UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File number: 0-19750
--------------------
MATRIX PHARMACEUTICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2957068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34700 Campus Drive, Fremont, California 94555
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 742-9900
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 preceeding 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
-- --
Number of shares of Common Stock, $.01 par value, outstanding as of June 30,
1996: 21,238,156.
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MATRIX PHARMACEUTICAL, INC.
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations -
Three Months and Six Months Ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Risk Factors 10
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
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<TABLE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Balance Sheets
<CAPTION>
(In thousands)
June 30, December 31,
1996 1995
------------ ------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,843 $ 55,675
Short-term investments 29,559 9,646
Other current assets 1,199 952
------------ ------------
Total current assets 56,601 66,273
Property and equipment, net 16,755 15,919
Non-current investments 73,977 12,010
Deposits and other assets, net 177 217
------------ ------------
$ 147,510 $ 94,419
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,177 $ 1,605
Accrued liabilities 2,893 3,322
Current portion of debt and capital lease obligations 727 830
------------ ------------
Total current liabilities 4,797 5,757
Debt and capital lease obligations, less current portion 12,129 12,307
Stockholders' equity
Capital stock 222,018 153,427
Other (904) (826)
Deficit accumulated during the development stage (90,530) (76,246)
------------ ------------
Total stockholders' equity 130,584 76,355
------------ ------------
$ 147,510 $ 94,419
============ ============
<FN>
See Accompanying Notes
</FN>
</TABLE>
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MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------------ ----------- ----------- -----------
(Unaudited)(Unaudited) (Unaudited) (Unaudited)
Revenues $ - $ - $ - $ -
Costs and expenses:
Research and development 6,304 4,503 12,004 8,935
General and administrative 2,176 1,361 4,304 2,636
------------ ----------- ----------- -----------
Total costs and expenses 8,480 5,864 16,308 11,571
------------ ----------- ----------- -----------
Loss from operations (8,480) (5,864) (16,308) (11,571)
Interest and other income, net 1,274 309 2,024 732
------------ ----------- ----------- -----------
Net loss $ (7,206) $ (5,555) $(14,284) $(10,839)
============ =========== =========== ===========
Net loss per share $ (0.34) $ (0.51) $ (0.76) $ (1.01)
============ =========== =========== ===========
Weighted average number
of shares outstanding 20,877 10,800 18,909 10,780
============ =========== =========== ===========
See Accompanying Notes
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MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
For the six months
ended June 30,
1996 1995
----------- ----------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $(14,284) $(10,839)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 516 445
Amortization of deferred compensation 84 101
Other 27 110
Changes in assets and liabilities:
Other current assets (247) (307)
Deposits and other assets 40 7
Accounts payable (428) (428)
Other accrued liabilities (429) 396
----------- ----------
Net cash used by operating activities (14,721) (10,515)
Cash flows from investing activities:
Capital expenditures (1,352) (131)
Investment in securities available-for-sale (96,431) (187)
Proceeds of securities available-for-sale 8,404 4,845
Maturities of investments 6,221 4,072
----------- ----------
Cash flows provided (used) by
investing activities (83,158) 8,599
Cash flows from financing activities:
Payments on debt and capital lease oblgations (281) (203)
Net cash proceeds from issuance of:
Debt and capital lease financing - 232
Capital stock 68,328 47
----------- ----------
Cash flows provided by financing activities 68,047 76
Net decrease in cash and cash equivalents (29,832) (1,840)
Cash and cash equivalents at the
beginning of period 55,675 10,276
----------- ----------
Cash and cash equivalents at the end of period $ 25,843 $ 8,436
=========== ==========
See Accompanying Notes
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MATRIX PHARMACEUTICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
1. Basis of presentation
The results of operations for the interim periods shown in
this report are not necessarily indicative of results to be expected
for the year ending December 31, 1996. In the opinion of management,
the information contained herein reflects all adjustments necessary to
make the results of operations for the interim periods a fair statement
of such operations. All such adjustments are of a normal recurring
nature.
These condensed consolidated financial statements should be
read in conjunction with the Company's audited consolidated financial
statements for the year ended December 31, 1995, which were filed with
the Securities and Exchange Commission on Form 10-K, and the Company's
quarterly report on Form 10-Q, filed with the Securities and Exchange
Commission for the quarter ended March 31, 1996.
2. Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary after elimination of all
material intercompany balances and transactions.
3. Net loss per share
Net loss per share is computed using the weighted average
number of shares of common stock outstanding during the period. Common
stock equivalents consisting of stock options, convertible Series A
preferred shares and warrants are excluded from the computation as
their impact is anti-dilutive.
4. Cash and cash equivalents, short-term investments, and non-current
investments
The Company invests its excess cash in government and
corporate securities. Highly liquid investments with maturities of
three months or less at the date of acquisition are considered by the
Company to be cash equivalents. Investments with maturities beyond
three months at the date of acquisition and that mature within one year
from the balance sheet date are considered to be short-term
investments. Investments with maturities longer than one year from the
balance sheet date are classified as short-term investments or
non-current investments based on the Company's intended holding period.
The Company maintains its cash, cash equivalents and
investments in several different instruments held by various banks and
brokerage houses. This diversification of risk is consistent with the
Company's policy to maintain liquidity and ensure the safety of
principal.
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The Company determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as
of each balance sheet date. The amortized cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in interest and other income.
Realized gains and losses and declines in value judged to be
other-than-temporary are also included in interest and other income.
The cost of securities sold is based on the specific identification
method. Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to
maturity and are carried at amortized cost.
Debt securities which are not classified as held-to-maturity
and which are not held for resale in anticipation of short-term market
movements are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and
losses, net of tax, reported in a separate component of stockholders'
equity.
5. Stockholders' equity
On April 8, 1996, the Company completed the sale of a
3,162,500 share public offering of the Company's common stock at $22.63
per share which resulted in net proceeds of $67.4 million to the
Company.
6. Subsequent event
On July 15, 1996 the Company entered into an agreement to
lease out a portion of its San Diego manufacturing facility. The term
of the lease is two years commencing July 15, 1996 and ending July 14,
1998 and the lease payments during that period total approximately $2.9
million.
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MATRIX PHARMACEUTICAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains certain statements of a forward-looking nature
relating to future events or the future performance of the Company. Such
statements are only predictions and the actual events or results may differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include those discussed in
"Risk Factors" in the 1995 Form 10-K and March 31, 1996 Form 10-Q, as well as
those discussed elsewhere in this report.
Results of Operations
Three and Six Months Ended June 30, 1996 and 1995
Since the Company's inception in 1985, the primary focus of its
operations has been research and development, and to date it has not received
any revenues from the commercial sale of products. The Company anticipates that
it will not recognize any revenues from commercial sales until regulatory
approvals are obtained. The Company has a history of operating losses and
expects to incur substantial additional losses over the next several years as it
continues to develop its products. For the period from February 11, 1985
(inception) to June 30, 1996 the Company has incurred a cumulative net loss of
$90,530,000.
The Company had no revenue in the second quarters of 1996 and 1995 and
the first six months of 1996 and 1995.
Research and development expenses for the second quarter of 1996
increased by 40% to $6,304,000 versus $4,503,000 for the second quarter of 1995.
For the first six months of 1996, research and development expenses increased by
34% to $12,004,000 compared to $8,935,000 in 1995. The quarterly and
year-to-date increases were primarily due to higher clinical costs to support
basal cell cancer, head and neck cancer and other accessible tumors, higher
personnel related expenses, higher occupancy expenses, and higher production
costs in preparation for the commercial launch of AccuSiteTM for the treatment
of genital warts.
General and administrative expenses increased by 60% to $2,176,000 for
the second quarter of 1996 compared to $1,361,000 for the second quarter of
1995. For the first six months of 1996, general and administrative expenses
increased by 63% to $4,304,000 versus $2,636,000 for the same period in 1995.
The quarterly and year-to-date increases were due to higher personnel related
expenses, including new marketing staff, higher occupancy expenses, and
AccusiteTM market research expenses. The year-to-date increase was also due to
increased legal expenses related to the Collagen Corporation litigation.
Net interest and other income increased to $1,274,000 for the second
quarter of 1996 versus $309,000 for the second quarter of 1995. For the first
six months of 1996, net interest and other income increased to $2,024,000
compared to $732,000 in 1995. The increase was primarily the result of higher
average balances in cash, cash equivalents and marketable securities in 1996.
This was partially offset by higher interest expense associated with the
mortgage on the Company's San Diego manufacturing facility, which was purchased
in the fourth quarter of 1995.
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Liquidity and Capital Resources
At June 30, 1996, the Company had $129.4 million in cash, cash
equivalents and marketable securities compared to $77.3 million at December 31,
1995.
On April 8, 1996, the Company completed the sale of a 3,162,500 share
public offering of the Company's common stock at $22.63 per share which resulted
in net proceeds of $67.4 million to the Company.
During the first quarter of 1996, 13,334 outstanding shares of the
Company's Series A preferred stock were converted into 1,333,400 shares of the
Company's common stock.
The Company has financed its operations and capital asset acquisitions
from its inception through the sale of equity securities, contract research
revenues, license fees, interest income, and capital lease and debt financing.
The Company expects to finance its continued operating requirements principally
with cash on hand as well with additional capital generated through equity and
debt financings and collaborative agreements.
The Company's working capital and capital requirements will depend on
numerous factors, including the progress of the Company's research and
development programs, preclinical testing and clinical trial activities, the
timing and cost of obtaining regulatory approvals, the levels of resources that
the Company devotes to the development of manufacturing and marketing
capabilities, technological advances and the status of competitors.
The Company expects to incur substantial additional costs relating to
the continued clinical development of its products, continued research and
development programs, the development of marketing and manufacturing
capabilities, the purchase of additional capital equipment and general working
capital requirements. The Company anticipates that its existing and committed
capital resources, including the proceeds of the public offering completed in
April 1996, will enable it to maintain its current and planned operations
through 1998. The Company may require additional outside financing to complete
the process of bringing current products to market, and while the Company is not
aware of any limitations on future sources of capital, there can be no assurance
that such financing will be available on favorable terms, if at all.
Capital expenditures for environmental control efforts were not
material during the first six months of 1996 and 1995.
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MATRIX PHARMACEUTICAL, INC.
RISK FACTORS
No Assurance of Regulatory Approvals
The preclinical and clinical testing, manufacturing, and marketing of
the Company's products are subject to extensive regulation by numerous
governmental authorities in the United States and other countries, including,
but not limited to, the FDA. Among other requirements, FDA approval of the
Company's products, including a review of the manufacturing processes and
facilities used to produce such products, will be required before such products
may be marketed in the United States. Similarly, marketing approval by a foreign
governmental authority is typically required before such products may be
marketed in a particular foreign country. Matrix has no products approved by the
FDA and one product approved by a foreign authority and does not expect to
achieve profitable operations unless other product candidates now under
development receive FDA or foreign regulatory approval and are thereafter
commercialized successfully.
In order to obtain FDA approval of a product, the Company must
demonstrate to the satisfaction of the FDA that such product is safe and
effective for its intended uses and that the Company is capable of manufacturing
the product with procedures that conform to the FDA's current good manufacturing
practice ("GMP") regulations, which must be followed at all times. The Company
has had only limited experience in submitting and pursuing regulatory
applications. The process of obtaining FDA approvals can be costly, time
consuming, and subject to unanticipated delays. There can be no assurance that
such approvals will be granted to the Company on a timely basis, or at all.
The process of obtaining FDA regulatory approval involves a number of
steps that, taken together, may involve seven years or more from the initiation
of clinical trials and require the expenditure of substantial resources. Among
other requirements, this process requires that the product undergo extensive
preclinical and clinical testing and that the Company file an NDA requesting FDA
approval. When a product contains more than one component that contributes to
the product's effect, as do all of the Company's current product candidates, the
FDA may request that additional data be submitted in order to demonstrate the
contribution of each such component to clinical efficacy. In addition, when
there has been a manufacturing change in a product component (either in the
process by which the component is manufactured or the site at which it is
manufactured) during product development, as is the case with the collagen gel
used in the Company's AccuSite product, the FDA may request that additional data
be submitted to demonstrate that the manufacturing change has not affected the
clinical performance of the product. In addition, the manufacturing facilities
for the product must be inspected and accepted by the FDA as being in compliance
with GMP regulations prior to approval of the product. There can be no assurance
that the Company's manufacturing facilities in San Jose and Milpitas will be
accepted by the FDA, and failure to achieve such acceptance would have a
material adverse effect on the Company's business.
Matrix has used three different sources of collagen gel in the products
on which it has conducted clinical trials: Koken Co., Ltd. ("Koken"), Collagen
Corporation ("Collagen") and its own production. The Company intends to use
collagen gel of its own manufacture in products it markets commercially if FDA
approval is received. Accordingly, the Company has not referenced Collagen's
Pre-Market Approval files in its NDA. (See "-- Litigation" )
However, as noted above, when there has been a manufacturing change in
a product, such as a change in the supplier of a component, the FDA may request
that additional data be submitted to demonstrate that the manufacturing change
has not affected the clinical performance of the
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product as shown in earlier clinical trials. Accordingly, Matrix has conducted a
series of preclinical studies to show comparability of products made from
Collagen, Koken and Matrix collagen gel, a human pharmakokinetic study to show
comparability of products made with Matrix and Collagen collagen gel and Phase
III clinical trials to show comparability in clinical performance of a product
made with Koken collagen gel and a product made with Collagen collagen gel. The
Company also conducted a Phase III(b) clinical trial to demonstrate the
comparable clinical performance of a product made with Matrix collagen gel to a
product made with Collagen collagen gel. The Company believes that all studies
conducted to date have supported the comparable clinical performance of products
made with collagen gel from all three sources, but there can be no assurance
that the FDA will agree. In addition, there can be no assurance that the FDA
will not require further clinical demonstrations either of the comparability of
a product made with Matrix collagen gel to product made with Collagen collagen
gel or Koken collagen gel, or the safety and efficacy of a product made with
Matrix collagen gel. If questions arise during the FDA review process about
comparability or about the safety and efficacy of a product made with collagen,
it could delay the approval process or prevent approval.
The Company's analysis of the results of its clinical studies submitted
as part of an NDA is subject to review and interpretation by the FDA, which may
differ from the Company's analysis. There can be no assurance that the Company's
data or its interpretation of data will be accepted by the FDA. In addition,
delays or rejections may be encountered based upon changes in applicable law or
FDA policy during the period of product development and FDA regulatory review.
Any failure to obtain, or delay in obtaining, FDA approvals would adversely
affect the ability of the Company to market its proposed products. Moreover,
even if FDA approval is granted, such approval may include significant
limitations on indicated uses for which a product could be marketed.
Both before and after approval is obtained, a product, its
manufacturer, and the holder of the NDA for the product are subject to
comprehensive regulatory oversight. Violations of regulatory requirements at any
stage, including the preclinical and clinical testing process, the approval
process or thereafter (including after approval), may result in adverse
consequences, including the FDA's delay in approving or refusal to approve a
product, withdrawal of an approved product from the market, and/or the
imposition of criminal penalties against the manufacturer and/or the NDA holder.
In addition, later discovery of previously unknown problems relating to a
marketed product may result in restrictions on such product, manufacturer, or
the NDA holder, including withdrawal of the product from the market. Also, new
government requirements may be established that could delay or prevent
regulatory approval of the Company's products under development. See
"--Uncertainty of Pharmaceutical Pricing; No Assurance of Adequate
Reimbursement."
The processes required by European regulatory authorities before the
Company's products can be marketed in Western Europe are similar to those in the
United States. First, appropriate preclinical laboratory and animal tests as
well as analytical product quality tests must be done, followed by submission of
a clinical trial exemption ("CTX") or similar documentation before human
clinical trials can be initiated. Upon completion of adequate and well
controlled clinical trials in humans that establish that the drug is safe and
efficacious, regulatory approval of a Market Authorization Application (MAA)
must be obtained from the relevant regulatory authorities. The Company filed its
MAA for AccuSite in the United Kingdom in August 1995 under the mutual
recognition process of a product. The Company subsequently filed an MAA in
Germany, France, Italy and Sweden. As with the United States FDA review process,
there are numerous risks associated with the MAA review. Additional data may be
requested by the regulatory agency reviewing the MAA to demonstrate the
contribution of a product component to the clinical safety and efficacy of a
product, or to confirm the comparable performance of materials produced by a
changed manufacturing process or at a changed manufacturing site.
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In June 1996, the Company was notified by the Medicines Control Agency
in the United Kingdom that a product license has been granted for AccuSiteTM for
the treatment of genital warts. However, there can be no assurance of mutual
recognition by other participating states of the approval obtained in the United
Kingdom.
Uncertainties Associated with Clinical Trials
Matrix has conducted and plans to continue to undertake extensive and
costly clinical testing to assess the safety and efficacy of its potential
products. Failure to comply with FDA regulations applicable to such testing can
result in delay, suspension, or cancellation of such testing, and/or refusal by
the FDA to accept the results of such testing. In addition, the FDA may suspend
clinical trials at any time if it concludes that the subjects or patients
participating in such trials are being exposed to unacceptable health risks.
Further, there can be no assurance that human clinical testing will show any
current or future product candidate to be safe and effective or that data
derived therefrom will be suitable for submission to the FDA.
The Company is currently conducting multiple clinical trials in the
United States and certain foreign countries, including two ongoing Phase III
trials. The rate of completion of the Company's clinical trials is dependent
upon, among other factors, the rate of patient enrollment. Patient enrollment is
a function of many factors, including the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites and the
eligibility criteria for the study. Delays in planned patient enrollment may
result in increased costs and delays, which could have a material adverse effect
on the Company. Generally similar considerations apply to clinical testing that
is subject to regulatory oversight by foreign authorities and/or that is
intended to be used in connection with foreign marketing applications.
In June 1996 the Company announced a delay in the development of
AccuSiteTM Injectible Gel for patients with basal cell cancer. This delay is a
result of disappointing findings in preliminary data analysis of two identical
Phase II "contribution of components" trials. These studies were designed to
demonstrate that each ingredient (component) of the AccuSiteTM gel formulation
provides a statistically significant contribution to the performance of the
product. Depending upon the results of the Company's analysis, the Company may
further delay, may have to perform additional clinical trials which may also
delay, or cancel, the development of AccuSiteTM Injectible Gel for patients with
basal cell cancer, which could result in a material adverse effect on the
Company's business.
History of Losses; Future Profitability Uncertain
Matrix was incorporated in 1985 and has experienced significant losses
since that date. As of June 30, 1996, the Company's accumulated deficit was
approximately $90.5 million. The Company has not generated revenues from its
products and expects to incur significant additional losses over the next
several years. The Company's ability to achieve a profitable level of operations
is dependent in large part on successfully developing products, obtaining
regulatory approvals for its products, and making the transition to an
organization producing commercial products and entering into agreements for
product commercialization. No assurance can be given that the Company's product
development efforts will be completed, that required regulatory approvals will
be obtained, that any products will be manufactured and marketed successfully,
or that profitability will be achieved.
Additional Financing Requirements and Uncertain Access to Capital Markets
The Company has expended and will continue to expend substantial funds
to complete the research and development of and to market its products. The
Company will require additional
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funds for these purposes through additional equity or debt financings,
collaborative arrangements with corporate partners or from other sources. No
assurance can be given that such additional funds will be available on
acceptable terms, if at all. If adequate funds are not available from operations
or additional sources of financing, the Company's business could be materially
and adversely affected. Based on its current operating plan, the Company
anticipates that its existing capital resources will be adequate to satisfy its
capital needs through 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Limited Sales and Marketing Experience
The Company intends to market and sell certain of its products, if
successfully developed and approved, through a direct sales force in the United
States, by co-promoting certain products to selected physician specialties and
through sales and marketing partnership arrangements outside the United States.
The Company currently has limited marketing and sales staff, and has yet to
announce any co-promotion or distribution arrangements. The Company is
developing a sales and marketing plan for AccuSite and its other products in
clinical development. In order to market its products directly, the Company must
develop a sales force with technical expertise. There can be no assurance that
the Company will be able to establish a successful direct sales organization or
co-promotion or distribution arrangements. In addition, there can be no
assurance that there will be sufficient sales of AccuSite or other products to
fund related expenses, many of which must be incurred before sales commence.
Failure to establish a marketing and sales capability in the United States
and/or outside the United States may have a material adverse effect on the
Company.
Limited Manufacturing Experience
The Company's ability to conduct clinical trials on a timely basis, to
obtain regulatory approvals and to commercialize its products will depend in
part upon its ability to manufacture its products, either directly or through
third parties, at a competitive cost and in accordance with applicable FDA and
other regulatory requirements, including GMP regulations. The Company is
currently manufacturing AccuSite and IntraDose for its clinical trials at its
manufacturing facilities in San Jose and Milpitas, California, as well as
contract manufacturing facilities. The Company anticipates that its facilities
in San Jose and Milpitas should provide sufficient production capacity to meet
clinical and early commercial requirements of its AccuSite product and selected
components for IntraDose products through 1997. However, there can be no
assurance that the Company will be able to produce adequate quantities of its
products for its clinical trials in a cost-effective manner or that the
Company's current manufacturing facilities will be accepted by the FDA.
In December 1995, the Company purchased a research and manufacturing
facility in San Diego, California. The Company intends to use this facility to
meet its long-term commercial scale production requirements. This facility
requires validation and process installation that will require capital
expenditures of approximately $10 million. The Company estimates that this
facility will not be available for production until 1998. There can be no
assurance that the Company will be able to validate and scale up this facility
in a timely manner or that this facility will be adequate for Matrix's long-term
needs without delay to the Company's ability to meet product demand. Matrix
expects to continue to use selected contract manufacturers, in addition to its
own manufacturing capability, for some or all of its product components. Failure
to establish additional manufacturing capacity on a timely basis may have a
material adverse effect on the Company.
Dependence on Sources of Supply
Several of the materials used in the Company's products are available
from a limited number of suppliers. These items, including collagen gel and
various bulk drug substances, have generally been available to Matrix and others
in the pharmaceutical industry on commercially reasonable terms. If the
Company's manufacturing facilities are not able to produce sufficient
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quantities of collagen gel in accordance with applicable regulations, the
Company would have to obtain collagen gel from another source and gain
regulatory approval for that source. There can be no assurance that the Company
would be able to locate an alternative, cost-effective source of supply of
collagen gel. Matrix has negotiated and intends to continue to negotiate supply
agreements, as appropriate, for the components of raw materials utilized in its
products. Matrix is also in the process of attempting to approve second sources
for as many as possible of these supplies. Any interruption of supply could have
a material adverse effect on the Company's ability to manufacture its products,
and thus the ability to complete the clinical trials or to commercialize
products. In addition, cisplatin, a chemotherapeutic drug being used by the
Company in its current clinical trials, is currently available only for research
purposes in the United States. Prior to the expiration of the patent in the
United States in 1996, the Company may not commercialize products incorporating
cisplatin in the United States without a license. To the Company's knowledge,
there are no such restrictions in Europe. The Company's process for
manufacturing collagen gel is currently being challenged in litigation with
Collagen. See "--Litigation."
Litigation
On December 21, 1994, Collagen filed a lawsuit against the Company in
Santa Clara County Superior Court alleging misappropriation of trade secrets
concerning the manufacturing process for collagen, including breach of contract
and fraud. The Complaint seeks unspecified damages and injunctive relief
directed to Matrix's manufacture of collagen, its regulatory filings and its
hiring of current or former Collagen employees. On February 14, 1995, the
Company filed its answer to Collagen's complaint, denying all claims of
misappropriation, asserting several affirmative defenses and seeking recovery of
its attorneys' fees. Matrix has also filed a cross-complaint against Collagen
and Howard Palefsky, Collagen's Chief Executive Officer, seeking recovery of
damages for defamation, violations of California antitrust law and other causes
of action. The parties are currently conducting discovery and no trial date has
been set with respect to any of the claims asserted by Collagen or by the
Company.
