FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ________ to ___________
Commission file number: 0-11749
Scios Inc.
(Exact name of Registrant as specified in its charter)
Delaware 95-3701481
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Scios Inc.
820 West Maude Ave.
Sunnyvale, CA 94086
(Address of principal executive offices) (Zip code)
(408) 616-8200
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of October 12, 1999.
Title Outstanding
Common Stock, $.001 par value 38,468,652
<PAGE>
SCIOS INC.
AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
SCIOS INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(In thousands, except share data)
<S>
ASSETS September 30, December 31,
1999 1998
------------- -------------
(Unaudited)
Current assets: <C> <C>
Cash and cash equivalents $4,815 $6,683
Marketable securities 17,237 23,394
Accounts receivable 5,171 6,768
Prepaid expenses 860 568
------------- -------------
Total current assets 28,083 37,413
Marketable securities, non-current 74,267 67,234
Property and equipment, net 12,258 32,214
Other assets 1,929 1,968
------------- -------------
TOTAL ASSETS $116,537 $138,829
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,060 $2,327
Other accrued liabilities 11,635 10,087
Deferred contract revenue 22,198 16,896
------------- -------------
Total current liabilities 34,893 29,310
Long-term debt 36,626 34,573
Minority interests -- 20
------------- -------------
Total liabilities 71,519 63,903
Stockholders' equity:
Preferred stock; $.001 par value; 20,000,000
shares authorized; none issued and outstanding -- --
Common stock; $.001 par value; 150,000,000
shares authorized; issued and outstanding
38,468,652 and 38,468,652 shares, respectively 38 38
Additional paid-in capital 416,597 416,428
Treasury stock; 735,036 and 754,199
shares, respectively (3,458) (3,481)
Notes receivable from stockholders (108) (145)
Deferred compensation, net (424) (505)
Accumulated other comprehensive income (loss) (436) 11,412
Accumulated deficit (367,191) (348,821)
------------- -------------
Total stockholders' equity 45,018 74,926
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $116,537 $138,829
------------- -------------
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCIOS INC.
AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Product sales $10,633 $7,407 $27,927 $20,566
Co-promotion commissions 2,025 1,436 6,639 4,691
Research & development contracts 2,067 4,747 7,129 32,220
------------- ------------- ------------- -------------
14,725 13,590 41,695 57,477
------------- ------------- ------------- -------------
Costs and expenses:
Cost of goods sold 5,638 4,167 14,836 11,957
Research and development 7,042 10,071 25,714 32,535
Marketing, general and administration 5,556 4,985 15,111 14,051
Profit distribution to third parties 1,718 711 4,363 1,909
Restructuring charges -- -- 6,670 --
------------- ------------- ------------- -------------
19,954 19,934 66,694 60,452
------------- ------------- ------------- -------------
Loss from operations (5,229) (6,344) (24,999) (2,975)
------------- ------------- ------------- -------------
Other income and expense:
Investment income 1,300 1,202 3,426 3,151
Interest expense (713) (657) (2,053) (1,951)
Realized gains (losses) on securities (92) 169 4,999 8,246
Other income, net -- 382 272 860
------------- ------------- ------------- -------------
495 1,096 6,644 10,306
------------- ------------- ------------- -------------
Equity in net loss of affiliates -- (518) -- (1,343)
------------- ------------- ------------- -------------
Income (loss) before provision for income taxes (4,734) (5,766) (18,355) 5,988
Provision for income taxes (1) -- (14) (127)
------------- ------------- ------------- -------------
Net income (loss) (4,735) (5,766) (18,369) 5,861
------------- ------------- ------------- -------------
Other comprehensive income (loss):
Change in unrealized gains (losses) on securities (40) 971 (11,848) 967
------------- ------------- ------------- -------------
Comprehensive income (loss) ($4,775) ($4,795) ($30,217) $6,828
------------- ------------- ------------- -------------
Earnings (loss) per common share:
Basic ($0.13) ($0.15) ($0.49) $0.16
------------- ------------- ------------- -------------
Diluted ($0.13) ($0.15) ($0.49) $0.15
------------- ------------- ------------- -------------
Weighted average number of common shares outstanding
used in calculation of:
Basic 37,708,060 37,907,160 37,726,253 37,677,168
------------- ------------- ------------- -------------
Diluted 37,708,060 37,907,160 37,726,253 38,495,891
------------- ------------- ------------- -------------
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCIOS INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Nine months ended
September 30,
1999 1998
------------ -----------
<S> (Unaudited)
Cash flows from operating activities: <C> <C>
Net income (loss) ($18,369) $ 5,861
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 2,085 2,819
Accrued long-term interest payable 2,053 1,913
Equity in net loss of affiliates -- 1,343
Gain on sale of securities (4,999) --
Minority interest (20) --
Amortization of deferred compensation 233 --
Change in assets and liabilities:
Accounts receivable 1,597 1,773
Accounts payable (1,267) 1,018
Other accrued liabilities (2,103) (4,230)
Other (252) 212
Deferred contract revenue 5,302 910
Restructuring charges 3,263 --
------------ -----------
Net cash provided by (used in) operating activities (12,477) 11,619
------------ -----------
Cash flows from investing activities:
Purchases of property and equipment (3,486) (1,645)
Proceeds from sale of investment in affiliate -- 144
Proceeds from sale of assets 21,744 --
Sales/maturities of marketable securities 80,529 212,029
Purchases of marketable securities (88,254) (227,855)
------------ -----------
Net cash provided by (used in) investing activities 10,533 (17,327)
------------ -----------
Cash flows from financing activities:
Issuance of common stock and collection of notes receivable from
stockholders, net 1,124 7,448
Purchase of treasury stock (1,048) (580)
Payment of notes payable and capital leases -- (323)
------------ -----------
Net cash provided by financing activities 76 6,545
------------ -----------
Net increase (decrease) in cash and cash equivalents (1,868) 837
Cash and cash equivalents at beginning of period 6,683 10,197
------------ -----------
Cash and cash equivalents at end of period $ 4,815 $ 11,034
------------ -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
SCIOS INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation and Accounting Policies
The unaudited consolidated financial statements of Scios Inc. ("Scios"
or the "Company") reflect, in the opinion of management, all
adjustments, consisting only of normal and recurring adjustments,
necessary to present fairly the Company's consolidated financial
position at September 30, 1999 and the Company's consolidated results
of operations and cashflows for the three-month and nine-month periods
ended September 30, 1999 and 1998. Interim-period results are not
necessarily indicative of results of operations or cash flows for a
full-year period.
These financial statements and the notes accompanying them should be
read in conjunction with the Company's annual report on Form 10-K for
the year ended December 31, 1998. Investors are encouraged to review
the Form 10-K for a broader discussion of the Company's business and
the opportunities and risks inherent in the Company's business. Copies
of the 10-K are available from the Company on request and from the
Securities and Exchange Commission's Edgar database at web site
www.sec.gov.
The year-end balance sheet data was derived from audited financial
statements, but do not include all disclosures required by generally
accepted accounting principles.
2. Restructuring Charges and Expenses
On March 1, 1999, the Company announced a restructuring plan that
included a reduction of the Company's full-time workforce by
approximately 30% and the consolidation of its headquarters,
development and research staff into currently leased facilities in
Sunnyvale, California. In the quarter ended March 31, 1999, the Company
recorded a one-time restructuring charge of approximately $6.7 million
for the disposal of certain excess assets and severance costs. The
provision for the restructure and the activity through September 30,
1999 are summarized in the following table:
<TABLE>
<CAPTION>
Accrued
Restructure Restructure
Provision at Cash Provisions at
March 1, Non-Cash (Payments) September 30,
1999 Items Receipts 1999
------------ --------- --------- -------------
<S>
(in thousands)
<C> <C> <C> <C>
Facilities $360 $(304) $56
Workforce reductions 2,819 (2,200) 619
Contractual Commitments 1,110 (312) 798
Write off of assets 1,800 $(21,262) 21,336 1,874
Lease exit costs 581 (278) 303
------------ --------- --------- -------------
$6,670 $(21,262) $18,242 $3,650
------------ --------- --------- -------------
</TABLE>
<PAGE>
3. Computation of Earnings (Loss) Per Share
The following table sets forth the computation of the Company's basic
and diluted earnings (loss) per share (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Numerator
Basic
Net income (loss) ($ 4,735) ($ 5,766) ($ 18,369) $ 5,861
Diluted
Net income (loss) ($ 4,735) ($ 5,766) ($ 18,369) $ 5,861
Denominator
Basic
Weighted average shares 37,708 37,907 37,726 37,677
Effect of dilutive securities:
Employee stock options --- --- --- 819
--------------- --------------- --------------- ---------------
Weighted average shares and
assumed conversions 37,708 37,907 37,726 38,496
--------------- --------------- --------------- ---------------
Basic earnings (loss) per share ($ 0.13) ($ 0.15) ($ 0.49) $ 0.16
--------------- --------------- --------------- ---------------
Diluted earnings (loss) per share ($ 0.13) ($ 0.15) ($ 0.49) $ 0.15
--------------- --------------- --------------- ---------------
<FN>
The potentially dilutive effect of outstanding options to purchase
common stock would have been anti-dilutive in both periods of 1999 and
in the three months ended September 30, 1998, and they were therefore
excluded from the diluted earnings calculations for these periods.
Although potentially dilutive, the payoff of the Genentech loan through
the issuance of common stock would have been anti-dilutive in 1998 and
1999 and was, therefore, excluded from the calculations.
At September 30, 1999, stock options at prices ranging from $3.688 to
$7.125 per share would have increased the number of weighted average
common shares outstanding by 172 and 473,257 shares for the three- and
nine-month periods of 1999, respectively, but were not included in the
computation of diluted income per share because they were antidilutive.
</FN>
</TABLE>
<PAGE>
4. Industry and Geographic Segment Information
Management uses one measurement of profitability for its business. The
Company receives revenue from product sales and from licensing and
development of products. The Company markets its products in the U.S.
and receives licensing revenue from partners in the U.S., Canada,
Europe and Asia Pacific and operates in one business segment.
<TABLE>
<CAPTION>
All long-lived assets are located in the United States and revenues by
geographic area are as follows for 1999 and 1998, respectively:
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 1999 1998 1999 1998
-------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues - U.S. $14,345 $10,134 $ 40,091 $ 30,661
Revenues - International 380 3,458 1,604 26,816
------- ------- ------- -------
Total $14,725 $13,592 $41,695 $57,477
------- ------- ------- -------
</TABLE>
5. Subsequent Event
On October 8, 1999 the Company announced that its collaboration with
Wyeth-Ayerst Laboratories division of American Home Products
Corporation for Fiblast(R) (trafermin) in the treatment of neurological
and cardiovascular disorders had been dissolved. All rights for Fiblast
in these indications revert to Scios. Scios and Wyeth-Ayerst have been
collaborating on Fiblast development from 1996 and shared expenses.
Dissolution of the agreement also terminated the $12 million letter of
credit provided to the Company by Wyeth-Ayerst to fund expansion of
Fiblast manufacturing capacity. No funds had been drawn down against
this letter of credit. The Company plans to out-license Fiblast and
does not expect to incur further costs to develop these indications
internally.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
In accordance with Federal laws, the Company reminds readers that the
following discussion contains forward-looking statements about plans,
objectives, future results and intentions of the Company. These forward-looking
statements are based on the current expectations of the Company, and the Company
assumes no obligation to update this information. Realization of these plans and
results involves risks and uncertainties, and the Company's actual results could
differ materially from the historical results or future plans discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those items discussed below, as well as the considerations discussed
in the Company's Form 10-K for the year ended December 31, 1998 and the
Company's Forms 10-Q for the quarters ended March 31, 1999 and June 30, 1999.
Results of Operations
Three Months Ended September 30, 1999 and 1998
Revenues in the third quarter of 1999 were $14.7 million and included
$10.6 million in product sales, $2.0 million in co-promotion commissions and
$2.1 million in contract revenues. Revenues for the corresponding period in 1998
were $13.6 million, including $7.4 million generated by product sales, $1.4
million in co-promotion commissions and $4.7 million from contract revenue.
Product sales from psychiatric products under license from SmithKline Beecham
Corporation ("SB Products") continued to outperform sales in the corresponding
period of the prior year. Co-promotion commissions increased from 1998 to 1999
due to a change in the products co-promoted by the Company that occurred in
1998. The decrease in contract revenue was mainly due to lower development
funding from Bayer AG ("Bayer") as a result of Bayer's termination of the
agreement for the commercialization of Natrecor(R)(nesiritide) in the second
quarter of 1999.
The Company incurred total operating expenses of $20.0 million in the
third quarter of 1999 versus $19.9 million in the same period in 1998. A $3.0
million decline in research and development expenses from 1998 to 1999 was
offset by increases of $1.4 million in cost of goods sold, $1.0 million in
profit distribution and $0.6 million in marketing, general and administration
expenses. The decrease in research and development expenses was mainly the
result of lower headcount due to the restructuring plan announced in March 1999.
The increases in both cost of goods sold and profit distribution were the result
of higher SB Product sales in the current quarter as compared to the year ago
quarter. Marketing, general and administration expenses increased due to
spending on Natrecor pre-marketing studies.
The net loss for the quarter was $4.7 million compared to a net loss of
$5.8 million in 1998. The $1.1 million decrease in the net loss was primarily
due to the revenue increase in 1999.
<PAGE>
Nine Months Ended September 30, 1999 and 1998
Revenues in the first nine months totaled $41.7 million in 1999 and
$57.5 million in 1998. SB Product sales increased from $20.6 million in 1998 to
$27.9 million in 1999. Co-promotion commissions increased by $1.9 million from
1998 to 1999 because of the change in product lines promoted by the Company. The
Company currently co-promotes Risperdal(R) (risperidone) with Janssen
Pharmaceutica and Paxil(R) (paroxetine HCl) with SmithKline Beecham Corporation.
The decline of $25.1 million in research and development contract revenue from
1998 to 1999 was mainly due to receipt of a $20.0 million up front payment from
Bayer for the commercialization of Natrecor and from milestone payments received
from Novo Nordisk in 1998.
For the nine-month period, costs and expenses increased from $60.5
million in 1998 to $66.7 million in 1999. The increase in expenses was primarily
due to the higher cost of goods sold and profit distribution to third parties
resulting from the higher product sales and from a one-time $6.7 million
restructure expense recognized in the first quarter of 1999.
The restructure expense resulted from the closure of the Company's Mountain View
facilities and from a 30% reduction in the Company's workforce, and is expected
to reduce annual operating expenses by $14.0 million per year. In the third
quarter, the Company completed the sale of the Mountain View facility. The
Company expects to complete the move of personnel from Mountain View to two
leased facilities in Sunnyvale, California by the end of October 1999. A portion
of the Mountain View facility will continue to be leased back through the second
quarter of 2000 to fulfill an obligation to Kaken Pharmaceutical associated with
their drug approval application for Fiblast in Japan.
Other income and expense declined from $10.3 million for the nine-month
period in 1998 to $6.6 million for the same period in 1999. The decrease was
mainly due to a reduction in realized gains on the sale of the Company's
securities from period to period. For the nine-month period in 1998, realized
gains on securities were $8.2 million which was primarily the result of the sale
of the Company's entire interest in its subsidiary, Karo Bio, through a public
stock offering. For the same period in 1999, realized gains were $5.0 million,
which were mainly due to the sales of the Company's holdings in Guilford
Pharmaceuticals Inc.
The Company had a net loss of $18.4 million for the first nine months
of 1999 versus net income of $5.9 million for the same period in 1998. The $24.3
million change in income is primarily due to the $20.0 million up front payment
received from Bayer for commercialization of Natrecor in 1998, coupled with the
$6.7 million recorded for restructuring in 1999.
The ability of the Company to achieve profitability depends principally
on the Company's success in developing and commercializing its own products and
on its ability to complete agreements with third parties that result in
additional revenue. Among the factors that will determine the Company's success
in commercializing its products are: the demonstrated safety and efficacy of
products in development; the cost of and the time taken to complete clinical
trials and regulatory submissions; the timing and scope of regulatory approvals,
particularly with respect to the Company's lead product Natrecor(R)
(nesiritide); the Company's success in managing third party manufacturers to
ensure a cost-effective drug supply; the Company's ability to develop and
implement cost effective sales and marketing strategies either on its own behalf
or in partnership with other companies; and the level of market acceptance if
products are approved, both at product launch and over time. The Company's
ability to raise additional
<PAGE>
revenue through third parties will be dependent on the factors described above,
as well as other factors such as: its success in marketing and selling the
third-party products which it may acquire the right to co-promote; the
disposition of various patent proceedings related to the protection of the
Company's potential products; the perceived value of the Company's current
product portfolio and research programs to outside parties; and the success of
third parties, such as Kaken Pharmaceutical Co., Ltd. on Fiblast(R) (trafermin)
and Novo Nordisk A/S on GLP-1, in developing and commercializing the Company's
products.
