FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[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
For the transition period from to
Commission File Number: 0-26372
CELLEGY PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
California 82-0429727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1065 East Hillsdale Boulevard, Suite 418, Foster City, California 94404
(Address of principal executive offices, including zip code)
(650) 524-1600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the registrant's common stock at April 29,
1998 was 10,165,315.
<PAGE>
CELLEGY PHARMACEUTICALS, INC.
INDEX TO FORM 10-QSB
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of March 31, 1998 (unaudited) and
December 31, 1997 ................................................ 3
Unaudited Condensed Statements of Operations for the three
months ended March 31, 1998 and 1997, and the period from
June 26, 1989 (inception) through March 31, 1998 ................. 4
Unaudited Condensed Statements of Cash Flows for the three
months ended March 31, 1998 and 1997, and the period from
June 26, 1989 (inception) through March 31, 1998 ................. 5
Notes to Condensed Financial Statements .......................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings ................................................ 11
Item 2. Changes in Securities ............................................ 11
Item 3. Defaults Upon Senior Securities .................................. 11
Item 4. Submission of Matters to a Vote of Security Holders .............. 11
Item 5. Other Information ................................................ 11
Item 6. Exhibits and Reports on Form 8-K ................................. 11
Signature(s) ................................................................ 12
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Cellegy Pharmaceuticals, Inc.
(a development stage company)
Condensed Balance Sheets
(Amounts in thousands, except share amounts)
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .............................................................. $ 1,508 $ 1,822
Short-term investments ................................................................. 5,224 7,482
Other current assets ................................................................... 855 1,011
-------- --------
Total current assets ........................................................................ 7,587 10,315
Property and equipment, net ................................................................. 13 14
Long-term investments ....................................................................... 13,432 12,422
-------- --------
Total assets ................................................................................ $ 21,032 $ 22,751
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities ............................................... 410 705
Deferred revenue ....................................................................... 250 500
Accrued research fees .................................................................. -- 155
Accrued compensation and related expenses .............................................. 49 37
-------- --------
Total current liabilities ................................................................... 709 1,397
Shareholders' equity:
Common stock, no par value; 20,000,000 shares authorized: 10,165,015 shares
issued and outstanding at March 31, 1998 and 10,123,751 shares issued
and outstanding at December 31, 1997 ............................................... 44,353 44,192
Accumulated other comprehensive income (loss) .......................................... 64 (12)
Deficit accumulated during the development stage ....................................... (24,094) (22,826)
-------- --------
Total shareholders' equity ............................................................. 20,323 21,354
-------- --------
Total liabilities and shareholders' equity .................................................. $ 21,032 $ 22,751
======== ========
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
Cellegy Pharmaceuticals, Inc.
(a development stage company)
Condensed Statements of Operations
(Unaudited)
(Amounts in thousands, except per share amounts)
<CAPTION>
Period from
June 26, 1989
(inception)
Three Months Ended March 31, through
------------------------------- March 31,
1998 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Licensing and contract revenue from affiliate ..................... $ -- $ -- $ 1,145
Licensing, milestone, and development funding ..................... 62 95 1,225
Government grants ................................................. 53 53 351
----------- ----------- -----------
Total revenues ......................................................... 115 148 2,721
Operating expenses:
Research and development .......................................... 1,182 734 14,091
General and administrative ........................................ 519 360 8,309
Acquired in process technology .................................... -- -- 3,843
----------- ----------- -----------
Total operating expenses ............................................... 1,701 1,094 26,243
----------- ----------- -----------
Operating loss ......................................................... (1,586) (946) (23,522)
Interest expense .................................................. -- -- (864)
Interest income and other, net .................................... 318 79 1,740
----------- ----------- -----------
Net loss ............................................................... (1,268) (867) (22,646)
Non-cash preferred dividends ........................................... -- 26 1,448
=========== =========== ===========
Net loss applicable to common shareholders ............................. $ (1,268) $ (893) $ (24,094)
=========== =========== ===========
Basic and diluted net loss per common share ............................ $ (0.13) $ (0.17)
=========== ===========
Weighted average common shares outstanding ............................. 10,143 5,377
=========== ===========
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
Cellegy Pharmaceuticals, Inc.
(a development stage company)
Condensed Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
<CAPTION>
Period from
June 26, 1989
(inception)
Three Months Ended March 31, through
---------------------------- March 31,
1998 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Operating activities
Net loss .............................................................................. $ (1,268) $ (867) $(22,646)
Adjustment to reconcile net loss to net cash used in operating activities:
Acquired in process technology ..................................................... -- -- 3,843
Depreciation and amortization ...................................................... 1 6 266
Compensation expense related to the extension of option
exercise periods ................................................................. -- 70 338
Loss on sale of property and equipment ............................................. -- -- 4
Amortization of discount on notes payable and deferred
financing costs .................................................................. -- -- 568
Issuance of common shares for services ............................................. -- -- 24
Issuance of Series A convertible preferred stock for
services rendered ................................................................ -- -- 73
Issuance of Series A convertible preferred stock for interest ...................... -- -- 68
Issuance of Series A convertible preferred stock for license
agreement ........................................................................ -- -- 100
Changes in operating assets and liabilities:
Other current assets ............................................................... 156 6 (855)
Accounts payable and accrued liabilities ........................................... (295) (53) 410
Accrued research fees .............................................................. (155) (21) --
Accrued compensation and related expenses .......................................... 12 (5) 49
Deferred revenue ................................................................... (250) -- 250
-------- -------- --------
Net cash used in operating activities ................................................. (1,799) (864) (17,508)
Investing activities
Purchase of property and equipment .................................................... -- -- (173)
Purchases of investments .............................................................. (3,000) (1,000) (38,539)
Sales and maturities of investments ................................................... 4,324 1,900 19,946
-------- -------- --------
Net cash used in investing activities ................................................. 1,324 900 (18,766)
<FN>
(continued on next page)
The accompanying notes are an integral part of these condensed financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
Cellegy Pharmaceuticals, Inc.
(a development stage company)
Condensed Statements of Cash Flows - (Continued)
(Unaudited)
(Amounts in thousands)
<CAPTION>
Period from
June 26, 1989
(inception)
Three Months Ended March 31, through
---------------------------- March 31,
1998 1997 1998
---------- ---------- --------
<S> <C> <C> <C>
Financing activities
Proceeds from notes payable ................................................... $ -- $ -- $ 3,547
Repayment of notes payable .................................................... -- -- (2,111)
Net proceeds from issuance of common stock .................................... 161 19 24,668
Issuance of convertible preferred stock, net of issuance costs ................ -- -- 11,758
Deferred financing costs ...................................................... -- -- (80)
---------- ---------- --------
Net cash provided by financing activities ..................................... 161 19 37,782
---------- ---------- --------
Net increase (decrease) in cash and cash equivalents .......................... (314) 55 1,508
Cash and cash equivalents, beginning of period 1,822 36 --
---------- ---------- --------
Cash and cash equivalents, end of period ...................................... $ 1,508 $ 91 $ 1,508
========== ========== ========
Supplemental disclosure of non-cash transactions:
Issuance of common stock in connection with acquired in process
technology ................................................................. $ -- $ -- $ 3,843
========== ========== ========
Conversion of preferred stock to common stock ................................. $ -- $ 1,623 $ 14,715
========== ========== ========
Issuance of common stock for notes payable .................................... $ -- $ -- $ 269
========== ========== ========
Issuance of warrants in connection with notes payable financing ............... $ -- $ -- $ 487
========== ========== ========
Issuance of Series A convertible preferred stock for notes
payable .................................................................... $ -- $ -- $ 1,153
========== ========== ========
Issuance of Series B convertible preferred stock for notes
payable .................................................................... $ -- $ -- $ 115
========== ========== ========
Issuance of common stock for Pacific Pharmaceuticals, Inc. .................... $ -- $ -- $ 9
========== ========== ========
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</FN>
</TABLE>
6
<PAGE>
Cellegy Pharmaceuticals, Inc.
(a development stage company)
Notes to Condensed Financial Statements
Note 1. - Basis of Presentation
The accompanying interim condensed financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all
of the information and footnote disclosures required by generally accepted
accounting principles for complete financial statements. These condensed
financial statements should be read in conjunction with the Company's financial
statements and notes thereto contained in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997. In the opinion of management, the
accompanying condensed financial statements include all adjustments (consisting
of only normal recurring adjustments) considered necessary for a fair
presentation of financial position and results of operations for the periods
presented.
Operating results for the three months ended March 31, 1998 may not
necessarily be indicative of the results to be expected for any other interim
period or for the full year.
Note 2. - Basic and Diluted Net Loss per Share
The financial statements are presented in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share." Basic net loss per
common share is computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share incorporates the
incremental shares issued upon the assumed exercise of stock options and
warrants, when dilutive. There is no difference between basic and diluted net
loss per share, as presented in the statement of operations, because all options
and warrants are anti-dilutive.
Note 3. - Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," as of the first quarter of
1998. SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components. It has no impact on net loss or
stockholders' equity.
The components of comprehensive income are as follows:
(in thousands)
Three Months Ended March 31,
----------------------------
1998 1997
------- -------
Net loss $(1,268) $ (893)
Change in unrealized gain (loss) on
available-for-sale investments 76 (9)
------- -------
Comprehensive net loss $(1,192) $ (902)
======= =======
Accumulated other comprehensive income (loss) presented on the
accompanying balance sheet consists of the accumulated net unrealized gain
(loss) on available-for-sale investments.
7
<PAGE>
Note 4. - Subsequent Event
In April 1998, the Company signed an agreement to lease a new facility,
currently under construction, in the proximity of its current facilities. The
lease term is for ten years. The facility size is approximately 65,000 square
feet, of which a significant portion may be sublet by Cellegy during its initial
years of occupancy. The Company plans to consolidate its laboratory and
administrative operations into the new facility by the end of this year or early
in 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-QSB, includes forward-looking statements.
Words such as "believes," "anticipates," "expects," "intends" and similar
expressions are intended to identify forward-looking statements, but are not the
exclusive means of identifying such statements. These forward-looking statements
concern matters that involve risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements.
Further, the Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may arise after the
date of this report. Actual events or results may differ materially from those
discussed in this Quarterly Report.
Cellegy Pharmaceuticals, Inc. is a biopharmaceutical company engaged in the
development of prescription drugs and cosmeceuticals to address a variety of
diseases and conditions utilizing its patented transdermal and topical delivery
technologies. The Company was incorporated in California in 1989. Cellegy is
developing several prescription drugs, including Anogesic(R), a
nitroglycerin-based product for the treatment of anal fissures and hemorrhoids,
and a transdermal testosterone gel for the treatment of hypogonadism, a
condition that frequently results in lethargy and reduced libido in men above
the age of 40. In addition to its prescription drugs, Cellegy is testing and
developing a line of anti-wrinkling cosmeceutical products which the Company
believes will address the skin care needs of an affluent and aging population.
General
In November 1997, the Company completed a $15.1 million public offering of
approximately 2.0 million shares of Common Stock. CIBC Oppenheimer Corp. acted
as underwriter in connection with the offering. Simultaneously, the Company's
stock was approved for listing on the Nasdaq National Market.
In December 1997, the Company completed an asset purchase agreement with
Neptune Pharmaceutical Corporation ("Neptune") to acquire all patent and other
intellectual property rights relating to Anogesic, a topical product candidate
for the treatment of anal fissures and hemorrhoids. The Company's expenses
relating to product development and clinical trials are expected to increase
during 1998 and thereafter as a result of clinical trial expenses relating to
Anogesic. Although the purchase price for Anogesic is payable in Cellegy Common
Stock, the Company recorded a non-cash charge to operations for in process
technology of $3,843,000 upon completion of the Anogesic acquisition in 1997.
During the first quarter of 1998, the Company finalized the clinical trial
plans with the FDA for Anogesic. Cellegy plans to initiate the clinical trials
for the treatment of anal fissures by the third quarter of 1998.
8
<PAGE>
Results of Operations
Revenues. The Company had revenues of $115,000 and $148,000 for the three
months ended March 31, 1998 and 1997, respectively. During the three months
ended March 31, 1998, revenues consisted of $62,000 for development funding
associated with the Glaxo license agreement and $53,000 related to an Orphan
Drug grant from the FDA to cover certain of the Company's clinical trial costs
for Glylorin. During the first quarter of 1997, revenues consisted of $95,000
associated with the Glaxo license agreement and $53,000 from FDA Orphan Drug
grant payments. The Company expects to receive lower levels of development
funding from Glaxo over the next several quarters, but is pursuing other
licensing and product supply agreements which, if entered into, may result in
additional contract revenues or product sales. There can be no assurances
regarding when, or if, such revenues will occur. Through the end of the Orphan
Drug grant period on September 30, 1998, the Company expects to receive
approximately $40,000 in FDA Orphan Drug grant funding.
Research and Development Expenses. Research and development expenses were
$1,182,000 for the three months ended March 31, 1998, compared with $734,000 for
the same period last year. The increase of $448,000 was primarily due to salary
costs in connection with increased scientific personnel and the associated
recruiting and relocation expenses, as well as increased contract research
expenses. Cellegy's research expenses are expected to continue to increase
during 1998 as preclinical and clinical trial activity associated with its
Anogesic, transdermal testosterone gel and anti-wrinkling programs increases and
as it continues to focus on the development of the Company's drug delivery
technologies. The Company plans to accelerate hiring in research and development
in order to accomplish its goals.
General and Administrative Expenses. General and administrative expenses
increased to $519,000 for the three months ended March 31, 1998, compared with
$360,000 for the same period last year. This increase was primarily due to
salary costs in connection with the addition of administrative personnel and the
associated recruiting expenses, as well as increased external reporting
expenses. The Company's general and administrative expenses are expected to
increase in the future in support of its research and product commercialization
efforts, particularly associated with the launch of its cosmeceuticals, and the
planned expansion and consolidation of its office and laboratory facilities.
Interest Income and Expense. The Company earned $318,000 in interest income
for the three months ended March 31, 1998, compared with $79,000 for the same
period last year. The additional interest income earned during the first quarter
of 1998 was due to higher average investment balances during the period
resulting from proceeds associated with a private placement in July 1997 and a
public offering of Common Stock in November 1997. No interest expense was
incurred during the three months ended March 31, 1998 or 1997. However, the
Company may incur such expenses in future periods associated with a tenant
improvement loan planned for its facility expansion.
Net Loss. The net loss applicable to common shareholders was $1,268,000 or
$0.13 per share for the three months ended March 31, 1998 based on 10,143,000
weighted average shares outstanding, compared with a net loss of $893,000 or
$0.17 per share for the same period in the prior year, when 5,377,000 weighted
average shares were outstanding.
9
<PAGE>
Liquidity and Capital Resources
The Company has experienced net losses and negative cash flow from
operations each year since its inception. Through March 31, 1998, the Company
had incurred an accumulated deficit of $24.1 million and had consumed cash from
operations of $17.5 million. The Company's public financings included $6.4
million in net proceeds from its initial public offering in August 1995, $6.8
million in net proceeds from a preferred stock financing in April 1996, $3.8
million in net proceeds from a private placement of Common Stock in July 1997,
and $13.8 million in net proceeds for a secondary public offering in November
1997.
The Company's cash and investments were $20.2 million at March 31, 1998,
compared with $21.7 million at December 31, 1997. The decrease in cash and
investments was principally due to net cash used in operating activities.
The Company's operations have and will continue to use substantial amounts
of cash. The Company has no current source of significant ongoing revenues or
capital beyond existing cash and investments. In order to complete the research
and development and other activities necessary to commercialize its products,
additional financing may be required. The Company's future expenditures and
capital requirements depend on numerous factors including, without limitation,
the progress and focus of its research and development programs, the progress
and results of preclinical and clinical testing, the time and costs involved in
obtaining regulatory approvals and complying with pre- and post-approval
regulatory requirements, the costs of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights, competing
technological and market developments, changes in the Company's existing
research relationships, the ability of the Company to establish collaborative
arrangements, the initiation of commercialization activities, the purchase of
capital equipment and the availability of other financing.
In the course of its development activities, the Company has incurred
significant losses and expects to incur substantial additional development
costs. As a result, the Company will require additional funds to finance
operations and may seek private or public equity investments and future
collaborative arrangements with third parties to meet such needs. There is no
assurance that such funding will be available for the Company to finance its
operations on acceptable terms, if at all. Insufficient funding may require the
Company to delay, reduce or eliminate some or all of its research and
development activities, planned clinical trials and administrative programs. The
Company believes that available cash resources and the interest thereon will be
adequate to satisfy its capital needs through at least December 31, 1999.
Factors That May Affect Future Operating Results
This Quarterly Report on Form 10-QSB contains forward-looking statements
which involve risks and uncertainties, including, but not limited to, statements
concerning the commencement and completion of clinical trials, the timing of
planned regulatory filings, the applicability of drug and cosmetic laws and
regulations to the Company's products, planned activities of collaborative
partners, the Company's strategic plans, the scope of the Company's patent
coverage, anticipated expenditures and the need for additional funds. The
factors discussed in the Company's reports filed with the Securities and
Exchange Commission, including the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1997, in particular under the caption "Factors That
May Affect Future Operating Results," should be carefully considered when
evaluating the Company's business and prospects.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.01 Lease agreement dated April 8, 1998
(b) Reports on Form 8-K
On November 3, 1997, the Company signed a letter of intent with Neptune
Pharmaceutical Corporation to acquire all patent and intellectual property
rights relating to "Anogesic", a topical product candidate for the treatment of
anal fissures and hemorrhoids. This event was reported on a Form 8-K filed on
November 12, 1997. The final purchase agreement for this product was signed on
December 31, 1997. This product acquisition was reported on a Form 8-K on
January 14, 1998.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CELLEGY PHARMACEUTICALS, INC.
Date: May 8, 1998 /s/ K. Michael Forrest
------------------------------------
K. Michael Forrest
President and Chief Executive
Officer
Date: May 8, 1998 /s/ A. Richard Juelis
------------------------------------
A. Richard Juelis
Vice President, Finance and
Chief Financial Officer
BASIC LEASE INFORMATION
LEASE DATE: April 8, 1998
TENANT: CELLEGY PHARMACEUTICALS, INC.
TENANT'S ADDRESS: Until the Term Commencement Date:
1065 E. Hillsdale Blvd., Suite 418
Foster City, CA 94404
Phone: (650)524-1600
Fax: (650)524-1616
After the Term Commencement Date:
349 Oyster Point Blvd.
South San Francisco, CA 94080
LANDLORD: TC Northern California, Inc.
