UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] 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 0-23155
TRIMERIS, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1808663
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4727 University Drive
Durham, North Carolina 27707
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (919) 419-6050
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ x ] Yes [ ] No
The number of shares outstanding of the registrant's common stock as of August
12, 1999 was 13,683,499
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
FORM 10-Q
For the Six Months Ended June 30, 1999
INDEX
PART 1. FINANCIAL INFORMATION Page
_______________________________ ----
Item 1. Financial Statements
____________________
Balance Sheets as of June 30, 1999 (unaudited) and
December 31, 1998 1
Statements of Operations (unaudited) for the Three
and Six Months Ended June 30, 1999 and 1998 and Period
From Inception (January 7, 1993) Through June 30, 1999 2
Statements of Cash Flows (unaudited) for the Six Months
Ended June 30, 1999 and 1998 and Period From Inception
(January 7, 1993) Through June 30, 1999 3
Notes to Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of Financial
________________________________________________
Condition and Results of Operations 6
___________________________________
Item 3. Quantitative and Qualitative Disclosures About
_______________________________________________
Market Risk 12
___________
PART 2. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 13
-----------------
Item 2. Changes in Securities and Use of Proceeds 13
-----------------------------------------
Item 3. Defaults Upon Senior Securities 13
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders 13
---------------------------------------------------
Item 5. Other Information 14
-----------------
Item 6. Exhibits and Reports on Form 8-K 14
--------------------------------
Signature Page 15
- --------------
Exhibit Index 16
- -------------
<PAGE>
PART 1. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
--------------------
TRIMERIS, INC.
(A Development Stage Company)
BALANCE SHEETS
(in thousands, except par value)
December 31, June 30,
1998 1999
---- ----
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 16,920 $ 28,825
Short-term investments 3,256 13,009
Accounts receivable 68 26
Prepaid expenses 321 344
-------- -------
Total current assets 20,565 42,204
Property, furniture and equipment, net 1,598 2,040
-------- -------
Other assets:
Exclusive license agreement, net 27 26
Patent costs, net 534 600
Equipment deposits 147 171
Other, net 1 0
-------- -------
Total other assets 709 797
-------- -------
Total assets $ 22,872 $45,041
======== =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,176 $ 1,404
Current installments of capital lease
obligations 471 439
Accrued compensation 829 1,311
Accrued expenses 1,527 2,219
--------- --------
Total current liabilities 4,003 5,373
Capital lease obligations, less current
installments 853 618
--------- --------
Total liabilities 4,856 5,991
-------- -------
Commitments and contingencies
Stockholders' equity:
Series A, B, C, and D preferred stock at
$.001 par value per share, 10,000
shares authorized, zero shares issued
and outstanding at December 31, 1998
and June 30, 1999 (unaudited) -- --
Common Stock at $.001 par value per share,
30,000 shares authorized, 10,637
and 13,675 shares issued and outstanding
at December 31, 1998 and
June 30, 1999 (unaudited) 11 14
Additional paid-in capital 68,406 100,66O
Deficit accumulated during the
development stage (48,395) (60,092)
Deferred compensation (1,788) (1,422)
Notes receivable from stockholders (218) (110)
--------- --------
Net stockholders' equity 18,016 39,050
--------- --------
Total liabilities and stockholders' equity $ 22,872 $ 45,041
========= ========
See accompanying notes to financial statements.
1
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
From Inception
Three Months Six Months (January 3, 1993)
Ended June 30, Ended June 30, To June 30,
1998 1999 1998 1999 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue $ 85 $ -- $ 175 $ 81 $ 1,034
-------- -------- -------- -------- --------
Operating expenses:
Research and development . 4,650 5,075 7,233 9,039 47,790
General and administrative 1,187 1,469 2,227 3,142 15,170
-------- -------- -------- -------- --------
Total operating
expenses 5,837 6,544 9,460 12,181 62,960
-------- -------- -------- -------- --------
Operating loss (5,752) (6,544) (9,285) (12,100) (61,926)
-------- -------- -------- -------- --------
Other income (expense):
Interest income 454 257 1,038 488 2,949
Interest expense (32) (43) (50) (85) (1,115)
-------- -------- -------- -------- --------
422 214 988 403 1,834
-------- -------- -------- -------- --------
Net loss $ (5,330) $(6,330) $ (8,297) $(11,697) $(60,092)
======== ======== ======== ======== ========
Basic net loss per share $ (0.50) $ (0.54) $ (0.78) $ (1.05)
========== ======== ======== ========
Weighted average
shares used in per share
computations 10,632 11,621 10,627 11,170
====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
From Inception
Six Months Ended (January 3, 1993)
June 30, To June 30,
1998 1999 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (8,297) $(11,697) (60,092)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 239 413 3,208
Other amortization 10 10 59
Amortization of deferred compensation 300 366 1,459
401(K) plan stock match -- -- 236
Provision for equipment held for resale -- -- 61
Stock issued for consulting services -- -- 5
Stock issued to repay interest on notes to
stockholders -- -- 195
Debt issued for research and development -- -- 194
Loss on disposal of property and equipment -- -- 16
Changes in operating assets and liabilities:
Accounts receivable and loans to employees (9) 42 (26)
Prepaid expenses (9) (23) (344)
Other assets (30) (32) (180)
Accounts payable (513) 228 1,404
Accrued compensation (130) 482 1,311
Accrued expenses (34) 692 2,129
-------- -------- --------
Net cash used by operating activities (8,473) (9,519) (50,365)
-------- -------- --------
Cash flows from investing activities:
Purchases of short-term investments (1,031) (9,753) (13,009)
Purchases of property and equipment (130) (855) (1,702)
Equipment held for resale -- -- (61)
Organization costs -- -- (8)
Patent costs (64) (66) (614)
-------- -------- --------
Net cash provided (used) by investing
activities (1,225) (10,674) (15,394)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of notes payable -- -- 6,150
Lease costs -- -- (13)
Principal payments under capital lease obligations (212) (267) (2,505)
Proceeds from issuance of Common Stock -- -- 31
Proceeds from issuance of Preferred Stock -- -- 23,896
Proceeds from public offerings, net -- 31,357 65,889
Proceeds from exercise of stock options 5 827 846
Proceeds from employee stock purchase plan exercise 182 73 328
Repayment of notes receivable from stockholders -- 108 158
Stock issuance costs -- -- (196)
-------- -------- --------
Net cash provided (used) by financing
activities (25) 32,098 94,584
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents (9,723) 11,905 28,825
Cash and cash equivalents, beginning of period 32,557 16,920 --
-------- -------- --------
Cash and cash equivalents, end of period $ 22,834 $ 28,825 $ 28,825
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
Trimeris, Inc. (the "Company") was incorporated on January 7, 1993 to discover
and develop novel therapeutic agents that block viral infection by inhibiting
viral fusion with host cells. These financial statements have been prepared in
accordance with Statement of Financial Accounting Standards No. 7, "Accounting
and Reporting by Development Stage Enterprises," to recognize the fact that the
Company is devoting substantially all of its efforts to establishing a new
business and planned principal operations have not commenced.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and applicable
Securities and Exchange Commission regulations for interim financial
information. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of financial position and results of operations have been
made. Operating results for interim periods are not necessarily indicative of
results which may be expected for a full year. The information included in this
Form 10-Q should be read in conjunction with the Risk Factors and Management's
Discussion and Analysis of Financial Condition and Results of Operations
sections and the 1998 financial statements and notes thereto included in the
Company's 1998 Form 10-K filed with the Securities and Exchange Commission on
March 31, 1999 and the Company's Registration Statement on Form S-3 as declared
effective by the Securities and Exchange Commission on May 26, 1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. BASIC NET LOSS PER SHARE
For periods beginning with the year ended December 31, 1997, the Company
adopted SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). In accordance with
this statement, primary net loss per common share is replaced with basic loss
per common share which is calculated by dividing net loss by the
weighted-average number of common shares outstanding for the period after
certain adjustments described below. Fully diluted net income per common share
is replaced with diluted net income per common share reflecting the maximum
dilutive effect of common stock issuable upon exercise of stock options, stock
warrants, and conversion of preferred stock. Diluted net loss per common share
is not shown, as common equivalent shares from stock options, and stock
warrants, would have an antidilutive effect. Prior period per share data has
been restated to reflect the adoption of SFAS No. 128. In accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB 83"),
all common shares and common equivalent shares issued during the twelve-month
period prior to the initial filing of the registration statement relating to the
Company's initial public offering, even when anti-dilutive, have been included
in the calculation as if they were outstanding for all periods, using the
treasury stock method. The basic net loss per common share gives retroactive
effect to the conversion of all outstanding shares of Preferred Stock into
6,261,615 shares of Common Stock upon the completion of the Company's initial
public offering in October 1997.
3. STATEMENTS OF CASH FLOWS
4
<PAGE>
Interest of approximately $50,000 and $85,000 was paid during the six months
ended June 30, 1998 and 1999, respectively. Capital leases of $760,000 and $0
were incurred for the six months ended June 30, 1998 and 1999, respectively for
the purchase of new furniture and equipment.
4. PUBLIC OFFERINGS OF STOCK
In October 1997, the Company closed its initial public offering of common
stock at $12 per share. The net proceeds of the offering, including the proceeds
received in connection with the exercise of the Underwriters' over-allotment
option which closed in November 1997, were approximately $34.5 million after
deducting applicable issuance costs and expenses. In connection with the public
offering, all the outstanding preferred stock was converted into 6,261,615
shares of the Company's common stock.
In June 1999, the Company closed a public offering of common stock at $11.75
per share. The net proceeds of the offering, including the proceeds received in
connection with the exercise of the Underwriters' over-allotment option, were
approximately $31.4 million after deducting applicable issuance costs and
expenses.
5. STOCK SPLIT
Effective July 11, 1997, the Company declared a one for eight and one-half
reverse stock split for common stockholders. This stock split has been
retroactively applied and all periods presented have been restated.
6. SUBSEQUENT EVENT
In July 1999, the Company announced an agreement with Hoffmann-La Roche to
develop and market T20 and T1249 worldwide. In the United States and Canada, the
Company and Roche will share equally development expenses and profits for the
two fusion inhibitors. Outside of these two countries, Roche will fund all
development costs and pay the Company royalties on net sales of these products.
Roche will make an initial cash payment to the Company of $10 million and up to
an additional $78 million in cash and funding upon achievement of developmental,
regulatory and commercial milestones.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
This discussion of our financial condition and the results of operations
should be read together with the financial statements and notes contained
elsewhere in this Form 10-Q. Certain statements in this section and other
sections are forward-looking. While we believe these statements are accurate,
our business is dependent on many factors, some of which are discussed in the
"Risk Factors" and "Business" sections of our Form 10-Q for the three months
ended March 31, 1999 filed with the Securities and Exchange Commission on May
17, 1999 and our Registration Statement on Form S-3 as declared effective by the
Securities and Exchange Commission on May 26, 1999. These factors include, but
are not limited to: that we are an early stage company with an uncertain future;
that we have never made money and expect our losses to continue; that we will
need to raise additional funds in the future; that our quarterly operating
results are subject to fluctuations and you should not rely on them as an
indication of our future results; that we are heavily dependent on our lead
product candidate, T20; that we face many uncertainties relating to our human
clinical trial results and clinical trial strategy; that HIV may develop
resistance to our drug candidates; that we have no experience manufacturing
pharmaceutical products; that we face risks associated with manufacturing T20
and T1249; that our business is based on novel technology and is highly risky
and uncertain; that we are dependent on third-party contract research
organizations; that we have no sales, marketing or distribution capabilities;
that our stock price is highly volatile; that we depend on collaborations and
licenses with others; that there is uncertainty relating to third-party
reimbursement and health care reform measures which could limit the amount we
will be able to charge for our products; that there is uncertainty regarding
patents and proprietary rights; that we are subject to extensive government
regulation; that our products may not receive regulatory approval; that we face
intense competition; that we use hazardous materials; that we are exposed to
product liability risks; that we depend upon certain key personnel and face
risks relating to our ability to attract and retain key personnel; that we may
be adversely affected by Year 2000 issues; that future sales of common stock by
our existing stockholders could adversely affect our stock price; and that we
have implemented certain anti-takeover provisions. Many of these factors are
beyond our control and any of these and other factors could cause actual results
to differ materially from the forward-looking statements made in this 10-Q. The
results of our previous clinical trials are not necessarily indicative of the
results of future clinical trials. We undertake no obligation to release
publicly the results of any revisions to the statements contained in this Form
10-Q to reflect events or circumstances that occur subsequent to the date
hereof.
OVERVIEW
We began our operations in January 1993 and are a development stage
company. Accordingly, we have a limited operating history. Since our inception,
substantially all of our resources have been dedicated to:
o the development, patenting, preclinical testing and clinical trials of
T20,
o the development of a manufacturing process for T20,
o production of drug material for future clinical trials, and
o research and development and preclinical testing of other potential
product candidates.
We have lost money since inception and, as of June 30, 1999, had an
accumulated deficit of approximately $60.1 million. We have received revenue
only from federal small business innovative research grants, otherwise known as
SBIR grants, and an investigative contract and have not generated any revenue
from product sales or royalties. We may never generate any revenue from product
sales or royalties.
Development of current and future drug candidates will require significant
additional, time-consuming
6
<PAGE>
and costly research and development, preclinical testing and extensive clinical
trials prior to submission of any regulatory application for commercial use. We
expect to incur substantial losses for the foreseeable future and expect losses
to increase as our research and development, preclinical testing, drug
production and clinical trial efforts expand. The amount and timing of our
operating expenses will depend on many factors, including:
o the status of our research and development activities,
o product candidate discovery and development efforts, including
preclinical testing and clinical trials,
o the timing of regulatory actions,
o the costs involved in preparing, filing, prosecuting, maintaining,
protecting and enforcing patent claims and other proprietary rights,
o our ability to work with Hoffmann-LaRoche to manufacture, develop,
sell, market and distribute T20 and T1249,
o technological and other changes in the competitive landscape,
o changes in our existing research and development relationships and
strategic alliances,
o evaluation of the commercial viability of potential product candidates,
and
o other factors, many of which are outside of our control.
As a result, we believe that period-to-period comparisons of our financial
results in the future are not necessarily meaningful. The past results of
operations and results of previous clinical trials should not be relied on as an
indication of future performance. If we fail to meet the clinical and financial
expectations of securities analysts and investors, it could have a material
adverse effect on the market price of our common stock. Our ability to achieve
profitability will depend, in part, on our own or our collaborative partners'
ability to successfully develop and obtain regulatory approval for T20 and other
product candidates, and our ability to develop the capacity, either internally
or through relationships with third parties, to manufacture, sell, market and
distribute approved products, if any. We may never generate significant revenues
or achieve profitable operations.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 AND 1999
REVENUE. Total revenue was $85,000 for the three months ended June 30, 1998 and
was entirely derived from SBIR grants. There was no revenue for the three months
ended June 30, 1999 due to the completion of the SBIR grant.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses were
$4.7 million and $5.1 million for the three months ended June 30, 1998 and 1999,
respectively. Expenses increased during the three months ended June 30, 1999
because we:
o initiated a Phase II clinical trial for T20,
o initiated a Phase I clinical trial for T1249, and
o continued manufacturing process development and purchase of drug material
from third party manufacturers to supply future clinical trials.
Total research personnel were 43 and 47 at June 30, 1998 and 1999, respectively.
We expect research and development expenses to increase substantially in the
future due to:
7
<PAGE>
o continued preclinical research and testing of product candidates,
o expanded clinical trials for T20, T1249 and other product candidates,
o the manufacture of drug material for these trials, and
o increased number of personnel to support these activities.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
were $1.2 million and $1.5 million for the three months ended June 30, 1998 and
1999, respectively. Expenses increased during the three months ended June 30,
1999 because we:
o added personnel to support our growth, and
o incurred professional fees in the patent application process.
We expect administrative expenses to increase in the future to support the
anticipated expansion of product development activities.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and
expense. Total other income was $422,000 and $214,000 for the three months ended
June 30, 1998 and 1999, respectively. The decrease was due to decreased interest
income because of lower cash and investment balances during 1999.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 AND 1999
REVENUE. Total revenue was $175,000 and $81,000 for the six months ended June
30, 1998 and 1999, respectively and was entirely derived from SBIR grants.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses were
$7.2 million and $9.0 million for the six months ended June 30, 1998 and 1999,
respectively. Expenses increased during the six months ended June 30, 1999
because we:
o completed one Phase II clinical trial and initiated two additional
Phase II clinical trials for T20,
o completed preclinical studies, filed an IND and initiated a Phase I
clinical trial for T1249, and
o continued manufacturing process development and purchase of drug material
from third party manufacturers to supply future clinical trials.
Total research personnel were 43 and 47 at June 30, 1998 and 1999, respectively.
We expect research and development expenses to increase substantially in the
future due to:
o continued preclinical research and testing of product candidates,
o expanded clinical trials for T20, T1249 and other product candidates,
o the manufacture of drug material for these trials, and
o increased number of personnel needed to support these activities.
8
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
were $2.2 million and $3.1 million for the six months ended June 30, 1998 and
1999, respectively. Expenses increased during the six months ended June 30, 1999
because we:
o accrued severance costs for our former Chief Executive Officer,
o initiated and completed market research on the sales potential of T20,
o added personnel to support our growth, and
o incurred professional fees in the patent application process.
We expect administrative expenses to increase in the future to support the
expansion of product development activities.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and
expense. Total other income was $988,000 and $403,000 for the six months ended
June 30, 1998 and 1999, respectively. The decrease was due to decreased interest
income because of lower cash and investment balances during 1999.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through the
private placement of equity securities, the issuance of notes to stockholders,
equipment lease financing, an initial public offering in October 1997 and a
public offering of common stock in June 1999. Net cash used by operating
activities was $8.5 million and $9.5 million for the six months ended June 30,
1998 and 1999, respectively. The cash used by operating activities was used
primarily to fund research and development relating to T20, T1249, and other
product candidates. Cash used by financing activities was $1.2 million and $10.7
million for the six months ended June 30, 1998 and 1999, respectively. The
increase for the six months ended June 30, 1999 was due to the purchase of
short-term investments as a result of a our public offering of common stock in
June 1999.
As of June 30, 1999, we had $41.8 million in cash and cash equivalents and
short-term-investments, compared to $20.2 million as of December 31, 1998. The
increase is primarily a result of the closing of a public offering of common
stock in June 1999 which resulted in net proceeds of approximately $31.4
million, less cash used by operating activities.
We have experienced negative cash flows from operations since our inception
and do not anticipate generating sufficient positive cash flows to fund our
operations in the foreseeable future. We have expended, and expect to continue
to expend in the future, substantial funds to pursue our product candidate and
compound discovery and development efforts, including:
o expenditures for clinical trials of T20, T1249 and other product
candidates,
o research and development and preclinical testing of other product
candidates,
o manufacture of drug material, and
o the development of our proprietary technology platform.
9
<PAGE>
As of June 30, 1999, we had commitments of approximately $9 million to
purchase product candidate materials and fund various clinical studies, and
expect to expend approximately $750,000 in capital expenditures during the
remainder of 1999. The majority of these expenditures will be shared equally by
Hoffmann-La Roche under a development and license agreement signed in July 1999.
Under this development and license agreement, we are obligated to share equally
the future development expenses for T20 and T1249 for the United States and
Canada. Our share of these expenditures may be financed with capital or
operating leases, debt or working capital. We expect that our existing capital
resources, together with the interest earned thereon, will be adequate to fund
our capital requirements through 1999. We believe that substantial additional
funds will be required after 1999.
If adequate funds are not available, we will be required to delay, scale-back
or eliminate certain preclinical testing, clinical trials and research and
development programs, including our collaborative efforts with Hoffmann-La
Roche. In addition, we will be required to obtain additional funds, which may be
raised through equity or debt financings. If we raise funds by selling equity,
our stockholders' interest may be diluted. Any debt financings may contain
restrictive terms that limit our operating flexibility. Additionally or
alternatively, we may have to attempt to obtain funds through arrangements with
collaborative partners. These partners may require us to relinquish rights to
our technologies or product candidates or to reduce our share of potential
profits. This could have a material adverse effect on our business, financial
condition or results of operations.
YEAR 2000 COMPLIANCE
STATE OF READINESS. We have adopted a Year 2000 compliance plan and formed a
team to identify and resolve any Year 2000 issues that may affect our business.
Our compliance plan has four phases: inventory, assessment, remediation and
testing. We have completed an inventory of all of our computer systems,
computer-related equipment and equipment with embedded processors. We are
currently in the process of assessing those systems. We have completed this
assessment with respect to most of our systems and expect to complete our
assessment of the remaining systems by September 1999. Although we cannot
control whether and how third parties will address the Year 2000 issue, we have
contacted our critical vendors and suppliers to assess their ability to ensure
smooth delivery of products without disruptions caused by Year 2000 problems. In
the course of our assessment, we have not yet identified any Year 2000 issues
that would affect our ability to do business; however, our assessment is not
complete, and there can be no assurance that there are no Year 2000 issues that
may affect us. Once we complete the assessment phase, we will prioritize and
implement necessary repairs or replacements to equipment and software to achieve
Year 2000 compliance. We expect to complete this phase by October 1999. The
final phase will consist of a testing program for all repairs. We anticipate
that all testing will be completed by November 1999.
COSTS. We have not prepared estimates of costs to remediate Year 2000
problems; however, based on currently available information, including the
results of our assessment to date and our replacement schedule for equipment, we
do not believe that the costs associated with Year 2000 compliance will have a
material adverse effect on our business, financial condition and results of
operations.
RISKS. Although we believe that our Year 2000 compliance plan is adequate to
address Year 2000 concerns, we may experience negative consequences as a result
of undetected defects or the non-compliance of third parties with whom we
interact. Furthermore, there may be a delay in, or increased costs associated
with, the implementation of corrections as the Year 2000 compliance plan is
performed, such as unexpected costs of correcting equipment that has not yet
been fully evaluated. If realized, these risks could result in a material
adverse effect on our business, financial condition and results of operations.
We believe that our greatest risk stems from the potential non-compliance of
our suppliers. We depend on a limited number of suppliers for certain materials,
components, services, including electrical service, and equipment necessary to
operate our research effort and our clinical trials. Accordingly, if those
suppliers are unable to process or fill our orders, provide us with services, or
otherwise interact with us because of Year 2000 problems, we could experience
material adverse effects to our business. We are in the process of assessing the
Year 2000 status of our suppliers and are investigating alternative sources of
supply.
CONTINGENCIES. We have not yet developed a contingency plan to address what
would happen in
10
<PAGE>
the event we are unable to address the Year 2000 issue. The contingency plan is
expected to be completed after the assessment of vendor and customer responses
is completed.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
CLINICAL DEVELOPMENT
The following discussion highlights certain aspects of our on-going and
planned clinical development programs. The results of our previous clinical
trials are not necessarily indicative of the results of future clinical trials.
T20
PHASE II - T20-205
In March 1999, we initiated a roll-over Phase II trial to continue T20
therapy for patients who participated in the earlier clinical trials of T20. The
primary purpose of this trial is to collect data relating to the safety of
long-term administration of T20. Patients in this trial will add T20 to their
individualized anti-HIV drug combinations and will remain on therapy for as long
as they demonstrate acceptable safety and antiviral responses. Approximately
three quarters of the patient population eligible for enrollment enrolled in
this study. We expect to have our initial long-term safety data from this trial
in the third quarter of 1999.
PHASE II - T20-204 (PEDIATRIC)
In cooperation with the Division of AIDS of the National Institute of Allergy
and Infectious Diseases, we are planning to commence a clinical trial in 1999 to
assess the safety, pharmacokinetics and preliminary antiviral activity of T20 in
children. We expect to enroll 12 HIV-infected children. We expect to begin this
pediatric trial in the third quarter of 1999 and complete it by early 2000. We
will use the results from this trial to design larger scale pediatric trials
that we expect to commence following culmination of the safety and
pharmacokinetic trial.
PHASE II - T20-206
In June 1999, we initiated a Phase II trial that should assess the long-term
safety and efficacy of T20 when used in combination with other anti-HIV drugs.
The trial is designed to run for 48 weeks, with formal data collection at 16 and
48 weeks. It is a multi-site, randomized, controlled comparison of three
different doses of T20 in combination with a background regimen of a nucleoside
RT inhibitor, a protease inhibitor and a non-nucleoside RT inhibitor. We intend
to collect data from up to 68 patients who complete treatment. We expect to have
our initial data from this trial in early 2000.
PIVOTAL TRIAL
Based on the results of these Phase II trials, we intend to begin a pivotal
trial late in the fourth quarter of 1999 in a larger population of HIV-infected
patients who are either resistant to, or intolerant of, currently-approved
anti-HIV drugs. Historically, pivotal trials of this type involving anti-HIV
drugs have included approximately 300 to 400 patients and have taken
approximately 18 months to complete.
T1249
We are developing T1249, our second drug candidate for HIV fusion inhibition.
We have filed an IND for T1249 with the FDA.
PHASE I - T1249-101
In June 1999, we initiated a Phase I dose escalation trial to assess the
safety and pharmacokinetics of T1249. Three different daily doses of T1249 will
be administered as monotherapy for 14 days to HIV-infected adults by once or
twice daily subcutaneous injection. T1249-101 will enroll up to 60 HIV-infected
individuals at up to eight sites in the United States.
RISK FACTORS
11
<PAGE>
Our business is subject to certain risks and uncertainties. Please read the
"Risk Factors" and "Business" sections of our Form 10-Q for the three months
ended March 31, 1999 filed with the Securities and Exchange Commission on May
17, 1999 and our Registration Statement on Form S-3 as declared effective by the
Securities and Exchange Commission on May 26, 1999, which highlight some of
these risks. If any of these risks materialize, our business, financial
condition and results of operations could be materially adversely affected.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk is primarily in our investment portfolio. We do
not use derivative financial instruments for speculative or trading purposes. We
have an investment policy that sets minimum credit quality standards for our
investments. The policy also limits the amount of money we can invest in any one
issue, issuer or type of instrument. We have not experienced any material loss
in our investment portfolio.
The table below presents the carrying value, which is approximately equal to
fair market value, and related weighted-average interest rates for our
investment portfolio at June 30, 1999. All of our investments mature in eighteen
months or less.
Carrying Average
Amount Interest
(thousands) Rate
Cash equivalents - fixed rate $ 28,571 5.15 %
Short-term investments - fixed rate 13,009 6.37 %
Overnight cash investments - fixed rate 346 4.93 %
----------- ----------
Total investment securities $ 41,926 5.52 %
=========== ==========
12
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Use of Proceeds:
Initial Public Offering, October 1997
The following information updates and supplements the information
regarding use of proceeds originally filed in our Form 10-Q for the
quarter ended September 30, 1997, as updated and supplemented in our
subsequent periodic reports to date. The registration statement on
Form S-1 (File No. 333-31109) to which this use of proceeds relates
was declared effective on October 6, 1997. A subsequent registration
statement on Form S-1 (File No. 333-37319) was filed pursuant to
Rule 462(b) and declared effective on October 7, 1997. Through March
31, 1999, we have expended for working capital approximately
$24,362,000 of the total net proceeds from our initial public
offering of $34,532,000. The unused proceeds of $10,170,000 are
invested in temporary investments, primarily short-term corporate
debt securities. All proceeds used or invested were direct or
indirect payments to others or payments to directors and officers in
the ordinary course of business. This use of proceeds does not
represent a material change in the use of proceeds described in our
prospectus filed as a part of the registration statement for our
initial public offering.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The following matters were voted upon at the Company's Annual
Stockholders' Meeting held on June 23, 1999:
FOR AGAINST WITHHELD
Election of the following Directors:
Jesse I. Treu, Ph.D. 7,646,808 N/A 1,039,604
Charles A. Sanders, M.D. 8,569,414 N/A 116,998
Appointment of KPMG
LLP as independent accountants for
the year ended December 31, 1999 8,649,777 29,552 7,083
Amendment to the Company's Amended
And Restated Stock Incentive Plan 5,489,863 1,279,334 19,670
13
<PAGE>
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
The exhibits filed as part of this Quarterly Report on Form 10-Q are
listed on the Exhibit Index immediately preceding such exhibits and
such list is incorporated herein by reference.
(b) Reports on Form 8-K
We filed a report on Form 8-K on May 17, 1999 under Item 5 describing
developments for T1249.
14
<PAGE>
SIGNATURES
In accordance with 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.
Trimeris, Inc.
(Registrant)
August 13, 1999 By: /s/ DANI P. BOLOGNESI
- --------------- ----------------------
Dani P. Bolognesi
Chief Executive Officer,
and Chief Scientific Officer
August 13, 1999 By: /s/ MATTHEW A. MEGARO
- --------------- ----------------------
Matthew A. Megaro
President,
Chief Financial Officer,
and Secretary (Principal
Accounting and Financial
Officer)
15
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
10.1 Development and License Agreement between Trimeris
and Hoffmann-La Roche dated July 1, 1999 (Portions
of this exhibit have been omitted pursuant to a
request for confidential treatment filed with the
Commission.)
10.2 Financing Agreement between Trimeris, Inc. and Roche
Finance Ltd. dated as of July 9, 1999
10.3 Registration Rights Agreement between Trimeris, Inc.
and Roche Finance Ltd. dated as of July 9, 1999
10.4 Lease between Trimeris, Inc. and University Place
Associates dated April 14, 1999
10.5 Sublease Agreement between Trimeris, Inc. and Blue
Cross and Blue Shield of North Carolina dated
May 15, 1999
10.6 Lease Agreement between Hamad Jassim Althani and
Blue Cross and Blue Shield of North Carolina,
relating to Sublease Agreement filed as Exhibit 10.5
hereto
11.1 Computations of Basic Loss Per Share
27.1 Financial Data Schedule
16
* Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Commission. The omitted portions, marked
by "*", have been separately filed with the Commission.
AGREEMENT
---------
This Development and License Agreement (the "Agreement"), dated as of July 1,
1999 (the "Effective Date"), is made by and between
TRIMERIS, INC., 4727 University Drive, Durham, North Carolina 27707 ("Trimeris")
on the one hand, and
F. HOFFMANN-LA ROCHE LTD, Grenzacherstrasse 124, CH-4070 Basel, and
HOFFMANN-LA ROCHE INC., 340 Kingsland Street, Nutley, New Jersey 07110, USA
on the other hand (collectively, "Roche")
BACKGROUND
WHEREAS, Trimeris has discovered and is developing a series of proprietary
compounds which act by binding to the glycoprotein GP 41 of the Human
Immunodeficiency virus and may primarily be effective in the treatment of HIV
infection as well as other human viral infection; and
WHEREAS, Roche, through its divisions and/or subsidiaries, is engaged
in the development, production and commercialization of pharmaceuticals; and
WHEREAS, Trimeris and Roche desire to enter into a development and license
agreement for the worldwide development and marketing of certain medical
products
-1-
<PAGE>
for human use.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and obligations set forth in this Agreement, the parties hereby agree
as follows:
ARTICLE 1 - DEFINITIONS
- -----------------------
1.1 "Adjusted Gross Sales" shall mean the gross sales amount invoiced by Roche,
its Affiliates, or sublicensees for the Product to non-Affiliated third party
purchasers less, to the extent such amounts are included in the amount of gross
sales invoiced and not otherwise recovered, *.
1.2 "Affiliate" shall mean:
a) an organization fifty percent (50%) or more of the voting stock of
which is owned and/or controlled directly or indirectly by a party to this
Agreement;
b) an organization which directly or indirectly owns and/or controls fifty
percent (50%) or more of the voting stock of a party to this Agreement; or
c) an organization which is directly or indirectly under common control
with a party to this Agreement through common share holdings.
The term Affiliate shall not include Genentech, Inc., 1 DNA Way, South San
Francisco, California, U.S.A., unless Roche, in its sole discretion, notifies
Trimeris that Genentech shall be so considered an Affiliate and Genentech agrees
in writing to be bound by the terms and obligations of this Agreement.
1.3 "Allowable Expenses" shall have the meaning as defined in Appendix A.
1.4 "Bulk Product" shall mean all bulk forms of the active ingredient of
Product.
-2-
<PAGE>
1.5 "Compound 1" shall mean T-20.
1.6 "Compound 2" shall mean T-1249 *.
1.7 "Compounds" shall mean all compounds covered by the Trimeris Patents listed
in Appendix C including e.g. Compound 1, Compound 2, and *.
Compounds shall include the salts and prodrugs of Compounds.
1.8 "COGS" shall have the meaning as defined in Appendix A.
1.9 "Development Costs" shall have the meaning as defined in Appendix A.
1.10 "FDA" shall mean the Food and Drug Administration in the USA and equivalent
governmental agencies outside the USA.
1.11 "Field of Use" shall mean *.
1.12 "Finished Product" shall mean all finished , packaged final dosage units of
Product.
1.13 "Initiation of First Phase III" shall mean *
1.14 "Information" shall mean any and all materials, trade secrets or other
information related to the making, having made, using, offering for sale,
selling or importing Product (including, without limitation, Technical
Information and business information or objectives) which is disclosed by one
party to the other party.
1.15 "Inventory Costs" shall have the meaning as defined in Appendix A hereto.
-3-
<PAGE>
1.16 "Joint Invention" shall mean any invention (whether or not patentable)
resulting from activities arising under this Agreement which is (a) conceived
and reduced to practice by both parties during the Term of this Agreement or (b)
conceived by both parties during the Term of this Agreement and reduced to
practice, by either or both parties, within 24 months of the expiration or
termination of this Agreement.
1.17 "Joint Patents" shall mean all Patents claiming Joint Inventions, and all
Patents claiming Trimeris Inventions or Roche Inventions which relate to
improvements or modifications of Compound 1 or Compound 2 the practice of which
would infringe a Valid Claim of a Trimeris Patent.
1.18 "Launch of Product" shall mean the first date upon which a Product is
shipped commercially by Roche to an independent third party in a country, after
formal marketing approval in that country, including any required price
approval, has been granted from the relevant authority in that country for that
Product.
1.19 "NDA" shall mean a New Drug Application or Product License Application
filed with the FDA, or its foreign equivalent, for approval to market and sell a
drug or biological.
1.20 "Net Sales" shall mean the amount calculated by subtracting from Adjusted
Gross Sales *
1.21 "Patents" shall mean:
(a) patents and the patent applications relating to the subject
matter of this Agreement, including
(b) all patents arising from said applications and all patents and patent
-4-
<PAGE>
applications based upon or claiming the priority date(s) of any of the
foregoing;
(c) any additions, divisions, continuations, continuations-in-part,
amendments, amalgamations, reissues and re-examinations of such applications or
patents;
(d) any confirmation, importation and registration patents thereof or
therefore; and
(e) any extensions and renewals of all such patents and patent
applications in whatever legal form and by whatever legal title they are granted
(e.g. supplementary protection certificates).
1.22 "Product" shall mean any pharmaceutical product which contains at least one
of the Compounds. The term Product shall include Bulk Product, Semi-Finished
Product and Finished Product. A "Product" may contain more than one active
principle.
1.23 "Product 1" shall mean a Product containing at least Compound 1.
1.24 "Product 2" shall mean a Product containing at least Compound 2.
1.25 "Products" shall mean Product 1 and Product 2 and any other Product.
1.26 "Profit or Loss" shall mean the profit or loss from the sales of a Product
in the USA and Canada and shall be defined as Adjusted Gross Sales of Product
less Allowable Expenses.
"Profit" shall mean an excess of such Adjusted Gross Sales over Allowable
Expenses. "Loss" shall mean an excess of Allowable Expenses over such Adjusted
-5-
<PAGE>
Gross Sales. Profit or Loss shall be calculated as defined in Appendix B.
1.27 "Regulatory Approval" shall mean the approval, license, registration or
other authorization (including price approval) of the FDA within a particular
country necessary for the commercial sale of the Product in said country.
1.28 *
1.29 "Roche Invention" means *
1.30 "Semi-Finished Product" shall mean all forms of the Product which are
filled but not packaged.
1.31 "Technical Information" shall mean any and all technical data, information,
materials including samples of Product, chemical manufacturing data,
toxicological data and pharmacological data, clinical data, medical uses,
formulations, specifications, quality control testing data, and all submissions
and correspondence to and from the FDA with regard to Product made by or on
behalf of Trimeris or its Affiliates, which is reasonably useful to enable Roche
to make, have made, use, offer for sale, sell or import Product.
1.32 "Term of the Agreement" shall mean the time period set forth in Section 9.1
of this Agreement.
1.33 "Trimeris Invention" means *
1.34 "Trimeris Know-how" shall mean all know-how (including Technical
Information) owned by or licensed (with the right to grant sublicenses) to
Trimeris on the Effective Date or at any time during the Term of this Agreement,
relating to the making, having made, using, offering for sale, selling and
importing of a Compound
-6-
<PAGE>
and a Product.
1.35 "Trimeris Patents" shall mean (a) all Patents owned by or licensed (with
the right to grant sublicenses) to Trimeris as of *. Such Trimeris Patents
include all those patents and patent applications as set forth in Appendix C;and
(b) all Patents acquired by Trimeris after the Effective Date which Trimeris, in
its sole discretion, and subject to Roche's agreement, chooses to include within
the scope of this Agreement. Trimeris, from time to time, but not less than once
a year during the Term of the Agreement shall, if there are any changes, update
Appendix C and provide the updated Appendix C to Roche.
1.36 "Trimeris Proprietary Rights" shall mean *.
1.37 "Valid Claim" means a claim in any Trimeris Patent that has not been
disclaimed, revoked or held invalid by a final unappealable decision of a court
of competent jurisdiction, and which claim, if issued, is otherwise enforceable.
2. GRANT OF RIGHTS
---------------
2.1 License Grant. Subject to a reserved right and license to Trimeris solely
for the purpose of fulfilling its obligations under this Agreement, Trimeris
grants Roche a worldwide, sole and exclusive right and license, with the right
to sublicense (except as set forth in Sections 2.2 and 2.3), to make and have
made, use, offer for sale, import and sell Compounds and Products under the
Trimeris Proprietary Rights and Trimeris' part of the Joint Patents.