Liquidity and Capital Resources
Combined cash, cash equivalents and marketable securities (both current
and non-current) totaled $96.3 million at September 30, 1999, a decrease of $1.0
million from December 31, 1998. For the nine-month period, cash received from
the sale of the Company's equity holdings in Guilford Pharmaceuticals and from
the sale of the Company's Mountain View, California facility offset cash used to
fund the Company's operations. At the end of the third quarter, the Company
received a $4 million milestone payment due October 1st, from Novo Nordisk
associated with the development of GLP-1. The payment was recorded as deferred
revenue and will be recognized as revenue in the fourth quarter.
The Company is striving to achieve profitability over the next several
years. The timing of the Company's success in reaching its objectives to achieve
and sustain profitability, in the short term, depends principally on the success
of the Company in achieving regulatory approvals and generating sales from
Natrecor. The Company has recently determined with the FDA the nature of the
additional clinical trials that the agency will require before it will consider
approval of Natrecor for marketing. The Company expects to initiate enrollment
in the trial in October 1999, with enrollment in the study to be approximately
500 patients at an estimated cost of $10.0 million. Profitability will also
depend on a number of other factors including the Company's success and
timeliness of its product development, clinical trial, regulatory approval and
product introduction efforts. Other contributing factors will be the Company's
ability to develop new revenue sources to support research and development
programs and its success in marketing and promoting the products of third
parties that may be licensed by the Company.
The Company's resources of $96.3 million in cash, cash equivalents and
marketable securities at September 30, 1999, together with revenues from product
sales, collaborative agreements, interest income and any funding from existing
or future debt or equity arrangements, will be used to support current and new
clinical trials for proprietary products under development, to support
development and commercialization efforts for prospective products and for other
general purposes. The Company believes its cash resources will be sufficient to
meet its operating and capital requirements for at least the next several years.
Key factors that will affect future cash use and the timing of the Company's
need to seek additional financing include the Company's decisions concerning the
degree to which it will incur expenses to launch its products in the United
States market following the necessary regulatory approvals, the results of the
Company's partnering efforts, the timing and amounts realized from licensing and
partnering activities, the rate of spending required to develop the Company's
products and respond to changing business conditions, and the net contribution
produced by the Company's ability to co-promote and market products for third
parties.
<PAGE>
Over the long-term, the Company may need to arrange additional
financing for the future operation of its business, including the
commercialization of products currently under development, and it will consider
collaborative arrangements and additional public or private financings,
including additional equity financings. Factors influencing the availability of
additional funding include, but are not limited to, the Company's progress in
product development, investor perception of the Company's prospects and the
general conditions of the financial markets.
Impact of Year 2000
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Based on recent assessments, the Company has determined that it will
not be required to modify or replace significant portions of hardware or
software to ensure that those systems will properly utilize dates beyond
December 31, 1999. The Company presently believes that with achievable
modifications and modest replacement of existing hardware and software, the Year
2000 Issue can be mitigated. However, if such modifications and replacements are
not made, or are not completed on a timely basis, the Year 2000 Issue could have
an impact on the operations of the Company.
The Company's plan to resolve the Year 2000 Issue involves the
following four phases: assessment, remediation, testing, and implementation. To
date the Company has fully completed its assessment of all internal systems that
could be significantly affected by the Year 2000. The completed assessment
indicated that most of the Company's significant information technology systems
are Year 2000 compliant. That assessment did, however, indicate that certain
systems were at risk. Affected systems include chromatography, clinical case
report forms tracking, and statistical analysis software. The Company is
currently assessing cost comparisons on whether to remediate or replace this
equipment and expects to have the equipment corrected and re-tested by October
31, 1999. For its information technology exposures, to date the Company is 80%
complete on the remediation phase and expects to complete software reprogramming
and replacement no later than November 30, 1999.
The Company is in the process of querying its important suppliers and
contractors (external agents) regarding their Year 2000 remediation activities.
To date, the Company is not aware of any external agent Year 2000 issue that
would materially impact the company's results of operations, liquidity, or
capital resources. However, the Company has no means of ensuring that external
agents will be Year 2000 ready. The inability of external agents to complete
their Year 2000 resolution process in a timely fashion could materially impact
the Company. The effect of non-compliance by external agents is not
determinable. The Company will update its analysis of external agent systems in
subsequent reports.
The Company will utilize both internal and external resources to
reprogram, or replace, test and implement the software and scientific equipment
for Year 2000 modifications. The total cost of the Year 2000 project is
estimated at approximately $75,000 and is being funded through operating
<PAGE>
cash flows. To date, the Company has incurred approximately $31,000 related to
all phases of the Year 2000 project. Of the total remaining project costs,
approximately $28,000 is attributable to the purchase of new software, $10,000
for new hardware, both of which will be capitalized, and $6,000 for the repair
of hardware and software.
The Company's plans to complete the Year 2000 modifications are based
on management's best estimates, which were derived utilizing numerous
assumptions of future events including continued availability of certain
resources, and other factors. Estimates on the status of completion and the
expected completion dates are based on costs incurred to date compared to total
expected costs. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
The Company has not completed a formal contingency plan for
non-compliance, but it is developing a plan based on the information obtained
from third parties and an on-going evaluation of the Company's own systems. The
Company anticipates having a contingency plan in place by November 30, 1999,
which will include development of backup procedures, identification of alternate
suppliers and possible increases in supplies inventory levels. The Company has
not identified its most reasonably likely worst case scenario with respect to
possible losses in connection with Year 2000 related problems. The Company plans
on completing this analysis by November 30, 1999.
The information above contains forward-looking statements including,
without limitation, statements relating to the Company's plans, strategies,
objectives, expectations, intentions, and adequate resources that are made
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Readers are cautioned that forward-looking statements about
the Year 2000 should be read in conjunction with the Company's disclosures in
its Annual Report or Form 10-K as filed with the Securities and Exchange
Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No significant change in market risk has occurred since the filing by
the Company on Form 10-K for the year ended December 31, 1998. Reference is made
to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk,
in the Company's Annual Report on Form 10-K for the year ended December 31,
1998.
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) Exhibits
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
10.39 Purchase and Sale Agreement and Joint Escrow Instructions
(Mountain View Real Estate Sale), dated May 24, 1999 between
Alexandria Real Estate Equities, Inc. and Registrant and
Registrant's wholly owned Subsidiary Bio-Shore Holdings, Ltd.
Portions of the exhibit has been omitted pursuant to a request for
confidential treatment.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SCIOS INC.
October 12, 1999 By: /s/Richard B. Brewer
-------------------------------------------
Richard B. Brewer, President and CEO
October 12, 1999 By: /s/David W. Gryska
-------------------------------------------
David W. Gryska, Vice President and CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet, consolidated statement of operations, and
consolidated statement of cash flows included in the Company's Form 10-Q for the
period ending September 30, 1999, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Sep-30-1999
<CASH> 4,815
<SECURITIES> 91,504
<RECEIVABLES> 5,171
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,083
<PP&E> 29,514
<DEPRECIATION> 17,256
<TOTAL-ASSETS> 116,537
<CURRENT-LIABILITIES> 34,893
<BONDS> 36,626
<COMMON> 38
0
0
<OTHER-SE> 44,980
<TOTAL-LIABILITY-AND-EQUITY> 116,537
<SALES> 27,927
<TOTAL-REVENUES> 41,695
<CGS> 14,836
<TOTAL-COSTS> 66,694
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,053
<INCOME-PRETAX> (18,355)
<INCOME-TAX> 14
<INCOME-CONTINUING> (18,369)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,369)
<EPS-BASIC> (0.49)
<EPS-DILUTED> (0.49)
</TABLE>
EXHIBIT 10.39
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
MAY 24, 1999
BY AND AMONG
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation
"Buyer"
AND
BIO-SHORE HOLDINGS, LTD.,
a CALIFORNIA LIMITED PARTNERSHIP
AND
SCIOS INC.,
a Delaware corporation
COLLECTIVELY,
"Seller"
<PAGE>
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this
"Agreement") is made and entered into as of May 24, 1999, by and among (i)
ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation, as buyer
("Buyer"), and (ii)(A) BIO-SHORE HOLDINGS, LTD., a California limited
partnership ("Bio-Shore"), and (B) SCIOS INC., a Delaware corporation ("Scios"),
as seller (collectively, "Seller"), for the purposes of setting forth the
agreement of the parties and of instructing CHICAGO TITLE COMPANY ("Escrow
Agent"), with respect to the transactions contemplated by this Agreement.
RECITALS
A. Bio-Shore is the current holder of the ground lessee's interest under a
certain Lease (Relating To Parcel III) dated October 1, 1981, by and between
Juana Salado, as Trustee of The Salado Living Trust, dated June 7, 1976, as
lessor (together with any successor or assign, "Ground Lessor"), and Charleston
Properties, a general partnership, as lessee ("Charleston") (as the same may
have been amended, modified, supplemented, restated, renewed, assigned, or
extended, the "Ground Lease"). A Short Form of Ground Lease was recorded March
11, 1982, as Instrument No. 7298629, in Book G645, at Page 429 of the Official
Records of Santa Clara County (the "County"), California (the "Official
Records"). Charleston assigned its rights as ground lessee under the Ground
Lease to Bio-Shore pursuant to a certain Ground Lease Assignment and Assumption
and Reservation of Easements dated December 30, 1986, and recorded December 30,
1986, as Instrument No. 9090415, in Book J981, at Page 1245 of the Official
Records.
B. The Ground Lease covers approximately 7.34 acres of real property
located in the City of Mountain View, California, as legally described on
Exhibit A attached hereto (the "Land"). The Land currently contains an
approximately 98,964 square foot office, laboratory, and pilot manufacturing
facility (the "Facility") comprised of three buildings (collectively, the
"Buildings") commonly known as 2450 Bayshore Parkway (or Building 1) ("2450
Bayshore Building"), 2425 Garcia Avenue (or Building 2) ("2425 Garcia
Building"), and 2400 Bayshore Parkway (or Building 3) ("2400 Bayshore
Building"). The 2450 Bayshore Building contains, among other things, laboratory
space and corporate headquarters for Scios. The 2425 Garcia Building contains,
among other things, manufacturing facilities, bioreactor rooms (the "Bioreactor
Rooms") and a vivarium (the "Vivarium"). The 2400 Bayshore Building primarily
contains office space.
C. Scios currently occupies 100% of the rentable square
footage of the Facility pursuant to a certain Temporary Lease dated January 1,
1987, between Bio-Shore and Scios (then California Biotechnology Inc., a
California corporation), as amended by a certain Amendment To Temporary Lease
dated January 1, 1989, between Bio-Shore and Scios (then California
Biotechnology Inc., a Delaware corporation), a certain Second Amendment To
Temporary Lease dated January 15, 1989, between Bio-Shore and Scios (then
California Biotechnology Inc., a Delaware corporation), and a certain Third
Amendment To Temporary
<PAGE>
Lease dated January 1, 1993, between Bio-Shore and Scios (then known as Scios
Nova Inc., the successor name for California Biotechnology
Inc.) (collectively, the "Temporary Lease").
D. Bio-Shore is wholly-owned by
Bio-Shore Management Corp., a California corporation ("Bio-Shore Management"),
as sole general partner, and Scios, as sole limited partner. In addition,
Bio-Shore Management is wholly-owned by Scios. Bio-Shore's only assets are the
"Ground Lease Interest" and the "Improvements" (as such terms are defined
below). Scios owns and operates the business currently conducted in the
Facility, and owns all of the "Tenant Leases", "Personal Property", and
"Intangible Property" (as such terms are defined below).
E. Upon and subject to the terms and conditions set forth in this Agreement,
Seller desires to sell and Buyer desires to purchase the following
(collectively, the "Property"):
(i) the ground lessee's interest in the Land, together with
all rights, privileges, and easements appurtenant thereto or used in
connection therewith, including, without limitation, all mineral, oil,
gas, and other hydrocarbon substance rights, all development rights,
air rights, water, water rights and water stock relating thereto, all
strips and gores, and all right, title, and interest in and to any
streets, alleys, easements, rights-of-way, public ways, or other rights
appurtenant, adjacent, or connected thereto or used in connection
therewith (collectively, the "Ground Lease Interest");
(ii) all of Seller's right, title, and interest in and to all
buildings, improvements, structures, and fixtures now or hereafter
included or located on or in the Land (collectively, the
"Improvements") and all apparatus, equipment, appliances, and other
fixtures used in connection with the operation or occupancy of the Land
and the Improvements, such as heating, air conditioning or mechanical
systems and facilities used to provide any utility services,
refrigeration, ventilation, waste disposal, or other services now or
hereafter located on or in the Land or the Improvements (the Ground
Lease Interest and the Improvements are sometimes hereinafter
collectively referred to as the "Real Property");
(iii) Seller's interest in all leases, licenses, and other
occupancy agreements covering the Land and Improvements, if any (these
leases, together with all amendments, modifications, extensions, or
supplements thereto or guarantees thereof, are collectively referred to
in this Agreement as the "Tenant Leases" and are identified in the
"Rent Roll" (as defined in Section 4.6 below) attached hereto as
Exhibit B-2);
(iv) all tangible personal property, equipment, and supplies
(collectively, the "Personal Property") now or hereafter owned by
Seller and located on or about the Land or the Improvements or attached
thereto or used in connection with the use, operation, maintenance, or
repair thereof, including, without limitation, the personal property
designated in Exhibit C-1 attached hereto but excluding the personal
property (if any) designated in Exhibit C-2 attached hereto (Seller and
Buyer shall prepare a detailed inventory of the Personal Property
within 15 days after the Execution Date, and thereafter the inventory
of the Personal Property shall serve as Exhibit C-1 hereto); and
(v) all intangible property (collectively, the "Intangible
Property") now or hereafter owned by Seller and used in connection with
the Real Property or the Personal Property, including, without
limitation, Facility-specific trademarks and trade names, transferable
licenses, architectural, site, landscaping, or other permits,
applications,
<PAGE>
approvals, authorizations, and other entitlements,
transferable guarantees and warranties covering the Real Property
and/or the Personal Property, all contract rights (including rights
under the "Service Contracts" (as defined in Section 4.13 below)),
books, records, reports, test results, environmental assessments,
as-built plans, specifications, and other similar documents and
materials relating to the use or operation, maintenance, or repair of
the Real Property and/or the Personal Property or the construction or
fabrication of any part thereof, and all transferable utility
contracts.
NOW, THEREFORE, in consideration of the foregoing Recitals, which are
incorporated herein by this reference, the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree, and
instruct Escrow Agent, as follows:
1. AGREEMENT TO PURCHASE AND SELL.
Subject to all of the terms and conditions of this Agreement,
Seller agrees to sell, transfer, and convey to Buyer, and Buyer agrees to
acquire and purchase from Seller, the Property upon the terms and conditions
set forth herein.
2. PURCHASE PRICE.
The purchase price for the Property (the "Purchase Price") shall be the
sum of $22,165,000.00, subject to adjustments pursuant to Section 2.3 below and
subject to prorations and adjustments provided for in this Agreement, including,
without limitation, Section 10. The Purchase Price shall be payable as follows:
2.1. Deposit.
2.1.1. Initial Deposit.
Not later than the date that is 3 "Business Days" (as
defined in Section 17.18 below) after the "Execution Date" (as hereinafter
defined), Buyer shall deposit into Escrow the sum of $250,000.00 (the "Initial
Deposit"). For purposes of this Agreement, the "Execution Date" shall mean May
28, 1999. Within 3 Business Days after the Execution Date, Seller and Buyer
shall confirm in writing the specific dates for deadlines under this Agreement
based upon the Execution Date determined as provided above and shall notify
Escrow Agent of such dates.
2.1.2. Additional Deposit.
If Buyer elects not to
terminate this Agreement in accordance with either Section 3.1.3 or Section 3.7
hereof, Buyer shall deposit into Escrow, not later than the date that is 1
Business Day after the "Due Diligence Termination Date" (as defined in Section
3.7 below), the sum of $500,000.00 (the "Additional Deposit").
