<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-19910
CREATIVE BIOMOLECULES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2786743
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
45 SOUTH STREET, HOPKINTON, MA 01748
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 435-9001
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of July 31, 1997, the registrant had 33,103,478 shares of common stock
outstanding.
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996 3
Consolidated Statements of Operations for the three
months and six months ended June 30, 1997
and 1996 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES
2
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CREATIVE BIOMOLECULES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,675,847 $ 38,248,988
Marketable securities 29,054,255 11,826,266
Accounts receivable 3,924,872 1,454,696
Inventory 1,417,060 1,341,914
Prepaid expenses and other 300,525 208,886
------------ ------------
Total current assets 44,372,559 53,080,750
------------ ------------
PROPERTY, PLANT AND EQUIPMENT - net 16,950,780 16,224,376
------------ ------------
OTHER ASSETS:
Note receivable - officer 350,000 350,000
Patents and licensed technology - net 385,036 401,629
Deferred patent application costs - net 3,941,769 3,471,169
Deposits and other 180,352 290,950
------------ ------------
Total other assets 4,857,157 4,513,748
------------ ------------
TOTAL $ 66,180,496 $ 73,818,874
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lease obligations - current portion $ 52,180 $ 53,532
Accounts payable 2,529,496 2,830,356
Accrued liabilities 514,147 561,562
Accrued compensation 1,033,214 1,460,856
Deferred contract revenue 6,250 --
------------ ------------
Total current liabilities 4,135,287 4,906,306
------------ ------------
LEASE OBLIGATIONS 1,626,263 1,651,493
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, none issued
Common stock, $.01 par value, 50,000,000 shares
authorized, 33,090,478 shares and 32,769,553 shares
issued and outstanding at June 30, 1997 and
December 31, 1996, respectively 330,905 327,696
Additional paid-in capital 139,498,441 138,371,802
Accumulated deficit (79,410,400) (71,438,423)
------------ ------------
Total stockholders' equity 60,418,946 67,261,075
------------ ------------
TOTAL $ 66,180,496 $ 73,818,874
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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CREATIVE BIOMOLECULES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
Research and development contracts $ 3,137,593 $ 1,112,000 $ 5,889,065 $ 2,167,704
Manufacturing contracts 161,687 1,713,029 393,926 2,325,094
License fees -- 420,000 -- 521,584
Interest 616,951 214,994 1,280,142 465,435
Other -- 141 35 20,141
----------- ----------- ----------- -----------
Total revenues 3,916,231 3,460,164 7,563,168 5,499,958
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Research and development 6,437,127 3,594,998 12,016,180 7,427,751
Manufacturing contracts 112,720 1,350,519 273,758 1,828,051
General and administrative 1,536,937 851,065 3,139,853 1,966,638
Interest 52,882 55,455 105,354 110,247
----------- ----------- ----------- -----------
Total costs and expenses 8,139,666 5,852,037 15,535,145 11,332,687
----------- ----------- ----------- -----------
NET LOSS $(4,223,435) $(2,391,873) $(7,971,977) $(5,832,729)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE $ (.13) $ (.08) $ (.24) $ (.20)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 33,016,188 29,072,074 32,934,903 29,049,580
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
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CREATIVE BIOMOLECULES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------------
June 30, June 30,
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,971,977) $(5,832,729)
------------ -----------
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 1,037,675 1,192,178
Consulting expense 196,500 --
Increase (decrease) in cash from:
Accounts receivable (2,470,176) 1,457,313
Inventory and prepaid expenses (166,785) (365,914)
Accounts payable and accrued liabilities (775,917) 1,292,950
Deferred contract revenue 6,250 --
------------ -----------
Total adjustments (2,172,453) 3,576,527
------------ -----------
Net cash used for operating activities (10,144,430) (2,256,202)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (21,572,059) (1,040,313)
Sales of marketable securities 4,344,070 8,059,753
Expenditures for property, plant and equipment (1,606,163) (1,224,608)
Expenditures for patents (611,923) (483,853)
Decrease (increase) in deposits and other 110,598 (478,515)
------------ -----------
Net cash provided by (used for) investing activities (19,335,477) 4,832,464
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of equity:
Common stock - other 933,348 500,186
Repayments of obligations under capital leases (26,582) (25,361)
------------ -----------
Net cash provided by financing activities 906,766 474,825
------------ -----------
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS (28,573,141) 3,051,087
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 38,248,988 11,917,779
------------ -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,675,847 $14,968,866
============ ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
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CREATIVE BIOMOLECULES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. OPINION OF MANAGEMENT - The accompanying consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
applicable to interim periods. These statements are condensed and do not
include all disclosures as required by generally accepted accounting
principles. In the opinion of management, the unaudited financial statements
contain all adjustments (all of which were considered normal and recurring)
necessary to present fairly the Company's financial position and the results
of operations and cash flows for the periods presented. The financial statements
should be read in conjunction with the Company's audited consolidated financial
statements and notes thereto for the year ended December 31, 1996.
Interim results are not necessarily indicative of results for a full year and
such results are subject to year-end adjustments and independent audit.
2. EARNINGS PER SHARE - In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards Number 128 "Earnings
per Share" ("SFAS 128") which changes the method of calculating earnings per
share ("EPS"). SFAS 128 requires the presentation of "basic" EPS and "diluted"
EPS on the face of the income statement. Basic EPS is computed by dividing the
net income available to common stockholders by the weighted average shares of
common stock. The calculation of diluted EPS is similar to basic EPS except that
the denominator includes dilutive common stock equivalents such as stock options
and warrants. The statement is effective for financial statements in the fourth
quarter of 1997. The Company will adopt SFAS 128 in the fourth quarter of 1997,
as early adoption is not permitted, and will restate at that time EPS data for
prior periods. If SFAS 128 had been in effect during the current and prior
periods, basic EPS and diluted EPS would not have been significantly different
than primary EPS reported.
3. STOCK PLANS - The Company granted stock options to non-employee consultants
in 1997 and 1996. These options were valued based on the fair value of services
received. Total compensation expense recognized in the six month period ended
June 30, 1997 was $196,500.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
To date, most of the Company's revenues have been derived from
research and development payments and license fees under agreements with
collaborative partners. In 1995 and 1996, a significant portion of the
Company's revenues also were derived from contract manufacturing. The Company
anticipates that over the next several years its revenues will be derived
primarily from agreements with collaborative partners. The Company has been
unprofitable since its inception and expects to incur additional operating
losses over the next several years.
The Company's research agreements with collaborative partners have
typically provided for the partial or complete funding of research and
development for specified projects and royalties payable to the Company in
exchange for licenses to market the resulting products. The Company is presently
a party to major research collaborations with Stryker Corporation ("Stryker") to
develop products for orthopedic reconstruction and with Biogen, Inc. ("Biogen")
to develop products for the treatment of renal disorders. Under the research
portion of the collaboration with Stryker, the Company supplies an OP-1 product
to Stryker for clinical trials and other uses, provides clinical support and
performs research work pursuant to work plans established periodically by the
two companies. The current work plan establishes research objectives and funding
through April 1998. In December 1996, the Company signed a Research
Collaboration and License Agreement with Biogen (the "Biogen Research
Agreement"). Under the research collaboration, the Company performs research
work pursuant to work plans established periodically by the two companies and
supplies OP-1 to Biogen for preclinical and clinical uses. Although the Company
is seeking and in the future may seek to enter into collaborative arrangements
with respect to certain other projects, there can be no assurance that the
Company will be able to obtain such agreements on acceptable terms or that the
costs required to complete the projects will not exceed the funding available
for such projects from the collaborative partners.
The Company's manufacturing contracts provide for technical
collaboration and manufacturing for third parties at the Company's
manufacturing facility in Lebanon, New Hampshire and at the Company's research
facility in Hopkinton, Massachusetts. The Company is presently a party to a
manufacturing contract with Biogen (the "Manufacturing Contract") to produce
several of Biogen's protein-based therapeutic candidates. The companies have
agreed that the supply of OP-1 to Biogen pursuant to the Biogen Research
Agreement during 1997 will satisfy Biogen's 1997 obligations under the
Manufacturing Contract. The companies also agreed to extend the Manufacturing
Contract for two years through 1999, with Biogen having the option, but not the
obligation, to use the manufacturing facility for a mutually agreeable number
of months in one of the two years. Although the Company is seeking additional
manufacturing contracts for available cell culture and bacterial fermentation
capacity, there can be no assurance that the Company will be able to obtain
such contracts on acceptable terms.
Revenue is earned and recognized based upon work performed, upon the
sale or licensing of product rights, upon shipment of product for use in
preclinical and clinical testing or upon attainment of benchmarks specified in
collaborative agreements. The Company's results of operations vary significantly
from year to year and quarter to quarter and depend on, among other factors, the
timing of contract manufacturing activities and the timing of payments made by
collaborative partners. The timing of the Company's contract revenues may not
match the timing of the Company's associated product development expenses. As a
result, research and development expenses may exceed contract revenues in any
particular period. Furthermore, aggregate
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research and development contract revenues for any product may not offset all of
the Company's development expenses for such product.
RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996. The
Company's total revenues for the three and six month periods ended June 30,
1997 were $3,916,000 and $7,563,000, respectively. This compared to total
revenues of $3,460,000 and $5,500,000 for the three and six month periods ended
June 30, 1996, respectively. Research and development contract revenues
increased 182% to $3,138,000 for the three month period ended June 30, 1997
from $1,112,000 for the three month period ended June 30, 1996 and 172% to
$5,889,000 for the six month period ended June 30, 1997 from $2,168,000 for the
six month period ended June 30, 1996. This increase is primarily a result of
research activity under the research collaboration with Biogen. The Company
anticipates that research and development contract revenues for each of the
remaining quarters of 1997 will continue at amounts higher than the prior year
primarily as a result of research activity under the research collaboration
with Biogen.
Manufacturing contract revenues for the three and six month periods
ended June 30, 1997 reflect manufacturing for Biogen, under a Service Agreement
separate from the Biogen Research Agreement and the Manufacturing Contract,
conducted at the Company's research facility in Hopkinton, Massachusetts. The
Company completed this manufacturing for Biogen in the second quarter of 1997.
Manufacturing contract revenues for the three and six month periods ended June
30, 1996 reflect manufacturing for Biogen, under the Manufacturing Contract,
conducted at the Company's manufacturing facility in Lebanon, New Hampshire.
The Company anticipates using the manufacturing facility for the production of
OP-1 for use by Stryker, Biogen and the Company for a substantial portion of
1997. Therefore, the Company does not anticipate significant contract
manufacturing revenues for each of the remaining quarters of 1997.
License fees and royalties revenues of $420,000 and $522,000 for the
three and six month periods ended June 30, 1996, respectively, resulted from
licensing patent rights and know-how associated with certain protein technology
which is not central to the Company's business.
Interest revenues increased 187% to $617,000 for the three month
period ended June 30, 1997 from $215,000 for the three month period ended June
30, 1996 and 175% to $1,280,000 for the six month period ended June 30, 1997
from $465,000 for the six month period ended June 30, 1996. The increase is due
to an increase in average funds available for investment. In December 1996,
under the Biogen Research Agreement and a Restricted Stock Purchase Agreement,
as discussed further below, Biogen paid to the Company a $10,000,000 license fee
and made an $18,000,000 equity investment in the Company's common stock.
The Company's total costs and expenses, consisting primarily of
research and development expenses, were $8,139,000 and $15,535,000 for the
three and six month periods ended June 30, 1997, respectively. This compared to
total costs and expenses of $5,852,000 and $11,333,000 for the three and six
month periods ended June 30, 1996, respectively. Research and development
expenses increased 79% to $6,437,000 for the three month period ended June 30,
1997 from $3,595,000 for the three month period ended June 30, 1996 and 62% to
$12,016,000 for the six month period ended June 30, 1997 from $7,428,000 for
the six month period ended June 30, 1996. The increase in research and
development expenses is due to expanded research and development activities
including work in preparation for the planned filing of a Pre-Market Approval
Application by Stryker for the bone graft substitute product, renal disease
therapy research as part of the Biogen collaboration and research into
neurological disease therapies and other indications proprietary to the
Company. The Company used the manufacturing facility in Lebanon, New Hampshire
for the three and six month periods ended June 30, 1997 for the production of
OP-1 for use by Stryker, Biogen and the Company. Costs associated with the
production of OP-1 for use by Stryker, Biogen and the Company are reported as
research and development expenses. Also contributing to the increase were staff
increases and a corresponding increase in purchases of laboratory supplies,
services, and recruiting and relocation expenses, as well as increased
expenditures on academic collaborations and subcontracted research related to
technology and product development. The Company anticipates that research and
development expenses for each of the remaining quarters of 1997 will continue
at amounts higher than the prior year primarily as a result of the expanded
research activities under the research collaborations with Stryker and Biogen
and the Company's proprietary programs.
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Cost of manufacturing contracts for the three and six month periods
ended June 30, 1997 consist of the costs associated with the manufacturing for
Biogen, conducted at the Company's research facility in Hopkinton,
Massachusetts. Cost of manufacturing contracts for the three and six month
periods ended June 30, 1996 includes the costs associated with the
manufacturing for Biogen conducted at the Company's manufacturing facility in
Lebanon, New Hampshire.
General and administrative expenses increased 81% to $1,537,000 for
the three month period ended June 30, 1997 from $851,000 for the three month
period ended June 30, 1996 and 60% to $3,140,000 for the six month period ended
June 30, 1997 from $1,967,000 for the six month period ended June 30, 1996. The
increase was due to increases in executive staff and recruiting and relocation
costs. The Company anticipates that general and administrative expenses for
each of the remaining quarters of 1997 will continue at amounts higher than the
prior year.
Interest expense decreased 4% to $53,000 for the three month period
ended June 30, 1997 from $55,000 for the three month period ended June 30, 1996
and 5% to $105,000 for the six month period ended June 30, 1997 from $110,000
for the six month period ended June 30, 1996. The decrease was due to the
repayment of obligations under capital leases.
As a result of the foregoing, the Company incurred a net loss of
$4,223,000 and $7,972,000 for the three and six month periods ended June 30,
1997, respectively. This compared to a net loss of $2,392,000 and $5,833,000 for
the three and six month periods ended June 30, 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company's principal sources of liquidity
consisted of cash, cash equivalents and marketable securities of $38,730,000,
and a $15,000,000 unsecured line of credit from Biogen, as discussed further
below.
The Company increased its investment in property, plant and equipment
to $30,065,000 at June 30, 1997 from $28,458,000 at December 31, 1996. The
Company currently plans to spend approximately $4,500,000 in the year ended
December 31, 1997 in leasehold improvements, equipment purchases and validation
expenses required to obtain FDA approval of the manufacturing facility and to
expand the Company's research, development and manufacturing capabilities. The
Company currently is seeking to secure a capital lease line under which it may
finance the purchase of certain equipment, if feasible. In addition, as part of
the Manufacturing Contract, Biogen financed the construction of leasehold
improvements to the Company's manufacturing facility at an estimated total cost
of $2,900,000 and is installing and financing certain equipment with an
estimated total cost of $2,400,000 for the Company, as discussed further below.
The Company's collaborative agreements with Stryker provide for
research payments to the Company and royalty payments to the nonseller from
sales of any OP-1 products. The Company also has the exclusive right to supply
Stryker's worldwide commercial requirements for OP-1 products for use in
orthopedic reconstruction. Under the research portion of the collaboration, the
Company supplies OP-1 products to Stryker for clinical trials and other uses and
provides clinical support and performs research work pursuant to work plans
established periodically by the two companies. The current work plan establishes
research objectives and funding through April 1998.
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In December 1996, the Company signed the Biogen Research Agreement to
collaborate on the development of the Company's morphogenic protein, OP-1, for
the treatment of renal disorders. Under the agreement, the Company granted to
Biogen exclusive worldwide rights to manufacture, market and sell OP-1 for the
treatment of renal disease. Biogen paid a $10,000,000 license fee in 1996 and
made an $18,000,000 equity investment in common stock at a premium over the
then-current market price per share. Biogen has guaranteed $10,500,000 in
research funding over a three year period ending December 31, 1999, will pay up
to an additional $69,000,000 upon the attainment of certain milestones and make
available a $15,000,000 line of credit. The Biogen Research Agreement further
provides for the payment of royalties to the Company based on product sales. The
Company may draw upon the $15,000,000 line of credit over a three year period
ending December 31, 1999 to fund the research and development of small molecule
products based on OP-1. Advances are limited to $5,000,000 per year. Biogen
received an exclusive option to obtain an exclusive, worldwide license to OP-1
based small molecule products for the treatment of renal disorders. In the event
Biogen exercises its option, Biogen will forgive the lesser of $10,000,000 or
the principal amount outstanding under the line of credit. The remaining
principal, together with all accrued and unpaid interest, is due and payable
five years from the date of the first advance and may be repaid, at the
Company's option, in either cash, common stock or reduction of royalties due
the Company from Biogen.
In September 1994, the Company signed the three-year Manufacturing
Contract with Biogen to produce in the Company's manufacturing facility in
Lebanon, New Hampshire several of Biogen's protein-based therapeutic candidates
for use in Biogen's clinical trials. The contract covers the period from January
1995 through December 1997. As part of the research collaboration, the two
companies agreed to extend the Manufacturing Contract for two years through
December 31, 1999, with Biogen having the option, but not the obligation, to use
the manufacturing facility for a mutually agreeable number of months in one of
the two extension years. To enable the Company to meet its obligations under the
Manufacturing Contract, Biogen financed the construction of a 7,000 square foot
addition to the present facility for cGMP production using bacterial
fermentation at an estimated total cost of $2,900,000. The Company agreed to
reimburse Biogen for the construction costs and leasehold improvements at the
end of the contract term, including the extension, at an amount equal to
Biogen's construction costs less $300,000 and less all accumulated depreciation.
The reimbursement to Biogen is estimated to be no more than $2,100,000. Biogen
also agreed to lease equipment to the Company for the operation of such portion
of the facility and for cGMP production using bacterial fermentation by the
Company at an estimated total cost of $2,400,000, as provided in an equipment
lease agreement. The Company has the option to purchase the equipment at the end
of the extended lease term for an amount equal to its then fair market value or
for such other amount as is negotiated by the two parties. Biogen currently
plans to complete the installation of the equipment and prepare the bacterial
facility for operation in 1997.
The Company anticipates that its existing capital resources should
enable it to maintain its current and planned operations through 1999. The
Company expects to incur substantial additional research and development and
other costs, including costs related to preclinical studies and clinical trials.
