<PAGE>
As filed with the Securities and Exchange Commission on May 3, 2000
Registration No. 333-30758
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 4 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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PARADIGM GENETICS, INC.
(Exact name of Registrant as specified in our charter)
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<S> <C> <C>
Delaware 8731 56-2047837
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
104 Alexander Drive
Research Triangle Park, North Carolina 27709
(919) 425-3000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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John A. Ryals, Ph.D.
Chief Executive Officer and President
Paradigm Genetics, Inc.
104 Alexander Drive
Research Triangle Park, North Carolina 27709
(919) 425-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Jeffrey M. Wiesen, Esq. Henry P. Nowak, Esq. David W. Pollak, Esq.
Peter S. Lawrence, Esq. Vice President and Stephanie M. Gulkin,
Mintz, Levin, Cohn, General Counsel Esq.
Ferris, Morgan, Lewis & Bockius
LLP
Paradigm Genetics, Inc.
Glovsky and Popeo, P.C 104 Alexander Drive
One Financial Center Research Triangle Park 101 Park Avenue
Boston, MA 02111 North Carolina 27709 New York, NY 10178
(617) 542-6000 (919) 425-3000 (212) 309-6000
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Approximate date of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
number for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement number for
the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell securities, and we are not soliciting +
+offers to buy these securities, in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 3, 2000
PROSPECTUS
5,000,000 Shares
[Paradigm Logo Appears Here]
Common Stock
This is an initial public offering of common stock by Paradigm Genetics,
Inc. We are selling 5,000,000 shares of common stock. It is currently estimated
that the initial public offering price will be between $14.00 and $16.00 per
share.
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There is currently no public market for our common stock. We have applied to
list our common stock on the Nasdaq National Market under the symbol PDGM.
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<CAPTION>
Per Share Total
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<S> <C> <C>
Public offering price........................................ $ $
Underwriting discounts....................................... $ $
Proceeds to Paradigm Genetics................................ $ $
</TABLE>
The underwriters may also purchase up to 750,000 additional shares of common
stock from us at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments.
Chase Securities Inc. expects to deliver the shares to purchasers on or
about , 2000.
-------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 5.
-------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
Chase H&Q
J.P. Morgan & Co.
Pacific Growth Equities, Inc.
Stephens Inc.
, 2000
<PAGE>
[Inside front cover and Gatefold]
[Graphic: Includes graphic depiction summarizing the
steps in our GENEFUNCTION FACTORY. The graphic is titled:
"Our GENEFUNCTION FACTORYTM. Text underneath the graphic
states: "Our GENEFUNCTION FACTORYTM is an assembly-line
process that enables us rapidly to discover genes, alter
genes in plants and other organisms, evaluate the results
of the alterations and determine the function of genes.
We capture information throughout the process in
FUNCTIONFINDERTM, our computerized system for storing and
analyzing biological information.
Second graphic includes pictures of components of our
FUNCTIONFINDERTM bioinformatics system. The graphic is
entitled "FUNCTIONFINDERTM."]
<PAGE>
TABLE OF CONTENTS
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Page
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Prospectus Summary................................................. 1
Risk Factors....................................................... 5
Special Note Regarding Forward-Looking Statements.................. 13
Use of Proceeds.................................................... 14
Dividend Policy.................................................... 14
Capitalization..................................................... 15
Dilution........................................................... 16
Selected Financial Data............................................ 17
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 18
Business........................................................... 22
Management......................................................... 38
Certain Transactions............................................... 48
Principal Stockholders............................................. 50
Description of Capital Stock....................................... 52
Shares Eligible for Future Sale.................................... 55
Underwriting....................................................... 57
Legal Matters...................................................... 60
Experts............................................................ 60
Where You Can Find More Information................................ 60
Index to Financial Statements...................................... F-1
</TABLE>
i
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PROSPECTUS SUMMARY
This summary highlights the most important features of this offering and
the information contained elsewhere in this prospectus. You should read the
entire prospectus carefully, especially the risks of investing in our common
stock discussed under "Risk Factors" beginning on page 5.
Paradigm Genetics, Inc.
Overview
We are industrializing the process of determining gene function by
creating an assembly-line process to generate information that we believe will
enable us to develop novel products in four major sectors of the global
economy: crop production, nutrition, human health and industrial products. We
have developed our GeneFunction Factory to simultaneously study the functions
of many genes in our selected plants and fungi. We designed our GeneFunction
Factory to be an integrated, rapid, industrial-scale laboratory through which
we can discover and modify genes, understand the consequences of the
modifications and reliably determine the function of those genes. We store and
annotate gene function information in our FunctionFinder bioinformatics system,
which is a computer system that helps us and our partners analyze the large
volumes of complex data generated from our study of genes. We currently have
strategic alliances with Bayer AG in the area of crop production and with The
Monsanto Company in the areas of crop production and nutrition. We describe
these alliances in greater detail below.
The Opportunity
In the early 1990s, a worldwide effort began to decipher and make publicly
available the precise sequence of the entire genetic content, or genomes, of
various organisms, including humans, pathogens and agricultural crops. Industry
experts anticipate that researchers will complete the sequencing of the entire
human genome, as well as the genome of the small mustard plant, Arabidopsis, by
the end of the year 2000. However, knowing a gene's sequence does not provide
enough information to determine gene function. In addition, the traditional
process of determining gene function has been slow, labor intensive and
formulaic. Furthermore, new technologies, such as those that measure gene
expression, in the absence of other supporting data, provide insufficient
information to conclude a gene's function.
Our GeneFunction Factory
We believe the most reliable way to determine a gene's precise function is
to study the effects of altered forms of the gene on an organism. The biology
and genetics of certain organisms, which we call model organisms, make them
effective tools for investigating the function of genes of other organisms with
commercial value, which we refer to as target organisms. By applying our
GeneFunction Factory to selected plants and fungi, we and our strategic
partners intend to use the resulting information to develop novel products. By
using our GeneFunction Factory we are able to discover a gene, alter the gene,
measure the consequences of the alteration, determine the function of the gene
and place the resulting large amount of information into our FunctionFinder
bioinformatics system. Our assembly-line approach automates the measurement of
thousands of physical and chemical characteristics of a selected organism at
different times of the organism's life cycle. Our GeneFunction Factory
presently is capable of determining the function of approximately 50 genes per
week, and we believe that it will be able to determine the function of up to
200 genes per week by the end of 2000.
Initially, we are using our GeneFunction Factory to determine the function
of genes in Arabidopsis, rice and six filamentous fungi, which are multi-cell
fungi. Arabidopsis is a useful model organism because it is related to
soybeans, cotton, vegetables and oil seed crops. Rice is an important target
and model organism
1
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because it is one of the world's most important grains, and it is closely
related to corn, wheat, barley, sugarcane, oats and rye. Fungi are useful
target and model organisms for developing potential products in crop
production, nutrition, human health and industrial products. We work with our
model organisms to infer the function of genes in target organisms, when
working directly with the target is not practicable. We have chosen our
particular models because they are relevant to target organisms with commercial
value, are efficient research tools and are amenable to the collection of large
numbers of measurements. We intend to study the function of essentially every
gene in these organisms, and utilize this information to develop novel
products.
Our Strategy
Our goal is to be the leading supplier of gene function information in our
model and target organisms. The key elements of our strategy are to:
. determine the function of genes in our target and model organisms;
. continue to develop our GeneFunction Factory and FunctionFinder
bioinformatics system;
. develop products both with strategic partners and independently;
. focus our development efforts on large market opportunities; and
. pursue intellectual property protection for our GeneFunction Factory and
gene function information.
We will continue to make significant expenditures in excess of our
revenues to pursue our strategy. Through December 31, 1999, we had incurred a
net loss of approximately $10.6 million, and this loss will continue to
increase for the foreseeable future. We may need additional funding to pursue
our strategy and because we are an early stage company and our technology is
unproven, we may not be able to achieve our goals or achieve or maintain
profitability.
Our Strategic Alliances
To date, we have established strategic alliances with Bayer and Monsanto.
The Bayer alliance is focused on the development of new herbicides while the
Monsanto alliance is focused on the development of crop production and
nutrition products. Under these alliances, we have total committed funding of
approximately $56 million and have performance fees, milestone payments and
payments in connection with extension options that could generate as much as an
additional $133 million. We will also earn product development milestones and
sales royalties if products are commercialized from these alliances.
In September 1998, we entered into a three-year collaboration with Bayer
for the development of new chemical herbicides. We will use our GeneFunction
Factory to identify Arabidopsis genes that may be targets for herbicide
discovery and will provide Bayer with assays to screen chemicals for potential
herbicides and access to customized Arabidopsis-based releases of our
FunctionFinder bioinformatics system.
In November 1999, we entered into a six-year strategic alliance with
Monsanto to develop crop production and nutrition products. Monsanto is to
provide us with thousands of gene sequences from Arabidopsis and other
organisms. Using our GeneFunction Factory, we will provide functional analysis
of these genes to Monsanto.
We were incorporated in North Carolina on September 9, 1997. We
reincorporated as a Delaware corporation on April 7, 2000. Our facilities and
executive offices are located at 104 Alexander Drive, Research Triangle Park,
North Carolina 27709, and our telephone number at that address is (919) 425-
3000. Our worldwide web address is www.paragen.com. The information on our web
site is not incorporated by reference into this prospectus.
2
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The Offering
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<S> <C>
Common Stock offered by Paradigm Genetics........... 5,000,000 shares
Common Stock to be outstanding after this offering.. 23,911,254 shares
Use of proceeds..................................... Research and development, plant and
equipment and general corporate
purposes, including possible
acquisition of or investment in
complementary businesses, products
or technologies. For a more detailed
discussion of our anticipated use of
proceeds from this offering, see
"Use of Proceeds."
Proposed Nasdaq National Market symbol.............. PDGM
</TABLE>
The above information is based on the number of shares outstanding as of
March 27, 2000 and excludes:
. 1,537,760 shares of common stock issuable upon the exercise of stock
options at a weighted average exercise price of $2.55 per share; and
. 763,779 shares of common stock underlying warrants at a weighted
average exercise price of $1.77 per share.
------------------
Unless otherwise indicated, all information contained in this prospectus:
. reflects our reincorporation from a North Carolina corporation to a
Delaware corporation on April 7, 2000;
. assumes that the underwriters do not exercise their over-allotment
option; and
. reflects the mandatory conversion of all of our outstanding shares of
Series A and Series B Preferred Stock into a total of 10,353,198 shares
of common stock upon completion of this offering.
The number of shares of common stock to be outstanding after this offering
reflects the mandatory conversion of 3,000,000 shares of our Series C Preferred
Stock, which were sold in January 2000.
3
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Summary Financial Data
The following statement of operations data for the period from inception
(September 9, 1997) through December 31, 1997 and for the years ended December
31, 1998 and 1999 have been derived from our financial statements and the notes
to those financial statements that are included elsewhere in this prospectus.
The summary balance sheet data as of December 31, 1999 are presented (1) on an
actual basis, (2) on a pro forma basis to reflect the mandatory conversion of
all of our outstanding preferred stock at December 31, 1999 into a total of
10,353,198 shares of common stock upon completion of this offering; and (3) on
a pro forma as adjusted basis to reflect the receipt of estimated proceeds from
our sale of 5,000,000 shares of common stock in this offering at an assumed
initial public offering price of $15.00 per share, after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us.
For a more detailed explanation of the financial data, see "Selected
Financial Data" on page 17, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" beginning on page 18 and our financial
statements and the notes to those financial statements beginning on page F-1 of
this prospectus.
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<CAPTION>
Period From
Inception
(September 9, Years Ended December
1997) to 31,
December 31, -----------------------
1997 1998 1999
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(in thousands, except per share
data)
<S> <C> <C> <C>
Statements of Operations Data:
Collaborative research agreements and
grant revenues....................... $ -- $ 871 $ 2,197
Total operating expenses.............. 220 5,171 12,442
Net loss.............................. (220) (4,290) (10,620)
Net loss per share--basic and
diluted.............................. $ (0.19) $ (1.14) $ (2.51)
Weighted average common shares
outstanding--basic and diluted....... 1,160,958 3,750,036 4,236,409
Pro forma net loss per share--basic
and diluted.......................... $ (0.76)
Pro forma weighted average common
shares outstanding--basic and
diluted.............................. 14,046,759
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- ----------- -----------
(unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term
investments............................... $ 3,956 $ 3,956 $ 72,706
Working capital............................ (3,635) (3,635) 65,115
Total assets............................... 14,225 14,225 82,975
Long-term debt, less current portion....... 8,047 8,047 8,047
Equity subject to potential redemption..... -- -- 7,500
Preferred stock............................ 11,919 -- --
Accumulated deficit........................ (15,163) (15,163) (15,163)
Total stockholders' equity (deficit) ...... (2,827) (2,827) 58,423
</TABLE>
The pro forma and pro forma as adjusted balance sheet data do not reflect
our receipt of proceeds of approximately $15.0 million, or $5.00 per share,
from the sale of 3,000,000 shares of our Series C Preferred Stock in January
2000. If this amount had been included, our total assets would have been
approximately $98.0 million and our total stockholders' equity would have been
approximately $80.9 million.
4
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RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially harm our business, operating results and
financial condition and could result in a complete loss of your investment.
Risks Related to our Business
We have a history of net losses. We will continue to incur net losses that may
depress our stock price.
We have incurred net losses in each year since our inception and expect
these losses to continue. We experienced a net loss of approximately $10.6
million for the year ended December 31, 1999. As of December 31, 1999, we had
an accumulated deficit of approximately $15.2 million. To date, we have derived
all of our revenues from only two strategic alliances and a government grant.
We expect to derive revenue in the foreseeable future principally from
strategic alliances. We expect to spend a significant amount of capital to fund
research and development and enhance our core technologies, including our
GeneFunction Factory. As a result, we expect that our operating expenses will
increase significantly in the near term and, consequently, we will need to
generate significant additional revenues to become profitable. We cannot
predict when, if ever, we will become profitable.
We may never become profitable if we and our strategic partners are unable to
develop or commercialize our technologies into products.
We have no experience in manufacturing and marketing products, and we
currently do not have the resources or capability to manufacture products on a
commercial scale. In order for us to commercialize our products on our own, we
would need to develop, or obtain through outsourcing arrangements or through
acquisitions, the capability to manufacture, market and sell products. Since we
do not currently possess the resources necessary to develop and commercialize
potential products ourselves, we must enter into strategic alliances to develop
and commercialize products.
We have entered into only two strategic alliances, with Bayer and
Monsanto, to fund the development of certain new products, including herbicides
and plants with improved nutritional and growth characteristics. We have
derived substantially all of our revenues to date from these two collaborative
research and development agreements. If we are unable to successfully achieve
milestones or our strategic partners fail to develop successful products, we
will not earn the revenues contemplated under such collaborative agreements. In
addition, we may not be able to enter into additional strategic alliances. We
do not control the resources that our strategic partners devote to our projects
and our strategic partners may not perform their obligations. Also, we may
pursue opportunities in fields that conflict with our strategic partners or in
which our strategic partners could become active competitors. In either case,
we may not be able to commercialize our products.
We may need additional financing, which may not be available, and any
financings may dilute the percentage ownership of our existing stockholders,
cause us to relinquish rights to our technologies or cause us to grant licenses
on unfavorable terms.
Our existing capital resources may not be sufficient to fund our future
operating plans and we may therefore need to raise significant additional
capital. We have expended significant resources in developing our GeneFunction
Factory and expect our capital expenditures and operating expenses to increase
over the next several years as we continue developing the GeneFunction Factory
and increase our research and development activities. The amount of additional
capital which we expect we will need to raise will depend on many factors,
including:
. the number, breadth and progress of our research programs;
. the achievement of the milestones under certain of our existing
strategic alliances;
5
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. our ability to establish additional and maintain current and
additional strategic alliances;
. our strategic partners' success in commercializing products developed
under our strategic alliances;
. our success in commercializing products to which we have retained the
rights under our strategic alliances;
. the costs incurred in enforcing and defending our patent claims and
other intellectual property rights; and
. the costs and timing of obtaining regulatory approvals for any of our
products.
We may need to raise additional capital through public or private equity
offerings, debt financings or additional strategic alliances and licensing
arrangements. We may not be able to find additional financing when we need it
or on terms favorable to our stockholders or us. If we raise additional capital
by issuing equity securities, such an issuance will reduce the percentage
ownership of existing stockholders. Furthermore, we may need to issue
securities that have rights, preferences and privileges senior to our common
stock. If we raise additional funds through strategic alliances and licensing
arrangements, we may be required to relinquish rights to certain of our
technologies or product candidates, or to grant licenses on unfavorable terms.
If we lose our key personnel or are unable to attract and retain additional
personnel, our operations could be disrupted and our revenues could decrease.
Our success depends on the continued services and on the performance of
our senior management and scientific staff, in particular John Ryals, Ph.D.,
our Chief Executive Officer and President. The loss of the services of Dr.
Ryals or any of our other senior management or scientific staff could seriously
impair our ability to operate and achieve our objectives, which could reduce
our revenues. We have $2 million of key man life insurance on Dr. Ryals. This
amount may not be sufficient to compensate us for the loss of his services. In
addition, recruiting and retaining qualified scientific personnel to perform
future research and development work will be critical to our success.
In order to achieve our business objectives, we must identify, attract,
train and motivate additional personnel with expertise in specific industries
and areas applicable to the products developed through our technologies. We
compete intensely for these personnel and we may be unable to achieve our
personnel goals. Our failure to achieve any of these goals could seriously
limit our ability to improve our operations and financial results.
If we were successfully sued for product liability, we could face substantial
liabilities that exceed our resources.
We may be held liable if any product we develop, or any product which is
made using our technologies, causes injury or is found unsuitable during
product testing, manufacturing, marketing or sale. For example, a genetically
modified food could, after it is sold, be found to cause illness in individuals
who eat the food. Also, like other pharmaceutical products, those produced
through genetically modified plants could be found to cause illness. These
risks are inherent in the development of chemical, agricultural and
pharmaceutical products. We currently do not have product liability insurance.
If we choose to obtain product liability insurance but cannot obtain sufficient
insurance coverage at an acceptable cost or otherwise protect against potential
product liability claims, the commercialization of products that we or our
strategic partners develop may be prevented or inhibited. If we are sued for
any injury caused by our products, our liability could exceed our total assets.
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If we do not compete effectively, our losses could increase.
Our technology platform for the industrialization of gene function
determination faces competition from functional genomics technologies, which
are computer hardware and software technologies that researchers use to help
them identify the role that specific genes play within organisms, created by
others, including Exelixis, Inc., CuraGen Corporation, Rosetta Inpharmatics,
Inc. and Large Scale Biology Corporation (formerly known as Biosource
Technologies, Inc.). We expect competition to intensify in genomics research as
scientists achieve technology advances that become widely known. Genomic
technologies have undergone and are expected to continue to undergo rapid and
significant change. Our future success will depend in large part on maintaining
a competitive position in the genomics field, and particularly in the
functional genomics field. We or others may make rapid technological
developments which may result in products or technologies becoming obsolete
before we recover the expenses we incur in connection with our development. We
or our strategic partners may offer products which could be made obsolete by
less expensive or more effective crop enhancement, nutrition enhancement, drug
discovery and industrial product development technologies, including
technologies that may be unrelated to genomics. We may not be able to enhance
our technology in ways necessary to compete successfully with newly emerging
technologies.
Any products that we may develop alone or in collaboration with others
will compete in highly competitive markets. In the specific markets in which we
apply or intend to apply our technology platform, we face competition from
plant genomics, pharmaceutical, agrochemical and biotechnology companies. Many
of our existing and potential competitors have substantially greater financial
resources, research and development staffs, facilities, manufacturing and
marketing experience, distribution channels and human resources than we do.
Many of these competitors have achieved substantial market penetration in the
crop production, nutrition, human health and industrial products markets.
Our exclusive use of plant and fungal model organisms may limit our
ability to compete in the human health market and the industrial products
markets. We believe that our ability to compete in the human health market may
depend on the degree to which information we develop on plant and fungal gene
and pathway functions may relate to human physiology. Competing companies who
use model organisms with greater similarities to human genes, such as mice, as
well as companies that do direct studies of human populations, may have a
substantial advantage in developing products for humans.
If we are not able to adequately acquire and protect patents and licenses, we
may not be able to operate our business and remain competitive.
Our business and competitive position will depend in part on our ability
to obtain patents and maintain adequate protection of our other intellectual
property for our technologies and products in the United States and other
countries. As of March 27, 2000, we had 31 patent applications pending covering
our technology with the United States Patent and Trademark Office. We hold no
issued patents and we may never receive patents on our applications in the
United States or other countries. The laws of some foreign countries do not
protect proprietary rights to the same extent as the laws of the United States,
and many companies have encountered significant problems in protecting their
proprietary rights in these foreign countries.
Third parties have filed, and in the future are likely to file, patent
applications covering genes and gene function that we have developed or may
develop or technology upon which our technology platform depends. If patent
offices issue patents on these patent applications and we wish to use the
claimed genes, gene functions or technology, we would need to obtain a license
from the third party. However, we might not be able to obtain any such license
on commercially favorable terms, if at all, and if we do not obtain these
licenses, we might be prevented from using certain technologies or taking
certain products to market.
7
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The patent positions of biopharmaceutical and biotechnology companies,
including our patent position, are generally uncertain and involve complex
legal and factual questions. Patent law relating to the scope of claiming the
technology field in which we operate is still evolving. We will be able to
protect our proprietary rights from unauthorized use by third parties only to
the extent that our proprietary technologies are covered by valid and
enforceable patents or are effectively maintained as trade secrets. We will
apply for patents covering both our technologies and products, as we deem
appropriate. However, other companies may challenge these applications and
governments may not issue patents we request. Any future patents we obtain may
not be sufficiently broad to prevent others from practicing our technologies or
from developing competing products. Furthermore, others may independently
develop similar or alternative technologies or design around our patented
technologies. In addition, our patents may be challenged, invalidated or fail
to provide us with any competitive advantages.
We rely upon trade secret protection for our confidential and proprietary
information. We have taken security measures to protect our proprietary
information. These measures may not provide adequate protection for our trade
secrets or other proprietary information. Even though we seek to protect our
proprietary information by entering into confidentiality agreements with
employees, strategic partners and consultants, people may still disclose our
proprietary information and we might not be able to meaningfully protect our
trade secrets.
If third parties make or file claims of intellectual property infringement
against us or otherwise seek to establish their intellectual property rights,
we may have to spend time and money in response and shut down some of our
operations.
Third parties may claim that we are employing their proprietary technology
without authorization or that we are infringing their patents. We could incur
substantial costs and diversion of management and technical personnel in
defending ourselves against any of these claims. Furthermore, parties making
claims against us may be able to obtain injunctive or other equitable relief
which could effectively block our ability to further develop, commercialize and
sell products. In the event of a successful claim of infringement, courts may
order us to pay damages and obtain one or more licenses from third parties. We
may not be able to obtain these licenses at a reasonable cost, if at all.
Defense of any lawsuit or failure to obtain any of these licenses could prevent
us from commercializing available products.
Risks Related to our Industry
We are an early stage company using unproven technologies and, as a result, we
may never achieve, or be able to maintain, profitability.
You should evaluate us in light of the uncertainties affecting an early
stage biotechnology company. Our GeneFunction Factory is still in the early
stages of development. We have not yet proven that determining the function of
a gene in commercially significant target organisms will enable us to develop
commercial products.
If adverse public reaction limits the acceptance of genetically modified
products, demand for any products that we or our collaborators may develop may
decrease.
The commercial success of our product candidates will depend in part on
public acceptance of the use of genetically modified products, including drugs,
plants and plant products. Claims that genetically modified products are unsafe
for consumption or pose a danger to the environment may influence public
attitudes. Any genetically modified products that our collaborators or we may
develop may not gain public acceptance. Due to public reaction in both the
United States and Europe, some food manufacturers and restaurants have already
decided not to sell food that has been genetically altered. If this continues
or increases, this could cause a decrease in demand for products that we or our
collaborators may develop.
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Any products that we or our strategic partners develop using the gene function
information we provide may be subject to a lengthy and uncertain government
regulatory process that may not result in the necessary approvals, may delay
the commercialization of these products or may be costly, any of which could
reduce our revenues.
Any new product that we or our strategic partners develop will likely
undergo extensive regulatory review process in the United States by the FDA and
the USDA and by regulators in other countries before it can be marketed or
sold. For example, in the United States, the FDA must approve any drug or
biologic product before it can be marketed in the U.S. This regulatory review
process can take many years and require substantial expense. Adverse publicity
could lead to greater regulation and trade restrictions on imports and exports
of genetically modified products. Changes in the policies of U.S. and foreign
regulatory bodies could increase the time required to obtain regulatory
approval for each new product.
Our efforts to date have been primarily limited to identifying targets. If
regulators approve any products that we or our strategic partners develop, the
approval may impose limitations on the uses for which a product may be
marketed. Regulators may continue to review a product after approving it for
marketing to the public. Regulators may impose restrictions and sanctions,
including banning the continued sale of the product, if they discover problems
with the product or its manufacturer.
Risks Related to this Offering
We may face a financial liability arising out of a possible violation of the
Securities Act of 1933 in connection with e-mails sent to all of our employees
regarding participation in our directed share program.
As part of our initial public offering, we and the underwriters have
determined to make available up to 500,000 shares of our common stock at the
initial public offering price for directors, employees, business associates and
related persons associated with us. On February 28 and March 13, 2000, we sent
e-mail messages with respect to the proposed directed share program to all of
our employees setting forth procedural aspects for participating in the
directed share program and informing them about the administration of the
program and that their friends and families might have an opportunity to
participate in the proposed program. No person who received either e-mail
should rely on it in any manner in making a decision whether to purchase shares
of our common stock in this offering. We did not deliver a preliminary
prospectus prior to distribution of the e-mails, and each e-mail may constitute
a non-conforming prospectus under the Securities Act of 1933. As a result, we
may have a contingent liability under the Securities Act of 1933. Any liability
would depend upon the number of shares of our common stock purchased by the
recipients of the e-mails. The recipients of the e-mails who purchase shares of
our common stock in this offering may have a right for a period of one year
from the date of the purchase to obtain recovery of the consideration paid in
connection with their purchase of shares of our common stock or, if they had
already sold the stock, sue us for damages resulting from their purchase of
shares of our common stock. If any liability is asserted with respect to either
e-mail, we will vigorously contest the matter. However, if all of the
purchasers in the directed share program who received the e-mails are awarded
damages after an entire or substantial loss of their investment, the damages
could total up to approximately $4.5 million plus interest based on an assumed
initial public offering price of $15.00 per share and based on the Company's
intention to allocate up to 300,000 of the potential 500,000 shares to such
persons. Although the Company does not intend to allocate more than 300,000
shares to employees who received the e-mails, or their friends and families, if
a violation of the Securities Act were deemed to apply to the entire allocation
of 500,000 shares in the directed share program, our damages could total up to
approximately $7.5 million plus interest based on an assumed initial public
offering price of $15.00 per share. If this occurs, our financial condition
would be adversely affected.
9
<PAGE>
Our management will have broad discretion as to the use of proceeds from this
offering and may spend the proceeds in ways with which you may not agree.
Our management will have broad discretion over the use of proceeds from
this offering. We currently intend to use the proceeds of this offering for
research and development and general corporate purposes. Our management may
allocate the net proceeds among these purposes as it determines is necessary.
In addition, market factors may require our management to allocate all or
portions of the net proceeds for other purposes. Management may not use the
proceeds in a manner in which you approve. Accordingly, you will be relying on
the judgment of our management with regard to the use of proceeds from this
offering.
Our stock price may be extremely volatile and you may not be able to resell
your shares at or above the initial public offering price.
Prior to this offering, there has been no public market for shares of our
common stock. An active trading market may not develop following completion of
this offering, or if developed, may not be maintained. We and representatives
of the underwriters will negotiate the initial public offering price for the
shares. This price may not be indicative of prices that will prevail later in
the market. The stock market has experienced significant price and volume
fluctuations, and the market prices of technology companies, particularly life
science companies, have been highly volatile. You may not be able to resell
your shares at or above the initial public offering price.
If our results of operations fluctuate and quarterly results are lower than the
expectations of securities analysts, then the price of our common stock could
fall.
Our operating results historically have fluctuated on a quarterly basis
and are likely to continue to do so in the future. These fluctuations could
cause our stock price to fluctuate significantly or decline. Some of the
factors, which could cause our operating results to fluctuate, include:
. expiration of research contracts with strategic partners, which may
not be renewed or replaced;
. the success rate of our discovery efforts leading to milestones and
royalties;
. the timing and willingness of strategic partners to commercialize our
products which would result in royalties; and
. general and industry specific economic conditions, which may affect
our strategic partners' research and development expenditures.
A large portion of our expenses, including expenses for facilities,
equipment and personnel are relatively fixed. Accordingly, if revenues decline
or do not grow as anticipated due to expiration of research contracts or
government research grants, failure to obtain new contracts or other factors,
we may not be able to correspondingly reduce our operating expenses. In
addition, we plan to significantly increase operating expenses in 2000. Failure
to achieve anticipated levels of revenues could therefore significantly harm
our operating results for a particular fiscal period.
Our operating results in some quarters may not meet the expectations of
stock market analysts and investors. In that case, our stock price would likely
decline.
If our stockholders sell substantial amounts of our common stock after this
offering, the market price of our common stock may fall.
The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market after the closing
of this offering, or the perception that these sales could occur. In addition,
these factors could make it more difficult for us to raise funds through future
offerings of common stock. There will be 23,911,254 shares of common stock
outstanding immediately after this offering, or 24,661,254 shares if the
underwriters exercise their over-allotment option in full. All of the
10
<PAGE>
shares sold in this offering will be freely transferable without restriction or
further registration under the Securities Act, except for any shares purchased
by our "affiliates," as defined in Rule 144 of the Securities Act, and except
for any shares that are subject to 180-day lock-up agreements providing that
the stockholders will not offer, sell, pledge or otherwise dispose of their
shares for a period of 180 days after this date of this prospectus without the
prior written consent of Chase Securities Inc. The remaining shares of common
stock outstanding will be "restricted securities" as defined in Rule 144.
Holders of these shares may sell them in the future without registration under
the Securities Act to the extent permitted by Rule 144 or other exemptions
under the Securities Act. See "Shares Eligible for Future Sale."
Anti-takeover provisions of Delaware law and our charter could make a third-
party acquisition of us difficult.
We reincorporated as a Delaware corporation on April 7, 2000. The anti-
takeover provisions of Delaware law could make it more difficult for a third
party to acquire control of us, even if the change in control would be
beneficial to stockholders. We will be subject to the provisions of Section 203
of the General Corporation Law of Delaware. Section 203 will prohibit us from
engaging in certain business combinations, unless the business combination is
approved in a prescribed manner. Accordingly, Section 203 may discourage, delay
or prevent someone from acquiring or merging with us. In addition, upon
completion of this offering, our restated certificate of incorporation and
amended and restated by-laws will contain certain provisions that may make a
third party acquisition of us difficult, including:
. a classified board of directors, with three classes of directors each
serving a staggered three-year term;
. the ability of the board of directors to issue preferred stock; and
. the inability of our stockholders to call a special meeting or act by
written consent.
Some of our existing stockholders can exert control over us, and may not make
decisions that are in the best interests of all stockholders.
After this offering, our officers, directors and stockholders who
beneficially own more than five percent of our common stock will together
control 17,173,448, or approximately 65.7%, of our outstanding common stock. As
a result, these stockholders, if they act together, will be able to exert a
significant degree of influence over our management and affairs and over
matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. In addition, this concentration
of ownership may delay or prevent a change in control of us and might affect
the market price of our common stock, even when a change may be in the best
interests of all stockholders. In addition, the interests of this concentration
of ownership may not always coincide with our interests or the interests of
other stockholders and accordingly, they could cause us to enter into
transactions or agreements, which we would not otherwise consider.
Future issuances of preferred stock may dilute the rights of our common
stockholders.
Our board of directors will have the authority to issue up to 5,000,000
shares of preferred stock and to determine the price, rights, privileges and
other terms of these shares. The board of directors may exercise this authority
without the approval of the stockholders. The rights of the holders of any
preferred stock that we may issue in the future may adversely affect the rights
of holders of our common stock.
11
<PAGE>
You will experience immediate dilution in the book value per share of the
common stock you purchase.
The assumed initial public offering price is substantially higher than the
book value per share of our common stock. Investors purchasing common stock in
this offering will, therefore, incur immediate dilution of $11.89 in net
tangible book value per share of common stock, based on an assumed initial
public offering price of $15.00 per share. Investors will incur additional
dilution based on the exercise of outstanding stock options and warrants.
12
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some statements contained in this prospectus are forward-looking
statements concerning our operations, economic performance and financial
condition. Forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended, are included, for example, in
the discussions about:
. our strategy;
. sufficiency of our cash resources;
. revenues from existing and new strategic alliances;
. product development;
. our research and development and other expenses; and
. our operational and legal risks.
These statements involve risks and uncertainties. Actual results may
differ materially from those expressed or implied in those statements. Factors
that could cause these differences include, but are not limited to, those
discussed under "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
------------------
"Paradigm Genetics", the Paradigm Genetics logo and FunctionFinder are
trademarks of Paradigm Genetics, Inc. The Company has filed a trademark
application for GeneFunction Factory. Other trademarks and trade names
appearing in this prospectus are the property of their holders.
13
<PAGE>
USE OF PROCEEDS
The net proceeds that we will receive from our sale of shares of common
stock in this offering are estimated to be approximately $68.8 million, after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by us and assuming an initial public offering price of $15.00
per share. If the underwriters exercise their over-allotment option in full, we
estimate the net proceeds from this offering will be approximately $79.2
million. We intend to use the net proceeds of this offering for the following
purposes:
. approximately 45% for research and development;
. approximately 35% for acquisitions of plant and equipment;
. approximately 10% for the development of our physical infrastructure;
and
. approximately 10% for general corporate purposes, including the
possible acquisition of or investment in complementary businesses,
products or technologies.
At the present time, we have no understandings, commitments or agreements with
respect to any material acquisition. Pending the use of the net proceeds of
this offering for the purposes described above, we intend to invest these
proceeds in short-term, interest-bearing, investment-grade securities.
The foregoing information is based on current expectations, and we may
allocate the net proceeds among these purposes as we deem necessary or
appropriate. The amounts and timing of our actual expenditures will depend upon
numerous factors, including the time actually required to reach profitability,
the status of our product development efforts, the success of our strategic
alliances, the amount of proceeds actually raised in this offering, the amount
of cash generated by our operations and competition. In addition, these and
other market factors, some of which are not yet known, may require us to
allocate portions of the net proceeds for purposes other than those described
above. See "Risk Factors--Risks Related to This Offering--Our management will
have broad discretion as to the use of proceeds from this offering and may
spend the proceeds in ways with which you may not agree" on page 10.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain earnings, if any, to support the development of our
business and do not anticipate paying cash dividends for the foreseeable
future.
Our loan security agreement with Transamerica Business Credit Corporation
prohibits the payment of any cash dividends to any of our stockholders,
warrantholders or optionholders until we have paid in full all amounts under
the terms of the agreement. See note 7 of our financial statements.
14
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of December
31, 1999 (1) on an actual basis; (2) on a pro forma basis to reflect the
mandatory conversion of all of our outstanding preferred stock at December 31,
1999 into a total of 10,353,198 shares of common stock upon the completion of
this offering and to reflect the increase in the number of authorized shares of
our Common Stock from 30,000,000 to 50,000,000 and the authorization of an
additional 5,000,000 shares of Preferred Stock, all of which is undesignated,
effected by our reincorporation as a Delaware corporation on April 7, 2000; and
(3) on a pro forma as adjusted basis to reflect the receipt of the estimated
proceeds from our sale of 5,000,000 shares of common stock in this offering at
an assumed initial public offering price of $15.00 per share, after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by us. This information should be read in conjunction with our
financial statements and the notes to those financial statements beginning on
page F-1 of this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- ----------- -----------
(unaudited) (unaudited)
(in thousands, except
share data)
<S> <C> <C> <C>
Long-term debt, less current portion......... $ 8,047 $ 8,047 $ 8,047
Equity subject to potential redemption....... -- -- 7,500
Stockholders' equity (deficit):
Series A Preferred Stock, $0.01 par value;
8,000,000 shares designated, 7,562,500
shares issued and outstanding, actual; no
shares issued or outstanding, pro forma and
pro forma as adjusted...................... 5,951 -- --
Series B Preferred Stock, $0.01 par value;
2,790,698 shares designated, 2,790,698
shares issued and outstanding, actual; no
shares issued or outstanding, pro forma and
pro forma as adjusted...................... 5,968 -- --
Preferred Stock, $0.01 par value; no shares
authorized, issued or outstanding, actual;
5,000,000 shares authorized, no shares
issued or outstanding, pro forma and pro
forma as adjusted.......................... -- -- --
Common Stock, $0.01 par value; 30,000,000
shares authorized; 5,224,257 shares issued
and outstanding, actual; 50,000,000 shares
authorized, 18,577,455 shares issued and
outstanding, pro forma; and 50,000,000
shares authorized, 23,577,455 shares issued
and outstanding, pro forma as adjusted..... 52 156 206
Additional paid-in capital.................. 3,530 15,345 76,545
Deferred compensation....................... (3,165) (3,165) (3,165)
Accumulated deficit......................... (15,163) (15,163) (15,163)
-------- -------- --------
Total stockholders' equity (deficit)..... (2,827) (2,827) 58,423
-------- -------- --------
Total capitalization................... $ 5,220 $ 5,220 73,970
======== ======== ========
</TABLE>
The pro forma amounts above do not include the effect on total
capitalization of the receipt of approximately $15.0 million of proceeds from
the sale of 3,000,000 shares of our Series C Preferred Stock at a sales price
of $5.00 per share. After giving effect to the sale of the Series C Preferred
Stock, our pro forma total capitalization would be approximately $20.2 million
and our pro forma as adjusted total capitalization would be approximately $89.0
million.
The outstanding share information is based on our shares outstanding as of
December 31, 1999 and excludes:
. 1,537,760 shares of common stock issuable upon the exercise of stock
options outstanding as of March 27, 2000 at a weighted average exercise
price of $2.55 per share; and
. 763,779 shares of common stock issuable upon the exercise of warrants
outstanding as of March 27, 2000 at a weighted average exercise price
of $1.77 per share.
See "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and
Results of Operations" and the financial statements and notes thereto included
in this prospectus.
15
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999, after
giving effect to the mandatory conversion of all of our outstanding preferred
stock into a total of 10,353,198 shares of common stock was negative $2.8
million or ($0.18) per share of common stock. Pro forma net tangible book
value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding.
After further giving effect to the sale of 3,000,000 shares of our Series C
Preferred Stock for $5.00 per share on January 21, 2000, our pro forma net
tangible book value as of December 31, 1999 was $12,147,299 or $0.63 per
share. This represents an increase in pro forma net tangible book value of
$0.81 per share of common stock. Further, assuming the sale by us of 5,000,000
shares of common stock in this offering at an assumed initial public offering
price of $15.00 per share, our pro forma net tangible book value as of
December 31, 1999 would have been approximately $73.4 million, or $3.11 per
share of common stock. This represents an immediate increase in pro forma net
tangible book value of $2.48 per share to our existing stockholders and an
immediate dilution in pro forma net tangible book value of $11.89 per share to
new investors purchasing shares in this offering. The following table
illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $15.00
Pro forma net tangible book value per share at December 31,
1999......................................................... $(0.18)
Increase per share attributable to our sale of Series C
Preferred Stock.............................................. $ 0.81
------
Pro forma net tangible book value per share at December 31,
1999 after giving effect to our sale of Series C Preferred
Stock........................................................ $ 0.63
Increase per share attributable to new investors.............. $ 2.48
Pro forma net tangible book value per share after the offering.. $ 3.11
------
Dilution per share to new investors............................. $11.89
======
</TABLE>
The following table summarizes, as of December 31, 1999, on a pro forma
basis, the number of shares of stock purchased from us, including amounts paid
by purchasers of preferred stock, the total consideration paid to us and the
average price per share paid by existing stockholders, including the Series C
Preferred Stock stockholders and by new investors, based upon an assumed
initial public offering price of $15.00 per share for shares purchased in this
offering, before deducting the estimated underwriting discounts and
commissions and estimated offering expenses. This table illustrates that
although investors purchasing common stock in this offering will have
contributed about 73.5% of the total consideration paid to us for our
outstanding common stock, they will only own about 21.2% of our outstanding
common stock.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders as
of December 31, 1999... 15,577,455 66.1% $ 12,095,998 11.8% $ 0.78
Series C Preferred Stock
Stockholders........... 3,000,000 12.7% $ 14,975,000 14.7% $ 4.99
New investors........... 5,000,000 21.2% $ 75,000,000 73.5% $15.00
---------- ------ ------------ ------
Total................. 23,577,455 100.0% $102,070,998 100.0% $ 4.33
========== ====== ============ ======
</TABLE>
The above tables assume no exercise of any outstanding stock options or
warrants to purchase common stock. As of March 27, 2000, there were:
. 1,537,760 shares of common stock issuable upon the exercise of stock
options outstanding at a weighted average exercise price of $2.55 per
share; and
. 763,779 shares of common stock issuable upon the exercise of warrants
outstanding at a weighted average exercise price of $1.77 per share.
To the extent these options or warrants are exercised, there will be further
dilution to the new investors.
16
<PAGE>
SELECTED FINANCIAL DATA
The statement of operations data for the period from inception (September
9, 1997) through December 31, 1997, and for 1998 and 1999 and the balance sheet
data as of December 31, 1998 and 1999 have been derived from our audited
financial statements beginning on page F-1 of this prospectus. The balance
sheet data as of December 31, 1997 have been derived from audited financial
statements that are not included in this prospectus. The historical results are
not necessarily indicative of the operating results to be expected in the
future. The selected financial data shown below should be read in conjunction
with our financial statements and the notes to those financial statements
beginning on page F-1 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" beginning on page 18 of this prospectus.
<TABLE>
<CAPTION>
Period from
Inception
(September Years Ended December
1997) to 31,
December 31, ------------------------
1997 1998 1999
------------ ----------- -----------
(in thousands, except per share
amounts)
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Collaborative research agreements..... $ -- $ 820 $ 2,052
Grant revenue......................... -- 51 145
---------- ----------- -----------
Total revenues....................... -- 871 2,197
Operating costs and expenses:
Research and development (excludes $0,
$0 and $88, respectively, of stock
based compensation).................. 71 3,641 7,528
Selling, general and administrative
(excludes $0, $6 and $112,
respectively, of stock based
compensation)........................ 149 1,524 4,714
Stock based compensation.............. -- 6 200
---------- ----------- -----------
Total operating costs and expenses... 220 5,171 12,442
---------- ----------- -----------
Loss from operations................... (220) (4,300) (10,245)
---------- ----------- -----------
Interest income (expense), net......... -- 10 (375)
---------- ----------- -----------
Net loss............................... $ (220) $ (4,290) $ (10,620)
========== =========== ===========
Net loss per share--basic and diluted.. $ (0.19) $ (1.14) $ (2.51)
========== =========== ===========
Weighted average common shares
outstanding--basic and diluted........ 1,160,958 3,750,036 4,236,409
========== =========== ===========
Pro forma net loss per share--basic and
diluted............................... $ (0.76)
===========
Pro forma weighted average common
shares outstanding--basic and
diluted............................... 14,046,759
===========
<CAPTION>
December 31,
-------------------------------------
1997 1998 1999
------------ ----------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term
investments........................... $ 18 $ 3,455 $ 3,956
Working capital........................ (224) 1,148 (3,635)
Total assets........................... 63 7,435 14,225
Long-term debt, net of current
portion............................... -- 3,539 8,047
Preferred stock........................ -- 5,951 11,919
Accumulated deficit.................... (253) (4,543) (15,163)
Total stockholders' equity (deficit)... (216) 1,452 (2,827)
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that are based
upon current expectations. Our actual results and the timing of events could
differ materially from those anticipated in our forward-looking statements as a
result of many factors, including those set forth under "Risk Factors",
"Special Note Regarding Forward-Looking Statements" and elsewhere in this
prospectus.
You should read the following discussion and analysis in conjunction with
the "Selected Financial Data" financial statements and related notes included
elsewhere in this prospectus.
Overview
To date, we have generated revenues from a collaborative herbicide
discovery and commercialization agreement with Bayer and a grant from the U.S.
Department of Energy. The agreement with Bayer was signed in September 1998 and
generated substantially all of our revenues for fiscal years 1998 and 1999. In
November 1999, we signed a joint development and commercialization agreement
with Monsanto. This agreement will not contribute to our revenue until the
first quarter of fiscal year 2000.
We have invested heavily in establishing our GeneFunction Factory and in
our bioinformatics infrastructure. Our total number of employees increased from
four employees at December 31, 1997 to 47 employees at December 31, 1998 and to
92 employees at December 31, 1999. Of our total number of employees on December
31, 1999, 74% were engaged in research and development activities. Our research
and development efforts consisted of work performed under our collaborative
research agreements and our federal government grant and work advancing our own
core technologies.
We have incurred significant losses since our inception. As of December
31, 1999, our accumulated deficit was approximately $15.2 million and total
stockholders' deficit was approximately $2.8 million. Operating expenses
increased from approximately $220,000 during the period from inception through
December 31, 1997, to approximately $5.2 million in the year ended December 31,
1998 and to approximately $12.4 million in the year ended December 31, 1999. We
expect to incur additional operating losses over at least the next two years as
we continue to expand our research and development efforts on our core
technologies and establish the infrastructure necessary to support our
business.
Source of Revenue and Revenue Recognition Policy
We recognize revenues from collaborative research agreements, including
nonrefundable and refundable payments received at the initiation of these
agreements, on a percentage of completion basis in accordance with the
applicable performance requirements of each agreement. Revenues related to our
government grant are recognized as related research and development expenses
are incurred. Milestone payments under collaborative research agreements are
recognized when milestones have been achieved and acknowledged by the relevant
strategic partner. Payments received in excess of revenue recognized that are
related to future performance are deferred and recognized as revenue as
performance occurs. As of December 31, 1999, we had deferred revenues of
approximately $5.8 million. Our sources of potential revenue for the next two
years are likely to be payments under existing and possible future
collaborative research agreements, government research grants and milestone
payments received under collaborative research agreements.
18
<PAGE>
Results of Operations
Years Ended December 31, 1998 and 1999.
Revenues. Revenues are comprised of amounts recognized under a
collaborative research agreement and a grant from the U.S. Department of
Energy. Total revenues increased 152% from approximately $871,000 in 1998 to
approximately $2.2 million in 1999. This increase was primarily a result of our
signing a collaborative research agreement in September 1998 with Bayer for the
development of novel screening targets in the field of herbicides.
Revenues earned under collaborative research agreements increased 150%
from approximately $820,000 in 1998 to approximately $2.1 million in 1999. This
increase was the result of an increase in revenues earned under the Bayer
collaborative research agreement in 1999 as compared to 1998 due to the fact
that this agreement was not signed until September 1998. Substantially all of
our revenues during 1998 and 1999 relate to the collaborative research
agreement with Bayer. Assuming our collaborative research agreements are
continued for the full terms under those agreements, Bayer will contribute
future committed revenues of approximately $11.8 million in 2000 through 2001
and Monsanto will contribute future committed revenues of approximately $41.5
million in 2000 through 2005.
Grant revenues increased 187% from approximately $51,000 in 1998 to
approximately $145,000 in 1999. This increase was the result of the grant being
extended in 1999.
Research and Development Expenses. Research and development expenses
consist primarily of personnel costs, facility costs, cost of supplies and
depreciation of laboratory equipment. Research and development expenses
increased 107% from approximately $3.6 million in 1998 to approximately
$7.5 million in 1999. Of this increase, approximately $2.5 million was due to
an increased number of research and development staff, approximately $334,000
was due to higher facilities costs, and approximately $886,000 was due to
depreciation of additional laboratory equipment to support our collaborative
research agreements and development of our core technology. We expect to
continue to devote substantial resources to research and development. We also
expect that research and development expenses will continue to increase and
that net losses will continue as a result.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of personnel costs, facilities costs,
business development costs and professional expenses, such as legal and
accounting fees. Selling, general and administrative expenses increased 209%
from approximately $1.5 million in 1998 to approximately $4.7 million in 1999.
Of this increase, approximately $1.3 million was due to increased staffing
necessary to manage and support our growth, approximately $209,000 was due to
higher facilities costs, approximately $267,000 was due to an increase in
professional expenses and approximately $397,000 was due to increased
depreciation expenses. We expect that our selling, general and administrative
expenses will continue to increase as we expand our legal, accounting and
business development staff, add infrastructure, incur additional costs related
to being a public company, including directors' and officers' insurance
premiums, investor relations programs and increased professional fees and
continue to make commission payments related to our collaborative research
agreements.
Stock Based Compensation Expense. Stock based compensation expense
represents the amortization of deferred compensation related to stock options
granted to employees with an exercise price below the estimated fair value of
our common stock at the date of grant, as determined by our board of directors.
Deferred compensation is amortized over the vesting period of the related stock
options, which is generally four years. We recognized approximately $6,000 in
non-cash compensation expense related to amortization of deferred compensation
in 1998 as compared to approximately $200,000 in 1999.
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Deferred compensation for options granted to employees has been determined
as the difference between the estimated fair value for financial reporting
purposes of our common stock on the date the options were granted and the
exercise price. Deferred compensation for options granted to consultants has
been determined in accordance with Statement of Financial Accounting Standards
No. 123 as the fair value of equity instruments issued. In connection with the
grant of stock options to employees, we recorded deferred compensation of
approximately $3.4 million in 1999.
Net Interest Income (Expense). Net interest income (expense) represents
interest earned on our cash and cash equivalents and short-term investments
offset by interest expense on long-term debt and capital leases. Net interest
income was approximately $11,000 in 1998, as compared to net interest expense
of approximately $375,000 in 1999. This change was attributable to increases in
senior long-term debt and an increase in notes payable secured by capital
equipment purchases, partially offset by an increase in interest income.
The Period from Inception (September 9, 1997) through December 31, 1997, and
the Year Ended December 31, 1998.
Revenues. Total revenues increased from zero during 1997 to approximately
$871,000 in 1998. The revenues in 1998 were attributable primarily to the Bayer
collaborative research agreement.
Research and Development Expenses. Research and development expenses
increased from approximately $71,000 in 1997 to approximately $3.6 million in
1998. Of this increase approximately $1.3 million was due to an increase in the
number of our research and development staff, approximately $901,000 was due to
increases in the cost of supplies, approximately $250,000 was due to
depreciation of laboratory equipment and approximately $226,000 was due to
increases in facilities costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from approximately $149,000 in 1997 to
approximately $1.5 million in 1998. Of this increase, approximately $586,000
was due to an increase in the number of administrative staff necessary to
manage and support the growth of our business, approximately $251,000 was due
to increased business development activities related to the negotiation of our
collaboration agreement with Bayer and $160,000 was due to increased
professional expenses.
Net Interest Income (Expense). Net interest expense was de minimus in
1997, as compared to net interest income of approximately $11,000 in 1998. The
increase in net interest income was attributable to higher average cash
balances during 1998.
Liquidity and Capital Resources
We have historically financed our operations through the sale of preferred
stock, debt and capital lease financing and payments received from
collaborative research agreements and a government grant. From our inception
through December 31, 1999, we have raised approximately $11.9 million in net
cash proceeds from the sale of preferred stock.
We had cash, cash equivalents and short-term investments of approximately
$18,000 at December 31, 1997, compared to approximately $3.5 million at
December 31, 1998 and approximately $4.0 million at December 31, 1999.
We had a working capital deficit of approximately $224,000 at December 31,
1997, working capital of approximately $1.1 million at December 31, 1998 and a
working capital deficit of approximately $3.6 million at December 31, 1999. The
increase in working capital between 1997 and 1998 was primarily due to
borrowings and the issuance of convertible preferred stock in 1998. The
decrease in working capital between 1998 and 1999 was primarily due to
increases in deferred revenue from our strategic partners in 1999 with which we
financed part of our operations, expenditures for property and equipment and
funding of our operating loss partially offset by proceeds from sales of
preferred stock and issuance of notes payable.
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Assuming our collaborative research agreements with our strategic partners are
continued for their full terms, Bayer will contribute committed working capital
of approximately $8.0 million in 2000 through 2001 and Monsanto will contribute
committed working capital of approximately $39.5 million in 2000 through 2005.
Our operating activities used cash of approximately $233,000 in 1997,
approximately $2.1 million in 1998 and approximately $4.4 million in 1999. Cash
used in operating activities was primarily related to net operating losses.
Cash used by investing activities totaled approximately $4,000 in 1997,
approximately $6.1 million in 1998 and approximately $7.6 million in 1999.
Investing activities consist primarily of additions to property and equipment
and net purchases of short-term investments. We expect to continue to make
significant investments in the purchase of property and equipment to support
our expanding operations. A portion of our cash may be used to acquire or
invest in complementary businesses, products or technologies, or to obtain the
right to use such complementary technologies.
Financing activities provided cash of approximately $254,000 in 1997,
approximately $9.2 million in 1998 and approximately $11.5 million in 1999.
Cash provided by financing activities resulted from the receipt of
approximately $6.0 million in net proceeds from the sale of Series A Preferred
Stock in 1998, including $350,000 in proceeds from bridge loans which were
converted to Series A Preferred Stock and approximately $6.0 million in net
proceeds from the sale of Series B Preferred Stock in 1999. In addition, we had
net borrowings of approximately $250,000 in 1997, approximately $3.6 million in
1998 and approximately $5.5 million in 1999, from borrowings under our notes
payable for equipment financing of approximately $3.8 million and our senior
note payable of approximately $2.0 million.
In January 2000, we completed the sale of our Series C Preferred Stock for
gross proceeds of approximately $15.0 million and received approximately $9.0
million in payments under collaboration agreements.
Our forecast of the period of time through which our financial resources
will be adequate to support our operations is a forward-looking statement that
involves risks and uncertainties, and actual results could vary as a result of
a number of factors. We believe that our existing cash and investment
securities and anticipated cash flow from existing collaborations together with
the net proceeds of this offering will be sufficient to support our current
operating plan for at least the next two years. We have based this estimate on
assumptions that may prove to be wrong. Our future capital requirements will
depend on many factors, including:
. the number, breadth and progress of our research programs;
. the achievement of the milestones under certain of our existing
strategic alliances;
. our ability to establish additional and maintain current and
additional strategic alliances;
. our strategic partners' success in commercializing products developed
under our strategic alliances;
. our success in commercializing products to which we have retained the
rights under our strategic alliances;
. the costs incurred in enforcing and defending our patent claims and
other intellectual property rights; and
. the costs and timing of obtaining regulatory approvals for any of our
products.
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BUSINESS
Overview
We are industrializing the process of determining gene function to
generate information that will enable us to develop novel products in four
major sectors of the global economy: crop production, nutrition, human health
and industrial products. We have developed our GeneFunction Factory to
simultaneously study the functions of many genes in our selected plants and
fungi. We designed our GeneFunction Factory to be an integrated, rapid,
industrial scale laboratory through which we can discover and modify genes,
understand the consequences of the modifications and reliably determine the
function of those genes. Our assembly-line approach automates the measurement
of thousands of physical and chemical characteristics of a selected organism at
different times in the organism's life cycle using the following techniques:
. gene expression profiling, a process of determining the level of
activity of genes in an organism at a specific time;
. metabolic profiling, a process of determining the identity and
quantities of chemicals in an organism at a specific time; and
. phenotypic profiling, a process of measuring the physical and chemical
characteristics of an organism at a specific time.
The resulting large amounts of information are then fed into our FunctionFinder
bioinformatics system. Our GeneFunction Factory presently is capable of
determining the function of approximately 50 genes per week, and we believe
that it will be capable of determining the function of up to 200 genes per week
by the end of 2000.
To date, we have established strategic alliances with Bayer and Monsanto.
The Bayer alliance is focused on the development of new herbicides while the
Monsanto alliance is focused on the development of crop production and
nutrition products. Under these alliances, we have total committed funding of
approximately $56 million and have performance fees, milestone payments and
payments in connection with extension options that could generate as much as an
additional $133 million. We will also earn product development milestones and
sales royalties if products are commercialized from these alliances.
Background
Genes
The genes of an organism, whether animal, plant or microbe, determine its
physical and chemical characteristics. The entire genetic content of an
organism is called its genome. Genes consist of organized units of molecules
called deoxyribonucleic acid, or DNA, which in turn consist of four different
chemical bases, called nucleotides. Each nucleotide pairs with its
complementary nucleotide in the double helix structure of DNA, forming what
scientists call a base pair. The precise sequence of the nucleotides in a gene
determines the physical and chemical activity that the gene produces in an
organism. Each cell of an organism contains at least one complete copy of the
organism's genes, but each cell type expresses only those genes that are
necessary for the cell to perform its role. When a gene is expressed, it acts
alone or in combination with other expressed genes to synthesize structural
proteins and enzymes. The activity of these proteins causes the cell to perform
biological functions, which may influence the physical and chemical
characteristics of the organism. A modification in a gene sequence may lead to
the over- or under-production of a protein, modifying the normal biological
function of the cell, and potentially affecting the physical and chemical
characteristics of the entire organism.
The Industrialization of Gene Sequencing
In the early 1990s, a worldwide effort began to decipher the precise
sequence of the genomes of various organisms, including humans, pathogens and
agricultural crops. The search to identify genes and their encoded proteins
that are associated with both health and disease has fueled this effort.
Advances in
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DNA sequencing technology and instrumentation have allowed researchers to begin
to sequence genes on an industrial scale by creating "sequencing factories,"
instead of sequencing genes one at a time. During the last two decades, the
speed at which scientists can sequence the building blocks of genes, or base
pairs, has increased from hundreds per week to millions per week, while the
cost of sequencing a base pair has decreased proportionately. Large sequencing
centers at universities, research institutes and private companies produce tens
of thousands of gene sequences each week. To date, scientists have cataloged
the complete genomes of over forty species of bacteria, Baker's Yeast and a
nematode, which is a small worm-like organism. In an effort called the Human
Genome Project, scientists funded by the government, as well as several
foundations, have been systematically sequencing human DNA since the late
1980s. Industry experts anticipate that researchers will complete the
sequencing of the entire human genome, as well as the genome of the plant
Arabidopsis, by the end of the year 2000. Additionally, the government and
private industry are funding researchers attempting to complete the sequencing
of the entire genomes of several species of crops, such as rice, corn, tomato
and soybean, as well as bacteria, protists and fungi. Researchers expect that
the entire DNA sequences of these organisms will be determined in the near
future.
The gene sequence information that has been discovered to date provides a
vast and diverse starting point for gene function research. However, in the
absence of other information, a gene's sequence does not provide any clues to a
gene's function. Without understanding function, researchers will have a
limited ability to translate this gene sequence data into information necessary
to develop new commercial products.
Determining Gene Function
Historically, gene function determination has been a slow, labor intensive
and formulaic process, pursuant to which an investigator typically would take
the following steps:
. identify a gene;
. determine its sequence;
. gather information on how the gene was expressed in an organism's
tissues;
. determine the activity of the protein corresponding to the gene;
. isolate or create modifications in the gene; and
. investigate the impact of modifications on the organism.
Individual research laboratories in different locations have conducted most of
this type of genetic research using variations on the same techniques to study
different genes, one gene at a time. Researchers have only recently developed
methods to study the function of many genes at one time and in one place, using
one or more of the following techniques, each of which is explained in the
corresponding paragraphs below:
. gene annotation and homology determination;
. gene expression profiling; and
. model organism functional genomics.
Gene Annotation and Homology Determination
Researchers can use search and alignment algorithms to determine the
degree to which a newly discovered gene sequence is similar, or homologous, to
previously known sequences. Researchers can then examine any remarks, or
annotations, written by other scientists about the characteristics, activity or
function of the previously studied sequence, and draw inferences about the
function of the new gene sequence based on its structural similarity, or
homology, to the known gene sequence. It is possible to find similarities among
gene sequences from different species, because researchers find many gene
families in certain groups of organisms, and some are even found in all
organisms.
Although gene annotation and homology determination may provide insight
into the function of a newly discovered gene, researchers can infer only
information with limited value. First, even if researchers
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have studied a similar gene, very few of the studied genes have reliable
annotation about function. Second, of the genes researchers have currently
annotated for function, most annotations relate to fundamental processes, such
as respiration, which address only a fraction of the potential commercial
applications of functional genomics, which is the assignment of a function to a
gene. Third, genes with similar sequences often have very different functions.
Gene Expression Profiling
A gene expression profile provides a snapshot of genes that are expressed
in specific tissues of specific organisms at specific points in time. This
snapshot tells an investigator where, when and to what extent a particular gene
is expressed in a cell, tissue or organism and what physiological pathways are
active in the cell. Gene expression technology has progressed rapidly over the
past few years. Currently, investigators use various profiling technologies
such as gene chips to analyze the expression patterns of tens of thousands of
genes at once.
Although gene expression profiling may provide clues to a gene's function
in a particular process or pathway, it does not provide sufficient information
to conclusively determine a gene's function or its commercial value. A gene
expression profile shows that a gene was expressed in a cell at the time a
certain biological function occurred in the cell. However, the profile does not
show whether the expression of the gene was causally related to the cellular
activity, or how the gene interacted with other genes that were expressed at
the same time. Also, the profile does not show the chemical and physical
effects of changes in gene expression in an organism.
Model Organism Functional Genomics
We believe the most reliable way to determine a gene's precise function is
to study the effects of modified, or variant, forms of the gene on an organism.
The biology and genetics of certain organisms, which we call model organisms,
make them effective tools for investigating the function of genes of other
organisms with commercial value, which we refer to as target organisms.
Generally, model organisms must be similar enough to associated target
organisms to allow meaningful comparisons. They must also be easier, faster and
less costly to investigate. Model organisms may also serve as targets for gene
discovery when there is commercial potential for the model organism itself.
Researchers use model organisms to determine the function of a gene from a
target organism by comparing the physical and chemical characteristics produced
by normal and variant forms of a comparable gene from the model organism, and
extrapolating the results to the target organism. We refer to this process as
model organism functional genomics.
Companies utilizing model organism functional genomics face several
critical challenges. First, they must choose a model organism that is relevant
to target organisms with commercial value. Second, they must choose model
organisms with physical and chemical characteristics that make them efficient
research tools. Third, they must collect large amounts of information about a
small number of genes in a model in their normal and variant states. Fourth,
they must have powerful informatics tools to manage and analyze collected data.
However, even when these challenges are met, determination of gene function
using model organisms typically occurs on a small scale, with individual
investigators studying a small number of genes at a time.
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Our Approach to Industrializing Gene Function Discovery: Our GeneFunction
Factory
The existing approaches to determining gene function have produced limited
results, as evidenced by the fact that the functions of most genes are still
unknown. We believe that an inexpensive, rapid, large-scale approach to
determining gene function is necessary to address this problem. We have
responded to this need by developing our GeneFunction Factory to study gene
function for numerous genes simultaneously in our selected organisms. We
designed our GeneFunction Factory to be an integrated, rapid, reliable,
industrial scale laboratory through which we can discover and modify genes,
measure the consequences of the modifications and reliably determine the
function of those genes. We believe that by determining gene function we will
be able to develop novel products in our target markets. In effect, we are
industrializing the discovery of gene function.
GENEFUNCTION FACTORY CHART
Our GeneFunction Factory is organized as a series of steps. Each step
consists of one or more work stations designed to perform complex tasks
rapidly, efficiently, routinely and repetitively in an assembly-line manner.
Organisms and genetic material pass from station to station to be studied for
gene function. We can scale each step in the process to increase the number of
genes that move through our GeneFunction Factory. Scalability, speed and our
proprietary processes distinguish this method of gene function determination
from other methods. Our GeneFunction Factory presently is capable of
determining the function of approximately 50 genes per week, and we believe it
will be capable of determining the function of up to 200 genes per week by the
end of 2000.
In the steps of our GeneFunction Factory, we first identify genes and
produce organisms with modified forms of the genes, leading to an over- or
under-expression of the encoded protein. We then
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measure thousands of physical and chemical characteristics of the variant
organisms at different times of the organisms' life using gene expression,
metabolic and phenotype profiling. Next, we organize and store the data
associated with the measurements taken in the previous step. Finally, we
analyze the data to elucidate function of the genes.
Our Model and Target Organisms
We carefully select the organisms we study in our GeneFunction Factory.
Some researchers use yeast and the bacterium Escherichia coli as general model
organisms, and others use the mouse as a model for humans. Yeast and bacteria
are efficient model organisms, but are such simple organisms that extrapolating
information about gene function to more complex target organisms is often not
meaningful. Mice are more useful for annotating genes of higher organisms, but
have long life cycles and are expensive to maintain and study. We conduct our
research directly in target organisms when feasible, but when a model organism
is needed, we have chosen, and will likely continue to choose, those organisms
that are comparable to the target organism, are economical and efficient to
maintain and study, have short life cycles and whose genes are easy to modify.
The first eight organisms we have decided to study are a mustard plant known as
Arabidopsis, rice and six fungi.
Arabidopsis is a useful model organism because it is related to soybeans,
cotton, vegetables and oil seed crops. It is an efficient model organism
because it has a short life cycle of seven weeks and a small genome. Rice is an
important target and model organism because it is one of the world's most
important grains, and it is closely related to corn, wheat, barley, sugarcane,
oats and rye. We are currently studying three fungi that cause diseases in
cereals, rice and broadleaf plants. We intend to study three additional fungi
that have commercial value for fermentation, human fungal disease and natural
product discovery. We believe we can use our GeneFunction Factory to study the
function of essentially every gene in these organisms.
Gene Discovery and Variant Generation
One constraint in gene function discovery has been the time consuming
nature of constructing gene variants. In gene discovery, researchers construct
libraries of DNA fragments for an organism. The researchers sequence and alter
the DNA fragments to produce a gene variant. In plants, we produce two types of
variants: knock-out variants, in which we have modified the selected gene to
under-produce its encoded protein, and over-expression variants, in which we
have modified the selected gene to over-produce its protein. In fungi, we use
proprietary technology to activate or inactivate genes using specialized DNA
fragments that we can insert into genes to modify the gene. We then introduce
the modified gene into the fungal nucleus where it efficiently and precisely
replaces the normal gene. Using these proprietary technologies, we have
modified hundreds of plant genes and thousands of fungal genes.
Variant Analysis
Traditionally, the process of understanding the often-subtle difference
between a variant and normal organism has required years of experimentation. We
have solved this problem by rapidly and accurately collecting large volumes of
data for many different gene modifications with our automated workstations,
sample tracking and data collection software that constitute our GeneFunction
Factory. The three types of data that we collect for each variant are gene
expression profiles, metabolic profiles and phenotype profiles.
Gene Expression Profiling. Gene expression profiling provides a snapshot
of the genes expressed in an organism at a given time. By comparing gene
expression profiles of a variant organism to a normal organism, we gather
information about the function of the modified gene as well as the effect of
that gene on the expression of other normal genes. By determining how a
modified gene affects normal genes, we gain insight into biochemical pathways
of an organism.
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Metabolic Profiling. Metabolic profiling provides a snapshot of the
chemicals in an organism's cell, including vitamins, minerals and other
biochemicals, at a given time. We are collaborating to develop a proprietary
method for extracting chemicals from an organism, which has traditionally been
the most time-consuming step in the metabolic profiling process. We detect and
measure these extracted chemicals using combinations of mass spectroscopy,
which separates molecules by electrical charge and size, and chromatography,
which separates molecules by size and chemical properties.
Phenotype Profiling. Phenotype profiling is the measurement of physical
and chemical characteristics of an organism at one or more times during its
life cycle. Characteristics of our target and model organisms that we measure
include flowering time, plant height, plant weight, seed set, seed shape, leaf
shape, color reflectance, root density, nutrient utilization and appearance.
Different measurements, when taken at specified times, produce a phenotype
profile for a variant that we can compare to a phenotype profile for a normal
organism to help understand the function of the modified gene. We have
developed a proprietary method for obtaining a phenotype profile for an
organism that is an important part of our variant analysis.
Our FunctionFinder Bioinformatics System
Data Management. Laboratory researchers typically track and collect data
using notebooks, which makes it difficult to organize, store and access the
volumes of data generated. We are addressing the issue of data management by
developing a proprietary Laboratory Information Management System, or LIMS,
utilizing barcodes and other automated data collection devices to track samples
and store data. We have also developed technology to improve the organization,
formatting and storage of data collected from our variant analyses. Our LIMS
system allows us to record and manage the thousands of daily measurements
produced by our GeneFunction Factory.
Data Analysis. The challenge with the vast amounts of data that have been
collected and stored for so many genes is being able to retrieve and make sense
of relevant information to determine the function of genes. To meet this
challenge, we have developed our FunctionFinder bioinformatics system, which
incorporates information obtained from our variant analyses and from public
sources. FunctionFinder includes tools for storing, retrieving, analyzing and
mining data to create knowledge about genes. The FunctionFinder bioinformatics
system contains proprietary software that we have developed.
Market Opportunities
By determining the function of genes in Arabidopsis, rice and six
filamentous fungi, we believe that we and our strategic partners will be able
to develop novel products in four major sectors of the global economy. We have
focused our initial efforts on generating gene function information that can be
used to develop crop and nutrition products. In the future, we intend to use
our GeneFunction Factory to discover gene function information on an industrial
scale that we and our strategic partners can use to develop human health and
industrial products. Our target sectors and markets are:
<TABLE>
<CAPTION>
Crop
Production Nutrition Human Health Industrial Products
---------- --------- ------------ -------------------
<S> <C> <C> <C>
Herbicides Additives Anti-Fungals Fermentation
Fungicides Botanicals Nutraceuticals Fiber
Fertilizers Foods Pharmaceuticals Industrial Enzymes
Seeds Health Foods Vaccines Specialty Chemicals
Crop Outputs
</TABLE>
Our near-term strategy in these sectors is to establish strategic
alliances with leading companies in order to develop commercial products. To
date, we have entered into strategic alliances with Bayer to develop novel
herbicides and with Monsanto to develop crop outputs and nutritional and human
health products.
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Crop Production
The crop production sector consists of crop inputs and crop outputs.
Herbicides, fungicides, fertilizers and seeds are examples of crop inputs.
Harvested grain, vegetables and fiber are examples of crop outputs. We intend
to utilize the information derived from our GeneFunction Factory to develop
commercial products, independently or with strategic partners, in the following
areas:
Crop Inputs
Herbicides. Herbicides are chemicals that kill weeds that cause
substantial crop loss. The herbicide market is a mature market in which
innovative products have historically been introduced only about once per
decade. In 1998, global sales of herbicides were approximately $15 billion,
with Roundup(R) being the leading product. While there are many herbicides
on the market today, there is still a need for new types of products. For
example, there is a need for a herbicide that can be applied at the same
time seeds are planted, remains active in the field for several weeks, is
environmentally friendly and kills a broad spectrum of weeds quickly.
Conventionally, researchers have discovered new herbicide products by
spraying various chemicals on weeds in the hope of finding a chemical that
kills weeds without killing crops. Once a promising chemical is discovered,
researchers use labor-intensive genetics, physiology and biochemistry
techniques to determine the protein in the weed that the chemical affects.
This conventional approach is expensive and slow and has a low success
rate. Typically, researchers must screen 80,000 chemicals to find a
commercial product.
We believe our GeneFunction Factory may provide new herbicide targets
for chemical screening faster and more economically than the conventional
method. As part of our collaboration with Bayer, we use our GeneFunction
Factory to identify Arabidopsis genes that may be promising targets for new
herbicides. We then produce the proteins encoded by these promising genes
in quantities that are sufficient for large-scale high-throughput, or high
volume, chemical screening for herbicides. Finally, our assay group
produces assays, or test kits, containing those proteins that can be used
to screen for new herbicides. By narrowly focusing our discovery efforts on
finding chemicals that disable specific genes within weeds, we believe
that, together with our strategic partners, we may be able to discover
environmentally friendly herbicides more efficiently than our competition.
Fungicides. Fungal plant diseases impose greater costs upon food growers
than any other plant disease. Chemicals used to control these diseases are
called fungicides. The global market for fungicides, such as Tilt(R) and
Ridomil PC(R), was approximately $6 billion in 1998. There is a need for
better and safer fungicides, particularly those that treat currently
untreatable fungal diseases or fungal strains that become resistant to
existing fungicides.
As with herbicides, researchers conventionally have discovered
fungicides by spraying various chemicals on crops in the hope of finding a
chemical that inhibits fungal infections on crops without killing the crops
themselves. Until recently, researchers had not used an approach based upon
the determination of gene function for fungicide discovery. We believe our
GeneFunction Factory will provide potential new fungicide targets for
screening chemicals faster and more economically than the conventional
method. We are currently examining three filamentous fungi, including
Magnaporthe grisea, a rice pathogen, and Mycosphaerella graminicola, a
wheat pathogen. We plan to identify genes in these fungi that are essential
for the survival of the fungi, but not the crop. We believe that these
genes will provide promising targets for chemical screening using assays
that we or our strategic partners produce.
Fertilizers. Fertilizers are products that are applied to the soil to
provide crops with the nutrients needed to produce high yields. The primary
ingredients of most fertilizers are nitrogen, potassium and phosphorus. The
global market for fertilizers in 1998 was about $50 billion. In general,
current product
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discovery efforts for fertilizers are focused on blending or reformulating
known fertilizer compounds and reducing production costs. Plants are
limited in their ability to utilize fertilizers. Excess fertilizer enters
the environment either as run-off or ground water seepage, both of which
are major environmental concerns. We believe that products that enhance
fertilizer utilization will dramatically improve the economics and lessen
environmental concerns of crop production because growers will be able to
use less fertilizer to produce the same yields. We believe that our
GeneFunction Factory may allow us to identify genes in crops that improve
their ability to utilize fertilizer.
Seeds. Typical commercial seeds include hybrid corn seeds, registered
wheat seeds and vegetable seeds. The global market for commercial seeds in
1998 was over $15 billion. Currently, there is a need for new commercial
seeds that can increase crop yields and improve the quality of foods and
fibers. One commercial seed that has successfully increased crop yield
while reducing the use of pesticides is the Bollgard(TM) cottonseed. Its
developers inserted a microbial gene into cottonseed that encodes a protein
that kills the cotton budworm, a significant pest of cotton. The resulting
seed produces a high yield of cotton while avoiding both the cost and
negative environmental impact of budworm pesticide.
Historically, time-consuming plant breeding techniques have dominated
research in the seed industry. Recently, the seed industry has invested
heavily in the genetic modification of crops, which has resulted in a
number of commercialized products and products in development. The seed
industry now has the technology to efficiently insert genes into seeds, and
products such as the Bollgard cottonseed have demonstrated the commercial
viability of this technology. We believe that there is a market need for a
technology that can rapidly generate information about the function of a
large number of genes and identify those genes that code for commercially
valuable crop traits that the seed industry could then breed or insert into
crops. Examples of valuable crop traits are disease resistance, vitamin
content and resistance to herbicides and fungicides.
Crop Outputs
The output side of crop production consists of harvested crops. The
global value of harvested crops in 1998 was approximately $700 billion with
additional value created through crop processing. While there are more than
170 crops grown worldwide, only a few key crops, such as corn, soybean,
rice, wheat, potatoes and tomatoes, account for most of the value. Two
major market opportunities involve improving processing and product
attributes. An example of a processing improvement is a reduction in the
soluble fiber present in wheat. Pasta made from this type of wheat would be
faster drying than ordinary pasta and therefore companies could produce and
package pasta at a reduced cost. An example of an improved product
attribute is an increased amount of oil in each ton of processed canola. We
believe that our GeneFunction Factory may allow us to quickly and
efficiently identify novel genes that control processing and product
attributes.
Nutrition
We believe that advances in functional genomics will make it possible for
companies to enhance the nutritional content of foods and develop foods that
can reduce the risk of disease in consumers. The nutrition market includes
additives, botanicals, foods and health foods. Product examples include
cholesterol-reducing margarines and nutritionally enhanced breakfast cereals.
It has been estimated that the size of the market for enhanced nutrition foods
will reach $15 billion in 2000 and $500 billion by 2010. Some of these foods
will result from genetic variants, while companies will produce others through
methods that do not involve genetic variants. For example, functional genomics
can identify which plants have certain nutritional qualities and researchers
can isolate these qualities and add them to foods. Because many foods and
additives come from plants and microbes, we believe that we and our strategic
partners can use our GeneFunction Factory to develop food products with
improved nutritional content.
Food production companies are exploring ways to create foods with
pharmaceutical benefits. For example, in January 2000, DuPont's Protein
Technologies International and General Mills, Inc. announced
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plans to collaborate in developing and marketing functional foods containing
proprietary soy technology consistent with the FDA approved health claim that
there is an association between consumption of soy protein and the reduced risk
of coronary heart disease. According to General Mills, sales for soy foods are
expected to top $2.5 billion in 2000 and grow at a 15% to 20% compound annual
rate over the next five years.
We believe that our GeneFunction Factory may, in the future, generate gene
function information that companies could use to develop food products that
contain:
. elevated levels of vitamins and essential amino acids in foods;
. novel proteins useful in the prevention or treatment of medical
conditions;
. elevated levels of compounds that are present in plants and reduce
serum cholesterol levels; and
. reduced levels of saturated fats.
Human Health
We are focusing our efforts in the human health sector on the discovery of
novel anti-fungal targets for drug discovery and the use of our model organisms
and our FunctionFinder bioinformatics system to understand the genetic basis of
human disease. There is a need for novel anti-fungals to treat immune-
compromised individuals coping with AIDS, recovering from transplant surgery or
undergoing cancer therapy.
We believe that the model organisms that we are studying may be useful in
discovering novel gene targets for the prevention and treatment of human
disease. By using the sequence and function information of each gene in our
model organisms and identifying the similarity of these known genes to human
genes using our FunctionFinder bioinformatics system, we may provide a powerful
tool for human drug discovery.
Industrial Products
Within the industrial products sector, we are targeting the markets for
industrial enzymes, fermentation, fiber and specialty chemicals. Proteases for
laundry detergent, paper and plastic are examples of products from such
markets. These industries are capital intensive, and research has focused on
improving current products. There is a need for industrial products that are
novel, effective, inexpensive and environmentally friendly. To fill this need,
major companies in each of these industries have recently made significant
investments in biotechnology. For example, companies are developing a new
plastic made from natural plant chemicals that researchers expect to be as
versatile and strong as some common synthetic plastics, yet less expensive and
more biodegradable.
Since many industrial products are derived from biological sources, we
believe that by understanding how gene function dictates product
characteristics, we may be able to develop information that will significantly
reduce production costs as well as lead to the creation of novel products. We
believe that the use of our GeneFunction Factory may lead to the discovery of
gene function information useful for the development of various industrial
products, including:
. improved or novel fermentation products, such as enzymes and specialty
chemicals;
. improved fiber products such as wood, plastics, cotton and linen; and
. improved industrial processes such as wastewater treatment.
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Our Strategy
Our goal is to be the leading provider of gene function information to
accelerate the commercialization of improved applications in crop production,
nutrition, human health and industrial products. The key elements of our
strategy are to:
Determine the Function of Genes in Our Target and Model Organisms.
Using our GeneFunction Factory, we intend to determine the function of
essentially every gene in each of our target and model organisms and
incorporate this data into our FunctionFinder bioinformatics system. We intend
to establish our FunctionFinder bioinformatics system as the definitive source
of gene function information for these target and model organisms, as well as
other target organisms related to our model organisms.
Continue to Develop Our GeneFunction Factory.
In order to expand our capability in the industrialization of gene
function determination, we will continue to develop our GeneFunction Factory.
In addition to internal efforts to further streamline our industrialization
process, we plan to license and acquire technologies that complement our core
capabilities. We intend to utilize our partners' expertise and information to
expand our FunctionFinder bioinformatics system and improve the capabilities of
our GeneFunction Factory. In addition to expanding our technology, we plan to
expand our facilities, equipment and personnel in order to increase
productivity.
Develop Products Both with Strategic Partners and Internally.
We intend to establish additional strategic alliances with leading
companies in the crop production, nutrition, human health and industrial
products industries. We seek to receive short-term financial support to advance
our internal discovery and development efforts, as well as generate long-term
revenues from milestone and royalty payments on any commercialized products. We
also intend to develop products independently when opportunities arise.
Focus Our Development Efforts on Large Market Opportunities.
We intend to utilize our GeneFunction Factory to develop products in the
crop production, nutrition, human health and industrial products sectors. We
believe there are substantial opportunities in these sectors for novel products
that we and any of our future strategic partners can efficiently develop with
information from our GeneFunction Factory. We intend to focus our development
efforts on large opportunities within these sectors.
Pursue Intellectual Property Protection for Our GeneFunction Factory and Gene
Function Information.
We intend to continue to aggressively pursue patents for our discovery
methods, our research platform and aspects of our bioinformatics system.
Additionally, we intend to aggressively pursue patents on discoveries of novel
genes and gene functions. As of March 27, 2000, we have rights to 31 U.S.
patent applications, relating to our technologies and genes. We intend to
protect and build on our existing patent portfolio and also rely on trade
secrets to protect our proprietary technologies. Where necessary, we will seek
licenses to implement aspects of our research platform subject to ownership
rights of others.
Strategic Alliances
As part of our business strategy, we have established strategic alliances
with pharmaceutical and agricultural companies in the fields of herbicide
development, crop production and nutrition. To date, we have entered into
significant strategic alliances with Bayer and Monsanto.
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Bayer
In September 1998, we entered into a collaboration research agreement with
Bayer for the development of new chemical herbicides. Under the terms of the
agreement, we have agreed to use our GeneFunction Factory to identify
Arabidopsis genes that may be targets for herbicide discovery. We will provide
exclusively to Bayer assays based on these targets for use in high throughput
screening for herbicides, as well as access to customized Arabidopsis-based
releases of FunctionFinder for use in herbicide discovery. The collaboration
has an initial term of three years, ending in September 2001, unless Bayer
terminates it at an earlier date because we do not achieve specific milestones,
and Bayer has the option to extend it for two additional years. The agreement
provides that we are entitled to committed research funds, additional fees
based on the number of assays we deliver and our success in delivering
customized releases of FunctionFinder, and milestone and royalty payments for
any products that might emerge from the collaboration. Under the terms of the
agreement, Bayer is obligated to pay us approximately $14.7 million in
committed funding and as much as an additional $25 million in performance fees,
milestone payments and payments made in connection with the exercise of options
to extend the agreement. To date, we have received approximately $9.2 million
of this funding from Bayer pursuant to the agreement. We will also earn sales
royalties and product milestones in the event that our strategic alliance with
Bayer yields commercial products.
We have achieved three milestones in our collaboration research agreement
with Bayer. These milestones include the delivery of the first two assays for
high throughput screening and the delivery of the first release of a customized
FunctionFinder bioinformatics system for discovery of novel herbicide targets.
Monsanto
In November 1999, we entered into a collaboration agreement with Monsanto
to provide certain Arabidopsis-based gene function data for the development of
crop inputs and outputs. Under the terms of this agreement, Monsanto is to
provide us with thousands of genes from Arabidopsis and other organisms. We are
to perform a functional analysis of such genes for Monsanto using our
GeneFunction Factory. Monsanto will either own or have exclusive licenses to
certain patents that result from this project. The collaboration has an initial
term of six years, ending in November 2005, unless Monsanto terminates it at an
earlier date because we do not achieve specific milestones, and Monsanto has
the option to extend it for up to two years and nine months. Monsanto may
expand the collaboration either by increasing the number of genes that we are
to analyze in Arabidopsis or by requiring us to analyze gene function in a
second model, or both, for additional research and possible milestone payments.
The agreement provides that we are entitled to committed research funds,
additional fees based on the number of genes analyzed and royalty payments for
any products that might emerge from the collaboration. Under the terms of the
agreement, Monsanto is obligated to pay us approximately $41.5 million in
committed funding and as much as an additional $107.5 million in performance
fees, milestone payments and payments made in connection with the exercise of
options to extend the agreement. To date, we have received approximately $10.7
million of this funding from Monsanto pursuant to the agreement. We will also
earn sales royalties and product milestones in the event that our strategic
alliance with Monsanto yields commercial products.
LION bioscience
We have entered into a binding letter of intent with LION bioscience to
negotiate an agreement for the co-development and co-marketing of
bioinformatics software products for analyzing gene function. The companies
initially intend to focus on the development of metabolic profiling informatics
tools, and later develop improved phenotype profiling tools. We may not
successfully negotiate a definitive agreement with LION bioscience.
Research and Development
Our research and development efforts are directed towards the development
of our GeneFunction Factory, including our FunctionFinder bioinformatics system
and research activities in connection with our strategic alliances and our
government grant. We spent approximately $72,000 in 1997, approximately $3.6
million in 1998 and approximately $7.5 million in 1999 on our research and
development efforts.
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Competition
We face competition from functional genomics companies, including
Exelixis, Inc., CuraGen Corporation, Rosetta Inpharmatics, Inc. and Large Scale
Biology Corporation (formerly known as Biosource Technologies, Inc.). We expect
competition to intensify in genomics research as technology advances are made
and become widely known. Genomic technologies have undergone and are expected
to continue to undergo rapid and significant change. Our future success will
depend in large part on maintaining a competitive position in the genomics
field, and particularly in the functional genomics field. We or others may make
rapid technological development which may result in products or technologies
becoming obsolete or noncompetitive before we recover the expenses we incur in
connection with our development. Products that we or our strategic partners
offer could be made obsolete by less expensive or more effective crop
production, nutrition enhancement, human health and industrial application
product development technologies, including technologies that may be unrelated
to genomics. We may not be able to make the enhancements to our technology
necessary to compete successfully with newly emerging technologies.
Any products that we may develop alone or in collaboration with others
will compete in highly competitive markets. In the specific markets in which we
apply or intend to apply our FunctionFinder bioinformatics system, we face
competition from plant genomics, pharmaceutical, agrochemical and biotechnology
companies. Many of our existing and potential competitors have substantially
greater financial resources, research and development staffs, facilities,
manufacturing and marketing experience, distribution channels and human
resources than we do. Many of these competitors have achieved substantial
market penetration in the crop enhancement, nutrition, human health and
industrial product sectors. We have entered into strategic alliances with Bayer
and Monsanto in the crop production and nutrition sectors, but have not yet
entered into any strategic alliances or commenced development work in the human
health and industrial products sectors. Moreover, our competitors may obtain
patent protection or other intellectual property rights that could limit our
rights or our strategic partners' ability to use our technologies or
commercialize products in the crop production, nutrition, human health and
industrial products sectors.
Our ability to compete in the human health sector and the industrial
products sector may be limited by our exclusive use of plant and fungal model
organisms. We believe that our ability to compete in the human health sector
will depend on the degree to which information we develop on plant and fungal
gene and pathway function is useful in developing information about how similar
human genes and pathways code for human pathology. Although our models have
several advantages, competing companies that use model organisms with greater
similarities to human genes, such as mice, as well as companies that do direct
studies of human populations, may have a substantial advantage in developing
products for humans. Similarly, we believe that as it relates to industrial
products, our FunctionFinder bioinformatics system will only be useful in the
development of products that are plant or fungal based, such as enzymes and
alcohols.
Government Regulation
Regulation of Development and Commercialization of Agricultural Products
Federal, state, local and foreign government regulations and regulatory
agencies will govern our efforts, alone or together with our strategic
partners, to develop and commercialize genetically enhanced nutrition and crop
products. These regulations and agencies may prevent us and our strategic
partners from developing and marketing nutrition and crop product candidates in
a timely manner or under technically or commercially feasible conditions, and
may impose expenses, delays and other impediments to our efforts to develop
such product candidates.
The FDA has adopted the policy that it will apply the same regulatory
standards to genetically modified foods that it applies to foods developed
through traditional plant breeding. This means that a food or food ingredient
developed by genetic modification must meet the same rigorous safety standards
under the Federal Food, Drug, and Cosmetic Act as other food products. Under
this policy, the FDA will
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ordinarily only require premarket review of genetically modified foods if they
raise significant safety concerns, such as elevated levels of toxicants or the
presence of allergens, or if the FDA deems them to contain a food additive. The
FDA requires premarket approval as food additives for products from introduced
genes only if the product differs substantially in structure and function from
similar naturally occurring substances. Also, the FDA does not currently
require that genetically modified products be labeled as such, as long as they
are as safe and have the same nutritional characteristics as conventional
products. The FDA is considering the adoption of a Premarket Notification
procedure, pursuant to which our strategic partners and we would have to inform
the FDA when we intend to commercialize a genetically modified food product and
that our internal safety procedure is complete.
The USDA prohibits genetically modified plants from being grown and
transported except pursuant to an exemption or under special controls. In
general, companies apply for an exemption to facilitate product development
because the special controls are burdensome. However, we can not guarantee that
the products we develop will qualify for such an exemption.
Regulatory policies for genetically modified nutrition and crop products
vary widely, are currently the subject of intense political controversy, and
may change substantially in the near future. Accordingly, labeling, premarket
notification or other restrictions in foreign countries where we and our
strategic partners may want to develop and/or market genetically modified
product candidates may impose additional expenses and delays on such product
candidates or may make commercialization in such countries impracticable.
Our future nutrition and crop product candidates may also be subject to
other regulations and regulatory agencies, such as the Occupational Safety and
Health Act, the Toxic Substances Control Act, the National Environmental Policy
Act, other federal water, air and environmental quality statutes, import/export
control legislation and other laws. Any product candidates relating to
pesticides will be subject to the jurisdiction of the Environmental Production
Agency.
Regulation of Drug Development and Commercialization
Prior to the marketing of any new drug developed by us or our strategic
partners, that new drug must undergo an extensive regulatory review process in
the United States and other countries. This regulatory process, which includes
preclinical studies and clinical trials, and may include post-marketing
surveillance of any compound to establish its safety and efficacy, can take
many years and require the expenditure of substantial resources. Data obtained
from preclinical studies and clinical trials are subject to varying
interpretations that could delay, limit or prevent marketing. We and our
strategic partners may also encounter delays or rejections based on changes in
government agency policies for drug review. Delays in obtaining marketing
clearance could delay the commercialization of any drugs or diagnostic products
developed by us or our strategic partners, impose costly procedures on our
strategic partners' activities, diminish any competitive advantages that our
strategic partners may attain and lessen our potential royalties.
Even if regulatory clearance is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product may result in withdrawal of the product from the
market, which could reduce our revenue sources and hurt our financial results.
No agency has approved any product resulting from the use of our
FunctionFinder bioinformatics system for commercialization in the United States
or elsewhere. In addition, we and our strategic partners have not submitted any
investigational new drug applications for any such product candidate. We cannot
be certain if or when we or our strategic partners will submit an application
for regulatory review, or whether we or our strategic partners will be able to
obtain marketing approval for any products on a timely basis, if at all. If we
and our strategic partners fail to obtain required governmental approvals, it
will prevent us from marketing drugs or diagnostic products. The occurrence of
any of these events may cause our business, financial condition and results of
operations to suffer.
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Environmental Regulation
Our research and development activities involve the controlled use of
hazardous materials and chemicals. We are subject to 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 eliminated. In the event of an accident,
we could be held liable for any damages that result, and any liability could
exceed our resources.
Intellectual Property
We seek U.S. and foreign patent protection for major components of our
GeneFunction Factory. We also rely on trade secret protection for certain of
our confidential and proprietary information, and we use license agreements
both to access external technologies and assets and to convey certain
intellectual property rights to others. Our commercial success will be
dependent in part on our ability to obtain commercially valuable patent claims
and to protect our intellectual property portfolio. As of March 27, 2000, we
had filed 31 U.S. patent applications, which are subject to rights that we have
granted to various collaborators and development partners. We have filed 16
trademark applications in the United States and have received allowances on six
of them.
The patent positions of life science companies are generally uncertain and
involve complex legal and factual questions. Our business could be hurt by any
of the following:
. our pending patent applications may not result in issued patents;
. the claims of any issued patents may not provide meaningful
protection;
. we may be unsuccessful in developing additional proprietary
technologies that are patentable;
. our patents may not provide a basis for commercially viable products
or provide us with any competitive advantages and may be challenged by
third parties; and
. others may have patents that relate to our technology or business.
In addition, patent law relating to the scope of claims in the technology
field in which we operate is still evolving. The extent of future patent
protection is uncertain. In particular, we are aware of several groups that are
attempting to identify and patent gene fragments and full-length genes, both
characterized and uncharacterized. There is substantial uncertainty regarding
the possible patent protection for gene fragments or genes without known
function or correlation with specific functions. Furthermore, others may
independently develop similar or alternative technologies, duplicate any of our
technologies, and if patents are licensed or issued to us, design around the
patented technologies licensed to or developed by us. In addition, we could
incur substantial costs in litigation if we are required to defend ourselves in
patent suits brought by third parties or if we initiate such suits.
We are aware of a number of U.S. patents and patent applications and
related foreign patents and patent applications owned by third parties relating
to gene sequences and the analysis of gene function. These other technologies
may provide third parties with competitive advantages over us and may hurt our
business. In addition, some third party patent applications contain broad
claims, and it is not possible to determine whether or not applicants will
narrow such claims during prosecution or whether patent offices will allow and
issue patents on such claims, even if such claims appear to cover prior art or
have other defects. An owner or licensee of a patent in the field may threaten
or file an infringement action and we may or may not prevail in any such
action. The cost of defending an infringement action may be substantial, which
could significantly increase our expenses and increase our losses. Furthermore,
other patent holders may not grant us required licenses on commercially viable
terms, if at all. Failure to obtain any required license could prevent us from
utilizing or commercializing one or more of our technologies or gene-related
products.
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We have applied, and intend to make additional applications, for patent
protection for:
. methods relating to gene sequencing, phenotype analysis, gene
expression profiling, metabolic profiling and other methods for
determination of gene function;
. bioinformatic technologies;
. function specific patterns of gene expression we identify; and
. individual genes and targets we discover.
Such patents may include claims relating to novel genes and gene fragments and
to novel uses for known genes or gene fragments identified through our
discovery programs. We may not be able to obtain meaningful patent protection
for our discoveries; even if patents are issued, the scope of the coverage or
protection they would afford is uncertain. Failure to secure such meaningful
patent protection would endanger our competitive position.
With respect to proprietary know-how that is not patentable and for
processes for which patents are difficult to enforce, we rely on trade secret
protection and confidentiality agreements to protect our interests, including
several elements of our FunctionFinder bioinformatics system. In addition, we
are developing a proprietary index of plant and fungal gene and gene fragment
sequences which we update on an ongoing basis. We will apply for patents on
some of this data, whereas we will maintain other data as proprietary trade
secret information. We have taken security measures to protect our proprietary
know-how and technologies and confidential data and continue to explore further
methods of protection. While we require all employees, consultants and
strategic partners to enter into confidentiality agreements, we cannot be
certain that others will not disclose proprietary information, or will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets, or that we can
meaningfully protect our trade secrets. In the case of arrangements with our
strategic partners that require the sharing of data, our policy is to make
available to our strategic partners only such data as is relevant to our
agreements with such strategic partners, under controlled circumstances, and
only during the contractual term of those agreements, and subject to a duty of
confidentiality on the part of our customer. However, such measures may not
adequately protect our data. Any material leak of confidential data into the
public domain or to third parties may harm our business.
We are a party to various license agreements that give us rights to use
technologies and biological materials in our research and development
processes. We may not be able to maintain such rights on commercially
reasonable terms, if at all. Failure by us to maintain such rights could harm
our business.
Employees
As of March 27, 2000, we had 118 full-time employees, of whom 33 hold
Ph.D. degrees. Of our total workforce, 92 are engaged in research and
development activities and 26 are engaged in business development, finance and
administration. None of our employees is represented by a collective bargaining
agreement. We believe that our relations with our employees are good.
Facilities
We currently lease an aggregate of approximately 48,000 square feet of
single-story office and laboratory facilities in Research Triangle Park, North
Carolina. The first building lease, for approximately 28,000 square feet on
Alexander Drive in Research Triangle Park, expires on May 31, 2000 but then is
automatically renewable on a month-to-month basis. The second building lease,
for approximately 20,000 square feet on S. Miami Boulevard in Durham, expires
August 31, 2002. We have the option to renew both leases.
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In July 1999, we entered into an agreement with a real estate investment
trust to develop and finance long-term laboratory and office facilities for us
on 11 acres adjacent to our current facilities in Research Triangle Park. Under
the terms of the agreement, the real estate investment trust has agreed to
develop a two-story laboratory and office complex covering approximately 54,000
square feet and a single-story plant facility incorporating growth rooms and
greenhouse space covering approximately 32,000 square feet. Both facilities are
scheduled to be completed by the end of 2000. We also have an option to require
the real estate investment trust to develop and finance an additional two-story
laboratory and office facility covering approximately 50,000 square feet on the
same site.
Legal Proceedings
We are not a party to any material legal proceedings.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding our executive
officers and directors as of March 27, 2000.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John A. Ryals, Ph.D. ..... 45 Chief Executive Officer, President and Director
Henry P. Nowak, Esq. ..... 44 Vice President of Intellectual Property,
General Counsel and Secretary
Richard E. Kouri, Ph.D. .. 56 Vice President of Business Development
Ian A.W. Howes............ 41 Vice President of Finance and Operations,
Chief Financial Officer and Treasurer
Athanasios Maroglou,
Ph.D. ................... 41 Vice President of Project Management
Scott J. Uknes, Ph.D. .... 39 Vice President of Business Strategy
John Hamer, Ph.D. ........ 42 Vice President of Research
Craig Liddell, Ph.D. ..... 41 Vice President of Informatics
James D. Bucci............ 55 Vice President of Human Resources
G. Steven Burrill (1)..... 55 Director and Chairman of the Board
Dennis Dougherty (1)...... 52 Director
Robert Goodman, Ph.D.
(2)...................... 54 Director
Terrance McGuire (2)...... 43 Director
Michael Summers (2)....... 57 Director
Henri Zinsli, Ph.D. (1)... 58 Director
</TABLE>
- ------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
John A. Ryals, Ph.D. co-founded our company in September 1997 and has
served as our Chief Executive Officer and President since inception. From
October 1996 to September 1997, Dr. Ryals was Vice President of Research for
Novartis Crop Protection, Inc. and Head of the Biotechnology and Genomics
Center of Novartis in Research Triangle Park, North Carolina, where he was
responsible for worldwide biotechnology and genomics research and target-based
discovery. Dr. Ryals has 15 years of experience in agricultural biotechnology
working in various positions at the Agricultural Biotechnology Research Unit of
Ciba-Geigy Corporation, including Head of Agricultural Biotechnology Research
and Vice-President of Biotechnology at Ciba Seeds, a position which he held
from 1993 to 1996. Dr. Ryals received his Ph.D. in Molecular Biology from the
University of Texas at Dallas in 1982 and is an Adjunct Professor at North
Carolina State University.
Henry P. Nowak, Esq. has been our Vice President of Intellectual Property,
General Counsel and Secretary since May 1998. From March 1995 to April 1998,
Mr. Nowak served as the legal and patent counsel at Novartis Pharmaceuticals
and Systemix. Previously, he served as legal and patent counsel for Somatogen,
Amgen, Ciba-Geigy Agriculture and Schering-Plough. He is a member of three
state bars and the Federal Patent Bar. Mr. Nowak received his joint J.D./M.B.A.
degree from Florida State University in 1986 and a M.S. in Biochemistry from
Utah State University in 1981.
Richard E. Kouri, Ph.D. has served as our Vice President of Business
Development since June 1999. From January 1997 to January 1999, he was Senior
Vice President of Research at VIMRX Pharmaceuticals, Inc. and President and
Chief Executive Officer of VIMRX Genomics, Inc., a subsidiary of VIMRX
Pharmaceuticals, Inc. From June 1994 to January 1997, he was Chief Operating
Officer, Chief Technical Officer and Senior Vice President at Gene Logic, Inc.
Dr. Kouri received the Ph.D. degree in Radiation Biology from the University of
Tennessee and was a post-doctoral fellow at the Roche Institute of Molecular
Biology.
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Ian A. W. Howes has served as our Vice President of Finance and Operations
and Chief Financial Officer since January 1999. From February 1997 to December
1998, Mr. Howes was Chief Financial Officer at Analytika, Inc., a provider of
pharmaceutical data mining software and services. From October 1995 to January
1997, he was Chief Financial Officer at American Care Communities. From May
1991 to August 1995, Mr. Howes was Chief Financial Officer at EnSys, Inc., a
publicly traded biotechnology company. Mr. Howes received his M.B.A. from the
Kenan-Flagler Business School at the University of North Carolina at Chapel
Hill in 1997 and is a Chartered Accountant in England and Wales.
Athanasios Maroglou, Ph.D. has served as our Vice President of Project
Management since October 1999. From 1985 to 1999, Dr. Maroglou was Research and
Development Manager at E. I. DuPont De Nemours & Company. As Research and
Development Manager, he was responsible for discovery and commercialization of
new herbicides and for product support and renewal. In his 14 years at DuPont,
Dr. Maroglou also served as Process Development Manager, Operations Supply
Chain Manager and Manufacturing Area Manager. He received his Ph.D. in Chemical
Engineering at the University of Birmingham, England.
Scott J. Uknes, Ph.D. co-founded our company in September 1997 and has
served as our Vice President of Business Strategy since March 1999. From
inception to March 1999, he served as our Vice President of Fungal Research.
From 1990 to September 1997, Dr. Uknes held various positions at Ciba-Geigy
Corporation, including Research Director for the Seeds Disease Control
projects, where he led a research program aimed at meeting the market need for
disease resistant crops. Dr. Uknes is an adjunct professor at North Carolina
State University and serves on the Scientific Advisory Board of Biolex, Inc.
Dr. Uknes received his Ph.D. in Plant Molecular Biology from Washington
University, St. Louis, Missouri, in 1990.
John Hamer, Ph.D. has served as our Vice President of Research since
February 2000. From March 1999 to February 2000, Dr. Hamer served as our
Director of Microbial Research. From September 1998 to March 1999, he served as
our Director of Fungal Biology. From September 1989 to September 1998, Dr.
Hamer served as Professor of Biological Sciences and Adjunct Professor of
Microbiology and Immunology at Purdue University. While at Purdue, Dr. Hamer
was awarded the David and Lucille Packard Fellowship and the National Science
Foundation Presidential Faculty Fellowship. He is currently editor-in-chief of
the academic press journal Fungal Genetics and Biology and currently serves on
the NSF-Microbial Genetics Study Panel. Dr. Hamer received his Ph.D. in
Microbiology from the University of California, Davis in 1987.
Craig Liddell, Ph.D. has served as our Vice President of Informatics since
February 2000. Since July 1998 through February 2000, Dr. Liddell served as our
Director of Informatics. Dr. Liddell has been an Adjunct Professor of Plant
Pathology and since 1991 he has been a Principal Investigator at the Computing
Research Laboratory at New Mexico State University. From July 1996 to July
1998, Dr. Liddell was an Associate Professor of Plant Pathology and from 1989
to July 1996, Dr. Liddell was an Assistant Professor of Plant Pathology at New
Mexico State University. Dr. Liddell was a Postdoctoral Research Scientist in
the Departments of Plant Pathology at the University of California, Davis and
the University of Wisconsin - Madison. He is the senior editor of the journal
Phytopathology. Dr. Liddell received his Ph.D. in Plant Pathology from the
University of Sydney, Australia in 1986.
James Bucci has served as our Vice President of Human Resources since
February 2000. From November 1997 to February 2000, Mr. Bucci was Senior Vice
President of Human Resources for Suburban Hospital Healthcare Systems in
Bethesda, Maryland, a not-for-profit integrated healthcare provider. From April
1993 to October 1997, he served as Group Vice President of Human Resources at
First Citizens Bank in Raleigh, North Carolina, a closely held regional bank.
Mr. Bucci has prior senior level human resources experience at Hallmark Cards,
Inc. and Fidelity Investments. Mr. Bucci received his Masters degree in Human
Development in 1984 from the University of Rhode Island. His undergraduate
degree is from Brown University.
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G. Steven Burrill has been a member of our board of directors since March
1999, and has served as the chairman of our board of directors since December
1999. Mr. Burrill is the Chief Executive Officer of Burrill & Company, a
private merchant bank focused on life science companies, which he founded in
1996. Prior to starting Burrill & Company, Mr. Burrill spent 27 years with
Ernst & Young, including the last 17 years as partner of the firm. Mr. Burrill
received his BBA degree from the University of Wisconsin - Madison. Mr. Burrill
currently serves on the boards of directors of DepoMed, Inc. and Transgene SA.
Dennis Dougherty has been a member of our board of directors since
February 1998. Since October 1984, Mr. Dougherty has been a General Partner of
Intersouth Partners, a series of venture capital funds which invests in life
science and technology companies throughout the Mid-Atlantic and Southeast. Mr.
Dougherty currently serves on the boards of directors of six private life
science companies, which include Xanthon, Inc., Cogent Neuroscience, Inc.,
Biolex, Inc., Insmed Pharmaceuticals, Inc. and Encelle, Inc.
Terrance McGuire has been a member of our board of directors since
February 1998. Mr. McGuire is a founder and has been a general partner of
Polaris Venture Funds, Inc., a venture capital fund, since March 1996. Since
1992, he has served as a general partner of Burr, Eagan, Deleage and Co., a
venture capital firm, and since 1989 he has served as general partner of Beta
Partners, a venture capital firm. He is also a member of the board of directors
of Akamai Technologies, Inc., Aspect Medical Systems, Inc., Inspire
Pharmaceuticals, Inc., Wrenchead.com, Inc. and deCODE Genetics, Inc. Mr.
McGuire received his B.S. in Physics and Economics from Hobart College, his
M.S. in Engineering from Dartmouth College and his M.B.A. from the Harvard
Business School.
Michael Summers has been a member of our board of directors since March
1998. Since October 1990, Mr. Summers has been a managing partner of Summers
Associates, a specialized international business development organization. Mr.
Summers is also managing director of Floranova Limited. He received his B.S. in
Botany from the University of Exeter in 1964.
Robert M. Goodman, Ph.D. has been a member of our board of directors since
June 1998. Since September 1991, Dr. Goodman has been a Professor of Plant
Pathology at the University of Wisconsin-Madison. Dr. Goodman is also a member
of the Department of Microbiology graduate program, the interdepartmental
program in plant genetics and plant breeding, the Institute of Environmental
Studies, the graduate program in cellular and molecular biology and the
biotechnology training program. Dr. Goodman received a Ph.D. in plant virology
from Cornell University in 1973.