LANDLORD'S ADDRESS: 1241 East Hillsdale Blvd., Ste. 200
Foster City, CA 94404
Phone: (650)578-8100
Fax: (650)345-2506
PROJECT: A two (2) building project totaling
approximately 105,000 square feet to be
constructed on approximately 5.52 acres of
land to be known as 347 and 349 Oyster Point
Blvd., South San Francisco, California 94080
which legal description is contained herein in
Exhibit A-1.
BUILDING: That approximately 65,000 square foot two
story building to be constructed as part of
the Project and to be known as 349 Oyster
Point Boulevard, South San Francisco,
California 94080, as approximately depicted on
the site plan attached as Exhibit A-2.
PREMISES: The Building to be known as 349 Oyster Point
Boulevard, South San Francisco, California
94080
PERMITTED USE: Office, laboratory, research and development
facility, with wet chemistry and biology labs,
clean rooms, clinical GMP manufacturing and
manufacturing of pharmaceutical and cosmetic
products, storage and use of toxic and
radioactive materials and laboratory animals
used in Tenant's business (subject to the
approval of the City of South San Francisco
and all other necessary government agencies),
and other related legal uses subject to
Landlord's approval which shall not be
unreasonably withheld.
PARKING DENSITY: 3.5 non-exclusive spaces per 1000 square feet
of rentable area
ESTIMATED TERM COMMENCEMENT DATE: November 1, 1998
LENGTH OF TERM: One Hundred Twenty (120) months
<TABLE>
RENT:
<CAPTION>
Base Rent Months of Term Rent Per Square Foot Monthly Rent
-------------- -------------------- ------------
<S> <C> <C>
Months 1-3 $1.45 psf per month $ 47,125
(rent on 32,500 sf)
Months 4-12 $1.45 (rent on 65,000 sf) $ 94,250
Months 13-24 $1.49 (rent on 65,000 sf) $ 97,078
Months 25-36 $1.54 (rent on 65,000 sf) $ 99,990
Month 37-48 $1.58 (rent on 65,000 sf) $ 102,990
Month 49-60 $1.63 (rent on 65,000 sf) $ 106,079
Month 61-72 $1.68 (rent on 65,000 sf) $ 109,262
Month 73-84 $1.73 (rent on 65,000 sf) $ 112,539
Month 85-96 $1.78 (rent on 65,000 sf) $ 115,916
Month 97-108 $1.84 (rent on 65,000 sf) $ 119,393
Month 109-120 $1.89 (rent on 65,000 sf) $ 122,975
</TABLE>
Estimated First Year Basic
Operating Cost $.30 psf per month, estimated at $19,500/mo.
SECURITY DEPOSIT: $227,500, plus secured first lien on Tenant's
fixtures and improvements
TENANT'S PROPORTIONATE SHARE: Subject to change, but based on the rentable
square feet of the Premises divided by the
total rentable square feet of the Building and
the Project, respectively, estimated as
follows:
Of Building: 100 %
Of Project 61.9 %
BROKER: R. Randy Scott Dean Givas
Cornish & Carey Commercial Trammell Crow NW, Inc.
245 Lytton Avenue, Ste 150 1241 East Hillsdale Blvd., Suite 200
Palo Alto, CA 94301 Foster City, CA 94404
The foregoing Basic Lease Information is incorporated into and made a part
of this Lease. Defined terms in the Lease shall have the meanings ascribed
to them in the Basic Lease Information unless otherwise stated. Each
reference in this Lease to any of the Basic Lease Information shall mean
the respective information above and shall be construed to incorporate all
of the terms provided under the particular Lease paragraph pertaining to
such information. In the event of any conflict between the Basic Lease
Information and the Lease, the latter shall control. The term "days" as
used in this Lease means "calendar days" unless the specific term "business
days" is used.
1
<PAGE>
TABLE OF CONTENTS
Page
Basic Lease Information...................................................1
Table of Contents.......................................................2-3
1. Premises..................................................................4
2. Term......................................................................4
3. Possession................................................................4
4. Use.....................................................................4-5
5. Rules and Regulations.....................................................5
6. Rent....................................................................5-6
7. Basic Operating Cost....................................................6-7
8. Insurance and Indemnification...........................................7-8
9. Waiver of Subrogation...................................................8-9
10. Landlord's Repairs and Services...........................................9
11. Tenant's Repairs..........................................................9
12. Alterations............................................................9-10
13. Signs....................................................................10
14. Inspection/Posting Notices...............................................10
15. Utilities................................................................10
16. Subordination............................................................10
17. Financial Statements.....................................................10
18. Estoppel Certificate..................................................10-11
19. Security Deposit.........................................................11
20. Tenant's Remedies........................................................11
21. Assignment and Subletting.............................................11-12
22. Authority of Parties.....................................................12
23. Condemnation.............................................................12
24. Casualty Damage.......................................................12-13
25. Holding Over.............................................................13
26. Default...............................................................13-15
27. Liens....................................................................15
28. Transfers By Landlord....................................................15
29. Right of Landlord to Perform Tenant's Covenants..........................15
30. Waiver...................................................................15
31. Notices..................................................................15
32. Attorneys' Fees..........................................................15
33. Successors and Assigns...................................................16
34. Force Majeure............................................................16
35. Brokerage Commission.....................................................16
36. Miscellaneous.........................................................16-17
37. Additional Provisions.................................................17-18
38. Signatures...............................................................19
Exhibits:
Exhibit A-1...................................................Legal Description
Exhibit A-2...........................................................Site Plan
Exhibit A-3...............................................................Phase
Plan
Exhibit B-1....................................Initial Improvements of Premises
Exhibit B-2.................................Interior Improvement Specifications
Exhibit B-3...................................Moveable Equipment/Trade Fixtures
Exhibit C .......................................Initial Project Specifications
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Exhibit D...........................................Tenant Estoppel Certificate
Exhibit E.........................Rules and Regulations for Tenants' Contractor
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LEASE
THIS LEASE is made as of this 8th day of April, 1998, by and between TC
Northern California, Inc., a Delaware corporation, (hereinafter called
"Landlord") and Cellegy Pharmaceuticals, Inc., a California corporation
(hereinafter called "Tenant").
PREMISES
1. Landlord hereby leases to Tenant, and Tenant leases from Landlord, the
Premises, for the Term, at the rental, and upon all of the terms and
conditions set forth in this Lease. The Premises is comprised of the
Building (sometimes referred to herein as the "Building") and is depicted
on Exhibit A-2. The Premises comprises one hundred (100%) percent of the
rentable area of the Building. The Building is part of the Project. The
Building is outlined in yellow on Exhibit A-2. Landlord shall, at its
sole cost and expense, construct the Building shell, parking lot,
exterior common areas, and landscaping approximately in the manner
depicted on Exhibit C hereto ("Initial Project Specifications"). The
Initial Project Specifications shall include, without limitation, the
Building shell, caulking of interior concrete joints, interior stairs,
roof, all exterior windows and doors, fire sprinklers at the roof line,
and utilities and services to the Building exterior. Upon the completion
of the Building shell, Tenant shall perform Tenant's Work (as defined in
Exhibit B-1 hereto) for the Premises. Tenant's Work shall be performed in
the manner described in Exhibit B-1 hereto.
TERM
1. The Term of this Lease ("Term") shall commence on the Term commencement
date and continue in full force and effect for the number of months
specified as the Length of Term in the Basic Lease Information or until
this Lease is terminated as otherwise provided herein. If the Term
commencement date is a date other than the first day of the calendar
month, the Term shall be the number of months of the Length of Term in
addition to the remainder of the calendar month following the Term
commencement date. The Term commencement date ("Term Commencement Date")
shall be the later of (a) the Estimated Term Commencement Date as stated
in the Basic Lease Information, or (b) the date of Substantial Completion
of Tenant's Work as provided in Exhibit B-1 hereto. Within ten (10) days
after requested by Landlord or Tenant, Landlord and Tenant shall execute
an amendment to this Lease stating and confirming the Term Commencement
Date and Tenant's acceptance of the Premises. If the shell construction
is not substantially completed for any reason other than Force Majeure
(defined in Paragraph 34.) or a Default of the Tenant (as defined in
Paragraph 26. hereto) by December 1, 1998, Tenant shall have ten (10)
days from December 1, 1998 within which to give Landlord written notice
of its intent to terminate this Lease. If such written notice is not
given within the prescribed time period, Tenant's right to cancel this
Lease shall terminate, and the Lease shall continue in full force and
effect.
POSSESSION
3. Landlord shall deliver, and Tenant shall accept delivery of, the Premises
on the Term Commencement Date. The Estimated Term Commencement Date is
Landlord's best estimate at the time this Lease is made of the date when
construction of Tenant's Work as provided in Exhibit B-1 will be
substantially completed. If the date of Substantial Completion of
Tenant's Work is delayed beyond the Estimated Term Commencement Date due
to Tenant's unreasonable delay in the construction of Tenant's Work,
Landlord may give a Termination Notice to Tenant. Unreasonable delay is
defined as a delay of thirty (30) days or more by Tenant to complete
tasks within the prescribed time periods set forth in Exhibit B-1,
provided that the thirty (30) day period may be extended up to ninety
(90) days if Tenant's delay is caused by theft, fire, acts of God, acts
of a public enemy, riot strike, insurrection, war, court order, delays
caused by Landlord, shortage of materials, requisition or order of
governmental body or authority. In the event that Landlord gives a
Termination Notice as hereinabove provided, the Lease shall terminate on
the third (3rd) day after the Termination Notice is given. Landlord shall
have no liability to Tenant if the Term Commencement Date does not occur
on or within thirty (30) days of the Estimated Term Commencement Date.
Landlord shall permit Tenant, or Tenant's agents, to enter the Premises
prior to the Term Commencement Date ("Early Possession") for the purpose
of installing Tenant's equipment and fixtures provided that such
installation shall not interfere with performance of Landlord's Work. The
term "Fixture" or "Trade Fixture" shall be defined as anything attached
in any manner to Landlord's property. All portable, unattached items are
Tenant's property. Tenant and Landlord agree that Tenant does not own any
Trade Fixtures in the Premises except those items listed in Exhibit B-3
or otherwise agreed to in a separate writing between Landlord and Tenant.
Landlord owns all remaining Trade Fixtures. If Landlord permits such
Early Possession, from and after the date on which Tenant or its agent
first enters the Premises therefor, all of the terms and conditions of
this Lease (including, but not limited to, insurance and indemnity
provisions) shall be applicable to Tenant's occupancy save and except for
the requirement to pay Base Rent and Basic Operating Costs. Upon
delivery, Landlord warrants that Landlord's Work, defined in Exhibit B-1,
will be performed substantially in accordance with the plans and
specifications described herein, with the exception that Landlord may
substitute materials and make other non-material changes, provided that
Landlord's substitutions and changes will not materially interfere with
Tenant's intended use of the Premises as provided herein.
USE
4. A. General. Tenant shall use the Premises for the Permitted Use and for
no other use or purpose. Tenant shall control Tenant's employees, agents,
customers, visitors, invitees, licensees, contractors, assignees and
subtenants (collectively, "Tenant's Parties") in such a manner that
Tenant and Tenant's Parties cumulatively do not exceed the Parking
Density at any time. Tenant and Tenant's Parties shall have the
nonexclusive right to use, in common with other parties occupying the
Building or the Project, the parking areas and driveways of the Project,
and other common areas subject to such rules and regulations as Landlord
may from time to time prescribe. Tenant shall have the right, at Tenant's
option and expense, to designate reserved parking as indicated in Exhibit
A-2. Landlord shall have no duty to police such reserved parking, and the
designation thereof shall be done in a manner reasonably approved by
Landlord.
B. Limitations. Tenant shall not permit any odors, smoke, dust, gas,
substances, noise or vibrations to emanate from the Premises, nor take
any action which would constitute a nuisance or would disturb, obstruct
or endanger any other tenants of the Building or the Project or interfere
with their use of their respective premises. Storage outside the Premises
of materials, vehicles or any other items is prohibited, with the
exception of outside storage in areas designated and approved by
Landlord. Tenant may be required to provide screening for such outside
storage, at the discretion of Landlord. Tenant shall not use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause or maintain or permit any nuisance in, on
or about the Premises or the Project. Tenant shall not commit or
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suffer the commission of any waste in, on or about the Premises or the
Project. Tenant shall not allow any sale by auction upon the Premises or
the Project, or place any loads upon the floors, walls or ceilings which
endanger the structure, or place any harmful liquids in the drainage
system of the Building or the Project. No waste, materials or refuse
shall be dumped upon or permitted to remain outside the Premises except
in trash containers placed inside exterior enclosures designated for that
purpose by Landlord. Landlord shall not be responsible to Tenant for the
non-compliance by any other tenant or occupant of the Building or the
Project with any of the above-referenced rules or any other terms or
provisions of such tenant's or occupant's lease or other contract.
Landlord agrees not to unreasonably enforce any of the above-referenced
rules against Tenant only and not against other tenants or occupants of
the Project.
C. Compliance with Regulations. By entering the Premises, Tenant accepts
the Premises in the condition existing as of the date of such entry,
subject to all existing or future applicable municipal, state and federal
and other governmental statutes, regulations, laws and ordinances,
including zoning ordinances and regulations governing and relating to the
use, occupancy and possession of the Premises and the use, storage,
generation and disposal of Hazardous Materials (hereinafter defined) in,
on and under the Premises (collectively "Regulations"). Except for
matters which occurred prior to the Term Commencement Date and were not
caused directly or indirectly by Tenant or by any of Tenant's Parties,
Tenant shall, at Tenant's sole expense, strictly comply with all
Regulations now in force or which may hereafter be in force relating to
the Premises and the use of the Premises and/or the use, storage,
generation of Hazardous Materials in, on and under the Premises. Tenant
shall at its sole cost and expense obtain any and all licenses or permits
necessary for Tenant's use of the Premises. Tenant shall promptly comply
with the requirements of any board of fire underwriters or other similar
body now or hereafter constituted. Tenant shall not do or permit anything
to be done in, on, or about the Premises or bring or keep anything which
will in any way increase the rate of any insurance paid for by Landlord
upon the Premises, the Building or the Project, or upon any contents
therein or cause a cancellation of said insurance or otherwise affect
said insurance in any manner. Tenant shall indemnify, defend, protect and
hold Landlord harmless from and against any loss, cost, expense, damage,
attorneys' fees or liability arising out of the failure of Tenant to
comply with any Regulation or comply with the requirements as set forth
herein.
D. Hazardous Materials. Tenant shall not cause, or allow any of Tenant's
Parties to cause, any Hazardous Materials to be used, generated, stored
or disposed of on or about the Premises, the Building or the Project
without Landlord's approval, which approval shall not be unreasonably
withheld. As used in this Lease, "Hazardous Materials" shall include, but
not be limited to, hazardous, toxic and radioactive materials and those
substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes," "toxic substances," or other similar designations in
any federal, state, or local law, regulation, or ordinance. Landlord
shall have the right at all reasonable times to inspect the Premises and
to conduct tests and investigations to determine whether Tenant is in
compliance with the foregoing provisions. The costs of all such
inspections, tests and investigations shall be borne by Tenant provided
that so long as Tenant is not in Default hereunder Tenant shall not be
responsible for the cost of more than one (1) inspection per calendar
year and Tenant's liability for the cost of each such inspection shall
not exceed $5,000 per inspection. Tenant shall indemnify, defend (by
counsel selected by Landlord), protect and hold Landlord harmless from
and against all liabilities, losses, costs and expenses, demands, causes
of action, claims or judgments directly or indirectly arising out of the
use, generation, storage or disposal of Hazardous Materials by Tenant or
any of Tenant's Parties, which indemnity shall include, without
limitation, attorneys' and consultants' fees, the cost of any required or
necessary repair, cleanup or detoxification, and the preparation of any
closure or other required plans, whether such action is required or
necessary prior to or following the termination of this Lease. Neither
the written consent by Landlord to the use, generation, storage or
disposal of Hazardous Materials nor the strict compliance by Tenant with
all laws pertaining to Hazardous Materials shall excuse Tenant from
Tenant's obligation of indemnification pursuant to this Paragraph 4.D.
Tenant's obligations pursuant to the foregoing indemnity shall survive
the termination of this Lease.
RULES AND
REGULATIONS
5. Tenant shall faithfully observe and comply with any rules and regulations
Landlord may from time to time prescribe in writing for the purpose of
maintaining the proper care, cleanliness, safety, traffic flow and
general order of the Premises, the Building, or the Project. Tenant shall
cause Tenant's Parties to comply with all such rules and regulations.
Landlord shall not be responsible to Tenant for the non-compliance by any
other tenant or occupant of the Building or the Project with any of the
rules and regulations.
RENT
6. A. Base Rent. Base Rent for the Premises shall be calculated on the basis
of the rentable square feet of the Premises at the rates specified in the
Basic Lease Information. Rentable square feet shall include all areas
inside the Building as determined by Landlord's architect. Tenant's
obligation to pay Base Rent for the Premises shall commence on the Term
Commencement Date. Upon completion of Landlord's Work, Landlord's
architect shall certify to Landlord the rentable square feet of the
Premises, measured from the outside of exterior walls, but including
areas below the "dripline" in the exterior entrances and exits and
including areas in the Building such as, but not limited to, utility
rooms and shafts for mechanical equipment. Landlord and Tenant currently
estimate that the rentable square feet of the Premises and the Base Rent
for the Premises will be as stated in the Basic Lease Information. Upon
receipt of the architect's certification of rentable square feet, the
actual Base Rent shall be determined and, if requested by Landlord or
Tenant, Landlord and Tenant shall enter into an amendment of this Lease
which states the actual Base Rent as so determined. Upon determination of
the actual Base Rent for the Premises, Landlord and Tenant shall adjust,
if necessary, the Base Rent deposited by Tenant for the first full month
of the Term as provided in Paragraph 6.B. below, and Tenant's share of
Operating Costs, as defined in Paragraph 7A. theretofore paid.
B. Payments. Tenant shall pay to Landlord, without demand throughout the
Term, Base Rent as specified in the Basic Lease Information and finally
determined as provided in Paragraph 6.A., payable in monthly installments
in advance on or before the first day of each calendar month, in lawful
money of the United States, without deduction or offset whatsoever, at
the address specified in the Basic Lease Information or to such other
place as Landlord may from time to time designate in writing. Base Rent
and Estimated Basic Operating Costs as defined in Paragraph 7.A. for the
first full month of the Term (based upon the estimated rentable area as
hereinabove provided) shall be paid by Tenant upon Tenant's execution of
this Lease. If the obligation for payment of Base Rent commences on other
than the first day of a month, then Base Rent (calculated at the rate
applicable to the second full month of the Term) for the partial month
shall be prorated on the basis of the actual number of days in the month.
