FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[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
For the transition period from_____________ to _____________
Commission File Number 1-11352
-------
DynaGen, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3029787
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
99 Erie Street
Cambridge, MA 02139
--------------------------------------------------------------
(Address of principal executive offices, including zip code)
(617) 491-2527
--------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
As of August 5, 1997, there were outstanding 32,177,625 shares of common stock,
$.01 par value per share.
DYNAGEN, INC.
FORM 10-Q
QUARTERLY REPORT
-------------
TABLE OF CONTENTS
Facing Page 1
Table of Contents 2
PART I. FINANCIAL INFORMATION (*)
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Loss 5
Condensed Consolidated Statements of Changes
in Stockholders' Equity 6
Condensed Consolidated Statements of
Cash Flows 7
Notes to Unaudited Condensed Consolidated
Financial Statements 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
PART II. OTHER INFORMATION
Item 2. Changes in Securities 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 18
(*) The financial information at December 31, 1996 has been derived from
the audited financial statements at that date and should be read in
conjunction therewith. All other financial statements are unaudited.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DYNAGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
1997 1996
---- ----
Current assets:
Cash and cash equivalents
(including interest-bearing
deposits of $31,686 and
$1,835,000) $ 576,881 $ 2,112,300
Investment securities available
for sale at fair value -- 3,004,700
Accounts receivable 2,959,945 261,932
Rebates 498,304 --
Inventory (Note 3) 8,876,626 451,883
Notes receivable 185,000 185,000
Prepaid expenses and other
current assets 291,125 295,613
----------- -----------
Total current assets 13,387,881 6,311,428
----------- -----------
Property and equipment, net of
accumulated depreciation and
amortization of $769,578 and $337,813 1,555,148 673,969
----------- -----------
Other assets:
Goodwill (note 4) 14,254,827 --
Patents and trademarks, net of
accumulated amortization of
$75,398 and $65,639 256,081 265,840
Deferred debt financing costs,
net of accumulated amortization
of $52,052 and $119,039 437,976 119,039
Deposits 292,873 92,873
----------- -----------
Total other assets 15,241,757 477,752
----------- -----------
$30,184,786 $ 7,463,149
=========== ===========
See accompanying notes to unaudited consolidated
financial statements.
3
DYNAGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1997 1996
---- ----
Current liabilities:
Current maturities of
long-term debt (Note 8) $2,576,667 $
Loan payable - Bank (Note C7) 5,514,615 --
Accounts payable 4,635,876 712,239
Accrued payroll and
payroll taxes 336,077 96,894
------------ ------------
Total current liabilities 13,063,235 809,133
Warrant put liability (Note 6) 702,000 --
Long-term debt 5,655,231 1,600,000
------------ ------------
Total liabilities 19,420,466 2,409,133
------------ ------------
Stockholders' equity (Note 6):
Preferred stock, $.01 par value,
10,000,000 shares authorized:
Series A convertible,
50,000 shares authorized,
41,000 shares issued and
outstanding, (liquidation value -
$4,100,000) 410 --
Series B convertible,
7,500 shares authorized, issued and
outstanding, liquidation value - $747,750) 75 --
Common stock, $.01 par value,
75,000,000 shares authorized,
32,164,144 and 29,106,231 shares
issued and outstanding 321,641 291,062
Additional paid-in capital 39,551,688 29,076,838
Accumulated deficit (29,109,494) (24,315,191)
------------ ------------
10,764,320 5,052,709
Unrealized gain on
investment securities -- 1,307
------------ ------------
Total stockholders' equity 10,764,320 5,054,016
------------ ------------
$ 30,184,786 $ 7,463,149
============ ============
See accompanying notes to unaudited consolidated
financial statements.
4
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Unaudited)
Six Months Ended
-------------------------
June 30, June 30,
1997 1996
------------- --------
Revenues:
Fees and royalties $ 50,658 $ 60,000
Product sales 1,783,857 162,890
------------ ------------
Total revenues 1,834,515 222,890
------------ ------------
Costs and expenses:
Cost of sales 2,707,667 67,843
Research and development 1,646,679 2,081,523
Selling, general and
administrative 2,248,649 1,496,092
------------ ------------
Total costs and expenses 6,602,995 3,645,458
------------ ------------
Operating loss (4,768,480) (3,422,568)
------------ ------------
Other income (expense):
Investment income, net 109,035 256,194
Interest expense (116,487) (63,999)
Amortization of debt
financing costs (18,372) (57,230)
------------ ------------
Other income (expense), net (25,824) 134,965
------------ ------------
Net loss $ (4,794,304) $ (3,287,603)
============ ============
Net loss per share $ (.16) $ (.12)
============ ============
Weighted average shares outstanding
(Note 2) 30,195,712 26,674,609
============ ============
See accompanying notes to unaudited consolidated
financial statements.
5
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Unaudited)
Three Months Ended
------------------
June 30, June 30,
1997 1996
------------- --------
Revenues:
Fees and royalties $ 50,426 $ 25,000
Product sales 1,229,846 69,565
------------ ------------
Total revenues 1,280,272 94,565
------------ ------------
Costs and expenses:
Cost of sales 1,754,509 21,219
Research and development 1,159,267 1,229,837
Selling, general and
administrative 1,066,743 615,859
------------ ------------
Total costs and expenses 3,980,519 1,866,915
------------ ------------
Operating loss (2,700,247) (1,772,350)
------------ ------------
Other income (expense):
Investment income, net 16,704 147,011
Interest expense (102,947) (39,999)
Amortization of debt
financing costs (9,186) (34,338)
------------ ------------
Other income (expense), net (95,429) 72,674
------------ ------------
Net loss $ (2,795,676) $ (1,699,676)
============ ============
Net loss per share $ (.09) $ (.06)
============ ============
Weighted average shares outstanding
(Note 2) 30,411,508 27,287,699
============ ============
See accompanying notes to unaudited consolidated
financial statements.
6
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
----------------
June 30, June 30,
1997 1996
------------- --------
Cash flows from operating activities:
Net loss $(4,794,304) $ (3,287,603)
Adjustments to reconcile net loss
to net cash used for operating
activities:
Stock option issued for services 156,918 -
Employee stock and
stock option grants - 558,857
Depreciation and amortization 134,477 93,170
Amortization and accretion of
(discounts) premiums on
investment securities (10,154) (114,935)
Stock issued for interest
obligation 38,438 37,333
Write-off of patent costs - 41,852
(Increase) decrease in operating assets:
Accounts receivable (142,722) (37,111)
Prepaid expenses and other
current assets 37,147 (10,553)
Inventory (1,033,686) -
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 3,008,065 333,628
Deferred revenue - (34,033)
----------- ------------
Net cash used for operating activities (2,605,821) (2,419,395)
Cash flows from investing activities:
Acquisition of Superior (6,250,000) -
Purchase of investment securities (1,186,455) (23,976,046)
Proceeds from sales and maturities
of investment securities 4,200,000 18,574,000
Purchase of property and equipment 586,906 (33,146)
Patent and trademark costs - (39,744)
Decrease in deposits (200,000) -
(Increase) decrease in notes receivable - (75,000)
----------- ------------
Net cash provided by (used for)
investing activities (2,849,549) (5,549,936)
----------- ------------
See accompanying notes to unaudited consolidated
financial statements.
7
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)
Six Months Ended
----------------
June 30, June 30,
1997 1996
---------- --------
Cash flows from financing activities:
Net proceds from exercise of
stock warrants and options $ -- $ 1,819
Net proceeds from issuance of Common
Stock and Warrants 854,250 4,852,561
Net proceeds from preferred stock 4,847,750 1,725,295
Net proceeds from private debt placement 2,696,898 --
Increase in deferred financing costs (328,123) --
Net repayments, notes payable bank (1,594,108) --
Net cash provided by
financing activities 6,476,667 (6,579,675)
---------- -----------
Net change in cash and cash equivalents (7,378,703) (1,389,656)
Cash and cash equivalents at
beginning of year 2,112,300 1,765,604
---------- -----------
Cash and cash equivalents, end of period $ 576,881 $ 375,948
Supplemental cash flow information:
Stock options issued (cancelled) in
exchange for future services -- $ 55,225
Conversion of preferred stock to common stock -- $ 3,461,150
Supplemental cash flow information:
Interest paid $ $
Schedule of non cash investing and financing
activities:
Conversion of convertible notes into
common stock 1,065,000
On June 18, 1997, the Company
purchased all of the common stock
of Superior Pharmaceutical Company, Inc.
for $16,250,000. In connection with the
acquisition, non cash financing activities,
liabilities assessed and goodwill were as
follows:
Fair value of assets acquired $10,913,834
Cash paid for common stock (6,250,000)
Fair value of common stock issued (5,000,000)
Note payable issued (5,000,000)
Liabilities assumed (8,263,477)
-----------
Goodwill (exclusive of other
acquisition costs
of $694,890) $13,599,643
===========
See accompanying notes to unaudited consolidated
financial statements.
8
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE
COMMON STOCK CONVERTIBLE PREFERRED STOCK PREFERRED STOCK
------------ --------------------------- SERIES B
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 29,106,231 $291,062 -- $ --
Decrease in unrealized
gain on investment
securities -- -- -- --
Shares issued in private
placements 375,000 3,750 41,000 410 7,500 75
Stock issued for Superior
acquisition 1,666,667 16,668 -- --
Exercise of stock options 1,500 15 -- --
Issuance of common stock
purchase warrents -- -- -- --
Stock options issued
for services -- -- -- --
Stock issued for
interest obligation 25,152 251 -- --
Conversion of note payable 989,594 9,896 -- --
Net loss -- -- -- --
Balance at June 30, 1997 32,164,144 321,642 41,000 $ 410 7,500 $ 75
========== ========= ========= ======= ====== =====
UNREALIZED
ADDITIONAL GAIN ON
PAID-IN ACCUMULATED INVESTMENT
CAPITAL DEFICIT SECURITIES TOTAL
------- ------- ---------- -----
Balance at
December 31, 1996 $29,076,838 $(24,315,191) $ 1,307 $5,054,016
Decrease in unrealized
gain on investment
securities -- -- (1,307) (1,307)
Shares issued in private
placements 4,318,982 -- -- 4,323,217
Stock issued for Superior
acquisition 4,983,333 -- -- 5,000,000
Exercise of stock options 1,110 -- -- 1,125
Issuance of common stock
purchase warrents 450 -- -- 450
Stock options issued
for services 156,918 -- -- 156,918
Stock issued for
interest obligation 38,187 -- -- 38,438
Conversion of note payable 975,869 -- -- 985,765
Net loss -- (4,794,304) -- (4,794,304)
---------- ----------- ------ -----------
Balance at June 30, 1997 39,551,687 (29,109,495) -- 10,764,318
=========== =========== ====== ===========
</TABLE>
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Series A Additional Gain on
Common Stock Convertible Preferred Stock Paid-in Accumulated Investment
Shares Amount Shares Amount Capital Deficit Securities Total
---------- ------ ------- ------ ----------- ------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 25,196,963 $251,970 -- $ -- $23,094,903 $(16,721,448) $ 1,142 $ 6,626,567
Decrease in unrealized
gain on investment
securities -- -- -- -- -- -- (1,125) (1,125)
Shares issued in
private placements 1,520,686 15,207 1,178,264 3,461,150 1,376,204 -- -- 4,852,561
Conversion of
preferred stock 1,612,834 16,128 (1,178,264) (3,461,150) 3,445,022 -- -- --
Costs related to exercise
of public warrants -- -- -- -- (3,756) -- -- (3,756)
Exercise of stock options 95,855 959 -- -- 4,616 -- -- 5,575
Employee stock and
stock option grants 117,250 1,172 -- -- 557,685 -- -- 558,857
Stock options issued for
services -- -- -- -- 55,225 -- -- 55,225
Stock issued for
interest obligation 16,411 164 -- -- 37,169 -- -- 37,333
Net loss -- -- -- -- -- (3,287,603) -- (3,287,603)
----------- -------- ---------- ------------ ----------- ------------ ------- -----------
Balance at June 30, 1996 28,559,999 $285,600 -- $ -- $28,567,068 $(20,009,051) $ 17 $ 8,843,634
=========== ======== ========== ============ =========== ============ ======= ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
9
11
DYNAGEN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial information and in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X and include the
accounts of DynaGen, Inc. and its wholly-owned subsidiaries, Superior
Pharmaceutical Company and Able Laboratories, Inc. Accordingly, they do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statement presentation. Significant
intercompany balances and transactions have been eliminated in consolidation.
As of December 31, 1996, the Company changed from a fiscal year ending
June 30 to a fiscal year ending December 31.
The results of operations for the interim periods reported are not
necessarily indicative of expected results for any future interim period for a
full fiscal year. In the opinion of management, all adjustments have been made
(consisting only of normal recurring adjustments) which are necessary for a fair
presentation of operating results for the interim periods presented.
The financial information included in this report has been prepared in
conformity with the accounting policies reflected in the financial statements
included in the Company's Transition Report on Form 10-K as of December 31, 1996
filed with the Securities and Exchange Commission.
2. NET LOSS PER SHARE
Net loss per common share has been computed by dividing the net loss by
the weighted average number of shares of common stock outstanding during the
periods indicated. The effect of all common stock equivalents have been excluded
from the calculation of the weighted average number of common shares outstanding
since their inclusion would be anti-dilutive.
3. INVENTORY
Inventory at June 30, 1997 consists of the following:
Raw material $ 500,250
Work in-process 165,320
Finished goods 8,211,056
----------
$8,876,626
12
DYNAGEN, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 1997
(Continued)
4. BUSINESS ACQUISITIONS
On August 19, 1996, the Company acquired certain assets of Able
Laboratories, Inc., consisting primarily of machinery and equipment, raw
materials and finished goods inventory, and other assets of the tablet business.
The assets were transferred by the Company to a newly formed and wholly-owned
subsidiary named Able Laboratories, Inc. ("Able"). The purchase price consisted
of $550,000 in cash and acquisition costs of $150,000. The acquisition has been
accounted for as a purchase. The Company allocated $313,300 of the purchase
price to inventory and $386,700 to property and equipment. The results of
operations related to Able have been included with those of the Company since
August 19, 1996.
On June 18, 1997, the Company acquired all of the outstanding stock of
Superior Pharmaceutical Company (Superior), a distributor of generic
pharmaceutical products.
In exchange for the common stock of Superior, the Company paid the
shareholders of Superior $6,250,000 in cash, $5,000,000 in three year notes and
1,666,667 shares of DynaGen's common stock with a guaranteed value of
$5,000,000. DynaGen is obligated to issue to the shareholders up to an
additional 1,666,667 shares of its common stock after twelve months if its
common stock is not trading at an average of at least $3.00 per share for 10
consecutive trading days as reported by the Nasdaq SmallCap Market. If,
immediately following the issuance of the additional 1,666,667 shares, DynaGen's
common stock is not trading at least $1.50 per share, DynaGen shall pay to the
shareholders the difference between $1.50 and the then current trading price of
its common stock for each of the 3,333,334 shares held by the Superior
shareholders.
DynaGen is obligated to register the shares within eleven months after the
closing of the acquisition. The Company also incurred costs of $694,890 related
to the acquisition which have been capitalized as additional costs of the
acquisition.
13
The shareholders of Superior may also receive certain incentive payments based
on Superior's performance during the three years following the close of the
acquisition. Immediately following the closing of the acquisition, DynaGen
contributed additional capital of $1,750,000 to Superior.
The acquisition has been accounted for as a purchase. Accordingly, the results
of operations of Superior have been included in the consolidated financial
statements since the date of acquisition. The preliminary purchase price
allocation was based on the estimated fair values at the date of acquisition
which resulted in an excess of purchase price over net assets acquired of
$14,294,534, which is being amortized on a straight-line basis over 15 years.
The preliminary allocation is subject to change because of the incentive
payments that may be made to certain shareholders and deferred income taxes.
Unaudited proforma consolidated operating results for the Company,
assuming the acquisition of Able and Superior had been made as of the beginning
of the fiscal year for each of the periods presented, are as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------- ------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Revenues $ 13,947,426 $ 17,388,413 $ 6,033,363 $ 7,878,340
Net loss $ (4,335,484) $ (2,824,684) $(3,093,359) $(1,581,012)
Net loss per share $ (.14) $ (.11) $ (.10) (.06)
</TABLE>
The unaudited proforma information is not necessarily indicative either of the
actual results of operations that would have occurred had the purchase been made
as of the beginning of each of the fiscal periods presented or of future results
of operations of the combined companies.
14
5. NOTES PAYABLE TO SUPERIOR AQUISITIONS
In connection with the acquisition of the Superior, the Company issued
$5,000,000 in notes payable to the former Superior stockholders. The notes are
payable in quarterly installments of principal and interest over three years at
an interest rate of 9.5% and are secured by a pledge of Superior Common Stock.
Amounts payable on the notes over the next three fiscal years are as
follows:
Year Ended
December 31, Amount
------------ ------
1997 $1,250,000
1998 1,666,667
1999 1,666,667
2000 .................... 416,666
----------
$5,000,000
DYNAGEN, INC.
6. FINANCING OF SUPERIOR ACQUISITION
The following debt and equity financings were arranged to fund the
Acquisition of Superior:
(A) DynaGen obtained senior subordinated debt financing of $3,000,000
from two private investors. Interest on the senior subordinated debt financing
is 13.5% annually with interest payable in monthly installments. There is no
amortization of the principal amount on the note for the first five years of the
note, and principal is paid upon maturity at the end of five years. The loan is
made available to DynaGen (as parent) for the acquisition and as working capital
for Superior and is secured by a first-lien security interest on the assets of
DynaGen, a second-lien security interest on the assets of Superior and a
second-lien interest in the pledge of the Superior Stock. DynaGen also issued to
the investors warrants to purchase 400,000 shares of Common Stock of DynaGen at
an exercise price per share of $.01 exercisable for five years. Under certain
circumstances, the two investors may exchange the warrants to buy DynaGen Common
Stock for warrants to purchase a 15% of Superior's Common Stock at an exercise
price per share of $.01 exercisable until August 31, 2002. In addition, these
warrants are subject to certain put features under certain circumstances.
