
each calendar year that the 1997 Incentive Plan is in effect, provided that Dr.
Ostrove is a member of the Scientific Advisory Board on that date.
4. SPECIAL CONSIDERATIONS
BioReliance has agreed to accelerate the vesting of Dr. Ostrove's
options as set forth below:
Unvested Options for 1,000 shares of the Common Stock of the Company at
an option price of $0.5625 of granted under the1994 MAGENTA Incentive Stock
Option (the "MAGENTA Plan") Plan shall be exercisable as of December 31, 1997.
Any vested options held by Dr. Ostrove must be exercised within 90 days after
the effective date of Dr. Ostrove's termination of employment with the Company.
The remainder of Dr. Ostrove's unvested options shall terminate as
provided in the Plan. Dr. Ostrove vested options shall be governed by the
MAGENTA Plan.
In consideration of the accelerated vesting described above, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Dr. Ostrove agrees to waive the payment by BioReliance of
the Annual Fee and the Attendance Fee for calendar years 1998 and 1999. He also
agrees to waive the initial grant of options for SAB members, and the annual
grant of options for calendar year 1999. If he is a member of the SAB on January
1, 2000, Dr. Ostrove shall be
- 2 -
<PAGE> 3
entitled to receive the Annual Fee, the Attendance Fee and the Annual Grant in
accordance with Paragraph 3 hereof. Dr. Ostrove acknowledges that he voluntary
resigned from the Company and, except as set forth in the paragraph 4 of this
Agreement and except for the payment of his 1997 bonus at the rate of 10%, he
has no right or entitlement to any separation payment and benefits, including
accelerated vesting of any stock options, or to a separation allowance in any
particular amount. In consideration of the benefits set forth above, Dr. Ostrove
hereby releases and discharges the Company, it agents, employees, successors,
assigns, corporate parent, affiliates, officers, and directors, and each of
them, from any and all real or pretended claims, demands, rights, liabilities,
damages, injuries or causes of action whatsoever, known or unknown, including
but not limited to, claims and demands relating to salary, compensation, pension
or retirement plans (except as to rights which already may have vested, which
rights are specifically reserved hereunder), bonuses, incentive compensation,
commissions of any other form of compensation or perquisite, personal injury,
bodily injury, defamation, unlawful interference with contract rights or
business advantage, and any or all claims which he even had or now has directly
or indirectly, arising out of his employment relationship with BioReliance or
the ending of that employment relationship with BioReliance, and all said
rights, actions, claims, demands, judgments, and executions are hereby satisfied
in full, terminated and forever discharged.
By granting this release, Dr. Ostrove acknowledges that this Agreement in no way
constitutes an admission by the Corporation of any violation of law, breach of
contract or any wrongdoing whatsoever towards him.
5. BIORELIANCE DESIGNATED REPRESENTATIVES
Dr. Ostrove shall report to and receive direction from the BioReliance
Science Council, which will act through its Chairperson in most situations, or
from the BioReliance President and CEO, or other individuals designated by
BioReliance from time to time. Members of the BioReliance Science Council
presently are as follows:
John E. McEntire, Ph.D. Raymond F. Cosgrove, Ph.D.
Brandon J. Price, Ph.D. David Jacobson-Kram, Ph.D.
6. TRAVEL
BioReliance agrees to reimburse Dr. Ostrove for required travel and
living expenses incurred in the performance of the Agreement when such travel is
approved in advance by BioReliance's designated representative. Dr. Ostrove may
travel business class, as authorized for other SAB members, when on SAB
business.
7. PROPRIETARY INFORMATION
- 3 -
<PAGE> 4
In providing services to BioReliance, Dr. Ostrove will have access to
proprietary knowledge of BioReliance's affairs, trade secrets, potential
customers and other proprietary information.
Dr. Ostrove shall treat all such information as proprietary and confidential to
BioReliance in accordance with the Confidentiality Agreement dated December 2,
1997 between BioReliance and Dr. Ostrove.
8. INDEPENDENT PARTIES
Nothing in this Agreement shall be construed as to create any
relationship between Dr. Ostrove and BioReliance other than that of independent
contracting parties. Neither party shall have any right, power or authority to
assume, create of incur any expense, liability or obligation, expressed or
implied, on behalf of the other.
9. WAIVER
No waiver by either party of any breach of any provision hereof shall
constitute a waiver of any other breech of that or any other provision hereof.
10. SEVERABILITY
If any part, term or provision of the Agreement is determined to be
invalid or unenforceable, the remainder of this Agreement shall not be affected,
and this Agreement shall otherwise remain in full force and effect.
11. ARBITRATION
Any claim or controversy relating to or arising out of this Agreement
shall be resolved exclusively by arbitration, in accordance with the rules then
obtaining of the American Arbitration Association.
12. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement and understanding
between Dr. Ostrove and BioReliance relating to the services to be performed
hereunder and supersedes all other communications between Dr. Ostrove and
BioReliance relating to the subject matter hereof. Any amendments to or
modifications of this Agreement shall be effective only if reduced to writing
and executed by both Dr. Ostrove and BioReliance.
13. HEADINGS
The subject matter headings used in the Agreement are solely for
convenience and are not to be taken as modifying, clarifying, describing or
limiting any provision hereof.
- 4 -
<PAGE> 5
IN WITNESS THEREOF, Dr. Ostrove and BioReliance have caused this
Agreement to be executed by their duly authorized representative as of the dates
set forth above.