The Company's ability to continue funding its planned operations beyond 1999 is
dependent upon its ability to generate sufficient cash flow from collaborative
arrangements and manufacturing contracts, and in the future, royalties from the
sale of the Company's products by the Company's collaborative partners, and to
obtain additional funds through equity or debt financings, or from other sources
of financing, as may be required. The Company is seeking additional
collaborative arrangements and also expects to raise funds through one or more
financing transactions, as conditions permit. In addition, the Company is
investigating the feasibility of raising capital through the sale/leaseback or
debt financing of some of its capital assets. Over the longer term, because of
the Company's significant long-term capital requirements, the Company intends to
raise funds when conditions are favorable, even if it does not have an immediate
need for additional capital at such time. If substantial additional funding is
not available, the Company's business will be materially and adversely affected.
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CAUTIONARY FACTORS WITH RESPECT TO FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements which are based on
management's current expectations and which involve risks and uncertainties.
The Company's actual results may differ significantly from the results
discussed in the forward-looking statements. The Company cautions investors
that there can be no assurance that the actual results or business conditions
will not differ materially from those projected or suggested in such
forward-looking statements as a result of various factors, including but not
limited to the following: uncertainty as to the Company's ability to
commercialize its products and the timing of any commercialization; the
Company's reliance on its lead product candidate and the Company's lack of
control over the clinical progress of several applications of its products,
which are controlled by the Company's collaborative partners; the Company's
reliance on current and prospective collaborative partners to supply funds for
research and development and to commercialize its products; intense competition
related to the research and development of morphogenic and other proteins for
various applications and therapies and the possibility that others may discover
or develop, and the Company may not be able to gain rights with respect to, the
technology necessary to commercialize its products; the Company's lack of
experience in commercial manufacturing and unproven ability to manufacture
products on a large scale; the Company's lack of marketing and sales experience
and the risk that any products that the Company develops may not be able to be
marketed at acceptable prices or receive commercial acceptance in the markets
that the Company expects to target; uncertainty as to whether there will exist
adequate reimbursement for the Company's products from government, private
health insurers and other organizations; and uncertainties as to the extent of
future government regulation of the Company's business. As a result, the
Company's future development efforts involve a high degree of risk.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
In April 1997, the Company issued a total of 3,008 shares of common
stock, pursuant to the exercise of a warrant by MMG Conseil at an
exercise price of $2.385 per share, with an aggregate purchase price
for such warrant shares of $7,174. The Company issued these
securities without registration in reliance upon the exemption
provided by Section 4(2) of the Securities Act of 1933, since no
public offering was involved. No underwriters were involved in the
offer and sale of the securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders of the Company was held on May 20,
1997. The following actions were voted upon by the stockholders at
the Annual Meeting:
1. The following persons were elected as Directors of the Company and
the number of votes cast for and withheld for each nominee for
Director is set forth below:
<TABLE>
<CAPTION>
Votes
Name Votes For Withheld
---- --------- --------
<S> <C> <C>
Charles Cohen, Ph.D. (term expiring in 2000) 25,664,699 776,003
Jeremy Curnock Cook (term expiring in 2000) 25,659,583 772,119
Suzanne Denbo Jaffe (term expiring in 2000) 25,657,147 774,555
</TABLE>
The terms of office of the following persons as Directors of the
Company continued after the meeting:
Name
----
Brian H. Dovey (term expiring in 1998)
Arthur J. Hale, M.D. (term expiring in 1998)
Michael M. Tarnow (term expiring in 1998)
Martyn D. Greenacre (term expiring in 1999)
Michael Rosenblatt, M.D. (term expiring in 1999)
James R. Tobin (term expiring in 1999)
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2. The stockholders of the Company voted to amend the Company's 1987
Stock Plan (the "1987 Plan") to increase by 1,650,000 shares the
aggregate number of shares authorized for issuance under the 1987
Plan and to extend the term of the 1987 Plan through June 30, 1999.
The number of votes cast for or against the proposal to amend the
1987 Plan, as well as the number of abstentions and broker
non-votes, was as follows: 16,588,131 shares FOR, 3,229,927 shares
AGAINST, 35,391 shares ABSTAINED and 6,578,253 shares representing
BROKER NON-VOTES.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Description
10.52 1987 Stock Plan, as amended on May 20, 1997.
10.53 Fourth Amendment, dated April 10, 1997, to Standard Form
Industrial Lease dated October 24, 1988, as amended
September 17, 1991, January 28, 1994 and September 20,
1994, by and between the Registrant and WRC Properties,
Inc.
10.54 Third Amendment, dated April 10, 1997, to Standard Form
Industrial Lease dated February 25, 1992, as amended
February 28, 1994 and September 20, 1994, by and between
the Registrant and WRC Properties, Inc.
10.55 Lease, dated as of June 16, 1997, by and between the
Registrant and The Prudential Insurance Company of
America.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three month period ended
June 30, 1997.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Hopkinton, Massachusetts, on August
11, 1997.
CREATIVE BIOMOLECULES, INC.
By: /s/ Wayne E. Mayhew III
---------------------------------------------
Wayne E. Mayhew III
Vice President and Chief Financial Officer
By: /s/ Susan B. Blanton
---------------------------------------------
Susan B. Blanton
Controller
<PAGE> 15
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.52 1987 Stock Plan, as amended on May 20, 1997
10.53 Fourth Amendment, dated April 10, 1997, to Standard Form Industrial
Lease dated October 24, 1988, as amended September 17, 1991, January
28, 1994 and September 20, 1994, by and between the Registrant and
WRC Properties, Inc.
10.54 Third Amendment, dated April 10, 1997, to Standard Form Industrial
Lease dated February 25, 1992, as amended February 28, 1994 and
September 20, 1994, by and between the Registrant and WRC Properties,
Inc.
10.55 Lease, dated as of June 16, 1997, by and between the Registrant and
The Prudential Insurance Company of America.
27 Financial Data Schedule
<PAGE> 1
Exhibit 10.52
CREATIVE BIOMOLECULES, INC.
1987 STOCK PLAN
---------------
(Amended as of May 20, 1997)
1. PURPOSE. This 1987 Stock Plan (the "Plan") is intended to
provide incentives:
(a) to the employees of Creative BioMolecules, Inc. (the
"Company"), its parent (if any) and any present or future subsidiaries
of the Company (collectively "Related Corporations") by providing them
with opportunities to purchase stock in the Company pursuant to options
granted hereunder which qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986 (the "Code") ("ISO or
ISOs");
(b) to employees and consultants of the Company and Related
Corporations by providing them with opportunities to purchase stock in
the Company pursuant to options granted hereunder which do not qualify
as ISOs ("Non-Qualified Option" or "Non-Qualified Options");
(c) to employees and consultants of the Company and Related
Corporations by providing them with awards of stock in the Company
("Awards"); and
(d) to employees and consultants of the Company and Related
Corporations by providing them with opportunities to make direct
purchases of stock in the Company ("Purchases").
Both ISOs and Non-Qualified Options are referred to hereafter individually as an
"Option" and collectively as "Options". Options, Awards and authorizations to
make Purchases are referred to hereafter collectively as "Stock Rights". As used
herein, the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation", respectively, as those terms are defined in Section
424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. The Plan shall be administered by a Committee of not
less than two (2) persons, each of whom shall be a "disinterested
person" within the meaning of Rule 16b-3(c)(2)(i) promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") and who shall be
appointed by the Board and who shall serve at the pleasure of the Board.
If no Committee has been appointed to administer the Plan, the functions
of the Committee specified in the Plan shall be administered by the
Board, except that at any time after a resignation of any of the
Company's stock under Section 12 of the Exchange Act, administered by a
Committee is
<PAGE> 2
required. Subject to the terms of the Plan, the Committee shall have the
authority to:
(i) determine the employees of the Company and
Related Corporations (from among the class of employees eligible
under paragraph 3 to receive ISOs) to whom ISOs may be granted,
and to determine (from among the class of individuals and
entities eligible under paragraph 3 to receive Non-Qualified
Options and Awards and to make purchases) to whom Non-Qualified
Options, Awards and authorizations to make purchases may be
granted;
(ii) determine the time or times at which Options or
Awards may be granted or purchases made;
(iii) determine the option price of shares subject to
each Option, which price shall not be less than the minimum
price specified in paragraph 6, and the purchase price of shares
subject to each Purchase;
(iv) determine whether each Option granted shall be
an ISO or a Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or
times when each Option shall become exercisable and the duration
of the exercise period;
(vi) determine whether restrictions such as
repurchase rights and other vesting restrictions are to be
imposed on shares subject to Options, Awards and Purchases and
the nature of such restrictions, if any, and
(vii) interpret the Plan and prescribe and rescind
rules and regulations relating to it. If the Committee
determines to issue an ISO, it shall take whatever actions it
deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option
is treated as an ISO. The interpretation and construction by the
Committee of any provisions of the Plan or of any Stock Right
granted under it shall be final unless otherwise determined by
the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem best.
No member of the Board or Committee shall be liable for any
action by determination made in good faith with respect to the
Plan or any Stock Right granted under it.
2
<PAGE> 3
B. The Committee may select one of its members as its
chairman, and shall hold meetings at such time and places as it may determine.
Acts by a majority of the Committee, or acts reduced to or approved in writing
by a majority of the members of the Committee, shall be valid acts of the
Committee. All references in this Plan to the Committee shall mean the Board if
no Committee has been appointed.
C. This Plan is intended to comply in all respects with
Rule 16b-3 or its successors promulgated under the Exchange Act with respect to
participants who are subject to Section 16 of the Exchange Act, and any
provision in this Plan with respect to such persons contrary to Rule 16b-3 shall
be deemed null and void to the extent permissible by law and deemed appropriate
by the Committee.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any
employee (including employees who serve as officers and directors) of the
Company and any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee (including
employees who serve as officers and directors) or consultants (including
consultants who serve as directors) of the Company or any Related Corporation.
The Committee may take into consideration a recipient's individual circumstances
in determining whether to grant an ISO, a Non-Qualified Option, an Award or an
authorization to make a Purchase. Granting of any Stock Right to any individual
or entity shall neither entitle that individual or entity to, nor disqualify him
from, participation in any other grant of Stock Rights. In no event shall any
employee be granted in any calendar year Stock Rights to purchase or receive
more than 1,030,000 shares of the Company's Common Stock pursuant to this Plan.
4. STOCK. The stock subject to Options, Awards and Purchases shall
be authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 6,800,000 subject to adjustment as provided in paragraph
13. Any such shares may be issued as ISOs, Non-Qualified Options or Awards, or
to persons or entities making Purchases, so long as the number of shares so
issued does not exceed such number, as adjusted. If any Option granted under the
Plan shall expire or terminate for any reason without having been exercised in
full or shall cease for any reason to be exercisable in whole or in part, or if
the Company shall reacquire any unvested shares issued pursuant to Awards or
purchases, the unpurchased shares subject to such Options and any untested
shares so reacquired by the Company shall again be available for grants of Stock
Rights under the Plan.
3
<PAGE> 4
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the
Plan at any time after May 15, 1987 and prior to June 30, 1999. The date of
grant under the Plan will be the date specified by the Committee at the time it
grants the Stock Right; provided, however, that such date shall not be prior to
the date on which the Committee acts to approve the grant. The Committee shall
have the right, with the consent of the optionee, to convert an ISO granted
under the Plan to a Non-Qualified Option pursuant to paragraph 16.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. The price for any share specified in the agreement
relating to each Non-Qualified Option granted under the Plan shall in no event
be less than the par value of such share.
B. The price per share specified in the agreement relating
to each ISO granted under the Plan shall not be less than the fair market value
per share of Common Stock on the date of such grant. In the case of an ISO to be
granted to an employee owning stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or any
Related Corporation, the price per share specified in the agreement relating to
such ISO shall not be less than 110 percent of the fair market value per share
of the Common Stock on the date of grant.
C. In no event shall the aggregate fair market value
(determined at the time an ISO is granted) of Common Stock for which ISOs
granted to any employee are exercisable for the first time by such employee
during any calendar year (under all stock option plans of the Company and any
Related Corporation) exceed $100,000.
D. If, at any time an option is granted under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined on the date such Option is granted (or, if prices or quotes discussed
in this sentence are unavailable on the date of grant, on the last business day
for which such prices or quotes are available prior to the date such Option is
granted) and shall mean
(i) the average (on that date) of the high and low prices of
the Common Stock on the principal national securities exchange on which
the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange, or on the Nasdaq National Market System,
if the Common Stock is not then traded on a national securities
exchange; or
4
<PAGE> 5
(ii) the closing bid price (or average of bid prices) last
quoted (on that day) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
Nasdaq National Market System.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than
(i) ten years and one day from the date of grant in the case
of Non-Qualified Options,
(ii) ten years from the date of grant in the case of ISOs
generally, and
(iii) five years from the date of grant in the case of ISOs
granted to an employee owning stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company
or any Related Corporation.
Subject to earlier termination as provided in paragraphs 9 and 10, the term of
each ISO shall be the term set forth in the original instrument granting such
ISO, except with respect to any part of such ISO that is converted into a
Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. The Option shall either be fully exercisable on the date
of grant or shall become exercisable thereafter in such installments as the
Committee may specify.
B. Once an installment becomes exercisable it shall remain
exercisable until expiration or termination of the Option, unless otherwise
specified by the Committee.
C. Each Option or installment may be exercised at any time
or from time to time, in whole or in part, for up to the total number of shares
with respect to which it is then exercisable.
D. The Committee shall have the right to accelerate the
date of exercise of any installment of any Option; provided that the Committee
shall not accelerate the exercise date of any installment of any Option granted
to any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would cause a violation of
the $100,000 limitation described in paragraph 6.C.
5
<PAGE> 6
E. In no event may an optionee who is subject to Section 16
of the Exchange Act dispose of any shares acquired through exercise of an option
unless at least six (6) months have elapsed from the date the option was
granted. In its discretion, the Committee may provide that the stock
certificates representing such shares bear a legend or that delivery be
withheld.
9. TERMINATION OF EMPLOYMENT. If an ISO optionee ceases to be
employed by the Company and all Related Corporations other than by reasons of
death, disability or termination for "cause" as defined in paragraph 10, no
further installments of his ISOs shall become exercisable, and his ISOs shall
terminate after the passage of 90 days from the date of termination of his
employment, but in no event later than on their specified expiration dates,
except to the extent that such ISOs (or unexercised installments thereof) have
been converted into Non-Qualified Options pursuant to paragraph 16. Employment
shall be considered as continuing uninterrupted during an bona fide leave of
absence (such as those attributable to illness, military obligations or
governmental service) provided that the period of such leave does not exceed 90
days or, if longer, any period by during which such optionee's right to
reemployment is guaranteed by statute. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under the Plan, provided that such written approval contractually
obligates the Company or any Related Corporation to continue the employment of
the employee after the approval period of absence. ISOs granted under the Plan
shall not be affected by any change of employment within or among the Company
and Related Corporations, so long as the optionee continues to be an employee of
the Company or any Related Corporation. Nothing in the Plan shall be deemed to
give any grantee of any Stock Right the right to be retained in employment or
other service by the company or any Related Corporation for any period of time.
10. DEATH; DISABILITY; TERMINATION FOR "CAUSE".
A. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his death, any ISO of his may be
exercised, to the extent of the number of shares with respect to which he could
have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the ISO by will or by the laws or
descent and distribution, at any time prior to the earlier of the ISO's
specified expiration date or 180 days from the date of the optionee's death.
B. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his disability, he shall have the
right to exercise any ISO held by him on the
6
<PAGE> 7
date of termination of employment, to the extent of the number of shares with
respect to which he could have exercised it on that date, at any time prior to
the earlier of the ISO's specified expiration date or 180 days from the date of
the termination of the optionee's employment. For purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as defined in Section
22(e)(3) of the Code or successor statute.
C. If an ISO optionee ceases to be employed by the Company
and all Related Corporations because his employment is terminated for "cause",
all ISOs held by him which are outstanding and unexercised as of the date he is
notified that his employment is terminated for "cause" will immediately be
forfeited. For purposes of this paragraph, "cause" shall include (but shall not
be limited to) dishonesty with respect to the employer, insubordination,
substantial malfeasance or non-feasance of duty, unauthorized disclosure of
confidential information and conduct substantially prejudicial to the business
of the Company or any Related Corporation. The determination of the Committee as
to the existence of "cause" shall be conclusive on the optionee and the Company.
Any agreement between the optionee and the Company or a Related Corporation
which contains a conflicting definition of "cause" for termination of employment
and which is in effect at the time of such termination, shall supersede the
definition in this paragraph with respect to such optionee.
11. ASSIGNABILITY. No Stock Right will be assignable or transferable
by the grantee except by will or by the laws of descent and distribution, and
during the lifetime of the grantee each Stock Right shall be exercisable only by
him, except as may be provided in a qualified domestic relations order, as that
term is interpreted under Rule 16b-3 under the Exchange Act.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
written option agreements (which need not be identical) in such forms as the
Committee may from time to time approve. Such option agreements shall conform to
the terms and conditions set forth in paragraphs 6 through 11 hereof and may
contain such other provisions as the Committee deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of
Common Stock issuable upon exercise of Options. Except as otherwise provided in
the pertinent option agreement, Non-Qualified Options shall be subject to the
same termination and cancellation provisions set forth herein with respect to
ISOs. The Committee may from time to time confer authority and responsibility on
one or more of its own members and/or one or more officers of the Company to
execute and deliver such instruments. The proper officers of the Company are
authorized and directed to take any and all action necessary or
7
<PAGE> 8
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS.
A. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such option:
(a) If the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
Outstanding Common Stock, the number of shares of Common Stock deliverable upon
exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) If the Company is to be consolidated with or
acquired by another entity in a merger, sale of all or substantially all of the
Company's assets or otherwise (an "Acquisition"), the Committee or the board of
directions of any entity assuming the obligations of the Company hereunder (the
"Successor Board") shall, as to outstanding Options, either:
(i) make appropriate provision for the
continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options the consideration payable with
respect to the outstanding shares of Common Stock in connection with the
Acquisition; or
(ii) upon written notice to the optionees,
provide that all Options must be exercised, to the extent then
exercisable, within a specified number of days of the date of such
notice, at the end of which period the Options shall terminate; or
(iii) terminate all Options in exchange for a
cash payment equal to the excess of the fair market value of the shares
subject to such Options (to the extent then exercisable) over the
exercise period thereof.
(c) In the event of a recapitalization or
reorganization of the Company (other than a transaction described in
subparagraph (b) above) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of Common
Stock, an optionee upon exercising an Option shall be entitled to receive for
the purchase price paid upon such exercise the securities he would have received
if
8
<PAGE> 9
he had exercised his Option prior to such recapitalization or reorganization.