On September 12, 1995, Collagen filed a First Amended Complaint, adding
as defendants two former Collagen employees currently working at Matrix,
alleging that these employees used confidential documents and information
acquired by them as Collagen employees for the benefit of Matrix. These
employees had been accused of wrong-doing in the original Complaint along with
other former Collagen employees, but not named as defendants. The First Amended
Complaint purports to add causes of action for conversion against Matrix and the
two individual defendants, and for breach of contract, breach of confidence,
breach of fiduciary obligation and breach of the duty of loyalty against the
former Collagen employees. Matrix is alleged to have induced such breaches. The
First Amended Complaint adds to the requested relief of the original Complaint
for damages and injunctive relief a request for the imposition of a constructive
trust on the alleged fruits of the alleged trade secret misappropriation.
The lawsuit follows a series of contract negotiations in 1994 aimed at
developing a long-term supply relationship between Collagen and Matrix. Although
processes to manufacture collagen gel have been in the public domain for many
years, Collagen is presently the only commercial source for collagen gel in the
United States. Prior to developing its own manufacturing process, Matrix used
collagen gel from two additional sources in its clinical trials, including
collagen gel manufactured by Koken and by Collagen. See "-- No Assurance of
Regulatory Approvals."
The Company believes that the manufacturing process which it has
developed for collagen gel does not incorporate any Collagen trade secrets and
that the lawsuit filed by Collagen is without merit. Although the Company
intends to defend against this suit vigorously, no assurances can be given
regarding its eventual outcome. This litigation does not involve any claims of
patent infringement. A finding of misappropriation of trade secrets could result
in damages and/or a
Page 14
<PAGE>
significant restriction on the Company's ability to manufacture its products.
Such a finding would also require the Company to alter its manufacturing
process, or seek an alternate source of collagen gel. There can be no assurance
that the Company would be able to alter its manufacturing process, if required,
in a timely manner, or at all or that it would be able to secure an alternative
source of collagen gel on commercially reasonable terms. As a result, there can
be no assurance that this lawsuit will not delay the Company's product approvals
or affect its ability to manufacture its products, each of which would have a
material adverse effect on the Company, its prospects and financial condition.
Additionally, the costs of litigating this matter, regardless of outcome, will
likely exceed $1,000,000 in 1996.
Uncertainty Regarding Patents and Proprietary Rights
The Company's success depends in part on its ability to obtain patent
protection for its products and to preserve its trade secrets and operate
without infringing on the proprietary rights of third parties. No assurance can
be given that the Company's pending patent applications will be approved or that
any patents will provide competitive advantages for the Company's products or
will not be successfully challenged or circumvented by its competitors. The
Company has not conducted an exhaustive patent search and no assurance can be
given that patents do not exist or could not be filed which would have an
adverse effect on the Company's ability to market its products or maintain its
competitive position with respect to its products. The Company's patents may not
prevent others from developing competitive products using related technology.
Other companies obtaining patents claiming products or processes useful to the
Company may bring infringement actions against the Company. As a result, the
Company may be required to obtain licenses from others to develop, manufacture
or market its products. There can be no assurance that the Company will be able
to obtain any such licenses on commercially reasonable terms, if at all. The
Company also relies on trade secrets and proprietary know-how which it seeks to
protect, in part, by confidentiality agreements with its employees, consultants,
suppliers and licensees. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach,
or that the Company's trade secrets will not otherwise become known or be
independently developed by competitors.
No assurance can be given that any patent issued to, or licensed by,
the Company will provide protection that has commercial significance. In this
regard, the patent position of pharmaceutical compounds and compositions is
particularly uncertain. Even issued patents may later be modified or revoked by
the United States Patent and Trademark Office ("PTO") in proceedings instituted
by Matrix or others. During an opposition proceeding in Japan, the Company
became aware of a reference which may affect the scope of its United States
Patent claims which cover the collagen gel matrix products. The Company has
brought this reference to the attention of the PTO for a determination of the
extent to which the claims should be modified in light of this reference. No
assurance can be given concerning the outcome of the determination, although the
Company believes that modifications of the claims that may be required because
of the reference will not materially adversely affect the Company's proprietary
protection for its products. In addition, no assurance can be given that the
Company's patents will afford protection against competitors with similar
compounds or technologies, that others will not obtain patents claiming aspects
similar to those covered by the Company's patents or applications, or that the
patents of others will not have an adverse effect on the ability of the Company
to do business. Moreover, the Company believes that obtaining foreign patents
may be more difficult than obtaining domestic patents because of differences in
patent laws, and recognizes that its patent position therefore may be stronger
in the United States than abroad. In addition, the protection provided by
foreign patents, once they are obtained, may be weaker than that provided by
domestic patents.
Page 15
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Rapid Technological Change and Substantial Competition
The pharmaceutical industry is subject to rapid and substantial
technological change. Technological competition in the industry from
pharmaceutical and biotechnology companies, universities, governmental entities
and others diversifying into the field is intense and is expected to increase.
Most of these entities have significantly greater research and development
capabilities, as well as substantially more marketing, financial and managerial
resources, and represent significant competition for the Company. Acquisitions
of, or investments in, competing biotechnology companies by large pharmaceutical
companies could increase such competitors' financial, marketing and other
resources. There can be no assurance that developments by others will not render
the Company's products or technologies noncompetitive or that the Company will
be able to keep pace with technological developments. Competitors have developed
or are in the process of developing technologies that are, or in the future may
be, the basis for competitive products. Some of these products may have an
entirely different approach or means of accomplishing similar therapeutic
effects than products being developed by the Company. These competing products
may be more effective and less costly than the products developed by the
Company. In addition, conventional drug therapy, surgery and other more familiar
treatments and modalities will offer competition to the Company's products.
Any product which the Company succeeds in developing and for which it
gains regulatory approval must then compete for market acceptance and market
share. Accordingly, important competitive factors, in addition to completion of
clinical testing and the gaining of regulatory approval will include product
efficacy, safety, timing and scope of regulatory approvals, availability of
supply, marketing and sales capability, reimbursement coverage, pricing and
patent protection.
Uncertainty of Pharmaceutical Pricing; No Assurance of Adequate Reimbursement
The future revenues and profitability of and availability of capital
for biopharmaceutical companies may be affected by the continuing efforts of
governmental and third party payors to contain or reduce the costs of health
care through various means. For example, in certain foreign markets pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the United States, there have been, and the Company expects that there will
continue to be, a number of federal and state proposals to implement similar
government control. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted, the announcement or
adoption of such proposals could have a material adverse effect on the Company's
prospects. Additionally, the cost of prescription drugs is receiving substantial
attention in the United States Congress. Legislation enacted in 1990, and
amended and strengthened in 1992, requires pharmaceutical manufacturers to
rebate to the government a portion of their revenues from drugs furnished to
Medicaid patients. In 1992, legislation was enacted that extends these
requirements to cover outpatient pharmaceuticals, and also mandates a reduction
in pharmaceutical prices charged to certain federally-funded facilities as well
as to certain hospitals serving a disproportionate share of low-income patients.
It is likely that Congressional attention will continue to focus on the cost of
drugs generally, and particularly on increases in drug prices in excess of the
rate of inflation, given recent government initiatives pertaining to the overall
reform of the U.S. health care system, and those specifically directed at
lowering total costs. The Company cannot predict the likelihood of passage of
federal and state legislation related to health care reform or lowering drug
costs.
The Company's ability to commercialize its products successfully will
depend in part on the extent which appropriate reimbursement levels for the cost
of such products and related treatment are obtained from government authorities,
private health insurers and other organizations, such as health maintenance
organizations ("HMOs"). Third-party payors are increasingly challenging the
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<PAGE>
prices charged for medical products and services. Also, the trend towards
managed health care in the United States and the concurrent growth of
organizations such as HMOs, which could control or significantly influence the
purchase of health care services and products, as well as legislative proposals
to reform health care or reduce government insurance programs, may all result in
lower prices for the Company's products. The cost containment measures that
health care payors and providers are instituting and the effect of any health
care reform could adversely affect the Company's ability to sell its products
and may have a material adverse effect on the Company.
Dependence Upon Qualified and Key Personnel
Because of the specialized nature of the Company's business, the
Company's ability to maintain its competitive position depends on its ability to
attract and retain qualified management and scientific personnel. Competition
for such personnel is intense. There can be no assurance that the Company will
be able to continue to attract or retain such persons. The loss of key personnel
or the failure to recruit additional personnel could have a material adverse
effect on the Company's business.
Product Liability Exposure; Limited Insurance Coverage
The Company faces an inherent business risk of exposure to product
liability claims in the event that the use of products during research or
commercialization results in adverse effects. While the Company will continue to
attempt to take appropriate precautions, there can be no assurance that it will
avoid significant product liability exposure. The Company maintains product
liability insurance for clinical studies. However, there can be no assurance
that such coverage will be adequate or that adequate insurance coverage for
future clinical or commercial activities will be available at all, or at
acceptable cost, or that a product liability claim would not materially
adversely affect the business or financial condition of the Company.
Hazardous Materials and Product Risks
The Company's research and development involves the controlled use of
hazardous materials, such as cytotoxic drugs, other toxic and carcinogenic
chemicals and various radioactive compounds. Although the Company believes that
its safety procedures for handling and disposing of such materials comply with
the standards prescribed by federal, state and local regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result, and any such liability could be extensive. The
Company is also subject to substantial regulation relating to occupational
health and safety, environmental protection, hazardous substance control, and
waste management and disposal. The failure to comply with such regulations could
subject the Company to, among other things, fines and criminal liability.
Certain of the chemotherapeutic agents employed by the Company in its
Therapeutic Implant, ADV and Therapeutic Adhesive products are known to have
toxic side effects, particularly when used in traditional methods of
administration. Each product incorporating such a chemotherapeutic agent will
require separate FDA approval as a new drug under the procedures specified
above. Bovine collagen is a significant component of the Company's protein
matrix. Two rare autoimmune connective tissue conditions, polymyositis and
dermatomyositis ("PM/DM"), have been alleged to occur with increased frequency
in patients who have received cosmetic collagen treatments. Based upon the
occurrence of these conditions, the FDA requested a major manufacturer of bovine
collagen products for cosmetic applications to investigate the safety of such
uses of its collagen. In October 1991, an expert panel convened by the FDA to
examine this issue found no statistically significant relationships between
injectable collagen and the occurrence of autoimmune disease, but noted that
certain limitations in the available data made it difficult to establish a
statistically significant association.
Page 17
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Volatility of Stock Price; No Dividends
The market prices for securities of biopharmaceutical and biotechnology
companies (including the Company) have historically been highly volatile, and
the market has from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. Future announcements concerning the Company, its competitors or other
biopharmaceutical products, governmental regulation, developments in patent or
other proprietary rights, litigation or public concern as to the safety of
products developed by the Company or others and general market conditions may
have a significant effect on the market price of the Common Stock. The Company
has not paid any cash dividends on its Common Stock and does not anticipate
paying any dividends in the foreseeable future.
Shares Eligible for Future Sale
Future sales of shares by existing stockholders could adversely affect
the prevailing market price of the Company's Common Stock. On August 26, 1994,
the Company sold 13,334 shares of Series A Convertible Preferred Stock (the
"Preferred Stock") in a private placement, and registered 1,333,400 shares of
Common Stock issuable upon conversion of the Preferred Stock. During the first
quarter of 1996, 13,334 outstanding shares of the Company's Series A preferred
stock were converted into 1,333,400 shares of the Company's common stock. On
August 29, 1995, the Company sold 1,481,982 shares of Common Stock in a private
placement and simultaneously registered the resale of such shares on a
Registration Statement on Form S-3. The outstanding shares of the Company's
Common Stock are all freely tradeable, subject to volume and other restrictions
imposed by Rule 144 under the Securities Act with respect to sales by
affiliates. Sales of substantial amounts of Common Stock may have an adverse
effect on the market price of the Common Stock.
Anti-Takeover Provisions
The ability of the Board of Directors of the Company to issue shares of
Preferred Stock without stockholder approval and a stockholder rights plan
adopted by the Company may, alone or in combination, have certain anti-takeover
effects. The Company also is subject to provisions of the Delaware General
Corporation Law which may make certain business combinations more difficult.
Page 18
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MATRIX PHARMACEUTICAL, INC.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1996 Annual Meeting of Stockholders was held on May 16, 1996. The
following directors, all of whom served in such capacity prior to the meeting,
were re-elected by the stockholders:
J. Stephan Dolezalek
Edward E. Luck
John E. Lyons
Craig R. McMullen
Richard D. Murdock
Julius L. Pericola
Alan E. Salzman
The following additional matters were submitted to the stockholders for vote and
approved at the meeting:
o Approval of an amendment to the Company's 1988 Restricted Stock
Plan ("the Plan") in order to (1) increase the maximum number of
shares of common stock authorized for issuance under the Plan by
an additional 850,000 shares and (2) impose a specific share
limitation of 750,000 shares on the maximum number of shares for
which any one participant may be granted stock options and direct
stock issuances under the Plan. Of the total shares voting on the
foregoing resolution, 9,507,612 voted in favor, 4,712,619 voted
against, 16,550 abstained and broker non-votes were 467,850.
o Ratification of the appointment of Ernst and Young as independent
auditors of the Company for the fiscal year ending December 31,
1996. Of the total shares voting on the foregoing resolution,
14,672,596 voted in favor, 19,215 voted against and 12,820
abstained.
Page 19
<PAGE>
MATRIX PHARMACEUTICAL, INC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Exhibit Table
- ------ -------------
10 Industrial Multi-Tenant Lease agreement dated July 15, 1996
between the Company, as landlord, and Advanced Tissue
Sciences, Inc., as tenant.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no Current Reports on Form 8-K during the
quarter ended June 30, 1996.
Page 20
<PAGE>
MATRIX PHARMACEUTICAL, INC.
SIGNATURE
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.
MATRIX PHARMACEUTICAL, INC.
Date: August 6, 1996 By: /s/ James R.Glynn
---------------- -----------------------------
James R. Glynn
Senior Vice President, Chief
Financial Officer & Secretary
Signing on behalf of the registrant
and as principal financial officer
Page 21
INDUSTRIAL MULTI-TENANT LEASE
BETWEEN
MATRIX PHARMACEUTICAL, INC.
"LANDLORD"
AND
ADVANCED TISSUE SCIENCES, INC.
"TENANT"
JULY 15, 1996
<PAGE>
INDUSTRIAL MULTI-TENANT LEASE
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
July 15, 1996 ("EFFECTIVE DATE"), is made by and between Matrix Pharmaceutical,
Inc., a Delaware corporation ("LANDLORD") and Advanced Tissue Sciences, Inc., a
Delaware corporation ("TENANT") (collectively the "PARTIES," or individually a
"PARTY").
1.2(A) PREMISES: That certain portion of the Building, including all
improvements therein or to be provided by Landlord under the terms of this
Lease, commonly known by the street address of 4757 Nexus Centre Drive, located
in the City of San Diego, County of San Diego, State of California, with zip
code 92121, as outlined on Exhibit "A" attached hereto, including, without
limitation, the existing Building elevator ("PREMISES"). The "BUILDING" is that
certain building containing the Premises and generally described as an
approximately 68,000 square foot two-story Building located in the City of San
Diego "SR" zone; the Premises consist of the entire second floor of the
Building. In addition to Tenant's rights to use and occupy the Premises as
hereinafter specified, Tenant shall have non-exclusive rights to the Common
Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall
not have any rights to the roof, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements thereon, are herein collectively referred to as
the "INDUSTRIAL CENTER." (Also see Paragraph 2.)
(B) PARKING: One Hundred Five (105) unreserved vehicle parking spaces
("UNRESERVED PARKING SPACES"); and five (5) reserved vehicle parking spaces for
visitors to the Industrial Center ("RESERVED PARKING SPACES"). (Also see
Paragraph 2.6.)
1.3 TERM: Two (2) years and no months ("ORIGINAL TERM") commencing July
15, 1996 ("COMMENCEMENT DATE") and ending July 14, 1998 ("EXPIRATION DATE").
(Also see Paragraph 3 and Addendum A.)
1.4 EARLY POSSESSION: Upon execution of this Lease ("EARLY POSSESSION
DATE"). (Also see Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: Months 1-12: $119,025.00 per month; Months 13-24:
$123,786.00 per month ("BASE RENT"). Base Rent shall be payable on the first day
of each month commencing August 1, 1996. Tenant shall have no obligation to pay
any rent or charges in excess of the Base Rent except as expressly set forth
herein or as otherwise agreed to in writing by the Parties. (Also see Paragraph
4 and Addendum A.)
1.6 BASE RENT PAID UPON EXECUTION: $59,512.50 as Base Rent for the period
July 15, 1996 - July 31, 1996.
1.7 SECURITY DEPOSIT: $89,700.00 ("SECURITY DEPOSIT"). (Also see
Paragraph 5.)
1.8 PERMITTED USE: General office and administrative use and scientific
research in compliance with San Diego "SR" zoning regulations and no other use
("PERMITTED USE"). (Also see Paragraph 6.)
1.9 INSURING PARTY. Landlord is the "INSURING PARTY." (Also see Paragraph
8.)
1.10(A) REAL ESTATE BROKERS. Brent Jacobs of John Burnham & Co.
represents Tenant exclusively ("TENANT'S BROKER"), and no broker represents
Landlord.
(B) PAYMENT TO BROKERS. Upon the execution of this Lease by both Parties,
Landlord shall pay to Tenant's Broker a fee as set forth in a separate written
agreement between Landlord and Tenant's Broker for brokerage services rendered
by Tenant's Broker in connection with this transaction.
1.11 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 1 through 14 and Exhibits "A" through "F", all of which
constitute a part of this Lease.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. The Premises will
include the existing furnishings and equipment left in the Premises by the
previous occupant of the Premises, as specifically described in Exhibit "C"
("EXISTING EQUIPMENT"), which shall remain the property of Landlord and shall
not be Tenant's Trade Fixtures, equipment or furnishings.
2.2 CONDITION. Landlord shall deliver the Premises to Tenant clean and
free of debris, floors waxed, carpets cleaned and holes in surfaces of walls in
the Premises repaired, on the Commencement Date. On or before the Commencement
Date, Landlord, at Landlord's sole cost and expense, shall commence construction
of a demising wall and doorway at the second floor landing of the stairs leading
to the Premises from the Building main lobby, and promptly after the Commencment
Date Landlord shall construct a demising emergency exit doorway at the top of
the stairs leading to the Building exit at the north end of the Building
("LANDLORD'S WORK"). The Landlord's Work shall be diligently completed by
Landlord in accordance with those certain construction plans and drawings
created by WHL Architects for WHL Architects Project No. 96144, as Drawing Nos.
A0, A1.0, A2.1, A2.2, and A9.1 (a copy of which was received by Tenant on July
12, 1996), and said demising doors shall be installed by Landlord no later than
ten (10) days after said demising doors are delivered to the Building. By taking
possession of the Premises, Tenant shall be deemed to have acknowledged that (a)
it has inspected the Premises, (b) it accepts the Premises subject to completion
of the Landlord's Work, and (c) the Premises are in good and sanitary order. As
of the effective date of this Lease, Tenant acknowledges that Tenant has
conducted Tenant's own investigation of the Premises and the physical condition
thereof, including, without limitation, accessibility and location of utilities
and improvements and existence of earthquake preparedness, which in Tenant's
judgment affect or influence Tenant's use of the Premises and Tenant's
willingness to enter this Lease.
RPL
INITIALS: ________________
JSS
________________
1
<PAGE>
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE.
(a) Landlord warrants that any improvements (other than those
constructed by Tenant or at Tenant's direction) on or in the Premises as of the
Commencement Date shall comply with all applicable covenants or restrictions of
record and applicable building codes, regulations and ordinances in effect on
the Commencement Date. Landlord further warrants to Tenant that Landlord has no
knowledge of any claim having been made by any governmental agency that a
violation or violations of applicable building codes, regulations, or ordinances
exist with regard to the Premises as of the Commencement Date. Said warranties
shall not apply to any Alterations or Utility Installations (defined in
Paragraph 7.3(a)) made or to be made by Tenant. If the Premises do not comply
with said warranties, Landlord shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Tenant given within thirty
(30) days after the Tenant's discovery of such non-compliance and setting forth
with specificity the nature and extent of such non-compliance, take such action,
at Landlord's expense, as may be reasonable or appropriate to rectify the
non-compliance. If Tenant does not give Landlord written notice of
non-compliance with the foregoing warranties within thirty (30) days after the
Tenant's discovery of such non-compliance, correction of that non-compliance
shall be the obligation of Tenant at Tenant's sole cost and expense. Landlord
makes no warranty that the Permitted Use in Paragraph 1.8 is permitted for the
Premises under Applicable Laws (as defined in Paragraph 2.4).
(b) Tenant shall, at Tenant's sole cost and expense, comply with
all Applicable Laws (as defined in Paragraph 2.4) now in force, or which may
hereafter be in force, pertaining to Tenant's particular use of the Premises,
including, without limitation, the costs and expenses of compliance of any of
Tenant's Utility Installations, or Alterations or additions made by Tenant to
the Premises with all requirements of Applicable Laws, and Tenant shall secure
any necessary permits therefor and shall faithfully observe, in the Tenant's use
of the Premises, Building and Industrial Center, all Applicable Laws which are
now in force, or which may hereafter be in force. Notwithstanding the foregoing
sentence, Landlord agrees that Landlord shall be responsible for making
improvements or alterations to the Industrial Center, Building and Premises
which Landlord is required to maintain or repair if such improvements or
alterations are required by changes in the Applicable Laws after the
Commencement Date, and are not required as a result of: (i) Tenant's particular
use or manner of occupancy of the Premises, Building or Industrial Center; (ii)
Tenant's Utility Installations or Alterations or additions to the Premises made
by Tenant (including, without limitation, the installation of Tenant's Trade
Fixtures and furnishings in the Premises, Building or Industrial Center) or
(iii) Tenant's activities more specifically addressed in Paragraph 6.2
(Hazardous Substances).
2.4 ACCEPTANCE OF PREMISES. Tenant hereby acknowledges: (a) that it has
been advised by the Tenant's Broker to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical and fire
sprinkler systems, security, environmental aspects, seismic and earthquake
requirements), and compliance with the Americans with Disabilities Act and
applicable zoning, municipal, county, state and federal laws, ordinances and
regulations and any covenants or restrictions of record (collectively
"APPLICABLE LAWS") and the present and future suitability of the Premises for
Tenant's intended use; (b) that Tenant has made such investigation as it deems
necessary with reference to such matters, is satisfied with reference thereto,
and (except for those items that are specifically set forth as Landlord's
responsibility under the terms and conditions of this Lease) assumes all
responsibility therefore as the same relate to Tenant's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Landlord, nor any
of Landlord's agents, has made any oral or written representations or warranties
with respect to said matters other than as set forth in this Lease.
2.5 INTENTIONALLY DELETED.
2.6 VEHICLE PARKING. Tenant shall have the non-exclusive right to use the
number of Unreserved Parking Spaces and, for the non-exclusive use of Industrial
Center invitees only, the Reserved Parking Spaces specified in Paragraph 1.2(b)
on those portions of the Common Areas designated from time to time by Landlord
for parking. Tenant shall not use more parking spaces than said number. Said
parking spaces shall be used for parking by vehicles no larger than full size
passenger automobiles, passenger mini-vans or pick-up trucks, herein called
"PERMITTED SIZE VEHICLES." Vehicles other than Permitted Size Vehicles shall be
parked and loaded or unloaded as directed by Landlord in the Rules and
Regulations (as defined in Paragraph 40) issued by Landlord. (Also see Paragraph
2.9.)