The proceeds from this financing was allocated to the DynaGen stock
warrants, based on their estimated fair value, $702,000. This amount is
reflected in the accompanying financial statements as a warrant liability
because the warrants are subject to a Put and Substitution Agreement (the
Agreement) which gives the holders of the warrants a choice of a cash settlement
under certain conditions. The Agreement allows the holders of the Warrants the
right and option to sell the Warrants to the company after three years, for
$667,000, and after five years, for $1,500,000.
If the market value of the shares issuable pursuant to the warrant is
equal to or greater than the put value, then the puts cannot be exercised.
The remaining proceeds from this offering $2,298,000 were allocated to
the subordinated debt. The debt discount of $702,000 will be amortized, using
the interest method, over the term of the debt.
(B) DynaGen obtained debt financing in the form of a bridge loan of
$500,000, from a private investor at an interest rate of 7% per annum and due
September 30, 1997, to
15
be used for the maintenance of net worth requirements for Superior's credit
facility, working capital for operations of DynaGen and the acquisition. This
loan is a non-recourse obligation of DynaGen. Two founders of DynaGen have
pledged 1 million shares of DynaGen's Common Stock in order to secure the
obligations represented by this bridge loan. In connection with this bridge
loan, the Company has issued 150,000 shares of its unregistered Common Stock to
Coutts & Co., AG.
The proceeds from the debt financing allocated to the common stock was
$150,000 based on the estimated fair value at June 18, 1997. The balance of the
proceeds was allocated to the bridge loan. The debt discount on the bridge loan,
$150,000, is being amortized over the life of the loan.
(C) DynaGen obtained equity financing in the form of the sale to twelve
accredited investors of 41,000 shares of DynaGen's Series A Preferred Stock and
warrants to purchase 328,000 shares of Common Stock at an aggregate purchase
price of $4,100,000. The Series A Preferred Stock has a stated dividend of five
dollars ($5.00) per share per annum. DynaGen is obligated to register the shares
of Common Stock issuable upon conversion of the Series A Preferred Stock and
exercise of the warrants within 90 days after the closing of the Acquisition.
The exercise price of the warrants will be 120% of the average closing bid price
of DynaGen's Common Stock as reported by the Nasdaq SmallCap Market (or such
other exchange on which the Common Stock is then traded) for the five trading
days immediately preceding the date on which the Securities and Exchange
Commission declares effective the registration statement to be filed registering
the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock and exercise of the Warrants. The holders of Series A preferred Stock have
certain rights of first refusal on future equity financings.
The Series A preferred stock may be converted into common stock at a
conversion price equal to the lesser of 120% of the average closing bid price,
as defined (the Series A Effective Price) and discounted percentages of the
Series A Effective Price ranging from 80% to 74%, based on a schedule of the
number of days after the issuance date that the conversion takes place.
All shares of the Series A preferred stock will be automatically
converted to common stock two years from the issue date.
16
(D) DynaGen obtained equity financing in the form of the sale of 7,500
shares of DynaGen's Series B Preferred Stock and 225,000 shares of DynaGen's
Common Stock at an aggregate purchase price of $750,000 to a private investor.
The Series B Preferred Stock has a stated dividend of seven dollars ($7.00) per
share per annum. Upon liquidation, the Series B Preferred Stock ranks junior to
the Series A Preferred Stock. DynaGen is obligated to register the 225,000
shares of Common Stock issued and the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock within 150 days after the closing of
the acquisition.
The Series B preferred stock may be converted into Common Stock at a
conversion price equal to the lesser of 125% of the average closing bid price,
as defined (the "Series B Effective Price") of and discounted percentages of the
Series B Effective Price ranging from 80% to 75%, based on a schedule of the
number of days after the issuance date that the conversion takes place.
All shares of the Series B preferred stock will be automatically
converted to common stock two years from the issued date.
17
7. NOTES PAYABLE - BANK
Superior obtained a secured revolving line of credit of up to
$9,000,000 from Huntington National Bank to provide working capital for its
general operations. The availability of advances under the line of credit is
subject to a borrowing base consisting of the sum of (1) 80% of Superior's
eligible accounts receivable, as defined, plus (2) 60% of Superior's eligible
inventory, as defined.
The advances under the line are secured by a first-lien security
interest in all of the assets of Superior and are guaranteed by DynaGen, as
parent of Superior. Superior may draw on the line of credit until April 5, 1998.
Interest on advances under the line of credit are based on the prime lending
rate or LIBOR plus 2% (7.8% at June 30, 1997.
8. LONG-TERM DEBT
Long-term debt consists of the following:
Notes payable Superior Acqusition $5,000,000
Senior subordinated debt 2,321,898
Bridge loan 375,000
Convertible 535,000
-------
8,231,898
Loss: current maturities (2,576,667)
Long-term debt. $5,655,231
18
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------------------
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. Except for historical
information contained herein, the matters discussed in the Liquidity and Capital
Resources section below contain potential risks and uncertainties, including,
without limitation, risks related to the Company's ability to successfully
develop, test, produce and market its proposed products; obtain governmental
approvals in a timely manner; identify and attract marketing partners to help
commercialize the Company's products; attract and retain key employees; obtain
meaningful patent protection or otherwise over the Company's proprietary
technology; protect itself from product liability risks or limitations imposed
due to potential health care reform; raise capital for future operations and
commercialization of its products; integrate the products and personnel the
Company acquired in the acquisition of Able Laboratories, Inc. ("Able"),
Superior Pharmacutical Company ("Superior") and any future acquisitions; and
successfully respond to technological changes in the marketplace. Specifically,
regulatory approvals of the Company's products are subject to factors beyond the
Company's control, and there can be no assurance that such approvals will not be
delayed or ultimately denied. The Company will need to attract marketing
partners in order to exploit its products, and there can be no assurance that
the Company will be successful in attracting such partners. Additional
information on potential factors which could affect the Company's financial
results are included in the Company's public filings with the Securities and
Exchange Commission, including without limitation its Form 10-K for the period
ended December 31, 1996.
RESULTS OF OPERATIONS
RECENT ACQUISITIONS
On August 19, 1996, the Company acquired the tablet manufacturing
business of Able, a generic pharmaceutical product subsidiary of Alpharma, Inc.
On June 18, 1997, the Company acquired all of the outstanding shares of
Superior, a distributor of generic pharmaceutical products. These acquisitions
have been accounted for using the "purchase" method of accounting. As a result,
the results of operations for the three and six month periods ended June 30,
1997 reflect a full three and six months of operations, respectively, for Able,
and reflect twelve days of operations for Superior for the three and six months
ended June 30, 1997. The results of operations for the three and six months
ended June 30, 1996 do not reflect any operations of Able or Superior.
THREE-MONTH PERIOD ENDED JUNE 30, 1997
AS COMPARED WITH THE THREE-MONTH PERIOD ENDED JUNE 30, 1996
Revenues in the second quarter of the year ending June 30, 1997 were
$1,280,000 versus $95,000 for the second quarter of the year ended June 30,
1996. This increase of $1,185,000 is primarily the result of product sales by
the Company's wholly-owned generic pharmaceutical subsidiaries, Able and
Superior.
Cost of sales exceeds product sales for the second quarter of Fiscal
1997 due to the low production levels at Able during the second quarter of
Fiscal 1997 which did not support fixed manufacturing costs required at the
facility.
Research and development expenses for the second quarter of Fiscal 1997
were $1,159,000 versus $1,230,000 for the same period as Fiscal 1996, a decrease
of $71,000. This decrease is partially to offset an increase in therapeutic
product development costs of $900,000. Research and development efforts are
primarily attributable to the Company's breast biopsy technology and other
technologies in an early stage of development. In addition, the Company is
expending development efforts towards generic pharmaceuticals.
Selling, general and administrative expenses for the second quarter of
Fiscal 1997 were $1,067,000 versus $616,000 for the same period as Fiscal 1996,
and increase of $45,000. This increase is primarily attributable to acquisition
and business development costs and the inclusion, in Fiscal 1997, of selling,
general and administrative costs of the Company's subsidiary operations at Able
and Superior.
Investment income decreased by $130,000 from $147,000 to $17,000 for
the second quarter of Fiscal 1997 as compared to the same period as Fiscal 1996,
respectively, as the Company had less funds available for investment. In the
second quarter of 1997, the Company incurred interest expense of $102,000 and
amortized debt financing costs of $18,000 associated with debt financing for the
Superior acquisition.
SIX-MONTH PERIOD ENDED JUNE 30, 1997
AS COMPARED WITH THE THREE-MONTH PERIOD ENDED JUNE 30, 1996
Revenues for the six months ended June 30, 1997 ("Fiscal 1997") were
$1,834,000 versus $223,000 for the six months ended June 30, 1996 ("Fiscal
1996"). This increase of $1,611,000 is primarily the result of generic
pharmacuetical product sales by the Company's wholly-owned subsidiaries, Able
and Superior.
Cost of sales exceeded product sales for the first half of Fiscal 1997
since production at Able during the first half of Fiscal 1997 did not support
the minimum level of fixed manufacturing costs required at the facility.
19
DYNAGEN, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------------------
Research and development expenses for the first half of Fiscal 1997
were $1,647,000 versus $2,081,000 for the same period as fiscal 1996, a decrease
of $434,000. Research and developement efforts are primarily attributable to the
Company's breast biopsy technology and other technologies in an early stage of
development. In addition, product development efforts towards new generic
pharmaceuticals.
Selling, general and administrative expenses for the first half of
Fiscal 1997 were $2,249,000 versus $1,496,000 for the same period as Fiscal 1996
an increase of $753,000. Selling, general and administrative expenses increased
in the following areas: product marketing and support - $108,000 (the increase
in product marketing and support is attributable to marketing efforts for the
Company's of NicCheck(R) Iproduct, public relations - $22,000 patent expense -
$57,000. These increases were offset by a net decrease of $168,000 in other
operating expenses primarily related to acquisitions and business development
project.
Investment income decreased by $147,000 from $256,000 to $109,000 for
the six months ended June 30, 1997 as compared to the six months ended June 30,
1996 1996, respectively, as the Company had less funds available for investment
during the six months ended June 30, 1997. In the six months ended June 30,
1997, the Company incurred interest expense of $116,000 and amortized debt
financing costs of $18,000 both associated with private debt financing for the
Superior acquisition.
20
DYNAGEN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had working capital of $324,646 versus
working capital of $5,502,295 at December 31, 1996. Cash and investment
securities were $576,881 at June 30, 1997 as compared to $5,117,000 at December
31, 1996. Working capital and cash were used primarily for research and
development and to fund Able and its operations during the quarter.
On June 18, 1997 the Company acquired all of the outstanding shares of
Superior (the "Superior Acquisition"), a privately-held distributor of generic
pharmaceutical products, for purchase price of $ 6.25 million in cash, $5
milliom in three-year notes and 1,666,667 shares of the Company's Common Stock.
The shareholders may also receive certain cash incentive payments based on
Superior's performance during the three years following the close of the
transaction. In addition, the Company assumed the existing debt of Superior,
consisting principally of an asset-based line of credit and trade payables.
Immediately following the closing of the Superior Acquisition, the Company
contributed $1.75 million to the working capital of Superior.
The Company has incurred significant losses since inception. To date,
the Company has financed current operations primarily through private and public
sale of equity as well as the private sale of dept. In August 1997, the Company
raised approximately $150,000 through the private sale of its equity. The
Company is presently negotiating the sale to a third party of an additional $3.0
million of its equity. If the Company is able to secure this financing,
management anticipates that the available working capital will be sufficient to
fund current level of operations, including the Able and Superior businesses,
through June 1998. There can be no assurance, however, that the Company will be
able to secure this financing or that such financing will be available on
favorable terms. The survival of the Company is dependent on its ability to
obtain this and additional financing and to generate revenue from sales of its
products. If the Company is usable to obtain additional financing, the Company
will be unable to maintain its current level of operations and will be required
to reduce or eliminate most expenditures relating to its business.
In order to finance the Superior Acquisition, the Company obtained (i)
senior subordinated debt financing of $3.0 million, (ii) a bridge loan of
$500,000 and (iii) equity financings totalling $4.85 million.
21
DYNAGEN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (Continued)
While the acquisition of Able has increased the Company's revenues, the
acquisition has also increased costs and expenses, capital expenditures and net
cash used for operating activities. The Company intends to fund Able operations
until it becomes self-supporting. The Company continues to pursue additional
sources of capital in order to fund the growth of the Able generic drug business
and its product development efforts. The Able financing may take the form of a
line of credit or equipment notes or leases. There can be no assurance that the
Company will be able to secure additional financing for the Able business or its
continued product development efforts or that financing will be available on
favorable terms. If the Company is unable to obtain such additional financing,
the Company's ability to maintain its current level of operations would be
materially and adversely affected and the Company will be required to reduce or
eliminate certain expenditures, including its research and development activity
with respect to certain proposed products.
22
DYNAGEN, INC.
PART II. OTHER INFORMATION
-------------------------------------------------------------
Item 2. Changes in Securities
a. Not applicable.
b. Not applicable.
On April29, 1997, the Company issued a warrant to
acquire 500,000 shares of its Common Stock at an
exercise price of $.05 per share. This warrant was
issued in connection with a Product Developement
Agreement between the Company and Kali. The warrant
was issued in a private transaction not involving a
public offering, pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the" Securities
Act").
c. On May 1, 1997, the Company issued 8,271 shares of
its Common Stock to GFL Performance Fund Limited in
payment of $10,700 in interest due on the Company's
Convertible Note dated February 7, 1996. The shares
were issued in a private transaction not involving a
public offering, pursuant to Section 4(2) of the
Securities Act.
On June 18, 1997, the Company issued 1,666,667 shares
of its Common Stock to Eric Hagerstrand, Dennis Smith
and Thomas Canning, who were the stockholders (the
"Stockholders") of Superior Pharmaceutical Company
("Superior"), as partial consideration for the
acquisition of all of the outstanding stock of
Superior. The shares were issued in a private
transaction not involving a public offering, pursuant
to Section 4(2) of the Securities Act.
On June 18, 1997, the Company issued Secured
Promissory Notes due June 30, 2000, in the aggregate
amount of $5,000,000, to the Stockholders as partial
consideration for the acquisition of all the
outstanding stock of Superior. The notes were issued
in a private transaction not involving a public
offering pursuant to Section 4(2) of the Securities
Act.
On June 18, 1997, the Company issued Secured
Promissory Notes due August 31, 2002, in the
aggregate amount of $3,000,000 (the "Sirrom Notes"),
to Sirrom Capital Corporation ("Sirrom") and Odyssey
Investment Partners, L.P. ("Odyssey"). The Sirrom
Notes were issued in a private transaction not
involving a public offering, pursuant to Section 4(2)
of the Securities Act.
On June 18, 1997, the Company also issued to Sirrom
and Odyssey, as partial consideration for the
$3,000,000 loan represented by the Sirrom Notes,
23
DYNAGEN, INC.
PART II. OTHER INFORMATION (Continued)
-------------------------------------------------------------
Stock Purchase Warrants to purchase an aggregate of
400,000 shares of the Company's Common Stock at an
exercise price per share of $.01, which warrants are
exercisable for five years. The warrants were issued
in a private transaction not involving a public
offering, pursuant to Section 4(2) of the Securities
Act.
On June 18, 1997, the Company issued 150,000 shares
of its Common Stock to Coutts & Co., AG as partial
consideration for a loan in the amount of $500,000.
The shares of Common Stock were issued in a private
transaction not involving a public offering, pursuant
to Section 4(2) of the Securities Act.
On June 18, 1997, the Company issued 41,000 shares of
its Series A Preferred Stock, $.01 par value per
share, and Common Stock Purchase Warrants to purchase
an aggregate of 328,000 shares of Common Stock to
twelve accredited investors for an aggregate purchase
price of $4,100,000. The Company is obligated to
register under the Securities Act the shares of
Common Stock issuable upon conversion of the Series A
Preferred Stock and exercise of the warrants within
90 days after June 18, 1997. The Series A Preferred
Stock is convertible into Common Stock at the lesser
of (i) 120% of the average closing bid price of the
Company's Common Stock as reported by the Nasdaq
SmallCap Market (or such other exchange on which the
Common Stock is then traded) for the five trading
days immediately preceding the date on which the
Securities and Exchange Commission (the "Commission")
declares effective the registration statement to be
filed registering the shares of Common Stock issuable
upon conversion of the Series A Preferred Stock and
exercise of the warrants or (ii) a discount on the
average closing bid price of the Company's Common
Stock as reported by the Nasdaq SmallCap Market (or
such other exchange on which the Common Stock is then
traded) for the five trading days immediately
preceding the date on which the Series A Preferred
Stock is converted. The exercise price of the
warrants will be 120% of the average closing bid
price of the Company's Common Stock as reported by
the Nasdaq SmallCap Market (or such other exchange on
which the Common
24
DYNAGEN, INC.
PART II. OTHER INFORMATION (Continued)
-------------------------------------------------------------
Stock is then traded) for the five trading days
immediately preceding the date on which the
Commission declares effective the registration
statement to be filed registering the shares of
Common Stock issuable upon conversion of the Series A
Preferred Stock and exercise of the warrants. The
warrants are exercisable for two years. The Series A
Preferred Stock and warrants were issued pursuant to
Regulation D under the Securities Act.
On June 18, 1997, the Company issued 7,500 shares of
its Series B Preferred Stock, $.01 par value per
share, and 225,000 shares of its Common Stock to
Julius Baer Securities Inc. as agent for certain
non-U.S. persons, for an aggregate purchase price of
$750,000. The Company is obligated to register under
the Securities Act the 225,000 shares of Common Stock
issued and the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock within 150
days after June 18, 1997. The Series B Preferred
Stock is convertible into Common Stock at the lesser
of (i) 125% of the average closing bid price of the
Company's Common Stock as reported by the Nasdaq
SmallCap Market (or such other exchange on which the
Common Stock is then traded) for the five trading
days immediately preceding the date on which the
Commission declares effective the registration
statement to be filed registering the shares of
Common Stock issuable upon conversion of the Series B
Preferred Stock or (ii) a discount on the average
closing bid price of the Company's Common Stock as
reported by the Nasdaq SmallCap Market (or such other
exchange on which the Common Stock is then traded)
for the five trading days immediately preceding the
date on which the Series B Preferred Stock is
converted. The Series B Preferred Stock and the
shares of Common Stock were issued pursuant to
Regulation D under the Securities Act.