(d) Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs shall be
made only after the Committee, after consulting with counsel for the Company,
determine whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments.
(e) In the event of the proposed dissolution or
liquidation of the Company, each Option will terminate immediately prior to the
consummation of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
(f) Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares subject to Options.
No adjustments shall be made for dividends paid in cash or in property other
than securities of the Company.
(g) No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
(h) Upon the occurrence of any of the foregoing
events described in subparagraph (a), (b) or (c), the class and aggregate number
of shares set forth in paragraph 4 hereof that are subject to Stock Rights which
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee shall determine the specific adjustments to be made hereunder and,
subject to paragraph 2, its determination shall be conclusive.
B. If any person or entity owning restricted Common Stock obtained
by exercise of a Stock Right made hereunder receives shares or securities or
cash in connection with a corporate transaction described in subparagraphs (a),
(b) or (c) above as a result of owning such restricted Common Stock, such shares
or securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash
9
<PAGE> 10
were issued, unless otherwise determined by the Committee or the Successor
Board.
14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either:
(a) in United States dollars in cash or by check, or
(b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date
of exercise to the cash exercise price of the Stock Right, or
(c) at the discretion of the Committee, by delivery of the
grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal rate, as
defined in Section 1274(d) of the Code, or
(d) at the discretion of the Committee, by any combination
of (a), (b) and (c) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c) or (d) of
the preceding sentence, such discretion shall be exercised in writing at the
time of the grant of the ISO in question. The holder of a Stock Right shall not
have the rights of a stockholder with respect to the shares covered by his Stock
Right until the date of issuance of a stock certificate to him for such shares.
Except as expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board
on May 15, 1987, subject to approval of the Plan by the Stockholders of the
Company at the next Meeting of Stockholders, and this approval was granted. The
Plan shall expire on June 30, 1999 (except as to Options outstanding on that
date). Subject to the provisions of paragraph 5 above, Stock Rights may be
granted under the Plan prior to the date of Stockholder approval of the Plan.
This restatement of the Plan was adopted by the Board on February 25, 1992 and
approved by the Stockholders on the same date. The Board may terminate or amend
the Plan in any respect at any time, except that, without the approval of such
10
<PAGE> 11
Stockholders obtained within 12 months before or after the Board adopts a
resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the
Plan may not be increased (except by adjustment pursuant to paragraph
13);
(b) the provisions of paragraph 3 regarding eligibility for
grants of Stock Awards may not be modified;
(c) the provisions of paragraph 6B regarding the exercise
price at which shares may be offered pursuant to ISOs may not be
modified (except as adjustment pursuant to paragraph 13); and
(d) the expiration date of the Plan may not be extended.
Except as provided in the fourth sentence of this paragraph 15, in no event may
action by the Board or Stockholders alter or impair the rights of a grantee,
without his consent, under any Stock Right previously granted to him. If the
scope of any amendment is such as to require Stockholder approval in order to
comply with Rule 16b-3, then such amendment shall not be effective unless and
until such Stockholder approval is obtained.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF
ISOS. The Committee, at the written request of any optionee, may in its
discretion take such action as may be necessary to convert such optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such ISOs, regardless of whether the optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments of such Options.
At the time of such conversions, the Committee (with the consent of the
Optionee) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Committee in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in the
Plan shall be deemed to give any optionee the right to have such optionee's ISOs
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Committee takes appropriate action. The Committee, with the
consent of the optionee, may also terminate any portion of any ISO that has not
been exercised at the time of such termination.
17. APPLICATION OF FUNDS. The proceeds received by the Company from
the sale of shares pursuant to Options granted and
11
<PAGE> 12
Purchases authorized under the Plan shall be used for general corporate
purposes.
18. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20) or the vesting of restricted Common
Stock acquired on the exercise of a Stock Right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the Optionee, Award
recipient or purchaser to pay additional withholding taxes in respect of the
amount that is considered compensation required to be included in such person's
gross income. The Committee in its discretion may condition
(i) the exercise of an Option,
(ii) the grant of an Award,
(iii) the making of a Purchase of Common Stock for less than
its fair market value, or
(iv) the vesting of restricted Common Stock
on the grantee's payment of such additional withholding taxes. The Committee
shall have the sole discretion to determine the form in which payment of such
withholding taxes will be made (i.e. cash, securities or a combination thereof).
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee
who receives an ISO must agree to notify the Company in writing immediately
after the employee makes a Disqualifying Disposition of any Common Stock
acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
21. SPECIAL PROVISIONS RELATED TO RESTRICTED STOCK AWARDS.
A. Shares of Stock ("Restricted Stock") may be issued
either alone, in addition to or in tandem with other awards
12
<PAGE> 13
granted under the Plan and/or cash awards made outside the Plan. The Committee
shall determine the eligible persons to whom, and the time or times at which,
grants of Restricted Stock will be made, the number of shares to be awarded, the
price (if any) to be paid by the recipient of Restricted Stock, the time or
times within which such awards may be subject to forfeiture, and all other terms
and conditions of the awards. The Committee may condition the grant of
Restricted Stock upon the attainment of specified performance goals or such
other factors as the Committee may determine, in its sole discretion. The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
B. The prospective recipient of a Restricted Stock Award
shall not have any rights with respect to such award, unless and until such
recipient has executed an agreement evidencing the award and has delivered a
fully executed copy thereof to the Company, and has otherwise complied with the
applicable terms and conditions of such award.
(a) The purchase price for shares of Restricted
Stock shall be equal to, less than or greater than their par value and
may be zero.
(b) Awards of Restricted Stock must be accepted
within a period of sixty (60) days (or such shorter period as the
Committee may specify at grant) after the award date, by executing a
Restricted Stock award agreement and paying whatever price (if any) is
required under the Award.
(c) Each participant receiving a Restricted Stock
Award shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of
such-participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such award.
(d) The Committee may require that the stock
certificates evidencing such shares be held in custody by the Company
until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock Award, the participant shall have
delivered a stock power endorsed in blank, relating to the stock covered
by such award.
C. The shares of Restricted Stock awarded under the Plan
shall be subject to the following restrictions and conditions:
(a) Subject to the provisions of the Plan and the
award agreement, during a period set by the Committee
13
<PAGE> 14
commencing with the date of such award (the "Restricted Period"), the
participant shall not be permitted to sell, transfer, pledge or assign
shares of Restricted Stock awarded under the Plan. Within these limits,
the Committee, in its sole discretion, may provide for the lapse of such
restrictions in installments and may accelerate or waive such
restriction in whole or in part, based on service, performance and/or
such other factors or criteria as the Committee may determine, in its
sole discretion. Shares issued to any person subject to Section 16(b) of
the Exchange Act may not be disposed of within six (6) months of grant,
except as may be permitted under Rule 16b-3(c) issued under the Exchange
Act.
(b) Except as provided herein, the participant shall
have, with respect to the shares of Restricted Stock, all of the rights
of a stockholder of the Company, including the right to vote the shares,
and the right to receive any cash dividends. The Committee, in its sole
discretion, as determined at the time of award, may permit or require
the payment of cash dividends to be deferred and, if the Committee so
determines, reinvested, in additional Restricted Stock to the extent
shares are available under the Plan or otherwise reinvested. Stock
dividends issued with respect to Restricted Stock shall be treated as
additional shares of Restricted Stock that are subject to the same
restrictions and other terms and conditions that apply to the shares
with respect to which such dividends are issued.
(c) Subject to the applicable provisions of the
award agreement and this Plan, upon termination of a participant's
employment with the Company and any Related Company for any reason
during the Restriction Period, all shares still subject to restriction
will vest, or be forfeited, in accordance with the terms and conditions
established by the Committee at or after grant.
(d) If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, certificates for an appropriate number of
unrestricted shares shall be delivered to the participant promptly.
22. GOVERNING LAW; CONSTRUCTION. The validity and construction of
the Plan and the instruments evidencing Stock Rights shall be governed by the
laws of the State of Delaware. In construing this Plan, the singular shall
include the plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.
14
<PAGE> 1
Exhibit 10.53
Page 1 of 4
FOURTH AMENDMENT
Amendment of Lease made this 10th day of April, 1997, by and between WRC
Properties, Inc., 730 Third Avenue, New York, New York 10017 (hereinafter with
its successors and assigns called the "Lessor"), and Creative BioMolecules, Inc.
(hereinafter with its successors and permitted assigns called the "Lessee").
Witnesseth:
Whereas Lessor and Lessee are the present parties to a certain Standard Form
Industrial Lease dated October 24, 1988, First Amendment dated September 17,
1991, Second Amendment dated January 28, 1994 and Third Amendment dated
September 20, 1994 (hereinafter the "Lease"), for premises consisting of
approximately 54,203 square feet of floor area located in the building known as
35 South Street (the "Building"), Hopkinton, Massachusetts (hereinafter referred
to as the "Demised Premises").
Whereas, in consideration of the covenants herein reserved and contained, the
parties hereto agree and amend the Lease as follows, effective on the
Commencement Date of this Amendment.
1. The Lease Term shall be extended for three (3) years, beginning on July
1, 1998 and terminating on June 30, 2001 (the "Fourth Extended Term").
2. The annual rent shall be based on $6.00 per square foot, triple net,
for the leased space of 54,203 square feet, fixed for the Fourth
Extended Term. Beginning July 1, 1998, the Annual Base Rent shall
increase from Two Hundred Eighty-Four Thousand Five Hundred Sixty-Five
and 75/100 ($284,565.75) Dollars to Three Hundred Twenty-Five Thousand
Two Hundred Eighteen and 00/100 ($325,218.00) Dollars, fixed for the
entire Fourth Extended Term, payable monthly in advance in equal
installments of Twenty- Seven Thousand One Hundred One and 50/100
($27,101.50) Dollars.
3. Lessee will have one (1), three (3) year option to renew the Lease at
Fair Market Rent, as hereafter defined, but in no event is the rate to
be less than the current rate. In order to exercise this option, Lessee
must notify Lessor in writing of its intention to renew at least one
hundred eighty (180) days prior to expiration of the Fourth Extended
Term.
4. Lessee shall have the continuous Right of First Refusal on any and all
additional space that becomes available in the Building, deferring,
however, to any pre-existing rights of first refusal held by
MicroElectronic Technologies, Inc. MicroElectronic Technologies, Inc.
has the Right of First Offer on adjacent space at Fair Market Rent and
must respond to Lessor within twenty (20) days of receipt of Lessor's
Notice. In the event that space in the Building shall become available
for leasing, and MicroElectronic Technologies, Inc.
does not exercise its Right of First Offer, Lessor
<PAGE> 2
Page 2 of 4
hereby agrees to advise Lessee of its intention to market such space
before offering it on the open market, which notice (an "Offer") shall
specify the terms and provisions upon which Lessor would be willing to
lease such space to Lessee (including annual base rent at a then Fair
Market Rent, as hereafter defined) all as determined by Lessor. Lessee
shall have a period of twenty (20) days after receipt of such Offer
within which to advise Lessor that it desires to lease all of such space
described in the Offer from Lessor upon and subject to all of the terms,
covenants and provisions contained in Lessor's Offer to Lessee. Failure
of the Lessee to timely exercise its right to accept such Offer to lease
the space or to enter into an Amendment to this Lease reasonably
reflecting the foregoing within 15 days after its receipt of such
agreement shall be deemed a waiver of Lessee's rights with respect to
such space and thereupon Lessor shall be free to enter into a Lease with
any third party for the space described in such Offer upon and subject
to the terms and provisions it shall deem appropriate in its discretion,
provided that such terms shall not provide for an annual base rent
(taking into consideration free rent, reduced rent, and other rent
concessions) in an amount which is less than eighty-five percent (85%)
of the annual base rent set forth in the Offer. In the event that Lessor
shall enter into a lease with a third party consistent with the terms
herein specified, Lessee shall have no further rights to receive a Right
of First Refusal. Failure of Lessee to timely accept any Offer shall be
deemed a waiver of such right by Lessee as to all other space in the
Building at any other time.
5. Except as provided in this Amendment, nothing herein shall be deemed to
modify or amend the terms of the Lease.
6. The Lease as hereby amended shall be governed by and construed and
enforced in accordance with the Laws of the Commonwealth of
Massachusetts.
7. For the purposes of this Amendment, the Fair Market Rent (FMR) shall be
determined as follows: Lessor shall initially designate the Fair Market
Rental Value and shall furnish data in support of such designation. If
Lessee disagrees with Lessor's designation of the Fair Market Rent,
Lessee shall have the right, by written notice given to Lessor within
ten (10) days after Lessee has been nofified of Lessor's designation, to
submit such Fair Market Rent to arbitration as follows: Fair Market Rent
shall be determined by agreement between Lessor and Lessee, but if
Lessor and Lessee are unable to agree upon the Fair Market Rent at least
one hundred fifty (150) days prior to the date upon which the Fair
Market Rent is to take effect, then the Fair Market Rent shall be
determined by appraisal as follows: The Lessor and Lessee shall each
appoint a Qualified Appraiser (as said term is hereinafter defined) at
least one hundred twenty (120) days prior to the commencement of the
period for which Fair Market Rent is to be determined and shall
designate the Qualified Appraiser so appointed by notice to the other
party. The two appraisers so appointed shall meet within ten (10) days
after both appraisers are designated in an attempt to agree upon the
Fair Market Rent for the applicable Extension Period
<PAGE> 3
Page 3 of 4
and if, within fifteen (15) days after both appraisers are designated,
the two appraisers do not agree upon the Fair Market Rent, then each
appraiser shall, nor later than thirty (30) days after both appraisers
have been chosen, deliver a written report to both the Lessor and Lessee
setting forth the Fair Market Rent as determined by each such appraiser,
taking into account the factors set forth in this Section 7. If the
lower of the two determinations of Fair Market Rental Value as
determined by such two appraisers is equal to or greater than 95% of the
higher of the Fair Market Rent as determined by such two appraisers, the
Fair Market Rent shall be deemed to be the average of such Fair Market
Rent as set forth in such two determinations. If the lower determination
of Fair Market Rent is less than 95% of the higher determination of Fair
Market Rent, the two appraisers shall promptly appoint a third Qualified
Appraiser and shall designate such third Qualified Appraiser by notice
to Lessor and Lessee. The cost and expenses of each appraiser appointed
separately by Lessee and Lessor shall be borne by the party who
appointed the appraiser. The cost and expenses of the third appraiser
shall be shared equally by Lessee and Lessor. If the two appraisers
cannot agree on the identity of the third Qualified Appraiser at least
three (3) months prior to commencement of the period for which Fair
Market Rent is to be determined, then the third Qualified Appraiser
shall be appointed by the American Arbitration Association ("AAA")
sitting in Boston, Massachusetts and acting in accordance with its rules
and regulations. The costs and expenses of the AAA proceeding shall be
borne equally by the Lessor and Lessee. The third appraiser shall
promptly make its own independent determination of Fair Market Rent for
the Premises, taking into account the factors set forth in this Section
7, and shall promptly notify Lessor and Lessee of his determination. If
the determination of the Fair Market Rent of any two of the appraisers
shall be identical in amount, said amount shall be deemed to be the Fair
Market Rent for the Premises. If the determinations of all three
appraisers shall be dfferent in amount, the average of the two nearest
in amount shall be deemed the Fair Market Rent. The Fair Market Rent of
the subject space determined in accordance with the provisions of this
Section shall be binding and conclusive on Lessee and Lessor. As
indicated above, in no event shall the Fair Market Rent be less than the
Basic Rent applicable to the 12 calendar month period immediately
preceding the commencement of the Extension Period. As used herein, the
term "Qualified Appraiser" shall mean any disinterested person (a) who
is employed by an appraisal firm of recognized competence in the Greater
Boston area, (b) who has not less than ten (10) years experience in
appraising and valuing properties of the general location, type and
character as the Premises, and (c) who is either a Senior Real Property
Appraiser of the Society of Real Estate Appraisers or a member of the
Appraisal Institute (or any successor organization). Notwithstanding the
foregoing, if either party shall fail to appoint its appraiser within
the period specified above (such party referred to hereinafter as the
"Failing Party"), the other party may serve notice on the Failing Party
requiring the Failing Party to appoint its appraiser within ten (10)
days of the giving of such notice, and if the Failing
<PAGE> 4
Page 4 of 4
Party shall not respond by appointment of its appraiser within said ten
(10) day period, then the appraiser appointed by the other party shall
be the sole appraiser whose determination of Fair Market Rent shall be
binding and conclusive upon Lessee and Lessor. If, for any reason, Fair
Market Rent shall not have been determined by the time of commencement
of the Extension Period and until such rent is determined, Lessee shall
pay Basic Rent during the Extension Period in an amount (the "Interim
Rent") as specified by Landlord's appraiser and upon receipt of a final
determination of Fair Market Rent as hereinabove set forth, any
overpayment or underpayment of Interim Rent shall be paid promptly to
the party entitled to receive the same. No rights of arbitration under
this paragraph shall apply to Paragraph 4 above.
In witness whereof, the parties have hereunder set their hands and seals this
8TH day of May, 1997.
Lessor: WRC Properties, Inc.
By: /s/ Richard J. Usas
---------------------------------
Richard J. Usas
Title: Assistant Secretary
Date: May 8, 1997
---------------------------------
Lessee: Creative BioMolecules, Inc.
By: /s/ Wayne E. Mayhew III
----------------------------------------
Print Name: Wayne E. Mayhew III
----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
Date: April 17, 1997
----------------------------------------
<PAGE> 1
Exhibit 10.54
Page 1 of 4
THIRD AMENDMENT
Amendment of Lease made this 10th day of April, 1997, by and between WRC
Properties, Inc., 730 Third Avenue, New York, New York 10017 (hereinafter with
its successors and assigns called the "Lessor"), and Creative BioMolecules, Inc.
(hereinafter with its successors and permitted assigns called the "Lessee").
Witnesseth:
Whereas Lessor and Lessee are the present parties to a certain Standard Form
Industrial Lease dated February 25, 1992, First Amendment dated February 28,
1994 and Second Amendment dated September 20, 1994 (hereinafter the "Lease"),
for premises consisting of approximately 15,000 square feet of floor area
located in the building known as 45 South Street (the "Building"), Hopkinton,
Massachusetts (hereinafter referred to as the "Demised Premises").
Whereas, in consideration of the covenants herein reserved and contained, the
parties hereto agree and amend the Lease as follows, effective on the
Commencement Date of this Amendment.
1. The Lease shall be extended for three (3) years, beginning on Apri 1,
1998 and terminating on March 31, 2001 (the "Third Extended Term").
