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 March 31, 1998
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 March 31,
1998: 21,933,765.
<PAGE>
MATRIX PHARMACEUTICAL, INC.
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II. OTHER INFORMATION
Risk Factors 12
Item 6. Exhibits and Reports on Form 8-K 20
Signature 21
2
<PAGE>
<TABLE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Balance Sheets
<CAPTION>
(In thousands)
March 31, December 31,
1998 1997
--------- ---------
<S> <C> <C>
Assets (Unaudited) (*)
Current assets:
Cash and cash equivalents $ 25,111 $ 19,719
Short-term investments 40,345 40,666
Other current assets 1,872 2,128
--------- ---------
Total current assets 67,328 62,513
Property and equipment, net 14,668 26,742
Non-current investments 20,008 19,983
Deposits and other assets, net 1,538 1,191
--------- ---------
$ 103,542 $ 110,429
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,800 $ 2,800
Accruals for special charge 1,103 2,063
Accrued clinical trial costs 1,382 1,788
Other accrued liabilities 2,828 2,681
Current portion of debt and capital lease obligations 2,276 2,283
--------- ---------
Total current liabilities 9,389 11,615
Non-current portion of debt and capital lease obligations 16,007 20,248
Deferred other income 5,365 1,913
--------- ---------
Total long-term liabilities 21,372 22,161
Stockholders' equity
Capital Stock 225,214 225,144
Notes receivable from shareholders (2,313) (2,313)
Other (477) (558)
Deficit accumulated during the development stage (149,643) (145,620)
--------- ---------
Total stockholders' equity 72,781 76,653
--------- ---------
$ 103,542 $ 110,429
========= =========
<FN>
(*) Derived from audited financial statements.
See accompanying notes
</FN>
3
</TABLE>
<PAGE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended
March 31,
1998 1997
-------- --------
(Unaudited) (Unaudited)
Revenues $ -- $ --
Costs and expenses:
Research and development 5,504 6,545
General and administrative 1,480 3,622
-------- --------
Total costs and expenses 6,984 10,167
-------- --------
Loss from operations (6,984) (10,167)
Gain on sale and leaseback transaction 1,887 --
Interest and other income, net 1,074 1,666
-------- --------
Net loss $ (4,023) $ (8,501)
======== ========
Basic and diluted net loss per common share $ (0.18) $ (0.40)
======== ========
Weighted average shares used in computing
basic and diluted net loss per common share 21,921 21,259
======== ========
See accompanying notes
4
<PAGE>
<TABLE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
<CAPTION>
For the three months
ended March 31,
1998 1997
-------- --------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (4,023) $ (8,501)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation, amortization, and other 568 335
Gain on sale and leaseback transaction (1,887) --
Changes in assets and liabilities:
Inventory -- (1,114)
Other changes in assets and liabilities (2,745) (559)
-------- --------
Net cash (used for) operating activities (8,087) (9,839)
Cash flows from investing activities:
Capital expenditures (419) (843)
Proceeds from sale of fixed assets 17,744 --
Investment in securities available-for-sale (5,175) --
Maturities of investments 5,500 --
-------- --------
Cash flows provided by (used for) investing activities 17,650 (843)
Cash flows from financing activities:
Payments on debt and capital lease obligations (10,248) (92)
Net cash proceeds from issuance of:
Debt financing 6,000 --
Capital stock 77 71
-------- --------
Cash flows (used for) financing activities (4,171) (21)
Net decrease in cash and cash equivalents 5,392 (10,703)
Cash and cash equivalents at the beginning of period 19,719 20,138
======== ========
Cash and cash equivalents at the end of period $ 25,111 $ 9,435
======== ========
<FN>
See accompanying notes
</FN>
5
</TABLE>
<PAGE>
MATRIX PHARMACEUTICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
1. Basis of presentation
The condensed consolidated balance sheet as of March 31, 1998,
the condensed consolidated statements of operations for the three
months ended March 31, 1998 and 1997, and the condensed consolidated
statements of cash flows for the three months ended March 31, 1998 and
1997, have been prepared by the Company, without audit. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at March 31, 1998 and for all
periods presented have been made. The condensed consolidated balance
sheet at December 31, 1997 has been derived from the audited financial
statements at that date.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission's rules and regulations.
The condensed financial statements should be read in
conjunction with the Company's audited financial statements as included
in the Company's Annual Report on Form 10-K for the year ended December
31, 1997 as filed with the Securities and Exchange Commission. The
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for any subsequent
quarter or for the entire fiscal year ending December 31, 1998.
2. Principles of consolidation
The condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary after
elimination of all material intercompany balances and transactions.
3. Basic and diluted net loss per common share
Basic and diluted net loss per common share is computed in
conformance with Statement of Financial Accounting Standards No. 128,
Earnings Per Share (Statement 128), which the Company adopted during
1997. Accordingly, the weighted average number of shares of common
stock outstanding are used while common stock equivalents, consisting
of stock options, 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 debt 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
6
<PAGE>
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 determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as
of each balance sheet date. 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 as a separate
component of stockholders' equity. Realized gains and losses and
declines in value judged to be other-than-temporary are included in
interest and other income. The cost of securities sold is based on the
specific identification method.
5. Gain on sale and leaseback transaction
In March 1998, the Company closed an agreement with a real
estate investment trust for the sale and leaseback of its San Diego
office/laboratory and manufacturing facility and an adjacent parcel of
land. The transaction was structured as an $18,400,000 purchase and a
$6,000,000 convertible loan secured by specific manufacturing related
building improvements. Under the terms of the agreement, the Company
will lease the facility for 13 years with the option to renew up to an
additional 25 years. The Company will pay $2,600,000 in annual lease
and interest expense, which will be partially offset by rental income
from a portion of the facility currently leased to another
pharmaceutical company. Net cash from the sale and loan agreements,
after the payment of the existing mortgage and escrow and other related
fees, totals approximately $14,000,000 and will be used to fund
operating expenses and capital purchases. The net gain on the
transaction is $5,774,000 of which $1,887,000 has been recognized in
the first quarter. The balance will be deferred and recorded as income
over the 13-year lease term.
6. Subsequent Event
In April 1998, the Company received $4,000,000 from an
insurance company for the reimbursement of legal expenses incurred
during prior years. The payment settles litigation between the Company
and the insurer over coverage under the Company's general liability
policy. The payment will be recorded as other income in the second
quarter of 1998.
7. New accounting pronouncements
As of January 1, 1998, the Company adopted Financial
Accounting Standards Board's Statement of Financial Accounting
Standards Statement No. 130, Reporting Comprehensive Income (Statement
130). Statement 130 establishes new rules for the reporting and display
of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or
shareholder's equity. Statement 130 requires unrealized gains or losses
on the Company's available-for-sale securities and foreign currency
translation adjustments, which prior to adoption were reported
separately in shareholders' equity to be included in other
comprehensive income. Prior year financial statements have been
reclassified to conform to requirements of Statement 130.
During the first quarter of 1998 and 1997, total comprehensive
loss amounted to $4,023,000 and $8,764,000 respectively.
7
<PAGE>
Effective January 1, 1998, the Company adopted the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information (Statement 131). Statement 131 superseded FASB
Statement No. 14, Financial Reporting for Segments of a Business
Enterprise. Statement 131 establishes standards for the way that public
business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. The adoption of Statement 131 did not affect the results of
operations, financial position, or the disclosure of segment
information.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
This Form 10-Q may contain, in addition to historical information,
forward-looking statements, including without limitation, statements regarding
the timing and outcome of regulatory reviews and clinical trials. Any such
forward-looking statements are based on management's current expectations and
are subject to a number of risks and uncertainties that could cause actual
results to differ materially from expected results. For additional information,
including risk factors, such as no assurance of regulatory approvals;
uncertainties associated with clinical trials; history of losses; future
profitability uncertain; additional financing requirements and uncertain access
to capital markets; limited manufacturing and sales and marketing experience;
dependence on sources of supply; uncertainty regarding patents and proprietary
rights; rapid technological change and substantial competition; uncertainty of
pharmaceutical pricing; no assurance of adequate reimbursement; dependence upon
qualified and key personnel; product liability exposure; limited insurance
coverage; hazardous materials and product risks; volatility of stock price; no
dividends; anti-takeover provisions; year 2000 compliance, please see the "Risk
Factors" section included in the Company's 1997 Form 10-K and in this Form 10-Q
as well as other factors discussed below and elsewhere in this report.
Results of Operations
Three Months Ended March 31, 1998 and 1997
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 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
its inception to March 31, 1998, the Company has incurred a cumulative net loss
of $149,643,000.
The Company had no revenue in either of the first quarters of 1998 and
1997.
Research and development expenses for the first quarter of 1998
decreased by 16% to $5,504,000 as compared to $6,545,000 for the first quarter
of 1997. The decrease was primarily due to lower personnel costs, the
termination of clinical trials for AccuSite(TM) Injectable Gel which were in
progress during the first quarter of 1997, lower purchases of operation supplies
and materials, and lower consulting expenses. The decrease was partially offset
by the transfer of certain production expenses to inventory during the first
quarter of 1997 when the Company marketed AccuSite in the United Kingdom.
General and administrative expenses for the first quarter of 1998
decreased by 59% to $1,480,000 as compared to $3,622,000 for the first quarter
of 1997. This decrease was principally due to lower litigation-related legal
expenses and the absence of AccuSite-related product marketing expenses during
the first quarter of 1998.
In March 1998, the Company closed an agreement with a real estate
investment trust for the sale and leaseback of its San Diego office/laboratory
and manufacturing facility and an adjacent parcel of land. The transaction was
structured as an $18,400,000 purchase and a $6,000,000 convertible loan secured
by specific manufacturing related building improvements. Under the terms of the
agreement, the Company will lease the facility for 13 years with the option to
renew up to an additional 25 years. The Company will pay $2,600,000 in annual
lease and interest expense, which will be partially offset by
9
<PAGE>
rental income from a portion of the facility currently leased to another
pharmaceutical company. Net cash from the sale and loan agreements, after the
payment of the existing mortgage and escrow and other related fees, totals
approximately $14,000,000 and will be used to fund operating expenses and
capital purchases. The net gain on the transaction is $5,774,000 of which
$1,887,000 has been recognized in the first quarter. The balance will be
deferred and recorded as income over the 13-year lease term.
Net interest and other income decreased to $1,074,000 for the first
quarter of 1998 as compared to $1,666,000 for the first quarter of 1997. This
decrease was primarily the result of a decline in interest income for the first
quarter 1998 due to lower average balances in cash, cash equivalents and
marketable securities. In addition, interest expense increased for the first
quarter 1998 as compared to the similar period in 1997 as the result of higher
debt balances.
Liquidity and Capital Resources
At March 31, 1998, the Company had $85,500,000 in cash, cash
equivalents and marketable securities, compared to $80,400,000 at December 31,
1997. The net increase of $5,100,000 is primarily due to the proceeds from the
sale and leaseback transaction as well as interest income and rental receipts,
net of cash disbursements used primarily to fund operating activities and
capital purchases.
In April 1998, the Company received $4,000,000 from an insurance
company for the reimbursement of legal expenses incurred during prior years. The
payment settles litigation between the Company and the insurer over coverage
under the Company's general liability policy. The payment will be recorded as
other income in the second quarter of 1998.
As discussed in "Results of Operations," in March 1998, the Company
closed an agreement with a real estate investment trust for the sale and
leaseback of its San Diego facility and an adjacent parcel of land and entered
into a loan agreement. Net cash from the sale and loan agreement, after the
payment of the existing mortgage and escrow and other related fees, totals
approximately $14,000,000 and will be used to fund operating expenses and
capital purchases.
In September 1995, the Company repurchased from Medeva PLC all
marketing rights related to its AccuSite product for $2,000,000, to be paid over
a period of five years. As of March 31, 1998, the remaining balance of this
obligation was $1,500,000.
The Company has financed its operations and capital asset acquisitions
from its inception through the sale of equity securities, interest income, and
capital lease and debt financing. The Company expects to finance its continued
operating requirements principally with cash on hand as well as additional
capital that may be 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 oncology products, continued research
and development programs, the development of manufacturing capabilities, and
general working capital requirements. The Company anticipates that
10
<PAGE>
its existing and committed capital resources, including the proceeds of its
April 1996 public offering, October 1997 equipment financing, and recent sales
and leaseback agreement, will enable it to maintain its current and planned
operations at least through 1999. The Company may require additional outside
financing to complete the process of bringing current products to market, and
there can be no assurance that such financing will be available on favorable
terms, if at all.
Year 2000 Compliance
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
During 1997, the Company installed a new accounting system that was
confirmed by the vendor to address the year 2000 related issues. However, the
Company has not analyzed the external factors, such as the impact on those
vendors adversely affected by the year 2000 issue, and has not assessed the
related potential effect on the Company's business, financial condition or
results of operations. There can be no assurance that computer systems and
applications of other companies on which the Company's operations rely will be
converted in a timely fashion, or that such failure to correct by another
company would not have a material adverse effect on the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
11
<PAGE>
PART II. OTHER INFORMATION
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 Food and Drug Administration ("FDA"). Among other
requirements, FDA approval of the Company's product candidate, including a
review of its manufacturing processes and production facilities, is required
before such product candidate 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 foreign authorities
and does not expect to achieve profitable operations unless other product
candidates now under development receive FDA and foreign regulatory approval and
are thereafter commercialized successfully.
In order to obtain FDA approval, the Company must demonstrate to the
satisfaction of the FDA that the Company's product candidate is safe and
effective for its intended uses and is manufactured in conformity with the FDA's
Current Good Manufacturing Practices ("cGMP") regulations. 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 New Drug
Application ("NDA") requesting FDA approval. When a product contains more than
one component that contributes to the product's effect, as do some 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 products, 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 a product must be inspected and accepted by the FDA
as being in compliance with cGMP regulations prior to approval of the product.
During the first quarter of 1998, the Company closed its manufacturing
facilities in San Jose and Milpitas, California and consolidated manufacturing
personnel at the Company's San Diego production facility. There can be no
assurance that the Company's San Diego manufacturing facility will be accepted
by the FDA in the future, and failure to receive or maintain such acceptance
would have a material adverse effect on the Company's business.
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,
changes in applicable law or FDA policy during the period of product development
and FDA regulatory review may result in the delay or rejection of an NDA filed
by the Company. Any failure to obtain, or delay in obtaining, FDA approvals
would adversely affect the ability of the Company to
12
<PAGE>
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.
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 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, the subsequent 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.
Matrix filed an NDA for AccuSite Injectable Gel for treatment of
condyloma (genital warts) with the FDA in 1995. The FDA has issued two action
(non-approvable) letters with respect to the Company's application. An action
letter received in September 1997 reiterated concerns expressed by the FDA in
December 1996 about the safety profile of AccuSite and, in particular, about the
persistence in certain AccuSite-treated patients of a bump-like thickening or
swelling (induration) at the site of injection, which the agency believes could
indicate an inflammatory process. The Company believes the clinical data for
AccuSite, including supplementary data submitted to the agency in March 1997 as
an amendment to the NDA, are supportive of the safety and efficacy of the
product in this indication. The Company has requested a re-review by the FDA of
its NDA. However, the Company does not intend to invest substantial Company
resources in pursuit of marketing clearance of AccuSite in the United States and
believes it is unlikely that AccuSite will be cleared for marketing in the
United States. Accordingly, the Company has indefinitely suspended further
development and commercialization programs related to AccuSite.
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 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 must be obtained from the relevant regulatory authorities.
AccuSite has been approved in Denmark, Germany, Ireland, Luxembourg,
The Netherlands, and the United Kingdom and recommended for approval in Belgium,
Finland, and Italy. A regulatory decision is expected in 1998 in France. The
Company is evaluating whether, in the absence of commercialization in the United
States, it may be cost effective to market AccuSite in Europe through local
partners. Commercialization of AccuSite in Europe would, in certain markets,
also require the negotiation of satisfactory pricing with local governments.
There can be no assurance that the Company will develop the distribution
agreements and regulatory approvals, including pricing approvals, that would be
necessary to commercialize AccuSite in Europe.
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 clinical testing
can result in delay, suspension, or cancellation of such testing, and/or
13
<PAGE>
refusal by the FDA to accept the results of such testing. In addition, the FDA
or the Company may modify or 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 provide data suitable for submission to the FDA.
The Company is currently conducting multiple clinical trials in the
United States and certain foreign countries, including four 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. The Company has experienced slower than
planned accrual of patients in its ongoing Phase III trials. Further delays in
completing enrollment in these trials or delays in other clinical studies 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.
History of Losses; Future Profitability Uncertain
Matrix was incorporated in 1985 and has experienced significant losses
since that date. As of March 31, 1998, the Company's accumulated deficit was
approximately $149,643,000. The Company has not generated revenues from its
products or product candidates 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 on successfully developing products,
obtaining regulatory approvals for its products, entering into agreements for
product commercialization outside the United States, and developing an effective
sales and marketing organization in the United States. 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 its product candidates. The Company
may require additional 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 1999. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Limited Manufacturing and Sales and Marketing Experience
The Company intends to market and sell certain of its product
candidates, if successfully developed and approved, through its own dedicated
sales force in the United States and through pharmaceutical licensees in Europe.
However, for AccuSite, the Company has entered into a sales and marketing
agreement with Savage Laboratories, the U.S. marketing division of Altana, Inc.,
to sell, market and distribute AccuSite to dermatology and obstetrics and
gynecology audiences in the United States. The Company has similar agreements in
place for AccuSite with pharmaceutical companies in
14
<PAGE>
Italy, Spain, and Portugal. The Company has announced the withdrawal of AccuSite
from the United Kingdom, where it has been marketed since January 1997 by a
contract sales organization. In order to establish a successful direct sales and
marketing capability in any of its targeted markets, the Company will need to
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 resources will be available to the Company to fund marketing and
sales 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.
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 cGMP regulations. The Company closed
manufacturing facilities in San Jose and Milpitas, California in March 1998 and
transferred manufacturing personnel to a research and manufacturing facility in
San Diego, California that was acquired in 1995 to meet the Company's
anticipated long-term commercial scale production requirements. The Company
expects that the San Diego facility and contract manufacturers should provide
sufficient production capacity to meet clinical requirements. There can be no
assurance that the Company will be able to validate this facility in a timely
manner or that this facility will be adequate for Matrix's cost-effective
manner. 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 used in the Company's products, 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 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 raw materials and components utilized
in its products. Any interruption of supply could have a material adverse effect
on the Company's ability to manufacture its products, complete clinical trials,
or commercialize products. In addition, the Company's ability to commercialize
its IntraDose Injectable Gel product in the United States could be limited by
the issuance in 1996 of a U.S. patent for cisplatin, a chemotherapeutic drug
that is the active compound in IntraDose, if the newly-issued patent were upheld
and if IntraDose were found to infringe that patent, and if the Company were
unable to obtain a license under that patent. See "--Uncertainty Regarding
Patents and Proprietary Rights."
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
15
<PAGE>
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 a material 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 that
obtain 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 the prosecution of the Japanese version of the first
patent on the Company's base technology, the Company became aware of a
previously unknown prior art reference. This was brought to the attention of the
U.S. PTO in a reexamination of the U.S. patent. The Japanese application has
been allowed, and the United States patent has been reissued with claims
slightly modified in light of the prior art. The Company believes, although no
assurance can be given, that the modified claims 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 with claims 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.
In 1996, for instance, a composition-of-matter patent for the cytotoxic
drug cisplatin was granted in the United States to a pharmaceutical company
whose use patent on cisplatin as an anti-tumor agent expired in December 1996.
The Company, on advice of patent counsel, believes the new patent for cisplatin,
the active agent in the Company's IntraDose product, may have been improperly
awarded and should be found invalid and/or unenforceable. However, if the new
patent on cisplatin is upheld and if IntraDose were found to infringe that
patent, there can be no assurance that the Company would be able to obtain a
license to the patent on commercially reasonable terms, if at all, in order to
commercialize IntraDose in the United States.
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.
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 than the Company, and represent
16
<PAGE>
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 compete with 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 receipt 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, profitability, and availability of capital for
biopharmaceutical companies may be affected by the continuing efforts of
governmental and third party payers 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.
The Company's ability to commercialize its products successfully will
depend in part on the extent to 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 payers are increasingly
challenging the 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
limit prices the Company can charge for its products. The cost containment
measures that health care payers 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.
17
<PAGE>
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
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 an 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 chemotherapeutic agents employed by the Company in its
aqueous-based protein systems, Anhydrous Delivery Vehicles ("ADV"), and regional
delivery technology 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.
In addition, bovine sourced materials are of some concern because of
transmission of Bovine Spongiform Encelphalopathy ("BSE"). The Company has taken
all precautions to minimize the risk of contamination of its collagen with BSE,
including the use of United States-sourced cow hides. The Committee For
Proprietary Medicinal Products ("CPMP"), a steering committee of the European
Medicines Evaluation Agency ("EMEA"), has classified materials made from bovine
skin products as showing no detectable infectivity, indicating minimal risk of
transmission of BSE.
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,
in addition, the market has from time to time
18
<PAGE>
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.
Anti-Takeover Provisions
Certain provisions of the Company's Certificate of Incorporation and
Bylaws may have the effect of making it more difficult for a third party to
acquire, or discouraging a third party from attempting to acquire, control of
the Company. Such provisions could limit the price that certain investors might
be willing to pay in the future for shares of the Company's Common Stock. The
Company's Board of Directors has the authority to issue shares of Preferred
Stock and to determine the price, rights, preferences, privileges and
restrictions of those shares without any further vote or action by the
stockholders.
The rights of the holders of Common Stock will be subject to, and may
be adversely affected by, the rights of the holders of any Preferred Stock that
may be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue shares of Preferred Stock.
Certain provisions of Delaware law applicable to the Company could also delay or
make more difficult a merger, tender offer or proxy contest involving the
Company, including Section 203 of the Delaware General Corporation Law, which
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years unless certain conditions
are met.
Year 2000 Compliance
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
During 1997, the Company installed a new accounting system that was
confirmed by the vendor to address the year 2000 related issues. However, the
Company has not analyzed the external factors, such as the impact on those
vendors adversely affected by the year 2000 issue, and has not assessed the
related potential effect on the Company's business, financial condition or
results of operations. There can be no assurance that computer systems and
applications of other companies on which the Company's operations rely will be
converted in a timely fashion, or that such failure to correct by another
company would not have a material adverse effect on the Company.
19
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.55 Purchase and Sale Agreement and Joint Escrow
Instructions by and Between Alexandria Real Estate
Equities, Inc. and Matrix Pharmaceutical, Inc. dated
February 3, 1998
10.56 Lease by and Between ARE-4757 Nexus Centre, LLC and
Matrix Pharmaceutical, Inc. dated March 25, 1998
10.57 Loan and Security Agreement by and Between ARE-4757
Nexus Centre, LLC, and Matrix Pharmaceutical, Inc.
dated March 25, 1998
10.58 Matrix Pharmaceutical, Inc. v. Chubb Customs Ins.
Co., et al. Settlement Agreement
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the
quarter ended March 31, 1998.
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: May 7, 1997 By: /s/ James R. Glynn
------------------- ---------------------------------
James R. Glynn
Director, Chief Operating Officer,
Chief Financial Officer, Assistant
Secretary
Signing on behalf of the registrant
and as principal financial and
accounting officer
21
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
February 3, 1998
BY AND BETWEEN
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Buyer
AND
MATRIX PHARMACEUTICALS, INC.
Seller
<PAGE>
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this
"Agreement") is made and entered into as of February 3, 1998, by and between
ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation ("Buyer"), and
MATRIX PHARMACEUTICALS, INC., a Delaware corporation ("Seller"), for the
purposes of setting forth the agreement of the parties and of instructing
CHICAGO TITLE INSURANCE COMPANY ("Escrow Agent"), with respect to the
transactions contemplated by this Agreement.
RECITALS
Upon and subject to the terms and conditions set forth in this
Agreement, Seller desires to sell and Buyer desires to purchase the following
(collectively, the "Property"): (i) the fee interest in those certain parcels of
real property located in the City of San Diego, County of San Diego, State of
California, as legally described on Exhibit "A-1" and Exhibit "A-2" attached
hereto, together with all rights, privileges and easements appurtenant thereto
or used in connection therewith, including, without limitation, all minerals,
oil, gas and other hydrocarbon substances thereon, all development rights, air
rights, water, water rights and water stock relating thereto, all strips and
gores, and all of Seller's right, title and interest in and to any streets,
alleys, easements, rights-of-way, public ways, or other rights appurtenant,
adjacent or connected thereto or used in connection therewith (collectively, the
"Land"); (ii) all buildings, improvements, structures and fixtures now or
hereafter included or located on or in the Land (collectively, but excluding the
improvements and fixtures designated in Exhibit "A-3" attached hereto, the
"Improvements"), including, without limitation, that certain building commonly
known as 4757 Nexus Center Drive (the "Building"), and all apparatus, equipment,
appliances and other fixtures used in connection with the operation or occupancy
of the Land and the Improvements, such as heating, air conditioning or
mechanical systems and facilities used to provide any utility services,
refrigeration, ventilation, waste disposal or other services now or hereafter
located on or in the Land or the Improvements, but specifically excluding the
improvements and fixtures designated in Exhibit "A-3" attached hereto; (iii) all
tangible personal property, equipment and supplies now or hereafter owned by
Seller and located on or about the Land or the Improvements or attached thereto
or used in connection with the use, operation, maintenance or repair thereof,
including, without limitation, the personal property designated in Exhibit "B-1"
attached hereto, but excluding the personal property designated in Exhibit "B-2"
attached hereto (collectively, but excluding the personal property designated in
said Exhibit "B-2", the "Personal Property"); and (iv) all intangible property
(collectively, the "Intangible Property") now or hereafter owned by Seller and
used in connection with the Land, the Improvements or the Personal Property,
1
<PAGE>
including, without limitation, the Tenant Leases and the Service Contracts (each
as hereinafter defined), building trademarks and trade names, transferable
business licenses, architectural, site, landscaping or other permits,
applications, approvals, authorizations and other entitlements, transferable
guarantees and warranties covering the Land and/or Improvements, all contract
rights, books, records, reports, test results, environmental assessments,
as-built plans, specifications and other similar documents and materials
relating to the use or operation, maintenance or repair of the Property or the
construction or fabrication thereof, and all transferable utility contracts, but
specifically excluding any intangible property exclusively related to the
operation of Seller's business.
AGREEMENT
In consideration of the mutual covenants contained in this Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Buyer and Seller hereby agree, and instruct
Escrow Agent, as follows:
1. AGREEMENT TO PURCHASE AND SELL.
Subject to all of the terms and conditions of this Agreement, Seller
agrees to sell, transfer and convey to Buyer, and Buyer agrees to acquire and
purchase from Seller, the Property, upon the terms and conditions set forth
herein.
2. PURCHASE PRICE.
The purchase price for the Property (the "Purchase Price") shall be the
sum of Eighteen Million Six Hundred Thousand Dollars ($18,600,000), payable as
follows:
2.1 Deposit. Within five (5) Business Days (as hereinafter defined)
following the date (the "Execution Date") which is the later of the dates set
forth next to Buyer's and Seller's signatures to this Agreement, Buyer shall
deposit into Escrow (as hereinafter defined) the sum of Five Hundred Fifty
Thousand Dollars ($550,000) (which amount, together with any and all interest
and dividends earned thereon, shall hereinafter be referred to as the "Deposit")
by wire transfer, or by certified or bank check, payable to the order of Escrow
Agent.
Escrow Agent shall invest the Deposit in insured money market accounts,
certificates of deposit, United States Treasury Bills or such other instruments
as Buyer may instruct from time to time. In the event of the consummation of the
purchase and sale of the Property as contemplated hereunder, the Deposit shall
be paid to Seller at the Closing (as defined in Section 6 below) and credited
against the Purchase
2
<PAGE>
Price. In the event the sale of the Property is not consummated because of the
termination of this Agreement by Buyer in accordance with any right to so
terminate provided herein, or the failure of any condition except for a default
of Buyer under this Agreement caused solely by Buyer, the Deposit shall be
returned to Buyer.
2.2 Balance. On the Closing Date (as defined in Section 6 below), Buyer
shall pay to Seller the balance of the Purchase Price over and above the Deposit
paid by Buyer under Section 2.1 above, by wire transfer of federal funds to
Escrow Agent, net of all prorations and adjustments as provided herein.
2.3 Allocation of Purchase Price. Subject to the prorations and
adjustments hereinafter provided, the Purchase Price shall be allocated among
the Land parcels, the Improvements, the Personal Property and the other Property
as Buyer and Seller shall mutually determine in good faith using, to the extent
required, the method set forth in section 1060 of the Internal Revenue Code of
1986 (as amended) and the Treasury Regulations promulgated thereunder for
purposes of filing Form 8594 with the Internal Revenue Service; provided,
however, that the parties agree that$16,000,000 shall be allocated to the Land
parcel described on Exhibit A-1 attached hereto and the other portions of the
Property located thereon or associated therewith, and $2,600,000 shall be
allocated to the Land parcel described on Exhibit A-2 attached hereto and the
other portions of the Property located thereon or associated therewith.
Notwithstanding such allocation of the Purchase Price, the sale of the Property
shall be on an all or nothing basis, the sale of each item of Property to be
conditioned upon the simultaneous sale of all other items of Property on a
concurrent basis, and Buyer shall have no right to purchase, and Seller shall
have no right to cause Buyer to purchase, less than all of the Property as an
entirety in accordance with the provisions of this Agreement. Both Buyer and
Seller agree that in all public filings and reports, including, without
limitation, any documentary or other transfer tax declarations and any federal,
state, or local income, sales, or use tax returns or declarations, the various
items of Property shall be valued as determined by Buyer.
3. OPENING OF ESCROW.
Promptly following the Execution Date, Buyer and Seller shall cause a
purchase and sale escrow ("Escrow") to be opened with Escrow Agent by delivery
to Escrow Agent of a fully executed copy of this Agreement (the "Opening of
Escrow"). This Agreement shall constitute escrow instructions to the Escrow
Agent as well as the agreement of the parties. Escrow Agent is hereby appointed
and designated to act as the Escrow Agent and instructed to deliver, pursuant to
the terms of this Agreement, the documents and funds to be deposited into Escrow
as herein provided. The parties hereto shall execute such additional escrow
instructions, not inconsistent with this Agreement as determined by counsel for
Buyer and Seller, as Escrow Agent shall deem reasonably necessary for its
protection, including Escrow Agent's general provisions, if
3
<PAGE>
any (as may be modified by Buyer, Seller and Escrow Agent). In the event of any
inconsistency between this Agreement and such additional escrow instructions,
the provisions of this Agreement shall govern.
4. ACTIONS PENDING CLOSING.
4.1 Due Diligence Period.
4.1.1 Due Diligence.
4.1.1.1 Property Documents. Within five (5) Business
Days after the Execution Date, Seller shall deliver or make available to Buyer
copies of all contracts, documents, leases, reports, books, records and other
materials relating to the Property, including, without limitation, as-built
plans and specifications, operating statements, income and expense records, rent
rolls, engineering tests, soil tests, a Phase One environmental/asbestos audit
of the Property, a Phase Two environmental audit of the Property, service
contracts, structural and mechanical reports, maps, plans, agreements,
governmental permits and approvals, appraisals, title policies, surveys,
construction warranties, and land studies (collectively, the "Property
Documents") to the extent in Seller's possession or control or in the possession
of its agents, auditors or independent contractors, all at Seller's sole cost
and expense.
4.1.1.2 Diligence Tests. At all reasonable times from
the Execution Date until the Closing or earlier termination of this Agreement,
Buyer, its agents and representatives shall be entitled at Buyer's sole cost and
expense to (i) enter onto the Property during normal business hours and upon
reasonable advance notice to Seller, to perform any inspections, investigations,
studies and tests of the Property, including, without limitation, physical,
structural, mechanical, architectural, engineering, soils, geotechnical and
environmental/asbestos tests that Buyer deems reasonable; (ii) upon reasonable
notice to Seller, cause an environmental assessment of the Property to be
performed; and (iii) review all Property Documents and Seller Documents and
examine and copy any and all books and records maintained by Seller or its
agents relating to the Property (including, without limitation, all documents
relating to utilities, zoning, and the access, subdivision and appraisal of the
Property).
4.1.1.3 Tenants. Within ten (10) days after the
Execution Date, Seller shall arrange for an introduction of Buyer to any tenant
of the Property and shall otherwise assist and cooperate with Buyer in providing
Buyer access to such tenants, subject to Seller's rights under any leases with
such tenants. Buyer and its agents, assigns and employees shall observe and
comply with all reasonable requests on the part of tenants at the Property
regarding entry into tenant facilities for purpose of inspection. Buyer may
conduct such inquiries and investigations of any and all tenants (or prospective
tenants) as Buyer, in its sole discretion, deems advisable or necessary.
4
<PAGE>
4.1.1.4 Insurance. Buyer agrees that during the Due
Diligence Period (as hereinafter defined) it shall carry, or cause its agent to
carry, workers' compensation and general liability insurance in the amount of
$1,000,000 per occurrence, which insurance shall name Seller as an additional
insured, and shall otherwise be issued by carriers and be in form reasonably
satisfactory to Seller. Buyer shall provide Seller with proof of such insurance
prior to commencing Buyer's physical inspections of the Property.
4.1.1.5 Indemnity and Repair. Buyer agrees to
indemnify, defend (with counsel reasonably acceptable to Seller) and hold
harmless Seller from any losses resulting from any final judgment by a court of
competent jurisdiction arising from any actual damage to the Property or any
injury to persons caused by any act of Buyer as a result of the inspections,
investigations or tests performed by Buyer, its agents or representatives or any
entry by Buyer or its agents or representatives onto the Property pursuant to
this Section 4.1.1, which indemnity shall survive the termination of this
Agreement or the Closing and delivery of the Deed (as hereinafter defined) for a
period of ninety (90) days; provided, however, that Buyer's indemnity hereunder
shall not include any losses, cost, damage or expenses resulting from (x) the
acts of Seller, its agents or representatives, or (y) the discovery of any
pre-existing condition of the Property. In addition, if this Agreement is
terminated, Buyer shall repair any material damage to the Property caused by its
entry thereon and shall restore the Property substantially to the condition in
which it existed prior to such entry; provided, however, that Buyer shall have
no obligation to repair any damage caused by Seller's negligence or willful
misconduct or to remediate, contain, abate or control any Material of
Environmental Concern (as hereinafter defined) or any hazardous defect that
existed at the Property prior to Buyer's entry thereon.
4.1.2 Termination Right. Buyer shall have the right at any
time during the period (the "Due Diligence Period") beginning upon the Execution
Date and ending on the date which is thirty (30) calendar days following the
Execution Date (the "Due Diligence Termination Date") to terminate this
Agreement if, during the course of Buyer's due diligence investigations of the
Property, Buyer determines in its sole and absolute discretion that the Property
is not acceptable to Buyer. Buyer may exercise such termination right by
delivering written notice of termination to Seller and Escrow Agent on or before
the Due Diligence Termination Date. Upon such termination, (i) Escrow Agent
shall return the Deposit to Buyer, (ii) the parties shall equally share the
cancellation charges of Escrow Agent and Title Company (as hereinafter defined),
and (iii) this Agreement shall automatically terminate and be of no further
force or effect and neither party shall have any further rights or obligations
hereunder, other than pursuant to any provision hereof which expressly survives
the termination of this Agreement. Upon the written request of Seller following
such termination, Buyer shall return to Seller all of the Property Documents
provided to Buyer and, provided that no dispute between Buyer and Seller then
exists, deliver to Seller copies of all non-
5
<PAGE>
confidential, non-privileged reports prepared by third parties for Buyer in
connection with its investigations of the Property. If Buyer does not exercise
such termination in writing prior to the Due Diligence Termination Date, then
Buyer's right to terminate this Agreement pursuant to this Section 4.1.2 shall
automatically lapse.
4.2 Title.
4.2.1 Deliveries. Buyer has obtained an ALTA extended coverage
preliminary title report (the "PTR") issued by Chicago Title Insurance Company
(in such capacity, "Title Company"), together with legible copies of all
documents referenced as exceptions therein. Not later than twenty (20) days
after the Execution Date, Seller shall deliver or cause to be delivered to Buyer
(a) a current or currently updated As-Built American Land Title Association
survey of the Property (the "Survey"), in form reasonably satisfactory to Buyer
and Title Company, prepared by a surveyor reasonably acceptable to Buyer and
licensed in the State of California and certified (using a surveyor's
certificate in substantially the same form as the certificate attached hereto as
Exhibit "C") to Buyer, Title Company, and such other persons or entities as
Buyer may, in its discretion, request, which Survey shall show any and all
matters which Buyer may reasonably require, including, without limitation, all
Improvements, all easements, all roads, all utilities, the number of parking
spaces, access to and from the Land, and drainage ditches, set-back lines,
protrusions, encroachments, and encumbrances affecting the same; and (b) a UCC
Search with regard to the Personal Property (the "UCC Search").
4.2.2 Buyer's Review of Title. Buyer shall have until the Due
Diligence Termination Date to notify Seller in writing of any objection which
Buyer may have to any exception reported in the PTR or matter shown on the
Survey or the UCC Search (or any updates thereof; provided, however, that if any
such updates are received by Buyer, Buyer shall have an additional five (5)
Business Days, regardless of the Due Diligence Termination Date, following
Buyer's receipt of such update and legible copies of all documents referenced
therein to notify Seller of objections to items shown on any such update).
Exceptions reported in the PTR and matters shown on the Survey or the UCC Search
(or any updates thereof) not objected to by Buyer as provided above shall be
deemed to be "Permitted Exceptions." As a condition to Closing, Seller shall
take all action necessary to remove from title to the Property any exceptions
and matters so objected to by Buyer, or in the alternative, Seller shall obtain
for Buyer title insurance insuring over such exceptions or matters, such
insurance to be in form and substance satisfactory to Buyer. If, prior to the
Closing, Seller is unable to remove or satisfactorily insure over any exceptions
or matters objected to by Buyer and Buyer is unwilling to take title subject
thereto, then, in addition to any and all other rights and remedies which Buyer
may have hereunder, Buyer may terminate this Agreement (in which case Escrow
Agent shall return the Deposit to Buyer, the parties shall equally share the
cancellation charges of Escrow Agent and Title Company, and
6
<PAGE>
neither party shall thereafter have any rights or obligations to the other
hereunder); provided, however, that if such objected to exceptions or matters
are not removed by the Closing Date, Buyer may elect, upon written notice on or
prior to such date, to (a) extend the Closing Date to allow Seller a reasonable
period of time to remove such objected to exceptions or matters or (b) proceed
to a timely Closing whereupon such objected to exceptions or matters shall be
deemed Permitted Exceptions. Seller shall in any event be required to discharge
and remove any and all liens and encumbrances affecting the Property which
secure an obligation to pay money (other than installments of real estate taxes
and assessments not delinquent as of the Closing) and, even though Buyer does
not expressly disapprove such liens, such liens and encumbrances shall not be
Permitted Exceptions.
4.2.3 Condition of Title at Closing. Upon the Closing, Seller
shall sell, transfer and convey to Buyer indefeasible fee simple title to the
Land and the Improvements thereon by a duly executed and acknowledged grant deed
in the form of Exhibit "D" attached hereto (the "Deed"), subject only to the
Permitted Exceptions. Prior to Closing, Seller shall not take any action or
commit or suffer any acts which would give rise to a variance from the current
legal description of the Land, or cause the creation of any exception or
encumbrance against or respecting the Land without the prior written consent of
Buyer, which consent Buyer may withhold in its sole discretion. Nothing in this
Section 4.2.3 shall preclude Buyer from disapproving title matters in accordance
with the provisions of Section 4.2.2 above.
4.2.4 Within ten (10) days of the Execution Date, Seller shall
deliver to Buyer property questionnaires in the form attached hereto as Exhibit
"E" (the "Property Questionnaires")completed to the reasonable satisfaction of
Buyer.
5. CONDITIONS PRECEDENT TO CLOSING.
5.1 Buyer's Conditions. The obligation of Buyer to render performance
under this Agreement is subject to the following conditions precedent (and
conditions concurrent, with respect to deliveries to be made by the parties at
Closing) ("Buyer's Conditions"), which conditions may be waived, or the time for
satisfaction thereof extended, by Buyer only in a writing executed by Buyer
(provided, however, that any such waiver shall not affect Buyer's ability to
pursue any remedy it may have with respect to any breach hereunder by Seller):
5.1.1 Title. Title Company shall be prepared and irrevocably
committed to issue to Buyer an American Land Title Association extended coverage
owner's policy of title insurance in favor of Buyer in an amount not less than
the Purchase Price showing indefeasible fee simple title to the Property vested
in Buyer, with those endorsements reasonably requested by Buyer, subject only to
the Permitted Exceptions (collectively, the "Owner's Title Policy").
7
<PAGE>
5.1.2 Seller's Due Performance. All of the representations and
warranties of Seller set forth herein shall be true and correct as of the
Closing Date, and Seller, on or prior to the Closing Date, shall have complied
with and/or performed all of the obligations, covenants and agreements required
on the part of Seller to be complied with or performed pursuant to the terms of
this Agreement. On the Closing Date, Seller shall deliver a certificate, in the
form of Exhibit "F" attached hereto (the "Seller's Certificate"), to Buyer
certifying that (i) all of the representations, covenants and warranties of
Seller made in or pursuant to this Agreement are true, accurate, correct and
complete as of the Closing, (ii) all conditions to the Closing that Seller was
to satisfy or perform have been satisfied and performed, and (iii) all
conditions to the Closing that Buyer was to perform have been satisfied and
performed.
5.1.3 Physical Condition of Property. Subject to the
provisions of Section 10 below, the physical condition of the Property shall be
substantially the same on the Closing Date as on the Execution Date, except for
reasonable wear and tear and any damages due to any act of Buyer or Buyer's
representatives.
5.1.4 Bankruptcy. No action or proceeding shall have been
commenced by or against Seller under the federal bankruptcy code or any state
law for the relief of debtors or for the enforcement of the rights of creditors
and no attachment, execution, lien or levy shall have attached to or been issued
with respect to the Property or any portion thereof.
5.1.5 Tenant Leases. At the Closing, Seller shall assign all
of Seller's rights and remedies under the Tenant Leases which Buyer has elected
in writing prior to the Closing to assume (collectively, the "Assumed Leases"),
including, without limitation, the right to any security deposits and prepaid
rent under the Assumed Leases, to Buyer pursuant to an assignment and assumption
of leases and security deposits (the "Assignment of Leases") in the form of
Exhibit "G" attached hereto, and Seller shall retain, pursuant to the Lease (as
hereinafter defined), all of the rights and obligations of the lessor under all
Tenant Leases other than the Assumed Leases (such Tenant Leases being referred
to herein as the "Retained Leases"); provided, however, that the parties agree
that that certain Industrial Multi-Tenant Lease between Seller, as "Landlord,"
and Advanced Tissue Sciences, Inc., as "Tenant," dated July 15, 1996, and that
certain Building Lease Agreement, dated August 9, 1996, between Seller, as
"Lessor," and Cox California PCS, Inc., as "Lessee," for rooftop communication
facilities, shall remain and constitute Retained Leases and Buyer shall have no
right to elect to assume the same.