(a) Tenant shall not permit or allow any vehicles that belong to
or are controlled by Tenant or Tenant's employees, suppliers, shippers,
customers, contractors or invitees to be loaded, unloaded, or parked in areas
other than those designated by Landlord for such activities.
(b) If Tenant permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Landlord shall have the right, with
reasonable notice, in addition to such other rights and remedies that it may
have, to remove or tow away the vehicle involved and charge the cost to Tenant,
which cost shall be immediately payable upon demand by Landlord.
2.7 COMMON AREAS - DEFINITION. The term "COMMON AREAS" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Landlord from time to time for the general
non-exclusive use of Landlord, Tenant and other tenants of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways, and landscaped areas. In
addition, the Common Areas shall include the following areas of the Building
throughout the Lease Term (but subject to Landlord's rights under Paragraph
2.10): the first-floor Building main entrance lobby, patios, first-floor
lunchroom (and first floor showers and bathroom facilities), stairways and
certain corridors of the Building, all as depicted on Exhibit "A". Tenant hereby
acknowledges and agrees that the availability of the first-floor showers and
bathroom facilities for Tenant's use as part of the Common Areas may be
terminated at any time by Landlord, if and when Tenant's use of such Common
Areas is reasonably determined by Landlord to endanger the ability to use the
first floor of the Building for the manufacture of pharmaceutical products or
otherwise materially interferes with any lawful use of the first floor premises
of the Building. Tenant's access to the Common Areas of the Building may be by
security access cards in accordance with the Rules and Regulations.
2.8 COMMON AREAS - TENANT'S RIGHTS. Landlord hereby grants to Tenant, for
the benefit of Tenant and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Landlord under the terms hereof or under the terms of any Rules and
Regulations
RPL
INITIALS: ________________
JSS
________________
2
<PAGE>
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Landlord or Landlord's designated agent, which consent may be revoked
at any time. In the event that any unauthorized storage shall occur then
Landlord shall have the right, without notice, in addition to such other rights
and remedies that it may have, to remove the property and charge the reasonable
cost to Tenant, which cost shall be immediately payable upon demand by Landlord.
2.9 COMMON AREAS - RULES AND REGULATIONS. Landlord or such other
person(s) as Landlord may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
establish, modify, amend and enforce reasonable Rules and Regulations with
respect thereto in accordance with Paragraph 40. Tenant agrees to abide by and
conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Landlord will use its diligent efforts to enforce the Rules and
Regulations, provided that Landlord shall not be responsible to Tenant for the
non-compliance with said Rules and Regulations by other tenants of the
Industrial Center. Notwithstanding the foregoing, Landlord agrees to abide by
and conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform, in Landlord's occupancy of the Industrial Center. (See Attached Exhibit
"B".)
2.10 COMMON AREAS - CHANGES. Landlord shall have the right, subject to
the last sentence of this subparagraph, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To add additional buildings and improvements to the Common
Areas;
(d) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(e) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Industrial Center as
Landlord may, in the exercise of sound business judgment, deem to be
appropriate.
In exercising any of the foregoing rights under this Paragraph 2.10 regarding
the Common Area, (i) Landlord shall make a reasonable effort to minimize
disruption to Tenant's business in the Premises and the cost to Tenant as a
result of any such changes, and (ii) Landlord shall not materially interfere
with Tenant's Permitted Use in exercising such rights without first obtaining
Tenant's consent, which shall not be unreasonably delayed or withheld.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If an Early Possession Date is specified in
Paragraph 1.4 and if Tenant totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy; provided,
however, that Tenant shall be obligated to pay any and all costs of Building
Services (defined in Paragraph 4.2(a)) associated with such early occupancy. All
other terms of this Lease, however (including, but not limited to, Tenant's
obligation to carry the insurance required by Paragraph 8) shall be in effect
during such period, and prior to Tenant's early occupancy of the Premises,
Tenant shall have previously provided Landlord with proof of Tenant's insurance
as set forth in Paragraph 8 of this Lease. Any such early possession shall not
affect nor advance the Expiration Date of the Original Term. Any and all
materials, work, installations, equipment and decorations of any nature brought
upon or installed by Tenant in the Premises prior to the Commencement Date shall
be at Tenant's sole risk. Except for loss or damage resulting from Landlord's
active negligence or willful misconduct, neither Landlord nor any party acting
on Landlord's behalf in the Building shall be responsible for any damage or loss
or destruction of such items brought to or installed in the Premises prior to
the Commencement Date.
3.3 DELAY IN POSSESSION. If for any reason beyond Landlord's reasonable
control, Landlord cannot deliver possession of the Premises to Tenant by the
Early Possession Date, if one is specified in Paragraph 1.4, or if no Early
Possession Date is specified, by the Commencement Date, Landlord shall not be
subject to any liability therefor, nor shall such failure affect the validity of
this Lease, or the obligations of Tenant hereunder, or extend the term hereof,
but in such case, Tenant shall not, except as otherwise provided herein, be
obligated to pay rent or perform any other obligation of Tenant under the terms
of this Lease until Landlord delivers possession of the Premises to Tenant. If
possession of the Premises is not delivered to Tenant within thirty (30) days
after the Commencement Date for any reason beyond Landlord's reasonable control,
Tenant may, at its option, by notice in writing to Landlord within fifteen (15)
days after Landlord's delivery of written notice of a revised Commencement Date
(which shall be delivered no later than fifteen (15) days after the expiration
of such 30-day period), cancel this Lease, in which event the parties shall be
discharged from all obligations hereunder; provided further, however, that if
such written notice of Tenant is not received by Landlord within said fifteen
(15) day period, Tenant's right to cancel this Lease hereunder shall terminate
and be of no further force or effect.
4. RENT.
4.1 BASE RENT. Tenant shall pay Base Rent, and other rent or charges (if
any), as the same may be adjusted from time to time, to Landlord in lawful money
of the United States, without offset or deduction, on or before the day on which
it is due under the terms of this Lease. Base Rent, and all other rent and
charges (if any), for any period during the term hereof which is for less than
one full month shall be prorated based upon the actual number of days of the
month involved. Payment of Base Rent and other charges shall be made to Landlord
at its address stated herein or to such other persons or at such other addresses
as Landlord may from time to time designate in writing to Tenant.
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4.2 BUILDING SERVICES. Landlord shall provide during the term hereof all
Building Services, as hereinafter defined, the cost of which services shall be
included in Tenant's Base Rent (except as otherwise specifically provided
herein), in accordance with the following provisions:
(a) "BUILDING SERVICES" are defined, for purposes of this Lease,
as all services to be performed by Landlord relating to the ownership and
operation of the Building and Industrial Center, including, but not limited to,
the following:
(i) The operation, repair and maintenance, in neat,
clean, good order and condition, of the following:
(aa) The Premises, subject to the provisions of
Paragraph 7.
(bb) The Industrial Center, including parking
areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways, landscaped areas, striping, bumpers, irrigation systems,
Common Area lighting facilities, fences and gates, elevators and roof.
(cc) Interior and exterior signs (with the
exception of Tenant's exterior identification signage, which shall be Tenant's
obligation to operate, maintain and repair) and any tenant directories.
(dd) Fire detection and sprinkler systems.
(ii) The delivery of water, sewer, gas, and electricity
services to the Building (as described in Paragraph 11), in accordance with and
subject to the terms and conditions of Paragraph 11.
(iii) Property management and security services
substantially similar to such services provided on the Effective Date.
(iv) Any environmental inspections of the Common Areas
as required by Applicable Requirements (subject to the terms and conditions of
Paragraph 6.2).
(v) Building receptionist services (as described in
Paragraph 11.4).
(vi) Building janitorial services (as described in
Paragraph 11.3).
(vii) Payment of Real Property Taxes (as defined in
Paragraph 10.2) to be paid by Landlord for the Industrial Center, Building and
the Common Areas under Paragraph 10 hereof.
(viii) Obtaining and maintaining the insurance policies
maintained by Landlord under Paragraph 8 hereof with respect to the Industrial
Center.
(ix) Any other services to be provided by Landlord that
are stated elsewhere in this Lease.
(b) The inclusion of the improvements, facilities and services
set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation
upon Landlord to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Landlord already
provides the services, or Landlord has agreed elsewhere in this Lease to provide
the same or some of them. Landlord's maintenance and repair of the Premises and
the Industrial Center shall be performed in such manner and to such extent as
reasonably deemed by Landlord to be standard for buildings of similar class,
size, age and location.
(c) The cost of any Building Services, which are required to be
reimbursed to Landlord under this Lease, if any, shall be payable by Tenant
within ten (10) days after a reasonably detailed statement of actual expenses is
presented to Tenant by Landlord. Any such sum payable by Tenant which would not
otherwise be due until after the date of the termination of this Lease, shall,
if the exact amount is uncertain at the time that this Lease terminates, be paid
by such party upon such termination in an amount to be determined by Landlord
with an adjustment to be made once the exact amount is known.
5. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon Tenant's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Tenant's
faithful performance of Tenant's obligations under this Lease. If Tenant fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Landlord may use, apply or
retain all or any portion of said Security Deposit for the payment of any amount
due Landlord or to reimburse or compensate Landlord for any liability, cost,
expense, loss or damage (including attorneys' fees) which Landlord may suffer or
incur by reason thereof. If Landlord uses or applies all or any portion of said
Security Deposit, Tenant shall within ten (10) days after written request
therefore deposit monies with Landlord sufficient to restore said Security
Deposit to the full amount required by this Lease. Landlord shall not be
required to keep all or any part of the Security Deposit separate from its
general accounts. Landlord shall, at the expiration or earlier termination of
the term hereof and after Tenant has vacated the Premises, return to Tenant (or,
at Landlord's option, to the last assignee, if any, of Tenant's interest
herein), that portion of the Security Deposit not used or applied by Landlord.
Unless otherwise expressly agreed in writing by Landlord, no part of the
Security Deposit shall be considered to be held in trust, to bear interest or
other increment for its use, or to be prepayment for any monies to be paid by
Tenant under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Tenant shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Tenant shall not use or
permit the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties. Tenant acknowledges that
neighboring premises of the Building are intended to be used by Landlord for the
manufacture of pharmaceutical products subject to regulation by the federal Food
and Drug Administration ("FDA"). Tenant hereby warrants and represents that it
shall cooperate in good faith with Landlord (including, without limitation,
using its best efforts to comply with FDA requests, rules and regulations
associated with Landlord's manufacturing of pharmaceutical products) in Tenant's
use of chemicals, biological and/or radioactive materials in the Premises and
any other part of the Industrial Center. In the event that, pursuant to
Landlord's discussions with the FDA regarding the use of the Building for the
manufacture of pharmaceutical products, Landlord reasonably determines that
Tenant's cooperation pursuant to this Section 6.1(a) either materially
interferes or is reasonably likely to materially interfere with Tenant's
beneficial use of all or a part of the Premises ("DIMINISHED USE PORTION"),
Landlord agrees to promptly notify Tenant of such prospective material
interference and to
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make a good faith effort to accommodate Tenant's Permitted Use in the Building.
If Landlord reasonably determines that Landlord's manufacture of pharmaceutical
products in accordance with FDA requirements cannot be accomplished without
material interference with Tenant's Permitted Use, Landlord shall promptly (but
no later than thirty (30) days after Landlord's receipt of a written decision
from the FDA regarding the effect of Landlord's manufacturing of pharmaceutical
products in the Building on Tenant's Permitted Use in the Premises) provide
Tenant with notice ("DIMINISHED USE NOTICE") that: (i) FDA requirements will
result in such material interference, (ii) the nature of such material
interference, and (iii) Landlord's reasonably estimated date that FDA
requirements will materially interfere with Tenant's Permitted Use ("LANDLORD'S
ESTIMATED DATE"). Tenant may, no later than thirty (30) days following the date
of Tenant's receipt of the Diminished Use Notice, elect to terminate this Lease
as to the Diminished Use Portion by delivery of notice to Landlord ("TENANT'S
TERMINATION NOTICE"). In the event of such termination pursuant to this Section
6.1(a), termination as to the Diminished Use Portion shall be effective as of
the date that Tenant vacates the Diminished Use Portion. Tenant shall vacate the
Diminished Use Portion at a date selected by Tenant, but in no event more than
the later of: (i) ninety (90) days after the date of the delivery of the
Tenant's Termination Notice to Landlord; or (ii) Landlord's Estimated Date.
Tenant shall surrender the Diminished Use Portion in accordance with the terms
and conditions of Paragraph 7.4(c) of this Lease. Tenant shall use its
reasonable best efforts to keep Landlord apprised of the intended date of its
vacation of the Diminished Use Portion. In the event of a termination by Tenant
under this Section 6.1(a), Landlord shall reimburse Tenant, within ten (10) days
after Tenant's delivery to Landlord of an itemized list of such expenses,
certified as correct by an authorized officer of Tenant, all of Tenant's actual
reasonable out-of-pocket expenses arising from said termination, the vacation of
the Diminished Use Portion and Tenant's relocation therefrom, which amount shall
not exceed Twenty-Five Thousand Dollars ($25,000.00). In the event that the
Diminished Use Portion constitutes less than the entire laboratory facilities
(as such facilities existed on the Commencement Date), from and after the date
of the material interference with Tenant's Permitted Use of the Diminished Use
Portion, the Base Rent payable by Tenant hereunder shall abate in direct
proportion to the interference with Tenant's beneficial use of the Premises. The
monthly Base Rent for the remaining Premises (i.e., the original Premises less
the Diminished Use Portion) shall be an amount equal to the sum of: (i) the
square footage of the remaining laboratory facilities (i.e. the area of the
laboratory facilities in the Premises as of the Commencement Date less the
Diminished Use Portion of such laboratory facilities) at a rate equal to Three
and 85/100 Dollars ($3.85) per square foot; plus (ii) the square footage of all
other remaining portions of the Premises (i.e. the original Premises less the
area of the laboratory facilities on the Commencement Date) at a rate equal to
Three Dollars ($3.00) per square foot. In the event that the Diminished Use
Portion constitutes the entire laboratory facilities (as such facilities existed
on the Commencement Date), from and after the date that Tenant vacates the
Diminished Use Portion as set forth in this Section 6.1(a), the Base Rent
payable by Tenant hereunder shall abate such that the remaining area of the
Premises (i.e. the area of the Premises less the area of the Diminished Use
Premises) shall accrue monthly Base Rent at a rate equal to Three Dollars
($3.00) per square foot. From and after the date Tenant vacates the Diminished
Use Premises the remaining area of the Premises shall be the "Premises" for
purposes of this Lease. No such diminution in use or election to terminate
hereunder shall diminish Tenant's obligations to cooperate under this Section
6.1(a). Notwithstanding the foregoing, in the event such material reduction of
Tenant's beneficial use of the Premises occurs during the last six (6) months of
the term of this Lease and Tenant elects to terminate this Lease as to the
Diminished Use Portion, Landlord may, at Landlord's Option, terminate the Lease
in its entirety effective thirty (30) days following the date of Tenant's
termination notice. Provided, however, if Tenant at that time has an exercisable
option to extend this Lease or to purchase the Premises, then Tenant may
preserve this Lease by exercising such option.
(b) Tenant's use and occupancy of the Premises shall not subject
the Premises to any use which would tend to damage any portion thereof or which
may in any way cause any cancellation of any insurance policy covering the
Industrial Center, the Building or portion thereof. Tenant shall also comply
with Rules and Regulations governing the use of the Building. Landlord, during
the period of its occupancy of any premises in the Building, hereby agrees to
comply with such Rules and Regulations in its occupancy of the Building.
(c) Landlord hereby agrees to not unreasonably withhold or delay
its consent to any written request by Tenant, Tenant's assignees or subtenants,
and by prospective assignees and subtenants of Tenant, its assignees and
subtenants, for a modification of said Permitted Use, so long as the same will
not impair the structural integrity of the improvements on the Premises or in
the Building or the mechanical or electrical systems therein, does not conflict
with uses by other tenants, is not significantly more burdensome to the Premises
or the Building and the improvements thereon, and is otherwise permissible
pursuant to this Paragraph 6. If Landlord elects to withhold such consent,
Landlord shall within five (5) business days after such request give a written
notification of same, which notice shall include an explanation of Landlord's
reasonable objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment, or the Premises; (ii) regulated or monitored by any
governmental authority; or (iii) a basis for potential liability of Landlord to
any governmental agency or third party under any applicable statute or common
law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products or by-products
thereof. Subject to the following sentence, Tenant shall not engage in any
activity in or about the Premises which constitutes a Reportable Use (as
hereinafter defined) of Hazardous Substances without the express prior written
consent of Landlord (which consent shall not be unreasonably delayed or
withheld) and compliance in a timely manner (at Tenant's sole cost and expense)
with all Applicable Requirements (as defined in Paragraph 6.3). Landlord
acknowledges and agrees that, as of the Commencement Date, Tenant may use those
certain Hazardous Substances listed on Exhibit "D" in accordance with all
Applicable Requirements and the relevant provisions of this Lease. "REPORTABLE
USE" shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or disposal
of a Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with, any
governmental authority, and (iii) the presence in, on or about the Premises of a
Hazardous Substance with respect to which any Applicable Laws require that a
notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Tenant may, without Landlord's prior
consent, but upon notice to Landlord and in compliance with all Applicable
Requirements, use any ordinary and customary materials reasonably required to be
used by Tenant in the normal course of the Permitted Use, so long as such use is
not a Reportable Use and does not expose the Premises or neighboring properties
to any meaningful risk of contamination or
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damage or expose Landlord to any liability therefor. In addition, Landlord may
(but without any obligation to do so) condition its consent to any Reportable
Use of any Hazardous Substance by Tenant upon Tenant's giving Landlord such
additional assurances as Landlord, in its reasonable discretion, deems necessary
to protect itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at Landlord's option, removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LANDLORD. If Tenant knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises or the Building due to acts or omissions of Tenant,
its agents, employees, invitees, licensees or contractors, other than as
previously consented to by Landlord, which consent shall not be unreasonably
delayed or withheld, Tenant shall immediately give Landlord written notice
thereof, together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding given
to, or received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to, such Hazardous Substance
including but not limited to all such documents as may be involved in any
Reportable Use involving the Premises. Tenant shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under or about the
Premises (including, without limitation, through the plumbing or sanitary sewer
system), except in compliance with all Applicable Requirements.
(c) INDEMNIFICATION. Tenant shall indemnify, protect, defend and
hold Landlord, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and reasonable
attorneys' and consultants' fees arising out of or involving any Hazardous
Substance brought onto the Industrial Center by or for Tenant or by anyone under
Tenant's control. Tenant's obligations under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Tenant, and the cost
of investigation (including reasonable consultants' and attorneys' fees and
testing), removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration or earlier
termination of this Lease. No termination, cancellation or release agreement
entered into by Landlord and Tenant shall release Tenant from its obligations
under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Landlord in writing at the time of such agreement. Landlord shall
indemnify, protect, defend and hold Tenant, its agents and employees harmless
from and against any and all damages, liabilities, judgments, costs, claims,
liens, expenses, penalties, loss of permits and reasonable attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Industrial Center by or for Landlord or by anyone under Landlord's
control. Subject to the provisions of Section 8 of Addendum "A", Landlord's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Landlord, and the cost of investigation
(including reasonable consultants' and attorneys' fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any contamination
therein involved, and shall survive the expiration or earlier termination of
this Lease. No termination, cancellation or release agreement entered into by
Landlord and Tenant shall release Landlord from its obligations under this Lease
with respect to Hazardous Substances, unless specifically so agreed by Tenant in
writing at the time of such agreement.
(d) TENANT'S COMPLIANCE WITH REQUIREMENTS. Tenant shall, at
Tenant's sole cost and expense, fully, diligently and in a timely manner, comply
with all "APPLICABLE REQUIREMENTS," which term is used in this Lease to mean all
laws, rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the reasonable recommendations of
Landlord's engineers and/or consultants (to the extent such recommendations are
intended to protect any person or property outside the Premises, or are required
to avoid a Landlord breach of any Security Device, as defined in Paragraph
30.1), relating in any manner to the Tenant's use and/or occupancy of the
Building or the activities of Tenant or anyone under Tenant's control in the
Industrial Center (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill, or release of any Hazardous Substance), now in
effect or which may hereafter come into effect. Tenant shall, within five (5)
days after receipt of Landlord's written request, provide Landlord with copies
of all documents and information, including but not limited to permits,
registrations, manifests, applications, reports and certificates, evidencing
Tenant's compliance with any Applicable Requirements specified by Landlord, and
shall immediately upon receipt, notify Landlord in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Tenant or the
Premises to comply with any Applicable Requirements.
(e) INSPECTION; COMPLIANCE WITH LAW. Landlord, Landlord's
agents, employees, contractors and designated representatives, and the holders
of any mortgages, deeds of trust or ground leases on the Premises ("LENDERS")
shall have the right to enter the Premises at any time in the case of an
emergency (provided that Landlord shall give Tenant notice of Landlord's entry
into the Premises promptly after such entry), and otherwise at reasonable times
and upon reasonable advance notice, for the purpose of inspecting the condition
of the Premises and for verifying compliance by Tenant with this Lease and all
Applicable Requirements (as defined in Paragraph 6.2(d)), and Landlord shall be
entitled to employ experts and/or consultants in connection therewith to advise
Landlord with respect to Tenant's activities relating to Tenant's installation,
operation, use, monitoring, maintenance, or removal of any Hazardous Substance
on or from the Premises. Except in the case of an emergency, Tenant shall be
permitted to have a representative of Tenant accompany such inspections,
provided that the non-availability of a Tenant representative shall not delay or
prevent Landlord from performing such an inspection. The costs and expenses of
any such inspections shall be paid by the party requesting same, unless a
Default or Breach of this Lease by Tenant or a violation of Applicable
Requirements or a contamination, caused or materially contributed to by Tenant,
is found to exist or to be imminent, or unless the inspection is requested or
ordered by a governmental authority as the result of any such existing or
imminent violation or contamination. In such case, Tenant shall upon request
reimburse Landlord or Landlord's Lender, as the case may be, for Landlord's
actual costs and expenses of such inspections reasonably incurred by Landlord.
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7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND
ALTERATIONS.
7.1 TENANT'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 4.2 (Building
Services), 7.2 (Landlord's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Tenant shall not commit or suffer any waste or damage to be
committed on any portion of the Premises, Building or Industrial Center and
shall enforce reasonable workplace operating practices in order to reasonably
reduce the likelihood of waste or damage to any portion of the Premises,
Building and Industrial Center, including, without limitation, all Building
equipment and systems. Notwithstanding Landlord's repair and maintenance
obligations in Paragraph 7.2, Landlord shall not be obligated to pay for any
maintenance, repairs or replacements of any portion of the Premises, Building or
Industrial Center that are required as a result of the negligence or willful
misconduct of Tenant, its agents, employees, invitees, licensees or consultants,
which shall be the responsibility of Tenant, at Tenant's cost (subject, however,
to the availability of insurance coverage for any such repairs pursuant to
Paragraph 8, in which case Tenant's payment obligation shall be limited to the
amount of the deductible paid by Landlord arising from such repairs).
Notwithstanding the foregoing, Tenant's repair and maintenance obligations with
respect to the Premises shall include, without limitation, any necessary repairs
to: (1) any carpet or other floor covering installed by Tenant, (2) any interior
partitions and other Existing Equipment in the Premises, (3) any holes made by
Tenant to any Building walls, (4) any telephone and computer cabling serving
Tenant exclusively, (5) any of Tenant's Trade Fixtures (defined in Paragraph
7.3(a)), and (6) any Tenant-Owned Alterations and/or Utility Installations
(defined in Paragraph 7.3(a)).
(b) If Tenant fails to perform Tenant's obligations under this
Paragraph 7.1. Landlord may enter upon the Premises after ten (10) days' prior
written notice to Tenant (except in the case of an emergency, in which case no
notice shall be required), and at Tenant's expense, perform such obligations on
Tenant's behalf, and put the Premises in good order, condition and repair, in
accordance with Paragraph 13.2 below.