2. The Annual Base Rent shall be based on a rate of $6.00 per square foot,
triple net, fixed for the Third Extended Term. Beginning April 1, 1998,
the Annual Base Rent shall be increased from Sixty-Nine Thousand and
00/100 ($69,000.00) Dollars to Ninety Thousand and 00/100 ($90,000.00)
Dollars, fixed for the entire Third Extended Term, payable in advance
in equal monthly installments of Seven Thousand Five Hundred and 00/100
($7,500.00) Dollars.
3. Lessee will have one (1), three (3) year option to renew the Lease at
Fair Market Rent, as hereafter defined, but in no event is the rate to
be less than the current rate. In order to exercise this option, Lessee
must notify Lessor of its intention to renew in writing at least one
hundred eighty (180) days prior to expiration of the Third Extended
Term.
4. Lessee will have the continuous Right of First Refusal on any and all
additional space that becomes available in the Building ("Expansion
Space"). In the event that space in the Building shall become available
for leasing, Lessor hereby agrees to first advise Lessee of its
intention to market such space before offering it on the open market,
<PAGE> 2
Page 2 of 4
which notice (an "Offer") shall specify the terms and provisions upon
which Lessor would be willing to lease such space to Lessee (including
annual base rent at a then Fair Market Rent, as hereafter defined), all
as determined by Lessor. Lessee shall have a period of twenty (20) days
after receipt of such Offer within which to advise Lessor that it
desires to lease all of such space described in the Offer from Lessor
upon and subject to all of the terms, covenants and provisions contained
in Lessor's Offer to Lessee. Failure of the Lessee to timely exercise
its right to accept such Offer to lease the space or to enter into an
Amendment to this Lease reasonably reflecting the foregoing within 15
days after its receipt of such agreement shall be deemed a waiver of
Lessee's rights with respect to such space and thereupon Lessor shall be
free to enter into a Lease with any third party for the space described
in such Offer upon and subject to the terms and provisions it shall deem
appropriate in its discretion, provided that such terms shall not
provide for an annual base rent (taking into consideration free rent,
reduced rent, and other rent concessions) in an amount which is less
than eighty-five percent (85 %) of the annual base rent set forth in the
Offer. In the event that Lessor shall enter into a lease with a third
party consistent with the terms herein specified, Lessee shall have no
further rights to receive a Right of First Refusal.
Failure of Lessee to timely accept any Offer shall be deemed a waiver of
such right by Lessee as to all other space in the building at any other
time.
5. Except as provided in this Amendment, nothing herein shall be deemed to
modify or amend the terms of the Lease.
6. The Lease as hereby amended shall be governed by and construed and
enforced in accordance with the Laws of the Commonwealth of
Massachusetts.
7. For the purposes of this Amendment, the Fair Market Rent (FMR) shall be
determined as follows: Lessor shall initially designate the Fair Market
Rental Value and shall furnish data in support of such designation. If
Lessee disagrees with Lessor's designation of the Fair Market Rent,
Lessee shall have the right, by written notice given to Lessor within
ten (10) days after Lessee has been notified of Lessor's designation, to
submit such Fair Market Rent to arbitration as follows: Fair Market Rent
shall be determined by agreement between Lessor and Lessee, but if
Lessor and Lessee are unable to agree upon the Fair Market Rent at least
one hundred fifty (150) days prior to the date upon which the Fair
Market Rent is to take effect, then the Fair Market Rent shall be
determined by appraisal as follows: The Lessor and Lessee shall each
appoint a Qualified Appraiser (as said term is hereinafter defined) at
least one hundred twenty (120) days prior to the commencement of the
period for which Fair Market Rent is to be determined and shall
designate the Qualified Appraiser so appointed by notice to the other
party. The two appraisers so appointed shall meet within ten (10) days
after both appraisers are designated in an attempt to agree upon the
Fair Market Rent for the applicable Extension Period
<PAGE> 3
Page 3 of 4
and if, within fifteen (15) days after both appraisers are designated,
the two appraisers do not agree upon the Fair Market Rent, then each
appraiser shall, no later than thirty (30) days after both appraisers
have been chosen, deliver a written report to both the Lessor and Lessee
setting forth the Fair Market Rent as determined by each such appraiser,
taking into account the factors set forth in this Section 7. If the
lower of the two determinations of Fair Market Rental Value as
determined by such two appraisers is equal to or greater than 95% of the
higher of the Fair Market Rent as determined by such two appraisers, the
Fair Market Rent shall be deemed to be the average of such Fair Market
Rent as set forth in such two determinations. If the lower determination
of Fair Market Rent is less than 95% of the higher determination of Fair
Market Rent, the two appraisers shall promptly appoint a third Qualified
Appraiser and shall designate such third Qualified Appraiser by notice
to Lessor and Lessee. The cost and expenses of each appraiser appointed
separately by Lessee and Lessor shall be borne by the party who
appointed the appraiser. The cost and expenses of the third appraiser
shall be shared equally by Lessee and Lessor. If the two appraisers
cannot agree on the identity of the third Qualified Appraiser at least
three (3) months prior to commencement of the period for which Fair
Market Rent is to be determined, then the third Qualified Appraiser
shall be appointed by the American Arbitration Association ("AAA")
sitting in Boston, Massachusetts and acting in accordance with its rules
and regulations. The costs and expenses of the AAA proceeding shall be
borne equally by the Lessor and Lessee. The third appraiser shall
promptly make its own independent determination of Fair Market Rent for
the Premises, taking into account the factors set forth in this Section
7, and shall promptly notify Lessor and Lessee of his determination. If
the determination of the Fair Market Rent of any two of the appraisers
shall be identical in amount, said amount shall be deemed to be the Fair
Market Rent for the Premises. If the determinations of all three
appraisers shall be different in amount, the average of the two nearest
in amount shall be deemed the Fair Market Rent. The Fair Market Rent of
the subject space determined in accordance with the provisions of this
Section shall be binding and conclusive on Lessee and Lessor. As
indicated above, in no event shall the Fair Market Rent be less than the
Basic Rent applicable to the 12 calendar month period immediately
preceding the commencement of the Extension Period. As used herein, the
term "Qualified Appraiser" shall mean any disinterested person (a) who
is employed by an appraisal firm of recognized competence in the Greater
Boston area, (b) who has not less than ten (10) years experience in
appraising and valuing properties of the general location, type and
character as the Premises, and (c) who is either a Senior Real Property
Appraiser of the Society of Real Estate Appraisers or a member of the
Appraisal Institute (or any successor organization). Notwithstanding the
foregoing, if either party shall fail to appoint its appraiser within
the period specified above (such party referred to hereinafter as the
"Failing Party"), the other party may serve notice on the Failing Party
requiring the Failing Party to appoint its appraiser within ten (10)
days of the giving of such notice, and if the Failing
<PAGE> 4
Page 4 of 4
Party shall not respond by appointment of its appraiser within said ten
(10) day period, then the appraiser appointed by the other party shall
be the sole appraiser whose determination of Fair Market Rent shall be
binding and conclusive upon Lessee and Lessor. If, for any reason, Fair
Market Rent shall not have been determined by the time of commencement
of the Extension Period and until such rent is determined, Lessee shall
pay Basic Rent during the Extension Period in an amount (the "Interim
Rent") as specified by Landlord's appraiser and upon receipt of a final
determination of Fair Market Rent as hereinabove set forth, any
overpayment or underpayment of Interim Rent shall be paid promptly to
the party entitled to receive the same. No rights of arbitration under
this paragraph shall apply to Paragraph 4 above.
In witness whereof, the parties have hereunder set their hands and seals this
8th day of May, 1997.
Lessor: WRC Properties, Inc.
By: /s/ Richard J. Usas
----------------------------------
Richard J. Usas
Title: Assistant Secretary
Date: MAY 8, 1997
----------------------------------
Lessee: Creative BioMolecules, Inc.
By: /s/ Wayne E. Mayhew III
----------------------------------------
Print Name: Wayne E. Mayhew III
----------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
Date: April 17, 1997
----------------------------------------
<PAGE> 1
Exhibit 10.55
101 HUNTINGTON AVENUE
PRUDENTIAL CENTER
BOSTON, MASSACHUSETTS 02199
LEASE COVER SHEET
Lease Date: June 16, 1997
Tenant: Creative BioMolecules, Inc.
Floor: 24th Floor
Notice Address: Creative BioMolecules, Inc.
101 HUNTINGTON AVENUE
Boston, MA 02199
1. Premises Net Rentable Area: 8,665 Rentable Square Feet - (RSF)
Building Net Rentable Area: 523,807 Square Feet
2. Term Commencement Date: August 1, 1997
3. Rent Commencement Date: The later of August 1, 1997 or the date the
Work (2.1) is Substantially Complete
4. Term: Five years commencing on the Rent
Commencement Date, subject to Tenant's right
to extend term for additional period of five
years - Section 12.14
5. Fixed Rents:
Years 1 - 5 - at rate of $34.00 per RSF -
<TABLE>
<S> <C>
Annual Amount $294,6l0.00
Monthly Payment Amount $ 24,550.83
</TABLE>
6. A. Base Operating Expense: 1997 Actuals $7.75 RSF Budgeted
B. Real Estate Tax: Base calendar 1997 - $4.25 RSF Budgeted
Tenant Share: 1.65%
<PAGE> 2
7. Use of Premises: General Offices
LANDLORD: TENANT:
THE PRUDENTIAL INSURANCE CREATIVE BIOMOLECULES, INC.
COMPANY OF AMERICA
By:/s/ DAVID RASZMANN By:/s/ WAYNE E. MAYHEW III
----------------------------- -----------------------------
Vice President Vice President
<PAGE> 3
LEASE
PRUDENTIAL CENTER
BOSTON, MASSACHUSETTS
TABLE OF CONTENTS
ARTICLE
1. Description of Premises and Term of Lease
Section 1.1 Demise
1.2 Easement for Utility Lines, etc.
1.3 Areas Outside Premises
1.4 Term
1.5 Commencement Date
2. Finishing the Premises
Section 2.1 Work
3. Payment of Rent and Tenant's Share of Increased Operating Expenses
Section 3.1 Rent
3.2 Increased Operating Expenses
3.3 Utility Charges
3.4 Real Estate Taxes
4. Covenants of Landlord
Section 4.1 Repairs by Landlord
Default by Landlord
4.2 Services by Landlord
5. Additional Covenants by Tenant
Section 5.1 Use of Premises
5.2 Tenant's Covenants
5.3 Assignment, Subletting
5.4 Excess Payments
5.5 Repairs by Tenant
5.6 Permits and Workmanship
5.7 Liens
3
<PAGE> 4
5.8 Control of Premises
5.9 Reserved
5.10 Reserved
5.11 Tenant's Statement
5.12 Surrender of Premises-Removal of Trade Fixtures
5.13 Personal Property Tax
5.14 Landlord's Right to Perform Tenant's Obligations
6. Damage or Destruction by Fire or Casualty
Section 6.1 Total or Partial Destruction by Fire or Otherwise
6.2 Damage Within Last Two (2) Years
6.3 Apportionment
7. Eminent Domain
Section 7.1 Entire or Partial Taking
7.2 Condemnation Award
7.3 Rent Abatement
7.4 Apportionment
7.5 Eminent Domain Defined
8. Default
Section 8.1 Default by Tenant
8.2 Landlord's Remedies
9. Quiet Enjoyment
10. Landlord's Reservation of Rights
Section 10.1 Rights Reserved to Landlord
10.2 Access to Premises by Landlord
10.3 Landlord's Safety Measures
10.4 Hazardous Substances
10.5 Interruption of Service
11. Insurance Covenants, Tenant
Section 11.1
11.2
11.3
11.4
11.5
<PAGE> 5
11.6
11.7
12. Miscellaneous Provisions
Section 12.1 Waiver of Subrogation
12.2 Subordination
12.3 Landlord's Remedies Cumulative
12.4 Partial Invalidity
12.5 Successors and Assigns
12.6 Article Headings and Marginal Notes
12.7 Notices
12.8 Written Approvals
12.9 Broker's Commission
12.10 Entire Agreement
12.11 Submission of Lease-No Option
12.12 Massachusetts Law Governs
12.13 Tenant's Parking Rights
12.14 Tenant Extension Rights
12.15 Exhibits
<PAGE> 6
LEASE
PRUDENTIAL CENTER
BOSTON, MASSACHUSETTS
THIS LEASE made this 16th day of June, 1997, between THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation, having its principal
office at Prudential Plaza, Newark, New Jersey (hereinafter called "LANDLORD"),
and Creative BioMolecules, Inc., a Delaware corporation with an office on the
24th Floor 101 Huntington Avenue, Boston, Massachusetts, (hereinafter called
"TENANT").
W I T N E S S E T H :
In consideration of the mutual covenants herein expressed, LANDLORD
and TENANT hereby covenant and agree as follows:
ARTICLE I
DESCRIPTION OF PREMISES AND TERM OF LEASE
1.1 DEMISE
LANDLORD hereby leases to TENANT and TENANT hereby leases from
LANDLORD the Premises (hereinafter called "the Premises") shaded on
Exhibit A attached hereto and made part hereof located on the 24th
floor, 101 Huntington Avenue, consisting of approximately 8,665
rentable square feet (RSF) in that part of Prudential Center in
Boston, Massachusetts which is shown on Exhibit A-1 attached hereto
and made part hereof (whereupon the Premises are shaded), excepting
and reserving from the Premises the roof and the exterior walls of the
Building in which the Premises are located, and subject to all rights
hereinafter reserved to LANDLORD and to all rights reserved to
LANDLORD by operation of law. Said Building (as the same may from time
to time be constituted after changes therein, additions thereto and
eliminations therefrom pursuant to rights of LANDLORD hereinafter
reserved) is hereinafter called "the Building." The Premises are a
portion of those described in Certificate of Title 64667 issued to
LANDLORD from the Suffolk Registry District of the Land Court. For all
purposes of this Lease, the term "Prudential Center" shall refer only
to such part of Prudential Center as is shown on said Exhibit A-1.
1.2 EASEMENT FOR UTILITY LINES, ETC.
LANDLORD reserves the right to place (or permit any other TENANT so to
place) in, over, below and upon the Premises (reasonable notice shall
be given TENANT and the work shall be performed in such a manner as to
keep to a minimum interference with TENANT'S use of the Premises and
without affecting TENANT'S business) utility lines,
<PAGE> 7
conduits, pipes, tunneling and the like to serve the Premises and
other premises and to use, replace, maintain and repair (or permit any
other TENANT so to do) such utility lines, conduits, pipes, tunneling
and the like in, over, below and upon the Premises as may have been
installed in the Building or Prudential Center.
1.3 AREAS OUTSIDE PREMISES
LANDLORD reserves and excepts all rights of ownership and use in all
respects outside the Premises, including without limitation, the
Building and all other structures and improvements and plazas and
common areas in Prudential Center, except that at all times during the
term of this Lease, TENANT shall have a reasonable means of access
from a public street to the Premises and the reasonable right to use
said areas outside the Premises in common with other tenants. Without
limitation of the foregoing reservation of rights by LANDLORD, it is
understood that in its sole discretion LANDLORD shall have the right
to change and rearrange the plazas and other common areas, to change,
relocate and eliminate facilities therein, to erect new buildings
thereon, to permit the use of or lease all or part thereof for
exhibition and displays and to sell, lease or dedicate all or part
thereof to public use; and further that LANDLORD shall have the right
to make changes in, additions to and eliminations from the Building
and other structures and improvements in Prudential Center, the
Premises excepted; provided however that such changes, additions or
eliminations do not materially affect TENANT'S Share, and TENANT, its
employees, agents, clients, customers, and invitees shall at all times
have reasonable access to the Building and Premises. LANDLORD is not
under any obligation to permit individuals without proper building
identification to enter the Building after 6:00 p.m.
1.4 TERM
TO HAVE AND HOLD the Premises for the term of five (5) years beginning
on the Commencement Date as hereinafter defined, (the "Term"), subject
to TENANT'S right to extend the Term as provided in Section 12.14.
In the event that TENANT should hold over after the expiration or
sooner termination of the Term, TENANT shall be a lessee at sufferance
subject to all of the terms and provisions of this Lease in effect
immediately prior to such holdover, except that TENANT shall pay on
account of the Rent an amount equal to 1.5 times the Rent most
recently in effect.
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1.5 COMMENCEMENT DATE
The Commencement Date shall be the later of August 1, 1997 or the date
the Premises are Substantially Complete as provided in Article 2
hereof and the issuance of a certificate of occupancy. LANDLORD and
TENANT agree to execute a document setting forth the Commencement Date
after the Commencement Date has been determined.
ARTICLE 2
FINISHING THE PREMISES
2. WORK
LANDLORD shall deliver the Premises in their "as is" shell condition
as described in Exhibit B attached and made a part hereof.
In connection with the preparation of the Premises (the Work) for
TENANT'S use and occupancy, LANDLORD and TENANT will select three (3)
contractors, acceptable to LANDLORD to bid on the Work. LANDLORD shall
select a contractor (LANDLORD'S Contractor), subject to TENANT'S
reasonable approval, whose labor will work in harmony with other labor
working at Prudential Center. The Work will be performed in accordance
with mutually acceptable plans and specifications (the Plans) drawn by
LANDLORD'S architect. LANDLORD'S Contractor shall perform the Work in
a good and workmanlike manner in accordance with all applicable codes.
The Work shall be Substantially Complete when (1) the Work is
Substantially Complete to TENANT'S satisfacation, and (2) permission
has been obtained from the City of Boston Building Department to
occupy the Premises, and (3) only minor items of finish or adjustment
(Punch List Items) remain to be finished. LANDLORD shall complete or
cause to be completed all Punch List Items within thirty (30) days of
Substantial Completion.
LANDLORD shall provide TENANT a tenant improvement allowance equal to
$40.00 per RSF (Tenant Allowance) which shall be used to pay for the
costs of the Tenant Improvements to the Premises performed by
LANDLORD'S Contractor. If the cost of preparation of the Premises
exceed the Tenant Allowance, TENANT agrees to reimburse LANDLORD for
90% of the amount of such excess within thirty (30) days of receipt of
LANDLORD'S invoice in reasonable detail and the balance within 10 days
of certificate of occupancy. LANDLORD shall provide architectural and
engineering services utilizing McMahon Architects Inc. and Erdman
Anthony Engineering for preparation of plans and specifications for
the Tenant Improvements, whose fees shall
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be paid from the Tenant Allowance. LANDLORD'S Contract
Manager, Premisys Real Estate Services, Inc. (Premisys), will
be compensated by TENANT for supervision of TENANT'S Work from
Tenant's Allowance in an amount equal to 3% of the cost of the
Work.