Henri Zinsli, Ph.D. has been a member of our board of directors since June
1998. Since 1997, Dr. Zinsli has served as the Chairman of Discovery
Technologies Ltd. in Allschwil, Switzerland, and since 1999, he has also served
as the Chief Executive Officer of Discovery Technologies Ltd. Since 1998, he
has served as the Chairman of Zeptosens Inc. in Witterswil, Switzerland. He is
also a non-executive Director of Plasmon, plc, in Royston, UK, a position which
he has held since 1996. Until 1996, he was the head of Corporate Business
Development at Ciba-Geigy Ltd. in Basel. Dr. Zinsli has over 30 years of
experience at Ciba-Geigy Ltd. He received his Ph.D. in economics at the
University of St. Gallen, Switzerland in 1968.
Our executive officers are appointed by our board of directors and serve
until their successors are elected or appointed. There are no family
relationships among any of our directors or executive officers. No director has
a contractual right to serve as a member of our board of directors.
Scientific Advisory Board
The following individuals are members of our Scientific Advisory Board:
Michael Bevan, Ph.D. heads the Molecular Genetics Department at the John
Innes Institute in the United Kingdom. Dr. Bevan also leads the European arm of
the Arabidopsis genome sequencing effort.
Joseph R. Ecker, Ph.D. is Professor of Plant Biology at the Salk Institute
in La Jolla California. In addition, he leads the U.S. Arabidopsis genome
sequencing effort.
Luis Herrera-Estrella, Ph.D. is Professor of Plant Genetic Engineering in
the Department of Genetics, Centro de Investigacion y Estudios Avanzanidos del
I.P.N.
40
<PAGE>
Mark Johnston, Ph.D. is Professor of Genetics at Washington University
School of Medicine. Dr. Johnston led the U.S. effort to sequence the genome of
Baker's yeast.
Ingo Potrykus, Ph.D. is Professor of Plant Sciences at the Institute of
Plant Sciences, Swiss Federal Institute of Technology in Zurich, Switzerland.
A. Ian Scott, Ph.D. is Distinguished Professor of Chemistry at Texas A&M
University and is the C.J. Davidson Chair in Science. He is a Fellow of the
Royal Society and the American Association for the Advancement of Science.
Bruce C. Weir is the William Neal Reynolds Professor of Statistics and
Genetics at North Carolina State University.
Board Composition
Upon completion of this offering, our board of directors will consist of
seven members divided into three classes, with two members in two of the
classes and three members in the third class. Each year, the stockholders will
elect the members of one of the three classes to a three-year term of office.
Upon completion of this offering, Mr. McGuire and Mr. Dougherty will serve in
the class whose term will expire at the annual meeting of our stockholders in
2001; Mr. Summers and Dr. Zinsli will serve in the class whose term will expire
at the annual meeting of our stockholders in 2002; and Mr. Burrill, Dr. Ryals
and Dr. Goodman will serve in the class whose term will expire at the annual
meeting of our stockholders in 2003. In addition, our certificate of
incorporation provides that the authorized number of directors may be changed
only by resolution of the board of directors. This classification of the board
of directors may have the effect of delaying or preventing changes in control
or management of us.
Board Committees
Audit Committee. Our audit committee, consisting of Dr. Goodman, Mr.
McGuire and Mr. Summers, reviews our internal accounting procedures and the
services provided by our independent auditors.
Compensation Committee. Our compensation committee, consisting of Mr.
Burrill, Mr. Dougherty and Dr. Zinsli, reviews and recommends to our board of
directors the compensation and benefits of all our officers and executive
management and establishes and reviews general policies relating to
compensation and benefits of our employees.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has at any time been one
of our officers or employees. No member of the compensation committee serves a
member of the board of directors or compensation committee of any entity that
has an executive officer serving as a member of our board of directors or
compensation committee.
Compensation of Directors
Our directors who are also our employees receive no compensation for
serving on the board of directors. We provide cash compensation to our non-
employee directors of $2,000 per board meeting attended in person, $1,000 per
board meeting via telephone and $500 per committee meeting that does not occur
on the same day as a board meeting. We reimburse our non-employee directors for
reasonable expenses incurred in attending board and committee meetings. Our
non-employee directors also receive on the date of each annual meeting of our
stockholders non-qualified options to purchase 5,000 shares of our common
stock, which vest immediately and have an exercise price equal to the fair
market value of our common stock on the date of grant.
41
<PAGE>
In June 1998, Dr. Goodman, Mr. Summers and Dr. Zinsli each received
options to purchase 50,000 shares of our common stock at an exercise price of
$0.08 per share. In December 1999, Dr. Goodman, Mr. Summers and Dr. Zinsli each
received options to purchase 2,666 shares of our common stock at an exercise
price of $0.60 per share. These options vest ratably beginning on the grant
date of the option and extending through the next four years of service. In
March 2000, Mr. Burrill, Mr. Dougherty and Mr. McGuire each received options to
purchase 50,000 shares of our common stock, which vest ratably beginning on the
grant date of the option and extending through the next three years of service
and have an exercise price equal to the public offering price that appears on
the cover page of this prospectus. For more information, see "Benefit Plans--
1998 Stock Option Plan."
Limitations of Liability; Indemnification of Directors and Officers
The Delaware General Corporation Law authorizes corporations to limit or
eliminate, subject to certain conditions, the personal liability of directors
to corporations and their stockholders for monetary damages for breach of their
fiduciary duties. In connection with the consummation of this offering, we will
adopt and file a restated certificate of incorporation and amended and restated
bylaws. Our restated certificate of incorporation will limit the liability of
our directors to the fullest extent permitted by Delaware law.
Our restated certificate of incorporation and amended and restated bylaws
will also provide that we will indemnify any of our directors and officers who,
by reason of the fact that he or she is one of our officers or directors, is
involved in a legal proceeding of any nature. We will repay certain expenses
incurred by a director or officer in connection with any civil or criminal
action or proceeding, specifically including actions by us or in our name
(derivative suits). Such indemnifiable expenses include, to the maximum extent
permitted by law, attorney's fees, judgments, civil or criminal fines,
settlement amounts and other expenses customarily incurred in connection with
legal proceedings. A director or officer will not receive indemnification if he
or she is found not to have acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, our best interest.
Such limitation of liability and indemnification does not affect the
availability of equitable remedies. In addition, we have been advised that in
the opinion of the SEC, indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act and
is therefore unenforceable.
There is no pending litigation or proceeding involving any of our
directors, officers, employees or agents in which indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
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<PAGE>
Executive Compensation
The following table sets forth the total compensation, during the year
ended December 31, 1999, paid to or accrued by our Chief Executive Officer and
each of our four other most highly compensated executive officers whose total
salary and bonus for 1999 exceeded $100,000:
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
------------
Annual Number of
Compensation Securities
----------------- Underlying All Other
Name and Principal Position Salary Bonus Options Compensation
- --------------------------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C>
John A. Ryals, Ph.D. ............ $221,825 $ 58,438 77,917 $ 600(1)
Chief Executive Officer,
President and Director
Ian A.W. Howes................... 155,400 41,250 303,300 --
Vice President of Finance and
Operations, Chief Financial
Officer and Treasurer
Henry P. Nowak, Esq.............. 145,000 41,250 303,300 --
Vice President of Intellectual
Property, General Counsel and
Secretary
Scott J. Uknes, Ph.D. ........... 131,250 33,750 9,000 --
Vice President of Business
Strategy
John Hamer, Ph.D. ............... 142,500 37,500 167,500 5,000(2)
Vice President of Research
</TABLE>
- ------------------
(1) Represents life insurance premiums paid on behalf of Dr. Ryals.
(2) Represents reimbursements for moving expenses paid to Dr. Hamer.
Option Grants in 1999
The following table presents each grant of stock options during the fiscal
year ended December 31, 1999, to each of the individuals listed in the Summary
Compensation Table.
All options were granted under our 1998 Stock Option Plan. The following
options are immediately exercisable in full at the date of grant, but shares
purchased on exercise of unvested options are subject to a repurchase right in
our favor that entitles us to repurchase unvested shares at their original
exercise price on termination of the employee's services with us.
The potential realizable value is calculated based on the ten year term of
the option at the time of grant. Stock price appreciation of 0%, 5% and 10% is
assumed pursuant to the rules promulgated by the SEC and does not represent our
estimate of future stock price performance. The potential realizable value at
0%, 5% and 10% appreciation are calculated by:
. multiplying the number of shares of common stock under the option by
the assumed public offering price of $15.00 per share;
. assuming that the aggregate stock value derived from that calculation
compounds at the annual 0%, 5% or 10% rate shown in the table until
the expiration of the options; and
. subtracting from that result the aggregate option exercise price.
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<PAGE>
Percentages shown under "Percentage of Total Options Granted to Employees
in 1999" are based in an aggregate of 1,633,119 options granted to our
employees and directors under our 1998 Stock Option Plan during 1999.
<TABLE>
<CAPTION>
Potential Realization
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
----------------------------------------------- ---------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted 1999 Share Date 0% 5% 10%
- ---- ---------- ------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Ryals, Ph.D. ... 77,917(1) 4.8% $0.60 12/14/2006 $1,122,005 $1,857,029 $ 2,984,699
Ian A.W. Howes.......... 270,300(2) 16.6% 0.08 12/07/2005 4,032,876 6,582,729 10,494,705
33,000(1) 2.0% 0.60 12/14/2006 475,200 786,503 1,264,103
Henry P. Nowak, Esq. ... 33,000(1) 2.0% 0.60 12/14/2006 475,200 786,503 1,264,103
Scott J. Uknes, Ph.D.... 9,000(1) 0.6% 0.60 12/14/2006 129,600 214,501 344,755
John Hamer, Ph.D........ 50,000(3) 3.1% 0.22 06/29/2006 739,000 1,210,671 1,934,307
17,500(1) 1.1% 0.60 12/14/2006 252,000 417,085 670,357
</TABLE>
- ------------------
(1) Our repurchase right lapses in equal monthly installments over the four
years commencing on the grant date.
(2) Includes 27,030 options as to which our repurchase right lapsed at the
grant date, 60,818 options as to which our repurchase right lapsed on the
first anniversary of the grant date, and 182,452 options as to which our
repurchase right will lapse in equal monthly installments over the 36
months following the first anniversary of the grant date.
(3) Includes 12,500 options as to which our repurchase right will lapse on the
first anniversary of the grant date and 37,500 options as to which our
repurchase right will lapse in equal monthly installments over the 36
months following the first anniversary of the grant date.
44
<PAGE>
Option Values at December 31, 1999
The following table presents the number and value of unexercised options
and securities issuable upon the exercise of options that were held by each of
the individuals listed in the Summary Compensation Table as of December 31,
1999.
These options are immediately exercisable in full at the grant date, but
shares purchased by exercise of unvested options are subject to a repurchase
right in our favor that entitles us to repurchase unvested shares at their
original exercise price on termination of the employee's services with us. The
value realized is based on the fair market value of the underlying securities
as of the date of exercise, minus the per share exercise price, multiplied by
the number of shares underlying the option. The value of unexercised in-the-
money options is based on a value of $4.50 per share, the fair market value of
our common stock on December 31, 1999 as determined in good faith by our board
of directors. Amounts reflected are based on the value of $4.50 per share,
minus the per share exercise price, multiplied by the number of shares
underlying the option.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Value
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options at the-Money Options at
Shares December 31, 1999 December 31, 1999
Acquired Value -------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John A. Ryals, Ph.D. ... -- -- 77,919(1) -- 83,371 --
Ian A.W. Howes.......... 303,300 132,618 -- -- -- --
Henry P. Nowak, Esq. ... 270,300 97,308 33,000(1) -- 35,310 --
Scott J. Uknes, Ph.D. .. -- -- 9,000(1) -- 9,630 --
John Hamer, Ph.D. ...... 33,333 52,999 134,167(2) -- 197,226 --
</TABLE>
- ------------------
(1) As of December 31, 1999, our repurchase right had not lapsed as to any of
these options. Accordingly, these options were exercisable but not vested
on that date.
(2) As of December 31, 1999, our repurchase right had lapsed as to 33,333.
Accordingly, the remaining 134,167 options were exercisable, but not
vested, on that date.
Employment Agreements and Termination of Employment Agreements
At the time of commencement of employment, most of our employees sign
offer letters and employment agreements. These employment agreements provide
for employment at will and contain standard provisions relating to confidential
information and invention assignment by which the employee agrees not to
disclose any confidential information received during his or her employment
with us and that, with some exceptions, he or she will assign to us any and all
inventions conceived or developed during employment.
In February 1998, we entered into employment agreements with Dr. Ryals and
Dr. Uknes. Pursuant to these employment agreements, initial annual base
salaries were set at $180,000 for Dr. Ryals and $120,000 for Dr. Uknes. In
addition, each is entitled to receive annual bonuses of 25% of base salary to
be awarded on the basis of mutually agreed upon objectives and criteria between
each of Dr. Ryals and Dr. Uknes and us. The agreements provide that the
employment relationship may be terminated with or without cause at any time by
the individual or us. Furthermore, the agreements provide that, if we terminate
either of Dr. Ryals or Dr. Uknes with or without "cause", as defined in the
agreements, we have no obligation to pay severance beyond the individual's
accrued base salary and bonus up to the date of termination. However, if we
continue to pay either of Dr. Ryals or Dr. Uknes an amount equal to his current
monthly salary for a three month period following a termination without cause,
he shall be prohibited from competing with us for that three
45
<PAGE>
month period. Moreover, upon proper notice to Dr. Ryals or Dr. Uknes, we may
extend the non-compete period to a total of twelve months provided we continue
to pay him such amounts. If we terminate Dr. Ryals or Dr. Uknes for cause or if
either terminates his employment relationship, he shall be prohibited from
competing with us for a period of twelve months following the date of
termination. These employment agreements also provide that employment is
contingent upon execution of separate agreements pursuant to which Dr. Ryals or
Dr. Uknes agrees that he will not disclose any confidential information
received during his employment with us and, that, with some exceptions, he will
assign to us any and all inventions conceived or developed during his
employment with us. Termination for any reason other than for cause results in
accelerated vesting of all of their restricted stock.
Benefit Plans
2000 Employee, Director and Consultant Stock Option Plan
Our 2000 Employee, Director and Consultant Stock Option Plan was approved
by our board of directors in February 2000 and by our stockholders in March
2000. Under this plan, we may grant both incentive stock options and
nonqualified stock options. As of March 27, 2000, a total of 1,800,000 shares
of common stock have been reserved for issuance under this plan. No options
have been granted under this plan.
Our board of directors administers the 2000 plan. Our board of directors
may delegate authority to administer the 2000 plan to a committee of our board
of directors. Subject to the terms of the plan, our board of directors or its
authorized committee determines recipients and the terms of options granted
pursuant to this plan including:
. the exercise price and the number of shares subject to each option;
. the vesting schedule for options;
. the termination or cancellation provisions applicable to options; and
. the conditions relating to our right to reacquire shares subject to
options.
The maximum term of options granted under this plan is ten years.
If we are acquired, our board of directors or its designated committee
will provide that outstanding options under this plan shall be: (1) assumed by
the successor or acquiring company; (2) exercised within a specified number of
days or the options will terminate; or (3) terminated in exchange for a cash
payment equal to the value of the option at the time we are acquired. If we are
acquired, our board of directors or its designated committee may also provide
that all outstanding options fully vest.
2000 Employee Stock Purchase Plan
Our 2000 Employee Stock Purchase Plan was approved by our board of
directors in March 2000 and by our stockholders in April 2000. Under this plan,
we may issue up to a total of 500,000 shares of our common stock to
participating employees. All employees that work 20 hours or more per week and
who are employed as of the first day of an offering period are eligible to
participate in the plan. However, any employee who would own more than 5% of
the voting power of our stock immediately after a grant under the plan is not
eligible to participate and no participant may purchase more than $25,000 of
common stock, based on the undiscounted value of the common stock at the
beginning of each offering period, in any one calendar year.
The plan is implemented by a series of offering periods, with a new
offering period starting on June 1 and December 1 of each year (or such other
times as our board of directors may determine). To participate in the plan, an
eligible employee authorizes us to deduct a percentage of the employee's pay,
not to exceed $21,250 per year, beginning on the first day of each designated
offering period. On the first day of each offering period, each eligible
employee who has elected to participate in the plan is granted an option to
purchase shares of our common stock. Unless a participating employee withdraws
from the plan prior to the
46
<PAGE>
end of the offering period, on the last day of the offering period the employee
is deemed to have automatically exercised the option for the purchase of a
number of shares of our common stock determined by dividing the employee's
contributions during the offering period by the lesser of:
. 85% of the fair market value of the common stock on the first day of
the offering period; or
. 85% of the fair market value of the common stock on the last day of
the offering period.
Our board of directors may amend or terminate the plan at any time and in
any respect without shareholder approval unless applicable law requires
shareholder approval of the amendment. The plan will continue in effect for a
term of ten years, subject to the right of the board of directors to terminate
the plan at any earlier time.
In the event we are acquired, each option under the Plan may be assumed or
substituted with an equivalent option by the successor corporation. In lieu of
assumption or substitution, our board of directors in its discretion may
shorten the offering period in progress.
1998 Stock Option Plan
In October 1998, we adopted our 1998 Stock Option Plan. The stockholders
approved the plan in June 1999. We amended the 1998 Plan in November and
December 1999 to increase its number of options that could be issued. The 1998
Plan authorizes the issuance of up to 4,015,000 shares of common stock. Since
March 21, 2000, after our stockholders approved our new stock option plan, no
additional grants of stock options are being made under the 1998 Plan. As of
March 27, 2000, options to purchase an aggregate of 1,537,760 shares of common
stock at a weighted average exercise price of $2.55 per share were outstanding
under the 1998 Plan.
Options granted to purchase shares of our common stock under our 1998
Stock Option Plan are generally immediately exercisable by the optionee but are
subject to a right of repurchase pursuant to the vesting schedule of each
specific grant. In the event that a purchaser ceases to provide service to us
and our affiliates, we have the right to repurchase any of that person's
unvested shares of common stock at the original option exercise price.
Our board of directors or its designated committee may, in its sole
discretion, accelerate or extend the date or dates on which all or any
particular option or options granted under the 1998 Plan may be exercised. In
the event of a decline in the value of our common stock, our board of directors
or its designated committee has the authority to offer optionees the
opportunity to replace outstanding higher priced options with new options below
our priced options.
The maximum term of options granted under this plan is ten years.
If we are acquired, all our outstanding options under the plan either will
be assumed or substituted for by any surviving entity or our parent or
subsidiary corporation, if any. For stock options granted, if the surviving
entity or our parent or subsidiary corporation, if any, determines not to
assume or substitute the options, the board of directors shall provide for the
options to be fully exercisable for a period of 30 days from the date of
notice. If the board of directors makes the options fully exercisable for this
30-day period, the options will terminate at the end of this period.
401(k) Plan
We maintain a retirement and deferred savings plan for our employees that
is intended to qualify as a tax-qualified plan under the Internal Revenue Code.
The 401(k) Plan provides that each participant may contribute up to 15% of his
or her pre-tax compensation to the savings plan, subject to statutorily
prescribed annual limits, which is $10,500 in the calendar year 2000. Under
this plan each participant who makes pre-tax contributions is eligible to have
a matching contribution in cash made by us to his or her matching plan account
in an amount up to 25% of the participant's savings plan contribution with a
maximum annual employer contribution of 6% of each participant's annual salary,
subject to statutorily prescribed annual limits. The matching contributions
vest annually over a three year period. We may make additional discretionary
contributions for all participants to their matching plan accounts.
47
<PAGE>
CERTAIN TRANSACTIONS
The following executive officers, directors, founders or holders of more
than five percent of our voting securities purchased securities in the amounts
as set forth below. Each share of our Series A, Series B and Series C Preferred
Stock is convertible into one share of our common stock.
<TABLE>
<CAPTION>
Shares of Preferred Stock
-----------------------------
Common Stock Series A Series B Series C Warrants (10)
------------ --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Directors and Executive
Officers
John A. Ryals (1)....... 1,195,181
Henry P. Nowak (2)...... 271,300
Richard E. Kouri........
Ian A.W. Howes ......... 303,300
Athanasios Maroglou..... 165,000
Scott J. Uknes.......... 852,272
John Hamer (3).......... 39,333
Craig Liddell...........
G. Steven Burrill (4)... 1,395,349 400,000
Dennis Dougherty (5).... 2,687,500 516,389 200,000 250,000
Robert Goodman.......... 52,666
Terrance McGuire (6).... 1,875,000 329,610 1,800,000
Michael Summers.........
Henri Zinsli............ 50,000
Founders
Sandy Stewart........... 852,272
Jorn Gorlach............ 852,272
Five Percent
Stockholders
The Burrill AgBio
Capital Fund L.P. ..... 1,395,349 400,000
Intersouth Partners
(7).................... 2,687,500 516,389 200,000 250,000
Polaris Venture Funds
(8).................... 1,875,000 329,610 1,800,000
Innotech Investments
Limited (9)............ 2,937,500 549,350 200,000 187,500
</TABLE>
- ------------------
(1) Includes 2,000 shares held by Dr. Ryals' wife.
(2) Includes 1,000 shares held by Mr. Nowak's wife.
(3) Includes 6,000 shares held by Dr. Hamer's wife.
(4) Represents shares held of record by The Burrill AgBio Capital Fund L.P.
Mr. Burrill, the chairman of our board directors, is Chief Executive
Officer of Burrill & Company, the General Partner of Burrill AgBio Capital
Fund L.P.
(5) Represents shares and warrants held of record by Intersouth Partners IV,
L.P. and Intersouth Partners III, L.P. Mr. Dougherty, one of our
directors, is General Partner of Intersouth Partners IV, L.P. and
Intersouth Partners III, L.P.
(6) Represents shares held of record by Polaris Venture Partners III, L.P.,
Polaris Venture Partners Founders' Fund L.P. and Polaris Venture Partners
L.P. Mr. McGuire is a founding partner of Polaris Venture Partners
Founders' Fund L.P., Polaris Venture Partners, L.P. and Polaris Venture
Partners III, L.P.
(7) Represents shares and warrants held of record by Intersouth Partners IV,
L.P. and Intersouth Partners III, L.P.
(8) Represents shares held of record by Polaris Venture Partners L.P., Polaris
Venture Partners Founders' Fund L.P. and Polaris Venture Partners III,
L.P.
(9) Represents shares of our common stock and warrants to purchase shares of
our common stock held of record by Innotech Investments Limited, an
investment company incorporated in the United Kingdom which has investment
and voting power over the shares. All of the issued capital stock of
Innotech Investments Limited is owned by a Blind Trust, the sole Trustee
of which is Miss J S Portrait, who, as a result of her control of the
shares of Innotech, may be deemed to be the beneficial owner of the
Paradigm shares held by Innotech.
(10) Consists of warrants issued in connection with the Series A Preferred
Stock round. They are warrants to purchase shares of Series A Preferred
Stock at an exercise price of $0.80 per share. These warrants expire on
February 2008.
48
<PAGE>
We have entered into the following agreements and transactions with our
executive officers, directors and holders of more than five percent of our
voting securities:
We, our founders, including Drs. Ryals and Uknes, the preferred
stockholders listed above and other stockholders have entered into an Amended
and Restated Registration Rights Agreement, which the parties amended in April
2000. Under this Agreement, they will have registration rights with respect to
their shares of common stock following this offering. See "Description of
Capital Stock -- Registration Rights" on page 53 for a more detailed
description of the terms of this agreement.
In June 1998, Dr. Zinsli, Mr. Summers and Dr. Goodman each received
options to purchase a total of 50,000 shares at an exercise price of $0.08 per
share. In December 1999, Dr. Zinsli, Mr. Summers and Dr. Goodman each received
options to purchase a total of 2,666 shares of common stock at an exercise
price of $0.60 per share. In March 2000, Mr. Burrill, Mr. Dougherty and Mr.
McGuire each received options to purchase a total of 50,000 shares of our
common stock, which options vested immediately and have an exercise price equal
to the public offering price that appears on the cover page of this prospectus
.
In February 1998, we entered into Founder Stock Repurchase and Vesting
Agreements with our founders, including Drs. Ryals and Uknes, which we amended
in April 2000. Pursuant to the terms of these vesting agreements, we have the
right to repurchase unvested shares of common stock held by each of them at the
initial purchase price in the event that he ceases his employment with us.
These vesting agreements apply to 1,193,181 shares of common stock held by Dr.
Ryals and 852,272 shares of common stock held by Dr. Uknes. As of March 2000,
50% of the shares subject to these vesting agreements had vested, and the
remaining shares vest in equal monthly installments over the following 24
months. Our repurchase right with respect to these shares will terminate in the
event that the shares of common stock sold in this offering are sold at a price
of $6 per share or greater and at an aggregate public offering price of $20
million or greater.
In February 2000, the Company agreed to pay Deborah Ryals, the wife of Dr.
Ryals, $14,250 and agreed to grant to Mrs. Ryals stock options to purchase
6,000 shares of common stock in settlement of her prior employment with the
Company during the period from September 1997 to January 1998.
We believe that all of the transactions described above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. All future transactions, including loans, between us and our officers,
directors, principal stockholders and our affiliates will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested directors, and will continue to be on terms no less favorable to
us than could be obtained from unaffiliated third parties.
49
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table provides summary information known to us regarding the
beneficial ownership of our outstanding common stock as of March 27, 2000, as
adjusted to reflect the sale of 5,000,000 shares of common stock in this
offering and the conversion of all outstanding shares of our convertible
preferred stock into shares of common stock, by:
. each person or group known to us who beneficially owns more than 5% of
outstanding our common stock;
. each of our directors and each named executive officer; and
. all of our directors and executive officers as a group.
Beneficial ownership of shares is determined under the rules of the
Securities and Exchange Commission. Unless otherwise indicated, the persons
included in the table have sole voting and investment power with respect to all
shares beneficially owned, subject to community property laws, where
applicable.
Shares of common stock subject to options currently exercisable or
exercisable within 60 days of March 27, 2000 are treated as outstanding for the
purpose of computing the percentage ownership of the person holding such
options. However, these shares are not treated as outstanding for the purposes
of computing the percentage ownership of any other person. Applicable
percentage ownership in the following table is based on 18,911,254 shares of
common stock outstanding as of March 27, 2000, after giving effect to the
conversion of all outstanding shares of preferred stock into common stock upon
the closing of this offering, and 23,911,254 shares of common stock outstanding
immediately following the completion of this offering. Unless otherwise
indicated, the address of each of the named individuals is c/o Paradigm
Genetics, Inc., 104 Alexander Drive, Research Triangle Park, North Carolina
27709. The percentages in the "After Offering" Column assumes that the
underwriters do not exercise their over-allotment option to purchase up to
750,000 shares.
<TABLE>
<CAPTION>
Percentage of
Common Stock
Beneficially Owned
---------------------
Number of Shares Before After
Beneficial Owner Beneficially Owned Offering Offering
- ---------------- ------------------ --------- ---------
<S> <C> <C> <C>
Directors and Executive Officers
Terrance McGuire (1)................ 4,054,610 21.4% 16.9%
Dennis Dougherty (2)................ 3,703,889 19.3% 15.3%
G. Steven Burrill (3)............... 1,845,349 9.7% 7.7%
John A. Ryals (4)................... 1,279,195 6.7% 5.3%
Scott J. Uknes (5).................. 861,272 4.6% 3.6%
Henry P. Nowak (6).................. 304,300 1.6% 1.3%
Ian A.W. Howes (7).................. 280,300 1.5% 1.2%
Craig Liddell (8)................... 167,500 * *
John Hamer (9)...................... 183,700 * *
Robert Goodman (10)................. 52,666 * *
Michael Summers (11)................ 52,666 * *
Henri Zinsli (12)................... 52,666 * *
Richard E. Kouri (13)............... 290,725 1.5% 1.2%
Athanasios Maroglou (14)............ 170,260 * *
James D. Bucci (15)................. 100,000 * *
All executive officers and directors
as a group (15 persons)............ 13,399,098 66.3% 53.2%
Five Percent Stockholders
Polaris Venture Funds (1)........... 4,054,610 21.4% 16.9%
Innotech Investments Limited (16)... 3,874,350 20.3% 16.1%
Intersouth Partners (2)............. 3,703,889 19.3% 15.3%
The Burrill AgBio Capital Fund L.P.
(3)................................ 1,845,349 9.7% 7.7%
</TABLE>
- ------------------
* Less than one percent (1%).
(1) Represents shares held of record by Polaris Venture Partners III, L.P.,
Polaris Venture Partners Founders' Fund L.P. and Polaris Venture Partners
L.P. Mr. McGuire is a founding partner of each of those entities. Mr.
McGuire
50
<PAGE>
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in those entities. Includes 50,000 shares that are
subject to immediately exercisable stock options. As of March 27, 2000, we
had the right to repurchase 50,000 shares issuable upon exercise of these
options if Mr. McGuire ceases his directorship with us.
(2) Includes shares held of record by Intersouth Partners IV, L.P. and
Intersouth Partners III, L.P. Includes a warrant to purchase 31,250 shares
of common stock held by Intersouth Partners IV, L.P. and a warrant to
purchase 218,750 shares of common stock held by Intersouth Partners III,
L.P. Mr. Dougherty is General Partner of those entities. Mr. Dougherty
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in those entities. Includes 50,000 shares that are
subject to immediately exercisable stock options. As of March 27, 2000, we
had the right to repurchase 50,000 shares issuable upon exercise of these
options if Mr. Dougherty ceases his directorship with us.
(3) Represents shares held of record by The Burrill AgBio Capital Fund L.P.
Mr. Burrill is Chief Executive Officer of Burrill & Company, the General
Partner of Burrill Ag Bio Capital Fund L.P. Mr. Burrill disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest in Burrill AgBio Capital Fund L.P. Includes 50,000 shares that
are subject to immediately exercisable stock options. As of March 27,
2000, we had the right to repurchase 50,000 shares issuable upon exercise
of these options if Mr. Burrill ceases his directorship with us.
(4) Includes 8,000 shares held by Dr. Ryals' wife and 77,917 shares that are
subject to immediately exercisable stock options. As of March 27, 2000, we
had the right to repurchase 73,047 shares issuable upon exercise of these
options if Dr. Ryals ceases his employment with us. Includes 1,193,181
shares of common stock subject to a vesting agreement described in
"Certain Transactions."
(5) Includes 9,000 shares which are subject to immediately exercisable
options. As of March 27, 2000, we had the right to repurchase 8,438 shares
issuable upon exercise of these options if Dr. Uknes ceases his employment
with us. Includes 852,272 shares of common stock subject to a vesting
agreement described in "Certain Transactions."
(6) Includes 1,000 shares held by Mr. Nowak's wife, 33,000 shares that are
subject to immediately exercisable stock options and 270,300 shares which
were issued upon the exercise of immediately exercisable stock options. As
of March 27, 2000, we had the right to repurchase 177,350 of the shares
issued or issuable upon exercise of these options if Mr. Nowak ceases his
employment with us.
(7) As of March 27, 2000, we had the right to repurchase 203,254 shares which
were issued upon exercise of options if Mr. Howes ceases his employment
with us.
(8) Includes options to purchase 167,500 shares that are subject to
immediately exercisable stock options. As of March 27, 2000, we had the
right to repurchase 114,323 shares issuable upon exercise of these options
if Dr. Liddell ceases his employment with us.
(9) Includes 6,000 shares which were issued upon the exercise of immediately
exercisable options and 10,200 immediately exercisable options held by Dr.
Hamer's wife. Also includes 33,333 shares of common stock that were issued
upon the exercise of immediately exercisable options and 134,167 shares
that are subject to immediately exercisable stock options held by Dr.
Hamer. As of March 27, 2000, we had the right to repurchase 126,823 shares
that are issuable upon exercise of Dr. Hamer's options if Dr. Hamer ceases
his employment with us.
(10) Consists of 52,666 shares subject to immediately exercisable options. As
of March 27, 2000, we had the right to repurchase 30,624 shares issued
upon exercise of options if Dr. Goodman ceases his directorship with us.
(11) Includes 52,666 shares that are subject to immediately exercisable stock
options. As of March 27, 2000, we had the right to repurchase 30,624
shares issuable upon exercise of these options if Mr. Summers ceases his
directorship with us.
(12) Includes 2,666 shares that are subject to immediately exercisable stock
options and 50,000 shares which were issued upon the exercise of stock
options. As of March 27, 2000, we had the right to repurchase 30,624 of
these shares issued or issuable upon exercise of these options if Dr.
Zinsli ceases his directorship with us.
(13) Includes 290,725 shares that are subject to immediately exercisable stock
options. As of March 27, 2000, we had the right to repurchase 289,874
shares issuable upon exercise of these options if Dr. Kouri ceases his
employment with us.
(14) Includes 5,260 shares that are subject to immediately exercisable options
and 165,000 shares that were issued upon the exercise of immediately
exercisable stock options. As of March 27, 2000, we had the right to
repurchase 170,041 of the shares issued or issuable upon exercise of these
options if Mr. Maroglou ceases his employment with us.
(15) Consists of options to purchase 100,000 shares that are subject to
immediately exercisable stock options. As of March 27, 2000, we had the
right to repurchase all of the shares issuable upon exercise of these
options if Mr. Bucci ceases his employment with us.
(16) Represents 3,686,850 shares of our common stock and warrants to purchase
187,500 shares of our common stock held of record by Innotech Investment
Limited, an investment company incorporated in the United Kingdom which
has investment and voting power over the shares. All of the issued capital
stock of Innotech Investment Limited is owned by a Blind Trust, the sole
Trustee of which is Miss J S Portrait, who as a result of her control of
the shares of Innotech, may be deemed to be the beneficial owner of the
Paradigm shares held by Innotech.
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering and the filing of our restated
certificate of incorporation, we will be authorized to issue 50 million shares
of common stock, $0.01 par value per share, and 5 million shares of preferred
stock, $0.01 par value per share, and there will be 23,911,254 shares of common
stock and no shares of preferred stock outstanding. Assuming the conversion of
our preferred stock, as of March 27, 2000, we had 18,911,254 shares of common
stock outstanding held of record by 148 stockholders, and there were
outstanding options to purchase 1,537,760 shares of common stock and
outstanding warrants to purchase 763,779 shares of common stock.
Common Stock
The holders of common stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the stockholders, and do not
have cumulative voting rights. Subject to preferences that may be applicable to
any outstanding shares of preferred stock, holders of common stock are entitled
to receive ratably such dividends, if any, as may be declared from time to time
by our board of directors out of funds legally available for dividend payments.
All outstanding shares of common stock are fully paid and nonassessable, and
the holders of common stock have no preferences or rights of conversion,
exchange or pre-emption. In the event of any liquidation, dissolution or
winding-up of our affairs, holders of common stock will be entitled to share
ratably in our assets that are remaining after payment or provision for payment
of all of our debts and obligations and after liquidation payments to holders
of outstanding shares of preferred stock, if any.
Preferred Stock
The preferred stock, if issued, would have priority over the common stock
with respect to dividends and other distributions, including the distribution
of assets upon liquidation. Our board of directors has the authority, without
further stockholder authorization, to issue from time to time shares of
preferred stock in one or more series and to fix the terms, limitations,
relative rights and preferences and variations of each series. Although we have
no present plans to issue any shares of preferred stock, the issuance of shares
of preferred stock, or the issuance of rights to purchase such shares, could
decrease the amount of earnings and assets available for distribution to the
holders of common stock, could adversely affect the rights and powers,
including voting rights, of the common stock, and could have the effect of
delaying, deterring or preventing a change in control of us or an unsolicited
acquisition proposal.
Warrants
As of March 27, 2000 the following warrants were outstanding.
. Warrants to purchase 437,500 shares of Series A Preferred Stock at an
exercise price of $0.80 per share. These warrants expire five years
after the completion of this offering.
. A warrant to purchase 150,000 shares of our common stock at an
exercise price of $3.00 per share. The warrant expires five years
after the completion of this offering.
. A warrant to purchase 116,279 shares of our common stock at an
exercise price of $ 2.15 per share. The warrant expires in July 2006.
. A warrant to purchase 60,000 shares of our common stock at an exercise
price of $5.00 per share. The warrant expires January 2010. The
issuance of the warrant is subject to the terms of an escrow
agreement.
Each of these warrants contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of
the warrant in the event of stock dividends, stock splits, reorganizations, and
reclassifications and consolidations.
52
<PAGE>
Registration Rights
The holders of the following shares of our common stock are entitled to
certain registration rights with respect to those shares. These registration
rights are subject to certain conditions and limitations, including the right
of the underwriters of an offering to limit the number of shares included in
any such registration under certain circumstances. All expenses incurred in
connection with registrations effected in connection with the following rights
will be borne by us.
Demand Rights. Beginning 180 days after completion of this offering, the
holders of 17,103,195 shares of common stock and 553,779 shares of common stock
issuable upon the exercise of outstanding warrants will have certain rights to
cause us to register those shares under the Securities Act. We may be required
to effect only one such registration. Stockholders with these registration
rights who are not part of an initial registration demand are entitled to
notice and are entitled to include their shares of common stock in the
registration.
Piggyback Rights. If at any time after this offering we propose to
register any of our equity securities under the Securities Act, other than in
connection with a registration relating solely to our stock option plans or
other employee benefit plans, or a registration relating solely to a business
combination or merger involving us, the holders of 17,103,195 shares of common
stock and 703,779 shares of common stock issuable upon the exercise of
outstanding warrants are entitled to notice of such registration and are
entitled to include their common stock in the registration.
S-3 Registration Rights. In addition, the holders of 17,103,195 shares of
common stock and 553,779 shares of common stock issuable upon the exercise of
outstanding warrants will have the right to cause us to register these shares
on a Form S-3, provided that we are eligible to use this form, subject to
certain limitations. We are not required to effect such a registration unless
the aggregate offering price of the shares to be registered, based on the then
current market price is at least $750,000. Also, we are only required to effect
one such registration during any 12-month period. Stockholders with these
registration rights who are not part of an initial registration demand are
entitled to notice and are entitled to include their shares of common stock in
the registration.
Delaware Law and Certain Charter and By-Law Provisions
Upon completion of this offering, the provisions of Delaware law and of
our restated certificate of incorporation and amended and restated by-laws
discussed below could discourage or make it more difficult to accomplish a
proxy contest or other change in our management or the acquisition of control
by a holder of a substantial amount of our voting stock. It is possible that
these provisions could make it more difficult to accomplish, or could deter,
transactions that stockholders may otherwise consider to be in their best
interests or the best interests of Paradigm Genetics.
Delaware Statutory Business Combinations Provision. In general, Section
203 prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is, or the transaction in which
the person became an interested stockholder was, approved in a prescribed
manner or another prescribed exception applies. For purposes of Section 203, a
"business combination" is defined broadly to include a merger, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder, and, subject to certain exceptions, an "interested stockholder" is
a person who, together with his or her affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's voting
stock.
Classified Board of Directors. Upon completion of this offering, our board
of directors will be divided into three classes. Each year the stockholders
will elect the members of one of the three classes to a three-year term of
office.
53
<PAGE>
All directors elected to our classified board of directors will serve
until the election and qualification of their respective successors or their
earlier resignation or removal. Only the board of directors will be authorized
to create new directorships and to fill such positions so created and be
permitted to specify the class to which any such new position is assigned. The
person filling such position would serve for the term applicable to that class.
Only the board of directors (or its remaining members, even if less than a
quorum) will be empowered to fill vacancies on the board of directors occurring
for any reason for the remainder of the term of the class of directors in which
the vacancy occurred. Members of the board of directors will only be able to be
removed for cause. These provisions are likely to increase the time required
for stockholders to change the composition of the board of directors. For
example, in general, at least two annual meetings will be necessary for
stockholders to effect a change in a majority of the members of the board of
directors.
Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. Our amended and restated by-laws will provide that,
for nominations to the board of directors or for other business to be properly
brought by a stockholder before a meeting of stockholders, the stockholder must
first have given timely notice of the proposal in writing to our Secretary. For
an annual meeting, a stockholder's notice generally must be delivered not less
than 45 days nor more than 75 days prior to the anniversary of the mailing date
of the proxy statement for the previous year's annual meeting. For a special
meeting, the notice must generally be delivered by the later of 90 days prior
to the special meeting or ten days following the day on which public
announcement of the meeting is first made. Detailed requirements as to the form
of the notice and information required in the notice will be specified in the
by-laws. If it is determined that business was not properly brought before a
meeting in accordance with our by-law provisions, such business will not be
conducted at the meeting.
Special Meetings of Stockholders. Special meetings of the stockholders
will be able to be called only by our board of directors pursuant to a
resolution adopted by a majority of the total number of directors.
No Stockholder Action by Written Consent. Our restated certificate of
incorporation will not permit our stockholders to act by written consent. As a
result, any action to be effected by our stockholders must be effected at a
duly called annual or special meeting of the stockholders.
Super-Majority Stockholder Vote Required for Certain Actions. The Delaware
General Corporation Law provides generally that the affirmative vote of a
majority of the shares entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or by-laws, unless the corporation's
certificate of incorporation or by-laws, as the case may be, requires a greater
percentage. Our restated certificate of incorporation will require the
affirmative vote of the holders of at least 80% of our outstanding voting stock
to amend or repeal any of the provisions discussed in this section of this
prospectus entitled "Delaware Law and Certain Charter and By-law Provisions".
This 80% stockholder vote would be in addition to any separate class vote that
might in the future be required pursuant to the terms of any preferred stock
that might then be outstanding. A 80% vote will also be required for any
amendment to, or repeal of, our by-laws by the stockholders. Our amended and
restated by-laws will be able to be amended or repealed by a simple majority
vote of the board of directors.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock will be American
Stock Transfer and Trust Company.
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices. Furthermore, because
only a limited number of shares will be available for sale shortly after this
offering because of contractual and legal restrictions on resale as described
below, sales of substantial amounts of our common stock in the public market
could occur after these restrictions lapse. This may adversely affect the
prevailing market price and our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding 23,911,254
shares of common stock, assuming no exercise of the underwriters' over-
allotment option and no exercise of outstanding options or warrants after March
27, 2000. Of these shares, the 5,000,000 shares sold in this offering will be
freely tradable without restriction or further registration under the
Securities Act, unless these shares are purchased by affiliates. The remaining
18,911,254 shares of common stock held by existing stockholders are restricted
securities. Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration described
below under Rules 144, 144(k) or 701 promulgated under the Securities Act.
As a result of the contractual 180 day lock-up period described below and
the provisions of Rules 144, 144(k) and 701, the restricted shares will be
available for sale in the public market as follows:
<TABLE>
<CAPTION>
Number of Shares Date
---------------- ----
<S> <C>
62,500 ............ On the date of this prospectus
16,550 ............ After 90 days from the date of this prospectus
16,535,983 ............ After 180 days from the date of this prospectus
(subject, in some cases, to volume limitations)
3,060,000 ............ After various times after 180 days from the date of
this prospectus (subject, in some cases, to volume
limitations)
</TABLE>
Lock-Up Agreements
We, our directors and executive officers and certain of our stockholders
and option holders have each agreed not to offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of common stock or
any securities convertible into or exercisable or exchangeable for common
stock, for a period of at least 180 days after the date of this prospectus,
without the prior written consent of Chase Securities Inc., subject to limited
exceptions. Chase Securities Inc., however, may in its sole discretion, at any
time without notice, release all or any portion of the shares subject to lock-
up agreements.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
this offering, a person, or persons whose shares are aggregated, who owns
shares that were purchased from us, or any affiliate, at least one year
previously, is entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of our then-outstanding shares of
common stock, which will equal about 239,113 shares immediately after this
offering, or the average weekly trading volume of our common stock on the
Nasdaq National Market during the four calendar weeks preceding the filing of a
notice of the sale on Form 144. Sales under Rule 144 are also subject to manner
of sale provisions, notice requirements and the availability of current public
information about us. Any person, or persons whose shares are aggregated, who
is not deemed to have been one of our affiliates at any time during the three
months preceding a sale, and who owns shares within the definition of
"restricted securities" under Rule 144 that were purchased from us,
55
<PAGE>
or any affiliate, at least two years previously, would be entitled to sell
shares under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements or notice requirements.
Rule 701
Subject to limitations on the aggregate offering price of a transaction
and other conditions, Rule 701 may be relied upon with respect to the resale of
securities originally purchased from us by our employees, directors, officers
or consultants prior to the date we become subject to the reporting
requirements of the Securities Exchange Act of 1934, or the Exchange Act, under
written compensatory benefit plans or written contracts relating to the
compensation of these persons. In addition, the Securities and Exchange
Commission has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Exchange Act, along with the shares acquired upon exercise of the options,
including exercises after the date of this prospectus. Securities issued in
reliance on Rule 701 are restricted securities and, subject to the contractual
restrictions described above, beginning 90 days after the date of this
prospectus, may be sold by persons other than affiliates subject only to the
manner of sale provisions of Rule 144 and by affiliates under Rule 144 without
compliance with its minimum holding period requirements.
Registration Rights
Upon completion of this offering, the holders of 17,103,195 shares of
common stock and 763,779 shares of common stock issuable upon the exercise of
and warrants or their transferees, will be entitled to various rights with
respect to the registration of these shares under the Securities Act.
Registration of these shares under the Securities Act would result in these
shares becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of the registration, except for shares
purchased by affiliates. See "Description of Capital Stock--Registration
Rights" on page 53 for a more complete description of these registration
rights.
Stock Options
As of March 27, 2000 options to purchase a total of 1,537,760 shares of
common stock under our stock option plans were outstanding and 1,537,760 were
exercisable. All of the shares subject to options are subject to lock-up
agreements. An additional 669,181 shares of common stock were available for
future option grants under our stock plans.
Upon completion of this offering, we intend to file a registration
statement under the Securities Act covering all shares of common stock subject
to outstanding options or issuable pursuant to our stock option and stock
purchase plans. Subject to Rule 144 volume limitations applicable to
affiliates, shares registered under any registration statements will be
available for sale in the open market, beginning 90 days after the date of the
prospectus, except to the extent that the shares are subject to vesting
restrictions with us or the contractual restrictions described above.
56
<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below. Chase Securities Inc., J.P. Morgan & Co., Incorporated, Pacific Growth
Equities, Inc. and Stephens Inc. are acting as representatives of the
underwriters.
The underwriting agreement provides for the purchase of a specific number
of shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject to the terms
and conditions of the underwriting agreement, each underwriter has severally
agreed to purchase the number of shares of common stock set forth opposite its
name below.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Chase Securities Inc. ............................................
J.P. Morgan Securities Inc. ......................................
Pacific Growth Equities, Inc. ....................................
Stephens Inc. ....................................................
---------
Total........................................................... 5,000,000
=========
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other
than those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances. We have agreed to indemnify the underwriters against certain
civil liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect of such liabilities.
The representatives have advised us that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to certain securities dealers at such price less a
concession of $ per share. The underwriters may also allow to dealers, and
such dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the shares are released for sale to the public,
the representatives may change the offering price and other selling terms at
various times.
We have granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of 750,000 additional shares
from us to cover over-allotments. If the underwriters exercise all or part of
this option, they will purchase shares covered by the option at the public
offering price that appears on the cover page of this prospectus, less the
underwriting discount. If this option is exercised in full, the total price to
public will be $ million and our net proceeds will be approximately $
million. The underwriters have severally agreed that, to the extent the over-
allotment option is exercised, they will each purchase a number of additional
shares proportionate to the underwriter's initial amount reflected in the above
table.
57
<PAGE>
The following table provides information regarding the amount of the
discount to be paid to the underwriters by us. Such amount is shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares.
UNDERWRITING DISCOUNT PAID BY US
<TABLE>
<CAPTION>
NO FULL
EXERCISE EXERCISE
-------- --------
<S> <C> <C>
Per Share ................................................ $ $
Total..................................................... $ $
</TABLE>
We estimate that the total expenses of the offering, excluding the
underwriting discount, will be approximately $1.0 million.
We have agreed to indemnify each underwriter against all liabilities to
which they may become subject under the federal securities laws or other law,
including reimbursement of expenses, arising out of any untrue statements or
alleged untrue statement of a material fact contained in the registration
statement, including the prospectus, or the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements not misleading, except that there is no indemnification for specific
information furnished by the underwriters. This includes contribution to any
payments which may be made by the underwriters in the event that
indemnification is not available.
Our executive officers, directors and certain of our stockholders, who
will own in the aggregate 17,173,448 shares of our common stock after the
offering, have agreed that they will not, without the prior written consent of
Chase Securities Inc., offer, sell, pledge or otherwise dispose of any shares
of common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock owned by
them during the 180-day period following the effectiveness of the registration
statement. We have agreed that we will not, without the prior written consent
of Chase Securities Inc., offer, sell or otherwise dispose of any shares of
common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock during
the 180-day period following the date of this prospectus, except that we may
(1) issue shares upon the exercise of options granted prior to the date hereof
or upon the exercise of warrants outstanding as of the date hereof, (2) grant
additional options under our stock option plan, provided that, without prior
written consent of Chase Securities Inc., such additional options shall not be
exercisable during such period, (3) issue any shares of common stock or other
rights to acquire shares of common stock issued pursuant to equipment or lease
financing activities entered into in the ordinary course of our business and
(4) issue any shares of common stock or other rights to acquire shares of
common stock issued in connection with any strategic alliance, collaboration,
license, acquisition, marketing agreement, distribution agreement, advertising
arrangement, promotional arrangement or similar agreement, arrangement or
transaction, provided that the total amount of securities issued pursuant to
clauses (3) and (4) would not exceed 2 million shares of common stock or
securities exchangeable or convertible into shares of common stock and provided
further that securities may only be issued pursuant to clauses (3) and (4) to
the extent the recipient of such securities agrees to the same transfer
restrictions imposed on us by Chase Securities Inc. as set forth above.
The underwriters have reserved for sale up to 500,000 shares for
employees, directors and certain other persons associated with us. These
reserved shares will be sold at the public offering price that appears on the
cover of this prospectus. The number of shares available for sale to the
general public in the offering will be reduced to the extent reserved shares
are purchased by these persons. The underwriters will offer to the general
public, on the same terms as other shares offered by this prospectus, any
reserved shares that are not purchased by these persons.
58
<PAGE>
Prior to this offering, there has been no public market for the common
stock. Consequently, the offering price for the common stock will be determined
by negotiations between us and the underwriters and is not necessarily related
to our asset value, net worth or other established criteria of value. The
factors considered in these negotiations, in addition to prevailing market
conditions, will include the history of and prospects for the industry in which
we compete, an assessment of our management, our prospects, our capital
structures, prevailing market conditions, our results of operations in recent
periods and other factors as we deem relevant.
Rules of the SEC may limit the ability of the underwriters to bid for or
purchase shares before the distribution of the shares is completed. However,
the underwriters may engage in the following activities in accordance with the
rules:
. Stabilizing transactions. The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the price
of the shares, so long as stabilizing bids do not exceed a specified
maximum.
. Over-allotments and syndicate covering transactions. The underwriters
may create a short position in the shares by selling more shares than
are shown on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may
engage in syndicate covering transactions by purchasing shares in the
open market. The representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option.
. Penalty bids. If the representatives purchase shares in the open
market in a stabilizing transaction or syndicate covering transaction,
they may reclaim a selling concession from underwriters and selling
group members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of those transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.
Neither we nor the underwriters makes any representation or prediction as
to the effect that the transactions described above may have on the price of
the shares. These transactions may occur on the Nasdaq National Market or
otherwise. If these transactions are commenced, they may be discontinued
without notice at any time.
Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
such sale is made.
The representatives have informed us that they do not intend to confirm
the sales to discretionary accounts that exceed 5% of the total number of
shares of common stock offered by them.
One or more members of the underwriting selling group may make copies of
the preliminary prospectus available over the Internet to certain customers
through its or their websites. The representatives expect to allocate a limited
number of shares to that member or members of the selling group for sale to
brokerage account holders.
59
<PAGE>
LEGAL MATTERS
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center,
Boston, Massachusetts 02111 will provide us with an opinion as to the validity
of the common stock offered under this prospectus. Morgan, Lewis and Bockius
LLP, 101 Park Avenue, New York, New York 10178 will pass upon certain legal
matters related to this offering for the underwriters.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for the
period from inception (September 9, 1997) to December 31, 1997 and for the
years ended December 31, 1998 and 1999 included in this prospectus have been so
included in reliance upon the report of PricewaterhouseCoopers LLP, independent
accountants, given as the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-1 under the Securities Act with respect to the
shares of common stock offered under this prospectus. This prospectus does not
contain all of the information in the registration statement and the exhibits
and schedule to the registration statement. For further information with
respect to us and our common stock, we refer you to the registration statement
and to the exhibits and schedule to registration statement. Statements
contained in this prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance, we
refer you to the copy of the contract or other document filed as an exhibit to
the registration statement. Each of these statements is qualified in all
respects by this reference. You may inspect a copy of the registration
statement without charge at the SEC's principal office in Washington, D.C., and
copies of all or any part of the registration statement may be obtained from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of fees prescribed by the SEC. The SEC maintains a
website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the web site is http://www.sec.gov. The SEC's toll free investor
information service can be reached at 1-800-SEC-0330. Information contained on
the web site does not constitute part of this prospectus.
Upon completion of this offering, we will be subject to the information
reporting requirements of the Securities Exchange Act of 1934, as amended, and
we will file reports, proxy statements and other information with the SEC.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent public accountants and
quarterly reports for the first three fiscal quarters of each fiscal year
containing unaudited interim financial information. Our telephone number is
(919) 425-3000.
60
<PAGE>
PARADIGM GENETICS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................................... F-2
Balance Sheets.............................................................. F-3
Statements of Operations.................................................... F-4
Statements of Stockholders' Equity (Deficit)................................ F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Paradigm Genetics, Inc.
In our opinion, the accompanying balance sheets and related statements of
operations, of stockholders' equity (deficit), and of cash flows present
fairly, in all material respects, the financial position of Paradigm Genetics,
Inc. (the "Company") at December 31, 1998 and 1999, and the results of its
operations and its cash flows for the period from inception (September 9, 1997)
through December 31, 1997 and the years ended December 31, 1998 and 1999, in
conformity with accounting principles generally accepted in the United States.
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
auditing standards generally accepted in the United States, 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.
As discussed in Note 12, the Company has restated its financial statements
for the year ended December 31, 1999, to record additional deferred
compensation and stock based compensation expense.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
February 17, 2000 except as to Note 12,
which is as of April 24, 2000
F-2
<PAGE>
PARADIGM GENETICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
December 31,
December 31, 1999
------------------------- (unaudited)
1998 1999 (Note 2)
----------- ------------ ------------
(restated)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 970,688 $ 468,342 $ 468,342
Short-term investments................ 2,484,132 3,488,108 3,488,108
Accounts receivable................... 89,025 256,844 256,844
Prepaid expenses...................... 48,166 1,157,851 1,157,851
----------- ------------ -----------
Total current assets................. 3,592,011 5,371,145 5,371,145
Property and equipment, net............ 3,822,293 8,816,665 8,816,665
Other assets, net...................... 20,667 37,494 37,494
----------- ------------ -----------
Total assets......................... $ 7,434,971 $ 14,225,304 $14,225,304
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable...................... $ 319,421 $ 1,327,423 $ 1,327,423
Accrued liabilities................... 222,462 571,184 571,184
Deferred revenue...................... 1,484,850 5,825,237 5,825,237
Long-term debt--current portion....... 327,244 1,182,456 1,182,456
Capital lease obligation--current
portion.............................. 90,365 100,075 100,075
----------- ------------ -----------
Total current liabilities............ 2,444,342 9,006,375 9,006,375
Long-term debt......................... 3,215,737 7,823,780 7,823,780
Capital lease obligation............... 322,925 222,850 222,850
----------- ------------ -----------
Total liabilities.................... 5,983,004 17,053,005 17,053,005
----------- ------------ -----------
Commitments (Note 11)
Stockholders' equity (deficit):
Convertible preferred stock, $0.01 par
value; 15,000,000 shares authorized:
Series A Convertible Preferred Stock,
8,000,000 shares designated;
7,562,500 shares issued and
outstanding as of December 31, 1998
and 1999, respectively; no shares
issued and outstanding pro forma.... 5,950,899 5,950,899 --
Series B Convertible Preferred Stock;
2,790,698 shares designated; -0- and
2,790,698 shares issued and
outstanding as of December 31, 1998
and 1999, respectively; no shares
issued and outstanding pro forma.... -- 5,967,819 --
Common Stock, $.01 par value;
30,000,000 shares authorized;
3,750,247 and 5,224,257 shares issued
and outstanding as of December 31,
1998 and 1999, respectively,
15,577,455 shares issued and
outstanding pro forma................ 37,502 52,242 155,775
Additional paid-in capital (restated).. 6,389 3,529,452 15,344,637
Deferred compensation (restated)....... -- (3,165,430) (3,165,430)
Accumulated deficit.................... (4,542,823) (15,162,683) (15,162,683)
----------- ------------ -----------
Total stockholders' equity
(deficit)........................... 1,451,967 (2,827,701) (2,827,701)
----------- ------------ -----------
Total liabilities and stockholders'
equity (deficit).................... $ 7,434,971 $ 14,225,304 $14,225,304
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
PARADIGM GENETICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
For the
Period from
Inception
(September 9,
1997) to
December 31,
1997 1998 1999
------------- ----------- ------------
(restated)
<S> <C> <C> <C>
Revenues:
Collaborative research agreements.... $ -- $ 820,150 $ 2,052,113
Grant revenues....................... -- 50,409 144,862
--------- ----------- ------------
Total revenues...................... -- 870,559 2,196,975
--------- ----------- ------------
Operating expenses:
Research and development (excludes
$0, $0 and $87,365, respectively, of
stock based compensation)........... 71,534 3,641,033 7,527,866
Selling, general and administrative
(excludes $0, $6,371 and $112,147,
respectively, of stock based
compensation)....................... 148,663 1,523,365 4,713,675
Stock based compensation (restated).. -- 6,371 199,512
--------- ----------- ------------
Total operating expenses............ 220,197 5,170,769 12,441,053
--------- ----------- ------------
Loss from operations.................. (220,197) (4,300,210) (10,244,078)
--------- ----------- ------------
Interest income (expense), net:
Interest income...................... -- 139,494 246,896
Interest expense..................... (13) (128,797) (622,678)
--------- ----------- ------------
Interest income (expense), net....... (13) 10,697 (375,782)
--------- ----------- ------------
Net loss.............................. $(220,210) $(4,289,513) $(10,619,860)
========= =========== ============
Net loss per share--basic and
diluted.............................. $ (0.19) $ (1.14) $ (2.51)
========= =========== ============
Weighted average Common shares
outstanding--basic and diluted....... 1,160,958 3,750,036 4,236,409
========= =========== ============
Pro forma net loss per share--basic
and diluted.......................... $ (0.76)
============
Pro forma weighted average Common
shares outstanding-- basic and
diluted.............................. 14,046,759
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
PARADIGM GENETICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Series A Series B
Preferred Stock Preferred Stock Common Stock Additional
-------------------- -------------------- ----------------- Paid In Deferred Accumulated
Shares Amount Shares Amount Shares Amount Capital Compensation Deficit
--------- ---------- --------- ---------- --------- ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
inception
(September 9,
1997)........... -- $ -- -- $ -- -- $ -- $ -- $ -- $ --
Issuance of
Common Stock... -- -- -- -- 3,749,997 37,500 -- -- (33,100)
Net loss........ -- -- -- -- -- -- -- -- (220,210)
--------- ---------- --------- ---------- --------- ------- ---------- ----------- ------------
Balance at
December 31,
1997............ -- -- -- -- 3,749,997 37,500 -- -- (253,310)
Stock based
compensation... -- -- -- -- -- -- 6,371 -- --
Issuance of
Series A
Preferred
Stock.......... 7,125,000 5,600,899 -- -- -- -- -- -- --
Notes payable
converted to
Series A
Preferred
Stock.......... 437,500 350,000 -- -- -- -- -- -- --
Exercise of
stock options.. -- -- 250 2 18 -- --
Net loss........ -- -- -- -- -- -- -- -- (4,289,513)
--------- ---------- --------- ---------- --------- ------- ---------- ----------- ------------
Balance at
December 31,
1998............ 7,562,500 5,950,899 -- -- 3,750,247 37,502 6,389 -- (4,542,823)
Issuance of
Series B
Preferred
Stock.......... -- -- 2,790,698 5,967,819 -- -- -- -- --
Exercise of
stock options.. -- -- -- -- 1,474,010 14,740 158,121 -- --
Deferred
compensation
(restated) .... -- -- -- -- -- -- 3,364,942 (3,364,942) --
Amortization of
deferred
compensation
(restated)..... -- -- -- -- -- -- -- 199,512 --
Net loss........ -- -- -- -- -- -- -- -- (10,619,860)
--------- ---------- --------- ---------- --------- ------- ---------- ----------- ------------
Balance at
December 31,
1999............ 7,562,500 $5,950,899 2,790,698 $5,967,819 5,224,257 $52,242 $3,529,452 $(3,165,430) $(15,162,683)
========= ========== ========= ========== ========= ======= ========== =========== ============
<CAPTION>
Total
Stockholders'
Equity
(Deficit)
--------------
<S> <C>
Balance at
inception
(September 9,
1997)........... $ --
Issuance of
Common Stock... 4,400
Net loss........ (220,210)
--------------
Balance at
December 31,
1997............ (215,810)
Stock based
compensation... 6,371
Issuance of
Series A
Preferred
Stock.......... 5,600,899
Notes payable
converted to
Series A
Preferred
Stock.......... 350,000
Exercise of
stock options.. 20
Net loss........ (4,289,513)
--------------
Balance at
December 31,
1998............ 1,451,967
Issuance of
Series B
Preferred
Stock.......... 5,967,819
Exercise of
stock options.. 172,861
Deferred
compensation
(restated) .... --
Amortization of
deferred
compensation
(restated)..... 199,512
Net loss........ (10,619,860)
--------------
Balance at
December 31,
1999............ $ (2,827,701)
==============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
PARADIGM GENETICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
For the
Period from
Inception
(September 9,
1997) to
December 31,
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $(220,210) $ (4,289,513) $(10,619,860)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Deferred revenue.................... -- 1,484,850 4,340,387
Depreciation and amortization....... 312 299,044 1,588,762
Stock based compensation............ -- 6,371 199,512
Changes in operating assets and
liabilities
Accounts receivable................ (500) (88,525) (167,819)
Prepaid expenses................... (41,570) (27,263) (1,126,512)
Accounts payable................... 29,017 290,404 1,008,002
Accrued liabilities................ -- 222,462 348,722
--------- ------------ ------------
Net cash used in operating
activities....................... (232,951) (2,102,170) (4,428,806)
--------- ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment.. (3,741) (3,650,783) (6,583,134)
Purchase of investments............. -- (15,021,015) (26,214,499)
Maturities of investments........... -- 12,536,883 25,210,522
--------- ------------ ------------
Net cash used in investing
activities....................... (3,741) (6,134,915) (7,587,111)
--------- ------------ ------------
Cash flows from financing activities:
Borrowings under notes payable...... 250,000 3,682,506 5,765,761
Repayments of notes payable......... -- (39,525) (302,506)
Repayments of capital lease
obligations........................ -- (53,835) (90,364)
Proceeds from issuance of
convertible preferred stock, net... -- 5,600,899 5,967,819
Proceeds from issuance of Common
Stock.............................. 4,400 -- --
Proceeds from exercise of stock
options............................ -- 20 172,861
--------- ------------ ------------
Net cash provided by financing
activities....................... 254,400 9,190,065 11,513,571
--------- ------------ ------------
Net increase in cash and cash
equivalents......................... 17,708 952,980 (502,346)
Cash and cash equivalents, beginning
of period........................... -- 17,708 970,688
--------- ------------ ------------
Cash and cash equivalents, end of
period.............................. $ 17,708 $ 970,688 $ 468,342
========= ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. The Company
Paradigm Genetics, Inc. (the "Company" or "Paradigm") was organized on
September 9, 1997 to discover the function of genes in plant and fungal
organisms. The Company is industrializing the process of determining gene
function by creating an assembly-line process to generate information that will
enable it to develop novel products in four major sectors of the global
economy: crop production, nutrition, human health and industrial products. The
Company has developed its GeneFunction Factory to simultaneously study the
functions of many genes in plants and fungi. The GeneFunction Factory is
designed to be an integrated, rapid, industrial-scale laboratory through which
it can discover and alter genes, understand the consequences of the
modifications and reliably determine the function of those genes. The Company
stores and annotates gene function information in its FunctionFinder
bioinformatics system. Paradigm generates revenues by licensing information
mined from the data in FunctionFinder for the development of products in crop
production, nutrition, human health and industrial applications. If the
Company's strategic partners commercialize products resulting from this
information, the Company is entitled to receive royalty payments based upon
product revenues.
2. Summary of Significant Accounting Policies
Unaudited Pro Forma Balance Sheet
The Board of Directors has authorized the Company to file a Registration
Statement with the Securities and Exchange Commission permitting the Company to
sell shares of Common Stock in an initial public offering ("IPO"). If the IPO
is consummated as presently anticipated, all shares of Series A and Series B
Preferred Stock will automatically convert into 10,353,198 shares of the
Company's Common Stock at a one-for-one conversion ratio. The unaudited pro
forma balance sheet reflects the subsequent conversion of the Series A and
Series B Preferred Shares into Common Stock as if such conversion had occurred
as of December 31, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the date of purchase to be cash equivalents.
Investments
The Company considers all investments in debt and equity securities
purchased with a maturity of between three months and one year from the balance
sheet date to be short-term investments. All investments are considered as
available for sale and are carried at fair value. Unrealized gains and losses
on investments are recognized as a component of other comprehensive income
(loss). At December 31, 1998 and 1999, the amortized costs of the Company's
investments approximated their fair value. Realized gains and losses on sales
of investments are determined using the specific identification method.
Realized gains and losses on sales of investments were not significant during
the period from inception (September 9, 1997) to December 31, 1997 or the years
ended December 31, 1998 and 1999.
F-7
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment is primarily comprised of laboratory equipment,
computer equipment, furniture, and leasehold improvements which are recorded at
cost and depreciated using the straight-line method over their estimated useful
lives which range from one to seven years. Expenditures for maintenance and
repairs are charged to operations as incurred; major expenditures for renewals
and betterments are capitalized and depreciated. Property and equipment
acquired under capital leases are being depreciated over their estimated useful
lives or the respective lease term, if shorter.
Other Assets
Other assets includes deposits for building leases which will be returned
to the Company upon the expiration of related leases.
Capitalized Software Costs
The Company accounts for the costs of development of software applications
to be sold to or used by third parties in accordance with Statement of
Financial Accounting Standards No. 86 "Accounting for the Costs of Computer
Software to Be Sold, Leased or Otherwise Marketed." Software development costs
are required to be capitalized beginning when a product's technological
feasibility has been established and ending when a product is available for
general release.
Fair Value of Financial Instruments
The carrying value of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, investments, accounts payable,
capital lease obligations and long-term debt, at December 31, 1998 and 1999
approximated their fair value due to the short term nature of these items.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its property and equipment and
other long-lived assets when circumstances indicate that an event of impairment
may have occurred in accordance with the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of'' ("SFAS No. 121"). SFAS No. 121 requires recognition of impairment
of long-lived assets in the event the net book value of such assets exceeds the
future undiscounted cash flows attributable to such assets or the business to
which such assets relate. Impairment is measured based on the difference
between the carrying value of the related assets or businesses and the
discounted future cash flows of such assets or businesses. No impairment was
required to be recognized during the period from inception (September 9, 1997)
to December 31, 1997 or the years ended December 31, 1998 and 1999.
Income Taxes
The Company accounts for income taxes using the liability method which
requires the recognition of deferred tax assets or liabilities for the
temporary differences between financial reporting and tax bases of the
Company's assets and liabilities and for tax carryforwards at enacted statutory
rates in effect for the years in which the differences are expected to reverse.
The effect on deferred taxes of a change in tax rates is recognized in income
in the period that includes the enactment date. In addition, valuation
allowances are established where necessary to reduce deferred tax assets to the
amounts expected to be realized.
F-8
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Revenues are derived from collaborative research agreements with strategic
partners and from government grants. Revenues, including nonrefundable and
refundable payments received at the initiation of collaboration agreements, are
recognized under the collaborative research agreements on a percentage of
completion basis in accordance with the applicable performance requirements of
each collaboration agreement. Nonrefundable fees received at the initiation of
a collaborative research agreement are deferred and recognized as revenues on a
percentage completion basis as the Company has a future performance obligation
under these agreements. Progress to completion under collaborative research
agreements is measured based on a comparison of actual costs incurred to
estimated total costs to be incurred, measured based on units of performance,
on a contract by contract basis. The Company does not segment its collaborative
research agreements for purposes of the calculation of revenues to be
recognized as the Company does not meet the criteria to allow segmentation
specified in the relevant authoritative accounting guidance. Milestone payments
under collaborative agreements will be recognized as revenue when the
applicable milestone has been achieved and such achievement has been
acknowledged by the other party to the collaboration agreement. Revenues from
government grants are recognized as expenses are incurred over the period of
each grant. Cash received in excess of revenues recognized under collaborative
agreements and grants is recorded as deferred revenue. Payments received under
the Company's collaborative agreements and government grants are generally non-
refundable regardless of the outcome of the future research and development
activities to be performed by the Company under these arrangements. The Company
is able to recognize refundable payments as revenues using a percentage of
completion method because it has the ability to perform under its various
agreements.
Research and Development
Research and development costs include expenses incurred by the Company to
develop its proprietary Gene Function Factory, perform required services under
collaborative research agreements and government grants and perform research
and development on internal projects. Research and development costs are
expensed as incurred.
Stock Based Compensation
The Company accounts for stock-based compensation based on the provisions
of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25") which states that no compensation expense
is recorded for stock options or other stock-based awards to employees that are
granted with an exercise price equal to or above the estimated fair value of
the Company's Common Stock on the grant date. In the event that stock options
are granted with an exercise price below the estimated fair value of the
Company's Common Stock at the grant date, the difference between the fair value
of the Company's Common Stock and the exercise price is recorded as deferred
compensation. The Company recognized deferred compensation of $3,364,942
(restated) to reflect the difference between the aggregate fair market value
and exercise price of all options granted during 1999 with an exercise price
below the fair market value of the Company's Common Stock at the date of grant.
Deferred compensation is amortized to compensation expense over the vesting
period of the related stock option. The Company recognized $199,512 (restated)
in non-cash compensation expense related to amortization of deferred
compensation during the year ended December 31, 1999. The Company did not
recognize any non-cash compensation expense for the year ended December 31,
1998 or the period from inception (September 9, 1997) through December 31, 1997
related to stock options granted to employees as no stock options were granted
to employees with an exercise price below the estimated fair value of the
Company's Common Stock until 1999. The Company has adopted the disclosure
requirements of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," ("SFAS 123") as it relates to stock options granted to
employees, which requires compensation expense to be disclosed based on the
fair
F-9
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
value of the options granted at the date of grant. Stock options or warrants
granted to non-employees for services are accounted for in accordance with SFAS
123, which requires that these options and warrants be valued using the Black-
Scholes model and the resulting charge is recognized as the related services
are performed.
Cash Flow
The Company made cash payments for interest of $13, $128,797, and $622,678
for the period from inception (September 9, 1997) to December 31, 1997 and the
years ended December 31, 1998 and 1999, respectively.
The Company acquired property and equipment through the assumption of
capital lease obligations amounting to $467,125 for the year ended December 31,
1998.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of temporary cash and short-
term investments and trade receivables. The Company primarily places its
temporary cash and short-term investments with high-credit quality financial
institutions which invest primarily in U.S. Government securities, commercial
paper of prime quality and certificates of deposit guaranteed by banks which
are members of the FDIC. Cash deposits are all in financial institutions in the
United States. The Company performs ongoing credit evaluations to reduce credit
risk and requires no collateral from its customers. Management estimates the
allowance for uncollectible accounts based on their historical experience and
credit evaluation.
The Company has one strategic partner which accounted for 100% of the
Company's collaborative research revenues and 94% and 93% of total revenues for
the years ended December 31, 1998 and 1999, respectively (see Note 8).
Comprehensive Income (Loss)
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display comprehensive income and its
components in the financial statements. Comprehensive income, as defined,
includes all changes in equity during a period from non-owner sources. The
Company had no items of other comprehensive income during the period from
inception (September 9, 1997) to December 31, 1997 or during the years ended
December 31, 1998 and 1999.
Net Income (Loss) Per Common Share
Historical
The Company computes net income (loss) per common share in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB No. 98"). Under the
provisions of SFAS 128 and SAB No. 98, basic net income (loss) per Common share
("Basic EPS") is computed by dividing net income (loss) by the weighted average
number of Common shares outstanding. Diluted net income (loss) per Common share
("Diluted EPS") is computed by dividing net income (loss) by the weighted
average number of Common shares and dilutive potential Common shares
equivalents then outstanding. Potential Common shares consist of shares
issuable upon the exercise of stock options and warrants and shares issuable
upon the conversion of outstanding convertible Preferred Stock. The calculation
of the net loss per share for the years ended December 31, 1998 and 1999 does
not include zero and 8,487,520 potential shares of Common Stock equivalents,
respectively, as their impact would be antidilutive.
F-10
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Pro Forma (Unaudited)
Pro forma net income (loss) per common share is calculated assuming the
conversion of all convertible Preferred Stock which will convert automatically
upon the effectiveness of the Company's initial public offering into 10,353,198
shares of Common Stock (see Note 9) at January 1, 1999 or the date of issuance,
if later.
Segment Reporting
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). This statement requires companies to report information about
operating segments in interim and annual financial statements. It also requires
segment disclosures about products and services, geographic areas and major
customers. The Company adopted SFAS 131 effective for its year ended December
31, 1998. The Company has determined that it operates in only one segment as of
December 31, 1998 and 1999.
Internal Use Software
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Public Accountants ("AICPA"), issued Statement of
Position No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP No. 98-1"), which provides guidance regarding
when software developed or obtained for internal use should be capitalized. The
Company adopted SOP No. 98-1 effective January 1, 1999. The Company accounts
for the development of software for internal uses in accordance with SOP No.
98-1. The adoption of SOP No. 98-1 did not have a material impact on the
Company's financial position or results of operations as the predominant
portion of the software applications used by the Company were purchased from
third parties. The Company expenses the cost of accumulating and preparing data
for use in its database applications as such costs are incurred.
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as "derivatives"), and for hedging
activities. SFAS 133, as amended by SFAS 137, is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000, with earlier
application encouraged. The Company does not currently, nor does it intend in
the future, to use derivative instruments and therefore does not expect that
the adoption of SFAS 133 will have any impact on its financial position or the
results of operations.
3. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
---------- -----------
<S> <C> <C>
Buildings.............................................. $ -- $ 408,079
Leasehold improvements................................. 240,923 2,700,467
Furniture and laboratory equipment..................... 1,974,561 4,513,141
Computer equipment..................................... 1,906,165 3,083,096
---------- -----------
Total costs.......................................... 4,121,649 10,704,783
Less accumulated depreciation.......................... (299,356) (1,888,118)
---------- -----------
Property and equipment, net.......................... $3,822,293 $ 8,816,665
========== ===========
</TABLE>
F-11
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and amortization expense for the years ended December 31,
1998 and 1999 was $299,044 and $1,588,762, respectively.
The Company leases certain equipment under capital lease agreements. The
cost of equipment under capital leases at December 31, 1998 and 1999 was
$467,125. The accumulated amortization for equipment under capital leases was
$116,701 at December 31, 1999.
4. Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts payable and
accounts receivable at December 31, 1998 and 1999 approximated their fair value
due to the short-term nature of these items.
The fair value of the Company's short-term investments at December 31,
1998 and 1999 was determined based on quoted financial market prices and
approximated their carrying values as these investments were primarily in
short-term corporate obligations.
The historical carrying value of the Company's capital lease obligations
and long-term debt approximated their fair value because the interest rates on
these obligations approximate rates currently available to the Company.
5. Accrued Liabilities
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
Payroll...................................................... $109,024 $539,184
Taxes other than income...................................... 50,000 --
Other........................................................ 63,438 32,000
-------- --------
$222,462 $571,184
======== ========
</TABLE>
6. Income Taxes
No provision for federal or state income taxes has been recorded as the
Company has incurred net operating losses since inception.
Significant components of the Company's deferred tax assets and
liabilities at December 31, 1998 and 1999 consist of the following:
<TABLE>
<CAPTION>
1998 1999
Deferred tax assets: ----------- -----------
<S> <C> <C>
Domestic net operating loss carryforwards........... $ 1,265,198 $ 3,778,046
Deferred revenue.................................... 575,899 2,259,318
Stock based compensation............................ -- 79,852
Compensation accruals............................... 25,594 60,004
Other .............................................. 19,393 2,795
----------- -----------
Total deferred tax assets........................... 1,886,084 6,180,015
Valuation allowance for deferred tax assets......... (1,733,030) (5,831,327)
----------- -----------
Deferred tax assets, net ........................... 153,054 348,688
----------- -----------
Deferred tax liabilities:
Property and equipment.............................. 153,054 348,688
----------- -----------
Total deferred tax liabilities...................... 153,054 348,688
=========== ===========
Net deferred tax asset (liability).................. $ -- $ --
=========== ===========
</TABLE>
F-12
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1998 and 1999, the Company provided a full valuation
allowance against its net deferred tax assets since it could not be determined
that it was more likely than not that the Company would realize these deferred
tax assets. The increase in the valuation allowance in 1999 resulted primarily
from the additional net operating loss carryforward generated.
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of $9,741,000. These net operating loss carryforwards begin
to expire in 2012. The utilization of the federal net operating loss
carryforwards is subject to an annual limitation of $1,569,000 under the rules
regarding a change in stock ownership as determined by the Internal Revenue
Code due to changes in ownership resulting from the Company's preferred stock
financings.
Taxes computed at the statutory federal income tax rate of 34% are
reconciled to the provision for income taxes as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ----------- -----------
<S> <C> <C> <C>
Effective Rate............................ 0% 0% 0%
-------- ----------- -----------
United States federal tax at statutory
rate..................................... $(74,871) $(1,458,434) $(3,610,752)
State taxes (net of federal benefit)...... (8,902) (203,635) (505,617)
Change in valuation allowance............. 82,460 1,650,571 4,098,297
Other nondeductible expenses.............. 1,313 11,498 18,072
-------- ----------- -----------
Provision for income taxes................ $ -- $ -- $ --
-------- ----------- -----------
</TABLE>
7. Long Term Debt
The Company's long term debt at December 31, 1998 and 1999 consists of the
following:
<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
Senior note payable.................................... $ -- $ 2,000,000
Notes payable for equipment financing.................. 3,542,981 7,006,236
---------- -----------
Total Notes payable.................................. 3,542,981 9,006,236
Less current maturities................................ (327,244) (1,182,456)
---------- -----------
Long-term portion.................................... $3,215,737 $ 7,823,780
========== ===========
</TABLE>
In February 1998, a bridge loan in the amount of $250,000 was converted
into 312,500 shares of the Company's Series A Preferred Stock at a conversion
price of $0.80 per share in conjunction with the closing of the Company's
initial round of financing (See Note 9).
The equipment financing consists of several notes payable to two financial
institutions for the financing of equipment purchases made in 1998 and 1999.
The payment amount is specified in each note agreement and is approximately 1%
of the outstanding balance for the first twelve months and then increases to 3%
of the outstanding balance for the remaining 36 months. A balloon payment of
the remaining balance on the notes is due at the maturity date of the
respective notes. The stated interest rate ranges from 11.3% to 14.2%. The
notes are collateralized by the equipment pledged against these proceeds by the
Company.
Subsequent to December 31, 1999, the Company entered into an additional
equipment financing loan agreement for $3.5 million with an additional $3.5
million available upon completion of an initial public
F-13
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
offering. The loan term will commence upon delivery of equipment with a monthly
payment equal to 2.519% of original principal for a period of 48 months. No
additional borrowings will be available under this loan agreement after January
31, 2001.
During July 1999, the Company entered into a $2 million senior debt
agreement with a financial institution. The note has interest-only payments
until March 1, 2002, followed by six equal principal and interest payments. The
loan is collateralized by the Company's equipment, intellectual property and
receivables. In connection with the debt, Paradigm issued the financial
institution 116,279 warrants to purchase the Company's Common Stock at an
exercise price of $2.15. The Company did not record any debt discount related
to these warrants as their fair value as determined by the Black-Scholes
valuation method was deminimis. This loan agreement prohibits the payment of
any cash dividends until we have fully repaid this loan.
Annual maturities of the long-term debt for the years subsequent to
December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000............................................................ $1,182,456
2001............................................................ 2,081,292
2002............................................................ 4,278,615
2003............................................................ 1,273,607
2004............................................................ 190,266
----------
Total....................................................... $9,006,236
==========
</TABLE>
8. Collaborative Agreements
In September 1998, Paradigm entered into a collaborative research
agreement with Bayer in which the Company is developing assays for the
development of new herbicides. If the collaborative agreement continues for the
full initial research term, the Company will receive a minimum of $14.7 million
in quarterly and up front payments during the three-year period from September
1998 through October 2001. If the agreement is extended and the Company meets
all of its milestones, the Company will receive up to a maximum of an
additional $25.1 million. The Company has recognized $2.9 million in cumulative
revenues from the collaboration agreement through December 31, 1999.
In addition, the Company is entitled to receive a royalty of the annual
net sales of herbicides developed by Bayer for a defined period of time.
In November 1999, Paradigm entered into a collaborative agreement with
another strategic partner for the development of crop products and nutrition
products. If the collaborative agreement continues for the full research term,
the Company will receive $41.5 million in quarterly and up front payments
during the six-year period from November 1999 through January 2006. The
strategic partner has options to extend the agreement. If the agreement is
extended and all the required milestones are met, the Company will also receive
up to an additional $107.5 million.
9. Stockholders' Equity (Deficit)
In September 1997, the Company issued 4,400 shares of Common Stock to the
founders of the Company for gross proceeds of $4,400. On February 12, 1998, the
Company issued a Common Stock dividend of 851.2727 shares for each issued and
outstanding share of Common Stock which increased the
F-14
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
number of shares of outstanding Common Stock to 3,749,997. All share amounts in
the accompanying financial statements for all periods presented prior to the
date of this dividend have been retroactively adjusted to reflect this
dividend.
During 1998, the Company's Articles of Incorporation were amended and
restated to authorize 20,000,000 shares of Common Stock with a par value of
$0.01 per share and 10,000,000 shares of Preferred Stock with a par value of
$0.01 per share, of which 9,275,000 shares were designated as Series A
Preferred Stock. The remaining 725,000 shares were undesignated.
In March 1999, the Company's Articles of Incorporation were amended and
restated to increase the number of authorized shares of Preferred Stock to
15,000,000, of which 8,000,000 shares were designated Series A Preferred Stock,
of which 7,562,500 shares were issued and outstanding at December 31, 1998 and
1999, and 2,790,698 shares were designated Series B Preferred Stock, of which
all were issued and outstanding as of December 31, 1999. The remaining
4,209,302 shares were undesignated. Also, in March 1999 the number of
authorized shares of Common Stock was increased to 30,000,000 shares, of which
3,750,247 and 5,224,257 shares were issued and outstanding at December 31, 1998
and 1999, respectively.
The Company is required at all times to reserve a number of shares of
unissued Common Stock for the purpose of effecting the conversion of the issued
and outstanding shares of the Series A and Series B Preferred Stock and the
exercise of all outstanding warrants and options to purchase the Company's
Common Stock. At December 31, 1999, the Company had 17,755,020 shares of Common
Stock reserved for this purpose.
In February 1998, the Company sold a total of 4,625,000 shares of Series A
Preferred Stock in a private placement transaction in exchange for gross
proceeds of $3,700,000 or $0.80 per share and issued 375,000 shares of Series A
Preferred Stock in exchange for the cancellation of notes payable of $300,000.
The notes payable were issued in the last quarter of 1997 and in January 1998.
Two of the purchasers of the Series A Preferred Stock each received 187,500
warrants for the purchase of Series A Preferred Stock with an exercise price of
$0.80 per share. Also, in consideration for being a lead investor, the Company
issued an additional 62,500 warrants in total to one of the two purchasers with
an exercise price of $0.80 per share. The Company did not record any additional
paid-in capital related to the value of these warrants, because the fair market
value of the warrants, as calculated using the Black-Scholes pricing model, was
de minimis.
In March 1998, 62,500 shares of Series A Preferred Stock were issued to an
investor for the cancellation of convertible debt of $50,000, which borrowing
was made in January 1998.
In May 1998, 2,500,000 shares of Series A Preferred Stock were sold to the
same group of purchasers in a second private placement transaction for gross
proceeds of $2,000,000 or $0.80 per share.
In March 1999, the Company sold 2,790,698 shares of Series B Preferred
Shares in a private placement transaction in exchange for gross proceeds of $
6,000,000 or $2.15 per share. The purchasers of the Series B Preferred Shares
were primarily the same as the holders of the Series A Preferred Stock. All of
the Series B Preferred Shares were issued at a price of $2.15. The rights and
preferences of the Series B Preferred Stock are essentially the same as the
Series A Preferred Stock with certain exceptions which are detailed below.
Rights, Preferences and Terms of Capital Stock
The following is a summary of the rights, preferences, and terms of the
Company's outstanding series of Common and Preferred Stock.
F-15
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Dividends
The holders of the Series A and Series B Preferred Stock shall be entitled
to receive in any fiscal year of the Company, when and if declared by the Board
of Directors, dividends payable in cash in an amount per share of Series A and
Series B Preferred Stock for such fiscal year at least equal to the product of
(a) the per share amount multiplied by (b) the number of whole shares of Common
Stock into which each such share of Series A and B Preferred Stock is
convertible immediately after the close of business on the record date fixed
for such dividend. No dividend shall be paid on Series A Preferred Stock unless
an equivalent dividend can be paid on the Series B Preferred Stock. The right
to such dividends shall not be cumulative, and no right shall accrue. Nor shall
any undeclared or unpaid dividend bear or accrue interest.
Liquidity
In the event of any liquidation, the holders of Series B Preferred Stock
shall be entitled to receive prior and in preference to any distribution of any
of the assets or surplus funds of the Company to the holders of Series A
Preferred Stock and Common Stock an amount equal to $2.15 per share plus all
accrued or declared but unpaid dividends. The holders of Series A Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of the Company to holders of Common Stock
and any series of Preferred Stock the terms of which specifically provide that
such series ranks junior and subordinate to the Series A Preferred Stock with
respect to distribution of assets upon any liquidation or deemed liquidation,
an amount equal to $0.80 per share, adjusted for any stock splits or dividends,
plus all accrued but unpaid dividends. After payment to the holders of the
Series A Preferred Stock, the entire remaining assets and funds of the Company
legally available for distribution shall be distributed among the holders of
the Common Stock in proportion to the shares of Common Stock then held by the
holders of the Common Stock.
Voting
Series A Preferred Stock and Series B Preferred Stock shall be voted
equally with shares of Common Stock at any annual or special meeting of
stockholders of the Company. As long as twenty percent of each series of
Preferred shares originally issued remain outstanding, the affirmative vote or
written consent of the holders of at least two-thirds of the outstanding shares
shall be required to approve all matters brought before the stockholders for
approval.
Conversion
Each share of Series A or Series B Preferred Stock shall be convertible,
at the option of the holder, into shares of the Company's Common Stock. The
initial conversion price per share of Series A Preferred Stock shall be $0.80.
The initial conversion price and value for the Series B Preferred Shares is
$2.15. Each share of Series A and Series B Preferred Stock shall automatically
be converted into a share of Common Stock at the then-effective conversion
rate, immediately upon the closing of the sale of the Company's Common Stock in
a firm commitment, underwritten public offering, at a public offering price
equal to or exceeding $6.00 per share of Common Stock and with aggregate gross
proceeds to the Company and any selling stockholders which equal or exceed
$20,000,000.
10. Stock Options and Warrants
In February 1998, the Company adopted the 1998 Stock Option Plan ("the
Plan") which provided for the grant of up to 1,765,000 employee stock options.
In March 1999, the Plan was amended to provide for the grant of up to 2,515,000
employee stock options. The board amended the Plan in November 1999 to
F-16
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
increase the options available for grant to 3,715,000. In December 1999, the
board authorized an additional 300,000 options for the Plan. Stock options
granted under the Plan are to have exercise periods not to exceed ten years.
Options granted under the Plan generally vest over a period of four years from
the date of grant. Option grants to new employees are generally made within 90
days of commencement of service with the Company and vest over a period of four
years retroactively from the date of hire. The Plan provides the right to
exercise options before they are vested into shares of Common Stock subject to
a repurchase right by the Company.
A summary of the status of the Plan as of December 31, 1999 and changes
during the years ended December 31, 1998 and 1999 presented below:
<TABLE>
<CAPTION>
Shares Underlying Weighted Average
Options Exercise Price
----------------- ----------------
<S> <C> <C>
Outstanding at December 31, 1997............. -- $ --
Granted.................................... 1,683,050 0.08
Forfeited.................................. (2,000) 0.08
Exercised.................................. (250) 0.08
---------- -----
Outstanding at December 31, 1998............. 1,680,800 0.08
Granted.................................... 1,362,819 0.33
Forfeited.................................. (95,823) 0.08
Exercised.................................. (1,474,010) 0.12
---------- -----
Outstanding at December 31, 1999............. 1,473,786 $0.28
========== =====
</TABLE>
As of December 31, 1999, the Company had 831,340 shares of Common Stock
outstanding which were subject to the Company's lapsing right of repurchase in
the event the holder's association with the Company terminates. These shares
are the result of the exercise of unvested stock options by employees. The
shares which relate to the exercise of unvested stock options generally vest
over the four year vesting period of the underlying exercised stock options.
There were no options granted during the period from inception (September
9, 1997) to December 31, 1997. All options granted during the year ended
December 31, 1998 were granted with an exercise price equal to the fair value
of the underlying Common Stock on the grant date, as determined by the board of
directors.
During 1999, the Company issued stock options to certain employees with
exercise prices below the deemed fair value of its Common Stock at the date of
grant. In accordance with the requirements of APB 25, the Company has recorded
deferred compensation and additional paid-in capital for the difference between
the exercise price of the stock options and the estimated fair value of the
Company's Common Stock at the date of grant. This deferred compensation is
amortized to stock based compensation expense over the period during which the
options or restricted Common Stock, subject to repurchase, vest using the
straight line method over a period which is generally four years. The Company
recognized $3,364,942 (restated) in deferred compensation related to 1999
option grants of which $199,512 (restated) was amortized to expense during the
year ended December 31, 1999.
F-17
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following is an analysis of stock options granted to employees
subsequent to December 31, 1999 (unaudited):
<TABLE>
<CAPTION>
Options Exercise
Date of Grant Granted Price
------------- ------- ---------
<S> <C> <C>
January 17, 2000 57,052 $ 2.50
January 20, 2000 63,902 4.50
February 8, 2000 148,000 5.00
February 16, 2000 4,439 10.00
February 28, 2000 8,310 10.00
February 28, 2000 6,000 0.08
March 21, 2000 90 0.60
March 21, 2000 500 2.50
March 21, 2000 5,970 10.00
March 21, 2000 150,000 IPO Price
</TABLE>
The Company will record deferred compensation related to these option
grants in an amount of approximately $1,750,000, which represents the
difference between the estimated fair value of the Company's Common Stock and
the exercise price of these options at the respective dates of grant. In
addition, in February 2000 the Company granted 12,000 options with an exercise
price of $5.00 per share to members of its Scientific Advisory Board. The
Company will record a charge of $72,000 at the date of the grant which
represents the fair value of these options determined through use of the Black-
Scholes model.
The following table summarizes information about the Company's stock
options at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding
----------------------------------------------------
Weighted Average Weighted Average
Range of Exercise Prices Number Outstanding Contracted Life Exercise Price
- ------------------------ ------------------ ---------------- ----------------
<S> <C> <C> <C>
$ 0.08 533,817 8.6 $0.08
$ 0.22 581,149 9.5 $0.22
$ 0.60 306,320 10.0 $0.60
$ 1.00 52,500 10.0 $1.00
</TABLE>
At December 31, 1999, the Company had 437,500 warrants outstanding to
purchase the Company's Common Stock at a price of $0.80 which expire in
February 2008. The warrants were issued in connection with the Series A
Preferred Stock financing.
In July 1999, the Company entered into a senior debt agreement. In
connection with the agreement the Company issued 116,279 warrants to purchase
the Company's Common Stock with an exercise price of $2.15 which will expire in
July 2009. Also in July 1999, the Company entered into an operating lease
agreement for a new facility being constructed. In connection with the
agreement, the Company issued 150,000 warrants to purchase the Company's Common
Stock with an exercise price of $3.00 per share which will expire in July 2009.
The fair value of these warrants as determined using the Black-Scholes model in
accordance with SFAS 123 was de minimis.
F-18
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The activity for stock warrants is presented in the following table:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998 1999
--------------------------- ---------------------------
Shares Weighted Average Shares Weighted Average
Underlying Exercise Price Underlying Exercise Price
Warrants Per Share Warrants Per Share
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year................ -- $ -- 437,500 $0.80
Issued.................. 437,500 0.80 266,279 2.63
Outstanding at end of
year................... 437,500 0.80 703,779 1.49
Exercisable at end of
year................... 437,500 0.80 703,779 1.49
</TABLE>
Subsequent to December 31, 1999, and in connection with an expansion of
the July 1999 operating lease agreement for a new facility, the Company issued
an additional 60,000 warrants to purchase the Company's Common Stock with an
exercise price of $5.00 per share. These warrants have an exercise period of 10
years. The fair value of these warrants at the date of grant was determined
using the Black-Scholes option-pricing model to be $361,000. This amount will
be deferred and recognized as an increase to rent expense over the life of the
related lease.
The Company continues to apply APB No. 25 and related interpretations in
accounting for the Plan. Had compensation costs for the Plan been determined
based on the fair value at the grant date for awards under the Plan consistent
with the methods of SFAS No. 123, the Company's net loss for the years ended
December 31, 1998 and 1999 would have been increased to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
Net Loss Pro Forma
Per Share As Net Loss
As Reported Pro Forma Reported Per Share
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
1998 net loss................ $ (4,289,513) $ (4,293,951) $(1.14) $(1.15)
============ ============ ====== ======
1999 net loss................ $(10,619,860) $(11,288,414) $(2.51) $(2.66)
============ ============ ====== ======
</TABLE>
The per share weighted average fair value of stock options granted during
fiscal 1998 and 1999 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions for 1998
and 1999: expected dividend yield of 0%; risk free interest rate of 6.0% in
1998 and 6.1% in 1999; an expected option life of approximately five years; and
a volatility factor of 0%.
F-19
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
11. Commitments
The Company leases software under a noncancellable capital lease and
leases office space and certain equipment under operating leases. Future
minimum lease payments required under the leases at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
--------- ----------
<S> <C> <C>
2000.................................................. $ 128,560 $1,006,731
2001.................................................. 128,560 1,403,288
2002.................................................. 117,847 1,250,641
2003.................................................. 1,175,782
Thereafter............................................ 1,229,520
--------- ----------
Total minimum lease payments........................ 374,967 $6,065,962
==========
Less: amount representing interest.................... (52,042)
---------
Present value of net minimum lease payments......... 322,925
Less: current portion................................. (100,075)
---------
Long-term portion capital lease obligations......... $ 222,850
=========
</TABLE>
Rent expense under operating leases totaled $ 5,788, $282,206 and $604,418
for the period from inception (September 9, 1997) through December 31, 1997 and
the years ended December 31, 1998 and 1999, respectively.
In March 1998, the Company entered into an agreement with a consultant to
identify collaboration opportunities for the Company. The consultant will
receive a monthly fee for its services plus a success fee based on the amount
of funding received by the Company under collaboration agreements entered into
during the term of this consulting agreement.
Based on the amount of funds received by the Company from its
collaboration agreements through December 31, 1999, the Company has paid this
consultant success fees of approximately $296,000. If the Company receives the
maximum amount of funding under its existing collaboration agreements,
approximately an additional $1,900,000 in success fees will be required to be
paid to this consultant.
12. Deferred Compensation Adjustment
In the process of finalizing its Registration Statement on Form S-1, the
Company was required to restate its financial statements for the year ended
December 31, 1999, to record an additional $1,019,942 in deferred compensation
and an additional $133,300 in stock based compensation expense. An analysis of
the impact of these adjustments on the Company's 1999 financial statements are
as follows:
<TABLE>
<CAPTION>
Amount Amount After
Previously Recorded Restatement
------------------- ------------
<S> <C> <C>
Deferred compensation......................... $ 2,345,000 $ 3,369,942
Additional paid in capital.................... 2,509,510 3,529,452
Stock based compensation expense.............. 66,212 199,512
Net loss...................................... (10,486,560) (10,619,860)
Net loss per share............................ (2.48) (2.51)
Pro forma net loss per share.................. (0.75) (0.76)
</TABLE>
F-20
<PAGE>
13. Subsequent Events (unaudited)
In January 2000, the Company sold 3,000,000 shares of Series C Preferred
Stock to a group of investors for gross proceeds of $15,000,000 or $5.00 per
share. The Series C Preferred Stock automatically converts into shares of the
Company's Common Stock upon the effectiveness of a qualified initial public
offering at a one-to-one conversion ratio. The Company will record a beneficial
conversion feature charge of $12,000,000 to reflect the difference between the
estimated fair value of the Company's Series C Preferred Stock of $9.00 per
share and the $5.00 per share sales price of these shares.
On April 7, 2000, upon the consummation of the Company's reincorporation
as a Delaware corporation, the number of authorized shares of the Company's
Common Stock increased to 50,000,000 shares and an additional 5,000,000 shares
of Preferred Stock were authorized.
As part of the Company's initial public offering of the Common Stock, the
Company and its underwriters have determined to make available up to 500,000
shares at the initial public offering price for directors, employees, business
associates and related persons associated with the Company (the "directed share
program"). On February 28 and March 13, 2000, prior to effectiveness of the
Company's registration statement, the Company sent e-mail messages with respect
to the proposed directed share program to all of the Company's employees
setting forth procedural aspects for participating in the directed share
program and informing them about the administration of the program and that
their friends and families might have an opportunity to participate in the
proposed program. The Company did not deliver a preliminary prospectus prior to
distribution of the e-mails, and each e-mail may have constituted a non-
conforming prospectus under the Securities Act of 1933. As a result, the
Company may have a contingent liability under the Securities Act of 1933. Any
liability would depend upon the number of shares of our common stock purchased
by the recipients of the e-mails. The recipients of the e-mails who purchase
shares of our common stock in the initial public offering may have a right for
a period of one year from the date of the purchase to obtain recovery of the
consideration paid in connection with their purchase of shares of common stock
or, if they had already sold the stock, file a claim against the Company for
damages resulting from their purchase of the common shares. If any liability is
asserted with respect to the e-mails, the Company will vigorously contest the
matter. However, if all of the purchasers in the directed share program who
received the e-mails are awarded damages after an entire or substantial loss of
their investment, the damages could total up to approximately $4,500,000 plus
interest based on the initial public offering price of $15.00 per share and
based on the Company's intention to allocate up to 300,000 of the potential
500,000 shares to such persons. Although the Company does not intend to
allocate more than 300,000 shares to employees who received the e-mails, or
their friends and families, if a violation of the Securities Act were deemed to
apply to the entire allocation of 500,000 shares in the directed share program,
the damages could total up to approximately $7,500,000 plus interest based on
an assumed initial public offering price of $15.00 per share. Although there
can be no assurance as to the ultimate disposition of this matter, it is the
opinion of the Company's management, based upon the information available at
this time, that the expected outcome of this matter would not have a material
adverse effect on the results of operations or on the financial condition of
the Company.
F-21
<PAGE>
[inside back cover]
[Graphic: pictures representing our four target market
sectors: crop production, nutrition, human health and
industrial products. Text above the pictures states: "We
have created an assembly-line process to determine gene
function and generate information that we believe will
enable us to develop novel products in four major sectors
of the global economy: crop production, nutrition, human
health, and industrial products.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,000,000 Shares
[Paradigm Logo appears here]
Common Stock
----------------
PROSPECTUS
----------------
Chase H&Q
J.P. Morgan & Co.
Pacific Growth Equities, Inc.
Stephens Inc.
-------------
, 2000
-------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is not an offer to sell or a
solicitation of an offer to buy our common stock in any jurisdiction where it
is unlawful. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.
Until , 2000 (or 25 days after the date of this prospectus) all
dealers that buy, sell or trade Paradigm's common stock, whether or not
participating in this offering may be required to deliver a prospectus. The
delivery requirement is in addition to the dealers' obligation to deliver a
prospectus when serving as underwriters and with respect to their unsold
allotment or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth an itemization of all estimated expenses,
all of which we will pay, in connection with the issuance and distribution of
the securities being registered:
<TABLE>
<S> <C>
SEC Registration Fee........................................... $ 24,288
Nasdaq National Market Listing Fee............................. 90,000
----------
NASD Filing Fee................................................ 9,700
----------
Printing and Engraving Fees.................................... 150,000
----------
Legal Fees and Expenses........................................ 375,000
----------
Accounting Fees and Expenses................................... 325,000
----------
Blue Sky Fees and Expenses..................................... 10,000
----------
Transfer Agent and Registrar Fees.............................. 10,000
----------
Miscellaneous.................................................. 6,012
----------
Total...................................................... $1,000,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers.
Upon completion of the offering, our restated certificate of incorporation
will provide that we shall indemnify, to the fullest extent authorized by the
Delaware General Corporation Law, each person who is involved in any litigation
or other proceeding because such person is or was a director or officer of
Paradigm Genetics, Inc. or is or was serving as an officer or director of
another entity at our request, against all expense, loss or liability
reasonably incurred or suffered in connection therewith. Our restated
certificate of incorporation will provide that the right to indemnification
includes the right to be paid expenses incurred in defending any proceeding in
advance of its final disposition, provided, however, that such advance payment
will only be made upon delivery to us of an undertaking, by or on behalf of the
director or officer, to repay all amounts so advanced if it is ultimately
determined that such director is not entitled to indemnification. If we do not
pay a proper claim for indemnification in full within 60 days after we receive
a written claim for such indemnification, our bylaws authorize the claimant to
bring an action against us and prescribes what constitutes a defense to such
action.
Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify any director or officer of the corporation against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any action, suit or
proceeding brought by reason of the fact that such person is or was a director
or officer of the corporation, if such person acted in good faith and in a
manner that he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, if he or she had no reason to believe his or her conduct was
unlawful. In a derivative action (i.e., one brought by or on behalf of the
corporation), indemnification may be provided only for expenses actually and
reasonably incurred by any director or officer in connection with the defense
or settlement of such an action or suit if such person acted in good faith and
in a manner that he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation, except that no indemnification shall be
provided if such person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which the action
or suit was brought shall determine that the defendant is fairly and reasonably
entitled to indemnity for such expenses despite such adjudication of liability.
II-1
<PAGE>
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law,
Article Tenth of our amended and restated certificate of incorporation
eliminates the liability of a director to us or our stockholders for monetary
damages for such a breach of fiduciary duty as a director, except for
liabilities arising:
. from any breach of the director's duty of loyalty to us or our
stockholders;
. from acts or omissions that the director knew at the time of the
breach knew or believed were clearly in conflict with the best
interests of the corporation;
. under Section 174 of the Delaware General Corporation Law; and
. from any transaction from which the director derived an improper
personal benefit.
We carry insurance policies insuring our directors and officers against
certain liabilities that they may incur in their capacity as directors and
officers.
Additionally, reference is made to the Underwriting Agreement filed as
Exhibit 1.1 hereto, which provides for indemnification by the underwriters of
Paradigm, our directors and officers who sign the Registration Statement and
persons who control Paradigm, under certain circumstances.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this Registration Statement, we
have sold the following securities that were not registered under the
Securities Act.
(a) Issuances of Capital Stock and Warrants
The sale and issuance of the securities described in paragraphs (1)
through (12) below were deemed to be exempt from registration under the
Securities Act by virtue of Section 4(2) or Regulation D promulgated
thereunder.
(1) On September 9, 1997, we issued 4,400 shares of common stock the
founders of the Company for $1.00 per share.
(2) On February 12, 1998, we issued a common stock dividend of 851.2727
shares for each issued and outstanding share of common stock.
(3) On February 12, 1998, we sold and issued a total of 4,625,000 shares
of Series A Preferred Stock for $0.80 per share to two investors in a
private placement. Each share of Series A Preferred Stock is convertible
into one share of our common stock.
(4) On February 12, 1998, we issued warrants to purchase an aggregate of
437,500 shares of our Series A Preferred Stock at an exercise price of
$0.80 per share to two investors.
(5) On February 12, 1998, we issued 375,000 shares of Series A Preferred
Stock in exchange for the cancellation of notes payable of $300,000.
(6) On March 6, 1998, we issued a total of 62,500 shares of Series A
Preferred Stock in exchange for the cancellation of convertible debt of
$50,000.
(7) On May 29, 1998, we sold and issued a total of 2,500,000 shares of
Series A Preferred Stock for $0.80 per share to two investors in a private
placement.
II-2
<PAGE>
(8) On March 12, 1999, we sold and issued a total of 2,790,698 shares of
Series B Preferred Stock for $2.15 per share to four investors in a
private placement. Each share of our Series B Preferred Stock is
convertible into one share of our common stock.
(9) On July 20, 1999, we issued warrants to purchase an aggregate of
116,279 shares of common stock at an exercise price of $2.15 per share to
one investor.
(10) On July 27, 1999, we issued warrants to purchase an aggregate of
150,000 shares of common stock at an exercise price of $3.00 per share to
one investor.
(11) On January 19, 2000, we issued warrants to purchase an aggregate of
60,000 shares of common stock at an exercise price of $5.00 per share to
one investor.
(12) On January 21, 2000, we sold and issued a total of 3,000,000 shares
of Series C Convertible Preferred Stock for $5.00 per share to five
investors in a private placement. Each share of our Series C Convertible
Preferred Stock is convertible into one share of our common stock.