25
DYNAGEN, INC.
PART II. OTHER INFORMATION (Continued)
-------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
The following exhibits, required by Item 601 of Regulation
S-K, are filed as pat of this Quarterly Report on Form 10-Q.
Exhibit numbers, where applicable, in the left column
correspond to those of Item 601 of Regulation S-K.
Exhibit
No. Description of Exhibit
--- ----------------------
3a Certificate of Designations, Preferences and Rights of Series
A Preferred Stock of DynaGen (filed as Exhibit 4.13 to
DynaGen's Current Report on Form 8-K dated June 18, 1997).
3b Certificate of Designations, Preferences and Rights of Series
B Preferred Stock of DynaGen (filed as Exhibit 4.17 to
DynaGen's Current Report on Form 8-K dated June 18, 1997).
4a Registration Rights Agreement dated June 18, 1997 among
DynaGen and Eric Hagerstrand, Dennis Smith and Thomas Canning
(filed as Exhibit 4.1 to DynaGen's Current Report on Form
8-K dated June 18, 1997).
4b Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Eric C. Hagerstrand (filed as Exhibit 4.2 to DynaGen's
Current Report on Form 8-K dated June 18, 1997).
4c Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Dennis B. Smith (filed as Exhibit 4.3 to DynaGen's Current
Report on Form 8-K dated June 18, 1997).
4d Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Thomas L. Canning (filed as Exhibit 4.4 to DynaGen's
Current Report on Form 8-K dated June 18, 1997).
4e Pledge Agreement dated June 18, 1997 among DynaGen and Eric
Hagerstrand, Dennis Smith and Thomas Canning (filed as Exhibit
4.5 to DynaGen's Current Report on Form 8-K dated June 18,
1997).
26
DYNAGEN, INC.
PART II. OTHER INFORMATION (Continued)
-------------------------------------------------------------
Exhibit
No. Description of Exhibit
--- ----------------------
4f Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Sirrom (filed as Exhibit 4.6 to DynaGen's Current Report on
Form 8-K dated June 18, 1997).
4g Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Odyssey (filed as Exhibit 4.7 to DynaGen's Current Report
on Form 8-K dated June 18, 1997).
4h Stock Purchase Warrant dated June 18, 1997 issued by DynaGen
to Sirrom (filed as Exhibit 4.8 to DynaGen's Current Report on
Form 8-K dated June 18, 1997).
4i Stock Purchase Warrant dated June 18, 1997 issued by DynaGen
to Odyssey (filed as Exhibit 4.9 to DynaGen's Current Report
on Form 8-K dated June 18, 1997).
4j Pledge and Security Agreement dated June 18, 1997 between
DynaGen and Sirrom (filed as Exhibit 4.10 to DynaGen's Current
Report on Form 8-K dated June 18, 1997).
4k Subordinated Note dated June 18, 1997 issued by DynaGen to
Coutts & Co. AG (filed as Exhibit 4.11 to DynaGen's Current
Report on Form 8-K dated June 18, 1997).
4l Bridge Financing Purchase Agreement dated June 16, 1997
between DynaGen and Coutts & Co. AG (filed as Exhibit 4.12 to
DynaGen's Current Report on Form 8-K dated June 18, 1997).
4m Securities Purchase Agreement dated June 16, 1997 among
DynaGen and the purchasers of Series A Preferred Stock (filed
as Exhibit 4.14 to DynaGen's Current Report on Form 8-K dated
June 18, 1997).
4n Registration Rights Agreement dated June 16, 1997 among
DynaGen and the purchasers of Series A Preferred Stock (filed
as Exhibit 4.15 to DynaGen's Current Report on Form 8-K dated
June 18, 1997).
4o Form of Common Stock Purchase Warrant dated June 18, 1997
issued by DynaGen to the purchasers of Series A Preferred
Stock (filed as Exhibit 4.16 to DynaGen's Current Report
on Form 8-K dated June 18, 1997).
27
DYNAGEN, INC.
PART II. OTHER INFORMATION (Continued)
-------------------------------------------------------------
Exhibit
No. Description of Exhibit
--- ----------------------
4p Securities Purchase Agreement dated June 17, 1997 between
DynaGen and Julius Baer Securities Inc. as agent for certain
non-U.S. persons (filed as Exhibit 4.18 to DynaGen's Current
Report on Form 8-K dated June 18, 1997).
4q Registration Rights Agreement dated June 17, 1997 between
DynaGen and Julius Baer Securities Inc. as agent for certain
non-U.S. persons (filed as Exhibit 4.19 to DynaGen's Current
Report on Form 8-K dated June 18, 1997).
4r Stock Purchase Warrant dated June 18, 1997 issued by Superior
to Sirrom (filed as Exhibit 4.20 to DynaGen's Current Report
on Form 8-K dated June 18, 1997).
4s Stock Purchase Warrant dated June 18, 1997 issued by Superior
to Odyssey (filed as Exhibit 4.21 to DynaGen's Current Report
on Form 8-K dated June 18, 1997).
4t Revolving Note dated June 18, 1997 issued by Superior to
Huntington National Bank (filed as Exhibit 4.22 to DynaGen's
Current Report on Form 8-K dated June 18, 1997).
4u Common Stock Purchase Warrant dated April 29, 1997 issued by
Dynagen to Kali Laboratories, Inc. (filed herewith).
10a Loan Agreement dated June 18, 1997 among DynaGen, Sirrom and
Odyssey (filed as Exhibit 99.1 to DynaGen's Current Report on
Form 8-K dated June 18, 1997).
10b Security Agreement dated June 18, 1997 among DynaGen, Sirrom
and Odyssey (filed as Exhibit 99.2 to DynaGen's Current Report
on Form 8-K dated June 18 ,1997).
10c Amended and Restated Loan and Security Agreement dated June
18, 1997 among Huntington National Bank, Superior and DynaGen
(filed as Exhibit 99.3 to DynaGen's Current Report on Form 8-K
dated June 18, 1997).
10d Continuing Guaranty Unlimited dated June 18, 1997 from DynaGen
to Huntington National Bank (filed as Exhibit 99.4 to
DynaGen's Current Report on Form 8-K dated June 18, 1997).
10e Commercial Lease Agreement dated March 9, 1995 between SPC
Properties Limited and Superior (filed herewith).
10f Amendment, Estoppel and Consent Agreement dated June 18, 1997
between SPC Properties Limited and Superior (filed herewith).
27 Financial Data Schedule (filed herewith in electronic format
only).
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.
DYNAGEN, INC.
By: /s/ Indu A. Muni
----------------------------------------
Indu A. Muni, Ph.D.
President, Chief Executive Officer, and
Treasurer (Principal Executive, Financial, and
Accounting Officer)
Date: August 14, 1997
30
EXHIBIT 4.u
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS
SECURITY MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITY UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED
THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE,
ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF
SUCH SECURITY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.
WARRANT NO. : W-CS-7 RIGHT TO PURCHASE 500,000
SHARES OF COMMON STOCK OF
APRIL 29, 1997 DYNAGEN, INC.
VOID UNLESS EXERCISED BEFORE THE EXPIRATION DATE (AS DEFINED BELOW)
DYNAGEN, INC.
COMMON STOCK PURCHASE WARRANT
DYNAGEN, INC., a Delaware corporation (the "COMPANY"), hereby certifies
that, in consideration of the services being performed by Kali Laboratories,
Inc. ("KALI") pursuant to the Product Development Agreement dated the date
hereof (the "DEVELOPMENT AGREEMENT"), Kali is entitled, subject to and in
accordance with the terms set forth below, to purchase from the Company,
commencing on the date hereof, at any time or from time to time before the
Expiration Date, 500,000 fully paid and non-assessable shares of Common Stock,
$.01 par value, of the Company, at an exercise price per share equal to $.05.
Such exercise price per share as adjusted from time to time as herein provided
is referred to herein as the "EXERCISE PRICE". The number and character of such
shares of Common Stock and the Exercise Price are subject to adjustment as
provided herein. THIS WARRANT IS EXERCISABLE IN INSTALLMENTS, SUBJECT TO THE
SATISFACTION OF CERTAIN CONDITIONS AS SET FORTH IN SECTION 1.3 BELOW. NO PORTION
OF THIS WARRANT MAY BE EXERCISED UNLESS SUCH CONDITIONS HAVE BEEN SATISFIED WITH
RESPECT TO THE CONDITIONS REGARDING EXERCISABILITY.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "COMPANY" shall include DynaGen, Inc., a Delaware
corporation, and any corporation which shall succeed or assume the obligations
of the Company hereunder.
(b) The term "COMMON STOCK" includes (a) the Company's Common Stock,
$.01 par value per share, as authorized, (b) any other capital stock of any
class or classes (however
-2-
designated) of the Company, authorized on or after such date, the holders of
which shall have the right, without limitation as to amount, either to all or to
a share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference, and
the holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote has been suspended by the happening of such a
contingency), (c) any other securities into which or for which any of the
securities described in (a) or (b) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise,
or the conversion of promissory notes or other obligations of the Company.
(c) The term "OTHER SECURITIES" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of this Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Sections 3 or 4 or otherwise.
(d) The term "EXPIRATION DATE" shall mean the earlier to occur of (i)
the termination of the Development Agreement at a time where (a) no shares have
become exercisable pursuant to Section 1.3 below or (b) any shares that have
become exercisable have been exercised by the holder of this Warrant or (ii)
5:00 p.m., Eastern Daylight Savings Time, on April 29, 2010. By way of example,
to the extent the Development Agreement is terminated prior to April 29, 2010
and shares have become exercisable pursuant to Section 1.3 (but not fully
exercised at the time of termination), the "Expiration Date" shall mean April
29, 2010. Furthermore, to the extent the Development Agreement is terminated
prior to April 29, 2010 and no shares have become exercisable pursuant to
Section 1.3, or any shares that have become exercisable have been exercised in
full, then in either case, the "Expiration Date" shall mean the date the
Development Agreement is terminated.
(e) The term "ANDA" means Abbreviated New Drug Application and the term
"FDA" means the United States Food and Drug Administration.
1. EXERCISE OF WARRANT.
1.1. FULL EXERCISE. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription at
the end hereof duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is then exercisable by
the Exercise Price then in effect.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part
by surrender of this Warrant in the manner and at the place provided in Section
1.1 except that the amount payable by the holder on such partial exercise shall
be the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
-3-
Exercise Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. CONDITIONS REGARDING EXERCISABILITY. This Warrant is
exercisable only upon the satisfaction of certain conditions, and unless such
conditions are satisfied, only that portion of this Warrant for which the
conditions have been previously satisfied may be exercised at any time. The
Warrant will vest and become exercisable in the following installments upon
occurrence of the following milestones in connection with Kali's performance of
its obligations pursuant to the Development Agreement:
<TABLE>
<CAPTION>
Number of shares to become
Milestone vested and exercisable
- --------- ----------------------
<S> <C>
FDA approval of ANDA for Labetalol tablet, or tentative 64,516
FDA approval pending patent expiration
FDA approval of ANDA for Promethazine suppository, or 64,516
tentative FDA approval pending patent expiration
FDA approval of ANDA for Enalapril tablet, or tentative 96,774
FDA approval pending patent expiration
FDA approval of ANDA for Fluoxetine capsule, or tentative 96,774
FDA approval pending patent expiration
FDA approval of ANDA for Buspirone tablet, or tentative 96,774
FDA approval pending patent expiration
FDA approval of ANDA for Omeprazole capsule, or tentative 80,646
FDA approval pending patent expiration
</TABLE>
1.4. CASHLESS EXERCISE FEATURE -- RIGHT TO CONVERT WARRANT
INTO COMMON STOCK. (a) In addition to and without limiting the rights of the
Warrantholder under the terms of this Warrant, the Warrantholder shall have the
right (the "CONVERSION RIGHT") to convert this Warrant or any portion thereof
into shares of Common Stock as provided in this Section at any
-4-
time or from time to time prior to its expiration, subject to the restrictions
set forth in paragraph (c) hereof. In lieu of exercising this warrant for cash,
the holder may elect to surrender this warrant for conversion and to receive
shares of Common Stock equal to the value of this Warrant (or the portion being
cancelled, surrendered and converted) by surrender of this Warrant to the
Company together with notice of such election. Upon such event, the Company
shall issue to the holder a number of shares of the Company's Common Stock
computed by using the following formula:
X EQUALS Y (A MINUS B)
--------------
A
Where: X = The number of shares of Common Stock to be issued to the holder;
Y = The number of shares of Common Stock purchasable under this
Warrant;
A = The "Fair Market Value" of one share of the Common Stock; and
B = The Exercise Price of the Warrant (as adjusted to the date of the
calculation).
Upon exercise of the Conversion Right with respect to a particular
number of shares subject to this Warrant, the Company shall deliver to the
Warrantholder, without payment by the Warrantholder of any exercise price or any
cash or other consideration, that number of shares of Common Stock equal to the
number computed using the above formula. Notwithstanding anything in this
Section to the contrary, the Conversion Right cannot be exercised with respect
to a number of Converted Warrant Shares having a value below $1,000. No
fractional shares shall be issuable upon exercise of the Conversion Right, and
if the number of shares to be issued in accordance with the foregoing formula is
other than a whole number, the Company shall round down to the nearest whole
number the total number of shares to be issued.
(b) The Conversion Right may be exercised by the Warrantholder by the
surrender of this Warrant at the principal office of the Company together with a
written statement specifying that the Warrantholder thereby intends to exercise
the Conversion Right and indicating the number of shares of Common Stock or
authorized Common Stock subject to this Warrant which are being surrendered in
exercise of the Conversion Right. Such conversion shall be effective upon
receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "CONVERSION
DATE"), but not later than the Expiration Date.
(c) For purposes of this Section, the "FAIR MARKET VALUE" of a share of
Common Stock or authorized Common Stock as of the Conversion Date shall mean:
(i) if the Company's Common Stock is then traded on any
nationally-recognized stock exchange or quoted on the Nasdaq National Market or
SmallCap Market, the average of the closing sale prices for the 20 trading days
preceding the Conversion Date, as reported by such exchange or system;
(ii) if the Company's Common Stock is then traded on the
over-the-counter market, the average of the closing bid and closing asked prices
for the 30 trading days preceding the Conversion Date, as reported in The Wall
Street Journal or by any market maker; or
-5-
(iii) if quotations for the Company's Common Stock or
authorized Common Stock is not readily available as set forth in (i) or (ii)
above, then as determined in good faith by the Company's Board of Directors upon
a review of all relevant factors, including, without limitation, the price at
which shares of the Company's Common Stock or authorized Common Stock could
reasonably be expected to be sold in an arms-length transaction, for cash, other
than on an installment basis, to a person not employed by, controlled by, in
control of or under common control with the Company, which determination by the
Board of Directors shall give due consideration to recent transactions involving
shares of the Common Stock or authorized Common Stock, if any, revenues and
earnings of the Company to the date of such determination (if any), projected
revenues and earnings of the Company, the effect of the transfer restrictions to
which the shares are subject under law, the absence of a public market for the
Common Stock or authorized Common Stock, and such other matters as the Board of
Directors deems pertinent. Such determination by the Board of Directors shall be
conclusive and binding.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
thirty (30) days thereafter, the Company at its expense (including the payment
by it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and non-assessable shares of Common Stock (or Other
Securities) to which such holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then current market value of one
full share.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION OR MERGER.
3.1. REORGANIZATION, CONSOLIDATION OR MERGER. In case at any
time or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or entity, or (c) transfer all
or substantially all of its capital stock, properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, upon the proper and rightful
exercise of this Warrant, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 4 and 5.
3.2. CONTINUATION OF TERMS. Upon any corporate event referred
to in this Section 3, this Warrant shall continue in full force and effect and
the terms hereof shall be applicable to the shares of stock and Other Securities
and property receivable on the exercise of this Warrant after the consummation
of such reorganization, consolidation or merger, as the case may be, and shall
be binding upon the issuer of any such stock or other securities.
-6-
4. ADJUSTMENTS FOR STOCK DIVIDENDS AND STOCK SPLITS. In the event that
the Company shall (i) issue additional shares of the Common Stock as a dividend
or other distribution on outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
the Common Stock into a smaller number of shares of the Common Stock, then, in
each such event, the Exercise Price shall, simultaneously with the happening of
such event, be adjusted by multiplying the then prevailing Exercise Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event (calculated assuming the conversion
or exchange of all outstanding shares of convertible or exchangeable securities
of the Company which are convertible or exchangeable into, or exercisable for,
shares of Common Stock) and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such event (calculated
assuming the conversion or exchange of all outstanding shares of convertible or
exchangeable securities of the Company which are convertible or exchangeable
into, or exercisable for, shares of Common Stock), and the product so obtained
shall thereafter be the Exercise Price then in effect. The Exercise Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4. The holder of
this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 4) be issuable on such exercise, by a fraction of
which (i) the numerator is the Exercise Price which would otherwise (but for the
provisions of this Section 4) be in effect, and (ii) the denominator is the
Exercise Price in effect on the date of such exercise.
5. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY AND
RECLASSIFICATIONS. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which, in the case
of Common Stock, are provided for in Section 4), then and in each such case the
holder of this Warrant, on the exercise hereof as provided in Section 1, shall
be entitled to receive the amount of other or additional stock and other
securities and property (including cash in the cases referred to in subdivision
(b) of this Section 5) which such holder would hold on the date of such exercise
if on the date of distribution of such other or additional stock or other
securities and property, or on the record date fixed for determining the
shareholders entitled to receive such other or additional stock or other
securities and property, such holder had been the holder of record of the number
of shares of Common Stock called for on the
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face of this Warrant and had thereafter, during the period from the date thereof
to and including the date of such exercise, retained such shares and all such
other or additional stock and other securities and property (including cash in
the cases referred to in subdivision (b) of this Section 5) receivable by such
holder as aforesaid during such period, giving effect to all adjustments called
for during such period by Sections 3 and 4.
