<PAGE>
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 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
OR
___TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from .............. to ............
Commission file number 0-15609
Agouron Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
California 33-0061928
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10350 North Torrey Pines Road,Suite 100 La Jolla, California 92037-1020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 622-3000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
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 ____
On July 20, 1995, the aggregate market value of the voting stock held by
nonaffiliates totaled approximately $191,046,000 based on the closing stock
price as reported by NASDAQ Stock Market.
On July 20, 1995, there were 7,359,932 shares of common stock, without
par value, of the registrant issued and outstanding.
<PAGE>
PART I
Item 1. BUSINESS
General
The Company was organized and incorporated in California in June
1984. Agouron is a pioneer and leader in technologies that enable the
atom-by-atom design of novel synthetic drugs based upon the molecular
structures of target proteins which play key roles in human disease. The
Company is conducting phase II clinical trials of two drugs generated by
these design technologies: AG1343 for the treatment of HIV infection and
AG337 for treatment of solid malignant tumors. In addition, ten preclinical
programs are in progress for discovery and development of other new drugs in
the fields of cancer, viral diseases, and immuno-inflammatory disease. The
Company's business currently consists of one business segment, the
operations of which are described below.
The Company's common stock account has evolved through a series
of public offerings and private placements of its common and preferred
stock and the exercise of various warrants and employee stock options.
Three public offerings (calendar 1987, 1989 and 1991) generated net
proceeds of approximately $55,770,000 through the issuance of approximately
4,159,000 shares. The most recent public offering raised approximately
$34,720,000 through the issuance of 1,940,000 shares. Private placements
of both common and preferred stock have generated approximately $17,090,000
in net proceeds and the issuance of approximately 2,763,000 shares.
Private placements in fiscal 1993 generated $6,000,000 through the issuance
of approximately 312,000 shares. The exercise of warrants and employee
stock options (including employee stock purchase plan transactions) have
generated proceeds of approximately $3,250,000 and the issuance of
approximately 438,000 shares.
Narrative Description of Business
Agouron is developing innovative drugs for treatment of cancer, HIV
infection and other serious diseases and has expended approximately
$119,500,000 on research and development since its inception.
Preliminary results from ongoing pilot phase II studies evaluating
alternative doses of AG1343, an orally administered inhibitor of the enzyme
HIV protease, indicate that AG1343 is safe, well tolerated and, in nearly
all of the 20 patients tested in the first two dosing groups, reduced the
amount of HIV and/or increased the number of CD4+ T cells (primary cells of
the immune system) detectable in blood. Four-week studies of higher dose
levels of AG1343 in tablet form are in progress at two centers in the United
States. If satisfied by these studies, the Company intends to initiate
large-scale pivotal trials in calendar 1995 which, if successful, could lead
to the submission of a New Drug Application ("NDA") for AG1343 in calendar
1997.
AG337, an inhibitor of the enzyme thymidylate synthase ("TS"), is being
tested clinically as a chemotherapeutic agent for treatment of solid
malignant tumors associated with cancer of the colon, lung, prostate,
pancreas, liver and head/neck. In a majority of more than 50 evaluable
patients treated to date in six ongoing phase II studies, AG337 has
stabilized previously progressive malignant disease and, in some patients,
caused significant reductions in the mass of solid tumors. Both
intravenous and oral formulations of AG337 are being developed. If
satisfied with results from these phase II studies, the Company intends to
initiate pivotal trials in calendar 1995 which, if successful, could lead
to the submission of an NDA for AG337 in calendar 1997.
<PAGE>
Agouron's goal is to become profitable from the sale of differentiated
drugs generated principally from its own drug discovery and development
efforts. To augment its technical capabilities, to enhance the likelihood
of successful commercialization of its products and to offset some of its
operating costs, the Company has entered into collaborative research and
development arrangements with other companies. However, consistent with
its commercial goal, the Company has generally retained significant
commercial rights in drugs developed in its collaborative research and
development programs funded in whole or in part by other companies. The
Company anticipates that its successfully developed products will be
commercialized both through its own direct sales and marketing activities in
certain pharmaceutical markets, where appropriate, and through manufacturing
and marketing relationships with other pharmaceutical firms.
In collaboration with the pharmaceutical division of Japan Tobacco Inc.
("JT"), Agouron is engaged in the development of AG1343 for treatment of
HIV infection, as well as in the design of drugs for treatment of
infections by herpes viruses, by the virus which causes hepatitis C, and by
the family of rhinoviruses--the most frequent cause for the common cold.
Under agreements with JT, Agouron retains exclusive commercial rights to
these anti-viral products in the United States, Canada and Mexico,
generally subject to the payment either of royalties or a share of profits
to JT.
In collaboration with scientists from Syntex (U.S.A.) Inc. (now a
subsidiary of Roche Holdings, Inc.) ("Roche"), Agouron is pursuing the
design and development of inhibitors of matrix metalloproteases ("MMPs") to
intervene in the degradation of bone and connective tissue in arthritis,
and in the invasion, growth and metastasis of solid malignant tumors. In
the field of cancer, Agouron retains exclusive commercial rights to
products from the collaboration, subject to the payment of royalties to
Roche.
Research and Development Program
Agouron's research and development programs concentrate in three areas
of human disease: cancer, viral diseases and immuno-inflammatory disease.
All of Agouron's drug discovery programs apply the Company's core
technologies for the atom-by-atom design of small synthetic drug molecules
based upon the three dimensional molecular architecture of proteins that
play key roles in human disease. The following table outlines the
Company's portfolio of preclinical and clinical research and development
programs. Some of these programs are being pursued by Agouron
independently while others are being undertaken in collaboration with other
companies.
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<TABLE>
<CAPTION>
<S> <S> <S> <S> <C>
-------------------------------------------------------------------------------------------------------
|Program Indication Protein Target Development Stage Partner |
|------- ---------- -------------- ----------------- ------- |
|Cancer |
| |
| AG337- i.v. Solid Tumors TS Phase II None |
| AG337- oral Solid Tumors TS Phase I None |
| AG331 Solid Tumors TS Phase I None |
| GART Inhibitors Solid Tumors GART Preclinical None |
| MMP Inhibitors Metastasis Collagenase Preclinical Roche |
| AICART Inhibitors Solid Tumors AICART Research None |
| cdk4 Inhibitors Solid Tumors cdk4 Research None |
| VEGF Receptor Solid Tumors kdr Research None |
| |
|Viral Disease |
| |
| AG1343 HIV Infection HIV Protease Phase II JT |
| Rhinovirus Common Cold RhV3C Protease Research JT |
| Cytomegalovirus CMV Infection CMV Protease Research JT |
| Herpes simplex Herpes Infection HSV-1 Protease Research JT |
| Hepatitis C Viral Diseases Hepatitis C Protease Research JT |
| |
|Immuno-inflammatory Disease |
| |
| MMP Inhibitors Arthritis Stromelysin Preclinical Roche |
| AICART Inhibitors Inflammation AICART Research None |
| Calcineurin Inhibitors Immuno-suppression Calcineurin Research None |
-------------------------------------------------------------------------------------------------------
</TABLE>
Cancer
The development of new drugs for treatment of cancer is a primary
scientific and commercial focus of the Company. Most existing anti-cancer
drugs display limited efficacy and significant toxicities that restrict
their clinical usefulness. As a result, there remains a critical need for
anti-cancer drugs which are less toxic and more efficacious. Agouron is
developing new anti-cancer drugs which circumvent the limitations of most
currently available chemotherapeutic drugs: susceptibility to DNA
repairmechanisms and drug resistance and the lack of impact on
nonproliferating cancer cells. The Company's anti-cancer drug discovery and
development program is focusing on the discovery and development of
inhibitors of the following enzymes: thymidylate synthase ("TS"),
glycinamide ribotide formyltransferase ("GART"), aminoimidazole carboxamide
ribonucleotide formyltransferase ("AICART"), matrix metalloproteases
("MMPs"), cyclin dependent kinase 4 ("cdk4"), and a receptor for Vascular
Endothelial Growth Factor ("VEGF"). Three of these enzyme targets (TS, GART
and AICART) have a common structural motif that permits lead inhibitors from
one program to be useful in others.
TS Inhibitors: AG337 and AG331
The enzyme TS catalyzes a critical step in the synthesis of DNA and is
especially crucial to cancer cells undergoing uncontrolled proliferation.
Inhibition of TS kills tumor cells by inducing programmed cell death--a
form of natural cellular suicide by which normal cell growth is usually
regulated.
Agouron's TS program has generated two compounds which are currently in
clinical development: AG337 in phase II clinical testing and AG331
currently in phase I clinical testing.
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In six phase II trials of an i.v. formulation of AG337 at ten clinical
sites in the United States, the company is evaluating 5-day courses of
treatment with AG337 in patients with solid malignant tumors associated
with cancer of the colon, lung, liver, pancreas, prostate, or head/neck.
Certain preliminary results from these studies indicate that in a majority
of more than 50 evaluable patients, AG337 has stabilized previously
progressive malignancy and, in some patients, caused measurable reductions
in tumor mass. In one or more patients with cancer of the liver or
head/neck, confirmed reductions in tumor mass of greater than 50% have been
observed, qualifying AG337 for expanded phase II studies in these diseases
in accordance with the study design. The Company may elect to extend phase
II trials of AG337 in cancer of the colon, pancreas, prostate and/or lung
based on future results. Agouron expects ultimately to select one or two
of these malignant diseases in which to pursue pivotal clinical trials
aimed at qualifying AG337 for registration. Such trials, if successful,
could permit the Company to file a NDA covering both the oral and i.v.
formulations of AG337 in calendar 1997.
Phase I clinical studies of an i.v. formulation of AG331 are being
completed. AG331 has been well tolerated until the occurrence of
apparently dose limiting liver toxicity at 800mg/m2/day; the
pharmacokinetic and safety data from the studies are presently being
evaluated. Because of the encouraging performance of AG337 in early phase
II testing, AG331 is being treated by the Company as a "backup" to AG337.
To date, the Company has self-funded the development of AG337 and AG331
and retains all commercial rights to such compounds.
GART Inhibitors and MMP Inhibitors
Based on the current status of its preclinical programs, the Company
anticipates selecting its next clinical development compound(s) from the
GART and/or MMP programs.
GART is an enzyme in a biochemical pathway through which tumor cells
synthesize purines, essential components of DNA. The Company believes that
inhibitors of GART will show a high degree of selectivity for tumor cells
and less severe bone marrow toxicity than other chemotherapeutic agents.
Independent research has shown MMPs to be involved in many disease
states. Within the cancer field, certain MMPs have been associated with
tumor growth, the metastasis of tumor cells to secondary sites within the
body, and the growth of new blood vessels (angiogenesis), through which
tumor cells obtain nutrients and growth factors. MMPs thus represent new
opportunities for the discovery of novel anti-cancer agents. The Company
believes that orally active inhibitors of certain combinations of MMPs, but
not of all MMPs, are most likely to have the optimal safety and efficacy
profiles of superior anti-cancer agents.
In both the GART and MMP programs, the Company has generated active and
potent inhibitors of target enzymes which have displayed biological
activity in preclinical test systems in vitro and in vivo. The Company
expects to select one or more development compounds for scale-up and
preclinical toxicology studies from either or both the GART and MMP
programs during calendar 1995. The Company retains all commercial rights
in drugs discovered in the GART program and, subject to payment of
royalties to Roche, to MMP inhibitors in the field of cancer. The Company
is pursuing the discovery of all MMP inhibitors in collaboration with
Roche.
<PAGE>
AICART Inhibitors
The enzyme AICART catalyzes a rate-determining step in the purine
biosynthetic pathway. Research has shown that inhibiting the rate-limiting
enzyme in such a pathway produces the most significant effects on the
growth of cells dependent on that pathway. The scientific rationale for
GART as a target for new anti-tumor drugs applies equally to AICART.
Agouron scientists believe that two inhibitors of the purine pathway (an
inhibitor of GART and an inhibitor of AICART) may be highly synergistic in
producing anti-tumor activity when administered in combination.
The Company's scientists are engaged in design, synthesis and evaluation
of AICART inhibitors intended to be efficacious in the treatment of cancer.
The Company presently retains all commercial rights to any compounds
resulting from this program.
cdk4 Inhibitors
Cyclin dependent kinases ("cdks") are enzymes that play roles in
regulating the transitions between phases in the life cycles of all cells.
The member of this family of enzymes known as cdk4 has been implicated by
independent research in driving cells from a quiescent phase to the highly
proliferative phase characteristic of malignancies -- particularly in
familial melanomas, esophageal carcinomas and pancreatic cancers. Agouron
has recently initiated a drug discovery program aimed at the design of
selective small molecule drugs with the potential to inhibit the activity
of cdk4 and therefore block the transition of cancer cells into their
proliferative phase.
VEGF Receptor
The process known as angiogenesis, the formation of new blood vessels,
is a key factor in the maintenance and progression of several disease
states including the metastasis of malignant tumors. The ability of cancer
cells to carry out angiogenesis depends in part upon the activity of a
protein known as Vascular Endothelial Growth Factor ("VEGF"), which by
binding to a receptor known as kdr, triggers the growth of endothelial
cells. Agouron has recently initiated a drug discovery program whose
objective is the design of drugs that block the kdr receptor for VEGF and
therefore compromise the ability of tumors to carry out a key process in
metastasis.
Viral Diseases
The development of new drugs for the treatment of certain viral
diseases is an additional scientific and commercial focus of the Company.
The Company is presently conducting programs aimed at discovery and/or
development of four classes of anti-viral drugs which block viral
proteases, enzymes required by several families of pathogenic viruses to
carry out replication and infection. Agouron's anti-viral drug programs
include HIV protease inhibitors (AG1343), rhinovirus 3C protease
inhibitors, herpes virus protease inhibitors and hepatitis C protease
inhibitors. The Company is developing its anti-viral drugs in
collaboration with JT.
HIV Protease Inhibitor: AG1343
Inhibitors of the enzyme HIV protease are widely regarded as one of the
most promising new classes of anti-HIV drugs. HIV protease is an enzyme
that performs an essential role in the infectious cycle of HIV. Inhibition
of the protease enzyme renders HIV unable to form new infective virus.
Several other companies are conducting clinical development of drugs in
this class. The Company believes that the most successful HIV protease
inhibitors will be those with the most favorable combination of potency,
safety, convenience of formulation and schedule of administration.
<PAGE>
Phase I safety and pharmacokinetic studies have been completed (with no
observations of clinically significant toxicity) and pilot phase II
efficacy trials are in progress in human subjects for AG1343, an orally
administered inhibitor of the HIV protease.
A series of four-week pilot phase II clinical studies are evaluating the
safety and acute anti-HIV efficacy of several daily doses of AG1343. To
date, the Company has reported only preliminary results from a four-week
study of a capsule formulation of AG1343 in the first two dosing groups
treated in England. In 10 patients who received doses of 257 mg of active
drug three times daily, AG1343 produced reductions of HIV in patients'
blood from pre-treatment levels of up to 99% and an average maximum of 80%.
In 10 other patients who have received doses of 515 mg of active drug twice
daily, AG1343 produced reductions in HIV from pre-treatment levels of up to
99% and average maximum reductions of 91%. In both dosing groups, the
average amount of HIV in the blood of patients was substantially below pre-
treatment levels at the end of four weeks of treatment. CD4+ T cells in
the patients enrolled in the first two dosing groups increased by up to 491
cells per cubic millimeter of blood and by more than 140 cells on average.
Additional phase II studies of daily doses of AG1343 in a tablet
formulation are currently in progress in the United States. To date, the
drug has been reported to be safe and well tolerated. Based on presently
available results, the Company intends to initiate a program of phase
II/III clinical studies during the second half of calendar 1995 and, if
such studies are successful, to file a NDA in the United States in calendar
1997.
Rhinovirus 3C Protease Inhibitors
Rhinoviruses are believed to be the single most frequent cause of the
common cold. While rhinovirus infections are a periodic annoyance to most
normal individuals, they produce more severe and prolonged symptoms in
people with asthma, emphysema and chronic obstructive pulmonary disease.
Agouron's research program has resulted in the design of potent, selective
rhinovirus 3C protease inhibitors currently being evaluated in preclinical
pharmacological studies of anti-viral activity, cellular toxicity and oral
bioavailability. It is the Company's goal to select one such inhibitor for
development in calendar 1996.
CMV and HSV-1 Protease Inhibitors
Among the most clinically significant members of the family of herpes
viruses are herpes simplex virus-1 (HSV-1) and cytomegalovirus (CMV). Like
HIV and rhinoviruses, HSV-1 and CMV each contain a protease enzyme
essential for virus maturation and infection. The Company believes that
these protease enzymes represent targets for a new class of anti-viral
drugs with the potential for low toxicity. Agouron scientists are
currently seeking to solve the three dimensional structures of the targeted
protease enzymes from both HSV-1 and CMV in preparation for the application
of its drug design technology. No inhibitor of HSV-1 or CMV has yet been
selected by Agouron for development.
Hepatitis C Protease Inhibitors
The ability to treat infection by hepatitis C virus represents a
significant unmet clinical need, particularly in Asian countries.
Hepatitis C virus depends upon a key protease enzyme for the production of
new infectious viruses. As no human counterparts of the hepatitis C
protease enzyme are known, Agouron scientists believe that the potential
for toxicity of selective hepatitis C protease inhibitors is low.
Agouron's anti-hepatitis C project is an early stage program and no
inhibitor has been selected for development.
<PAGE>
Immuno-inflammatory Disease
Another scientific and commercial focus of the Company is the development
of drugs for treatment of immuno-inflammatory disease. These include MMP
inhibitors for use against degenerative diseases such as rheumatoid
arthritis and osteoarthritis, AICART inhibitors for use as anti-
inflammatory agents, and immuno-suppressive agents for treatment of various
neuro-degenerative disorders.
MMP Inhibitors
In addition to their role in the growth and metastasis of solid tumors,
MMPs display high levels of enzymatic activity in such degenerative
diseases as rheumatoid arthritis and osteoarthritis. Certain members of
the MMP family are associated most closely with these disease states and,
the Company believes, offer targets for orally active drugs with potential
for minimal toxicity. If successfully developed, the Company believes such
selective inhibitors of certain MMPs have the potential to interrupt the
progression of arthritic disease itself rather than just to treat the
symptoms. The Company has retained a royalty position in any products
resulting from the collaborative program with Roche used to treat arthritis
and other degenerative bone diseases.
AICART Inhibitors
AICART is being pursued by Agouron scientists as a target for the
development of novel anti-inflammatory drugs. It is widely believed that
the anti-inflammatory effects of the anti-cancer drug methotrexate result
from the drug's indirect inhibition of AICART. Used for chronic therapy,
methotrexate accumulates in the liver and frequently results in serious
toxicity. Agouron scientists believe that inhibitors of AICART designed to
avoid accumulation in tissues may be superior anti-inflammatory drugs for
conditions such as arthritis. The Company's initial lead compounds in this
program are being used to validate this assertion. Having solved the
three-dimensional molecular structure of the AICART enzyme, Agouron
scientists believe they are uniquely positioned to initiate the design,
synthesis and evaluation of AICART inhibitors intended to be efficacious in
the treatment of inflammatory disease. No candidate for development has
yet been identified in this program. The Company presently retains all
commercial rights to any compounds resulting from this program.
Calcineurin Inhibitors
In unpublished research, Company scientists have solved the structure of
a key enzyme involved in the activation of cells involved in the immune
response. This enzyme, calcineurin, is the indirect site of action of two
commonly used drugs for post-organ transplant immuno-suppressive therapy,
cyclosporin and FK506. Agouron scientists believe that intervention in
this pathway by direct, rather than indirect inhibition of calcineurin, may
provide a superior class of immuno-suppressive drugs with the potential for
reduced toxicity. The Company intends to explore the clinical potential of
calcineurin inhibitors in various neuro-degenerative disorders. No
development candidate has yet been identified in this program. The Company
retains all commercial rights to any compounds resulting from this program.
<PAGE>
Research and Development Agreements
The Company has funded its research and development primarily from
working capital generated from both private and public sales of Agouron
equity, corporate collaborative arrangements and federal grants. The
Company has an ongoing program of business development which may, from time
to time, lead to the establishment of corporate collaborations in addition
to those noted below.
Japan Tobacco Inc.
In December 1992, the Company entered into an agreement with Japan
Tobacco Inc. ("JT") to collaborate on the discovery, development and
commercialization of novel therapeutic drugs which act on key proteins
related to the human immune system ("JT 1992"). In February 1994, the
Company expanded its strategic alliance with JT into the field of anti-
viral drugs for the treatment of infections caused by hepatitis C, the
herpes family of viruses and the rhinoviruses ("JT 1994"). In December
1994, the Company added its anti-HIV drug, AG1343, to the JT collaboration
with the execution of a worldwide development and licensing agreement
("JT HIV"). In January 1995, JT 1992 was canceled by mutual agreement and
JT 1992 resources were reallocated to JT 1994 programs.
Under the provisions of JT 1994, JT has agreed to make certain research
payments of not less than $8,000,000 to the Company over a two-year period
ending December 1996. Such payments could approximate more than
$21,000,000 over a four-year period if certain technical milestones are
achieved. In addition, JT made an up-front payment of $7,778,000, which is
being amortized to revenue over a twenty-four month period. Under the
provisions of JT HIV, JT has made payments of $6,000,000 to Agouron
representing an initial payment of $2,500,000 and a milestone payment of
$3,500,000 in recognition of the satisfactory completion of a phase I
clinical study. A second milestone payment of $24,000,000 is to be made by
JT, at its election, subsequent to the receipt of results from a pilot
phase II clinical study of AG1343. The Company anticipates such payment to
be received in calendar 1995. If the milestone payment is not made, all
rights to AG1343 revert to the Company. If the payment is made, then
Agouron and JT will ultimately share equally the costs of further
development of AG1343.
Under the provisions of JT 1994, the Company will have exclusive rights
to develop, manufacture and market anti-hepatitis C and anti-herpes drugs
in the United States, Canada and Mexico. JT will have exclusive rights to
develop, manufacture and market these drugs in Japan, Taiwan and South
Korea. Outside the countries in which they respectively have exclusive
rights, Agouron and JT will have co-exclusive rights to manufacture and
market jointly developed anti-hepatitis C and anti-herpes drugs. Each
company will pay royalties to the other based upon their respective sales
of anti-hepatitis C and anti-herpes drugs. The Company will have
exclusive, world-wide, royalty-free rights to develop, manufacture and
market drugs for the treatment or prevention of infections by pathogenic
rhinoviruses. JT will have the first right to negotiate for a license to
develop, manufacture and market such anti-rhinovirus drugs in Japan and
certain other countries in Asia. Under the provisions of JT HIV, Agouron
will retain exclusive commercial rights to AG1343 (with the right to
sublicense, subject to JT's right of first refusal) in the United States,
Canada and Mexico. JT will have exclusive commercial rights to AG1343
(with the right to sublicense, subject to Agouron's right of first refusal)
in Japan and certain other countries of Asia. Exclusive commercial rights
(with the right to sublicense) in Europe and all remaining countries of the
world will be held by a joint venture owned equally by Agouron and JT. The
two companies will share profits equally from the worldwide commercialization
of AG1343.
Under a separate agreement dated December 1992, JT purchased 155,844
shares of newly issued common stock for an aggregate purchase price of
$3,000,000. Such purchase represented approximately 2% of the total
outstanding common stock.
<PAGE>
Syntex (U.S.A.) Inc.