7.2 LANDLORD'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Building Services), 6 (Use), 7.1 (Tenant's Obligations), 7.4(c) (Surrender/
Restoration), 9 (Damage or Destruction) and 14 (Condemnation), Landlord shall
keep in good order, condition and repair the plumbing, heating, ventilation and
air-conditioning, electrical and mechanical systems, lighting facilities,
windows, doors and plate glass of the Building and the Industrial Center, and
the foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipes and hoses or other automatic
fire extinguishing system, including fire alarm and/or smoke detection systems
and equipment, fire hydrants, parking lots, walkways, parkways, driveways,
landscaping, fences, signs and utility systems serving the Building and all
parts thereof as well as providing the Building Services pursuant to Paragraph
4.2., but excluding any items which are the responsibility of Tenant pursuant to
Paragraph 7.1 above. Tenant expressly waives the benefit of any statute now or
hereafter in effect which would otherwise afford Tenant the right to make
repairs at Landlord's expense or to terminate this Lease because of Landlord's
failure to keep the Building, Industrial Center or Common Areas in good order,
condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security and fire protection systems, communications
systems, lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "TRADE FIXTURES"
shall mean Tenant's machinery and equipment which can be removed without doing
material damage to the Premises. The term "ALTERATIONS" shall mean any
modification of the improvements on the Premises which are provided by Landlord
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "TENANT-OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Tenant that are not yet owned
by Landlord pursuant to Paragraph 7.4(a). Tenant shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Landlord's prior written consent. Tenant may, however, make
non-structural Alterations and/or Utility Installations to the interior of the
Premises (excluding the roof) without Landlord's consent but upon notice to
Landlord, so long as they are not visible from the outside of the Premises, do
not involve puncturing, relocating or removing the roof or any existing walls,
or changing or interfering with the fire sprinkler or fire detection systems and
the cumulative cost thereof during the term of this Lease as extended does not
exceed $25,000.00.
(b) CONSENT. Any Alterations or Utility Installations that
Tenant shall desire to make and which require the consent of the Landlord shall
be presented to Landlord in written form with detailed plans. Any consents given
by Landlord pursuant to Subparagraph 7.3(a) shall be deemed conditioned upon:
(i) Tenant's acquiring all applicable permits required by governmental
authorities; (ii) the furnishing of copies of such permits together with a copy
of the plans and specifications for the Alteration or Utility Installation to
Landlord prior to commencement of the work thereon; and (iii) the compliance by
Tenant with any conditions of said permits in a prompt and expeditious manner.
Any Alterations or Utility Installations by Tenant during the term of this Lease
shall be done in a good and workmanlike manner, with good and sufficient
materials, and be in compliance with all Applicable Requirements. Tenant shall
promptly upon completion thereof furnish Landlord with as-built plans and
specifications therefor. Landlord may (but without obligation to do so)
condition its consent to any requested Alteration or Utility Installation that
costs more than the amount of the Security Deposit held by Landlord upon
Tenant's providing Landlord with a lien and completion bond in an amount equal
to one and one-half times the estimated cost of such Alteration or Utility
Installation.
(c) LIEN PROTECTION. Tenant shall pay when due all claims for
labor or materials furnished or alleged to have been furnished to or for Tenant
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Tenant shall give Landlord not less than ten (10) days' notice prior to the
commencement of any work in, on, or about the Premises, and Landlord shall have
the right to post notices of non-responsibility in or on the Premises as
provided by law. If Tenant shall, in good faith, contest the validity of any
such lien, claim or demand, then Tenant shall, at its sole expense, defend and
protect itself, Landlord and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Landlord or the Premises. If Landlord shall
require, Tenant shall furnish to Landlord a surety bond satisfactory to Landlord
in an amount equal to one and one-half times the amount of such contested lien
claim or demand, indemnifying Landlord against liability for the same, as
required by law for the holding of the Premises free from the effect of such
lien or claim. In addition, Landlord may require Tenant to pay Landlord's
attorneys' fees and costs in participating in such action if Landlord shall
reasonably decide it is in its best interest to do so.
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(d) LANDLORD'S ALTERATIONS. Landlord may at any time during the
Term of this Lease, upon at least thirty (30) days advance written notice to
Tenant, install air-handling ducting in the Premises in accordance with the
preliminary plans attached hereto and incorporated herein as Exhibit "E"
("LANDLORD'S ALTERATIONS"). Landlord hereby agrees, as a condition to Landlord's
continued ability to perform such work in the Premises, to coordinate with
Tenant's designated representative in making Landlord's Alterations in the
Premises in such a manner and at such times as Tenant may reasonably request in
order to minimize the disruption of Tenant's use of the Premises. Landlord and
Tenant hereby agree to act in good faith to permit Landlord's Alterations to be
completed in a timely manner.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Landlord's right to require their
removal and to cause Tenant to become the owner thereof as hereinafter provided
in this Paragraph 7.4, all Alterations and Utility Installations made to the
Premises by Tenant shall be the property of and owned by Tenant, but considered
a part of the Premises. Landlord may, at any time and at its option, elect in
writing to Tenant to be the owner of all or any specified part of the
Tenant-Owned Alterations and Utility Installations. Except for Tenant-owned
communications systems (which shall be identified in writing to Landlord at the
time such Utility Installations are installed in the Premises) and unless
otherwise instructed per Subparagraph 7.4(b) hereof, all Tenant-Owned
Alterations and Utility Installations shall, at the expiration or earlier
termination of this Lease, become the property of Landlord and remain upon the
Premises and be surrendered with the Premises by Tenant.
(b) REMOVAL. Unless otherwise agreed in writing at the time such
Alterations or Utility installations are installed in the Premises (regardless
of whether Landlord consent for such Tenant-Owned Alterations and Utility
Installations is required under Subparagraph 7.3(b)), Landlord may require that
any or all Tenant-Owned Alterations or Utility Installations be removed by the
expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Landlord. Landlord may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Landlord.
(c) SURRENDER/RESTORATION. Pursuant to Tenant's obligations in
Section 7.1(a) to enforce reasonable workplace operating practices, Tenant shall
surrender the Premises by the end of the last day of the Lease term or any
earlier termination date, clean and free of debris and (subject to Landlord's
maintenance requirements in Section 7.2) in good operating order, condition and
state of repair, ordinary wear and tear, Premises Partial Damage, Premises Total
Destruction and condemnation excepted. Ordinary wear and tear shall not include
any damage or deterioration caused by waste or that would have been prevented by
Tenant's enforcement of reasonable workplace operating practices or by Tenant
otherwise performing all of its obligations under this Lease. Except as agreed
or specified herein, the Premises, as surrendered, shall include the Alterations
and Utility Installations. The obligation of Tenant shall include the repair of
any damage occasioned by the installation, maintenance or removal of Tenant's
Trade Fixtures furnishings, equipment, and Tenant-Owned Alterations and Utility
Installations as well as the removal of any storage tank installed by or for
Tenant, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Tenant as may then be required by Applicable
Requirements and/or good practice. Tenant's Trade Fixtures shall remain the
property of Tenant and shall be removed by Tenant subject to its obligation to
repair and restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUMS. Subject to the provisions of Subparagraphs
8.3(b), 8.3(c) and 8.5, the cost of the premiums for the insurance policies
maintained by Landlord under this Paragraph 8 shall be included as a cost of the
Building Services pursuant to Paragraph 4.2 hereof.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY TENANT. Tenant shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of insurance
protecting Tenant, Landlord and any Lender(s) whose names have been provided to
Tenant in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
combined single limit coverage in an amount not less than $1,000,000 per
occurrence, and not less than $5,000,000 excess umbrella coverage, with an
"ADDITIONAL INSURED-MANAGERS OR LANDLORDS OF PREMISES" endorsement and contain
the "AMENDMENT OF THE POLLUTION EXCLUSION" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include cross-liability endorsements for Tenant's liability assumed under this
Lease as an "insured contract" for the performance of Tenant's indemnity
obligations under this Lease. The limits of said insurance required by this
Lease or as carried by Tenant shall not, however, limit the liability of Tenant
nor relieve Tenant of any obligation hereunder. All insurance to be carried by
Tenant shall be primary to and not contributory with any similar insurance
carried by Landlord, whose insurance shall be considered excess insurance only.
Provided that such form of coverage shall not materially affect Tenant's
obligations under the foregoing requirements, the policy of insurance required
under this Paragraph 8.2(a) may be in the form of a so-called blanket policy of
broad form commercial general liability insurance with the same coverage for the
Premises as described above, as well as coverage of other premises and
properties of Tenant, or in which Tenant has some interest.
(b) CARRIED BY LANDLORD. In addition to and not in lieu of, the
insurance required to be maintained by Tenant described in Paragraph 8.2(a)
above, Landlord shall also maintain in force during the term of this Lease a
Commercial General Liability policy of insurance protecting Landlord, and Tenant
(as an additional insured) against claims for bodily injury, personal injury and
property damage based upon, involving or arising out of the ownership, use,
occupancy or maintenance of the Industrial Center. Such insurance shall be on an
occurrence basis providing combined single limit coverage in an amount not less
than $1,000,000 per occurrence, and not less than $5,000,000 excess umbrella
coverage. Landlord's obligations to carry the insurance set forth herein may be
satisfied by coverage under a so-called blanket policy of broad form commercial
general liability insurance with the same coverage for the Premises as described
above, as well as coverage of other premises and properties of Landlord, or in
which Landlord has some interest.
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8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Landlord shall obtain and keep in
force during the term of this Lease a policy or policies in the name of
Landlord, with loss payable to Landlord and to any Lender(s), insuring against
loss or damage to the Building. Such insurance shall be for full replacement
cost, as the same shall exist from time to time, or the amount required by any
Lender(s), but in no event more than the commercially reasonable and available
insurable value thereof by reason of the unique nature or age of the
improvements involved, if such latter amount is less than full replacement cost.
Tenant-Owned Alterations and Utility Installations, Trade Fixtures and Tenant's
personal property shall be insured by Tenant pursuant to Paragraph 8.4. If the
coverage is available and commercially appropriate Landlord's policy or policies
shall insure against all risks of direct physical loss or damage (except the
perils of flood and/or earthquake unless required by a Lender), including
coverage for any additional costs resulting from debris removal and reasonable
amounts of coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Building required
to be demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered loss but not
including plate glass insurance. Said policy or policies shall also contain an
agreed valuation provision in lieu of any co-insurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers, Los
Angeles-Anaheim-Riverside (1982-84=100).
(b) RENTAL VALUE. Landlord may also obtain and keep in force
during the term of this Lease a policy or policies in the name of Landlord, with
loss payable to Landlord and any Lender(s), insuring the loss of the full rental
and other charges payable by all tenants of the Building to Landlord for one
year. Said insurance may provide that in the event the Lease is terminated by
reason of an insured loss, the period of indemnity for such coverage shall be
extended beyond the date of the completion of repairs or replacement of the
Premises, to provide for one full year's loss of rental revenues from the date
of any such loss. Said insurance shall contain an agreed valuation provision in
lieu of any co-insurance clause, and the amount of coverage shall be adjusted
annually to reflect the projected rental income, Real Property Taxes, insurance
premium costs and other expenses, if any, otherwise payable, for the next
12-month period.
(c) INSURANCE COSTS INCREASES. Tenant shall pay any Insurance
Cost Increase to Landlord as an additional charge hereunder. As used herein, the
term "INSURANCE COST INCREASE" is defined as any increase in the actual cost of
the insurance applicable to the Industrial Center and required to be carried by
Landlord pursuant to Paragraphs 8.3(a) and 8.3(b) ("REQUIRED INSURANCE"), over
and above the Base Premium, as hereinafter defined, calculated on an annual
basis, as a result of Tenant's use of the Premises. "Insurance Cost Increase"
shall not include requirements of the holder of a mortgage or deed of trust
covering the Premises, increased valuation of the Premises, and/or a general
premium rate increase unless such requirements are imposed as a result of
Tenant's acts, omissions, use or occupancy of the Premises and/or its activities
in the Industrial Center. The term "Insurance Cost Increase" shall also not
include any premium increases resulting from the nature of the occupancy of any
other tenant of the Building. The "BASE PREMIUM" shall be the lowest annual
premium reasonably obtainable for the Required Insurance as of the Commencement
Date, assuming the intended and full use of the Building. In no event, however,
shall Tenant be responsible for any portion of the premium cost attributable to
liability insurance coverage procured by Landlord under Paragraph 8.2(b).
Premiums for policy periods commencing prior to, or extending beyond, the term
of this Lease shall be prorated to coincide with the corresponding Commencement
Date or Expiration Date.
(d) TENANT'S IMPROVEMENTS. Landlord shall not be required to
insure Tenant-Owned Alterations and Utility Installations unless the item in
question has become the property of Landlord under the terms of this Lease.
8.4 TENANT'S PROPERTY INSURANCE. Subject to the requirements of Paragraph
8.5, Tenant at its cost shall either by separate policy or by endorsement to a
policy already carried, maintain insurance coverage on all of Tenant's personal
property, Trade Fixtures and Tenant-Owned Alterations and Utility Installations
in, on, or about the Premises similar in coverage to that carried by Landlord as
the Insuring Party under Paragraph 8.3(a). Such insurance shall be full
replacement cost coverage with a deductible not to exceed $10,000 per
occurrence. Upon request from Landlord, Tenant shall provide Landlord with
written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "GENERAL POLICYHOLDERS RATING"
of at least B+ or such other rating as may be required by a Lender, as set forth
in the most current issue of "Best's Insurance Guide." Tenant shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Tenant shall cause to be delivered to Landlord,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Landlord. Tenant shall at least thirty (30) days
prior to the expiration of such policies (or as soon as possible before said
expiration date), furnish Landlord with evidence of renewals or "insurance
binders" evidencing renewal thereof, or Landlord may order such insurance and
charge the reasonable cost thereof to Tenant, which amount shall be payable by
Tenant to Landlord upon demand.
8.6 WAIVER OF SUBROGATION. Notwithstanding anything to the contrary
contained herein, Landlord and Tenant (for themselves and for their respective
insurers and any other person claiming through or under them, by subrogation or
otherwise) each hereby release and relieve the other, and waive their entire
right to recover damages (whether in contract or in tort) against the other, for
loss or damage to their property arising out of or incident to the perils
required to be insured against under Paragraph 8 or which is otherwise insured,
regardless of cause or origin, including the negligence of the other party, its
agents, employees, shareholders, officers and contractors. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Landlord and Tenant agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Landlord or Tenant, as the case may be, so long as
the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Landlord's negligence and/or breach of express
warranties, Tenant shall indemnify, protect, defend and hold harmless the
Premises, Landlord and its agents, Landlord's master or ground lessor,
shareholders, officers, directors and Lenders from and against any and all
claims, loss of rents and/or damages, costs, liens, judgments, penalties, loss
of permits, attorneys' and consultants' fees, expenses and/or liabilities
arising out of, involving, or in
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connection with, the occupancy of the Premises by Tenant, the conduct of
Tenant's business, any act, omission or neglect of Tenant, its agents,
contractors, employees or invitees, and out of any Default or Breach by Tenant
in the performance in a timely manner of any obligation on Tenant's part to be
performed under this Lease. The foregoing shall include, but not be limited to,
the defense or pursuit of any claim or any act on or proceeding involved
therein, and whether or not (in the case of claims made against Landlord)
litigated and/or reduced to judgment. In case any action or proceeding is
brought against Landlord by reason of any of the foregoing matters, Tenant, upon
notice from Landlord, shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord and Landlord shall cooperate with Tenant in
such defense. Landlord need not have first paid any such claim in order to be so
indemnified.
8.8 EXEMPTION OF LANDLORD FROM LIABILITY. Unless caused by Landlord's
active negligence or willful misconduct, Landlord shall not be liable for injury
or damage to the person or goods, wares, merchandise or other property of
Tenant, Tenant's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not.
Landlord shall not be liable for any damages arising from any act or neglect of
any other tenant of Landlord nor from the failure by Landlord to enforce the
provisions of any other lease in the Industrial Center. Notwithstanding
Landlord's negligence or breach of this Lease, Landlord shall under no
circumstances be liable for injury to Tenant's business or for any loss of
income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the Premises, other than Tenant-Owned Alterations and Utility Installations,
the repair cost of which damage or destruction is less than fifty percent (50%)
of the then Replacement Cost (as defined in Paragraph 9.1 (d)) of the Premises
(excluding Tenant-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Tenant-Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is fifty percent
(50%) or more of the then Replacement Cost of the Premises (excluding Tenant
Owned Alterations and Utility Installations and Trade Fixtures) immediately
prior to such damage or destruction. In addition, damage or destruction to the
Building, other than Tenant-Owned Alterations and Utility Installations and
Trade Fixtures of any tenants of the Building, the cost of which damage or
destruction is fifty percent (50%) or more of the then Replacement Cost
(excluding Tenant-Owned Alterations and Utility Installations and Trade Fixtures
of any tenants of the Building) of the Building shall at the option of Landlord,
be deemed to be Premises Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the
Premises, other than Landlord Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Landlord at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PREMISES PARTIAL DAMAGE - INSURED LOSS. If Premises Partial Damage
that is an Insured Loss occurs, then Landlord shall, at Landlord's expense,
repair such damage (but not Tenant's Trade Fixtures or Tenant-Owned Alterations
and Utility Installations) as soon as reasonably possible and this Lease
shall continue in full force and effect.
(a) In the event however, that there is a shortage of insurance
proceeds and such shortage is due to the fact that, by reason of the unique
nature of the improvements in the Premises full replacement cost insurance
coverage was not commercially reasonable and available, Landlord shall have no
obligation to pay for the shortage in insurance proceeds or to fully restore the
unique aspects of the Premises unless Tenant provides Landlord with the funds to
cover same, or adequate assurance thereof within ten (10) days following receipt
of written notice of such shortage and request therefor. If Landlord receives
said funds or adequate assurance thereof within said ten (10) day period,
Landlord shall complete them as soon as reasonably possible and this Lease shall
remain in full force and effect. If Landlord does not receive such funds or
assurance within said period, Landlord may nevertheless elect by written notice
to Tenant within ten (10) days thereafter to make such restoration and repair as
is commercially reasonable with Landlord paying any shortage in proceeds, in
which case this Lease shall remain in full force and effect. If Landlord does
not receive such funds or assurance within such ten (10) day period, and if
Landlord does not so elect to restore and repair, then this Lease shall
terminate effective as of thirty (30) days following the occurrence of the
damage or destruction.
(b) In the event that such damage, in the reasonable estimate of
Landlord's contractor for such repairs, cannot be repaired within one hundred
eighty (180) days from the date of the Premises Partial Damage (under a normal
construction schedule not requiring payment of overtime or premium), either
Landlord or Tenant may terminate this Lease by delivery of written notice to the
other party within thirty (30) days after the date that the contractor's opinion
is delivered to Tenant. Upon termination in accordance with this Subparagraph
9.2(b), Base Rent and any additional charges under this Lease and any related
agreement shall be apportioned as of the date of the Premises Partial Damage.
(c) Unless otherwise agreed, Tenant shall in no event have any
right to reimbursement from Landlord for any funds contributed by Tenant to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
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9.3 PARTIAL DAMAGE - UNINSURED LOSS. If Premises Partial Damage that is
not an Insured Loss occurs unless caused by a negligent or willful act of Tenant
(in which event Tenant shall make the repairs at Tenant's expense and this Lease
shall continue in full force and effect), Landlord may at Landlord's option,
either (i) repair such damage as soon as reasonably possible at Landlord's
expense in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Tenant within thirty (30) days after receipt by
Landlord of knowledge of the occurrence of such damage of Landlord's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice; provided, however, if, in the reasonable estimate of Landlord's
contractor, repairs of such damage cannot be repaired within one hundred eighty
(180) days from the date of Premises Partial Damage (under a normal construction
schedule not requiring payment of overtime or premium), then notwithstanding
Landlord's decision to repair such damage, Tenant may terminate this Lease by
delivery of written notice to Landlord within thirty (30) days after the date
said contractor's estimate is delivered to Tenant. In the event Landlord acts to
give such notice of Landlord's intention to terminate this Lease, Tenant shall
have the right within ten (10) days after the receipt of such notice to give
written notice to Landlord of Tenant's commitment to pay for the repair of such
damage totally at Tenant's expense and without reimbursement from Landlord.
Tenant shall provide Landlord with the required funds or satisfactory assurance
thereof within thirty (30) days following such commitment from Tenant. In such
event this Lease shall continue in full force and effect, and Landlord shall
proceed to make such repairs as soon as reasonably possible after the required
funds are available. If Tenant does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Landlord's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority) this Lease shall terminate thirty (30) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an insured Loss or was caused by a negligent or willful act of
Tenant. In the event, however, that the damage or destruction was caused by
Tenant, Landlord shall have the right to recover Landlord's damages from Tenant
except as released and waived in Paragraph 9.7.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last eight (8)
months of the term of this Lease there is damage for which the cost to repair
exceeds $200,000, whether or not an Insured Loss, Landlord may, at Landlord's
option, terminate this Lease effective on a date to be determined by Tenant, not
less than thirty (30) or more than ninety (90) days following the date of
occurrence of such damage, by giving written notice to Tenant of Landlord's
election to do so within fifteen (15) days after the date of occurrence of such
damage. Provided, however, if Tenant at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Tenant may preserve this
Lease by (a) exercising such option, and (b) providing Landlord with any
shortage in insurance proceeds (or adequate assurance thereof) needed to make
the repairs on or before the earlier of (i) the date which is ten (10) days
after Tenant's receipt of Landlord's written notice purporting to terminate this
Lease, or (ii) the day prior to the date upon which such option expires. If
Tenant duly exercises such option during such period and provides Landlord with
funds (or adequate assurance thereof) to cover an shortage in insurance proceeds
Landlord shall at Landlord's expense repair such damage as soon as reasonably
possible and this Lease shall continue in full force and effect. If Tenant fails
to exercise such option and provide such funds or assurance during such period,
then this Lease shall terminate as of the date set forth in the first sentence
of this Paragraph 9.5.
9.6 ABATEMENT OF RENT; TENANT'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii)
Hazardous Substance Condition for which Tenant is not legally responsible, the
Base Rent and other charges, if any, payable by Tenant hereunder for the period
during which such damage or condition, its repair, remediation or restoration
continues, shall be abated in proportion to the degree to which Tenant's use of
the Premises is impaired. Except for abatement of Base Rent and other charges,
if any, as aforesaid, all other obligations of Tenant hereunder shall be
performed by Tenant, and Tenant shall have no claim against Landlord for any
damage suffered by reason of any such damage, destruction, repair, remediation
or restoration, except to the extent of Landlord's negligence or willful
misconduct (and then only to the extent that Tenant has not waived its right to
recover such damages pursuant to Paragraph 8.6 of this Lease).
