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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-15327
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CYTRX CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 58-1642740
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
154 Technology Parkway
Norcross, Georgia 30092 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 368-9500
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Securities registered pursuant to Section l2(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.001 par value per share
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 and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
On March 20 1998, the aggregate market value of the Registrant's common stock
held by non-affiliates was approximately $23,345,000.
On March 20 1998, there were 7,611,853 shares of the Registrant's common stock
outstanding, exclusive of treasury shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the CytRx Corporation 1997 Annual Report to Stockholders are
incorporated by reference into Parts II, III and IV. Portions of the CytRx
Corporation Proxy Statement for the 1998 Annual Meeting of Stockholders (the
"Proxy Statement") are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
CytRx Corporation ("CytRx") was founded in 1985 and is engaged in the
development and commercialization of pharmaceutical-related products and
services including human therapeutics focused on high-value critical-care
therapies.
In addition to its development work in human therapeutics, CytRx has
created several operating subsidiaries to broaden the development of its
technologies without losing focus on its core critical-care strategy. Vaxcel,
Inc. ("Vaxcel") is developing delivery systems to enhance the effectiveness of
vaccines. Vetlife, Inc. ("VetLife") is engaged in developing technologies to
enhance food animal growth and marketing and distributing products to enhance
North American beef cattle productivity. Before its divestiture by CytRx in
February 1998 (see "New Business Developments"), Proceutics, Inc.
("Proceutics") provided preclinical development services to the pharmaceutical
industry. Reference herein to "the Company" includes CytRx and its
majority-owned subsidiaries.
Certain financial information concerning the industry segments in
which the Company operates can be found in Note 14 to the Company's
Consolidated Financial Statements.
This Form 10-K contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Holders of the Company's capital stock are cautioned that such statements are
only predictions and that actual events or results may differ materially.
NEW BUSINESS DEVELOPMENTS
Acquisition of Zynaxis, Inc.
Effective May 21, 1997, Zynaxis, Inc. ("Zynaxis"), a publicly-held
biotechnology company engaged in the development of certain vaccine
technologies, merged with Vaxcel Merger Sub, a wholly-owned subsidiary of
Vaxcel formed for the purpose of the transaction (such transaction hereinafter
referred to as the "Vaxcel Merger"). As a result of the Vaxcel Merger, Zynaxis
became a wholly-owned subsidiary of Vaxcel.
As part of the Vaxcel Merger (i) shares of common stock of Vaxcel were
issued to the existing shareholders of Zynaxis in exchange for all of the
outstanding shares of capital stock of Zynaxis and (ii) Vaxcel issued to CytRx
shares of common stock of Vaxcel and a warrant to purchase additional shares of
common stock of Vaxcel in exchange for CytRx's contribution to Vaxcel of $4
million, less the outstanding principal and interest under a secured loan
extended to Zynaxis by CytRx.
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As a result of the Vaxcel Merger, CytRx owns approximately 87.5% of
the outstanding common shares of Vaxcel, with the remaining 12.5% held by the
former shareholders of Zynaxis. The Vaxcel Merger was treated as a purchase by
Vaxcel and constituted a tax-free reorganization for the former Zynaxis
shareholders. Also in connection with the Vaxcel Merger (i) options and
warrants to purchase Zynaxis common stock were converted into options and
warrants for the purchase of Vaxcel common stock, and (ii) convertible notes
issued by Zynaxis were converted into the right to receive shares of Vaxcel
common stock.
As a result of the Vaxcel Merger, Vaxcel acquired the PLG
microencapsulation and mucoadhesive vaccine technologies of Zynaxis. The
Company believes that the Zynaxis technologies will be complementary to
Vaxcel's current technologies, which are primarily focused on enhancing the
effectiveness of injectable vaccines, while the Zynaxis technologies are
primarily targeted toward development of vaccines for oral and mucosal
delivery.
Issuance of Convertible Debentures
On October 22, 1997, the Company privately placed (the "Note Sale")
with certain investors (the "Investors") $2,000,000 of convertible notes (the
"Debentures"). The Debentures may be converted into CytRx Common Stock at a
price of the lesser of 85% of the average closing bid price for the 10 days
preceding the conversion, or $5.68 per share (the "Conversion Price"). The
Debentures were sold at par and bear interest at a rate of 6% per annum. The
terms of the Debentures grant CytRx the right to redeem the Debentures at 110%
of par if the Conversion Price falls below $4. Also in connection with the Note
Sale, the Investors were issued two year warrants to purchase 40,000 shares of
CytRx Common Stock at an exercise price of $5.68. The fair value of such
warrants was determined to be insignificant.
In addition, CytRx has the option, subject to certain conditions, to
sell to the Investors an additional $2,000,000 in value of the Debentures. Also
in connection with the Note Sale, CytRx agreed to file and did file a
registration statement in connection with the shares of CytRx Common Stock into
which the Debentures are convertible (the "Securities"), and agreed to keep
such registration statement effective until October 22, 1999 (or such earlier
date when the holders of the Securities are able to sell all such securities
immediately without restriction pursuant to Rule 144(k) under the Securities
Act of 1933 or any successor rule thereunder or otherwise).
In February and March 1998, an aggregate of $500,000 of the Debentures
were converted into 204,104 shares of Common Stock. An additional $400,000 of
the Debentures were redeemed by the Company in February.
Divestiture of Subsidiaries and Sale of Real Estate
On February 16, 1998, the Company consummated a sale of substantially
all of the assets of Proceutics other than real estate to Oread Laboratories,
Inc. ("Oread") for approximately $2.1 million. Proceutics retained its real
estate assets and leased the laboratory building at 150
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Technology Parkway, Norcross, Georgia to Oread. The Company expects a gain
related to this transaction which will be recognized in 1998.
On February 23, 1998, CytRx and Proceutics entered into an agreement
with Alexandria Real Estate Equities, Inc. ("Alexandria") pursuant to which
CytRx and Proceutics would sell the two buildings owned by them at 150 and 154
Technology Parkway, Norcross, Georgia, to Alexandria for $4.5 million. Under
the terms of the agreement, Proceutics' rights and obligations under the lease
to Oread would be assigned to Alexandria and CytRx would lease the building at
154 Technology Parkway from Alexandria. The Company expects that this
transaction will be consummated in April 1998 and will result in a gain which
will be recognized in 1998.
CytRx anticipates that it may raise funds through equity financings
of its remaining subsidiaries, either directly by the subsidiary through
issuance of the subsidiary's stock, or through sale by CytRx of all, or a
portion, of its ownership in a subsidiary. CytRx is currently negotiating with
a third party for the sale of the cattle implant marketing operations of
VetLife.
PRODUCT DEVELOPMENT
FLOCOR(TM)
CytRx's human therapeutics product development efforts are focused on
critical-care products providing target opportunities for high-value
breakthrough products to address unmet medical needs. CytRx's current product
development focus is FLOCOR, which the Company believes has the potential to
alleviate pain and suffering associated with sickle cell crisis.
In 1995, results from a 2,900 patient RheothRx(R) trial indicated a
rise in creatinine, a marker of kidney toxicity, in a small percentage of heart
attack patients, at doses that provided a therapeutic benefit. As a result,
CytRx's licensee, Glaxo Wellcome PLC ("GW"), returned the rights to RheothRx to
the Company. Following GW's termination of the license, CytRx completed a
purification process that removed certain impurities in the compound, and
conducted experiments that showed higher toleration in models of renal failure.
The purified form of RheothRx is now named FLOCOR(TM), and a composition of
matter patent was issued for the new compound in June 1996. CytRx believes that
FLOCOR still offers opportunity in treating sickle cell crisis and other
vascular-occlusive disorders.
FLOCOR is an intravenous solution that has the unique property of
improving blood flow. The Company believes that FLOCOR has significant
potential in treating a variety of vascular-occlusive diseases where blood flow
is restricted. CytRx has chosen the painful vascular-occlusive crisis
associated with sickle cell anemia as its first development priority. Currently
there is no effective treatment to alleviate the pain and suffering sickle cell
anemia patients in crisis must endure. Sickle cell anemia primarily affects
African-Americans. It is an inherited abnormality of hemoglobin, the
oxygen-carrying molecule in red blood cells. Under conditions of low blood
oxygen, which is generally caused by dehydration or stress, the sickle cell
victim's hemoglobin becomes rigid. This causes red blood cells to lose their
normal flexibility. The cells become rough, sticky and irregularly shaped,
often looking like sickles, which gives the disease its name.
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These deformed cells cannot easily flow through the smaller blood
vessels of the body and tend to clump together, forming occlusions which impede
blood flow. The occlusions deprive tissues of vital oxygen which can result in
tissue death, inflammation and intense throbbing pain. Patients suffering from
sickle cell disease may experience several crisis episodes each year.
Hospitalization is required when pain becomes too much to bear. As there is
currently no effective treatment to alleviate the crisis, patients only receive
narcotics, fluids and rest. Aside from causing considerable pain and suffering,
these crisis episodes slowly destroy vital organs as they are deprived of
oxygen. As a result, the life expectancy of sickle cell victims is about twenty
years shorter than those without the disease.
Estimates place the number of persons suffering from sickle cell
anemia in the U.S. at about 60,000. There are about 100,000 hospital admissions
annually to treat sickle cell patients undergoing acute vascular-occlusive
crisis caused by the disease. On average, these patients require in-patient
treatment for 7.2 days, resulting in significant healthcare costs. A recent
study indicated that each year an average sickle cell patient consumes about
$25,000 in hospital goods and services while seeking treatment for his or her
pain.
FLOCOR's unique surface-active properties decrease blood viscosity and
enable the rigid sickled cells to become more flexible, thus allowing easier
passage of blood cells through narrow blood vessels.
A Phase II human clinical trial conducted by Burroughs Wellcome Co.
has indicated trends towards reducing the duration of sickle cell crisis and
associated hospital stay when FLOCOR is used. Also, the trial indicated that
FLOCOR significantly reduced use of medication required to alleviate the severe
pain. CytRx has conducted small safety and dose ranging studies with the new
purified material and is preparing to conduct a larger Phase III trial.
The Company believes that FLOCOR has the potential to be an effective
treatment for other vascular-occlusive diseases as well. Once the sickle cell
program is underway, CytRx plans to explore the opportunities with FLOCOR in
significant diseases such as Acute Respiratory Distress Syndrome (ARDS) and
stroke. However, CytRx's current strategy is to focus its efforts and resources
on gaining approval for the acute crisis of sickle cell anemia.
In June 1989, the FDA informed CytRx of its decision to grant
RheothRx(R) "Orphan Drug" designation for the treatment of sickle cell crisis.
The Orphan Drug Act of 1983, as amended, provides incentive to drug
manufacturers to develop drugs for the treatment of rare diseases (e.g.
diseases that affect less than 200,000 individuals in the United States, or
diseases that affect more than 200,000 individuals in the United States where
the sponsor does not reasonably anticipate that its product will become
profitable). As a result of the designation of RheothRx/FLOCOR as an Orphan
Drug, if the Company is the first manufacturer to obtain FDA approval to market
FLOCOR for treatment of sickle cell crisis, the Company will obtain a
seven-year period of marketing exclusivity beginning from the date of its
approval. During this period, the FDA cannot approve the same drug for the same
use from another sponsor. In March 1990, RheothRx also received Orphan Drug
designation for the treatment of severe burns.
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Vaccine Delivery Technologies
Vaxcel has four proprietary adjuvant and delivery system technologies
which can be used to increase the effectiveness and/or convenience of both
currently marketed and new vaccines. Vaxcel derives its rights to these four
technologies from the following: (a) the rights to OPTIVAX(R) ("Optivax") are
derived from an exclusive, worldwide license agreement with CytRx; (b) the
rights to PLG microspheres for oral vaccine delivery are derived as a result of
a the Vaxcel Merger; (c) the rights to mucoadhesives for oral vaccine delivery
are also derived as a result of the Vaxcel Merger; and (d) the rights to
entrapment techniques for vaccine delivery using certain water soluble polymers
are derived from a Research Agreement and and Options Agreement with Vanderbilt
University ("Vanderbilt"). These technologies are complementary to each other,
thereby providing Vaxcel with a broad portfolio of tehcnologies for the
development of vaccines to be delivered by the injectable, oral, and mucosal
routes of administration.
Optivax is the tradename for a family of proprietary nonionic block
copolymers which augment or modify the immune response to vaccines when
administered primarily by injection. Optivax acts both as a delivery system by
targeting vaccines to cells of the immune system and as an adjuvant because of
its ability to augment the immune system's response to vaccines. Vaxcel and its
institutional / corporate collaborators have performed numerous preclinical
studies (including several studies in non-human primates) to characterize the
adjuvant activity of Optivax. Vaxcel also performed a Phase I clinical trial to
help demonstrate that Optivax was safe and effective in humans. In this trial,
the results of which were published in the December 1997 issue of Clinical
Cancer Research, Optivax in combination with a subpotent cancer immunogen
generated potentially beneficial humoral and cellular immune responses in
patients with advanced cancer without evidence of significant local or systemic
toxicity.
Vaxcel's business strategy is to sublicense its technologies on a
vaccine-by-vaccine basis to companies engaged in vaccine development. Such
sublicense agreements may be either exclusive, co-exclusive, or non-exclusive
in the field depending upon the situation. The sublicensees will combine their
vaccine with Vaxcel's technology and then be responsible for product
development, regulatory approval, and commercialization of the final product at
their expense. In return, Vaxcel will receive licensing fees, milestone
payments, and royalty on sales. At present, Vaxcel has entered into an option
agreement for Optivax with Medeva PLC ("Medeva"), a license agreement for
Optivax with Corixa Corporation ("Corixa"), and a license agreement for PLG
microspheres with ALK A/S ("ALK").
Other Product Development Efforts
CytRx is also developing Protox(TM) as a treatment for tuberculosis as
well as for use in combination with certain antibiotic and anti-viral compounds
to enhance their uptake and resulting effectiveness. Protox is currently in
preclinical development.
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Vetlife is engaged in the development, licensing and marketing of
technologies to improve the value of food animal products to the cattle,
poultry, swine and dairy industries. Vetlife's products under development are
targeted at improving food animal production or reducing cost without
compromising safety or quality. Projects include a non-antibiotic growth
promoter for poultry and swine, adjuvants to enhance animal vaccines and
antibiotic potentiators to overcome antibiotic resistance or reduce the level
of drug required.
Consolidated expenditures for research and development activities were
$4.6 million, $2.8 million, and $7.1 million during the years ended December
31, 1997, 1996, and 1995, respectively.
PRODUCTS AND SERVICES CURRENTLY MARKETED
Cattle Growth Products and Services
VetLife is focused on marketing and distributing technologies to
enhance North American beef cattle productivity and end-product quality without
compromising human food safety or the environment. VetLife currently markets a
line of cattle implants and value-added services to corporate feedlot
operators, major beef cattle product distributors, veterinarians and consulting
nutritionists.
In 1996, VetLife entered into worldwide manufacturing, marketing and
distribution alliances with two companies which are pioneers and established
participants in the cattle growth implant business, Ivy Laboratories, Inc.
("Ivy") and the Elanco Animal Health division of Eli Lilly Company ("Elanco").
The agreement with Ivy allows VetLife to market and distribute Ivy's line of
FDA approved cattle growth products and licenses in North America. Pursuant to
the agreement with Elanco, VetLife became Elanco's exclusive supplier of cattle
growth promotant products. These alliances position VetLife to offer the most
complete line of cattle implant products currently available to the United
States market.
The effectiveness of VetLife's cattle implants are enhanced by cattle
implant programs and services tailored to meet specific customer objectives.
VetLife's V*Net(TM) Implant Management System is a powerful database that helps
producers, consultants and veterinarians implement specific, real-time implant
management decisions and recommendations. The V*Net System provides access to
information on hundreds of implant management trials that enable VetLife to
design a customized implant program for any cattle producer. VetLife also has a
novel Benchmark(TM) Program which enables producers to compare their own
implant programs with other Benchmark feedlots on a quarterly basis.
VetLife's distribution strategy involves the use of its direct sales
force to target large feedlot operators and major distributors in the "cattle
corridor" since these targets represent a disproportionately large segment of
the cattle implant market. VetLife uses major distributors as an integral
component of its distribution strategy, not only for their ability to cover a
wide market, but also for their inventory, shipping and invoicing capabilities.
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During 1997, three customers of VetLife each contributed significant
portions (greater than 10%) of the Company's consolidated net sales from
continuing operations. These three customers comprise approximately 49.8%,
34.9% and 10.1% of consolidated net sales from continuing operations. During
1996, two customers each contributed significant portions (greater than 10%) of
the Company's consolidated net sales (approximately 12% each). The loss of any
of these customers could have a significant negative impact on VetLife's
operations.
Titermax(R)
CytRx manufactures, markets and distributes TiterMax, an adjuvant used
to produce cell mediated and humoral responses in research animals. The keys to
the potency of TiterMax lie in its immunostimulatory activity and the formation
of stable water-in-oil emulsions. TiterMax aids in the antigen's effective
presentation to the immune system without the toxic effects of other research
adjuvants.
Other
CytRx also has a small group of human resource professionals who, in
addition to their services to the Company, provide recruiting services to third
parties under the name of Spectrum Recruitment Research.
MANUFACTURING
The Company has maintained a portion of Proceutics' Norcross, Georgia
facility as a pilot manufacturing facility. The pilot facility is intended for
manufacture of investigational supplies of certain of the Company's products
under development and is generally not large enough to produce quantities of
product adequate for commercial purposes. The process used in the pilot
facility also may require modification to achieve commercial scale. The pilot
facility is contained within the building leased to Oread (see "New Business
Developments"). Oread has agreed to maintain Good Manufacturing Practices
("GMP") conditions in the facility for a minimum of two years from the date of
their lease and to allow the Company reasonable usage of the facility.
Production of the bulk chemical supply and final dosage form of
materials for use in clinical trials will be performed by third party
manufacturers. The Company has contracted with a European chemical company for
production of the bulk purified drug substance (CRL-5861) used as the active
ingredient in FLOCOR, and anticipates that it will contract with an additional
third party manufacturer to provide commercial scale manufacturing of FLOCOR
for injection, as well as to manage their respective portion of the chemistry
manufacturing and controls (CMC) section of the planned NDA filing.
If the Company modifies its manufacturing process or changes the
source or location of product supply, regulatory authorities will require the
Company to demonstrate that the material
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produced from the modified or new process or facility is equivalent to the
material used in the Company's clinical trials. Further, any manufacturing
facility and the quality control and manufacturing procedures used by the
Company for the commercial supply of a product must comply with applicable
OSHA, EPA, and FDA standards, including Good Manufacturing Practice
regulations.
Cattle growth products marketed and distributed by Vetlife are
manufactured under contract by IVY and Elanco.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company actively seeks patent protection for its technologies,
processes, uses, and ongoing improvements and considers its patents and other
intellectual property to be critical to its business.
The Company continually evaluates the patentability of new inventions
and improvements developed by its employees and collaborators. Whenever
appropriate, the Company will endeavor to file United States and international
patent applications to protect these new inventions and improvements. However,
there can be no assurance that any of the current pending patent applications
or any new patent applications that may be filed will result in issued United
States or foreign patents.
The Company also attempts to protect its proprietary products,
processes and other information by relying on trade secrets and non-disclosure
agreements with its employees, consultants and certain other persons who have
access to such products, processes and information. Under the agreements, all
inventions conceived by employees are the exclusive property of the Company.
Nevertheless, there can be no assurance that these agreements will afford
significant protection against misappropriation or unauthorized disclosure of
the Company's trade secrets and confidential information.
COMPETITION
Many companies, including large pharmaceutical, chemical and
biotechnology firms with financial resources, research and development staffs,
and facilities that are substantially greater than those of the Company, are
engaged in the research and development of pharmaceutical products that could
compete with the products under development by the Company. The industry is
characterized by rapid technological advances and competitors may develop their
products more rapidly and/or such products may be more effective than those
under development by the Company or its licensees and corporate partners. The
Company competes in this research and development environment by attempting to
develop its products and technologies in an innovative and timely fashion that
would provide the Company with an advantage in the licensing and/or marketing
of its products and technologies.
VetLife's competitors include animal health companies and major
pharmaceutical companies that have divisions or subsidiaries in animal health
activities. These competitors have
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substantially greater resources, research, and larger, more established
marketing, sales, distribution and service organizations than VetLife. VetLife
differentiates itself from the competition by focusing its resources solely on
the cattle implant business and by offering customers the most comprehensive,
easy-to-use, customized line on cattle implants in the industry.
GOVERNMENT REGULATION
The marketing of pharmaceutical products requires the approval of the
FDA and comparable regulatory authorities in foreign countries. The FDA has
established guidelines and safety standards which apply to the pre-clinical
evaluation, clinical testing, manufacture and marketing of pharmaceutical
products. The process of obtaining FDA approval for a new therapeutic product
(drug) generally takes several years and involves the expenditure of
substantial resources. The steps required before such a product can be produced
and marketed for human use in the United States include preclinical studies in
animal models, the filing of an Investigational New Drug ("IND") application,
human clinical trials and the submission and approval of a New Drug Application
("NDA"). The NDA involves considerable data collection, verification and
analysis, as well as the preparation of summaries of the manufacturing and
testing processes, preclinical studies, and clinical trials. The FDA must
approve the NDA before the drug may be marketed. There can be no assurance that
the Company will be able to obtain the required FDA approvals for any of its
products.
The manufacturing facilities and processes for the Company's products,
whether manufactured directly by the Company or by a third party, will be
subject to rigorous regulation, including the need to comply with Federal Good
Manufacturing Practice regulations. The Company is also subject to regulation
under the Occupational Safety and Health Act, the Environmental Protection Act,
the Nuclear Energy and Radiation Control Act, the Toxic Substance Control Act
and the Resource Conservation and Recovery Act.
ENVIRONMENTAL PROTECTION
During 1997 compliance with federal, state and local regulations
pertaining to environmental standards did not have a material effect upon the
capital expenditures or earnings of the Company.
EMPLOYEES
As of December 31, 1997, the Company had 72 full-time and 2 part-time
employees.
ITEM 2. PROPERTIES
The Company owns two buildings, consisting of an aggregate of
approximately 30,700 square feet, at 150 and 154 Technology Parkway, Norcross,
Georgia. In February 1998, the Company leased its laboratory building at 150
Technology Parkway to Oread and entered into an
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agreement to sell both of its properties at 150 and 154 Technology Parkway to
Alexandria (See "Business - New Business Developments"). The Company currently
subleases laboratory and related space from Oread, and will execute a lease
with Alexandria for its administrative office needs upon the consummation of
the sale of the properties to Alexandria.
The Company also leases approximately 3,500 square feet of office and
warehouse space in Winterset, Iowa and 600 square feet of office space in
Overland Park, Kansas in support of Vetlife's Cattle Business Unit activities.
The above-mentioned facilities are in satisfactory condition and
suitable for the particular purposes for which they were acquired or
constructed and are adequate for present operations.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on The Nasdaq Stock Market under
the symbol CYTR. The following table sets forth the high and low sale prices
for the Common Stock for the periods indicated as reported by Nasdaq. Such
prices represent prices between dealers without adjustment for retail mark-ups,
mark-downs, or commissions and may not necessarily represent actual
transactions. Such prices have been adjusted to reflect the one-for-four
reverse stock split effected February 6, 1996.
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
COMMON STOCK:
1998
January 1 to March 20 3 5/8 2 9/16
1997
Fourth Quarter 5 5/8 3 7/8
Third Quarter 5 3 5/32
Second Quarter 4 1/4 3 1/4
First Quarter 5 3 1/4
1996
Fourth Quarter 4 9/16 3 5/16
Third Quarter 4 13/16 3 5/8
Second Quarter 6 1/8 3 7/8
First Quarter 6 3 3/8
</TABLE>
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On March 20, 1998, the closing price of the Common Stock as reported
on The Nasdaq Stock Market, was $3 5/16 and there were approximately 1,500
holders of record of the Company's Common Stock. The number of record holders
does not reflect the number of beneficial owners of the Company's Common Stock
for whom shares are held by Cede & Co., certain brokerage firms and other
institutions. The Company has not paid any dividends since its inception and
does not contemplate payment of dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to this item is incorporated herein by
reference from the Company's 1997 Annual Report to Stockholders. The applicable
portion of the 1997 Annual Report to Stockholders is included in Exhibit 13.1
to this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information with respect to this item is incorporated herein by
reference from the Company's 1997 Annual Report to Stockholders. The applicable
portion of the 1997 Annual Report to Stockholders is included in Exhibit 13.1
to this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is incorporated herein by
reference from the Company's 1997 Annual Report to Stockholders. The applicable
portion of the 1997 Annual Report to Stockholders is included in Exhibit 13.1
to this report.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this item is incorporated herein by
reference from the Proxy Statement, which is expected to be filed pursuant to
Regulation 14A within 120 days after the end of the Company's 1997 fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated herein by
reference from the Proxy Statement, which is expected to be filed pursuant to
Regulation 14A within 120 days after the end of the Company's 1997 fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated herein by
reference from the Proxy Statement, which is expected to be filed pursuant to
Regulation 14A within 120 days after the end of the Company's 1997 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this 10-K:
1. Financial Statements
The financial statements listed below are incorporated by
reference from the Company's 1997 Annual Report to
Stockholders:
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1995, 1996 and 1997
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995
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Consolidated Notes to Financial Statements
Report of Independent Auditors
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1997, 1996 and 1995 Page 17
All other schedules are omitted because they are not
required, not applicable, or the information is provided in
the financial statements or notes thereto.
3. Exhibits required by Item 601 of Regulation S-K:
See Exhibit Index on page 14 of this Form 10-K.
(b) Reports on Form 8-K:
On November 6, 1997, the Registrant filed a Current Report on Form 8-K
related to its issuance of $2 million of convertible debentures.
13
<PAGE> 15
CytRx Corporation
Form 10-K Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C>
2.1 Agreement and Plan of Merger and Contribution dated as of December
6, 1996, among CytRx Corporation, Vaxcel, Inc.,
Vaxcel Merger Subsidiary, Inc. and Zynaxis, Inc. (a)
2.2 Preferred Stock and Warrant Agreement dated as of December 6, 1996,
among CytRx Corporation, Zynaxis, Inc., Vaxcel, Inc. and each of
the holders of Zynaxis, Inc. warrants signatory thereto (a)
2.3 Private Securities and Subscription Agreements dated October 22, 1997
between CytRx Corporation and various investors (b)
3.1 Certificate of Incorporation (c)
3.2 By-Laws (d)
3.3 CytRx Corporation 6% Converible Debentures dated as of October 22, 1997
in favor of various investors (b)
4.1 Shareholder Protection Rights Agreement dated April 16, 1997
between CytRx Corporation and American Stock Transfer & Trust
Company as Rights Agent (e)
4.2 CytRx Corporation Stock Purchase Warrants dated as of October 22, 1997
in favor of various investors (b)
10.1 Agreement with Emory University, as amended (f)
10.2 Agreement with BASF Corporation, as amended (f)
10.3 1995 Employment Agreement between CytRx Corporation
and Jack J. Luchese
10.4* Amendment No. 1 to 1995 Employment Agreement between
CytRx Corporation and Jack J. Luchese (g)
10.5* Amendment No. 2 to 1995 Employment Agreement between
CytRx Corporation and Jack J. Luchese (h)
10.6* Change of Control Employment Agreement between CytRx Corporation
and Jack J. Luchese (h)
10.7* 1986 Stock Option Plan, as amended and restated (i)
10.8* 1994 Stock Option Plan, as amended and restated (h)
10.9* 1995 Stock Option Plan (j)
10.10 Asset Purchase Agreement dated February 10, 1998 by and between
Proceutics, Inc. and Oread Laboratories, Inc.
10.11 Lease Agreement dated February 16, 1998 by and between
Proceutics, Inc. and Oread, Inc.
10.12 Sublease Agreement dated February 16, 1998 by and between CytRx
Corporation and Oread, Inc.
10.13 Purchase and Sale Agreement dated February 23, 1998 by and between
CytRx Corporation and Alexandria Real Estate Equities, Inc.
10.14 Purchase and Sale Agreement dated February 23, 1998 by and between
</TABLE>
14
<PAGE> 16
<TABLE>
<S> <C>
Proceutics, Inc. and Alexandria Real Estate Equities, Inc.
13.1 Selected Portions of the CytRx Corporation 1997 Annual Report to Stockholders
21.1 Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule (for SEC use only).
27.2 Financial Data Schedule - 1996 Restatement (for SEC use only).
</TABLE>
*Indicates a management contract or compensatory plan or arrangement.
- -------------------
(a) Incorporated by reference to the Registrant's Current Report on Form
8-K filed on May 21, 1997.
(b) Incorporated by reference to the Registrant's Current Report on
Form 8-K filed on November 6, 1997.
(c) Incorporated by reference to the Registrant's Registration Statement
on Form S-3 (File No. 333-39607) filed on November 5, 1997.
(d) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (File No. 333-37171) filed on July 21, 1997.
(e) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997.
(f) Incorporated by reference to the Registrant's Registration Statement
on Form S-l (File No. 33-8390) filed on November 5, 1986.
(g) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q filed on August 14, 1997.
(h) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q filed on November 6, 1997.
(i) Incorporated by reference to the Registrant's Annual Report on
Form 10-K filed on March 27, 1996.
(j) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (File No. 33-93818) filed on June 22, 1995.
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CYTRX CORPORATION
By:/s/ Jack J. Luchese
-----------------------------------
Jack J. Luchese, President
Date: March 26, 1998 and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jack L. Bowman Director March 26, 1998
- ------------------------------------
Jack L. Bowman
/s/ Raymond C. Carnahan, Jr. Director March 26, 1998
- ------------------------------------
Raymond C. Carnahan, Jr.
/s/ Max Link Director March 26, 1998
- ------------------------------------
Max Link
/s/ Jack J. Luchese Chairman of the March 26, 1998
- ------------------------------------ Board of Directors
Jack J. Luchese President and Chief Executive Officer
(Principal Executive Officer)
/s/ Herbert H. McDade, Jr. Director March 26, 1998
- ------------------------------------
Herbert H. McDade, Jr.
/s/ Mark W. Reynolds Chief Financial Officer March 26, 1998
- ------------------------------------ (Principal Financial Officer)
Mark W. Reynolds
</TABLE>
16
<PAGE> 18
CYTRX CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Additions
----------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
- --------------------------------------- ----------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Reserve Deducted in the Balance Sheet
from the Asset to Which it Applies:
Allowance for Bad Debts
Year ended December 31, 1997 $ 48,430 $ 44,850 $ -- $ 71,093 $ 22,187
Year ended December 31, 1996 -- 2,516 45,914 -- 48,430
Year ended December 31, 1995 -- -- -- -- --
Allowance for Deferred Tax Assets
Year ended December 31, 1997 $15,200,000 $2,484,000 $ -- $ -- $17,684,000
Year ended December 31, 1996 13,600,000 1,600,000 -- -- 15,200,000
Year ended December 31, 1995 9,200,000 4,400,000 -- -- 13,600,000
Marketable Securities Valuation Reserve
Year ended December 31, 1997 $ -- $ -- $ -- $ -- $ --
Year ended December 31, 1996 -- -- -- -- --
Year ended December 31, 1995 2,475,277 -- -- 2,475,277 --
</TABLE>
17
<PAGE> 1
EXHIBIT 10.3
1995 Employment Agreement between
CytRx Corporation and Jack J. Luchese
<PAGE> 2
1995 EMPLOYMENT AGREEMENT
BETWEEN
CYTRX CORPORATION
AND
JACK J. LUCHESE
This Employment Agreement ("Agreement") is made and executed this
_____ day of March, 1995 effective January 1, 1995 (the "Effective Date"), by
and between CYTRX CORPORATION ("CytRx" or the "Company"), a Delaware
Corporation having its principal place of business at 154 Technology Parkway,
Technology Park/Atlanta, Norcross, Georgia 30092, and JACK J. LUCHESE ("Mr.
Luchese") who currently resides at 3030 Castle Pines Drive, Duluth, Georgia
30136.
WHEREAS, CytRx employed Mr. Luchese as its President and Chief
Executive Officer pursuant to an Employment Agreement dated March 13, 1989, and
amended by Amendment Nos. 1 dated May 11, 1989, and March 14, 1991, Amendment
No. 2 dated March 24, 1993, Amendment No. 3 dated May 11, 1993, and Amendment
No. 4 dated June 20, 1994 (collectively, the "1989 Agreement").
WHEREAS, the Compensation Committee of the Board of Directors of the
Company at its meeting on December 8, 1994, approved certain changes to the
terms of the employment of Mr. Luchese with the Company.
WHEREAS, as a result of the foregoing, both the Company and Mr.
Luchese concluded that the 1989 Agreement should be amended and restated so as
to reflect the changes.
WHEREAS, the Company and Mr. Luchese executed the 1995 Employment
Agreement on February 20, 1995 (the "Original Execution Date"), and
subsequently determined to amend Paragraphs 3(b) and 7(c) of the Agreement, but
not any of the terms and conditions relating to the Executive Warrants as
defined below.
WHEREAS, this Agreement amends and restates the 1995 Employment
Agreement.
WHEREAS, the Board has authorized the execution of this Agreement.
<PAGE> 3
NOW, THEREFORE, in consideration of the mutual covenants and promises
made in this Agreement, the parties do hereby agree as follows:
1. EMPLOYMENT.
(a) The 1989 Agreement is hereby terminated as of the Effective Date,
except for the Category I Warrants, the Category II Warrants, the 1994 Warrants
and the Category IV Warrants (collectively, the "Executive Warrants"), which
were granted pursuant to the terms of such Agreement. The Executive Warrants
were amended and restated on the Original Execution Date, and as so amended and
restated are set forth in separate warrant agreements effective as of the
Original Execution Date.
(b) CytRx agrees to and does hereby engage and employ Mr. Luchese as
President and Chief Executive Officer of CytRx Corporation for the term and
upon the terms and conditions set forth herein, and Mr. Luchese accepts such
offer of employment. It is also understood and agreed that Mr. Luchese will
serve as a director of the Company, without additional compensation, for any
term he is elected to serve. During the term of this Agreement, the Board of
Directors will take such actions as may be required to nominate and recommend
Mr. Luchese for election as a director by the shareholders. Mr. Luchese agrees
to discharge his duties hereunder in accordance with the direction of the Board
of Directors of CytRx and to follow diligently and implement faithfully all
management policies and decisions communicated to him by the Board of
Directors. During the employment of Mr. Luchese by CytRx, Mr. Luchese shall
devote his full and undivided time, attention, energies and loyalty to the
Company's business but the foregoing shall not be construed to prevent Mr.
Luchese from making investments in other businesses or enterprises or engaging
in any other business activity that does not interfere with Mr. Luchese's
duties under this Agreement, or conflict with his obligations under Paragraph
11 hereof or otherwise represent a conflict of interest with his duties to
CytRx. Notwithstanding the above, Mr. Luchese may serve on the Board of
Directors of companies not affiliated with CytRx, and receive compensation in
connection therewith, if such position is approved by the Board of Directors of
CytRx.
2. TERM AND RENEWAL. The term of Mr. Luchese's employment hereunder will be
for a period commencing on the date hereof, and continuing until December 31,
1998 (the "Expiration Date"), unless Mr. Luchese's employment is terminated by
either party pursuant to Paragraph 7 of this Agreement.
3. SALARY.
(a) For services provided hereunder, Mr. Luchese will be paid an
annual base salary. The initial base salary shall be Two Hundred Ninety-Five
Thousand Dollars ($295,000). The base salary shall be reviewed by the Board of
Directors of the Company no less than once each calendar year. The base salary
will be increased each year consistent with the average overall merit
increases, if any, granted to all employees as a
-2-
<PAGE> 4
whole for such year, but will not be decreased. If the base salary is
increased, then the increased amount shall be deemed the "base salary" for all
purposes under this Agreement.
(b) It is understood and contemplated that, in addition to the
foregoing annual base salary, Mr. Luchese will be eligible to receive cash
bonuses in each calendar year during the term of this Agreement in such
amounts, if any, as shall be determined from time to time by the Board of
Directors of the Company in its sole discretion. The bonus for the last three
(3) calendar quarters of 1994 shall accrue, and become due and payable, on
April 1, 1995. The bonuses for each of 1995 and all future years shall accrue,
and become due and payable, on January 1 of the following year, or any later
time requested by Mr. Luchese. If this Agreement expires on the Expiration
Date, then the obligation of the Company to pay a bonus to Mr. Luchese on
January 1, 1999, shall survive such expiration, and the Company shall pay such
bonus to Mr. Luchese as if this Agreement remained in full force and effect
4. FRINGE BENEFITS. Mr. Luchese, during the period of his employment
hereunder, will receive fringe benefits such as insurance, vacation leave, sick
leave and participation in any retirement plan as may exist from time to time
for all other executive officers of the Company; provided, however, that, during
the term of this Agreement, the Company shall maintain at its expense a
long-term disability policy for the benefit of Mr. Luchese, which will provide
coverage equal to a percentage of Mr. Luchese's base salary consistent with the
percentage coverage provided to the other executive officers of the Company.
Such insurance shall include any group long-term disability insurance on Mr.
Luchese that the Company maintains for the benefit of its senior executives.
Mr. Luchese will not receive an automobile or automobile expense allowance. Mr.
Luchese shall be entitled to six weeks of vacation leave, annually, which shall
be paid at his base salary, and shall accrue and be used in accordance with the
policies and procedures of the Company.
5. REIMBURSEMENT OF BUSINESS EXPENSES. The Company will promptly reimburse
Mr.Luchese for all business expenses incurred by him in connection with the
business of the Company in accordance with regular Company policy regarding the
nature and amount of expenses and the maintenance and submission of receipts and
records necessary for the Company to document them as proper business expenses.
6. THE EXECUTIVE WARRANTS.
(a) Category I and Category II Warrants. Under the 1989 Agreement, the
Company granted to Mr. Luchese Category I Warrants to purchase 1,550,000, and
Category II Warrants to purchase 650,000, shares of CytRx Common Stock. To
evidence an extension of the expiration date (from February 22, 1999 to
December 31, 2004) of such warrants granted prior to 1990 and the incorporation
of the terms of this Agreement, Mr. Luchese has surrendered Warrant Nos. WI-1
(150,000 shares), WI-2 (400,000 shares), WI-3 (400,000 shares), WI-4 (400,000
shares) and WII-1 (650,000 shares) to the
-3-
<PAGE> 5
Company for cancellation and, on the Original Execution Date, received Warrant
No. WI/II-1 (2,000,000 shares). To evidence the incorporation of the terms of
this Agreement in the balance of the warrants, Mr. Luchese has surrendered
Warrant Nos. WI-5 (100,000 shares) and WI-6 (100,000 shares) for cancellation
and, on the Original Execution Date, received Warrant No. I/II-2 (200,000
shares). All of such warrants have vested in full.
(b) 1994 Warrants and Category IV Warrants.
(1) Under the 1989 Agreement, the Company granted to Mr.
Luchese 1994 Warrants and Category IV Warrants to purchase 600,000 shares of
CytRx Common Stock at $4.25 and $4.00 per share during the sixteen calendar
quarters beginning with April 1, 1994, and ending on March 31, 1998. As amended
and restated on the Original Execution Date, the 1994 Warrants and the Category
IV Warrants grant Mr. Luchese the right to purchase 529,706 shares of CytRx
Common Stock at $1.75 per share during the nineteen calendar quarters beginning
with April 1, 1994, and ending on December 31, 1998. The warrants were amended
and restated to effect two changes. First, the Company repriced the warrants
that vested during 1994 using the repricing formula applied to options held by
employees of the Company generally. The formula reduced Mr. Luchese's right to
purchase 180,000 shares of CytRx Common Stock at $4.25 per share to a right to
purchase 129,706 shares of CytRx Common Stock at $1.75 per share. Second, in
exchange for Mr. Luchese's agreement to extend the term of his employment under
this Agreement for an additional 18 months (previously, Mr. Luchese had a
one-year renewal option to extend the term of his employment until July 1,
1998), the Company amended the warrants that vested after 1994 to reduce the
shares of CytRx Common Stock subject to the warrants from 420,000 to 400,000,
to reduce the exercise price from $4.25 and $4.00 to $1.75, and to change a
"back-end loaded" vesting schedule designed to induce Mr. Luchese to exercise
his renewal option to a schedule that vests warrants to purchase an equal
number of shares each calendar quarter.
(2) To evidence changes in the exercise price and shares
subject to the 1994 Warrants and the incorporation of the terms of this
Agreement, Mr. Luchese has surrendered Warrant No. WIII-1 (300,000 shares) for
cancellation and, on the Original Execution Date, received Warrant No. WIII-2
(129,706 shares). All of such warrants have vested in full.
(3) To evidence changes in the exercise price, vesting
schedule, expiration date and shares subject to the Category IV Warrants and
the incorporation of the terms of this Agreement, Mr. Luchese has surrendered
Warrant No. WIV-1 (300,000 shares) for cancellation and, on the Original
Execution Date, received Warrant No. WIV-2 (400,000 shares). The Category IV
Warrants shall vest and be exercisable as to 25,000 shares on the date hereof
and, thereafter, on the first day of each calendar quarter, beginning on April
1, 1995, and ending on October 1, 1998.
-4-
<PAGE> 6
(c) Other Registration, Vesting and Exercise Rights.
(1) In addition to any other registration rights Mr. Luchese
may have, as soon as reasonably practicable, but in no event later than May 1,
1995, the Company shall file with the Securities and Exchange Commission a
registration statement to register the shares of Common Stock to be acquired
under the 1994 Warrants or the Category IV Warrants under the Securities Act of
1933, and shall use its best efforts to keep such registration statement
effective and remain current for as long as Mr. Luchese has the right to
exercise the Executive Warrants and for a period of six (6) months thereafter,
if such additional period is required to allow Mr. Luchese to dispose of the
Warrant Shares in an orderly fashion.
(2) All rights to purchase CytRx stock pursuant to the
Executive Warrants that have vested prior to or upon the termination of Mr.
Luchese's employment with the Company may be exercised by Mr. Luchese at any
time until the expiration of such rights under the applicable warrant
agreement, even after Mr. Luchese's employment with the Company has been
terminated. All rights to purchase CytRx stock pursuant to the Executive
Warrants that by their terms vest after the termination of Mr. Luchese's
employment with the Company shall terminate on the effective date of the
termination of Mr. Luchese's employment.
(3) All of the Category IV Warrants shall become fully vested
in the event of the termination of Mr. Luchese's employment in the
circumstances described in Paragraph 7(b) or 7(c) prior to the Expiration Date.
(4) All of the Category IV Warrants shall become fully vested
upon an extraordinary corporate event such as a Change of Control (as defined
in Paragraph 8 hereof).
(5) For all purposes of the Agreement and the Executive
Warrants, (A) in the event of the death of Mr. Luchese, the Executive Warrants
may be exercised by his personal representative, executor, or heirs (whether by
will or by the laws of descent and distribution), and (B) in the event of the
incapacity of Mr. Luchese, the Executive Warrants may be exercised by his duly
appointed attorney-in-fact or other authorized person, in each case, to the
same extent such warrants have vested and are exercisable by the Holder (as
defined in the Executive Warrants) in accordance with the terms thereof.
7. TERMINATION OF EMPLOYMENT AND THIS AGREEMENT.
(a) If Mr. Luchese's employment is terminated by the Company for cause
(as hereinafter defined) or if Mr. Luchese voluntarily leaves the employment of
the Company prior to the Expiration Date, the Company will pay Mr. Luchese the
equivalent of three (3) months' salary at the base salary, and three (3) months
continuation of fringe benefits then being received by Mr. Luchese. For
purposes of this Agreement, termination "for
-5-
<PAGE> 7
cause" means termination of Mr. Luchese's employment by action of a majority of
the members of the Board of Directors who are not employees of CytRx or any
subsidiary, because of:
(1) material breach of contract,
(2) failure or inability to carry out reasonable directives
of the Board of Directors,
(3) conviction of Mr. Luchese for a felony, even if such
conviction is subject to appeal,
(4) uncontroverted evidence of falsification of records or
statements of the Company,
(5) uncontroverted evidence of intentional misuse of Company
funds or property, or
(6) other substantial misconduct which, in the reasonable
judgment of the Board, results in material adverse effect, discredit
or disrepute to the Company.
A termination of employment for any cause listed in clauses (1), (2)
or (6) above shall be effective only if Mr. Luchese has first been given notice
by the Board of Directors of the alleged breach, failure to perform or
misconduct and such breach, failure to perform or misconduct continues for
fifteen days following the date of such notice.
(b) If this Agreement expires on the Expiration Date, or if the sooner
termination of Mr. Luchese's employment and this Agreement is not for cause,
not because of Mr. Luchese's death or disability and not because of his
voluntary termination of employment, then the Company will continue to make
semi-monthly base salary payments for a period of one year after the Expiration
Date or the earlier effective date of termination; provided, however, that (1)
in the case of the expiration of this Agreement on the Expiration Date, the
one-year salary continuation period shall be reduced by the period of time
before the Expiration Date that the Board of Directors gives Mr. Luchese
written notice that it intends to allow the Agreement to expire, or not to pay
the full salary continuation obligation if negotiations to renew the Agreement
are unsuccessful, and (2) in all cases, Mr. Luchese's rights to receive salary
continuation payments are contingent upon his using his best efforts to find a
new job commensurate with his position as the chief executive officer and
member of the Board of directors of the Company. If Mr. Luchese obtains a
position during the one-year salary continuation period (whether commensurate
with his position with the Company or not) the obligation for salary
continuation hereunder shall be limited to an amount equivalent to the
difference, if any, between the base salary under this Agreement and the base
salary paid to him by his new
-6-
<PAGE> 8
employer. Fringe benefits provided during employment shall be continued until
Mr. Luchese finds another job as provided for under this Subparagraph or until
the end of the one-year salary continuation period, whichever first occurs.