In June 1993, the Company entered into an agreement with Syntex (U.S.A.)
Inc. (now a subsidiary of Roche Holdings, Inc.) ("Roche"), to collaborate
on the discovery of novel matrix metalloprotease inhibitor drugs for use
against cancer and degenerative diseases such as rheumatoid arthritis and
osteoarthritis. Under the provisions of the agreement, Roche has agreed to
make certain research payments of approximately $8,500,000 to the Company
over a three year period ending June 1996. The Company is funding a
portion of the activities associated with this collaboration on its own
account. Under the terms of the agreement, the Company will have a royalty
position in certain agreement products, if any, and other development and
commercial rights in other agreement products, if any.
Under a separate agreement dated June 1993, Roche purchased 155,844
shares of newly issued common stock for an aggregate purchase price of
$3,000,000. Such purchase represented approximately 2% of the total
outstanding common stock.
Schering-Plough Corporation
In April 1994, the Company and Schering-Plough Corporation completed a
three year collaborative research agreement providing for the discovery and
development of anti-cancer drugs which target oncogenic ras proteins. Each
company may pursue further discovery or development efforts in this program
area at its sole discretion and expense with no subsequent obligations to
the other company.
Eli Lilly and Company
In April 1993, the Company and Eli Lilly and Company completed a five
year collaborative research program in several therapeutic categories.
Further development of any discoveries made in the program will be
undertaken at each company's sole discretion and expense. Agouron has
continuing commercial rights and/or financial interests in certain of these
discoveries.
National Institutes of Health
The Company is the grantee organization for two grants from the National
Institutes of Health to conduct research related to HIV.
Competition
The pharmaceutical and biotechnology industries are subject to intense
competition and rapid and significant technological change. Many companies
and organizations, including major pharmaceutical, biotechnology and
chemical companies, universities and other research organizations, are
engaged in discovery and development of drugs for diseases targeted by the
Company. Certain of these companies and organizations have substantially
greater financial and other resources, larger research and development
staffs and more extensive production and marketing organizations,
experience and capabilities than the Company. In addition, many of these
companies have significantly greater experience than the Company in
preclinical testing and human clinical trials of new pharmaceutical
products and in obtaining FDA and other regulatory approvals of products
for use in health care. All of these companies and other research
organizations compete with the Company in recruiting and retaining highly
qualified scientific and management personnel.
<PAGE>
Agouron was the first company to devote itself to the development and
application of protein structure-based drug design. As such, the Company
believes that it has achieved certain competitive advantages including
developmental lead time, level of commitment to the technology and the
development of certain practical or technical capabilities. However, in
recent years several pharmaceutical companies have undertaken to establish
capabilities in protein x-ray crystallography, either internally or through
academic collaborations, and can be presumed to be engaged in the use of
such technology for the same purposes as is the Company. Certain
biotechnology companies and other companies have also entered into the field
of protein structure-based drug design. The Company expects that the
technology for protein structure-based drug design will become more widely
implemented over time and will ultimately become more common in the
pharmaceutical industry.
The Company believes that its ability to compete successfully will be
based on its ability to create and maintain scientifically advanced
technology, attract and retain scientific personnel with a broad range of
expertise, obtain patent protection or otherwise develop proprietary
products or processes, obtain required government approvals on a timely
basis, select and pursue drug design projects in areas in which significant
market opportunities exist or are likely to develop, manufacture its
products on a cost-effective basis either alone or through others and
successfully market its products either alone or in conjunction with
others. Many of the Company's competitors have substantially greater
financial resources, clinical and regulatory experience, manufacturing
facilities, and sales and marketing organizations than Agouron.
Patents and Trade Secrets
The Company seeks patent protection for its proprietary technology and
products in the United States and in foreign countries. Most of the
Company's products are expected to be synthetic chemical compounds which
may be afforded patent protection under principles and procedures well
established by the United States Patent and Trademark Office under United
States patent law. However, certain of Agouron's products or inventions
may involve naturally occurring molecules or genetically engineered
organisms and the degree of patent protection for such subject matter is
uncertain.
The Company's strategy is to pursue a strong patent portfolio. The
Company is currently prosecuting a number of patent applications in the
United States and in various other countries seeking protection for certain
series of compounds, including AG1343, AG337 AND AG331, and certain
proprietary technology. The Company will continue to file patent
applications on its evolving technology, processes and products. As of June
30, 1995, the Company had received one United States patent (covering
processes of making AG337) and one foreign patent (covering AG331). The
Company believes that if such patents do not issue or are successfully
challenged, any such events could have an adverse impact on the Company.
Many of the processes and much of the know-how of importance to the
Company's technology are dependent upon the skills, knowledge and
experience of its scientific and technical personnel, which skills,
knowledge and experience are not patentable. To protect its rights in
these areas, the Company requires all employees, significant consultants
and advisors, and collaborators to enter into confidentiality agreements
with Agouron. There can be no assurance, however, that these agreements
will provide meaningful protection for the Company's trade secrets, know-
how or other proprietary information in the event of any unauthorized use
or disclosure of such trade secrets, know-how or proprietary information.
Further, in the absence of patent protection, the Company may be exposed to
competitors who independently develop substantially equivalent technology
or otherwise gain access to the Company's trade secrets, knowledge or other
proprietary information.
<PAGE>
Government Regulation
The production and marketing of the Company's products and its ongoing
research and development activities are subject to regulation for safety,
efficacy and quality by numerous governmental authorities in the United
States and other countries. Pharmaceutical products intended for
therapeutic use in humans are principally governed by FDA regulations in
the United States and by comparable government regulations in foreign
countries. Various federal, state and local statutes and regulations also
govern or influence the research and development, manufacturing, safety,
labeling, storage, recordkeeping, distribution and marketing of such
products. The process of completing preclinical and clinical testing and
obtaining the approval of FDA and similar health authorities in foreign
countries to market a new drug product requires a number of years and the
expenditure of substantial resources. Failures or delays by the Company or
its collaborators or licensees in obtaining regulatory approvals would
adversely affect the marketing of products being developed by the Company
alone or in collaboration with others and the Company's ability to receive
product revenues or royalties.
The steps required by FDA before a new human pharmaceutical product may
be marketed in the United States include: (a) preclinical laboratory tests,
in vivo preclinical studies and formulation studies; (b) the submission to
FDA of a request for authorization to conduct clinical trials on an
Investigational New Drug Application ("IND"), which must become effective
before human clinical trials may commence; (c) adequate and well-controlled
human clinical trials to establish the safety and efficacy of the drug for
its intended use; (d) submission to FDA of a NDA with respect to drugs; and
(e) review and approval of the NDA by FDA before the drug product may be
shipped or sold commercially. Prior to obtaining FDA approval for each
product, each manufacturing establishment for new drugs must be registered
with and receive appropriate approval by FDA.
Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies to assess the safety and efficacy of
the product. Preclinical test results are submitted to FDA as a part of
the IND, which must become effective prior to commencement of human
clinical trials. Clinical trials are typically conducted in three
sequential phases, although the phases may overlap. Phase I represents the
initial administration of the drug to a small group of humans, either healthy
volunteers or patients, to test for safety, dosage tolerance, absorption,
distribution, metabolism, excretion and clinical pharmacology and, if
possible, early indications of effectiveness. Phase II involves studies in a
small sample of the actual intended patient population to assess the efficacy
of the investigational drug for a specific clinical indication, to ascertain
dose tolerance and the optimal dose range and to collect additional clinical
information relating to safety and potential adverse effects. Once an
investigational drug is found to have some efficacy and an acceptable
clinical safety profile in the targeted patient population, phase III studies
are often initiated to further establish safety and efficacy of the
investigational drug in a broader sample of the target patient population.
The results of the clinical trials together with the results of the
preclinical tests and complete manufacturing and controls information are
submitted in a NDA to FDA for approval.
If a NDA is submitted to FDA, there can be no assurance that such
application will be reviewed and approved by FDA in a timely manner, if at
all. Even after initial FDA approval has been obtained, further studies,
including post-market studies, may be required to provide additional
information. Results of such post-market programs may limit or expand the
further marketing of the product.
The Company is also subject to foreign regulatory requirements governing
development, manufacturing and sales of pharmaceutical products that vary
widely from country to country. Approval of a drug by applicable regulatory
agencies of foreign countries must be secured prior to the marketing of such
drug in those countries. The regulatory approval process may be more or less
rigorous from country to country and the time required for approval may be
longer or shorter than that required in the United States.
<PAGE>
In addition to the regulatory framework for pharmaceutical product
approvals, the Company is and may become subject to various federal, state,
local and foreign laws, regulations and recommendations relating to safe
working conditions, laboratory and manufacturing practices, the experimental
use of animals and the use and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and infectious disease agents,
used in connection with Agouron's research and development work. The Company
is unable to predict the extent of government regulation that might arise
from United States or foreign administrative action.
Human Resources
As of June 30, 1995, the Company had 258 employees, 72 of whom hold
Ph.D. or M.D. degrees. Two hundred nineteen employees are engaged in, or
directly support, research and product development. The Company's
employees are not covered by a collective bargaining agreement and the
Company considers its relations with its employees to be excellent. The
Company has entered into confidentiality agreements with all of its
employees.
Item 2. PROPERTIES
The Company leases space in three facilities which provide a total of
approximately 93,000 square feet of office and laboratory space. The
Company's corporate headquarters are located at 10350 North Torrey Pines
Road, Suite 100, La Jolla, California 92037, where the Company occupies
approximately 25,000 square feet under two leases which expire in April
1997. Research and development activities are conducted at 3565 General
Atomics Court, San Diego, California 92121 (where the Company is the sole
tenant and occupies approximately 43,500 square feet under a lease which
expires September 2001) and at 11099 North Torrey Pines Road, La Jolla,
California 92037 (where the Company occupies approximately 24,500 square
feet, under two leases which expire in September 2000). These two research
and development buildings provide state-of-the-art facilities designed
specifically to implement and support the Company's innovative approach to
drug design. Included in the facilities are approved scale-up laboratories
in which kilogram quantities of Company designed drug compounds are
manufactured under current Good Manufacturing Practices for use in clinical
trials. The Company believes that its facilities are adequate for its
current operations, except that additional facilities will be necessary if
the Company undertakes commercial manufacturing.
Item 3. LEGAL PROCEEDINGS
The Company is involved in certain legal proceedings generally
incidental to its normal business activities. While the outcome of any
such proceedings cannot be accurately predicted, the Company does not
believe the ultimate resolution of any such existing matters should have a
material adverse effect on its financial position or results of operation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the year ended
June 30, 1995 to a vote of the Company's security holders.
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded in the over-the-counter market
and prices are quoted on the NASDAQ Stock Market under the symbol AGPH.
The following table sets forth the high and low selling prices as reported
by the NASDAQ Stock Market for the periods indicated.
1994
First Quarter $ 10 1/4 $ 7 3/4
Second Quarter 12 1/2 8 3/4
Third Quarter 16 3/4 9 1/2
Fourth Quarter 14 1/4 9 3/4
1995
First Quarter $ 13 3/4 $ 9 3/4
Second Quarter 13 1/4 10
Third Quarter 19 10 7/8
Fourth Quarter 27 1/4 15
On July 20, 1995, the closing price of the Company's common stock as
reported by the NASDAQ Stock Market was $28.25 per share. There were
approximately 5,000 shareholders of the common stock of the Company as of
such date. The Company has not paid cash dividends on its common stock and
does not intend to do so in the foreseeable future.
Item 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data for
each of the five years in the period ended June 30, 1995. The information
presented should be read in conjunction with the financial statements
included elsewhere in this report.
<TABLE>
<CAPTION>
(In thousands, exceptper share Years ended
amounts) June 30, 1995 1994 1993 1992 1991
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $ 27,961 $ 17,651 $ 9,970 $ 6,847 $ 4,795
Net loss (12,939) (9,462) (9,829) (9,132) (6,621)
Net loss per common share (1.77) (1.31) (1.40) (1.47) (1.42)
Shares used in computing net
loss per common share 7,296 7,241 6,997 6,199 4,674
Balance Sheet Data:
Working capital $ 8,837 $ 21,039 $ 29,933 $ 35,115 $ 8,978
Total assets 27,097 37,178 41,721 45,625 15,672
Long-term liabilities 1,884 2,285 2,613 3,050 1,179
Stockholders' equity 12,591 24,852 33,757 37,517 10,620
</TABLE>
The Company has never declared or paid dividends on its common stock.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company has been primarily engaged in the research and
development of human pharmaceuticals utilizing protein structure-based drug
design since its inception in 1984. Such research and development has been
funded from the Company's equity-derived working capital, through
collaborative arrangements with other companies and through grants from the
National Institutes of Health. The Company's net operating losses incurred
since inception are primarily a result of the Company's independent
research and development activities. Net losses for the fiscal years ended
June 30, 1995, 1994 and 1993 were $12,939,000, $9,462,000 and $9,829,000.
As product sales may not begin for several years and preclinical and
clinical development activities and costs are increasing in certain
research and development programs, it is anticipated that net operating
losses will continue and will increase in the next several years.
Results of Operations
Collaborative research and development agreements with Japan Tobacco Inc.
("JT"), Syntex (U.S.A.) Inc. (now a subsidiary of Roche Holdings, Inc. --
"Roche"), Schering-Plough Corporation ("Schering") and Eli Lilly and Company
("Lilly") accounted for approximately 97%, 94% and 94% of the Company's total
contract revenue for 1995, 1994 and 1993. Total contract revenue for 1995
increased approximately 64% over 1994 due principally to an anti-HIV
collaboration with JT initiated in December 1994 ("JT HIV"), the effect of a
full year of program activities on the anti-viral collaboration with JT
initiated in February 1994 ("JT 1994") and increased activities for research
programs with Roche. These increases were partially offset by the absence of
funding in 1995 from Schering due to the completion of a collaborative
research program in April 1994. The increase in contract revenues from 1993
to 1994 was due principally to the effect of a full year of activities on the
collaborative programs covered by the 1992 agreement with JT ("JT 1992")
and the June 1993 collaboration with Roche, and the initiation of work on JT
1994 programs. Partially offsetting these increases is the absence of any
funding in 1994 from Lilly due to the completion of a collaboration in April
1993. The Company anticipates that its contract revenues for 1996 will
exceed the level of such revenues recognized in 1995.
Interest income decreased by approximately 8% from 1994 to 1995 and
21% from 1993 to 1994 primarily due to a generally declining portfolio of
cash, cash equivalents and short-term investments which were utilized to
fund operations. The Company anticipates that interest income will
increase in 1996.
Research and development spending increased by approximately 52% from
1994 to 1995 and 38% from 1993 to 1994 due principally to staff-related
expenses and third-party costs associated with increasing preclinical and
clinical development activities associated with the Company's leading
product candidates: AG337 for the treatment of cancer and AG1343 for the
treatment of HIV infection and AIDS. Collaborator-funded program
expenditures representing 65%, 45% and 55% of total research and
development costs and expenses in 1995, 1994 and 1993, generated a
significant majority of the increases in research and development costs and
expenses. The Company's self-funded research and development programs
generated approximately 35%, 55% and 45% of total research and development
costs and expenses in 1995, 1994 and 1993. Of such self-funded costs
during 1995, 1994 and 1993, approximately 49%, 44% and 60% was dedicated to
the preclinical and clinical development of anti-proliferative drugs in the
Company's most advanced programs. The Company anticipates that total
research and development costs and expenses will increase in 1996 in
response to expanding drug design efforts on various projects and
increasing preclinical and clinical studies associated with several of the
Company's product development programs.
<PAGE>
General and administrative costs and expenses represented
approximately 11% of total costs and expenses in each of 1995, 1994 and
1993. The increase from 1994 to 1995 was due to increasing average staff
levels (approximately 36%) and staff-related expenditures and certain
administrative costs associated with the JT collaborations. The increase
in absolute dollar spending for such costs from 1993 to 1994 was due mainly
to certain administrative costs associated with the JT collaborations and
increased occupancy costs related to additional leased facilities. The
Company anticipates that total general and administrative costs and
expenses will increase in 1996 due to additional staff, costs associated
with the planned facility expansion and increasing commercial development
and sales and marketing activities.
Interest expense increased by approximately 15% from 1994 to 1995 and
decreased by approximately 27% from 1993 to 1994 due to fluctuations in
interest rates and the level of debt and capital lease obligations from
year to year.
Financial Condition
Liquidity and Capital Resources
Since its inception, the Company's cash expenditures have substantially
exceeded its revenues and the Company has relied primarily on equity, lease
and debt financing and various collaborative arrangements to fund its
operations and capital expenditures. To date, the Company has raised net
equity proceeds of approximately $76,100,000 principally from corporate and
venture capital investors and through its public offerings in calendar 1987,
1989 and 1991. The Company believes that its current capital resources,
existing contractual commitments and the JT milestone payment of $24,000,000,
are sufficient to meet its operating needs through fiscal 1996. This belief
is based on current research and clinical development plans, the current
regulatory environment, historical industry experience in the development of
therapeutic drugs and general economic conditions. However, if the JT
milestone payment is not received, the Company will need additional financing
to meet the planned operating needs of fiscal 1996 as well as fiscal 1997 and
beyond. Such needs would include the expenditure of substantial funds to
continue research and development activities, conduct existing and planned
preclinical studies and tests, conduct human clinical trials and establish
certain manufacturing, sales and marketing capabilities. As a result, the
Company anticipates pursuing various financing alternatives such as
collaborative arrangements and additional public offerings or private
placements of Company common or preferred stock. If such alternatives are
not available, the Company may be required to delay or eliminate expenditures
for certain of its potential products under development or to license third
parties to commercialize products or technologies that the Company would
otherwise seek to develop itself.
Capital Expenditures
During 1995, capital expenditures totaled $2,032,000 compared with
$1,829,000 and $3,186,000 during 1994 and 1993, of which $17,000, $58,000
and $85,000 were financed through capital lease obligations. Of the total
capital expenditures during 1995, 1994 and 1993, approximately $130,000,
$119,000 and $1,202,000 represented leasehold improvement costs associated
with certain of the Company's scientific and administrative facilities.
With the exception of the leasehold improvement costs incurred during 1995,
1994 and 1993, virtually all of the capital expenditures during 1995, 1994
and 1993 represented laboratory equipment and scientific instrumentation
necessary to support an expanding research and development and product
manufacturing activities.
Capital expenditures during 1996 are expected to be approximately
$2,200,000 to support product manufacturing, development and research
activities. The Company may utilize lease or debt financing for certain
expenditures if available on acceptable terms.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES PAGE
Report of Independent Accountants F-1
Balance Sheet as of June 30, 1995 and 1994 F-2
Statement of Operations for the years ended F-3
June 30, 1995, 1994 and 1993
Statement of Stockholders' Equity for the
years ended June 30, 1995, 1994 and 1993 F-4
Statement of Cash Flows for the years ended
June 30, 1995, 1994 and 1993 F-5
Notes to Financial Statements F-6
NOTE: All schedules are omitted because they are either not
applicable or not required or the information is shown
elsewhere in the financial statements or in the notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Agouron Pharmaceuticals, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of Agouron Pharmaceuticals,
Inc. at June 30, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended June 30, 1995,
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Diego, California
July 25, 1995
F-1
<PAGE>
AGOURON PHARMACEUTICALS, INC.
BALANCE SHEET
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
June 30,
Current assets: 1995 1994
--------- --------
<S> <C> <C>
Cash and cash equivalents $ 4,358 $ 2,104
Short-term investments 15,886 27,757
Accounts receivable 344 328
Other current assets 871 891
--------- --------
Total current assets 21,459 31,080
Property and equipment, net 5,638 6,098
--------- --------
$ 27,097 $ 37,178
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,426 $ 1,514
Accrued liabilities 683 519
Deferred revenue 5,745 6,818
Current portion of long-term debt 768 1,190
--------- --------
Total current liabilities 12,622 10,041
--------- --------
Long-term liabilities:
Long-term debt, less current portion 580 992
Accrued rent 1,304 1,293
--------- --------
Total long-term liabilities 1,884 2,285
--------- --------
Stockholders' equity:
Common stock, no par value, 75,000,000 shares authorized,
7,359,282 and 7,278,488 shares issued and outstanding 76,113 75,435
Accumulated deficit (63,522) (50,583)
--------- ---------
Total stockholders' equity 12,591 24,852
--------- --------
Commitments and contingencies (Note 8) -- --
--------- --------
$ 27,097 $ 37,178
========= ========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
AGOURON PHARMACEUTICALS, INC.
STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Contracts $ 26,722 $ 16,301 $ 8,266
Interest 1,239 1,350 1,704
--------- --------- ---------
27,961 17,651 9,970
--------- --------- ---------
Costs and expenses:
Research and development 36,317 23,957 17,404
General and administrative 4,358 2,961 2,127
Interest 225 195 268
--------- --------- ---------
40,900 27,113 19,799
--------- --------- ---------
Net loss $(12,939) $ (9,462) $ (9,829)
========= ========= =========
Net loss per common share $ (1.77) $ (1.31) $ (1.40)
========= ========= =========
Shares used in computing net loss per common share 7,296,000 7,241,000 6,997,000
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
AGOURON PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Accumulated
-------------------
Shares Amount Deficit Total
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at June 30, 1992 6,903,933 $ 68,809 $ (31,292) $ 37,517
Stock issuances:
Private sales 311,688 5,940 - 5,940
Exercise of stock options 2,500 21 - 21
Employee stock purchase plan 8,425 70 - 70
Options granted for services provided - 38 - 38
Net loss - - (9,829) (9,829)
--------- -------- --------- --------
Balance at June 30, 1993 7,226,546 74,878 (41,121) 33,757
Stock issuances:
Exercise of stock options 32,649 352 - 352
Employee stock purchase plan 19,293 170 - 170
Options granted for services provided - 35 - 35
Net loss - - (9,462) (9,462)
--------- -------- --------- --------
Balance at June 30, 1994 7,278,488 75,435 (50,583) 24,852
Stock issuances:
Exercise of stock options 49,125 382 - 382
Employee stock purchase plan 31,669 296 - 296
Net loss - - (12,939) (12,939)
--------- -------- --------- --------
Balance at June 30, 1995 7,359,282 $ 76,113 $ (63,522) $ 12,591
========= ======== ========= ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
AGOURON PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from contracts $ 25,633 $ 20,307 $ 7,973
Cash paid to suppliers, employees and service providers (34,113) (24,955) (16,962)
Interest received 1,239 1,350 1,704
Interest paid (225) (195) (268)
Net cash provided (used) by operating activities (7,466) (3,493) (7,553)
---------- ---------- ----------
Cash flows from investing activities:
Net (increase) decrease in short-term investments 11,871 (840) 6,878
Expenditures for property and equipment (1,978) (1,783) (2,655)
---------- ---------- ----------
Net cash provided (used) by investing activities 9,893 (2,623) 4,223
---------- ---------- ----------
Cash flows from financing activities:
Net proceeds from issuance of common stock 678 522 6,031
Principal payments under equipment leases (613) (550) (572)
Increase (decrease) in long-term debt, net (238) 465 (312)
---------- ---------- ----------
Net cash provided (used) by financing activities (173) 437 5,147
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 2,254 (5,679) 1,817
Cash and cash equivalents at beginning of year 2,104 7,783 5,966
---------- ---------- ----------
Cash and cash equivalents at end of year $ 4,358 $ 2,104 $ 7,783
========== ========== ==========
Reconciliation of net loss to net cash provided (used) by
operating activities:
Net loss $(12,939) $ (9,462) $ (9,829)
Depreciation and amortization 2,455 2,180 1,755
Net (increase) decrease in accounts receivable and
other current assets 4 (635) (172)
Net increase (decrease) in accounts payable, accrued
liabilities, deferred revenue and other liabilities 3,014 4,389 655
Options granted for services provided -- 35 38
---------- ---------- ----------
Net cash provided (used) by operating activities $ (7,466) $ (3,493) $ (7,553)
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
AGOURON PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - The Company and its significant accounting policies
The Company
Agouron Pharmaceuticals, Inc. ("Agouron" or the "Company") was
incorporated in the state of California on June 22, 1984. The Company is
engaged in the development of human pharmaceuticals utilizing protein
structure-based drug design.