5.1.6 Bill of Sale. At the Closing, Seller shall deliver to
Buyer a bill of sale and assignment (the "Bill of Sale and Assignment"), by
which Seller shall transfer to Buyer all the Personal Property and the
Intangible Property, including, without limitation, the Property Documents, but
excluding the Tenant Leases and any
8
<PAGE>
Service Contracts which Buyer has elected in writing prior to the Closing not to
assume, in each case free of all liens and encumbrances, in the form of Exhibit
"H" attached hereto.
5.1.7 Estoppel Certificates. Seller shall use commercially
reasonable efforts to deliver to Buyer, within fifteen (15) Business Days after
the Execution Date, estoppel certificates, each substantially in the form of
Exhibit "I" attached hereto, executed by each tenant under the Tenant Leases
(collectively, the "Estoppel Certificates"), and as a condition to Closing,
Seller shall deliver Estoppel Certificates from each tenant on or before the Due
Diligence Termination Date. Within the Due Diligence Period (or within five (5)
days after delivery with respect to each Estoppel Certificate which is delivered
after the expiration of the Due Diligence Period), Buyer shall review and
approve or disapprove the Estoppel Certificates, in their sole discretion. In
addition, not more than five (5) days prior to the Closing Date, Seller shall
deliver to Buyer an update for each of the Estoppel Certificates executed by
each tenant under the Tenant Leases (collectively, the "Estoppel Updates"),
which Estoppel Updates shall reflect that there have been no material adverse
changes since the date of the Estoppel Certificate and that any of Buyer's
objections to the Estoppel Certificates have been corrected or cured to Buyer's
satisfaction. Buyer shall review and approve or disapprove the Estoppel Updates,
in its sole discretion, prior to the Closing Date.
5.1.8 Nonforeign Affidavits. At the Closing, Seller shall
deliver to Buyer (i) the Nonforeign Affidavit (the "Nonforeign Affidavit") in
the form of Exhibit "J-1" attached hereto, and (ii) the California Form 590 (the
"Form 590") attached hereto as Exhibit "J-2", each executed by Seller.
5.1.9 Property Questionnaires. Buyer shall have received
Property Questionnaires for the Property, completed to the reasonable
satisfaction of Buyer, and no such Property Questionnaire shall indicate any
fact or circumstance that Buyer reasonably believes (based on advice of counsel)
would be likely to result in Buyer losing its status as a real estate investment
trust, as defined in Section 856 of the Internal Revenue Code (as amended), if
the transactions contemplated hereby are consummated.
5.1.10 New Lease. At the Closing, Seller shall execute and
deliver to Buyer a Lease (the "Lease"), in the form of Exhibit "K" to be
attached hereto, covering the entire Property, which Lease shall include the
terms set forth in Exhibit "K-1" attached hereto. Notwithstanding anything to
the contrary set forth herein, in the event that Seller and Buyer have not
agreed upon the form of Exhibit "K" before the Due Diligence Termination Date,
unless Buyer and Seller otherwise agree in writing, this Agreement shall
thereupon terminate and be of no further force or effect, Escrow Agent shall
return the Deposit to Buyer, Buyer shall pay the charges of Title Company and
Escrow Agent, and neither party shall have any further obligation hereunder
except
9
<PAGE>
for those obligations which by their terms survive the termination hereof.
5.1.11 Loan Agreement. At the Closing, Seller shall execute
and deliver to Buyer a Promissory Note, a Loan and Security Agreement and such
other instruments and agreements (including, without limitation, UCC-1's) as
Buyer may reasonably require (collectively, the "Loan Documents"), all in form
and substance satisfactory to Buyer in its discretion, in connection with the
contemplated loan from Buyer to Seller (the "Loan"), the principal terms of
which are set forth on Exhibit "L" attached hereto. Notwithstanding anything to
the contrary set forth herein, in the event that Seller and Buyer have not
agreed upon the form of the Loan Documents before the Due Diligence Termination
Date, unless Buyer and Seller otherwise agree in writing, this Agreement shall
thereupon terminate and be of no further force or effect, Escrow Agent shall
return the Deposit to Buyer, Buyer shall pay the charges of Title Company and
Escrow Agent, and neither party shall have any further obligation hereunder
except for those obligations which by their terms survive the termination
hereof.
5.1.12 Cooperation. Seller shall promptly deliver to Buyer
copies of such 10-K's, 10-Q's, 8-K's, proxy statements, annual reports,
contracts, documents and other materials as may be reasonably requested by Buyer
pertaining to the financial condition of Seller, including the latest monthly
and year-to-date financial statement, and a copy of Seller's Business Plan.
5.1.13 No Moratoria. No moratorium, statute, regulation,
ordinance, or federal, state, county or local legislation, or order, judgment,
ruling or decree of any governmental agency or of any court shall have been
enacted, adopted, issued, entered or pending which would adversely affect
Buyer's intended use of the Property.
5.1.14 Parking License. At the Closing, Seller and Buyer shall
execute and deliver a Parking License Agreement (the "Parking License") in form
and substance mutually acceptable to Buyer and Seller, granting the lessee
pursuant to the Lease a right to use such parking spaces located on the portion
of the Land described in Exhibit "A-2" attached hereto which, when combined with
the number of spaces available pursuant to the Lease entitles such lessee to use
not less than 201 parking spaces.
5.2 Failure of Buyer's Conditions. Subject and without limitation to
Buyer's rights hereunder, including, without limitation, Section 11.2 hereof, if
any of the Buyer's Conditions have not been fulfilled within the applicable time
periods, Buyer may:
5.2.1 Waive and Close. Waive the Buyer's Condition and close
Escrow in accordance with this Agreement, with or without adjustment or
abatement of
10
<PAGE>
the Purchase Price; or
5.2.2 Close. Close escrow without waiving or curing the
failure of the Buyer's Condition but without waiving any other rights which
Buyer may have against Seller, which rights are expressly reserved hereby; or
5.2.3 Terminate. Terminate this Agreement by written notice to
Seller and to Escrow Agent, in which event Escrow Agent shall return the Deposit
to Buyer, Seller shall pay the cancellation charges of Title Company and Escrow
Agent, and Buyer shall be entitled to pursue any other rights and remedies which
it may have against Seller in connection herewith.
5.3 Seller's Conditions. The obligation of Seller to render performance
under this Agreement is subject to the following conditions precedent (and
conditions concurrent with respect to deliveries to be made by the parties at
Closing) ("Seller's Conditions"), which conditions may be waived, or the time
for satisfaction thereof extended, by Seller only in a writing executed by
Seller (provided, however, that any such waiver shall not affect Seller's
ability to pursue any remedy it may have with respect to any breach hereunder by
Buyer):
5.3.1 Buyer's Due Performance. All of the representations and
warranties of Buyer set forth in Section 8 hereof shall be true and correct as
of the Closing Date, and Buyer, on or prior to the Closing Date, shall have
complied with and/or performed all of the obligations, covenants and agreements
required on the part of Buyer to be complied with or performed pursuant to the
terms of this Agreement; and
5.3.2 Loan. At the Closing, Buyer shall deposit with Escrow
Agent the proceeds of the Loan, and shall instruct Escrow Agent to disburse such
proceeds to Seller as Seller may direct immediately following the Closing.
5.3.3 Bankruptcy. No action or proceeding shall have been
commenced by or against Buyer under the federal bankruptcy code or any state law
for the relief of debtors or for the enforcement of the rights of creditors.
5.4 Failure of Seller's Conditions. Subject to Seller's rights under
Section 11.1 hereof in the event of a default by Buyer which results in the
failure of a Seller's Condition, in the event of the failure of a Seller's
Condition, Seller may terminate this Agreement by delivery of written notice to
Buyer and Escrow Agent, in which event Escrow Agent shall return the Deposit to
Buyer, the parties shall equally share the cancellation charges of Title Company
and Escrow Agent, and neither party shall thereafter have any rights or
obligations to the other hereunder.
6. CLOSING.
11
<PAGE>
6.1 Closing Date. Subject to the provisions of this Agreement, the
Closing shall take place on the fifth (5th) day after the Due Diligence
Termination Date, or on such other date as the parties hereto may agree. As used
herein, the "Closing" shall mean the recordation of the Deed in the Official
Records of the County of San Diego, State of California (the "Official
Records"), and the "Closing Date" shall mean the date upon which the Closing
actually occurs.
6.2 Deliveries by Seller. Not less than two (2) Business Days prior to
the Closing Date, Seller, at its sole cost and expense, shall deliver or cause
to be delivered into Escrow the following documents and instruments, each dated
as of the Closing Date and executed by Seller, in addition to the other items
and payments required by this Agreement to be delivered by Seller:
6.2.1 Deed. The original executed and acknowledged Deed
conveying the Property to Buyer or its nominee;
6.2.2 Nonforeign Affidavit. Two (2) originals of the
Nonforeign Affidavit, each executed by Seller;
6.2.3 Form 590. Two (2) duplicate originals of the Form 590,
each executed by Seller;
6.2.4 Lease and Parking License. Four (4) originals of (i) the
Lease, (ii) a Memorandum of Lease in recordable form, and (iii) the Parking
License, each executed by Seller;
6.2.5 Assignment of Leases. Four (4) original counterparts of
the Assignment of Leases, each executed by Seller;
6.2.6 Loan Documents. Four (4) original counterparts of each
of the Loan Documents, each executed by Seller;
6.2.7 Bill of Sale and Assignment. Four (4) original
counterparts of the Bill of Sale and Assignment, each executed by Seller;
6.2.8 Seller's Certificate. Four (4) original Seller's
Certificates, each executed by Seller;
6.2.9 Tenant Leases. An original (or certified copy if an
original is not available), fully executed counterpart of each of the Assumed
Leases and any amendments, modifications, supplements and restatements thereto,
and a certified copy of each of the Retained Leases and any amendments,
modifications, supplements and restatements thereto;
12
<PAGE>
6.2.10 Proof of Authority. Such proof of Seller's authority
and authorization to enter into this Agreement and the transaction contemplated
hereby, and such proof of the power and authority of the individual(s) executing
or delivering any instruments, documents or certificates on behalf of Seller to
act for and bind Seller as may be reasonably required by Title Company or Buyer;
and
6.2.11 Other. Such other documents and instruments, signed and
properly acknowledged by Seller, if appropriate, as may be reasonably required
by Buyer, Escrow Agent or otherwise in order to effectuate the provisions of
this Agreement and the Closing of the transactions contemplated herein,
including, without limitation, reasonable or customary title affidavits and
indemnities.
6.3 Deliveries by Buyer. On or before the Closing, Buyer, at its sole
cost and expense, shall deliver or cause to be delivered into Escrow the
following: (i) the balance of the Purchase Price pursuant to Section 2 hereof
and Buyer's share of prorations and "Closing Costs" (as hereinafter defined), as
provided in Sections 6.5 and 6.6, respectively; (ii) four (4) original executed
counterparts of the Assignment of Leases; (iii) four (4) original executed
counterparts of the Lease, the Memorandum of Lease, the Parking License and the
Loan Documents to which Buyer is a party; (iv) such proof of Buyer's authority
and authorization to enter into this Agreement and the transaction contemplated
hereby, and such proof of the power and authority of the individual(s) executing
or delivering any instruments, documents or certificates on behalf of Buyer to
act for and bind Buyer as may be reasonably required by Title Company or Seller;
and (v) such other documents and instruments, signed and properly acknowledged
by Buyer, if appropriate, as may reasonably be required by Escrow Agent or
otherwise in order to effectuate the provisions of this Agreement and the
closing of the transactions contemplated herein.
6.4 Actions by Escrow Agent. Provided that Escrow Agent shall not have
received written notice from Buyer or Seller of the failure of any condition to
the Closing or of the termination of the Escrow and this Agreement, when Buyer
and Seller have deposited into Escrow the documents and funds required by this
Agreement, and Title Company is irrevocably and unconditionally committed to
issue the Owner's Title Policy concurrently with the Closing, Escrow Agent
shall, in the order and manner herein below indicated, take the following
actions:
6.4.1 Recording and Filing. Following Title Company's
acknowledgment that it is prepared and irrevocably committed to issue the
Owner's Title Policy to Buyer, first cause the Deed, and thereafter the
Memorandum of Lease and any other documents which the parties hereto may
mutually direct, to be recorded in the Official Records, and file such other
documents or instruments with the appropriate filing offices as the parties may
mutually direct, and obtain conformed copies
13
<PAGE>
thereof for distribution to Buyer and Seller.
6.4.2 Lease and Promissory Note. Date as of the Closing Date
(i) each counterpart of the Lease, and (ii) the original Promissory Note with
respect to the Loan, and deliver one fully-executed and dated counterpart of the
Lease and the original executed and dated Promissory Note to Buyer.
6.4.3 Funds. Upon receipt of confirmation of the recordation
of the Deed and such other documents as were recorded or filed pursuant to
Section 6.4.1 above, disburse all funds deposited with it by Buyer as follows:
(a) Pursuant to the "Closing Statement" (as hereinafter
defined), retain for Escrow Agent's own account all escrow fees and costs,
disburse to Title Company the fees and expenses incurred in connection with the
issuance of the Owner's Title Policy, and disburse to any other persons or
entities entitled thereto the amount of any other Closing Costs;
(b) Disburse to Seller an amount equal to the Purchase Price,
less or plus the net debit or credit to Seller by reason of the prorations and
allocation of Closing Costs provided for in this Section 6. Seller's portion (as
provided in Section 6.6 below) of the escrow fees, title fees and other Closing
Costs shall be paid pursuant to clause (a) above;
(c) Disburse to Seller an amount equal to the proceeds of the
Loan, less any costs to file or record any of the Loan Documents, which shall be
paid by Seller;
(d) Disburse to Buyer any remaining funds in the possession of
Escrow Agent after payments pursuant to (a), (b) and (c) above have been
completed.
6.4.4 Owner's Title Policy. Cause Title Company to issue the
Owner's Title Policy to Buyer.
6.4.5 Delivery of Documents. Deliver to Buyer and Seller each
one original of all documents, other than the Deed and the Promissory Note with
respect to the Loan, deposited into Escrow.
6.5 Prorations. Rentals, revenues, and other income, if any, from the
Property (other than income in connection with the Retained Leases), taxes,
assessments, improvement bonds, service or other contract fees, utility costs,
and other expenses affecting the Property shall be prorated between Buyer and
Seller as of the Closing Date. For purposes of calculating prorations, Buyer
shall be deemed to be in title to the Property, and therefore entitled to the
income (other than income in connec-
14
<PAGE>
tion with the Retained Leases) and responsible for the expenses, after 12:01
a.m. on the Closing Date. Delinquent rentals in connection with the Assumed
Leases as of the Closing Date shall not be prorated, but when paid shall be the
sole property of Buyer and Seller hereby irrevocably assigns, as of the Closing
Date, its entire right, title and interest in and to such delinquent rentals
(including the right to collect to same) to Buyer. On the Closing Date, Buyer
shall be fully credited for (i) security deposits which were paid by tenants to
Seller under or in connection with the Assumed Leases, (ii) reimbursement
expenses and other sums owed by Seller to tenants for work or disputes which
occurred prior to the Closing Date or for work to be performed or allowances to
be granted to any tenants upon or after the Closing Date pursuant to any Assumed
Leases in existence as of the Closing Date, (iii) any commissions or brokerage
fees payable upon or after the Closing Date in connection with any Assumed
Leases in existence as of the Closing Date, and (iv) rentals already received by
Seller in connection with the Assumed Leases attributable to periods after the
Closing Date. All non-delinquent real estate taxes or assessments on the
Property shall be prorated based on the actual current tax bill, but if such tax
bill has not yet been received by Seller by the Closing Date or if supplemental
taxes are assessed after the Closing for the period prior to the Closing, the
parties shall make any necessary adjustment after the Closing by cash payment to
the party entitled thereto so that Seller shall have borne all taxes, including
all supplemental taxes, allocable to the period prior to the Closing and Buyer
shall bear all taxes, including all supplemental taxes, allocable to the period
after the Closing. If any expenses attributable to the Property and allocable to
the period prior to the Closing are discovered or billed after the Closing, the
parties shall make any necessary adjustment after the Closing by cash payment to
the party entitled thereto so that Seller shall have borne all expenses
allocable to the period prior to the Closing and Buyer shall bear all expenses
allocable to the period from and after the Closing. The provisions of this
Section 6.5 shall survive the Closing for a period of one (1) year.
Ten (10) days prior to the Closing, Escrow Agent shall deliver to each
of the parties for their review and approval a preliminary closing statement
(the "Preliminary Closing Statement") based on an income and expense statement
prepared by Seller, approved by Buyer, and delivered to Escrow Agent prior to
said date, setting forth (i) the proration amounts allocable to each of the
parties pursuant to this Section 6.5 and (ii) the Closing Costs allocable to
each of the parties pursuant to Section 6.6 hereof. Based on each of the party's
comments, if any, regarding the Preliminary Closing Statement, Escrow Agent
shall revise the Preliminary Closing Statement and deliver a final, signed
version of a closing statement to each of the parties at the Closing (the
"Closing Statement").
6.6 Closing Costs. Each party shall pay its own costs and expenses
arising in connection with the Closing (including, without limitation, its own
attorney and advisor fees), except the following costs (the "Closing Costs"),
which shall be allocated between the parties as follows:
15
<PAGE>
(i) Seller shall pay all documentary transfer, stamp, sales
and other taxes related to the transfer of the Property, one-half (1/2) of
Escrow Agent's escrow fees and costs, and all premiums, costs and fees related
to the delivery of the Owner's Title Policy (other than the cost of any
endorsements requested by Buyer), the cost of the Survey (if not already paid),
all brokerage commissions payable to John Burnham & Company in connection
herewith and with the Lease, all recording fees related to the transfer of
ownership of the Property, and all recording or filling fees in connection with
the Loan.
(ii) Buyer shall pay one-half (1/2) of Escrow Agent's escrow
fees and costs, the cost of any endorsements to the Owner's Title Policy
requested by Buyer, and all recording fees related to the financing of Buyer's
acquisition of the Property.
6.7 Deliveries Outside of Escrow. Seller shall deliver possession of
the Property, subject to the Tenant Leases, to Buyer upon the Closing. Further,
Seller hereby covenants and agrees to deliver to Buyer, on or prior to the
Closing, the following items:
6.7.1 Approvals. Originals of the "Approvals" (as hereinafter
defined);
6.7.2 Intangible Property. The Intangible Property, including,
without limitation, the original Property Documents and the original Assumed
Leases; and
6.7.3 Personal Property. The Personal Property, including,
without limitation, all keys, pass cards, remote controls, security codes,
computer software and other devices relating to access to the Improvements.
7. SELLER'S REPRESENTATIONS AND WARRANTIES.
Seller represents and warrants to and agrees with Buyer that, as of the
date hereof and as of the Closing Date:
7.1 Title.
7.1.1 Ownership. Seller is the legal and equitable owner of
the Property, with full right to convey the same. Seller has not granted any
options or rights of first refusal or rights of first offer to third parties to
purchase or otherwise acquire an interest in the Property.
7.1.2 Encumbrances. To Seller's Knowledge (as hereinafter
defined), the Property is free and clear of all liens, encumbrances, claims,
rights, de-
16
<PAGE>
mands, rights of way, easements, leases (other than the Tenant Leases),
agreements, covenants, conditions, and restrictions of any kind, except for (A)
the Permitted Exceptions, and (B) the Tenant Leases.
7.1.3 Encroachments. Except as shown on the Survey, there are
no encroachments on the Property from adjoining property, and the Property does
not encroach on adjoining property, easements, or streets.
7.1.4 Streets. To Seller's Knowledge, there are no existing,
proposed, or contemplated plans to widen, modify, or realign any street or
highway which affects the size of, use of, or set-backs on the Property.
7.2 Property Documents. The Property Documents required to be delivered
by Seller pursuant to the terms hereof constitute all of the material documents
relating to the Property and each such Property Document as delivered by Seller
constitutes a true, correct and complete copy of such Property Document in
Seller's possession or control. There are no commitments or agreements affecting
the Property which have not been disclosed by Seller to Buyer in writing.
7.3 Leases.
7.3.1 The schedule attached hereto as Exhibit "M" (the
"Schedule of Leases") is a true, correct and complete statement of all (i) the
leases, tenancies and occupancies, including any extensions, modifications,
amendments or guarantees thereof in effect at the Property (the "Tenant
Leases"), (ii) the tenants at the Property, (iii) the dates of the Tenant Leases
(including the commencement and expiration dates thereof), (iv) the annual base
rents payable, the base year for escalations, the currently escalated rents and
contributions to common area maintenance, operating expenses and insurance under
the Tenant Leases, (v) the security deposits held by or deposited with Seller
under the Tenant Leases, (vi) any and all options to extend, renew or cancel any
Tenant Leases or to expand or decrease the space covered by any Tenant Lease
(including any rights of first refusal), and (vii) any and all concessions,
allowances, credits, rebates, offsets or other cases for relief or adjustment,
including, without limitation, any unpaid reimbursements for tenant improvements
and any "free" or "reduced" rent.
7.3.2 There are no security deposits or arrearages in rent or
additional rent under any of the Tenant Leases except as set forth on the
Schedule of Leases. No rent has been prepaid under any Tenant Lease except as
set forth on the Schedule of Leases.
7.3.3 All of the services required to be supplied to each
tenant and maintained in connection with the Property are presently being
supplied and
17
<PAGE>
maintained and will continue to be supplied and maintained up to and as of the
Closing Date.
7.3.4 Seller has received no notices of any failure of Seller
to supply any services which Seller is required to furnish pursuant to any
Tenant Lease.
7.3.5 Seller has received no notices of any items of work,
repair, maintenance or construction to be completed by Seller pursuant to any
Tenant Lease for the benefit of any tenant and Seller has no knowledge of any
such work to be done.
7.3.6 As of the Closing Date, no tenant shall be entitled to
any additional work during the term of its Tenant Lease, except as set forth on
the Schedule of Leases.
7.3.7 Except as set forth on the Schedule of Leases, Seller
has received no notice from any tenant (i) to cancel any Tenant Lease, (ii) that
such tenant is or may become unable or unwilling to perform any or all of its
obligations under its Tenant Lease, whether for financial or other reasons, or
that an action or proceeding, voluntary or involuntary, is pending or threatened
against such tenant under any section or sections of any bankruptcy or
insolvency law, or (iii) that such tenant disputes the base rent or escalation
rents or the computation of escalation rents pursuant to its Tenant Lease.
7.3.8 The Tenant Leases are in full force and effect and
Seller has received no notice of any default by the landlord thereunder and has
no knowledge of any fact or facts which would now or with the giving of notice
or the passage of time or both be a default under the terms thereof, except as
otherwise set forth on the Schedule of Leases.
7.3.9 As of the Closing Date, there will be no brokerage or
other leasing commissions payable in connection with any of the tenants or the
Tenant Leases or any new leases or amendments of existing Tenant Leases.
7.3.10 All of the Tenant Leases are assignable to Buyer in
connection with its purchase of the Property without the necessity for any
approval, consent or additional payment.
7.4 Condition of Property. To Seller's Knowledge, the Property is in
good condition and repair and free from any defects, including, without
limitation, environmental, erosion, drainage or soil problems, physical,
structural, mechanical, construction or electrical defects, defects in the
parking lot pavement, or defects in utility systems. There is no material fact
which has not been disclosed to Buyer in writing which has or could reasonably
be expected to have a material adverse effect
18
<PAGE>
upon the Property, or the use or value thereof.
7.5 Special Assessments or Condemnation. To Seller's Knowledge, there
are not presently pending (i) any special assessments, except those shown as
exceptions on the PTR, or (ii) condemnation actions against the Property or any
part. Seller has not received notice of any contemplated special assessments or
eminent domain proceedings that would affect the Property.
7.6 Utilities. To Seller's Knowledge, all water, sewer, electric, gas,
telephone, and drainage facilities, and all other utilities required by law or
for the normal operation of the Property are (or will be prior to Closing)
installed to the property lines of the Property, have been (or will be prior to
Closing) connected to the Improvements pursuant to valid permits, are (or will
be prior to Closing) in good working order, and are (or will be prior to
Closing) adequate to service the Property.
7.7 Permits. Seller has obtained all appropriate licenses, permits,
easements, and rights of way, including proofs of dedication, which are required
to use and operate the Property.
7.8 Service Contracts. There are no service, maintenance, repair,
management, leasing, or supply contracts or other contracts (including, without
limitation, janitorial, elevator and landscaping agreements) affecting the
Property, oral or written, except as set forth on the schedule attached hereto
as Exhibit "N" (the "Service Contracts").
7.9 Employees. Attached hereto as Exhibit "O" is a schedule of
employees who are employed by Seller or the manager of the Property in the
operation, management or maintenance of the Property and the wages and benefits
that are paid to such employees, all of which are true and correct as of the
date hereof; there are no contracts covering such employees other than as set
forth on such schedule and the employment of each may be terminated without cost
at the option of Seller or the then owner of the Property upon not more than
thirty (30) days prior written notice.
7.10 Defaults. Seller is not in default of Seller's obligations or
liabilities pertaining to the Property or the Property Documents; nor, to
Seller's Knowledge, are there facts, circumstances, conditions, or events which,
after notice or lapse of time, would constitute a default. Seller has not
received notice or information that any party to any of the Property Documents
considers a breach or default to have occurred; nor has Seller any reason to
believe that there is likely to be a default under any of the documents.
19
<PAGE>
7.11 Consents and Releases. Seller has obtained all required consents,
releases, and permissions to convey good, marketable and indefeasible title to
Buyer.
7.12 Authority. This Agreement and all other documents delivered prior
to or at the Closing (i) have been duly authorized, executed, and delivered by
Seller; (ii) are binding obligations of Seller; (iii) are collectively
sufficient to transfer all of Seller's rights to the Property; and (iv) do not
violate the formation documents of Seller. Seller further represents that it is
a corporation, duly organized and existing in good standing under the laws of
the State of Delaware, with its principal place of business in California.
7.13 Bankruptcy. No filing or petition under the United States
Bankruptcy Law or any insolvency laws, or any laws for composition of
indebtedness or for the reorganization of debtors has been filed with regard to
Seller.
7.14 Certificates of Occupancy. Seller has (or will have prior to
Closing) all necessary, valid, final and unconditional certificates of
occupancy, or the equivalent permitting required by the applicable licensing
agency, for the current use and occupancy of the Property.
7.15 Foreign Investment In Real Property Tax Act. Seller is not a
foreign person within the meaning of 42 USCS ss. 1445(f)(3).
7.16 Existing Approvals. The documents set forth on Exhibit "P"
attached hereto (collectively, the "Approvals") are in full force and effect
and, to Seller's Knowledge, constitute all necessary or appropriate
certifications, approvals, consents, authorizations, licenses, and permits
required by any governmental authority in connection with the ownership,
development, use and maintenance of the Property (other than those related to
the manufacturing operations of Seller's business conducted therein). To
Seller's Knowledge, all of the Approvals are transferable to Buyer without the
necessity of any approval or consent or additional payment and no such transfer
will affect the validity thereof.
7.17 Insurance. There are currently in effect such casualty and general
liability insurance policies as are customarily maintained with respect to
similar properties. All premiums due on such insurance policies have been paid
by Seller and Seller will maintain such insurance policies from the date hereof
through the Closing Date or earlier termination of this Agreement. Seller has
not received and has no knowledge of any notice or request from any insurance
company requesting the performance of any work or alteration with respect to the
Property. Seller has received no notice from any insurance company concerning,
nor is Seller aware of, any defects or inadequacies in the Property which, if
not corrected, would result in the termination of insurance coverage or increase
its cost.
20
<PAGE>
7.18 Litigation. There are no actions, suits or proceedings before any
judicial or quasi-judicial body, by any governmental authority or other third
party, pending, or to Seller's Knowledge, threatened, against or affecting all
or any portion of the Property and to Seller's Knowledge, there is no basis for
any such action. There are no actions, suits or proceedings pending,
contemplated or threatened by Seller in connection with all or any portion of
the Property or Seller's ownership, rights, use, development or maintenance
thereof, including, without limitation, tax reduction proceedings; and from and
after the date hereof, Seller shall not commence or allow to be commenced on its
behalf any action, suit or proceeding with respect to all or any portion of the
Property without the prior written consent of Buyer. No attachments, execution
proceedings, assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other proceedings are pending, or, to Seller's best knowledge,
threatened, against Seller. In the event any proceeding of the character
described in this Section 7.18 is initiated prior to the Closing, Seller shall
promptly advise Buyer in writing.
7.19 Compliance with Laws. To Seller's Knowledge, the Property is in
full compliance with all existing laws, rules, regulations, ordinances and
orders of all applicable federal, state, city and other governmental authorities
in effect as of the date of this Agreement (collectively, "Laws"), including,
without limitation, all Laws with respect to zoning, building, fire and health
codes, environmental protection and sanitation and pollution control. Seller has
received no notice of, and has no knowledge of, any condition currently or
previously existing on the Property or any portion thereof which may give rise
to any violation of any existing Law applicable to the Property if it were
disclosed to the authorities having jurisdiction over the Property.
7.20 Toxic or Hazardous Materials.
7.20.1 Definitions.
(a) "Environmental Claim" means any claim, action, cause of
action, investigation or notice (written or oral) by any person or entity
alleging potential liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (i) the manufacture, treatment, processing,
distribution, use, transport, handling, deposit, storage, disposal, leaking or
other presence, or release into the environment of any "Material of
Environmental Concern" (as hereinafter defined) in, at, on, under or about any
location, whether or not owned or operated by Seller or (ii) circumstances
forming the basis of any violation, or alleged violation, of any "Environmental
Law" (as defined below).
(b) "Environmental Laws" means all federal, state and local
laws and regulations relating to pollution or protection of human health or the
environment
21
<PAGE>
(including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern.
(c) "Material of Environmental Concern" means chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products.
7.20.2 Representations and Warranties. Seller represents and
warrants to and agrees with Buyer that, as of the date hereof, and as of the
Closing Date: (i) each of the Property and Seller is in full compliance with all
applicable Environmental Laws relating to the Property, which compliance
includes, but is not limited to, the possession by Seller of all permits and
other governmental authorities required under applicable Environmental Laws, and
compliance with the terms and conditions thereof; (ii) Seller has not received
any communication (written or oral), whether from a governmental authority,
citizens group, employee or other third party, that alleges that Seller is not
in such full compliance and there are no circumstances that may prevent or
interfere with such full compliance in the future; (iii) Seller has received no
written or oral notice or other communication that any Environmental Claim is
pending or threatened with regard to the Property; (iv) there are no present or,
to Seller's Knowledge, past actions, activities, circumstances, conditions,
events or incidents relating to the Property, including, without limitation, the
manufacture, treatment, processing, distribution, use, transport, handling,
deposit, storage, disposal, leaking, or other presence or release of any
Material of Environmental Concern, that could form the basis of any
Environmental Claim against Seller or against any person or entity, including,
without limitation, persons or entities whose liability for any such
Environmental Claim Seller has or may have retained or assumed either
contractually or by operation of law; and (v) without in any way limiting the
generality of the foregoing, (a) Seller has not stored, disposed or arranged for
the disposal of Materials of Environmental Concern on the Property, (b) there
are no underground storage tanks located on the Property, (c) there is no
asbestos contained in or forming part of any Improvement, including, without
limitation, any building, building component, structure or office space on the
Property, and (d) no polychlorinated biphenyls (PCBs) are used or stored at the
Property.
7.20.3 Indemnification. Seller agrees to indemnify, reimburse,
defend, and hold Buyer harmless from, for and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including, without limitation, interest, penalties, reasonable
attorneys' fees, charges, disbursements and expenses, and reasonable
consultants' fees, charges, disbursements and expenses, asserted against,
resulting to, imposed on, or incurred by Buyer, directly or indirectly, in
connection with (i) the breach of any representation or warranty set forth in
Section 7.20.2 of this Agreement or (ii) any event or condition, whether known
or
22
<PAGE>
unknown to Seller or disclosed in any report provided to Buyer, which results,
directly or indirectly, in an Environmental Claim, to the extent such event or
condition occurred, existed, or arose out of conditions that occurred or
existed, or were caused, in whole or in part, on or before the Closing.
7.21 No Restriction on Access. Seller has no knowledge of any pending
or threatened restriction or denial, governmental or otherwise, which would
prohibit or adversely affect the right of access to or from the Property from or
to the existing highways and roads (all of such existing highways and roads
being duly opened and dedicated to the municipality having jurisdiction
thereof).
7.22 Storm Drainage. To Seller's Knowledge, all storm water flowing
from the Property drains either into a public system or onto a permitted
location and through easements for the benefit of the Property.
7.23 Soils. Seller has no knowledge of any soil conditions adversely
affecting the Property or any part thereof or Buyer's intended use and
development thereof.
7.24 No Conflicts. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with, or, with or without notice or
the passage of time or both, result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, deed of trust,
mortgage, loan agreement, or other document, or instrument or agreement, oral or
written, to which Seller is a party or by which Seller or the Property is bound,
or any applicable regulation of any governmental agency, or any judgment, order
or decree of any court having jurisdiction over Seller or all or any portion of
the Property.
7.25 Survival. All of the representations, warranties and agreements of
Seller set forth in this Agreement shall be true upon the execution of this
Agreement, shall be deemed to be repeated at and as of the Closing Date without
the necessity of a separate certificate with respect thereto and shall survive
the delivery of the Deed and other Closing instruments and documents for a
period of 12 months. As used in this Agreement, the phrase "to Seller's
Knowledge" and words of similar import shall mean the best knowledge of Seller's
Chief Executive Officer, Seller's President and Seller's Vice President of
Operations, after reasonable inquiry and investigation of the files and
materials readily available to such persons. Seller represents and warrants that
the foregoing persons are those persons affiliated with Seller possessing the
greatest experience and familiarity with the Property, and that no other person
presently or previously affiliated with Seller possesses any equal or greater
familiarity and experience with the Property.
23
<PAGE>
7.26 As-Is. Except as expressly set forth herein, including, without
limitation elsewhere in this Article 7, and except for those warranties implied
by law in the Deed, Seller shall convey the Property to Buyer in its present
"AS-IS" condition, without any warranties, expressed or implied.
8. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants to and agrees with Seller that, as of the
date hereof, and as of the Closing Date:
8.1 No Conflicts. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with, or, with or without notice or
the passage of time or both, result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, deed of trust,
mortgage, loan agreement, or other document or instrument to which Buyer is a
party or by which Buyer is bound, or any applicable regulation of any
governmental agency, or any judgment, order or decree of any court having
jurisdiction over Buyer or all or any portion of the Property.
8.2 Due Organization; Consents. Buyer is a corporation duly organized
and existing in good standing under the laws of the State of Maryland with its
principal place of business in the State of California. All requisite corporate
action has been taken by Buyer in connection with entering into this Agreement,
and will be taken prior to the Closing in connection with the execution and
delivery of the instruments referenced herein and the consummation of the
transactions contemplated hereby. No consent of any partner, shareholder,
beneficiary, creditor, investor, judicial or administrative body, governmental
authority or other party is required in connection herewith which has not been
obtained.
8.3 Buyer's Authority; Validity of Agreements. Buyer has full right,
power and authority to purchase the Property from Seller as provided in this
Agreement and to carry out its obligations hereunder. The individual(s)
executing this Agreement and the instruments referenced herein on behalf of
Buyer have the legal power, right and actual authority to bind Buyer to the
terms hereof and thereof. This Agreement is and all other documents and
instruments to be executed and delivered by Buyer in connection with this
Agreement shall be duly authorized, executed and delivered by Buyer and shall be
valid, binding and enforceable obligations of Buyer.
8.4 Bankruptcy. No filing or petition under the United States
Bankruptcy Law or any insolvency laws, or any laws for composition of
indebtedness or for the reorganization of debtors has been filed with regard to
Buyer.
9. ADDITIONAL COVENANTS OF SELLER.
24
<PAGE>
In addition to the covenants and agreements of Seller set forth
elsewhere in this Agreement, Seller covenants and agrees that between the date
hereof and the Closing Date:
9.1 Title. Seller shall not directly or indirectly sell, assign or
create any right, title or interest whatsoever in or to the Property, or create
or permit to exist thereon any lien, charge or encumbrance other than the
Permitted Exceptions, or enter into any agreement to do any of the foregoing,
including, without limitation, any new Tenant Leases (or renewals, modifications
or extensions of any Tenant Leases) or Service Contracts, without the prior
written consent of Buyer.
9.2 Notice of Change in Circumstances. Seller shall promptly notify
Buyer of any change in any condition with respect to the Property or any portion
thereof or of any event or circumstance of which Seller becomes aware subsequent
to the date of this Agreement which (a) materially, adversely affects the
Property or any portion thereof or the use or operation of the Property or any
portion thereof, (b) makes any representation or warranty of Seller to Buyer
under this Agreement untrue or misleading, or (c) makes any covenant or
agreement of Seller under this Agreement incapable or less likely of being
performed, it being expressly understood that Seller's obligation to provide
information to Buyer under this Section 9.2 shall in no way relieve Seller of
any liability for a breach by Seller of any of its representations, warranties,
covenants or agreements under this Agreement.
9.3 No Defaults; Maintenance of Property. Seller shall not default with
respect to the performance of any obligation relating to the Property,
including, without limitation, the payment of all amounts due and the
performance of all obligations with respect to the Tenant Leases, the Service
Contracts and any existing indebtedness relating to the Property. Seller shall
operate and maintain the Property in accordance with Seller's past practice and
all applicable Laws affecting the Property or any portion thereof.
9.4 Exclusive Negotiations. Seller shall (i) remove the Property from
the market, (ii) cease and refrain from any and all negotiations with any other
prospective optionees or purchasers of the Property, and (iii) advise Buyer of
any material negotiations with current or potential tenants at the Property.
9.5 Development Activities. Seller shall not take any actions with
respect to the development of the Property, including, without limitation,
applying for, pursuing, accepting or obtaining any permits, approvals or other
development entitlements from any governmental or other regulatory entities or
finalizing or entering into any agreements relating thereto without the prior
written consent of Buyer (which consent may be granted or withheld in Buyer's
sole and absolute discretion, except with
25
<PAGE>
respect to the construction of improvements to the processing and manufacturing
facility located on the first floor of the Building, in which event Buyer's
consent may not be unreasonably withheld). Seller hereby agrees to reasonably
cooperate with Buyer in Buyer's efforts to obtain such governmental approvals as
Buyer deems necessary to permit Buyer to operate the Property as Buyer wishes.
9.6 No Pre-Paid Rent. Seller shall not accept any rent from any Tenant
(or any new tenant under any new lease to which Buyer has consented) for more
than one (1) month in advance of the payment date.
9.7 Service, Management and Employment Contracts. Seller shall not
enter into, extend, renew or replace any existing service, property management
or employment contracts in respect of the Property without the prior written
consent of Buyer (which consent may be withheld in Buyer's sole and absolute
discretion), unless the same shall be cancellable without penalty or premium,
upon not more than thirty (30) days' notice from the owner of the Property and
Seller shall immediately notify Buyer of any such entrance, extension, renewal
or replacement
9.8 New Leases. At Buyer's request, Seller shall advise Buyer of any
and all material negotiations with current or potential tenants of the Property.
Seller shall not enter into any new lease or extend any Lease without Buyer's
prior written consent, which consent may be withheld in Buyer's sole and
absolute discretion.
10. RISK OF LOSS.
10.1 Condemnation. If, prior to the Closing Date, all or any material
portion of the Property is taken by condemnation or eminent domain (or is the
subject of a pending or contemplated taking which has not been consummated),
Seller shall immediately notify Buyer of such fact. In such event, Buyer shall
have the option to terminate this Agreement upon written notice to Seller given
not later than thirty (30) days after receipt of such notice from Seller. Upon
such termination, Escrow Agent shall return the Deposit to Buyer, the parties
shall equally share the cancellation charges of Escrow Agent and Title Company,
and neither party shall have any further rights or obligations hereunder, other
than pursuant to any provision hereof which expressly survives the termination
of this Agreement. If any condemnation or eminent domain action is not material,
or if Buyer does not elect to terminate this Agreement, Seller shall assign and
turn over to Buyer, and, subject to the terms of the Lease, Buyer shall be
entitled to receive and keep, all awards for the taking by condemnation or Buyer
shall be deemed to have accepted the Property subject to the taking without
reduction in the Purchase Price. For purposes of this Section 10.1, a taking
action shall be deemed to be material if the value of the property which is
subject to such action equals or exceeds $100,000, or if such action otherwise
has an adverse affect upon Buyer's intended use, operation or development of the
Property.
26
<PAGE>
10.2 Casualty. Prior to the Closing and notwithstanding the pendency of
this Agreement, the entire risk of loss or damage by earthquake, flood,
landslide, fire, hurricane, tornado or other casualty shall be borne and assumed
by Seller. If, prior to Closing any part of the Property is damaged or destroyed
by earthquake, flood, landslide, fire, hurricane, tornado or other casualty,
Seller shall immediately notify Buyer of such fact. In the event of a material
casualty, Buyer and, so long as such casualty was not the result of the
negligence or wilful misconduct of Seller, Seller, shall have the option to
terminate this Agreement in accordance with the preceding section upon written
notice to the other party given not later than thirty (30) days after receipt of
any such notice from Seller. If the casualty is not material, or if Buyer and
Seller do not elect to terminate this Agreement, Seller shall assign and turn
over, and Buyer shall be entitled to receive and keep, all insurance proceeds
payable with respect to such destruction (which shall then be repaired or not at
Buyer's option and cost), plus Seller shall pay over to Buyer an amount equal to
the deductible amount with respect to the insurance and any uninsured loss, and
the parties shall proceed to Closing pursuant to the terms hereof without
modification of the terms of this Agreement and without any reduction in the
Purchase Price. If this Agreement is not terminated by reason of any casualty,
Buyer shall have the right to participate in any adjustment of the insurance
claim. For purposes of this Section, a casualty shall be deemed to be material
if the estimated cost to repair the same equals or exceeds $250,000.
11. LIQUIDATED DAMAGES; SPECIFIC PERFORMANCE.
11.1 Liquidated Damages. IN THE EVENT THAT THE ESCROW AND THIS
TRANSACTION FAIL TO CLOSE SOLELY AS A RESULT OF THE DEFAULT OF BUYER IN THE
PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, BUYER AND SELLER AGREE THAT
SELLER'S ACTUAL DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX.