2.1.3. Handling of Deposit.
Escrow Agent shall deposit the Initial Deposit and the Additional
Deposit (collectively, the "Deposit") in a non-commingled federally insured
interest bearing trust account and shall invest the Deposit in insured money
market accounts, certificates of deposit, United States Treasury Bills, or such
other instruments as Buyer may instruct from time to time. Upon Buyer's deposit
of the Additional Deposit, the entire Deposit shall become non-refundable,
except as may be expressly provided otherwise herein. If the sale and purchase
<PAGE>
of the Property is consummated as contemplated hereunder, the amount of the
Deposit, plus any interest or dividends earned thereon, shall be credited
against the Purchase Price at the "Closing" (as defined in Section 8.1 below).
If the sale and purchase
of the Property is not consummated because of the
termination of this Agreement by Buyer in accordance with any right to so
terminate provided herein, or the failure of any "Buyer's Conditions" (as
defined in Section 7.1 below), or for any other reason except for a default
under this Agreement solely on the part of Buyer, Buyer shall give Seller and
Escrow Agent Notice of the same, and the Deposit, plus any interest or dividends
earned thereon, shall be immediately returned to Buyer by Escrow Agent.
2.2. Leaseback To Scios.
Scios currently occupies 100% of the rentable square footage
of the Facility pursuant to the Temporary Lease. Upon the sale and purchase of
the Property as contemplated hereunder, Bio-Shore and Scios will terminate the
Temporary Lease (with no cost or liability to Buyer) and Scios will lease the
Facility from Buyer pursuant to a lease agreement in form and substance mutually
agreed upon by Buyer and Scios in accordance with the procedure set forth below
(the "Leaseback"). The Leaseback shall be for a fixed term expiring (i) 6 months
after the "Closing Date" (as defined in Section 8.1 below), as to all portions
of the Facility other than the Bioreactor Rooms (the "Primary Facility"), and
(ii) 7 months after the Closing Date, as to the Bioreactor Rooms. Among other
things, the Leaseback shall provide for:
(a) monthly base rent of [***] per rentable square foot ("Base Rent");
(b) the payment by Scios of additional monthly rent equal to all
reasonable operating costs and expenses of any kind or description ("Operating
Costs") incurred or accrued by Buyer with respect to the Facility (including,
without limitation, maintenance and repair costs, insurance premiums, real and
personal property taxes, and utilities) for the period (1) through and including
December 31, 1999, as to the Primary Facility and (2) through and including
January 31, 2000, as to the Bioreactor Rooms;
c) the right of Buyer to terminate the Leaseback, at any time, for any
portion of the Primary Facility for which Buyer has entered into binding
leases with persons or entities other than Scios; and
d) the payment by Scios of a fee upon the termination of the Leaseback as
to any portion of the Primary Facility (the "Termination Fee"), which
Termination Fee shall be (1) [***], and (2) payable in 2 installments, with
60.00% of the Termination Fee payable upon the effective date of the termination
in question and the balance of the Termination Fee payable on the 90th day after
such effective date.
Seller hereby acknowledges and agrees that the Purchase Price has been agreed to
by Buyer in reliance on Scios entering into the Leaseback and either paying the
aggregate monthly rent that would be due thereunder through the entire term of
the Leaseback or, in lieu of thereof, the Termination Fee.
Not later than the date that is 2 Business Days after the "Ground Lease
Termination Date" (as defined in Section 3.1.2 below), Buyer shall prepare and
deliver to Scios a draft of the proposed Leaseback. Within 5 Business Days after
Scios' receipt of the draft of the proposed Leaseback, Scios shall give Buyer
Notice of any reasonable objections, questions, and/or comments (generally,
"Comments") that Scios may have regarding such draft. Within 5 Business Days
after Buyer's receipt of any such Comments, Buyer shall cause the draft of the
proposed
***A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE>
Leaseback to be revised to address such Comments in a reasonable manner and to
be resubmitted to Scios for further review and/or approval. Within 5 Business
Days after Scios' receipt of the revised draft of the proposed Leaseback, Scios
shall deliver to Buyer any final Comments that Scios may have regarding such
revised draft. Within 5 Business Days after Buyer's receipt of any such final
Comments, Buyer shall cause the revised draft of the proposed Leaseback to be
revised further to address such final Comments in a reasonable manner and to be
resubmitted to Scios for execution.
2.3. Adjustments To Purchase Price.
2.3.1. Modification of Ground Lease Percentage Rent.
If Ground Lessor fails or refuses
to deliver to Buyer at the Closing the "Ground Lease Consent" (as defined in
Section 3.1.2 below) with a provision modifying the current "percentage rent"
calculation under the Ground Lease in the manner set forth in Section 2(a) of
the form of Ground Lease Consent attached hereto as Exhibit T, the Purchase
Price shall be reduced by the sum of $292,500.00.
2.3.2. Cost Savings.
The Purchase Price shall be reduced by the amount that the total of (i) the cost
of the Survey, (ii) Seller's share of the cost of the "Phase I Study" and "Phase
I Report" (as such terms are defined in Section 3.3 below), and (iii) Seller's
share of the cost of the "Phase II Study" and "Phase II Report" (as such terms
are defined in Section 4.20.4 below), is less than $40,000.00.
2.4. Balance.
On the Closing Date, Buyer shall cause the Deposit (plus any interest or
dividends earned thereon) to be disbursed to Seller and shall pay to Seller the
balance of the Purchase Price over and above the amount of the Deposit
(plus any interest or dividends earned thereon) by wire transfer of federal
funds to Escrow Agent, net of all prorations and adjustments provided
herein.
2.5. Allocation of Purchase Price.
Buyer and Seller hereby agree to allocate the Purchase Price for
all tax and non-tax purposes among the components of the Property described in
Exhibit D attached hereto (the "Allocation Schedule"). Buyer and Seller hereby
agree that the Allocation Schedule shall be prepared in a manner consistent with
the rules prescribed under Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code") and shall be completed by Buyer and Seller not later than
the date that is 1 Business Day after the Due Diligence Termination Date. Buyer
and Seller hereby each (a) agree to use the amounts allocated pursuant to the
Allocation Schedule in filing all tax returns (including any amended tax
returns) and (b) agree not to take any position on or in connection with any
such tax return or otherwise that is inconsistent with such allocation.
3. DUE DILIGENCE
3.1. Ground Lease.
3.1.1. Deliveries By Seller.
Seller has delivered
to Buyer a true, correct, and complete copy of the Ground Lease, including any
amendments, modifications, supplements, and restatements thereto (except for a
certain Recognition Agreement dated May ___, 1985 (the "Recognition Agreement"),
among Ground Lessor, Charleston, and Union Mutual Life Insurance Company (a
Memorandum of Recognition Agreement was recorded May 9, 1985, as Instrument No.
8403810 in Book J341, Page 988, of the Official Records)), and any short forms
or memoranda thereof. Seller, at Seller's sole cost and expense, shall deliver
<PAGE>
or make available to Buyer before 5:00 p.m. (California time) on the 2nd
Business Day after the Execution Date, to the extent such items are in Seller's
possession or control or in the possession or control of Seller's agents,
auditors, independent contractors, or representatives ("Seller's Possession"),
(a) true, correct, and complete copies of any correspondence with authorized
representatives of the Ground Lessor or any other material correspondence
related to the Ground Lease, and (b) Bio-Shore's existing title policy for the
Ground Lease Interest, if available. Further, Seller, at Seller's sole cost and
expense, shall promptly deliver or make available to Buyer a true, correct, and
complete copy of the Recognition Agreement if and when Seller obtains the same.
3.1.2. Buyer's Review of Ground Lease Matters.
At Buyer's request, Seller has
submitted to Ground Lessor, for Ground Lessor's review and approval, (a) a
consent to assignment and modification of ground lease, substantially in the
form of Exhibit T attached hereto (the "Ground Lease Consent"), and (b) a ground
lease estoppel certificate, substantially in the form of Exhibit U attached
hereto (the "Ground Lease Estoppel"). Seller has contacted authorized
representatives of the Ground Lessor and offered to arrange for an introduction
of Buyer, and shall assist and cooperate with Buyer in providing Buyer access to
such authorized representatives, it being understood and agreed that Buyer may
negotiate such changes to the Ground Lease Consent and/or the Ground Lease
Estoppel and conduct such inquiries and investigations of the Ground Lessor as
Buyer, in its sole discretion, deems advisable or necessary. In addition, not
later than the date that is 3 Business Days before the "Ground Lease Objection
Date" (as hereinafter defined), Buyer shall have received the Ground Lease
Estoppel executed and acknowledged on behalf of Ground Lessor and a written
agreement from Ground Lessor pursuant to which Ground Lessor irrevocably agrees
to deliver the Ground Lease Consent at the Closing. Buyer shall have until 5:00
p.m. (California time) on June 16, 1999 (the "Ground Lease Objection Date"), to
give Seller Notice of any objection that Buyer may have to any aspect of the
Ground Lease (including, without limitation, the Recognition Agreement, any
deviations from the requested form of the Ground Lease Estoppel or the Ground
Lease Consent that may be required by Ground Lessor, any additional documents or
instruments that Ground Lessor contends constitute part of the Ground Lease, or
any amendment or update to the Ground Lease Estoppel or the Ground Lease Consent
received by Buyer before the Ground Lease Objection Date (provided, however,
that if any such amendment or update is received by Buyer, Buyer shall have an
additional 3 Business Days, regardless of the Ground Lease Objection Date or the
"Scheduled Closing Date" (as defined in Section 8.1 below) (but subject to
Section 8.1 below), following Buyer's receipt of such amendment or update and
legible copies of all documents referenced therein, to give Seller Notice of
objections to any aspect of such amendment or update)). Any aspect of the Ground
Lease (or any amendment or update thereof) not objected to by Buyer as provided
above shall be deemed to be "Permitted Ground Lease Matters". If, however, Buyer
objects to any aspect of the Ground Lease ("Objectionable Ground Lease
Matters"), Seller shall have until 5:00 p.m. (California time) on the 2nd
Business Day after receiving Buyer's Notice of Objectionable Ground Lease
Matters to give Buyer Notice that (i) Seller will correct or cure specific
Objectionable Ground Lease Matters ("Voluntary Ground Lease Cure Matters"),
and/or (ii) Seller will not take any action with respect to specific
Objectionable Ground Lease Matters. If Seller elects not to take any action with
respect to any specific Objectionable Ground Lease Matters and Buyer does not
terminate this Agreement on or before 5:00 p.m. (California time) on the 2nd
Business Day after receiving Seller's Notice of such election (the "Ground Lease
Termination Date"), Buyer shall be deemed to have elected to proceed with the
purchase and to accept the Ground Lease Interest subject to such Objectionable
Ground Lease Matters.
<PAGE>
3.1.3. Ground Lease Termination Right.
Buyer shall have
the right to terminate this Agreement at any time on or before the Ground Lease
Termination Date if, during the course of Buyer's due diligence investigations
of the Ground Lease, Buyer determines, in Buyer's sole and absolute discretion,
that Buyer does not want to accept the Ground Lease Interest subject to any
Objectionable Ground Lease Matters. Buyer may exercise such termination right by
delivering a Notice of termination to Seller and Escrow Agent (a "Ground Lease
Termination Notice") on or before the Ground Lease Termination Date. Upon the
timely delivery of such Ground Lease Termination Notice, (i) Escrow Agent shall
immediately return to Buyer the Initial Deposit (plus any interest or dividends
earned thereon), (ii) the parties shall equally share the cancellation charges
of Escrow Agent and "Title Company" (as defined in Section 3.10.1 below), and
(iii) this Agreement shall automatically terminate and be of no further force or
effect and neither party shall have any further rights or obligations hereunder,
other than pursuant to any provision hereof that expressly survives the
termination of this Agreement. If Buyer has timely delivered to Escrow Agent a
Ground Lease Termination Notice, no notice to Escrow Agent from Seller shall be
required for the return to Buyer of the Initial Deposit (plus any interest or
dividends earned thereon). If Buyer does not exercise such termination by
delivery of the Ground Lease Termination Notice on or before the Ground Lease
Termination Date, then Buyer's right to terminate this Agreement pursuant to
this Section shall automatically lapse.
3.1.4. Seller's Obligations Regarding Ground Lease Matters.
If Buyer does not elect to terminate this Agreement
pursuant to Section 3.1.3 above, Seller, as a condition to Closing, shall take
all action necessary to correct or cure Voluntary Removal Ground Lease Matters
and the following matters: (a) all amendments or modifications to the Ground
Lease created by Seller on or after the Execution Date without the prior written
consent of Buyer (which consent may be withheld in Buyer's sole and absolute
discretion); and (b) any and all defaults by Seller under the Ground Lease for
any period prior to the Closing (collectively, the "Obligatory Ground Lease Cure
Matters"). If, prior to the Closing, Seller is unable to correct or cure any of
the Voluntary Ground Lease Cure Matters or the Obligatory Ground Lease Cure
Matters (collectively, the "Ground Lease Cure Matters"), then, in addition to
any and all other rights and remedies that Buyer may have hereunder, Buyer may:
(i) terminate this Agreement by Notice to Seller and Escrow Agent (in which case
Escrow Agent shall return to Buyer the Deposit (plus any interest or dividends
earned thereon), and the parties shall equally share the cancellation charges of
Escrow Agent and Title Company), and Seller shall reimburse Buyer for up to
$150,000.00 of Buyer's actual out-of-pocket costs and expenses incurred in
connection with the transaction contemplated by this Agreement, and thereafter
neither party shall have any rights or obligations to the other hereunder, other
than pursuant to any provision hereof that expressly survives the termination of
this Agreement; or (ii) if Buyer does not elect to terminate this Agreement,
pursue an action for specific performance to compel Seller to correct or cure
the Ground Lease Cure Matters or waive Buyer's objections to such Ground Lease
Cure Matters and proceed to a timely Closing, whereupon such Ground Lease Cure
Matters shall be deemed "Permitted Ground Lease Matters".
3.2. Property Documents.
Not later than the date that is 3 Business Days after the Execution
Date, Seller, at Seller's sole cost and expense, shall deliver or make available
to Buyer, to the extent such items are in Seller's Possession, true, correct,
and complete copies of all agreements, contracts, documents, information, Tenant
Leases (if any), reports, books, records, and other materials pertinent to the
ownership, operation, occupancy, use, or management of the Property (including,
without limitation, the items described in Exhibit E attached hereto)
(collectively, the "Property Documents"). Seller shall give Buyer Notice of the
date that Seller determines that Seller has delivered copies of, or given Buyer
satisfactory access to, all of the Property Documents (which date, for purposes
of this
<PAGE>
Agreement, may not be before the Execution Date); provided, however, if
Seller delivers copies of, or gives Buyer access to, additional Property
Documents after the Ground Lease Termination Date, the Due Diligence Termination
Date shall be extended by the period, not to exceed 7 days, that Buyer
reasonably determines is necessary for Buyer to incorporate such additional
Property Documents into Buyer's due diligence investigations of the Property
(Buyer shall give Seller prompt Notice of the period determined by Buyer).
Seller and Buyer hereby acknowledge and agree that Buyer shall have no
obligation to review, examine, or otherwise analyze any of the Property
Documents unless and until Buyer elects not to terminate this Agreement pursuant
to Section 3.1.3 above.
3.3. Investigations.
At all reasonable times from the
Execution Date until the Closing or earlier termination of this Agreement and
upon reasonable prior notice to Seller, Buyer and its agents and representatives
shall be entitled, at Buyer's sole cost and expense, to (i) enter onto the
Property during normal business hours to perform any inspections,
investigations, studies, and tests of the Property, including, without
limitation, physical, structural, mechanical, architectural, engineering, soils,
geotechnical and environmental/asbestos tests that Buyer deems reasonable
(provided that no invasive testing shall be performed without Seller's prior
written approval (which approval shall not be unreasonably withheld or
delayed)); (ii) cause an environmental assessment of the Property to be
performed; (iii) review all Property Documents and examine and copy any and all
other books and records in Seller's Possession relating to the Property
(including, without limitation, all documents relating to utilities, zoning, and
the access, subdivision and appraisal of the Property); and (iv) interview
Seller's property manager, if any ("Manager"), and any of its employees who are
responsible for the operation, management, or maintenance of any part of the
Property. For purposes of this Section, it shall be deemed "reasonable prior
notice" if Buyer complies with the notice provisions of Section 17.4 or gives
Scott Korney (Director of Facilities for Scios) or David Gryska (Chief Financial
Officer of Scios) telephonic notice of Buyer's intent to do any of the foregoing
at least 18 hours before commencing any such activity. Seller and Buyer hereby
acknowledge and agree that Buyer shall have no obligation to perform any
inspection, investigation, study, or test of the Property unless and until Buyer
elects not to terminate this Agreement pursuant to Section 3.1.3 above;
provided, however, that (x) Buyer, not later than the date that is 3 Business
Days after the Execution Date, shall cause its environmental consultant to
commence performing a "phase I" environmental site assessment plus asbestos
survey and lead in drinking water survey of the "Property Environment" (as
defined in Section 4.20.1(a) below) (the "Phase I Study"), (y) Buyer shall
require its environmental consultant to prepare a written report regarding the
Phase I Study (the "Phase I Report") and shall cause such environmental
consultant to deliver to Seller an accurate and complete copy of such Phase I
Report, including all schedules, graphs, photographs, and any other supplemental
materials, and (z) the actual cost of the Phase I Study and the Phase I Report
shall be borne equally by Seller and Buyer, provided that in no event shall
Seller's share of such cost exceed $5,000.00.