The sole and exclusive license with regard to a Product hereunder shall
become non-exclusive on a country-by-country basis at the later of *.
-7-
<PAGE>
Notwithstanding the foregoing, Trimeris shall have the right to grant
licenses to third parties for Compounds and Products, other than Compound 1 and
2 and Product 1 and 2, for all indications outside the Field of Use. In the
event that Trimeris has granted such licenses at the time when such Compounds
start to be developed under this Agreement, the rights and licenses to Roche
under this Agreement with regard to such Compounds and Products shall be limited
to all indications within the Field of Use.
2.2 Sublicenses. Except as otherwise provided in Section 2.3 below, Roche shall
have the right to sublicense the rights granted under Section 2.1 above to any
given third party.
If Roche grants a sublicense, all of the terms and conditions of this
Agreement shall apply to the sublicensee to the same extent as they apply to
Roche for all purposes. Roche assumes full responsibility for the performance of
all obligations so imposed on such sublicensee and will itself pay and account
to Trimeris for all payments due under this Agreement by reason of the operation
of any such sublicenses.
2.3 Trimeris Rights of First Negotiation in the USA. Roche's rights to
sublicense in the USA to any third party are subject to the prior written
approval of Trimeris. Trimeris shall not unreasonably withheld such approval.
*
3. DEVELOPMENT
-----------
3.1 Cooperation. Roche and Trimeris will jointly develop the Product to obtain
Regulatory Approval in the USA and Canada.
3.2 Joint Steering Committee. (a) Within twenty (20) days after the Effective
Date, the parties shall form a Joint Steering Committee ("JSC"), consisting of
an
-8-
<PAGE>
equal number of representatives from each of Roche and Trimeris, which equal
number shall not exceed three (3). One of the three representatives of each
party shall be a specialist in manufacturing. The JSC shall be chaired by a
representative from Roche. The JSC shall have the following responsibilities:
(i) approve the annual development plans and related budgets for the worldwide
development of the Product with a focus on Regulatory Approval in the USA,
Canada and the EU ("Development Program"), (ii) monitor the Development Program
and modifications thereto, including the assignment of contributions by the
parties to the conduct of clinical trials and the responsibility for filings,
interactions with the USA FDA and the appropriate time for transfer of
regulatory responsibility to Roche; (iii) establish subcommittees and project
teams on an as-needed basis; and (iv) undertake such other activities as may be
agreed upon by the parties. The JSC shall meet at least twice per year, once in
Europe and once in the USA.
(b) To implement its policies, within forty (40) days after the Effective
Date, the JSC shall establish a Development Project Team ("DPT") containing an
appropriate number of representatives from Roche and Trimeris. The DPT will (i)
prepare and submit to the JSC for approval the Development Program, and, (ii)
under the oversight of the JSC, implement and monitor the Development Program,
including submitting proposed modifications thereof to the JSC for its approval.
The DPT shall be chaired by a Roche representative who shall direct the
day-to-day operations of the DPT in implementing the Development Program.
(c) The DPT will annually establish the Development Program, consisting of
a development plan and a development budget for the development of the Product
directed to the Regulatory Approval of the Product in the USA, Canada and the
EU. The first version of the Development Program shall be submitted for approval
by the JSC within sixty (60) days from the Effective Date.
The JSC shall determine and agree which activities and costs shall be
-9-
<PAGE>
considered as pertaining to the Development Program and which are a priori
incurred with the primary purpose of Regulatory Approval of the Product in the
USA and Canada.
The development plan shall be prepared on a Product-by Product and
activity-by activity basis, for at least eight (8) calendar quarters in advance
and shall be updated on a quarterly basis.
A rolling development budget, per main development function and in USD
will be derived from such development plan and shall identify manpower used,
expressed as Full Time Equivalents ("FTE"), standard fully loaded FTE rates and
costs to be incurred by each party, either internally or externally. The rolling
development budget shall identify activities in each main development function,
as detailed in Appendix A, in sufficient activity detail to allow an appropriate
monitoring of expenses versus budget. The parties shall update the development
budget on a quarterly basis and may revise it if changes in the Development
Program so require it.
3.3 JSC Decisions.
(a) Consensus. Decisions of the JSC regarding development of Product shall
be made by consensus. If the JSC is unable to reach consensus on any development
decision, the issue shall be submitted for consideration to the Head of the
Pharmaceutical Division of Roche and to the Chief Executive Officer of Trimeris.
(b) Lack of Consensus. In the event that the issue can not be resolved by
the individuals named in subparagraph a) above, then
(i) if such issue relates to the USA or Canada the issue must promptly be
brought to an independent neutral expert selected by the parties or, if within
thirty (30) days the parties are unable to agree upon an independent neutral
expert, one
-10-
<PAGE>
selected by the American Arbitration Association, to determine whether such
development commitment is reasonably necessary, consistent with prudent business
practices, to obtain Regulatory Approval of the Product in the USA and Canada.
Such determination shall include consideration of whether development or
commercialization, directly or indirectly, would have a material adverse impact
on the worldwide potential of Product from a business or scientific viewpoint.
If the neutral expert determines that the commitment is reasonably necessary,
then such activities shall be included within the Development Plan. If the
neutral expert determines that the commitment is not reasonably necessary, then
such commitment shall not be included within the Development Plan;
(ii) if such issue relates to countries outside the USA or Canada, Roche
shall have the final decision right.
3.4 Development Costs. (a)The Development Program shall be the
reference for sharing Development Costs ("DC"). DC incurred in connection
with the Development Program shall be shared equally between the parties, * .
(b) The parties shall conduct the Development Program in accordance with
annual budgets and shall share DC provided that they relate to activities which
have been planned for and budgeted in the development plans and development
budgets of the Development Program according to the Regulatory Approval
submission purpose as determined by the JSC.
(c) DC incurred by the parties and directed solely and exclusively to the
Regulatory Approval of the Product outside the USA and Canada shall remain the
sole cost of Roche.*
-11-
<PAGE>
(d) In the case of i) activities or costs which have not been planned and
budgeted but have actually been incurred by a party or ii) actual costs of
planned activities which have significantly exceeded (more than 10 %) the amount
budgeted, the JSC shall decide whether and/or how such additional costs shall be
shared between the parties.
(e) Notwithstanding the above, the parties shall share Development Costs
incurred after the Effective Date, e.g. payments made after the Effective Date
shall be shared to the extent they relate to activities performed after the
effective date and payments made before the Effective Date shall be shared to
the extent they cover activities performed after the Effective Date.
(f) The reporting and settlement of DC shall be as set forth in Appendix
A. Reports provided to Roche shall be sent to:
F. Hoffmann-La Roche Ltd
Department PFD
CH-4070 Basel, Switzerland
or to any other address that Roche may advise in writing.
Reports provided to Trimeris shall be sent to:
Trimeris, Inc.
47827 University Drive
Durham, NC 27707
Attn: Timothy J. Creech, Director of Finance
or to any other address that Trimeris may advise in writing.
(g) All Development Costs payable to a party under this Agreement shall be
payable in USD by wire transfer to a bank account designated by the party.
-12-
<PAGE>
3.5 Audit. The parties shall maintain and cause the third parties acting for
their account to maintain books of account and complete and accurate records
pertaining to the DC in sufficient detail to permit to confirm the correct
calculation of DC.
At a party's ("Auditing Party") request, the other party ("Audited Party")
will cause its independent certified public accountants to prepare abstracts of
its's relevant business records for review by the Auditing Party. If, based upon
a review of such abstracts, the Auditing Party reasonably believes that a full
audit of said business records would be necessary for the confirmation of the
accuracy of all payments due hereunder, the Auditing Party shall have the right
to engage the Audited Party's independent public accountant to perform, on
behalf of the Auditing Party, an audit of all work papers and supporting
documents pertinent to such abstracts.
Such auditing shall not be requested to be performed more frequently than
once per calendar year nor more frequently than once with respect to records
covering any specific period of time, shall be performed upon no less than
thirty (30) days prior written notice to the Audited Party, during the Audited
Party's normal business hours and shall not commence later than three (3) years
following the end of the period requested to be audited.
The Auditing Party will bear the full cost of the preparation of abstracts
and any such audit unless such abstracts or audit discloses an underpayment to
the auditing party of more than five percent (5%) from the amounts paid. The
Audited Party shall (1) promptly pay any underpayment due the Auditing Party
and, (2) if the underpayment due to the auditing party is more than five percent
(5%) of the amount paid, bear the full reasonable cost of such audit. Any
overpayment by the Audited Party shall be deducted from the next payment due the
Auditing Party under Section 3 of this Agreement or, if no such further payments
are due promptly reimbursed by the Auditing Party.
-13-
<PAGE>
The failure of a party to request verification of any calculation of DC
during the period when records have to be retained shall be considered
acceptance of the accuracy of such reporting by such party.
The terms of this Section 3.5 shall survive the term of this Agreement for
a period of three (3) years.
3.6. Due Diligence. Roche shall use best efforts consistent with prudent
business practices to develop Product 1 and Product 2 or any other Products the
parties agree shall be developed hereunder and obtain and maintain necessary
governmental approval to market these Products. Trimeris shall use best efforts
consistent with prudent business practices to perform its development activities
defined hereunder. "Best efforts" with regard to Roche shall mean the standard
of effort consistent with the efforts major pharmaceutical companies devote to
significant general practice products of similar market potential derived from
internal research programs. "Best efforts" with regard to Trimeris shall mean
the standard of effort consistent with the efforts established public biotech
companies devote to significant general practice products of similar market
potential derived from internal research programs.
3.7 IND. Prior to the transfer of the IND in the USA to Roche, Roche shall
receive copies of all material correspondence with the FDA and shall have the
right to be present at all meetings with the FDA related to Products. Beginning
at the time of transfer of ownership of the IND to Roche, Roche shall be
primarily responsible with Trimeris' assistance for all regulatory affairs in
the USA and Canada. In addition, Trimeris shall either transfer ownership of, or
provide Roche with letters of access to, any drug master files or other
regulatory dossiers containing information necessary or useful to Roche in
connection with its regulatory filings for Product, with the choice between
transfer or providing letters of access to be made in the discretion of
-14-
<PAGE>
Trimeris.
After the transfer of the IND in the USA to Roche, Trimeris shall receive
copies of all material correspondence with the FDA and shall have the right to
be present at all meetings with the FDA related to Products.
3.8 NDA. The NDA for Product shall be owned by Roche or its Affiliates and filed
by Roche or its Affiliates.
3.9 Data. All data generated on account of the Development Program shall be
owned jointly by Roche and Trimeris and shall not be provided to any third party
without the consent of both parties.
3.10 Withholding Tax. With respect to Development Costs, each party will remit
payments to the other party due under this Article 3 without deduction of any
withholding taxes which may otherwise be due, provided, however, that to the
extent that the tax burden of Trimeris is not encreased, Roche shall be entitled
to the extent required under the tax law of a given country, withhold such
withholding taxes from any such sum and forthwith upon paying such sum to the
given countries' tax authorities promptly furnish Trimeris with the receipt
thereof in respect of the same. The parties agree to cooperate in all respects
necessary to (a) take advantage of reduced withholding tax rates available under
any applicable tax treaties, and (b) assist Trimeris in obtaining any refunds
for Trimeris of amounts withheld and paid to tax authorities.
4. SUPPLY AND MANUFACTURING
------------------------
4.1 *.
4.2 Supply Price. Supply of (i) clinical material shall be at Manufacturing Cost
-15-
<PAGE>
("MC") as defined in Appendix A and (ii) commercial material shall be at COGS.
4.3 Manufacturing/Supply Agreement. In due time but not later than six (6)
months after the Effective Date, the parties shall discuss in good faith and
conclude a manufacturing/supply agreement for Products.
4.4 Finished Product Specifications - The Development Project Team will define
one set of specifications for the Finished Product and its manufacturing process
that will allow Regulatory Approval of Product (according to existing practice
and/or guidelines) in the USA and major European countries. In the case that
there exists no such practice or guidelines, these specifications will be based
upon best guidance from the FDA in the USA and major European countries. Such
specifications will be presented to the JSC for approval as part of the
Development Plan and be pursued globally for the registration of Product.
The production of Finished Product, meeting the aforementioned specifications
must be deemed by the JSC to be sufficient to meet reasonable worldwide
commercial requirements defined in the forecasts for Product as approved by the
JSC prior to filing for regulatory approval.
5. COMMERCIALIZATION
-----------------
5.1 Due Diligence. Roche shall use best efforts consistent with prudent business
practices to market and sell Product 1 and Product 2 and any other Products the
parties agree to commercialize hereunder in all major countries of the world
(i.e., USA, Japan, Germany, France, Italy, United Kingdom, Canada and Brazil).
Best efforts for Roche under this Section 5.1 shall mean the standard of effort
consistent with the efforts major pharmaceutical companies devote to significant
general practice products of similar market potential derived from internal
research programs.
-16-
<PAGE>
Trimeris shall use best efforts consistent with prudent business practices
to fulfil its obligations under the commercialization phase of the Products in
the USA and Canada. Best efforts for Trimeris under this Section 5.1 shall mean
the standard of effort consistent with the efforts established public biotech
companies devote to significant general practice products of similar market
potential derived from internal research programs.
5.2 Marketing and Promotion. While Roche retains sole responsibility and right
to make decisions for the marketing and promotion of Product outside of the USA
and Canada, the contribution of Trimeris to marketing in the USA and Canada are
reflected in Appendix D.
5.3 Trademarks. Roche shall own the trademarks for a given Product and Roche
shall bear the cost of obtaining and maintaining such trademarks.
5.4 Use of the Trimeris Name. The packaging and promotional materials for the
Products marketed by Roche and/or Roche's sublicensees shall identify Trimeris
as licensor. If only one name is allowed to be in any specific item of packaging
or promotional material pursuant to governmental laws or regulations, then Roche
may use its name alone on such item, without identifying Trimeris as licensor.
6. CONSIDERATION
-------------
6.1 Development Payments.
---------------------
(a) Development Fee. Roche shall pay to Trimeris a development fee as
contribution for past development costs of ten million USD (10,000,000) within
ten (10) days following the Effective Date and receipt of an invoice from
Trimeris. Such fee shall be nonrefundable and noncreditable.
-17-
<PAGE>
(b) Product 1. Roche shall make the following non-refundable payment(s) to
Trimeris within thirty (30) days after (i) the first achievement of the
respective event(s) set forth below for Product 1 and (ii) receipt of an invoice
from Trimeris:
*
(c) Product 2. Roche shall make the following non-refundable payment(s) to
Trimeris within thirty (30) days after (i) the first achievement of the
respective event(s) set forth below for Product 2 and (ii) receipt of an invoice
from Trimeris:
*
(d) *
(e) Reduction of Manufacturing Costs. Roche shall make the following
non-refundable payment(s) to Trimeris within thirty (30) days after (i) the
first achievement due to Trimeris of the respective event(s) set forth below for
Product 1 and (ii) receipt of an invoice from Trimeris:
*
(f) Withholding Tax. When due and payable, Roche will remit each of the
above payments under Section 6.1 to Trimeris without deduction of any
withholding taxes which may otherwise be due, provided, however, that to the
extent that the tax burden of Trimeris is not increased, Roche shall be entitled
to the extent required under the tax law of a given country, to withhold such
withholding taxes from any such sum and forthwith upon paying such sum to the
given countries' tax authorities promptly furnish Trimeris with the receipt
thereof in respect of the same. The parties agree to cooperate in all respects
necessary to (a) take advantage of reduced withholding tax rates available under
any applicable tax treaties, and (b) assist Trimeris in obtaining any refunds
for Trimeris of amounts withheld and paid to tax authorities.
-18-
<PAGE>
6.2 Payments - USA and Canada.
(a) Profit or Loss from sales for each of the Products in the USA and
Canada shall be calculated on a country by country basis and on the basis of the
Profit and Loss statement which is attached hereto as Appendix B. Within sixty
(60) days from the first filing of a Product NDA in the USA or Canada the
parties shall meet and agree on the details relating to the definition,
calculation, accounting of the elements of Allowable Expenses and reporting,
currency conversion, payment timeframe and other reimbursement procedures of
Profit and Loss.
(b) Profit or Loss from sales of Product in the USA and Canada shall be
equally shared between the parties, *.
(c) Duration. The duration of payments under Section 6.2 in the USA and
Canada shall on a country by country basis continue for the longer of *
(d) Milestones on Sales for Product 1. If Net Sales of Product 1 in the
USA and Canada exceed *, Roche shall pay Trimeris *. Payment shall be made
within ninety (90) days after the end of the last month of the twelve months
period. Such payment shall only be due once for Product 1.
(e) Milestones on Sales of Product 2. If Net Sales of Product 2 in the USA
and Canada exceed *, Roche shall pay Trimeris *. If Net Sales of Product 2 in
the USA and Canada exceed *, Roche shall pay Trimeris *. Payments shall be made
within ninety (90) days after the end of the last month of the twelve months
period. Such payments shall only be due once for Product 2 and shall in no case
exceed a total of *.
-19-
<PAGE>
(f) No Milestones on Sales of Products other than Product 1 and 2. No
milestones shall be due by Roche to Trimeris on Net Sales of any Product other
than Product 1 and 2.
6.3 Payments - Outside the United States and Canada.
------------------------------------------------
(a) Royalties for Product 1 and 2. For sales of Product 1 and 2 in all
countries outside the USA and Canada, Roche shall pay Trimeris a royalty of (i)
* for that portion on Net Sales of Product outside the USA and Canada up to and
including * and (ii) * for that portion on Net Sales of Product outside the USA
and Canada above * ("ex-US Royalties").
(b) Royalties for Products other than Product 1 and 2. For sales of
Products other than Product 1 and 2 in all countries outside the USA and Canada,
Roche shall pay Trimeris a royalty of (i) * for that portion on Net Sales of
Product outside the USA and Canada up to and including * and (ii) * for that
portion on Net Sales of Product outside the USA and Canada above * ("ex-US
Royalties").
(c) Report. Within ninety (90) days after the end of each calendar
quarter, Roche shall provide Trimeris with a report of Net Sales of Product sold
by Roche in countries outside the USA and Canada for that calendar quarter and
compute the amount of royalties owed by Roche to Trimeris under this Section
6.3. Payment of such royalties shall accompany this report.
(d) Duration. The duration of payment of royalties under this Section 6.3
in a country shall continue for the longer of *.
(e) Third party Entry Outside the United States and Canada. If, in a
country outside the USA and Canada, in any calendar quarter one or more third
-20-
<PAGE>
parties other than an Affiliate or sublicensee of Roche achieves market
penetration which, with respect to a third product (and all formulations
thereof) containing the same Compound (including acids, salts or esters thereof)
as found in the given Product, cumulatively amounts to more than a * market
share in such country of units of such product as determined on a unit basis in
such calendar quarter, the ex-US Royalties otherwise due from Roche to Trimeris
under this Section 6.3 shall be reduced by *. In the event such third party
market share shall exceed *, the reduction of Royalties due from Roche shall be
*.
(f) Milestone on Sales of Product 1 and 2 If combined Net Sales of Product
1 and 2 outside the USA and Canada exceed *, Roche shall pay Trimeris *. Payment
shall be made within ninety days after the end of the last month of the twelve
months period. Such payment shall only be due once. No milestone shall be due on
sales of any Product other than Product 1 and 2.
(g) Royalty Cap If the sum of (i) COGS of Finished Product plus (ii)
royalties to Trimeris are superior to * of the Net Sales of such Product outside
the USA and Canada, the royalty for such Product to Trimeris shall be reduced
such that the above-mentioned sum is reduced to * of the above-mentioned Net
Sales, however in no case shall the royalty rate applicable be lower than * and
* respectively for Product 1 and 2 and * and * respectively for any Product
other than Product 1 and 2. The royalty cap shall only apply in a calendar year
in which the Net Sales of the respective Product outside the USA and Canada are
lower than *.
6.4 Withholding Tax. All payments under Sections 6.2 and 6.3 shall be made in
full without deduction of taxes, charges and any other duties ("Taxes") that may
be imposed, provided, however, that Roche shall to the extent required under the
tax law of a given country, withhold such Taxes from any such sum and forthwith
upon paying such sum to the given countries' tax authorities promptly furnish
Trimeris with the receipt thereof in respect of the same. The parties agree to
cooperate in all
-21-
<PAGE>
respects necessary to (a) take advantage of reduced withholding tax rates
available under any applicable tax treaties, and (b) assist Trimeris in
obtaining any refunds for Trimeris of amounts withheld and paid to tax
authorities.
6.5 Third Party Payments outside the USA and Canada. If Roche, in good faith,
pays consideration under patent rights or know-how owned or controlled by a
party other than Trimeris, which in Roche's opinion, is reasonably required to
allow Roche to make, have made, use, import, offer for sale or sell Product in a
given country, Roche may deduct * of such consideration from the royalty
payments payable by Roche to Trimeris under this Agreement.
Trimeris shall be solely responsible for all royalties and other payments
that may be due or payable by it to a third party, during the Term of this
Agreement, including any payments that may become due under agreements entered
into subsequent to the Effecitve Date. Subject to the provisions of 8.4, Roche
shall reimburse such payments made by Trimeris which are reasonably required to
make, have made, use, import, offer for sale or sell Product in a given country
provided that Roche may deduct * of such reimbursement from the royalty payments
payable by Roche to Trimeris under this Agreement
However, in no event shall any such royalty payment to Trimeris be reduced
by more than * in any quarter as a result of such consideration, with any
amounts not utilized as a result of such limitation ("Unutilized Amounts") being
carried forward to future reporting periods. Within thirty (30) days after the
end of the Term of the Agreement for a given country, Trimeris shall reimburse
Roche for an amount equal to the cumulative Unutilized Amounts for such country,
however, in no case shall the payment of the cumulative Unutilized Amounts
reduce the total royalty otherwise due in that country by more than *.
6.6 Royalties Due Once. Sales of Product between and among Roche, its
-22-
<PAGE>
Affiliates and its sublicensees shall not be subject to a royalty. The
obligation to pay royalties to Trimeris under this Agreement is imposed only
once with respect to the same unit of Product.
6.7 Combination Products. For any product containing both a pharmaceutically
active agent which causes it to be considered a Product and one or more other
pharmaceutically active agents which are not Products ("Combination Product"),
the parties shall in good faith negotiate and agree to an appropriate adjustment
to the Net Sales to reflect the relative contribution of each Product and each
other pharmaceutically active agent which is not a Product to the Combination
Product. If, after good faith negotiations (not to exceed ninety (90) days,
which can be extended by mutual agreement), the parties can not agree to an
appropriate adjustment, Net Sales shall be equal to Net Sales of the Combination
Product multiplied by a fraction, the numerator of which is the reasonable fair
market value of the Compounds contained in the Combination Product and the
denominator of which is the reasonable fair market value of all pharmaceutically
active agents contained in the Combination Product.
6.8 Currency. All amounts payable to Trimeris under this Agreement shall be
payable in USD by wire transfer to a bank account designated by Trimeris. When
calculating the Adjusted Gross Sales, the amount of such sales in foreign
currencies shall be converted into CHF as computed by Roche in its Swiss Francs
sales statistics for the countries concerned, using the average rate of exchange
at the time for such currencies as retrieved from the Reuters System. When
calculating the royalties on Net Sales, such conversion shall be at the average
rate of CHF to USD as retrieved from the Reuter's System for the applicable
period.
6.9 Blocked Country. If at any time a Product is sold in a country in which
conditions or legal restrictions exist which prohibit remittance of USD or CHF
("Blocked Country") the following provisions shall apply to the payment of the
-23-
<PAGE>
corresponding royalty, depending on where the Product is made:
(a) If such Product is made in the same or another Blocked Country, Roche
shall make such royalty payment by depositing the amount thereof in the currency
of the country of sale or manufacture, at Trimeris's election, to Trimeris's
account in a bank designated by Trimeris in such country.
(b) If such Product is made in a country which is not a Blocked Country,
then a "number" shall be obtained by multiplying the applicable royalty rate by
the price at which the Product is sold to the entity selling in the Blocked
Country. Roche or its Affiliate (i) shall pay that "number" to Trimeris as
converted to USD in accordance with Section 6.8, and (ii) shall deposit the
excess of the applicable royalty over the "number", in the currency of the
country of sale of the Product, to Trimeris's account in a bank designated by
Trimeris in such Blocked Country.
6.10 Audit. Roche shall keep, and shall require its Affiliates and sublicensees
to keep, accurate and correct records of Products sold under this Agreement
appropriate to determine the amounts due hereunder to Trimeris. Such records
shall be retained for at least three (3) years following the end of the calendar
year to which such records pertain.
At Trimeris request, Roche will cause its independent certified public
accountants to prepare abstracts of Roche's relevant business records for review
by Trimeris. If, based upon a review of such abstracts, Trimeris reasonably
believes that a full audit of said business records would be necessary for the
confirmation of the accuracy of all payments due hereunder, Trimeris shall have
the right to engage Roche's independent public accountant to perform, on behalf
of Trimeris, an audit of all work papers and supporting documents pertinent to
such abstracts.
The audit rights under this Agreement may be exercised by Trimeris (i) no
-24-
<PAGE>
more often than once per calendar year, (ii) not more frequently than once with
respect to records covering any specific period of time, and (iii) within three
(3) years after the payment period to which such records relate. The audit shall
be performed upon no less than thirty (30) days prior written notice to Roche,
during Roche's normal business hours. The terms of this Section 6.10 shall
survive the Term of the Agreement for a period of three (3) years.
Trimeris will bear the full cost of any such abstracts or audit unless
such audit discloses an underpayment to Trimeris of more than five percent (5%)
from the amounts paid. Roche shall promptly (i) pay any underpayment due to
Trimeris and, (ii) if the underpayment is more than five percent (5%) of the
amount paid, Roche shall bear the full reasonable cost of such audit. Any
overpayment by Roche shall be deducted from the next payment due Trimeris under
Section 6 of this Agreement or, if no such further payments are due, promptly
reimbursed to Roche by Trimeris.
6.11 Mechanism for Adjustment. Should any amount such as reductions, credits or
deductions otherwise allowable to Roche for a country under this Agreement not
be utilized by Roche upon the termination of this Agreement, then Trimeris shall
promptly reimburse Roche for the allowable amount.
7. INFORMATION
-----------
7.1 Exchange. Following the Effective Date, Trimeris shall make available to
Roche all Trimeris Proprietary Rights which have not been disclosed to Roche
until the Effective Date.
During the Term of the Agreement, the parties will, free of charge,
exchange and, to this end, the parties shall establish a mechanism by which the
parties will share, Information necessary for the parties to meet their
obligations under this Agreement.
-25-
<PAGE>
In particular, a party shall, to the extent it is legally permitted to do
so, exchange all information coming into its possession or control, or its
representatives or Affiliates possession or control, relating to formulation,
manufacture, improvement, use and sale of Product, including any such
information consisting of technical, pharmacological, preclinical, clinical,
biochemical, toxicological and pharmacokinetic experimental data and results
related to Product. Each party shall also permit a reasonable number of
representatives of the other party or its Affiliates, at reasonable time and
upon reasonable notice, to observe, review, make copies of, and/or discuss with
the party or its Affiliate's scientists and/or clinicians supervising or
conducting research related to Product, the results of studies and/or
submissions to governmental agencies concerning Products, at mutually agreeable
times and locations. Each party shall also permit a reasonable number of
representatives of the other party or its Affiliates, at reasonable time and
upon reasonable notice, to observe, review, make copies of, and/or discuss with
its or its Affiliate's scientists supervising or conducting manufacture of
Product or third party scientists supervising or conducting manufacture on
behalf of it, at mutually agreeable times and locations.
7.2 Information. During the Term of the Agreement and for five (5) years after
termination, a Receiving party shall a) treat Information provided by a
Disclosing party as it would treat its own information of a similar nature and
take all reasonable precautions not to disclose such Information to third
parties except Affiliates or actual or potential sublicensees who agree to be
bound by the same terms and conditions as found in this Article 7, without the
other party's prior written authorization and b) not use such Information for
other than the purposes of fulfilling its obligations under this Agreement.
The provisions of this Section 7.2 shall not apply to such Information
which:
-26-
<PAGE>
(a) was known or used by the Receiving party or its Affiliates prior to
its date of disclosure to the Receiving party or its Affiliates by the
Disclosing party or its Affiliates, as evidenced by the prior written records of
the Receiving party or its Affiliates; or
(b) either before or after the date of the disclosure to the Receiving
party or its Affiliates, is lawfully disclosed to the Receiving party or its
Affiliates by a third party rightfully in possession of such information; or
(c) either before or after the date of the disclosure to the Receiving
party or its Affiliates, becomes published or generally known to the public
through no fault or omission on the part of the receiving party or its
Affiliates, but such inapplicability applies only after such information is
published or becomes generally known; or
(d) is independently developed by the Receiving party or its Affiliates
without reference to or reliance upon any such information of the Disclosing
party or its Affiliates; or
(e) is required to be disclosed by the Receiving party or its Affiliates
to comply with applicable laws, to defend or prosecute litigation or to comply
with governmental regulations, provided that, the Receiving party or its
Affiliates provides prior written notice of such disclosure to the Disclosing
party or its Affiliates and, to the extent practicable, takes reasonable and
lawful actions to avoid and/or minimize the degree of such disclosure.
7.3 Publications. During the Term of the Agreement, the following restrictions
shall apply with respect to disclosure by any party of Information in any
publication or presentation (collectively "Publications"):
(a) A party ("Publishing party") shall provide the other party with a copy
of
-27-
<PAGE>
any proposed Publication at least forty-five (45) days or less if agreed by both
parties within the DPT prior to submission for publication so as to provide such
other party with an opportunity to recommend any changes it reasonably believes
are necessary to continue to maintain the Information disclosed by the other
party to the Publishing party in accordance with the requirements of this
Agreement . The incorporation of such recommended changes shall not be
unreasonably refused; and
(b) If such other party notifies ("Notice") the Publishing party in
writing, within forty-five (45) days of receipt of the copy of the proposed
Publication, that such Publication in its reasonable judgment (i) contains an
invention, solely or jointly conceived and/or reduced to practice by the other
party, for which the other party reasonably desires to obtain patent protection
or (ii) could be expected to have a material adverse effect on the commercial
value of any Information disclosed by the other party to the Publishing party,
the Publishing party shall prevent such publication or delay such publication
for a mutually agreeable period of time. In the case of inventions, a delay
shall be for a period reasonably sufficient to permit the timely preparation and
filing of a patent application(s) on the Invention, and in no event less than
one hundred and eighty (180) days from the date of Notice. In the event the
parties do not agree as to whether such Publication (i) contains an invention,
solely or jointly conceived and/or reduced to practice by the other party, or
(ii) could be expected to have a material adverse effect on the commercial value
of any Information disclosed by the other party to the Publishing party, either
party may submit the matter to arbitration generally in accordance with the
procedures set forth in Article 11 of this Agreement.
7.4 Exceptions. The restrictions set forth in this Article 7 shall not prevent
either party from (i) preparing, filing, prosecuting or maintaining a patent
application or its resulting patents related to the making, having made, using,
offering for sale, selling or importing of Product, (ii) disclosing Information
provided by the Disclosing party to
-28-
<PAGE>
persons working on behalf of the Receiving party or to governmental agencies, to
the extent the Receiving party reasonably believes is required or desirable to
secure any government approval for the development, manufacture, marketing or
sale of Product, or (iii) upon imminent approval or actual approval for
Regulatory Approval by a governmental agency in a country of a drug application
on Product, disclosing Information to the extent reasonably necessary to promote
the use and sale of Product in the country.
7.5 Adverse Events. Roche shall be responsible for reporting to the appropriate
regulatory authorities all adverse events related to the use of the Products
worldwide, except that prior to the time Trimeris transfers the IND to Roche,
Trimeris shall be responsible for the reporting of such adverse events in the
USA. Adverse events related to the use of the Products worldwide shall be
recorded in Roche's standard database and during the development the parties
will coordinate their efforts to assure that all adverse events are reported
properly.
8. PATENTS
-------
8.1 Ownership of Technology.
(a) Trimeris Proprietary Rights. Subject to Section 8.1(b), ownership of
Trimeris Proprietary Rights and other intellectual property owned or controlled
by Trimeris shall remain vested at all times in Trimeris.
(b) Joint Patents. Ownership of Joint Patents shall be vested jointly in
Trimeris and Roche.
8.2. Patent Filing, Prosecution and Maintenance.
(a) Trimeris Patents. Subject to Section 8.2(b) and the further provisions
of this Section 8.2(a), Trimeris agrees to (i) prepare, file, prosecute and
maintain all Trimeris Patents in such countries as may be determined by the
parties, (ii) consult
-29-
<PAGE>
with Roche as to the preparing, filing, prosecuting and maintaining of such
patent applications and patents, and (iii) furnish to Roche copies of all
significant documents relevant to any such preparation, filing, prosecution or
maintenance. Trimeris shall furnish such documents and consult with Roche in
sufficient time before any action by Trimeris is due to allow Roche to provide
comments thereon, which comments Trimeris shall consider. Trimeris shall bear
all costs and expenses for preparing, filing, prosecuting and maintaining such
patents and patent applications. Roche shall cooperate, in all reasonable ways
and at Trimeris' cost, in connection with the preparing, filing, prosecuting and
maintaining TrimerisPatents, each party to absorb its own expenses related
thereto. Should Trimeris decide that it does not desire to file, maintain or
prosecute any Trimeris Patent in one or more countries, it shall promptly advise
Roche thereof and, at the request of Roche, Trimeris shall (i) in the case of
Trimeris patents which are owned by Trimeris, assign to Roche its rights in and
to such patent or patent application in such country or countries, or (ii) in
the case of Trimeris patents which are licensed, provide Roche with such rights
to prosecute and maintain such patent or patent application asmay be permitted,
and Roche will thereafter file, prosecute and/or maintain the same at Roche's
own cost, to the extent that Roche desires to do so.
(b) Joint Invention, Trimeris Inventions and Roche Inventions. As soon as
a party concludes that it wishes to file a patent application claiming a Joint
Invention, Trimeris Invention and Roche Invention, it shall immediately inform
the other party. The party also will provide the other party with the
determination of inventors and a copy of a draft specification, if any, and the
scope of claims as early as possible. Unless otherwise agreed, Roche agrees to
(i) prepare, file, prosecute and maintain such priority patent application,
corresponding foreign patents, and resulting patents, (ii) consult with Trimeris
as to the preparing, filing, prosecuting and maintaining of such patent
applications and resulting patents, and (iii) furnish Trimeris with copies of
all documents relevant to any such preparation, filing, prosecution or
maintenance. Unless agreed otherwise, the filing party shall furnish such
-30-
<PAGE>
documents and consult with the other party in sufficient time before any action
by the filing party is due to allow the other party to provide comments thereon,
which comments the filing party shall consider. All external costs and expenses
for preparing, filing, prosecuting and maintaining such patent applications and
resulting patents in the USA and Canada shall be equally shared by the parties.
All external costs and expenses for preparing, filing, prosecuting and
maintaining such patent applications and resulting patents in the countries
other than the USA and Canada, shall be borne by Roche. Either party shall bear
its internal costs. On request of the party performing the filing, the other
party will cooperate, in all reasonable ways, in connection with the preparing,
filing, prosecuting and maintaining of such patent applications and resulting
patents. Should the filing party decide that it does not desire to file,
maintain or prosecute a patent or patent application claiming a Joint Invention,
Trimeris Invention or Roche Invention in one or more countries, it shall
promptly advise the other party thereof and, at the request of the other party,
the filing party shall assign to the other party its rights in and to such
patent or patent application in such country or countries, and the other party
will thereafter file, prosecute and/or maintain the same at the other party's
own cost, to the extent that the other party desires to do so.
8.3 Infringement by Third parties.
------------------------------
(a) Notification. Each party shall promptly notify the other in writing of
any alleged or threatened infringement of the Trimeris Patents and Joint
Patents, of which it becomes aware.
(b) Trimeris Patents. Trimeris shall have the right, but not the
obligation, to bring, at Trimeris's expense and in its sole control, an
appropriate action against any person or entity infringing a Trimeris Patent
directly or contributorily. If Trimeris does not bring such action within ninety
(90) days (forty five (45) days in the case of an action brought under the
Hatch-Waxman Act (or any foreign equivalent)) of
-31-
<PAGE>
notification thereof to or by Roche, Roche shall have the right, but not the
obligation, to bring at Roche's expense and in its sole control, such
appropriate action. The party not bringing an action under this paragraph (b)
shall be entitled to separate representation in such matter by counsel of its
own choice and at its own expense, but such party shall cooperate fully with the
party bringing such action.
(c) Joint Patents. With respect to third party infringement of Joint
Patents, the parties shall confer and take such action, and allocate expenses
and recoveries in such manner, as they may agree. In the absence of agreement
within ninety (90) days of notification thereof, Roche shall have the right, but
not the obligation, to bring, at Roche's expense and in its sole control, an
appropriate action against any person or entity infringing a Joint Patent
directly or contributorily. Trimeris shall have the right to be fully informed
regarding any litigation brought thereunder by Roche, including the status of
any settlement activity. Notwithstanding anything herein to the contrary, should
a party receive a certification for a Product pursuant to the Drug Price
Competition and Patent Term Restoration Act of 1984 (Public Law 98-417), as
amended, or its equivalent in a country other than the United States of America,
then such party shall immediately provide the other party with a copy of such
certification. Trimeris shall have thirty (30) days from date on which it
receives or provides a copy of such certification to provide written notice to
Roche ("H-W Suit Notice") whether Trimeris will bring suit, at its expense,
within a forty-five (45) day period from the date of such certification. Should
such thirty (30) day period expire without Trimeris bringing suit or providing
such H-W Suit Notice, then Roche shall be free to immediately bring suit in its
name.