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C. Additional Rent. All monies other than Base Rent required to be paid
by Tenant hereunder, including, but not limited to, the interest and late
charge described in Paragraph 26.D., any monies spent by Landlord
pursuant to Paragraph 29., and Tenant's Proportionate Share of Basic
Operating Costs, as specified in Paragraph 7. of this Lease, shall be
considered additional rent ("Additional Rent"). "Rent" shall mean Base
Rent and Additional Rent.
BASIC
OPERATING
COST
7. A. Basic Operating Cost. In addition to the Base Rent required to be paid
hereunder, Tenant shall pay as Additional Rent, Basic Operating Costs in
the manner set forth below. The Basic Operating Costs shall be calculated
on the basis of Landlord's architect's certification of the rentable
square feet of the Building and the Project. The certification by
Landlord's architect of the rentable square feet of the Building and the
Project shall be conclusive and binding upon both Landlord and Tenant for
all purposes of this Lease. Tenant's obligation to pay Basic Operating
Costs with respect to the Building and the Project shall commence on the
Term Commencement Date. Landlord shall account for each item of Basic
Operating Costs attributable to the Building and the Project, as
determined by Landlord in Landlord's sole discretion, and unless provided
to the contrary in this Lease, Tenant shall pay the Basic Operating
Costs, as set forth in the Basic Lease Information. "Basic Operating
Costs" shall mean all expenses and costs of every kind and nature which
Landlord shall pay or become obligated to pay because of or in connection
with the management, maintenance, preservation and operation of the
Building and the Project (determined in accordance with generally
accepted accounting principles, consistently applied) including but not
limited to the following:
(1) Taxes. All real property taxes, possessory interest taxes, business
or license taxes or fees, service payments in lieu of such taxes or fees,
annual or periodic license or use fees, excises, transit charges, housing
fund assessments, open space charges, assessments, levies, fees or
charges general and special, ordinary and extraordinary, unforeseen as
well as foreseen, of any kind (including fees "in-lieu" of any such tax
or assessment) which are assessed, levied, charged, confirmed, or imposed
by any public authority upon the Project, its operations or the Rent (or
any portion or component thereof) (all of the foregoing being hereinafter
collectively referred to as "real property taxes"), or any tax imposed in
substitution, partially or totally, of any tax previously included within
the definition of real property taxes, or any additional tax the nature
of which was previously included within the definition of real property
taxes, except (a) inheritance or estate taxes imposed upon or assessed
against the Project, or any part thereof or interest therein, and (b)
taxes computed upon the basis of net income of Landlord or the owner of
any interest therein, except as otherwise provided in the following
sentence. Basic Operating Costs shall also include any taxes,
assessments, or any other fees imposed by any public authority upon or
measured by the monthly rental or other charges payable hereunder,
including, without limitation, any gross income tax or excise tax levied
by the local governmental authority in which the Project is located, the
federal government, or any other governmental body with respect to
receipt of such rental, or upon, with respect to or by reason of the
development, possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises or any
portion thereof, or upon this transaction or any document to which Tenant
is a party creating or transferring an interest or an estate in the
Premises. In the event that it shall not be lawful for Tenant to
reimburse Landlord for all or any part of such taxes, the Base Rent
payable to Landlord under this Lease shall be revised to net to Landlord
the same net rental after imposition of any such taxes on Landlord as
would have been payable to Landlord prior to the payment of any such
taxes. If Landlord at any time during the Term of this Lease or within
two (2) years after termination of this Lease shall receive a refund of
real property taxes applicable to a period within the Term of this Lease
for which Tenant has paid real property taxes hereunder, Landlord shall
refund to Tenant Tenant's proportionate share of said refund if Tenant is
not then in Default or was not in Default at the termination of the
Lease, as the case may be. If Tenant timely pays real property taxes to
Landlord, Landlord alone shall be responsible for any fines, penalties,
interest and other charges that result from any late payment of taxes by
Landlord.
(2) Insurance. All insurance premiums and costs, including but not
limited to, any deductible amounts, premiums and costs of insurance
incurred by Landlord, as more fully set forth in Paragraph 8.A. herein.
(3) Repairs and Improvements. The cost of all repairs, replacements and
general maintenance for the Premises, the Building and the Project
(except for those repairs expressly made the financial responsibility of
Landlord pursuant to the terms of this Lease, repairs to the extent paid
for by proceeds of insurance or by Tenant or other third parties, and
alterations attributable solely to tenants of the Project other than
Tenant). Tenant shall not be responsible for the cost of repairs to
tenant-occupied buildings which are part of the Project other than the
Building. Such repairs, replacements, and general maintenance shall
include the cost of any capital improvements made to or capital assets
acquired for the Project, the Building, or the Premises after the Term
Commencement Date that are intended by Landlord to reduce any other Basic
Operating Cost, are reasonably necessary for the health and safety of the
occupants of the Project, or are made to the Building by Landlord after
the date of this Lease and are required under any governmental law or
regulation, such costs or allocable portions thereof to be amortized over
the useful life of the improvement, as determined by the Landlord,
together with interest on the unamortized balance at the "prime rate"
charged at the time such improvements or capital assets are constructed
or acquired by Wells Fargo Bank, N.A. (San Francisco) plus two (2)
percentage points, but in no event more than the maximum rate permitted
by law.
(4) Services. To the extent such expenses are not the obligation of
Tenant under other provisions of this Lease, all expenses relating to
maintenance, janitorial and service agreements and services, and costs of
supplies and equipment used in operating and maintaining the Premises,
the Building and the Project and the equipment therein and the adjacent
sidewalks, driveways, parking and service areas, including, without
limitation, alarm service, window cleaning, elevator maintenance, the
Building exterior maintenance and Project landscaping.
(5) Utilities. To the extent such expenses are not the obligation of
Tenant under other provisions of this Lease, the cost of all utilities
which benefit all or a portion of the Premises, the Building or the
Project.
(6) Management Fee. A management and accounting cost recovery fee equal
to three (3%) percent of the sum of Base Rent and Basic Operating Cost.
(7) Legal and Accounting. Legal and accounting expenses relating to the
Project other than legal expenses related to negotiating leases with
tenants in the Project. Accounting expenses shall be limited to
preparation of annual reconciliation of estimated and actual Operating
Costs.
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In the event that the Building is not fully occupied during any fiscal
year of the Term as determined by Landlord, an adjustment shall be made
in computing the Basic Operating Costs for such year so that Tenant pays
an equitable portion of all variable items of Basic Operating Costs, as
reasonably determined by Landlord; provided, however, that in no event
shall Landlord be entitled to collect in excess of one hundred (100%)
percent of the total Basic Operating Costs from all of the tenants in the
Building including Tenant.
Basic Operating Costs shall not include specific costs incurred for the
account of, separately billed to and paid by specific tenants.
Notwithstanding anything herein to the contrary, in any instance wherein
Landlord, in Landlord's sole discretion, deems Tenant to be responsible
for any amounts greater than Tenant's Proportionate Share, Landlord shall
have the right to allocate costs in any manner Landlord reasonably deems
appropriate.
B. Payment of Estimated Basic Operating Cost. "Estimated Basic Operating
Costs" for any particular year shall mean Landlord's estimate of the
Basic Operating Cost for such fiscal year made prior to commencement of
such fiscal year as hereinafter provided. Landlord shall have the right
from time to time to revise its fiscal year and interim accounting
periods so long as the periods as so revised are reconciled with prior
periods in accordance with generally accepted accounting principles
applied in a consistent manner. During the last month of each fiscal year
during the Term, or as soon thereafter as practicable, Landlord shall
give Tenant written notice of the Estimated Basic Operating Costs for the
ensuing fiscal year. Tenant shall pay Tenant's Proportionate Share of the
Estimated Basic Operating Cost with installments of Base Rent for the
fiscal year to which the Estimated Basic Operating Cost applies in
monthly installments on the first day of each calendar month during such
year, in advance. If at any time during the course of the fiscal year,
Landlord determines that Basic Operating Cost is projected to vary from
the then Estimated Basic Operating Cost by more than ten (10%) percent,
Landlord may, by written notice to Tenant, revise the Estimated Basic
Operating Cost for the balance of such fiscal year, and Tenant's monthly
installments for the remainder of such year shall be adjusted so that by
the end of such fiscal year Tenant has paid to Landlord Tenant's
Proportionate Share of the revised Estimated Basic Operating Cost for
such year. Upon execution of this Lease, Tenant shall pay to Landlord the
Estimated Basic Operating Cost for the Premises (calculated on the
estimated rentable square feet) for the first full month of the Term.
Upon final determination of the rentable square feet, Landlord and Tenant
shall adjust such estimated payment.
C. Computation of Basic Operating Cost Adjustment. "Basic Operating Cost
Adjustment" shall mean the difference between Estimated Basic Operating
Cost and Basic Operating Cost for any fiscal year determined as
hereinafter provided. Within one hundred twenty (120) days after the end
of each fiscal year, as determined by Landlord, or as soon thereafter as
practicable, Landlord shall deliver to Tenant a statement of Basic
Operating Cost for the fiscal year just ended, accompanied by a
computation of Basic Operating Cost Adjustment. If such statement shows
that Tenant's payment based upon Estimated Basic Operating Cost is less
than Tenant's Proportionate Share of Basic Operating Cost, then Tenant
shall pay to Landlord the difference within twenty (20) days after
receipt of such statement. If such statement shows that Tenant's payments
of Estimated Basic Operating Cost exceed Tenant's Proportionate Share of
Basic Operating Cost, then (provided that Tenant is not in Default under
this Lease) Landlord shall credit the difference against the Estimated
Basic Operating Cost payment next due. If this Lease has been terminated
or the Term hereof has expired prior to the date of such statement, then
the Basic Operating Cost Adjustment shall be paid by the appropriate
party within twenty (20) days after the date of delivery of the statement
and this obligation shall survive termination of the Lease. Should this
Lease commence or terminate at any time other than the first day of the
fiscal year, Tenant's Proportionate Share of the Basic Operating Cost
adjustment shall be prorated by reference to the exact number of calendar
days during such fiscal year that this Lease is in effect.
D. Net Lease. This shall be a net Lease and Base Rent shall be paid to
Landlord absolutely net of all costs and expenses, except as specifically
provided to the contrary in this Lease. The provisions for payment of
Basic Operating Cost and the Basic Operating Cost Adjustment are intended
to pass on to Tenant and reimburse Landlord for all costs and expenses of
the nature described in Paragraph 7.A. incurred in connection with the
management, maintenance, preservation and operation of the Building or
the Project and such additional facilities now and in subsequent years as
may be determined by Landlord to be necessary to the Building or the
Project.
E. Tenant Audit. In the event that Tenant shall dispute the amount set
forth in any statement provided by Landlord under Paragraph 7.B. or 7.C.
above, Tenant shall have the right, not later than sixty (60) days
following the receipt of such statement and upon the condition that
Tenant shall first deposit with Landlord the full amount in dispute
within sixty (60) days of receipt of such statement, to cause Landlord's
books and records with respect to Basic Operating Cost for such fiscal
year to be audited by certified public accountants selected by Tenant and
subject to Landlord's reasonable right of approval. The Basic Operating
Cost Adjustment shall be appropriately adjusted on the basis of such
audit. If such audit discloses a liability for a refund in excess of five
(5%) percent of Tenant's Proportionate Share of the Basic Operating Cost
Adjustment previously reported, the cost of such audit shall be borne by
Landlord; otherwise the cost of such audit shall be paid by Tenant. If
Tenant shall not request an audit in accordance with the provisions of
this Paragraph 7.E. within sixty (60) days after receipt of Landlord's
statement provided pursuant to Paragraph 7.B. or 7.C., such statement
shall be final and binding for all purposes hereof.
INSURANCE
AND
INDEM-
NIFICATION
8. A. Landlord's Insurance. Landlord agrees to maintain insurance insuring
the Building against fire, lightning, vandalism and malicious mischief
(including, if Landlord elects, "All Risk" coverage, earthquake, and/or
flood insurance), in an amount of not less than one hundred (100%)
percent of the current replacement cost thereof, except where
commercially unreasonable, with deductibles and the form and endorsements
of such coverage as selected by Landlord. Such insurance may also
include, at Landlord's option, insurance against loss of Base Rent and
Additional Rent, in an amount equal to the amount of Base Rent and
Additional Rent payable by Tenant for a period of at least twelve (12)
months commencing on the date of loss. Such insurance shall be for the
sole benefit of Landlord and under Landlord's sole control. Landlord
shall not be obligated to insure any furniture, equipment, machinery,
goods or supplies which Tenant may keep or maintain in the Premises, or
any leasehold improvements, additions or alterations within the Premises.
Landlord may also carry such other insurance as Landlord may deem prudent
or advisable, including, without limitation, liability insurance in such
amounts and on such terms as Landlord shall determine.
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B. Tenant's Insurance.
(1) Property Insurance. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term, insurance on all personal property and
Fixtures of Tenant and all improvements made by or for Tenant to the
Premises, insuring such property for the full replacement value of such
property.
(2) Liability Insurance. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term either Comprehensive General Liability
insurance or Commercial General Liability insurance applying to the use
and occupancy of the Premises and the Building, and any part of either,
and any areas adjacent thereto, and the business operated by Tenant, or
by any other occupant on the Premises. Such insurance shall include Broad
Form Contractual Liability insurance coverage insuring all of Tenant's
indemnity obligations under this Lease. Such coverage shall have a
minimum combined single limit of liability of at least two million
dollars ($2,000,000.00), and a general aggregate limit of five million
dollars ($5,000,000.00). All such policies shall be written to apply to
all bodily injury, property damage or loss, personal injury and other
covered loss, however occasioned, occurring during the policy term, shall
be endorsed to add Landlord, Riggs Bank N.A., as trustee of
Multi-Employer Trust, the Multi-Employer Trust, Kennedy Associates Real
Estate Counsel, Inc., and the officers, agents and employees of each of
the foregoing entities, and any party holding an interest to which this
Lease may be subordinated as an additional insured, and shall provide
that such coverage shall be primary and that any insurance maintained by
Landlord shall be excess insurance only. Such coverage shall also contain
endorsements: (i) deleting any employee exclusion on personal injury
coverage; (ii) including employees as additional insureds; (iii) deleting
any liquor liability exclusion; and (iv) providing for coverage of
employer's automobile non-ownership liability. All such insurance shall
provide for severability of interests; shall provide that an act or
omission of one of the named insureds shall not reduce or avoid coverage
to the other named insureds; and shall afford coverage for all claims
based on acts, omissions, injury and damage, which claims occurred or
arose (or the onset of which occurred or arose) in whole or in part
during the policy period. Said coverage shall be written on an
"occurrence" basis, if available. If an "occurrence" basis form is not
available, Tenant must purchase "tail" coverage for the most number of
years available, and tenant must also purchase "tail" coverage if the
retroactive date of an "occurrence" basis form is changed so as to leave
a gap in coverage for occurrences that might have occurred in prior
years. If a "claims made" policy is ever used, the policy must be
endorsed so that Landlord is given the right to purchase "tail" coverage
should Tenant for any reason not do so or if the policy is to be canceled
for nonpayment of premium.
(3) General Insurance Requirements. All coverages described in this
Paragraph 8.B. shall be endorsed to provide Landlord with thirty (30)
days' notice of cancellation or change in terms. If at any time during
the Term the amount or coverage of insurance which Tenant is required to
carry under this Paragraph 8.B. is, in Landlord's reasonable judgment,
materially less than the amount or type of insurance coverage typically
carried by owners or tenants of properties located in the general area in
which the Premises are located which are similar to and operated for
similar purposes as the Premises, Landlord shall have the right to
require Tenant to increase the amount or change the types of insurance
coverage required under this Paragraph 8.B. All insurance policies
required to be carried under this Lease shall be written by companies
rated A or better in "Best's Insurance Guide" and authorized to do
business in California. Any deductible amounts under any insurance
policies required hereunder shall be subject to Landlord's prior written
approval. In any event deductible amounts shall not exceed one thousand
dollars ($1,000.00). Tenant shall deliver to Landlord on or before the
Term Commencement Date, and thereafter at least thirty (30) days before
the expiration dates of the expiring policies, certified copies of
Tenant's insurance policies, or a certificate evidencing the same issued
by the insurer thereunder, showing that all premiums have been paid for
the full policy period; and, in the event Tenant shall fail to procure
such insurance, or to deliver such policies or certificates, Landlord
may, at Landlord's option and in addition to Landlord's other remedies in
the event of a Default by Tenant hereunder, procure the same for the
account of Tenant, and the cost thereof shall be paid to Landlord as
Additional Rent.
C. Indemnification. Landlord shall not be liable to Tenant for any loss
or damage to person or property caused by theft, fire, acts of God, acts
of a public enemy, riot, strike, insurrection, war, court order,
requisition or order of governmental body or authority or for any damage
or inconvenience which may arise through repair or alteration of any part
of the Building or the Project or failure to make any such repair, except
as expressly otherwise provided in Paragraph 10. Tenant shall indemnify,
defend by counsel acceptable to Landlord, protect and hold Landlord
harmless from and against any and all liabilities, losses, costs,
damages, injuries or expenses, including reasonable attorneys' fees and
court costs, arising out of or related to: (1) claims of injury to or
death of persons or damage to property occurring or resulting directly or
indirectly from the use or occupancy of the Premises, or from activities
of Tenant, Tenant's Parties or anyone in or about the Premises or
Project, or from any cause whatsoever; (2) claims for work or labor
performed, or for materials or supplies furnished to or at the request of
Tenant in connection with performance of any work done for the account of
Tenant within the Premises or Project; and (3) claims arising from any
breach or Default on the part of Tenant in the performance of any
covenant contained in this Lease. The foregoing indemnity shall not be
applicable to claims arising from the gross negligence or willful
misconduct of Landlord and Landlord shall indemnify Tenant for any loss
incurred by Tenant as a direct consequence of any such gross negligence
or willful misconduct of Landlord. The provisions of this Paragraph shall
survive the expiration or termination of this Lease with respect to any
claims or liability occurring prior to such expiration or termination.
WAIVER OF
SUBROGATION
9. To the extent permitted by law and without affecting the coverage
provided by insurance to be maintained hereunder, Landlord and Tenant
each waive any right to recover against the other for: (a) damages for
injury to or death of persons; (b) damages to property; (c) damages to
the Premises or any part thereof, and (d) claims arising by reason of the
foregoing due to hazards covered by insurance to the extent of proceeds
recovered therefrom. This provision is intended to waive fully, and for
the benefit of each party, any rights and/or claims which might give rise
to a right of subrogation in favor of any insurance carrier. The coverage
obtained by each party pursuant to this Lease shall include, without
limitation, a waiver of subrogation by the carrier which conforms to the
provisions of this Paragraph.