(c) If Mr. Luchese's employment and thereby this Agreement is
terminated because of Mr. Luchese's death, CytRx shall pay any compensation
then due him under this Agreement as of the date of his death to his surviving
spouse, or if there is no surviving spouse, to his estate, and shall make to
such spouse or his estate, as above, semi-monthly payments of salary based on
the annual rate which then would have been applicable to Mr. Luchese's
employment for six (6) months after his death, and provide six (6) months'
continuation of fringe benefits available to his dependents covered for such
benefits at the time of Mr. Luchese's death. If Mr. Luchese becomes permanently
disabled or subject to long term disability during the period of his employment
hereunder, and CytRx terminates this Agreement other than pursuant to Paragraph
7(a), Mr. Luchese's employment shall be deemed to have been terminated without
cause pursuant to Paragraph 7(b); provided, however, that (1) Mr. Luchese shall
not be required to find a new job, and (2) instead of the one-year salary
continuation, an amount equal to his base salary for one year shall be paid to
Mr. Luchese in variable monthly installments until such amount is exhausted,
with each installment being equal to the amount that when combined with
payments received during such month by Mr. Luchese from the Company under its
short-term disability policy, or from one or more insurance companies under
long term disability insurance policies maintained by the Company pursuant to
Paragraph 4, equals the amount of base salary (calculated on a pre-tax basis)
that Mr. Luchese would have received during such month if this Agreement had
not been terminated. For example, if (1) CytRx terminates this Agreement
because Mr. Luchese becomes permanently disabled at a time when his annual base
salary is $300,000, (2) Mr. Luchese is eligible immediately to receive monthly
short term disability payments from the Company equal to $25,000 (100% of his
base salary) and (3) Mr. Luchese will be eligible after one month to receive
long term disability payments from the insurance carrier equal to $15,000 (60%
of his base salary), then CytRx will not be obligated to make any payment to
Mr. Luchese for the first month and will be obligated to pay Mr. Luchese
$10,000 per month (40% of his base salary) for the next 2.5 years (30 months).
If, in the above example, Mr. Luchese ceased for any reason to qualify for the
insurance company payments after the first 11 months, then the Company shall be
obligated to make monthly payments of $25,000 (100% of his base salary) for the
following 8 months ($300,000 less the $100,000 already paid divided by
$25,000), subject to the salary adjustment described in Paragraph 7(b) if Mr.
Luchese obtains a position during the 8 month period.
It is understood that permanently disabled and subject to long term
disability shall mean such sickness, as well as physical or mental disability,
that qualifies or, with the passage of time (not to exceed 90 calendar days),
will quality Mr. Luchese to receive benefit payments under at least one of the
long-term disability policies maintained by the Company for Mr. Luchese in
accordance with Paragraph 4. In the event of a dispute as to Mr. Luchese's
ability to perform his duties, the Company may refer Mr. Luchese to a
-7-
<PAGE> 9
licensed practicing physician of CytRx's choice and reasonably satisfactory to
Mr. Luchese, and Mr. Luchese agrees to submit to such tests and examinations as
such physician shall deem appropriate. The determination by the physician as to
whether or not Mr. Luchese is unable to perform substantially his normal duties
shall conclusively determine such facts for the purposes of this Paragraph
7(c). Short term illness or injury not amounting to long term disability shall
be treated in accordance with any benefit provided under Paragraph 4 of this
Agreement.
It is also understood that, if CytRx becomes obligated to make
payments to Mr. Luchese pursuant to this Paragraph 7(c) because of Mr.
Luchese's disability and, within a reasonable period of time after Mr.
Luchese's termination, a majority of the members of the Board of Directors of
the Company who are not employees of CytRx or any subsidiary determine in good
faith that Mr. Luchese should have been terminated for cause in accordance with
Paragraph 7(a), then the obligations of the Company under this Paragraph 7(c)
shall cease after the Company has paid to Mr. Luchese an amount equal to the
amount due him pursuant to Paragraph 7(a) and continued Mr. Luchese's fringe
benefits for the period of time required by Paragraph 7(a); provided, however,
that in no event shall Mr. Luchese be required to repay the Company any amounts
paid to him under this Paragraph 7(c).
8. CHANGE IN CONTROL.
(a) Applicability. The provisions of this Paragraph 8 shall be
effective immediately upon execution of this Agreement, but anything in this
Agreement to the contrary notwithstanding, the provisions of this Paragraph 8
shall not be operative unless, during the term of this Agreement, there has
been a Change in Control of the Company, as defined in Subparagraph 8(b) below.
Upon such a Change in Control of the Company during the term of this Agreement,
all of the provisions of this Paragraph 8 shall become operative immediately.
(b) Definitions.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Cause" means, for purposes of this Paragraph 8 only, any act that
constitutes, on the part of Mr. Luchese, (1) fraud, dishonesty, a felony or
gross malfeasance of duty, and (2) that directly results in a demonstrable,
material injury to the Company.
"Change in Control" means either
(1) the acquisition, directly or indirectly, by any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) within any twelve (12) month period of securities of
the Company representing an aggregate of twenty-five percent (25%) or more of
the combined voting power of the Company's then outstanding securities; or
-8-
<PAGE> 10
(2) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board, cease for any reason
to constitute at least a majority thereof, unless the election of each new
director was approved in advance by a vote of at least a majority of the
directors then still in office who were directors at the beginning of the
period; or
(3) consummation of (A) a merger, consolidation or other
business combination of the Company with any other "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) or affiliate thereof, other than a merger, consolidation or business
combination which would result in the outstanding common stock of the Company
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into common stock of the surviving entity or
a parent or affiliate thereof) at least sixty percent (60%) of the outstanding
common stock of the Company or such surviving entity or parent or affiliate
thereof outstanding immediately after such merger, consolidation or business
combination, or (B) a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets; or
(4) the occurrence of any other event or circumstance which
is not covered by (1) through (3) above which the Board determines affects
control of the Company and, in order to implement the purposes of this
Agreement as set forth above, adopts a resolution that such event or
circumstance constitutes a Change in Control for the purposes of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation Committee" means the Compensation Committee of the Board
of Directors, or any successor committee.
"Disability" means Mr. Luchese's probable and expected inability as a
result of physical or mental incapacity to substantially perform his duties for
the Company on a full-time basis for a period of six months. The determination
of whether Mr. Luchese suffers a Disability shall be made by a physician
acceptable to both Mr. Luchese (or his personal representative) and the
Company.
"Involuntary Termination" means termination of Mr. Luchese's
employment by Mr. Luchese following a Change in Control which, in the
reasonable judgment of Mr. Luchese, is due to (1) a change of Mr. Luchese's
responsibilities, position (including title, reporting relationships, working
conditions or Mr. Luchese ceasing for any reason to be a member of the Board of
Directors of the Company), authority or duties (including changes resulting
from the assignment to Mr. Luchese of any duties inconsistent with his
positions, duties or responsibilities as in effect immediately prior to the
Change in Control); or (2) a reduction in Mr. Luchese's compensation or
benefits as in effect immediately prior to the Change in Control, or (3) a
forced relocation of Mr. Luchese outside the Atlanta, Georgia metropolitan area
or significant increase in Mr. Luchese's travel requirements. Involuntary
Termination does not include the death or Disability of Mr. Luchese.
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<PAGE> 11
"Payment Period" means the period that begins on the effective date of
the termination of Mr. Luchese's employment hereunder and ends on the
Expiration Date; provided, however, that the Payment Period shall be at least
one (1) year and not longer than two (2) years.
(c) Benefits upon Termination of Employment Following a Change in
Control.
(1) Termination. Executive shall be entitled to, and the
Company shall pay or provide to Executive, the benefits described in Paragraph
8(c)(2) below if a Change in Control occurs during the term of this Agreement
and Executive's employment is terminated within two (2) years following the
Change in Control, either (A) by the Company (other than for Cause or by reason
of Executive's death or Disability) or (B) by Executive pursuant to Involuntary
Termination; provided, however, that if:
(x) during the term of this Agreement there is a public
announcement of a proposal for a transaction that, if consummated,
would constitute a Change in Control or the Board receives and decides
to explore an expression of interest with respect to a transaction
which, if consummated, would lead to a Change in Control (either
transaction being referred to herein as the "Proposed Transaction");
and
(y) Executive's employment is thereafter terminated by the
Company other than for Cause or by reason of Executive's death or
Disability; and
(z) the Proposed Transaction is consummated within one year
after the date of termination of Executive's employment,
then, for the purposes of this Agreement, a Change in Control shall be deemed
to have occurred during the term of this Agreement and the termination of
Executive's employment shall be deemed to have occurred within two (2) years
following a Change in Control.
(2) Benefits to be Provided. If Executive becomes eligible for
benefits under Paragraph 8(c)(1) above, the Company shall pay or provide to
Executive the benefits set forth in this Paragraph 8(c)(2).
(A) Salary. Executive will continue to receive his current base salary
(subject to withholding of all applicable taxes and any amounts referred to in
(C) below) for the Payment Period in the same manner as it was being paid as of
the date of termination; provided, however, that the salary payments provided
for hereunder shall be paid in a single lump sum payment, to be paid not later
than thirty (30) days after his termination of employment; provided further,
that the amount of such lump sum payment shall be determined by taking the
salary payments to be made.
(B) Bonuses. Executive shall receive bonus payments from the Company
for the Payment Period in an amount for each such month equal to one-twelfth of
the average of the bonuses paid to him for the two calendar years immediately
preceding the year in which such
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<PAGE> 12
termination occurs. Any bonus amounts that Executive had previously earned from
the Company but which may not yet have been paid as of the date of termination
shall not be affected by this provision. The bonus amounts determined herein
shall be paid in a single lump sum payment, to be paid not later than thirty
(30) days after termination of employment; provided, that the amount of such
lump sum payment shall be determined by taking the bonus payments (as of the
payment date) to be made.
(C) Health and Life Insurance Coverage. The health and life insurance
benefits coverage provided to Executive at his date of termination shall be
continued at the same level and in the same manner as if his employment had not
terminated, beginning on the date of such termination and ending on the last
day of the Payment Period. Any additional coverages Executive had at
termination, including dependent coverage, will also be continued for such
period at the same level and on the same terms as provided to Executive
immediately prior to his termination, to the extent permitted by the applicable
policies or contracts and with such reasonable increases as applicable to other
participants for the same or similar coverage. Any costs Executive was paying
for such coverages at the time of termination (plus reasonable increases as
applicable to other participants for the same or similar coverage) shall be
paid by Executive by separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to in this Subparagraph do
not permit continued participation by Executive, then the Company will use its
best efforts to arrange for other coverage, at its expense, providing
substantially similar benefits as it can find for other officers in similar
positions.
(D) Executive Retirement Plans. To the extent permitted by the
applicable plan, Executive will be fully vested in and will be entitled to
continue to participate, consistent with past practices, in all Executive
retirement plans maintained by the Company in effect as of his date of
termination. Executive's participation in such retirement plans shall continue
for the Payment Period (at which point he will be considered to have terminated
employment within the meaning of the plans) and the compensation payable to
Executive under (A) and (B) above shall be treated (unless otherwise excluded)
as compensation under the plan. If full vesting and continued participation in
any plan is not permitted, the Company shall pay to Executive and, if
applicable, his beneficiary, a supplemental benefit equal to the excess of (1)
the benefit Executive would have been paid under such plan if he had been fully
vested and had continued to be covered for the Payment Period as if Executive
had earned compensation described under (A) and (B) above and had made
contributions sufficient to earn the maximum matching contribution, if any,
under such plan (less any amounts he would have been required to contribute),
over (2) the benefit actually payable to or on behalf of Executive under such
plan. For purposes of determining the benefit under (1) in the preceding
sentence, contributions deemed to be made under a defined contribution plan
will be deemed to be invested in the same manner as Executive's account under
such plan at the time of termination of employment. The Company shall pay such
supplemental benefits (if any) in a lump sum.
(E) Effect of Lump Sum Payment. The lump sum payment under (A) or (B)
above shall not alter the amounts Executive is entitled to receive under the
benefit plans described in
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<PAGE> 13
(C) and (D) above. Benefits under such plans shall be determined as if
Executive had remained employed and received such payments over a period equal
to the Payment Period.
(F) Effect of Death or Retirement. The benefits payable or to be
provided under this Agreement shall cease in the event of Executive's death or
election to commence retirement benefits under the Company's retirement plan.
(G) Limitation on Amount. To the extent permitted by law, Executive
may in his sole discretion elect to reduce any payments he may be eligible to
receive under this Agreement to prevent the imposition of excise taxes on
Executive under Section 4999 of the Code.
9. NO RESTRICTIONS ON MR. LUCHESE'S EMPLOYMENT BY CYTRX. Mr. Luchese
represents as a condition of this Agreement that he is not under any existing
employment agreement, noncompetition agreement or other legally binding
agreement which would prohibit or in any manner restrict his employment
hereunder with CytRx.
10. EMPLOYEE CONFIDENTIALITY AND INVENTION ASSIGNMENT AGREEMENT. Mr.
Luchese and the Company are parties to a confidentiality and invention
assignment letter agreement dated November 3, 1994, which shall be deemed to be
incorporated into this Agreement as if fully set forth in this Paragraph 10.
11. RESTRICTIONS ON COMPETITION.
(a) During Employment. In order to protect CytRx's investment, which
includes but is not limited to, time, money and proprietary information, and in
recognition of the unique character of the Trade Secrets and other Confidential
Information which are the basis of CytRx's business and future business
opportunities, in recognition of the worldwide geographic scope of CytRx's
business and/or potential business opportunities and Mr. Luchese's contemplated
role, responsibilities and knowledge therefor, for the entire period of Mr.
Luchese's employment by CytRx, Mr. Luchese agrees that he will not work as a
consultant for or directly or indirectly perform services anywhere in the world
for himself or any other person, firm or corporation in competition with CytRx.
A business in competition with CytRx includes any business activity being
actively investigated or contemplated by CytRx during the period of Mr.
Luchese's employment by CytRx. Without limitation on the foregoing, but by way
of example, businesses currently contemplated by CytRx as being in competition
with it include pharmaceutical businesses engaged in or considering engaging in
manufacture, marketing or development of commercial products in any and all of
the following areas:
(1) Immune system stimulating compounds and methods;
(2) Growth stimulation of animals;
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<PAGE> 14
(3) all formulations and methods using the
surface-active copolymers described in U.S. Patent
No. 4,801,452, U.S. Patent Application Serial No.
291,925, U.S. Patent Application Serial No. 107,358,
U.S. Patent Application Serial No. 208,335, and U.S.
Patent Application Serial No. 150,731.
(4) Mycobacterial and antiviral chemotherapy; and
(5) Vaccine adjuvants.
(b) For two (2) years after termination of employment. In order to
protect CytRx's investment, which includes but is not limited to, time, money
and proprietary information and in recognition of the unique character of the
Trade Secrets and other Confidential Information which are the basis of CytRx's
business and future business opportunities, in recognition of the worldwide
geographic scope of CytRx's business and/or potential business opportunities
and Mr. Luchese's contemplated role, responsibilities and knowledge therefor,
for a period of two (2) years following the termination of Mr. Luchese's
employment with CytRx, regardless of the reason therefor, Mr. Luchese agrees
that he will not work as a consultant for or directly or indirectly perform
services anywhere in the world for himself or any other person, firm or
corporation in any capacity involving the study, development, use, manufacture
or marketing of all formulations and methods using the surface-active
copolymers described in U.S. Patent No. 4,801,452, U.S. Patent Application
Serial No. 291,925, U.S. Patent Application Serial No. 107,358, U.S. Patent
Application Serial No. 208,335, and U.S. Patent Application Serial No. 150,731.
The foregoing shall not preclude (1) the employment of Mr. Luchese,
whether as a director, officer, employee, consultant or otherwise, by a
research partner, joint venture partner, licensee or other person, or
corporation or entity that at such time is authorized by CytRx to have rights
in or to restricted products, or (2) the ownership by Mr. Luchese of investment
securities representing not more than three (3) per cent of the outstanding
voting securities of company engaged in a pharmaceutical business, whose stock
and/or securities are traded on a national stock exchange or national
quotations system, provided that such investment is passive and not with the
intention of controlling such business.
(c) Mr. Luchese will notify the Company at least three (3) weeks
before he is to begin any employment or activity which is described in
Subparagraph (b) of this Paragraph if such employment or activity would
commence within two (2) years after the termination of his employment with
CytRx. Such notice shall be in writing and shall contain a complete description
of such offer, including the position and the responsibilities involved.
(d) Mr. Luchese agrees and acknowledges that the restrictions on
competition contained herein including their geographic and product scope are
necessary and
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<PAGE> 15
reasonable to protect the interests of CytRx and that the Company's Trade
Secrets and other Confidential Information of which he will become acquainted,
if used anywhere in the world during the period in which he has agreed not to
use them or to disclose them would cause CytRx serious and irreparable damage
and harm. Mr. Luchese represents and admits that upon the termination of his
employment with CytRx, his experience and capabilities are such that he can
obtain employment engaged in other lines of endeavor and that the enforcement of
this Agreement would not prevent him from earning a livelihood.
12. ACKNOWLEDGMENTS.
(a) It is understood and contemplated by the parties that if the
obligations undertaken herein in Paragraphs 10 and 11 were breached in any way,
irreparable harm to the Company should be presumed. Damages might be difficult
if not impossible to ascertain, and the faithful observance of the terms of
this Agreement during and after termination of Mr. Luchese's employment is an
essential condition to his employment with the Company. In light of these
considerations, Mr. Luchese agrees that a court of competent jurisdiction may
immediately enjoin any breach or threatened breach of Paragraphs 10 and 11 to
this Agreement, without waiver of any other rights and remedies which the
Company may have at law.
(b) The obligations undertaken in Paragraphs 10 and 11 of this
Agreement survive the termination of Mr. Luchese's employment hereunder for the
period specified in each such Paragraph and the termination of this Agreement,
regardless of the reason therefor.
The obligations of CytRx to Mr. Luchese following his termination of
employment as set forth in Paragraphs 3(b), 6, 7 and 8 shall survive the
termination of this Agreement until satisfied in accordance with the terms
thereof.
(c) The rights of Mr. Luchese under this Agreement are in addition to
any other rights or remedies he may have in law or in equity in the event CytRx
breaches this Agreement, all of which rights and remedies are preserved in
full. Without limiting the foregoing, the rights of Mr. Luchese under Paragraph
7 herein do not limit any right he would have upon termination of employment
caused by a breach of CytRx. However, any damages he may sustain shall be
reduced by the payments required to be made under this Agreement.
13. CONSTRUCTION OF AGREEMENT.
(a) It is the intention of the parties to this Agreement that any
construction of this Agreement or Paragraph thereof shall be in favor of its
legality and enforceability and that any construction causing illegality or
unenforceability should yield to a construction favoring legality and
enforceability. Further, the parties agree that should any portion of
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<PAGE> 16
this Agreement be judicially held invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding any remaining portion of
this Agreement not so declared and that any portion held to be invalid,
unenforceable or void shall, if possible, be deemed amended or reduced in scope,
otherwise to be stricken from this Agreement, but only to the extent required
for purposes of maintaining the legality, validity and enforceability of this
Agreement and all portions thereof in the jurisdiction so holding.
(b) It is understood that use of the word "and" herein included the
disjunctive as well as its injunctive meaning whenever such meaning would
broaden the protection to the Company in the context in which it is used.
14. NO WAIVER. No waiver of any breach of this Agreement may be
construed or deemed as a waiver of any succeeding breach of this Agreement.
15. PERSONAL SERVICES. It is understood and contemplated that this
Agreement provides for personal services of Mr. Luchese to the Company.
16. NO INTERFERENCE. For two (2) years following the termination of
Mr. Luchese's employment hereunder, regardless of the reason therefor, Mr.
Luchese will not intentionally disrupt or attempt to disrupt the Company's
business relationship with its customers or suppliers, nor solicit any of the
Company's employees to terminate their employment with CytRx.
17. CERTIFICATION BY EMPLOYEE. Mr. Luchese certifies that he has
received a copy of this Agreement for review and study before being asked to
execute it, that he has read this Agreement carefully, that he has had a
sufficient opportunity before executing this Agreement to ask questions about
it and to receive answers to any such questions and that he understands the
obligations and rights provided hereunder.
18. ENTIRE AGREEMENT. This Agreement hereto supersedes any and all
other agreements, both oral and in writing, between the parties hereto with
respect to the employment and terms and conditions thereof of Mr. Luchese by
CytRx, and it contains all of the parties' representations, covenants and
agreements with respect to such matters. The terms of this Agreement may not be
changed orally but only by a subsequent writing signed by the party against
whom enforcement of such modification is sought.
19. CAPTIONS. Paragraph captions used herein are for convenience of
reference only and shall not change the meaning of the terms of this Agreement.
20. SUCCESSORS AND ASSIGNS. The terms of this Agreement shall inure to
the benefit of any successors and assigns of the Company.
21. GOVERNING LAW. This Agreement shall be construed and governed in
accordance with the laws of the State of Georgia.
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<PAGE> 17
22. CORPORATE AUTHORITY. The Company represents and warrants that this
Agreement including the issuance of the warrants (1) has been duly authorized,
executed and delivered by the Company, (2) constitutes a legal, valid and
binding obligation of the Company enforceable in accordance with its terms, and
(3) does not conflict with or result in a violation of the Company's
Certificate of Incorporation, By-laws, or any contract, agreement or instrument
to which the Company is a party or is otherwise bound.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal on the date hereof, to be effective as of the Effective Date.
JACK J. LUCHESE:
----------------------------------------
Attest: CYTRX CORPORATION:
- ------------------- ----------------------------------------
Corporate Secretary By: William B. Fleck
(CORPORATE SEAL) Title: Vice President, Human Resources
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<PAGE> 1
EXHIBIT 10.10
Asset Purchase Agreement dated February 16, 1998
by and between CytRx Corporation and Oread, Inc.
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 10th day of February,
1998, between PROCEUTICS, INC., a Delaware corporation ("Seller") and OREAD
LABORATORIES, INC., a Delaware corporation, ("Buyer").
In consideration of the mutual promises and agreements set forth
below, the parties agree as follows:
1. Assets Purchased and Sold.
(a) Assets. Subject to the terms and conditions contained in this Agreement, on
the Closing Date (as defined in Section 4 below) Seller agrees to sell, assign
and deliver to Buyer, and Buyer agrees to purchase from Seller, free and clear
of all liens and encumbrances, the following assets (collectively, the
"Assets") but excluding the Excluded Assets (defined in subsection 1(b)):
(i) All inventory and supplies owned by Seller as of the Closing Date
(including all of Seller's rights in inventory under order);
(ii) All equipment, tools, computers, analytical instrumentation,
caging, furniture and other laboratory equipment owned by Seller other than
those considered to be fixtures (as defined in the Uniform Commercial Code of
the State of Kansas) of the building in which they are installed including but
not limited to those listed on Exhibit 1(a)(ii) ("Tangible Assets");
(iii) Any computer software owned or utilized by Seller, including, but not
limited to, all Seller's rights under any software license agreement relating
to computer software installed on computers listed on Exhibit 1(a)(iii).
(iv) All notes and other receivables ("Accounts Receivable") as of the
Closing Date listed on Exhibit 1(a)(iv);
(v) All rights of Seller under those certain contracts, service
agreements, open orders, leases, licenses, supply agreements and other
agreements (the "Contracts") listed on Exhibit 1(a)(v);
(vi) All records, files, invoices, blueprints, specifications, designs,
drawings, accounting records, business records, personnel files for Key
Employees (as hereinafter defined), operating data, customer data, and other
data relating to Seller's business, including, but not limited to, study data
sufficient for facility and instrument validation and for FDA review and
inspection.
<PAGE> 3
(vii) All rights to employ Seller's standard operating procedures listed on
Exhibit 1(a)(vii) and all of Seller's plans and study data relating to the
design, operation and maintenance of the Assets; all rights under any of
Seller's patent, trademark, service mark, trade name or copyright, whether
registered or unregistered and any applications therefor and all goodwill
related thereto; and all technologies, methods, formulations, databases, trade
secrets, know-how, inventions and other intellectual property or intangible
assets of the Seller listed on Exhibit 1(a)(vii).
(b) Excluded Assets. Notwithstanding the foregoing, the Assets shall
not include any of the following assets (collectively, the "Excluded Assets"):
(i) All cash on hand or in bank accounts;
(ii) Corporate seal, certificate of incorporation, minute book, stock
book, tax returns, books of account or other records having to do with the
corporate organization of Seller;
(iii) Rights of any Seller's claims for any federal, state, local or
foreign tax refunds (including, but not limited to, any real estate tax
abatements or refunds resulting from any real property lease and due for the
period before the Closing Date during which Seller occupies the premises);
provided, however, that Buyer shall hold all rights of any claims for any
federal, state, local or foreign tax refunds in connection with the Assets.
(iv) Any patent, trademark, service mark, trade name or copyright, whether
registered or unregistered and any applications therefor, and all goodwill
related thereto; and all technologies, methods, formulations, databases, trade
secrets, know-how, inventions and other intellectual property or intangible
assets owned by or that relate in any way to CytRx Corporation ("CytRx"),
Vaxcel, Inc. or Zynaxis, Inc., including particularly, any copolymers, or any
compounds of ethylene oxide, propylene oxide (or any combination thereof) owned
by any of the above referenced corporations in this subsection;
(v) All real property owned by Seller and the fixtures attached
thereto; and
(vi) All other items listed on Exhibit 1(b)(vi).
2. Purchase Price; Adjustment; Allocation.
(a) Purchase Price. As consideration for the purchase and sale of the
Assets, Buyer agrees to pay to Seller the Purchase Price, which shall be the
sum of:
(i) $1,100,000 through wire transfer of immediately available funds to
Seller pursuant to wire instructions attached as Exhibit 2(a)(i) at the time of
Closing (as defined in Section 4 below);
(ii) the value of "Total Adjusted Accounts Receivable," as set forth
and reconciled on attached Exhibit 2(a)(ii) which is (A) the sum of all of
Seller's Accounts Receivable as of
<PAGE> 4
the Closing Date, excluding certain account balances identified on Exhibit
1(a)(iv) which will be retained and collected by Seller, (B) plus the sum of
all of Seller's Earned but Unbilled Revenue as of the Closing Date, calculated
using the percentage-of-completion method, (C) plus the sum of all of Seller's
Unbilled Pass-Through Costs as of the Closing Date, (D) minus the sum of all of
Seller's Unearned Revenue as of the Closing Date, calculated using the
percentage-of-completion method, (E) minus an amount equal to 3% of the sum of
A, B and C above, except that such reduction shall not apply to amounts due
from Affiliates.
(iii) $600,000 in Service Credits (as defined hereafter). "Service Credits"
shall mean the right to receive pre-clinical research service performed by the
Buyer or any of its subsidiary companies or its assigns for CytRx Corporation
or any of its subsidiary companies (collectively referred to as "CytRx") based
upon Buyer's standard rates and on terms acceptable to Buyer and CytRx. CytRx
projects and listed on Exhibit 2(a)(iii) shall be honored by Buyer at the rate
shown on such exhibit. Such contracts shall not include extensions and
amendments of such projects.
(b) Adjustment of Purchase Price. To the extent Buyer is, 90 days
after the Closing Date, unable to collect, after a good faith effort, any
amount of the Total Adjusted Accounts Receivable, Buyer shall assign at its
option such accounts to Seller and subtract the amount of such account from the
Service Credits then remaining. In the event no Service Credits remain, Seller
shall pay Buyer the amount of such accounts in full within 10 business days.
(c) Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets as set forth on Exhibit 2(c). Buyer and Seller each hereby
agree that it will not take a position on any income tax return, before any
governmental agency charged with the collection of any income tax, or in any
judicial proceeding that is in any way inconsistent with the terms of this
subsection 2(c).
3. Assumption of Liabilities.
(a) Retained Liabilities. Except as described in subsection 3(b), no
obligations or liabilities of Seller will be assumed by buyer in the
acquisition of the Assets, and Seller shall retain all such obligations and
liabilities (the "Retained Liabilities").
(b) Assumed Liabilities. Buyer agrees to assume, as of the Closing Date,
Seller's liability with respect to (i) all payables relating to inventory in
transit and inventory accepted for delivery and not yet paid Set forth on
Schedule 3(b)(ii) and (ii) all obligations under the Contracts on and after the
Closing Date (collectively, the "Assumed Liabilities").
4. Closing Date.
<PAGE> 5
The closing ("Closing") shall be at the office of Alston & Bird LLP, One
Atlantic Center, 1201 West Peachtree Street, Atlanta, Georgia, commencing at
9:00 a.m. on February 16, 1998, or such other date, time or place mutually
agreed upon by the parties (the "Closing Date"). The Closing shall be effective
as of close of business on February 15, 1998.
5. Taxes.
Buyer shall be responsible for and agrees to pay when due all sales and use
taxes arising out of the transactions contemplated by this Agreement.
6. Representations and Warranties of Seller.
Seller and CytRx (but only as to its representations and warranties in Section
6(a)) represent and warrant as follows, each of which is true and correct on
the date hereof and will be true and correct on the Closing Date, each of which
shall be unaffected by any investigation heretofore or hereafter made by Buyer,
and each of which shall survive the Closing and the transactions contemplated
hereby:
(a) Organization Authority. Seller and CytRx are corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller has the power to execute and deliver this Agreement and the
Lease Agreement and CytRx has the power to execute and deliver this Agreement.
Each of Seller and CytRx have the power to carry out the transactions hereunder
and thereunder (as may be the case) contemplated. This Agreement (and the Lease
Agreement in the case of Seller) have been duly authorized, executed and
delivered by Seller and are valid, binding and enforceable against each (as
applicable) in accordance with their terms. The execution, delivery and
performance of this Agreement (and the Lease Agreement in the case of Seller)
will not violate or breach any provision of the Certificate of Incorporation or
Bylaws of Seller or CytRx or the Contracts listed on Exhibit 1(a)(v), or any
material mortgage, trust indenture, lien, lease, agreement, instrument, order,
judgment, law, statute, regulation, ordinance, decree or other restriction of
any kind or character to which the Seller or CytRx is subject.
(b) Consents. Except as set forth in Schedule 6(b), no approval, order,
license, consent, authorization or other action by, or filing with, any
governmental or quasi-governmental authority or any third party is required in
connection with the execution, delivery and performance by Seller of Seller's
obligations under this Agreement and the consummation of the transactions
contemplated hereby.
(c) Compliance with Laws; Litigation. Seller is not in violation of any
material law, rule, regulation or court order, local, state or federal,
pertaining to the operation or conduct of Seller. There are no judgments,
suits, actions, investigations or proceedings pending or threatened in any
court, governmental authority or private arbitration tribunal against Seller or
its respective properties nor is there any basis for any of the foregoing. No
aspect of the Demised Premises (as that term is defined in the Lease Agreement)
does
<PAGE> 6
not comply with any Governmental Requirements (as that term is defined in
the Lease Agreement) in effect as of the Effective Date (as that term is
defined in the Lease Agreement).
(d) Title to Assets. Seller has good and marketable title to all of
the Assets and all of the Assets will be transferred to Buyer at the Closing
free of all liens (including, without limitation, tax liens), claims,
encumbrances and restrictions whatsoever.
(e) No Other Obligation to Transfer. Seller has not made any other
contract or understanding to sell or otherwise transfer the Assets.
(f) Employees. Seller has no right, claim or agreement pertaining to its
employees that would affect the right of Buyer to employ such employees and
Seller recognizes and agrees that, except as provided for in subsection 6(g),
Buyer may, but shall have no obligation to, employ such employees. A list of
all pension and welfare benefit plans and other benefits (including insurance)
maintained by the Seller for its employees (the "Plans") are set forth on
Exhibit 6(f) hereto. Seller has not contributed to a multi-employer pension
plan. Buyer shall have no liability as a result of any Plan of Seller or the
termination thereof, whether prior to or after the Closing Date. The Plans are
in material compliance with all governmental laws, rules and regulations. No
"reportable event," "prohibited transactions" or "accumulated funding
deficiencies" within the meaning of ERISA or the Internal Revenue Code have
occurred that could subject Seller or Buyer to any tax, penalty or liability.
Buyer also shall have no obligation to provide any benefits under any group
health plan of Seller, including, without limitation, any benefits required
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, 29 USC 601 et seq. ("COBRA") with respect to employees, former
employees or their dependents that are the obligation of Seller under COBRA,
any benefits provided to retirees or other former employees of Seller, and any
benefits with respect to claims incurred before the Closing Date but not paid
before the Closing Date.
(g) Contracts. The Contracts listed on Exhibit 1(a)(v) are binding and
in full force and effect. There exist no defaults by Seller or any other party
to any of the Contracts, nor any events which, with the lapse of time or the
election of any person other than Seller, will become a default under any such
Contracts. The execution, delivery and performance of this Agreement is not
prohibited by the Contracts nor will such actions cause a default with respect
to any Contract listed on Exhibit 1(a)(v), except as set forth in Schedule
6(g), all of the Contracts are assignable to Buyer subject only to the consents
listed on Exhibit 1(a)(v).
(h) Accounts Receivable. All of Seller's accounts receivable have been
received in the ordinary course of business.
(i) Tax Returns; Other Reports. The Seller has filed in true and
correct form all federal, state, local and foreign tax returns and other
reports required to be filed, and has timely paid all taxes and assessments
that have become due and payable, whether or not
<PAGE> 7
so shown on any such return or report. Seller has received no notice of, nor
does Seller have any knowledge of, any notice of deficiency or assessment or
proposed deficiency or assessment from any taxing governmental authority. There
are no audits pending with respect to Seller, except as set forth in Schedule
6(i), and there are no outstanding agreements or waivers by or with respect to
Seller that extends the statutory period of limitations applicable to any
federal, state, local, or foreign tax returns or taxes for any period. There
are no determined tax deficiencies or proposed tax assessments against Seller.
(j) Environmental. There has been no storage, disposal, generation,
manufacture, transportation, production or treatment of any hazardous waste,
hazardous waste constituents, hazardous substances, toxic or polluting waste,
oil, asbestos, polychlorinated biphenyls, or other polluting substances
(collectively referred to as "Polluting Substances") at, upon or from any real
property owned, leased or otherwise possessed by Seller (the "Real Property")
in violation of any applicable law, rule, regulation, order, judgment, decree
or permit ("Law") or which would require remedial action at a material cost or
expense. Seller is and has been in compliance with all applicable federal,
state and local environmental Laws, including without limitation all record
keeping requirements, and no environmental regulatory governmental unit has
served upon Seller any notice of (A) violation of any statute, rule or
regulation, (B) the potential responsibility of Seller for clean-up or other
liability at any site, or (C) the need for any repair, remedy, construction,
alteration or installation upon any premises owned, leased or used by Seller or
any change in the method of operating. There has been no spill, discharge,
leak, emission, escape, dumping or release of any kind onto the Real Property
of any Polluting Substances that could require reporting under any applicable
Law or require remedial action at a material cost or expense. There are no
underground storage tanks located at or under the Real Property.
(k) Disclosure. No representation or warranty of Seller in this
Agreement or in any certificate to be furnished by Seller pursuant to this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit a material fact necessary to make the statements contained
therein not misleading. To the best knowledge of Seller there is no fact Seller
has not disclosed in writing to Buyer that materially adversely affects, or may
materially adversely affect, Seller, its operations or prospects or the Assets.
7. Representations and Warranties of Buyer.
Buyer represents and warrants as follows, each of which is true and correct on
the date hereof and will be true and correct on the Closing Date, each of which
shall be unaffected by any investigation heretofore or hereafter made by
Seller, and each of which shall survive the Closing and the transactions
contemplated hereby:
(a) Organization Authority. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Buyer
has the power to
<PAGE> 8
execute and deliver this Agreement and the Lease Agreement and to carry out the
transactions hereunder and thereunder contemplated. This Agreement and the
Lease Agreement have been duly authorized, executed and delivered by Buyer and
are valid, binding and enforceable against it in accordance with their terms.
The execution, delivery and performance of this Agreement and the Lease
Agreement will not violate or breach any provision of the Certificate of
Incorporation or Bylaws of Buyer, or any material mortgage, trust indenture,
lien, lease, agreement, instrument, order, judgment, law, statute, regulation,
ordinance, decree or other restriction of any kind or character to which the
Buyer is subject.
(b) Consents. Except for certain required preferred shareholder approval,
no approval, order, license, consent, authorization or other action by, or
filing with, any governmental or quasi-governmental authority or any third
party is required in connection with the execution, delivery and performance by
Buyer of Buyer's obligations under this Agreement and the consummation of the
transactions contemplated hereby.
(c) Compliance with Laws; Litigation. Buyer is not in violation of any
law, rule, regulation or court order, local, state or federal, pertaining to
the operation or conduct of Buyer. There are no judgments, suits, actions,
investigations or proceedings pending or threatened in any court, governmental
authority or private arbitration tribunal against Buyer or its respective
properties nor is there any basis for any of the foregoing.
(d) Disclosure. No representation or warranty of Buyer in this Agreement
or in any certificate to be furnished by Buyer pursuant to this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit a material fact necessary to make the statements contained therein
not misleading.
(e) Preferred Shareholder and Board Approval. Buyer has obtained approval
and authorization from its preferred shareholders, in principle on the basis of
a review of due diligence materials and Oread will endeavor to obtain final
approval from such shareholders, to the execution and delivery of this
Agreement, and has obtained approval and authorization from its Board of
Directors to execute and deliver this Agreement and the Lease Agreement.
8. Covenants.
(a) Full Access. Buyer and its authorized representatives shall have full
access during normal business hours to the Assets and all books, records,
contracts and documents of Seller relating to the Assets, and Seller shall
furnish or cause to be furnished to Buyer and its authorized representatives
all information with respect to the affairs of Seller with respect to the
Assets as Buyer may reasonably request.
(b) Carry on in Regular Course. Seller covenants and agrees that from the
date hereof to the Closing Date (subject to written consent by Buyer to the
contrary):
<PAGE> 9
(i) Seller shall not enter into any contractor commitment, modify any of
the Contracts or engage in any transaction not in the usual and ordinary course
of its business and not consistent with past practices;
(ii) The Assets will be used, operated, maintained and repaired in a
careful and efficient manner;
(iii) Seller shall duly comply with all applicable laws as may be required
for the valid and effective sale and transfer of the Assets and the performance
of all other acts and things contemplated by this Agreement; and
(iv) Seller shall not sell or enter into any agreement to sell any of the
Assets, except inventory and supplies as used in the usual and ordinary course
of its business and not inconsistent with past practices (such approval to sell
inventory and supplies in such manner is not deemed to be construed as approval
or consent to the sale of any other Assets (i.e., the Assets set forth under
subsections 1(a)(ii) through 1(a)(viii).
(c) Obtain Consents. To the extent that Seller's rights under any Contract
or other Asset to be assigned to Buyer hereunder may not be assigned without
the consent of another person which has not been obtained, this Agreement shall
not constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof or be unlawful, and Seller, at its expense, shall
use reasonable commercial efforts to obtain any such required consent(s) as
promptly as possible. Such unobtained consents include all governmental (or
quasi-governmental) consents, and the consent of Microsoft, among other
vendors/licensors named in contracts referenced in Exhibit 1(a)(iii), to assign
certain software contained in the computers listed on Exhibit 8(c). If any such
consent shall not be obtained or if any attempted assignment would be
ineffective or would impair buyer's rights under the Asset in question so that
Buyer would not in effect acquire the benefit of all such rights, Seller, to
the maximum extent permitted by law and the Asset, shall act after the Closing
as Buyer's agent in order to obtain for it the benefits thereunder and shall
cooperate, to the maximum extent permitted by law and the Asset, with Buyer in
any other reasonable arrangement designed to provide such benefits to Buyer.
Buyer's cooperation and assistance shall include, if necessary, securing new
licenses and/or consents on behalf of Buyer at Seller's expense.
(d) Notification of Defaults. Seller shall promptly notify Buyer of any
circumstance, event or action by Seller or otherwise:
(i) which, if known at the date of this Agreement, would have been
required to be disclosed in or pursuant to this Agreement; or
(ii) the existence, occurrence, or taking of which would result in any of
the representations and warranties of Seller in this Agreement not being true
and correct when made or at the Closing in any material respect and, with
respect to this clause (ii), use its best efforts to remedy the same.
<PAGE> 10
(e) Avoidance of Defaults. Seller will take no action that will cause any
of Seller's representations and warranties in this Agreement to be untrue as of
the Closing Date.
(f) Confidentiality. On or about October 27, 1997 and as amended on
December 17, 1997, Buyer and Seller entered into a Confidentiality Agreement
attached hereto as Exhibit 8(f) ("Confidentiality Agreement"), and the
covenants of the Confidentiality Agreement are hereby extended for a period of
three years from the Closing Date. Each party agrees to not disclose the
Confidential Information (as defined in the Confidentiality Agreement) of the
other, or use the Confidential Information of the other, in any manner except
as contemplated by this Agreement. Each party's obligations under this Section
and the Confidentiality Agreement shall survive for a period of three years
from the date of termination or Closing; provided, however, that from and after
the Closing Date, Buyer may use and disclose Seller's Confidential Information
(including, but not limited to, study data, but specifically excluding any
confidential information relating in any way to CytRx, Vaxcel, Inc. or Zynaxis,
Inc.) as Buyer deems appropriate in the use of the Assets.
(g) Preservation of Key Employees. Buyer shall make every effort to retain
the services of the employees of Seller set forth on Exhibit 8(g)(a)
(hereinafter referred to as "Key Employees") subsequent to the sale of the
Assets of Seller to Buyer. Prior to or on the Closing Date, Buyer will offer to
employ each Key Employee pursuant to the terms set forth in a letter of
employment. Buyer and Seller shall endeavor to make available to Buyer on not
less than a 3/4 time basis, the services of Will Fleck for a period of six
months commencing upon the Closing Date. Further, Buyer agrees, for a period of
two (2) years following the Closing Date, to provide a Good Manufacturing
Practices environment to Seller at the property governed by the Sublease that
enables CytRx and its affiliated companies to conduct small scale chemical
synthesis and chemical purification.
(h) Continuation of Benefit Coverage. Seller shall provide
continuation of benefit coverage to eligible employees, eligible former
employees and spouses, and eligible former spouses or other beneficiaries of
employees who are receiving such continuation coverage under a group health
plan of Seller applicable to employees of the Seller on the Closing Date
pursuant to COBRA.
(i) Non-Solicitation. For six months after the Closing Date, for any
reason or no reason at all, neither Seller nor any of its subsidiaries or
affiliated companies (including CytRx) shall directly or indirectly recruit,
solicit or induce, or attempt to induce, any employee or independent contractor
(other than Will Fleck) who prior to the Closing was employed by Seller and
subsequent to the Closing is employed by Buyer, or any other person who shall
be in such service with Seller and then subsequent to the closing is employed
by Buyer, to terminate his or her employment with or otherwise cease his or her
relationship with Buyer. For a period of eighteen months following the last day
of the six month non-solicitation period, Seller and its subsidiaries or
affiliated companies shall not directly or indirectly recruit, solicit or
induce, or attempt to induce, any employee or
<PAGE> 11
independent contractor (other than Will Fleck) who prior to the Closing was
employed by Seller and subsequent to the Closing is employed by Buyer, or any
other person who shall be in such service with Seller and then subsequent to
the closing is employed by Buyer, to terminate his or her employment with or
otherwise cease his or her relationship with Buyer until Seller receives
Buyer's consent, which shall not be unreasonably withheld.
(j) Removal and Installation of Certain Equipment. Within 90 days
following the Closing Date, Seller shall, under the direction of Buyer and at
its own expense, move or have moved (i) certain equipment listed on Exhibit
8(j)(a) from Building 150, located at 150 Technology Parkway, Norcross, Georgia
to Building 154, located at 154 Technology Parkway, Norcross, Georgia, and (ii)
certain phone equipment listed on Exhibit 8(j)(b) from the same Building 154 to
the same Building 150. If during the move such equipment is damaged due to the
negligence of Seller, Seller shall provide the funds necessary to return the
damaged equipment to substantially the condition and state of repair such
equipment was in immediately preceding the move. In the event Seller has not
moved such equipment within 90 days following the Closing Date, Buyer, upon
written notice to Seller, shall have the right to receive liquidated damages in
the amount of $500 (beginning with the 91st day following the Closing Date)
until such equipment has been moved according to this Section. The amount of
liquidated damages owed will be offset by reducing the total amount of Services
Credits owed pursuant to subsection 2(a)(iii) hereof.
(k) Access to Accounting and Business Records. CytRx and its authorized
representatives will have reasonable access during normal business hours to the
accounting and business records acquired by Buyer (as of the Closing Date) in
order to make copies of such records for CytRx's own use.
9. Conditions Precedent to Buyer's Obligation.
Each and every obligation of Buyer to be performed in connection with the
Closing on the Closing Date shall be subject to the satisfaction of the
following conditions (unless waived by Buyer):
(a) Accuracy of Representations and Warranties True as of the Closing
Date. The representations and warranties made by Seller in this Agreement shall
be true in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made or given on
and as of the Closing Date.
(b) Compliance with Agreement. Seller shall have substantially
performed and complied with all of its obligations under this Agreement that
are to be performed or complied with by Seller prior to or on the Closing Date.
(c) Certificate. Seller shall provide a certificate to Buyer signed by the
President of Seller certifying that the conditions set forth in subsections (a)
and (b) of this Section 9 have been fulfilled.
<PAGE> 12
(d) Approvals and Consents. Seller shall have made or obtained all
licenses, consents, approvals or authorizations by or filings with all third
parties listed on Exhibit 9(d).
(e) Instrument of Transfer. Seller shall have delivered or caused to be
delivered to Buyer a Bill of Sale and Assignment (in the form attached hereto
as Exhibit 9(e)) and such other assignments and other instruments of transfer
and conveyance, and shall take such other action as Buyer shall reasonably deem
to be necessary or desirable to vest in Buyer all right, title and interest in
and to the Assets.
(f) Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
satisfactory in form and substance to Buyer and Buyer's counsel; and Seller
shall have made available to Buyer for examination the originals or true and
correct copies of all documents relating to the business and affairs of Seller
which Buyer may reasonably request.
(g) Legal Proceedings. There shall be in effect no legal requirement,
and no judgment or order shall have been entered and not vacated by any court
or governmental authority of competent jurisdiction in any litigation or
proceeding that (i) enjoins, restrains, makes illegal, or prohibits
consummation of the transactions contemplated hereby or (ii) requires
separation or divestiture by Buyer of all or any significant portion of the
Assets after Closing, and there shall be no litigation or proceeding pending or
threatened seeking, or which, if successful, would have the effect of any of
the foregoing.
(h) No Casualty Loss. There shall not have been any material casualty loss
affecting any of the Assets, unless (i) all of such assets shall be, at or
prior to the Closing Date, returned to substantially the condition and state of
repair such assets were in immediately preceding such casualty loss or (ii) to
the satisfaction of Buyer, such casualty loss shall be adequately covered by
insurance, and all insurance proceeds shall be payable to Buyer concurrently
with or after the Closing, and such insurance proceeds shall be adequate to
return such assets to substantially the condition and state of repair such
assets were in immediately preceding such casualty loss or (iii) at Seller's
election, to the satisfaction of Buyer, the funds necessary to return such
assets to substantially the condition and state of repair such assets were
immediately preceding such casualty loss shall have been deposited in escrow
under terms satisfactory to Buyer.