(b) Certain Grants and Exercises of Stock Options
The sale and issuance of the securities described below were deemed to be
exempt from registration under the Securities Act in reliance on Rule 701
promulgated under Section 3(b) of the Securities Act, as transactions by an
issuer not involving a public offering or transactions pursuant to compensatory
benefit plans and contracts relating to compensation as provided under Rule
701.
Pursuant to our 1998 Stock Option Plan, we have issued options to purchase
an aggregate of 3,502,132 shares of common stock. Of these options:
. options to purchase 156,313 shares of common stock have been canceled
or lapsed without being exercised;
. options to purchase 1,808,059 shares of common stock have been
exercised; and
. options to purchase a total of 1,537,760 shares of common stock are
currently outstanding, at a weighted average exercise price of $2.55
per share.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
**1.1 Form of Underwriting Agreement
**2.1 Plan and Agreement of Merger between Paradigm Genetics, Inc., a
North Carolina corporation and Paradigm Genetics, Inc., a Delaware
corporation
**3.1 Restated Articles of Incorporation of the Registrant - North
Carolina
**3.1.1 Certificate of Incorporation of the Registrant - Delaware
**3.1.2 Certificate of Amendment of the Certificate of Incorporation of the
Registrant - Delaware
**3.1.3 Certificate of Retirement and Elimination of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock of the
Registrant - Delaware - to be filed upon completion of this offering
**3.2 Restated Certificate of Incorporation of the Registrant - Delaware -
to be filed upon completion of this offering
**3.3 By-laws of the Registrant - North Carolina
**3.3.1 By-laws of the Registrant - Delaware
**3.4 Amended and Restated By-laws of the Registrant - Delaware - to be
effective upon completion of this offering
**4.1 Form of Common Stock Certificate
**5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
**10.1 Registrant's 1998 Stock Option Plan
**10.2 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and John A. Ryals
**10.3 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Scott J. Uknes
**10.4 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and John A. Ryals
**10.5 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Scott Uknes
**10.6 Amended and Restated Registration Rights Agreement, dated January
21, 2000, between the Registrant and certain Founders and Investors
**10.6.1 First Amendment to the Amended and Restated Registration Rights
Agreement between the Registrant and certain Investors and Founders
+10.7 Agreement by and between Bayer AG and the Registrant dated
September 22, 1998, as amended
+10.8 Collaboration Agreement, dated November 17, 1999, by and between
The Monsanto Company and the Registrant
**10.9 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Jorn Gorlach
**10.10 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Sandy J. Stewart
**10.11 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Jorn Gorlach
**10.12 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Sandy J. Stewart
**10.13 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and John A. Ryals
**10.13.1 Amendment to the Founder Stock Repurchase and Vesting Agreement
between the Registrant and John A. Ryals
**10.14 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Jorn Gorlach
**10.14.1 Amendment to the Founder Stock Repurchase and Vesting Agreement
between the Registrant and Jorn Gorlach
**10.15 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Sandy J. Stewart
**10.15.1 Amendment to the Founder Stock Repurchase and Vesting Agreement
between the Registrant and Sandy J. Stewart
**10.16 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Scott Uknes
**10.16.1 Amendment to the Founder Stock Repurchase and Vesting Agreement
between the Registrant and Scott Uknes
**10.17 Employment Agreement between the Registrant and Ian Howes dated
January 14, 1999
**10.18 Employment Agreement between the Registrant and Henry Nowak dated
May 18, 1998
**10.19 Employment Agreement between the Registrant and John Hamer dated
October 4, 1998
**10.20 Agreement of Sublease, dated September 18, 1998, between the
Registrant and Integrated Energy Services
**10.21 Sublease Amendment Agreement and Assignment of Lease between the
Registrant and Integrated Energy Services
**10.22 Lease, dated September 7, 1999, as amended between the Registrant
and Parker-Raleigh Development XXXII, Limited Partnership
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
**10.23 Agreement of Lease between the Registrant and Triangle Service
Center, Inc.
**10.24 Amendment of Lease between the Registrant and Triangle Service
Center, Inc.
**10.25 Lease Agreement between the Registrant and ARE-104 Alexander Road
LLC dated July 27, 1999
10.25.1 Amended and Restated Lease Agreement, dated April 2000 between the
Registrant and ARE-104 Alexander Road LLC
10.25.2 Lease Agreement dated April 2000 between the Registrant and ARE-104
Alexander Road LLC
**10.26 Work Letter Agreement, dated July 27, 1999, between the Registrant
and ARE-104 Alexander Road LLC
**10.27 Cost Sharing Agreement, dated July 27, 1999, between the Registrant
and ARE-104 Alexander Road LLC
**10.28 Memorandum of Lease Agreement, dated July 27, 1999, between the
Registrant and ARE-104 Alexander Road LLC
**10.29 Tenant Certificate and Agreement, dated January 11, 2000, between
the Registrant and ING Investment Management, LLC
**10.30 Master Loan and Security Agreement, dated May 13, 1998, between the
Registrant and Transamerica Business Credit Corporation.
**10.31 Loan and Security Agreement, dated July 20, 1999, between the
Registrant and Transamerica Business Credit Corporation
**10.32 Intellectual Property Security Agreement, dated July 20, 1999,
between the Registrant and Transamerica Business Credit Corporation
**10.33 Promissory Note, dated July 23, 1999, issued by the Registrant to
Transamerica Business Credit Corporation
**10.34 Master Loan and Security Agreement, dated June 18, 1998, between
the Registrant and Oxford Venture Leasing LLC
**10.35 Equipment Schedule No. 1 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.36 Equipment Schedule No. 2 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.37 Equipment Schedule No. 3 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.38 Equipment Schedule No. 4 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.39 Equipment Schedule No. 5 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.40 Equipment Schedule No. 6 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.41 Equipment Schedule No. 7 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.42 Acknowledgment of Assignment of Loan, dated December 7, 1999, by
Oxford Venture Finance Leasing LLC
**10.43 Warrant to Purchase Common Stock, dated July 27, 1999, issued by
the Registrant to ARE-104 Alexander Road LLC
**10.43.1 First Amendment to Warrant to ARE-104 Alexander Road LLC
**10.44 Warrant to Purchase Common Stock, dated July 20, 1999, issued by
the Registrant to TBCC Funding Trust II
**10.45 Warrant to Purchase Common Stock, dated January 19, 2000, issued by
the Registrant to ARE-104 Alexander Road LLC, and Escrow Agreement
**10.45.1 First Amendment to Warrant to ARE-104 Alexander Road LLC
**10.46 Warrants to Intersouth Partners III, LP and Intersouth Partners IV,
LP dated February 12, 1998
**10.46.1 First Amendments to Warrants to Intersouth Partners III, LP and
Intersouth Partners IV, LP
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
**10.47 Warrant to Innotech Investments Limited dated February 12, 1998
**10.47.1 First Amendment to Warrant to Innotech Investments Limited
**10.48 2000 Employee, Director and Consultant Stock Option Plan
**10.49 2000 Employee Stock Purchase Plan
23.1 Consent of PricewaterhouseCoopers LLP
**23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1)
**24.1 Powers of Attorney
**27 Financial Data Schedule--1997 and 1998
**27.1 Financial Data Schedule--1999
</TABLE>
- ------------------
** Previously filed with the SEC.
+ Confidential Treatment requested as to certain provisions, which portions
have been omitted and filed separately with the SEC.
Financial Statement Schedules are omitted because the information is
included in our financial statements or notes to those financial statements.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 14 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Amendment No. 4 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Boston, Massachusetts, on May 3, 2000.
PARADIGM GENETICS, INC.
By: /s/ John A. Ryals
-----------------------------------
John A. Ryals
Chief Executive Officer and
President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed by the following persons in
the capacities held on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------- -------------------------- -------------------
<S> <C> <C>
/s/ John A. Ryals Chief Executive Officer, May 3, 2000
______________________________________ President and Director
John A. Ryals (principal executive
officer)
/s/ Ian A.W. Howes Vice President of Finance May 3, 2000
______________________________________ and Chief Financial
Ian A.W. Howes Officer (principal
financial and accounting
officer)
* Director May 3, 2000
______________________________________
G. Steven Burrill
* Director May 3, 2000
______________________________________
Dennis Dougherty
* Director May 3, 2000
______________________________________
Terrance McGuire
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------- -------------------------- -------------------
<S> <C> <C>
* Director May 3, 2000
______________________________________
Michael Summers
* Director May 3, 2000
______________________________________
Robert Goodman
* Director May 3, 2000
______________________________________
Henri Zinsli
</TABLE>
* By executing his name hereto on May 3, 2000, John A. Ryals is signing this
document on behalf of the persons indicated above pursuant to powers of
attorney duly executed by such persons and filed with the Securities and
Exchange Commission.
/s/ John A. Ryals
By:
----------------------------
John A. Ryals
Attorney-in-fact
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
**1.1 Form of Underwriting Agreement
**2.1 Plan and Agreement of Merger between Paradigm Genetics, Inc., a
North Carolina corporation and Paradigm Genetics, Inc., a Delaware
corporation
**3.1 Restated Articles of Incorporation of the Registrant - North
Carolina
**3.1.1 Certificate of Incorporation of the Registrant - Delaware
**3.1.2 Certificate of Amendment of the Certificate of Incorporation of the
Registrant - Delaware
**3.1.3 Certificate of Retirement and Elimination of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock of the
Registrant - Delaware - to be filed upon completion of this
offering
**3.2 Restated Certificate of Incorporation of the Registrant - Delaware
- to be filed upon completion of this offering
**3.3 By-laws of the Registrant - North Carolina
**3.3.1 By-laws of the Registrant - Delaware
**3.4 Amended and Restated By-laws of the Registrant - Delaware - to be
effective upon completion of this offering
**4.1 Form of Common Stock Certificate
**5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
**10.1 Registrant's 1998 Stock Option Plan
**10.2 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and John A. Ryals
**10.3 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Scott J. Uknes
**10.4 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and John A. Ryals
**10.5 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Scott Uknes
**10.6 Amended and Restated Registration Rights Agreement, dated January
21, 2000, between the Registrant and certain Founders and Investors
**10.6.1 First Amendment to the Amended and Restated Registration Rights
Agreement between the Registrant and certain Investors and Founders
+10.7 Agreement by and between Bayer AG and the Registrant dated
September 22, 1998, as amended
+10.8 Collaboration Agreement, dated November 17, 1999, by and between
The Monsanto Company and the Registrant
**10.9 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Jorn Gorlach
**10.10 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Sandy J. Stewart
**10.11 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Jorn Gorlach
**10.12 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Sandy J. Stewart
**10.13 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and John A. Ryals
**10.13.1 Amendment to the Founder Stock Repurchase and Vesting Agreement
between the Registrant and John A. Ryals
**10.14 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Jorn Gorlach
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
**10.14.1 Amendment to the Founder Stock Repurchase and Vesting Agreement
between the Registrant and Jorn Gorlach
**10.15 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Sandy J. Stewart
**10.15.1 Amendment to the Founder Stock Repurchase and Vesting Agreement
between the Registrant and Sandy J. Stewart
**10.16 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Scott Uknes
**10.16.1 Amendment to the Founder Stock Repurchase and Vesting Agreement
between the Registrant and Scott Uknes
**10.17 Employment Agreement between the Registrant and Ian Howes dated
January 14, 1999
**10.18 Employment Agreement between the Registrant and Henry Nowak dated
May 18, 1998
**10.19 Employment Agreement between the Registrant and John Hamer dated
October 4, 1998
**10.20 Agreement of Sublease, dated September 18, 1998, between the
Registrant and Integrated Energy Services
**10.21 Sublease Amendment Agreement and Assignment of Lease between the
Registrant and Integrated Energy Services
**10.22 Lease, dated September 7, 1999, as amended between the Registrant
and Parker-Raleigh Development XXXII, Limited Partnership
**10.23 Agreement of Lease between the Registrant and Triangle Service
Center, Inc.
**10.24 Amendment of Lease between the Registrant and Triangle Service
Center, Inc.
**10.25 Lease Agreement between the Registrant and ARE-104 Alexander Road
LLC dated July 27, 1999
10.25.1 Amended and Restated Lease Agreement, dated April 2000 between the
Registrant and ARE-104 Alexander Road LLC
10.25.2 Lease Agreement between the Registrant and ARE-104 Alexander Road
LLC dated April 2000
**10.26 Work Letter Agreement, dated July 27, 1999, between the Registrant
and ARE-104 Alexander Road LLC
**10.27 Cost Sharing Agreement, dated July 27, 1999, between the Registrant
and ARE-104 Alexander Road LLC
**10.28 Memorandum of Lease Agreement, dated July 27, 1999, between the
Registrant and ARE-104 Alexander Road LLC
**10.29 Tenant Certificate and Agreement, dated January 11, 2000, between
the Registrant and ING Investment Management, LLC
**10.30 Master Loan and Security Agreement, dated May 13, 1998, between the
Registrant and Transamerica Business Credit Corporation.
**10.31 Loan and Security Agreement, dated July 20, 1999, between the
Registrant and Transamerica Business Credit Corporation
**10.32 Intellectual Property Security Agreement, dated July 20, 1999,
between the Registrant and Transamerica Business Credit Corporation
**10.33 Promissory Note, dated July 23, 1999, issued by the Registrant to
Transamerica Business Credit Corporation
**10.34 Master Loan and Security Agreement, dated June 18, 1998, between
the Registrant and Oxford Venture Leasing LLC
**10.35 Equipment Schedule No. 1 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.36 Equipment Schedule No. 2 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.37 Equipment Schedule No. 3 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
**10.38 Equipment Schedule No. 4 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.39 Equipment Schedule No. 5 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.40 Equipment Schedule No. 6 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.41 Equipment Schedule No. 7 to Master Loan and Security Agreement
between the Registrant and Oxford Venture Leasing LLC
**10.42 Acknowledgment of Assignment of Loan, dated December 7, 1999, by
Oxford Venture Finance Leasing LLC
**10.43 Warrant to Purchase Common Stock, dated July 27, 1999, issued by
the Registrant to ARE-104 Alexander Road LLC
**10.43.1 First Amendment to Warrant to ARE-104 Alexander Road LLC
**10.44 Warrant to Purchase Common Stock, dated July 20, 1999, issued by
the Registrant to TBCC Funding Trust II
**10.45 Warrant to Purchase Common Stock, dated January 19, 2000, issued by
the Registrant to ARE-104 Alexander Road LLC, and Escrow Agreement
**10.45.1 First Amendment to Warrant to ARE-104 Alexander Road LLC
**10.46 Warrants to Intersouth Partners III, LP and Intersouth Partners IV,
LP dated February 12, 1998
**10.46.1 First Amendments to Warrants to Intersouth Partners III, LP and
Intersouth Partners IV, LP
**10.47 Warrant to Innotech Investments Limited dated February 12, 1998
**10.47.1 First Amendment to Warrant to Innotech Investments Limited
**10.48 2000 Employee, Director and Consultant Stock Option Plan
**10.49 2000 Employee Stock Purchase Plan
23.1 Consent of PricewaterhouseCoopers LLP
**23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1)
**24.1 Powers of Attorney
**27 Financial Data Schedule--1997 and 1998
**27.1 Financial Data Schedule--1999
</TABLE>
- ------------------
** Previously filed with the SEC.
+ Confidential Treatment requested as to certain provisions, which portions
have been omitted and filed separately with the SEC.
<PAGE>
Exhibit 10.7
------------
Paradigm Genetics, Inc. has omitted from this Exhibit 10.7 portions of the
Agreement for which Paradigm Genetics, Inc. has requested confidential treatment
from the Securities and Exchange Commission. The portions of the Agreement for
which confidential treatment has been requested have been filed separately with
the Securities and Exchange Commission. Such omitted portions have been marked
with an asterisk.
AGREEMENT
This Agreement is entered into by and between Bayer AG (hereinafter
"BAYER") of Leverkusen D51368, Germany and Paradigm Genetics, Inc., (hereinafter
"PARADIGM") of 104 Alexander Drive, Building 2, Research Triangle Park, North
Carolina USA 27709.
WHEREAS, PARADIGM and BAYER have facilities and personnel capable of
conducting research and rendering services for the development of biological
test systems ("ASSAYS") useful for the discovery of new herbicides; and
WHEREAS, PARADIGM and BAYER desire to engage in a collaborative research
program relating to the development of such biological test systems
("ASSAYS"),
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:
1. Scope of Research. BAYER and PARADIGM shall undertake a research
-----------------
collaboration ("RESEARCH COLLABORATION") relating to the identification and
development of novel genes, and/or gene products, gene functions and ASSAYS
useful to measure the potential herbicidal activity of chemical compounds or
substances ("FIELD").
1
<PAGE>
PARADIGM under this Agreement agrees to conduct research and render
services in the FIELD as defined in the RESEARCH PROGRAM exclusively for BAYER.
PARADIGM will not conduct research and render services in the FIELD as
defined in the RESEARCH PROGRAM for other third parties.
"ASSAY" means with respect to a particular target gene, an in vitro or in
vivo assay developed by PARADIGM in the course of the RESEARCH COLLABORATION or
by BAYER, including the required reagents for performing such assay that are not
otherwise readily available, that is suitable for high-throughput screening and
that can measure whether a particular molecule or compound inhibits or
antagonizes (or, if appropriate, agonizes or enhances) the function of the
target gene and/or their products.
Unless indicated otherwise, the term "HERBICIDE" throughout this Agreement
shall mean (for the period prior to ten (10) years after termination of the
RESEARCH COLLABORATION or prior to expiration of any issued patent controlled by
PARADIGM, which patent would result in infringement by BAYER in the absence of
this Agreement, whichever occurs last), a chemical compound or any substance
useful as a herbicide for combating weeds, including a chemical compound or any
substance identified as a potential herbicide discovered, or identified by BAYER
or a sublicensee directly or indirectly as a result of an ASSAY developed during
the RESEARCH COLLABORATION using PARADIGM INTELLECTUAL PROPERTY.
PARADIGM INTELLECTUAL PROPERTY means (i) information that is controlled by
PARADIGM or its Affiliate, including, but not limited to, Proprietary
Information disclosed to BAYER that is necessary or useful for establishing and
performing an ASSAY or otherwise useful for discovering HERBICIDES under this
Agreement, and (ii) all patents controlled by PARADIGM or its affiliate that
claim or cover the components, manufacture or use of an ASSAY or Target Gene, or
the discovery of a HERBICIDE,
2
<PAGE>
where such patents include inventions which were made prior to the end of the
term of this Agreement, including those made prior to the effective date of this
Agreement.
The RESEARCH COLLABORATION shall be conducted in accordance with the
RESEARCH PROGRAM attached hereto as Exhibit A. The RESEARCH COLLABORATION shall
be under the direction and supervision of a JOINT RESEARCH COMMITTEE consisting
of a REPRESENTATIVE and a maximum of three voting members from both PARADIGM and
BAYER as listed in the attached Exhibit B. In the event that the JOINT RESEARCH
COMMITTEE is unable to agree upon the direction of the RESEARCH PROGRAM, BAYER
shall have a super majority vote. In addition, upon decision of the JOINT
RESEARCH COMMITTEE the content of the RESEARCH COLLABORATION may be modified,
including necessary changes in allocation of resources.
2. Meetings. BAYER and PARADIGM shall meet quarterly to discuss the
--------
RESEARCH COLLABORATION. Participants of such meetings shall be determined by the
REPRESENTATIVES. Meetings shall take place alternating at PARADIGM's and BAYER's
facilities unless an alternate location is mutually agreed upon. All meetings
shall be conducted in the English language.
3. Reports. PARADIGM agrees to submit to BAYER a written summary of
-------
meetings of the JOINT RESEARCH COMMITTEE, including protocols. PARADIGM further
agrees to furnish BAYER with a final written report summarizing the results of
the RESEARCH PROGRAM within sixty (60) days of completion of the RESEARCH
COLLABORATION. This final report shall include, but not be limited to, all data,
conclusions, results, observations, a detailed description of all procedures,
and the like. The final report shall be owned by BAYER and all information
contained in such report relating to the FIELD and resulting from the RESEARCH
COLLABORATION under this Agreement submitted to BAYER may be utilized by BAYER
for any purpose in the FIELD, subject to the provisions of this Agreement. All
such reports shall constitute CONFIDENTIAL INFORMATION subject to the provisions
of Article 6.
3
<PAGE>
4. Consideration. In consideration of the services provided by PARADIGM
-------------
during the RESEARCH COLLABORATION and the rights obtained by BAYER under this
Agreement, BAYER shall provide PARADIGM with the following payments:
a) [________________________________________________]* upon execution
of this Agreement by both parties, [______________________
__________________________________________________________________]*
b) A total of [______________________________________________
_______________]* during the initial first three years after
execution of this Agreement ("Initial Term") and [_______________
_____________________________________________]* during the fourth
and fifth years after execution of this Agreement of the total five
(5) year term ("Extended Term") according to the following schedule
with each payment due as specified in Exhibit C:
Year 1 [________]*
Year 2 [________]*
Year 3 [________]*
Subtotal (years 1-3) [________]*
Year 4 [________]*
Year 5 [________]*
Subtotal (years 4-5) [________]*
Total (years 1-5) $21,850,000
The first installment shall be payable and due [_____________]*, and the
subsequent [_______]* installments payable prior to [__________________________
________________]* thereafter.
4
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
c) Technical payments of:
i) [_________________________________]* upon delivery of and/or
access to a first customized agricultural database (AgDB(TM)
BAYER 1.0) to BAYER;
ii) [__________________________]* upon delivery of and/or access
to a second customized agricultural database (AgDB(TM) BAYER
2.0) to BAYER;
iii) [__________________________________________]* for each ASSAY
delivered to BAYER by PARADIGM up to a maximum of
[______]* ASSAYS. The total number of ASSAYS in the first
three (3) years shall be a minimum of [________]* and a
maximum of [_______] The total number of ASSAYS in the five
year Extended Term shall be a minimum of [_______]* and a
maximum of [______]*. The maximum total number of assays to
be delivered may be increased upon written agreement of the
JOINT RESEARCH COMMITTEE.
d) Product Milestone payments of
i) [______________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
_________]*;
ii) A [_______]* payment of [___________________________]* upon
first commercial sale of each and every HERBICIDE in
5
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
a major market country; wherein "major market countries" are
NAFTA countries, Japan, China, India and all countries that
are members of the European Union.
[___________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________]*
e) SUCCESS FEE PAYMENTS on the annual Net Sales of each HERBICIDE of
[_________________________]* of worldwide Net Sales for
[_____________________________________________________________]* after the first
commercial sale of a HERBICIDE in a major market country, such
[_______________________________________________________________________________
______________________________________________]* after the first commercial sale
in a major market country as defined in Article 4.d.ii.
f) Net Sales for purposes of calculating SUCCESS FEE PAYMENTS
royalties under this Article means the sum of the invoiced sales price of a
HERBICIDE billed to independent customers who are not Affiliates or joint
venture partner, less to the extent included in the invoiced sales price, (i)
credits, allowances, discounts and rebates to, and chargebacks from the account
of, such independent customers for spoiled, damaged, out-dated and returned, but
not replaced, HERBICIDE; (ii) actual freight and insurance costs incurred in
transporting such HERBICIDE in final form to such customers; (iii) cash,
quantity and trade discounts and other price reduction programs; (iv) sales,
use, value added and other direct taxes incurred; and (v) customs, duties,
surcharges and other governmental charges incurred in connection with the
exportation or importation of such HERBICIDE in final form. Affiliate for
purposes of this Agreement means, with respect to a party, any other party which
directly or indirectly controls, is controlled by or is under common control
with such party. A party shall be regarded as in control of another if it owns,
or directly or indirectly
6
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
controls at least fifty percent (50%) of the voting stock or other ownership
interest of the other party, or if it, directly or indirectly, possesses the
power to direct or to cause the direction of the management and policies of the
other party by any means whatsoever. Unless stated otherwise, all SUCCESS FEE
PAYMENTS shall be made within sixty (60) days after the end of each royalty
period. A SUCCESS FEE PAYMENT period for purposes of this Agreement means each
quarter of each calendar year in which SUCCESS FEE PAYMENTS are due. Such
SUCCESS FEE PAYMENTS shall be paid in US Dollars and all SUCCESS FEE PAYMENTS
for worldwide sales shall be converted to US Dollars at the exchange rate quoted
in the Wall Street Journal on the last business day of each period. Total annual
net sales shall be based on total sales for a calendar year or portion thereof
PARADIGM shall have the right at any time to request to inspect the records of
sales and to audit the calculation of SUCCESS FEE PAYMENTS for any period and
BAYER shall grant such request and provide access to the necessary information
within ten (10) business days of receipt by BAYER of notice of such request.
g) If the HERBICIDE active ingredient ("a.i.") is sold in a
Combination Product which contains in addition to the HERBICIDE a.i. other
herbicidal active ingredients different from the HERBICIDE a.i. then Adjusted
Net Sales as basis for SUCCESS FEE PAYMENTS shall be computed as follows:
(i) If during the relevant accounting period, the HERBICIDE
was sold and its content of the HERBICIDE a.i. is comparable to
the Combination Product, then the following formula shall be
applicable:
[____________________________________________________________________]*
7
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
All percentages being percentages by weight.
If during the relevant accounting period, no appropriate
HERBICIDE was sold, then the dates of an appropriate HERBICIDE
sold within one year before the relevant accounting period shall
be applicable.
ii) If neither during the relevant accounting period nor within
one year before the relevant accounting period any HERBICIDE of
comparable content of the HERBICIDE a.i. in the Combination
Product was sold, then the Adjusted Net Sales of the Combination
Product is computed according to the ratio (by weight) of the
content of the HERBICIDE a.i. in HERBICIDE and the total content
of the agricultural chemicals from the Net Sales of the
Combination Product.
5. Withholding Taxes. BAYER shall have the right to deduct from the
SUCCESS FEE PAYMENTS the tax which PARADIGM is liable to pay thereon under the
German tax law and for the payment of which PARADIGM is responsible.
PARADIGM shall immediately be sent a tax receipt certifying the payments of
the tax, so that PARADIGM may use it for claiming a credit on the tax payable by
PARADIGM in her own country on such SUCCESS FEE PAYMENTS.
No deduction shall be made if PARADIGM furnishes a document from the German
tax authorities by the time of the payment of the SUCCESS FEE PAYMENTS
certifying that the SUCCESS FEE PAYMENTS are exempt from tax in the Federal
Republic of Germany according to the convention for the avoidance of double
taxation between USA and the Federal Republic of Germany.
8
<PAGE>
The German value added tax (VAT) will be administrated by BAYER for
PARADIGM. PARADIGM will not invoice any VAT to BAYER.
Each party undertakes to cooperate with the other party to achieve the tax
arrangements which are most favorable for both parties.
6. Grants, Licenses and Options. The following grants of rights are given
-----------------------------
by the parties to this Agreement:
a) PARADIGM grants to BAYER a worldwide, exclusive license,
including the right to sublicense, to use PARADIGM INTELLECTUAL PROPERTY for the
discovery and identification of HERBICIDES. If however, any ASSAY is not used by
BAYER to screen at least [_________________________]* compounds within
[___________]* after delivery of such ASSAY to BAYER by PARADIGM it shall be
considered abandoned and the worldwide, exclusive license to BAYER for such
ASSAY under this Article 6a shall be considered revoked and all conveyed rights
in such ASSAY shall revert to PARADIGM.
If such reverted ASSAY is used by or licensed by PARADIGM for the
discovery, identification and development of chemical compounds or substances to
be used as herbicides, PARADIGM shall negotiate in good faith terms of an
agreement whereby PARADIGM would pay to BAYER a reasonable payment for the use
of the ASSAY in the FIELD, such payment taking into consideration the payments
made for such ASSAY in the FIELD by BAYER. BAYER shall have the option to forego
any payment from PARADIGM for the reverted ASSAY in return for a co-exclusive
right to use such ASSAY in the FIELD. As far as PARADIGM obtains royalties for
the discovery or identification of chemical substances or compounds as a result
of a reverted ASSAY in the FIELD to be used as herbicides, BAYER shall receive
[______________]* of the net royalty income.
b) For the term BAYER uses PARADIGM INTELLECTUAL PROPERTY
9
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
as defined in this Agreement, PARADIGM grants to BAYER an exclusive option to
negotiate in good faith to obtain an exclusive license to results of an
additional research collaboration on herbicide tolerance of plant crops to each
HERBICIDE based on the target genes, including modifications and analogues of
such genes and any other herbicides. Upon exercise of an option under this
Article 5b by written notice, BAYER and PARADIGM shall undertake negotiations to
complete an agreement of terms to a license to results of an additional research
collaboration within ninety (90) days of exercise of the option. The terms of
such a license for an additional research collaboration may include a one time
licensing fee, periodic research payments, milestone payments and a commercially
reasonable royalty rate. Negotiations to acquire such a license shall take into
consideration factors affecting PARADIGM's business including, but not limited
to, size of market, development time and cost, product performance relative to
competing products and the like.
c) BAYER shall hold a fully paid, irrevocable, exclusive license,
without the right to sublicense to third parties, to use AgDB(TM) BAYER 1.0,
AgDB(TM) BAYER 2.0, AgDB(TM) BAYER 3.0 and AgDB(TM) BAYER 4.0, including
software developed by PARADIGM associated with Analytical Packages AnP1 and
AnP2.
d) PARADIGM grants to BAYER a [_______________________________________
___________]*. If BAYER exercises such license rights, BAYER shall inform
PARADIGM in writing and provide PARADIGM with results and data relating thereto
and grant to PARADIGM the right to make such results and data a part of
PARADIGM's AgDB(TM).
[_______________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
10
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
________________________________________________________________________________
_____________________________________________________________________________]*.
e) PARADIGM hereby grants to BAYER [________________________________
___________________________________________________________________________
_______]*.
f) BAYER grants PARADIGM the right to use HERBICIDES identified or
discovered during the RESEARCH COLLABORATION to develop and use selectable
markers. Any selectable marker developed as a result of this Article may be used
by either BAYER or PARADIGM for research purposes, shall be treated as
CONFIDENTIAL INFORMATION, and shall be jointly owned by BAYER and PARADIGM and
treated as if it were a JOINT PATENT outside the FIELD pursuant to Article 9.
g) Upon BAYER's request, PARADIGM shall positively consider to
extend the FIELD of this Agreement to additional still to be defined objectives,
e.g., quality traits in plants and the like.
7. Confidentiality. In view of the parties' proprietary rights and
---------------
interests concerning their facilities and technology, PARADIGM and BAYER agree
that during the term of and any subsequent &tension of this Agreement and for a
period of five (5) years thereafter, each party shall hold in confidence any
CONFIDENTIAL INFORMATION: a) received by one party ("Receiving Party") from the
other party ("Disclosing Party")("Proprietary Information"), or 2) that results
from the RESEARCH COLLABORATION under this Agreement ("New Information"). Such
CONFIDENTIAL INFORMATION includes, but is not limited to, confidential or
proprietary information, business plan information, reports, materials, know-
how, data, both technical and non-technical, procedures, databases, documents,
specifications, techniques, ASSAYS, results, product development, conclusions,
and the like (including the terms of this
11
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
Agreement). Each party shall not disclose such information to any third party or
use such information for any purpose, except as provided herein, and necessary
for the fulfillment of the terms and provisions of this Agreement, without the
prior written approval of the other party. The parties shall have no obligations
with respect to any portion of such Proprietary Information and BAYER shall have
no obligations with respect to any portion of such New Information which:
a) is or later becomes generally available to the public by use,
publication or the like through no fault of the Receiving Party in the case of
Proprietary Information or BAYER in the case of New Information;
b) is obtained from a third party who had the legal right to disclose
the same to the Receiving Party in the case of Proprietary Information or BAYER
in the case of New Information;
c) the Receiving Party in the case of Proprietary Information or BAYER
in the case of New Information already possesses, as evidenced by written
records, predating receipt thereof from of the Receiving Party in the case of
Proprietary Information or BAYER in the case of New Information.
8. Publication. PARADIGM and BAYER recognize the importance to present or
------------
publish scientific articles and the importance to protect Proprietary
Information from premature disclosure to third parties relating to the FIELD.
However, BAYER agrees to obtain written permission from PARADIGM prior to
submission of any such presentation or article for publication that contains
PARADIGM's Proprietary Information or New Information or prior to disclosure of
PARADIGM's Proprietary Information or New Information to third parties. PARADIGM
agrees to obtain written permission from BAYER prior to submission of any such
presentation or article for publication that contains BAYER's Proprietary
Information or prior to disclosure of BAYER's Proprietary Information to third
parties. Each party agrees to provide to the REPRESENTATIVE of
12
<PAGE>
the other party all such presentations or articles or disclosure of Proprietary
Information or New Information to third parties at least sixty (60) days prior
to submission of such presentations or articles for publication or prior to the
intended disclosure of CONFIDENTIAL INFORMATION to third parties. The receiving
REPRESENTATIVE will notify the other party within the thirty (30) days following
receipt of the contents of the proposed publication or disclosure of any
comments they may have. The parties agree to remove any Proprietary Information
and BAYER agrees to delay disclosures, presentations or articles for publication
for up to ninety (90) days in order to file a patent application if it is
determined that the presentations or articles for publication or disclosure of
contain New Information with potentially patentable subject matter.
9. Inventions and Patents
----------------------
9.1 Ownership of Research Intellectual Property.
-------------------------------------------
a) Any patents or technology arising from inventions first conceived
or discovered by one or more employees of BAYER in the performance of the
RESEARCH COLLABORATION shall belong to BAYER ("BAYER PATENTS"). Any patents
arising from inventions first conceived or discovered by one or more employees
of PARADIGM in the performance of the RESEARCH COLLABORATION shall belong to
PARADIGM ("PARADIGM PATENTS"). Any patents arising from an invention first
conceived or discovered jointly by one or more employees of BAYER and one or
more employees of PARADIGM in the performance of RESEARCH COLLABORATION shall
belong jointly to BAYER and PARADIGM ("JOINT PATENTS'). JOINT PATENTS within the
FIELD shall be subject to the provisions of this Agreement. Neither party of any
JOINT PATENT outside the FIELD shall exploit their undivided interest in such
JOINT PATENT without the written consent of the other party. Each party agrees
to cooperate with the other in preparing and executing any documents necessary
to obtain patent protection in any country in the world. Inventorship shall be
determined in accordance with the applicable patent laws of the jurisdiction
where the relevant patent application is filed.
13
<PAGE>
9.2 Disclosure of Patentable Inventions. In addition to the disclosures
-----------------------------------
required under this Agreement, each party shall submit a written report to the
other within sixty (60) days of the end of each quarter summarizing any
invention arising during the prior quarter of the RESEARCH COLLABORATION in the
FIELD which it believes may be patentable.
9.3 Patent Prosecution and Maintenance: Abandonment.
------------------------------------------------
a) PARADIGM PATENTS. PARADIGM shall control the filing, prosecution
----------------
and maintenance of all PARADIGM PATENTS arising from the RESEARCH COLLABORATION.
In the event PARADIGM elects not to file in a reasonable time or to cease
prosecution of a filed application for a PARADIGM PATENT or to abandon an issued
PATENT, PARADIGM shall notify BAYER not less than two (2) months before any
relevant deadline, and BAYER shall have the right to assume control over the
prosecution of such filed application for a PARADIGM PATENT or maintenance of
such issued PARADIGM PATENT.
b) BAYER PATENTS. BAYER shall control the filing prosecution and
--------------
maintenance of all BAYER patents. In the event BAYER elects not to file in a
reasonable time or to cease prosecution of a filed application for a BAYER
PATENT or to abandon an issued BAYER PATENT, BAYER shall notify PARADIGM not
less than two (2) months before any relevant deadline, and PARADIGM shall have
the right to assume control over the prosecution of such filed application for a
BAYER PATENT or maintenance of such issued BAYER PATENT.
c) JOINT PATENTS. PARADIGM shall control the initial preparation,
--------------
filing, prosecution and maintenance in the U.S. of all JOINT PATENTS arising
from the RESEARCH COLLABORATION. BAYER shall be responsible for subsequent
filing, prosecution and maintenance in Europe of all JOINT PATENTS arising from
the RESEARCH COLLABORATION. Outside the U.S. and Europe ("Rest of World"),
PARADIGM and BAYER shall jointly be responsible for the filing, prosecution and
maintenance in Rest of World of all JOINT PATENTS arising from the RESEARCH
14
<PAGE>
COLLABORATION. In the event PARADIGM or BAYER elects not to file in a reasonable
time or to cease prosecution of a filed application for a JOINT PATENT or to
abandon an issued JOINT PATENT, they shall notify the other party not less than
two (2) months before any relevant deadline, and the other party shall have the
right to assume control over the prosecution of such filed application for a
JOINT PATENT or maintenance of such issued JOINT PATENT.
9.4 Costs. Each party shall retain control over and bear all expenses
-----
associated with the filing, prosecution and maintenance of patents relating to
the Field on inventions made before the effective date of this Agreement by such
party.
BAYER shall retain control over and bear all expenses associated with the
filing, prosecution and maintenance of BAYER PATENTS. PARADIGM shall retain
control over and bear all expenses associated with the filing, prosecution and
maintenance of PARADIGM PATENTS. In the FIELD, PARADIGM shall bear all expenses
associated with the filing, prosecution and maintenance of JOINT PATENTS in the
U.S. In the FIELD, BAYER shall bear all expenses associated with the filing,
prosecution and maintenance of JOINT PATENTS in EUROPE and Rest of World.
Outside the FIELD, PARADIGM and BAYER shall equally share all expenses
associated with the filing, prosecution and maintenance of JOINT PATENTS.
In the FIELD, BAYER may elect not to pay any such costs and expenses with
respect to a patent application of issued patent covering a particular JOINT
PATENT, provided BAYER notifies PARADIGM not less than two (2) months before any
relevant deadline. If PARADIGM assumes the expenses associated with future
prosecution of the patent application or maintenance of the issued Patent,
PARADIGM will thereby become the sole owner of the JOINT PATENT.
If BAYER elects not to pay such costs and expenses in the FIELD with
respect to a particular PARADIGM PATENT and/or JOINT PATENTS, PARADIGM may take
over or abandon prosecution and maintenance and bear expenses associated with
those
15
<PAGE>
patents, but in any case, BAYER will only lose (i) exclusive user rights, which
shall become non-exclusive, and/or (ii) any remuneration payable by PARADIGM to
BAYER as provided for in this Agreement.
9.5 Confidential Treatment. All information disclosed under Sections 9.2
----------------------
and 9.3 shall be treated as confidential pursuant to Article 7.
9.6 The provisions of this Article 9 shall be applicable mutatis mutandis
to such portions of PARADIGM INTELLECTUAL PROPERTY generated during the RESEARCH
COLLABORATION under this Agreement.
10. Term. This Agreement shall be effective upon the execution of this
----
Agreement and the RESEARCH COLLABORATION shall commence October 1, 1998 and
continue for the Initial Term of three (3) years. The Initial Term may be
extended and this Agreement shall remain in continuous and uninterrupted effect
for another two (2) years term, unless terminated as provided in Article 11,
11. Termination. a) Except as provided in Article 11b and 11c of this
-----------
Agreement or unless mutually agreed to by both parties to Agreement shall
terminate:
i) September 30, 2001; or
ii) on September 30, 2003, if extended in
accordance with Article 10.
b) Provided the milestones of Article 4.c.ii and Article 4.c.iii have
not been achieved on or before September 30, 2001 or in the event that necessary
internal funding by BAYER is not approved, BAYER may terminate this Agreement
effective one hundred and twenty (120) days after providing notice to PARADIGM
of BAYER's intent to terminate this Agreement.
c) A party may terminate this Agreement upon or after the breach of
16
<PAGE>
any material provision of this Agreement, if the breaching party has not cured
such breach within ninety (90) days after notice thereof from the other party.
The licenses granted hereunder to the non-breaching party shall survive a
termination of this Agreement under this Article 10c and shall remain in full
force and effect, so long as such non-breaching party shall continue to comply
with its obligations under this Agreement to the breaching party in respect of
such licenses (including without limitation, any reporting, payment, funding,
development, commercialization, or royalty obligations) as if this Agreement had
not been terminated.
d) In the event a third party issued patent is found by a court of
competent jurisdiction to prevent the parties from the performance of the
RESEARCH COLLABORATION and/or the development and/or use of assays in the FIELD,
either party may terminate this agreement by giving the other party thirty (30)
days notice.
12. Notices. Unless otherwise stated, any notice or reports required to be
-------
given under the terms of this Agreement may be given by certified letter
addressed to the other party and addressed to the party at the following
address. All such notices and reports shall be written in the English language.
Any notice so given shall be deemed to have been served when hand delivered to
the other party or at the expiration of two (2) days from the time of posting.
For BAYER: Professor Dr. Dieter Berg
Bayer AG
Agricultural Center Monheim
D-51368 Leverkusen
Germany
For PARADIGM: Dr. John Ryals, CEO
Paradigm Genetics, Inc.
104 Alexander Drive, Building 2
Research Triangle Park,
17
<PAGE>
North Carolina 27709
Copy to: Henry Nowak, General Counsel
Vice President of Intellectual Property
13. Publicity. During the term of this Agreement, neither party hereto will
---------
use the name of the other party in publicity or advertising without the written
approval of the other party. Neither party will make any public announcement of
the existence and nature of this Agreement or the RESEARCH COLLABORATION without
the written consent of the other party. However, nothing in this Article or
elsewhere in this Agreement is intended to restrict either party from disclosing
the existence and nature of this Agreement if required by applicable law.
14. Liability. a) Subject to the provisions of Article 14.b, each party
---------
hereto agrees to be responsible and assume liability for its own wrongful or
negligent acts or omissions, or those of its officers, agents or employees to
the full extent allowed by law. Further, each party warrants and represents that
it has adequate liability insurance for the protection of itself and its
officers, employees and agents, while acting within the scope of their
employment by the party. Neither party warrants that any license granted herein
allows the making using or selling of any product or technique resulting from
the RESEARCH COLLABORATION without liability to any third party or a license
from such third party. Each party is liable for its own actions and neither
indemnifies the other for any act of patent infringement by or against such
third party.
b) PARADIGM agrees to indemnify BAYER for any damages that may
result from a successful claim by a third party of patent infringement as
indicated by a judgment against BAYER by a court of competent jurisdiction,
where such claim of infringement results from use of an ASSAY in the FIELD and
where such judgment is based upon infringement of a patent that has issued prior
to October 1,1998.
c) Additionally, PARADIGM agrees to indemnify BAYER for any damages that
18
<PAGE>
may result from a successful claim by a third party of patent infringement as
indicated by a judgment against BAYER by a court of competent jurisdiction,
where such claim of infringement results from use of an ASSAY in the FIELD and
where such judgment is based upon infringement of a patent that has issued prior
to a decision in writing by the JOINT RESEARCH COMMITTEE to develop an ASSAY
from a target gene. PARADIGM shall provide the JOINT RESEARCH COMMITTEE with a
review of relevant patent literature known to PARADIGM and BAYER, including any
possible infringement issues.
15. Independent Contractor. In the performance of all services hereunder,
----------------------
neither party is authorized or empowered to act as agent for the other for any
purpose and shall not on behalf of the other enter into any contract, warranty,
or representation as to any matter. Neither party shall be bound by the acts of
the other.
16. Warranties. The parties warrant and represent that they have the right
----------
to enter into this Agreement. Both parties further warrant and represent that
the terms of this Agreement are not inconsistent with other contractual
obligations, expressed or implied that they may have.
17. Amendments. No modification to this Agreement shall be effective unless
----------
made in writing and signed by a duly authorized representative of each party.
18. Entire Agreement. This agreement constitutes the entire Agreement
----------------
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings between the parties (whether written or
oral) relating to said subject matter.
19. Survival of Terms. The terms of Articles 1, 3, 4, 5, 6, 7, 8, 9,12,14,
-----------------
20, 22 and 24 shall survive any termination of this Agreement pursuant to
Article 11.
19
<PAGE>
20. No Implied License. Neither party by this Agreement grants to the other
------------------
any license, express or implied, to any technology, know-how, inventions,
improvements, trade secrets or materials that it possesses, except for research
purposes necessary to conduct the RESEARCH COLLABORATION. Upon the termination
of the RESEARCH COLLABORATION, the parties' intellectual property rights with
respect to the results of the RESEARCH COLLABORATION shall be as set forth in
Article 6, and neither party shall have any implied license to any other
technology, know-how, inventions, improvements, trade secrets or materials of
the other party.
21. Force Majeure. Neither party shall be held liable or responsible to the
-------------
other party nor be deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any term of this Agreement to the
extent, and for so long as, such failure or delay is caused by or results from
causes beyond the reasonable control of the affected party including but not
limited to fire, floods, embargoes, war, acts of war (whether war be declared or
not), insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions, or delays in acting by any
governmental authority or the other party.
22. Assignment. Neither party shall assign or transfer any interest in this
----------
Agreement, nor assign any claims for money due or to become due during this
Agreement, without the prior written approval of the other party. Subject to the
foregoing, the agreement shall inure to the benefit of and shall be binding upon
the successors and permitted assigns of the parties.
23. Compliance with Laws. Each party agrees that it will comply with all
--------------------
applicable international, national, state, province and local laws, codes,
regulations, rules and orders in the performance and direction of the work under
this Agreement. The parties represent and agree that they shall diligently apply
for and use their best efforts to obtain all necessary government licenses and
permits for the execution of this Agreement and any transactions required
hereunder.
20
<PAGE>
24. Governing Law. This Agreement shall be governed by the common law and
-------------
the laws of the State of North Carolina and the United States, and the parties
hereby submit to the jurisdiction of the North Carolina courts, both state and
federal. Any proceedings relating to this Agreement shall be conducted in the
English language.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates set forth below.
PARADIGM GENETICS, INC. BAYER AG
By: By:
--------------------------- -----------------------------
Dr. John A. Ryals Dr. Bamelis
CEO and President Member of Board
Date: Date:
--------------------------- ---------------------------
BAYER AG
By:
---------------------------
Dr. Wulff
Head, Business Group
Crop Protection
Date:
-------------------------
21
<PAGE>
EXHIBIT A
Research Program
In addition to the quantitative volume expectations herein, major
accomplishments and milestones for the research program are:
a) Acquisition of Arabidopsis gene sequence information from public sources,
[__ ____ ______________________]* as well as from [________]*if decided so
by [_____]*. The [_________________]* is focussed on the identification of
genes derived from differential libraries
[____________________________________ _________]* . Libraries under
investigation include [________]* from [________
____________________________________________________________________________
______________]*, Arabidopsis [_______]*. The [_________]* are evaluated for
the presence of [________]*. Considering a genomic [___]* of [_______]* in
Arabidopsis corresponding to about [_______ ]* individual genes, about
[___]* of the genes are identified in [____]*, an additional [__]* each in
the following [_______]*, and an additional [__]* each in [_______]*.
Overall goal is the identification of about [____]* of the Arabidopsis
genes.
b) First customized agricultural database (AgDB(TM) BAYER 1.0), which
represents the milestone of Article 5.c.i. This version includes publicly
available DNA sequence information present in corresponding versions of
GenEmbl, their [________________________________]*, all available
[________________ _______]* from [________________________________]* plus
[__________ ________________________________________________]*. AgDB(TM)
BAYER 1.0 contains [____________]* for the [_______________________________
______]*. These [______]* allow [__________________________________
___________________]* and the [____]* for [__________]* within [_______
_________________]*.
c) Gene Modification system in Arabidopsis. The system includes the generation
and identification of Arabidopsis [_____]* with [________________________]*
for selected genes via one or more of the following different methods:
- [____________________]*
- [________________________________________________________ ______]*
- [_______________________________________________________]*
- [________________________________________________________
______________________________]*
- [________________________________________________________
_______________________]*
Starting with about [___________]* in [______]*, [_______]* are generated for
genes identified in the [____________________________________]*. Initial
priority is given by the JOINT RESEARCH COMMITTEE to [_________________]* from
the following groups:
- [____________________]*
- [_____________________________________]*
- [__________]*
- [___________________________________]*
- [______________]*
- [_____________________]*.
In either of these groups but especially in the group of [_____________________
_____________________________]* are selected upon request by BAYER and then
introduced into the gene modification system. In case of selection of a [___
__________]* gene, the [_____________]* Arabidopsis [________]* will be used for
[________________]*.
Further prioritization is dependent upon the result of these initial
investigations,
and [_____________]* with the [_________]* of [______________]* are selected by
the JOINT RESEARCH COMMITTEE for further investigations first.
d) First functional analytical package (Analytical Package 1.0; AnP1). The
package includes [_________________________________________
_________________________]*. Besides others, [_________________]* are
determined for the [_______________________________________]* and for
[______________________________________________________________
__________]*. In particular, material treated with [______________________
_______]* and representing [_________________]* or [____________]* in
[_______________]* is included upon request from [______]*. The first [___
___]* is comprised of at least [___]* genes (corresponding to about [__]*of
the genes in Arabidopsis). Additionally, a number of
[____________________]* and other [__________]* are [______]* for
these[_____]*, including: [_______
___________________________________________________________________________
___________________________________________________________________]*. In
addition, Analytical Package 1.0 includes the establishment of methodology
to investigate [_________________________ _____________]* and
[________________________________________]* or [________________]* or
[_______]*. The establishment and implementation of such methodology
represents a high priority during [_________________]* of the RESEARCH
COLLABORATION.
e) Second customized agricultural database (AgDB(TM) BAYER 2.0), which
represents the milestone of Article 5.c.ii. This version includes [________
_____]* and [____________________]*. AgDB(TM) BAYER 2.0 contains
[__________________________________________________________]* including
[___________________]* and [____________]*. This version allows
_____________________________________________________]*, and thus enables
[_______________________________________________________
___________________________________]*. In particular, AgDB(TM) BAYER 2.0
contains structures to include information collected for [_________________
____________]*, including [______________]* available from [_______]* and
[______________________]*. This version of AgDB represents [__________
__________________________________________]* during the RESEARCH
COLLABORATION within PARADIGM, in particular [___]* and [______
____________________________________________________]*.
f) Assay Development and first functional assay for a [_______]* target to
[___ ______________________]*. Promotion of potential targets to [_______
______________]* is based on agreement in the JOINT RESEARCH COMMITTEE.
Assays are developed according to a format agreed upon between BAYER and
PARADIGM, fulfilling requirements for [________ _________]* purposes.
Assays are developed based on results of [_______
_________________________________________________]* as well as on
[________________________]*, and a total of [_______________]* assays are
developed over [___________]*, and a total of [______________]* assays are
developed during [_________]* of the RESEARCH COLLABORATION.
g) Second functional analytical package (Analytical Package 2.0; AnP2). The
package includes [______________________________]* of [___________
_______]* in a [________________________________________________
_____________________________________________]* and [__________ ______]*
either [_______________________________]* or [____________ ____________]*.
[________________]* are [_______]*, and [________]* in [____________]*
after [_________]* of [_______]* with [_____________]* are investigated.
[___________]* under investigation include [___________]* of [_________]*
with [_________________]* as well as [_________]* involved in
[_______________]*.
h) Third customized agricultural database (AgDB(TM) BAYER 3.0). In addition to
[__________________________________________________]* AgDB(TM) BAYER 3.0
includes [__________________________________________]*. This version allows
[________________________]* from [________]* experiments and the
[________]* of [_______]* in [______]* for [_________ ________]*.
i) Fourth customized agricultural database(AgDB(TM) BAYER 4.0). In addition to
[__________________________________________________________
_________________________]*. AgDB(TM) BAYER 4.0 includes [__________
_______________________________________]* in relation to [________]* and
the [_____________]* of [_________]*. This DB contains structures to store
results of [_____________________]* and investigate the relation of
[___________]* to their [______]* in [_______]* as well as the [________]*
of [_______]* of [___________]* with [______________]*.
EXHIBIT A
Herbicide Project Work Plan, Schedule and Volume Expectation
(all numbers = finished per year)
<TABLE>
<S> <C> <C> <C> <C> <C>
Year 1 2 3 4 5
- ---------------------------------------------------------------------------------------------------------------------
FTE [_]* [_]* [_]* [_]* [_]*
- ---------------------------------------------------------------------------------------------------------------------
Gene Discovery:
[_]* [_]* [_]* [_]* [_]*
----------------------------------------------------------------------------------------
FUNCTIONAL ANALYSIS:
[________________]*
[_]* [_]* [_]* [_]* [_]*
----------------------------------------------------------------------------------------
[________]*PROFILING:
[_______]*
[_]* [_]*
----------------------------------------------------------------------------------------
[________]*PROFILING:
[________]*
[_]* [_]* [_]* [_]*
----------------------------------------------------------------------------------------
Assay Development:
[_]* [_]* [_]* [_]* [_]*
----------------------------------------------------------------------------------------
[_________]*/Achievement: . . . . . .
[_]* [_]* [_]* [_]* [_]* [_]*
</TABLE>
22
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
EXHIBIT B
JOINT RESERCH COMMITTEE
BAYER REPRESENTATIVE: Rudiger Hain
BAYER VOTING MEMBERS: Rudiger Hain
Dieter Berg
Klaus Tietgen
BAYER NON-VOTING MEMBERS: Jorg Reif
PARADIGM REPRESENTATIVE: Jorn Gorlach
PARADIGM VOTING MEMBERS: Jorn Gorlach
Sandy Stewart
John Ryals
23
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
EXHIBIT C
Payment Schedule
QUARTER DUE DATE AMOUNT DUE (U.S. Dollars)
1 October 1, 1998 [________]*
2 January 1, 1999 [________]*
3 April, 1999 [________]*
4 July 1, 1999 [________]*
5 October 1, 1999 [________]*
6 January 1, 2000 [________]*
7 April 1, 2000 [________]*
8 July 1, 2000 [________]*
9 October 1, 2000 [________]*
10 January 1, 2001 [________]*
11 April 1, 2001 [________]*
12 July 1, 2001 [________]*
13 October 1, 2001 [________]*
14 January 1, 2002 [________]*
15 April 1, 2002 [________]*
16 July 1, 2002 [________]*
17 October 1, 2002 [________]*
18 January 1, 2003 [________]*
19 April 1, 2003 [________]*
20 July 1, 2003 [________]*
24
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
Side Letter
To the Paradigm Genetics, Inc. / Bayer AG - Agreement
Dated September 22, 1998
We mutually agree that Article 11.b (page 17) for a better understanding of the
parties interests should read:
"11 .b) Provided the milestones of Article 4.c.ii and 4.c.iii have not been
achieved as indicated in Exhibit A (in particular delivery of AG DB 2.0
by October 1, 2000) BAYER may notify PARADIGM that it is in breach of
this Agreement and PARADIGM will be given 90 (ninety) days to cure the
breach by delivering Ag DB 2.0 to BAYER. If PARADIGM does not deliver Ag
DB 2.0 within the ninety (90) days period, then BAYER may terminate this
Agreement effective one hundred twenty (120) days after providing notice
to PARADIGM of BAYER's interest to terminate this Agreement. However, if
PARADIGM is able to deliver Ag DB 2.0 to BAYER during this one hundred
twenty (120) days period then the Agreement will not terminate. In the
event that necessary internal funding by BAYER is not approved BAYER may
terminate this Agreement at September 30, 2001, providing notice to
PARADIGM ninety (90) days before this date."
PARADIGM GENETICS, INC. BAYER AG
By: By:
________________________ ____________________________
Dr. John A. Ryals Dr. F.R. Heiker
CEO and President Head of Chemical Research
Date: Sept. 22, 1998 Date: Sept. 22, 1998
--------------------- --------------
BAYER AG
By:
____________________________
Dr. Adrian
Patents and Licensing
Date: Sept. 22, 1998
--------------
25
<PAGE>
Side Letter
To the Paradigm Genetics, Inc. / Bayer AG - Agreement
Dated September 22, 1998
We mutually agree that for a better understanding of the parties interests,
Article 4, first sentence, should be modified to clarify that the
consideration provided by Bayer is for the services provided by Paradigm
Genetics, and therefore should read:
4. Consideration. In consideration of the services provided
-------------
by PARADIGM during the RESEARCH COLLABORATION under this
Agreement, BAYER shall Provide PARADIGM with the following
payments:
Moreover, Article 6.a., first paragraph, should be modified to clarify that
the License to Paradigm is royalty-free, and therefore should read:
a) PARADIGM grants to BAYER a worldwide, royalty-free,
exclusive license, including the right to sublicense, to use
PARADIGM INTELLECTUAL PROPERTY to the extent necessary for
the operation of a licensed ASSAY for discovery and
identification of HERBICIDES If, however, any ASSAY is not
used by BAYER to screen [___________ _____________________]*
compounds within [_________________]* after delivery of such
ASSAY to BAYER by PARADIGM it shall be considered abandoned
and the worldwide, royalty-free exclusive license to BAYER
for such ASSAY under this Article 6a shall be considered
revoked and all conveyed rights in such ASSAY shall revert
to PARADIGM.
PARADIGM GENETICS, INC. BAYER AG
By: By:
___________________________ ____________________________
Dr. John A. Ryals Dr. Heiker
CEO and President Head of Research
Date: Oct 30, 1998 Date: Nov. 17, 1998
------------ -------------
BAYER AG
By:
____________________________
Dr. Adrian Patents and Licensing
Date: Nov. 9, 1998
------------
26
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
AMENDMENT
WHEREAS, PARADIGM GENETICS, INC. and BAYER AG entered into a collaborative
research program relating to the development of biological test systems dated
September 22,1998 (the "AGREEMENT"), the parties herewith agree to amend the
AGREEMENT as follows:
Section 4.c(i) shall be deleted in its entirety and replaced with:
[__________________________]* upon delivery of and/or access to a first
customized agricultural database (AgDB(TM)\BAYER\ 1.0) to BAYER AG;
Section 4.c(ii) shall be deleted in its entirety and replaced with:
[__________________________________]* upon delivery of and/or access to
a second customized agricultural database (AgDB (TM)\BAYER\ 2.0) to BAYER
AG;
BAYER AG PARADIGM GENETICS, INC.
____________________________ ___________________________
Signature Signature
John A. Ryals
____________________________
Printed or Typed Name
President & CEO
____________________________
Title
10.9.99 10.8.99
- ---------------------------- ---------------------------
Date Date
BAYER AG
____________________________
Signature
____________________________
Printed or Typed Name
____________________________
Title
13.9.99
- ----------------------------
Date
27
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
AMENDMENT
WHEREAS, PARADIGM GENETICS, INC. and BAYER AG entered into a collaborative
research program relating to the development of biological test systems dated
September 22, 1998 ("the AGREEMENT"), the parties herewith agree to amend the
AGREEMENT as follows:
Section 4.c(I) shall be deleted in its entirety and replaced with:
[________________________]* upon delivery of and/or access
to a first customized agricultural database
(AgDB(TM)\BAYER/ 1.0) to BAYER, such payment to be made
within 60 days of the first anniversary of execution of
this Agreement, [_______________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
______________________]*
PARADIGM GENETICS, INC. BAYER AG
By: ______________________ By: ______________________
Dr. John A. Ryals
CEO ______________________
______________________
Date: 24.11.99
--------------------
BAYER AG
By:
_______________________
_______________________
_______________________
Date: 30.11.99
---------------------
28
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
Exhibit 10.8
------------
Paradigm Genetics, Inc. has omitted from this Exhibit 10.8 portions of the
Agreement for which Paradigm Genetics, Inc. has requested confidential treatment
from the Securities and Exchange Commission. The portions of the Agreement for
which confidential treatment has been requested have been filed separately with
the Securities and Exchange Commission. Such omitted portions have been marked
with an asterisk.
Monsanto/Paradigm Genetics Collaboration Agreement
November 17, 1999
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS........................................................... 1
1.1 Affiliate...................................................... 1
1.2 Agreement...................................................... 1
1.3 Average Net Benchmark Product Price............................ 2
1.4 Average Net Product Price...................................... 2
1.5 Benchmark Product.............................................. 3
1.6 DNA............................................................ 3
1.7 Effective Date of this Agreement............................... 3
1.8 Grace Periods.................................................. 3
1.9 Gene Patent Rights............................................. 3
1.10 Paradigm Gene Patent Rights.................................... 4
1.11 Improvements................................................... 4
1.12 Know How....................................................... 4
1.13 Licensed Products.............................................. 4
1.14 Licensed Patent Rights......................................... 4
1.15 Monsanto Enabling Technology................................... 4
1.16 Monsanto Licensed Products..................................... 4
1.17 Monsanto DNA Information....................................... 5
1.18 Net Product Revenues........................................... 5
1.19 Paradigm Licensed Products..................................... 5
1.20 Permitted Data................................................. 5
1.21 Project Commencement Date...................................... 5
1.22 Project Committee.............................................. 5
1.23 Production Target Level........................................ 5
1.24 Project Plan................................................... 6
1.25 Project Quarter................................................ 6
1.26 Project Technology............................................. 6
1.27 Product Sublicense Payments.................................... 6
1.28 Subsidiary..................................................... 6
1.29 Term of this Agreement......................................... 6
1.30 Value Added.................................................... 6
1.31 Monsanto Patents............................................... 7
1.32 Paradigm Patents............................................... 7
1.33 Joint Patents.................................................. 7
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2. CONVEYANCE OF RIGHTS:.................................................................................... 7
2.1 Assignment to Monsanto:............................................................................ 7
2.2 License to Monsanto: Licensed Patent Rights........................................................ 7
2.3 License to Monsanto: Paradigm Gene Patent Rights................................................... 7
2.4 License to Monsanto: Paradigm Gene Patent Rights - restriction on license.......................... 7
2.5 License to Monsanto: restriction on license........................................................ 8
2.6 License to Paradigm: Licensed Patent Rights........................................................ 8
2.7 License to Monsanto: research license - [________________]*........................................ 8
2.8 License to Paradigm: research license - [________________]*........................................ 8
2.9 License to Paradigm: research license - Monsanto Enabling Technology in research crops............. 9
2.10 to Paradigm: research license - Monsanto Enabling Technology - restriction on license.............. 9
2.11 License to Paradigm: restriction on license........................................................ 9
3. FUNDED PROJECT........................................................................................... 9
3.1 Funded Project..................................................................................... 9
3.2 Contribution of Monsanto........................................................................... 9
3.2.1 Monsanto DNA supplied.......................................................................... 10
3.2.2 Counting Monsanto DNA.......................................................................... 10
3.2.3 Counting for failed experiments................................................................ 10
3.3 Contribution of Paradigm........................................................................... 11
3.3.1 Conducting Project Plan........................................................................ 11
3.3.2 Database Compatibility......................................................................... 11
3.3.3 Biological Materials........................................................................... 11
3.3.4 Contribution of Third Party Information........................................................ 11
3.3.4.1 Right to Summary Information............................................................. 11
3.3.4.2 Consequence of Using Permitted Data...................................................... 11
3.3.4.3 Consequence of Expansion................................................................. 12
3.4 Project Committee.................................................................................. 12
3.4.1 Committee Duties............................................................................... 12
3.4.2 Committee Structure............................................................................ 12
3.4.3 Meetings....................................................................................... 12
3.4.4 Decision Making................................................................................ 12
3.5 Term and Termination of Funded Project.................................................................. 13
3.5.1 Early Termination - Production Target Levels Achieved.......................................... 13
3.5.2 Early Termination - Production Target Levels Not Achieved...................................... 13
3.5.3 Early Termination - Other Reasons.............................................................. 14
3.5.4 Extension...................................................................................... 14
3.5.5 Surviving Paragraphs........................................................................... 14
4. PAYMENTS................................................................................................ 14
4.1 Project Funding.................................................................................... 14
4.1.1 Inducement Fee................................................................................. 14
4.1.1.1 Termination Refund........................................................................ 15
4.1.2 Annual Technology Enhancement Fee.............................................................. 15
4.1.3 Quarterly Payment.............................................................................. 15
</TABLE>
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* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
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4.1.4 Production Target Level Payments................................................................ 15
4.1.5 Additional Optional Projects.................................................................... 16
4.1.5.1. Rice Option................................................................................ 16
4.1.5.2 Increase in Arabidopsis.................................................................... 16
4.1.5.3 Increase in Arabidopsis.................................................................... 16
4.1.5.4 Impact of Expansion - Production Target Level Measurement.................................. 17
4.1.5.5 Impact of Expansion - right to terminate................................................... 17
4.2 Royalties - Monsanto Licensed Products.............................................................. 17
4.2.1 Minimum Royalty................................................................................. 17
4.2.2 One Royalty..................................................................................... 18
4.2.3 Third Party Royalty Offset...................................................................... 18
4.2.4 Monsanto Royalty Buy-Out........................................................................ 18
4.3 License or sublicense of Licensed Patent Rights by Monsanto......................................... 18
4.4 Royalties - Paradigm Licensed Products.............................................................. 19
4.5 Valuation of Non-Monetary Consideration for Product Sublicense Payments:............................ 19
5. RECORDS.................................................................................................. 19
5.1 Payments of Royalties............................................................................... 19
5.2 Books and Records for Royalty Payments.............................................................. 19
5.3 Late Payment of Royalties........................................................................... 20
6. INTELLECTUAL PROPERTY.................................................................................... 20
6.1 Ownership of Project Technology Other Than Gene Patent Rights....................................... 20
6.2 Disclosure of Patentable Inventions................................................................. 20
6.3 Access to Gene Patent Rights........................................................................ 21
6.4 Patent Prosecution and Maintenance; Paradigm Patents................................................ 21
6.5 Patent Prosecution and Maintenance; Monsanto Patents................................................ 21
6.6 Patent Prosecution and Maintenance; Joint Patents................................................... 21
6.7 Gene Patent Rights.................................................................................. 22
6.7.1 Disclosure...................................................................................... 22
6.7.2 Prosecution of applications..................................................................... 22
6.8 Cooperation......................................................................................... 22
6.9 Costs............................................................................................... 22
6.10 Patent Litigation: Right to Bring Suit.............................................................. 23
6.11 Confidential Treatment............................................................................. 23
7. CONFIDENTIALITY.......................................................................................... 23
7.1 Confidential Information:........................................................................... 23
7.2 Confidentiality and Limited Use:.................................................................... 23
7.2.1 Limited Use:.................................................................................... 23
7.2.2 Exceptions to Disclosure of Confidential Information:........................................... 24
7.3 Exceptions to Classification as Confidential:....................................................... 24
7.3.1 Publicly Available:............................................................................. 24
</TABLE>
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7.3.2 Already Known:............................................. 24
7.3.3 Third Party Disclosure:.................................... 24
7.4 Specific Information:............................................ 24
7.5 Disclosures to Personnel:........................................ 25
7.6 Return of Confidential Information:.............................. 25
7.7 Confidential Status of Agreement:................................ 25
7.8 Disclosure to Third Parties...................................... 25
7.8.1 Consultants................................................ 25
7.8.2 Investors.................................................. 26
7.9 Publications..................................................... 26
8. REPRESENTATION AND WARRANTIES........................................ 26
8.1 Monsanto......................................................... 26
8.2 Paradigm......................................................... 27
8.3 Third Party Obligation........................................... 27
9. INDEMNIFICATION...................................................... 28
9.1 General -Paradigm................................................ 28
9.2 General -Monsanto................................................ 28
9.3 Other Loss....................................................... 28
10. APPLICABLE LAW...................................................... 29
10.1 Governing Law; Jurisdiction..................................... 29
11. MISCELLANEOUS PROVISIONS............................................ 29
11.1 Notices:........................................................ 29
11.2 Assignability:.................................................. 30
11.3 Dispute Resolution.............................................. 30
11.3.1 General................................................... 30
11.3.2 Parties Shall Meet........................................ 30
11.3.3 CEOs Shall Meet........................................... 30
11.3.4 Arbitration Trigger....................................... 30
11.3.5 Arbitration Rules......................................... 31
11.3.6 Agreements to Agree....................................... 31
11.4 Tax Reporting:.................................................. 31
11.5 Severability:................................................... 32
11.6 Counterparts:................................................... 32
11.7 Headings:....................................................... 32
11.8 Agreement references:........................................... 32
11.9 Appendices:..................................................... 32
11.10 Export Control:................................................. 32
</TABLE>
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11.11 Force Majeure:.............................................. 33
11.12 Negation of Agency:......................................... 33
11.13 Other Requests:............................................. 33
11.14 Amendment and Waiver:....................................... 34
</TABLE>
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THIS IS AN AGREEMENT effective November 17, 1999, ("Effective Date of this
Agreement") by and between Paradigm Genetics Inc. a corporation organized under
the laws of North Carolina having its principal place of business at 104
Alexander Drive, Building 2, P.O. Box 14528, Research Triangle Park, North
Carolina 27009 ("Paradigm") and Monsanto Company ("Monsanto"), a Delaware
corporation, having a principal place of business at 800 North Lindbergh
Boulevard, St. Louis, Missouri 63167.
WHEREAS, Monsanto has certain rights relating to genes which impart traits
in plants and plants containing such genes, such rights including possession of
technical information and know-how relating to such plants and their use, and
ownership of U.S. and foreign patent applications covering the plants, seeds,
genes and their use;
WHEREAS, Paradigm has expertise in transforming Arabidopsis plants with DNA
and analyzing the resultant plants for functional changes, including possession
of technical information and know how relating to such plants and their analysis
and use, and ownership of U.S. and foreign patent applications covering the
plants, genes and their use.
WHEREAS, Monsanto and Paradigm are contemplating establishing a strategic
functional genomics research alliance to create proprietary intellectual
property and products for both parties relating to gene sequences provided by
Monsanto to Paradigm;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
1. DEFINITIONS
-----------
Terms in this Agreement defined in the singular have the same meanings when
used in the plural and vice versa. For purposes of this Agreement, the following
words and phrases shall have the following meanings:
1.1 Affiliate
"Affiliate" shall mean with respect to any person or entity, any other
person or entity which directly or indirectly controls, is controlled by or is
under common control with such person or entity. A person or entity shall be
deemed to be "controlled" by any other person or entity if such other person or
entity (i) possesses, directly or indirectly, power to direct or cause the
direction of the management and policies of such person or entity whether by
contract or otherwise, (ii) has direct or indirect ownership of more than 50%
(in the aggregate) of the voting power of all outstanding shares entitled to
vote at a general election of directors of the person or entity or (iii) has
direct or indirect ownership of more than 50% of the equity interests in a
partnership or a limited liability company.
1.2 Agreement
"Agreement" shall mean this collaboration agreement.
<PAGE>
1.3 Average Net Benchmark Product Price
"Average Net Benchmark Product Price" shall mean the average gross invoiced
sales price received by Monsanto and its Affiliates for the sale of a unit
of Benchmark Product, or if no Benchmark Product is sold by Monsanto or its
Affiliates, all consideration received by a third party for the Benchmark
Product, in each case, in arm's length sales to an independent third party,
in a particular country for the applicable period, after deduction of the
following items, provided and to the extent such items are actually
incurred and documented and do not exceed reasonable and customary amounts
in the market in which such sale occurred: (i) trade discounts actually
allowed; (ii) credits, rebates and returns; (iii) freight and duties paid
for and separately identified on the invoice or other documentation
maintained in the ordinary course of business, (iv) taxes, duties and other
compulsory payments to governmental authorities actually paid and
separately identified on the invoice or other documentation maintained in
the ordinary course of business, and (v) dealer/distributor and seed
service fees paid by Monsanto and its Affiliates. All sales of Benchmark
Products between Monsanto and any of its Affiliates and sublicensees shall
be disregarded for purposes of computing Average Net Benchmark Product
Price. A "sale" shall include any transfer or other disposition for
consideration, and Average Net Benchmark Product Price shall include all
consideration received by Monsanto or its Affiliates in respect of any sale
of Benchmark Products, whether such consideration is in cash, payment in
kind, exchange or another form.
1.4 Average Net Product Price
"Average Net Product Price" shall mean the average gross invoiced sales
price received by Monsanto and its Affiliates for the sale of a unit of
Licensed Product in arm's length sales to an independent third party, in a
particular country for the applicable period, after deduction of the
following items, provided and to the extent such items are actually
incurred and documented and do not exceed reasonable and customary amounts
in the market in which such sale occurred: (i) trade discounts actually
allowed; (ii) credits, rebates and returns; (iii) freight and duties paid
for and separately identified on the invoice or other documentation
maintained in the ordinary course of business, (iv) taxes, duties and other
compulsory payments to governmental authorities actually paid and
separately identified on the invoice or other documentation maintained in
the ordinary course of business, and (v) dealer/distributor and seed
service fees paid by Monsanto and its Affiliates. All sales of Licensed
Products between Monsanto and any of its Affiliates and sublicensees shall
be disregarded for purposes of computing Average Net Product Price. A
"sale" shall include any transfer or other disposition for consideration,
and Average Net Product Price shall include all consideration received by
Monsanto or its Affiliates in respect of any sale of Licensed Product,
whether such consideration is in cash, payment in kind, exchange or another
form. Average Net Product Price shall not be discounted due to any product
"bundling" unless Monsanto or its Affiliates does not offer the Licensed
Product outside of a "bundle". In the case of discounts on "bundles" of
products or services which include Licensed Products, Monsanto may with
notice to Paradigm calculate the Average Net Product Price by discounting
the bona fide list price
2
<PAGE>
of a Licensed Product by no more than the average percentage discount of
all products of Monsanto and/or its Affiliates in a particular "bundle",
calculated as follows:
Average percentage
discount on a = (1 -A/B)x 100
particular "bundle"
where A equals the total discounted price of a particular "bundle" of
products, and B equals the sum of the un-discounted bona fide list prices
of each unit of every product in such "bundle". Monsanto shall provide
Paradigm documentation, reasonably acceptable to Paradigm, establishing
such average discount with respect to each "bundle".
1.5 Benchmark Product
"Benchmark Product" shall mean a product not covered by Licensed Patent
Rights, but otherwise identical to a Licensed Product, or if no such
product exists, substantially similar to a Licensed Product, but not
covered by Licensed Patent Rights, in each case, available in the same
country and time period. A Benchmark Product must be a commercial product
sold by Monsanto or its Affiliates or a third party. If Monsanto or its
Affiliates do not sell such a Benchmark Product, then the most suitable
product that meets the above definition sold by a third party in the
applicable country during the applicable time period shall be used as the
Benchmark Product.
1.6 DNA
"DNA" shall mean deoxyribonucleic acid or other similar material.
1.7 Effective Date of this Agreement
"Effective Date of this Agreement" shall mean the date first written above.
1.8 Grace Periods
"Grace Period" shall mean for the Project Plan's years 1 and 2, 120 days
beyond the Project Quarter given to achieve the Production Target Level for
such Project Quarter and during the Project Plan's years 3 and beyond, 90
days beyond the Project Quarter given to achieve the Production Target
Level for such Project Quarter.
1.9 Gene Patent Rights
"Gene Patent Rights" shall mean Licensed Patent Rights claiming an
invention relating to the making, composition or function of any Monsanto
DNA Information other than patent rights claiming discoveries or inventions
not discovered or developed in the course of carrying out the Project Plan.
3
<PAGE>
1.10 Paradigm Gene Patent Rights
"Paradigm Gene Patent Rights" shall mean patent rights of Paradigm claiming
discoveries or inventions related to Monsanto DNA Information not
discovered or developed in the course of carrying out the Project Plan.
1.11 Improvements
"Improvements" shall mean any improvements to Monsanto Enabling Technology.
Improvements may or may not result in patentable subject matter.
1.12 Know How
"Know How" shall mean information and material known to Monsanto necessary
to use any particular Monsanto Enabling Technology, including, but not
limited to DNA constructs, probes, and antibodies.
1.13 Licensed Products
"Licensed Product" shall mean a particular product or a particular species
of animals, plants, plant or animal parts, animal progeny, seed of plants
and products from any of the foregoing, or the process of making any of the
above, which, in the absence of a license, would infringe at least one (1)
claim of an unexpired U.S. or foreign patent included within Licensed
Patent Rights.
1.14 Licensed Patent Rights
"Licensed Patent Rights" shall mean (i) patent rights of Monsanto or
Paradigm claiming [_________________]*, (ii) patent rights of Monsanto
claiming Monsanto DNA Information, and (iii) patent rights of Paradigm
claiming Monsanto DNA Information other than patent rights claiming
discoveries or inventions not discovered or developed in the course of
carrying out the Project Plan.
1.15 Monsanto Enabling Technology
"Monsanto Enabling Technology" shall mean proprietary DNA, processes,
techniques and Know How of Monsanto owned by Monsanto or otherwise
licensable by Monsanto to Paradigm at the Project Commencement Date which
assists in or improves the ability to insert or express DNA in plants,
including without limitation, those technologies listed in Appendix K.
1.16 Monsanto Licensed Products
"Monsanto Licensed Products" shall mean Licensed Products, other than
chemical herbicides, which (i) infringe a Licensed Patent for which
Paradigm has an ownership interest or which lists a Paradigm employee as an
inventor, or (ii) infringe a Licensed Patent, the patentability of which
was based, in whole or in part, on [________________]* to which an employee
of Paradigm made a material contribution.
4
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* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
1.17 Monsanto DNA Information
"Monsanto DNA Information" shall mean DNA and sequence information for such
DNA provided by Monsanto to Paradigm including, but not limited to, full
length cDNA clones, genomic clones, PCR primers to be used to amplify the
desired gene from a target DNA or sequence for 5' and 3' PCR primers.
1.18 Net Product Revenues
"Net Product Revenues" shall mean the gross invoiced sales of Licensed
Products received by Paradigm or their respective Affiliates during the
applicable period in arm's length transactions after deduction of the
following items, provided and to the extent such items are actually
incurred and do not exceed reasonable and customary amounts in each market
in which such sales occurred: (i) trade and quantity discounts and rebates;
(ii) credits or allowances made for rejection or return of previously sold
Licensed Products; (iii) any tax or government charge levied on the sale,
such as value added tax (but not including income tax); and (iv) any
charges for freight or insurance. In the event that the Licensed Product is
not sold or is used internally by Paradigm or an Affiliate of Paradigm, or
is sold or otherwise transferred to a third party for a price lower than if
it had been sold to a third party in an arm's length transaction ("fair
market value"), then Net Products Revenues shall be the fair market value
of the Licensed Product.
1.19 Paradigm Licensed Products
"Paradigm Licensed Products" shall mean chemical herbicides which (i)
infringe a Licensed Patent for which Monsanto has an ownership interest or
which lists a Monsanto employee as an inventor, or (ii) infringe a Licensed
Patent the patentability of which was based, in whole or in part, on
[________________]* to which an employee of Monsanto made a material
contribution.
1.20 Permitted Data
"Permitted Data" shall have the meaning set forth in Article 3.3.4.
1.21 Project Commencement Date
"Project Commencement Date" shall mean February 1, 2000.
1.22 Project Committee
"Project Committee" shall mean the committee established in Article 3.4.
1.23 Production Target Level
"Production Target Level" shall mean, for each Project Quarter, the
achievement by Paradigm of the goal set forth in bold print in Appendix C
or in any other Appendix adopted under Article 4.1.5.
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* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
1.24 Project Plan
"Project Plan" shall mean the plan attached as Appendix B, as amended by
the Project Committee.
1.25 Project Quarter
"Project Quarter" shall mean a calendar quarter starting from the Project
Commencement Date.
1.26 Project Technology
"Project Technology" shall mean any materials, know-how, information,
discoveries or inventions that are discovered or developed in the course of
carrying out the Project Plan.
1.27 Product Sublicense Payments
"Product Sublicense Payments" shall mean all consideration received by
Monsanto and its Affiliates or Paradigm and its Affiliates from licensees
or sublicensees of Licensed Patent Rights in respect of any grant of rights
to make, use, sell or import Licensed Products (including, without
limitation, royalties or other payments for the sale of Licensed Products,
sublicense fees and Production payments) less pro rata deductions (based on
the number of technologies licensed to the licensee or sublicensee) for:
(i)dealer/distributor and seed service fees actually paid by Monsanto and
its Affiliates or Paradigm and its Affiliates, and (ii) taxes, duties and
other compulsory payments to governmental authorities actually paid and
separately identified on the invoice or the documentation maintained in the
ordinary course of business.
1.28 Subsidiary
"Subsidiary" shall mean an Affiliate controlled by a party to this
Agreement.
1.29 Term of this Agreement
"Term of this Agreement" shall be 6 years from the Project Commencement
Date unless extended or terminated as provided for in this Agreement.
1.30 Value Added
"Value Added" shall mean (i) the difference between the Average Net Product
Price of a Licensed Product as compared to the Average Net Benchmark
Product Price of the applicable Benchmark Product in the same country and
time period, and (ii) any other identifiable value (which is not merely
speculative) attributable to the Licensed Patent Right's contribution to
any Licensed Product sales, including, without limitation, increased market
share of a Licensed Product and market share maintenance of a Licensed
Product, in each case, as compared to the applicable Benchmark Product. It
is understood and agreed that "Value Added" shall include all incremental
value which is identifiable (and not merely speculative) which Monsanto and
its Affiliates receives
6
<PAGE>
from customers of Licensed Products. For Licensed Products where there is
no Benchmark Product, the Value Added will equal the Average Net Product
Price.
1.31 Monsanto Patents
"Monsanto Patents" shall have the definition provided in Article 6.1.
1.32 Paradigm Patents
"Paradigm Patents" shall have the definition provided in Article 6.1.
1.33 Joint Patents
"Joint Patents" shall have the definition provided in Article 6.1.
2. CONVEYANCE OF RIGHTS:
--------------------
2.1 Assignment to Monsanto:
Subject to the terms and conditions of this Agreement and for the
consideration as set forth in Article 4, Paradigm agrees to assign and
hereby assigns to Monsanto Paradigm's right, title and interest to the Gene
Patent Rights.
2.2 License to Monsanto: Licensed Patent Rights
Except for Gene Patent Rights assigned to Monsanto pursuant to Article 2.1,
subject to the terms and conditions of this Agreement (including, without
limitation, Article 2.5) and for the consideration as set forth in Article
4, Paradigm hereby grants to Monsanto under Paradigm's interest in the
Licensed Patent Rights and for the life of such Licensed Patent Rights a
perpetual non-exclusive, world-wide license to make and use
[________________]* and Monsanto DNA Information and a perpetual exclusive,
world-wide license to develop, make, have made, import, use, sell, have
sold, and offer to sell Monsanto Licensed Products. Paradigm further grants
Monsanto the right to sublicense any of the above rights.
2.3 License to Monsanto: Paradigm Gene Patent Rights
Paradigm grants to Monsanto, Subsidiaries of Monsanto and wholly-owned
Affiliates of Monsanto under Paradigm's interest in Paradigm Gene Patent
Rights a perpetual non-exclusive, world-wide license to use Monsanto DNA
Information for research purposes only. Such right shall not extend to any
other Paradigm owned or in-licensed technology.
2.4 License to Monsanto: Paradigm Gene Patent Rights - restriction on license
No right to commercialize a plant produced under Article 2.3 is granted in
this Agreement and Paradigm shall be under no obligation to provide such a
license. Monsanto shall be responsible for maintaining sufficient records
on the use of plants
7
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* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
which infringe Paradigm Gene Patent Rights so that such plants can be
identified. To the extent that Monsanto or an Affiliate of Monsanto seeks
to produce and analyze plants for a third party, Monsanto shall inform such
third party that the rights granted Monsanto under Paradigm Gene Patent
Rights is limited to the use of such plants solely by Monsanto and only for
research purposes and that any license necessary to commercialize any
plants can only be granted by Paradigm.
2.5 License to Monsanto: restriction on license
Nothing in this Agreement shall be construed as granting a license under
any Paradigm patents other than Licensed Patent Rights or Paradigm Gene
Patent Rights. No license is granted to any Licensed Product which
infringes a Paradigm patent that is not included in Licensed Patent Rights
or Paradigm Gene Patent Rights.
2.6 License to Paradigm: Licensed Patent Rights
Subject to the terms and conditions of this Agreement and for the
performance of the Research Plan and other consideration as set forth
herein, Monsanto hereby grants to Paradigm under the Licensed Patent Rights
except for those patent rights directed to DNA other than Arabidopsis DNA
and, if the Project Plan is extended under Article 4.1.5.1, except for
those patent rights directed to DNA other than Arabidopsis and rice DNA,
and for the life of such Licensed Patent Rights a perpetual non-exclusive
world-wide license to make and use [________________]* and Monsanto DNA
Information directed to Arabidopsis DNA and, if the Project Plan is
extended under Article 4.1.5.1, rice DNA and a perpetual exclusive world-
wide license to develop, make, have made, import, use, sell, have sold, and
offer to sell Paradigm Licensed Products. Monsanto further grants Paradigm
the right to sublicense the rights to develop, make, have made, import,
use, sell, have sold, and offer to sell Paradigm Licensed Products.
2.7 License to Monsanto: research license - [________________]*
Paradigm grants to Monsanto, Subsidiaries of Monsanto and wholly-owned
Affiliates of Monsanto under Paradigm's interest in Licensed Patent Rights
and [________________]* a perpetual non-exclusive, worldwide license to use
[________________]* for research purposes only. Such right shall not extend
to any other Paradigm owned or in-licensed [________________]*.
2.8 License to Paradigm: research license - [________________]*
Monsanto grants Paradigm and those Subsidiaries of Paradigm at the
Effective Date of this Agreement under Monsanto's interest in Licensed
Patent Rights except for those patent rights directed to DNA other than
Arabidopsis DNA and, if the Project Plan is extended under Article 4.1.5.1,
except for those patent rights directed to DNA other than Arabidopsis and
rice DNA, and [________________]* a perpetual nonexclusive, world-wide
license to use [____________]* and Monsanto DNA Information directed to
Arabidopsis DNA and, if the Project Plan is extended under Article 4.1.5.1,
rice DNA for research purposes only. Such right shall not extend to any
other Monsanto owned or in-licensed[________________]*, including Monsanto
DNA Information that is not from
8
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* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
Arabidopsis or, if the Project Plan is extended under Article 4.1.5.1,
rice, except as set forth in Article 2.9.
2.9 License to Paradigm: research license - Monsanto Enabling Technology
in research crops
Monsanto grants Paradigm and Subsidiaries of Paradigm under Monsanto's
interest in Monsanto Enabling Technology a perpetual, nonexclusive, U.S.
and Europe only, license to use Monsanto Enabling Technology in
Arabidopsis, tobacco and, if the Project Plan is extended under Article
4.1.5.1, rice for research purposes only. Such right shall not extend to
any other Monsanto owned or in-licensed technology, whether or not licensed
to Paradigm herein, except and to the extent as set forth in Article 2.8.
Notwithstanding the foregoing, such research license shall not apply to
research in herbicide resistance in any plant species.
2.10 License to Paradigm: research license - Monsanto Enabling Technology -
restriction on license
No right to commercialize a plant produced under Article 2.9 is granted in
this Agreement and Monsanto shall be under no obligation to provide such a
license. Paradigm agrees to keep any plant produced in the United States
and Europe. Paradigm shall be responsible for maintaining sufficient
records on the use of Monsanto Enabling Technology so that such plants can
be identified. To the extent that Paradigm or an Affiliate of Paradigm
seeks to produce and analyze plants for a third party, Paradigm shall
inform such third party that the rights granted Paradigm under Monsanto
Enabling Technology is limited to the use of such plants solely by Paradigm
and only for research purposes and that any license necessary to
commercialize any plants can only be granted by Monsanto. Paradigm agrees
to grant and hereby grants a royalty-free, nonexclusive license to Monsanto
to any Improvements created by Paradigm.
2.11 License to Paradigm: restriction on license
Nothing in this Agreement shall be construed as granting a license under
any Monsanto patents other than Licensed Patent Rights and Monsanto
Enabling Technology. No license is granted to any Licensed Product which
infringes a Monsanto patent that is not included in Licensed Patent Rights
or Monsanto Enabling Technology.
3. FUNDED PROJECT
------------------
3.1 Funded Project
Subject to the terms and conditions set forth herein, commencing on the
Project Commencement Date, Paradigm shall conduct the project pursuant to
the Project Plan, as described herein or as amended by the Project
Committee. Paradigm shall be responsible for the management and
implementation of the Project Plan.
3.2 Contribution of Monsanto
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Monsanto will supply Monsanto DNA Information to Paradigm as provided in the
Project Plan to allow Paradigm to meet the Production Target Levels as set forth
in the applicable Appendix.
3.2.1 Monsanto DNA supplied
In the case of Monsanto DNA Information relating to a species
other than Arabidopsis, such Monsanto DNA Information shall be in
the form of a
[__________________________________________________________]*
each such non-Arabidopsis DNA, Paradigm will provide [________
__________________________________________________________]*.
Monsanto agrees to provide to Paradigm [________________________
_____________________________________________]*. Under the
Project Plan, Monsanto shall be limited to providing no more than
[_________________]* non-Arabidopsis DNA of which no more than
[_____________________]* will be from rice, no more than
[__________________]* will be from [__________]* and no more than
[_______________]* will be from
[________________________________]*. These amounts will be
proportionally expanded if Monsanto exercise the options under
Articles 4.1.5.2 or 4.1.5.3. Monsanto will use diligent efforts
to assure that all Monsanto DNA Information is accurate.
3.2.2 Counting Monsanto DNA
For purposes of calculating the achievement of Production Target
Levels, each analysis, whether [______________]* shall be counted,
so that an analysis of a [________________________________________
________________________________________________________]*. In the
case of [__________________________________________________________
_____________]* shall be counted as [_______________________]*. If
the [_____________________]* does not have an [_____________________
_______________________________________]* shall be counted as
[___________________]*. It is additionally expected that control
experiments will be included in the Project Plan which will not be
counted towards the Production Target Levels.
3.2.3 Counting for failed experiments
In the event that Paradigm attempts diligently to insert the DNA from any
Monsanto DNA Information into Arabidopsis as set forth in the Project Plan
but is unable to do so, then for purposes of calculating the achievement of
Production Target Levels, Paradigm will be deemed to have achieved
[___________________]* of an analysis.
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3.3 Contribution of Paradigm
3.3.1 Conducting Project Plan
Paradigm shall use diligent efforts to conduct the Project Plan and
meet the Production Target Levels set out in the appendices.
3.3.2 Database Compatibility
Paradigm agrees to make diligent efforts to report data generated from the
Project Plan in a customized database as described in the Project Plan.
This data base will be updated on a monthly basis.
3.3.3 Biological Materials
Paradigm will provide Monsanto with reasonable access to biological
materials generated in the course of conducting the Project Plan as set
forth in the Project Plan.
3.3.4 Contribution of Third Party Information
In the event that Monsanto provides Monsanto DNA Information to Paradigm
that Paradigm has already analyzed for a third party, Paradigm agrees, to
the extent it has the right to do so, to make available to the Project
Committee data resulting from such analysis on the following basis:
3.3.4.1 Right to Summary Information
For each such analysis Paradigm will initially provide to the
Project Committee a brief summary of the data which will consist of
a statement as to whether the data shows a statistically significant
deviation from data obtained from a wild type Arabidopsis plant. The
Project Committee will then determine whether or not to receive the
data that Paradigm has the right to deliver ("Permitted Data"). If
the Project Committee chooses not to receive the Permitted Data and
not to have Paradigm analyze such Monsanto DNA Information
independently in the Project Plan, then the specific Monsanto DNA
Information will not be counted in the throughput targets for the
Project Plan and Monsanto can replace that Monsanto DNA Information
with different Monsanto DNA Information to be analyzed by Paradigm,
provided, however, that the Project Committee may only do so with
respect to [__]* DNA sequences provided by Monsanto.
3.3.4.2 Consequence of Using Permitted Data
If the Project Committee decides to proceed with a full analysis, it
will elect to receive the Permitted Data and, assuming the Permitted
Data does not contain all the analysis provided in the Project Plan,
have Paradigm
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<PAGE>
complete the analysis of the Monsanto DNA Information as provided in
the Project Plan. If the Project Committee chooses to receive the
Permitted Data, or if the Project Committee decides to have Paradigm
complete the analysis of that Monsanto DNA Information in the
Project Plan, or if the Project Committee elects to not receive the
Permitted Data for any DNA sequences in excess of [__]*, then that
Monsanto DNA Information will be counted in the throughput targets
for Paradigm in the Project Plan.
3.3.4.3 Consequence of Expansion
In the event that the Project Plan is expanded as set forth in
Article 4.1.5.2 or Article 4.1.5.3, there will be no limit to the
number of times the Project Committee may elect not to receive the
Permitted Data; provided, however, that of at any time Monsanto has
not provided Paradigm with sufficient Monsanto DNA Information to be
able to achieve the Production Target Levels set forth in the
appropriate Appendix, then Monsanto DNA Information which was not
counted in the throughput targets for the Project Plan because it
was not elected will be counted for purposes of determining the
Production Target Level.
3.4 Project Committee
3.4.1 Committee Duties
The duties of the Project Committee shall be as specified in this
Agreement and as determined in writing by the parties, so long as
such written determination is not inconsistent with this Agreement
unless the parties amend the Agreement accordingly.
3.4.2 Committee Structure
The Project Committee shall be comprised of three Monsanto and three
Paradigm employees designated by Monsanto and Paradigm,
respectively. Each party is free to name and change its Project
Committee Members without permission from the other party.
3.4.3 Meetings
The Project Committee shall meet quarterly at Paradigm or other
location as agreed upon by both parties. The Project Committee will
prepare quarterly science reports and the minutes of the meetings
will be approved by both parties.
3.4.4 Decision Making
The Project Committee may modify the Project Plan based upon actual
project results. The Project Committee will also agree upon how to
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<PAGE>
integrate new technology into the project from Monsanto, Paradigm or
third parties. Monsanto will be given a supermajority vote on all
decisions that do not materially change the scope of the Project
Plan or do not require Paradigm to incur any additional costs with
the exception that a unanimous vote is required to change the
provisions of the Project Plan relating to Monsanto's supply of DNA
(Article 3.2) or Monsanto's access to biological materials (Article
3.3.3). Other than the Project Plan, the Project Committee may not
modify this Agreement. Any decisions related to material changes in
the scope or the budget for the Project Plan or related to changing
the terms of this Agreement will require mutual consent of Paradigm
and Monsanto.
3.5 Term and Termination of Funded Project
The Term of this Agreement will be 6 years after the Project Commencement
Date with the possibility to extend the Agreement based upon the mutual
agreement of both parties.
3.5.1 Early Termination - Production Target Levels Achieved
Monsanto will have the option to serve notice of its intention to
terminate the Project Plan at end of any quarter from Project
Quarter 8 to Project Quarter 12 of the Project Plan, such notice
having the effect of terminating the Agreement eighteen (18) months
after such written notice to Paradigm (e.g., notice given at the end
of Project Quarter 8 terminating the Agreement at the end of Project
Quarter 14). In the event of early termination, Production Target
Level payments and quarterly payments remaining the same as set
forth in Appendix C and D until such termination.
3.5.2 Early Termination - Production Target Levels Not Achieved
Both parties will have the option to terminate this Agreement prior
to the expiration of the six (6) year term under the following
conditions. Either party may terminate the Agreement with thirty
(30) days prior written notice given within thirty (30) days after
the relevant period set forth below as follows: (a) after the third
Project Quarter or any subsequent Project Quarter (including its
permitted Grace Period), if Paradigm has achieved no Production
Target Levels at a level requiring payment pursuant to Article 4.1.4
during a period of three (3) consecutive Project Quarters ending
with such Project Quarter (including permitted Grace Periods), or
(b) after the fourth Project Quarter or any subsequent Project
Quarter (including its permitted Grace Period), if Paradigm has
achieved no Production Target Levels at a level requiring payment
pursuant to Article 4.1.4 during fifty percent (50%) or more of the
completed Project Quarters (including permitted Grace Periods). In
the event of termination for failure to achieve Production Target
Levels as set forth above,
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Monsanto shall not be obligated to make any research funding
payments pursuant to Articles 4.1.3 or 4.1.4 to Paradigm that are
due more than thirty (30) days after notice has been given. Monsanto
will have no right to recoup any monies already paid to Paradigm
prior to termination under this Article 3.5.2.
3.5.3 Early Termination - Other Reasons
Either party may terminate this Agreement by reason of failure to
cure a material breach by the other party or upon bankruptcy,
insolvency, and dissolution or winding up of the other party. Any
such termination will require written notice from the terminating
party, specifying, in reasonable detail, the breach or other basis
of the termination. The breaching party will be given 60 days from
receipt of such written notice to cure the breach pursuant to this
Article 3.5.3 prior to actual termination. If the breach is cured
during such period, the notice will have no force or effect.
3.5.4 Extension
Paradigm and Monsanto will meet during the twenty-first Project
Quarter to determine the conditions and terms on which the project
would be extended beyond 6 years. No extension will occur except
upon mutual agreement of the parties.
3.5.5 Surviving Paragraphs
Termination of this Agreement for any reason other than Articles
3.5.2 and 3.5.3 shall not terminate the provisions set forth in
Articles 2, 4.2, 4.3, 4.4, 5, 6, 7, 8, 9, 10 and 11. The rights and
obligations of these Articles shall continue in full force and
effect following any such termination. If Monsanto terminates the
Agreement under Articles 3.5.2 or Article 3.5.3, then all the above
Articles shall survive except for Articles 2.9 and 2.10. Upon any
termination, Monsanto DNA Information shall only include that DNA
that has been analyzed and reported to Monsanto under the Project
Plan.
4. PAYMENTS
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4.1 Project Funding
Monsanto agrees to fund the Project Plan over the Term of this Agreement as
set forth below:
4.1.1 Inducement Fee
As an inducement to Paradigm to commit assets and personnel and
undertake the obligation to conduct the Project Plan over the
Term of this Agreement, Monsanto agrees to pay Paradigm ten million
dollars ($10,000,000) of which [___________________________________
__________________]* shall be paid upon execution and [___________
_______________]* shall be paid by January 17, 2000.
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4.1.1.1 Termination Refund
In the event that this Agreement is terminated within
eighteen (18) months of Project Commencement Date due to a
breach by Paradigm, Paradigm shall refund Monsanto
[____________ ___________________]*.
4.1.2 Annual Technology Enhancement Fee
Paradigm shall invest during project years 1-5 at least [_________
_______________________________]* in new technology, either
externally or internally. Such investments shall be approved by the
Project Committee, which approval shall not be unreasonably
withheld.
4.1.3 Quarterly Payment
Monsanto will pay Paradigm the fees set out in Appendix D as
compensation for Paradigm's services under the Project Plan for each
Project Quarter at the beginning of each Project Quarter.
4.1.4 Production Target Level Payments
For each quarter in which Paradigm meets at least 80% (except as set
forth below) of the quarterly Production Target Level, set out in
Appendix C, during the Project Quarter or within the permitted Grace
Period, Monsanto will pay Paradigm the Production payment according
to the following formula:
Production payment =
[Production payment set forth in Appendix E] * [[[actual
deliverable/Production Target Level]-1]*2]+1:
wherein if [actual deliverable/Production Target Level] 0.8,
then Production payment =0 (except as set forth below); and
wherein Production payment cannot be greater than 1.4 *
[Production payment set forth in Appendix D]; and wherein sum of
all Production payments cannot be greater than
[_____________________________________________ ___________]*,
unless one or more of the options in Article 4.1.5 are exercised, in
which event the sum of the Production payments cannot be greater
than the aggregate total of the Production payments on the
appropriate Appendices.
Notwithstanding the foregoing, if during the last three (3)
Project Quarters, there is an insufficient quantity of Monsanto
DNA Information being analyzed under the Project Plan to allow
the Production Target Level to be reached, then
[___________________________________
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<PAGE>
______]* for such quarter will be paid based on
[_____________________ _________]* for such Project Quarter to the
[______________________]* for such Project Quarter subject to the
limit on the sum of all Production payments in the preceding
paragraph.
Such payment will be made within sixty (60) days of the
demonstration of the achievement of the Production Target Level.
4.1.5 Additional Optional Projects
The following changes to the Project Plan will occur upon proper
notice from Monsanto to Paradigm
4.1.5.1. Rice Option
Provided that Monsanto gives Paradigm at least six (6) months
written notice of its desire to add rice to the project, in
addition to the project initially described in the Project Plan,
Paradigm will add analyzing rice to the project. This expansion
will begin as of the beginning of the fifth, sixth, seventh or
eighth Project Quarter and continue for 20 Project Quarters. The
Project Plan will be appropriately amended by the parties.
Production Target Levels for rice are set out in Appendix E and
quarterly and production payments for rice are set out in
Appendix F.
4.1.5.2. Increase in Arabidopsis
Provided that Monsanto gives Paradigm at least six (6) months
written notice of its desire to increase the number of Arabidopsis
genes to be analyzed, Paradigm will increase the number of genes to
be analyzed in Arabidopsis by [____]* genes. This expansion will
begin as of the beginning of the ninth, tenth, eleventh or twelfth
Project Quarter and continue for 20 Project Quarters, with the Term
of this Agreement being appropriately extended The Project Plan will
be appropriately amended by the parties. Production Target Levels
for this option are set out in Appendix G and quarterly and
production payments for this option are set out in Appendix H.
4.1.5.3 Increase in Arabidopsis
Provided that Monsanto gives Paradigm at least six (6) months
written notice of its desire to increase the number of Arabidopsis
genes to be analyzed, Paradigm will increase the number of genes to
be analyzed in Arabidopsis by [____]* genes. This expansion will
begin as of the beginning of the ninth, tenth, eleventh or twelfth
Project Quarter and continue for 24 Project Quarters with the Term
of this Agreement being appropriately extended. The Project Plan
will be appropriately amended by the parties. Production Target
Levels for this option are set out in
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<PAGE>
Appendix I and quarterly and production payments for this option are
set out in Appendix J.
4.1.5.4 Impact of Expansion - Production Target Level Measurement
Each Production Target Level set out in the appendices will be
measured independently with Arabidopsis deliverables counted toward
the Production Target Levels set forth in Appendix C first up to
100% of the Production Target Levels set forth in Appendix C and the
remainder applied to the expansion in Articles 4.1.5.2 or 4.1.5.3,
whichever applies. Production payments for each expansion shall be
calculated pursuant to the formula set forth in Article 4.1.4. In
addition, failure to achieve Production Target Levels for any
expansion in Articles 4.1.5.1, 4.1.5.2 and 4.1.5.3 as described in
Article 3.5.2 shall only give rise to a right of termination of the
expansion and not the original Project Plan unless the Production
Target Levels of the original Project Plan are also not achieved as
set out in Article 3.5.2.
4.1.5.5 Impact of Expansion - right to terminate
If Monsanto exercises its option under Article 4.1.5.1, 4.1.5.2, or
4.1.5.3, then Monsanto's right to terminate this Agreement pursuant
to Article 3.5.1 will terminate.
4.2 Royalties - Monsanto Licensed Products
Monsanto shall pay Paradigm a royalty of [_]* of the aggregate
[__________]* of all Monsanto Licensed Products sold by Monsanto or its
Affiliates or a licensee of Monsanto (except in the case of a bare
sublicense as provided in Article 4.3) subject to the following conditions:
4.2.1 Minimum Royalty
The minimum annual royalty to be paid by Monsanto will be
[_____________________________________]* for each trait within
Monsanto Licensed Products that is covered by Licensed Patent
Rights, provided such trait is used in a crop in Appendix A,
otherwise the minimum royalty shall be [_______________________]*
subject to Article 4.2.2. If earned royalties paid pursuant to
Article 4.2 do not reach this amount, the balance will be paid with
the report delivered for the second half of each annual period
(either fiscal or calendar) pursuant to Article 5.1. By way of
illustration, engineering drought resistance into corn and soybeans
would be a single trait, regardless of the number of genes used to
achieve that trait, with a minimum annual royalty of
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<PAGE>
[_______]* and engineering drought resistance and freeze resistance
into corn would be two traits with a minimum annual royalty of
[_______]*.
4.2.2 One Royalty
Royalties shall be paid by Monsanto on a product-by-product basis.
Only one royalty shall be due and payable to Paradigm by Monsanto
regardless of the number of patents included in the Licensed Patent
Rights practiced by Monsanto and its Affiliates and sublicensees in
connection with the production and commercialization of a particular
Licensed Product, provided, such royalty shall reflect [___]* of the
total aggregate [__________]* of such Licensed Product.
4.2.3 Third Party Royalty Offset.
In the event that Monsanto owes royalties directly or indirectly to
an independent third party for licenses to intellectual property
necessary for use of Licensed Patent Rights in the commercialization
of Licensed Products, then Monsanto may offset against royalties due
to Paradigm an amount [__________________________________________]*
being paid to Paradigm with respect to the relevant Licensed Product
(e.g., where Paradigm receives a royalty of
[__________________________]*, Monsanto would be entitled to an
offset equal to [_____________]* of such royalties paid to third
parties). By way of illustration and without limitation, if the
[__________]* for a particular Licensed Product is[_______________
_____________]* and Monsanto owes a royalty to a third party with
respect to such Licensed Product of [__________________]*, then the
royalty due to Paradigm with respect to such Licensed Products would
be [__________________________________]*. Such offsets will not
affect Monsanto's obligation to pay minimum royalties pursuant to
Article 4.2.1.
4.2.4 Monsanto Royalty Buy-Out
Monsanto shall have an option to negotiate with Paradigm with
respect to a one-time payment to Paradigm with respect to each or
all Monsanto Licensed Product in lieu of paying any further
royalties on such products. The parties shall conduct such
negotiation in good faith, but neither shall be obligated to agree
to any buy-out.
4.3 License or sublicense of Licensed Patent Rights by Monsanto.
If Monsanto grants a license or sublicense of Licensed Patent Rights to a
third party non-Affiliate without providing such licensee or sublicensee
with a Licensed Product, Monsanto shall pay Paradigm [___________________]*
of Product Sublicense Payments received for such license or sublicense by
Monsanto, unless the grant is for a crop listed in Appendix A, in which
case
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Monsanto shall pay Paradigm [_________________]* of Product Sublicense
Payments received for such license or sublicense by Monsanto. All such
payments shall apply against the minimum royalty payments set forth in
Article 4.2.1.
4.4 Royalties - Paradigm Licensed Products
Paradigm shall pay Monsanto [____________________________________
_________________________________________________________________]*
received for any license or sublicense granted by Paradigm under the
license granted to it by Article 2.6.
4.5 Valuation of Non-Monetary Consideration for Product Sublicense Payments:
Paradigm or Monsanto can accept non-monetary consideration for the sale of
any product or the grant of any license or sublicense for which Product
Sublicense Payments are to be calculated under this Article, provided that
such non-monetary consideration can be reasonably valued.