3.4. Tenants.
Not later than the
date that is 5 days after the Execution Date, Seller shall contact authorized
representatives of such tenants of the Property as Buyer may request to arrange
for an introduction of Buyer, and shall otherwise assist and cooperate with
Buyer in providing Buyer access to such tenants. Buyer and its agents, assigns,
and employees shall observe and comply with all reasonable requests on the part
of tenants of the Property regarding entry into tenant facilities for purposes
of inspection. Buyer may conduct such inquiries and investigations of any and
all tenants (or prospective tenants) as Buyer, in its sole discretion, deems
advisable or necessary. Seller shall use commercially reasonable efforts to
deliver to Buyer estoppel certificates, each substantially in the form of
Exhibit F attached
<PAGE>
hereto, executed by each tenant under the Tenant Leases (if
any) (collectively, the "Tenant Estoppels"), no later than 5 Business Days
before the Due Diligence Termination Date. Seller and Buyer hereby acknowledge
and agree that Buyer shall have no obligation to review, examine, or otherwise
analyze any aspect of any Tenant Lease (if any) unless and until Buyer elects
not to terminate this Agreement pursuant to Section 3.1.3 above.
3.5. CC&Rs.
Buyer may conduct such inquiries and investigations of any and all declarants or
associations created by any covenants, conditions, or restrictions encumbering
the Property ("CC&Rs") as Buyer, in its sole discretion, deems advisable or
necessary. Seller shall use commercially reasonable efforts to deliver to Buyer
an estoppel certificate, each substantially in form and substance acceptable to
Buyer, executed by each declarant or association under any CC&Rs (collectively,
the "CC&Rs Estoppels"), no later than 5 Business Days before the Due Diligence
Termination Date. Seller and Buyer hereby acknowledge and agree that Buyer shall
have no obligation to conduct any inquiry or investigation of any declarant or
association created by any CC&Rs unless and until Buyer elects not to terminate
this Agreement pursuant to Section 3.1.3 above.
3.6. Property Questionnaire.
Not later than thedate that is 5 days after the Execution Date, Seller shall
deliver to Buyer a property questionnaire in the form attached hereto as Exhibit
G (the "Property Questionnaire") completed by Seller and its Manager to the
reasonable satisfaction of Buyer. The Property Questionnaire shall not indicate
any fact or circumstance that Buyer reasonably believes (based on advice of
counsel) would be likely to affect Buyer's status as a real estate investment
trust, as defined in Section 856 of the Internal Revenue Code (as amended), if
the transactions contemplated hereby are consummated.
3.7. Due Diligence Termination Right.
Buyer shall have the right to terminate this Agreement at any
time on or before 5:00 p.m. (California time) on the date (the "Due Diligence
Termination Date") that is 30 calendar days after the Ground Lease Termination
Date (subject to Section 3.2 above and Section 8.1 below) if, during the course
of Buyer's due diligence investigations of the Property, Buyer determines, in
Buyer's sole and absolute discretion, that Buyer does not want to purchase the
Property. Buyer may exercise such termination right by delivering a Notice of
termination to Seller and Escrow Agent (a "Due Diligence Termination Notice") on
or before the Due Diligence Termination Date. Upon the timely delivery of such
Due Diligence Termination Notice, (i) Escrow Agent shall immediately return to
Buyer the Initial Deposit (plus any interest or dividends earned thereon), (ii)
the parties shall equally share the cancellation charges of Escrow Agent and
Title Company, and (iii) this Agreement shall automatically terminate and be of
no further force or effect and neither party shall have any further rights or
obligations hereunder, other than pursuant to any provision hereof that
expressly survives the termination of this Agreement. If Buyer has timely
delivered to Escrow Agent a Due Diligence Termination Notice, no notice to
Escrow Agent from Seller shall be required for the return to Buyer of the
Initial Deposit (plus any interest or dividends earned thereon). If Buyer does
not exercise such termination by delivery of the Due Diligence Termination
Notice on or before the Due Diligence Termination Date, then Buyer's right to
terminate this Agreement pursuant to this Section shall automatically lapse.
3.8. Insurance.
Buyer agrees that from the Execution Date through the Due
Diligence Termination Date, Buyer shall carry, or cause its agents and
representatives that will enter the Property in connection with the
investigations pursuant to Section 3.3 above to carry, workers' compensation and
general liability insurance in the amount of $1,000,000 per occurrence, which
insurance shall name Seller as an additional insured; Buyer shall provide
<PAGE>
Seller with proof of such insurance prior to commencing Buyer's physical
inspections of the Property.
3.9. Indemnity and Repair.
Buyer agrees to indemnify and hold
harmless Seller from any losses arising from any physical damage to the Property
or any injury to persons caused by any act of Buyer as a result of the
inspections, investigations, or tests performed pursuant to Section 3.3 above,
which indemnity shall survive the termination of this Agreement or the Closing
for a period of 1 year; provided, however, that Buyer's indemnity hereunder
shall not include any loss, cost, damage, or expense to the extent caused by (a)
the acts of Seller or its agents or representatives, or (b) the discovery of any
pre-existing condition of the Property. In addition, if this Agreement is
terminated, Buyer shall repair any physical damage to the Property caused by its
entry thereon and shall restore the Property substantially to the condition in
which it existed prior to such entry; provided, however, that Buyer shall have
no obligation to repair any damage caused by the acts or omissions of Seller or
its agents or representatives or to remediate, contain, abate, or control any
pre-existing condition of the Property that existed prior to Buyer's entry
thereon.
3.10. Title.
3.10.1. Deliveries By Seller.
Seller shall deliver to
Buyer, before 5:00 p.m. (California time) on the 3rd Business Day after the
Execution Date, the most recently updated ALTA as-built survey for the Property,
if any. Buyer shall order, before 5:00 p.m. (California time) on the 7th day
after the Execution Date, (a) an ALTA extended coverage preliminary title report
(the "PTR") issued by Chicago Title Company (in such capacity, "Title Company"),
together with legible copies of all documents referenced therein, and (b) a UCC
Search with regard to Seller and the Property (the "UCC Search"). In addition,
Buyer shall order, before 5:00 p.m. (California time) on the 1st Business Day
after the Ground Lease Termination Date, a current as-built ALTA survey of the
Property (the "Survey"), in form reasonably satisfactory to Buyer, Title
Company, and such other persons or entities as Buyer, in its discretion, may
request, prepared by a surveyor licensed in the State where the Property is
located and certified (using a surveyor's certificate in substantially the same
form as the certificate attached hereto as Exhibit H) to Buyer, Title Company,
and such other persons or entities as Buyer, in its discretion, may request.
3.10.2. Buyer's Review of Title.
Buyer shall have until 5:00 p.m. (California
time) on the 10th day before the Due Diligence Termination Date to give Seller
Notice of any objection that Buyer may have to any exception reported in the
PTR, any matter shown on UCC Search, or any exception or matter contained in any
amendment or update thereof (provided, however, that if any such amendment or
update is received by Buyer, Buyer shall have an additional 3 Business Days,
regardless of the Due Diligence Termination Date or Scheduled Closing Date,
following Buyer's receipt of such amendment or update and legible copies of all
documents referenced therein, to give Seller Notice of objections to items shown
on any such amendment or update). In addition, Buyer shall have until 5:00 p.m.
(California time) on the 5th day before the Due Diligence Termination Date to
give Seller Notice of any objection that Buyer may have to any matter shown on
the Survey, or any matter contained in any amendment or update thereof
(provided, however, that if any such amendment or update is received by Buyer,
Buyer shall have an additional 3 Business Days, regardless of the Due Diligence
Termination Date or Scheduled Closing Date (but subject to Section 8.1 below),
following Buyer's receipt of such amendment or update and legible copies of all
documents referenced therein, to give Seller Notice of objections to matters
shown on any such amendment or update). Exceptions reported in the PTR and
matters shown on the UCC Search
<PAGE>
or the Survey (or any amendments or updates
thereof) not objected to by Buyer as provided above shall be deemed to be
"Permitted Exceptions". If, however, Buyer objects to any exception reported in
the PTR or any matter shown on the UCC Search or the Survey (or any amendments
or updates thereof) ("Objectionable Title Matters"), Seller shall have until
5:00 p.m. (California time) on the 3rd day before the Due Diligence Termination
Date to give Buyer Notice that (i) Seller will cure specific Objectionable Title
Matters ("Voluntary Title Removal Exceptions"), and/or (ii) Seller will not take
any action with respect to specific Objectionable Title Matters. If Seller
elects not to take any action with respect to any specific Objectionable Title
Matters and Buyer does not terminate this Agreement on or before the Due
Diligence Termination Date, Buyer shall be deemed to have elected to proceed
with the purchase and to take title to the Property subject to such
Objectionable Title Matters.
3.10.3. Seller's Obligations Regarding Title.
As a condition to Closing, Seller shall take all action necessary to remove from
title to the Property (or in the alternative, Seller shall obtain for Buyer
title insurance insuring over such exceptions or matters, such insurance to be
in form and substance satisfactory to Buyer in its sole discretion) all
Voluntary Title Removal Exceptions and the following matters: (a) all exceptions
to title and survey matters created by Seller on or after the Execution Date
without the prior written consent of Buyer (which consent may be withheld in
Buyer's sole and absolute discretion); (b) any and all liens and encumbrances
affecting the Property that secure an obligation to pay money (other than
installments of real estate taxes or assessments not delinquent as of the
Closing); and (c) all taxes and assessments due and payable for any period prior
to the Closing (collectively, the "Obligatory Title Removal Exceptions"). If,
prior to the Closing, Seller is unable to remove or satisfactorily insure over
any of the Voluntary Title Removal Exceptions or the Obligatory Title Removal
Exceptions (collectively, the "Title Removal Exceptions"), then, in addition to
any and all other rights and remedies that Buyer may have hereunder, Buyer may:
(i) terminate this Agreement by Notice to Seller and Escrow Agent (in which case
Escrow Agent shall return to Buyer the Deposit (plus any interest or dividends
earned thereon), and the parties shall equally share the cancellation charges of
Escrow Agent and Title Company), and Seller shall reimburse Buyer for up to
$150,000.00 of Buyer's actual out-of-pocket costs and expenses incurred in
connection with the transaction contemplated by this Agreement, and thereafter
neither party shall have any rights or obligations to the other hereunder, other
than pursuant to any provision hereof that expressly survives the termination of
this Agreement; or (ii) if Buyer does not elect to terminate this Agreement,
pursue an action for specific performance to compel Seller to remove or
satisfactorily insure over, as required, the Title Removal Exceptions or waive
Buyer's objections to such Title Removal Exceptions and proceed to a timely
Closing, whereupon such Title Removal Exceptions shall be deemed "Permitted
Exceptions".
3.10.4. Condition of Title at Closing.
Upon the Closing, Bio-Shore
shall absolutely and irrevocably sell, transfer, convey, and assign to Buyer all
of Bio-Shore's right, title, and interest in and to the Real Property by a duly
executed and acknowledged ground lease assignment and assumption in the form of
Exhibit I attached hereto (the "Ground Lease Assignment"), subject only to the
Permitted Exceptions and the Permitted Ground Lease Matters.
4. SELLER'S REPRESENTATIONS AND WARRANTIES.
Seller represents and warrants to and agrees with Buyer that, as of the
date hereof and as of the Closing Date:
<PAGE>
4.1. Authority.
This Agreement and all
other documents delivered prior to or at the Closing (i) have been duly
authorized, executed, and delivered by Scios and Bio-Shores; (ii) are binding
obligations of Scios and Bio-Shores; (iii) are collectively sufficient to
transfer all of Seller's collective rights to the Property; and (iv) do not
violate the formation documents of Scios or Bio-Shore. Scios and Bio-Shore have
obtained all required consents, releases, and approvals necessary to execute
this Agreement and consummate the transaction contemplated by this Agreement.
Scios is a corporation duly organized and existing in good standing under the
laws of the State of Delaware, with its principal place of business in the State
of California, Bio-Shore is a limited partnership duly organized and existing in
good standing under the laws of the State of California, with its principal
place of business in the State of California, and Bio-Shore Management is a
corporation duly organized and existing in good standing under the laws of the
State of California, with its principal place of business in the State of
California. Bio-Shore Management, acting alone, has the power and authority to
bind Bio-Shore.
4.2. No Conflicts.
The execution and delivery of this Agreement,
the consummation of the transactions herein contemplated, and compliance with
the terms of this Agreement will not conflict with, or, with or without notice
or the passage of time or both, result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, deed of trust,
mortgage, loan agreement, or other document, or instrument or agreement, oral or
written, to which Scios or Bio-Shore is a party or by which Scios, Bio-Shore, or
the Property is bound, or any applicable regulation of any governmental agency,
or any judgment, order, or decree of any court, having jurisdiction over Scios
or Bio-Shore (or any of the business conducted by either in connection with the
Property) or all or any portion of the Property.
4.3. Preferential Rights.
Neither Scios nor Bio-Shore has granted any option or right of first refusal or
right of first offer to third parties to purchase or otherwise acquire an
interest in all or any portion of the Property.
4.4. Property Documents.
There are no commitments or agreements affecting the Property that have not been
disclosed by Seller to Buyer in writing. Seller is not in default of Seller's
obligations or liabilities pertaining to the Property or the Property Documents;
nor, to Seller's Knowledge, are there facts, circumstances, conditions, or
events that, after notice or lapse of time or both, would constitute a default.
Seller has not received notice or information that any party to any of the
Property Documents considers a breach or default to have occurred.
4.5. Ground Lease.
The Ground Lease (as provided to Buyer pursuant to Section 3.1.1)
evidences all of Seller's rights and obligations with respect to the Real
Property, and there are no other documents or agreements that will be binding
upon the Real Property or Buyer after the Closing with respect to Seller's
rights and obligations relating to the Real Property, other than the Recognition
Agreement and the Permitted Exceptions. Except to the extent Seller has given
Buyer Notice otherwise, no rent or other amount is past due under the Ground
Lease. The Ground Lease is in full force and effect, Seller has received no
notice of any default by Bio-Shore under the Ground Lease, and Seller has no
Knowledge of any fact or facts that would now or with the giving of notice or
the passage of time or both be a default by Bio-Shore under the terms thereof,
except to the extent Seller has given Buyer Notice otherwise.
4.6. Tenant Leases.
The Tenant Leases (if any) described in the schedule attached hereto as
Exhibit B-1 (the "Schedule of Leases") comprise all of the documents evidencing
the rights and obligations of all third parties to occupy space at the Property
as of the
<PAGE>
Execution Date, and there are no other documents or agreements that
will be binding upon the Property or Buyer after the Closing with respect to the
rights and obligations of such third parties relating to the Property. The Rent
Roll attached hereto as Exhibit B-2 (the "Rent Roll") is true, correct, and
complete. Except as set forth in the Rent Roll, no rent or other amount has been
prepaid under any of the Tenant Leases (if any). The Tenant Leases (if any) are
in full force and effect.
4.7. Notices.
Except as set forth on the Rent Roll,
(a) Seller has received no notice of any default by the landlord under the
Tenant Leases (if any) and Seller has no Knowledge of any fact or facts that
would now or with the giving of notice or the passage of time or both be a
default under the terms thereof, except as otherwise set forth on the Rent Roll;
(b) Seller has received no notice from any tenant (i) to cancel any Tenant Lease
(if any), (ii) that such tenant is or may become unable or unwilling to perform
any or all of its obligations under its Tenant Lease, whether for financial or
other reasons, or (iii) that an action or proceeding, voluntary or involuntary,
is pending or, or to Seller's knowledge, threatened against such tenant under
any section or sections of any bankruptcy or insolvency law, or (iv) that such
tenant disputes the base rent or escalation rents or the computation of
escalation rents pursuant to its Tenant Lease.