LANDLORD'S
REPAIRS AND
SERVICES
10. Except for damage, destruction or deterioration which is caused by
Tenant, Tenant's Parties, or by an act or event which is not fully
insured, Landlord shall at Landlord's expense maintain the structural
soundness of
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the structural beams of the roof, the foundations and exterior walls of
the Building in good repair, reasonable wear and tear excepted; provided
that, Landlord shall not be responsible for the cost of any repairs
resulting from damage, destruction or deterioration which is caused by
Tenant, Tenant's Parties, or by an act or event which is not fully
insured. The term "exterior walls" as used herein shall not include
windows, glass or plate glass, doors, special store fronts or office
entries. Landlord shall perform on behalf of Tenant and other tenants of
the Project, as an item of Basic Operating Cost, the exterior maintenance
of the Building, the Project, and public and common areas of the Project,
including but not limited to the roof, pest extermination, the landscaped
areas, parking areas, driveways, the truck staging areas, fire sprinkler
systems, sanitary and storm sewer lines, utility services, electric and
telephone equipment servicing the Building(s), exterior lighting, and
anything which affects the operation and exterior appearance of the
Project, which determination shall be at Landlord's sole discretion.
Except for the expenses directly involving the items specifically
described in the first sentence of this Paragraph 10., Tenant shall
reimburse Landlord for all such costs in accordance with Paragraph 7. Any
damage caused by or repairs necessitated by any act of Tenant or Tenant's
Parties may be repaired by Landlord at Landlord's option and at Tenant's
expense. Tenant shall immediately give Landlord written notice of any
defect or need of repairs after which Landlord shall have a reasonable
opportunity to repair same. Landlord's liability with respect to any
defects, repairs, or maintenance for which Landlord is responsible under
any of the provisions of this Lease shall be limited to the cost of such
repairs or maintenance. Landlord shall provide Tenant with reasonable
notice before entering the Premises to conduct repairs.
TENANT'S
REPAIRS
11. Tenant shall at Tenant's expense throughout the Term of this Lease
maintain all parts of the Premises in a good, clean and secure condition
and promptly make all necessary repairs and replacements, including but
not limited to all windows, glass, doors, walls and wall finishes, floor
covering, heating, ventilating and air conditioning systems, truck doors,
dock bumpers, dock plates and levelers, plumbing work and Fixtures, root
(exclusive of structural beams), downspouts, electrical and lighting
systems, and fire sprinklers. Tenant shall at Tenant's expense also
perform regular removal of trash and debris. If required by the railroad
company, Tenant agrees to sign a joint maintenance agreement governing
the use of the rail spur, if any. Tenant shall, at Tenant's own expense,
enter into a regularly scheduled preventive maintenance/service contract
with a maintenance contractor for servicing all hot water, heating and
air conditioning systems and equipment within or serving the Premises.
The maintenance contractor and the contract must be approved by Landlord.
The service contract must include all services suggested by the equipment
manufacturer within the operation/maintenance manual and must become
effective and a copy thereof delivered to Landlord within thirty (30)
days after the Term Commencement Date. Tenant shall not damage any
demising wall or disturb the integrity and support provided by any
demising wall and shall, at its sole expense, immediately repair any
damage to any demising wall caused by Tenant or Tenant's Parties. To the
extent permitted by applicable contracts or law, Landlord shall make
available to Tenant the benefits of any contractor warranties applicable
to items for which Tenant has repair, maintenance or replacement
responsibility hereunder, provided, however, that Landlord shall not be
obligated to incur any cost or liability in so doing.
ALTERATIONS
12. Tenant shall not make, or allow to be made, any Alterations or physical
additions in, about or to the Premises without obtaining the prior
written consent of Landlord, except as stated below, which consent shall
not be unreasonably withheld with respect to proposed alterations and
additions which: (a) comply with all applicable laws, ordinances, rules
and regulations; (b) are in Landlord's opinion, compatible with the
Project and its mechanical, plumbing, electrical, heating/ventilation/air
conditioning systems, (c) are constructed utilizing Union Labor as set
forth in Section 2.5. of Exhibit B-1; (d) will not interfere with the use
and occupancy of any other portion of the Building or the Project by any
other tenant or its invitees; (e) are performed promptly and in a workman
like manner; (f) the Project remains lien free as a result of the
construction; and (g) are constructed using all new materials. The term
"Alteration" as used herein is defined as alterations, additions,
substitutions, installations, changes and improvements, but excludes
minor decorations. Tenant shall have the right to make up to fifty
thousand dollars ($50,000) worth of Alterations to the Premises per year,
which would otherwise be permissible under the Lease and which do not
involve demolition or effect the structural parts or exterior of the
Building, without obtaining the prior written consent of Landlord. In the
event Landlord's prior written consent is not necessary pursuant to this
section, Tenant shall nevertheless submit to Landlord copies of its plans
and specification, and Tenant's work shall be performed pursuant to the
other requirements of this section. Specifically, but without limiting
the generality of the foregoing, Landlord shall have the right of written
consent for all plans and specifications for the proposed Alterations or
additions, construction means and methods, all appropriate permits and
licenses, any contractor or subcontractor to be employed on the work of
Alteration or additions, and the time for performance of such work.
Tenant shall also supply to Landlord any documents and information
reasonably requested by Landlord in connection with Landlord's
consideration of a request for approval hereunder. Tenant shall reimburse
Landlord for all costs which Landlord may incur in connection with
granting approval to Tenant for any such Alterations and additions,
including any costs or expenses which Landlord may incur in electing to
have outside architects and engineers review said plans and
specifications. All such Alterations, physical additions or improvements
shall remain the property of Tenant until termination of this Lease, at
which time they shall be and become the property of Landlord if Landlord
so elects; provided, however, that Landlord may, at Landlord's option,
require that Tenant, at Tenant's expense, remove any or all Alterations,
additions, improvements and partitions made by Tenant and restore the
Premises by the termination of this Lease, whether by lapse of time, or
otherwise, to their condition existing prior to the construction of any
such alterations, additions, partitions or leasehold improvements, except
for initial Tenant Improvements made pursuant to Exhibit B-1. All such
removals and restoration shall be accomplished in a good and workmanlike
manner so as not to cause any damage to the Premises or Project
whatsoever. If Tenant fails to so remove such alterations, additions,
improvements and partitions or Tenant's Trade Fixtures or furniture,
Landlord may keep and use them or remove any of them and cause them to be
stored or sold in accordance with applicable law, at Tenant's sole
expense. In addition to and wholly apart from Tenant's obligation to pay
Tenant's Proportionate Share of Basic Operating Cost, Tenant shall be
responsible for and shall pay prior to delinquency any taxes or
governmental service fees, possessory interest taxes, fees or charges in
lieu of any such taxes, capital levies, or other charges imposed upon,
levied with respect to or assessed against its personal property, on the
value of the alterations, additions or improvements within the Premises,
and on Tenant's interest pursuant to this Lease. To the extent that any
such taxes are not separately assessed or billed to Tenant, Tenant shall
pay the amount thereof as invoiced to Tenant by Landlord.
SIGNS
13. Subject to the provisions of this Section, Tenant may, at Tenant's cost,
erect a sign on the Premises. All signs, notices, graphics and
advertising balloons of every kind or character, visible in or from
public view or corridors, the common areas or the exterior of the
Premises, shall be subject to Landlord's prior written approval. Landlord
shall provide, at Landlord's cost, monument signage on Oyster Point
Boulevard which identifies Tenant's business. Tenant shall not place or
maintain any banners whatsoever or any window decor in or on any exterior
window or window fronting upon any common areas or service area or upon
any truck doors or man doors without Landlord's prior written
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approval. Any installation of signs or graphics on or about the Premises
and Project shall be subject to any applicable governmental laws, CC&Rs,
ordinances, regulations and to any other requirements imposed by
Landlord. Tenant shall remove all such signs and graphics prior to the
termination of this Lease. Such installations and removals shall be made
in such manner as to avoid injury or defacement of the Premises, the
Building or the Project and any other improvements contained therein, and
Tenant shall repair any injury or defacement, including without
limitation, discoloration caused by such installation or removal.
INSPECTION/
POSTING
NOTICES
14.After reasonable notice, except in emergencies where no such notice shall
be required, Landlord, and Landlord's agents and representatives, shall
have the right to enter the Premises to inspect the same, to clean, to
perform such work as may be permitted or required hereunder, to make
repairs or alterations to the Premises or Project or to other tenant
spaces therein, to deal with emergencies, to post such notices as may be
permitted or required by law to prevent the perfection of liens against
Landlord's interest in the Project or to exhibit the Premises to
prospective tenants, purchasers, encumbrances or others, or for any other
purpose as Landlord may deem necessary or desirable; provided, however,
that Landlord shall use reasonable efforts not to unreasonably interfere
with Tenant's business operations. Provided that Tenant is not in Default
hereunder, Landlord shall not advertise or show the Premises to
prospective successor tenants except during the last twelve (12) months
of the Lease term. Tenant shall not be entitled to any abatement of Rent
by reason of the exercise of any such right of entry. At any time within
six (6) months prior to the end of the Term, Landlord shall have the
right to erect on the Premises and/or Project a suitable sign indicating
that the Premises are available for lease, but agrees not to attach such
sign directly to the Building. Tenant shall give written notice to
Landlord at least thirty (30) days prior to vacating the Premises and
shall meet with Landlord for a joint inspection of the Premises at the
time of vacating. In the event of Tenant's failure to give such notice or
participate in such joint inspection, Landlord's inspection at or after
Tenant's vacating the Premises shall conclusively be deemed correct for
purposes of determining Tenant's responsibility for repairs and
restoration.
UTILITIES
15. Tenant shall pay directly for all water, gas, heat, air conditioning,
light, power, telephone, sewer, sprinkler charges and other utilities and
services used on or from the Premises, together with any taxes,
penalties, surcharges or the like pertaining thereto, and maintenance
charges for utilities and shall furnish all electric light bulbs,
ballasts and tubes. If any such services are not separately metered to
Tenant, Tenant shall pay a reasonable proportion, as determined by
Landlord, of all charges jointly serving other premises. Landlord shall
not be liable for any damages directly or indirectly resulting from nor
shall the Rent or any monies owed Landlord under this Lease herein
reserved be abated by reason of: (a) the installation, use or
interruption of use of any equipment used in connection with the
furnishing of any such utilities or services; (b) the failure to furnish
or delay in furnishing any such utilities or services when such failure
or delay is caused by acts of God or the elements, labor disturbances of
any character, or any other accidents or other conditions beyond the
reasonable control of Landlord; or (c) the limitation, curtailment,
rationing or restriction on use of water, electricity, gas or any other
form of energy or any other service or utility whatsoever serving the
Premises or Project. Landlord shall be entitled to cooperate voluntarily
and in a reasonable manner with the efforts of national, state or local
governmental agencies or utility suppliers in reducing energy or other
resource consumption. The obligation to make services available hereunder
shall be subject to the limitations of any such voluntary, reasonable
program.
SUBORDINATION
16. Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination, this Lease shall be subject
and subordinate at all times to: (a) all ground leases or underlying
leases which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises and Project are
situated, or both; and (b) any mortgage or deed of trust which may now
exist or be placed upon said Project, land, ground leases or underlying
leases, or Landlord's interest or estate in any of said items which is
specified as security. At the request of Tenant, Landlord will endeavor
to obtain from the secured party under any mortgage or deed of trust
which is senior to this Lease, a nondisturbance agreement upon such
lender's customary form therefor. Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be subordinated any such
ground leases or underlying leases or any such liens to this Lease. In
the event that any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a conveyance in
lieu of foreclosure is made for any reason, Tenant shall, notwithstanding
any subordination, attorn to and become the Tenant of the successor in
interest to Landlord at the option of such successor in interest. Within
ten (10) days after request by Landlord, Tenant shall execute and deliver
any additional documents evidencing Tenant's attornment or the
subordination of this Lease with respect to any such ground leases or
underlying leases or any such mortgage or deed of trust, in the form
requested by Landlord or by any ground landlord, mortgagee, or
beneficiary under a deed of trust.
FINANCIAL
STATEMENTS
17. At the request of Landlord, Tenant shall provide to Landlord Tenant's
current financial statement or other information discussing financial
worth of Tenant within thirty (30) days after the date of Landlord's
request, which Landlord shall use solely for purposes of this Lease and
in connection with the ownership, management and disposition of the
Project. So long as Tenant remains a publicly traded company, Tenant is
not in Default and Tenant files its public filings quarterly, Tenant may
comply with the provisions of this section by submitting its public
filings to Landlord.
ESTOPPEL
CERTIFICATE
18. Tenant agrees from time to time, within ten (10) business days after
request of Landlord, to deliver to Landlord, or Landlord's designee, an
estoppel certificate per Exhibit D or in an alternate form that the
requesting party may require stating that this Lease is in full force and
effect, the date to which Rent has been paid, the unexpired portion of
this Lease, and such other matters pertaining to this Lease as may be
reasonably requested by Landlord. Landlord and Tenant intend that any
statement delivered pursuant to this Paragraph may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the Project
or any interest therein. The parties agree that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material
inducement for Landlord's execution of the Lease, and shall be an Event
of Default if Tenant fails to fully comply. Tenant acknowledges that
failure to provide the Estoppel Certificate to Landlord or Landlord's
designee within the time provided above may cause Landlord to incur
substantial damages. Tenant hereby agrees to indemnify Landlord for any
liabilities, losses, costs, damages (including, without limitation,
compensatory, incidental and consequential damages), injuries or expenses
arising from
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the failure of Tenant to deliver the Estoppel certificate in the time and
manner provided in this Paragraph. In addition to any other remedies
Landlord may have at law and equity, Landlord shall be entitled to
specific performance of this Paragraph. The provisions of this Paragraph
shall survive the expiration or termination of this Lease with respect to
any claims or liability occurring prior to such expiration or
termination. Landlord agrees that in connection with any sale of Tenant's
business, stock offering, or financing, but in no event more than twice
in any calendar year, Tenant may request, and Landlord will deliver to
Tenant within fifteen (15) business days of Tenant's request, an estoppel
certificate. Such certificate will state that this Lease is in full force
and effect, the date on which Rent was last paid and any other matters
directly concerning this Lease which Tenant may reasonably request.
SECURITY
DEPOSIT
19. Tenant agrees to deposit with Landlord upon execution of this Lease, a
Security Deposit as stated in the Basic Lease Information, which sum
shall be held by Landlord, without obligation for interest, as security
for the performance of Tenant's covenants and obligations under this
Lease. The Security Deposit is not an advance rental deposit or a measure
of damages incurred by Landlord in case of Tenant's Default. Landlord is
not required to keep all or any part of the Security Deposit separate
from its general accounts. Upon the occurrence of any Event of Default by
Tenant, Landlord may, from time to time, without prejudice to any other
remedy provided herein or provided by law, use such fund to the extent
necessary to make good any arrears of Rent or other payments due to
Landlord hereunder, and any other damage, injury, expense or liability
caused by such Event of Default, and Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the Security Deposit to
its original amount. Although the Security Deposit shall be deemed the
property of Landlord, any remaining balance of such deposit shall be
returned by Landlord to Tenant at such time after termination of this
Lease that all of Tenant's obligations under this Lease have been
fulfilled. Landlord may use and commingle the Security Deposit with other
funds of Landlord. As additional security, Tenant agrees to execute and
deliver to Landlord a Uniform Commercial Code Financing Statement and
Security agreement on all Trade Fixtures and improvements otherwise made
pursuant to Tenant's Work as set forth in Exhibit B-1 in a form
reasonably satisfactory to Landlord. As an alternate to depositing the
cash sum with Landlord for the Security Deposit, Tenant may within six
(6) months after execution of this Lease deliver to Landlord an
unconditional irrevocable Letter of Credit in the amount of $227,500.00
meeting the requirements of this paragraph (the "Letter of Credit"),
which shall secure the full and timely payment and performance of all of
Tenant's covenants and obligations under this Lease. The Letter of Credit
shall (a) designate Landlord or its assignees as beneficiary, (b) be
issued by a financial institution approved by Landlord, (c) remain in
full force and effect during the entire term of this Lease and any
extension or holdover period, plus an additional period of three (3)
months, and (d) be in form satisfactory to Landlord. The Letter of Credit
may be for an initial term of fifteen (15) months so long as it provides
that Landlord may immediately draw the full amount of the Letter of
Credit if the issuer does not give Landlord written notice of renewal for
additional successive periods of twelve (12) months at least sixty (60)
days prior to the expiration date. Landlord is authorized to draw on the
Letter of Credit from time to time in the event that (i) Landlord advises
the issuer of the Letter of Credit that there is an Event of Default by
Tenant under this Lease, or (ii) the issuer gives Landlord notice that
the Letter of Credit will be terminated or will expire prior to it
initial term of fifteen (15) months, or (iii) the issuer does not give
Landlord a written notice of renewal of the term of the Letter of Credit
as required by the preceding sentence. In the event Landlord shall draw
on the Letter of Credit in the circumstances described in clause (i) of
this paragraph, Landlord shall be permitted to draw an amount necessary
in Landlord's good faith estimation to fully cure any such Event of
Default, including any damage, injury, expense or liability caused or
projected to be caused by such Event of Default, and Tenant shall, on
demand from Landlord, increase the Letter of Credit up to its full
original amount. In the event Landlord shall draw on the Letter of Credit
in the circumstances described in clause (ii) or (iii) of this paragraph,
Landlord shall be permitted to draw the entire amount of the Letter of
Credit, in which case such sum shall be held by Landlord as the Security
Deposit and administered as such. Landlord may draw on the Letter of
Credit regardless of whether or not Tenant disputes that an Event of
Default has occurred and regardless of any other disputes or claims
between the parties. Landlord shall not be required to deliver any
certifications or documentation of any kind to the issuer in order to
make a draw, other than Landlord's written demand. The issuer shall not
be required to conduct any inquiry or investigation before paying
Landlord the requested amount of the draw. Landlord may assign, transfer
or pledge the Letter of Credit to any lender or purchaser in connection
with any financing or sale of the Premises.