Short-term Investments
Short-term investments consist principally of government or government
agency securities, corporate notes and bonds, commercial paper and
certificates of deposit with original maturities of three to thirty-six
months. Included in short-term investments at June 30, 1995 and 1994 is
$172,000 and $246,000 of accrued interest receivable.
The Company adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" ("FAS
115") for investments held as of or acquired after July 1, 1994. The
Company has classified its short-term investments as available-for-sale.
The adoption of FAS 115 did not have a material impact on the Company's
financial position or results of operations.
Concentration of Credit and Market Risk and Off Balance Sheet Risk
The Company invests its excess cash principally in marketable securities
from a diversified portfolio of institutions with strong credit ratings
and, by policy, limits the amount of credit exposure at any one
institution. These investments are generally not collateralized and
primarily mature within one year. The Company has not realized any
material losses from such investments in 1995, 1994 or 1993.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed
using the straight-line method over estimated useful lives of three to five
years. Leasehold improvements are amortized over the life of the lease.
Charges to costs and expenses for repairs and maintenance were $422,000,
$534,000 and $508,000 for the years ended June 30, 1995, 1994 and 1993.
Revenue Recognition
Contract revenues (including profit, if any) are earned and recognized
as work is performed. Contract payments received in advance of performance
are recorded as deferred revenue. Subsequent contract revenues are
recognized according to the provisions of each collaborative agreement,
generally on a percentage-of-completion basis over the life of the
contract.
Statement of Cash Flows
For purposes of the Statement of Cash Flows, cash equivalents are highly
liquid investments purchased with an original maturity of three months or
less. Non-cash financing activities are comprised primarily of capital
lease obligations and were $17,000, $58,000 and $85,000 for 1995, 1994 and
1993.
F-6
<PAGE>
Income Taxes
Effective July 1, 1993, the Company adopted, on a prospective basis,
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("FAS 109"). Under FAS 109, deferred tax is recognized using the
liability method, whereby tax rates are applied to cumulative temporary
differences based on when and how they are expected to affect the tax
return. The adoption of FAS 109 did not have a material impact on the
Company's financial statements.
Liquidity and Capital Resources
At June 30, 1995, the Company believes that its current capital
resources, existing contractual commitments and the JT milestone payment of
$24,000,000 (see Note 4), will be sufficient to meet its operating needs
through fiscal 1996. This belief is based on current research and clinical
development plans, the current regulatory environment, historical industry
experience in the development of therapeutic drugs and general economic
conditions. However, if the JT milestone payment is not received, the
Company will need additional financing to meet the planned operating needs
of fiscal 1996 as well as fiscal 1997 and beyond. Such needs would include
the expenditure of substantial funds to continue research and development
activities, conduct existing and planned preclinical studies and tests,
conduct human clinical trials and establish certain manufacturing, sales
and marketing capabilities. As a result, the Company anticipates pursuing
various financing alternatives such as collaborative arrangements and
additional public offerings or private placements of Company common or
preferred stock. If such alternatives are not available, the Company may
be required to delay or eliminate expenditures for certain of its potential
products under development or to license third parties to commercialize
products or technologies that the Company would otherwise seek to develop
itself.
Note 2 - Short-term investments
At June 30, 1995, the amortized cost and estimated fair value of short-term
investments held as available-for-sale were as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
United States government securities $ 10,236 $ 5 $ (60) $ 10,181
Corporate obligations 3,037 2 (16) 3,023
Other interest bearing securities 2,613 -- -- 2,613
---------- ----------- ----------- --------
$ 15,886 $ 7 $ (76) $ 15,817
========== =========== =========== ========
Realized gains and losses on the disposal of available-for-sale securities
during 1995 totaled $3,000 and $7,000, respectively. The cost of
securities sold is based upon the specific identification method. At June
30, 1995, scheduled maturities for available-for-sale securities were less
than one year for $14,720,000 and between one and two years for $1,166,000.
At June 30, 1995, short-term investments are carried on the balance sheet
at amortized cost. The difference between amortized cost and fair value
has not been reflected in stockholders' equity as such difference is not
material.
F-7
<PAGE>
Note 3 - Composition of certain financial statement captions
June 30,
1995 1994
------- -------
(Dollars in
thousands)
Accounts receivable:
Employee receivables $ 262 $ 270
Other receivables 82 58
------- -------
$ 344 328
Property and equipment, net: ======= =======
Scientific instrumentation $ 7,787 6,748
Computer equipment 5,453 4,838
Leasehold improvements 2,798 2,535
Furniture and fixtures 944 794
------- -------
16,982 14,915
Less accumulated depreciation and amortization (11,344) (8,817)
------- -------
$ 5,638 $ 6,098
------- -------
Accrued liabilities:
Accrued vacation $ 623 $ 489
Other 60 30
------- -------
$ 683 $ 519
======= =======
Note 4 - Significant contract and grant arrangements
Japan Tobacco Inc.
In December 1992, the Company entered into an agreement with Japan
Tobacco Inc. ("JT") to collaborate on the discovery, development and
commercialization of novel therapeutic drugs which act on key proteins
related to the human immune system ("JT 1992"). In February 1994, the
Company expanded its strategic alliance with JT into the field of anti-
viral drugs for the treatment of infections caused by hepatitis C, the
herpes family of viruses and the rhinoviruses ("JT 1994"). In December
1994, the Company added its anti-HIV drug, AG1343, to the JT collaboration
with the execution of a worldwide development and licensing agreement ("JT
HIV"). In January 1995, JT 1992 was canceled by mutual agreement and JT
1992 resources were reallocated to JT 1994 programs.
Under the provisions of JT 1994, JT has agreed to make certain research
payments to the Company of not less than $8,000,000 over a two year period
ending December 1996. Such payments could approximate more than
$21,000,000 over a four year period if certain technical milestones are
achieved. In addition, JT made an up-front payment of $7,778,000, which is
being amortized to revenue over a twenty-four month period. Under the
provisions of JT HIV, JT has made payments of $6,000,000 to Agouron
representing an initial payment of $2,500,000 and a milestone payment of
$3,500,000 in recognition of the satisfactory completion of a phase I
clinical study. A second milestone payment of $24,000,000 is to be made by
JT, at its election, subsequent to the receipt of results from a pilot
phase II clinical study of AG1343. The Company anticipates such payment to
be received in calendar 1995. If the milestone payment is not made, all
rights to AG1343 revert to the Company. If the payment is made, then
Agouron and JT will ultimately share equally the costs of further
development of AG1343.
F-8
<PAGE>
Under the provisions of JT 1994, the Company will have exclusive rights
to develop, manufacture and market anti-hepatitis C and anti-herpes drugs
in the United States, Canada and Mexico. JT will have exclusive rights to
develop, manufacture and market these drugs in Japan, Taiwan and South
Korea. Outside the countries in which they respectively have exclusive
rights, Agouron and JT will have co-exclusive rights to manufacture and
market jointly developed anti-hepatitis C and anti-herpes drugs. Each
company will pay royalties to the other based upon their respective sales
of anti-hepatitis C and anti-herpes drugs. The Company will have
exclusive, world-wide, royalty-free rights to develop, manufacture and
market drugs for the treatment or prevention of infections by pathogenic
rhinoviruses. JT will have the first right to negotiate for a license to
develop, manufacture and market such anti-rhinovirus drugs in Japan and
certain other countries in Asia. Under the provisions of JT HIV, Agouron
will retain exclusive commercial rights to AG1343 (with the right to
sublicense, subject to JT's right of first refusal) in the United States,
Canada and Mexico. JT will have exclusive commercial rights to AG1343
(with the right to sublicense, subject to Agouron's right of first refusal)
in Japan and certain other countries of Asia. Exclusive commercial rights
(with the right to sublicense) in Europe and all remaining countries of the
world will be held by a joint venture owned equally by Agouron and JT. The
two companies will share profits equally from the worldwide commercialization
of AG1343.
Under the combined terms of the agreements, the Company has incurred
costs of $19,211,000, $5,043,000 and $1,144,000 and recognized
corresponding revenues of $22,880,000, $11,144,000 and $2,156,000 for the
years ended June 30, 1995, 1994 and 1993.
Under a separate agreement dated December 1992, JT purchased 155,844
shares of newly issued common stock for an aggregate purchase price of
$3,000,000. Such purchase represented approximately 2% of the total
outstanding common stock.
Syntex (U.S.A.) Inc.
In June 1993, the Company entered into an agreement with Syntex (U.S.A.)
Inc. (now a subsidiary of Roche Holdings, Inc.) ("Roche"), to collaborate
on the discovery of novel matrix metalloprotease inhibitor drugs for use
against cancer and degenerative diseases such as rheumatoid arthritis and
osteoarthritis. Under the provisions of the agreement, Roche has agreed to
make certain research payments to the Company over a three year period
ending June 1996 of approximately $8,500,000. Under the agreement, the
Company has incurred costs and recognized corresponding revenues of
$3,043,000, $2,307,000 and $120,000 during the years ended June 30, 1995,
1994 and 1993. The Company is funding a portion of the activities
associated with this collaboration on its own account. Under the terms of
the agreement, the Company will have a royalty position in certain
agreement products, if any, and other development and commercial rights in
other agreement products, if any.
Under a separate agreement dated June 1993, Roche purchased 155,844
shares of newly issued common stock for an aggregate purchase price of
$3,000,000. Such purchase represented approximately 2% of the total
outstanding common stock.
Schering-Plough Corporation
In April 1994, the Company and Schering-Plough Corporation completed a
three year collaborative research agreement providing for the discovery and
development of anti-cancer drugs which target oncogenic ras proteins. Each
company may pursue further discovery or development efforts in this program
area at its sole discretion and expense with no subsequent obligations to
the other company. Under the agreement, the Company has incurred costs and
recognized corresponding revenues of $1,894,000 and $2,570,000 during the
years ended June 30, 1994 and 1993.
F-9
<PAGE>
Eli Lilly and Company
In April 1993, the Company and Eli Lilly and Company completed a five
year collaborative research program in several therapeutic categories.
Further development of any discoveries made in the program will be
undertaken at each company's sole discretion and expense. Agouron has
continuing commercial rights and/or financial interests in certain of these
discoveries. During the collaborative research program, the Company has
been reimbursed for certain costs incurred and has recognized revenues of
$2,941,000 during 1993.
National Institutes of Health
The Company is currently the grantee organization for two grants from
the National Institutes of Health to conduct research related to the Human
Immunodeficiency Virus. Costs incurred and the corresponding reimbursement
revenues recognized under various grant programs were $799,000, $956,000
and $479,000 for 1995, 1994 and 1993.
Note 5 - Long-term debt
At June 30, 1995 and 1994, long-term debt and capital lease obligations
were as follows:
</TABLE>
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Notes payable, secured with personal property and a $ 931,000 $ 1,169,000
certificate of deposit for $400,000; interest at prime
plus 1.5%; maturing September 1995, June 1997 and
November 1998
Capital leases, with interest rates between 6.7% and 16.5%, 417,000 1,013,000
maturing at various dates through December 1998
------------ ------------
Total long-term debt and capital lease obligations 1,348,000 2,182,000
Current portion of long-term debt (768,000) (1,190,000)
------------ ------------
Long-term debt $ 580,000 $ 992,000
============ ============
</TABLE>
Maturities of long-term debt, excluding capital leases, are as follows:
1996 - $445,000, 1997 - $344,000, 1998 - $100,000, 1999 - $42,000 and
2000 and thereafter $0.
F-10
<PAGE>
Note 6 - Income taxes
At June 30, 1995 and 1994, the Company has total deferred income taxes
of $30,299,000 and $23,609,000, which have been fully reserved as follows:
June 30,1995 June 30, 1994
------------ ------------
Deferred revenue $ 2,358,000 $ 2,737,000
Book and tax depreciation differences 1,664,000 1,588,000
Accrued liabilities 790,000 715,000
Net operating loss carryforwards 19,638,000 14,437,000
Foreign tax credits 1,913,000 1,237,000
Research and development tax credits 3,936,000 2,895,000
------------ -------------
30,299,000 23,609,000
Valuation allowance (30,299,000) (23,609,000)
------------ -------------
Deferred taxes, net $ -- $ --
============ =============
The Company has not recorded provisions for any United States income
taxes due to net operating losses for tax reporting purposes. At June 30,
1995, the Company had net operating loss carryforwards for federal tax
reporting purposes of approximately $53,509,000, expiring from 2000 through
2010. The Company also has federal research and development credit
carryforwards of approximately $2,721,000 at June 30, 1995, expiring from
2000 through 2010. The future utilization of, or limitation as to the use
of, net operating loss carryforwards for federal and state income tax
purposes may be impacted by the issuance of additional equity securities.
As a result of California's partial conformity with federal provisions
regarding net operating loss and research and development credit
carryforwards, the Company has net operating loss and research and
development credit carryforwards of approximately $15,055,000 and
$1,215,000 for state tax reporting purposes at June 30, 1995, expiring from
1996 through 2010.
Included in general and administrative costs and expenses at June 30,
1995, 1994 and 1993 is approximately $863,000, $611,000 and $116,000 of
foreign tax expense associated with the contract research payments from JT.
F-11
<PAGE>
Note 7 - Stockholders' equity
Stock Options
The Company has two stock option plans whereby 3,220,000 shares of
common stock have been reserved for issuance to its officers, directors,
employees and consultants. The plans, as amended, are administered by the
Board of Directors or its designees and provide generally that, for
incentive stock options, the exercise price shall not be less than the fair
market value of the shares at the date of grant and, for certain non-
qualified stock options, the price shall not be less than 85% of the fair
market value of the shares at the date of grant and may be at any price
determined by the Board of Directors for others. The options expire not
later than ten years from the date of the grant and generally become
exercisable ratably over a four year period beginning one year from the
grant date. As of June 30, 1995, 293,636 of these options had been
exercised, 1,107,922 were exercisable and 340,672 shares of common stock
remain available for option grant. The following table summarizes stock
option activity for 1993 through 1995:
Shares Price
--------- ---------------
Outstanding June 30, 1992 803,278
Options granted 494,239 $ 7.88 - $13.88
Options exercised (2,500) $ 7.38 - $ 9.15
Options cancelled (20,550) $ 7.38 - $15.50
----------
Outstanding June 30, 1993 1,274,467
Options granted 703,450 $ 8.63 - $16.00
Options exercised (32,649) $ 5.40 - $12.00
Options cancelled (39,829) $ 7.88 - $15.50
----------
Outstanding June 30, 1994 1,905,439
Options granted 773,275 $10.13 - $24.50
Options exercised (49,125) $ 5.40 - $15.50
Options cancelled (43,897) $ 7.88 - $16.13
----------
Outstanding June 30, 1995 2,585,692 $ 5.40 - $24.50
==========
Employee Stock Purchase Plan
In December 1992, the shareholders approved an Employee Stock Purchase
Plan ("ESPP") which commenced on January 1, 1993. Under the ESPP, 250,000
shares of common stock have been reserved for issuance and 190,613 shares
remain available for purchase at June 30, 1995. Eligible employees may
purchase shares of the Company's common stock through payroll deductions at
prices equal to 85% of the fair market value of the common stock on either
the first or last day of a purchase period. During 1995, 25,524 shares were
issued at a price of $9.24 per share and 6,145 shares were issued at a
price of $9.88 per share. During 1994, 10,073 shares were issued at a
price of $8.2875 per share and 9,220 shares were issued at a price of $9.35
per share. During 1993, 8,425 shares were issued at a price of $8.2875 per
share.
Stock Warrants
As part of certain financing arrangements in 1986, the Company issued a
warrant to purchase 45,000 shares of the Company's common stock at a per
share price of $6.30. This warrant is currently exercisable and expires in
July 1996.
F-12
<PAGE>
Note 8 - Commitments and contingencies
Certain scientific instrumentation and computer and other equipment are
subject to leases which are classified as capital leases. At June 30, 1995
and 1994, $2,364,000 ($227,000, net) and $2,601,000 ($624,000, net) of such
leased equipment were included in property and equipment.
Rental expenses (principally for leased facilities under long-term
operating lease commitments) were $2,198,000, $1,973,000 and $1,502,000 for
1995, 1994 and 1993. Future minimum payments for capital and operating
leases at June 30, 1995 are as follows:
Capital Leases Operating Leases
-------------- ----------------
1996 $ 350,000 $ 2,579,000
1997 56,000 2,565,000
1998 37,000 2,244,000
1999 8,000 2,295,000
2000 -- 2,411,000
Thereafter -- 2,291,000
------------ -------------
Total minimum lease payments 451,000 $ 14,385,000
Less amount representing interest (34,000) =============
------------
Obligation under capital leases $ 417,000
============
The Company is involved in certain legal proceedings generally
incidental to its normal business activities. While the outcome of any
such proceedings cannot be accurately predicted, the Company does not
believe the ultimate resolution of any such existing matters should have a
material adverse effect on its financial position or results of operations.
F-13
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
The executive officers and directors of the Company are as follows:
<CAPTION>
Name Age Position
------------------------------- ---- -------------------------------------------
<S> <C> <S>
Peter Johnson(2)(4) 50 President, Chief Executive
Officer and Director
Neil J. Clendeninn, M.D., Ph.D. 46 Vice President, Clinical Affairs
Steven S. Cowell(2) 46 Vice President, Finance and Chief Financial
Officer
Gary E. Friedman(2) 48 Vice President, General Counsel, Secretary
and Director
Robert C. Jackson, Ph.D. 52 Vice President, Research and Development
Barry D. Quart, Pharm.D. 38 Vice President, Regulatory Affairs
R. Kent Snyder 41 Vice President, Commercial Affairs
Glenn R. Zinser 52 Vice President, Operations
John N. Abelson, Ph.D.(1) 56 Director
Patricia M. Cloherty(3)(4) 53 Director
A.E. Cohen(1)(4) 59 Director
Michael E. Herman(1)(4) 54 Director
Irving S. Johnson, Ph.D.(4) 70 Director
Antonie T. Knoppers, M.D.(3) 80 Director
Melvin I. Simon, Ph.D.(3) 58 Director
</TABLE>
(1) Member of Directors Compensation Committee
(2) Member of Management Compensation Committee
(3) Member of Audit Committee
(4) Member of Executive Committee
<PAGE>
Peter Johnson, a founder of the Company, has served as a director and as
president and chief executive officer of the Company since its inception in
1984. Through 1989, Mr. Johnson held various positions with The Agouron
Institute, including executive director. Mr. Johnson received a M.A. from
the University of California, San Diego.
Neil J. Clendeninn joined the Company in February 1993 as vice
president, clinical affairs. From 1985 until joining the Company, Dr.
Clendeninn held various positions with Burroughs Wellcome Co., including
head of the chemotherapy section from 1988. From 1981 through 1985, Dr.
Clendeninn worked with the clinical oncology and clinical pharmacology
groups at the National Institutes of Health. Dr. Clendeninn received an
M.D. and a Ph.D. in pharmacology from New York University.
Steven S. Cowell joined the Company in August 1991 as vice president,
finance and chief financial officer. From 1982 until joining the Company,
Mr. Cowell held various positions, the most recent of which was vice
president and controller at Cetus Corporation, a public biotechnology
company primarily engaged in the development, manufacture and marketing of
pharmaceutical products. Mr. Cowell is a Certified Public Accountant in
California and received a B.S. in business administration from the
University of California, Berkeley.
Gary E. Friedman, a founder of the Company, has served as a director
since its inception, as the secretary of the Company since May 1986 and as
vice president and general counsel since December 1991. Previously, from
1982 until December 1991, Mr. Friedman was a principal of the law firm of
Friedman, Jay & Cramer, a Professional Corporation. Mr. Friedman is a
California Certified Specialist in Taxation. Mr. Friedman received a J.D.
and an M.B.A. from the University of California, Berkeley and an L.L.M. in
taxation from the University of San Diego.
Robert C. Jackson joined the Company in March 1991 as vice president,
research and development. From June 1990 to February 1991, Dr. Jackson was
group director of the anti-cancer drug discovery program at The DuPont
Merck Pharmaceutical Company and, from 1982 to June 1990, held various
positions with the Parke-Davis Pharmaceutical Research Division of the
Warner-Lambert Company, including director of tumor biology and director of
the chemotherapy department. Dr. Jackson received a Ph.D. in biochemistry
from the University of London.
Barry D. Quart joined the Company in June 1993 as vice president,
regulatory affairs. From 1983 until joining the Company, Dr. Quart held
various positions with Bristol-Myers Squibb Company, including executive
director of international regulatory affairs from 1992. Dr. Quart received
a Pharm.D. in clinical pharmacy from the University of California, San
Francisco.
R. Kent Snyder joined the Company in July 1991 as vice president,
business development. In June 1995, Mr. Snyder's title was changed to vice
president, commercial affairs. From 1982 until joining the Company, Mr.
Snyder held various positions with Marion Laboratories, Inc. (now Hoechst
Marion Roussel), including director of U.S./European licensing. Prior to
his employment at Marion, from 1978 to 1982, he held various sales and
marketing positions with Roche Biomedical Laboratories, Inc. Mr. Snyder
received an M.B.A. from Rockhurst College.
Glenn R. Zinser joined the Company in 1987 and, since July 1, 1995, has
served as vice president, operations. Previously, from 1987 through June
1995, Mr. Zinser held various management positions with the Company,
including senior director, operations from July 1993 through June 1995.
Mr. Zinser received an M.B.A. from the University of California, Los
Angeles.
<PAGE>
John N. Abelson, a founder of the Company, has served as a director
since its inception. Dr. Abelson, a molecular biologist, is a member
of the National Academy of Sciences. Since 1982, Dr. Abelson has been a
member of the faculty of the Division of Biology at the California
Institute of Technology where, from October 1989 until June 1995, he served
as chairman. Previously, Dr. Abelson was a member of the faculty in the
Department of Chemistry at the University of California, San Diego. Dr.
Abelson received a Ph.D. in biophysics from The Johns Hopkins University
and was a postdoctoral fellow at the Laboratory of Molecular Biology in
Cambridge, England. Dr. Abelson also serves as a director of The Agouron
Institute.
Patricia M. Cloherty joined the Board in December 1988. Since 1970, Ms.
Cloherty has been associated with Patricof & Co. Ventures, Inc.( formerly
Alan Patricof Associates, Inc.), a New York venture capital firm
("Patricof"), and has been a general partner of its funds since 1973. In
1993, she was elected president of Patricof. Ms. Cloherty also served as
deputy administrator for the U.S. Small Business Administration in 1977 and
1978. Ms. Cloherty also serves on the board of directors of several
private companies and is chairman of the National Venture Capital
Association.
A.E. Cohen joined the Board in March 1992. Mr. Cohen is an independent
management consultant. From 1957 until his retirement in January 1992, Mr.