THE PARTIES THEREFORE AGREE THAT IN THE EVENT THAT ESCROW AND THIS TRANSACTION
FAIL TO CLOSE SOLELY AS A RESULT OF THE DEFAULT OF BUYER IN THE PERFORMANCE OF
ITS OBLIGATIONS HEREUNDER AND SELLER IS READY, WILLING AND ABLE TO PERFORM ITS
OBLIGATIONS HEREUNDER, SELLER, AS SELLER'S SOLE AND EXCLUSIVE REMEDY, IS
ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF THE DEPOSIT (INCLUSIVE OF
INTEREST AND DIVIDENDS EARNED THEREON) THEN HELD BY ESCROW AGENT. IN THE EVENT
ESCROW FAILS TO CLOSE SOLELY AS A RESULT OF BUYER'S DEFAULT AND SELLER IS READY,
WILLING AND ABLE TO PERFORM ITS OBLIGATIONS HEREUNDER, THEN (1) THIS AGREEMENT
AND THE RIGHTS AND OBLIGATIONS OF BUYER AND SELLER HEREUNDER AND THE ESCROW
CREATED HEREBY SHALL TERMINATE, (2) ESCROW AGENT SHALL, AND IS HEREBY AUTHORIZED
AND INSTRUCTED TO, RETURN PROMPTLY TO BUYER AND
27
<PAGE>
SELLER ALL DOCUMENTS AND INSTRUMENTS TO THE PARTIES WHO DEPOSITED THE SAME, AND
(3) ESCROW AGENT SHALL DELIVER THE DEPOSIT (INCLUSIVE OF INTEREST AND DIVIDENDS
EARNED THEREON) THEN HELD BY ESCROW AGENT TO SELLER PURSUANT TO SELLER'S
INSTRUCTIONS, AND THE SAME SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES.
SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS
OF THIS SECTION 11.1, AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND
BY ITS TERMS.
/s/ JRG /s/ AG
- ----------------- ----------------
Seller's Initials Buyer's Initials
11.2 Default by Seller. In the event that the Closing of the
transaction contemplated in this Agreement does not occur by reason of any
default by Seller, then (i) Escrow Agent shall return the Deposit to Buyer and
(ii) Buyer shall be entitled to pursue any remedy available to it hereunder, at
law or in equity, other than the specific performance of this Agreement;
provided, however, that in the event that Seller's default hereunder is wilful
and Buyer and Seller have agreed upon the form of Lease and the Loan Documents,
Buyer shall also be entitled to pursue the specific performance of this
Agreement.
12. BROKERS.
Seller and Buyer each hereby represent, warrant to and agree with each other
that there are no broker or finder fees or commissions payable in
connection with the transaction contemplated hereby (including, without
limitation, the Lease), other than those payable to John Burnham &
Company which shall be paid by Seller in accordance with a separate
agreement. Seller shall indemnify, protect, defend and hold Buyer
harmless from and against any and all claims, losses, damages, costs
and expenses (including attorneys' fees, charges and disbursements)
incurred by Buyer by reason of any breach or inaccuracy of the
representation, warranty and agreement of Seller contained in this
Section 12. Buyer shall indemnify, protect, defend and hold Seller
harmless from and against any and all claims, losses, damages, costs
and expenses (including attorneys' fees, charges and disbursements)
incurred by Seller by reason of any breach or inaccuracy of the
representation, warranty and agreement of Buyer contained in this
Section 12. The provisions of this Section 12 shall survive the Closing
or earlier termination of this Agreement.
13. CONFIDENTIALITY.
13.1 Buyer. Buyer agrees that until the Closing, except as otherwise
28
<PAGE>
provided herein or required by law and except for the exercise by Buyer of any
remedy hereunder, Buyer shall (a) keep confidential the pendency of this
transaction and the documents and information supplied by Seller to Buyer, (b)
disclose such information only to Buyer's agents, employees, contractors,
consultants or attorneys, as well as lenders (if any), investment bankers,
venture capital groups, investors, title company personnel and Tenants, with a
need to know in connection with Buyer's review and consideration of the
Property, provided that Buyer shall inform all persons receiving such
information from Buyer of the confidentiality requirement and (to the extent
within Buyer's control) cause such confidence to be maintained, and (c) upon the
termination of this Agreement prior to the Closing, return to Seller promptly
upon request all copies of documents and materials supplied by Seller.
Disclosure of information by Buyer shall not be prohibited if that disclosure is
of information that is or becomes a matter of public record or public knowledge
as a result of the Closing of this transaction or from sources other than Buyer
or its agents, employees, contractors, consultants or attorneys.
13.2 Seller. Seller agrees that both prior to and after the Closing,
except as otherwise provided herein (including the Estoppel Certificates) or
required by law, and except for the exercise by Seller of any remedy hereunder,
Seller shall (a) keep confidential the pendency of this transaction with Buyer
and the identity of Buyer and the relationship between Buyer and the entity to
which Buyer may assign this Agreement or which Buyer designates as the party to
whom Seller shall convey the Property at the Closing, and (b) disclose such
information only to Seller's agents, employees, contractors, consultants or
attorneys, as well as Tenants and title company personnel, with a need to know
such information in connection with effecting this transaction, provided that
Seller shall inform all such persons receiving such confidential information
from Seller of the confidentiality requirement and (to the extent within
Seller's control) cause such confidence to be maintained. Disclosure of the
pendency of this transaction by Seller shall not be prohibited if that
disclosure is of information that is or becomes a matter of public record or
public knowledge as a result of the Closing of this transaction or from sources
other than Seller or its agents, employees, contractors, consultants or
attorneys.
14. INDEMNIFICATION.
Buyer hereby agrees to indemnify, defend and hold Seller harmless from
and against any claims, demands, obligations, losses, costs, damages,
liabilities, judgments or expenses (including reasonable attorneys' fees,
charges and disbursements) arising out of or in connection with the ownership,
operation or maintenance of the Property after the Closing. Seller hereby agrees
to indemnify, defend and hold Buyer harmless from and against any claims,
demands, obligations, losses, costs, damages, liabilities, judgments or expenses
(including reasonable attorneys' fees, charges and disbursements) arising out of
or in connection with the ownership, opera-
29
<PAGE>
tion or maintenance of the Property prior to the Closing. Each party shall do,
execute and deliver, or shall cause to be done, executed and delivered, all such
further acts and instruments which the other party may reasonably request in
order to more fully effectuate the indemnifications provided for in this
Agreement. The provisions of this Section 14 shall survive the Closing.
15. MISCELLANEOUS PROVISIONS.
15.1 Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of California, without regard to its principles of
conflicts of law.
15.2 Entire Agreement; Modifications; Waiver.
15.2.1 Entire Agreement. This Agreement, including the
exhibits and schedules attached hereto, constitutes the entire agreement between
Buyer and Seller pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, letters of intent, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements, express or implied, made to
either party by the other party in connection with the subject matter hereof
except as specifically set forth herein or in the documents delivered pursuant
hereto or in connection herewith. Without limiting the foregoing, upon the
execution of this Agreement, that certain Letter of Intent, dated November 6,
1997, between Buyer and Seller, shall terminate and be of no further force or
effect.
15.2.2 Modification. No supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any provision of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
15.3 Notices. All notices, consents, requests, reports, demands or
other communications hereunder (collectively, "Notices") shall be in writing and
may be given personally, by registered or certified mail, by Federal Express (or
other reputable overnight delivery service) by telex or telegram or by facsimile
transmission.
To Buyer: Alexandria Real Estate Equities, Inc.
135 N. Los Robles Avenue, Suite 250
Pasadena, California 91101
Attention: Corporate Secretary
Telephone: (818) 578-0777
Facsimile: (818) 578-0770
30
<PAGE>
With A Copy to: Alexandria Real Estate Equities, Inc.
11440 West Bernardo Court, Suite 170
San Diego, California 92127
Attention: Gary A. Kreitzer, Esq.
Telephone: (619) 592-6801
Facsimile: (619) 592-6814
With A Copy To: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: George M. Eshaghian, Esq.
Telephone: (213) 687-5215
Facsimile: (213) 687-5600
To Seller: Matrix Pharmaceuticals, Inc.
4757 Nexus Centre Drive
San Diego, California 92121
Attention: Mr. Ron Lucas
Telephone: (619) 824-5121
Facsimile: (619) 643-5699
With A Copy To: Brobeck, Phlegar & Harrison LLP
550 W. "C" Street, Suite 1300
San Diego, California 92101
Attention: Scott Biel, Esq.
Telephone: (619) 234-1966
Facsimile: (619) 234-3848
To Escrow Agent: Chicago Title Company
925 "B" Street
San Diego, California 92101
Attention: Ms. Lori Brandt
Telephone: (619) 544-6254
Facsimile: (619) 544-6229
or to such other address or such other person as the addressee party shall have
last designated by notice to the other party. Notices given by telex shall be
deemed to be received when answered back; notices given by facsimile
transmission shall be deemed to be received when confirmed; and all other
Notices shall have been deemed to have been given when received.
15.4 Expenses. Subject to the allocation of Closing Costs provided in
Section 6.6 hereof, whether or not the transactions contemplated by this
Agreement
31
<PAGE>
shall be consummated, all fees and expenses incurred by any party hereto in
connection with this Agreement shall be borne by such party.
15.5 Assignment.
15.5.1 Seller's Right to Assign. Seller shall not have the
right, power, or authority to assign, pledge or mortgage this Agreement or any
portion of this Agreement, or to delegate any duties or obligations arising
under this Agreement, voluntarily, involuntarily, or by operation of law,
without Buyer's prior written consent.
15.5.2 Buyer's Right to Assign. Except as otherwise provided
in this Agreement, Buyer shall have the right, power, and authority to assign
this Agreement (including, without limitation, an assignment for security
purposes) or any portion of this Agreement or to delegate any duties or
obligations arising under this Agreement, voluntarily, involuntarily or by
operation of law, without Seller's consent, to any entity or person controlling,
controlled by or under common control with Buyer. Upon an assignment, Buyer
shall be relieved of all obligations under this Agreement and the Escrow, except
for its obligations under Section 4.1.1.5 hereof.
15.6 Severability. Any provision or part of this Agreement which is
invalid or unenforceable in any situation in any jurisdiction shall, as to such
situation and such jurisdiction, be ineffective only to the extent of such
invalidity and shall not affect the enforceability of the remaining provisions
hereof or the validity or enforceability of any such provision in any other
situation or in any other jurisdiction.
15.7 Successors and Assigns; Third Parties. Subject to and without
waiver of the provisions of Section 15.5 hereof, all of the rights, duties,
benefits, liabilities and obligations of the parties shall inure to the benefit
of, and be binding upon, their respective successors and assigns. Except as
specifically set forth or referred to herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or entity, other than the parties hereto and their successors or assigns, any
rights or remedies under or by reason of this Agreement.
15.8 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary and convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute one and the
same instrument.
15.9 Headings. The section headings of this Agreement are for
convenience of reference only and shall not be deemed to modify, explain,
restrict, alter or affect the meaning or interpretation of any provision hereof.
15.10 Time of the Essence. Time shall be of the essence with respect to
32
<PAGE>
all matters contemplated by this Agreement.
15.11 Further Assistance. In addition to the actions recited herein and
contemplated to be performed, executed, and/or delivered by Seller and Buyer,
Seller and Buyer agree to perform, execute and/or deliver or cause to be
performed, executed and/or delivered at the Closing or after the Closing any and
all such further acts, instruments, deeds and assurances as may be reasonably
required to consummate the transactions contemplated hereby.
15.12 Number and Gender. Whenever the singular number is used, and when
required by the context, the same includes the plural, and the masculine gender
includes the feminine and neuter genders.
15.13 Construction. This Agreement shall not be construed more strictly
against one party hereto than against any other party hereto merely by virtue of
the fact that it may have been prepared by counsel for one of the parties.
15.14 Post-Closing Access to Records. Upon receipt by Seller of Buyer's
reasonable written request at anytime and from time to time within a period of
one (1) year after the Closing, Seller shall make available (or cause its
property manager or asset manager, as applicable, to make available) to Buyer
and its accountants and designees, for inspection and copying during normal
business hours and at Buyer's sole cost and expense, (i) all accounting records
relating to the Property for the calendar year period ended December 31, 1997,
and for the period(s) from January 1, 1998, through the Closing Date, including,
without limitation, all general ledgers, cash receipts, cancelled checks and
other accounting documents or information reasonably requested by Buyer and
related to the Property, and (ii) all other records related to the Property, in
either case whether in the possession or control of Seller or Seller's property
manager, asset manager or other agent. In addition, in connection with any such
accounting information, Seller shall provide Buyer and Buyer's accountants with
a representation letter in form and substance customarily provided to certified
public accountants when performing an audit in accordance with generally
accepted auditing standards.
15.15 Exhibits. All exhibits attached hereto are hereby incorporated by
reference as though set out in full herein.
15.16 Attorneys' Fees. In the event that either party hereto brings an
action or proceeding against the other party to enforce or interpret any of the
covenants, conditions, agreements or provisions of this Agreement, the
prevailing party in such action or proceeding shall be entitled to recover all
costs and expenses of such action or proceeding, including, without limitation,
attorneys' fees, charges and disbursements, and the fees and costs of expert
witnesses.
33
<PAGE>
15.17 Business Days. As used herein, the term "Business Day" shall mean
a day that is not a Saturday, Sunday or legal holiday. In the event that the
date for the performance of any covenant or obligation under this Agreement
shall fall on a Saturday, Sunday or legal holiday, the date for performance
thereof shall be extended to the next Business Day.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER:
ALEXANDRIA REAL ESTATE EQUITIES,
INC., a Maryland corporation
Execution Date: February 5, 1998 By: /s/ Alan D. Gold
-----------------------------------
Name: Alan Gold
----------------------------
Its: President
-----------------------------
SELLER:
MATRIX PHARMACEUTICALS, INC.,
a Delaware corporation
Execution Date: February 3, 1998 By: /s/ James R. Glynn
-----------------------------------
Name: James R. Glynn
----------------------------
Its: Senior Vice President and CFO
-----------------------------
ESCROW AGENT:
The undersigned Escrow Agent accepts the foregoing Agreement of Purchase and
Sale and Joint Escrow Instructions and agrees to act as Escrow Agent under this
Agreement in strict accordance with its terms.
CHICAGO TITLE INSURANCE COMPANY Date: February 6, 1998
By: /s/ Lori Brandt
-----------------------------
Name: Lori Brandt
------------------
Its: Escrow Officer
------------------
34
<PAGE>
LIST OF EXHIBITS
EXHIBIT "A-1" LEGAL DESCRIPTION OF IMPROVED PARCEL
EXHIBIT "A-2" LEGAL DESCRIPTION OF UNIMPROVED PARCEL
EXHIBIT "A-3" EXCLUDED IMPROVEMENTS AND FIXTURES
EXHIBIT "B-1" PERSONAL PROPERTY INVENTORY
EXHIBIT "B-2" EXCLUDED PERSONAL PROPERTY
EXHIBIT "C" SURVEYOR'S CERTIFICATE
EXHIBIT "D" DEED
EXHIBIT "E" PROPERTY QUESTIONNAIRE
EXHIBIT "F" SELLER'S CERTIFICATE
EXHIBIT "G" ASSIGNMENT OF LEASES
EXHIBIT "H" BILL OF SALE AND ASSIGNMENT
EXHIBIT "I" ESTOPPEL CERTIFICATE
EXHIBIT "J-1" NONFOREIGN AFFIDAVIT
EXHIBIT "J-2" FORM 590
EXHIBIT "K" LEASE
EXHIBIT "K-1" LEASE TERM SHEET
EXHIBIT "L" LOAN TERM SHEET
EXHIBIT "M" TENANT LEASES
EXHIBIT "N" SERVICE CONTRACTS
EXHIBIT "O" EMPLOYEES
EXHIBIT "P" APPROVALS
35
<PAGE>
Exhibit "A-1"
LEGAL DESCRIPTION OF IMPROVED PARCEL
Parcel 1 of Parcel Map 17892, in the City of San Diego, County of San
Diego, State of California, according to Map filed in the Office of the County
Recorder of San Diego County on August 6, 1997.
36
<PAGE>
Exhibit "A-2"
LEGAL DESCRIPTION OF UNIMPROVED PARCEL
Parcel 2 of Parcel Map 17892, in the City of San Diego, County of San
Diego, State of California, according to Map filed in the Office of the County
Recorder of San Diego County on August 6, 1997.
37
<PAGE>
Exhibit "A-3"
DESCRIPTION OF EXCLUDED IMPROVEMENTS AND FIXTURES
To be agreed upon by Buyer and Seller on or before the expiration of the Due
Diligence Period.
38
<PAGE>
Exhibit "B-1"
PERSONAL PROPERTY INVENTORY
To be agreed upon by Buyer and Seller on or before the expiration of the Due
Diligence Period.
39
<PAGE>
Exhibit "B-2"
EXCLUDED PERSONAL PROPERTY
To be agreed upon by Buyer and Seller on or before the expiration of the Due
Diligence Period.
40
<PAGE>
Exhibit "C"
SURVEYOR'S CERTIFICATE
The undersigned hereby certifies to: Alexandria Real Estate Equities,
Inc.; and [TITLE COMPANY]; as of _______________as follows: that this survey was
actually made upon the ground and was completed on_____________; that this
survey and the other information, courses and distances shown thereon are
accurate; that the title lines and lines of actual possession are the same; that
the property description "closes" by mathematical calculation; that the land
depicted on the survey forms one contiguous parcel, uninterrupted by any strips,
gaps or gores; that this survey correctly shows the size, location and type of
all buildings, structures and other improvements on the property and all are
within the boundary lines and applicable setback lines (whether established by
subdivision plat, recorded restrictions or applicable zoning or building codes)
affecting the property; that there are no easements, rights-of-way or uses
affecting the property known to the undersigned or appeared from a careful
physical inspection of the same, other than those shown on the survey, together
with the applicable recording references; that municipal water, sanitary sewer,
telephone, electric and gas services for the operation of the property are
present on the property or within adjacent public rights-of-way or recorded
easements in the locations shown on the survey; that there are no party walls
with or encroachments upon adjoining premises, streets or alleys by any of the
buildings, structures or other improvements on the property, or encroachments
upon or party walls with the property by any building, structure or other
improvements situated upon any adjoining premises; that the buildings and other
improvements on the property do not overhang or encroach upon any easements or
rights-of-way of others; that all public streets necessary for access to the
property have been completed and dedicated and there is direct access between
such streets and the property; that the property contains _____________ square
feet (__________acres) and is located in a zoning district classification of
_____; that the property contains _____ ordinary parking spaces and ____
handicapped parking spaces, totaling _____ ordinary and handicapped parking
spaces; that the property lies within a flood hazard area designated as Flood
Zone ____, shown on special flood hazard map published by the Federal Emergency
Management Agency; that the street address of the property is _______________;
that the property shown on this survey is the same property described in the
following revised title insurance commitment:____________, Commitment Date:
______________; that the location of each easement, right-of-way over the land
of others are required for (i) access to and egress from the parcel over a duly
dedicated and accepted all-weather public street or highway, (ii) drainage of
surface or other water off the parcel, (iii) any utilities which currently serve
the parcel and the current improvements, or (iv) storm water and sanitary sewer
facilities which serve the parcel and the current improvements; unless otherwise
shown or detailed on the survey, the subject property does not serve any
adjoining property for drainage utilities, parking, ingress or egress. This
survey was made on the ground in accordance with the "Minimum Stan-
41
<PAGE>
dard Detail Requirements and Classification for Land Title Surveys" jointly
established by ALTA and ACSM in 1992, and includes Items 1-4, 6-11 and 13, and
meets the accuracy requirements of an Urban Survey, as defined therein. This
survey also was made in accordance with the State of California Minimum
Standards of Practice for Land Surveyors.
42
<PAGE>
Exhibit D
DEED
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: George M. Eshaghian, Esq.
MAIL TAX STATEMENTS TO:
Alexandria Real Estate Equities, Inc.
11440 West Bernardo Court, Suite 170
San Diego, California 92127
Attention: Property Manager
---------------------------------------------------------------------
Space above this line for Recorder's use only
GRANT DEED
A.P.N. _______________
The undersigned Grantor declares:
Documentary transfer tax is not shown pursuant to R&T ss. 11932
( ) computed on full value of property conveyed, or
( ) computed on full value less value of liens and encumbrances
remaining at time of sale.
( ) Unincorporated area (x) City of San Diego, and
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is
hereby acknowledged, MATRIX PHARMACEUTICALS, INC., a Delaware corporation
("Grantor"), has granted, sold and conveyed, and by these presents does hereby
grant, sell and convey, unto [ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland
corporation] ("Grantee"), that certain property located in the City and County
of San Diego, State of California and more particularly described on Exhibit "A"
attached hereto and incorporated herein by reference (the "Property").
TO HAVE AND TO HOLD the Property, together with all and singular the
rights and appurtenances thereto in anywise belonging unto the said Property,
subject only to non-delinquent taxes and assessments and the matters described
on Exhibit "B" attached hereto and incorporated herein by this reference.
43
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Grant Deed to be executed
this ___ day of _________________, 1998.
MATRIX PHARMACEUTICALS, INC.
a Delaware corporation
By: _______________________________
Name:
Its:
44
<PAGE>
STATE OF ___________________ )
: ss.
COUNTY OF _________________ )
On the __ day of _____________, 199__, before me, _______________
___________________________________________________________, personally appeared
__________________________________________________________________________, [ ]
personally known to me or o proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
__________________________________
(SEAL)
45
<PAGE>
Exhibit "A" to Grant Deed
LEGAL DESCRIPTION
46
<PAGE>
Exhibit "B" to Grant Deed
PERMITTED EXCEPTIONS
47
<PAGE>
Exhibit "E"
PROPERTY QUESTIONNAIRE
Attached.
48
<PAGE>
Exhibit "F"
SELLER'S CERTIFICATE
The undersigned hereby certifies to ___________________("Buyer") that,
as of the date hereof,
(i) all of the representations, covenants and warranties of
____________________________. ("Seller") made in or pursuant to that certain
Purchase and Sale Agreement and Joint Escrow Instructions, dated as of
___________, 1997 (the "Agreement"), between Seller and Alexandria Real Estate
Equities, Inc. ("ARE") are true, accurate, correct and complete;
(ii) all conditions to the Closing (as such term is defined in the
Agreement) that Seller was to satisfy or perform have been satisfied and
performed; and
(iii) all conditions to the Closing that ARE or Buyer was to perform
have been satisfied and performed.
Dated: _________, 199__ ___________________________________,
a ____________________________
By: _______________________________
Name:
Title:
49
<PAGE>
Exhibit "G"
ASSIGNMENT OF LEASES AND TENANT SECURITY DEPOSITS
THIS ASSIGNMENT OF LEASES AND TENANT SECURITY DEPOSITS ("Assignment")
is made and entered into as of the ___ day of ___________, 19__, by and between
_______________ ("Assignor"), and ______________ ("Assignee").
RECITALS
WHEREAS, Assignor, as landlord, has entered into those certain leases
identified on Exhibit "A" attached hereto and incorporated herein by reference
(collectively, together with all amendments, modifications, supplements,
restatements and guarantees thereof which are identified on said Exhibit "A,"
the "Assumed Leases"), for certain property located in the City of _________,
County of _________, State of _________;
WHEREAS, Assignor and Alexandria Real Estate Equities, Inc., a Maryland
corporation ("ARE"), have entered into that certain Purchase and Sale Agreement,
dated as of _________ (as amended, the "Purchase Agreement");
WHEREAS, pursuant to Section ____ of the Purchase Agreement, ARE has
assigned its interest in the Purchase Agreement to Assignee; and
WHEREAS, the Purchase Agreement requires Assignor and Assignee to
execute this Assignment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree
as follows:
1. Definitions. All capitalized terms used but not otherwise defined
herein shall have the respective meanings provided therefor in the Purchase
Agreement.
2. Assignment and Assumption. From and after the date hereof for the
remainder of the term of each of the Assumed Leases, Assignor hereby irrevocably
assigns, sets over, transfers, grants, bargains and conveys to Assignee all of
Assignor's right, title and interest in and to (i) the Assumed Leases and (ii)
all security deposits made under the Assumed Leases (the "Security Deposits").
Subject to the terms and conditions of the Purchase Agreement, Assignee hereby
accepts this Assignment of the Assumed Leases, the Security Deposits and the
rights granted herein. Assignee hereby expressly assumes, for itself and its
successors, assigns and legal representatives, the Assumed Leases and all of the
obligations and liabilities, fixed and contingent, of
50
<PAGE>
Assignor thereunder first accruing and arising from and after the date hereof
with respect to the Assumed Leases and agrees to (a) be fully bound by all of
the terms, covenants, agreements, provisions, conditions, obligations and
liability of Assignor thereunder, which first accrue and arise from and after
the date hereof, and (b) keep, perform and observe all of the covenants and
conditions contained therein on the part of Assignor to be kept, performed and
observed, from and after the date hereof.
3. Indemnifications. Assignor hereby agrees to indemnify, protect,
defend and hold Assignee harmless from and against any and all claims, losses,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred or suffered by Assignee in
connection with the Assumed Leases and arising or accruing prior to the date
hereof. Assignee hereby agrees to indemnify, protect, defend and hold Assignor
harmless from and against any and all actions, suits, proceedings, claims,
losses, damages, costs and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred or suffered by Assignor in
connection with the Assumed Leases and first arising and accruing on or after
the date hereof.
4. General Provisions.
4.1. Successors. This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
4.2 Counterparts. This Assignment may be executed in as many
counterparts as may be deemed necessary and convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute one and the
same instrument.
4.3. Governing Law. This Assignment and the legal relations of
the parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of California, without regard to its principles of
conflicts of law.
4.4 Construction with Respect to Principal Agreement. This
Assignment is made pursuant to and governed by all of the terms, conditions,
warranties, representations, disclaimers, indemnities and limitations of the
Purchase Agreement, which are incorporated herein by this reference.
4.5 No Other Leases Assigned. Except for the Assumed Leases,
Assignee has not assumed any obligations under or with respect to any other
leases heretofore entered into with respect to the Property, including, without
limitation, the Retained Leases, which obligations are retained by Assignor.
51
<PAGE>
IN WITNESS WHEREOF, this Assignment was made and executed as of the
date first above written.
ASSIGNOR:
____________________________________
By: _______________________________
Name:
Its:
ASSIGNEE:
____________________________________
By: _______________________________
Name:
Its:
52
<PAGE>
Exhibit "H"
BILL OF SALE AND ASSIGNMENT
THIS BILL OF SALE AND ASSIGNMENT ("Bill of Sale") is made as of
____________, 1997, by _______________, a _______________ ("Seller"), to
_____________________, a ________________________ ("Buyer").
RECITALS
WHEREAS, Seller is the owner of that certain real property located in
the County of ________________, State of ____________(the "Real Property"), as
more particularly described on Exhibit "A" attached hereto and incorporated
herein by reference;
WHEREAS, Buyer and Seller have entered into that certain Purchase and
Sale Agreement and Joint Escrow Instructions (the "Purchase Agreement"), dated
as of ___________, 1998, with respect to, among other things, the acquisition of
the "Personal Property" and the "Intangible Property" (each as defined below),
and certain other property; and
WHEREAS, the Purchase Agreement requires Seller to convey all of
Seller's right, title and interest in, to and under the Personal Property and
the Intangible Property to Buyer.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller hereby agrees as follows:
1. Unless the context otherwise requires, all capitalized terms used
but not otherwise defined herein shall have the respective meanings provided
therefor in the Purchase Agreement.
2. Seller does hereby unconditionally, absolutely, and irrevocably
grant, bargain, sell, transfer, assign convey, set over and deliver unto Buyer
all of Seller's right, title and interest in and to:
a. all tangible personal property now or hereafter owned by
Seller and located on or about the Land or Improvements or attached thereto or
used in connection with the use, operation, maintenance or repair thereof
(collectively, the "Personal Property"), including, without limitation, the
personal property described on Exhibit B-1 attached hereto, but expressly
excluding the personal property described on Exhibit B-2 attached hereto; and
53
<PAGE>
b. all intangible property now or hereafter owned by Seller
and used in connection with the Land, the Improvements or the Personal Property,
including, without limitation, the Service Contracts identified on Schedule 1
attached hereto (the "Assumed Service Contracts"), building trademarks and trade
names, transferable business licenses, permits, applications, authorizations and
other entitlements, transferable guarantees and warranties covering the Land
and/or Improvements, all contract rights, books, records, reports, test results,
environmental assessments, and other similar documents and materials relating to
the use or operation, maintenance or repair of the Property or the construction
or fabrication thereof, and all transferable utility contracts, but specifically
excluding any intangible property exclusively related to the operation of
Seller's business (collectively, the "Intangible Property" and, together with
the Personal Property, the "Property").
3. Buyer hereby expressly assumes, for itself and its successors,
assigns and legal representatives, the Assumed Service Contracts and all of the
obligations and liabilities, fixed and contingent, of Seller thereunder accruing
from and after the date hereof with respect thereto and agrees to (a) be fully
bound by all of the terms, covenants, agreements, provisions, conditions,
obligations and liability of Seller thereunder, which accrue from the date
hereof, and (b) keep, perform and observe all of the covenants and conditions
contained therein on the part of Seller to be kept, performed and observed, from
and after the date hereof.
4. Seller represents and warrants that its title to the Property is
free and clear of all liens, mortgages, pledges, security interests, prior
assignments, encumbrances and claims of any nature other than the Permitted
Exceptions.
5. Seller hereby agrees to indemnify, protect, defend and hold Buyer
harmless from and against any and all claims, losses, damages, costs and
expenses (including, without limitation, reasonable attorney's fees and
disbursements) incurred or suffered by Buyer in connection with the Property and
arising prior to the Closing. Buyer hereby agrees to indemnify, protect, defend
and hold Seller harmless from and against any and all claims, losses, damages,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements) incurred or suffered by Seller in connection with the
Property and arising on or after the Closing.
6. This Bill of Sale shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, legal representatives, successors
and assigns.
7. This Bill of Sale and the legal relations of the parties hereto
shall be governed by and construed and enforced in accordance with the laws of
the State of California, without regard to its principles of conflicts of law.
IN WITNESS WHEREOF, this Bill of Sale was made and executed as of the
54
<PAGE>
date first above written.
SELLER:
_________________________________, a
_________________________________
By:______________________________
Its:_____________________________
55
<PAGE>
Exhibit "I"
ESTOPPEL CERTIFICATE
THIS TENANT ESTOPPEL CERTIFICATE ("Certificate"), dated as of ________,
19__, is executed by ("Tenant") in favor of Alexandria Real Estate Equities,
Inc., a Maryland corporation, together with its nominees, designees and assigns
(collectively, "Buyer").
RECITALS
A. Buyer and ____________ ("Landlord"), have entered into that certain
Purchase and Sale Agreement and Joint Escrow Instructions, dated as of
_________, 19__ (the "Purchase Agreement"), whereby Buyer has agreed to
purchase, among other things, the improved real property located in the City of
_________, County of _________, State of _________, more particularly described
on Exhibit "A" attached to the Purchase Agreement (the "Property").
B. Tenant and Landlord have entered into that certain Lease Agreement,
dated as of ___________ (together with all amendments, modifications,
supplements, guarantees and restatements thereof, the "Lease"), for a portion of
the Property.
C. Pursuant to the Lease, Tenant has agreed that upon the request of
Landlord, Tenant would execute and deliver an estoppel certificate certifying
the status of the Lease.
D. In connection with the Purchase Agreement, Landlord has requested
that Tenant execute this Certificate with an understanding that Buyer will rely
on the representations and agreements below.
NOW, THEREFORE, Tenant certifies, warrants, and represents to Buyer as
follows:
Section 1. Lease.
Attached hereto as Exhibit "1" is a true, correct and complete copy of
the Lease, including the following amendments, modifications, supplements,
guarantees and restatements thereof, which together represent all of the
amendments, modifications, supplements, guarantees and restatements thereof:
________________________________________________________________________________
________________________________________________________________________________
(If none, please state "None.")
56
<PAGE>
Section 2. Leased Premises.
Pursuant to the Lease, Tenant leases those certain premises (the
"Leased Premises") consisting of approximately _______________ (________)
rentable square feet within the Property, as more particularly described in the
Lease. In addition, pursuant to the terms of the Lease, Tenant has the
[non-exclusive] right to use [_____ parking spaces/the parking area] located on
the Property during the term of the Lease. [Cross-out the preceding sentence or
portions thereof if inapplicable.]
Section 3. Full Force of Lease.
The Lease has been duly authorized, executed and delivered by Tenant,
is in full force and effect has not been terminated and constitutes a legally
valid instrument, binding and enforceable against Tenant in accordance with its
terms, subject only to applicable limitations imposed by laws relating to
bankruptcy and creditor's rights.
Section 4. Complete Agreement.
The Lease constitutes the complete agreement between Landlord and
Tenant for the Leased Premises and the Property, except as modified by the Lease
amendments noted above (if any), has not been modified, altered or amended.
Section 5. Acceptance of Leased Premises.
Tenant has accepted possession and is currently occupying the Leased
Premises.
Section 6. Lease Term.
The term of the Lease commenced on ______________ and ends on
_______________, subject to the following options to extend: ___________________
_______________________________________________.
(If none, please state "None.")
Section 7. Purchase Rights.
Tenant has no option, right of first refusal, right of first offer, or
other right to acquire or purchase all or any portion of the Leased Premises or
all or any portion of, or interest in, the Property, except as follows: ________
________________________________________________________________________________
_____________________.
(If none, please state "None.")
Section 8. Rights of Tenant.
57
<PAGE>
Except as expressly stated in this Certificate, Tenant:
(a) has no right to renew or extend the term of the Lease;
(b) has no option or other right to purchase all or any part of the
Leased Premises or all or any part of the Property;
(c) has no right, title, or interest in the Leased Premises, other than
as Tenant under the Lease.
Section 9. Rent.
(a) The obligation to pay rent under the Lease commenced on
___________. The rent under the Lease is current, and Tenant is not in default
in the performance of any of its obligations under the Lease.
(b) Tenant is currently paying base rent under the Lease in the amount
of ___________________ Dollars ($__________) per month. Tenant has not received
and is not, presently, entitled to any abatement, refunds, rebates, concessions
or forgiveness of rent or other charges, free rent, partial rent, or credits,
offsets or reductions in rent, except as follows: ______________________________
_______________________________________________.
(If none, please state "None.")
(c) Tenant's estimated share of operating expenses, common area
charges, insurance, real estate taxes and administrative and overhead expenses
is __________ percent ( %) and is currently being paid at the rate of
_____________________ Dollars ($__________) per month, payable to: _____________
_______________________________________________.
(d) There are no existing defenses or offsets against rent due or to
become due under the terms of the Lease, and there presently is no default or
other wrongful act or omission by Landlord under the Lease or otherwise in
connection with Tenant's occupancy of the Leased Premises, nor is there a state
of facts which with the passage of time or the giving of notice or both could
ripen into a default on the part of Tenant, or to the best knowledge of Tenant,
could ripen into a default on the part of Landlord under the Lease, except as
follows: _______________________________________________________________________
_______________________________________________.
(If none, please state "None.")
Section 10. Security Deposit.
58
<PAGE>
The amount of Tenant's security deposit held by Landlord under the
Lease is _________________ Dollars ($ __________).
Section 11. Prepaid Rent.
The amount of prepaid rent, separate from the security deposit, is
__________________________ Dollars ($___________), covering the period from to .
Section 12. Insurance.
All insurance, if any, required to be maintained by Tenant under the
Lease is presently in effect.
Section 13. Pending Actions.
There is not pending or, to the knowledge of Tenant, threatened against
or contemplated by the Tenant, any petition in bankruptcy, whether voluntary or
otherwise, any assignment for the benefit of creditors, or any petition seeking
reorganization or arrangement under the federal bankruptcy laws or those of any
state.
Section 14. Tenant Improvements.
As of the date of this Certificate, to the best of Tenant's knowledge,
Landlord has performed all obligations required of Landlord pursuant to the
Lease; no offsets, counterclaims, or defenses of Tenant under the Lease exist
against Landlord; and no events have occurred that, with the passage of time or
the giving of notice, would constitute a basis for offsets, counterclaims, or
defenses against Landlord, except as follows:__________________________________
_______________________________________________________________________________.
(If none, please state "None.")
Section 15. Assignments by Landlord.
Tenant has received no notice of any assignment, hypothecation or
pledge of the Lease or rentals under the Lease by Landlord.
Section 16. Assignments by Tenant.
Tenant has not sublet or assigned the Leased Premises or the Lease or
any portion thereof to any sublessee or assignee. No one except Tenant and its
employees will occupy the Leased Premises. The address for notices to be sent to
Tenant is as set forth in the Lease.
59
<PAGE>
Section 17. Environmental Matters.
The operation and use of the Leased Premises does not involve the
generation, treatment, storage, disposal or release into the environment of any
hazardous materials, regulated materials and/or solid waste, except those used
in the ordinary course of operating a retail store or otherwise used in
accordance with all applicable laws.
Section 18. Succession of Interest.
Tenant agrees that, in the event Buyer succeeds to interest of Landlord
under the Lease:
(a) Buyer shall not be liable for any act or omission of any prior
landlord (including Landlord);
(b) Buyer shall not be liable for the return of any security deposit;
(c) Buyer shall not be bound by any rent or additional rent which
Tenant might have prepaid under the Lease for more than the current month;
(d) Buyer shall not be bound by any amendments or modifications of the
Lease made without prior consent of Buyer;
(e) Buyer shall not be subject to any offsets or defenses which Tenant
might have against any prior landlord (including Landlord); or
(f) Buyer shall not be liable under the Lease to Tenant for the
performance of Landlord's obligations under the Lease beyond Buyer's interest in
the Property.
Section 19. Notice of Default.
Tenant agrees to give Buyer a copy of any notice of default under the
Lease served upon Landlord at the same time as such notice is given to the
Landlord. Tenant further agrees that if Landlord shall fail to cure such default
within the applicable grace period, if any, provided in the Lease, then Buyer
shall have an additional sixty (60) days within which to cure such default, or
if such default cannot be cured within such sixty (60) day period, such sixty
(60) day period shall be extended so long as Buyer has commenced and is
diligently pursuing the remedies necessary to cure such default (including, but
not limited to, commencement of foreclosure proceedings, if necessary to effect
(such cure), in which event the Lease shall not be terminated while such
remedies are being pursued.
Section 20. Notification by Tenant.
60
<PAGE>
From the date of this Certificate and continuing until ____________,
Tenant agrees to immediately notify Buyer, in writing by registered or certified
mail, return receipt requested, at the following addresses, on the occurrence of
any event or the discovery of any fact that would make any representation
contained in this Certificate inaccurate:
If To Buyer: Alexandria Real Estate Equities, Inc.
135 N. Los Robles Avenue, Suite 250
Pasadena, California 91101
Attention: Corporate Secretary
With A Copy To: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: George M. Eshaghian
Tenant makes this Certificate with the knowledge that it will be relied
upon by Buyer in agreeing to purchase the Property.
Tenant has executed this Certificate as of the date first written above
by the person named below, who is duly authorized to do so.
TENANT
___________________________________________
By: _______________________________
Name:
Its:
61
<PAGE>
Exhibit "J-1"
NONFOREIGN AFFIDAVIT
1. Section 1445 of the Internal Revenue Code of 1986, as
amended (the "IRC"), provides that a transferee of a United States real property
interest must withhold tax if the transferor is a foreign person.
2. In order to inform Alexandria Real Estate Equities, Inc., a
Maryland corporation, and its nominees, designees and assigns (collectively, the
"Transferee"), that withholding of tax is not required upon the disposition by
___________________ (the "Transferor"), of the United States real property more
particularly described on Exhibit "A" attached hereto and incorporated herein by
reference (the "Property"), the undersigned Transferor certifies and declares by
means of this certification, the following:
a. The Transferor is not a foreign person, foreign
corporation, foreign partnership, foreign trust or
foreign estate (as such terms are defined in the IRC
and the Income Tax Regulations).
b. Transferor's federal taxpayer identification number
is:
______________________________.
c. Transferor's address is:
_____________________________________________________
_____________________________________________________
_____________________________________________________
3. Transferor understands that this certification may be
disclosed to the Internal Revenue Service by Transferee and that any false
statement contained in this certification may be punished by fine, imprisonment
or both.
62
<PAGE>
Under penalties of perjury, Transferor declares that it has
carefully examined this certification and it is true, correct and complete.
Executed this __ day of ________, 19__ at .
TRANSFEROR
___________________________________________
By: _______________________________
Name:
Its:
63
<PAGE>
Exhibit "J-2"
FORM 590
Attached.
64
<PAGE>
Exhibit "K"
LEASE
Attached
65
<PAGE>
Exhibit "K-1"
LEASE TERM SHEET
Lessor: Alexandria Real Estate Equities, Inc. or its assignee
Lessee: Matrix Pharmaceuticals, Inc.
Rentable Square Footage: 67,050 square feet (approximately)
Initial Base Rent: $1,920,000 per year, payable in advance in equal
monthly installments
Escalation of Base Rent: The Base Rent shall increase on the fifth (5th)
anniversary of the Lease Commencement Date by an
amount equal to the cumulative increase in the
Consumer Price Index for San Diego metropolitan
statistical area ("Index") for the previous fifth (5)
years but not less than 2% and not more than 4% for
any given year during the initial five (5) year
period. Thereafter, the Base Rent, including renewal
periods, shall increase every three (3) years by an
amount equal to the cumulative increases in the Index
for the previous three (3) years, but not less than 2%
and not more than 4% for any given year during the
three year period.
Security Deposit: $2,580,000 to be deposited with Lessor in cash or an
acceptable letter of credit in a form and with a
financial institution normally acceptable to Lessee
and Lessor ("Letter of Credit").
Percentage Reduction Amount Mileage Event
--------------------------- -------------
25% Lessee to have
completed strategic
alliances or joint
ventures with a
cumulative value in
excess of $10
million (value equal
to up front payments
plus milestone
payments).
25% Lessee corporate
sales from products
exceed $10 million.
Initial Lease Term: 13 years
66
<PAGE>
Options to Extend: Upon at least one year's prior notice, five (5)
consecutive five (5) year options to extend the term
at a mutually acceptable rent on the commencement date
of each such renewal term.
Late Charges: 3% of the amount delinquent, if any amount is not paid
within 10 days from the date notice of delinquency is
given to Lessee.
Expenses: Absolute net: Lessee shall be responsible for the
entire cost of maintaining and improving the Property,
which shall include, without limitation, all
maintenance, upkeep, cleaning, repairs, and
replacements of all improvements at the Property,
structural, and non-structural, all real and personal
property taxes, assessments and bonds pertaining to
the Property, public Liability, environmental,
earthquake and property damage insurance premiums, all
utilities and related services rendered or furnished
to the Property such as electricity, water, sewer,
heat, air, telephone, refuse and gas, and all related
charges and deposits, and costs of any tenant or other
capital improvements to the Property, as well as the
cost of property management which shall equal $2,000
per month.
Subleases: Lessee shall execute a present assignment of leases
and rents to Lessor whereby Lessee shall continue as
the Lessor ("Master Lessor") under the existing leases
to Advanced Tissue Sciences, Inc. and lessees of
rooftop space for antenna purposes (collectively, the
"Subleases"). The Subleases shall be subordinated to
Lessor's interest in the Property and the sublessees
shall attorn to Lessor. Upon any default by Lessee
under the Lease such Subleases shall make all rent
payments directly to Lessor.