(i) Lease Agreement. Seller and Buyer shall have executed a Lease
Agreement (the "Lease Agreement") (in the form attached hereto as Exhibit 9(i),
whereby Buyer shall lease the real property where the Assets are located.
(j) Sublease Agreement. Seller and Buyer shall have executed a Sublease
Agreement (in the form attached hereto as Exhibit 9(j)), whereby Seller shall
lease certain property set forth in the Sublease Agreement.
<PAGE> 13
(k) Preferred Shareholder Approval. Buyer shall have received approval
of its preferred shareholders to execution of this Agreement.
(l) Schedules and Exhibits Satisfactory. Buyer shall be reasonably
satisfied with its review of all final schedules and exhibits provided by
Seller hereunder, such acceptance not to be withheld unless the final exhibits
and schedules reveal a material adverse variation from those exhibits and
schedules provided as of the date hereof.
10. Conditions Precedent to Seller's Obligations.
Each and every obligation of Seller to be performed in connection with the
Closing on the Closing Date shall be subject to the following conditions
(unless waived by Seller):
(a) Accuracy of Representations and Warranties True as of the Closing
Date. The representations and warranties made by Buyer in this Agreement shall
be true in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties have been made or given on
and as of the Closing Date.
(b) Compliance with Agreement. Buyer shall have substantially
performed and complied with all of its obligations under this Agreement that
are to be performed or complied with by Buyer prior to or on the Closing Date.
(c) Certificate. Buyer shall provide a Certificate to Seller signed by the
President of the Buyer certifying that the conditions set forth in subsections
(a) and (b) of this Section 10 have been fulfilled.
(d) Instrument of Assumption. Buyer shall have delivered or caused to
be delivered to Seller an assumption agreement in form attached hereto as
Exhibit 10(d).
(e) Lease and Subleases. Seller and Buyer shall have executed both the
Lease Agreement and the Sublease Agreement.
11. Indemnification and Resolution of Disputes.
(a) Seller's Indemnification. Seller agrees to defend, indemnify and hold
harmless Buyer against and in respect of any and all loss, liability and
expense (a "Loss") resulting from:
(i) all Retained Liabilities and all acts, actions, omissions, events,
facts or transactions of Seller or its agents or representatives prior to or on
the Closing Date;
(ii) the inaccuracy of any representation or breach of warranty or
non-fulfillment of any obligation by Seller under this Agreement or from any
misrepresentation in or
<PAGE> 14
omission from any certificate or other instrument furnished or to be furnished
to Buyer by Seller under this Agreement; and
(iii) any and all actions, suits, proceedings, claims, demands, assessments,
tax deficiencies, judgments, costs and expenses (including attorneys' fees)
incident to any of the foregoing provisions.
(b) Buyer's Idemnification. Buyer agrees to defend, indemnify and hold
harmless Seller against and in respect of any and all Losses resulting from:
(i) all Assumed Liabilities and all acts, actions, omissions, events,
facts or transactions of Buyer or its agents or representatives after the
Closing Date;
(ii) the inaccuracy of any representation or breach of warranty or
non-fulfillment of any obligation by Buyer under this Agreement or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to Seller by Buyer under this Agreement; and
(iii) any and all actions, suits, proceedings, claims, demands, assessments,
tax deficiencies, judgments, costs and expenses (including attorneys' fees)
incident to any of the foregoing provisions.
(c) Claims Procedure. Promptly after receipt by a party entitled to
indemnification under this Section (the "Indemnified Party") of written notice
of the assertion or the commencement of any litigation with respect to any
matter referred to in paragraphs (a) or (b) above, the Indemnified Party shall
give written notice of such claim to the party from whom indemnification is
sought (the "Indemnifying Party") and thereafter shall keep the Indemnifying
Party reasonably informed with respect to that claim; provided, however, that
failure of the Indemnified Party to give the Indemnifying Party notice as
provided in this Section shall not relieve the Indemnifying Party of its
obligations hereunder, except to the extent the Indemnifying Party is
prejudiced by the Indemnified Party's failure to provide prompt notice. If any
litigation is brought against the Indemnified Party, the Indemnifying Party (i)
shall be entitled to participate in such litigation and (ii), at the request of
the Indemnified Party, shall assume the defense thereof with counsel
satisfactory to the Indemnified Party at the Indemnifying Party's sole expense;
provided, however, that the Indemnified Party may participate in such
litigation at its own expense. If the Indemnifying Party assumes the defense of
any litigation, it shall not settle the litigation unless the settlement shall
include, as an unconditional term thereof, the giving by the claimant or
plaintiff of a release of the Indemnified Party, satisfactory to the
Indemnified Party, from all liability with respect to such litigation.
(d) Limitations on Indemnification.
<PAGE> 15
(i) No party to this Agreement shall be entitled to indemnification
under this agreement to the extent that such party's Losses are increased or
extended by the willful misconduct, violation of law or bad faith of such
party.
(ii) No Indemnifying Party shall be required to indemnify an Indemnified
Party with respect to any Loss arising out of or with respect to a claim for
indemnification under subsections 11(a) or 11(b) (a "Claim") unless the amount
of such Loss when aggregated with all other such Losses, shall exceed the
Threshold Amount (as defined below); provided, however, that in the event such
claims exceed this amount, the Indemnified Party shall be permitted to recover
for all such losses as permitted under this Section 11. The "Threshold Amount"
shall be Twenty-Five Thousand Dollars ($25,000.00).
(iii) In no event shall the aggregate liability of the Indemnifying Party for
any Claim under this Section 11 exceed an amount equal to One Million Seven
Hundred Thousand Dollars ($1,700,000.00).
(iv) An Indemnifying Party shall have no liability to indemnify an
Indemnified Party under subsections 11(a) or 11(b) if the Indemnified Party
provides a written notice of indemnification claim to the Indemnifying Party
more than 18 months following the Closing Date; provided, however, that this
limitation shall not apply to claims for indemnification relating to
representations and warranties made by Seller pursuant to Section 6(j) of this
Agreement.
(e) Exclusive Remedy. Except for equitable remedies in any action for
common law fraud, the remedies provided in this Section 11 constitute the sole
and exclusive remedies for recovery against the Indemnifying Party based upon
this Agreement.
(f) Guarantee. CytRx hereby guarantees the obligations of Seller under
this Article 11 as they relate to Seller's representations and warranties
contained in Section 6(j) of this Agreement; provided, however, that CytRx may
assign its obligation under this Section 11 (f) to a third party purchaser of
all or substantially all of the assets of CytRx and upon the reasonable
approval of Oread, Inc. on the basis of such purchaser having a net worth equal
to CytRx as of the Closing Date.
(g) Disclosure Schedules. Seller shall have made a good faith effort
to provide complete disclosure schedules on an individual basis as required by
this Agreement; provided, however, that for purposes of the indemnity under
Sections 11(a) and 11(b), items disclosed on a disclosure schedule shall be
deemed provided on any other relevant disclosure schedule. Notwithstanding the
foregoing, this Section 11(g) shall in no way reduce or eliminate any liability
of Seller hereunder for failing to make a disclosure required by this
Agreement.
12. Termination.
(a) This Agreement may be terminated at any time prior to the Closing Date:
<PAGE> 16
(i) by mutual consent of the parties hereto;
(ii) by the Buyer if any of the conditions of its obligations hereunder
shall not have been satisfied at or prior to the Closing on the Closing Date and
(if not satisfied) shall not have been waived by it;
(iii) by the Seller if any of the conditions of its obligations hereunder
shall not have been satisfied at or prior to the Closing on the Closing Date and
(if not satisfied) shall not have been waived by Seller; or
(iv) by either party if the Closing has not occurred by February 16,
1998 and the terminating party has not breached the terms of this Agreement.
(b) The right of termination hereof, as granted to the respective parties
hereto under subsection 12(a) above, shall be in addition to, and not in lieu
of, any other legal or equitable remedy that the terminating party may have for
or in respect of any breach of any provisions of this Agreement or failure to
satisfy a condition to its obligations hereunder by another party hereto.
(c) The provisions of subsection 8(f) above shall survive the termination
of this Agreement.
13. Miscellaneous.
(a) Notice. Any notices given under this Agreement shall be deemed to be
effectively given when delivered personally or five days after being placed in
the United States mail, postage prepaid, certified or registered mail or one
day after being sent via air courier, addressed, in the case of Seller, as
follows:
Proceutics, Inc.
154 Technology Pkwy
Norcross, Georgia 30092
Attn: Jack Luchese
with a copy to:
Alston & Bird LLP
One Atlantic Center
1201 W. Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Chris Ford
and in the case of Buyer, as follows:
<PAGE> 17
Oread, Inc.
1501 Wakarusa Drive
Lawrence, Kansas 66047
Attn: Kelly Drake
with a copy to:
Gary D. Gilson
Blackwell Sanders Matheny Weary & Lombardi LLP
2300 Main, Suite 1100
Kansas City, Missouri 64108
(b) Survival of Representations, Warranties, Covenants and Liabilities. The
completion of the sale hereunder shall not terminate any of the covenants,
representations, warranties or liabilities of the parties under this Agreement,
and the same shall continue and survive the completion of the sale.
(c) Entire Agreement; Modifications. This Agreement supersedes all prior
negotiations between the parties hereto and contains the entire understanding
between them. It may be modified only by a writing duly executed by each of the
parties hereto or their successors or assigns.
(d) Binding Effect and Counterparts. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their successors and
assigns. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
(e) Governing Law. This Agreement and all rights and obligations of the
parties shall be governed, construed and interpreted under and pursuant to the
laws of the State of Kansas, applicable to agreements made and to be performed
entirely within such state.
(f) Negotiated Transaction. The provisions of this Agreement were
negotiated by the parties hereto and this Agreement shall be deemed to have
been drafted by all the parties hereto, notwithstanding any presumptions at law
to the contrary.
(g) Further Assurances. After the Closing, the parties, at the request
of the other or others, shall promptly execute and deliver, or cause to be
executed and delivered, any documents and instruments requested by the other or
others in addition to those required by this Agreement, in form and substance
reasonably satisfactory to the other or others, as the other or others may deem
necessary to carry out the terms of this Agreement.
(h) Expenses. Each of the parties shall pay its own expenses and the
fees and expenses of its counsel, accountants, and other experts in connection
with this Agreement.
<PAGE> 18
(i) Waivers. No action taken pursuant to this Agreement, including the
investigation, by or on behalf of Buyer, shall be deemed to constitute a waiver
by the party taking the action of compliance with any representation, warranty,
covenant or agreement herein. The waiver by any party of any condition or
breach of a provision of this Agreement shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by any party of
any of the conditions precedent to its obligations under this Agreement shall
not preclude it from seeking redress for the breach of this Agreement or any
representations, warranties or covenants hereunder.
(j) Attorneys' Fees to Prevailing Party. The prevailing party in any
litigation with respect to this Agreement or the transactions contemplated
hereby shall be entitled to recover from the non-prevailing party its
reasonable attorneys' fees and costs of litigation.
(k) Publicity. The parties agree that the content and timing of any press
release or other public announcement concerning the transaction described in
this Agreement are subject to the prior approval of Buyer and Seller.
<PAGE> 19
IN WITNESS WHEREOF, the foregoing agreement has been executed and
delivered as of the date first written above.
SELLER BUYER
PROCEUTICS, INC. OREAD LABORATORIES, INC.
By:
----------------------------
By:
----------------------------
Name: Jack J. Luchese Name: David Johnston
Title: President Title: President
CYTRX, INC.
(only as to its representations and warranties
contained in Section 6(a) and its guarantee
pursuant to Section 11(f))
By:
----------------------------
Name: Jack J. Luchese
Title: President
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EXHIBIT 10.11
Exhibit 10.11
Lease Agreement dated February 16, 1998 by and between
Proceutics, Inc. and Oread, Inc.
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LEASE
BY AND BETWEEN
PROCEUTICS, INC.
as Landlord
and
OREAD, INC.
as Tenant
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LEASE
THIS LEASE is made as of February ____, 1998 ("Effective Date"), by
and between PROCEUTICS, INC., a Delaware corporation- ("Landlord") and OREAD,
INC., a Delaware corporation ("Tenant").
1. Lease of Premises
Landlord hereby leases and demises to Tenant, and Tenant
hereby leases and hires from Landlord, upon the terms and conditions hereof
those certain premises (the "Demised Premises") within the building (the
"Building") located on the land described in Exhibit "A" attached hereto (the
"Land"), and having the mailing address set forth in Section 2.1.1. The Demised
Premises, the Land, the Building and all landscaping, parking facilities and
other improvements and appurtenances related thereto, are hereinafter
collectively referred to as the "Project", the site plan and legal description
for which is attached hereto as Exhibit "B". All portions of the Project which
are for the non-exclusive use of tenants of the Project, including, without
limitation, driveways, sidewalks, parking areas and landscaped areas are
hereinafter referred to as "Project Common Area". The Demised Premises shall
also include the fenced storage area located in the Project Common Area on
property adjacent to the Land as depicted on the Site Plan (the "Storage
Area"). Tenant shall have the exclusive use of the Storage Area.
2. Basic Lease Provisions
2.1. For convenience of the parties, certain basic provisions of this
Lease are set forth herein. The provisions set forth herein are subject to the
remaining terms and conditions of this Lease and are to be interpreted in light
of such remaining terms and conditions.
2.1.1 Address of the Building:
150 Technology Parkway
Norcross, Georgia 30092
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2.1.2 [Intentionally Omitted]
2.1.3 (a) Rentable Area of Demised Premises: 20,580
square feet.
(b) Rentable Area of Project: 37,080
2.1.4 Initial Basic Annual Rent: $411,600.
2.1.5 Initial Monthly Rental Installments of Basic Annual
Rent: $34,300.
2.1.6 (a) Tenant's Pro Rata Share of Building Operating
Expenses:
100% of Building Operating Expenses (as defined
in Section 7)
(b) Tenant's Pro Rata Share of Project
Operating Expenses: 55.5% of Project
Operating Expenses (as defined in Section 7)
2.1.7 (a) Term Commencement Date: the Effective Date.
(b) Term Expiration Date: Ten (10) years from
the Term Commencement Date, subject to
extension or earlier termination as
provided herein.
2.1.8 Security Deposit: $137,200, to be deposited in
accordance with and subject to the terms of Section 9
hereof.
2.1.9 Permitted Use: Scientific research laboratories and
related warehouse and distribution uses and general
office uses consistent with Section 10 hereof;
provided, that, at no time during the Term shall
more than thirty percent (30%) of the Rentable Area
of the Building be used for general office uses.
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2.1.10 Address for Rent Payment:
154 Technology Parkway
Norcross, Georgia 30092
Attention: Mr. Jack Luchese
Address for Notices to Landlord:
154 Technology Parkway
Norcross, Georgia 30092
Attention: Mr. Jack Luchese
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With a copy to:
Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: George M. Maxwell, Jr., Esq.
2.1.11 Address for Notices to Tenant:
150 Wakaruse Drive
Lawrence, Kansas 66047
Attention: Legal Department
3. Term
3.1. This Lease shall take effect upon the Effective Date and, except
as specifically otherwise provided within this Lease, each of the provisions
hereof shall be binding upon and inure to the benefit of Landlord and Tenant,
and each of their respective successors and permitted assigns, from the
Effective Date.
3.2. The term of this Lease (the "Term") will be that period from the
Term Commencement Date as defined in Section 4.2 below through the Term
Expiration Date, as such may be terminated or extended as provided herein.
4. Possession and Commencement Date
4.1. Landlord shall tender possession of the Demised Premises to
Tenant on the Effective Date.
4.2. The "Term Commencement Date" shall be the Effective Date.
4.3. [Intentionally Omitted.]
4.4. Subject to the provisions of Section 31.4, access to areas of the
Building necessary for Landlord to exercise its rights or perform its
obligations under this Lease is reserved to Landlord. Access to and possession
of areas necessary for utilities, services, safety and operation of the Project
is reserved to Landlord.
4.5. [Intentionally Omitted.]
5. Rent
5.1. Tenant agrees, commencing on the Term Commencement
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Date, to pay Landlord as Basic Annual Rent for the Demised Premises the sum set
forth in Section 2.1.4 subject to the rental increases provided in Section 6
hereof. Basic Annual Rent shall be paid in the equal monthly installments set
forth in Section 2.1.5, subject to the rental increases provided in Section 6
hereof, each in advance on the first day of each and every calendar month
during the Term.
5.2. In addition to Basic Annual Rent, Tenant agrees to pay to
Landlord as additional rent ("Additional Rent") at times hereinafter specified
in this Lease (i) Tenant's Pro Rata Share of Building Operating Expenses as set
forth in Section 2.1.6, (ii) Tenant's Pro Rata Share of Project Operating
Expenses as set forth in Section 2.1.6 and (iii) any other amounts that Tenant
assumes or agrees to pay under the provisions of this Lease that are owed to
Landlord, including, without limitation, any and all other sums that may become
due by reason of any Default of Tenant or failure on Tenant's part to comply
with the agreements, terms, covenants and conditions of this Lease to be
performed by Tenant, after notice and lapse of applicable cure period.
5.3. Basic Annual Rent and Additional Rent shall together be
denominated "Rent". Rent shall be paid to Landlord, without abatement,
deduction, or offset, in lawful money of the United States of America, at the
office of Landlord as set forth in Section 2.1.10 or to such other person or at
such other place as Landlord may from time to time designate in writing. In the
event the Term commences or ends on a day other than the first day of a
calendar month, then the Rent for such fraction of a month shall be prorated
for such period on the basis of the actual number of days in the applicable
month and shall be paid at the then current rate for such fractional month.
6. Rent Adjustments
6.1. Basic Annual Rent shall be increased on the first anniversary of
the Term Commencement Date, and on such date every year thereafter during the
Term (each, a "Rent Adjustment Date") by four percent (4%), compounded
annually. Each such adjustment shall become effective commencing on the Rent
Adjustment Date.
7. Operating Expenses
7.1. As used herein, (i) the term "Building Operating Expenses" shall
mean those Operating Expenses related to the Building and any other area of the
Project with respect to which Tenant has exclusive use, and (ii) the term
"Project Operating Expenses" shall mean those Operating Expenses related to the
Project Common Areas. As used herein, "Operating Expenses", with respect to
Project Operating Expenses or Building Operating Expenses, as applicable, shall
include the following to the extent
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actually incurred by Landlord:
7.1.1 Government impositions, other than those set forth in
Section 7.1.3, not paid directly by Tenant, including, without limitation,
property tax costs consisting of real and personal property taxes and
assessments (including amounts due under any improvement bond upon the Building
or the Project, including the parcel or parcels of real property upon which the
Building or the Project are located or assessments levied in lieu thereof)
imposed by any governmental authority or agency; any tax on or measured by
gross rentals received from the rental of space in the Building, or tax based
on the square footage of the Demised Premises, the Building or the Project as
well as any utilities surcharges, or, except as otherwise specifically set
forth herein, any other costs levied, assessed or imposed by, or at the
direction of, or resulting from statutes or regulations, or interpretations
thereof, promulgated by any federal, state, regional, municipal or local
government authority in connection with the use or occupancy by Tenant or its
employees, agents, contractors or permitted subtenants of the Building or the
parking facilities serving the Building or the Project; any tax on this
transaction or any document to which Tenant is a party creating or transferring
an interest in the Demised Premises; any fee for a business license required to
be held by Landlord to operate the Building for the purposes contemplated by
this Lease; any expenses, including the reasonable cost of attorneys or
experts, reasonably incurred by Landlord in seeking a reduction by the taxing
authority of the applicable taxes, which expenses shall not exceed the tax
refunds obtained as a result of an application for review thereof unless such
application for reduction was submitted by Landlord at the request of Tenant,
in which event Tenant shall pay all such expenses of Landlord in connection
with the reduction proceedings, less tax refunds obtained as a result of an
application for review thereof.
7.1.2 All other costs of any kind paid or incurred by Landlord and not
expressly excluded from Operating Expenses, in connection with the operation
and maintenance of the Building and the Project including, by way of examples
and not as a limitation upon the generality of the foregoing:
(a) costs of repairs and replacements to the Building or the other
improvements within the Project Common Areas, other than Capital Repairs (as
hereinafter defined), as appropriate to maintain the Building or the Project
Common Areas as may be required of Landlord hereunder;
(b) the costs of any capital repairs or improvements ("Capital
Repairs") to the Building or the Project Common Areas which can be amortized
over a useful life in excess of one year pursuant to the Internal Revenue Code
and the regulations promulgated therein (the "Code"), the cost of which Capital
Repairs shall be amortized over the useful life of the
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item in question, and only the annual amortized amount shall be included as
part of Operating Expenses. The useful life of such Capital Repairs shall be
the same as set forth in the Code but in no event greater than ten (10) years;
(c) fees and costs of sewers, cable T.V, trash collection, cleaning
(including windows), heating, ventilation and air-conditioning;
(d) maintenance of landscape and grounds and drives and parking areas;
(e) security services and devices;
(f) building supplies and maintenance for and replacement of equipment
utilized for operation and maintenance of the Building or the Project;
(g) license, permit and inspection fees;
(h) sales, use and excise taxes on goods and services purchased by
Landlord in connection with the operation, maintenance or repair of the Project
and Building systems and equipment;
(i) insurance premiums, including premiums for commercial general
liability, property casualty and environmental coverages pursuant to Section
21;
(j) portions of insured losses paid by Landlord as part of the
deductible portion of such losses by reason of insurance policy terms;
(k) costs of utilities furnished to the Project Common Areas;
(l) service contracts and costs of services of independent contractors
retained to do work of nature or type herein referenced; and
(m) costs of compensation (including employment taxes and fringe
benefits) of all persons who perform regular and recurring duties connected
with the day-to-day operation and maintenance of Building or the Project or its
equipment, including without limitation, janitors, floor waxers,
window-washers, watchmen, gardeners, sweepers, and handymen and costs of
management services, which costs of management services shall not exceed one
percent (1%) of the annual Rent due from Tenant.
7.1.3 Notwithstanding the foregoing, Operating Expenses shall not
include:
(a) any net income, franchise, capital stock, estate or
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inheritance taxes or taxes which are the personal obligation of Landlord,
Tenant or of another tenant of the Building or Project;
(b) any leasing commissions or expenses which relate to preparation of
rental space for a tenant;
(c) expenses of initial development and construction, including but
not limited to, grading, paving, landscaping, and decorating (as distinguished
from maintenance repair and replacement of the foregoing);
(d) legal expenses relating to other tenants;
(e) costs or expenditures to the extent reimbursed by payments
received by Landlord;
(f) principal, interest or other amounts paid (but excluding any
amount paid as a result of any act or omission of Tenant) on loans to Landlord
or secured by mortgages or deeds of trust or pursuant to any ground lease
covering the Project or a portion thereof (provided interest upon a government
assessment or improvement bond payable in installments is an Operating Expense
under Section 7.1.1 above);
(g) fines, penalties and late charges unless incurred as a result of
any act or omission of Tenant;
(h) promotional and advertising expenses attributable to marketing of
other leaseable space in the Building other than Building signage;
(i) salaries of executive officers of Landlord and employees of
Landlord; and
(j) depreciation claimed by Landlord for tax purposes (provided this
exclusion of "depreciation" is not intended to delete from Operating Expenses
actual costs of repairs and replacements and reasonable reserves in regard
thereto which are provided for in Section 7.1.2 above).
7.1.4 Notwithstanding anything to the contrary set forth herein,
Landlord and Tenant acknowledge their respective maintenance and repair
obligations pursuant to Section 18 and that, until Landlord exercises its
rights pursuant to Section 24.3, no costs associated with Tenant's maintenance
and repair obligations shall become a Building Operating Expense.
7.1.5 No expense items paid for by Tenant as Building Operating
Expenses shall be included in Landlord's calculation of Project Operating
Expenses, and no items paid for by Tenant as Project Operating
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Expenses shall be included in Landlord's calculation of Building Operating
Expenses. Landlord shall use its good faith efforts to keep Operating Expenses
at a reasonable level.
7.2. Tenant shall pay to Landlord on the first day of each calendar
month of the Term, as Additional Rent, Landlord's estimate of Tenant's Pro Rata
Share of Building Operating Expenses and Tenant's Pro Rata Share of Project
Operating Expenses for such month.
7.2.1 Within ninety (90) days after the conclusion of each
calendar year Landlord shall furnish to Tenant a statement showing in
reasonable detail the actual Operating Expenses and Tenant's Pro Rata Share of
Building Operating Expenses and Tenant's Pro Rata Share of Project Operating
Expenses for the previous calendar year. Any additional sum due from Tenant to
Landlord shall be due and payable no later than thirty (30) days after delivery
of such statement. If the amounts paid by Tenant pursuant to Section 7.2
exceeds Tenant's Pro Rata Share of Building Operating Expenses or Tenant's Pro
Rata Share of Project Operating Expenses, as applicable, for the previous
calendar year, Landlord shall, at Landlord's option, either (i) credit the
excess amount to the next succeeding installments of estimated Additional Rent,
or (ii) pay the excess to Tenant within thirty (30) days after delivery of such
statements.
7.2.2 Any amount due under Section 7.2 for any period which is
less than a full month shall be prorated for such fractional month on the basis
of the actual number of days in the month.
7.3. Landlord's annual statement shall be final and binding upon
Tenant unless Tenant, within sixty (60) days after Tenant's receipt thereof,
shall contest any item therein by giving written notice to Landlord, specifying
each item contested and the reason therefor. If, during such sixty (60) day
period, Tenant reasonably and in good faith questions or contests the
correctness of Landlord's statement of Tenant's Pro Rata Share of Building
Operating Expenses or Tenant's Pro Rata Share of Project Operating Expenses,
Landlord will provide Tenant with access to Landlord's books and records
pertaining to Operating Expenses and such other information as Landlord
reasonably determines to be responsive to Tenant' questions. In the event that
after Tenant's review of such information, Landlord and Tenant cannot agree
upon the amount of Tenant's Pro Rata Share of Building Operating Expenses or
Tenant's Pro Rata Share of Project Operating Expenses, then Tenant shall have
the right to have an independent public accounting firm selected from among the
ten (10) largest in the United States hired by Tenant and approved by Landlord
(which approval shall not be unreasonably withheld or delayed) audit and/or
review such Landlord's books and records for the year in question (the
"Independent Review"). The results of any such Independent Review shall
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be binding on Landlord and Tenant. If the Independent Review shows that
Tenant's Pro Rata Share of Building Operating Expenses or Tenant's Pro Rata
Share of Project Operating Expenses actually paid for the calendar year in
question exceeded Tenant's obligations for such calendar year, Landlord shall
at Landlord's option either (1) credit the excess amount to the next succeeding
installments of estimated Additional Rent or (2) pay the excess to Tenant
within thirty (30) days after delivery of such statement. If the Independent
Review shows that Tenant's payments of Tenant's Pro Rata Share of Building
Operating Expenses or Tenant's Pro Rata Share of Project Operating Expenses for
such calendar year were less than Tenant's obligation for the calendar year,
Tenant shall pay the deficiency to the Landlord within thirty (30) days after
delivery of such statement. All costs and expenses in connection with the
Independent Review shall be Tenant's sole obligation; provided, however, that
if the Independent Review shows that Tenant's payments of Tenant's Pro Rata
Share of Building Operating Expenses Tenant's Pro Rata Share of Project
Operating Expenses actually paid for the calendar year in question exceeded
Tenant's obligations for such calendar year by five percent (5%) or more,
Landlord shall pay the costs of the Independent Review.
7.4. The responsibility of Tenant for Tenant's Pro Rata Share of
Building Operating Expenses and Tenant's Pro Rata Share of Project Operating
Expenses shall continue to the latest of (i) the date of termination of the
Lease, or (ii) the date Tenant has fully vacated the Demised Premises
(including, without limitation, the removal of all items required hereby to be
removed and the completion of all procedures necessary to fully release and
terminate any permits or licenses restricting the use of the Demised Premises
in any manner).
7.5. Operating Expenses for the calendar year in which Tenant's
obligation to share therein commences and in the calendar year in which such
obligation ceases, shall be prorated. Expenses such as taxes, assessments and
insurance premiums which are incurred for an extended time period shall be
prorated based upon time periods to which applicable so that the amounts relate
to the time period wherein Tenant has an obligation to share in Operating
Expenses.
7.6. [Intentionally Omitted.]
7.7. The parties agree that statements in this Lease to the effect
that Landlord is to perform certain of its obligations hereunder at its own
cost and expense shall not be interpreted as excluding any cost from Operating
Expenses if such cost is an Operating Expense pursuant to the terms of this
Lease.
8. Rentable and Usable Area
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8.1. The terms "Rentable Area" as used within this Lease shall mean
the rentable area and useable area, respectively, as calculated in accordance
with the 1996 Standard Method for Measuring Floor Area in Office Buildings as
adopted by the Building Owners and Managers Association.
9. Security Deposit
9.1. Tenant has deposited with Landlord the sum set forth in Section
2.1.8 (together with all interest earned thereon, the "Security Deposit") in
cash, which Security Deposit shall be held by Landlord as security for the
performance by Tenant of all of the terms, covenants, and conditions of this
Lease to be kept and performed by Tenant during the Term. If a Default occurs
with respect to any provision of this Lease, including, but not limited to, any
provision relating to the payment of Rent, Landlord may (but shall not be
required to) use, apply or retain all or any part of the Security Deposit for
the payment of any Rent or any other sum in Default, or to compensate Landlord
for any other loss or damage which Landlord may suffer by reason of Tenant's
Default. If any portion of the Security Deposit is so used or applied, Tenant
shall, upon demand therefor, deposit cash with Landlord in an amount sufficient
to restore the Security Deposit to its original amount, and Tenant's failure to
do so shall be a material breach of this Lease. The Security Deposit shall be
held in an interest bearing account separate from Landlord's general fund.
9.2. In the event of bankruptcy or other debtor-creditor proceedings
against Tenant, the Security Deposit shall be deemed to be applied first to the
payment of Rent and other charges due Landlord for all periods prior to the
filing of such proceedings.
9.3. Landlord shall deliver the Security Deposit, or any balance
thereof following application of any portion of the Security Deposit pursuant
to the provisions of Section 9.1, to any purchaser of Landlord's interest in
the Demised Premises, and, upon such purchaser's written confirmation of
receipt of the Security Deposit and assumption of Landlord's obligations under
this Lease, Landlord shall be discharged from any further liability with
respect to the Security Deposit. This provision shall also apply to any
subsequent transfers.
9.4. If Tenant shall fully perform every provision of this Lease to be
performed by Tenant, the Security Deposit, or any balance thereof following
application of any portion of the Security Deposit pursuant to the provisions
of Section 9.1, shall be returned to Tenant (or, at Landlord's option, to the
last assignee of Tenant's interest hereunder) within thirty (30) days after the
expiration or earlier termination of this Lease.
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10. Use
10.1. Tenant shall use the Demised Premises for the purpose set forth
in Section 2.1.9 and shall not use the Demised Premises, or permit or suffer
the Demised Premises to be used, for any other purpose without the prior
written consent of Landlord which may be withheld in Landlord's sole
discretion.
10.2. Tenant shall not use or occupy the Demised Premises in violation
of any federal, state and local laws and regulations, zoning ordinances, or of
the certificate of occupancy issued for the Building, and shall, upon five (5)
days' written notice from Landlord, discontinue any use of the Demised Premises
which is declared or claimed by any governmental authority having jurisdiction
to be a violation of law, regulation or zoning ordinance or of said certificate
of occupancy. Tenant shall comply with any direction of any governmental
authority having jurisdiction which shall, by reason of the nature of Tenant's
use or occupancy of the Demised Premises, impose any duty upon Tenant or
Landlord with respect to the Demised Premises or with respect to the use or
occupation thereof.
10.3. Tenant shall not do or permit to be done anything which will
invalidate or increase the cost of any fire, environmental, extended coverage
or any other insurance policy covering the Building and Project and shall
comply with all rules, orders, regulations, and requirements of the insurers of
the Building and Project and Tenant shall promptly upon demand reimburse
Landlord for any additional premium charged for such policy by reason of
Tenant's failure to comply with the provisions of this Section 10.3.
10.4. [Intentionally Omitted.]
10.5. Tenant shall notify Landlord of additional locks or bolts of any
kind placed upon any of the doors or windows by Tenant or any changes made in
existing locks or the mechanism thereof, and Tenant shall provide Landlord with
copies of any keys or other access devices required for such additional or
changed locks or bolts. Tenant must, upon termination of this Lease return to
Landlord all keys to offices and restrooms, either furnished to, or otherwise
procured by Tenant. In the event any key so furnished is lost, Tenant shall pay
to Landlord the cost of replacing the same or of changing the lock or locks
opened by such lost key if Landlord shall deem it necessary to make such
change. Notwithstanding the foregoing, Tenant shall have the right to designate
certain areas of the Building as "secure" areas, and, subject to the provisions
of Section 31.4, to limit access thereto.
10.6. No awnings or other projection shall be attached to any outside
wall of the building. Without Landlord's prior consent, which shall not be
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unreasonably withheld, conditioned or delayed (i) the interior or exterior of
any windows shall not be coated or otherwise sunscreened, (ii) the window
treatments shall not be changed (other than replacements as part of Tenant's
maintenance and repair obligations hereunder), and (iii) no bottles, parcels,
or other articles shall be placed on the windowsills. No equipment, furniture
or other items of personal property shall be placed on any exterior balcony
without the express written consent of Landlord, which shall not be
unreasonably withheld, conditioned or delayed.
10.7. No sign, advertisement, or notice shall be exhibited, painted or
affixed by Tenant on the exterior of the Building without the prior written
consent of Landlord, which shall not be unreasonably withheld.
10.8. No equipment weighing five hundred (500) pounds, or greater,
shall be placed upon the Demised Premises from and after the Effective Date
without advance notice to and approval by Landlord, which shall not be
unreasonably withheld, conditioned or delayed . Placement of such equipment, if
approved by Landlord, shall be only at a location designed to carry the weight
of such equipment.
10.9. Tenant shall not do or permit anything to be done in or about
the Demised Premises which shall in any way obstruct or interfere with the
rights of other tenants or occupants of the Project, or use or allow the
Demised Premises to be used for unlawful purposes or, other than the particular
research (and related uses) being conducted by Tenant or other occupants of the
Building as of the Effective Date, for purposes which Landlord reasonably finds
immoral or objectionable. Tenant shall not knowingly cause, maintain or permit
any nuisance or waste in, on, or about the Building or Project.
10.10. Notwithstanding any other provision herein to the contrary,
Tenant shall be responsible for all liabilities, costs and expenses arising out
of or in connection with the compliance of the Demised Premises with (i) any
laws ordinances or regulations of any governmental entity, including, without
limitation, the Americans With Disabilities Act, 42 U.S.C. ss. 12101, et seq.
(collectively "Governmental Requirements"), as each is in effect as of the
Effective Date, or (ii) any Governmental Requirements, as in effect as of the
Effective Date or as may be amended or modified, where noncompliance results
from Tenant's use of or alterations to the Project. Tenant hereby indemnifies
and agrees to defend and hold harmless Landlord from and against any loss,
cost, liability or expense (including reasonable attorneys fees and
disbursements) arising out of any failure of the Demised Premises to comply
with Governmental Requirements; provided, however, that all liabilities, costs
and expenses arising out of or in connection with the compliance with any
amended or modified Governmental Requirements and not in connection with
Tenant's use of or alterations to the Project, and any
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modifications of or alterations to the Demised Premises made by Landlord for
Landlord's benefit and at Landlord's sole cost and expense, shall be Capital
Repairs for the purposes of calculating Operating Expenses pursuant to Section
7.1.2.
11. Brokers
11.1. Landlord and Tenant each represents and warrants to the other
party hereto that it has had no dealings with any real estate broker or agent
in connection with the negotiation of this Lease other than Atlanta Real Estate
Partners ("Broker") and that neither Landlord nor Tenant knows of any other
real estate broker or agent who is or might be entitled to a commission in
connection with this Lease. Landlord further represents to Tenant that no
commission or fee is due Broker in connection with this Lease.
11.2. Tenant hereby indemnifies and shall defend, hold and save
Landlord harmless from and against any and all claims for any commissions or
fees in connection with this Lease made by any broker or finder having worked,
or claiming to have worked, on behalf Tenant, other than Broker. Landlord
hereby indemnifies and shall defend, hold and save Tenant harmless from and
against any and all claims for any commissions or fees in connection with this
Lease made by any broker or finder having worked, or claiming to have worked,
on behalf Landlord, including, without limitation, Broker.
11.3. Tenant represents and warrants that no broker or agent has made
any representation or warranty relied upon by Tenant in Tenant's decision to
enter into this Lease other than as contained in this Lease.
11.4. Tenant acknowledges and agrees that the employment of brokers by
Landlord is for the purpose of solicitation of offers of lease from prospective
tenants and no authority is granted to any broker to furnish any representation
(written or oral) or warranty from Landlord unless expressly contained within
this Lease. Landlord in executing this Lease does so in reliance upon Tenant's
representations and warranties contained within Sections 11.1 and 11.3 hereof.
12. Holding Over
12.1. If, with Landlord's express written consent, Tenant holds
possession of all or any part of the Demised Premises after the expiration or
earlier termination of the Term, Tenant shall become a tenant from
month-to-month upon the date of such expiration or earlier termination, and in
such case Tenant shall continue to pay Basic Annual Rent in the amount payable
upon the date of the expiration or earlier termination of this Lease or
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such other amount as Landlord may indicate, in Landlord's sole and absolute
discretion, in such written consent, and all other provisions, representations,
covenants and agreements contained herein, other than with respect to the Term
and any extensions thereof, but specifically including, without limitation, the
adjustment of Basic Annual Rent pursuant to Section 6 hereof, shall remain in
full force and effect.
12.2. Notwithstanding the foregoing, if Tenant remains in possession
of the Demised Premises after the expiration or earlier termination of the Term
without the express written consent of Landlord, Tenant shall become a tenant
at sufferance upon the terms of this Lease except that the monthly rental shall
be equal to one hundred fifty percent (150%) of the Basic Annual Rent and
Additional Rent in effect during the last thirty (30) days of the Term. Tenant
shall be responsible for all damages suffered by Landlord resulting from or
occasioned by Tenant's holding over.
12.3. Acceptance by Landlord of Rent after such expiration or earlier
termination shall not result in a renewal or reinstatement of this Lease.
12.4. The foregoing provisions of this Section 12 are in addition to
and do not affect Landlord's right to re-entry or any other rights of Landlord
hereunder or as otherwise provided by law.
13. Taxes
13.1. Tenant shall pay, prior to delinquency, any and all taxes levied
against any personal property or trade fixtures placed by Tenant in or about
the Demised Premises.
13.2. If any such taxes on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property or, if the assessed
valuation of the Building or the Project is increased by the inclusion therein
of a value attributable to Tenant's personal property or trade fixtures, and if
Landlord, after written notice to Tenant, pays the taxes based upon such
increase in the assessed value, then Tenant shall upon demand repay to Landlord
the taxes so levied against Landlord.
14. Condition of Demised Premises
14.1. Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty with respect to the condition
of the Demised Premises or the Building or Project, or with respect to the
suitability for the conduct of Tenant's business. The taking of possession of
the Demised Premises by Tenant shall, except as otherwise agreed in writing by
Landlord and Tenant conclusively establish that the Demised Premises and
Building were at such time in good, sanitary and
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satisfactory condition and repair. Tenant further acknowledges that Tenant is
accepting the Demised Premises "AS-IS," provided, however, that the foregoing
shall in no way limit Landlord's obligations under the Lease, including without
limitation, Landlord's obligations to perform Capital Repairs, maintenance and
repairs of the Project Common Areas and repairs, subsequent to any casualty or
condemnation as set forth herein.
15. Parking Facilities
15.1. As an appurtenance to the Demised Premises, Tenant shall have
the exclusive right on a reserved basis to use parking facilities serving the
Building located on the Land and depicted on the Site Plan as "Tenant's
Designated Spaces" (the "Parking Allotment").
15.2. Tenant agrees not to unreasonably overburden the parking
facilities in excess of the Parking Allotment and agrees to cooperate with
Landlord and other tenants in the use of parking facilities. Landlord reserves
the right to determine that parking facilities are becoming overcrowded and to
limit Tenant's use thereof (but not below the Parking Allotment). Upon such
determination, Landlord may reasonably allocate parking spaces among Tenant and
other tenants; provided that Tenant shall at all times be allowed to use the
Parking Allotment. In the alternative, if Landlord determines that Tenant's
customers, clients, or invitees appear to be using more than the Parking
Allotment, Landlord may require Tenant and its employees to obtain parking
outside the Project for such excess uses. However, nothing in this Section 15.2
is intended to create an affirmative duty on Landlord's part to monitor
parking.
16. Utilities and Services
16.1. Tenant shall pay for all water, (including the cost to service,
repair and replace reverse osmosis, deionized and other treated water) gas,
heat, light, power, telephone and other utilities supplied to the Demised
Premises, together with any fees, surcharges and taxes thereon. All such
utilities shall be separately metered to Tenant.
16.2. Landlord shall not be liable for, nor shall any eviction of
Tenant result from, the failure to furnish any such utility or service whether
or not such failure is caused by accident, breakage, repairs, strikes, lockouts
or other labor disturbances or labor disputes of any character, governmental
regulation, moratorium or other governmental action, inability despite the
exercise of reasonable diligence or by any other cause. In the event of such
failure, Tenant shall not be entitled to any abatement or reduction of Rent,
nor be relieved from the operation of any covenant or agreement of this Lease.
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16.3. Tenant shall pay directly to the applicable utility or service
provider, prior to delinquency, for all utilities and services which may be
furnished to Tenant or the Demised Premises during the Term.
16.4. If Tenant desires to use any device in the Demised Premises,
including, but without limitation, data processing machines and laboratory
equipment, which will in any way increase the amount of ventilation, air
exchange, gas, steam, electricity or water beyond the existing capacity of the
Building, Tenant shall be solely responsible for all cost and expense in
connection with increasing the existing capacity of the Building, and all
alterations required to so increase the capacity shall be made upon prior
written notice to Landlord and pursuant to the terms and provisions of Article
17.
16.5. [Intentionally Omitted.]
16.6. [Intentionally Omitted.]
16.7. Landlord reserves the right to stop service of the elevator,
plumbing, ventilation, air conditioning and electric systems, when necessary,
by reason of accident or emergency or for repairs, alterations or improvements
(but only to the extent and for such time as reasonably necessary under the
circumstances), in the reasonable judgment of Landlord desirable or necessary
to be made, until said repairs, alterations or improvements shall have been
completed, and Landlord shall use its good faith efforts to cause such repairs,
alterations or improvements to be promptly completed. Landlord shall further
have no responsibility or liability for failure to supply elevator facilities,
plumbing, ventilation, air conditioning or electric service, when prevented
from doing so by strike or accident, or by laws, rules, order, ordinances,
directions, regulations or requirements of any federal, state, country or
municipal authority or failure to deliver gas, oil or other suitable fuel
supply or inability by exercise of reasonable diligence to obtain gas, oil or
other suitable fuel. It is expressly understood and agreed that any covenants
on Landlord's part to furnish any service pursuant to any of the terms,
covenants, conditions, provisions or agreements of this Lease, or to perform
any act or thing for the benefit of Tenant, shall not be deemed breached if
Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause outside the reasonable control of Landlord.
17. Alterations
17.1. Tenant shall make no alterations, additions or improvements in
or to the Demised Premises without Landlord's prior written consent, which
approval shall not be unreasonably withheld, conditioned or delayed (provided,
however, that in the event any proposed alteration, addition or
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<PAGE> 20
improvement affects (i) any structural portions of the Building including
exterior walls, roof, foundation and core of the Building, (ii) the exterior of
the Building or (iii) any Building systems, including elevator, plumbing, air
conditioning, heating electrical, security, life safety and power, then
Landlord may withhold its consent with respect thereto in its sole and absolute
discretion), and then only by architects, contractors, suppliers or mechanics
approved by Landlord in Landlord's reasonable discretion. In seeking Landlord's
approval, Tenant shall provide Landlord, at least fourteen (14) days in advance
of any proposed construction, with plans, specifications, bid proposals, work
contracts and such other information concerning the nature and cost of the
alterations as may be reasonably requested by Landlord. Notwithstanding
anything contained herein to the contrary, to the extent Tenant desires to
alter the Demised Premises for the purpose of installing ventilation hoods and
ventilation systems, back-up generators or security systems, Landlord shall
grant or withhold its consent in the exercise of its reasonable discretion and
such consent shall not be unreasonably conditioned or delayed. Further,
alterations to the Demised Premises having a cost of $25,000 or less which are
not referenced in the previous sentence or described in items (i) (ii) or (iii)
of this Section 17.1 may be made by Tenant without Landlord's consent or
approval; provided, however, Tenant shall provide Landlord with prior written
notice describing in reasonable detail the alterations being undertaken by
Tenant without Landlord's consent.
17.2. [Intentionally Omitted.]
17.3. Tenant agrees that there shall be no construction of partitions
or other obstructions which might interfere with free access to mechanical
installation or service facilities of the Building or interfere with the moving
of Landlord's equipment to or from the enclosures containing said installations
or facilities.
17.4. Tenant agrees that any work by Tenant shall be accomplished in
such a manner as to permit any fire sprinkler system and fire water supply
lines to remain fully operable at all times.
17.5. Tenant covenants and agrees that all work done by Tenant shall
be performed in full compliance with all laws, rules, orders, ordinances,
directions, regulations, and requirements of all governmental agencies,
offices, departments, bureaus and boards having jurisdiction, and in full
compliance with the rules, orders, directions, regulations, and requirements of
any applicable fire rating bureau. Upon demand by Landlord, Tenant shall
provide Landlord with (i) construction agreements, building plans, lien
releases and other similar documentation with respect to any improvements or
alterations reasonably requested by Landlord or Landlord's lenders, insurers or
investors, and (ii) "as-built" plans showing any change in the Demised
Premises.
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17.6. Before commencing any work, Tenant shall give Landlord at least
fourteen (14) days prior written notice of the proposed commencement of such
work and shall, for any work costing in excess of One Hundred Thousand Dollars
($100,000) and if required by Landlord, secure at Tenant's own cost and expense
a completion and lien indemnity bond or other security for completion of said
work reasonably satisfactory to Landlord.