Cohen held various positions at Merck & Co., Inc., including senior vice
president and president of the Merck Sharp & Dohme International Division.
Currently, Mr. Cohen is the chairman of the board of Neurobiological
Technologies, Inc. and is a member of the board of directors of Akzo N.V.,
Immunomedics, Inc., Macrochem Corporation, Teva Pharmaceutical Industries
Ltd. and Vasomedical, Inc., all of which are public companies. Mr. Cohen
also serves on the board of directors of several private companies.
Michael E. Herman joined the Board in October 1992. Mr. Herman is a
private investor as well as president and chief operating officer of the
Kansas City Royals Baseball Team. From October 1974 until his retirement
in 1990, Mr. Herman held various positions at Marion Laboratories, Inc.
(now Hoechst Marion Roussel), including executive vice president and chief
financial officer. Currently, Mr. Herman serves as chairman of the finance
committee of the Ewing Marion Kauffman Foundation, a private foundation
located in Kansas City, where from 1985 through 1990, he was the president
and chief operating officer. Mr. Herman is also a member of the board of
directors of Cerner Corporation and Seafield Capital, both of which are
public companies, and serves on the board of directors of several private
companies.
Irving S. Johnson joined the Board in May 1989. Dr. Johnson is an
independent consultant in biomedical research working with numerous private
companies. From 1953 until his retirement in November 1988, Dr. Johnson
held various positions at Eli Lilly and Company, including vice president
of research from 1973 until 1988. Dr. Johnson also served on several
committees of the National Academy of Sciences, the Office of Technology
Assessment and the National Institutes of Health. Currently, he is a
member of the board of directors of Allelix Biopharmaceuticals Inc., Athena
Neurosciences, Inc. and Ligand Pharmaceuticals Incorporated, all of which
are public companies. Dr. Johnson received a Ph.D. in developmental
biology from the University of Kansas.
Antonie T. Knoppers joined the Board in July 1991. Dr. Knoppers is an
independent management consultant. From 1952 until his retirement in 1975,
Dr. Knoppers held various positions at Merck & Co., Inc., including vice
chairman of the board and president and chief operating officer. Dr.
Knoppers is a member of the board of directors of Centocor, Inc., a public
biotechnology company. In addition, he is a member of the board of
trustees of the Salk Institute, was the former chairman of the U.S. Council
of the International Chamber of Commerce and a member of the advisory board
of PaineWebber Development Corporation, an affiliate of PaineWebber
Incorporated. Dr. Knoppers received an M.D. from the University of
Amsterdam and a Ph.D. from the University of Leiden, The Netherlands.
<PAGE>
Melvin I. Simon, a founder of the Company, has served as a director
since its inception. Dr. Simon, a molecular geneticist, is a member
of the National Academy of Sciences. Currently, Dr. Simon is chairman of
the Division of Biology at the California Institute of Technology where he
has been a member of the faculty since 1982. Previously, Dr. Simon was a
member of the faculty in the Department of Biology at the University of
California, San Diego. Dr. Simon received a Ph.D. in biochemistry from
Brandeis University. Dr. Simon also serves as a director of The Agouron
Institute.
The Board consists of nine directors elected by the holders of the
common stock. All directors of the Company hold office until the next
annual meeting of the shareholders and the election and qualification of
their successors. Non-officer members of the Board of Directors of the
Company receive cash compensation in the amount of $250 per meeting
attended for their services as a director.
As permitted by California law, the articles of incorporation and the
bylaws of the Company currently provide for the limitation of director
liability for monetary damages for breach of duty to the Company and for
indemnification of agents (including officers and directors) to the full
extent permitted under the California General Corporations Law. The
Company has entered into indemnification agreements with all of its
directors and officers. Additionally, the Company has in effect a
directors and officers liability insurance policy which insures directors
and officers of the Company against loss arising from claims made against
them due to wrongful acts while acting in their individual and collective
capacities as directors and officers. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
During fiscal 1995, late Form 4 filings were made by: Melvin Simon, a
director of the Company (one filing), and The Agouron Institute, a holder
of over ten percent of the common stock of the Company (two filings).
Item 11. EXECUTIVE COMPENSATION
Compensation of Directors
Non-employee members of the Board of Directors receive cash compensation
in the amount of $250 per Board Meeting for their services as Board
Members, and are eligible for reimbursement of their expenses incurred to
attend such meeting in accordance with Company policy. In addition to
meeting fees, certain non-employee directors received consulting fees
during fiscal 1995. For scientific consultation, Dr. Abelson received
$29,040; Dr. Knoppers, $5,000; Dr. Johnson, $18,000 and Dr. Simon, $26,400.
For special consultation concerning corporate development issues, Mr. Cohen
received $18,000 and Mr. Herman received $9,000.
Compensation of Executive Officers
The following table sets forth the aggregate compensation paid or
accrued by the Company to the Chief Executive Officer and to the four other
most highly compensated executive officers whose annual compensation
exceeded $100,000 for the fiscal year ended June 30, 1995 (collectively the
"named executive officers") for service during the fiscal years ended June
30, 1995, 1994 and 1993:
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards(2)
Name ---------------------------- ------------
Principal Stock All Other
Position Year Salary(1) Bonus Options Compensation(3)
- ---------------------- ---- --------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Peter Johnson 1995 $253,500 $70,000(6) 78,200 $ 948
President & CEO 1994 205,000 50,000 91,200 899
1993 200,000 50,000 40,000 888
Neil J. Clendeninn(4) 1995 187,900 88,309(7) 10,000 131,619
Vice President, 1994 177,200 35,000 18,300 107,056
Clinical Affairs 1993 92,384 - - 50,000 262
Robert C. Jackson 1995 179,000 30,000(6) 12,000 948
Vice President, 1994 156,600 35,000 33,000 899
Research & Development 1993 142,400 35,000 15,000 958
Barry D. Quart(5) 1995 150,600 57,000(6) 30,000 9,005
Vice President, 1994 142,000 32,500 26,800 68,453
Regulatory Affairs 1993 9,682 57,821(8) 35,000 - -
R. Kent Snyder 1995 158,000 55,000(6) 20,000 1,014
Vice President, 1994 149,000 53,000 40,800 720
Business Development 1993 141,800 48,000 15,000 18,753
</TABLE>
(1) Includes amounts deferred out of compensation under the Company's
401(k) Plan otherwise payable in cash during each fiscal year.
(2) The Company has made no restricted stock awards, has not granted any
stock appreciation rights and has no other long-term incentive plans.
(3) (a) During 1995, the Company made matching contributions to the
Company's 401(k) Plan in the following amounts:
Mr. Johnson, $948; Dr. Clendeninn, $900; Dr. Jackson, $948; Dr.
Quart, $557; and Mr. Snyder, $1,014.
(b) During 1994, the Company made matching contributions to the
Company's 401(k) Plan in the following amounts: Mr. Johnson, $899;
Dr. Clendeninn, $1,047; Dr. Jackson, $899; Dr. Quart, $1,047; and
Mr. Snyder, $720.
(c) During 1993, the Company made matching contributions to the
Company's 401(k) Plan in the following amounts: Mr. Johnson, $888;
Dr. Clendeninn, $262; Dr. Jackson, $958; and Mr. Snyder, $363.
(d) During 1995, the Company reimbursed certain officers for
relocation costs as follows: Dr. Clendeninn, $130,719 and Dr.
Quart, $8,448.
(e) During 1994, the Company reimbursed certain officers for
relocation costs as follows: Dr. Clendeninn, $106,009 and Dr.
Quart, $67,406.
(f) During 1993, the Company reimbursed Mr. Snyder for relocation
costs in the amount of $18,390.
(4) Dr. Clendeninn's employment commenced in February 1993.
(5) Dr. Quart's employment commenced in June 1993.
(6) Cash bonus shown in year earned; actually paid in fiscal 1996. For
Dr. Quart and Mr. Snyder, a portion of the bonus amount was subsequently
used to partially repay their outstanding relocation loans.
(7) A portion of the bonus was used to partially repay an outstanding
relocation loan and $43,982 of the bonus was directly applied to the
reduction of such loan.
(8) Initial hiring bonus.
<PAGE>
The following table sets forth certain information with respect to
individual grants of stock options made during the fiscal year ended June
30, 1995, to each of the named executive officers:
Option Grants in Fiscal 1995
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term(2)
% of Total ----------------------
Options
Granted to
Employees
Options in Fiscal Exercise Expiration
Name Granted(1) Year Price Date 5% 10%
- ------------------ -------- ------ -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Peter Johnson 60,716# 7.8% $22.875 6/14/05 $873,500 $2,213,500
17,484* 2.3 22.875 6/14/05 251,500 637,400
Neil J. Clendeninn 10,000* 1.3 22.875 6/14/05 143,900 364,600
Robert C. Jackson 12,000* 1.6 22.875 6/14/05 172,600 437,500
Barry D. Quart 30,000* 3.9 22.875 6/14/05 431,600 1,093,700
R. Kent Snyder 20,000* 2.6 22.875 6/14/05 287,700 729,100
</TABLE>
(1) The Agouron Stock Option Plan ("Plan") for executive
officers is administered by the Board of Directors or by the
Disinterested Stock Option Committee of the Board if the grant is to an
executive officer who is also a director. The Board, based upon the
recommendation of the Directors Compensation Committee, determines the
number of shares to be granted and the term of such grants to each
executive officer. The options granted in fiscal 1995 were either
incentive stock options(*) or non-statutory stock options(#), have
exercise prices equal to the fair market values on the date of grant,
vest over a period of four years and have a term of ten years. Upon
certain corporate events as defined in the Plan which result in a change
of control, the exercise date of all outstanding options for all
employees including executive officers may be accelerated. The Plan
also permits the Company to assist an employee in using a so-called
"cashless" exercise procedure to pay the option exercise price.
(2) Potential realizable value is based on an assumption that
the stock price of the common stock appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the ten
year option term. These numbers are calculated based on the
requirements promulgated by the Securities and Exchange Commission and
do not reflect the Company's estimate of future stock price growth. Any
such growth would benefit all shareholders.
<PAGE>
The following table sets forth certain information with respect to each
exercise of stock options during the fiscal year ended June 30, 1995, by
each of the named executive officers and the number and value of
unexercised options held by such named executive officers as of June 30,
1995:
<TABLE>
<CAPTION>
Option Exercises in Fiscal 1995
And Value of Options at June 30, 1995
Number of Value of Unexercised
Unexercised In-the-Money
Options at Options at
Shares June 30, 1995 June 30, 1995(1)
Acquired on Value ----------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ----------- -------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter Johnson 0 $0 192,800 166,600 $ 2,137,600 $ 1,127,700
Neil J. Clendeninn 0 0 29,575 48,725 437,900 558,800
Robert C. Jackson 0 0 80,750 44,250 1,153,100 402,600
Barry D. Quart 0 0 24,200 67,600 344,200 525,800
R. Kent Snyder 0 0 40,200 65,600 443,700 545,300
</TABLE>
(1) Value calculated as market value of Company stock on June 30, 1995
($23.625), minus exercise price multiplied by the number of shares.
Compensation Committee Report on Executive Compensation
Overview and Philosophy
The Directors Compensation Committee (the "Committee") is composed entirely
of outside directors and is responsible for developing and making
recommendations to the Board with respect to the Company's executive
compensation policies and practices, including the establishment of the
annual total compensation for the chief executive officer (the "CEO") and
all executive officers. The Committee has available to it an outside
compensation consultant and access to independent compensation data. The
Board is responsible for approving and implementing the compensation
recommendations of the Committee. The recommendations made by the
Committee to the Board during 1995 were approved without any significant
modification.
The objectives of the Company's executive compensation program are to
attract, retain and motivate highly qualified executive personnel. These
objectives are satisfied through the use of three principal compensation
elements: base salary, cash bonus payments and stock options.
<PAGE>
Base Salary
Base salary levels for the Company's executive officers are based on the
concept of pay for performance and are competitively set relative to the
compensation of other executives in the biotechnology industry. Extensive
salary survey data is available on the industry (notably, the annual
"Biotechnology Compensation and Benefits Survey" conducted by Radford
Associates and Alexander & Alexander Consulting Group) and is utilized by
the Committee in establishing annual base salaries. In determining base
salaries, the Committee also considers corporate performance and progress
in the immediately-preceding fiscal year, individual experience and
performance, specific issues which are relevant to the Company and general
economic conditions. The base salary of the CEO and all other executive
officers is reviewed annually. During fiscal year 1995, the base salaries
paid to the executive officers other than the CEO approximated the 75th
percentile of the above-noted industry survey data.
Bonus Payments
Annual cash bonus payments are discretionary unless otherwise required
pursuant to an employment agreement. Only one executive officer has such
an agreement: Dr. Jackson is to receive a minimum annual bonus payment of
$30,000. Bonus payments, if any, to other executive officers, including
the CEO, or payments above the required annual minimum, are based on two
principal factors: corporate performance as compared to the Company's
annual goals and objectives and individual performance relative to
corporate performance and individual goals and objectives. The bonus
payments to Dr. Quart and Dr. Clendeninn in 1994 were pursuant to their
employment agreements and mandatory for only their first year of
employment.
Bonus payments in 1995 were generally in recognition of the satisfaction of
several significant corporate objectives, including the establishment of a
major corporate collaboration during the year and the continued preclinical
and clinical development of the Company's leading cancer and anti-viral
agents.
Bonus payment recommendations for executive officers other than the CEO are
initiated by the CEO and submitted to the Committee for review and
subsequent submission to the Board. Bonus payment recommendations for the
CEO are initiated by the Committee and submitted to the Board.
Total base salary and any bonus payments are compared to "total
compensation" as reported by the previously noted industry survey. Such
total compensation for the executive officers of the Company is at or above
the averages of such data, which reflects the Committee's belief that the
relative levels of corporate performance and increase in shareholder value
during the period were also above average.
Stock Options
To conserve its cash resources, the Company places special emphasis on
equity-based incentives to attract, retain and motivate executive officers
as well as other employees. Under the Company's stock option plans, grants
are generally priced at the fair market value on the date of grant, vest
over a period of four years and have a term of ten years. Grants are made
to all employees on their date of hire based on salary level and position.
All employees, including executive officers, are eligible for subsequent,
discretionary grants which are generally based on either individual
or corporate performance. It is the Committee's intent that the interests
of the Company shareholders and the executive officers be closely aligned
through the use of stock options. Option grants recommended by the
Committee are submitted to the Board for approval. If a recommendation
relates to any director, including an executive officer who is also a
director, such recommendation is submitted to the Disinterested Stock
Option Committee of the Board for approval. Based on recent peer-company
proxy data compiled by the Company, the level of option grants to each
executive officer in 1995
<PAGE>
remains competitive, and the resultant total option position as a percent of
total shares outstanding represents approximately the 75th to 95th percentile
of such positions.
Chief Executive Officer Compensation
During 1995, Mr. Johnson's base salary of $253,500 was based on individual
and corporate performance, and was between the 50th and 75th percentile of
the updated industry data for base salaries of CEOs.
During 1995, Mr. Johnson was awarded a bonus of $70,000 in recognition of
the satisfaction of several significant corporate objectives, including the
continued preclinical and clinical development of three product candidates
and the creation of a significant corporate alliance. The Committee
believes that Mr. Johnson has made a significant contribution during 1995
in establishing a sound base for enhancing shareholder value through his
managerial and entrepreneurial efforts.
The stock options awarded to Mr. Johnson during fiscal 1995 are competitive
and consistent with the purpose of the stock option plans. The resultant
total option position as a percent of total shares outstanding represents
approximately the 85th percentile for peer CEO positions.
Executive Compensation Deduction Limitations
In 1993, Section 162(m) of the Internal Revenue Code ("Section 162(m)") was
enacted which disallows the deductibility by the Company of any
compensation over $1 million per year paid to each of the chief executive
officer and the four other most highly compensated executive officers,
unless certain performance-based compensation criteria are satisfied.
While it is the Committee's firm belief and intent that compensation from
base salary and cash bonus payments will not approach the annual Section
162(m) limitation in the foreseeable future, additional "compensation" from
the exercise of option grants pursuant to the Company's stock option plans
could result in the annual limitation being exceeded. Accordingly, in
1994, the Committee recommended and the Board and the shareholders approved
an amendment to the 1990 Stock Option Plan which qualifies any
"compensation" resulting from an option grant under the Plan for an
exemption from the $1 million limitation. The Committee will continue to
monitor all forms of compensation to its executive officers to ensure that
the Company may maximize the tax benefits of such compensation.
Directors Compensation Committee
Michael E. Herman, Chairman
John N. Abelson, Ph.D.
A. E. Cohen
Directors Compensation Committee Interlocks and Insider Participation
The Directors Compensation Committee is composed exclusively of three
outside directors: Mr. Herman, Mr. Cohen and Dr. Abelson. The Company is
not aware of any Committee interlocks.
<PAGE>
Performance Measurement Comparison
The chart set forth below shows the value of an investment of $100 on
June 30, 1990 in Agouron common stock, the NASDAQ Stock Market Index (U.S.
Companies) ("NASDAQ Market (US)") and the NASDAQ Pharmaceutical Index
("NASDAQ Pharmaceuticals"). The total returns assume the reinvestment of
dividends, although dividends have not been declared on the Company's
common stock. The Company's common stock is traded on the NASDAQ National
Market System and is a component of both the NASDAQ Market (US) and the
NASDAQ Pharmaceutical Index. The comparisons in the chart are required by
the Securities and Exchange Commission and are not intended to forecast or
be an indicator of possible future performance of the Company's common
stock.
<TABLE>
<CAPTION>
Measurement Period
----------------------------------------------------------------
6/30/90 6/30/91 6/30/92 6/30/93 6/30/94 6/30/95
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Agouron $100.00 $155.56 $130.56 $111.11 $125.00 $262.50
NASDAQ Market (US) 100.00 105.89 127.25 159.99 161.61 215.33
NASDAQ Pharmaceuticals 100.00 159.66 198.79 172.80 144.55 193.60
</TABLE>
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 30, 1995
relating to the beneficial ownership of the Company's common stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of the Company's common stock, (ii) each director, (iii)
each of the executive officers named in the Summary Compensation Table in
Item 11, and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
Beneficial Ownership(1)
-------------------------
Number of Percentage of
Beneficial Owner Share Total
- ------------------------------------------------ --------- -------------
<S> <C> <C>
Peter Johnson(2) 270,300 3.6%
Gary E. Friedman(2) Family Trust 89,410 1.2
John N. Abelson(2)(3)(7) 50,055 *
Patricia M. Cloherty(2)(4) 332,502 4.5
A. E. Cohen(2) 22,916 *
Michael E. Herman(2)(5) 35,084 *
Irving S. Johnson(2) 17,916 *
Antonie T. Knoppers(2) 13,433 *
Melvin I. Simon(2) & Linda F. Simon Living Trust(3)(6) 76,000 1.0
Neil J. Clendeninn 29,575 *
Robert C. Jackson 80,950 1.1
Barry D. Quart 24,452 *
R. Kent Snyder 49,346 *
The Agouron Institute 726,000 9.9
505 Coast Boulevard
La Jolla, CA 92037
State Farm Insurance Company 408,000 5.5
One State Farm Plaza
Bloomington, IL 61710
All executive officers and directors as a group (15 persons) 1,156,529 14.6
</TABLE>
- -----------------------------------
* less than 1%.
(1) Unless otherwise indicated, the persons named in the above table
exercise sole voting and investment powers with respect to all shares
beneficially owned by them, subject to applicable community property
laws. The number of shares beneficially owned includes the following
number of shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1995: Mr. Johnson, 192,800 shares; Mr.
Friedman, 55,075 shares; Dr. Johnson, 17,766 shares; Dr. Knoppers,
13,333 shares; Mr. Cohen, 17,916 shares; Mr. Herman, 18,584 shares; Dr.
Clendeninn, 29,575 shares; Dr. Jackson, 80,750 shares; Dr. Quart 24,200
shares; Mr. Snyder, 47,700 shares; and all executive officers and
directors as a group, 559,286 shares.
(2) Director.
(3) Does not include 726,000 shares held by the Agouron Institute, of
which Drs. Abelson and Simon are directors. As directors, they share
voting and investment powers as to the shares held by the Agouron
Institute.
(4) Includes 332,502 shares which are held by APA Excelsior II, L.P.
("APA") and Excelsior Venture Capital Holdings, Ltd. ("Jersey"), of
which Ms. Cloherty may be deemed to share beneficial ownership. Ms.
Cloherty is a general partner of a partnership which is the general
partner of APA and, as such, shares voting and investment powers with
the other general partners. Ms. Cloherty is also president of Patricof
& Co. Ventures, Inc. ("Patricof"), investment advisor to Jersey and, as
such, shares investment power with the other officers of Patricof.
However, Patricof does not have power to vote the shares owned by Jersey
but does make recommendations to those entities. See "CERTAIN
TRANSACTIONS."
(5) Includes 10,000 shares held by the Herman Family Trading Company, a
family partnership of which Mr. Herman is the general partner, 5,000
shares held by Vail Fishing Partners in which Mr. Herman has a 50%
general partner interest and 1,500 shares held by Mrs. Herman, of which
Mr. Herman disclaims any beneficial ownership.
(6) Shared voting and investment power.
(7) Includes 500 shares held by Dr. Abelson as custodian for his minor
children, of which Dr. Abelson disclaims any beneficial ownership.
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Agouron Institute ("Institute") is a holder of 726,000 shares of
common stock. Material business transactions between the Company and the
Institute require approval by a majority of the disinterested directors of
the Company. The Company and the Institute have two common directors (Drs.
Abelson and Simon) and no common officers.
As part of its employment agreement with Mr. Snyder, the Company
provided him with a six-year, non-interest bearing $85,000 employee
relocation loan. The loan is secured by real property. At July 7, 1995,
the principal balance of the loan outstanding was $28,538.
As part of its employment agreement with Dr. Clendeninn, the Company
provided him with a four-year, non-interest bearing $150,000 employee
relocation loan. The loan is secured by real property. At June 30, 1995,
the principal balance of the loan outstanding was $0.
As part of its employment agreement with Dr. Quart, the Company
provided him with a four year, non-interest bearing $60,000 employee
relocation loan. The loan is secured by real property. At July 7, 1995,
the principal balance of the loan outstanding was $45,799.
All transactions with affiliates have been and will continue to be on
terms no less favorable to the Company than could be obtained from
unaffiliated parties. Furthermore, all transactions with affiliates and
any loans to Company officers, affiliates or shareholders must be approved
by a majority of the disinterested directors.
In connection with its Series A preferred stock purchase (converted
in October 1990 to common stock), APA Excelsior II, L.P. was contractually
granted the right to designate a nominee (Ms. Cloherty) for election to the
Board. The Company will use its best efforts to encourage its shareholders
to elect Ms. Cloherty to the Board.
As permitted by California law, the articles of incorporation and
bylaws of the Company currently provide for the limitation of director
liability for monetary damages for breach of duty to the Company and for
indemnification of agents (including officers and directors) to the full
extent permitted under the California General Corporations Law. The
Company has entered into Indemnification Agreements with all of its
directors and officers. Additionally, the Company has in effect a
directors and officers liability insurance policy which insures directors
and officers of the Company against loss arising from claims made against
them due to wrongful acts while acting in their individual and collective
capacities as directors and officers.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
(1) Financial Statements and Supplementary Data
Reference is made to the Index to Financial Statements and
Schedules under Item 8 in Part II hereof, where these documents
are listed.