6. NOTICES OF RECORD DATE. In the event of
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
then and in each such event the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, and
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for securities or
other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be mailed at least twenty (20) days prior to the
date specified in such notice on which any such action is to be taken.
7. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock from time to time
issuable on the exercise of the Warrant; the shares of Common Stock which the
holder of this Warrant shall receive upon exercise of the Warrant will be duly
authorized, validly issued, fully paid and non-assessable.
8. EXCHANGE OF WARRANT. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
-8-
9. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. WARRANTHOLDER NOT DEEMED STOCKHOLDER; RESTRICTIONS ON TRANSFER.
This Warrant is issued upon the following terms, to all of which each holder or
owner hereof by the taking hereof consents and agrees:
(a) No holder of this Warrant shall, as such, be deemed the holder of
Common Stock that may at any time be issuable upon exercise of this
Warrant for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon such holder, as such, any of the rights of a
stockholder of the Company until such holder shall have delivered formal
notice to the Company of an intention to exercise this Warrant, tendered
promptly the consideration required for exercise (whether cash or
securities), exercised the Warrant, and been issued shares of Common Stock
in accordance with the provisions hereof.
(b) Neither this Warrant nor any shares of Common Stock purchased
pursuant to this Warrant shall be registered under the Securities Act of
1933, as amended (the "SECURITIES ACT") and applicable state securities
laws. Therefore, the Company may require, as a condition of allowing the
transfer or exchange of this Warrant or such shares, that the holder or
transferee of this Warrant or such shares, as the case may be, furnish to
the Company an opinion of counsel acceptable to the Company to the effect
that such transfer or exchange may be made without registration under the
Securities Act and applicable state securities laws. The certificates
evidencing the shares of Common Stock issued on the exercise of the
Warrant shall bear a legend to the effect that the shares evidenced by
such certificates have not been registered under the Securities Act and
applicable state securities laws.
(c) This Warrant is not transferable or assignable to any party without
the prior written consent of the Company, and accompanied by an opinion of
counsel satisfactory to the Company that such transfer is permissible
under applicable law.
11. NOTICES. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by (i) first class mail, postage
prepaid, (ii) electronic facsimile transmission, or (iii) express overnight
courier service, at such address as may have been furnished to the Company in
writing by such holder or, until any such holder furnishes to the Company an
address, then to, and at the address of, the last holder of this Warrant who has
so furnished an address to the Company.
12. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant and the shares of Common Stock underlying this Warrant
shall be construed and enforced in accordance
-9-
with and governed by the laws of the State of Delaware. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
Dated: April 29, 1997 DYNAGEN, INC.
ATTEST:
By: Dennis Bilodeau By: Indu A. Muni
---------------------- ------------------
Title: Controller Title: President
---------------------- ------------------
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO DynaGen, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ........ shares
of Common Stock of DynaGen, Inc., a Delaware corporation, and herewith makes
payment of $........ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to .............., whose address
is ................................
Dated:
(Signature must conform to name of holder
as specified on the face of the Warrant)
(Address)
--------------------
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and
transfers unto .................. the right represented by the within Warrant to
purchase ............. shares of Common Stock of DynaGen, Inc., a Delaware
corporation, to which the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the books of
DynaGen, Inc., a Delaware corporation, with full power of substitution in the
premises.
Dated:
(Signature must conform to name of holder
as specified on the face of the Warrant)
(Address)
Signed in the presence of:
EXHIBIT 10e
COMMERCIAL LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into as of the date set forth below
between SPC PROPERTIES LIMITED, and Ohio limited liability company, hereafter
referred to as "Lessor" and SUPERIOR PHARMACEUTICAL COMPANY, an Ohio corporation
hereinafter referred to as "Lessee":
WITNESSETH
1. LEASE PREMISES: In consideration of the rents, terms, provisions and
covenants of this Lease, Lessor hereby leases, lets, and demises to Lessee the
following described premises:
Approximately 37,323 square feet office/warehouse building (Building)
comprising 100% of Lessor's building (Lessee's Percentage) situated on
a 6.93 +/- acre parcel located at 1385 Kemper Meadow Drive, in the City
of Forest Park, Hamilton County, Ohio, and being further described as
follows:
Lot No. 3 of Kemper Meadow Business Center, Block "B", recorded in Plat
Book 312, Page 36, of the Hamilton County, Ohio Plat Records, and being
subject to all legal highways, easements and restrictions of record.
2. INITIAL TERM: Subject to and upon the conditions set forth below, the term of
this Lease shall commence upon issuance of a certificate of occupancy
("Commencement Date"). The Lease shall terminate on the last day of the 241st
month thereafter.
3. RENT: (a) BASE RENT: Lessee agrees to pay monthly as Base Rental during the
term of this Lease the sums as indicated on the attached "Base Rent Schedule"
(Exhibit B), which amounts shall be payable to Lessor at the address shown below
on the first day of the month. One monthly installment of rent shall be due and
payable on the day of execution of this Lease by Lessee for the first month's
rent and a like monthly installment shall be due and payable on or before the
first day of each calendar month, as indicated on the Rent Schedule, during the
demised term; provided, that if the "Commencement Date" should be a date other
than the first day of a calendar month, the monthly rental set forth above shall
be pro-rated to the end of that calendar month, and all succeeding installments
of rent shall be payable on or before the first day of each succeeding calendar
month during the demised term. Lessee shall pay, as additional rental, all other
sums due under this Lease.
(b) INSURANCE PREMIUMS: Lessor shall provide and Lessor shall pay for
the All Risk Fire and Extended Coverage Insurance for the Building with loss of
rent endorsement. However, at Lessee's option and subject to Lessor's review and
approval as to form, content and carrier, Lessee may provide the Building
insurance to Lessor at Lessee's expense. The costs associated with said
insurance coverage shall be included in the Base Rent as indicated on the
attached "Base Rent Schedule" (Exhibit B). If, however, the lessee pays for the
cost of the insurance then the lessee shall receive a credit on the Base Rent
for the actual amount paid.
-2-
(c) REAL ESTATE TAX: The total rental to be paid under this Lease shall
also include all real estate taxes and assessments levied on the Leased
Premises. Such payments be included in the Base Rent as indicated on the
attached "Base Rent Schedule' (Exhibit B).
(d) SERVICE CHARGE: Other remedies for nonpayment of rent
notwithstanding, if the monthly rental payment is not received by Lessor or if
any other payment due Lessor by Lessee is not received by Lessor on or before
the fifth (5th) day after it is due, a service charge of five percent (5%) of
such past due amount shall become due and payable in addition to such amounts
owed under this Lease.
It is the Lessee's responsibility to pay on a timely basis all costs associated
with the use and occupancy of the Leased Premises including , but not limited
to, all taxes, other than Real Estate Taxes and assessments, maintenance,
repairs, grounds keeping and snow removal.
4. USAGE: Lessee warrants and represents to Lessor that the Leased Premises
shall be used and occupied only for the purposes of the "Lessee" as
office/warehouse space. Lessee shall occupy the Leased Premises, conduct its
business and control its agents, employees, invitees and visitors in such a way
as is lawful, reputable and will not create any nuisance or otherwise interfere
with, annoy or disturb any property owner in Kemper Meadow Business Center in
its normal business operations or Lessor in its management of the Premises.
Lessee shall not commit, or suffer to be committed, any waste on the Leased
Premises.
5. INSURANCE: Use of Premises. Lessee shall not permit the Leased Premises to be
used in any way which could be extra hazardous on account of fire or otherwise
which would in any way increase or render void the fire insurance on the
Building or any part thereof or any contents in the Building belonging to or
used by Lessor. If at any time during the term of this Lease the State Board of
Insurance or other insurance authority disallows any of Lessor's sprinkler
credits or imposes an additional penalty or surcharge in Lessor's insurance
premiums because of Lessee's original or subsequent placement or use of storage
racks or bins, method of storage or nature of Lessee's inventory or any other
act of Lessee, Lessee agrees to pay as additional rental the increase in
Lessor's insurance premiums.
Lessee shall carry, at its expense, liability insurance on the Premises
throughout the Lease Term covering both Lessee and Lessor as named insureds and
if Lessor elects, any owner and/or Lessee of the land upon which the building is
located, as additional named insured, with terms and companies satisfactory to
Lessor and having a combined single limit, providing both bodily injury,
including death resulting therefrom, and property damage coverage, to the extent
of $2,000,000.00, arising out of the Ownership, maintenance or use of the Leased
Premises. Lessee shall also carry insurance against fire and such other risks as
are from time to time included in standard extended coverage insurance, insuring
the full replacement cost of all leasehold improvements paid for by Lessee,
including wall coverings, carpeting, furnishings and equipment. All such
policies shall be cancelable only upon ten (10) days prior written notice to
Lessee and Lessor. Prior to the Commencement Date and within fifteen (15) days
prior to the expiration of each such policy, Lessee shall furnish Lessor with
copies of such policies or certificates evidencing that such insurance is in
full force and effect and stating the terms thereof.
-3-
6. UTILITY SERVICE: Lessor shall provide the normal utility service connection
into the Leased Premises as indicated on approved construction plans. Lessee
shall pay the cost of all utility services, including, but not limited to, all
charges for gas, water and electricity used on the Leased Premises. Lessee shall
pay all costs caused by Lessee introducing excessive pollutants or solids other
than human waste into the sanitary sewer system, including permits, fees and
charges levied by any governmental subdivision for any such pollutants or
solids. Lessee shall be responsible for the installation and maintenance of any
dilution tanks, settling tanks, sewer sampling devices, sand traps, grease traps
or similar devices as may be required by any governmental subdivision for
Lessee's use of the sanitary sewer system. Lessor shall not be required to pay
for any utility services, supplies or upkeep in connection with the Leased
Premises.
7. REPAIRS AND MAINTENANCE: (a) Lessor's Obligations Unless otherwise expressly
provided, Lessor shall not be required to make any improvements, replacements or
repairs of any kind or character to the Leased Premises during the term of this
Lease except such repairs as are set forth in this subparagraph. Lessor shall
maintain only the foundation and the structural soundness of the roof, slab and
exterior walls (excluding all windows, window glass, plate glass and all doors)
of the Building in good repair and condition except for reasonable wear and
tear. Lessor will pass through any manufacturing warranties on building
components for benefit of Lessee. Lessee shall repair and pay for any damage
caused by the negligence or default of Lessee or Lessee's agents and employees.
Lessee shall immediately give written notice to Lessor of the need for repairs,
which repairs shall be made by Lessor beginning not more than fifteen (15) days
after written notice by Lessee. Lessor shall not be liable to Lessee, except as
expressly provided in the Lease, for any damage or inconvenience, and Lessee
shall not be entitled to any abatement or reduction of rent by reason of any
repairs, alterations or additions made by Lessor under this Lease except as
provided for in Paragraph 13.
(b) Lessee Obligations (i) Except as indicated hereinabove, Lessee
shall, at its own cost and expense, maintain all parts of the Building and other
Improvements on the Leased Premises in good repair and condition (including all
necessary replacements), including, but not limited to, dock bumpers, pest
control and extermination, and regular removal of debris. Lessee shall enter
into a service contract for maintenance of the heating, ventilating and cooling
systems with a qualified mechanical contractor providing for complete
maintenance service at six (6) month intervals.
(ii) Lessee shall not allow any damage to be committed on any portion of the
Leased Premises, and at the termination of this Lease, by lapse of time or
otherwise, Lessee shall deliver the Leased Premises to Lessor in as good
conditions as existed at the Commencement Date of this Lease, ordinary wear and
tear excepted. The cost and expense of any repairs necessary to restore the
condition of the Leased Premises shall be borne by Lessee, and if Lessor
undertakes to restore the Leased Premises it shall have a right of reimbursement
against Lessee.
8. COMPLIANCE WITH LAWS, RULES AND REGULATIONS: Lessee, at Lessee's expense,
shall comply with all laws, ordinances, orders rules, regulations and other
requirements
-4-
of state, federal, municipal or other agencies or bodies having jurisdiction
relating to the use, condition and occupancy of the Leased Premises. Lessee
shall not erect any exterior signs without the prior written approval of Lessor,
which shall not be unreasonably withheld.
9. LESSOR IMPROVEMENTS: If construction to the Leased Premises is to be
performed by Lessor prior to the Lessee's occupancy, Lessor will, at its
expense, commence and/or complete the construction of the improvements
constituting the Leased Premises, including partitions, in accordance with the
plans and specifications agreed to by the parties and made a part of this Lease
by reference. The plans and specifications shall be approved and signed by the
parties. Any changes or modifications to the approved plans and specifications
shall be made and accepted by written change order signed by Lessor and Lessee
and shall constitute an amendment to this Lease. Upon completion of the Building
and other improvements in accordance with the plans and specifications, Lessee
agrees to execute and deliver to Lessor a letter accepting delivery of the
Leased Premises.
In the event the Premises shall not be substantially completed and ready for
occupancy on the date above fixed for the commencement of the term of this
Lease, this Lease shall nevertheless continue in full force and effect, and no
liability shall arise against Lessor out of any such delay beyond the abatement
of rent until the Premises are ready for occupancy; provided, however, there
shall be no abatement of rent if the space is not substantially completed to
permit occupancy because of the failure of Lessee to submit Lessee Plans to
Lessor on a timely basis and, further, there shall be no abatement of rent
should Lessee unreasonably delay in authorizing Lessor to commence the
installation of Lessee's work or should Lessee request any changes of Lessee
work in progress if, in Lessor's opinion, such change may be a cause for the
extension of the date of substantial completion. If Lessee shall enter
possession of all or any part of the Premises and commence its business from the
Premises prior to the date fixed above for the first day of the term, all of the
covenants and conditions of this lease shall be binding upon the parties hereto
in respect of such possession the same as if the first day of the term had been
fixed as of the date which Lessee entered such possession and Lessee shall pay
to Lessor as rent for the period prior to the first day of the term of this
Lease a proportionate amount of the rent set forth in the Rent Schedule.
10. ALTERATIONS AND IMPROVEMENTS: Lessee shall not make or allow to be made any
alterations or physical additions in or to the Leased Premises without first
obtaining the written consent of Lessor which shall not be unreasonably
withheld. Any alterations, physical additions or Improvements to the Leased
Premises made by Lessee shall at once become the property of Lessor and shall be
surrendered to Lessor upon the termination of this Lease. Lessor, at its option,
may require Lessee to remove any physical additions and/or repair any
alterations in order to restore the Leased Premises to the condition existing at
the time Lessee took possession, all costs of removal and/or alterations to be
borne by Lessee. This clause shall not apply to moveable equipment or furniture
owned by Lessee which may be removed by Lessee at the end of the term of this
Lease if Lessee is not then in default and if such equipment and furniture is
not then subject to any other rights, liens and interest of Lessor.
-5-
11. LIENS: Lessee shall not permit any lien or claim for any lien of any
mechanic, laborer or supplier or any other lien to be filed against the
Building, the land on which the Building is located, the Leased Premises, or any
part thereof arising out of work performed, or alleged to have been performed
by, or at the direction of, or on behalf of Lessee. If any such lien or claim
for lien is filed, Lessee immediately either shall have such lien or claim for
lien released of record or shall deliver to Lessor either: (i) a bond form,
content, amount, and issued by surety, satisfactory to Lessor, indemnifying
Lessor and others designated by Lessor against all costs and liabilities
resulting from such lien or claim for lien and the foreclosure or attempted
foreclosure thereof, or (ii) endorsements to the title policies of Lessor and
Lessor's mortgagee "Insuring Over" such liens satisfactory to Lessor and
Lessor's mortgagee, respectively. If Lessee fails to have such lien or claim for
lien so released or to deliver such a bond or title endorsements to Lessor,
Lessor, without investigating the validity of such lien, may pay or discharge
the same and Lessee shall reimburse Lessor upon demand for the amount so paid by
Lessor, including Lessor's expenses and attorney's fees. At Lessee's request,
Lessor will grant a waiver of lien rights to Lessee's inventory.
12. CONDEMNATION: (a) Substantial Taking If, during the term (or any extension
or renewal) of this Lease, all or a substantial part of the Leased Premises are
taken for any public or quasipublic use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
such taking or purchase would prevent or materially interfere with the use of
the Leased Premises for the purpose for which they are then being used, this
Lease shall terminated and the rent shall be abated during the unexpired portion
of this Lease effective on the date physical possession is taken by the
condemning authority. Lessee shall have no claim to the condemnation award or
any part thereof, unless some portion of the award is specifically allocated to
Lessee. Lessee can pursue its own claims.
(b) Partial Taking In the event a portion of the Leased Premises shall
be taken for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain or by purchase in lieu
thereof, and this Lease is not terminated as provided in subparagraph (a) above,
Lessor may, at Lessor's sole risk and expense, restore and reconstruct the
Building and other Improvements on the Leased Premises to the extent necessary
to make it reasonably tenantable. The rent payable under this Lease during the
unexpired portion of the term shall be adjusted to such an extent as may be fair
and reasonable under the circumstances. Lessee shall have no claim to the
condemnation award or any part thereof, unless some portion of the award is
specifically allocated to Lessee. Lessee can pursue its own claims.
13. FIRE AND CASUALTY: (a) Substantial Damage If the Leased Premises should be
totally destroyed by fire or other casualty, or if the Leased Premises should be
so damaged so that rebuilding cannot reasonably be completed within one hundred
and eighty (180) working days after the date of written notification by Lessee
to Lessor of the destruction, this Lease shall terminate, and if such damage
shall not have been caused by the fault or neglect of Lessee, its agents,
employees, invitees, or those for whom Lessee is responsible, the rent shall be
abated for the unexpired portion of the Lease, effective as of the date of the
written notification.