(d) Costs and Awards. The party which is not in control of any action
brought pursuant to Section 8.3(b) or (c) may elect to contribute fifty percent
(50%) of the costs of litigation against such third party infringer, by
providing written notice to the controlling party within ninety (90) days after
such action is first brought. If the non-controlling party elects to bear fifty
percent (50%) of such litigation costs, it shall
-32-
<PAGE>
receive fifty percent (50%) of any damage award or settlement resulting from
such action. If the non-controlling party does not elect to share such
litigation costs, it shall not participate in any damage award or settlement
resulting from such action.
(e) Settlement; Allocation of Proceeds. Neither party shall settle a claim
brought under this Section 8.3 without the consent of the other party. In the
event of any recovery of monetary damages from the third party, whether such
damages result from the infringement of Trimeris Patents or Joint Patents, such
recovery shall be allocated first to the reimbursement of any expenses incurred
by the parties in the litigation under this Section 8.3 (including, for the
purpose, a reasonable allocation of internal counsel and other expenses), and
thereafter as provided in Section 8.3 (d). If the amount recovered from the
third party is less than the aggregate expenses of the parties incurred in
connection with such litigation, the recovery shall be shared pro rata between
Trimeris and Roche in proportion to their respective expenses.
8.4 Infringement of Third party Rights. In the event that a third party at any
time provides notice to, or commences an action, suit or proceeding against, a
party or such party's Affiliates, sublicensees or distributors, claiming
infringement of the third party's patent rights or copyrights or unauthorized
use or misappropriation of its technology, based upon an assertion or claim
arising out of the making, having made, using, offering for sale, selling or
importing of a Product, such party shall promptly notify the other party.
Neither party may settle such claim or action without the consent of the other
party. The parties shall also discuss how the expenses and any recoveries from
such action should be treated. If the parties do not reach agreement, Roche
shall make the final decision at its own discretion and expenses.
9. TERM AND TERMINATION
--------------------
9.1 Term. The Term of the Agreement shall commence on the Effective Date
-33-
<PAGE>
and, unless sooner terminated as provided in this Article, expire on a
country-by-country basis on the expiration of Roche's payment obligations set
forth in Sections 6.2 and 6.3.
After expiration, Roche shall have a fully paid up non-exclusive license
under Trimeris Proprietary Rights, on a country-by-country basis.
9.2 Termination. Roche shall have the right to terminate this Agreement on a
country-by-country basis and on a Product-by-Product basis by providing Trimeris
with the following prior written notice:
*
Termination shall be effective at the end of the applicable notice period.
9.3 Material Breach. In the event of a material breach of this Agreement by
either party, the non-breaching party shall have the right to terminate this
Agreement by providing written notice of such breach to the breaching party,
specifying the nature of such breach ("Breach Notice"). The non-breaching party
shall thereupon have the right to terminate this Agreement immediately upon
written notice if the breaching party fails to cure such breach within sixty
(60) days after receipt of the Breach Notice.
9.4 Effect of Termination.
----------------------
(a) By Roche without cause. Termination of this Agreement by Roche under
Section 9.2 shall not relieve either party of the performance of any obligations
incurred or payments i) due prior to the effective date of termination, ii)
which are uncancellable, and iii) in accordance with the budget previously
approved by the JSC.Notwithstanding the foregoing, if Roche terminates the
Agreement with regard to a Product, Roche shall continue to contribute to the
costs for the completion of
-34-
<PAGE>
any clinical trials of such Product if (i) such trial commenced prior to giving
the termination notice, (ii) such costs are incurred after the effective date of
termination, with the proviso that Roche's participation shall also be limited
to the costs related to those patients already enrolled in the study at the time
of giving the termination notice.
In the event of termination of this Agreement by Roche under Section 9.2,
with regard to such country or Product (i) all licenses granted by Trimeris to
Roche shall terminate, (ii) at the request of Trimeris, Roche shall assign to
Trimeris all regulatory filings, regulatory approvals and clinical data owned
and controlled by Roche relating to Products, or, if such assignment is not
legally permissible, grant Trimeris the right to access, use and cross reference
such filings, approval and data, and (iii) Roche shall, at its discretion,
assign to Trimeris all rights in or grant to Trimeris a royalty free exclusive
license to the trademarks referred to in Section 5.3.
In the event that Trimeris requests the assignment of any regulatory
filings, regulatory approvals or clinical data pursuant to subsection 9.4(a),
then Trimeris shall pay Roche a royalty upon sales of Product reasonably related
to such assigned filings, approvals or data. The amount of such royalty shall be
determined by mutual agreement of the parties after good faith negotiation;
provided, however, that if the parties are unable to reach mutual agreement
thereon, the matter shall be submitted to arbitration generally in accordance
with the procedures set forth in Article 11 of this Agreement, and the
arbitrator shall base his/her decision on the following factors: (i) the value
of the assigned filings, approvals and/or data as related to the
commercialization of Product; (ii) the relative contributions of the parties to
the development of Product.
(b) By either party for cause. Termination of this Agreement by either
party under Section 9.3 shall (i) not relieve either party of the performance of
any obligations incurred or payments due prior to the date of breach, and (ii)
be without
-35-
<PAGE>
prejudice to any remedy that any party may have in addition to those
rights as provided under this Agreement.
(c) By Roche for Cause. In the event of termination of the Agreement by
Roche under Section 9.3, the rights and licenses granted by Trimeris to Roche
under this Agreement shall, at Roche's option, remain in effect. If Roche
chooses for such rights and licenses to remain in effect, Roche's payment
obligations under Article 6 shall continue; provided, however, that the amounts
of such payments shall be decreased to reflect the following factors: the nature
of Trimeris' breach, the damage to Roche caused thereby, and the relative
contributions of the parties to the development of Product. Such amounts shall
be determined by the mutual agreement of the parties after good faith
negotiations; provided, however, that if the parties are unable to reach mutual
agreement thereon, the matter shall be submitted to arbitration generally in
accordance with the procedures set forth in Article 11 of this Agreement, and
the arbitrator shall base his/her decision on the above factors.
(d) By Trimeris For Cause. In the event of termination of this Agreement
by Trimeris under Section 9.3, (i) all licenses granted by Trimeris to Roche
shall terminate, (ii) at the request of Trimeris, Roche shall assign to Trimeris
all regulatory filings, regulatory approvals and clinical data owned and
controlled by Roche relating to Products, or, if such assignment is not legally
permissible, grant Trimeris the right to access, use and cross reference such
filings, approval and data, and (iii) Roche shall assign to Trimeris all rights
in the trademarks referred to in Section 5.3.
In the event that Trimeris requests the assignment of any regulatory
filings, regulatory approvals or clinical data pursuant to subsection 9.4(d),
then Trimeris shall pay Roche a royalty upon sales of Product reasonably related
to such assigned filings, approvals or data. The amount of such royalty shall be
determined by mutual agreement of the parties after good faith negotiation;
provided, however, that if the parties are unable to reach mutual agreement
thereon, the matter shall be submitted
-36-
<PAGE>
to arbitration generally in accordance with the procedures set forth in Article
11 of this Agreement, and the arbitrator shall base his/her decision on the
following factors: (i) the value of the assigned filings, approvals and/or data
as related to the commercialization of Product; (ii) the relative contributions
of the parties to the development of Product; and (iii) the nature of Roche's
breach and the damages caused to Trimeris thereby.
9.5 Survival. Notwithstanding any termination of this Agreement, the obligations
of the parties with respect to audit under Sections 3.5 and 6.11 and Information
under Article 7, as well as any other provisions which by their nature are
intended to survive any such termination, shall survive and continue to be
enforceable.
10. WARRANTIES AND INDEMNITIES
--------------------------
10.1 Trimeris Warranties.
--------------------
(a) Trimeris warrants and represents that, as of the date Trimeris signs
this Agreement and to the best of its knowledge, it has the entire right, title
and interest to make, have made, use, offer for sale, sell and import Compound
and/or Product; that it has no knowledge of the existence of any patent or
patent application other than those mentioned in Appendix E owned or controlled
by anyone other than Trimeris which could be asserted to claim the Compounds
and/or Products and/or could be asserted to prevent Trimeris or Roche from
importing, making, having made, using, offering to sell, or selling Compound
and/or Product. Notwithstanding any other provisions of this Agreement,
including those provisions regarding Development Costs and Allowable Expenses,
any costs incurred in connection with the resolution of any claim or assertion
of patent rights reflected in Appendix E shall be borne solely by Trimeris.
(b) Trimeris warrants and represents that it has identified on Appendix C
-37-
<PAGE>
all of the patents or patent applications that, as of the date Trimeris signs
this Agreement, it owns or licenses which, in its reasonable opinion, would
preclude Roche from making, having made, using, offering for sale, selling or
importing Product for any use.
(c) Trimeris warrants and represents that it is not aware that anyone has
or has asserted any claim to a finder's fee or any other agent's fee or
commission in connection with this transaction other than the persons identified
in Appendix F. Notwithstanding any other provisions of this Agreement, including
those provisions regarding Development Costs and Allowable Expenses, any costs
incurred in connection with the resolution of any claim or assertion of any
claim reflected in Appendix F shall be borne solely by Trimeris.
(d) Trimeris warrants and represents that the only third party payments or
royalty obligations existing as of the effective date which might result in
either Development Costs or Allowable Expenses hereunder is the royalty
obligation to New York Blood Center resulting from a license agreement with
Trimeris effective September 9, 1997.
10.2 Warranties of Both parties. Each party warrants that, as of the date
Trimeris signs this Agreement, it has the full right and authority to enter into
this Agreement, and that it is not aware of any impediment that would inhibit
its ability to perform its obligations hereunder. Each party warrants and
represents to the other that, as of the date it signs this Agreement to the best
of its knowledge, it or its Affiliates has disclosed all information in
possession or control of it or its Affiliates which, in the opinion of it or its
Affiliates, would be material to the other party entering into this Agreement,
and such information does not contain any untrue statement of material fact or
omit to state a material fact.
10.3 DISCLAIMER. THE FOREGOING REPRESENTATIONS AND
----------
-38-
<PAGE>
WARRANTIES ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES NOT EXPRESSLY
SET FORTH HEREIN. TRIMERIS AND ROCHE DISCLAIM ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, WITH RESPECT TO EACH OF THEIR RESEARCH, DEVELOPMENT AND
COMMERCIALIZATION EFFORTS HEREUNDER, INCLUDING, WITHOUT LIMITATION, WHETHER THE
PRODUCTS CAN BE SUCCESSFULLY DEVELOPED OR MARKETED, THE ACCURACY, PERFORMANCE,
UTILITY, RELIABILITY, TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS,
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WHATSOEVER OF THE
PRODUCTS. IN NO EVENT SHALL EITHER TRIMERIS OR ROCHE BE LIABLE FOR SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT
BASED ON CONTRACT, TORT OR ANY OTHER LEGAL THEORY.
10.4 Indemnification by Roche. Roche agrees to defend, indemnify and hold
Trimeris and its directors, officers, employees and agents (the "Trimeris
Indemnified parties") harmless from and against any losses, costs, and damages,
including reasonable costs and expenses arising out of the development,
manufacture, use, sale or other disposition of any Product by Roche, its
Affiliates, its sublicensees, its distributors, or representatives, except to
the extent that such losses, costs and damages are due to the negligence or
wrongful acts or failures to act of Trimeris. In the event of any such claim
against the Trimeris Indemnified parties by a third party, Trimeris shall
promptly notify Roche in writing of the claim and Roche shall undertake and
shall solely manage and control, at its sole expense, the defense of the claim
and its settlement. The Trimeris Indemnified parties shall cooperate with Roche
and may, at their option and expense, be represented in any such action or
proceeding. Roche shall not be liable for any litigation costs or expenses
incurred by the Trimeris Indemnified parties without Roche's written
authorization. Roche shall not settle any such claim against Trimeris unless
such settlement fully and unconditionally releases Trimeris from all liability
relating thereto, unless Trimeris
-39-
<PAGE>
otherwise agrees in writing.
10.5 Indemnification by Trimeris. Trimeris agrees to defend, indemnify and hold
Roche and its directors, officers, employees and agents (the "Roche Indemnified
parties") harmless from and against any losses, costs, and damages, including
reasonable costs and expenses arising out of the development, manufacture, use,
sale or other disposition of any Product by Trimeris, its Affiliates, licensees
(other than Roche), distributors, or representatives (if applicable), except to
the extent that such losses, costs and damages are due to the negligence or
wrongful acts or failures to act of Roche. In the event of any such claim
against the Roche Indemnified parties by a third party, Roche shall promptly
notify Trimeris in writing of the claim and Trimeris shall undertake and shall
solely manage and control, at its sole expense, the defense of the claim and its
settlement. The Roche Indemnified parties shall cooperate with Trimeris and may,
at their option and expense, be represented in any such action or proceeding.
Trimeris shall not be liable for any litigation costs or expenses incurred by
the Roche Indemnified parties without Trimeris's written authorization. Trimeris
shall not settle any such claim against Roche unless such settlement fully and
unconditionally releases Roche from all liability relating thereto, unless Roche
otherwise agrees in writing.
ARTICLE 11. DISPUTE RESOLUTION
------------------
11.1 Procedure
---------
(a) Internal Escalation. Unless otherwise explicitly set forth in this
Agreement, in the event that the parties are unable to resolve any dispute,
controversy or claim arising out of, or in relation to this Agreement, or the
breach, termination or invalidity thereof (collectively "Issue"), the parties
shall first refer such Issue to the Head of the Pharma Division of Roche and to
the Chief Executive Officer of Trimeris. In the event that such Issue cannot be
resolved by these individuals after a good faith discussion to resolve the
issue, then either party may
-40-
<PAGE>
initiate arbitration in accordance with this subsection under the guidelines of
AAA in New York City, New York, under the commercial rules then in effect for
AAA, except as provided for herein.
(b) Procedure. A party shall notify the other in writing should it intend
to initiate arbitration. The parties shall select, by mutual agreement, one
arbitrator within a time period of thirty (30) days after receipt of such
notice. Should no arbitrator be chosen within the above period, the AAA shall
appoint the arbitrator within thirty (30) days after the end of such period.
Within thirty (30) days after selection of such arbitrator, each party shall
submit to the arbitrator a proposed resolution of the Issue and the reasons for
proposing the resolution. Should either party desire, a joint meeting before the
arbitrator shall be held within thirty (30) days after the end of the above
resolution submission period.
Within thirty (30) days after the later of (i) the end of the resolution
submission period or (ii) holding of the joint meeting, the arbitrator shall
decide the matter by selecting only one of such resolutions, and shall have no
authority to modify its proposed terms.
(c) Unless otherwise agreed to by the parties, the arbitrator shall make
such decision based on the following factors in descending order of importance:
(a) consistency with the provisions of this Agreement; (b) consistency with the
intent of the parties as reflected in this Agreement; and (c) customary and
reasonable provisions included in comparable agreements. The decision of the
arbitrator will be binding upon the parties without the right of appeal, and
judgment upon the decision rendered by the arbitrator may be entered in any
court having jurisdiction thereof.
11.2 Cost. The parties shall share equally the reasonable documented cost of
such arbitration proceeding, but not the individual cost of the parties in
participating in such proceeding.
-41-
<PAGE>
12. MISCELLANEOUS
-------------
12.1 Disclosure of Agreement and Press Releases and Technical Information.
Neither party will disclose the existence, terms or conditions of this Agreement
to any third party or issue any press release relating to the existence, terms
and conditions of this Agreement for any purpose without the prior written
consent of the other party, except as required by law (including without
limitation any regulatory agency or commission of competent jurisdiction).
12.2 Force Majeure. If either party shall be delayed, interrupted or prevented
with respect to the performance of any obligation hereunder by reason of an act
of God, fire, flood, war (declared or undeclared), public disaster, strike or
labor dispute, governmental enactment, rule or regulation, or any similar cause
beyond such party's control, such party shall not be liable to the other
therefor; and the time for performance of such obligation shall be extended for
a period equal to the duration of the contingency which occasioned the delay,
interruption or prevention.
Within fifteen (15) days after the beginning of the force majeure, the
party invoking its force majeure rights must notify the other party of this fact
in accordance with Section 12.5. The other party must also be notified of the
termination of the force majeure within fifteen (15) days after such
termination. If the force majeure renders either of the required notifications
impossible, notification must be given as soon as possible.
12.3 Bankruptcy. In the event that Trimeris shall become insolvent, shall make
an assignment to the benefit of creditors, or shall have a petition in
bankruptcy filed for or against it (which, in the case of an involuntary
petition, is not dismissed or stayed within sixty (60) days after such petition
is filed), all rights and licenses granted under or pursuant to this Agreement
by Trimeris to Roche are, and shall otherwise
-42-
<PAGE>
be deemed to be, for purposes of Section 365(n) of Title 11, US Code (the
"Bankruptcy Code"), licenses of rights to "intellectual property" as defined
under Section 101(60) of the Bankruptcy Code. The parties agree that Roche, as a
licensee of such rights under this Agreement, shall retain and may fully
exercise all of its rights and elections under the Bankruptcy Code, subject to
the continued performance of its obligations under this Agreement.
12.4 Waiver. The waiver by a party of a breach or a default of any provision of
this Agreement by the other party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of a party to exercise or avail itself of any right, power
or privilege that it has or may have hereunder operate as a waiver of any right,
power or privilege by such party.
12.5 Notices. Any notice or communication (including invoices) required to be
given hereunder shall be in writing and shall be considered properly given when
(a) personally delivered or sent by telefax (other than for invoices) or
overnight mail with a confirmation copy, (b) three (3) business days after being
sent by certified or registered mail to the respective address of a party, or
(c) the next business day after being sent by overnight mail or overnight
courier as follows:
If to Roche: F. Hoffmann-La Roche Ltd
Grenzacherstrasse 124
CH-4070 Basel Switzerland
Att.: Corporate Law
and
Hoffmann-La Roche Inc.
430 Kingsland Street
Nutley, New Jersey 70110, USA
Attn.: Corporate Secretary
or any other address that Roche may advise in writing;
-43-
<PAGE>
If to Trimeris: Trimeris, Inc.
4727 University Drive
Durham, North Carolina 27707, USA
Attn.:
or any other address that Trimeris may advise in writing.
12.6 No Agency. Nothing herein shall be deemed to constitute either party as the
agent or representative of the other party. Each party shall be an independent
contractor, not an employee or partner of the other party. Each party shall be
responsible for the conduct of activities at its own facilities and for any
liabilities resulting therefrom. Neither party shall be responsible for the acts
or omissions of the other party, and neither party will have authority to speak
for, represent or obligate the other party in any way without prior written
authority from the other party.
12.7 Entire Agreement. This Agreement (including its Appendices) constitutes the
entire agreement between the parties with respect to the subject matter and
supersedes all previous agreements , whether oral or written. This Agreement can
only be changed or modified by written agreement of the parties.
12.8 Captions. The captions herein are for convenience only and shall not be
interpreted as having any substantive meaning.
12.9 Severability. In the event that any provision of this Agreement is held by
a court of competent jurisdiction to be unenforceable because it is invalid or
in conflict with any law of any relevant jurisdiction, the validity of the
remaining provisions shall not be affected, and the parties shall negotiate a
substitute provision that, to the extent possible, accomplishes the original
business purpose.
-44-
<PAGE>
12.10 Assignment. This Agreement shall be binding upon and shall inure to the
benefit of successors of the parties hereto and to the assigns of all good will
and entire business and assets of a party hereto, but shall otherwise not be
assignable without prior written consent of the other party. Notwithstanding the
above, without notice to Trimeris, Roche may at any time and for any reason
assign all or certain rights and obligations to its Affiliates who agree to be
bound by the terms and obligations of this Agreement. Such assignment shall be
considered as effective on the date specified by Roche in its notice, even if
retroactive.
12.11 Law . This Agreement will be interpreted in accordance with the laws of
the state of New York.
12.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of such together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, Trimeris and Roche have caused this Agreement to be
duly executed by their authorized representatives on the dates written below.
TRIMERIS HOFFMANN-LA ROCHE INC.
By: /s/ Dani P. Bolognesi By: /s/ Dennis E. Burns
Title: CEO Title: Vice President
Date: 7/9/99 Date: 7/9/99
-45-
<PAGE>
F. HOFFMANN-LA ROCHE LTD
By: /s/ Werner Henrich
------------------
Title: Director
--------
Date: 7/9/99
------
85675
-46-
<PAGE>
APPENDICES
----------
+ Appendix A Financial Appendix and Definitions
+ Appendix B Profit or Loss Calculation Schedule
+ Appendix C Trimeris Patents
Appendix D North American Marketing and Promotion
+ Appendix E Assertions of third Party Patent Claims
+ Appendix F Assertions of Third Party Finder's Fee or Related Claims
+ Appendices A, B, C, E and F have been omitted because such appendices do not
contain information material to an investment decision. Trimeris agrees to
furnish supplementally a copy of any omitted Appendix to the Commission upon
request.
-47-
<PAGE>
* Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Commission. The omitted portions, marked
by "*", have been separately filed with the Commission.
Appendix D
North American Marketing and Promotion
--------------------------------------
1. North American Joint Marketing Committee. A North American Joint Marketing
Committee ("NAJMC") comprised of representatives from Roche and Trimeris
will be formed within sixty (60) days of the Effective Date to oversee and
discuss promotional, pre-marketing, marketing and sales activities for
Products in the U.S.A. and Canada. The NAJMC will establish mechanisms for
achieving an effective collaboration between Roche and Trimeris on
marketing programs and optimization of Product sales to include
professional educational activities, public relations and communications
with government and community support groups. As a participant in the
NAJMC, Trimeris shall have the right to comment upon and make
recommendations to Roche regarding such activities, which recommendations
Roche shall evaluate and consider, consistent with its own sound business
judgment and prudent business practices.
2. NAJMC Composition and Governance. The NAJMC shall consist of an equal
number of representatives of Roche and Trimeris, for a total of four
members. The size of the NAJMC may be changed by agreement of the parties.
The NAJMC shall be chaired by a senior representative from Roche U.S., who
shall be responsible for the appropriate preparation of minutes and/or
recommendations resulting from the NAJMC's meetings. *
<PAGE>
3. NAJMC Meetings and Responsibilities.
------------------------------------
a. Meetings. The NAJMC shall meet at least once per year to discuss and
adopt an annual business plan for the product in the succeeding
calendar year. The site for such meetings shall alternate between
the U.S.A. business offices of Roche and Trimeris. The first meeting
of the NAJMC shall be held within six (6) months of the Effective
Date and shall have as its primary agenda item the adoption of a
plan and budget, as described below, for pre-marketing activities
and launch of the first Product to be commercialized under the
Agreement. A similar initial meeting of the NAJMC shall be scheduled
for each Product developed under the Agreement within at least six
(6) months following the initiation of Phase II studies. The NAJMC
shall also plan for and facilitate such other additional meetings of
NAJMC members or other appropriate marketing and sales personnel of
the parties reasonably required update each other regarding the
marketing and promotional activities conducted in accordance with
the annual plans. The site, frequency and duration of meetings shall
be subject to modification as agreed by the NAJMC members. Each
party shall pay all of its respective expenses for such meetings,
which shall be Allowable Expenses.
General Responsibilities. The NAJMC shall discuss and adopt annual
business plans, including the marketing budget, for each approved Product.
In the initial business plan for the commercialization of a Product, the
NAJMC shall adopt a budget for the pre-marketing activities and launch of
the Product. The budget amount for these activities and their overall
design and strategic plan shall be adopted by consensus of the Committee
members. It shall be Roche's responsibility to circulate a draft proposed
plan and budget in advance of the
- 2 -
<PAGE>
meeting. In the event the NAJMC is unable to reach a consensus as to any
such initial business plan and budget for a Product, the issue shall be
submitted for consideration to the CEO's of Trimeris and Roche USA. In the
event there is still no resolution of the issue, the procedure for
resolving lack of consensus set forth in Section 3.3 (b) shall then be
followed. Following the launch of a Product the NAJMC shall also adopt
subsequent annual business plans and budgets for the Product. *
The content of the business plans shall focus on the following areas:
o Determining a product strategy for the U.S.A. and Canada including
the design of a core message and promotion platform for each
approved Product.
o Determining and coordinating policy and communications with regard
to community relations and communications with the medical
community.
o Selecting and determining the meetings and responsibilities of
advisory boards with respect to Products.
o Determining and coordinating public affairs and communication
activities regarding the Products.
o Determining and coordinating the parties' participation and
presence at conferences, seminars and symposia concerning the
Products.
o Coordination of post approval regulatory efforts including the
selection and design of Phase IV studies.
o Selecting and determining the meetings and responsibilities of
advisory boards with respect to Products.
b. Medical Inquiries. (I) Prior to transfer of the Product IND from Trimeris
to
- 3 -
<PAGE>
Roche, Trimeris will be responsible for all inquiries for medical
information regarding the Product. (ii) After transfer of the Product IND
from Trimeris to Roche, Roche will be responsible for all inquiries for
medical information regarding the Product. -- (iii) The NAJMC will
determine how the parties will communicate information between each other
regarding inquiries for medical information regarding the Product.
c. Serious Adverse Events ("SAEs").(i) Prior to transfer of the Product IND
from Trimeris to Roche, Trimeris will be responsible for processsing all
SAEs and product complaints regarding the Product. Roche will communicate
all SAEs related to Products to Trimeris within 24 hours of receipt of
such information.
(ii) After transfer of the Product IND from Trimeris to Roche, Roche will
be responsible for processsing all SAEs and product complaints regarding
the Product. Trimeris will communicate all SAEs related to Products to
Roche within 24 hours of receipt of such information.
d. Trade Inquiries. Roche has responsibility for managing relationships with
the trade. The NAJMC shall coordinate and develop procedures for providing
information from Trimeris on orders or other trade inquires to Roche for
action.
4. *
5. Product Presentation. Roche will acknowledge on promotional material and
at promotional events that the Product is licensed from Trimeris and is
being jointly developed. Products will be presented to the medical
community as being jointly
- 4 -
<PAGE>
developed by Roche and Trimeris. Roche will use reasonable efforts
consistent with prudent business practice to include Trimeris' name and
logo on appropriate advertising and promotional materials with the Roche
and Trimeris names in equivalent sized font. All such activities shall be
consistent with all laws and governmental regulations. If only one name is
allowed to be on any specific item of packaging or promotional material
pursuant to law or regulation, then Roche may use its name alone on such
item.
*
- 5 -
EXHIBIT 10.2
FINANCING AGREEMENT
This Financing Agreement, dated as of July 9, 1999 (this "Agreement"), is
entered into by and between Trimeris Inc., a Delaware corporation (the
"Company"), and Roche Finance Ltd ( the "Lender").
RECITAL
-------
To provide the Company with additional resources to conduct its business,
the Lender is willing to make loans (the "Loans") to the Company from time to
time, and the Company is willing to borrow from the Lender, on the terms and
subject to the conditions set forth herein, and at the closings specified
herein, in an amount not to exceed an aggregate principal amount of Twenty
Million ($20,000,000) Dollars, which amount shall be evidenced by Senior Secured
Convertible Promissory Notes to the Company (the "Notes"). In further
consideration of Lender's agreement to make the Loans, the Company has agreed to
issue to the Lender a Warrant (the "Warrant") to acquire up to $7,500,000 of the
common stock, par value $.001 per share, of the Company (the "Common Stock") at
an exercise price of thirty-five (35%) percent above the average market closing
price for the thirty (30) day period preceding the execution of the Development
and License Agreement between the Company, F.Hoffmann-La Roche Ltd and
Hoffmann-La Roche Inc. (the "License Agreement").
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, covenants and conditions set forth below, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. The Loans
---------
(a) Commitment to Lend. In reliance upon the representations,
warranties and covenants of the parties set forth herein, and subject to
satisfaction of the conditions set forth in Section 1(d) hereof and the terms
set forth herein, the Lender agrees to make the Loans to the Company, each of
which shall be in the amount of Five Million Dollars ($5,000,000) and the
aggregate of which shall not exceed Twenty Million Dollars ($20,000,000). To
evidence the Loans, the Company shall issue to the Lender Senior Secured
Convertible Promissory Notes of the Company each in the amount of Five Million
($5,000,000) Dollars and in an aggregate principal amount not to exceed Twenty
Million ($20,000,000) Dollars (the "Notes"). The Loans shall be available and
shall be closed on a quarterly basis, the first closing to take place upon sixty
day prior notice from the Company, but in no event shall the first closing take
place before January 1, 2000 nor later than December 31, 2000 with each
subsequent closing to take place no later than 90 days after the prior closing;
provided, however, that any such Loan would be available by 3:00 p.m. on the
respective closing date. Notwithstanding the foregoing, the Company may elect
not to close on any Loan; and such election shall have no effect on the License
Agreement or the issuance of the Warrant. If the Company has elected
<PAGE>
not to close on the sale of any Loan, the Lender shall have no obligation to
make any further Loans. Notwithstanding anything contained herein to the
contrary, at the Lender's option, the Lender shall not be obligated to close on
any Loan if notice of termination is provided under the License Agreement
regarding both compounds T20 and T1249 as defined in the License Agreement. Each
closing of a Loan shall be a closing with respect to the terms, representations
and conditions of this Agreement; and the delivery of any documents hereunder.
(b) Delivery of Notes. At each closing, the Company shall deliver to
the Lender the Note with respect to the Loan being made on such closing date,
and the Lender shall make available to the Company the amount of such Loan to be
advanced at such closing by wire transfer of immediately available funds to an
account designated by the Company in writing at least three Business Days prior
to such closing.
(c) Terms of the Notes. The terms and conditions of the Notes are set
forth in the form of Note attached as Exhibit A hereto.
(d) Conditions to Closing. The obligations of the Lender under this
Section 1 to be performed at each closing shall be subject to satisfaction of
the following conditions:
(i) The representations and warranties of the Company contained in this
Agreement shall be true and correct, in all material respects, at and as of each
such closing, and the Company shall have performed and complied with all the
covenants and agreements and satisfied all the conditions required by this
Agreement to be performed or compiled with or satisfied by the Company at or
prior to such closing. The Lender shall have received a certificate dated as of
the date of such closing and signed by the President of the Company stating
that, to the best of his knowledge after due inquiry, the conditions specified
in this Section 1(d)(i) and Section 1(d)(iii) hereof have been satisfied and
that the terms of this Agreement have not been violated.
(ii) The Lender shall have received, at the initial closing, an opinion
of counsel to the Company, in form and substance reasonably satisfactory to the
Lender, addressing the matters set forth in Exhibit C hereto.
(iii) The Company shall have received all consents and approvals of
third parties necessary for the Company to consummate the transactions
contemplated hereby and by the Notes and the Warrant.
(iv) The Lender shall have received from the Company such other
documents confirming the accuracy and completeness of the representations and
Warranties of the Company as the Lender may reasonably request.
(e) Additional Indebtedness. Upon the Company's successful completion
of Phase III clinical trials for compound T20, the Company and the Lender shall
meet to discuss whether the Lender will agree to make additional loan amounts
available to the Company.
2
<PAGE>
(f) Issuance of the Warrant. In further consideration of the Lender's
entering into this Financing Agreement, and expressly conditional on the
execution and delivery of the Licensing Agreement, upon such execution and
delivery, the Lender shall issue the Warrant to the Lender or an affiliate of
the Lender. The terms and conditions of the Warrant shall be as set forth in the
form of Warrant attached hereto as Exhibit B.
(g) Registration Rights. The Lender shall have the registration rights
with respect to any stock issued under the Notes and the Warrant specified in
Registration Rights Agreement attached hereto as Exhibit D.
(h) Senior Indebtedness. Without the prior written consent of the
Lender (which consent will not be unreasonably withheld), except as permitted in
the Notes and except for lease transactions in the ordinary course of business,
after the date hereof, the Company shall not incur any indebtedness for borrowed
money, guarantee any such indebtedness or incur any obligation that for
financial reporting purposes is required to be carried as an indebtedness of the
Company unless (i) such indebtedness, guaranty or obligation is expressly
subordinated to the repayment in full of all principal, interest and other
amounts due under the Notes; (ii) the proceeds of such indebtedness are used to
retire in full all amounts then due under the Notes.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Lender that, except as set forth in the Company's
Disclosure Schedule attached to this Agreement as Exhibit E (the "Disclosure
Schedule"), the statements contained in the following paragraphs of this Section
2 are all true and correct:
(a) Organization and Good Standing: Certificate of Incorporation and
Bylaws; No Subsidiaries. The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and has all requisite
corporate power and authority to carry on its business as now conducted and
proposed to be conducted. The Company is duly qualified to conduct business as a
foreign corporation and is in good standing as a foreign corporation in all
jurisdictions where the properties owned, leased or operated by it are located
or where its business is conducted, except where the failure to so qualify or be
in good standing is not reasonably likely to have a material adverse effect on
the Company's business, financial condition, results of operations, assets,
liabilities or prospects (a "Material Adverse Effect"). The Company has
previously delivered to the Lender a true and complete copy of the Certificate
of Incorporation and Bylaws of the Company as in effect on the date hereof. The
Company does not own more than a 5% equity or other ownership interest in, or
otherwise control, any corporation, partnership, limited partnership, limited
liability company or other entity.
(b) Corporate Power. The Company has all requisite legal and corporate
power to enter into, execute, deliver and perform its obligations under this
Agreement, the Notes and the Warrant. This Agreement is, and upon their
issuance, the Notes and Warrant will be, valid and binding obligations of the
Company, enforceable in accordance with their terms.
3
<PAGE>
(c) Authorization, Etc.
(i) Corporate Action. All corporate and legal action on the part of the
Company, its officers, directors and stockholders necessary for the execution
and delivery of this Agreement, the Notes and Warrant, the sale and issuance of
the Notes and Warrant, and the performance of the Company's obligations
hereunder and thereunder, has been taken.
(ii) Valid Issuance. The Notes, the Warrant, any shares of Common Stock
issued upon conversion of the Notes or exercise or conversion of the Warrant,
when issued in compliance with the provisions of this Agreement, the Notes, the
Warrant, as the case may be, will be validly issued and, in the case of any such
shares of Common Stock, will be fully-paid and nonassessable.
(iii) No Preemptive Rights. No person has any right of first refusal or
any preemptive or similar rights in connection with the issuance of the Notes or
Warrant, the issuance of shares of Common Stock upon conversion of the Notes or
exercise or conversion of the Warrant, or the issuance of any other securities
by the Company.
(iv) Security Interest. Section 4 of each Note will create, upon
execution and delivery of such Note by the Company, a valid first security
interest in the Collateral (as defined in the Notes) securing repayment by the
Company of the Obligations (as defined in the Notes) thereunder.
(d) Noncontravention. The execution, delivery and performance of and
compliance with this Agreement, the Notes, the Warrant, the issuance and sale of
the Common Stock upon conversion of the Notes or exercise or conversion of the
Warrant will not result in nor constitute any breach, default or violation of
(i) any indenture, agreement, contract, mortgage, deed of trust, lease, license,
loan agreement, equipment lease, instrument or commitment (oral or written) to
which the Company is a party or is bound or (ii) any law, rule, regulation,
statute or order applicable to the Company or its properties, nor result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company, any of which breach, default or violation
under clause (i) or (ii), preceding, would have a Material Adverse Effect.
(e) Consents, Etc. No consent, approval, order or authorization of, or
designation, registration, declaration or filing with, any federal, state, local
or provincial or other governmental authority or other person on the part of the
Company is required in connection with the valid execution and delivery of this
Agreement, the Notes and the Warrant, or the offer, sale or issuance of the
Notes, the Warrant, or the Common Stock to be issued upon conversion of the
Notes or exercise or conversion of the Warrant, other than, if required, filings
or qualifications under applicable state securities laws, which filings or
qualifications, if required, will be timely filed or obtained by the Company.
(f) Offering. In reliance, in part, on the representations and
Warranties of the Lender in Section 3 hereof, neither the making of the Loans,
the
4
<PAGE>
issuance of the Notes, or the Warrant in conformity with the terms of this
Agreement or the shares of Common Stock issued upon conversion of the Notes or
exercise or conversion of the Warrant will result in a violation of the
requirements of Section 5 of the Securities Act of 1933, as amended, (the
"Securities Act") or the qualification or registration requirements of any
applicable state securities laws.
(g) Capitalization. Section 2(g) of the Disclosure Schedule sets forth
the authorized, issued and outstanding capitalization of the Company as of the
date hereof, and all of the issued and outstanding shares of capital stock
reflected therein have been duly authorized and validly issued, are fully paid
and nonassessable and have been offered, issued, sold and delivered by the
Company in compliance with all applicable federal and state securities laws.
Except for shares of Common Stock reserved for issuance to officers, directors
and employees pursuant to the Amended and Restated Stock Incentive Plan of the
Company, there are no outstanding options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of the Company's capital stock or any securities
convertible into or ultimately exchangeable or exercisable for any shares of the
Company's capital stock, nor is the Company obligated in any manner to issue any
shares of its capital stock or any other securities.
(h) Financial Statements and Related Matters. The Company's
consolidated balance sheets as of December 31, 1998 and the Company's
consolidated statements of operations, cash flows and changes in stockholders'
equity for the year ended December 31, 1998 and for the three months ended March
31, 1999, as well as any subsequent annual and quarterly filings with the
Securities and Exchange Commission (collectively, the "Financial Statements"),
all of which have been made available to the Lender prior to the date hereof,
have been prepared in accordance with generally accepted accounting standards
consistently applied (except as may be noted therein). Furthermore, the
Financial Statements are complete and correct in all material respects and
accurately set out and describe in all material respects the financial
condition, results of operations, cash flows or changes in stockholders' equity
of the Company as of the date or for the period indicated. There has been no
material change in the Company's accounting policies except as described in the
notes to the Financial Statements. Except as set forth in the Financial
Statements, the Company has no indebtedness, obligation or liability (contingent
or otherwise) that, either alone or when combined with all similar obligations
or liabilities, would be material to the Company, and there does not exist a set
of circumstances that, to the knowledge of the Company, could reasonably be
expected to result in any such material indebtedness, obligation or liability.