5. RECORDS
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5.1 Payments of Royalties
Within ninety (90) days of the end of the applicable semi-annual period
(either fiscal or calendar) following the first commercial sale of a
Licensed Product and within ninety (90) days after the end of each six
months thereafter, the party selling or receiving value for such Licensed
Product shall make a written report to the other party setting forth the
information, including that of Affiliates and licensees or sublicensees,
necessary to permit the other party to calculate and confirm the royalty
payment due the other party, even if no royalty payment is due. At the time
each report is made, the party selling or receiving value shall pay to the
other party the royalties shown by such report to be payable hereunder.
Payments due on sales in foreign currency shall be calculated in United
States dollars on the basis of the rate of exchange in effect for purchase
of dollars at Chase Manhattan Bank, New-York, New York, on the last
business day of the last-preceding June or December, whichever shall be
later. Payments shall be without set off and free and clear of any taxes,
duties, fees or charges other than withholding taxes, if any. Payment shall
be made by wire transfer to an account in the United States which the other
party may designate from time to time by prior, written notice.
5.2 Books and Records for Royalty Payments
Each party shall keep, and shall cause its Affiliates, licensees and
sublicensees to keep, books and records in such reasonable detail as will
permit the reports provided for in this Article hereof to be made and the
royalties payable hereunder to be determined. Each party further agrees to
permit each party's and their
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Affiliates books and records to be inspected and audited from time to time
(but not more often than once annually) during reasonable business hours by
an independent auditor, designated by the holder of such books and records
and approved by the other party, which approval will not be unreasonably
withheld, to the extent necessary to verify the reports provided for in
this article provided, however, that such auditor shall indicate to the
other party only whether the reports and royalties paid are correct, and if
not, the reason why not. In the event that such an audit results in
additional royalties being owed to the other party, such royalties shall be
paid within sixty (60) days from notice of deficiency along with interest
calculated as from the date the correct payment was due to the date of
actual payment at an annual rate of five (5) percentage points above the
prime rate quoted by Chase Manhattan Bank, New York, New York, on the day
payment was due, until paid; and if the original payment was more than five
percent (5%) less than it should have been, the cost of the audit shall be
reimbursed.
5.3 Late Payment of Royalties
If any royalties owed under this Agreement are not paid when due, the
unpaid amount shall bear interest, compounded annually, at an annual rate
of five (5) percentage points above the prime rate quoted by Chase
Manhattan Bank of New York on the day payment was due, until paid or
offset.
6. INTELLECTUAL PROPERTY
---------------------
6.1 Ownership of Project Technology Other Than Gene Patent Rights.
Except as set forth in Article 2.1 of this Agreement (which covers Gene
Patent Rights): (i) any Project Technology and any patent applications and
patents claiming Project Technology first conceived or discovered by one or
more employees of Monsanto shall belong to Monsanto ("Monsanto Patents");
(ii) any Project Technology and any patent applications and patents
claiming an Project Technology first conceived or discovered by one or more
employees of Paradigm shall belong to Paradigm ("Paradigm Patents"); and
(iii) any Project Technology and any patent applications and patents
claiming any Project Technology first conceived or discovered jointly by
one or more employees of Monsanto and one or more employees of Paradigm
shall belong jointly to Monsanto and Paradigm ("Joint Patents"). Each owner
of any Joint Patent shall be free to exploit its undivided interest in such
Joint Patent. Inventorship shall be determined in accordance with United
States patent laws.
6.2 Disclosure of Patentable Inventions
In addition to the disclosures otherwise required under this Agreement,
each party shall submit a written report to the other within sixty (60)
days of the end of
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each Project Quarter summarizing any invention arising in the performance
of the Project Plan during the prior Project Quarter which it believes may
be patentable.
6.3 Access to Gene Patent Rights
Monsanto shall provide Paradigm with access to inspect patent applications
and prosecution files for Gene Patent Rights and to make copies of such
files and prosecution files at its own expense and for its own internal use
upon reasonable notice to Monsanto of Paradigm's intent to perform such
inspection. Paradigm shall bear the out-of pocket costs of inspecting and
copying such patent applications and prosecution files.
6.4 Patent Prosecution and Maintenance; Paradigm Patents
Paradigm shall control the preparation, filing, prosecution and maintenance
of all Paradigm Patents and be responsible for all costs associated
therewith. In the event Paradigm elects not to file in a reasonable time or
to cease prosecution of a filed application for a Paradigm Patent or to
abandon an issued Paradigm Patent, Paradigm shall notify Monsanto not less
than two (2) months before any relevant deadline, and Monsanto shall have
the right to assume control over the prosecution of such filed application
for a Paradigm Patent or maintenance of such issued Paradigm Patent.
6.5 Patent Prosecution and Maintenance; Monsanto Patents
Monsanto shall control the preparation, filing, prosecution and maintenance
of all Monsanto Patents and be responsible for all costs associated
therewith. In the event Monsanto elects not to file in a reasonable time or
to cease prosecution of a filed application for a Monsanto Patents or to
abandon an issued Monsanto Patents, Monsanto shall notify Paradigm not less
than two (2) months before any relevant deadline, and Paradigm shall have
the right to assume control over the prosecution of such filed application
for a Monsanto Patent or maintenance of such issued Monsanto Patent.
6.6 Patent Prosecution and Maintenance; Joint Patents
The parties shall agree upon an outside law firm who shall prepare, file,
prosecute and maintain Joint Patents under the joint instructions of the
parties. All costs shall be shared equally. In the event Paradigm or
Monsanto elects not to share or continue to share such costs of prosecution
of a filed application for a Joint Patent or maintenance costs for an
issued Joint Patent, it shall notify the other party not less than two (2)
months before any relevant deadline, and the other party shall have the
right to assume sole control over the prosecution of such filed application
for a Joint Patent or maintenance of such issued Joint Patent. In such
event, the party which assumes such control shall have title to such Joint
Patent and the other party agrees to execute the appropriate documents to
assign such patent to the other party.
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6.7 Gene Patent Rights
6.7.1 Disclosure
Each party shall promptly disclose to the other any invention made
during the Term of this Agreement by such party which may reasonably
be expected to be the subject of a Gene Patent Right. In order to
safeguard Monsanto's right to prepare, file and prosecute Gene
Patent Rights, Paradigm will not file any patent application which
discloses the sequence, composition or function of any Monsanto DNA
Information until the earlier of: (i) receipt of notice from
Monsanto that a patent application has been filed on such Gene
Patent Rights; or (ii) six (6) months after disclosure by Paradigm
to Monsanto that it seeks to file a patent application that would
disclose the sequence, composition or function of Monsanto DNA
Information, unless the parties mutually agree to extend such time.
6.7.2 Prosecution of applications
Monsanto shall control the preparation, filing, prosecution and
maintenance of all Gene Patent Rights and be responsible for all
costs associated therewith. Monsanto will notify Paradigm of the
filing of each application for a Gene Patent Right within five (5)
days of such filing and provide Paradigm with a copy of such
application. In the event Monsanto elects not to file a patent
applications, ceases prosecution of a filed application for a Gene
Patent Right or decides to abandon an issued Gene Patent Right,
Monsanto shall notify Paradigm as early as possible, but not less
than one (1) month before any relevant deadline, and Paradigm shall
have the right to assume control over the filing of an application
for such Gene Patent Right, prosecution of such filed application
for a Gene Patent Right or maintenance of such issued Gene Patent
Right.
6.8 Cooperation
Each party agrees to cooperate with the other in preparing and executing
any documents necessary or useful to obtain patent protection on any
invention that is subject to this Agreement in any country in the world.
6.9 Costs
Each party shall retain control over and bear all expenses associated with
the filing, prosecution and maintenance of patents on inventions made
before the effective date of this Agreement by such party.
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6.10 Patent Litigation: Right to Bring Suit
Each party shall have the sole power to institute and prosecute at its own
discretion and expense suits for infringement of their respective patent
rights, provided that if Monsanto does not bring suit against a party who
is alleged to be infringing any Gene Patent Right through the sale of a
Paradigm Licensed Product within sixty (60) days of a request from
Paradigm to bring such suit, then Paradigm may bring such suit in its own
name or in the name of Monsanto. Each party agrees to cooperate with the
other in any suit brought under this Article. All expenses in such suits
will be borne entirely by the party bringing such suit and such party
shall collect all judgments or awards arising from these suits. In the
event a judgment or award is collected by the party bringing the suit,
then the party not bringing the suit shall be entitled to any royalties or
shares of Product Sublicense Payments which they would otherwise have been
entitled to from the sale of Licensed Products by the infringer.
6.11 Confidential Treatment
All information disclosed under this Article 7 shall be treated as
Confidential Information under Article 8.
7. CONFIDENTIALITY
---------------
7.1 Confidential Information:
It is anticipated that it will be necessary, in connection with their
obligations under this Agreement, for Paradigm and Monsanto, and
Affiliates of either party, to disclose to each other confidential
proprietary business and/or technical information ("Confidential
Information") relating to their respective businesses, products and
technologies. The Confidential Information shall include information
disclosed in writing or other tangible form, including samples of
materials.
7.2 Confidentiality and Limited Use:
7.2.1 Limited Use:
With respect to all Confidential Information, both Paradigm and
Monsanto and Subsidiaries and wholly-owned Affiliates of either
party agree as follows, it being understood that "recipient"
indicates the party receiving the confidential, proprietary
information from the other "disclosing" party. Confidential
Information disclosed to the recipient shall remain the property of
the disclosing party and shall be maintained in confidence by the
recipient and shall not be disclosed to third parties or to
Affiliates other than Subsidiaries or wholly-owned Affiliates by the
recipient and, further, shall not be used except for purposes
contemplated
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in this Agreement. All confidentiality and limited use obligations
with respect to the Confidential Information shall terminate five
(5) years after the termination date of this Agreement.
7.2.2 Exceptions to Disclosure of Confidential Information:
Notwithstanding any provision to the contrary, a party may disclose
the Confidential Information of the other party: (i) in connection
with an order of a court or other government body or as otherwise
required by or in compliance with law or regulations; provided that
the disclosing party provides the other party with notice and takes
reasonable measures to obtain confidential treatment thereof; (ii)
in confidence to attorneys, accountants, banks and financial sources
and their advisors; or (iii) in confidence, in connection with a
license, sublicense, or acquisition, permitted by this Agreement.
7.3 Exceptions to Classification as Confidential:
The obligations of confidentiality and limited use shall not apply to any
of the Confidential Information which
7.3.1 Publicly Available:
as of the date of disclosure is publicly available by publication or
other documented means or later becomes likewise publicly available
through no act or fault of recipient; or
7.3.2 Already Known:
is already known to recipient before receipt from the disclosing
party, as demonstrated by recipient's written records; or
7.3.3 Third Party Disclosure:
is made known to recipient by a third party who did not obtain it
directly or indirectly from the disclosing party and who does not
obligate recipient to hold it in confidence.
7.4 Specific Information:
Specific information shall not be deemed to be within any of these
exclusions merely because it is embraced by more general information
falling within these exclusions.
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7.5 Disclosures to Personnel:
Recipient agrees to advise those of its officers, directors, stockholders,
employees, associates, agents, consultants, and Affiliates who become aware
of the Confidential Information, of these confidentiality and limited use
obligations and agrees, prior to any disclosure of Confidential Information
to such individuals or entities, to make them bound by obligations of
confidentiality and limited use of the same stringency as those contained
in this Agreement.
7.6 Return of Confidential Information:
Upon termination of this Agreement, originals and copies of Confidential
Information in written or other tangible form will be returned to the
disclosing party by recipient or destroyed by recipient, except to the
extent that it is the subject of a continuing license or other right of
use. One copy of each document may be retained in the custody of the
recipient's legal counsel solely to provide a record of what disclosures
were made.
7.7 Confidential Status of Agreement:
The terms and existence of this Agreement shall be deemed to be
Confidential Information and shall be dealt with according to the
confidentiality requirements of this Article. Both parties agree,
furthermore, that neither party will make public disclosures concerning
other specific terms of this Agreement without obtaining the prior written
consent of the other party, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, at such time as Paradigm or
Monsanto may request, the parties shall mutually agree on a press release
announcing the execution of this Agreement and the basic terms hereof. Once
any written statement is approved for disclosure by both parties, either
party may make subsequent public disclosures of the contents of such
statement without the further approval of the other party.
7.8 Disclosure to Third Parties
7.8.1 Consultants
Monsanto and Paradigm will be permitted to share Project Technology
with third parties who have signed a funded research agreement which
obligates the third party to do research for the party, maintain the
Project Technology confidential and to assign all inventions and
discoveries arising from the Project Technology to the party to the
agreement (either Monsanto or Paradigm). The parties will inform
each other which such third parties have been given access to
Project Technology.
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<PAGE>
7.8.2 Investors
Paradigm may disclose Confidential Information to current and future
Paradigm investors and other sources and potential sources of
financing so long as, in each case, the entity to which disclosure
is made is bound to confidentiality on terms consistent with those
set forth herein. With respect to Project Technology, such investors
and other sources of financing are to be given a summary of
Confidential Information related to Project Technology, including a
summary of patent information, which the investors can use for
investment purposes only. Such summaries shall be reviewed and
approved by Monsanto prior to any such disclosure, such approval
shall not be unreasonably withheld. Paradigm shall make reasonable
efforts to provide such summaries well in advance of any need to
disclose such summaries. While Monsanto's approval will be deemed to
have been given unless Monsanto notifies Paradigm of its disapproval
within ten (10) days after receipt of the summary, Paradigm agrees
to extend this time period if practicable upon the request of
Monsanto.
7.9 Publications
It is expected that each party may wish to publish the results of its
research under this Agreement. Contributions by the other party shall be
acknowledged in any publication by the publishing party. In order to
safeguard intellectual property rights, the party wishing to publish or
otherwise publicly disclose material which describes or otherwise discloses
the other party's Confidential Information or Project Technology shall
first submit a draft of any proposed manuscript to the Project Committee
for review, comment and consideration of appropriate patent application
preparation activity at least sixty (60) days prior to any submission for
publication or other public disclosure. The Project Committee will advise
the party seeking publication as to whether a patent application will be
prepared and filed or whether Confidential Information should be removed
from the disclosure. The Project Committee will, in cooperation with both
parties, determine the appropriate timing and content of any such
publications. The Project Committee can, in its discretion, request that
the publishing party delay publication for a reasonable time period for the
purpose of preparation of an appropriate patent application(s). If the
Project Committee is no longer functioning, its responsibilities under this
Article 7.9 will be assigned to a committee consisting of one person
designated by Monsanto and one person designated by Paradigm.
8. REPRESENTATION AND WARRANTIES
-----------------------------
8.1 Monsanto
Monsanto represents and warrants that it has the right to make conveyances
and grants in accordance with the Articles hereof, including, without
limitation, the delivery of the Monsanto DNA Information and the grant of
rights to use Monsanto Enabling Technology. It is expressly understood,
however, that in
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<PAGE>
making the conveyances and grants under this Agreement with the exception
of the foregoing provisions of this paragraph, Monsanto MAKES NO
REPRESENTATION, EXTENDS NO WARRANTIES, EITHER EXPRESS OR IMPLIED, AND
ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO:
1) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN LICENSED
PATENT RIGHTS;
2) ANY USE OF LICENSED PRODUCT OR MONSANTO ENABLING TECHNOLOGY BEING FREE
FROM INFRINGEMENT OF PATENTS OTHER THAN THE MONSANTO PATENTS CLAIMING
MONSANTO ENABLING TECHNOLOGY OR LICENSED PATENT RIGHTS.
8.2 Paradigm
Paradigm represents and warrants that it has the right to make conveyances
and grants in accordance with the articles hereof. Paradigm does not
warrant that any use of the Project Technology database is without
liability to any third party or without a need to obtain a license from
such third party. Except as set forth in the first sentence of this
paragraph, Paradigm MAKES NO REPRESENTATION, EXTENDS NO WARRANTIES, EITHER
EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT
TO:
1) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN LICENSED
PATENT RIGHTS;
2) ANY USE OF LICENSED PRODUCT BEING FREE FROM INFRINGEMENT OF PATENTS
OTHER THAN THE LICENSED PATENT RIGHTS.
8.3 Third Party Obligation
Paradigm has informed Monsanto that it has an exclusive herbicide discovery
project with a third party that involves functional analysis of Arabidopsis
genes. Paradigm shall not conduct research for Monsanto relating to the
identification and development of novel genes, and/or gene products, gene
functions and assays useful to measure the potential herbicidal activity of
chemical compounds or substances. Notwithstanding the above provisions in
Article 2.1, Monsanto will not own inventions in the field of herbicides
made by Paradigm or any patent application or patent based on such
inventions and Paradigm will grant no rights to Monsanto with respect to
inventions in the field of herbicides or with respect to any patent
application or patent based on such inventions.
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<PAGE>
9. INDEMNIFICATION
---------------
9.1 GENERAL -PARADIGM
EXCEPT TO THE EXTENT CAUSED BY MONSANTO'S NEGLIGENCE OR WILLFUL MISCONDUCT,
OR ARISING FROM A BREACH BY MONSANTO OF ITS WARRANTIES UNDER ARTICLE 8.1
ABOVE, PARADIGM SHALL DEFEND AND INDEMNIFY AGAINST, AND HOLD MONSANTO AND
ITS EMPLOYEES, DIRECTORS, OFFICERS AND AGENTS HARMLESS FROM, ANY LOSS,
COST, LIABILITY OR EXPENSE (INCLUDING COURT COSTS AND REASONABLE FEES OF
ATTORNEYS AND OTHER PROFESSIONALS) INCURRED FROM ANY CLAIM ARISING OR
ALLEGED TO ARISE OUT OF THE MANUFACTURE, USE, DISTRIBUTION OR SALE BY
PARADIGM OR ANY PARADIGM AFFILIATE OF ANY LICENSED PRODUCT; PROVIDED,
HOWEVER, THAT (I) PARADIGM SHALL HAVE SOLE CONTROL OF SUCH DEFENSE, AND
(II) MONSANTO SHALL PROVIDE NOTICE PROMPTLY TO PARADIGM OF ANY ACTUAL OR
THREATENED CLAIM OF WHICH MONSANTO BECOMES AWARE.
9.2 GENERAL -MONSANTO
EXCEPT TO THE EXTENT CAUSED BY PARADIGM'S NEGLIGENCE OR WILLFUL MISCONDUCT,
OR ARISING FROM A BREACH BY PARADIGM OF ITS WARRANTIES UNDER ARTICLE 8.2
ABOVE, MONSANTO SHALL DEFEND AND INDEMNIFY AGAINST, AND HOLD PARADIGM AND
ITS EMPLOYEES, DIRECTORS, OFFICERS AND AGENTS HARMLESS FROM, ANY LOSS,
COST, LIABILITY OR EXPENSE (INCLUDING COURT COSTS AND REASONABLE FEES OF
ATTORNEYS AND OTHER PROFESSIONALS) INCURRED FROM ANY CLAIM ARISING OR
ALLEGED TO ARISE OUT OF (A) THE MANUFACTURE, USE, DISTRIBUTION OR SALE BY
MONSANTO, ANY MONSANTO AFFILIATE, OR ANY MONSANTO LICENSEE OR SUBLICENSEE
OF ANY PRODUCT CONTAINING ANY LICENSED PRODUCT; OR (B) THE INFRINGEMENT OF
ANY PATENT, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHT OF ANY THIRD
PARTY AS A RESULT OF THE USE OF ANY MONSANTO DNA INFORMATION IN THE PROJECT
PLAN; PROVIDED, HOWEVER, THAT (I) MONSANTO SHALL HAVE SOLE CONTROL OF SUCH
DEFENSE, AND (II)PARADIGM SHALL PROVIDE NOTICE PROMPTLY TO MONSANTO OF ANY
ACTUAL OR THREATENED CLAIM OF WHICH PARADIGM BECOMES AWARE.
9.3 OTHER LOSS
EXCEPT TO THE EXTENT PROVIDED FOR IN THIS AGREEMENT, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER FOR ANY LOSS OF
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PROFITS, LOSS OF BUSINESS, INTERRUPTION OF BUSINESS, INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND SUFFERED BY SUCH OTHER PARTY FOR BREACH
HEREOF, WHETHER BASED ON CONTRACT OR TORT CLAIMS OR OTHERWISE, EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS.
10. APPLICABLE LAW
--------------
10.1 Governing Law; Jurisdiction
THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT AND ANY
DISPUTE CONNECTED WITH THIS AGREEMENT SHALL BE GOVERNED BY AND DETERMINED
IN ACCORDANCE WITH THE STATUTORY, REGULATORY AND DECISIONAL LAW OF THE
STATE OF DELAWARE (EXCLUSIVE OF SUCH STATE'S CHOICE OR CONFLICTS OF LAWS
RULES) AND, TO THE EXTENT APPLICABLE, THE FEDERAL STATUTORY, REGULATORY AND
DECISIONAL LAW OF THE UNITED STATES (EXCEPT FOR THE U.N. CONVENTION ON
CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS, APRIL 10, 1980, U.N. DOC.
A/CONF. 97/18, 19 I.L.M. 668, 671 (1980) REPRINTED IN PUBLIC NOTICE, 52
FED. REG. 662-80 (1987), WHICH IS HEREBY SPECIFICALLY DISCLAIMED AND
EXCLUDED).
11. MISCELLANEOUS PROVISIONS
------------------------
11.1 Notices:
All notices and other communications required or permitted under this
Agreement shall be deemed to be properly given when in writing and sent by
registered or certified mail, postage prepaid or by reputable courier
service providing evidence of delivery or by facsimile with receipt
confirmation, to the other party at the address set forth below, or at such
other address as either party may be in writing designate from time to time
for these purposes.
If to Paradigm: Paradigm Genetics Inc.
104 Alexander Drive, Building 2
P0 Box 14528
RTP, North Carolina, 27709
Attention: Chief Executive Officer
with a copy to: Chief Counsel, Paradigm Genetics
If to Monsanto: Monsanto Company
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attention: President, Ag
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<PAGE>
Copy to: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Group Patent Counsel
11.2 Assignability:
The rights and obligations acquired herein by the parties are not
assignable, transferable or otherwise conveyable, in whole or part (by
operation of law or otherwise) to any third party without the consent of
other party, which shall not be unreasonably withheld, except that either
party may, without such consent, assign its rights and obligations to any
purchaser of all or substantially all of the assets of the party related
to this Agreement or to any successor corporation resulting from any
merger or consolidation of a party.
11.3 Dispute Resolution
11.3.1 General
All disputes which may arise under, out of, or in connection with
this Agreement shall be resolved as follows:
11.3.2 Parties Shall Meet
First, the parties shall make all commercially reasonable efforts
to resolve the dispute. If, after making all commercially
reasonable efforts the parties cannot resolve the issue within
six months after written notice of the dispute from one party to
the other, then the parties may appoint one or more independent
parties to assist in resolving the dispute through mediation
("mediation stage").
11.3.3 CEOs Shall Meet
If the mediation described above does not resolve the dispute,
then the Chief Executive Officer of Monsanto and the Chief
Executive Officer of the ultimate parent of Paradigm shall meet
to resolve the dispute.
11.3.4 Arbitration Trigger
In the event such Chief Executive Officers shall not have
resolved such matter within sixty (60) days of written request by
one of such Chief Executive Officers for such a meeting, either
party may initiate arbitration with respect to such dispute in
accordance with paragraph 11.3.5 hereof.
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11.3.5 Arbitration Rules
The arbitration proceeding shall be conducted in the City of New
York, State of New York, United States of America, in accordance
with the then existing commercial rules of the American Arbitration
Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction
thereof. The parties hereby agree that service of any notices in
the course of such arbitration at their respective addresses as
provided for in Article 11.1 of this Agreement shall be valid and
sufficient. In any arbitration, the award shall be rendered by a
majority of the members of a Board of Arbitration consisting of
three (3) members, one of whom shall be appointed by Monsanto, the
second by Paradigm, and the third by mutual agreement of the first
two said arbitrators, and none of whom shall be affiliated with
either party or its Affiliates. In the event of failure of said
first two arbitrators to agree within sixty (60) days after
commencement of the arbitration proceeding upon the appointment of
the third member, the third arbitrator shall be appointed by the
American Arbitration Association in accordance with its then
existing rules.
Notwithstanding the foregoing, in the event that either such party
shall fail to appoint an arbitrator within thirty (30) days after
commencement of the arbitration proceeding, such arbitrator and the
third arbitrator shall be appointed by the American Arbitration
Association in accordance with its then existing rules. For the
purposes of this paragraph, the "commencement of arbitration
proceeding" shall be deemed to be the date upon which a written
demand for arbitration is received by the American Arbitration
Association from one of the parties.
11.3.6 Agreements to Agree
The failure by the parties to agree on any matter expressed in this
Agreement as a matter to be agreed upon by or determined by mutual
agreement, decision, consent or approval of the parties shall not
constitute a basis for the initiation by either party of litigation
or arbitration. Any court having jurisdiction under this Article or
any arbitrator shall have no power to decide any such matter to
which such mutual agreement, decision or consent has not been
obtained.
11.4 Tax Reporting:
Monsanto and Paradigm shall treat all payments made by Monsanto under
Article 4.1 as amounts paid for qualified research under section 41(b)(3)
of the Internal Revenue Code of 1986.
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11.5 Severability:
In case any one or more of the provisions contained in this Agreement
shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, but this Agreement shall be construed as if
such invalid or illegal or unenforceable provisions had never been
contained herein.
11.6 Counterparts:
This Agreement may be executed in any number of counterparts, each of
which shall be an original with the same effect as if the signatures
thereto and hereto were upon the same instrument.
11.7 Headings:
Headings as to the contents of particular Articles are for convenience
only and are in no way to be construed as part of this Agreement or as a
limitation of the scope of the particular Articles to which they refer.
11.8 Agreement references:
All Articles referred to herein are Articles of this Agreement.
11.9 Appendices:
The appended Appendices form an integral part of this Agreement.
11.10 Export Control:
Notwithstanding any other provisions of this Agreement, Paradigm agrees to
make no disclosure or use of any Monsanto information or Monsanto
technology furnished or made known to Paradigm pursuant to this Agreement,
and Monsanto agrees to make no disclosure or use of any Paradigm
information, Paradigm technology or Improvements disclosed to Monsanto
pursuant to this Agreement except in compliance with the laws and
regulations of the United States of America, including the Export
Administration Regulations promulgated by the Office of Export
Administration International Trade Administration, United States
Department of Commerce; and in particular, each party agrees not to
export, directly or indirectly, either
the technical data furnished or made known to it by the other party
pursuant to this Agreement; or
the "direct product" thereof; or
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<PAGE>
any commodity produced using such technical data to any country or
countries for which a validated license is required unless a validated
license is first obtained pursuant to the Export Administration
Regulations. The term "direct product" as used above, is defined to mean
the immediate product (including process and services) produced directly
by the use of the technical data.
11.11 Force Majeure:
Except for payments of money, neither of the parties shall be liable for
any default or delay in performance of any obligation under this
Agreement caused by any of the following: Act of God, war, riot, fire,
explosion, accident, flood, sabotage, compliance with governmental
requests, laws, regulations, orders or actions, national defense
requirements or any other event beyond the reasonable control of such
party; or labor trouble, strike, lockout or injunction (provided that
neither of the parties shall be required to settle a labor dispute
against its own best judgment).
The party invoking this subparagraph shall give the other party notice
and full particulars of such force majeure event by telephone, telegram,
telex or facsimile as soon as possible after the occurrence of the cause
upon which said party is relying. Telephone, telegram, telex and
telecopier notices shall be confirmed in writing by the sending party
within five (5) days.
Both Monsanto and Paradigm shall use reasonable efforts to mitigate the
effects of any force majeure on their respective part.
11.12 Negation of Agency:
It is agreed and understood by the parties hereto that each of Paradigm
and Monsanto, in its performance of its obligations and responsibilities
under this Agreement, is an independent contractor and that nothing
herein contained shall be deemed to create an agency, partnership, joint
venture or like relationship between the parties. The manner in which
each of Paradigm and Monsanto carries out its performance under this
Agreement is within each of Paradigm's and Monsanto's sole discretion and
control.
11.13 Other Requests:
The parties hereto agree that upon reasonable request of the other party,
each such party shall execute and deliver such additional documents and
Agreements, and take such further actions, as may be necessary in order
to fulfill and give effect to the terms of this Agreement.
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11.14 Amendment and Waiver:
This Agreement may be amended, modified, superseded or canceled, and any
of the terms may be waived, only by a written instrument executed by each
party or, in the case of waiver, by the party or parties waiving
compliance. The delay or failure of any party at any time or times to
require performance of any provisions shall in no manner affect the
rights at a later time to enforce the same. No waiver by any party of any
condition or of the breach of any term contained in this Agreement,
whether by conduct, or otherwise, in any one or more instances, shall be
deemed to be, or considered as, a further or continuing waiver of any
such condition or of the breach of such term or any other term of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the Effective Date.
PARADIGM GENETICS INC. MONSANTO COMPANY
By________________________________ By______________________________
Date______________________________ Date____________________________
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<PAGE>
APPENDICES
Appendix A - Major Crops
corn
soybean
wheat
rice
cotton
canola
oilseed rape
36
<PAGE>
Appendix B - Project Plan
PROJECT OVERVIEW
Paradigm Genetics and MONSANTO are entering into a strategic relationship to
leverage MONSANTO's investment in genomics by accessing PARADIGM's functional
genomics expertise and capacity. The objective of the relationship is to
develop a robust product discovery platform utilizing the strengths of both
parties. MONSANTO will provide PARADIGM with [____]* genes for analysis in
Arabidopsis. As shown in Table 1, these [____]* genes will be tested as
[_______ ___________________]* reflecting the combination of [_____]* and
[___________________]* illustrated in the table. PARADIGM will use diligent
effort to provide a full data package that provides functional data to
strengthen or obtain intellectual property claims for each gene. PARADIGM will
provide MONSANTO with customized data-packages concerning those genes including
the data from the experiments conducted in this project. Elements of the
Project Plan are subject to change based on mutual agreement within the Project
Committee, as set forth in the AGREEMENT to which this Project Plan is attached.
SCOPE
The goal is the functional analysis of [____]* genes, tested as
[_______________]* as shown in Table 1, over a period of [_______]* to determine
their function and to evaluate their
[____________________________________________]*. [_____________________________
________________________________________________________________________________
______________________]* for every gene are collected over the
[________________]* development cycle. The outlined data collection package
will be applied to Arabidopsis [_______________________________]* completing
[__________________]*. For [_________________]* exhibiting [_________________]*
at [___________________________]* data will be collected up to the point of
[___________]* and such data will be delivered as full data sets corresponding
to the respective gene.
RESEARCH PLAN
Arabidopsis [________________]* Generation:
Up to [____]* genes will be provided by MONSANTO either as
[_______________________________________________________________________________
__________________________]* for the gene. All of the genes will be
[_________]* and [_______]* into
[________________________________________________]* and subsequently
[________________]* Arabidopsis. For all Arabidopsis genes, genes will also be
investigated by [______________________]* The numbers of
[______________________________________________________________________________]
* assume investigation of a [____]* of genes of the following composition:
Table 1.
<TABLE>
<CAPTION>
Gene Class [_____]* CONSTRUCTS [__________]* CONSTRUCTS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Arabidopsis [____]* [____]*
- ------------------------------------------------------------------------------------------
[_____________________]* [____]* [____]*
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Total [____]* [____]*
- ------------------------------------------------------------------------------------------
</TABLE>
* Up to [____]* Arabidopsis [_________]* (corresponding to [___]*) of genes from
non-Arabidopsis [______]* or [___________________]* shall be used for
[_____________________]*.
37
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* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
Composition of the [____]* of genes will not be changed unless otherwise
unanimously approved by the Project Committee, except that the number of
Arabidopsis genes may be increased with a corresponding decrease in
[___________________]* genes. In the case of [_______________________________]*
gene [____]* numbers corresponding to
[__________________________________________________]* will be adjusted in
proportion to the agreed upon numbers.
Concerning the generation of DNA constructs for Arabidopsis transformation, the
procedures and exchange of materials outlined in Table 2 will be performed
depending on [__________________________]* gene:
Table 2.
<TABLE>
<CAPTION>
MONSANTO HAS MONSANTO DELIVERS PARADIGM DELIVERS
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arabidopsis [_____]* [_____]* [____________]*
[________]* [_________]* [____________]*
[_____]* [____________]*
[____]* [________]*
- --------------------------------------------------------------------------------------------
ARABIDOPSIS [________]* [________]* [____________]*
[_____]* [____]* [____________]*
[____]* [____________]*
[____]* [____________]*
- --------------------------------------------------------------------------------------------
ARABIDOPSIS [________]* [____________]* [____________]*
[_____]* [________]* [____________________]*
[____]* [________]*
[____________]*
- --------------------------------------------------------------------------------------------
[___________]* [________]* [________]* [____________]*
[_____]* [____________]* [____________________]*
[________]* [________________]*
[________]* [____________]*
[____________]* [________]*
- --------------------------------------------------------------------------------------------
[___________]* [________]* [____________]* [____________]*
[_____]* [________]* [________]*
[____________]* [____________]*
[________]* [________]*
[____________]* [____]*
- --------------------------------------------------------------------------------------------
</TABLE>
Genes will be selected on a [_______]* basis. [___]* Arabidopsis genes for
[__________________]* constructs are to be selected [____________]* of the
collaboration to secure progress of the scientific work schedule. [___]*
additional genes for [_________________]* will be selected at the beginning of
[___________________________]*. [___]* additional genes shall be selected at
the beginning of [_____________________]*. [___]* genes will be selected in
[___]*. This results in a selection of the total [____]* genes at the beginning
of [___]* of the collaboration.
For all non-Arabidopsis genes, MONSANTO will provide [_____________________]* as
well as [_____________________________________________________________]*
respective genes suitable for [_________]* in Arabidopsis using [_______]*
provided by PARADIGM as described above unless otherwise unanimously approved by
the PROJECT COMMITTEE.
All genes are to be [_____]* using [__________________________________________]*
based on the information provided by MONSANTO. In case of non-successful
diligent performance of [________________________________________]*, the efforts
will be counted as [___]* of a data package. [___]* is to be performed [_____]*
using [____]* as template and [____]* with [____________]* template. If
[_________]* then a [____________]* of [____________]* shall be tested in the
same way. The status of all [_______]* efforts is reported to MONSANTO on a
weekly basis (spreadsheets and telephone/e-mail follow-up).
38
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
The preferred system to be used for [___________]* of all [___________]* is a
[________________]* system. During the [___________]* of the collaboration,
[__]* genes will be investigated using
[__________________________________________________________________]* as well as
[_______________________________________________________________________________
________________]*. MONSANTO will choose the [_________]* to be used in
consultation with PARADIGM. The [____________________]* system used will be
comprised of a [___________________________________________]* and a
corresponding [_________________________________________________]*. The
combined set of [____________________________]* will count as [__]* genes and
[___]* constructs (out of a total of [____]* genes and [____]* constructs). If
the [________________]* system is determined to be at least as effective as
[__________________]*, then PARADIGM will use [___________________________]* for
the remainder of the Research Program. In the interim, while the first [__]*
genes are being tested in parallel with [________________]* and
[__________________]*, PARADIGM intends to use [__________________]*. At the
end of the comparison with the first [__]* genes a decision on the system to use
for the program will be made.
After [_________________________________________]*, the identity of all genes
will be confirmed by [_______________]*.
For all genes, functional analyses comprised of
[_______________________________________________________________________________
__________________]* will be performed. All genes will be tested by
[_______________]* into Arabidopsis and the [________________________________]*.
It is intended that PARADIGM will generate sufficient [_________________]* for
each construct (a construct being [____________________________________]* for a
given gene) to have at least [_________________________________]* from which to
select the [________________________________________]* investigation. This
decision will be based on an analysis of [___________]* of the
[________________________]* as described in this paragraph. In the case of
using a [__________________]* system, levels of [___________]* of the
[___________]* are to be determined by [______]* for either the
[________________________________________________]*. The first [__]* genes in
[____________________]* orientation will be evaluated for [___________]* of both
the [_____________________________________]*. At this time it is anticipated
that selection of the [_______]* for each [__________]* for further
investigation will be based on selection of those that show the
[___________________________]*. Upon initial evaluation of the data generated
from [__]* individual genes in which both [______________________________]* have
been determined, the PROJECT COMMITTEE will decide on a final procedure.
Generated [___________________]* as well as samples of [____]* from
[___________________________]* that were grown
[_______________________________________________________________________________
_______]* for the duration of the collaboration. Extracts from
[______________]* will be [____________________]* after the final analysis is
performed. [_______________________]* generated and used during the
collaboration will be stored for [______]* after the analysis of the
corresponding gene has been performed. Reasonable amounts of these materials
will be made available to MONSANTO upon request. This will include at least
[______________]* lots to allow [____________]* analysis of [________________]*
by MONSANTO.
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<PAGE>
STANDARD [________________]*:
For every [________________]*, individual [______]* are to be investigated over
[________________________]*. [___________]* data are to be collected from a
total of [________________________]*. Early developmental stages will be
investigated on [____________]* or in
[___________________________________________]*. Measurements are to be
performed on a regular schedule or at distinct growth stages as outlined in
Table 3.
Table 3.
<TABLE>
<CAPTION>
[_____]* MEASUREMENTS Growth Stage
- --------------------------------------------------------------------------
<S> <C>
[_________________________________]* [____]*
- --------------------------------------------------------------------------
[___________________________________]* [____]*
- --------------------------------------------------------------------------
[___________________________________]* [____]*
- --------------------------------------------------------------------------
[___________________________________]* [____]*
- --------------------------------------------------------------------------
[______________________________________]* [____]*
- --------------------------------------------------------------------------
[______________________________________]* [____]*
- --------------------------------------------------------------------------
[________________________________]* [____]*
- --------------------------------------------------------------------------
[__________________________]* [__________]*
- --------------------------------------------------------------------------
[__________________________]* [__________]*
- --------------------------------------------------------------------------
[____________________]* [__________]*
- --------------------------------------------------------------------------
[____________________________________]* [__________]*
- --------------------------------------------------------------------------
[_____________________________________]* [__________]*
- --------------------------------------------------------------------------
[_____________________________________]* [__________]*
- --------------------------------------------------------------------------
[______________________________________]* [__________]*
- --------------------------------------------------------------------------
[________________________]* [__________]*
- --------------------------------------------------------------------------
[_______________________]* [_____________]*
- --------------------------------------------------------------------------
[__________________________________]* [_____________]*
- --------------------------------------------------------------------------
[__________________________________]* [_____________]*
- --------------------------------------------------------------------------
[___________________________________]* [_____________]*
- --------------------------------------------------------------------------
[______________________________________]* [_____________]*
- --------------------------------------------------------------------------
[______________________________________]* [______________]*
- --------------------------------------------------------------------------
</TABLE>
Additional [_____]* Measurements from Table 4 can be performed as decided by the
Project Committee.
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<PAGE>
Table 4.
<TABLE>
<C> <S>
1 [_____________]*
- -------------------------------------------------
2 [__________________]*
- -------------------------------------------------
3 [_____________________]*
- -------------------------------------------------
4 [___________________]*
- -------------------------------------------------
S [____________________]*
- -------------------------------------------------
6 [_____________________]*
- -------------------------------------------------
7 [__________]*
- -------------------------------------------------
8 [______________]*
- -------------------------------------------------
</TABLE>
[______________________]* will be investigated under
[__________________________]* in [_______________]*. All [______]* shall be
grown under [______________________________________________________________]*
including [______________________________________________]* as well as [____]*
and [______________]* will be constantly monitored. Measurements performed
are listed in Table 5.
Table 5.
<TABLE>
<CAPTION>
[____]* MEASUREMENTS GROWTH STAGE
- --------------------------------------------------------------------
<S> <C>
[_____________________]* [____]*
- --------------------------------------------------------------------
[__________________________]* [__________]*
- --------------------------------------------------------------------
[________________]* [__________]*
- --------------------------------------------------------------------
[______________________________]* [__________]*
- --------------------------------------------------------------------
[____________________________]* [____]*
- --------------------------------------------------------------------
[_________________________________]* [____]*
- --------------------------------------------------------------------
[_____________________________________]* [____]*
- --------------------------------------------------------------------
[______________]* [__________]*
- --------------------------------------------------------------------
[__________________]* [__________]*
- --------------------------------------------------------------------
[_____________________]* [__________]*
- --------------------------------------------------------------------
[__________________]* [__________]*
- --------------------------------------------------------------------
[__________________]* [__________]*
- --------------------------------------------------------------------
[_____________________]* [__________]*
- --------------------------------------------------------------------
[____________________]* [__________]*
- --------------------------------------------------------------------
[__________________________]* [____]*
- --------------------------------------------------------------------
[_____________________________]* [____]*
- --------------------------------------------------------------------
[_____________________________________]* [____]*
- --------------------------------------------------------------------
[__________________________________]* [____]*
- --------------------------------------------------------------------
[_________________________]* [__________]*
- --------------------------------------------------------------------
[____________________________]* [__________]*
- --------------------------------------------------------------------
[_________________________]* [__________]*
- --------------------------------------------------------------------
[_______________]* [__________]*
- --------------------------------------------------------------------
[______________________]* [___________]*
- --------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
[____]* MEASUREMENTS GROWTH STAGE
- --------------------------------------------------------------------
<S> <C>
[________]* [___________]*
- --------------------------------------------------------------------
[____________]* [____]*
- --------------------------------------------------------------------
[______________]* [___________]*
- --------------------------------------------------------------------
[___________]* [___________]*
- --------------------------------------------------------------------
[____________]* [___________]*
- --------------------------------------------------------------------
[_____________]* [___________]*
- --------------------------------------------------------------------
[______________]* [___________]*
- --------------------------------------------------------------------
[___________]* [____]*
- --------------------------------------------------------------------
[___________]* [____]*
- --------------------------------------------------------------------
[______________]* [____]*
- --------------------------------------------------------------------
[__________]* [____]*
- --------------------------------------------------------------------
[___________]* [____]*
- --------------------------------------------------------------------
[____________]* [____]*
- --------------------------------------------------------------------
[______]* [____]*
- --------------------------------------------------------------------
[________]* [____]*
- --------------------------------------------------------------------
[__________]* [____]*
- --------------------------------------------------------------------
[_________]* [____]*
- --------------------------------------------------------------------
[_________]* [____]*
- --------------------------------------------------------------------
[________]* [____]*
- --------------------------------------------------------------------
[___________]* [___________]*
- --------------------------------------------------------------------
[__________]* [___________]*
- --------------------------------------------------------------------
[__________]* [____]*
- --------------------------------------------------------------------
[____________]* [____]*
- --------------------------------------------------------------------
[_____________]* [____]*
- --------------------------------------------------------------------
[_____________]* [____]*
- --------------------------------------------------------------------
[____________]* [____]*
- --------------------------------------------------------------------
[_________]* [____]*
- --------------------------------------------------------------------
[__________]* [____]*
- --------------------------------------------------------------------
[________]* [____]*
- --------------------------------------------------------------------
[______________]* [____]*
- --------------------------------------------------------------------
[______]* [____]*
- --------------------------------------------------------------------
[______]* [____]*
- --------------------------------------------------------------------
[________]* [____]*
- --------------------------------------------------------------------
[_________]* [____]*
- --------------------------------------------------------------------
[_______]* [____]*
- --------------------------------------------------------------------
[________]* [____]*
- --------------------------------------------------------------------
[_____________]* [____]*
- --------------------------------------------------------------------
[____________]* [____]*
- --------------------------------------------------------------------
[______________]* [____]*
- --------------------------------------------------------------------
</TABLE>
Additional measurements from Table 6 can be performed as decided by the PROJECT
COMMITTEE.
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<PAGE>
Table 6.
<TABLE>
<C> <S>
- -------------------------------------------------
1 [____________________]*
- -------------------------------------------------
2 [________]*
- -------------------------------------------------
3 [____________]*
- -------------------------------------------------
4 [________________]*
- -------------------------------------------------
5 [________]*
- -------------------------------------------------
6 [____]*
- -------------------------------------------------
7 [____________]*
- -------------------------------------------------
8 [____________]*
- -------------------------------------------------
9 [____________]*
- -------------------------------------------------
10 [____________]*
- -------------------------------------------------
11 [____________]*
- -------------------------------------------------
</TABLE>
Data will be collected by [____________]* measurements of the [_____]* and from
[____]* of [________________________]*. Several traits including [____________]*
[_____________________________________________________________________________]*
[_____________________________________________________________________________]*
[____________]* will be used to define [___________________]* as they develop.
[____________]* measurements will be taken [_________]* to determine particular
[______________]* at which [____________]* and [____________]* will be
performed. For [________________]* [____________]*, analyses of the [______]*
generate between [___]* to [___]* individual [____________]* per gene of
interest. In addition, [_______]* will be taken from [________]*. During
[___________________]*, analyses of the [_____________]* will generate between
[_____]* to [______]* individual [_____________]* per [_________]*. In addition,
[_____]* will be taken from whole [________]* as well as [_______________]*.
In cases where [___________]* of the [___________]* (or [______________________
____________]* results in apparent [_______________]*, attempts will be made to
[_________]* with [_________________]* to [____________]*.
[_________________]* PROFILING:
At [_____________]*, [____________]* is to be [_________]* for [_______]*
analysis. The material is derived from individual [__________]* under [______]*
conditions as for the [__________]*. Material will be [__________]* from
[___________]* to generate a [_______________]* sample. All samples will be
submitted for [________________]* profiling, samples A) through C) from List 1
will be measured as [_______________]* from a [______________]* of tissue.
[_________________]* profiles include [______________]* and [_______________]*
analysis. For [____________]* profiling of [____________]*, special emphasis
is put on the analysis of [____________________________]*. Total [_________]*
will be quantified by [__________________]* profiling of [_________]* tissue
includes the determination of [________________________________________________
__________________]*. Specific methodologies will be applied upon agreement of
the PROJECT COMMITTEE.
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<PAGE>
LIST 1. HARVESTING TIME POINTS AND TISSUES:
A) [____________________________________________]*
B) [_________________________________________]*
C) [________________________________________________]*
D) [_____________________________]*
E) [_____________________________]*
Properties of the [_______________________________________________]*
o The output is [________]* and [___________]* data of [_________]* levels
in tissues. [______________]* levels will be defined relative to a
[_______________________________________]*. [________________]* will be
used to compare large data tables.
o Sample throughput is [________]*; one set of instruments is capable of
[_________]* per [___________]*.
o Sample processing consists of [_________________________________________]*
automation is used to [________________________]*.
o [_______________]*: [_____________]* is accomplished with [__________]* or
[____________]*. [____________________]* and [_____________________]* are
used to [______________]* of [_______________]*. [___________]* will be
subjected to [_________________]*, and [_______________]* are [_________]*
by [____________________]*.
o Detection: [_______________]* will be detected by [______________]* in the
forms of [__________________]* , and [______________]*. [__________]* are
to be analyzed by [____________________________]*.
o Data Reduction: The [__________________]* instruments generate [_______]*
of data per [_______________________]*. The [______________________]*.
Quantitative data for specific [___________________]* will be delivered to
MONSANTO, and these data will be updated and delivered to MONSANTO as the
[_____________________]* of [_______________________]*.
Sample Processing and Extraction
Extraction efficiency was determined analytically for several [____________]*.
Tissue is to be placed in a [__________________________]* and [______________]*
with a [______________]* of [_________________]*. The tissue is disrupted
for [____________________]* at an [___________________________]*.
o [_____________]* are obtained from the [_______________]* , following
[_______________]* through [_____________]*, and [_____________]* under
[____________________]*.
o [___________________]* are [___________]* from the [_______]* via [____]*
into [_____________]*. The [______________]* is subjected to [_________]*
and [__________________________]*.
o A portion of the [___________________________]* can be subjected to
[________________________]* for eventual analysis of [__________]* and
[____________]*, according to well established procedures.
o [________________]* analysis is accomplished following [________]* of
[____]* or [____________________]* tissue.
[___]* PROFILES
[_________________]* will be analyzed by [___________________]*. Primary focus
is the detection and quantitative analysis of [______________________]* and
[______________]*, the [_________]* comprise compounds of [_________]* (e.g.,
[________]* and [_________]* (e.g., [___________________________]*. From the
initiation of the research program PARADIGM will analyze all of the
[_________]* listed in Table 7 as well as trace [_________]* listed in this
paragraph. PARADIGM intends during the course of this agreement to attempt to
develop analytical capabilities to measure the components listed in Table 8. The
intention is to attempt to develop validated protocols for approximately
[___________________________]* and the remaining in the [__________________]*.
[___________________________]* listed in Table 8 have been abbreviated such
that Table 8 does not list all potential [__________________]* of various
[_________]* (e.g., [____________________________________]*. [__________________
___________]* are to be analyzed by total [__________________]* of tissue,
followed by [_________]*. [___________________________]* include [_________]*,
and other [__________________] components. PARADIGM will attempt to develop
validated protocols for the assays during the first [__________________]* for
all the [___________________________]* listed in Table 8 but which are not
listed in Table 7 below. PARADIGM will make a [_________]* to complete these
assays in the first [_______________]*.
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<PAGE>
Table 7.
<TABLE>
<CAPTION>
[ ]* PATHWAY CLASS
- -------------------------------------------------------------------------------------
<S> <C> <C>
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- -------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Table 8.
<TABLE>
<CAPTION>
[ ]* PATHWAY CLASS
- ------------------------------------------------------------------------------------
<S> <C> <C>
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
[ ]* PATHWAY CLASS
- ------------------------------------------------------------------------------------
<S> <C> <C>
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
[ ]* PATHWAY CLASS
- ------------------------------------------------------------------------------------
<S> <C> <C>
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
[ ]* PATHWAY CLASS
- ------------------------------------------------------------------------------------
<S> <C> <C>
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------------
</TABLE>
GENE [______________________]*
Gene [___________]* of Arabodopsis genes is determined from [___________]* to
the samples collected under List 1 for [_______________]*. For each [_________
___________]* of about [_____________]* genes will be assayed in relation
to the [____________]* level of [_______________]* under [_______]* conditions.
This allows evaluation of the level of [_________]* of those [_________]* in
relation to all other information collected from the respective [_________]*,
and provides information about effects of [_________________________]* of each
gene on [_______________]* Arabidopsis gene[__________]*. These assays will be
conducted [_____________]* on [____________]* to those used for
[__________________________]*.
At least [______________]*, the committee will evaluate the data from gene
[_________________]* of the [_________________________]* to determine the
value and utility of gene [___________________]*. If MONSANTO determines that
gene [______________]* of additional [_____________]* is not warranted, then
the committee will substitute in the research plan additional analysis that is
equivalent in cost and work effort to PARADIGM. For example, MONSANTO may
determine that additional [______________]* analyses should be performed
instead of continuing with gene [___________________________________________]*.
The intention is to keep the cost and work load to PARADIGM approximately
equivalent.
[________________]*
Besides the [____]* conditions on [______]* and in [_____________]*, all
[________________]* are investigated for their response to different
[________________]*. These [________________]* are:
[_______________________________________________]*
[_________________________________]*
[______________________]*
[___________]*
[____________________________________________]*
[_________________________________]*
Specific protocols will be discussed and approved by the PROJECT COMMITTEE.
[________________]*
[_____________]* under [____________]* conditions and [____________]* by [___]*
after [_________]* become [_________]*. [____]* are [__]* for [_____]*
additional [_____]* or until [___]* (whichever is shorter). [______]* is
assessed by measuring the following [_____________]* until [___________]*.
- --------------------------------------------------------------
[______________________]* [_____________]*
- --------------------------------------------------------------
[_________________________________]* [_____________]*
- --------------------------------------------------------------
[_________________________________]* [_____________]*
- --------------------------------------------------------------
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<PAGE>
[______]* is also assessed by measuring [___________]* by determining
[______________]* and [_________________________________________________]*.
[________________]*
[____]* are [____]* on [_____]* under [________]* conditions for [________]*,
[__________]* by placing [___________]* or [_________]* for [__________]*, and
returned to [____________]* conditions for [__________]* additional [ ]*.
[____________]* is assessed as described above. Additional measurements listed
in the [________________________________________]* can be performed as decided
by the PROJECT COMMITTEE.
[______________________]* LIMITATION:
[___________]* are [________________]* and [___________]* for [___________]*
on defined [___________]*. [______________________]* is assessed by measuring
the following [______________________]* and [______________________]*:
<TABLE>
<S> <C>
[______________________]* [___________]*
- -----------------------------------------------------------------------------------------------
[______________________]* [____________________]*
- -----------------------------------------------------------------------------------------------
[____________________________]* [___________]*
- -----------------------------------------------------------------------------------------------
[____________________________]* [___________]*
- -----------------------------------------------------------------------------------------------
[____________________________]* [___________]*
- -----------------------------------------------------------------------------------------------
[______________________]* [___________]*
- -----------------------------------------------------------------------------------------------
[____________________________]* [___________]*
- -----------------------------------------------------------------------------------------------
[____________________________]* [___________]*
- -----------------------------------------------------------------------------------------------
</TABLE>
Additional measurements listed in the [_____________]* and
[_____________________]* can be performed as decided by the PROJECT COMMITTEE.
[___________________________________]*
[_____]* will be [__________]* on defined [___________]* containing specified
amounts of [______________________]* and [_____________________]* will be noted.
DATA FORMAT AND TRANSFER:
Data are collected and transferred to MONSANTO in the form of computer files.
Data are summarized and transferred on a monthly basis.
PARADIGM Genetics will supply a [______]* with [____________]* quality control
applied to the data but no [__________________]*. [__________]* identification
and study identification tags will be supplied with the data in a standard
agreed upon format that allows for the [___________________________________]*.
All data will be transmitted by standard protocols such as [__________]* using
an agreed upon security protocol and on a regular schedule.
During the [______________]* of the collaboration, the PROJECT TEAM will define
and mutually agree upon the following elements of the PARADIGM Genetics -
MONSANTO data exchange:
1) [________________________]*
2) [________________________]*
3) [_________________________________]*
4) [_____________________________]*
5) [_____________________]*
50
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<PAGE>
- --------------------------------------------------------------------------------
Appendix C
- --------------------------------------------------------------------------------
Project Plan
Production Target
Levels
- --------------------------------------------------------------------------------
Production
Target Levels per
Quarter
- --------------------------------------------------------------------------------
Constructs Plant Trans Pheno Anal Full Anal
- --------------------------------------------------------------------------------
Q1 [__]*
- --------------------------------------------------------------------------------
Q2 [__]* [__]*
- --------------------------------------------------------------------------------
Q3 [__]* [__]*
- --------------------------------------------------------------------------------
Q4 [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q5 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q6 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q7 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q8 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q9 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q10 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q11 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q12 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q13 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q14 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
51
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
Q15 [__]* [__]* [__]* [__]*
- -----------------------------------------------------------------------------
Q16 [__]* [__]* [__]* [__]*
- -----------------------------------------------------------------------------
Q17 [__]* [__]* [__]* [__]*
- -----------------------------------------------------------------------------
Q18 [__]* [__]* [__]* [__]*
- -----------------------------------------------------------------------------
Q19 [__]* [__]* [__]* [__]*
- -----------------------------------------------------------------------------
Q20 [__]* [__]* [__]* [__]*
- -----------------------------------------------------------------------------
Q21 [__]* [__]* [__]* [__]*
- -----------------------------------------------------------------------------
Q22 [__]* [__]* [__]*
- -----------------------------------------------------------------------------
Q23 [__]* [__]*
- -----------------------------------------------------------------------------
Q24 [__]* [__]*
- -----------------------------------------------------------------------------
Total [____]* [____]* [____]* [____]*
- -----------------------------------------------------------------------------
BOLD NUMBERS =
PRODUCTION
TARGET LEVELS
- -----------------------------------------------------------------------------
52
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Appendix D: Appendix D
- --------------------------------------------------------------------------------
Quarterly Production Target Level
- --------------------------------------------------------------------------------
Payments Payments
- --------------------------------------------------------------------------------
Year 1
- --------------------------------------------------------------------------------
Q1 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q2 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q3 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q4 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 2
- --------------------------------------------------------------------------------
Q5 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q6 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q7 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q8 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 3
- --------------------------------------------------------------------------------
Q9 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q10 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q11 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q12 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 4
- --------------------------------------------------------------------------------
Q13 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q14 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q15 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q16 [__________]* [__________]*
- --------------------------------------------------------------------------------
53
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Year 5
- --------------------------------------------------------------------------------
Q17 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q18 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q19 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q20 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 6
- --------------------------------------------------------------------------------
Q21 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q22 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q23 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q24 [__________]* [__________]*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL $31,500,000.00 $13,500,000.00
- --------------------------------------------------------------------------------
54
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Appendix E
- --------------------------------------------------------------------------------
Rice Option
Production Target
Levels
- --------------------------------------------------------------------------------
Production
Target Levels per
Quarter
- --------------------------------------------------------------------------------
Clone/Seq Plant Trans Pheno Anal Full Anal
- --------------------------------------------------------------------------------
Q1 [__]*
- --------------------------------------------------------------------------------
Q2 [__]*
- --------------------------------------------------------------------------------
Q3 [__]*
- --------------------------------------------------------------------------------
Q4 [__]* [__]*
- --------------------------------------------------------------------------------
Q5 [__]* [__]*
- --------------------------------------------------------------------------------
Q6 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q7 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q8 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q9 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q10 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q11 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q12 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q13 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q14 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q11 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
55
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Q16 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q17 [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q18 [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q19 [__]* [__]*
- --------------------------------------------------------------------------------
Q20 [__]* [__]*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total [____]* [____]* [____]* [____]*
- --------------------------------------------------------------------------------
BOLD NUMBERS =
PRODUCTION
TARGET LEVELS
- --------------------------------------------------------------------------------
QUARTERS = RICE OPTION
QUARTERS (NOT
PROJECT
QUARTERS)
- --------------------------------------------------------------------------------
56
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Appendix F
RICE OPTION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Quarterly Production Target Level
- --------------------------------------------------------------------------------
Payments Payments
- --------------------------------------------------------------------------------
Year 1
- --------------------------------------------------------------------------------
Up front access fees [__________]*
- --------------------------------------------------------------------------------
Q1 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q2 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q3 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q4 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 2
- --------------------------------------------------------------------------------
Q5 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q6 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q7 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q8 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 3
- --------------------------------------------------------------------------------
Q9 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q10 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q11 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q12 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 4
- --------------------------------------------------------------------------------
Q13 [__________]* [__________]*
- --------------------------------------------------------------------------------
57
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Q14 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q15 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q16 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 5
- --------------------------------------------------------------------------------
Q17 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q18 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q19 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q20 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 6
- --------------------------------------------------------------------------------
Q21 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q22 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q23 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q24 [__________]* [__________]*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL $13,880,000.00 $5,120,000.00
- --------------------------------------------------------------------------------
58
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Appendix G
- --------------------------------------------------------------------------------
Increase in
Arabidopsis Option
Production Target
Levels
- --------------------------------------------------------------------------------
Production
Target Levels per
Qtr
- --------------------------------------------------------------------------------
Clone/Seq Plant Trans Pheno Anal Full Anal
- --------------------------------------------------------------------------------
Q1 [__]*
- --------------------------------------------------------------------------------
Q2 [__]* [__]*
- --------------------------------------------------------------------------------
Q3 [__]* [__]*
- --------------------------------------------------------------------------------
Q4 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q5 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q6 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q7 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q8 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q9 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q10 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q11 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q12 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q13 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q14 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
59
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Q15 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q16 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q17 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q18 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q19 [__]* [__]*
- --------------------------------------------------------------------------------
Q20 [__]* [__]*
- --------------------------------------------------------------------------------
Total [_____]* [_____]* [_____]* [_____]*
- --------------------------------------------------------------------------------
BOLD
NUMBERS =
PRODUCTION
TARGET
LEVELS
- --------------------------------------------------------------------------------
QUARTERS =
OPTION
QUARTERS
(NOT PROJECT
QUARTERS)
- --------------------------------------------------------------------------------
60
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Appendix H
- --------------------------------------------------------------------------------
Increase in Arabidopsis
Option
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Quarterly Production Target Level
- --------------------------------------------------------------------------------
Payments Payments
- --------------------------------------------------------------------------------
Year 1
- --------------------------------------------------------------------------------
Up-front access fees [__________]*
- --------------------------------------------------------------------------------
Q1 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q2 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q3 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q4 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 2
- --------------------------------------------------------------------------------
Q5 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q6 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q7 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q8 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 3
- --------------------------------------------------------------------------------
Q9 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q10 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q11 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q12 [__________]* [__________]*
- --------------------------------------------------------------------------------
Year 4
- --------------------------------------------------------------------------------
61
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Q13 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q14 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q15 [__________]* [__________]*
- --------------------------------------------------------------------------------
Q16 [__________]* [__________]*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL $46,760,000.00 $21,240,000.00
- --------------------------------------------------------------------------------
62
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Appendix I
- --------------------------------------------------------------------------------
Increase in
Arabidopsis with 8
Year Term
- --------------------------------------------------------------------------------
Production Target
Levels per Qtr
- --------------------------------------------------------------------------------
Clone/Seq Plant Trans Pheno Anal Full Anal
- --------------------------------------------------------------------------------
Q1 [__]*
- --------------------------------------------------------------------------------
Q2 [__]* [__]*
- --------------------------------------------------------------------------------
Q3 [__]* [__]*
- --------------------------------------------------------------------------------
Q4 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q5 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q6 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q7 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q8 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q9 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q10 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
all [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q12 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q13 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q14 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q15 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q16 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
63
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Q17 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q18 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q19 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q20 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q21 [__]* [__]* [__]* [__]*
- --------------------------------------------------------------------------------
Q22 [__]* [__]*
- --------------------------------------------------------------------------------
Q23 [__]* [__]*
- --------------------------------------------------------------------------------
Q24 [__]*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total [_____]* [_____]* [_____]* [_____]*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOLD NUMBERS =
PRODUCTION
TARGET
LEVELS
- --------------------------------------------------------------------------------
QUARTERS =
OPTION
QUARTERS (NOT
PROJECT
QUARTERS)
- --------------------------------------------------------------------------------
64
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Appendix J
- --------------------------------------------------------------------------------
Increase in Arabidopsis
with 8 Year Term Option
- --------------------------------------------------------------------------------
Quarterly Production Target Level
- --------------------------------------------------------------------------------
Payments Payments
- --------------------------------------------------------------------------------
Year 1
- --------------------------------------------------------------------------------
Up-front access fees [____________]*
- --------------------------------------------------------------------------------
Q1 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q2 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q3 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q4 [____________]* [____________]*
- --------------------------------------------------------------------------------
Year 2
- --------------------------------------------------------------------------------
Q5 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q6 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q7 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q8 [____________]* [____________]*
- --------------------------------------------------------------------------------
Year 3
- --------------------------------------------------------------------------------
Q9 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q10 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q11 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q12 [____________]* [____________]*
- --------------------------------------------------------------------------------
Year 4
- --------------------------------------------------------------------------------
Q13 [____________]* [____________]*
- --------------------------------------------------------------------------------
65
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
- --------------------------------------------------------------------------------
Q14 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q15 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q16 [____________]* [____________]*
- --------------------------------------------------------------------------------
Year 5
- --------------------------------------------------------------------------------
Q17 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q18 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q19 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q20 [____________]* [____________]*
- --------------------------------------------------------------------------------
Year 6 [____________]*
- --------------------------------------------------------------------------------
Q21 [____________]*
- --------------------------------------------------------------------------------
Q22 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q23 [____________]* [____________]*
- --------------------------------------------------------------------------------
Q24 [____________]* [____________]*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL $51,040,000.00 $23,960,000.00
- --------------------------------------------------------------------------------
66
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
Appendix K
Monsanto Enabling Technologies
Monsanto Enabling Technologies
[_____________________________]*
[_____________________________]*
[_____________________________]*
[_____________________________]*
[_____________________________]*
67
- --------
* Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
Exhibit 10.25.1
AMENDED AND RESTATED
LEASE AGREEMENT
[PHASE 1A: OFFICE / LABORATORY]
This AMENDED AND RESTATED LEASE AGREEMENT (this "LEASE"), executed as of
April ___, 2000, and effective as of July 27, 1999 (the "EFFECTIVE DATE"), is
made between ARE-104 ALEXANDER ROAD, LLC, a Delaware limited liability company
("LANDLORD"), and PARADIGM GENETICS, INC., a Delaware corporation (formerly a
North Carolina corporation) ("TENANT"), and amends, restates, and supersedes in
its entirety that certain Lease Agreement dated as of July 27, 1999, between
Landlord and Tenant (which Lease Agreement is evidenced of record by a certain
Memorandum of Lease Agreement (the "LEASE MEMORANDUM") dated as of July 27,
1999, and recorded July 27, 1999, in Book 2684, Page 810 of the Official Records
of Durham County, North Carolina (the "OFFICIAL RECORDS")).
RECITALS
A. Landlord has entered into a Ground Lease Agreement dated as of July 27,
1999 (the "ORIGINAL GROUND LEASE"), with Triangle Service Center, Inc., a North
Carolina corporation ("GROUND LESSOR"), pursuant to which Landlord has ground
leased approximately 6.084 acres of land within the Triangle Park Research
Center (which is located within Research Triangle Park ("RTP"), Durham County,
North Carolina), as more fully described in Exhibit A-1 (the "SITE"). The
Original Ground Lease is evidenced of record by a certain Memorandum of Ground
Lease dated as of July 27, 1999, and recorded July 27, 1999, in Book 2684, Page
795 of the Official Records. In addition, Ground Lessor and Landlord have
entered into or, concurrently with the execution of this Lease, are entering
into, (i) a certain Agreement Regarding Allocation of Development Rights (the
"DEVELOPMENT RIGHTS AGREEMENT") (which will be evidenced of record by a certain
Memorandum of Agreement Regarding Allocation of Development Rights to be
recorded in the Official Records), and (ii) a certain First Amendment to Ground
Lease Agreement (the "GROUND LEASE AMENDMENT"). The Original Ground Lease, the
Ground Lease Amendment, and any other subsequent amendments or modifications
thereto shall be referred to collectively as the "GROUND LEASE".
B. In Section 2.d. of the Original Ground Lease, Ground Lessor grants
Landlord an option (the "EXPANSION OPTION") to ground lease approximately 4.916
additional acres of land adjacent to the Site, as more fully described in
Exhibit A-2 (the "ADDITIONAL SITE"). The Expansion Option is evidenced of record
by a certain Grant of Easements and Memorandum of Option To Ground Lease dated
as of July 27, 1999, and recorded July 27, 1999, in Book 2684, Page 802 of the
Official Records. Landlord may exercise the Expansion Option by delivering
written notice to Ground Lessor at any time prior to the 3rd anniversary of the
"RENT COMMENCEMENT DATE" (as defined in the Ground Lease; hereafter, the "GROUND
LEASE RENT COMMENCEMENT DATE").
C. Landlord desires to lease to Tenant, and Tenant desires to lease from
Landlord, certain improvements that Landlord is hereby agreeing to cause to be
constructed, or to permit to be constructed, on the Site, including, but not
limited to, a first-class scientific research and development building (the
"BUILDING").
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
Paradigm Genetics, Inc.--Page 2
D. Concurrently with the execution of this Lease, Landlord and Tenant
are entering into a separate Lease Agreement (the "GREENHOUSE LEASE") for the
lease of certain other improvements that Landlord is agreeing to cause to be
constructed, or to permit to be constructed, on other parts of the Site,
including, but not limited to, a plant analysis and growth room facility, a
commercial greenhouse, and a headhouse (collectively, the "GREENHOUSE").
BASIC LEASE PROVISIONS
ADDRESS: 108 Alexander Avenue, RTP, North Carolina.
PREMISES: The Building, containing approximately 54,463 rentable
square feet, as more fully described in Exhibit B.
BASE RENT: Equal monthly installments of base rent, such base rent to
be calculated using the formula set forth in Section 3(a)
below, which formula is based on the incremental levels of
"BUILDING ALLOWANCE" (as defined below) disbursed to Tenant
for use by Landlord in the construction of all portions of
the "PROJECT" (as defined below) other than the Greenhouse.
RENT ADJUSTMENT
PERCENTAGE: 5.00%.
TENANT'S SHARE: 63.15%.
RENTABLE AREA
OF PREMISES: Building: approximately 54,463 sq. ft.
RENTABLE AREA
OF PROJECT: Building: approximately 54,463 sq. ft.;
Greenhouse: approximately 31,776 sq. ft.;
Total: approximately 86,239 sq. ft.
TARGET
COMMENCEMENT DATE: September 11, 2000.
SECURITY DEPOSIT: An amount equal to the sum of 6 monthly payments of Base
Rent (estimated as of the date hereof as approximately
$560,000.00).
TERM: The initial term of this Lease shall expire on the
same date that the initial term of the Greenhouse Lease
expires (estimated as of the date hereof to be
approximately 121 months from the 1st day of the 1st full
month following the month in which the Commencement Date
occurs).
TERM EXTENSIONS: 2 options to extend the Term for 5 years each.
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
Paradigm Genetics, Inc.--Page 3
PERMITTED USE: Scientific research and development facility, including
laboratory and related administrative space.
LANDLORD'S BROKER: None.
TENANT'S BROKER: Advantis Realty (formerly known as Goodman Segar).
ADDRESS FOR RENT PAYMENT: LANDLORD'S NOTICE ADDRESS
135 N. Los Robles Avenue, Suite 250 135 N. Los Robles Avenue, Suite 250
Pasadena, California 91101 Pasadena, California 91101
Attention: Accounts Receivable Attention: General Counsel
TENANT'S NOTICE ADDRESS:
104 Alexander Dr., Building 2
RTP, North Carolina 27709
Attention: Mr. Ian Howes
Chief Financial Officer
The following Exhibits are or will be attached hereto and are incorporated
herein by this reference:
<TABLE>
<S> <C>
[X] EXHIBIT A-1 - DESCRIPTION OF SITE [ ] EXHIBIT G - ORIGINAL SECURITY AMOUNT
[X] EXHIBIT A-2 - DESCRIPTION OF ADDL SITE [X] EXHIBIT H - RULES AND REGULATIONS
[X] EXHIBIT B - DESCRIPTION OF PREMISES [X] EXHIBIT I - TENANT'S PERSONAL PROPERTY
[X] EXHIBIT C - WORK LETTER [X] EXHIBIT J - ESTOPPEL CERTIFICATE
[ ] EXHIBIT D - COMMENCEMENT DATE; TERM [X] EXHIBIT K - LOAN SUBORDINATION AGMT
[ ] EXHIBIT E - BASE CONSTR COSTS; BLDG [X] EXHIBIT L - LEASE SUBORDINATION AGMT
ALLOWANCE; BASE RENT [X] EXHIBIT M -ENVIRONMENTAL INFORMATION
[ ] EXHIBIT F - GROUND LEASE RENT
- ----------------------------------------------------------------------------------------------------
</TABLE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Lease, the receipt and legal sufficiency of which are hereby
acknowledged by the parties hereto, Landlord and Tenant hereby agree as follows:
1. LEASE OF PREMISES. Landlord hereby leases the Premises to Tenant and
Tenant hereby leases the Premises from Landlord, effective as of the
"COMMENCEMENT DATE" (as defined below) for the Term set forth in the Basic Lease
Provisions, upon and subject to all of the terms and conditions of the Ground
Lease. The Site and all improvements thereon and appurtenances thereto are
collectively referred to herein as the "PROJECT", and the portions of the
Project that are for the non-exclusive use of Tenant and the guests, invitees,
licensees, and other authorized users of the Project (including, without
limitation, Ground Lessor and any approved subtenants) are collectively referred
to herein as the "COMMON AREAS" (all as more fully described in Exhibit B).
Landlord reserves the right to modify the Common Areas, provided
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
Paradigm Genetics, Inc.--Page 4
that such modifications do not materially adversely affect Tenant's use of the
Premises for the Permitted Use.
2. DELIVERY; COMMENCEMENT DATE; ACCEPTANCE OF PREMISES.
(a) Landlord shall use commercially reasonable efforts to deliver the
Premises to Tenant ("DELIVER" or "DELIVERY") on or before the Target
Commencement Date, with "LANDLORD'S WORK" (as defined in the Amended and
Restated Work Letter attached as Exhibit C (the "WORK LETTER")) "SUBSTANTIALLY
COMPLETED" (as defined in the Work Letter). If Landlord Delivers the Premises
Substantially Completed before the Target Commencement Date, Tenant shall pay to
Landlord, in addition to any "RENT" (as defined in Section 3(c) below) then due
under this Lease, a sum equal to 1/2 day of Rent for each day that such Delivery
precedes the Target Commencement Date. If Landlord fails to timely Deliver the
Premises Substantially Completed, Landlord shall not be liable to Tenant for any
loss or damage resulting therefrom, and this Lease shall not be void or
voidable, except as may be expressly provided otherwise herein.
(i) Notwithstanding the foregoing, if Landlord does not Deliver the
Premises Substantially Completed by the Target Commencement Date and the
aggregate delay that is due solely to "LANDLORD CAUSED DELAYS" (as defined
below) exceeds 120 days, this Lease shall be voidable by Tenant by giving
Landlord "NOTICE" (as defined in Section 44(a) below) of Tenant's election to
void this Lease within 5 business days after such 120th day, and if voided: (A)
the Security Deposit (if paid) shall be returned to Tenant, and (B) neither
Landlord nor Tenant shall have any further rights, duties, or obligations under
this Lease, except with respect to provisions that expressly survive termination
of this Lease (as provided in Section 28 below). Except as may be expressly
provided otherwise herein, Tenant's right to void this Lease shall be Tenant's
sole and exclusive remedy at law, in equity, or otherwise for Landlord's failure
to timely Deliver the Premises Substantially Completed. If Tenant does not give
Landlord Notice of Tenant's election within the required 5 business days,
Tenant's right to void this Lease shall terminate and this Lease shall continue
in full force and effect. If Landlord Delivers the Premises Substantially
Completed after the Target Commencement Date but the aggregate delay that is due
solely to Landlord Caused Delays does not exceed 120 days, or the aggregate
delay that is due solely to Landlord Caused Delays exceeds 120 days but Tenant
does not timely elect to void this Lease, Tenant shall be entitled to an
abatement of Rent equal to 1 day of Rent for each day of the delay that is due
solely to Landlord Caused Delays. As used herein, the term "LANDLORD CAUSED
DELAY" shall mean any delay occurring after March 1, 2000, for a reason other
than a "TENANT CAUSED DELAY" (as defined in the Work Letter) or a "FORCE MAJEURE
DELAY" (as defined in the Work Letter). Landlord hereby acknowledges and agrees
that Tenant is entitled to 51 days abatement of Rent for all delays (whether
Landlord Caused Delays or Force Majeure Delays) that occurred on or before March
1, 2000.
(ii) Notwithstanding the foregoing, (A) if Landlord Delivers the
Premises Substantially Completed after the Target Commencement Date and the
aggregate delay that is due solely to Force Majeure Delays does not exceed 120
days, Tenant shall not be entitled to any abatement of Rent for the delay that
is due solely to Force Majeure Delays, (B) if Landlord Delivers the Premises
Substantially Completed after the Target Commencement Date and the aggregate
delay that is due solely to Force Majeure Delays exceeds 120 days but does not
exceed 240 days, Tenant shall be entitled to an abatement of Rent equal to 1/2
day of Rent for each day of Force Majeure Delays in excess of 120 days, and (C)
if Landlord Delivers the Premises Substantially Completed after the Target
Commencement Date and the aggregate delay that is due solely to Force Majeure
Delays exceeds 240 days,
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Paradigm Genetics, Inc.--Page 5
Tenant shall be entitled to an abatement of Rent equal to 1 day of Rent for each
day of Force Majeure Delays in excess of 240 days; provided, however, that, for
purposes of this Section 2(a)(ii), Force Majeure Delays shall not include any
delays resulting from a "FORCE MAJEURE" (as defined in Section 34 below) that is
solely attributable to "PRE-EXISTING CONTAMINATION" (as defined in Section
19.a.xii. of the Ground Lease).
(b) The "COMMENCEMENT DATE" shall be earliest of: (i) the date Landlord
Delivers the Premises Substantially Completed; (ii) the date Landlord could
have Delivered the Premises Substantially Completed but for Tenant Caused
Delays or Force Majeure Delays; and (iii) the date Tenant conducts any
business in any part of the Premises; provided, however, that, for purposes
of this Section 2(b), Force Majeure Delays shall not include any delays
resulting from a Force Majeure that is solely attributable to Pre-Existing
Contamination. Upon either party's request, the other party shall execute
and deliver a written acknowledgment of the Commencement Date and the
expiration date of the Term, when the same have been established, and shall
attach the acknowledgment to this Lease as Exhibit D; provided, however,
either party's failure to execute and deliver such acknowledgment shall not
affect the other party's rights hereunder.
(c) Except as may be expressly provided otherwise in the Work Letter, Tenant
shall accept the Premises in their condition as of the Commencement Date,
subject to all applicable laws, ordinances, regulations, covenants, and
restrictions. Neither Landlord nor any agent of Landlord has made or will
make any representation or warranty with respect to the condition of any or
all of the Premises or the Project and/or the suitability of the Premises
for the conduct of Tenant's business, and Tenant waives any implied
warranty that the Premises are suitable for Tenant's intended purposes.
Except as may be expressly provided otherwise in the Work Letter: (i)
Landlord has no obligation for any defects in the Premises; and (ii)
Tenant's taking possession of the Premises shall be conclusive evidence
that Tenant accepts the Premises and that the Premises were in good
condition at the time possession was taken. Any occupancy of the Premises
by Tenant before the Commencement Date shall be subject to all of the terms
and conditions of this Lease, including the obligation to pay Rent.
3. RENT.
(A) BASE RENT. As more fully described in the Work Letter, Landlord is making
available to Tenant an allowance (the "BUILDING ALLOWANCE") to be used by
Tenant solely for the costs of designing and constructing all portions of
the Project other than the Greenhouse, which costs shall include, but not
be limited to, payments to surveyors, engineers, architects, consultants,
contractors, sub-contractors, and all other persons and laborers of every
class providing services, performing labor, or furnishing skill or other
necessary services used in or contributing to such construction, the cost
of materials or equipment used or consumed in such construction, the cost
(including legal and engineering fees and disbursements) of obtaining,
maintaining, renewing, or revising permits, licenses, approvals,
certificates, or other entitlements, utility connection fees, premiums and
fees for all insurance maintained by Landlord in connection with the
construction, initial financing and debt service (including principal),
"land acquisition" costs (which shall include up to $20,000.00 of all
environmental, site evaluation, engineering, and title fees, premiums, and
disbursements, plus 50.00% of all legal fees and disbursements incurred by
Landlord in negotiating the Ground Lease and the Development Rights
Agreement and in performing due diligence in connection therewith), all
real estate brokerage commissions or fees, all "ADMINISTRATIVE RENT" (as
defined in Section 6.1 of the Work Letter), and all "TAXES" (as defined in
Section 9 below) that become due and payable while construction is being
performed (collectively, the "BASE CONSTRUCTION COSTS").
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Paradigm Genetics, Inc.--Page 6
The maximum amount of the Building Allowance shall be $153.25 per rentable
square foot of the Building, provided that under no circumstances (including an
increase in the rentable square footage of the Building) shall the aggregate
amount of the Building Allowance exceed $8,350.00. For each incremental level of
Building Allowance disbursed to Tenant (adjusted for any amounts actually
received by Landlord as reimbursement under Sections 19.b. or 19.d. of the
Ground Lease and retained by Landlord pursuant to the terms and condition of a
certain Cost Sharing Agreement dated July 27, 1999, between Landlord and Tenant
(the "COST SHARING AGREEMENT")), Tenant shall pay to Landlord the amount ("BASE
RENT") set forth for such increment on the following schedule:
<TABLE>
<CAPTION>
Building Allowance Incremental Base Rent
(Per Rentable Square Foot) (Per Rentable Square Foot Per Month)
<S> <C>
$0.00 to $55.00 $0.5500
$55.01 to $95.00 add $0.4334
$95.01 to $115.00 add $0.2334
$115.01 to $135.00 add $0.2500
$135.01 to $153.25 add $0.2334
</TABLE>
For illustration purposes only, the aggregate monthly Base Rent will be $1.7102
per rentable square foot if the entire $153.25 per rentable square foot Building
Allowance is disbursed to Tenant (and, if the rentable square footage of the
Building is 54,463 sq. ft., the aggregate monthly Base Rent will be $93,142.62).
Upon either party's request, the other party shall execute and deliver a written
acknowledgment of the aggregate Base Construction Costs, the aggregate Building
Allowance actually disbursed to or for the benefit of Tenant (adjusted for any
amounts actually received by Landlord as reimbursement under Sections 19.b. or
19.d. of the Ground Lease and retained by Landlord pursuant to the terms and
condition of the Cost Sharing Agreement), and the initial monthly Base Rent
computed on such aggregate Building Allowance (as adjusted), when the same have
been established, and shall attach the acknowledgment to this Lease as Exhibit
E; provided, however, either party's failure to execute and deliver such
acknowledgment shall not affect the other party's rights hereunder. Tenant
hereby acknowledges and agrees that the aggregate Base Construction Costs may
exceed the aggregate Building Allowance and that Tenant may be responsible for
any such excess, as provided in the Work Letter (including, but not limited to,
Section 6.2 thereof).
(b) ADDITIONAL RENT. In addition to Base Rent, Tenant shall pay to Landlord
all of the following as additional rent ("ADDITIONAL RENT"):
(i) Tenant's Share (as set forth in the Basic Lease Provisions) of "OPERATING
EXPENSES" (as defined in Section 5 below). Tenant's Share shall be
reasonably adjusted by Landlord following a measurement of the rentable
square footage of the Premises and the Project to be done by Landlord
within 60 days of the Commencement Date, or as soon as reasonably possible
thereafter, and shall be subject to further adjustment for changes in the
physical size of the Premises or the Project occurring thereafter (any
measurement required under this Lease shall be performed in accordance with
the 1996 Standard Method of Measuring Floor Area in Office Buildings as
adopted by the Building Owners and Managers Association (ANSI/BOMA Z65.1-
1996)).
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(ii) "GROUND LEASE RENT" (as defined below). Subject to the terms and
conditions of Section 38(b) below, Tenant shall pay to Landlord, in equal
monthly installments, an annual amount ("GROUND LEASE RENT") equal to the
annual rent payable by Landlord under the Ground Lease, as the same may be
adjusted from time to time pursuant to the terms and conditions of the
Ground Lease, with any such adjustment to be effective hereunder at the
same time that such adjustment is effective under the Ground Lease. Upon
either party's request, the other party shall execute and deliver a
written acknowledgment of the Ground Lease Rent payable hereunder, when
the same has been established and whenever such is adjusted, and shall
attach the acknowledgment to this Lease as Exhibit F; provided, however,
either party's failure to execute and deliver such acknowledgment shall
not affect the other party's rights hereunder. Ground Lease Rent shall be
payable commencing on the later of the Commencement Date or the Ground
Lease Rent Commencement Date, and all monthly installments of Ground Lease
Rent shall be paid in advance on or before the 3rd business day prior to
the 1st day of each calendar month during the Term and during any Term
Extension.
(iii) Any and all other amounts Tenant assumes or agrees to pay under the
provisions of this Lease, including, without limitation, any and all other
sums that may become due by reason of any "DEFAULT" (as defined in Section
20 below) or other failure to comply with the agreements, terms, covenants
and conditions of this Lease to be performed by Tenant, after any
applicable notice and cure period.
(c) RENT. Base Rent and Additional Rent shall together be denominated "RENT".
All monthly installments of Rent other than Ground Lease Rent shall be
paid in advance on or before the 1st day of each calendar month during the
Term and during any Term Extension. Payments of Rent for any fractional
calendar month shall be prorated and paid on the basis of a 30-day month.
Tenant's obligation to pay Rent and other sums to Landlord under this
Lease and Landlord's obligations under this Lease shall be separate and
independent obligations. Except to the extent, and only to the extent,
expressly provided otherwise in Sections 2(a)(i) and (ii) above, all Rent
shall be paid to Landlord without demand, abatement, reduction, deduction,
or set-off, in lawful money of the United States of America at the office
of Landlord for payment of Rent set forth in the Basic Lease Provisions,
or to such other person or at such other place as Landlord may from time
to time designate in writing.
4. RENT ADJUSTMENTS. Base Rent shall be increased on the 3rd annual
anniversary of the 1st day of the 1st full month during the Term, and on each
annual anniversary of such date thereafter during the remainder of the Term, by
multiplying the Base Rent payable immediately before such adjustment by the Rent
Adjustment Percentage and adding the resulting amounts to the Base Rent payable
immediately before such adjustment. Base Rent, as so adjusted, shall thereafter
be due as provided herein. Rent adjustments for any fractional calendar month
shall be prorated.
5. OPERATING EXPENSE PAYMENTS. No later than 10 business days prior to the
1st day of the 1st full month during the Term and no later than 30 days prior to
the 1st day of each calendar year during the Term and any Term Extension,
Landlord shall deliver to Tenant a written estimate of Operating Expenses for
the remainder of the calendar year or for the following calendar year, as the
case may be (the "ANNUAL ESTIMATE"), which may be revised by Landlord from time
to time during the relevant calendar year. During each month of the Term and any
Term Extension, Tenant shall pay Landlord an amount equal to 1/12th of the
annual cost, as reasonably estimated by Landlord from time to time, of Tenant's
Share of Operating Expenses for the Project. The term "OPERATING EXPENSES" means
all reasonable costs and expenses of any kind or description whatsoever incurred
or accrued by Landlord with respect to
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
Paradigm Genetics, Inc.--Page 8
the Project (including, without limitation, the rent (as the same may be
adjusted from time to time) and all expenses to be paid or reimbursed by
Landlord under the Development Rights Agreement, maintenance and repair costs,
insurance premiums (for the insurance described in Section 17 below), Taxes,
"UTILITIES" (as defined in Section 11 below), costs of capital repairs and
improvements (amortized over the useful life of the improvement, not to exceed 7
years), reasonable reserves consistent with good business practice for future
repairs and replacements, and administrative rent for management services in the
amount of 2.50% of the then applicable Base Rent), excluding only:
(a) the original construction costs of the Project (including Base Construction
Costs);
(b) capital expenditures for expansion of the Project or for the remodeling or
refurbishment of the Project to a materially higher standard than existed
on the Commencement Date;
(c) costs directly and solely attributable to correcting a "CONSTRUCTION
DEFECT" (as defined in the Work Letter);
(d) interest and amortization of funds borrowed by Landlord, whether secured or
unsecured;
(e) depreciation of the Project (except for capital improvements the cost of
which are specifically includable in Operating Expenses);
(f) salaries, wages, or other compensation paid to officers and employees of
Landlord who are not assigned to the operation, management, maintenance, or
repair of the Project;
(g) any expenses otherwise includable within Operating Expenses to the extent
actually reimbursed by persons other than Tenant;
(h) legal expenses incurred in the negotiation of this Lease;
(i) costs relating to maintaining Landlord's existence, either as a
corporation, partnership, or other entity;
(j) costs (including "LEGAL FEES" (as defined in Section 44(k) below)) arising
from the enforcement of this Lease or claims, disputes, or potential
disputes pertaining to Landlord and/or the Project;
(k) costs incurred by Landlord due to the violation by Landlord of the terms
and conditions of this Lease;
(l) costs incurred by Landlord due to the violation by Landlord of any "LEGAL
REQUIREMENTS" (as defined in Section 7 below);
(m) tax penalties incurred as a result of Landlord's negligence, inability, or
unwillingness to make payment and/or to file any tax or informational
returns when due;
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
Paradigm Genetics, Inc.--Page 9
(n) overhead or profit increment paid to Landlord or to subsidiaries or
affiliates of Landlord for the provision of goods and/or services in or to
the Project, but only to the extent the same exceeds the overhead or profit
increment that would be paid to unaffiliated third parties on a competitive
basis for providing the same goods and/or services;
(o) costs arising from Landlord's charitable or political contributions;
(p) costs incurred in the sale or refinancing of the Project;
(q) net income, franchise, capital stock, estate, or inheritance taxes; and
(r) any costs of constructing, repairing, or maintaining any new improvement
within the Project, or of providing any new and recurring service, where
the new improvement or the new service is not requested or approved by
Tenant, and (i) there is or will be no material benefit to Tenant from the
new improvement or the new service, or (ii) regardless of the benefit to
Tenant, construction of the new improvement commences or the new service is
first provided in the final 12 months of the Term or the first Term
Extension and Tenant has elected not to exercise its then applicable
Extension Right.
Within 120 days after the end of each calendar year, Landlord shall furnish
to Tenant a statement (an "ANNUAL STATEMENT") showing in reasonable detail: (i)
the total and Tenant's Share of actual Operating Expenses for the previous
calendar year, and (ii) the total of Tenant's payments in respect of Operating
Expenses for such year. If Tenant's Share of actual Operating Expenses for such
year exceeds Tenant's payments of Operating Expenses for such year, the excess
shall be immediately due and payable by Tenant as Rent. If Tenant's payments of
Operating Expenses for such year exceed Tenant's Share of actual Operating
Expenses for such year, Landlord shall, in its sole and absolute discretion,
either: (x) credit the excess amount to the next succeeding installments of
estimated Operating Expenses due hereunder, or (y) pay the excess to Tenant
within 30 days after delivery of such Annual Statement.
The Annual Statement shall be final and binding upon Tenant unless Tenant,
within 30 days after Tenant's receipt thereof, shall contest any item therein by
giving Notice to Landlord, specifying each item contested and the reason
therefor. If, during such 30-day period, Tenant reasonably and in good faith
questions or contests the correctness of Landlord's statement of Tenant's Share
of Operating Expenses, Landlord will provide Tenant access to Landlord's books
and records and such information as Landlord reasonably determines to be
responsive to Tenant's questions. If, after Tenant's review of such
information, Landlord and Tenant cannot agree upon the amount of Tenant's Share
of Operating Expenses, then Tenant shall have the right to have an independent
public accounting firm selected from among the 6 largest in the United States,
hired by Tenant (at Tenant's sole cost and expense) and approved by Landlord
(which approval shall not be unreasonably withheld or delayed), audit and/or
review such Landlord's books and records for the year in question (the
"INDEPENDENT REVIEW"). The results of any such Independent Review shall be
binding on Landlord and Tenant. If the Independent Review shows that Tenant's
pro rata share of the Operating Expenses actually paid by Tenant for the
calendar year in question exceeded Tenant's obligations for such calendar year,
Landlord shall at Landlord's option either (i) credit the excess amount to the
next succeeding installments of estimated Operating Expenses due hereunder, or
(ii) pay the excess to Tenant within 30 days after delivery of the results of
such Independent Review, except that after expiration or termination of the Term
or any Term Extension, Landlord shall pay the excess to Tenant after deducting
all other amounts due Landlord. If the
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
Paradigm Genetics, Inc.--Page 10
Independent Review shows that Tenant's payments of Tenant's Share of Operating
Expenses for such calendar year were less than Tenant's obligation for the
calendar year, Tenant shall pay the deficiency to Landlord within 30 days after
delivery of the results of such Independent Review. If the Independent Review
shows that Tenant has overpaid Tenant's pro rata share of Operating Expenses by
more than 5.00%, then Landlord shall reimburse Tenant for all costs incurred by
Tenant for the Independent Review. Operating Expenses for the calendar years in
which Tenant's obligation to share therein begins and ends shall be prorated.
6. SECURITY DEPOSIT.
(a) Tenant shall deposit with Landlord on the Commencement Date security for
the performance of all of Tenant's obligations hereunder (the "SECURITY
DEPOSIT") in an amount equal to 6 monthly payments of Base Rent (the
"ORIGINAL SECURITY AMOUNT"). Upon either party's request, the other party
shall execute and deliver a written acknowledgment of the Original Security
Amount, when the same has been established, and shall attach the
acknowledgment to this Lease as Exhibit G; provided, however, either
party's failure to execute and deliver such acknowledgment shall not affect
the other party's rights hereunder. At least one-sixth of the Security
Deposit shall be in cash and up to five-sixths of the Security Deposit may
be in the form of an unconditional and irrevocable letter of credit (a
"LETTER OF CREDIT"); provided, however, that the entire Security Deposit
may be in the form of a Letter of Credit at any time after Tenant completes
an initial public offering of Tenant's capital shares. Landlord shall hold
the cash portion of the Security Deposit in an interest bearing account
(which may contain Landlord's own funds), with any interest accruing on
such cash portion being for Tenant's benefit. Any Letter of Credit that
constitutes a portion of the Security Deposit: (i) shall be in form and
substance satisfactory to Landlord, in Landlord's sole and absolute
discretion; (ii) shall name Landlord as sole beneficiary; (iii) shall not
refer to this Lease, the Project, or the Premises or any circumstances,
factors, or rights that might be related thereto, but shall expressly allow
Landlord to draw upon the Letter of Credit in any amount, and at any time
and from time to time, simply by delivering to the issuer a clean sight
draft on the Letter of Credit, without any other demand, statement, or
other representation regarding Landlord's rights under this Lease or with
respect to the Letter of Credit; (iv) shall be drawable on an FDIC-insured
financial institution satisfactory to Landlord, in Landlord's reasonable
discretion, with any draws to be payable from such financial institution's
own immediately available funds; (v) shall be drawable at the branch or
office of the issuer that Landlord may choose, in Landlord's sole and
absolute discretion; and (vi) shall expressly allow Landlord to draw the
full amount of the Letter of Credit if Tenant does not provide Landlord
with a substitute Letter of Credit complying with all of the requirements
hereof at least 10 days before the stated expiration date of such Letter of
Credit.
(b) If, at any time during the Term or any Term Extension, Tenant satisfies
both the "NET WORTH TEST" (as defined below) and the "PROFITABILITY TEST"
(as defined below) (each, a "REDUCTION REQUIREMENT" and collectively, the
"REDUCTION REQUIREMENTS"), then the Original Security Amount shall be
reduced to an amount equal to 3 monthly payments of Base Rent (the "REDUCED
SECURITY AMOUNT"). For purposes of this provision, the "NET WORTH TEST"
shall be deemed satisfied at any time that: (i) Tenant's stock is listed on
either the New York Stock Exchange or the NASDAQ stock market, and (ii)
Tenant has maintained a net worth of at least $100,000,000.00, using a
market capitalization analysis based on the daily closing trading price of
Tenant's common stock, for the immediately preceding consecutive 90
business days. For purposes of this provision, the "PROFITABILITY TEST"
shall be deemed satisfied at any time that: (x) Tenant's net revenues after
taxes for the immediately preceding fiscal year exceed $100,000,000.00, and
(y) the aggregate amount of Tenant's "LIQUID ASSETS" (as defined below),
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
Paradigm Genetics, Inc.--Page 11
as certified by a nationally recognized, independent public accounting firm
or as demonstrated in annual audited financial statements, equals or
exceeds Tenant's anticipated expenses for the shorter of (1) 30 months and
(2) the remainder of the Term. For purposes of the Profitability Test, (A)
"LIQUID ASSETS" shall mean all cash, cash equivalents, liquid short term
investments, and short term accounts receivables from unrelated third
parties, and (B) the phrase "REMAINDER OF THE TERM" shall include any
period for which Tenant has an "EXTENSION RIGHT" (as defined in Section
41(a) below), regardless of whether any such Extension Right has been
exercised, unless such Extension Right has been waived or otherwise is no
longer exercisable (provided, however, that under no circumstances shall
the "REMAINDER OF THE TERM" be fewer than 12 months, unless there are fewer
than 3 months actually remaining in the Term and any Term Extension that
may be available to Tenant, in which case the "REMAINDER OF THE TERM" shall
be deemed to be 6 months). Within 60 days after Tenant provides Landlord
with written evidence reasonably satisfactory to Landlord demonstrating
that Tenant then satisfies both of the Reduction Requirements, Landlord
shall pay to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest hereunder) any balance of the Security Deposit then held
by Landlord (including accrued interest, if any), less an amount equal to
the Reduced Security Amount (provided, however, that if any portion of the
Security Deposit is then in the form of a Letter of Credit, Landlord will
return such Letter of Credit to Tenant upon Tenant's delivery to Landlord
of cash (if then required hereunder) plus a substitute Letter of Credit
complying with all of the requirements hereof in an aggregate amount equal
to the Reduced Security Amount). The Reduced Security Amount shall be
deemed to be the amount of the "SECURITY DEPOSIT" for all purposes related
to this Lease from and after the date that Landlord returns to Tenant any
portion of the Original Security Amount in accordance with this provision.
Notwithstanding the foregoing, the Security Deposit shall be increased to
the Original Security Amount if there is a Default or if Tenant fails to
continue to satisfy both of the Reduction Requirements. Landlord shall have
the right (not to be exercised more than twice each calendar year) to
request written evidence from Tenant demonstrating that Tenant continues to
meet both of the Reduction Requirements. Tenant shall pay to Landlord the
amount of the difference between the Reduced Security Amount and the
Original Security Amount within 15 days after Landlord gives Tenant written
demand to do so (provided, however, that if any portion of the Reduced
Security Amount is then in the form of a Letter of Credit, Landlord will
return such Letter of Credit to Tenant upon Tenant's delivery to Landlord
of cash (if then required hereunder) plus a substitute Letter of Credit
complying with all of the requirements hereof in an aggregate amount equal
to the Original Security Amount). The Original Security Amount shall be
deemed to be the amount of the "SECURITY DEPOSIT' for all purposes related
to this Lease from and after the date that Landlord gives Tenant written
demand to increase the Reduced Security Amount in accordance with this
provision.
(c) Landlord shall hold the Security Deposit as security for the performance of
Tenant's obligations under this Lease. The Security Deposit is not an
advance rental deposit or a measure of Landlord's damages in case of a
Default. At any time that Landlord reasonably believes that a Default has
occurred and remains uncured, Landlord may use all or any part of the
Security Deposit (including accrued interest, if any) to pay or perform any
obligation of Tenant under this Lease or to compensate Landlord for any
loss or damage resulting from any Default, without prejudice to any other
remedy provided herein or provided by law. Upon any such use of all or any
portion of the Security Deposit, Tenant shall deposit with Landlord, within
5 days after Landlord gives Tenant a written demand therefor, cash (or, if
appropriate, a substitute Letter of Credit complying with all of the
requirements hereof) in the amount that will restore the Security Deposit
to its required amount. Upon bankruptcy or other debtor-creditor
proceedings against Tenant, the Security Deposit shall be deemed to be
applied first to the payment of Rent and other charges due Landlord for
periods prior to the filing of such
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Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
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proceedings. Tenant hereby waives the provisions of any law, now or
hereafter in force, that provide that Landlord may claim from a security
deposit only those sums reasonably necessary to remedy defaults in the
payment of rent, to repair damage caused by Tenant, or to clean the leased
premises, it being agreed that Landlord may claim, in addition, those sums
reasonably necessary to compensate Landlord for any other loss or damage,
foreseeable or unforeseeable, caused by the act or omission of Tenant or
any officer, employee, agent or invitee of Tenant.
(d) If Landlord transfers its interest in the Project or this Lease, Landlord
shall either (i) transfer any balance of the Security Deposit then held by
Landlord (including accrued interest, if any) to a person or entity
assuming Landlord's obligations under this Section, or (ii) pay to Tenant
any balance of the Security Deposit then held by Landlord (including
accrued interest, if any). Upon the transfer to such transferee or the
payment to Tenant, Landlord shall have no further obligation with respect
to the Security Deposit, and Tenant's right to the Security Deposit shall
apply solely against Landlord's transferee.
(e) Landlord's obligation with respect to the Security Deposit is that of a
debtor, not a trustee. The Security Deposit shall be the property of
Landlord, but shall be paid to Tenant when Tenant's obligations under this
Lease have been completely fulfilled. If Tenant and all assignees of
Tenant's interest hereunder fully perform every provision of this Lease to
be performed by Tenant and return the Premises to Landlord upon the
expiration or earlier termination of this Lease, Landlord shall pay to
Tenant (or, at Landlord's option, to the last assignee of Tenant's interest
hereunder) any balance of the Security Deposit then held by Landlord
(including accrued interest, if any) within 60 days after the expiration or
earlier termination of this Lease.
7. USE. The Premises shall be used solely for the Permitted Use set forth in
the Basic Lease Provisions and for lawful purposes incidental thereto, all in
compliance with all laws, orders, judgments, ordinances, regulations, codes,
directives, permits, licenses, covenants and restrictions now or hereafter
applicable to the Premises, and the use and occupancy thereof (collectively,
"LEGAL REQUIREMENTS"). Tenant, within 5 days' after Notice from Landlord, shall
cause to be discontinued any use of the Premises that is declared by any
governmental authority having jurisdiction to be a violation of any Legal
Requirement. Provided that Tenant has prior knowledge of the then current terms
of Landlord's insurance coverage with respect to the Project, (i) Tenant will
not use or permit the Premises to be used for any purpose or in any manner that
would void Tenant's or Landlord's insurance, increase the insurance risk, or
cause the disallowance of any sprinkler or other credits, and Tenant, within 5
days' after Notice from Landlord, shall cause to be discontinued any such use,
and (ii) Tenant shall reimburse Landlord promptly upon demand for any additional
premium charged for any insurance policy maintained by Landlord as a result of
Tenant's failure to comply with the provisions of this Section. Tenant will use
the Premises in a careful, safe and proper manner and will not commit waste,
overload the floor or structure of the Premises, subject the Premises to uses
that would damage the Premises or obstruct or interfere with the rights of
Landlord or other guests, invitees, licensees, or other authorized users of the
Project, including conducting or giving notice of any auction, liquidation, or
going out of business sale on the Premises, or using or allowing the Premises to
be used for any unlawful purpose. Tenant shall cause any office equipment or
machinery to be installed in the Premises so as to reasonably prevent sounds or
vibrations therefrom from extending into Common Areas or other space in the
Project. Tenant shall not place any equipment weighing 500 pounds or more in or
upon the Premises or transport or move such items through the Common Areas of
the Project or in the Project elevators without the prior written consent of
Landlord. Except as may be provided under the Work Letter, Tenant, without the
prior written consent of Landlord, shall not use the
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Paradigm Genetics, Inc.--Page 13
Premises in any manner that will require ventilation, air exchange, heating,
gas, steam, electricity or water beyond the existing capacity of the Project as
proportionately allocated to the Premises and as usually furnished for the
Permitted Use.
Tenant, at its sole expense, shall make any alterations or modifications,
to the interior or the exterior of the Premises or the Project, that are
required by Legal Requirements (including, without limitation, compliance of the
Premises with the Americans With Disabilities Act, 42 U.S.C. (S) 12101, et seq.
(together with regulations promulgated pursuant thereto, "ADA")) related to
Tenant's use or occupancy of the Premises, provided that the foregoing
obligation shall not apply to the extent any non-compliance with Legal
Requirements is due to a Construction Defect. Notwithstanding any other
provision herein to the contrary, Tenant shall be responsible for any and all
demands, claims, liabilities, losses, costs, expenses, actions, causes of
action, damages or judgments, and all reasonable expenses incurred in
investigating or resisting the same (including, without limitation, Legal Fees)
(collectively, "CLAIMS") arising out of or in connection with Legal Requirements
and Tenant shall indemnify, defend, hold and save Landlord harmless from and
against any and all Claims arising out of or in connection with any failure of
the Premises to comply with any Legal Requirement, except to the extent, and
only to the extent, a Claim is attributable to a Construction Defect or to the
gross negligence or willful misconduct of Landlord.
8. HOLDING OVER. If, with Landlord's express written consent, Tenant retains
possession of the Premises after the expiration or earlier termination of this
Lease, such possession, unless otherwise agreed in writing, shall be subject to
immediate termination by Landlord at any time, and all of the other terms and
provisions of this Lease (including, without limitation, the adjustment of Rent
pursuant to Section 4 hereof but excluding any expansion or renewal option or
other similar right or option) shall remain in full force and effect during such
holdover period, and in such case Tenant shall continue to pay Rent in the
amount payable upon the date of the expiration or earlier termination of this
Lease or such other amount as Landlord may indicate, in Landlord's sole and
absolute discretion, in such written consent. All other payments shall continue
under the terms of this Lease. If Tenant remains in possession of the Premises
after the expiration or earlier termination of this Lease without the express
written consent of Landlord, Tenant shall become a tenant at sufferance upon the
terms of this Lease except that the monthly rental shall be equal to 150.00% of
the Rent in effect during the last 30 days prior to the expiration or earlier
termination of this Lease. In addition, Tenant shall be responsible for all
damages suffered by Landlord resulting from or occasioned by Tenant's holding
over. No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly provided, and
this Section shall not be construed as consent for Tenant to retain possession
of the Premises. Acceptance by Landlord of Rent after the expiration or earlier
termination of this Lease shall not result in a renewal or reinstatement of this
Lease.
9. TAXES. Tenant shall pay all taxes, levies, assessments and governmental
charges of any kind (collectively referred to as "TAXES") imposed by any
federal, state, regional, municipal, local, or other governmental authority or
agency, including, without limitation, quasi-public agencies (collectively,
"GOVERNMENTAL AUTHORITY") in connection with the Project and accruing during the
Term and any Term Extension, including, without limitation, all Taxes: (i)
imposed on or measured by or based, in whole or in part, on rent payable to
Landlord under this Lease and/or from the rental by Landlord of the Project,
(ii) based on the square footage, assessed value, or other measure or evaluation
of any kind of the Premises or the Project, (iii) assessed or imposed by or on
the operation or maintenance of the Premises or the Project (including parking),
(iv) assessed or imposed by, or at the direction of, or resulting from statutes
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Paradigm Genetics, Inc.--Page 14
or regulations, or interpretations thereof, promulgated by, any Governmental
Authority, (v) assessed or imposed by reason of the subsequent occurrence of
certain specified events (including, but not limited to, the construction of
additional improvements within the Project), or (vi) imposed as a license or
other fee on Landlord's business of leasing space in the Project. Landlord
shall cause all Taxes to be billed directly to Tenant by the Governmental
Authority, and Landlord shall promptly forward to Tenant any bills for Taxes
that Landlord nevertheless may receive. All payments of Taxes shall be made at
least 10 business days prior to delinquency, and Tenant shall promptly furnish
Landlord with satisfactory evidence that all Taxes have been so paid; provided,
however, that Tenant shall not be responsible for evidence of timely payment or
for any penalties, surcharges, or similar charges imposed upon delinquency if
the delinquency is due solely to any failure by Landlord to forward promptly to
Tenant any bills for Taxes that Landlord may receive. If any Taxes cover any
period of time beginning before the Commencement Date or ending after the
expiration or earlier termination of this Lease, Tenant's responsibility for
such Taxes shall be prorated to cover only that portion of such Taxes applicable
to the period that the Lease is in effect, and Landlord shall promptly reimburse
Tenant for any overpayment (provided that all Taxes that become due and payable
while construction is being performed shall still be included in and a part of
Base Construction Costs). Tenant may contest by appropriate legal proceedings
the amount, validity, or application of any Taxes or liens securing Taxes.