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(b) Partial Damage If the Leased Premises should be partially damaged
by fire or other casualty, and rebuilding or repairs can reasonably be completed
within one hundred and eighty (180) working days from the date of written
notification by Lessee to Lessor of the destruction, this Lease shall not
terminate, but Lessor may proceed with reasonable diligence to rebuild or repair
the Building or other improvements to substantially the same conditions in which
they existed prior to the damage. If the Leased Premises are to be rebuilt or
repaired and are untenantable in whole or in part following the damage, and the
damage or destruction was not caused or contributed to by act or negligence of
Lessee, its agents, employees, invitees or those for whom Lessee is responsible,
the rent payable under this Lease during the period for which the Leased
Premises are untenantable shall be adjusted to such an extent as may be fair and
reasonable under the circumstances and mutually agreed upon by both the Lessee
and Lessor. In event that Lessor fails to complete the necessary repairs or
rebuilding within one hundred and eighty (180) working days from the date of
written notification by Lessee to Lessor of the destruction, Lessee may at its
option terminate this Lease by delivering written notice of termination to
Lessor, whereupon all rights and obligations under this Lease shall cease to
exist.
14. PROPERTY INSURANCE: Lessor shall at all times during the term of this Lease
maintain a policy or policies of insurance with the premiums paid in advance,
issued by and binding upon a solvent insurance company, insuring the Building
against all risk of direct physical loss in an amount equal to 100% of the full
insurable value of the Building structure and its improvements (exclusive of
excavation and foundation costs and costs of conduits, pilings and other similar
underground items and costs of parking lot paving and landscaping) as of the
date of the loss, provided, that Lessor shall not be obligated in any way or
manner to insure any personal property (including, but not limited to, any
furniture, machinery, goods or supplies) of Lessee or which Lessee may have upon
or within the Leased Premises or any fixtures, installed machinery, goods or
supplies of Lessee or which Lessee may have upon or within the Leased Premises
or any fixtures installed by or paid for by Lessee upon or within the Leased
Premises or any additional Improvements which Lessee may construct on the Leased
Premises.
15. WAIVER OF SUBROGATION: Anything in this Lease to the contrary
notwithstanding, to the extent that Lessor or Lessee shall be or have the right
to be reimbursed by insurance, Lessor and Lessee hereby waive and release each
other of and from any and all rights of recovery, claim, action or cause of
action, against each other, their agents, officers and employees, for any loss
or damage that may occur to the Leased Premises, Improvements to the Building of
which the Leased Premises are a part, or personal property (Building Contents)
within the Building, by reason of fire or the elements regardless of cause or
origin. Because this paragraph will preclude the assignment of any claim
mentioned in it by way of subrogation or otherwise to an insurance company or
any other person, each party to this Lease agrees immediately to give to each
insurance company which has issued to it policies of insurance covering all risk
of direct physical loss, written notice of the terms of the mutual waivers
contained in this paragraph, and to have the insurance policies properly
endorsed, if necessary, to prevent the invalidation of the insurance coverages
by reason of the mutual waivers contained in this paragraph.
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16. HOLD HARMLESS: Lessor shall not be liable to Lessee's employees, agents,
invitees, licensees or visitors, or to any other person, for any injury to
person or damage to property on or about the Leased premises caused by the
negligence or misconduct of Lessee, its agents, servants or employees, or of any
other person entering upon the Leased Premises under express or implied
authority of Lessee. Lessee agrees to indemnify and hold harmless Lessor of and
from any loss, attorney's fees, expenses or claims arising out of any such
damage or injury.
17. QUIET ENJOYMENT: Lessor warrants that it has full right to execute and to
perform this Lease and to grant the estate demised and that Lessee, upon payment
of the required rents and performing the terms, conditions, covenants and
agreements contained in this Lease, shall peaceably and quietly have, hold and
enjoy the Leased Premises during the full term of this Lease as well as any
extension or renewal thereof. Lessor shall not be responsible for the acts or
omissions of any other Lessee or third party that may interfere with Lessee's
use and enjoyment of the Leased Premises.
18. LESSOR'S RIGHT OF ENTRY: Lessor shall have the right, upon 24 hours prior
notice, at all reasonable hours, to enter the Leased Premises for the following
reasons: inspection; cleaning or making repairs; showing the Leased Premises to
prospective tenants or purchasers; determining Lessee's use of the Leased
Premises, or determining if an act of default under this Lease has occurred.
Lessee may escort Lessor or its agents while on Lease Premises.
19. ASSIGNMENT AND SUBLETTING: (a) Lessor's Rights Lessor shall have the right
to transfer and assign, in whole or in part, its rights and obligations in the
Building and property that are the subject of this Lease.
(b) Lessee's Restrictions. (i) without the prior written consent of
Lessor, which shall not be unreasonably withheld, Lessee may not sublease,
assign, mortgage, pledge, hypothecate or otherwise transfer or permit the
transfer of this lease or the interest of Lessee in this Lease, in whole or in
part, by operation of law or otherwise. If Lessee desires to enter into any
sublease of the Leased Premises, Lessee shall deliver written notice thereof to
Lessor, together with financial and other information sufficient for Lessor to
make an informed judgement with respect to such proposed sublease. Any approved
sublease shall be expressly subject to the terms and conditions of this Lease.
In the event of any assignment or subletting, Lessee shall never the less at all
times remain fully responsible and liable for the payment of the rent and
compliance with all of its other obligations under the terms, provisions, and
covenants of this Lease. Upon the occurrence of an "Event of Default" as defined
below, if all or any part of the Leased Premises are then assigned or sublet,
Lessor, in addition to any other remedies provided by this Lease or provided by
law, may at its option, collect directly from the assignee or subtenant all
rents becoming due to Lessee by reason of the assignment or sublease, and Lessor
shall have a security interest in all properties on the Leased Premises to
secure payment of such sums. Any collection directly by Lessor from the Assignee
or subtenant shall not be construed to constitute a novation or a release of
Lessee from the further performance of its obligations under the Lease.
(ii) In the event Lessee desires to enter into any sublease of
the Leased Premises, Lessor shall have the option to exclude from the Leased
Premises covered by the
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Lease, the space proposed to be sublet by Lessee, effective as of the proposed
Commencement Date of sublease of said space by Lessee. Lessor may exercise said
option after Lessee notifies Lessor of the proposed sublease. In the event
Lessor exercises said option, Lessee shall surrender possession of the proposed
sublease space to Lessor on the effective date of exclusion of said space from
the Leased Premises covered by this Lease, and neither party hereto shall have
any further rights or liabilities with respect to said space under this Lease.
20. DEFAULT BY LESSEE: The following shall be deemed to be Events of Default by
Lessee under this Lease:
(a) Delinquent Rent Lessee shall fail to pay when due any installment
of rent or any other payment required pursuant to this Lease and such failure to
pay continues for five days from date of notice;
(b) Abandonment Lessee shall abandon any substantial portion of the
Leased Premises;
(c) Other Defaults Lessee shall fail to comply with any term, provision
or covenant of this Lease, other than the payment or rent, and the failure is
not cured within ten (10) days after written notice to Lessee;
(d) Bankruptcy Lessee shall file a petition or be adjudged bankrupt or
insolvent under the National Bankruptcy Act, as amended, or any similar law or
statute of the United States or any state; or a receiver or trustee shall be
appointed for all or substantially all of the assets of Lessee; or Lessee shall
make a transfer in fraud of creditors or shall make an assignment for benefit of
creditors; or
(e) Liens Lessee shall do or permit to be done any act which results in
a lien being filed against the Leased Premises or the Building and/or Project of
which the Leased Premises are a part.
21. REMEDIES FOR LESSEE'S DEFAULT: Upon the occurrence of any event of default
set forth in this Lease, Lessor shall have the option to pursue any one or more
of the following remedies without any notice or demand:
(a) Termination. Terminate this Lease, in which event Lessee shall
immediately surrender the Leased Premises to Lessor, and if the Lessee fails to
surrender the Leased Premises, Lessor may, without prejudice to any other remedy
which it may have for possession or arrearages in rent, enter upon and take
possession of the Leased Premises, by picking or changing locks if necessary and
lock out, expel, or remove Lessee and any other person who may be occupying all
or any part of the Leased Premises without being liable for prosecution of any
claim for damages. Lessee agrees to pay on demand the amount of all loss and
damage which Lessor may suffer by reason of the termination of the Lease under
this subparagraph, whether through inability to relet the Leased Premises on
satisfactory terms or otherwise.
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(b) Entry and Reletting Enter upon and take possession of the Leased
Premises by picking or changing lock if necessary, and lock out, expel or remove
Lessee and any other person who may be occupying all or any part of the Leased
Premises without being liable for any claim or damages, and relet the Leased
Premises on behalf of Lessee and receive directly the rent by reason of the
reletting.
(c) Entry and Performing Lessee's Obligations. Enter upon the Leased
Premises, by picking or changing locks if necessary, without being liable for
prosecution or any claim for damages, and do whatever Lessee is obligated to do
under the terms of this Lease. Lessee agrees to reimburse Lessor on demand for
any expenses which Lessor may incur in effecting compliance with Lessee's
obligations under this Lease; further, Lessee agrees that Lessor shall not be
liable for any damages resulting to Lessee from effecting compliance with
Lessee's obligations under this subparagraph caused by negligence of Lessor or
otherwise.
22. WAIVER OF DEFAULT OR REMEDY: Failure of Lessor to declare an event of
default immediately upon its occurrence, or delay in taking any action in
connection with an event of default, shall not constitute a waiver of the
default, but Lessor shall have the right to declare the default at any time and
take such action as is lawful or authorized under this Lease. Pursuit of any one
or more of the remedies set forth in Paragraph 21 above shall not preclude
pursuit of any one or more of the other remedies provided elsewhere in this
Lease or provided by law, nor shall pursuit of any remedy provided constitute
forfeiture or waiver of any rent or damages accruing to Lessor by reason of the
violation of any of the terms, provisions or covenants of this Lease. Failure by
Lessor to enforce one or more of the remedies provided upon an event of default
shall not be deemed or construed to constitute a waiver of the default or of any
other violation or breach of any of the terms, provisions or covenants contained
in this Lease.
23. ACTS OF GOD: Lessor shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Lessee, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
by or prevented by an Act of God or Force Majeure.
24. ATTORNEY'S FEES: Lessee shall pay upon demand, all costs and expenses,
including reasonable attorney's fees, incurred by Lessor in enforcing the
observance and performance by Lessee of all covenants, conditions provisions of
this Lease or resulting from Lessee's default under this Lease. In the event of
default by Lessor, Lessee shall be entitled to attorney's fees required to
enforce any remedies resulting from such default.
25. SURRENDER OF PREMISES: Upon expiration or termination of this Lease or
termination of Lessee's right of possession of the Leased Premises. Lessee shall
vacate the Leased premises. Lessee shall immediately deliver possession thereof
to Lessor in a clean, good and tenantable condition, ordinary wear and tear
accepted. Upon any termination which occurs other than by reason of Lessee's
default, Lessee shall be entitled to remove from the Leased Premises all movable
personal property of Lessee's provided Lessee immediately shall repair all
damage resulting from such removal and shall restore the Leased Premises to
tenantable condition. In the event possession of the Leased Premises is not
immediately delivered to Lessor or if Lessee shall fail to remove all of
Lessee's movable property as aforesaid, Lessor may
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remove any of such property therefrom without any liability of Lessor to Lessee
or any other party. All movable property which may be removed from the Leased
Premises by Lessor shall be conclusively presumed to have been abandoned by
Lessee and title thereto shall pass to Lessor without any cost or credit
therefore and Lessor may at its option and at Lessee's expense, store and/or
dispose of such property.
26. HOLDING OVER: In the event of holding over by Lessee after the expiration or
termination of this Lease, the hold over shall be as a tenant at will and all of
the terms and provisions of this Lease shall be applicable during that period.
Lessee shall pay Lessor as rental for the period of such hold over an amount
equal to one and one-half (1-1/2) of the rent which would have been payable by
Lessee had the hold over period been a part of the original term of this Lease.
Lessee agrees to vacate and deliver the Leased Premises to Lessor upon Lessee's
receipt of notice from Lessor to vacate. The rental payable during the hold over
period shall be payable to Lessor on demand. No holding over by Lessee, whether
with or without consent of Lessor, shall operate to extend this Lease except as
otherwise expressly provided.
27. RIGHTS OF FIRST AND SECOND MORTGAGEE: Lessee accepts this Lease subject and
subordinate to any recorded first and second mortgage or deed of trust lien
presently existing or hereafter created upon the Leased Premises. Lessor is
hereby irrevocably vested with full power and authority to subordinate Lessee's
interest under this Lease to any first and second mortgage or deed of trust lien
hereafter placed on the Leased Premises, and Lessee agrees upon demand to
execute additional instruments subordinating this Lease as Lessor may require.
If the interests of Lessor under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any first or second mortgage
or deed of trust on the Leased Premises, Lessee shall be bound to the transferee
(sometimes called the `Purchaser'), at the option of the Purchaser, under the
terms, covenants and conditions of this Lease for the balance of the term
remaining, and any extensions or renewals with the same force and effect as if
the Purchaser were Lessor under this Lease, and, if requested by the Purchaser,
Lessee agrees to atone to the Purchaser, including the first and second
mortgagee under any such mortgage if it be the Purchaser, as its Lessor. The
transfer of any interest of Lessor under this Lease shall not diminish Lessee's
rights under the Lease as long as it is not in default hereunder.
28. ESTOPPEL CERTIFICATES: Lessee agrees to furnish promptly from time to time,
upon request of Lessor or Lessor's mortgagee, a statement certifying, if
applicable, that Lessee is in possession of the Leased premises; the Leased
Premises are acceptable; the Lease is in full force and effect; the Lease is
unmodified; Lessee claims no present charge, liens or claim of offset against
rent; the rent is paid for the current month, but is not prepaid for more than
one month and will not be prepaid for more than one month in advance; there is
no existing default by reason of some act or omission by Lessor; and such other
matters as may be reasonably required by Lessor or Lessor's mortgagee.
29. SUCCESSORS: Subject to Paragraphs 20 and 21 hereof, this Lease shall be
binding upon and insure to benefit of Lessor and Lessee and their respective
heirs, personal representatives, successors and assigns, and if Lessor's
interest in the Leased Premises cease to exist for any reason during the term of
this lease, then, notwithstanding the happening of such
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event, this Lease nevertheless shall remain unimpaired and in full force and
effect and Lessee hereunder agrees to atone to the then owner of the Leased
Premises.
30. RENT TAX: If applicable in the jurisdiction where the Leased Premises are
situated, Lessee shall pay and be liable for all rental, sales and use taxes or
other similar taxes, related to the leased Premises, levied or imposed by any
city, state, or county or other governmental body having authority, such
payments to be in addition to all other payments required to be paid to Lessor
by Lessee under the terms of this Lease. Any such payment shall be paid
concurrently with the payment of the rent upon which the tax is based as set
forth above.
31. DEFINITIONS: The following definitions apply to the terms set forth below as
used in this Lease:
(a) "Abandon" means the vacating of all or a substantial portion of the
Leased Premises by lessee, whether or not Lessee is in default of the rental
payments due under this Lease.
(b) An "Act of God" or "Force Majeure" is defined for purposes of this
Lease as strikes, lockouts, sit-downs, material or labor restrictions by any
governmental authority, unusual transportation delays, riots, floods, washouts,
explosions, earthquakes, fire, storms weather (including wet ground or inclement
weather which prevents construction), acts of the public enemy, wars,
insurrections and any other cause not reasonably within control of Lessor and
which by the exercise of due diligence Lessor is unable, wholly or in part, to
prevent or overcome.
(c) The "Completion Date" shall be the date on which the Improvements
erected and to be erected upon the Leased Premises shall have been substantially
completed in accordance with the plans and specifications referred to in
Paragraph 9.
(d) "Real Estate Tax" means all school, city, state and county taxes
and assessments including special district taxes or assessments.
(e) "Square Feet" or "Square Foot" as used in this Lease includes the
area contained within the space occupied by Lessee.
32. MISCELLANEOUS: The captions, headings, and titles appearing in this Lease
are inserted only as a matter of convenience and in no way define, limit,
construe or describe the scope or intent of such paragraph. If any provision of
this Lease or the application thereof to any person or circumstance shall be
invalid or unenforceable to any extent, the remainder of this Lease and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by Law.
33. NOTICE AND PAYMENTS: (a) Payments by Lessee All rent and other payments
required to be made by Lessee shall be payable to Lessor the address set forth
below.
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(b) Payments by Lessor All payments required to be made by Lessor to
Lessee shall be payable to Lessee at the address set forth below, or at any
other address with the United States as Lessee may specify from time to time by
written notice.
(c) Notice Any notice or document required or permitted to be delivered
by this Lease shall be deemed to be delivered (whether or not actually received)
when deposited in the Untied States Mail, postage prepaid, certified mail,
return receipt requested, addressed to the parties at the respective addresses
set out below:
LESSOR: LESSEE:
1385 Kemper Meadow Drive 1385 Kemper Meadow Drive
Forest Park, Ohio 45240 Forest Park, Ohio 45240
or to such other address as Lessor or Lessee may specify by a notice given in
the foregoing manner. All notices, demands, and requests shall be effective upon
being deposited in the United States Mail. However, the time period in which a
response to any such notice, demand or request must be given shall commence to
run from the date of receipt on the return receipt of the notice, demand or
request by the addressee thereof. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to be receipt of the notice, demand or request sent.
34. REAL ESTATE BROKERS: Lessee represents that Lessee has not dealt with any
real estate broker, salesperson, or finder in connection with this Lease, and no
such person initiated or participated in the negotiation of this Lease, or
showed the Premises to Lessee. Lessee agrees to indemnify and hold Lessor
harmless from any claim or claims, as well as costs and expenses including
attorney's fees incurred by Lessor in conjunction with any such claim or claims,
of any broker or brokers, claiming to have interested Lessee in the Building or
Leased Premises or claiming to have caused Lessee to enter into this Lease.
35. SECURITY DEPOSIT: Lessor has received from Lessee the sum of $10,000.00 as
security for the performance of all of Lessee's obligation hereunder including
the payment of rent. In the event of any default by Lessee, Lessor may at it
option apply such part of the deposit as may be necessary to cure the default,
and if Lessor does so, Lessee shall upon demand make such additional deposit as
may be required to maintain the sum of $10,000.00 on hand. Upon the termination
of this Lease, Lessor shall, provided the Lessee is not in any default, refund
to Lessee the balance held by Lessor without interest. In the event of a sale of
the Land and Building of which the Leased premises are a part, Lessor shall have
the right to transfer the deposit and Lessee agrees to look to the new purchaser
solely for the return of said deposit.