4.8. Uncompleted Work.
Seller has
received no notices of any items of work, repair, maintenance, or construction
to be completed by Seller pursuant to any Tenant Lease (if any) for the benefit
of any tenant and, to Seller's Knowledge, there is no such work to be done. As
of the Closing Date, no tenant shall be entitled to any additional work during
the term of its Tenant Lease (if any), except as may be provided otherwise on
the updated Rent Roll.
4.9. Unpaid Commissions.
As of the Closing Date, there
will be no brokerage or other leasing commissions due or payable on an absolute
or contingent basis to any person in connection with any of the tenants or any
of the Tenant Leases (if any) (or any amendments, extensions, or renewals
thereof or exercise of any options thereunder).
4.10. Access To Information.
To Seller's Knowledge, (a) Seller has delivered to Buyer, or given Buyer
satisfactory access to, all Property Documents in Seller's Possession, and (b)
this Agreement, together with the Property Documents and any matters heretofore
disclosed to Buyer in writing by Seller, do not contain any untrue statement of
a material fact or omit or fail to state a material fact necessary to make the
statements contained herein or therein not materially misleading.
4.11. Special Assessments or Condemnation.
To Seller's Knowledge, there are no existing,
proposed, or contemplated (i) special assessments, except those shown as
exceptions on the PTR, or (ii) condemnation actions against any part of the
Property, and Seller has not received notice of any contemplated special
assessments or eminent domain proceedings that would affect the Property.
4.12. Utilities.
To Seller's Knowledge, all water, sewer, electric, gas, telephone,
and drainage facilities, and all other utilities required by law or for the
normal operation of the Property are installed to the property lines of the
Property, have been connected to the Improvements and Seller has received no
notices that service will be disconnected or reduced.
<PAGE>
4.13. Service Contracts.
There are no service, maintenance, repair, management, leasing, or supply
contracts or other contracts (including, without limitation, janitorial,
elevator and landscaping agreements) affecting the Property, oral or written,
except as set forth on the schedule attached hereto as Exhibit J (the "Service
Contracts") and, except as set forth on such schedule, all Service Contracts are
cancelable without cost at the option of Seller or the then owner of the
Property upon not more than 30 days' prior written notice.
4.14. Employees.
There are no employees who are employed by Scios, Bio-Shore, Bio-Shore
Management, or Manager in the operation, management, or maintenance of the
Property and whose employment will continue after the Closing. On and after the
Closing, there will be no obligations concerning any pre-Closing employees of
Scios, Bio-Shore, Bio-Shore Management, or Manager that will be binding upon
Buyer or the Property.
4.15. Bankruptcy.
No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization, or other proceedings are pending, or, to Seller's Knowledge,
threatened, against Seller, any tenant of the Real Property, or the Ground
Lessor.
4.16. Existing Vivarium Approvals.
The schedule attached hereto as
Exhibit O contains a list of all of the permits, licenses, approvals, consents,
authorizations, and other certifications currently maintained by Seller in
connection with the Vivarium (collectively, the "Vivarium Approvals").
4.17. Existing Insurance.
The schedule attached hereto as Exhibit P contains a list of
the policies, insureds, additional insureds, loss-payees, coverages, coverage
amounts, and deductible amounts of all of the insurance currently in effect with
respect to the Property. To Seller's Knowledge, Seller has received no notice
from any insurance company concerning any defects or inadequacies in the
Property that, if not corrected, would result in the termination of insurance
coverage or materially increase its cost.
4.18. Litigation.
Except as may be set
forth on the schedule attached hereto as Exhibit Q, there are no actions, suits,
or proceedings against Scios or Bio-Shore or affecting all or any portion of the
Property currently being prosecuted, litigated, or otherwise contested before
any judicial or quasi-judicial body, Seller has not received service of any
document, pleading, or claim instituting any other such action, suit, or
proceeding, and, to Seller's Knowledge, no other such action, suit, or
proceeding has been instituted, filed, or threatened.
4.19. Compliance with Laws.
Except as may be set forth on the schedule attached hereto as Exhibit R,
Seller has received no notice of, and has no Knowledge of, any condition
currently existing on any portion of the Property that is a potential material
violation of any currently effective laws, rules, regulations, ordinances, or
orders of any federal, state, city, or other governmental authority having
jurisdiction over Scios or Bio-Shore (or any of the business conducted by either
in connection with the Property) or all or any portion of the Property
(including, without limitation, all zoning, building, fire, and health codes,
environmental protection and sanitation and pollution regulations, and the
Americans with Disabilities Act, as amended) (collectively, "Laws").
<PAGE>
4.20. Environmental Materials.
4.20.1. Definitions.
(a) "Environmental Claim" means any and all actions (including, without
limitation, investigations or response, cleanup, remedial, removal, restoration,
abatement, or enforcement actions of any kind, administrative or judicial
proceedings, and orders or judgments arising out of or resulting therefrom),
costs, claims, damages (including, without limitation, punitive damages),
expenses (including, without limitation, attorneys', consultants', and experts'
fees, court costs, and amounts paid in settlement of any claims or actions),
fines, forfeitures, or other civil, administrative, or criminal penalties,
injunctive or other relief (whether or not based upon personal injury, property
damage, or contamination of, or adverse effects upon, the environment, water
tables, or natural resources), liabilities, or losses arising from or relating
to the presence or suspected presence of any Environmental Materials in the air,
soil, or ground water above, in, on, under, or about the Property (the "Property
Environment") or properties adjacent thereto.
b) "Environmental Materials" means chemicals, pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, or any other
chemical, material, or substance that, because of its quantity, concentration,
or physical or chemical characteristics, exposure to which is limited or
regulated for health and safety reasons by any governmental authority, or that
poses a significant present or potential hazard to human health and safety or to
the environment if released into the workplace or the environment, and include,
without limitation, asbestos, polychlorinated biphenyls ("PCBs"), urea
formaldehyde, solvents, lead and lead based substances, cyanide, pesticides
(including DDT), printing inks, acids, ammonia compounds, chemicals known to
cause cancer or reproductive toxicity, and any other material or substance that
is (i) designated as a "hazardous substance" pursuant to Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. Section 1317), (ii) 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),
(iii) 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), (iv) defined as "hazardous waste,
"extremely hazardous waste" or "restricted hazardous waste" under any applicable
state law, or (v) defined as a "hazardous material" or "hazardous substance"
under any applicable state law.
4.20.2. Representations and Warranties.
Seller
represents and warrants to and agrees with Buyer that, as of the date hereof and
as of the Closing Date, except as may be set forth on the schedule attached
hereto as Exhibit S: (i) Seller and, to Seller's Knowledge, the Property are in
full compliance with all Laws relating to Environmental Materials (generally,
"Environmental Laws"), which compliance includes, but is not limited to, the
possession by Seller of all permits and other governmental approvals required
under applicable Environmental Laws and compliance with the terms and conditions
thereof; (ii) Seller has not received any communication (written or oral) that
alleges that Seller or the Property currently is not in such full compliance
and, to Seller's Knowledge, there are no currently existing circumstances that
may prevent or interfere with such full compliance in the future; (iii) there
are no Environmental Claims against Seller currently being prosecuted,
litigated, or otherwise contested before any governmental or quasi-governmental
authority, Seller has not received service of any document, pleading, or claim
instituting any other such Environmental Claim, and, to Seller's Knowledge, no
other such Environmental Claim has been instituted, filed, or threatened; (iv)
Seller has received no notice of, and has no Knowledge of, any past or present
<PAGE>
actions, activities, circumstances, conditions, events, or incidents relating to
Environmental Materials that could form the basis of any Environmental Claim
against Seller or against any other person or entity whose liability for any
such Environmental Claim Seller has or may have retained or assumed, either
contractually or by operation of law; and (v) without in any way limiting the
generality of the foregoing, (a) Seller has not used, stored, generated,
released, disposed, or arranged for the disposal of Environmental Materials on
the Property except in full compliance with all Environmental Laws, (b) to
Seller's Knowledge, there are no underground storage tanks located on the Land,
(c) to Seller's Knowledge, there is no asbestos contained in or forming part of
any Improvement, and (d) to Seller's Knowledge, no PCBs are used or stored at
the Facility except in full compliance with all Environmental Laws.
4.20.3. Indemnification.
Seller hereby indemnifies and agrees to reimburse, defend, and
hold Buyer harmless from, for, and against all Environmental Claims arising
from, asserted against, imposed on, or incurred by Buyer, directly or
indirectly, in connection with the breach of any representation or warranty set
forth in Section 4.20.2 above.
4.20.4. Additional Environmental Assessments.
Notwithstanding anything to the contrary that may be set forth in this Agreement
and regardless of whether Buyer otherwise would elect to do so as part of its
due diligence investigations pursuant to Section 3.3 hereof, Buyer shall cause
its environmental consultant to perform a "phase II" environmental site
assessment of the Property Environment (the "Phase II Study") in order to
determine if actionable levels of any Environmental Materials are then present
in the Property Environment and, if so, the precise quantities thereof. Buyer
shall require its environmental consultant to prepare a written report regarding
the Phase II Study (the "Phase II Report") and shall cause such environmental
consultant to deliver to Seller an accurate and complete copy of such Phase II
Report, including all schedules, graphs, photographs, and any other supplemental
materials. The actual cost of the Phase II Study and the Phase II Report shall
be borne equally by Seller and Buyer.
4.20.5. No Effect on Statutory Rights.
Seller and Buyer hereby expressly acknowledge and agree that nothing contained
in this Agreement in general or in this Section 4.20 in particular shall
diminish, impair, decrease, reduce, lessen, supersede, override, replace,
invalidate, nullify, negate, or otherwise affect in any manner whatsoever any
right of any party to this Agreement under any applicable Environmental Law to
claim or demand contribution, reimbursement, restitution, or other repayment or
compensation (generally "Contribution") from any other party to this Agreement
for any Environmental Claim arising from, asserted against, imposed on, or
incurred by the claiming or demanding party, directly or indirectly, in
connection with any event or condition now or hereafter existing with respect to
the Property Environment; provided, however, that each party to this Agreement
hereby agrees that no party may collect from any other party to this Agreement
(i) any Contribution in excess of [***] (except in the case of fraud or material
misrepresentation regarding Environmental Materials or Environmental Laws
committed by the party from which Contribution is being sought, in which case
there shall be no limit on the amount of the Contribution recoverable), (ii) any
portion of any Contribution that directly arises from an Environmental Claim
that is covered by any insurance policy maintained by the claiming or demanding
party (provided that the insurance coverage is not affected by this potential
impairment of the insurer's subrogation rights), or (iii) any portion of any
Contribution that directly arises from an Environmental Claim for any
Environmental Material as to which the Phase II Report indicates actionable
levels were present in the Property Environment as of the date of such Phase II
Report. No party to this Agreement is assuming, undertaking, or agreeing to be
responsible for any other party's obligations or liabilities in connection with
any Environmental Claim, and under no
***A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE>
circumstances shall the foregoing
agreements regarding the Contribution rights of the parties to this Agreement be
deemed, construed, or interpreted as an assumption, undertaking, or agreement to
be responsible for any other party's obligations or liabilities in connection
with any Environmental Claim. Further, Seller and Buyer do not intend by any
term or condition of this Section 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 term or condition
of this Section. All of the agreements contained in this Section 4.20.5 shall
survive the delivery of the Ground Lease Assignment and other Closing
instruments indefinitely, and shall not be subject to the terms of Section 4.21
below.
4.21. Survival.
All of the representations, warranties, and agreements of
Seller set forth in this Agreement shall be true upon the execution of this
Agreement, shall be deemed to be repeated at and as of the Closing Date without
the necessity of a separate certificate with respect thereto and shall survive
the delivery of the Ground Lease Assignment and other Closing instruments and
documents for a period of [***] days.
4.22. Seller's Knowledge.
As used in this
Agreement, the phrase "to Seller's Knowledge" and words of similar import shall
mean the current actual knowledge of David Gryska (Chief Financial Officer of
Scios), John H. Newman (Senior Vice President and Chief Legal Counsel of Scios
and Vice President of Bio-Shore Management), Jack Cohen (Director of Regulatory
Affairs and Quality Assurance for Scios), and Scott Korney (Director of
Facilities for Scios) (collectively, "Seller's Representatives"). Seller
represents and warrants that Seller's Representatives are the persons currently
affiliated with Seller who, together, possess the most familiarity with the
Property.
4.23. As-Is.
Except as may be expressly provided otherwise in this
Agreement, and except for those warranties expressly set forth herein or set
forth, or implied by law, in the Ground Lease Assignment, Seller shall convey
the Property to Buyer in its present "AS-IS" condition, without any warranties,
expressed or implied.
5. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants to and agrees with Seller that, as of the
date hereof, and as of the Closing Date:
5.1. No Conflicts.
The execution and
delivery of this Agreement, the consummation of the transactions herein
contemplated, and compliance with the terms of this Agreement will not conflict
with, or, with or without notice or the passage of time or both, result in a
breach of any of the terms or provisions of, or constitute a default under, any
indenture, deed of trust, mortgage, loan agreement, or other document or
instrument to which Buyer is a party or by which Buyer is bound, or any
applicable regulation of any governmental agency, or any judgment, order, or
decree of any court, having jurisdiction over Buyer or all or any portion of the
Property.
5.2. Due Organization; Consents.
Buyer is a corporation duly organized
and existing in good standing under the laws of the State of Maryland with its
principal place of business in the State of California. All requisite corporate
action has been taken by Buyer in connection with entering into this Agreement,
and will be taken prior to the Closing in connection with the execution and
delivery of the instruments referenced herein and the consummation of the
transactions contemplated hereby. No consent of any partner, shareholder,
beneficiary,
***A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE>
creditor, investor, judicial or administrative body, governmental
authority, or other party is required in connection herewith that has not been
obtained.
5.3. Buyer's Authority; Validity of Agreements.
Buyer has full right,
power, and authority to purchase the Property from Seller as provided in this
Agreement and to carry out its obligations hereunder. The individual(s)
executing this Agreement and the instruments referenced herein on behalf of
Buyer have the legal power, right, and actual authority to bind Buyer to the
terms hereof and thereof. This Agreement is and all other documents and
instruments to be executed and delivered by Buyer in connection with this
Agreement shall be duly authorized, executed, and delivered by Buyer and shall
be valid, binding, and enforceable obligations of Buyer.
5.4. As-Is.
Except as may be expressly provided otherwise in this Agreement, and except
for those warranties expressly set forth herein or set forth, or implied by law,
in the Ground Lease Assignment, Buyer shall purchase the Property from Seller
in its present "AS-IS" condition, without any warranties, expressed or implied.
6. COVENANTS OF SELLER.
In addition to the covenants and agreements of Seller set forth
elsewhere in this Agreement, Seller covenants and agrees that between the date
hereof and the Closing Date:
6.1. Title.
Seller shall not (a) directly or
indirectly sell, assign, or create any right, title, or interest whatsoever in
or to the Property, (b) take any action, create, commit, permit to exist, or
suffer any acts that would (i) give rise to a variance from the current legal
description of the Land, or (ii) cause the creation of any lien, charge, or
encumbrance other than the Permitted Exceptions, or (c) enter into any agreement
to do any of the foregoing without Buyer's prior written consent (which consent
may be withheld in Buyer's sole and absolute discretion).
6.2. Notice of Change in Circumstances.
Seller shall promptly notify Buyer of any change in any
condition with respect to all or any portion of the Property or of any event or
circumstance of which Seller has Knowledge subsequent to the date of this
Agreement that (a) materially, adversely affects the Property or any portion
thereof or the use or operation of the Property or any portion thereof, (b)
makes any representation or warranty of Seller to Buyer under this Agreement
untrue or misleading, or (c) makes any covenant or agreement of Seller under
this Agreement incapable or less likely of being performed, it being expressly
understood that Seller's obligation to provide information to Buyer under this
Section shall in no way relieve Seller of any liability for a breach by Seller
of any of its representations, warranties, covenants or agreements under this
Agreement.
6.3. No Defaults; Maintenance of Property.
Seller shall not default
with respect to the performance of any obligation relating to the Property,
including, without limitation, the payment of all amounts due and the
performance of all obligations with respect to the Tenant Leases (if any), the
Service Contracts and any existing indebtedness relating to the Property.
Subject to Section 12, Seller shall operate and maintain the Property in its
current condition, reasonable wear and tear excepted, in accordance with all
applicable Laws.
6.4. Exclusive Negotiations.
Seller (i) shall remove the
Property from the market, (ii) shall not solicit or accept any offers, whether
or not binding, to buy all or any part of the Property, (iii) shall cease and
refrain from any and all negotiations with any other
<PAGE>
prospective optionees or
purchasers of the Property, whether begun before or after any negotiations with
Buyer, and (iv) shall advise Buyer of any negotiations with current or potential
tenants at the Property.