Taxes shall not include any of the following (except to the extent any of the
following are in substitution for any Taxes payable hereunder): (x) any net
income taxes that may be imposed on Landlord, or (y) any revenue taxes that may
be imposed on any sale of Landlord's interest in the Project. Tenant also shall
pay, prior to delinquency, any and all Taxes levied or assessed against any
personal property or trade fixtures placed by Tenant in the Premises, whether
levied or assessed against Landlord or Tenant. If Tenant fails to pay any
Taxes, Landlord shall have the right (but not the obligation) to pay the same,
and any amount actually so paid by Landlord shall be payable to Landlord on
demand as Additional Rent or includable by Landlord as an Operating Expense.
10. PARKING. At no additional cost to Tenant, Tenant shall have a license to
use at least 141 parking spaces at the Site. Such license shall be effective
during the Term and any Term Extension, shall be revocable by Landlord upon the
expiration or earlier termination of this Lease, and shall be limited by and
subject to any changes mandated by Legal Requirements (including zoning
restrictions) that may be enacted or first effective after the Effective Date
and to any changes in the design of the Building requested or approved by Tenant
and made after the Effective Date.
11. UTILITIES; SERVICES. Subject to the terms of this Section, Landlord shall
cause to be provided to the Project and the Premises, water, electricity, gas,
light, power, telephone, sewer, and other utilities (including fire sprinklers)
(collectively, "UTILITIES"). Tenant shall arrange for refuse and trash
collection and janitorial services provided to the Premises. Landlord shall
cause all Utilities to be charged directly to Tenant by the provider. Tenant
shall pay directly to the Utility provider, prior to delinquency, all charges
for Utilities used on the Premises during the Term and any Term Extension, all
maintenance charges for Utilities, and any storm sewer charges or other similar
charges for Utilities imposed by any Governmental Authority or Utility provider,
and any taxes, penalties, surcharges, or similar charges thereon. If Tenant
fails to pay any Utilities in the manner required hereunder, Landlord shall have
the right (but not the obligation) to pay the same, and the amount thereof shall
be payable to Landlord on demand as Additional Rent or includable by Landlord as
an Operating Expense. No interruption or failure of Utilities, from any cause
whatsoever other than Landlord's willful misconduct, shall result in eviction or
constructive eviction of Tenant, termination of this Lease or the abatement of
Rent.
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12. ALTERATIONS AND TRADE FIXTURES. Any alterations, additions, or
improvements made to the Premises ("ALTERATIONS") by or on behalf of Tenant,
including additional locks or bolts of any kind or nature upon any doors or
windows in the Premises, but excluding installation, removal, or realignment of
furniture systems (other than removal of furniture systems owned or paid for by
Landlord) not involving any modifications to the structure or connections (other
then by ordinary plugs or jacks) to "BUILDING SYSTEMS" (as defined in Section 13
below) shall be subject to Landlord's prior written consent, which consent (i)
will not be unreasonably withheld or delayed with respect to non-structural
Alterations to the interior of the Premises that do not involve any Building
Systems or puncturing, relocating, or removing the roof or any existing load-
bearing walls ("NON-STRUCTURAL ALTERATIONS"), and (ii) may be withheld, in
Landlord's sole and absolute discretion, with respect to all other Alterations.
Notwithstanding the foregoing, Landlord's prior consent will not be required
with respect to Non-Structural Alterations if the cost of each such Non-
Structural Alteration does not exceed $5,000.00 ("PERMITTED NON-STRUCTURAL
ALTERATIONS"), the aggregate cost of all such Permitted Non-Structural
Alterations does not exceed $25,000.00 in any consecutive 12 month period, and
Tenant provides Landlord with Notice of each such Permitted Non-Structural
Alteration, accompanied by any plans, specifications, bid proposals, work
contracts, or other information concerning the nature and cost of each such
Permitted Non-Structural Alteration that Tenant may have in its possession or
control, including the identities and mailing addresses of all persons
performing work or supplying materials (collectively, "ALTERATIONS
INFORMATION"). If Landlord approves any Alterations, Landlord may impose such
conditions on Tenant in connection with the commencement, performance, and
completion of such Alterations as Landlord may deem appropriate (in Landlord's
reasonable discretion, with respect to Non-Structural Alterations, and in
Landlord's sole and absolute discretion, with respect to all other Alterations).
Any request for approval shall be in writing, delivered not less than 15
business days in advance of any proposed construction, and accompanied by such
Alterations Information as may be reasonably requested by Landlord. Landlord's
right to review plans and specifications and to monitor construction shall be
solely for its own benefit, and Landlord shall have no duty to see that such
plans and specifications or construction comply with applicable Legal
Requirements. Tenant, at its sole cost and expense, shall cause all Alterations
to comply with insurance requirements known to Tenant and Legal Requirements and
shall implement any alteration or modification required by Legal Requirements as
a result of any Alterations. Except as to Permitted Non-Structural Alterations,
Tenant shall pay to Landlord, on demand as Additional Rent, an amount equal to
5.00% of all charges incurred by Tenant or its contractors or agents in
connection with any Alterations to cover Landlord's overhead and expenses for
plan review, coordination, scheduling, and supervision. Tenant will give
Landlord Notice at least 5 days (or any longer period that may be required under
the Ground Lease) before beginning any Alterations so that Landlord may post on
and about the Premises notices of non-responsibility pursuant to applicable law.
Tenant, at its sole cost and expense, shall correct any faulty work or
inadequate cleanup done by Tenant or its contractors within 5 business days
after Notice of the same from Landlord. Tenant shall reimburse Landlord for, and
indemnify and hold Landlord harmless from, any reasonable and necessary expenses
incurred by Landlord by reason of such faulty work or inadequate cleanup or by
reason of delays caused by the same.
Tenant shall furnish security or make other arrangements satisfactory to
Landlord to assure payment for the completion of all work free and clear of
"LIENS" (as defined in Section 15 below), and shall provide certificates of
insurance for workers compensation and other coverage in amounts and from an
insurance company satisfactory to Landlord protecting Landlord against liability
for personal injury or property damage during construction (copies of such
certificates will suffice, so long as the original certificates are forwarded to
Landlord within 2 business days thereafter). Upon completion of any
Alterations, Tenant shall deliver to Landlord: (i) sworn
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statements setting forth the names of all contractors and subcontractors who did
the work and final lien waivers from all such contractors and subcontractors;
and (ii) as-built plans for any such Alteration.
Other than the items, if any, listed on Exhibit I and any items agreed by
Landlord in writing to be included on Exhibit I in the future ("TENANT'S
PROPERTY"), all Alterations, all "TENANT IMPROVEMENTS" (as defined in the Work
Letter), and all other equipment, fixtures, trade fixtures, machinery, built-in
furniture and cabinets, and other additions and improvements attached to or
built into the Premises, including, without limitation, fume hoods that
penetrate the roof or plenum area, built-in cold rooms, built-in warm rooms,
walk-in cold rooms, walk-in warm rooms, deionized water systems, glass washing
equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical
equipment and systems, and any power generator and transfer switch
(collectively, "INSTALLATIONS"), shall be and shall remain the property of
Landlord during the Term and any Term Extension and following the expiration or
earlier termination of this Lease, shall not be removed by Tenant at any time
during the Term or any Term Extension, and shall remain upon and be surrendered
with the Premises as a part thereof following the expiration or earlier
termination of this Lease; provided, however, that Landlord, at the time its
approval of any Installation is requested, may elect to cause Tenant to remove
such Installation upon the expiration or earlier termination of this Lease. If
Landlord so elects, Tenant shall remove such Installation upon the expiration or
earlier termination of this Lease and restore any damage caused by or occasioned
as a result of such removal. During any such restoration period, Tenant shall
pay Rent to Landlord as provided herein as if Tenant otherwise occupied said
space. Landlord and Tenant hereby acknowledge and agree that the list of
Tenant's Property attached hereto as Exhibit I is intentionally over-inclusive
and includes items that will be used, located, placed, and/or stored in the
Greenhouse. Tenant shall be solely responsible for keeping records regarding
the actual location of each particular item of Tenant's Property. For purposes
of this Lease, if, at any time, any particular item of Tenant's Property is not
within the Premises, such item shall be presumed to be within the Greenhouse.
13. TENANT'S REPAIRS. During the Term and any Term Extension, Tenant shall
keep all components of the Premises and the Project in good order, condition,
and repair (to the extent the need for such repairs occurs as a result of
Tenant's use of the portion of the Premises or Project requiring repairs),
reasonable wear and tear and Construction Defects excluded, including, but not
limited to, all equipment or facilities, such as plumbing, heating, ventilation,
and air-conditioning ("HVAC"), electrical and lighting facilities, boilers,
pressure vessels, fire protection systems, fixtures, exterior and interior
walls, foundations, ceilings, roofs, floors, windows, doors, plate glass,
landscaping and irrigation systems, driveways and parking areas, fences,
retaining walls, signs, and sidewalks ("BUILDING SYSTEMS"). Tenant's
obligations shall include restorations, replacements, or renewals when
necessary. During the Term and any Term Extension, Tenant also shall keep the
exterior appearance of the Building in a condition consistent with the exterior
appearance of other substantially similar facilities of comparable age and size
("SIMILAR FACILITIES") located within the area commonly known as the "I-40/RTP
sub-market' (the "SUB-MARKET"), including, when necessary, the exterior sealing,
resealing, or repainting of the Building. Tenant, in keeping the Premises and
the Project in good order, condition, and repair, shall exercise and perform
good maintenance practices, specifically including the procurement and
maintenance of service contracts, with copies to Landlord, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of, the following Building Systems (the "SERVICE CONTRACTS"): (i)
HVAC, (ii) boilers and pressure vessels, (iii) fire protection systems, (iv)
landscaping and irrigation systems, (v) roof covering and drains, (vi) driveways
and parking areas, (vii) basic Utilities feeds to the perimeter of the Building,
and (viii) any other Building Systems reasonably required by Landlord.
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Tenant's obligations under this Section shall be at Tenant's sole cost and
expense. If Tenant fails to repair or maintain any portion of the Premises or
the Project as required under this Section within 15 days after Landlord gives
Tenant written demand to so repair or maintain, Landlord may perform such work
and the reasonable and necessary cost thereof shall be payable to Landlord on
demand as Additional Rent or includable by Landlord as an Operating Expense.
Notwithstanding the foregoing, if any "MAJOR REPAIR" (as hereinafter
defined) is required, Landlord shall be responsible for completing a
"RESTORATION" (as hereinafter defined). As used herein, the term "MAJOR REPAIR"
shall mean the following: (a) during the final 12 months of the Term or any Term
Extension (provided that Tenant has elected not to exercise any then available
Extension Right or no Extension Right is then available) (the "FINAL 12
MONTHS"), any repair to any Building System other than a "TENANT SPECIFIC
BUILDING SYSTEM" (as hereinafter defined) that will cost more than 60.00% of the
cost of replacing such Building System; and (b) at all other times, any repair
to any Building System that will cost more than 50.00% of the cost of replacing
such Building System. As used herein, the term "TENANT SPECIFIC BUILDING
SYSTEM" shall mean any Building System that is necessary only because of
Tenant's specific use of the Premises or the conduct of Tenant's specific
business operations on the Premises. As used herein, the term "RESTORATION"
shall mean the following: (x) during the Final 12 Months, repairing or replacing
the Building System in question, at Landlord's sole option; and (y) at all other
times, replacing the Building System in question. The cost of any Restoration
shall be includable by Landlord as an Operating Expense, provided that the cost
of any Restoration that involves replacing the Building System in question shall
be deemed a capital improvement and amortized over the useful life of the
improvement (not to exceed 7 years). Under all circumstances, Landlord shall
have no obligation with respect to any Building System to the extent any repair
of such Building System becomes necessary because of Tenant's failure to
exercise and perform adequate maintenance as required hereunder.
Notwithstanding the foregoing, substantial repairs to the Premises or the
Project required as the result of fire, earthquake, flood, vandalism, war, or
similar cause of damage or destruction shall be controlled by Section 18.
14. LANDLORD'S REPAIRS. It is intended by Landlord and Tenant that Landlord
shall have no obligation, in any manner whatsoever, to repair or maintain the
Premises or the Project (including, without limitation, the Building Systems),
except to the extent, and only to the extent, of any repairs that are necessary
solely because of Construction Defects, Landlord's gross negligence or willful
misconduct, the elements, or the age of the Premises or the Project. It is also
intended by Landlord and Tenant that the terms of this Lease shall govern their
respective obligations regarding repair and maintenance of the Premises and the
Project, and Tenant expressly waives the benefit of any state or local law now
or hereafter in effect to the extent any such law is inconsistent with the terms
of this Lease. Notwithstanding the foregoing, Landlord shall not be in default
in its obligations under this Section if:
(a) with respect to Construction Defects that Landlord reasonably determines,
in good faith, involve or may involve structural components of the Premises
or pose or may pose a significant risk of personal injury or substantial
property damage ("SERIOUS CONSTRUCTION DEFECTS"), the applicable
contractor, despite Landlord's reasonable efforts, fails to remedy such
Construction Defect within 30 days after Tenant gives Landlord Notice of
such Construction Defect, but Landlord, within 30 days thereafter,
commences and diligently and continuously prosecutes such remedial action
to completion, at Landlord's sole cost and expense;
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Paradigm Genetics, Inc.--Page 18
(b) with respect to Construction Defects that Landlord reasonably determines,
in good faith, are not Serious Construction Defects or involve Tenant's
Property, the applicable contractor, despite Landlord's reasonable efforts,
fails to remedy such Construction Defect within 30 days after Tenant gives
Landlord Notice of such Construction Defect, in which case Landlord shall
have no further obligation with respect to such Construction Defect other
than to cooperate, at no cost to Landlord, with Tenant should Tenant elect
to pursue a claim against such contractor, provided that Tenant indemnifies
and holds Landlord harmless from and against any liability, loss, cost,
damage, or expense that may arise because Tenant's claim is denied or is
determined to be baseless, erroneous, faulty, groundless, improper,
inappropriate, unfounded, or otherwise unjustified or unwarranted; or
(c) with respect to any part of the Premises or the Project, any action by
Tenant has directly resulted in the invalidation of any otherwise
enforceable warranty or bond that would cover the cost of remedying such
Construction Defect.
Any determination made by Landlord pursuant to paragraph (a) or (b) above shall
be deemed reasonable and in good faith if based on advice received by Landlord
from an independent and duly licensed design or construction consultant (a
"DEFECT CONSULTANT"). Tenant may ask a Defect Consultant to provide written
confirmation of the advice given Landlord in connection with a determination by
Landlord that a specific Construction Defect is not a Serious Construction
Defect if, and only if, (i) Tenant gives Landlord Notice of such desire within 3
business days after receiving Notice of Landlord's determination, and (ii)
Tenant is solely responsible for any fee, cost, charge, or other assessment
imposed by the Defect Consultant for providing such written confirmation;
provided, however, that Tenant understands and agrees that Landlord's waiver of
the potential conflict of interest facing the Defect Consultant shall be
strictly limited to the advice, and only the advice, given Landlord in the
specific instance in question and shall not apply, under any circumstances, to
any other advice or matters that may be the subject of the services provided to
Landlord by the Defect Consultant.
15. LIENS. Tenant, at Tenant's sole cost and expense, shall pay for all work
performed for, materials furnished to, or obligations incurred by Tenant in
connection with the Premises or the Project, and shall keep the Premises and the
Project free from, and shall discharge, by bond or otherwise, any mechanic's or
materialmen's lien or claim of lien filed against the Premises or the Project
for work claimed to have been done for, materials claimed to have been furnished
to, or obligations claimed to have been incurred by, Tenant in connection with
the Premises or the Project (generally, "LIENS"). Tenant shall discharge any
such Lien within 10 days after Tenant receives notice of such Lien. With
respect to any Alterations for which the estimated cost exceeds $15,000.00,
Landlord may require Tenant, at Tenant's sole cost and expense, to provide a
lien and completion bond in an amount equal to 150.00% of such estimated cost,
insuring Landlord against any liability for any Liens that may arise from such
Alterations. Should Tenant fail to discharge any Lien in the manner and at the
time provided herein, Landlord shall have the right, but not the obligation, to
pay such claim or post a bond or otherwise provide security to eliminate the
Lien as a claim against title to the Project and the cost thereof shall be
immediately due from Tenant as Additional Rent. If Tenant shall lease or
finance the acquisition of office equipment, furnishings, or other personal
property of a removable nature used by Tenant in the operation of Tenant's
business, Tenant warrants that any Uniform Commercial Code Financing Statement
executed by Tenant will on its face or by exhibit thereto indicate that such
Financing Statement is applicable only to removable personal property of Tenant
located within the Premises. In no event shall the address of the Project be
furnished on the statement without qualifying language as to applicability of
the lien only to removable personal property, located in an identified suite
held by Tenant.
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16. INDEMNIFICATION.
(a) Tenant hereby indemnifies and agrees to defend, save, and hold Landlord
harmless from and against any and all Claims for injury or death to persons
or damage to property occurring within or about the Premises or the
Project, arising directly or indirectly out of Tenant's use or occupancy of
the Premises or the Project or a breach or default by Tenant in the
performance of any of its obligations hereunder, except to the extent
caused by the gross negligence or willful misconduct of Landlord.
(b) Landlord hereby indemnifies and agrees to defend, save, and hold Tenant
harmless from and against any and all Claims for injury or death to persons
or damage to property occurring within or about the Premises or the
Project, to the extent, and only to the extent, caused by the gross
negligence or willful misconduct of Landlord. Under no circumstances,
however, shall Landlord be liable to Tenant for, and Tenant assumes all
risk of, damage to personal property (including, without limitation, loss
of records kept within the Premises). Further, Tenant waives any and all
Claims for injury to Tenant's business or loss of income relating to any
such damage or destruction of personal property (including, without
limitation, any loss of records). Finally, Landlord shall not be liable
for any damages arising from any act, omission, or neglect of any guests,
invitees, licensees, and other authorized users of the Project or of any
other third party.
17. INSURANCE. Landlord shall maintain all insurance against any peril
generally included within the classification "Fire and Extended Coverage",
sprinkler damage (if applicable), vandalism and malicious mischief covering the
full replacement cost of the Project, as the same shall exist from time to time,
or the amount required by Ground Lessor or any lender of Landlord holding a
security interest in Landlord's interest in the Project, but in no event more
than the commercially reasonable and available insurable value thereof.
Landlord also may maintain, but is not obligated to maintain, such other
insurance and additional coverages as Landlord may deem necessary, including,
but not limited to, comprehensive public liability, flood, environmental hazard,
earthquake, loss or failure of building equipment, and rental loss during
periods of repair or rebuilding. The Project may be included in a blanket
policy (in which case the cost of such insurance allocable to the Project will
be determined by Landlord based upon the insurer's cost calculations). Tenant
hereby acknowledges that Tenant has been provided with a written summary of the
insurance coverage that Landlord will be maintaining with respect to the Project
as of the Commencement Date; Landlord will be responsible for notifying Tenant
of any material changes in such insurance coverage made after the Commencement
Date.
Tenant, at its sole expense, shall maintain during the Term and any Term
Extension: all risk property insurance covering the full replacement cost of all
property and improvements installed or placed in the Premises by Tenant;
worker's compensation insurance with no less than the minimum limits required by
law; employees liability insurance with such limits as required by law; and
comprehensive public liability insurance, with a minimum limit of not less than
$2,000,000 per occurrence for death or bodily injury and not less than
$1,000,000 for property damage with respect to the Premises. Landlord may from
time to time require reasonable increases in any such limits. The comprehensive
public liability insurance policies shall name Landlord, its officers,
directors, employees, managers, agents, invitees and contractors (collectively,
"RELATED PARTIES"), as additional insureds; insure on an occurrence and not a
claims-made basis; be issued by insurance companies that have a rating of not
less than policyholder rating of A and financial category rating of at least
Class XII in "Best's Insurance Guide"; shall not be cancelable unless 30 days
prior written notice shall have been
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Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
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given to Landlord from the insurer; contain a hostile fire endorsement and a
contractual liability endorsement; and provide primary coverage to Landlord (any
policy issued to Landlord providing duplicate or similar coverage shall be
deemed excess over Tenant's policies). Such policies or certificates thereof
shall be delivered to Landlord by Tenant upon commencement of the Term and upon
each renewal of said insurance (upon renewal, copies of such policies or
certificates will suffice, so long as the original policies or certificates are
forwarded to Landlord within 2 business days thereafter). Tenant's policy may be
a "blanket policy" which specifically provides that the amount of insurance
shall not be prejudiced by other losses covered by the policy. Tenant shall, at
least 20 days prior to the expiration of such policies, furnish Landlord with
renewals or binders. Tenant agrees that if Tenant does not maintain such
insurance, Landlord shall have the right (but not the obligation) to procure
said insurance on Tenant's behalf.
In each instance where insurance is to name Landlord as an additional
insured, Tenant, upon Landlord's written request, shall furnish certificates so
evidencing Landlord as additional insured to: (i) Ground Lessor, (ii) any lender
of Landlord holding a security interest in any portion of the Project, and/or
(iii) any management company retained by Landlord to manage the Project.
Further, Tenant agrees that Landlord may require insurance policy limits to be
raised to conform to the requirements of Ground Lessor and/or Landlord's lender.
The property insurance obtained by Landlord and Tenant shall include a
waiver of subrogation by the insurers and all rights based upon an assignment
from its insured, against Landlord or Tenant, and their respective Related
Parties, in connection with any loss or damage thereby insured against. Neither
party nor its respective Related Parties shall be liable to the other for loss
or damage caused by any risk insured against under property insurance required
to be maintained hereunder, and each party waives any claims against the other
party, and its respective Related Parties for such loss or damage. The failure
of a party to insure its property shall not void this waiver. Landlord and its
respective Related Parties shall not be liable for, and Tenant hereby waives all
claims against such parties for, business interruption and losses occasioned
thereby sustained by Tenant or any person claiming through Tenant resulting from
any accident or occurrence in or upon the Premises or the Project from any cause
whatsoever. If the foregoing waivers shall contravene any law with respect to
exculpatory agreements, the liability of Landlord or Tenant shall be deemed not
released but shall be secondary to the others insurer.
The cost of any insurance procured and/or maintained by Landlord pursuant
to this Section shall be included as an Operating Expense.
Notwithstanding any provision of this Section, Landlord shall insure, and
shall bear all risk of loss with respect to, the Premises and the Project at all
times prior to the Commencement Date, with the exception of any acts or
omissions by Tenant or its agents or contractors.
18. RESTORATION. If at any time during the Term or any Term Extension the
Project or the Premises are damaged by a fire or other insured casualty,
Landlord shall notify Tenant within 45 days after discovery of such damage as to
the amount of time Landlord reasonably estimates it will take to restore the
Project or the Premises, as applicable. If the restoration time is estimated to
exceed 6 months, either party, by giving Notice to the other party, may elect to
terminate this Lease as of the date that is 75 days after the date of discovery
of such damage. Unless either party elects to terminate this Lease, Landlord,
subject to receipt of sufficient insurance proceeds, shall promptly restore the
Premises (excluding any Alterations installed by
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Tenant and any other improvements installed by Landlord and paid for by Tenant
after Substantial Completion of the original Premises), subject to delays
arising from the collection of insurance proceeds, from Force Majeure events, or
as needed to obtain any license, clearance, or other authorization of any kind
required to enter into and restore the Premises issued by any Governmental
Authority having jurisdiction over the use, storage, release or removal of
Hazardous Materials in, on, or about the Premises (collectively referred to
herein as "HAZARDOUS MATERIALS CLEARANCES"); provided, however, that if such
repair or restoration of the Premises is not Substantially Complete within 9
months after the date of discovery of the damage (to be extended by 1 day for
each day that the restoration time is estimated to exceed 6 months, provided
that neither party elected to terminate this Lease based on such estimate),
either party, by giving Notice to the other party, may elect not to proceed with
such repair and restoration, in which event Landlord shall be relieved of its
obligations to make such repairs or restoration and this Lease shall terminate
effective as of the date of such election.
Tenant, at its expense, shall promptly perform, subject to delays arising
from the collection of insurance proceeds, from Force Majeure events or to
obtain Hazardous Material Clearances, all repairs or restoration not required to
be done by Landlord and, as soon as reasonably practicable, shall re-enter the
Premises and commence doing business in accordance with this Lease.
Notwithstanding the foregoing, Landlord may terminate this Lease if the Premises
are damaged during the last 18 months of the Term or of any Term Extension and
Landlord reasonably estimates that it will take more than 60 days to repair such
damage, or if insurance proceeds are not available for such restoration. Rent
shall be abated from the date all required Hazardous Material Clearances are
obtained until the Premises are repaired and restored, in the proportion that
the area of the Premises that is not usable by Tenant, if any, bears to the
total area of the Premises, unless Landlord provides Tenant with other space
during the period of repair that is suitable, in Tenant's reasonable discretion,
for the temporary conduct of Tenant's business. Such abatement shall be
Tenant's sole and exclusive remedy at law, in equity, or otherwise, and except
as provided herein, Tenant waives any right to terminate the Lease by reason of
damage or casualty loss.
The provisions of this Lease, including this Section, constitute an express
agreement between Landlord and Tenant with respect to any and all damage to, or
destruction of, all or any part of the Premises, or any other portion of the
Project, and any statute or regulation that is now or may hereafter be in
effect, shall have no application to this Lease or any damage or destruction to
all or any part of the Premises or any other portion of the Project, the parties
hereto expressly agreeing this Section sets forth their entire understanding and
agreement with respect to such matters.
19. CONDEMNATION. If any part of the Premises or the Project is taken for any
public or quasi-public use under any governmental law, ordinance, or regulation,
or by right of eminent domain, or by private purchase in lieu thereof (a
"TAKING" or "TAKEN"), and the Taking would, in Tenant's judgment, prevent or
materially interfere with Tenant's use of the Premises for the Permitted Use or,
in Landlord's judgment, materially interfere with or impair Landlord's ownership
or operation of the Project, then upon Notice by either party to the other party
this Lease shall terminate and Rent shall be apportioned as of said date. If
part of the Premises shall be Taken, and this Lease is not terminated as
provided above, Landlord shall promptly restore the Premises and the Project as
nearly as is commercially reasonable under the circumstances to their condition
prior to such partial taking and the Rent payable hereunder during the unexpired
portion of the Term or any Term Extension shall be reduced to such extent as may
be fair and reasonable under the circumstances. Upon any such Taking, Landlord
shall be entitled to receive the entire price or award from any such Taking
without any payment to
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Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such
award. Tenant shall have the right, to the extent that same shall not diminish
Landlord's award, to make a separate claim against the condemning authority (but
not Landlord) for such compensation as may be separately awarded or recoverable
by Tenant for moving expenses and damage to Tenant's Trade Fixtures, if a
separate award for such items is made to Tenant. Tenant hereby waives any and
all rights it might otherwise have pursuant to any provision of state law to
terminate this Lease upon a partial Taking of the Premises or the Project.
20. EVENTS OF DEFAULT. Each of the following events shall be a default
("DEFAULT") by Tenant under this Lease:
(a) PAYMENT DEFAULTS. Tenant shall fail to pay any installment of Rent or any
other payment hereunder when due; provided, however, that Landlord will
give Tenant Notice and an opportunity to cure any failure to pay Rent
within 3 days of any such Notice not more than once in any 12 month period
and Tenant agrees that such Notice shall be in lieu of and not in addition
to any notice required by law.
(b) INSURANCE. (i) Any insurance required to be maintained by Tenant pursuant
to this Lease shall be canceled or terminated or shall expire or shall be
reduced or materially changed, or Landlord shall receive a notice of
nonrenewal of any such insurance and (ii) Tenant shall fail to obtain
replacement insurance at least 20 days before the expiration of the current
coverage.
(c) ABANDONMENT. Tenant shall abandon the Premises.
(d) IMPROPER TRANSFER. Tenant shall assign, sublease or otherwise transfer or
attempt to transfer all or any portion of Tenant's interest in this Lease
or the Premises except as expressly permitted herein, or Tenant's interest
in this Lease shall be attached, executed upon, or otherwise judicially
seized and such action is not released within 90 days of the action.
(e) LIENS. Tenant shall fail to satisfy its obligations under Section 15.
(f) INSOLVENCY EVENTS. Tenant or any guarantor or surety of Tenant's
obligations hereunder shall: (i) make a general assignment for the benefit
of creditors; (ii) commence any case, proceeding or other action seeking to
have an order for relief entered on its behalf as a debtor or to adjudicate
it bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts or
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or of any substantial part of its property
(collectively a "PROCEEDING FOR RELIEF"); (iii) become the subject of any
Proceeding for Relief that is not dismissed within 90 days of its filing or
entry; or (iv) die or suffer a legal disability (if Tenant, guarantor, or
surety is an individual) or be dissolved or otherwise fail to maintain its
legal existence (if Tenant, guarantor or surety is a corporation,
partnership or other entity).
(g) ESTOPPEL CERTIFICATE OR SUBORDINATION AGREEMENT. Tenant fails to execute
any document required from Tenant under Sections 23, 27, or 38 within 10
days after a second Notice requesting such document.
(h) GREENHOUSE LEASE. Tenant is in breach of, in default under, or otherwise
has failed to comply with the agreements, terms, covenants and conditions
to be
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performed by Tenant in connection with the Greenhouse Lease, after any
applicable notice and cure periods.
(i) [INTENTIONALLY OMITTED]
(j) OTHER DEFAULTS. Tenant shall fail to comply with any provision of this
Lease other than those specifically referred to in this Section, and except
as otherwise expressly provided herein, such failure shall continue for a
period of 30 days after Notice thereof from Landlord to Tenant.
Any Notice given under Section 20(g) or (j) hereof, shall: (i) specify the
alleged default, (ii) demand that Tenant cure such default, (iii) be in lieu of,
and not in addition to, or be deemed to be, any notice required under any
provision of applicable law, and (iv) not be deemed a forfeiture or a
termination of this Lease unless Landlord elects otherwise in such Notice;
provided, however, that if the nature of Tenant's default is such that it cannot
be cured by the payment of money and reasonably requires more than 30 days to
cure, then Tenant shall not be deemed to be in default if Tenant commences such
cure within said 30-day period and thereafter diligently prosecutes the same to
completion; provided further, however, that such cure shall be completed no
later than 60 days from the date of Landlord's Notice.
21. LANDLORD'S REMEDIES.
(a) PAYMENT BY LANDLORD; INTEREST. Upon a Default by Tenant hereunder,
Landlord, without waiving or releasing any obligation of Tenant hereunder,
may make such payment or perform such act. All sums so paid or incurred by
Landlord, together with interest thereon, from the date such sums were paid
or incurred, at the annual rate equal to 12.00% per annum or the highest
rate permitted by law, whichever is less (the "DEFAULT RATE"), shall be
payable to Landlord on demand as Additional Rent. Nothing herein shall be
construed to create or impose a duty on Landlord to mitigate any damages
resulting from Tenant's Default hereunder.
(b) LATE PAYMENT RENT. Late payment by Tenant to Landlord of Rent and other
sums due under this Lease will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult and impracticable to ascertain. Such costs include, but are not
limited to, processing and accounting charges and late charges that may be
imposed on Landlord under any "MORTGAGE" (as defined in Section 27 below)
covering the Premises. Therefore, if Landlord does not receive any
installment of Rent due from Tenant within 5 days after the date such
payment is due, Tenant shall pay to Landlord an additional sum of 6.00% of
the overdue Rent as a late charge. In addition to the late charge, Rent
not paid when due shall bear interest at the Default Rate from the 5th day
after the date due until paid. Provided there is no other Default by
Tenant hereunder, the foregoing late charge and interest at the Default
Rate will not be payable until the 2nd late payment of Rent in any 12 month
period. Tenant agrees that the foregoing late charge and interest at the
Default Rate represent a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Tenant also acknowledges
that Landlord is entitled to use reasonable methods to deter delinquent
payments by Tenant and agrees that, under the circumstances in existence as
of the date of this Lease, the foregoing late charge and interest at the
Default Rate are reasonable, as evidenced by the fact that, among other
things, (i) Landlord and Tenant have comparatively equal bargaining power,
(ii) this Lease is not a pre-printed form document, and (iii) Tenant's
principals are well experienced in leasing properties, were represented by
counsel in the
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negotiation and documentation of this Lease, and bargained at arms
length and without duress for all of the terms and conditions of this
Lease, including this provision.
(c) REMEDIES. Upon the occurrence of a Default, Landlord, at its option,
without further Notice to or demand on Tenant, shall have the option, in
addition to all other rights and remedies provided in this Lease, at law or
in equity, to pursue any one or more of the following remedies, each and
all of which shall be cumulative and nonexclusive, without any Notice or
demand whatsoever.
(i) Terminate this Lease, or at Landlord's option, Tenant's right to possession
only, in which event Tenant shall immediately surrender the Premises to
Landlord, and if Tenant fails to do so, Landlord may, in accordance with
applicable law and without prejudice to any other remedy that it may have
for possession or arrearages in rent, enter upon and take possession of the
Premises and expel or remove Tenant and any other person who may be
occupying the Premises or any part thereof, without being liable for
prosecution or any claim or damages therefor;
(ii) Upon any termination of this Lease, whether pursuant to the foregoing
Section 21(c)(i) or otherwise, Landlord may recover from Tenant the
following:
(a) The worth at the time of award of any unpaid rent which has been earned at
the time of such termination; plus
(b) The worth at the time of award of the amount by which the unpaid rent that
would have been earned after termination until the time of award exceeds
the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(c) The worth at the time of award of the amount by which the unpaid rent for
the balance of the Term or Term Extension (as the case may be) after the
time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided; plus
(d) Any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under
this Lease or which in the ordinary course of things would be likely to
result therefrom, specifically including, but not limited to, brokerage
commissions and advertising expenses incurred and the expenses of
remodeling the Premises or any portion thereof for a new tenant, whether
for the same or a different use, and any special concessions made to obtain
a new tenant; and
(e) At Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.
The term "RENT" as used in this Section shall be deemed to be and to mean all
sums of every nature required to be paid by Tenant pursuant to the terms of this
Lease, whether to Landlord or to others. As used in Sections 21(c)(ii)(A) and
(B), above, the "WORTH AT THE TIME OF AWARD" shall be computed by allowing
interest at the Default Rate. As used in Section 21(c)(ii)(C) above, the "WORTH
AT THE TIME OF AWARD" shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus 1.00%.
(iii) Landlord may continue this Lease in effect after Tenant's Default and
recover rent as it becomes due. Accordingly, if Landlord does not elect
to terminate this
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Lease following a Default by Tenant, Landlord may, from time to time, without
terminating this Lease, enforce all of its rights and remedies hereunder,
including the right to recover all Rent as it becomes due.
(iv) Whether or not Landlord elects to terminate this Lease following a Default
by Tenant, Landlord shall have the right to terminate any and all
subleases, licenses, concessions or other consensual arrangements for
possession entered into by Tenant and affecting the Premises or may, in
Landlord's sole and absolute discretion, succeed to Tenant's interest in
such subleases, licenses, concessions or arrangements. Upon Landlord's
election to succeed to Tenant's interest in any such subleases, licenses,
concessions or arrangements, Tenant shall, as of the date of Notice by
Landlord of such election, have no further right to or interest in the rent
or other consideration receivable thereunder.
(d) EFFECT OF EXERCISE. Exercise by Landlord of any remedies hereunder or
otherwise available shall not be deemed to be an acceptance of surrender of
the Premises and/or a termination of this Lease by Landlord, it being
understood that such surrender and/or termination can be effected only by
the express written agreement of Landlord and Tenant. Any law, usage, or
custom to the contrary notwithstanding, Landlord shall have the right at
all times to enforce the provisions of this Lease in strict accordance with
the terms hereof; and the failure of Landlord at any time to enforce its
rights under this Lease strictly in accordance with same shall not be
construed as having created a custom in any way or manner contrary to the
specific terms, provisions, and covenants of this Lease or as having
modified the same and shall not be deemed a waiver of Landlord's right to
enforce one or more of its rights in connection with any subsequent
default. A receipt by Landlord of Rent or other payment with knowledge of
the breach of any covenant hereof shall not be deemed a waiver of such
breach, and no waiver by Landlord of any provision of this Lease shall be
deemed to have been made unless expressed in writing and signed by
Landlord. To the greatest extent permitted by law, Tenant waives the
service of notice of Landlord's intention to re-enter, re-take or otherwise
obtain possession of the premises as provided in any statute, or to
institute legal proceedings to that end, and also waives all right of
redemption in case Tenant shall be dispossessed by a judgment or by warrant
of any court or judge. Any reletting of the Premises or any portion
thereof shall be on such terms and conditions as Landlord in its sole and
absolute discretion may determine. Landlord shall not be liable, nor shall
Tenant's obligations hereunder be diminished because of, Landlord's failure
to relet the Premises or collect rent due in respect of such reletting or
otherwise to mitigate any damages arising by reason of Tenant's Default.
22. ASSIGNMENT AND SUBLETTING.
(a) GENERAL PROHIBITION. Without Landlord's prior written consent, Tenant
shall not, directly or indirectly, voluntarily or by operation of law,
assign this Lease or sublease the Premises or any part thereof or mortgage,
pledge, or hypothecate its leasehold interest or grant any concession or
license within the Premises and any attempt to do any of the foregoing
shall be void and of no effect. For purposes of this Section, a transfer
of ownership interests controlling Tenant shall be deemed an assignment of
this Lease unless such ownership interests are publicly traded.
(b) PERMITTED TRANSFERS. If Tenant desires to assign, sublease, hypothecate or
otherwise transfer this Lease or sublet the Premises (generally, a
"TRANSFER"), then at least 15 business days, but not more than 30 business
days, before the date Tenant desires the Transfer to be effective (the
"ASSIGNMENT DATE"), Tenant shall give Landlord a Notice (the "ASSIGNMENT
NOTICE") containing such information about the proposed transferee,
including the
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proposed use of the Premises and any Hazardous Materials proposed to be
used or stored in the Premises, the Assignment Date, any relationship
between Tenant and the proposed transferee, and all material terms and
conditions of the proposed Transfer, and such other information as Landlord
may deem reasonably necessary or appropriate to its consideration whether
to grant its consent. Landlord may, by giving Notice to Tenant within 15
business days after receipt of the Assignment Notice: (i) grant or refuse
such consent, in its sole and absolute discretion, with respect to any
Transfer other than a straightforward sublease of not more than 5,000
square feet of the Premises (a "MINOR SUBLEASE"), or grant or refuse such
consent, in its reasonable discretion, with respect to such a Minor
Sublease, or (ii) terminate this Lease with respect to the space described
in the Assignment Notice, as of the Assignment Date (an "ASSIGNMENT
TERMINATION"). If Landlord elects an Assignment Termination, Tenant shall
have the right to withdraw its Assignment Notice by Notice to Landlord of
such election within 5 days after Landlord's Notice electing to exercise
the Assignment Termination. If Tenant withdraws such Assignment Notice,
this Lease shall continue in full force and effect. If Tenant does not
withdraw such Assignment Notice, this Lease, and the term and estate herein
granted, shall terminate as of the Assignment Date with respect to the
space described in such Assignment Notice. No failure of Landlord to
exercise any such option to terminate this Lease shall be deemed to be
Landlord's consent to the proposed Transfer. Tenant shall reimburse
Landlord for all reasonable out-of-pocket expenses, up to a maximum of
$1,000.00, incurred by Landlord in connection with its consideration of any
Assignment Notice.
(c) ADDITIONAL CONDITIONS. As a condition to any such Transfer, Landlord may
require:
(i) that any transferee agree, in writing at the time of such Transfer, that if
Landlord gives such third party notice that Tenant is in default under this
Lease, such third party shall thereafter make all payments otherwise due
Tenant directly to Landlord, which payments will be received by Landlord
without any liability except to credit such payment against those due under
this Lease, and any such third party shall agree to attorn to Landlord or
its successors and assigns should this Lease be terminated for any reason;
provided, however, in no event shall Landlord or its successors or assigns
be obligated to accept such attornment; and
(ii) A list of Hazardous Materials, certified by the proposed transferee to be
true and correct, which the proposed transferee intends to use or store in
the Premises together with the "DOCUMENTS" (as defined in Section 30(b)
below) with respect to such proposed transferee.
(d) NO RELEASE OF TENANT. Notwithstanding any Transfer, Tenant and any
guarantor or surety of Tenant's obligations under this Lease shall at all
times remain fully and primarily responsible and liable for the payment of
Rent and for compliance with all of Tenant's other obligations under this
Lease. If the Rent due and payable by a transferee (or a combination of
the rental payable under such Transfer plus any bonus or other
consideration therefor or incident thereto) exceeds the rental payable
under this Lease, then Tenant shall be bound and obligated to pay Landlord
as Additional Rent hereunder all such excess rental and other excess
consideration within 10 days following receipt thereof by Tenant. If
Tenant shall sublet the Premises or any part thereof, Tenant hereby
immediately and irrevocably assigns to Landlord, as security for Tenant's
obligations under this Lease, all rent from any such subletting and
Landlord, as assignee, or a receiver for Tenant appointed on Landlord's
application, may collect such rent and apply it toward Tenant's obligations
under this Lease; except that, until the occurrence of a Default, Tenant
shall have the right to collect such rent.
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(e) NO WAIVER. The consent by Landlord to a Transfer shall not relieve Tenant
or any transferee from obtaining the consent of Landlord to any further
Transfer nor shall it release Tenant or any transferee from full and
primary liability under the Lease. The acceptance of Rent hereunder, or
the acceptance of performance of any other term, covenant, or condition
thereof, from any other person or entity shall not be deemed to be a waiver
of any of the provisions of this Lease or a consent to any Transfer.
23. ESTOPPEL CERTIFICATE. Tenant shall within 15 business days of Notice from
Landlord, execute, acknowledge and deliver a statement in writing substantially
in the form attached to this Lease as Exhibit J with the blanks filled in, and
on any other form reasonably requested by a proposed lender or purchaser, (i)
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified is in full force and effect) and the dates to which the rental
and other charges are paid in advance, if any, (ii) acknowledging that there are
not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder, or specifying such defaults if any are claimed, and (iii) setting
forth such further information with respect to the status of this Lease or the
Premises as may be reasonably requested thereon. Any such statement may be
relied upon by any prospective purchaser or encumbrancer of all or any portion
of the real property of which the Premises are a part. Tenant's failure to
deliver such statement within such time shall, at the option of Landlord,
constitute a Default under this Lease, and, in any event, shall be conclusive
upon Tenant that the Lease is in full force and effect and without modification
except as may be represented by Landlord in any certificate prepared by Landlord
and delivered to Tenant for execution.
24. QUIET ENJOYMENT. If Tenant shall perform all of the covenants and
agreements herein required to be performed by Tenant, Tenant shall, at all times
during the Term and any Term Extension, have peaceful and quiet enjoyment of the
Premises and the Project against any person claiming by, through, or under
Landlord.
25. PRORATIONS. All prorations required or permitted to be made hereunder
shall be made on the basis of a 360-day year and 30-day months.
26. RULES AND REGULATIONS. Tenant shall, at all times during the Term and any
Term Extension, comply with all reasonable rules and regulations at any time or
from time to time established by Landlord covering the use of the Premises and
the Project and delivered to Tenant at least 30 days prior to their effective
date. The current rules and regulations are attached hereto as Exhibit H. If
there is any conflict between said rules and regulations and other provisions of
this Lease, the terms and provisions of this Lease shall control. Landlord
shall not have any obligation to enforce any rules or regulations against, and
shall have no liability for the breach of any rules or regulations by, other
tenants in the Project. If Landlord chooses to enforce any rules or regulations
against other tenants in the Project, Landlord shall do so in a non-
discriminatory manner.
27. SUBORDINATION. This Lease and Tenant's interest and rights hereunder are
and shall be subject and subordinate at all times to the lien of any first
mortgage, now existing or hereafter created on or against the Project or the
Premises, and all amendments, restatements, renewals, modifications,
consolidations, refinancings, assignments and extensions thereof (collectively,
a "MORTGAGE"), without the necessity of any further instrument or act on the
part of Tenant; provided, however, that so long as there is no Default
hereunder, Tenant's receipt of a fully executed instrument containing
appropriate non-disturbance provisions assuring Tenant's quiet enjoyment of the
Premises as set forth in Section 24 hereof shall be a condition precedent
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to the subordination of Tenant's interest and rights hereunder and Tenant's
right to possession of the Premises shall not be disturbed by the holder of any
such Mortgage (a "HOLDER"). Tenant agrees, at the election of any Holder, to
attorn to any such Holder. Tenant agrees, upon demand, to execute, acknowledge
and deliver a Subordination, Non-Disturbance and Attornment Agreement
substantially in the form attached hereto as Exhibit K (the "LOAN SUBORDINATION
AGREEMENT") or such other instruments, confirming such subordination and such
instruments of attornment as shall be reasonably requested by any Holder,
provided any such instruments contain the appropriate non-disturbance provisions
described above. Notwithstanding the foregoing, any Holder may at any time
subordinate its Mortgage to this Lease, without Tenant's consent, by written
notice to Tenant, and thereupon this Lease shall be deemed prior to such
Mortgage without regard to their respective dates of execution, delivery, or
recording and in that event such Holder shall have the same rights with respect
to this Lease as though this Lease had been executed prior to the execution,
delivery, and recording of such Mortgage and had been assigned to such Holder.
Landlord shall use commercially reasonable efforts to obtain an express
agreement from the Holder of any Mortgage that the lien of such Mortgage does
not apply or attach to any property that, by operation of the terms of this
Lease, is deemed to be Tenant's separate property, whether or not such property
is, has been, or will become affixed to the Premises. The term "MORTGAGE"
whenever used in this Lease shall be deemed to include deeds of trust, security
assignments and any other encumbrances given for value, and any reference to the
"HOLDER" of a mortgage shall be deemed to include the beneficiary under a deed
of trust.
28. SURRENDER. Upon expiration or earlier termination of Tenant's right of
possession, Tenant may, subject to the exercise of any remedies by Landlord,
remove Tenant's Property and shall surrender the Premises to Landlord in
substantially the same condition as received, broom clean, ordinary wear and
tear, approved Alterations, and casualty loss and condemnation covered by
Sections 18 and 19 excepted, and shall return to Landlord all keys to offices
and restrooms furnished to, or otherwise procured by, Tenant. If any such key
is lost, Tenant shall pay to Landlord, at Landlord's election, either the cost
of replacing such lost key or the cost of changing the lock or locks opened by
such lost key. Any Trade Fixtures, Alterations, and property not so removed by
Tenant as permitted or required herein shall be deemed abandoned and may be
stored, removed, and disposed of by Landlord at Tenant's expense, and Tenant
waives all claims against Landlord for any damages resulting from Landlord's
retention and/or disposition of such property. All obligations of either party
that have arisen and/or become binding hereunder but have not been fully
satisfied as of the expiration or earlier termination of this Lease shall
survive such expiration or earlier termination, including without limitation,
indemnity obligations, payment obligations (including Rent), obligations
concerning the condition and repair of the Premises, and the obligation to
obtain all required Hazardous Materials Clearances. Without limiting the
generality of the foregoing, the following provisions shall survive the
expiration or earlier termination of this Lease: (a) the indemnity obligations
contained in Sections 7, 12, 14(b), 16(a), 16(b), 30(a), 30(d), 35, and 38(b);
(b) the payment obligations contained in Sections 3, 5, 6, 8, 9, 11, 15, 21(a),
21(b), and 22(d); (c) the maintenance, repair, and/or restoration obligations
contained in Sections 12, 13, and 18; (d) the obligation to obtain Hazardous
Materials Clearances contained in Section 18; and (e) the agreements contained
in Sections 29, 36, and 44.
29. WAIVER OF JURY TRIAL. TENANT AND LANDLORD EACH AGREE NOT TO ELECT A TRIAL
BY JURY, AND WAIVE ANY RIGHT TO A TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN
LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT,
OR AGREEMENT EXECUTED OR
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DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO. THIS WAIVER
IS GIVEN KNOWINGLY AND VOLUNTARILY, AND IS INTENDED TO ENCOMPASS EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY OTHERWISE WOULD ACCRUE.
TENANT AND LANDLORD EACH AGREE THAT THIS PROVISION CONSTITUTES A WRITTEN CONSENT
TO WAIVER OF TRIAL BY JURY, AND EACH PARTY AUTHORIZES THE OTHER PARTY TO FILE A
COPY OF THIS PROVISION, IN ANY PROCEEDING, AS CONCLUSIVE EVIDENCE OF THIS
CONSENT TO WAIVER.
30. ENVIRONMENTAL REQUIREMENTS.
(a) PROHIBITION/COMPLIANCE. Landlord has provided Tenant with copies of all
environmental tests, reports, inspections, surveys, samples, studies, and
other analyses of the Site and the Additional Site that are in Landlord's
possession or control or that Landlord, through the exercise of
commercially reasonable efforts, has been able to obtain from various
Governmental Authorities having jurisdiction over "HAZARDOUS MATERIALS" (as
hereinafter defined) that may be present at the Site or the Additional Site
(collectively, the "ENVIRONMENTAL INFORMATION") A list of the documents
containing the Environmental Information is attached hereto as Exhibit M.
Landlord shall not be responsible, and Tenant hereby waives any right to
assert any claim against Landlord, for any Pre-Existing Contamination. In
addition to the forgoing, Tenant shall not cause or permit any Hazardous
Materials to be brought upon, kept, or used in or about the Premises, the
Project, or the Site in violation of applicable law. If Tenant breaches
the obligation stated in the preceding sentence, if the presence of
Hazardous Materials permitted by Tenant results in contamination of the
Premises, the Project, the Site, or any adjacent property (including the
Additional Site), or if any contamination of the Premises, Project, Site,
or any adjacent property (including the Additional Site) that is not
expressly identified in the Environmental Information ("PREVIOUSLY UNKNOWN
CONTAMINATION") is discovered during the Term or any Term Extension or
renewal hereof or holding over hereunder and Tenant cannot demonstrate that
such Previously Unknown Contamination was present at the Site before the
Effective Date or is attributable solely to the actions or omissions of a
person or entity other than Tenant, Tenant shall indemnify, defend, and
hold Landlord, its officers, directors, employees, agents and contractors
harmless from any and all claims, judgments, damages, penalties, fines,
costs, liabilities, or losses (including, without limitation, diminution in
value of the Premises or any portion of the Project, damages for the loss
or restriction on use of rentable or usable space or of any amenity of the
Premises or the Project, damages arising from any adverse impact on
marketing of space in the Premises or the Project, increase in the cost of
designing, constructing, or permitting any additional improvements within
the Project, and sums paid in settlement of claims and Legal Fees) that
arise before or after the expiration or earlier termination of this Lease
as a result of such contamination. This indemnification of Landlord by
Tenant includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any Governmental Authority because of
Hazardous Materials present in the air, soil, or ground water above, on, or
under the Premises, the Project, the Site, or any adjacent property
(including the Additional Site). Without limiting the foregoing, if the
presence of any Hazardous Materials within the Premises, the Project, the
Site, or any adjacent property (including the Additional Site) caused or
permitted by Tenant results in any contamination of the Premises, the
Project, the Site, or any adjacent property (including the Additional
Site), Tenant shall promptly take all actions at its sole expense as are
necessary to return the Premises, the Project, the Site, or any adjacent
property (including the Additional Site) to the condition existing prior to
the time of such contamination, provided that Landlord's approval of such
action shall first be obtained, which
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approval shall not unreasonably be withheld so long as such actions would
not potentially have any material adverse long-term or short-term effect on
the Premises, the Project, or the Site.
(b) BUSINESS. Landlord acknowledges that it is not the intent of this Section
to prohibit Tenant from operating its business as described in Section 7
above. Tenant may operate its business according to the custom of the
industry so long as the use or presence of Hazardous Materials is strictly
and properly monitored according to all applicable governmental
requirements. As a material inducement to Landlord to allow Tenant to use
Hazardous Materials in connection with its business, Tenant agrees to
deliver to Landlord prior to the Commencement Date a list identifying each
type of Hazardous Materials to be present on the Premises, the Project, or
the Site and setting forth any and all governmental approvals or permits
required in connection with the presence of such Hazardous Materials on the
Premises, the Project, or the Site ("HAZARDOUS MATERIALS LIST"). Tenant
shall deliver to Landlord an updated Hazardous Materials List at least once
a year and shall also deliver an updated list before any new Hazardous
Materials are brought onto the Premises, the Project, or the Site. Tenant
shall deliver to Landlord true and correct copies of the following
documents (the "DOCUMENTS") relating to the handling, storage, disposal,
and emission of Hazardous Materials prior to the Commencement Date, or if
unavailable at that time, concurrent with the receipt from or submission to
a Governmental Authority: permits; approvals; reports, and correspondence;
storage and management plans, notice of violations of any laws; plans
relating to the installation of any storage tanks to be installed in or
under the Premises, the Project, or the Site (provided said installation of
tanks shall only be permitted after Landlord has given Tenant its written
consent to do so, which consent may be withheld in Landlord's sole and
absolute discretion); and all closure plans or any other documents required
by any and all Governmental Authorities for any storage tanks installed in,
on, or under the Premises, the Project, or the Site for the closure of any
such tanks. Tenant is not required, however, to provide Landlord with any
portion(s) of the Documents containing information of a proprietary nature
that, in and of themselves, do not contain a reference to any Hazardous
Materials or hazardous activities, it being understood and agreed that it
is not the intent of this Section to provide Landlord with information that
could be detrimental to Tenant's business should such information become
possessed by Tenant's competitors. Accordingly, Landlord, except as may be
provided otherwise herein or required by law, shall (i) keep confidential
the information contained in the Documents, and (ii) disclose such
information only to Landlord's officers, directors, employees, or
consultants with a need to know in connection with Landlord's management of
the Project, provided that Landlord shall inform all non-affiliated
recipients of such information of the confidentiality requirement and (to
the extent within Landlord's control) cause such confidence to be
maintained; provided, however, that disclosure of such information by
Landlord shall not be prohibited if that disclosure is of information that
is a matter of public record or public knowledge or was obtained by
Landlord from sources other than Tenant. Tenant agrees that it shall, at
its own expense, and upon the written request of Landlord, establish and
maintain a separate area of the Premises classified under the North
Carolina State Building Code (as adopted by the City of Durham) as an "H"
occupancy area (i.e., the classification denoting a hazardous materials
occupancy area) for the use and storage of Hazardous Materials.
(c) TERMINATION OF LEASE. Notwithstanding the provisions of Section 30(a)
above, if (i) Tenant or any proposed transferee of Tenant has been required
by any prior landlord, lender, or Governmental Authority to take remedial
action in connection with Hazardous Materials contaminating a property if
the contamination resulted from such party's action or use of the property
in question, or (ii) Tenant or any proposed transferee of Tenant is
adjudicated guilty or responsible under an enforcement order issued by any
Governmental Authority in connection with the use, disposal, or storage of
a Hazardous Materials, Landlord
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shall have the right to terminate this Lease in Landlord's sole and
absolute discretion (with respect to any such matter involving Tenant) and
it shall not be unreasonable for Landlord to withhold its consent to any
proposed Transfer (with respect to any such matter involving a proposed
transferee).
(d) TESTING. Landlord shall have the right to conduct annual tests of the
Premises (each, an "ANNUAL TEST" and collectively, "ANNUAL TESTS") to
determine whether any contamination has occurred as a result of Tenant's
use. Tenant shall be required to pay up to $2,000.00 of the cost of each
such Annual Test; provided, however, if Tenant conducts its own tests of
the Premises using third party contractors and test procedures acceptable
to Landlord, which tests are certified to Landlord, Landlord shall accept
such tests in lieu of the Annual Tests to be paid for by Tenant. In
addition, at any time, and from time to time, prior to the expiration or
earlier termination of this Lease, Landlord shall have the right to conduct
additional appropriate tests of the Premises, the Project, and the Site to
determine whether contamination has occurred as a result of Tenant's use of
the Premises, the Project, or the Site. If contamination has occurred for
which Tenant is liable under this Section, Tenant shall pay all costs to
conduct such tests. If no such contamination is found, Landlord shall pay
the costs of such tests (which shall not constitute an Operating Expense).
Landlord shall provide Tenant with a copy of all reports and tests of the
Premises made by or on behalf of Landlord. Tenant shall be solely
responsible for and shall defend, indemnify, and hold Landlord and its
agents and contractors harmless from and against any and all claims, costs
and liabilities (including actual Legal Fees) arising out of or in
connection with any removal, clean up, restoration and materials required
hereunder to return the Premises, the Project, the Site, and any other
property of whatever nature to their condition existing prior to the time
of any such contamination. Landlord's receipt of or satisfaction with any
environmental assessment in no way waives any rights that Landlord holds
against Tenant.
(e) UNDERGROUND TANKS. If underground or other storage tanks storing Hazardous
Materials are located on the Premises, the Project, or the Site or are
hereafter placed on the Premises, the Project, or the Site by any party at
Tenant's request, Tenant shall monitor the storage tanks, maintain
appropriate records, implement reporting procedures, properly close any
underground storage tanks, and take or cause to be taken all other steps
necessary or required under applicable state and federal law, as such now
exists or may hereafter be adopted or amended.
(f) TENANT'S OBLIGATIONS. Each party's obligations under this Section shall
survive the expiration or earlier termination of the Lease. During any
period of time after the expiration or earlier termination of this Lease
required by Tenant or Landlord to complete the removal from the Premises of
any Hazardous Materials and the release and termination of any licenses or
permits restricting the use of the Premises, Tenant shall continue to pay
the full Rent in accordance with this Lease, which Rent shall be prorated
daily.
(g) DEFINITION OF "HAZARDOUS MATERIALS". As used herein, the term "HAZARDOUS
MATERIALS" means any hazardous or toxic substance, material or waste that
is or becomes regulated by any Governmental Authority and includes, without
limitation, any material or substance that is (i) petroleum, (ii) asbestos,
(iii) designated as a "hazardous substance" pursuant to Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. Section 1317), (iv) defined
as a "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C.
Section 6903), (v) defined as a "hazardous substance" pursuant to Section
101 of the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq.
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(42 U.S.C. Section 9601), (vi) defined as "hazardous waste, "extremely
hazardous waste" or "restricted hazardous waste" under any applicable state
law, or (vii) defined as a "hazardous material" or "hazardous substance"
under any applicable state law.
31. TENANT'S REMEDIES/LIMITATION OF LIABILITY. Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after Notice from Tenant specifying such failure
(unless such performance will, due to the nature of the obligation, reasonably
require a period of time in excess of 30 days, then after such period of time as
is reasonably necessary). Upon any default by Landlord, Tenant shall give
notice by registered or certified mail to Ground Lessor and to any Holder of a
Mortgage covering the Premises or the Project and Tenant shall offer all such
persons a reasonable opportunity to cure the default, including time to obtain
possession of the Premises or the Project by power of sale or a judicial action
if such should prove necessary to effect a cure; provided Landlord shall have
furnished to Tenant in writing the names and addresses of all such persons who
are to receive such notices. All obligations of Landlord hereunder shall be
construed as covenants, not conditions; and, except as may be otherwise
expressly provided in this Lease, Tenant may not terminate this Lease for breach
of Landlord's obligations hereunder. All obligations of Landlord under this
Lease will be binding upon Landlord only during the period of its ownership of
the ground lessee's interest under the Ground Lease and not thereafter. The
term "LANDLORD" in this Lease shall mean only the owner, for the time being, of
the ground lessee's interest under the Ground Lease, and upon the transfer by
such owner of such ground lessee's interest under the Ground Lease, such owner
shall thereupon be released and discharged from all obligations of Landlord
thereafter accruing, but such obligations shall be binding during the Term and
any Term Extension upon each new owner for the duration of such owner's
ownership. Any liability of Landlord under this Lease shall be limited solely
to its interest in the Project, and in no event shall any personal liability be
asserted against Landlord in connection with this Lease nor shall any recourse
be had to any other property or assets of Landlord or any of Landlord's
officers, employees, agents, or contractors. Under no circumstances shall
Landlord or any of Landlord's officers, employees, agents or contractors be
liable for injury to Tenant's business or for any loss of income or profit
therefrom.
32. INSPECTION AND ACCESS. During business hours on not less than 48 hours
advance Notice (except in the case of emergencies in which case no such Notice
shall be required and such entry may be at any time), Landlord and its agents,
representatives, and contractors may enter the Premises at any reasonable time
to inspect the Premises and to make such repairs as may be required or permitted
pursuant to this Lease and for any other business purpose, including, without
limitation, for the purpose of showing the Premises to prospective purchasers
and, during the last year of the Term or any Term Extension (as the case may
be), to prospective tenants, and Landlord may erect a suitable sign on the
Premises stating the Premises are available to let or that the Project is
available for sale. Landlord shall use commercially reasonable efforts to
minimize any loss, injury, inconvenience to or interference with Tenant's
business, or loss of occupancy or quiet enjoyment of the Premises occasioned by
Landlord entering the Premises pursuant to this Section. Landlord also may
grant easements, make public dedications, designate common areas and create
restrictions on or about the Premises, provided, however, that no sign or
easement, dedication, designation, or restriction materially adversely
interferes with Tenant's use or occupancy of the Premises. At Landlord's
request, Tenant shall execute such instruments as may be necessary for such
easements, dedications, or restrictions.
33. SECURITY. Tenant acknowledges and agrees that security devices and
services, if any, while intended to deter crime may not in given instances
prevent theft or other criminal
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acts and that Landlord is not providing any security services with respect to
the Premises. Tenant agrees that Landlord shall not be liable to Tenant for, and
Tenant waives any claim against Landlord with respect to, any loss by theft or
any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises. Tenant shall be solely responsible for the personal
safety of Tenant's officers, employees, agents, contractors, guests and invitees
while any such person is in, on or about the Premises and/or the Project. Tenant
shall at Tenant's cost obtain insurance coverage to the extent Tenant desires
protection against such criminal acts.
34. FORCE MAJEURE. Except for the payment of Rent, neither party shall be held
responsible for delays in the performance of its obligations hereunder when
caused by strikes, lockouts, labor disputes, acts of God, inability to obtain
labor or materials or reasonable substitutes therefor, governmental
restrictions, governmental regulations, governmental controls, delay in issuance
of permits, enemy or hostile governmental action, civil commotion, fire or other
casualty, and other causes beyond the reasonable control of Landlord ("FORCE
MAJEURE").
35. BROKERS; ENTIRE AGREEMENT; AMENDMENT. Landlord shall pay Tenant's Broker
the commission agreed upon by Tenant and Tenant's Broker pursuant to their
separate agreement, as reviewed and approved by Landlord. Landlord and Tenant
each represent and warrant that it has not dealt with any broker, agent or other
person (collectively, "BROKER") in connection with this transaction and that no
Broker brought about this transaction, other than Tenant's Broker. Landlord and
Tenant each hereby agree to indemnify and hold the other harmless from and
against any claims by any other Broker claiming a commission or other form of
compensation by virtue of having dealt with Tenant or Landlord, as applicable,
with regard to this leasing transaction. This Lease constitutes the complete
agreement of Landlord and Tenant with respect to the subject matter hereof. No
representations, inducements, promises or agreements, oral or written, have been
made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant,
including any Brokers representing either Landlord or Tenant, that are not
contained herein, and any prior agreements, promises, negotiations, or
representations are superseded by this Lease. Tenant represents and warrants
that no broker or agent has made any representation or warranty relied upon by
Tenant in Tenant's decision to enter into this Lease. Landlord in executing
this Lease does so in reliance upon Tenant's representations and warranties
contained herein. This Lease may not be amended except by an instrument in
writing signed by both parties hereto.
36. LIMITATION ON LANDLORD'S LIABILITY. NOTWITHSTANDING ANYTHING SET FORTH
HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY:
(A) LANDLORD SHALL NOT BE LIABLE TO TENANT OR ANY OTHER PERSON FOR (AND TENANT
AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER
ACTUAL OR CONSEQUENTIAL TO: TENANT'S PERSONAL PROPERTY OF EVERY KIND AND
DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT, INVENTORY,
SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS, PRODUCT,
SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER RECORDS OF
EVERY KIND AND DESCRIPTION KEPT AT THE PREMISES AND ANY AND ALL INCOME DERIVED
OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL RECOURSE TO LANDLORD FOR
ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING IN ANY WAY UNDER
THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT WITH RESPECT TO
THE SUBJECT MATTER
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HEREOF AND ANY LIABILITY OF LANDLORD HEREUNDER SHALL BE STRICTLY LIMITED TO
LANDLORD'S INTEREST IN THE PROPERTY OF WHICH THE PREMISES ARE A PART.
37. SEVERABILITY. If any clause or provision of this Lease is illegal, invalid
or unenforceable under present or future laws, then and in that event, it is the
intention of the parties hereto that the remainder of this Lease shall not be
affected thereby. It is also the intention of the parties to this Lease that in
lieu of each clause or provision of this Lease that is illegal, invalid or
unenforceable, there be added, as a part of this Lease, a clause or provision as
similar in terms to such illegal, invalid or unenforceable clause or provision
as may be possible and be legal, valid and enforceable.
38. GROUND LEASE.
(a) Tenant acknowledges that the Premises, the Project, and this Lease are and
shall remain subject and subordinate to the Ground Lease and the
Development Rights Agreement and to the rights of Ground Lessor thereunder,
and to all amendments, restatements, renewals, modifications, assignments,
and extensions thereof, without the necessity of any further instrument or
act on the part of Tenant; provided, however, that so long as there is no
Default hereunder, Tenant's receipt from Ground Lessor (or any successor or
assignee thereof, as appropriate) of a fully executed instrument containing
appropriate non-disturbance provisions assuring Tenant's quiet enjoyment of
the Premises as set forth in Section 24 hereof shall be a condition
precedent to the subordination of Tenant's interest and rights hereunder
and Tenant's interest and rights hereunder shall not be disturbed by Ground
Lessor. Tenant agrees, at the election of Ground Lessor, to attorn to
Ground Lessor. Unless Ground Lessor and Tenant mutually agree upon and
execute and deliver a different form of Subordination, Non-Disturbance and
Attornment Agreement, Tenant shall, upon demand, execute, acknowledge, and
deliver a Subordination, Non-Disturbance and Attornment Agreement
substantially in the form attached hereto as Exhibit L (the "LEASE
SUBORDINATION AGREEMENT") or such other instruments, confirming such
subordination and instruments of attornment as shall be reasonably
requested by Ground Lessor, provided any such instruments contain the
appropriate non-disturbance provisions described above. Tenant
acknowledges that, among other things, notwithstanding the terms of this
Lease, (i) the final design and aesthetic of the Premises and the Project,
(ii) any Transfer, (iii) any financing to be secured by Tenant's interest
in this Lease, and (iv) the "EXPANSION RIGHT" (as defined in Section 40(a)
below), may be subject to the requirements of the Ground Lease and/or the
Development Rights Agreement and/or to the approval of Ground Lessor.
(b) Tenant shall be responsible for, and hereby covenants to satisfy in a
timely fashion, any and all obligations, covenants, responsibilities,
and/or indemnities binding on Landlord as holder of the ground lessee's
interest under the Ground Lease or as a party to the Development Rights
Agreement (collectively, the "GROUND LEASE OBLIGATIONS"), including,
without limitation, the payment of the annual rent provided for in the
Ground Lease (at the times and in the manner specified in Section 3(b)(ii)
above), the payment or reimbursement of all expenses to be paid or
reimbursed by Landlord under the Ground Lease, the payment of the rent
provided for in the Development Agreement, and the payment or reimbursement
of all expenses to be paid or reimbursed by Landlord under the Development
Rights Agreement; provided, however, that the terms and conditions of this
Lease shall control to the extent the responsibility for satisfying any
Ground Lease Obligation is expressly conferred on Landlord and/or allocated
between Landlord and Tenant herein. For illustration purposes only,
Sections 13 and 14 hereof allocate between Landlord and Tenant all
maintenance and repair obligations with respect to the Premises and the
Project and, therefore, such provisions control.
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If Tenant fails to satisfy, in a timely fashion, any of the Ground Lease
Obligations in the manner required hereunder, Landlord shall have the right
(but not the obligation) to satisfy the same, and any cost incurred by
Landlord in doing so shall be payable to Landlord on demand as Additional
Rent or includable by Landlord as an Operating Expense. Further, Tenant
shall indemnify, defend, hold, and save Landlord harmless from and against
any and all Claims arising out of or in connection with any such failure by
Tenant. Conversely, if Tenant gives Landlord Notice requesting Landlord to
take affirmative action to enforce any of Landlord's rights as ground
lessee under the Ground Lease or as a party to the Development Rights
Agreement or to enforce any obligation, covenant, responsibility, and/or
indemnity of Ground Lessor under the Ground Lease and/or the Development
Rights Agreement (collectively, the "GROUND LEASE RIGHTS") and Landlord
elects not to do so, Tenant shall have the right, at Tenant's sole cost and
expense, to take affirmative action to enforce any such Ground Lease
Rights, and for such purpose Landlord, effective as of Landlord's election
not to take affirmative action, appoints Tenant attorney-in-fact for
Landlord (such power of attorney being coupled with an interest); provided,
however, that, notwithstanding the foregoing, the exercise of any Ground
Lease Rights that relate to Hazardous Materials (as provided in Section
30(a) hereof) shall be subject to compliance with Section 3 of the Cost
Sharing Agreement. Tenant shall indemnify, defend, hold, and save Landlord
harmless from and against any and all Claims arising out of or in
connection with any affirmative action taken by Tenant to enforce any
Ground Lease Rights. Tenant's rights and obligations under this Section
shall terminate and be of no further force or effect as of the expiration
or earlier termination of this Lease, provided that all obligations that
have arisen and/or become binding hereunder but have not been fully
satisfied as of the expiration or earlier termination of this Lease shall
survive such expiration or earlier termination.
(c) Pursuant to the Development Rights Agreement, Ground Lessor is allocating
to the Site the additional "DEVELOPMENT RIGHTS" (as defined in the
Development Rights Agreement) necessary to permit the Greenhouse to be
significantly larger than originally planned (as expressly desired by
Tenant). Tenant acknowledges that Tenant has been expressly named in the
Development Rights Agreement as an "intended third party beneficiary"
entitled to enforce Landlord's remedies against Ground Lessor in the event
of a default by Ground Lessor under the Development Rights Agreement. If,
at any time prior to the expiration or earlier termination of this Lease,
there shall be insufficient Development Rights to permit either the
Premises or the Greenhouse to remain, or to be restored to, the size and
configuration contemplated in this Lease and the Greenhouse Lease (a
"DEVELOPMENT RIGHTS DEFICIENCY"), Tenant's sole and exclusive remedy at
law, in equity, or otherwise shall be to pursue Ground Lessor under the
Development Rights Agreement or at law or in equity, except to the extent,
and only to the extent, that the Development Rights Deficiency is
attributable to the gross negligence or willful misconduct of Landlord (a
"LANDLORD CAUSED DEVELOPMENT RIGHTS DEFICIENCY"). Tenant hereby expressly,
absolutely, unconditionally, and irrevocably waives and relinquishes any
right Tenant may now have or may hereafter acquire to initiate, institute,
maintain, or prosecute any action or proceeding against Landlord for any
claims, sums of money, compensation, damages, costs, losses, or expenses,
of any type, kind, nature, description, or character, that in any way arise
out of, are connected with, or relate to any Development Rights Deficiency
other than a Landlord Caused Development Rights Deficiency.
39. SIGNS; EXTERIOR APPEARANCE. Tenant shall not, without the prior written
consent of Landlord, which shall not be unreasonably withheld or delayed: (i)
attach any awnings, exterior lights, decorations, balloons, flags, pennants,
banners, painting, or other projection to any outside wall of any part of the
Premises or the Project, (ii) store any equipment, furniture, or other items of
personal property on any exterior balcony, or (iii) paint, affix, or exhibit on
any part of the Premises or the Project any signs, notices, window or door
lettering, placards,
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decorations, or advertising media of any type that can be viewed from the
exterior of the Premises. Interior signs on doors shall be inscribed, painted or
affixed for Tenant by Landlord at the sole cost and expense of Tenant, and shall
be of a size, color and type acceptable to Landlord. Nothing may be placed on
the exterior of corridor walls or corridor doors other than Landlord's standard
lettering. Notwithstanding the foregoing, Landlord hereby reserves the right to
install a sign or placard (of up to 2 feet by 2 feet) that can be viewed from
the exterior of the Premises and that identifies the Project as an asset of
Alexander Real Estate Equities, Inc.
40. RIGHT TO EXPAND.
(a) GENERALLY. Subject to any necessary permits, licenses, approvals,
certificates, or other entitlements required by any Governmental Authority
exercising or having jurisdiction, Landlord and Tenant reasonably believe
that approximately 50,000 square feet of additional office/research and
development space, with a building footprint of no more than 25,000 square
feet (the "ADDITIONAL BUILDING"), can be constructed on the Additional
Site. Tenant shall have the right (the "EXPANSION RIGHT"), but not the
obligation, at any time between the Commencement Date and 20 business days
prior to the 3rd anniversary of the Ground Lease Rent Commencement Date
(the "EXPANSION RIGHT EXPIRATION DATE"), to give Landlord Notice (the
"EXPANSION NOTICE") requesting that Landlord exercise the Expansion Option
(if not previously exercised) and design, permit, and construct the
Additional Building on the Additional Site (generally, the "EXPANSION").
Tenant shall reimburse Landlord for all reasonable out-of-pocket expenses,
up to a maximum of $1,000.00, incurred by Landlord in connection with its
consideration of any Expansion Notice. Notwithstanding the foregoing,
Landlord may exercise the Expansion Option at any time before the 3rd
anniversary of the Ground Lease Rent Commencement Date (the "EXPANSION
OPTION EXPIRATION DATE"), regardless of whether Tenant ever gives Landlord
an Expansion Notice, provided that Landlord may not construct any
improvements on the Additional Site for lease to other tenants unless and
until the Expansion Right expires or is terminated in accordance with the
terms and conditions of this Section.
(b) BEFORE JULY 1, 2001. Landlord shall exercise the Expansion Option (if not
previously exercised) and proceed with the Expansion if Tenant gives
Landlord the Expansion Notice at any time before July 1, 2001, and all of
the requirements described below are satisfied (each, an "EXPANSION
REQUIREMENT" and collectively, the "EXPANSION REQUIREMENTS"):
(i) Tenant has completed an initial public offering of Tenant's capital shares
resulting in gross proceeds to Tenant of at least $75,000,000.00, or Tenant
has entered into binding, third-party contracts that provide, in the
aggregate, at least the following guaranteed minimum economic benefits to
Tenant, subject only to contractual targets, requirements, goals,
milestones, and/or deliverables that Tenant is reasonably capable of
meeting (as reasonably determined by Landlord, in good faith):
A. net revenues to Tenant (before taxes) of $30,000,000.00 over a
3-year period beginning not more than 3 months after the date
Landlord receives Tenant's Expansion Notice; and
B. net revenues to Tenant (before taxes) of $75,000,000.00 over a
5-year period beginning not more than 6 months after the date
Landlord receives Tenant's Expansion Notice; and
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
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(ii) Landlord reasonably determines, in good faith, that there has been no
material, adverse change since the Effective Date in Tenant's financial
position (including, without limitation, Tenant's net worth, profitability,
or liquidity).
If Tenant does not satisfy all of the Expansion Requirements, Landlord may elect
to exercise the Expansion Option (if not previously exercised) and to proceed
with the Expansion or may elect not to exercise the Expansion Option (if not
previously exercised) or to proceed with the Expansion by giving Notice to
Tenant of such election within 30 days after receipt of the Expansion Notice.
If Landlord elects not to exercise the Expansion Option (if not previously
exercised) or to proceed with the Expansion, this Lease shall continue in full
force and effect without any changes in the rights and obligations of the
parties.
(c) FROM JULY 1, 2001, THROUGH EXPANSION RIGHT EXPIRATION DATE. If Tenant
gives Landlord the Expansion Notice at any time from July 1, 2001, through
the Expansion Right Expiration Date, Landlord may elect to exercise the
Expansion Option (if not previously exercised) and to proceed with the
Expansion or may elect not to exercise the Expansion Option (if not
previously exercised) or to proceed with the Expansion by giving Notice to
Tenant of such election within 10 business days after receipt of the
Expansion Notice. If Landlord elects not to exercise the Expansion Option
(if not previously exercised) or to proceed with the Expansion, Landlord
and Tenant shall negotiate regarding the Expansion in good faith for a
reasonable period of time not to exceed 10 business days (provided that
such negotiations must conclude at least 5 business days prior to the
Expansion Option Expiration Date). Only if Landlord and Tenant cannot
reach an agreement regarding the Expansion after such good faith
negotiations and Tenant gives Landlord Notice that Tenant still elects to
proceed with the Expansion, (i) Landlord shall assign to Tenant all of
Landlord's rights in connection with the Expansion Option, (ii) Tenant, at
Tenant's sole cost and expense, may exercise the Expansion Option and
design, permit, and construct the Expansion (provided that all rights in
connection with the Expansion Option shall automatically revert to Landlord
if Tenant does not exercise the Expansion Option within 3 business days
after its assignment to Tenant), and (iii) Landlord shall reasonably
cooperate with Tenant's efforts to design, permit, and construct the
Expansion. If Landlord and Tenant cannot reach an agreement regarding the
Expansion after good faith negotiations and Tenant elects not to proceed
with the Expansion, this Lease shall continue in full force and effect
without any changes in the rights and obligations of the parties except
that the Expansion Right shall terminate.
(d) EXPANSION LEASE. If the parties jointly proceed with the Expansion as a
result of the operation of the foregoing provisions, Landlord and Tenant
shall enter into a separate lease agreement covering the Expansion (the
"EXPANSION LEASE"). Under all circumstances, the term of the Expansion
Lease shall be at least 10 years and shall be adjusted as necessary to make
the Expansion Lease expire at the same time as this Lease expires, provided
that Tenant shall be deemed to have exercised any Extension Rights that may
be necessary in order for this Lease to expire no less than 10 years after
the commencement date of the Expansion Lease. If the Expansion occurs as a
result of the operation of paragraph (b) above, the Expansion Lease shall
be on the same legal and economic terms as this Lease (including the Work
Letter), with the exception of any warrants issued by Tenant in connection
with this Lease. If the Expansion occurs as a result of the operation of
paragraph (c) above, the Expansion Lease shall be on the same legal terms
as this Lease (including the Work Letter) and on such economic terms as
shall be mutually determined by the parties after negotiating in good faith
for a reasonable period of time, provided, however, that if Landlord and
Tenant cannot reach an agreement regarding the economic terms of the
Expansion Lease after negotiating in good faith for a reasonable period of
time, Tenant may elect, at Tenant's sole cost and expense,
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Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
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to unilaterally design, build, and pay for the Additional Building. If
Tenant elects to do so, Tenant shall provide to Landlord, for Landlord's
written approval (which approval may not be unreasonably withheld or
delayed), copies of any plans, specifications, bid proposals, work
contracts, or other information concerning the nature and cost of the
Additional Building that Tenant may have in its possession or control,
including the identities and mailing addresses of all persons performing
work or supplying materials (collectively, "ADDITIONAL BUILDING
INFORMATION"). If Landlord approves the Additional Building Information,
Landlord may impose such conditions on Tenant in connection with the
commencement, performance, and completion of the Additional Building as
Landlord may deem appropriate (in Landlord's reasonable discretion). Any
request for approval of the Additional Building Information shall be in
writing and delivered to Landlord not less than 15 business days before
construction is scheduled to begin. Landlord's right to review the
Additional Building Information and to monitor construction shall be solely
for its own benefit, and Landlord shall have no duty to see that either the
Additional Building Information or the construction complies with
applicable Legal Requirements. Tenant, at its sole cost and expense, shall
cause the Additional Building to comply with insurance requirements known
to Tenant and with applicable Legal Requirements. Tenant will give Landlord
Notice at least 5 days (or any longer period that may be required under the
Ground Lease) before beginning construction on the Additional Building so
that Landlord may post on and about the Premises and the Additional Site
notices of non-responsibility pursuant to applicable law. Tenant, at its
sole cost and expense, shall correct any faulty work or inadequate cleanup
done by Tenant or its contractors within 5 business days after Notice of
the same from Landlord, and Tenant shall reimburse Landlord for, and
indemnify and hold Landlord harmless from, any reasonable and necessary
expenses incurred by Landlord by reason of such faulty work or inadequate
cleanup or by reason of delays caused by the same.
(e) EXCEPTIONS. Notwithstanding the above, the Expansion Right shall not be in
effect and may not be exercised by Tenant:
(i) during any period of time that Tenant is in Default under any provision of
this Lease; or
(ii) if Tenant has been in Default under any provision of this Lease 3 or more
times, whether or not the Defaults are cured, during the 12 consecutive
month period prior to the date on which Tenant seeks to exercise the
Expansion Right.
(f) TERMINATION. Landlord, in Landlord's sole and absolute discretion, may
terminate the Expansion Right, even after Tenant's due and timely exercise
of the Expansion Right, if, after such exercise, but prior to the
commencement date of the Expansion Lease, (i) Tenant fails to timely cure
any Default by Tenant under this Lease; or (ii) Tenant has Defaulted 3 or
more times during the period from the date of the exercise of the Expansion
Right to the date of the commencement of the Expansion Lease, whether or
not such Defaults are cured.
(g) RIGHTS PERSONAL. The Expansion Right is personal to Tenant and is not
assignable separate and apart from this Lease, except that it may be
assigned in connection with any Approved Transfer, as defined in Section
22.
41. RIGHT TO EXTEND TERM. Tenant shall have the right to extend the Term upon
the following terms and conditions:
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Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
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(a) EXTENSION RIGHTS. Tenant shall have 2 consecutive rights (each, an
"EXTENSION RIGHT") to extend the term of this Lease for 5 years each (each,
a "TERM EXTENSION") on the same terms and conditions as this Lease by
giving Notice to Landlord of Tenant's election to exercise each Extension
Right at least 12 months prior to the expiration of the Term or the
expiration of any prior Term Extension. During any Term Extension, Base
Rent shall be payable at the "MARKET RATE" (as defined below), but in no
event less than the Base Rent payable as of the date immediately preceding
the commencement of such Term Extension. Base Rent shall be adjusted on
the commencement of each Term Extension and on each annual anniversary of
the commencement of such Term Extension shall be increased by a percentage
determined by Landlord and Tenant at the time the Market Rate is determined
(the "EXTENSION RENT ADJUSTMENT PERCENTAGE"). As used herein, "MARKET
RATE" shall mean the then market rental rate as determined by Landlord and
Tenant, taking into account the base rent then payable at Similar
Facilities. If, on or before the date that is 180 days prior to the
expiration of the Term or the expiration of any prior Term Extension,
Tenant has not agreed with Landlord's determination of the Market Rate and
the Extension Rent Adjustment Percentage during such subsequent Term
Extension after negotiating in good faith, Tenant may elect arbitration as
described in Section 41(b) below. If Tenant does not elect such
arbitration, Tenant shall be deemed to have waived any right to extend, or
further extend, the Term and all of the remaining Extension Rights shall
terminate.
(b) ARBITRATION.
(i) Within 10 business days of Tenant's election to arbitrate the Market Rate
and the Extension Rent Percentage Adjustment, each party shall deliver to
the other a proposal containing the Market Rate and the Extension Rent
Percentage Adjustment that the submitting party believes to be correct
("EXTENSION PROPOSAL"). If either party fails to timely submit an
Extension Proposal, the other party's Extension Proposal shall determine
the Base Rent and the Extension Rent Percentage Adjustment for the Term
Extension. If both parties submit Extension Proposals, then Landlord and
Tenant shall meet within 7 business days after delivery of the last
Extension Proposal and make a good faith attempt to mutually appoint a
single "ARBITRATOR" (as defined below) to determine the Market Rate and the
Extension Rent Percentage Adjustment. If Landlord and Tenant are unable to
agree upon a single Arbitrator, then each shall, by Notice delivered to the
other within 10 business days after the meeting, select an Arbitrator. If
either party fails to timely give Notice of its selection for an
Arbitrator, the other party's Extension Proposal shall determine the Base
Rent and the Extension Rent Percentage Adjustment for the Term Extension.
The 2 Arbitrators so appointed shall, within 5 business days after their
appointment, appoint a 3rd Arbitrator. If the 2 Arbitrators so selected
cannot agree on the selection of the 3rd Arbitrator within the time above
specified, then either party, on behalf of both parties, may request such
appointment of such 3rd Arbitrator by application to any Judge of the trial
level court in the jurisdiction in which the Project is located, upon 10
days prior Notice to the other party of such intent.
(ii) The authority of the Arbitrator(s) shall be limited strictly to a selection
of either Landlord's Extension Proposal in its entirety or Tenant's
Extension Proposal in its entirety as the Extension Proposal that most
closely approximates the Market Rate and the Extension Rent Percentage
Adjustment. The Arbitrator(s) shall have no authority to create an
independent structure of the Market Rate and the Extension Rent Percentage
Adjustment, combine elements of both Extension Proposals to create a third,
or compromise or alter in any way any of the components of the Extension
Proposals submitted by the parties. The sole decision to be made shall be
which of the parties' Extension Proposals in its entirety shall
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Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
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determine the Market Rate and the Extension Rent Percentage Adjustment for
the Term Extension.
(iii) The decision of the Arbitrator(s) shall be made within 30 days after the
appointment of a single Arbitrator or the 3rd Arbitrator, as applicable. The
decision of the single Arbitrator or majority of the 3 Arbitrators shall be
final and binding upon the parties. Each party shall pay the fees and expenses
of the Arbitrator appointed by or on behalf of such party and the fees and
expenses of the 3rd Arbitrator shall be borne equally by both parties. If the
Market Rate and the Extension Rent Percentage Adjustment are not determined by
the first day of the Term Extension, then Tenant shall pay Landlord Base Rent in
an amount equal to the Base Rent in effect immediately prior to the Term
Extension until such determination is made. After the determination of the
Market Rate and the Extension Rent Percentage Adjustment, the parties shall make
any necessary adjustments to such payments made by Tenant. Landlord and Tenant
shall then execute an amendment recognizing the Market Rate and the Extension
Rent Percentage Adjustment for the Term Extension.
(iv) An "ARBITRATOR" shall be any person appointed by or on behalf of either
party or appointed pursuant to the provisions hereof and: (i) shall be (A)
a member of the American Institute of Real Estate Appraisers with not less
than 10 years of experience in the appraisal of improved office and high
tech industrial real estate in the Sub-Market, or (B) a licensed commercial
real estate broker with not less than 15 years experience representing
landlords and/or tenants in the leasing of high tech or life sciences space
in the Sub-Market, (ii) devoting substantially all of their time to
professional appraisal or brokerage work, as applicable, at the time of
appointment and (iii) be in all respects impartial and disinterested.
(c) RIGHTS PERSONAL. The Extension Rights are personal to Tenant and are not
assignable separate and apart from this Lease, except that they may be
assigned in connection with any Approved Transfer, as defined in Section 22
of this Lease.
(d) EXCEPTIONS. Notwithstanding anything set forth above to the contrary,
Extension Rights shall not be in effect and Tenant may not exercise any of
the Extension Rights:
(i) during any period of time that Tenant is in Default under any provision of
this Lease; or
(ii) if Tenant has been in Default under any provision of this Lease 3 or more
times, whether or not the Defaults are cured, during the 12 consecutive
month period immediately prior to the date that Tenant intends to exercise
an Extension Right, whether or not the Defaults are cured.
(e) NO EXTENSIONS. The period of time within which any Extension Rights may be
exercised shall not be extended or enlarged by reason of the Tenant's
inability to exercise the Expansion Rights.
(f) TERMINATION. Landlord, in Landlord's sole and absolute discretion, may
terminate the Extension Rights, even after Tenant's due and timely exercise
of an Extension Right, if, after such exercise, but prior to the
commencement date of an Term Extension, (i) Tenant fails to timely cure any
Default by Tenant under this Lease; or (ii) Tenant has Defaulted 3 or more
times during the period from the date of the exercise of an Extension Right
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
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to the date of the commencement of the Term Extension, whether or not such
Defaults are cured.
42. [INTENTIONALLY OMITTED]
43. [INTENTIONALLY OMITTED]
44. MISCELLANEOUS.
(a) NOTICES. Any communication, notice, or demand of any kind whatsoever that
either party may be required or may desire to give to or serve on the other
party (a "NOTICE") shall be in writing and shall be deemed duly given if
delivered in person or sent by reputable overnight guaranty courier,
addressed to the parties at their addresses set forth in the Basic Lease
Provisions. Either party may designate from time to time a new address for
receipt of future Notices by giving the other party Notice of such new
address at least 5 days prior to the effective date of such new address.
(b) JOINT AND SEVERAL LIABILITY. If and when included within the term
"TENANT," as used in this instrument, there is more than one person, firm
or corporation, each shall be jointly and severally liable for the
obligations of Tenant.
(c) LANDLORD CONSENTS. Except as otherwise expressly provided in this Lease or
as otherwise required by law, Landlord retains the absolute right to
withhold any consent or approval. Further, regardless of any standard that
may be applicable to any consent or approval rights given to Landlord
hereunder, Landlord shall be justified in withholding, and shall not incur
any liability for so withholding, any consent or approval to any action,
document, or matter that Landlord determines, in its sole and absolute
discretion, will or might adversely affect Landlord's status as a "real
estate investment trust".
(d) FINANCIAL INFORMATION. During the Term and any Term Extension, Tenant
shall provide Landlord with the following financial information or business
related reports:
(i) Unaudited quarterly financial statements within 30 days after the end of
each of Tenant's fiscal quarters;
(ii) Audited annual financial statements within 90 days after the end of each of
Tenant's fiscal years; and
(iii) Updates to Tenant's business plan no less than once every 12 months and
otherwise within 30 days after the completion and/or submittal of any such
update to Tenant's board of directors.
(e) RECORDATION. This Lease shall not be recorded or filed by or on behalf of
Tenant in any public record. Notwithstanding the foregoing, this Lease is
evidenced of record by the Lease Memorandum. Upon Tenant's request and at
Tenant's sole cost and expense, Landlord shall prepare, execute, and cause
to be recorded or filed an amendment of the Lease Memorandum, which
amendment shall amend any information in the Lease Memorandum that has been
amended in this Lease.
<PAGE>
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(f) INTERPRETATION. The normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Lease or any exhibits or amendments
hereto. Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held
to include the plural, unless the context otherwise requires. The captions
inserted in this Lease are for convenience only and in no way define, limit
or otherwise describe the scope or intent of this Lease, or any provision
hereof, or in any way affect the interpretation of this Lease.
(g) NOT BINDING UNTIL EXECUTED. The submission by Landlord to Tenant of this
Lease shall have no binding force or effect, shall not constitute an option
for the leasing of the Premises, nor confer any right or impose any
obligations upon either party until execution of this Lease by both
parties.
(h) LIMITATIONS ON INTEREST. It is expressly the intent of Landlord and Tenant
at all times to comply with applicable law governing the maximum rate or
amount of any interest payable on or in connection with this Lease. If
applicable law is ever judicially interpreted so as to render usurious any
interest called for under this Lease, or contracted for, charged, taken,
reserved, or received with respect to this Lease, then it is Landlord's and
Tenant's express intent that all excess amounts theretofore collected by
Landlord be credited on the applicable obligation (or, if the obligation
has been or would thereby be paid in full, refunded to Tenant), and the
provisions of this Lease immediately shall be deemed reformed and the
amounts thereafter collectible hereunder reduced, without the necessity of
the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
hereunder.
(i) CHOICE OF LAW. Construction and interpretation of this Lease shall be
governed by and construed and enforced in accordance with the internal laws
of the state in which the Premises are located, without regard to choice of
law principles of such state.
(j) TIME. Time is of the essence as to the performance of each party's
obligations under this Lease.
(k) ATTORNEYS FEES. If either Landlord or Tenant reasonably seeks legal
services with respect to the proper interpretation or enforcement of this
Lease, the party receiving substantially the result it sought or defended
(the "PREVAILING PARTY"), whether by award, judgment, stipulation,
settlement, workout, default, or otherwise and whether or not any legal
action may have been instituted or instituted and then voluntarily
dismissed, shall be entitled to recover from the adverse party all
reasonable fees and costs incurred by the Prevailing Party in connection
with such legal services ("LEGAL FEES"). Legal Fees include, without
limitation, (i) fees, costs, and expenses of any engineers, accountants,
appraisers, consultants, brokers, and other professionals or experts
retained or consulted by the Prevailing Party, and other costs and expenses
of investigation or analysis incurred by the Prevailing Party in support of
its position, and (ii) all such fees, costs, and expenses incurred in any
aspect of the legal process, whether out-of-court negotiations, mediation,
arbitration, commencement of suit, discovery, law and motion, trial,
appellate proceedings, or any action or participation in, or in connection
with, any case or proceeding under Chapter 7, 11, or 13 of the Bankruptcy
Code, 11 U.S.C. Section 101 et seq., or any successor statutes.
(l) NO THIRD PARTY BENEFITS. Landlord and Tenant do not intend by any
provision of this Lease to confer any right, remedy, or benefit upon any
third party,
<PAGE>
Net Office/Laboratory Lease 108 Alexandar Ave., RTP/
Paradigm Genetics, Inc.--Page 43
and no third party shall be entitled to enforce, or otherwise shall acquire
any right, remedy, or benefit by reason of, any provision of this Lease.
(m) COUNTERPARTS. This Lease may be executed in any number of counterparts,
each of which shall be deemed an original and all of which, taken together,
shall constitute a single agreement with the same effect as if all parties
had signed the same signature page. Any signature page from any
counterpart of this Lease, signed only by one party, may be detached from
such counterpart and re-attached to any other counterpart of this Lease
that has a signature page signed only by the other party.
(n) INTEGRATION. This Lease and all exhibits and addenda attached hereto
constitute the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior and contemporaneous oral or
written representations, statements, documents, understandings, and
agreements with respect thereto.
(o) SUCCESSORS AND ASSIGNS. Without limiting in any way the provisions of
Section 22, this Lease shall be binding upon, and inure to the benefit of,
the parties hereto and their respective permitted successors and assigns.
(p) NO WAIVER; REMEDIES CUMULATIVE. No purported waiver of any provision of
this Lease shall be binding unless such waiver is in writing and signed by
the party to be bound. In addition, no waiver of any provision of this
Lease shall be deemed, or shall constitute, a waiver of any other provision
of this Lease, whether or not similar, nor shall any waiver constitute a
continuing waiver. Further, no failure to exercise and no delay in
exercising any power, right, remedy, or privilege under this Lease shall
impair such power, right, remedy, or privilege or shall be deemed, or shall
constitute, a waiver of any default under this Lease or acquiescence
therein, nor shall any single or partial exercise of any such power, right,
remedy, or privilege preclude any other or further exercise thereof or of
any other power, right, remedy, or privilege. Finally, all powers, rights,
remedies, and privileges existing under this Lease are cumulative, in
addition to, and not exclusive of any other powers, rights, remedies, or
privileges otherwise available to the parties to this Lease.
(q) INCORPORATION BY REFERENCE. All exhibits and addenda attached hereto are
hereby incorporated into this Lease and made a part hereof. Except to the
extent expressly provided otherwise herein, if there is any conflict
between such exhibits or addenda and the terms of this Lease, such exhibits
or addenda shall control.
[SIGNATURES ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amended and
Restated Lease Agreement to be effective as of the day and year first above
written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:_____________________________________
John A. Ryals
CEO and President
Execution Date:____________________________
ATTEST: _____________________
Its __________________ Secretary
[CORPORATE SEAL]
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By:_____________________________________
Print Name:______________________________
Print Title:______________________________
Execution Date:___________________________
ATTEST: _____________________
Its __________________ Secretary
[CORPORATE SEAL]
<PAGE>
EXHIBIT A-1
DESCRIPTION OF SITE
-------------------
Being a particular tract or tracts of land located in Durham County, Triangle
Township, Research Triangle Park, North Carolina and being further described
below:
BEGINNING at a point, said point being located the following courses from NC
Geodetic Monument "Triad", said NC Geodetic Monument bearing NC Grid Coordinates
NAD 83 of N:238,772.801 Meters, E:620,488.448 Meters; Thence from said monument,
South 01(degree)34'26" West a ground distance of 3,011.37 feet to an existing
R/W Monument set in the westerly right-of-way of T.W. Alexander Drive; Thence
with said right-of-way along a curve to the right having a radius of 2846.41
feet, an arc length of 153.75 feet and being subtended by a chord bearing and
distance of South 02(degree)43'15" West,153.73 feet to an existing concrete R/W
Monument set in the westerly right-of-way of T.W. Alexander Drive; Thence
leaving said right-of-way, North 87(degree)20'44" West a distance of 142.69 feet
to a point, said point being the POINT AND PLACE OF BEGINNING.
Thence, from the POINT AND PLACE OF BEGINNING South 02(degree)44'10" West a
distance of 100.85 feet to a point; Thence, North 89(degree)49'25" West a
distance of 85.25 feet to a point; Thence, South 02(degree)33'01" West a
distance of 80.34 feet to a point; Thence, North 89(degree)49'25" West a
distance of 157.55 feet to a point; Thence, South 02(degree)26'24" West a
distance of 88.04 feet to a point; Thence, North 89(degree)49'25" West a
distance of 52.18 feet to a point; Thence, South 02(degree)26'24" West a
distance of 336.73 feet to a point; Thence, North 88(degree)43'29" West a
distance of 276.76 feet to an existing concrete monument; Thence, North
01(degree)16'24" East a distance of 330.28 feet to an existing concrete
monument; Thence, North 88(degree)03'29" West a distance of 22.85 feet to a new
iron pipe; Thence, North 84(degree)51'33" West a distance of 150.08 feet to an
existing concrete monument; Thence, North 05(degree)10'14" East a distance of
235.37 feet to a new iron pipe; Thence, South 87(degree)36'14" East a distance
of 150.23 feet to a new iron pipe; Thence, North 05(degree)09'46" East a
distance of 16.45 feet to a new iron pipe; Thence, South 87(degree)36'14" East a
distance of 105.32 feet to a new iron pipe; Thence, North 02(degree)39'16" East
a distance of 36.22 feet to a new iron pipe; Thence, South 87(degree)20'44" East
a distance of 483.95 feet to the POINT AND PLACE OF BEGINNING and containing
265,020.77 sq. ft. (6.084 acres), and being shown on a particular survey or plat
entitled "ALTA/ACSM Property Survey - 104 T.W. Alexander Drive", project number
98321.01, prepared by Barbara H. Mulkey Engineering, Inc., dated 04/30/99 and
revised 07/21/99.
<PAGE>
EXHIBIT A-2
DESCRIPTION OF ADDITIONAL SITE
------------------------------
Being a particular tract or tracts of land located in Durham County, Triangle
Township, Research Triangle Park, North Carolina and being further described
below:
BEGINNING at a point, said point being located the following courses from NC
Geodetic Monument "Triad", said NC Geodetic Monument bearing NC Grid Coordinates
NAD 83 of N:238,772.801 Meters, E:620,488.448 Meters; Thence from said monument,
South 01(degree)34'26" West a ground distance of 3,011.37 feet to an existing
R/W Monument set in the westerly right-of-way of T.W. Alexander Drive; Thence
with said right-of-way along a curve to the right having a radius of 2846.41
feet, an arc length of 153.75 feet and being subtended by a chord bearing and
distance of South 02(degree)43'15" West,153.73 feet to an existing concrete R/W
Monument set in the westerly right-of-way of T.W. Alexander Drive, said monument
being the POINT AND PLACE OF BEGINNING.
Thence, from the POINT AND PLACE OF BEGINNING along the right-of-way of T.W.
Alexander Drive with a curve to the right having a radius of 2846.41 feet, an
arc length of 610.47 feet and being subtended by a chord bearing and distance of
South 04(degree)58'14" West, 609.30 feet to an existing concrete monument;
Thence, North 88(degree)43'29" West a distance of 411.30 feet to a point;
Thence, North 02(degree)26'24" East a distance of 336.73 feet to a point;
Thence, South 89(degree)49'25" East a distance of 52.18 feet to a point; Thence
North 02(degree)26'24" East a distance of 88.04 feet to a point; Thence, South
89(degree)49'25" East a distance of 157.55 feet to a point; Thence, North
02(degree)33'01" East a distance of 80.34 feet to a point; Thence, South
89(degree)49'25" East a distance of 85.25 feet to a point; Thence North
02(degree)44'10" East a distance of 100.85 feet to a point; Thence, South
87(degree)20'44" East a distance of 142.69 feet to the POINT AND PLACE OF
BEGINNING and containing 214,139.28 sq. ft. (4.916 acres), and being shown on a
particular survey or plat entitled "ALTA/ACSM Property Survey - 104 T.W.
Alexander Drive", prepared by Barbara H. Mulkey Engineering, Inc., dated
04/30/99 and revised 07/21/99.
<PAGE>
EXHIBIT B
DESCRIPTION OF PREMISES
-----------------------
[See Attached Site Map]
<PAGE>
EXHIBIT C
AMENDED AND RESTATED
WORK LETTER
[PHASE 1A: OFFICE / LABORATORY]
This AMENDED AND RESTATED WORK LETTER, executed as of April ___, 2000, and
effective as of July 27, 1999 (this "WORK LETTER"), (i) is made and entered into
by and between ARE-104 ALEXANDER ROAD, LLC, a Delaware limited liability company
("LANDLORD"), and PARADIGM GENETICS, INC., a Delaware corporation (formerly a
North Carolina corporation) ("TENANT"), (ii) amends, restates, and supersedes in
its entirety that certain Work Letter dated as of July 27, 1999, between
Landlord and Tenant, and (iii) is attached to and made a part of the Amended and
Restated Lease Agreement [Phase 1A: Office / Laboratory] executed as of April
___, 2000, and effective as of July 27, 1999, by and between Landlord and Tenant
(the "LEASE") (which Lease is evidenced of record by a certain Memorandum of
Lease Agreement dated as of July 27, 1999, and recorded July 27, 1999, in Book
2684, Page 810 of the Official Records of Durham County, North Carolina (the
"OFFICIAL RECORDS")). Any initially capitalized terms used but not defined
herein shall have the meanings given them in the Lease.
RECITALS
A. Landlord has entered into a Ground Lease Agreement dated as of July 27,
1999 (the "ORIGINAL GROUND LEASE"), with Triangle Service Center, Inc., a North
Carolina corporation ("GROUND LESSOR"), pursuant to which Landlord has ground
leased approximately 6.084 acres of land within the Triangle Park Research
Center (which is located within Research Triangle Park, Durham County, North
Carolina), as more fully described in Exhibit A-1 attached to the Lease (the
"SITE"). The Original Ground Lease is evidenced of record by a certain
Memorandum of Ground Lease dated as of July 27, 1999, and recorded July 27,
1999, in Book 2684, Page 795 of the Official Records. In addition, Ground Lessor
and Landlord have entered into or, concurrently with the execution of the Lease,
are entering into, (i) a certain Agreement Regarding Allocation of Development
Rights (which will be evidenced of record by a certain Memorandum of Agreement
Regarding Allocation of Development Rights to be recorded in the Official
Records), and (ii) a certain First Amendment to Ground Lease Agreement (the
"GROUND LEASE AMENDMENT"). The Original Ground Lease, the Ground Lease
Amendment, and any other subsequent amendments or modifications thereto shall be
referred to collectively as the "GROUND LEASE".
B. Subject to the terms and conditions of the Lease, Landlord has agreed to
cause to be constructed on the Site, or to permit to be constructed on the Site,
certain improvements including, but not limited to, a first-class scientific
research and development building containing approximately 54,463 rentable
square feet (the "BUILDING").
C. This Work Letter contains the agreements of the parties with respect to
the design and construction of the shell and core of the Building, the site
improvements appurtenant to the Building, and all fixed and permanent
improvements to the Building (commonly referred to as the "tenant
improvements").
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Amended and Restated Work Letter 108 Alexander Ave.,
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AGREEMENT
1. General Requirements.
--------------------
1.1. Tenant's Authorized Representative. Tenant designates Jim Miller and
Stanford White & Associates (collectively, "TENANT'S REPRESENTATIVE") as the
only persons authorized to initial or approve plans, drawings, or change orders
or otherwise to act for Tenant pursuant to this Work Letter. Stanford White &
Associates shall act for Tenant during any period that Mr. Miller is not
available. Landlord shall not be obligated to respond to or act upon any
request, approval, inquiry, or other communication ("COMMUNICATION") from or on
behalf of Tenant in connection with this Work Letter unless such Communication
is in writing and has been initialed or approved in writing by Tenant's
Representative. Tenant may change Tenant's Representative at any time upon not
less than 5 business days advance Notice to Landlord. No period set forth
herein for any approval of any matter by Tenant shall be extended by reason of
any change in Tenant's Representative. Neither Tenant nor Tenant's
Representative shall be authorized to direct Landlord's contractors in the
performance of "LANDLORD'S WORK" (as hereinafter defined) except as may be
expressly provided otherwise herein.
1.2. Development Schedule. The schedule for design and development of the
"BASE BUILDING WORK" (as defined below) and the "TENANT IMPROVEMENTS" (as
defined below), including, without limitation, the time periods for preparation,
delivery, review, and approval of construction documents and performance
pursuant to such documents, shall be in accordance with the Development Schedule
attached hereto as Schedule A, subject to adjustment as mutually agreed by the
parties in writing or as provided in this Work Letter (the "DEVELOPMENT
SCHEDULE").
1.3. Architects, Consultants, and Contractors. The architect (the "PROJECT
ARCHITECT"), engineers, designers, and general contractor (the "PROJECT
CONTRACTOR") responsible for the design, development, and construction of the
Base Building Work and other components of the Project as a whole (collectively,
the "PROJECT WORK"), and the architect (the "TI ARCHITECT"), engineers,
designers, and general contractor (the "TI CONTRACTOR") responsible for the
design, development, and construction of the Tenant Improvements, shall be
selected by Landlord, subject to Tenant's approval, which approval shall not be
unreasonably withheld, conditioned, or delayed. The Project Contractor shall
select all subcontractors to be used for the Project Work, and the TI Contractor
shall select all subcontractors to be used for the Tenant Improvements, provided
that any subcontractors ("MAJOR SUBCONTRACTORS") under subcontracts in excess of
$100,000.00 ("MAJOR SUBCONTRACTS") shall be subject to the mutual approval of
Landlord and Tenant. The TI Architect and the TI Contractor shall coordinate
with the Project Architect in a manner reasonably satisfactory to Landlord.