(b) If Landlord shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
thirty (30) days after such obligation shall accrue, Tenant may, at any time
prior to the commencement of such repair or restoration, give written notice to
Landlord and to any Lenders of which Tenant has actual notice of Tenant's
election to terminate this Lease on a date not less than thirty (30) days
following the giving of such notice if Tenant gives such notice to Landlord and
such Lenders and such repair or restoration is not commenced within fifteen (15)
days after receipt of such notice this Lease shall terminate as of the date
specified in said notice. If Landlord or a Lender commences the repair or
restoration of the Premises within thirty (30) days after the receipt of such
notice, this Lease shall continue in full force and effect. "COMMENCE" as used
in this Paragraph 9.6 shall mean either the authorization of the preparation of
the required plans, or the beginning of the actual work on the Premises,
whichever occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
(as defined in Paragraph 9.1(e)) occurs, unless Tenant is legally responsible
therefor (in which case Tenant shall make the investigation and remediation
thereof required by Applicable Requirements and this Lease shall continue in
full force and effect, but subject to Landlord's rights under Paragraph 6.2(c)
and Paragraph 13), Landlord may, at Landlord's option, either: (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Landlord's expense, in which event this Lease shall
continue in full force and effect; or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000 whichever is greater, and such Hazardous Substance Condition
was not caused by Landlord or its agents, employees, contractors or invitees and
such Hazardous Substance Condition materially interferes with Tenant's or any
other Building occupant's business in the Building, give written notice to
Tenant within thirty (30) days after receipt by Landlord of knowledge of the
occurrence of such Hazardous Substance Condition of Landlord's desire to
terminate this Lease as to the date sixty (60) days following the date of such
notice. In the event Landlord elects to give such notice of Landlord's intention
to terminate this Lease, Tenant shall have the right within ten (10) days after
the receipt of such notice to give written notice to Landlord of Tenant's
commitment to pay for the excess costs of a investigation and remediation of
such Hazardous Substance Condition to the extent required by Applicable
Requirements, over (b) an amount equal to twelve (12) times the then monthly
Base Rent or $100,000, whichever is greater. Tenant shall provide Landlord with
the funds required of Tenant or satisfactory assurance) thereof within thirty
(30) days following said commitment by Tenant. In such event this Lease shall
continue in full force and effect, and Landlord shall proceed to make
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such investigation and remediation as soon as reasonably possible after the
required funds are available. If Tenant does not give such notice and provide
the required funds or assurance thereof within the time period specified above,
this Lease shall terminate as of the date specified in Landlord's notice of
termination.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Landlord shall return to Tenant any advance
payment made by Tenant to Landlord and so much of Tenant's Security Deposit as
has not been, or is not then required to be, used by Landlord under the terms of
this Lease.
9.9 WAIVER OF STATUTES. Landlord and Tenant agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Landlord shall timely pay the Real Property Taxes,
as defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in the
cost of Building Services in accordance with the provisions of Paragraph 4.2;
provided, however, that following Landlord's receipt of the reassessment of the
Industrial Center by the County of San Diego Tax Assessor, pursuant to the
change in ownership of the Building in December 1995, Base Rent shall be
adjusted upward or downward to reflect any upward or downward assessment of the
value of the Industrial Center, and Landlord and Tenant agree to amend this
Lease to reflect the revised Base Rent.
10.2 REAL PROPERTY TAX DEFINITION. As used herein, the term "REAL
PROPERTY TAXES" shall include any form of real estate tax or assessment,
general, special ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax imposed upon the Industrial
Center by any authority having the direct or indirect power to tax, including
any city, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage, or other improvement district thereof, levied against
any legal or equitable interest of Landlord in the Industrial Center or any
portion thereof, Landlord's right to rent or other income therefrom, and/or
Landlord's business of leasing the Premises. The term "REAL PROPERTY TAXES"
shall also include any tax, fee, levy, assessment or charge, or any increase
therein imposed by reason of events occurring, or changes in Applicable Law
taking effect, during the term of this Lease, including but not limited to a
change in the ownership of the Industrial Center or in the improvements thereon,
the execution of this Lease or any modification, amendment or transfer thereof
and whether or not contemplated by the Parties. Nothing contained in this Lease
shall require Tenant to pay either directly or by way of reimbursement to
Landlord, any franchise, estate, inheritance or succession transfer tax of
Landlord, or any income, profits or revenue tax or charge, upon the net income
of Landlord from all sources; provided, however, that if at any time during the
term of this Lease under the laws of the United States Government or the State
of California, or any political subdivision thereof, a tax or excise on rent, or
any other tax however described (excluding any tax measured by net income), is
levied or assessed by any such political body against Landlord on account of
Rent, or a portion thereof, Real Property Taxes shall include one hundred
percent (100%) of any said tax or excise. In calculating Real Property Taxes for
any calendar year, the Real Property Taxes for any real estate tax year shall be
included in the calculation of Real Property Taxes for such calendar year based
upon the number of days which such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. The costs payable by Landlord as Building
Services shall not include the costs of Real Property Taxes specified in the tax
assessor's records and work sheets as being caused by additional improvements
placed upon the Industrial Center by Tenant or by Landlord for the exclusive
enjoyment of Tenant. Notwithstanding Paragraph 10.1 hereof, Tenant shall pay to
Landlord, in accordance with Paragraph 4.2(c), the entirety of any increase in
Real Property Taxes if assessed solely by reason of Alterations, Trade Fixtures
or Utility Installations placed upon the Premises by Tenant or at Tenant's
request.
11. UTILITIES AND SERVICES. All utilities and services supplied to the Premises,
including but not limited to water (including RODI water), sewer, electricity,
heating, ventilating and air-conditioning, security, gas and trash removal for
and normal cleaning of the Premises, together with any taxes thereon, shall be
paid for by tenant through inclusion in Base Rent. Tenant's use of electrical
service in the Premises shall not exceed, either in voltage, rated capacity, use
or overall load, that which Landlord reasonably determines to be standard for
Tenant's Permitted Use of the Premises. In the event Tenant shall consume (or
request that it be allowed to consume) water, gas or electrical service in
excess of that deemed by Landlord to be standard (and upon which Base Rent
payable by Tenant under this Lease is calculated), Landlord may condition
Tenant's excess usage upon such conditions as Landlord may reasonably elect
(including the installation of utility service upgrades, submeters, additional
air handlers or cooling units), and all such usage (to the extent such
additional usage is feasible and permitted by law), installation and maintenance
thereof shall be paid for by Tenant as an additional charge; provided that the
cost of such excess usage shall not exceed the rate that would be charged to
Tenant if billed directly by the local utility for the same services.
11.1 HEATING, VENTILATING AND AIR-CONDITIONING. The furnishing of
heating, ventilation and air conditioning ("HVAC") for the Premises shall be
without representation or warranty from Landlord as to whether HVAC for the
Premises complies with Tenant's exact performance specifications thereof or as
to the adequacy of the HVAC for meeting Tenant's particular requirements in its
use of the Premises, but shall be operated in a manner consistent with the
design specifications and capacities of such equipment and systems as the same
may exist as of the date of this Lease. The cost of maintenance and service
calls to adjust and regulate the HVAC system for the Premises shall be charged
to Tenant if the need for maintenance work results from Tenant's adjustment of
room thermostats in deviation from Landlord's thermostat settings as set by
Landlord in its reasonable judgment for the comfortable and normal occupancy of
the Premises.
11.2 TELEPHONE. The costs and expenses of any and all local and
long-distance telephone services, associated hook-up and maintenance fees and
any other telephone charges, and the cost of any additional or replacement
equipment or cabling to the Premises shall be at Tenant's sole cost and expense.
11.3 SECURITY AND JANITORIAL SERVICES. Building security systems
consistent with those currently in place, securing access to the Building by
card key access to the Building lobby shall be provided by Landlord and paid for
by Tenant
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through inclusion in the Base Rent, except that Tenant shall be liable for the
cost of replacing any lost or stolen card keys provided to Tenant by Landlord.
Landlord shall provide vacuuming and general cleaning services to the Premises
at least five (5) days per week, Monday through Friday (excluding Building
holidays, as set forth in the Building Rules and Regulations) at such times and
under such general terms as Landlord may establish in its reasonable discretion
from time to time. The cost of Building- standard janitorial services provided
to the Premises shall be paid for by Tenant through inclusion in Base Rent.
Tenant shall pay the additional cost reasonably attributable to any special
janitorial services provided to the Premises as a result of Tenant's particular
requirements, Trade Fixtures or Tenant-Owned Alterations and/or Utility
Installations, which shall be billed separately by Landlord based on the
janitorial service provider's invoices.
11.4 RECEPTIONIST SERVICES. Landlord shall provide a receptionist for the
Building ("BUILDING RECEPTIONIST"), located in the main entrance lobby of the
Building, Monday through Friday (excluding Building holidays, as set forth in
the Building Rules and Regulations), during the hours set forth in the Building
Rules and Regulations and, subject to Tenant's reasonable review and approval,
under such general terms as Landlord may establish in its reasonable discretion
from time to time. The cost of such receptionist services shall be paid by
Tenant as an inclusion in Base Rent. Provided that Tenant gives Landlord written
notice of any such special services or overtime provided by the Building
Receptionist on a monthly basis, Tenant may separately arrange for the Building
Receptionist to provide special or overtime services not covered by Landlord's
contract. Tenant shall pay the additional cost for such services and overtime,
which shall be billed separately by Landlord.
12. ASSIGNMENT AND SUBLETTING.
12.1 LANDLORD'S CONSENT REQUIRED.
(a) Tenant shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Tenant's interest in this Lease or in the Premises
without Landlord's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Tenant shall constitute an
assignment requiring Landlord's consent. The transfer, on a cumulative basis, of
fifty percent (50%) or more of the voting control of Tenant (provided that the
foregoing shall not apply so long as Tenant remains a publicly-traded company on
a national securities exchange), or the transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Tenant to a single
person or entity or commonly-controlled entities, shall constitute a change in
control for this purpose.
(c) An assignment or subletting of Tenant's interest in this
Lease without Landlord's specific prior written consent shall, at Landlord's
option, be a Breach of this Lease. If Landlord elects to treat such unconsented
to assignment or subletting as a Breach, Landlord shall have the right to
either: (i) exercise any of Landlord's remedies under Section 13.2 (subject to
Tenant's cure rights under Section 13.1) or (ii) upon thirty (30) days' written
notice ("LANDLORD'S NOTICE"), increase the monthly Base Rent for the Premises to
the greater of the then fair market rental value of the Premises, as reasonably
determined by Landlord or one hundred ten percent (110%) of the Base Rent then
in effect. Pending determination of the new fair market rental value, if
disputed by Tenant, Tenant shall pay the amount set forth in Landlord's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Tenant shall be
subject to similar adjustment to the then far market value as reasonably
determined by Landlord (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formula as contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Landlord's Notice.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND
SUBLETTING.
(a) Regardless of Landlord's consent or a Permitted Transfer not
requiring Landlord's consent (as provided in Subparagraph 12.4), any assignment
or subletting shall not (i) be effective without the express written assumption
by such assignee or sublessee of the obligations of Tenant under this Lease,
(ii) release Tenant of any obligations hereunder, nor (iii) alter the primary
liability of Tenant for the payment of Base Rent and other sums due Landlord
hereunder or for the performance of any other obligations to be performed by
Tenant under this Lease.
(b) Landlord may accept any rent or performance of Tenant's
obligations from any person other than Tenant pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Landlord's right to exercise its remedies for the Default or Breach
by Tenant of any of the terms, covenants or conditions of this Lease.
(c) The consent of Landlord to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Tenant or to any subsequent or successive assignment or subletting by the
assignee or sublessee. However, Landlord may consent to subsequent sublettings
and assignments of the sublease or any amendments or modifications thereto
without notifying Tenant or anyone else liable under this Lease or the sublease
and without obtaining their consent, and such action shall not relieve such
persons from liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Tenant's obligation
under this Lease, Landlord may proceed directly against Tenant or anyone else
responsible for the performance of the Tenant's obligations under this Lease,
including any sublessee, without first exhausting Landlord's remedies against
any other person or entity responsible therefor to Landlord, or any security
held by Landlord.
(e) Each request for consent to an assignment or subletting
shall be in writing accompanied by information relevant to Landlord's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a deposit of $1,000, as reasonable consideration for Landlord's
considering and processing the request for consent. Tenant agrees to reimburse
Landlord for all of Landlord's expenses associated with Tenant's request for any
sublease or assignment, including, but not limited to, Landlord's actual
attorneys' fees and costs up to an
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amount of $1,000 per request for all such costs and expenses. Tenant also agrees
to provide Landlord with such other or additional information and/or
documentation as may be reasonably requested by Landlord.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Landlord, to have assumed and agreed to conform and comply
with each and every term covenant condition and obligation herein to be observed
or performed by Tenant during the term of said assignment or sublease, other
than such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Landlord has specifically consented in writing.
(g) If for any assignment or sublease, Tenant receives rent or
other consideration, either initially or over the term of the assignment or
sublease, in excess of the Base Rent called for hereunder, or in case of the
sublease of a portion of the Premises, in excess of such Base Rent fairly
allocable to such portion, after appropriate adjustments to assure that all
other payments called for hereunder are appropriately taken into account, Tenant
shall pay to Landlord, as additional rent hereunder, fifty percent (50%) of the
excess of each such payment of rent or other consideration received by Tenant
over Tenant's customary and reasonable costs and expenses of making the
assignment or sublease (which costs and expenses shall be amortized over the
term of the assignment or sublease), which shall be due and payable by Tenant to
Landlord promptly after its receipt by Tenant.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Tenant of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Tenant hereby assigns and transfers to Landlord all of
Tenant's interest in all rentals and income arising from any sublease of all or
any portion of the Premises heretofore or hereafter made by Tenant, and Landlord
may collect such rent and income and apply same toward Tenant's obligations
under this Lease provided, however, that until a Breach (as defined in Paragraph
13.1) shall occur in the performance of Tenant's obligations under this Lease,
Tenant may, except as otherwise provided in this Lease, receive, collect and
enjoy the rents accruing under such sublease. Landlord shall not, by reason of
the foregoing provision or any other assignment of such sublease to Landlord,
nor by reason of the collection of the rents from a sublessee, be deemed liable
to the sublessee for any failure of Tenant to perform and comply with any of
Tenant's obligations to such sublessee under such Sublease. Tenant hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Landlord stating that a Breach exists in the performance of Tenant's
obligations under this Lease, to pay to Landlord the rents and other charges due
and to become due under the sublease, sublessee shall rely upon any such
statement and request from Landlord and shall pay such rents and other charges
to Landlord without any obligation to inquire as to whether such Breach exists
and notwithstanding any notice from or claim from Tenant to the contrary (unless
Tenant provides such sublessee with reasonable evidence refuting Landlord's
written notice). Tenant shall have no right or claim against such sublessee, or,
until the Breach has been cured, against Landlord, for any such rents and other
charges so paid by said sublessee to Landlord.
(b) In the event of a Breach by Tenant in the performance of its
obligations under this Lease, Landlord, at its option and without any obligation
to do so, may require any sublessee to attorn to Landlord, in which event
Landlord shall undertake the obligations of the sublessor under such sublease
from the time of the exercise of said option to the expiration of such sublease;
provided, however, Landlord shall not be liable for any prepaid rents or
security deposit paid by such sublessee to such sublessor or for any other prior
defaults or breaches of such sublessor under such sublease.
(c) No sublessee under a sublease approved by Landlord shall
further assign or sublet all or any part of the Premises without Landlord's
prior written consent.
(d) Landlord shall deliver a copy of any notice of Default or
Breach by Tenant to the sublessee, who shall have the right to cure the Default
of Tenant within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Tenant
for any such Defaults cured by the sublessee.
12.4 PERMITTED TRANSFER. Any provision in this Lease to the contrary
notwithstanding, and so long as Tenant otherwise complies with the provisions of
this Paragraph 12, Landlord's consent shall not be required for any of the
following transfers (each of which shall be a "PERMITTED TRANSFER," and the
transferee of such Permitted Transfer shall be a "PERMITTED TRANSFEREE"), and
Landlord shall not be entitled to receive any part of the subrent resulting
therefrom that would otherwise be due under this Paragraph 12; provided that
before such assignment shall be effective, (a) Landlord shall be given written
notice of such Permitted Transfer and (b) the use of the Premises by the
Permitted Transferee shall be as set forth in Subparagraph 6.1. "NET WORTH OF
TENANT" for purposes of this Lease shall be the net worth of Tenant established
under generally accepted accounting principles consistently applied.
(a) Tenant may sublease all or part of the Premises or assign
its interest in this Lease to any corporation which controls, is controlled by
or is under common control with the original Tenant to this Lease by means of an
ownership interest of more than 50%. For purposes of this Subparagraph 12.4(a),
the term "ownership interest" means possession, directly or indirectly, of the
power to direct or cause the direction of the management, affairs and policies
of anyone, whether through the ownership of voting securities, by contract or
otherwise.
(b) Tenant may assign its interest in the Lease to a corporation
which results from a merger, consolidation or other reorganization in which
Tenant is not the surviving corporation, so long as the surviving corporation
has a net worth at the time of such Permitted Transfer that is equal to or
greater than the lesser of (i) the Net Worth of Tenant immediately prior to such
Permitted Transfer or (ii) the Net Worth of Tenant on the Commencement Date.
(c) Tenant may assign this Lease to a corporation which
purchases or otherwise acquires all or substantially all of the assets of
Tenant, so long as such acquiring corporation has a net worth at the time of
such Permitted Transfer that is equal to or greater than the lesser of (i) the
Net Worth of Tenant immediately prior to such Permitted Transfer, or (ii) the
Net Worth of Tenant on the Commencement Date.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Landlord and Tenant agree that if an attorney is
consulted by either party in connection with a default or breach by the other
party of the material terms, covenants, conditions or rules applicable to the
other party, the reasonable out-of-pocket costs for legal services and
out-of-pocket costs in the preparation and service of a notice of Default shall
be reimbursed by the party receiving such notice as follows: (i) in the case of
a Tenant Default or Breach, as additional rent due and payable to cure said
default; or (ii) in the case of Landlord's breach pursuant to Paragraph 13.5,
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reimbursable by Landlord in accordance with Paragraph 13.5. A "DEFAULT" by
Tenant is defined as a failure by Tenant to observe, comply with or perform any
of the terms, covenants, conditions or rules applicable to Tenant under this
Lease. A "BREACH" by Tenant is defined as the occurrence of any one or more of
the following Defaults, and, where a grace period for cure after notice is
specified herein, the failure by Tenant to cure such Default prior to the
expiration of the applicable grace period, and shall entitle Landlord to pursue
the remedies set forth in Paragraph 13.2;
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Tenant to make any payment of Base Rent or any other monetary payment
required to be made by Tenant hereunder as and when due, the failure by Tenant
to provide Landlord with reasonable evidence of insurance or surety bond
required under this Lease, or the failure of Tenant to fulfill any obligation
under this Lease which endangers or threatens life or property, where such
failure continues for a period of five (5) business days following written
notice thereof by or on behalf of Landlord to Tenant (or such shorter period of
time as Landlord determines to be reasonable in the event of a proximate threat
to life or property).
(c) Except as expressly otherwise provided in this Lease, the
failure by Tenant to provide Landlord with reasonable written evidence (in duly
executed original form if applicable) of (i) compliance with Applicable
Requirements per Paragraph 6.2(d), (ii) the rescission of an unauthorized
assignment or subletting per Paragraph 12.1, (iii) an Estoppel Certificate per
Paragraph 16, (iv) the subordination or non-subordination of this Lease per
Paragraph 30, (v) the execution of any document requested under Paragraph 42
(easements), or (vi) any other documentation or information which Landlord may
reasonably require of Tenant under the terms of this lease, where any such
failure continues for a period of ten (10) days following written notice by or
on behalf of Landlord to Tenant (or such longer period of time as reasonably
required by Tenant to comply with or to provide reasonable written evidence of
compliance with the Applicable Requirements, if Tenant is reasonably unable to
comply with such ten-day period).
(d) A Default by Tenant as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof
that are to be observed, complied with or performed by Tenant, other than those
described in Subparagraphs 13.1 (a), (b) or (c), above where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Landlord to Tenant; provided, however, that if the nature of Tenant's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Tenant if
Tenant commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the
making by Tenant of any general arrangements or assignment for the benefit of
creditors; (ii) Tenant's becoming a "debtor" as defined in 11 U.S. Code Section
101 or any successor statute thereto (unless, in the case of a petition filed
against Tenant the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease
where possession is not restored to Tenant within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease where such
seizure is not discharged within thirty (30) days provided, however in the event
that any provision of this Subparagraph 13.1(e) is contrary to any applicable
law, such provision shall be of no force or effect, and shall not affect the
validity of the remaining provisions.
(f) The discovery by Landlord that any financial statement of
Tenant given to Landlord by Tenant was materially false.
13.2 REMEDIES. If Tenant fails to perform any affirmative duty or
obligation of Tenant under this Lease, within ten (10) days after written notice
to Tenant (or in case of an emergency without notice), Landlord may at its
option (but without obligation to do so) perform such duty or obligation on
Tenant's behalf, including but not limited to the obtaining of reasonably
required bonds insurance policies, or governmental licenses, permits or
approvals. The reasonable costs and expenses of any such performance by Landlord
shall be due and payable by Tenant to Landlord upon invoice therefor. If any
check given to Landlord by Tenant shall not be honored by the bank upon which it
is drawn, Landlord, at its own option, may require a future payments to be made
under this Lease by Tenant to be made only by cashier's check. In the event of a
Breach of this Lease by Tenant (as defined in Paragraph 13.1), with or without
further notice or demand, and without limiting Landlord in the exercise of any
right or remedy which Landlord may have by reason of such Breach, Landlord may:
(a) Terminate Tenant's right to possession of the Premises by
any lawful means, in which case this Lease and the term hereof shall terminate
and Tenant shall immediately surrender possession of the Premises to Landlord.
In such event Landlord shall be entitled to recover from Tenant: (i) the worth
at the time of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Tenant proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Tenant proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by the Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Landlord in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Landlord to mitigate damages caused by Tenant's Default or Breach of
this Lease shall not waive Landlord's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Landlord shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Landlord
may reserve the right to recover all or any part thereof in a separate suit for
such rent and/or damages. If a notice and grace period required under
Subparagraph 13.1(b), (c) or (d) was not previously given, a notice to pay rent
or quit, or to perform or quit as the case may be, given to Tenant under any
statute authorizing the forfeiture of leases for unlawful detainer shall also
constitute the applicable notice for calculating grace periods required by
Subparagraph 13.1(b),(c) or (d). In such case, the applicable grace period under
the unlawful detainer statue shall run concurrently with the applicable grace
period under this Lease after the one such statutory notice, and the failure of
Tenant to cure the
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Default within the greater of the two (2) such grace periods shall constitute
both an unlawful detainer and a Breach of this Lease entitling Landlord to the
remedies provided for in this Lease and/or by said statute.
(b) Continue the Lease and Tenant's right to possession (under
California Civil Code Section 1951.4 or any superseding statute) after Tenant's
Breach and recover the rent as it becomes due, provided Tenant has the right to
sublet or assign, subject only to reasonable limitations. Landlord and Tenant
agree that the limitations on assignment and subletting in this Lease are
reasonable Acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver to protect the Landlord's interest under this
Lease, shall not constitute a termination of the Tenant's right to possession.
(c) Pursue any other remedy now or hereafter available to
Landlord under the laws or judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Tenant's right to possession shall not relieve Tenant from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Tenant's occupancy of the
Premises.
13.3 INTENTIONALLY DELETED.
13.4 LATE CHARGES. Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent and other sums due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Landlord by the terms of any ground lease, mortgage or deed of trust covering
the Premises. Accordingly, if any installment of rent or other sum due from
Tenant shall not be received by Landlord or Landlord's designee within ten (10)
days after such amount shall be due, then, without any requirement for notice to
Tenant. Tenant shall pay to Landlord a late charge equal to five percent (5%) of
such overdue amount; provided, however, that, no more than twice per calendar
year, Tenant shall not incur the obligation to pay the foregoing charge for late
payment until five (5) days after Tenant's receipt of written notice that such
amounts have not been received by Landlord when due. The parties hereby agree
that such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of late payment by Tenant. Acceptance of such late
charge by Landlord shall in no event constitute a waiver of Tenant's Default or
Breach with respect to such overdue amount, nor prevent Landlord from exercising
any of the other rights and remedies granted hereunder. In the event that a late
charge is payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall, at Landlord's option,
become due and payable quarterly in advance.