(2) Exhibits - see (c) below
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of fiscal
1995.
(c) Exhibits
Exhibit
Number Exhibit
-------- ------------------------------------------------------------
3.1(b) Articles of Incorporation (as Amended).
3.3(d) Amended and Restated Bylaws (Restated June 17, 1991).
3.4(h) Restated Articles of Incorporation (December 10, 1992).
4.1(h) Restated Articles of Incorporation.
4.3(a) Seaport Ventures, Inc. Warrant dated June 30, 1986.
10.33(l) 1990 Stock Option Plan (Restated November 3, 1994).
10.34(d) Form of 1990 Incentive Stock Option Agreement.
10.35(d) Form of 1990 Non-Statutory Stock Option Agreement--
Employee/Officer/ Director.
10.36(d) Form of 1990 Non-Statutory Stock Option Agreement--
Consultant.
10.37(d) 1985 Stock Option Plan (Last Amended August 14, 1991).
10.38(d) Form of 1985 Incentive Stock Option Agreement (Last
Amended December 5, 1990).
10.39(d) Form of 1985 Non-Statutory Stock Option Agreement--
Employee/Officer/ Director (Last Amended December 5, 1990).
10.40(d) Form of 1985 Stock Option Agreement--Consultant (Last
Amended December 5, 1990).
10.41(e) Business Loan Agreement and Promissory Note dated
September 24, 1991 between the Company and First National
Bank.
10.42(f) Agouron Pharmaceuticals, Inc. 401(k) Plan (Amended August
1992).
10.43(k) Second Amendment and Restatement of Agreement One dated
April 22, 1994 (effective December 18, 1992) between Japan
Tobacco Inc. and the Company. (Portions of the agreement
receive confidential treatment pursuant to an application
filed September 9, 1994; File No. 0-15609).
10.44(g) Common Stock Purchase Agreement dated December 18, 1992
between Japan Tobacco Inc. and the Company.
10.45(h) Agouron Pharmaceuticals, Inc. Flexible Benefits Plan
(December 10, 1992).
10.46(h) Agouron Pharmaceuticals, Inc. Employee Stock Purchase
Plan (October 15, 1992).
10.47(i) Agreement dated June 8, 1993 between Syntex (U.S.A.) Inc.
and the Company. (Portions of the agreement receive
confidential treatment pursuant to an application filed
September 1, 1993; File No. 0-15609).
<PAGE>
Exhibit
Number Exhibit
-------- ------------------------------------------------------------
10.48(i) Common Stock Purchase Agreement dated June 8, 1993
between Syntex Corporation and the Company.
10.49(c) Office Lease dated March 16, 1990 between Nexus Science
Centre--Torrey Pines Associates and the Company.
10.50(c) First Amendment to Lease dated May 22, 1990 between Nexus
Science Centre--Torrey Pines Associates and the Company.
10.51(d) Second Amendment to Lease dated January, 1991 between
Nexus Science Centre--Torrey Pines Associates and the
Company.
10.52(j) Agreement Two dated February 28, 1994 between Japan
Tobacco Inc. and the Company. (Portions of the agreement
receive confidential treatment pursuant to an application
filed April 25, 1994; File No. 0-15609).
10.53(j) Agreement Three dated February 28, 1994 between Japan
Tobacco Inc. and the Company. (Portions of the agreement
receive confidential treatment pursuant to an application
filed April 25, 1994; File No. 0-15609).
10.54(l) Development and License Agreement dated December 1, 1994
between Japan Tobacco Inc. and the Company (Portions of the
agreement receive confidential treatment pursuant to an
application dated January 31, 1995).
10.55(l) Third Amendment of Agreement One effective January 15,
1995 between Japan Tobacco Inc. and the Company (Portions of
the agreement receive confidential treatment pursuant to an
application dated January 31, 1995).
10.56 Amended and Restated Lease dated July 28, 1995 between
Health Science Properties, Inc. and the Company.
10.57 Lease Amendment dated February 17, 1994 between Koll Hancock
Torrey Pines and the Company.
23.1 Consent of Independent Accountants.
- ------------------------
(a) Incorporated by Reference to Form S-18 filed on March 20, 1987, File
No. 33-12110-LA.
(b) Incorporated by Reference to Form 10-Q filed for the quarter ended
December 31, 1988.
(c) Incorporated by Reference to Form 8-K filed on May 25, 1990
(Exhibits 10.49 and 10.50 originally filed as Exhibits 28.1 and
28.2, respectively).
(d) Incorporated by Reference to Form 10-K filed for the year ended June
30, 1991 (Exhibit 10.51 originally filed as Exhibit 28.3).
(e) Incorporated by Reference to Form S-1 filed on October 4, 1991, File
No. 33-43162.
(f) Incorporated by Reference to Form 10-K filed for the year ended June
30, 1992.
(g) Incorporated by Reference to Form 8-K filed on December 30, 1992.
(h) Incorporated by Reference to Form 10-Q filed for the quarter ended
December 31, 1992.
(i) Incorporated by Reference to Form 10-K filed for the year ended June
30, 1993.
(j) Incorporated by Reference to Form 10-Q/A filed for the quarter ended
March 31, 1994.
(k) Incorporated by Reference to Form 10-K filed for the year ended June
30, 1994.
(l) Incorporated by Reference to Form 10-Q filed for the quarter ended
December 31, 1994.
Note: Certain previously filed exhibits are no longer being incorporated
by reference (and therefore not numerically listed) as the
underlying documents have either expired or are no longer material
or relevant.
<PAGE>
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.
AGOURON PHARMACEUTICALS, INC.
July 28, 1995 By: /s/ Peter Johnson
President, Chief Executive Officer
and Director
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 date indicated.
Signature Title Date
- --------- ----- ----
/s/ Peter Johnson President, Chief Executive July 28, 1995
Officer and Director
/s/ Steven S. Cowell Vice President, Finance and July 28, 1995
Chief Financial Officer
/s/ John N. Abelson, Ph.D. Director July 28, 1995
/s/ Patricia M. Cloherty Director July 28, 1995
/s/ A. E. Cohen Director July 28, 1995
/s/ Gary E. Friedman Vice President, General Counsel, July 28, 1995
Secretary and Director
/s/ Michael E. Herman Director July 28, 1995
/s/ Irving S. Johnson, Ph.D. Director July 28, 1995
Antonie Knoppers, M.D. Director July 28, 1995
/s/ Melvin I. Simon, Ph.D. Director July 28, 1995
Exhibit 10.56
11099 North Torrey Pines Road
Suite 130, Suite 100-A
and Suite 260
La Jolla, California
AMENDED AND RESTATED
LEASE
BY AND BETWEEN
Health Science Properties, Inc.
and
Agouron Pharmaceuticals, Inc.
TABLE OF CONTENTS
Article Page
1. Lease Premises 3
2. Basic Lease Provisions 3
3. Term 4
4. Possession and Rental Commencement Date 5
5. Rent 6
6. Rent Adjustments 7
7. Operating Expenses 7
8. Rentable Area 9
9. Security Deposit 9
10. Use 10
11. Brokers 11
12. Holding Over 12
13. Taxes on Tenant's Property 12
14. Condition of Demised Premises 12
15. Common Areas and Parking Facilities 12
16. Utilities and Services 13
17. Alterations 15
18. Repairs and Maintenance 16
19. Liens 16
20. Indemnification and Exculpation 17
21. Insurance - Waiver of Subrogation 18
22. Damage or Destruction 19
23. Eminent Domain 20
24. Defaults and Remedies 21
25. Assignment or Subletting 23
26. Attorney's Fees 25
27. Bankruptcy 25
28. Definition of Landlord 26
29. Estoppel Certificate 26
30. Joint and Several Obligations 26
31. Limitation of Landlord's Liability 27
32. Project Control by Landlord 27
33. Quiet Enjoyment 27
34. Quitclaim Deed 27
35. Rules and Regulations 27
36. Subordination and Attornment 28
37. Surrender 28
38. Waiver and Modification 28
39. Waiver of Jury Trial and Counterclaims 28
40. Relocation of Demised Premises 29
41. Hazardous Materials 29
42. Option to Expand 31
43. Miscellaneous 32
44. Grant of License 33
45. Financial Statement 33
46. Option(s) to Extend Term 34
47. Fire Control Zone 35
48. Special Equipment 35
49. Termination of Cytel Sublease 35
Exhibits
"A" Project Site Plan and Legal Description
"A-1" Suite 260
"A-2" Omitted
"A-3" Suite 130
"A-4" Suite 100-A
"B" Work Letter
"C" Tenant's Air Requirement Letter
"D" Rules and Regulations
"E" Estoppel Certificate
"F" Tenant Personal Property List
"G" Term Commencement Date
"H" Licensed Area
LEASE
THIS AMENDED AND RESTATED LEASE ("Lease") is made as of the ______ day
of July, 1995, by and between Health Science Properties, Inc., a Maryland
corporation (hereinafter called "Landlord") and Agouron Pharmaceuticals,
Inc., a California corporation (hereinafter called "Tenant") on the basis of
the facts stated below. Landlord and Tenant are sometimes hereinafter
collectively referred to as the Parties.
RECITALS
A. By lease dated March 9, 1995 ("Suite 260 Lease") Tenant, as
tenant, leased from Landlord, as landlord, the premises known as Suite 260
("Suite 260") located at the Building (as defined below).
B. By lease dated October 28, 1992, as amended by addendum dated
December 11, 1992 and by amendment dated November 1, 1992 ("Suite 130 Lease")
Tenant leased from Balit-Torrey Pines, Inc., (predecessor in interest to
Landlord) the premises known as Suite 130 ("Suite 130") located at the Building.
C. By Sublease dated December 17, 1993 ("Cytel Sublease"), Tenant as
subtenant leased from Cytel Corporation, a Delaware corporation ("Cytel"), as
sublandlord, the premises known as Suite 100-A ("Suite 100-A") located at the
Building.
D. The Parties desire to amend and restate the Suite 260 Lease upon
the terms and conditions hereinafter set forth in this Lease. The Parties
also desire to terminate the Suite 130 Lease and to apply the terms and
conditions of this Lease to the rental by Tenant of Suite 130. The Parties
further desire to enter into a new lease for the rental of Suite 100-A also
in accordance with the terms and conditions of this Lease.
AGREEMENT
IT IS THEREFORE AGREED, on the basis of the foregoing facts and for valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
as follows:
1. Lease of Premises
1.1 Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, those certain premises known as Suite 260, Suite 130 and Suite
100-A (hereinafter collectively called the "Demised Premises") within the
building located at the address set forth below (hereinafter called the
"Building"). The Demised Premises are crosshatched on the floor plans
attached hereto as Exhibit "A-1" (Suite 260), "A-3" (Suite 130) and "A-4"
(Suite 100-A) and are situated on the floor(s) and suite(s) of this Building
as set forth in Section 2.1.2. The real property upon which the Building is
located, 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 "A". All portions of the Project which are for the non-
exclusive use of tenants of the Building, including without limitation
driveways, sidewalks, parking areas, landscaped areas, service corridors,
stairways, elevators, public restrooms and Building lobbies, are hereinafter
referred to as "Common Area".
1.2 This Lease hereby supersedes and replaces the terms and
conditions of the Suite 260 Lease and the Suite 130 Lease and to the extent
expressly provided for herein, the obligation of Tenant to Landlord with
regard to Suite 100-A.
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:
11099 North Torrey Pines Road
La Jolla, California 92037
2.1.2 Designation of Demised Premises
Suite: 260
Floor: Second
Suite: 130
Floor: First
Suite: 100-A
Floor: First and Second
2.1.3 (a) Rentable Area of Demised Premises:
24,465 total sq. ft. as follows:
1. 8,381 sq. ft. (Suite 260)
2. 8,014.1 sq. ft. (Suite 100-A)
3. 8,070 sq. ft. (Suite 130)
(b) Rentable Area of Building/Project:
85,225 sq. ft.
(c) Usable Area of Demised Premises
21,375 total sq. ft. as follows:
1. 7,319 sq. ft. (Suite 260)
2. 6,972 sq. ft. (Suite 100-A)
3. 7,084 sq. ft. (Suite 130)
2.1.4 Initial Basic Annual Rent:
24,465 s.f. x $2.325 per s.f. x 12 months =
$682,573.56
2.1.5 Initial Monthly Rental Installments of Basic
Annual Rent:
24,465 s.f. x $2.325 per s.f. = $56,881.13
2.1.6 Tenant's Pro Rata Share:
28.70% of the Building as follows:
1. 9.83% of the Building (Suite 260)
2. 9.40% of the Building (Suite 100-A)
3. 9.47% of the Building (Suite 130)
2.1.7 (a) Estimated Term Commencement Date:
July 17, 1995
(b) Term Expiration Date:
September 30, 2000
2.1.8 Security Deposit:
$53,897.58 as follows:
1. $19,486.00 (Suite 260)
2. $18,632.78 (Suite 100-A)
3. $15,778.80 (Suite 130)
2.1.9 Permitted Use:
Scientific research laboratories including GMP
manufacturing and related offices as
consistent with SR zone
2.1.10 Address for Rent Payment:
251 South Lake Avenue, Suite 535
Pasadena, CA 91101
Address for Notices to Landlord:
9737 Aero Drive, Suite 140
San Diego, CA 92123
Address for Notices to Tenant:
10350 North Torrey Pines Road, Suite 100
La Jolla, CA 92037
2.1.11 Guarantor of Lease: None
2.1.12 Plan Completion Date: March 27, 1995
2.1.13 The following Exhibits are attached hereto and
incorporated herein: A, A-1, A-3, A-4, B, C,
D, E, F, G, H
3. Term
3.1 This Lease shall take effect upon the date of execution
and delivery hereof by all parties hereto and, except as specifically
otherwise provide within this Lease, each of the provisions hereof shall be
binding upon and inure to the benefit of Landlord and Tenant from the date of
execution and delivery hereof by all parties hereto.
3.2 The term of this Lease is as set forth in Section 2.1.7.
subject to earlier commencement, extension or earlier termination of this
Lease as provided herein. Notwithstanding Section 2.1.7, the Parties hereby
acknowledge the actual Term Commencement Date to be July 15, 1995.
4. Possession of Suite 260 and Commencement Date
4.1 Tenant shall cause to be prepared on or before March 27,
1995 plans and specifications for the work to be performed at Suite 260 as
described in the work letter ("Work Letter") attached hereto as Exhibit B,
which Work Letter shall be executed by Tenant and Landlord concurrently with
the execution of this Lease. Not later than April 7, 1995 Landlord shall
cause the tenant improvements presently existing at Suite 260 to be
demolished and removed as may be necessary to perform the work described in
the Work Letter. Upon completion of said demolition, Landlord shall provide
Tenant and it's contractors with access to the Suite 260 for purposes of
completing the work under the Work Letter. The actual Term Commencement Date
shall be the date all of the work required under the Work Letter is
substantially completed and the certificate of occupancy is issued by the
City of San Diego. Tenant agrees that in the event such work is not
substantially completed on or before the Estimated Term Commencement Date
that Landlord shall have no liability to Tenant for such failure and that the
Tenant shall remain responsible for the payment of Rent (as defined below) as
of the Estimated Term Commencement Date unless such work was not
substantially complete because of: i) the occurrence of a force majeure such
as the unavailability of supplies or strikes by trade groups necessary for
substantial completion of such work; ii) extraordinary acts of government
that force a general halt of construction at the Building and the surrounding
vicinities of the Building; iii) governmental or regulatory delays in
inspecting and/or approving the Tenant Improvements (as defined below) beyond
the reasonable control of Tenant; or iv) delays caused by Landlord's failure
to timely complete the demolition work as described above (collectively
"Permitted Delay") provided, however, Tenant immediately notifies Landlord in
writing of the Permitted Delay and the time lost therefrom. In the event of
a Permitted Delay : i) the Lease shall not be void or voidable; ii) Landlord
shall not be liable to Tenant for any loss or damage resulting therefrom;
iii) the Estimated Term Commencement Date shall be extended a number of days
equal to the number of days lost by reason of the Permitted Delay at which
date the Tenant shall become liable for Rent; and iv) the Lease Term
Expiration Date shall remain as set forth in Section 2.1.7 above. The work
required of Tenant described in the Work Letter shall be deemed substantially
completed, as that term is used in this Article 4 and elsewhere in this
Lease, if Tenant has completed all Tenant's work identified on Tenant's
plans and specifications (subject only to a punch list of items that do not
materially and substantially interfere with Tenant's use of Suite 260), and
has received the temporary certificate of occupancy from the City of San
Diego, if required, or a substantial completion certificate from the
architect, or would have received the temporary occupancy certificate or
substantial completion certificate but for delays or failure of Tenant or
Tenant's architect or contractor to complete items in accordance with the
Work Letter. Notwithstanding the above, Tenant shall have no obligation to
commence paying Rent despite substantial completion of the work under the
Work Letter, and the Estimated Term Commencement Date shall be extended, if
necessary, until such date as Landlord has completed the HVAC Upgrade as
defined in Section 16.6 below. Landlord and Tenant shall each execute and
deliver to the other written acknowledgment of the actual Term Commencement
Date when such is established and attach it to this Lease as Exhibit "G".
However, failure to execute and deliver such acknowledgment shall not affect
Landlord or Tenant's liability hereunder.
4.2 Prior to Landlord allowing Tenant to enter upon Suite 260
for the purpose of installing improvements pursuant to the Work Letter or the
placement of personal property, Tenant shall furnish to Landlord evidence
satisfactory to Landlord that insurance coverages required of Tenant under
the provisions of Article 21 are in effect, and such entry shall be subject
to all the terms and conditions of this Lease other than the payment of Basic
Annual Rent or Additional Rent (as defined below).
4.3 Possession of areas necessary for utilities, services,
safety and operation of the Building is reserved to Landlord which areas
shall be limited to ventilation and utility shafts, the ceiling plenum area
and utility conduits.
4.4 Tenant shall cause to be constructed the tenant
improvements in Suite 260 ("Tenant Improvements") pursuant to the Work Letter
at a cost to Landlord not to exceed Six Hundred Fourteen Thousand Seven
Hundred Ninety Six Dollars ($614,796) (based upon Eighty Four Dollars
($84.00) per square foot Usable Area) ("Tenant Improvement Allowance") which
shall include the cost of construction, project supervision by Landlord
(which fee shall not exceed Twenty-Nine Thousand, Two Hundred Seventy Six
Dollars ($29,276.00)), cost of space planning, architect, engineering and
other related services, building permits and other planning and inspection
fees. Landlord shall bear the expense of completing the HVAC Upgrade and
Deferred HVAC Upgrade as described in Section 16.6 below which expense shall
not be chargeable against the Tenant Improvement Allowance. In addition,
Landlord shall be responsible for the cost, which also shall not be
chargeable against the Tenant Improvement Allowance, for demolishing
any existing improvements at Suite 260 necessary to allow for the
construction of the Tenant Improvements. Any costs incurred in performing
the Tenant's work described in the Work Letter in excess of the Tenant
Improvement Allowance shall be borne solely by Tenant.
4.5 Tenant shall select the architect, engineer, general
contractor and all major subcontractors performing the work described in the
Work Letter, subject to the approval of the Landlord which shall not be
unreasonably withheld. Tenant shall provide Landlord with copies of the
construction documents which shall include contracts, plans and
specifications, purchase orders, change orders, invoices, draw requests or
such other documentation reasonably required by Landlord to monitor the
progress of the Tenant Improvement work and the expenditure of the Tenant
Improvement Allowance.
4.6 Any unresolved dispute arising under this Article 4 shall
be submitted to binding arbitration under the commercial rules of the
American Arbitration Association in San Diego, California.
4.7 Prior to the Term Commencement Date, Landlord shall
deliver to Tenant a "base line" environmental report prepared by an
independent environmental engineering firm describing the observed
environmental condition of Suite 260 at the time just prior to commencement
of construction of the Tenant Improvements.
5. Rent
5.1 Tenant agrees, commencing on the Term Commencement 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 adjustments provided in Article
6 hereof. Basic Annual Rent shall be paid in the equal monthly installments
set forth in Section 2.1.5, subject to the rental adjustments provided in
Article 6 hereof, each in advance on the first day of each and every calendar
month during the term of this Lease.
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, as set forth in Section
2.1.6, of Operating Expenses as provided in Article 7 and (ii) 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 designate in writing. In the
event the term of this Lease 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 a thirty (30) day month and shall be
paid at the then current rate for such fractional month.
5.4 The Parties acknowledge that contrary to the terms of the
Cytel Sublease, Tenant, with the consent of Cytel, pays its Cytel Sublease
rental and Building expense payments for Suite 100-A directly to Landlord.
Effective as of the Term Commencement Date, the amount of rental and Building
expense payments paid by Tenant under the Cytel Sublease shall be adjusted so
that such payments shall be in an amount as provided by this Lease. In the
event that Cytel shall require that Tenant's payments under the Cytel
Sublease be made directly to Cytel, Landlord shall adjust the Basic Annual
Rent under this Lease such that Tenant's Basic Annual Rent payment for the
Demised Premises shall be no greater than as provided by this Lease.
6. Rent Adjustments
6.1 The Basic Annual Rent shall be adjusted upward as
follows: The Basic Annual Rent shall be adjusted upward in the amount of
three percent (3%) of the prior year's Basic Annual Rent, beginning on the
first anniversary of the Term Commencement Date of the Lease and every twelve
(12) months thereafter.
7. Operating Expenses
7.1 As used herein, the term "Operating Expenses" shall
include:
(a) Government impositions 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 and/or Project including the parcel or parcels of real property upon
which the Building and areas serving such Building 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 or
Buildings as well as any parking charges, utilities surcharges, or 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 of the Building or the parking
facilities serving the Building, 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 to operate an office
building, and any expenses, including the reasonable cost of attorneys or
experts, reasonably incurred by Landlord in seeking reduction by the taxing
authority of the applicable taxes, less tax refunds obtained as a result of
an application for review thereof. Operating Expenses shall not include any
net income franchise, capital stock, estate or inheritance taxes or taxes
which are the personal obligation of Tenant or of another tenant of the
Project.
(b) All other costs of any kind paid or incurred by
Landlord 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, costs of repairs and replacements to Common Area
improvements within the Project as appropriate to maintain the Project as
required hereunder, including cost of funding such reasonable reserves as
Landlord, consistent with good business practice, may establish to provide
for repairs and replacements of existing improvements (as opposed to capital
expenditures and replacements which extend the depreciable life (as
calculated from the rules and regulations of the Internal Revenue Services)
of the improvements substantially beyond the term of the Lease), costs of
utilities furnished to the Common Areas, sewer fees, cable T.V., when
applicable, trash collection, cleaning, including windows, heating,
ventilation, air-conditioning, maintenance of landscape and grounds,
maintenance of drives and parking areas, security services and devices,
building supplies, maintenance and replacement to equipment utilized for
operation and maintenance of the Project, capital expenditures pertaining to
existing improvements (as opposed to capital expenditures and replacements
which extend the depreciable life (as calculated from the rules and
regulations of the Internal Revenue Services) of the improvements
substantially beyond the term of the Lease), costs of complying with any
applicable laws, hazard waste remediation, rules or regulations, pro-rated
portion of the Project insurance premiums including premiums for public
liability, property casualty, earthquake and environmental coverages,
portions of insured losses paid by Landlord as part of deductible
portion of loss by reason of insurance policy terms, service contracts, costs
of services of independent contractors retained to do work of nature before
referenced, and 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 the Project, its equipment,
the adjacent walks, landscaped areas, drives, and parking areas, 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 three percent (3%) of the Basic
Annual Rent due from Tenant.