Landlord and Tenant hereby acknowledge and agree that: (i) O'Brien Atkins &
Associates has been pre-approved as the Project Architect and the TI Architect;
and (ii) Miller Building Corporation has been pre-approved as the Project
Contractor and the TI Contractor. For purposes of this Work Letter, the Project
Architect and the TI Architect may be referred to collectively as the
"ARCHITECTS", the Project Contractor and the TI Contractor may be referred to
collectively as the "CONTRACTORS", and the Architects and the Contractors may be
referred to generally as "DEVELOPERS".
2. Building Work.
-------------
2.1. Base Building Work Defined. As used herein, "BASE BUILDING WORK" shall
mean all of the work required to design and construct, in their entirety, the
improvements
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Amended and Restated Work Letter 108 Alexander Ave.,
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described on Schedule B attached hereto, and shall include on-site surface
parking of not less than 141 spaces (as may be limited by, and subject to, any
changes mandated by Legal Requirements (including zoning restrictions) that may
be enacted or first effective after the Effective Date and to any changes in the
design of the Building requested or approved by Tenant and made after the
Effective Date).
2.2. Tenant Improvements Defined. As used herein, "TENANT IMPROVEMENTS"
shall mean all improvements to the Building desired by Tenant of a fixed and
permanent nature, exclusive of the Base Building Work. Other than the Base
Building Work and the Tenant Improvements (collectively, "LANDLORD'S WORK"),
Landlord shall have no obligation whatsoever with respect to the finishing,
outfitting, equipping, or furnishing of the Premises for Tenant's use and
occupancy.
2.3. Building Design Program. Tenant has prepared and delivered to Landlord
and the Architects outline specifications detailing Tenant's requirements for
Landlord's Work (the "BUILDING DESIGN PROGRAM"), Landlord has delivered to
Tenant any written objections, questions, and/or comments (generally,
"COMMENTS") that Landlord and/or the Architects had regarding such Building
Design Program, and Tenant has caused the Building Design Program to be revised
to address such Comments and to be resubmitted to Landlord and the Architects
for approval. The final Building Design Program was approved on August 25, 1999.
2.4. Building Schematic Plans. Landlord has caused the Architects to
prepare and submit to Tenant for Tenant's review and comment schematic drawings
for the development of Landlord's Work (the "BUILDING SCHEMATIC PLANS"), Tenant
has delivered to Landlord and the Architects any Comments that Tenant had
regarding the Building Schematic Plans, and Landlord has caused the Architects
to revise the Building Schematic Plans to address such Comments and to resubmit
the same to Tenant for approval. The final Building Schematic Plans were
approved on October 5, 1999. Tenant hereby confirms that the final Building
Schematic Plans reflect Tenant's requirements for Landlord's Work and were
prepared substantially in accordance with the Building Design Program, and
Landlord shall have no responsibility to Tenant if such Building Schematic Plans
do not reflect Tenant's requirements for Landlord's Work.
2.5. Building Design Development Plans. Landlord has caused the Architects
to prepare and submit to Tenant for Tenant's review and comment design
development plans and specifications for the development of Landlord's Work (the
"BUILDING DESIGN DEVELOPMENT PLANS"), Tenant has delivered to Landlord and the
Architects any Comments that Tenant had regarding the Building Design
Development Plans, and Landlord has caused the Architects to revise the Building
Design Development to address such Comments and to resubmit the same to Tenant
for approval. The final Building Design Development Plans were approved on
November 30, 1999. Tenant hereby confirms that the final Building Design
Development Plans reflect Tenant's requirements for Landlord's Work and were
prepared substantially in accordance with the Building Schematic Plans, and
Landlord shall have no responsibility to Tenant if such Building Design
Development Plans do not reflect Tenant's requirements for Landlord's Work.
2.6. Building Construction Drawings. Landlord has caused the Architects to
prepare and submit to Tenant for Tenant's review and comment construction plans,
specifications, and drawings for Landlord's Work ("BUILDING CONSTRUCTION
DRAWINGS"), Tenant has delivered to Landlord and the Architects any Comments
that Tenant had regarding the
<PAGE>
Amended and Restated Work Letter 108 Alexander Ave.,
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Building Construction Drawings, and Landlord has caused the Architects to
revise the Building Construction Drawings to address such Comments and to
resubmit the same to Tenant for approval. The final Building Construction
Drawings were approved on January 21, 2000. Tenant hereby confirms that the
final Building Construction Drawings reflect Tenant's requirements for
Landlord's Work and were prepared substantially in accordance with the Building
Design Development Plans, and Landlord shall have no responsibility to Tenant if
such Building Construction Drawings do not reflect Tenant's requirements for
Landlord's Work. Once approved by Tenant, Landlord shall not materially modify
the Building Construction Drawings except as may be reasonably required in
connection with the issuance of any of the "PERMITS" (as defined in Section
4.1). Landlord will give Tenant prompt Notice of any such material
modifications.
3. Approval and Completion. If there is any dispute regarding the design of
Landlord's Work that is not settled within 5 business days after Notice of such
dispute is delivered by one party to the other, (x) Landlord shall have the
right to make the final decision if the dispute concerns the design of the Base
Building Work, provided Landlord acts reasonably and such final decision is
either consistent with or a reasonable compromise between Landlord's and
Tenant's positions with respect to such dispute, and (y) Tenant shall have the
right to make the final decision if the dispute concerns the design of the
Tenant Improvements, provided Tenant acts reasonably and such final decision is
either consistent with or a reasonable compromise between Landlord's and
Tenant's positions with respect to such dispute. All costs and expenses
resulting from any final decision with respect to Landlord's Work shall be
payable out of the "BUILDING FUND" (as defined in Section 6.5). Any changes to
the Building Construction Drawings requested by Tenant following Landlord's and
Tenant's approval of same shall be processed as provided in Section 5 hereof.
4. Performance of Landlord's Work.
------------------------------
4.1. Permitting and Commencement of Landlord's Work. Landlord obtained a
building permit authorizing the construction of the Base Building Work as
contemplated in this Work Letter (the "BASE BUILDING PERMIT") on November 11,
1999, and commenced construction of the Base Building Work on November 15, 1999.
The cost of obtaining the Base Building Permit shall be payable from the
Building Fund. Landlord shall commence construction of the Tenant Improvements
upon the later of (a) the date that Landlord obtains a building permit
authorizing the construction of the Tenant Improvements as contemplated in this
Work Letter (the "TI PERMIT"), and (b) the date that the Base Building Work has
been sufficiently completed such that the work of constructing the Tenant
Improvements can be efficiently performed. Tenant shall cooperate and assist
Landlord in obtaining the TI Permit, the cost of which shall be payable from the
Building Fund. If any governmental or quasi-governmental authorities having
jurisdiction over the performance of any portion of Landlord's Work (a
"GOVERNMENTAL AUTHORITY") or any permit, license, or approval required in
connection therewith shall impose terms or conditions on the Base Building
Permit or the TI Permit (which may be referred to collectively as the
"PERMITS") that: (i) are inconsistent with Landlord's obligations under this
Work Letter; (ii) are substantially inconsistent with any of the Building
Construction Drawings; (iii) materially increase the cost of performing
Landlord's Work; or (iv) will materially delay the performance of Landlord's
Work, Landlord and Tenant shall reasonably and in good faith seek means by which
to mitigate or eliminate any such adverse terms or conditions.
4.2. Completion of Landlord's Work. In recognition and consideration of the
fact that the Building and the Tenant Improvements have been designed but only
partially
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Amended and Restated Work Letter 108 Alexander Ave.,
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constructed, the parties to this Work Letter hereby agree that Landlord may make
"MINOR VARIATIONS" (as defined below) in the size, design, engineering,
configuration, and placement of any portion of Landlord's Work, and such Minor
Variations shall not render the Lease void or voidable nor give Tenant the right
to any reduction or abatement in Rent, notwithstanding anything contained in
this Work Letter or any rule of law or equity to the contrary. On or before the
Commencement Date (subject only to "TENANT CAUSED DELAYS" (as defined in Section
4.5) and delays occurring after March 1, 2000, caused by Force Majeure ("FORCE
MAJEURE DELAYS")), Landlord shall substantially complete or cause to be
substantially completed Landlord's Work in accordance with the Permits, and
shall obtain at least a temporary certificate of occupancy for the Building that
will allow Tenant to use and occupy such Building for substantially the purposes
contemplated in the Permitted Use (collectively, the "TEMPORARY CERTIFICATE"),
subject to Minor Variations and customary "punch list" items of a non-material
nature that do not adversely affect Tenant's use or occupancy of the Building
for substantially the purposes contemplated in the Permitted Use or the validity
of the Temporary Certificate ("SUBSTANTIALLY COMPLETE" or "SUBSTANTIAL
COMPLETION"); provided, however, that Landlord shall have no obligation to
obtain or maintain, and shall not obtain or maintain, any permits, licenses,
approvals, certificates, or other entitlements necessary or appropriate to
Tenant's specific use of the Premises or the conduct of Tenant's specific
business operations on the Premises. Upon the Substantial Completion of
Landlord's Work, each Architect shall be required to execute and deliver, for
the benefit of Tenant and Landlord, a Certificate of Substantial Completion in
the form of the American Institute of Architects document G704. For purposes of
this Work Letter, "MINOR VARIATIONS" shall mean any modifications reasonably
required: (i) to comply with all applicable Legal Requirements (including the
North Carolina State Building Code, as adopted by the City of Durham (the
"CODE")) and/or to obtain or to comply with any required permit (including the
Permits); (ii) to comply with any request by the Tenant for modifications to
Landlord's Work; (iii) to make reasonable, but minor, adjustments in order to
comport with good design, engineering, and construction practices; or (iv) to
make reasonable adjustments for field deviations or conditions encountered
during the performance of Landlord's Work.
4.3. Selection of Materials, Etc. Where more than one type of material or
structure is indicated on any of the Building Construction Drawings approved by
Landlord and Tenant, the option will be within Landlord's reasonable discretion.
As to all building materials and equipment that Landlord is obligated to supply
under this Work Letter, Landlord shall select the manufacturer thereof in
Landlord's reasonable discretion.
4.4. Delivery of the Premises. When Landlord's Work is Substantially
Complete, subject to the remaining terms and provisions of this Section, Tenant
shall accept the Premises in their then existing condition. Tenant's taking
possession and acceptance of the Premises shall not constitute a waiver of: (i)
any warranty, including those with respect to workmanship (including
installation of equipment) or material (exclusive of equipment provided directly
to Tenant by manufacturers), (ii) any non-compliance of Landlord's Work with
Legal Requirements (including the Code), or (iii) any claim that Landlord's Work
was not completed substantially in accordance with any of the Building
Construction Drawings (subject to Minor Variations and such other changes as are
permitted hereunder) (collectively, a "CONSTRUCTION DEFECT"). Tenant shall have
1 year after Substantial Completion within which to notify Landlord of any such
Construction Defect discovered by Tenant, and Landlord shall use reasonable
efforts to remedy or cause the responsible contractor to remedy any such
Construction Defect within 30 days thereafter. Notwithstanding the foregoing,
Landlord shall not be in default under the Lease if:
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Amended and Restated Work Letter 108 Alexander Ave.,
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(a) with respect to Construction Defects that Landlord reasonably
determines, in good faith, involve or may involve structural components of the
Premises or pose or may pose a significant risk of personal injury or
substantial property damage ("SERIOUS CONSTRUCTION DEFECTS"), the applicable
contractor, despite Landlord's reasonable efforts, fails to remedy such
Construction Defect within such 30-day period, but Landlord, within 30 days
thereafter, commences and diligently and continuously pursues such remedial
action to completion, at Landlord's sole cost and expense;
(b) with respect to Construction Defects that Landlord reasonably
determines, in good faith, are not Serious Construction Defects or involve
Tenant's Property, the applicable contractor, despite Landlord's reasonable
efforts, fails to remedy such Construction Defect within such 30-day period, in
which case Landlord shall have no further obligation with respect to such
Construction Defect other than to cooperate, at no cost to Landlord, with Tenant
should Tenant elect to pursue a claim against such contractor, provided that
Tenant indemnifies and holds Landlord harmless from and against any liability,
loss, cost, damage or expense in connection with any such claim; or
(c) with respect to any part of Landlord's Work, any action by Tenant to
the extent such action results in the invalidation of any otherwise enforceable
warranty or bond that would cover the cost of remedying such Construction
Defect.
Any determination made by Landlord pursuant to paragraph (a) or (b) above shall
be deemed reasonable and in good faith if based on advice received by Landlord
from an independent and duly licensed design or construction consultant (a
"DEFECT CONSULTANT"). Tenant may ask a Defect Consultant to provide written
confirmation of the advice given Landlord in connection with a determination by
Landlord that a specific Construction Defect is not a Serious Construction
Defect if, and only if, (i) Tenant gives Landlord Notice of such desire within 3
business days after receiving Notice of Landlord's determination, and (ii)
Tenant is solely responsible for any fee, cost, charge, or other assessment
imposed by the Defect Consultant for providing such written confirmation;
provided, however, that Tenant understands and agrees that Landlord's waiver of
the potential conflict of interest facing the Defect Consultant shall be
strictly limited to the advice, and only the advice, given Landlord in the
specific instance in question and shall not apply, under any circumstances, to
any other advice or matters that may be the subject of the services provided to
Landlord by the Defect Consultant.
Landlord shall use commercially reasonable efforts to cause the following
to be included in the agreements ("DEVELOPMENT AGREEMENTS") entered into with
each Developer: (i) an express statement or agreement by each such Developer
that Tenant is an "intended third party beneficiary" with respect to all express
representations and warranties contained in such Developer's Development
Agreement and with respect to all warranties implied, at law or in equity, from
the relationship created by such Developer's Development Agreement or from the
work performed by or on behalf of such Developer pursuant to such Developer's
Development Agreement; (ii) express representations and warranties from each
Developer that are "industry standard" for such professionals when providing
services to Similar Facilities in the Sub-Market, which representations and
warranties also shall be expressly assignable to Tenant and, as to each
Architect, shall include, but not be limited to, a representation or warranty
that the Building Construction Drawings prepared by or on behalf of such
Architect comply with all applicable Legal Requirements (including the Code),
subject to Minor Variations and such other changes as are permitted hereunder;
(iii) as to the Project Architect, an express requirement that the Project
Architect obtain and/or maintain errors and omissions insurance with a minimum
limit of not less than $2,000,000.00; (iv) as to each Developer, an express
requirement that Tenant be
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Amended and Restated Work Letter 108 Alexander Ave.,
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added as an additional insured under any insurance for which the contracting
party is to be named an additional insured; and (v) as to each Contractor, an
express requirement that such Contractor direct all manufacturers supplying
equipment to be installed in the Building to name both Landlord and Tenant as
the parties entitled to the benefits of the manufacturers' equipment warranties.
In all events, Tenant shall be entitled to receive the benefit of all design and
construction warranties and all manufacturers' equipment warranties for
equipment installed in the Building, and Landlord, if requested by Tenant, will
cooperate with Tenant in obtaining the benefit of all such warranties (subject
to the limitations described in paragraphs (a), (b), and (c) above). If
requested by Tenant, Landlord shall use commercially reasonable efforts to
obtain extended warranties from the manufacturers and suppliers of any equipment
to be installed in the Building, provided that the cost of any such extended
warranties shall be subject to Tenant's approval and, unless paid directly by
Tenant, at Tenant's option, shall be paid solely out of the Building Fund.
Within 5 days after receiving Notice from Tenant identifying punch list items,
Landlord shall undertake the correction of such punch list items and shall
complete, or cause to be completed, the correction of all punch list items
within 20 days thereafter; provided, however, if the nature of the punch list
items are such that they reasonably require more than 20 days to correct, then
Landlord shall not be deemed to be in default hereunder if Landlord commences
such correction within said 20-day period and thereafter diligently pursues the
same to completion; provided further, however, that such correction shall be
completed no later than 45 days from the date of Tenant's Notice regarding punch
list items (subject to Force Majeure Delays).
4.5. Commencement Date Delay. The Commencement Date shall occur when
Landlord's Work has been Substantially Completed (the "COMPLETION DATE"), except
to the extent that completion of Landlord's Work shall have been actually
delayed after March 1, 2000, by any one or more of the following causes (a
"TENANT CAUSED DELAY"):
(a) Tenant's Representative was not available to give or receive any
Communication (in the manner required under the notice provisions contained in
Section 44(a) of the Lease) or to take any other action required to be taken by
Tenant hereunder;
(b) Any "CHANGE REQUEST" (as defined in Section 5.1), whether or not
the "CHANGE" (as defined in Section 5) that is the subject of the Change Request
is actually performed;
(c) Construction of any Change;
(d) Tenant's request for materials, finishes, or installations
requiring unusually long lead times;
(e) Tenant's delay in reviewing, revising, providing Comments, or
approving specifications, plans, drawings, or other materials beyond the periods
set forth herein;
(f) Tenant's delay in providing information critical to the normal
progression of Landlord's Work (Tenant shall provide such information as soon as
reasonably possible, but in no event longer than 1 week after receipt of any
request for such information from Landlord that is transmitted in the manner
required under the notice provisions contained in Section 44(a) of the Lease);
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(g) Tenant's delay in making payments to Landlord for "EXCESS BUILDING
COSTS" (as defined in Section 6.5);
(h) Any delay in the timely completion of Landlord's Work caused by
Tenant's inability to obtain from the appropriate Governmental Authorities all
necessary approvals of a revised site plan for the Site that reflects Tenant's
redesign of the Greenhouse; or
(i) Any other act or omission by Tenant or its agents, contractors, or
persons employed by any of such persons.
If the Commencement Date is delayed for any of the foregoing reasons, then
Landlord shall cause the Project Architect (with respect to the Base Building
Work) and the TI Architect (with respect to the Tenant Improvements) to certify
the date on which Landlord's Work would have been Substantially Completed but
for such Tenant Caused Delay and such certified date shall be the Commencement
Date under the Lease.
5. Changes. Any changes requested by Tenant to Landlord's Work ("CHANGES")
after the mutual approval of any of the Building Construction Drawings shall be
requested and instituted in accordance with the provisions of this Section and
shall be subject to the written approval of Landlord and the appropriate
Architect, such approval not to be unreasonably withheld, conditioned, or
delayed.
5.1. Tenant's Right to Request Changes. Tenant shall request Changes,
if any, by giving Notice to Landlord in substantially the same form as the AIA
standard change order form (a "CHANGE REQUEST"), which Change Request shall
detail the nature and extent of any such Change. Tenant's Representative must
sign such Change Request. Landlord, before proceeding with any Change, shall use
commercially reasonable efforts to respond to Tenant as soon as reasonably
possible with an estimate of: (i) the period of time, if any, that the Change
will extend the date on which Landlord's Work will be Substantially Complete;
and (ii) the architectural and engineering fees and costs that will be incurred
to analyze such Change Request. Within 10 business days after Landlord's receipt
of the Change Request (or such longer period of time as is reasonably required
depending on the extent of the Change Request), Landlord shall submit to Tenant
a written analysis of the additional cost or savings involved, including,
without limitation, architectural and engineering costs and the period of time,
if any, that the Change will extend the date on which Landlord's Work will be
Substantially Complete. Any such delay in the completion of Landlord's Work
caused by a Change, including any suspension of Landlord's Work while any such
Change is being evaluated and/or designed, shall be a Tenant Caused Delay.
Notwithstanding the foregoing, Landlord's Work may not be suspended as a result
of any Change Request unless specifically approved by Tenant.
5.2. Implementation of Changes. If Tenant: (i) approves in writing the
cost or savings and the estimated extension in the time for completion of
Landlord's Work, if any, and (ii) deposits with Landlord any Excess Building
Costs required in connection with any Change, Landlord shall cause the approved
Change to be instituted. Notwithstanding any approval or disapproval by Tenant
of any estimate of the delay caused by such proposed Change, the appropriate
Architect's determination of the amount of Tenant Caused Delay in connection
with such Change shall be final and binding on Landlord and Tenant.
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6. Costs.
-----
6.1. Budget for Landlord's Work. Before commencing Landlord's Work,
Landlord prepared or obtained a detailed budget (the "BUDGET"), by trade, of the
costs incurred or that will be incurred in connection with the design,
permitting, and construction of Landlord's Work (the "BUILDING COSTS"). The
Budget is based upon the Building Construction Drawings and includes a payment
to Landlord of administrative rent ("ADMINISTRATIVE RENT") equal to 2.50% of the
Building Costs for administering, monitoring, and inspecting Landlord's Work,
which sum shall be payable from the Building Fund. Such Administrative Rent
shall include, without limitation, all out-of-pocket costs, expenses, and fees
incurred by or on behalf of Landlord arising from, out of, or in connection
with, such administration, monitoring, and inspection of Landlord's Work.
Landlord shall have the right (but not the obligation) to engage a project or
development manager to assist in performing such administration, monitoring, and
inspection of Landlord's Work and any payments to any such manager (excluding
payments for any services performed by such manager at Tenant's direct request
or direction) shall be payable from Administrative Rent.
6.2. Excess Line Item Costs. If at any time and from time-to-time
Landlord reasonably determines that the actual cost of certain services or
materials required for Landlord's Work will exceed the line item in the Budget
for such services or materials, Landlord shall give Notice to Tenant of same and
Tenant thereafter either shall approve or disapprove the excess line item cost
within 5 business days after Landlord's Notice. If Tenant approves the excess
line item cost, Landlord shall proceed with Landlord's Work and the excess line
item cost will be included in "BASE CONSTRUCTION COSTS" (as defined in Section
3(a) of the Lease). If Tenant disapproves the excess line item cost, Landlord
and Tenant shall reasonably and in good faith seek means by which to mitigate or
eliminate such excess line item cost. Any excess line item cost not approved by
Tenant shall not be included in Base Construction Costs.
6.3. Building Allowance. Landlord shall provide to Tenant a building
allowance ("BUILDING ALLOWANCE") of not more than $153.25 (in increments of
$10.00) per rentable square foot of the Building, provided that under no
circumstances (including an increase in the rentable square footage of the
Building) shall the aggregate amount of the Building Allowance exceed
$8,350,000.00. Within 3 business days after the execution of this Work Letter,
Tenant shall give Landlord Notice of how much of the Building Allowance Tenant
has elected to receive from Landlord. Such election shall be final and binding
on Tenant, and may not thereafter be modified without Landlord's consent, which
may be granted or withheld in Landlord's sole and absolute discretion. If the
Budget for Landlord's Work is greater than the Building Allowance, Tenant, as a
condition precedent to Landlord's obligation to complete Landlord's Work, shall
deposit with Landlord the difference, in cash, within 3 business days after
Landlord gives Notice to Tenant demanding the same. Any such deposit shall be
disbursed by Landlord to pay Building Costs.
6.4. Costs Includable in Building Allowance. The Building Allowance
shall be used solely for the payment of design, permitting, and construction
costs in connection with Landlord's Work, including, without limitation, the
cost of preparing the Building Design Program, the Building Schematic Plans, the
Building Design Development Plans, and the Building Construction Drawings, all
costs set forth in the Budget, including Administrative Rent and Landlord's out-
of-pocket expenses and other costs resulting from Tenant Caused Delays and the
cost of Changes, to the extent of the Building Allowance. The items that may be
paid for using the Building Allowance include, without limitation, the shell and
core of the Building, the site improvements appurtenant to the Building, HVAC
systems, utility distribution systems,
<PAGE>
Amended and Restated Work Letter 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 10
laboratory benches and casework, and hazardous waste containment equipment.
Notwithstanding anything to the contrary contained herein, the Building
Allowance shall not be used to pay for trade fixtures, emergency generators or
related emergency power equipment, furniture, personal property, or other non-
building system materials or equipment, including, but not be limited to,
biological safety cabinets and other scientific equipment not incorporated into
the Building.
6.5. Excess Building Costs. It is understood and agreed that Landlord
is under no obligation to bear any portion of the cost of any of Landlord's Work
except to the extent of the Building Allowance (as adjusted). Notwithstanding
Section 6.2 above, if at any time and from time-to-time Landlord reasonably
determines that the remaining Building Costs under the Budget exceed the
remaining unexpended Building Allowance, Landlord shall give Notice to Tenant of
same and Tenant thereafter shall deposit with Landlord, as a condition precedent
to Landlord's obligation to complete Landlord's Work, 100% of the then current
Building Costs in excess of the remaining Building Allowance ("EXCESS BUILDING
COSTS"). If Tenant fails to deposit with Landlord, or deposits with Landlord
after the date demanded in Landlord's Notice (which shall not be less than 5
business days after Landlord's Notice), the amount of any Excess Building Costs,
Landlord may suspend Landlord's Work until the required deposit has been made
and shall have all of the rights and remedies set forth in the Lease for
nonpayment of Rent (including, but not limited to, the right to interest at the
Default Rate and the right to assess a late charge), and for purposes of any
litigation instituted with regard to such amounts the same will be considered
Rent. Such deposits of Excess Building Costs, together with the Building
Allowance (as adjusted) and any funds deposited by Tenant pursuant to Section
6.3 above, are herein referred to as the "BUILDING FUND". Funds so deposited by
Tenant shall be the first thereafter disbursed to pay Building Costs.
Notwithstanding anything to the contrary set forth in this Section, Tenant shall
be fully and solely liable for Building Costs and the cost of Minor Variations
in excess of the Building Allowance (except as may be provided otherwise in
Section 6.2 above). If upon Substantial Completion of Landlord's Work and the
payment of all sums due in connection therewith there remains any undisbursed
Building Allowance, Tenant shall be entitled to such undisbursed Building
Allowance solely to the extent of any deposits of Excess Building Costs that
Tenant has actually made with Landlord.
7. Tenant Access.
-------------
7.1. Tenant's Access Rights. Landlord hereby agrees to permit Tenant
access to the Building, at Tenant's sole risk and expense, (i) 30 days prior to
the Commencement Date to perform any work ("TENANT'S WORK") required by Tenant
other than Landlord's Work (including, as examples only, installation of
telephones, cables, and, to the extent reasonably practical, trade fixtures and
furniture), provided that such Tenant's Work is coordinated with the TI
Architect and the TI Contractor and complies with the Lease and all other
reasonable restrictions and conditions Landlord may impose, and (ii) prior to
the completion of Landlord's Work, to inspect and observe work in process; all
such access shall be during normal business hours or at such other times as are
reasonably designated by Landlord. Notwithstanding the foregoing, Tenant shall
have no right to enter onto the Premises or the Building unless and until Tenant
shall deliver to Landlord evidence reasonably satisfactory to Landlord
demonstrating that any insurance reasonably required by Landlord in connection
with such pre-commencement access (including, but not limited to, any insurance
that Landlord may require pursuant to the Lease) is in full force and effect.
<PAGE>
Amended and Restated Work Letter 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 11
7.2. No Interference. Neither Tenant nor its employees, consultants,
agents, contractors, and suppliers shall interfere with the performance of
Landlord's Work, nor with any inspections or issuance of final approvals by
Durham County, North Carolina, or the City of Durham, and upon any such
interference, Landlord shall have the right to exclude Tenant and Tenant's
employees, consultants, agents, contractors, and suppliers from the Premises and
the Building until Substantial Completion of Landlord's Work.
7.3. No Acceptance of Premises. So long as Tenant engages only in the
activities enumerated in Section 7.1, the fact that Tenant, with Landlord's
consent, may enter the Building prior to the date Landlord's Work is
Substantially Complete shall not be deemed an acceptance by Tenant of possession
of the Premises, but in such event Tenant shall indemnify and hold Landlord
harmless from any loss of or damage to Tenant property, completed work,
fixtures, equipment, materials or merchandise, and from liability for death of,
or injury to, any person, caused by the willful misconduct or negligence of
Tenant or its agents.
8. Notification of Delays. Not less than once each calendar month beginning
in April, 2000, and continuing through the Commencement Date, Landlord shall
deliver to Tenant written notification of the number of days during the
immediately preceding calendar month Landlord's performance under this Work
Letter or the Lease was delayed as a result of Tenant Caused Delays or Force
Majeure Delays, which written notification shall also include a description of
the nature of such Tenant Caused Delay or Force Majeure Delay.
9. Miscellaneous
-------------
9.1. Consents. Whenever consent or approval of either party is
required under this Work Letter, that party shall not unreasonably withhold,
condition, or delay such consent or approval, except as may be expressly set
forth herein to the contrary. Notwithstanding the foregoing, and regardless of
any standard that may be applicable to any consent or approval rights given to
Landlord hereunder, Landlord shall be justified in withholding, and shall not
incur any liability for so withholding, any consent or approval to any action,
document, or matter that Landlord determines, in its sole and absolute
discretion, will or might adversely affect Landlord's status as a "real estate
investment trust".
9.2. Modification. No modification, waiver, or amendment of this Work
Letter or of any of its conditions or provisions shall be binding upon Landlord
or Tenant unless in writing signed by Landlord and Tenant.
9.3. Counterparts. This Work Letter may be executed in any number of
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute a single agreement with the same effect as if all
parties had signed the same signature page. Any signature page from any
counterpart of this Work Letter, signed only by one party, may be detached from
such counterpart and re-attached to any other counterpart of this Work Letter
that has a signature page signed only by the other party.
9.4. Governing Law. This Work Letter shall be governed by, construed
and enforced in accordance with the internal laws of the state in which the
Premises are located, without regard to choice of law principles of such State.
9.5. Time of the Essence. Time is of the essence of this Work Letter
and of each and all provisions thereof.
<PAGE>
Amended and Restated Work Letter 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 12
9.6. Severability. If any term or provision of this Work Letter is
declared invalid or unenforceable, the remainder of this Work Letter shall not
be affected by such determination and shall continue to be valid and
enforceable.
9.7. Merger. All understandings and agreements, oral or written,
heretofore made between the parties hereto and relating to Landlord's Work are
merged in this Work Letter, which alone (but inclusive of provisions of the
Lease incorporated herein and the final approved constructions drawings and
specifications prepared pursuant hereto) fully and completely expresses the
agreement between Landlord and Tenant with regard to the matters set forth in
this Work Letter.
9.8. Interpretation. The normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Work Letter or any schedules or
amendments hereto. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires. The captions
inserted in this Work Letter are for convenience only and in no way define,
limit or otherwise describe the scope or intent of this Work Letter, or any
provision hereof, or in any way affect the interpretation of this Work Letter.
9.9. Attorneys Fees. If either Landlord or Tenant reasonably seeks
legal services with respect to the proper interpretation or enforcement of this
Work Letter, the party receiving substantially the result it sought or defended
(the "PREVAILING PARTY"), whether by award, judgment, stipulation, settlement,
workout, default, or otherwise and whether or not any legal action may have been
instituted or instituted and then voluntarily dismissed, shall be entitled to
recover from the adverse party all reasonable fees and costs incurred by the
Prevailing Party in connection with such legal services ("LEGAL FEES"). Legal
Fees include, without limitation, (i) fees, costs, and expenses of any
engineers, accountants, appraisers, consultants, brokers, and other
professionals or experts retained or consulted by the Prevailing Party, and
other costs and expenses of investigation or analysis incurred by the Prevailing
Party in support of its position, and (ii) all such fees, costs, and expenses
incurred in any aspect of the legal process, whether out-of-court negotiations,
mediation, arbitration, commencement of suit, discovery, law and motion, trial,
appellate proceedings, or any action or participation in, or in connection with,
any case or proceeding under Chapter 7, 11, or 13 of the Bankruptcy Code, 11
U.S.C. Section 101 et seq., or any successor statutes.
9.10. No Third Party Benefits. Landlord and Tenant do not intend by
any provision of this Work Letter to confer any right, remedy, or benefit upon
any third party, and no third party shall be entitled to enforce, or otherwise
shall acquire any right, remedy, or benefit by reason of, any provision of this
Work Letter.
9.11. No Waiver; Remedies Cumulative. No purported waiver of any
provision of this Work Letter shall be binding unless such waiver is in writing
and signed by the party to be bound. In addition, no waiver of any provision of
this Work Letter shall be deemed, or shall constitute, a waiver of any other
provision of this Work Letter, whether or not similar, nor shall any waiver
constitute a continuing waiver. Further, no failure to exercise and no delay in
exercising any power, right, remedy, or privilege under this Work Letter shall
impair such power, right, remedy, or privilege or shall be deemed, or shall
constitute, a waiver of any default under this Work Letter or acquiescence
therein, nor shall any single or partial exercise of any such power, right,
remedy, or privilege preclude any other or further exercise thereof or of any
other power, right, remedy, or privilege. Finally, all powers, rights, remedies,
and privileges existing
<PAGE>
Amended and Restated Work Letter 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 13
under this Work Letter are cumulative, in addition to, and not exclusive of any
other powers, rights, remedies, or privileges otherwise available to the parties
to this Work Letter.
9.12. Incorporation by Reference. All schedules attached hereto are
hereby incorporated into this Lease and made a part hereof. If there is any
conflict between such schedules and the terms of this Work Letter, such
schedules shall control.
9.13. Entire Agreement. This Work Letter is made as a part of and
pursuant to the Lease and, together with the Lease, constitutes the entire
agreement of the parties with respect to the subject matter hereof. This Work
Letter is subject to all of the terms and limitation set forth in the Lease, and
neither party shall have any rights or remedies under this Work Letter separate
and apart from their respective remedies pursuant to the Lease.
[ SIGNATURES ON NEXT PAGE ]
<PAGE>
Amended and Restated Work Letter 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 14
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amended and
Restated Work Letter to be effective on the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:
-------------------------------
John A. Ryals
CEO and President
Execution Date:
---------------
ATTEST: _____________________
Its __________________ Secretary
[CORPORATE SEAL]
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By: _______________________________________
Print Name: _______________________________
Print Title: ______________________________
Execution Date: ___________________________
ATTEST: _____________________
Its __________________ Secretary
[CORPORATE SEAL]
<PAGE>
Schedule A to Amended and Restated Work Letter
[PHASE 1A: OFFICE / LABORATORY]
DEVELOPMENT SCHEDULE
--------------------
Event Date
- ----------------------------------------------------- --------------
Final approval of Building
Design Program pursuant to Section 2.3 Done; 08/25/99
Final approval of Building Construction
Drawings pursuant to Section 2.6 Done; 01/21/00
Issuance of Base Building Permit Done; 11/11/99
Commencement of
construction of Base Building Work Done; 11/15/99
Issuance of TI Permit 04/01/00
Commencement of
construction of Tenant Improvements 04/01/00
Substantial Completion of Landlord's Work 09/11/00
Issuance of Temporary Certificate of Occupancy 09/11/00
<PAGE>
Schedule B to Amended and Restated Work Letter
[PHASE 1A: OFFICE / LABORATORY]
BASE BUILDING WORK
------------------
===============================================================================
Description of Base Building Work - Shell and Core*
. Concrete Foundations and Floors
. Structural/Steel Frame
. Exterior Walls/Facade/Windows
. Exterior Doors
. Exterior Painting
. Roofing/Fireproofing/Caulking and Sealant
. Roof Hatch
. Shell and Core Mechanical/Plumbing
(Includes roof drains, hose bibs, main service backflow preventer, garage
exhaust (if req'd by Code))
. Shell and Core Electrical
(Main electrical switchgear req'd by Code to service shell only, incl. req'd
life safety improvements)
. Shell and Core Fire Sprinklers
(Fire riser to shell for Ordinary Group 2 fire system)
. Loading Area/Dock Bumpers
. Exit Stairs
(As req'd by Code)
. Related Shell Architectural/Engineering Fees; Building Permit and Inspection
Fees
. Builder's Risk Insurance Premiums
===============================================================================
Description of Base Building Work - Site Improvements *
. Finished Grading
. Finished Landscape and Hardscape Features
. Irrigation Systems
. Surface Parking and Striping
(Parking provided at or near a ratio of 3 spaces per 1,000 rentable sq. ft.,
or as req'd by Code)
. Exterior Lighting
(Parking and landscaped areas)
. Trash Enclosure
. Utilities Stubbed to the Building
(Sewer, water, natural gas, and electricity)
. Fire Hydrants
. ADA Access and Other Improvements Required by Code
. Concrete Pad for Tenant's Emergency Generator
. Monument Signage
(Tenant responsible for its lettering and graphics)
* All materials and labor shall comply with Code and be "industry standard" for
the Sub-Market
<PAGE>
EXHIBIT D
COMMENCEMENT DATE; TERM
-----------------------
This Acknowledgment, dated _______________, 2000, is given by ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company ("LANDLORD"), and
PARADIGM GENETICS, INC., a Delaware corporation (formerly a North Carolina
corporation) ("TENANT"), and is attached to and made a part of the Amended and
Restated Lease Agreement [Phase 1A: Office / Laboratory] executed as of April
___, 2000, and effective as of July 27, 1999 (the "LEASE"), between Landlord and
Tenant. Any initially capitalized terms used but not defined herein shall have
the meanings given them in the Lease.
Tenant and Landlord hereby acknowledge and agree that, for all purposes
related to the Lease, the "COMMENCEMENT DATE" shall be _______________, 2000,
and the initial "TERM" shall expire on _______________, 2010.
IN WITNESS WHEREOF, Tenant and Landlord have executed this Acknowledgment
as of the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By: __________________________________________
Its: _________________________________________
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By: ___________________________________
Its: __________________________________
<PAGE>
EXHIBIT E
BASE CONSTRUCTION COSTS; BUILDING ALLOWANCE; BASE RENT
------------------------------------------------------
This Acknowledgment, dated _______________, 2000, is given by ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company ("LANDLORD"), and
PARADIGM GENETICS, INC., a Delaware corporation (formerly a North Carolina
corporation) ("TENANT"), and is attached to and made a part of the Amended and
Restated Lease Agreement [Phase 1A: Office / Laboratory] executed as of April
___, 2000, and effective as of July 27, 1999 (the "LEASE"), between Landlord and
Tenant. Any initially capitalized terms used but not defined herein shall have
the meanings given them in the Lease.
Tenant and Landlord hereby acknowledge and agree that, for all purposes
related to the Lease, the aggregate "BASE CONSTRUCTION COSTS" shall be
$__________, the aggregate "BUILDING ALLOWANCE" actually disbursed to or for the
benefit of Tenant shall be $__________, and the initial monthly "BASE RENT"
shall be $__________.
IN WITNESS WHEREOF, Tenant and Landlord have executed this Acknowledgment
as of the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By: _____________________________________________
Its: ____________________________________________
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By: ___________________________________
Its: __________________________________
<PAGE>
EXHIBIT F
GROUND LEASE RENT
-----------------
This Acknowledgment, dated _______________, 2000, is given by ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company ("LANDLORD"), and
PARADIGM GENETICS, INC., a Delaware corporation (formerly a North Carolina
corporation) ("TENANT"), and is attached to and made a part of the Amended and
Restated Lease Agreement [Phase 1A: Office / Laboratory] executed as of April
___, 2000, and effective as of July 27, 1999 (the "LEASE"), between Landlord and
Tenant. Any initially capitalized terms used but not defined herein shall have
the meanings given them in the Lease.
Tenant and Landlord hereby acknowledge and agree that, for all purposes
related to the Lease, the initial annual "GROUND LEASE RENT" shall be
$__________.
IN WITNESS WHEREOF, Tenant and Landlord have executed this Acknowledgment
as of the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By: ____________________________________________
Its: ___________________________________________
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By: __________________________________
Its: _________________________________
<PAGE>
EXHIBIT G
ORIGINAL SECURITY AMOUNT
------------------------
This Acknowledgment, dated _______________, 2000, is given by ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company ("LANDLORD"), and
PARADIGM GENETICS, INC., a Delaware corporation (formerly a North Carolina
corporation) ("TENANT"), and is attached to and made a part of the Amended and
Restated Lease Agreement [Phase 1A: Office / Laboratory] executed as of April
___, 2000, and effective as of July 27, 1999 (the "LEASE"), between Landlord and
Tenant. Any initially capitalized terms used but not defined herein shall have
the meanings given them in the Lease.
Tenant and Landlord hereby acknowledge and agree that, for all purposes
related to the Lease, the "ORIGINAL SECURITY AMOUNT" shall be $__________.
IN WITNESS WHEREOF, Tenant and Landlord have executed this Acknowledgment
as of the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By: ________________________________________________
Its: _______________________________________________
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By: ______________________________________
Its: _____________________________________
<PAGE>
EXHIBIT H
RULES AND REGULATIONS
---------------------
(a) The sidewalk, entries, and driveways of the Project shall not be
obstructed by Tenant, or its agents, or used by them for any purpose other than
ingress and egress to and from the Premises.
(b) Tenant shall not place any objects, including antennas, outdoor
furniture, etc., in the parking areas, landscaped areas or other areas outside
of its Premises, or on the roof of the Project.
(c) No animals shall be allowed in the offices, halls, or corridors in the
Project, except for seeing-eye dogs and any other animals that may be reasonably
necessary to the Permitted Use.
(d) Tenant shall not disturb the occupants of the Project or adjoining
buildings by the use of any radio or musical instrument or by the making of loud
or improper noises.
(e) If Tenant desires telegraphic, telephonic or other electric connections
in the Premises, Landlord or its agent will direct the electrician as to where
and how the wires may be introduced; and, without such direction, no boring or
cutting of wires will be permitted. Any such installation or connection shall be
made at Tenant's expense.
(f) Tenant shall not install or operate any steam or gas engine or boiler,
or other mechanical apparatus in the Premises, except as specifically approved
in the Lease. The use of oil, gas or inflammable liquids for heating, lighting
or any other purpose is expressly prohibited. Explosives or other articles
deemed extra hazardous shall not be brought into the Project.
(g) Parking any type of recreational vehicles is specifically prohibited on
or about the Project. Except for the overnight parking of operative vehicles, no
vehicle of any type shall be stored in the parking areas at any time. In the
event that a vehicle is disabled, it shall be removed within 48 hours. There
shall be no "For Sale" or other advertising signs on or about any parked
vehicle. All vehicles shall be parked in the designated parking areas in
conformity with all signs and other markings. All parking will be open parking,
and no reserved parking, numbering or lettering of individual spaces will be
permitted except as specified by Landlord.
(h) Tenant shall maintain the Premises free from rodents, insects and other
pests.
(i) Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs or who shall in any manner do any act in violation of the
Rules and Regulations of the Project.
(j) Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and cleanliness.
Landlord shall not be responsible to Tenant for any loss of property on the
Premises, however occurring, or for any damage done to the effects of Tenant by
the janitors or any other employee or person.
<PAGE>
Rules and Regulations 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 2
(k) Tenant shall give Landlord prompt Notice of any defects in the water,
lawn sprinkler, sewage, gas pipes, electrical lights and fixtures, heating
apparatus, or any other service equipment affecting the Premises.
(l) Tenant shall not permit storage outside the Premises, including without
limitation, outside storage of trucks and other vehicles, or dumping of waste or
refuse or permit any harmful materials to be placed in any drainage system or
sanitary system in or about the Premises.
(m) All moveable trash receptacles provided by the trash disposal firm for
the Premises must be kept in the trash enclosure areas, if any, provided for
that purpose.
(n) No auction, public or private, will be permitted on the Premises or the
Project.
(o) No awnings shall be placed over the windows in the Premises except with
the prior written consent of Landlord.
(p) The Premises shall not be used for lodging, sleeping, or cooking
(except to the extent contemplated in the plans and specifications for the
Premises approved by Landlord) or for any immoral or illegal purposes or for any
purpose other than that specified in the Lease. No gaming devices shall be
operated in the Premises.
(q) Tenant shall ascertain from Landlord the maximum amount of electrical
current that can safely be used in the Premises, taking into account the
capacity of the electrical wiring in the Project and the Premises and the needs
of other tenants, and shall not use more than such safe capacity. Landlord's
consent to the installation of electric equipment shall not relieve Tenant from
the obligation not to use more electricity than such safe capacity.
(r) Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's ordinary use of
the Premises and shall keep all such machinery free of vibration, noise and air
waves which may be transmitted beyond the Premises.
<PAGE>
EXHIBIT I
TENANT'S PERSONAL PROPERTY
--------------------------
Emergency diesel generator(s)
De-ionized water system pumps, tanks, and fixtures [point of use systems only]
Nitrogen gas system manifolds and LN2 storage tanks
Uninterruptable Power Supply [UPS] with battery array
Computer Disk arrays and support equipment
Modular Plant Growth Rooms
Modular (0-56C) environmental rooms
Autoclaves with internal steam supply [stand alone, movable, and not built in
only]
Glassware washer and dryer [stand alone, movable, and not built in only]
All incubators
All biological safety cabinets [non-ducted]
All laminar flow hoods [non-ducted]
Non-HVAC monitoring and control systems
Non-sprinkler Fire Suppression Systems
All Telephone-LAN-Video Communications Systems
Chemical spray booth
Soil handling equipment
Air compressor
Benches, racks, and canopies [stand alone, movable, and not built in only]
<PAGE>
EXHIBIT J
ESTOPPEL CERTIFICATE
--------------------
This TENANT ESTOPPEL CERTIFICATE ("CERTIFICATE"), dated as of
_______________, _____, is executed by PARADIGM GENETICS, INC., a Delaware
corporation ("TENANT"), in favor of ________________________________________, a
_________________________, together with its nominees, designees and assigns
(collectively, "BUYER"), and in favor of
________________________________________, a _________________________, together
with its nominees, designees and assigns (collectively, "LENDER").
RECITALS
--------
A. Buyer and ARE-104 ALEXANDER ROAD, LLC, a Delaware limited liability
company ("LANDLORD"), have entered into that certain Purchase and Sale Agreement
and Joint Escrow Instructions, dated as of __________, _____ (the "PURCHASE
AGREEMENT"), whereby Buyer has agreed to purchase, among other things,
Landlord's interests in the improved real property located in the City of
Durham, County of Durham, State of North Carolina, more particularly described
on Exhibit A attached to the Purchase Agreement (the "PROPERTY").
B. Tenant and Landlord have entered into that certain Amended and Restated
Lease Agreement [Phase 1A: Office / Laboratory] executed as of April ___, 2000,
and effective as of July 27, 1999 (together with all amendments, modifications,
supplements, guarantees and restatements thereof, the "LEASE"), for a portion of
the Property.
C. Pursuant to the Lease, Tenant has agreed that upon the request of
Landlord, Tenant would execute and deliver an estoppel certificate certifying
the status of the Lease.
D. In connection with the Purchase Agreement, Landlord has requested that
Tenant execute this Certificate with an understanding that Lender will rely on
the representations and agreements below in granting to Buyer a loan.
NOW, THEREFORE, Tenant certifies, warrants, and represents to Buyer and
Lender as follows:
SECTION 1. LEASE.
Attached hereto as Exhibit B is a true, correct and complete copy of the
Lease, including the following amendments, modifications, supplements,
guarantees and restatements thereof, which together represent all of the
amendments, modifications, supplements, guarantees and restatements thereof:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(If none, please state "None.")
<PAGE>
Estoppel Certificate 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 2
SECTION 2. LEASED PREMISES.
Pursuant to the Lease, Tenant leases those certain premises (the "LEASED
PREMISES") consisting of approximately _______________ rentable square feet
within the Property, as more particularly described in the Lease. In addition,
pursuant to the terms of the Lease, Tenant has the [non-exclusive] right to use
[_____ parking spaces/the parking area] located on the Property during the term
of the Lease. [Please cross-out the preceding sentence or portions thereof if
inapplicable.]
SECTION 3. FULL FORCE OF LEASE.
The Lease has been duly authorized, executed and delivered by Tenant, is in
full force and effect, has not been terminated, and constitutes a legally valid
instrument, binding and enforceable against Tenant in accordance with its terms,
subject only to applicable limitations imposed by laws relating to bankruptcy
and creditor's rights.
SECTION 4. COMPLETE AGREEMENT.
The Lease constitutes the complete agreement between Landlord and Tenant
for the Leased Premises and the Property, and except as modified by the Lease
amendments noted above (if any), has not been modified, altered or amended.
SECTION 5. ACCEPTANCE OF LEASED PREMISES.
Tenant has accepted possession and is currently occupying the Leased
Premises.
SECTION 6. LEASE TERM.
The term of the Lease commenced on __________, _____, and ends on
__________, _____, subject to the following options to extend:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(If none, please state "None.")
SECTION 7. PURCHASE RIGHTS.
Tenant has no option, right of first refusal, right of first offer, or
other right to acquire or purchase all or any portion of the Leased Premises or
all or any portion of, or interest in, the Property, except as follows:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(If none, please state "None.")
SECTION 8. RIGHTS OF TENANT.
Except as expressly stated in this Certificate, Tenant:
(a) has no right to renew or extend the term of the Lease;
<PAGE>
Estoppel Certificate 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 3
(b) has no option or other right to purchase all or any part of the
Leased Premises or all or any part of the Property;
(c) has no right, title, or interest in the Leased Premises, other
than as Tenant under the Lease.
SECTION 9. RENT.
(a) The obligation to pay rent under the Lease commenced on
__________. The rent under the Lease is current, and Tenant is not in default in
the performance of any of its obligations under the Lease.
(b) Tenant is currently paying base rent under the Lease in the amount
of $__________ per month. Tenant has not received and is not presently entitled
to any abatement, refunds, rebates, concessions or forgiveness of base rent or
other charges, free rent, partial rent, or credits, offsets or reductions in
base rent, except as follows:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(If none, please state "None.")
(c) Tenant is currently paying ground lease rent under the Lease in
the amount of $__________ per month. Tenant has not received and is not
presently entitled to any abatement, refunds, rebates, concessions or
forgiveness of ground lease rent or other charges, free rent, partial rent, or
credits, offsets or reductions in ground lease rent, except as follows:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(If none, please state "None.")
(d) Tenant is currently paying building improvement rent under the
Lease in the amount of $__________ per month. Tenant has not received and is not
presently entitled to any abatement, refunds, rebates, concessions or
forgiveness of building improvement rent or other charges, free rent, partial
rent, or credits, offsets or reductions in building improvement rent, except as
follows:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(If none, please state "None.")
(e) Tenant's estimated share of operating expenses, common area
charges, insurance, real estate taxes and administrative and overhead expenses
is _____% and is currently being paid at the rate of $__________ per month,
payable to: _______________________________________________________; there
currently are no existing defenses or offsets against rent due or to become due
under the terms of the Lease, and, to the best of Tenant's knowledge, there
currently is no default or other wrongful act or omission by Landlord under the
Lease or otherwise in connection with
<PAGE>
Estoppel Certificate 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 4
Tenant's occupancy of the Leased Premises, nor is there a state of facts that,
with the passage of time or the giving of notice or both, could ripen into a
default on the part of Tenant, or to the best knowledge of Tenant, could ripen
into a default on the part of Landlord under the Lease, except as follows:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(If none, please state "None.")
SECTION 10. SECURITY DEPOSIT.
The amount of Tenant's security deposit held by Landlord under the Lease is
$__________.
SECTION 11. PREPAID RENT.
The amount of prepaid rent, separate from the security deposit, is
$__________, covering the period from __________, _____ to __________, _____.
SECTION 12. INSURANCE.
All insurance, if any, that Tenant is required to maintain under the Lease
is presently in effect.
SECTION 13. PENDING ACTIONS.
There is not pending or, to the knowledge of Tenant, threatened against or
contemplated by the Tenant, any petition in bankruptcy, whether voluntary or
otherwise, any assignment for the benefit of creditors, or any petition seeking
reorganization or arrangement under the federal bankruptcy laws or those of any
state.
SECTION 14. LANDLORD'S PERFORMANCE.
As of the date of this Certificate, to the best of Tenant's knowledge,
Landlord has performed all obligations required of Landlord pursuant to the
Lease; no offsets, counterclaims, or defenses of Tenant under the Lease exist
against Landlord; and no events have occurred that, with the passage of time or
the giving of notice, would constitute a basis for offsets, counterclaims, or
defenses against Landlord, except as follows:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(If none, please state "None.")
SECTION 15. ASSIGNMENTS BY LANDLORD.
Tenant has received no notice of any assignment, hypothecation or pledge of
the Lease or rentals under the Lease by Landlord. Tenant hereby consents to an
assignment of the Lease and rents to be executed by Landlord to Buyer or Lender
in connection with the Loan and acknowledges that said assignment does not
violate the provisions of the Lease. Tenant acknowledges that the interest of
the Landlord under the Lease is to be assigned to Buyer or
<PAGE>
Estoppel Certificate 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 5
Lender solely as security for the purposes specified in said assignment and
Buyer or Lender shall have no duty, liability or obligation whatsoever under the
Lease or any extension or renewal thereof, either by virtue of said assignment
or by any subsequent receipt or collection of rents thereunder, unless Buyer or
Lender shall specifically undertake such liability in writing. Tenant agrees
that upon receipt of a written notice from Buyer or Lender of a default by
Landlord under the Loan, Tenant will thereafter pay rent to Buyer or Lender in
accordance with the terms of the Lease.
SECTION 16. ASSIGNMENTS BY TENANT.
Tenant has not sublet or assigned the Leased Premises or the Lease or any
portion thereof to any sublessee or assignee. No one except Tenant and its
employees will occupy the Leased Premises. The address for notices to be sent
to Tenant is as set forth in the Lease.
SECTION 17. ENVIRONMENTAL MATTERS.
The operation and use of the Leased Premises does not involve the
generation, treatment, storage, disposal or release into the environment of any
hazardous materials, regulated materials and/or solid waste, except those used
in the ordinary course of operating a scientific research and development
facility (including laboratory and related administrative space) or otherwise
used in accordance with all applicable laws.
SECTION 18. SUCCESSION OF INTEREST.
Tenant agrees that, in the event Buyer or Lender succeeds to the interest
of Landlord under the Lease:
(a) Buyer or Lender shall not be liable for any act or omission of any
prior landlord (including Landlord);
(b) Buyer or Lender shall not be liable for the return of any security
deposit;
(c) Buyer or Lender shall not be bound by any rent or additional rent
which Tenant might have prepaid under the Lease for more than the current month;
(d) Buyer or Lender shall not be bound by any amendments or
modifications of the Lease made without prior consent of Buyer or Lender;
(e) Buyer or Lender shall not be subject to any offsets or defenses
which Tenant might have against any prior landlord (including Landlord); or
(f) Buyer or Lender shall not be liable under the Lease to Tenant for
the performance of Landlord's obligations under the Lease beyond Buyer or
Lender's interest in the Property.
SECTION 19. NOTICE OF DEFAULT.
Tenant agrees to give Buyer and Lender a copy of any notice of default
under the Lease served upon Landlord at the same time as such notice is given to
Landlord. Tenant further agrees that if Landlord shall fail to cure such
default within the applicable grace period, if any, provided in the Lease, then
Buyer or Lender shall have an additional 30 days within which to cure such
default, or if such default cannot be cured within such 30-day period, such 30-
day
<PAGE>
Estoppel Certificate 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 6
period shall be extended so long as Buyer or Lender has commenced and is
diligently pursuing the remedies necessary to cure such default (including, but
not limited to, commencement of foreclosure proceedings, if necessary to effect
such cure, in which event the Lease shall not be terminated while such remedies
are being pursued.
SECTION 20. NOTIFICATION BY TENANT.
From the date of this Certificate and continuing until __________, _____,
Tenant agrees to immediately notify Buyer and Lender, in writing by registered
or certified mail, return receipt requested, at the following addresses, on the
occurrence of any event or the discovery of any fact that would make any
representation contained in this Certificate inaccurate:
<PAGE>
Estoppel Certificate 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 7
If to Buyer: If to Lender:
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
With a copy to: With a copy to:
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
Tenant makes this Certificate with the knowledge that it will be relied
upon by Buyer in agreeing to purchase the Property and by Lender in agreeing to
provide financing for such purchase.
Tenant has executed this Certificate as of the date first written above by
the person named below, who is duly authorized to do so.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By: ______________________________________
Its: _____________________________________
<PAGE>
Exhibit A
LEGAL DESCRIPTION
-----------------
<PAGE>
Exhibit B
COPY OF LEASE
-------------
<PAGE>
EXHIBIT K
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT is made and
entered into as of _______________, _____ ("AGREEMENT"), by and between ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company, together with its
nominees, designees and assigns (collectively, "LANDLORD"), PARADIGM GENETICS,
INC., a Delaware corporation ("TENANT"), and _________________________, a
_________________________ ("MORTGAGEE").
WHEREAS, Mortgagee is making a loan to Landlord and others evidenced by a
certain promissory note ("NOTE"), and secured by, among other things, a deed of
trust/mortgage to be recorded prior hereto in the public records of the City of
Durham, County of Durham, State of North Carolina ("MORTGAGE") constituting a
lien upon the real property interests described in Exhibit A hereto (the "
PROPERTY"); and
WHEREAS, Landlord and Tenant have entered into an Amended and Restated
Lease Agreement [Phase 1A: Office / Laboratory] executed as of April ___, 2000,
and effective as of July 27, 1999 ("LEASE"), for certain leased premises located
in the Triangle Park Research Center in Research Triangle Park, Durham County,
North Carolina, containing or intended to contain a building with approximately
54,463 net rentable square feet (hereinafter referred to as "PREMISES"); and
WHEREAS, the Lease is subordinate to the Mortgage and to the right, title,
and interests of Mortgagee thereto and thereunder; and
WHEREAS, Mortgagee wishes to obtain from Tenant certain assurances that
Tenant will attorn to Mortgagee in the event of a foreclosure by Mortgagee or
the exercise of other rights under the Mortgage; and
WHEREAS, Tenant wishes to obtain from Mortgagee certain assurances that
Tenant's possession of the Premises will not, subject to the terms and
conditions of this Agreement, be disturbed by reason of a foreclosure of the
lien of the Mortgage on the Property; and
WHEREAS, Tenant and Mortgagee are both willing to provide such assurances
to each other upon and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the above, the mutual promises
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto mutually
agree as follows:
1. AFFIRMATION. Tenant hereby agrees that the Lease now is and shall be
subject and subordinate in all respects to the Mortgage and to all renewals,
modifications and extensions thereof until such time that the Mortgage is
released, satisfied or otherwise discharged, subject to the terms and conditions
of this Agreement. Landlord and Tenant hereby affirm that the Lease is in full
force and effect and that the Lease has not been modified or amended. Mortgagee
hereby confirms that it is the holder of the Note and the beneficiary of the
Mortgage and has full power and authority to enter into this Agreement.
<PAGE>
Subordination Agreement [Loan] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 2
2. ATTORNMENT AND NON-DISTURBANCE.
------------------------------
(a) So long as Tenant is not in default under the Lease (beyond
Tenant's receipt of notice from Landlord and any grace period granted Tenant
under the Lease to cure such default) as would entitle the Landlord to terminate
the Lease or would cause without any further action of the Landlord, the
termination of the Lease or would entitle the Landlord to dispossess Tenant
thereunder, then Mortgagee agrees with Tenant that, in the event the interest of
Landlord shall be acquired by Mortgagee or in the event Mortgagee comes into
possession of or acquires title to the Property by reason of foreclosure or
foreclosure sale or the enforcement of the Mortgage or the Note or other
obligation secured thereby or by a conveyance in lieu thereof, or as a result of
any other means, then:
(i) Subject to the provisions of this Agreement, Tenant's
occupancy and possession of the Premises and Tenant's rights and privileges
under the Lease or any extensions, modifications or renewals thereof or
substitutions therefor (in accordance with the Lease and the Mortgage) shall not
be disturbed, diminished or interfered with by Mortgagee during the term of the
Lease (or any extensions or renewals thereof provided for in the Lease);
(ii) Mortgagee will not join Tenant as a party defendant in any
action or proceeding for the purpose of terminating Tenant's interest and estate
under the Lease because of any default under the Mortgage; and
(iii) The Lease shall continue in full force and effect and shall
not be except in accordance with the terms of the Lease.
(b) Tenant shall be bound to Mortgagee under all of the terms,
covenants and conditions of the Lease for the balance of the term thereof
remaining (and any extensions or renewals thereof which may be effected in
accordance with any option contained in the Lease) with the same force and
effect as if Mortgagee were the landlord under the Lease, and Tenant does hereby
agree to attorn to Mortgagee as its landlord, said attornment to be effective
and self-operative without the execution of any other instruments on the part of
either party hereto immediately upon Mortgagee's succeeding to the interest of
Landlord under the Lease. Upon request of Lender or such Purchaser, Tenant shall
execute and deliver to Lender or such Purchaser an agreement reaffirming such
attornment. Tenant hereby agrees that any right of first refusal or right of
first offer to purchase the Property that Tenant may have pursuant to the terms
of the Lease (generally, a "PURCHASE RIGHT") shall not be applicable to, and
shall not block, prevent or delay, Mortgagee's or any Purchaser's acquisition of
the Property by foreclosure, deed in lieu of foreclosure, other transaction
related thereto or in substitution thereof, trustee sale, or other similar
statutory conveyance; provided, however, that any Purchase Right shall survive,
remain valid, and be exercisable by Tenant in accordance with the terms of the
Lease at any time after any such acquisition by Mortgagee or any Purchaser.
(c) In the event that the Mortgage is foreclosed and any party
("PURCHASER") other than Mortgagee purchases the Premises and succeeds to the
interest of Landlord under the Lease, Tenant shall likewise be bound to
Purchaser and Tenant hereby covenants and agrees to attorn to Purchaser in
accordance with all of the provisions of this Agreement; provided, however, that
Purchaser shall have transmitted to Tenant a written document in recordable
form, whereby Purchaser agrees to recognize Tenant as its lessee under the Lease
and agrees to be directly bound to Tenant for the performance and observance of
all the terms and conditions of the Lease required to be performed or observed
by Landlord thereunder, subject to and in accordance with the terms of this
Agreement.
<PAGE>
Subordination Agreement [Loan] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 3
(d) Mortgagee agrees that if Mortgagee shall succeed to the interest
of Landlord under the Lease as above provided, Mortgagee shall be bound to
Tenant under all of the terms, covenants, and conditions of this Lease, and
Tenant shall, from and after Mortgagee's succession to the interest of Landlord
under the Lease, have the same remedies against Mortgagee that Tenant might have
had under the Lease against Landlord if Mortgagee had not succeeded to the
interest of Landlord; provided, however, that Mortgagee (and Purchaser, as the
case may be) shall not be:
(i) liable for any act or omission of any prior lessor (including
Landlord) occurring prior to the date that Mortgagee or Purchaser acquired title
to the Premises; provided, however, no inference shall be drawn from this clause
that Mortgagee or Purchaser would not be liable for the same or similar act or
omission occurring after the date that Mortgagee or Purchaser acquired title to
the Premises; or
(ii) subject to any offsets, counterclaims, or defenses that
Tenant might have solely against any prior lessor (including Landlord); or
(iii) bound by any previous payment of rent or additional rent
for a period greater than 1 month unless such prepayment shall have been
consented to in writing by Mortgagee; or
(iv) bound by any amendment or modification of the Lease made
after the date hereof without Mortgagee's written consent; or
(v) liable to Tenant for any loss of business or any other
indirect or consequential damages from whatever cause; provided, however, no
inference shall be drawn from this clause that Tenant would otherwise be
entitled (or not entitled) to recover for loss of business or any other indirect
or consequential damages; or
(vi) liable for the return of any security deposit unless such
deposit has been paid over to the Mortgagee.
The foregoing shall not be construed to modify or limit any right Tenant may
have at law or in equity against Landlord or any other prior owner of the
Property.
3. NOTICES. All notices required or permitted to be given pursuant to this
Agreement shall be in writing and shall be sent postage prepaid, by certified
mail, return receipt requested or other nationally utilized overnight delivery
service. All notices shall be deemed delivered when received or refused.
Rejection or other refusal to accept or inability to deliver because of changed
address of which no notice has been given shall constitute receipt of the
notice, demand or request sent. Any such notice if given to Tenant shall be
addressed as follows:
Paradigm Genetics, Inc.,
104 Alexander Dr., Building 2
Research Triangle Park, NC 27709
Attention: Mr. Ian Howes
Chief Financial Officer
<PAGE>
Subordination Agreement [Loan] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 4
if given to Landlord shall be addressed as follows:
Alexandria Real Estate Equities, Inc.
135 N. Los Robles Ave., Suite 250
Pasadena, California 91101
Attention: General Counsel
if given to Mortgagee shall be addressed as follows:
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. The words "foreclosure" and "foreclosure sale" as used herein shall be
deemed to also include the acquisition of Landlord's estate in the Property by
voluntary deed, assignment or other conveyance or transfer in lieu of
foreclosure.
5. MODIFICATIONS TO LEASE. Tenant shall not modify or amend the Lease or
terminate the same without Mortgagee's prior written consent. If Mortgagee fails
to provide Tenant with a written approval of the proposed modification,
amendment or termination within 10 business days after notice to Mortgagee of
such proposal, then Mortgagee shall be deemed to have rejected such proposal.
6. ADDITIONAL AGREEMENTS. Tenant agrees that:
---------------------
(a) it shall give Mortgagee copies of all notices of default and
requests for approval or consent by Landlord that Tenant gives to Landlord
pursuant to the Lease in the same manner as they are given to Landlord and no
such notice or other communication shall be deemed to be effective until a copy
is given to Mortgagee;
(b) whenever any consent or approval by Landlord is required to be
obtained by Tenant or is requested by Tenant such consent or approval shall not
be effective until it is also confirmed by or obtained from Mortgagee, provided
that Mortgagee shall respond within 30 days after Mortgagee's receipt of
Tenant's request;
(c) in all provisions of the Lease where Landlord is indemnified, the
reference to Landlord as an indemnitee shall be deemed to include Mortgagee and
any Purchaser and such agreement of indemnification shall survive the repayment
of the loan secured by the Mortgage and, to the extent provided in the Lease,
the expiration or termination of the Lease;
(d) Tenant shall name Mortgagee and any Purchaser as additional insureds
and loss payees, as applicable and appropriate, on all insurance policies
required by the Lease; and
(e) this Agreement satisfies any condition or requirement in the Lease
relating to the granting of a non-disturbance agreement by Mortgagee, and in the
event that
<PAGE>
Subordination Agreement [Loan] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 5
there are inconsistencies between the terms and provisions of this Agreement and
the terms and provisions of the Lease dealing with non-disturbance by Mortgagee,
the terms and provisions hereof shall be controlling; and
(f) Mortgagee shall have no liability under the Lease until Mortgagee
succeeds to the rights of the Landlord under the Lease, and then only during
such period as Mortgagee is the Landlord. At all times during which Mortgagee is
liable under the Lease, Mortgagee's liability shall be limited to Mortgagee's
interest in the Property.
7. MORTGAGEE CURE RIGHTS. If Landlord shall have failed to cure any default
within the time period provided for in the Lease (including any applicable
notice and grace periods), and thereafter Tenant exercises any right to
terminate the Lease, Mortgagee shall have an additional 30 days within which to
cure such default, or if such default cannot be cured by the payment of money or
reasonably requires more than 30 days to cure, then Mortgagee shall have such
additional time as may be reasonably necessary to complete such a cure
(including, if necessary, sufficient time to complete foreclosure proceedings)
provided that Mortgagee commences such cure within such 30-day period, Mortgagee
thereafter diligently prosecutes the same to completion, and Mortgagee completes
such cure no more than 60 days after the expiration of such 30-day period. The
Lease shall not be terminated (i) while such remedies are being diligently
pursued or (ii) based upon a default that is personal to Landlord and therefore
not susceptible to cure by Mortgagee or that requires possession of the Premises
to cure. Mortgagee shall in no event be obligated to cure any such default by
Landlord unless it forecloses. Nothing in this Section 7 shall affect any of
Tenant's termination rights under the Lease due to casualty or condemnation.
8. DIRECTION TO PAY. Landlord hereby directs Tenant and Tenant agrees to
make all payments of amounts owed by Tenant under the Lease directly to
Mortgagee from and after receipt by Tenant of notice from Mortgagee directing
Tenant to make such payments to Mortgagee. (As between Landlord and Mortgagee,
the foregoing provision shall not be construed to modify any rights of Landlord
under or any provisions of the Mortgage or any other instrument securing the
Note).
9. CONDITIONAL ASSIGNMENT. With reference to any assignment by Landlord of
Landlord's interest in the Lease, or the rents payable thereunder, conditional
in nature or otherwise, which assignment is made to Mortgagee, Tenant agrees
that the execution thereof by Landlord, and the acceptance thereof by Mortgagee
shall never be treated as an assumption by Mortgagee of any of the obligations
of Landlord under the Lease unless and until Mortgagee shall have succeeded to
the interest of Landlord. The foregoing sentence shall not affect any of
Tenant's rights against Landlord under the Lease.
[ SIGNATURES ON NEXT PAGE ]
<PAGE>
Subordination Agreement [Loan] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
properly executed by their duly authorized representatives as of the date first
above written.
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By: ___________________________
Its: __________________________
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By: _____________________________________
Its: ____________________________________
MORTGAGEE:
________________________________________,
a _______________________________________
By: _____________________________________
Its: ____________________________________
<PAGE>
Exhibit A
Legal Description
-----------------
<PAGE>
EXHIBIT L
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT is made and
entered into as of _______________, _____ ("AGREEMENT"), by and among ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company, together with its
nominees, designees, and assigns (collectively, "LANDLORD"), PARADIGM GENETICS,
INC., a Delaware corporation ("TENANT"), and TRIANGLE SERVICE CENTER, INC., a
North Carolina corporation ("GROUND LESSOR").
WHEREAS, Landlord and Ground Lessor have entered into a Ground Lease
Agreement dated as of July 27, 1999, and have entered into or are entering into
a First Amendment to Ground Lease Agreement (collectively, the "GROUND LEASE")
pursuant to which Landlord has ground leased approximately 6.084 acres of land
more fully described in Exhibit A (the "SITE"); and
WHEREAS, Landlord and Tenant have entered into or are entering into an
Amended and Restated Lease Agreement [Phase 1A: Office / Laboratory] executed
as of April ___, 2000, and effective as of July 27, 1999 ("LEASE"), for certain
premises to be built on the Site containing or intended to contain a building
with approximately 54,463 net rentable square feet (hereinafter referred to as
"PREMISES"); and
WHEREAS, the Lease is intended to be subordinate to the Ground Lease and to
the right, title, and interests of Ground Lessor thereunder; and
WHEREAS, Ground Lessor wishes to obtain from Tenant certain assurances that
Tenant will attorn to Ground Lessor in the event Ground Lessor terminates the
Ground Lease or exercises other rights under the Ground Lease; and
WHEREAS, Tenant wishes to obtain from Ground Lessor certain assurances that
Tenant's possession of the Premises will not, subject to the terms and
conditions of this Agreement, be disturbed by reason of the termination of the
Ground Lease or the exercise of any other rights under the Ground Lease; and
WHEREAS, Tenant and Ground Lessor are willing to provide such assurances to
each other upon and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the above, the mutual promises
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto mutually
agree as follows:
1. AFFIRMATION. Tenant hereby agrees that the Lease now is and shall be
subject and subordinate in all respects to the Ground Lease and to all renewals,
modifications and extensions thereof, subject to the terms and conditions of
this Agreement. Landlord and Tenant hereby affirm that the Lease is in full
force and effect and that the Lease has not been modified or amended. Ground
Lessor hereby confirms that it is the holder of the ground
<PAGE>
Subordination Agreement [Ground Lease] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 2
lessor's interest under the Ground Lease and has full power and authority to
enter into this Agreement.
2. ATTORNMENT AND NON-DISTURBANCE.
------------------------------
(a) So long as Tenant is not in default under the Lease (beyond Tenant's
receipt of notice from Landlord and any grace period granted Tenant under the
Lease to cure such default) as would entitle the Landlord to terminate the Lease
or would cause without any further action of the Landlord, the termination of
the Lease or would entitle the Landlord to dispossess Tenant thereunder, then
Ground Lessor agrees with Tenant that, in the event Ground Lessor terminates the
Ground Lease or exercises other rights under the Ground Lease that permit Ground
Lessor to acquire Landlord's interest under the Lease, then:
(i) Subject to the provisions of this Agreement, Tenant's occupancy
and possession of the Premises and Tenant's rights and privileges under the
Lease or any extensions, modifications or renewals thereof or substitutions
therefor (in accordance with the Lease and the Ground Lease) shall not be
disturbed, diminished or interfered with by Ground Lessor during the term of the
Lease (or any extensions or renewals thereof provided for in the Lease);
(ii) Ground Lessor will not join Tenant as a party defendant in any
action or proceeding for the purpose of terminating Tenant's interest and estate
under the Lease because of any default under the Ground Lease; and
(iii) The Lease shall continue in full force and effect and shall
not be terminated except in accordance with the terms of the Lease.
(b) Tenant shall be bound to Ground Lessor under all of the terms,
covenants and conditions of the Lease for the balance of the term thereof
remaining (and any extensions or renewals thereof which may be effected in
accordance with any option contained in the Lease) with the same force and
effect as if Ground Lessor were the landlord under the Lease, and Tenant does
hereby agree to attorn to Ground Lessor as its landlord, said attornment to be
effective and self-operative without the execution of any other instruments on
the part of either party hereto immediately upon Ground Lessor's succeeding to
the interest of Landlord under the Lease. Upon the request of Ground Lessor,
Tenant shall execute and deliver to Ground Lessor an agreement reaffirming such
attornment. Tenant hereby agrees that any right of first refusal or right of
first offer to purchase Landlord's interest under the Ground Lease that Tenant
may have pursuant to the terms of the Lease (generally, a "PURCHASE RIGHT")
shall not be applicable to, and shall not block, prevent or delay, Ground
Lessor's acquisition of Landlord's interest under the Lease; provided, however,
that any Purchase Right shall survive, remain valid, and be exercisable by
Tenant in accordance with the terms of the Lease at any time after any such
acquisition by Ground Lessor.
(c) Ground Lessor agrees that if Ground Lessor shall succeed to the
interest of Landlord under the Lease as above provided, Ground Lessor shall be
bound to Tenant under all of the terms, covenants, and conditions of the Lease,
and Tenant shall, from and after Ground Lessor's succession to the interest of
Landlord under the Lease, have the same remedies against Ground Lessor that
Tenant might have had under the Lease against Landlord if Ground Lessor had not
succeeded to the interest of Landlord; provided, however, that Ground Lessor
shall not be:
<PAGE>
Subordination Agreement [Ground Lease] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 3
(i) liable for any act or omission of any prior lessor (including
Landlord) occurring prior to the date that Ground Lessor succeeded to the
interest of Landlord under the Lease; provided, however, no inference shall be
drawn from this clause that Ground Lessor would not be liable for the same or
similar act or omission occurring after the date that Ground Lessor succeeded to
the interest of Landlord under the Lease; or
(ii) subject to any offsets, counterclaims or defenses that Tenant
might have solely against any prior lessor (including Landlord); or
(iii) bound by any previous payment of rent, however denominated,
for a period greater than 1 month unless such prepayment shall have been
consented to in writing by Ground Lessor; or
(iv) bound by any amendment or modification of the Lease made after
the date hereof without Ground Lessor's written consent; or
(v) liable to Tenant for any loss of business or any other indirect
or consequential damages from whatever cause; provided, however, no inference
shall be drawn from this clause that Tenant would otherwise be entitled (or not
entitled) to recover for loss of business or any other indirect or consequential
damages; or
(vi) liable for the return of any security deposit unless such
deposit has been paid over to the Ground Lessor.
The foregoing shall not be construed to modify or limit any right Tenant may
have at law or in equity against Landlord or any other prior owner of the
Property.
(d) Ground Lessor hereby acknowledges that Section 38(b) of the Lease
contains the following terms and conditions, and hereby agrees to accept
performance of the "GROUND LEASE OBLIGATIONS" (as defined therein) from Tenant,
and to permit Tenant to enforce the "GROUND LEASE RIGHTS" (as defined therein),
at the times and in the manner described therein:
Tenant shall be responsible for, and hereby covenants to satisfy in a
timely fashion, any and all obligations, covenants, responsibilities,
and/or indemnities binding on Landlord as holder of the ground lessee's
interest under the Ground Lease or as a party to the [Agreement Regarding
Allocation of Development Rights dated as of April ___, 2000 (the
"DEVELOPMENT RIGHTS AGREEMENT")] (collectively, the "GROUND LEASE
OBLIGATIONS"), including, without limitation, the payment of the annual
rent provided for in the Ground Lease (at the times and in the manner
specified in Section 3(b)(ii) [of the Lease]), the payment or reimbursement
of all expenses to be paid or reimbursed by Landlord under the Ground
Lease, the payment of the rent provided for in the Development Agreement,
and the payment or reimbursement of all expenses to be paid or reimbursed
by Landlord under the Development Rights Agreement; provided, however, that
the terms and conditions of this Lease shall control to the extent the
responsibility for satisfying any Ground Lease Obligation is expressly
conferred on Landlord and/or allocated between Landlord and Tenant herein.
For illustration purposes only, Sections 13 and 14 [of the Lease] allocate
between Landlord and Tenant all maintenance and repair obligations with
respect to the Premises and the Project and, therefore, such provisions
control.
<PAGE>
Subordination Agreement [Ground Lease] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 4
If Tenant fails to satisfy, in a timely fashion, any of the Ground Lease
Obligations in the manner required hereunder, Landlord shall have the right
(but not the obligation) to satisfy the same, and any cost incurred by
Landlord in doing so shall be payable to Landlord on demand as Additional
Rent or includable by Landlord as an Operating Expense. Further, Tenant
shall indemnify, defend, hold, and save Landlord harmless from and against
any and all Claims arising out of or in connection with any such failure by
Tenant. Conversely, if Tenant gives Landlord Notice requesting Landlord to
take affirmative action to enforce any of Landlord's rights as ground
lessee under the Ground Lease or as a party to the Development Rights
Agreement or to enforce any obligation, covenant, responsibility, and/or
indemnity of the Ground Lessor under the Ground Lease and/or the
Development Rights Agreement (collectively, the "GROUND LEASE RIGHTS") and
Landlord elects not to do so, Tenant shall have the right, at Tenant's sole
cost and expense, to take affirmative action to enforce any such Ground
Lease Rights, and for such purpose Landlord, effective as of Landlord's
election not to take affirmative action, appoints Tenant attorney-in-fact
for Landlord (such power of attorney being coupled with an interest);
provided, however, that, notwithstanding the foregoing, the exercise of any
Ground Lease Rights that relate to Hazardous Materials (as provided in
Section 30(a) [of the Lease]) shall be subject to compliance with Section 3
of [a separate] Cost Sharing Agreement. Tenant shall indemnify, defend,
hold, and save Landlord harmless from and against any and all Claims
arising out of or in connection with any affirmative action taken by Tenant
to enforce any Ground Lease Rights. Tenant's rights and obligations under
this Section shall terminate and be of no further force or effect as of the
expiration or earlier termination of this Lease, provided that all
obligations that have arisen and/or become binding hereunder but have not
been fully satisfied as of the expiration or earlier termination of this
Lease shall survive such expiration or earlier termination.
3. NOTICES. All notices required or permitted to be given pursuant to this
Agreement shall be in writing and shall be sent postage prepaid, by certified
mail, return receipt requested or other nationally utilized overnight delivery
service. All notices shall be deemed delivered when received or refused.
Rejection or other refusal to accept or inability to deliver because of changed
address of which no notice has been given shall constitute receipt of the
notice, demand or request sent. Any such notice if given to Tenant shall be
addressed as follows:
Paradigm Genetics, Inc.,
104 Alexander Dr., Building 2
Research Triangle Park, NC 27709
Attention: Mr. Ian Howes
Chief Financial Officer
<PAGE>
Subordination Agreement [Ground Lease] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 5
if given to Landlord shall be addressed as follows:
Alexandria Real Estate Equities, Inc.
135 N. Los Robles Ave., Suite 250
Pasadena, California 91101
Attention: General Counsel
if given to Ground Lessor shall be addressed as follows:
Triangle Service Center, Inc.
2 Hanes Drive
Research Triangle Park, NC 27709
Attention: Mr. James Roberson
4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
5. ADDITIONAL AGREEMENTS. Tenant agrees that:
---------------------
(a) it shall give Ground Lessor copies of all notices of default by
Landlord that Tenant gives to Landlord pursuant to the Lease in the same manner
as they are given to Landlord;
(b) in all provisions of the Lease where Landlord is indemnified, the
reference to Landlord as an indemnitee shall be deemed to include Ground Lessor;
(c) this Agreement satisfies any condition or requirement in the Lease
relating to the granting of a non-disturbance agreement by Ground Lessor, and in
the event that there are inconsistencies between the terms and provisions of
this Agreement and the terms and provisions of the Lease dealing with non-
disturbance by Ground Lessor, the terms and provisions hereof shall be
controlling; and
(d) Ground Lessor shall have no liability under the Lease until Ground
Lessor succeeds to the rights of the Landlord under the Lease, and then only
during such period as Ground Lessor is the landlord thereunder. At all times
during which Ground Lessor is liable under the Lease, Ground Lessor's liability
shall be limited to Ground Lessor's interest in the Property.
6. DIRECTION TO PAY. Landlord hereby directs Tenant and Tenant agrees to
make all payments of amounts owed by Tenant under the Lease directly to Ground
Lessor from and after receipt by Tenant of notice from Ground Lessor directing
Tenant to make such payments to Ground Lessor. (As between Landlord and Ground
Lessor, the foregoing provision shall not be construed to modify any rights of
Landlord under or any provisions of the Ground Lease).
[ SIGNATURES ON NEXT PAGE ]
<PAGE>
Subordination Agreement [Ground Lease] 108 Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
properly executed by their duly authorized representatives as of the date first
above written.
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By: ______________________________________
Its: _____________________________________
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By: _______________________________________________
Its: ______________________________________________
GROUND LESSOR:
TRIANGLE SERVICE CENTER, INC., (SEAL)
a North Carolina corporation
By: ______________________________________________
Its: _____________________________________________
<PAGE>
Exhibit A
Legal Description
-----------------
<PAGE>
EXHIBIT M
ENVIRONMENTAL INFORMATION
-------------------------
1. LEAK DETECTION TEST REPORT dated June 4, 1993, prepared by Advanced Tank
Certification, Inc., REGARDING 20,000 GALLON FUEL OIL TANK TEST RESULTS.
2. UST CLOSURE REPORT NATIONAL INSTITUTE OF ENVIRONMENTAL HEALTH SCIENCES
dated June 27, 1993, prepared by Triangle Environmental, Inc., REGARDING 1000
GALLON GASOLINE UST.
3. REPORT OF ENVIRONMENTAL SERVICES dated March 30, 1994, prepared by Law
Engineering, Inc. REGARDING NIEHS FACILITY, NORTH CAMPUS, PHASE II RESEARCH
TRIANGLE PARK, NORTH CAROLINA.
4. LETTER dated April 13, 1994, from Law Engineering, Inc., to Mr. William
Few REGARDING OBSERVATIONS OF UNDERGROUND STORAGE TANK CLOSURE AT NIEHS FACILITY
IN RESEARCH TRIANGLE PARK, NORTH CAROLINA.
5. LETTER dated April 25, 1994, from State of North Carolina Department of
Environment, Health and Natural Resources ("DEHNR"), to Brian L. Hayes at
Southwestern Environmental Audits, Inc. REGARDING WELL CONSTRUCTION PERMIT NO.
31-0444-WM-0259.
6. LETTER dated May 23, 1994, from Southeastern Environmental Audits, Inc.,
together with UST CLOSURE ASSESSMENT REPORT dated May 10, 1994, prepared by
Southwestern Environmental Audit, Inc. REGARDING 20,000 GALLON FUEL OIL UST.
7. APPLICATION dated June 14, 1994, from McCarthy Associates to DEHNR
REGARDING LEAKING PETROLEUM UNDERGROUND STORAGE TANK CLEANUP FUNDS.
8. COMPREHENSIVE SITE ASSESSMENT dated July 6, 1994, prepared by
Southeastern Environmental Audits, Inc.
9. POLLUTION INCIDENT/UST LEAK REPORTING FORM dated August 15, 1994,
prepared by NIEHS REGARDING 1,000 GALLON GASOLINE UST AND INCIDENT ON MAY 6,
1993.
10. LETTER dated October 27, 1994, from DEHNR to McCarthy & Associates
REGARDING ASSIGNMENT OF FACILITY IDENTIFICATION NUMBER FOR ONE 20,000 GALLON
UST.
11. FACSIMILE COVER SHEET dated December 18, 1995, from Nettie Lowery at
DEHNR, to Jay Zimmerman at Raleigh Regional Office REGARDING DENIAL LETTERS,
together with MEMORANDUM dated December 15, 1995, from DEHNR REGARDING TRUST
FUND ELIGIBILITY DENIAL.
12. FACSIMILE COVER SHEET dated January 11, 1996, from Sean Boyles of DEHNR
to Fay Sweat, enclosing POLLUTION INCIDENT/U.S.T. LEAK REPORTING FORM dated
January 10, 1996, REGARDING MARCH 11, 1994, INCIDENT AT NIEHS NORTH CAMPUS,
together with NORTH CAROLINA GROUND WATER CONTAMINATION INCIDENT MANAGEMENT SITE
PRIORITY RANKING SYSTEM dated January 10, 1996, REGARDING MARCH 11, 1994,
INCIDENT AT NIEHS NORTH CAMPUS.
<PAGE>
13. MEMORANDUM dated January 18, 1996, from DEHNR REGARDING TF ELIGIBILITY
DENIAL NIEHS NORTH CAMPUS INCIDENT #14941.
14. LETTER dated February 15, 1996, from DEHNR to McCarthy Associates
REGARDING CLEANUP FUNDS FOR NIEHS NORTH CAMPUS SITE.
15. LETTER dated February 26, 1996, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates, to Ms. Liz Rooks at Research Triangle
Foundation of North Carolina REGARDING NPDES PERMIT ISSUED TO MCCARTHY
ASSOCIATES FOR GROUNDWATER REMEDIATION AT NIEHS NORTH CAMPUS.
16. REPORT dated August, 1996, prepared by Turner Environmental
Consultants, P.C., REGARDING FREE PRODUCT RECOVERY AND GROUNDWATER MONITORING
REPORT - FORMER NIEHS NORTH CAMPUS FACILITY 110 TW ALEXANDER DRIVE, RESEARCH
TRIANGLE PARK, NC.
17. LETTER dated November 5, 1996, from Manning, Fulton & Skinner, P.A.
counsel for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina REGARDING LEAKING FROM UNDERGROUND STORAGE TANK AT
FORMER NIEHS NORTH CAMPUS FACILITY.
18. LETTER dated December 9, 1996, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina enclosing FREE PRODUCT DELINEATION AND RECOVERY
PLAN dated December 3, 1996, prepared by Turner Environmental Consultants, P.C.
REGARDING FORMER NIEHS NORTH CAMPUS FACILITY.
19. LETTER dated May 21, 1997, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina enclosing LETTER dated May 16, 1997, from Prescott
Environmental Associates, Inc. enclosing LETTER dated May 14, 1997, from Turner
Environmental Consultants, P.C. REGARDING FREE PRODUCT RECOVERY PLAN
IMPLEMENTATION.
20. LETTER dated September 23, 1997, from by Department of Health & Human
Services, to DEHNR REGARDING CONTAMINATED SOIL FROM THE NIEHS SOUTH CAMPUS,
enclosing LETTER dated September 12, 1997, from Prescott Environmental
Associates, Inc. to DEHNR REGARDING DISPOSAL OF SOIL FROM THE FORMER NIEHS NORTH
CAMPUS FACILITY, together with FORM #GW-71.
21. LETTER dated May 4, 1998, from Manning, Fulton & Skinner, P.A., counsel
for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle Foundation
of North Carolina enclosing LETTER dated April 30, 1998, prepared by Prescott
Environmental Associates, Inc. REGARDING FREE PRODUCT RECOVERY.
22. LETTER dated August 4, 1998, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina enclosing LETTER REPORT dated July 24, 1998,
prepared by Prescott Environmental Associates, Inc. REGARDING FREE PRODUCT
RECOVERY ACTIVITIES AT THE FORMER NIEHS NORTH CAMPUS FACILITY.
<PAGE>
23. LETTER dated August 4, 1998, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina enclosing LETTER dated August 2, 1998, from
Prescott Environmental Associates to NC DEHNR, enclosing LETTER REPORT dated
July 24, 1998, prepared by Prescott Environmental Associates, Inc. REGARDING
FREE PRODUCT RECOVERY ACTIVITIES AT THE FORMER NIEHS NORTH CAMPUS FACILITY.
24. LETTER dated November 2, 1998, from Manning, Fulton & Skinner, P.A.
counsel for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina, enclosing LETTER REPORT dated October 27, 1998,
prepared by Prescott Environmental Associates, Inc. REGARDING FREE PRODUCT
RECOVERY ACTIVITIES AT THE FORMER NIEHS NORTH CAMPUS FACILITY.
25. LETTER dated January 12, 1999, from Prescott Environmental Associates,
Inc., to NC DEHNR, Raleigh Regional Office REGARDING FORMER NIEHS N. CAMPUS
SITE.
26. LETTER dated January 27, 1999, from NC DEHNR to Prescott Environmental
Associates, Inc. REGARDING PROPOSED ABANDONMENT OF MONITORING WELLS AT NIEHS
NORTH CAMPUS SITE.
27. Draft PHASE I ENVIRONMENTAL SITE ASSESSMENT dated April 29, 1999,
prepared by Dames & Moore NC.
<PAGE>
EXHIBIT 10.25.2
LEASE AGREEMENT
[PHASE 1B: GREENHOUSE]
This LEASE AGREEMENT (this "LEASE"), dated April ___, 2000 (the "EFFECTIVE
DATE"), is made between ARE-104 ALEXANDER ROAD, LLC, a Delaware limited
liability company ("LANDLORD"), and PARADIGM GENETICS, INC., a Delaware
corporation ("TENANT").
RECITALS
A. Landlord has entered into a Ground Lease Agreement dated as of July 27,
1999 (the "ORIGINAL GROUND LEASE"), with Triangle Service Center, Inc., a North
Carolina corporation ("GROUND LESSOR"), pursuant to which Landlord has ground
leased approximately 6.084 acres of land within the Triangle Park Research
Center (which is located within Research Triangle Park ("RTP"), Durham County,
North Carolina), as more fully described in Exhibit A-1 (the "SITE"). The
Original Ground Lease is evidenced of record by a certain Memorandum of Ground
Lease dated as of July 27, 1999, and recorded July 27, 1999, in Book 2684, Page
795 of the Official Records of Durham County, North Carolina (the "OFFICIAL
RECORDS"). In addition, Ground Lessor and Landlord have entered into or,
concurrently with the execution of this Lease, are entering into, (i) a certain
Agreement Regarding Allocation of Development Rights (the "DEVELOPMENT RIGHTS
AGREEMENT") (which will be evidenced of record by a certain Memorandum of
Agreement Regarding Allocation of Development Rights to be recorded in the
Official Records), and (ii) a certain First Amendment to Ground Lease Agreement
(the "GROUND LEASE AMENDMENT"). The Original Ground Lease, the Ground Lease
Amendment, and any other subsequent amendments or modifications thereto shall be
referred to collectively as the "GROUND LEASE".
B. Landlord desires to lease to Tenant, and Tenant desires to lease from
Landlord, certain improvements that Landlord is hereby agreeing to cause to be
constructed, or to permit to be constructed, on the Site, including, but not
limited to, a plant analysis and growth room facility, a commercial greenhouse,
and a headhouse (collectively, the "GREENHOUSE").
C. Landlord and Tenant have entered into a separate Amended and Restated
Lease Agreement (the "OFFICE / LAB LEASE") for the lease of certain other
improvements that Landlord is agreeing to cause to be constructed, or to permit
to be constructed, on other parts of the Site, including, but not limited to, a
first-class scientific research and development building (the "OFFICE / LAB").
BASIC LEASE PROVISIONS
ADDRESS: Fronting on T.W. Alexander Avenue, RTP, North Carolina
(numbered address to be obtained later).
PREMISES: The Greenhouse, containing approximately 31,776 rentable square
feet, as more fully described in Exhibit B.
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 2
BASE RENT: Annual base rent equal to $315,000.00 payable in equal
monthly installments equal to $26,250.00.
IMPROVEMENT RENT: Equal monthly installments of improvement rent equal to the
monthly payment necessary to amortize fully the "EXCESS
DISBURSED CONSTRUCTION ALLOWANCE" (as defined below) over a
period of 120 months at an annual interest rate of 12.00%.
RENT ADJUSTMENT
PERCENTAGE: Base Rent: 4.00%;
Improvement Rent: 2.228%.
TENANT'S SHARE: 36.85%.
RENTABLE AREA
OF PREMISES: Greenhouse: approximately 31,776 sq. ft.
RENTABLE AREA
OF PROJECT: Greenhouse: approximately 31,776 sq. ft.;
Office / Lab: approximately 54,463 sq. ft.;
Total: approximately 86,239 sq. ft.
TARGET
COMMENCEMENT DATE: November 1, 2000.
SECURITY DEPOSIT: An amount equal to the sum of 6 monthly payments of Base
Rent plus 6 monthly payments of Improvement Rent (estimated
as of the date hereof as approximately $243,500.00).
DEMOLITION DEPOSIT: $600,000.00.
TERM: 120 months from the 1st day of the 1st full month following
the month in which the Commencement Date occurs.
TERM EXTENSIONS: 2 options to extend the Term for 5 years each.
PERMITTED USE: Plant analysis and growth room facility, commercial
greenhouse, and headhouse.
LANDLORD'S BROKER: None.
TENANT'S BROKER: Advantis Realty (formerly known as Goodman Segar).
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 3
ADDRESS FOR RENT PAYMENT: LANDLORD'S NOTICE ADDRESS:
135 N. Los Robles Avenue, Suite 250 135 N. Los Robles Avenue, Suite 250
Pasadena, California 91101 Pasadena, California 91101
Attention: Accounts Receivable Attention: General Counsel
TENANT'S NOTICE ADDRESS:
104 Alexander Dr., Building 2
RTP, North Carolina 27709
Attention: Mr. Ian Howes
Chief Financial Officer
The following Exhibits are or will be attached hereto and are incorporated
herein by this reference:
<TABLE>
<S> <C> <C>
[X] EXHIBIT A-1 - DESCRIPTION OF SITE [ ] EXHIBIT F - ORIGINAL SECURITY AMOUNT
[X] EXHIBIT A-2 - DESCRIPTION OF ADDL SITE [X] EXHIBIT G - RULES AND REGULATIONS
[X] EXHIBIT B - DESCRIPTION OF PREMISES [X] EXHIBIT H - TENANT'S PERSONAL PROPERTY
[X] EXHIBIT C - WORK LETTER [X] EXHIBIT I - ESTOPPEL CERTIFICATE
[ ] EXHIBIT D - COMMENCEMENT DATE; TERM [X] EXHIBIT J - LOAN SUBORDINATION AGMT
[ ] EXHIBIT E - CONSTR COSTS; DISBURSED [X] EXHIBIT K - LEASE SUBORDINATION AGMT
CONSTR ALLOWANCE; EXCESS [X] EXHIBIT L - ENVIRONMENTAL INFORMATION
DISBURSED CONSTR ALLOWANCE; [X] EXHIBIT M - HAZARDOUS MATERIALS LIST
IMPROVEMENT RENT
</TABLE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Lease, the receipt and legal sufficiency of which are hereby
acknowledged by the parties hereto, Landlord and Tenant hereby agree as follows:
1. LEASE OF PREMISES. Landlord hereby leases the Premises to Tenant and
Tenant hereby leases the Premises from Landlord, effective as of the
"COMMENCEMENT DATE" (as defined below) for the Term set forth in the Basic Lease
Provisions, upon and subject to all of the terms and conditions of the Ground
Lease. The Site and all improvements thereon and appurtenances thereto are
collectively referred to herein as the "PROJECT", and the portions of the
Project that are for the non-exclusive use of Tenant and the guests, invitees,
licensees, and other authorized users of the Project (including, without
limitation, Ground Lessor and any approved subtenants) are collectively referred
to herein as the "COMMON AREAS" (all as more fully described in Exhibit B).
Landlord reserves the right to modify the Common Areas, provided that such
modifications do not materially adversely affect Tenant's use of the Premises
for the Permitted Use.
2. DELIVERY; COMMENCEMENT DATE; ACCEPTANCE OF PREMISES.
(a) Landlord shall use commercially reasonable efforts to deliver the
Premises to Tenant ("DELIVER" or "DELIVERY") on or before the Target
Commencement Date,
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 4
with "LANDLORD'S WORK" (as defined in the Work Letter attached as Exhibit C (the
"WORK LETTER")) "SUBSTANTIALLY COMPLETED" (as defined in the Work Letter). If
Landlord Delivers the Premises Substantially Completed before the Target
Commencement Date, Tenant shall pay to Landlord, in addition to any "RENT" (as
defined in Section 3(c) below) then due under this Lease, a sum equal to 1/2 day
of Rent for each day that such Delivery precedes the Target Commencement Date.
If Landlord fails to timely Deliver the Premises Substantially Completed,
Landlord shall not be liable to Tenant for any loss or damage resulting
therefrom, and this Lease shall not be void or voidable, except as may be
expressly provided otherwise herein.
(i) Notwithstanding the foregoing, if Landlord does not Deliver
the Premises Substantially Completed by the Target Commencement Date and the
aggregate delay that is due solely to "LANDLORD CAUSED DELAYS" (as defined
below) exceeds 150 days, this Lease shall be voidable by Tenant by giving
Landlord "NOTICE" (as defined in Section 44(a) below) of Tenant's election to
void this Lease within 5 business days after such 120th day, and if voided: (A)
the Security Deposit (if paid) and the Demolition Deposit (if paid) shall be
returned to Tenant, and (B) neither Landlord nor Tenant shall have any further
rights, duties, or obligations under this Lease, except with respect to
provisions that expressly survive termination of this Lease (as provided in
Section 28 below). Except as may be expressly provided otherwise herein,
Tenant's right to void this Lease shall be Tenant's sole and exclusive remedy at
law, in equity, or otherwise for Landlord's failure to timely Deliver the
Premises Substantially Completed. If Tenant does not give Landlord Notice of
Tenant's election within the required 5 business days, Tenant's right to void
this Lease shall terminate and this Lease shall continue in full force and
effect. If Landlord Delivers the Premises Substantially Completed after the
Target Commencement Date but the aggregate delay that is due solely to Landlord
Caused Delays does not exceed 150 days, or the aggregate delay that is due
solely to Landlord Caused Delays exceeds 150 days but Tenant does not timely
elect to void this Lease, Tenant shall be entitled to an abatement of Rent equal
to 1 day of Rent for each day of the delay that is due solely to Landlord Caused
Delays. As used herein, the term "LANDLORD CAUSED DELAY" shall mean any delay
for a reason other than a "TENANT CAUSED DELAY" (as defined in the Work Letter)
or a "FORCE MAJEURE DELAY" (as defined in the Work Letter).
(ii) Notwithstanding the foregoing, (A) if Landlord Delivers
the Premises Substantially Completed after the Target Commencement Date and the
aggregate delay that is due solely to Force Majeure Delays does not exceed 120
days, Tenant shall not be entitled to any abatement of Rent for the delay that
is due solely to Force Majeure Delays, (B) if Landlord Delivers the Premises
Substantially Completed after the Target Commencement Date and the aggregate
delay that is due solely to Force Majeure Delays exceeds 120 days but does not
exceed 240 days, Tenant shall be entitled to an abatement of Rent equal to 1/2
day of Rent for each day of Force Majeure Delays in excess of 120 days, and (C)
if Landlord Delivers the Premises Substantially Completed after the Target
Commencement Date and the aggregate delay that is due solely to Force Majeure
Delays exceeds 240 days, Tenant shall be entitled to an abatement of Rent equal
to 1 day of Rent for each day of Force Majeure Delays in excess of 240 days;
provided, however, that, for purposes of this Section 2(a)(ii), Force Majeure
Delays shall not include any delays resulting from a "FORCE MAJEURE" (as defined
in Section 34 below) that is solely attributable to "PRE-EXISTING CONTAMINATION"
(as defined in Section 19.a.xii. of the Ground Lease).
(b) The "COMMENCEMENT DATE" shall be earliest of: (i) the date Landlord
Delivers the Premises Substantially Completed; (ii) the date Landlord could have
Delivered the Premises Substantially Completed but for Tenant Caused Delays or
Force Majeure Delays; and (iii) the date Tenant conducts any business in any
part of the Premises; provided, however, that,
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 5
for purposes of this Section 2(b), Force Majeure Delays shall not include any
delays resulting from a Force Majeure that is solely attributable to Pre-
Existing Contamination. Upon either party's request, the other party shall
execute and deliver a written acknowledgment of the Commencement Date and the
expiration date of the Term, when the same have been established, and shall
attach the acknowledgment to this Lease as Exhibit D; provided, however, either
party's failure to execute and deliver such acknowledgment shall not affect the
other party's rights hereunder.
(c) Except as may be expressly provided otherwise in the Work Letter,
Tenant shall accept the Premises in their condition as of the Commencement Date,
subject to all applicable laws, ordinances, regulations, covenants, and
restrictions. Neither Landlord nor any agent of Landlord has made or will make
any representation or warranty with respect to the condition of any or all of
the Premises or the Project and/or the suitability of the Premises for the
conduct of Tenant's business, and Tenant waives any implied warranty that the
Premises are suitable for Tenant's intended purposes. Except as may be expressly
provided otherwise in the Work Letter: (i) Landlord has no obligation for any
defects in the Premises; and (ii) Tenant's taking possession of the Premises
shall be conclusive evidence that Tenant accepts the Premises and that the
Premises were in good condition at the time possession was taken. Any occupancy
of the Premises by Tenant before the Commencement Date shall be subject to all
of the terms and conditions of this Lease, including the obligation to pay Rent.
3. RENT.
(a) BASE RENT. Tenant shall pay to Landlord equal monthly installments
of annual base rent, which annual base rent initially shall be equal to
$315,000.00 and which equal monthly installments of annual base rent initially
shall be equal to $26,250.00 ("BASE RENT").
(b) ADDITIONAL RENT. In addition to Base Rent, Tenant shall pay to
Landlord all of the following as additional rent ("ADDITIONAL RENT"):
(i) Tenant's Share (as set forth in the Basic Lease Provisions)
of "OPERATING EXPENSES" (as defined in Section 5 below). Tenant's Share shall be
reasonably adjusted by Landlord following a measurement of the rentable square
footage of the Premises and the Project to be done by Landlord within 60 days of
the Commencement Date, or as soon as reasonably possible thereafter, and shall
be subject to further adjustment for changes in the physical size of the
Premises or the Project occurring thereafter (any measurement required under
this Lease shall be performed in accordance with the 1996 Standard Method of
Measuring Floor Area in Office Buildings as adopted by the Building Owners and
Managers Association (ANSI/BOMA Z65.1-1996)).
(ii) "IMPROVEMENT RENT" (as defined below). As more fully
described in the Work Letter, Landlord is making available to Tenant an
allowance (the "CONSTRUCTION ALLOWANCE") to be used by Tenant solely for the
costs of designing, permitting, and constructing the Greenhouse, which costs
shall include, but not be limited to, payments to surveyors, engineers,
architects, consultants, contractors, sub-contractors, and all other persons and
laborers of every class providing services, performing labor, or furnishing
skill or other necessary services used in or contributing to such construction,
the cost of materials or equipment used or consumed in such construction, the
cost (including legal and engineering fees and disbursements) of obtaining,
maintaining, renewing, or revising permits, licenses, approvals, certificates,
or other entitlements, premiums and fees for all insurance maintained by
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 6
Landlord in connection with the construction, initial financing and debt service
(including principal), all "ADMINISTRATIVE RENT" (as defined in Section 6.1 of
the Work Letter), and all "TAXES" (as defined in Section 9 below) that become
due and payable while construction is being performed (collectively, the
"CONSTRUCTION COSTS"). The maximum amount of the Construction Allowance shall be
$3,000,000.00 (adjusted for any amounts actually received by Landlord as
reimbursement under Sections 19.b. or 19.d. of the Ground Lease and retained by
Landlord pursuant to the terms and conditions of a certain Cost Sharing
Agreement dated July 27, 1999, between Landlord and Tenant (the "COST SHARING
AGREEMENT")); Tenant hereby acknowledges and agrees that the aggregate
Construction Costs may exceed the Construction Allowance (as adjusted and
actually disbursed to or for the benefit of Tenant, the "DISBURSED CONSTRUCTION
ALLOWANCE")), and that Tenant may be responsible for any such excess, as
provided in the Work Letter (including, but not limited to, Sections 6.2 and 6.4
thereof). Tenant shall pay to Landlord equal monthly installments of improvement
rent ("IMPROVEMENT RENT"), which installments of Improvement Rent are intended
generally to constitute repayment of any portion of the Disbursed Construction
Allowance that exceeds $2,000,000.00 (the "EXCESS DISBURSED CONSTRUCTION
ALLOWANCE") and shall be equal to the equal monthly payments that would be
necessary to amortize fully the Excess Disbursed Construction Allowance over a
period of 120 months at an annual interest rate of 12%. For illustration
purposes only, if the Excess Disbursed Construction Allowance is $1,000,000.00,
the equal monthly installments of Improvement Rent will be $14,347.09. Upon
either party's request, the other party shall execute and deliver a written
acknowledgment of the aggregate Construction Costs, the Disbursed Construction
Allowance, the Excess Disbursed Construction Allowance, and the initial equal
monthly installments of Improvement Rent computed on such Excess Disbursed
Construction Allowance, when the same have been established, and shall attach
the acknowledgment to this Lease as Exhibit E; provided, however, either party's
failure to execute and deliver such acknowledgment shall not affect the other
party's rights hereunder.