Since December 31, 1998, and for any subsequent period prior to any closing,
there has been no material adverse change in the consolidated business,
financial condition, results of operations, assets, or liabilities or prospects
of the Company, which is not disclosed on the Financial Statements or financial
information as of a later date set forth in the Disclosure Schedule. The Company
has made all filings with the Securities and Exchange Commission required under
the Exchange Act or Securities Act (the "SEC Filings"). The SEC Filings do not,
as of their respective dates, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
5
<PAGE>
(i) Compliance with Laws. The Company is not (i) subject to the terms
or provisions of any material judgment, decree, order, writ or injunction or
(ii) in violation of any terms or provisions of any laws, rules, or regulations,
except where such violations do not and are not likely to have a Material
Adverse Effect.
(j) Title to Property and Assets. The Company owns and possesses the
properties and assets that the Company owns (other than Proprietary Assets,
which are covered in subsection (k) below) free and clear of all mortgages,
deeds of trust, liens, encumbrances, security interests and claims except as
reflected in the Financial Statements and except for statutory liens for the
payment of current taxes that are not yet delinquent and liens, encumbrances and
security interests which arise in the ordinary course of business and which do
not affect material properties and assets of the Company. With respect to the
property and assets the Company leases, the Company is in compliance with such
leases in all material respects.
(k) Proprietary Assets.
(i) The Company (A) owns or has sufficient rights to all Proprietary
Assets used in or necessary for its business as currently conducted and as
proposed to be conducted, free and clear of all material liens and other
encumbrances; and (B) has taken reasonable and customary measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
all its Proprietary Assets (except the Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all its Proprietary Assets.
(ii) Except where such infringement, misappropriation or unlawful use
has not or could not reasonably be expected to have a Material Adverse Effect,
the Company is not infringing, misappropriating or making any unlawful use of or
has at any time infringed, misappropriated or made any unlawful use of, any
Proprietary Asset owned or used by any other person; and no claims or notices
(in writing or otherwise) with respect to Proprietary Assets have been
communicated to the Company: (A) to the effect that the manufacture, sale,
license or use of any Proprietary Assets as now used or currently offered or
proposed for use or sale by the Company or any of its subsidiaries infringes or
potentially infringes, or constitutes a misappropriation or unlawful use of any
copyright, patent, trade secret or other intellectual property right of a third
party, or (B) challenging the ownership or validity of any of the rights of the
Company to or interest in such Proprietary Assets. The Company has received no
notice to the effect that any patents or registered trademarks, service marks or
registered copyrights held by the Company are invalid or not subsisting except
for failures to be valid and subsisting that would not reasonably be expected to
have a Material Adverse Effect. To the Company's knowledge, no other person is
infringing, misappropriating or making any unlawful use of, and no Proprietary
Asset owned or used by any other person infringes or conflicts with, any
Proprietary Asset used in or pertaining to the business of the Company.
(iii) The Proprietary Assets used in or pertaining to the business of
the Company and its subsidiaries are sufficient in the Company's reasonable
judgment,
6
<PAGE>
to enable the Company to conduct its business in the manner in which such
business has been and is being conducted free from liabilities or valid claims
of infringement or misappropriation by third parties. The Company has not
licensed any of its Proprietary Assets to any person on an exclusive basis and
the Company has not entered into any covenant not to compete or contract
limiting its ability to sell the Company's products in any market or
geographical area or with any person other than restrictions in a license
agreement that are typical of those granted in the ordinary course of business
in its industry. The Company has not licensed any Proprietary Assets from any
third party, including compounds T20 and T1249.
(iv) As used herein, "Proprietary Assets" means: (A) any patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; and (B) any right to use or
exploit any of the foregoing.
(l) Contracts.
(i) Section 2(l) of the Disclosure Schedule identifies each license
agreement, development agreement, manufacturing agreement, distribution
agreement, OEM agreement or other agreement to which the Company is a party and
under which the Company's obligation exceeds or is reasonably likely to exceed
$500,000.
(ii) (A) The Company has no agreements, contracts or commitments that
call for prospective fixed and/or contingent payments or expenditures by or to
the Company of more than $500,000;
(B) There is no outstanding sales contract, commitment or proposal
(including, without limitation, development projects) of the Company that is
reasonably likely to have, either individually or in the aggregate, any Material
Adverse Effect;
(C) Except as set forth in clause (D) below, the Company has no
outstanding agreements, contracts or commitments with officers, employees,
agents, consultants, advisors, salesmen, sales representatives, distributors or
dealers that are not cancelable by it on notice of not longer than thirty days
and without liability, penalty or premium exceeding $500,000 in the aggregate;
(D) The Company has not entered into any employment, independent
contractor or similar agreement, contract or commitment that is not terminable
on not more than thirty days' notice without penalty or liability of any type,
7
<PAGE>
including, without limitation, severance or termination pay, except for
agreements where the aggregate annual liabilities of the Company do not exceed
$2 million;
(E) The Company has no collective bargaining or union agreements,
contracts or commitments;
(F) The Company is not restricted by agreement from competing with any
person, from carrying on its business anywhere in the world or otherwise
operating its business in any manner it deems appropriate;
(G) The Company has not guaranteed any obligations of other persons or
made any agreements to acquire or guarantee any obligations of other persons;
and
(H) Except as set forth in the Financial Statements, as of the date
hereof, the Company has no outstanding loan or advance to any person; nor is it
party to any line of credit, standby financing, revolving credit or other
similar financing arrangement of any sort that would permit the borrowing by the
Company of any sum not reflected in the Financial Statements.
(iii) [The Company has made available to the Lender accurate and
complete copies of all written contracts identified in Section 2(l)(i) or (ii)
of the Disclosure Schedule, including all amendments thereto.] Sections 2(l)(i)
and (ii) of the Disclosure Schedule contain a complete list of all the contracts
described in this subsection (l) to which the Company is a party. The Company
has not entered into any material oral contracts. Each contract identified in
Sections 2(l)(i) or (ii) of the Disclosure Schedule (a "Company Material
Contract") is valid and in full force and effect, is enforceable by the Company
in accordance with its terms, subject to (1) laws of general application
relating to insolvency and the relief of debtors and (2) rules of law governing
specific performance, injunctive relief and other equitable remedies, and will
continue to be so immediately following the closing Date. No such contract,
agreement or instrument contains any liquidated damages, penalty or similar
provision. To the Company's knowledge, no party to any such contract, agreement
or instrument intends to cancel, withdraw, modify or amend such contract,
agreement or instrument.
(iv) (A) The Company has not violated or breached, or committed any
default under, any Company Material Contract in any material respect, and, to
,'s knowledge, no other person has violated or breached, or committed
any default under, any Company Material Contract in any material respect; and
(B) to the Company's knowledge, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to: (A) result in a material violation or
breach of any of the provisions of any Company Material Contract, (B) give any
person the right to declare a default or exercise any remedy under any Company
Material Contract, (C) give any person the right to accelerate the maturity or
performance of any Company
8
<PAGE>
Material Contract or (D) give any person the right to cancel, terminate or
modify any Company Material Contract.
(v) None of the Company Material Contracts contains any provision which
would require the consent of third parties to the sale and issuance of the Notes
or the Warrants or any of the other transactions as contemplated hereunder or
thereunder or which would be altered as a result of such transaction.
(m) Registration Rights. As of the date hereof, the Company has not
granted or agreed to grant to any person or entity any rights (including
piggyback registration rights) to have any securities of the Company registered
with the U.S. Securities and Exchange Commission ("SEC") or any other
governmental authority.
(n) Taxes.
(i) The Company has fully and timely, properly and accurately filed all
tax returns and reports required to be filed by it, including all federal,
foreign, state and local tax returns and estimates for all years and periods
(and portions thereof) for which any such returns, reports or estimates were
due. All such returns, reports and estimates were prepared in the manner
required by applicable law in all material respects. All income, sales, use,
occupation, property or other taxes or assessments due from the Company have
been paid or will be paid. There are no pending assessments, asserted
deficiencies or claims for additional taxes that have not been paid. The
reserves for taxes, if any, reflected on the Financial Statements are adequate,
and there are no tax liens on any property or assets of the Company (other than
liens for taxes not yet due and payable). There have been no audits or
examinations of any tax returns or reports of the Company by any governmental
body. No state of facts exists or has existed which would constitute grounds for
the assessment of any penalty or any further tax liability in a material amount,
either individually or in the aggregate, beyond that shown on the respective tax
reports, returns or estimates. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any federal, foreign,
state or local tax return or report for any period.
(ii) All taxes that the Company has been required to collect or
withhold have been duly withheld or collected and, to the extent required, have
been paid to the proper taxing authority.
(iii) The Company is not a party to any tax-sharing agreement or
similar arrangement with any other person.
(iv) At no time has the Company been included in the federal
consolidated income tax return of any affiliated group of corporations.
(v) The Company is not currently under any contractual obligation to
pay to any governmental body any tax obligations of, or with respect to any
transaction relating to, any other person or to indemnify any other person with
respect to any tax, other than pursuant to this Agreement.
9
<PAGE>
(o) Insurance. The Company maintains and keeps in force with good and
responsible insurance companies, fire, public liability, property damage and
other insurance in such amounts and with such coverage or risks as are customary
for similar businesses and adequate to the needs of the Company. The Company has
not done anything, either by way of action or inaction, that might reasonably be
expected to invalidate any of its insurance policies as a whole or in part.
(p) Compliance with Environmental Requirements. The Company has
complied with all federal, foreign, state and local laws applicable to the
Company and relating to pollution or protection of the environment, including
laws or provisions relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials,
substances, or wastes into air, surface water, groundwater, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials, substances, or wastes. The Company has obtained
all material permits, licenses and other authorizations which are required under
such laws. The Company is in material compliance with all terms and conditions
of the required permits, licenses and authorizations. The Company is not aware
of, nor has the Company received written notice of, any conditions,
circumstances, activities, practices, incidents, or actions which might
reasonably form the basis of a claim, action, suit, proceeding, hearing, or
investigation of, by, against or relating to the Company, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic substance, material or waste.
(q) Litigation. There is no suit, action, proceeding, claim or
investigation pending or, to the Company's knowledge, threatened against the
Company before any court or administrative agency which could have a Material
Adverse Effect or which questions or challenges the validity of this Agreement,
the Notes or the Warrant. [There is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company.]
(r) Corporate Documents. The Company has furnished to the Lender or its
counsel for their examination true and complete copies of the following
documents: (i) copies of its Certificate of Incorporation and Bylaws, each as
currently in effect, and (ii) all material permits, orders, and consents issued
by any regulatory agency with respect to the Company, or any securities of the
Company, and all applications for such permits, orders, and consents. The
corporate stock certificate books, stock registers and other corporate records
of the Company are complete and accurate in all material respects, and the
signatures appearing on all documents contained therein are the true signatures
of the persons purporting to have signed the same. All actions reflected in such
books and records were duly and validly taken in compliance in all material
respects with the laws of the applicable jurisdiction.
10
<PAGE>
(s) No Brokers. Neither the Company nor, to the Company's knowledge,
any Company shareholder is obligated for the payment of fees or expenses of any
broker or finder in connection with the origin, negotiation or execution of this
Agreement, the Notes or the Warrant or in connection with any transaction
contemplated hereby or thereby.
(t) Related Party Transactions.
(i) All transactions involving the Company in which any of the
Company's affiliates, officers, directors, shareholders or employees, or any
affiliate of such persons, has any material interest and that are required to be
disclosed by the Company under Item 404 of Regulation S-K of the Securities and
Exchange Commission have been disclosed.
(ii) Disclosure. The statements by the Company contained in this
Agreement, the exhibits hereto, and the certificates and documents required to
be delivered by the Company to the Lender under this Agreement, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements contained herein and
therein not misleading in light of the circumstances under which such statements
were made.
(u) Securities Act. Subject to the accuracy of the Lender's
representations in Section 3 hereof, the offer, sale and issuance of the Notes
and the Warrant in conformity with the terms of this Agreement and the issuance
of Common Stock upon conversion of the Notes or upon exercise or conversion of
the Warrant constitute or will constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, and the qualification or registration requirements of any applicable
state securities laws as such laws exist on the date hereof.
(v) No Violation. Neither the Company nor any of its subsidiaries is,
or with the giving of notice or lapse of time or both would be, in violation of
or in default under its certificate of incorporation or by-laws or any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of them or any of their respective properties is bound or any
applicable law or statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company, its
subsidiaries or any of their respective properties, except for violations and
defaults which would not, individually or in the aggregate, have a Material
Adverse Effect. Each of the Company and each of its subsidiaries has all
licenses, permits, registrations and the like necessary to operate its
respective business.
(w) Investment Company Act. The Company is not an "investment company"
or an entity "controlled" by an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended (the "Investment Company
Act").
11
<PAGE>
(x) Stabilization. The Company has not taken nor will it take, directly
or indirectly, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock, except for actions taken by underwriters in connection with public
offerings of securities.
(y) FDA Compliance. All studies, tests and preclinical and clinical
trials conducted by or on behalf of the Company were and, if still pending, are
being conducted in accordance with experimental protocols, procedures and
controls pursuant to, where applicable, accepted professional scientific
standards; the descriptions of the results of such studies, tests and trials are
accurate and complete in all material respects; and the Company has not received
any notices or correspondence from the U.S. Food and Drug Administration (the
"FDA") or any foreign, state or local governmental body exercising comparable
authority requiring the termination, suspension or material modification of any
studies, tests or preclinical or clinical trials conducted by or on behalf of
the Company which termination, suspension or material modification could
reasonably be expected to have a Material Adverse Effect.
(z) Y2K Compliance. The Company has reviewed its operations and those
of its subsidiaries to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries will be affected by the Year 2000
Problem and the Company has either requested and/or received representations and
warranties from all third parties with which the Company or any of its
subsidiaries has a material relationship to the effect that such third parties
will not be materially affected by the Year 2000 Problem . As a result of such
review and such representations and warranties from such third parties, the
Company has no reason to believe, and does not believe, that the Year 2000
Problem will have a Material Adverse Effect or result in any material loss or
interference with the Company's business or operations. The "Year 2000 Problem"
as used herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of mechanical or
electrical systems of any kind will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000.
(aa) ERISA. Each employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that is maintained, administered or contributed to by the Company or
any of its affiliates for employees or former employees of the Company and its
affiliates has been maintained in material compliance with its terms and the
requirements of any applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Internal Revenue Code of 1986, as
amended ("Code"); no prohibited transaction, within the meaning of Section 406
of ERISA or Section 4975 of the Code, has occurred with respect to any such plan
excluding transactions effected pursuant to a statutory or administrative
exemption; for each such plan which is subject to the funding rules of Section
412 of the Code or Section 302 of ERISA, no "accumulated funding deficiency," as
defined in Section 412 of the Code, has been incurred, whether or not waived,
and the fair market value of the assets of each such plan (excluding for these
purposes accrued
12
<PAGE>
but unpaid contributions) exceed the present value of all benefits accrued under
such plan determined.
3. Representations and Warranties by the Lender. The Lender represents,
and warrants to, and covenants with, the Company as follows:
(a) Investment Intent: Authority. The Lender is making the Loans, and
acquiring the Notes, and the Warrant, and any shares of Common Stock issuable
upon conversion of the Notes or exercise or conversion of the Warrant for
investment for the Lender's own account, and not as nominee or agent for
investment and not with a view to or for resale in connection with any
distribution or public offering thereof within the meaning of the Securities
Act. The Lender has the full right, power, authority and capacity to enter into
and perform this Agreement and this Agreement will constitute a valid and
binding obligation upon the Lender.
(b) Shares Not Registered. The Lender understands and acknowledges that
neither the Notes, the Warrant nor the shares of Common Stock issuable upon
conversion of the Notes or exercise or conversion of the Warrant will be
registered under the Securities Act or qualified under any state securities laws
in reliance upon one or more exemptions from registration or qualification under
the Securities Act and such state securities laws, and that the Company's
reliance upon such exemption is predicated upon the Lender's representations set
forth in this Agreement. The Lender understands and acknowledges that resale of
the Notes, the Warrant and the shares of Common Stock issuable upon conversion
of the Notes or exercise or conversion of the Warrant may be restricted
indefinitely unless they are subsequently registered under the Securities Act
and qualified under state law or an exemption from such registration and such
qualification is available.
(c) No Transfer. The Lender will not dispose of any of the Notes, the
Warrant or the shares of Common Stock issuable upon conversion of the Notes or
exercise or conversion of the Warrant, other than in conjunction with an
effective registration statement or exemption from registration under the
Securities Act and other than in compliance with the applicable state securities
laws
(d) Accredited Investor. The Lender is an "accredited investor" within
the meaning of Securities and Exchange Commission ("SEC") Rule 501 or Regulation
D, as presently in effect.
4. Miscellaneous.
(a) Reports. For as long as the Lender continues to hold any Note,
Warrant or shares of Common Stock issued upon exercise or conversion thereof ,
the Company agrees to send the following reports and materials to the Lender at
the Basel, Switzerland and Nutley, New Jersey addresses specified in subsection
(f) below: (i) within ten days after the filing with the SEC a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy and
information statements and any
13
<PAGE>
Current Reports on Form 8-K and (ii) within one day after release, copies of all
press releases issued by the Company or any of its subsidiaries, if any.
(b) Waivers and Amendments. Any provision of this Agreement may be
amended, waived or modified upon the written consent of the Company and the
Lender to be bound by such amendment, waiver or modification.
(c) Governing Law. This Agreement and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to conflict of laws
provisions of the State of New York or of any other state. In the event of any
dispute among or between any of the parties to this Agreement arising out of the
terms of this Agreement, the parties hereby consent to the exclusive
jurisdiction of the federal and state courts located in the State of New York
for resolution of such dispute, and agree not to contest such exclusive
jurisdiction or seek to transfer any action relating to such dispute to any
other jurisdiction.
(d) Entire Agreement. This Agreement, together with the Exhibits hereto
and the Notes and Warrant, constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
(e) Expenses. Except as specifically set forth herein, each Party shall
pay all of the costs and expenses, including reasonable attorneys' fees,
incurred by such Party in connection with the negotiation and consummation of
the transactions contemplated hereunder.
(f) Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed to have been duly given at the time of
receipt if delivered by hand or by facsimile transmission or three days after
being mailed, registered or certified mail, return receipt requested, with
postage prepaid to the applicable parties hereto at the address stated below or
if any party shall have designated a different address or facsimile number by
notice to the other party given as provided above, then to the last address or
facsimile number so designated.
If to the Company:
Trimeris Inc.
4727 University Drive
Suite 100
Durham, NC 27707
Attention: Chief Financial Officer
with a simultaneous copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
14
<PAGE>
Attention: Russell J. Bruemmer, Esq.
Facsimile No. (202) 663-6363
If to the Lender:
Roche Finance Ltd
124 Grenzacherstrasse
Postfach CH-4070
Basel, Switzerland
Attn: Law Department
Facsimile No.:011 41 61 688 1396
with a simultaneous copy sent to:
Frederick C. Kentz, III
340 Kingsland Street
Nutley, NJ 07110-1199
Facsimile No.: 973-235-3500
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004-1206
Attention: Robert B. Ott, Esq.
Facsimile No.: (202) 942-5999
(g) Validity. If any provision of this Agreement, the Notes or the
Warrant shall be judicially determined to be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions thereof
shall not in any way be affected or impaired thereby.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, and a party's delivery of a signed counterpart by facsimile
transmission shall constitute that party's due execution of this Agreement.
(i) Business Day. As used herein, "Business Day" means any day other
than a Saturday, Sunday or other day on which the national or state banks
located in either of the State of New York or the State of North Carolina are
authorized to be closed.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date and year first written above.
TRIMERIS INC.
By: /s/ Dani P. Bolognesi
----------------------------------
Name: Dani P. Bolognesi
------------------------------
Title: CEO
------------------------------
ROCHE FINANCE LTD
By: /s/ Bruno Maier
--------------------------------
Name: Dr. Bruno Maier
-------------------------------
Title: Director
------------------------------
16
<PAGE>
By: /s/ Peter Matter
---------------------------------
Name: Peter Matter
-------------------------------
Title: Director
------------------------------
Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") sets forth the
registration rights granted by Trimeris Inc. (the "Company") to the Lender under
the Financing Agreement dated as of July 9, 1999 by and between the Company and
Roche Finance Ltd (the "Financing Agreement"). Capitalized terms defined in the
Financing Agreement and used herein without definition have the same meanings
herein as in the Financing Agreement.
In consideration of the agreements of the Lender contained in the
Financing Agreement, the Company hereby grants to the Lender the rights set
forth herein:
Section 1. Definitions. For purposes of this Agreement:
a. "Commencement Date" means the first Closing under the Financing
Agreement.
b. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
c. "Investors" means (i) the Lender, (ii) any affiliate of the
Lender or its successor and (iii) any person or entity to whom the Lender or any
person or entity identified in clause (ii) of this Section 1(c) sells, transfers
or assigns any of its Registrable Securities, other than in a sale pursuant to
Rule 144 under the Securities Act or a registration effected pursuant to this
Agreement.
d. "Register," "registered," and "registration" refer to an
underwritten registration effected by preparing and filing with the Securities
and Exchange Commission (the "Commission") a registration statement or similar
document in compliance with the Securities Act, and the declaration or ordering
by the Commission of effectiveness of such registration statement or document.
e. "Registration Expenses" means all expenses in connection with
the Company's performance of or compliance with its obligations under this
Agreement, including, without limitation, all (i) registration, qualification
and filing fees; (ii) fees, costs and expenses of compliance with securities or
blue sky laws (including reasonable fees, expenses and disbursements of counsel
for the underwriters in connection with blue sky qualifications of the
Registrable Securities under the laws of such jurisdictions as the managing
underwriter or underwriters in a registration may designate, subject to the
limitation as set forth in subsection (h) of Section 5 hereof); (iii) printing
expenses; (iv) messenger, telephone and delivery expenses; (v) fees, expenses
and disbursements of counsel for the Company and of all independent certified
public accountants retained by
<PAGE>
the Company (including the expenses of any special audit and "cold comfort"
letters required by or incident to such performance); (vi) Securities Act
liability insurance if the Company so desires; (vii) fees, expenses and
disbursements of any other individuals or entities retained by the Company in
connection with the registration of the Registrable Securities; (viii) fees,
costs and expenses incurred by the Company in connection with the listing of the
Registrable Securities on each national securities exchange or automated
quotation system on which the Company has made application for the listing of
its Common Stock; and (ix) internal expenses of the Company (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties and expenses of any annual audit). Registration
Expenses shall not include selling commissions, discounts or other compensation
paid to underwriters or other agents or brokers to effect the sale of
Registrable Securities, counsel fees or any other expenses incurred by Investors
in connection with any registration that are not specified in the immediately
preceding sentence.
f. "Registrable Securities" means (i) shares of Common Stock
issued upon conversion of any Notes issued pursuant to the Financing Agreement
or upon exercise or conversion of any Warrants issued pursuant to the Financing
Agreement, or (ii) shares of Common Stock or other securities of the Company
issued as a dividend or other distribution on or in exchange for any of the
shares of Common Stock specified in clause (i).
g. "Requestor" means the Investor requesting the registration in
question.
h. "Securities Act" means the Securities Act of 1933, as amended,
or any successor statute.
Section 2. Demand Registration
---------------------
a. Request for Registration. If at any time after the Commencement
Date an Investor submits a written request (a "Demand Notice") to the Company
that the Company register Registrable Securities under and in accordance with
the Securities Act (a "Demand Registration"), then the Company shall:
(i) within 5 days after receipt of such Demand Notice, give
written notice of the proposed registration to all other Investors; and
(ii) as soon as practicable, use diligent efforts to effect such
registration as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Investors joining in such request as are specified in written
requests received by the Company within 20 days after the date the Company mails
the written notice referred to in clause (i) above.
-2-
<PAGE>
Notwithstanding the foregoing, if the Company shall furnish to the
Investors a certificate signed by the president of the Company stating that in
the good faith judgment of the board of directors of the Company, it would be
detrimental to the Company or its stockholders for a registration statement to
be filed on or before the date filing would be required in connection with any
Demand Registration and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing or
delay its effectiveness for a reasonable period not to exceed 90 days provided
that such right shall not be exercised more than once with respect to a
particular request for registration hereunder. The Company will pay all
Registration Expenses in connection with such withdrawn request for
registration.
Any rights to a Demand Registration may be exercised not more than
four times and each such Demand Registration must relate to a number of
Registrable Securities greater than or equal to the lesser of (i) 75,000
Registrable Securities (subject to appropriate adjustment for stock dividends,
stock splits and other recapitalization transactions), (ii) a number of
Registrable Securities for which the anticipated offering price at the time of
such exercise exceeds $5 million, and (iii) the number of Registrable Securities
then held by the Holder (including Registrable Securities that may be acquired
by the Holder upon the exercise or conversion of any other securities then held
by the Holder.
b. Underwriting. In connection with any registration under this
Section 2, if so requested by the Requestor, the Company shall enter into an
underwriting agreement with one or more underwriters selected by the Requestor
having terms and conditions customary for such agreements.
Section 3. Company Registration.
---------------------
a. Notice of Registration. If at any time or from time to time, the
Company shall determine to register any of its Common Stock, whether or not for
its own account, other than a registration relating to employee benefit plans or
a registration effected on Form S-4, the Company shall:
(i) provide to each Investor written notice thereof at least ten
days prior to the filing of the registration statement by the Company in
connection with such registration; and
(ii) include in such registration, and in any underwriting involved
therein, all those Registrable Securities specified in a written request by each
Investor received by the Company within five days after the Company mails the
written notice referred to above, subject to the provisions of Section 3(b)
below.
b. Underwriting. The right of any Investor to registration pursuant
to this Section 3 shall be conditioned upon the participation by such Investor
in the underwriting
-3-
<PAGE>
arrangements specified by the Company in connection with such registration and
the inclusion of the Registrable Securities of such Investor in such
underwriting to the extent provided herein. All Investors proposing to
distribute their Registrable Securities through such underwriting shall
(together with the Company) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the Company
and take all other actions, and deliver such opinions and certifications, as may
be reasonably requested by such managing underwriter. Notwithstanding any other
provision of this Section 3, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in such registration. The Company shall so advise all
Investors distributing Registrable Securities through such underwriting, and
there shall be excluded from such registration and underwriting, to the extent
necessary to satisfy such limitation, first shares held by the Investors and,
thereafter, to the extent necessary, shares which the Company wishes to register
for its own account. As among the Investors as a group, the number of
Registrable Securities that may be included in the registration and underwriting
shall be allocated in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities required to be included (determined without
regard to any requirement of a request to be included in such registration) in
such registration held by all Investors at the time of filing the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Investor
to the nearest 100 shares.
c. Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by the Company under this
Section 3 prior to the effectiveness of such registration whether or not any
Investor has elected to include Registrable Securities in such registration.
Section 4. Expense of Registration. All Registration Expenses incurred in
connection with the registration and other obligations of the Company pursuant
to Sections 2, 3 and 5 shall be borne by Company.
Section 5. Registration Procedures. If and whenever the Company is required
by the provisions of this Agreement to effect the registration of Registrable
Securities, the Company shall:
a. promptly prepare and file with the Commission a registration
statement with respect to such Registrable Securities on any form that may be
utilized by the Company and that shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods of disposition
thereof, and use its reasonable diligent efforts to cause such registration
statement to become effective as promptly as practicable and remain effective
thereafter as provided herein, provided that prior to filing a registration
statement or prospectus or any amendments or supplements thereto, including
documents incorporated by reference after the initial filing of any registration
statement, the Company will furnish to each of the Investors whose Registrable
Securities are covered by such registration statement, their counsel and the
underwriters copies of all such documents proposed to be filed sufficiently in
advance of filing to provide them with a reasonable opportunity to review such
documents and
-4-
<PAGE>
comment thereon;
b. prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and current and to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
Registrable Securities covered by such registration statement, including such
amendments (including post-effective amendments) and supplements as may be
necessary to reflect the intended method of disposition by the prospective
seller or sellers of such Registrable Securities, but for no longer than 120
days subsequent to the effective date of such registration statement;
c. provide customary indemnity and contribution arrangements to any
qualified independent underwriter or qualified independent pricer as defined in
Schedule E of the Bylaws of the National Association of Securities Dealers, Inc.
(a "Qualified Independent Underwriter/Pricer"), if requested by such Qualified
Independent Underwriter/Pricer, on such reasonable terms as such Qualified
Independent Underwriter/Pricer customarily requires;
d. subject to receiving reasonable assurances of confidentiality,
for a reasonable period after the filing of such registration statement, and
throughout each period during which the Company is required to keep a
registration effective, make available for inspection by the selling holders of
Registrable Securities being offered, and any underwriters, and their respective
counsel, such financial and other information and books and records of the
Company, and cause the officers, directors, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries as
shall be reasonably necessary, in the judgment of such counsel, to conduct a
reasonable investigation within the meaning of Section 11 of the Securities Act;
e. promptly notify the selling holders of Registrable Securities and
any underwriters and confirm such advice in writing, (i) when such registration
statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same has become
effective, (ii) of any comments by the Commission, by the National Association
of Securities Dealers Inc. ("NASD"), and by the blue sky or securities
commissioner or regulator of any state with respect thereto or any request by
any such entity for amendments or supplements to such registration statement or
prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of such registration
statement or the initiation or threatening of any proceedings for that purpose,
(iv) if at any time the representations and warranties of the Company cease to
be true and correct in all material respects, (v) of the receipt by the Company
of any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (vi) at any time when a
prospectus is required to be delivered under the Securities Act, that such
registration
-5-
<PAGE>
statement, prospectus, prospectus amendment or supplement or post-effective
amendment, or any document incorporated by reference in any of the foregoing,
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading;
f. furnish to each selling holder of Registrable Securities being
offered, and any underwriters, prospectuses or amendments or supplements
thereto, in such quantities as they may reasonably request and as soon as
practicable, that update previous prospectuses or amendments or supplements
thereto;
g. in the case of a registration under Section 3 hereof, permit
selling holders of Registrable Securities to rely on any representations and
warranties made to any underwriter of the Company or any opinion of counsel or
"cold comfort" letter delivered to any such underwriter, and indemnify each such
holder to the same extent that it indemnifies any such underwriter;
h. use reasonable diligent efforts to (i) register or qualify the
Registrable Securities to be included in a registration statement hereunder
under such other securities laws or blue sky laws of such jurisdictions within
the United States of America as any selling holder of such Registrable
Securities or any underwriter of the securities being sold shall reasonably
request, (ii) keep such registrations or qualifications in effect for so long as
the registration statement remains in effect and (iii) take any and all such
actions as may be reasonably necessary or advisable to enable such holder or
underwriter to consummate the disposition in such jurisdictions of such
Registrable Securities owned by such holder; provided, however, that the Company
shall not be required for any such purpose to (x) qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify but for the requirements of this Section 5(h),
(y) subject itself to taxation in any such jurisdiction or (z) consent to
general service of process in any such jurisdiction;
i. cause all such Registrable Securities to be listed or accepted
for quotation on each securities exchange or automated quotation system on which
the Company's Common Stock then trades; and
j. otherwise use reasonable diligent efforts to comply with all
applicable provisions of the Securities Act, and rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering a period of at least twelve months
which shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder.
Section 6. Indemnification. In the event any of the Registrable Securities are
included in a registration statement under this Agreement:
a. the Company will indemnify each Investor who participates in such
registration, each of its officers and directors and partners and such
Investor's separate legal counsel and independent accountants, and each person
controlling such Investor
-6-
<PAGE>
within the meaning of Section 15 of the Securities Act, and each underwriter, if
any, and each person who controls any underwriter within the meaning of Section
15 of the Securities Act, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Investor, each of its officers and directors
and partners and such Investor's separate legal counsel and independent
accountants and each person controlling such Investor, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Investor or underwriter and
stated to be specially for use therein.
b. Each Investor will, if Registrable Securities held by such
Investor are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act, and each other such
Investor, each of its officers and directors and each person controlling such
Investor within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, and will reimburse the Company, such
Investors, such directors, officers, persons, underwriters or control persons
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with information furnished to the Company by an
instrument duly executed by such Investor and stated to be specifically for use
therein.
c. Each party entitled to indemnification under this Section 6 (the
-7-
<PAGE>
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought provided
that failure to give such prompt notice shall not relieve the Indemnifying Party
of its obligations hereunder unless it is materially prejudiced thereby, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). Such Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be that of such Indemnified Party unless
(i) the Indemnifying Party has agreed to pay such fees and expenses or (ii) the
Indemnifying Party shall have failed to assume the defense of such action or
proceeding and employ counsel reasonably satisfactory to such Indemnified Party
in any such action or proceeding or (iii) the named parties to any such action
or proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party and such Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses available to
such Indemnified Party which are different from or additional to those available
to the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing of an election to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Party
then shall have the right to employ separate counsel at its own expense and to
participate in the defense thereof, and shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all Indemnified
Parties, which firm shall be designated in writing by a majority of the
Indemnified Parties who are eligible to select such counsel). No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. No Indemnified Party may
consent to entry of any judgment or enter into any settlement without the prior
written consent of the Indemnifying Party.
d. If the indemnification provided for in this Section 6 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying the Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party with
respect to such loss, liability, claim, damage or expenses in the proportion
that is appropriate to reflect the relative fault of the Indemnifying Party and
the Indemnified Party in connection with the statements or omissions that
resulted in such loss, liability, claim, damage, or expense, as well as any
other relevant equitable considerations. The relative fault of the Indemnifying
Party and the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or the
omission to state a material fact relates to
-8-
<PAGE>
information supplied by the Indemnifying Party or by the Indemnified Party, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
Section 7. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock and for so long as any
Note, Warrant or Registrable Securities are outstanding, the Company shall use
reasonably diligent efforts to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, beginning 90 days
after the Company registers a class of securities under Section 12 of the
Exchange Act or completes a registered offering under the Securities Act;
b. file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements);
c. furnish to any Investor promptly upon request a written statement
as to its compliance with the reporting requirements of Rule 144 (at any time
after 90 days after the Company completes a registered offering under the
Securities Act), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as an Investor may reasonably request in
availing itself of any rule or regulation of the Commission allowing an Investor
to sell Registrable Securities without registration.
Section 8. Termination of Registration Rights. The Investor shall be entitled to
exercise all rights provided in this Agreement until (a) if the Holder is an
"affiliate" of the Company under Rule 144 of the Securities Act, until such time
as such Investor is permitted to sell all such Registerable Securities in a
single transaction under Rule 144 or (b) in all other cases, the second
anniversary of the last exercise of the Holder's conversion or exercise rights
under any Note or the Warrant (each as defined in the Purchase Agreement).
Section 9. Information To Be Provided by the Investors. Each Investor whose
Registrable Securities are included in any registration pursuant to this
Agreement shall furnish the Company such information regarding such Investor and
the distribution proposed by such Investor as may be reasonably requested in
writing by the Company and as shall be required in connection with such
registration or the registration or qualification of such securities under any
applicable state securities law.
Section 10. Agreements With Respect to Underwritten Offering. In the event
that Registrable Securities are sold pursuant to a registration statement in an
underwritten offering, the Company and each Investor participating in such sale
shall enter into an underwriting agreement with the lead underwriters for such
offering containing customary
-9-
<PAGE>
representations, warranties and covenants.
Section 11. Miscellaneous.
--------------
a. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to depart from the provisions hereof may
not be given unless the Company has obtained the written consent of the
Majority-In-Interest. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof with respect to a matter which relates
exclusively to the rights of Investors whose Registrable Securities are being
sold pursuant to a registration statement and which does not directly or
indirectly affect the rights of other Investors may be given by the holders of a
majority of the Registrable Securities being sold by such holders.
b. Notices. All communications provided for hereunder shall be sent
by registered or certified mail, reputable overnight delivery service or
facsimile transmission. Communications to an Investor shall be sent to such
Investor at its address set forth in the Financing Agreement or, if the Investor
was not a Lender, in the security register or other records of the Company.
Communications to the Company shall be sent to the Company as provided in the
Financing Agreement.
c. Descriptive Headings. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
d. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York as applied to agreements entered into and wholly performed
in New York, without giving effect to the choice of law or conflicts principles
thereof. In the event of any dispute arising out of the terms of this Agreement,
the parties hereby consent to the exclusive jurisdiction of the federal and
state courts located in the State of New York for resolution of such dispute,
and agree not to contest such exclusive jurisdiction or seek to transfer any
action relating to such dispute to any other jurisdiction.
e. Part of Financing Agreement. This Agreement is being executed as
a part of the Financing Agreement and is subject to all provisions thereof.
f. Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
g. Counterparts. This Agreement may be executed in any number of
counterparts, and a party's delivery of a signed counterpart by facsimile
transmission shall constitute that party's due execution of this Agreement.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date and year first written above.
TRIMERIS INC. ROCHE FINANCE LTD
By: /s/ Dani P. Bolognesi By: /s/ Bruno Maier
Name: Dani P. Bolognesi Name: Dr. Bruno Maier
Title: CEO Title: Director
-11-
<PAGE>
By: /s/ Peter Matter
Name: Peter Matter
Title: Director
-12-
Exhibit 10.4
TABLE OF CONTENTS
PARAGRAPHS PAGE NO.
1. REFERENCE DATA
1.1 Basic Information and Provisions 3
1.2 Exhibits 6
1.3 Special Provisions 6,7,8,9, 10
2. PREMISES 11
3. TERM 11
4. CONSTRUCTION 11
5. USE 14
6. RENT 14
7. ADDITIONAL RENT 14
8. SERVICES/UTILITIES 18
9. TENANT'S ACCEPTANCE AND MAINTENANCE
OF PREMISES; LANDLORD'S DUTIES
AND RIGHTS 18
10. DAMAGES TO PREMISES 20
11. ASSIGNMENT - SUBLEASE 22
12. TENANT'S COMPLIANCE - INSURANCE REQUIREMENTS 22
1
<PAGE>
13. SUBORDINATION - ATTORNMENT -- LANDLORD
FINANCING 25
14. SIGNS 26
15. ACCESS TO PREMISES 26
16. DEFAULT 26
17. PROPERTY OF TENANT 27
18. EMINENT DOMAIN 28
19. QUIET ENJOYMENT 28
20. SECURITY DEPOSIT 28
21. NOTICES 28
22. HOLDING OVER 29
23. BROKER'S COMMISSIONS 30
24. ENVIRONMENTAL COMPLIANCE 30
25. RIGHT TO RELOCATE 32
26. MISCELLANEOUS 32
2
<PAGE>
THIS LEASE made this 15 day of April, 1999 by and between Landlord and
Tenant.