17.7. All alterations, attached equipment, decorations, fixtures,
trade fixtures, additions and improvements, built-in furniture and cabinets,
together with all additions and accessories thereto, subject to Sections 17.9
and 17.10, attached to or built into the Demised Premises, made by either of
Landlord or Tenant from and after the Effective Date, including (without
limiting the generality of the foregoing) all floor and wallcovering, built-in
cabinet work and paneling, sinks and related plumbing fixtures, exterior
venting fume hoods and walk-in freezers and refrigerators, clean rooms,
climatized rooms, ductwork, conduits, electrical panels and circuits, shall
become the property of Landlord upon the expiration or earlier termination of
the term of this Lease, and shall remain upon and be surrendered with the
Demised Premises as a part thereof. At the same time as Landlord delivers to
Tenant Landlord's consent to any alteration, addition or improvement pursuant
to Section 17.1, Landlord shall notify Tenant of Landlord's election to cause
Tenant to remove any items which are the subject of such consent from the
Demised Premises upon the expiration or earlier termination of this Lease, and,
if Landlord so elects, Tenant shall remove such alterations, attached
equipment, decorations, fixtures, trade fixtures, additions and improvements
upon the expiration or earlier termination of this Lease and restore any damage
caused by or occasioned as a result of such result. Tenant shall be deemed to
be in occupancy of the Demised Premises during any such restoration period.
17.8. [Intentionally Omitted.]
17.9. Except as to those items listed on Exhibit "D" attached hereto
and incorporated herein, all business and trade fixtures, machinery and
equipment, built-in furniture and cabinets, together with all additions and
accessories thereto, installed in and upon the Demised Premises as of the
Effective Date shall be and remain the property of Landlord and shall not be
moved by Tenant at any time during the Term. If Tenant shall fail to remove all
of its property from the Demised Premises prior to expiration or earlier
termination of this Lease, then Landlord may, at its option, remove the same in
any manner that Landlord shall choose, and store said effects without liability
to Tenant for loss thereof or damage thereto, and Tenant agrees to pay Landlord
upon demand any expenses incurred by Landlord in connection with such removal
and storage or Landlord may, subject to applicable law, at its option, without
notice, sell said property or any of the same, at private sale and without
legal process, for such price as Landlord may obtain
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and apply the proceeds of such sale against any amounts due under this Lease
from Tenant to Landlord and against any expenses incident to the removal,
storage and sale of said personal property.
17.10. Notwithstanding any other provision of this Section 17 to the
contrary, in no event may Tenant remove any improvement from the Demised
Premises as to which Landlord contributed payment without Landlord's prior
written consent, which may be withheld in Landlord's sole discretion.
17.11. In connection with any improvement or alteration project
costing in excess of Twenty-Five Thousand ($25,000), Tenant shall pay to
Landlord up to five percent (5%) of the cost to Tenant of all charges incurred
by Tenant of its contractors or agents in connection with such alterations,
additions or improvements to the Demised Premises to cover Landlord's actual
expenses for plan review, coordination, scheduling and supervision thereof. For
purposes of payment of such sum, Tenant shall submit to Landlord copies of all
bills, invoices, and statements covering the costs of such charges, which will
be accompanied by payment to Landlord of the percentage fee set forth above.
Tenant shall reimburse Landlord for any extra expense incurred by Landlord by
reason of faulty work done by Tenant or its contractors, or by reason of delays
caused by such work, or by reason of inadequate cleanup.
18. Repairs and Maintenance
18.1. Landlord shall perform the Capital Repairs and shall repair and
maintain the Project Common Areas, including, without limitation, repair and
maintenance of landscaping, parking facilities, driveways, walkways, lighting,
utilities, snow removal, irrigation and storm water management systems (and the
full or amortized cost thereof, as applicable, shall be included as a part of
Operating Expenses), unless such Capital Repairs or maintenance or repairs are
required in whole or in part because of any act, neglect, fault of or omissions
of any duty by Tenant, its agents, servants, employees, contractors, guests or
invitees, in which case Tenant shall pay to Landlord the cost of such Capital
Repairs or maintenance and repairs to the extent such costs are incurred as a
result of any act, neglect, fault of or omission of any duty by Tenant, its
agents, servants, employees, contractors, guests or invitees.
18.2. Except for services of Landlord, if any, required by Section
18.1, Tenant shall at Tenant's sole cost and expense keep the Demised Premises
and every part thereof in good condition and repair, damage thereto from
ordinary wear and tear excepted and subject to the provisions of Section 22.
Tenant shall, upon the expiration or earlier termination of this Lease,
surrender the Demised Premises to Landlord in as good as condition
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as when received, ordinary wear and tear excepted and subject to the provisions
of Section 22. Landlord shall have no obligation to alter, remodel, improve,
repair, decorate or paint the Demised Premises or any part thereof.
18.3. [Intentionally Omitted.]
18.4. [Intentionally Omitted.]
18.5. This Section 18 relates to repairs and maintenance arising in
ordinary course of operation of the Building, the Project and any related
facilities. In the event of fire, earthquake, flood, vandalism, war, or similar
cause of damage or destruction, this Section 18 shall not be applicable and the
provisions of Section 22 shall apply and control.
19. Liens
19.1. Subject to the immediately succeeding sentence, Tenant shall
keep the Demised Premises, the Building, and the Land free from any liens
arising out of work performed, materials furnished or obligations incurred by
Tenant. Tenant further covenants and agrees that any mechanic's lien filed
against the Demised Premises or against the Building or the Project for work
claimed to have been done for, or materials claimed to have been furnished to
Tenant, will be discharged by Tenant, by bond or otherwise, within thirty (30)
days after the receipt of notice of the filing thereof, at the sole cost and
expense of Tenant.
19.2. Should Tenant fail to discharge any lien of the nature described
in Section 19.1, Landlord may at Landlord's election pay such claim or post a
bond or otherwise provide security to eliminate the lien as a claim against
title and the cost thereof shall be immediately due from Tenant as Additional
Rent.
19.3. In the event Tenant shall lease or finance the acquisition of
office equipment, furnishings, or other personal property of a removable nature
utilized by Tenant in the operation of Tenant's business, Tenant warrants that
any Uniform Commercial Code Financing Statement executed by Tenant will upon
its face or by exhibit thereto indicate that such Financing Statement is
applicable only to removable personal property of Tenant located within the
Demised Premises. In no event shall the address of the Building be furnished on
the statement without qualifying language as to applicability of the lien only
to removable personal property owned by Tenant, located in an identified suite
held by Tenant. Should any holder of a Financing Statement executed by Tenant
record or place of record a Financing Statement which appears to constitute a
lien against any interest of Landlord or against equipment which may be located
other than within the Demised Premises, Tenant shall within ten (10) days after
filing such
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Financing Statement (i) cause a copy of the Security Agreement or other
documents to which Financing Statement pertains to be furnished to Landlord to
facilitate Landlord's being in a position to show such lien is not applicable
to Landlord's interest, and (ii) cause Tenant's lender to amend any documents
of record so as to clarify that such lien is not applicable to any interest of
Landlord in the Building or the Project.
20. Indemnification and Exculpation
20.1. Tenant hereby indemnifies and agrees to defend and save Landlord
harmless from and against any and all demands, claims, liabilities, losses,
costs, expenses, actions, causes of action, damages or judgments, and all
reasonable expenses actually incurred in investigating or resisting the same
(including, without limitation, reasonable attorneys' fees, charges and
disbursements actually incurred), for injury or death to person or injury to
property occurring within or about Project, arising out of Tenant's, it's
employees, agents or guests use or occupancy of the Project or a breach or
default by Tenant in the performance of any of its obligations hereunder,
except to the extent caused by the willful act or gross negligence of the
Landlord.
20.2. Landlord hereby indemnifies and agrees to defend, hold and save
Tenant harmless from and against any and all demands, claims, liabilities,
losses, costs, expenses, actions, causes of action, damages or judgments, and
all reasonable expenses actually incurred in investigating or resisting the
same (including, without limitation, reasonable attorneys' fees, charges and
disbursements actually incurred), for injury or death to person or injury to
property occurring within or about the Project, arising out of the use or
occupancy of the Project by Landlord and its employees, agents, or guests or a
breach or default by Landlord in the performance of any of its obligations
hereunder, except to the extent caused by the willful act or gross negligence
of Tenant.
20.3. Landlord shall not be liable to Tenant and Tenant assumes all
risk of damage to personal property or scientific research, including loss of
records kept within the Demised Premises if the cause of such damage is of a
nature which, if Tenant had elected to maintain fire and theft insurance with
extended coverage and business records endorsement available on a commercially
reasonable basis, would be a loss subject to settlement by the insurance
carrier, including, but not limited to, damage or losses caused by fire,
electrical malfunctions, gas explosion, and water damage of any type,
including, but not limited to, broken water lines, malfunction of fire
sprinkler system, roof leakage or stoppages of lines unless and except if such
loss is due to willful disregard of Landlord after written notice by Tenant of
need for a repair which Landlord is responsible to make for an unreasonable
period of time. Tenant further waives any claim for injury to Tenant's business
or loss
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of income relating to any such damage or destruction of personal property
including any loss of records.
20.4. Landlord shall not be liable for any damages arising from any
act, omission or neglect of any other tenant in the Building or the Project or
of any other unrelated third party, except to the extent caused by the willful
act or gross negligence of Landlord or any of its employees, agents or
independent contractors.
20.5. Security devices and services, if any, while intended to deter
crime may not in given instances prevent theft or other criminal acts and it is
agreed that Landlord shall not be liable for injuries or losses caused by
criminal acts of third parties and the risk that any security device or service
may malfunction or otherwise be circumvented by a criminal is assumed by
Tenant. Tenant shall at Tenant's cost obtain insurance coverage to the extent
Tenant desires protection against such criminal acts.
21. Insurance - Waiver of Subrogation
21.1. Landlord, as part of Operating Expenses, shall carry throughout
the Term insurance upon the Building, (i) in an amount equal to full
replacement cost (exclusive of the costs of excavation, foundations, and
footings, and without reference to depreciation taken by Landlord upon its
books or tax returns), (ii) providing protection against any peril generally
included within the classification "Fire and Extended Coverage" together with
insurance against sprinkler damage (if applicable), vandalism and malicious
mischief and rental losses for a period not less than twelve (12) months, and
(iii) if commercially available, with a deductible not to exceed Ten Thousand
Dollars ($10,000). At Tenant's request, Landlord shall use its good faith
efforts to cause such deductible to be reduced, provided that such reduced
deductible is commercially available and that Tenant shall be solely
responsible for all costs and expenses in connection with the reduction of such
deductible, including, without limitation, any increases in the premium
associated with such reduced deductible. Landlord, subject to availability
thereof and, as part of Operating Expenses, shall further insure as Landlord
deems appropriate coverage against flood, environmental hazard and earthquake,
loss or failure of building equipment, rental loss during the period of repair
or rebuild, workmen's compensation insurance and fidelity bonds for employees
employed to perform services. Notwithstanding the foregoing, Landlord may, but
shall not be deemed required to, provide insurance as to any improvements
installed by Tenant or which are in addition to the standard improvements
customarily furnished by Landlord without regard to whether or not such are
made a part of the Building.
21.2. Landlord, as part of Operating Expenses, shall further carry
throughout the Term commercial general liability insurance with a single loss
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limit of not less than Two Million Dollars ($2,000,000.00) for death or bodily
injury, or property damage with respect to the Project.
21.3. Tenant at its own cost shall procure and continue in effect from
the Term Commencement Date and continuing throughout the Term (and occupancy by
Tenant, if any, after the expiration or earlier termination of this Lease)
comprehensive commercial liability insurance with limits of not less than Two
Million Dollars ($2,000,000.00) per occurrence for death or bodily injury, not
less than One Million Dollars ($1,000,000.00) for property damage with respect
to the Demised Premises, and not less than a Five Million Dollar ($5,000,000)
aggregate loss limit.
21.4. The aforesaid required insurance shall name Landlord and Tenant,
and their respective officers, employees and agents, as insureds. All insurance
required by this Article 21 shall be with companies having a rating of not less
than policyholder rating of A and financial category rating of at least Class
XII in "Best's Insurance Guide." Each of Landlord and Tenant shall obtain from
its insurance companies or cause its insurance companies to furnish
certificates of coverage to the other party hereto. No such policy shall be
cancelable or subject to reduction of coverage or other modification or
cancellation except after thirty (30) days prior written notice to Landlord
from the insurer. All such policies shall be written as primary policies, not
contributing with and not in excess of the coverage which Landlord may carry.
Tenant's policy may be a "blanket policy" which specifically provides that the
amount of insurance shall not be prejudiced by other losses covered by the
policy. Each of Landlord and Tenant shall, at least twenty (20) days prior to
the expiration of such policies, furnish the other party hereto with renewals
or binders. Tenant agrees that if Tenant does not take out and maintain such
insurance, Landlord may (but shall not be required to) procure said insurance
on Tenant's behalf and at its cost to be paid as Additional Rent.
21.5. Tenant assumes the risk of damage to any fixtures, goods,
inventory, merchandise, equipment, and leasehold improvements, and Landlord
shall not be liable for injury to Tenant's business or any loss of income
therefrom relative to such damage all as more particularly heretofore set forth
within this Lease. Tenant at Tenant's cost shall carry such insurance as Tenant
desires for Tenant's protection with respect to personal property of Tenant or
business interruption.
21.6. The party carrying the insurance required hereunder shall upon
written request of the other party hereto, also designate and furnish
certificates evidencing the requesting party as an insured to (i) any lender of
such requesting party holding a security interest in, as applicable, the Lease
or the Building or real property upon which the Building is situated, and/or
(ii) the landlord under any lease wherein Landlord is tenant of the real
property
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whereupon the Building is located if the interest of Landlord is or shall
become that of a tenant under a ground lease rather than that of a fee owner,
and/or (iii) any management company retained by Landlord to manage the Project.
21.7. Landlord and Tenant each hereby waive any and all rights of
recovery against the other or against the officers, directors, employees,
agents, and representatives of the other, on account of loss or damage
occasioned to such waiving party or its property or the property of others
under its control to the extent that such loss or damage is insured against
under any fire and extended coverage insurance policy which either may have in
force, but not less than as required pursuant to this Article 21, at the time
of such loss or damage. Such waivers shall continue as long as their respective
insurers so permit. Any termination of such a waiver shall be by written notice
of circumstances as hereinafter set forth. Landlord and Tenant upon obtaining
the policies of insurance required or permitted under this Lease shall give
notice to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease. If such policies shall not be
obtainable with such waiver or shall be so obtainable only at a premium over
that chargeable without such waiver, the party seeking such policy shall notify
the other thereof, and the latter shall have ten (10) days thereafter to either
(i) procure such insurance with companies reasonably satisfactory to the other
party or (ii) agree to pay such additional premium. If neither (i) nor (ii) are
done, this Section 21.7 shall have no effect during such time as such policies
shall not be obtainable or the party in whose favor a waiver of subrogation is
desired refuses to pay the additional premium. If such policies shall at any
time be unobtainable, but shall be subsequently obtainable, neither party shall
be subsequently liable for a failure to obtain such insurance until a
reasonable time after notification thereof by the other party. If the release
of either Landlord or Tenant, as set forth in the first sentence of this
Section 21.7 shall contravene any law with respect to exculpatory agreements,
the liability of the party in question shall be deemed not released but shall
be secondary to the other's insurer.
21.8. Landlord may require insurance policy limits to be raised to
conform with requirements of Landlord's lender.
22. Damage or Destruction
22.1. In the event of a partial destruction of the Building (i) by
fire or other perils covered by extended coverage insurance required by Section
21 not exceeding (x) twenty-five percent (25%) of the full insurable value
thereof, or (y) so long at least five (5) years will remain in the Term (as the
Term may have been extended pursuant to Section 41 hereof) as of the date of
completion of reconstruction, fifty percent (50%) of the full insurable value
thereof; (ii) the damage thereto is such that the Building may be repaired,
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reconstructed, or restored within a period of nine (9) months from the date of
the happening of such casualty; and (iii) Landlord will receive insurance
proceeds sufficient to cover the cost of such repairs (except for any
deductible amount provided by Landlord's policy pursuant to the terms of
Section 21, which deductible amount if paid by Landlord shall be an Operating
Expense), Landlord shall commence and proceed diligently with the work of
repair, reconstruction and restoration and this Lease shall continue in full
force and effect.
22.2. In the event of any damage to or destruction of the Building,
other than as provided in Section 22.1, Landlord may elect to repair,
reconstruct and restore the Building, in which case this Lease shall continue
in full force and effect. If Landlord elects not to repair then this Lease
shall terminate as of date of destruction.
22.3. Landlord shall give written notice to Tenant of its election not
to repair, reconstruct or restore the Building or Project within the sixty (60)
day period following the date of damage or destruction.
22.4. Upon any termination of this Lease under any of the provisions
of this Section, the parties shall be released thereby without further
obligation to the other from the date possession of the Demised Premises is
surrendered to the Landlord except for obligations which have theretofore
accrued.
22.5. In the event of repair, reconstruction and restoration as herein
provided, the rental provided to be paid under this Lease shall be abated
proportionately based on the extent to which Tenant's use of the Demised
Premises is impaired during the period of such repair, reconstruction or
restoration, unless Landlord provides Tenant with other space during the period
of repair, which in Tenant's reasonable opinion is suitable for the temporary
conduct of Tenant's business.
22.6. Notwithstanding anything to the contrary contained in this
Section, should Landlord be delayed or prevented from completing the repair or
restoration of the damage to the Demised Premises after the occurrence of such
damage or destruction by reason of acts of God or war, governmental
restrictions, inability to procure the necessary labor or materials, strikes,
or other reasons beyond the control of Landlord (collectively, "Force Majeure
Delay"), the time for Landlord to commence or complete repairs shall be
extended; provided, at the election of either party exercisable by the delivery
of written notice to the other party not later than sixty (60) days after
Landlord notifies Tenant of Landlord's inability to complete the repairs by the
end of the eighteenth (18th) month following such damage as a result of a
Force-Majeure Delay, Landlord shall be
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relieved of its obligation to make such repairs or restoration and Tenant shall
be released from its obligation under this Lease effective as of the date of
the receipt of such written notice.
22.7. If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall be obligated to make repairs or restoration
only of those portions of the Building and the Demised Premises which were
originally provided at Landlord's expense; the repair and restoration of items
not provided at Landlord's expense shall be the obligation of Tenant. In the
event Tenant elected to upgrade certain improvements from the standard normally
provided by Landlord, Landlord shall, upon the need for replacement due to an
insured loss, provide only the standard Landlord improvements unless Tenant
shall elect to again upgrade and pay any additional cost of such upgrades,
except to such extent as insurance proceeds which, if received, the excess
proceeds are adequate to provide such upgrades, in addition to providing for
basic reconstruction and standard improvements.
22.8. Notwithstanding anything to the contrary contained in this
Section, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Demised Premises when the damage resulting from any
casualty covered under this Section exceeds Fifty Thousand Dollars ($50,000)
and occurs during the last twenty-four (24) months of the Term (as the Term may
have been extended pursuant to Section 41 hereof), or to the extent that
insurance proceeds are not available therefor; provided, however, that if
Landlord elects not to repair, reconstruct or restore under this Section 22.8
Tenant may cause Landlord to repair, reconstruct or restore (so long as, and to
the extent that, insurance proceeds are available) by exercising its right to
extend the Term of the Lease within fifteen (15) days of Landlord's notice to
Tenant of Landlord's election not to repair pursuant to this Section 2.8. If
Landlord elects not to repair then this Lease shall terminate as of date of
destruction.
23. Eminent Domain
23.1. In the event the whole of the Demised Premises, or such part
thereof as shall substantially interfere with the Tenant's use and occupancy
thereof, shall be taken for any public or quasi-public purpose by any lawful
power or authority by exercise of the right of appropriation, condemnation or
eminent domain, or sold to prevent such taking, Tenant or Landlord may
terminate this Lease effective as of the date possession is required to be
surrendered to said authority.
23.2. In the event of a partial taking of the Building or the Land for
any public or quasi-public purpose by any lawful power or authority by exercise
of right of appropriation, condemnation, or eminent domain, or sold
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to prevent such taking, then Landlord may elect to terminate this Lease as of
such taking if such taking is, in the opinion of Landlord, of a material nature
such as to make it uneconomical to continue use of the unappropriated portion
for the purposes contemplated by this Lease.
23.3. Tenant shall be entitled to any award which is specifically
awarded as compensation for the taking of Tenant's property, which was
installed at Tenant's expense and for costs of Tenant moving to a new location.
Except as before set forth, any award for such taking shall belong to Landlord;
provided, that, Tenant shall have the right, at Tenant's sole cost and expense,
to pursue a separate award from the condemning authority in connection with
such taking and Tenant hereby indemnifies and agrees to defend and save
Landlord harmless from and against any and all demands, claims, liabilities,
losses, costs, expenses, actions, causes of action, damages or judgments, and
all reasonable expenses actually incurred (including, without limitation,
reasonable attorneys' fees, charges and disbursements actually incurred)
arising out of or in connection with Tenant's pursuit of such separate award,
including, without limitation, any reduction in the award granted to Landlord.
23.4. If, upon any taking of the nature described in this Section 23,
this Lease continues in effect, the Landlord shall promptly proceed to restore
the Demised Premises, Building and the Project to substantially their same
condition prior to such partial taking. To the extent such restoration is
feasible, as determined by Landlord in its sole discretion, the Rent shall be
abated proportionately based upon the extent to which Tenant's use of the
Demised Premises has decreased on the basis of the percentage of the rental
value of the Demised Premises after such taking and the rental value of the
Demised Premises prior to such taking.
24. Defaults and Remedies
24.1. If Tenant is in Default of Tenant's obligation to pay Rent,
Tenant shall pay to Landlord an additional sum of six percent (6%) of the
overdue Rent as a late charge. In addition to the late charge if Tenant is in
Default of Tenant's obligation to pay Rent. Rent not paid when due shall bear
interest from the 5th day after date due until paid at the lesser of (i) twelve
percent (12%) per annum or (ii) the maximum rate permitted by law.
24.2. No payment by Tenant or receipt by Landlord of a lesser amount
than the Rent payment herein stipulated shall be deemed to be other than on
account of the Rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice
to Landlord's right to recover the balance of such Rent or pursue any other
remedy provided. If at any time a dispute shall arise as to
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any amount or sum of money to be paid by Tenant to Landlord, Tenant shall have
the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of Tenant to institute suit for recovery of the payment paid under protest.
24.3. If Tenant fails to pay any sum of money required to be paid by
it hereunder, or shall fail to perform any other act on its part to be
performed hereunder, Landlord may, without waiving or releasing Tenant from any
obligations of Tenant, but shall not be obligated to, make such payment or
perform such act. All sums so paid or incurred by Landlord, together with
interest thereon, from the date such sums were paid or incurred, at the annual
rate equal to twelve percent (12%) per annum or highest rate permitted by law,
whichever is less, shall be payable to Landlord on demand as Additional Rent.
24.4. The occurrence of any one or more of the following events shall
constitute a "Default" hereunder by Tenant:
24.4.1 The abandonment or vacation of the Demised Premises by
Tenant;
24.4.2 The failure by Tenant to make any payment of Rent as and
when due and such failure continues for more than five (5) days following
delivery of written notice from Landlord (provided, however, that (i) no such
notice shall be required in the event that Landlord has given one (1) such
notice to Tenant within the preceding twelve (12) months, and (ii) such notice
shall be in place of, and not in addition to, any similar notice required under
Georgia law);;
24.4.3 The failure by Tenant to observe or perform any
obligation or covenant contained herein (other than described in Section 24.4.1
and 24.4.2) to be performed by Tenant, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Landlord to
Tenant. Such notice shall be in lieu of, and not in addition to, any notice
required under Georgia law; provided that if the nature of Tenant's default is
such that it reasonably requires more than thirty (30) days to cure, then
Tenant shall not be deemed to be in default if Tenant shall commence such cure
within said thirty (30) day period and thereafter diligently prosecutes the
same to completion provided, however, that such cure is completed no later than
ninety (90) days from the date of written notice;
24.4.4 Tenant makes an assignment for the benefit of creditors;
24.4.5 A receiver, trustee or custodian is appointed to, or
does, take title, possession or control of all, or substantially all, of
Tenant's assets and is not judicially dismissed within sixty (60) days after
appointment;
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24.4.6 Tenant files a voluntary petition under the Bankruptcy
Code (or any similar law) or an order for relief is entered against Tenant
pursuant to a voluntary or involuntary proceeding commenced under any chapter
of the Bankruptcy Code;
24.4.7 Any involuntary petition if filed against the Tenant
under any chapter of the Bankruptcy Code and is not dismissed within ninety
(90) days; or
24.4.8 Tenant's interest in this Lease is attached, executed
upon, or otherwise judicially seized and such action is not released within
ninety (90) days of the action. Notices given under this Section 24.4 shall
specify the alleged default and shall demand that Tenant perform the provisions
of this Lease or pay the Rent that is in arrears, as the case may be, within
the applicable period of time, or quit the Demised Premises. No such notice
shall be deemed a forfeiture or a termination of this Lease unless Landlord
elects otherwise in such notice. Notwithstanding anything to the contrary set
forth herein, any Default relating to the payment of money shall be deemed
cured upon receipt by Landlord of the original amount payable by Tenant,
together will all late charges and interest due and owing on such original
amount as of the date of delivery of such original amount to Landlord.
24.5. In the event of a Default by Tenant, and at any time thereafter,
with or without notice or demand and without limiting Landlord in the exercise
of any right or remedy which Landlord may have, Landlord shall be entitled to
terminate Tenant's right to possession of the Demised Premises by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Demised Premises to Landlord. In such event,
Landlord shall have the immediate right to re-enter and remove all persons and
property, and such property may be removed and stored in a public warehouse or
elsewhere at the cost of, and for the account of Tenant, all without service of
notice or resort to legal process and without being deemed guilty of trespass,
or becoming liable for any loss or damage which may be occasioned thereby. In
the event that Landlord shall elect to so terminate this Lease, then Landlord
shall be entitled to recover from Tenant all damages incurred by Landlord by
reason of Tenant's Default, including:
24.5.1 The worth at the time of award of any unpaid Rent which
had been earned at the time of such termination; plus
24.5.2 The worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination for the balance of
the term exceeds the reasonable rental value of the Demised Premises for such
time period; plus
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24.5.3 Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its obligation
under this Lease or which in the ordinary course of things would be likely to
result therefrom, including, but not limited to, the cost of restoring the
Demised Premises to the condition required under the terms of this Lease; plus
24.5.4 At the Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time
by applicable law.
As used in Sections 24.5.1 above, "worth at the time of award" shall be
computed by allowing interest at the rate specified in Section 24.1. As used in
Section 24.5.2 above, the "worth at the time of the award" shall be computed by
taking the present value of such amount, by using the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award plus six (6)
percentage points.
24.6. If Landlord does not elect to terminate this Lease as provided
in this Section, then Landlord may, from time to time, recover all Rent as it
becomes due under this Lease. At any time thereafter, Landlord may elect to
terminate this Lease and to recover damage to which Landlord is entitled.
24.7. In the event Landlord elects to terminate this Lease and relet
the Demised Premises, it may execute any new lease in its own name. Tenant
hereunder shall have no right or authority whatsoever to collect any Rent from
such tenant. The proceeds of any such reletting shall be applied as follows:
First, to the payment of any indebtedness other than Rent due
hereunder from Tenant to Landlord, including, but not limited to,
storage charges or brokerage commissions owing from Tenant to Landlord
as the result of such reletting;
Second, to the payment of the costs and expenses of reletting
the Demised Premises, including alterations and repairs which Landlord
deems reasonably necessary and advisable and reasonable attorneys'
fees, charges and disbursements actually incurred by Landlord in
connection with the retaking of the Demised Premises and such
reletting;
Third, to the payment of Rent and other charges due and
unpaid hereunder; and
Fourth, to the payment of future Rent and other damages
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payable by Tenant under this Lease.
24.8. All rights, options, and remedies of Landlord contained in this
Lease shall be construed and held to be nonexclusive and cumulative. Landlord
shall have the right to pursue any one or all of such remedies or any other
remedy or relief which may be provided by law, whether or not stated in this
Lease. No waiver of any default of Tenant hereunder shall be implied from any
acceptance by Landlord of any Rent or other payments due hereunder or any
omission by Landlord to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect defaults
other than as specified in said waiver.
24.9. Termination of this Lease or Tenant's right to possession by
Landlord shall not relieve Tenant from any liability to Landlord which has
theretofore accrued or shall arise based upon events which occurred prior to
the last to occur of (i) the date of Lease termination or (ii) the date
possession of Demised Premises is surrendered.
24.10. Landlord shall not be in default under any provision of this
Lease unless Landlord fails to perform obligations required of Landlord within
a reasonable time, but in no event shall such failure continue for more than
thirty (30) days after written notice by Tenant specifying wherein Landlord has
failed to perform such obligation; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
performance, then Landlord shall not be in default if Landlord commences
performance within such thirty (30) day period and thereafter diligently
prosecutes the same to completion. In the event that Landlord fails to cure any
default within the time periods set forth in this Section 24.10, or in the
event of a condition giving rise to an emergency threatening imminent harm to
human health or safety or substantial damage to property, Tenant shall have the
right to take all necessary and reasonable action to cure such default or
remedy such condition to the extent necessary to eliminate the emergency, and
all such action shall be performed by Tenant is a good and workmanlike manner
in accordance will all applicable governmental requirements. Upon delivery to
Landlord of documentation of the costs and expenses incurred by Tenant pursuant
to the provisions of this Section 24.10, which costs and expenses shall be at
the market rate regardless of whether Tenant performs the work or hires
unrelated third parties and shall not exceed the amounts necessary to cure the
specific default or emergency condition, Landlord shall reimburse Tenant for
such documented costs and expenses.
24.11. In the event of any default on the part of Landlord, Tenant
will give notice by registered or certified mail to any beneficiary of a deed
of trust or mortgagee or a mortgage covering the Demised Premises and to any
landlord of any lease of any building in which Demised Premises is located
whose address shall have been furnished, and Tenant shall offer such
beneficiary, mortgagee
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and/or landlord a reasonable opportunity to cure the default, including time to
obtain possession of the Building by power of sale or a judicial action if such
should prove necessary to effect a cure, provided the Landlord shall have
furnished to Tenant in writing the names and addresses of all such persons who
are to receive such notices.
25. Assignment or Subletting
25.1. Assignment. Tenant shall not, either voluntarily or by operation
of law, directly or indirectly, sell, hypothecate, assign, pledge, encumber or
otherwise transfer this Lease, without the prior written consent of Landlord in
each instance, which consent may be withheld in Landlord's sole discretion.
25.2. Subleasing. Except as hereinafter provided, Tenant shall not,
either voluntarily or by operation of law, directly or indirectly, sublet the
Demised Premises or any part thereof, or permit or suffer the Demised Premises
or any part thereof to be used or occupied as work space, storage space,
mailing privileges, concession or otherwise by anyone other than Tenant or
Tenant's employees, without the prior written consent of Landlord in each
instance, which consent shall not be unreasonably withheld conditioned or
delayed. Landlord shall consent to the subleases of portions of the Demised
Premises to CytRx Corporation or its affiliates which are in compliance with
the terms of Section 25.7. 10 and are for a period not to exceed two (2) years
from the date hereof.
25.3. If Tenant is a corporation, the shares of which are not actively
traded upon a stock exchange or in the over-the-counter market, a transfer or
series of transfers whereby twenty-five percent (25%) or more of the issued and
outstanding shares of such corporation are, or the voting control is,
transferred (but excepting transfers upon deaths of individual shareholders)
from a person or persons or entity or entities which were owners thereof at
time of execution of this Lease to persons or entities who were not owners of
shares of the corporation at time of execution of this Lease shall be deemed an
assignment of this Lease requiring the consent of Landlord as provided in
Section 25.1 above.
25.4. If Tenant desires to assign this Lease to any entity into which
Tenant is merged, with which Tenant is consolidated, or which acquires all or
substantially all of the assets of Tenant, provided that the assignee first
executes, acknowledges and delivers to Landlord an agreement whereby the
assignee agrees to be bound by all of the covenants and agreements in this
Lease and that the assignee shall have a net worth (determined in accordance
with generally accepted accounting principles consistently applied) immediately
after such assignment which is at least equal to the net worth (as so
determined) of Tenant immediately prior to the assignment (or as of the date
hereof, if greater), then Landlord, upon receipt of proof of foregoing shall
consent to such assignment so long as no change in the permitted use pursuant
to Section 2 is requested.
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25.5. In the event Tenant desires to assign, sublease, hypothecate or
otherwise transfer this Lease or sublet the Demised Premises, then at least
thirty (30) days, but not more than ninety (90) days, prior to the date when
Tenant desires the assignment or sublease to be effective (the "Assignment
Date"), Tenant shall give Landlord a notice (the "Assignment Notice")
containing information (including references) concerning the character of the
proposed assignee or sublessee, the Assignment Date, any ownership or
commercial relationship between Tenant and the proposed assignee or sublessee,
and the consideration and all other material terms and conditions of the
proposed assignment or sublease along with such other information as Landlord
may reasonably require, all in such detail as Landlord shall reasonably
require.
25.6. Landlord in making its determination as to whether consent
should be given to a proposed assignment or sublease, may give consideration to
the financial strength of such successor (notwithstanding the assignor
remaining liable for Tenant's performance) and any change in use which such
successor proposes to make in use of Demised Premises. In no event shall
Landlord be deemed to be unreasonable for declining to consent to transfer to a
successor of poor reputation, lacking financial qualifications, or seeking
change in use.
25.7. As conditions precedent to Landlord considering a request by
Tenant to Tenant's transfer of rights or subletting of the Demises Premises,
Landlord may require any or all of the following:
25.7.1 Tenant shall remain fully liable under this Lease during
the unexpired Term;
25.7.2 Tenant shall provide Landlord with evidence reasonably
satisfactory to Landlord that the value of Landlord's interest under this Lease
will not thereby be diminished or reduced. Such evidence shall include, but
need not be limited to, evidence respecting the relevant business experience
and financial responsibility and status of the third party concerned;
25.7.3 Tenant shall reimburse Landlord for Landlord's actual and
reasonable costs and expenses not to exceed Two Thousand Dollars ($2,000),
including, without limitation, reasonable attorneys' fees, charges and
disbursements actually incurred in connection with the review, processing and
documentation of such request ;
25.7.4 Other than with respect to any subleases to the CytRx
Corporation or its affiliates by the Tenant pursuant to Section 25.2, if
Tenant's transfer of rights or sharing of the Demised Premises provides for the
receipt by, on behalf or on account of Tenant of any consideration of any kind
whatsoever (including, but not by way of limitation, a premium rental for a
sublease or lump sum payment for an assignment) in excess of the rental and
other charges due
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Landlord under this Lease, Tenant shall pay to Landlord seventy-five percent
(75%) of said excess, less reasonable amounts for broker commissions and
attorneys' fees actually incurred by Tenant in connection with such sublease or
assignment. If said consideration consists of cash paid to Tenant, said payment
to Landlord shall be made upon receipt by Tenant of said cash payment;
25.7.5 Written agreement from any applicable sublessee that in
the event Landlord gives such third party notice that Tenant is in default
under this Lease, such sublessee shall thereafter make all payments otherwise
due Tenant directly to Landlord, which payments will be received by Landlord
without any liability to Landlord except to credit such payment against amounts
due under the Lease, and any such sublessee shall agree to attorn to Landlord
or its successors and assigns should this Lease be terminated for any reason;
provided, however that in no event shall Landlord or its successors or assigns
be obligated to accept such attornment;
25.7.6 Any such transfer and consent shall be effected on forms
reasonably approved by Landlord as to form and substance;
25.7.7 Tenant shall not then be in Default hereunder in any
respect;
25.7.8 Such third party's proposed use of the Demised Premises
shall be the same as Tenant's permitted use;
25.7.9 Landlord shall not be bound by any provision of any
agreement pertaining to Tenant's transfer of rights or subletting of the
Demised Premises; provided, however, that no permitted transfer or subletting
shall relieve Landlord from any of its obligations under this Lease;
25.7.10 Any agreement pertaining to Tenant's transfer of rights
or subletting of the Premises shall be in a form reasonably acceptable to
Landlord and any such agreement shall not be modified or amended without
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Tenant acknowledges and agrees that it shall be reasonable for
Landlord to withhold its consent to any agreement which, it Landlord's opinion,
contains any provision which would negatively impact Landlord's status as a
real estate investment trust;
25.7.11 Tenant shall deliver to Landlord one original executed
copy of any and all written instruments evidencing or relating to Tenant's
transfer of rights or subletting of the Demised Premises; and
25.7.12 A list of Hazardous Materials, certified by the proposed
sublessee to be true and correct, which the proposed sublessee intends to use
or store in the Demised Premises. Additionally, Tenant shall deliver to
Landlord, on or before the date any proposed sublessee takes occupancy of the
Demised Premises, all of the items required pursuant to Section 39 relating to
Hazardous Materials of such proposed sublessee.
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25.8. Any sale, assignment, hypothecation or transfer of this Lease or
subletting of the Demised Premises that is not in compliance with the
provisions of this Section 25 shall be void and shall, at the option of
Landlord, terminate this Lease.
25.9. The consent by Landlord to an assignment or subletting shall not
relieve Tenant or any assignees of this Lease or sublessee of the Demised
Premises from obtaining the consent of Landlord to any further assignment or
subletting nor shall it release Tenant or any assignee or sublessee of Tenant
from full and primary liability under the Lease.
25.10. Notwithstanding any subletting or assignment Tenant shall
remain fully and primarily liable for the payment of all Rent and other sums
due, or to become due hereunder, and for the full performance of all other
terms, conditions, and covenants to be kept and performed by Tenant. The
acceptance of Rent or any other sum due hereunder, or the acceptance of
performance of any other term, covenant, or condition thereof, from any other
person or entity shall not be deemed to be a waiver of any of the provisions of
this Lease or a consent to any subletting, assignment or other transfer of the
Demised Premises.
25.11. If Tenant delivers to Landlord an Assignment Notice indicating
a desire to transfer this Lease to a transferee other than the Proceutics
Purchaser or as provided within Section 25.4, then Landlord shall have the
option, exercisable by giving notice to Tenant at any time within ten (10) days
after Landlord's receipt of the Assignment Notice, to terminate this Lease as
of the date specified in the Assignment Notice as the Assignment Date. If
Landlord exercises such option, then Tenant shall have the right to withdraw
such Assignment Notice by delivery to Landlord written notice of such election
within five (5) days after Landlord's delivery of notice electing to exercise
such option to terminate. In the event Tenant withdraws the Assignment Notice,
this Lease shall continue in full force and effect as if such Assignment Notice
had not been given. If Tenant fails to withdraw the Assignment Notice as
hereinabove provided, this Lease, and the term and estate herein granted, shall
terminate as of the Assignment Date. No failure of Landlord to exercise any
such option to terminate this Lease shall be deemed to be Landlord's consent to
the proposed Assignment, Sublease or other Transfer.
25.12. If Tenant shall sublet the Demised Premises or any part, Tenant
hereby immediately and irrevocably assigns to Landlord, as security for
Tenant's obligations under this Lease, all rent from any subletting of all or a
part of the Demised Premises, and Landlord as assignee and as attorney-in-fact
for Tenant, or a receiver for Tenant appointed on Landlord's application, may
collect such rent and apply it toward Tenant's obligations under this Lease;
except that, until the occurrence of a Default by Tenant, Tenant shall have the
right to collect such rent.
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26. Attorneys' Fees and Costs
Tenant shall be responsible for (i) all of Tenant's legal and related
costs and fees in connection with this Lease, and (ii) all of Landlord's
reasonable legal and related costs and fees actually incurred if Landlord is
required to consult an attorney regarding the administration or enforcement of
this Lease. If either party commences an action against the other party arising
out of or in connection with this Lease, the prevailing party shall be entitled
to have and recover from the non-prevailing party reasonable attorneys' fees,
charges and disbursements and costs of suit actually incurred.
27. Bankruptcy
27.1. In the event a debtor, trustee, or debtor in possession under
the Bankruptcy Code, or other person with similar rights, duties and powers
under any other law, proposes to cure any default under this Lease or to assume
or assign this Lease, and is obliged to provide adequate assurance to Landlord
that (i) a default will be cured, (ii) Landlord will be compensated for its
damages arising from any breach of this Lease, or (iii) future performance
under this Lease will occur, then adequate assurance shall include any or all
of the following, as designated by Landlord:
27.1.1 Those acts specified in the Bankruptcy Code or other law
as included within the meaning of adequate assurance, even if this Lease does
not concern a shopping center or other facility described in such laws;
27.1.2 A prompt cash payment to compensate Landlord for any
monetary defaults or actual damages arising directly from a breach of this
Lease;
27.1.3 A cash deposit in an amount at least equal to the
Security Deposit as referenced in 2.1.8 originally required at time of
execution of this Lease.
27.1.4 The assumption or assignment of all of Tenant's interest
and obligations under this Lease.
28. Estoppel Certificate
Each of Tenant and Landlord shall, within ten (10) days of written
notice from the other party hereto, execute, acknowledge and deliver a
statement in writing substantially in the form attached to this Lease as
Exhibit "E" with the blanks filled in, and on any other form reasonably
requested by a proposed lender or purchaser, (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease as so modified is in full
force and effect) and the dates to which
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the rental and other charges are paid in advanced, if any, (ii) acknowledging
that there are not, to such party's knowledge, any uncured defaults on the part
of the other party hereunder, or specifying such defaults if any are claimed
and (iii) setting forth such further information with respect to this Lease or
the Demised Premises as may be reasonably requested thereon. Any such statement
may be relied upon by any prospective purchaser or encumbrancer of all or any
portion of the Lease or the real property of which the Demised Premises are a
part. Failure to deliver such statement within such time shall, at the option
of the requesting party, constitute a Default under this Lease, and, in any
event, shall be conclusive upon the non-requesting party that the Lease is in
full force and effect and without modification except as may be represented by
the requesting party in any certificate prepared and delivered for execution.
29. Joint and Several Obligations
29.1. If more than one person or entity executes this Lease as Tenant,
29.1.1 Each of them is jointly and severally liable for the
keeping, observing and performing of all of the terms, covenants, conditions,
provisions and agreements of this Lease to be kept, observed and performed by
Tenant, and
29.1.2 The term "Tenant" as used in this Lease shall mean and
include each of them jointly and severally. The act of, notice from, notice to,
refund to, or the signature of, any one or more of them, with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted, so given or received such
notice or refund or so signed.
30. Definition of Landlord; Limitation of Landlord's Liability
30.1. The term "Landlord" as used in this Lease, so far as covenants
or obligations on the part of Landlord are concerned, shall be limited to mean
and include only Landlord or the successor-in-interest of Landlord under this
Lease at the time in question. In the event of any transfer, assignment or the
conveyance of Landlord's fee title or leasehold interest, the landlord herein
named (and in case of any subsequent transfers or conveyances, the then
grantor) shall, subject to the provisions of Section 9.3, be freed and relieved
from, and after the date of such transfer, assignment or conveyance, of all
liability for the performance of any covenants or obligations contained in this
Lease thereafter to be performed by Landlord and, without further agreement,
the transferee of such title or leasehold shall be deemed to have assumed and
agreed to observe and perform any and all obligations of Landlord hereunder.
Landlord may transfer its interest in the Demised Premises or this Lease
without the consent of
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Tenant and such transfer or subsequent transfer shall not be deemed a violation
on the part of Landlord or the then grantor of any of the terms or conditions
of this Lease.
30.2. If Landlord is in default of this Lease, and as a consequence,
Tenant recovers a money judgment against Landlord, the judgment shall be
satisfied only out of the proceeds of sale received on execution of the
judgment and levy against the right, title and interest of Landlord in the
Building, and out of rent or other income from such real property receivable by
Landlord , including insurance and condemnation proceeds actually received but
not used in the repair of the property, or out of the consideration received by
Landlord from the sale, financing, refinancing, or other disposition of all or
any part of Landlord's right, title, and interest in the Building and Project.
30.3. Landlord shall not be personally liable for any deficiency. If
Landlord is a partnership or joint venture, the partners of such partnership
shall not be personally liable and no partner of Landlord shall be sued or
named as a party in any suit or action or service of process be made against
any partner of Landlord except as may be necessary to secure jurisdiction of
the partnership or joint venture. If Landlord is a corporation, the
shareholders, directors, officers, employees, and/or agents of such corporation
shall not be personally liable and no shareholder, director, officer, employee
or agent of Landlord shall be sued or named as a party in any suit or action or
service of process made against any shareholder, director, officer, employee or
agent of Landlord. No partner, shareholder, director, employee, or agent of
Landlord shall be required to answer or otherwise plead to any service of
process and no judgment will be taken or writ of execution levied against any
partner, shareholder, director, employee or agent of Landlord.
30.4. Each of the covenants and agreements of this Section 30 shall be
applicable to any covenant or agreement either expressly contained in this
Lease or imposed by statute or by common law and shall survive the termination
of this Lease.
31. Project Control by Landlord
31.1. Landlord reserves full control over the Building and the Project
to the extent not inconsistent with Tenant's enjoyment of the Demised Premises
pursuant to the terms of this Lease. This reservation includes but is not
limited to right of Landlord to expand the Project, subdivide the Project,
convert the Building and or other buildings within the Project to condominium
units, the right to grant easements and licenses to others and the right to
maintain or establish ownership of the Building separate from fee title to the
land on which the Building is located. Notwithstanding anything to the contrary
set forth herein, Landlord shall not (i) alter the Demised Premises without
Tenant's consent, which shall not be unreasonably withheld, conditioned or
delayed with respect to nonmaterial
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alterations which do not affect Tenant's use of the Demised Premises as
contemplated by this Lease or as may be required by any governmental entity, or
(ii) grant any rights to any third party to occupy any portion of the Demised
Premises or any of the parking spaces of Tenant which comprise the Parking
Allotment.
31.2. Landlord further reserves the right to combine the Project with
any other project in the area of the Project and owned by Landlord or its
affiliates.
31.3. Tenant shall, should Landlord so request, promptly join with
Landlord in execution of such documents as may be reasonably appropriate to
assist Landlord to implement any such action, provided that Tenant need not
execute any document which is of nature wherein liability is created in Tenant
or, if by reason of the terms of such document, Tenant will be deprived of the
quiet enjoyment and use of the Demised Premises as granted by this Lease.