Repurchase Rights: Option (A). Right of First Offer. Provided that Lessee
is not then in default under the Lease, in the event
Lessor determines that it intends to sell the
Property, it shall give Lessee at least 10 days' prior
written notice of such intent ("Lessor's Notice")
prior to actively marketing the Property to third
parties, and Lessee may elect, by delivery of written
notice to Lessor ("Lessee's Notice") within 10 days
after receipt of Lessor's Notice, to negotiate for the
acquisition of the Property. If Lessee so elects, the
parties shall meet and negotiate in good faith for the
purchase and sale of the Property for a period of 30
days following delivery of Lessor's Notice. In the
event that Lessor and Lessee are unable to agree upon
the terms of the sale within said 30 day period or in
the event that Lessee does not deliver Lessee's
Notice, then Lessor shall be entitled to thereafter
sell the Property to
67
<PAGE>
any third party purchaser, provided that any such
purchaser shall acquire the Property subject to
Lessee's right of first offer.
(B). Certain Terms of Sale. Any purchase and sale
pursuant to Lessee's right of first offer shall be
handled by Holder. The transaction shall close no
sooner than nine (9) and no later than twelve (12)
months after Lessee's written notification of election
to exercise right of first offer unless otherwise
mutually agreed in writing. The right of first offer
shall terminate at the end of the Lease term and any
extensions.
Indemnification: Lessee to provide Lessor with full indemnifications,
including without limitations indemnification for
damages suffered by reason of hazardous materials
utilized by Lessee.
68
<PAGE>
Exhibit "L"
LOAN TERM SHEET
Lender: Alexandria Real Estate Equities, Inc. or its assigns.
Borrower: Matrix Pharmaceuticals, Inc.
Loan Amount: $6,000,000
Interest Rate: 11%
Payment Terms: Interest only payable in advance in equal monthly
installments ($660,000 per annum).
Term: 4 years
Conversion Event: The loan shall be reduced in $3,000,000 increments and
shall convert into lease payments upon achievement of
the following milestone events.
1. Borrower to have completed strategic alliances or
joint ventures with a cumulative value in excess
of $10 million (value equal to up front payments
plus milestone payments);
2a. Borrower corporate sales from products exceed $10
million; or
2b. Borrower to have completed strategic alliances or
joint ventures with cumulative value in excess of
$15 million.
______________________________________________________
Conversion Lease Terms for each $3,000,000 reduction increment:
Initial Base Rent: $330,000 per year, payable in advance in equal monthly
installments, subject to escalation on the same terms
and time periods as provided in the Lease.
Other Lease Terms: All other terms and conditions of Lease apply.
Default: A default under the loan shall be a default under the
Lease.
Security: Borrower's manufacturing related building improvements
and fixtures.
69
<PAGE>
Exhibit "M"
TENANT LEASES
Attached
70
<PAGE>
Exhibit "N"
SERVICE CONTRACTS
Attached
71
<PAGE>
Exhibit "O"
EMPLOYEES
None.
72
<PAGE>
Exhibit "P"
APPROVALS
Attached.
73
LEASE
BY AND BETWEEN
ARE-4757 NEXUS CENTRE, LLC
as Landlord
and
MATRIX PHARMACEUTICAL, INC.
as Tenant
<PAGE>
LEASE
THIS LEASE is made as of March 25, 1998 ("Effective Date"), by and
between ARE-4757 NEXUS CENTRE, LLC, a Delaware limited liability company
("Landlord") and MATRIX PHARMACEUTICAL, INC., a Delaware corporation ("Tenant").
1. Lease of Premises
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
upon the terms and conditions hereof, those certain premises (the "Demised
Premises") located on the land legally described on Exhibit "A" attached hereto
(the "Land") and commonly known as the building located at the address set forth
below in Section 2.1.1 (the "Building"). The real property upon which the
Building is located and all landscaping, parking facilities and other
improvements and appurtenances related thereto, are hereinafter collectively
referred to as the "Project", the site plan and legal description for which is
attached hereto as Exhibit "B". All portions of the Project which in a
multi-tenant complex would be for the non-exclusive use of tenants of the
Building, including, without limitation, driveways, sidewalks, parking areas,
landscaped areas, service corridors, stairways, elevators, public restrooms and
Building lobbies, are hereinafter referred to as "Common Area".
2. Basic Lease Provisions
2.1. For convenience of the parties, certain basic provisions of this
Lease are set forth herein. The provisions set forth herein are subject to the
remaining terms and conditions of this Lease and are to be interpreted in light
of such remaining terms and conditions.
2.1.1 Address of the Building:
4757 Nexus Centre Drive
San Diego, California
2.1.2 [Intentionally omitted.]
2.1.3 (a) Rentable Area of Demised Premises: 67,050 sq.
ft.
(b) Rentable Area of Building: 67,050 sq. ft.
2.1.4 Initial Basic Annual Rent: $1,920,000
2.1.5 Initial Monthly Rental Installments of Basic Annual
Rent: $160,000
2.1.6 Tenant's Pro Rata Share: 100 % of the Building, and
100% of the Project
1
<PAGE>
2.1.7 (a) Term Commencement Date: As defined in Section
4.2 hereof.
(b) Term Expiration Date: The last day of the
calendar month in which the thirteenth
anniversary of the Term Commencement Date
occurs, subject to extension or earlier
termination as provided herein.
2.1.8 Security Deposit: $2,580,000, to be deposited in
accordance with and subject to increase and
decrease in accordance with Section 9 hereof.
2.1.9 Permitted Use: Scientific research laboratories and
related manufacturing, distribution and office uses
and incidental storage uses consistent with Section
10 hereof.
2.1.10 Address for Rent Payment:
135 North Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: Corporate Secretary
Address for Notices to Landlord:
135 North Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: Corporate Secretary
With a copy to:
11440 West Bernardo Court, Suite 170
San Diego, CA 92127
Attention: Gary A. Kreitzer, Esq.
2.1.11 Address for Notices to Tenant:
34700 Campus Drive
Fremont, California 94555
Attention: Mr. James R. Glynn
2
<PAGE>
3. Term
3.1. This Lease shall take effect upon the Effective Date and, except
as specifically otherwise provide within this Lease, each of the provisions
hereof shall be binding upon and inure to the benefit of Landlord and Tenant,
and each of their respective successors and permitted assigns, from the
Effective Date.
3.2. The term of this Lease (the "Term") will be that period from the
Term Commencement Date as defined in Section 4.2 below through the Term
Expiration Date, as such may be terminated or extended as provided herein.
4. Possession and Commencement Date
4.1. Landlord shall tender possession of the Demised Premises to Tenant
on the Effective Date.
4.2. The "Term Commencement Date" shall be the Effective Date.
4.3. [Intentionally omitted.]
4.4. Access to and non-exclusive possession of areas necessary for
utilities, services, safety and operation of the Building and the Project is
reserved to Landlord.
5. Rent
5.1. Tenant agrees, commencing on the Term Commencement Date, to pay
Landlord as Basic Annual Rent for the Demised Premises the sum set forth in
Section 2.1.4 subject to the rental increases provided in Section 6 hereof.
Basic Annual Rent shall be paid in the equal monthly installments set forth in
Section 2.1.5, subject to the rental increases provided in Section 6 hereof,
each in advance on the first day of each and every calendar month during the
Term.
5.2. In addition to Basic Annual Rent, Tenant agrees to pay to Landlord
as additional rent ("Additional Rent") at times hereinafter specified in this
Lease (i) Tenant's pro rata share, as set forth in Section 2.1.6 ("Tenant's Pro
Rata Share") of Operating Expenses as provided in Section 7 and (ii) any other
amounts that Tenant assumes or agrees to pay under the provisions of this Lease
that are owed to Landlord, including, without limitation, any and all other sums
that may become due by reason of any default of Tenant or failure on Tenant's
part to comply with the agreements, terms, covenants and conditions of this
Lease to be performed by Tenant, after notice and lapse of applicable cure
period.
5.3. Basic Annual Rent and Additional Rent shall together be
denominated "Rent". Rent shall be paid to Landlord, without abatement,
deduction, or offset, in lawful money of the United States of America, at the
office of Landlord as set forth in Section 2.1.10 or to such other
3
<PAGE>
person or at such other place as Landlord may from time designate in writing. In
the event the Term commences or ends on a day other than the first day of a
calendar month, then the Rent for such fraction of a month shall be prorated for
such period on the basis of a thirty (30) day month and shall be paid at the
then current rate for such fractional month.
6. Rent Adjustments
6.1. Basic Annual Rent shall be adjusted on the fifth (5th) anniversary
of the Term Commencement Date, and on such date every three (3) years thereafter
during the Term (each, a "Rent Adjustment Date") in proportion to increases in
the Consumer Price Index (as hereinafter defined) as provided within this
Section 6. The each such adjustment shall become effective commencing on the
Rent Adjustment Date. Basic Annual Rent shall be adjusted upward as follows:
6.2. The Basic Annual Rent shall be adjusted upward as follows:
6.2.1 For purposes of each Rent Adjustment Date, the "Base
Month" shall be that month which is three (3) months prior to the month in which
the previous Rent Adjustment Date occurred, or, in the case of the first Rent
Adjustment Date, the Term Commencement Date. The "Comparison Month" shall be
that month which is three (3) months prior to the month in which the Rent
Adjustment Date occurs.
6.2.2 As used in this Section 6, the term "Consumer Price
Index" means the Consumer Price Index (all items) for all wage earners and
clerical workers in the Los Angeles/Riverside metropolitan area (1982-84 = 100)
as published by the United States Department of Labor, Bureau of Labor
Statistics. If the 1982-84 base of the Consumer Price Index is hereafter
changed, then the new base will be converted to the 1982-84 base and the base as
so converted shall be used. In the event that the Bureau ceases to publish the
Consumer Price Index at lease once every other month, then the successor or most
nearly comparable index thereto reasonably selected by Landlord shall be used.
6.2.3 In the event that the Consumer Price Index for the
Comparison Month exceeds the Consumer Price Index for the Base Month, the Basic
Annual Rent then payable (as increased by previous adjustments under this
Section 6) shall be multiplied by a fraction, the numerator of which is the
Consumer Price Index figure for the Comparison Month, and the denominator of
which is the Consumer Price Index figure for the Base Month. Such amount as
calculated shall be the Basic Annual Rent to be paid until the next Rent
Adjustment Date.
6.2.4 Notwithstanding the foregoing, on every Rent Adjustment
Date Basic Annual Rent shall increase on account of any such adjustment a
minimum of the aggregate of two percent (2%) of the Basic Annual Rent per year
for each year during the period since the previous Rent Adjustment Date, and
shall not increase more than the aggregate of four percent (4%) of the Basic
Annual Rent per year for each year during the period since the previous Rent
4
<PAGE>
Adjustment Date.
7. Operating Expenses
7.1. As used herein, the term "Operating Expenses" shall include:
7.1.1 Government impositions including, without limitation,
property tax costs consisting of real and personal property taxes and
assessments (including amounts due under any improvement bond upon the Building
or the Project, including the parcel or parcels of real property upon which the
Building or the Project are located or assessments levied in lieu thereof)
imposed by any governmental authority or agency; any tax on or measured by gross
rentals received from the rental of space in the Building, or tax based on the
square footage of the Demised Premises, the Building or the Project as well as
any parking charges, utilities surcharges, or any other costs levied, assessed
or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any federal, state,
regional, municipal or local government authority in connection with the use or
occupancy of the Building or the parking facilities serving the Building
including those located on any adjacent parcel to the extent used by or
benefitting the Demised Premises; any tax on this transaction or any document to
which Tenant is a party creating or transferring an interest in the Demised
Premises; any fee for a business license to operate an office building; and any
expenses, including the reasonable cost of attorneys or experts, reasonably
incurred by Landlord in seeking reduction by the taxing authority of the
applicable taxes, less tax refunds obtained as a result of an application for
review thereof. Operating Expenses shall not include (i) any net income
franchise, capital stock, estate or inheritance taxes, (ii) taxes which are the
personal obligation of Tenant or of another tenant of the Project, (iii) any
government impositions arising from any legal parcel of the Project adjacent to
the Land whether or not owned by Landlord, and any improvements thereto, to the
extent not used by or benefitting the Demised Premises, (iv) any environmental
assessment, charges or liens arising in connection with remediation of Hazardous
Materials from the Project which are caused by Landlord to be brought upon, kept
or used in or about the Demised Premises, the Building or the Project, (v)
reserves for future taxes and assessments in excess of the installment of taxes
and assessments next coming due, or any documentary transfer taxes arising from
a voluntary transfer of the Project or any portion thereof by Landlord. If a
reduction in real property taxes or assessments is obtained for any year of the
Term during which Tenant paid Tenant's Pro Rata Share of Operating Expenses,
then Operating Expenses for such year shall be retroactively adjusted, and
Landlord shall provide Tenant with a credit against Tenant's next due
obligations for Rent in the amount of such reduction (or, if none, refund such
amount to Tenant within ninety (90) days of such reduction). Landlord hereby
agrees to contest increases in the tax rate and assessed valuation of the
Project, which affect the general real estate tax component of Operating
Expenses or any other increase in taxes customarily protested by prudent owners
of commercial office buildings in the City of San Diego in a manner appropriate
for such an owner if requested by Tenant and provided that Tenant shall bear all
cost and expense in connection with such contest. If, by applicable law, any
taxes or assessments may be paid in installments at the option of the taxpayer,
then whether or not
5
<PAGE>
Landlord elects to pay taxes and assessments in installments, Tenant's liability
for such taxes and assessments shall be computed as if such election had been
made, and only the installments thereof and any interest or fee payable thereon
which would have become due during the Term shall be included in Tenant's Pro
Rata Share of Operating Expenses.
7.1.2 All other costs of any kind paid or incurred by Landlord
and not otherwise paid by Tenant in connection with the operation and
maintenance of the Building and the Project including, by way of examples and
not as a limitation upon the generality of the foregoing, costs of repairs and
replacements to the Building or the other improvements within the Project as
appropriate to maintain Building or the Project as required hereunder; costs of
utilities furnished to the Common Areas; sewer fees; cable T.V.; trash
collection; cleaning, including windows; heating; ventilation; air-conditioning;
maintenance of landscape and grounds; maintenance of drives and parking areas;
security services and devices; building supplies; maintenance for and
replacement of equipment utilized for operation and maintenance of the Project:
license, permit and inspection fees; sales, use and excise taxes on goods and
services purchased by Landlord in connection with the operation, maintenance or
repair of the Project and Building systems and equipment; telephone, postage,
stationary supplies and other expenses incurred in connection with the
operation, maintenance, or repair of the Project; accounting, legal and other
professional fees and expenses incurred in connection with the Project; the cost
of furniture, draperies, carpeting, landscaping and other customary and ordinary
items of personal property provided by Landlord for use in Common Areas; capital
expenditures; costs of complying with any applicable laws or hazardous waste
remediation rules or regulations; insurance premiums, including premiums for
public liability, property casualty, earthquake and environmental coverages;
portions of insured losses paid by Landlord as part of the deductible portion of
such losses by reason of insurance policy terms; service contracts; costs of
services of independent contractors retained to do work of nature or type herein
referenced; and costs of compensation (including employment taxes and fringe
benefits) of all persons who perform regular and recurring duties connected with
the day-to-day operation and maintenance of the Project, its equipment, the
adjacent walks, landscaped areas, drives, and parking areas below the level of
Project manager, including without limitation, janitors, floor waxers,
window-washers, watchmen, gardeners, sweepers, and handymen and costs of
management services in the amount of $2,000 per month during the Term. The cost
of any capital expenditures by Landlord reimbursed as Operating Expenses
pursuant to this Lease shall be amortized on a straight-line basis over a period
equal to the useful life of the item as determined by reference to the vendor's
or manufacturer's suggested useful life for such capital improvements or, where
such reference does not exist, by reference to generally accepted accounting
principals, consistently applied, but not more than seven years.
7.1.3 Notwithstanding the foregoing, Operating Expenses shall
not include any leasing commissions; expenses which relate to preparation of
rental space for a tenant; expenses of initial development and construction,
including but not limited to, grading, paving, landscaping, and decorating (as
distinguished from maintenance repair and replacement of the foregoing); legal
expenses relating to other tenants; costs of repair to the extent reimbursed by
6
<PAGE>
payment received by Landlord of insurance proceeds; interest upon loans to
Landlord or secured by mortgages or deeds of trust covering the Project or a
portion thereof (provided interest upon a government assessment or improvement
bond payable in installments is an Operating Expense under Section 7.1.1 above);
salaries of executive officers of Landlord; depreciation claimed by Landlord for
tax purposes (provided this exclusion of "depreciation" is not intended to
delete from Operating Expenses actual costs of repairs and replacements which
are provided for in Section 7.1.2 above); and taxes of the types set forth
within the last sentence of Section 7.1.1 above. Notwithstanding any provision
of this Lease to the contrary, the following shall not be included as Operating
Expenses: (i) any costs incurred solely due to Landlord's violation of any terms
or conditions of this Lease and not otherwise caused or contributed to by
Tenant; (ii) damage and repairs necessitated solely by the gross negligence or
willful misconduct of Landlord or its agents, employees, contractors or invitees
and not otherwise caused or contributed to by Tenant; (iii) advertising,
promotional, and marketing costs, including leasing commissions and attorneys'
fees in connection with the negotiation and preparation of letters, deal memos,
letters of intent, leases or space planning costs with respect to tenants other
than Tenant; (iv) costs, including permit, license and inspection costs,
incurred with respect to the development or construction of any other buildings
of the Project not for the benefit of Tenant, or the installation of other
tenants or other occupants in the Project, improvements made to the demised
premises of other tenants or other occupants in the Project or incurred in
designing, constructing, renovating or otherwise improving, decorating, painting
or redecorating vacant space for tenants or other occupants of the Project other
than Tenant; (v) any costs, fines, or penalties incurred due to violations by
Landlord of any governmental rule or authority, this Lease or any other lease in
the Project and not otherwise caused or contributed to by Tenant, or due to
Landlord's gross negligence or willful misconduct; (vi) Landlord's general
corporate overhead and administrative expenses (which shall be covered by the
costs of management services); and (vii) reserves for Operating Expenses (other
than reasonable reserves for taxes, assessments, insurance and other recurring
charges which are payable less frequently than monthly for payments which are
next coming due, which may be collected and held by Landlord only upon and
during the continuance of a Default). Landlord agrees to exercise care that
there be no duplication of submittals of items of expense for which Tenant is
obligated to pay Landlord under this Lease.
7.2. Tenant shall pay to Landlord on the first day of each calendar
month of the Term, as Additional Rent, Landlord's estimate of Tenant's Pro Rata
Share of Operating Expenses with respect to the Project for such month.
7.2.1 Within ninety (90) days after the conclusion of each
calendar year, (or such longer period as may be reasonably required) Landlord
shall furnish to Tenant a statement showing in reasonable detail the actual
Operating Expenses and Tenant's Pro Rata Share of Operating Expenses for the
previous calendar year. Any additional sum due from Tenant to Landlord shall be
immediately due and payable. If the amounts paid by Tenant pursuant to Section
7.2 exceeds Tenant's Pro Rata Share of Operating Expense for the previous
calendar year, Landlord shall, at Landlord's option, either (i) credit the
excess amount to the next succeeding installments of estimated Additional Rent,
or (ii) pay the excess to Tenant within
7
<PAGE>
thirty (30) days after delivery of such statements; provided, however, any
excess owing to Tenant after the expiration of the term shall be paid to Tenant
within thirty (30) days after delivery of such statements.
7.2.2 Any amount due under Section 7.2 for any period which is
less than a full month shall be prorated (based on a thirty (30) day month) for
such fractional month.
7.3. Landlord's annual statement shall be final and binding upon Tenant
unless Tenant, within one hundred twenty (120) days after Tenant's receipt
thereof, shall contest any item therein by giving written notice to Landlord,
specifying each item contested and the reason therefor. If, during such one
hundred twenty (120) day period, Tenant reasonably and in good faith questions
or contests the correctness of Landlord's statement of Tenant's Pro Rata Share
of Operating Expenses, Landlord will provide Tenant with access to Landlord's
books and records and such information as Landlord reasonably determines to be
responsive to Tenant' questions. In the event that after Tenant's review of such
information, Landlord and Tenant cannot agree upon the amount of Tenant's Pro
Rata Share of Operating Expenses, then Tenant shall have the right to have an
independent public accounting firm selected from among the ten (10) largest in
the United States hired by Tenant (at Tenant's sole cost and expense except as
hereinafter provided) and approved by Landlord (which approval shall not be
unreasonably withheld or delayed) audit and/or review such Landlord's books and
records for the year in question (the "Independent Review"). The results of any
such Independent Review shall be binding on Landlord and Tenant. If the
Independent Review shows that Tenant's Pro Rata Share of Operating Expenses
actually paid for the calendar year in question exceeded Tenant's obligations
for such calendar year, Landlord shall at Landlord's option either (1) credit
the excess amount to the next succeeding installments of estimated Additional
Rent or (2) pay the excess to Tenant within thirty (30) days after delivery of
such statement and if such Independent Review determines that Tenant's Pro Rata
Share of Operating Expenses actually paid for such year exceeded Tenant's
obligations for such calendar year by the greater of 5% and $5,000, Landlord
shall pay the reasonable cost of such Independent Review. If the Independent
Review shows that Tenant's payments of Tenant's Pro Rata Share of Operating
Expenses for such calendar year were less than Tenant's obligation for the
calendar year, Tenant shall pay the deficiency to the Landlord within thirty
(30) days after delivery of such statement.
7.4. Tenant shall not be responsible for Operating Expenses
attributable to the time period prior to the Term Commencement Date. The
responsibility of Tenant for Tenant's Pro Rata Share of Operating Expenses shall
continue to the latest of (i) the Term Expiration Date or (ii) the date Tenant
has fully vacated the Demised Premises (including, without limitation, the
removal of all items required hereby to be removed and the completion of all
procedures necessary to fully release and terminate any permits or licenses
restricting the use of the Demised Premises in any manner), or (iii) if
termination of the Lease is due to the default of Tenant, the date of rental
commencement of a replacement tenant.
7.5. Operating Expenses for the calendar year in which Tenant's
obligation to share
8
<PAGE>
therein commences and in the calendar year in which such obligation ceases,
shall be prorated on a basis reasonably determined by Landlord. Expenses such as
taxes, assessments and insurance premiums which are incurred for an extended
time period shall be prorated based upon time periods to which applicable so
that the amounts attributed to the Demised Premises relate in a reasonable
manner to the time period wherein Tenant has an obligation to share in Operating
Expenses. In the event that any Operating Expenses are allocable to portions of
the Project other than the Demised Premises and the Land, Landlord shall
allocate such Operating Expenses based upon the ratio of the maximum buildable
area of the Land compared to the maximum buildable area of all land comprising
the Project.
7.6. [Intentionally omitted.]
7.7. [Intentionally omitted.].
8. [Intentionally omitted.]
9. Security Deposit
9.1. Tenant has deposited with Landlord the sum set forth in Section
2.1.8 (the "Security Deposit") in cash or a Letter of Credit (as hereinafter
defined) or any combination thereof, which Security Deposit shall be held by
Landlord as security for the performance by Tenant of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the Term (including, without limitation, Tenant's obligations to repair,
maintain and improve the Demised Premises). If Tenant defaults with respect to
any provision of this Lease, including, but not limited to, any provision
relating to the payment of Rent or the repair, maintenance or improvement of the
Demised Premises, Landlord may (but shall not be required to) use, apply or
retain all or any part of the Security Deposit for the payment of any Rent or
any other sum in default, to repair, maintain and improve the Demised Premises
or to compensate Landlord for any other loss or damage which Landlord may suffer
by reason of Tenant's default. If any portion of the Security Deposit is so used
or applied, Tenant shall, upon demand therefor, restore the Security Deposit to
its original amount, and Tenant's failure to do so shall be a material breach of
this Lease. Landlord shall keep the Security Deposit separate from its general
fund, and Tenant shall be entitled to annual payments of interest on any portion
of the Security Deposit held by Landlord as cash, at such rate as Landlord may
receive thereon.
9.2. In lieu of depositing cash as the Security Deposit, Tenant shall
have the right, but not the obligation, to deliver to Landlord an unconditional,
irrevocable standby letter of credit in the amount of $2,580,000 (the "Letter of
Credit"), which Letter of Credit shall (i) be in a form reasonably acceptable to
Landlord, (ii) be issued by Imperial Bank, or such other financial institution
selected by Tenant and reasonably acceptable to Landlord, (iii) be for the
benefit of Landlord, but shall be assignable by Landlord to any subsequent
purchaser or encumbrancer of the Building or the Project, (iv) be automatically
renewable from year to year throughout the Term, (v) be payable by draft sight
in San Diego, California, upon presentation of a certification
9
<PAGE>
signed by an officer of Landlord which states that a default under the Lease has
occurred and has not been cured within any applicable cure period, and (vi) be
payable in the event such Letter of Credit is not renewed on or before the date
which is thirty (30) days prior to its expiration.
9.3. In the event of bankruptcy or other debtor-creditor proceedings
against Tenant, the Security Deposit shall be deemed to be applied first to the
payment of Rent and other charges due Landlord for all periods prior to the
filing of such proceedings.
9.4. Landlord shall deliver the unapplied and unrefunded portion of the
Security Deposit to any purchaser of Landlord's interest in the Demised Premises
and thereupon Landlord shall be discharged from any further liability with
respect to the Security Deposit. This provision shall also apply to any
subsequent transfers.
9.5. If Tenant shall not then be in default under this Lease, the
Security Deposit, or any balance thereof, shall be returned to Tenant (or, at
Landlord's option, to the last assignee of Tenant's interest hereunder) within
sixty (60) days after the expiration or earlier termination of this Lease.
9.6. [Intentionally omitted.]
9.7. Upon delivery of written evidence reasonably satisfactory to
Landlord that Tenant has completed strategic alliances or joint ventures with a
cumulative value in excess of $10,000,000, as measured by initial and milestone
payments received by Tenant from unaffiliated joint venture or alliance
partners, and provided that no Default, or event which, with the giving of
notice or the passage of time, or both, would constitute a Default, has occurred
and is continuing, the Security Deposit shall be decreased by twenty-five
percent (25%) of the amount then held by Landlord (the "Reduction Amount"), and
(i) Landlord shall return to Tenant the Reduction Amount, if the Security
Deposit is held in cash, within ten (10) days of receipt by Landlord of such
written evidence, or (ii) Landlord shall permit Tenant to deliver a replacement
letter of credit in the amount of the Security Deposit then held by Landlord
less the Reduction Amount, which replacement letter of credit shall otherwise
comply with the terms of Section 9.2, and Landlord shall return to Tenant the
Letter of Credit upon receipt of the replacement letter, at which time the
replacement letter of credit shall become the Letter of Credit.
9.8. If, subsequent to any reduction in the Security Deposit pursuant
to Section 9.7, Landlord receives written evidence reasonably satisfactory to
Landlord that Tenant's net sales from products for the immediately preceding
fiscal year (as reported in Tenant's most recent public filings with the
Securities and Exchange Commission) were no less than $10,000,000, and provided
that no Default, or event which, with the giving of notice or the passage of
time, or both, would constitute a Default, has occurred and is continuing, the
Security Deposit shall be decreased by twenty-five percent (25%) of the amount
then held by Landlord (the "Additional Reduction Amount"), and (i) Landlord
shall return to Tenant the Additional Reduction Amount, if the Security Deposit
is held in cash, within ten (10) days of receipt by Landlord of such written
10
<PAGE>
evidence, or (ii) Landlord shall permit Tenant to deliver a replacement letter
of credit in the amount of the Security Deposit then held by Landlord less the
Additional Reduction Amount, which replacement letter of credit shall otherwise
comply with the terms of Section 9.2, and Landlord shall return to Tenant the
letter of credit then held by Landlord upon receipt of the replacement letter,
at which time the replacement letter of credit shall become the Letter of
Credit.
10. Use
10.1. Tenant shall use the Demised Premises for the purpose set forth
in Section 2.1.9 and shall not use the Demised Premises, or permit or suffer the
Demised Premises to be used, for any other purpose without the prior written
consent of Landlord which may be withheld in Landlord's sole discretion;
provided, however, that Landlord consents to the Antenna Lease (as hereinafter
defined) to the same extent as in effect as of the Effective Date.
10.2. Tenant shall not use or occupy the Demised Premises in violation
of any federal, state and local laws and regulations, zoning ordinances, or of
the certificate of occupancy issued for the Building, and shall, upon thirty
(30) days' written notice from Landlord, or, if required by law or if resulting
in a threat to human health or safety, then within five (5) days written notice
or as required by law, discontinue any use of the Demised Premises which is
declared or claimed by any governmental authority having jurisdiction to be a
violation of law, regulation or zoning ordinance or of said certificate of
occupancy, subject to Tenant's right to reasonably contest or appeal such
governmental action; provided, however, that such contest rights shall not
suspend Tenant's obligation to so comply during the pendency of any appeal or
contest. Tenant shall comply with any direction of any governmental authority
having jurisdiction which shall, by reason of the nature of Tenant's use or
occupancy of the Demised Premises, impose any duty upon Tenant or Landlord with
respect to the Demised Premises or with respect to the use or occupation
thereof; provided, however (but without limiting Landlord's ability to determine
that the cost thereof constitutes an Operating Expense for which Tenant is
responsible in accordance with the terms hereof), that Tenant shall have no
obligation to make any alterations, replacements or improvements to the Demised
Premises, Building or Project, including without limitation structural or
capital improvements, required to comply with such governmental action if such
alterations, replacements or improvements are not required as a result of
Tenant's use or occupancy of the Demised Premises or as a result of the Tenant
Improvements or any other Tenant alterations to the Demised Premises or
installation of Tenant's personal property in the Demised Premises. For example,
Tenant shall not be responsible for complying with seismic upgrade requirements
imposed by governmental authority beyond Tenant's obligation to pay Tenant's Pro
Rata Share of Operating Expenses associated with such capital improvements.
10.3. Tenant shall not do or permit to be done anything which will
invalidate or permanently increase the cost of any fire, environmental, extended
coverage or any other insurance policy covering the Building and Project and
shall comply with all rules, orders, regulations, and requirements of the
insurers of the Building and Project and Tenant shall promptly upon demand
reimburse Landlord for any additional premium charged for such policy
11
<PAGE>
by reason of Tenant's failure to comply with the provisions of this Section
10.3.
10.4. [Intentionally omitted.]
10.5. Tenant shall deliver to Landlord copies of all new keys and
access control devices promptly following installation. Tenant must, upon
termination of this Lease return to Landlord all keys to offices and restrooms,
either furnished to, or otherwise procured by Tenant. In the event any key so
furnished is lost, Tenant shall pay to Landlord the cost of replacing the same
or of changing the lock or locks opened by such lost key if Landlord shall deem
it necessary to make such change.
10.6. No awnings or other projection shall be attached to any outside
wall of the building. Neither the interior nor exterior of any windows shall be
coated or otherwise sunscreened without the express written consent of Landlord
(which shall not be unreasonably withheld, conditioned or delayed), nor shall
any bottles, parcels, or other articles be placed on the windowsills. No
equipment, furniture or other items of personal property shall be placed on any
exterior balcony without the express written consent of Landlord.
10.7. No sign, advertisement, or notice shall be exhibited, painted or
affixed by Tenant on any part of the Demised Premises or the Building which is
visible from the exterior of the Building without the prior written consent of
Landlord, which shall not be unreasonably withheld, conditioned or delayed.
10.8. Tenant shall cause any office equipment or machinery to be
installed in the Demised Premises so as to reasonably prevent sounds or
vibrations therefrom from extending into any other building of the Project or
any portion of the Building not leased to or occupied by Tenant. Further, no
equipment exceeding the recommended floor load capacity shall be placed upon the
second floor Demised Premises without advance notice to and approval by
Landlord. Placement of such equipment, if approved by Landlord, shall be only at
a location designed to carry the weight of such equipment.
10.9. Tenant shall not do or permit anything to be done in or about the
Demised Premises which shall in any way obstruct or interfere with the rights of
other tenants of the Project, or injure or unreasonably annoy them, or use or
allow the Demised Premises to be used for immoral or unlawful purpose (provided,
however, that any medical research activity permitted by the United States Food
and Drug Administration shall not be deemed to be an immoral purpose), nor shall
Tenant knowingly cause, maintain or permit any nuisance or commit or permit any
act of waste in, on, or about the Demised Premises, Building or Project.
10.10. Notwithstanding any other provision herein to the contrary,
Tenant shall be responsible for all liabilities, costs and expense arising out
of or in connection with the compliance of the Demised Premises with the
Americans With Disabilities Act, 42 U.S.C. ss. 12101, et seq. (together with
regulations promulgated pursuant thereto, "ADA") and Tenant shall indemnify,
defend and hold harmless from and against any loss, cost, liability or expense
12
<PAGE>
(including reasonable attorneys fees and disbursements) arising out of any
failure of the Demised Premises to comply with the ADA.
11. Brokers
11.1. Tenant represents and warrants that it has had no dealings with
any real estate broker or agent in connection with the negotiation of this Lease
other than John Burnham & Company ("Broker"), as has been disclosed in writing
to Landlord and that Tenant knows of no other real estate broker or agent who is
or might be entitled to a commission in connection with this Lease.
11.2. Tenant hereby indemnifies and shall defend, hold and save
Landlord harmless from and against any and all claims for any commissions or
fees in connection with this Lease made by any broker or finder having worked,
or claiming to have worked, on behalf Tenant, other than Broker. Landlord hereby
indemnifies and shall defend, hold and save Tenant harmless from and against any
and all claims for any commissions or fees in connection with this Lease made by
any broker or finder having worked, or claiming to have worked, on behalf of
Landlord, other than Broker.
11.3. Tenant represents and warrants that no broker or agent has made
any representation or warranty relied upon by Tenant in Tenant's decision to
enter into this Lease other than as contained in this Lease.
11.4. Tenant acknowledges and agrees that the employment of brokers by
Landlord is for the purpose of solicitation of offers of lease from prospective
tenants and no authority is granted to any broker to furnish any representation
(written or oral) or warranty from Landlord unless expressly contained within
this Lease. Landlord in executing this Lease does so in reliance upon Tenant's
representations and warranties contained within Sections 11.1 and 11.3 hereof.
12. Holding Over
12.1. If, with Landlord's express written consent, Tenant holds
possession of all or any part of the Demised Premises after the expiration or
earlier termination Term, Tenant shall become a tenant from month-to-month
(provided, however, that if such holdover is with Landlord's consent and is for
less than 30 days, Tenant's obligation to pay Basic Annual Rent (or such other
amount as Landlord has indicated) shall be on a per diem basis during such
initial 30-day period) upon the Term Expiration Date, and in such case Tenant
shall continue to pay monthly installments of Basic Annual Rent in the amount
payable upon the Term Expiration Date, or such other amount as Landlord may
indicate, in Landlord's sole and absolute discretion, in such written consent,
and all other provisions, representations, covenant and agreements contained
herein, other than with respect to the Term and any extensions thereof, but
specifically including, without limitation, the adjustment of Basic Annual Rent
pursuant to Section 6 hereof,
13
<PAGE>
shall remain in full force and effect.
12.2. Notwithstanding the foregoing, if Tenant remains in possession of
the Demised Premises after the expiration or earlier termination of the Term
without the express written consent of Landlord, Tenant shall become a tenant at
sufferance upon the terms of this Lease except that the monthly rental shall be
equal to one hundred twenty-five percent (125%) of the Basic Annual Rent and
Additional Rent in effect during the last thirty (30) days of the Term. Tenant
shall be responsible for all damages suffered by Landlord resulting from or
occasioned by Tenant's holding over.
12.3. Acceptance by Landlord of Rent after such expiration or earlier
termination shall not result in a renewal or reinstatement of this Lease.
12.4. The foregoing provisions of this Section 12 are in addition to
and do not affect Landlord's right to re-entry or any other rights of Landlord
hereunder or as otherwise provided by law.
13. Taxes on Tenant's Property
13.1. Tenant shall pay, prior to delinquency, any and all taxes levied
against any personal property or trade fixtures placed by Tenant in or about the
Demised Premises.
13.2. Subject to Tenant's contest rights as provided in Section 13.4
below, if any such taxes on Tenant's personal property or trade fixtures are
levied against Landlord or Landlord's property or, if the assessed valuation of
the Building is increased by the inclusion therein of a value attributable to
Tenant's personal property or trade fixtures, and if Landlord, after written
notice to Tenant, pays the taxes based upon such increase in the assessed
valued, then Tenant shall upon demand repay to Landlord the taxes so levied
against Landlord.
13.3. If any improvements in or alterations to the Demised Premises,
whether owned by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which improvements
conforming to Landlord's "Building Standard" in other spaces in the Project are
assessed, then the real property taxes and assessments levied against Landlord
or the Project by reason of such excess assessed valuation shall be deemed to be
taxes levied against personal property of Tenant and shall be governed by the
provisions of Section 13.2 above. Any such excess assessed valuation due to
improvements in or alterations to space in the Project leased by other tenants
of Landlord shall not be included in the Operating Expenses defined in Section
7.1, but shall be treated, as to such other tenants, as provided in this Section
13.3.
13.4. Tenant shall have the right, by appropriate proceedings, to
protest or contest with the appropriate governmental agency any assessment,
reassessment or allocation of Property Taxes or other taxes payable by Tenant
hereunder, in whole or in part; provided that Tenant
14
<PAGE>
provides such financial assurances as Landlord may reasonably require in order
to bond over or provide for such taxes and no jeopardy or threat to the Project
or any portion thereof exists as a result. Tenant may act in its own name and
Landlord shall, at Tenant's request and expense, reasonably cooperate with
Tenant in connection with such contest. Tenant may utilize any legal procedure
for payment under protest, if available, and may sue to recover overpayments.
Tenant shall indemnify, hold harmless and defend Landlord and the Demised
Premises from any liens, liabilities, claims, losses, costs, expenses, fees,
judgments, actions, causes of action or damages (including, without limitation,
reasonable attorneys' fees and expenses) arising out of or related to any
contest of Property Taxes by Tenant and shall pay any Property Taxes ultimately
determined to be due, together with any interest or penalties charged by the
taxing entity.
14. Condition of Demised Premises
14.1. Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty with respect to the condition
of the Demised Premises or the Building or Project, or with respect to the
suitability for the conduct of Tenant's business. The taking of possession of
the Demised Premises by Tenant shall, except as otherwise agreed in writing by
Landlord and Tenant conclusively establish that the Demised Premises and
Building were at such time in good, sanitary and satisfactory condition and
repair. Tenant further acknowledges that, prior to the Effective Date, Tenant
has been in possession of the Demised Premises as owner, that as owner Tenant
has developed an intimate familiarity with the Building and the Project and that
Tenant is accepting the Demised Premises "AS-IS."
15. Common Areas and Parking Facilities
15.1. Tenant shall have the non-exclusive right, in common with other
tenants of the Building or the Project, to use the Common Areas other than
parking facilities (provided, however, that with respect to the Common Areas
within the Building and so long as Tenant is the sole tenant of the Building,
Tenant shall have the exclusive rights thereto, subject to the rights of
Landlord under this Lease), subject to the rules and regulations adopted by
Landlord and attached hereto as Exhibit "C" together with such other reasonable
and nondiscriminatory rules and regulations as are hereafter promulgated by
Landlord in its discretion (the "Rules and Regulations").
15.2. [Intentionally omitted.]
15.3. Tenant shall have the exclusive right to use the parking
facilities located upon the Land, subject to the Rules and Regulations;
provided, however, that nothing in this Section 15.3 is intended to create an
affirmative duty on Landlord's part to monitor parking.
15.4. Landlord reserves the right to modify Common Areas including the
right to add or remove exterior and interior landscaping (provided, however,
that Landlord shall have no right to modify the portion of the Common Area
located within the Building unless a default by Tenant
15
<PAGE>
has occurred).
16. Utilities and Services
16.1. Tenant shall pay for all water, (including the cost to service,
repair and replace reverse osmosis, deionized and other treated water) gas,
heat, light, power, telephone and other utilities supplied to the Demised
Premises, the Building and the Common Area, together with any fees, surcharges
and taxes thereon, including, without limitation, water in Common Areas for
drinking and lavatory purposes. If any such utility is not separately metered to
Tenant, Tenant shall pay a reasonable proportion to be determined by Landlord of
all charges jointly metered with other premises as part of Tenant's Pro Rata
Share of Operating Expenses, or in the alternative, Landlord may, at its option,
monitor the usage of such utilities by Tenant and charge Tenant with the cost of
purchasing, installing and monitoring such metering equipment, which shall be
paid by Tenant as Additional Rent. Tenant agrees to pay for its Pro Rata Share
of water consumed in Common Areas, as shown on said meter, as and when bills are
rendered, and on default in making such payment, Landlord may pay such charges
and collect the same from Tenant. Any such costs or expenses incurred, or
payments made by Landlord for any of the reasons or purposes herein above stated
shall be deemed to be Additional Rent payment by Tenant and collectible by
Landlord as such.
16.2. Landlord shall not be liable for, nor shall any eviction of
Tenant result from, the failure to furnish any such utility or service whether
or not such failure is caused by accident, breakage, repairs, strikes, lockouts
or other labor disturbances or labor disputes of any character, governmental
regulation, moratorium or other governmental action, inability despite the
exercise of reasonable diligence or by any other cause, including the gross
negligence of Landlord. In the event of such failure, Tenant shall not be
entitled to any abatement or reduction of Rent (except to the extent of any
rental abatement or interruption insurance proceeds actually received by
Landlord with respect to such period), nor be relieved from the operation of any
covenant or agreement of this Lease.
16.3. Tenant shall pay directly to the applicable utility or service
provider, prior to delinquency, for any separately metered utilities and
services which may be furnished to Tenant or the Demised Premises during the
Term.
16.4. Tenant shall not, without the prior written consent of Landlord,
use any device in the Demised Premises, including, but without limitation, data
processing machines, which will in any way increase the amount of ventilation,
air exchange, gas, steam, electricity or water beyond the existing capacity of
the Building as proportionately allocated to the Demised Premises based upon
Tenant's Pro Rata Share.
16.5. If Tenant shall require services in excess of that usually
furnished or supplied for similar space in the Building, by reason of equipment
operated and/or extended hours of business operation, Tenant may procure the
same all at Tenant's sole cost and expense.
16
<PAGE>
16.6. Landlord shall provide water to the outdoor portions of the
Common Areas for landscape irrigation purposes only, and Tenant shall pay
Tenant's Pro Rata Share thereof as an Operating Expense.