PARAGRAPH 1
REFERENCE DATA
PARAGRAPH 1.1 BASIC INFORMATION AND PROVISIONS
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Paragraph 1.1:
LANDLORD: University Place Associates, a North Carolina general partnership
AGENT: Craig Davis Properties, Inc.
MANAGING AGENT'S ADDRESS:
3605 Glenwood Avenue, 435 UCB Plaza, Raleigh, North Carolina 27612
LANDLORD'S REPRESENTATIVE: Richard A. Moehring
TENANT'S SPACE (the "Premises"): 21,429 rentable square feet, including fixtures
affixed to the Building within the space leased and lab furniture and equipment
previously leased by Eli Lilly and Company
BUILDING: Two University Place, The Campus at University Place, Durham, North
Carolina
TENANT: Trimeris, Inc., a Delaware corporation
TENANT'S ADDRESS (prior to occupancy): Two University Place, Suite 100, 4727
University Drive, Durham, North Carolina, 27707
NAME AND ADDRESS TO SEND RENT: Craig Davis Properties, Inc., 3605 Glenwood
Avenue, 435 UCB Plaza, Raleigh, North Carolina 27612
TENANT'S REPRESENTATIVE: Matthew A. Megaro
TENANT'S BROKER: Corporate Realty Advisors
INITIALS:
Landlord: /s/ CMD
-------------------
Tenant: /s/ MM
---------------------
3
<PAGE>
RENTABLE FLOOR AREA OF PREMISES: _21,429 square feet
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 38,818 square feet
TENANT'S DESIGN COMPLETION DATE: N/A
Check one: Complete Plans_______Interior selections
TERM COMMENCEMENT DATE: October 1, 1999
RENTAL COMMENCEMENT DATE: October 1, 1999
TERM EXPIRATION DATE: September 30, 2002
INITIAL LEASE TERM: 3 years
BASE RENT: $428,580.00/yr. $35,715.00/mo ($20.00/r.s.f.)
LANDLORD'S BASE OPERATING
EXPENSES ALLOCABLE
TO TENANT ** $70,287.12/yr. $5,857.26/mo. ($3.28 /r.s.f.)
FIXED RENT: $498,867.12/yr. $41,572.26/mo. ($23.28/r.s.f.)
** LANDLORD'S BASE OPERATING EXPENSES (ESTIMATED):
$127,323.04.00/yr. $10,610.25/mo.
($ 3.28 per rentable square foot/yr.)
TENANT'S PROPORTIONATE SHARE OF LANDLORD'S BASE OPERATING EXPENSES:
55.20%
INITIALS:
Landlord: /s/ CMD
---------------
Tenant: /s/ MM
----------------
4
<PAGE>
ESCALATIONS: Fixed Rent is to be escalated in accordance with the terms of
Special Provision No. 2.
FIRST 12-MONTH PERIOD IN WHICH TENANT PAYS BASE RENT ESCALATION:
Year commencing October 1, 2000
FIRST 12-MONTH PERIOD IN WHICH TENANT PAYS INCREASE IN LANDLORD'S BASE OPERATING
EXPENSE ALLOCABLE TO TENANT:
Year commencing October 1, 2000
TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD: N/A
SECURITY DEPOSIT: $ N/A
GUARANTORS: N/A
PERMITTED USES: General office, lab space, research and development,
manufacturing of pharmaceuticals for research purposes
TENANT'S PUBLIC LIABILITY INSURANCE: Commercial General Liability insurance
policies or Comprehensive General Liability insurance policies with a Broad Form
Comprehensive Liability Endorsement including Contracted Insurance and with a
combined single limit of at least $1,000,000.00 per occurrence on a per location
basis
and including:
Bodily Injury: $1,000,000.00
Property Damage: $1,000,000.00
INITIALS:
Landlord: /s/ CMD
-------------------
Tenant: /s/ MM
-------------------
5
<PAGE>
PARAGRAPH 1.2 EXHIBITS
The exhibits listed below when checked are incorporated in this Lease
and made a part by reference.
___X____ EXHIBIT A The Premises
___X____ EXHIBIT B Complete Plans and Specifications for Tenant
Improvements
___X____ EXHIBIT C Building Rules and Regulations
___X____ EXHIBIT D Legal Description of Lot on which Building is located
__N/A___ EXHIBIT E Lease Guaranty
___X____ EXHIBIT F Commencement Letter
__N/A___ EXHIBIT G Outline of "janitorial services"
PARAGRAPH 1.3 SPECIAL PROVISIONS
Any special terms or provisions of this Lease, if not typed below, are
attached immediately following this page as page(s) 7, 8, 9 and 10 and all such
terms and provisions are and shall be considered a part of this Lease. In the
event any special terms or provisions conflict with any other term or provision
of this Lease, the special terms and provisions shall control.
INITIALS:
Landlord: /s/ CMD
-------------------
Tenant: /s/ MM
--------------------
6
<PAGE>
PARAGRAPH 1.3 SPECIAL PROVISIONS
1. Construction. The provisions of Paragraph 4 of the Lease are hereby deleted.
2. Annual Base Rent Escalations. On October 1, 2000 and every twelve (12) months
thereafter (including the Extended Term, if applicable), Base Rent shall be
increased and be payable according to the following schedule:
Lease Term Monthly Base Rent
Commencement date - September 30, 2000 $ 35,715.00 ($20.00/r.s.f.)
October 1, 2000 - September 30, 2001 $ 36,768.59 ($20.59/r.s.f.)
October 1, 2001 - September 30, 2002 $ 37,840.04 ($21.19/r.s.f.)
Extended Term Monthly Base Rent
October 1, 2002 - September 30, 2003 $ 38,054.33 ($21.31/r.s.f.)
October 1, 2003 - September 30, 2004 $ 39,197.21 ($21.95/r.s.f.)
October 1, 2004 - September 30, 2005 $ 40,375.81 ($22.61/r.s.f.)
The provisions of Paragraph 7(c)(i) are hereby deleted.
3. Ground Rent Exclusion. All references to ground rents in Paragraph 7 of the
Lease are hereby deleted.
4. Landlord's Operating Expense Exclusion. In addition to the items excluded
from the definition of "Landlord's Operating Expenses" contained in Paragraph 7
of the Lease, the following items shall also be excluded: (i) expenditures
required by Landlord's failure to comply with laws, statutes or ordinances; (ii)
expenditures incurred by Landlord for the repair of casualty damage to the
Building; (iii) costs incurred with respect to the installation of tenant
improvements made for tenants in the Building or incurred in renovating or
otherwise improving, decorating, painting or redecorating vacant space for other
occupants of the Building; (iv) attorneys' fees and other costs and expenses
incurred in connection with negotiations or disputes with prospective or actual
tenants of the Building or litigation to collect rent from tenants from the
Building; (v) costs incurred by Landlord for alterations which are considered
improvements and replacements under general accepted accounting principles,
consistently applied, except as expressly provided herein; (vi) costs of a
capital nature, including, without limitation, improvements, equipment and
tools, as determined in accordance with general accepted accounting principles,
consistently applied; (vii) expenses in connection with services or other
benefits which are not offered to Tenant or for which Tenant is charged directly
but which are provided to another tenant or occupant of the Building; (viii)
Landlord's general corporate overhead; (ix) cost incurred by Landlord due to the
violation by Landlord or any other tenant of the terms and conditions or any
lease or space in the Building; (x) rentals and other related expenses incurred
in leasing air conditioning systems, elevators or equipment ordinarily
considered to be of a capital nature; (xi) damage and repairs attributable to
fire or other casualty insured by Landlord or covered by insurance Landlord is
required to carry, whichever is greater; (xii) damage and repairs necessitated
by the negligence or willful misconduct of Landlord or Landlord's employees,
contractors or agents; (xiii) costs associated with the removal, testing,
abatement, containment or any remedy necessary because of the existence of
hazardous waste on the property; and (xiv) income, franchise or similar taxes
payable by Landlord relating to the ownership of the Building, except rental
income tax if such income ever becomes subject to taxation.
7
<PAGE>
5. Right of First Offer. Tenant is hereby granted a right of first offer to
lease contiguous space (the "ROFO Space") in the Building. If all or any portion
of the ROFO Space becomes available for lease, and on the condition that Tenant
has fully complied with all the terms and conditions of this Lease and is not in
default under any of the terms hereof after the applicable cure period, if any,
Landlord shall give notice to Tenant of Landlord's intent to lease the ROFO
Space to an identified prospect (the "Prospect"), and Tenant shall have ten (10)
days after receipt of such notice within which to give Landlord written notice
of whether Tenant desires to exercise its right of first offer to lease said
space under the same terms and conditions of this Lease (including the rental
rate as escalated) and for a term of not less than three (3) years. The failure
of Tenant to so notify Landlord within the 10-day time period shall be deemed to
be a rejection by Tenant of its right to lease the offered ROFO Space. However,
if the space is not leased to the Prospect within one hundred twenty (120) days
of Tenant's receipt of notice as provided herein, then the right of Tenant shall
be renewed as to this space. If Tenant exercises its right to lease such ROFO
Space as herein provided, Landlord and Tenant shall enter into a lease amendment
relative to such ROFO Space on the same terms and conditions offered in the
notice to Tenant.
6. Option to Extend. On condition that Tenant has fully complied with all the
terms and conditions of this Lease and is not in default under any of the terms
hereof after the applicable cure period, if any, and on the further condition
that Tenant gives Landlord at least nine (9) months prior written notice to
exercise this option to extend (failure to give notice being an absolute bar to
any right on the part of Tenant to so extend), Landlord hereby gives to Tenant
the right to extend this Lease for one additional term of three (3) years (the
"Extended Term"), said Extended Term to expire (unless sooner terminated as
provided in this Lease by reason of default on the part of Tenant) three (3)
years after the expiration of the Initial Lease Term.
All terms and conditions of the Lease shall be and remain in effect during
the Extended Term, with rent continuing to escalate during the Extended Term as
if the Initial Lease Term had originally included the Extended Term and Base
Rent shall be payable according to the schedule set forth in Special Provision
No. 2.
7. Tenant Improvements. Landlord will provide a tenant improvement allowance of
$3.00 per rentable square foot ($64,287.00). Tenant shall be responsible for all
tenant improvements exceeding said amount. Tenant may select its own service
providers for programming, space planning, architectural and engineering
drawings and specifications for the Premises from a list provided by Landlord.
Tenant may also hire its own contractor as reasonably approved by Landlord.
Landlord will only pass through to Tenant the costs charged by outside
contractors for the review of Tenant's plans and specifications. Landlord shall
not charge a construction management fee for the tenant improvements.
Prior to commencing any work, Tenant shall provide to Landlord for
its reasonable approval:
Complete sets of construction drawings and specifications prepared at
Tenant's expense including, but not limited to:
(i) Furniture and Equipment Layout Plans
(ii) Dimensioned Partition Plans
(iii) Dimensioned Electrical and Telephone Outlet Plans
(iv) Reflected Ceiling Plans
8
<PAGE>
(v) Door and Hardware Schedules
(vi) Room Finish Schedule, including wall, carpet and floor tile colors
(vii) Electrical and Mechanical Engineering Plans.
(collectively "Complete Plans").
Landlord's and Tenant's representatives shall initial the Complete Plans
after the same have been submitted by Tenant and approved by Landlord, which
approval, if forthcoming, shall be within twenty (20) days of submittal to
Landlord's project manager or property manager, the identity of which Landlord
will make known to Tenant. If no response is given by Landlord to Tenant after
this twenty-day period, the Complete Plans shall be deemed to be approved. If
same are not approved by Landlord, the reasons for such disapproval shall be
given to Tenant, and Tenant shall be given the opportunity to resubmit for
approval.
Tenant's interior furnishings, i.e., specification, coordination, supply
and installation of furniture, furnishings, telephones and movable equipment,
will be the responsibility of Tenant, and later changes or additions shall
performed by Tenant in such manner as to maintain harmonious labor relations and
not damage the Building or Lot or interfere with building operations. Landlord
will not be required to approve any construction, alterations, or additions
requiring unusual expense to readapt the Premises to normal office use on lease
termination or increasing the cost of construction, insurance or taxes on the
Building or of Landlord's services as provided herein unless Tenant first gives
assurances acceptable to Landlord that readaptation will be made prior to such
termination without expense to Landlord. All changes and additions affixed to
the Premises shall be part of the Building except such items as by writing at
the time of approval the parties agree either shall be removed by Tenant on
termination of this Lease, or shall be removed or left at Tenant's election.
In the event of Tenant's failure to comply with the provisions of this
Paragraph to submit information, to deliver construction drawings and
specifications which meet Landlord's reasonable approval, or if applicable, to
complete construction of the Tenant Improvements, Landlord shall, at Landlord's
option exercisable by notice to Tenant, have the rights provided under Paragraph
16 of this Lease.
All construction work required or permitted by this Lease shall be done in
a good and workmanlike manner and in compliance with all applicable laws and all
lawful ordinances, regulations and orders of governmental authority and insurers
of the Building. Landlord may inspect the work of Tenant at reasonable times and
shall promptly give notice of observed defects.
8. Subordination - Non-Disturbance. Prior to the Term Commencement Date,
Landlord shall obtain and deliver to Tenant from its mortgagee a written
Subordination and Non-Disturbance Agreement providing that so long as Tenant
performs all of the terms, covenants and conditions of this Lease and agrees to
attorn to the mortgagee, beneficiary of the deed of trust, purchaser at a
foreclosure sale, prime lessor or fee owner, Tenant's rights under this Lease
shall not be disturbed and shall remain in full force and effect for the Term,
and Tenant shall not be joined by the holder of any mortgage or deed of trust in
any action or proceeding to foreclose thereunder.
9
<PAGE>
9. Right to Relocate. Paragraph 25 of the Lease is hereby stricken in its
entirety.
10. Assignment. Notwithstanding the provisions of Paragraph 11 of the Lease,
this Lease may be assigned or sublet without Landlord's consent to any
corporation or partnership that controls, is controlled by, or is under common
control with Tenant, or to any business entity resulting from the merger,
acquisition or consolidation with Tenant, or to any entity that acquires all of
Tenant's assets as a going concern of the business that is being conducted on
the premises provided that (a) the assignee or subtenant assumes in writing all
obligations of Tenant hereunder for the term assigned or sublet, and (b) the
financial strength and viability of the assignee or subtenant, as determined to
the reasonable satisfaction of Landlord, is greater than or equal to that of
Tenant.
11. Landlord's Property. Notwithstanding anything in this Lease to the contrary,
all lab furniture and equipment previously owned or leased by Eli Lilly and
Company ("Lilly") is now owned by Landlord and shall not be removed from the
Premises. In addition, all vent hoods, casework benches and lab cabinets
attached to the Premises shall not be removed from the Premises, regardless of
whether they are owned or attached to the Premises by Landlord, Lilly or Tenant.
Landlord acknowledges that the condition of the property referred to herein may
be diminished due to ordinary wear and tear and Tenant shall only be responsible
for the diminished condition of the property that is in excess of ordinary wear
and tear, if any.
10
<PAGE>
LEASE
STATE OF NORTH CAROLINA :
COUNTY OF DURHAM :
W I T N E S S E T H :
Upon the terms and conditions contained in Paragraph 1 and those
enumerated Paragraphs hereinafter set forth, Landlord Leases to Tenant and
Tenant leases from Landlord property referred to as the Premises, all as
follows:
2. PREMISES. The property hereby leased to Tenant is the space shown on
Exhibit A hereto attached, including lab furniture and equipment previously
leased by Eli Lilly and Company and fixtures affixed to the Building within the
space (the "Premises").
3. TERM. This Lease shall commence on the Term Commencement Date, and
shall terminate (unless terminated earlier as herein provided) on the Term
Expiration Date (the foregoing period shall be referred to herein as the
"Initial Lease Term").
4. CONSTRUCTION. Unless otherwise provided in the Special Provisions
section of the Lease, Landlord agrees to cause to be completed the upfitting
work on the Premises in accordance with the plans and specifications set forth
on Exhibit B (the "Tenant Improvements"), subject to the other provisions of
this Paragraph. The allowances, if any, being provided to Tenant for the Tenant
Improvements are recited in the Special Provisions section of this Lease.
Tenant shall, on or before Tenant's Design Completion Date, provide to
Landlord for its reasonable approval:
(A) If "Complete Plans" is marked in Paragraph 1.1, complete sets of
construction drawings and specifications prepared at Tenant's expense by an
architect approved by Landlord, and Landlord's engineer, including, but not
limited to:
(i) Furniture and Equipment Layout Plans
(ii) Dimensioned Partition Plans
(iii) Dimensioned Electrical and Telephone Outlet Plans
(iv) Reflected Ceiling Plans
(v) Door and Hardware Schedules
(vi) Room Finish Schedule, including wall, carpet and floor tile colors
(vii) Electrical and Mechanical Engineering Plans
(viii) All necessary construction details and constructions for
work not specified in Exhibit B.
11
<PAGE>
(B) If "Interior Selections" is marked in Paragraph 1.1, all applicable
wall finish, carpet, and floor tile colors shall be selected by Tenant and
submitted to Landlord for approval.
Landlord's and Tenant's representatives shall initial the Complete Plans
or the Interior Selections after the same have been submitted by Tenant and
approved by Landlord, which approval, if forthcoming, shall be within twenty
(20) days of submittal to Landlord's project manager or property manager, the
identity of which Landlord will make known to Tenant. If no response is given by
Landlord to Tenant after this twenty-day period, the Complete Plans and/or
Interior Selections shall be deemed to be approved. If same are not approved by
Landlord, the reasons for such disapproval shall be given to Tenant, and Tenant
shall be given the opportunity to resubmit for approval.
Tenant's interior furnishings, i.e., specification, coordination, supply
and installation of furniture, furnishings, telephones and movable equipment,
will be the responsibility of Tenant, and later changes or additions shall be
coordinated with any work being performed by Landlord and Tenant in such manner
as to maintain harmonious labor relations and not damage the Building or Lot or
interfere with building operations. Except for the installation of furnishings
and the installation of telephone service which must be performed by the local
telephone company at Tenant's direction and expense, unless otherwise provided
in the Special Provisions section of the Lease, all such work shall be performed
by Landlord's general contractor and Tenant shall pay therefor the Tenant
Improvement Reimbursement to Landlord and an additional amount equal to the cost
of any changes from the plans and specifications in Exhibit B, including the
cost to Landlord of the general contractor's overhead and profit, which amount
shall be due and payable, as additional rent, on the Term Commencement Date.
Landlord will not be required to approve any construction, alterations, or
additions requiring unusual expense to readapt the Premises to normal office use
on lease termination or increasing the cost of construction, insurance or taxes
on the Building or of Landlord's services as provided herein unless Tenant first
gives assurances acceptable to Landlord that readaptation will be made prior to
such termination without expense to Landlord. Landlord also will not be required
to approve any alterations or additions requested by Tenant which, in Landlord's
reasonable opinion, will delay completion of the Premises or the Building. All
changes and additions affixed to the Premises shall be part of the Building
except such items as by writing at the time of approval the parties agree either
shall be removed by Tenant on termination of this Lease, or shall be removed or
left at Tenant's election.
12
<PAGE>
Landlord agrees to use best efforts to have the Premises ready for
occupancy on or before the Term Commencement Date, which shall, however, be
extended for those delays beyond the reasonable control of Landlord. The
Premises shall be deemed ready for occupancy on the earlier of:
(a) the date on which Tenant occupies all or any part of the
Premises; or
(b) the date on which the Tenant Improvements, as specified in
Exhibit B, are substantially completed for Tenant's intended use
as confirmed by the issuance of a certificate of occupancy by the
appropriate governmental authority; provided, however, that if
Landlord is unable to complete construction of the Building and
Premises (if Landlord's general contractor is selected) due to
delay in Tenant's compliance with the provisions of this
Paragraph, then the Premises shall be deemed ready for occupancy
no later than the Rental Commencement Date.
Landlord shall permit Tenant and Tenant's contractors (if applicable)
access for installing equipment and furnishings in the Premises prior to the
Term Commencement Date when it can be done without material interference with
remaining work. Landlord acknowledges joint access may occur and agrees to
cooperate fully with Tenant's general contractor and subcontractors.
In the event of Tenant's failure to comply with the provisions of this
Paragraph to submit information, to deliver construction drawings and
specifications which meet Landlord's reasonable approval, or if applicable, to
complete construction of the Tenant Improvements, Landlord shall, at Landlord's
option exercisable by notice to Tenant, have the rights provided under Paragraph
16 of this Lease. However, if the Premises are not deemed ready for occupancy on
or before the Outside Delivery Date for whatever reason, other than Tenant's
default, Tenant may terminate this Lease by written notice to Landlord without
further obligation by Tenant to Landlord; provided, that written notice shall be
ineffective if given after Tenant takes possession of any part of the Premises,
or if given more than ninety (90) days after the Outside Delivery Date plus the
time of any delays caused by Tenant.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurers of the Building. Either party may
inspect the work of the other at reasonable times and shall promptly give notice
of observed defects. Landlord's obligations under this Paragraph shall be deemed
to have been performed when Tenant commences to occupy any portion of the
Premises for the Permitted Uses except for items which are incomplete or do not
conform with the
13
<PAGE>
requirements of this Paragraph and as to which Tenant shall in either case have
given written notice to Landlord prior to such commencement. If Tenant has not
commenced to occupy the Premises for the Permitted Uses within 30 days after
they are deemed ready for occupancy as provided in this Paragraph, a certificate
of completion by Landlord's licensed architect or registered engineer shall be
conclusive evidence that Landlord has performed all such obligations except for
items stated in such certificate to be incomplete or not in conformity with such
requirements.
5. USE. Tenant may use the Premises for general office purposes, lab
space, research and development and manufacturing of pharmaceuticals for
research purposes, but not for any other purpose without Landlord's prior
written consent. Tenant shall never make any use of the Premises which is in
violation of any governmental laws, rules or regulations, whether now existing
or hereafter enacted, or which use is not permitted, or otherwise prohibited, by
any restrictive covenants which apply to the Premises. Nor may Tenant make any
use which may or shall constitute a nuisance or trespass, or which increases the
fire insurance premiums, or makes such insurance unavailable to Landlord on the
Building. In the event of an increase in Landlord's fire insurance premiums
which specifically result from Tenant's use or occupancy of the Premises, Tenant
shall pay Landlord, on demand, the amount of such increase, and failure to do so
shall be a default hereunder.
6. RENT. All rent payable by Tenant shall be paid at the address set forth
in Paragraph 1.1, shall be without previous demand or notice therefor by
Landlord, and paid without set off or deduction. The monthly Fixed Rent as set
forth in Paragraph 1.1, shall be payable in advance on or before the first day
of each calendar month during the Initial Lease Term of this Lease, unless the
Initial Lease Term commences on a day other than the first day of a calendar
month, in which event Fixed Rent shall be prorated on a per diem basis at the
stated rate for the remainder of the month and shall be due and payable on the
Rental Commencement Date. In addition to such remedies as may be provided under
the Default provisions of this Lease, Landlord shall be entitled to a late
charge of four percent (4%) of the amount of each monthly rent payment not
received by the fifth day of the month for which due, and a charge of the lower
of the highest lawful bad check fee or five percent (5%) of the amount of such
check given by Tenant when such check is not paid when first presented to the
bank on which it is drawn for payment.
7. ADDITIONAL RENT.
(a) Fixed Rent as provided in Paragraph 1.1 is composed of two increments:
(i) Base
14
<PAGE>
Rent and (ii) Tenant's Proportionate Share (herein defined) of Landlord's Base
Operating Expenses (herein defined). Both increments of Fixed Rent shall be
subject to an annual adjustment, as outlined in Paragraphs 7(c)(i) and 7(c)(ii)
(the "Additional Rent"). Thus, for each twelve month period following the
preceding twelve full months of this Lease, Tenant shall pay as Additional Rent
an amount calculated in accordance with the provisions of Paragraph 7(c), and as
otherwise provided herein. Tenant shall further pay as Additional Rent any sales
or use tax that may in the future be imposed on rents collected by Landlord. If
any such sales or use tax shall be imposed upon Landlord, and Landlord shall be
prohibited by applicable law from collecting the amount of such tax from Tenant
as Additional Rent, then Landlord, upon ninety (90) days prior written notice to
Tenant, may terminate this Lease.
(b) Tenant's Proportionate Share of Landlord's Base Operating Expenses
shall be calculated by dividing the total rentable square footage of the
Premises by the total rentable square footage of the Building. As of the date
hereof, the Tenant's Proportionate Share of Landlord's Base Operating Expenses
is as stated in Paragraph 1.1.
(c) (i) Annual Base Rent Escalations. Upon the first anniversary of the
Rental Commencement Date, and every twelve (12) months thereafter, Base Rent
shall be increased as may be necessary to increase the purchasing power of the
annual Base Rent to a level equivalent to that existing at the commencement of
the Initial Lease Term ("Cost of Living Increase"). The Cost of Living Increase
shall be determined by subtracting the annual Base Rent from the product
obtained by multiplying the annual Base Rent by a fraction, the denominator of
which is the Revised Consumer Price Index for All Urban Consumers-New Series
(1982-1984 = 100), as published by the Bureau of Labor Statistics, U. S.
Department of Labor (the "Index"), for the month of the commencement of the
twelve month period for which the increase is being calculated, and the
numerator of which is the Index for the third month immediately preceding the
twelve month term just concluding. If the Index as published by the Bureau of
Labor Statistics is discontinued, then the Consumer Price Index published by the
United States Department of Commerce (with proper adjustment) shall be used, and
if the Department of Commerce discontinues its index and the parties are unable
to agree upon adjustments in rents, then the rent shall be determined in
accordance with the Uniform Arbitration Act then in effect in North Carolina.
Landlord shall notify Tenant annually in writing of the annual Cost of Living
Increase in Base Rent, which notice shall include calculations of the annual
Cost of Living Increase in the Base Rent, including the new monthly Base Rent
reflecting this increase. Notwithstanding the resulting calculations hereunder,
the amount of annual Base Rent paid under
15
<PAGE>
this Paragraph 7(c)(i) shall never be less than the annual Base Rent stated
under Paragraph 1.1.
(ii) Annual Operating Expense Adjustments. If in any calendar year during
the Initial Lease Term hereof, the Landlord's Operating Expenses (as defined
herein) exceed the Landlord's Base Operating Expenses (such excess being
hereafter referred to as the "Operating Expense Differential"), then as
Additional Rent for that year, Tenant shall pay to Landlord, within the time
period set forth herein, the Tenant's Proportionate Share of the Operating
Expense Differential.
Statements showing the actual Landlord's Operating Expenses, and the
Tenant's proportionate share thereof (hereinafter referred to as the "Statement
of Actual Adjustment"), shall be delivered by Landlord to Tenant within ninety
(90) days after the end of each calendar year in which Additional Rent is paid
or due by Tenant under provisions hereof. Within fifteen (15) days after written
notice by Landlord to Tenant of such Statement of Actual Adjustment, Tenant
shall pay to Landlord the amount of any Additional Rent shown as being due and
unpaid thereon.
Commencing with the first month of the second full calendar year of the
Initial Lease Term, and each and every calendar year thereafter, there shall be
added to Tenant's monthly payments an amount to cover Tenant's Proportionate
Share of the Operating Expense Differential for the year in progress as
reasonably estimated by Landlord. Said monthly payments (as estimated by
Landlord) shall be paid by Tenant until such time as actual figures are
available, when the monthly payments shall be adjusted to reflect the prior
year's experience. Should the Statement of Actual Adjustment show the Tenant had
paid to Landlord an amount that exceeded Tenant's Proportionate Share of the
actual Landlord Operating Expenses and Tenant is not in default hereunder or has
cured any such default, Landlord shall adjust Tenant's rental payments if any
credit is shown to be due Tenant, except at the end of the Initial Lease Term at
which time any credit due Tenant shall be refunded by Landlord within thirty
(30) days thereafter.
If the final months of this Lease should be less than a full twelve (12)
month term, the amount shown as due by Tenant on the Statement of Actual
Adjustment shall reflect a proration based on the proportion that the number of
days this Lease was in effect during such lease year bears to 365. Landlord's
right to recover its Operating Expenses Differential shall survive the
termination of this Lease.
If in the twelve-month period preceding the computation of each Operating
Expense Differential, the occupancy of the net rentable area of the Building
averages less than ninety-five percent (95%), then it is agreed that the
Landlord's Operating Expenses will be adjusted for such
16
<PAGE>
year so that such Operating Expenses shall be computed as though the net
rentable area of the Building has been ninety-five percent (95%) occupied for
such calendar year, but Tenant's share shall not exceed Tenant's proportionate
share of the actual expenses. All such expense categories will be accounted for
and reported for in accordance with generally accepted accounting principles.
The term "Landlord's Operating Expenses" shall include all costs of
operation, maintenance, repair, and management of (i) the Building, (ii) the
personal property used in conjunction therewith, (iii) the roof of the Building,
and (iv) the land upon which the Building is situated (the "Lot"), all as
determined by standard accounting practices.
The definition of "Landlord's Operating Expenses" includes, but not by way
of limitation, the following: real estate taxes on the Building and Lot;
increases in ground rents; installments and interest on assessments for public
betterment or public improvements; reasonable expenses of any proceedings for
abatement of taxes and assessments; premiums for insurance; reasonable
compensation and all fringe benefits, worker's compensation insurance premiums
and payroll taxes paid by Landlord to, for or with respect to all persons
engaged in the operating, maintaining, or cleaning of the Building and Lot
provided that such persons are engaged in positions no more senior than property
manager, provided these costs are consistent with market rates; steam, water,
sewer, electricity, gas, telephone, and other utility charges for the Building
and Lot not billed directly to tenants by Landlord or the utility company; costs
of building and cleaning supplies and cleaning equipment (including rental);
cost of maintenance, cleaning, and repairs, cost of snowplowing or removal, or
both, and care of landscaping; payments to the independent contractors under
service contracts for cleaning, operating, managing, maintaining and repairing
the Building and Lot (which payments may be to affiliates of Landlord provided
the same are at reasonable rates consistent with local market practices and with
the type of occupancy and the services rendered); reasonable pro rata rental
costs associated with providing the managing agent space for an office in the
office park of which the Building is a part; if the Building is located in an
office park, the Building's pro rata share (as reasonably determined by the
Landlord) of the cost of operating, maintaining and repairing the common areas
and facilities within such park (such as, but not limited to, snowplowing,
landscaping, common area and street lighting, security and management); if the
Building is located, either in whole or in part, on a lot which is ground
leased, the Building's pro rata share (as reasonably determined by Landlord) of
all fixed or additional rents or charges payable with respect to such ground
lease; and all other reasonable and necessary expenses paid in connection with
the operation, cleaning, management,
17
<PAGE>
maintenance and repair of the Building and Lot, or either, and properly
chargeable against new income, it being agreed that if Landlord installs a new
or replacement capital item for the purpose of significantly reducing Landlord's
Operating Expenses, the cost thereof as reasonably amortized by Landlord with
reasonable interest on the unamortized amount shall be included in Landlord's
Operating Expenses. The Statement of Actual Adjustment shall show the average
number of square feet of the Building which were vacant for the preceding lease
year or fraction thereof.
The definition of "Landlord's Operating Expenses" shall exclude, but not
by way of limitation, depreciation on the Building in which the Premises are
situated or equipment therein, executive salaries, real estate broker's
commissions, or other expenses that do not directly relate to the operation of
the Building.
Upon reasonable notice to Landlord, and during normal business hours,
Tenant shall have a right to inspect and audit the books and records of
Landlord, wherever located, relating to the Operating Expenses.
8. SERVICES/UTILITIES. Landlord shall cause to be furnished to the
Premises all utility line connections to the Premises as found in standard
office space. Tenant shall arrange and pay for all electrical, gas, water,
sewer, telephone, heating and air conditioning, janitorial, and other utilities
or services used in connection with Tenant's use of the Premises, together with
any taxes, penalties, surcharges or the like pertaining thereto. Tenant shall
also pay for any utility maintenance charges and shall be responsible for all
light bulbs, tubes and controls required for the Premises. Landlord shall have
the right to enter and inspect the Premises, and all devices, machines and
equipment therein used by Tenant, from time to time, with reasonable advance
notice where possible, to insure compliance with all applicable laws and rules
and regulations, and to confirm the safe use thereof. Tenant shall have the
right to accompany Landlord during such visits. There shall be no abatement or
reduction of rent by reason of any of the foregoing services not being
continuously provided to Tenant, except if due to the gross negligence or
willful misconduct of Landlord. In addition, Landlord shall further provide a
reasonable amount of unreserved free parking, in common with the other tenants,
for Tenant's employees and visitors. Landlord covenants and agrees that a ratio
of one parking space for each 250 square feet of rentable space within the
Building shall be maintained at all times during the Lease Term.
Tenant shall report immediately to Landlord any defective condition in or
about the Premises which becomes known to Tenant and if failure to promptly
report such defective
18
<PAGE>
condition results in other damage that Landlord could have avoided, Landlord
shall not be responsible for same.
9. TENANT'S ACCEPTANCE AND MAINTENANCE OF PREMISES; LANDLORD'S DUTIES AND
RIGHTS. Tenant, on occupancy of the Premises, represents to Landlord that it has
examined and inspected the same, finds the Premises to be as represented by
Landlord and satisfactory for Tenant's intended use, and constitutes Tenant's
acceptance "AS IS", subject to incomplete items about which Tenant notifies
Landlord for which Landlord is responsible as provided herein. Landlord shall
diligently and immediately pursue the completion of such incomplete items.
Tenant shall deliver at the end of this Lease each and every part of the
Premises in good repair and condition, reasonable wear and tear and damage by
insured casualty only excepted. Tenant shall: (i) keep the Premises and fixtures
in good order, except to the extent allocated to Landlord under this Paragraph;
(ii) make repairs and replacements to the Premises or Building needed because of
Tenant's misuse or negligence, except to the extent that the repairs or
replacements are covered by Landlord's insurance; (iii) repair and replace
special equipment or decorative treatments installed by or at Tenant's request
that serve the Premises only, except (A) to the extent the repairs or
replacements are needed because of Landlord's misuse or negligence, but not then
if covered by Tenant's insurance or the insurance Tenant is required to carry
under this Lease; or (B) if the Lease is ended because of casualty loss or
condemnation; and (iv) not commit waste. Tenant, however, shall make no
structural or interior alterations of the Premises which are not in compliance
with all then existing applicable codes, ordinances, laws and regulations, and
no alterations may be made without Landlord's prior written consent, which
consent will not be unreasonably withheld. Any work performed by Tenant shall be
done in a good and workmanlike manner, and so as not to unreasonably disturb or
inconvenience other tenants in the Building. Tenant shall provide Landlord with
at least ten (10) business days' advance written notice of the commencement of
any such alterations to the Premises, and if Landlord does not object to such
alterations, these alterations shall be deemed to be permitted. Tenant shall not
at any time permit any work to be performed on the Premises except by duly
licensed contractors or artisans, each of whom must carry workmen's compensation
and general public liability insurance reasonably satisfactory to Landlord,
certificates of which shall be furnished to Landlord prior to commencement of
any such work. Tenant shall never do any work which results in a claim of lien
against Landlord. Tenant shall cause any lien filed against Tenant's interest in
the Premises to be either cancelled or released pursuant to NCGS 44A-16 within
thirty days after such lien has been filed. On termination of
19
<PAGE>
this Lease, or vacation of the Premises by Tenant, Tenant shall restore the
Premises at Tenant's sole expense to the same condition as existed at the
commencement of the Initial Lease Term, ordinary wear and tear and damage by
insured casualty only excepted. Landlord, however, may elect to require Tenant
to leave alterations made by Tenant unless at the time of such alterations
Landlord agreed in writing they could be removed upon expiration of this Lease.
Except for repairs and replacements that Tenant must make under this
Paragraph, Landlord shall pay for and make all other necessary repairs and
replacements to the Premises, the common areas and the Building (including
Building fixtures and equipment).
Landlord shall make the repairs and replacements required to maintain the
Building in a condition comparable to other comparable office buildings in the
same geographical area. This maintenance shall include, but not be limited to,
the roof, foundation, exterior walls, interior structural walls, all structural
components, and all systems, such as mechanical, electrical, HVAC, and plumbing.
Repairs or replacements required under this Paragraph shall be made within a
reasonable time (depending on the nature of the repair or replacement needed)
after receiving notice or having actual knowledge of the need for such repair or
replacement.
Notwithstanding anything to the contrary set forth above in this
Paragraph, if Tenant does not perform its maintenance obligations in a timely
manner as set forth in this Lease, commencing the same within five (5) business
days of receipt of notice from Landlord specifying the work needed and
thereafter diligently and continuously pursuing to completion all unfulfilled
maintenance obligations, Landlord shall have the right, but not the obligation,
to perform such maintenance, and any amounts so expended by Landlord shall be
paid by Tenant to Landlord within 30 days after demand, with interest at the
lower of the maximum rate allowed by law or 15% per annum, from the date of
expenditure through the date paid.
10. DAMAGES TO PREMISES. If the Premises shall be partially damaged by
fire or other casualty insured under Landlord's insurance policies, Landlord
shall use its best efforts to obtain the permission of Landlord's lender(s) to
use insurance proceeds paid as a result thereof to be so used, and if Landlord's
lender(s) shall permit the insurance proceeds to be so used, then upon
Landlord's receipt of the insurance proceeds, Landlord shall, except as
otherwise provided herein, promptly repair and restore the same as hereinafter
defined (including fixtures affixed to the Premises but exclusive of trade
fixtures, equipment, furnishings, decorations, signs, and contents); limited,
however, to the extent of the insurance proceeds actually received by Landlord.