31.4. Landlord may, at any and all reasonable times during
non-business hours (or during business hours if Tenant so requests), and upon
reasonable advance notice (provided that no time restrictions shall apply or
advance notice need be given if an emergency necessitates an immediate entry),
enter the Demised Premises to (a) inspect the same and to determine whether
Tenant is in compliance with its obligations hereunder, (b) supply any service,
perform any obligation or exercise any right which Landlord is permitted to
exercise or required to supply or perform hereunder, (c) show the Demised
Premises to prospective lenders, insurers, investors, purchasers or, during the
last year of the Term, tenants, (d) post notices of nonresponsibility, and (e)
access the telephone equipment, electrical substation and fire risers. Tenant,
at Tenant's sole cost and expense, shall have the right to require that a
representative of Tenant accompany Landlord during any such entry (provided
that Landlord shall not be required to seek accompaniment of Tenant if an
emergency necessitates an immediate entry), and Tenant shall not unreasonably
withhold, condition or delay scheduling such accompaniment. In connection with
any such alteration, improvement or repair, Landlord may erect in the Demised
Premises or elsewhere in the Building or the Project scaffolding and other
structures reasonably required for the work to be performed. In no event shall
Tenant's Rent abate as a result of any such entry or work; provided, however,
that all such work shall be done in such a manner as to cause as little
interference with the use of the Demised Premises as contemplated by this Lease
by Tenant and its permitted subtenants as reasonably possible. Landlord shall
at all times retain a key with which to unlock all of the doors in the Demised
Premises subject to Tenant's rights to establish "secure" areas pursuant to
Section 10.5. If an emergency necessitates immediate access to the Demised
Premises, Landlord may use whatever force is necessary to enter the Demised
Premises and any such entry to the Demised Premises shall not constitute a
forcible or unlawful entry to the Demised Premises, an unlawful detainer of the
Demised Premises, or an eviction of Tenant from the Demised Premises, or any
portion thereof.
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Notwithstanding anything to the contrary set forth herein, Tenant hereby
indemnifies and agrees to defend and hold Landlord, its agents and contractors
harmless from and against any and all claims, costs and liabilities including
reasonable and actual attorneys' fees, charges and disbursements, arising out
of or in connection with any injury, damage or other loss resulting from or
arising out of Landlord's inability to access all or any part of the Demised
Premises or the Building, including, without limitation, due to Tenant's
failure to provide access to any "secure" area or to arrange for Landlord to be
accompanied by a representative of Tenant.
31.5. Landlord reserves the right to modify the Land and the exterior
portions of the Building, including the right to add or remove landscaping
32. Quiet Enjoyment
So long as Tenant is not in default, Landlord covenants that Landlord
or anyone acting through or under Landlord will not disturb Tenant's occupancy
of the Demised Premises except as permitted by the provisions of this Lease.
33. Quitclaim Deed
Tenant shall execute and deliver to Landlord on the expiration or
termination of this Lease, immediately on Landlord's request, in recordable
form, a quitclaim deed to the Demised Premises or such other documentation
reasonably requested by Landlord evidencing termination of this Lease.
34. [Intentionally Omitted.]
35. Subordination and Attornment
35.1. Provided that Tenant receives a non-disturbance agreement from
any applicable mortgagee, beneficiary or landlord in substantially the same
form as Exhibit "F" attached hereto (the "Nondisturbance Agreement"), this
Lease shall be subject and subordinate to the lien of any mortgage, deed of
trust, or lease in which Landlord is tenant now or hereafter in force against
the Project and the Building and to all advances made or hereafter to be made
upon the security thereof without the necessity of the execution and delivery
of any further instruments on the part of Tenant to effectuate such
subordination.
35.2. Notwithstanding the foregoing, Tenant shall execute and deliver
upon demand such further instrument or instruments evidencing such
subordination of this Lease to the lien of any such mortgage or mortgages or
deeds of trust or lease in which Landlord is tenant as may be required by
Landlord. However, if any such mortgagee, beneficiary or Landlord under lease
wherein Landlord is tenant so elects, this Lease shall be deemed prior in lien
to any such lease, mortgage, or deed of trust upon or including the Demised
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<PAGE> 44
Premises regardless of date and Tenant will execute a statement in writing to
such effect at Landlord's request. If Tenant fails to execute any document
required from Tenant under this Section within ten (10) days after written
request therefor, Tenant hereby constitutes and appoints Landlord or its
special attorney-in-fact to execute and deliver any such document or documents
in the name of Tenant. Such power is coupled with an interest and is
irrevocable.
35.3. In the event any proceedings are brought for foreclosure, or in
the event of the exercise of the power of sale under any mortgage or deed of
trust made by the Landlord covering the Demised Premises, the Tenant shall at
the election of the purchaser at such foreclosure or sale attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as the
Landlord under this Lease.
36. Surrender
36.1. No surrender of possession of any part of the Demised Premises
shall release Tenant from any of its obligations hereunder unless accepted by
Landlord.
36.2. The voluntary or other surrender of this Lease by Tenant shall
not work a merger, unless Landlord consents and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies.
36.3. The voluntary or other surrender of any ground or underlying
lease that now exists or may hereafter be executed affecting the Building or
the Project, or a mutual cancellation, thereof, or of Landlord's interest
therein, shall not work a merger and shall, at the option of the successor of
Landlord's interest in the Building or Project, operate as an assignment of
this Lease.
36.4. Upon the expiration or earlier termination of this Lease, Tenant
shall surrender the Demised Premises to Landlord broom clean and free of
debris; with all of Tenant's personal property and effects removed therefrom;
with all alterations, improvements and fixtures required by Landlord in
accordance with Section 17 to be removed from the Demised Premises actually
removed and all damage as a result of or caused by such removal repaired; and
with all licenses, permits and similar items held or obtained by or at the
request of Tenant which restrict or affect the used of the Demised Premises
released and fully terminated.
37. Waiver and Modification
No provision of this Lease may be modified, amended or added to except
by an agreement in writing. The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
any subsequent breach of the same or any other term, covenant or condition
42
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herein contained.
38. Waiver of Jury Trial and Counterclaims
THE PARTIES HERETO SHALL AND THEY HEREBY DO WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S
USE OR OCCUPANCY OF THE DEMISED PREMISES, AND OR ANY CLAIM OF INJURY OR DAMAGE.
39. Hazardous Materials
39.1. Prohibition/Compliance. Tenant shall not cause or permit any
Hazardous Materials (as hereinafter defined) to be brought upon, kept or used
in or about the Demised Premises (including without limitation, the Storage
Area), the Building or the Project in violation of applicable law by Tenant,
its agents, employees, contractors or invitees. If Tenant breaches the
obligation stated in the preceding sentence, or if the presence of Hazardous
Materials in or on the Demised Premises (including without limitation the
Storage Area), the Building or the Land results in contamination of the Demised
Premises, the Building, the Project or any adjacent property or if
contamination of the Demised Premises, the Building or the Land by Hazardous
Materials otherwise occurs during the term of this Lease or any extension or
renewal hereof or holding over hereunder, Tenant hereby indemnifies and shall
defend and hold Landlord, its officers, directors, employees, agents and
contractors harmless from any and all claims, judgments, damages, penalties,
fines, costs, liabilities, or losses actually incurred (including, without
limitation, diminution in value of the Demised Premises or any portion of the
Building or the Project, damages for the loss or restriction on use of rentable
or usable space or of any amenity of the Demised Premises, the Building or the
Project, damages arising from any adverse impact on marketing of space in the
Demised Premises, the Building or the Project, and sums paid in settlement of
claims, including reasonable attorneys' fees, consultant fees and expert fees
actually incurred) which arise during or after the Lease term as a result of
such contamination. This indemnification of Landlord by Tenant includes,
without limitation, reasonable costs actually incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Materials present in the air, soil
or ground water above on or under the Demised Premises. Without limiting the
foregoing, if the presence of any Hazardous Materials on the Demised Premises,
the Building, the
43
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Project or any adjacent property, caused or permitted by Tenant results in any
contamination of the Demised Premises, the Building, the Project or any
adjacent property, Tenant shall promptly take all actions at its sole expense
as are necessary to return the Demised Premises, the Building, the Project or
any adjacent property, to the condition existing prior to the time of such
contamination, provided that Landlord's approval of such action shall first be
obtained, which approval shall not unreasonably be withheld so long as such
actions would not potentially have any material adverse long-term or short-term
effect on the Demised Premises, the Building or the Project.
39.2. Business. Landlord acknowledges that it is not the intent of
this Section 39 to prohibit Tenant from operating its business as described in
Section 2.1.9 above. Tenant may operate its business according to the custom of
the industry so long as the use or presence of Hazardous Materials is strictly
and properly monitored according to all applicable governmental requirements.
As a material inducement to Landlord to allow Tenant to use Hazardous Materials
in connection with its business, Tenant agrees to deliver to Landlord prior to
the Term Commencement Date a list identifying each type of Hazardous Materials
to be present on the Demised Premises and setting forth any and all
governmental approvals or permits required in connection with the presence of
such Hazardous Materials on the Demised Premises ("Hazardous Materials List ").
Tenant shall deliver to Landlord an updated Hazardous Materials List at least
once a year and shall also deliver an updated list before any new Hazardous
Materials is brought onto the Demised Premises. Tenant shall deliver to
Landlord true and correct copies of the following documents (the "Documents")
relating to the handling, storage, disposal and emission of Hazardous Materials
prior to the Term Commencement Date, or if unavailable at that time, concurrent
with the receipt from or submission to a governmental agency: permits;
approvals; reports and correspondence; storage and management plans, notice of
violations of any laws; plans relating to the installation of any storage tanks
to be installed in or under Building or the Project (provided, said
installation of tanks shall only be permitted after Landlord has given Tenant
its written consent to do so, which consent may be withheld in Landlord's sole
and absolute discretion); and all closure plans or any other documents required
by any and all federal, state and local governmental agencies and authorities
for any storage tanks installed in, on or under the Building or the Project for
the closure of any such tanks. Tenant is not required, however, to provide
Landlord with any portion(s) of the Documents containing information of a
proprietary nature which, in and of themselves, do not contain a reference to
any Hazardous Materials or hazardous activities. It is not the intent of this
Section to provide Landlord with information which could be detrimental to
Tenant's business should such information become possessed by Tenant's
competitors. Tenant agrees that it shall, at its own expense, and upon the
written request of Landlord, establish and maintain a separate area of the
Demised Premises for the use and storage of Hazardous Materials.
39.3. Termination of Lease/Withholding Approval of Assignment or
Sublease. Notwithstanding the provisions of Section 39.1 above, if Tenant or
any existing sublessee of Tenant, with respect to the Demised Premises or the
Project, or any proposed assignee or sublessee, with respect to any property,
is
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subject to an uncured enforcement order issued by any governmental authority in
connection with the use, disposal or storage of Hazardous Materials, Landlord
shall have the right, with respect to any such matter involving Tenant or an
existing sublessee of Tenant, to terminate this Lease in Landlord's sole and
absolute discretion, and, with respect to any such matter involving a proposed
assignee or sublessee, it shall not be unreasonable for Landlord to withhold
its consent to any proposed assignment or subletting. Notwithstanding the
foregoing, after the first occurrence of any event with respect to Tenant or
any existing sublessee of Tenant described above (a "Termination Event"),
Landlord shall deliver written notice to Tenant, and such sublessee, if
applicable, of the occurrence of such event and Tenant shall have thirty (30)
days after receipt of such notice to cure, or cause to be cured, the condition
causing such Termination Event. After the expiration of such thirty (30) day
period, or upon the occurrence of any subsequent Termination Event, Landlord
shall have the right to terminate this Lease in Landlord's sole and absolute
discretion.
39.4. Testing. At any time, and from time to time, prior to the
expiration or earlier termination of the Term, Landlord shall have the right to
conduct appropriate tests of the Demised Premises, the Building and the Project
to demonstrate that contamination has occurred as a result of Tenant's use of
the Demised Premises. Tenant shall be solely responsible for and shall defend,
indemnify and hold the Landlord, its agents and contractors harmless from and
against any and all claims, costs and liabilities including reasonable and
actual attorneys' fees, charges and disbursements, arising out of or in
connection with any removal, clean up, restoration and materials required
hereunder to return the Demised Premises and any other property of whatever
nature to their condition existing prior to the time of any such contamination.
Tenant shall pay for the actual and reasonable cost of the tests of the Demised
Premises if contamination is determined to have occurred.
39.5. Underground Tanks. If underground or other storage tanks storing
Hazardous Materials are located on the Demised Premises or are hereafter placed
on the Demised Premises by any party, Tenant shall monitor the storage tanks,
maintain appropriate records, implement reporting procedures, properly close
any underground storage tanks, and take or cause to be taken all other steps
necessary or required under any applicable federal, state or local laws, rules,
regulations or ordinances as they now exist or may hereafter be adopted or
amended.
39.6. Tenant's Obligations. Tenant's obligations under this Section 39
shall survive the expiration or earlier termination of the Lease. Tenant shall
be deemed to be in occupancy of the Demised Premises during any period of time
employed by Tenant or Landlord after the termination of this Lease to complete
the removal from the Demised Premises of any such Hazardous Materials and the
release and termination of any licenses or permits restricting the use of the
Demised Premises.
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39.7. Definition of "Hazardous Materials." As used herein, the term
"Hazardous Materials" means any hazardous or toxic substance, material or waste
which is or becomes regulated by any local governmental authority, the State of
Georgia or the United States government and includes, without limitation, any
material or substance which is (i) petroleum, (ii) asbestos, (iii) designated
as a "hazardous substance" pursuant to Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317), (iv) defined as a "hazardous
waste" pursuant to Section 1004 of the Federal Resource Conversation and
Recovery Act, 42 U.S.C. Section 6901, et. seq. (42 U.S.C. Section 6903), or (v)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. Section 9601
et. seq. (42 U.S.C. Section 9601).
40. Miscellaneous
40.1. Terms and Headings. Where applicable in this Lease, the singular
includes the plural and the masculine or neuter includes the masculine,
feminine and neuter. The section headings of this Lease are not a part of this
Lease and shall have no effect upon the construction or interpretation of any
part hereof.
40.2. Examination of Lease. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or
option for lease, and it is not effective as a lease or otherwise until
execution by and delivery to both Landlord and Tenant.
40.3. Time. Time is of the essence with respect to the performance of
every provision of this Lease in which time of performance is a factor.
40.4. Covenants and Conditions. Each provision of this Lease
performable by Tenant shall be deemed both a covenant and a condition.
40.5. Consents. Whenever consent or approval of either party is
required, that party shall not unreasonably withhold such consent or approval,
except as may be expressly set forth to the contrary.
40.6. Entire Agreement. The terms of this Lease are intended by the
parties as a final expression of their agreement with respect to the terms as
are included herein, and may not be contradicted by evidence of any prior or
contemporaneous agreement. The Exhibits are incorporated into this Lease and
the Lease and the Exhibits constitute a single document.
40.7. Severability. Any provision of this Lease which shall prove to
be invalid, void, or illegal in no way affects, impairs or invalidates any
other provision hereof, and such other provisions shall remain in full force
and effect.
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40.8. Recording. Landlord or Tenant may, but shall not be obligated
to, record a short form memorandum hereof upon notice but without the consent
of the other party hereto. Neither party shall record this Lease. The party
requesting recordation shall be responsible for the cost of recording any
Memorandum of Lease, including any transfer or other taxes incurred in
connection with said recordation.
40.9. Impartial Construction. The language in all parts of this Lease
shall be in all cases construed as a whole according to its fair meaning and
not strictly for or against either Landlord or Tenant.
40.10. Inurement. Each of the covenants, conditions and agreements
herein contained shall inure to the benefit of and shall apply to and be
binding upon the parties hereto and their respective heirs, legatees, devisees,
executors, administrators, successors, assigns, sublessees, or any person who
may come into possession of said Demised Premises or any part thereof in any
manner whatsoever. Nothing in this Section 40.10 contained shall in any way
alter the provisions against assignment or subletting in this Lease provided.
40.11. Notices. Any notice, consent, demand, bill, statement, or other
communication required or permitted to be given hereunder must be in writing
and may be given by (i) personal delivery which shall be deemed given when
received, (ii) reputable overnight courier which shall be deemed given the
business day following the date on the courier's receipt of pick-up, subject to
Force Majeure Delays, addressed to Tenant at the Demised Premises, or to Tenant
or Landlord at the addresses shown in Sections 2.1.10 and 2.1.11 of the Basic
Lease Provisions. Either party may, by notice to the other given pursuant to
this Section, specify additional or different addresses for notice purposes.
40.12. Jurisdiction. This Lease has shall be governed by, construed
and enforced in accordance with the laws of the State of Georgia.
40.13. Authority. That individual or those individuals signing this
Lease warrant and represent that said individual or individuals have the power,
authority and legal capacity to sign this Lease on behalf of and to bind all
entities, corporations, partnerships, joint venturers or other organizations
and/or entities on whose behalf said individual or individuals have signed.
41. Right to Extend Term.
Tenant shall have the right to extend the Term of the Lease upon the
following terms and conditions:
41.1 Tenant shall have the one (1) time right (the "Extension Right ")
to extend the term of this Lease for a period of five (5) years (the "Extension
Term") on the same terms and conditions as the Lease. During any Extension
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Term, Basic Annual Rent shall be payable at the Market Rate (as defined below),
but in no event less than the Basic Annual Rent payable on the date immediately
preceding the commencement of such Extension Term, as adjusted pursuant to
Section 6 hereof. Basic Annual Rent shall be adjusted on the commencement of
each Extension Term and on each one (1) year anniversary of the commencement
such Extension Term in accordance with Section 6 above. As used herein, "Market
Rate" shall mean the then market rental rate as determined by Landlord and
agreed to by Tenant. If, on or before the date which is one hundred twenty
(120) days prior to the expiration of the initial Term of this Lease, or the
expiration of any Extension Term, Tenant has not agreed with Landlord's
determination of the Market Rate or if Landlord and Tenant have not agreed upon
any of the other terms of such subsequent Extension Term after negotiating in
good faith, Tenant shall be deemed to have waived any right to extend the Term
of the Lease and the Extension Right shall terminate.
41.2 Extension Rights are personal to OREAD, Inc. and are not
assignable separate and apart from this Lease.
41.3 Extension Rights are conditional upon Tenant giving Landlord
written notice of its election to exercise the Extension Right at least one (1)
year prior to the end of the expiration of the initial term of the Lease.
41.4 Notwithstanding anything set forth above to the contrary, the
Extension Right shall not be in effect and Tenant may not exercise the
Extension Right:
41.4.1 during any period of time that Tenant is in default under
any provision of this Lease; or
41.4.2 if Tenant has been in default under any provision of this
Lease three (3) or more times, whether or not the defaults are cured, during
the twelve (12) month period immediately prior to the date that Tenant intends
to exercise the Extension Right, whether or not the defaults are cured.
41.5 The period of time within which the Extension Right may be
exercised shall not be extended or enlarged by reason of the Tenant's inability
to exercise the Extension Right because of the provisions of Section 41.4
above.
41.6 The Extension Right shall terminate and be of no further force or
effect even after Tenant's due and timely exercise of the Extension Right, if,
after such exercise, but prior to the commencement date of an Extension Term,
(1) Tenant fails to timely cure any default by Tenant under this Lease; or (2)
Tenant has defaulted three (3) or more times during the period from the date of
the exercise of the Extension Right to the date of the commencement of the
Extension Term, whether or not such defaults are cured.
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<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the date first above written.
Landlord:
PROCEUTICS, INC., a Delaware
corporation
By:
---------------------------
Name: Jack J. Luchese
Its: President and CEO
Tenant:
OREAD, INC., a Delaware corporation
By:
---------------------------
Name: W. David Kimerell
Its: Chairman and CEO
[Signature page for Lease between Proceutics, Inc. and OREAD, Inc.
for 150 Technology Parkway, Norcross, Georgia]
1
<PAGE> 52
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT "A" LAND
EXHIBIT "B" PROJECT
EXHIBIT "C" [Intentionally Omitted.]
EXHIBIT "D" TENANT'S PROPERTY
EXHIBIT "E" ESTOPPEL CERTIFICATE
EXHIBIT "F" NONDISTURBANCE AGREEMENT
</TABLE>
1
<PAGE> 1
EXHIBIT 10.12
Sublease Agreement dated February 16, 1998 by and between
CytRx Corporation and Oread, Inc.
<PAGE> 2
SUBLEASE
THIS SUBLEASE is made as of the 16th day of February, 1998, by and
between OREAD, INC., a Delaware corporation ("Oread"), and CYTRX CORPORATION, a
Delaware corporation ("Subtenant").
RECITALS
A. Oread is the tenant under that certain Lease dated February 16, 1998
(the "Prime Lease"), by and between Proceutics, Inc. ("Prime Landlord") and
Oread covering that certain building ("Building") located on the land described
in Exhibit A attached hereto and having the mailing address of 150 Technology
Parkway, Norcross, Georgia 30092.
B. Oread and Subtenant have agreed that Subtenant will sublease a
portion of the Building from Oread on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. Sublease of Premises. Oread hereby subleases to Subtenant solely for
scientific research, storage and laboratory use, and Subtenant hereby rents from
Oread solely for scientific research, storage and laboratory uses a portion of
the Building consisting of approximately 1506 square feet as more particularly
shown on Exhibit B attached hereto and incorporated herein by this reference
("Subleased Premises"). Subtenant shall take the Subleased Premises in its "as
is" condition.
2. Prime Lease.
(a) Except as otherwise provided herein, this Sublease shall
be upon the same terms and conditions as set forth in the Prime Lease, a copy of
which is attached hereto as Exhibit C and incorporated herein by this reference.
Subtenant shall observe and perform all of the covenants and obligations of the
Tenant under the Prime Lease with respect to the use, operation and occupancy of
the Subleased Premises. Without limiting the generality of the foregoing, the
following provisions of the Prime Lease shall not apply to Subtenant: Sections
1, 2.1.3, 2.1.4, 2.1.5, 2.1.6, 2.1.7(b), 2.1.8, 2.1.10, 3, 5.1, 6.1, 9, and the
indemnities in favor of Landlord set forth in Sections 10.10, 20.1 and 39.1,
except to the extent any such claim, judgment, damages, penalties, fines, costs,
liabilities or losses described in such sections result from the acts, omissions
or negligence of Subtenant or its agents, employees, contractors or guests (the
"Subtenant Indemnity Obligations").
(b) In those instances under the Prime Lease in which the
Prime Landlord
<PAGE> 3
thereunder has reserved certain rights with respect to the Demised Premises (as
defined in the Prime Lease), or with respect to the Tenant under the Prime
Lease, Oread shall be entitled to exercise all of such rights as against the
Subleased Premises and Subtenant with the same force and effect as if all such
rights of the Prime Landlord, as landlord under the Prime Lease, had been
expressly set forth in this Sublease.
(c) With respect to obligations to be performed by the Prime
Landlord under the Prime Lease, Oread shall have no obligation with respect to
the performance of such obligations and shall have no liability to Subtenant by
reason of Prime Landlord's failure to perform the same; however, in the event
Prime Landlord shall breach such obligations, then, upon request by Subtenant,
Landlord agrees to cooperate with Tenant (at Tenant's cost and expense) to cause
Prime Landlord to perform such obligations. Tenant agrees to reimburse Landlord
upon demand, as additional rent, for any costs and expenses incurred by Landlord
at Tenant's direction to enforce compliance with the provisions of the Prime
Lease.
(d) In the event of conflict between the Prime Lease and the
provisions of this Sublease, the applicable provision which is more restrictive
on Subtenant, or which imposes a greater obligation on Subtenant, shall control.
(e) Capitalized terms not otherwise defined herein shall have
the meaning ascribed to them in the Prime Lease.
3. Term. The term of this Sublease ("Sublease Term") shall commence on
February 16, 1998 ("Commencement Date") and shall expire on February 29, 2000,
unless sooner terminated in compliance with the terms of this Sublease.
Notwithstanding the foregoing, at any time after December 31, 1998, Oread or
Subtenant shall have the right to cancel this Sublease by giving to the other
party at least one hundred twenty (120) days' prior written notice of the intent
to cancel. Said notice shall specify the cancellation date ("Cancellation
Date"), which date shall not be on a day other than the last day of a month.
Each of the parties hereto shall be responsible for performance of all terms and
conditions of this Sublease which arise on or before the Cancellation Date.
4. Rent.
(a) Subtenant shall pay to Oread as initial annual rent ("Sublease
Annual Rent") an amount equal to the greater of (i) Forty Five Thousand One
Hundred Eighty Dollars ($45,180.00), or (ii) that sum which Oread must pay
Landlord pursuant to the Prime Lease as Rent on an annual basis attributable to
that portion of the Demised Premises designated hereunder as the Subleased
Premises. Subtenant shall pay to Oread the Sublease Annual Rent, without
abatement, deduction or offset, in lawful money of the United States of America,
at the address for Landlord set forth in Paragraph 13 of this Sublease. The
initial Sublease Annual Rent shall be paid on the first day of each month during
the Sublease Term in equal monthly installments of Three Thousand Seven Hundred
Sixty Five Dollars ($3,765.00). The Sublease
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<PAGE> 4
Annual Rent is subject to adjustment as hereafter set forth.
(b) The Sublease Annual Rent shall be increased effective each Rent
Adjustment Date under the Prime Lease by eighty cents ($.80) per square foot.
(c) Within ten (10) days after Oread receives from Prime Landlord the
statement described in Section 7.2.1 of the Prime Lease showing the actual
Operating Expenses and Oread's Pro Rata Share of Building Operating Expenses and
Project Operating Expenses, Oread shall furnish to Subtenant a similar statement
showing the additional amount, if any, owed by Subtenant to Oread as Sublease
Annual Rent pursuant to Paragraph 4(a) above. If any additional amount is owed
by Subtenant to Oread, such amount shall be due and payable no later than five
(5) days after delivery to Subtenant of such statement. Subtenant's obligation
to pay any additional amount of Sublease Annual Rent due shall survive the
termination of this Sublease.
(d) Any monthly installment of Sublease Annual Rent due for any period
less than a full month shall be prorated for such fractional month on the basis
of the actual number of days in the month.
5. Security Deposit.
(a) On or before the Sublease Commencement Date, Subtenant shall
deposit with Oread a security deposit (together with all interest thereon, the
"Sublease Security Deposit") in the amount of Seven Thousand Five Hundred Thirty
Dollars ($7,530.00), in cash, which Sublease Security Deposit shall be held by
Oread as security for the performance by Subtenant of all of the terms,
covenants and conditions of this Sublease to be kept and performed by Subtenant
during the Sublease Term. If a Default shall occur with respect to any provision
of this Sublease, including, without limitation, any provisions relating to the
payment of Sublease Annual Rent or any installment thereof, Oread may (but shall
not be required to) use, apply or retain all or any part of the Sublease
Security Deposit for the payment of any Sublease Annual Rent or any other sum in
Default, or to compensate Oread for any other loss or damage which Oread may
suffer by reason of Subtenant's default. If any portion of the Sublease Security
Deposit is so used or applied, Subtenant shall, upon demand therefor, deposit
cash with Oread in an amount sufficient to restore the Sublease Security Deposit
to its original amount, and Subtenant's failure to do so shall be a material
breach of this Sublease. The Sublease Security Deposit shall be held in an
interest bearing account separate from Oread's general fund.
(b) In the event of bankruptcy or other debtor-creditor proceedings
against Subtenant, the Sublease Security Deposit shall be deemed to be applied
first to the payment of Sublease Annual Rent and other charges due Oread for all
periods prior to the filing of such proceedings.
(c) Oread shall deliver the Sublease Security Deposit, or any balance
thereof
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<PAGE> 5
following application of any portion of the Sublease Security Deposit pursuant
to the provisions of Paragraph 5(a) above, to any purchaser of Oread's interest
in the Subleased Premises, and, upon such purchaser's written confirmation of
receipt of the Sublease Security Deposit and assumption of Oread's obligations
under this Sublease, Oread shall be discharged from any further liability with
respect to the Sublease Security Deposit. This provision also shall apply to any
subsequent transfers.
(d) If Subtenant shall fully perform every provision of this Sublease
to be performed by Subtenant, the Sublease Security Deposit, or any balance
thereof following application of any portion of the Sublease Security Deposit
pursuant to the provisions of Paragraph 5(a) above, shall be returned to
Subtenant within thirty (30) days after the expiration or earlier termination of
this Sublease.
6. Indemnities. (a) All indemnity and hold harmless agreements
("Indemnities") made by Oread in favor of Prime Landlord under the Prime Lease
shall be deemed made by Subtenant in favor of Oread under this Sublease,
including, without limitation, the Indemnities contained in Sections 10.10, 20.1
and 39.1 of the Prime Lease, but only to the extent of the Subtenant Indemnity
Obligations. Nothing contained herein, however, shall be deemed to negate any
indemnity obligations of Oread in favor of the Prime Landlord under the Prime
Lease.
(b) Oread hereby indemnifies and agrees to defend, hold and save
Subtenant harmless from and against any and all demands, claims, liabilities,
losses, costs, expenses, actions, causes of action, damages or judgments, and
all reasonable expenses actually incurred in investigating or resisting the same
(including, without limitation, reasonable attorneys' fees, charges and
disbursements actually incurred), for injury or death to person or injury to
property occurring within or about the Building, arising out of the use or
occupancy of the Building by Oread and its employees, agents or guests or a
breach or default by Oread in the performance of any of its obligations under
this Sublease, except to the extent caused by the acts, omissions or negligence
of Subtenant or its employees, agents, contractors or guests (provided that
nothing herein shall be deemed to affect the indemnity obligations of Subtenant
contained in Paragraph 6(a) above).
7. Parking. Subtenant shall not have the right to use the parking
facilities provided to Oread under the Prime Lease. Rather, Subtenant shall use
the parking facilities available to the occupants of the building located at 154
Technology Parkway, Norcross, Georgia.
8. Maintenance and Repair. Oread shall be responsible for all
maintenance with respect to the Subleased Premises in accordance with the
obligations of Tenant under the Prime Lease; provided, however, Subtenant shall
be responsible for the repair of any damage to the Subleased Premises or
Building which is caused by the activity of Subtenant, its employees, agents,
contractors, customers or invitees, and Subtenant also shall be responsible for
keeping the Subleased Premises clean and free of trash and debris. At the
conclusion of the term of the
4
<PAGE> 6
Sublease, Subtenant shall be responsible for the repair of any damage to the
Subleased Premises or Building caused by the removal of Subtenant's property;
provided, however, that Subtenant shall not remove from the Subleased Premises
or Building any property which Oread would be prohibited from removing under the
Prime Lease. In addition, at the conclusion of the term of this Sublease,
Subtenant shall remove from the Subleased Premises and Building all radioactive
materials.
9. Insurance. Subtenant shall maintain the same type of insurance
Oread is required to maintain under the Prime Lease in accordance with Section
21 of the Prime Lease. Subtenant shall provide Oread with a certificate
evidencing the required insurance, which certificate shall show Oread and Prime
Landlord as additional insureds.
10. Default. The terms and provisions of Section 24 of the Prime Lease
shall determine and govern any default by Subtenant under this Sublease. All
late charges, default interest and other charges which Prime Landlord has the
right to recover under the Prime Lease from Tenant can be recovered by Oread
from Subtenant under this Sublease, with such amounts being calculated with
respect to the rent payable by Subtenant for the Subleased Premises only.
11. Assignment or Subletting. Subtenant shall not, either voluntarily
or by operation of law, directly or indirectly, sell, hypothecate, assign,
pledge, encumber or otherwise transfer this Lease or sublet the Subleased
Premises or any part thereof without the prior written consent of Oread and
Prime Landlord in each instance, which consent can be withheld in the sole and
absolute discretion of Oread and/or Prime Landlord.
12. Services by Oread. Subtenant agrees that Oread shall have no
responsibility for the provision of any service which is the responsibility of
Prime Landlord under the Prime Lease, and that Subtenant shall look solely to
Prime Landlord for such services. Subtenant further agrees that Oread has not
agreed to provide any other service or assistance to Subtenant in connection
with this Sublease, except as specifically set forth herein.
13. Notices. All notices and demands which are required to be given
shall be in writing and shall be given in the same manner required by Section
40.11 of the Prime Lease at the addresses of the respective parties set forth
below:
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<PAGE> 7
Oread: Oread, Inc.
1501 Wakarusa Drive
Lawrence, Kansas 66047
Attention: Legal Department
Subtenant: CytRx Corporation
154 Technology Parkway
Norcross, Georgia 30092
Attention: Jack Luchese
Prime Landlord: At the address set forth in
the Prime Lease
14. Miscellaneous.
(a) This Sublease, together with any exhibits hereto, constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes any prior representations and understandings. This Sublease may
not be amended or modified except in a writing executed by both parties, and
subject to any required consent of the Prime Landlord.
(b) The paragraph captions used in this Sublease are for convenience
and reference only, and the words contained therein shall in no way be held to
explain, modify, amplify or aid in the interpretation, construction or meaning
of the provisions of this Sublease.
(c) Submission of this instrument for examination or signature by
Subtenant does not constitute a reservation of or option for lease, and this
Sublease is not effective as a lease or otherwise until execution by and
delivery to both Landlord and Tenant.
(d) Time is of the essence with respect to the performance of every
provision of this Sublease in which time of performance is a factor.
(e) Each provision of this Sublease performable by Subtenant shall be
deemed both a covenant and a condition.
(f) In the event any of the provisions of this Sublease shall at any
time be held by a court of competent jurisdiction to be illegal, invalid or
unenforceable for any reason, such illegality, invalidity or unenforceability
shall not affect the remaining provisions of this Sublease, and this Sublease
shall be construed and enforced as if all such illegal, invalid or unenforceable
provisions had never been inserted herein.
(g) The language in all parts of this Sublease (together with the Prime
Lease) shall
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<PAGE> 8
be in all cases construed as a whole according to its fair meaning and not
strictly for or against either Oread or Subtenant.
(h) Whenever herein the singular number is used, the same shall include
the plural and vice versa, and the neuter gender shall include the feminine and
masculine genders.
(i) Each of the covenants, conditions and agreements herein contained
shall inure to the benefit of and shall apply to and be binding upon the parties
hereto and their respective successors and assigns or any person who may come
into possession of the Subleased Premises or any part thereof in any manner
whatsoever. Nothing in this Paragraph 14(i), however, shall in any way alter the
prohibition against assignment or subletting contained in this Sublease.
(j) This Sublease shall be governed by, construed and enforced in
accordance with the laws of the State of Georgia.
(k) All obligations of Oread and Subtenant which by their nature
involve performance, in any particular, after the end of the Sublease Term or
which cannot be ascertained to have been fully performed until after the end of
the Sublease Term shall survive the expiration or sooner termination of this
Sublease.
(l) Oread and Subtenant each represent and warrant to the other that
the person or entity signing this Sublease on behalf of such party is duly
authorized to execute and deliver this Sublease and to legally bind the party on
whose behalf this Sublease is signed to all of the terms, covenants and
conditions contained herein. Subtenant represents and warrants that it is and
shall remain during the Sublease Term in good standing under the laws of the
state in which it was organized and in the state in which the Subleased Premises
are located.
15. WAIVER OF JURY TRIAL AND COUNTERCLAIMS.
THE PARTIES HERETO SHALL AND THEY HEREBY DO WAIVE TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS SUBLEASE, THE RELATIONSHIP OF OREAD AND SUBTENANT,
SUBTENANT'S USE OR OCCUPANCY OF THE SUBLEASED PREMISES OR ANY CLAIM OF INJURY OR
DAMAGE.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Lease to be
effective as of the date first above written.
LANDLORD: OREAD, INC.,
a Delaware corporation
By:
----------------------------
Printed Name:
------------------
Title:
-------------------------
SUBTENANT: CYTRX CORPORATION,
a Delaware corporation
By:
----------------------------
Printed Name:
------------------
Title:
-------------------------
CONSENT TO SUBLEASE
The undersigned, as Prime Landlord under the Prime Lease, hereby
consents to the subletting of the Subleased Premises to Subtenant under the
terms and conditions contained in this Sublease.
PROCEUTICS, INC.,
a Delaware corporation
By:
----------------------------
Printed Name:
------------------
Title:
-------------------------
8
<PAGE> 10
EXHIBIT A
[LAND]
<PAGE> 11
EXHIBIT B
[SUBLEASED PREMISES]
<PAGE> 12
EXHIBIT C
[PRIME LEASE]
<PAGE> 1
EXHIBIT 10.13
Purchase and Sale Agreement dated February 23, 1998 by and between
CytRx Corporation and Alexandria Real Estate Equities, Inc.
<PAGE> 2
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
FEBRUARY ___, 1998
BY AND BETWEEN
ALEXANDRIA REAL ESTATE EQUITIES, INC.
BUYER
AND
CYTRX CORPORATION
SELLER
<PAGE> 3
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 February __, 1998, by and
between ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation ("Buyer"),
and CYTRX CORPORATION, a Delaware corporation ("Seller"), for the purposes of
setting forth the agreement of the parties and of instructing CHICAGO TITLE
INSURANCE COMPANY ("Escrow Agent"), with respect to the transactions
contemplated by this Agreement.
RECITALS
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 fee interest in that certain real
property located in the City of Norcross, County of Gwinnett, State of Georgia,
as legally described on Exhibit "A" attached hereto, together with all rights,
privileges and easements appurtenant thereto or used in connection therewith,
including, without limitation, all minerals, oil, gas and other hydrocarbon
substances thereon, if any, all development rights, air rights, water, water
rights and water stock relating thereto, all strips and gores, and all of
Seller's 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 "Land"); (ii) all
buildings, improvements, structures and fixtures now or hereafter included or
located on or in the Land (collectively, the "Improvements"), including, without
limitation, that certain building commonly known as 154 Technology Parkway ( the
"Building"), and all alterations, attached equipment, decorations, fixtures,
trade fixtures, additions and improvements, built-in furniture and cabinets,
together with all accessories thereto, including, without limitation, all floor
and wallcovering, built-in cabinet work and paneling, sinks and related plumbing
fixtures, exterior venting fume hoods and walk-in freezers and refrigerators,
clean rooms, climatized rooms, ductwork, conduits and electrical panels and
circuits now or hereafter located on or in the Land or the Improvements; (iii)
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, and designated in Exhibit "B",
attached hereto; and (iv) all intangible property (collectively, the "Intangible
Property") now or hereafter owned by Seller and used in connection with the
operation, maintenance and
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<PAGE> 4
repair of the Land, the Improvements or the Personal Property, including,
without limitation, the Tenant Leases and the Service Contracts (each as
hereinafter defined), building trademarks and building trade names,
architectural, site,
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<PAGE> 5
landscaping or other building and occupancy permits, applications, approvals,
authorizations and other entitlements, transferable guarantees and warranties
covering the Land and/or Improvements, all contract rights, 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 Property or the construction or fabrication
thereof, and all transferable utility contracts, but specifically excluding any
intangible property related to the operation of Seller's business on the Land
and in the Improvements; provided, however, that the ownership or operation of
the Land or the Improvements shall not be considered Seller's business.
AGREEMENT
In consideration of 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 One Million Two Hundred Thousand Dollars ($1,200,000),
payable as follows:
2.1 Deposit. Not later than the date which is three (3)
Business Days (as hereinafter defined) after the later of (i) the later of the
dates set forth next to Buyer's and Seller's signatures to this Agreement (the
"Execution Date"), or (ii) the date of the opening of Escrow (as hereinafter
defined), Buyer shall deposit into Escrow the sum of Thirty-Three Thousand One
Hundred Twenty-Five Dollars ($33,125) (which amount, together with any and all
interest and dividends earned thereon, shall hereinafter be referred to as the
"Deposit") by wire transfer, or by certified or bank check, payable to the order
of Escrow Agent.
Escrow Agent shall invest the Deposit in insured money market
accounts, certificates of deposit, United States Treasury Bills or such other
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<PAGE> 6
instruments as Buyer may instruct from time to time. In the event of the
consummation of the purchase and sale of the Property as contemplated hereunder,
the Deposit shall be paid to Seller at the Closing (as defined in Section 6
below) and credited against the Purchase Price. In the event the sale 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 condition or any other reason except for a default under this
Agreement solely on the part of Buyer, the Deposit shall be returned to Buyer.
2.2 Balance. On the Closing Date (as defined below), Buyer
shall pay to Seller the balance of the Purchase Price over and above the Deposit
paid by Buyer under Section 2.1 above, by wire transfer of federal funds to
Escrow Agent, net of all prorations and adjustments as provided herein.
3. OPENING OF ESCROW.
Promptly following the Execution Date, Buyer and Seller shall
cause a purchase and sale escrow ("Escrow") to be opened with Escrow Agent by
delivery to Escrow Agent of a fully executed copy of this Agreement (the
"Opening of Escrow"). This Agreement shall constitute escrow instructions to the
Escrow Agent as well as the agreement of the parties. Escrow Agent is hereby
appointed and designated to act as the Escrow Agent and instructed to deliver,
pursuant to the terms of this Agreement, the documents and funds to be deposited
into Escrow as herein 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, including Escrow Agent's general provisions, if any (as may
be modified by 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.
4. DUE DILIGENCE
4.1 Property Documents. Not later than the date which is five
(5) Business Days after the Execution Date, Seller shall deliver or make
available to Buyer, at Seller's sole cost and expense, copies of all materials
relating to the Property in Seller's possession or control or in the control or
possession of its agents, including, without limitation, all contracts,
documents, leases, reports, books, records and other materials relating to the
Property to the extent currently in Seller's possession or control or in the
control or possession of its agents, as-built plans and specifications,
operating statements, income and
4
<PAGE> 7
expense records, rent rolls, engineering tests, soil tests, a Phase One
environmental/asbestos audit of the Property, a Phase Two environmental audit of
the Property, service contracts, structural and mechanical reports, maps, plans,
agreements, governmental permits and approvals, appraisals, title policies,
surveys, construction warranties, and land studies (collectively, the "Property
Documents").
4.2 Diligence Tests. At all reasonable times from the
Execution Date until the Closing or earlier termination of this Agreement and
upon reasonable notice to Seller, Buyer, 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; (ii) cause an
environmental assessment of the Property to be performed; and (iii) review all
Property Documents and examine and copy any and all books and records maintained
by Seller or its agents relating to the Property (including, without limitation,
all documents relating to utilities, zoning, and the access, subdivision and
appraisal of the Property); provided, however, that Buyer shall not conduct or
caused to be conducted any testing or inspections to be conducted inside the
Building ("Interior Testing") without Seller's consent, which consent shall not
be unreasonably withheld, conditioned or delayed. Seller shall be deemed to have
consented to any Interior Testing request if no response is received by Buyer
within five (5) business days of a written request for such consent.
4.3 Tenants. Not later than the date which is ten (10) days
after the Execution Date, Seller shall arrange for an introduction of Buyer to
any tenant of the Property 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 at the Property regarding entry into tenant facilities for purpose 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. Not later than the date which is fifteen (15) Business
Days after the Execution Date, Seller shall undertake a good faith effort to
deliver to Buyer estoppel certificates, each substantially in the form of
Exhibit "C" attached hereto, executed by each tenant under the Tenant Leases
(collectively, the "Estoppel Certificates"). Seller shall have no liability if
any such tenant alters or refuses to execute the requested Estoppel Certificate.
4.4 Property Questionnaires. Not later than the date which is
ten (10) days after the Execution Date, Seller shall deliver to Buyer property
questionnaires in the form attached hereto as Exhibit "D" (the "Property
5
<PAGE> 8
Questionnaires") completed to the reasonable satisfaction of Buyer.
4.5 Termination Right. Buyer shall have the right at any time
on or before the date which is forty-five (45) calendar days after the Execution
Date (the "Due Diligence Termination Date") to terminate this Agreement if,
during the course of Buyer's due diligence investigations of the Property, Buyer
determines in its sole and absolute discretion that the Property is not
acceptable to Buyer. Buyer may exercise such termination right by delivering
written notice of termination to Seller and Escrow Agent on or before the Due
Diligence Termination Date. Upon such termination, (i) Escrow Agent shall return
the Deposit to Buyer, (ii) Buyer shall pay the cancellation charges of Escrow
Agent and Title Company (as hereinafter defined), 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 which expressly survives the termination of this Agreement.
If Buyer elects to exercise such termination right, all material Property
Documents delivered to Buyer pursuant to Section 4.1 shall be returned to Seller
and, so long as no dispute then exists between Buyer and Seller, Buyer shall
provide to Seller copies of all non-confidential reports prepared by third
parties relating to the Property in connection with this transaction. If Buyer
does not exercise such termination in writing on or before the Due Diligence
Termination Date, then Buyer's right to terminate this Agreement pursuant to
this Section 4.5 shall automatically lapse.
4.6 Insurance. Buyer agrees that from the Execution Date
through the Due Diligence Termination Date, Buyer shall carry, or cause its
agent 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; upon request, Buyer shall provide Seller with proof of such
insurance prior to commencing Buyer's physical inspections of the Property.
4.7 Indemnity and Repair. Buyer agrees to indemnify and hold
harmless Seller from any losses resulting from any actual damage to the Property
or any bodily or personal injury caused by any act of Buyer as a result of the
inspections, investigations or tests performed pursuant to Section 4.2 above
(the "Diligence Losses") with respect to any such Diligence Losses of which
Buyer receives notice not later than the date which is 90 days after the Closing
or earlier termination of this Agreement (the "Indemnity Notice Date"), which
indemnity shall survive the earlier termination of this Agreement (and shall not
be subject to the limitation on damages contained in Section 11) or the Closing;
provided, however, that Buyer's indemnity hereunder shall not include any
losses, cost, damage or expenses resulting from (x) the acts of Seller, its
agents or representatives, or (y) the discovery of any pre-existing condition of
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<PAGE> 9
the Property. In addition, if this Agreement is terminated, Buyer shall repair
any damage to the Property caused by Buyer's 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 Seller's negligence or willful misconduct or to remediate, contain,
abate or control any Material of Environmental Concern (as hereinafter defined)
or any hazardous defect that existed at the Property prior to Buyer's entry
thereon.
4.8 Title.
4.8.1 Deliveries by Seller. Not later than fifteen
(15) days after the Execution Date, Buyer shall undertake a good faith effort to
cause to be delivered to Buyer an ALTA extended coverage preliminary title
report (the "PTR") issued by Chicago Title Insurance Company (in such capacity,
"Title Company"), together with legible copies of all documents referenced as
exceptions therein. Not later than twenty (20) days after the Execution Date,
Buyer shall undertake a good faith effort to cause to be prepared and delivered
to Buyer (a) a current As-Built American Land Title Association survey of the
Property (the "Survey"), in form reasonably satisfactory to Buyer and the Title
Company , prepared by a surveyor licensed in the State of Georgia and certified
(using a surveyor's certificate in substantially the same form as the
certificate attached hereto as Exhibit "E") to Buyer, Title Company and such
other persons or entities as Buyer may, in its discretion, request, which Survey
shall show any and all matters which Buyer may reasonably require, including,
without limitation, all Improvements, all easements, all roads, all utilities,
the number of parking spaces, access to and from the Land, and drainage ditches,
set-back lines, protrusions, encroachments, and encumbrances affecting the same;
and (b) a UCC Search with regard to the Personal Property (the "UCC Search").