(c) Notwithstanding the foregoing, Operating Expenses
shall not include the capital cost of the HVAC Upgrade and the Deferred HVAC
Upgrade, any leasing commissions, expenses which relate to preparation of
rental space for a tenant, which includes permits, licenses and inspection
fees for new tenant improvements, modification of the Common Area for the
sole benefit of a tenant, expenses of initial development and construction,
including but not limited to, grading, paving, landscaping, and decorating
(as distinguished from repair and replacement of an improvement previously
located in the Project), legal expenses relating to other tenants, Building
advertising and promotion expenses, costs of repair to the extent reimbursed
by payment received by Landlord of insurance proceeds, interest upon loans to
Landlord or secured by mortgage or deed of trust covering the Project or a
portion thereof (provided interest upon a government assessment or
improvement bond payable in installments is an Operating Expense
under subparagraph (a) above), salaries of executive officers of Landlord,
depreciation and amortization claimed by Landlord for tax purposes (provided
this exclusion of "depreciation" or "amortization" 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 subparagraph
(b) above) and taxes of the types set forth within the last sentence of
subparagraph (a) above.
7.2 Commencing as of the Term Commencement Date, Tenant shall
pay to Landlord on the first day of each calendar month of the term of this
Lease, as Additional Rent, Landlord's estimate of Tenant's Pro Rata Share (as
set forth in 2.1.6) of Operating Expenses with respect to the Project for
such month.
(a) Within ninety (90) days after the conclusion of
each calendar year, (or such longer period as may be reasonably required)
Landlord shall furnish to Tenant a statement showing in reasonable detail the
actual Operating Expenses and Tenant's Pro Rata Share of Operating Expenses
for the previous calendar year. Any additional sum due from Tenant to
Landlord shall be due and payable within fourteen (14) days of Tenant's
receipt of said statement. If the amounts paid by Tenant pursuant to Section
7.2 exceeds Tenant's Pro Rata Share of Operating Expense for the previous
calendar year, the difference shall be credited by Landlord against the Rent
next due and owing from Tenant; provided that, if the Lease term has expired,
Landlord shall accompany said statement with payment for the amount of such
difference.
(b) Any amount due under Section 7.2 for any period
which is less than a full month shall be prorated (based on a 30-day month)
for such fractional month.
7.3 Tenant shall have the right, at Tenant's expense, upon
reasonable notice during reasonable business hours, to have a Certified
Public Accountant inspect the portion of Landlord's books that are relevant
to preparation of Landlord's actual Operating Expenses for any year end
provided any request for such review shall be furnished within fifteen (15)
months of Tenant's receipt of such statement. Landlord shall receive a copy
of the results of such audit. An annual statement shall be deemed final and
binding upon Tenant unless a request for review is furnished to Landlord
within said fifteen (15) month time period.
7.4 Tenant shall be responsible for Tenant's Pro Rata Share
of Operating Expenses commencing as of the Term Commencement Date. Tenant
shall not be responsible for Operating Expenses attributable to the time
period prior to the Term Commencement Date, except if Landlord shall permit
Tenant possession of the Demised Premises prior to the Term Commencement
Date, Tenant shall be responsible for Operating Expenses from such earlier
date of possession. The responsibility of Tenant for Operating Expenses
attributable to the Demised Premises shall continue to the latest of (i) the
date of termination of the Lease, (ii) the date Tenant has fully vacated the
Demised Premises, or (iii) if termination of the Lease is due to the default
of Tenant, the date of rental commencement of a replacement tenant.
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 on a basis reasonably
determined by Landlord. 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 attributed to
the Demised Premises relate in a reasonable manner to the time period wherein
Tenant has an obligation to share in Operating Expenses.
8. Rentable Area
8.1 The term "Usable Area" as set forth in Section 2.1.3 (c)
and as referenced within the Work Letter attached hereto as Exhibit "B" and
as may otherwise be referenced within this Lease, is calculated in accordance
with the 1980 Standard Method for Measuring Floor Area in Office Buildings as
adopted by the Building Owners and Managers Association ("BOMA Standards").
The Usable Area refers generally to that approximate area to be occupied by
Tenant, such area having been calculated by measuring to the finished surface
of the office side of corridor and other permanent walls, to the center of
partitions that separate the office space of Tenant from adjoining usable
area of other tenants and to the inside finished surfaces of the dominant
portion of the permanent outer Building walls. No deductions are made with
respect to such calculations for any columns or projections which may be
included within that area necessary to the Building.
8.2 The "Rentable Area" of the Building is generally
determined by making separate calculations of Rentable Area applicable to
each floor within the Building and totaling the Rentable Area of all floors
within the Building. The Rentable Area of a floor is computed by measuring
to the inside finished surface of the dominant portion of the permanent outer
Building walls, excluding any major vertical penetrations of the floor. The
full area calculated as before set forth is included as Rentable Area without
deduction for columns and projections necessary to the Building.
8.3 The Rentable Area of the Project is the total of Rentable
Area of all buildings within the Project.
8.4 The term "Rentable Area" when applied to Tenant is that
area
equal to the Usable Area of the Demised Premises plus an equitable allocation
of
Rentable Area within the Building, as agreed upon by Landlord and Tenant,
which
is not then utilized or expected to be utilized as Usable Area, including but
not
limited to the portion of the Building devoted to corridors, equipment rooms,
restrooms, elevator lobby and mailroom.
8.5 Due to changes in corridor configurations which may be
required
in connection with renting of the Building, the Rentable Area applicable to a
particular tenant is subject to modification. Notwithstanding any such
modification, Rent shall not be adjusted upward or downward by reason of any
later determination that Rentable Area applicable to the Usable Area of
Tenant differs from the Rentable Area set forth in Section 2.1.3(a).
However, Rentable Area as most recently adjusted shall be utilized for
computation of Tenant's Pro Rata Share of Operating Expenses at such time an
allocation of Operating Expenses is made among tenants of the Building or
project.
8.6 Review of allocations of Rentable Areas as between
tenants of the Building and the Project may be made as frequently as in
Landlord's opinion appears appropriate in order to facilitate an equitable
apportionment of Operating Expenses. If such review is by a licensed
architect and allocations are certified correct by such licensed architect,
the Tenant shall be bound by such certifications.
9. Security Deposit
9.1 Tenant shall deposit with Landlord on or before the Term
Commencement Date the sum set forth in Section 2.1.8 and designated as the
security deposit for Suite 260. Landlord hereby acknowledges as having
received from Tenant the security deposit designated in Section 2.1.8 for
Suite 130. The security deposit designated in Section 2.1.8 pertaining to
Suite 100-A shall be deposited with Landlord at such time as: i) Landlord has
released to Cytel that portion of the security deposit held by Landlord under
its master lease with Cytel in an amount at least equal to the security
deposits held by Cytel from Tenant under the Cytel Sublease (Tenant Sublease
Deposit); and ii) Cytel has released to Tenant the Tenant Sublease Deposit.
The security deposits provided for herein shall be held by Landlord as
security for the faithful performance by Tenant of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the term hereof. Tenant's failure to deliver said security deposits
to Landlord on or before the dates provided herein shall be a
material breach of this Lease. If Tenant defaults 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 all of such security deposits for the
payment of any Rent or any other sum in default, or too compensate Landlord
for any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of said deposit is so used or applied, Tenant shall,
within ten (10) days following demand therefore, 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.
Landlord shall not be required to keep this security deposit separate from
its general fund, however, Tenant shall be entitled to four percent (4%) per
annum non-compounding interest on such deposit to be treated as part of the
security deposit and paid by Landlord to Tenant annually on the anniversary
date of the Term Commencement Date unless Tenant is in default in the
performance of its obligations under this Lease. Notwithstanding the fact
that Section 2.1.8 above designates separate deposits for different areas of
the Demised Premises, the deposits provided for herein shall be treated as
one single deposit which may be used, applied or retained in part or entirely
by Landlord with respect to any default by Tenant under this Lease,
regardless of suite.
9.2 In the event of bankruptcy or other debtor-creditor
proceedings against Tenant, such 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 may deliver the funds deposited hereunder by
Tenant to any purchaser of Landlord's interest in the Demised Premises and
thereupon Landlord shall be discharged from any further liability with
respect to such deposit. This provision shall also apply to any subsequent
transfers.
9.4 If Tenant shall fully and faithfully perform every
provision of this Lease to be performed by it, the security deposit plus
accrued interest, or any balance thereof, 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.
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.
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, or which in the reasonable
opinion of Landlord violates law, regulation or zoning ordinance or the
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
is inconsistent with the intended uses of the Demised Premises and which will
invalidate or substantially 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. Tenant shall
promptly, upon demand, reimburse Landlord for any significant additional
premium charged for such policy by reason of Tenant's actions or omissions.
10.4 Tenant shall keep all doors opening onto public
corridors closed, except when in use for ingress and egress.
10.5 Except as provided in the Work Letter, no additional
locks or bolts of any kind shall be placed upon any of the doors or windows
by Tenant nor shall any changes be made in existing locks or the mechanism
thereof, without the written consent of Landlord, which shall not be
unreasonably withheld. 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.
10.6 No awnings or other projection shall be attached to any
outside wall of the building. No curtains, blinds, shades or screens shall
be attached to or hung in, or use in connection with, any window or door of
the Demised Premises other than Landlord's standard window coverings.
Neither the interior nor exterior of any windows shall be coated or otherwise
sunscreened without the express written consent of Landlord, nor shall any
bottles, parcels, or other articles 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.
10.7 No sign, advertisement, or notice shall be exhibited,
painted or affixed by Tenant on any part of the Demised Premises or the
Building without the prior written consent of Landlord except such signage as
may be required by government regulation or for health and safety purposes.
Interior signs on doors and the directory tablet shall be inscribed, painted
or affixed for Tenant by Landlord at the expense of Tenant, and shall be of a
size, color and type acceptable to Landlord. The directory tablet shall be
provided exclusively for the display of the name and location of tenants
only. Nothing may be placed on the exterior of corridor walls or corridor
doors other than Landlord's standard lettering.
10.8 Tenant shall cause any office equipment or machinery to
be installed in the Demised Premises so as to reasonably prevent sounds or
vibrations therefrom from extending into Common Areas as defined in Section
1.1, or other offices in the Building. Further, no equipment exerting floor
pressure equal to one hundred (100) pounds per square foot live load, or
greater, shall be placed upon the Demised Premises without advance notice to
and approved by Landlord and placement, if approved by Landlord, shall be 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 Building, or injure or annoy
them, or use or allow the Demised Premises to be used for unlawful purpose,
nor shall Tenant knowingly cause, maintain or permit any nuisance or waste
in, on, or about the Demised Premises, Building or Project.
11. Brokers
11.1 Tenant represents and warrants that it has had no
dealings with any real estate broker or agent in connection with the
negotiation of this Lease other than Colliers Iliff Thorn, as have been
disclosed in writing to Landlord and that it knows of no other real estate
broker or agent who is or might be entitled to a commission in connection
with this Lease.
11.2 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.
11.3 Tenant acknowledges and agrees that the employment of
brokers by Landlord is for the purpose of solicitation of offers of lease
from prospective tenant 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 11.2 herein.
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 term of
this Lease, 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 in accordance with Article 5 the Basic Annual Rent as
adjusted from the Term Commencement Date in accordance with Article 6, and
Tenant's Pro Rata Share of Operating Expenses, and such month-to-month
tenancy shall be subject to every other term, covenant and agreement
contained herein.
12.2 If Tenant remains in possession of the Demised Premises
after the expiration or earlier termination of the term hereof 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 twenty percent (120%) of the monthly rental in effect
during the last thirty (30) days of the Lease term.
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 Article 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 on Tenant's Property
13.1 Tenant shall pay 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 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 valued, then Tenant shall upon demand repay to
Landlord the taxes so levied against Landlord.
13.3 If any improvements in or alterations to the Demised
Premises, whether owned by Landlord or Tenant and whether or not affixed to
the real property so as to become a part thereof, are assessed for real
property tax purposes at a valuation higher than the valuation at which
improvements conforming to Landlord's "Building Standard" in other spaces in
the Building are assessed, then the real property taxes and assessments
levied against Landlord or the Building by reason of such excess assessed
valuation shall be deemed to be taxes levied against personal property of
Tenant and shall be governed by the provisions of Section 13.2 above. Any
such excess assessed valuation due to improvements in or alterations to space
in the Building leased by other tenants of Landlord shall not be included in
the Operating Expenses defined in Article 7, but shall be treated, as to such
other tenants, as provided in this Section 13.3. If the records of the
County Assessor are available and sufficiently detailed to serve as a basis
for determining whether said Tenant improvements or alterations are assessed
at a higher valuation than Landlord's "Building Standard," such records shall
be binding on both Landlord and Tenant. For purposes of this Article,
Landlord's Building Standards shall be improvements or alterations which
cause a valuation higher than One Hundred Fifty-five Dollars ($155.00) per
square foot of rentable Area.
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 Suite 260 by Tenant and the continued possession by Tenant of
Suite 130 and 100-A 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 satisfactory condition and repair. Tenant
further acknowledges that it has been, prior to the execution of this Lease,
in possession of Suite 100-A and Suite 130 pursuant to respectively the Cytel
Sublease and the Suite 130 Lease and that Tenant does hereby waive and
disclaim any objection to, cause of action based upon, or claim that its
obligations hereunder should be reduced or limited because of the condition
of Suite 100-A or Suite 130 or the suitability of either for Tenant's purposes.
15. Common Areas and Parking Facilities
15.1 Tenant shall have the non-exclusive right, in common
with others, to use the Common Areas, subject to the rules and regulations
adopted by Landlord and attached hereto as Exhibit "D" together with such
other reasonable and nondiscriminatory rules and regulations as are hereafter
promulgated by Landlord (the "Rules and Regulations").
15.2 As an appurtenance to the Demised Premises, Tenant shall
have, at no additional charge, a non-exclusive revocable license to use one
hundred two (102) parking spaces at the Project in common on a non reserved
basis with other tenants of the Building and the Project.
15.3 Tenant agrees not to unreasonably overburden the parking
facilities 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 to
not less than the thirty-six (36) parking spaces provided for in Section 15.2
above. Upon such determination, Landlord may reasonably allocate parking
spaces among Tenant and other tenants. In the alternative, if Landlord
determines that Tenant's customers, clients, or invitees appear to be using
more than the number of parking spaces that would otherwise be attributable
to a reasonable number of parking spaces for Tenant's use, Landlord may
require Tenant and its employees to obtain for such unreasonable excess of
parking outside the Project. However, nothing in this Section is intended to
create an affirmative duty on Landlord's part to monitor parking.
15.4 Landlord reserves the right to modify Common Areas
including the right to add or remove exterior and interior landscaping and to
subdivide real property. It is recognized that Landlord specifically
reserves the right as to a portion of the Building to allow exclusive use of
corridors and restroom facilities located on specific floors to one or more
tenants occupying such floors, provided Tenant herein shall not be deprived
of the use of the corridors reasonably required to serve the Demised Premises
or of restroom facilities serving the floor upon which the Demised Premise
are located.
16. Utilities and Services
16.1 Tenant shall pay for all water, (including reverse
osmosis, deionized and other treated water) gas, heat, light, power,
telephone and other utilities supplied to the Demised Premises, together with
any taxes thereon. If any such utility is not separately metered to Tenant,
Tenant shall pay a reasonable proportion to be determined by Landlord of all
charges jointly metered with other premises as part of Tenant's Pro Rata
Share of Operating Expenses, or in the alternative, Landlord may, at its
option, monitor the usage of such utilities by Tenant and charge Tenant with
the cost of purchasing, installing and monitoring such metering equipment,
which shall be paid by Tenant as Additional Rent.
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,
beyond the reasonable control of Landlord. 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.
16.3 Tenant shall pay for, prior to delinquency, any
utilities which may be furnished to the Demised Premises during the term of
this Lease.
16.4 Tenant shall not, without the prior written consent of
Landlord, use any device in the Demised Premises, including, but without
limitation, data processing machines, which will increase the amount of
ventilation, air exchange, electricity, gas or water usage beyond the
existing capacity of the Building as allocated to the Demised Premises.
16.5 If Tenant shall require services in excess of that
allocated to the Demised Premises by reason of equipment operated and/or
extended hours of business operation, then Tenant shall first procure the
consent of Landlord for the use thereof, which consent Landlord may condition
upon the availability of such excess utilities or services and Tenant's
payment as Additional Rent of an amount equal to the cost to provide and
meter such excess services and utility capacity.
16.6 Notwithstanding Sections 16.4 and 16.5 above, Landlord
shall ensure, during the Lease term and any extension thereof, that the
Building heating, ventilating and air conditioning systems (HVAC System)
shall be capable of servicing Suite 260 with one hundred percent (100%)
outside air at a minimum delivery capacity of 13,300 cubic feet per minute
(CFM) of which approximately 10,800 CFM shall service the laboratory area and
2,500 CFM shall service the office area of Suite 260, all as more
particularly described in that certain letter dated January 17, 1995 from
Todd Sorbo, P. E. of Tsuchiyama, Kaino & Gibson directed to Tenant, attention
Glen Zinser, a copy of which is attached hereto as Exhibit "C" and made a
part hereof (the "HVAC Upgrade"). Landlord shall also ensure during the term
of this Lease and any extension thereof that air volume delivered by the HVAC
System to such other premises leased and subleased by Tenant in the Building
shall not be less than that being delivered as of the date of this Lease.
Within ninety (90) days of the date the tenant now occupying the Expansion
Space vacates the Expansion Space, but not later than January 15, 1996,
Landlord shall modify, at its expense, which shall not be credited against
the Tenant Improvement Allowance, the HVAC System servicing the other
premises leased and subleased by Tenant in the Building so that no
laboratory air from other premises in the Building is returned through the
HVAC System into the Demised Premises or any other premises in the Building
leased by Tenant (the "Deferred HVAC Upgrade").
16.7 Utilities and services provided by Landlord to the Demised
Premises shall be paid by Tenant directly to the supplier of such utility or
service.
16.8 Landlord shall provide water in Common Areas for drinking
and lavatory purposes only, but if Tenant requires, uses or consumes water
for any purpose in addition to ordinary drinking and lavatory purposes
Landlord and Tenant may agree to install a water meter and thereby measure
Tenant's water consumption for all purposes. Tenant shall pay Landlord for
the cost of the meter and the cost of the installation thereof and throughout
the duration of Tenant's occupancy, thereof and throughout the duration of
Tenant's occupancy, Tenant shall keep said meter and installation equipment
in good working order and repair at Tenant's own cost and expense, in default
of which Landlord may cause such meter and equipment to be replaced or
repaired and collect the cost thereof from Tenant. Tenant agrees to pay for
water consumed, as shown on said meter, as and when bills are rendered, and
on default in making such payment, Landlord may pay such charges and collect
the same from Tenant. Any such costs or expenses incurred, or payments made
by Landlord for any of the reasons or purposes hereinabove stated shall be
deemed to be Additional Rent payment by Tenant and collectible by Landlord as
such.
16.9 Landlord reserves the right to stop service of the
elevator, plumbing, ventilation, air conditioning and electric systems with
prior notice to Tenant (except in the case of an emergency), when necessary,
by reason of accident or emergency or for repairs, alterations or
improvements, in the judgment of Landlord desirable or necessary to be made,
until said repairs, alterations or improvements shall have been completed,
provided the stoppage of such service does not materially interfere with
Tenant's use of the Demised Premises. 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 whatsoever.
16.10 Notwithstanding any of the other provisions contained
in this Section 16, Landlord shall not be responsible for providing to Suite
100-A any of the utilities and services (i.e., vacuum, specialized water,
ventilation, etc.) provided to Tenant by Cytel under the Cytel Sublease.
Notwithstanding the foregoing, upon termination of Cytel's lease with
Landlord, Tenant may continue to utilize such services and utilities to the
extent such utilities and services remain available to Suite 100-A and
provided further that Landlord incurs no costs with regard to Tenant's
continued use thereof. In the event Cytel removes such services and
utilities, Tenant may install or otherwise construct, without any expense to
Landlord, replacement utilities and services, subject to Landlord's prior
approval which shall not be unreasonably withheld. Landlord agrees that
after termination of Cytel's lease with Landlord that it shall not remove or
otherwise make unavailable such services and utilities to Tenant except
as necessary in connection with a remodel or other improvement of the former
Cytel premises or Building, or in connection with the re-leasing of said
premises.
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, and then only by
architects, contractors, suppliers or mechanics approved by Landlord in
Landlord's sole discretion. In seeking Landlord's approval, Tenant shall
provide Landlord, at least 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 the above, Tenant may make
non-structural alterations without Landlord's consent provided i) Tenant
provides Landlord with prior written notification and prior to commencement
of work, a copy of the plans and specifications for said alterations; ii) the
alterations do not affect the mechanical, electrical, heating, ventilation,
air conditioning, plumbing or other systems of the Building; iii) the
alterations do not exceed Five Thousand Dollars ($5,000) in cost for each
alteration and; iv) are not visible from the Common Areas of the Project.
17.2 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.
17.3 Except for modification or other work to the fire
sprinkler and/or fire water supply lines, 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.
Tenant shall provide Landlord with notice in writing prior to commencing any
work which may affect the operation of the fire sprinkler system or fire
water supply lines.
17.4 All such work shall be done at such times and in such
manner as Landlord may from time to time designate. 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. Tenant shall provide Landlord with "as-built" plans showing any
change in the Demised Premises.
17.5 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, if required by Landlord, secure at
Tenant's own cost and expenses a completion and lien indemnity bond
satisfactory to Landlord for said work.
17.6 Subject to Section 17.8, all alterations, attached
equipment, decorations, fixtures, trade fixtures, additions and improvements,
attached to or built into the Demised Premises, made by either party,
including (without limiting the generality of the foregoing) all
wallcovering, built-in cabinet work and paneling, shall, unless prior to such
construction or installation, Landlord elects otherwise, 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.
17.7 Tenant shall repair any damage to the Demised Premises
caused by Tenant's removal of any property from the Demised Premises. During
any such restoration period, Tenant shall pay Rent to Landlord as provided
herein as if said space were otherwise occupied by Tenant.
17.8 Except as to those items listed on Exhibit "F" attached
hereto and incorporated herein, and such other similar property that may be
purchased and placed by Tenant in Suite 260 during the term of this Lease,
all business and trade fixtures, machinery and equipment, built-in furniture
and cabinets, together with all additions and accessories thereto, installed
now or hereafter in and upon Suite 260 shall be and remain the property of
Landlord and shall not be moved by Tenant at any time during or after the
term of this Lease. If Tenant shall fail to remove all of its effects from
the Demised Premises prior to 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
to such removal and storage or Landlord may, 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 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.
17.9 Subject to Section 17.8, in no event may Tenant remove
any improvement from the Demised Premises as to which Landlord contributed
payment, including, without limitation, the Tenant Improvements made pursuant
to the Work Letter without Landlord's prior written consent, which may be
withheld in Landlord's sole discretion.
17.10 Except as to minor changes as described under Section
17.1 above, and excluding any work performed under the Work Letter, Tenant
shall reimburse Landlord for all actual expenses incurred by Landlord, but
not to exceed Five Thousand Dollars ($5,000.00), to cover the cost for third
party consultants to review plans and inspect construction. Tenant shall
also reimburse Landlord for any extra expense actually 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 repair and maintain the structural and
exterior portions and Common Areas of the Building and Project, including,
without limitations, roofing and covering materials, foundations, walls, the
plumbing, fire sprinkler system (if any), heating, ventilating, air
conditioning, elevator, and electrical systems installed or furnished by
Landlord, unless such 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 or invitees, in which case Tenant shall pay to
Landlord the cost of such maintenance and repairs.