If by reason of such occurrence: (a) the Premises are rendered wholly
untenantable; or (b) the Premises are damaged in whole or in part as a result of
a risk which is not covered by
20
<PAGE>
Landlord's insurance policies; or (c) Landlord's lender does not permit a
sufficient amount of the insurance proceeds to be used for restoration purposes;
or (d) the Premises are damaged in whole or in part during the last year of the
Initial Lease Term; or (e) the Building containing the Premises is damaged
(whether or not the Premises are damaged) to an extent of fifty percent (50%) or
more of the fair market value thereof, Landlord may elect either to repair the
damage as aforesaid within one hundred twenty (120) days of damage, or to cancel
this Lease by written notice of cancellation given to Tenant within sixty (60)
days after the date of such occurrence, and thereupon this Lease shall
terminate. Tenant shall vacate and surrender the Premises to Landlord within
thirty (30) days after receipt of such notice of termination. In addition,
Tenant may also terminate this Lease by written notice given to Landlord at any
time between the one hundred twenty-first (121st) and one hundred fiftieth
(150th) days after the occurrence of any such casualty, if Landlord has failed
to restore the damaged portions of the Building (including the Premises) within
one hundred twenty (120) days of such casualty. However, if Landlord is
prevented by strike, act of God, unavailability of materials, weather, Tenant
induced delays or other cause beyond its reasonable control, from completing the
restoration within said one hundred twenty (120) day period, then Landlord shall
have an additional period beyond said one hundred twenty (120) days, equal to
the lesser of thirty (30) days or the period Landlord is delayed by causes
beyond its reasonable control, in which to restore the damaged areas of the
Building, provided that if the delays are Tenant induced delays, such thirty
(30) day cap shall not be applicable; and Tenant may not elect to terminate this
Lease until said additional period required for completion has expired with the
Building not having been substantially restored. In such case, Tenant's
termination period shall begin to run upon the expiration of Landlord's
additional period for restoration set forth in the preceding sentence. Upon the
termination of this Lease as aforesaid, Tenant's liability for all rent and
other charges reserved hereunder shall cease as of the effective date of the
termination of this Lease, subject, however, to the provisions for the prior
abatement of Rent hereinafter set forth.
Unless this Lease is terminated as aforesaid, this Lease shall remain in
full force and effect, and Tenant shall promptly repair, restore, or replace
Tenant's improvements, trade fixtures, decorations, signs, and contents in the
Premises in a manner and to a condition substantially equal to that existing
prior to their damage or destruction, and the proceeds of all insurance carried
by Tenant on said property shall be held in trust by Tenant for the purposes of
such repair, restoration, or replacement.
If, by reason of such fire or other casualty, the Premises are rendered
wholly
21
<PAGE>
untenantable, all rent and other charges payable by Tenant shall be fully
abated, or if only partially damaged, such Rent and other charges shall be
abated proportionately as to that portion of the Premises rendered untenantable,
in either event (unless the Lease is terminated, as aforesaid) from the date of
such casualty until fifteen (15) days after notice by Landlord to Tenant that
the Premises have been substantially repaired and restored, or until Tenant
resumes or can resume its normal business operations in the Premises, whichever
shall first occur. Tenant shall continue the operation of Tenant's business in
the Premises or any part thereof not so damaged during any such period to the
extent reasonably practicable from the standpoint of prudent business
management, except for such abatement of Rent and other charges as hereinabove
set forth. However, if such damages or other casualty were caused by the gross
negligence or other wrongful conduct of Tenant or of Tenant's subtenants,
licensees, contractors, or invitees, or their respective agents or employees,
there shall be no abatement of Rent or other charges. Except for the abatement
of the Rent and other charges hereinabove set forth, Tenant shall not be
entitled to, and hereby waives, all claims against Landlord for any compensation
or damage for loss of use of the whole or any part of the Premises and/or for
any inconvenience or annoyance occasioned by any such damage, destruction,
repair, or restoration unless due to gross negligence or willful misconduct of
Landlord, its agents, licensees or contractors..
As used in this Paragraph, "restoration", "restored", "substantially
restored", or "substantially repaired and restored" shall be deemed to mean the
Premises have been put in substantially the same quality and condition as
existed immediately prior to such damage or destruction, is habitable for
Tenant's intended use, and is evidenced by the issuance of a certificate of
occupancy by the appropriate governmental authority.
11. ASSIGNMENT - SUBLEASE. Tenant may not assign or encumber this Lease or
its interest in the Premises or any part thereof arising under this Lease, and
may not sublet any part or all of the Premises without the prior written consent
of Landlord, which consent shall not be unreasonably withheld, delayed or
conditioned. Any assignment or sublease to which Landlord may consent (one
consent not being any basis that Landlord should consent grant any further
consent) shall not relieve Tenant of any of its obligations hereunder.
In no event shall this Lease be assignable by operation of any law, and
Tenant's rights hereunder may not become, and shall not be listed by Tenant as
an asset under any bankruptcy, insolvency or reorganization proceedings. Tenant
is not, may not become, and shall never represent itself to be, an agent of
Landlord. Tenant expressly recognizes that Landlord's title is paramount, and
that it can do nothing to affect or impair Landlord's title.
22
<PAGE>
If this Lease shall be assigned or the Premises or any portion thereof
sublet by Tenant at a rental that exceeds the rentals to be paid to Landlord
hereunder, attributable to the Premises or portion thereof so assigned or
sublet, then any such excess, after deducting the costs of assignment or
subletting incurred by Tenant (e.g., upfitting expense, commissions, legal
costs, etc.), shall be paid over to Landlord by Tenant, and refusal of Tenant to
so agree shall be grounds based on which Landlord may withhold its consent to
any sublease or assignment.
12. TENANT'S COMPLIANCE-INSURANCE REQUIREMENTS. Tenant shall comply with
all applicable laws, ordinances and regulations affecting the use of the
Premises, now existing or hereafter adopted except those relating to obligations
of Landlord hereunder, including reasonable general rules and regulations for
tenants (a copy of the present rules are attached as Exhibit C) as may be
developed from time to time by Landlord and either delivered to Tenant or posted
on the Premises. Landlord agrees that its rules and regulations will be enforced
in a non-discriminatory manner as to all tenants and shall not be contrary to
the terms of this Lease.
Throughout the Initial Lease Term of this Lease, Tenant at its sole cost
and expense shall keep or cause to be kept for the mutual benefit of Landlord,
Landlord's managing agent (presently Vector Properties) and Tenant public
liability and property damage insurance with combined single limit coverage of
at least $1,000,000.00 (with appropriate cross-liability endorsements so
showing). Such policies shall insure against all liability of Tenant, Tenant's
authorized representatives, and anyone for whom Tenant is responsible, arising
out of and in connection with Tenant's use of the Premises, and shall insure
Tenant's performance of the indemnity provisions contained herein. Tenant shall
also insure its personal property and fixtures located in the Premises and any
improvements made by Tenant for their full insurable value, and Tenant shall
neither have, nor make, any claim against Landlord for any loss or damage to the
same, regardless of the cause thereof except as expressly provided herein.
Prior to taking possession of the Premises, and thereafter at least ten
(10) business days prior to the renewal dates thereof, Tenant shall deliver to
Landlord copies of original policies, or satisfactory certificates thereof, and
a receipt showing payment of the next year's premium. All such policies shall be
non-assessable and shall contain language, to the extent obtainable, that: (A)
any loss shall be payable notwithstanding any act or negligence of Landlord or
Tenant that might otherwise result in forfeiture of the insurance, (B) that the
policies are primary and non-contributing with any insurance that Landlord may
carry, and (C) that the policies cannot be cancelled or changed except after
thirty (30) days' prior written notice to Landlord.
23
<PAGE>
Anything in this Lease to the contrary notwithstanding, Landlord hereby
releases and waives unto Tenant (including all partners, stockholders, members,
managers, officers, directors, employees and agents thereof), its successors and
assigns, and Tenant hereby releases and waives unto Landlord (including all
partners, stockholders, members, managers, officers, directors, employees and
agents thereof), its successors and assigns, all rights to claim damages for any
injury, loss, cost or damage to persons or to the Premises or any other
casualty, as long as the amount of which injury, loss, cost or damage has been
paid either to Landlord, Tenant, or any other person, firm or corporation, under
the terms of any fire, extended coverage, public liability or other policy of
insurance, to the extent such releases or waivers are permitted under applicable
law. All policies of insurance carried or maintained pursuant to this Lease
shall contain, or be endorsed to contain, a provision whereby the insurer waives
all rights of subrogation against either Tenant or Landlord.
Subject to the terms of the preceding paragraph, Tenant shall indemnify
and hold Landlord harmless from and against any and all claims arising out of
(a) Tenant's use of the Premises or any part thereof, (b) any activity, work, or
other thing done, permitted or suffered by Tenant in or about the Premises or
the Building, or any part thereof, (c) any breach or default by Tenant in the
performance of any of its obligations under this Lease, or (d) any act or
negligence of Tenant, or any partner, shareholder, member, manager, officer,
agent, employee, contractor, servant, invitee or guest of Tenant; and in each
case from and against any and all damages, losses, liabilities, lawsuits, costs
and expenses (including attorneys' fees at all tribunal levels) arising in
connection with any such claim or claims as described in (a) through (d) above,
or any action brought thereon, except for Landlord's substantial negligence or
willful misconduct. If such action shall be brought against Landlord, Tenant
upon notice from Landlord shall defend the same through counsel selected by
Tenant's insurer, or other counsel, which counsel in either case must be
reasonably acceptable to Landlord. Tenant assumes all risk of damage or loss to
its property or injury or death to persons in, on, or about the Premises, from
all causes except those for which the law imposes liability on Landlord,
regardless of any attempted waiver thereof, and Tenant hereby waives such claims
in respect thereof against Landlord, except for Landlord's substantial
negligence or willful misconduct. The provisions of this paragraph shall survive
the termination of this Lease.
Landlord shall keep the Building, including but not limited to the
improvements per the Complete Plans, insured against damage and destruction by
fire, extended coverage peril, vandalism, and other perils in the amount of the
full replacement value of the Building, as the
24
<PAGE>
value may exist from time to time.
Each party shall keep its personal property and trade fixtures in the
Premises and Building insured with "all risks" insurance covering one hundred
(l00) percent of the replacement cost of the property and fixtures. Tenant shall
also keep any post-occupancy improvements made to the Premises at Tenant's
request following occupancy insured to the same degree as Tenant's personal
property. The amounts of insurance coverage required by this Lease are subject
to review at the end of each three-year period following the Term Commencement
Date. At each review, if necessary to maintain the same level of coverage that
existed on the Term Commencement Date, the amounts of coverage shall be
increased to the amounts of coverage carried by prudent landlords and tenants of
comparable first class office buildings in the Wake, Durham and Orange County,
North Carolina area.
Insurance policies required by this Lease shall: (i) be issued by
insurance companies licensed to do business in the state of North Carolina with
general policyholder's ratings of at least A- and a financial size category of
at least VIII in the most current Best's Key Rating Guide available on the Term
Commencement Date (if the Best's ratings are changed or discontinued, the
parties shall agree to an equivalent method of rating insurance companies); (ii)
name the nonprocuring party and Landlord's managing agent as additional insureds
as their interest may appear; (iii) provide that the insurance not be canceled
or materially changed in the scope or amount of coverage unless thirty (30)
days' advance notice is given to the nonprocuring party; (iv) be primary
policies - not as contributing with, or in excess of, the coverage that the
other party may carry; (v) provide that any loss shall be payable
notwithstanding any act or negligence of Landlord or Tenant which might result
in a forfeiture thereunder of such insurance or the amount of proceeds payable;
(vi) have deductibles not greater than $25,000.00; and (vii) be maintained
during the entire Initial Lease Term and any extension or renewal thereof.
By the Term Commencement Date and upon each renewal of its insurance
policies, each party shall give certificates of insurance to the other party.
The certificate shall specify amounts, types of coverage, the waiver of
subrogation, and the insurance criteria listed in this paragraph. The policies
shall be renewed or replaced and maintained by the party responsible for that
policy. If either party fails to give the required certificate within thirty
(30) days after notice of demand for it, the other party may obtain and pay for
that insurance and be entitled to receive immediate reimbursement from the party
required to have the insurance.
13. SUBORDINATION-ATTORNMENT - LANDLORD FINANCING. Tenant agrees that this
Lease will be either subordinate or superior to any mortgage heretofore or
25
<PAGE>
hereafter executed by Landlord covering the Premises, depending on the
requirements of such mortgagee. Tenant, within ten (l0) days of request to do so
from Landlord or its mortgagee, will execute an agreement making this Lease
superior or subordinate and containing such other covenants on Tenant's part as
Landlord's mortgagee may reasonably request. Tenant will agree to attorn to said
mortgagee provided the mortgagee agrees not to disturb Tenant's possession
hereunder so long as Tenant is in compliance with this Lease. Landlord consents
to Tenant's execution of Landlord's mortgagee's subordination, attornment and
non-disturbance agreement, and to be bound by the provisions thereof. Further,
Tenant agrees to execute ten (10) days of request therefor, and as often as
requested, estoppel certificates confirming any factual matter requested therein
which is true and is within Tenant's knowledge regarding this Lease, the
Premises, or Tenant's use thereof, including, but not limited to, date of
occupancy, termination date of this Lease, the amount of rent due and date to
which rent is paid, whether or not Tenant has any knowledge of any defense or
offsets to the enforcement of this Lease or the rent payable hereunder or
knowledge of any default or breach by Landlord, and that this Lease is in full
force and effect except as to any modifications or amendments, copies of which
Tenant shall attach to such estoppel certificate.
Tenant agrees to give any mortgagee of Landlord which has provided a
non-disturbance agreement to Tenant, notice of, and a reasonable opportunity to
cure (which shall in no event be less than thirty (30) days after written notice
thereof delivered to mortgagee as herein provided) any Landlord default
hereunder; and Tenant agrees to accept such cure if effected by such mortgagee.
No termination of this Lease by Tenant shall be effective until such notice has
been given and unless such cure period has expired without such default having
been cured. Further Tenant agrees to permit such mortgagee (or other purchaser
at any foreclosure sale), and its successors and assigns, on acquiring
Landlord's interest in the Premises and the Lease, to become substitute Landlord
hereunder, with liability only for such Landlord obligations as accrue after
Landlord's interest is so acquired.
14. SIGNS. Tenant may not erect, install or display any sign or
advertising material upon the Building exterior, the exterior of the Premises,
or the exterior walls thereof, or in any window therein, without the prior
written consent of Landlord, excluding suite entry and monument signage hereby
approved by Landlord. Landlord shall furnish, install and maintain a Building
directory at a location in or near the lobby listing the name of Tenant and the
room number of Tenant's entrance.
15. ACCESS TO PREMISES. Landlord shall have the right, either itself or
through
26
<PAGE>
its authorized agents, to enter the Premises at all reasonable times
with at least one (1) business day prior notice, except in the event of
emergency, for inspection to show prospective tenants within one hundred eighty
(180) days of the termination date hereof, as extended by an exercised option,
to allow inspection by mortgagees, and to make such repairs, alterations or
changes as Landlord deems necessary, with reasonable advance notice where
possible. Tenant shall have the right to accompany Landlord in such visits.
Tenant, its agents, employees, invites, and guests, shall have the right of
ingress and egress to common and public areas of the Building, provided Landlord
by reasonable regulation may control such access for the comfort, convenience,
safety and protection of all tenants in the Building.
16. DEFAULT. If Tenant: (A) fails to pay within ten (10) days after notice
of its failure do pay any rent or other sums which Tenant is obligated to pay as
provided herein; or (B) breaches any other agreement, covenant or obligation
herein set forth and within fifteen (15) days after notice thereof fails to
commence to cure such breach, or diligently prosecute to complete cure such
breach after commencing cure; or (C) files (or has filed against it) any
petition or action for relief under any creditor's law (including bankruptcy,
reorganization, or similar actions), either in state or federal court; or (D)
becomes insolvent, makes any transfer in fraud of creditors, has a receiver
appointed for its assets, or makes an assignment for benefit of creditors, then
Tenant shall be in default hereunder, and, in addition to any other lawful right
or remedy which it may have, Landlord, without notice to Tenant, may do any one
or more of the following: (i) terminate this Lease; or (ii) repossess the
Premises, and with or without terminating, relet the same at such amount as
Landlord deems reasonable, and if the amount is less than Tenant's rent, Tenant
shall immediately pay the difference on demand to Landlord, but if in excess of
Tenant's rent and other monetary obligations hereunder, the entire amount shall
belong to Landlord free of any claim of Tenant thereof. All reasonable expenses
of Landlord in repairing, restoring or altering the Premises for reletting,
together with leasing fees and all other reasonable expenses in seeking and
obtaining a new tenant, shall be charged to and become a liability of Tenant if
they cannot be recouped from increased rent being paid by the new tenant.
Landlord's reasonable attorneys' fees actually incurred in pursuing any of the
foregoing remedies, or in collecting any rents due by Tenant hereunder, shall be
paid by Tenant. Landlord agrees to use its best efforts to mitigate damages
resulting from any breach hereunder by Tenant.
Tenant further agrees that Landlord may obtain an order for summary
ejectment from any court of competent jurisdiction without prejudice to
Landlord's rights to otherwise collect rents from Tenant.
27
<PAGE>
All rights and remedies of Landlord are cumulative, and the exercise of
any one shall not be an election excluding Landlord at any other time from
exercise of a different or inconsistent remedy. No exercise by Landlord of any
right or remedy granted herein shall constitute or effect a termination of this
Lease unless Landlord shall so elect by written notice delivered to Tenant.
No waiver by Landlord of any covenant or condition shall be deemed to
imply or constitute a further waiver of the same at a later time, and acceptance
of rent by Landlord, even with knowledge of a default by Tenant, shall not
constitute a waiver of such default.
17. PROPERTY OF TENANT. Tenant shall timely pay any and all taxes levied
or assessed against or upon Tenant's equipment, fixtures, furniture, leasehold
improvements, and personal property located in the Premises. Tenant prior to the
expiration date of this Lease, may remove all fixtures and equipment which it
has placed in the Premises, provided Tenant repairs all damages caused by such
removal. If Tenant does not remove its property from the Premises within five
(5) days of termination (for whatever cause) of this Lease, such property shall
be deemed abandoned by Tenant, and Landlord may dispose of the same in whatever
manner Landlord may elect, with no obligation to account to Tenant for same.
18. EMINENT DOMAIN. If all of the Premises, or such part thereof as will
make the same unusable for the purposes contemplated by this Lease, be taken
under the power of eminent domain (or a conveyance in lieu thereof), then this
Lease shall terminate as of the date possession is taken by the condemnor, and
rent shall be adjusted between Landlord and Tenant as of such date. If only a
portion of the Premises are taken and Tenant can continue use of the remainder
for the intended use of Tenant and its invitees, then this Lease will not
terminate, but rent shall abate in a just and proportionate amount to the loss
of use occasioned by the taking. Tenant shall have no right or claim to any part
of any award made to or received by Landlord for any taking and no right or
claim for any alleged value of the unexpired portion of this Lease; provided,
however, that Tenant shall not be prevented from making a claim against the
condemning party (but not against Landlord) for any moving expenses, loss of
profits, or taking of Tenant's personal property (other than its leasehold
estate) to which Tenant may be entitled.
19. QUIET ENJOYMENT. If Tenant promptly and punctually complies with each
of its obligations hereunder, it shall peacefully have and enjoy the possession
of the Premises during the Initial Lease Term or any renewal thereof, provided
that no action of Landlord or other tenants in working in other space in the
Building, or in repairing or restoring the Premises, shall be deemed a breach of
this covenant, or give to Tenant any right to modify this Lease either as to
term, rent payable, or other obligations to be performed.
28
<PAGE>
20. SECURITY DEPOSIT. Landlord hereby acknowledges receipt from Tenant of
the sum of (N/A) , which sum Landlord shall retain as security for the
performance by Tenant of each of its obligations hereunder. If Tenant fails at
any time to perform its obligations, Landlord may at its option apply said
deposit, or so much thereof as is required, to cure Tenant's default, but if
prior to the termination of this Lease Landlord depletes said deposit in whole
or in part, Tenant shall immediately restore the amount so used by Landlord.
This deposit shall not bear interest and unless Landlord uses the same to cure a
default of Tenant, or to restore the Premises to the condition that Tenant is
required to leave them at the conclusion of the term, Landlord shall within
thirty (30) days of the termination of this Lease refund to Tenant so much of
the deposit as it continues to hold.
21. NOTICES. All notices which may or are required to be given under this
Lease shall be in writing and may be delivered in either of the following ways:
by personal service; by certified, registered or express United States mail,
postage prepaid, return receipt requested; by overnight courier services such as
Federal Express; or by facsimile transmission (except that notices of default
may not be given by facsimile), and addressed or sent as follows, or to such
other address (or facsimile number) as a party may specify by notice duly given:
If to Landlord: c/o Craig Davis Properties, Inc.
3605 Glenwood Avenue
435 UCB Plaza
Raleigh, North Carolina 27612
Attn: Mr. Richard A. Moehring
Facsimile No. (919) 781-1262
If to Tenant: c/o Trimeris, Inc.
Two University Place, Ste. 100
4727 University Drive
Durham, North Carolina 27707
Attn: Chief Financial Officer
Facsimile No. (919) 419-1816
Notices given in the foregoing manner shall be effective (except as
provided in the next succeeding paragraph) when personally delivered, if mailed
on the earlier of the date actually received or three business days after
deposited in the United States mail, the next business day if sent by overnight
courier, and the date the facsimile transmission is received on a business day,
if before noon, otherwise on the next succeeding business day.
Notice of a change of address or facsimile number shall be given in
writing to the other
29
<PAGE>
party as provided above, but shall not be effective until ten days after
receipt. Notices may be given on behalf of any party by such party's legal
counsel.
22. HOLDING OVER. If Tenant shall hold over after the expiration of the
Initial Lease Term or other termination of this Lease, such holding over shall
not be deemed to be a renewal of this Lease but shall be deemed to create a
tenancy-at-sufferance and by such holding over Tenant shall be deemed to have
agreed to be bound by all of the terms and conditions of this Lease, except
those as to the term hereof, and during such tenancy-at-sufferance, Tenant shall
pay to Landlord (A) Fixed Rent at the rate equal to one hundred twenty-five
percent (125%) of that provided for in Paragraph 1.1 (as such rental amount may
have been increased in accordance with Paragraph 7), and (B) any and all
operating expenses or other forms of additional rent payable under the terms of
this Lease. The increased rental during such holding over is intended to
partially compensate Landlord for losses, damages and expenses, including
frustrating and delaying Landlord's ability to secure a replacement tenant.
23. BROKER'S COMMISSIONS. Tenant represents and warrants that it has not
had dealings with any real estate broker, finder or other person, with respect
to this Lease in any manner, except Corporate Realty Advisors. Landlord shall
pay any commissions or fees that are payable to the above-named brokers with
respect to this Lease pursuant to separate agreements that it has with one or
both of them. Tenant shall indemnify and hold Landlord harmless from any and all
damages resulting from any current or future claims that may be asserted against
Landlord by any other broker, finder or other person, claiming to have dealt
with Tenant in connection with this Lease. The provisions of this paragraph
shall survive the termination of this Lease.
24. ENVIRONMENTAL COMPLIANCE.
(A) Tenant's Responsibility. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any biologically
active or other hazardous substances, or materials contrary to law. Tenant shall
not allow the storage or use of such substances or materials in any manner not
sanctioned by law or by the standards prevailing in the industry for the storage
and use of such substances or materials, nor allow to be brought into the
Building in which the Premises are any such materials or substances except to
use in the ordinary course of Tenant's business, and then only after written
notice is given to Landlord of the identity of such substances or materials,
except that Tenant need not provide written notice of the use on the Premises of
cleaning supplies, copying fluids, other office and maintenance supplies and
other substances normally and customarily used by tenants of space similar to
the Premises if
30
<PAGE>
done in accordance with all applicable laws. Tenant covenants and agrees that
the Premises will at all times during its use or occupancy thereof be kept and
maintained so as to comply with all now existing or hereafter enacted or issued
statutes, laws, rules, ordinances, orders, permits and regulations of all state,
federal, local and other governmental and regulatory authorities, agencies and
bodies applicable to the Premises, pertaining to environmental matters or
regulating, prohibiting or otherwise having to do with asbestos and all other
toxic, radioactive, or hazardous wastes or material including, but not limited
to, the Federal Clean Air Act, the Federal Water Pollution Control Act, and the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as from time to time amended (all hereafter collectively called "Laws"). Tenant
shall execute affidavits, representations and the like, from time to time, at
Landlord's request, concerning Tenant's best knowledge and belief regarding the
presence of hazardous substances or materials on the Premises.
(B) Tenant's Liability. Tenant shall hold Landlord free, harmless, and
indemnified from any penalty, fine, claim, demand, liability, cost, or charge
whatsoever which Landlord shall incur, or which Landlord would otherwise incur,
by reason of Tenant's failure to comply with this Paragraph 24 including, but
not limited to: (1) the cost of bringing the Premises into compliance with all
Laws; (2) the reasonable cost of all appropriate tests and examinations of the
Premises to confirm that the Premises have been brought into compliance with all
Laws; and (3) the reasonable fees and expenses of Landlord's attorneys,
engineers, and consultants incurred by Landlord in enforcing and confirming
compliance with this Paragraph 24.
(C) Property. For the purposes of this Paragraph 24, the Premises shall
include the real estate covered by this Lease; all improvements thereon; all
personal property used in connection with the Premises (including that owned by
Tenant); and the soil, ground water, and surface water of the Premises, if the
Premises include any ground area.
(D) Inspections by Landlord. With reasonable notice, Landlord and its
engineers, technicians, and consultants (collectively the "Auditors") may, from
time to time as Landlord deems appropriate, conduct periodic tests and
examinations ("Audits") of the Premises to confirm and monitor Tenant's
compliance with this Paragraph 24. Such Audits shall be conducted in such a
manner as to minimize the interference with Tenant's permitted activities on the
Premises; however in all cases, the Audits shall be of such nature and scope as
shall be reasonably required by then existing technology to confirm Tenant's
compliance with this Paragraph 24. Tenant shall fully cooperate with Landlord
and its Auditors in the conduct of such Audits. The cost of such Audits shall be
paid by Landlord unless an Audit shall disclose a
31
<PAGE>
material failure of Tenant to comply with this Paragraph 24, in which case, the
cost of such Audit, and the cost of all subsequent Audits made during the
Initial Lease Term and within thirty (30) days thereafter (not to exceed two [2]
such Audits per calendar year), shall be paid for on demand by Tenant.
(E) Landlord's Liability. Provided, however, the foregoing covenants and
undertakings of Tenant contained in this Paragraph 24 shall not apply to any
condition or matter constituting a violation of any Law: (1) which existed prior
to the commencement of Tenant's use or occupancy of the Premises; (2) which was
not caused, in whole or in part, by Tenant or Tenant's agents, employees,
officers, partners, contractors or invites; or (3) to the extent such violation
is caused by, or results from the acts or neglects of Landlord or Landlord's
agents, employees, officers, partners, contractors, guests, or invitees.
(F) Tenant's Liability After Termination of Lease. The covenants contained
in this Paragraph 24 shall survive the expiration or termination of this Lease,
and shall continue for so long as Landlord and its successors and assigns may be
subject to any expense, liability, charge, penalty, or obligation against which
Tenant has agreed to indemnify Landlord under this Paragraph 24.
25. RIGHT TO RELOCATE. Landlord, at its option, may substitute for the
Premises other space (hereafter called "Substitute Premises") within the
Building of which the Premises are located or another building in the office
park where the Building is located before the Term Commencement Date or at any
time during the term or any extension of this Lease. Insofar as reasonably
possible, the Substitute Premises shall have a comparable square foot area and a
configuration substantially similar to the Premises. Landlord shall give Tenant
at least sixty (60) days written notice of its intention to relocate Tenant to
the Substitute Premises. This notice will be accompanied by a floor plan of the
Substitute Premises. After such notice, Tenant shall have ten (10) days within
which to agree with Landlord on the proposed new space and unless such agreement
is reached within such period of time, this Lease shall be terminated at the end
of the sixty (60) day period of time following the aforesaid notice. Landlord
agrees to construct or alter, at its own expense, the Substitute Premises as
expeditiously as possible so that they are in substantially the same condition
that the Premises were in immediately prior to the relocation. Landlord shall
have the right to reuse the fixtures, improvements, and alterations used in the
Premises. Tenant agrees to occupy the Substitute Premises as soon as the
Landlord's work is substantially completed and a certificate of occupancy is
issued for the Substitute Premises. Landlord shall pay Tenant's reasonable cost
of moving Tenant's furnishings, trade
32
<PAGE>
fixtures, and inventory to the Substitute Premises.
Except as provided herein, Tenant agrees that all of the obligations of
this Lease, including the payment of rent, will continue despite Tenant's
relocation to the Substitute Premises. Upon substantial completion of the
Substitute Premises, this Lease will apply to the Substitute Premises as if the
Substitute Premises had been the space originally described in the Lease.
Landlord shall use all reasonable efforts to minimize any period when the
Premises shall be closed to the public as a result of the relocation.
26. MISCELLANEOUS. Headings of paragraphs are for convenience only and
shall not be considered in construing the meaning of the contents of such
paragraph. The invalidity of any portion of this Lease shall not have any effect
on the balance hereof. Should either party institute any legal proceedings
against the other party for breach of any provision herein contained, and
prevail in such action, the losing (guilty) party shall in addition be liable
for the costs and expenses of the prevailing party, including its reasonable
attorneys' fees actually incurred (at all tribunal levels). This Lease shall be
binding upon the respective parties hereto, and upon their heirs, executors,
successors and assigns. This Lease supersedes and cancels all prior negotiations
between the parties, and no changes shall be effective unless in writing signed
by the party affected by such change. Landlord reserves the right to promulgate
(and change from time to time) reasonable regulations it deems appropriate for
the common use and benefit of all tenants, with which regulations Tenant shall
comply. Landlord may sell the Premises or the Building without affecting the
obligations of Tenant hereunder; upon the sale of the Premises or the Building,
Landlord shall be relieved of all responsibility for the Premises and shall be
released from any liability thereafter accruing under this Lease. If any
security deposit or prepaid rent has been paid by Tenant, Landlord may transfer
the security deposit or prepaid rent to Landlord's successor. Tenant agrees to
attorn to any successor to Landlord. This Lease may be recorded by either party
without the other party's prior written consent, and either party agrees on
request of the other party to execute a memorandum hereof for recording
purposes. The singular shall include the plural, and the masculine, feminine or
neuter includes the other. If Landlord, or its employees, officer, directors,
members, managers, stockholders or partners are ordered to pay Tenant a money
judgment because of Landlord's default under this Lease, said money judgment may
only be enforced against and satisfied out of: (i) Landlord's interest in the
Building in which the Premises are located including the rental income and
proceeds from sale; and (ii) any insurance or condemnation proceeds received
because of damage or condemnation to, or of, said Building that are available
for use by Landlord. No other assets of Landlord or
33
<PAGE>
said other parties exculpated by the preceding sentence shall be liable for, or
subject to, any such money judgment.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in
duplicate originals, all as of the day and year first above written.
LANDLORD:
UNIVERSITY PLACE ASSOCIATES,
a North Carolina general partnership
By: /s/ Craig M. Davis
___________________, general partner
TENANT:
TRIMERIS, INC.,
a Delaware corporation
(corporate seal)
By: /s/ Matthew A. Megaro
____________ President
ATTEST:
/s/ Timothy J. Creech
Assistant Secretary
STATE OF NORTH CAROLINA :
COUNTY OF ________________ :
I, a Notary Public of the County and State aforesaid, certify that
_____________________, general partner of University Place Associates, a North
Carolina general partnership, personally came before me this day and
acknowledged the due execution of the foregoing instrument on behalf of, and as
an act of, said general partnership.
Witness my hand and official stamp or seal, this _______ day of
____________, 1999.
-------------------------------
Notary Public
My Commission Expires:_________
34
<PAGE>
STATE OF NORTH CAROLINA :
COUNTY OF Durham :
I, a Notary Public of the County and State aforesaid, certify that
Timothy Creech and Matthew Megaro personally came before me this day and
acknowledged that _he is _________ Secretary of Trimeris, Inc., a Delaware
corporation, and that by authority duly given and as the act of the corporation,
the foregoing instrument was signed in its name by its ______ President, and
attested by ____as its _____ Secretary.
Witness my hand and official stamp or seal, this 13th day of April, 1999.
/s/ Jacqueline P. Inscoe
-------------------------------
Notary Public
My Commission Expires:4-15-2003
---------
35
<PAGE>
EXHIBIT A
("Premises")
[cross-hatched drawing of premises]
36
<PAGE>
EXHIBIT B
(Complete Plans and Specifications for Tenant Improvements)
[NOTE: To be supplied by Tenant]
37
<PAGE>
EXHIBIT C
(Building Rules and Regulations)
The following rules and regulations have been adopted by the Landlord for the
care, protection and benefit of the Premises and the Building and for the
general comfort and welfare of the tenants.
1. The sidewalks, entrances, halls, passages, elevators, and stairways shall
not be obstructed by the Tenant or used by it for any other purpose than
for ingress and egress.
2. Toilet rooms and other water apparatus shall not be used for any purpose
other than those for which they are constructed.
3. The Tenant shall not do anything in the premises, or bring or keep
anything therein, which shall in any way conflict with any law, ordinance,
rule or regulation affecting the occupancy and use of the premises, which
are or may hereafter be enacted or promulgated by any public authority or
by the Board of Fire Underwriters.
4. In order to insure proper use and care of the Premises, neither the Tenant
nor agent nor employee of the Tenant shall:
a. Allow any furniture, packages or articles of any kind to remain in
corridors except for short periods incidental to moving same in or
out of the Building or for cleaning or rearranging occupancy of
leased space.
b. Maintain or utilize bicycles or other vehicles in the Building.
c. Mark or defile elevators, toilet rooms, walls, windows, doors or any
part of the Building.
d. Keep animals or birds on the Premises except those animals or birds
normally or customarily used by Tenant in accordance with applicable
laws.
e. Deposit waste paper, dirt or other substances in corridors,
stairways, elevators, toilets, restrooms, or any other part of the
Building not leased to it.
f. Tamper or interfere in any way with windows, doors, locks, air
conditioning controls, heating, lighting, electrical or plumbing
fixtures.
g. Leave Premises unoccupied without locking all doors, extinguishing
lights and turning off all water outlets.
5. The Landlord shall have the right to prohibit any advertising by the
Tenant, which, in its opinion, tends to damage the reputation of the
Building or its desirability, and upon written notice from Landlord, the
Tenant shall discontinue any such advertising.
6. The Landlord reserves the right to designate the time when and method
whereby freight, furniture, safes, goods, merchandise and other articles
may be brought into, moved or taken from the Building and the Premises
leased by the Tenant; and workmen employed, designated or approved by the
Landlord must be employed by Tenant for repairs, painting, material moving
and other similar work that may be done on the Premises.
38
<PAGE>
7. The Tenant will reimburse the Landlord for the cost of repairing any
damage to the Premises or other parts of the Building caused by the Tenant
or the agents or employees of the Tenant, including replacing any glass
broken.
8. The Landlord shall furnish a reasonable number of door keys for the needs
of the Tenant, which shall be surrendered on termination of the Lease, and
reserves the right to require a deposit to insure their return at
termination of the Lease. The Tenant shall obtain keys only from the
Landlord, shall not obtain duplicate keys from any outside source, and
shall not alter the locks or effect any substitution.
9. The Tenant shall not install in the Premises any metal safes or permit any
concentration of excessive weight in any portion thereof without first
having obtained the written permission of the Landlord.
10. The Landlord reserves the right at all times to exclude newsboys,
loiterers, vendors, solicitors and peddlers, from the Building and to
require registration, satisfactory identification and credentials from
all persons seeking access to any part of the Building outside of
ordinary business hours. Ordinary business hours shall mean Monday
through Friday from 7:00 a.m. to 7:00 p.m., and Saturday from 9:00 a.m.
to 12:00 noon, except on legal holidays. The Landlord will exercise
its best judgment in the execution of such control but shall not be
held liable for the granting or refusal of such access. The Landlord
reserves the right to exclude the general public from the Building
after ordinary business hours and on weekends and holidays.
11. The attaching of wires to the outside of the Building is absolutely
prohibited, and no wires shall be run or installed in any part of the
Building without the Landlord's permission and direction.
12. Requests for services of janitors or other Building employees must be made
to the Landlord. Agents or employees of Landlord shall not perform any
work or do anything outside of their regular duties unless under special
instructions from Landlord.
13. Signs or any other tenant identification chill in accordance with standard
signage for the Building. No signs of any nature shall be placed in the
windows so as to be visible from the exterior of the Building. All signs
not approved in writing by the Landlord shall be subject to removal
without notice.
14. Any improvements or alterations to the Premises by Tenant shall be
approved in advance by the Landlord and all such work, if approved, shall
be done at the Tenant's sole expense under the supervision of the
Landlord.
15. Tenant shall have a non-exclusive right to use all driveways and parking
areas adjoining the Premises. Landlord shall have the authority to assign
parking areas for Tenant and Tenant's employees, if deemed necessary by
Landlord.
16. If additional drapes or window decorations are desired by Tenant, they
shall be approved by Landlord and installed at the Tenant's expense under
the direction of the Landlord.
The Landlord shall have the right to make such other and further reasonable
rules and regulations as, in the judgment of the Landlord, may from time to time
be necessary for the safety, care and cleanliness of the Premises and Building,
and for the preservation of good order therein, effective five (5) days after
all tenants have been given written notice thereof.
39
<PAGE>
EXHIBIT D
(Legal Description of Lot on which Building is located)
All of Lot 6 of University Place, containing 4.050 acres, as shown on those
plats recorded in Plat Book 120, Page 198, and Plat Book 124, Page 94, Durham
County Registry; said premises being located in Durham County, North Carolina.