6.5. Development Activities.
Seller shall not take any
actions with respect to the development of the Property, including, without
limitation, applying for, pursuing, accepting or obtaining any permits,
approvals, or other development entitlements from any governmental or other
regulatory entities or finalizing or entering into any agreements relating
thereto without Buyer's prior written consent (which consent may be withheld in
Buyer's sole and absolute discretion). Seller hereby agrees to reasonably
cooperate with Buyer in Buyer's efforts to obtain such governmental approvals as
Buyer deems necessary to permit Buyer to operate the Property as Buyer wishes.
6.6. Service, Management, and Employment Contracts.
Seller shall not enter into,
extend, renew, or replace any existing service, property management, or
employment contracts in respect of the Property without Buyer's prior written
consent (which consent may be withheld in Buyer's sole and absolute discretion),
unless the same shall be cancelable without penalty or premium, upon not more
than 30 days' notice from the owner of the Property and Seller shall immediately
notify Buyer of any such new, extended, renewed, or replaced contract.
6.7.
Leases.
Seller shall not (i) enter into any new lease for any portion of the
Real Property, or (ii) enter into any amendment, modification, extension, or
renewal of any Tenant Lease (if any), without Buyer's prior written consent
(which consent may be withheld in Buyer's sole and absolute discretion). Seller
shall not accept any rent from any tenant under any Tenant Lease (if any) for
more than 1 month in advance of the payment date without Buyer's prior written
consent (which consent may be withheld in Buyer's sole and absolute discretion).
6.8. Insurance.
Seller will maintain the insurance described on the schedule
attached hereto as Exhibit P from the date hereof through the Closing Date or
earlier termination of this Agreement.
6.9. Litigation.
Seller shall not allow
to be commenced on its behalf any action, suit or proceeding with respect to all
or any portion of the Property without Buyer's prior written consent (which
consent may be withheld in Buyer's reasonable discretion). In the event Seller
receives any notice of any proceeding of the character described in Sections
4.15 or 4.18 that has not been previously disclosed to Buyer prior to the
Closing, Seller shall promptly advise Buyer in writing.
6.10. Seller's Representatives.
Seller shall cause Seller's Representatives to be reasonably
available to Buyer and its agents and representatives at all reasonable times
from the Execution Date until the Closing or earlier termination of this
Agreement for purposes of responding to any reasonable inquiries or requests
that Buyer may have as part of Buyer's due diligence investigations of the
Property.
7. CONDITIONS PRECEDENT TO CLOSING.
7.1. Buyer's Conditions.
The obligation of Buyer to purchase the Property is subject to the
following conditions precedent (and conditions concurrent, with respect to
deliveries to be made by the parties at Closing) ("Buyer's Conditions"), which
conditions may be waived, or the time for satisfaction thereof extended, by
Buyer only in a writing executed by
<PAGE>
Buyer; provided, however, that any such waiver shall not
affect Buyer's ability to pursue any remedy Buyer may have with respect to any
breach hereunder by Seller (except as set forth in Section 7.2.1):
7.1.1. Title.
Title Company shall be prepared and irrevocably committed to issue to Buyer an
ALTA extended coverage owner's policy of title insurance (Form B-1970 (expressly
deleting any creditor's rights exclusion)) in favor of Buyer in an amount equal
to the Purchase Price showing the Ground Lease Interest vested in Buyer, with
those endorsements and reinsurance reasonably requested by Buyer, subject only
to the Permitted Exceptions (collectively, the "Owner's Title Policy").
7.1.2. Seller's Due Performance.
All of the representations and warranties of Seller
set forth in Section 4 shall be true and correct as of the Closing Date, and
Seller, on or prior to the Closing Date, shall have complied with and/or
performed all of the obligations, covenants, and agreements required on the part
of Seller to be complied with or performed pursuant to the terms of this
Agreement, including, without limitation, the deliveries required to be made by
Seller pursuant to Sections 9.1 and 9.3 hereof.
7.1.3. Condition of Property.
Subject to the provisions of Section 12 below, the condition of the Property
shall be substantially the same on the Closing Date as on the Execution Date,
except for reasonable wear and tear and any physical damage due to any act of
Buyer or Buyer's representatives.
7.1.4. Bankruptcy.
No action or proceeding shall have been commenced by or against Scios,
Bio-Shore, or Ground Lessor under the federal bankruptcy code or any state law
for the relief of debtors or for the enforcement of the rights of creditors and
no attachment, execution, lien, or levy shall have attached to or been issued
with respect to the Property or any portion thereof or interest therein.
7.1.5. No Moratoria.
No moratorium, statute, regulation, ordinance, or federal, state, county, or
local legislation, or order, judgment, ruling, or decree of any governmental
agency or of any court shall have been enacted, adopted, issued, entered,
or pending that would adversely affect Buyer's intended use of the Property.
7.1.6. Ground Lease Matters.
Not less than 2 Business Days prior to the Scheduled Closing Date,
Buyer shall have received (a) a counterpart of the Ground Lease Consent executed
and acknowledged on behalf of Ground Lessor, with written authority from Ground
Lessor that the Ground Lease Consent may be executed and acknowledged on behalf
of Bio-Shore and Buyer's nominee, designee, or assignee and recorded at the
Closing, and (b) an update for the Ground Lease Estoppel (the "Ground Lease
Estoppel Update"), which Ground Lease Estoppel Update shall be dated not earlier
than 7 days prior to the Closing Date, shall reflect that there have been no
material adverse changes since the date of the original Ground Lease Estoppel,
and may be executed solely by the trustee of The Salado Living Trust, dated June
7, 1976. Further, Buyer shall have received evidence satisfactory to Buyer, in
Buyer's sole discretion, that any Ground Lease Cure Matters have been corrected
or cured.
7.2. Failure of Buyer's Conditions.
Subject and without limitation to
Buyer's rights hereunder, including, without limitation, Section 13.2 hereof, if
any of Buyer's Conditions have not been fulfilled within the applicable time
periods, Buyer shall have the right to do either of the following:
<PAGE>
7.2.1. Waive and Close.
Waive the Buyer's Condition and close Escrow in accordance with this
Agreement, without adjustment or abatement of the Purchase Price. If Buyer
intends to waive the Buyer's Condition, close Escrow, and retain the right to
pursue any other rights and remedies that Buyer may have against Seller in
connection herewith, Buyer shall give Notice to Seller of such intention and
Seller shall have 2 Business Days to terminate this Agreement by Notice to Buyer
and to Escrow Agent, in which event Escrow Agent shall return to Buyer the
Deposit (plus any interest or dividends earned thereon), Seller shall pay the
cancellation charges of Title Company and Escrow Agent, Seller shall reimburse
Buyer for up to $150,000.00 of Buyer's actual out-of-pocket costs and expenses
incurred in connection with the transaction contemplated by this Agreement, and
thereafter neither party shall have any rights or obligations to the other
hereunder, other than pursuant to any provision hereof that expressly survives
the termination of this Agreement. If Seller does not timely elect to terminate
this Agreement, Buyer may proceed to close Escrow and shall retain the right to
pursue any other rights and remedies that Buyer may have against Seller in
connection herewith.
7.2.2. Terminate.
Terminate this Agreement by Notice to Seller and to Escrow Agent, in which
event Escrow Agent shall return to Buyer the Deposit (plus any interest or
dividends earned thereon), Seller shall pay the cancellation charges of Title
Company and Escrow Agent, and Buyer shall be entitled to pursue any other rights
and remedies that Buyer may have against Seller in connection herewith.
7.3. Seller's Conditions.
The obligation of Seller to render performance under this Agreement is subject
to the following conditions precedent (and conditions concurrent with respect to
deliveries to be made by the parties at Closing) ("Seller's Conditions"), which
conditions may be waived, or the time for satisfaction thereof extended, by
Seller only in a writing executed by Seller:
7.3.1. Buyer's Due Performance.
All of the representations and warranties of Buyer set forth in Section 5
hereof shall be true and correct as of the Closing Date, and Buyer, on or prior
to the Closing Date, shall have complied with and/or performed all of the
obligations, covenants, and agreements required on the part of Buyer to be
complied with or performed pursuant to the terms of this Agreement.
7.4. Failure of Seller's Conditions.
Subject to Seller's rights in the event of a default by Buyer (as
set forth in Section 13.1 below), in the event of the failure of a Seller's
Condition, Seller may terminate this Agreement by delivery of Notice to Buyer
and Escrow Agent, in which event Escrow Agent shall return to Buyer the Deposit
(plus any interest or dividends earned thereon), the parties shall equally share
the cancellation charges of Title Company and Escrow Agent, and thereafter
neither party shall have any rights or obligations to the other hereunder.
8. CLOSING.
8.1. Closing; Closing Date.
As used herein, the "Closing" shall mean
the recordation of the Ground Lease Assignment in the Official Records of the
County (the "Official Records"), and the "Closing Date" shall mean the date upon
which the Closing actually occurs. Subject to the provisions of this Agreement,
the Closing shall take place on or before the date that is 5 days after the Due
Diligence Termination Date, or on such other date as the parties hereto may
agree (as the case may be, the "Scheduled Closing Date"). Each party to this
Agreement intends for the Closing to occur by 5:00 p.m. (California time) on
July 16, 1999 (the "Target Closing Date"). Accordingly, each party to this
Agreement shall use its good faith best
<PAGE>
efforts to cause the Closing to occur by
the Target Closing Date; provided, however, that no party shall have any
liability to any other party if, despite the use of such party's good faith best
efforts, the Closing cannot or does not occur by the Target Closing Date.
Notwithstanding the foregoing, if (a) Buyer receives material amendments or
updates of the Ground Lease Consent and/or Ground Lease Estoppel after the
Ground Lease Objection Date, or (b) Buyer does not receive the Phase II Report
by 5:00 p.m. (California time) on July 13, 1999, the Closing Date shall be
subject to a reasonable extension to a time not later than 5:00 p.m. (California
time) on July 30, 1999. The Closing Date shall not be extended beyond 5:00 p.m.
(California time) on July 30, 1999; provided, however, that Buyer may request a
reasonable further extension of the Closing Date for either of the matters
described in clauses (a) and (b) above by giving Seller Notice of such request,
including the date and time to which Buyer would like to extend the Closing
Date. Seller may, but shall not be obligated to, agree to such extension. If
Seller does not agree to such extension and Buyer does not withdraw its request
for an extension (or, in the alternative, does not make the deliveries required
to be made by Buyer pursuant to Section 9.2 below) by 5:00 p.m. (California
time) on July 30, 1999, Seller may terminate this Agreement by delivery of
Notice to Buyer and Escrow Agent, in which event Escrow Agent shall return to
Buyer the Deposit (plus any interest or dividends earned thereon), the parties
shall equally share the cancellation charges of Title Company and Escrow Agent,
and thereafter neither party shall have any rights or obligations to the other
hereunder, other than pursuant to any provision hereof that expressly survives
the termination of this Agreement.
8.2. Closing Costs.
Each party shall pay its own costs and expenses arising in connection with the
Closing (including, without limitation, its own attorneys' and advisors' fees),
except the following costs (the "Closing Costs"), which shall be allocated
between the parties as follows:
8.2.1. Seller's Share.
Seller shall pay all documentary transfer,
stamp, sales, and other taxes related to the transfer of the Property, 1/2 of
Escrow Agent's escrow fees and costs, and all premiums, fees, and costs related
to the delivery of the Owner's Title Policy (including all endorsements and
reinsurance reasonably requested by Buyer), all fees and costs related to the
Survey, all fees and costs related to the UCC Search, and all recording fees and
costs related to the transfer of ownership of the Property.
8.2.2. Buyer's Share.
Buyer shall pay 1/2 of Escrow Agent's escrow fees and
costs, and any recording fees and costs related to any financing Buyer may
obtain in connection with Buyer's acquisition of the Property.
9. CLOSING DELIVERIES.
9.1. Deliveries by Seller to Escrow.
Not less than 2 Business Days prior to the Scheduled
Closing Date, Seller, at its sole cost and expense, shall deliver or cause to be
delivered into Escrow the following documents and instruments, each effective as
of the Closing Date, in addition to the other items and payments required by
this Agreement to be delivered by Seller:
9.1.1. Ground Lease Assignment.
1 original Ground Lease Assignment, executed and acknowledged on behalf of
Bio-Shore;
9.1.2. Non-Foreign Affidavit.
2 original counterparts of the Non-Foreign Affidavit in the form of Exhibit
L attached hereto, each executed on behalf of Bio-Shore;
<PAGE>
9.1.3. California FTB Form 590-RE.
2 original counterparts of a California FTB Form 590-RE, each executed on
behalf of Bio-Shore;
9.1.4. Termination of Temporary Lease.
2 original counterparts of a termination of the Temporary Lease, in form and
substance reasonably satisfactory to Buyer and Title Company, each executed
on behalf of Bio-Shore, as landlord, and Scios, as tenant;
9.1.5. Assignment of Leases.
If there then exist any Tenant Leases, 2 original counterparts of the Assignment
of Leases in the form of Exhibit M attached hereto (the "Assignment of
Leases"), each executed on behalf of Scios, pursuant to which Scios shall assign
to Buyer all of Scios' rights and remedies under the Tenant Leases, including,
without limitation, the right to any security deposits and prepaid rent;
9.1.6. Bill of Sale and Assignment.
2 original counterparts of the Bill of Sale and Assignment in the form of
Exhibit N attached hereto, each executed on behalf of Scios, pursuant to
which Scios shall transfer to Buyer all the Personal Property and the
Intangible Property, including, without limitation, the Property Documents,
but excluding the Tenant Leases (if any), in each case free of all liens and
encumbrances;
9.1.7. Seller's Certificate.
2 original counterparts of a certificate, in the form of
Exhibit K attached hereto (the "Seller's Certificate"), each executed on behalf
of Scios and Bio-Shore;
9.1.8. Updated Rent Roll.
An updated Rent Roll, if there are any Tenant Leases, accurate as of the Closing
Date, executed on behalf of Scios;
9.1.9. Proof of Authority.
Such proof of Seller's authority and
authorization to enter into this Agreement and the transaction contemplated
hereby, and such proof of the power and authority of the individual(s) executing
or delivering any instruments, documents, or certificates on behalf of Seller to
act for and bind Seller as may be reasonably required by Title Company or Buyer;
and
9.1.10. Other.
Such other documents and instruments, executed and properly acknowledged on
behalf of Seller, if appropriate, as may be reasonably required by Buyer, Title
Company, Escrow Agent, or otherwise in order to effectuate the provisions of
this Agreement and the Closing of the transactions contemplated herein,
including, without limitation, reasonable or customary title affidavits
and indemnities.
9.2. Deliveries by Buyer.
On or before the Closing, Buyer, at its sole cost and expense, shall deliver
or cause to be delivered into Escrow the following:
9.2.1. Balance, Prorations & Closing Costs.
The balance of the
Purchase Price pursuant to Section 2.4 hereof and Buyer's share of prorations
and Closing Costs, as provided in Sections 10 and 8.2, respectively;
9.2.2.
Ground Lease Assignment.
1 original Ground Lease Assignment, executed and acknowledged on behalf of
Buyer or its nominee;
9.2.3. Assignment of Leases.
If there then exist any Tenant Leases, 2 original counterparts of the Assignment
of Leases, executed and acknowledged on behalf of Buyer or its nominee; and
<PAGE>
9.2.4. Other.
Such other documents and instruments, signed and properly acknowledged by
Buyer, if appropriate, as may reasonably be required by Escrow Agent or
otherwise in order to effectuate the provisions of this Agreement and the
closing of the transactions contemplated herein.
9.3. Deliveries Outside of Escrow.
Seller shall deliver possession of the Property to Buyer upon the
Closing, subject to the rights of the tenants (as tenants only without any
options or rights of first refusal or other preferential rights to purchase)
under Tenant Leases (if any). Further, Seller hereby covenants and agrees, at
its sole cost and expense, to deliver or cause to be delivered to deliver to
Buyer, on or prior to the Closing, the following items:
9.3.1. Ground Lease.
If in Seller's Possession, an original, fully executed counterpart of the
Ground Lease and any amendments, modifications, supplements, and restatements
thereto;
9.3.2. Tenant Leases.
An original, fully executed counterpart of each of the
Tenant Leases (if any) and any amendments, modifications, supplements, and
restatements thereto;
9.3.3. Service Contracts.
An original, fully executed
counterpart of each of the Service Contracts being assumed by Buyer, and any
amendments, modifications, supplements and restatements thereto;
9.3.4.