<TABLE>
<S> <C>
BioReliance Corporation Jeffrey M. Ostrove, Ph.D.
By By
------------------------------------------ ------------------------------------------
Name Capers W. McDonald Name Jeffrey M. Ostrove, Ph.D.
------------------------------------------ ------------------------------------------
Title President and C.E.O Title
------------------------------------------ ------------------------------------------
Date Date
------------------------------------------ ------------------------------------------
</TABLE>
- 5 -
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-3434) of BioReliance Corporation of our report
dated February 23, 1998 appearing on page F-2 of this Annual Report on Form
10-K.
PRICE WATERHOUSE LLP
Washington, D.C.
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the December
31, 1997 financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,227
<SECURITIES> 27,554
<RECEIVABLES> 16,165
<ALLOWANCES> (242)
<INVENTORY> 0
<CURRENT-ASSETS> 51,531
<PP&E> 30,545
<DEPRECIATION> (14,944)
<TOTAL-ASSETS> 68,651
<CURRENT-LIABILITIES> 13,422
<BONDS> 0
0
0
<COMMON> 77
<OTHER-SE> 49,795
<TOTAL-LIABILITY-AND-EQUITY> 68,651
<SALES> 47,888
<TOTAL-REVENUES> 47,888
<CGS> 29,452
<TOTAL-COSTS> 40,938
<OTHER-EXPENSES> 784
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 717
<INCOME-PRETAX> 7,017
<INCOME-TAX> 2,951
<INCOME-CONTINUING> 4,066
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,066
<EPS-PRIMARY> 1.18<F1>
<EPS-DILUTED> 0.60
<FN>
<F1>
Represents basic EPS calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share."
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1997 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,881
<SECURITIES> 23,421
<RECEIVABLES> 17,361
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 53,510
<PP&E> 14,617
<DEPRECIATION> 0
<TOTAL-ASSETS> 69,149
<CURRENT-LIABILITIES> 14,555
<BONDS> 5,877
0
0
<COMMON> 76
<OTHER-SE> 48,641
<TOTAL-LIABILITY-AND-EQUITY> 59,149
<SALES> 36,060
<TOTAL-REVENUES> 36,060
<CGS> 22,321
<TOTAL-COSTS> 22,321
<OTHER-EXPENSES> 8,676
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 186
<INCOME-PRETAX> 4,877
<INCOME-TAX> 2,048
<INCOME-CONTINUING> 2,829
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,829
<EPS-PRIMARY> 1.40<F1>
<EPS-DILUTED> .44
<FN>
<F1>
Represents basic EPS calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share."
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the June
30, 1997 financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,444
<SECURITIES> 0
<RECEIVABLES> 14,383
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,106
<PP&E> 14,091
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,262
<CURRENT-LIABILITIES> 13,689
<BONDS> 6,283
0
65
<COMMON> 4
<OTHER-SE> 15,221
<TOTAL-LIABILITY-AND-EQUITY> 35,262
<SALES> 24,364
<TOTAL-REVENUES> 24,364
<CGS> 15,027
<TOTAL-COSTS> 15,027
<OTHER-EXPENSES> 5,955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 317
<INCOME-PRETAX> 3,065
<INCOME-TAX> 1,287
<INCOME-CONTINUING> 1,778
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,778
<EPS-PRIMARY> 4.78<F1>
<EPS-DILUTED> 0.31
<FN>
<F1>
Represents basic EPS calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share."
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the March
31, 1997 financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,571
<SECURITIES> 0
<RECEIVABLES> 14,168
<ALLOWANCES> (255)
<INVENTORY> 0
<CURRENT-ASSETS> 18,733
<PP&E> 27,141
<DEPRECIATION> (13,079)
<TOTAL-ASSETS> 35,748
<CURRENT-LIABILITIES> 14,587
<BONDS> 0
0
65
<COMMON> 4
<OTHER-SE> 14,459
<TOTAL-LIABILITY-AND-EQUITY> 35,748
<SALES> 11,781
<TOTAL-REVENUES> 11,781
<CGS> 7,442
<TOTAL-COSTS> 10,380
<OTHER-EXPENSES> (29)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 229
<INCOME-PRETAX> 1,201
<INCOME-TAX> 511
<INCOME-CONTINUING> 690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 690
<EPS-PRIMARY> 1.89<F1>
<EPS-DILUTED> 0.12
<FN>
<F1>
Represents basic EPS calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share."
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the December
31, 1996 financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,965
<SECURITIES> 0
<RECEIVABLES> 13,885
<ALLOWANCES> (240)
<INVENTORY> 0
<CURRENT-ASSETS> 18,169
<PP&E> 27,481
<DEPRECIATION> (12,536)
<TOTAL-ASSETS> 35,827
<CURRENT-LIABILITIES> 12,754
<BONDS> 0
0
65
<COMMON> 3
<OTHER-SE> 14,091
<TOTAL-LIABILITY-AND-EQUITY> 35,827
<SALES> 37,682
<TOTAL-REVENUES> 37,682
<CGS> 24,860
<TOTAL-COSTS> 34,518
<OTHER-EXPENSES> (28)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 844
<INCOME-PRETAX> 2,348
<INCOME-TAX> 846
<INCOME-CONTINUING> 1,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,502
<EPS-PRIMARY> 4.41<F1>
<EPS-DILUTED> 0.26
<FN>
<F1>
Represents basic EPS calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share."
</FN>
</TABLE>