In the event the total cost of the Work including architectural and
engineering services and Premisys' supervision fee is less than $40.00
per RSF, TENANT shall receive an annual rent credit equal to $ .25 per
RSF for each dollar per RSF savings of Tenant Allowance. For example,
if the total amount of Tenant Allowance spent is $38.00 per RSF, the
rent credit would be $ .50 per RSF and the rent would be $33.50 per
RSF.
ARTICLE 3
PAYMENT OF RENT
AND
TENANT'S SHARE OF INCREASED OPERATING EXPENSES
3.1 RENT
LANDLORD reserves and TENANT covenants and agrees, commencing on the
commencement date, to pay to LANDLORD without notice or demand, and
without setoff, defense, counterclaim, reduction or abatement except
as provided herein, at the office of LANDLORD at Prudential Center or
elsewhere as designated from time to time by written notice to TENANT
and in the manner herein prescribed for payment thereof, rent for the
Premises as follows:
Commencing on the Commencement Date (the Rent Commencement Date), a
fixed guaranteed annual rent, hereinafter called "Rent" payable in
equal monthly installments in advance on the first day of each month
throughout the term of this Lease, in the amounts set forth in the
Lease Cover Sheet attached hereto and made a part hereof subject to
any rent credit TENANT may be entitled to pursuant to Article 2.
Simultaneously with the execution and delivery of this Lease, TENANT
shall pay Rent due for the first month of the Term.
Rent for any partial months at the beginning and end of the Term shall
be a pro rata portion (based on the number of days in the particular
month) of the monthly installment of Rent for the respective Lease
year.
TENANT also agrees to pay to LANDLORD, on demand, interest on all
overdue installments of Rent commencing five (5) days from the due
date thereof until payment thereof in full at a rate equal to twelve
(12%) percent per year.
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3.2 INCREASED OPERATING EXPENSES
Commencing on January 1, 1998, TENANT also agrees to reimburse
LANDLORD for TENANT'S Share of Increased Operating Expense in excess
of Base Operating Expenses in accordance with Exhibit F attached
hereto and made a part hereof.
TENANT also agrees to pay LANDLORD, on demand, interest on all overdue
installments of TENANT'S Share of increased operating expenses from
the due date of written notice of overdue payment thereof until
payment thereof in full at a rate equal to twelve (12%) percent.
3.3 UTILITY CHARGES
TENANT shall pay directly to Boston Edison the costs of electrical
service consumed in the Premises as measured by a separate meter.
LANDLORD'S charges for chilled water used in supplemental HVAC units,
if any, serving the Premises exclusively as measured by a meter
installed by LANDLORD shall be billed to and paid for monthly by
TENANT. LANDLORD'S charges for chilled water shall be commercially
reasonable and shall not exceed the rates charged to other tenants of
the Building.
3.4 REAL ESTATE TAXES
Commencing on January 1, 1998, TENANT covenants and agrees to pay as
Additional Rent each year of the term the amount equal on a per square
foot basis of the increase in real estate taxes over the amount paid
by LANDLORD in calendar 1997 as real estate taxes. TENANT shall make
payments in its share of increased real estate taxes monthly with the
payment of Rent and Additional Rent based upon LANDLORD'S good faith
estimate of TENANT'S Share of increased Real Estate Taxes. TENANT'S
monthly payment shall equal 1/12 TENANT'S estimated annual liability
for increased taxes which LANDLORD shall adjust periodically to
reflect tax bills received from the City of Boston. Each year at the
time LANDLORD provides TENANT with a statement of operating costs as
provided in Exhibit F, LANDLORD shall also provide TENANT with a
statement of tax payments. LANDLORD shall refund to TENANT any
overpayments at any time and TENANT shall promptly (within 30 days),
pay any underpayment. LANDLORD shall deliver to TENANT upon request
copies due TENANT of relevant tax bills with allocation detail.
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It is the intent of the LANDLORD and TENANT that, in the event the
scheme of taxation is altered in any way, TENANT shall pay, and hereby
covenants and agrees to pay, its proportionate Tenant's Share of such
charges so that there will be no increased cost to LANDLORD.
ARTICLE 4
COVENANTS OF LANDLORD
4.1 REPAIRS BY LANDLORD
Subject to the provisions of Articles 6 and 7 and except for any loss,
destruction or damage caused by omission, negligence or fault of
TENANT, LANDLORD covenants and agrees at LANDLORD'S cost and expense:
to inspect and cause the structural floor slabs, exterior walls,
load-bearing interior walls, columns of the Premises and building
system including the heating, ventilating, plumbing and electrical,
that service the Premises and the rest of the Building including
common areas (excluding all doors and interior glass, finish and
coverings) to be kept in good order, repair and condition.
DEFAULT BY LANDLORD
LANDLORD shall in no event be in default in the performance of any
obligations under this Section 4.1 unless and until LANDLORD shall
have failed to respond within 7 days of any written notice from TENANT
and to perform such obligations within thirty (30) days (or such
additional time as is reasonably required to correct any such default)
after notice by TENANT to LANDLORD properly specifying wherein
LANDLORD has failed to perform any such obligation, and in no event
shall LANDLORD be liable to TENANT for any indirect or consequential
damages.
4.2 SERVICES BY LANDLORD
LANDLORD further covenants and agrees:
(i) LANDLORD shall subject to all governmental orders or decrees
furnish space heating and cooling (air conditioning) as normal
seasonal changes may require to provide reasonably comfortable space
temperature and ventilation for occupants of the Premises under normal
business operation, daily from 8:00 A.M. to 6:00 P.M. (Saturday to
1:00 P.M.), Sundays and holidays excepted. Whenever machines or
equipment are used in the Premises which affect the temperature
otherwise maintained, LANDLORD, with TENANT'S prior approval not to be
unreasonably withheld or delayed, reserves the right to install
supplementary air conditioning and heating units in
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the Premises and the cost of such units and the installation thereof
shall be paid by TENANT to LANDLORD upon demand. The cost of operating
and maintaining the same shall be borne by TENANT.
(ii) LANDLORD shall provide the cleaning services and incidental
supplies set forth on Exhibit C attached hereto and made a part
hereof.
(iii) LANDLORD shall supply, for normal business office use, water for
lavatory and toilet purposes in the Building toilet rooms.
(iv) LANDLORD shall furnish non-exclusive use of fully automatic
(operator less) passenger elevators for ingress to and egress from the
floor or floors upon which the Premises are located. The service shall
be supplied daily by passenger elevators serving such floors from 8:00
A.M. to 6:00 P.M., Saturdays, Sundays and holidays excepted. Automatic
freight elevator service shall be available in common with other
tenants from 8:00 A.M. to 5:00 P.M. daily, Saturdays, Sundays and
holidays excepted. TENANT shall have limited non-exclusive elevator
access to the Premises (i.e. controlled by Building security services)
24 hours a day 365 days a year, subject to disruptions caused by acts
of God or other causes beyond LANDLORD'S control. LANDLORD reserves
the right to program the elevator service in the Building to obtain in
its sole discretion the most efficient and economically feasible
method of bringing in and taking out all persons using the Building.
TENANT agrees to cooperate in the programming of such service of those
elevators serving the floor or floors on which the Premises are
located.
ARTICLE 5
ADDITIONAL COVENANTS OF TENANT
TENANT further covenants and agrees:
5.1 USE OF PREMISES
To use and occupy the Premises for general offices and for no other
use whatsoever. TENANT shall not cause or permit any noise or sounds
to emit from the Premises, into the rest of the Building, or otherwise
disturb other tenants in the Building.
It is expressly agreed that TENANT shall not use the Premises, or
permit the same to be used, for any manufacturing or mechanical
purposes or for the sale of food or alcoholic or non-alcoholic
beverages for consumption on or off the Premises or for cooking and
preparation of food even though any of such uses might, but for this
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provision, be regarded as incidental to the business of TENANT. TENANT
may, for its own use, have microwave ovens, coffee makers, and
refrigerators for storage and preparation of light meals for officers,
employees and guests.
5.2 TENANT'S COVENANTS
In connection with TENANT'S use of the Premises:
(i) TENANT shall not conduct any auction, fire, bankruptcy, going out
of business, liquidation or similar sales and TENANT shall not use any
walk or passageways adjacent to Premises for business purposes.
(ii) TENANT shall comply with all laws, orders and regulations and
with the directions of any public officer authorized by law with
respect to the Premises and the use and occupancy thereof and shall
not suffer or permit any use of the Premises which directly or
indirectly is forbidden by law, ordinance or governmental or municipal
regulation or order or which may be dangerous to life, limb or
property.
(iii) TENANT shall not erect, install or maintain any sign, lettering,
placard or similar matter if all or any part of such sign, lettering,
placard or similar matter is painted upon or posted or otherwise
affixed to the exterior or interior of any window or door or the glass
thereof or is otherwise located in such manner as to be visible from
the outside of the Premises without, in each case, obtaining
LANDLORD'S advanced written consent not to be unreasonably withheld.
Neither LANDLORD'S name nor the word "Prudential" alone or in any
combination other than "Prudential Center" shall be used by the TENANT
for any purpose whatsoever. TENANT shall not use the words "Prudential
Center" other than as part of the business address of TENANT and then
only in such manner as will not appear to be part of TENANT'S name.
TENANT shall not use the words "Prudential Center" in any manner
which is undignified, confusing, detrimental or misleading in
LANDLORD'S opinion and shall give no greater prominence to the words
"Prudential Center" than to any other part of the business address of
TENANT and shall give less prominence to the words "Prudential
Center" than to TENANT'S name. LANDLORD shall provide TENANT, at
LANDLORD'S cost and expense, with appropriate listings in the
Building Directory. TENANT, at its sole cost and expense, may, with
LANDLORD'S approval not to be unreasonably withheld or delayed,
install signage in the lobby of the floor the Premises are on
consistent with the Building signage policy.
(iv) TENANT shall not do or permit to be done any act or thing which
will invalidate or be in conflict with fire or other insurance
policies covering the Building or its operation or the Premises or
part of either; or do or permit to be done anything in or
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about the Premises or bring or keep anything therein which shall not
comply with all rules, orders, regulations or requirements of the
Board of Fire Underwriters or any similar organization (and TENANT
shall at all times comply with all such rules, orders, regulations and
requirements); or which shall increase the rate of insurance on the
Building, its appurtenances or contents, unless TENANT shall reimburse
LANDLORD to the extent of such increase.
(v) TENANT shall not install or operate any refrigerating, heating or
air conditioning apparatus without the written permission of LANDLORD
which permission shall not be unreasonably withheld or delayed except
as specified in the Work.
(vi) TENANT shall not place any radio or television antenna on the
roof or on or in any part of the Building other than the inside of the
Premises; or operate or permit to be operated any musical or
sound-producing instrument or device inside or outside the Premise
which may be heard outside the Premises; or operate any electrical
device from which may emanate electrical waves or any other emanations
which interfere with or impair radio or television or telephone
broadcasting or reception from or in the Building or elsewhere in
Prudential Center.
(vii) TENANT shall not place anything or allow anything to be placed
near the glass of any door, partition or window which may be unsightly
from outside the Premises; or obstruct any passageway, exit, stairway,
elevator, shipping platform or truck concourse. TENANT shall lend its
full cooperation to keep such areas free from all obstruction and in a
clean and sightly condition and move all supplies, furniture and
equipment as soon as received directly to the Premises and move all
such items and waste being taken from the Premises directly to the
loading platform designated by LANDLORD at or about the time arranged
for removal therefrom. TENANT shall also keep the premises free of
vermin and shall not permit any odors to emanate from the Premises.
LANDLORD shall, at TENANT'S request and expense, provide vermin
extermination services to the Premises.
(viii) TENANT shall not move any safe, vault or other heavy equipment
in or out of the Premises except in such a manner and at such time as
LANDLORD shall in each instance authorize, not to be unreasonably
withheld.
(ix) TENANT shall not place a load upon the floor area of the Premises
exceeding seventy-five (75) pounds per square foot.
(x) TENANT shall make no material installations, alterations or
additions in or to the Premises without LANDLORD'S prior written
consent, not to be unreasonably
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withheld, and then only pursuant to plans and specifications approved
by LANDLORD in advance in each instance.
(xi) TENANT shall obey and comply with all rules and regulations
promulgated by the LANDLORD pursuant to Section 10.1 hereof, so long
as the same are applying in a non-discriminatory manner to all tenants
in Building.
5.3 ASSIGNMENT, SUBLETTING
TENANT shall not assign, transfer, mortgage or pledge this Lease or
sublease (which term shall be deemed to include the granting of
concessions and licenses and the like) all or any part of the Premises
without first obtaining on each occasion the written consent of
LANDLORD, which consent shall not be unreasonably withheld or delayed,
or suffer or permit this Lease or the leasehold estate hereby created
or any other rights arising under this Lease to be assigned,
transferred or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the occupancy of the
Premises by anyone other than TENANT. Any attempted assignment,
transfer, mortgage, pledge, sublease or other encumbrance made without
such written consent shall be void. No assignment, transfer, mortgage,
pledge, sublease or other encumbrance shall affect the continuing
primary liability of TENANT and no consent to any of the foregoing in
a specific instance shall operate as a waiver in any subsequent
instance.
Notwithstanding the foregoing, TENANT may, without LANDLORD'S consent,
but with written notice to LANDLORD, assign this Lease or sub-lease
all or a portion of the Premises to any entity (i) controlled by
TENANT, (ii) controlling TENANT and (iii) controlled by an entity
controlling TENANT. Control for the purposes of the foregoing shall
mean ownership directly or beneficially of greater than 50% or more of
the stock or partnership interest in the entity.
5.4 EXCESS PAYMENTS
In the event that the aggregate of all payments received by, or paid
to discharge an obligation of, TENANT as a result of any assignment,
subletting or permission to use or occupy the Premises, whether or not
LANDLORD shall have consented hereto (it being agreed by TENANT that
nothing herein contained shall in anyway affect the covenant contained
herein prohibiting an assignment of subletting of the Premises without
LANDLORD'S prior consent), shall exceed the aggregate of all payments
less all reasonable and customary transaction costs, including but not
limited to brokerage commission, legal fees, marketing materials,
Tenant Improvements, Rental Holiday,
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payable by TENANT hereunder, then TENANT agrees to pay to LANDLORD 50%
of the amount of any such excess.
5.5 REPAIRS BY TENANT
TENANT shall, subject to the provisions Section by 4.1 and Articles 6
and 7, and subject to reasonable wear and tear and any loss or damage
from a casualty, at TENANT'S own cost and expense: keep neat and clean
and in good order, repair and condition the Premises, including
without limitation, all glass, windows, interior walls and doors and
the interior of the Premises and all air conditioning, heating,
plumbing, electrical, ventilating, lighting and other mechanical
equipment within and serving the Premises (other than building
standard air conditioning, heating, plumbing and electrical) and all
the installations made by TENANT pursuant to Article 2 or otherwise,
to the extent not covered by Landlord's repair obligations and will
make all alterations, improvements, replacements, repairs or
renovations to the Premises required by any laws, rules, regulations
or requirements of all public authorities or the fire insurance rating
association having jurisdiction after the Commencement Date; make all
repairs and replacements and do all other work necessary for the
foregoing purposes and also make at LANDLORD'S request all repairs to
and replacements of the items referred to in Section 4.1 and
LANDLORD'S property outside the Premises which are necessitated solely
by any negligence, fault or omission of TENANT, all of the foregoing
repairs and replacements to be at least equal in condition to the
original condition of the item repaired or replaced. TENANT shall use
reasonable diligence to conserve steam and hot and cold water supplied
by LANDLORD.
5.6 PERMITS AND WORKMANSHIP
Except as provided in Section 2, TENANT shall pay when due the entire
cost of any work in the Premises undertaken by TENANT so that the
Premises shall at all times be free of liens for labor and materials;
procure all necessary permits before undertaking such work; do all of
such work in a good and workmanlike manner, employing materials of
good quality and complying with all governmental requirements; and
defend, save harmless and indemnify LANDLORD from all claims, injury,
loss or damage to any person or property occasioned by or growing out
of such work. TENANT further agrees to employ for such work one or
more responsible contractors whose labor will work in harmony with any
other labor then working in Prudential Center and to cause such
contractors employed by TENANT to carry Workmen's Compensation
Insurance in accordance with statutory requirements and Comprehensive
Public Liability Insurance covering such contractors on or about the
Premises in such reasonable amounts as LANDLORD shall require and to
submit certificates evidencing such coverage to LANDLORD prior to the
commencement of such work.
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5.7 LIENS
In the event any mechanic's lien shall at any time be filed against
the Premises by reason of work, labor, service or materials performed
or furnished to TENANT or to anyone holding the Premises through or
under TENANT, TENANT shall forthwith, after written notice, cause the
same to be discharged of record. If TENANT shall fail to cause such
lien forthwith to be discharged after being notified of the filing
thereof, then, in addition to any other right or remedy of LANDLORD,
LANDLORD may, but shall not be obligated to, discharge the same by
paying the amount claimed to be due, and the amount so paid by
LANDLORD and all costs and expenses, including reasonable attorneys'
fees, incurred by LANDLORD in procuring the discharge of such lien,
shall be due and payable by TENANT to LANDLORD on the first day of the
next following month, with interest thereon at a rate equal to the
lesser of (a) the maximum rate permitted by applicable law, or (b)
twelve (12%) percent per year.
5.8 CONTROL OF PREMISES
TENANT shall assume exclusive control of the Premises and all tort
liabilities incident to the control or ownership thereof, and defend,
save harmless and indemnify LANDLORD from all claims, damage or costs,
including attorney's fees, arising on account of any injury or damage
to any person or property including, without limitation, the personal
property of TENANT and TENANT'S servants, employees, agents, guests,
visitors and licensees, on the Premises, or otherwise resulting from
the use or maintenance or occupancy by TENANT or anyone claiming under
it of the Premises or of the sidewalks and ways immediately adjoining
the Premises.
TENANT further agrees that LANDLORD shall not be responsible or liable
to TENANT, or to those claiming by, through or under TENANT for any
loss or damage that may be occasioned by or through the acts or
omissions of any person other than LANDLORD, its agents, contractors
and employees including, without limitation, persons occupying
premises which adjoin or are adjacent to or connect with the Premises
or any part of the Building.