13.5 BREACH BY LANDLORD. Landlord shall not be deemed in breach of this
Lease unless Landlord fails within a reasonable time to perform an obligation
required to be performed by Landlord. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Landlord, and by any Lender(s) whose name and address shall have been furnished
to Tenant in writing for such purpose, of written notice specifying wherein such
obligation of Landlord has not been performed; provided, however that if the
nature of Landlord's obligation is such that more than thirty (30) days after
such notice are reasonably required for its performance, then Landlord shall not
be in breach of this Lease if performance is commenced within such thirty (30)
day period after delivery of Tenant's written notification and is thereafter
diligently pursued to completion. If Landlord (a) does not commence performance
within such thirty (30) day period, or (b) fails to diligently commence and
pursue such performance to completion, and the effect of such failure associated
with such non-performance materially interferes with Tenant's Use of the
Premises, Tenant may perform Landlord's obligation, at Landlord's expense (if
the cost of such performance obligations are included in Base Rent), and
Landlord shall reimburse Tenant within thirty (30) days of Tenant's delivery to
Landlord of written proof that such performance costs have been paid by Tenant.
If Landlord fails to reimburse Tenant within such 30-day period, Tenant may
deduct the cost of such repairs from future payments becoming due and payable to
Landlord.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Tenant's parking is taken by condemnation,
Tenant may at Tenant's option, to be exercised in writing within ten (10) days
after Landlord shall have given Tenant written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. Failure by Tenant to deliver such notice within
such 10-day period shall be deemed Tenant's decision to continue the Lease. If
Tenant does not terminate this Lease in accordance with the foregoing, this
Lease shall remain in full force and effect as to the portion of the Premises
remaining except that the Base Rent shall be reduced in the same proportion as
the rentable floor area of the Premises taken bears to the total rentable floor
area of the Premises. No reduction of Base Rent shall occur if the condemnation
does not apply to any portion of the Premises or does not otherwise materially
impair the operation of Tenant's business therein. Any award for the taking of
all or any part of the Premises under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the property of
Landlord, whether such award shall be made as compensation for diminution of
value of the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Tenant shall be entitled to any compensation, separately
awarded to Tenant for Tenant's relocation expenses and/or loss of Tenant's Trade
Fixtures. In the event that Tenant does not terminate this Lease by reason of
such condemnation, Landlord shall provide Tenant, within thirty (30) days after
Landlord shall have given Tenant written notice of such taking (or in the
absence of such notice, within thirty (30) days after the condemning authority
shall have taken possession), with written notice of the scope and nature of
Landlord's proposed repairs of any damage to the Premises, if any, caused by
such condemnation authority, as reasonably determined by Landlord. If the scope
and nature of Landlord's proposed repairs contained in such notice are not
acceptable to Tenant, Tenant may within ten (10) days after delivery of such
notice terminate this Lease as of the date thirty (30) days following the date
of Landlord's notice of the scope and nature of Landlord's proposed repairs. If
Tenant does not terminate this Lease, Landlord shall repair such damage as soon
as reasonably possible in substantial conformance with the scope and nature of
the repairs set forth in Landlord's notice.
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15. BROKERS' FEES.
15.1 PROCURING CAUSE. The Tenant's Broker named in Paragraph 1.10 is the
procuring cause of this Lease.
15.2 REPRESENTATIONS AND WARRANTIES. Tenant and Landlord each represent
and warrant to the other that it has had no dealings with any person, firm,
broker or finder other than as named in Paragraph 1.10 in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Tenant and Landlord do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each Party (as "RESPONDING PARTY") shall within
ten (10) days after written notice from the other Party (the "REQUESTING PARTY")
execute, acknowledge and deliver to the Requesting Party an estoppel certificate
in reasonable and customary form and substance ("ESTOPPEL CERTIFICATE") which
may include such additional information, confirmation and/or statements as may
be reasonably requested by the Requesting Party or by any lender of a Requesting
Party.
16.2 FINANCIAL STATEMENT. If Landlord desires to finance, refinance, or
sell the Premises or the Building or any part thereof, Tenant shall deliver to
any potential lender or purchaser designated by Landlord such financial
statements of Tenant as may be reasonably required by such lender or purchaser,
including but not limited to Tenant's financial statements for the past three
(3) years. All such financial statements shall be received by Landlord and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth. As long as Tenant is a publicly-held company, Tenant's most recent
annual report and all quarterly reports published (or otherwise publicly
disseminated) shall be sufficient for the requirements of this Paragraph 16.2.
17. LANDLORD'S LIABILITY. The term "LANDLORD" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises. In the
event of a transfer of Landlord's title or interest in the Premises or in this
Lease, Landlord shall deliver to the transferor or assignee (in cash or by
credit) any unused Security Deposit held by Landlord at the time of such
transfer or assignment. Upon such transfer or assignment and delivery of the
Security Deposit, as aforesaid, the prior Landlord shall be relieved of
liability with respect to the obligations and/or covenants under this Lease
thereafter to be performed by the Landlord. Subject to the foregoing, the
obligations and/or covenants in this Lease to be performed by the Landlord shall
be binding only upon the Landlord as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Landlord or
Tenant hereunder, other than Tenant's late charges, not received by the party to
whom such payment is due within ten (10) days following the date on which it was
due, shall bear interest from the date due at the prime rate charged by the
largest state chartered bank in the state in which the Premises are located plus
four percent (4%) per annum, but not exceeding the maximum rate allowed by law.
In the event Landlord is entitled to a late charge from Tenant pursuant to
Paragraph 13.4, such interest shall be payable by Tenant to Landlord in addition
to such late charge.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Tenant to Landlord under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Landlord and Tenant each represents and warrants to Tenant's Broker that it has
made and is relying solely upon its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Tenant's Broker has no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Tenant's Broker shall be an intended third party
beneficiary of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by certified or registered mail, return receipt
requested, with postage prepaid, or nationally recognized overnight delivery
service, or by facsimile transmission during normal business hours, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes. A
copy of all notices required or permitted to be given to Landlord hereunder
shall be concurrently transmitted to such party or parties at such addresses as
Landlord may from time to time hereafter designate by written notice to Tenant.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon; failure
to accept delivery shall be deemed effective delivery. If sent by regular mail,
the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by overnight courier that guarantees next day delivery shall be deemed given
twenty-four (24) hours after delivery of the same to the courier. If any notice
is transmitted by facsimile transmission or similar means, the same shall be
deemed served or delivered upon
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telephone or facsimile confirmation of receipt of the transmission thereof,
provided a copy is also delivered via personal delivery or mail. If notice is
received on a Saturday or a Sunday or a legal holiday, it shall be deemed
received on the next business day.
24. WAIVERS. No waiver by a Party (the "WAIVING PARTY") of the Default or Breach
of any term, covenant or condition hereof by the other Party (the "NON-WAIVING
PARTY"), shall be deemed a waiver of any other term, covenant or condition
hereof, or of any subsequent Default or Breach by the Non-Waiving Party of the
same or any other term, covenant or condition hereof. The Waiving Party's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of the Waiving Party's consent to, or approval of, any
subsequent or similar act by the Non-Waiving Party, or be construed as the basis
of an estoppel to enforce the provision or provisions of this Lease requiring
such consent. Regardless of the Landlord's knowledge of a Default or Breach at
the time of accepting rent, the acceptance of rent by Landlord shall not be a
waiver of any Default or Breach by Tenant of any provision hereof. Any payment
given Landlord by Tenant may be accepted by Landlord on account of moneys or
damages due Landlord, notwithstanding any qualifying statements or conditions
made by Tenant in connection therewith, which such statements and/or conditions
shall be of no force or effect whatsoever unless specifically agreed to in
writing by Landlord at or before the time of deposit of such payment.
25. RECORDING. Subject to the prior written approval of Landlord's lender,
either Landlord or Tenant shall, upon request of the other, execute, acknowledge
and deliver to the other a short form memorandum of this Lease for recording
purposes. The Party requesting recordation shall be responsible for payment of
any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Tenant has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Tenant holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to one hundred fifty
percent (150%) of the Base Rent applicable during the month immediately
preceding such expiration or earlier termination. Nothing contained herein shall
be construed as a consent by Landlord to any holding over by Tenant.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Landlord or Tenant are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the Parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. Subject to the conditions of Paragraph 11 of Addendum
"A" hereto, this Lease and any Option granted hereby shall be subject and
subordinate to any ground lease, mortgage, deed of trust, or other hypothecation
or security device (collectively, "SECURITY DEVICE"), now or hereafter placed by
Landlord upon the real property of which the Premises are a part, to any and all
advances made on the security thereof, and to all renewals, modifications,
consolidations, replacements and extensions thereof. Tenant agrees that the
Lenders holding any such Security Device shall have no duty, liability or
obligation to perform any of the obligations of Landlord under this Lease, but
that in the event of Landlord's default with respect to any such obligation,
Tenant will give any Lender whose name and address have been furnished Tenant in
writing for such purpose notice of Landlord's default pursuant to Paragraph
13.5. If any Lender shall elect to have this Lease and/or any Option granted
hereby superior to the lien of its Security Device and shall give written notice
thereof to Tenant, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Tenant agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Tenant might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Landlord after the execution of this lease, Tenant's subordination of this Lease
shall be subject to receiving assurance (a "NON-DISTURBANCE AGREEMENT") from the
Lender that Tenant's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Tenant is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Landlord or a Lender in connection with a sale,
financing or refinancing of Premises, Tenant and Landlord shall execute such
further writings as may be reasonably required to separately document any such
subordination or non subordination, attornment and/or Non-Disturbance Agreement
as is provided for herein.
31. ATTORNEYS' FEES. If any Party brings an action or proceeding to enforce the
terms hereof or declare rights hereunder, the Prevailing Party (as hereafter
defined) in any such proceeding, action, or appeal thereon, shall be entitled to
reasonable attorneys' fees. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term "PREVAILING PARTY" shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party of its claim or defense. The attorneys' fee award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all reasonable attorneys' fees incurred.
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32. LANDLORD'S ACCESS; SHOWING PREMISES; REPAIRS. Landlord and Landlord's agents
shall have the right to enter the Premises at any time, in the case of an
emergency (provided that Landlord shall give Tenant notice of such emergency
promptly after such entry), and otherwise at reasonable times for the purpose of
showing the same to prospective purchasers, lenders, or tenants, and performing
such maintenance and making such alterations, repairs, improvements or additions
to the Premises or to the Building, as Landlord may reasonably deem necessary
and as otherwise required under this Lease. Except in the case of an emergency
or normal maintenance and repairs, Tenant shall be permitted to have a
representative of Tenant accompany such inspections, provided that the
non-availability of a Tenant representative shall not delay or prevent Landlord
from performing such an inspection. Landlord may at any time place on or about
the Building any ordinary "FOR SALE" signs and Landlord may at any time during
the last one hundred eighty (180) days of the term hereof place on or about the
Building any ordinary "FOR LEASE" signs. All such activities of Landlord shall
be without abatement of rent or liability to Tenant.
33. AUCTIONS. Tenant shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Landlord's prior written consent. Notwithstanding anything to the
contrary in this Lease, Landlord shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Tenant shall not place any sign upon the exterior of the Premises or
the Building, except that Tenant may, with Landlord's prior written consent,
install (but not on the Building) such signs as are reasonably required to
advertise Tenant's own business so long as such signs are in a location
designated by Landlord and comply with Applicable Requirements and such signage
criteria as may be reasonably promulgated for the Industrial Center by Landlord.
The installation of any sign on the Premises by or for Tenant shall be subject
to the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). Unless otherwise expressly agreed herein,
Landlord reserves air rights to the use of the roof of the Building, and the
right to install advertising signs on the Building, including the roof, which do
not unreasonably interfere with the conduct of Tenant's business; Landlord shall
be entitled to all revenues from such advertising signs.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Landlord, the voluntary or other surrender of this Lease by Tenant, the mutual
termination or cancellation hereof, or a termination hereof by Landlord for
Breach by Tenant, shall automatically terminate any sublease or lesser estate in
the Premises; provided, however, Landlord shall, in the event of any such
surrender, termination or cancellation, have the option to continue any one or
all of any existing subtenancies. Landlord's failure within ten (10) days
following any such event to make a written election to the contrary by written
notice to the holder of any such lesser interest, shall constitute Landlord's
election to have such event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Tenant's actual reasonable out-of-pocket costs and expenses (including
but not limited to architects', attorneys', engineers' and other consultants'
fees) incurred in the consideration of, or response to, a request by Landlord
for any Tenant consent pertaining to Landlord's Alterations, compliance with FDA
requirements or any Tenant consents under Paragraph 42 (as long as such consents
are not required as a result of Tenant's particular use of, or Alterations or
additions to the Premises, Building or Industrial Center) shall be paid by
Landlord to Tenant upon receipt of an invoice and supporting documentation
therefor. Landlord's actual reasonable out-of-pocket costs and expenses
(including but not limited to architects', attorneys', engineers' and other
consultants' fees) incurred in the consideration of, or response to, a request
by Tenant for any Landlord consent pertaining to this Lease or the Premises,
including but not limited to consents to an assignment a subletting or the
presence or use of a Hazardous Substance, shall be paid by Tenant to Landlord
upon receipt of an invoice and supporting documentation therefor. In the event
that Landlord's liability associated with the action for which Landlord's
consent is requested by Tenant is reasonably estimated by Landlord to exceed the
amount held by Landlord as the Security Deposit, then it shall be reasonable for
Landlord to require, as a condition to Landlord's consent to any such request by
Tenant, that Tenant deposit with Landlord an amount of money (in addition to the
Security Deposit held under Paragraph 5) reasonably calculated by Landlord to
represent Landlord's excess liability not covered by the amount of the Security
Deposit. Any unused portion of said additional deposit shall be refunded to
Tenant without interest. Landlord's consent to any act, assignment of this Lease
or subletting of the Premises by Tenant shall not constitute an acknowledgment
that no Default or Breach by Tenant of this Lease exists, nor shall such consent
be deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Landlord at the time of such
consent.
(b) All conditions to Landlord's consent authorized by this Lease are
acknowledged by Tenant as being reasonable. The failure to specify herein any
particular condition to Landlord's consent shall not preclude the impositions by
Landlord at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. INTENTIONALLY DELETED.
38. QUIET POSSESSION. Upon payment by Tenant of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Tenant's
part to be observed and performed under this Lease, Tenant shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. Landlord covenants and agrees to act in good faith to
coordinate its construction activities in the Building, if any, with Tenant and
to act reasonably in performing such construction so as to not unreasonably
interfere with Tenant's Permitted Use of the Premises. Tenant agrees to act in
good faith to permit Landlord to perform its construction in a reasonable manner
and at reasonable times in order to allow Landlord to avoid interfering with
Tenant's Permitted Use of the Premises.
39. OPTIONS.
39.1 DEFINITION. As used in this Lease, the word "OPTION" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Tenant has on other property of
Landlord; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal
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to lease other property of Landlord or the right of first offer to lease other
property of Landlord; (c) the right to purchase the Premises, or the right of
first refusal to purchase the Premises, or the right of first offer to purchase
the Premises, or the right to purchase other property of Landlord, or the right
of first refusal to purchase other property of Landlord, or the right of first
offer to purchase other property of Landlord.
39.2 OPTIONS PERSONAL TO ORIGINAL TENANT. Each Option granted to Tenant
in this Lease is personal to the original Tenant named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Tenant or a Permitted Transferee while the
original Tenant is in full and actual possession of the Premises and without the
intention of thereafter assigning or subletting. The Options, if any, herein
granted to Tenant are not assignable (except to a Permitted Transferee), either
as a part of an assignment of this Lease or separately or apart therefrom, and
no Option may be separated from this Lease in any manner, by reservation or
otherwise.
39.3 MULTIPLE OPTIONS. In the event that Tenant has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Tenant shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Landlord from Tenant is unpaid
(without regard to whether notice thereof is given Tenant), or (iii) during the
time Tenant is in Breach of this Lease, or (iv) in the event that Tenant has
materially defaulted under Paragraph 13.1 three (3) or more times during the
twelve (12) month period immediately preceding the exercise of the Option,
whether or not the Defaults are cured.
(b) All rights of Tenant under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Tenant's due and
timely exercise of the Option if after such exercise and during the term of this
Lease, (i) Tenant fails to pay to Landlord a monetary obligation of Tenant for a
period of thirty (30) days after such obligation becomes due (without any
necessity of Landlord to give notice thereof to Tenant), or (ii) Tenant
materially defaults under Paragraph 13.1 three (3) or more times during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) if
Tenant commits a Breach of this Lease.
40. RULES AND REGULATIONS. Tenant agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("RULES AND REGULATIONS") which
Landlord may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees. Landlord
agrees that it shall abide by, keep and observe the Rules and Regulations in its
occupancy of the Building, in the event that Landlord occupies any other
premises of the Building during the Term of this Lease.
41. SECURITY MEASURES. Security services or measures provided by Landlord to the
Building are provided to Tenant without warrranty by Landlord as to the
effectiveness of such services or measures to protect the Premises, Tenant, its
agents and invitees and their property against the acts of third parties.
42. RESERVATIONS. Landlord reserves the right, from time to time, to grant,
without the consent or joinder of Tenant, such easements, rights of way, utility
race ways, and dedications that Landlord deems necessary, and to cause the
recordation of parcel maps and restrictions; provided that any such easements,
rights of way, utility raceways, dedications, maps and restrictions which
materially interfere with the use of the Premises by Tenant or materially
increase Tenant's monetary obligations under this Lease shall not be granted by
Landlord without Tenant's consent (except that such limitations shall not
prevent Landlord granting an interest in the Industrial Center in compliance
with Applicable Requirements). If Landlord seeks to make any of the foregoing
changes which require Tenant's consent, Tenant's consent shall not be
unreasonably delayed or withheld. Tenant agrees to sign any documents reasonably
requested by Landlord to effectuate any such easement rights, dedication, map or
restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid to the other under the provisions hereof, the
Party against whom the obligation to pay the money is asserted shall have the
right to make payment "under protest" and such payment shall not be regarded as
a voluntary payment and there shall survive the right on the part of said Party
to institute suit for recovery of such sum. If it shall be adjudged that there
was no legal obligation on the part of said Party to pay such sum or any part
thereof, said Party shall be entitled to recover such sum or so much thereof as
it was not legally required to pay under the provisions of this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Tenant is a corporation, trust or
partnership, Tenant shall within thirty (30) days after request by Landlord,
deliver to Landlord evidence satisfactory to Landlord of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation of this Lease by either Landlord or Tenant or Landlord's
agent or Tenant's agent and submission of same to Tenant or Landlord shall not
be deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing signed by the parties
in interest at the time of the modification. The Parties shall amend this Lease
from time to time to reflect any adjustments that are made to the Base Rent or
other rent payable under this Lease. As long as they do not materially change
Tenant's obligations hereunder Tenant agrees to make such reasonable
non-monetary modifications to this Lease as may be reasonably required by an
institutional insurance company or pension plan Lender in connection with the
obtaining of normal financing or refinancing
RPL
INITIALS: ________________
JSS
________________
20
<PAGE>
of the property of which the Premises are a part; provided that Landlord shall
reimburse Tenant its reasonable actual out-of-pocket legal fees and costs
associated with such modification up to an amount of $1,000 per request.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Landlord or Tenant, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Landlord or
Tenant.
49. COUNTERPARTS. This Lease may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall
comprise but a single instrument.
[Remainder of This Page Intentionally Left Blank]
<PAGE>
LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH RESPECT TO THE
PREMISES.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: San Diego, CA Executed at La Jolla, California
on: 7/18/96 on: 7/17/96
By LANDLORD: By TENANT:
MATRIX PHARMACEUTICAL, INC. ADVANCED TISSUE SCIENCES, INC.
a Delaware corporation a Delaware corporation
RONALD P. LYNCH ARTHUR J. BENVENUTO
By:________________________ By:________________________
Ronald P. Lucas Arthur J. Benvenuto
Name:______________________ Name:__________________________________
V.P. of Operations Chairman and CEO
Title:_____________________ Title:_____________________
Address: 34700 Campus Drive Address: 10933 North Torrey Pines Road
Fremont, California 94555 La Jolla, California 92037
Telephone: (510) 742-9900 Telephone: (619) 450-5730
Facsimile: (510) 742-8510 Facsimile: (619) 450-5732
<PAGE>
ADDENDUM "A"
TO INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE
BETWEEN
MATRIX PHARMACEUTICAL, INC., A DELAWARE CORPORATION
AND
ADVANCED TISSUE SCIENCES, INC.
A DELAWARE CORPORATION
This Addendum "A" to Lease ("Lease Addendum") is attached to and made a
part of that certain INDUSTRIAL MULTI-TENANT LEASE, dated July 15, 1996, made by
and between MATRIX PHARMACEUTICAL, INC., a Delaware corporation, as "Landlord,"
and ADVANCED TISSUE SCIENCES, INC., a Delaware corporation, as "Tenant" (the
"LEASE"), and constitutes additional covenants and agreements thereto as set
forth in the Lease, with the covenants and agreements contained herein to
prevail in the event of any conflicts between the covenants and agreements
contained herein and those in the Lease.
THE FOLLOWING ADDENDA PARAGRAPHS 1 THROUGH 14 ARE HEREBY INCORPORATED INTO THE
LEASE.
1. BASE RENT SCHEDULE: Tenant shall pay Base Rent for the Premises according to
the schedule outlined below:
Months 1 - 12: $119,025.00/month
Months 13 - 24: $123,786.00/month
Each six-month
Option Term: $128,737.44/month
2. ROOM 114. Tenant shall have the right to use, on a non-preferential space
available basis in conjunction with Landlord and any other tenants of the
Building, Room 114 located on the first floor of the Building and indicated on
Exhibit "A" ("ROOM 114"), for purposes reasonably related to Tenant's Permitted
Use. Scheduling of Room 114 will be handled by Landlord, through the Building
Receptionist, on a non-preferential space available basis by Tenant's prior
reservation of Room 114 at least 24 hours in advance.
3. OPTION TO EXTEND. Tenant shall have two (2) consecutive options to extend the
Term of this Lease for one (1) additional period of six (6) months each (each of
such options are referred to herein individually as a "Premises Option"). The
period of each of the Premises Options is referred to herein individually as a
"Option Term". Tenant shall have no right or interest to exercise the Premises
Option unless, not later than one hundred twenty (120) days prior to the end of
the then-current Term or Option Term, Tenant provides Landlord with (a) written
notice of its exercise of the Premises Option (the "Extension Notice").
Furthermore, Tenant shall have no right or interest to exercise either of the
Premises Options unless: (a) no uncured Breach has occurred and is continuing
under this Lease and no Breach on the part of Tenant under this Lease is then
continuing under the Lease; and (b) during the term of the Lease, (i) Tenant has
not filed for or sought protection under any bankruptcy statute, and (ii) Tenant
has not failed to obtain a vacation from any involuntary bankruptcy proceeding
within one hundred twenty (120) days after such filing. All of the terms,
covenants, conditions, provisions and agreements of the Lease shall apply to the
Option Term. Time is of the essence with respect to Tenant's exercise of each of
the Premises Options. The period of time within which the Premises Option may be
exercised shall not be extended or enlarged by reason of Tenant's inability to
exercise the Premises Option because of the provisions of this Paragraph 3.
4. WORKER'S COMPENSATION INSURANCE. Tenant shall, at its own cost and expense,
keep and maintain in full force during the term, a policy or policies of
worker's compensation insurance, in statutory amounts and limits, and employer's
liability insurance with limits as follows: bodily injury each accident in the
amount of not less than One Million Dollars ($1,000,000), bodily injury/disease
each employee in an amount not less than One Million Dollars ($1,000,000), and a
bodily injury/disease policy limit of not less than One Million Dollars
($1,000,000).