16.7. Landlord reserves the right to stop service of the elevator,
plumbing, ventilation, air conditioning and electric systems, when necessary, by
reason of accident or emergency or for repairs, alterations or improvements, in
the judgment of Landlord desirable or necessary to be made, until said repairs,
alterations or improvements shall have been completed, and Landlord shall
further have no responsibility or liability for failure to supply elevator
facilities, plumbing, ventilation, air conditioning, electric or other utility
service, when prevented from doing so by strike or accident, or by laws, rules,
order, ordinances, directions, regulations or requirements of any federal,
state, country or municipal authority or failure to deliver gas, oil or other
suitable fuel supply or inability by exercise of reasonable diligence to obtain
gas, oil or other suitable fuel. It is expressly understood and agreed that any
covenants on Landlord's part to furnish any service pursuant to any of the
terms, covenants, conditions, provisions or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, shall not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever.
17. Alterations
17.1. Tenant shall make no alterations, additions or improvements in or
to the Demised Premises without Landlord's prior written consent, which approval
shall not be unreasonably withheld, conditioned or delayed (provided, however,
that in the event any proposed alteration, addition or improvement affects (i)
any structural portions of the Building including exterior walls, roof,
foundation and core of the Building, (ii) the exterior of the Building or (iii)
any Building systems, including elevator, plumbing, air conditioning, heating
electrical, security, life safety and power, then Landlord may withhold its
consent with respect thereto if Tenant does not provide adequate assurance to
Landlord of Tenant's ability to restore the Demised Premises to the condition in
which they existed prior to the construction of such alterations upon the Term
Expiration Date), and then only by architects, contractors, suppliers or
mechanics approved by Landlord in Landlord's sole discretion (provided, however,
that Tenant may make minor alterations to the interior portions of the Building
which do not affect the Building systems, which do not affect the structural
portions of the Building and which do not exceed $100,000 in the aggregate in
value without Landlord's prior consent but upon not less than 14 days' prior
notice to Landlord). In seeking Landlord's approval, Tenant shall provide
Landlord, at least fourteen (14) days in advance of any proposed construction,
with plans, specifications, bid proposals, work contracts and such other
information concerning the nature and cost of the alterations as may be
reasonably requested by Landlord.
17.2. [Intentionally omitted.]
17
<PAGE>
17.3. Tenant agrees that there shall be no construction of partitions
or other obstructions which might interfere with free access to mechanical
installation or service facilities of the Building or interfere with the moving
of Landlord's equipment to or from the enclosures containing said installations
or facilities.
17.4. Tenant agrees that any work by Tenant shall be accomplished in
such a manner as to permit any fire sprinkler system and fire water supply lines
to remain fully operable at all times.
17.5. Tenant covenants and agrees that all work done by Tenant (whether
or not requiring Landlord's consent) shall be performed in compliance with all
laws, rules, orders, ordinances, directions, regulations, and requirements of
all governmental agencies, offices, departments, bureaus and boards having
jurisdiction, and in full compliance with the rules, orders, directions,
regulations, and requirements of any applicable fire rating bureau. Upon demand
by Landlord, Tenant shall provide Landlord with (i) construction agreements,
building plans, lien releases and other similar documentation with respect to
any improvements or alterations reasonably requested by Landlord or Landlord's
lenders, insurers or investors, and (ii) "as-built" plans showing any change in
the Demised Premises.
17.6. Before commencing any work, Tenant shall give Landlord at least
fourteen (14) days prior written notice of the proposed commencement of such
work and shall, if required by Landlord, secure at Tenant's own cost and
expenses a completion and lien indemnity bond, letter of credit or such other
security reasonably satisfactory to Landlord for said work.
17.7. All alterations, attached equipment, decorations, fixtures, trade
fixtures, additions and improvements, subject to Section 17.9, attached to or
built into the Demised Premises, made by either of Landlord or Tenant, including
(without limiting the generality of the foregoing) all floor and wall covering,
built-in cabinet work and paneling, sinks and related plumbing fixtures,
exterior venting fume hoods and walk-in freezers and refrigerators, clean rooms,
climatized rooms, ductwork, conduits, electrical panels and circuits, shall
become the property of Landlord upon the Term Expiration Date or earlier
termination of the term of this Lease, and shall remain upon and be surrendered
with the Demised Premises as a part thereof; provided, however, that Landlord
may at the time of Landlord's consent to such alterations (or at any time if no
consent is obtained from Landlord) elect to cause Tenant to remove any such
items from the Demised Premises upon the Term Expiration Date or earlier
termination of this Lease, and, if Landlord so elects, Tenant shall remove such
alterations, attached equipment, decorations, fixtures, trade fixtures,
additions and improvements upon the Term Expiration Date or earlier termination
of this Lease and restore any damage caused by or occasioned as a result of such
removal and further provided that Tenant may remove the items listed on Exhibit
"D" attached hereto so long as Tenant restores any damage caused by or
occasioned as a result of such removal.
17.8. Tenant shall repair any damage to the Demised Premises caused by
Tenant's removal of any property from the Demised Premises. During any such
restoration period, Tenant
18
<PAGE>
shall pay Rent to Landlord as provided herein as if said space were otherwise
occupied by Tenant.
17.9. Except as to those items listed on Exhibit "D" attached hereto
and incorporated herein, all business and trade fixtures, machinery and
equipment, built-in furniture and cabinets, together with all additions and
accessories thereto, installed in and upon the Demised Premises shall be and
remain the property of Landlord and shall not be moved by Tenant at any time
during the Term. If Tenant shall fail to remove all of its effects from the
Demised Premises prior to expiration or earlier termination of this Lease, then
Landlord may, at its option, remove the same in any manner that Landlord shall
choose, and store said effects without liability to Tenant for loss thereof or
damage thereto, and Tenant agrees to pay Landlord upon demand any expenses
incurred to such removal and storage or Landlord may, at its option, without
notice, sell said property or any of the same, at private sale and without legal
process, for such price as Landlord may obtain and apply the proceeds of such
sale against any amounts due under this Lease from Tenant to Landlord and
against any expenses incident to the removal, storage and sale of said personal
property.
17.10. Notwithstanding any other provision of this Section 17 to the
contrary, except with respect to the items list on Exhibit "D" attached hereto,
in no event may Tenant remove any improvement from the Demised Premises as to
which Landlord contributed payment, without Landlord's prior written consent,
which may be withheld in Landlord's sole discretion.
17.11. Tenant shall pay to Landlord an amount equal to ten percent
(10%) (not to exceed $5,000) of the cost to Tenant of all charges incurred by
Tenant of its contractors or agents in connection with any alterations,
additions or improvements to the Demised Premises for projects less than
$250,000, and $10,000 plus all reasonable out-of-pocket costs and expenses
incurred by Landlord in connection therewith for all projects of $250,000 or
more, to cover Landlord's overhead and expenses for plan review, coordination,
scheduling and supervision thereof. Landlord shall use its good faith efforts to
review, coordinate, schedule and supervise any such project with Landlord's
internal personnel prior to incurring any material out-of-pocket cost related
thereto. For purposes of payment of such sum, Tenant shall submit to Landlord
copies of all bills, invoices, and statements covering the costs of such
charges, which will be accompanied by payment to Landlord of the percentage fee
set forth above. Tenant shall reimburse Landlord for any extra expense
reasonably incurred by Landlord by reason of faulty work done by Tenant or its
contractors, or by reason of inadequate cleanup.
18. Repairs and Maintenance
18.1. Landlord shall repair and maintain the structural portions of the
Demised Premises and the exterior portions of the Common Areas, including,
without limitation, structural portions of the roof system (but not including
the roof membrane), foundations, exterior walls, interior load bearing walls,
landscaping and parking areas (and the full cost thereof shall be included as a
part of Operating Expenses), unless such maintenance or repairs are
19
<PAGE>
required in whole or in part because of any act, neglect, fault of or omissions
of any duty by Tenant, its agents, servants, employees or invitees, in which
case Tenant shall pay to Landlord the cost of such maintenance and repairs. If
Landlord fails to perform any of its repair and maintenance obligations under
this Section 18.1, and such failure materially affects Tenant's ability to use
and occupy the Demised Premises for the purposes permitted herein, Tenant shall
have the right, but not the obligation, at Tenant's sole cost and expense to
perform such repairs and/or maintenance if such failure continues for more than
fifteen (15) days after written notice from Tenant to Landlord and any of
Landlord's lenders; provided, however, that if the nature of the repairs and/or
maintenance to be completed by Landlord is such that more than fifteen (15) days
are required to complete such repairs and/or maintenance, Landlord shall have
such additional time as is reasonably necessary to complete such repairs and/or
maintenance so long as Landlord takes appropriate action to commence such
repairs and/or maintenance within such fifteen (15) day period and thereafter
diligently pursues such repairs and/or maintenance to completion.
18.2. Except for services of Landlord, if any, required by Section
18.1, Tenant shall at Tenant's sole cost and expense keep the Demised Premises
and the Common Areas and every part thereof (including, without limitation, the
roof membrane, the plumbing and the fire sprinkler, heating, ventilating, air
conditioning, elevator and electrical systems) in good condition and repair,
damage thereto from ordinary wear and tear and casualty and condemnation not
caused by Tenant excepted. Tenant shall, upon the Term Expiration Date or
earlier termination of this Lease, surrender the Demised Premises to Landlord in
as good as condition as when received, ordinary wear and tear and casualty and
condemnation not caused by Tenant excepted. Landlord shall have no obligation to
alter, remodel, improve, repair, decorate or paint the Demised Premises or any
part thereof, except as specifically set forth in Sections 22 and 23 of this
Lease.
18.3. Landlord shall not be liable for any failure to make any repairs
or to perform any maintenance which is an obligation of Landlord unless such
failure shall persist for an unreasonable time after written notice of the need
of such repairs or maintenance is given to Landlord by Tenant. Tenant waives the
rights under Section 1941 and 1942 of the California Civil Code or under any
similar law, statute or ordinance now or hereafter in effect to make repairs at
Landlord's expense.
18.4. Repairs under this Section 18 which are obligations of Landlord
are subject to allocation among Tenant and other tenants as Operating Expenses.
18.5. This Section 18 relates to repairs and maintenance arising in
ordinary course of operation of the Building, the Project and any related
facilities. In the event of fire, earthquake, flood, vandalism, war, or similar
cause of damage or destruction, this Section 18 shall not be applicable and the
provisions of Section 22 shall apply and control.
19. Liens
20
<PAGE>
19.1. Subject to the immediately succeeding sentence, Tenant shall keep
the Demised Premises, the Building, the Project and the real property upon which
the Building and the Project are situated free from any liens arising out of
work performed, materials furnished or obligations incurred by Tenant. Tenant
further covenants and agrees that any mechanic's lien filed against the Demised
Premises or against the Building or the Project for work claimed to have been
done for, or materials claimed to have been furnished to Tenant, will be
discharged by Tenant, by bond or otherwise, within ten (10) business days after
the filing thereof, at the sole cost and expense of Tenant, subject, however, to
Tenant's latest rights set forth in Section 19.4 below.
19.2. Should Tenant fail to discharge any lien of the nature described
in Section 19.1, Landlord may at Landlord's election pay such claim or post a
bond or otherwise provide security to eliminate the lien as a claim against
title and the cost thereof shall be immediately due from Tenant as Additional
Rent.
19.3. In the event Tenant shall lease or finance the acquisition of
equipment, furnishings, or other personal property of a removable nature
utilized by Tenant in the operation of Tenant's business, Tenant warrants that
any Uniform Commercial Code Financing Statement executed by Tenant will upon its
face or by exhibit thereto indicate that such Financing Statement is applicable
only to removable personal property of Tenant located within the Demised
Premises. In no event shall the address of the Building be furnished on the
statement without qualifying language as to applicability of the lien only to
removable personal property. Should any holder of a Financing Statement executed
by Tenant record or place of record a Financing Statement which appears to
constitute a lien against any interest of Landlord or against equipment which
may be located other than within the Demised Premises, Tenant shall within ten
(10) days after filing such Financing Statement (i) cause a copy of the Security
Agreement or other documents to which Financing Statement pertains to be
furnished to Landlord to facilitate Landlord's being in a position to show such
lien is not applicable to Landlord's interest, and (ii) cause Tenant's lender to
amend any documents of record so as to clarify that such lien is not applicable
to any interest of Landlord in the Building or the Project. If Tenant desires to
purchase subject to a security interest, lease or obtain a loan secured by
tenant's personal property and requests that Landlord execute a lien waiver or
consent to encumbrance in connection therewith, Landlord agrees to execute such
lien waiver or consent to encumbrance in a form reasonably acceptable to the
Landlord, the delivery of which shall not be unreasonably delayed by the
Landlord.
19.4. Notwithstanding anything to the contrary herein, Tenant may, in
good faith, contest the validity of any lien of the nature described in Section
19.1, or any claim or demand arising therefrom, and, as a condition thereto,
Tenant shall, at its sole expense, indemnity, defend, hold harmless and protect
itself, Landlord and the Demised 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 Demised Premises or the Project.
If Landlord shall in its discretion require, Tenant shall furnish to Landlord a
letter of credit or surety bond in
21
<PAGE>
a form reasonably satisfactory to Landlord and 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 Demised Premises free from the effect of such lien or claim.
20. Indemnification and Exculpation
20.1. Tenant hereby indemnifies and agrees to defend and save Landlord
harmless from and against any and all demands, claims, liabilities, losses,
costs, expenses, actions, causes of action, damages or judgments, and all
reasonable expenses incurred in investigating or resisting the same (including,
without limitation, reasonable attorneys' fees, charges and disbursements), for
injury or death to person or injury to property occurring within or about the
Demised Premises, arising directly or indirectly out of Tenant's, it's
employees, agents or guests use or occupancy of the Demised Premises or a breach
or default by Tenant in the performance of any of its obligations hereunder,
unless caused solely by the willful act or gross negligence of the Landlord.
20.2. Landlord shall not be liable to Tenant and Tenant assumes all
risk of damage to personal property or scientific research, including loss of
records kept within the Demised Premises if the cause of such damage is of a
nature which, if Tenant had elected to maintain fire and theft insurance with
extended coverage and business records endorsement available on a commercially
reasonable basis, would be a loss subject to settlement by the insurance
carrier, including, but not limited to, damage or losses caused by fire,
electrical malfunctions, gas explosion, and water damage of any type, including,
but not limited to, broken water lines, malfunction of fire sprinkler system,
roof leakage or stoppages of lines unless and except if such loss is due to
willful disregard of Landlord after written notice by Tenant of need for a
repair which Landlord is responsible to make for an unreasonable period of time.
Tenant further waives any claim for injury to Tenant's business or loss of
income relating to any such damage or destruction of personal property including
any loss of records.
20.3. Landlord shall not be liable to Tenant for any damages arising
from any act, omission or neglect of any other tenant in the Building or the
Project or of any other third party provided that the foregoing shall not create
any liability of Tenant for any act, omission or neglect of any other tenant in
the Building or Project (other than Tenant's subtenants, licensees, invitees,
agents or contractors).
20.4. Security devices and services, if any, while intended to deter
crime may not in given instances prevent theft or other criminal acts and it is
agreed that Landlord shall not be liable for injuries or losses caused by
criminal acts of third parties and the risk that any security device or service
may malfunction or otherwise be circumvented by a criminal is assumed by Tenant.
Tenant shall at Tenant's cost obtain insurance coverage to the extent Tenant
desires protection against such criminal acts.
22
<PAGE>
21. Insurance - Waiver of Subrogation
21.1. Landlord, as part of Operating Expenses, shall carry insurance
upon the Building, in an amount equal to full replacement cost (exclusive of the
costs of excavation, foundations, and footings, and without reference to
depreciation taken by Landlord upon its books or tax returns) or such lesser
coverage as Landlord may elect provided such coverage is not less than ninety
percent (90%) of such full replacement cost or the amount of such insurance
Landlord's mortgage lender requires Landlord to maintain, providing protection
against any peril generally included within the classification "Fire and
Extended Coverage" together with insurance against sprinkler damage (if
applicable), vandalism and malicious mischief. Landlord, subject to availability
thereof and, as part of Operating Expenses, shall further insure as Landlord
deems appropriate coverage against flood, environmental hazard and earthquake,
loss or failure of building equipment, rental loss during the period of repair
or rebuild (for a period not exceeding 18 months), workmen's compensation
insurance and fidelity bonds for employees employed to perform services.
Notwithstanding the foregoing, Landlord may, but shall not be deemed required
to, provide insurance as to any improvements installed by Tenant after the
Effective Date or which are in addition to the standard improvements customarily
furnished by Landlord without regard to whether or not such are made a part of
the Building. The insurance maintained by Landlord on the Project shall include
reasonable deductibles as are maintained by prudent owners of similar projects
in the San Diego metropolitan area (which, except with respect to earthquake
coverages, shall not exceed 10% of the replacement value of the Building).
21.2. Landlord, as part of Operating Expenses, shall further carry
public and excess liability insurance with a single loss limit of not less than
Five Million Dollars ($5,000,000) for death or bodily injury, or property damage
with respect to the Project.
21.3. Tenant at its own cost shall procure and continue in effect from
the Term Commencement Date and continuing throughout the Term (and occupancy by
Tenant, if any, after the Term Expiration Date) comprehensive public and excess
liability insurance with limits of not less than Five Million Dollars
($5,000,000) per occurrence for death or bodily injury and not less than Five
Million Dollars ($5,000,000) for property damage with respect to the Demised
Property.
21.4. The aforesaid insurance required of Tenant shall name Landlord
and any mortgage lender of Landlord who so requests as an additional insured.
Said insurance shall be with companies having a rating of not less than
policyholder rating of A and financial category rating of at least Class XII in
"Best's Insurance Guide." Tenant shall obtain for Landlord from the insurance
companies or cause the insurance companies to furnish certificates of coverage
to Landlord. No such policy shall be cancellable or subject to reduction of
coverage or other modification or cancellation except after thirty (30) days
prior written notice to Landlord from the insurer. All such policies shall be
written as primary policies with respect to the Demised Premises, not
contributing with and not in excess of the coverage which Landlord may carry.
Tenant's policy may be a "blanket policy" which specifically provides that the
amount of
23
<PAGE>
insurance shall not be prejudiced by other losses covered by the policy. Tenant
shall, at least twenty (20) days prior to the expiration of such policies,
furnish Landlord with renewals or binders. Tenant agrees that if Tenant does not
take out and maintain such insurance, Landlord may (but shall not be required
to), upon not less than five (5) days notice to Tenant, procure said insurance
on Tenant's behalf and at its cost to be paid as Additional Rent.
21.5. Tenant assumes the risk of damage to any fixtures, goods,
inventory, merchandise, equipment, and leasehold improvements, and Landlord
shall not be liable for injury to Tenant's business or any loss of income
therefrom relative to such damage all as more particularly heretofore set forth
within this Lease. Tenant at Tenant's cost shall carry such insurance as Tenant
desires for Tenant's protection with respect to personal property of Tenant or
business interruption.
21.6. In each instance where insurance is to name Landlord as
additional insured, Tenant shall upon written request of Landlord also designate
and furnish certificates so evidencing Landlord as additional insured to (i) any
lender of Landlord holding a security interest in the Building or real property
upon which the Building is situated, and/or (ii) the landlord under any lease
wherein Landlord is tenant of the real property whereupon the Building is
located if the interest of Landlord is or shall become that of a tenant under a
ground lease rather than that of a fee owner, and/or (iii) any management
company retained by Landlord to manage the Building or the Project.
21.7. Landlord and Tenant each hereby waive any and all rights of
recovery against the other or against the officers, directors, employees,
agents, and representatives of the other, on account of loss or damage
occasioned to such waiving party or its property or the property of others under
its control to the extent that such loss or damage is insured against under any
fire and extended coverage insurance policy which either may have in force at
the time of such loss or damage. Such waivers shall continue as long as their
respective insurers so permit or such waivers are generally permitted by
insurance carriers in the California market (provided that neither party shall
be required to pay any material amount to their respective insurers in order to
maintain such waivers). Any termination of such a waiver shall be by written
notice of circumstances as hereinafter set forth. Landlord and Tenant upon
obtaining the policies of insurance required or permitted under this Lease shall
give notice to the insurance carrier or carriers that the foregoing mutual
waiver of subrogation is contained in this Lease. If such policies shall not be
obtainable with such waiver or shall be so obtainable only at a premium over
that chargeable without such waiver, the party seeking such policy shall notify
the other thereof, and the latter shall have ten (10) days thereafter to either
(i) procure such insurance with companies reasonably satisfactory to the other
party or (ii) agree to pay such additional premium. If neither (i) nor (ii) are
done, this Section 21.7 shall have no effect during such time as such policies
shall not be obtainable or the party in whose favor a waiver of subrogation is
desired refuses to pay the additional premium. If such policies shall at any
time be unobtainable, but shall be subsequently obtainable, neither party shall
be subsequently liable for a failure to obtain such insurance until a reasonable
time after notification thereof by the other party. If the release
24
<PAGE>
of either Landlord or Tenant, as set forth in the first sentence of this Section
21.7 shall contravene any law with respect to exculpatory agreements, the
liability of the party in question shall be deemed not released but shall be
secondary to the other's insurer.
21.8. Landlord may require insurance policy limits to be raised to
conform with any reasonable requirements of Landlord's lender and/or to bring
coverage limits to levels then generally being required by institutional
landlords for comparable projects.
22. Damage or Destruction
22.1. In the event of a partial destruction of the Building by fire or
other perils covered by extended coverage insurance, not exceeding twenty-five
percent (25%) of the full replacement cost thereof, and if the damage thereto is
such that the Building may be repaired, reconstructed or restored within a
period of six (6) months from the date of the happening of such casualty and
Landlord will receive insurance proceeds sufficient to cover the cost of such
repairs (except for any deductible amount provided by Landlord's policy, which
deductible amount if paid by Landlord shall be an Operating Expense), Landlord
shall commence and proceed diligently with the work of repair, reconstruction
and restoration and this Lease shall continue in full force and effect.
22.2. In the event of any damage to or destruction of the Building,
other than as provided in Section 22.1, Landlord may elect to repair,
reconstruct and restore the Building, in which case this Lease shall continue in
full force and effect. If Landlord elects not to repair then the Term Expiration
Date shall be (and this Lease shall terminate as of) the date of destruction.
22.3. Landlord shall give written notice to Tenant of its election to
repair or not to repair, reconstruct or restore the Building or Project within
the sixty (60) day period following the date of damage or destruction.
22.4. Upon any termination of this Lease under any of the provisions of
this Section, the parties shall be released thereby without further obligation
to the other from the date possession of the Demised Premises is surrendered to
the Landlord except for items which have theretofore occurred.
22.5. In the event of repair, reconstruction and restoration as herein
provided, the rental provided to be paid under this Lease shall be abated
proportionately based on the extent to which Tenant's use of the Demised
Premises is impaired during the period of such repair, reconstruction or
restoration, unless Landlord provides Tenant with other comparable space during
the period of repair, which in Tenant's reasonable opinion is suitable for the
temporary conduct of Tenant's business and which shall be leased by Tenant on
terms substantially similar to this Lease, but at monthly installments of Basic
Annual Rent equitably reduced to reflect the area and permitted uses of such
temporary premises.
25
<PAGE>
22.6. Notwithstanding anything to the contrary contained in this
Section, should Landlord be delayed or prevented from completing the repair or
restoration of the damage to the Demised Premises after the occurrence of such
damage or destruction by reason of acts of God or war, governmental
restrictions, inability to procure the necessary labor or materials, strikes, or
other circumstances beyond the control of Landlord, the time for Landlord to
commence or complete repairs shall be extended, provided, at the election of
Landlord, Landlord shall be relieved of its obligation to make such repairs or
restoration and Tenant shall be released from its obligation under this Lease as
of the end of eight (8) months from date of destruction, if repairs required to
provide Tenant use of the Demised Premises are not then substantially complete.
22.7. If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall be obligated to make repairs or restoration only
of those portions of the Building and the Demised Premises which were provided
at Landlord's expense; the repair and restoration of items not provide at
Landlord's expense shall be the obligation of Tenant. In the event Tenant
elected to upgrade certain improvements from the standard normally provided by
Landlord, Landlord shall upon the need for replacement due to an insured loss,
provide only the standard Landlord improvements unless Tenant shall elect to
again upgrade and pay any additional cost of such upgrades, except to such
extent as insurance proceeds which, if received, the excess proceeds are
adequate to provide such upgrades, in addition to providing for basic
reconstruction and standard improvements.
22.8. Notwithstanding anything to the contrary contained in this
Section, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Demised Premises to the extent that insurance
proceeds are not available therefor (except for the amount of the deductible
carried by Landlord as permitted hereunder). In addition, notwithstanding
anything to the contrary contained in this Section 22, if at any time during the
last twenty four (24) months of the term of this Lease there is damage for which
the cost to repair exceeds two months' installments of Basic Annual Rent, or the
repair, reconstruction or restoration of which is reasonably determined by
Landlord to exceed two (2) months from the date of damage or destruction, then
Landlord shall have no obligation whatsoever, to repair, reconstruct or restore
the Demised Premises and Landlord may terminate this Lease effective sixty (60)
days following the date of occurrence of such damage by giving written notice to
the Tenant of its election to do so within thirty (30) days after the date of
occurrence of such damage; provided, however, that if Tenant at the time of such
election has an exercisable option to extend this Lease so that the Lease after
exercise of such option would have an unexpired term of not less seven years,
then Tenant may preserve this Lease, notwithstanding Landlord's election to
terminate 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 any 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
26
<PAGE>
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 22.8.
23. Eminent Domain
23.1. In the event the whole of the Demised Premises, or such part
thereof or of the Project as shall substantially interfere with the Tenant's use
and occupancy thereof, shall be taken for any public or quasi-public purpose by
any lawful power or authority by exercise of the right of appropriation,
condemnation or eminent domain, or sold to prevent such taking, Tenant or
Landlord may terminate this Lease effective as of the date possession is
required to be surrendered to said authority.
23.2. In the event of a partial taking of the Building, the Project or
of drives, walkways, and parking areas serving the Building or the Project for
any public or quasi-public purpose by any lawful power or authority by exercise
of right of appropriation, condemnation, or eminent domain, or sold to prevent
such taking, then without regard as to whether any portion of the Demised
Premises occupied by Tenant was so taken, Landlord may elect to terminate this
Lease as of such taking if such taking is, in the reasonable opinion of
Landlord, of a material nature such as to make it uneconomical to continue use
of the unappropriated portion for purposes of office rentals, laboratory space
or manufacturing facilities.
23.3. Tenant shall be entitled to any award which is specifically
awarded as compensation for the taking of Tenant's personal property which was
installed at Tenant's expense, for the value of Tenant's good will, for any
damage to Tenant's business and for costs of Tenant moving to a new location.
Except as before set forth, any award for such taking shall belong to Landlord.
23.4. If upon any taking of the nature described in this Section 23
this Lease continues in effect, the Landlord shall promptly proceed to restore
the Demised Premises, Building and the Project to substantially their same
condition prior to such partial taking. To the extent such restoration is
feasible, as determined by Landlord in its sole discretion, the Rent shall be
abated proportionately based upon the extent to which Tenant's use of the
Demised Premises has decreased on the basis of the percentage of the rental
value of the Demised Premises after such taking and the rental value of the
Demised Premises prior to such taking.
24. Defaults and Remedies
24.1. Late payment by Tenant to Landlord of Rent and other sums due
will cause Landlord to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult and impracticable to ascertain. Such
costs include, but are not limited to, processing and accounting charges and
late charges which may be imposed on Landlord by the terms of any mortgage or
trust deed covering the Demised Premises. Therefore, if any installment of Rent
due from Tenant is not received by Landlord within ten (10) days after delivery
by Landlord of a notice of delinquency to Tenant, Tenant shall pay to Landlord
an
27
<PAGE>
additional sum of three percent (3%) of the overdue Rent as a late charge. The
parties agree that this late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment by Tenant. In
addition to the late charge, Rent not paid when due shall bear interest from the
5th day after date due until paid at the lesser of (i) twelve percent (12%) per
annum or (ii) the maximum rate permitted by law (such rate being referred to
herein as the "Default Rate").
24.2. No payment by Tenant or receipt by Landlord of a lesser amount
than the Rent payment herein stipulated shall be deemed to be other than on
account of the Rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or pursue any other remedy
provided. If at any time a dispute shall arise as to any amount or sum of money
to be paid by Tenant to Landlord, Tenant shall have the right to make payment
"under protest" and such payment shall not be regarded as a voluntary payment,
and there shall survive the right on the part of Tenant to institute suit for
recovery of the payment paid under protest.
24.3. If Tenant fails to pay any sum of money required to be paid by it
hereunder, or shall fail to perform any other act on its part to be performed
hereunder, Landlord may, without waiving or releasing Tenant from any
obligations of Tenant, but shall not be obligated to, make such payment or
perform such act. All sums so paid or incurred by Landlord, together with
interest thereon, from the date such sums were paid or incurred, at the Default
Rate shall be payable to Landlord on demand as Additional Rent.
24.4. The occurrence of any one or more of the following events shall
constitute a "Default" hereunder by Tenant:
24.4.1 The abandonment of the Demised Premises by Tenant;
24.4.2 The failure by Tenant to make any payment of Rent
within three days after written notice that the same is due (provided, however,
the Landlord shall have no obligation to give Tenant written notice more than
two times in any twelve month period);
24.4.3 The failure by Tenant to observe or perform any
obligation or covenant contained herein (other than described in Section 24.4.1
and 24.4.2) to be performed by Tenant which results in a threat to the health or
safety of any tenants or occupants of the Building or Project, where such
failure shall continue for a period of three (3) business days after written
notice thereof from Landlord to Tenant.
24.4.4 The failure by Tenant to observe or perform any
obligation or covenant contained herein (other than described in Section 24.4.1,
24.4.2 and 24.4.3) to be performed by Tenant, where such failure shall continue
for a period of thirty (30) days after written notice thereof from Landlord to
Tenant. Such notice shall be in lieu of, and not in addition to, any
28
<PAGE>
notice required under California Code or Civil Procedure Section 1161; provided
that if the nature of Tenant's default is such that it reasonably requires more
than thirty (30) days to cure, then Tenant shall not be deemed to be in default
if Tenant shall commence such cure within said thirty (30) day period and
thereafter diligently prosecute the same to completion provided, however, that
such cure is completed no later than sixty (60) days from the date of written
notice;
24.4.5 Tenant makes a general assignment for the benefit of
creditors;
24.4.6 A receiver, trustee or custodian is appointed to, or
does, take title, possession or control of all, or substantially all, of
Tenant's assets;
24.4.7 Tenant files a voluntary petition under the Bankruptcy
Code (or any similar law) or an order for relief is entered against Tenant
pursuant to a voluntary or involuntary proceeding commenced under any chapter of
the Bankruptcy Code;
24.4.8 Any involuntary petition if filed against the Tenant
under any chapter of the Bankruptcy Code and is not dismissed within ninety (90)
days; or
24.4.9 Tenant's interest in this Lease is attached, executed
upon, or otherwise judicially seized and such action is not released within
ninety (90) days of the action.
24.4.10 Tenant defaults beyond any applicable grace period
under that certain Loan and Security Agreement of even date herewith, by and
between Tenant, as borrower, and Landlord, as lender, or any documents or
instruments delivered in connection therewith.
Notices given under this Section 24.4 shall specify the alleged default and
shall demand that Tenant perform the provisions of this Lease or pay the Rent
that is in arrears, as the case may be, within the applicable period of time, or
quit the Demised Premises. No such notice shall be deemed a forfeiture or a
termination of this Lease unless Landlord elects otherwise in such notice.
24.5. During the continuance of a Default by Tenant, with or without
notice or demand and without limiting Landlord in the exercise of any right or
remedy which Landlord may have, Landlord shall be entitled to terminate Tenant's
right to possession of the Demised Premises by any lawful means, in which case
this Lease shall terminate and Tenant shall immediately surrender possession of
the Demised Premises to Landlord. In such event, Landlord shall have the
immediate right to re-enter and remove all persons and property, and such
property may be removed and stored in a public warehouse or elsewhere at the
cost of, and for the account of Tenant, all without service of notice or resort
to legal process and without being deemed guilty of trespass, or becoming liable
for any loss or damage which may be occasioned thereby. In the event that
Landlord shall elect to so terminate this Lease, then Landlord shall be entitled
to recover from Tenant all damages incurred by Landlord by reason of Tenant's
default, including:
29
<PAGE>
24.5.1 The worth at the time of award of any unpaid Rent which
had been earned at the time of such termination; plus
24.5.2 The worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until the time of
award exceeds that portion of such rental loss which Tenant proves could have
been reasonably avoided; plus
24.5.3 The worth at the time of award of the amount by which
the unpaid Rent for the balance of the term after the time of award exceeds the
amount of such rental loss which Tenant proves could have been reasonably
avoided; plus
24.5.4 Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligation under this Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, the cost of restoring
the Demised Premises to the condition required under the terms of this Lease;
plus
24.5.5 At the Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time by
applicable law.
As used in Sections 24.5.1 and 24.5.2 above, "worth at the time of award" shall
be computed by allowing interest at the rate specified in Section 24.1. As used
in Section 24.5.3 above, the "worth at the time of the award" shall be computed
by taking the present value of such amount, by using the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award plus six (6)
percentage points.
24.6. If Landlord does not elect to terminate this Lease as provided in
this Section, then Landlord may, from time to time, recover all Rent as it
becomes due under this Lease. At any time thereafter, Landlord may elect to
terminate this Lease and to recover damage to which Landlord is entitled.
24.7. In the event Landlord elects to terminate this Lease and relet
the Demised Premises, it may execute any new lease in its own name. Tenant
hereunder shall have no right or authority whatsoever to collect any Rent from
such tenant. The proceeds of any such reletting shall be applied as follows:
First, to the payment of any indebtedness other than Rent due
hereunder from Tenant to Landlord, including, but not limited to,
storage charges or brokerage commissions owing from Tenant to Landlord
as the result of such reletting;
Second, to the payment of the costs and expenses of reletting
the Demised Premises, including alterations and repairs which Landlord
deems reasonably necessary and advisable and reasonable attorneys'
fees, charges and disbursements incurred by
30
<PAGE>
Landlord in connection with the retaking of the Demised Premises and
such reletting;
Third, to the payment of Rent and other charges due and unpaid
hereunder; and
Fourth, to the payment of future Rent and other damages
payable by Tenant under this Lease.
24.8. All rights, options, and remedies of Landlord contained in this
Lease shall be construed and held to be nonexclusive and cumulative. Landlord
shall have the right to pursue any one or all of such remedies or any other
remedy or relief which may be provided by law, whether or not stated in this
Lease. No waiver of any default of Tenant hereunder shall be implied from any
acceptance by Landlord of any Rent or other payments due hereunder or any
omission by Landlord to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect defaults
other than as specified in said waiver.
24.9. Termination of this Lease or Tenant's right to possession by
Landlord shall not relieve Tenant from any liability to Landlord which has
theretofore accrued or shall arise based upon events which occurred prior to the
last to occur of (i) the Term Expiration Date or (ii) the date possession of
Demised Premises is surrendered.
24.10. Landlord shall not be in default unless Landlord fails to
perform obligations required of Landlord within a reasonable time, but in no
event shall such failure to continue be for more than thirty (30) days after
written notice by Tenant specifying wherein Landlord has failed to perform such
obligation; provided, however, that if the nature of Landlord's obligation is
such that more than thirty (30) days are required for performance, then Landlord
shall not be in default if Landlord commences performance within such thirty
(30) day period and thereafter diligently prosecutes the same to completion.
24.11. In the event of any default on the part of Landlord, Tenant will
give notice by registered or certified mail to any beneficiary of a deed of
trust or mortgagee or a mortgage covering the Demised Premises and to any
landlord of any lease of any building in which Demised Premises is located whose
address shall have been furnished, and Tenant shall offer such beneficiary,
mortgagee and/or landlord a reasonable opportunity to cure the default,
including the minimum amount of time necessary to obtain possession of the
Building by power of sale or a judicial action if such should prove necessary to
effect a cure, provided the Landlord shall have furnished to Tenant in writing
the names and addresses of all such persons who are to receive such notices.
25. Assignment or Subletting
25.1. Except as hereinafter provided, Tenant shall not, either
voluntarily or by operation of law, directly or indirectly, sell, hypothecate,
assign, pledge, encumber or otherwise transfer this Lease, or sublet the Demised
Premises or any part thereof, or permit or suffer the Demised
31
<PAGE>
Premises or any part thereof to be used or occupied as work space, storage
space, mailing privileges, concession or otherwise by anyone other than Tenant,
Tenant's employees or consultants, or employees of Tenant's joint venture
partners, without the prior written consent of Landlord in each instance, which
consent may be withheld in Landlord's sole discretion (except as otherwise
provided herein). Notwithstanding anything to the contrary set forth herein,
Landlord does hereby consent to the existing sublease of portions of the Demised
Premises pursuant to that certain Industrial Multi-Tenant Lease between Tenant,
as "Landlord," and Advanced Tissue Sciences, Inc., as "Tenant," dated July 15,
1996, and that certain Building Lease Agreement, dated August 9, 1996 (the
"Antenna Lease"), between Tenant, as "Lessor," and Cox California PCS, Inc., as
"Lessee," for rooftop communication facilities, which leases and the obligations
of lessor thereunder are being retained by Tenant.
25.2. If Tenant is a corporation, the shares of which are not actively
traded upon a stock exchange or in the over-the-counter market, a transfer or
series of transfers whereby twenty-five percent (25%) or more of the issued and
outstanding shares of such corporation are, or the voting control is,
transferred (but excepting transfers upon deaths of individual shareholders)
from a person or persons or entity or entities which were owners thereof at time
of execution of this Lease to persons or entities who were not owners of shares
of the corporation at time of execution of this Lease shall be deemed an
assignment of this Lease requiring the consent of Landlord as provided in
Section 25.1 above.
25.3. If Tenant desires to assign this Lease to any entity into which
Tenant is merged, with which Tenant is consolidated, which acquires all or
substantially all of the assets of Tenant, or which is controlled by, under
common control with or controls Tenant, provided that the assignee first
executes, acknowledge and delivers to Landlord an agreement whereby the assignee
agrees to be bound by all of the covenants and agreements in this Lease and that
the assignee shall have a net worth (determined in accordance with generally
accepted accounting principles consistently applied) immediately after such
assignment which is at least equal to the net worth (as so determined) of Tenant
immediately prior to the assignment (or as of the date hereof, if greater), then
Landlord, upon receipt of proof of foregoing shall consent to such assignment.
25.4. In the event Tenant desires to assign, sublease, hypothecate or
otherwise transfer this Lease or sublet the Demised Premises, then at least
fifteen (15) days, but not more than ninety (90) days, prior to the date when
Tenant desires the assignment or sublease to be effective (the "Assignment
Date"), Tenant shall give Landlord a notice (the "Assignment Notice") containing
information (including references) concerning the character of the proposed
assignee or sublessee, the Assignment Date, any ownership or commercial
relationship between Tenant and the proposed assignee or sublessee, and the
consideration and all other material terms and conditions of the proposed
assignment or sublease along with such other information as Landlord may
reasonably require, all in such detail as Landlord shall reasonably require.
Tenant shall also tender to Landlord, reasonable attorneys fees and other costs
or overhead expenses incurred by Landlord in reviewing Tenants request for such
assignment.
32
<PAGE>
25.5. Landlord in making its determination as to whether consent should
be given to a proposed assignment or sublease, may give consideration to the
financial strength of such assignee or subtenant (notwithstanding the assignor
or sublessor remaining liable for Tenant's performance), any change in use which
such assignee or subtenant proposes to make in use of Demised Premises and
desire of Landlord to exercise rights under Section 25.10 to obtain cancellation
of this Lease. In no event shall Landlord be deemed to be unreasonable for
declining to consent to transfer to an assignee or subtenant of poor reputation,
lacking financial qualifications, or seeking change in use.
25.6. As conditions precedent to Landlord considering a request by
Tenant to Tenant's transfer of rights or subletting of the Demises Premises,
Landlord may require any or all of the following:
25.6.1 Tenant shall remain fully liable under this Lease
during the unexpired Term;
25.6.2 Tenant shall provide Landlord with evidence reasonably
satisfactory to Landlord that the value of Landlord's interest under this Lease
will not thereby be diminished or reduced. Such evidence shall include, but need
not be limited to, evidence respecting the relevant business experience and
financial responsibility and status of the third party concerned;
25.6.3 Tenant shall reimburse Landlord for Landlord's actual
costs and expenses, including, without limitation, reasonable attorneys' fees,
charges and disbursements incurred in connection with the review, processing and
documentation of such request;
25.6.4 If Tenant's transfer of rights or sharing of the
Demised Premises provides for the receipt by, on behalf or on account of Tenant
of any consideration of any kind whatsoever (including, but not by way of
limitation, a premium rental for a sublease or lump sum payment for an
assignment) in excess of the rental and other charges due Landlord under this
Lease, Tenant shall be entitled to retain such excess for Tenant's own account
and benefit;
25.6.5 Written agreement from any applicable third party that
in the event Landlord gives such third party notice that Tenant is in default
under this Lease, such third party shall thereafter make all payments otherwise
due Tenant directly to Landlord, which payments will be received by Landlord
without any liability to Landlord except to credit such payment against amounts
due under the Lease, and any such third party shall agree to attorn to Landlord
or its successors and assigns should this Lease be terminated for any reason;
provided, however that in no event shall Landlord or its successors or assigns
be obligated to accept such attornment;
25.6.6 Any such transfer and consent shall be effected on
forms reasonably approved by Landlord as to form and substance;
33
<PAGE>
25.6.7 Tenant shall not then be in Default hereunder in any
respect;
25.6.8 Such third party's proposed use of the Demised Premises
shall be substantially the same as Tenant's Permitted Use;
25.6.9 Landlord shall not be bound by any provision of any
agreement pertaining to Tenant's transfer of rights or subletting of the Demised
Premises;
25.6.10 Any agreement pertaining to Tenant's transfer of
rights or subletting of the Premises shall be in a form acceptable to Landlord
in Landlord's reasonable discretion and any such agreement shall not be modified
or amended without Landlord's prior written consent, which shall not be
unreasonably withheld;
25.6.11 Tenant shall deliver to Landlord one original executed
copy of any and all written instruments evidencing or relating to Tenant's
transfer of rights or subletting of the Demised Premises; and
25.6.12 A list of Hazardous Materials, certified by the
proposed sublessee to be true and correct, which the proposed sublessee intends
to use or store in the Demised Premises. Additionally, Tenant shall deliver to
Landlord, on or before the date any proposed sublessee takes occupancy of the
Demised Premises, all of the items relating to Hazardous Materials of such
proposed sublessee.
25.7. Any sale, assignment, hypothecation or transfer of this Lease or
subletting of the Demised Premises that is not in compliance with the provisions
of this Section 25 shall be void and shall, at the option of Landlord, terminate
this Lease.
25.8. The consent by Landlord to an assignment or subletting shall not
relieve Tenant or any assignees of this Lease or sublessee of the Demised
Premises from obtaining the consent of Landlord to any further assignment or
subletting nor shall it release Tenant or any assignee or sublessee of Tenant
from full and primary liability under the Lease.