All of the furnishings, fixtures, equipment, effects and property of
every kind, nature and description of TENANT and of all persons
claiming by, through or under TENANT which, during the continuance of
this Lease or any occupancy of the Premises by TENANT or anyone
claiming under TENANT, may be on the Premises or elsewhere in
Prudential Center, shall be at the sole risk and hazard of TENANT, and
if the whole or any part thereof shall be destroyed or damaged by
fire, water or otherwise, or by the leakage or bursting of water
pipes, steam pipes, or other pipes, by
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theft or from any other cause, no part of said loss or damage is to be
charged to or to be borne by LANDLORD.
Notwithstanding the foregoing provisions, LANDLORD shall in no event
be indemnified or held harmless or exonerated from any liability to
TENANT or to any other person, for injury, loss, damage, or liability
arising from any omission, fault, negligence or other misconduct of
LANDLORD within the meaning of the provisions of Massachusetts General
Laws, Chapter 186, Section 15, as the same are in force at the time of
delivery of this Lease.
5.9 (Intentionally left blank)
5.10 (Intentionally left blank)
5.11 TENANT'S STATEMENT
TENANT agrees, subject to the conditions set forth below, from time to
time, not more than once in twelve (12) months, upon not less than
fifteen (15) days prior written request by LANDLORD, to execute,
acknowledge and deliver to LANDLORD a statement in writing certifying
that this lease is unmodified and in full force and effect (or, if
there have been any modifications that the same is in full force and
effect as modified and stating the modification), the dates to which
the Operating Expenses, Rent, and any other rent and charges have been
paid, the TENANT has accepted possession of the Premises, no Rent or
other charges have been paid more than thirty (30) days in advance,
the TENANT has no defenses, offsets or counterclaims against its
obligations hereunder and whether or not the LANDLORD is in default in
the performance of any of its obligations hereunder. Any such
statement delivered pursuant to this Section 5.11 may be relied upon
by any prospective purchaser or mortgagee of the Premises or any
prospective assignee of any mortgage of the Premises.
TENANT'S obligation under this Section 5.11 shall be subject to
written acknowledgement by any prospective purchaser, mortgagee or
assignee of any mortgage of the Premises that TENANT'S possession of
the Premises under this Lease shall not be disturbed.
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5.12 SURRENDER OF PREMISES-REMOVAL OF TRADE FIXTURES
At the expiration or earlier termination of this Lease, TENANT shall
remove all installations, moveable fixtures, moveable partitions and
personal property in the Premises and such installations made under
Article 2 or otherwise as LANDLORD shall request and all its signs
wherever located and shall surrender all keys to the Premises and
yield up the Premises in as good, clean and safe repair, order and
condition, reasonable wear and tear excepted. Any property not so
removed shall be deemed abandoned and may be removed and disposed of
by LANDLORD in such manner as LANDLORD shall determine and TENANT
shall pay LANDLORD the entire cost and expense incurred by it in
effecting such removal and disposition and in making any incidental
repairs and replacements to the Premises and Building. TENANT shall
further indemnify LANDLORD against all loss, costs, and damage,
including attorney's fees, resulting from TENANT'S failure and delay
in surrendering the Premises as above provided.
5.13 PERSONAL PROPERTY TAX
TENANT shall pay promptly when due all taxes which may be imposed upon
personal property (including, without limitation, fixtures and
equipment) in the Premises to whomever assessed, and shall pay all
license and similar fees and taxes which may be imposed on the
business of TENANT conducted upon the Premises.
5.14 LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
If TENANT shall at anytime default in the performance of any
obligation under this Lease, after reasonable written notice from
LANDLORD, LANDLORD shall have the right, but shall not be obligated,
to perform such obligation notwithstanding the fact that no specific
provision for such substituted performance by LANDLORD is made in this
Lease with respect to such default. In performing such obligation,
LANDLORD may make any payment of money or perform any other act. All
sums so paid by LANDLORD and all necessary incidental costs and
expenses in connection with the performance of any such act by
LANDLORD, shall be payable to LANDLORD immediately on demand, and, if
not paid within ten (10) days after demand, shall accrue interest at a
rate equal to the lesser of (a) the maximum rate permitted by
applicable law, or (b) twelve (12%) percent. LANDLORD may exercise the
foregoing rights without waiving any other of its rights or releasing
TENANT from any of its obligations under this Lease.
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ARTICLE 6
DAMAGE OR DESTRUCTION BY FIRE OR CASUALTY
6.1 TOTAL OR PARTIAL DESTRUCTION BY FIRE OR OTHERWISE
If the Building is damaged and made substantially untenantable by fire
or casualty, whether or not the Premises are damaged, LANDLORD may by
written notice to TENANT given within sixty (60) days after such
occurrence terminate this Lease. Such termination shall be effective
as of the date of such damage if the Premises have been made
untenantable by said casualty, otherwise as of a date sixty (60) days
following the giving of such notice of termination, subject to the
option hereby given TENANT to advance said effective date of
termination, such option to be exercised by written notice specifying
such earlier effective date of termination.
Unless this Lease is terminated under the foregoing provisions of this
Section 6.1, if the Premises are made partially or wholly untenantable
by fire or casualty, LANDLORD shall use reasonable dispatch to restore
that part thereof originally constructed by LANDLORD or any prior
owner thereof (including any work described in Article 2) to
substantially the same condition of such part at the time of such
damage, subject, however, to zoning laws and building codes then in
force, and only to the extend of insurance proceeds recovered by
LANDLORD. LANDLORD shall not be responsible for any delay in the
performance of the foregoing obligation which may result from
governmental regulations, inability to obtain labor or materials or
any other cause beyond LANDLORD'S reasonable control. There shall be a
reasonable abatement of Rent and Operating Expenses, parking charges
and all other amounts payable under this Lease from the later of the
time of any such damage to the Premises or the date the conduct of
TENANT'S business at the Premises is substantially impaired as a
result of damage to the Building (provided, in the later instance,
TENANT has vacated the Premises) until completion of restoration as
aforesaid by LANDLORD. LANDLORD shall endeavor to locate temporary
alternate space for TENANT'S use and occupancy. Notwithstanding
anything to the contrary, in this Article 6, if, within 120 days of
the fire or casualty, (i) LANDLORD shall not have completed the
restoration or (ii) LANDLORD shall not have sufficiently repaired the
damage to the Building and the conduct of TENANT'S business continues
to be substantially impaired or the Premises are not reasonably
accessible, TENANT shall have the right, by notice to LANDLORD to
terminate this Lease effective as of the date of the notice.
6.2 DAMAGE WITHIN LAST TWO YEARS
Notwithstanding the foregoing provisions of Section 6.1, if any
substantial damage to or destruction of the Premises (i.e. 50% or
more of the Premises) shall occur within the
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last two (2) years of the term, and shall be of such a character that
the Premises cannot reasonably be expected to be repaired and restored
within one hundred twenty (120) days from such damage or destruction,
then either party may elect to terminate this Lease by written notice
given to the other party within thirty (30) days after such damage or
destruction and in such event this Lease shall terminate as of the
date of such damage or destruction.
6.3 APPORTIONMENT
In the event of any termination under the provisions of this Article
6, Rent and other payments shall be apportioned as of the termination
date.
ARTICLE 7
EMINENT DOMAIN
7.1 ENTIRE OR PARTIAL TAKING
If the entire Premises, or such portion thereof as would substantially
impair the conduct of TENANT'S business, shall be taken by right of
eminent domain, either party may terminate this Lease by written
notice given to the other party within thirty (30) days after TENANT
has been deprived of possession, such termination to be effective as
of the date on which TENANT has been deprived of possession. If the
Building or any substantial part thereof, whether or not including the
Premises, is taken by right of eminent domain, LANDLORD may terminate
this Lease by written notice given to TENANT within thirty (30) days
after such taking, such termination to be effective as of the date on
which TENANT has been deprived of possession if TENANT has so been
deprived, otherwise as of the date specified in such notice which
shall be not less than fifteen (15) nor more than thirty (30) days
after the giving of such notice. Should any part of the Premises be
taken and this Lease is not terminated in accordance with the
foregoing provisions, LANDLORD covenants and agrees promptly to
restore that part of the Premises originally constructed by LANDLORD
to an architectural unit as nearly like the condition of such part
prior to such taking as shall be practicable, but only to the extent
of the condemnation proceeds received by LANDLORD.
7.2 CONDEMNATION AWARD
LANDLORD shall have, and hereby reserves and excepts, and TENANT
hereby grants and assigns to LANDLORD, exclusive rights to recover and
retain the award for any taking of or damage done to the Premises or
any part thereof (including, without limitation, all such
installations made by TENANT under Article 2 or otherwise except
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for TENANT'S trade fixtures) or the leasehold estate hereby created or
to any other premises of LANDLORD over, under and in the vicinity of
the Premises. TENANT shall have and LANDLORD hereby grants and assigns
to TENANT exclusive rights to recover and retain any amounts which may
be specifically awarded to it for any taking or damage by public
authority to any of TENANT'S trade fixtures.
7.3 RENT ABATEMENT
In the event of any such taking of the Premises, the Rent or a fair
and just proportion thereof according to the nature, duration and
extent of the damage sustained, shall be suspended or abated until the
Premises or what may remain thereof shall be restored by LANDLORD
pursuant to Article 7.1.
7.4 APPORTIONMENT
In the event of any termination under the provision of the Article 7,
rent and other payments shall be apportioned as of the termination
date.
7.5 EMINENT DOMAIN DEFINED
The term "eminent domain" shall include the exercise of any similar
governmental power and any purchase or other acquisition by
governmental authority in lieu of condemnation.
ARTICLE 8
DEFAULT
8.1 DEFAULT BY TENANT
If at any time after the date hereof (whether the term of this Lease
is then in force or has not yet begun) any of the following shall
occur:
a. TENANT shall be in default in the performance of
any of its obligations set forth in Articles 3 continuing for
seven (7) days after written notice from LANDLORD (provided,
however, that there shall be no grace period if TENANT has
received two (2) notices of default under Article 3 in any
twelve (12) month period); or TENANT shall be in default in
the performance of any other obligation, warranty or agreement
by TENANT set forth herein continuing for thirty (30) days
after notice from LANDLORD (or if any such default is
non-monetary and cannot reasonably be cured within such
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time period, such period shall be extended for so long as it
takes to cure such default as long as TENANT has commenced
curing within such time period and thereafter diligently
prosecutes the curing of the defect); or
b. any assignment, trust or other arrangement for
the benefit of creditors is made by TENANT; or
c. the leasehold interest hereunder is taken on
execution or is subjected to any lien and such levy or
lien is not removed or reasonable security for its
removal is not provided, in either case within ten (10)
days after such levy or lien becomes effective; or
d. a petition is filed by TENANT or those claiming
through or under TENANT, for adjudication as a bankrupt or for
reorganization or an arrangement or for any other relief under
the Bankruptcy Reform Act or other federal or state insolvency
laws, or, any involuntary petition under any of the provisions
of said Act or laws is filed against TENANT or those claiming
through or under TENANT and said involuntary petition is not
dismissed within ninety (90) days of filing; or
e. the Premises are vacated or abandoned (whether
or not keys have been returned or rent is paid); or
f. within a period of thirty (30) days after
written notice from LANDLORD to TENANT, specifying any other
default or defaults in the performance of any other
obligation of TENANT, TENANT has not corrected or commenced
to correct, to LANDLORD'S reasonable satisfaction, the
default or defaults so specified;
then, in any such case, LANDLORD may lawfully, immediately or at any
time thereafter, and without notice, demand (subject to applicable law
including any statute relating to summary process and section of the
Bankruptcy Code, if applicable), either enter into and upon the
Premises or any part thereof and expel TENANT and those claiming
through or under TENANT and remove their goods, effects and fixtures
and store them at TENANT'S expense without liability for prosecution
or damage thereof or mail a notice of termination to TENANT, and upon
such entry or mailing, this Lease and TENANT'S possessions and all
rights relating to the Premises shall terminate, cease and be at an
end, including all of TENANT'S statutory rights of redemption, said
rights being hereby waived by TENANT.
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The failure of LANDLORD at any time to exercise any of its options to
forfeit and terminate this Lease in case of a default shall not waive
the right of forfeiture or termination of this Lease as herein
provided. Any right accruing to LANDLORD hereunder to forfeit or
terminate this Lease shall not be waived or defeated except by the
written waiver of LANDLORD, and acceptance of rent shall not, in any
event, be construed as a waiver.
8.2 LANDLORD'S REMEDIES
In the event that this Lease is terminated under any of the provisions
contained in Section 8.1 or shall be otherwise terminated for breach
of any obligation of TENANT, TENANT covenants to pay forthwith to
LANDLORD, as compensation, the excess of the total rent reserved for
the residue of the term over the rental value of the Premises for said
residue of the term. In calculating the rent reserved there shall be
included in addition to the Rent and Operating Expenses, the value of
all other considerations agreed to be paid or performed by TENANT for
said residue.
TENANT further covenants as an additional and cumulative obligation
after any such ending to pay punctually to LANDLORD all the sums and
perform all the obligations which TENANT covenants in this Lease to
pay and perform in the same manner and to the same extent and at the
same time as if this Lease had not been terminated. In calculating the
amounts to be paid by TENANT under the next foregoing covenant TENANT
shall be credited with any amount paid to LANDLORD as compensation as
in this Section 8.2 provided and also with the net proceeds of any
rent obtained by LANDLORD by reletting the Premises, after deducting
all LANDLORD'S expenses in connection with such reletting, including,
without limitation, all repossession cost, brokerage commissions, fees
for legal services and expenses of preparing the Premises for such
reletting.
In lieu of any other damages or indemnity and in lieu of full recovery
by LANDLORD of all sums payable under the provisions of the next
preceding paragraph, LANDLORD at any time after such termination and
before such full recovery by LANDLORD under the provisions of the next
preceding paragraph may, by written notice to TENANT, elect to recover
as liquidated damages an amount equal to the aggregate of the annual
Rent and Operating Expenses accrued under Article 3 in the twelve (12)
months ended next prior to such termination plus the amount of any
Rent of any kind accrued and unpaid at the time of termination and
less the amount of any recovery by LANDLORD under the provisions of
the next preceding paragraph up to the time of payment of such
liquidated damages.
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ARTICLE 9
QUIET ENJOYMENT
QUIET ENJOYMENT
LANDLORD covenants that it has full authority to make this Lease for
the full term thereof and that TENANT, paying the Rent reserved and
performing and observing the agreements and conditions herein on its
part to be performed and observed, shall and may during the term
hereof peaceably and quietly have, hold and enjoy the Premises,
subject, however, to all provisions of this Lease.
ARTICLE 10
LANDLORD'S RESERVATION OF RIGHTS
10.1 RIGHTS RESERVED TO LANDLORD
Without limitation of any of the rights LANDLORD would otherwise have
and without effecting an eviction or disturbance of TENANT'S use or
possession of the Premises or giving rise to any claim or set-off or
abatement of rent or assuming any obligation by the reservation or
exercise of any such rights, LANDLORD may exercise any and all of the
following rights:
(i) To designate the time, manner and sources of
furnishing refuse and garbage collections and further to
designate the times and the routes of incoming and outgoing
freight and the removal routes of all garbage and refuse.
(ii) To have passkeys to the Premises to be used
only in the event of an emergency and TENANT cannot be
located, or pursuant to Section 10.2 hereof.
(iii) At any time or times, upon reasonable written
notice, to decorate and to make, at its own expense, repairs,
alterations, additions and improvements, structural or
otherwise, in or to the Building or part thereof, and during
such operations to take into and through the Premises or any
part of the Building all materials required, and to close or
temporarily suspend operation of entrances, doors, corridors,
elevators and other facilities. LANDLORD may do any such work
during ordinary business hours provided that if TENANT shall
pay LANDLORD for overtime or premium wages and for other
additional expenses incurred, such work shall be done during
other hours if TENANT so
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requests. LANDLORD agrees that it will endeavor to carry out
work under this subparagraph so as to keep to a minimum
interference with TENANT'S use of the Premises.
(iv) To modify, alter or relocate facilities
utilized in common with other tenants in the Building or
Prudential Center.
(v) To adopt and from time to time amend rules and
regulations for the protection and welfare of Prudential
Center and for the maintenance of high standards of conduct,
safety, care and cleanliness therein, with which TENANT agrees
to comply provided they apply to a majority of the other
tenants of the Prudential Center. LANDLORD shall not be
responsible to TENANT for noncompliance with said rules and
regulations by any other occupant of Prudential Center.
(vi) To install and maintain signs on the exterior
of the Building which do not obstruct the windows in the
Premises and to install and maintain signs in the interior
of the Building outside the Premises.
(vii) To approve all sources from which TENANT is to
obtain sign painting and lettering, ice and mineral or
drinking water and vending machines.
(viii) To require all persons entering or leaving the
Building's or the banks of elevators servicing the Building
between the hours of 6:00 P.M. and 7:00 A.M. on weekdays, and
at all hours on Saturday, Sunday and holidays to identify
themselves by signature registration and supporting evidence
with the designated representative of LANDLORD if any.
10.2 ACCESS TO PREMISES BY LANDLORD
Without limitation of any other rights which are reserved by or
granted to LANDLORD in this Lease or which LANDLORD would otherwise
enjoy, LANDLORD and persons authorized by it may on reasonable notice
or except in an emergency and at time(s) convenient to TENANT'S
business operations enter into the Premises for the purposes of (a)
inspecting the same, (b) making timely repairs which LANDLORD is
obligated to make under the provisions of this Lease, (c) making
repairs to the Premises which TENANT is obligated to make and has
failed to make within thirty (30) days after written demand by
LANDLORD and performing any other duty which TENANT is obliged to
perform by the provisions of this Lease and has failed to perform
after like demand (the reasonable cost and expense of which repairs
and performance TENANT covenants and agrees to pay upon demand of
LANDLORD
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along with interest thereon from the date of expenditure until payment
is made in full at a rate equal to the lesser of (a) the maximum rate
permitted by applicable law, or (b) eighteen (18%) percent), and (d)
performing any acts related to the safety, protection and preservation
of the Premises and the Building. LANDLORD may, during the progress of
any work on or in the Premises, keep and store in the Premises all
necessary materials, tools and equipment and, except in the event of
LANDLORD's negligence or wilful misconduct, LANDLORD shall not be
liable for inconvenience, annoyance, disturbance, loss of business or
other damage to TENANT by reason of the exercise of any of the
aforesaid rights or on account of bringing materials, supplies and
equipment into or through the Premises during the course thereof and
the obligations of TENANT under this Lease shall not thereby be
affected in any manner. The foregoing right of entry does not impose,
nor does LANDLORD assume (except as provided in Section 4.1) any
responsibility or liability for the repair, maintenance or supervision
of the Premises or of any of the fixtures or appurtenances therein
contained or therewith connected or of any of TENANT'S property.