TENANT'S
REMEDIES
20. The liability of Landlord to Tenant for any default by Landlord under the
terms of this Lease are not personal obligations of the Landlord or other
trustees, advisors, partners, directors, officers and shareholders of
Landlord, and Tenant agrees to look solely to Landlord's interest in the
Project for the recovery of any amount from Landlord, and shall not look
to other assets of Landlord nor seek recourse against the assets of the
Landlord or other trustees, advisors, partners, directors, officers and
shareholders of Landlord. Any lien obtained to enforce any such judgment
and any levy of execution thereon shall be subject and subordinate to any
lien, mortgage or deed of trust on the Project.
ASSIGNMENT
AND
SUBLETTING
21. A. General. Tenant shall have the right to assign or sublet the Premises
to any entity resulting from a merger or consolidation with Tenant, a
public offering and sale of some or all of Tenant's stock, a transfer of
shares of Tenant's stock on the public stock exchange, or a transfer of
the Lease in connection with the sale of all or substantially all of
Tenant's assets, provided that the entity which results from the merger
or consolidation of Tenant has a net equity of ten million dollars
($10,000,000.00). Otherwise, Tenant shall not assign or sublet the
Premises or any part thereof without Landlord's prior written approval.
The right to assign and/or sublet the Premises is personal to the Tenant
and shall not inure to the benefit of any assignee, subtenant or
successor of Tenant. If a Tenant desires to assign this Lease, it must
present the Landlord with an ERISA Certificate in compliance with the
provisions of Paragraph 37. of this Lease signed by the potential
assignee, demonstrate that the potential assignee has adequate credit,
demonstrate to the Landlord's satisfaction that the potential assignee's
proposed use of the Premises is compatible with the Project and complies
with all applicable laws, ordinances, rules and regulations. If Tenant
desires to assign this Lease or sublet any or all of the Premises, Tenant
shall give Landlord written notice ninety (90) days prior to the
anticipated effective date of the assignment or sublease. Landlord shall
then have a period of thirty (30) days following receipt of such notice
to notify Tenant in writing whether Landlord elects to permit Tenant to
assign this Lease or sublet such space, subject, however, to Landlord's
prior written approval of the proposed assignee or subtenant and of any
related documents or agreements associated with the assignment or
sublease. Landlord's consent to a proposed assignment or sublet shall not
be unreasonably withheld. Without limiting the other instances in which
it may be reasonable for Landlord to withhold Landlord's consent to an
assignment or subletting, Landlord and Tenant acknowledge that it shall
be
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reasonable for Landlord to withhold Landlord's consent in the following
instances: The use of the Premises by such proposed assignee or subtenant
would not be a permitted use or would increase the Parking Density of the
Project; the proposed assignee or subtenant is not of sound financial
condition, as determined by Landlord after receipt of the proposed
assignee's financial statements in form satisfactory to Landlord; the
proposed assignee or subtenant is a governmental agency; the proposed
assignee or subtenant does not have a good reputation as a tenant of
property; the proposed assignee or subtenant is a person with whom
Landlord is negotiating to lease space in the Project; the assignment or
subletting would entail any alterations which would lessen the value of
the leasehold improvements in the Premises; or if Tenant is in Default of
any obligation of Tenant under this Lease, or Tenant has defaulted under
this Lease on three (3) or more occasions during any twelve (12) months
preceding the date that Tenant shall request consent. Failure by Landlord
to approve a proposed assignee or subtenant shall not cause a termination
of this Lease.
B. Bonus Rent. Any Rent or other consideration realized by Tenant under
any approved sublease or assignment in excess of the Rent payable
hereunder, after Tenant's actual payment of a reasonable brokerage
commission, reasonable attorneys' fees related to the subletting and
reasonable costs of improving the subleased or assigned premises for the
subtenant's use in excess of costs attributable to Tenant's Work, shall
be divided and paid, sixty (60%) -percent to Tenant, forty (40%) percent
to Landlord. Notwithstanding the foregoing, when Tenant has invested a
minimum of seventy dollars ($70.00) per square foot, excluding related
"soft costs" (as defined in Exhibit B-1), to improve the entire Premises
during the Lease Term, Tenant shall receive seventy-five (75%) percent of
any bonus rent after payment of a reasonable brokerage commission and
reasonable attorneys' fee, and Landlord shall receive twenty-five (25%)
percent of such bonus rent.
C. Corporation. If Tenant is a corporation, a transfer of corporate
shares by sale, assignment, bequest, inheritance, operation of law or
other disposition (including such a transfer to or by a receiver or
trustee in federal or state bankruptcy, insolvency or other proceedings),
so as to result in a change in the present control of such corporation or
any of its parent corporations by the person or persons owning a majority
of said corporate shares, shall constitute an assignment for purposes of
this Lease.
D. Partnership. If Tenant is a partnership, joint venture or other
incorporated business form, a transfer of the interest of persons, firms
or entities responsible for managerial control of Tenant by sale,
assignment, bequest, inheritance, operation of law or other disposition,
so as to result in a change in the present control of said entity and/or
a change in the identity of the persons responsible for the general
credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.
E. Liability. No assignment or subletting by Tenant shall relieve Tenant
of any obligation under this Lease. Any assignment or subletting which
conflicts with the provisions hereof shall be void.
F. Options. Tenant must be in possession of the entire Premises in order
to exercise its options to renew and/or expand under this Lease.
AUTHORITY
OF PARTIES
22. Landlord represents and warrants that it has full right and authority to
enter into this Lease and to perform all of Landlord's obligations
hereunder. Tenant represents and warrants that it has full right and
authority to enter into this Lease and to perform all of Tenant's
obligations hereunder.
CONDEMNATION
23. A. Condemnation Resulting in Termination. If the whole or any substantial
part of the Project of which the Premises are a part should be taken or
condemned for any public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the
Permitted Use of the Premises, this Lease shall terminate and the Rent
shall be abated during the unexpired portion of this Lease, effective
when the physical taking of said Premises shall have occurred.
B. Condemnation Not Resulting in Termination. If a portion of the Project
of which the Premises are a part should be taken or condemned for any
public use under any governmental law, ordinance, or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this
Lease is not terminated as provided in Paragraph 23.A. above, this Lease
shall not terminate, but the Rent payable hereunder during the unexpired
portion of the Lease shall be reduced, beginning on the date when the
physical taking shall have occurred, to such amount as may be fair and
reasonable under all of the circumstances.
C. Award. Landlord shall be entitled to any and all payment, income,
rent, award, or any interest therein whatsoever which may be paid or made
in connection with such taking or conveyance and Tenant shall have no
claim against Landlord or otherwise for the value of any unexpired
portion of this Lease. Notwithstanding the foregoing, any compensation
specifically awarded Tenant for loss of business, Tenant's personal
property, moving costs or loss of goodwill, shall be and remain the
property of Tenant.
CASUALTY
DAMAGE
24. A. General. If the Premises or the Building should be damaged or
destroyed by fire, tornado, earthquake or other casualty, Tenant shall
give immediate written notice thereof to Landlord. Within thirty (30)
days after Landlord's receipt of such notice, Landlord shall notify
Tenant whether in Landlord's opinion such repairs can reasonably be made
either: (1) within ninety (90) days; (2) in more than ninety (90) days
but in less than one hundred eighty (180) days; or (3) in more than one
hundred eighty (180) days from the date of such notice. Landlord's
determination shall be binding on Tenant.
B. Less Than 90 Days. If the Premises or the Building should be damaged
by fire, tornado, earthquake or other casualty but only to such extent
that rebuilding or repairs can in Landlord's estimation be reasonably
completed within ninety (90) days after the date of such damage, this
Lease shall not terminate, and provided that insurance proceeds are
available to fully repair the damage, Landlord shall proceed to rebuild
and repair the Premises in the manner determined by Landlord, except that
Landlord shall not be required to rebuild, repair or replace any part of
the partitions, Fixtures, additions and other leasehold improvements
which may have been placed in, on or about the Premises. If the Premises
are untenantable in whole or in part following such damage, the Rent
payable hereunder during the period in which they are untenantable shall
be abated proportionately, but only to the extent the Premises are unfit
for occupancy.
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C. Greater Than 90 Days. If the Premises or the Building should be
damaged by fire, tornado, earthquake or other casualty but only to such
extent that rebuilding or repairs can in Landlord's estimation be
reasonably completed in more than ninety (90) days but in less than one
hundred eighty (180) days, then Landlord shall have the option of either:
(1) terminating the Lease effective upon the date of the occurrence of
such damage, in which event the Rent shall be abated during the unexpired
portion of the Lease; or (2) electing to rebuild or repair the Premises
to substantially the condition in which they existed prior to such
damage, provided that insurance proceeds are available, to fully repair
the damage, except that Landlord shall not be required to rebuild, repair
or replace any part of the partitions, Fixtures, additions and other
improvements which may have been placed in, on or about the Premises. If
the Premises are untenantable in whole or in part following such damage,
the Rent payable hereunder during the period in which they are
untenantable shall be abated proportionately, but only to the extent the
Premises are unfit for occupancy. In the event that Landlord should fail
to complete such repairs and rebuilding within one hundred eighty days
(180) days after the date upon which Landlord is notified by Tenant of
such damage, such period of time to be extended for delays caused by the
fault or neglect of Tenant or because of acts of God, acts of public
agencies, labor disputes, strikes, fires, freight embargoes, rainy or
stormy weather, inability to obtain materials, supplies or fuels, or
delays of the contractors or subcontractors or any other causes or
contingencies beyond the reasonable control of Landlord, Tenant may at
Tenant's option within ten (10) days after the expiration of such one
hundred eighty (180) day period (as such may be extended), terminate this
Lease by delivering written notice of termination to Landlord as Tenant's
exclusive remedy, whereupon all rights hereunder shall cease and
terminate thirty (30) days after Landlord's receipt of such termination
notice.
D. Greater Than 180 Days. If the Premises or the Building should be so
damaged by fire, tornado, earthquake or other casualty that rebuilding or
repairs cannot in Landlord's estimation be completed within one hundred
eighty (180) days after such damage, this Lease shall terminate and the
Rent shall be abated during the unexpired portion of this Lease,
effective upon the date of the occurrence of such damage.
E. Tenant's Fault. If the Premises or any other portion of the Building
is damaged by fire or other casualty resulting from the fault,
negligence, or breach of this Lease by Tenant or any of Tenant's Parties,
Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and
expense of the repair and restoration of the Building caused thereby to
the extent such cost and expense is not covered by insurance proceeds.
F. Uninsured Casualty. Notwithstanding anything herein to the contrary,
in the event that the Premises or the Building is damaged or destroyed
and are not fully covered by the insurance proceeds received by Landlord
or in the event that the holder of any indebtedness secured by a mortgage
or deed of trust covering the Premises requires that the insurance
proceeds be applied to such indebtedness, then in either case Landlord
shall have the right to terminate this Lease by delivering written notice
of termination to Tenant within thirty (30) days after the date of notice
to Landlord that said damage or destruction is not fully covered by
insurance or such requirement is made by any such holder, as the case may
be, whereupon all rights and obligations hereunder shall cease and
terminate.
G. Waiver. Except as otherwise provided in this Paragraph 24., Tenant
hereby waives the provisions of Sections 1932(a), 1933(4), 1941 and 1942
of the Civil Code of California.
HOLDING
OVER
25. If Tenant shall retain possession of the Premises or any portion thereof
without Landlord's consent following the expiration of the Lease or
sooner termination for any reason, then Tenant shall pay to Landlord for
each day of such retention one hundred and fifty (150%) percent of the
amount of the daily rental as of the last month prior to the date of
expiration or termination. Tenant shall also indemnify, defend, protect
and hold Landlord harmless from any loss, liability or cost, including
reasonable attorneys' fees, resulting from delay by Tenant in
surrendering the Premises, including, without limitation, any claims made
by any succeeding tenant founded on such delay. Acceptance of Rent by
Landlord following expiration or termination shall not constitute a
renewal of this Lease, and nothing contained in this Paragraph 25. shall
waive Landlord's right of reentry or any other right. Unless Landlord
consents in writing to Tenant's holding over, Tenant shall be only a
Tenant at sufferance, whether or not Landlord accepts any Rent from
Tenant while Tenant is holding over without Landlord's written consent.
Additionally, in the event that upon termination of the Lease, Tenant has
not fulfilled its obligation with respect to repairs and cleanup of the
Premises or any other Tenant obligations as set forth in this Lease, then
Landlord shall have the right to perform any such obligations as it deems
necessary at Tenant's sole cost and expense, and any time required by
Landlord to complete such obligations shall be considered a period of
holding over and the terms of this Paragraph 25. shall apply.
DEFAULT
26. A. Events of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default" or "Default") on the
part of Tenant:
(1) Abandonment. Abandonment of the Premises for a continuous period in
excess of five (5) business days. Tenant waives any right to notice
Tenant may have under Section 1951.3 of the Civil Code of the State of
California, the terms of this Paragraph 26.A. being deemed such notice to
Tenant as required by said Section 1951.3.
(2) Nonpayment of Rent. Failure to pay any installment of Rent or any
other amount due and payable hereunder when said payment is due.
(3) Other Obligations. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in
subparagraphs (1) and (2) of this Paragraph 26.A., such failure
continuing for fifteen (15) days after written notice of such failure. In
the event Tenant has commenced to cure the Default within the fifteen
(15) day period, but has not completed the cure, so long as Tenant
diligently pursues the cure to completion, Tenant shall not be in
Default.
(4) General Assignment. A general assignment by Tenant for the benefit of
creditors.
(5) Bankruptcy. The filing of any voluntary petition in bankruptcy by
Tenant, or the filing of an involuntary petition by Tenant's creditors,
which involuntary petition remains undischarged for a period of sixty
(60) days. In the event that under applicable law the trustee in
bankruptcy or Tenant has the right to affirm this Lease and continue to
perform the obligations of Tenant hereunder, such trustee or Tenant
shall, in such time period as may be permitted by the bankruptcy court
having jurisdiction, cure all Defaults of Tenant hereunder
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outstanding as of the date of the affirmance of this Lease and provide to
Landlord such adequate assurances as may be necessary to ensure Landlord
of the continued performance of Tenant's obligations under this Lease .
(6) Receivership. The employment of a receiver to take possession of
substantially all of Tenant's assets or the Premises, if such appointment
remains undismissed or undischarged for a period of thirty (30) days
after the order therefor.
(7) Attachment. The attachment, execution or other judicial seizure of
all or substantially all of Tenant's assets or the Premises, if such
attachment or other seizure remains undismissed or undischarged for a
period of thirty (30) days after the levy thereof.
(8) Delays. Any delay in the construction of Landlord's Work caused by
Tenant or Tenant's Work as provided in Exhibit B-1.
B. Remedies Upon Default.
(1) Termination. In the event of the occurrence of any Event of Default,
Landlord shall have the right to give a written termination notice to
Tenant, and on the date specified in such notice, Tenant's right to
possession shall terminate, and this Lease shall terminate unless on or
before such date all arrears of rental and all other sums payable by
Tenant under this Lease and all reasonable costs and expenses incurred by
or on behalf of Landlord hereunder shall have been paid by Tenant and all
other Events of Default of this Lease by Tenant at the time existing
shall have been fully remedied to the satisfaction of Landlord. At any
time after such termination, Landlord may recover possession of the
Premises or any part thereof and expel and remove therefrom Tenant and
any other person occupying the same, by any lawful means, and again
repossess and enjoy the Premises without prejudice to any of the remedies
that Landlord may have under this Lease, or at law or equity by reason of
Tenant's Default or of such termination.
(2) Continuation After Default. Even though an Event of Default may have
occurred, this Lease shall continue in effect for so long as Landlord
does not terminate Tenant's right to possession under Paragraph 26.B.(1)
hereof, and Landlord may enforce all of Landlord's rights and remedies
under this Lease, including without limitation, the right to recover Rent
as it becomes due, and Landlord, without terminating this Lease, may
exercise all of the rights and remedies of a landlord under Section
1951.4 of the Civil Code of the State of California or any successor code
section. Acts of maintenance, preservation or efforts to lease the
Premises or the appointment of a receiver upon application of Landlord to
protect Landlord's interest under this Lease shall not constitute an
election to terminate Tenant's right to possession.
C. Damages After Default. Should Landlord terminate this Lease pursuant
to the provisions of Paragraph 26.B.(1) hereof, Landlord shall have the
rights and remedies of a Landlord provided by Section 1951.2 of the Civil
Code of the State of California, or successor code sections. Upon such
termination, in addition to any other rights and remedies to which
Landlord may be entitled under applicable law, Landlord shall be entitled
to recover from Tenant: (1) the worth at the time of award of the unpaid
Rent and other amounts which had been earned at the time of termination,
(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 the amount of such Rent loss that Tenant proves could have been
reasonably avoided; (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 Rent loss that the Tenant proves could be
reasonably avoided; and (4) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to
perform Tenant's obligations under this Lease or which, in the ordinary
course of things, would be likely to result therefrom. The "worth at the
time of award" of the amounts referred to in (1) and (2), above shall be
computed at the lesser of the "prime rate," as announced from time to
time by Wells Fargo, N.A. (San Francisco) plus five (5) percentage
points, or the maximum interest rate allowed by law ("Applicable Interest
Rate"). The "worth at the time of award" of the amount referred to in (3)
above shall be computed by discounting such amount at the Federal
Discount Rate of the Federal Reserve Bank of San Francisco at the time of
the award plus one (1%) percent. If this Lease provides for any periods
during the Term during which Tenant is not required to pay Base Rent or
if Tenant otherwise receives a Rent concession, then upon the occurrence
of an Event of Default, Tenant shall owe to Landlord the full amount of
such Base Rent or value of such Rent concession, plus interest at the
Applicable Interest Rate, calculated from the date that such Base Rent or
Rent concession would have been payable.
D. Late Charge. If any installment of Rent is not paid within five (5)
business days from the date when due, such amount shall bear interest at
the Applicable Interest Rate from the date on which said payment shall be
due until the date on which Landlord shall receive said payment. In
addition, Tenant shall pay Landlord a late charge equal to five (5%)
percent of the delinquency, to compensate Landlord for the loss of the
use of the amount not paid and the administrative costs caused by the
delinquency, the parties agreeing that Landlord's damage by virtue of
such delinquencies would be difficult to compute and the amount stated
herein represents a reasonable estimate thereof. This provision shall not
relieve Tenant of Tenant's obligation to pay Rent at the time and in the
manner herein specified.
E. Remedies Cumulative. All rights, privileges and elections or remedies
of the parties are cumulative and not alternative, to the extent
permitted by law and except as otherwise provided herein.