40
<PAGE>
EXHIBIT E
(Lease Guaranty)
[Not applicable]
41
<PAGE>
EXHIBIT F
(Commencement Agreement)
THIS COMMENCEMENT AGREEMENT made and entered into this ___ day of
_____________, 199__ by and between ____________________________ (herein
"Landlord"), and ______________________________________(herein "Tenant).
W I T N E S S E T H:
WHEREAS, Landlord and Tenant have entered into a lease dated _____________
(the "Lease"), a memorandum of which has been recorded in Book _________, page
_________, ______ County Registry, North Carolina covering premises legally
described on Exhibits A and D of the Lease and which are made a part hereof; and
WHEREAS, said Lease provided for the execution of a Commencement Agreement
establishing such items as the commencement and expiration dates of the Initial
Lease Term of the Premises, the rentable and usable square footage of the
Premises, the Tenant's Proportionate Share of Landlord's Operating Expenses, and
the amount of the monthly rental obligation of Tenant.
NOW, THEREFORE, the parties hereto agree as follows:
1. This Commencement Agreement adopts the same defined terms as set
forth in the Lease.
2. The Term Commencement Date is ______________________, the Term
Expiration Date is _________________________________, and the Rental
Commencement Date is _______________________ (which may have to be identified at
a later time by the parties hereof).
3. The rentable floor area of the Premises is __________ square feet, and
the usable floor area of the Premises is __________ square feet. The rentable
floor area of the Building is ______________ square feet.
4. The Tenant's Proportionate Share of the Landlord's Base Operating
Expenses is ___________%.
5. The initial monthly Base Rent is $________/month, the initial monthly
Base Operating Expenses allocable to Tenant is $____________/month, the total
initial monthly Fixed Rent is $___________/month.
42
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Agreement to be
duly executed, as of the date and year first above written.
LANDLORD:
TENANT:
43
Exhibit 10.5
SUBLEASE AGREEMENT
THIS SUBLEASE (this "Sublease") dated this 12th day of May, 1999, is
entered into by and between Blue Cross and Blue Shield of North Carolina,
hereinafter referred to as "Sublandlord," and Trimeris, Inc., hereinafter
referred to as "Subtenant."
WHEREAS, Sublandlord, as tenant, and Hamad Jassim Althani, as landlord,
hereinafter referred to as "Prime Landlord," entered into that certain lease
agreement dated November 8, 1994, as amended by first amendment to lease
agreement dated December 15, 1995, and second amendment to lease agreement dated
February 1999 (as amended, the "Prime Lease") pertaining to the rental of
approximately 15,658 rentable square feet known as Suite 390, which is the
entire third floor of that certain building known as South Park Office Center,
located at 3815 Westgate Drive, Durham, Durham County, North Carolina (the
"Premises").
WHEREAS, Sublandlord desires to sublet the Premises to Subtenant, subject
to the written consent of the Prime Landlord, and Subtenant desires to sublet
the Premises from Sublandlord in accordance with the terms and provisions
provided herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Sublandlord and Subtenant hereby agree as follows:
1. The Sublandlord hereby sublets and demises to the Subtenant, and the
Subtenant hereby leases from the Sublandlord, the Premises, together
with Sublandlord's rights in all improvements located thereon and with
all rights, privileges and appurtenances thereto or therein to the
extent of the Premises, for a term commencing on the day that this
Sublease is fully executed by the parties, approved in writing by
Prime Landlord, and the Premises is delivered to Subtenant, but in
no event later than May 15, 1999; and expiring on December 31, 2001
(the "Term").
2. Subtenant shall pay Sublandlord monthly rent throughout the Term, in
advance on the first day of each and every month of the Term in the
amounts set forth in the Prime Lease and adjusted annually by Prime
Landlord. Sublandlord shall notify Subtenant promptly of any increase
in rent once Sublandlord has received notice from Prime Landlord.
Subject to paragraph 10 hereof, all rent and any other sums due to
Sublandlord shall be paid to Sublandlord at Attn: Penny Kaffenberger
Blue Cross and Blue Shield of North Carolina, P.O. Box 2291, Durham,
North Carolina 27707 or at such other address directed by Sublandlord.
The first monthly installment of rent, Twenty-three Thousand Six
Hundred Fifty Six and 63/100 ($23,656.63), shall be paid and delivered
to Sublandlord at execution of this Sublease by Subtenant, provided,
however, that if the Term commences on a date other than the first day
of the month, rent for the first month of the Term shall be prorated
based on the number of days remaining in the first month of the Term.
3. In addition to the monthly rent stated above, Subtenant shall also
reimburse Sublandlord for Sublandlord's proportionate share of the
operating expense increases within 10 days of receiving invoice, as
outlined in the Prime Lease, which amounts shall be paid to Sublandlord
upon receipt of invoice. Sublandlord shall notify Subtenant promptly of
any change in such operating expenses once Sublandlord has received such
information from Prime Landlord.
<PAGE>
4. Unless otherwise defined in this Sublease, all capitalized terms used
herein that are defined in the Prime Lease, shall have the meaning
ascribed to such term in the Prime Lease.
5. Except as otherwise provided in this Sublease, the terms, provisions and
conditions contained in the Prime Lease are incorporated herein by
reference, and are made a part hereof as if set forth at length herein;
provided, however, that:
a. each reference in the Prime Lease to "Lease" shall be deemed a
reference to "Sublease";
b. each reference in the Prime Lease to the "leased premises" or
"Leased Premises" shall be deemed a reference to the "Premises";
c. each reference in the Prime Lease to "Lessor" and "Lessee" shall
be deemed a reference to "Sublandlord" and "Subtenant,"
respectively; provided, however, the following provisions of the
Prime Lease are expressly not incorporated herein by reference:
paragraphs 2, 22, 23, 35(c), 35(d), 35(g), and 37; the section
entitled "Lessor's Liability"; the section entitled "Lessor
Improvements on exhibit A; exhibit D; exhibit F; paragraphs 7 and
8 of the first amendment to lease agreement;
d. except as provided in this Sublease, (i) all terms, covenants,
and conditions which Sublandlord is bound to comply with under
the Prime Lease shall be binding upon Subtenant hereunder, (ii)
Subtenant agrees to observe or perform the terms, covenants and
conditions on its part to be observed and performed by
Sublandlord as tenant under the Prime Lease and Subtenant agrees
to be bound by the provisions of the Prime Lease, and (iii) the
remedies of the parties, as Subtenant and Sublandlord hereunder
shall be the same as the respective remedies of the Lessor and
Lessee under the Prime Lease;
e. Sublandlord shall have no obligation or liability to Subtenant in
the event that the Prime Landlord fails to perform any of its
obligations under the Prime Lease, unless such failure arose as a
result of Sublandlord's defaulting in the performance of any of
Sublandlord's obligations under the Prime Lease beyond any
applicable cure periods contained therein, and Subtenant shall
look solely to the Prime Landlord for the performance of any such
obligations; provided, however, Sublandlord shall use its
reasonable good faith efforts to cooperate with Subtenant to
obtain Prime Landlord's performance of its obligations or to
cause Prime Landlord to perform its obligations; and
f. each obligation of tenant under the Prime Lease assumed hereunder by
Subtenant by operation of this Sublease shall commence as of the
Commencement Date, and in no event shall Subtenant be liable for any
costs, claims, damages, or violations of the Lease caused by
Sublandlord or on behalf of Sublandlord prior to the Commencement
Date.
6. Sublandlord shall not commit or permit to be committed any act or
omission which shall violate any term or condition of the Prime Lease
or do anything which would result in a default by it under the Prime
Lease, cause the Prime Lease to be terminated, rejected or forfeited,
or cause the Sublease or the Term to be terminated or forfeited.
Sublandlord covenants that it shall not, by any action, avoid or seek
to avoid the observance or performance of the terms to be observed or
performed by Sublandlord under the Prime Lease.
Page 2
<PAGE>
7. Sublandlord agrees that it will not modify, amend or change the Prime
Lease in any manner that would affect the Subtenant's right hereunder
without Subtenant's prior written consent and that it will not do
anything or permit anything to be done that would cause the Sublease or
the Term hereof to be terminated or forfeited.
8. Sublandlord represents and warrants, that as of the date hereof, (i)
neither Prime Landlord nor Sublandlord are in default (or with the mere
passage of time or the giving of notice would ripen into a default) under
the terms of the Prime Lease; and (ii) a true, correct and complete copy
of the Prime Lease is attached hereto as exhibit A.
9. Notwithstanding anything in this Sublease to the contrary, Sublandlord
hereby irrevocably appoints Subtenant as its attorney-in-fact coupled with
an interest to seek performance of Prime Landlord's obligations under the
Prime Lease directly from Prime Landlord to the extent that such
obligations are those which Sublandlord owes to Subtenant under this
Sublease.
10. Intentionally omitted.
11. Sublandlord covenants and agrees to deliver to Subtenant, within one
(1) business day of receipt by Sublandlord, copies of any notices of
default or of events, which with the further passage of time could
ripen into a default, received by Sublandlord from Prime Landlord under
the Prime Lease. Upon receiving any other written notice, statement or
other written communication from Prime Landlord which pertains to the
Premises, the party receiving such notice shall forward a copy of such
notice to the other.
12. Subtenant agrees at its expense to keep and maintain the Premises in good
repair and in a good, sanitary and safe condition and to return the
Premises to Sublandlord at the end of the Term in as good a condition as
received, normal wear and tear and casualty excepted.
13. Subtenant acknowledges that this Sublease shall not be effective unless
and until Prime Landlord's written consent is given.
14. It is understood and agreed upon by all parties hereto that neither the
Sublease of the above described Premises, nor anything contained in
this agreement shall release the Sublandlord from its duty and
obligation to perform and be bound by all the covenants, terms, and
conditions contained in the Prime Lease with the Prime Landlord
provided, however, that Subtenant shall perform all such duties and
obligations and be bound by such covenants, terms, and conditions in
the first instance.
15. Sublandlord agrees that if Subtenant pays all rent and other sums due
hereunder and performs all of the terms and conditions of this Sublease
and of the Prime Lease required hereunder, that Subtenant's quiet
enjoyment of the Premises for the Term shall not be disturbed or
interfered with by Sublandlord.
Page 3
<PAGE>
16. Notwithstanding anything herein to the contrary, Subtenant agrees that it
will not assign this Sublease or sublet the Premises without the prior
written approval of the Prime Landlord and Sublandlord, which approval by
Sublandlord will not be unreasonably withheld, conditioned or delayed.
17. During the term of this Sublease, Subtenant, at its sole cost and
expense and for the mutual benefit of the Sublandlord, Prime Landlord
and Subtenant shall carry and maintain comprehensive public liability
insurance, including property damage, insuring Sublandlord, Prime
Landlord, and Subtenant against liability for injury to persons or
property occurring in or about the Premises arising out of the use or
occupancy thereof, and Subtenant shall name Sublandlord and Prime
Landlord as additional insureds hereunder. Said liability insurance
shall be in amounts as called for in the Prime Lease. On or before the
commencement of this Sublease, Subtenant shall deliver to Sublandlord a
copy of a certificate of insurance evidencing that such insurance has
been purchased and is in effect. Any insurance which Subtenant is
required to maintain under this Sublease shall include a provision
which requires the insurance carrier to give Prime Landlord and
Sublandlord not less than thirty (30) days' written notice prior to any
cancellation or modification of such coverage. Further, if Subtenant
fails to maintain said liability insurance, this act shall be a
material breach of this Sublease, and Sublandlord may elect any of its
remedies under this Sublease, and, in addition, Sublandlord may obtain
such insurance on behalf of Subtenant, in which case Subtenant shall
reimburse Sublandlord for the costs thereof within fifteen (15) days
after receipt of a statement indicating the cost of such insurance.
18. Subtenant shall not do or permit to be done or omit or permit to be
omitted any act or thing that will constitute or cause a breach or
violation of any of the terms, covenants or conditions of the Prime
Lease or this Sublease. Each party will indemnify and hold harmless
the other from and against all losses, costs, damages, expenses and
liability, including reasonable attorneys' fees actually incurred,
which may be incurred or pay out by reason of injuries to person or
property occurring in, on or about the Premises, occasioned by such
party's use, occupancy, negligence or intentional acts or by reason of
any breach or default of this Sublease.
19. Sublandlord hereby represents that to the best of its knowledge it
knows of no facts or circumstances related to environmental matters
concerning the Premises that could lead to any future environmental
claims, liabilities, responsibilities against Subtenant. Sublandlord
shall indemnify and hold Subtenant harmless from all costs, losses,
damages, liabilities or claims (including reasonable attorney's fees)
arising out of the operations or activities or presence of Sublandlord
on the Premises relating to environmental matters.
20. The Premises shall be delivered to Subtenant in AS-IS condition. Any
improvements to be performed within the Premises must have
Sublandlord's and Prime Landlord's prior written consent, which consent
by Sublandlord will not be unreasonably withheld, conditioned, or
delayed. Such improvements shall be paid for by Subtenant and removed
by Subtenant at the expiration of the Term if so required under the
Prime Lease and with all resulting damage to the Premises from such
removal also repaired to its original condition as at the commencement
of the Term by Subtenant at its sole cost and expense.
Page 4
<PAGE>
21. Together with the payment made at Sublease execution of the first
monthly installment of rent, and expenses, Subtenant shall deposit with
Sublandlord the sum of Twenty-three Thousand Six Hundred Fifty Six and
63/100 dollars ($23,656.63), as security for Subtenant's obligations
under this Sublease. Sublandlord will not be required to keep the
security deposit separate from its general funds and Subtenant shall
not be entitled to interest on the security deposit. The security
deposit will not be a limitation on Sublandlord's damages or
other rights under this Sublease. If Subtenant pays all such due
amounts and performed all of its obligations under this Sublease,
Sublandlord will return the unused portion of the security deposit to
Subtenant within thirty (30) days after the expiration or earlier
termination of the Term.
22. The parties also agree that (a) Subtenant shall use and occupy the
Premises solely for uses permitted in the Prime Lease; (b)
Sublandlord's refusal to consent to or to approve any matter or thing,
whenever Sublandlord's consent or approval is required under this
Sublease or under the Prime Lease, shall be deemed reasonable if Prime
Landlord has refused to give such consent or approval; provided
Sublandlord agrees to use reasonable efforts and good faith to assist
Subtenant in obtaining Prime Landlord's consent; (c) if for any reason
the term of the Prime Lease shall be terminated prior to the expiration
date of the Sublease, the Sublease shall thereupon be automatically
terminated, and Sublandlord shall not be liable to Subtenant by reason
thereof, unless such termination shall have been affected because of
the breach or default by Sublandlord under the Prime Lease not
occasioned by any breach or default by Subtenant, but Subtenant shall
be entitled whatever rights and remedies against the Prime Landlord
that may be available to Sublandlord in connection with such
termination, provided, however, that Subtenant shall receive from
Sublandlord prompt notice of any default under the Prime Lease by
Sublandlord and Subtenant shall have the right to cure such default;
and (d) Subtenant acknowledges and agrees that in the event Subtenant
fails to vacate the Premises when required hereunder, Sublandlord may
incur damages under the terms of the Prime Lease, in which event,
Subtenant agrees to indemnify and hold harmless Sublandlord from and
against any and all costs, expenses and liabilities (including
reasonable attorneys' fees) incurred by Sublandlord arising out of such
failure.
23. Any notice required to be given by either party to the other shall be
in writing and shall be (a) delivered personally, and the giving of
such notice shall be complete on the date of delivery; (b) sent by
reputable overnight delivery service, and the giving of such notice
shall be complete on the immediately succeeding business day after such
notice is deposited with such delivery service, or (c) sent by United
States registered or certified mail, postage prepaid, return receipt
request, and the giving of such notice shall be complete on the
immediately succeeding second business day after such notice is
deposited into the U.S. mail; at the following addresses:
If to Sublandlord:
Blue Cross and Blue Shield of North Carolina
Post Office Box 2291
Durham, North Carolina 27702-2291
Attn: Joseph A. Palumbo
Senior Director - Corporate Services
If to Subtenant:
Trimeris, Inc.
Two University Place, Suite 100
4727 University Drive
Durham, North Carolina 27707
Attn: Chief Financial Officer
Page 5
<PAGE>
With a copy to Prime Landlord:
Hamad Jassim Althani by Rajai Zumot
c/o CB Richard Ellis
Post Office Box 19206
Raleigh, North Carolina 27619
Attn: Mark Andrews
Either party may change its address by written notice to the other.
24. Sublandlord and Subtenant each represent and warrant to the other that it
had no dealings with any broker or agent in connection with the Sublease
except for Vector Properties, LLC and Corporate Realty Advisors.
Sublandlord shall be responsible for payment of any and all fees payable
to Vector Properties, LLC and Corporate Realty Advisors as a result of
this Sublease.
25. To the extent any terms or provisions or this Sublease are inconsistent
with or shall conflict with any other terms or provisions of the Prime
Lease, the terms and provisions of this Sublease shall control.
26. This Sublease and the exhibits incorporated herein by reference set forth
all of the agreements, covenants, representations and warranties of
Sublandlord and Subtenant. No modification or amendment of this Sublease
shall be binding or effective unless in writing signed by Sublandlord and
Subtenant.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease the day
and year first written above.
Blue Cross and Blue Shield of North
Carolina
By:/s/ Kenneth C. Otis II
-------------------------------------
Name: Kenneth C. Otis II
-----------------------------------
Its: President
------------------------------------
Date: May 12, 1999
-----------------------------------
Trimeris, Inc.
By: /s/ Matthew A. Megaro
-------------------------------------
Name: Matthew A. Megaro
-----------------------------------
Its: President
------------------------------------
Date: April 27, 1999
-----------------------------------
Page 6
<PAGE>
CONSENT OF PRIME LANDLORD TO SUBLEASE
The Prime Landlord, Hamad Jassim Althani, as landlord, entered into that
certain Prime Lease pertaining to the rental of the Premises, and hereby
consents to the sublease of the Premises under the terms and conditions set
forth in the Sublease dated as of May 12, 1999, by and between Blue Cross
and Blue Shield North Carolina and Trimeris, Inc., to which this consent is
attached. This consent shall apply only to this Sublease and shall not be deemed
to be consent to any other sublease or assignment by Sublandlord. The Prime
Lease remains in full force and effect and the obligations of the Prime Landlord
and the Sublandlord pursuant to the Prime Lease are not modified or extinguished
by this Sublease. Prime Landlord agrees to accept the tender of rent and the
performance of other obligations of Sublandlord under the Prime Lease from
Subtenant as if tendered or performed by Sublandlord.
Prime Landlord represents and warrants to Subtenant, that as of the date
hereof, (i) neither Prime Landlord nor Sublandlord are in default (or with the
mere passage of time or the giving of notice would ripen into a default) under
the terms of the Prime Lease; (ii) a true, correct and complete copy of the
Prime Lease is attached hereto as exhibit A; and (iii) no further consent or
approval is required of any lender having an interest in the Premises or any
other party claiming an interest in and to the Premises through Prime Landlord
to the sublease of the Premises.
As a material inducement for the Subtenant to enter into the Sublease,
Prime Landlord hereby agrees with the Subtenant that after the commencement of
occupancy of the Premises by Subtenant, if Sublandlord shall fail at any time to
make any payment or perform any obligation as tenant under the Prime Lease in
accordance with its terms and if Prime Landlord shall then declare Sublandlord
in default under the Prime Lease, Prime Landlord shall not exercise any remedy
for the Sublandlord's default which would affect any rights of the Subtenant
under the Sublease, including, but not limited to a termination of the
Sublandlord's rights of possession to the Premises under Prime Lease, or a
termination of the Prime Lease, without in each instance the Prime Landlord
giving the Subtenant notice of such default under the Prime Lease with
particularity at the address set forth in Sublease and an opportunity of the
Subtenant to cure such Sublandlord's default. If the Sublandlord's default under
Prime Lease is a monetary default, Subtenant shall have the right, but not the
obligation, over a period of ten (10) days after written notice from Prime
Landlord of the default to make such payment, and if the Sublandlord's default
is a non-monetary default, then Subtenant shall have the right, but not the
obligation, over a period of thirty (30) days after written notice from Prime
Landlord of the default to perform such obligation the subject of the default,
provided however, if such performance cannot be completed within such thirty
(30) day period, Subtenant shall be permitted to proceed with such cure for as
long as Subtenant continues and diligently proceeds to complete same, and upon
the performance by the Subtenant as set forth above, the default of the
Sublandlord under the Prime Lease shall be deemed cured. Prime Landlord agrees
to accept the performance by Subtenant as set forth herein as performance by the
Sublandlord under the provisions of the Prime Lease; provided, however, that the
performance by the Subtenant of the Sublandlord's obligations under the Prime
Lease in curing such default shall not prejudice the Subtenant's rights against
the Sublandlord.
Page 7
<PAGE>
The execution of this consent by Prime Landlord is not a release by Prime
Landlord of Sublandlord of any of its duties and obligations under the Prime
Lease.
PRIME LANDLORD:
Hamad Jassim Althani
By:_____________________________________
Page 8
Exhibit 10.6
SOUTH PARK OFFICE CENTER
AGREEMENT OF LEASE
BETWEEN
Hamad Jassim Althani by Rajai Zumot LESSOR
AND
Blue Cross and Blue Shield of North Carolina LESSEE
TABLE OF CONTENTS
Paragraph Number Description Page
1. Leased Premises......................................... 1
2. Term.................................................... 1
3. Rent.................................................... 1
4. Signs................................................... 2
5. Usage and Insurance..................................... 2
6. Janitorial Service...................................... 2
7. Building Services....................................... 2
8. Lessee's Electricity Charge............................. 3
9. Relocation.............................................. 3
10. Repairs and Maintenance................................. 3
11. Compliance with Laws, Rules and Regulations............. 4
12. Lessor Improvements..................................... 4
13. Alterations and Improvements.............................4
14. Condemnation............................................ 4
15. Fire and Casualty....................................... 4
16. Property insurance...................................... 4
17. Waiver of Subrogation................................... 4
18. Hold Harmless........................................... 5
19. Quiet Enjoyment......................................... 5
20. Lessor's Right of Entry................................. 5
21. Assignment or Sublease.................................. 5
22. Landlord's Lien......................................... 5
23. Uniform Commercial Code................................. 5
24. Default by Lessee....................................... 5
25. Remedies for Lessee's Default........................... 5
26. Waiver of Default or Remedy............................. 6
27. Acts of God............................................. 6
28. Attorney's Fees......................................... 6
29. Holding Over............................................ 6
30. Rights of First Mortgage................................ 6
31. Estoppel Certificates................................... 6
32. Cost of Living Increase................................. 6
33. Successors.............................................. 7
34. Rent tax................................................ 7
35. Definitions............................................. 7
36. Miscellaneous........................................... 7
37. Notice ................................................. 7
38. Entire Agreement and Limitation of Warranties .......... 7
39. Other Provisions ....................................... 8
<PAGE>
COMMERCIAL
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into as of the date set forth below
between Hamad Jassim Althani by Rajai Zumot, hereafter referred to as "Lessor"
and Blue Cross and Blue Shield of North Carolina, hereafter referred to as
"Lessee".
W I T N E S S E T H
LEASE PREMISES: In consideration of the rents, terms, provisions and
covenants of this Lease, Lessor hereby leases, lets and demises to Lessee the
following described premises (referred to as "leased premises") as shown on the
floor plan annexed hereto as Exhibit A and containing approximately 11,851
rentable square feet situated at South Park Office Center, 3518 Westgate Drive,
Durham, N.C. (sometimes referred to as "the building" or "the project"):
For purposes of prorating various expenses, leased premises will represent 20.44
percent of the building or project.
2. TERM: (a) Subject to and upon the conditions set forth below, the term
of the Lease shall commence on January 1, 1995 (the "commencement date") and
shall expire on December 31, 1999 (which date shall be on the last day of the
calendar month), unless sooner terminated as hereinafter provided. Lessor shall
use its reasonable efforts to establish the "completion date" as December 31,
1994.
(b) If the leased premises are not available for occupancy on the
"commencement date" or "completion date," the Lease shall not be affected
thereby and Lessee shall have no claim against Lessor as a result of the
postponement of such date.
3. RENT: (a) Lessee agrees to pay monthly as base rental during the term of
this Lease the sum of See Exhibit D (Rental Schedule) ($___________), which
amount shall be payable to Lessor at the address shown below on the first day of
the month. One monthly installment of rent shall be due and payable on the date
of execution of this Lease by Lessee for the first month's rent and a like
monthly installment shall be due and payable on or before the first day of each
calendar month succeeding the "commencement date" during the demised term;
provided, that if the "commencement date" should be a date other than the first
day of a calendar month, the monthly rental set forth above shall be prorated to
the end of that calendar month, and all succeeding installments of rent shall be
payable on or before the first day of each succeeding calendar month during the
demised term. Lessee shall pay, as additional rental, all other sums due under
this Lease. All rent and sums to be paid under the Lease are to be paid without
set-off, abatement or deduction, except as specifically provided in the Lease.
If the Lease terminates on a day other than the last day of a calendar month,
the rent for said month will be prorated. See Exhibit F, attached hereto and
incorporated herein by this reference for a continuation of Rent.
(c) If any increase in the fire insurance premiums paid by Lessor for the
building in which Lessee occupies space is caused by Lessee's use and occupancy
of the leased premises or if Lessee vacates the leased premises and causes an
increase in such premiums, the Lessee shall pay as additional rent, upon demand,
the amount of such increase to Lessor.
(d) Other remedies for nonpayment of rent notwithstanding, if the monthly
rental payment is not received by Lessor on or before the tenth day of the month
for which rent is due, or if any other payment due Lessor by Lessee is not
received by Lessor on or before the tenth day following the date it was due, a
late charge of five percent (5%) of such past due amount shall become due and
payable in addition to such amounts owed under this Lease.
<PAGE>
(e) In the event the operating expenses (as defined below) of Lessor for
the building and/or project of which the leased premises are part shall, in any
calendar year during the term of this Lease, exceed the sum of *, Lessee agrees
to pay as additional rental Lessee's pro rata share of such excess operating
expenses. For purposes of this calculation, it is understood that the total
square footage in the building is 57,976. Lessor shall, within nine months
following the close of any calendar year for which additional rental is due
under this paragraph, invoice Lessee for the additional rental. The invoice
shall include in reasonable detail all computations of the additional rental,
and Lessee agrees to pay the additional rental within ten days following receipt
of the invoice. If this Lease shall terminate on a day other than the last day
of a year, the amount of any additional rental payable by Lessee applicable to
the year in which such termination shall occur shall be prorated on the ratio
that the number of days from the commencement of such year to and including such
termination date bears to 365. If at any time during the term of this Lease,
Lessor has reason to believe the per square foot operating expenses for the
calendar year will exceed the sum set forth above, Lessor may by invoice direct
Lessee to prepay monthly one-twelfth of an amount equal to the additional rental
paid in the previous year. If the invoice delivered within nine months following
the close of a calendar year in accordance with this subparagraph 3(e) shows an
amount owing by Lessee that is less than the sum of the monthly payments made by
Lessee in the previous calendar year, the invoice shall be accompanied by a
refund of the excess by Lessor to Lessee. If such invoice shows an amount owing
by Lessee which is more than the sum of the monthly payments made by Lessee in
the previous calendar year, Lessee shall pay such deficiency to Lessor within
ten days after receipt of the invoice. During the year in which this Lease
terminates, Lessor shall have the option to invoice Lessee for Lessee's pro rata
share of the excess operating expenses based upon the previous year's excess
operating expenses; Lessor shall invoice Lessee under this option within thirty
days prior to the termination of this Lease or at any time thereafter. Lessee
shall have the right, at its own expense and at a reasonable time, to audit
Lessor's books relevant to the additional rentals due under this Paragraph 3.
The provisions herein shall survive the expiration or sooner termination of the
Lease. *the Operating Expenses during the 1995 calendar year,
(f) The term "operating expenses" as used above includes all expenses
incurred with respect to the maintenance and operation of the building and/or
project of which the leased premises are a part, including, but not limited to,
maintenance and repair costs, electricity, fuel, water, sewer, gas and other
utility charges, security, window washing, janitorial services, trash and snow
removal, landscaping and pest control, management fees, wages and fringe
benefits payable to employees of Lessor whose duties are connected with the
operation and maintenance of the building and/or project, amounts paid to
contractors or subcontractors for work or services performed in connection with
the operation and maintenance of the building and/or project, all services,
supplies, repairs, replacements or other expenses for maintaining and operating
the building and/or project including common area, parking area, recreation area
and plaza area maintenance. The term "operating expenses" also includes all real
property taxes and installments of special assessments, including special
assessments due to deed restrictions and/or owner's associations which are
against the building and/or project of which the leased premises are part during
the term of this Lease as well as all insurance premiums Lessor is required to
pay or deems necessary to pay, including public liability insurance, with
respect to the building and/or project. The term "operating expenses" shall also
include capital improvements (amortized on a basis reasonably determined by
Lessor) that are either required by law or result in cost savings in connection
with the operation or maintenance of the building. The term "operating expenses"
does not include any capital improvement to the building and/or project of which
the leased premises are a part, nor shall it include income and franchise taxes
of Lessor, expenses incurred in leasing to or procuring of tenants, leasing
commissions, advertising expenses, expenses for the renovating of space for new
tenants, interest or principal payments on any mortgage or other indebtedness of
Lessor, compensation paid to any employee of Lessor above the grade of building
superintendent nor any depreciation allowance or expense.
4. SIGNS: (a) If the leased premises are within a multi-story building,
Lessor will furnish and install a suitable building directory and establish
suite numbers to facilitate locating and identifying Lessee's premises. In order
to effect uniformity, to control the graphics, and to maintain dignified
aesthetics, Lessor will also furnish and install at the entrance door to
Lessee's premises a uniform suite number plate and a name plate. Signs, name
plates or graphics which are wholly within the leased premises and not visible
from the exterior of the building or from public spaces within the building will
be permitted.
(b) If the leased premises are within a single-story building which has
integral exterior sign pylons or sign plaques, Lessee shall have the right to
install letters upon a sign plaque approved by Lessor or upon the sign pylon
adjacent to the leased premises, if space is available. The letters, numerals,
emblems, trademarks, insignia and other designs shall be of non-illuminated
plastic, porcelain enamel or aluminum and shall be individual cut-out letters
using the surface of the pylon or sign plaque as background and shall be subject
to approval of Lessor for the purpose of maintaining architectural continuity
and quality of design. If Lessee has not installed a sign in accordance with the
provisions of this paragraph within ninety (90) days following the commencement
date of this Lease, Lessee's right to install a sign shall terminate.
(c) If the leased premises are within a single-story building with or
without integral exterior sign pylons, Lessee shall have the right to place
lettering upon the entrance doors, plate glass windows or sign plaques of the
leased premises; provided, however, that the lettering shall not exceed six
inches in height and shall be subject to the approval of Lessor. If the leased
premises open off a public corridor or lobby, Lessor will furnish and install a
uniform member plate and name plate for Lessee for installation at the corridor
door, and Lessor will furnish and install a suitable building directory to
facilitate locating and identifying Lessee's premises.
(d) Lessee agrees that no other sign (mobile or stationary) of any
description shall be erected, placed or painted in or about the leased premises.
Lessee shall, at Lessee's expense, remove all signs at the termination of this
Lease, and the installation and removal shall be in such manner as to avoid
injury, defacement or overloading of the building or other improvements.
5. USAGE AND INSURANCE: Lessee warrants and represents to Lessor that the
leased premises shall be used and occupied only for the purpose of general
office use. Lessee shall occupy the leased premises, conduct its business and
control its agents, employees, invitees and visitors in such a manner as is
lawful reportable and will not create any nuisance or otherwise interfere with,
annoy or disturb any other Lessee in its normal business operations or Lessor in
its management of the building. Lessee shall not commit, or suffer to be
committed, any waste on the leased premises, nor shall Lessee permit the leased
premises to be used in any way which would, in the opinion of Lessor, be extra
hazardous on account of fire or otherwise which would in any way increase or
render void the fire insurance on the leased premises or contents of the
building.
6. JANITORIAL SERVICE: Lessor shall furnish janitorial services as set
forth on Exhibit C attached hereto during the term of this Lease. The janitorial
services shall be provided five times per week during the term of this Lease.
7. BUILDING SERVICES: (a) Lessor agrees to furnish for the occupied portion
of the leased premises, at Lessor's cost and expense, the following services:
(i) air conditioning, both heating and cooling (as required by the seasons),
from 8:00 a.m. to 6:00 p.m. on weekdays and on Saturdays from 8:00 a.m. to
1:00 p.m. (except on legal holidays designated in the Building Rules and
Regulations) and at such temperatures and in such amounts as may in the sole
judgment of Lessor be reasonably required for comfortable use and occupancy
under normal business operations; provided, that circulating air will not be
available other than by air conditioning and if Lessee shall require air
conditioning at any time other than the hours and days above specified, Lessor
<PAGE>
shall furnish the same for the area or areas specified in a written request by
Lessee delivered to the superintendent of the building before 3:00 p.m. of the
business day preceding the extra usage, and for such service Lessee shall pay
Lessor as additional rent within five (5) days after receipt of a bill
therefore, the sum of $25.00 per hour (subject to proportional adjustments to
reflect increases or decreases in labor and utility costs) and if more than one
Lessee has requested and is furnished this service for the same hour(s), it is
understood that the charge will be prorated if such proration is reasonably
possible and practicable, (ii) cold water (at the normal temperature of the
supply of water to the building) for lavatory and toilet purposes, refrigerated
water for drinking purposes, and hot water (from the regular building supply at
prevailing temperatures) for lavatory purposes, all of such water service to be
supplied from the regular supply of water to the building at points of supply
provided for general use of tenants of the building through fixtures installed
by Lessor or by Lessee with Lessor's prior written consent, (iii) janitor and
maid service to the leased premises on weekdays other than holidays and such
window washing and wall cleaning as may in the judgment of the Lessor be
reasonably required, (iv) operatorless passenger elevators of ingress and
egress from the floor(s) on which the leased premises are located, provide that
Lessor may reasonably limit the number of elevators to be in operation on
Saturdays, Sundays, and holidays, and freight elevator service in common with
other Lessee's but only when scheduled through the manager of the building, (v)
rest-room facilities, and (vi) electric lighting for all public areas and
special service areas of the building in the manner and to the extent deemed by
Lessor to be reasonable and standard including replacement of building standard
light bulbs and tubes.
(b) Lessor shall furnish and install window coverings on all exterior
windows to maintain a uniform exterior appearance. Lessee shall not remove or
replace these window coverings or install any other window covering which would
affect the exterior appearance of the building. Lessee may install lined or
unlined over draperies on the interior sides of the Lessor furnished draperies,
for interior appearance, or to reduce light transmission, provided such over
draperies do not affect the exterior appearance of the building.
8. LESSEE'S ELECTRICITY CHARGE: Lessor shall furnish sufficient power for
lighting and for typewriters, voice writers, calculating machines, and other
standard office machines of similar low electrical consumption, but not
including electricity for electronic data processing equipment, special lighting
in excess of building standard, or any other equipment or machines other than
such standard office machines or which require a nominal voltage of more than
120 volts single phase. If Lessee's requirements for electricity are in excess
of those set forth in the preceeding sentences ('excess amounts of
electricity'), (i) Lessee shall give Lessor written notice prior to placing any
such equipment, machines or special lighting in the leased premises, (ii) Lessor
shall make reasonable efforts to supply such service through the then existing
feeders servicing the building and (iii) Lessee shall reimburse Lessor for the
costs of excess amounts of electricity as set forth below.
If Lessee has any equipment or machines that require excess amounts of
electricity, Lessor reserves the right, at its sole option, except as provided
hereinafter, to install a separate meter(s), at Lessee expense to be reimbursed
to Lessor as additional rent upon demand for the leased premises or any part of
parts thereof. If Lessee has excess electricity requirements for which Lessor
does not elect to install separate meter(s), Lessor's engineer shall determine
the amount of excess electricity to be billed to Lessee based on the power
requirements of any such equipment, machines, or special lighting. If Lessee
does not agree with the amount of such allocation, Lessee may require Lessor to
exercise Lessor's option to install separate meter(s) by giving written notice
to Lessor. Lessor shall not be liable in any way to Lessee for any failure or
defect in the supply or character of electric energy furnished on the leased
premises by reason of any requirement, act, or omission of the public utility
serving the building with electricity. All installations of electrical fixtures,
appliances, and equipment within the leased premises shall be subject to
Lessor's prior written approval. All replacement lighting tubes and bulbs
required in building standard fixtures in the leased premises will be furnished
and installed by Lessor at Lessor's expenses. Whenever heat generating machines
or equipment (other than such standard office machines) which affect the
temperatures otherwise maintained by the air conditioning system, are used in
the leased premises by Lessee, Lessor shall have the right to install
supplemental air conditioning units in the leased premises, and the cost
thereof, including the cost of installation operation, use and maintenance,
shall be paid as additional rent by Lessee to Lessor on demand. The obligation
of Lessor to furnish electrical service shall be subject to the rules and
regulations of the supplier of such electricity and of any municipal or other
governmental authority regulating the business of providing electrical utility
service. Lessee covenants and agrees that at all times its use of electric
current shall never exceed the capacity of existing feeders to the building, or
the risers or wiring installations. Any riser or risers on wiring to meet
Lessee's excess electrical requirements will be installed by Lessor upon written
request of Lessee, at the sole cost and expense of Lessee to be reimbursed to
Lessor as additional rent upon demand, if, in Lessor's sole judgment, the same
are necessary and will not cause permanent damage or injury to the building or
leased premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense or interfere with or
disturb other tenants or occupants.
10. REPAIRS AND MAINTENANCE: (a) Unless otherwise expressly provided,
Lessor shall not be required to make any improvements, replacements or repairs
of any kind or character to the leased premises during the term of this Lease.