4.8.2 Buyer's Review of Title. Buyer shall have until
the Due Diligence Termination Date to notify Seller in writing of any objection
which Buyer may have to any exception reported in the PTR or matter shown on the
Survey or the UCC Search or any updates thereof; provided, however, that if any
such updates are received by Buyer, Buyer shall have an additional five (5)
Business Days, regardless of the Due Diligence Termination Date, following
Buyer's receipt of such update and legible copies of all documents referenced
therein to notify Seller of objections to items shown on any such update.
Exceptions reported in the PTR and matters shown on the Survey or the UCC Search
(or any updates thereof) not objected to by Buyer as provided above shall be
deemed to be "Permitted Exceptions." Seller shall have until the fifth (5th)
business day after the date on which Buyer delivers such objections, if any,
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<PAGE> 10
to Seller, to notify Buyer in writing as to (a) whether Seller will not remove
or cure the objections, (b) whether Seller will remove from title to the
Property any exceptions and matters so objected to by Buyer, or (c) whether
Seller will obtain for Buyer title insurance insuring over such exceptions or
matters, such insurance to be in form and substance satisfactory to Buyer. If
Seller informs Buyer that Seller is unwilling or unable to remove or
satisfactorily insure over any exceptions or matters objected to by Buyer, Buyer
will have five (5) business days to either (a) terminate this Agreement (in
which case Escrow Agent shall return the Deposit to Buyer, the parties shall
equally share the cancellation charges of Escrow Agent and Title Company, and
neither party shall thereafter have any rights or obligations to the other
hereunder), (b) discharge any objected to exceptions or matters which can be
discharged by the payment of money and to deduct from the cash portion of the
Purchase Price the amount reasonably necessary to do so, or (c) proceed to a
timely Closing without a reduction in the Purchase Price whereupon such objected
to exceptions or matters shall be deemed Permitted Exceptions. Seller shall in
any event be required to discharge and remove any and all liens and encumbrances
affecting the Property which secure an obligation to pay money (other than
installments of real estate taxes not delinquent as of the Closing) and, even
though Buyer does not expressly disapprove such liens, such liens and
encumbrances shall not be Permitted Exceptions.
4.8.3 Condition of Title at Closing. Upon the
Closing, Seller shall sell, transfer and convey to Buyer indefeasible fee simple
title to the Land and the Improvements thereon by a duly executed and
acknowledged limited warranty deed in the form of Exhibit "F" attached hereto
(the "Deed"), subject only to the Permitted Exceptions. Prior to Closing, Seller
shall not take any action or commit or voluntarily suffer any acts which would
give rise to a variance from the current legal description of the Land, or cause
the creation of any exception or encumbrance against or respecting the Land
without the prior written consent of Buyer, which consent Buyer may withhold in
its sole discretion. Nothing in this Section 4.8.3 shall preclude Buyer from
disapproving title matters in accordance with the provisions of Section 4.8.2
above.
5. CONDITIONS PRECEDENT TO CLOSING.
5.1 Buyer's Conditions. The obligation of Buyer 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) ("Buyer's Conditions"), which conditions may be waived,
or the time for satisfaction thereof extended, by Buyer only in a writing
executed by Buyer; provided, however, that any such waiver shall not affect
Buyer's ability to pursue any remedy it may have with respect to any breach
hereunder by Seller:
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5.1.1 150 Technology Parkway. Concurrent herewith,
Buyer has entered into a purchase and sale agreement with Proceutics, Inc., a
Delaware corporation for the adjoining property commonly known as 150 Technology
Parkway (the "Proceutics Purchase Agreement"). The transaction contemplated by
the Proceutics Purchase Agreement shall close concurrently with the transaction
contemplated by this Agreement.
5.1.2 Title. Title Company shall be prepared and
irrevocably committed to issue (a) to Buyer an American Land Title Association
extended coverage owner's policy of title insurance in favor of Buyer in an
amount equal to the Purchase Price showing indefeasible fee simple title to the
Property vested in Buyer, with those endorsements reasonably requested by Buyer,
subject only to the Permitted Exceptions (collectively, the "Owner's Title
Policy").
5.1.3 Seller's Due Performance. All of the
representations and warranties of Seller set forth herein 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 Section 6.2 hereof. On the
Closing Date, Seller shall deliver a certificate, in the form of Exhibit "G"
attached hereto (the "Seller's Certificate"), to Buyer certifying that (i) all
of the representations, covenants and warranties of Seller made in or pursuant
to this Agreement are true, accurate, correct and complete as of the Closing,
and (ii) all conditions to the Closing that Seller was to satisfy or perform
have been satisfied and performed.
5.1.4 Physical Condition of Property. Subject to the
provisions of Section 10 below, the physical 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 damages due to any act of Buyer or Buyer's
representatives.
5.1.5 Bankruptcy. No action or proceeding shall have
been commenced by or against Seller 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.
5.1.6 Estoppel Certificates. Buyer shall have
received a
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fully executed original of each Estoppel Certificate.
5.1.7 Property Questionnaires. Buyer shall have
received Property Questionnaires for the Property, completed to the reasonable
satisfaction of Buyer, and no such Property Questionnaire shall indicate any
fact or circumstance that Buyer reasonably believes (based on advice of counsel)
would be likely to result in Buyer losing its 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.
5.1.8 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 which would adversely affect
Buyer's intended use of the Property.
5.2 Failure of Buyer's Conditions. Subject and without
limitation to Buyer's rights hereunder, including, without limitation, Section
11.2 hereof, if any of the Buyer's Conditions have not been fulfilled within the
applicable time periods, Buyer may:
5.2.1 Waive and Close. Waive the Buyer's Condition
and close Escrow in accordance with this Agreement, without adjustment or
abatement of the Purchase Price; or
5.2.2 Cure and Close. With regard to Buyer's right to
cure title matters pursuant to Section 4.8.2 only, cure the failure of the
Buyer's Condition and reduce the Purchase Price by an amount equal to the cost
of cure; or
5.2.3 Terminate. Terminate this Agreement by written
notice to Seller and to Escrow Agent, in which event Escrow Agent shall return
the Deposit to Buyer, Buyer shall pay the cancellation charges of Title Company
and Escrow Agent, and neither party shall thereafter have any rights or
obligations to the other hereunder, except those provisions which expressly
survive Closing or earlier termination of this Agreement.
5.3 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:
5.3.1 Buyer's Due Performance. All of the
representations
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and warranties of Buyer set forth in Section 8 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.
5.4 Failure of Seller's Conditions. Subject to Seller's rights
hereunder in the event of a default by Buyer which results in the failure of a
Seller's Condition, Seller may terminate this Agreement by delivery of written
notice to Buyer and Escrow Agent, in which event Escrow Agent shall return the
Deposit to Buyer, Buyer shall pay the cancellation charges of Title Company and
Escrow Agent, and neither party shall thereafter have any rights or obligations
to the other hereunder, except those provisions which expressly survive Closing
or earlier termination of this Agreement.
6. CLOSING.
6.1 Closing Date. Subject to the provisions of this Agreement,
the Closing shall take place on the fifteenth (15th) day after the Due Diligence
Termination Date, or on such other date as the parties hereto may agree. As used
herein, the "Closing" shall mean the recordation of the Deed in the Official
Records of the County of Gwinnett, State of Georgia (the "Official Records"),
and the "Closing Date" shall mean the date upon which the Closing actually
occurs.
6.2 Deliveries by Seller. Not less than two (2) Business Days
prior to the Closing Date, Seller, at its sole cost and expense, shall deliver
or cause to be delivered into Escrow the following documents and instruments,
each dated as of the Closing Date and executed by Seller, in addition to the
other items and payments required by this Agreement to be delivered by Seller:
6.2.1 Deed. The original executed, witnessed and
notarized Deed conveying the Property to Buyer or its nominee;
6.2.2 Nonforeign Affidavit. Two (2) originals of the
Nonforeign Affidavit in the form of Exhibit "H" attached hereto, each executed
by Seller;
6.2.3 Assignment of Leases. Three (3) original
counterparts of the Assignment of Leases in the form of Exhibit "I" attached
hereto, each executed by Seller, pursuant to which Seller shall assign all of
Seller's rights and remedies under the Tenant Leases, including, without
limitation, the right to any security deposits and prepaid rent, to Buyer
pursuant to an assignment and assumption of leases and security deposits;
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6.2.4 Bill of Sale and Assignment. Three (3) original
counterparts of the Bill of Sale and Assignment in the form of Exhibit "J"
attached hereto, each executed by Seller, pursuant to which Seller shall
transfer to Buyer all the Personal Property and the Intangible Property,
including, without limitation, the Property Documents, but excluding the Tenant
Leases, in each case free of all liens and encumbrances;
6.2.5 Seller's Certificate. Three (3) original
Seller's Certificates, each executed by Seller;
6.2.6 Tenant Leases. An original, fully executed
counterpart of each of the Tenant Leases and any amendments, modifications,
supplements and restatements thereto;
6.2.7 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;
6.2.8 New Leases. At the Closing, Seller shall
deliver to Buyer four (4) counterparts of the Building Lease (as hereinafter
defined) executed by all parties other than Buyer, in the form of Exhibit "O" to
be attached hereto (the "Building Lease"). In addition to the Building Lease,
Seller shall deliver to Buyer written leases or sub-leases in form and substance
reasonably satisfactory to Buyer executed by all parties who will remain in
occupancy as tenants or sub-tenants following the Closing, including, without
limitation, any month-to-month tenants (together with the Building Lease, the
"Permitted Leases"). The Permitted Leases shall be approved by Buyer prior to
their execution;
6.2.9 Affidavit of Seller's Residence. Three (3)
originals of the Affidavit of Seller's Residence, in the form of Exhibit "P"
attached hereto, each completed and executed by Seller; and
6.2.10 Other. Such other documents and instruments,
signed and properly acknowledged by Seller, if appropriate, as may be reasonably
required by Buyer, 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.
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6.3 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: (i) the balance of the Purchase Price pursuant to Section 2
hereof and Buyer's share of prorations and Closing Costs (as hereinafter
defined), as provided in Sections 6.5 and 6.6, respectively, by wire transfer of
immediately available funds; (ii) three (3) original executed counterparts of
the Assignment of Leases; (iii) all counterparts of the Permitted Leases; and
(iv) 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.
6.4 Actions by Escrow Agent. Provided that Escrow Agent shall
not have received written 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, in the order and manner herein below indicated take the
following actions:
6.4.1 Recording. Following Title Company's
acknowledgement that it is prepared and irrevocably committed to issue the
Owner's Title Policy to Buyer, cause the Deed 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.
6.4.2 Funds. Upon receipt of confirmation of the
recordation of the Deed and such other documents as were recorded pursuant to
Section 6.4.1 above, disburse all funds deposited with it by Buyer as follows:
(a) Pursuant to the Closing Statement (as hereinafter
defined), 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 this Section 6.
Seller's portion (as provided in Section 6.6 below) of the escrow fees, title
fees and other Closing Costs shall be paid pursuant to clause (a) above; and
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(c) Disburse to Buyer any remaining funds in the
possession of Escrow Agent after payments pursuant to (a) and (b) above have
been completed.
6.4.3 Owner's Title Policy. Cause Title Company to
issue the Owner's Title Policy to Buyer.
6.4.4 Delivery of Documents. Deliver to Buyer and
Seller one original of each of all documents deposited into Escrow, other than
the Deed and the Nonforeign Affidavit.
6.5 Prorations. Rentals, revenues, and other income, if any,
from the Property, 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. 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. on the Closing Date. Delinquent rentals as of the Closing Date shall
not be prorated and Seller hereby irrevocably assigns, as of the Closing Date,
its entire right to collect the same to Buyer, provided, however, that any
delinquent rentals actually collected by Buyer after the Closing Date shall be
remitted to Seller after deducting Buyer's actual costs (including attorney's
fees and costs) in the collection of such delinquent rentals and after applying
such amounts to any rentals due and owing and attributable or allocable to the
period after the Closing. On the Closing Date, Buyer shall be fully credited for
(i) security deposits which were paid by tenants to Seller, (ii) reimbursement
expenses and other sums owed by Seller to tenants for work or disputes which
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 in existence as of the Closing Date, (iii) any commissions or brokerage
fees payable upon or after the Closing Date in connection with any Tenant Leases
in existence as of the Closing Date, and (iv) rentals already received by Seller
attributable to periods after the Closing Date. 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. If any expenses
attributable to the Property and allocable to the period prior to the Closing
are
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discovered or billed after 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 expenses allocable to the period prior to the
Closing and Buyer shall bear all expenses allocable to the period from and after
the Closing. The provisions of this Section 6.5 shall survive the Closing for a
period of one (1) year.
Ten (10) 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 6.5 and (ii) the Closing Costs allocable to
each of the parties pursuant to Section 6.6 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").
6.6 Closing Costs. Each party shall pay its own costs and
expenses arising in connection with the Closing (including, without limitation,
its own attorney and advisor fees), except the following costs (the "Closing
Costs"), which shall be allocated between the parties as follows:
(i) Seller shall pay all documentary transfer,
stamp, sales and other taxes related to the transfer of the Property, one-half
(1/2) of Escrow Agent's escrow fees and costs, and all premiums, costs and fees
related to the delivery of the Owner's Title Policy, the cost of the Survey (if
not already paid), and all recording fees related to the transfer of ownership
of the Property.
(ii) Buyer shall pay one-half (1/2) of Escrow Agent's
escrow fees and costs.
6.7 Deliveries Outside of Escrow. Seller shall deliver
possession of the Property to Buyer upon the Closing, subject to the Tenant
Leases. Further, Seller hereby covenants and agrees to deliver to Buyer, on or
prior to the Closing, the following items:
6.7.1 Approvals. Originals of the Approvals, or, if
Seller is not able to deliver originals after diligent efforts to locate such
originals, copies of the Approvals certified to be true, complete and correct
(as hereinafter defined);
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6.7.2 Intangible Property. The Intangible Property,
including, without limitation, the original Property Documents and the original
Tenant Leases; and
6.7.3 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 as required by the Permitted Leases.
7. 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:
7.1 Title.
7.1.1 Ownership. Seller is the legal and equitable
owner of the Property, with full right to convey the same. Seller has not
granted any options or rights of first refusal or rights of first offer to third
parties to purchase or otherwise acquire an interest in the Property.
7.1.2 Encumbrances. To Seller's Knowledge, the
Property is free and clear of all liens, encumbrances, claims, rights, demands,
rights of way, easements, leases (other than the Tenant Leases), agreements,
covenants, conditions, and restrictions of any kind, except for (A) the
Permitted Exceptions, and (B) the Tenant Leases.
7.1.3 Streets. To "Seller's Knowledge" (as
hereinafter defined), there are no existing, proposed, or contemplated plans to
widen, modify, or realign any street or highway which affects the size of, use
of, or set-backs on the Property.
7.2 Property Documents. To Seller's Knowledge, the Property
Documents required to be delivered by Seller pursuant to the terms hereof
constitute all of the material documents relating to the Property, and each such
Property Document as delivered by Seller constitutes a true, correct and
complete copy of such Property Document. There are no commitments or agreements
known to Seller affecting the Property which have not been disclosed by Seller
to Buyer in writing.
7.3 Leases.
7.3.1 The schedule attached hereto as Exhibit "K"
(the
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"Schedule of Leases") is a true, correct and complete statement, as
applicable, of all (i) the leases, tenancies and occupancies, including any
extensions, modifications, amendments or guarantees thereof in effect at the
Property (the "Tenant Leases"), (ii) the tenants at the Property, (iii) the
dates of the Tenant Leases (including the commencement and expiration dates
thereof), (iv) the annual base rents payable, the base year for escalations, the
currently escalated rents and contributions to common area maintenance,
operating expenses and insurance under the Tenant Leases, (v) the security
deposits held by or deposited with Seller under the Tenant Leases, (vi) any and
all options to extend, renew or cancel any Tenant Leases or to expand or
decrease the space covered by any Tenant Lease (including any rights of first
refusal), and (vii) any and all concessions, allowances, credits, rebates,
offsets or other cases for relief or adjustment, including, without limitation,
any unpaid reimbursements for tenant improvements and any "free" or "reduced"
rent.
7.3.2 There are no security deposits or arrearages in
rent or additional rent under any of the Tenant Leases except as set forth on
the Schedule of Leases. No rent has been prepaid under any Tenant Lease except
as set forth on the Schedule of Leases.
7.3.3 All of the services required to be supplied to
each tenant and maintained in connection with the Property are presently being
supplied and maintained and will continue to be supplied and maintained up to
and as of the Closing Date.
7.3.4 Seller has received no notices of any failure
of Seller to supply any services which Seller is required to furnish pursuant to
any Tenant Lease, and Seller has received no notice from any tenant (i) to
cancel any Tenant Lease, (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 that an action or proceeding,
voluntary or involuntary, is pending or threatened against such tenant under any
section or sections of any bankruptcy or insolvency law, or (iii) that such
tenant disputes the base rent or escalation rents or the computation of
escalation rents pursuant to its Tenant Lease.
7.3.5 Seller has received no notices of any items of
work, repair, maintenance or construction to be completed by Seller pursuant to
any Tenant Lease for the benefit of any tenant and Seller has no knowledge of
any such work to be done.
7.3.6 As of the Closing Date, no tenant shall be
entitled to any additional work during the term of its Tenant Lease, except as
set forth in
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the leases described on the Schedule of Leases.
7.3.7 The Tenant Leases are in full force and effect
and Seller has received no notice of any default by the landlord thereunder and
has no knowledge of any fact or facts which 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 Schedule of Leases.
7.3.8 As of the Closing Date, there will be no
brokerage or other leasing commissions payable in connection with any of the
tenants or the Tenant Leases or any new leases or amendments of existing Tenant
Leases.
7.3.9 All of the Tenant Leases are assignable to
Buyer in connection with its purchase of the Property without the necessity for
any approval, consent or additional payment.
7.4 Condition of Property. The Property is in good condition
and repair and free from any defects, including, without limitation,
environmental, erosion, drainage or soil problems, physical, structural,
mechanical, construction or electrical defects, defects in the parking lot
pavement, or defects in utility systems. There is no material fact which has not
been disclosed to Buyer in writing which has or could reasonably be expected to
have a material adverse effect upon the Property, or the use or value thereof.
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 to state a material fact necessary to make the
statements contained herein not materially misleading.
7.5 Special Assessments or Condemnation. There are not
presently pending (i) any special assessments, except those shown as exceptions
on the PTR, or (ii) condemnation actions against the Property or any part, and
Seller has not received notice of any contemplated special assessments or
eminent domain proceedings that would affect the Property.
7.6 Utilities. 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 pursuant to valid permits, are in good
working order, and are adequate to service the Property.
7.7 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
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Property, oral or written, except as set forth on the schedule attached hereto
as Exhibit "L" (the "Service Contracts") and, except as set forth on such
schedule, all Service Contracts are cancellable without cost at the option of
Seller or the then owner of the Property upon not more than thirty (30) days
prior written notice. All of the Service Contracts are assignable to Buyer in
connection with its purchase of the Property without the necessity for any
approval, consent or additional payment.
7.8 Employees. There are no employees who are employed by
Seller nor any manager of the Property in the operation, management or
maintenance of the Property.
7.9 Defaults. 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 which,
after notice or lapse of time, 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; nor does Seller know of any
reason that there is likely to be a default under any of the documents.
7.10 Consents and Releases. Seller has obtained all required
consents, releases, and permissions to convey good, marketable and indefeasible
title to Buyer.
7.11 Authority. This Agreement and all other documents
delivered prior to or at the Closing (i) have been duly authorized, executed,
and delivered by Seller; (ii) are binding obligations of Seller; (iii) are
collectively sufficient to transfer all of Seller's rights to the Property; and
(iv) do not violate the formation documents of Seller. Seller further represents
that it 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 Georgia.
7.12 Bankruptcy. No filing or petition under the United States
Bankruptcy Law or any insolvency laws, or any laws for composition of
indebtedness or for the reorganization of debtors has been filed with regard to
Seller.
7.13 Foreign Investment In Real Property Tax Act. Seller is
not a foreign person within the meaning of 42 USCS ss. 1445(f)(3).
7.14 Existing Approvals. The documents set forth on Exhibit
"M" attached hereto (collectively, the "Approvals") are in full force and effect
and, to Seller's Knowledge, constitute all necessary or appropriate
certifications,
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approvals, consents, authorizations, licenses, permits, easements, rights of
way, and all valid, final and unconditional certificates of occupancy, or the
equivalent permitting required by the applicable licensing agency, required by
any governmental authority in connection with the ownership, development, use
and maintenance of the Property. To Seller's Knowledge, all of the Approvals are
transferable to Buyer without the necessity of any approval or consent or
additional payment and no such transfer will affect the validity thereof.
7.15 Insurance. There are currently in effect casualty and
liability insurance policies with respect to the Property. All premiums due on
such insurance policies have been paid by Seller and Seller will maintain such
insurance policies from the date hereof through the Closing Date or earlier
termination of this Agreement. Seller has not received and has no knowledge of
any notice or request from any insurance company requesting the performance of
any work or alteration with respect to the Property. Seller has received no
notice from any insurance company concerning, nor is Seller aware of, any
defects or inadequacies in the Property which, if not corrected, would result in
the termination of insurance coverage or increase its cost.
7.16 Litigation. Except as set forth on the schedule attached
hereto as Exhibit "N", there are no actions, suits or proceedings before any
judicial or quasi-judicial body, by any governmental authority or other third
party, pending, or to Seller's Knowledge, threatened, against or affecting all
or any portion of the Property and to Seller's Knowledge, there is no basis for
any such action. There are no actions, suits or proceedings pending,
contemplated or threatened by Seller in connection with all or any portion of
the Property or Seller's ownership, rights, use, development or maintenance
thereof, including, without limitation, tax reduction proceedings; and from and
after the date hereof, Seller shall not commence or allow to be commenced on its
behalf any action, suit or proceeding with respect to all or any portion of the
Property without the prior written consent of Buyer. 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. In the event any proceeding of the character
described in this Section 7.18 is initiated prior to the Closing, Seller shall
promptly advise Buyer in writing.
7.17 Compliance with Laws. The Property is in full compliance
with all existing laws, rules, regulations, ordinances and orders of all
applicable federal, state, city and other governmental authorities in effect as
of the date of this Agreement (collectively, "Laws"), including, without
limitation, all Laws with respect to zoning, building, fire and health codes,
environmental protection and sanitation and pollution control. Seller has
received no notice of, and has no
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knowledge of, any condition currently or previously existing on the Property or
any portion thereof which may give rise to any violation of any existing Law
applicable to the Property if it were disclosed to the authorities having
jurisdiction over the Property.
7.18 No Restriction on Access. To Seller's Knowledge, no fact
or condition exists which would prohibit or adversely affect the right of access
to or from the Property from or to the existing highways and roads (all of such
existing highways and roads being duly opened and dedicated to the municipality
having jurisdiction thereof) and Seller has no knowledge of any pending or
threatened restriction or denial, governmental or otherwise, upon such ingress
and egress.
7.19 Storm Drainage. All storm water flowing from the Property
drains either into a public system or onto a permitted location and through
easements for the benefit of the Property.
7.20 Soils. Seller has no knowledge of any soil conditions
adversely affecting the Property or any part thereof or Buyer's intended use.
7.21 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 Seller is a party or by which Seller 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 Seller or all or
any portion of the Property.
7.22 Toxic or Hazardous Materials.
7.22.1 Definitions.
(a) "Environmental Claim" means any claim, action,
cause of action, investigation or notice (written or oral) by any person or
entity alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (i) the manufacture, treatment,
processing, distribution, use, transport, handling, deposit, storage, disposal,
leaking or other presence, or release into the environment of any "Material of
Environmental
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Concern" (as hereinafter defined) in, at, on, under or about any
location, whether or not owned or operated by Seller or (ii) circumstances
forming the basis of any violation, or alleged violation, of any "Environmental
Law" (as defined below).
(b) "Environmental Laws" means all federal, state and
local laws and regulations relating to pollution or protection of human health
or the environment (including, without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
(c) "Material of Environmental Concern" means
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products.
7.22.2 Representations and Warranties. Seller
represents and warrants to and agrees with Buyer that, as of the date hereof,
and as of the Closing Date: (i) each of the Property and Seller is in full
compliance with all applicable Environmental Laws relating to the Property,
which compliance includes, but is not limited to, the possession by Seller of
all permits and other governmental authorities required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (ii)
Seller has not received any communication (written or oral), whether from a
governmental authority, citizens group, employee or other third party, that
alleges that Seller is not in such full compliance and there are no
circumstances that may prevent or interfere with such full compliance in the
future; (iii) there is no Environmental Claim pending or, to Seller's Knowledge,
threatened with regard to the Property; (iv) there are no past or present
actions, activities, circumstances, conditions, events or incidents relating to
the Property, including, without limitation, the manufacture, treatment,
processing, distribution, use, transport, handling, deposit, storage, disposal,
leaking, or other presence or release of any Material of Environmental Concern,
that could form the basis of any Environmental Claim against (a) Seller or (b)
any other person or entity, including, without limitation, persons or entities
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 stored,
disposed or arranged for the disposal of Materials of Environmental Concern on
the Property, except in accordance with applicable Environmental Laws, as
disclosed on Exhibit "Q" attached hereto (b) there are no underground storage
tanks located on the Property, (c) there is no asbestos contained in or forming
part of any
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Improvement, including, without limitation, any building, building component,
structure or office space on the Property, and (d) no polychlorinated biphenyls
(PCBs) are used or stored at the Property.
7.22.3 Indemnification. Seller agrees to indemnify,
reimburse, defend, and hold Buyer harmless from, for and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest, penalties,
reasonable attorneys' fees, charges, disbursements and expenses actually
incurred, and reasonable consultants' fees, charges, disbursements and expenses,
asserted against, resulting to, imposed on, or incurred by Buyer, directly or
indirectly, in connection with (i) the breach of any representation or warranty
set forth in Section 7.21.2 of this Agreement or (ii) any event or condition,
whether known or unknown to Seller or disclosed in any report provided to Buyer,
which results, directly or indirectly, in an Environmental Claim, to the extent
such event or condition occurred, existed, or arose out of conditions that
occurred or existed, or were caused, in whole or in part, on or before the
Closing.
7.23 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 Deed and other Closing instruments
and documents for two (2) years. If Seller is unable to reaffirm any warranty or
representation in Section 7 because of a change in facts or circumstances not
caused by Seller, Seller will identify the change in either a notice given
pursuant to Section 9.2 or in the reaffirmation delivered at Closing and the
sole and exclusive remedy of Buyer available as a result of such change shall be
to terminate this Agreement by giving written notice to Seller not later than
the date of Closing, whereupon Escrow Agent shall return the Deposit to Buyer,
Seller will pay the cancellation charges of Escrow Agent and neither party will
have any further rights, duties or obligations under this Agreement, except
those obligations which expressly survive termination.
7.24 Seller's Knowledge. As used in this Agreement, the phrase
"to Seller's Knowledge" and words of similar import shall mean the best
knowledge of Mark Reynolds and Jack Luchese, after reasonable inquiry and
investigation of the files and materials readily available to such persons.
Seller represents and warrants that the foregoing persons are those persons
affiliated with Seller possessing the greatest experience and familiarity with
the Property, and that no other person presently or previously affiliated with
Seller possesses any equal or greater familiarity and experience with the
Property.
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7.25 As-Is. Except as expressly set forth herein, including,
without limitation elsewhere in this Article 7, and except for those warranties
in the Deed, Seller shall convey the Property to Buyer in its present "AS-IS"
condition, without any warranties, expressed or implied.
8. 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:
8.1 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.
8.2 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, creditor, investor, judicial or administrative body, governmental
authority or other party is required in connection herewith which has not been
obtained.
8.3 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.
9. ADDITIONAL COVENANTS OF SELLER.
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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:
9.1 Title. Seller shall not directly or indirectly sell,
assign or create any right, title or interest whatsoever in or to the Property,
or create or permit to exist thereon any lien, charge or encumbrance other than
the Permitted Exceptions, or enter into any agreement to do any of the
foregoing, including, without limitation, any new Tenant Leases (or renewals,
modifications or extensions of any Tenant Leases) or Service Contracts, without
the prior written consent of Buyer, except that Seller may enter into the
Permitted Leases as contemplated by Section 6.2.8.
9.2 Notice of Change in Circumstances. Seller shall promptly
notify Buyer of any change in any condition with respect to the Property or any
portion thereof or of any event or circumstance of which Seller becomes aware
subsequent to the date of this Agreement which (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 9.2 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.
9.3 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, the Service
Contracts and any existing indebtedness relating to the Property. Seller shall
operate and maintain the Property in accordance with Seller's past practice and
all applicable Laws affecting the Property or any portion thereof.
9.4 Exclusive Negotiations. Seller shall (i) remove the
Property from the market, (ii) cease and refrain from any and all negotiations
with any other prospective optionees or purchasers of the Property, and (iii)
advise Buyer of any negotiations with current or potential tenants at the
Property.
9.5 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 the prior
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written consent of Buyer (which consent may be granted or withheld in Buyer's
sole and absolute discretion). Seller hereby agrees to reasonably cooperate with
Buyer, at no expense to Seller, in Buyer's efforts to obtain such governmental
approvals as Buyer deems necessary to permit Buyer to operate the Property as
Buyer wishes.
9.6 No Pre-Paid Rent. Seller shall not accept any rent from
any Tenant (or any new tenant under any new lease to which Buyer has consented)
for more than one (1) month in advance of the payment date.
9.7 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 the prior
written consent of Buyer (which consent may be withheld in Buyer's sole and
absolute discretion), unless the same shall be cancellable without penalty or
premium, upon not more than thirty (30) days' notice from the owner of the
Property and Seller shall immediately notify Buyer of any such entrance,
extension, renewal or replacement
9.8 New Leases. Seller shall advise Buyer of any and all
negotiations with current or potential tenants of the Property. Seller shall not
enter into any new lease or extend any Tenant Lease without Buyer's prior
written consent, which consent may be withheld in Buyer's sole and absolute
discretion.
10. RISK OF LOSS.
10.1 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 which has not been consummated),
Seller shall immediately notify Buyer of such fact after obtaining notice
thereof. In such event, Buyer shall have the option to terminate this Agreement
upon written notice to Seller given not later than thirty (30) days after
receipt of such notice from Seller. Upon such termination, Escrow Agent shall
return the Deposit to Buyer, the parties shall equally share the cancellation
charges of Escrow Agent and Title Company, and neither party shall have any
further rights or obligations hereunder, other than pursuant to any provision
hereof which expressly survives the termination of this Agreement. If Buyer does
not elect to terminate this Agreement, Seller shall assign and turn over to
Buyer, and Buyer shall be entitled to receive and keep, all awards for the
taking by condemnation or Buyer shall be deemed to have accepted the Property
subject to the taking without reduction in the Purchase
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Price.
10.2 Casualty. Prior to the Closing and notwithstanding the
pendency of this Agreement, the entire risk of loss or damage by earthquake,
flood, landslide, fire, hurricane, tornado or other casualty shall be borne and
assumed by Seller. If, prior to Closing any part of the Property is damaged or
destroyed by earthquake, flood, landslide, fire, hurricane, tornado or other
casualty (the "Casualty"), Seller shall immediately notify Buyer of such fact.
In such event, Buyer shall have the option to terminate this Agreement in
accordance with the preceding section upon written notice to Seller given not
later than thirty (30) 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 destruction (which shall then be repaired or not at
Buyer's option and cost), plus Seller shall pay over to Buyer an amount equal to
the deductible amount with respect to the insurance and the parties shall
proceed to Closing pursuant to the terms hereof without modification of the
terms of this Agreement and without any reduction in the Purchase Price. 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. At Buyer's sole option, if the Casualty causes less than $50,000 total
damage, (a) Seller shall, at Seller's sole cost, restore the Property to at
least the same condition as of the effective date of this Agreement, and the
Closing shall be postponed, or (b) Seller shall assign and turn over, and Buyer
shall be entitled to receive and keep, all insurance proceeds payable with
respect to such destruction (which shall then be repaired), plus Seller shall
pay over to Buyer an amount equal to the deductible amount with respect to the
insurance and the parties shall proceed to Closing pursuant to the terms hereof
without modification of the terms of this Agreement and without any reduction in
the Purchase Price.
11. LIQUIDATED DAMAGES; SPECIFIC PERFORMANCE.
11.1 Liquidated Damages. 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.
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, WILING AND ABLE TO PERFORM ITS
OBLIGATIONS HEREUNDER, SELLER, AS SELLER'S SOLE AND EXCLUSIVE REMEDY, IS
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ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF THE DEPOSIT (INCLUSIVE OF
INTEREST AND DIVIDENDS EARNED THEREON) THEN HELD BY ESCROW AGENT. 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, AND (3) ESCROW AGENT SHALL
DELIVER THE DEPOSIT (INCLUSIVE OF INTEREST AND DIVIDENDS EARNED THEREON) THEN
HELD BY ESCROW AGENT TO SELLER PURSUANT TO SELLER'S INSTRUCTIONS, AND THE SAME
SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES. SELLER AND BUYER ACKNOWLEDGE
THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS SECTION 11.1, AND BY
THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
- --------------------- ----------------------
Seller's Initials Buyer's Initials
11.2 Default by Seller. In the event that the Closing of the
transaction contemplated in this Agreement does not occur by reason of any
default by Seller, then (i) Escrow Agent shall return the Deposit to Buyer and
(ii) Buyer shall be entitled to pursue, as its exclusive remedies, either (a)
the specific performance of this Agreement, provided that such action is filed
within sixty (60) days of the alleged default by the Seller, or (b) recovery of
the expenses and losses incurred by Buyer, directly or indirectly, as a result
of Seller's breach in an amount not to exceed $125,000 plus all of Buyer's due
diligence costs, attorneys' fees and costs actually incurred; provided, however,
that any claims by Buyer for fraud are not subject to this recovery limit.
12. BROKERS.
Seller and Buyer each hereby represent, warrant to and agree
with each other that there are no broker or finder fees or commissions payable
in connection with the transaction contemplated hereby, other than those payable
to Atlanta Real Estate Partners which shall be paid by Seller in accordance with
a separate agreement. Seller shall indemnify, protect, defend and hold Buyer
harmless from and against any and all claims, losses, damages, costs and
expenses (including reasonable attorneys' fees, charges
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and disbursements) actually incurred by Buyer by reason of any breach or
inaccuracy of the representation, warranty and agreement of Seller contained in
this Section 12. Buyer shall indemnify, protect, defend and hold Seller harmless
from and against any and all claims, losses, damages, costs and expenses
(including reasonable attorneys' fees, charges and disbursements) actually
incurred by Seller by reason of any breach or inaccuracy of the representation,
warranty and agreement of Buyer contained in this Section 12. The provisions of
this Section 12 shall survive the Closing or earlier termination of this
Agreement and not be subject to the limitations contained in Section 11.
13. CONFIDENTIALITY.
13.1 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 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 and materials supplied 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.
13.2 Seller. Seller agrees that both prior to and after the
Closing, except as otherwise provided herein (including the Estoppel
Certificates) or required by law, and except for the exercise by Seller of any
remedy hereunder, Seller shall (a) keep confidential the pendency of this
transaction with Buyer 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
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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.
14. INDEMNIFICATION.
Buyer hereby agrees to indemnify, 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. Seller
hereby agrees to indemnify, 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 14 shall survive the Closing.
15. MISCELLANEOUS PROVISIONS.
15.1 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 Georgia, without regard to its
principles of conflicts of law.
15.2 Entire Agreement; Modifications; Waiver.
15.2.1 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 December
2, 1997, between Buyer and Seller, shall terminate and be of no further force or
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effect.
15.2.2 Modification. 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.
15.3 Notices. All notices, consents, requests, reports,
demands or other communications hereunder (collectively, "Notices") shall be in
writing and may be given by (i) personal delivery which shall be deemed given
when received, (ii) reputable overnight courier which shall be deemed given the
business day following the date on the courier's receipt of pick-up, subject to
acts of God or war, governmental restrictions, strikes, or other reasons beyond
the control of either Buyer or Seller.
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To Buyer: Alexandria Real Estate Equities, Inc.
135 N. Los Robles Ave., Suite 250
Pasadena, California 91101
Attention: Corporate Secretary
Telephone: (626) 578-0777
Facsimile: (626) 578-0770
With A Copy to: Alexandria Real Estate Equities, Inc.
11440 West Bernardo Court, Suite 170
San Diego, California 92127
Attention: Gary A. Kreitzer, Esq.
Telephone: (619) 592-6801
Facsimile: (619) 592-6814
With A Copy To: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: George M. Eshaghian, Esq.
Telephone: (213) 687-5215
Facsimile: (213) 687-5600
To Seller: CytRx Corporation
154 Technology Parkway
Norcross, Georgia 30092
Attention: Mr. Jack Luchese
Telephone: (770) 368-9500
Facsimile: (770) 448-3357
With A Copy To: Alston & Bird
1201 W. Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Homer Lee Walker, Esq.
Telephone: (404) 881-7338
Facsimile: (404) 881 7777
To Escrow Agent: Chicago Title Insurance Company
----------------------------------
----------------------------------
Attention:
------------------------
Telephone:
------------------------
Facsimile:
------------------------
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15.4 Expenses. Subject to the allocation of Closing Costs
provided in Section 6.6 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.
15.5 Assignment.
15.5.1 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 to delegate any duties or obligations
arising under this Agreement, voluntarily, involuntarily, or by operation of
law, without Buyer's prior written consent.
15.5.2 Buyer's Right to Assign. Except as otherwise
provided in this Agreement, Buyer shall have the right, power, and authority to
assign this Agreement (including, without limitation, an assignment for security
purposes) or any portion of this Agreement or to delegate any duties or
obligations arising under this Agreement, voluntarily, involuntarily or by
operation of law, without Seller's consent. Upon an assignment, Buyer shall be
relieved of all obligations under this Agreement and the Escrow, except the
indemnification obligations of Buyer pursuant to Section 4.7 and Section 12 of
this Agreement, which shall expressly survive assignment.
15.6 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.
15.7 Successors and Assigns; Third Parties. Subject to and
without waiver of the provisions of Section 15.5 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.
15.8 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary and convenient, and by the
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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.
15.9 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.
15.10 Time of the Essence. Time shall be of the essence with
respect to all matters contemplated by this Agreement.
15.11 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.
15.12 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.
15.13 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 may have been prepared by counsel for one of the
parties.
15.14 Post-Closing Access to Records. Upon receipt by Seller
of Buyer's reasonable written request at anytime and from time to time within a
period of one (1) year after the Closing, Seller shall make available (or cause
its property 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, (i) all accounting
records relating to the Property (but not confidential records relating to
Seller's business conducted on the Property) for the calendar year period ended
December 31, 1997, and for the period from January 1, 1998 through the Closing
Date, including, without limitation, all general ledgers, cash receipts,
cancelled 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 the possession or control of
Seller or Seller's property manager, asset manager or other agent.
15.15 Exhibits. All exhibits attached hereto are hereby
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<PAGE> 37
incorporated by reference as though set out in full herein.
15.16 Attorneys' Fees. In the event that either party hereto
brings an action or proceeding against the other party to enforce or interpret
any of the covenants, conditions, agreements or provisions of this Agreement,
the prevailing party in such action or proceeding shall be entitled to recover
all costs and expenses of such action or proceeding, including, without
limitation, reasonable attorneys' fees, charges and disbursements actually
incurred, and the reasonable fees and costs of expert witnesses actually
incurred.
15.17 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, Sunday or legal holiday, the date for
performance thereof shall be extended to the next Business Day.
[Remainder of page intentionally blank.]
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<PAGE> 38
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
Execution Date: ________, 1998 By:
---------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SELLER:
CYTRX CORPORATION,
a Delaware corporation
Execution Date: ________, 1998 By:
---------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
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 INSURANCE COMPANY Date: ____________, 1998
By:
------------------------------
Name:
-------------------------
Its:
--------------------------
36
<PAGE> 39
LIST OF EXHIBITS
EXHIBIT "A" LEGAL DESCRIPTION [TO BE PROVIDED BY SELLER]
EXHIBIT "B" PERSONAL PROPERTY INVENTORY
EXHIBIT "C" ESTOPPEL CERTIFICATE
EXHIBIT "D" PROPERTY QUESTIONNAIRE
EXHIBIT "E" SURVEYOR'S CERTIFICATE
EXHIBIT "F" DEED
EXHIBIT "G" SELLER'S CERTIFICATE
EXHIBIT "H" NONFOREIGN AFFIDAVIT
EXHIBIT "I" ASSIGNMENT OF LEASES
EXHIBIT "J" BILL OF SALE AND ASSIGNMENT
EXHIBIT "K" SCHEDULE OF LEASES
EXHIBIT "L" SERVICE CONTRACTS
EXHIBIT "M" APPROVALS
EXHIBIT "N" LITIGATION
EXHIBIT "O" NEW LEASE - 154 TECHNOLOGY PARKWAY
EXIBHIT "P" AFFIDAVIT OF SELLER'S RESIDENCE
EXHIBIT "Q" DISCLOSED STORAGE OR DISPOSAL OF MATERIALS OF
ENVIRONMENTAL CONCERN [TO BE PROVIDED BY SELLER]
37
<PAGE> 1
EXHIBIT 10.14
Purchase and Sale Agreement dated February 23, 1998 by and between
Proceutics, Inc. and Alexandria Real Estate Equities, Inc.
<PAGE> 2
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
FEBRUARY ___, 1998
BY AND BETWEEN
ALEXANDRIA REAL ESTATE EQUITIES, INC.
BUYER
AND
PROCEUTICS, INC.
SELLER
<PAGE> 3
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 February __, 1998, by and
between ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation ("Buyer"),
and PROCEUTICS, INC., a Delaware corporation ("Seller"), for the purposes of
setting forth the agreement of the parties and of instructing CHICAGO TITLE
INSURANCE COMPANY ("Escrow Agent"), with respect to the transactions
contemplated by this Agreement.
RECITALS
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 fee interest in that certain real
property located in the City of Norcross, County of Gwinnett, State of Georgia,
as legally described on Exhibit "A" attached hereto, together with all rights,
privileges and easements appurtenant thereto or used in connection therewith,
including, without limitation, all minerals, oil, gas and other hydrocarbon
substances thereon, if any, all development rights, air rights, water, water
rights and water stock relating thereto, all strips and gores, and all of
Seller's 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 "Land"); (ii) all
buildings, improvements, structures and fixtures now or hereafter included or
located on or in the Land (collectively, the "Improvements"), including, without
limitation, that certain building commonly known as 150 Technology Parkway (the
"Building"), and all alterations, attached equipment, decorations, fixtures,
trade fixtures, additions and improvements, built-in furniture and cabinets,
together with all accessories thereto, including, without limitation, all floor
and wallcovering, built-in cabinet work and paneling, sinks and related plumbing
fixtures, exterior venting fume hoods and walk-in freezers and refrigerators,
clean rooms, climatized rooms, ductwork, conduits and electrical panels and
circuits now or hereafter located on or in the Land or the Improvements; (iii)
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, and designated in Exhibit "B",
attached hereto; and (iv) all intangible property (collectively, the "Intangible
Property") now or hereafter owned by Seller and used in connection with the
operation, maintenance and repair of the Land, the Improvements or the Personal
Property, including,
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without limitation, the Tenant Leases and the Service Contracts (each as
hereinafter defined), building trademarks and building trade names,
architectural, site, landscaping or other building and occupancy permits,
applications, approvals, authorizations and other entitlements, transferable
guarantees and warranties covering the Land and/or Improvements, all contract
rights, 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 Property or the
construction or fabrication thereof, and all transferable utility contracts, but
specifically excluding any intangible property related to the operation of
Seller's business on the Land and in the Improvements; provided, however, that
the ownership or operation of the Land or the Improvements shall not be
considered Seller's business.
AGREEMENT
In consideration of 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 Three Million Three Hundred Thousand Dollars ($3,300,000),
payable as follows:
2.1 Deposit. Not later than the date which is three (3)
Business Days (as hereinafter defined) after the later of (i) the later of the
dates set forth next to Buyer's and Seller's signatures to this Agreement (the
"Execution Date"), or (ii) the date of the opening of Escrow (as hereinafter
defined), Buyer shall deposit into Escrow the sum of Ninety-One Thousand Eight
Hundred Seventy-Five Dollars ($91,875) (which amount, together with any and all
interest and dividends earned thereon, shall hereinafter be referred to as the
"Deposit") by wire transfer, or by certified or bank check, payable to the order
of Escrow Agent.
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<PAGE> 5
Escrow Agent 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. In the event of the
consummation of the purchase and sale of the Property as contemplated hereunder,
the Deposit shall be paid to Seller at the Closing (as defined in Section 6
below) and credited against the Purchase Price. In the event the sale 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 condition or any other reason except for a default under this
Agreement solely on the part of Buyer, the Deposit shall be returned to Buyer.
2.2 Balance. On the Closing Date (as defined below), Buyer
shall pay to Seller the balance of the Purchase Price over and above the Deposit
paid by Buyer under Section 2.1 above, by wire transfer of federal funds to
Escrow Agent, net of all prorations and adjustments as provided herein.
3. OPENING OF ESCROW.
Promptly following the Execution Date, Buyer and Seller shall
cause a purchase and sale escrow ("Escrow") to be opened with Escrow Agent by
delivery to Escrow Agent of a fully executed copy of this Agreement (the
"Opening of Escrow"). This Agreement shall constitute escrow instructions to the
Escrow Agent as well as the agreement of the parties. Escrow Agent is hereby
appointed and designated to act as the Escrow Agent and instructed to deliver,
pursuant to the terms of this Agreement, the documents and funds to be deposited
into Escrow as herein 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, including Escrow Agent's general provisions, if any (as may
be modified by 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.
4. DUE DILIGENCE
4.1 Property Documents. Not later than the date which is five
(5) Business Days after the Execution Date, Seller shall deliver or make
available to Buyer, at Seller's sole cost and expense, copies of all materials
relating to the Property in Seller's possession or control or in the control or
possession of its agents, including, without limitation, all contracts,
documents, leases,
3
<PAGE> 6
reports, books, records and other materials relating to the Property to the
extent currently in Seller's possession or control or in the control or
possession of its agents, as-built plans and specifications, operating
statements, income and expense records, rent rolls, engineering tests, soil
tests, a Phase One environmental/asbestos audit of the Property, a Phase Two
environmental audit of the Property, service contracts, structural and
mechanical reports, maps, plans, agreements, governmental permits and approvals,
appraisals, title policies, surveys, construction warranties, and land studies
(collectively, the "Property Documents").