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, which shall include, without
limitation, the maintenance and repair of any equipment and/or trade fixtures
provided by Landlord under the Work Letter or already existing at the Demised
Premises on the Term Commencement Date. Tenant shall, upon the expiration or
sooner termination of the term hereof, surrender the Demised Premises to
Landlord in as good condition as when received, ordinary wear and tear
excepted. Landlord shall have no obligation to alter, remodel, improve,
repair, decorate or paint the Demised Premises or any part thereof except as
provided in the Work Letter.
18.3 Landlord shall not be liable for any failure to make any
repairs or to perform any maintenance which is an obligation of Landlord
unless such failure shall persist for an unreasonable time after written
notice of the need of such repairs or maintenance is given to Landlord by
Tenant. Tenant agrees that it may exercise the rights under Section 1941 and
1942 of California Civil Code or under any law, statute or ordinance now or
hereafter in effect to make repairs at Landlord's expense only after Landlord
has failed for an unreasonable period of time to make such repairs or
maintenance and after giving Landlord prior written notice of its intent to
exercise such rights.
18.4 Except for damage caused by reason of Landlord's
negligence, repairs under this Article 18 which are obligations of Landlord
are subject to allocation among Tenant and other tenants as Operating
Expenses.
18.5 This Article 18 relates to repairs and maintenance
arising in ordinary course of operation of the Building and any related
facilities. In the event of fire, earthquake, flood, vandalism, war, or
similar cause of damage or destruction, this Article 18 shall not be
applicable and the provisions of Article 22 entitled "Damage or Destruction"
shall apply and control.
19. Liens
19.1 Subject to the immediately succeeding sentence, Tenant
shall keep the Demised Premises, the Building and the real property upon
which the Building is situated 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 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 ten (10) days after 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, 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 Financing Statement cause (i) 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) its lender
to amend documents of record so as to clarify that such lien is not
applicable to any interest of Landlord in the Building or Project.
20. Indemnification and Exculpation
20.1 Tenant, agrees to indemnify, defend and save Landlord
harmless from and against any and all demands, claims, liabilities, losses,
costs, expenses, actions, causes of action or judgments, and all reasonable
expenses incurred in investigating or resisting the same (including, without
limitation, reasonable attorneys' fees and disbursements), for injury to
person or to property occurring within or about the Demised Premises, arising
directly or indirectly out of Tenant's, it's employees, agents or guests use
or occupancy of the Demised Premises or a breach or default by Tenant in the
performance of any of its obligations hereunder, unless caused by the
willful, reckless or intentional acts or negligence of the Landlord.
20.2 Landlord, agrees to indemnify, defend and save Tenant
harmless from and against any and all demands, claims, liabilities, losses,
costs, expenses, actions, causes of action or judgments, and all reasonable
expenses incurred in investigating or resisting the same (including, without
limitation, reasonable attorneys' fees and disbursements), for injury to
person or to property occurring within or about the Demised Premises, arising
directly or indirectly out of Landlord's, it's employees, or guests use or
occupancy of the Demised Premises or a breach or default by Landlord in the
performance of any of its obligations hereunder, unless caused by the
willful, reckless or intentional acts or negligence of the Tenant.
20.3 Except for the willful, reckless or intentional acts of
Landlord, notwithstanding any provision of Article 20 to the contrary,
Landlord shall not be liable to Tenant and Tenant assumes all risk of damage
to personal property, 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 of 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 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
Project or of any other third party.
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
insurance upon the Building, 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) or
such lesser coverage as Landlord may elect provided such coverage is not less
than ninety percent (90%) of such full replacement cost or the amount of such
insurance Landlord's mortgage lender requires Landlord to maintain, 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. 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. At the written
request of Tenant, Landlord shall provide Tenant with a summary of
the Building insurance coverages.
21.2 Landlord, as part of Operating Expenses, shall further
carry public liability insurance with single limit of not less than One
Million Dollars ($1,000,000.00) 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 or the date of occupancy, whichever
first occurs, and continuing throughout the term of this Lease (and occupancy
by Tenant, if any, after termination of this Lease) comprehensive public
liability insurance with limits of not less than Two Million Dollars
($2,000,000.00) per occurrence for death or bodily injury and not less than
One Million Dollars ($1,000,000.00) for property damage with respect to the
Demised Premises.
21.4 The aforesaid insurance required of Tenant shall name
Landlord, and its lenders, if requested by such lenders, as an additional
insured. Said insurance shall be with companies having a rating of not less
than policyholder rating of A and financial category rating of at least Class
X in "Best's Insurance Guide." Tenant shall obtain for Landlord from the
insurance companies or cause the insurance companies to furnish certificates
of coverage to Landlord. 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.
Tenant shall, at least five (5) days prior to the expiration of such
policies, furnish Landlord with renewals or certificates of insurance showing
the extension of coverage. 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 In each instance where insurance is to name Landlord as
additional insured, Tenant shall upon written request of Landlord also
designate and furnish certificates so evidencing Landlord as additional
insured to (i) any lender of Landlord holding a security interest in 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
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 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
within companies reasonably satisfactory to the other party or (ii) agree to
pay such additional premium (in the Tenant's case, in the proportion which
the area of the Demised Premises bears to the insured area). 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 shall 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 Not more frequently than once each five (5) years,
Landlord may require insurance policy limits to be raised to conform with
requirements of Landlord's lender and/or to bring coverage limits to the
level then being required of tenants conducting businesses similar to Tenant
in the geographical area of the Project.
22. Damage or Destruction
22.1 In the event of a partial destruction of the Building
wherein the Demised Premises are located by fire or other perils covered by
extended coverage insurance, not exceeding fifty percent (50%) of the full
insurable value thereof, and if the damage thereto is such that the Building
may be repaired, reconstructed or restored within a period of twelve (12)
months from the date of the happening of such casualty and Landlord will
receive insurance proceeds sufficient to cover the cost of such repairs
(except for any deductible amount provided by Landlord's policy, 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 wherein the Demised Premises are located, 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,
provided however, if such destruction occurs during the last twelve (12)
months of the term of this Lease or any extension thereof or if it is likely
in the reasonable opinion of Landlord that the Building cannot be repaired,
reconstructed or restored within twelve (12) months of said destruction, then
Tenant may elect to terminate this Lease as of the date of destruction
provided Tenant gives Landlord written notice of such election within
fourteen (14) days of the date of said destruction. 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 Article, 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 items which have
theretofore occurred.
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 and the Building 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 Article, 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 uses beyond the control of Landlord, the time
for Landlord to commence or complete repairs shall be extended, provided, at
the election of either Tenant or Landlord, Landlord shall be relieved of its
obligation to make such repairs or restoration and Tenant shall be released
from its obligation under this Lease as of the end of twelve (12) months from
date of destruction, if repairs required to provide Tenant use of the Demised
Premises are not then substantially complete.
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 provide 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
Article, 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 Article occurs during the last twelve (12)
months of the term of this Lease or any extension hereof, or to the extent
that insurance proceeds are not available therefor, in which event, upon the
election of Landlord not to repair, reconstruct or restore the Demised
Premises, the Lease shall terminate as of the date of the damage.
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, the
Project or of drives, walkways, and parking areas serving the Building 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
to prevent such taking, then without regard as to whether any portion of the
Demised Premises occupied by Tenant was so taken, Landlord may elect to
terminate this Lease as of such taking if such taking is, in the sole opinion
of Landlord, of a material nature such as to make it uneconomical to
continue use of the unappropriated portion for purposes of office rentals or
laboratory space. Tenant may elect to terminate this Lease provided such
taking is of material detriment to Tenant's use of the Demised Premises. In
no event shall this Lease be terminated when such a partial taking does not
have a material adverse effect upon Landlord or Tenant or both.
23.3 Tenant shall be entitled to any award which is
specifically awarded as compensation for the taking of Tenant's personal
property or other improvements or property belonging to Tenant as defined
under Article 17 above and for costs of Tenant moving to a new location.
Except as before set forth, any award for such taking shall belong to
Landlord.
23.4 If upon any taking of the nature described in this
Article 23 this Lease continues in effect, the Landlord shall promptly
proceed to restore the Demised Premises, Building, and Project to
substantially their same condition prior to such partial taking. To the
extent such restoration is feasible, the Rent shall be abated proportionately
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 Late payment by Tenant to Landlord of Rent and other
sums due will cause Landlord to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult and impracticable to
ascertain. Such costs include, but are not limited to, processing and
accounting charges and late charges which may be imposed on Landlord by the
terms of any mortgage or trust deed covering the Demised Premises.
Therefore, if any installment of Rent due from Tenant is not received by
Landlord within seven (7) calendar days after the date such payment is due,
Tenant shall pay to Landlord an additional sum of Five Hundred Dollars
($500.00) as a late charge. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of late payment by Tenant. In addition to the late charge,
Rent not paid when due shall bear interest from the 7th calendar day after
date due until paid at the lesser of (i) ten percent (10%) 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
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 (other than Basic
Annual Rent or Rental Adjustments) 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;
provided, that such failure by Tenant continues for three (3) days after
notice from Landlord demanding performance by Tenant was delivered to Tenant,
or that such failure by Tenant unreasonably interfered with the use of the
Building by any other tenant or with the efficient operation of the Building,
or resulted or could have resulted in a violation of law or the cancellation
of an insurance policy maintained by Landlord. 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 ten percent (10%) 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:
(a) The abandonment or vacation of the Demised
Premises by Tenant;
(b) The failure by Tenant to make any payment of
Rent, as and when due, where such failure shall continue for a period of ten
(10) 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
California Code of Civil Procedure Section 1161;
(c) The failure by Tenant to observe or perform any
obligation or covenant contained herein (other than described in Section
24.4(a) and 24.4(b)) to be performed by Tenant, where such failure shall
continue for a period of ten (10) 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 California Code or Civil Procedure Section 1161;
provided that if the nature of Tenant's default is such that it reasonably
requires more than ten (10) days to cure, then Tenant shall not be deemed to
be in default if Tenant shall commence such cure within said ten (10) day
period and thereafter promptly and diligently prosecute the same to
completion;
(d) Tenant makes a general assignment for the
benefit of creditors;
(e) A receiver, trustee or custodian is appointed
to, or does, take title, possession or control of all, or substantially all,
of Tenant's assets;
(f) 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;
(g) Any involuntary petition if filed against the
Tenant under any chapter of the Bankruptcy Code and is not dismissed within
one hundred twenty (120) days; or
(h) Tenant's interest in this Lease is attached,
executed upon, or otherwise judicially seized and such action is not released
within one hundred twenty (120) days of the action.
Notices given under this Section 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.
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 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:
(a) The worth at the time of award of any unpaid
Rent which had been earned at the time of such termination; plus
(b) The worth at the time of award of the amount by
which the unpaid Rent which would have been earned after termination until
the time of award exceeds that portion of such rental loss which Tenant
proves could have been reasonably avoided; plus
(c) The worth at the time of award of the amount by
which the unpaid Rent for the balance of the term after the time of award
exceeds the amount of such rental loss which Tenant proves could have been
reasonably avoided; plus
(d) Any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to
perform its 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 Premises to the condition required under the terms
of this Lease; plus
(e) 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 Subsections (a) and (b) above, "worth at the
time of award" shall be computed by allowing interest at the rate specified
in Section 24.1. As used in Subsection (c) 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 two (2) 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, as long as
Tenant remains in Default, 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 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 Premises, including alterations and repairs which Landlord
deems reasonably necessary and advisable and reasonable attorneys' fees
incurred by Landlord in connection with the retaking of the Premises and such
reletting;
Third, to the payment of Rent and other charges due and
unpaid hereunder; and
Fourth, to the payment of other damages 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 non-exclusive 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 unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but not
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.
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 Building and to any
landlord of any lease in which building is located whose address shall have
been furnished and shall offer such beneficiary, mortgagee 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 Except as hereinafter provided, Tenant 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 Demised Premises or any part hereof, or permit or suffer the
Demises 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 may be withheld in Landlord's sole
and absolute discretion.
25.2 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.
25.3 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, acknowledge and delivers to Landlord an agreement
whereby the assignee agrees to be bound by all of the covenants and
agreements in this Lease, then Landlord, upon receipt of the foregoing, will
consent to the assignment.
25.4 In the event Tenant desires to assign, sublease,
hypothecate or otherwise transfer this Lease or sublet the Demised Premises,
then as soon as practical, 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, all in such detail as
Landlord shall reasonably require. Tenant shall also tender to Landlord, the
sum of Five Hundred Dollars ($500) as reimbursement of Landlord's
administrative expense in reviewing Tenants request for such assignment.
25.5 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), any change in use
which such successor proposes to make in use of Demised Premises and desire
of Landlord to exercise rights under Section 25.10 to obtain cancellation of
this Lease. 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.
25.6 As conditions precedent to Landlord considering a
request by Tenant to Tenant's transfer of rights or sharing of the Premises,
Landlord may require any or all of the following:
(a) Tenant shall remain fully liable under this
Lease during the unexpired term hereof;
(b) 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;
(c) Tenant shall reimburse Landlord for Landlord's
reasonable attorneys' fees incurred in connection with the review, processing
and documentation of such request, but not to exceed Five Hundred Dollars
($500);
(d) If Tenant's transfer of rights or sharing of the
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 Landlord under this
Lease, Tenant shall pay fifty percent (50%) of said excess to Landlord. If
said consideration consists of cash paid to Tenant, said payment to Landlord
shall be made upon receipt by Tenant of said cash payment;
(e) Written agreement from any third party concerned
that in the event Landlord gives such third party notice that Tenant is in
default under this Lease, such third party shall thereafter make all payments
otherwise due Tenant directly to Landlord, which payments will be received by
Landlord without any liability on Landlord except to credit such payment
against those due under the Lease, and any such third party shall agree to
attorn to Landlord or its successors and assigns should this Lease be
terminated for any reason; provided, however that in no event shall Landlord
or its successors or assigns be obligated to accept such attornment;
(f) Any such transfer and consent shall be effected
on forms reasonably approved by Landlord as to form and substance;
(g) Tenant shall not then be in default hereunder in
any respect;
(h) Such third party's proposed use of the Premises
shall be substantially similar as Tenant's permitted use;
(i) Landlord shall not be bound by any provision of
any agreement pertaining to Tenant's transfer of rights or sharing of the
Premises;
(j) Tenant shall deliver to Landlord one executed
copy of any and all written instruments evidencing or relating to Tenant's
transfer of rights or sharing of the Premises;
(k) A list of Hazardous Material (as defined in
Section 41.6 below), 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 relating to Hazardous Material of such proposed sublessee as
described in Section 41.1.1 below; and
(l) Payment to Landlord fifty percent (50%) of any
"bonus rent" (rent paid by assignee/sublessee in excess of the Basic Annual
Rent) paid to Tenant.
25.7 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 Article 25 shall be void and shall, at the option of
Landlord, terminate this Lease.
25.8 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.
25.9 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.
25.10 If Tenant delivers to Landlord an Assignment Notice
indicating a desire to transfer this Lease to a transferee other than as
provided within Section 25.3, 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 as hereinabove provided, this Lease shall continue in full
force and effect as if such Assignment Notice had never been given. In the
event Tenant does not withdraw any 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.
25.11 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 an act of
default by Tenant, Tenant shall have the right to collect such rent.
26. Attorneys' Fees
26.1 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 and costs of suit.
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:
(a) 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;
(b) A prompt cash payment to compensate Landlord for
any monetary defaults or actual damages arising directly from a breach of
this Lease;
(c) A cash deposit in an amount at least equal to
the Security Deposit as referenced in 2.1.8 originally required at the time
of execution of this Lease.
(d) The assumption or assignment of all of Tenant's
interest and obligations under this Lease.
28. Definition of Landlord
28.1 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 title or leasehold and
provided that the security deposit described in Article 9 above is
transferred to the new owner which acknowledges responsibility therefor to
Tenant in writing, then Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) shall be automatically 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, during its ownership or ground lease of the Demised
Premises. Landlord may transfer its interest in the Demised Premises or this
Lease without the consent of 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.
29. Estoppel Certificate
29.1 Tenant and Landlord shall within ten (10) days of
written notice from Landlord or Tenant, 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 the rental and other charges
are paid in advanced, if any, (ii) acknowledging that there are not, to
Tenant's knowledge, any unsecured defaults on the part of Landlord hereunder,
or specifying such defaults if any are claimed and (iii) setting forth such
further information with respect to this Lease or the Demised Premises as may
be requested thereon. Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the real
property of which the Demised Premises are a part. Tenant's failure to
deliver such statement within such time shall, at the option of Landlord,
constitute a default under this Lease, and, in any event, shall be conclusive
upon Tenant that the Lease is in full force and effect and without dification
except as may be represented by Landlord in any certificate prepared by
Landlord and delivered to Tenant for execution.
30. Joint and Several Obligations
30.1 If more than one person or entity executes this Lease as
Tenant,
(a) 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
(b) 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.
31. Limitation of Landlord's Liability
31.1 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 Project of which the Demises Premises are a part, and out of
rent or other income from such real property receivable by Landlord 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 of which the Demised Premises are a
part.
31.2 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.
31.3 Each of the covenants and agreements of this Article 31
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.
32. Project Control by Landlord
32.1 Landlord reserves full control over the Building and
Project to the extent not inconsistent with Tenant's enjoyment of the Demised
Premises. This reservation includes but is not limited to right of Landlord
to 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 Building
separate from fee title to land.
32.2 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 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.
33. Quiet Enjoyment
33.1 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.
34. Quitclaim Deed
34.1 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.
35. Rules and Regulations
35.1 Tenant shall faithfully observe and comply with the
Rules and Regulations attached hereto as Exhibit "D" and all reasonable and
nondiscriminatory modifications thereof and additions thereto from time to
time put into effect by Landlord. Landlord shall not be responsible to
Tenant for the violation or non-performance by any other tenant or any agent,
employee or invitee thereof of any of said Rules and Regulations.
36. Subordination and Attornment
36.1 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 Building of which the Demised
Premises are a part, 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.
36.2 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 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.
36.3 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.
37. Surrender
37.1 No surrender of possession of any part of the demised
Premises shall release Tenant from any of its obligations hereunder unless
accepted by Landlord.
37.2 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.
37.3 The voluntary or other surrender of any ground or
underlying lease that now exists or may hereafter be executed affecting the
Building or 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.
38. Waiver and Modification
38.1 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 herein contained.
39. Waiver of Jury Trial and Counterclaims
39.1 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.
40. Relocation of Demised Premises
40.1 Landlord shall have the right at any time during the
term hereof upon giving Tenant not less than sixty (60) days prior written
notice, to provide Tenant with space substantially similar elsewhere in the
Building or Project of substantially the same size, improvements, utilities,
services and access, decor, and nature as the herein Demised Premises and
remove and place Tenant in such space, with Landlord to pay all reasonable
and customary costs and expenses incurred as a result of such removal of
Tenant, including without limitation, costs incurred in changing addresses on
stationery and business cards. Should Tenant refuse to permit Landlord to
move Tenant to such new space at the end of said sixty (60) day period,
Landlord shall have, in addition to all other rights and remedies allowed by
law or equity, the right to cancel and terminate this Lease upon giving
Tenant within thirty (30) days of the end of such sixty (60) day period
written notice of such election to terminate. Upon giving such notice this
Lease shall immediately terminate. Notwithstanding the foregoing, Tenant
shall not be required to relocate to new premises during any time when such
relocation will materially adversely affect any laboratory work Tenant may be
performing at the Demised Premises. If Landlord moves Tenant to such new
space, this Lease and each and all of its terms, covenants, and conditions
shall remain in full force and effect and be deemed applicable to such new
space and such new space shall thereafter be deemed to be the "Demised
Premises" as though Landlord and Tenant have entered into an express written
amendment to this Lease with respect thereto.
41. Hazardous Materials
41.1 Prohibition/Compliance. Tenant shall not cause or
permit any Hazardous Material (as hereinafter defined) to be brought upon,
kept or used in or about the Demised Premises 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 results in unlawful contamination of the
Demised Premises, the Building, the Project or any adjacent Property or if
unlawful contamination of the Demised Premises, the Building, the Project or
any adjacent Property by Hazardous Material otherwise occurs during the term
of this Lease or any extension or renewal hereof or holding over hereunder,
then Tenant shall indemnify, defend and hold Landlord, its agents and
contractors harmless from any and all claims, judgments, damages, penalties,
fines, costs, liabilities, or losses (including without limitation diminution
in value of the Demised Premises or any portion of the Project, damages for
the loss or restriction on use of rentable or usable space or of any amenity
of the Demised Premises or Project, damages arising from any adverse impact
on marketing of space in the Demised Premises or the Project, and sums paid
in settlement of claims, attorneys' fees, consultant fees and expert fees)
which arise during or after the Lease term as a result of such contamination.
For the purpose of this Section 41, unlawful contamination is Hazardous
Material which violates any applicable local, state or federal laws or any
regulations or standards promulgated thereunder, including requirements or
standards imposed by any governmental agency or by governmental order or
court having jurisdiction over the Project. This indemnification of Landlord
by Tenant includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state or local governmental agency
or political subdivision because of Hazardous material 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 Material on the
Demised Premises, the Building, the Project or any adjacent Property, caused
or permitted by Tenant results in any unlawful 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 ensure the
Demised Premises, the Building, the Project or any adjacent Property meets
all applicable local, state and federal laws and any regulations or standards
promulgated thereunder, in effect now or in the future, including
requirements by any governmental agency or imposed by any governmental order
or court having jurisdiction over the Project, 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.
41.1.1 Business. Landlord acknowledges that it is not
the intent of this Article 41 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 Material is strictly and properly monitored according to all
applicable governmental requirements. As a material inducement to Landlord
to allow Tenant to use Hazardous Material in connection with its business,
Tenant agrees to deliver to Landlord prior to the Term Commencement Date a
list identifying each type of Hazardous Material 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 Material on the
Demised Premises ("Hazardous Material List"). Tenant shall deliver to
Landlord an updated Hazardous Material List at least once a year. Tenant
shall deliver to Landlord true and correct copies of the following documents
(hereinafter referred to as the "Documents") relating to the handling,
storage, disposal and emission of Hazardous Material 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 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 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 Material 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.
41.2 Termination of Lease. Notwithstanding the provisions of
Section 41.1 above, if Tenant or the proposed assignee or sublessee is
subject to an enforcement order issued by any governmental authority in
connection with the use, disposal or storage of a Hazardous Material at the
Project, Landlord shall have the right to terminate the Lease in Landlord's
sole and absolute discretion (with respect to any such matter involving
Tenant) and it shall not be unreasonable for Landlord to withhold its consent
to any proposed assignment or subletting (with respect to any such matter
involving a proposed assignee or sublessee).