25.9. Notwithstanding any subletting or assignment, Tenant shall remain
fully and primarily liable for the payment of all Rent and other sums due, or to
become due hereunder, and for the full performance of all other terms,
conditions, and covenants to be kept and performed by Tenant. The acceptance of
Rent or any other sum due hereunder, or the acceptance of performance of any
other term, covenant, or condition thereof, from any other person or entity
shall not be deemed to be a waiver of any of the provisions of this Lease or a
consent to any subletting, assignment or other transfer of the Demised Premises.
25.10. If Tenant delivers to Landlord an Assignment Notice indicating a
desire to assign this Lease to an assignee other than as provided within Section
25.3, then Landlord shall have the
34
<PAGE>
option, exercisable by giving notice to Tenant at any time within ten (10) days
after Landlord's receipt of the Assignment Notice, to terminate this Lease as of
the date specified in the Assignment Notice as the Assignment Date. If Landlord
exercises such option, then Tenant shall have the right to withdraw such
Assignment Notice by delivery to Landlord written notice of such election within
five (5) days after Landlord's delivery of notice electing to exercise such
option to terminate. In the event Tenant withdraws the Assignment Notice as
herein above provided, this Lease shall continue in full force and effect as if
such Assignment Notice as herein above provided, this Lease, and the term and
estate herein granted, shall terminate as of the Assignment Date. No failure of
Landlord to exercise any such option to terminate this Lease shall be deemed to
be Landlord's consent to the proposed assignment.
25.11. If Tenant shall sublet the Demised Premises or any part, Tenant
hereby immediately and irrevocably assigns to Landlord, as security for Tenant's
obligations under this Lease, all rent from any subletting of all or a part of
the Demised Premises, and Landlord as assignee and as attorney-in-fact for
Tenant, or a receiver for Tenant appointed on Landlord's application, may
collect such rent and apply it toward Tenant's obligations under this Lease;
except that, except during the continuation of a Default by Tenant, Tenant shall
have the right to collect such rent.
26. Attorneys' Fees
If either party commences an action against the other party arising out
of or in connection with this Lease, the prevailing party shall be entitled to
have and recover from the non-prevailing party reasonable attorneys' fees,
charges and disbursements and costs of suit and such reasonable fees, changes
disbursements and costs may be included in and as part of the judgment or
declaration resulting from such action.
27. Bankruptcy
27.1. In the event a debtor, trustee, or debtor in possession under the
Bankruptcy Code, or other person with similar rights, duties and powers under
any other law, proposes to cure any default under this Lease or to assume or
assign this Lease, and is obliged to provide adequate assurance to Landlord that
(i) a default will be cured, (ii) Landlord will be compensated for its damages
arising from any breach of this Lease, or (iii) future performance under this
Lease will occur, then adequate assurance shall include any or all of the
following, as designated by Landlord:
27.1.1 Those acts specified in the Bankruptcy Code or other
law as included within the meaning of adequate assurance, even if this Lease
does not concern a shopping center or other facility described in such laws;
27.1.2 A prompt cash payment to compensate Landlord for any
monetary defaults or actual damages arising directly from a breach of this
Lease;
35
<PAGE>
27.1.3 A cash deposit in an amount at least equal to the
Security Deposit as referenced in 2.1.8 originally required at time of execution
of this Lease.
27.1.4 The assumption or assignment of all of Tenant's
interest and obligations under this Lease.
28. Estoppel Certificate
Tenant shall within ten (10) days of written notice from Landlord,
execute, acknowledge and deliver a statement in writing substantially in the
form attached to this Lease as Exhibit "E" with the blanks filled in, and on any
other form reasonably requested by a proposed lender or purchaser, (i)
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified is in full force and effect) and the dates to which the rental
and other charges are paid in advanced, if any, (ii) acknowledging that there
are not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder, or specifying such defaults if any are claimed and (iii) setting
forth such further information with respect to this Lease or the Demised
Premises as may be reasonably requested thereon. Any such statement may be
relied upon by any prospective purchaser or encumbrancer of all or any portion
of the real property of which the Demised Premises are a part. Tenant's failure
or unreasonable refusal to deliver such statement within such time shall, at the
option of Landlord, constitute a Default under this Lease, and, in any event,
shall be conclusive upon Tenant that the Lease is in full force and effect and
without modification except as may be represented by Landlord in any certificate
prepared by Landlord and delivered to Tenant for execution.
29. [Intentionally Omitted.]
30. Definition of Landlord; Limitation of Landlord's Liability
30.1. The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only Landlord or the successor-in-interest of Landlord under this Lease
at the time in question. In the event of any transfer, assignment or the
conveyance of Landlord's fee title or leasehold interest, the landlord herein
named (and in case of any subsequent transfers or conveyances, the then grantor)
shall be automatically freed and relieved from, and after the date of such
transfer, assignment or conveyance, of all liability for the performance of any
covenants or obligations contained in this Lease thereafter accruing or to be
performed by Landlord and, without further agreement, the transferee of such
title or leasehold shall be deemed to have assumed and agreed to observe and
perform any and all obligations of Landlord hereunder during its ownership or
ground lease of the Demised Premises. Landlord may transfer its interest in the
Demised Premises or this Lease without the consent of Tenant and such transfer
or subsequent transfer shall not be deemed a violation on the part of Landlord
or the then grantor of any of the terms or conditions of this
36
<PAGE>
Lease; provided, however that such transferee shall have delivered to Tenant
written confirmation of such transferee's assumption of Landlord's obligations
hereunder and receipt of the Security Deposit.
30.2. If Landlord is in default of this Lease, and as a consequence,
Tenant recovers a money judgment against Landlord, the judgment shall be
satisfied only out of the proceeds of sale received on execution of the judgment
and levy against the right, title and interest of Landlord in the Building and
Project, and out of rent or other income from such real property receivable by
Landlord or out of the consideration received by Landlord from the sale,
financing, refinancing, or other disposition of all or any part of Landlord's
right, title, and interest in the Building and Project.
30.3. Landlord shall not be personally liable for any deficiency. If
Landlord is a partnership, joint venture, or limited liability company, the
partners or members of such partnership or limited liability company shall not
be personally liable and no partner or member of Landlord or limited liability
company shall be sued or named as a party in any suit or action or service of
process be made against any partner of Landlord except as may be necessary to
secure jurisdiction of the partnership or joint venture. If Landlord is a
corporation, the shareholders, directors, officers, employees, and/or agents of
such corporation shall not be personally liable and no shareholder, director,
officer, employee or agent of Landlord shall be sued or named as a party in any
suit or action or service of process made against any shareholder, director,
officer, employee or agent of Landlord. No partner, shareholder, director,
employee, or agent of Landlord shall be required to answer or otherwise plead to
any service of process and no judgment will be taken or writ of execution levied
against any partner, shareholder, director, employee or agent of Landlord.
30.4. Each of the covenants and agreements of this Section 30 shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or by common law and shall survive the termination of this
Lease.
31. Project Control by Landlord
31.1. Landlord reserves full control over the Project to the extent not
inconsistent with Tenant's enjoyment of the Demised Premises. This reservation
includes but is not limited to right of Landlord to expand the Project,
subdivide the Project, the right to grant easements and licenses to others, the
right to enter the Building and the right to maintain or establish ownership of
the Building separate from fee title to the land on which the Building is
located; provided, however, that any expansion or subdivision of the Project
shall not permanently and unreasonably interfere with Tenant's access to or use
of the Demised Premises and will not directly result in an increase to Tenant's
Pro Rata Share of Operating Costs of more than 5% without Tenant's prior written
consent, which shall not be unreasonably withheld, conditioned or delayed.
37
<PAGE>
31.2. Landlord further reserves the right to combine the Project with
any other project in the area of the Project and owned by Landlord or its
affiliates; provided, however, that any combination of the Project shall not
permanently and unreasonably interfere with Tenant's access to or use of the
Demised Premises and will not directly result in an increase to Tenant's Pro
Rata Share of Operating Costs of more than 5% without Tenant's prior written
consent, which shall not be unreasonably withheld, conditioned or delayed.
31.3. Tenant shall, should Landlord so request and of Landlord's sole
cost and expense for the reasonable fees and costs incurred by Tenant pursuant
thereto, promptly join with Landlord in execution of such documents as may be
reasonably appropriate to assist Landlord to implement any such action, provided
that Tenant need not execute any document which is of nature wherein liability
is created in Tenant or, if by reason of the terms of such document, Tenant will
be deprived of the quiet enjoyment and use of the Demised Premises as granted by
this Lease.
31.4. Landlord may, at any and all reasonable times during non-business
hours (or during business hours if Tenant so requests), and upon reasonable
advance notice which, with respect to entry to Tenant's manufacturing facilities
shall be not less than twenty-four hours (provided that no time restrictions
shall apply or advance notice need be given if an emergency necessitates an
immediate entry), enter the Demised Premises to (a) inspect the same and to
determine whether Tenant is in compliance with its obligations hereunder, (b)
supply any service Landlord is required to provide hereunder, (c) show the
Demised Premises to prospective lenders, insurers, investors, purchasers or,
during the last year of the Term, tenants, (d) post notices of
nonresponsibility, (e) access the telephone equipment, electrical substation and
fire risers, and (f) alter, improve or repair any portion of the Building which
Landlord is obligated or entitled to repair or maintain. Tenant and its
designees shall have the right to accompany Landlord personnel in connection
with any entry upon the Demised Premises, and Landlord shall comply with all
other reasonable rules which Tenant may have in connection with any required
access. In connection with any such alteration, improvement or repair, Landlord
may erect in the Demised Premises or elsewhere in the Building or the Project
scaffolding and other structures reasonably required for the work to be
performed. In no event shall Tenant's Rent abate as a result of any such entry
or work; provided, however, that all such work shall be done in such a manner as
to cause as little interference to Tenant as reasonably possible. Landlord shall
at all times retain a key with which to unlock all of the doors in the Demised
Premises. If an emergency necessitates immediate access to the Demised Premises,
Landlord may use whatever force is necessary to enter the Demised Premises and
any such entry to the Demised Premises shall not constitute a forcible or
unlawful entry to the Demised Premises, an unlawful detainer of the Demised
Premises, or an eviction of Tenant from the Demised Premises, or any portion
thereof.
32. Quiet Enjoyment
38
<PAGE>
So long as Tenant is not in default, Landlord covenants that Landlord
or anyone acting through or under Landlord will not disturb Tenant's occupancy
of the Demised Premises except as permitted by the provisions of this Lease.
33. Quitclaim Deed
Tenant shall execute and deliver to Landlord on the expiration or
termination of this Lease, immediately on Landlord's request, in recordable
form, a quitclaim deed to the Demised Premises or such other documentation
reasonably requested by Landlord evidencing termination of this Lease, which may
be recorded by Landlord at its sole cost and expense.
34. Rules and Regulations
Tenant shall faithfully observe and comply (and shall cause its
subtenants, guests, invitees, licensees, agents, employees and contractors to
comply) with the Rules and Regulations and all reasonable and nondiscriminatory
modifications thereof and additions thereto from time to time put into effect by
Landlord. Neither Landlord nor Tenant (except with respect to Tenant's
subtenants, guests, invitees, licensees, agents, employees and contractors)
shall be responsible for the violation or non-performance by any other tenant or
any agent, employee or invitee of Landlord of any of said Rules and Regulations.
35. Subordination and Attornment
35.1. This Lease shall be subject and subordinate to the lien of any
mortgage, deed of trust, or lease in which Landlord is tenant now or hereafter
in force against the Project or the Building and to all advances made or
hereafter to be made upon the security thereof without the necessity of the
execution and delivery of any further instruments on the part of Tenant to
effectuate such subordination provided, however, that as a condition to such
subordination, the lender must agree not to disturb Tenant's right of possession
upon and following a foreclosure sale so long as Tenant attorns to the lender or
new purchaser and Tenant is not in Default hereunder.
35.2. Notwithstanding the foregoing, Tenant shall execute and deliver
upon demand such further instrument or instruments evidencing such subordination
of this Lease to the lien of any such mortgage or mortgages or deeds of trust or
lease in which Landlord is tenant as may be reasonably required by Landlord
provided, however, that as a condition to such subordination, the lender must
agree not to disturb Tenant's right of possession upon and following a
foreclosure sale so long as Tenant attorns to the lender or new purchaser and
Tenant is not in default hereunder. However, if any such mortgagee, beneficiary
or landlord under lease wherein Landlord is tenant so elects, this Lease shall
be deemed prior in lien to any such lease, mortgage, or deed of trust upon or
including the Demised Premises regardless of date and Tenant will execute a
statement in writing to such effect at Landlord's request. If Tenant fails or
unreasonably refuses to execute any document reasonably required from Tenant
under this
39
<PAGE>
Section within ten (10) days after written request therefor, Tenant hereby
constitutes and appoints Landlord or its special attorney-in-fact to execute and
deliver any such document or documents in the name of Tenant. Such power is
coupled with an interest and is irrevocable.
35.3. In the event any proceedings are brought for foreclosure, or in
the event of the exercise of the power of sale under any mortgage or deed of
trust made by the Landlord covering the Demised Premises, the Tenant shall at
the election of the purchaser at such foreclosure or sale attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as the
Landlord under this Lease, so long as, with respect to a new purchaser, such new
purchaser assumes all of Landlord's obligations under this Lease arising from
and after the date of such transfer.
36. Surrender
36.1. No surrender of possession of any part of the Demised Premises
shall release Tenant from any of its obligations hereunder unless accepted by
Landlord.
36.2. The voluntary or other surrender of this Lease by Tenant shall
not work a merger, unless Landlord consents and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies.
36.3. The voluntary or other surrender of any ground or underlying
lease that now exists or may hereafter be executed affecting the Building or the
Project, or a mutual cancellation, thereof, or of Landlord's interest therein,
shall not work a merger and shall, at the option of the successor of Landlord's
interest in the Building or Project, operate as an assignment of this Lease.
36.4. Upon the expiration or earlier termination of this Lease, Tenant
shall surrender the Demised Premises to Landlord broom clean and free of debris;
with all of Tenant's property and effects removed therefrom except as otherwise
provided under Section 17.7 of this Lease; with all alterations, improvements
and fixtures required by Landlord to be removed from the Demised Premises as
provided under Section 17.7 of this Lease actually removed and all damage as a
result of or caused by such removal repaired; and with all licenses, permits and
similar items which restrict or affect the used of the Demised Premises released
and fully terminated.
37. Waiver and Modification
No provision of this Lease may be modified, amended or added to except
by an agreement in writing. The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained.
38. Waiver of Jury Trial and Counterclaims
40
<PAGE>
THE PARTIES HERETO SHALL AND THEY HEREBY DO WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE
OR OCCUPANCY OF THE DEMISED PREMISES, AND OR ANY CLAIM OF INJURY OR DAMAGE.
39. [Intentionally omitted.]
40. [Intentionally omitted.]
41. Hazardous Materials
41.1. Prohibition/Compliance. Tenant shall not cause or permit any
Hazardous Materials (as hereinafter defined) to be brought upon, kept or used in
or about the Demised Premises, the Building or the Project in violation of
applicable law by Tenant, its agents, employees, contractors or invitees. If
Tenant breaches the obligation stated in the preceding sentence, or if the
presence of Hazardous Materials results in contamination of the Demised
Premises, the Building, the Project or any adjacent property or if contamination
of the Demised Premises, the Building, the Project or any adjacent property by
Hazardous Materials otherwise occurs during the term of this Lease or any
extension or renewal hereof or holding over hereunder, Tenant hereby indemnifies
and shall defend and hold Landlord, its officers, directors, employees, agents
and contractors harmless from any and all claims, judgments, damages, penalties,
fines, costs, liabilities, or losses (including, without limitation, diminution
in value of the Demised Premises or any portion of the building or the Project,
damages for the loss or restriction on use of rentable or usable space or of any
amenity of the Demised Premises, the Building or the Project, damages arising
from any adverse impact on marketing of space in the Demised Premises, the
Building or the Project, and sums paid in settlement of claims, reasonable
attorneys' fees, consultant fees and expert fees) which arise during or after
the Lease term as a result of such contamination. This indemnification of
Landlord by Tenant includes, without limitation, costs incurred in connection
with any investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Materials present in the air, soil or
ground water above on or under the Demised Premises. Without limiting the
foregoing, if the presence of any Hazardous Materials on the Demised Premises,
the Building, the Project or any adjacent property, caused or permitted by
Tenant results in any contamination of the Demised Premises, the Building, the
Project or any adjacent property, Tenant shall promptly take all actions at its
sole expense as are necessary to return the Demised Premises, the Building, the
Project or any adjacent property, to the condition existing prior to the time of
such contamination, provided that Landlord's approval of such action shall first
be obtained, which approval shall not unreasonably be withheld so long as such
actions would not potentially have any material adverse long-term or short-term
effect on the Demised Premises, the Building or the Project.
41
<PAGE>
41.2. Business. Landlord acknowledges that it is not the intent of this
Section 41 to prohibit Tenant from operating its business as described in
Section 2.1.9 above. Tenant may operate its business according to the custom of
the industry so long as the use or presence of Hazardous Materials is strictly
and properly monitored according to all applicable governmental requirements. As
a material inducement to Landlord to allow Tenant to use Hazardous Materials in
connection with its business, Tenant agrees to deliver to Landlord prior to the
Term Commencement Date a list identifying each type of Hazardous Materials to be
present on the Demised Premises and setting forth any and all governmental
approvals or permits required in connection with the presence of such Hazardous
Materials on the Demised Premises ("Hazardous Materials List"). Tenant shall
deliver to Landlord an updated Hazardous Materials List at least once a year and
shall also deliver an updated list before any new Hazardous Materials is brought
onto the Demised Premises. Tenant shall deliver to Landlord true and correct
copies of the following documents (the "Documents") relating to the handling,
storage, disposal and emission of Hazardous Materials prior to the Term
Commencement Date, or if unavailable at that time, concurrent with the receipt
from or submission to a governmental agency: permits; approvals; reports and
correspondence; storage and management plans, notice of violations of any laws;
plans relating to the installation of any storage tanks to be installed in or
under Building or the Project (provided, said installation of tanks shall only
be permitted after Landlord has given Tenant its written consent to do so, which
consent may be withheld in Landlord's sole and absolute discretion); and all
closure plans or any other documents required by any and all federal, state and
local governmental agencies and authorities for any storage tanks installed in,
on or under the Building or the Project for the closure of any such tanks.
Tenant is not required, however, to provide Landlord with any portion(s) of the
Documents containing information of a proprietary nature which, in and of
themselves, do not contain a reference to any Hazardous Materials or hazardous
activities. It is not the intent of this Section to provide Landlord with
information which could be detrimental to Tenant's business should such
information become possessed by Tenant's competitors. At the written request of
Landlord, Tenant agrees that it shall enter into a written agreement with other
tenant's at the Building concerning the equitable allocation of fire control
areas (as defined in the Uniform Building Code, and adopted by the City of San
Diego ("UBC")) within the Building for the storage of Hazardous Materials. In
the event that Tenant's use of Hazardous Materials is such that it utilizes fire
control areas in the Building in excess of Tenant's Pro Rata Share of the
Building as set forth in Section 2.1.6 above, Tenant agrees that it shall, at
its own expense, and upon the written request of Landlord, establish and
maintain a separate area of the Demised Premises or the Land classified by the
UBC as an "H" occupancy area, for the use and storage of Hazardous Materials, or
take such other action so that its share of the fire control areas of the
Building is not greater than Tenant's Pro Rata Share of the Building.
41.3. Termination of Lease. Notwithstanding the provisions of Section
41.1 above, if Tenant or the proposed assignee or sublessee is subject to an
enforcement order issued by any governmental authority in connection with the
continued use, disposal or storage of Hazardous Materials in material violation
of any applicable laws, (i) Landlord shall have the right, if Tenant
42
<PAGE>
has failed to comply with such enforcement order within thirty (30) days after
written notice from Landlord of such non-compliance (or, if such failure to
comply results in an imminent threat to the health or safety of any tenants or
occupants of the Building or Project, within three (3) business days after
written notice from Landlord), to terminate this Lease in Landlord's sole and
absolute discretion (with respect to any such matter involving Tenant) and (ii)
it shall not be unreasonable for Landlord to withhold its consent to any
proposed assignment or subletting (with respect to any such matter involving a
proposed assignee or sublessee).
41.4. Testing. At any time, and from time to time (but not more
frequently than once in any calendar year unless Landlord reasonably believes
that a hazardous Materials release or spill has occurred), prior to the
expiration or earlier termination of the Term, Landlord shall have the right to
conduct appropriate tests of the Demised Premises, the Building and the Project
to demonstrate that contamination has occurred as a result of Tenant's use of
the Demised Premises. Tenant shall be solely responsible for and shall defend,
indemnify and hold the Landlord, its agents and contractors harmless from and
against any and all claims, costs and liabilities including actual attorneys'
fees, charges and disbursements, arising out of or in connection with any
removal, clean up, restoration and materials required hereunder to return the
Demised Premises and any other property of whatever nature to their condition
existing prior to the time of any such contamination. Tenant shall pay for the
cost of the tests of the Demised Premises.
41.5. Underground Tanks. If underground or other storage tanks storing
Hazardous Materials are located on the Demised Premises or are hereafter placed
on the Demised Premises by any party, Tenant shall monitor the storage tanks,
maintain appropriate records, implement reporting procedures, properly close any
underground storage tanks, and take or cause to be taken all other steps
necessary or required under the California Administrative Code, Title 23,
Chapter 3, Subchapter 16, "Underground Storage Tank Regulations," and Division
20, Chapter 6.7 of the California Health & Safety Code, "Underground Storage of
Hazardous Substances," as they now exist or may hereafter be adopted or amended.
41.6. Tenant's Obligations. Tenant's obligations under this Section 41
shall survive the expiration or earlier termination of the Lease. During any
period of time employed by Tenant or Landlord after the termination of this
Lease to complete the removal from the Demised Premises of any such Hazardous
Materials and the release and termination of any licenses or permits restricting
the use of the Demised Premises, Tenant shall continue to pay the full Rent in
accordance with this Lease, which Rent shall be prorated daily.
41.7. Definition of "Hazardous Materials." As used herein, the term
"Hazardous Materials" means any hazardous or toxic substance, material or waste
which is or becomes regulated by any local governmental authority, the State of
California or the United States government and includes, without limitation, any
material or substance which is (i) defined as a "hazardous waste, " "extremely
hazardous waste" or "restricted hazardous waste" under Section 25515 or 25117,
or listed pursuant to Section 25140, of the California Health and Safety Code,
Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) Defined as a
"hazardous
43
<PAGE>
substance" under Section 25316 of the California Health and Safety Code,
Division 2, Chapter 6.8 (Carpenter-Presly-Tanner Hazardous Substance Account
Act), (iii) defined as a "hazardous material," "hazardous substance" or
"hazardous waste" under Section 25501 of the California Health and Safety Code,
Division 20, Chapter 6.95 (Hazardous Substances), (v) petroleum, (vi) asbestos,
(vii) listed under Article 9 and defined as hazardous or extremely hazardous
pursuant to Article 11 of Title 22 of the California Administrative Code,
Division 4, Chapter 20, (viii) designated as a "hazardous substance" pursuant to
Section 311 of the Federal Water Pollution Control Act (33 U.S.C. Section 1317),
(ix) defined as a "hazardous waste" pursuant to Section 1004 of the Federal
Resource Conversation and Recovery Act, 42 U.S.C. Section 6901, et. seq. (42
U.S.C. Section 6903), or (x) defined as a "hazardous substance" pursuant to
Section 101 of the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S.C. Section 9601).
42. Option to Extend Term.
Tenant shall have the option to extend the term of the Lease upon the
following terms and conditions:
42.1. Tenant shall have five (5) consecutive options (each, an
"Extension Option") to extend the term of this Lease for five (5) years each
(each, an "Extension Term") on the same terms and conditions as the Lease.
During any Extension Term, Basic Annual Rent shall be payable at the Market Rate
(as defined below), but in no event less than the Basic Annual Rent payable on
the date immediately preceding the commencement such Extension Term, as adjusted
pursuant to Section 6 hereof. Basic Annual Rent shall be adjusted on the
commencement of each Extension Term and on each one (1) year anniversary of the
commencement such Extension Term in accordance with Section 6 above.
42.2. Extension Options are personal to Matrix Pharmaceuticals, Inc.
and its corporate successors and are not assignable separate and apart from this
Lease.
42.3. Extension Options are conditional upon Tenant giving Landlord
written notice of its election to exercise each Extension Option at least one
(1) year prior to the end of the expiration of the initial term of the Lease or
the expiration of any Extension Term.
42.4. Notwithstanding anything set forth above to the contrary,
Extension Options shall not be in effect and Tenant may not exercise any of the
Extension Options:
42.4.1 during any period of time that Tenant is in default
under any provision of this Lease; or
42.4.2 if Tenant has been in default under any provision of
this Lease three (3) or more times, whether or not the defaults are cured,
during the twelve (12) month period immediately prior to the date that Tenant
intends to exercise an Extension Option, whether or not
44
<PAGE>
the defaults are cured.
42.5. The period of time within which any Extension Option may be
exercised shall not be extended or enlarged by reason of the Tenant's inability
to exercise the Expansion Option because of the provisions of Section 42.4
above.
42.6. The Extension Option shall terminate and be of no further force
or effect even after Tenant's due and timely exercise of an Extension Option,
if, after such exercise, but prior to the commencement date of an Extension
Term, (1) Tenant fails to timely cure any default by Tenant under this Lease; or
(2) Tenant has defaulted three (3) or more times during the period from the date
of the exercise of an Extension Option to the date of the commencement of the
Extension Term, whether or not such defaults are cured.
42.7. As used herein, "Market Rate" shall mean the price that a ready
and willing tenant would pay, at commencement of the Extension term, as monthly
base rent to a ready and willing landlord if such space were offered for lease
on the open market for a reasonable period of time and be the sum of the fair
market monthly rental rate per rentable square foot multiplied by the Rentable
Area of the Premises determined as follows: (a) as mutually agreed by Landlord
and Tenant within ten (10) days of Landlord's delivery to Tenant of Landlord's
opinion of the Market Rate for the first year of the Extension term ("Landlord
Rent Notice")(which shall be delivered to Tenant within ten (10) days of receipt
of Tenant's written Extension Notice); or (b) in the event that Landlord and
Tenant are unable to so agree within such ten (10) day period, the Market Rate
shall be determined by concurrent appraisals pursuant to subparagraph 42.8
below. The Market Rate shall be determined by considering (i) the highest and
best use of the Premises, (ii) the duration of the Extension Term, (iii) the
quality and prestige of the Premises (as then improved and maintained as
required by the terms and conditions of this Lease), (iv) recent monthly rental
rates for buildings of similar size and location, (v) anticipated CPI Index
changes from the date of the Market Rate determination to the date of the actual
Extension term commencement; (vi) all other relevant terms and conditions of
this Lease; provided, however, that in no event shall the Market Rate be less
than the Basic Annual Rent payable on the date immediately preceding the
commencement such Extension Term, as adjusted pursuant to Section 6 hereof.
42.8. In the event that Landlord and Tenant are unable to agree upon
the Market rate within the required ten (10) day period described above, the
Market Rate shall be determined as follows:
42.8.1 If Tenant rejects the Market Rate proposed by Landlord
in Landlord's Rent Notice, Landlord and Tenant shall attempt to agree in good
faith upon a single appraiser not later than five (5) days after the Landlord
receives notice of Tenant's rejection of Landlord's proposed Market Rate
("Tenant's Rejection Notice"), which date of receipt shall be within ten (10)
days of Landlord's delivery of Landlord's Rent Notice. If Landlord and Tenant
are unable to agree upon a single appraiser within such time period, then
Landlord and Tenant shall each appoint one appraiser not later than ten (10)
days after Landlord's receipt of Tenant's Rejection Notice.
45
<PAGE>
Within five (5) days thereafter, the two appointed appraisers shall appoint a
third appraiser. Landlord and Tenant shall instruct the appraiser(s) to complete
the determination of the Market Rate not later than fifteen (15) days after all
appraisers have been appointed.
42.8.2 If either Landlord or Tenant fails to appoint its
appraiser within the prescribed time period, the single appraiser appointed
shall determine the Market Rate of the Premises for the first year of the
Extension Term. If both parties fail to appoint appraisers within the prescribed
time periods, then the first appraiser thereafter selected by a party shall
determine the Market Rate of the Premises for the first year of the Extension
Term.
42.8.3 Landlord and Tenant shall each bear the cost of its own
appraiser and the parties shall share equally the cost of the single or third
appraiser, if applicable. All appraisers so designated herein shall have at
least five (5) years' experience in the appraisal of similar office buildings in
the San Diego area and shall be members of professional organizations such as
MAI or equivalent.
42.8.4 If a single appraiser is chosen, then such appraiser
shall determine the Market Rate of the Premises for the first year of the Option
Term. Otherwise, the Market Rate of the Premises for the first year of the
Option Term shall be the arithmetic average of (2) of the three (3) appraisals
which are closest in amount, and the third appraisal shall be disregarded.
43. Right of First Offer to Purchase.
Tenant shall have a right of first offer (the "Purchase Right") to
purchase the Building upon the following terms and conditions:
43.1. In the event that Landlord desires to sell the Building, no less
than ten (10) days prior to actively marketing the Building, Landlord shall
deliver to Tenant written notice (the "Sale Notice") of Landlord's intent to
sell the Building, together with the terms and conditions under which Landlord
is prepared to sell the Building. Tenant shall have ten (10) days following
delivery of the Sale Notice to deliver to Landlord written notification of
Tenant's exercise of the Purchase Right upon the terms and conditions of the
Sale Notice. In the event Tenant fails to timely deliver such notice, or if on
the date which is thirty (30) days after the delivery of the Sale Notice,
Landlord and Tenant have failed to agree upon any of the terms of the purchase
agreement for the Building after negotiating in good faith, Tenant shall be
deemed to have waived any right to purchase the Building and Landlord may
thereafter sell the Building to any third party free of the Purchase Right;
provided, however, that in the event Tenant does not purchase the Building
following timely exercise of the Purchase Right due to a failure of Landlord and
Tenant to agree upon the terms of the purchase agreement, any purchaser who
subsequently acquires title to the Building shall acquire such title subject to
the Purchase Right and Tenant's rights in connection therewith.
43.2. In the event that Tenant and Landlord enter into a purchase
agreement following
46
<PAGE>
the timely exercise of the Purchase Right, the purchase and sale of the Building
shall close no sooner than the date which is nine (9) months, and no later than
the date which is twelve (12) months, following receipt by Landlord of Tenant's
election to exercise the Purchase Right.
43.3. Notwithstanding the above, the Purchase Right shall not be in
effect and may not be exercised by Tenant during any period of time that Tenant
is in Default under any provision of the Lease (provided, however, that
notwithstanding the foregoing Tenant may, as a condition to exercising the
Purchase Right, cure any Default due to failure to any Rent or other sum due
Landlord).
43.4. The Purchase Right is personal to Matrix Pharmaceuticals, Inc.
and its corporate successors and may not be transferred separate and apart from
this Lease or to any other person or entity (including, without limitation, any
successor tenant).
43.5. The Purchase Right shall terminate and be of no further force or
effect upon the expiration or earlier termination of the Term.
43.6. The Purchase Right shall terminate and be of no further force or
effect even after Tenant's due and timely exercise of the Purchase Right, if,
after such exercise, but prior to the closing of the purchase and sale of the
Building, (1) Tenant fails to timely cure any Default by Tenant under the Lease
(provided, however, that notwithstanding the foregoing Tenant may, as a
condition to the closing of the purchase and sale of the Building, cure any
Default due to failure to any Rent or other sum due Landlord); or (2) Tenant has
defaulted three (3) or more times, whether or not such Defaults are cured.
44. Miscellaneous
44.1. Terms and Headings. Where applicable in this Lease, the singular
includes the plural and the masculine or neuter includes the masculine, feminine
and neuter. The section headings of this Lease are not a part of this Lease and
shall have no effect upon the construction or interpretation of any part hereof.
44.2. Examination of Lease. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or
option for lease, and it is not effective as a lease or otherwise until
execution by and delivery to both Landlord and Tenant.
44.3. Time. Time is of the essence with respect to the performance of
every provision of this Lease in which time of performance is a factor.
44.4. Covenants and Conditions. Each provision of this Lease
performable by Tenant shall be deemed both a covenant and a condition.
44.5. Consents. Whenever consent or approval of either party is
required, that party
47
<PAGE>
shall not unreasonably withhold such consent or approval, except as may be
expressly set forth to the contrary.
44.6. Entire Agreement. The terms of this Lease are intended by the
parties as a final expression of their agreement with respect to the terms as
are included herein, and may not be contradicted by evidence of any prior or
contemporaneous agreement. The Exhibits are incorporated into this Lease and the
Lease and the Exhibits constitute a single document.
44.7. Severability. Any provision of this Lease which shall provide to
be invalid, void, or illegal in no way affects, impairs or invalidates any other
provision hereof, and such other provisions shall remain in full force and
effect.
44.8. Recording. Either party may, but shall not be obligated to,
record a short form memorandum hereof upon reasonable advance notice to the
other party, which shall be executed in recordable form and otherwise in form
satisfying to Landlord within ten (10) business days after receipt of the other
party's written request therefor. Neither parties shall record this Lease.
Tenant shall be responsible for the cost of recording any Memorandum of Lease,
including any transfer or other taxes incurred in connection with said
recordation.
44.9. Impartial Construction. The language in all parts of this Lease
shall be in all cases construed as a whole according to its fair meaning and not
strictly for or against either Landlord or Tenant.
44.10. Inurement. Each of the covenants, conditions and agreements
herein contained shall inure to the benefit of and shall apply to and be binding
upon the parties hereto and their respective heirs, legatees, devisees,
executors, administrators, successors, assigns, sublessees, or any person who
may come into possession of said Demised Premises or any part thereof in any
manner whatsoever. Nothing in this Section 43.10 contained shall in any way
alter the provisions against assignment or subletting in this Lease provided.
44.11. Notices. Any notice, consent, demand, bill, statement, or other
communication required or permitted to be given hereunder must be in writing and
may be given by personal delivery, reputable overnight courier or by mail, and
if given by mail shall be deemed sufficiently given two (2) days after time when
deposited in United States Mail is sent by registered or certified mail, and if
given by other means shall be deemed given when received, addressed to Tenant or
Landlord at the addresses shown in Sections 2.1.10 and 2.1.11 of the Basic Lease
Provisions. Either party may, by notice to the other given pursuant to this
Section, specify additional or different addresses for notice purposes.
44.12. Jurisdiction. This Lease has been negotiated and entered into in
the State of California and shall be governed by, construed and enforced in
accordance with the laws of the State of California, applied to contracts made
in California to be wholly performed in California.
44.13. Authority. That individual or those individuals signing this
Lease guarantee,
48
<PAGE>
warrant and represent that said individual or individuals have the power,
authority and legal capacity to sign this Lease on behalf of and to bind all
entities, corporations, partnerships, joint venturers or other organizations
and/or entities on whose behalf said individual or individuals have signed.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the date first above written.
Landlord:
ARE - 4757 NEXUS CENTRE, LLC,
a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership,
managing member
By: ARE-QRS Corp., a Maryland
corporation, general partner
By: /s/ Joel S. Marcus
----------------------------
Name: Joel S. Marcus
----------------------
Its: Chief Executive Officer
-----------------------
Tenant:
MATRIX PHARMACEUTICAL, INC.,
a Delaware corporation
By: /s/ Ronald P. Lucas
-----------------------------
Name: Ronald P. Lucas
---------------------------
Its: Vice President of Operations
----------------------------
49
<PAGE>
EXHIBITS
EXHIBIT "A" LAND
EXHIBIT "B" PROJECT
EXHIBIT "C" RULES AND REGULATIONS
EXHIBIT "D" TENANT'S PERSONAL PROPERTY
EXHIBIT "E" ESTOPPEL CERTIFICATE
50
<PAGE>
Exhibit "A"
LAND
Parcel 1 of Parcel Map 17892, in the City of San Diego, County
of San Diego, State of California, according to Map filed in the Office of the
County Recorder of San Diego County on August 6, 1997.
A-1
<PAGE>
Exhibit "B"
PROJECT
Parcels 1 and 2 of Parcel Map 17892, in the City of San Diego,
County of San Diego, State of California, according to Map filed in the Office
of the County Recorder of San Diego County on August 6, 1997.
B-1
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
-1-
No awnings shall be attached to the outside walls of the Demised
Premises or Building.
-2-
Tenant shall not install any loudspeaker or other devices on the roof
or exterior walls of the Demised Premises or Building. Tenant shall not
interfere with radio or television broadcasting or reception outside the
Building from or in the Premises.
-3-
The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Demised Premises or Building shall not be covered or obstructed, nor shall any
bottles, parcels or other articles be placed on the windowsills. Neither the
interior nor the exterior of any windows shall be coated or otherwise
sunscreened without Landlord's prior written consent.
-4-
With the exception of signage existing on the Term Commencement Date,
no sign, advertisement or notice shall be exhibited, painted or affixed by
Tenant on any part of, so as to be seen from the outside of the Building without
Landlord's prior written consent. In the event of Tenant's violation of the
foregoing, Landlord may remove the same without any liability and may charge the
expense incurred in such removal to Tenant.
-5-
Tenant shall store all of its trash and garbage within the Demised
Premises or in other facilities provided by Landlord. Tenant shall not place in
any trash box or receptacle any material which cannot be disposed of in the
ordinary and customary manner of trash and garbage disposal.
-6-
Tenant assumes any and all responsibility for protecting the Demised
Premises or Building from theft, robbery and pilferage, which includes keeping
doors locked and other means of entry into the Demised Premises or Building
closed.
-7-
Landlord shall have card key access to the Building for emergency
purposes. Tenant must, upon the termination of its tenancy, give to Landlord all
keys pertaining to the Demised Premises and the Building, and in the event of
the loss of any keys so furnished, Tenant shall pay Landlord the cost of
replacing same or of changing the lock or locks opened by such lost key(s) if
Landlord shall deem it necessary to make such change.
-8-
No windows or other air conditioning or heating units or other similar
apparatus shall be installed or used by Tenant without Landlord's prior written
consent.
-9-
The water and wash closets and other plumbing fixtures shall not be
used for any purpose other than those for which they were constructed and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures by Tenant of its servants,
employees, agents, visitors or licensees shall be borne by Tenant
1
<PAGE>
-10-
Landlord reserves the right to inspect all safes or other heavy or
bulky equipment or articles, the weight of which may exceed the floor load for
which the Building is designed, or such equipment or articles as may violate any
of the provisions of the Lease of which these Rules and Regulations are a part.
Tenant shall not use any machinery or other bulky articles in the Demised
Premises or Building, which by its weight might injure the floor of the Demised
Premises or Building.
-11-
Neither Tenant nor its servants, employees, agents, visitors or
licensees shall at any time bring or keep upon the Demised Premises or Building
any flammable, combustible or explosive fluid, chemical or substance, except for
a reasonable quantity of such material reasonably necessary for the conduct of
Tenant's trade or business.
-12-
Tenant shall not, without Landlord's prior written consent, occupy or
permit any portion of the Demised Premises or Building to be occupied or used
for other than as provided under Section 2.1.9. The Demised Premises or Building
shall not be used for lodging or sleeping.
-13-
Tenant shall not make, or permit to be made, any unseemly or disturbing
noises, or disturb or interfere with neighboring buildings or premises or those
having business with it by the use of any musical instrument, radio, phonographs
or unusual noise, or in any other way. Neither Tenant nor its servants,
employees, agents, visitors or licensees shall throw anything out of doors,
windows or skylights or down the passageways.
-14-
No birds or non-laboratory animals of any kind shall be brought into or
kept in or about the Demised Premises or Building except as required pursuant to
the American with Disabilities Act (ADA), and no cooking shall be done or
permitted by Tenant in its Premises, except that provided for in Tenant's
cafeteria (or similar facility), if any, for the preparation of coffee, tea, hot
chocolate, pastries, sandwiches and similar microwaveable items for Tenant, its
employees and visitors. Tenant shall nor cause or permit any unusual or
objectionable odors to emanate from the Building.
-15-
Except in Tenant's lunch room, no vending or coin operated machines
shall be placed within the Demised Premises or Building without Landlord's prior
written consent.
2
<PAGE>
-16-
Landlord shall have the right to prohibit any advertising by Tenant
which, in Landlord's opinion, tends to impair the reputation of the Project or
its desirability as an office/laboratory building, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising. Nothing in
this provision, however, shall be construed to prevent Tenant from installing
reasonable signage at the Building identifying Tenant provided such signage is
located at a place and is of a size and is constructed of a material acceptable
to Landlord.
-17-
Canvassing, soliciting and peddling in the Building are prohibited and
Tenant shall cooperate to prevent same.
-18-
Landlord reserves the right to exclude or expel from the Demised
Premises or 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 Building.
-19-
Landlord and Tenant agree that there shall be no consent to any waiver
of any of these Rules or Regulations unless said waiver is done in writing and
acknowledged by Landlord and Tenant.
-20-
Landlord reserves the right at any time to change or rescind any one or
more of these Rules or Regulations, or to make such other and further reasonable
Rules and Regulations as in Landlord's reasonable judgment may from time to time
be necessary for the management, safety, care and cleanliness of the Demised
Premises or Building, and for the preservation of good order therein, as well as
for the convenience of other occupants and tenants of the Building. Landlord
shall not be responsible to Tenant herein or to any other person for the
non-observance of the Rules and Regulations by any other tenant or other person.
Tenant shall be deemed to have read these Rules and Regulations and to have
agreed to abide by them as a condition to its occupancy of the Demised Premises
and Building.
-21-
These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of Tenant's lease of its Premises.
-22-
Tenant shall be responsible for the observance of all of the foregoing
Rules and Regulations by Tenant's employees, agents, clients, customers,
invitees and guests.