35. SEVERABILITY: If any provision of this Lease shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
validate or render unenforceable any other provision hereof.
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36. APPLICABLE LAW: This Lease shall be governed by the applicable laws of the
State of Ohio.
37. LESSER COVENANTS: Lessee agrees, covenants, represents and warrants that:
1) as of the date of execution hereof, Lessee is not in
default of any of its obligations or agreements with its creditors.
2) Upon request, Lessee will provide Lessor financial
information or sureties satisfactory to Lessor and Lessor's first mortgagee.
3) All obligations of Lessee shall be guaranteed by all
Shareholders of Lessee pursuant to a Lease Guaranty Agreement of even date
herewith.
39. ENTIRE AGREEMENT AND LIMITATION OF WARRANTIES; IT IS EXPRESSLY AGREED BY
LESSEE, AS A MATERIAL CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS
LEASE, WITH THE SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE
ENTIRE AGREEMENT OF THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL
REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR
PROMISES PERTAINING TO THIS LEASE OR THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC
DOCUMENTS NOT INCORPORATED IN WRITING IN THIS LEASE. LESSOR AND LESSEE EXPRESSLY
AGREE THAT THERE ARE AND SHALL BE NO IMPLIED WARRANTIES WHICH EXTEND BEYOND
THOSE EXPRESSLY SET FORTH IN THIS LEASE. IT IS LIKEWISE AGREED THAT THIS LEASE
MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED EXCEPT BY AN INSTRUMENT IN
WRITING SIGNED BY BOTH LESSOR AND LESSEE.
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Signed at Cincinnati, Ohio, this 9th day of March, 1995.
LESSEE: SUPERIOR PHARMACEUTICAL COMPANY
Witnesseth:
Sheila M. Jobe_____________________ By: Dennis B. Smith____________________
[illegible]________________________ By: Eric C. Hagerstrand, VP____________
STATE OF OHIO )
)SS.
COUNTY OF HAMILTON )
I HEREBY CERTIFY, that on this 9th day of March, 1995, before me the
subscriber, a Notary Public of the State of Ohio, in and for said County of
Hamilton, aforesaid personally appeared DENNIS B. SMITH, the President, and ERIC
C. HAGERSTRAND, the Vice-President of SUPERIOR PHARMACEUTICAL COMPANY, the
Lessee in the foregoing Lease, who being duly authorized by its Board of
Directors and acting in order to and with the express intent of binding said
corporation acknowledged the signing of the foregoing Lease Agreement as the
free and voluntary corporate act of Tenant and the free and voluntary act and
deed of said officers for an on behalf of said corporation for the uses of
purposes therein mentioned.
IN TESTIMONY WHEREOF, I hereunto set my hand and official seal at
Cincinnati, Ohio.
Sheila M. Jobe
---------------------------------------
Notary Public
Witnesseth: LESSOR: SPC PROPERTIES LIMITED
Sheila M. Jobe By: Thomas L. Canning
- ------------------------------------- ---------------------------------------
[illegible] By: Eric C. Hagerstrand
- ------------------------------------- ---------------------------------------
By: Dennis B. Smith
- ------------------------------------- ---------------------------------------
I HEREBY CERTIFY, that on this 9th day of March, 1995, before me the
subscriber, a Notary Public of the State of Ohio, in and for said County of
Hamilton, aforesaid personally
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appeared DENNIS B. SMITH, ERIC C. HAGERSTRAND, and THOMAS L. CANNING, all of the
members of SPC Properties Limited, the Lessor in the foregoing Lease Agreement
as his free and voluntary act for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I hereunto set my hand and official seal at
Cincinnati, Ohio.
Sheila M. Jobe
---------------------------------
Notary Public
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BASE RENT SCHEDULE
FOR
COMMERCIAL LEASE AGREEMENT
Months 1 through 60 $25,000.00
Months 2 through 120 $30,000.00
Months 121 through 241 $35,000.00
Witnesseth: LESSOR:
Sheila M Jobe Eric C. Hagerstrand
- ------------------------------------- ---------------------------------------
[illegible Thomas L. Canning
- ------------------------------------- ---------------------------------------
Witnesseth: LESSEE:
Sheila M. Jobe Eric C. Hagerstrand
- ------------------------------------- ---------------------------------------
[illegible] Dennis B. Smith
- ------------------------------------- ---------------------------------------
EXHIBIT 10f
AMENDMENT, ESTOPPEL AND CONSENT AGREEMENT
Agreement made as of June 18, 1997 between SPC Properties Limited
("Lessor"), an Ohio limited liability company, and Superior Pharmaceutical
Company ("Lessee"), an Ohio corporation (the "Agreement").
WHEREAS, an Agreement and Plan of Merger was entered into on March 7,
1997, and amended by Amendment No. 1 to Agreement and Plan of Merger dated as of
June , 1997, by and among DynaGen, Inc. ("DynaGen"), DynaGen Acquisition Corp.
("Acquisition"), Lessee and others, pursuant to which Acquisition will be merged
with and into Lessee, and as a result, the separate corporate existence of
Acquisition shall cease and Lessee shall continue as the surviving corporation
under the name "Superior Pharmaceutical Company" (the "Merger"); and
WHEREAS, Lessor is the landlord and Lessee is the tenant under a
Commercial Lease Agreement dated March 9, 1995 (the "Lease") with respect to the
approximately 37,323 square foot office/warehouse building situated on a 6.93
+/- acre parcel located at 1385 Kemper Meadow Drive, Forest Park, Ohio (the
"Leased Premises"); and
WHEREAS, in anticipation of the Merger and in order to induce DynaGen
to complete the Merger, Lessor and Lessee desire to clarify certain obligations
and rights under the Lease and amend the Lease.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties and agreements set forth in this Agreement and other
valuable consideration, the receipt of which is hereby acknowledged by Lessor
and Lessee, the parties hereby agree as follows:
1. Consent Not Required. Notwithstanding any provision of the Lease to
the contrary, Lessor hereby agrees that the consent of Lessor is not
required with respect to the completion of the Merger, and Lessor
hereby waives any right to claim that the Merger constitutes an
assignment, mortgage, pledge, hypothecation, sublet or transfer of the
Lease by operation of law or otherwise.
2. Amendment. Lessor and Lessee hereby agree that the Lease shall be
amended as follows:
(a) The following paragraph is added to the end of Section 1
of the Lease as a further definition of the Leased Premises:
Lessee shall have the appurtenant rights to use (i)
all parking areas on said Lot No. 3, (ii) all
driveways, entrances and walkways providing access to
the Building or such parking areas, to the extent of
Lessor's interest therein, (iii) all easements,
rights-of-way and other appurtenant rights and
interests benefiting said Lot 3 from time to time,
and (iv) all wires, cables, pipes, conduits, mains,
equipment and other improvements necessary for or
relating to the provision of electrical, gas,
telephone, cable, drainage, water, sewer and other
utility services to the Building, to the extent of
Lessor's interest therein. The Building and such
appurtenant rights are hereinafter collectively
called the "Leased Premises".
(b) The "Base Rental Schedule" (attached to the Lease), which
is incorporated into Section 3 of the Lease, is hereby amended
to delete the phrase "Months 2-120" and insert the phrase
"Months 61-120" in order to correct the typographical error
contained therein.
(c) The following provision is hereby added to the end of
Section 3 of the Lease:
To the extent Lessor receives such payments of real
estate taxes and assessments from Lessee, Lessor
shall pay when due all Real Estate Taxes (as
hereinafter defined) levied on the Leased Premises
and shall not allow any penalties or interest to be
assessed due to the failure to pay such Real Estate
Taxes.
(d) Section 7(a) is hereby amended to add the following
language at the end of the fourth sentence of such section:
except that Lessee shall not be responsible for the
repair of any damage caused by fire or other casualty
or for any damage for which Lessor has waived its
rights against Lessee pursuant to Section 15 of the
Lease.
(e) Section 7(b)(ii) is hereby amended such that the following
language is added at the end of the first sentence thereof
before the word "excepted":
, damage by fire or other casualty and eminent domain
(f) Section 10 is further amended by deleting the last
sentence thereof and inserting the following in its place:
Notwithstanding the foregoing, Lessee shall be
entitled to remove all trade fixtures, equipment and
personal property (including, without limitation, the
storage and material handling equipment) from the
Leased Premises during or at the expiration of the
term without the consent or approval of Lessor or any
other party and any damage caused thereby shall be
repaired by Lessee; provided, however that during the
term of the Lease and for as long as the interest of
the First Mortgagee (as defined below) is in full
force and effect, Lessee shall obtain the prior
consent of the First Mortgagee of such removal (which
consent shall not be unreasonably withheld).
(t) Section 19(b)(ii) is hereby deleted.
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(g) Section 20 is hereby amended by deleting Subsection (c)
and replacing it with the following:
(c) Other Defaults. Lessee shall fail to comply with
any term, provision or covenant of this Lease, other
than the payment of rent or any other payment
required under this Lease, and such failure is not
cured within thirty (30) days after written notice to
Lessee, provided, however, that if such failure
cannot reasonably be cured within said thirty (30)
day period, Lessee shall not be deemed to be in
default if Lessee shall within such period commence
such cure, and thereafter diligently prosecute the
same to completion.
(h) Section 25 is hereby amended by deleting the word
"accepted" at the end of the second sentence thereof and
replacing it with the following:
, damage by fire or other casualty and eminent domain
excepted.
(i) Section 27 is hereby amended by adding the following at
the end of such Section:
Lessor hereby warrants and represents that no parties
other than The Huntington National Bank (the "First
Mortgagee") and Hamilton County Development Co.,
Inc., (the "Second Mortgagee"; together with the
First Mortgagee, the "Existing Mortgagees") have an
interest in the Leased Premises under a ground lease,
mortgage, deed of trust or any other security
instrument (collectively, "Security Instruments").
Lessor shall use its best efforts to obtain from the
Existing Mortgagees and deliver to Lessee an
agreement for Lessee's benefit (a "Non-Disturbance
Agreement") providing that, if either Existing
Mortgagee (or any of its successors in interest with
respect to the Leased Premises or this Lease)
acquires title to the Leased Premises or succeeds to
the landlord's interest under this Lease by
foreclosure, deed in lieu of foreclosure, termination
or other exercise of rights under its Security
Instruments (any such acquisition or succession being
a "Foreclosure"), such Existing Mortgagee (or its
successors) shall not disturb Lessee's possession of
the Leased Premises under this Lease, shall recognize
Lessee's rights as tenant under this Lease and shall
assume Lessor's obligations under this Lease that
arise or accrue after such Foreclosure, so long as
Lessee is not in default of its obligations under
this Lease after any applicable notice and beyond any
applicable cure periods under this Lease. Lessor
shall obtain and deliver to Lessee a Non-Disturbance
Agreement from the holders of any Security
Instruments under which any party now or
-3-
hereafter holds an interest in the Leased Premises or
this Lease, except the first and second priority
Security Instruments held by the Existing Mortgagees
as of March 30, 1995 (any such Security Instrument
being a "New Security Instrument"). Each
Non-Disturbance Agreement shall require such other
holders to give Lessee written notice of any default
by Lessor in the payment or performance of its
obligations secured by the Security Instrument that
is the subject of such Non-Disturbance Agreement.
Notwithstanding any contrary provision of this Lease,
(i) the subordination of this Lease to any New
Security Instrument, (ii) the power and authority of
Lessor to subordinate this Lease to any New Security
Instruments, (iii) the obligation of Lessee to
subordinate this Lease to any New Security
Instruments, (v) the option of any Purchaser to bind
Lessee under this Lease after the Foreclosure under
any New Security Instrument, and (v) the obligation
of Lessee to attorn to any such Purchaser shall all
be conditioned upon Lessee receiving a
Non-Disturbance Agreement with respect to such New
Security Instrument. If Lessor delivers a
Non-Disturbance Agreement from any Existing Mortgagee
or any such other holder, Lessee shall agree in such
Non-Disturbance Agreement to subordinate this Lease
to the Security Instrument that is the subject of
such Non-Disturbance Agreement and to attorn to such
Existing Mortgagee or holder (or its successor in
interest with respect to the Leased Premises or this
Lease), subject to the terms and conditions of this
Lease and such Non-Disturbance Agreement.
(j) Section 33(c) is hereby amended so that a copy of any
notice or document required or permitted to be delivered under
the Lease to Lessee shall be delivered to:
DynaGen, Inc.
99 Erie Street
Cambridge, MA 02139
Attention: President
3. Lessor's Warranties and Representations. Lessor hereby warrants and
represents to Lessee and DynaGen that:
(a) A copy of the Lease attached to this Agreement as Exhibit
A is a complete and correct copy of the Lease which has not
been amended prior to the date hereof;
(b) The Lease is in full force and effect according to the
terms set forth in Exhibit A;
-4-
(c) Lessor is the holder of the lessor's interest under the
Lease and holds fee title to the Leased Premises;
(d) Lessor has not delivered to Lessee a notice of default
under the Lease;
(e) Neither Lessee nor Lessor is not in default under the
Lease, nor has any event occurred which, after the giving of
any applicable notice, and/or such expiration date of any
applicable grace period which would constitute a default by
either party under the Lease;
(f) All rent, additional rent and other charges under the
Lease have been paid as billed in the normal course through
May 31, 1997;
(g) To the extent that the consent of a bank or other lender
is required in connection with this Agreement, Lessor has
obtained such consent; and
(h) The Commencement Date of the Lease occurred on March 9,
1995.
4. Reliance. Lessor and Lessee hereby agree that DynaGen may rely on
the representations and agreements contained herein.
5. Payment of Rent/Release of Guaranty. Notwithstanding any provision
of the Lease to the contrary, for so long as Lessee or its affiliates or
successors shall have any obligations with respect to any debt of Lessor now or
hereafter secured by an interest in the Leased Premises or this Lease under a
Security Instrument (a "Secured Obligation"), Lessee shall have the right, but
not the obligation, at any time and from time to time, to pay the Base Rental
and any other rent due under the Lease directly to the creditor or holder of any
Secured Obligation to satisfy such portion of the Secured Obligations then due
and payable as the Base Rental and any other rent will cover. To the extent the
Base Rental and any other rent exceed the Secured Obligations due and payable
from time to time, Lessee shall pay such excess to Lessor. Lessor warrants and
represents that the current monthly payment to the First Mortgagee is $9,753.37
and to the Second Mortgagee is $6,270.43. Lessor shall notify Lessee in writing
of (i) any change in the amount of the monthly payment due to either of the
Existing Mortgagees, (ii) any default in the payment or performance of any
Secured Obligations, and (iii) the name and address, and any change in the name
or address, of any present and future creditor or holder of a Secured
Obligation.
Lessor further agrees not take to take any action which will increase
the obligations, monetary or otherwise, owed or due to the Existing Mortgagees.
Before March 31, 2000, Lessor shall cause Lessee to be released from (i) all
guaranties in effect as of the date of this Lease with respect to any present or
future liabilities, debts and other obligations of Lessor, and (ii) all other
Secured Obligations.
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IN WITNESS WHEREOF, the parties hereto have hereunto caused this
Agreement to be executed as of the day and year first written above.
Signed and Acknowledged in the Presence of LESSOR:
(as to Landlord):
SPC PROPERTIES LIMITED
By: John R. Nalter
------------------------------
Title: Legal Office Clerk
By: Eric C. Hagerstrand
----------------------------
Jack L. Tucker Title: Member
------------------------------ Name: Eric C. Hagerstrand
Signed and Acknowledged in the Presence of LESSEE:
(as to Tenant):
SUPERIOR PHARMACEUTICAL COMPANY
By: John R. Nalter
-----------------------------------
Title: Legal Office Clerk
By: Eric C. Hagerstrand
----------------------------
Jack L. Tucker Title: Chairman/VP
----------------------------------- Name: Eric C. Hagerstrand
State of Ohio
County of Hamilton
Before me personally appeared Eric C. Hagerstrand, the Member of SPC
Properties Limited, to me known, and known by me to be the party executing the
foregoing instrument on behalf of said corporation and he acknowledged said
instrument, executed to the his free act and deed in the free act and deed of
SPC Properties Limited.
John R. Nalter
------------------------
Notary Public
My Commission Expires on:
State of Ohio
County of Hamilton
Before me personally appeared Eric C. Hagerstrand, the Chairman/VP of
the Superior Pharmaceutical Company, to me known, and known by me to be the
party executing the foregoing instrument on behalf of said corporation and he
acknowledged said instrument, executed to the his free act and deed in the free
act and deed of the Superior Pharmaceutical Company.
John R. Nalter
------------------------
Notary Public
My Commission Expires on:
-6-
EXHIBIT A
COMMERCIAL LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into as of the date set forth below
between SPC PROPERTIES LIMITED, and Ohio limited liability company, hereafter
referred to as "Lessor" and SUPERIOR PHARMACEUTICAL COMPANY, an Ohio corporation
hereinafter referred to as "Lessee":
WITNESSETH
1. LEASE PREMISES: In consideration of the rents, terms, provisions and
covenants of this Lease, Lessor hereby leases, lets, and demises to Lessee the
following described premises:
Approximately 37,323 square feet office/warehouse building (Building)
comprising 100% of Lessor's building (Lessee's Percentage) situated on
a 6.93 +/- acre parcel located at 1385 Kemper Meadow Drive, in the City
of Forest Park, Hamilton County, Ohio, and being further described as
follows:
Lot No. 3 of Kemper Meadow Business Center, Block "B", recorded in Plat
Book 312, Page 36, of the Hamilton County, Ohio Plat Records, and being
subject to all legal highways, easements and restrictions of record.
2. INITIAL TERM: Subject to and upon the conditions set forth below, the term of
this Lease shall commence upon issuance of a certificate of occupancy
("Commencement Date"). The Lease shall terminate on the last day of the 241st
month thereafter.