LIENS
27. Tenant shall keep the Premises free from liens arising out of or related
to work performed, materials or supplies furnished or obligations
incurred by Tenant or in connection with work made, suffered or done by
or on behalf of Tenant in or on the Premises or Project. In the event
that Tenant shall not, within ten (10) business days following the
imposition of any such lien, cause the same to be released of record by
payment or posting of a proper bond, Landlord shall have, in addition to
all other remedies provided herein and by law, the right, but not the
obligation, to cause the same to be released by such means as Landlord
shall deem proper, including payment of the claim giving rise to such
lien. All sums paid by Landlord on behalf of Tenant and all expenses
incurred by Landlord in connection therefor shall be payable to Landlord
by Tenant on demand with interest at the Applicable Interest Rate.
Landlord shall have the right at all times to post and keep posted on the
Premises any notices permitted or required by law, or which Landlord
shall deem proper, for the protection of Landlord, the Premises, the
Project and any other party having an interest therein, from mechanics'
and materialmen's liens, and Tenant shall give Landlord not less than ten
(10) business days
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prior written notice of the commencement of any work in the Premises or
Project which could lawfully give rise to a claim for mechanics' or
materialmen's liens.
TRANSFERS
BY
LANDLORD
28. In the event of a sale or conveyance by Landlord of the Building or the
Project or a foreclosure by any creditor of Landlord, the same shall
operate to release Landlord from any liability upon any of the covenants
or conditions, express or implied, herein contained in favor of Tenant,
to the extent required to be performed after the passing of title to
Landlord's successor-in-interest. In such event, Tenant agrees to look
solely to the responsibility of the successor-in-interest of Landlord
under this Lease with respect to the performance of the covenants and
duties of "Landlord" to be performed after the passing of title to
Landlord's successor-in-interest. This Lease shall not be affected by any
such sale and Tenant agrees to attorn to the purchaser or assignee.
Landlord's successor(s)-in-interest shall not have liability to Tenant
with respect to the failure to perform all of the obligations of
"Landlord", to the extent required to be performed prior to the date such
successor(s)-in-interest became the owner of the Building.
RIGHT OF
LANDLORD
TO PERFORM
TENANT'S
COVENANTS
29. All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any abatement of Rent. If Tenant shall fail to
pay any sum of money, other than Base Rent and Basic Operating Cost,
required to be paid by Tenant hereunder or shall fail to perform any
other act on Tenant's part to be performed hereunder, and such failure
shall continue for five (5) days after notice thereof by Landlord,
Landlord may, but shall not be obligated to do so, and without waiving or
releasing Tenant from any obligations of Tenant, make any such payment or
perform any such act on Tenant's part to be made or performed. All sums,
so paid by Landlord and all necessary incidental costs together with
interest thereon at the Applicable Interest Rate from the date of such
payment by Landlord shall be payable to Landlord on demand, and Tenant
covenants to pay such sums, and Landlord shall have, in addition to any
other right or remedy of Landlord, the same right and remedies in the
event of the non-payment thereof by Tenant as in the case of Default by
Tenant in the payment of Base Rent and Basic Operating Cost.
WAIVER
30. If either Landlord or Tenant waives the performance of any term, covenant
or condition contained in this Lease, such waiver shall not be deemed to
be a waiver of any subsequent breach of the same or any other term,
covenant or condition contained herein. The acceptance of Rent by
Landlord shall not constitute a waiver of any preceding breach by Tenant
of any term, covenant or condition of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time Landlord
accepted such Rent. Failure by Landlord to enforce any of the terms,
covenants or conditions of this Lease for any length of time shall not be
deemed to waive or to decrease the right of Landlord to insist thereafter
upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a
written document signed by Landlord.
NOTICES
31. Each provision of this Lease or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to sending,
mailing or delivery of any notice or the making of any payment by
Landlord or Tenant to the other shall be deemed to be complied with when
and if the following steps are taken:
A. Rent. All Rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address set forth
in the Basic Lease Information, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance
herewith. Tenant's obligation to pay Rent and any other amounts to
Landlord under the terms of this Lease shall not be deemed satisfied
until such Rent and other amounts have been actually received by
Landlord.
B. Other. All notices, demands, consents and approvals which may or are
required to be given by either party to the other hereunder shall be in
writing and either personally delivered, sent by commercial overnight
courier, sent by facsimile, or mailed, certified or registered, postage
prepaid, and addressed to the party to be notified at the address for
such party as specified in the Basic Lease Information or to such other
place as the party to be notified may from time to time designate by at
least fifteen (15) days notice to the notifying party. Notices shall be
deemed served upon receipt or refusal to accept delivery. Tenant appoints
as its agent to receive the service of all default notices and notice of
commencement of unlawful detainer proceedings the person in charge of or
apparently in charge of occupying the Premises at the time, and, if there
is no such person, then such service may be made by attaching the same on
the main entrance of the Premises.
ATTORNEYS'
FEES
32. In the event that Landlord places the enforcement of this Lease, or any
part thereof, or the collection of any Rent due, or to become due
hereunder, or recovery of possession of the Premises in the hands of an
attorney, Tenant shall pay to Landlord, upon demand, Landlord's
reasonable attorneys' fees and court costs. In any action which Landlord
or Tenant brings to enforce its respective rights hereunder, the
unsuccessful party shall pay all costs incurred by the prevailing party
including reasonable attorneys' fees, to be fixed by the court, and said
costs and attorneys' fees shall be a part of the judgment in said action.
SUCCESSORS
AND ASSIGNS
33. This Lease shall be binding upon and inure to the benefit of Landlord,
its successors and assigns, and shall be binding upon and inure to the
benefit of Tenant, its successors, and to the extent assignment is
approved by Landlord hereunder, Tenant's assigns.
FORCE
MAJEURE
34. In the event that Landlord shall be delayed, hindered in or prevented
from the performance of any act or obligation required under this Lease
by reason of acts of God, strikes, lockouts, labor troubles or disputes,
inability to procure or shortage of materials or labor, failure of power
or utilities, delay in transportation, fire, vandalism, accident, flood,
severe weather, other casualty, governmental requirements (including
mandated changes in the plans and specifications of Landlord's Work
resulting from changes in pertinent governmental requirements or
interpretations thereof), riot, insurrection, civil commotion, sabotage,
explosion, war, natural or local emergency, acts or omissions of others,
including Tenant, or other reasons of a similar or dissimilar nature not
solely the fault of, or under the exclusive control of, Landlord
(individually and collectively, "Force Majeure"), then performance of
such act or obligation shall be excused for the period of the delay and
the period for the performance of any such act or obligations shall be
extended for the period equivalent to the period of such delay.
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BROKERAGE
COMMISSION
35. Landlord shall pay a brokerage commission to Broker in accordance with a
separate agreement between Landlord and Broker. Tenant warrants to
Landlord that Tenant's sole contact with Landlord or with the Premises in
connection with this transaction has been directly with Landlord and
Broker, and that no other broker or finder can properly claim a right to
a commission or a finder's fee based upon contacts between the claimant
and Tenant with respect to Landlord or the Premises. Tenant shall
indemnify, defend by counsel acceptable to Landlord, protect and hold
Landlord harmless from and against any loss, cost or expense, including,
but not limited to, attorneys' fees and costs, resulting from any claim
for a fee or commission by any broker or finder in connection with the
Premises and this Lease other than Broker. Likewise, Landlord warrants to
Tenant that Landlord's sole contact with Tenant or withthe Premises in
connection with this transaction has been directly with Tenant and
Broker, and that no other broker or finder can properly claim a right to
a commission or a finder's fee based upon contacts between the claimant
and Landlord with respect to Tenant or the Premises. Landlord also agrees
to indemnify Tenant for any loss, cost or expense, including but not
limited to, attorneys' fees and costs, resulting from any claim for a fee
or commission by any broker or finder alleging a course of conduct with
Landlord in connection with the Premises and this Lease other than
Broker.
MISCELLANEOUS
36. A. General. The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural
number, individuals, firms or corporations, and their respective
successors, executors, administrators and permitted assigns, according to
the context hereof.
B. Time. Time is of the essence regarding this Lease and all of its
provisions.
C. Choice of Law. This Lease shall in all respects be governed by the
laws of the State of California.
D. Entire Agreement. This Lease, together with its exhibits, contains all
the agreements of the parties hereto and supersedes any previous
negotiations. There have been no representations made by the Landlord or
understandings made between the parties other than those set forth in
this Lease and its exhibits.
E. Modification. This Lease may not be modified except by a written
instrument signed by the parties hereto.
F. Severability. If, for any reason whatsoever, any of the provisions
hereof shall be unenforceable or ineffective, all of the other provisions
shall be and remain in full force and effect.
G. Recordation. Tenant shall not record this Lease or a short form
memorandum hereof.
H. Examination of Lease. Submission of this Lease to Tenant does not
constitute an option or offer to lease and this Lease is not effective
otherwise until execution and delivery by both Landlord and Tenant.
I. Accord and Satisfaction. No payment by Tenant of a lesser amount than
the Rent nor any endorsement on any check or letter accompanying any
check or payment of Rent shall be deemed an accord and satisfaction of
full payment of Rent, and Landlord may accept such payment without
prejudice to Landlord's right to recover the balance of such Rent or to
pursue other remedies.
J. Easements. Landlord may grant easements on the Project and dedicate
for public use portions of the Project without Tenant's consent; provided
that no such grant or dedication shall substantially interfere with
Tenant's use of the Premises. Upon Landlord's demand, Tenant shall
execute, acknowledge and deliver to Landlord documents, instruments, maps
and plats necessary to effectuate Tenant's covenants hereunder.
K. Drafting and Determination Presumption. The parties acknowledge that
this Lease has been agreed to by both the parties, that both Landlord and
Tenant have consulted with attorneys with respect to the terms of this
Lease and that no presumption shall be created against Landlord because
Landlord drafted this Lease. Except as otherwise specifically set forth
in this Lease, with respect to any consent, determination or estimation
of Landlord required in this Lease or requested of Landlord, Landlord's
consent, determination or estimation shall be made in Landlord's good
faith opinion, whether objectively reasonable or unreasonable.
L. Exhibits. Exhibits A through E attached hereto are hereby incorporated
herein by this reference.
M. No Light, Air or View Easement. Any diminution or shutting off of
light, air or view by any structure which may be erected on lands
adjacent to or in the vicinity of the Building shall in no way affect
this Lease or impose any liability on Landlord.
N. No Third Party Benefit. This Lease is a contract between Landlord and
Tenant and nothing herein is intended to create any third party benefit.
O. Waiver of Jury Trial. IF ANY ACTION OR PROCEEDING BETWEEN LANDLORD AND
TENANT TO ENFORCE THE PROVISIONS OF THIS LEASE (INCLUDING AN ACTION OR
PROCEEDING BETWEEN LANDLORD AND THE TRUSTEE OR DEBTOR IN POSSESSION WHILE
TENANT IS A DEBTOR IN A PROCEEDING UNDER ANY BANKRUPTCY LAW) PROCEEDS TO
TRIAL, LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
IN SUCH TRIAL. Landlord and Tenant agree that this Paragraph constitutes
a written consent to waiver of trial by jury within the meaning of
California Code of Civil Procedure Section 631(a)(2), and Tenant does
hereby authorize and empower Landlord to file this Paragraph and or this
Lease, as required, with the clerk or judge of any court of competent
jurisdiction as a written consent to waiver of jury trial.
P. Covenant of Quiet Enjoyment. So long as Tenant is not in Default under
this Lease, Tenant has the right to occupy and enjoy the Premises during
the Term of this Lease in peace and without disturbance from Landlord or
any other party subject to Landlord's supervision or control.
ADDITIONAL
PROVISIONS
37. A. ERISA Representations. Tenant represents to Landlord that with the
exception of this Lease, neither the Tenant nor any affiliate of the
Tenant is a tenant under a lease or any other tenancy arrangement (1)
with (a) Riggs& Company, a division of Riggs Bank N.A., a trustee of the
Multi-Employer Property Trust; (b) Riggs Bank N.A., a trustee of the
Multi-Employer Property Trust; (c) the Multi-Employer Property Trust; (d)
the
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National Bank of Washington Multi-Employer Property Trust, the previous
name of the Multi-Employer Property Trust; (e) The Riggs National Bank of
Washington, D.C., as trustee of the Multi-Employer Property Trust; (f)
the Harman International Business Campus Joint Venture; (g) the Corporate
Drive Corporation as trustee of the Corporate Drive Nominee Realty Trust;
(h) Goldbelt Place Joint Venture; (i) Arboretum Lakes-1, L.L.C., a
Delaware limited liability company; (j) Village Green of Rochester Hills
Associates L.L.C., a Michigan limited liability company; (k) Pine Street
Development, L.L.C., a Washington limited liability company; (l) MEPT
Realty LLC, a New York limited liability company; (m) MEPT, L.L.C., a
Delaware limited liability company; (n) Cabrillo Properties LLC, a
Delaware limited liability company; (o) Valencia L.L.C., a Delaware
limited liability company; or (p) Mission Trails LLC, a Delaware limited
liability company; or (2) involving any property in which any one or more
of the entities named in clauses (1)(a) through (p) are known by the
Tenant to have an ownership interest.
B. Anti-Discrimination. There shall be no discrimination against or
segregation of any person or group of persons, on account of race, color,
creed, religion, sex, marital status, national origin, or ancestry, in
the leasing, subleasing, transferring, use, occupancy, tenure or
enjoyment of the Premises, nor shall the Landlord or Tenant or any person
claiming under or through the Landlord or Tenant, establish or permit any
such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of
tenants, sublessees, subtenants, or vendees in the Premises.
C. Landlord's Assignment. Landlord shall have the right to assign this
Lease, and upon such assignment Landlord shall have no further
obligations, duties under this Lease, or liabilities hereunder.
D. Right of First Offer. Landlord is currently under contract to acquire
and intends to develop a second phase of the Project ("Phase II") as
depicted in Exhibit A-3. In the event that during the term of this Lease
Landlord obtains a controlling interest in Phase II and provided that as
of such date there is no act or omission of Tenant that would become a
Default with the passage of time or the giving of notice, Tenant shall
have a one-time right of first offer ("Right of First Offer") to lease
all or a portion of space in the approximately 40,000 square foot
building proposed in Phase II which the Right of First Offer shall be on
the terms and conditions set forth in this section. Landlord shall
provide Tenant with written notice ("First-Offer Notice") when Landlord
determines at Landlord's sole discretion that Phase II will become
available for lease to third parties. Provided that Tenant is not in
Default as of the time of exercise of the Right of First Offer, and
provided that as of such date there is no act or omission of Tenant that
would become a Default with the passage of time or the giving of notice,
if Tenant wishes to exercise its Right of First Offer, Tenant shall
within ten (10) days after delivery of the First-Offer Notice to Tenant,
deliver written notice to Landlord of its intention to exercise its Right
of First Offer on available Phase II space. While Tenant may lease less
than all available space, the unleased portion must be of adequate size,
as determined by Landlord, to be marketable. If Tenant does not exercise
its Right of First Offer and elect to lease space available in Phase II
within the prescribed response period, the Right of First Offer shall
terminate and the Landlord shall be free to lease the space to anyone on
any terms at any time during the Lease Term, without any obligation to
provide Tenant with a further right to lease that space.
If Tenant timely and validly exercises the Right of First Offer, Tenant
and Landlord shall negotiate in good faith the terms of the lease on the
Phase II space. If Landlord and Tenant cannot agree as to the terms of
the lease within twenty (20) days of Tenant's written notice exercising
its Right of First Offer, Landlord shall be free to lease the Phase II
space to anyone on any terms it deems acceptable.
E. Option to Extend Term. Provided that Tenant is not in Default as of
the time of exercise of this option and the commencement date of the
Option Period, and provided that as of such date there is no act or
omission of Tenant that would become a Default with the passage of time
or the giving of notice, Tenant shall have one (1) successive option to
extend the Term of the Lease for the Premises in "as is" condition at the
expiration of the original Lease Term for a period of five (5) years. All
of the terms and conditions of this Lease except for Base Rent and the
provisions of this Paragraph shall be applicable to the Option Period.
The Base Rent for the Premises under the option shall be the then current
market rent for comparable facilities in the proximate South San
Francisco market area. The definition of comparable facilities shall
incorporate the parking amenities of the Premises, and the Building's
location, age, quality, amenities, identity, exterior appearance,
interior improvements, and type of construction, excluding laboratory and
manufacturing improvements paid for by Tenant.
Tenant shall give Landlord written notice of its intent to exercise its
option at least twelve (12) but not more than eighteen (18) months prior
to the expiration of the then current Term for the Premises. Within
fifteen (15) days after Tenant exercises its option to extend, Landlord
shall provide Tenant with the Base Rent, as determined by Landlord, for
the Option Period. The parties are obligated to negotiate in good faith
to agree on the Base Rent. If the parties have not mutually agreed on the
Base Rent within thirty (30) days from notification by Landlord to Tenant
of Landlord's determination of Base Rent, each party hereto shall appoint
one representative who shall be a licensed real estate broker experienced
in the leasing of comparable facilities in the County of San Mateo to act
as an arbitrator. The two (2) arbitrators so appointed shall determine
the Base Rent for the relevant Option Period. The determination of said
Base Rent shall be made by said two (2) arbitrators within sixty (60)
days from notification by Landlord to Tenant of Landlord's determination
of Base Rent and they shall submit said determination in writing and
signed by said arbitrators in duplicate. One of the written notifications
shall be delivered to Landlord and the other to Tenant.
In the event the two (2) arbitrators of the parties hereto cannot agree
on the Base Rent for the Premises herein, said two (2) arbitrators shall
appoint a third arbitrator who shall be a licensed real estate broker
experienced in the leasing of comparable facilities in the County of San
Mateo, to act as an arbitrator. The Base Rent for the relevant Option
Period shall be independently determined by the third of said
arbitrators, which said determination shall be made within ninety (90)
days from notification by Landlord to Tenant of Landlord's determination
of Base Rent. The role of the third arbitrator shall then be to
immediately select from the proposed resolution of arbitrators #1 and #2
the one that most closely approximates the third arbitrator's
determination of Base Rent. The third arbitrator shall have no right to
adopt a compromise or middle ground or any modification of either of the
two final proposed resolutions. The resolution that the third arbitrator
chooses as most closely approximating his determination of the Base Rent
shall constitute the decision of all arbitrators and shall be final and
binding upon the parties.
17
<PAGE>
The parties hereto shall pay the charges of the arbitrator appointed by
it and any expenses incurred by such arbitrator. The charges and expenses
of the third arbitrator, as provided herein, shall be paid by the parties
hereto in equal shares.