4.2 Diligence Tests. At all reasonable times from the
Execution Date until the Closing or earlier termination of this Agreement and
upon reasonable notice to Seller, Buyer, 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; (ii) cause an
environmental assessment of the Property to be performed; and (iii) review all
Property Documents and examine and copy any and all books and records maintained
by Seller or its agents relating to the Property (including, without limitation,
all documents relating to utilities, zoning, and the access, subdivision and
appraisal of the Property); provided, however, that Buyer shall not conduct or
caused to be conducted any testing or inspections to be conducted inside the
Building ("Interior Testing") without Seller's consent, which consent shall not
be unreasonably withheld, conditioned or delayed. Seller shall be deemed to have
consented to any Interior Testing request if no response is received by Buyer
within five (5) business days of a written request for such consent.
4.3 Tenants. Not later than the date which is ten (10) days
after the Execution Date, Seller shall arrange for an introduction of Buyer to
any tenant of the Property 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 at the Property regarding entry into tenant facilities for purpose 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. Not later than the date which is fifteen (15) Business
Days after the Execution Date, Seller shall undertake a good faith effort to
deliver to Buyer estoppel certificates, each substantially in the form of
Exhibit "C" attached hereto, executed by each tenant under the Tenant Leases
(collectively, the "Estoppel Certificates"). Seller shall have no liability if
any such tenant alters or refuses to execute the requested Estoppel Certificate.
4
<PAGE> 7
4.4 Property Questionnaires. Not later than the date which is
ten (10) days after the Execution Date, Seller shall deliver to Buyer property
questionnaires in the form attached hereto as Exhibit "D" (the "Property
Questionnaires")completed to the reasonable satisfaction of Buyer.
4.5 Termination Right. Buyer shall have the right at any time
on or before the date which is forty-five (45) calendar days after the Execution
Date (the "Due Diligence Termination Date") to terminate this Agreement if,
during the course of Buyer's due diligence investigations of the Property, Buyer
determines in its sole and absolute discretion that the Property is not
acceptable to Buyer. Buyer may exercise such termination right by delivering
written notice of termination to Seller and Escrow Agent on or before the Due
Diligence Termination Date. Upon such termination, (i) Escrow Agent shall return
the Deposit to Buyer, (ii) Buyer shall pay the cancellation charges of Escrow
Agent and Title Company (as hereinafter defined), 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 which expressly survives the termination of this Agreement.
If Buyer elects to exercise such termination right, all material Property
Documents delivered to Buyer pursuant to Section 4.1 shall be returned to Seller
and, so long as no dispute then exists between Buyer and Seller, Buyer shall
provide to Seller copies of all non-confidential reports prepared by third
parties relating to the Property in connection with this transaction. If Buyer
does not exercise such termination in writing on or before the Due Diligence
Termination Date, then Buyer's right to terminate this Agreement pursuant to
this Section 4.5 shall automatically lapse.
4.6 Insurance. Buyer agrees that from the Execution Date
through the Due Diligence Termination Date, Buyer shall carry, or cause its
agent 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; upon request, Buyer shall provide Seller with proof of such
insurance prior to commencing Buyer's physical inspections of the Property.
4.7 Indemnity and Repair. Buyer agrees to indemnify and hold
harmless Seller from any losses resulting from any actual damage to the Property
or any bodily or personal injury caused by any act of Buyer as a result of the
inspections, investigations or tests performed pursuant to Section 4.2 above
(the "Diligence Losses") with respect to any such Diligence Losses of which
Buyer receives notice not later than the date which is 90 days after the Closing
or earlier termination of this Agreement (the "Indemnity Notice Date"), which
indemnity shall survive the earlier termination of this Agreement (and
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<PAGE> 8
shall not be subject to the limitation on damages contained in Section 11) or
the Closing; provided, however, that Buyer's indemnity hereunder shall not
include any losses, cost, damage or expenses resulting from (x) the acts of
Seller, its agents or representatives, or (y) the discovery of any pre-existing
condition of the Property. In addition, if this Agreement is terminated, Buyer
shall repair any damage to the Property caused by Buyer's 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 Seller's negligence or willful misconduct or to
remediate, contain, abate or control any Material of Environmental Concern (as
hereinafter defined) or any hazardous defect that existed at the Property prior
to Buyer's entry thereon.
4.8 Title.
4.8.1 Deliveries by Seller. Not later than fifteen
(15) days after the Execution Date, Buyer shall undertake a good faith effort to
cause to be delivered to Buyer an ALTA extended coverage preliminary title
report (the "PTR") issued by Chicago Title Insurance Company (in such capacity,
"Title Company"), together with legible copies of all documents referenced as
exceptions therein. Not later than twenty (20) days after the Execution Date,
Buyer shall undertake a good faith effort to cause to be prepared and delivered
to Buyer (a) a current As-Built American Land Title Association survey of the
Property (the "Survey"), in form reasonably satisfactory to Buyer and the Title
Company , prepared by a surveyor licensed in the State of Georgia and certified
(using a surveyor's certificate in substantially the same form as the
certificate attached hereto as Exhibit "E") to Buyer, Title Company and such
other persons or entities as Buyer may, in its discretion, request, which Survey
shall show any and all matters which Buyer may reasonably require, including,
without limitation, all Improvements, all easements, all roads, all utilities,
the number of parking spaces, access to and from the Land, and drainage ditches,
set-back lines, protrusions, encroachments, and encumbrances affecting the same;
and (b) a UCC Search with regard to the Personal Property (the "UCC Search").
4.8.2 Buyer's Review of Title. Buyer shall have until
the Due Diligence Termination Date to notify Seller in writing of any objection
which Buyer may have to any exception reported in the PTR or matter shown on the
Survey or the UCC Search or any updates thereof; provided, however, that if any
such updates are received by Buyer, Buyer shall have an additional five (5)
Business Days, regardless of the Due Diligence Termination Date, following
Buyer's receipt of such update and legible copies of all documents referenced
therein to notify Seller of objections to items shown on any such update.
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<PAGE> 9
Exceptions reported in the PTR and matters shown on the Survey or the UCC Search
(or any updates thereof) not objected to by Buyer as provided above shall be
deemed to be "Permitted Exceptions." Seller shall have until the fifth (5th)
business day after the date on which Buyer delivers such objections, if any, to
Seller, to notify Buyer in writing as to (a) whether Seller will not remove or
cure the objections, (b) whether Seller will remove from title to the Property
any exceptions and matters so objected to by Buyer, or (c) whether Seller will
obtain for Buyer title insurance insuring over such exceptions or matters, such
insurance to be in form and substance satisfactory to Buyer. If Seller informs
Buyer that Seller is unwilling or unable to remove or satisfactorily insure over
any exceptions or matters objected to by Buyer, Buyer will have five (5)
business days to either (a) terminate this Agreement (in which case Escrow Agent
shall return the Deposit to Buyer, the parties shall equally share the
cancellation charges of Escrow Agent and Title Company, and neither party shall
thereafter have any rights or obligations to the other hereunder), (b) discharge
any objected to exceptions or matters which can be discharged by the payment of
money and to deduct from the cash portion of the Purchase Price the amount
reasonably necessary to do so, or (c) proceed to a timely Closing without a
reduction in the Purchase Price whereupon such objected to exceptions or matters
shall be deemed Permitted Exceptions. Seller shall in any event be required to
discharge and remove any and all liens and encumbrances affecting the Property
which secure an obligation to pay money (other than installments of real estate
taxes not delinquent as of the Closing) and, even though Buyer does not
expressly disapprove such liens, such liens and encumbrances shall not be
Permitted Exceptions.
4.8.3 Condition of Title at Closing. Upon the
Closing, Seller shall sell, transfer and convey to Buyer indefeasible fee simple
title to the Land and the Improvements thereon by a duly executed and
acknowledged limited warranty deed in the form of Exhibit "F" attached hereto
(the "Deed"), subject only to the Permitted Exceptions. Prior to Closing, Seller
shall not take any action or commit or voluntarily suffer any acts which would
give rise to a variance from the current legal description of the Land, or cause
the creation of any exception or encumbrance against or respecting the Land
without the prior written consent of Buyer, which consent Buyer may withhold in
its sole discretion. Nothing in this Section 4.8.3 shall preclude Buyer from
disapproving title matters in accordance with the provisions of Section 4.8.2
above.
5. CONDITIONS PRECEDENT TO CLOSING.
5.1 Buyer's Conditions. The obligation of Buyer 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
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<PAGE> 10
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 Buyer;
provided, however, that any such waiver shall not affect Buyer's ability to
pursue any remedy it may have with respect to any breach hereunder by Seller:
5.1.1 154 Technology Parkway. Concurrent herewith,
Buyer has entered into a purchase and sale agreement with CytRx Corporation, a
Delaware corporation for the adjoining property commonly known as 154 Technology
Parkway (the "CytRx Purchase Agreement"). The transaction contemplated by the
CytRx Purchase Agreement shall close concurrently with the transaction
contemplated by this Agreement.
5.1.2 Title. Title Company shall be prepared and
irrevocably committed to issue (a) to Buyer an American Land Title Association
extended coverage owner's policy of title insurance in favor of Buyer in an
amount equal to the Purchase Price showing indefeasible fee simple title to the
Property vested in Buyer, with those endorsements reasonably requested by Buyer,
subject only to the Permitted Exceptions (collectively, the "Owner's Title
Policy").
5.1.3 Seller's Due Performance. All of the
representations and warranties of Seller set forth herein 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 Section 6.2 hereof. On the
Closing Date, Seller shall deliver a certificate, in the form of Exhibit "G"
attached hereto (the "Seller's Certificate"), to Buyer certifying that (i) all
of the representations, covenants and warranties of Seller made in or pursuant
to this Agreement are true, accurate, correct and complete as of the Closing,
and (ii) all conditions to the Closing that Seller was to satisfy or perform
have been satisfied and performed.
5.1.4 Physical Condition of Property. Subject to the
provisions of Section 10 below, the physical 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 damages due to any act of Buyer or Buyer's
representatives.
5.1.5 Bankruptcy. No action or proceeding shall have
been commenced by or against Seller 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.
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5.1.6 Estoppel Certificates. Buyer shall have
received a fully executed original of each Estoppel Certificate.
5.1.7 Property Questionnaires. Buyer shall have
received Property Questionnaires for the Property, completed to the reasonable
satisfaction of Buyer, and no such Property Questionnaire shall indicate any
fact or circumstance that Buyer reasonably believes (based on advice of counsel)
would be likely to result in Buyer losing its 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.
5.1.8 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 which would adversely affect
Buyer's intended use of the Property.
5.2 Failure of Buyer's Conditions. Subject and without
limitation to Buyer's rights hereunder, including, without limitation, Section
11.2 hereof, if any of the Buyer's Conditions have not been fulfilled within the
applicable time periods, Buyer may:
5.2.1 Waive and Close. Waive the Buyer's Condition
and close Escrow in accordance with this Agreement, without adjustment or
abatement of the Purchase Price; or
5.2.2 Cure and Close. With regard to Buyer's right to
cure title matters pursuant to Section 4.8.2 only, cure the failure of the
Buyer's Condition and reduce the Purchase Price by an amount equal to the cost
of cure; or
5.2.3 Terminate. Terminate this Agreement by written
notice to Seller and to Escrow Agent, in which event Escrow Agent shall return
the Deposit to Buyer, Buyer shall pay the cancellation charges of Title Company
and Escrow Agent, and neither party shall thereafter have any rights or
obligations to the other hereunder, except those provisions which expressly
survive Closing or earlier termination of this Agreement.
5.3 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
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<PAGE> 12
for satisfaction thereof extended, by Seller only in a writing executed by
Seller:
5.3.1 Buyer's Due Performance. All of the
representations and warranties of Buyer set forth in Section 8 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.
5.4 Failure of Seller's Conditions. Subject to Seller's rights
hereunder in the event of a default by Buyer which results in the failure of a
Seller's Condition, Seller may terminate this Agreement by delivery of written
notice to Buyer and Escrow Agent, in which event Escrow Agent shall return the
Deposit to Buyer, Buyer shall pay the cancellation charges of Title Company and
Escrow Agent, and neither party shall thereafter have any rights or obligations
to the other hereunder, except those provisions which expressly survive Closing
or earlier termination of this Agreement.
6. CLOSING.
6.1 Closing Date. Subject to the provisions of this Agreement,
the Closing shall take place on the fifteenth (15th) day after the Due Diligence
Termination Date, or on such other date as the parties hereto may agree. As used
herein, the "Closing" shall mean the recordation of the Deed in the Official
Records of the County of Gwinnett, State of Georgia (the "Official Records"),
and the "Closing Date" shall mean the date upon which the Closing actually
occurs.
6.2 Deliveries by Seller. Not less than two (2) Business Days
prior to the Closing Date, Seller, at its sole cost and expense, shall deliver
or cause to be delivered into Escrow the following documents and instruments,
each dated as of the Closing Date and executed by Seller, in addition to the
other items and payments required by this Agreement to be delivered by Seller:
6.2.1 Deed. The original executed, witnessed and
notarized Deed conveying the Property to Buyer or its nominee;
6.2.2 Nonforeign Affidavit. Two (2) originals of the
Nonforeign Affidavit in the form of Exhibit "H" attached hereto, each executed
by Seller;
6.2.3 Assignment of Leases. Three (3) original
counterparts of the Assignment of Leases in the form of Exhibit "I" attached
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hereto, each executed by Seller, pursuant to which Seller shall assign all of
Seller's rights and remedies under the Tenant Leases, including, without
limitation, the right to any security deposits and prepaid rent, to Buyer
pursuant to an assignment and assumption of leases and security deposits;
6.2.4 Bill of Sale and Assignment. Three (3) original
counterparts of the Bill of Sale and Assignment in the form of Exhibit "J"
attached hereto, each executed by Seller, pursuant to which Seller shall
transfer to Buyer all the Personal Property and the Intangible Property,
including, without limitation, the Property Documents, but excluding the Tenant
Leases, in each case free of all liens and encumbrances;
6.2.5 Seller's Certificate. Three (3) original
Seller's Certificates, each executed by Seller;
6.2.6 Tenant Leases. An original, fully executed
counterpart of each of the Tenant Leases and any amendments, modifications,
supplements and restatements thereto;
6.2.7 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;
6.2.8 New Leases. At the Closing, Seller shall
deliver to Buyer four (4) counterparts of the Building Lease (as hereinafter
defined) executed by all parties other than Buyer, in the form of Exhibit "O" to
be attached hereto (the "Building Lease"). In addition to the Building Lease,
Seller shall deliver to Buyer written leases or sub-leases in form and substance
reasonably satisfactory to Buyer executed by all parties who will remain in
occupancy as tenants or sub-tenants following the Closing, including, without
limitation, any month-to-month tenants (together with the Building Lease, the
"Permitted Leases"). The Permitted Leases shall be approved by Buyer prior to
their execution;
6.2.9 Affidavit of Seller's Residence. Three (3)
originals of the Affidavit of Seller's Residence, in the form of Exhibit "P"
attached hereto, each completed and executed by Seller; and
6.2.10 Other. Such other documents and instruments,
signed and properly acknowledged by Seller, if appropriate, as may be
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reasonably required by Buyer, 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.
6.3 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: (i) the balance of the Purchase Price pursuant to Section 2
hereof and Buyer's share of prorations and Closing Costs (as hereinafter
defined), as provided in Sections 6.5 and 6.6, respectively, by wire transfer of
immediately available funds; (ii) three (3) original executed counterparts of
the Assignment of Leases; (iii) all counterparts of the Permitted Leases; and
(iv) 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.
6.4 Actions by Escrow Agent. Provided that Escrow Agent shall
not have received written 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, in the order and manner herein below indicated take the
following actions:
6.4.1 Recording. Following Title Company's
acknowledgement that it is prepared and irrevocably committed to issue the
Owner's Title Policy to Buyer, cause the Deed 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.
6.4.2 Funds. Upon receipt of confirmation of the
recordation of the Deed and such other documents as were recorded pursuant to
Section 6.4.1 above, disburse all funds deposited with it by Buyer as follows:
(a) Pursuant to the Closing Statement (as hereinafter
defined), 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
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Price, less or plus the net debit or credit to Seller by reason of the
prorations and allocation of Closing Costs provided for in this Section 6.
Seller's portion (as provided in Section 6.6 below) 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 (a) and (b) above have
been completed.
6.4.3 Owner's Title Policy. Cause Title Company to
issue the Owner's Title Policy to Buyer.
6.4.4 Delivery of Documents. Deliver to Buyer and
Seller one original of each of all documents deposited into Escrow, other than
the Deed and the Nonforeign Affidavit.
6.5 Prorations. Rentals, revenues, and other income, if any,
from the Property, 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. 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. on the Closing Date. Delinquent rentals as of the Closing Date shall
not be prorated and Seller hereby irrevocably assigns, as of the Closing Date,
its entire right to collect the same to Buyer, provided, however, that any
delinquent rentals actually collected by Buyer after the Closing Date shall be
remitted to Seller after deducting Buyer's actual costs (including attorney's
fees and costs) in the collection of such delinquent rentals and after applying
such amounts to any rentals due and owing and attributable or allocable to the
period after the Closing. On the Closing Date, Buyer shall be fully credited for
(i) security deposits which were paid by tenants to Seller, (ii) reimbursement
expenses and other sums owed by Seller to tenants for work or disputes which
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 in existence as of the Closing Date, (iii) any commissions or brokerage
fees payable upon or after the Closing Date in connection with any Tenant Leases
in existence as of the Closing Date, and (iv) rentals already received by Seller
attributable to periods after the Closing Date. 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
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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. 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 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. The provisions of this Section 6.5 shall survive the Closing for a
period of one (1) year.
Ten (10) 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 6.5 and (ii) the Closing Costs allocable to
each of the parties pursuant to Section 6.6 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").
6.6 Closing Costs. Each party shall pay its own costs and
expenses arising in connection with the Closing (including, without limitation,
its own attorney and advisor fees), except the following costs (the "Closing
Costs"), which shall be allocated between the parties as follows:
(i) Seller shall pay all documentary transfer,
stamp, sales and other taxes related to the transfer of the Property, one-half
(1/2) of Escrow Agent's escrow fees and costs, and all premiums, costs and fees
related to the delivery of the Owner's Title Policy, the cost of the Survey (if
not already paid), and all recording fees related to the transfer of ownership
of the Property.
(ii) Buyer shall pay one-half (1/2) of Escrow Agent's
escrow fees and costs.
6.7 Deliveries Outside of Escrow. Seller shall deliver
possession of the Property to Buyer upon the Closing, subject to the Tenant
Leases. Further, Seller hereby covenants and agrees to deliver to Buyer, on or
prior to the Closing, the following items:
6.7.1 Approvals. Originals of the Approvals, or, if
Seller is
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not able to deliver originals after diligent efforts to locate such originals,
copies of the Approvals certified to be true, complete and correct (as
hereinafter defined);
6.7.2 Intangible Property. The Intangible Property,
including, without limitation, the original Property Documents and the original
Tenant Leases; and
6.7.3 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 as required by the Permitted Leases.
7. 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:
7.1 Title.
7.1.1 Ownership. Seller is the legal and equitable
owner of the Property, with full right to convey the same. Seller has not
granted any options or rights of first refusal or rights of first offer to third
parties to purchase or otherwise acquire an interest in the Property.
7.1.2 Encumbrances. To Seller's Knowledge, the
Property is free and clear of all liens, encumbrances, claims, rights, demands,
rights of way, easements, leases (other than the Tenant Leases), agreements,
covenants, conditions, and restrictions of any kind, except for (A) the
Permitted Exceptions, and (B) the Tenant Leases.
7.1.3 Streets. To "Seller's Knowledge" (as
hereinafter defined), there are no existing, proposed, or contemplated plans to
widen, modify, or realign any street or highway which affects the size of, use
of, or set-backs on the Property.
7.2 Property Documents. To Seller's Knowledge, the Property
Documents required to be delivered by Seller pursuant to the terms hereof
constitute all of the material documents relating to the Property, and each such
Property Document as delivered by Seller constitutes a true, correct and
complete copy of such Property Document. There are no commitments or agreements
known to Seller affecting the Property which have not been disclosed by Seller
to Buyer in writing.
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7.3 Leases.
7.3.1 The schedule attached hereto as Exhibit "K"
(the "Schedule of Leases") is a true, correct and complete statement, as
applicable, of all (i) the leases, tenancies and occupancies, including any
extensions, modifications, amendments or guarantees thereof in effect at the
Property (the "Tenant Leases"), (ii) the tenants at the Property, (iii) the
dates of the Tenant Leases (including the commencement and expiration dates
thereof), (iv) the annual base rents payable, the base year for escalations, the
currently escalated rents and contributions to common area maintenance,
operating expenses and insurance under the Tenant Leases, (v) the security
deposits held by or deposited with Seller under the Tenant Leases, (vi) any and
all options to extend, renew or cancel any Tenant Leases or to expand or
decrease the space covered by any Tenant Lease (including any rights of first
refusal), and (vii) any and all concessions, allowances, credits, rebates,
offsets or other cases for relief or adjustment, including, without limitation,
any unpaid reimbursements for tenant improvements and any "free" or "reduced"
rent.
7.3.2 There are no security deposits or arrearages in
rent or additional rent under any of the Tenant Leases except as set forth on
the Schedule of Leases. No rent has been prepaid under any Tenant Lease except
as set forth on the Schedule of Leases.
7.3.3 All of the services required to be supplied to
each tenant and maintained in connection with the Property are presently being
supplied and maintained and will continue to be supplied and maintained up to
and as of the Closing Date.
7.3.4 Seller has received no notices of any failure
of Seller to supply any services which Seller is required to furnish pursuant to
any Tenant Lease, and Seller has received no notice from any tenant (i) to
cancel any Tenant Lease, (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 that an action or proceeding,
voluntary or involuntary, is pending or threatened against such tenant under any
section or sections of any bankruptcy or insolvency law, or (iii) that such
tenant disputes the base rent or escalation rents or the computation of
escalation rents pursuant to its Tenant Lease.
7.3.5 Seller has received no notices of any items of
work, repair, maintenance or construction to be completed by Seller pursuant to
any Tenant Lease for the benefit of any tenant and Seller has no knowledge of
any
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such work to be done.
7.3.6 As of the Closing Date, no tenant shall be
entitled to any additional work during the term of its Tenant Lease, except as
set forth in the leases described on the Schedule of Leases.
7.3.7 The Tenant Leases are in full force and effect
and Seller has received no notice of any default by the landlord thereunder and
has no knowledge of any fact or facts which 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 Schedule of Leases.
7.3.8 As of the Closing Date, there will be no
brokerage or other leasing commissions payable in connection with any of the
tenants or the Tenant Leases or any new leases or amendments of existing Tenant
Leases.
7.3.9 All of the Tenant Leases are assignable to
Buyer in connection with its purchase of the Property without the necessity for
any approval, consent or additional payment.
7.4 Condition of Property. The Property is in good condition
and repair and free from any defects, including, without limitation,
environmental, erosion, drainage or soil problems, physical, structural,
mechanical, construction or electrical defects, defects in the parking lot
pavement, or defects in utility systems. There is no material fact which has not
been disclosed to Buyer in writing which has or could reasonably be expected to
have a material adverse effect upon the Property, or the use or value thereof.
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 to state a material fact necessary to make the
statements contained herein not materially misleading.
7.5 Special Assessments or Condemnation. There are not
presently pending (i) any special assessments, except those shown as exceptions
on the PTR, or (ii) condemnation actions against the Property or any part, and
Seller has not received notice of any contemplated special assessments or
eminent domain proceedings that would affect the Property.
7.6 Utilities. 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 pursuant to valid permits, are in good
working order, and are adequate to service the Property.
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7.7 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 "L" (the "Service Contracts") and, except as set forth on such
schedule, all Service Contracts are cancellable without cost at the option of
Seller or the then owner of the Property upon not more than thirty (30) days
prior written notice. All of the Service Contracts are assignable to Buyer in
connection with its purchase of the Property without the necessity for any
approval, consent or additional payment.
7.8 Employees. There are no employees who are employed by
Seller nor any manager of the Property in the operation, management or
maintenance of the Property.
7.9 Defaults. 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 which,
after notice or lapse of time, 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; nor does Seller know of any
reason that there is likely to be a default under any of the documents.
7.10 Consents and Releases. Seller has obtained all required
consents, releases, and permissions to convey good, marketable and indefeasible
title to Buyer.
7.11 Authority. This Agreement and all other documents
delivered prior to or at the Closing (i) have been duly authorized, executed,
and delivered by Seller; (ii) are binding obligations of Seller; (iii) are
collectively sufficient to transfer all of Seller's rights to the Property; and
(iv) do not violate the formation documents of Seller. Seller further represents
that it 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 Georgia.
7.12 Bankruptcy. No filing or petition under the United States
Bankruptcy Law or any insolvency laws, or any laws for composition of
indebtedness or for the reorganization of debtors has been filed with regard to
Seller.
7.13 Foreign Investment In Real Property Tax Act. Seller is
not a foreign person within the meaning of 42 USCS ss. 1445(f)(3).
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7.14 Existing Approvals. The documents set forth on Exhibit
"M" attached hereto (collectively, the "Approvals") are in full force and effect
and, to Seller's Knowledge, constitute all necessary or appropriate
certifications, approvals, consents, authorizations, licenses, permits,
easements, rights of way, and all valid, final and unconditional certificates of
occupancy, or the equivalent permitting required by the applicable licensing
agency, required by any governmental authority in connection with the ownership,
development, use and maintenance of the Property. To Seller's Knowledge, all of
the Approvals are transferable to Buyer without the necessity of any approval or
consent or additional payment and no such transfer will affect the validity
thereof.
7.15 Insurance. There are currently in effect casualty and
liability insurance policies with respect to the Property. All premiums due on
such insurance policies have been paid by Seller and Seller will maintain such
insurance policies from the date hereof through the Closing Date or earlier
termination of this Agreement. Seller has not received and has no knowledge of
any notice or request from any insurance company requesting the performance of
any work or alteration with respect to the Property. Seller has received no
notice from any insurance company concerning, nor is Seller aware of, any
defects or inadequacies in the Property which, if not corrected, would result in
the termination of insurance coverage or increase its cost.
7.16 Litigation. Except as set forth on the schedule attached
hereto as Exhibit "N", there are no actions, suits or proceedings before any
judicial or quasi-judicial body, by any governmental authority or other third
party, pending, or to Seller's Knowledge, threatened, against or affecting all
or any portion of the Property and to Seller's Knowledge, there is no basis for
any such action. There are no actions, suits or proceedings pending,
contemplated or threatened by Seller in connection with all or any portion of
the Property or Seller's ownership, rights, use, development or maintenance
thereof, including, without limitation, tax reduction proceedings; and from and
after the date hereof, Seller shall not commence or allow to be commenced on its
behalf any action, suit or proceeding with respect to all or any portion of the
Property without the prior written consent of Buyer. 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. In the event any proceeding of the character
described in this Section 7.18 is initiated prior to the Closing, Seller shall
promptly advise Buyer in writing.
7.17 Compliance with Laws. The Property is in full compliance
with all existing laws, rules, regulations, ordinances and orders of all
applicable
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federal, state, city and other governmental authorities in effect as of the date
of this Agreement (collectively, "Laws"), including, without limitation, all
Laws with respect to zoning, building, fire and health codes, environmental
protection and sanitation and pollution control. Seller has received no notice
of, and has no knowledge of, any condition currently or previously existing on
the Property or any portion thereof which may give rise to any violation of any
existing Law applicable to the Property if it were disclosed to the authorities
having jurisdiction over the Property.
7.18 No Restriction on Access. To Seller's Knowledge, no fact
or condition exists which would prohibit or adversely affect the right of access
to or from the Property from or to the existing highways and roads (all of such
existing highways and roads being duly opened and dedicated to the municipality
having jurisdiction thereof) and Seller has no knowledge of any pending or
threatened restriction or denial, governmental or otherwise, upon such ingress
and egress.
7.19 Storm Drainage. All storm water flowing from the Property
drains either into a public system or onto a permitted location and through
easements for the benefit of the Property.
7.20 Soils. Seller has no knowledge of any soil conditions
adversely affecting the Property or any part thereof or Buyer's intended use.
7.21 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 Seller is a party or by which Seller 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 Seller or all or
any portion of the Property.
7.22 Toxic or Hazardous Materials.
7.22.1 Definitions.
(a) "Environmental Claim" means any claim, action,
cause of action, investigation or notice (written or oral) by any person or
entity alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources
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damages, property damages, personal injuries, or penalties) arising out of,
based on or resulting from (i) the manufacture, treatment, processing,
distribution, use, transport, handling, deposit, storage, disposal, leaking or
other presence, or release into the environment of any "Material of
Environmental Concern" (as hereinafter defined) in, at, on, under or about any
location, whether or not owned or operated by Seller or (ii) circumstances
forming the basis of any violation, or alleged violation, of any "Environmental
Law" (as defined below).
(b) "Environmental Laws" means all federal, state and
local laws and regulations relating to pollution or protection of human health
or the environment (including, without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
(c) "Material of Environmental Concern" means
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products.
7.22.2 Representations and Warranties. Seller
represents and warrants to and agrees with Buyer that, as of the date hereof,
and as of the Closing Date: (i) each of the Property and Seller is in full
compliance with all applicable Environmental Laws relating to the Property,
which compliance includes, but is not limited to, the possession by Seller of
all permits and other governmental authorities required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (ii)
Seller has not received any communication (written or oral), whether from a
governmental authority, citizens group, employee or other third party, that
alleges that Seller is not in such full compliance and there are no
circumstances that may prevent or interfere with such full compliance in the
future; (iii) there is no Environmental Claim pending or, to Seller's Knowledge,
threatened with regard to the Property; (iv) there are no past or present
actions, activities, circumstances, conditions, events or incidents relating to
the Property, including, without limitation, the manufacture, treatment,
processing, distribution, use, transport, handling, deposit, storage, disposal,
leaking, or other presence or release of any Material of Environmental Concern,
that could form the basis of any Environmental Claim against (a) Seller or (b)
any other person or entity, including, without limitation, persons or entities
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 stored,
disposed or arranged for
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the disposal of Materials of Environmental Concern on the Property, except in
accordance with applicable Environmental Laws, as disclosed on Exhibit "Q"
attached hereto (b) there are no underground storage tanks located on the
Property, (c) there is no asbestos contained in or forming part of any
Improvement, including, without limitation, any building, building component,
structure or office space on the Property, and (d) no polychlorinated biphenyls
(PCBs) are used or stored at the Property.
7.22.3 Indemnification. Seller agrees to indemnify,
reimburse, defend, and hold Buyer harmless from, for and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest, penalties,
reasonable attorneys' fees, charges, disbursements and expenses actually
incurred, and reasonable consultants' fees, charges, disbursements and expenses,
asserted against, resulting to, imposed on, or incurred by Buyer, directly or
indirectly, in connection with (i) the breach of any representation or warranty
set forth in Section 7.21.2 of this Agreement or (ii) any event or condition,
whether known or unknown to Seller or disclosed in any report provided to Buyer,
which results, directly or indirectly, in an Environmental Claim, to the extent
such event or condition occurred, existed, or arose out of conditions that
occurred or existed, or were caused, in whole or in part, on or before the
Closing.
7.23 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 Deed and other Closing instruments
and documents for two (2) years. If Seller is unable to reaffirm any warranty or
representation in Section 7 because of a change in facts or circumstances not
caused by Seller, Seller will identify the change in either a notice given
pursuant to Section 9.2 or in the reaffirmation delivered at Closing and the
sole and exclusive remedy of Buyer available as a result of such change shall be
to terminate this Agreement by giving written notice to Seller not later than
the date of Closing, whereupon Escrow Agent shall return the Deposit to Buyer,
Seller will pay the cancellation charges of Escrow Agent and neither party will
have any further rights, duties or obligations under this Agreement, except
those obligations which expressly survive termination.
7.24 Seller's Knowledge. As used in this Agreement, the phrase
"to Seller's Knowledge" and words of similar import shall mean the best
knowledge of Mark Reynolds and Jack Luchese, after reasonable inquiry and
investigation of the files and materials readily available to such persons.
Seller represents and warrants that the foregoing persons are those persons
affiliated with Seller possessing the greatest experience and familiarity with
the Property, and that no other person presently or previously affiliated
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with Seller possesses any equal or greater familiarity and experience with the
Property.
7.25 As-Is. Except as expressly set forth herein, including,
without limitation elsewhere in this Article 7, and except for those warranties
in the Deed, Seller shall convey the Property to Buyer in its present "AS-IS"
condition, without any warranties, expressed or implied.
8. 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:
8.1 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.
8.2 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, creditor, investor, judicial or administrative body, governmental
authority or other party is required in connection herewith which has not been
obtained.
8.3 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
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<PAGE> 26
be valid, binding and enforceable obligations of Buyer.
9. ADDITIONAL 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:
9.1 Title. Seller shall not directly or indirectly sell,
assign or create any right, title or interest whatsoever in or to the Property,
or create or permit to exist thereon any lien, charge or encumbrance other than
the Permitted Exceptions, or enter into any agreement to do any of the
foregoing, including, without limitation, any new Tenant Leases (or renewals,
modifications or extensions of any Tenant Leases) or Service Contracts, without
the prior written consent of Buyer, except that Seller may enter into the
Permitted Leases as contemplated by Section 6.2.8.
9.2 Notice of Change in Circumstances. Seller shall promptly
notify Buyer of any change in any condition with respect to the Property or any
portion thereof or of any event or circumstance of which Seller becomes aware
subsequent to the date of this Agreement which (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 9.2 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.
9.3 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, the Service
Contracts and any existing indebtedness relating to the Property. Seller shall
operate and maintain the Property in accordance with Seller's past practice and
all applicable Laws affecting the Property or any portion thereof.
9.4 Exclusive Negotiations. Seller shall (i) remove the
Property from the market, (ii) cease and refrain from any and all negotiations
with any other prospective optionees or purchasers of the Property, and (iii)
advise Buyer of any negotiations with current or potential tenants at the
Property.
9.5 Development Activities. Seller shall not take any actions
with
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<PAGE> 27
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 the prior
written consent of Buyer (which consent may be granted or withheld in Buyer's
sole and absolute discretion). Seller hereby agrees to reasonably cooperate with
Buyer, at no expense to Seller, in Buyer's efforts to obtain such governmental
approvals as Buyer deems necessary to permit Buyer to operate the Property as
Buyer wishes.
9.6 No Pre-Paid Rent. Seller shall not accept any rent from
any Tenant (or any new tenant under any new lease to which Buyer has consented)
for more than one (1) month in advance of the payment date.
9.7 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 the prior
written consent of Buyer (which consent may be withheld in Buyer's sole and
absolute discretion), unless the same shall be cancellable without penalty or
premium, upon not more than thirty (30) days' notice from the owner of the
Property and Seller shall immediately notify Buyer of any such entrance,
extension, renewal or replacement
9.8 New Leases. Seller shall advise Buyer of any and all
negotiations with current or potential tenants of the Property. Seller shall not
enter into any new lease or extend any Tenant Lease without Buyer's prior
written consent, which consent may be withheld in Buyer's sole and absolute
discretion.
10. RISK OF LOSS.
10.1 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 which has not been consummated),
Seller shall immediately notify Buyer of such fact after obtaining notice
thereof. In such event, Buyer shall have the option to terminate this Agreement
upon written notice to Seller given not later than thirty (30) days after
receipt of such notice from Seller. Upon such termination, Escrow Agent shall
return the Deposit to Buyer, the parties shall equally share the cancellation
charges of Escrow Agent and Title Company, and neither party shall have any
further rights or obligations hereunder, other than pursuant to any provision
hereof which expressly survives the termination of this
25
<PAGE> 28
Agreement. If Buyer does not elect to terminate this Agreement, Seller shall
assign and turn over to Buyer, and Buyer shall be entitled to receive and keep,
all awards for the taking by condemnation or Buyer shall be deemed to have
accepted the Property subject to the taking without reduction in the Purchase
Price.
10.2 Casualty. Prior to the Closing and notwithstanding the
pendency of this Agreement, the entire risk of loss or damage by earthquake,
flood, landslide, fire, hurricane, tornado or other casualty shall be borne and
assumed by Seller. If, prior to Closing any part of the Property is damaged or
destroyed by earthquake, flood, landslide, fire, hurricane, tornado or other
casualty (the "Casualty"), Seller shall immediately notify Buyer of such fact.
In such event, Buyer shall have the option to terminate this Agreement in
accordance with the preceding section upon written notice to Seller given not
later than thirty (30) 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 destruction (which shall then be repaired or not at
Buyer's option and cost), plus Seller shall pay over to Buyer an amount equal to
the deductible amount with respect to the insurance and the parties shall
proceed to Closing pursuant to the terms hereof without modification of the
terms of this Agreement and without any reduction in the Purchase Price. 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. At Buyer's sole option, if the Casualty causes less than $50,000 total
damage, (a) Seller shall, at Seller's sole cost, restore the Property to at
least the same condition as of the effective date of this Agreement, and the
Closing shall be postponed, or (b) Seller shall assign and turn over, and Buyer
shall be entitled to receive and keep, all insurance proceeds payable with
respect to such destruction (which shall then be repaired), plus Seller shall
pay over to Buyer an amount equal to the deductible amount with respect to the
insurance and the parties shall proceed to Closing pursuant to the terms hereof
without modification of the terms of this Agreement and without any reduction in
the Purchase Price.
11. LIQUIDATED DAMAGES; SPECIFIC PERFORMANCE.
11.1 Liquidated Damages. 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.
THE PARTIES THEREFORE AGREE THAT IN THE EVENT THAT ESCROW AND THIS TRANSACTION
FAIL TO
26
<PAGE> 29
CLOSE SOLELY AS A RESULT OF THE DEFAULT OF BUYER IN THE PERFORMANCE OF ITS
OBLIGATIONS HEREUNDER AND SELLER IS READY, WILING AND ABLE TO PERFORM ITS
OBLIGATIONS HEREUNDER, SELLER, AS SELLER'S SOLE AND EXCLUSIVE REMEDY, IS
ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF THE DEPOSIT (INCLUSIVE OF
INTEREST AND DIVIDENDS EARNED THEREON) THEN HELD BY ESCROW AGENT. 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, AND (3) ESCROW AGENT SHALL
DELIVER THE DEPOSIT (INCLUSIVE OF INTEREST AND DIVIDENDS EARNED THEREON) THEN
HELD BY ESCROW AGENT TO SELLER PURSUANT TO SELLER'S INSTRUCTIONS, AND THE SAME
SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES. SELLER AND BUYER ACKNOWLEDGE
THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS SECTION 11.1, AND BY
THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
- --------------------- ----------------------
Seller's Initials Buyer's Initials
11.2 Default by Seller. In the event that the Closing of the
transaction contemplated in this Agreement does not occur by reason of any
default by Seller, then (i) Escrow Agent shall return the Deposit to Buyer and
(ii) Buyer shall be entitled to pursue, as its exclusive remedies, either (a)
the specific performance of this Agreement, provided that such action is filed
within sixty (60) days of the alleged default by the Seller, or (b) recovery of
the expenses and losses incurred by Buyer, directly or indirectly, as a result
of Seller's breach in an amount not to exceed $125,000 plus all of Buyer's due
diligence costs, attorneys' fees and costs actually incurred; provided, however,
that any claims by Buyer for fraud are not subject to this recovery limit.
12. BROKERS.
Seller and Buyer each hereby represent, warrant to and agree
with each other that there are no broker or finder fees or commissions payable
in connection with the transaction contemplated hereby, other than those
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<PAGE> 30
payable to Atlanta Real Estate Partners which shall be paid by Seller in
accordance with a separate agreement. Seller shall indemnify, protect, defend
and hold Buyer harmless from and against any and all claims, losses, damages,
costs and expenses (including reasonable attorneys' fees, charges and
disbursements) actually incurred by Buyer by reason of any breach or inaccuracy
of the representation, warranty and agreement of Seller contained in this
Section 12. Buyer shall indemnify, protect, defend and hold Seller harmless from
and against any and all claims, losses, damages, costs and expenses (including
reasonable attorneys' fees, charges and disbursements) actually incurred by
Seller by reason of any breach or inaccuracy of the representation, warranty and
agreement of Buyer contained in this Section 12. The provisions of this Section
12 shall survive the Closing or earlier termination of this Agreement and not be
subject to the limitations contained in Section 11.
13. CONFIDENTIALITY.
13.1 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 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 and materials supplied 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.
13.2 Seller. Seller agrees that both prior to and after the
Closing, except as otherwise provided herein (including the Estoppel
Certificates) or required by law, and except for the exercise by Seller of any
remedy hereunder, Seller shall (a) keep confidential the pendency of this
transaction with Buyer 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
28
<PAGE> 31
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.
14. INDEMNIFICATION.
Buyer hereby agrees to indemnify, 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. Seller
hereby agrees to indemnify, 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 14 shall survive the Closing.
15. MISCELLANEOUS PROVISIONS.
15.1 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 Georgia, without regard to its
principles of conflicts of law.
15.2 Entire Agreement; Modifications; Waiver.
15.2.1 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
29
<PAGE> 32
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 December
2, 1997, between Buyer and Seller, shall terminate and be of no further force or
effect.
15.2.2 Modification. 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.
15.3 Notices. All notices, consents, requests, reports,
demands or other communications hereunder (collectively, "Notices") shall be in
writing and may be given by (i) personal delivery which shall be deemed given
when received, (ii) reputable overnight courier which shall be deemed given the
business day following the date on the courier's receipt of pick-up, subject to
acts of God or war, governmental restrictions, strikes, or other reasons beyond
the control of either Buyer or Seller.
30
<PAGE> 33
To Buyer: Alexandria Real Estate Equities, Inc.
135 N. Los Robles Ave., Suite 250
Pasadena, California 91101
Attention: Corporate Secretary
Telephone: (626) 578-0777
Facsimile: (626) 578-0770
With A Copy to: Alexandria Real Estate Equities, Inc.
11440 West Bernardo Court, Suite 170
San Diego, California 92127
Attention: Gary A. Kreitzer, Esq.
Telephone: (619) 592-6801
Facsimile: (619) 592-6814
With A Copy To: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: George M. Eshaghian, Esq.
Telephone: (213) 687-5215
Facsimile: (213) 687-5600
To Seller: Proceutics, Inc.
c/o CytRx Corporation
154 Technology Parkway
Norcross, Georgia 30092
Attention: Mr. Jack Luchese
Telephone: (770) 368-9500
Facsimile: (770) 448-3357
With A Copy To: Alston & Bird
1201 W. Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Homer Lee Walker, Esq.
Telephone: (404) 881-7338
Facsimile: (404) 881 7777
To Escrow Agent: Chicago Title Insurance Company
-----------------------------------
-----------------------------------
Attention:
-------------------------
Telephone:
-------------------------
Facsimile:
-------------------------
31
<PAGE> 34
15.4 Expenses. Subject to the allocation of Closing Costs
provided in Section 6.6 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.
15.5 Assignment.
15.5.1 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 to delegate any duties or obligations
arising under this Agreement, voluntarily, involuntarily, or by operation of
law, without Buyer's prior written consent.
15.5.2 Buyer's Right to Assign. Except as otherwise
provided in this Agreement, Buyer shall have the right, power, and authority to
assign this Agreement (including, without limitation, an assignment for security
purposes) or any portion of this Agreement or to delegate any duties or
obligations arising under this Agreement, voluntarily, involuntarily or by
operation of law, without Seller's consent. Upon an assignment, Buyer shall be
relieved of all obligations under this Agreement and the Escrow, except the
indemnification obligations of Buyer pursuant to Section 4.7 and Section 12 of
this Agreement, which shall expressly survive assignment.
15.6 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.
15.7 Successors and Assigns; Third Parties. Subject to and
without waiver of the provisions of Section 15.5 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.
15.8 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary and convenient, and by the
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<PAGE> 35
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.
15.9 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.
15.10 Time of the Essence. Time shall be of the essence with
respect to all matters contemplated by this Agreement.
15.11 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.
15.12 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.
15.13 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 may have been prepared by counsel for one of the
parties.
15.14 Post-Closing Access to Records. Upon receipt by Seller
of Buyer's reasonable written request at anytime and from time to time within a
period of one (1) year after the Closing, Seller shall make available (or cause
its property 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, (i) all accounting
records relating to the Property (but not confidential records relating to
Seller's business conducted on the Property) for the calendar year period ended
December 31, 1997, and for the period from January 1, 1998 through the Closing
Date, including, without limitation, all general ledgers, cash receipts,
cancelled 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 the possession or control of
Seller or Seller's property manager, asset manager or other agent.
15.15 Exhibits. All exhibits attached hereto are hereby
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<PAGE> 36
incorporated by reference as though set out in full herein.
15.16 Attorneys' Fees. In the event that either party hereto
brings an action or proceeding against the other party to enforce or interpret
any of the covenants, conditions, agreements or provisions of this Agreement,
the prevailing party in such action or proceeding shall be entitled to recover
all costs and expenses of such action or proceeding, including, without
limitation, reasonable attorneys' fees, charges and disbursements actually
incurred, and the reasonable fees and costs of expert witnesses actually
incurred.
15.17 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, Sunday or legal holiday, the date for
performance thereof shall be extended to the next Business Day.
[Remainder of page intentionally blank.]
<PAGE> 37
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
Execution Date: ________, 1998 By:
---------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SELLER:
PROCEUTICS, INC.,
a Delaware corporation
Execution Date: ________, 1998 By:
---------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
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 INSURANCE COMPANY Date: , 1998
By:
---------------------------------------
Name:
-----------------------------
Its:
------------------------------
35
<PAGE> 38
LIST OF EXHIBITS
EXHIBIT "A" LEGAL DESCRIPTION [TO BE PROVIDED BY SELLER]
EXHIBIT "B" PERSONAL PROPERTY INVENTORY
EXHIBIT "C" ESTOPPEL CERTIFICATE
EXHIBIT "D" PROPERTY QUESTIONNAIRE
EXHIBIT "E" SURVEYOR'S CERTIFICATE
EXHIBIT "F" DEED
EXHIBIT "G" SELLER'S CERTIFICATE
EXHIBIT "H" NONFOREIGN AFFIDAVIT
EXHIBIT "I" ASSIGNMENT OF LEASES
EXHIBIT "J" BILL OF SALE AND ASSIGNMENT
EXHIBIT "K" SCHEDULE OF LEASES
EXHIBIT "L" SERVICE CONTRACTS
EXHIBIT "M" APPROVALS
EXHIBIT "N" LITIGATION
EXHIBIT "O" NEW LEASE - 150 TECHNOLOGY PARKWAY
EXIBHIT "P" AFFIDAVIT OF SELLER'S RESIDENCE
EXHIBIT "Q" DISCLOSED STORAGE OR DISPOSAL OF MATERIALS OF
ENVIRONMENTAL CONCERN [TO BE PROVIDED BY SELLER]
<PAGE> 1
EXHIBIT 13.1
Selected Portions of the
CytRx Coporation 1997 Annual Report to Stockholders
<PAGE> 2
FIVE YEAR SELECTED FINANCIAL DATA *
- -----------------------------------
CytRx Corporation and Subsidiaries
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Revenues:
Net Sales $ 14,347,461 $ 1,591,123 $ 512,528 $ 500,814 $ 506,317
Investment and other income 1,439,419 1,452,867 2,030,802 1,987,204 4,038,221
-------------- ------------ ------------- ------------ ------------
Total revenues 15,786,880 3,043,990 2,543,330 2,488,018 4,544,538
Loss from continuing operations (5,915,060) (4,343,812) (10,652,582) (7,700,186) (3,228,600)
Loss from discontinued operations (137,932) (1,447,967) -- -- --
Net loss (6,052,992) (5,791,779) (10,652,582) (7,700,186) (3,228,600)
Basic and diluted loss per common share:
Loss from continuing operations (0.80) $ (0.56) $ (1.35) $ (0.98) $ (0.41)
Loss from discontinued operations (0.02) (0.19) -- -- --
-------------- ------------ ------------- ------------ ------------
Net loss (0.82) (0.75) (1.35) (0.98) (0.41)
Balance Sheet Data:
Total assets $ 24,905,995 24,299,322 $30,959,983 $ 38,660,567 $ 49,760,261
Total stockholders' equity 19,248,395 22,337,734 29,770,485 38,026,347 47,685,269
</TABLE>
*Restated for discontinued operations.