3
<PAGE>
Exhibit "D"
EXCLUDED PERSONAL PROPERTY
--------------------------
4757 NEXUS CENTRE DRIVE, SAN DIEGO, CALIFORNIA
ITEM DESCRIPTION QTY. LOCATION
1 All conference room furniture and chairs
2 All lab stools and chairs
3 All laboratory equipment and glassware
4 All lunch room furniture and chairs
5 All manufacturing process equipment
6 All office cubicle furniture and chairs
7 All patio furniture and chairs
8 All plug-in refrigerators and freezers
9 All stand-alone corrosive cabinets
10 All stand-alone flammable cabinets
11 Amsco single door autoclave 1 117
12 Baker Edgegard Hood 1 188
13 Baker Edgegard Hood E6552 1
14 Baker Stenigard Hood 1 118
15 Bike Lockers 1
16 BioChem Garb Hood BC-6 1 147
17 BloChem Garb Hood BC-8 1 147
18 BioKlone 2 bio-contamination hood 1 143
19 Captair Labx Ductless Filtration Hood 1 152
20 Continental 2-door refrigerator 1 143
21 Continental 3-door refrigerator (MEIN 11537) 1 115
22 Continental refrigerator w/wheels 1 117
23 Forklift-Komatsu 1
24 Forma incubator, large, model 3919 2 143
25 Forma incubator, small, model 3546 3 143
28 Gallenkamp oven 1
27 Gelman Filter Housing 3
28 Hamilton SafeAir Hood 1 143
29 Hazardous materials storage 5 Outside
30 Mobile laminar flow hood 3
<PAGE>
Exhibit "D"
EXCLUDED PERSONAL PROPERTY
--------------------------
4757 NEXUS CENTRE DRIVE, SAN DIEGO, CALIFORNIA
ITEM DESCRIPTION QTY. LOCATION
31 Portable particle counter- Met one 1
32 Refrigerator recovery unit (maint. tool) 1
33 Remote particle counter - Met One 12
34 Scotsman Icemaker (E-144) 1 117
35 Signage for Reception Area
38 Stainless steel racks
37 Stainless steel trays 1
38 Sterilizer, Kuhlman 1
39 Storage Trailers 2 Outside
40 Telephone System (Siemens)
<PAGE>
Exhibit "E"
ESTOPPEL CERTIFICATE
THIS TENANT ESTOPPEL CERTIFICATE ("Certificate"), dated as of ________,
19__, is executed by _____________ ("Tenant") in favor of Alexandria Real Estate
Equities, Inc., a Maryland corporation, together with its nominees, designees
and assigns (collectively, "Buyer"), and in favor of _______________ together
with its nominees, designees and assigns (collectively, "Lender").
RECITALS
A. Buyer and _____________ ("Landlord"), have entered into that certain
Purchase and Sale Agreement and Joint Escrow Instructions, dated as of
_________, 19__ (the "Purchase Agreement"), whereby Buyer has agreed to
purchase, among other things, the improved real property located in the City of
_________, County of _________, State of __________, more particularly described
on Exhibit "A" attached to the Purchase Agreement (the "Property").
B. Tenant and Landlord have entered into that certain Lease Agreement,
dated as of ___________ (together with all amendments, modifications,
supplements, guarantees and restatements thereof, the "Lease"), for a portion of
the Property.
C. Pursuant to the Lease, Tenant has agreed that upon the request of
Landlord, Tenant would execute and deliver an estoppel certificate certifying
the status of the Lease.
D. In connection with the Purchase Agreement, Landlord has requested
that Tenant execute this Certificate with an understanding that Lender will rely
on the representations and agreements below in granting to Buyer a loan.
NOW, THEREFORE, Tenant certifies, warrants, and represents to Buyer and
Lender as follows:
Section 1. Lease.
<PAGE>
Attached hereto as Exhibit "1" is a true, correct and complete copy of
the Lease, including the following amendments, modifications, supplements,
guarantees and restatements thereof, which together represent all of the
amendments, modifications, supplements, guarantees and restatements thereof:
________________________________________________________________________________
_______________________________________________________________________________.
(If none, please state "None.")
Section 2. Leased Premises.
Pursuant to the Lease, Tenant leases those certain premises (the
"Leased Premises") consisting of approximately ________________ (______)
rentable square feet within the Property, as more particularly described in the
Lease. In addition, pursuant to the terms of the Lease, Tenant has the
[non-exclusive] right to use [_____ parking spaces/the parking area] located on
the Property during the term of the Lease. [Cross-out the preceding sentence or
portions thereof if inapplicable.]
Section 3. Full Force of Lease.
The Lease has been duly authorized, executed and delivered by Tenant,
is in full force and effect has not been terminated and constitutes a legally
valid instrument, binding and enforceable against Tenant in accordance with its
terms, subject only to applicable limitations imposed by laws relating to
bankruptcy and creditor's rights.
Section 4. Complete Agreement.
The Lease constitutes the complete agreement between Landlord and
Tenant for the Leased Premises and the Property, except as modified by the Lease
amendments noted above (if any), has not been modified, altered or amended.
Section 5. Acceptance of Leased Premises.
Tenant has accepted possession and is currently occupying the Leased
Premises.
Section 6. Lease Term.
2
<PAGE>
The term of the Lease commenced on _______________ and ends on
_______________, subject to the following options to extend:____________________
____________________________________________________________________.
(If none, please state "None.")
Section 7. Purchase Rights.
Tenant has no option, right of first refusal, right of first offer, or
other right to acquire or purchase all or any portion of the Leased Premises or
all or any portion of, or interest in, the Property, except as follows:_________
________________________________________________________________________________
______________________.
(If none, please state "None.")
Section 8. Rights of Tenant.
Except as expressly stated in this Certificate, Tenant:
(a) has no right to renew or extend the term of the Lease;
(b) has no option or other right to purchase all or any part of the
Leased Premises or all or any part of the Property;
(c) has no right, title, or interest in the Leased Premises, other than
as Tenant under the Lease.
Section 9. Rent.
(a) The obligation to pay rent under the Lease commenced on ___________.
The rent under the Lease is current, and Tenant is not in default in the
performance of any of its obligations under the Lease.
(b) Tenant is currently paying base rent under the Lease in the amount
of _____________________ Dollars ($________) per month. Tenant has not received
and is not, presently, entitled to any abatement, refunds, rebates, concessions
or forgiveness of rent or other charges, free rent, partial rent, or credits,
offsets or reductions in rent, except as follows: ______________________________
________________________________________________________________________________
___________________________.
3
<PAGE>
(If none, please state "None.")
(c) Tenant's estimated share of operating expenses, common area charges,
insurance, real estate taxes and administrative and overhead expenses is
___________ percent (_______%) and is currently being paid at the rate of
_______________________ Dollars ($________) per month, payable to:______________
____________________________________________________________________.
(d) There are no existing defenses or offsets against rent due or to
become due under the terms of the Lease, and there presently is no default or
other wrongful act or omission by Landlord under the Lease or otherwise in
connection with Tenant's occupancy of the Leased Premises, nor is there a state
of facts which with the passage of time or the giving of notice or both could
ripen into a default on the part of Tenant, or to the best knowledge of Tenant,
could ripen into a default on the part of Landlord under the Lease, except as
follows: _______________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________.
(If none, please state "None.")
Section 10. Security Deposit.
The amount of Tenant's security deposit held by Landlord under the Lease
is ___________________ Dollars ($ ___________
Section 11. Prepaid Rent.
The amount of prepaid rent, separate from the security deposit, is
___________________________ Dollars ($_______), covering the period from ______
to ______.
Section 12. Insurance.
All insurance, if any, required to be maintained by Tenant under the
Lease is presently in effect.
Section 13. Pending Actions.
4
<PAGE>
There is not pending or, to the knowledge of Tenant, threatened against
or contemplated by the Tenant, any petition in bankruptcy, whether voluntary or
otherwise, any assignment for the benefit of creditors, or any petition seeking
reorganization or arrangement under the federal bankruptcy laws or those of any
state.
Section 14. Tenant Improvements.
As of the date of this Certificate, to the best of Tenant's knowledge,
Landlord has performed all obligations required of Landlord pursuant to the
Lease; no offsets, counterclaims, or defenses of Tenant under the Lease exist
against Land- lord; and no events have occurred that, with the passage of time
or the giving of notice, would constitute a basis for offsets, counterclaims, or
defenses against Landlord, except as follows:___________________________________
________________________________________________________________________________
_________________________.
(If none, please state "None.")
Section 15. Assignments by Landlord.
Tenant has received no notice of any assignment, hypothecation or pledge
of the Lease or rentals under the Lease by Landlord. Tenant hereby consents to
an assignment of the lease and rents to be executed by Landlord to Buyer or
Lender in connection with the Loan and acknowledges that said assignment does
not violate the provisions of the Lease. Tenant acknowledges that the interest
of the Landlord under the Lease is to be assigned to Buyer or Lender solely is
security for the purposes specified in said assignment and Buyer or Lender shall
have no duty, liability or obligation whatsoever under the Lease or any
extension or renewal thereof, either by virtue of said assignment or by any
subsequent receipt or collection of rents thereunder, unless Buyer or Lender
shall specifically undertake such liability in writing. Tenant agrees that upon
receipt of a written notice from Buyer or Lender of a default by Landlord under
the Loan, Tenant will thereafter pay rent to Buyer or Lender in accordance with
the terms of the Lease.
Section 16. Assignments by Tenant.
Tenant has not sublet or assigned the Leased Premises or the Lease or
any portion thereof to any sublessee or assignee. No one except Tenant and its
5
<PAGE>
employees will occupy the Leased Premises. The address for notices to be sent to
Tenant is as set forth in the Lease.
Section 17. Environmental Matters.
The operation and use of the Leased Premises does not involve the
generation, treatment, storage, disposal or release into the environment of any
hazardous materials, regulated materials and/or solid waste, except those used
in the ordinary course of operating a retail store or otherwise used in
accordance with all applicable laws.
Section 18. Succession of Interest.
Tenant agrees that, in the event Buyer or Lender succeeds to interest of
Landlord under the Lease:
(a) Buyer or Lender shall not be liable for any act or omission of any
prior landlord (including Landlord);
(b) Buyer or Lender shall not be liable for the return of any security
deposit;
(c) Buyer or Lender shall not be bound by any rent or additional rent
which Tenant might have prepaid under the Lease for more than the current month;
(d) Buyer or Lender shall not be bound by any amendments or
modifications of the Lease made without prior consent of Buyer or Lender;
(e) Buyer or Lender shall not be subject to any offsets or defenses
which Tenant might have against any prior landlord (including Landlord); or
(f) Buyer or Lender shall not be liable under the Lease to Tenant for
the performance of Landlord's obligations under the Lease beyond Buyer or
Lender's interest in the Property.
Section 19. Notice of Default.
Tenant agrees to give Buyer and Lender a copy of any notice of default
under the Lease served upon Landlord at the same time as such notice is given to
6
<PAGE>
the Landlord. Tenant further agrees that if Landlord shall fail to cure such
default within the applicable grace period, if any, provided in the Lease, then
Buyer or Lender shall have an additional sixty (60) days within which to cure
such default, or if such default cannot be cured within such sixty (60) day
period, such sixty (60) day period shall be extended so long as Buyer or Lender
has commenced and is diligently pursuing the remedies necessary to cure such
default (including, but not limited to, commencement of foreclosure proceedings,
if necessary to effect (such cure), in which event the Lease shall not be
terminated while such remedies are being pursued.
Section 20. Notification by Tenant.
From the date of this Certificate and continuing until
_____________, Tenant agrees to immediately notify Buyer and Lender, in writing
by registered or certified mail, return receipt requested, at the following
addresses, on the occurrence of any event or the discovery of any fact that
would make any representation contained in this Certificate inaccurate:
If To Buyer: Alexandria Real Estate Equities, Inc.
135 N. Los Robles Avenue, Suite 250
Pasadena, California 91101
Attention: Corporate Secretary
With A Copy To: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: George M. Eshaghian
If To Lender:
Tenant makes this Certificate with the knowledge that it will be relied
upon by Buyer and Lender in agreeing to purchase the Property.
Tenant has executed this Certificate as of the date first written above
by the person named below, who is duly authorized to do so.
7
<PAGE>
TENANT
________________________________________
By: __________________________
Name:
Its:
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of March
25, 1998 by and between ARE-4757 NEXUS CENTRE, LLC, a Delaware limited liability
company ("Lender"), and MATRIX PHARMACEUTICAL, INC., a Delaware corporation
("Borrower"), with respect to the following Recitals:
R E C I T A L S
A. Borrower is the owner of the Improvements (as hereinafter
defined).
B. Borrower desires to borrow from Lender, and Lender is
willing to loan to Borrower, the principal amount of Six Million Dollars
($6,000,000.00) for the purposes and upon the terms set forth herein.
A G R E E M E N T
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
65535RT65535CLE 1
GENERAL DEFINITIONS
When used herein, the following initially capitalized terms shall have
the following meanings:
"Affiliate" means, with respect to any Person, any other Person which
controls, is controlled by, or is under common control with the Person in
question. For the purposes of the foregoing definition, "controls" (and its
correlative terms "controlled by" and "under common control with") means
possession by the applicable Person of the power to direct or cause the
direction of the management and policies thereof, whether through the ownership
of voting securities, by contract, or otherwise.
"Agreement" means this Loan and Security Agreement, together with all
supplements, amendments and modifications hereto and all extensions and renewals
hereof.
"Attorneys' Fees," "Attorneys' Fees and Costs," "attorneys' fees" and
"attorneys' fees and
<PAGE>
costs" mean the reasonable fees and expenses of counsel to the applicable
parties to the Loan Documents, which may include printing, photostating,
duplicating, facsimilating, messengering, filing and other expenses, air freight
charges, and fees billed for law clerks, paralegals, librarians and others not
admitted to the bar but performing services under the supervision of an
attorney. The terms "attorneys' fees" or "attorneys' fees and costs" shall also
include, without limitation, all such fees and expenses incurred with respect to
appeals, arbitrations, bankruptcy proceedings and any post-judgment proceedings
to collect any judgment, and whether or not any action or proceeding is brought
with respect to the matter for which, such fees and expenses were incurred, but
shall not include any such fees or expenses incurred in connection with the
preparation and negotiation of the Lease or the Purchase Agreement. The recovery
of post-judgment fees, costs and expenses is separate and several and shall
survive the merger of the applicable Loan Documents into any judgment.
"Bankruptcy Code" means Titles 7, 11 or 13 of the U.S. Code, as
applicable, or any similar federal or state laws for the relief of debtors, each
as hereafter amended.
"Business Day" means any day other than a Saturday, a Sunday, a legal
holiday under the laws of the State of California or a day on which commercial
banks in such state are authorized or required by law or other governmental
action to be closed.
"Closing Date" means the date of the closing of the Loan and the
recordation of the Deed of Trust in the Official Records of the County in which
the Project is situated.
"Contractual Obligation" as applied to any Person means any provision
of any instrument, document or security issued by that Person or of any
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which any of its properties is
bound or to which it or any of its properties is subject.
"Deed of Trust" means that certain Deed of Trust and Fixture Filing of
even date herewith executed by Borrower, as trustor, to Chicago Title Insurance
Company, as trustee, and naming Lender, as beneficiary, to be recorded on the
Closing Date in the Official Records of the County in which the Project is
situated.
"Default Interest Rate" means an interest rate that is the lesser of
(i) eighteen percent (18%) per annum or (ii) the maximum rate permitted by law.
"Environmental Laws" is defined in the Lease.
"Event of Default" means any of the events specified in Section 6.1.
2
<PAGE>
"Formation Documents" means (a) as to any corporation, its articles of
incorporation and bylaws, (b) as to any limited partnership, its Certificate of
Limited Partnership and partnership agreement, (c) as to any general partnership
or joint venture, its Statement of Partnership and partnership agreement, (d) as
to any limited liability company, its articles or certificate of organization
and operating agreement, and (e) as to any trust, its trust agreement and a
certification of the current trustees thereof, each of the foregoing together
with all supplements, amendments and modifications.
"General Partner" or "general partner" means the general partners of
the partnership in question, together with any constituent general partners of
such general partners.
"Governmental Agency" means any federal, state, municipal or other
governmental or quasi-governmental court, agency, authority or district.
"Hazardous Substances" is defined in the Lease.
"Improvements" means all fixtures and interior improvements located
within the manufacturing suites cross-hatched on Exhibit B-1 attached hereto
(which manufacturing suites are located within the buildings upon the Project),
including, without limitation, the fixtures and improvements to the extent
constituting real property and located therein and identified on Exhibit B-2
attached hereto, together with all present and future attachments, accessions,
replacements, substitutions and additions thereto or therefor, and together with
all insurance proceeds relating to the loss of or damage to such fixtures or
improvements which Borrower receives from any policy of insurance covering any
of the foregoing property now or hereafter acquired by Borrower.
"Indemnitees" means, collectively and individually, Lender, its
Affiliates and its and their directors, officers, agents, employees, successors
and assigns.
"Laws" means all federal, state, county, municipal and other
governmental and quasi-governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting Borrower's interest in
the Project or Borrower's occupancy, operation, ownership or use thereof,
whether now or hereafter enacted and in force including, without limitation, the
Americans With Disabilities Act, 42 U.S.C. ss.ss. 12101-12213 (1991) and all
Environmental Laws, any zoning or other land use entitlements and any
requirements which may require repairs, modifications or alterations in or to
the Project, all Permits and all covenants, agreements, restrictions and
encumbrances running in favor of any Person, contained in any instruments,
either of record or known to Borrower, at any time in force affecting Borrower's
interest in the Project or Borrower's occupancy, operation, ownership or use
thereof.
3
<PAGE>
"Lease" means that certain Lease of even date herewith by and between
Lender, as landlord, and Borrower, as tenant, pursuant to which Borrower has
leased from Lender a portion of the Project.
"Lien" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, charge or claim of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof, and/or the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction) with
respect to Borrower's interest in the Project or the Personal Property or any
portion thereof or interest therein.
"Loan" means the loan to Borrower as more particularly described in
Section 2.1.
"Loan Documents" means the documents described in Section 3.1, and all
other documents securing, or executed in connection with, the Loan, together
with all renewals, substitutions, extensions, modifications or replacements
thereof.
"Maturity Date" means the date set forth in the Note upon which the
entire principal amount of the Loan, together with all other amounts owing to
Lender under the Loan Documents, shall be due and payable.
"Note" means that certain Secured Promissory Note of even date herewith
in the principal amount of Six Million Dollars ($6,000,000.00) executed by
Borrower, as maker, in favor of Lender, as holder, substantially in the form of
Exhibit D attached hereto, and any and all modifications, extensions, renewals
and replacements thereof.
"Permits" means all permits, licenses, franchises, approvals, variances
and land use entitlements necessary for Borrower's occupancy, operation,
ownership and use of the Project.
"Permitted Liens" means the liens and encumbrances identified on
Exhibit E attached hereto.
"Person" means and includes natural persons, corporations, limited
liability companies, limited liability partnerships, limited partnerships,
general partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts, real
estate investment trusts or other organizations, whether or not legal entities,
and governments and agencies and political subdivisions thereof.
4
<PAGE>
"Personal Property" means all personal property described on Exhibit C
attached hereto, together with all present and future attachments, accessions,
replacements, substitutions and additions thereto or therefor, and together with
all insurance proceeds relating to the loss of or damage to such personal
property which Borrower receives from any policy of insurance covering any of
the foregoing property now or hereafter acquired by Borrower; provided, however,
that "Personal Property" shall not include any of Borrower's inventory or work
in process.
"Potential Default" means a condition or event which, with the giving
of notice or passage of time, or both, would constitute an Event of Default
under any of the Loan Documents or the Lease.
"Principals" means individually and collectively Borrower, its general
partners, managing members and major shareholders, as applicable, and each of
such parties' constituent general partners, managing members and major
shareholders, as applicable.
"Project" means that certain parcel of land described on Exhibit A
attached hereto.
"Project Documents" means (a) all agreements to which Borrower is a
party now or hereafter in effect with any contractor, architect or engineer,
including, without limitation, any design architect, landscape architect, civil
engineer, electrical engineer, environmental engineer, soils engineer or
mechanical engineer, in connection with Borrower's interest in the Project; (b)
all other agreements to which Borrower is a party now or hereafter in effect
with any property manager or broker with respect to the management, subleasing,
or operation of Borrower's interest in the Project; (c) all as-built plans and
specifications and surveys for the Project; (d) all Permits; and (e) all
renewals, substitutions, extensions, modifications or replacements of any of the
foregoing.
"Purchase Agreement" means that certain Purchase and Sale Agreement and
Joint Escrow Instructions, dated as of February 3, 1998, by and between
Borrower, as seller, and Alexandria Real Estate Equities, Inc., a Maryland
corporation, as buyer.
"Related Parties" means Borrower, Principals, any Affiliate of Borrower
or Principals, any partnership of which Borrower or any Principal is a general
partner, and any limited liability company of which Borrower or any Principal is
a manager or managing member.
"Secured Obligations" is defined in the Deed of Trust.
"Tax Identification Number" means Borrower's employer identification
number or social security number, which is 94-2957068.
5
<PAGE>
"Title Policy" means an American Land Title Association Extended
Coverage Policy of Title Insurance (1970 version, amended 10/17/70 only), issued
by Chicago Title Insurance Company ("Title Company"), insuring Lender that on
the Closing Date the Deed of Trust is a valid first lien on the Improvements,
and is in the amount of the Loan. The Title Policy shall contain such
endorsements as Lender reasonably requires and shall be subject only to such
exceptions to coverage as approved by Lender in writing prior to the Closing
Date.
65535RT65535CLE 2
LOAN TERMS
2.1 Loan and Disbursements of Loan Proceeds.
Subject to the terms and conditions of this Agreement, and in
reliance upon the representations and warranties of Borrower set forth in the
Loan Documents, Lender agrees to make to Borrower, and Borrower agrees to accept
from Lender, a loan (the "Loan") in the principal amount of Six Million Dollars
($6,000,000.00). The Loan proceeds shall be disbursed by Lender on the Closing
Date.
2.2 Evidence of Indebtedness and Maturity.
Borrower shall execute and deliver to Lender, on or before the
Closing Date, the Note evidencing the Loan. Borrower agrees to repay the
indebtedness evidenced by the Note in accordance with the terms thereof and the
terms hereof. The outstanding principal balance of the Loan, together with
accrued and unpaid interest thereon and all other amounts payable by Borrower
under the Loan Documents shall be due and payable on the Maturity Date.
2.3 Interest Rate.
The Loan shall bear interest at the rate per annum specified
in the Note.
65535RT65535CLE 3
CONDITIONS TO LOAN
3.1 Condition Precedent to Closing of Loan.
As a condition precedent to Lender's obligation to close the
Loan and disburse any Loan proceeds, on or before the Closing Date Borrower must
satisfy and fulfill each of the following conditions precedent to closing, to
the satisfaction of Lender:
6
<PAGE>
A. Loan Documents. Borrower shall deliver to Lender the
following documents, each duly executed and acknowledged by a notary public
where necessary, and in form and substance satisfactory to Lender:
(i) This Agreement;
(ii) The Lease;
(iii) The Note;
(iv) The Deed of Trust; and
(v) A California UCC-1 Financing Statement
relating to the Personal Property and the Improvements (to the extent that the
Improvements or any portion thereof or proceeds therefrom constitute personal
property), to be filed with the California Secretary of State, together with
UCC-1 Financing Statements for such other States as are required by Lender.
B. Title. The Title Company shall be irrevocably and
unconditionally committed to issue the Title Policy to Lender in the form and
with such endorsements required by Lender.
C. Opinion. Borrower's counsel shall be committed to deliver
to Lender an opinion regarding the enforceability and the due authorization,
execution and delivery of this Agreement, the Note and the Deed of Trust, in
form and substance, and containing such assumptions and qualifications, as may
be reasonably satisfactory to Lender's counsel.
D. Truth of Representations and Warranties. The
representations and warranties of Borrower contained herein and in the other
Loan Documents, the Lease and the Purchase Agreement shall be true, correct and
complete in all material respects on the Closing Date.
E. No Default. As of the Closing Date, no event shall have
occurred or would result from the funding of the Loan that would constitute an
Event of Default or a Potential Default.
65535RT65535CLE 4
SECURITY AGREEMENT
4.1 Grant of Security Interest.
As security for the payment and performance of the Secured
Obligations, subject to the terms and conditions hereof, Borrower hereby
assigns, transfers and grants to Lender, and there is hereby created in favor of
Lender, a security interest under the California Commercial
7
<PAGE>
Code in and to the Personal Property and the Improvements (to the extent that
the Improvements or any portion thereof or proceeds therefrom constitute
personal property), whether now owned or hereafter acquired, and in all proceeds
thereof (and proceeds of proceeds). This Agreement shall constitute a security
agreement pursuant to the California Commercial Code with respect to the
Personal Property and the Improvements (to the extent that the Improvements or
any portion thereof or proceeds therefrom constitute personal property) and the
proceeds thereof, with Borrower the "Debtor" and Lender the "Secured Party" as
such terms are used therein.
4.2 Representations, Agreements and Covenants Regarding Personal
Property and Improvements.
In order to induce Lender to enter into this Agreement and
make the Loan, Borrower represents, warrants and covenants as follows:
A. Except for the security interest in favor of Lender and the
Permitted Liens, Borrower is, and as to any of the Personal Property or the
Improvements acquired after the date hereof will be, the sole owner of such
Personal Property and Improvements, free from any adverse lien, security
interest, or adverse claim of any kind whatsoever. Borrower will notify Lender
of and will defend such Personal Property and Improvements against all claims
and demands of all persons at any time claiming any interest therein.
B. Borrower will keep the Personal Property and the
Improvements in good condition and repair, and will not misuse, abuse, allow to
deteriorate, waste or destroy such Personal Property or Improvements or any part
thereof, except for ordinary wear and tear resulting from normal and expected
use in the ordinary course of Borrower's business, which shall be promptly
replaced by Borrower with property of similar nature and of equal or greater
value unless obsolete.
C. Borrower will not, without the prior written consent of
Lender, sell, offer to sell or otherwise transfer, exchange or dispose of the
Personal Property or the Improvements or any interest therein, unless such
Personal Property or Improvements are being replaced by collateral of similar
nature and of equal or greater value. If the Personal Property or the
Improvements or any part thereof are sold, transferred, exchanged, or otherwise
disposed of (either with or without the written consent of Lender), the security
interest of Lender shall extend to the proceeds of such sale, transfer, exchange
or other disposition and Borrower will hold such proceeds in a separate account
for Lender's benefit and will, at Lender's request, transfer such proceeds to
Lender.
D. The tangible Personal Property will be kept on or at the
Project and Borrower will not, without the prior written consent of Lender,
remove the Personal Property or
8
<PAGE>
the Improvements (to the extent that the Improvements or any portion thereof
constitute personal property) therefrom or otherwise sever the Improvements from
the Project except such portions or items of such Personal Property or
Improvements which are consumed or worn out in ordinary usage or due to casualty
not caused by Borrower, all of which shall be promptly replaced by Borrower as
provided in Section 4.2(B).
E. Borrower will immediately notify Lender in writing of any
change in its place of business or the adoption or change of any trade name or
fictitious business name, and will, within ten (10) days after Lender's request,
execute any additional financing statements or other certificates reasonably
requested by Lender to reflect such change.
F. The Personal Property and the Improvements are not and will
not be used or bought for personal, family or household purposes.
G. Borrower shall immediately notify Lender of any claim
against the Personal Property or the Improvements adverse to the interest of
Borrower or Lender therein.
H. Lender may examine and inspect the Personal Property and
the Improvements at any reasonable time, wherever located, upon reasonable prior
notice to Borrower.
4.3 Affixed Collateral.
The inclusion in Section 4.1 of any Personal Property or
Improvements (to the extent that the Improvements or any portion thereof
constitute personal property) which may now be or hereafter become affixed or in
any manner attached to the Project shall be without prejudice to any claim at
any time made by Lender that such Personal Property or Improvements are or have
become a part of or an accession to the Project.
4.4 Further Security Agreements.
Borrower agrees to take such actions and, within ten (10) days
after Lender's request, to execute, deliver and file and/or record such
documents, agreements and financing statements as may be reasonably necessary to
evidence the security interest set forth in Section 4.1, to establish the
priority thereof and to carry out the intent and purpose of this Article 4.
4.5 Borrower's License.
Notwithstanding anything to the contrary herein, as long as
there shall exist no Event of Default hereunder, Borrower shall have the right
under a license hereby granted by
9
<PAGE>
Lender to collect, but not prior to accrual, all cash proceeds arising from (i)
Borrower's ownership of the Personal Property and Improvements, (ii) Borrower's
leasehold interest in the Project as a result of Borrower's leasing or licensing
thereof and (iii) the ordinary course of Borrower's business in the Project;
provided that, except as otherwise provided herein, Borrower shall not sell,
encumber, pledge or otherwise dispose of the Personal Property or Improvements
without the Lender's prior written approval, which may be withheld in Lender's
sole discretion.
65535RT65535CLE 5
BORROWER'S REPRESENTATIONS AND WARRANTIES
As an inducement to Lender to execute this Agreement and make the Loan,
Borrower represents and warrants to Lender the truth and accuracy of the matters
set forth in this Article 5.
5.1 Organization, Power, Good Standing, and Business.
Borrower is a corporation duly formed, validly existing and in
good standing under the Laws of the State of Delaware and, if formed under the
Laws of a jurisdiction other than the State of California, has registered to do
business and is in good standing under the Laws of the State of California.
Borrower has the full power and authority to own and operate its properties, to
carry on its business as now conducted, to enter into each Loan Document, and to
carry out the transactions contemplated hereby and thereby. Borrower does not do
business under any trade name or fictitious business name other than "Matrix
Pharmaceutical". Borrower has delivered to Lender true, correct and complete
copies of its Formation Documents and such Formation Documents have not been
amended or modified except pursuant to agreements delivered to Lender prior to
the date hereof.
5.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and
performance of the Loan Documents and the issuance, delivery and payment of the
Note have been duly authorized by all necessary action of Borrower.
B. No Conflict. The execution, delivery and performance by
Borrower of each applicable Loan Document do not and will not (i) violate any
Law applicable to any such Person, the Formation Documents of any such Person,
or any order, judgment or decree of any court or other Governmental Agency
binding on any such Person; (ii) conflict with, result in a breach of or
constitute (with the giving of notice or the passage of time or both) a default
under any Contractual Obligation of any such Person; (iii) result in or require
the creation or imposition
10
<PAGE>
of any Lien of any nature on Borrower's properties or assets other than the
Liens in favor of Lender under the Loan Documents; or (iv) require any approval
or consent of any Person under any Contractual Obligation of Borrower.
C. Governmental Consents. The execution, delivery and
performance by Borrower of each applicable Loan Document does not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any Governmental Agency or other Person.
D. Binding Obligation. The Note and the other Loan Documents
are the legally valid and binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally.
5.3 Actions.
There is no action, suit, proceeding or arbitration, before or
by any Governmental Agency or other Person, pending or, to Borrower's best
knowledge, threatened against or affecting Borrower, any of the Principals or
any properties or rights of Borrower or any of the Principals, which might
adversely affect Lender's rights or remedies under the Loan Documents, the
business, assets, operations or financial condition of any such party or its
ability to perform its obligations under the Loan Documents. As of the date
hereof, there are no outstanding judgments against the Related Parties or their
property.
5.4 Financial Position.
A. Financial Information. All financial statements and
financial data delivered to Lender in connection with the Loan and/or relating
to Borrower and the Principals are true, correct and complete in all material
respects and accurately present the financial position of such parties as of the
date thereof. No material adverse change has occurred in the financial position
disclosed by any financial statements or financial data delivered to Lender.
B. Bankruptcy and Insolvency. Neither Borrower nor any of the
Related Parties has filed or been the subject of any bankruptcy, insolvency,
reorganization, dissolution or similar proceeding or any proceeding for the
appointment of a receiver or trustee for all or any substantial part of their
respective property. Neither Borrower nor any of the Related Parties has
admitted in writing its inability to pay its debts when due, made an assignment
for the benefit of creditors or taken other similar action.
C. Other Borrowing. Except for the Loan, no borrowings have
been made by
11
<PAGE>
Borrower which are secured by the Improvements or which might give rise to any
Lien other than the Liens created by the Loan Documents.
5.5 Liens.
Borrower is the sole owner of the Improvements free from any
adverse Liens, except for Liens and other rights in favor of Lender and for the
Permitted Liens. Borrower has paid in full all contractors, materialmen,
laborers, architects or other such Persons hired by Borrower to perform services
or work with respect to the Improvements and all statutory lien periods have
expired with respect to any such services or work. No previous assignment, sale,
pledge, encumbrance or other hypothecation of the Improvements has been made
(except for Permitted Liens and pledges and encumbrances which have been
released in full prior to the date hereof or will be released in full
concurrently with the funding of the Loan).
5.6 Defects.
To the best of Borrower's knowledge, there are no defects,
facts or conditions affecting the Improvements or any portion thereof which
would make the Improvements unsuitable for their intended operation, use or
sale.
5.7 No Defaults.
No Potential Default or Event of Default exists under this
Agreement, the Lease, the Purchase Agreement or any of the other Loan Documents.
To the best of Borrower's knowledge, no default by Borrower exists under any
Contractual Obligation which would have a material adverse effect on Borrower's
ability to repay the Loan or to perform its obligations under any of the Loan
Documents or the Lease.
5.8 Disclosure.
No representation or warranty of Borrower contained in this
Agreement, the Lease, the Purchase Agreement or any Loan Document contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading.
65535RT65535CLE 6
BORROWER'S COVENANTS
Borrower covenants and agrees that, until the Loan and all
other amounts owing
12
<PAGE>
to Lender under the Loan Documents have been paid in full and all Secured
Obligations have been satisfied, Borrower shall perform all of the covenants in
this Article 6.
6.1 No Liens.
Borrower shall not permit any Lien to be made or filed with
respect to the Improvements except for Liens which are being contested in good
faith, for which adequate reserves have been established and which do not pose
an imminent risk to the Improvements or the Personal Property. Borrower shall be
the sole owner of the Improvements, free from any adverse Liens, except for
Permitted Liens and Liens in favor of Lender. Borrower shall not assign, sell,
pledge, encumber or otherwise hypothecate all or any portion of the
Improvements.
6.2 Compliance with Laws.
Borrower shall comply with all Laws applicable to Borrower,
its property, Borrower's interest in the Project, the Personal Property, the
Improvements and/or Borrower's occupancy, operation, ownership or use thereof.
6.3 Inspection.
During normal business hours and upon reasonable advance
notice, Borrower shall permit Lender and any Person designated by Lender to
visit and inspect the Improvements.
6.4 Environmental Matters.
Borrower shall comply and cause all persons entering the
Project to comply with all Environmental Laws and all of Borrower's covenants
relating to Hazardous Substances set forth in the Lease.
6.5 Insurance Requirements.
Borrower shall procure and maintain, or cause to be procured
and maintained, at all times until the repayment of the Loan and the
satisfaction of the Secured Obligations, policies of insurance in form and
amounts satisfying the requirements of the Lease.
6.6 Notice of Proceeding.
Borrower will promptly notify Lender of any action, suit,
proceeding or arbitration (including, without limitation, any judicial or
nonjudicial foreclosure proceeding, any
13
<PAGE>
voluntary or involuntary bankruptcy proceeding or any proceeding for the
appointment of a receiver), commenced or threatened against Borrower, the
Improvements, Borrowers' interest in the Project or any portion thereof or
interest therein. Borrower shall deliver to Lender copies of all notices and
other information in connection with any action, suit, proceeding or arbitration
promptly upon receipt or transmittal thereof.
6.7 Representations and Warranties.
Until repayment of the Loan and all other amounts owing to
Lender under the Loan Documents and the satisfaction of all other Secured
Obligations, the representations and warranties set forth in Article 5 shall
remain true and correct.
6.8 Financial Reporting.
Borrower shall deliver to Lender (a) within thirty days
following the end of each fiscal quarter of Borrower, Borrower's unaudited
financial statements and accompanying notes for such quarter and year to date,
certified by Borrower to be true, correct and complete in all respects, (b)
within sixty days following the end of each fiscal year of Borrower, Borrower's
audited financial statements and accompanying notes for such year, certified by
Borrower to be true, correct and complete in all respects, (c) within ten
business days following the occurrence of any event or circumstance which could
reasonably be expected to have a material adverse affect upon the business,
prospects or financial condition of Borrower, notice thereof together with
Borrower's plans to address such event or circumstance, (d) promptly following
the preparation or submission of such items, copies of all 10-K's, 10-Q's,
8-K's, proxy statements, annual reports, Business Plans and other materials as
may be reasonably requested by Buyer pertaining to the financial condition of
Seller.
6.9 Further Assurances.
Borrower shall execute and deliver from time to time, within
ten (10) business days after any request by Lender, any and all instruments,
agreements and documents and shall take such other action as may be reasonably
necessary or desirable in the opinion of Lender to maintain, perfect or insure
Lender's security provided for herein and in the other Loan Documents,
including, without limitation, the execution of UCC-1 renewal statements, the
execution of such amendments to the Deed of Trust and the other Loan Documents
and the delivery of such endorsements to the Title Policy, all as Lender shall
reasonably require, and to the extent that such actions are required as a result
of Borrower's activities or an Event of Default, Borrower shall pay all fees and
expenses (including reasonable attorney's fees) related thereto, and in all
14
<PAGE>
other circumstances Lender shall be responsible for its own fees and expenses.
65535RT65535CLE 7
EVENTS OF DEFAULT; REMEDIES
7.1 Events of Default.
The occurrence of any of the following events shall constitute
an Event of Default under this Agreement and the other Loan Documents:
A. Failure to Make Payments When Due. Borrower's failure to
pay any principal, interest or other monies due under this Agreement, the Lease
or any of the other Loan Documents within three (3) days after written notice
that such amount is due (provided, however, that Lender shall have no obligation
to give Borrower written notice more than two times in any twelve month period).
B. Breach of Covenants. Borrower's failure to perform or
comply with any other term, obligation or condition contained in this Agreement
or any of the other Loan Documents, within thirty (30) days after the delivery
of written notice from Lender of such failure; provided that if such default is
not reasonably capable of being cured within such thirty (30) day period, such
failure shall not constitute an Event of Default so long as Borrower commences
the cure of such default within such thirty (30) day period and diligently
prosecutes such cure to completion within sixty (60) days after such written
notice from Lender.
C. Breach of Warranty. Any representation, warranty,
certification or other statement made by Borrower herein or in any other Loan
Document or in any statement or certificate at any time given by Borrower or any
of the Principals to Lender in writing in connection with the Loan shall be
materially false or misleading.
D. Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having proper jurisdiction shall enter a decree or
order for relief with respect to Borrower in an involuntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, which decree or order is not stayed within seven (7)
days after entry and dismissed within ninety (90) days after the entry of such
order; or any other similar relief shall be granted under any applicable federal
or state law; or
(ii) An involuntary case is commenced against Borrower or any
of the Principals, under any applicable bankruptcy, insolvency or other similar
law now or hereafter in
15
<PAGE>
effect; or a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over Borrower or any of the Principals or over all or a substantial part
of their respective property, shall be entered; or the involuntary appointment
of an interim receiver, trustee or other custodian of Borrower or any of the
Principals, for all or a substantial part of their respective property; or the
issuance of a warrant of attachment, execution or similar process against any
substantial part of the respective property of Borrower or any of the
Principals, and the continuance of any such event in this clause (ii) for ninety
(90) days unless dismissed or discharged.
E. Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Borrower or any of the Principals shall have an order for
relief entered with respect to them or commence a voluntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of their respective property; the making by Borrower or any of
the Principals of any assignment for the benefit of creditors; or
(ii) The inability or failure of Borrower or any of the
Principals, or the admission by Borrower or any of the Principals in writing of
its inability, to pay their respective debts as such debts become due.
F. Lien Priority. Lender fails to have a legal, valid binding
and enforceable first priority Lien on the Improvements and the Personal
Property subject only to Permitted Liens.
G. Unapproved Transfers. Any transfer of the Improvements, the
Personal Property, Borrower's interest in the Lease or any interest in Borrower
occurs without Lender's prior written consent or otherwise in accordance with of
the Loan Documents.
H. Failure to Maintain Insurance. Borrower fails to maintain
or cause to be maintained the insurance coverage required by Section 6.5.
I. Other Liens. Without limiting the provisions of Section 6.1
of this Agreement, Borrower defaults under any Lien (other than the Liens
created by the Loan Documents) or foreclosure or other proceedings are commenced
to enforce any Lien (other than the Liens created by the Loan Documents).
16
<PAGE>
J. Other Loan Documents. The occurrence of an Event of Default
under any of the Loan Documents other than this Agreement or the Lease (as
"Event of Default" is defined therein).
K. Lease. The occurrence of an Event of Default under the
Lease (as "Event of Default" is defined therein).
7.2 General Remedies.
Notwithstanding anything to the contrary contained herein or
in any of the other Loan Documents, upon the occurrence of any Event of Default
(i) at the option of Lender upon written notice to Borrower as to Sections
6.1(A) through (C) and (F) through (I), and automatically without notice to
Borrower as to Sections 7.1(D), (E), (J) and (K), the unpaid principal amount of
the Loan, all accrued and unpaid interest and all other Secured Obligations
shall become immediately due and payable, without presentment, demand, protest,
further notice or other requirements of any kind, all of which are hereby
expressly waived by Borrower, (ii) Lender shall have the rights and remedies of
a secured party under the California Commercial Code, and under any other
applicable law, (iii) Lender may pursue all of its rights and remedies
hereunder, under the other Loan Documents, at law, in equity or otherwise,
including without limitation, obtaining the appointment of a receiver, provided,
however, that if Lender seeks to exercise its right of sale under the Deed of
Trust, the purchaser of the Improvements (including Lender or its affiliates)
shall have the right to cause Borrower to enter into a lease (and Borrower shall
be deemed to have elected to enter into such lease) of the Improvements to
Borrower in accordance with the rent payment as set forth in Article 9 (iv)
Lender may pursue any remedies available to it pursuant to California Code of
Civil Procedure Section 726.5, (v) all outstanding indebtedness and all other
amounts owing to Lender under the Loan Documents shall bear interest at the
Default Interest Rate, and (vi) Lender shall have no further obligation to
disburse Loan proceeds to Borrower.
7.3 Specific Performance.
Upon the occurrence of an Event of Default, Lender may
commence and maintain an action in any court of competent jurisdiction for
specific performance of any of the covenants and agreements contained herein or
in any of the other Loan Documents, may obtain the aid and direction of the
court in the performance of any of the covenants and agreements contained herein
or therein, and may obtain orders or decrees directing the same and, in the case
of any sale under the Deed of Trust, directing, confirming or approving Lender's
or the trustee's actions.
65535RT65535CLE 8
17
<PAGE>
MISCELLANEOUS PROVISIONS
8.1 Nonforeign Status.
Section 1445 of the Internal Revenue Code of 1985, as amended
(the "Internal Revenue Code") and Sections 18662, 18668 and 18669 of the
California Revenue and Taxation Code (the "California Tax Code") provide that a
transferee of a U.S. real property interest, or California property interest, as
the case may be, must withhold tax under the circumstances described therein. To
inform Lender that the withholding of tax will not be required in the event of
the disposition of the Improvements pursuant to the terms of the Deed of Trust,
Borrower hereby certifies, under penalty of perjury, that: (a) Borrower is not a
foreign corporation, foreign partnership, foreign trust or foreign estate, as
those terms are defined in the Internal Revenue Code and/or California Tax Code
and the regulations promulgated thereunder; and (b) Borrower's U.S. employer
identification number is the Tax Identification Number; (c) Borrower's principal
place of business is at the address set forth in Section 8.10, and (d) Borrower
is qualified to do business in the State of California. Lender may disclose the
contents of this Section 8.1 to the Internal Revenue Service or any other
Governmental Agency and Borrower acknowledges that any false statement contained
herein could be punished by fine, imprisonment or both. Borrower covenants and
agrees to execute further certificates, which shall be signed under penalty of
perjury, as Lender shall reasonably require in connection with the
certifications set forth herein. The covenant set forth herein shall survive the
foreclosure of the lien of the Deed of Trust or acceptance of a deed in lieu or
in aid thereof.