Intangible Property.
If in Seller's Possession, the original of each document evidencing the
Intangible Property or rights to ownership and use thereof including the
Approvals;
9.3.5. Property Documents.
To the extent not previously delivered, originals of all of the Property
Documents in Seller's Possession;
9.3.6. Personal Property.
The Personal Property, including, without limitation, all keys, pass cards,
remote controls, security codes, computer software and other devices relating
to access to the Improvements; and
9.3.7. Other.
Keys,
combinations or card keys to all locks and security systems, and such other
documents and instruments, as may be reasonably required by Buyer or otherwise
in order to effectuate the provisions of this Agreement and the Closing of the
transactions contemplated herein.
10. PRORATIONS.
10.1. Prorations.
10.1.1. Income.
Rentals, revenues, and other income, if any, from the Property, shall be
prorated between Buyer and Seller as of the Closing Date to the extent actually
collected. Delinquent rentals as of the Closing Date shall be prorated if and
when collected by Buyer. With respect to any amounts due under the Tenant Leases
(if any) that are subject to an annual or other periodic reconciliation, Seller
and Buyer shall cooperate to complete a reconciliation as of the Closing. Based
upon such reconciliation, for any amounts owing to tenants under the Tenant
Leases (if any), Buyer shall receive a credit at the Closing,
<PAGE>
and for any
amounts payable by tenants under the Tenant Leases (if any), Seller shall be
entitled to a credit at the Closing unless such tenant is delinquent in the
payment of rental under its respective Tenant Lease, in which event Seller shall
receive a credit only to the extent such amount owed to such tenant exceeds the
delinquent rental owed by such tenant.
10.1.2. Other Credits.
On the Closing Date, Buyer shall be fully credited for:
10.1.2.1. Security Deposits.
Security
deposits that were paid to Seller by tenants under Tenant Leases (if any);
provided, however, that if any security deposit is in the form of a letter of
credit, promissory note, or similar instrument, Seller shall use commercially
reasonable efforts to cause such letter of credit, promissory note, or other
instrument to be assigned and transferred to Buyer at the Closing, and there
shall be no credit against the Purchase Price at the Closing with respect to any
such security deposit. If Seller is unable to transfer a security deposit in the
form of a letter of credit, promissory note, or similar instrument at the
Closing, then at the Closing, Seller shall deposit in escrow the originals of
such letter of credit, promissory note, or other similar instrument to be held
pursuant to mutually satisfactory instructions providing for the release thereof
to Seller to achieve such transfer or, as requested by Buyer, to draw thereon.
In addition thereto, Seller shall instruct Escrow Agent to retain in escrow cash
in the amount of such letter of credit, promissory note, or other similar
instrument, which cash shall be disbursed to Buyer if Seller is unable to
achieve such transfer within 30 days after the Closing, at which time the
originals of such letter of credit, promissory note, or other similar instrument
shall be returned to Seller.
10.1.2.2. Unpaid Obligations To Tenants.
Reimbursement of expenses and other sums owed by Seller to tenants for work or
disputes that occurred prior to the Closing Date, or for work to be performed or
allowances to be granted to any tenants upon or after the Closing Date, pursuant
to any Tenant Leases (if any) that will be binding upon the Real Property or
Buyer after the Closing;
10.1.2.3. Unpaid Leasing Commissions.
Any leasing
commissions or brokerage fees payable before, upon, or after the Closing Date in
connection with any Tenant Leases (if any); 10.1.2.4. Prepaid Rents and Other
Impounds. Prepaid rentals already received by Seller and other impounds
attributable to periods after the Closing Date. 10.1.3. Expenses. Taxes,
assessments, improvement bonds, service or other contract fees, utility costs,
and other expenses affecting the Property shall be prorated between Buyer and
Seller as of the Closing Date to the extent due and payable for any period prior
to the Closing. All non-delinquent real estate taxes or assessments on the
Property shall be prorated based on the actual current tax bill, but if such tax
bill has not yet been received by Seller by the Closing Date or if supplemental
taxes are assessed after the Closing for the period prior to the Closing, the
parties shall make any necessary adjustment after the Closing by cash payment to
the party entitled thereto so that Seller shall have borne all taxes, including
all supplemental taxes, allocable to the period prior to the Closing and Buyer
shall bear all taxes, including all supplemental taxes, allocable to the period
after the Closing.
10.1.4. Adjustments.
If any expenses attributable to the Property and allocable to the period
prior to the Closing are discovered or billed after the Closing, the parties
<PAGE>
shall make any necessary adjustment after the Closing by cash payment to the
party entitled thereto so that Seller shall have borne all expenses allocable
to the period prior to the Closing and Buyer shall bear all expenses allocable
to the period from and after the Closing.
10.1.5. Tax Appeals.
With respect to any property tax appeals or reassessments
filed by Seller for tax years prior to the year in which the Closing occurs,
Seller shall be entitled to the full amount of any refund or rebate resulting
therefrom (subject to any requirement under the Tenant Leases (if any) to pay to
the tenants thereunder a share of any such refund or rebate, which Seller shall
promptly pay to Buyer for refunding to such tenants), and with respect to any
property tax appeals or reassessments filed by Seller for the tax year in which
the Closing occurs, Seller and Buyer shall share the amount of any rebate or
refund resulting therefrom (after first paying to Seller all costs and expenses
incurred by Seller in pursuing such appeal or reassessment) in proportion to
their respective periods of ownership of the Property for such tax year (subject
to any requirement under the Tenant Leases (if any) to pay to the tenants
thereunder a share of any such refund or rebate, which Seller shall promptly pay
to Buyer for refunding to such tenants);
10.1.6. Generally.
For purposes of
calculating prorations, Buyer shall be deemed to be in title to the Property,
and therefore entitled to the income and responsible for the expenses, after
12:01 a.m. (California time) on the Closing Date. All such prorations shall be
made on the basis of the actual number of days of the month which shall have
elapsed as of the day of the Closing and based upon the actual number of days in
the month and a 365 day year. The provisions of this Section 10 shall survive
the Closing for a period of 1 year.
10.2. Preliminary Closing Statement.
3 days
prior to the Closing, Escrow Agent shall deliver to each of the parties for
their review and approval a preliminary closing statement (the "Preliminary
Closing Statement") based on an income expense statement prepared by Seller,
approved by Buyer, and delivered to Escrow Agent prior to said date, setting
forth (i) the proration amounts allocable to each of the parties pursuant to
this Section 10 and (ii) the Closing Costs allocable to each of the parties
pursuant to Section 8.2 hereof. Based on each of the party's comments, if any,
regarding the Preliminary Closing Statement, Escrow Agent shall revise the
Preliminary Closing Statement and deliver a final, signed version of a closing
statement to each of the parties at the Closing (the "Closing Statement").
11. ESCROW.
11.1. Opening of Escrow.
Promptly following the Execution Date, Buyer
and Seller shall each cause a purchase and sale escrow ("Escrow") to be opened
with Escrow Agent by delivery to Escrow Agent of 3 duplicate partially executed
originals of this Agreement executed by Seller and Buyer. Upon receipt of such
partially executed originals of this Agreement, Escrow Agent shall form 3
duplicate original counterparts of this Agreement and telephonically confirm to
Buyer and Seller the date upon which Escrow is opened (the "Opening of Escrow").
On or immediately after the Opening of Escrow, Escrow Agent shall (a) confirm
the same by executing and dating the 3 duplicate original counterparts of this
Agreement in the space provided for Escrow Agent, and (b) deliver a fully
executed original of this Agreement to each of Seller and Buyer.
11.2. Escrow Instructions.
This Agreement shall constitute escrow instructions to Escrow
Agent as well as the agreement of the parties. Escrow Agent is hereby appointed
and designated to act as Escrow Agent and instructed to deliver, pursuant to the
terms of this Agreement, the documents and funds to be deposited into Escrow as
herein
<PAGE>
provided. The parties hereto shall execute such additional escrow
instructions, not inconsistent with this Agreement as determined by counsel for
Buyer and Seller, as Escrow Agent shall deem reasonably necessary for its
protection, if any (as may be modified by and mutually acceptable to Buyer,
Seller and Escrow Agent). In the event of any inconsistency between this
Agreement and such additional escrow instructions, the provisions of this
Agreement shall govern.
11.3. Actions by Escrow Agent.
Provided that Escrow
Agent shall not have received Notice from Buyer or Seller of the failure of any
condition to the Closing or of the termination of the Escrow and this Agreement,
when Buyer and Seller have deposited into Escrow the documents and funds
required by this Agreement, and Title Company is unconditionally and irrevocably
committed to issue the Owner's Title Policy concurrently with the Closing,
Escrow Agent shall take the following actions, in the order and manner herein
below indicated:
11.3.1. Recording.
Following Title Company's acknowledgment
that it is prepared and irrevocably committed to issue the Owner's Title Policy
to Buyer, cause the Ground Lease Assignment and any other documents which the
parties hereto may mutually direct to be recorded in the Official Records and
obtain conformed copies thereof for distribution to Buyer and Seller.
11.3.2. Funds.
Upon receipt of confirmation of the recordation of the Ground Lease
Assignment and such other documents as were recorded pursuant to Section 11.3.1
above, disburse all funds deposited with it by Buyer as follows:
(a) Pursuant to the Closing Statement, retain for Escrow Agent's own
account all escrow fees and costs, disburse to Title Company the fees and
expenses incurred in connection with the issuance of the Owner's Title Policy,
and disburse to any other persons or entities entitled thereto the amount of any
other Closing Costs;
(b) Disburse to Seller an amount equal to the Purchase Price, less or
plus the net debit or credit to Seller by reason of the prorations and
allocation of Closing Costs provided for in Sections 10 and 8.2. Seller's
portion (as provided in Section 8.2) of the escrow fees, title fees and other
Closing Costs shall be paid pursuant to clause (a) above; and
(c) Disburse to Buyer any remaining funds in the possession of Escrow
Agent after payments pursuant to clauses (a) and (b) above have been completed.
11.3.3. Owner's Title Policy.
Cause Title Company to issue the Owner's Title Policy to Buyer.
11.3.4. Delivery of Documents.
Deliver to Buyer and Seller one
original of each of all documents deposited into Escrow, other than the Ground
Lease Assignment and any other recorded documents.
11.4. Conflicting Demands.
Upon receipt of a written demand for the Deposit (a "Deposit Demand") by Seller
or Buyer (the "demanding party"), Escrow Agent shall promptly send a copy of
such Deposit Demand to the other party (the "non-demanding party"). Except in
connection with the delivery of a Due Diligence Termination Notice (in which
event the Deposit (plus any interest or dividends earned thereon) shall be
immediately returned to Buyer), Escrow Agent shall hold the Deposit for 5
Business Days from the date of delivery by Escrow
<PAGE>
Agent of the Deposit Demand to
the non-demanding party ("Objection Period") or until Escrow Agent receives a
confirming instruction from the non-demanding party. In the event the
non-demanding party delivers to Escrow Agent written objection to the release of
the Deposit to the demanding party (an "Objection Notice") within the Objection
Period (which Objection Notice shall set forth the basis under this Agreement
for objecting to the release of the Deposit), Escrow Agent shall promptly send a
copy of the Objection Notice to the demanding party. In the event of any dispute
between the parties regarding the release of the Deposit, Escrow Agent, in its
good faith business judgment, may disregard all inconsistent instructions
received from either party and may either (a) hold the Deposit until the dispute
is mutually resolved and Escrow Agent is advised of such mutual resolution in
writing by both Seller and Buyer, or Escrow Agent is otherwise instructed by a
final non-appealable judgment of a court of competent jurisdiction, or (b)
deposit the Deposit (plus any interest or dividends earned thereon) with a court
of competent jurisdiction by an action of interpleader (whereupon Escrow Agent
shall be released and relieved of any further liability or obligations hereunder
from and after the date of such deposit). In the event Escrow Agent shall in
good faith be uncertain as to its duties or obligations hereunder or shall
receive conflicting instructions, claims or demands from the parties hereto
(expressly excluding however a conflicting demand given by Seller after Buyer
has delivered a Due Diligence Termination Notice and demand for the Deposit
(plus any interest or dividends earned thereon)), Escrow Agent shall promptly
notify both parties in writing and thereafter Escrow Agent shall be entitled
(but not obligated) to refrain from taking any action other than to keep safely
the Deposit (plus any interest or dividends earned thereon) until Escrow Agent
shall receive a joint instruction from both parties clarifying Escrow Agent's
uncertainty or resolving such conflicting instructions, claims, or demands, or
until a final non-appealable judgment of a court of competent jurisdiction
instructs Escrow Agent to act.
11.5. Real Estate Reporting Person.
Escrow Agent is designated the "real estate reporting person" for purposes of
section 6045 of title 26 of the United States Code and Treasury Regulation
1.6045-4 and any instructions or settlement statement prepared by Escrow Agent
shall so provide. Upon the consummation of the transaction contemplated by this
Agreement, Escrow Agent shall file Form 1099 information return and send the
statement to Seller as required under the aforementioned statute and regulation.
11.6. Destruction of Documents; Survival.
Escrow Agent is hereby authorized to destroy or
otherwise dispose of any and all documents, papers, instructions, and other
material concerning the Escrow at the expiration of 6 years from the later of
(a) the Closing, (b) the final disbursement of any funds maintained in Escrow
after the Closing, or (c) the final release of the Deposit and any related funds
following the termination of this Agreement. The provisions of this Section 11
shall survive the Closing or earlier termination of this Agreement until Escrow
Agent's duties and obligations hereunder are fully and finally discharged.
12. RISK OF LOSS.
12.1. Condemnation.
If, prior to the Closing Date, all or any
portion of the Property is taken by condemnation or eminent domain (or is the
subject of a pending or contemplated taking that has not been consummated),
Seller shall immediately notify Buyer of such fact. In such event, Buyer shall
have the option to terminate this Agreement upon Notice to Seller given not
later than 30 days after receipt of such notice from Seller. Upon such
termination, Escrow Agent shall immediately return to Buyer the Deposit (plus
any interest or dividends earned thereon), the parties shall equally share the
cancellation charges of Escrow Agent and Title Company, and neither party shall
have any further rights or obligations
<PAGE>
hereunder, other than pursuant to any
provision hereof that expressly survives the termination of this Agreement. If
Buyer does not elect to terminate this Agreement, Seller shall not compromise,
settle, or adjust any award without Buyer's prior written consent (which consent
may be withheld in Buyer's sole and absolute discretion). At the Closing, Seller
shall assign and turn over to Buyer, and Buyer shall be entitled to receive and
keep all awards for such taking or pending or contemplated taking.
12.2. Casualty.
Prior to the Closing and notwithstanding the pendency of this
Agreement, the entire risk of loss or damage or destruction of the Property
shall be borne and assumed by Seller. If, prior to Closing any material part of
the Property is damaged or destroyed and, (i) as to the 2450 Bayshore Building
or the 2400 Bayshore Building, cannot be repaired for less than $100,000.00, or
(ii) as to the 2425 Garcia Building, cannot be repaired for less than
$50,000.00, Seller shall immediately give Buyer Notice of such fact. In such
event, Buyer shall have the option to terminate this Agreement upon Notice to
Seller given not later than 15 days after receipt of any such Notice from
Seller. If Buyer does not elect to terminate this Agreement, Seller shall assign
and turn over, and Buyer shall be entitled to receive and keep, all insurance
proceeds payable with respect to such damage or destruction, plus Buyer shall
receive a credit against the Purchase Price equal to the amount by which the sum
of any insurance deductible and the cost to repair any uninsured damage exceeds
$10,000.00, and the parties shall proceed to Closing pursuant to the terms
hereof, without modification and without any reduction in the Purchase Price,
and the damage or destruction thereafter shall be repaired or not at Buyer's
sole option and cost; provided, however, that Seller shall have the option to
terminate this Agreement upon Notice to Buyer if a peril covered by Seller's
"difference-in-conditions" insurance is the cause of the damage or destruction
and the credit against the Purchase Price that Buyer would receive pursuant to
this sentence would exceed $500,000.00. If Buyer does not elect to terminate
this Agreement by reason of any casualty, Buyer shall have the right to
participate in any adjustment of the insurance claim and Seller shall not
compromise, settle, or adjust any such claim without Buyer's prior written
consent (which consent may be withheld in Buyer's sole and absolute discretion).