3. RENT: (a) BASE RENT: Lessee agrees to pay monthly as Base Rental during the
term of this Lease the sums as indicated on the attached "Base Rent Schedule"
(Exhibit B), which amounts shall be payable to Lessor at the address shown below
on the first day of the month. One monthly installment of rent shall be due and
payable on the day of execution of this Lease by Lessee for the first month's
rent and a like monthly installment shall be due and payable on or before the
first day of each calendar month, as indicated on the Rent Schedule, during the
demised term; provided, that if the "Commencement Date" should be a date other
than the first day of a calendar month, the monthly rental set forth above shall
be pro-rated to the end of that calendar month, and all succeeding installments
of rent shall be payable on or before the first day of each succeeding calendar
month during the demised term. Lessee shall pay, as additional rental, all other
sums due under this Lease.
(b) INSURANCE PREMIUMS: Lessor shall provide and Lessor shall pay for
the All Risk Fire and Extended Coverage Insurance for the Building with loss of
rent endorsement. However, at Lessee's option and subject to Lessor's review and
approval as to form, content and carrier, Lessee may provide the Building
insurance to Lessor at Lessee's expense. The costs associated with said
insurance coverage shall be included in the Base Rent as indicated on the
attached "Base Rent Schedule" (Exhibit B). If, however, the lessee pays for the
cost of the insurance then the lessee shall receive a credit on the Base Rent
for the actual amount paid.
(c) REAL ESTATE TAX: The total rental to be paid under this Lease shall
also include all real estate taxes and assessments levied on the Leased
Premises. Such payments be included in the Base Rent as indicated on the
attached "Base Rent Schedule' (Exhibit B).
(d) SERVICE CHARGE: Other remedies for nonpayment of rent
notwithstanding, if the monthly rental payment is not received by Lessor or if
any other payment due Lessor by Lessee is not received by Lessor on or before
the fifth (5th) day after it is due, a service charge of five percent (5%) of
such past due amount shall become due and payable in addition to such amounts
owed under this Lease.
It is the Lessee's responsibility to pay on a timely basis all costs associated
with the use and occupancy of the Leased Premises including , but not limited
to, all taxes, other than Real Estate Taxes and assessments, maintenance,
repairs, grounds keeping and snow removal.
4. USAGE: Lessee warrants and represents to Lessor that the Leased Premises
shall be used and occupied only for the purposes of the "Lessee" as
office/warehouse space. Lessee shall occupy the Leased Premises, conduct its
business and control its agents, employees, invitees and visitors in such a way
as is lawful, reputable and will not create any nuisance or otherwise interfere
with, annoy or disturb any property owner in Kemper Meadow Business Center in
its normal business operations or Lessor in its management of the Premises.
Lessee shall not commit, or suffer to be committed, any waste on the Leased
Premises.
5. INSURANCE: Use of Premises. Lessee shall not permit the Leased Premises to be
used in any way which could be extra hazardous on account of fire or otherwise
which would in any way increase or render void the fire insurance on the
Building or any part thereof or any contents in the Building belonging to or
used by Lessor. If at any time during the term of this Lease the State Board of
Insurance or other insurance authority disallows any of Lessor's sprinkler
credits or imposes an additional penalty or surcharge in Lessor's insurance
premiums because of Lessee's original or subsequent placement or use of storage
racks or bins, method of storage or nature of Lessee's inventory or any other
act of Lessee, Lessee agrees to pay as additional rental the increase in
Lessor's insurance premiums.
Lessee shall carry, at its expense, liability insurance on the Premises
throughout the Lease Term covering both Lessee and Lessor as named insureds and
if Lessor elects, any owner and/or Lessee of the land upon which the building is
located, as additional named insured, with terms and companies satisfactory to
Lessor and having a combined single limit, providing both bodily injury,
including death resulting therefrom, and property damage coverage, to the extent
of $2,000,000.00, arising out of the Ownership, maintenance or use of the Leased
Premises. Lessee shall also carry insurance against fire and such other risks as
are from time to time included in standard extended coverage insurance, insuring
the full replacement cost of all leasehold improvements paid for by Lessee,
including wall coverings, carpeting, furnishings and equipment. All such
policies shall be cancelable only upon ten (10) days prior written notice to
Lessee and Lessor. Prior to the Commencement Date and within fifteen (15) days
prior to the expiration of each such policy, Lessee shall furnish Lessor with
copies of such policies or certificates evidencing that such insurance is in
full force and effect and stating the terms thereof.
6. UTILITY SERVICE: Lessor shall provide the normal utility service connection
into the Leased Premises as indicated on approved construction plans. Lessee
shall pay the cost of all utility services, including, but not limited to, all
charges for gas, water and electricity used on the Leased Premises. Lessee shall
pay all costs caused by Lessee introducing excessive pollutants or solids other
than human waste into the sanitary sewer system, including permits, fees and
charges levied by any governmental subdivision for any such pollutants or
solids. Lessee shall be responsible for the
installation and maintenance of any dilution tanks, settling tanks, sewer
sampling devices, sand traps, grease traps or similar devices as may be required
by any governmental subdivision for Lessee's use of the sanitary sewer system.
Lessor shall not be required to pay for any utility services, supplies or upkeep
in connection with the Leased Premises.
7. REPAIRS AND MAINTENANCE: (a) Lessor's Obligations Unless otherwise expressly
provided, Lessor shall not be required to make any improvements, replacements or
repairs of any kind or character to the Leased Premises during the term of this
Lease except such repairs as are set forth in this subparagraph. Lessor shall
maintain only the foundation and the structural soundness of the roof, slab and
exterior walls (excluding all windows, window glass, plate glass and all doors)
of the Building in good repair and condition except for reasonable wear and
tear. Lessor will pass through any manufacturing warranties on building
components for benefit of Lessee. Lessee shall repair and pay for any damage
caused by the negligence or default of Lessee or Lessee's agents and employees.
Lessee shall immediately give written notice to Lessor of the need for repairs,
which repairs shall be made by Lessor beginning not more than fifteen (15) days
after written notice by Lessee. Lessor shall not be liable to Lessee, except as
expressly provided in the Lease, for any damage or inconvenience, and Lessee
shall not be entitled to any abatement or reduction of rent by reason of any
repairs, alterations or additions made by Lessor under this Lease except as
provided for in Paragraph 13.
(b) Lessee Obligations (i) Except as indicated hereinabove, Lessee
shall, at its own cost and expense, maintain all parts of the Building and other
Improvements on the Leased Premises in good repair and condition (including all
necessary replacements), including, but not limited to, dock bumpers, pest
control and extermination, and regular removal of debris. Lessee shall enter
into a service contract for maintenance of the heating, ventilating and cooling
systems with a qualified mechanical contractor providing for complete
maintenance service at six (6) month intervals.
(ii) Lessee shall not allow any damage to be committed on any portion of the
Leased Premises, and at the termination of this Lease, by lapse of time or
otherwise, Lessee shall deliver the Leased Premises to Lessor in as good
conditions as existed at the Commencement Date of this Lease, ordinary wear and
tear excepted. The cost and expense of any repairs necessary to restore the
condition of the Leased Premises shall be borne by Lessee, and if Lessor
undertakes to restore the Leased Premises it shall have a right of reimbursement
against Lessee.
8. COMPLIANCE WITH LAWS, RULES AND REGULATIONS: Lessee, at Lessee's expense,
shall comply with all laws, ordinances, orders rules, regulations and other
requirements of state, federal, municipal or other agencies or bodies having
jurisdiction relating to the use, condition and occupancy of the Leased
Premises. Lessee shall not erect any exterior signs without the prior written
approval of Lessor, which shall not be unreasonably withheld.
9. LESSOR IMPROVEMENTS: If construction to the Leased Premises is to be
performed by Lessor prior to the Lessee's occupancy, Lessor will, at its
expense, commence and/or complete the construction of the improvements
constituting the Leased Premises, including partitions, in accordance with the
plans and specifications agreed to by the parties and made a part of this Lease
by reference. The plans and specifications shall be approved and signed by the
parties. Any changes or modifications to the approved plans and specifications
shall be made and accepted by written change order signed by Lessor and Lessee
and shall constitute an amendment to this Lease. Upon completion of the Building
and other improvements in accordance with the plans and specifications, Lessee
agrees to execute and deliver to Lessor a letter accepting delivery of the
Leased Premises.
In the event the Premises shall not be substantially completed and ready for
occupancy on the date above fixed for the commencement of the term of this
Lease, this Lease shall nevertheless continue in full force and effect, and no
liability shall arise against Lessor out of any such delay beyond the abatement
of rent until the Premises are ready for occupancy; provided, however, there
shall be no abatement of rent if the space is not substantially completed to
permit occupancy because of the failure of Lessee to submit Lessee Plans to
Lessor on a timely basis and, further, there shall be no abatement of rent
should Lessee unreasonably delay in authorizing Lessor to commence the
installation of Lessee's work or should Lessee request any changes of Lessee
work in progress if, in Lessor's opinion, such change may be a cause for the
extension of the date of substantial completion. If Lessee shall enter
possession of all or any part of the Premises and commence its business from the
Premises prior to the date fixed above for the first day of the term, all of the
covenants and conditions of this lease shall be binding upon the parties hereto
in respect of such possession the same as if the first day of the term had been
fixed as of the date which Lessee entered such possession and Lessee shall pay
to Lessor as rent for the period prior to the first day of the term of this
Lease a proportionate amount of the rent set forth in the Rent Schedule.
10. ALTERATIONS AND IMPROVEMENTS: Lessee shall not make or allow to be made any
alterations or physical additions in or to the Leased Premises without first
obtaining the written consent of Lessor which shall not be unreasonably
withheld. Any alterations, physical additions or Improvements to the Leased
Premises made by Lessee shall at once become the property of Lessor and shall be
surrendered to Lessor upon the termination of this Lease. Lessor, at its option,
may require Lessee to remove any physical additions and/or repair any
alterations in order to restore the Leased Premises to the condition existing at
the time Lessee took possession, all costs of removal and/or alterations to be
borne by Lessee. This clause shall not apply to moveable equipment or furniture
owned by Lessee which may be removed by Lessee at the end of the term of this
Lease if Lessee is not then in default and if such equipment and furniture is
not then subject to any other rights, liens and interest of Lessor.
11. LIENS: Lessee shall not permit any lien or claim for any lien of any
mechanic, laborer or supplier or any other lien to be filed against the
Building, the land on which the Building is located, the Leased Premises, or any
part thereof arising out of work performed, or alleged to have been performed
by, or at the direction of, or on behalf of Lessee. If any such lien or claim
for lien is filed, Lessee immediately either shall have such lien or claim for
lien released of record or shall deliver to Lessor either: (i) a bond form,
content, amount, and issued by surety, satisfactory to Lessor, indemnifying
Lessor and others designated by Lessor against all costs and liabilities
resulting from such lien or claim for lien and the foreclosure or attempted
foreclosure thereof, or (ii) endorsements to the title policies of Lessor and
Lessor's mortgagee "Insuring Over" such liens satisfactory to Lessor and
Lessor's mortgagee, respectively. If Lessee fails to have such lien or claim for
lien so released or to deliver such a bond or title endorsements to Lessor,
Lessor, without investigating the validity of such lien, may pay or discharge
the same and Lessee shall reimburse Lessor upon demand for the amount so paid by
Lessor, including Lessor's expenses and attorney's fees. At Lessee's request,
Lessor will grant a waiver of lien rights to Lessee's inventory.
12. CONDEMNATION: (a) Substantial Taking If, during the term (or any extension
or renewal) of this Lease, all or a substantial part of the Leased Premises are
taken for any public or quasipublic use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
such taking or purchase would prevent or materially interfere with the use of
the Leased Premises for the purpose for which they are then being used, this
Lease shall terminated and the rent shall be abated during the unexpired portion
of this Lease effective on the date physical possession is taken by the
condemning authority. Lessee shall have no claim to the condemnation award or
any part
thereof, unless some portion of the award is specifically allocated to Lessee.
Lessee can pursue its own claims.
(b) Partial Taking In the event a portion of the Leased Premises shall
be taken for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain or by purchase in lieu
thereof, and this Lease is not terminated as provided in subparagraph (a) above,
Lessor may, at Lessor's sole risk and expense, restore and reconstruct the
Building and other Improvements on the Leased Premises to the extent necessary
to make it reasonably tenantable. The rent payable under this Lease during the
unexpired portion of the term shall be adjusted to such an extent as may be fair
and reasonable under the circumstances. Lessee shall have no claim to the
condemnation award or any part thereof, unless some portion of the award is
specifically allocated to Lessee. Lessee can pursue its own claims.
13. FIRE AND CASUALTY: (a) Substantial Damage If the Leased Premises should be
totally destroyed by fire or other casualty, or if the Leased Premises should be
so damaged so that rebuilding cannot reasonably be completed within one hundred
and eighty (180) working days after the date of written notification by Lessee
to Lessor of the destruction, this Lease shall terminate, and if such damage
shall not have been caused by the fault or neglect of Lessee, its agents,
employees, invitees, or those for whom Lessee is responsible, the rent shall be
abated for the unexpired portion of the Lease, effective as of the date of the
written notification.
(b) Partial Damage If the Leased Premises should be partially damaged
by fire or other casualty, and rebuilding or repairs can reasonably be completed
within one hundred and eighty (180) working days from the date of written
notification by Lessee to Lessor of the destruction, this Lease shall not
terminate, but Lessor may proceed with reasonable diligence to rebuild or repair
the Building or other improvements to substantially the same conditions in which
they existed prior to the damage. If the Leased Premises are to be rebuilt or
repaired and are untenantable in whole or in part following the damage, and the
damage or destruction was not caused or contributed to by act or negligence of
Lessee, its agents, employees, invitees or those for whom Lessee is responsible,
the rent payable under this Lease during the period for which the Leased
Premises are untenantable shall be adjusted to such an extent as may be fair and
reasonable under the circumstances and mutually agreed upon by both the Lessee
and Lessor. In event that Lessor fails to complete the necessary repairs or
rebuilding within one hundred and eighty (180) working days from the date of
written notification by Lessee to Lessor of the destruction, Lessee may at its
option terminate this Lease by delivering written notice of termination to
Lessor, whereupon all rights and obligations under this Lease shall cease to
exist.
14. PROPERTY INSURANCE: Lessor shall at all times during the term of this Lease
maintain a policy or policies of insurance with the premiums paid in advance,
issued by and binding upon a solvent insurance company, insuring the Building
against all risk of direct physical loss in an amount equal to 100% of the full
insurable value of the Building structure and its improvements (exclusive of
excavation and foundation costs and costs of conduits, pilings and other similar
underground items and costs of parking lot paving and landscaping) as of the
date of the loss, provided, that Lessor shall not be obligated in any way or
manner to insure any personal property (including, but not limited to, any
furniture, machinery, goods or supplies) of Lessee or which Lessee may have upon
or within the Leased Premises or any fixtures, installed machinery, goods or
supplies of Lessee or which Lessee may have upon or within the Leased Premises
or any fixtures installed by or paid for by Lessee upon or within the Leased
Premises or any additional Improvements which Lessee may construct on the Leased
Premises.
15. WAIVER OF SUBROGATION: Anything in this Lease to the contrary
notwithstanding, to the extent that Lessor or Lessee shall be or have the right
to be reimbursed by insurance, Lessor and Lessee hereby waive and release each
other of and from any and all rights of recovery, claim, action or cause of
action, against each other, their agents, officers and employees, for any loss
or damage that may occur to the Leased Premises, Improvements to the Building of
which the Leased Premises are a part, or personal property (Building Contents)
within the Building, by reason of fire or the elements regardless of cause or
origin. Because this paragraph will preclude the assignment of any claim
mentioned in it by way of subrogation or otherwise to an insurance company or
any other person, each party to this Lease agrees immediately to give to each
insurance company which has issued to it policies of insurance covering all risk
of direct physical loss, written notice of the terms of the mutual waivers
contained in this paragraph, and to have the insurance policies properly
endorsed, if necessary, to prevent the invalidation of the insurance coverages
by reason of the mutual waivers contained in this paragraph.
16. HOLD HARMLESS: Lessor shall not be liable to Lessee's employees, agents,
invitees, licensees or visitors, or to any other person, for any injury to
person or damage to property on or about the Leased premises caused by the
negligence or misconduct of Lessee, its agents, servants or employees, or of any
other person entering upon the Leased Premises under express or implied
authority of Lessee. Lessee agrees to indemnify and hold harmless Lessor of and
from any loss, attorney's fees, expenses or claims arising out of any such
damage or injury.
17. QUIET ENJOYMENT: Lessor warrants that it has full right to execute and to
perform this Lease and to grant the estate demised and that Lessee, upon payment
of the required rents and performing the terms, conditions, covenants and
agreements contained in this Lease, shall peaceably and quietly have, hold and
enjoy the Leased Premises during the full term of this Lease as well as any
extension or renewal thereof. Lessor shall not be responsible for the acts or
omissions of any other Lessee or third party that may interfere with Lessee's
use and enjoyment of the Leased Premises.
18. LESSOR'S RIGHT OF ENTRY: Lessor shall have the right, upon 24 hours prior
notice, at all reasonable hours, to enter the Leased Premises for the following
reasons: inspection; cleaning or making repairs; showing the Leased Premises to
prospective tenants or purchasers; determining Lessee's use of the Leased
Premises, or determining if an act of default under this Lease has occurred.
Lessee may escort Lessor or its agents while on Lease Premises.
19. ASSIGNMENT AND SUBLETTING: (a) Lessor's Rights Lessor shall have the right
to transfer and assign, in whole or in part, its rights and obligations in the
Building and property that are the subject of this Lease.
(b) Lessee's Restrictions. (i) without the prior written consent of
Lessor, which shall not be unreasonably withheld, Lessee may not sublease,
assign, mortgage, pledge, hypothecate or otherwise transfer or permit the
transfer of this lease or the interest of Lessee in this Lease, in whole or in
part, by operation of law or otherwise. If Lessee desires to enter into any
sublease of the Leased Premises, Lessee shall deliver written notice thereof to
Lessor, together with financial and other information sufficient for Lessor to
make an informed judgement with respect to such proposed sublease. Any approved
sublease shall be expressly subject to the terms and conditions of this Lease.