5. SECURITY. Tenant acknowledges that safety and security devices, services and
programs provided by Landlord, which are intended to deter crime and enhance
safety, may not in given instances prevent theft or other criminal acts, or
insure safety of persons or property. The risk that any safety or security
device, service or program may not be effective, or may malfunction or be
circumvented, is assumed by Tenant with respect to Tenant's property and
interests, and Tenant shall obtain insurance coverage to the extent Tenant
desires additional protection against criminal acts and other losses. Tenant
agrees to cooperate with any reasonable safety or security program developed by
Landlord or required by law. Tenant hereby covenants that Tenant and all of
Tenant's employees, agents, contractors and invitees shall limit their access to
such areas of the Building and Industrial Center as may be made available to
such persons by the use of such security access cards as are provided by
Landlord to Tenant. Except for those doors which are internal to the Premises,
Tenant shall
<PAGE>
not re-key any doors or change the card access system in any way without the
prior consent of Landlord, whose consent shall not be unreasonably withheld.
Tenant shall, however, provide Landlord with copies of all keys to interior
doors of the Premises for emergency access.
6. ENVIRONMENTAL ASSESSMENT. Prior to the Commencement Date, Landlord shall have
conducted (or received from the immediately-preceding tenant of the Premises) an
"Entrance Assessment," consisting of an updated Phase I Environmental Assessment
and such other tests as are listed on the "Assessment Criteria" attached hereto
as Exhibit "F", by an environmental consultant reasonably acceptable to
Landlord. A copy of such Entrance Assessment shall be delivered to Tenant as
soon as available as anticipated by Paragraph 3.3 of the Lease, and said
Assessment shall be deemed to be the baseline environmental condition of the
Premises upon Tenant's occupancy. To the extent such Entrance Assessment
indicates the existence of any Hazardous Substances in the Premises in violation
of Applicable Requirements, remediation of such Hazardous Substance condition
shall be performed at Landlord's cost and shall be remediated as soon as
possible after the date Landlord receives notice of such Hazardous Substance
condition. The cost of the Entrance Assessment shall be paid by Landlord. Prior
to Tenant's surrender of the Premises, Tenant shall conduct an "Exit
Assessment," consisting of an updated Phase I Environmental Assessment and such
other tests as are listed on the Assessment Criteria attached hereto as Exhibit
"F", by an environmental consultant selected by Tenant and reasonably acceptable
to Landlord and shall include Tenant's biological waste storage unit and
Tenant's hazardous and/or radioactive materials storage unit(s), it any.
Landlord shall receive a copy of the report(s) of the Exit Assessment, and said
report(s) shall be deemed the environmental condition of the Premises upon
Tenant's surrender of the Premises. The cost of the Exit Assessment shall be
paid by Tenant. The Entrance and Exit Assessments shall be performed by an
independent environmental consultant with expertise in performing environmental
analyses of biotechnology laboratory and manufacturing facilities.
7. HAZARDOUS SUBSTANCES. In further definition of Tenant's obligations under
Subparagraph 6.2 of the Lease, Tenant shall not allow any Hazardous Substance to
be used, generated, manufactured, released, stored or disposed of on, under or
about, or transported from, the Premises, unless: (a) such use is specifically
disclosed to and approved by Landlord in writing prior to such use (either by
disclosure herein in Exhibit "D" or, after the Commencement Date, by Landlord's
written approval within ten (10) business days of delivery of Tenant's written
request for such approval to Landlord); and (b) such use is conducted in
compliance with the provisions of Paragraph 6 of the Lease. Landlord may approve
such use subject to reasonable conditions to protect the Premises and Landlord's
interests. Landlord may withhold its approval if Landlord reasonably determines
that such proposed use involves a material risk of a release or discharge of
Hazardous Substances in violation of any Applicable Requirements or that Tenant
has not provided reasonable assurances of its ability to remedy such a violation
and fulfill its obligations under Paragraph 6 of the Lease and this Section 7.
Failure by Landlord to reasonably approve or disapprove Tenant's use of any
Hazardous Substance proposed by Tenant within such 10-day period shall be deemed
Landlord's approval of such use in compliance with Paragraph 6 of the Lease.
7.1 Remedial Work. Tenant shall perform any monitoring, testing,
investigation, clean-up, removal, detoxification, preparation of closure or
other required plans and any other remedial work required by any governmental
agency or reasonably recommended by Landlord or the environmental consultants
performing the Exit Assessment, as a result of any release or discharge or
potential release or discharge of Hazardous Substances and resulting in
contamination or any violation or potential violation of Applicable Requirements
by Tenant or any successor or subtenant of Tenant or their respective agents,
contractors, employees, licensees or invitees (collectively, "Remedial Work").
Landlord shall have the right to intervene in any governmental action or
proceeding involving any Remedial Work, and to approve performance of the work
(which approval shall not be unreasonably delayed or withheld), in order to
reasonably protect Landlord's interests. Tenant shall not enter into any
settlement agreement, consent decree or other compromise with respect to any
claims relating to Hazardous Substances without notifying Landlord and providing
ample opportunity for Landlord to intervene.
7.2 Compliance With Insurance Requirements. Tenant shall comply with the
requirements of Landlord's and Tenant's insurers regarding Hazardous Substances
and with such insurers' recommendations based upon prudent industry practices
regarding management of Hazardous Substances.
7.3 Indemnity. Tenant's indemnification obligations under the Lease shall
include the all of Landlord's reasonably foreseeable consequential damages and
the cost of any Remedial Work arising out of Hazardous Substances brought onto
the Industrial Center by or for Tenant, its successors and subtenants, or anyone
under Tenant's control. Neither the consent by Landlord to the use, generation,
storage, release, disposal or transportation of Hazardous Substances nor the
strict compliance with all Applicable Requirements shall excuse Tenant from
Tenant's indemnification obligations pursuant to Paragraph 6 of the Lease.
Tenant's indemnity provisions of Subparagraph 6.2(c) of the Lease shall be in
addition to and not a limitation of the indemnification provisions of Paragraph
8.7 of the Lease. Tenant's obligations pursuant to Paragraph 6 of the Lease and
this Section 7 shall survive the termination or expiration of the Lease.
Landlord's indemnification obligations under the Subparagraph 6.2(c) of the
Lease shall include all of Tenant's reasonably foreseeable consequential damages
and the cost of any Remedial Work arising out of Hazardous Substances brought
onto the Industrial Center by or for Landlord or anyone under Landlord's
control. Landlord's obligations pursuant to Paragraph 6 of the Lease and this
Section 7 shall survive the termination or expiration of the Lease.
2
<PAGE>
7.4 Default. The release or discharge of any Hazardous Substance in
violation of Applicable Requirements or the violation of any Applicable
Requirements by Tenant or any successor or subtenant of Tenant shall be a
Default by Tenant under the Lease. In addition to or in lieu of the remedies
available under the Lease as a result of such Default (after the applicable
notice and cure periods, if any), Landlord shall have the right, without
terminating the Lease, to require Tenant to suspend its operations and
activities on the Premises to the extent reasonably necessary to protect
Landlord's interest in the Industrial Center and until Landlord is satisfied
that appropriate Remedial Work has been or is being adequately performed;
Landlord's election of this remedy shall not constitute a waiver of Landlord's
right thereafter to declare a Default and pursue other remedies set forth in the
Lease.
8. RADIOACTIVE MATERIALS/BIOHAZARD WASTE STORAGE. In addition to its lease of
the Premises, and non-exclusive rights to the Common areas, Tenant shall have
the exclusive right to use, in accordance with all Applicable Requirements,
Radioactive Materials Storage Unit 5 in the Industrial Center. Tenant shall also
have the non-exclusive right to install and operate, in accordance with all
Applicable Requirements, a biohazard waste disposal bin for Tenant's exclusive
use on the Industrial Center, for the temporary storage of biohazardous waste.
Radioactive Materials Storage Unit 5 shall be located in its current location in
the Industrial Center, and the biohazard waste disposal bin shall be installed
by Tenant in a location mutually agreed upon by landlord and Tenant; provided
that Landlord shall have the right to relocate Radioactive Materials Storage
Unit 5 and the biohazard waste disposal bin (collectively, the "UNITS") within
the Industrial Center from time to time, as Landlord may reasonably determine
necessary for safe and efficient operation of the Industrial Center, in
accordance with Applicable Requirements and at Landlord's sole cost and expense.
Notwithstanding anything to the contrary contained in the Lease, Tenant shall be
responsible for all fees and costs (including, without limitation, licensing and
permitting fees) of keeping the Units in good order, condition and repair
(including, without limitation, repairing and maintaining all safety and
security systems associated with such Units) in accordance with all Applicable
Requirements.
8.1 Notice. Tenant shall provide Landlord with written notice of the
chemicals, wastes and substances to be stored in the Units as an amendment to
Exhibit "D" hereto, and shall comply with all Applicable Requirements and the
provisions of this Lease with respect to said Hazardous Substances.
8.2 Surrender. At the earlier of the termination of the Lease or Tenant's
termination of its use of any of the Units, Tenant will retain a qualified
environmental consultant, at its sole cost, who is acceptable to Landlord, to
perform an Exit Assessment of Radioactive Materials Storage Unit 5 and those
portions of the Common Areas: (a) where the biohazard waste disposal bin was
located prior to its removal, and (b) over which the path of access between the
Premises and the Units was located. Such Exit assessment shall consist of, at a
minimum, Sections A.1 and B of the Exit Assessment Criteria in Exhibit "F" to
the Lease, and all additional sampling and surveys necessary to assure that all
Hazardous Substances, including but not limited to any radioactive materials,
have been removed from the Units. Landlord shall be provided with a copy of the
such Exit Assessment as prepared by Tenant's consultant.
9. CONFIDENTIALITY. Unless otherwise agreed to in writing by Landlord and
Tenant, each party shall keep confidential all confidential documents, financial
statements, reports, assessments or other information provided to, or generated
by the other party relating to Landlord, Tenant and/or the Industrial Center and
shall not disclose any such information to any person other than (i) those
employees and agents of Landlord and Tenant reasonably receiving such
information for valid business purposes; (ii) those who are actively and
directly participating in the evaluation of the Premises, Building or Industrial
Center or financing of the Building or Industrial Center; (iii) governmental,
administrative, regulatory or judicial authorities in the investigation of the
compliance of the Property with applicable legal requirements; and (iv)
representative(s) of the Securities Exchange Commission ("SEC") to the extent
such information is required by any official request, order, rule or regulation
of the SEC or applicable legal requirements. However, Tenant expressly covenants
and agrees that except as required by law, it shall not disclose any code
compliance, environmental or other regulatory matters relating to Landlord's
interest in the Industrial Center or this Lease to governmental or other
authorities without the express prior written approval by Landlord. Upon the
expiration or earlier termination of this Lease for any reason, Tenant shall
promptly turn over to Landlord all confidential documents, financial statements,
reports, assessments or other information provided to Tenant by Landlord and
pertaining to Landlord's operations in the Industrial Center, obtained by Tenant
pursuant to this Lease. The provisions of this paragraph shall survive the
termination of this Lease.
10. LIMITATION OF LANDLORD'S LIABILITY. The obligations of Landlord under this
Lease shall not constitute personal obligations of the individual directors,
officers, or shareholders of Landlord, and in consideration of the benefits
accruing hereunder to Tenant and notwithstanding anything contained in this
Lease to the contrary, Tenant hereby covenants and agrees, for itself and all of
its successors and assigns, that the liability of Landlord for its obligations
under this Lease shall be limited solely to, and Tenant's and its successors'
and assigns' sole and exclusive monetary remedy shall be against, Landlord's
interest in the Industrial Center (including, without limitation, the right to
offset against future payments of Base Rent (a) any claim finally adjudicated in
favor of Tenant or (b) any payments made by Tenant, for which Tenant is entitled
to reimbursement from Landlord in accordance with the terms and conditions of
the Lease). Tenant hereby covenants and agrees, for itself and all of its
successors and assigns, that Tenant shall not seek recourse against the
individual directors, officers or shareholders of Landlord or any of their
personal assets for such satisfaction.
3
<PAGE>
11. MORTGAGEE'S CONSENT. This Lease is conditioned upon the written approval of
this Lease by the mortgagee of the Industrial Center as of the date of the Lease
(the Federal Deposit Insurance Corporation as Receiver of The Merchants Bank)
and Tenant hereby agrees to act reasonably in negotiating a commercially
reasonable form of subordination, non-disturbance and attornment agreement with
such mortgagee. If such mortgagee refuses to consent to this Lease on or before
August 1, 1996, this Lease shall terminate and neither party shall have any
continuing obligation to the other with respect to the Premises; provided,
however, that Landlord shall return the Security Deposit to Tenant.
12. RATIONING; GOVERNMENT ACTION. Notwithstanding anything to the contrary in
this Lease, Landlord reserves the right to limit, restrict, or ration the use of
water, electricity, gas or any other form of energy or any other service or
utilities serving the Premises or the Building, in compliance with the
requirements of federal, state or local governmental agencies, or utilities
suppliers in reducing energy or other resources consumption. Tenant shall
cooperate reasonably with any voluntary energy conservation program reasonably
initiated by Landlord in cooperation with the efforts of federal, state or local
governmental agencies, or utilities suppliers in reducing the consumption of
energy or other resources. In addition, Landlord shall not be liable to Tenant
nor shall this Lease be affected if any parking privileges appurtenant to the
Premises are impaired by reason of any new moratorium, initiative, referendum,
statute, regulation or other governmental decree or action, which is beyond the
reasonable control of Landlord and which could in any manner prevent or limit
the parking rights of Tenant hereunder. In the event of any such limitation
restriction or impairment of services or utilities provided in this Lease
results from any Applicable Requirement and materially interferes with Tenant's
Permitted Use of the Premises, Tenant's sole remedy shall be the equitable
abatement of Base Rent for the duration of the interruption or failure.
13. CORPORATE AUTHORITY. If Tenant executes the Lease as a corporation, each of
the persons executing the Lease on behalf of Tenant hereby covenants and
warrants that: (i) Tenant is a duly authorized and existing corporation; (ii)
Tenant is qualified to do business in the State of California; (iii) Tenant has
full right and authority to enter into the Lease; and (iv) each of the persons
executing on behalf of Tenant is authorized to do so. If Landlord executes the
Lease as a corporation, each of the persons executing the Lease on behalf of
Landlord hereby covenants and warrants that: (i) Landlord is a duly authorized
and existing corporation; (ii) Landlord is qualified to do business in the State
of California; (iii) Landlord has full right and authority to enter into the
Lease; and (iv) each of the persons executing on behalf of Landlord is
authorized to do so.
14. NO VIOLATIONS. In addition to any other express agreements of Landlord
contained in the Lease, the following representations and warranties by Landlord
shall be true and correct as of the date of this Lease: To Landlord's actual
knowledge, the Premises is subject to the City of San Diego SR zoning
requirements as of the date of this Lease, and neither Landlord's entering into
the Lease nor Tenant's occupancy of the Premises nor the use of the Premises for
general office use and ordinary scientific research in accordance with the City
of San Diego SR zoning requirements will in itself cause a material violation of
any governmental laws, ordinances, rules, regulations, permits or restrictive
covenants, including, without limitation, those relating to safety, health,
building, fire and zoning, or any judgments, orders or decrees, pending,
outstanding or threatened against the Industrial Center or against Landlord
which would materially affect Tenant's use of the Premises or Landlord's ability
to perform its obligations under the Lease. To the best of Landlord's knowledge,
based upon Landlord's title insurance policy for the Industrial Center, the
Federal Deposit Insurance Corporation as the Receiver for the Merchants Bank
holds the only mortgage encumbering the Industrial Center.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum "A" to
Lease to be executed on this 18th day of July, 1996.
LANDLORD: TENANT:
MATRIX PHARMACEUTICAL, INC. ADVANCED TISSUE SCIENCES, INC.
a Delaware corporation a Delaware corporation
RONALD P. LUCAS ARTHUR J. BENVENUTO
By:________________________ By:_____________________________
Ronald P. Lucas Arthur J. Benvenuto
Name:______________________ Name:___________________________
V.P. of Operations Chairman and CEO
Title:_____________________ Title:__________________________
4
<PAGE>
EXHIBIT "A"
BUILDING PLAN PREMISES
--------
[HAND-DRAWN FLOOR PLAN WITH ROOM NUMBERS AND STAIRWAYS]
LEGEND
------
/ / / / Common Areas of Building
<PAGE>
EXHIBIT "A"
BUILDING PLAN PREMISES
--------
[HAND-DRAWN FLOOR PLAN WITH ROOM NUMBERS AND STAIRWAYS, INCLUDING FIRE ALARM
SECURITY PANEL, LUNCH PATIO AREA, FIRE ANNOUNCLATOR PANEL, LOADING AREA, AND
BOILER ENCLOSURE AREA LOCATIONS.]
LEGEND
------
/ / / / Common Areas of Building
<PAGE>
EXHIBIT "B"
RULES AND REGULATIONS
1. The sidewalks, entrances, lobby, elevators, stairways and public
corridors shall be used only as a means of ingress and egress and shall remain
unobstructed at all times. The entrance and exit doors of the Premises are to be
kept closed at all times except as required for orderly passage to and from the
Premises. Loitering in any part of the Building or obstruction of any means of
ingress or egress shall not be permitted. Doors and windows shall not be covered
or obstructed.
2. Plumbing fixtures shall not be used for any purposes other than those
for which they were constructed, and no rubbish, newspapers, trash or other
substances of any kind shall be thrown into them, except as otherwise agreed in
writing by Landlord and Tenant. Walls, floors and ceilings shall not be defaced
in any way and no one shall be permitted to mark, drive nails, screws or drill
into, paint, or in any way mar any Building surface, except that pictures,
certificates, licenses and similar items normally used in Tenant's business may
be carefully attached to the walls by Tenant in a manner to be prescribed by
Landlord. Upon removal of such items by Tenant any damage to the walls or other
surfaces, except minor nail holes, shall be repaired by Tenant.
3. No awning, shade, sign, advertisement or notice shall be inscribed,
painted, displayed or affixed on, in or to any window, door or balcony or any
other part of the outside or inside of the Building or the demised premises
unless provided by Landlord or approved by Landlord in writing. No window
displays or other public displays shall be permitted without the prior written
consent of Landlord. All tenant identification on public corridor doors beyond
building standard will be installed by Landlord for Tenant but the cost shall be
paid by Tenant. No lettering or signs other than the name of Tenant will be
permitted on public corridor doors with the size and type of letters to be
prescribed by Landlord. The directory of the Building will be provided
exclusively for the display and location of Tenant only and Landlord reserves
the right to exclude all other names therefrom. All requests for listing on the
Building directory shall be submitted to the office of Landlord in writing.
Landlord reserves the right to approve all listing requests. Any change
requested by Tenant of Landlord of the name or names posted on directory, after
initial posting, will be charged to Tenant.
4. The cost of any special electrical circuits for items such as copying
machines, computers, microwaves, etc. (excluding those items listed in the Final
Plans approved by Landlord), shall be borne by Tenant unless the same are part
of the building standard improvements. Upon Landlord's request, Tenant shall
deliver to Landlord within five (5) business days of such request a list of all
equipment in the Premises (costing in excess of $2,000 per item (or, in the
event of equipment systems, $2,000 per system)), which shall reflect an
inventory of such equipment performed no more than sixty (60) days prior to the
date such list is delivered to Landlord.
5. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor is designed to carry and which
is then allowed by law. The weight, size and position of all safes and other
unusually heavy objects used or placed in the Building shall be prescribed by
Landlord and shall, in all cases, stand on metal-plates of such size as shall be
prescribed by Landlord. The repair of any damage done to the Building or
property therein by putting in or taking out or maintaining such safes or other
unusually heavy objects shall be paid for by Tenant.
6. Except for Tenant's initial move into to the Premises, during normal
business hours Tenant shall not intentionally permit its freight, fixtures or
other personal deliveries to block the entrance of the Building or the Premises,
impede passage through the entrance door or block any passageways or doors in
the Building, nor shall Tenant permit its agents, employees or invitees to place
obstructions in front of the Building or any Building doors unless due to
emergency and or scheduled necessary repairs. All freight, furniture, fixtures
and other personal property shall be moved into, within and out of the Building
so as not interfere with any other tenant's conduct of business or quiet
enjoyment of the Industrial Center. Except to the extent caused by Landlord's
active negligence or willful misconduct, in no event will Landlord be
responsible for any loss or damage to such freight, furniture, fixtures or
personal property from any cause.
7. No improper noises, vibrations or odors will be permitted in the
Building. No person will be permitted to bring or keep within the Building any
animal, bird or bicycle without Landlord's prior permission. No person shall
throw trash, refuse, cigarettes or other substances of any kind any place within
or out of the Building except in the refuse containers provided therefor. Tenant
shall not be permitted to interfere in any way with tenants or those having
business with them. Landlord reserves the right to exclude or expel from the
Building any person who, in the judgment of Landlord, is intoxicated or under
the influence of liquor or drugs or who shall in any manner do any act in
violation of the rules and regulations of the Industrial Center.
8. Landlord shall provide Tenant with an initial set of security access
cards for the card access system, if any. All re-keying of office doors, changes
to the card access system and replacement of lost or stolen keys or security
access cards caused or initiated by Tenant, or any of its employees, agents,
invitees or contractors, after occupancy, will be at the expense of Tenant.
B-1
<PAGE>
9. Tenant shall not use the patios for storage, barbecues, drying of
laundry or any other activity which would detract from the appearance of the
Building or Industrial Center or interfere in any way with the use of the
Building or Industrial Center by other tenants.
10. If Tenant uses the Premises after regular business hours or on
non-business days, Tenant shall lock any entrance doors to the Building used by
Tenant or take such other steps as are necessary to secure the Building's doors
immediately after entering or leaving the Building.
11. INTENTIONALLY DELETED.
12. If, after installation of Tenant's initial improvements (which
initial improvements shall be deemed installed by December 31, 1996), Tenant
requires new or additional telegraphic, telephonic, burglar or similar systems,
it shall first obtain Landlord's approval, which approval shall not be
unreasonably withheld.
13. Tenant shall not waste electricity, water or air-conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air-conditioning, as Landlord shall reasonably
determine.
14. At Landlord's sole cost and expense (including reimbursement of
Tenant's expenses arising therefrom), Landlord reserves the right, exercisable
without notice and without liability to Tenant, to change the name and street
address of the Building.
15. Tenant shall not retail any goods on the Premises.
16. Tenant shall not install any radio or television antenna, loudspeaker
or other device on the roof or exterior walls of the Building. Tenant shall not
interfere with radio or television broadcasting or reception from or in the
Building elsewhere. Tenant shall not install, maintain or operate upon the
Premises any vending machine without the written consent of Landlord.
Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Building are prohibited, and each tenant shall
cooperate to prevent same.
17. Tenant shall not use in any space or in the public halls of the
Building any hand trucks except those equipped with rubber tires and side guards
or such other material-handling equipment as Landlord may approve. Tenant shall
not bring any other vehicles of any kind into the Building.
18. Tenant shall not park its vehicles in any parking areas designated by
Landlord as areas for parking by visitors to the Industrial Center. Tenant shall
not leave vehicles in the Industrial Center parking areas overnight nor park any
vehicles in the Industrial Center parking areas other than automobiles,
motorcycles, motor driven or non-motor driven bicycles or four-wheeled trucks.
Landlord may, in its sole discretion, designate separate areas for bicycles and
motorcycles.
19. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Industrial Center;
provided, however, that Landlord shall not unreasonably discriminate against any
tenant in making any such waiver.
20. Tenant shall be deemed to have read these Rules and Regulations and
to have agreed to abide by them as a condition to his occupancy of the Premises
and shall be responsible for the observance of all the rules by Tenant's
employees, agents, clients, customers, invitees and guests.