10.3 LANDLORD'S SAFETY MEASURES
TENANT agrees without any diminution or abatement of Rent to observe
and be bound by such measures as may directly or indirectly affect the
Premises which LANDLORD may take, in connection with the prosecution
by LANDLORD of any construction work in or adjacent to Prudential
Center, for the safety of the general public, the preservation and
protection of Prudential Center and any and all persons having access
thereto. It is agreed, however, that pedestrian ingress and egress
shall be available at all times during such construction.
10.4 HAZARDOUS SUBSTANCES
TENANT shall not cause or permit any Hazardous Substances to be used,
stored, generated or disposed of on or in the Premises by TENANT,
TENANT's agents, employees or contractors, without first obtaining in
each instance, LANDLORD'S written consent. TENANT may, without
LANDLORD'S consent, but with written notice to LANDLORD as to amount
and location, store and use (for all but minimal quantities of one
gallon or less) Hazardous Substances normally used in TENANT'S
business operations conducted on the Premises, as long as (a) such
operations are within the scope of the uses permitted under this Lease
and (b) in doing so, TENANT complies with all provisions of this
Section 10.4. Any such use, storage, generation or disposal of
Hazardous Substances shall comply with all applicable federal, state
and local laws and regulations. If TENANT or TENANT'S agents,
employees or contractors use, store, generate or dispose of Hazardous
Substances on or in the Premises, or if the Premises become
contaminated in any manner for which TENANT
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is legally liable, TENANT shall indemnify and hold harmless the
LANDLORD from any and all claims, damages, fines, judgment, penalties,
costs, liabilities or losses arising during or after the term and
arising as a result of such contamination by TENANT. This
indemnification includes, without limitation, any and all costs
incurred due to any investigation of the site or any cleanup, removal
or restoration mandated by a federal, state or local agency or
political subdivision. Without limitation of the foregoing, if TENANT
causes or permits the presence of any Hazardous Substance on the
Premises and such results in contamination, TENANT shall promptly, at
its sole expense, take any and all necessary actions to return the
Premises to the condition existing prior to the presence of any such
Hazardous Substance on the Premises. Except in the case of an
emergency, TENANT shall first obtain LANDLORD's approval for any such
remedial action, which approval shall not be unreasonably withheld or
delayed and which, in any event, shall be granted if the regulatory
authorities with jurisdiction have approved the proposed remedial
action. TENANT shall not have any responsibility or liability (a) for
any Hazardous Substance brought upon, generated or disposed of on or
from the Premises or Building by any party other than TENANT or
TENANT'S agents, employees or contractors, or (b) for any Hazardous
Substance on the Premises or Building on or prior to the Commencement
Date of the term of this Lease.
As used herein, "Hazardous Substance" means any substance which is
toxic, ignitable, reactive, or corrosive and which is regulated by a
local government, the Commonwealth of Massachusetts, or the United
States government. "Hazardous Substances" includes any and all
materials or substances which are defined as "hazardous waste",
"extremely hazardous waste" or a "hazardous substance" pursuant to
state, federal or local governmental law. "Hazardous Substance"
includes but is not restricted to asbestos, polchlorobiphenyls
("PCB's") and petroleum.
LANDLORD has replaced the asbestos containing fireproofing originally
installed in the Premises with non-asbestos containing fireproofing.
To the best of LANDLORD'S knowledge and belief, LANDLORD represents
and warrants to TENANT that (i) no investigative order, settlement,
agreement, enforcement order or litigation with respect to Hazardous
or Toxic Materials or Substances is proposed, threatened, anticipated
or in existence with respect to the Premises or the Building; and (ii)
no notice, demand, claim, citation, complaint, request for information
or similar communication has been received by LANDLORD with respect to
Hazardous or Toxic Materials or Substances in, on, under or at the
Building, the Premises or Prudential Center.
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LANDLORD agrees, subject to the provisions of this Lease, to be
responsible for the cost of removal, remediation or cure of Hazardous
Substances or Toxic Materials or Substances or conditions resulting
from the presence or release of the same at the Building, the Premises
or Prudential Center to the extent not the responsibility of TENANT or
any other person, but only to the extent, LANDLORD is required and
liable under Applicable Environmental Laws.
10.5 INTERRUPTION OF SERVICE
LANDLORD shall not be required to supply any service to the Premises
except as expressly stipulated in this Lease and, except in the case
of LANDLORD'S negligence or wilfull misconduct, LANDLORD shall not be
liable under any circumstances for interruption of any service due to
accident, to making repairs, alterations or additions, to labor
difficulties, to trouble in obtaining fuel, electricity, service or
supplies or to any cause beyond LANDLORD'S reasonable control.
ARTICLE 11
INSURANCE
11.1 INSURANCE
TENANT hereby agrees to indemnify, defend and hold harmless LANDLORD,
its subsidiaries, directors, officers, agents and employees from and
against any and all damage, loss, liability or expense including but
not limited to, attorneys' fees and legal costs suffered by same
directly or by reason of any claim, suit or judgment brought by or in
favor of any person or persons for damage, loss or expense due to, but
not limited to, bodily injury, including death resulting anytime
therefrom, and property damage sustained by such person or persons
which occurs on the Premises by the TENANT or otherwise, the acts or
omissions of the TENANT, its agents, employees or any contractors
brought onto the Premises by the TENANT, or the failure by TENANT to
perform, fulfill or observe any obligation or liability of TENANT set
forth herein, except that caused by the negligence, acts of omission
of LANDLORD or its employees, agents, customers and invitees. Such
loss or damage shall include, but not be limited to, any injury or
damage to LANDLORD'S personnel (including death resulting anytime
therefrom) or premises. TENANT agrees that the obligations assumed
herein shall survive this Lease.
11.2 TENANT hereby agrees to maintain in full force and effect at all times
during the term of this Lease, at its own expense, for the protection
of TENANT and LANDLORD, as their interest may appear, policies of
insurance issued by a carrier or carriers licensed
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to do business in Massachusetts and acceptable to LANDLORD
affording the following coverage:
a) Worker's Compensation - Statutory
Employer's Liability - Not less than $100,000
Comprehensive General - Not less than $1,000,000
Liability Insurance Combined Single Limit
including Blanket, for both bodily injury
Contractual Liability, and property damage
Broad Form Property
11.3 LANDLORD shall insure the Building, including all Leasehold
improvements installed pursuant to Article 2 for its full
insurable replacement cost value and shall maintain Commercial
General Liability Insurance in an amount that is commercially
reasonable and at least equal to that other owners of high-rise
office buildings of comparable quality in Boston maintain.
11.4 The TENANT shall deliver to LANDLORD at least thirty (30) days prior
to the time such insurance is first required to be carried by TENANT,
Certificates of Insurance evidencing the above coverage. Such
Certificates, with the exception of Worker's Compensation, shall name
LANDLORD, its subsidiaries, directors, agents and employees, and
LANDLORD'S property manager (Premisys Real Estate Services, Inc.), as
additional insureds and shall expressly provide that the interest of
same therein shall not be affected by any breach by TENANT of any
policy provision for which such Certificates evidence coverage. All
Certificates shall provide that no less than thirty (30) days prior
written notice shall be given LANDLORD in the event of material
alteration to or cancellation of the coverages evidenced by such
Certificates.
11.5 Upon demand, TENANT shall provide LANDLORD, at TENANT'S expense with
such increased amount of insurance coverage, as LANDLORD may require
of all other tenants in the Building. Any increase requested by
LANDLORD in the amount of TENANT'S insurance shall not exceed the
amounts and types of coverages required by Landlords in other
first-class high-rise buildings in Boston for similar risks.
11.6 If, on account of the failure of TENANT to comply with the foregoing
provisions, LANDLORD is adjudged a co-insurer by its insurance
carrier, then any loss or damage LANDLORD shall sustain by reason
thereof shall be borne by TENANT and shall be immediately paid by
TENANT upon receipt of a bill thereof and evidence of such loss.
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11.7 LANDLORD makes no representation that the limits of liability
specified to be carried by TENANT under the terms of this Lease are
adequate to protect TENANT against TENANT'S undertaking under this
Article.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 WAIVER OF SUBROGATION
The parties agree that all insurance carried by either party with
respect to the Premises, whether or not required by this Lease, if
either party so requests and it can be so written, and if it does not
result in additional premium or if the requesting party agrees to pay
any additional premium, shall include provisions which either
designate the requesting party as one of the insureds or deny to the
insurer acquisition by subrogation of rights of recovery against the
requesting party to the extent such rights have been waived by the
insured party prior to the occurrence of loss or injury. The
requesting party shall be entitled to have duplicates or certificates
of any policies containing such provisions. Each party hereby waives
any rights of recovery against the other for loss or injury against
which the waiving party is protected by insurance containing
provisions denying to the insurer acquisition by subrogation of rights
of recovery, reserving, however, any rights with respect to any excess
of loss or injury over the amount recovered by such insurance. TENANT
shall not acquire as insured under any fire or extended coverage
insurance on the Premises any right to participate in the adjustment
of loss or to receive insurance proceeds and agrees upon request
promptly to endorse any checks or other instruments in payment of loss
in which TENANT is named as payee.
12.2 SUBORDINATION
This Lease shall at the election of LANDLORD be subject and
subordinate to all mortgages which may now or hereafter affect the
real estate of which the Premises form a part, and to all renewals,
modifications, consolidations, replacements and extensions thereof.
LANDLORD shall obtain a subordination agreement from any holder of any
such mortgage which shall bind and benefit the respective parties and
their successors and provide in substance that (i) such holder shall
not disturb the possession and other rights of TENANT under this Lease
and shall acknowledge that the Lease is enforceable, so long as this
Lease remains in full force and effect, (ii) in the event of
acquisition of title by such holder, through foreclosure proceedings
or otherwise, such holder shall accept TENANT as TENANT of the
Premises under the terms and conditions of this Lease and shall
perform the obligations of LANDLORD hereunder
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(but only such as accrue while such holder is owner of the Premises),
and (iii) TENANT shall recognize such holder or any other person
acquiring title to the Premises as LANDLORD. LANDLORD and TENANT agree
to execute and deliver any appropriate instruments necessary to carry
out the foregoing provisions of this Section 12.2. Any such mortgage
to which this Lease shall be subordinate may contain such other terms,
provisions and conditions as are usual or customary.
12.3 LANDLORD'S REMEDIES CUMULATIVE
The specific remedies to which LANDLORD may resort under the terms of
this Lease are cumulative and are not intended to be exclusive of any
other remedies or means of redress to which LANDLORD may be lawfully
entitled in case of any breach or threatened breach by TENANT of any
provision of this Lease. The failure of LANDLORD to insist in any one
or more cases upon the strict performance of any of the provisions of
this Lease or to exercise any option herein contained shall not be
construed as a waiver or relinquishment for the future of such
provision or option. Consent, approval or permission by LANDLORD in
any instance where required shall not waive or render unnecessary like
consent, approval or permission in any subsequent instance. A receipt
of rent by LANDLORD or the holder of any mortgage upon the Premises
with knowledge of the breach of any obligation of TENANT under this
Lease shall not be deemed a waiver of such breach except as to the
payment of such rent.
12.4 PARTIAL INVALIDITY
If any of the terms, provisions or conditions of this Lease or the
application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease and
the application of such term, provision or condition to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby and each of the other
terms, provisions and conditions of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
12.5 SUCCESSORS AND ASSIGNS
Unless repugnant to the context, the words "LANDLORD" and "TENANT"
shall be construed to mean the original parties and their respective
successors and assigns and those claiming through or under them
respectively. The agreements and conditions contained in this Lease to
be performed and observed on the part of TENANT shall be binding upon
TENANT and its successors and assigns and shall inure to the benefit
of LANDLORD and its successors and assigns, and the agreements and
conditions contained in this Lease to be performed and observed on the
part of LANDLORD shall be binding upon LANDLORD and its successors and
assigns and shall inure to the
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benefit of TENANT and its permitted successors and assigns. TENANT
agrees that at all times on and after the Commencement Date of this
Lease the sole liability for performance of all obligations of
LANDLORD hereunder shall be that of the owner from time to time of the
Premises and that such liability with respect to each owner shall
exist only for breaches of such obligations as are committed during
the period of its ownership. To the fullest extent permitted by law,
TENANT further agrees that LANDLORD'S liability for any negligence,
claims, causes of action, damages arising hereunder shall be limited
to the value of LANDLORD'S interest in Prudential Center and no other
assets of LANDLORD. The term "owner" shall not include the holder of
any mortgage prior to the taking of possession by such holder for the
purpose of foreclosure of its mortgage.
Except as otherwise specifically provided by statute, no recourse
shall be made on any of TENANT obligations under this Lease or for any
claim based thereon or otherwise in respect thereof against any
incorporator of TENANT, subscriber to TENANT'S capital stock,
shareholder, employee, agent, officer or director, past, present or
future, of any corporation or counsel, which shall be TENANT hereunder
of included in the term "TENANT" or any successor of any such
corporation, partnership or association, or against any principal,
disclosed or undisclosed, of any such corporation, or against any
principal, disclosed or undisclosed, of any affiliate of any party
which shall be TENANT or included in the term "TENANT" whether
directly or indirectly or through TENANT or through any receiver,
assignee, agent, trustee in bankruptcy or through any receiver,
assignee, agent, trustee in bankruptcy or through any other person,
firm or corporation, whether by virtue of any constitution, statute or
rule of law or by enforcement of any assessment or penalty or
otherwise.
12.6 ARTICLE HEADINGS AND MARGINAL NOTES
The headings of Articles and marginal notes are inserted only as a
matter of convenience and for reference and in no way define, limit or
describe the scope or intent of this Lease nor in any way affect it.
12.7 NOTICES
Every notice and demand required or permitted to be given under this
Lease shall be in writing and deemed to have been duly given when
mailed by certified mail, addressed in the case of notice to or demand
upon LANDLORD to it at Prudential Tower, Boston, MA 02199, attention
Boston Realty Group Office with a copy to Premisys Real Estate
Services, Inc., Suite 450, Prudential Center, Boston, MA 02199 and in
the case of notice to or demand upon TENANT to it at the Premises with
a copy to Michael
28
<PAGE> 34
Tarnow, CEO, or to such other address as the party may upon notice to
the other request.
12.8 WRITTEN APPROVALS
Except as provided in Section 5.3, all approvals required of LANDLORD
and TENANT under this Lease shall be in writing and shall not be
unreasonably withheld or delayed.
12.9 BROKER'S COMMISSION
TENANT and LANDLORD represent and warrant to each other that they have
not directly or indirectly dealt, with respect to the leasing of space
in Prudential Center, with any broker other than R. M. Bradley & Co.,
Inc. and McCall & Almy, Inc. and covenant and agree to defend, save
harmless and indemnify each other against any claims for a commission
arising out of the execution and delivery of this Lease or out of any
negotiations between LANDLORD and TENANT with respect to the leasing
of space within Prudential Center, except that TENANT'S
indemnification shall not apply to any claims by R. M. Bradley & Co.,
Inc. and McCall & Almy, Inc., it being understood that LANDLORD shall
pay any commissions due such brokers. The indemnification provided in
this section shall apply to claims arising out of the acts of the
indemnifying party.
12.10 ENTIRE AGREEMENT
This instrument contains all the agreements made between the parties
hereto and may not be modified in any other manner than by instrument
in writing executed by the parties or their respective successors in
interest.
12.11 SUBMISSION OF LEASE-NO OPTION
The submission of this Lease or a summary of some or all of its
provisions for examination does not constitute a reservation of or
option for the Premises or an offer of lease.
12.12 MASSACHUSETTS LAW GOVERNS
This lease shall be construed in accordance with and governed by the
Laws of the Commonwealth of Massachusetts.
29
<PAGE> 35
12.13 TENANT'S PARKING RIGHTS
TENANT may, provided it is not in default hereunder beyond any
applicable grace/cure period, contract with the Prudential Center
garage operator for up to ten (10) monthly unassigned parking spaces
in the Prudential Center at such rates as may be charged for
unassigned monthly parking spaces from time to time during the term
hereof. The rate for such spaces as of January 1, 1997 shall be $270
per month. In addition, LANDLORD and TENANT shall enter into a parking
license agreement to provide TENANT with an additional ten (10)
parking spaces in the Prudential Center through June 30, 2001 or at
such later date LANDLORD requires such spaces for an office building
to be constructed.
12.14 TENANT'S EXTENSION RIGHTS
If TENANT is not then in default of its obligations hereunder beyond
any applicable grace or cure periods, or if in default, is diligently
pursuing the cure of such default TENANT may by giving LANDLORD twelve
(12) months advance written notice to LANDLORD, extend the term of
this Lease Agreement for one (1) additional period of five (5) years
(Extended Term) on all terms and conditions hereof, except that the
rent shall be 95% of the then current fair market rent, including
without limitation then current renewal rates for comparable space
discounts and common allowances. In the event LANDLORD and TENANT
cannot agree within six (6) months prior to commencement of the
Extended Term as to the amount of rent to be paid, the LANDLORD shall
provide TENANT, within fifteen (15) days of the end of such six (6)
month period, a written statement setting forth LANDLORD'S position as
to the amount of rent for the ensuing period and containing the name
of a qualified Broker nominated by LANDLORD to determine the rent.
TENANT may, within fifteen (15) days of receipt of LANDLORD'S
statement, submit to LANDLORD and the qualified Broker nominated by
LANDLORD a written response setting forth TENANT'S position as to the
rent to be charged and, if TENANT elects to, the name of a qualified
Broker nominated by TENANT, the two qualified Brokers so nominated
shall determine the rent within thirty (30) days of the nomination of
the second qualified Broker. In the event the two Brokers so named
cannot agree upon the rent to be charged within the thirty (30) days
period, they shall jointly promptly select a third qualified Broker
who shall with the other two qualified Brokers determine the rent
within twenty (20) days of the third Broker being named. A decision of
any two of the three qualified Brokers so named shall be binding upon
the parties. The cost of the two or three qualified Brokers shall be
shared equally between LANDLORD and TENANT.
30
<PAGE> 36
Qualified Brokers for the purpose of this Section shall mean a
licensed Massachusetts Real Estate Broker with at least seven (7)
years experience in commercial brokerage in the downtown Boston and
Back Bay markets who has been a broker in leases totaling at least
15,000 RSF in Downtown and Back Bay within two years prior to
appointment.
In the event either TENANT or LANDLORD does not nominate a qualified
Broker, the rent shall be determined solely by the other's qualified
Broker and the costs of such qualified Broker shall be borne by the
party who appointed the qualified Broker.