In the event of any assignment or subletting, Lessee shall never the less at all
times remain fully responsible and liable for the payment of the rent and
compliance with all of its other obligations under the terms, provisions, and
covenants of this Lease. Upon the occurrence of an "Event of Default" as defined
below, if all or any part of the Leased Premises are then assigned or sublet,
Lessor, in addition to any other remedies provided by this Lease or provided by
law, may at its option, collect directly from the assignee or
subtenant all rents becoming due to Lessee by reason of the assignment or
sublease, and Lessor shall have a security interest in all properties on the
Leased Premises to secure payment of such sums. Any collection directly by
Lessor from the Assignee or subtenant shall not be construed to constitute a
novation or a release of Lessee from the further performance of its obligations
under the Lease.
(ii) In the event Lessee desires to enter into any sublease of
the Leased Premises, Lessor shall have the option to exclude from the Leased
Premises covered by the Lease, the space proposed to be sublet by Lessee,
effective as of the proposed Commencement Date of sublease of said space by
Lessee. Lessor may exercise said option after Lessee notifies Lessor of the
proposed sublease. In the event Lessor exercises said option, Lessee shall
surrender possession of the proposed sublease space to Lessor on the effective
date of exclusion of said space from the Leased Premises covered by this Lease,
and neither party hereto shall have any further rights or liabilities with
respect to said space under this Lease.
20. DEFAULT BY LESSEE: The following shall be deemed to be Events of Default by
Lessee under this Lease:
(a) Delinquent Rent Lessee shall fail to pay when due any installment
of rent or any other payment required pursuant to this Lease and such failure to
pay continues for five days from date of notice;
(b) Abandonment Lessee shall abandon any substantial portion of the
Leased Premises;
(c) Other Defaults Lessee shall fail to comply with any term, provision
or covenant of this Lease, other than the payment or rent, and the failure is
not cured within ten (10) days after written notice to Lessee;
(d) Bankruptcy Lessee shall file a petition or be adjudged bankrupt or
insolvent under the National Bankruptcy Act, as amended, or any similar law or
statute of the United States or any state; or a receiver or trustee shall be
appointed for all or substantially all of the assets of Lessee; or Lessee shall
make a transfer in fraud of creditors or shall make an assignment for benefit of
creditors; or
(e) Liens Lessee shall do or permit to be done any act which results in
a lien being filed against the Leased Premises or the Building and/or Project of
which the Leased Premises are a part.
21. REMEDIES FOR LESSEE'S DEFAULT: Upon the occurrence of any event of default
set forth in this Lease, Lessor shall have the option to pursue any one or more
of the following remedies without any notice or demand:
(a) Termination. Terminate this Lease, in which event Lessee shall
immediately surrender the Leased Premises to Lessor, and if the Lessee fails to
surrender the Leased Premises, Lessor may, without prejudice to any other remedy
which it may have for possession or arrearages in rent, enter upon and take
possession of the Leased Premises, by picking or changing locks if necessary and
lock out, expel, or remove Lessee and any other person who may be occupying all
or any part of the Leased Premises without being liable for prosecution of any
claim for damages. Lessee agrees to pay on demand the amount of all loss and
damage which Lessor may suffer by reason of the termination of the Lease under
this subparagraph, whether through inability to relet the Leased Premises on
satisfactory terms or otherwise.
(b) Entry and Reletting Enter upon and take possession of the Leased
Premises by picking or changing lock if necessary, and lock out, expel or remove
Lessee and any other person who may be occupying all or any part of the Leased
Premises without being liable for any claim or damages, and relet the Leased
Premises on behalf of Lessee and receive directly the rent by reason of the
reletting.
(c) Entry and Performing Lessee's Obligations. Enter upon the Leased
Premises, by picking or changing locks if necessary, without being liable for
prosecution or any claim for damages, and do whatever Lessee is obligated to do
under the terms of this Lease. Lessee agrees to reimburse Lessor on demand for
any expenses which Lessor may incur in effecting compliance with Lessee's
obligations under this Lease; further, Lessee agrees that Lessor shall not be
liable for any damages resulting to Lessee from effecting compliance with
Lessee's obligations under this subparagraph caused by negligence of Lessor or
otherwise.
22. WAIVER OF DEFAULT OR REMEDY: Failure of Lessor to declare an event of
default immediately upon its occurrence, or delay in taking any action in
connection with an event of default, shall not constitute a waiver of the
default, but Lessor shall have the right to declare the default at any time and
take such action as is lawful or authorized under this Lease. Pursuit of any one
or more of the remedies set forth in Paragraph 21 above shall not preclude
pursuit of any one or more of the other remedies provided elsewhere in this
Lease or provided by law, nor shall pursuit of any remedy provided constitute
forfeiture or waiver of any rent or damages accruing to Lessor by reason of the
violation of any of the terms, provisions or covenants of this Lease. Failure by
Lessor to enforce one or more of the remedies provided upon an event of default
shall not be deemed or construed to constitute a waiver of the default or of any
other violation or breach of any of the terms, provisions or covenants contained
in this Lease.
23. ACTS OF GOD: Lessor shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Lessee, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
by or prevented by an Act of God or Force Majeure.
24. ATTORNEY'S FEES: Lessee shall pay upon demand, all costs and expenses,
including reasonable attorney's fees, incurred by Lessor in enforcing the
observance and performance by Lessee of all covenants, conditions provisions of
this Lease or resulting from Lessee's default under this Lease. In the event of
default by Lessor, Lessee shall be entitled to attorney's fees required to
enforce any remedies resulting from such default.
25. SURRENDER OF PREMISES: Upon expiration or termination of this Lease or
termination of Lessee's right of possession of the Leased Premises. Lessee shall
vacate the Leased premises. Lessee shall immediately deliver possession thereof
to Lessor in a clean, good and tenantable condition, ordinary wear and tear
accepted. Upon any termination which occurs other than by reason of Lessee's
default, Lessee shall be entitled to remove from the Leased Premises all movable
personal property of Lessee's provided Lessee immediately shall repair all
damage resulting from such removal and shall restore the Leased Premises to
tenantable condition. In the event possession of the Leased Premises is not
immediately delivered to Lessor or if Lessee shall fail to remove all of
Lessee's movable property as aforesaid, Lessor may remove any of such property
therefrom without any liability of Lessor to Lessee or any other party. All
movable property which may be removed from the Leased Premises by Lessor shall
be conclusively presumed to have been abandoned by Lessee and title thereto
shall pass to Lessor without any cost or credit therefore and Lessor may at its
option and at Lessee's expense, store and/or dispose of such property.
26. HOLDING OVER: In the event of holding over by Lessee after the expiration or
termination of this Lease, the hold over shall be as a tenant at will and all of
the terms and provisions of this Lease shall be applicable during that period.
Lessee shall pay Lessor as rental for the period of such hold over an amount
equal to one and one-half (1-1/2) of the rent which would have been payable by
Lessee had the hold over period been a part of the original term of this Lease.
Lessee agrees to vacate and deliver the Leased Premises to Lessor upon Lessee's
receipt of notice from Lessor to vacate. The rental payable during the hold over
period shall be payable to Lessor on demand. No holding over by Lessee, whether
with or without consent of Lessor, shall operate to extend this Lease except as
otherwise expressly provided.
27. RIGHTS OF FIRST AND SECOND MORTGAGEE: Lessee accepts this Lease subject and
subordinate to any recorded first and second mortgage or deed of trust lien
presently existing or hereafter created upon the Leased Premises. Lessor is
hereby irrevocably vested with full power and authority to subordinate Lessee's
interest under this Lease to any first and second mortgage or deed of trust lien
hereafter placed on the Leased Premises, and Lessee agrees upon demand to
execute additional instruments subordinating this Lease as Lessor may require.
If the interests of Lessor under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any first or second mortgage
or deed of trust on the Leased Premises, Lessee shall be bound to the transferee
(sometimes called the `Purchaser'), at the option of the Purchaser, under the
terms, covenants and conditions of this Lease for the balance of the term
remaining, and any extensions or renewals with the same force and effect as if
the Purchaser were Lessor under this Lease, and, if requested by the Purchaser,
Lessee agrees to atone to the Purchaser, including the first and second
mortgagee under any such mortgage if it be the Purchaser, as its Lessor. The
transfer of any interest of Lessor under this Lease shall not diminish Lessee's
rights under the Lease as long as it is not in default hereunder.
28. ESTOPPEL CERTIFICATES: Lessee agrees to furnish promptly from time to time,
upon request of Lessor or Lessor's mortgagee, a statement certifying, if
applicable, that Lessee is in possession of the Leased premises; the Leased
Premises are acceptable; the Lease is in full force and effect; the Lease is
unmodified; Lessee claims no present charge, liens or claim of offset against
rent; the rent is paid for the current month, but is not prepaid for more than
one month and will not be prepaid for more than one month in advance; there is
no existing default by reason of some act or omission by Lessor; and such other
matters as may be reasonably required by Lessor or Lessor's mortgagee.
29. SUCCESSORS: Subject to Paragraphs 20 and 21 hereof, this Lease shall be
binding upon and insure to benefit of Lessor and Lessee and their respective
heirs, personal representatives, successors and assigns, and if Lessor's
interest in the Leased Premises cease to exist for any reason during the term of
this lease, then, notwithstanding the happening of such event, this Lease
nevertheless shall remain unimpaired and in full force and effect and Lessee
hereunder agrees to atone to the then owner of the Leased Premises.
30. RENT TAX: If applicable in the jurisdiction where the Leased Premises are
situated, Lessee shall pay and be liable for all rental, sales and use taxes or
other similar taxes, related to the leased Premises, levied or imposed by any
city, state, or county or other governmental body having authority, such
payments to be in addition to all other payments required to be paid to Lessor
by Lessee under the terms of this Lease. Any such payment shall be paid
concurrently with the payment of the rent upon which the tax is based as set
forth above.
31. DEFINITIONS: The following definitions apply to the terms set forth below as
used in this Lease:
(a) "Abandon" means the vacating of all or a substantial portion of the
Leased Premises by lessee, whether or not Lessee is in default of the rental
payments due under this Lease.
(b) An "Act of God" or "Force Majeure" is defined for purposes of this
Lease as strikes, lockouts, sit-downs, material or labor restrictions by any
governmental authority, unusual transportation delays, riots, floods, washouts,
explosions, earthquakes, fire, storms weather (including wet ground or inclement
weather which prevents construction), acts of the public enemy, wars,
insurrections and any other cause not reasonably within control of Lessor and
which by the exercise of due diligence Lessor is unable, wholly or in part, to
prevent or overcome.
(c) The "Completion Date" shall be the date on which the Improvements
erected and to be erected upon the Leased Premises shall have been substantially
completed in accordance with the plans and specifications referred to in
Paragraph 9.
(d) "Real Estate Tax" means all school, city, state and county taxes
and assessments including special district taxes or assessments.
(e) "Square Feet" or "Square Foot" as used in this Lease includes the
area contained within the space occupied by Lessee.
32. MISCELLANEOUS: The captions, headings, and titles appearing in this Lease
are inserted only as a matter of convenience and in no way define, limit,
construe or describe the scope or intent of such paragraph. If any provision of
this Lease or the application thereof to any person or circumstance shall be
invalid or unenforceable to any extent, the remainder of this Lease and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by Law.
33. NOTICE AND PAYMENTS: (a) Payments by Lessee All rent and other payments
required to be made by Lessee shall be payable to Lessor the address set forth
below.
(b) Payments by Lessor All payments required to be made by Lessor to
Lessee shall be payable to Lessee at the address set forth below, or at any
other address with the United States as Lessee may specify from time to time by
written notice.
(c) Notice Any notice or document required or permitted to be delivered
by this Lease shall be deemed to be delivered (whether or not actually received)
when deposited in the Untied States Mail, postage prepaid, certified mail,
return receipt requested, addressed to the parties at the respective addresses
set out below:
LESSOR: LESSEE:
1385 Kemper Meadow Drive 1385 Kemper Meadow Drive
Forest Park, Ohio 45240 Forest Park, Ohio 45240
or to such other address as Lessor or Lessee may specify by a notice given in
the foregoing manner. All notices, demands, and requests shall be effective upon
being deposited in the United States Mail. However, the time period in which a
response to any such notice, demand or request must be given shall commence to
run from the date of receipt on the return receipt of the notice, demand or
request by the
addressee thereof. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given shall be deemed
to be receipt of the notice, demand or request sent.
34. REAL ESTATE BROKERS: Lessee represents that Lessee has not dealt with any
real estate broker, salesperson, or finder in connection with this Lease, and no
such person initiated or participated in the negotiation of this Lease, or
showed the Premises to Lessee. Lessee agrees to indemnify and hold Lessor
harmless from any claim or claims, as well as costs and expenses including
attorney's fees incurred by Lessor in conjunction with any such claim or claims,
of any broker or brokers, claiming to have interested Lessee in the Building or
Leased Premises or claiming to have caused Lessee to enter into this Lease.
35. SECURITY DEPOSIT: Lessor has received from Lessee the sum of $10,000.00 as
security for the performance of all of Lessee's obligation hereunder including
the payment of rent. In the event of any default by Lessee, Lessor may at it
option apply such part of the deposit as may be necessary to cure the default,
and if Lessor does so, Lessee shall upon demand make such additional deposit as
may be required to maintain the sum of $10,000.00 on hand. Upon the termination
of this Lease, Lessor shall, provided the Lessee is not in any default, refund
to Lessee the balance held by Lessor without interest. In the event of a sale of
the Land and Building of which the Leased premises are a part, Lessor shall have
the right to transfer the deposit and Lessee agrees to look to the new purchaser
solely for the return of said deposit.
35. SEVERABILITY: If any provision of this Lease shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
validate or render unenforceable any other provision hereof.
36. APPLICABLE LAW: This Lease shall be governed by the applicable laws of the
State of Ohio.
37. LESSER COVENANTS: Lessee agrees, covenants, represents and warrants that:
1) as of the date of execution hereof, Lessee is not in
default of any of its obligations or agreements with its creditors.
2) Upon request, Lessee will provide Lessor financial
information or sureties satisfactory to Lessor and Lessor's first mortgagee.
3) All obligations of Lessee shall be guaranteed by all
Shareholders of Lessee pursuant to a Lease Guaranty Agreement of even date
herewith.
39. ENTIRE AGREEMENT AND LIMITATION OF WARRANTIES; IT IS EXPRESSLY AGREED BY
LESSEE, AS A MATERIAL CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS
LEASE, WITH THE SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE
ENTIRE AGREEMENT OF THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL
REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR
PROMISES PERTAINING TO THIS LEASE OR THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC
DOCUMENTS NOT INCORPORATED IN WRITING IN THIS LEASE. LESSOR AND LESSEE EXPRESSLY
AGREE THAT THERE ARE AND SHALL BE NO IMPLIED WARRANTIES WHICH EXTEND BEYOND
THOSE EXPRESSLY SET FORTH IN THIS LEASE. IT IS LIKEWISE AGREED
THAT THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED EXCEPT BY AN
INSTRUMENT IN WRITING SIGNED BY BOTH LESSOR AND LESSEE.
Signed at Cincinnati, Ohio, this 9th day of March, 1995.
LESSEE: SUPERIOR PHARMACEUTICAL COMPANY
Witnesseth:
Sheila M. Jobe___________________ By: Dennis B. Smith____________________
[illegible]______________________ By: Eric C. Hagerstrand, VP____________
STATE OF OHIO )
)SS.
COUNTY OF HAMILTON )
I HEREBY CERTIFY, that on this 9th day of March, 1995, before me the
subscriber, a Notary Public of the State of Ohio, in and for said County of
Hamilton, aforesaid personally appeared DENNIS B. SMITH, the President, and ERIC
C. HAGERSTRAND, the Vice-President of SUPERIOR PHARMACEUTICAL COMPANY, the
Lessee in the foregoing Lease, who being duly authorized by its Board of
Directors and acting in order to and with the express intent of binding said
corporation acknowledged the signing of the foregoing Lease Agreement as the
free and voluntary corporate act of Tenant and the free and voluntary act and
deed of said officers for an on behalf of said corporation for the uses of
purposes therein mentioned.
IN TESTIMONY WHEREOF, I hereunto set my hand and official seal at
Cincinnati, Ohio.
Sheila M. Jobe
---------------------------------------
Notary Public
Witnesseth: LESSOR: SPC PROPERTIES LIMITED
Sheila M. Jobe By: Thomas L. Canning
- ---------------------------------- ----------------------------------------
[illegible] By: Eric C. Hagerstrand
- ---------------------------------- ----------------------------------------
By: Dennis B. Smith
- ---------------------------------- ----------------------------------------
I HEREBY CERTIFY, that on this 9th day of March, 1995, before me the
subscriber, a Notary Public of the State of Ohio, in and for said County of
Hamilton, aforesaid personally appeared DENNIS B. SMITH, ERIC C. HAGERSTRAND,
and THOMAS L. CANNING, all of the members of SPC Properties Limited, the Lessor
in the foregoing Lease Agreement as his free and voluntary act for the uses and
purposes therein mentioned.
IN TESTIMONY WHEREOF, I hereunto set my hand and official seal at
Cincinnati, Ohio.
Sheila M. Jobe_________________________
Notary Public
BASE RENT SCHEDULE
FOR
COMMERCIAL LEASE AGREEMENT
Months 1 through 60 $25,000.00
Months 2 through 120 $30,000.00
Months 121 through 241 $35,000.00
Witnesseth: LESSOR:
Sheila M Jobe Eric C. Hagerstrand
- ---------------------------------- ------------------------------------------
[illegible] Thomas L. Canning
- ---------------------------------- ------------------------------------------
Witnesseth: LESSEE:
- ---------------------------------- ------------------------------------------
Sheila M. Jobe Eric C. Hagerstrand
- ---------------------------------- ------------------------------------------
[illegible] Dennis B. Smith
- ---------------------------------- ------------------------------------------
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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