Notwithstanding the foregoing, Tenant, at any time after the 36th month of the
Term, shall have the right to prepay, without penalty or premium, all of the
Improvement Rent that will be due for the remainder of the Term, which
prepayment (the "IMPROVEMENT RENT PREPAYMENT") shall be equal to the balance of
the Excess Disbursed Construction Allowance that has not been amortized through
monthly installments of Improvement Rent as of the end of the calendar month in
which such full payment is actually made to Landlord by Tenant (the "PREPAYMENT
MONTH"). Under no circumstances will Tenant have the right to make a partial
prepayment of Improvement Rent. Rent adjustments (pursuant to Section 4 below)
shall not be considered when calculating the balance of the Excess Disbursed
Construction Allowance that has not been amortized. Tenant may exercise this
prepayment right only by giving Notice to Landlord of Tenant's election to
exercise such right at least 12 months prior to the expiration of the Prepayment
Month. For illustration purposes only, if the Excess Disbursed Construction
Allowance is $1,000,000.00 and the Prepayment Month is the 36th month of the
Term, the Improvement Rent Prepayment will be $812,740.72. Tenant shall have no
obligation to make any monthly payments of Improvement Rent after Tenant makes
the Improvement Rent Prepayment. The Improvement Rent Prepayment shall be deemed
fully earned by Landlord and non-refundable to Tenant.
(iii) Any and all other amounts Tenant assumes or agrees to pay
under the provisions of this Lease, including, without limitation, any and all
other sums that may become due by reason of any "DEFAULT" (as defined in Section
20 below) or other failure to comply with the agreements, terms, covenants and
conditions of this Lease to be performed by Tenant, after any applicable notice
and cure period.
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 7
(c) RENT. Base Rent and Additional Rent shall together be denominated
"RENT". All monthly installments of Rent shall be paid in advance on or before
the 1st day of each calendar month during the Term and during any Term
Extension. Payments of Rent for any fractional calendar month shall be prorated
and paid on the basis of a 30-day month. Tenant's obligation to pay Rent and
other sums to Landlord under this Lease and Landlord's obligations under this
Lease shall be separate and independent obligations. Except to the extent, and
only to the extent, expressly provided otherwise in Sections 2(a)(i) and (ii)
above, all Rent shall be paid to Landlord without demand, abatement, reduction,
deduction, or set-off, in lawful money of the United States of America at the
office of Landlord for payment of Rent set forth in the Basic Lease Provisions,
or to such other person or at such other place as Landlord may from time to time
designate in writing.
4. RENT ADJUSTMENTS. Base Rent and Improvement Rent shall be increased on
the 1st annual anniversary of the 1st day of the 1st full month during the Term,
and on each annual anniversary of such date thereafter during the remainder of
the Term, by (i) multiplying the Base Rent payable immediately before such
adjustment by the Rent Adjustment Percentage applicable to Base Rent and adding
the resulting amounts to the Base Rent payable immediately before such
adjustment, and (ii) multiplying the Improvement Rent payable immediately before
such adjustment by the Rent Adjustment Percentage applicable to Improvement Rent
and adding the resulting amounts to the Improvement Rent payable immediately
before such adjustment. Base Rent and Improvement Rent, as so adjusted, shall
thereafter be due as provided herein. Rent adjustments for any fractional
calendar month shall be prorated.
5. OPERATING EXPENSE PAYMENTS. No later than 10 business days prior to the
1st day of the 1st full month during the Term and no later than 30 days prior to
the 1st day of each calendar year during the Term and any Term Extension,
Landlord shall deliver to Tenant a written estimate of Operating Expenses for
the remainder of the calendar year or for the following calendar year, as the
case may be (the "ANNUAL ESTIMATE"), which may be revised by Landlord from time
to time during the relevant calendar year. During each month of the Term and any
Term Extension, Tenant shall pay Landlord an amount equal to 1/12th of the
annual cost, as reasonably estimated by Landlord from time to time, of Tenant's
Share of Operating Expenses for the Project. The term "OPERATING EXPENSES" means
all reasonable costs and expenses of any kind or description whatsoever incurred
or accrued by Landlord with respect to the Project (including, without
limitation, the rent (as the same may be adjusted from time to time) and all
expenses to be paid or reimbursed by Landlord under the Development Rights
Agreement, maintenance and repair costs, insurance premiums (for the insurance
described in Section 17 below), Taxes, "UTILITIES" (as defined in Section 11
below), costs of capital repairs and improvements (amortized over the useful
life of the improvement, not to exceed 7 years), reasonable reserves consistent
with good business practice for future repairs and replacements, and
administrative rent for management services in the amount of 2.50% of the then
applicable Base Rent), excluding only:
(a) the original construction costs of the Project (including
Construction Costs);
(b) capital expenditures for expansion of the Project or for the
remodeling or refurbishment of the Project to a materially higher standard than
existed on the Commencement Date;
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 8
(c) costs directly and solely attributable to correcting a
"CONSTRUCTION DEFECT" (as defined in the Work Letter);
(d) interest and amortization of funds borrowed by Landlord, whether
secured or unsecured;
(e) depreciation of the Project (except for capital improvements the
cost of which are specifically includable in Operating Expenses);
(f) salaries, wages, or other compensation paid to officers and
employees of Landlord who are not assigned to the operation, management,
maintenance, or repair of the Project;
(g) any expenses otherwise includable within Operating Expenses to the
extent actually reimbursed by persons other than Tenant;
(h) legal expenses incurred in the negotiation of this Lease;
(i) costs relating to maintaining Landlord's existence, either as a
corporation, partnership, or other entity;
(j) costs (including "LEGAL FEES" (as defined in Section 44(k) below))
arising from the enforcement of this Lease or claims, disputes, or potential
disputes pertaining to Landlord and/or the Project;
(k) costs incurred by Landlord due to the violation by Landlord of the
terms and conditions of this Lease;
(l) costs incurred by Landlord due to the violation by Landlord of any
"LEGAL REQUIREMENTS" (as defined in Section 7 below);
(m) tax penalties incurred as a result of Landlord's negligence,
inability, or unwillingness to make payment and/or to file any tax or
informational returns when due;
(n) overhead or profit increment paid to Landlord or to subsidiaries or
affiliates of Landlord for the provision of goods and/or services in or to the
Project, but only to the extent the same exceeds the overhead or profit
increment that would be paid to unaffiliated third parties on a competitive
basis for providing the same goods and/or services;
(o) costs arising from Landlord's charitable or political
contributions;
(p) costs incurred in the sale or refinancing of the Project;
(q) net income, franchise, capital stock, estate, or inheritance taxes;
and
(r) any costs of constructing, repairing, or maintaining any new
improvement within the Project, or of providing any new and recurring service,
where the new improvement or the new service is not requested or approved by
Tenant, and (i) there is or will be no material benefit to Tenant from the new
improvement or the new service, or (ii) regardless of the benefit to Tenant,
construction of the new improvement commences or the new service is first
provided
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 9
in the final 12 months of the Term or the first Term Extension and Tenant has
elected not to exercise its then applicable Extension Right.
Within 120 days after the end of each calendar year, Landlord shall furnish
to Tenant a statement (an "ANNUAL STATEMENT") showing in reasonable detail: (i)
the total and Tenant's Share of actual Operating Expenses for the previous
calendar year, and (ii) the total of Tenant's payments in respect of Operating
Expenses for such year. If Tenant's Share of actual Operating Expenses for such
year exceeds Tenant's payments of Operating Expenses for such year, the excess
shall be immediately due and payable by Tenant as Rent. If Tenant's payments of
Operating Expenses for such year exceed Tenant's Share of actual Operating
Expenses for such year, Landlord shall, in its sole and absolute discretion,
either: (x) credit the excess amount to the next succeeding installments of
estimated Operating Expenses due hereunder, or (y) pay the excess to Tenant
within 30 days after delivery of such Annual Statement.
The Annual Statement shall be final and binding upon Tenant unless Tenant,
within 30 days after Tenant's receipt thereof, shall contest any item therein by
giving Notice to Landlord, specifying each item contested and the reason
therefor. If, during such 30-day period, Tenant reasonably and in good faith
questions or contests the correctness of Landlord's statement of Tenant's Share
of Operating Expenses, Landlord will provide Tenant access to Landlord's books
and records and such information as Landlord reasonably determines to be
responsive to Tenant's questions. If, after Tenant's review of such
information, Landlord and Tenant cannot agree upon the amount of Tenant's Share
of Operating Expenses, then Tenant shall have the right to have an independent
public accounting firm selected from among the 6 largest in the United States,
hired by Tenant (at Tenant's sole cost and expense) and approved by Landlord
(which approval shall not be unreasonably withheld or delayed), audit and/or
review such Landlord's books and records for the year in question (the
"INDEPENDENT REVIEW"). The results of any such Independent Review shall be
binding on Landlord and Tenant. If the Independent Review shows that Tenant's
pro rata share of the Operating Expenses actually paid by Tenant for the
calendar year in question exceeded Tenant's obligations for such calendar year,
Landlord shall at Landlord's option either (i) credit the excess amount to the
next succeeding installments of estimated Operating Expenses due hereunder, or
(ii) pay the excess to Tenant within 30 days after delivery of the results of
such Independent Review, except that after expiration or termination of the Term
or any Term Extension, Landlord shall pay the excess to Tenant after deducting
all other amounts due Landlord. If the Independent Review shows that Tenant's
payments of Tenant's Share of Operating Expenses for such calendar year were
less than Tenant's obligation for the calendar year, Tenant shall pay the
deficiency to Landlord within 30 days after delivery of the results of such
Independent Review. If the Independent Review shows that Tenant has overpaid
Tenant's pro rata share of Operating Expenses by more than 5.00%, then Landlord
shall reimburse Tenant for all costs incurred by Tenant for the Independent
Review. Operating Expenses for the calendar years in which Tenant's obligation
to share therein begins and ends shall be prorated.
6. SECURITY DEPOSIT.
(a) Tenant shall deposit with Landlord on the Commencement Date
security for the performance of all of Tenant's obligations hereunder (the
"SECURITY DEPOSIT") in an amount equal to 6 initial monthly payments of Base
Rent plus 6 initial monthly payments of Improvement Rent (the "ORIGINAL SECURITY
AMOUNT"). Upon either party's request, the other party shall execute and deliver
a written acknowledgment of the Original Security Amount, when the same has been
established, and shall attach the acknowledgment to this Lease as
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 10
Exhibit F; provided, however, either party's failure to execute and deliver such
acknowledgment shall not affect the other party's rights hereunder. At least
one-sixth of the Security Deposit shall be in cash and up to five-sixths of the
Security Deposit may be in the form of an unconditional and irrevocable letter
of credit (a "LETTER OF CREDIT"); provided, however, that the entire Security
Deposit may be in the form of a Letter of Credit at any time after Tenant
completes an initial public offering of Tenant's capital shares. Landlord shall
hold the cash portion of the Security Deposit in an interest bearing account
(which may contain Landlord's own funds), with any interest accruing on such
cash portion being for Tenant's benefit. Any Letter of Credit that constitutes a
portion of the Security Deposit: (i) shall be in form and substance satisfactory
to Landlord, in Landlord's sole and absolute discretion; (ii) shall name
Landlord as sole beneficiary; (iii) shall not refer to this Lease, the Project,
or the Premises or any circumstances, factors, or rights that might be related
thereto, but shall expressly allow Landlord to draw upon the Letter of Credit in
any amount, and at any time and from time to time, simply by delivering to the
issuer a clean sight draft on the Letter of Credit, without any other demand,
statement, or other representation regarding Landlord's rights under this Lease
or with respect to the Letter of Credit; (iv) shall be drawable on an FDIC-
insured financial institution satisfactory to Landlord, in Landlord's reasonable
discretion, with any draws to be payable from such financial institution's own
immediately available funds; (v) shall be drawable at the branch or office of
the issuer that Landlord may choose, in Landlord's sole and absolute discretion;
and (vi) shall expressly allow Landlord to draw the full amount of the Letter of
Credit if Tenant does not provide Landlord with a substitute Letter of Credit
complying with all of the requirements hereof at least 10 days before the stated
expiration date of such Letter of Credit.
(b) If, at any time during the Term or any Term Extension, Tenant
satisfies both the "NET WORTH TEST" (as defined below) and the "PROFITABILITY
TEST" (as defined below) (each, a "REDUCTION REQUIREMENT" and collectively, the
"REDUCTION REQUIREMENTS"), then the amount of the Security Deposit shall be
reduced to an amount equal to one-half of the amount of the Security Deposit
then held by Landlord. For purposes of this provision, the "NET WORTH TEST"
shall be deemed satisfied at any time that: (i) Tenant's stock is listed on
either the New York Stock Exchange or the NASDAQ stock market, and (ii) Tenant
has maintained a net worth of at least $100,000,000.00, using a market
capitalization analysis based on the daily closing trading price of Tenant's
common stock, for the immediately preceding consecutive 90 business days. For
purposes of this provision, the "PROFITABILITY TEST" shall be deemed satisfied
at any time that: (x) Tenant's net revenues after taxes for the immediately
preceding fiscal year exceed $1,000,000.00, and (y) the aggregate amount of
Tenant's "LIQUID ASSETS" (as defined below), as certified by a nationally
recognized, independent public accounting firm or as demonstrated in annual
audited financial statements, equals or exceeds Tenant's anticipated expenses
for the shorter of (1) 30 months and (2) the remainder of the Term. For purposes
of the Profitability Test, (A) "LIQUID ASSETS" shall mean all cash, cash
equivalents, liquid short term investments, and short term accounts receivables
from unrelated third parties, and (B) the phrase "REMAINDER OF THE TERM" shall
include any period for which Tenant has an "EXTENSION RIGHT" (as defined in
Section 41(a) below), regardless of whether any such Extension Right has been
exercised, unless such Extension Right has been waived or otherwise is no longer
exercisable (provided, however, that under no circumstances shall the "REMAINDER
OF THE TERM" be fewer than 12 months, unless there are fewer than 3 months
actually remaining in the Term and any Term Extension that may be available to
Tenant, in which case the "REMAINDER OF THE TERM" shall be deemed to be 6
months). Within 60 days after Tenant provides Landlord with written evidence
reasonably satisfactory to Landlord demonstrating that Tenant then satisfies
both of the Reduction Requirements, Landlord shall pay to Tenant (or, at
Landlord's option, to the last assignee of Tenant's interest hereunder) one-half
of the amount of the Security Deposit then held by Landlord, including one-half
of the interest that has accrued on the Security Deposit, if
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 11
any (provided, however, that if any portion of the Security Deposit is then in
the form of a Letter of Credit, Landlord will return such Letter of Credit to
Tenant upon Tenant's delivery to Landlord of cash (if then required hereunder)
plus a substitute Letter of Credit complying with all of the requirements hereof
in an aggregate amount equal to one-half of the amount of the Security Deposit
held by Landlord immediately prior to Landlord's return of the Letter of
Credit). This reduced amount shall be deemed to be the amount of the "SECURITY
DEPOSIT" for all purposes related to this Lease from and after the date that
Landlord returns to Tenant any portion of the Security Deposit then held by
Landlord in accordance with this provision. Notwithstanding the foregoing, the
Security Deposit shall be increased to an amount equal to twice the amount of
the Security Deposit then held by Landlord if there is a Default or if Tenant
fails to continue to satisfy both of the Reduction Requirements. Landlord shall
have the right (not to be exercised more than twice each calendar year) to
request written evidence from Tenant demonstrating that Tenant continues to meet
both of the Reduction Requirements. Tenant shall pay to Landlord the amount of
the required increase in the Security Deposit within 15 days after Landlord
gives Tenant written demand to do so (provided, however, that if any portion of
the Security Deposit is then in the form of a Letter of Credit, Landlord will
return such Letter of Credit to Tenant upon Tenant's delivery to Landlord of
cash (if then required hereunder) plus a substitute Letter of Credit complying
with all of the requirements hereof in an aggregate amount equal to twice the
amount of the Security Deposit held by Landlord immediately prior to Landlord's
return of the Letter of Credit). This increased amount shall be deemed to be the
amount of the "SECURITY DEPOSIT' for all purposes related to this Lease from and
after the date that Landlord gives Tenant written demand to increase the amount
of the Security Deposit in accordance with this provision.
(c) If, at any time during the Term, Tenant makes the Improvement Rent
Prepayment, then the amount of the Security Deposit shall be reduced by an
amount equal to (i) 6 initial monthly payments of Improvement Rent if, at that
time, the Security Deposit has not been reduced in accordance with Section 6(b)
above, and (ii) 3 initial monthly payments of Improvement Rent if, at that time,
the Security Deposit has been reduced in accordance with Section 6(b) above.
Within 30 days after Tenant makes the Improvement Rent Prepayment, Landlord
shall pay to Tenant (or, at Landlord's option, to the last assignee of Tenant's
interest hereunder) an amount equal to the required reduction in the amount of
the Security Deposit, including the interest that has accrued on such amount, if
any (provided, however, that if any portion of the Security Deposit is then in
the form of a Letter of Credit, Landlord will return such Letter of Credit to
Tenant upon Tenant's delivery to Landlord of cash (if then required hereunder)
plus a substitute Letter of Credit complying with all of the requirements hereof
in an aggregate amount equal to the amount of the Security Deposit held by
Landlord immediately prior to Landlord's return of the Letter of Credit less the
required reduction in such amount). This reduced amount shall be deemed to be
the amount of the "SECURITY DEPOSIT" for all purposes related to this Lease from
and after the date that Landlord returns to Tenant any portion of the Security
Deposit in accordance with this provision.
(d) Landlord shall hold the Security Deposit as security for the
performance of Tenant's obligations under this Lease. The Security Deposit is
not an advance rental deposit or a measure of Landlord's damages in case of a
Default. At any time that Landlord reasonably believes that a Default has
occurred and remains uncured, Landlord may use all or any part of the Security
Deposit (including accrued interest, if any) to pay or perform any obligation of
Tenant under this Lease or to compensate Landlord for any loss or damage
resulting from any Default, without prejudice to any other remedy provided
herein or provided by law. Upon any such use of all or any portion of the
Security Deposit, Tenant shall deposit with Landlord, within 5 days after
Landlord gives Tenant a written demand therefor, cash (or, if appropriate, a
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 12
substitute Letter of Credit complying with all of the requirements hereof) in
the amount that will restore the Security Deposit to its required amount. Upon
bankruptcy or other debtor-creditor proceedings against Tenant, the Security
Deposit shall be deemed to be applied first to the payment of Rent and other
charges due Landlord for periods prior to the filing of such proceedings. Tenant
hereby waives the provisions of any law, now or hereafter in force, that provide
that Landlord may claim from a security deposit only those sums reasonably
necessary to remedy defaults in the payment of rent, to repair damage caused by
Tenant, or to clean the leased premises, it being agreed that Landlord may
claim, in addition, those sums reasonably necessary to compensate Landlord for
any other loss or damage, foreseeable or unforeseeable, caused by the act or
omission of Tenant or any officer, employee, agent or invitee of Tenant.
(e) If Landlord transfers its interest in the Project or this Lease,
Landlord shall either (i) transfer any balance of the Security Deposit then held
by Landlord (including accrued interest, if any) to a person or entity assuming
Landlord's obligations under this Section, or (ii) pay to Tenant any balance of
the Security Deposit then held by Landlord (including accrued interest, if any).
Upon the transfer to such transferee or the payment to Tenant, Landlord shall
have no further obligation with respect to the Security Deposit, and Tenant's
right to the Security Deposit shall apply solely against Landlord's transferee.
(f) Landlord's obligation with respect to the Security Deposit is that
of a debtor, not a trustee. The Security Deposit shall be the property of
Landlord, but shall be paid to Tenant when Tenant's obligations under this Lease
have been completely fulfilled. If Tenant and all assignees of Tenant's interest
hereunder fully perform every provision of this Lease to be performed by Tenant
and return the Premises to Landlord upon the expiration or earlier termination
of this Lease, Landlord shall pay to Tenant (or, at Landlord's option, to the
last assignee of Tenant's interest hereunder) any balance of the Security
Deposit then held by Landlord (including accrued interest, if any) within 60
days after the expiration or earlier termination of this Lease.
7. USE. The Premises shall be used solely for the Permitted Use set forth
in the Basic Lease Provisions and for lawful purposes incidental thereto, all in
compliance with all laws, orders, judgments, ordinances, regulations, codes,
directives, permits, licenses, covenants and restrictions now or hereafter
applicable to the Premises, and the use and occupancy thereof (collectively,
"LEGAL REQUIREMENTS"). Tenant, within 5 days' after Notice from Landlord, shall
cause to be discontinued any use of the Premises that is declared by any
governmental authority having jurisdiction to be a violation of any Legal
Requirement. Provided that Tenant has prior knowledge of the then current terms
of Landlord's insurance coverage with respect to the Project, (i) Tenant will
not use or permit the Premises to be used for any purpose or in any manner that
would void Tenant's or Landlord's insurance, increase the insurance risk, or
cause the disallowance of any sprinkler or other credits, and Tenant, within 5
days' after Notice from Landlord, shall cause to be discontinued any such use,
and (ii) Tenant shall reimburse Landlord promptly upon demand for any additional
premium charged for any insurance policy maintained by Landlord as a result of
Tenant's failure to comply with the provisions of this Section. Tenant will use
the Premises in a careful, safe and proper manner and will not commit waste,
overload the floor or structure of the Premises, subject the Premises to uses
that would damage the Premises or obstruct or interfere with the rights of
Landlord or other guests, invitees, licensees, or other authorized users of the
Project, including conducting or giving notice of any auction, liquidation, or
going out of business sale on the Premises, or using or allowing the Premises to
be used for any unlawful purpose. Tenant shall cause any office equipment or
machinery to be installed in the Premises so as to reasonably prevent sounds or
vibrations therefrom from extending into Common Areas or other space in the
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 13
Project. Tenant shall not place any equipment weighing 500 pounds or more in or
upon the Premises or transport or move such items through the Common Areas of
the Project or in the Project elevators without the prior written consent of
Landlord. Except as may be provided under the Work Letter, Tenant, without the
prior written consent of Landlord, shall not use the Premises in any manner that
will require ventilation, air exchange, heating, gas, steam, electricity or
water beyond the existing capacity of the Project as proportionately allocated
to the Premises and as usually furnished for the Permitted Use.
Tenant, at its sole expense, shall make any alterations or modifications,
to the interior or the exterior of the Premises or the Project, that are
required by Legal Requirements (including, without limitation, compliance of the
Premises with the Americans With Disabilities Act, 42 U.S.C. (S) 12101, et seq.
(together with regulations promulgated pursuant thereto, "ADA")) related to
Tenant's use or occupancy of the Premises, provided that the foregoing
obligation shall not apply to the extent any non-compliance with Legal
Requirements is due to a Construction Defect. Notwithstanding any other
provision herein to the contrary, Tenant shall be responsible for any and all
demands, claims, liabilities, losses, costs, expenses, actions, causes of
action, damages or judgments, and all reasonable expenses incurred in
investigating or resisting the same (including, without limitation, Legal Fees)
(collectively, "CLAIMS") arising out of or in connection with Legal Requirements
and Tenant shall indemnify, defend, hold and save Landlord harmless from and
against any and all Claims arising out of or in connection with any failure of
the Premises to comply with any Legal Requirement, except to the extent, and
only to the extent, a Claim is attributable to a Construction Defect or to the
gross negligence or willful misconduct of Landlord.
8. HOLDING OVER. If, with Landlord's express written consent, Tenant
retains possession of the Premises after the expiration or earlier termination
of this Lease, such possession, unless otherwise agreed in writing, shall be
subject to immediate termination by Landlord at any time, and all of the other
terms and provisions of this Lease (including, without limitation, the
adjustment of Rent pursuant to Section 4 hereof but excluding any expansion or
renewal option or other similar right or option) shall remain in full force and
effect during such holdover period, and in such case Tenant shall continue to
pay Rent in the amount payable upon the date of the expiration or earlier
termination of this Lease or such other amount as Landlord may indicate, in
Landlord's sole and absolute discretion, in such written consent. All other
payments shall continue under the terms of this Lease. If Tenant remains in
possession of the Premises after the expiration or earlier termination of this
Lease without the express written consent of Landlord, Tenant shall become a
tenant at sufferance upon the terms of this Lease except that the monthly rental
shall be equal to 150.00% of the Rent in effect during the last 30 days prior to
the expiration or earlier termination of this Lease. In addition, Tenant shall
be responsible for all damages suffered by Landlord resulting from or occasioned
by Tenant's holding over. No holding over by Tenant, whether with or without
consent of Landlord, shall operate to extend this Lease except as otherwise
expressly provided, and this Section shall not be construed as consent for
Tenant to retain possession of the Premises. Acceptance by Landlord of Rent
after the expiration or earlier termination of this Lease shall not result in a
renewal or reinstatement of this Lease.
9. TAXES. Tenant shall pay all taxes, levies, assessments and governmental
charges of any kind (collectively referred to as "TAXES") imposed by any
federal, state, regional, municipal, local, or other governmental authority or
agency, including, without limitation, quasi-public agencies (collectively,
"GOVERNMENTAL AUTHORITY") in connection with the Project and accruing during the
Term and any Term Extension, including, without limitation, all Taxes: (i)
imposed on or measured by or based, in whole or in part, on rent payable to
Landlord under
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 14
this Lease and/or from the rental by Landlord of the Project, (ii) based on the
square footage, assessed value or other measure or evaluation of any kind of the
Premises or the Project, (iii) assessed or imposed by or on the operation or
maintenance of the Premises or the Project (including parking), (iv) assessed or
imposed by, or at the direction of, or resulting from statutes or regulations,
or interpretations thereof, promulgated by, any Governmental Authority, (v)
assessed or imposed by reason of the subsequent occurrence of certain specified
events (including, but not limited to, the construction of additional
improvements within the Project), or (vi) imposed as a license or other fee on
Landlord's business of leasing space in the Project. Landlord shall cause all
Taxes to be billed directly to Tenant by the Governmental Authority, and
Landlord shall promptly forward to Tenant any bills for Taxes that Landlord
nevertheless may receive. All payments of Taxes shall be made at least 10
business days prior to delinquency, and Tenant shall promptly furnish Landlord
with satisfactory evidence that all Taxes have been so paid; provided, however,
that Tenant shall not be responsible for evidence of timely payment or for any
penalties, surcharges, or similar charges imposed upon delinquency if the
delinquency is due solely to any failure by Landlord to forward promptly to
Tenant any bills for Taxes that Landlord may receive. If any Taxes cover any
period of time beginning before the Commencement Date or ending after the
expiration or earlier termination of this Lease, Tenant's responsibility for
such Taxes shall be prorated to cover only that portion of such Taxes applicable
to the period that the Lease is in effect, and Landlord shall promptly reimburse
Tenant for any overpayment (provided that all Taxes that become due and payable
while construction is being performed shall still be included in and a part of
Base Construction Costs). Tenant may contest by appropriate legal proceedings
the amount, validity, or application of any Taxes or liens securing Taxes. Taxes
shall not include any of the following (except to the extent any of the
following are in substitution for any Taxes payable hereunder): (x) any net
income taxes that may be imposed on Landlord, or (y) any revenue taxes that may
be imposed on any sale of Landlord's interest in the Project. Tenant also shall
pay, prior to delinquency, any and all Taxes levied or assessed against any
personal property or trade fixtures placed by Tenant in the Premises, whether
levied or assessed against Landlord or Tenant. If Tenant fails to pay any Taxes,
Landlord shall have the right (but not the obligation) to pay the same, and any
amount actually so paid by Landlord shall be payable to Landlord on demand as
Additional Rent or includable by Landlord as an Operating Expense.
10. PARKING. At no additional cost to Tenant, Tenant shall have a license to
use at least 33 parking spaces at the Site. Such license shall be effective
during the Term and any Term Extension, shall be revocable by Landlord upon the
expiration or earlier termination of this Lease, and shall be limited by and
subject to any changes mandated by Legal Requirements (including zoning
restrictions) that may be enacted or first effective after the Effective Date
and to any changes in the design of the Premises requested or approved by Tenant
and made after the Effective Date.
11. UTILITIES; SERVICES. Subject to the terms of this Section, Landlord
shall cause to be provided to the Project and the Premises, water, electricity,
gas, light, power, telephone, sewer, and other utilities (including fire
sprinklers) (collectively, "UTILITIES"). Tenant shall arrange for refuse and
trash collection and janitorial services provided to the Premises. Landlord
shall cause all Utilities to be charged directly to Tenant by the provider.
Tenant shall pay directly to the Utility provider, prior to delinquency, all
charges for Utilities used on the Premises during the Term and any Term
Extension, all maintenance charges for Utilities, and any storm sewer charges or
other similar charges for Utilities imposed by any Governmental Authority or
Utility provider, and any taxes, penalties, surcharges, or similar charges
thereon. If Tenant fails to pay any Utilities in the manner required hereunder,
Landlord shall have the right (but not the obligation) to pay the same, and the
amount thereof shall be payable to Landlord on
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 15
demand as Additional Rent or includable by Landlord as an Operating Expense. No
interruption or failure of Utilities, from any cause whatsoever other than
Landlord's willful misconduct, shall result in eviction or constructive eviction
of Tenant, termination of this Lease or the abatement of Rent.
12. ALTERATIONS AND TRADE FIXTURES. Any alterations, additions, or
improvements made to the Premises ("ALTERATIONS") by or on behalf of Tenant,
including additional locks or bolts of any kind or nature upon any doors or
windows in the Premises, but excluding installation, removal, or realignment of
furniture systems (other than removal of furniture systems owned or paid for by
Landlord) not involving any modifications to the structure or connections (other
then by ordinary plugs or jacks) to "BUILDING SYSTEMS" (as defined in Section 13
below) shall be subject to Landlord's prior written consent, which consent (i)
will not be unreasonably withheld or delayed with respect to non-structural
Alterations to the interior of the Premises that do not involve any Building
Systems or puncturing, relocating, or removing the roof or any existing load-
bearing walls ("NON-STRUCTURAL ALTERATIONS"), and (ii) may be withheld, in
Landlord's sole and absolute discretion, with respect to all other Alterations.
Notwithstanding the foregoing, Landlord's prior consent will not be required
with respect to Non-Structural Alterations if the cost of each such Non-
Structural Alteration does not exceed $5,000.00 ("PERMITTED NON-STRUCTURAL
ALTERATIONS"), the aggregate cost of all such Permitted Non-Structural
Alterations does not exceed $25,000.00 in any consecutive 12 month period,
and Tenant provides Landlord with Notice of each such Permitted Non-Structural
Alteration, accompanied by any plans, specifications, bid proposals, work
contracts, or other information concerning the nature and cost of each such
Permitted Non-Structural Alteration that Tenant may have in its possession or
control, including the identities and mailing addresses of all persons
performing work or supplying materials (collectively, "ALTERATIONS
INFORMATION"). If Landlord approves any Alterations, Landlord may impose such
conditions on Tenant in connection with the commencement, performance, and
completion of such Alterations as Landlord may deem appropriate (in Landlord's
reasonable discretion, with respect to Non-Structural Alterations, and in
Landlord's sole and absolute discretion, with respect to all other Alterations).
Any request for approval shall be in writing, delivered not less than 15
business days in advance of any proposed construction, and accompanied by such
Alterations Information as may be reasonably requested by Landlord. Landlord's
right to review plans and specifications and to monitor construction shall be
solely for its own benefit, and Landlord shall have no duty to see that such
plans and specifications or construction comply with applicable Legal
Requirements. Tenant, at its sole cost and expense, shall cause all Alterations
to comply with insurance requirements known to Tenant and Legal Requirements and
shall implement any alteration or modification required by Legal Requirements as
a result of any Alterations. Except as to Permitted Non-Structural Alterations,
Tenant shall pay to Landlord, on demand as Additional Rent, an amount equal to
5.00% of all charges incurred by Tenant or its contractors or agents in
connection with any Alterations to cover Landlord's overhead and expenses for
plan review, coordination, scheduling, and supervision. Tenant will give
Landlord Notice at least 5 days (or any longer period that may be required under
the Ground Lease) before beginning any Alterations so that Landlord may post on
and about the Premises notices of non-responsibility pursuant to applicable law.
Tenant, at its sole cost and expense, shall correct any faulty work or
inadequate cleanup done by Tenant or its contractors within 5 business days
after Notice of the same from Landlord. Tenant shall reimburse Landlord for,
and indemnify and hold Landlord harmless from, any reasonable and necessary
expenses incurred by Landlord by reason of such faulty work or inadequate
cleanup or by reason of delays caused by the same.
Tenant shall furnish security or make other arrangements satisfactory to
Landlord to assure payment for the completion of all work free and clear of
"LIENS" (as defined in Section 15
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 16
below), and shall provide certificates of insurance for workers compensation and
other coverage in amounts and from an insurance company satisfactory to Landlord
protecting Landlord against liability for personal injury or property damage
during construction (copies of such certificates will suffice, so long as the
original certificates are forwarded to Landlord within 2 business days
thereafter). Upon completion of any Alterations, Tenant shall deliver to
Landlord: (i) sworn statements setting forth the names of all contractors and
subcontractors who did the work and final lien waivers from all such contractors
and subcontractors; and (ii) as-built plans for any such Alteration.
Other than the items, if any, listed on Exhibit H and any items agreed by
Landlord in writing to be included on Exhibit H in the future ("TENANT'S
PROPERTY"), all Alterations, all "TENANT IMPROVEMENTS" (as defined in the Work
Letter), and all other equipment, fixtures, trade fixtures, machinery, built-in
furniture and cabinets, and other additions and improvements attached to or
built into the Premises, including, without limitation, fume hoods that
penetrate the roof or plenum area, built-in cold rooms, built-in warm rooms,
walk-in cold rooms, walk-in warm rooms, deionized water systems, glass washing
equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical
equipment and systems, and any power generator and transfer switch
(collectively, "INSTALLATIONS"), shall be and shall remain the property of
Landlord during the Term and any Term Extension and following the expiration or
earlier termination of this Lease, shall not be removed by Tenant at any time
during the Term or any Term Extension, and, subject to the provisions of Section
42 below, shall remain upon and be surrendered with the Premises as a part
thereof following the expiration or earlier termination of this Lease; provided,
however, that Landlord, at the time its approval of any Installation is
requested, may elect to cause Tenant to remove such Installation upon the
expiration or earlier termination of this Lease. If Landlord so elects, Tenant
shall remove such Installation upon the expiration or earlier termination of
this Lease and restore any damage caused by or occasioned as a result of such
removal. During any such restoration period, Tenant shall pay Rent to Landlord
as provided herein as if Tenant otherwise occupied said space. Landlord and
Tenant hereby acknowledge and agree that the list of Tenant's Property attached
hereto as Exhibit H is intentionally over-inclusive and includes items that will
be used, located, placed, and/or stored in the Office / Lab. Tenant shall be
solely responsible for keeping records regarding the actual location of each
particular item of Tenant's Property. For purposes of this Lease, if, at any
time, any particular item of Tenant's Property is not within the Premises, such
item shall be presumed to be within the Office / Lab.
13. TENANT'S REPAIRS. During the Term and any Term Extension, Tenant shall
keep all components of the Premises and the Project in good order, condition,
and repair (to the extent the need for such repairs occurs as a result of
Tenant's use of the portion of the Premises or Project requiring repairs),
reasonable wear and tear and Construction Defects excluded, including, but not
limited to, all equipment or facilities, such as plumbing, heating, ventilation,
and air-conditioning ("HVAC"), electrical and lighting facilities, boilers,
pressure vessels, fire protection systems, fixtures, exterior and interior
walls, foundations, ceilings, roofs, floors, windows, doors, plate glass,
landscaping and irrigation systems, driveways and parking areas, fences,
retaining walls, signs, and sidewalks ("BUILDING SYSTEMS"). Tenant's
obligations shall include restorations, replacements, or renewals when
necessary. During the Term and any Term Extension, Tenant also shall keep the
exterior appearance of the Greenhouse in a condition consistent with the
exterior appearance of other substantially similar facilities of comparable age
and size ("SIMILAR FACILITIES") located within the area commonly known as the
"I-40/RTP sub-market' (the "SUB-MARKET"), including, when necessary, the
exterior sealing, resealing, or repainting of the Greenhouse. Tenant, in
keeping the Premises and the Project in good order, condition, and repair, shall
exercise and perform good maintenance practices,
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 17
specifically including the procurement and maintenance of service contracts,
with copies to Landlord, in customary form and substance for, and with
contractors specializing and experienced in the maintenance of, the following
Building Systems (the "SERVICE CONTRACTS"): (i) HVAC, (ii) boilers and pressure
vessels, (iii) fire protection systems, (iv) landscaping and irrigation systems,
(v) roof covering and drains, (vi) driveways and parking areas, (vii) basic
Utilities feeds to the perimeter of the Greenhouse, and (viii) any other
Building Systems reasonably required by Landlord. Tenant's obligations under
this Section shall be at Tenant's sole cost and expense. If Tenant fails to
repair or maintain any portion of the Premises or the Project as required under
this Section within 15 days after Landlord gives Tenant written demand to so
repair or maintain, Landlord may perform such work and the reasonable and
necessary cost thereof shall be payable to Landlord on demand as Additional Rent
or includable by Landlord as an Operating Expense.
Notwithstanding the foregoing, if any "MAJOR REPAIR" (as hereinafter
defined) is required, Landlord shall be responsible for completing a
"RESTORATION" (as hereinafter defined). As used herein, the term "MAJOR REPAIR"
shall mean the following: (a) during the final 12 months of the Term or any Term
Extension (provided that Tenant has elected not to exercise any then available
Extension Right or no Extension Right is then available) (the "FINAL 12
MONTHS"), any repair to any Building System other than a "TENANT SPECIFIC
BUILDING SYSTEM" (as hereinafter defined) that will cost more than 60.00% of the
cost of replacing such Building System; and (b) at all other times, any repair
to any Building System that will cost more than 50.00% of the cost of replacing
such Building System. As used herein, the term "TENANT SPECIFIC BUILDING
SYSTEM" shall mean any Building System that is necessary only because of
Tenant's specific use of the Premises or the conduct of Tenant's specific
business operations on the Premises. As used herein, the term "RESTORATION"
shall mean the following: (x) during the Final 12 Months, repairing or replacing
the Building System in question, at Landlord's sole option; and (y) at all other
times, replacing the Building System in question. The cost of any Restoration
shall be includable by Landlord as an Operating Expense, provided that the cost
of any Restoration that involves replacing the Building System in question shall
be deemed a capital improvement and amortized over the useful life of the
improvement (not to exceed 7 years). Under all circumstances, Landlord shall
have no obligation with respect to any Building System to the extent any repair
of such Building System becomes necessary because of Tenant's failure to
exercise and perform adequate maintenance as required hereunder.
Notwithstanding the foregoing, substantial repairs to the Premises or the
Project required as the result of fire, earthquake, flood, vandalism, war, or
similar cause of damage or destruction shall be controlled by Section 18.
14. LANDLORD'S REPAIRS. It is intended by Landlord and Tenant that Landlord
shall have no obligation, in any manner whatsoever, to repair or maintain the
Premises or the Project (including, without limitation, the Building Systems),
except to the extent, and only to the extent, of any repairs that are necessary
solely because of Construction Defects, Landlord's gross negligence or willful
misconduct, the elements, or the age of the Premises or the Project. It is also
intended by Landlord and Tenant that the terms of this Lease shall govern their
respective obligations regarding repair and maintenance of the Premises and the
Project, and Tenant expressly waives the benefit of any state or local law now
or hereafter in effect to the extent any such law is inconsistent with the terms
of this Lease. Notwithstanding the foregoing, Landlord shall not be in default
in its obligations under this Section if:
(a) with respect to Construction Defects that Landlord reasonably
determines, in good faith, involve or may involve structural components of the
Premises or pose
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 18
or may pose a significant risk of personal injury or substantial property damage
("SERIOUS CONSTRUCTION DEFECTS"), the applicable contractor, despite Landlord's
reasonable efforts, fails to remedy such Construction Defect within 30 days
after Tenant gives Landlord Notice of such Construction Defect, but Landlord,
within 30 days thereafter, commences and diligently and continuously prosecutes
such remedial action to completion, at Landlord's sole cost and expense;
(b) with respect to Construction Defects that Landlord reasonably
determines, in good faith, are not Serious Construction Defects or involve
Tenant's Property, the applicable contractor, despite Landlord's reasonable
efforts, fails to remedy such Construction Defect within 30 days after Tenant
gives Landlord Notice of such Construction Defect, in which case Landlord shall
have no further obligation with respect to such Construction Defect other than
to cooperate, at no cost to Landlord, with Tenant should Tenant elect to pursue
a claim against such contractor, provided that Tenant indemnifies and holds
Landlord harmless from and against any liability, loss, cost, damage, or expense
that may arise because Tenant's claim is denied or is determined to be baseless,
erroneous, faulty, groundless, improper, inappropriate, unfounded, or otherwise
unjustified or unwarranted; or
(c) with respect to any part of the Premises or the Project, any action
by Tenant has directly resulted in the invalidation of any otherwise enforceable
warranty or bond that would cover the cost of remedying such Construction
Defect.
Any determination made by Landlord pursuant to paragraph (a) or (b) above shall
be deemed reasonable and in good faith if based on advice received by Landlord
from an independent and duly licensed design or construction consultant (a
"DEFECT CONSULTANT"). Tenant may ask a Defect Consultant to provide written
confirmation of the advice given Landlord in connection with a determination by
Landlord that a specific Construction Defect is not a Serious Construction
Defect if, and only if, (i) Tenant gives Landlord Notice of such desire within 3
business days after receiving Notice of Landlord's determination, and (ii)
Tenant is solely responsible for any fee, cost, charge, or other assessment
imposed by the Defect Consultant for providing such written confirmation;
provided, however, that Tenant understands and agrees that Landlord's waiver of
the potential conflict of interest facing the Defect Consultant shall be
strictly limited to the advice, and only the advice, given Landlord in the
specific instance in question and shall not apply, under any circumstances, to
any other advice or matters that may be the subject of the services provided to
Landlord by the Defect Consultant.
15. LIENS. Tenant, at Tenant's sole cost and expense, shall pay for all work
performed for, materials furnished to, or obligations incurred by Tenant in
connection with the Premises or the Project, and shall keep the Premises and the
Project free from, and shall discharge, by bond or otherwise, any mechanic's or
materialmen's lien or claim of lien filed against the Premises or the Project
for work claimed to have been done for, materials claimed to have been furnished
to, or obligations claimed to have been incurred by, Tenant in connection with
the Premises or the Project (generally, "LIENS"). Tenant shall discharge any
such Lien within 10 days after Tenant receives notice of such Lien. With respect
to any Alterations for which the estimated cost exceeds $15,000.00, Landlord may
require Tenant, at Tenant's sole cost and expense, to provide a lien and
completion bond in an amount equal to 150.00% of such estimated cost, insuring
Landlord against any liability for any Liens that may arise from such
Alterations. Should Tenant fail to discharge any Lien in the manner and at the
time provided herein, Landlord shall have the right, but not the obligation, to
pay such claim or post a bond or otherwise provide security to eliminate the
Lien as a claim against title to the Project and the cost thereof shall be
immediately due from Tenant as Additional Rent. If Tenant
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 19
shall lease or finance the acquisition of office equipment, furnishings, or
other personal property of a removable nature used by Tenant in the operation of
Tenant's business, Tenant warrants that any Uniform Commercial Code Financing
Statement executed by Tenant will on its face or by exhibit thereto indicate
that such Financing Statement is applicable only to removable personal property
of Tenant located within the Premises. In no event shall the address of the
Project be furnished on the statement without qualifying language as to
applicability of the lien only to removable personal property, located in an
identified suite held by Tenant.
16. INDEMNIFICATION.
(a) Tenant hereby indemnifies and agrees to defend, save, and hold
Landlord harmless from and against any and all Claims for injury or death to
persons or damage to property occurring within or about the Premises or the
Project, arising directly or indirectly out of Tenant's use or occupancy of the
Premises or the Project or a breach or default by Tenant in the performance of
any of its obligations hereunder, except to the extent caused by the gross
negligence or willful misconduct of Landlord.
(b) Landlord hereby indemnifies and agrees to defend, save, and hold
Tenant harmless from and against any and all Claims for injury or death to
persons or damage to property occurring within or about the Premises or the
Project, to the extent, and only to the extent, caused by the gross negligence
or willful misconduct of Landlord. Under no circumstances, however, shall
Landlord be liable to Tenant for, and Tenant assumes all risk of, damage to
personal property (including, without limitation, loss of records kept within
the Premises). Further, Tenant waives any and all Claims for injury to Tenant's
business or loss of income relating to any such damage or destruction of
personal property (including, without limitation, any loss of records). Finally,
Landlord shall not be liable for any damages arising from any act, omission, or
neglect of any guests, invitees, licensees, and other authorized users of the
Project or of any other third party.
17. INSURANCE. Landlord shall maintain all insurance against any peril
generally included within the classification "Fire and Extended Coverage",
sprinkler damage (if applicable), vandalism and malicious mischief covering the
full replacement cost of the Project, as the same shall exist from time to time,
or the amount required by Ground Lessor or any lender of Landlord holding a
security interest in Landlord's interest in the Project, but in no event more
than the commercially reasonable and available insurable value thereof.
Landlord also may maintain, but is not obligated to maintain, such other
insurance and additional coverages as Landlord may deem necessary, including,
but not limited to, comprehensive public liability, flood, environmental hazard,
earthquake, loss or failure of building equipment, and rental loss during
periods of repair or rebuilding. The Project may be included in a blanket
policy (in which case the cost of such insurance allocable to the Project will
be determined by Landlord based upon the insurer's cost calculations). Tenant
hereby acknowledges that Tenant has been provided with a written summary of the
insurance coverage that Landlord will be maintaining with respect to the Project
as of the Commencement Date; Landlord will be responsible for notifying Tenant
of any material changes in such insurance coverage made after the Commencement
Date.
Tenant, at its sole expense, shall maintain during the Term and any Term
Extension: all risk property insurance covering the full replacement cost of all
property and improvements installed or placed in the Premises by Tenant;
worker's compensation insurance with no less than the minimum limits required by
law; employees liability insurance with such limits as required by law; and
comprehensive public liability insurance, with a minimum limit of not less
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 20
than $2,000,000 per occurrence for death or bodily injury and not less than
$1,000,000 for property damage with respect to the Premises. Landlord may from
time to time require reasonable increases in any such limits. The comprehensive
public liability insurance policies shall name Landlord, its officers,
directors, employees, managers, agents, invitees and contractors (collectively,
"RELATED PARTIES"), as additional insureds; insure on an occurrence and not a
claims-made basis; be issued by insurance companies that have a rating of not
less than policyholder rating of A and financial category rating of at least
Class XII in "Best's Insurance Guide"; shall not be cancelable unless 30 days
prior written notice shall have been given to Landlord from the insurer; contain
a hostile fire endorsement and a contractual liability endorsement; and provide
primary coverage to Landlord (any policy issued to Landlord providing duplicate
or similar coverage shall be deemed excess over Tenant's policies). Such
policies or certificates thereof shall be delivered to Landlord by Tenant upon
commencement of the Term and upon each renewal of said insurance (upon renewal,
copies of such policies or certificates will suffice, so long as the original
policies or certificates are forwarded to Landlord within 2 business days
thereafter). Tenant's policy may be a "blanket policy" which specifically
provides that the amount of insurance shall not be prejudiced by other losses
covered by the policy. Tenant shall, at least 20 days prior to the expiration of
such policies, furnish Landlord with renewals or binders. Tenant agrees that if
Tenant does not maintain such insurance, Landlord shall have the right (but not
the obligation) to procure said insurance on Tenant's behalf.
In each instance where insurance is to name Landlord as an additional
insured, Tenant, upon Landlord's written request, shall furnish certificates so
evidencing Landlord as additional insured to: (i) Ground Lessor, (ii) any lender
of Landlord holding a security interest in any portion of the Project, and/or
(iii) any management company retained by Landlord to manage the Project.
Further, Tenant agrees that Landlord may require insurance policy limits to be
raised to conform to the requirements of Ground Lessor and/or Landlord's lender.
The property insurance obtained by Landlord and Tenant shall include a
waiver of subrogation by the insurers and all rights based upon an assignment
from its insured, against Landlord or Tenant, and their respective Related
Parties, in connection with any loss or damage thereby insured against. Neither
party nor its respective Related Parties shall be liable to the other for loss
or damage caused by any risk insured against under property insurance required
to be maintained hereunder, and each party waives any claims against the other
party, and its respective Related Parties for such loss or damage. The failure
of a party to insure its property shall not void this waiver. Landlord and its
respective Related Parties shall not be liable for, and Tenant hereby waives all
claims against such parties for, business interruption and losses occasioned
thereby sustained by Tenant or any person claiming through Tenant resulting from
any accident or occurrence in or upon the Premises or the Project from any cause
whatsoever. If the foregoing waivers shall contravene any law with respect to
exculpatory agreements, the liability of Landlord or Tenant shall be deemed not
released but shall be secondary to the others insurer.
The cost of any insurance procured and/or maintained by Landlord pursuant
to this Section shall be included as an Operating Expense.
Notwithstanding any provision of this Section, Landlord shall insure, and
shall bear all risk of loss with respect to, the Premises and the Project at all
times prior to the Commencement Date, with the exception of any acts or
omissions by Tenant or its agents or contractors.
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 21
18. RESTORATION. If at any time during the Term or any Term Extension the
Project or the Premises are damaged by a fire or other insured casualty,
Landlord shall notify Tenant within 45 days after discovery of such damage as to
the amount of time Landlord reasonably estimates it will take to restore the
Project or the Premises, as applicable. If the restoration time is estimated to
exceed 6 months, either party, by giving Notice to the other party, may elect to
terminate this Lease as of the date that is 75 days after the date of discovery
of such damage. Unless either party elects to terminate this Lease, Landlord,
subject to receipt of sufficient insurance proceeds, shall promptly restore the
Premises (excluding any Alterations installed by Tenant and any other
improvements installed by Landlord and paid for by Tenant after Substantial
Completion of the original Premises), subject to delays arising from the
collection of insurance proceeds, from Force Majeure events, or as needed to
obtain any license, clearance, or other authorization of any kind required to
enter into and restore the Premises issued by any Governmental Authority having
jurisdiction over the use, storage, release or removal of Hazardous Materials
in, on, or about the Premises (collectively referred to herein as "HAZARDOUS
MATERIALS CLEARANCES"); provided, however, that if such repair or restoration of
the Premises is not Substantially Complete within 9 months after the date of
discovery of the damage (to be extended by 1 day for each day that the
restoration time is estimated to exceed 6 months, provided that neither party
elected to terminate this Lease based on such estimate), either party, by giving
Notice to the other party, may elect not to proceed with such repair and
restoration, in which event Landlord shall be relieved of its obligations to
make such repairs or restoration and this Lease shall terminate effective as of
the date of such election.
Tenant, at its expense, shall promptly perform, subject to delays arising
from the collection of insurance proceeds, from Force Majeure events or to
obtain Hazardous Material Clearances, all repairs or restoration not required to
be done by Landlord and, as soon as reasonably practicable, shall re-enter the
Premises and commence doing business in accordance with this Lease.
Notwithstanding the foregoing, Landlord may terminate this Lease if the Premises
are damaged during the last 18 months of the Term or of any Term Extension and
Landlord reasonably estimates that it will take more than 60 days to repair such
damage, or if insurance proceeds are not available for such restoration. Rent
shall be abated from the date all required Hazardous Material Clearances are
obtained until the Premises are repaired and restored, in the proportion that
the area of the Premises that is not usable by Tenant, if any, bears to the
total area of the Premises, unless Landlord provides Tenant with other space
during the period of repair that is suitable, in Tenant's reasonable discretion,
for the temporary conduct of Tenant's business. Such abatement shall be
Tenant's sole and exclusive remedy at law, in equity, or otherwise, and except
as provided herein, Tenant waives any right to terminate the Lease by reason of
damage or casualty loss.
The provisions of this Lease, including this Section, constitute an express
agreement between Landlord and Tenant with respect to any and all damage to, or
destruction of, all or any part of the Premises, or any other portion of the
Project, and any statute or regulation that is now or may hereafter be in
effect, shall have no application to this Lease or any damage or destruction to
all or any part of the Premises or any other portion of the Project, the parties
hereto expressly agreeing this Section sets forth their entire understanding and
agreement with respect to such matters.
19. CONDEMNATION. If any part of the Premises or the Project is taken for
any public or quasi-public use under any governmental law, ordinance, or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof (a "TAKING" or "TAKEN"), and the Taking would, in Tenant's judgment,
prevent or materially interfere with Tenant's use of the Premises for the
Permitted Use or, in Landlord's judgment, materially interfere with or impair
Landlord's
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 22
ownership or operation of the Project, then upon Notice by either party to the
other party this Lease shall terminate and Rent shall be apportioned as of said
date. If part of the Premises shall be Taken, and this Lease is not terminated
as provided above, Landlord shall promptly restore the Premises and the Project
as nearly as is commercially reasonable under the circumstances to their
condition prior to such partial taking and the Rent payable hereunder during the
unexpired portion of the Term or any Term Extension shall be reduced to such
extent as may be fair and reasonable under the circumstances. Upon any such
Taking, Landlord shall be entitled to receive the entire price or award from any
such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord
Tenant's interest, if any, in such award. Tenant shall have the right, to the
extent that same shall not diminish Landlord's award, to make a separate claim
against the condemning authority (but not Landlord) for such compensation as may
be separately awarded or recoverable by Tenant for moving expenses and damage to
Tenant's Trade Fixtures, if a separate award for such items is made to Tenant.
Tenant hereby waives any and all rights it might otherwise have pursuant to any
provision of state law to terminate this Lease upon a partial Taking of the
Premises or the Project.
20. EVENTS OF DEFAULT. Each of the following events shall be a default
("DEFAULT") by Tenant under this Lease:
(a) PAYMENT DEFAULTS. Tenant shall fail to pay any installment of Rent
or any other payment hereunder when due; provided, however, that Landlord will
give Tenant Notice and an opportunity to cure any failure to pay Rent within 3
days of any such Notice not more than once in any 12 month period and Tenant
agrees that such Notice shall be in lieu of and not in addition to any notice
required by law.
(b) INSURANCE. (i) Any insurance required to be maintained by Tenant
pursuant to this Lease shall be canceled or terminated or shall expire or shall
be reduced or materially changed, or Landlord shall receive a notice of
nonrenewal of any such insurance and (ii) Tenant shall fail to obtain
replacement insurance at least 20 days before the expiration of the current
coverage.
(c) ABANDONMENT. Tenant shall abandon the Premises.
(d) IMPROPER TRANSFER. Tenant shall assign, sublease or otherwise
transfer or attempt to transfer all or any portion of Tenant's interest in this
Lease or the Premises except as expressly permitted herein, or Tenant's interest
in this Lease shall be attached, executed upon, or otherwise judicially seized
and such action is not released within 90 days of the action.
(e) LIENS. Tenant shall fail to satisfy its obligations under Section
15.
(f) INSOLVENCY EVENTS. Tenant or any guarantor or surety of Tenant's
obligations hereunder shall: (i) make a general assignment for the benefit of
creditors; (ii) commence any case, proceeding or other action seeking to have an
order for relief entered on its behalf as a debtor or to adjudicate it bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or of
any substantial part of its property (collectively a "PROCEEDING FOR RELIEF");
(iii) become the subject of any Proceeding for Relief that is not dismissed
within 90 days of its filing or entry; or (iv) die or suffer a legal disability
(if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise
fail to maintain its legal existence (if Tenant, guarantor or surety is a
corporation, partnership or other entity).
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 23
(g) ESTOPPEL CERTIFICATE OR SUBORDINATION AGREEMENT. Tenant fails to
execute any document required from Tenant under Sections 23, 27, or 38 within 10
days after a second Notice requesting such document.
(h) OFFICE / LAB LEASE. Tenant is in breach of, in default under, or
otherwise has failed to comply with the agreements, terms, covenants and
conditions to be performed by Tenant in connection with the Office / Lab Lease,
after any applicable notice and cure periods.
(i) [INTENTIONALLY OMITTED]
(j) OTHER DEFAULTS. Tenant shall fail to comply with any provision of
this Lease other than those specifically referred to in this Section, and except
as otherwise expressly provided herein, such failure shall continue for a period
of 30 days after Notice thereof from Landlord to Tenant.
Any Notice given under Section 20(g) or (j) hereof, shall: (i) specify the
alleged default, (ii) demand that Tenant cure such default, (iii) be in lieu of,
and not in addition to, or be deemed to be, any notice required under any
provision of applicable law, and (iv) not be deemed a forfeiture or a
termination of this Lease unless Landlord elects otherwise in such Notice;
provided, however, that if the nature of Tenant's default is such that it cannot
be cured by the payment of money and reasonably requires more than 30 days to
cure, then Tenant shall not be deemed to be in default if Tenant commences such
cure within said 30-day period and thereafter diligently prosecutes the same to
completion; provided further, however, that such cure shall be completed no
later than 60 days from the date of Landlord's Notice.
21. LANDLORD'S REMEDIES.
(a) PAYMENT BY LANDLORD; INTEREST. Upon a Default by Tenant hereunder,
Landlord, without waiving or releasing any obligation of Tenant hereunder, may
make such payment or perform such act. All sums so paid or incurred by Landlord,
together with interest thereon, from the date such sums were paid or incurred,
at the annual rate equal to 12.00% per annum or the highest rate permitted by
law, whichever is less (the "DEFAULT RATE"), shall be payable to Landlord on
demand as Additional Rent. Nothing herein shall be construed to create or impose
a duty on Landlord to mitigate any damages resulting from Tenant's Default
hereunder.
(b) LATE PAYMENT RENT. Late payment by Tenant to Landlord of Rent and
other sums due under this Lease will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult and impracticable to ascertain. Such costs include, but are not
limited to, processing and accounting charges and late charges that may be
imposed on Landlord under any "MORTGAGE" (as defined in Section 27 below)
covering the Premises. Therefore, if Landlord does not receive any installment
of Rent due from Tenant within 5 days after the date such payment is due, Tenant
shall pay to Landlord an additional sum of 6.00% of the overdue Rent as a late
charge. In addition to the late charge, Rent not paid when due shall bear
interest at the Default Rate from the 5th day after the date due until paid.
Provided there is no other Default by Tenant hereunder, the foregoing late
charge and interest at the Default Rate will not be payable until the 2nd late
payment of Rent in any 12 month period. Tenant agrees that the foregoing late
charge and interest at the Default Rate represent a fair and reasonable estimate
of the costs Landlord will incur by reason of late payment by Tenant. Tenant
also acknowledges that Landlord is entitled to use reasonable methods to deter
delinquent payments by Tenant and agrees that, under the circumstances in
existence as of the
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 24
date of this Lease, the foregoing late charge and interest at the Default Rate
are reasonable, as evidenced by the fact that, among other things, (i) Landlord
and Tenant have comparatively equal bargaining power, (ii) this Lease is not a
pre-printed form document, and (iii) Tenant's principals are well experienced in
leasing properties, were represented by counsel in the negotiation and
documentation of this Lease, and bargained at arms length and without duress for
all of the terms and conditions of this Lease, including this provision.
(c) REMEDIES. Upon the occurrence of a Default, Landlord, at its
option, without further Notice to or demand on Tenant, shall have the option, in
addition to all other rights and remedies provided in this Lease, at law or in
equity, to pursue any one or more of the following remedies, each and all of
which shall be cumulative and nonexclusive, without any Notice or demand
whatsoever.
(i) Terminate this Lease, or at Landlord's option, Tenant's right
to possession only, in which event Tenant shall immediately surrender the
Premises to Landlord, and if Tenant fails to do so, Landlord may, in accordance
with applicable law and without prejudice to any other remedy that it may have
for possession or arrearages in rent, enter upon and take possession of the
Premises and expel or remove Tenant and any other person who may be occupying
the Premises or any part thereof, without being liable for prosecution or any
claim or damages therefor;
(ii) Upon any termination of this Lease, whether pursuant to the
foregoing Section 21(c)(i) or otherwise, Landlord may recover from Tenant the
following:
(a) The worth at the time of award of any unpaid rent which
has been earned at the time of such termination; plus
(b) The worth at the time of award of the amount by which the
unpaid rent that would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(c) The worth at the time of award of the amount by which the
unpaid rent for the balance of the Term or Term Extension (as the case may be)
after the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; plus
(d) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom, specifically including, but not limited to, brokerage
commissions and advertising expenses incurred and the expenses of remodeling the
Premises or any portion thereof for a new tenant, whether for the same or a
different use, and any special concessions made to obtain a new tenant; and
(e) At Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by applicable
law.
The term "RENT" as used in this Section shall be deemed to be and to mean all
sums of every nature required to be paid by Tenant pursuant to the terms of this
Lease, whether to Landlord or to others. As used in Sections 21(c)(ii)(A) and
(B), above, the "WORTH AT THE TIME OF AWARD" shall be computed by allowing
interest at the Default Rate. As used in Section 21(c)(ii)(C)
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 25
above, the "WORTH AT THE TIME OF AWARD" shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus 1.00%.
(iii) Landlord may continue this Lease in effect after Tenant's
Default and recover rent as it becomes due. Accordingly, if Landlord does not
elect to terminate this Lease following a Default by Tenant, Landlord may, from
time to time, without terminating this Lease, enforce all of its rights and
remedies hereunder, including the right to recover all Rent as it becomes due.
(iv) Whether or not Landlord elects to terminate this Lease
following a Default by Tenant, Landlord shall have the right to terminate any
and all subleases, licenses, concessions or other consensual arrangements for
possession entered into by Tenant and affecting the Premises or may, in
Landlord's sole and absolute discretion, succeed to Tenant's interest in such
subleases, licenses, concessions or arrangements. Upon Landlord's election to
succeed to Tenant's interest in any such subleases, licenses, concessions or
arrangements, Tenant shall, as of the date of Notice by Landlord of such
election, have no further right to or interest in the rent or other
consideration receivable thereunder.
(d) EFFECT OF EXERCISE. Exercise by Landlord of any remedies hereunder
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises and/or a termination of this Lease by Landlord, it being understood
that such surrender and/or termination can be effected only by the express
written agreement of Landlord and Tenant. Any law, usage, or custom to the
contrary notwithstanding, Landlord shall have the right at all times to enforce
the provisions of this Lease in strict accordance with the terms hereof; and the
failure of Landlord at any time to enforce its rights under this Lease strictly
in accordance with same shall not be construed as having created a custom in any
way or manner contrary to the specific terms, provisions, and covenants of this
Lease or as having modified the same and shall not be deemed a waiver of
Landlord's right to enforce one or more of its rights in connection with any
subsequent default. A receipt by Landlord of Rent or other payment with
knowledge of the breach of any covenant hereof shall not be deemed a waiver of
such breach, and no waiver by Landlord of any provision of this Lease shall be
deemed to have been made unless expressed in writing and signed by Landlord. To
the greatest extent permitted by law, Tenant waives the service of notice of
Landlord's intention to re-enter, re-take or otherwise obtain possession of the
premises as provided in any statute, or to institute legal proceedings to that
end, and also waives all right of redemption in case Tenant shall be
dispossessed by a judgment or by warrant of any court or judge. Any reletting of
the Premises or any portion thereof shall be on such terms and conditions as
Landlord in its sole and absolute discretion may determine. Landlord shall not
be liable, nor shall Tenant's obligations hereunder be diminished because of,
Landlord's failure to relet the Premises or collect rent due in respect of such
reletting or otherwise to mitigate any damages arising by reason of Tenant's
Default.
22. ASSIGNMENT AND SUBLETTING.
(a) GENERAL PROHIBITION. Without Landlord's prior written consent,
Tenant shall not, directly or indirectly, voluntarily or by operation of law,
assign this Lease or sublease the Premises or any part thereof or mortgage,
pledge, or hypothecate its leasehold interest or grant any concession or license
within the Premises and any attempt to do any of the foregoing shall be void and
of no effect. For purposes of this Section, a transfer of ownership interests
controlling Tenant shall be deemed an assignment of this Lease unless such
ownership interests are publicly traded.
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 26
(b) PERMITTED TRANSFERS. If Tenant desires to assign, sublease,
hypothecate or otherwise transfer this Lease or sublet the Premises (generally,
a "TRANSFER"), then at least 15 business days, but not more than 30 business
days, before the date Tenant desires the Transfer to be effective (the
"ASSIGNMENT DATE"), Tenant shall give Landlord a Notice (the "ASSIGNMENT
NOTICE") containing such information about the proposed transferee, including
the proposed use of the Premises and any Hazardous Materials proposed to be used
or stored in the Premises, the Assignment Date, any relationship between Tenant
and the proposed transferee, and all material terms and conditions of the
proposed Transfer, and such other information as Landlord may deem reasonably
necessary or appropriate to its consideration whether to grant its consent.
Landlord may, by giving Notice to Tenant within 15 business days after receipt
of the Assignment Notice: (i) grant or refuse such consent, in its sole and
absolute discretion, with respect to any Transfer other than a straightforward
sublease of not more than 3,000 square feet of the Premises (a "MINOR
SUBLEASE"), or grant or refuse such consent, in its reasonable discretion, with
respect to such a Minor Sublease, or (ii) terminate this Lease with respect to
the space described in the Assignment Notice, as of the Assignment Date (an
"ASSIGNMENT TERMINATION"). If Landlord elects an Assignment Termination, Tenant
shall have the right to withdraw its Assignment Notice by Notice to Landlord of
such election within 5 days after Landlord's Notice electing to exercise the
Assignment Termination. If Tenant withdraws such Assignment Notice, this Lease
shall continue in full force and effect. If Tenant does not withdraw such
Assignment Notice, this Lease, and the term and estate herein granted, shall
terminate as of the Assignment Date with respect to the space described in such
Assignment Notice. No failure of Landlord to exercise any such option to
terminate this Lease shall be deemed to be Landlord's consent to the proposed
Transfer. Tenant shall reimburse Landlord for all reasonable out-of-pocket
expenses, up to a maximum of $1,000.00, incurred by Landlord in connection with
its consideration of any Assignment Notice.
(c) ADDITIONAL CONDITIONS. As a condition to any such Transfer,
Landlord may require:
(i) that any transferee agree, in writing at the time of such
Transfer, that if Landlord gives such third party notice that Tenant is in
default under this Lease, such third party shall thereafter make all payments
otherwise due Tenant directly to Landlord, which payments will be received by
Landlord without any liability except to credit such payment against those due
under this Lease, and any such third party shall agree to attorn to Landlord or
its successors and assigns should this Lease be terminated for any reason;
provided, however, in no event shall Landlord or its successors or assigns be
obligated to accept such attornment; and
(ii) A list of Hazardous Materials, certified by the proposed
transferee to be true and correct, which the proposed transferee intends to use
or store in the Premises together with the "DOCUMENTS" (as defined in Section
30(b) below) with respect to such proposed transferee.
(d) NO RELEASE OF TENANT. Notwithstanding any Transfer, Tenant and any
guarantor or surety of Tenant's obligations under this Lease shall at all times
remain fully and primarily responsible and liable for the payment of Rent and
for compliance with all of Tenant's other obligations under this Lease. If the
Rent due and payable by a transferee (or a combination of the rental payable
under such Transfer plus any bonus or other consideration therefor or incident
thereto) exceeds the rental payable under this Lease, then Tenant shall be bound
and obligated to pay Landlord as Additional Rent hereunder all such excess
rental and other excess consideration within 10 days following receipt thereof
by Tenant. If Tenant shall
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 27
sublet the Premises or any part thereof, Tenant hereby immediately and
irrevocably assigns to Landlord, as security for Tenant's obligations under this
Lease, all rent from any such subletting and Landlord, as assignee, or a
receiver for Tenant appointed on Landlord's application, may collect such rent
and apply it toward Tenant's obligations under this Lease; except that, until
the occurrence of a Default, Tenant shall have the right to collect such rent.
(e) NO WAIVER. The consent by Landlord to a Transfer shall not relieve
Tenant or any transferee from obtaining the consent of Landlord to any further
Transfer nor shall it release Tenant or any transferee from full and primary
liability under the Lease. The acceptance of Rent hereunder, or the acceptance
of performance of any other term, covenant, or condition thereof, from any other
person or entity shall not be deemed to be a waiver of any of the provisions of
this Lease or a consent to any Transfer.
23. ESTOPPEL CERTIFICATE. Tenant shall within 15 business days of Notice
from Landlord, execute, acknowledge and deliver a statement in writing
substantially in the form attached to this Lease as Exhibit I with the blanks
filled in, and on any other form reasonably requested by a proposed lender or
purchaser, (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease as so modified is in full force and effect) and the dates to
which the rental and other charges are paid in advance, if any, (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed,
and (iii) setting forth such further information with respect to the status of
this Lease or the Premises as may be reasonably requested thereon. Any such
statement may be relied upon by any prospective purchaser or encumbrancer of all
or any portion of the real property of which the Premises are a part. Tenant's
failure to deliver such statement within such time shall, at the option of
Landlord, constitute a Default under this Lease, and, in any event, shall be
conclusive upon Tenant that the Lease is in full force and effect and without
modification except as may be represented by Landlord in any certificate
prepared by Landlord and delivered to Tenant for execution.
24. QUIET ENJOYMENT. If Tenant shall perform all of the covenants and
agreements herein required to be performed by Tenant, Tenant shall, at all times
during the Term and any Term Extension, have peaceful and quiet enjoyment of the
Premises and the Project against any person claiming by, through, or under
Landlord.
25. PRORATIONS. All prorations required or permitted to be made hereunder
shall be made on the basis of a 360-day year and 30-day months.
26. RULES AND REGULATIONS. Tenant shall, at all times during the Term and
any Term Extension, comply with all reasonable rules and regulations at any time
or from time to time established by Landlord covering the use of the Premises
and the Project and delivered to Tenant at least 30 days prior to their
effective date. The current rules and regulations are attached hereto as Exhibit
G. If there is any conflict between said rules and regulations and other
provisions of this Lease, the terms and provisions of this Lease shall control.
Landlord shall not have any obligation to enforce any rules or regulations
against, and shall have no liability for the breach of any rules or regulations
by, other tenants in the Project. If Landlord chooses to enforce any rules or
regulations against other tenants in the Project, Landlord shall do so in a non-
discriminatory manner.
27. SUBORDINATION. This Lease and Tenant's interest and rights hereunder are
and shall be subject and subordinate at all times to the lien of any first
mortgage, now existing or
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 28
hereafter created on or against the Project or the Premises, and all amendments,
restatements, renewals, modifications, consolidations, refinancings, assignments
and extensions thereof (collectively, a "MORTGAGE"), without the necessity of
any further instrument or act on the part of Tenant; provided, however, that so
long as there is no Default hereunder, Tenant's receipt of a fully executed
instrument containing appropriate non-disturbance provisions assuring Tenant's
quiet enjoyment of the Premises as set forth in Section 24 hereof shall be a
condition precedent to the subordination of Tenant's interest and rights
hereunder and Tenant's right to possession of the Premises shall not be
disturbed by the holder of any such Mortgage (a "HOLDER"). Tenant agrees, at the
election of any Holder, to attorn to any such Holder. Tenant agrees, upon
demand, to execute, acknowledge and deliver a Subordination, Non-Disturbance and
Attornment Agreement substantially in the form attached hereto as Exhibit J (the
"LOAN SUBORDINATION AGREEMENT") or such other instruments, confirming such
subordination and such instruments of attornment as shall be reasonably
requested by any Holder, provided any such instruments contain the appropriate
non-disturbance provisions described above. Notwithstanding the foregoing, any
Holder may at any time subordinate its Mortgage to this Lease, without Tenant's
consent, by written notice to Tenant, and thereupon this Lease shall be deemed
prior to such Mortgage without regard to their respective dates of execution,
delivery, or recording and in that event such Holder shall have the same rights
with respect to this Lease as though this Lease had been executed prior to the
execution, delivery, and recording of such Mortgage and had been assigned to
such Holder. Landlord shall use commercially reasonable efforts to obtain an
express agreement from the Holder of any Mortgage that the lien of such Mortgage
does not apply or attach to any property that, by operation of the terms of this
Lease, is deemed to be Tenant's separate property, whether or not such property
is, has been, or will become affixed to the Premises. The term "MORTGAGE"
whenever used in this Lease shall be deemed to include deeds of trust, security
assignments and any other encumbrances given for value, and any reference to the
"HOLDER" of a mortgage shall be deemed to include the beneficiary under a deed
of trust.
28. SURRENDER. Upon expiration or earlier termination of Tenant's right of
possession, Tenant, subject to the provisions of Section 42 below and to the
exercise of any remedies by Landlord, may remove Tenant's Property and shall
surrender the Premises to Landlord in substantially the same condition as
received, broom clean, ordinary wear and tear, approved Alterations, and
casualty loss and condemnation covered by Sections 18 and 19 excepted, and shall
return to Landlord all keys to offices and restrooms furnished to, or otherwise
procured by, Tenant. If any such key is lost, Tenant shall pay to Landlord, at
Landlord's election, either the cost of replacing such lost key or the cost of
changing the lock or locks opened by such lost key. Any Trade Fixtures,
Alterations, and property not so removed by Tenant as permitted or required
herein shall be deemed abandoned and may be stored, removed, and disposed of by
Landlord at Tenant's expense, and Tenant waives all claims against Landlord for
any damages resulting from Landlord's retention and/or disposition of such
property. All obligations of either party that have arisen and/or become binding
hereunder but have not been fully satisfied as of the expiration or earlier
termination of this Lease shall survive such expiration or earlier termination,
including without limitation, indemnity obligations, payment obligations
(including Rent), obligations concerning the condition and repair of the
Premises, and the obligation to obtain all required Hazardous Materials
Clearances. Without limiting the generality of the foregoing, the following
provisions shall survive the expiration or earlier termination of this Lease:
(a) the indemnity obligations contained in Sections 7, 12, 14(b), 16(a), 16(b),
30(a), 30(d), 35, and 38(b); (b) the payment obligations contained in Sections
3, 5, 6, 8, 9, 11, 15, 21(a), 21(b), 22(d), and 42; (c) the maintenance, repair,
restoration, and/or demolition obligations contained in Sections 12, 13, 18, and
42; (d) the obligation to obtain
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 29
Hazardous Materials Clearances contained in Sections 18 and 42; and (e) the
agreements contained in Sections 29, 36, and 44.
29. WAIVER OF JURY TRIAL. TENANT AND LANDLORD EACH AGREE NOT TO ELECT A
TRIAL BY JURY, AND WAIVE ANY RIGHT TO A TRIAL BY JURY OR TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER
INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS RELATED HERETO. THIS WAIVER IS GIVEN KNOWINGLY AND
VOLUNTARILY, AND IS INTENDED TO ENCOMPASS EACH INSTANCE AND EACH ISSUE AS TO
WHICH THE RIGHT TO TRIAL BY JURY OTHERWISE WOULD ACCRUE. TENANT AND LANDLORD
EACH AGREE THAT THIS PROVISION CONSTITUTES A WRITTEN CONSENT TO WAIVER OF TRIAL
BY JURY, AND EACH PARTY AUTHORIZES THE OTHER PARTY TO FILE A COPY OF THIS
PROVISION, IN ANY PROCEEDING, AS CONCLUSIVE EVIDENCE OF THIS CONSENT TO WAIVER.
30. ENVIRONMENTAL REQUIREMENTS.
(a) PROHIBITION/COMPLIANCE. Landlord has provided Tenant with copies of
all environmental tests, reports, inspections, surveys, samples, studies, and
other analyses of the Site and of the approximately 4.916 acres of land adjacent
to the Site (more fully described in Exhibit A-2 (the "ADDITIONAL SITE")) that
are in Landlord's possession or control or that Landlord, through the exercise
of commercially reasonable efforts, has been able to obtain from various
Governmental Authorities having jurisdiction over "HAZARDOUS MATERIALS" (as
hereinafter defined) that may be present at the Site or the Additional Site
(collectively, the "ENVIRONMENTAL INFORMATION") A list of the documents
containing the Environmental Information is attached hereto as Exhibit L.
Landlord shall not be responsible, and Tenant hereby waives any right to assert
any claim against Landlord, for any Pre-Existing Contamination. In addition to
the forgoing, Tenant shall not cause or permit any Hazardous Materials to be
brought upon, kept, or used in or about the Premises, the Project, or the Site
in violation of applicable law. If Tenant breaches the obligation stated in the
preceding sentence, if the presence of Hazardous Materials permitted by Tenant
results in contamination of the Premises, the Project, the Site, or any adjacent
property (including the Additional Site), or if any contamination of the
Premises, Project, Site, or any adjacent property (including the Additional
Site) that is not expressly identified in the Environmental Information
("PREVIOUSLY UNKNOWN CONTAMINATION") is discovered during the Term or any Term
Extension or renewal hereof or holding over hereunder and Tenant cannot
demonstrate that such Previously Unknown Contamination was present at the Site
before the Effective Date or is attributable solely to the actions or omissions
of a person or entity other than Tenant, Tenant shall indemnify, defend, and
hold Landlord, its officers, directors, employees, agents and contractors
harmless from any and all claims, judgments, damages, penalties, fines, costs,
liabilities, or losses (including, without limitation, diminution in value of
the Premises or any portion of the Project, damages for the loss or restriction
on use of rentable or usable space or of any amenity of the Premises or the
Project, damages arising from any adverse impact on marketing of space in the
Premises or the Project, increase in the cost of designing, constructing, or
permitting any additional improvements within the Project, and sums paid in
settlement of claims and Legal Fees) that arise before or after the expiration
or earlier termination of this Lease as a result of such contamination. This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup,
remedial, removal, or restoration work required by any Governmental Authority
because of Hazardous
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 30
Materials present in the air, soil, or ground water above, on, or under the
Premises, the Project, the Site, or any adjacent property (including the
Additional Site). Without limiting the foregoing, if the presence of any
Hazardous Materials within the Premises, the Project, the Site, or any adjacent
property (including the Additional Site) caused or permitted by Tenant results
in any contamination of the Premises, the Project, the Site, or any adjacent
property (including the Additional Site), Tenant shall promptly take all actions
at its sole expense as are necessary to return the Premises, the Project, the
Site, or any adjacent property (including the Additional Site) to the condition
existing prior to the time of such contamination, provided that Landlord's
approval of such action shall first be obtained, which approval shall not
unreasonably be withheld so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Premises, the Project, or
the Site.
(b) BUSINESS. Landlord acknowledges that it is not the intent of this
Section to prohibit Tenant from operating its business as described in Section 7
above. Tenant may operate its business according to the custom of the industry
so long as the use or presence of Hazardous Materials is strictly and properly
monitored according to all applicable governmental requirements. A list
identifying each type of Hazardous Materials that Tenant currently anticipates
will be present on the Premises, the Project, or the Site and setting forth any
and all governmental approvals or permits required in connection with the
presence of such Hazardous Materials on the Premises, the Project, or the Site
("HAZARDOUS MATERIALS LIST") is attached hereto as Exhibit M. As a material
inducement to Landlord to allow Tenant to use Hazardous Materials in connection
with its business, Tenant agrees to deliver to Landlord an updated Hazardous
Materials List no more than 30 days prior to the Commencement Date. Tenant shall
deliver to Landlord an updated Hazardous Materials List at least once a year and
shall also deliver an updated list before any new Hazardous Materials are
brought onto the Premises, the Project, or the Site. Tenant shall deliver to
Landlord true and correct copies of the following documents (the "DOCUMENTS")
relating to the handling, storage, disposal, and emission of Hazardous Materials
prior to the Commencement Date, or if unavailable at that time, concurrent with
the receipt from or submission to a Governmental Authority: permits; approvals;
reports, and correspondence; storage and management plans, notice of violations
of any laws; plans relating to the installation of any storage tanks to be
installed in or under the Premises, the Project, or the Site (provided said
installation of tanks shall only be permitted after Landlord has given Tenant
its written consent to do so, which consent may be withheld in Landlord's sole
and absolute discretion); and all closure plans or any other documents required
by any and all Governmental Authorities for any storage tanks installed in, on,
or under the Premises, the Project, or the Site for the closure of any such
tanks. Tenant is not required, however, to provide Landlord with any portion(s)
of the Documents containing information of a proprietary nature that, in and of
themselves, do not contain a reference to any Hazardous Materials or hazardous
activities, it being understood and agreed that it is not the intent of this
Section to provide Landlord with information that could be detrimental to
Tenant's business should such information become possessed by Tenant's
competitors. Accordingly, Landlord, except as may be provided otherwise herein
or required by law, shall (i) keep confidential the information contained in the
Documents, and (ii) disclose such information only to Landlord's officers,
directors, employees, or consultants with a need to know in connection with
Landlord's management of the Project, provided that Landlord shall inform all
non-affiliated recipients of such information of the confidentiality requirement
and (to the extent within Landlord's control) cause such confidence to be
maintained; provided, however, that disclosure of such information by Landlord
shall not be prohibited if that disclosure is of information that is a matter of
public record or public knowledge or was obtained by Landlord from sources other
than Tenant. Tenant agrees that it shall, at its own expense, and upon the
written request of Landlord, establish and maintain a separate area of the
Premises classified under the North Carolina
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 31
State Building Code (as adopted by the City of Durham) as an "H" occupancy area
(i.e., the classification denoting a hazardous materials occupancy area) for the
use and storage of Hazardous Materials.
(c) TERMINATION OF LEASE. Notwithstanding the provisions of Section 30(a)
above, if (i) Tenant or any proposed transferee of Tenant has been required by
any prior landlord, lender, or Governmental Authority to take remedial action in
connection with Hazardous Materials contaminating a property if the
contamination resulted from such party's action or use of the property in
question, or (ii) Tenant or any proposed transferee of Tenant is adjudicated
guilty or responsible under an enforcement order issued by any Governmental
Authority in connection with the use, disposal, or storage of a Hazardous
Materials, Landlord shall have the right to terminate this Lease in Landlord's
sole and absolute discretion (with respect to any such matter involving Tenant)
and it shall not be unreasonable for Landlord to withhold its consent to any
proposed Transfer (with respect to any such matter involving a proposed
transferee).
(d) TESTING. Landlord shall have the right to conduct annual tests of the
Premises (each, an "ANNUAL TEST" and collectively, "ANNUAL TESTS") to determine
whether any contamination has occurred as a result of Tenant's use. Tenant shall
be required to pay up to $2,000.00 of the cost of each such Annual Test;
provided, however, if Tenant conducts its own tests of the Premises using third
party contractors and test procedures acceptable to Landlord, which tests are
certified to Landlord, Landlord shall accept such tests in lieu of the Annual
Tests to be paid for by Tenant. In addition, at any time, and from time to time,
prior to the expiration or earlier termination of this Lease, Landlord shall
have the right to conduct additional appropriate tests of the Premises, the
Project, and the Site to determine whether contamination has occurred as a
result of Tenant's use of the Premises, the Project, or the Site. If
contamination has occurred for which Tenant is liable under this Section, Tenant
shall pay all costs to conduct such tests. If no such contamination is found,
Landlord shall pay the costs of such tests (which shall not constitute an
Operating Expense). Landlord shall provide Tenant with a copy of all reports and
tests of the Premises made by or on behalf of Landlord. Tenant shall be solely
responsible for and shall defend, indemnify, and hold Landlord and its agents
and contractors harmless from and against any and all claims, costs and
liabilities (including actual Legal Fees) arising out of or in connection with
any removal, clean up, restoration and materials required hereunder to return
the Premises, the Project, the Site, and any other property of whatever nature
to their condition existing prior to the time of any such contamination.
Landlord's receipt of or satisfaction with any environmental assessment in no
way waives any rights that Landlord holds against Tenant.
(e) UNDERGROUND TANKS. If underground or other storage tanks storing
Hazardous Materials are located on the Premises, the Project, or the Site or are
hereafter placed on the Premises, the Project, or the Site by any party at
Tenant's request, Tenant shall monitor the storage tanks, maintain appropriate
records, implement reporting procedures, properly close any underground storage
tanks, and take or cause to be taken all other steps necessary or required under
applicable state and federal law, as such now exists or may hereafter be adopted
or amended.
(f) TENANT'S OBLIGATIONS. Each party's obligations under this Section shall
survive the expiration or earlier termination of the Lease. During any period of
time after the expiration or earlier termination of this Lease required by
Tenant or Landlord to complete the removal from the Premises of any Hazardous
Materials and the release and termination of any
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 32
licenses or permits restricting the use of the Premises, Tenant shall continue
to pay the full Rent in accordance with this Lease, which Rent shall be prorated
daily.
(g) DEFINITION OF "HAZARDOUS MATERIALS". As used herein, the term
"HAZARDOUS MATERIALS" means any hazardous or toxic substance, material or waste
that is or becomes regulated by any Governmental Authority and includes, without
limitation, any material or substance that is (i) petroleum, (ii) asbestos,
(iii) designated as a "hazardous substance" pursuant to Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. Section 1317), (iv) defined as a
"hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903), (v)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601
et seq. (42 U.S.C. Section 9601), (vi) defined as "hazardous waste, "extremely
hazardous waste" or "restricted hazardous waste" under any applicable state law,
or (vii) defined as a "hazardous material" or "hazardous substance" under any
applicable state law.
31. TENANT'S REMEDIES/LIMITATION OF LIABILITY. Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after Notice from Tenant specifying such failure
(unless such performance will, due to the nature of the obligation, reasonably
require a period of time in excess of 30 days, then after such period of time as
is reasonably necessary). Upon any default by Landlord, Tenant shall give
notice by registered or certified mail to Ground Lessor and to any Holder of a
Mortgage covering the Premises or the Project and Tenant shall offer all such
persons a reasonable opportunity to cure the default, including time to obtain
possession of the Premises or the Project by power of sale or a judicial action
if such should prove necessary to effect a cure; provided Landlord shall have
furnished to Tenant in writing the names and addresses of all such persons who
are to receive such notices. All obligations of Landlord hereunder shall be
construed as covenants, not conditions; and, except as may be otherwise
expressly provided in this Lease, Tenant may not terminate this Lease for breach
of Landlord's obligations hereunder. All obligations of Landlord under this
Lease will be binding upon Landlord only during the period of its ownership of
the ground lessee's interest under the Ground Lease and not thereafter. The
term "LANDLORD" in this Lease shall mean only the owner, for the time being, of
the ground lessee's interest under the Ground Lease, and upon the transfer by
such owner of such ground lessee's interest under the Ground Lease, such owner
shall thereupon be released and discharged from all obligations of Landlord
thereafter accruing, but such obligations shall be binding during the Term and
any Term Extension upon each new owner for the duration of such owner's
ownership. Any liability of Landlord under this Lease shall be limited solely
to its interest in the Project, and in no event shall any personal liability be
asserted against Landlord in connection with this Lease nor shall any recourse
be had to any other property or assets of Landlord or any of Landlord's
officers, employees, agents, or contractors. Under no circumstances shall
Landlord or any of Landlord's officers, employees, agents or contractors be
liable for injury to Tenant's business or for any loss of income or profit
therefrom.
32. INSPECTION AND ACCESS. During business hours on not less than 48 hours
advance Notice (except in the case of emergencies in which case no such Notice
shall be required and such entry may be at any time), Landlord and its agents,
representatives, and contractors may enter the Premises at any reasonable time
to inspect the Premises and to make such repairs as may be required or permitted
pursuant to this Lease and for any other business purpose, including, without
limitation, for the purpose of showing the Premises to prospective purchasers
and, during the last year of the Term or any Term Extension (as the case may
be), to prospective tenants, and Landlord may erect a suitable sign on the
Premises
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 33
stating the Premises are available to let or that the Project is available for
sale. Landlord shall use commercially reasonable efforts to minimize any loss,
injury, inconvenience to or interference with Tenant's business, or loss of
occupancy or quiet enjoyment of the Premises occasioned by Landlord entering the
Premises pursuant to this Section. Landlord also may grant easements, make
public dedications, designate common areas and create restrictions on or about
the Premises, provided, however, that no sign or easement, dedication,
designation, or restriction materially adversely interferes with Tenant's use or
occupancy of the Premises. At Landlord's request, Tenant shall execute such
instruments as may be necessary for such easements, dedications, or
restrictions.
33. SECURITY. Tenant acknowledges and agrees that security devices and
services, if any, while intended to deter crime may not in given instances
prevent theft or other criminal acts and that Landlord is not providing any
security services with respect to the Premises. Tenant agrees that Landlord
shall not be liable to Tenant for, and Tenant waives any claim against Landlord
with respect to, any loss by theft or any other damage suffered or incurred by
Tenant in connection with any unauthorized entry into the Premises or any other
breach of security with respect to the Premises. Tenant shall be solely
responsible for the personal safety of Tenant's officers, employees, agents,
contractors, guests and invitees while any such person is in, on or about the
Premises and/or the Project. Tenant shall at Tenant's cost obtain insurance
coverage to the extent Tenant desires protection against such criminal acts.
34. FORCE MAJEURE. Except for the payment of Rent, neither party shall be
held responsible for delays in the performance of its obligations hereunder when
caused by strikes, lockouts, labor disputes, acts of God, inability to obtain
labor or materials or reasonable substitutes therefor, governmental
restrictions, governmental regulations, governmental controls, delay in issuance
of permits, enemy or hostile governmental action, civil commotion, fire or other
casualty, and other causes beyond the reasonable control of Landlord ("FORCE
MAJEURE").
35. BROKERS; ENTIRE AGREEMENT; AMENDMENT. Landlord and Tenant each represent
and warrant that it has not dealt with any broker, agent, or other person
(collectively, "BROKER") in connection with this transaction and that no Broker
brought about this transaction, other than Tenant's Broker (it being understood
and agreed, however, that no commission or other form of compensation is due or
payable to Tenant's Broker with regard to this leasing transaction). Landlord
and Tenant each hereby agree to indemnify and hold the other harmless from and
against any claims by any other Broker claiming a commission or other form of
compensation by virtue of having dealt with Tenant or Landlord, as applicable,
with regard to this leasing transaction. This Lease constitutes the complete
agreement of Landlord and Tenant with respect to the subject matter hereof. No
representations, inducements, promises or agreements, oral or written, have been
made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant,
including any Brokers representing either Landlord or Tenant, that are not
contained herein, and any prior agreements, promises, negotiations, or
representations are superseded by this Lease. Tenant represents and warrants
that no broker or agent has made any representation or warranty relied upon by
Tenant in Tenant's decision to enter into this Lease. Landlord in executing this
Lease does so in reliance upon Tenant's representations and warranties contained
herein. This Lease may not be amended except by an instrument in writing signed
by both parties hereto.
36. LIMITATION ON LANDLORD'S LIABILITY. NOTWITHSTANDING ANYTHING SET FORTH
HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY:
(A) LANDLORD SHALL NOT BE LIABLE TO TENANT OR ANY OTHER
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 34
PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS,
DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL TO: TENANT'S PERSONAL PROPERTY
OF EVERY KIND AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES,
EQUIPMENT, INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY
ANIMALS, PRODUCT, SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING
AND OTHER RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE PREMISES AND ANY AND
ALL INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL
RECOURSE TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR
ARISING IN ANY WAY UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND
TENANT WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITY OF LANDLORD
HEREUNDER SHALL BE STRICTLY LIMITED TO LANDLORD'S INTEREST IN THE PROPERTY OF
WHICH THE PREMISES ARE A PART.
37. SEVERABILITY. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease shall
not be affected thereby. It is also the intention of the parties to this Lease
that in lieu of each clause or provision of this Lease that is illegal, invalid
or unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.
38. GROUND LEASE.
(a) Tenant acknowledges that the Premises, the Project, and this Lease
are and shall remain subject and subordinate to the Ground Lease and the
Development Rights Agreement and to the rights of Ground Lessor thereunder, and
to all amendments, restatements, renewals, modifications, assignments, and
extensions thereof, without the necessity of any further instrument or act on
the part of Tenant; provided, however, that so long as there is no Default
hereunder, Tenant's receipt from Ground Lessor (or any successor or assignee
thereof, as appropriate) of a fully executed instrument containing appropriate
non-disturbance provisions assuring Tenant's quiet enjoyment of the Premises as
set forth in Section 24 hereof shall be a condition precedent to the
subordination of Tenant's interest and rights hereunder and Tenant's interest
and rights hereunder shall not be disturbed by Ground Lessor. Tenant agrees, at
the election of Ground Lessor, to attorn to Ground Lessor. Unless Ground Lessor
and Tenant mutually agree upon and execute and deliver a different form of
Subordination, Non-Disturbance and Attornment Agreement, Tenant shall, upon
demand, execute, acknowledge, and deliver a Subordination, Non-Disturbance and
Attornment Agreement substantially in the form attached hereto as Exhibit K (the
"LEASE SUBORDINATION AGREEMENT") or such other instruments, confirming such
subordination and instruments of attornment as shall be reasonably requested by
Ground Lessor, provided any such instruments contain the appropriate non-
disturbance provisions described above. Tenant acknowledges that, among other
things, notwithstanding the terms of this Lease, (i) the final design and
aesthetic of the Premises and the Project, (ii) any Transfer, and (iii) any
financing to be secured by Tenant's interest in this Lease, may be subject to
the requirements of the Ground Lease and/or the Development Rights Agreement
and/or to the approval of Ground Lessor.
(b) Tenant shall be responsible for, and hereby covenants to satisfy in
a timely fashion, any and all obligations, covenants, responsibilities, and/or
indemnities binding on Landlord as holder of the ground lessee's interest under
the Ground Lease or as a party to the Development Rights Agreement
(collectively, the "GROUND LEASE OBLIGATIONS"), including,
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Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 35
without limitation, the payment or reimbursement of all expenses to be paid or
reimbursed by Landlord under the Ground Lease (but excluding the payment of the
annual rent provided for in the Ground Lease (which shall be governed by the
terms and conditions of the Office / Lab Lease)), the payment of the rent
provided for in the Development Agreement, and the payment or reimbursement of
all expenses to be paid or reimbursed by Landlord under the Development Rights
Agreement; provided, however, that the terms and conditions of this Lease shall
control to the extent the responsibility for satisfying any Ground Lease
Obligation is expressly conferred on Landlord and/or allocated between Landlord
and Tenant herein. For illustration purposes only, Sections 13 and 14 hereof
allocate between Landlord and Tenant all maintenance and repair obligations with
respect to the Premises and the Project and, therefore, such provisions control.
If Tenant fails to satisfy, in a timely fashion, any of the Ground Lease
Obligations in the manner required hereunder, Landlord shall have the right (but
not the obligation) to satisfy the same, and any cost incurred by Landlord in
doing so shall be payable to Landlord on demand as Additional Rent or includable
by Landlord as an Operating Expense. Further, Tenant shall indemnify, defend,
hold, and save Landlord harmless from and against any and all Claims arising out
of or in connection with any such failure by Tenant. Conversely, if Tenant gives
Landlord Notice requesting Landlord to take affirmative action to enforce any of
Landlord's rights as ground lessee under the Ground Lease or as a party to the
Development Rights Agreement or to enforce any obligation, covenant,
responsibility, and/or indemnity of Ground Lessor under the Ground Lease and/or
the Development Rights Agreement (collectively, the "GROUND LEASE RIGHTS") and
Landlord elects not to do so, Tenant shall have the right, at Tenant's sole cost
and expense, to take affirmative action to enforce any such Ground Lease Rights,
and for such purpose Landlord, effective as of Landlord's election not to take
affirmative action, appoints Tenant attorney-in-fact for Landlord (such power of
attorney being coupled with an interest); provided, however, that,
notwithstanding the foregoing, the exercise of any Ground Lease Rights that
relate to Hazardous Materials (as provided in Section 30(a) hereof) shall be
subject to compliance with Section 3 of the Cost Sharing Agreement. Tenant shall
indemnify, defend, hold, and save Landlord harmless from and against any and all
Claims arising out of or in connection with any affirmative action taken by
Tenant to enforce any Ground Lease Rights. Tenant's rights and obligations under
this Section shall terminate and be of no further force or effect as of the
expiration or earlier termination of this Lease, provided that all obligations
that have arisen and/or become binding hereunder but have not been fully
satisfied as of the expiration or earlier termination of this Lease shall
survive such expiration or earlier termination.
(c) Pursuant to the Development Rights Agreement, Ground Lessor is
allocating to the Site the additional "DEVELOPMENT RIGHTS" (as defined in the
Development Rights Agreement) necessary to permit the Greenhouse to be
significantly larger than originally planned (as expressly desired by Tenant).
Tenant acknowledges that Tenant has been expressly named in the Development
Rights Agreement as an "intended third party beneficiary" entitled to enforce
Landlord's remedies against Ground Lessor in the event of a default by Ground
Lessor under the Development Rights Agreement. If, at any time prior to the
expiration or earlier termination of this Lease, there shall be insufficient
Development Rights to permit either the Premises or the Office / Lab to remain,
or to be restored to, the size and configuration contemplated in this Lease (a
"DEVELOPMENT RIGHTS DEFICIENCY"), Tenant's sole and exclusive remedy at law, in
equity, or otherwise shall be to pursue Ground Lessor under the Development
Rights Agreement or at law or in equity, except to the extent, and only to the
extent, that the Development Rights Deficiency is attributable to the gross
negligence or willful misconduct of Landlord (a "LANDLORD CAUSED DEVELOPMENT
RIGHTS DEFICIENCY"). Tenant hereby expressly, absolutely, unconditionally, and
irrevocably waives and relinquishes any right Tenant may now have or may
hereafter acquire to initiate, institute, maintain, or prosecute any action or
proceeding against Landlord for any claims, sums of money, compensation,
damages, costs,
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 36
losses, or expenses, of any type, kind, nature, description, or character, that
in any way arise out of, are connected with, or relate to any Development Rights
Deficiency other than a Landlord Caused Development Rights Deficiency.
39. SIGNS; EXTERIOR APPEARANCE. Tenant shall not, without the prior written
consent of Landlord, which shall not be unreasonably withheld or delayed: (i)
attach any awnings, exterior lights, decorations, balloons, flags, pennants,
banners, painting, or other projection to any outside wall of any part of the
Premises or the Project, (ii) store any equipment, furniture, or other items of
personal property on any exterior balcony, or (iii) paint, affix, or exhibit on
any part of the Premises or the Project any signs, notices, window or door
lettering, placards, decorations, or advertising media of any type that can be
viewed from the exterior of the Premises. Interior signs on doors shall be
inscribed, painted or affixed for Tenant by Landlord at the sole cost and
expense of Tenant, and shall be of a size, color and type acceptable to
Landlord. Nothing may be placed on the exterior of corridor walls or corridor
doors other than Landlord's standard lettering. Notwithstanding the foregoing,
Landlord hereby reserves the right to install a sign or placard (of up to 2 feet
by 2 feet) that can be viewed from the exterior of the Premises and that
identifies the Project as an asset of Alexander Real Estate Equities, Inc.
40. [INTENTIONALLY OMITTED]
41. RIGHT TO EXTEND TERM. Tenant shall have the right to extend the Term
upon the following terms and conditions:
(a) EXTENSION RIGHTS. Tenant shall have 2 consecutive rights (each, an
"EXTENSION RIGHT") to extend the term of this Lease for 5 years each (each, a
"TERM EXTENSION") on the same terms and conditions as this Lease by giving
Notice to Landlord of Tenant's election to exercise each Extension Right at
least 12 months prior to the expiration of the Term or the expiration of any
prior Term Extension. During any Term Extension, no Base Rent and no Improvement
Rent shall be payable; all other Rent shall remain payable on the same terms and
conditions as this Lease.
(b) RIGHTS PERSONAL. The Extension Rights are personal to Tenant and
are not assignable separate and apart from this Lease, except that they may be
assigned in connection with any Approved Transfer, as defined in Section 22 of
this Lease.
(c) EXCEPTIONS. Notwithstanding anything set forth above to the
contrary, Extension Rights shall not be in effect and Tenant may not exercise
any of the Extension Rights:
(i) during any period of time that Tenant is in Default under any
provision of this Lease;
(ii) if Tenant has been in Default under any provision of this
Lease 3 or more times, whether or not the Defaults are cured, during the 12
consecutive month period immediately prior to the date that Tenant intends to
exercise an Extension Right, whether or not the Defaults are cured; or
(iii) if Tenant no longer has the right to use or occupy, or if
Tenant is no longer actually using or occupying, the Office / Lab pursuant to
the terms and conditions of the Office / Lab Lease, or if Tenant has not
exercised any extension rights under the
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 37
Office / Lab Lease that are necessary to make the Office / Lab Lease expire at
the same time as this Lease expires.
(d) NO EXTENSIONS. The period of time within which any Extension Rights
may be exercised shall not be extended or enlarged by reason of the Tenant's
inability to exercise the Expansion Rights.
(e) TERMINATION. Landlord, in Landlord's sole and absolute discretion,
may terminate the Extension Rights, even after Tenant's due and timely exercise
of an Extension Right, if, after such exercise, but prior to the commencement
date of an Term Extension, (i) Tenant fails to timely cure any Default by Tenant
under this Lease; or (ii) Tenant has Defaulted 3 or more times during the period
from the date of the exercise of an Extension Right to the date of the
commencement of the Term Extension, whether or not such Defaults are cured.
42. DEMOLITION UPON SURRENDER.
(a) Notwithstanding any other provisions of this Lease to the contrary
(including, but not limited to, Section 28 and the last paragraph of Section
12), Landlord may elect to cause Tenant to demolish completely the Greenhouse
and all Improvements, Alterations, and Installations, and to restore any damage
to the Site caused by or occasioned as a result of such demolition, upon the
expiration or earlier termination of this Lease. Landlord may make such election
by giving Notice to Tenant of such election: (i) within 5 days after any early
termination of this Lease, or (ii) no later than 90 days prior to the scheduled
expiration of this Lease. If Landlord so elects, Tenant shall cause such
demolition and restoration to be performed within 120 days after the expiration
or earlier termination of this Lease, subject to Force Majeure Delays and delays
needed to obtain any Hazardous Materials Clearances required to perform such
demolition and restoration. Without in any way limiting the generality of the
foregoing, (x) during the demolition, Tenant, on a daily basis, shall cause the
Site and any adjacent property (including the Additional Site) to be cleaned so
that they are free from any accumulation of waste materials, trash, rubbish, or
other debris, (y) at all times, Tenant shall ensure that no burning of waste
materials, trash, or rubbish occurs on the Site or any adjacent property
(including the Additional Site), that no dirt, dust, or other by-product of the
demolition creates a public nuisance, and that all demolition work is performed
in compliance with all applicable Legal Requirements, and (z) upon completion of
the demolition, Tenant shall cause to be removed from the Site and any adjacent
property (including the Additional Site) all waste materials, trash, rubbish,
tools, equipment, machinery, and other debris. Tenant also shall ensure that all
demolition and restoration work is performed by duly licensed, insured, and
bonded contractors. If the demolition and/or restoration is not performed within
the required 120 days, Tenant shall pay Rent to Landlord for the additional time
used (as provided herein) as if Tenant otherwise occupied the Premises during
such period. Tenant's obligations under this Section shall be referred to
collectively as the "DEMOLITION OBLIGATIONS".
(b) Tenant shall deposit with Landlord on the Commencement Date
security for the performance of all of Tenant's Demolition Obligations (the
"DEMOLITION DEPOSIT") in an amount equal to $600,000.00. At least one-sixth of
the Demolition Deposit shall be in cash and up to five-sixths of the Demolition
Deposit may be in the form of a Letter of Credit; provided, however, that the
entire Demolition Deposit may be in the form of a Letter of Credit at any time
after Tenant completes an initial public offering of Tenant's capital shares.
Landlord shall hold the cash portion of the Demolition Deposit in an interest
bearing account (which may contain Landlord's own funds), with any interest
accruing on such cash portion being for Tenant's
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 38
benefit. Any Letter of Credit that constitutes a portion of the Demolition
Deposit shall satisfy all of the requirements set forth in clauses (i) through
(vi) of Section 6(a) above.
(c) Landlord shall hold the Demolition Deposit as security for the
performance of Tenant's Demolition Obligations. The Demolition Deposit is not an
advance rental deposit or a measure of Landlord's damages in case of Tenant's
failure or refusal to perform any of its Demolition Obligations. At any time
that Landlord reasonably believes that Tenant has failed or refused to perform
any of its Demolition Obligations, Landlord may use all or any part of the
Demolition Deposit (including accrued interest, if any) to pay or perform any of
Tenant's Demolition Obligations or to compensate Landlord for any loss or damage
resulting from any such failure or refusal, without prejudice to any other
remedy provided herein or provided by law. Upon bankruptcy or other debtor-
creditor proceedings against Tenant, the Demolition Deposit shall be deemed to
be applied first to the payment of Rent and other charges due Landlord for
periods prior to the filing of such proceedings. Tenant hereby waives the
provisions of any law, now or hereafter in force, that provide that Landlord may
claim from a security deposit only those sums reasonably necessary to remedy
defaults in the payment of rent, to repair damage caused by Tenant, or to clean
the leased premises, it being agreed that Landlord may claim, in addition, those
sums reasonably necessary to compensate Landlord for any other loss or damage,
foreseeable or unforeseeable, caused by the act or omission of Tenant or any
officer, employee, agent or invitee of Tenant.
(d) If Landlord transfers its interest in the Project or this Lease,
Landlord shall either (i) transfer any balance of the Demolition Deposit then
held by Landlord (including accrued interest, if any) to a person or entity
assuming Landlord's obligations under this Section, or (ii) pay to Tenant any
balance of the Demolition Deposit then held by Landlord (including accrued
interest, if any). Upon the transfer to such transferee or the payment to
Tenant, Landlord shall have no further obligation with respect to the Demolition
Deposit, and Tenant's right to the Demolition Deposit shall apply solely against
Landlord's transferee.
(e) Landlord's obligation with respect to the Demolition Deposit is
that of a debtor, not a trustee. The Demolition Deposit shall be the property of
Landlord, but shall be paid to Tenant when Tenant's Demolition Obligations have
been completely fulfilled. If Tenant and all assignees of Tenant's interest
hereunder fully and timely perform all of the Demolition Obligations upon the
expiration or earlier termination of this Lease, Landlord shall pay to Tenant
(or, at Landlord's option, to the last assignee of Tenant's interest hereunder)
any balance of the Demolition Deposit then held by Landlord (including accrued
interest, if any) within 60 days after Landlord's acceptance of the Site after
the completion of all of the Demolition Obligations.
43. [INTENTIONALLY OMITTED]
44. MISCELLANEOUS.
(a) NOTICES. Any communication, notice, or demand of any kind
whatsoever that either party may be required or may desire to give to or serve
on the other party (a "NOTICE") shall be in writing and shall be deemed duly
given if delivered in person or sent by reputable overnight guaranty courier,
addressed to the parties at their addresses set forth in the Basic Lease
Provisions. Either party may designate from time to time a new address for
receipt of future Notices by giving the other party Notice of such new address
at least 5 days prior to the effective date of such new address.