41.3 Testing. At reasonable times, and from time to time,
prior to the expiration of the Lease term Landlord shall have the right to
conduct appropriate investigations and tests of the Demised Premises,
Building and Project to demonstrate that contamination has occurred as a
result of Tenant's use of the Demised Premises. Tenant shall be responsible
for the cost of any investigations and tests which indicate that unlawful
contamination resulted from 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 actual attorneys' fees and costs,
arising out of or in connection with any removal, clean up, restoration and
materials required hereunder to ensure the Demised Premises and any other
property of whatever nature, meets all applicable local, state and federal
laws and any regulations or standards promulgated thereunder, in effect now
or in the future, including requirements by any governmental agency or
imposed by any governmental order or court having jurisdiction over the
Project. Tenant shall pay for the cost of a third party prepared Phase I
exit audit of the Demised Premises at the termination of the Lease plus the
cost of any tests or remediations reasonably recommended in said audit to
bring any Tenant caused contamination to meet all applicable local, state and
federal laws and any regulations or standards promulgated thereunder,
in effect now or in the future, including requirements by any governmental
agency or imposed by any governmental order or court having jurisdiction over
the Project.
41.4 Underground Tanks. If underground or other storage
tanks storing Hazardous Materials are located on the Demised Premises and
utilized by Tenant or are hereafter placed on the Demised Premises by any
party for the benefit of Tenant, 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 the California Administrative Code, Title 23,
Chapter 3, Subchapter 16, "Underground Storage Tank Regulations," and
Division 20, Chapter 6.7 of the California Health & Safety Code, "Underground
Storage of Hazardous Substances," as they now exist or may hereafter be
adopted or amended.
41.5 Tenant's Obligations. Tenant's obligations under this
Article 41 shall survive the termination of the Lease. 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 created or brought upon the Demised Premises by Tenant, Tenant
shall continue to pay the full Rent in accordance with this Lease, which Rent
shall be prorated daily.
41.6 Definition of "Hazardous Material." As used herein, the
term "Hazardous Material" means any hazardous or toxic substance, material or
waste which is or becomes regulated by any local governmental authority, the
State of California or the United States government. The term "Hazardous
Material" includes, without limitation, any material or substance which is
(i) defined as a "hazardous waste, " "extremely hazardous waste" or
"restricted hazardous waste" under Section 25515 or 25117, or listed pursuant
to Section 25140, of the California Health and Safety Code, Division 20,
Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous
substance" under Section 25316 of the California Health and Safety Code,
Division 2, Chapter 6.8 (Carpenter-Presly-Tanner Hazardous Substance Account
Act), (iii) defined as a "hazardous material," "hazardous substance" or
"hazardous waste" under Section 25501 of the California Health and Safety
Code, Division 20, Chapter 6.95 (Hazardous Substances), (v) petroleum, (vi)
asbestos, (vii) listed under Article 9 and defined as hazardous or extremely
hazardous pursuant to Article 11 of Title 22 of the California Administrative
Code, Division 4, Chapter 20, (viii) designated as a "hazardous substance"
pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C.
Section 1317), (ix) 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 (x) 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).
42. Option to Expand.
42.1 Tenant shall have the right, but not the obligation, to
expand the Demised Premises (the "Expansion Option") in accordance with the
provisions set forth below.
42.1.1 Available Space. For the purposes of the
Expansion Option, "Available Space" shall mean any rentable area within the
Building not leased to a tenant and not subject to the option rights of any
tenant. Tenant may exercise the Expansion Option as to any Available Space,
provided however, that if the Available Space was configured for use by a
single tenant, Tenant must exercise the Expansion Option as to all of such
available Space. Tenant may not exercise the Expansion Option as to a
portion or less than all or any Available Space configured for use by a
single tenant.
42.1.2 Exercise of Option. From time to time,
Landlord shall provide Tenant with written notice as to areas within the
Building which Landlord believes are or will become Available Space (the
"Available Space Notice"). The Available Space Notice shall identify the
location, configuration and rentable square feet of the Available Space.
Upon receipt of the Available Space Notice and for ten (10) days thereafter
(the "Expansion Option Period"), Tenant may exercise the Expansion Option by
providing Landlord with written notice (the "Expansion Option Exercise
Notice") that Tenant exercises its Expansion Option as to the Available Space
identified in the Available Space Notice. If Tenant does not exercise the
Expansion Option within the Expansion Option Period, the Expansion Option
shall terminate as to the Available Space identified in the Available Space
Notice until after it has been occupied by a new tenant, or is vacant for one
hundred eighty (180) days after the Available Space Notice is given, after
which time the Expansion Option shall renew as to said Available Space.
42.1.3 Amendment to Lease. Within ten (10) days
after the proper exercise of the Expansion Option, Tenant and Landlord shall
enter into a written amendment to the Lease (the "Amendment") which shall
provide, unless otherwise agreed in writing, (a) that the Amendment shall be
effective ten (10) days after the date of the Amendment or ten (10) days
after the prior tenant vacates the Available Space, whichever shall last
occur; (b) that the Demised Premises under the Lease shall be increased to
include the rentable square feet of the Available Space; (c) the new Basic
Annual Rent, with the Available Space increasing the Basic Annual Rent at the
square foot rental rate then applicable under the Lease; (d) Tenant's new Pro
Rata Share of Operating Expenses, based upon the addition of the Available
Space to the Demised Premises; (e) the proportionate increase to the Security
Deposit (which shall be payable upon execution of the Amendment and shall be
equal to one (1) month's Basic Annual Rent for said Available Space); and (f)
the proportionate increase in the number of parking spaces allocated to
Tenant. In the event Tenant does not execute and deliver to Landlord the
Amendment within the ten (10) day period stated herein, Tenant's Expansion
Option as to the Available Space shall terminate until after it has been
occupied by a new tenant, or is vacant for one hundred eighty (180) days
after the Available Space Notice is given, after which time the Expansion
Option renews as to said Available Space. Landlord shall not be required to
provide any tenant improvements for the Available Space. In all other
respects, the Lease shall remain in full force and effect, and shall apply to
the Available Space.
42.1.4 Term Limitation. Notwithstanding any other
provision relating to the Expansion Option, Tenant shall not be entitled to
exercise the Expansion Option if the remaining Term under the Lease (not
including unexercised options to extend the Term) is less than two (2) years.
42.3 The exercise by Tenant of the Expansion Option is
subject to the following terms and conditions:
(a) The Expansion Option herein granted to Tenant is
not assignable separate and apart from this Lease.
(b) Tenant shall not have the right to exercise the
Expansion Option, notwithstanding anything set forth above to the contrary:
(1) During the time commencing from the date
Landlord gives to Tenant a written notice that Tenant is in default under any
material provisions of this Lease and continuing until the default alleged in
said notice is cured; or
(2) At any time after an event of default as
described in Article 24, of this Lease (without any necessity of Landlord to
give notice of such default to Tenant) and continuing until any such default
is cured, if curable.
(c) The period of time within which the Expansion
Option may be exercised shall not be extended or enlarged by reason of the
Tenant's inability to exercise the Expansion Option because of the foregoing
provisions of subparagraph (b).
(d) All rights of Tenant under the provisions of the
Expansion Option shall terminate and be of no further force or effect, even
after Tenant's due and timely exercise of the Expansion Option, if, after
such exercise, but prior to the commencement date of the term of the lease
for the Available Space or part, (i) Tenant fails to pay the Landlord a
monetary obligation of Tenant for a period of ten (10) days after written
notice from Landlord to Tenant; or (ii) Tenant fails to commence to cure a
default (other than a monetary default) within ten (10) days after Landlord
gives notice to Tenant of such default.
42.4 Priority. The Parties acknowledge and agree that the
Expansion Option initially arose in similar form and substance under the
Addendum to the Suite 130 Lease dated December 11, 1992 and the Cytel Lease
with Landlord made in 1988 (no month or date referenced) as assigned to
Tenant under the Cytel Sublease and that as such, the Expansion Option rights
are senior in priority to any similar rights granted later in time to other
tenants at the Building.
42.5 Tenant shall be responsible for any brokerage fees owed
to any third party engaged by Tenant in connection with any Expansion Option
and shall indemnify Landlord with respect to any claims for any fees or
commissions made by any person with whom Tenant dealt in connection with
exercising the Expansion Option.
42.6 Supersedes Prior Agreements. The Expansion Option shall be
exercised only as provided in this Agreement and supersede all prior
agreements with respect to Available Space.
43. Miscellaneous
43.1 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.
43.2 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.
43.3 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.
43.4 Covenants and Conditions. Each provision of this Lease
performable by Tenant shall be deemed both a covenant and a condition.
43.5 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.
43.6 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 Basic Lease Provisions, general
Provisions, and Exhibits all constitute a single document and are
incorporated herein.
43.7 Severability. Any provision of this Lease which shall
provide 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.
43.8 Recording. Either party may, but shall not be obligated
to, record a short form memorandum of this Lease provided the nonrecording
party agrees in writing to the form and content of the memorandum. Neither
parties shall record this Lease.
43.9 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.
43.10 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 43.10 contained
shall in any way alter the provisions against assignment or subletting in
this Lease provided.
43.11 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 personal delivery, by electronic communication
whether by telex, telegram or telecopy (if confirmed in writing sent by
registered or certified mail, postage prepaid, return receipt requested) or
by mail, and if given by mail shall be deemed sufficiently given upon receipt
after deposit in United States mail, sent by registered or certified mail,
postage prepaid, addressed to Tenant at the Demised Premises, or to Tenant or
Landlord at the addresses shown in Item 2.1.10 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.
44. Grant of License.
44.1 Landlord hereby grants to Tenant a license to use rent
free during the term of this Lease and any extension thereof approximately
500 square feet of space in the garage area in the Building to be designated
by Landlord for use associated with the ordinary business of Tenant, which
use shall be subject to Landlord's approval which shall not be unreasonably
withheld. Tenant shall be responsible for all permits and improvements
associated with the use of said space and for the cost of utilities, cleaning
and otherwise maintaining such area. This license shall not be assignable.
The area of the parking garage space licensed to Tenant may be all or a
portion of that area of the second floor of the parking garage cross hatched
and identified as "Proposed Agouron Mechanical/Electrical Area" as shown on
Exhibit "H" attached to this letter and made a part hereof, plus such other
areas as the Parties may agree such that the total square footage of such
licensed areas does not exceed 500 square feet.
44.2 The Demised Premises shall also include approximately
400 square feet of enclosed storage area ("Storage Area") located on Parking
Level One (P-1) of the Building which Storage Area was utilized by Tenant
under this Suite 130 Lease. Such Storage Area shall be for the exclusive use
of Tenant. The Storage Area rental is included in the Base Annual Rent set
forth in Section 5 of the Lease and in Tenant's share of Operating Expenses
as set forth in Section 7 of the Lease.
44.3 Nothing contained in this Section 44 shall be construed
as eliminating or diminishing the storage and/or mechanical spaces utilized
by Tenant under the Cytel Sublease.
45. Financial Statements.
Upon the written request of Landlord, but not more frequently
than quarterly, Tenant shall deliver to Landlord a copy of its most recent
Security Exchange Commission 10Q and 10K filings and Annual Report.
46. Option(s) to Extend Term.
Tenant shall have the option ("Option(s)") to extend the term of
this Lease upon the following terms and conditions:
(a) Tenant shall have one (1) option to extend the term of
this Lease one (1) year on the same terms and conditions as this Lease.
Basic Annual Rent shall be adjusted on the first day of the renewal term in
accordance with Article 6 above.
(b) After Tenant's exercise of the Option provided under
section 46(a) above, Tenant shall have three (3) successive options to extend
the term of this Lease, each for a period of five (5) additional years.
(1) In the event Tenant elects to exercise an
Option under section 46(b), the Basic Annual Rent shall be adjusted to be
ninety-five percent (95%) of the then effective fair rental value for similar
space with the same level of tenant improvements in the geographical area
where the Building is located (the "New Basic Annual Rent"). If the parties
fail to agree upon the New Basic Annual Rent within thirty (30) days after
exercise of an Option as aforesaid, Tenant may rescind its exercise of the
Option by notice in writing of such rescission within five (5) days following
the expiration of such thirty (30) day period. If Tenant fails to timely
rescind its exercise of the Option, the determination of the fair rental
value shall be made by appraisers, as hereinafter provided. If Landlord and
Tenant are not able to agree upon the fair rental value of the Demised
Premises within the prescribed time period, then Landlord and Tenant shall
attempt to agree in good faith upon a single appraiser not later than thirty
(30) days thereafter. If Landlord and Tenant are unable to agree in good
faith upon a single appraiser within such time period, then Landlord and
Tenant shall appoint one appraiser not later than ten (10) days thereafter.
Within ten (10) days thereafter, the two appointed appraisers shall appoint a
third appraiser. If either Landlord or Tenant fails to appoint its appraiser
within the prescribed time period, the single appraiser appointed shall
determine the fair rental value of the Demised Premises. If both parties
fail to appoint appraisers within the prescribed time period, then the first
appraiser thereafter selected by a party shall determine the fair rental
value of the Demised Premises. Each party shall bear the cost of its own
appraiser and the parties shall share equally the cost of the single or third
appraiser. If appraisers are used, such appraisers shall have at least five
(5) years' experience in the appraisal of biotechnology laboratory real
property in the area in which the Demised Premises is located and shall be
members of professional organizations such as MAI or equivalent. For the
purpose of such appraisal, the term "fair rental value" shall mean the price
that a ready and willing tenant would pay as of the applicable commencement
date of the option term as annual rent on a triple net basis to a ready and
willing landlord of property comparable to the Demised Premises if such
property were exposed for lease on the open market for a reasonable period of
time and taking into account all of the purposes for which such property may
be used. If a single appraiser is chosen, then such appraiser shall
determine the fair rental value of the Demised Premises. Otherwise, the fair
rental value of the Demised Premises shall be the arithmetic average of the
two (2) of the three (3) appraisals which are closest in amount, and the
third appraisal shall be disregarded. Landlord and Tenant shall instruct the
appraiser (s) to complete their determination of the fair rental value not
later than one hundred twenty (120) days prior to the applicable commencement
date of the option term. In the event the New Basic Annual Rent as
determined by the fair rental value of the Demised Premises exceeds the Basic
Annual Rent for the last year of the term of this Lease, or any prior tension
thereof, by more than one hundred twenty percent (120%), then Tenant may, by
written notice to Landlord delivered not more than thirty (30) days after
Landlord and Tenant received the appraiser(s) determination of fair rental
value for the Demised Premises, withdraw its notice of election to exercise
such option, in which case the term of this Lease shall terminate as if
Tenant had not exercised the option to extend the term of this Lease. If
Tenant does not withdraw its notice of the exercise of the option as
hereinabove provided, the determination by the appraiser(s) of the fair
rental value of the Demised Premises shall be conclusive and binding on the
parties.
(c) The Options herein granted are not assignable
separate and apart from this Lease except as provided under Section 25.3
above.
(d) The Options are conditional upon Tenant giving
Landlord written notice of its election to exercise an Option at least six
(6) months prior to the end of the expiration of the initial term of this
Lease or any extension of the term thereof.
(e) Tenant shall not have the right to exercise any
Option, notwithstanding anything set forth above to the contrary:
(1) During the time commencing from the date
Landlord gives to Tenant a written notice that Tenant is in default under any
provisions of this Lease and continuing until the default alleged in said
notice is cured; or
(2) At any time after an event of default as
described in Article 24, of the Lease (without any necessity of Landlord to
give notice of such default to Tenant) and continuing until any such default
is cured, if curable; or
(3) In the event that Tenant has defaulted in the
performance of its obligations three (3) or more times and a service charge
has become payable under Section 24.1 for each of such defaults during the
twelve-month period immediately prior to the date that Tenant intends to
exercise the Option, whether or not the defaults are cured.
(f) The period of time within which the Options may be
exercised shall not be extended or enlarged by reason of the Tenant's
inability to exercise the Options because of the foregoing provisions of
subparagraph (e).
(g) All rights of Tenant under the provisions of the
Options shall terminate and be of no further force or effect even after
Tenant's due and timely exercise of an Option, if, after such exercise, but
prior to the commencement date of the new term, (1) Tenant fails to pay to
Landlord a monetary obligation of Tenant for a period of twenty (20) days
after written notice from Landlord to Tenant; (2) Tenant fails to commence to
cure a default (other than a monetary default) within thirty (30) days after
the date Landlord gives notice to Tenant of such default; or (3) Tenant has
defaulted three (3) or more times and a service charge under Section 24.1 has
become payable for any such default, during the period from the date of the
exercise of such option to the date of the commencement of such option term,
whether or not such defaults are cured.
47. Fire Control Zone.
Tenant shall be entitled to store and utilize at Suite 260 up to
one-third (1/3rd) of the exempted amounts of hazardous materials permitted
within a single fire control area as such materials and quantities are
defined in the Uniform Building Code, as adopted by the City of San Diego.
Upon the written request of Landlord, Tenant agrees to enter into a written
agreement with other tenants at the Building within the same fire control
area as Tenant confirming the use of such materials by the tenants and their
agreement not to exceed their respective quantity limitation within the
single fire control area. Nothing contained in this paragraph, however,
shall be construed as diminishing the size of the fire control areas
currently utilized by Tenant at Suite 130 and Suite 100-A.
48. Special Equipment.
The Parties acknowledge that the following equipment
("Equipment") located in Suite 130 is part of the Demised Premises and shall
remain with the Demised Premises upon Lease expiration. Landlord makes no
representation or warranty regarding the Equipment. The Equipment shall be
maintained by Tenant in good operating condition, reasonable wear and tear
excepted, at Tenant's sole expense during the term of the Lease. At
termination or expiration of the Lease such Equipment shall be turned over to
Landlord in good operating condition, reasonable wear and tear excepted. The
Equipment consists of:
1. Commercial glass washer and dryer.
2. Walk-in cold storage room.
3. Two (2) fume hoods and epoxy tops.
4. Deionized water filtration system.
5. Unattached laboratory table.
49. Termination of Cytel Sublease.
The Parties hereby acknowledge that as of the date of this
Lease, Tenant remains subject to the terms and conditions of the Cytel
Sublease with respect to Suite 100-A. Upon expiration or sooner termination
of the Cytel Sublease and deletion of Suite 100-A from the Cytel lease with
Landlord, the terms and conditions of this Lease shall automatically and
without notice to either party, apply to Suite 100-A and shall bind Tenant
and Landlord as if Suite 100-A were subject to this Lease as of the Term
Commencement Date. The Parties agree that they shall use reasonable efforts
to cause Cytel to terminate the Cytel Sublease so as to allow Landlord and
Tenant to enter into this Lease with respect to Suite 100-A, provided that
neither Landlord nor Tenant shall be required to expend any sums or incur any
costs in connection with such efforts.
[INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the date first above written.
Landlord: Tenant:
Health Science Properties, Inc. Agouron Pharmaceuticals, Inc.
By:____________/s/_________________ By:_____________/s/_____________
Name:Gary Kreitzer_________________ Name:Gary Friedman______________
Its:Senior Vice President__________ Its:Vice President & General Counsel
By:________________________________ By:_____________________________
Name:______________________________ Name:___________________________
Its:_______________________________ Its:____________________________
Exhibit 10.57
LEASE AMENDMENT NO. 2
THIS LEASE AMENDMENT NO. 2, made this 17th day of February, 1994, by and
between KOLL HANCOCK TORREY PINES, a California General Partnership
("Landlord"), and AGOURON PHARMACEUTICALS, INC., a California Corporation
("Tenant").
WHEREAS, by a lease dated as of December 8, 1992 Landlord leased to
Tenant approximately 10,255 rentable square feet of office space ("Original
Space") located in Suite 100 of the office building known as TORREY PINES
BUSINESS AND RESEARCH PARK ("Building"), located at 10350 North Torrey Pines
Road, La Jolla, California, for a term of four (4) years, beginning on
February 1, 1993, and ending on April 30, 1997;
WHEREAS, by written Lease Amendment No. 1, dated February 9, 1993,
Landlord leased an additional 3,774 rentable square feet on the plaza level
of the building to Tenant for a term commencing May 1, 1993 and terminating
April 30, 1997. (The Lease, Lease Amendment No. 1, and Lease Amendment No. 2
are hereinafter referred to as "The Lease");
WHEREAS, Landlord and Tenant desire to increase Tenant's Square Footage,
and make certain other modifications to the Lease;
NOW, THEREFORE, in consideration of the above stated premises and of the
mutual promises and of the mutual promises and undertakings contained herein,
the parties hereto agree as follows:
1. Landlord hereby agrees to increase Tenant's Square Footage by
4,909 rentable square feet ("Expansion Space") to 18,938 rentable square
feet. The Expansion Space shall mean Suite 250 as described in Exhibit B
attached hereto and made a part hereof. The Expansion Space is hereby added
to the definition of Leased Premises.
2. The term for the second Expansion Space shall commence
approximately May 1, 1994 or upon completion of Tenant Improvements,
whichever is later ("Second Expansion Space Commencement Date").
3. Base Rent Schedule shall now be as follows:
Monthly Base Monthly Base Monthly Base
Rent for Original Rent for First Rent for Second Total Monthly
Period Space Expansion Space Expansion Space Base Rent
5/1/94 - $17,023.30 $5,510.04 $7,854.40 $30,387.74
4/30/95
5/1/95 - $17,536.05 $5,510.04 $8,148.94 $31,195.03
4/30/96
5/1/96 - $18,151.35 $5,510.04 $8,394.39 $32,055.78
4/30/97
4. Landlord will be responsible for calendar year 1994 ("Base Year")
Operating Costs for the Expansion Space. Tenant will be responsible for any
increase in Operating Costs above the 1994 calendar year Base Year.
5. Commencing on the Second Expansion Space Commencement Date,
Tenant's "Pro Rata Share" shall increase to 10.447%.
6. "Authorized Number of Parking Spaces" shall be increased from
thirty-seven (37) spaces to fifty-one (51) spaces. There will be no parking
fees for the Authorized Number of Parking Spaces during the Lease Term.
7. Tenant shall pay $15,708.80 to Landlord upon execution of this
Amendment. This payment represents the first monthly installment of Base
Rent for the Expansion Space, and a security deposit of $7,854.40 to be added
to the existing $21,918.04 for a total deposit of $29,772.44.
8. Landlord will provide Tenant with an allowance of $20.00 per
rental square foot to build the tenant improvements for the Expansion Space
subject to mutually-approved floor plan. Landlord will construct and install
the tenant improvements in the Expansion Space in accordance with the Work
Letter Agreement. The cost of space planning, working drawings and permits
will be part of the tenant improvement allowance.
9. Tenant can install signage on the second floor subject to
Landlord's reasonable approval.
10. Except as modified by this Lease Amendment No. 2, all other
terms, covenants and conditions contained in the Lease and Lease Amendment
No. 1 shall remain in full force and effect. Initially capitalized terms not
otherwise defined herein and amendments shall have the same meaning as
contained in the Lease.
IN WITNESS WHEREOF, the parties hereto have executed this LEASE
AMENDMENT NO. 2 as of the date first above written, the execution and
delivery thereof having been duly authorized.
LANDLORD:
KOLL HANCOCK TORREY PINES,
A California General Partnership
By: ____________/s/___________
By: Bill Punel
Its Authorized Signatories
TENANT:
AGOURON PHARMACEUTICALS, INC.
A California Corporation
By: ____________/s/___________
Peter Johnson
Its: President and CEO
Date: ____2-23-94______________
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-20401, 33-58214, 33-58276 and 33-89352) of
Agouron Pharmaceuticals, Inc. of our report dated July 25, 1995 appearing
on page F-1 of this Form 10-K.
PRICE WATERHOUSE LLP
San Diego, California
July 28, 1995
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THIS SCHEDULE CONTAINS SUMMAY FINANCIAL INFORMATION EXTRACTED FROM THE
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QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
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<RECEIVABLES> 344
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,459
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0
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