21. The normal business hours of the Industrial Center shall be 7:00 a.m.
to 7:00 p.m., Monday through Friday, 8:00 a.m. to 12:00 p.m, Saturday, holidays
excepted. Receptionist services shall be provided between 8:00 a.m. and 12:00
p.m., and between 1:00 p.m. and 5:00 p.m., Monday through Friday, holidays
excepted. Unless noticed by Landlord, the Building shall be closed on the
following holidays: President's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day and New Year's Day. Landlord shall publish to
all tenants from time to time a list of holidays to be observed by the
Industrial Center. Notwithstanding the foregoing, Tenant shall be allowed access
to its Premises 24 hours per day, 7 days per week.
B-2
<PAGE>
EXHIBIT "C"
EXISTING EQUIPMENT
7/12/96 Lab Furn. (by Location) Page 1
LOCATION DESCRIPTION MATRIX # COMMENTS
243 Bench, c-frame 2 each
243 Exhaust snorkle 1 each
243 Fume hood, 6 ft. 3254
244 Bench, c-frame 1 each
255 Bench, c-frame 1 each
255 Bench, c-frame w/sink 1 each
255 Bench, c-frame, porable 2 each
w/wheels
255 Exhaust snorkle 3 each
262 Bench, cabinet 1 each
262 Bench, photography paper 1 each
storage
262 Benchtops (no cabinets) each
262 Sink, darkroom photography 1 each
263 Bench, c-frame 1 each
263 Bench, c-frame w/sink 1 each
263 Cabinet, glassware w/glass 1 each
doors
263 Exhaust snorkle 1 each
263 Fume hood, 5 ft. 5185
264 Bench, c-frame w/sink 1 each
264 Bench, c-frame, portable 4 each
w/wheels
265 Bench, c-frame 2 each
266 Bench, c-frame 1 each
269 Bench, c-frame, center 3322
island
269 Bench, c-frame, center 3323
island
269 Bench, c-frame, center 3324
island
269 Bench, c-frame, center 3325
island
269 Bench, c-frame, center 3326
island
269 Bench, c-frame, center 3327
island
269 Bench, c-frame, center 3328
island
269 Bench, c-frame, center 3329
island
269 Bench, c-frame, center 5177
island
269 Bench, c-frame, center 5178
island
269 Bench, c-frame, center 5179
island
269 Bench, c-frame, center 5180
island
269 Bench, perimeter 2 each
269 Bench, perimeter w/sink 6 each
269 Bench, perimeter, 30" desk 26 each Kneehole spaces -
continuous bench
269 Cabinet, glassware w/glass 8 each
doors
269 Flammable storage cabinet, 1 each
30" x 48"
269 Freezer, upright - 20 3503
269 Fume hood, 4 ft. 5181
269 Fume hood, 5 ft. 3330
269 Lab Chair, Cramer teal-blue 3152
269 Lab Chair, Cramer teal-blue 3153
269 Lab Chair, Cramer teal-blue 3154
269 Lab Chair, Cramer teal-blue 3155
269 Lab Chair, Cramer teal-blue 3156
269 Lab Chair, Cramer teal-blue 3157
269 Lab Chair, Cramer teal-blue 3158
269 Lab Chair, Cramer teal-blue 3159
269 Lab Chair, Cramer teal-blue 3160
269 Lab Chair, Cramer teal-blue 3161
269 Lab Chair, Cramer teal-blue 3162
C-1
<PAGE>
7/12/96 Lab Furn. (by Location) Page 2
LOCATION DESCRIPTION MATRIX # COMMENTS
269 Lab Chair, Cramer teal-blue 3163
269 Lab Chair, Cramer teal-blue 3164
269 Lab Chair, Cramer teal-blue 3165
269 Lab Chair, Cramer teal-blue 3166
269 Lab Chair, Cramer teal-blue 3167
269 Lab Chair, Cramer teal-blue 3168
269 Lab Chair, Cramer teal-blue 3288
269 Lab Chair, Cramer teal-blue 3289
269 Lab Chair, Cramer teal-blue 3290
269 Lab Chair, Cramer teal-blue 3291
269 Lab Chair, Cramer teal-blue 3292
269 Lab Chair, Cramer teal-blue 3293
269 Lab Chair, Cramer teal-blue 3294
269 Lab Chair, Cramer teal-blue 3295
269 Lab Chair, Cramer teal-blue 3296
269 Lab Chair, Cramer teal-blue 3297
269 Lab Chair, Cramer teal-blue 3298
269 Lab Chair, Cramer teal-blue 3299
269 Lab Chair, Cramer teal-blue 3300
269 Lab Chair, Cramer teal-blue 3301
269 Lab Chair, Cramer teal-blue 3302
269 Lab Chair, Cramer teal-blue 3303
269 Lab Chair, Cramer teal-blue 3304
269 Lab Chair, Cramer teal-blue 3305
269 Lab Chair, Cramer teal-blue 3306
269 Lab Chair, Cramer teal-blue 3307
269 Lab Chair, Cramer teal-blue 3308
269 Lab Chair, Cramer teal-blue 3309
269 Lab Chair, Cramer teal-blue 3310
269 Lab Chair, Cramer teal-blue 3311
269 Lab Chair, Cramer teal-blue 3312
269 Lab Chair, Cramer teal-blue 3313
269 Lab Chair, Cramer teal-blue 3314
269 Lab Chair, Cramer teal-blue 3315
269 Lab Chair, Cramer teal-blue 3316
269 Lab Chair, Cramer teal-blue 3317
269 Lab Chair, Cramer teal-blue 3318
269 Lab Chair, Cramer teal-blue 3319
269 Lab Chair, Cramer teal-blue 3320
269 Lab Chair, Cramer teal-blue 3321
269 Lab Chair, Cramer teal-blue 3332
269 Lab Chair, Cramer teal-blue NT
269 Refrigerator box, double door 3386
269 Refrigerator box, double door 3387
269 Refrigerator box, double door 3388
269 Refrigerator box, double door 3389
269 Refrigerator box, double door 3390
269 Refrigerator box, double door 3391
269 Refrigerator box, double door 5183
269 Refrigerator box, double door 5184
269 Refrigerator box, single door 5182
270 Bench, c-frame 1 each
C-2
<PAGE>
7/11/96 Office Furn. (by location) Page 1
LOCATION DESCRIPTION MATRIX # COMMENTS
114 Desk chair 5090
114 Desk chair 5091
114 Desk chair 5092
114 Desk chair 5093
114 Storage cabinet NT
114 Table, conference round 5095
201 Desk chair 5112
201 Desk chair 5118
201 Desk chair 5147
201 File cabinet - 2 drawer 5152
201 File cabinet - 2 drawer 5153
201 Table worksurface 3410
202 Desk chair 5157
202 Desk chair 5051
202 Desk chair 5063
202 File cabinet - 2 drawer 5158
202 File cabinet - 2 drawer 5159
202 Table worksurface 3334
203 Desk chair 3039
203 Desk chair 3487
203 Desk chair 3492
203 File cabinet - 2 drawer 3495
203 File cabinet - 2 drawer 3496
205 Bookcase, 5 ft. 3470
205 Desk chair 3471
205 Desk chair 3038
205 Desk chair 3473
205 File cabinet - 2 drawer 3468
205 File cabinet - 2 drawer 3469
207 Desk chair 3453
207 Desk chair 3474
207 Desk chair 3435
207 File cabinet - 2 drawer 3477
207 File cabinet - 2 drawer 3478
208 Desk chair 3488
208 Desk chair 3489
208 Desk chair 3486
208 File cabinet - 2 drawer 3490
208 File cabinet - 2 drawer 3491
209 Desk chair 3482
209 Desk chair 3480
209 Desk chair 3101
209 File cabinet - 2 drawer 3481
210 File cabinet - 2 drawer 3483
213 Desk chair 3427
213 Desk worksurface 3423
213 Desk worksurface 3424
213 Desk worksurface 3425
213 Desk worksurface 3426
213 Side chair 3070
214 Boardroom chair 5096
214 Boardroom chair 5097
214 Boardroom chair 5098
214 Boardroom chair 5099
C-3
<PAGE>
7/11/96 Office Furn. (by location) Page 2
LOCATION DESCRIPTION MATRIX # COMMENTS
214 Boardroom chair 5100
214 Boardroom chair 5101
214 Boardroom chair 5102
214 Boardroom chair 5103
214 Boardroom chair 5104
214 Boardroom chair 5105
214 Boardroom chair 5106
214 Boardroom chair 5107
214 Boardroom chair 5108
214 Boardroom chair 5109
214 Boardroom chair 5110
214 Boardroom chair 5111
214 Boardroom table 5119
214 Boardroom white board 5120
219 Desk chair 5144
219 File cabinet - 2 drawer NT
219 File cabinet - 2 drawer NT
219 File cabinet - 2 drawer NT
219 Side chair 3108
220 Desk chair 3047
220 Desk chair 3049
220 Desk chair 5141
220 File cabinet - 2 drawer NT
220 File cabinet - 2 drawer NT
221 Desk chair 3368
221 Desk chair 5142
221 Desk chair 3088
221 File cabinet - 2 drawer NT
221 File cabinet - 2 drawer NT
222 Desk chair 3048
222 Desk chair 5135
222 Desk chair 5125
222 File cabinet - 2 drawer NT
222 File cabinet - 2 drawer NT
223 Desk chair 3065
223 Desk chair 5123
223 Desk chair 3113
223 File cabinet - 2 drawer 3444
225 Desk chair 3421
225 File cabinet - 2 drawer 3419
225 File cabinet - 4 drawer 3420
225 Side chair 3422
226 Desk chair 5162
226 File cabinet - 2 drawer 5163
226 File cabinet - 5 drawer NT
226 Side chair 5160
226 Side chair 5161
227 Desk chair 3413
227 File cabinet - 2 drawer 3112
227 Side chair 3114
230 Desk chair 3412
230 Desk chair 3414
230 Desk chair 3411
230 File cabinet - 2 drawer 5077
C-4
<PAGE>
7/11/96 Office Furn. (by location) Page 3
LOCATION DESCRIPTION MATRIX # COMMENTS
230 File cabinet - 2 drawer 3031
231 Desk chair 3068
231 Desk chair 5122
231 Desk chair 3365
231 File cabinet - 2 drawer 3406
232 Desk chair 3066
232 File cabinet - 2 drawer 3401
232 File cabinet - 2 drawer 3402
232 File cabinet - 5 drawer 3403
240 Desk chair 3415
240 Desk chair 3416
240 Desk chair 3367
240 File cabinet - 2 drawer 3417
240 File cabinet - 2 drawer 3418
241 Desk chair NT
241 Desk chair 3054
241 Desk chair NT
241 File cabinet - 2 drawer NT
241 File cabinet - 2 drawer NT
267 Storage cabinet 3331
267 Table, worksurface 3335
267 Table, worksurface 3338
276 Table, conference 3397
287 Desk chair 3236
287 Desk chair 3238
287 Desk chair 3374
287 File cabinet - 2 drawer 3235
288 Desk chair 3228
288 Desk chair 3232
288 Desk chair 3373
288 File cabinet - 2 drawer 3231
289 Desk chair 3333
289 Desk chair NT
289 Desk chair 3227
289 File cabinet - 2 drawer 3230
290 Bookcase, library 3198
290 Bookcase, library 3199
290 Bookcase, library 3200
290 Bookcase, library 3201
290 Bookcase, library 3202
290 Bookcase, library 3203
290 Bookcase, library 3204
290 Bookcase, library 3205
290 Bookcase, library 3206
290 Bookcase, library 3207
290 Bookcase, library 3208
290 Bookcase, library 3209
290 Bookcase, library 3210
290 Bookcase, library 3211
290 Bookcase, library 3213
290 Bookcase, library 3214
290 Bookcase, library 3215
290 Bookcase, library 3216
290 Bookcase, library 3217
C-5
<PAGE>
7/11/96 Office Furn. (by location) Page 4
LOCATION DESCRIPTION MATRIX # COMMENTS
290 Bookcase, library 3218
290 Bookcase, library 3219
290 Bookcase, library 3220
290 Bookcase, library 3221
290 Bookcase, library 3222
290 Bookcase, library 3223
290 File cabinet, 2 drawer 3226
290 Stacking chair, orange NT
290 Stacking chair, orange NT
290 Stacking chair, orange NT
290 Stacking chair, orange NT
290 Stacking chair, orange NT
290 Stacking chair, orange NT
290 Stacking chair, orange NT
290 Stacking chair, orange NT
206-c1 Desk chair 3456
206-c1 Desk chair 3457
206-c1 Desk chair 3370
206-c1 File cabinet - 2 drawer 3465
206-c10 Desk chair 3433
206-c10 Desk chair 3434
206-c10 File cabinet - 2 drawer 3436
206-c10 File cabinet - 2 drawer 3437
206-c10 File cabinet - 2 drawer 3438
206-c11 Desk chair 3429
206-c11 File cabinet - 2 drawer 3430
206-c11 Side chair 3431
206-c2 Desk chair 3369
206-c2 Desk chair 3454
206-c2 Desk chair 3472
206-c2 File cabinet - 2 drawer 3464
206-c3 Desk chair 3451
206-c3 Desk chair 3452
206-c3 Desk chair 3371
206-c3 File cabinet - 2 drawer 3463
206-c4 Desk chair 3458
206-c4 File cabinet - 2 drawer 3462
206-c4 File cabinet - 3 drawer 3449
206-c4 Side chair 3459
206-c5 Desk chair 3450
206-c5 File cabinet - 2 drawer 3461
206-c5 File cabinet - 3 drawer 3448
206-c5 Side chair 3460
206-c6 Desk chair 3445
206-c6 File cabinet - 2 drawer 3443
206-c6 File cabinet - 3 drawer 3447
206-c6 Side chair 3446
206-c7 Desk chair 3455
206-c7 File cabinet - 2 drawer 3439
206-c7 Side chair NT
206-c8 Desk chair 3476
206-c8 File cabinet - 2 drawer 3440
206-c8 Side chair 3441
206-c9 Desk chair 3475
C-6
<PAGE>
7/11/96 Office Furn. (by location) Page 5
LOCATION DESCRIPTION MATRIX # COMMENTS
206-c9 File cabinet - 2 drawer 3442
206-c9 Side chair 5145
218-c1 Desk chair 3110
218-c1 File cabinet - 2 drawer 3104
218-c1 File cabinet - 2 drawer 3105
218-c10 Desk chair 5133
218-c10 File cabinet - 2 drawer 3092
218-c10 Side chair 3093
218-c11 Desk chair 3080
218-c11 File cabinet - 2 drawer 3074
218-c11 Side chair 3075
218-c12 Desk chair 3077
218-c12 File cabinet - 2 drawer 3076
218-c13 Desk chair 5136
218-c13 File cabinet - 2 drawer 3079
218-c13 Side chair 3081
218-c14 Desk chair 3083
218-c14 File cabinet - 2 drawer 3082
218-c14 Side chair 3084
218-c2 Desk chair 3107
218-c2 File cabinet - 2 drawer 3109
218-c2 Side chair 3111
218-c3 Desk chair 5126
218-c3 File cabinet - 4 drawer 3097
218-c3 File cabinet - 4 drawer 3098
218-c4 Desk chair 5131
218-c4 File cabinet - 4 drawer 3095
218-c4 File cabinet - 4 drawer 3096
218-c4 File cabinet - 4 drawer 3100
218-c5 Desk chair NT
218-c5 File cabinet - 2 drawer 3466
218-c5 File cabinet - 2 drawer 3467
218-c6 Desk chair 5127
218-c6 File cabinet - 2 drawer 3102
218-c6 Side chair 3103
218-c7 Desk chair 3094
218-c7 File cabinet - 2 drawer 3085
218-c7 File cabinet - 2 drawer 3086
218-c8 Desk chair 3099
218-c8 File cabinet - 2 drawer 3087
218-c8 Side chair 3089
218-c9 Desk chair 3428
218-c9 File cabinet - 2 drawer 3090
218-c9 Side chair 3091
242-c1 Desk chair 3363
242-c1 File cabinet - 2 drawer 3404
242-c1 File cabinet - 2 drawer 3405
242-c2 Desk chair 3361
242-c2 File cabinet - 2 drawer 3400
242-c2 Side chair 3378
242-c3 Desk chair 3366
242-c3 File cabinet - 2 drawer NT
242-c3 File cabinet - 4 drawer 3395
242-c3 Side chair 3071
C-7
<PAGE>
7/11/96 Office Furn. (by location) Page 6
LOCATION DESCRIPTION MATRIX # COMMENTS
242-c4 Desk chair 3362
242-c4 File cabinet - 2 drawer 3239
242-c4 Side chair 3069
242-c5 Desk chair 3360
242-c5 File cabinet - 2 drawer 3399
242-c5 Side chair 3376
242-c6 Desk chair 3364
242-c6 File cabinet - 2 drawer 3407
242-c6 Side chair 3377
256-c1 Desk chair 3242
256-c1 File cabinet - 2 drawer 3248
256-c1 Side chair 3246
256-c2 Desk chair 3243
256-c2 File cabinet - 2 drawer 3253
256-c2 Side chair 3247
256-c3 Desk chair 3241
256-c3 Desk chair 5167
256-c3 File cabinet - 2 drawer 3249
256-c3 File cabinet - 2 drawer 3250
256-c4 Desk chair 3244
256-c4 Desk chair 3245
256-c4 File cabinet - 2 drawer 3251
256-c4 File cabinet - 2 drawer 3252
268-c1 Desk chair 3340
268-c1 File cabinet - 2 drawer 3339
268-c1 Side chair 3341
268-c2 Desk chair 3342
268-c2 File cabinet - 2 drawer 3344
268-c2 Side chair 3343
268-c3 Desk chair 3346
268-c3 File cabinet - 2 drawer 3353
268-c3 Side chair 3358
268-c4 Desk chair 3345
268-c4 File cabinet - 2 drawer 3352
268-c4 Side chair 3357
268-c5 Desk chair 3348
268-c5 Desk chair 3350
268-c5 File cabinet - 2 drawer 3336
268-c5 File cabinet - 2 drawer 3354
268-c6 Desk chair 3349
268-c6 Desk chair 3351
268-c6 File cabinet - 2 drawer 3355
268-c6 File cabinet - 2 drawer 3356
273-c1 Desk chair 5200
273-c1 Desk chair 5201
273-c1 File cabinet - 2 drawer 5198
273-c1 File cabinet - 2 drawer 5199
273-c2 Desk chair 3479
273-c2 Desk chair 5196
273-c2 File cabinet - 2 drawer 5194
273-c2 File cabinet - 2 drawer 5195
273-c3 Desk chair 5189
273-c3 File cabinet - 2 drawer 5188
273-c3 Side chair 3150
C-8
<PAGE>
7/11/96 Office Furn. (by location) Page 7
LOCATION DESCRIPTION MATRIX # COMMENTS
273-c4 Desk chair 5192
273-c4 File cabinet - 2 drawer 5191
273-c4 Side chair 5193
273-c5 Desk chair 3147
273-c5 File cabinet - 2 drawer 5202
273-c5 Side chair 3375
273-c6 Desk chair 5205
273-c6 File cabinet - 2 drawer 5203
273-c6 Side chair 5207
283-c1 Desk chair NT
283-c1 File cabinet - 2 drawer 3240
283-c1 File cabinet - 2 drawer 5213
283-c2 Desk chair 3432
283-c2 Desk chair 3347
283-c2 File cabinet - 2 drawer 5214
283-c2 File cabinet - 2 drawer NT
283-c3 Desk chair 3237
283-c3 Desk chair 5212
283-c3 File cabinet - 2 drawer 5208
283-c3 File cabinet - 2 drawer 5209
283-c4 Desk chair 3050
283-c4 Desk chair NT
283-c4 File cabinet - 2 drawer 5210
283-c4 File cabinet - 2 drawer 5211
286-c1 Desk chair 3372
286-c1 Desk chair 3229
286-c1 Desk chair 3183
286-c1 File cabinet - 2 drawer 3182
286-c2 Desk chair 3224
286-c2 Desk chair 3185
286-c2 Desk chair 3187
286-c2 File cabinet - 2 drawer 3188
286-c2 File cabinet - 2 drawer 3189
286-c3 Desk chair 3179
286-c3 File cabinet - 2 drawer 3181
286-c3 Side chair 3180
286-c4 Desk chair 3184
286-c4 File cabinet - 2 drawer 3178
286-c4 Side chair 3177
286-c5 Desk chair 3173
286-c5 File cabinet - 2 drawer 3171
286-c5 Side chair 3172
286-c6 Desk chair 3175
286-c6 File cabinet - 2 drawer 3174
286-c6 Side chair 3176
Verified by: Peter Hammar, Advanced Tissue Sciences
/s/ PH 2/15/95
John Richardson, Matrix Pharmaceutical Inc.
/s/ John Richardson 2/15/96
C-9
<PAGE>
EXHIBIT "D"
LANDLORD-APPROVED HAZARDOUS SUBSTANCES
[17 ILLEGIBLE FORMS SETTING FORTH INFORMATION ON THE FOLLOWING:
Page
BENZO[A]PYRENE D-1
CYCLOPHOSPHAMIDE D-2
FORMALDEHYDE D-3
ACRYLAMIDE D-4
DIGOXIN D-5
LINDANE D-6
PARAQUAT D-7
SODIUM AZIDE D-8
THALLOUS SULFATE D-9
BENZO[A]PYRENE D-10
CARBON TETRACHLORIDE D-11
CROCEIN SCARLET D-12
DIPHENYL HYDANTOIN D-13
ISONICOTINIC ACID HYDRAZIDE D-14
DIMETHYL ARSENIC ACID D-15
CARBON DIOXIDE D-16
OXYGEN D-17
<PAGE>
Tenant uses various human and animal tissues in its research to be conducted on
the Premises. Such tissus are subject to Tenant's SOPs and all Applicable
Requirements.
Tenant shall bring tissue into the building in accordance with procedures agreed
upon between Landlord and Tenant.
D-18
<PAGE>
EXHIBIT "E"
LANDLORD'S ALTERATIONS
<PAGE>
[HAND-DRAWN MAP OF OFFICE AND LAB LOCATIONS SHOWING ALTERATIONS, INCLUDING
EXISTING FLOOR CRACKS.]
<PAGE>
[HAND-DRAWN MAP OF OFFICE AND LAB LOCATIONS SHOWING ALTERATIONS, INCLUDING
NOTATION: *EXISTING LAB BENCH AND SINK AND RELATED PLUMBING TO BE RELOCATED
APPROX. 12 FEET AWAY AT LANDLORD'S SOLE COST AND EXPENSE.]
<PAGE>
EXHIBIT "F"
ENTRANCE/EXIT ASSESSMENT CRITERIA
For purposes of compliance with the requirements of Sections 7 and 8 of Addendum
"A" to the Lease, the term "Assessment Criteria" with respect to the Premises
and hazardous radioactive storage units utilized by Tenant shall refer to, and
include, the following studies and assessments:
A. The following assessments and inspections:
1. Interior Site Assessment consisting of a visual inspection of all
surfaces (floors, walls, ceiling tiles, benches, interior of
cabinets and fume hoods) for signs of contamination and
deterioration. Visual inspection of all bench and hood sinks and
readily accessible drain lines for signs of deterioration, loss
of integrity and leakage. The Interior Site Assessment shall
include detailed written documentation of all observations and
dated photos to document the existing condition thereof.
2. Wastewater Collection System Assessment consisting of a flush and
clean-out of all discharge piping and traps with observation of
effluent during the clean-out.
3. In order to verify that there is no contamination of the
laboratory hoods and exhaust system, an inspection shall be made
consisting of an inspection of the laboratory hoods and exhaust
system with detailed documentation of all observances, including
without limitation, observed solids, liquids, odors or Hazardous
Materials entrapment. Such inspection shall include inspection of
the roof area to determine the existence of any deterioration
from condensation of hazardous materials in the exhaust system.
B. The Assessment Criteria shall also include such sampling and testing
as the consultant reasonably recommends based upon his or her
observations.
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<NAME> Matrix Pharmaceutical, Inc.
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