8.2 Assignments and Participations in Loan and Note.
Lender may assign its rights and delegate its obligations
under this Agreement or any of the other Loan Documents and further may assign,
or sell participations in, all or any part of the Loan, the Loan Documents, or
any other interest herein or in the Note to any Person, all without notice to or
the consent of Borrower. To the extent of any such assignment, Lender shall be
relieved of its obligations with respect to the Loan and the assignee shall have
the same rights, benefits and obligations as it would if it were Lender
hereunder and a holder of the Note. Lender may furnish any information
(including, without limitation, financial information) concerning the
Improvements, the Project, Borrower, Principals and any of their assets to third
parties from time to time for legitimate business purposes (provided, however,
that Lender shall use reasonable efforts to maintain the confidentiality of any
information provided by Borrower of a proprietary nature).
8.3 Expenses.
18
<PAGE>
Borrower agrees to pay, within ten (10) days after demand by
Lender, all reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and costs, fees of any consultants, and fees for any
environmental audits, appraisal, inspections or other review required by Lender)
incurred by Lender in connection with the enforcement of any of the Secured
Obligations, the enforcement of any of Lender's rights and remedies under the
Loan Documents, the collection of any payments owing to Lender hereunder or
under any of the other Loan Documents, whether or not such enforcement and
collection includes the filing of a lawsuit, or the retaking, holding, preparing
for sale or selling the Improvements or the Personal Property or any portion
thereof or any interest therein. Such costs and expenses shall include, without
limitation, Lender's reasonable attorneys' fees and costs, including without
limitation attorneys' fees and costs incurred by Lender in connection with any
insolvency, bankruptcy, reorganization, arrangement or other similar proceedings
involving Borrower or any of the Principals which in any way affect the exercise
by Lender of its rights and remedies hereunder, under any of the other Loan
Documents, at law or in equity.
8.4 Joint and Several Obligations.
The liability of Borrower under this Agreement and under each
of the other Loan Documents shall be joint and several.
8.5 Indemnity.
In addition to the duties of indemnification set forth in the
Lease, Borrower hereby indemnifies and agrees to defend and hold harmless the
Indemnitees from and against any and all expenses, loss, claims, damage or
liability, including, without limitation, architects', engineers' and attorneys'
fees and costs, to the extent arising from: (a) any use, nonuse, misuse,
possession, occupation, alteration, operation, maintenance or management by
Borrower of the Improvements or the Personal Property or any part thereof; (b)
any negligence or willful act or omission on the part of Borrower or its agents,
contractors, servants, employees, licensees or invitees; (c) any accident,
injury (including death) or damage to any person or property relating to the
use, nonuse, misuse, possession, occupation, alteration, operation, maintenance
or management of the Improvements or the Personal Property; (d) any tax
attributable to the execution, delivery, filing or recording of the Deed of
Trust, the Note or the other Loan Documents; (e) any default under the Note or
the other Loan Documents, or (f) any claim by or liability to any contractor or
subcontractor performing work or any party supplying materials to Borrower in
connection with the Improvements or the Personal Property.
8.6 Waiver of Offset.
19
<PAGE>
All sums payable by Borrower pursuant to any of the Loan
Documents shall be paid without notice, demand, counterclaim, setoff, deduction
or defense and without abatement, suspension, deferment, diminution or
reduction, and the obligations and liabilities of Borrower under the Loan
Documents shall in no way be released, discharged or otherwise affected (except
as expressly provided in the Loan Documents) by reason of: (a) any damage to or
destruction of the Improvements or any condemnation or eminent domain action
affecting the Improvements or any part thereof; (b) any restriction or
prevention of or interference by any third party with any use of the
Improvements or any part thereof; (c) any title defect or encumbrance or any
eviction from the Project or any part thereof by title paramount or otherwise;
(d) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to Lender, or any
action taken with respect to any of the Loan Documents by any trustee or
receiver of Lender, or by any court, in any such proceeding; (e) any claim which
Borrower has or might have against Lender; (f) any default or failure on the
part of Lender to perform or comply with any of the terms hereof or of any other
agreement with Borrower; or (g) any other occurrence whatsoever, whether similar
or dissimilar to the foregoing; whether or not Borrower shall have notice or
knowledge of any of the foregoing. Except as expressly provided herein, Borrower
waives all rights now or hereafter conferred by statute or otherwise to any
abatement, suspension, deferment, diminution or reduction of any of the Secured
Obligations.
8.7 Amendments and Waivers.
This Agreement and the other Loan Documents may only be
modified in writing signed by all of the parties hereto or thereto or their
respective successors and assigns. No waiver of any provision of this Agreement
or of any of the other Loan Documents, or consent to any departure by Borrower
therefrom, shall in any event be effective without the written agreement of
Lender. Any waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given. Except as expressly
required by the terms of the Loan Documents, no notice to or demand on Borrower
in any case shall entitle Borrower to any other or further notice or demand in
similar or other circumstances.
8.8 WAIVER OF JURY TRIAL.
BORROWER AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
TORT OR CONTRACT LITIGATION BASED HEREON OR ON ANY OF THE OTHER LOAN DOCUMENTS,
OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THE NOTE, ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY IN CONNECTION THEREWITH.
20
<PAGE>
8.9 Submission of Loan Documents.
The submission of this Agreement or any of the other Loan
Documents to Borrower or its agents or attorneys for review or signature does
not constitute a commitment by Lender to make the Loan to Borrower, and the Loan
Documents shall have no binding force or effect unless and until they are
executed and delivered by Borrower and Lender and all of the conditions set
forth in Section 3.1 have been satisfied.
8.10 Notices.
Any notice, or other document or demand required or permitted
under this Agreement or any of the other Loan Documents shall be in writing
addressed to the appropriate address set forth below and shall be deemed
delivered upon the earliest of (a) actual receipt, (b) confirmation of delivery
by telecopy (provided that a copy is subsequently delivered by regular mail or
overnight delivery), (c) the next Business Day after the date when sent by
recognized overnight courier, or (c) the second Business Day after the date when
sent by registered or certified mail, postage prepaid. Any party may, from time
to time, change the address at which such written notice or other documents or
demands are to be sent, by giving the other party written notice of such change
in the manner hereinabove provided.
To Borrower: Matrix Pharmaceutical, Inc.
4757 Nexus Centre Drive
San Diego, California 92121
Attention: Mr. Ron Lucas
Telephone: (619) 824-5121
Facsimile: (619) 643-5699
With A Copy To: Brobeck, Phlegar & Harrison
550 W. "C" Street, Suite 1300
San Diego, California 92101
Attention: Scott Biel, Esq.
Telephone: (619) 699-0289
Facsimile: (619) 234-3848
To Lender: ARE-4757 Nexus Centre, LLC
135 N. Los Robles Avenue, Suite 250
Pasadena, California 91101
Attention: Corporate Secretary
21
<PAGE>
Telephone: (626) 578-0777
Facsimile: (626) 578-0770
With A Copy to: Alexandria Real Estate Equities, Inc.
11440 West Bernardo Court, Suite 170
San Diego, California 92127
Attention: Gary A. Kreitzer, Esq.
Telephone: (619) 592-6801
Facsimile: (619) 592-6814
With A Copy To: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: George M. Eshaghian, Esq.
Telephone: (213) 687-5215
Facsimile: (213) 687-5600
8.11 Survival of Warranties and Certain Agreements.
All agreements, indemnities, representations and warranties
made herein and in the other Loan Documents shall survive the execution and
delivery of this Agreement, the making of the Loan hereunder and the execution
and delivery of the Note. All representations and warranties made in this
Agreement or in any of the other Loan Documents shall further survive any and
all investigations and inquiries made by Lender, shall remain true, correct and
complete in all material respects and shall remain continuing obligations so
long as any portion of the Secured Obligations remains outstanding or
unsatisfied. Notwithstanding anything in this Agreement or the other Loan
Documents or implied by law to the contrary, any indemnities made by Borrower in
the Loan Documents shall survive the payment of the Loan, the satisfaction of
the Secured Obligations, and/or the termination of this Agreement or the other
Loan Documents.
8.12 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Lender or any holder of the
Note or portion thereof in the exercise of any power, right or privilege
hereunder or under the Note shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement and the other Loan Documents
are
22
<PAGE>
separate, distinct and cumulative to, and not exclusive of, any rights or
remedies otherwise available at law or in equity. No act of Lender under any of
the Loan Documents shall be construed as an election to proceed under any one
provision to the exclusion of any other provision, notwithstanding anything in
the Loan Documents to the contrary. Borrower expressly waives all right to the
benefit of any statute of limitations and any moratorium, reinstatement,
marshaling, forbearance, extension, redemption, or appraisement now or hereafter
provided by federal or state law, as a defense to any demand against Borrower to
the fullest extent permitted by law.
8.13 Survival of Obligations Upon Termination of Agreement.
No termination or cancellation (regardless of cause or
procedure) of this Agreement or any of the other Loan Documents shall in any way
affect or impair the powers, obligations, duties, rights, and liabilities of
Borrower or Lender relating to (a) any transaction or event occurring prior to
such termination or cancellation, or (b) any of the undertakings, agreements,
covenants, indemnities, warranties and representations of Borrower or Lender
contained in this Agreement or any of the other Loan Documents.
8.14 Disbursements in Excess of Loan Amount.
In the event the total disbursements by Lender exceed the
amount of the Loan set forth herein, the total of all disbursements shall, to
the extent permitted by the laws of the State of California, constitute part of
the Secured Obligations and be secured by the Deed of Trust and other Loan
Documents. All other sums expended by Lender pursuant to this Agreement or any
of the other Loan Documents shall be deemed to have been paid to Borrower and
shall be secured by the Loan Documents.
8.15 Severability.
If any term of this Agreement or any of the other Loan
Documents or the application thereof to any person or circumstances, shall, to
any extent, be invalid or unenforceable, the remainder of this Agreement or
other Loan Document or the application of such term to persons or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby, and each term of this Agreement or other Loan Document shall
be valid and enforceable to the fullest extent.
8.16 Rules of Construction.
Where the identity of the parties to this Agreement or any of
the other Loan
23
<PAGE>
Documents or the circumstances make it appropriate, the masculine gender
includes the feminine and/or neuter, and the singular number includes the
plural. Article and Section headings in this Agreement and the other Loan
Documents are included for convenience of reference only and shall not
constitute a part of this Agreement or such other Loan Documents for any other
purpose or be given any substantive effect. The recitals to this Agreement and
to each of the other Loan Documents are incorporated herein and therein and made
a part hereof and thereof.
8.17 Applicable Law.
This Agreement and the other Loan Documents shall be governed
by, and construed and enforced in accordance with, the laws of the State of
California.
8.18 Successors and Assigns.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors an assigns. Except
as expressly provided in the Loan Documents (including, without limitation, the
Lease), Borrower's rights and obligations or any interest hereunder or under any
of the other Loan Documents may not be assigned, including without limitation,
assigned for security purposes, without the prior written consent of Lender
which may be withheld in Lender's sole discretion, and any such purported
assignment shall be null and void ab initio. As used herein, and in the other
Loan Documents, "Lender" (or similar references to the lender) shall include all
holders of the Note, including, without limitation, pledgees of the Note,
whether or not named herein or therein. In exercising any rights hereunder or
under any of the other Loan Documents or taking any actions provided for herein
or therein, Lender may act through its employees, agents or independent
contractors authorized by Lender.
8.19 Disclosure of Information.
Borrower hereby acknowledges and agrees that upon the request
of any partner, member or shareholder of Borrower, as applicable, Lender may
disclose to such party any information (including, without limitation, financial
information) relating to the Loan and Borrower's performance of its obligations
under the Loan Documents. Borrower hereby indemnifies and agrees to defend and
hold harmless the Indemnitees from and against any and all expenses, loss,
claims, damage or liability, including, without limitation, attorneys' fees and
costs, arising by reason of any disclosure of information by Lender under this
Section 8.19.
24
<PAGE>
8.20 Counterparts.
This Agreement and the other Loan Documents may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which counterparts taken together shall
constitute but one and the same instrument. Signature and, if applicable,
acknowledgment pages may be detached from the counterparts and attached to a
single copy of the applicable document to physically form one document, which
may be recorded if applicable.
8.21 Entire Agreement.
The Loan Documents set forth the entire understanding between
Borrower and Lender relative to the Loan and the same supersede all prior
agreements and understandings relating to the subject matter hereof or thereof.
8.22 Inconsistencies.
In the event it is impossible to simultaneously comply with
the terms of this Agreement and any of the terms of any other Loan Document, the
terms of this Agreement shall control over any inconsistent term of any other
Loan Document.
8.23 Time is of the Essence.
Time is strictly of the essence of this Agreement and the
other Loan Documents.
8.24 No Third Party Beneficiaries.
This Agreement and the other Loan Documents are made and
entered into for the sole protection and benefit of the parties hereto, and,
except as provided in Section 8.18, no other person or entity shall be a direct
or indirect beneficiary of, or shall have any direct or indirect cause of action
or claim in connection with, this Agreement or any of the other Loan Documents.
65535RT65535CLE 9
PUT RIGHT & OPTION
9.1 Borrower shall have the right at any time prior to the Maturity
Date, upon delivery of written evidence reasonably satisfactory to Lender,
together with such supporting
25
<PAGE>
documentation and certificates as Lender may in its good faith discretion
require, that Borrower has completed strategic alliances or joint ventures with
a cumulative value in excess of $10,000,000, as measured by initial and
milestone payments received by Borrower from unaffiliated joint venture or
alliance partners, and provided that no Event of Default or Potential Default
exists, to cause Lender to purchase an undivided one-half interest in the
Improvements in exchange for one-half of the outstanding principal balance of
the Loan (up to $3,000,000). In the event that Borrower exercises such right,
Borrower shall, as a condition precedent to the transfer, execute and deliver to
Lender such instruments, agreements and title endorsements (including, without
limitation, deeds, assignments and other conveyance documents) as Lender may
reasonably request in order to convey good and marketable title to the
Improvements to be conveyed to Lender, together with an amendment to the Lease
in form and substance acceptable to Lender in its discretion whereby Borrower
shall lease back from Lender the Improvements so conveyed and the rent
thereunder shall be increased by $330,000 per annum, payable in the same manner
(and subject to the same adjustments) as Basic Annual Rent thereunder.
9.2 Borrower shall have right at any time subsequent to the sale of an
undivided one-half interest in the Improvements to Lender pursuant to Section
9.1 above but prior to the Maturity Date, and provided that no Event of Default
or Potential Default exists, upon delivery of written evidence reasonably
satisfactory to Lender, together with such supporting documentation and
certificates as Lender may in its good faith discretion require, that either (a)
Borrower has completed strategic alliances or joint ventures with a cumulative
value in excess of $15,000,000, as measured by initial and milestone payments
received by Borrower from unaffiliated joint venture or alliance partners, or
(b) Borrower's net sales from products for the immediately preceding fiscal year
(as reported in Borrower's most recent public filings with the Securities and
Exchange Commission) were no less than $10,000,000, to cause Lender to purchase
the remaining interest in the Improvements in exchange for the remaining
outstanding principal balance of the Loan (up to $3,000,000). In the event that
Borrower exercises such right, Borrower shall, as a condition precedent to the
transfer, execute and deliver to Lender such instruments, agreements and title
endorsements (including, without limitation, deeds, assignments and other
conveyance documents) as Lender may reasonably request in order to convey good
and marketable title to the Improvements to be conveyed to Lender, together with
an amendment to the Lease in form and substance acceptable to Lender in its
discretion whereby Borrower shall lease back from Lender the Improvements so
conveyed and the rent thereunder shall be increased by an additional $330,000
per annum, payable in the same manner (and subject to the same adjustments) as
Basic Annual Rent thereunder.
9.3 Lender shall have the right at any time prior to the Maturity Date,
upon
26
<PAGE>
delivery of written notice to Borrower, to purchase the Improvements in exchange
for the outstanding principal balance of the Loan (up to $6,000,000). In the
event that Lender exercises such right, Borrower shall execute and deliver to
Lender such instruments, agreements and title endorsements (including, without
limitation, deeds, assignments and other conveyance documents) as Lender may
reasonably request in order to convey good and marketable title to the
Improvements to Lender, together with an amendment to the Lease in form and
substance acceptable to Lender in its discretion whereby Borrower shall lease
back from Lender the Improvements so conveyed and the rent thereunder shall be
increased by $660,000 per annum, payable in the same manner (and subject to the
same adjustments) as Basic Annual Rent thereunder.
27
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered Borrower and Lender as of the date first above written.
BORROWER:
MATRIX PHARMACEUTICAL, INC.,
a Delaware corporation
By: /s/ Ronald P. Lucas
--------------------------------
Its: Vice President of Operations
----------------------------
By:
--------------------------------
Its:
----------------------------
LENDER:
ARE-4757 NEXUS CENTRE, LLC,
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES,
L.P., a Delaware limited
partnership, managing member
By: ARE-QRS CORP., a Maryland
corporation, general partner
By: /s/ Peter Nelson
-------------------------
Its: Chief Financial Officer
------------------------
<PAGE>
EXHIBIT A
Description of Project
That certain real property located in the City of San Diego, County of San
Diego, State of California, having a street address of 4757 Nexus Centre Drive,
more particularly described as follows:
Parcel 1 of Parcel Map 17892 in the City and County of San Diego,
according to Map filed in the Office of the County Recorder of said
county on August 6, 1997.
A-1
<PAGE>
EXHIBIT B-1
Manufacturing Suite Plans
B-1-1
<PAGE>
EXHIBIT B-2
DESCRIPTION OF EXCLUDED IMPROVEMENTS AND FIXTURES
Production Equipment Design Requirements
MEP Design-TKG
MEP Design-TKG
Architectural Design-WHL
Civil Design-Latitude 33
Structural Design-Hope Eng.
Production Equipment
WFI System including tanks, pumps, valve, controls
RQ/DI Water Equipment
Air Handler No. 12
Cargocaire Unit
Pure Steam Generator Drip Legs
Production Equipment Contractor Work (Labor, Overhead & Profit)
Work Performed by Contractor
Site Management
Site Requirements
Contractor Fee
Production Equipment Subcontractor Work (Installation, Material & Labor
Requirements)
Site Utilities
Doors/Frames/Hardware
Drywall/Taping & Painting
Flooring/Walls-Mipolam, VCT, Sheet Vinyl
Stainless Steel Casework
Kolpak Cold Box w/Honeywell Trueline Recorder
HVAC
Plumbing Systems
Process Utilities
Process Controls
Electrical
Production Facility Scope of Work Changes
Boroscoping
<PAGE>
EXHIBIT C
Description of Personal Property
All of Borrower's right, title and interest, now or hereafter acquired,
in and to the following; provided, however, that none of the following shall be
construed to include any of those items of personal property listed on Exhibit
B-2 to this Agreement, or the proceeds therefrom:
(a) All personal property (including, without limitation, all goods,
supplies, equipment, furniture, furnishings, machinery and construction
materials) which Borrower now or hereafter owns or in which Borrower now or
hereafter acquires an interest or right, which are now or hereafter located on
or affixed to the Project and are used or useful in the maintenance or operation
of any of the Improvements, together with and all books, records, leases and
other documents, of whatever kind or character, relating to any of the
foregoing;
(b) All fees, income and rents which, after the date hereof and while
any portion of the Secured Obligations remains unpaid, may accrue from any of
the personal property described in paragraph (a) of this Exhibit C, or which may
be received or receivable by Borrower from any hiring, letting, leasing,
subhiring, subletting, or subleasing therefor;
(d) All other intangible property and rights relating to the
Improvements or Borrower's operation thereof, or used in connection therewith,
including but not limited to all governmental permits owned by Borrower relating
to construction of the Improvements, and all permits, licenses, franchises,
approvals and variances relating in any way to, or to the operation, ownership
and use of, the Improvements;
(e) All judgments, claims, settlements of claims and causes of action
under any legal proceeding relating to Borrower's interest in the Improvements
or Borrower's use, occupancy or operation thereof;
(f) All proceeds from sale or disposition of the Personal Property;
(g) Borrower's rights under all insurance policies covering the
Improvements or any of the Personal Property (whether or not Borrower is
required to maintain such insurance under the terms of the Loan Documents), and
all proceeds, loss payments and premium refunds payable regarding the same;
(h) All reserves, deferred payments, deposits, refunds, cost savings
and payments
C-1
<PAGE>
of any kind relating to the construction of any Improvements;
(i) All causes of action, claims, compensation and recoveries for any
damage to or condemnation or taking of the Improvements or the Personal
Property, or for any conveyance in lieu thereof, whether direct or
consequential, or for any damage or injury to the Improvements or the Personal
Property, or for any loss or diminution in value of the Improvements or the
Personal Property;
(j) All architectural, structural, mechanical and engineering plans and
specifications prepared for construction of Improvements and all studies, data
and drawings related thereto, and all contracts and agreements of Borrower
relating to such plans and specification or such studies, data and drawings or
to the construction of Improvements;
(k) All of Borrower's present and future rights in and to all refunds,
rebates, reimbursements, reserves, deferred payments, deposits, cost savings,
governmental subsidy payments, governmental-registered credits (such as
emissions reduction credits), other credits, waivers and payments, whether in
cash or kind, due from or payable by any Governmental Agency or any insurance or
utility company relating to any or all of the Improvements or arising out of
satisfaction of any condition imposed upon or the obtaining of any approvals for
the development of the Improvements;
(l) All of Borrower's present and future rights in and to all refunds,
rebates, reimbursements, credits and payments of any kind due from or payable by
any Governmental Agency or other entity for any taxes, special taxes,
assessments, or similar governmental or quasi-governmental charges or levies
imposed upon Borrower with respect to the Improvements or arising out of the
satisfaction of any condition imposed upon or the obtaining of any approvals for
the development of the Improvements;
(m) All Borrower's rights in proceeds of the Loan;
(n) All Borrower's rights to receive the proceeds of any "take-out" or
permanent financing or commitment to provide such financing; and
All terms used herein which are defined in the California Commercial
Code shall have the same meanings when used herein, unless the context requires
otherwise.
C-2
<PAGE>
EXHIBIT D
Form of Promissory Note
SECURED PROMISSORY NOTE
$6,000,000.00 San Diego, California
as of March __, 1998
FOR VALUE RECEIVED, MATRIX PHARMACEUTICAL, INC., a Delaware corporation
(the "Maker"), promises to pay, on or before the "Due Date" (as defined below),
to the order of ARE4-757 NEXUS CENTRE, LLC, a Delaware limited liability company
or its designee (the "Holder"), having an address at c/o Alexandria Real Estate
Equities, Inc., 135 N. Los Robles Avenue, Suite 250, Pasadena, California 91101,
at said address or in accordance with such other instructions or place as the
Holder may hereafter designate from time to time in writing, the principal sum
of SIX MILLION DOLLARS ($6,000,000.00) in lawful money of the United States,
with interest on the "Principal Balance" (as defined below) from the date of
this Secured Promissory Note (this "Note") to and including the date on which
this Note is paid in full, calculated in the manner hereinafter set forth.
1. As used herein, the term "Principal Balance" shall mean the
outstanding principal balance of this Note from time to time.
2. The entire Principal Balance shall bear interest at the rate of
eleven percent (11%) per annum, calculated on the basis of the actual number of
days elapsed over a 365 day year. Interest only on the Principal Balance shall
be payable monthly, in arrears, commencing on the last day of the month in which
this Note is executed and thereafter on the last business day of each month
until paid in full. All accrued and unpaid interest, and any other unpaid
charges accruing or due hereunder, shall be added to the Principal Balance on a
monthly basis.
<PAGE>
3. The entire unpaid Principal Balance, together with all accrued and
unpaid interest thereon, shall be due and payable on the date which is four (4)
calendar years from the date of this Note (the "Due Date").
4. This Note is subject to the express condition that at no time shall
the Maker be obligated or required to pay interest on any amount outstanding
hereunder at a rate which could subject the Holder to either civil or criminal
liability as a result of such rate being in excess of the maximum rate which the
Maker is permitted by law to contract or agree to pay. If by the terms of this
Note the Maker is at any time required or obligated to pay interest on any
amount outstanding hereunder at a rate in excess of such maximum rate, the rate
of interest under this Note shall be deemed to be immediately reduced to such
maximum rate and interest payable hereunder shall be computed at such maximum
rate and the portion of all prior interest payments in excess of such maximum
rate shall be applied and shall be deemed to have been payments in reduction of
the principal amount outstanding hereunder.
5. The Maker hereby waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Note, and agrees to pay all
costs of collection when incurred, including attorneys' fees, charges and
disbursements (which amounts shall be added to the Principal Balance). No
extension of time for payment of this Note or any installment hereunder, and no
alteration, amendment or waiver of any provision of this Note, shall release,
discharge, modify, change or affect the liability of the Maker hereunder.
6. Maker may make full or partial prepayment of the Principal Balance
together with accrued and unpaid interest thereon at any time or from time to
time without penalty or charge, upon at least 30 days' prior written notice to
Holder.
7. All payments received hereunder shall be applied first to accrued
interest, then to any due and unpaid charges incurred by Holder in connection
with this Note and thereafter to a reduction of the Principal Balance.
8. In the event of any default by Maker under the terms of this Note,
time being of the essence, Holder may, in addition to any other rights and
remedies which Holder may have hereunder, at law, in equity, pursuant to: (a)
that certain Loan and Security Agreement of even date herewith by and between
Maker and Holder (the "Loan Agreement"); (b) that certain Lease of even date
2
<PAGE>
herewith by and between Holder, as landlord, and Maker, as tenant (the "Lease");
(c) that certain Deed of Trust and Fixture Filing of even date herewith executed
by Maker, as trustor, to Chicago Title Insurance Company, as trustee, and naming
Holder, as beneficiary, to be recorded concurrently herewith (the "Deed of
Trust"); and (d) that certain California UCC-1 Financing Statement of even date
herewith to be filed with the California Secretary of State, together with UCC-1
Financing Statements for such other States as are required by Holder
(collectively, the "Financing Statement") (the Loan Agreement, the Lease, the
Deed of Trust and the Financing Statement are herein collectively referred to as
the "Loan Documents"), or otherwise, at any time following such default, without
waiving any other rights or remedies available to it, declare the entire
Principal Balance, accrued interest and all other amounts payable under this
Note, immediately due and payable, and the entire sum shall thereby become due
and payable.
9. If any action is brought in connection with or to enforce this Note,
or if this Note is placed in the hands of an attorney or agent for collection,
Maker shall pay all costs, fees and disbursements of such action or collection,
including, without limitation, reasonable attorneys' fees, charges and
disbursements, and all such sums shall be added to and become part of the
Principal Balance as and when incurred.
10. This Note is the promissory note referred to in the Loan Agreement
and is secured by the Deed of Trust.
11. This Note and Maker's obligations hereunder and under each of the
other Loan Documents are intended to be, and shall be, recourse obligations of
Maker, and Holder shall have full recourse to Maker and all of its assets in
connection with any default hereunder or under any of the other Loan Documents.
12. The terms of this Note shall be governed by and construed under the
laws of the State of California.
13. This Note may not be amended or terminated orally, but only by an
agreement in writing executed by the Holder.
3
<PAGE>
IN WITNESS WHEREOF, the Maker has duly executed this Note as of the
date first above written.
MAKER:
MATRIX PHARMACEUTICAL, INC.,
a Delaware corporation
By: ________________________
Name: ___________________
Its: ____________________
4
<PAGE>
EXHIBIT "E"
Permitted Liens
EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage (and the Company will
not pay costs, attorneys' fees or expenses) which arise by reason of:
A 1. PROPERTY TAXES, INCLUDING ANY ASSESSMENTS COLLECTED WITH TAXES, TO BE
LEVIED FOR THE FISCAL YEAR 1998-99 THAT ARE A LIEN NOT YET DUE.
B 2. THE LIEN OF SUPPLEMENTAL TAXES, IF ANY, ASSESSED PURSUANT TO THE
PROVISIONS OF CHAPTER 3.5 (COMMENCING WITH SECTION 75) OF THE REVENUE
AND TAXATION CODE OF THE STATE OF CALIFORNIA.
C 3. THE FACT THAT THE OWNERSHIP OF SAID LAND DOES NOT INCLUDE RIGHTS OF
ACCESS TO OR FROM THE STREET OR HIGHWAY ABUTTING SAID LAND, SUCH RIGHTS
HAVING BEEN SEVERED FROM SAID LAND BY THE DOCUMENT.
RECORDED: APRIL 8, 1969 AS FILE NO. 59708, OFFICIAL RECORDS
AFFECTS: IN AND TO I-805 FREEWAY, BEING A PORTION OF THE EASTERLY
BOUNDARY OF PARCEL 2 AS SHOWN ON PARCEL MAP 17892.
D 4. THE RIGHTS, AS A "RESTRICTIVE USE EASEMENT" AS RESERVED BY THE UNITED
STATES OF AMERICA IN DEED DATED JULY 21, 1983 AND RECORDED JULY 28, 1983
AS FILE NO. 83-261437.
REFERENCE IS MADE TO SAID DOCUMENT FOR FULL PARTICULARS.
THE EXACT LOCATION AND EXTENT OF SAID EASEMENT IS NOT DISCLOSED OF
RECORD.
E 5. A RESTRICTIVE USE EASEMENT IN PERPETUITY FOR THE ESTABLISHMENT,
MAINTENANCE, OPERATION AND USE OF A SAFETY AREA OF COMPATIBLE USE ZONE
IN CONNECTION WITH THE OPERATION OF THE NAVAL AIR STATION MIRAMAR AND
INCIDENTAL PURPOSES, IN FAVOR OF UNITED STATES OF AMERICA, RECORDED JULY
JULY 28, 1983 AS FILE NO. 83-261438 OF OFFICIAL RECORDS.
REFERENCE IS MADE TO SAID DOCUMENT FOR FULL PARTICULARS.
THE EXACT LOCATION AND EXTENT OF SAID EASEMENT IS NOT DISCLOSED OF
RECORD.
F 6. COVENANTS, CONDITIONS AND RESTRICTIONS (BUT OMITTING ANY COVENANT OR
RESTRICTIONS BASED ON RACE, COLOR, RELIGION, SEX, HANDICAP, FAMILIAL
STATUS, OR NATIONAL ORIGIN) AS SET FORTH IN THE DOCUMENT.
RECORDED: JULY 28, 1983 AS FILE NO. 83-261430, OFFICIAL RECORDS
G 7. PLANNING DIRECTOR RESOLUTION NO. 7493 PD GRANTING PLANNED INDUSTRIAL
DEVELOPMENT PERMIT NO. 87-1049 AMENDMENT TO PID PERMIT NO. 86-0967.
<PAGE>
RECORDED JUNE 14, 1988 AS FILE NO. 88-283002.
H 8. AN OFFER OF DEDICATION TO PUBLIC USE OF, A PORTION OF SAID LAND, SAID
OFFER WAS REJECTED ON SAID MAP, BUT IS SUBJECT TO FUTURE ACCEPTANCE
UNDER THE PROVISIONS OF SECTION NUMBER 66477.2 OF THE GOVERNMENT CODE OF
THE STATE OF CALIFORNIA.
DESIGNATED ON
MAP NO.: 12473
AS: RESERVED FOR FUTURE STREET
AFFECTS: A PORTION OF PARCEL 2 AS SHOWN ON PARCEL MAP 17892
I 9. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SHOWN ON MAP OF SAID TRACT.
EASEMENT
PURPOSE: SEWER, DRAINAGE, SLOPE
AFFECTS: AS SHOWN ON SAID MAP NO. 12473
NOTE: A PORTION OF SAID EASEMENT WAS ABANDONED ON PARCEL MAP 17892.
J 10. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: SAN DIEGO GAS & ELECTRIC COMPANY
PURPOSE: PUBLIC UTILITIES, INGRESS AND EGRESS
RECORDED: DECEMBER 27, 1989 AS FILE NO. 89-699805, OFFICIAL
RECORDS
AFFECTS: THE EXACT LOCATION AND EXTENT OF SAID EASEMENT IS
NOT DISCLOSED OF RECORD.
K RESTRICTIONS ON THE USE, BY THE OWNERS OF SAID LAND, OF THE EASEMENT
AREA AS PROVIDED IN THE DOCUMENT REFERRED TO ABOVE.
N 11. AN AGREEMENT BETWEEN THE CITY OF SAN DIEGO AND NEXUS CENTRE/I-805, A
CALIFORNIA LIMITED PARTNERSHIP, OWNER, RECORDED FEBRUARY 20, 1992 AS
FILE NO. 92-0091575, OFFICIAL RECORDS, RELATING TO THE INSTALLATION,
MAINTENANCE AND POSSIBLE REMOVAL OF 6" PRIVATE SEWER LATERAL AND 12"
PRIVATE DRAINAGE PIPE.
N 12. PROVISIONS, HEREIN RECITED, OF THE DEDICATION STATEMENT ON THE
MAP NO: PARCEL MAP 16892 AND 17892
PROVISIONS: THIS IS A MAP OF A PLANNED INDUSTRIAL DEVELOPMENT
PROJECT AS DEFINED IN CHAPTER X, ARTICLE I, DIVISION
9 OF THE SAN DIEGO MUNICIPAL CODE.
Exhibit "E" (Continued)
<PAGE>
O 13. A PENDING ASSESSMENT FOR THE DISTRICT SHOWN BELOW. WHEN NOTICE OF THE
ASSESSMENT IS RECORDED WITH THE COUNTY RECORDER THE ASSESSMENT SHALL
BECOME A LIEN ON SAID LAND.
DISTRICT: DISTRICT DIAGRAM OF NORTH UNIVERSITY CITY AMENDED DISTRICT
DIAGRAM FACILITIES BENEFIT ASSESSMENT IN THE CITY OF SAN DIEGO,
COUNTY OF SAN DIEGO, STATE OF CALIFORNIA
DISCLOSED BY: ASSESSMENT DISTRICT DIAGRAM AMENDED
RECORDED: AUGUST 9, 1994 AS FILE NO. 1994-0485272, OFFICIAL
RECORDS
P NOTICE OF ASSESSMENT RECORDED OCTOBER 1, 1991 AS FILE NO. 1991-506423
AS AUGUST 9, 1994 AS FILE NO. 1994-0485273, OFFICIAL RECORDS
Q 14. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO
AS SET FORTH IN A DOCUMENT
GRANTED TO: CITY OF SAN DIEGO
PURPOSE: TUNNEL OR TUNNELS FOR UTILITY PURPOSES
RECORDED: MARCH 3, 1995 AS FILE NO. 1995-0093861, OFFICIAL
RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF SAID LAND AND
IS MORE FULLY DESCRIBED IN SAID DOCUMENT.
R 15. AN AGREEMENT BETWEEN THE CITY OF SAN DIEGO AND MATRIX PHARMACEUTICAL,
INC., A DELAWARE CORPORATION, OWNER, RECORDED APRIL 24, 1997 AS FILE
NO. 1997-0189196 OF OFFICIAL RECORDS. RELATING TO THE INSTALLATION,
MAINTENANCE AND POSSIBLE REMOVAL OF TRASH ENCLOSURE, WATER SERVICE,
PAVEMENT AND LANDSCAPING.
S 16. ANY RIGHTS, INTEREST, OR CLAIMS WHICH MAY EXIST OR ARISE BY REASON OF
THE FOLLOWING FACTS.
A) IMPROVEMENTS LIE WITHIN THE RESTRICTIVE USE EASEMENT RECORDED JULY
21, 1983 AS FILE NO. 83-261437.
B) A BUILDING, CURBS, DECORATIVE CONCRETE, WALLS & STAIRS ENCROACH ONTO
THE EASEMENT FOR WATER, SEWER, DRAINAGE AND SLOPE SHOWN ON MAP 12473.
T 17. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SHOWN OR AS OFFERED FOR DEDICATION ON THE RECORDED MAP SHOWN
BELOW.
MAP NO: PARCEL MAP 17892 EASEMENT
PURPOSE: 24' WIDE WATER EASEMENT
AFFECTS: AS SHOWN ON SAID MAP
Exhibit "E" (Continued)
<PAGE>
AB 19. AN UNRECORDED LEASE AFFECTING THE PREMISES HEREIN DESCRIBED, EXECUTED
BY AND BETWEEN THE PARTIES HEREIN NAMED, WITH CERTAIN TERMS, COVENANTS,
CONDITIONS AND PROVISIONS SET FORTH THEREIN.
LESSOR: ARE-4757 NEXUS CENTRE, LLC
LESSEE: MATRIX PHARMACEUTICAL, INC.
DISCLOSED BY: MEMORANDOM OF LEASE (PARKING LEASE)
RECORDED: ----
AC 21. A DOCUMENT ENTITLED "DECLARATION OF RECIPROCAL EASEMENTS,"
DATED-EXECUTED BY MATRIX PHARMACEUTICAL, INC., SUBJECT TO ALL THE
TERMS, PROVISIONS AND CONDITIONS THEREIN CONTAINED, RECORDED-.
Exhibit "E" (Continued)
Matrix Pharmaceutical, Inc. v. Chubb Custom Ins. Co., et al. Settlement
Agreement
SETTLEMENT AGREEMENT AND
RELEASE IN FULL OF ALL CLAIMS
This Settlement Agreement and Release in Full of All Claims
("Agreement") is made and entered into this 3rd day of April, 1998 by, between
and among Matrix Pharmaceutical Company, Inc. (hereinafter "Matrix"), Chubb
Custom Insurance Company and Vigilant Insurance Company (hereinafter
"Defendants") (collectively "the Parties"), with reference to the following
facts, representations, warranties and promises:
WITNESSETH
WHEREAS, Matrix brought suit against Defendants in the matter filed in
the Alameda County Superior Court-Hayward Division, case no. H-192476 9,
entitled Matrix Pharmaceutical, Inc. v. Chubb Custom Insurance Company, et al.
(hereinafter "the Case"); and
WHEREAS, Defendants appeared through their counsel of record; and
WHEREAS, the Case arose from Defendants' denial of coverage under
insurance policies issued by Defendants to Matrix; and
WHEREAS, Defendants vigorously deny that they did anything wrong, have
any liability under any theory whatsoever, or so caused Matrix's damages, and
that by entering into this agreement, Defendants do not concede they have any
liability for any claims brought or which could have been brought by Matrix, and
specifically deny any liability whatsoever for Matrix's claims; and
WHEREAS, the Parties desire to avoid the expense, burden, and
uncertainty of continued litigation; and
WHEREAS, the Parties reached a compromise during a two-part mediation
before Justice Harry W. Low of JAMS Endispute in San Francisco on March 3, 1998
and April 3, 1998.
NOW THEREFORE, it is hereby agreed among the Parties as follows:
1. In consideration of (1) the total payment by Defendants to Matrix in
the amount of Four Million Dollars ($4,000,000.00) to occur on or before April
13, 1998 and (2)
<PAGE>
Matrix Pharmaceutical, Inc. v. Chubb Custom Ins. Co., et al. Settlement
Agreement
the return by Defendants, its lawyers and consultants of all of the documents
(including electronic data and those used as exhibits) Defendants obtained
relating to the underlying lawsuit, entitled Collagen Corporation v. Matrix
Pharmaceutical, Inc., Santa Clara County Superior Court, case no. CV 746197, to
Matrix's counsel, Brobeck, Phleger & Harrison, LLP, to occur on or before April
20, 1998. The receipt of and adequacy of the consideration described herein is
hereby acknowledged as an accord and satisfaction, and Matrix agrees that its
claims, in their entirety, as asserted against Defendants, may and shall be
dismissed with prejudice and without any further cost to either party.
2. Matrix, its successors, assigns, representatives, agents, employees,
attorneys, and any person or persons acting by, through or for it, hereby fully
releases, acquits and forever discharges Defendants, their successors, assigns,
officers, directors, representatives, agents, employees, attorneys, insurers,
and any person or persons acting by, for or through them from any and all
liability, actual or potential, for any and all claims, damages or demands
whatsoever in law or in equity which Matrix has, might have asserted, have
claimed or now or in the future might claim arose from or in connection with the
Collagen Action.;
3. With respect to the claims released herein, Matrix and Defendants
each expressly waive any rights or benefits available to them under the
provisions of California Civil Code Section 1542, which provides as follows:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him, must have materially affected
the settlement with the debtor.
4. It is understood and agreed that this is a full and final release of
any and all claims and that the parties agree that it shall apply to all
unknown, unanticipated, unsuspected, and undisclosed claims, demands,
liabilities, actions, or causes of action, as well as those which are now known,
anticipated, suspected or disclosed.
5. This Agreement is made and entered into as a free and voluntary act,
and has been done only after Matrix consulted with its attorneys, Brobeck,
Phleger & Harrison, LLP,
2
<PAGE>
Matrix Pharmaceutical, Inc. v. Chubb Custom Ins. Co., et al. Settlement
Agreement
and Defendants consulted with their attorneys, Rudloff Wood & Barrows LLP
(and formerly Gordon & Rees).
6. The Parties agree that any and all actions necessary to secure an
immediate dismissal with prejudice of Plaintiff's claims in this lawsuit as
against Defendants shall be taken by the Parties and that each party shall bear
its own cost and expense incurred in connection with such claims and the
dismissal thereof.
7. The undersigned representatives have full authority to enter into
this Agreement.
8. In the event that any of the terms, conditions or covenants
contained in this Agreement are held to be invalid, then such invalidity shall
not effect the remaining terms, conditions, or covenants contained herein, all
of which shall remain in full force and effect.
9. This Agreement may be executed in counterparts, all of which shall
be considered one and the same document.
10. The Stipulation for Settlement CCP Section 664.6 executed in
Justice Low's presence on April 3, 1998, is attached hereto as an exhibit to
this Agreement, however, to the extent that any of its terms conflict with those
stated herein. this Agreement shall control.
3
<PAGE>
Matrix Pharmaceutical, Inc. v. Chubb Custom Ins. Co., et al. Settlement
Agreement
11. This Agreement contains the entire agreement between the parties,
and the terms of this Release are contractual and not a mere recital.
Dated this _____________ day of ____________, 1997.
/s/ J R Glynn
- ---------------------------------
MATRIX PHARMACEUTICAL, INC.
by J R Glynn, its Chief Operating Officer.
----------- ------------------------
print name title
- ---------------------------------
CHUBB CUSTOM INSURANCE COMPANY
by , its
----------- ------------------------
- ---------------------------------
VIGILANT INSURANCE COMPANY
by , its
----------- ------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000882194
<NAME> Matrix Pharmaceutical, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 25,111
<SECURITIES> 40,345
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,872
<PP&E> 19,060
<DEPRECIATION> 4,392
<TOTAL-ASSETS> 103,542
<CURRENT-LIABILITIES> 9,389
<BONDS> 16,007
0
0
<COMMON> 225,214
<OTHER-SE> (152,433)
<TOTAL-LIABILITY-AND-EQUITY> 103,542
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (4,023)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 596
<INCOME-PRETAX> (4,023)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,023)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,023)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