In the event either arbitrator #1 or arbitrator #2 fails to present a
Base Rent figure within the thirty (30) day period, the Base Rent
presented by the other arbitrator shall be considered final and binding
on both parties.
Notwithstanding anything to the contrary herein contained, Tenant's right
to extend the term by exercise of the foregoing Option shall be
conditioned upon the following: (I) at the time of the exercise of the
Option, and at the time of the commencement of the extended term, Tenant
shall be in possession of and occupying the Premises for the conduct of
its business therein and the same shall not be occupied by any assignee,
subtenant or licensee, and (ii) the notice of exercise shall constitute a
representation by Tenant to Landlord effective as of the date of the
exercise and as of the date of commencement of the extended term, that
Tenant does not intend to seek to assign the lease in whole or in part,
or sublet all of any portion of the Premises, the election to extend the
term being for purposes of utilizing the Premises for Tenant's purposes
in the conduct of Tenant's business therein.
F. Contingency. This Lease is contingent upon the approval by Landlord's
lenders.
G. Notice to Lender of Default. In the event that a notice of default
("Notice of Default") is served on Landlord, Tenant shall provide a copy
of such Notice of Default to all lenders for whose benefit a Deed of
Trust then encumbers the Project (a "Beneficiary"). A copy of any Notice
of Default should be mailed by certified mail to:
KeyBank National Association
10 West Market Street, 9th Floor
Indianapolis, IN 46266
Attn: Jane E. Butler
H. Lender's Time to Cure. In the event that Tenant is served with a
Notice of Default and Landlord fails to cure such default within the time
provided in this Lease, Beneficiary shall have an additional thirty (30)
days within which to cure the default, commencing with its receipt of the
Notice of Default, or if such default cannot be cured within that time,
then such additional time as may be necessary to effect such cure if
within such thirty (30) days the Beneficiary 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).
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.
"Landlord"
TC NORTHERN CALIFORNIA, INC., a Delaware corporation
By: TC NORTHERN CALIFORNIA, INC.
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Its: Executive Vice President
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By:
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Its:
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"Tenant"
CELLEGY PHARMACEUTICALS, INC., a California corporation
By: /s/ K. Michael Forrest
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Its: President & CEO
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By: /s/ A. Richard Juelis
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Its: V.P., Finance and CFO
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<PAGE>
EXHIBIT A-1
LEGAL DESCRIPTION OF PROJECT
PARCEL I:
BEGINNING at granite monument set 10 chains South of the corner common to
Sections 14-15-22 and 13 in Township 3 South of Range 5 West, Mount Diablo
Base and Meridian; running thence along the line dividing said Sections 22 and
23, North 460.02 feet to the Southwesterly corner of tide Lot No. 8; thence
along the Southerly line of said tide Lot 8, as same is described in Deed from
Morgan Oyster Company, to Bay Counties Land Company, dated March 25, 1909 and
recorded in Book 163 of Deeds at page 44; Records of San Mateo County, South
81(0) 45' East 339.24 feet; North 64(0) 45' East 214.80 feet to a point;
thence leaving said Southerly line South 508.85 feet; thence South 88(0) 27'
14" West 229.94 feet; thence North 89(0) 59' West 300.16 feet; thence North
12.0 feet to the point of beginning.
PARCEL II:
A non-exclusive easement for storm drainage purposes in on and over the
following described property:
That portion of the Easterly 12.50 feet of the Westerly 62.50 feet of Parcel
"B" as described in the Lot Line Adjustment recorded September 1, 1992 under
Document Number 92141612 in the Records of San Mateo County, also being the
Westerly 12.50 feet of Parcel 1 as shown on the Map of Oyster Point Business
Park recorded April 12, 1982 in Book 52 of Parcel Maps at page 58 in the
Records of San Mateo County that lies Southerly of the line shown as "N 81(0)
45' 55" W 339.24" on said Parcel Map (52 PM 58).
The easement is appurtenant to Parcel I above and was created by Easement for
Storm Drainage dated July 31, 1997, by and between Shelton Properties Inc., a
Hawaii corporation and TC Northern California, Inc., a Delaware corporation,
recorded August 1, 1997, Document No. 97093545, San Mateo County Records.
PARCEL III:
A non-exclusive easement for grading and lateral support for the intended
purpose and Grantee may import, deposit grade, compact, and maintain soil and
fill on the easement area, in on and over the following described property.
A portion of Parcel "B" as described in the Lot Line Adjustment recorded under
Series Number 92141612 in the Official Records of said County, described as
follows:
Beginning at the Southwesterly corner of Parcel "B" thence North 81(0) 45' 55"
West along said line 44.44 feet to the actual point of beginning and through
the following numbered courses:
1) South 81 degree 45' 55" East along the Southerly line of Parcel "B"
345.32 feet
2) North 64 degree 44' 05" East along the Southerly line of Parcel "B"
220.36 feet
3) North 30 degree 04' 12" West 10.04 feet
4) South 64 degree 44' 05" West 216.51 feet
5) North 81 degree 45' 55" West along said line 330.51 feet
6) South 57 degree57' 36" West 15.47 feet to the point of beginning.
PARCEL IV:
A non-exclusive easement for grading and lateral support for the intended
purpose and Grantee may, import, deposit grade, compact and maintain soil and
file on the easement area, in, on and over the following described property:
A portion of the lands described in the Lot Line Adjustment recorded under
Serial Number 92141612 in the Official Records of said County, described as
follows:
Beginning at the Southeasterly corner of Parcel A of said Lot Line Adjustment.
This also being the Southeasterly corner of Parcel 4 of the Map recorded in
Volume 23 of Parcel Maps at page 27 in the records of said County; thence
North 00(0) 00' 55" West along the Westerly line of Parcel A 48.00 feet to the
actual point of beginning and through the following numbered courses:
1) North 10(0) 07' 28" West 131.03 feet 2) North 05(0) 00' 57" West 80.31
feet
3) North 02(0) 52' 40" West 40.05 feet
4) North 04(0) 50' 57" East 141.51 feet to a curve to the right with a
radius of 30.00 feet
5) Along said curve through a central of 53(0) 06' 39" an arc distance of
27.81 feet to the Southerly line of Parcel B.
6) South 81(0) 45' 55" East along said line 6.08 feet to the Easterly line
of Parcel A
7) South 00(0) 00' 55" East along said line 412.02 feet to the point of
beginning.
A.P. No. 015-190-020 JPN 015 019 190 02 A
R/W 015 019 190 03
R/W 015 001 010 20.02
<PAGE>
EXHIBIT A-2
SITE PLAN
[GRAPHIC OMITTED]
EXHIBIT
<PAGE>
EXHIBIT A-3
PHASE II PLAN
[GRAPHIC OMITTED]
EXHIBIT
<PAGE>
EXHIBIT B-1
INITIAL IMPROVEMENTS OF PREMISES
1. LANDLORD'S WORK
1.1 Landlord's work ("Landlord's Work") shall be defined as
the construction of the Building shell more particularly described in Exhibit
C, including ADA facilities, to the extent required by the City. The scope of
the shell construction shall include: The Building shell, roof, all exterior
windows and doors, fire sprinklers at the roof line, utilities and services to
the Building's exterior, the parking lot, exterior common areas, caulking of
interior concrete joints and construction of interior stairs, and landscaping.
1.2 Landlord's work shall be completed through Landlord's
general contractor, South Bay Construction, in compliance with all applicable
codes and regulations.
1.3 Landlord shall pay for all costs involved in shell
construction described in Paragraph 1.1.
2. TENANT'S WORK
2.1 All interior improvements, including installation of Trade
Fixtures, as indicated in Exhibit B-3, furnishings and building core
improvements ("Building Core Improvements") (collectively referred to herein
as "Tenant's Work"), shall be constructed by Tenant at its sole cost and
expense. All of the plans and specifications for Tenant's Work shall be
approved by Landlord in advance of commencing any construction. Such approval
by Landlord, shall not be unreasonably withheld. The parties agree that
certain items of the Building Core Improvements shall be completed during
shell construction by Landlord. Tenant shall invest a minimum of fifty dollars
($50.00) per rentable square foot, in excess of the Tenant Improvement
Allowance supplied by Landlord, excluding soft costs ("Soft Costs" are those
items described in Paragraphs 2.2 (v) through (xii)), to improve the entire
Premises. Tenant shall, on or before the Term Commencement Date, provide
Landlord with an accounting, certified by an officer of Tenant, itemizing all
amounts expended by Tenant in excess of the Tenant Improvement Allowance to
improve the Premises. If the amount expended by Tenant is less than fifty
dollars ($50.00) per rentable square foot of the Building, (exclusive of Soft
Costs), Tenant shall, together with the accounting, deliver to Landlord an
unconditional irrevocable letter of credit (separate from the Letter of Credit
described in paragraph 19 of this Lease) in an amount equal to the difference
between the amount expended by Tenant and fifty dollars ($50.00) per rentable
square foot of the Building (exclusive of Soft Costs). At any time prior to
the twenty-fourth month of the Lease Term (but in no event more frequently
than monthly) Tenant may provide Landlord with an amended accounting, as
above, showing additional amounts expended by Tenant to improve the Premises
since the last date shown on the immediately preceding accounting. If the
total amount expended by Tenant is less than fifty dollars ($50.00) per
rentable square foot of the Building (exclusive of Soft Costs), the amount of
the letter of credit may be reduced to a sum equal to the difference between
the amount expended by Tenant and fifty dollars ($50.00) per rentable square
foot of the Building (exclusive of Soft Costs). On or before the last day of
the twenty-fourth month of the Lease Term, with an amended accounting as above
showing in addition any amounts expended by Tenant to improve the Premises
since the last date shown on Tenant's most recent accounting, if the total
amount expended by Tenant is less than fifty dollars ($50) per rentable square
foot, Landlord shall be immediately entitled to draw down from the letter of
credit an amount equal to the difference between the amount expended by Tenant
and fifty dollars ($50.00) per rentable square foot. Upon such draw the
requirement that this letter of credit be maintained shall terminate. The
letter of credit shall (a) designate Landlord or its assignees as beneficiary,
(b) be issued by a financial institution approved by Landlord, (c) be in form
satisfactory to Landlord, and (d) be for a term of twenty-six months. Landlord
shall not be required to deliver any certifications or documentation of any
kind to the issuer in order to make a draw, other than Landlord's written
demand. The issuer shall not be required to conduct any inquiry or
investigation before paying Landlord the requested amount of the draw.
Landlord may assign, transfer or pledge the letter of credit to any lender or
purchaser in connection with any financing or sale of the Premises. Landlord
shall provide to Tenant a Tenant Improvement Allowance of up to a maximum of
thirty dollars ($30.00) per rentable square foot on the Premises ("Tenant
Improvement Allowance") which shall include Soft Costs. The Tenant Improvement
Allowance shall be reduced by the amount Landlord expends on Building Core
Improvements, including the cost to Landlord of contracting with an architect
to design the Building Core Improvements. Tenant shall promptly pay when due
all costs for Tenant's Work. Landlord shall reimburse Tenant a portion of such
costs not to exceed in the aggregate the amount of the Tenant Improvement
Allowance less amounts expended by Landlord for Building Core Improvements as
provided above. Tenant shall, not more frequently than monthly after
commencement of the construction of Tenant's Work, submit to Landlord requests
for reimbursement of amounts expended by Tenant for Tenant's Work. Each
request shall be certified by an officer of Tenant and shall include, without
limitation, (i) copies of all invoices paid by Tenant for which reimbursement
is sought (ii) proof of payment of each invoice (iii) a fully executed
unconditional lien release from each payee, and (iv) such additional
information as Landlord may reasonably request. After Landlord has received
and approved each request as provided herein, Landlord shall process the
approved request for payment by its lender and upon disbursement by Landlord's
Lender reimburse Tenant promptly for one-half of all amounts shown in the
request as expenditures for costs to which the Tenant Improvement Allowance
applies, as hereinbelow provided, up to the maximum amount set forth above.
2.2 Tenant's Improvement Allowance (thirty dollars ($30.00)
per rentable square foot on the Premises) shall be applied to, but not limited
to the following costs:
(i) Costs paid to general contractors and subcontractors
for labor, material, permits, bonds and the like
relating to the Premises;
(ii) Construction management fee to Landlord in the amount
of two (2%) percent of the Tenant Improvement
Allowance;
(iii) Building Core Improvements items such as lobbies,
restrooms, locker areas with showers, janitorial
room, elevator improvements (i.e., pit, footings,
shaft, power, etc.), elevator equipment room and
structurally reinforcing the roof for Tenant's HVAC
and screening of mechanical equipment;
(iv) Cost of labor, material and overhead for change
orders approved by Landlord in accordance with this
Exhibit B-1 and minor field changes;
EXHIBIT
<PAGE>
(v) Architectural, engineering and other design fees;
(vi) Plans, drawings and printing costs;
(vii) Insurance premiums;
(viii) Cost of any reasonably required reports, surveys or
studies;
(ix) The cost of utility connections, installation of
utility facilities and meters and user installation
or hook-up fees;
(x) All governmental fees and development impact fees,
including fees for permits, charges and costs of
obtaining governmental approvals;
(xi) Recording costs and filing fees; and
(xii) All other costs reasonably incurred by Landlord in
connection with construction of Building Core
Improvements, provided that no compensation will be
payable for any services rendered by Landlord in
connection with the performance of Building Core
Improvements, except as expressly approved by Tenant
in accordance with Paragraph 2.2 (iii) above.
2.3 Tenant's architect, as described in Paragraph 2.4, shall
furnish all architectural and engineering plans and specifications ("Core
Improvement Plans and Specifications") required for the construction of
Building Core Improvements. To the extent Landlord's architect previously
completed plans with regard to Core Improvements, Landlord's architect will
supply such plans to Tenant's architect and the costs incurred by Landlord
will be deducted from Tenant's Improvement Allowance. Core Improvement Plans
and Specifications shall be based on the Interior Improvement Specifications
attached as Exhibit B-2 herein, or as otherwise indicated by Landlord. It is
understood and agreed by Tenant that any minor changes from any plans and
specifications that may be reasonably necessary during construction of the
Premises shall not affect, change or invalidate this Lease and shall not
require Tenant's consent.
2.4 Tenant shall contract with an architect approved by
Landlord for Tenant's Work (such approval shall not be unreasonably withheld
by Landlord) to furnish architectural plans and specifications ("Tenant's
Plans and Specifications") required for the construction of Tenant's Work.
Tenant's Plans and Specifications shall also be based on the Interior
Improvement Specifications attached hereto as Exhibit B-2.
2.5 Tenant shall contract with Landlord's general contractor
for completion of Tenant's Work. Tenant's suppliers, contractors, workmen and
mechanics shall be subject to approval by Landlord, which shall not be
unreasonably withheld or delayed, prior to the commencement of work and shall
be subject to Landlord's administrative control while performing their work.
Landlord shall coordinate with Tenant's representative the scheduling of
Tenant's Work. Prior to commencement of Landlord's Work, Tenant shall notify
Landlord with respect to any special scheduling requirements of Tenant in
connection with the installation of Tenant's Work. If at any time any
supplier, contractor, workman or mechanic performing Tenant's Work hinders or
delays any other work in the Building or performs any work which may or does
impair the quality, integrity or performance of any portion of the Building,
Tenant shall take all steps necessary to bring an end to the delay or
hindrance, and the contractor in question shall not recommence Tenant's Work
until reasonable steps have been taken to avoid further delay or hindrance. In
performing Tenant's Work, Tenant shall be required to employ contractors (and
subcontractors) which (a) are parties to, and bound by, a collective
bargaining agreement with a labor organization affiliated with the Building
and Construction Trades Council of the AFL-CIO and (b) employ only members of
such labor organizations to perform work within their respective
jurisdictions), with the exception of labor hired for network cabling for
personal and mainframe computer systems and related items. Tenant shall
reimburse Landlord for any repairs or corrections of Landlord's Work or of
Tenant's Work or of any portion of the Building caused by or resulting from
the work of any supplier, contractor, workman or mechanic with whom Tenant
contracts. Landlord shall provide access to Tenant's suppliers, contractors,
workmen and mechanics so as to achieve timely completion and occupancy of the
Premises.
2.6 Unless the Lease has been terminated pursuant to Paragraph
26 of the Lease, upon the termination or expiration of the Lease, as such term
may be extended, Tenant shall have the right to remove items listed in Exhibit
B-3 which have been installed and paid for by Tenant. Tenant shall repair any
damage to the Premises resulting from such removal, patch and repair the
walls, floor and ceiling and return the Premises in clean condition. Landlord
shall have a security interest in Tenant's Work pursuant to Paragraph 19. of
the Lease.
3. COMPLETION DATES
3.1 Landlord shall notify Tenant when Landlord's Work is
sufficiently underway that Tenant may begin construction of Tenant's Work.
Tenant shall notify Landlord in advance of the approximate date on which
Tenant's Work will be substantially completed and will notify Landlord when
Tenant's Work is in fact substantially competed ("Substantial Completion").
The day Tenant notifies Landlord that its work is substantially completed
shall constitute the Term Commencement Date. If any dispute shall arise as to
whether the Premises are substantially completed and ready for Tenant's
occupancy, a certificate furnished by an independent architect mutually agreed
to by Landlord and Tenant certifying the date of Substantial Completion shall
be conclusive. The following shall constitute tenant delays ("Tenant Delays")
under the Lease:
(a) Tenant's failure to furnish complete and timely
instructions or approvals;
(b) Tenant's failure to hire an architect for
Building Core Improvements within fifteen (15) days of execution of Lease;
(c) Tenant's failure to submit conceptual plans for
Tenant's Work to Landlord within forty-five (45) days from execution of Lease;
(d) Tenant's failure to submit preliminary Plans and
Specifications for Tenant's Work for approval by Landlord within seventy-five
(75) days from execution of Lease;
EXHIBIT
<PAGE>
(e) Tenant's failure to enter into contract with
Landlord's general contractor for construction of Tenant's Work within ninety
(90) days of execution of Lease;
(f) Tenant's failure to commence Tenant's Work within
fifteen (15) days of permission by Landlord;
(g) Tenant's failure to substantially complete
construction of Tenant's Work within one hundred thirty-five (135) days after
permission to commence construction of Tenant's Work by Landlord; and
(h) Tenant's failure to deliver a Certificate of
Occupancy to Landlord within thirty (30) days after Substantial Completion of
Tenant's Work.
Tenant Delays resulting in postponement of the Term Commencement Date shall
cause Tenant to be charged rent under the terms of the Lease for each day of
such delay. All time periods indicated above shall be computed on a calendar
basis with no allowance for holidays, weekends or other customs.