13. DEFAULT.
13.1. Default by Buyer.
IN THE EVENT THAT THE ESCROW AND THIS
TRANSACTION FAIL TO CLOSE SOLELY AS A RESULT OF THE DEFAULT OF BUYER IN THE
PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, BUYER AND SELLER AGREE THAT
SELLER'S ACTUAL DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX AND
THAT THE AMOUNT OF THE DEPOSIT REPRESENTS THE PARTIES' REASONABLE ESTIMATE OF
SUCH DAMAGES. THE PARTIES THEREFORE AGREE THAT IN THE EVENT THAT ESCROW AND THIS
TRANSACTION FAIL TO CLOSE SOLELY AS A RESULT OF THE DEFAULT OF BUYER IN THE
PERFORMANCE OF ITS OBLIGATIONS HEREUNDER AND SELLER IS READY, WILLING, AND ABLE
TO PERFORM ITS OBLIGATIONS HEREUNDER, SELLER, AS SELLER'S SOLE AND EXCLUSIVE
REMEDY, SHALL BE ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF THE DEPOSIT
(EXCLUSIVE OF INTEREST AND DIVIDENDS EARNED THEREON). IN THE EVENT ESCROW FAILS
TO CLOSE SOLELY AS A RESULT OF BUYER'S DEFAULT AND SELLER IS READY, WILLING, AND
ABLE TO PERFORM ITS OBLIGATIONS HEREUNDER, THEN (1) THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF BUYER AND SELLER HEREUNDER AND THE ESCROW CREATED
HEREBY SHALL TERMINATE, (2) ESCROW AGENT SHALL, AND IS HEREBY AUTHORIZED AND
INSTRUCTED TO, RETURN PROMPTLY TO BUYER AND SELLER ALL DOCUMENTS AND INSTRUMENTS
TO THE PARTIES WHO DEPOSITED THE SAME,
<PAGE>
(3) ESCROW AGENT SHALL DELIVER TO SELLER
THE DEPOSIT (EXCLUSIVE OF INTEREST AND DIVIDENDS EARNED THEREON) PURSUANT TO
SELLER'S INSTRUCTIONS, AND THE SAME SHALL BE THE FULL, AGREED, AND LIQUIDATED
DAMAGES, AND (4) ESCROW AGENT SHALL DELIVER TO BUYER ALL INTEREST AND DIVIDENDS
EARNED ON THE DEPOSIT. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT
INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE
SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO
SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. SELLER
HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. SELLER AND
BUYER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS
SECTION 13.1, AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS
TERMS.
JHN LAS
Seller's Initials Buyer's Initials
13.2. Default by Seller.
In the event of any breach or default by Seller, then
Buyer shall be entitled to pursue any remedy available to Buyer hereunder, at
law or in equity, including, without limitation, the specific performance of
this Agreement, provided that any suit for specific performance must be filed
prior to the Scheduled Closing Date, unless there are fewer than 60 days from
the date of the breach or default by Seller until the Scheduled Closing date, in
which event any suit for specific performance must be filed within 60 days after
the date of the breach or default by Seller.
14. BROKERS.
Seller and Buyer each hereby represent, warrant to and covenant to each
other that it has not dealt with any third party (other than Cresa Partners
("Broker")) in a manner that would obligate the other to pay any brokerage
commission, finder's fee or other compensation due or payable with respect to
the transaction contemplated hereby other than a commission to be paid to Broker
pursuant to a separate agreement, which shall be paid by Seller only upon the
Closing of the purchase and sale contemplated hereby. Seller hereby indemnifies
and agrees to protect, defend and hold Buyer harmless from and against any and
all claims, losses, damages, costs and expenses (including attorneys' fees,
charges and disbursements) incurred by Buyer by reason of any breach or
inaccuracy of the representation, warranty and agreement of Seller contained in
this Section. Buyer hereby indemnifies and agrees to protect, defend and hold
Seller harmless from and against any and all claims, losses, damages, costs and
expenses (including attorneys' fees, charges and disbursements) incurred by
Seller by reason of any breach or inaccuracy of the representation, warranty and
agreement of Buyer contained in this Section. The provisions of this Section
shall survive the Closing or earlier termination of this Agreement.
15. CONFIDENTIALITY.
15.1. Buyer.
Buyer agrees that until the Closing, except as otherwise provided
herein or required by law and except for the exercise by Buyer of any remedy
hereunder, Buyer shall (a) keep confidential the pendency of this transaction
and the documents and information supplied by Seller to Buyer, (b) disclose such
information only to Buyer's agents, employees, contractors, consultants or
attorneys, as well as lenders (if any), investment bankers, venture
<PAGE>
capital
groups, investors, title company personnel and tenants, with a need to know in
connection with Buyer's review and consideration of the Property, provided that
Buyer shall inform all persons receiving such information from Buyer of the
confidentiality requirement and (to the extent within Buyer's control) cause
such confidence to be maintained, and (c) upon the termination of this Agreement
prior to the Closing, return to Seller promptly upon request all copies of
documents, reports, and other information and materials relating to the Property
previously supplied to Buyer by Seller. Disclosure of information by Buyer shall
not be prohibited if that disclosure is of information that is or becomes a
matter of public record or public knowledge as a result of the Closing of this
transaction or from sources other than Buyer or its agents, employees,
contractors, consultants or attorneys.
15.2. Seller.
Seller agrees that both
prior to and after the Closing, except as otherwise provided herein (including
the Tenant Estoppels) or required by law (including any requirements of the
Securities and Exchange Commission or any other requirements applicable to
publicly-traded companies), and except for the exercise by Seller of any remedy
hereunder, Seller shall (a) keep confidential the pendency of this transaction
with Buyer, the terms and conditions contained in the Agreement and the identity
of Buyer and the relationship between Buyer and the entity to which Buyer may
assign this Agreement or which Buyer designates as the party to whom Seller
shall convey the Property at the Closing, and (b) disclose such information only
to Seller's agents, employees, contractors, consultants or attorneys, as well as
tenants and title company personnel, with a need to know such information in
connection with effecting this transaction, provided that Seller shall inform
all such persons receiving such confidential information from Seller of the
confidentiality requirement and (to the extent within Seller's control) cause
such confidence to be maintained. Disclosure of the pendency of this transaction
by Seller shall not be prohibited if that disclosure is of information that is
or becomes a matter of public record or public knowledge as a result of the
Closing of this transaction or from sources other than Seller or its agents,
employees, contractors, consultants or attorneys.
16. INDEMNIFICATION.
Except as otherwise set forth herein, Buyer hereby indemnifies and
agrees to defend and hold Seller harmless from and against any claims, demands,
obligations, losses, costs, damages, liabilities, judgments or expenses
(including reasonable attorneys' fees, charges and disbursements) arising out of
or in connection with the ownership, operation or maintenance of the Property
after the Closing. Except as otherwise set forth herein, Seller hereby
indemnifies and agrees to defend and hold Buyer harmless from and against any
claims, demands, obligations, losses, costs, damages, liabilities, judgments or
expenses (including reasonable attorneys' fees, charges and disbursements)
arising out of or in connection with the ownership, operation or maintenance of
the Property prior to the Closing. Each party shall do, execute and deliver, or
shall cause to be done, executed and delivered, all such further acts and
instruments which the other party may reasonably request in order to more fully
effectuate the indemnifications provided for in this Agreement. The provisions
of this Section shall survive the Closing.
17. MISCELLANEOUS PROVISIONS.
17.1. Governing Law.
This Agreement and the legal relations between the parties hereto
shall be governed by and construed and enforced in accordance with the laws of
the State of California, without regard to its principles of conflicts of law.
<PAGE>
17.2. Entire Agreement.
This Agreement, including the exhibits and schedules
attached hereto, constitutes the entire agreement between Buyer and Seller
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, letters of intent, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements, express or implied, made to either party by the other party in
connection with the subject matter hereof except as specifically set forth
herein or in the documents delivered pursuant hereto or in connection herewith.
Without limiting the foregoing, upon the execution of this Agreement, that
certain Letter of Intent dated as of March 5, 1999, between Buyer and Seller,
shall terminate and be of no further force or effect.
17.3. Modifications; Waiver.
No supplement, modification, waiver or termination of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any provision of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
17.4. Notices.
All notices, consents, requests, reports, demands or other
communications hereunder (collectively, "Notices") shall be in writing and may
be given personally, by reputable overnight delivery service or by facsimile
transmission (with in the case of a facsimile transmission, confirmation by
reputable overnight delivery service) to each of the parties at the following
addresses:
<PAGE>
If to Buyer: If to Seller:
Alexandria Real Estate Equities, Inc. Scios Inc.
135 N. Los Robles Ave., Suite 250 820 West Maude Avenue
Pasadena, California 91101 Sunnyvale, California 94086
Attention: General Counsel Attention: Mr. David Gryska
Re: 2425 Garcia; Re: 2425 Garcia;
2400/2450 Bayshore 2400/2450 Bayshore
Telephone: (626) 578-0777 Telephone: (408) 481-9177
Facsimile: (626) 578-0770 Facsimile: (not yet available)
With a copy to: With a copy to:
McKay, Meyer and Herbert Cooley Godward LLP
1801 Century Park East, 25th Floor One Maritime Plaza, 20th Floor
Los Angeles, California 90067-2327 San Francisco, California 94111
Attention: David S. Meyer, Esq. Attention: Anna B. Pope, Esq.
Re: 2425 Garcia; Re: 2425 Garcia;
2400/2450 Bayshore 2400/2450 Bayshore
Telephone: (310) 772-0836 Telephone: (415) 693-2000
Facsimile: (310) 772-0239 Facsimile: (415) 951-3699
If to Escrow Agent: If to Title Company:
Chicago Title Company Chicago Title Company
700 South Flower Street, Suite 900 110 West Taylor Street
Los Angeles, California 90017 San Jose, California 95110
Attention: Ms. Maggie G. Watson Attention: Ms. Laura Miller
Re: NBU No. 89903910-57 Re: Order No. 827124
2425 Garcia; 2425 Garcia;
2400/2450 Bayshore 2400/2450 Bayshore
Telephone: (213) 488-4300 (or 4337) Telephone: (408) 292-4212
Facsimile: (213) 488-4388 Facsimile: (408) 282-1404
or to such other address or such other person as the addressee party shall have
last designated by notice to the other party. Notices given by facsimile
transmission shall be deemed received when confirmed, and all other Notices
shall be deemed given on the date of delivery or refusal.
17.5. Expenses.
Subject to the allocation of Closing Costs provided in Section 8.2 hereof and to
the specific allocation of other costs provided in Section 3.3 and Section
4.20.4 hereof, whether or not the transactions contemplated by this Agreement
shall be consummated, all fees and expenses incurred by any party hereto in
connection with this Agreement shall be borne by such party.
17.6. Assignment.
17.6.1. Seller's Right to Assign.
Seller shall not have the right, power, or authority to assign, pledge, or
mortgage this Agreement or any portion of this Agreement, or
<PAGE>
to delegate any duties or obligations arising under this
Agreement, voluntarily, involuntarily, or by operation of law.
17.6.2. Buyer's Right to Assign.
Upon Notice to Seller and Escrow Agent, Buyer shall have the
right, power, and authority to assign this Agreement or to delegate any duties
or obligations arising under this Agreement, voluntarily, involuntarily or by
operation of law, to any person or entity. Upon such assignment, Buyer shall be
relieved of all obligations under this Agreement and the Escrow, provided that
Buyer shall not be relieved of any liabilities or indemnification obligations
arising under this Agreement or the Escrow prior to the date of such assignment
if such liabilities or indemnification obligations have not been fully satisfied
as of the date of such assignment.
17.7. Severability.
Any provision or part of
this Agreement which is invalid or unenforceable in any situation in any
jurisdiction shall, as to such situation and such jurisdiction, be ineffective
only to the extent of such invalidity and shall not affect the enforceability of
the remaining provisions hereof or the validity or enforceability of any such
provision in any other situation or in any other jurisdiction.
17.8. Successors and Assigns; Third Parties.
Subject to and without waiver of the provisions of
Section 17.6 hereof, all of the rights, duties, benefits, liabilities, and
obligations of the parties shall inure to the benefit of, and be binding upon,
their respective successors and assigns. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or entity, other than the parties
hereto and their successors or assigns, any rights or remedies under or by
reason of this Agreement.
17.9. Counterparts.
This Agreement may be executed in as many counterparts as may be deemed
necessary and convenient, and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original,
but all such counterparts shall constitute one and the same instrument.
17.10. Headings.
The section headings of this Agreement are for convenience of reference only and
shall not be deemed to modify, explain, restrict, alter or affect the meaning
or interpretation of any provision hereof.
17.11. Time of the Essence.
Time shall be of the essence with respect to all matters contemplated by
this Agreement.
17.12. Further Assistance.
In addition to the actions recited herein and contemplated to be
performed, executed, and/or delivered by Seller and Buyer, Seller and Buyer
agree to perform, execute and/or deliver or cause to be performed, executed
and/or delivered at the Closing or after the Closing any and all such further
acts, instruments, deeds and assurances as may be reasonably required to
consummate the transactions contemplated hereby.
17.13. Number and Gender.
Whenever the singular number is used, and when required by the context, the same
includes the plural, and the masculine gender includes the feminine and neuter
genders.
17.14. Construction.
This Agreement shall not be construed more
strictly against one party hereto than against any other party hereto merely by
virtue of the fact that it
<PAGE>
may have been prepared by counsel for one of the
parties. Further, no inferences are to be drawn, and no conclusions are to be
made, based on the fact that a particular provision contained in a draft of this
Agreement is not included in the executed version of this Agreement, and no
differences between drafts of this Agreement and the executed version of this
Agreement may be used as evidence of the parties' intended interpretation of any
of the terms of this Agreement.
17.15. Post-Closing Access to Records.
Seller shall retain, for at least [***] after the Closing, (i) all accounting
records relating to the Property ("Accounting Records") for the calendar year
periods for which Buyer may be required by the Securities and Exchange
Commission and/or Buyer's accountants to have audited financial statements
prepared with respect to the Property, including, without limitation, all
general ledgers, cash receipts, canceled checks and other accounting
documents or information reasonably requested by Buyer and related to the
Property, and (ii) all other records related to the Property, in either case
whether in Seller's Possession or in the possession or control of Seller's
Manager, asset manager, or other agent (collectively, the "Property
Information"). Upon receipt by Seller of Buyer's reasonable written request
at anytime and from time to time within 1 year after the Closing, Seller
shall make all of the Property Information available (or cause its Manager
or asset manager, as applicable, to make available) to Buyer and its
accountants and designees, for inspection and copying during normal
business hours and at Buyer's sole cost and expense.
17.16. Exhibits.
All exhibits attached hereto are hereby incorporated by
reference as though set out in full herein.
17.17. Attorneys' Fees.
If any
action is brought by either party against the other party, relating to or
arising out of this Agreement, the transaction described herein or the
enforcement hereof, the prevailing party shall be entitled to recover from the
other party reasonable attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action. For purposes of this
Agreement, the term "attorneys' fees" or "attorneys' fees and costs" shall mean
the fees and expenses of counsel to the parties hereto, which may include
printing, photostating, duplicating and other expenses, air freight charges, and
fees billed for law clerks, paralegals and other persons not admitted to the bar
but performing services under the supervision of an attorney, and the costs and
fees incurred in connection with the enforcement or collection of any judgment
obtained in any such proceeding. The provisions of this Section shall survive
the entry of any judgment, and shall not merge, or be deemed to have merged,
into any judgment.
17.18. Business Days.
As used herein, the term "Business Day"
shall mean a day that is not a Saturday, Sunday or legal holiday. In the event
that the date for the performance of any covenant or obligation under this
Agreement shall fall on a Saturday,
***A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE>
Sunday or legal holiday under the laws of the State of California, the
date for performance thereof shall be extended to the next Business Day.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER:
ALEXANDRIA REAL ESTATE EQUITIES, INC.,
a Maryland corporation
By: /s/ Lynn Anne Shapiro
Name:
Its:
Execution Date: May 28, 1999
SELLER:
BIO-SHORE HOLDINGS, LTD.,
a California Limited Partnership
By: BIO-SHORE MANAGEMENT CORP.,
a California corporation,
Sole General Partner
By: /s/ John H. Newman
Name:
Its:
Execution Date: May 28, 1999
SCIOS INC.,
a Delaware corporation
By: /s/ David W. Gryska
Name:
Its: CFO
Execution Date: _____, 1999
<PAGE>
ESCROW AGENT
The undersigned Escrow Agent accepts the foregoing Agreement of
Purchase and Sale and Joint Escrow Instructions and agrees to act as Escrow
Agent under this Agreement in strict accordance with its terms.
CHICAGO TITLE COMPANY
subject to Escrow Agent's Supplemental
Escrow Instructions
By: /s/ G. Aguilar
Name:
Its: Escrow Officer