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At December 31, 1997 the Company had cash and short-term investments of
$5.9 million and net assets of $19.2 million, compared to $11.0 million and
$22.3 million, respectively, at December 31, 1996. Working capital totaled $7.1
million at December 31, 1997, compared to $10.2 million at December 31, 1996.
Management believes that cash and investments on hand, combined with
interest income and operating revenues, are sufficient to satisfy the Company's
current liquidity and working capital needs, but it is likely that additional
funding will be required to accomplish the necessary testing and data collection
procedures prescribed by the U.S. Food and Drug Administration for the
commercialization of any products for human use. Definitive statements as to the
time required and costs involved in reaching certain objectives for the
Company's products are difficult to project due to the uncertainties of the
medical research field. Requirements could vary depending upon the results of
research, competitive and technological developments, and the time and expense
required for governmental approval of products, some of which factors are beyond
management's control. CytRx anticipates that it may raise funds through equity
financings of its remaining subsidiaries, either directly by the subsidiary
through issuance of the subsidiary's stock, or through sale by CytRx of all, or
a portion, of its ownership in a subsidiary. CytRx is currently negotiating
with a third party for the sale of the cattle implant marketing operations of
VetLife. Additional funding for research and development expenditures may be
obtained through joint ventures and product licensing arrangements with other
companies.
During 1996 and 1997, the Company received federal government funding
for certain research and development activities via several Small Business
Innovative Research (SBIR) grants. Most recently, the Company received a grant
from the U.S. Food and Drug Administration's Division of Orphan Drug Development
to support CytRx's Phase III clinical trial of FLOCOR. This grant will provide
approximately $400,000 over two years to help defray the overall costs of the
study. The Company intends to continue to seek government assistance for its
product development efforts.
In October 1997, CytRx sold $2.0 million of convertible notes through a
private placement, realizing approximately $1.8 million in net proceeds. (See
Note 6 to Financial Statements.) CytRx has the option to sell an additional $2.0
million to the same investors under certain conditions.
In February 1998, CytRx's wholly-owned subsidiary, Proceutics, Inc.
consummated a sale of substantially all of its non-real estate assets to Oread
Laboratories, Inc. ("Oread") for approximately $2.1 million. (See Note 12 to
Financial Statements.) Also, in February 1998, the Company entered into an
agreement with Alexandria Real Estate Equities, Inc. ("Alexandria") pursuant to
which Alexandria will purchase the building owned by Proceutics and assume the
existing lease with Oread. CytRx will also sell its building to Alexandria and
simultaneously
<PAGE> 4
execute a ten year lease. Total proceeds from this transaction, which is
expected to be consummated in April 1998 will be $4.5 million. (See Note 13 to
Financial Statements.)
As of December 31, 1997, the Company had outstanding firm purchase
commitments of approximately $46.0 million related to minimum annual volumes
under certain contracts covering a period of four years.
At December 31, 1997 the Company had net operating loss carryforwards
for income tax purposes of approximately $44.6 million, which will expire in
2000 through 2012 if not utilized. The Company also has research and development
credits available to reduce income taxes, if any, of approximately $1.1 million
which will expire in 2000 through 2010 if not utilized. Based on an assessment
of all available evidence including, but not limited to, the Company's limited
operating history and lack of profitability, uncertainties of the commercial
viability of the Company's technology, the impact of government regulation and
healthcare reform initiatives, and other risks normally associated with
biotechnology companies, the Company has concluded that it is more likely than
not that these net operating loss carryforwards and credits will not be realized
and, as a result, a 100% deferred tax valuation allowance has been recorded
against these assets..
The above statements regarding the Company's plans and expectations for
future financing are forward-looking statements that are subject to a number of
risks and uncertainties. The Company's ability to obtain future financings
through joint ventures, product licensing arrangements, equity financings or
otherwise is subject to market conditions and the Company's ability to identify
parties that are willing and able to enter into such arrangements on terms that
are satisfactory to the Company. There can be no assurance that the Company will
be able to obtain future financing from these sources. Additionally, depending
upon the outcome of the Company's fund raising efforts via its subsidiaries
discussed above, the accompanying financial information may not necessarily be
indicative of future operating results or future financial condition.
Results of Operations
The following table presents the breakdown of consolidated results of
operations by operating unit for 1997, 1996 and 1995. Although the subsequent
discussion addresses the consolidated results of operations for CytRx and its
subsidiaries, management believes this presentation of net results by operating
unit is important to an understanding of the consolidated financial statements
taken as a whole.
<PAGE> 5
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------
(in thousands) 1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
CytRx $(4,462) $(2,205) $ (8,441)
Vaxcel (2,599) (1,124) (1,386)
Vetlife 1,146 (1,015) (826)
------- ------- --------
Net loss from Continuing Operations $(5,915) $(4,344) $(10,653)
Proceutics (discontinued operations) (138) (1,448) -
------- ------- --------
Net loss $(6,053) $(5,792) $(10,653)
======= ======= ========
</TABLE>
Consolidated net sales from continuing operations for 1997 were
$14,347,000, as compared to $1,591,000 in 1996 and $513,000 in 1995. Cost of
sales from continuing operations was $7,206,000 in 1997, $652,000 in 1996,and
$50,000 in 1995. The dramatic increase in net sales was due to the initiation of
sales and marketing activities by Vetlife during the fourth quarter of 1996. The
significant components of net sales are shown below.
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
(in thousands) 1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Product Sales (Vetlife) $13,469 $711 $ -
Product Sales (CytRx) 456 522 513
Services (CytRx) 422 358 -
------- ------ ------
Net Sales from Continuing Operations $14,347 $1,591 $ 513
====== ====== ======
</TABLE>
Investment income from continuing operations was $797,000 in 1997, as
compared to $1,169,000 in 1996 and $1,804,000 in 1995. The decrease for each
year is attributable to declining cash and investment balances. In 1995 CytRx
chose to convert the majority of its short-term investments into cash
equivalents. At January 1, 1995, the Company had $2.5 million in unrealized
losses as a result of 1994's dramatic increase in interest rates. By taking
advantage of strength in the bond market during the second quarter of 1995,
CytRx reduced its unrealized losses by $1.4 million, recording non-cash charges
of $1.1 million during 1995. These charges are shown as a separate line item in
the Consolidated Statements of Operations. Due to the higher yield on its
longer-term investments during the period in which these losses were incurred
and then recognized (February 1994 to June 1995), total investment income, net
of realized losses, exceeded the amount of potential investment income which
would have been realized had the Company avoided such losses by investing in
shorter-term securities.
Research and development expenditures from continuing operations during
1997 were $4,649,000 versus $2,806,000 in 1996 and $7,071,000 in 1995. The
decrease from 1995 to 1996 was primarily due to a shift of personnel and capital
resources from the Company's internal research efforts to Proceutics, coupled
with a broader base of selling and administrative activities in Proceutics and
Vetlife to which overall facilities costs and shared services are allocated,
thereby reducing such allocations to research and development. Research and
development expenditures increased in 1997 as a result of the Company's
development activities for
<PAGE> 6
FLOCOR, including the completion of a Phase II clinical trial and preparation
for a Phase III trial which was initiated in March 1998. The Company also
devoted significant resources toward addressing manufacturing issues for FLOCOR.
In 1997, the Company recognized a $951,000 charge for acquired in-process
research and development as a result of Vaxcel's acquisition of Zynaxis (See
Note 5 to Financial Statements). The acquisition of this in-process research and
development did not significantly impact the Company's ongoing research and
development expenditures during 1997; however, the Company anticipates
significant future expenditures will be required to continue development of
these technologies into commercially viable products. Such expenditures will be
limited by Vaxcel's available capital resources.
Selling, general and administrative expenses from continuing operations
during 1997 were $8,846,000 as compared to $3,929,000 in 1996 and $3,575,000 in
1995. The increase from 1996 to 1997 is primarily due to the initiation of
selling activities for Vetlife. Management believes that inflation had no
material impact on the Company's operations during the three year period ended
December 31, 1997.
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. As a result,
those computer programs having time-sensitive software would recognize a date
using "00" as the year 1900 rather than the year 2000.
Based on a recent assessment, the Company determined that its
accounting software will need to be updated or modified. This should be
accomplished through updates from the software manufacturer. The Company does
not expect any material costs associated with this modification or any
disruptions to its primary operations. The Company anticipates no other year
2000 problems which are reasonably likely to have a material adverse effect on
the Company's operations. There can be no assurance, however, that such problems
will not arise.
Impact of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, Reporting Comprehensive Income ("Statement 130"). Statement
130 establishes new standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
These new standards require that all items recognized as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Statement 130 is effective
for fiscal years beginning after December 15, 1997. The adoption of Statement
130 will not impact the Company's consolidated financial statements.
In June 1997, the FASB issued Statement 131, Disclosures About Segments
of an Enterprise and Related Information ("Statement 131"). Statement 131
changes the way public companies report segment information in annual financial
statements and also requires those companies to report selected segment
information in interim financial reports. Statement 131 is
<PAGE> 7
effective for periods beginning after December 15, 1997. The adoption of
Statement 131 will not have a significant impact on the Company's consolidated
financial statements.
<PAGE> 8
CONSOLIDATED BALANCE SHEETS
CytRx Corporation and Subsidiaries
<TABLE>
<CAPTION>
December 31,
-------------------------------
ASSETS 1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,895,008 $ 1,429,207
Short-term investments - 9,564,827
Accounts receivable 1,917,013 643,079
Inventories 2,272,798 9,508
Other current assets 29,157 532,399
------------ ------------
Total current assets 10,113,976 12,179,020
Property and equipment, net 4,713,586 5,012,809
Other assets:
Long-term investments (restricted) 5,326,647 5,979,430
Notes receivable 400,000 975,000
Acquired developed technology and other intangibles, net 4,095,347 -
Other 256,439 153,063
------------ ------------
Total other assets 10,078,433 7,107,493
------------ ------------
Total assets $ 24,905,995 $ 24,299,322
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,273,303 $ 586,920
Accrued liabilities 1,599,628 1,123,476
Unearned revenue 166,187 251,192
------------ ------------
Total current liabilities 3,039,118 1,961,588
6% Convertible debentures 2,000,000 -
Minority interest in Vaxcel,Inc. 618,482 -
Commitments
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000 shares authorized,
including 1,000 shares of Series A Junior Participating Preferred
Stock; no shares issued and outstanding - -
Common stock, $.001 par value, 18,750,000 shares authorized;
7,986,441 and 7,945,203 shares issued at December 31, 1997
and 1996, respectively 7,986 7,945
Additional paid-in capital 65,793,491 62,653,015
Treasury stock, at cost (555,154 and 507,750 shares held at
December 31, 1997 and 1996, respectively) (2,198,533) (2,021,669)
Accumulated deficit (44,354,549) (38,301,557)
------------ ------------
Total stockholders' equity 19,248,395 22,337,734
------------ ------------
Total liabilities and stockholders' equity $ 24,905,995 $ 24,299,322
============ ============
</TABLE>
See accompanying notes.
<PAGE> 9
CONSOLIDATED STATEMENTS OF OPERATIONS
CytRx Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Net sales $ 14,347,461 $ 1,591,123 $ 512,528
Investment income 797,069 1,168,641 1,803,988
Collaborative, grant and license fee income 337,438 187,667 115,000
Other 304,912 96,559 111,814
------------ ------------ ------------
15,786,880 3,043,990 2,543,330
Expenses:
Cost of sales 7,205,522 652,465 49,789
Research and development 4,648,555 2,806,216 7,070,600
Acquired incomplete research and development 951,017 - -
Selling, general and administrative 8,846,285 3,929,121 3,574,651
Write-off of patent costs - - 1,395,476
Realized loss on short-term investments - - 1,102,622
Interest 293,048 - 2,774
------------ ------------ ------------
21,944,427 7,387,802 13,195,912
------------ ------------ ------------
Loss from continuing operations before minority interest (6,157,547) (4,343,812) (10,652,582)
Minority interest (242,487) - -
------------ ------------ ------------
Loss from continuing operations (5,915,060) (4,343,812) (10,652,582)
Loss from discontinued operations (137,932) (1,447,967) -
============ ============ ============
Net loss $ (6,052,992) $ (5,791,779) $(10,652,582)
============ ============ ============
Basic and diluted loss per common share:
Loss from continuing operations $ (0.80) $ (0.56) $ (1.35)
Loss from discontinued operations (0.02) (0.19) -
============ ============ ============
Net loss $ (0.82) $ (0.75) $ (1.35)
============ ============ ============
Basic and diluted weighted average shares outstanding 7,424,372 7,737,949 7,905,364
</TABLE>
See accompanying notes.
<PAGE> 10
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CytRx Corporation and Subsidiaries
<TABLE>
<CAPTION>
Common Stock Additional Net Unrealized
----------------------
Shares Paid-in Accumulated Loss on
Issued Amount Capital Deficit Investments
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 7,893,962 $ 7,894 $ 62,350,926 $(21,857,196) $(2,475,277)
Issuance of common stock upon
exercise of stock options and other 21,346 21 163,765
Reduction of unrealized loss
on investments 2,475,277
Purchase of treasury stock
Net loss (10,652,582)
----------------------------------------------------------------------
Balance at December 31, 1995 7,915,308 7,915 62,514,691 (32,509,778) -
Issuance of common stock 29,895 30 138,324
Purchase of treasury stock
Net loss (5,791,779)
----------------------------------------------------------------------
Balance at December 31, 1996 7,945,203 7,945 62,653,015 (38,301,557) -
Issuance of common stock 41,238 41 169,373
Purchase of treasury stock
Unrealized gain on sale of shares
of subsidiary 2,706,397
Beneficial conversion feature of
convertible debentures 264,706
Net loss (6,052,992)
----------------------------------------------------------------------
Balance at December 31, 1997 7,986,441 $ 7,986 $65,793,491 $(44,354,549) $ -
======================================================================
<CAPTION>
Treasury
Stock Total
------------------------------
<S> <C> <C>
Balance at December 31, 1994 $ - $ 38,026,347
Issuance of common stock upon
exercise of stock options and other 163,786
Reduction of unrealized loss
on investments 2,475,277
Purchase of treasury stock (242,343) (242,343)
Net loss (10,652,582)
------------------------------
Balance at December 31, 1995 (242,343) 29,770,485
Issuance of common stock 138,354
Purchase of treasury stock (1,779,326) (1,779,326)
Net loss (5,791,779)
------------------------------
Balance at December 31, 1996 (2,021,669) 22,337,734
Issuance of common stock 169,414
Purchase of treasury stock (176,864) (176,864)
Unrealized gain on sale of shares
of subsidiary 2,706,397
Beneficial conversion feature of
convertible debentures 264,706
Net loss (6,052,992)
------------------------------
Balance at December 31, 1997 $(2,198,533) $ 19,248,395
==============================
</TABLE>
See accompanying notes.
<PAGE> 11
Consolidated Statements of Cash Flows
CytRx Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (6,052,992) $ (5,791,779) $(10,652,582)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 607,349 655,006 568,542
Amortization 145,644 - -
Charge for acquired incomplete research and development 951,017 - -
Charge for beneficial conversion feature of
convertible debentures 264,706 - -
Write-off of patent costs - - 1,395,476
Write-off of fixed assets - - 136,647
Minority interest in net loss of subsidiary (242,487) - -
Changes in assets and liabilities:
Receivables (979,874) (552,002) (22,487)
Inventories (2,263,290) (3,190) 333
Note receivable - (975,000) -
Other assets 537,902 (162,443) 168,299
Accounts payable 640,383 320,795 (18,054)
Unearned revenue (85,005) 251,192 -
Other liabilities 382,053 200,103 573,332
------------ ------------ ------------
Total adjustments (41,602) (265,539) 2,802,088
------------ ------------ ------------
Net cash used in operating activities (6,094,594) (6,057,318) (7,850,494)
Cash flows from investing activities:
Purchases of held-to-maturity securities (22,103,140) (12,024,022) (9,632,312)
Sales of available-for-sale securities - - 26,437,732
Maturities of held-to-maturity securities 32,399,348 5,036,000 4,625,000
Net cash paid for acquisition (1,257,974) - -
Capital expenditures, net (273,755) (530,051) (251,773)
------------ ------------ ------------
Net cash provided (used) by investing activities 8,764,479 (7,518,073) 21,178,647
Cash flows from financing activities:
Net proceeds from issuance of common stock 169,414 138,354 163,786
Purchase of treasury stock (176,864) (1,779,326) (242,343)
Proceeds from issuance of debt, net of issuance costs 1,803,366 - -
------------ ------------ ------------
Net cash provided (used) by financing activities 1,795,916 (1,640,972) (78,557)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 4,465,801 (15,216,363) 13,249,596
Cash and cash equivalents at beginning of year 1,429,207 16,645,570 3,395,974
------------ ------------ ------------
Cash and cash equivalents at end of year $ 5,895,008 $ 1,429,207 $ 16,645,570
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 23,342 $ - $ 2,774
============ ============ ============
</TABLE>
See accompanying notes
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CYTRX CORPORATION AND SUBSIDIARIES
1. NATURE OF BUSINESS
CytRx Corporation and its subsidiaries (Proceutics, Inc., Vaxcel, Inc.
and Vetlife, Inc.) (collectively the "Company") are engaged in the development
of pharmaceutical products including FLOCOR to treat acute sickle cell crisis
and other vascular diseases and technologies to improve the effectiveness of
vaccines. The Company also markets and distributes products to enhance food
animal growth.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The consolidated financial statements include
the accounts of CytRx Corporation ("CytRx") together with those of its
majority-owned subsidiaries. All significant intercompany transactions have been
eliminated. Certain prior year amounts have been reclassified to conform to the
1997 financial statement presentation. As more thoroughly discussed in Note 12,
Proceutics, Inc. ("Proceutics") is presented as a discontinued operation for all
periods presented.
Reverse Stock Split - All share and per share information in the
accompanying consolidated financial statements and notes thereto has been
retroactively adjusted to reflect a one-for-four reverse stock split approved on
February 5, 1996 by the Company's stockholders, effective February 6, 1996.
Cash Equivalents - The Company considers all highly liquid debt
instruments with an original maturity of 90 days or less to be cash equivalents.
Cash equivalents consist primarily of auction-market preferred stock, commercial
paper and amounts invested in money market accounts.
Restricted Cash - In January 1996 Vetlife, Inc. ("Vetlife") signed an
agreement with IVY Laboratories, Inc. ("IVY") to market and distribute IVY's
line of FDA-approved cattle growth products and devices in North America. In
connection with the agreement, Vetlife was required to obtain a letter of credit
in the amount of $5 million in favor of IVY. Such unused letter of credit is
collateralized by approximately $5.3 and $5.9 million in cash equivalents and
investments at December 31, 1997 and 1996, respectively. Such collateral is
presented as long-term investments in the accompanying consolidated balance
sheet.
Investments - Management determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. Debt securities are classified as held-to-maturity when
the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost. Marketable
equity securities and debt securities not classified as held-to-maturity are
classified as
<PAGE> 13
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses reported in a separate component of
stockholders' equity. Realized gains and losses are included in investment
income and are determined on a first-in, first-out basis (see Note 3).
Fair Value of Financial Instruments - The carrying amounts reported in
the balance sheet for cash and cash equivalents, investments (see Note 3),
accounts receivable, note receivable, accounts payable and convertible
debentures approximate their fair values. The carrying amount reported in the
balance sheet for long-term debt approximates its fair value. The fair value of
such long-term debt is estimated using discounted cash flow analyses based on
the Company's current incremental borrowing rate for similar types of borrowing
arrangements.
Inventories - Inventories, which are comprised primarily of finished
cattle growth promotant products, are valued at the lower of cost or market
using the first-in, first-out (FIFO) method.
Property and Equipment - Property and equipment are stated at cost and
depreciated using the straight-line method based on the estimated useful lives
(twenty years for buildings and five to seven years for equipment and furniture)
of the related assets.
Acquired Developed Technology and Other Intangibles - Acquired
developed technology and other intangible assets, primarily goodwill, (See
Note 5) are amortized over their estimated useful lives (fifteen years) on a
straight-line basis. Management continuously monitors and evaluates the
realizability of recorded acquired developed technology and other intangible
assets to determine whether their carrying values have been impaired. In
evaluating the value and future benefits of the acquired developed technology
and other intangible assets their carrying values would be reduced by the
excess, if any, of their carrying values over management's best estimate of
undiscounted future cash flows over the remaining amortization periods. The
Company believes that the carrying values of recorded acquired developed
technology and other intangible assets are not impaired.
Patents and Patent Application Costs - Prior to 1995 the Company
capitalized the costs associated with obtaining patents on its technologies.
During the first quarter of 1995 the Company changed from deferring and
amortizing such costs to recording them as expenses when incurred because, even
though the Company believes the patents and underlying technology have
continuing value, the amount of future benefits to be derived therefrom is
uncertain. Accordingly, the new accounting method was adopted in recognition of
a possible change in estimated future benefits. Since the effect of this change
in accounting principle was inseparable from the effect of the change in
accounting estimate, such change was accounted for as a change in estimate in
accordance with Opinion No. 20 of the Accounting Principles Board. As a result,
the Company recorded a non-cash write-off of $1.4 million during 1995 ($.18 per
share). Future patent costs are expected to be expensed since the benefits to be
derived therefrom are likely to be uncertain.
Basic and Diluted Loss per Common Share - In February 1997, the
Financial Accounting Standards Board ("FASB") issued Statement No. 128, Earnings
Per Share ("Statement 128"). Statement 128 replaced the calculation of primary
and fully diluted loss per share with basic and diluted loss per share. Unlike
primary loss per share, the calculation of basic loss per share
<PAGE> 14
excludes any dilutive effects of options, warrants and convertible securities.
Diluted loss per share is very similar to the previously reported fully diluted
loss per share. Loss per share amounts for all periods have been presented in
accordance with Statement 128 requirements.
Basic and diluted loss per share are computed based on the weighted
average number of common shares outstanding. Common share equivalents (which may
consist of options, warrants and convertible debentures) are excluded from the
computation of diluted loss per share since the effect would be antidilutive.
Shares Reserved for Future Issuance - The Company has reserved
approximately 2,238,000 of its authorized but unissued shares of common stock
for future issuance pursuant to stock options and warrants, convertible debt and
employee benefit plans.
Revenue Recognition - Sales are recognized at the time the products are
shipped or services rendered. The Company does not require collateral or other
securities for sales made on credit. Revenues from collaborative research
arrangements and grants are generally recorded as the related costs are
incurred. The costs incurred under such arrangements approximated the revenues
reported in the accompanying statements of operations. License fees reported in
the accompanying statements of operations consist entirely of nonrefundable fees
received upon the signing of certain technology license and option agreements.
These fees were recognized as income when they were received. Such agreements
generally contain provisions for additional fees upon the achievement of certain
development milestones by the licensee and upon approval of the related
products, followed by a royalty based upon net sales. Such fees, if any, will be
recognized as income when they become receivable under the terms of the related
contracts.
Sale of Stock by a Subsidiary - The Company does not recognize gains on
the sale of previously unissued stock of subsidiaries when there are significant
uncertainties regarding the Company's ability to ultimately realize its
investment in the subsidiary. Such gains are reflected as additional paid-in
capital in the Company's consolidated financial statements.
Stock-based Compensation - The Company grants stock options for a fixed
number of shares to key employees, directors and consultants with an exercise
price equal to the fair market value of the shares at the date of grant. The
Company accounts for stock option grants in accordance with APB Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and, accordingly,
recognizes no compensation expense for the stock option grants (see Note 8).
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-based Compensation ("Statement 123"),
which provides an alternative to APB 25 in accounting for stock-based
compensation issued to employees. However, the Company has continued to account
for stock-based compensation in accordance with APB 25.
Concentrations of Credit Risk - Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of cash investments. The Company maintains cash equivalents and
investments in large well-capitalized financial
<PAGE> 15
institutions and the Company's investment policy disallows investment in any
debt securities rated less than "investment-grade" by national ratings services.
Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. Investments
At January 1, 1995 the Company classified all of its investments as
available-for-sale. Proceeds from sales of available-for-sale securities during
1995 were $25.3 million. Net realized losses on sales of available-for-sale
securities during 1995 were $1.1 million.
At December 31, 1997 and 1996 the Company has classified all of its
investments as held-to-maturity, as summarized below (in thousands):
<TABLE>
<CAPTION>
Gross Gross Fair
Unrealized Unrealized Market
Cost Gains Losses Value
------- ---------- ---------- -------
<S> <C> <C> <C> <C>
December 31, 1997:
- ------------------
Corporate debt securities $10,541 $ 1 $ - $10,542
December 31, 1996:
- ------------------
U.S. government debt securities $ 598 $ 1 $ - $ 599
Corporate debt securities 15,645 - 64 15,581
------- ------- ------- -------
Total $16,243 $ 1 $ 64 $16,180
======= ======= ======= =======
</TABLE>
On December 31, 1997 and 1996, investments were included in the
following captions on the consolidated balance sheets as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash and cash equivalents $ 5,214 $ 699
Short-term investments - 9,565
Long-term investments 5,327 5,979
------- -------
$10,541 $16,243
======= =======
</TABLE>
The contractual maturities of securities held at December 31, 1997 are
one year or less. Actual maturities may differ from contractual maturities
because the issuers of the securities may have the right to prepay obligations
with or without prepayment penalties.
<PAGE> 16
4. Property and Equipment
Property and equipment at December 31 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land $ 220 $ 220
Buildings and improvements 4,184 4,188
Equipment and furnishings 2,963 2,651
------- ------
7,367 7,059
Less accumulated depreciation and amortization (2,653) (2,046)
------- ------
$ 4,714 $5,013
======= ======
</TABLE>
5. Acquisition of Zynaxis, Inc.
In December 1996 CytRx, Vaxcel, Inc. ("Vaxcel") and Zynaxis, Inc.
("Zynaxis") signed an agreement whereby Zynaxis would be merged with a
wholly-owned subsidiary of Vaxcel. At that time Zynaxis was a publicly-held
biotechnology company engaged in the development of certain vaccine
technologies. The transaction was approved by the Zynaxis stockholders at a
meeting held on May 21, 1997 and was consummated as of that date.
Under the terms of the agreement all of the outstanding shares of
Zynaxis were converted into shares of Vaxcel based upon certain exchange ratios
defined in the agreement, resulting in the issuance of an aggregate of 1.4
million (12.5%) of the outstanding (post-merger) shares of Vaxcel common stock
(at $2.91 per share) to former Zynaxis stockholders at the date of closing. The
merger was treated as a purchase by Vaxcel and constituted a tax-free
reorganization for Zynaxis stockholders. The results of operations of Zynaxis
are included in the statement of operations since May 21, 1997.
Pursuant to the agreement, CytRx was to provide up to $2 million to
Zynaxis under a secured credit facility during the period prior to closing of
the merger, at which time the outstanding principal and interest was to be
contributed to the capital of Vaxcel, together with additional equity in the
amount of $4 million less the outstanding principal and interest of the secured
note. At the time of closing the outstanding principal and interest of the
secured note to Zynaxis was approximately $1.7 million, resulting in a net cash
infusion from CytRx to Vaxcel of approximately $2.3 million. In addition, at the
date of closing, Vaxcel issued to CytRx a one-year warrant entitling CytRx to
purchase a number of shares of Vaxcel common stock equal to the amount of
capital which may be necessary for Vaxcel to satisfy requirements for inclusion
in the Nasdaq SmallCap Market, divided by one-half of the $2.91 per share
transaction price at the date of closing.
In accordance with the provisions of APB Nos. 16 and 17, all
identifiable assets acquired, including identified intangible assets and
liabilities assumed, were assigned a portion of the purchase price based on
their respective fair values. The fair values of the acquired developed
<PAGE> 17
technology and incomplete research and development were determined based on an
independent appraisal. A summary of the allocation of the purchase price is a
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net tangible assets, less outstanding liabilities $ (830)
Acquired developed technology and other intangibles 4,241
Acquired incomplete research and development 951
------
$4,362
======
</TABLE>
As a result of this transaction, CytRx owns 87.5% of the outstanding
Vaxcel common stock and former Zynaxis stockholders own the remaining 12.5%. An
unrealized gain of $2,706,000 relating to the sale of 12.5% of Vaxcel common
stock is reflected in stockholders' equity. The change to equity reflecting
CytRx's proportionate share of the increase in Vaxcel's equity related to the
shares issued in connection with the acquisition of Zynaxis was recorded as an
equity transaction since realization of the gain was not assured.
The following table presents unaudited pro forma operating results for
the years ended December 31, 1997 and 1996, as if the acquisition of Zynaxis had
occurred on January 1 of each period (in thousands, except for per share data).
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Revenues $16,615 $4,834
Loss from continuing operations
before minority interest (5,901) (9,624)
Minority interest (293) (800)
Loss from continuing operations (5,608) (8,824)
Net loss (5,746) (10,272)
Basic and diluted loss per share from
continuing operations (.76) (1.14)
Basic and diluted net loss per share (.77) (1.33)
</TABLE>
6. 6% CONVERTIBLE DEBENTURES
On October 22, 1997, the Company privately placed (the "Note Sale")
with certain investors (the "Investors") $2,000,000 of convertible notes (the
"Debentures") which mature in October, 2001. The Debentures may be converted
into CytRx common stock on and after December 21, 1997 at a price equal to the
lesser of 85% of the average closing bid price for the 10 days preceding the
conversion, or $5.68 per share (the "Conversion Price"). Such beneficial
conversion feature was determined to have a fair value of $265,000 at the date
of issuance and has been amortized to interest expense from the date of issuance
through the date the Debentures first became convertible. The Debentures were
sold at par and bear interest at a rate of 6% per annum. The terms of the
Debentures grant CytRx the right to redeem the Debentures at 110% of par if the
Conversion Price falls below $4. Also in connection with the Note Sale, the
Investors were issued two year warrants to purchase 40,000 shares of CytRx
common stock at an exercise price of $5.68. The fair value of such warrants was
determined to be insignificant.
<PAGE> 18
In February 1998, $400,000 of the Debentures were converted into
161,608 shares of common stock, and an additional $400,000 of Debentures were
redeemed by the Company.
7. COMMITMENTS AND CONTINGENCIES
Lease Commitments - Rental expense under operating leases during 1997,
1996 and 1995 approximated $118,000, $96,000 and $69,000, respectively. Minimum
annual future obligations for operating leases are $167,000, $50,000 and $45,000
in 1998, 1999 and 2000, respectively. Aggregate minimum future subrentals the
Company expects to receive under noncancellable subleases through January 2000
total approximately $60,000 at December 31, 1997.
Purchase Commitments - At December 31, 1997, the Company had
outstanding firm purchase commitments for inventory of approximately $46.0
million related to minimum annual purchase volumes under certain contracts
covering a period of four years. Such contracts are with the supplier of the
Company's cattle growth promotant products. Purchases from this supplier totaled
$7,270,000 and $2,000 in the years ended December 31, 1997 and 1996,
respectively.
8. STOCK OPTIONS AND WARRANTS
The Company has stock option plans pursuant to which certain key
employees, directors and consultants are eligible to receive incentive and/or
nonqualified stock options to purchase shares of the Company's common stock. The
options granted under the plans generally become exercisable over a three year
period from the dates of grant and have lives of ten years. Additionally, the
Company has granted warrants to purchase shares of the Company's common stock to
its President and Chief Executive Officer subject to vesting criteria as set
forth in his employment agreement; such warrants have lives of ten years from
the dates of grant. Exercise prices of all options and warrants are set at the
fair market values of the common stock on the dates of grant.
A summary of the Company's stock option and warrant activity and
related information for the years ended December 31 shown below. In January 1995
the Company repriced certain
<PAGE> 19
employee stock options and warrants, resulting in the net cancellation of 91,060
options and warrants.
<TABLE>
<CAPTION>
Options and Warrants Weighted Average Exercise Price
--------------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning of year 1,237,031 1,018,289 1,084,731 $ 5.00 $ 6.08 $ 10.08
Granted 221,700 275,688 151,611 4.35 3.72 6.19
Exercised - - (3,926) - - 7.00
Forfeited (19,434) (56,946) (214,127) 6.64 20.44 15.36
Expired - - - - - -
--------- --------- --------- ------ ------ -------
Outstanding - end of year 1,439,297 1,237,031 1,018,289 $ 4.87 $ 5.00 $ 6.08
========= ========= ========= ====== ====== =======
Exercisable at end of year 940,541 874,946 842,992 $ 5.22 $ 5.22 $ 5.81
Weighted average fair value of
options and warrants granted
during the year: $3.97 $3.39 $6.07
</TABLE>
The following table summarizes additional information concerning
options and warrants outstanding and exercisable at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------- --------------------------------
Weighted
Average
Remaining Weighted Weighted
Range of Number of Shares Contractual Average Number Average
Exercise Prices Life (years) Exercise Price Exercisable Exercise Price
- -------------------- ----------------- ---------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 2.75 - 4.81 1,131,060 7.6 $ 4.24 665,437 $ 4.39
5.00 - 7.00 278,689 5.9 6.98 252,439 6.97
7.50 - 10.00 26,047 7.0 8.47 19,164 8.63
15.75 - 31.00 3,501 6.4 17.41 3,501 17.41
--------- -------
1,439,297 7.3 4.88 940,541 5.22
========= =======
</TABLE>
At December 31, 1997 and 1996, CytRx's subsidiaries had stock option
plans under which there were outstanding options to purchase a total of
1,837,150 and 1,689,603 respectively, of the subsidiaries' common stock at
exercise prices ranging from $1.50 to $3.25 in 1997 and $1.50 in 1996. The
weighted average exercise price and remaining contractual life for options
outstanding at December 31, 1997 were $1.56 and 7.6 years, respectively.
The Company has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under Statement 123 requires use
of option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the fair market value of the underlying stock on
the date of grant, no compensation expense is recognized.
Pro forma information regarding net loss and loss per share is required
by Statement 123, which also requires that the information be determined as if
the Company had accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of
<PAGE> 20
that Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following assumptions:
weighted-average risk-free interest rates of 6.79% for 1995, 6.30% for 1996 and
6.22% for 1997, dividend yields of 0.0%, volatility factors of the expected
market price of the Company's common stock of 1.12 for 1995 and 1996 and 1.055
for 1997 and a weighted average expected life of the option of 8 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
pro forma information is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Pro forma net loss ($6,969) ($6,343) ($10,936)
Pro forma net loss per share (basic
and diluted) ($.94) ($.82) ($1.38)
</TABLE>
Statement 123 is applicable only to options granted subsequent to
December 31, 1994; therefore, its proforma effect will not be fully reflected
until 1998.
9. ADOPTION OF SHAREHOLDER PROTECTION RIGHTS PLAN
Effective April 16, 1997, the Company's Board of Directors declared a
distribution of one Right for each outstanding share of the Company's common
stock to stockholders of record at the close of business on May 15, 1997 and for
each share of common stock issued by the Company thereafter and prior to a
Flip-in Date (as defined below). Each Right entitles the registered holder to
purchase from the Company one ten-thousandth (1/10,000th) of a share of Series A
Junior Participating Preferred Stock, at an exercise price of $30. The Rights
are generally not exercisable until 10 business days after an announcement by
the Company that a person or group of affiliated persons (an "Acquiring Person")
has acquired beneficial ownership of 15% or more of the Company's then
outstanding shares of common stock (a "Flip-in Date").
In the event the Rights become exercisable as a result of the
acquisition of shares, each Right will enable the owner, other than the
Acquiring Person, to purchase at the Right's then current exercise price a
number of shares of common stock with a market value equal to twice the exercise
price. In addition, unless the Acquiring Person owns more than 50% of the
outstanding shares of common stock, the Board of Directors may elect to exchange
all outstanding Rights (other than those owned by such Acquiring Person) at an
exchange ratio of
<PAGE> 21
one share of common stock per Right. All Rights that are owned by any person on
or after the date such person becomes an Acquiring Person will be null and void.
The Rights have been distributed to protect the Company's stockholders
from coercive or abusive takeover tactics and to give the Board of Directors
more negotiating leverage in dealing with prospective acquirers.
10. RETIREMENT PLAN
The Company maintains a defined contribution retirement plan (the
"Plan") covering employees of the Company. Historically, at the Board of
Directors' discretion, the Company has matched 50% of the participant's
contribution with common stock. The Company's matching contribution vests over 3
years. Total expense for the Plan for the years ended December 31, 1997, 1996
and 1995 was $164,000, $143,000 and $139,000, respectively, of which $53,000,
$52,000 and $-0- related to the discontinued operations of Proceutics for the
years ended December 31, 1997, 1996 and 1995, respectively.
11. INCOME TAXES
For income tax purposes, CytRx and its subsidiaries have an aggregate
of approximately $44.6 million of net operating losses available to offset
against future taxable income, subject to certain limitations. Such losses
expire in 2000 through 2012. They also have an aggregate of approximately $1.1
million of research and development credits available for offset against future
income taxes which expire in 2000 through 2010.
Deferred income taxes reflect the net effect of temporary differences
between the financial reporting carrying amounts of assets and liabilities and
income tax carrying amounts of assets and liabilities. The components of the
Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
Deferred tax assets:
<S> <C> <C>
Net operating loss carryforward $16,942,006 $13,965,378
Tax credit carryforward 1,095,762 1,075,455
Other 1,395,900 334,389
----------- -----------
Total deferred tax assets 19,433,668 15,375,222
Deferred tax liabilities:
Acquired developed technology and other intangibles (1,556,100) -
Depreciation (194,065) (183,542)
----------- -----------
Total deferred tax liabilities (1,750,165) (183,542)
----------- -----------
Net deferred tax assets 17,683,503 15,191,680
Valuation allowance (17,683,503) (15,191,680)
----------- -----------
$ - $ -
=========== ===========
</TABLE>
<PAGE> 22
Based on assessments of all available evidence as of December 31, 1997
and 1996, management has concluded that the respective deferred income tax
assets should be reduced by valuation allowances equal to the amounts of the
deferred income tax assets.
The amount of net operating loss carryforwards generated by Zynaxis
prior to the merger was $31,000,000. The use of pre-acquisition operating loss
carryforwards is subject to limitations imposed by the Internal Revenue Code.
The Company anticipates that these limitations will affect utilization of the
carryforwards prior to expiration. Therefore, for financial reporting purposes
the Company has recorded a deferred tax asset of $1,277,000, giving effect to
these limitations with a corresponding valuation allowance of $1,277,000. When
realized, the tax benefit of these loss carryforwards will be applied to
reduce acquired developed technology and other intangibles related to the
acquisition of Zynaxis.
12. DISCONTINUED OPERATIONS
On February 16, 1998, the Company consummated a sale of substantially
all of the assets of Proceutics other than real estate to Oread Laboratories,
Inc. ("Oread") for approximately $2.1 million. Proceutics retained its real
estate assets consisting of a laboratory building which it is leasing to Oread.
The Company expects a gain related to the sale of Proceutics which will be
recognized in 1998.
Revenues from the discontinued operations of Proceutics approximated
$1,984,000, $1,004,000 and $-0- for the years ended December 31, 1997, 1996 and
1995, respectively. In addition, capital expenditures and depreciation expense
for the years ended December 31, 1997 and 1996 were $165,000 and $365,000; and
$336,000 and $437,000, respectively. At December 31, 1997 and 1996, the
following assets and liabilities of Proceutics are included in the balance sheet
(in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Current assets $ 721 $ 674
Property and equipment, net 3,455 3,643
------ ------
Total assets $4,176 $4,317
Total liabilities $ 228 $ 637
</TABLE>
13. POTENTIAL SALE OF REAL ESTATE
On February 23, 1998, the Company entered into an agreement with
Alexandria Real Estate Equities, Inc. ("Alexandria") pursuant to which CytRx and
Proceutics would sell the two buildings owned by them at 150 and 154 Technology
Parkway, Norcross, Georgia, to Alexandria for $4,500,000. Under the terms of the
Agreement, Proceutics' rights and obligations under the lease to Oread (See Note
12) would be assigned to Alexandria and CytRx would lease the building at 154
Technology Parkway from Alexandria. The Company expects that this transaction
will be consummated in April, 1998 and will result in a gain which will be
recognized in 1998.
14. SEGMENT REPORTING
Commencing in 1996 the Company's continuing operating revenues have
been generated from two primary industry segments: cattle growth promotant
products (Vetlife), and research
<PAGE> 23
products (CytRx - Titermax). Financial information for continuing operations by
industry segment at December 31, 1997 and 1996 and for the years then ended is
presented below.
<TABLE>
<CAPTION>
1997:
- -----
Cattle
Growth Research General Consolidated
(in thousands) Products Products Other Corporate Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $13,469 $456 $422 $ - $14,347
Operating profit (loss) 1,504 193 77 (7,689) (5,915)
Identifiable assets 9,122 - - 11,608 20,730
Capital expenditures 11 - - 98 109
Depreciation and amortization 16 - - 372 388
1996:
- -----
Cattle
Growth Research General Consolidated
(in thousands) Products Products Other Corporate Total
- ------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $ 711 $522 $358 $ - $1,591
Operating profit (loss) (672) 173 29 (3,874) (4,344)
Identifiable assets 6,714 - - 13,268 19,982
Capital expenditures 115 - - 79 194
Depreciation and amortization 15 - - 203 218
</TABLE>
Identifiable assets are assets used in the operations of each segment.
The Company has no foreign operations and operating revenues derived from
foreign sources are immaterial to the consolidated total.
During 1997, three customers of the cattle growth promotant products
segment each contributed significant portions (greater than 10%) of the
Company's consolidated net sales from continuing operations. These three
customers comprise approximately 49.8%, 34.9% and 10.1% of consolidated net
sales from continuing operations. During 1996, two customers each contributed
significant portions (greater than 10%) of the Company's consolidated net sales
(approximately 12% each). Also, during 1997 and 1996, the Company's cattle
growth promotant products were supplied to the Company by two vendors.
<PAGE> 24
Report of Independent Auditors
ERNST & YOUNG LLP
The Board of Directors and Stockholders
CytRx Corporation
We have audited the accompanying consolidated balance sheets of CytRx
Corporation as of December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CytRx Corporation at December 31, 1997 and 1996 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 27, 1998
<PAGE> 1
Exhibit 21.1
Subsidiaries of the Registrant
<PAGE> 2
EXHIBIT 21.1
CYTRX CORPORATION
1997 FORM 10-K
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Percentage
Name of Subsidiary State of Incorporation of Ownership
- ------------------ ---------------------- ------------
<S> <C> <C>
Custom Adjuvants, Inc. Georgia 100%
Proceutics, Inc. Delaware 100%
Vetlife, Inc. Delaware 100%
Vaxcel, Inc. Delaware 87.5%
</TABLE>
<PAGE> 1
Exhibit 23.1
Consent of Ernst & Young LLP
<PAGE> 2
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of CytRx Corporation of our report dated February 27, 1998, included in the 1997
Annual Report to Shareholders of CytRx Corporation.
Our audits also included the financial statement schedule of CytRx Corporation
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, as of the date of our report referred to in the preceding
paragraph, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
on Form S-8 Nos. 33-48706 and 333-37171 pertaining to the CytRx Corporation
401(k) Profit-Sharing Plan, 33-93816 pertaining to the CytRx Corporation 1994
Stock Option Plan, and 33-93818 pertaining to the CytRx Corporation 1995 Stock
Option Plan, and on Form S-3 Nos. 33-93820, 333-39607 and 333-44043 and the
related Prospectus, of our report dated February 27, 1998, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of CytRx
Corporation.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 20, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,895,008
<SECURITIES> 5,326,647
<RECEIVABLES> 1,917,013
<ALLOWANCES> 0
<INVENTORY> 2,272,798
<CURRENT-ASSETS> 10,113,976
<PP&E> 7,367,000
<DEPRECIATION> 2,653,000
<TOTAL-ASSETS> 24,905,995
<CURRENT-LIABILITIES> 3,039,118
<BONDS> 0
0
0
<COMMON> 7,986
<OTHER-SE> 19,240,409
<TOTAL-LIABILITY-AND-EQUITY> 24,905,995
<SALES> 14,347,461
<TOTAL-REVENUES> 15,786,880
<CGS> 7,205,522
<TOTAL-COSTS> 7,205,522
<OTHER-EXPENSES> 14,738,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 293,048
<INCOME-PRETAX> (5,915,060)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,915,060)
<DISCONTINUED> (137,932)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,052,992)
<EPS-PRIMARY> (.82)
<EPS-DILUTED> (.82)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,429,207
<SECURITIES> 15,544,257
<RECEIVABLES> 691,509
<ALLOWANCES> 48,430
<INVENTORY> 9,508
<CURRENT-ASSETS> 12,179,020
<PP&E> 7,059,101
<DEPRECIATION> 2,046,292
<TOTAL-ASSETS> 24,299,322
<CURRENT-LIABILITIES> 1,961,588
<BONDS> 0
0
0
<COMMON> 7,945
<OTHER-SE> 22,329,789
<TOTAL-LIABILITY-AND-EQUITY> 24,299,322
<SALES> 1,591,123
<TOTAL-REVENUES> 3,043,990
<CGS> 652,465
<TOTAL-COSTS> 652,465
<OTHER-EXPENSES> 6,735,337
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,343,812)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,343,812)
<DISCONTINUED> (1,447,967)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,791,779)
<EPS-PRIMARY> (.75)
<EPS-DILUTED> (.75)
</TABLE>