3.2 Except as otherwise provided in the Lease, failure of
Landlord to deliver possession of the Premises within the time and in the
condition provided for in the Lease will not give rise to any claim for
damages by Tenant against Landlord or Landlord's general contractor. If
Landlord fails to deliver the Premises in the condition as provided for under
this Lease, Landlord shall promptly correct any such deficiencies, excluding
any immaterial deficiencies which do not prevent Tenant from using the
Premises for their intended use. If Landlord fails to correct such
deficiencies within a reasonable time, Tenant may pursue its legal remedies
against Landlord.
EXHIBIT
<PAGE>
EXHIBIT B-2
INTERIOR IMPROVEMENT SPECIFICATIONS
NOTE: Not all specified items listed herein refer to this project.
1. WALLS
A. All walls receive paint to be properly prepared. Texture to be
medium spray finish with 1 coat of latex paint to cover. Paint
to be Pittsburg Doric white.
B. Demising walls, between tenant spaces to roof height shall be
metal studs with 5/8" gypsum board both sides. Fire tape
finish. U.O.N. See T.I. drawings for size, gauge and spacing.
C. Restroom studs with 5/8" gypsum board to 6" above adjacent
ceiling U.O.N. with friction fit sound batt insulation.
Wainscot at wet walls to be +4' - 0' high with ceramic tile.
Texture to be smooth finish with semi-gloss latex paint U.O.N.
D. Interior Office Walls. Metal studs with 5/8" gypsum board on
both sides to underside of ceiling, U.O.N. Perimeter office
walls between office and warehouse areas to 6" above ceiling,
U.O.N. per Title 24 energy calculation requirements.
E. Other. As may be directed by code or tenant purposes for fire
protection, sound or energy insulation, demountability and
aesthetics.
F. See tenant improvements drawings for specifications on size,
gauge and spacing of studs.
2. CEILING
A. General. Finished ceiling height to be 10'.
B. Restrooms. Finished ceiling height to be 9' with metal joist
with 5/8" gypsum board. Texture to be smooth finish with
semi-gloss latex paint with friction fit sound batt
insulation. See tenant improvement drawings for specifications
on size, gauge and spacing of joists.
C. Office. 2' x 4' T-bar suspended ceiling system with 2' x 4'
Second Look II acoustical ceiling tile by Armstrong or
approved equal.
D. Other. As may be directed by tenant or as may otherwise be
required by tenant or codes. See tenant improvement drawings.
3. FLOOR COVERING
A. Carpet - 30 oz. cut pile nylon Design Weave "Westbridge"/26
oz. loop Design Weave "Caravan" or equivalent without pad.
Carpet to be glued down installation. Color to be selected by
Tenant.
B. V.C.T. Armstrong "Standard Excelon" - 1/8" gauge: 12" x 12" or
approved equal.
C. Sheet vinyl Congoleum "Forever" or approved equal.
D. Base. 2-1/2" coved base at carpet and resilient floors.
E. Ceramic tile at toilet rooms with 6" ceramic tile base.
F. Sealed Concrete. Sealed with a clear acrylic sealer.
4. DOORS
A. Interior. SP Particleboard Core Oak 3'-0" x 7'-0", Rotary Sawn
Red Oak Veneer door by Weyerhauser or equal. 20 minute rated
at one hour fire walls. In laboratory and laboratory support
spaces, hollow metal doors.
5. FRAMES (DOORS & WINDOWS)
A. Timely Standard prefinished steel door and sidelight frame in
standard white. "Timely II" at rated walls.
B. Other. As may be directed by code.
6. HARDWARE
A. Latch set and lockset - Schlage D Series in brushed stainless
steel with H.C. Levon lever.
B. Butts - 2 pair per door finished to match.
7. RESTROOM ACCESSORIES
A. Water closet, white American Standard flush valve #2221.18
with Olsonite #95 seat and Sloan Ryal #110.3 flush valve. H.C.
stalls to have white #9468.018 water closet with Sloan Royal
#115.3 flush valve.
B. Urinal, white American Standard "Washbrook" #6501.010 with
Sloan Royal #186 flush valve.
EXHIBIT
<PAGE>
C. Lavatory, American Standard with faucet #0355.027 and drain
#2103.786.
D. Recessed towel dispenser/waste receptacle, Bobrick #B3944.
E. Surface mounted seat cover dispenser, Bobrick.
F. Surface mounted toilet tissue dispenser, Bobrick #B2740.
G. Hook, Bobrick #B682.
H. Grab bars, Bobrick #B6806, 36" and 42".
I. Toilet partitions, Bobrick 1080 series, plastic laminate, or
equivalent. Baked enamel floor-braced with coat hook/bumper.
J. Urinal partitions, Bobrick 1085 "Duraline" series, or
equivalent.
K. Recessed toilet room accessories, Brobrick B301, B3570 and
B35704, or equivalent.
8. HVAC
Gas-fired roof-mounted VAV system for cooling, heating and ventilation.
Designed and installed in accordance with the California Energy Act -
Title 24.
1. All cuts in roof to be properly sealed, flashed and
hot mopped.
9. ELECTRICAL
A. Designed and installed in accordance with the California
Energy Act - Title 24.
B. Power distributed as required by tenant for warehouse,
assembly and manufacturing equipment, appliance operation and
special office machinery shall be ceiling hung U.O.N.
C. Warehouse/Manufacturing/Assembly Lighting. High Bay THS
150-watt high pressure sodium light fixtures by Lithonia or
equal in areas with open ceiling. U.O.N. See tenant
improvement drawings. T-bar dropped ceilings 2' x 4' recessed
mounted fluorescent fixtures with light levels ranging from
15-75 foot candles as specified by Owner. Fixtures same as for
office lighting following.
D. Office lighting is 2' x 4' recessed mounted fluorescent
ceiling fixtures, Lithonia 2PM4G B3 40 18LS 120 or equal,
approved by Owner, with parabolic lens.
E. Downlights. Halo #117-1CT-331-P Coilex Baffle 7" O.D. trim.
F. Wallwashers. Halo #1176-T-425P Coilex Baffle with scoop trim
7" O.D.
G. Track Lights. Halo 120v single circuit power trac with Coilex
Continental lampholdes #L733P.1.
H. Wall-mounted fixture at restroom. Lithonia Wallens #W240-120A.
I. Other lighting as required by tenant or code.
J. Provide plates for all power outlets. Provide pull wires at
all telephone and cable (C.R.T.) pull locations as indicated
on plan.
K. Illuminated exit signs as required by tenant or code.
L. Emergency lighting as required by code.
10. FINISHES/SPECIALTIES
A. Special office wall or floor finishes. See tenant improvement
drawings or specifications.
B. Lunch room, conference room, coffee or wet bar cabinetry and
plumbing. See tenant improvement drawings.
EXHIBIT
<PAGE>
EXHIBIT B-3
MOVEABLE EQUIPMENT & TRADE FIXTURES
Moveable Equipment & Trade Fixtures includes:
Emergency Generator
Lab Benches and Counters
Fume Hoods
Cold Rooms
Mixing Tanks and Associated Equipment
Filling and Packing Machines
Autoclaves
Dishwashers
Chemical Storage Building
EXHIBIT
<PAGE>
EXHIBIT C
INITIAL PROJECT SPECIFICATION
GENERAL DESCRIPTION
o Two story concrete tilt-up building.
o Clear heights of 13'8" on the top floor and 24'2-1/2" and 19'2-1/2" on
the bottom floor (349 and 347 Oyster Point respectively).
o Bay spacing of 33'-4" and 34' x 60' on the top floor and 33'-4" and
34' x 30' on the bottom (349 and 347 Oyster Point respectively).
BUILDING STRUCTURE
o All foundations to Include footings, foundation walls or other
building foundation components required to support the entire building
structure.
o Columns shall be steel box or pipe columns.
o All columns, beams, joists, purlins, headers, or other framing members
to support the roof, roofing membrane and stair openings.
o Five inch (5") thick concrete slab on grade with #3 reinforcing bars
at 18" on center each way or welded wire mesh and any other
reinforcing or structural connections that may be necessary or
required.
o Two and a half (2-1/2") thick concrete slab over metal deck supported
by structural metal beams and columns.
o Exterior walls that enclose the perimeter of the building with steel
reinforcing and structural connections that may be necessary or
required.
o All exterior glass and glazing with pained aluminum frames. Glass to
be tinted as appropriate to the aesthetic design of the building. All
exterior doors, door closer and locking devices necessary for proper
functioning.
o Hybrid Volcraft panel roof system to support roofing membrane.
o Four (4) ply built-up roofing (including a base sheet, two plys and a
cap sheet) and all flashings by Owens-Corning, Johns Manville, or
equal.
o Painting of all concrete walls with Tex-Coat or Kel-Tex textural
paint. All caulking of exterior concrete joint in preparation for
painting.
o The foundation and structural framing should be designed to support a
minimum live load of 100 psf in all areas.
o The floor-to-floor height of the building shall allow a minimum of
10'0" interior drop ceiling height.
o Roof hatch and ladder within each building.
o Floors to be smooth and level per industry standards for comparable
facility.
PLUMBING
o Underground sanitary sewer laterals connected to the city sewer main
the street and piped into the building and under the concrete slab on
grade for the length of the building. Sewer lines to consist of a six
inch (6" sanitary sewer line and a six inch (6") biowaste sewer line.
Sanitary sewer line under the slabs will be in a close proximity to
the building restroom locations.
o Domestic water mains connected to the city water main in the street
and stubbed to the building. Water main to the building shall be two
inches (2") in size with a three inch (3") supply line.
o Roof drain leaders piped and connected to the site storm drainage
systems or asphalt paved area.
o Gas lines connected from the city public utility mains and gas meters
adjacent to, and in close proximity to the building. Meters supplied
by utility company.
ELECTRICAL
o All primary electrical service to the building that is complete
including underground conduit and wire feeders from transformers pads
into the building's main switchgear electrical room. The electrical
characteristics of the secondary side of transformers shall be 277/480
volt, 3 Phase and the rated capacity of the transformers shall be
2,000 amps for each building.
o Underground pull section, meter, and panel(s), for site lighting and
landscaping.
EXHIBIT
<PAGE>
o Underground conduit from the street to the building for telephone
trunk line service by Pacific Telephone. Conduit to the building shall
not be less than 4".
o An electrically operated landscape irrigation controller that is a
complete and functioning system.
o Underground conduit from the building to the main fire protection
system, shut off valve (PIV) for installation for security alarm
wiring.
o All parking lot and landscaping lighting to include fixtures,
underground conduit, wire, distribution panel and controller. All
exterior lighting shall be a complete and functioning system.
FIRE PROTECTION
o A complete and fully functional overhead system distributed throughout
the building with a density of .2/3000 on the top floors and .4/2000
and .495/2000 on the bottom floors (349 and 347 Oyster Point
respectively).
o System shall include all sprinkler heads that may be required by
building codes above the ceiling, when ceilings are installed.
LOADING
o Two (2) grade level 12' x 14' roll-up doors plus at least one (1) 12'
x 10' location for future grade level opening per building.
SITEWORK
o All work outside the building perimeter walls shall be considered site
work for the building shell and shall include grading, asphalt
concrete, paving, landscaping (hard and soft), landscape and
irrigation, storm drainage, utility service laterals, curbs, butters,
sidewalks, specialty paving (if required), retaining walls, fencing
and gates, trash enclosures, planters, sign monuments, parking lot and
landscape lighting and other exterior lighting per code.
o Paving sections for automobile and truck access shall be according to
the Geological Soils Report.
o All parking lot striping to include handicap signage and spaces.
o Underground site storm drainage system shall be connected to the city
storm system main.
EXCLUSIONS
o The following items are not included in the building shell:
o All items relating to the elevator.
o Electrical panels and distribution.
o Screening of Mechanical equipment.
o HVAC including proof loading of roof structure.
o Security system.
EXHIBIT
<PAGE>
EXHIBIT D
TENANT ESTOPPEL CERTIFICATE
TO: TC Northern California, Inc.
1241 East Hillsdale Blvd., Ste. 200
Foster City, CA 94404
THIS IS TO CERTIFY:
1. That the undersigned is the Tenant under that certain Lease dated
___________________, and, if applicable, amended on__________________, by and
between _________________________________ ("Landlord"), and the undersigned
("Tenant") covering those certain premises located as shown on the drawing made
part of the Lease (the "Premises").
2. That said Lease is in full force and effect and, except as noted in
Paragraph 1. above, has not been modified, changed, altered or amended in any
respect, and is the only lease or agreement between the Tenant and the Landlord
affecting the Premises.
3. To the best of Tenant's knowledge, the information set forth below is
true and correct:
(a) Square footage of the Premises: __________________________________
(b) Annual rent as of the Commencement of Lease: $_____________________
(c) Current annual rent (if different than at commencement): $_________
(d) Commencement date of Lease: ______________________________________
(e) Lease termination date: __________________________________________
(f) Rent paid to and including: _______________________________________
(g) Security deposit: $________________________________________________
(h) Prepaid rent for and in amount of: $_______________________________
(i) Free rent period:_________________________ to _____________________
(j) Amount of current monthly escrow payment obligations
with respect to taxes, insurance, and Common Area
Maintenance charges under the Lease:
Taxes: $ ________________________
Insurance: $ ________________________
Common Area Maintenance Charges: $ ________________________
(k) Dates through which Tenant has paid monthly escrow
payments and Common Area Maintenance charges:
Escrow Payment for Taxes: __________________________
Escrow Payment for Insurance: __________________________
Common Area Maintenance Charges: __________________________
4. Delete if Tenant has not occupied the Premises: Tenant now occupies the
Premises, accepts the Premises in their current condition subject only to those
punch list items listed in Exhibit A, if any, and is not aware of any defect in
the Premises except as described in Exhibit A, if any.
5. Delete if Tenant has occupied the Premises: Tenant does not occupy the
Premises. The status of the plans and specifications for and the construction of
Tenant Improvements is described in Exhibit A. Tenant is familiar with the
Tenant Improvement work done to date and is not aware of any defect in such
work, except as described in Exhibit A.
6. No rent has been paid in the current month other than as disclosed in
Paragraph 3. No free rent or other concessions, benefits, or inducements other
than as specified in the Lease have been granted to Tenant or undertaken by the
Landlord.
7. Tenant has not been granted any renewal, expansion, purchase options or
any rights of first refusal, except as disclosed in writing in the Lease.
8. Neither Tenant nor to the best of Tenant's knowledge, Landlord is in
breach of the Lease and there has not occurred any event, act, omission or
condition which by notice or lapse of time or both or otherwise, will result in
any breach by Tenant or to the best of Tenant's knowledge, by Landlord. As of
the date hereof and except as set forth in the Lease, the undersigned is
entitled to no credit, offset or deduction in rent. Tenant knows of no
liabilities or obligations of Landlord which have accrued but are unsatisfied
under the Lease as of the date of this Certificate.
9. To the best of Tenant's knowledge, there are no actions, whether
voluntary or otherwise, pending against the undersigned under the bankruptcy
laws or other laws for the relief of debtors of the United States or any state
thereof.
EXHIBIT
<PAGE>
10. With the exception of this Lease and except as otherwise disclosed in
writing to Landlord, neither the Tenant nor any affiliate of the Tenant is a
tenant under a lease or any other tenancy arrangement (i) with (a) __________;
(b) __________; (c) ___________; or (ii) involving any property in which the
entities named in clauses (___), (___) or (___) are known by the Tenant to have
an ownership interest.
DATED this ______________ day of __________________, 19__.
TENANT:
CELLEGY PHARMACEUTICALS, INC.
By:_______________________________
Name:_____________________________
Its:______________________________
(Tenant to attach Exhibit A to Tenant Estoppel Certificate,
List of Defects, if necessary.)
EXHIBIT
<PAGE>
EXHIBIT E
RULES AND REGULATIONS
FOR TENANT'S CONTRACTOR(S)
1. Tenant's contractor will be responsible for making arrangements with
Landlord as to time for the use of Building and equipment such as
elevators and loading areas. The delivery of materials, equipment and
supplies to the Building or Premises must be coordinated with Landlord
at least two (2) business days prior to delivery. The Building debris
box is not to be used for waste produced by Tenant's contractor.
2. Tenant's contractor shall not interfere with the Landlord's contractor
and sub-trades in any way and will cooperate fully with same.
3. All Tenant's contractor's waste and debris must be removed from the
Premises and Building regularly and promptly. All combustible waste and
debris must be stored in a covered, fire-proof container prior to
removal.
4. Tenant's contractor and sub-trades shall take all precautions to ensure
the security and the site condition of the Premises and Building in
which the work is being performed, including their own tools, equipment
and materials, and are responsible for any damage caused by employees
and sub-trades to any part of the Building or Premises.
5. Tenant's contractor shall remove and properly replace underfloor duct
access covers as required for Tenant's trades and services. Any damage
to underfloor duct access coverings shall be repaired or replaced by
Tenant's contractor to the satisfaction of Landlord.
6. Tenant's contractor must provide their own fire protection equipment,
have same on premises at all times and conform to any requirements of
Landlord or Landlord's contractor regarding fire protection.
7. Tenant's contractor shall carry out all work in compliance with all
Federal, State, County and City Building Codes and applicable Acts,
Ordinances and Statutes.
8. Tenant's contractor shall provide all their own protective devices and
coverings, so as to protect the Building finishes provided by Landlord
in the Building.
9. No attachments to or use of window frames and mullions, ceiling
systems, glass, ceiling frame or Building frame, will be permitted
without the expressed written consent of Landlord.
10. All Tenant's contractors, employees and trades must be confined to the
area in which work is being performed.
11. Tenant or Tenant's contractor shall carry builder's risk insurance with
limits of not less than the amount requested by Landlord, insurance
covering loss or damage to the work during the course of construction;
worker's compensation/employer's liability insurance covering all
employees of contractor and subcontractor. All such policies shall name
Landlord and Tenant as additional insureds. A certificate of insurance
must be provided to Landlord prior to commencement of work.
12. Any construction, alteration, maintenance, repair, replacement, removal
or decoration undertaken by Tenant's contractor shall be carried out in
a good, workmanlike, and prompt manner, shall comply with applicable
statutes, laws, ordinances, regulations, rules, orders and requirements
of the authorities having jurisdiction thereof, and shall be subject to
supervision by Landlord or its employees, agents, or contractors. All
construction shall be performed in a timely manner without delays or
interruptions.
13. Tenant's contractors shall not use excessive quantities of electricity
or water and shall not shut off any water, electricity, sprinkler
systems or other services without first obtaining Landlord's express
authorization.
EXHIBIT
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