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 39
(b) JOINT AND SEVERAL LIABILITY. If and when included within the term
"TENANT," as used in this instrument, there is more than one person, firm or
corporation, each shall be jointly and severally liable for the obligations
of Tenant.
(c) LANDLORD CONSENTS. Except as otherwise expressly provided in this
Lease or as otherwise required by law, Landlord retains the absolute right to
withhold any consent or approval. Further, regardless of any standard that may
be applicable to any consent or approval rights given to Landlord hereunder,
Landlord shall be justified in withholding, and shall not incur any liability
for so withholding, any consent or approval to any action, document, or matter
that Landlord determines, in its sole and absolute discretion, will or might
adversely affect Landlord's status as a "real estate investment trust".
(d) FINANCIAL INFORMATION. During the Term and any Term Extension,
Tenant shall provide Landlord with the following financial information or
business related reports:
(i) Unaudited quarterly financial statements within 30 days after
the end of each of Tenant's fiscal quarters;
(ii) Audited annual financial statements within 90 days after the
end of each of Tenant's fiscal years; and
(iii) Updates to Tenant's business plan no less than once every 12
months and otherwise within 30 days after the completion and/or submittal of any
such update to Tenant's board of directors.
(e) RECORDATION. This Lease shall not be recorded or filed by or on
behalf of Tenant in any public record. Notwithstanding the foregoing, upon
Tenant's request and at Tenant's sole cost and expense, Landlord shall prepare,
execute, and cause to be recorded or filed a memorandum of this Lease, which
memorandum shall contain only the following information and any other additional
information that may be required by applicable law: (i) the names of the parties
to this Lease, (ii) a description of the Site and the Premises, (iii) the
Commencement Date, (iv) the Term, and (v) the Extension Rights.
(f) INTERPRETATION. The normal rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Lease or any exhibits or amendments
hereto. Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
(g) NOT BINDING UNTIL EXECUTED. The submission by Landlord to Tenant of
this Lease shall have no binding force or effect, shall not constitute an option
for the leasing of the Premises, nor confer any right or impose any obligations
upon either party until execution of this Lease by both parties.
(h) LIMITATIONS ON INTEREST. It is expressly the intent of Landlord and
Tenant at all times to comply with applicable law governing the maximum rate or
amount of any interest payable on or in connection with this Lease. If
applicable law is ever judicially interpreted so as
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 40
to render usurious any interest called for under this Lease, or contracted for,
charged, taken, reserved, or received with respect to this Lease, then it is
Landlord's and Tenant's express intent that all excess amounts theretofore
collected by Landlord be credited on the applicable obligation (or, if the
obligation has been or would thereby be paid in full, refunded to Tenant), and
the provisions of this Lease immediately shall be deemed reformed and the
amounts thereafter collectible hereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder.
(i) CHOICE OF LAW. Construction and interpretation of this Lease shall
be governed by and construed and enforced in accordance with the internal laws
of the state in which the Premises are located, without regard to choice of law
principles of such state.
(j) TIME. Time is of the essence as to the performance of each party's
obligations under this Lease.
(k) ATTORNEYS FEES. If either Landlord or Tenant reasonably seeks legal
services with respect to the proper interpretation or enforcement of this Lease,
the party receiving substantially the result it sought or defended (the
"PREVAILING PARTY"), whether by award, judgment, stipulation, settlement,
workout, default, or otherwise and whether or not any legal action may have been
instituted or instituted and then voluntarily dismissed, shall be entitled to
recover from the adverse party all reasonable fees and costs incurred by the
Prevailing Party in connection with such legal services ("LEGAL FEES"). Legal
Fees include, without limitation, (i) fees, costs, and expenses of any
engineers, accountants, appraisers, consultants, brokers, and other
professionals or experts retained or consulted by the Prevailing Party, and
other costs and expenses of investigation or analysis incurred by the Prevailing
Party in support of its position, and (ii) all such fees, costs, and expenses
incurred in any aspect of the legal process, whether out-of-court negotiations,
mediation, arbitration, commencement of suit, discovery, law and motion, trial,
appellate proceedings, or any action or participation in, or in connection with,
any case or proceeding under Chapter 7, 11, or 13 of the Bankruptcy Code, 11
U.S.C. Section 101 et seq., or any successor statutes.
(l) NO THIRD PARTY BENEFITS. Landlord and Tenant do not intend by any
provision of this Lease to confer any right, remedy, or benefit upon any third
party, and no third party shall be entitled to enforce, or otherwise shall
acquire any right, remedy, or benefit by reason of, any provision of this Lease.
(m) COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute a single agreement with the same effect as if all
parties had signed the same signature page. Any signature page from any
counterpart of this Lease, signed only by one party, may be detached from such
counterpart and re-attached to any other counterpart of this Lease that has a
signature page signed only by the other party.
(n) INTEGRATION. This Lease and all exhibits and addenda attached
hereto constitute the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior and contemporaneous oral or
written representations, statements, documents, understandings, and agreements
with respect thereto.
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc.-Page 41
(o) SUCCESSORS AND ASSIGNS. Without limiting in any way the provisions
of Section 22, this Lease shall be binding upon, and inure to the benefit of,
the parties hereto and their respective permitted successors and assigns.
(p) NO WAIVER; REMEDIES CUMULATIVE. No purported waiver of any
provision of this Lease shall be binding unless such waiver is in writing and
signed by the party to be bound. In addition, no waiver of any provision of this
Lease shall be deemed, or shall constitute, a waiver of any other provision of
this Lease, whether or not similar, nor shall any waiver constitute a continuing
waiver. Further, no failure to exercise and no delay in exercising any power,
right, remedy, or privilege under this Lease shall impair such power, right,
remedy, or privilege or shall be deemed, or shall constitute, a waiver of any
default under this Lease or acquiescence therein, nor shall any single or
partial exercise of any such power, right, remedy, or privilege preclude any
other or further exercise thereof or of any other power, right, remedy, or
privilege. Finally, all powers, rights, remedies, and privileges existing under
this Lease are cumulative, in addition to, and not exclusive of any other
powers, rights, remedies, or privileges otherwise available to the parties to
this Lease.
(q) INCORPORATION BY REFERENCE. All exhibits and addenda attached
hereto are hereby incorporated into this Lease and made a part hereof. Except to
the extent expressly provided otherwise herein, if there is any conflict between
such exhibits or addenda and the terms of this Lease, such exhibits or addenda
shall control.
[ SIGNATURES ON NEXT PAGE ]
<PAGE>
Net Greenhouse Lease T.W. Alexander Ave.,
RTP/Paradigm Genetics, Inc. - Page 42
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease Agreement
as of the day and year first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:
--------------------------------
John A. Ryals
CEO and President
ATTEST:
------------------------
Its Secretary
-------------------
[CORPORATE SEAL]
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By:
-------------------------------------
Print Name:
-----------------------------
Print Title:
----------------------------
ATTEST:
------------------------
Its Secretary
-------------------
[CORPORATE SEAL]
<PAGE>
EXHIBIT A-1
DESCRIPTION OF SITE
-------------------
Being a particular tract or tracts of land located in Durham County, Triangle
Township, Research Triangle Park, North Carolina and being further described
below:
BEGINNING at a point, said point being located the following courses from NC
Geodetic Monument "Triad", said NC Geodetic Monument bearing NC Grid Coordinates
NAD 83 of N:238,772.801 Meters, E:620,488.448 Meters; Thence from said monument,
South 0134'26" West a ground distance of 3,011.37 feet to an existing R/W
Monument set in the westerly right-of-way of T.W. Alexander Drive; Thence with
said right-of-way along a curve to the right having a radius of 2846.41 feet, an
arc length of 153.75 feet and being subtended by a chord bearing and distance of
South 0243'15" West,153.73 feet to an existing concrete R/W Monument set in the
westerly right-of-way of T.W. Alexander Drive; Thence leaving said right-of-way,
North 8720'44" West a distance of 142.69 feet to a point, said point being the
POINT AND PLACE OF BEGINNING.
Thence, from the POINT AND PLACE OF BEGINNING South 0244'10" West a distance of
100.85 feet to a point; Thence, North 8949'25" West a distance of 85.25 feet to
a point; Thence, South 0233'01" West a distance of 80.34 feet to a point;
Thence, North 8949'25" West a distance of 157.55 feet to a point; Thence, South
0226'24" West a distance of 88.04 feet to a point; Thence, North 8949'25" West a
distance of 52.18 feet to a point; Thence, South 0226'24" West a distance of
336.73 feet to a point; Thence, North 8843'29" West a distance of 276.76 feet to
an existing concrete monument; Thence, North 0116'24" East a distance of 330.28
feet to an existing concrete monument; Thence, North 8803'29" West a distance of
22.85 feet to a new iron pipe; Thence, North 8451'33" West a distance of 150.08
feet to an existing concrete monument; Thence, North 0510'14" East a distance of
235.37 feet to a new iron pipe; Thence, South 8736'14" East a distance of 150.23
feet to a new iron pipe; Thence, North 0509'46" East a distance of 16.45 feet to
a new iron pipe; Thence, South 8736'14" East a distance of 105.32 feet to a new
iron pipe; Thence, North 0239'16" East a distance of 36.22 feet to a new iron
pipe; Thence, South 8720'44" East a distance of 483.95 feet to the POINT AND
PLACE OF BEGINNING and containing 265,020.77 sq. ft. (6.084 acres), and being
shown on a particular survey or plat entitled "ALTA/ACSM Property Survey - 104
T.W. Alexander Drive", project number 98321.01, prepared by Barbara H. Mulkey
Engineering, Inc., dated 04/30/99 and revised 07/21/99.
<PAGE>
EXHIBIT A-2
DESCRIPTION OF ADDITIONAL SITE
------------------------------
Being a particular tract or tracts of land located in Durham County, Triangle
Township, Research Triangle Park, North Carolina and being further described
below:
BEGINNING at a point, said point being located the following courses from NC
Geodetic Monument "Triad", said NC Geodetic Monument bearing NC Grid Coordinates
NAD 83 of N:238,772.801 Meters, E:620,488.448 Meters; Thence from said monument,
South 0134'26" West a ground distance of 3,011.37 feet to an existing R/W
Monument set in the westerly right-of-way of T.W. Alexander Drive; Thence with
said right-of-way along a curve to the right having a radius of 2846.41 feet, an
arc length of 153.75 feet and being subtended by a chord bearing and distance of
South 0243'15" West,153.73 feet to an existing concrete R/W Monument set in the
westerly right-of-way of T.W. Alexander Drive, said monument being the POINT AND
PLACE OF BEGINNING.
Thence, from the POINT AND PLACE OF BEGINNING along the right-of-way of T.W.
Alexander Drive with a curve to the right having a radius of 2846.41 feet, an
arc length of 610.47 feet and being subtended by a chord bearing and distance of
South 0458'14" West, 609.30 feet to an existing concrete monument; Thence, North
8843'29" West a distance of 411.30 feet to a point; Thence, North 0226'24" East
a distance of 336.73 feet to a point; Thence, South 8949'25" East a distance of
52.18 feet to a point; Thence North 0226'24" East a distance of 88.04 feet to a
point; Thence, South 8949'25" East a distance of 157.55 feet to a point; Thence,
North 0233'01" East a distance of 80.34 feet to a point; Thence, South 8949'25"
East a distance of 85.25 feet to a point; Thence North 0244'10" East a distance
of 100.85 feet to a point; Thence, South 8720'44" East a distance of 142.69 feet
to the POINT AND PLACE OF BEGINNING and containing 214,139.28 sq. ft. (4.916
acres), and being shown on a particular survey or plat entitled "ALTA/ACSM
Property Survey - 104 T.W. Alexander Drive", prepared by Barbara H. Mulkey
Engineering, Inc., dated 04/30/99 and revised 07/21/99.
<PAGE>
EXHIBIT B
DESCRIPTION OF PREMISES
-----------------------
[See Attached Site Map]
<PAGE>
EXHIBIT C
WORK LETTER
[PHASE 1B: GREENHOUSE]
This WORK LETTER, dated April ___, 2000 (this "WORK LETTER"), is made and
entered into by and between ARE-104 ALEXANDER ROAD, LLC, a Delaware limited
liability company ("LANDLORD"), and PARADIGM GENETICS, INC., a Delaware
corporation ("TENANT"), and is attached to and made a part of the Lease
Agreement [Phase 1B: Greenhouse] dated April ___, 2000 (the "LEASE"), by and
between Landlord and Tenant. Any initially capitalized terms used but not
defined herein shall have the meanings given them in the Lease.
RECITALS
A. Landlord has entered into a Ground Lease Agreement dated as of July 27,
1999 (the "ORIGINAL GROUND LEASE"), with Triangle Service Center, Inc., a North
Carolina corporation ("GROUND LESSOR"), pursuant to which Landlord has ground
leased approximately 6.084 acres of land within the Triangle Park Research
Center (which is located within Research Triangle Park, Durham County, North
Carolina), as more fully described in Exhibit A-1 attached to the Lease (the
"SITE"). The Original Ground Lease is evidenced of record by a certain
Memorandum of Ground Lease dated as of July 27, 1999, and recorded July 27,
1999, in Book 2684, Page 795 of the Official Records of Durham County, North
Carolina (the "OFFICIAL RECORDS"). In addition, Ground Lessor and Landlord have
entered into or, concurrently with the execution of the Lease, are entering
into, (i) a certain Agreement Regarding Allocation of Development Rights (which
will be evidenced of record by a certain Memorandum of Agreement Regarding
Allocation of Development Rights to be recorded in the Official Records), and
(ii) a certain First Amendment to Ground Lease Agreement (the "GROUND LEASE
AMENDMENT"). The Original Ground Lease, the Ground Lease Amendment, and any
other subsequent amendments or modifications thereto shall be referred to
collectively as the "GROUND LEASE".
B. Subject to the terms and conditions of the Lease, Landlord has agreed
to cause to be constructed on the Site, or to permit to be constructed on the
Site, certain improvements including, but not limited to, a plant analysis and
growth room facility, a commercial greenhouse, and a headhouse containing
approximately 31,776 rentable square feet (collectively, the "GREENHOUSE").
C. This Work Letter contains the agreements of the parties with respect to
the design and construction of the shell and core of the Greenhouse, the site
improvements appurtenant to the Greenhouse, and all fixed and permanent
improvements to the Greenhouse (commonly referred to as the "tenant
improvements").
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 2
AGREEMENT
1. General Requirements.
--------------------
1.1. Tenant's Authorized Representative. Tenant designates Jim Miller
and Stanford White & Associates (collectively, "TENANT'S REPRESENTATIVE") as the
only persons authorized to initial or approve plans, drawings, or change orders
or otherwise to act for Tenant pursuant to this Work Letter. Stanford White &
Associates shall act for Tenant during any period that Mr. Miller is not
available. Landlord shall not be obligated to respond to or act upon any
request, approval, inquiry, or other communication ("COMMUNICATION") from or on
behalf of Tenant in connection with this Work Letter unless such Communication
is in writing and has been initialed or approved in writing by Tenant's
Representative. Tenant may change Tenant's Representative at any time upon not
less than 5 business days advance Notice to Landlord. No period set forth herein
for any approval of any matter by Tenant shall be extended by reason of any
change in Tenant's Representative. Neither Tenant nor Tenant's Representative
shall be authorized to direct Landlord's contractors in the performance of
"LANDLORD'S WORK" (as hereinafter defined) except as may be expressly provided
otherwise herein.
1.2. Development Schedule. The schedule for design and development of
the "BASE BUILDING WORK" (as defined below) and the "TENANT IMPROVEMENTS" (as
defined below), including, without limitation, the time periods for preparation,
delivery, review, and approval of construction documents and performance
pursuant to such documents, shall be in accordance with the Development Schedule
attached hereto as Schedule A, subject to adjustment as mutually agreed by the
parties in writing or as provided in this Work Letter (the "DEVELOPMENT
SCHEDULE").
1.3. Architects, Consultants and Contractors. The architect (the
"GREENHOUSE ARCHITECT"), engineers, and designers responsible for the design and
development of the Base Building Work, the Tenant Improvements, and the other
components of the Greenhouse as a whole (collectively, "LANDLORD'S WORK") shall
be selected by Tenant, subject to Landlord's approval, which approval shall not
be unreasonably withheld, conditioned, or delayed. The general contractor (the
"GREENHOUSE CONTRACTOR") responsible for the construction of the Greenhouse Work
shall be selected by Landlord, subject to Tenant's approval, which approval
shall not be unreasonably withheld, conditioned, or delayed. The Greenhouse
Contractor shall select all subcontractors to be used for the Greenhouse Work,
provided that any subcontractors ("MAJOR SUBCONTRACTORS") under subcontracts in
excess of $100,000.00 ("MAJOR SUBCONTRACTS") shall be subject to the mutual
approval of Landlord and Tenant. The Greenhouse Architect and the Greenhouse
Contractor shall coordinate with the architect, engineers, and designers
responsible for the design and development of the Project as a whole
(collectively, the "PROJECT ARCHITECT") in a manner reasonably satisfactory to
Landlord. Landlord and Tenant hereby acknowledge and agree that: (i) Bartholomew
Associates, Inc. has been pre-approved as the Greenhouse Architect; (ii) Miller
Building Corporation has been pre-approved as the Greenhouse Contractor; and
(iii) O'Brien Atkins & Associates has been selected to act as the Project
Architect. For purposes of this Work Letter, the Greenhouse Architect and the
Greenhouse Contractor may be referred to generally as "DEVELOPERS".
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 3
2. Landlord's Work.
---------------
2.1. Base Building Work Defined. As used herein, "BASE BUILDING WORK"
shall mean all of the work required to design and construct, in their entirety,
the shell, the core, and the other site improvements detailed in the "GREENHOUSE
CONSTRUCTION DRAWINGS" (as defined in Section 2.6), and shall include on-site
surface parking of not less than 33 spaces (as may be limited by, and subject
to, any changes mandated by Legal Requirements (including zoning restrictions)
that may be enacted or first effective after the Effective Date and to any
changes in the design of the Greenhouse requested or approved by Tenant and made
after the Effective Date).
2.2. Tenant Improvements Defined. As used herein, "TENANT
IMPROVEMENTS" shall mean all improvements to the Greenhouse desired by Tenant of
a fixed and permanent nature, exclusive of the Base Building Work. Other than
Landlord's Work, Landlord shall have no obligation whatsoever with respect to
the finishing, outfitting, equipping, or furnishing of the Premises for Tenant's
use and occupancy.
2.3. Greenhouse Design Program. Tenant has prepared and delivered to
Landlord and the Greenhouse Architect outline specifications detailing Tenant's
requirements for Landlord's Work (the "GREENHOUSE DESIGN PROGRAM"), Landlord has
delivered to Tenant any written objections, questions, and/or comments
(generally, "COMMENTS") that Landlord may have regarding such Greenhouse Design
Program, and Tenant has caused the Greenhouse Design Program to be revised to
address such Comments and to be resubmitted to Landlord for approval. The final
Greenhouse Design Program was approved on August 25, 1999.
2.4. Greenhouse Schematic Plans. Tenant has caused the Greenhouse
Architect to prepare and submit to Landlord for Landlord's review and comment
schematic drawings for the development of Landlord's Work (the "GREENHOUSE
SCHEMATIC PLANS"), Landlord has delivered to Tenant and the Greenhouse Architect
any Comments that Landlord had regarding the Greenhouse Schematic Plans, and
Tenant has caused the Greenhouse Architect to revise the Greenhouse Schematic
Plans to address such Comments and to resubmit the same to Landlord for
approval. The final Greenhouse Schematic Plans were approved on October 5, 1999.
Tenant hereby confirms that the final Greenhouse Schematic Plans reflect
Tenant's requirements for Landlord's Work and were prepared substantially in
accordance with the Greenhouse Design Program, and Landlord shall have no
responsibility to Tenant if such Greenhouse Schematic Plans do not reflect
Tenant's requirements for Landlord's Work. The cost of any changes to the design
of the Office / Lab that become necessary because of changes to the Greenhouse
Schematic Plans requested by Tenant shall be payable by Tenant, and the cost of
any changes to the design of the Office / Lab that become necessary because of
changes to the Greenhouse Schematic Plans requested by Landlord shall be payable
by Landlord.
2.5. Greenhouse Design Development Plans. Tenant has caused the
Greenhouse Architect to prepare and submit to Landlord for Landlord's review and
comment design development plans and specifications for the development of
Landlord's Work (the "GREENHOUSE DESIGN DEVELOPMENT PLANS"), Landlord has
delivered to Tenant and the Greenhouse Architect any Comments that Landlord had
regarding the Greenhouse Design Development Plans, and Tenant has caused the
Greenhouse Architect to revise the Greenhouse Design Development Plans to
address such Comments and to resubmit the same to Landlord for approval. The
final Greenhouse Design Development Plans were approved on
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Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 4
December 30, 1999. Tenant hereby confirms that the final Greenhouse Design
Development Plans reflect Tenant's requirements for Landlord's Work and were
prepared substantially in accordance with the Greenhouse Schematic Plans, and
Landlord shall have no responsibility to Tenant if such Greenhouse Design
Development Plans do not reflect Tenant's requirements for Landlord's Work. The
cost of any changes to the design of the Office / Lab that become necessary
because of Tenant's requirements for the Greenhouse Design Development Plans
shall be payable by Tenant, and the cost of any changes to the design of the
Office / Lab that become necessary because of Landlord's requirements for the
Greenhouse Design Development Plans shall be payable by Landlord.
2.6. Greenhouse Construction Drawings. On March 3, 2000, Tenant
caused the Greenhouse Architect to prepare and deliver to Landlord, for
Landlord's review and comment, construction plans for Landlord's Work. On March
20, 2000, Landlord delivered to Tenant and the Greenhouse Architect the Comments
that Landlord had regarding such construction plans only. Within 5 business days
after Landlord's receipt of the specifications and drawings that correspond to
such construction plans (with such construction plans, the "GREENHOUSE
CONSTRUCTION DRAWINGS"), Landlord shall deliver to Tenant and the Greenhouse
Architect any Comments that Landlord may have regarding the remainder of the
Greenhouse Construction Drawings; provided, however, that Landlord may not
disapprove any matter that is substantially consistent with the Greenhouse
Design Development Plans; provided further, however, that Tenant may not submit
to Landlord any Greenhouse Construction Drawings that are not substantially
consistent with the Greenhouse Design Development Plans without submitting a
"CHANGE REQUEST" (as defined in Section 5.1). All Greenhouse Construction
Drawings shall be prepared substantially in accordance with the Greenhouse
Design Development Plans, and Tenant shall be solely responsible for ensuring
that the Greenhouse Construction Drawings reflect Tenant's requirements for
Landlord's Work. Within 5 business days after Tenant's and the Greenhouse
Architect's receipt of any Comments from Landlord, Tenant and the Greenhouse
Architect shall consider all such Comments in good faith and shall notify
Landlord how Tenant proposes to respond to such Comments. Any disputes in
connection with such Comments shall be resolved in accordance with Section 3.
The cost of any changes to the design of the Office / Lab that become necessary
because of Tenant's requirements for the Greenhouse Construction Drawings shall
be payable by Tenant, and the cost of any changes to the design of the Office
/ Lab that become necessary because of Landlord's requirements for the
Greenhouse Design Development Plans shall be payable by Landlord. Once approved
by Landlord, Tenant shall not materially modify the Greenhouse Construction
Drawings except as may be reasonably required in connection with the issuance of
the "BUILDING PERMIT" (as defined in Section 4.1). Tenant will give Landlord
prompt Notice of any such material modifications.
3. Approval and Completion. Landlord and Tenant hereby acknowledge that
the Greenhouse Construction Drawings must be completed and approved not later
than April 14, 2000, in order for Landlord's Work to be "SUBSTANTIALLY COMPLETE"
(as defined in Section 4.2) by the Target Commencement Date. If there is any
dispute regarding the design of Landlord's Work that is not settled within 5
business days after Notice of such dispute is delivered by one party to the
other, (x) Landlord shall have the right to make the final decision if the
dispute concerns the design of the Base Building Work, provided Landlord acts
reasonably and such final decision is either consistent with or a reasonable
compromise between Landlord's and Tenant's positions with respect to such
dispute, and (y) Tenant shall have the right to make the final decision if the
dispute concerns the design of the Tenant Improvements, provided Tenant acts
reasonably and such final decision is either consistent with or a reasonable
compromise between Landlord's and Tenant's positions with respect to such
dispute. All costs and
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Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 5
expenses resulting from any final decision with respect to Landlord's Work shall
be payable out of the "CONSTRUCTION FUND" (as defined in Section 6.4). Any
changes to the Greenhouse Construction Drawings requested by Tenant following
Landlord's and Tenant's approval of same shall be processed as provided in
Section 5 hereof.
4. Performance of Landlord's Work.
------------------------------
4.1. Permitting and Commencement of Landlord's Work. Once the
Greenhouse Construction Drawings have been approved, Tenant shall obtain, or
shall cause the Greenhouse Architect to obtain, a building permit authorizing
the construction of Landlord's Work as contemplated in this Work Letter (the
"BUILDING PERMIT") and all other permits, licenses, or approvals that may be
required in connection with construction of Landlord's Work (including, but not
limited to, approval of a revised site plan for the Site that reflects Tenant's
redesign of the Greenhouse). Landlord shall cooperate and assist Tenant in
obtaining the Building Permit, the cost of which shall be payable from the
Construction Fund. Landlord shall commence construction of Landlord's Work
within 3 business days after Tenant or the Greenhouse Architect (as the case may
be) obtains the Building Permit and all other required permits, licenses, or
approvals. If any governmental or quasi-governmental authorities having
jurisdiction over the performance of any portion of Landlord's Work (a
"GOVERNMENTAL AUTHORITY") or any permit, license, or approval required in
connection therewith shall impose terms or conditions on the Building Permit
that: (i) are inconsistent with Landlord's obligations under this Work Letter;
(ii) are substantially inconsistent with the Greenhouse Construction Drawings;
(iii) materially increase the cost of performing Landlord's Work; or (iv) will
materially delay the performance of Landlord's Work, Landlord and Tenant shall
reasonably and in good faith seek means by which to mitigate or eliminate any
such adverse terms or conditions.
4.2. Completion of Landlord's Work. In recognition and consideration
of the fact that the Greenhouse is yet to be designed and/or constructed, the
parties to this Work Letter hereby agree that Landlord may make "MINOR
VARIATIONS" (as defined below) in the size, design, engineering, configuration,
and placement of any portion of Landlord's Work, and such Minor Variations shall
not render the Lease void or voidable nor give Tenant the right to any reduction
or abatement in Rent, notwithstanding anything contained in this Work Letter or
any rule of law or equity to the contrary. On or before the Commencement Date
(subject only to "TENANT CAUSED DELAYS" (as defined in Section 4.5) and delays
cause by Force Majeure ("FORCE MAJEURE DELAYS")), Landlord shall substantially
complete or cause to be substantially completed Landlord's Work in accordance
with the Building Permit, and shall obtain at least a temporary certificate of
occupancy for the Greenhouse that will allow Tenant to use and occupy such
Greenhouse for substantially the purposes contemplated in the Permitted Use
(collectively, the "TEMPORARY CERTIFICATE"), subject to Minor Variations and
customary "punch list" items of a non-material nature that do not adversely
affect Tenant's use or occupancy of the Greenhouse for substantially the
purposes contemplated in the Permitted Use or the validity of the Temporary
Certificate ("SUBSTANTIALLY COMPLETE" or "SUBSTANTIAL COMPLETION"); provided,
however, that Landlord shall have no obligation to obtain or maintain, and shall
not obtain or maintain, any permits, licenses, approvals, certificates, or other
entitlements necessary or appropriate to Tenant's specific use of the Premises
or the conduct of Tenant's specific business operations on the Premises. Upon
the Substantial Completion of Landlord's Work, the Greenhouse Architect shall be
required to execute and deliver, for the benefit of Tenant and Landlord, a
Certificate of Substantial Completion in the form of the American Institute of
Architects document G704. For purposes of this Work Letter, "MINOR VARIATIONS"
shall mean any modifications reasonably required: (i) to comply with all
applicable Legal Requirements (including the North Carolina State Building Code,
as adopted by the City of
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 6
Durham (the "CODE")) and/or to obtain or to comply with any required permit
(including the Building Permit); (ii) to comply with any request by the Tenant
for modifications to Landlord's Work; (iii) to make reasonable, but minor,
adjustments in order to comport with good design, engineering, and construction
practices; or (iv) to make reasonable adjustments for field deviations or
conditions encountered during the performance of Landlord's Work.
4.3. Selection of Materials, Etc. Where more than one type of
material or structure is indicated on the Greenhouse Construction Drawings
approved by Landlord and Tenant, the option will be within Tenant's reasonable
discretion. As to all building materials and equipment that Landlord is
obligated to supply under this Work Letter, Landlord shall select the
manufacturer thereof in Landlord's reasonable discretion.
4.4. Delivery of the Premises. When Landlord's Work is Substantially
Complete, subject to the remaining terms and provisions of this Section, Tenant
shall accept the Premises in their then existing condition. Tenant's taking
possession and acceptance of the Premises shall not constitute a waiver of:
(i) any warranty, including those with respect to workmanship (including
installation of equipment) or material (exclusive of equipment provided directly
to Tenant by manufacturers), (ii) any non-compliance of Landlord's Work with
Legal Requirements (including the Code), or (iii) any claim that Landlord's Work
was not completed substantially in accordance with the Greenhouse Construction
Drawings (subject to Minor Variations and such other changes as are permitted
hereunder) (collectively, a "CONSTRUCTION DEFECT"). Tenant shall have 1 year
after Substantial Completion within which to notify Landlord of any such
Construction Defect discovered by Tenant, and Landlord shall use reasonable
efforts to remedy or cause the responsible contractor to remedy any such
Construction Defect within 30 days thereafter. Notwithstanding the foregoing,
Landlord shall not be in default under the Lease if:
(a) with respect to Construction Defects that Landlord
reasonably determines, in good faith, involve or may involve structural
components of the Premises or pose or may pose a significant risk of personal
injury or substantial property damage ("SERIOUS CONSTRUCTION DEFECTS"), the
applicable contractor, despite Landlord's reasonable efforts, fails to remedy
such Construction Defect within such 30-day period, but Landlord, within 30 days
thereafter, commences and diligently and continuously pursues such remedial
action to completion, at Landlord's sole cost and expense;
(b) with respect to Construction Defects that Landlord
reasonably determines, in good faith, are not Serious Construction Defects or
involve Tenant's Property, the applicable contractor, despite Landlord's
reasonable efforts, fails to remedy such Construction Defect within such 30-day
period, in which case Landlord shall have no further obligation with respect to
such Construction Defect other than to cooperate, at no cost to Landlord, with
Tenant should Tenant elect to pursue a claim against such contractor, provided
that Tenant indemnifies and holds Landlord harmless from and against any
liability, loss, cost, damage or expense in connection with any such claim; or
(c) with respect to any part of Landlord's Work, any action by
Tenant to the extent such action results in the invalidation of any otherwise
enforceable warranty or bond that would cover the cost of remedying such
Construction Defect.
Any determination made by Landlord pursuant to paragraph (a) or (b) above shall
be deemed reasonable and in good faith if based on advice received by Landlord
from an independent and duly licensed design or construction consultant (a
"DEFECT CONSULTANT"). Tenant may ask a
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 7
Defect Consultant to provide written confirmation of the advice given Landlord
in connection with a determination by Landlord that a specific Construction
Defect is not a Serious Construction Defect if, and only if, (i) Tenant gives
Landlord Notice of such desire within 3 business days after receiving Notice of
Landlord's determination, and (ii) Tenant is solely responsible for any fee,
cost, charge, or other assessment imposed by the Defect Consultant for providing
such written confirmation; provided, however, that Tenant understands and agrees
that Landlord's waiver of the potential conflict of interest facing the Defect
Consultant shall be strictly limited to the advice, and only the advice, given
Landlord in the specific instance in question and shall not apply, under any
circumstances, to any other advice or matters that may be the subject of the
services provided to Landlord by the Defect Consultant.
Landlord shall use commercially reasonable efforts to cause the following
to be included in the agreement (generally, a "DEVELOPMENT AGREEMENT") entered
into with the Greenhouse Contractor, and Tenant shall use commercially
reasonable efforts to cause the following to be included in the Development
Agreement entered into with the Greenhouse Architect: (i) an express statement
or agreement by each such Developer that Tenant (if Landlord is the contracting
party) or Landlord (if Tenant is the contracting party) is an "intended third
party beneficiary" with respect to all express representations and warranties
contained in such Developer's Development Agreement and with respect to all
warranties implied, at law or in equity, from the relationship created by such
Developer's Development Agreement or from the work performed by or on behalf of
such Developer pursuant to such Developer's Development Agreement; (ii) express
representations and warranties from each Developer that are "industry standard"
for such professionals when providing services to Similar Facilities in the Sub-
Market, which representations and warranties also shall be expressly assignable
to Tenant (if Landlord is the contracting party) or Landlord (if Tenant is the
contracting party) and, as to the Greenhouse Architect, shall include, but not
be limited to, a representation or warranty that the Greenhouse Construction
Drawings prepared by or on behalf of the Greenhouse Architect comply with all
applicable Legal Requirements (including the Code), subject to Minor Variations
and such other changes as are permitted hereunder; (iii) as to the Greenhouse
Architect, an express requirement that the Greenhouse Architect obtain and/or
maintain errors and omissions insurance with a minimum limit of not less than
$2,000,000.00; (iv) as to each Developer, an express requirement that Tenant
(if Landlord is the contracting party) or Landlord (if Tenant is the contracting
party) be added as an additional insured under any insurance for which the
contracting party is to be named an additional insured; and (v) as to the
Greenhouse Contractor, an express requirement that the Greenhouse Contractor
direct all manufacturers supplying equipment to be installed in the Greenhouse
to name both Landlord and Tenant as the parties entitled to the benefits of the
manufacturers' equipment warranties. In all events, Tenant shall be entitled to
receive the benefit of all design and construction warranties and all
manufacturers' equipment warranties for equipment installed in the Greenhouse,
and Landlord, if requested by Tenant, will cooperate with Tenant in obtaining
the benefit of all such warranties (subject to the limitations described in
paragraphs (a), (b), and (c) above). If requested by Tenant, Landlord shall use
commercially reasonable efforts to obtain extended warranties from the
manufacturers and suppliers of any equipment to be installed in the Greenhouse,
provided that the cost of any such extended warranties shall be subject to
Tenant's approval and, unless paid directly by Tenant, at Tenant's option, shall
be paid solely out of the Construction Fund. Within 5 days after receiving
Notice from Tenant identifying punch list items, Landlord shall undertake the
correction of such punch list items and shall complete, or cause to be
completed, the correction of all punch list items within 20 days thereafter;
provided, however, if the nature of the punch list items are such that they
reasonably require more than 20 days to correct, then Landlord shall not be
deemed to be in default hereunder if Landlord commences such correction within
said 20-day period and thereafter diligently pursues the same to completion;
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 8
provided further, however, that such correction shall be completed no later than
45 days from the date of Tenant's Notice regarding punch list items (subject to
Force Majeure Delays).
4.5. Commencement Date Delay. The Commencement Date shall occur when
Landlord's Work has been Substantially Completed (the "COMPLETION DATE"), except
to the extent that completion of Landlord's Work shall have been actually
delayed by any one or more of the following causes (a "TENANT CAUSED DELAY"):
(a) Tenant's Representative was not available to give or receive
any Communication (in the manner required under the notice provisions contained
in Section 44(a) of the Lease) or to take any other action required to be taken
by Tenant hereunder;
(b) Any Change Request, whether or not the "CHANGE" (as defined
in Section 5) that is the subject of the Change Request is actually performed;
(c) Construction of any Change;
(d) Tenant's request for materials, finishes, or installations
requiring unusually long lead times;
(e) Tenant's delay in causing the Greenhouse Architect to
prepare, revise, deliver, or submit, or to address Comments regarding,
specifications, plans, drawings, or other materials beyond the periods set forth
herein;
(f) Tenant's delay in providing information critical to the
normal progression of Landlord's Work (Tenant shall provide such information as
soon as reasonably possible, but in no event longer than 1 week after receipt of
any request for such information from Landlord that is transmitted in the manner
required under the notice provisions contained in Section 44(a) of the Lease);
(g) Tenant's delay in making payments to Landlord for "EXCESS
CONSTRUCTION COSTS" (as defined in Section 6.4);
(h) Any delay in the timely completion of Landlord's Work caused
by Tenant's inability to obtain from the appropriate Governmental Authorities
all necessary approvals of a revised site plan for the Site that reflects
Tenant's redesign of the Greenhouse; or
(i) Any other act or omission by Tenant or its agents,
contractors, or persons employed by any of such persons.
If the Commencement Date is delayed for any of the foregoing reasons, then
Landlord shall cause the Greenhouse Architect to certify the date on which
Landlord's Work would have been Substantially Completed but for such Tenant
Caused Delay and such certified date shall be the Commencement Date under the
Lease.
5. Changes. Any changes requested by Tenant to Landlord's Work
("CHANGES") after the mutual approval of the Greenhouse Construction Drawings
shall be requested and instituted in accordance with the provisions of this
Section and shall be subject to the written approval of Landlord and the
Greenhouse Architect, such approval not to be unreasonably withheld,
conditioned, or delayed.
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 9
5.1. Tenant's Right to Request Changes. Tenant shall request Changes,
if any, by giving Notice to Landlord in substantially the same form as the AIA
standard change order form (a "CHANGE REQUEST"), which Change Request shall
detail the nature and extent of any such Change. Tenant's Representative must
sign such Change Request. Landlord, before proceeding with any Change, shall use
commercially reasonable efforts to respond to Tenant as soon as reasonably
possible with an estimate of: (i) the period of time, if any, that the Change
will extend the date on which Landlord's Work will be Substantially Complete;
and (ii) the architectural and engineering fees and costs that will be incurred
to analyze such Change Request. Within 10 business days after Landlord's receipt
of the Change Request (or such longer period of time as is reasonably required
depending on the extent of the Change Request), Landlord shall submit to Tenant
a written analysis of the additional cost or savings involved, including,
without limitation, architectural and engineering costs and the period of time,
if any, that the Change will extend the date on which Landlord's Work will be
Substantially Complete. Any such delay in the completion of Landlord's Work
caused by a Change, including any suspension of Landlord's Work while any such
Change is being evaluated and/or designed, shall be a Tenant Caused Delay.
Notwithstanding the foregoing, Landlord's Work may not be suspended as a result
of any Change Request unless specifically approved by Tenant.
5.2. Implementation of Changes. If Tenant: (i) approves in writing
the cost or savings and the estimated extension in the time for completion of
Landlord's Work, if any, and (ii) deposits with Landlord any Excess Construction
Costs required in connection with any Change, Landlord shall cause the approved
Change to be instituted. Notwithstanding any approval or disapproval by Tenant
of any estimate of the delay caused by such proposed Change, the Greenhouse
Architect's determination of the amount of Tenant Caused Delay in connection
with such Change shall be final and binding on Landlord and Tenant.
6. Costs.
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6.1. Budget for Landlord's Work. Before commencing Landlord's Work,
Landlord shall obtain a detailed budget (the "BUDGET"), by trade, of the costs
incurred or that will be incurred in connection with the design, permitting, and
construction of Landlord's Work (the "GREENHOUSE COSTS"). The Budget shall be
based upon the Greenhouse Construction Drawings and shall include a payment to
Landlord of administrative rent ("ADMINISTRATIVE RENT") equal to 2.50% of the
Greenhouse Costs for administering, monitoring, and inspecting Landlord's Work,
which sum shall be payable from the Construction Fund. Such Administrative Rent
shall include, without limitation, all out-of-pocket costs, expenses, and fees
incurred by or on behalf of Landlord arising from, out of, or in connection
with, such administration, monitoring, and inspection of Landlord's Work.
Landlord shall have the right (but not the obligation) to engage a project or
development manager to assist in performing such administration, monitoring, and
inspection of Landlord's Work and any payments to any such manager (excluding
payments for any services performed by such manager at Tenant's direct request
or direction) shall be payable from Administrative Rent.
6.2. Payment for Landlord's Work; Construction Allowance. Landlord
shall provide to Tenant a "CONSTRUCTION ALLOWANCE" (as defined in Section
3(b)(ii) of the Lease) of not more than $3,000,000.00 (adjusted for any amounts
actually received by Landlord as reimbursement under Sections 19.b. or 19.d. of
the Ground Lease and retained by Landlord pursuant to the terms and condition of
the Cost Sharing Agreement) for the payment of all "CONSTRUCTION COSTS" (as
defined in Section 3(b)(ii) of the Lease), subject to the terms hereof and the
terms of the Lease. Within 5 business days after Tenant's receipt of the Budget
from Landlord, Tenant shall give Landlord Notice of how much of the Construction
Allowance Tenant
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 10
has elected to receive from Landlord. Such election shall be final and binding
on Tenant, and may not thereafter be modified without Landlord's consent, which
may granted or withheld in Landlord's sole and absolute discretion. If the
Budget for Landlord's Work is greater than the Construction Allowance, Tenant
shall deposit with Landlord the difference, in cash, prior to the commencement
of Landlord's Work, for disbursement by Landlord to pay Construction Costs.
6.3. Costs Includable in Construction Allowance. The Construction
Allowance shall be used solely for the payment of design, permitting, and
construction costs in connection with Landlord's Work, including, without
limitation, the cost of preparing the Greenhouse Design Program, the Greenhouse
Schematic Plans, the Greenhouse Design Development Plans, and the Greenhouse
Construction Drawings, all costs set forth in the Budget, including
Administrative Rent and Landlord's out-of-pocket expenses and other costs
resulting from Tenant Caused Delays and the cost of Changes, to the extent of
the Construction Allowance. The items that may be paid for using the
Construction Allowance include, without limitation, the shell and core of the
Greenhouse, the site improvements appurtenant to the Greenhouse, HVAC systems,
utility distribution systems, laboratory benches and casework, and hazardous
waste containment equipment. Notwithstanding anything to the contrary contained
herein, the Construction Allowance shall not be used to pay for trade fixtures,
emergency generators or related emergency power equipment, furniture, personal
property, or other non-building system materials or equipment, including, but
not limited to, modular plant growth rooms, biological safety cabinets, and
scientific equipment not incorporated into the Greenhouse.
6.4. Excess Construction Costs. It is understood and agreed that
Landlord is under no obligation to bear any portion of the cost of any of
Landlord's Work except to the extent of the Construction Allowance (as
adjusted). Notwithstanding Section 6.1 above, if at any time and from time-to-
time Landlord reasonably determines that the actual cost of certain services or
materials required for Landlord's Work will exceed the line item in the Budget
for such services or materials, Landlord shall give Notice to Tenant of same and
Tenant thereafter either shall approve or disapprove the excess line item cost
within 5 business days after Landlord's Notice. If Tenant approves the excess
line item cost, Landlord shall proceed with Landlord's Work and the excess line
item cost will be included in Construction Costs and may be paid from the
Construction Allowance (if sufficient). If Tenant disapproves the excess line
item cost, Landlord and Tenant shall reasonably and in good faith seek means by
which to mitigate or eliminate such excess line item cost. Any excess line item
cost not approved by Tenant shall not be included in Construction Costs and may
not be paid from the Construction Allowance. Subject to the foregoing
limitations on Construction Costs payable from the Construction Allowance, if at
any time and from time-to-time Landlord reasonably determines that the remaining
Construction Costs under the Budget exceed the remaining unexpended Construction
Allowance (as adjusted), Landlord shall give Notice to Tenant of same and Tenant
thereafter shall deposit with Landlord, as a condition precedent to Landlord's
obligation to complete Landlord's Work, 100.00% of the then current Construction
Costs in excess of the remaining Construction Allowance ("EXCESS CONSTRUCTION
COSTS"). If Tenant fails to deposit with Landlord, or deposits with Landlord
after the date demanded in Landlord's Notice (which shall not be less than 5
business days after Landlord's Notice), the amount of any Excess Construction
Costs, Landlord shall have all of the rights and remedies set forth in the Lease
for nonpayment of Rent (including, but not limited to, the right to interest at
the Default Rate and the right to assess a late charge), and for purposes of any
litigation instituted with regard to such amounts the same will be considered
Rent. Such deposits of Excess Construction Costs, together with the Construction
Allowance (as adjusted) and any funds deposited by Tenant pursuant to Section
6.2 above, are herein referred to as the "CONSTRUCTION FUND". Funds deposited by
Tenant to pay Excess Construction Costs shall be the first thereafter disbursed
to
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 11
pay Construction Costs. If upon Substantial Completion of Landlord's Work and
the payment of all sums due in connection therewith there are undisbursed
portions of the Construction Fund, Tenant shall be entitled to such undisbursed
portions solely to the extent of any deposits of Excess Construction Costs
actually made by Tenant with Landlord.
7. Tenant Access.
-------------
7.1. Tenant's Access Rights. Landlord hereby agrees to permit Tenant
access to the Premises, at Tenant's sole risk and expense, (i) 30 days prior to
the Commencement Date to perform any work ("TENANT'S WORK") required by Tenant
other than Landlord's Work (including, as examples only, installation of
telephones, cables, and, to the extent reasonably practical, trade fixtures and
furniture), provided that such Tenant's Work is coordinated with the Greenhouse
Architect and the Greenhouse Contractor and complies with the Lease and all
other reasonable restrictions and conditions Landlord may impose, and (ii) prior
to the completion of Landlord's Work, to inspect and observe work in process;
all such access shall be during normal business hours or at such other times as
are reasonably designated by Landlord. Notwithstanding the foregoing, Tenant
shall have no right to enter onto the Premises unless and until Tenant shall
deliver to Landlord evidence reasonably satisfactory to Landlord demonstrating
that any insurance reasonably required by Landlord in connection with such pre-
commencement access (including, but not limited to, any insurance that Landlord
may require pursuant to the Lease) is in full force and effect.
7.2. No Interference. Neither Tenant nor its employees, consultants,
agents, contractors, and suppliers shall interfere with the performance of
Landlord's Work, nor with any inspections or issuance of final approvals by
Durham County, North Carolina, or the City of Durham, and upon any such
interference, Landlord shall have the right to exclude Tenant and Tenant's
employees, consultants, agents, contractors, and suppliers from the Premises
until Substantial Completion of Landlord's Work.
7.3. No Acceptance of Premises. So long as Tenant engages only in the
activities enumerated in Section 7.1, the fact that Tenant, with Landlord's
consent, may enter the Premises prior to the date Landlord's Work is
Substantially Complete shall not be deemed an acceptance by Tenant of possession
of the Premises, but in such event Tenant shall indemnify and hold Landlord
harmless from any loss of or damage to Tenant property, completed work,
fixtures, equipment, materials or merchandise, and from liability for death of,
or injury to, any person, caused by the willful misconduct or negligence of
Tenant or its agents.
8. Notification of Delays. Not less than once each calendar month
beginning the date of this Work Letter and continuing through the Commencement
Date, Landlord shall deliver to Tenant written notification of the number of
days during the immediately preceding calendar month Landlord's performance
under this Work Letter or the Lease was delayed as a result of Tenant Caused
Delays or Force Majeure Delays, which written notification shall also include a
description of the nature of such Tenant Caused Delay or Force Majeure Delay.
9. Miscellaneous
-------------
9.1. Consents. Whenever consent or approval of either party is
required under this Work Letter, that party shall not unreasonably withhold,
condition, or delay such consent or approval, except as may be expressly set
forth herein to the contrary. Notwithstanding the foregoing, and regardless of
any standard that may be applicable to any consent or approval rights given to
Landlord hereunder, Landlord shall be justified in
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 12
withholding, and shall not incur any liability for so withholding, any consent
or approval to any action, document, or matter that Landlord determines, in its
sole and absolute discretion, will or might adversely affect Landlord's status
as a "real estate investment trust".
9.2. Modification. No modification, waiver, or amendment of this Work
Letter or of any of its conditions or provisions shall be binding upon Landlord
or Tenant unless in writing signed by Landlord and Tenant.
9.3. Counterparts. This Work Letter may be executed in any number of
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute a single agreement with the same effect as if all
parties had signed the same signature page. Any signature page from any
counterpart of this Work Letter, signed only by one party, may be detached from
such counterpart and re-attached to any other counterpart of this Work Letter
that has a signature page signed only by the other party.
9.4. Governing Law. This Work Letter shall be governed by, construed
and enforced in accordance with the internal laws of the state in which the
Premises are located, without regard to choice of law principles of such State.
9.5. Time of the Essence. Time is of the essence of this Work Letter
and of each and all provisions thereof.
9.6. Severability. If any term or provision of this Work Letter is
declared invalid or unenforceable, the remainder of this Work Letter shall not
be affected by such determination and shall continue to be valid and
enforceable.
9.7. Merger. All understandings and agreements, oral or written,
heretofore made between the parties hereto and relating to Landlord's Work are
merged in this Work Letter, which alone (but inclusive of provisions of the
Lease incorporated herein and the final approved constructions drawings and
specifications prepared pursuant hereto) fully and completely expresses the
agreement between Landlord and Tenant with regard to the matters set forth in
this Work Letter.
9.8. Interpretation. The normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Work Letter or any schedules or
amendments hereto. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires. The captions
inserted in this Work Letter are for convenience only and in no way define,
limit or otherwise describe the scope or intent of this Work Letter, or any
provision hereof, or in any way affect the interpretation of this Work Letter.
9.9. Attorneys Fees. If either Landlord or Tenant reasonably seeks
legal services with respect to the proper interpretation or enforcement of this
Work Letter, the party receiving substantially the result it sought or defended
(the "PREVAILING PARTY"), whether by award, judgment, stipulation, settlement,
workout, default, or otherwise and whether or not any legal action may have been
instituted or instituted and then voluntarily dismissed, shall be entitled to
recover from the adverse party all reasonable fees and costs incurred by the
Prevailing Party in connection with such legal services ("LEGAL FEES"). Legal
Fees include, without limitation, (i) fees, costs, and expenses of any
engineers, accountants, appraisers, consultants, brokers, and other
professionals or experts retained or consulted by the Prevailing
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 13
Party, and other costs and expenses of investigation or analysis incurred by the
Prevailing Party in support of its position, and (ii) all such fees, costs, and
expenses incurred in any aspect of the legal process, whether out-of-court
negotiations, mediation, arbitration, commencement of suit, discovery, law and
motion, trial, appellate proceedings, or any action or participation in, or in
connection with, any case or proceeding under Chapter 7, 11, or 13 of the
Bankruptcy Code, 11 U.S.C. Section 101 et seq., or any successor statutes.
9.10. No Third Party Benefits. Landlord and Tenant do not intend by
any provision of this Work Letter to confer any right, remedy, or benefit upon
any third party, and no third party shall be entitled to enforce, or otherwise
shall acquire any right, remedy, or benefit by reason of, any provision of this
Work Letter.
9.11. No Waiver; Remedies Cumulative. No purported waiver of any
provision of this Work Letter shall be binding unless such waiver is in writing
and signed by the party to be bound. In addition, no waiver of any provision of
this Work Letter shall be deemed, or shall constitute, a waiver of any other
provision of this Work Letter, whether or not similar, nor shall any waiver
constitute a continuing waiver. Further, no failure to exercise and no delay in
exercising any power, right, remedy, or privilege under this Work Letter shall
impair such power, right, remedy, or privilege or shall be deemed, or shall
constitute, a waiver of any default under this Work Letter or acquiescence
therein, nor shall any single or partial exercise of any such power, right,
remedy, or privilege preclude any other or further exercise thereof or of any
other power, right, remedy, or privilege. Finally, all powers, rights, remedies,
and privileges existing under this Work Letter are cumulative, in addition to,
and not exclusive of any other powers, rights, remedies, or privileges otherwise
available to the parties to this Work Letter.
9.12. Incorporation by Reference. All schedules attached hereto are
hereby incorporated into this Lease and made a part hereof. If there is any
conflict between such schedules and the terms of this Work Letter, such
schedules shall control.
9.13. Entire Agreement. This Work Letter is made as a part of and
pursuant to the Lease and, together with the Lease, constitutes the entire
agreement of the parties with respect to the subject matter hereof. This Work
Letter is subject to all of the terms and limitation set forth in the Lease, and
neither party shall have any rights or remedies under this Work Letter separate
and apart from their respective remedies pursuant to the Lease.
[ SIGNATURES ON NEXT PAGE ]
<PAGE>
Work Letter [Greenhouse] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 14
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter to
be effective on the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:
-------------------------------------------------
John A. Ryals
CEO and President
ATTEST:
-------------------------
Its Secretary
------------------
[CORPORATE SEAL]
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By:
---------------------------------------------
Print Name:
-------------------------------------
Print Title:
------------------------------------
ATTEST:
-------------------------
Its Secretary
------------------
[CORPORATE SEAL]
<PAGE>
SCHEDULE A TO WORK LETTER
[PHASE 1B: GREENHOUSE]
DEVELOPMENT SCHEDULE
--------------------
<TABLE>
<CAPTION>
Event Date
--------------------------------------------------------
<S> <C>
Final approval of Greenhouse
Design Program pursuant to Section 2.3 Done; 08/25/99
Delivery to Landlord of construction
plans portion of Greenhouse Construction
Drawings pursuant to Section 2.6 Done; 03/03/00
Delivery to Landlord of remainder of
Greenhouse Construction Drawings 03/27/00
Final approval of Greenhouse Construction
Drawings pursuant to Section 3 04/14/00
Issuance of Building Permit 04/14/00
Commencement of
construction of Base Building Work Within 3 business days
after Tenant obtains necessary
permits
Issuance of building permit
for Tenant Improvements N/A
Commencement of
construction of Tenant Improvements N/A
Substantial Completion of Landlord's Work 11/01/00
Issuance of Temporary Certificate of Occupancy 11/01/00
</TABLE>
<PAGE>
EXHIBIT D
COMMENCEMENT DATE; TERM
-----------------------
This Acknowledgment, dated _______________, 2000, is given by ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company ("LANDLORD"), and
PARADIGM GENETICS, INC., a Delaware corporation ("TENANT"), and is attached to
and made a part of the Lease Agreement [Phase 1B: Greenhouse] dated April ___,
2000 (the "LEASE"), between Landlord and Tenant. Any initially capitalized
terms used but not defined herein shall have the meanings given them in the
Lease.
Tenant and Landlord hereby acknowledge and agree that, for all purposes
related to the Lease, the "COMMENCEMENT DATE" shall be _______________, 2000,
and the initial "TERM" shall expire on _______________, 2010.
IN WITNESS WHEREOF, Tenant and Landlord have executed this Acknowledgment
as of the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:
-----------------------------------------------
Its:
----------------------------------------------
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By:
-------------------------------------
Its:
-------------------------------------
<PAGE>
EXHIBIT E
CONSTRUCTION COSTS; DISBURSED CONSTRUCTION ALLOWANCE;
-----------------------------------------------------
EXCESS DISBURSED CONSTRUCTION ALLOWANCE; IMPROVEMENT RENT
---------------------------------------------------------
This Acknowledgment, dated _______________, 2000, is given by ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company ("LANDLORD"), and
PARADIGM GENETICS, INC., a Delaware corporation ("TENANT"), and is attached to
and made a part of the Lease Agreement [Phase 1B: Greenhouse] dated April ___,
2000 (the "LEASE"), between Landlord and Tenant. Any initially capitalized
terms used but not defined herein shall have the meanings given them in the
Lease.
Tenant and Landlord hereby acknowledge and agree that, for all purposes
related to the Lease, the aggregate "CONSTRUCTION COSTS" shall be $__________,
the aggregate "DISBURSED CONSTRUCTION ALLOWANCE" shall be $__________, the
aggregate "EXCESS DISBURSED CONSTRUCTION ALLOWANCE" shall be $__________, and
the initial equal monthly installments of "IMPROVEMENT RENT" shall be
$__________.
IN WITNESS WHEREOF, Tenant and Landlord have executed this Acknowledgment
as of the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:
-----------------------------------------------
Its:
----------------------------------------------
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By:
-------------------------------------
Its:
------------------------------------
<PAGE>
EXHIBIT F
ORIGINAL SECURITY AMOUNT
------------------------
This Acknowledgment, dated _______________, 2000, is given by ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company ("LANDLORD"), and
PARADIGM GENETICS, INC., a Delaware corporation ("TENANT"), and is attached to
and made a part of the Lease Agreement [Phase 1B: Greenhouse] dated April ___,
2000 (the "LEASE"), between Landlord and Tenant. Any initially capitalized
terms used but not defined herein shall have the meanings given them in the
Lease.
Tenant and Landlord hereby acknowledge and agree that, for all purposes
related to the Lease, the "ORIGINAL SECURITY AMOUNT" shall be $__________.
IN WITNESS WHEREOF, Tenant and Landlord have executed this Acknowledgment
as of the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:
-----------------------------------------------
Its:
----------------------------------------------
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By:
-------------------------------------
Its:
------------------------------------
<PAGE>
EXHIBIT G
RULES AND REGULATIONS
---------------------
(a) The sidewalk, entries, and driveways of the Project shall not be
obstructed by Tenant, or its agents, or used by them for any purpose other than
ingress and egress to and from the Premises.
(b) Tenant shall not place any objects, including antennas, outdoor
furniture, etc., in the parking areas, landscaped areas or other areas outside
of its Premises, or on the roof of the Project.
(c) No animals shall be allowed in the offices, halls, or corridors in the
Project, except for seeing-eye dogs and any other animals that may be reasonably
necessary to the Permitted Use.
(d) Tenant shall not disturb the occupants of the Project or adjoining
buildings by the use of any radio or musical instrument or by the making of loud
or improper noises.
(e) If Tenant desires telegraphic, telephonic or other electric
connections in the Premises, Landlord or its agent will direct the electrician
as to where and how the wires may be introduced; and, without such direction, no
boring or cutting of wires will be permitted. Any such installation or
connection shall be made at Tenant's expense.
(f) Tenant shall not install or operate any steam or gas engine or boiler,
or other mechanical apparatus in the Premises, except as specifically approved
in the Lease. The use of oil, gas or inflammable liquids for heating, lighting
or any other purpose is expressly prohibited. Explosives or other articles
deemed extra hazardous shall not be brought into the Project.
(g) Parking any type of recreational vehicles is specifically prohibited
on or about the Project. Except for the overnight parking of operative vehicles,
no vehicle of any type shall be stored in the parking areas at any time. In the
event that a vehicle is disabled, it shall be removed within 48 hours. There
shall be no "For Sale" or other advertising signs on or about any parked
vehicle. All vehicles shall be parked in the designated parking areas in
conformity with all signs and other markings. All parking will be open parking,
and no reserved parking, numbering or lettering of individual spaces will be
permitted except as specified by Landlord.
(h) Tenant shall maintain the Premises free from rodents, insects and
other pests.
(i) Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs or who shall in any manner do any act in violation of the
Rules and Regulations of the Project.
(j) Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and cleanliness.
Landlord shall not be responsible to Tenant for any loss of property on the
Premises, however occurring, or for any damage done to the effects of Tenant by
the janitors or any other employee or person.
<PAGE>
Rules and Regulations T.W. Alexander Ave., RTP/Paradigm Genetics, Inc.--Page 2
(k) Tenant shall give Landlord prompt Notice of any defects in the water,
lawn sprinkler, sewage, gas pipes, electrical lights and fixtures, heating
apparatus, or any other service equipment affecting the Premises.
(l) Tenant shall not permit storage outside the Premises, including
without limitation, outside storage of trucks and other vehicles, or dumping of
waste or refuse or permit any harmful materials to be placed in any drainage
system or sanitary system in or about the Premises.
(m) All moveable trash receptacles provided by the trash disposal firm for
the Premises must be kept in the trash enclosure areas, if any, provided for
that purpose.
(n) No auction, public or private, will be permitted on the Premises or
the Project.
(o) No awnings shall be placed over the windows in the Premises except
with the prior written consent of Landlord.
(p) The Premises shall not be used for lodging, sleeping, or cooking
(except to the extent contemplated in the plans and specifications for the
Premises approved by Landlord) or for any immoral or illegal purposes or for any
purpose other than that specified in the Lease. No gaming devices shall be
operated in the Premises.
(q) Tenant shall ascertain from Landlord the maximum amount of electrical
current that can safely be used in the Premises, taking into account the
capacity of the electrical wiring in the Project and the Premises and the needs
of other tenants, and shall not use more than such safe capacity. Landlord's
consent to the installation of electric equipment shall not relieve Tenant from
the obligation not to use more electricity than such safe capacity.
(r) Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's ordinary use of
the Premises and shall keep all such machinery free of vibration, noise and air
waves which may be transmitted beyond the Premises.
<PAGE>
EXHIBIT H
TENANT'S PERSONAL PROPERTY
--------------------------
Emergency diesel generator(s)
De-ionized water system pumps, tanks, and fixtures [point of use systems only]
Nitrogen gas system manifolds and LN2 storage tanks
Uninterruptable Power Supply [UPS] with battery array
Computer Disk arrays and support equipment
Modular Plant Growth Rooms
Modular (0-56C) environmental rooms
Autoclaves with internal steam supply [stand alone, movable, and not built in
only]
Glassware washer and dryer [stand alone, movable, and not built in only]
All incubators
All biological safety cabinets [non-ducted]
All laminar flow hoods [non-ducted]
Non-HVAC monitoring and control systems
Non-sprinkler Fire Suppression Systems
All Telephone-LAN-Video Communications Systems
Chemical spray booth
Soil handling equipment
Air compressor
Benches, racks, and canopies [stand alone, movable, and not built in only]
<PAGE>
EXHIBIT I
ESTOPPEL CERTIFICATE
--------------------
This TENANT ESTOPPEL CERTIFICATE ("CERTIFICATE"), dated as of
_______________, _____, is executed by PARADIGM GENETICS, INC., a Delaware
corporation ("TENANT"), in favor of ________________________________________, a
_________________________, together with its nominees, designees and assigns
(collectively, "BUYER"), and in favor of
________________________________________, a _________________________, together
with its nominees, designees and assigns (collectively, "LENDER").
RECITALS
--------
A. Buyer and ARE-104 ALEXANDER ROAD, LLC, a Delaware limited liability
company ("LANDLORD"), have entered into that certain Purchase and Sale Agreement
and Joint Escrow Instructions, dated as of __________, _____ (the "PURCHASE
AGREEMENT"), whereby Buyer has agreed to purchase, among other things,
Landlord's interests in the improved real property located in the City of
Durham, County of Durham, State of North Carolina, more particularly described
on Exhibit A attached to the Purchase Agreement (the "PROPERTY").
B. Tenant and Landlord have entered into that certain Lease Agreement
[Phase 1B: Greenhouse], dated as of April ___, 2000 (together with all
amendments, modifications, supplements, guarantees and restatements thereof, the
"LEASE"), for a portion of the Property.
C. Pursuant to the Lease, Tenant has agreed that upon the request of
Landlord, Tenant would execute and deliver an estoppel certificate certifying
the status of the Lease.
D. In connection with the Purchase Agreement, Landlord has requested that
Tenant execute this Certificate with an understanding that Lender will rely on
the representations and agreements below in granting to Buyer a loan.
NOW, THEREFORE, Tenant certifies, warrants, and represents to Buyer and
Lender as follows:
SECTION 1. LEASE.
Attached hereto as Exhibit B is a true, correct and complete copy of the
Lease, including the following amendments, modifications, supplements,
guarantees and restatements thereof, which together represent all of the
amendments, modifications, supplements, guarantees and restatements thereof:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If none, please state "None.")
<PAGE>
SECTION 2. LEASED PREMISES.
Pursuant to the Lease, Tenant leases those certain premises (the "LEASED
PREMISES") consisting of approximately _______________ rentable square feet
within the Property, as more particularly described in the Lease. In addition,
pursuant to the terms of the Lease, Tenant has the [non-exclusive] right to use
[_____ parking spaces/the parking area] located on the Property during the term
of the Lease. [Please cross-out the preceding sentence or portions thereof if
inapplicable.]
SECTION 3. FULL FORCE OF LEASE.
The Lease has been duly authorized, executed and delivered by Tenant, is in
full force and effect, has not been terminated, and constitutes a legally valid
instrument, binding and enforceable against Tenant in accordance with its terms,
subject only to applicable limitations imposed by laws relating to bankruptcy
and creditor's rights.
SECTION 4. COMPLETE AGREEMENT.
The Lease constitutes the complete agreement between Landlord and Tenant
for the Leased Premises and the Property, and except as modified by the Lease
amendments noted above (if any), has not been modified, altered or amended.
SECTION 5. ACCEPTANCE OF LEASED PREMISES.
Tenant has accepted possession and is currently occupying the Leased
Premises.
SECTION 6. LEASE TERM.
The term of the Lease commenced on __________, _____, and ends on
__________, _____, subject to the following options to extend:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If none, please state "None.")
SECTION 7. PURCHASE RIGHTS.
Tenant has no option, right of first refusal, right of first offer, or
other right to acquire or purchase all or any portion of the Leased Premises or
all or any portion of, or interest in, the Property, except as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If none, please state "None.")
SECTION 8. RIGHTS OF TENANT.
Except as expressly stated in this Certificate, Tenant:
(a) has no right to renew or extend the term of the Lease;
<PAGE>
(b) has no option or other right to purchase all or any part of the Leased
Premises or all or any part of the Property;
(c) has no right, title, or interest in the Leased Premises, other than as
Tenant under the Lease.
SECTION 9. RENT.
(a) The obligation to pay rent under the Lease commenced on __________.
The rent under the Lease is current, and Tenant is not in default in the
performance of any of its obligations under the Lease.
(b) Tenant is currently paying base rent under the Lease in the amount of
$__________ per month. Tenant has not received and is not presently entitled to
any abatement, refunds, rebates, concessions or forgiveness of base rent or
other charges, free rent, partial rent, or credits, offsets or reductions in
base rent, except as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If none, please state "None.")
(c) Tenant is currently paying improvement rent under the Lease in the
amount of $__________ per month. Tenant has not received and is not presently
entitled to any abatement, refunds, rebates, concessions or forgiveness of
improvement rent or other charges, free rent, partial rent, or credits, offsets
or reductions in improvement rent, except as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If none, please state "None.")
(d) Tenant's estimated share of operating expenses, common area charges,
insurance, real estate taxes and administrative and overhead expenses is _____%
and is currently being paid at the rate of $__________ per month, payable to:
- -------------------------------------------------------------------------------
;
- -------------------------------------------------------------------------------
there currently are no existing defenses or offsets against rent due or to
become due under the terms of the Lease, and, to the best of Tenant's knowledge,
there currently is no default or other wrongful act or omission by Landlord
under the Lease or otherwise in connection with Tenant's occupancy of the Leased
Premises, nor is there a state of facts that, with the passage of time or the
giving of notice or both, could ripen into a default on the part of Tenant, or
to the best knowledge of Tenant, could ripen into a default on the part of
Landlord under the Lease, except as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If none, please state "None.")
<PAGE>
SECTION 10. SECURITY DEPOSIT.
The amount of Tenant's security deposit held by Landlord under the Lease is
$__________.
SECTION 11. DEMOLITION DEPOSIT.
The amount of Tenant's demolition deposit held by Landlord under the Lease
is $__________.
SECTION 12. PREPAID RENT.
The amount of prepaid rent, separate from the security deposit, is
$__________, covering the period from __________, _____ to __________, _____.
SECTION 13. INSURANCE.
All insurance, if any, that Tenant is required to maintain under the Lease
is presently in effect.
SECTION 14. PENDING ACTIONS.
There is not pending or, to the knowledge of Tenant, threatened against or
contemplated by the Tenant, any petition in bankruptcy, whether voluntary or
otherwise, any assignment for the benefit of creditors, or any petition seeking
reorganization or arrangement under the federal bankruptcy laws or those of any
state.
SECTION 15. LANDLORD'S PERFORMANCE.
As of the date of this Certificate, to the best of Tenant's knowledge,
Landlord has performed all obligations required of Landlord pursuant to the
Lease; no offsets, counterclaims, or defenses of Tenant under the Lease exist
against Landlord; and no events have occurred that, with the passage of time or
the giving of notice, would constitute a basis for offsets, counterclaims, or
defenses against Landlord, except as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If none, please state "None.")
SECTION 16. ASSIGNMENTS BY LANDLORD.
Tenant has received no notice of any assignment, hypothecation or pledge of
the Lease or rentals under the Lease by Landlord. Tenant hereby consents to an
assignment of the Lease and rents to be executed by Landlord to Buyer or Lender
in connection with the Loan and acknowledges that said assignment does not
violate the provisions of the Lease. Tenant acknowledges that the interest of
the Landlord under the Lease is to be assigned to Buyer or Lender solely as
security for the purposes specified in said assignment and Buyer or Lender shall
have no duty, liability or obligation whatsoever under the Lease or any
extension or renewal thereof, either by virtue of said assignment or by any
subsequent receipt or collection of rents thereunder, unless Buyer or Lender
shall specifically undertake such liability in writing. Tenant agrees that upon
receipt of a written notice from Buyer or Lender of a default by
<PAGE>
Landlord under the Loan, Tenant will thereafter pay rent to Buyer or Lender in
accordance with the terms of the Lease.
SECTION 17. ASSIGNMENTS BY TENANT.
Tenant has not sublet or assigned the Leased Premises or the Lease or any
portion thereof to any sublessee or assignee. No one except Tenant and its
employees will occupy the Leased Premises. The address for notices to be sent
to Tenant is as set forth in the Lease.
SECTION 18. ENVIRONMENTAL MATTERS.
The operation and use of the Leased Premises does not involve the
generation, treatment, storage, disposal or release into the environment of any
hazardous materials, regulated materials and/or solid waste, except those used
in the ordinary course of operating a scientific research and development
facility (including laboratory, commercial greenhouse, and related
administrative space) or otherwise used in accordance with all applicable laws.
SECTION 19. SUCCESSION OF INTEREST.
Tenant agrees that, in the event Buyer or Lender succeeds to the interest
of Landlord under the Lease:
(a) Buyer or Lender shall not be liable for any act or omission of any
prior landlord (including Landlord);
(b) Buyer or Lender shall not be liable for the return of any security
deposit;
(c) Buyer or Lender shall not be bound by any rent or additional rent
which Tenant might have prepaid under the Lease for more than the current month;
(d) Buyer or Lender shall not be bound by any amendments or modifications
of the Lease made without prior consent of Buyer or Lender;
(e) Buyer or Lender shall not be subject to any offsets or defenses which
Tenant might have against any prior landlord (including Landlord); or
(f) Buyer or Lender shall not be liable under the Lease to Tenant for the
performance of Landlord's obligations under the Lease beyond Buyer or Lender's
interest in the Property.
SECTION 20. NOTICE OF DEFAULT.
Tenant agrees to give Buyer and Lender a copy of any notice of default
under the Lease served upon Landlord at the same time as such notice is given to
Landlord. Tenant further agrees that if Landlord shall fail to cure such
default within the applicable grace period, if any, provided in the Lease, then
Buyer or Lender shall have an additional 30 days within which to cure such
default, or if such default cannot be cured within such 30-day period, such 30-
day period shall be extended so long as Buyer or Lender has commenced and is
diligently pursuing the remedies necessary to cure such default (including, but
not limited to, commencement of foreclosure proceedings, if necessary to effect
such cure, in which event the Lease shall not be terminated while such remedies
are being pursued.
<PAGE>
SECTION 21. NOTIFICATION BY TENANT.
From the date of this Certificate and continuing until __________, _____,
Tenant agrees to immediately notify Buyer and Lender, in writing by registered
or certified mail, return receipt requested, at the following addresses, on the
occurrence of any event or the discovery of any fact that would make any
representation contained in this Certificate inaccurate:
If to Buyer: If to Lender:
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
With a copy to: With a copy to:
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
Tenant makes this Certificate with the knowledge that it will be relied
upon by Buyer in agreeing to purchase the Property and by Lender in agreeing to
provide financing for such purchase.
Tenant has executed this Certificate as of the date first written above by
the person named below, who is duly authorized to do so.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:
--------------------------------------------------
Its:
-------------------------------------------------
<PAGE>
Exhibit A
LEGAL DESCRIPTION
-----------------
<PAGE>
Exhibit B
COPY OF LEASE
-------------
<PAGE>
EXHIBIT J
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT is made and
entered into as of _______________, _____ ("AGREEMENT"), by and between ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company, together with its
nominees, designees and assigns (collectively, "LANDLORD"), PARADIGM GENETICS,
INC., a Delaware corporation ("TENANT"), and _________________________, a
_________________________ ("MORTGAGEE").
WHEREAS, Mortgagee is making a loan to Landlord and others evidenced by a
certain promissory note ("NOTE"), and secured by, among other things, a deed of
trust/mortgage to be recorded prior hereto in the public records of the City of
Durham, County of Durham, State of North Carolina ("MORTGAGE") constituting a
lien upon the real property interests described in Exhibit A hereto (the "
PROPERTY"); and
WHEREAS, Landlord and Tenant have entered into a Lease Agreement [Phase 1B:
Greenhouse] dated as of April ___, 2000 ("LEASE"), for certain leased premises
located in the Triangle Park Research Center in Research Triangle Park, Durham
County, North Carolina, containing or intended to contain a commercial
greenhouse with approximately 31,776 net rentable square feet (hereinafter
referred to as "PREMISES"); and
WHEREAS, the Lease is subordinate to the Mortgage and to the right, title,
and interests of Mortgagee thereto and thereunder; and
WHEREAS, Mortgagee wishes to obtain from Tenant certain assurances that
Tenant will attorn to Mortgagee in the event of a foreclosure by Mortgagee or
the exercise of other rights under the Mortgage; and
WHEREAS, Tenant wishes to obtain from Mortgagee certain assurances that
Tenant's possession of the Premises will not, subject to the terms and
conditions of this Agreement, be disturbed by reason of a foreclosure of the
lien of the Mortgage on the Property; and
WHEREAS, Tenant and Mortgagee are both willing to provide such assurances
to each other upon and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the above, the mutual promises
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto mutually
agree as follows:
1. AFFIRMATION. Tenant hereby agrees that the Lease now is and shall be
-----------
subject and subordinate in all respects to the Mortgage and to all renewals,
modifications and extensions thereof until such time that the Mortgage is
released, satisfied or otherwise discharged, subject to the terms and conditions
of this Agreement. Landlord and Tenant hereby affirm that the Lease is in full
force and effect and that the Lease has not been modified or amended. Mortgagee
hereby confirms that it is the holder of the Note and the beneficiary of the
Mortgage and has full power and authority to enter into this Agreement.
<PAGE>
Subordination Agreement [Loan] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 2
2. ATTORNMENT AND NON-DISTURBANCE.
------------------------------
(a) So long as Tenant is not in default under the Lease (beyond
Tenant's receipt of notice from Landlord and any grace period granted Tenant
under the Lease to cure such default) as would entitle the Landlord to terminate
the Lease or would cause without any further action of the Landlord, the
termination of the Lease or would entitle the Landlord to dispossess Tenant
thereunder, then Mortgagee agrees with Tenant that, in the event the interest of
Landlord shall be acquired by Mortgagee or in the event Mortgagee comes into
possession of or acquires title to the Property by reason of foreclosure or
foreclosure sale or the enforcement of the Mortgage or the Note or other
obligation secured thereby or by a conveyance in lieu thereof, or as a result of
any other means, then:
(i) Subject to the provisions of this Agreement, Tenant's
occupancy and possession of the Premises and Tenant's rights and privileges
under the Lease or any extensions, modifications or renewals thereof or
substitutions therefor (in accordance with the Lease and the Mortgage) shall not
be disturbed, diminished or interfered with by Mortgagee during the term of the
Lease (or any extensions or renewals thereof provided for in the Lease);
(ii) Mortgagee will not join Tenant as a party defendant in any
action or proceeding for the purpose of terminating Tenant's interest and estate
under the Lease because of any default under the Mortgage; and
(iii) The Lease shall continue in full force and effect and
shall not be terminated except in accordance with the terms of the Lease.
(b) Tenant shall be bound to Mortgagee under all of the terms,
covenants and conditions of the Lease for the balance of the term thereof
remaining (and any extensions or renewals thereof which may be effected in
accordance with any option contained in the Lease) with the same force and
effect as if Mortgagee were the landlord under the Lease, and Tenant does hereby
agree to attorn to Mortgagee as its landlord, said attornment to be effective
and self-operative without the execution of any other instruments on the part of
either party hereto immediately upon Mortgagee's succeeding to the interest of
Landlord under the Lease. Upon request of Lender or such Purchaser, Tenant shall
execute and deliver to Lender or such Purchaser an agreement reaffirming such
attornment. Tenant hereby agrees that any right of first refusal or right of
first offer to purchase the Property that Tenant may have pursuant to the terms
of the Lease (generally, a "PURCHASE RIGHT") shall not be applicable to, and
shall not block, prevent or delay, Mortgagee's or any Purchaser's acquisition of
the Property by foreclosure, deed in lieu of foreclosure, other transaction
related thereto or in substitution thereof, trustee sale, or other similar
statutory conveyance; provided, however, that any Purchase Right shall survive,
remain valid, and be exercisable by Tenant in accordance with the terms of the
Lease at any time after any such acquisition by Mortgagee or any Purchaser.
(c) In the event that the Mortgage is foreclosed and any party
("PURCHASER") other than Mortgagee purchases the Premises and succeeds to the
interest of Landlord under the Lease, Tenant shall likewise be bound to
Purchaser and Tenant hereby covenants and agrees to attorn to Purchaser in
accordance with all of the provisions of this Agreement; provided, however, that
Purchaser shall have transmitted to Tenant a written document in recordable
form, whereby Purchaser agrees to recognize Tenant as its lessee under the Lease
and agrees to be directly bound to Tenant for the performance and observance of
all the terms and conditions of the Lease required to be performed or observed
by Landlord thereunder, subject to and in accordance with the terms of this
Agreement.
<PAGE>
Subordination Agreement [Loan] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 3
(d) Mortgagee agrees that if Mortgagee shall succeed to the interest
of Landlord under the Lease as above provided, Mortgagee shall be bound to
Tenant under all of the terms, covenants, and conditions of this Lease, and
Tenant shall, from and after Mortgagee's succession to the interest of Landlord
under the Lease, have the same remedies against Mortgagee that Tenant might have
had under the Lease against Landlord if Mortgagee had not succeeded to the
interest of Landlord; provided, however, that Mortgagee (and Purchaser, as the
case may be) shall not be:
(i) liable for any act or omission of any prior lessor
(including Landlord) occurring prior to the date that Mortgagee or Purchaser
acquired title to the Premises; provided, however, no inference shall be drawn
from this clause that Mortgagee or Purchaser would not be liable for the same or
similar act or omission occurring after the date that Mortgagee or Purchaser
acquired title to the Premises; or
(ii) subject to any offsets, counterclaims, or defenses that
Tenant might have solely against any prior lessor (including Landlord); or
(iii) bound by any previous payment of rent or additional rent
for a period greater than 1 month unless such prepayment shall have been
consented to in writing by Mortgagee; or
(iv) bound by any amendment or modification of the Lease made
after the date hereof without Mortgagee's written consent; or liable to Tenant
for any loss of business or any other indirect or consequential damages from
whatever cause; provided, however, no inference shall be drawn from this clause
that Tenant would otherwise be entitled (or not entitled) to recover for loss of
business or any other indirect or consequential damages; or
(vi) liable for the return of any security deposit unless such
deposit has been paid over to the Mortgagee.
The foregoing shall not be construed to modify or limit any right Tenant may
have at law or in equity against Landlord or any other prior owner of the
Property.
3. NOTICES. All notices required or permitted to be given pursuant to
this Agreement shall be in writing and shall be sent postage prepaid, by
certified mail, return receipt requested or other nationally utilized overnight
delivery service. All notices shall be deemed delivered when received or
refused. Rejection or other refusal to accept or inability to deliver because of
changed address of which no notice has been given shall constitute receipt of
the notice, demand or request sent. Any such notice if given to Tenant shall be
addressed as follows:
Paradigm Genetics, Inc.,
104 Alexander Dr., Building 2
Research Triangle Park, NC 27709
Attention: Mr. Ian Howes
Chief Financial Officer
<PAGE>
Subordination Agreement [Loan] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 4
if given to Landlord shall be addressed as follows:
Alexandria Real Estate Equities, Inc.
135 N. Los Robles Ave., Suite 250
Pasadena, California 91101
Attention: General Counsel
if given to Mortgagee shall be addressed as follows:
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. The words "foreclosure" and "foreclosure sale" as used herein shall be
deemed to also include the acquisition of Landlord's estate in the Property by
voluntary deed, assignment or other conveyance or transfer in lieu of
foreclosure.
5. MODIFICATIONS TO LEASE. Tenant shall not modify or amend the Lease or
terminate the same without Mortgagee's prior written consent. If Mortgagee fails
to provide Tenant with a written approval of the proposed modification,
amendment or termination within 10 business days after notice to Mortgagee of
such proposal, then Mortgagee shall be deemed to have rejected such proposal.
6. ADDITIONAL AGREEMENTS. Tenant agrees that:
(a) it shall give Mortgagee copies of all notices of default and
requests for approval or consent by Landlord that Tenant gives to Landlord
pursuant to the Lease in the same manner as they are given to Landlord and no
such notice or other communication shall be deemed to be effective until a copy
is given to Mortgagee;
(b) whenever any consent or approval by Landlord is required to be
obtained by Tenant or is requested by Tenant such consent or approval shall not
be effective until it is also confirmed by or obtained from Mortgagee, provided
that Mortgagee shall respond within 30 days after Mortgagee's receipt of
Tenant's request;
(c) in all provisions of the Lease where Landlord is indemnified, the
reference to Landlord as an indemnitee shall be deemed to include Mortgagee and
any Purchaser and such agreement of indemnification shall survive the repayment
of the loan secured by the Mortgage and, to the extent provided in the Lease,
the expiration or termination of the Lease;
(d) Tenant shall name Mortgagee and any Purchaser as additional
insureds and loss payees, as applicable and appropriate, on all insurance
policies required by the Lease; and
(e) this Agreement satisfies any condition or requirement in the
Lease relating to the granting of a non-disturbance agreement by Mortgagee, and
in the event that
<PAGE>
Subordination Agreement [Loan] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 5
there are inconsistencies between the terms and provisions of this Agreement and
the terms and provisions of the Lease dealing with non-disturbance by Mortgagee,
the terms and provisions hereof shall be controlling; and
(f) Mortgagee shall have no liability under the Lease until Mortgagee
succeeds to the rights of the Landlord under the Lease, and then only during
such period as Mortgagee is the Landlord. At all times during which Mortgagee is
liable under the Lease, Mortgagee's liability shall be limited to Mortgagee's
interest in the Property.
7. MORTGAGEE CURE RIGHTS. If Landlord shall have failed to cure any
default within the time period provided for in the Lease (including any
applicable notice and grace periods), and thereafter Tenant exercises any right
to terminate the Lease, Mortgagee shall have an additional 30 days within which
to cure such default, or if such default cannot be cured by the payment of money
or reasonably requires more than 30 days to cure, then Mortgagee shall have such
additional time as may be reasonably necessary to complete such a cure
(including, if necessary, sufficient time to complete foreclosure proceedings)
provided that Mortgagee commences such cure within such 30-day period, Mortgagee
thereafter diligently prosecutes the same to completion, and Mortgagee completes
such cure no more than 60 days after the expiration of such 30-day period. The
Lease shall not be terminated (i) while such remedies are being diligently
pursued or (ii) based upon a default that is personal to Landlord and therefore
not susceptible to cure by Mortgagee or that requires possession of the Premises
to cure. Mortgagee shall in no event be obligated to cure any such default by
Landlord unless it forecloses. Nothing in this Section 7 shall affect any of
Tenant's termination rights under the Lease due to casualty or condemnation.
8. DIRECTION TO PAY. Landlord hereby directs Tenant and Tenant agrees to
make all payments of amounts owed by Tenant under the Lease directly to
Mortgagee from and after receipt by Tenant of notice from Mortgagee directing
Tenant to make such payments to Mortgagee. (As between Landlord and Mortgagee,
the foregoing provision shall not be construed to modify any rights of Landlord
under or any provisions of the Mortgage or any other instrument securing the
Note).
9. CONDITIONAL ASSIGNMENT. With reference to any assignment by Landlord
of Landlord's interest in the Lease, or the rents payable thereunder,
conditional in nature or otherwise, which assignment is made to Mortgagee,
Tenant agrees that the execution thereof by Landlord, and the acceptance thereof
by Mortgagee shall never be treated as an assumption by Mortgagee of any of the
obligations of Landlord under the Lease unless and until Mortgagee shall have
succeeded to the interest of Landlord. The foregoing sentence shall not affect
any of Tenant's rights against Landlord under the Lease.
[ SIGNATURES ON NEXT PAGE ]
<PAGE>
Subordination Agreement [Loan] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
properly executed by their duly authorized representatives as of the date first
above written.
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By:
--------------------------------------------
Its:
--------------------------------------------
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:
------------------------------------------------------
Its:
------------------------------------------------------
MORTGAGEE:
,
-----------------------------------------------------------
a
---------------------------------------------------------
By:
------------------------------------------------------
Its:
------------------------------------------------------
<PAGE>
Exhibit A
LEGAL DESCRIPTION
-----------------
<PAGE>
EXHIBIT K
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT is made and
entered into as of _______________, _____ ("AGREEMENT"), by and among ARE-104
ALEXANDER ROAD, LLC, a Delaware limited liability company, together with its
nominees, designees, and assigns (collectively, "LANDLORD"), PARADIGM GENETICS,
INC., a Delaware corporation ("TENANT"), and TRIANGLE SERVICE CENTER, INC., a
North Carolina corporation ("GROUND LESSOR").
WHEREAS, Landlord and Ground Lessor have entered into a Ground Lease
Agreement dated as of July 27, 1999, and have entered into or are entering into
a First Amendment to Ground Lease Agreement (collectively, the "GROUND LEASE")
with Ground Lessor pursuant to which Landlord has ground leased approximately
6.084 acres of land more fully described in Exhibit A (the "SITE"); and
WHEREAS, Landlord and Tenant have entered into or are entering into a Lease
Agreement [Phase 1B: Greenhouse] dated as of April ___, 2000 ("LEASE"), for
certain premises to be built on the Site containing or intended to contain a
commercial greenhouse with approximately 31,776 net rentable square feet
(hereinafter referred to as "PREMISES"); and
WHEREAS, the Lease is intended to be subordinate to the Ground Lease and to
the right, title, and interests of Ground Lessor thereunder; and
WHEREAS, Ground Lessor wishes to obtain from Tenant certain assurances that
Tenant will attorn to Ground Lessor in the event Ground Lessor terminates the
Ground Lease or exercises other rights under the Ground Lease; and
WHEREAS, Tenant wishes to obtain from Ground Lessor certain assurances that
Tenant's possession of the Premises will not, subject to the terms and
conditions of this Agreement, be disturbed by reason of the termination of the
Ground Lease or the exercise of any other rights under the Ground Lease; and
WHEREAS, Tenant and Ground Lessor are willing to provide such assurances to
each other upon and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the above, the mutual promises
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto mutually
agree as follows:
1. AFFIRMATION. Tenant hereby agrees that the Lease now is and shall be
subject and subordinate in all respects to the Ground Lease and to all renewals,
modifications and extensions thereof, subject to the terms and conditions of
this Agreement. Landlord and Tenant hereby affirm that the Lease is in full
force and effect and that the Lease has not been modified or amended. Ground
Lessor hereby confirms that it is the holder of the ground lessor's interest
under the Ground Lease and has full power and authority to enter into this
Agreement.
<PAGE>
Subordination Agreement [Ground Lease] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 2
2. ATTORNMENT AND NON-DISTURBANCE.
(a) So long as Tenant is not in default under the Lease (beyond Tenant's
receipt of notice from Landlord and any grace period granted Tenant under the
Lease to cure such default) as would entitle the Landlord to terminate the Lease
or would cause without any further action of the Landlord, the termination of
the Lease or would entitle the Landlord to dispossess Tenant thereunder, then
Ground Lessor agrees with Tenant that, in the event Ground Lessor terminates the
Ground Lease or exercises other rights under the Ground Lease that permit Ground
Lessor to acquire Landlord's interest under the Lease, then:
(i) Subject to the provisions of this Agreement, Tenant's occupancy
and possession of the Premises and Tenant's rights and privileges under the
Lease or any extensions, modifications or renewals thereof or substitutions
therefor (in accordance with the Lease and the Ground Lease) shall not be
disturbed, diminished or interfered with by Ground Lessor during the term of the
Lease (or any extensions or renewals thereof provided for in the Lease);
(ii) Ground Lessor will not join Tenant as a party defendant in any
action or proceeding for the purpose of terminating Tenant's interest and estate
under the Lease because of any default under the Ground Lease; and
(iii) The Lease shall continue in full force and effect and shall not
be terminated except in accordance with the terms of the Lease.
(b) Tenant shall be bound to Ground Lessor under all of the terms,
covenants and conditions of the Lease for the balance of the term thereof
remaining (and any extensions or renewals thereof which may be effected in
accordance with any option contained in the Lease) with the same force and
effect as if Ground Lessor were the landlord under the Lease, and Tenant does
hereby agree to attorn to Ground Lessor as its landlord, said attornment to be
effective and self-operative without the execution of any other instruments on
the part of either party hereto immediately upon Ground Lessor's succeeding to
the interest of Landlord under the Lease. Upon the request of Ground Lessor,
Tenant shall execute and deliver to Ground Lessor an agreement reaffirming such
attornment. Tenant hereby agrees that any right of first refusal or right of
first offer to purchase Landlord's interest under the Ground Lease that Tenant
may have pursuant to the terms of the Lease (generally, a "PURCHASE RIGHT")
shall not be applicable to, and shall not block, prevent or delay, Ground
Lessor's acquisition of Landlord's interest under the Lease; provided, however,
that any Purchase Right shall survive, remain valid, and be exercisable by
Tenant in accordance with the terms of the Lease at any time after any such
acquisition by Ground Lessor.
(c) Ground Lessor agrees that if Ground Lessor shall succeed to the
interest of Landlord under the Lease as above provided, Ground Lessor shall be
bound to Tenant under all of the terms, covenants, and conditions of the Lease,
and Tenant shall, from and after Ground Lessor's succession to the interest of
Landlord under the Lease, have the same remedies against Ground Lessor that
Tenant might have had under the Lease against Landlord if Ground Lessor had not
succeeded to the interest of Landlord; provided, however, that Ground Lessor
shall not be:
(i) liable for any act or omission of any prior lessor (including
Landlord) occurring prior to the date that Ground Lessor succeeded to the
interest of Landlord under the Lease; provided, however, no inference shall be
drawn from this clause that Ground
<PAGE>
Subordination Agreement [Ground Lease] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 3
Lessor would not be liable for the same or similar act or omission occurring
after the date that Ground Lessor succeeded to the interest of Landlord under
the Lease; or
(ii) subject to any offsets, counterclaims or defenses that Tenant
might have solely against any prior lessor (including Landlord); or
(iii) bound by any previous payment of rent, however denominated, for
a period greater than 1 month unless such prepayment shall have been consented
to in writing by Ground Lessor; or
(iv) bound by any amendment or modification of the Lease made after
the date hereof without Ground Lessor's written consent; or
(v) liable to Tenant for any loss of business or any other indirect
or consequential damages from whatever cause; provided, however, no inference
shall be drawn from this clause that Tenant would otherwise be entitled (or not
entitled) to recover for loss of business or any other indirect or consequential
damages; or
(vi) liable for the return of any security deposit unless such deposit
has been paid over to the Ground Lessor.
The foregoing shall not be construed to modify or limit any right Tenant may
have at law or in equity against Landlord or any other prior owner of the
Property.
(d) Ground Lessor hereby acknowledges that Section 38(b) of the Lease
contains the following terms and conditions, and hereby agrees to accept
performance of the "GROUND LEASE OBLIGATIONS" (as defined therein) from Tenant,
and to permit Tenant to enforce the "GROUND LEASE RIGHTS" (as defined therein),
at the times and in the manner described therein:
Tenant shall be responsible for, and hereby covenants to satisfy in a
timely fashion, any and all obligations, covenants, responsibilities,
and/or indemnities binding on Landlord as holder of the ground
lessee's interest under the Ground Lease or as a party to the
[Agreement Regarding Allocation of Development Rights dated as of
April ___, 2000 (the "DEVELOPMENT RIGHTS AGREEMENT")] (collectively,
the "GROUND LEASE OBLIGATIONS"), including, without limitation, the
payment or reimbursement of all expenses to be paid or reimbursed by
Landlord under the Ground Lease (but excluding the payment of the
annual rent provided for in the Ground Lease (which shall be governed
by the terms and conditions of [a certain Amended and Restated Lease
Agreement [Phase 1A: Office / Laboratory] executed as of April ___,
2000, and effective as of July 27, 1999])), the payment of the rent
provided for in the Development Rights Agreement, and the payment of
all expenses to be paid or reimbursed by Landlord under the
Development Rights Agreement; provided, however, that the terms and
conditions of this Lease shall control to the extent the
responsibility for satisfying any Ground Lease Obligation is
expressly conferred on Landlord and/or allocated between Landlord and
Tenant herein. For illustration purposes only, Sections 13 and 14 [of
the Lease] allocate between Landlord and Tenant all maintenance and
repair obligations with respect to the Premises and the Project and,
therefore, such provisions control. If Tenant fails to satisfy, in a
timely fashion, any of the Ground Lease Obligations in the manner
required hereunder,
<PAGE>
Subordination Agreement [Ground Lease] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 4
Landlord shall have the right (but not the obligation) to satisfy the
same, and any cost incurred by Landlord in doing so shall be payable
to Landlord on demand as Additional Rent or includable by Landlord as
an Operating Expense. Further, Tenant shall indemnify, defend, hold,
and save Landlord harmless from and against any and all Claims
arising out of or in connection with any such failure by Tenant.
Conversely, if Tenant gives Landlord Notice requesting Landlord to
take affirmative action to enforce any of Landlord's rights as ground
lessee under the Ground Lease or as a party to the Development Rights
Agreement or to enforce any obligation, covenant, responsibility,
and/or indemnity of the Ground Lessor under the Ground Lease and/or
the Development Rights Agreement (collectively, the "GROUND LEASE
RIGHTS") and Landlord elects not to do so, Tenant shall have the
right, at Tenant's sole cost and expense, to take affirmative action
to enforce any such Ground Lease Rights, and for such purpose
Landlord, effective as of Landlord's election not to take affirmative
action, appoints Tenant attorney-in-fact for Landlord (such power of
attorney being coupled with an interest); provided, however, that,
notwithstanding the foregoing, the exercise of any Ground Lease
Rights that relate to Hazardous Materials (as provided in Section
30(a) [of the Lease]) shall be subject to compliance with Section 3
of [a separate] Cost Sharing Agreement. Tenant shall indemnify,
defend, hold, and save Landlord harmless from and against any and all
Claims arising out of or in connection with any affirmative action
taken by Tenant to enforce any Ground Lease Rights. Tenant's rights
and obligations under this Section shall terminate and be of no
further force or effect as of the expiration or earlier termination
of this Lease, provided that all obligations that have arisen and/or
become binding hereunder but have not been fully satisfied as of the
expiration or earlier termination of this Lease shall survive such
expiration or earlier termination.
3. NOTICES. All notices required or permitted to be given pursuant to
this Agreement shall be in writing and shall be sent postage prepaid, by
certified mail, return receipt requested or other nationally utilized overnight
delivery service. All notices shall be deemed delivered when received or
refused. Rejection or other refusal to accept or inability to deliver because of
changed address of which no notice has been given shall constitute receipt of
the notice, demand or request sent. Any such notice if given to Tenant shall be
addressed as follows:
Paradigm Genetics, Inc.,
104 Alexander Dr., Building 2
Research Triangle Park, NC 27709
Attention: Mr. Ian Howes
Chief Financial Officer
<PAGE>
Subordination Agreement [Ground Lease] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 5
if given to Landlord shall be addressed as follows:
Alexandria Real Estate Equities, Inc.
135 N. Los Robles Ave., Suite 250
Pasadena, California 91101
Attention: General Counsel
if given to Ground Lessor shall be addressed as follows:
Triangle Service Center, Inc.
2 Hanes Drive
Research Triangle Park, NC 27709
Attention: Mr. James Roberson
4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5. ADDITIONAL AGREEMENTS. Tenant agrees that:
(a) it shall give Ground Lessor copies of all notices of default by
Landlord that Tenant gives to Landlord pursuant to the Lease in the same manner
as they are given to Landlord;
(b) in all provisions of the Lease where Landlord is indemnified, the
reference to Landlord as an indemnitee shall be deemed to include Ground Lessor;
(c) this Agreement satisfies any condition or requirement in the
Lease relating to the granting of a non-disturbance agreement by Ground Lessor,
and in the event that there are inconsistencies between the terms and provisions
of this Agreement and the terms and provisions of the Lease dealing with non-
disturbance by Ground Lessor, the terms and provisions hereof shall be
controlling; and
(d) Ground Lessor shall have no liability under the Lease until
Ground Lessor succeeds to the rights of the Landlord under the Lease, and then
only during such period as Ground Lessor is the landlord thereunder. At all
times during which Ground Lessor is liable under the Lease, Ground Lessor's
liability shall be limited to Ground Lessor's interest in the Property.
6. DIRECTION TO PAY. Landlord hereby directs Tenant and Tenant agrees to
make all payments of amounts owed by Tenant under the Lease directly to Ground
Lessor from and after receipt by Tenant of notice from Ground Lessor directing
Tenant to make such payments to Ground Lessor. (As between Landlord and Ground
Lessor, the foregoing provision shall not be construed to modify any rights of
Landlord under or any provisions of the Ground Lease).
[ SIGNATURES ON NEXT PAGE ]
<PAGE>
Subordination Agreement [Ground Lease] T.W. Alexander Ave., RTP
Paradigm Genetics, Inc.--Page 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
properly executed by their duly authorized representatives as of the date first
above written.
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By:
--------------------------------------------
Its:
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TENANT:
PARADIGM GENETICS, INC., (SEAL)
a Delaware corporation
By:
------------------------------------------------------
Its:
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GROUND LESSOR:
TRIANGLE SERVICE CENTER, INC., (SEAL)
a North Carolina corporation
By:
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Its:
------------------------------------------------------
<PAGE>
Exhibit A
LEGAL DESCRIPTION
-----------------
<PAGE>
EXHIBIT L
ENVIRONMENTAL INFORMATION
-------------------------
1. LEAK DETECTION TEST REPORT dated June 4, 1993, prepared by Advanced
Tank Certification, Inc., REGARDING 20,000 GALLON FUEL OIL TANK TEST RESULTS.
2. UST CLOSURE REPORT NATIONAL INSTITUTE OF ENVIRONMENTAL HEALTH SCIENCES
dated June 27, 1993, prepared by Triangle Environmental, Inc., REGARDING 1000
GALLON GASOLINE UST.
3. REPORT OF ENVIRONMENTAL SERVICES dated March 30, 1994, prepared by Law
Engineering, Inc. REGARDING NIEHS FACILITY, NORTH CAMPUS, PHASE II RESEARCH
TRIANGLE PARK, NORTH CAROLINA.
4. LETTER dated April 13, 1994, from Law Engineering, Inc., to Mr. William
Few REGARDING OBSERVATIONS OF UNDERGROUND STORAGE TANK CLOSURE AT NIEHS FACILITY
IN RESEARCH TRIANGLE PARK, NORTH CAROLINA.
5. LETTER dated April 25, 1994, from State of North Carolina Department of
Environment, Health and Natural Resources ("DEHNR"), to Brian L. Hayes at
Southwestern Environmental Audits, Inc. REGARDING WELL CONSTRUCTION PERMIT NO.
31-0444-WM-0259.
6. LETTER dated May 23, 1994, from Southeastern Environmental Audits,
Inc., together with UST CLOSURE ASSESSMENT REPORT dated May 10, 1994, prepared
by Southwestern Environmental Audit, Inc. REGARDING 20,000 GALLON FUEL OIL UST.
7. APPLICATION dated June 14, 1994, from McCarthy Associates to DEHNR
REGARDING LEAKING PETROLEUM UNDERGROUND STORAGE TANK CLEANUP FUNDS.
8. COMPREHENSIVE SITE ASSESSMENT dated July 6, 1994, prepared by
Southeastern Environmental Audits, Inc.
9. POLLUTION INCIDENT/UST LEAK REPORTING FORM dated August 15, 1994,
prepared by NIEHS REGARDING 1,000 GALLON GASOLINE UST AND INCIDENT ON MAY 6,
1993.
10. LETTER dated October 27, 1994, from DEHNR to McCarthy & Associates
REGARDING ASSIGNMENT OF FACILITY IDENTIFICATION NUMBER FOR ONE 20,000 GALLON
UST.
11. FACSIMILE COVER SHEET dated December 18, 1995, from Nettie Lowery at
DEHNR, to Jay Zimmerman at Raleigh Regional Office REGARDING DENIAL LETTERS,
together with MEMORANDUM dated December 15, 1995, from DEHNR REGARDING TRUST
FUND ELIGIBILITY DENIAL.
12. FACSIMILE COVER SHEET dated January 11, 1996, from Sean Boyles of
DEHNR to Fay Sweat, enclosing POLLUTION INCIDENT/U.S.T. LEAK REPORTING FORM
dated January 10, 1996, REGARDING MARCH 11, 1994, INCIDENT AT NIEHS NORTH
CAMPUS, together with NORTH CAROLINA GROUND WATER CONTAMINATION INCIDENT
MANAGEMENT SITE PRIORITY RANKING SYSTEM dated January 10, 1996, REGARDING
MARCH 11, 1994, INCIDENT AT NIEHS NORTH CAMPUS.
<PAGE>
13. MEMORANDUM dated January 18, 1996, from DEHNR REGARDING TF ELIGIBILITY
DENIAL NIEHS NORTH CAMPUS INCIDENT #14941.
14. LETTER dated February 15, 1996, from DEHNR to McCarthy Associates
REGARDING CLEANUP FUNDS FOR NIEHS NORTH CAMPUS SITE.
15. LETTER dated February 26, 1996, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates, to Ms. Liz Rooks at Research Triangle
Foundation of North Carolina REGARDING NPDES PERMIT ISSUED TO MCCARTHY
ASSOCIATES FOR GROUNDWATER REMEDIATION AT NIEHS NORTH CAMPUS.
16. REPORT dated August, 1996, prepared by Turner Environmental
Consultants, P.C., REGARDING FREE PRODUCT RECOVERY AND GROUNDWATER MONITORING
REPORT - FORMER NIEHS NORTH CAMPUS FACILITY 110 TW ALEXANDER DRIVE, RESEARCH
TRIANGLE PARK, NC.
17. LETTER dated November 5, 1996, from Manning, Fulton & Skinner, P.A.
counsel for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina REGARDING LEAKING FROM UNDERGROUND STORAGE TANK AT
FORMER NIEHS NORTH CAMPUS FACILITY.
18. LETTER dated December 9, 1996, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina enclosing FREE PRODUCT DELINEATION AND RECOVERY
PLAN dated December 3, 1996, prepared by Turner Environmental Consultants, P.C.
REGARDING FORMER NIEHS NORTH CAMPUS FACILITY.
19. LETTER dated May 21, 1997, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina enclosing LETTER dated May 16, 1997, from Prescott
Environmental Associates, Inc. enclosing LETTER dated May 14, 1997, from Turner
Environmental Consultants, P.C. REGARDING FREE PRODUCT RECOVERY PLAN
IMPLEMENTATION.
20. LETTER dated September 23, 1997, from by Department of Health & Human
Services, to DEHNR REGARDING CONTAMINATED SOIL FROM THE NIEHS SOUTH CAMPUS,
enclosing LETTER dated September 12, 1997, from Prescott Environmental
Associates, Inc. to DEHNR REGARDING DISPOSAL OF SOIL FROM THE FORMER NIEHS NORTH
CAMPUS FACILITY, together with FORM #GW-71.
21. LETTER dated May 4, 1998, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina enclosing LETTER dated April 30, 1998, prepared by
Prescott Environmental Associates, Inc. REGARDING FREE PRODUCT RECOVERY.
22. LETTER dated August 4, 1998, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina enclosing LETTER REPORT dated July 24, 1998,
prepared by Prescott Environmental Associates, Inc. REGARDING FREE PRODUCT
RECOVERY ACTIVITIES AT THE FORMER NIEHS NORTH CAMPUS FACILITY.
<PAGE>
23. LETTER dated August 4, 1998, from Manning, Fulton & Skinner, P.A.,
counsel for McCarthy Associates to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina enclosing LETTER dated August 2, 1998, from
Prescott Environmental Associates to NC DEHNR, enclosing LETTER REPORT dated
July 24, 1998, prepared by Prescott Environmental Associates, Inc. REGARDING
FREE PRODUCT RECOVERY ACTIVITIES AT THE FORMER NIEHS NORTH CAMPUS FACILITY.
24. LETTER dated November 2, 1998, from Manning, Fulton & Skinner, P.A.
counsel for McCarthy Associates, to Ms. Elizabeth Rooks at Research Triangle
Foundation of North Carolina, enclosing LETTER REPORT dated October 27, 1998,
prepared by Prescott Environmental Associates, Inc. REGARDING FREE PRODUCT
RECOVERY ACTIVITIES AT THE FORMER NIEHS NORTH CAMPUS FACILITY.
25. LETTER dated January 12, 1999, from Prescott Environmental Associates,
Inc., to NC DEHNR, Raleigh Regional Office REGARDING FORMER NIEHS N. CAMPUS
SITE.
26. LETTER dated January 27, 1999, from NC DEHNR to Prescott Environmental
Associates, Inc. REGARDING PROPOSED ABANDONMENT OF MONITORING WELLS AT NIEHS
NORTH CAMPUS SITE.
27. Draft PHASE I ENVIRONMENTAL SITE ASSESSMENT dated April 29, 1999,
prepared by Dames & Moore NC.
<PAGE>
EXHIBIT M
HAZARDOUS MATERIALS LIST
------------------------
[See Following Page]
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 4 to the Registration
Statement on Form S-1 of Paradigm Genetics, Inc. of our report dated February
17, 2000, except as to Note 12 which is as of April 24, 2000, relating to the
financial statements of Paradigm Genetics, Inc. which appear in such
Registration Statement. We also consent to the references to us under the
heading "Experts" in such Registration Statements.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
May 3, 2000