During the Extended Term, until determination of the amount of rent,
TENANT shall pay rent at the rate including escalations as at end of
the then current term subject to adjustment after determination of
rent.
12.15 EXHIBITS
Exhibits A, A-1, B, C, and F are hereby incorporated herein and made a
part hereof.
IN WITNESS WHEREOF, LANDLORD and TENANT have caused this Lease to be
executed by their duly authorized officers and their respective seals to be
hereto affixed, the day and year first above written.
LANDLORD:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:/s/ David Raszmann
-------------------------------------
Vice President
TENANT:
CREATIVE BIOMOLECULES, INC.
By:/s/ Wayne E. Mayhew III
-------------------------------------
Vice President
31
<PAGE> 37
EXHIBIT A
24th FLOOR 101 HUNTINGTON AVENUE
(floor plan)
<PAGE> 38
EXHIBIT A-1
PRUDENTIAL CENTER, BOSTON, MA
(plan)
<PAGE> 39
EXHIBIT B
ATTACHED TO AND MADE PART OF LEASE
DATED JUNE 16,1997 BETWEEN THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, LANDLORD AND
CREATIVE BIOMOLECULES, INC.
DESCRIPTION OF SHELL CONDITION
The Premises shall be deemed completed "in shell condition" upon
LANDLORD'S furnishing and installing the following:
WINDOWS: Multi and Full Floor Tenant -- Delivered with building
standard venetian blinds and solar reflective film. Building standard blinds are
levelor energy conservation reflective type.
FLOORS: Multi and Full Floor Tenant -- Delivered in rough condition,
ready to accept leveling and fill where appropriate. The floors are cellular
type with concrete composite fill on a metal decking. Electrical and telephone
closets delivered with rough concrete floor.
COLUMNS: Multi and Full Floor Tenant -- Delivered with unpainted
concrete or hard surface fireproofing on interior columns. The exterior columns
shall be delivered ready to accept finishes.
ELEVATOR LOBBIES: Full Floor Tenant -- Passenger and Service
Elevator Lobbies - Delivered in rough concrete floor and walls ready for
construction. Multi Tenant Floor-Delivered in finished condition.
HVAC INTERIOR SYSTEMS: Multi and Full Floor Tenant -- Delivered with
VAV boxes (one per 5,000 sq. ft. approximate) per floor for tenant use.
LANDLORD shall provide the main duct take-offs with fire dampers. Tenant work
to include all duct work "downstream" of the fire damper.
HVAC PERIMETER SYSTEM: Multi and Full Floor Tenant -- Existing
perimeter HVAC induction system shall be maintained. The existing thermostats
shall be maintained. Perimeter induction units shall be delivered with covers
ready to accept paint.
CEILING: Multi and Full Floor Tenant -- Delivered unfinished with
exposed nonasbestos containing fireproofing on structural steel and deck of
floor above.
B-1
<PAGE> 40
CODE: Multi and Full Floor Tenant -- All building core space will
be delivered in compliance with code including, but not limited to A.D.A. and
Mass. Architectural Access Board (MABB).
ELECTRIC: Multi and Full Floor Tenant -- Premises to be delivered with
primary service utility lines. Electric feeds to be delivered with floor
disconnect switch in place. Tenant to be responsible for all electric wiring
"downstream" of the floor disconnect switch. All primary feeds and switches to
be sized for a maximum power load of 5 Watts/USF of floor space.
LIFE SAFETY: Multi and Full Floor Tenant -- Premises to include at
LANDLORD'S expense, sprinklers and life safety systems to comply with building
standard systems. In lieu of the above, Tenant may elect to have LANDLORD
provide a monetary allowance of $1.00/New York USF to be used by the Tenant to
install the Life Safety System.
TOILET ROOMS: Multi and Full Floor Tenant -- Delivered with a ceramic
tile floor and walls with a suspended acoustical tile ceiling and plumbing
fixtures installed and in operating condition. Toilet rooms will be delivered in
compliance with current A.D.A. and MABB requirements.
JANITOR'S CLOSET: Multi and Full Floor Tenant -- Delivered with
tiled floor and utility sink in operating order.
B-2
<PAGE> 41
EXHIBIT C
ATTACHED TO AND MADE PART OF LEASE
DATED JUNE 16, 1997 BETWEEN THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, LANDLORD, AND
CREATIVE BIOMOLECULES, INC.
LANDLORD shall furnish at LANDLORD'S own expense the following services:
(1) Daily Services (Monday through Friday, holidays excepted):
a. Empty wastebaskets and ashtrays in office areas;
b. Damp sweep entire tile floor area or vacuum carpet;
c. Clean toilet rooms, fixtures, mirrors and mop toilet room
floors, and furnish paper products and soap.
(2) Weekly Services
Dust office area including furniture, tops of files and windowsills.
(3) Services Every Month
Spot wash finger markings from door frames and light switch plates.
(4) Other Periodic Services
a. Wash all exterior windows every two months unless weather
does not permit the safe use of LANDLORD'S exterior
window washing equipment;
b. Tile floors (other than ceramic tile) will be cleaned of
wax and rewaxed three (3) times per year; and
c. Clean fluorescent fixtures once a year.
C-1
<PAGE> 42
EXHIBIT F
TENANT'S SHARE OF INCREASED OPERATING EXPENSES
101 HUNTINGTON AVENUE
ATTACHED TO AND MADE A PART OF LEASE
DATED JUNE 16, 1997 BETWEEN THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, LANDLORD
AND CREATIVE BIOMOLECULES, INC., TENANT
I. DEFINITIONS
TENANT shall reimburse LANDLORD for TENANT'S proportionate share
("Tenant's Share") of increased "Operating Expenses" (as herein defined) in
excess of Base Operating Expenses as follows:
A. "Tenant's Share" of the amount of Operating Expenses in
excess of Base Operating Expenses equals 1.65%.
8,665 R.S.F. (PREMISES NET RENTABLE AREA)
523,807 s.f. (Building Net Rentable Area)
B. Base Operating Expenses equal calendar year 1997 Actual
Operating Expenses
C. "Operating Expenses" shall mean any and all costs and
expenses adjusted for 100% occupancy [except those listed
in subparagraphs (a) through (e) below] actually paid or
incurred by LANDLORD in connection with the ownership,
management, operating, servicing, and maintenance of the
Building, its utility services from the property line to
the Building including, without limitation, the cost and
expense of the following: salaries, wages, medical,
surgical and general welfare and other so-called "fringe"
benefits (including group insurance and retirement
benefits) for employees of LANDLORD or any contractor of
LANDLORD engaged in the cleaning, operation, maintenance
or management of the Building, and payroll taxes, and
worker's compensation insurance premiums relating thereto
as it relates to the Building, gas, steam, fuel oil,
water, sewer rental, electricity (exclusive of TENANT'S
Electrical Usage), utility taxes, rubbish removal, fire,
casualty, liability, rent and other insurance carried by
LANDLORD, repairs, repainting, replacement, building
supplies, uniforms, and cleaning thereof, window
cleaning, service contracts with independent contractors
for any of the foregoing (including, but not limited to
elevator and
F-1
<PAGE> 43
air conditioning maintenance), management fees at market rates
based on management fees for similar office buildings in
Boston (whether or not paid to any person, firm or corporation
having an interest in or under common ownership with LANDLORD
or any of the persons, firms or corporations comprising
LANDLORD), legal fees and expenses incurred in connection with
any application or proceeding brought for reduction of the
assessed valuation of the Building or any part thereof, but
only if brought to have the effect of reducing TENANT'S cost,
auditing fees and all other costs and expenses actually
incurred in connection with the operation, maintenance and
management of the Building and an allocated share of the
"Center's Common Area Expenses" (as herein defined). Included
in the foregoing will be the cost or portion thereof properly
allocatable to the property (amortized over such reasonable
period as LANDLORD shall determine together with the interest
on the unamortized balance as the greater of 10% or the six
month Treasury Bill rate for the date upon which funds for the
project are committed) of any capital improvements made to the
Building by the LANDLORD which result in appropriate reduction
of Operating Expenses or made to the Building by the LANDLORD
after the date of this Lease that are required under any
governmental law or regulation that was not applicable to the
Building on the date of this Lease. Operating Expenses shall
be computed on an accrual basis and shall be determined in
reasonable detail in accordance with generally accepted
accounting principles consistently applied. They may be
incurred directly or by way of reimbursement, and shall
include taxes applicable thereto. The following shall be
excluded in calculating Operating Expenses:
(a) Depreciation or capital expenditures on the
Building or any part thereof, except as included above;
(b) Expenses incurred directly in leasing or in
procuring any tenants, including advertising, promotion,
public relations, sales, brokers' commissions, and expenses
for tenant alterations or renovating space for new tenants;
(c) Amortization and interest on indebtedness;
(d) Real estate taxes or payments in lieu of real
estate taxes except as provided for in Section 3.4
hereof;
(e) The net amount of any insurance proceeds,
reimbursements, discounts or allowances received by LANDLORD
in connection with those "Operating Expenses" which are
included.
F-2
<PAGE> 44
(f) Also excluded are the following:
(i) cost of repairs or replacements
incurred by reason of fire or other casualty or by the
exercise or the right of eminent domain;
(ii) advertising and promotional
expenditures;
(iii) legal fees incurred in disputes with
tenants, matters in connection with any underlying lease
including, but not limited to, the conveyance or financing
or refinancing thereof, negotiation of leases with
prospective or current tenants, financing or refinancing of
mortgages, disputes with mortgagees not caused by TENANT and
other legal and auditing fees, other than legal and auditing
fees reasonable incurred in connection with the preparation
of statements required pursuant to additional rent or rental
escalation provisions;
(iv) costs incurred in performing work or
furnishing services to or for individual tenants (including
TENANT) other than work or services of a kind and scope
which LANDLORD would be obligated to furnish TENANT without
charge if such work were required in the Demised Premises
pursuant to applicable law or codes as required by the
governmental authority having jurisdiction;
(v) the cost incurred by LANDLORD in
performing work or furnishing any services to or for a
tenant of space in the building (including TENANT) for which
a separate charge is made, including without limitation, the
supply of overtime air-conditioning, ventilation and heating
at LANDLORD'S cost and expense, regardless of the amount
billed or received by LANDLORD for performing such work or
furnishing such service;
(vi) franchise and income taxes of LANDLORD;
(vii) real estate taxes on land and/or
Building to the extent included in this Lease;
(viii) the costs of providing overtime heat
and air-conditioning to tenants of the Building to the
extent that the same are payable by the tenants for whom
such services are provided;
(ix) rent under ground leases (if any)
F-3
<PAGE> 45
(x) all costs incurred in connection with or
directly related to the original construction of the Building
(as distinguished from operating expenses and the repair,
maintenance and operations thereof);
(xi) financing and refinancing costs,
interest on debt or amortization payments on any mortgage or
mortgages, and rental under any ground or underlying lease or
leases;
(xii) a bad debt loss, rent loss or any
reserves;
(xiii) all interest or penalties incurred as
a result of LANDLORD'S failure to pay any costs or taxes as
the same shall become due provided such failure shall not have
been caused by TENANT;
(xiv) any and all costs associated with the
operation of the business of the entity which constitutes
LANDLORD; excluded items shall specifically include, but shall
not be limited to, formation of the entity, costs of defending
any lawsuits with any mortgagee (except as the actions of
TENANT may be in issue), costs of selling, syndication,
financing, mortgaging or hypothecating any of the LANDLORD'S
interest in the Building, costs of any disputes between
LANDLORD and its employees (if any) not engaged in the
operation of the Building, disputes between LANDLORD and
managers of the Building;
(xv) (i) costs of printing and decorating
for any tenant's space; (ii) the cost of providing overtime
heat and air-conditioning to tenants of the Building to the
extent that the same are payable by the tenants for whom such
services are provided; and (iii) rent under ground leases (if
any);
(xvi) amounts for which LANDLORD has been
reimbursed by insurance proceeds;
(xvii) costs incurred in renovating or
otherwise improving or decorating or redecorating space for
tenants or other occupants in the Building or vacant space in
the Building or costs related thereto;
(xviii) LANDLORD'S costs of electricity,
incremental air-conditioning and other services sold to
tenants for which LANDLORD is
F-4
<PAGE> 46
entitled to be reimbursed by tenants (whether or not
actually collected by LANDLORD) as a separate additional
charge or rental;
(xix) any cost or expense incurred as a
result of painting, decorating, carpet shampooing, drapery
cleaning and wall washing within the rentable areas of the
Building for a specific tenant as opposed to that performed
for all tenants or common areas.
D. "Center's Common Area Expenses" is defined as those costs
and expenses incurred for the open areas, public areas
and amenities within the Prudential Center which become a
cost center to receive expenses reasonably deemed by the
LANDLORD to be chargeable thereto which are accumulated
and prorated against the income-generating elements of
the Center by a formula predicated on a rentable area
basis consistently applied annually. (The portion
chargeable during 1997 to the Building is 14.3%, subject
to change as rentable areas may change.)
E. "Calendar Year" is defined as any consecutive twelve (12)
month period commencing January lst, provided that LANDLORD,
upon written notice to TENANT, may change from time to time to
any other consecutive 12-month period, and in that event
Tenant's Share of Operating Expenses shall be adjusted pro
rata.
II. PAYMENT OF TENANT'S SHARE
A. LANDLORD shall on or after January 1 in each year give to
TENANT a statement of Tenant's Estimated Share of
Operating Expenses (Estimate) for the current calendar
year. Tenant's Estimated Share of Operating Expenses
shall be the product of Tenant's Share times the amount
by which LANDLORD'S Estimate of Operating Expenses for
the Calendar Year exceed Base Operating Expenses. TENANT
shall reimburse LANDLORD monthly with each rent payment
an amount equal to 1/12th of Tenant's Estimated Share of
Operating Expenses. LANDLORD reserves the right during
any year to adjust Tenant's Estimated Share of Operating
Expenses in any year to reflect increases of 5% or more
by which actual Operating Expenses are exceeding
Estimated Operating Expenses.
B. LANDLORD shall on or before May 1, in each calendar year
provide a Statement of Operating Expenses (Statement) for the
prior calendar year prepared by an independent Certified
Public Accountant which shall show in reasonable detail all
items of Operating Expense for the prior year and Tenant's
Share of such Operating Expenses with the amount of any
difference due to
F-5
<PAGE> 47
LANDLORD or TENANT between Tenant's Estimated Share of
Operating Expenses and Tenant's Share of Operating Expense for
such year. The amount of any difference due TENANT shall
accompany the Statement when delivered to TENANT. TENANT shall
reimburse LANDLORD the amount of any difference due LANDLORD
within thirty (30) days of receipt of LANDLORD'S Statement.
C. If any part of the original lease term or any extended lease
term is less than a calendar year, the TENANT shall reimburse
LANDLORD for Tenant's Share of Operating Expenses due in
accordance with this Section II hereof as the number of days
of the term or extended term contained in a calendar year
bears to 365 days.
D. Upon expiration or termination of the Lease or extensions
thereof, all reimbursements due under this Exhibit shall
become due coincident with rent payments due LANDLORD for the
last month of the lease term or any extended term thereof.
E. LANDLORD shall notify TENANT of any adjustment of
Tenant's Share upon expiration or termination of Lease
which shall be an estimate, computed by LANDLORD based
upon the most recent figures available to and prepared by
LANDLORD. LANDLORD shall notify TENANT after the end of
the calendar year of any overpayment or underpayment
resulting from such calculation of the Tenant's Share of
Operating Expenses and TENANT and LANDLORD shall within
thirty (30) days of receipt of said notice make
appropriate payment to adjust overpayment or underpayment
previously made.
F. TENANT'S obligation to reimburse LANDLORD for Tenant's Share
of Operating Expenses under this Exhibit and LANDLORD'S and
TENANT'S obligation to make adjustments referred to above
shall survive expiration or termination of this Lease.
III. AVAILABILITY OF RECORDS
A. Within thirty (30) days after receipt by TENANT of
LANDLORD'S Statement of Operating Expenses, TENANT may
notify LANDLORD in writing of any cost items for which
TENANT requests to see supporting data. Promptly upon
receipt of such notice, LANDLORD will make available to
TENANT or its agents for examination, at such place in
Metropolitan Boston as LANDLORD may reasonably designate,
at TENANT'S expense, such appropriate accounting
F-6
<PAGE> 48
books and records of LANDLORD as shall relate to the items so
designated by TENANT. TENANT shall cause all information so
obtained to be held in strict confidence. Notwithstanding the
giving of said notice, TENANT shall make payment of all
amounts indicated in LANDLORD'S Estimate or Statement within
thirty (30) days of said notice.
At any time within sixty (60) days after LANDLORD'S accounting
books and records relating to the designated cost items shall
have been made available to TENANT as aforesaid, TENANT may
dispute in writing any specific, significant (i.e., having an
effect of an increase of over 5%) item or items included by
LANDLORD. If such dispute is not amicably settled between
LANDLORD and TENANT within thirty (30) days after TENANT'S
notice thereof, either party may during the next succeeding
thirty (30) days (upon written notice to the other party
accompanied by a copy of its letter of submission setting
forth the items of dispute) refer such disputed item or items
to an independent, nationally-recognized Certified Public
Accounting firm (to be selected by LANDLORD and to be other
than the firm that issued the certification of Estimate or
Statement) for decision and the decision of such accounting
firm shall be conclusive and binding upon LANDLORD and TENANT.
The expenses involved in such determination shall be borne by
the party against whom a decision is rendered by said
accounting firm provided that if more than one item is
disputed and a decision shall be rendered against each party
in respect to any item or number of items so disputed, then
the expenses shall be apportioned according to the amounts
decided against each party. Within thirty (30) days after the
rendering of such decision, LANDLORD shall make any
adjustments required thereby to the Estimate or Statement.
F-7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1997 AND FOR THE THREE MONTH
PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 9,675,847
<SECURITIES> 29,054,255
<RECEIVABLES> 3,924,872
<ALLOWANCES> 0
<INVENTORY> 1,417,060
<CURRENT-ASSETS> 44,372,559
<PP&E> 16,950,780
<DEPRECIATION> 0
<TOTAL-ASSETS> 66,180,496
<CURRENT-LIABILITIES> 4,135,287
<BONDS> 1,626,263
0
0
<COMMON> 330,905
<OTHER-SE> 60,088,041
<TOTAL-LIABILITY-AND-EQUITY> 66,180,496
<SALES> 0
<TOTAL-REVENUES> 3,916,231
<CGS> 0
<TOTAL-COSTS> 112,720
<OTHER-EXPENSES> 6,437,127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,882
<INCOME-PRETAX> (4,223,435)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,223,435)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,223,435)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