Lessor shall not be liable to Lessee, except as expressly provided in this
Lease, for any damage or inconvenience, and Lessee shall not be entitled to any
abatement or deduction of rent by reason of any repairs, alterations or
additions made by Lessor under this Lease. Lessee will be required to promptly
repair all damage to the walls, doors, corridors, windows and other structures
and equipment within and serving the leased premises, unless the same are
necessitated by Lessor's negligence.
(b) Lessee shall, at its own cost and expense, repair or replace any damage
or injury to all or any part of the leased premises caused by Lessee or Lessee's
agents, employees, invitees, licensees or visitors; provided, however, if
Lessee fails to make the repairs or replacements promptly, Lessor may, at its
option, make the repairs or replacements and Lessee shall pay Lessor the cost
thereof plus an overhead charge equal to ten percent (10%) of the cost of such
repairs or replacements; and payment of such cost and overhead shall be made on
demand.
(c) Lessee shall not allow any damage to be committed on any portion of the
leased premises, and at the termination of this Lease, by lapse of time or
otherwise, Lessee shall deliver the leased premises to Lessor in as good
condition as existed at the commencement date or completion date of this Lease,
ordinary wear and tear excepted. The cost and expense of any repairs necessary
to restore the condition of the leased premises shall be borne by Lessee, and if
Lessor undertakes to restore the leased premises it shall have a right of
reimbursement against Lessee.
(d) All requests for repairs or maintenance that are the responsibility of
Lessor pursuant to any provision of this Lease must be made in writing to Lessor
at the address set forth below.
<PAGE>
11. COMPLIANCE WITH LAWS, RULES AND REGULATIONS: Lessee, at Lessee's
expense, shall comply with all laws, ordinances, orders, rules and regulations
of state, federal, municipal or other agencies or bodies having jurisdiction
relating to the disposal of waste including Hazardous Waste, use, condition and
occupancy of the leased premises. Lessee will comply with the rules of the
building adopted by Lessor which are set forth on a schedule attached to this
Lease. Lessor shall have the right at all times to change the rules and
regulations of the building or to amend them in any reasonable manner as may be
deemed advisable for the safety, care and cleanliness, and for the preservation
of good order, of the leased premises. All changes and amendments in the rules
and regulations of the building will be sent by Lessor to Lessee in writing and
shall thereafter be carried out and observed by Lessee.
12. LESSOR IMPROVEMENTS: If construction to the leased premises is to be
performed by Lessor prior to Lessee's occupancy, Lessor will, at its expense,
commence and/or complete the construction of the improvements constituting the
leased premises, including partitions, in accordance with floor plan (attached
Exhibit A), and its specifications agreed to by the parties and made a part of
this Lease by reference. The plans and specifications shall be approved and
signed by the parties prior to the commencement of construction. Any changes or
modifications to the approved plans and specifications shall be made and
accepted by written change order signed by Lessor and Lessee and shall
constitute an amendment to this Lease. Upon completion of the building and
other improvements in accordance with the plans and specifications, Lessee
agrees to execute and deliver to Lessor a letter accepting delivery of the
leased premises.
13. ALTERATIONS AND IMPROVEMENTS: Lessee shall not make or allow to be made
any alterations or physical additions in or to the leased premises without first
obtaining the written consent of Lessor, Lessee shall remove all liens of accord
that may result from the performance of any alteration or additions. Any
alterations, physical additions or improvements to the leased premises made by
Lessee shall at once become the property of Lessor and shall be surrendered to
Lessor upon the termination of this Lease, except that the foregoing shall not
apply to moveable equipment or furniture owned by Lessee which may be removed by
Lessee at the end of the term of this Lease if Lessee is not then in default and
if such equipment and furniture is not then subject to any other rights, liens
and interests of Lessor. Lessor, at its option, may require Lessee to remove any
physical additions and/or repair any alterations in order to restore the leased
premises to the condition existing at the time Lessee took possession, all costs
of removed and/or alterations to be borne by Lessee. If Lessee does not remove
moveable equipment, or furniture or other personal property not owned by Lessor
from the leased premises after Lessor's written request at the end of the term
of the Lease, such property will be deemed abandoned by Lessee and Lessor may
dispose of such property as Lessor sees fit and, if Lessor disposes of such
property, Lessor shall recover its costs incurred for the removal and disposal
thereof. The provisions of this Paragraph 13 shall survive the expiration or
sooner termination of the Lease.
14. CONDEMNATION: (a) If, during the term (or any extention or renewal) of
this Lease, all or a substantial part of the leased premises or the building
(other than the leased premises) are taken for any public or quasi-public use
under any governmental law, ordinance or regulation, or by right of eminent
domain or by purchase in lieu thereof, and the taking would prevent or
materially interfere with the use of the leased premises for the purpose for
which they are then being used, this lease shall terminate and the rent shall be
abated during the unexpired portion of this Lease effective on the date physical
possession is taken by the condemning authority. Lessee shall have no claim to
the condemnation award.
(b) In the event a portion of the leased premises shall be taken for any
public or quasi-public use under any governmental law, ordinance or regulation,
or by right of eminent domain or by purchase in lieu thereof, and this Lease is
not terminated as provided in subparagraph (a) above, Lessor may, at Lessor's
sole risk and expense, restore and reconstruct the building and other
improvements on the leased premises to the extent necessary to make it
reasonably tenantable. The rent payable under this Lease during the unexpired
portion of the item shall be adjusted to such an extent as may be fair and
reasonable under the circumstances. Lessee shall have no claim to the
condemnation award.
15. FIRE AND CASUALTY: (a) If the leased premises or a portion of the
building other than the leased premises should be totally destroyed by fire or
other casualty, or if the leased premises or a portion of the building other
than the leased premises should be so damaged so that rebuilding cannot
reasonably be completed within one hundred and twenty (120) working days after
the date of written notification by Lessee to Lessor of the destruction, this
Lease shall terminate and the rent shall be abated for the unexpired portion of
the Lease, effective as of the date of the written notification.
(b) If the leased premises should be partially damaged by fire or other
casualty, and rebuilding or repairs can reasonably be completed within one
hundred and twenty (120) working days from the date of written notification by
Lessee to Lessor of the destruction, this Lease shall not terminate, but the
Lessor may at sole risk and expense proceed with reasonable diligence to rebuild
or repair the building or other improvements (other than improvements which
Lessor is not obligated to insure pursuant to Paragraph 16) to substantially the
same condition in which they existed prior to the damage. If the leased premises
are to be rebuilt or repaired and are untenantable in whole or in part following
the damage, and the damage or destruction was not caused or contributed to by
act or negligence of Lessee, its agents, employees, invites or those for whom
Lessee is responsible, the rent payable under the Lease during the period for
which the leased premises are untenantable shall be adjusted to such an extent
as may be fair and reasonable under the circumstances. In the event that Lessor
fails to complete the necessary repairs or rebuilding within one hundred and
twenty (120) working days from the date of written notification by Lessee to
Lessor of the destruction plus the number of days by which such repairs or
rebuilding are delayed by reason of acts of God or force majeure, Lessee may at
its option terminate this Lease by delivering written notice of termination to
Lessor, where upon all rights and obligations under this Lease shall cease to
exist.
16. PROPERTY INSURANCE: Lessor shall not be obligated in any way or manner
to insure any personal property (including, but not limited to, any furniture,
machinery, goods or supplies) of Lessor or which Lessee may have upon or within
the leased premises or any fixtures installed by or paid for by Lessee upon or
within the leased premises or any additional improvements which Lessee may
construct on the leased premises. Lessee shall be required to maintain amounts
of insurance (personal injury and property damage and, in connection with the
performance of alterations, workmen's compensation) reasonably required by
Lessor, but in no event less than $1,000,000.00 combined single limit with
respect to personal injury and property damage, the amount required by statute
with respect to workmen's compensation. All such insurance shall be carried with
insurers reasonably acceptable to Lessor. Lessee shall provide Lessor with
evidence of insurance, on an annual basis.
17. WAIVER OF SUBROGATION: Anything in this Lease to the contrary
notwithstanding, Lessor and Lessee hereby waive and release each other of and
from any and all rights of recovery, claim, action or cause of action, against
each other, their agents, officers and employees, for any loss or damage that
may occur to the leased premises, improvements to the building of which the
leased premises are a part, or personal property (building contents) within the
building, by reason of fire or the elements regardless of cause or origin,
including negligence of Lessor or Lessee and their agents, officers and
employees. Because this paragraph will preclude the assignment of any claim
mentioned in it by way of subrogation or otherwise to an insurance company or
any other person, each party to this Lease agrees immediately to give to
each insurance company which has issued to it policies of insurance covering
all risk of direct physical loss, written notice of the terms of the mutual
waivers contained in the paragraph, and to have the insurance policies properly
endorsed, if necessary, to prevent the invalidation of the insurance coverages
by reason
<PAGE>
of the mutual waivers contained in this paragraph.
18. HOLD HARMLESS: There shall be no liability of Lessor hereunder arising
from any injury to person or damage to property, unless such injury results from
the negligence or misconduct of Lessor, its agents, servants, or employees.
There shall be no allowance to Lessee for a diminution of rental value arising
from any building or improvements located on the leased premises becoming out of
repair, or caused by leakage of gas, oil, water or steam or by electricity
emanating from the leased premises. Lessee shall indemnify Lessor and hold it
harmless from and against any loss, attorney's fee, expense or claim arising
from the use or occupation of the leased premises by Lessee or by anyone in the
leased premises with Lessee's permission, and/or from any breach of the lease by
Lessee.
19. QUIET ENJOYMENT: Lessor warrants that it has full right to execute and
to perform this Lease and to grant the estate demised and that Lessee, upon
payment of the required rents and performing the terms, conditions, covenants
and agreements contained in this Lease, shall peaceably and quietly have, hold
and enjoy the leased premises during the full term of this Lease as well as any
extention or renewal thereof, subject to the provisions of this Lease. Lessor
shall not be responsible for the acts or omissions of any other Lessee or third
party that may interfere with Lessee's use and enjoyment of the leased premises.
20. LESSOR'S RIGHT OF ENTRY: Lessor shall have the right, at all reasonable
hours, to enter the leased premises for the following reasons: cleaning or
making repairs; making alterations or additions as Lessor may deem necessary or
desirable; determining Lessee's use of the leased premises, determining if an
act of default under this Lease has occurred, or for the purpose of showing the
leased premises to prospective purchasers, mortgagees, and tenants.
21. ASSIGNMENT OR SUBLEASE: Lessor shall have the right to transfer and
assign, in whole or in part, its rights and obligations in the building and
property that are the subject of this Lease. Lessee shall not assign this Lease
or sublet all or any part of the leased premises. The transfer of a majority of
shares or partnership interests in Lessee, will be deemed an assignment in
violation of this Lease. Without limiting the generality of the foregoing,
Lessor shall have the option, upon receipt from Lessee of written request for
Lessor's consent to subletting or assignment, setting forth the date that the
requested subletting or assignment is to be effective, to cancel this Lease as
of such date. The option shall be exercised, if at all, within fifteen (15) days
following Lessor's receipt of such written request by delivery to Lessee of
written notice of Lessor's intention to exercise the option. In the event of any
assignment or subletting, Lessee shall nevertheless at all times remain fully
responsible and liable for the payment of the rent and for compliance with all
of its other obligations under the terms, provisions and covenants of this
Lease. Upon the occurrence of an "event of default" as defined below, if all or
any part of the leased premises are then assigned or sublet, Lessor, in addition
to any other remedies provided by this lease or provided by law, may, at its
option, collect directly from the assignee or subtenant all rents becoming due
to Lessee by reason of the assignment or sublease, and Lessor shall have a
security interest in all properties on the leased premises to secure payment of
such sums. Any collection directly by Lessor from the assignee or subtenant
shall not be construed to constitute a novation or a release of Lessee from the
further performance of its obligations under this Lease.
22. LANDLORD'S LIEN: As security for payment of rent, damages and all other
payments required to be made by this Lease, Lessee hereby grants to Lessor a
lien upon all property of Lessee now or subsequently located upon the leased
premises. If Lessee abandons or vacates any substantial portion of the leased
premises or is in default in the payment of any rentals, damages or other
payments required to be made by this Lease or is in default of any other
provision of this Lease, Lessor may enter upon the leased premises, by picking
or changing locks if necessary, and take possession of all or any part of the
personal property, and may sell all or any part of the personal property at a
public or private sale, in one or successive sales, with or without notice, to
the highest bidder for cash, and on behalf of Lessee, sell and convey all or
part of the personal property to the highest bidder, delivering to the highest
bidder all of Lessee's title and interest in the personal property sold to him.
The proceeds of the sale of the personal property shall be applied by Lessor
toward the reasonable costs and expenses of the sale, including attorney's fees,
and then toward the payment of all sums then due by Lessee to Lessor under the
terms of this Lease; any excess remaining shall be paid to Lessee or any other
person entitled thereto by law.
23. UNIFORM COMMERCIAL CODE: This Lease is intended as and constitutes a
security agreement within the meaning of the Uniform Commercial Code of the
state in which the leased premises are situated and, Lessor, in addition to the
rights prescribed in this Lease, shall have all of the rights, titles, liens and
interests in and to Lessee's property now or hereafter located upon the leased
premises which are granted a secured party, as that term is defined, under the
Uniform Commercial Code to secure the payment to Lessor of the various amounts
provided in this Lease. Lessee will on request execute and deliver to Lessor a
financing statement for the purpose of perfecting Lessor's security interest
under this Lease or Lessor may file this Lease or a copy thereof as a financing
statement.
24. DEFAULT BY LESSEE: The following shall be deemed to be events of
default by Lessee under this Lease;
(a) Lessee shall fail to pay when due any installment of rent or any other
payment required persuant to this Lease:
(b) Lessee shall abandon any substantial portion of the leased premises;
(c) Lessee shall fail to comply with any term, provision or covenant of
this Lease, other than the payment of rent, and the failure is not cured within
five (5) days after written notice to Lessee;
(d) Lessee shall file a petition or be adjudged bankrupt or insolvent under
federal bankruptcy law or any similar law or statute of the United States or any
state; or a receiver or trustee shall be appointed for all or substantially all
of the assets of Lessee; or Lessee shall make a transfer in fraud of creditors
or shall make an assignment for the benefit of creditors; or
(e) Lessee shall do or permit to be done any act which results in a lien
being filed against the leased premises or the building and/or project of which
the leased premises are a part.
25. REMEDIES FOR LESSEE'S DEFAULT: Upon the occurrence of any event of
default set forth in this Lease, Lessor shall have the option to pursue any one
or more or all of the following remedies without any notice or demand;
(a) Terminate this Lease, in which event Lessee shall immediately surrender
the leased premises to Lessor, and if Lessee fails to surrender the leased
premises, Lessor may, without prejudice to any other remedy which it may have
for possession or arrearages in rent, enter upon and take possession of the
leased premises, by picking or changing locks if necessary, and lock out, expel,
or remove Lessee and any other person who may be occupying all or any part of
the leased premises without being liable for prosecution of any claim for
damages. Lessee agrees to pay on demand the amount of all loss and damage which
Lessor may suffer by reason of the termination of the Lease under this
subparagraph, whether through inability to relet the lease premises on
satisfactory terms or otherwise.
(b) Enter upon and take possession of the leased premises, by picking or
changing locks if necessary, and lock out, expel or remove Lessee and any other
person who may be occupying all or any part of the leased premises without being
liable for any claim for damages, and relet the leased premises on behalf of
Lessee and receive directly the rent by reason of the reletting. Lessee agrees
to
<PAGE>
pay Lessor on demand any deficiency that may arise by reason of any reletting of
the lease premises; further, Lessee agrees to reimburse Lessor for any
expenditures made by it for remodeling or repairing in order to relet the leased
premises.
(c) Enter upon the leased premises, by picking or changing locks if
necessary without, being liable for prosecution of any claim for damages, and do
whatever Lessee is obligated to do under the terms of this Lease. Lessee agrees
to reimburse Lessor on demand for any expenses which Lessor may incur in
effecting compliance with Lessee's obligations under this Lease; further, Lessee
agrees that Lessor shall not be liable for any damages resulting to Lessee from
effecting compliance with Lessee's obligations under this subparagraph caused by
the negligence of Lessor or otherwise.
26. WAIVER OF DEFAULT OR REMEDY: Failure of Lessor to declare an event of
default immediately upon its occurance, or delay in taking any action in
connection with an event of default, shall not constitute a waiver of the
default, but Lessor shall have the right to declare the default at any time and
take such action as is lawful or authorized under this Lease. Pursuit of any one
or more of the remedies set forth in Paragraph 25 above shall not preclude
pursuit of any one or more of the other remedies provided in Paragraph 25 above
or elsewhere in this Lease or provided by law, nor shall pursuit of any remedy
provided constitute forfeiture or waiver of any rent or damages accruing to
Lessor by reason of the violation of any of the terms, provisions or covenants
of this Lease. Failure by Lessor to enforce one or more of the remedies provided
upon an event of default shall not be deemed or construed to constitute a waiver
of the default or of any other violation or breach of any of the terms,
provisions and covenants contained in this Lease.
27. ACTS OF GOD: Lessor shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Lessee, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
by or prevented by an act of God or force majeure.
28. ATTORNEY'S FEES: In the event Lessee defaults in the performance of any
of the terms, covenants, agreements or conditions contained in this Lease and
Lessor places in the hands of an attorney the enforcement of all or any part of
this Lease or the collection of any rent due or to become due or recovery of the
possession of the leased premises, then in any of such events. Lessee agrees to
pay Lessor reasonable attorney's fees for the services of the attorney, whether
suit is actually filed or not. In no event shall the attorney's fees be less
than fifteen percent of the outstanding balance owed by Lessee to Lessor.
29. HOLDING OVER: In the event of holding over by Lessee after the
expiration or termination of this Lease, the hold over shall be as a tenant at
will and all of the terms and provisions of this Lease shall be applicable
during that period, except that Lessee shall pay Lessor as rental for the period
of such hold over an amount equal to one and one-half the rent which would have
been payable by Lessee had the hold over period been a part of the original term
of this Lease. Lessee agrees to vacate and deliver the leased premises to Lessor
upon Lessee's receipt of notice from Lessor to vacate. The rental payable during
the hold over period shall be payable to Lessor on demand. No holding over by
Lessee, whether with or without consent of Lessor, shall operate to extend this
Lease except as otherwise expressly provided.
30. RIGHTS OF FIRST MORTGAGEE: This Lease is and shall be subject and
subordinate to all ground or underlying leases which may now or hereafter affect
the building and to all mortgages and deeds of trust which may now or hereafter
affect such leases or the building, and to all renewals, refinancings,
modifications, replacements and extensions thereof (each, a 'superior
instrument'), and to any lien created thereby. Lessee shall promptly execute and
deliver any certificate that the holder of a superior instrument (the 'Holder')
may reasonably request to confirm the subordination and Lessor is hereby
irrevocably designated as attorney-in-fact for Lessee to deliver any such
certificate to the Holder in the name, place and stead of Lessee. In the event
the Holder succeeds to the interest of Lessor under this Lease, it shall not (i)
have any liability for refusal or failure to perform or complete any work
required to be done by Lessor under this Lease or any work letter annexed
thereto, or to prepare the leased premises for Lessee's occupancy, or have any
liability under any guaranty of indemnification with respect to such work, or
otherwise to prepare the leased premises for occupancy in accordance with the
provisions of this Lease, (ii) be liable for any act, omission or default of any
prior Lessor under this Lease, (iii) be subject to any offsets, claims or
defenses which shall have theretofore accrued to Lessee against any prior
Lessor, (iv) be bound by any rent or additional rent which the Lessee might have
paid to any prior Lessor for more than one month in advance, (v) be bound by any
modification, amendment, abridgement, cancellation or surrender of this Lease to
which the Holder shall not have consented in writing. In the case of any
foreclosure or conveyance by deed in lieu of foreclosure under any superior
instrument, the rights and remedies of Lessee in respect of any obligations of
any successor Lessor under this Lease shall be nonrecourse as to any assets of
such successor Lessor other than its equity in the building. In the event the
Holder shall succeed to the interest of Lessor under this Lease, whether through
possessory or foreclosure action or deed in lieu of foreclosure, this Lease
shall, at the option of the Holder, not be terminated or affected by such
foreclosure or any of such proceedings and Lessee shall attorn to and recognize
the Holder as its Lessor upon the terms, covenants, conditions and agreements
contained in this Lease to the same extent and in the same manner as if this
Lease was a direct lease between the Holder and Lessee, except as otherwise
provided above.
31. ESTOPPEL CERTIFICATES: Lessee agrees to furnish promptly, from time to
time, upon request of Lessor or any mortgagee, an estoppel certificate to
Lessor, any person designated by Lessor or any mortgagee, in the form attached
hereto as Exhibit B.
<PAGE>
33. SUCCESSORS: This Lease shall be binding upon and inure to the benefit
of Lessor and Lessee and their respective heirs, personal representatives,
successors and assigns. It is hereby covenanted and agreed that should Lessor's
interest in the leased premises cease to exist for any reason during the term of
this Lease, then notwithstanding the happening of such event this Lease
nevertheless shall remain unimpaired and in full force and effect and Lessee
hereunder agrees to attorn to the then owner of the leased premises.
34. RENT TAX: If applicable in the jurisdiction where the leased premises
are situated, Lessee shall pay and be liable for all rental, sales and use taxes
or other similar taxes, if any, levied or imposed by any city, state, county or
other governmental body having authority, such payments to be in addition to all
other payments required to be paid to Lessor by Lessee under the terms of this
Lease. Any such payment shall be paid concurrently with the payment of the rent
upon which the tax is based as set forth above.
35. DEFINITIONS: The following definitions apply to the terms set forth
below as used in this Lease;
(a) "Abandon" means the vacating of all or a substantial portion of the
leased premises by Lessee, whether or not Lessee is in default of the rental
payments due under this Lease.
(b) An "act of God" or "force majeure" is defined for purposes of this
Lease as strikes, lockouts, sit-downs, material or labor restrictions by any
governmental authority, unusual transportation delays, riots, floods, washouts,
explosions, earthquakes, fire, storms, weather (including wet grounds or
inclement weather which prevents construction), acts of the public enemy, wars,
insurrections and any other cause not reasonably within the control of Lessor
and which by the exercise of due diligence Lessor is unable, wholly or in part,
to prevent or overcome.
(c) The "commencement date" shall be the date set forth in Paragraph 2. The
"commencement date" shall constitute the commencement of this Lease for all
purposes, whether or not Lessee has taken possession.
(d) The "completion date" shall be the date on which the improvements
erected and to be erected upon the leased premises shall have been substantially
completed in accordance with the plans and specifications described in Paragraph
12. Lessor shall use its reasonable efforts to establish the "completion date"
as the date set forth in Paragraph 2. In the event that the improvements have
not in fact been completed as of that date, Lessee shall notify Lessor in
writing of its objections. Lessor shall have a reasonable time after delivery of
the notice in which to take such corrective action as may be necessary, and
shall notify Lessee in writing as soon as it deems such corrective action has
been completed so that the improvements are completed and ready for occupancy.
Taking of possession by Lessee shall be deemed to establish conclusively that
the improvements have been completed and that the leased premises are in good
and satisfactory condition, as of the date possession was so taken by Lessee,
except for latent defects, if any.
(e) "Real property tax" means all school, city, state and county taxes and
assessments including special district taxes or assessments.
(f) "Square feet" or "square foot" as used in this Lease includes the area
contained within the space occupied by Lessee together with a common area
percentage factor of Lessee's space proportionate to the total building area.
(g) "Lessor" as used in this Lease means only the owner, or the mortgagee
in possession, for the time being of the building or the land on which the
building is situated (the "Land") (or the owner of a lease of the building or of
the land and the building), so that in the event of any transfer of title to
said land and building or said lease, or in the event of a lease of the
building, or of the land and building, upon notification to Lessee of such
transfer or lease the said transferor Lessor shall be and hereby is entirely
freed and relieved of all existing or future covenants, obligations and
liabilities of Lessor hereunder.
36. MISCELLANEOUS: The captions appearing in this Lease are inserted only
as a matter of convenience and in no way define, limit, construe or describe the
scope or intent of such paragraph. If any provision of this Lease shall ever be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Lease, and such other provisions shall
continue in full force and effect.
37. NOTICE: (a) All rent and other payments required to be made by Lessee
shall be payable to Lessor at the first address set forth below.
(b) All payments required to be made by Lessor to Lessee shall be payable
to Lessee at the address set forth below, or at any other address within the
United States as Lessee may specify from time to time by written notice.
(c) Any notice or document required or permitted to be delivered by this
Lease shall be deemed to be delivered (whether or not actually received) when
deposited in the United States Mail, or hand delivered, postage prepaid,
certified mail, return receipt requested, addressed to the parties at all
respective addresses set out below:
<TABLE>
<CAPTION>
LESSOR: LESSEE:
<S> <C>
Hamad Jassim Althani by Rajai Zumot Blue Cross and Blue Shield of North Carolina
c/o Property Resources P.O. Box 2291
P.O. Box 19206 Durham, NC 27702-2291
Raleigh, North Carolina 27619
Attention: Mark Andrews Attn: Conway Spiers
Senior Vice President Finance
</TABLE>
38. ENTIRE AGREEMENT AND LIMITATION OF WARRANTIES: IT IS EXPRESSLY AGREED
BY LESSEE, AS A MATERIAL CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT
THIS LEASE, WITH THE SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE
ENTIRE AGREEMENT OF THE PARTIES; THAT THERE ARE AND WERE NO VERBAL
REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR
PROMISES PERTAINING TO THIS LEASE OR THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC
DOCUMENTS NOT INCORPORATED IN WRITING IN THIS LEASE. LESSOR AND LESSEE EXPRESSLY
AGREE THAT THERE ARE AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY.
<PAGE>
HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT
OF THIS LEASE AND THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY
SET FORTH IN THIS LEASE. IT IS LIKEWISE AGREED THAT THIS LEASE MAY NOT BE
ALTERED, WAIVED, AMENDED OR EXTENDED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED
BY BOTH LESSOR AND LESSEE. THE FOLLOWING DOCUMENTS ARE ATTACHED HERETO AND
INCORPORATED HEREIN BY REFERENCES.
39. HAZARDOUS WASTE: Tenant further covenants and agrees that it will not
use, keep or suffer to be kept, or generate or store any hazardous substances,
pollutants or contaminants (collectively, "Hazardous Substance") in, upon or
about the Premises or the Building. Tenant shall promptly remove and clean up
any Hazardous Substance brought on to or about the Premises or the Building in
violation of this provision. Tenant shall indemnify Landlord for all costs and
expenses, incurred by Landlord to correct any violation of this covenant, or to
remove, neutralize or render harmless any Hazardous Substance, or to comply with
the requirements of any regulatory body having jurisdiction over hazardous
substances, or to contest the actions of any such regulatory body with respect
to the Building. Tenant's agreement to indemnify Landlord just given shall
survive the termination of this Lease. In the event of a breach of this
covenant, then in addition to any other remedies available to Landlord, Landlord
at its sole option may declare Tenant to be immediately in default hereof and in
forfeiture of its rights to occupy the Premises under this Lease, and may cause
Tenant to be immediately removed from the Premises, which events shall not
release Tenant from its covenant to pay Rent or otherwise relieve Tenant from
any monetary obligation under this lease.
40. OTHER PROVISIONS:
See Attached Exhibit E "Expansion Option"/"Renewal Option".
LESSOR'S LIABILITY:
Lessee agrees to look solely to Lessor's interest in the property, or the lease
of the building or of the property, and the leased premises, for the
satisfaction of any right or remedy of Lessee for the collection of a judgment
(or other judicial process) requiring the payment of money by Lessor, in the
event of any liability by Lessor, and no other property or assets of Lessor
shall be subject to levy, execution, attachment, or other enforcement, procedure
for the satisfaction of Lessee's remedies under or with respect to the Lease,
the relationship of Landlord and Lessee hereunder, or Lessee's use and occupancy
of the demised premises, or any other liability of Landlord to Lessee.
Signed at /s/ Rajai Zumot , this 8th day of November, 1994.
------------------------- --- -------- --
LESSOR: LESSEE:
BLUE CROSS AND BLUE SHIED OF
HAMAD JASSIM ALTHANI BY RAJAI ZUMOT NORTH CAROLINA
- ----------------------------------- -----------------------------------
Property Resources as Agent By /s/ Kenneth C. Otis II
--------------------------------
By: /s/ (Signature Illegible) Kenneth C. Otis, II, President
------------------------------- -----------------------------------
PRINCIPAL (Type Name and Title)
Attest:
(Corporate Seal)
By /s/ (Signature Illegible)
--------------------------------
--------------------------Secretary
<PAGE>
EXHIBIT A
LEASED PREMISES AND
LESSOR IMPROVEMENTS
Leased Premises:
- ----------------
(Diagram of Southpark Center's third floor appears here, depicting premises
that are leased.)
LESSOR IMPROVEMENTS:
Lessor shall provide an allowance for Lessor Improvements of $90,000.00 to
retrofit the Leased Premises. Any costs beyond this level shall be paid for by
Lessee. The plans and specifications shall be approved and signed by both
parties prior to the commencement of construction.
<PAGE>
Exhibit B
Form of Estoppel Certificate
The undersigned __________________________________________________________
("Lessee"), in consideration of One Dollar ($1.00) and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
hereby certifies to ________________________________________________________
("Lessor"), [the holder or prospective holder of any mortgage or deed of trust
covering the property] (the "Mortgagee") and [the vendee under any contract of
sale with respect to the Property] (the "Purchaser") as follows:
1. Lessee executed and exchanged with Lessor a certain lease (the "Lease"),
dated ________________________, 19________, covering the _______________________
floor shown attached on the plan annexed hereto as Exhibit A (the "leased
premises") in the building located in the _____________________________________
known as and by the street number __________________________ (the "Property"),
for a term to commence (or which commenced) on ___________________, 19______,
and to expire on ______________________________________.
2. The Lease is in full force and effect and has not been modified,
changed, altered or amended in any respect.
3. Lessee has accepted and is now in possession of the leased premises and
is paying the full rental under the Lease.
4. The base rental payable under the Lease is $__________________ per
month. The base rental and all additional rent and other charges required to be
paid under the Lease have been paid for the period up to and including
________________________.
5. No rent under the Lease has been paid for more than thirty (30) days in
advance of its due date.
6. All work required under the Lease to be performed by Lessor has been
completed to the full satisfaction of Lessee.
7. There are no defaults existing under the Lease on the part of either
Lessor or Lessee.
8. There is no existing basis for Lessee to cancel or terminate the Lease.
9. As of the date hereof, there exists no valid defense, offsets,
credits, deductions in rent or claims against the enforcement of any of the
agreements, terms, covenants or conditions of the Lease.
10. Lessee affirms that any disputes with Lessor giving rise to a claim
against Lessor is a claim under the Lease only and is subordinate to the rights
of the holder of all mortgages or deeds of trust of the fee or leasehold of the
building and shall be subject to all the terms, conditions and provisions
thereof. Any such claims are not offsets to or defense against enforcement of
the Lease.
11. Lessee affirms that any dispute with Lessor giving rise to a claim
against Lessor is a claim under the Lease only and is subordinate to the rights
of the Purchaser pursuant to any contract of sale. Any such claims are not
offsets to or defense against enforcement of the Lease.
12. Lessee affirms that any claims pertaining to matters in existence at
the time Lessee took possession and which are known to or which were then
readily ascertainable by Lessee shall be enforced solely by money judgment
and/or specific performance against Lessor named in the Lease and may not be
enforced as an offset to or defense against enforcement of the Lease.
13. There are no actions, whether voluntary or otherwise, pending against
Lessee under the bankruptcy laws of the United States or any state thereof.
14. There has been no material adverse change in Lessee's financial
condition between the date hereof and the date of the execution and delivery of
the Lease.
15. Lessee acknowledges that Lessor has informed Lessee that an assignment
of Lessor's interest in the Lease has been or will be made to the Mortgagee and
that no modification, revision, or cancellation of the Lease or amendments
thereto shall be effective unless a written consent thereto of the Mortgagee is
first obtained, and that until further notice payments under the Lease may
continue as heretofore.
16. Lessee acknowledges that Lessor has informed Lessee that Lessor has
entered into a contract to sell the Property to Purchaser and that no
modification, revision or cancellation of the Lease or amendments thereto shall
be effective unless a written consent thereto of the Purchaser has been
obtained.
17. This certification is made to induce Purchaser to consummate a purchase
of the Property and to induce Mortgagee to make and maintain a mortgage loan
secured by the Property and/or to disburse additional funds to Lessor under the
terms of its agreement with Lessor, knowing that said Purchaser and Mortgagee
rely upon the truth of this certification in making and/or maintaining such
purchase or mortgage or disbursing such funds, as applicable.
-1-
<PAGE>
18. Except as modified herein, all other provisions of the Lease are hereby
ratified and confirmed.
By: ______________________________________
LESSEE
___________________________________________
DATE
-2-
<PAGE>
Exhibit C
Specifications for Janitorial Services
DAILY: OFFICES, KITCHENETTE
Empty waste containers and reline
Empty and wipe ash trays
Dust horizontal surfaces
Dust window ledges
Vacuum rugs and carpeting
Clean drinking fountains
Spot wash partitions, walls, and doors as needed
Spot clean rugs and carpeting
Clean all door glass
Clean stairwells
Sweep or dust tile floors
Spot mop tile floors and clean stains
Clean sinks and counters in kitchenette
RESTROOMS
Empty waste containers
Clean and polish sinks
Clean and sanitize urinals
Clean and sanitize toilets
Spot wash partitions and walls
Clean and wash mirrors
Replenish all paper and soap dispensers
Replenish sanitary napkins
Sweep and mop floors with disinfectant
ENTRANCES AND WALKWAYS
Wash entry door glass
Main entrance swept and polished
Mats lifted and swept
ELEVATORS
Metal inside and outside dusted and polished
Carpets cleaned and vacuumed
Elevator tracks vacuumed
WEEKLY: Dust vertical surfaces (ledges, door jambs, etc.)
Damp mop floors
MONTHLY: Wash all exterior lobby glass, inside and outside
Refinish lobby floor
QUARTERLY: Strip and refinish tile floors
Clean baseboards
Clean air grills and vents
MISCELLANEOUS: Extra charge, upon request only
Refer to cost of services
Any services not covered under contract
<PAGE>
TOWER SECTION (IF APPLICABLE)
21. Movement in or out of the building of furniture or office supplies and
equipment, or dispatch or receipt by Lessee of any merchandise or materials,
which require use of elevators or stairways, or movement through the
building entrances or lobby, shall be restricted to hours designated by
Lessor. All such movement shall be under supervision of Lessor and carried
out in the manner agreed between Lessee and Lessor by prearrangement before
performance. Such prearrangement will include determination by Lessor of
time, method, and routing of movement and limitations imposed by safety or
other concerns which may prohibit any article, equipment or any other item
from being brought into the building. Lessee assumes, and shall indemnify
Lessor against, all risks and claims of damage to persons and properties
arising in connection with any said movement.
22. Lessor will provide and maintain an alphabetical directory board in the
ground floor lobby of the building and allot one name strip for Lessee.
23. Lessor shall not be liable for any damages from the stoppage of elevators
for necessary or desirable repairs or improvements or delays of any sort of
duration in connection with the elevator service.
It is Lessor's desire to maintain in the building or project the highest
standard of dignity and good taste consistent with comfort and convenience for
Lessees. Any action or condition not meeting this high standard should be
reported directly to Lessor. Your cooperation will be mutually beneficial and
sincerely appreciated. Lessor reserves the right to make such other and further
reasonable rules and regulations as in its judgment may from time to time be
necessary, for the safety, care and cleanliness of the leased premises, and for
the preservation of good order therein.
<PAGE>
EXHIBIT D
RENT SCHEDULE
During the first through the twelfth month of the Term, Monthly Rent shall be
Fifteen Thousand Three Hundred and Seven dollars and Fifty Four cents
($15,307.54).
During the thirteenth through the twenty-fourth month of the Lease Term, monthly
rent shall be Fifteen Thousand Nine Hundred and Nineteen dollars and Eighty
Four cents ($15,919.84).
During the twenty-fifth through the thirty-sixth month of the Lease Term,
Monthly Rent shall be Sixteen Thousand Five Hundred Fifty Six dollars and Sixty
Four cents ($16,556.64).
During the thirty-seventh through the forty-eighth month of the Lease Term,
Monthly Rent shall be Seventeen Thousand Two Hundred Eighteen dollars and Ninety
cents ($17,218.90).
During the forty-ninth through the sixtieth month of the Lease Term, Monthly
Rent shall be Seventeen Thousand Nine Hundred and Seven dollars and Sixty-Six
Cents ($17,907.66).
<PAGE>
EXHIBIT E
EXPANSION OPTION / RENEWAL OPTION
1. First Right to Lease: Provided Lessee is not in default under any of the
terms of the Lease, Lessee shall have a first right to lease any additional
space on the Third Floor of the Building that becomes vacant. Prior to Lessor
leasing any vacant area on the third floor to a third party, Lessor shall
provide Lessee with notice of the vacancy and the existence of a rental
prospect and Lessee must exercise this first right to lease, if at all, within
three (3) business days of the date of the notice by giving to Lessor written
notice of its intent to lease the additional space. If Lessee does exercise its
first right to lease, then the additional space shall immediately be added to
the Lease Premises under the same terms and conditions as apply to the Lease
Premises at that time, with Rent for the additional office space at the same
rate per square foot as set out in the Lease and terminating on the same date,
unless renewed or extended. Lessee's failure to exercise its first right to
lease in any one instance shall not operate as a waiver of this right. For
purposes of prorating various expenses, the portion of the building represented
by the Leased Premises shall be adjusted accordingly.
2. Renewal Option: Provided Lessee is not in default under any of the terms of
the Lease, Lessee shall have the right to renew the term of the Lease for one
(1) additional term of five (5) years, provided Lessee has given Lessor at
least 180 days prior written notice of its intent to exercise its right. The
terms and conditions of the Lease for the renewal period shall be the same as
specified in the Lease except that Rental Rate and Lessor Improvements shall be
at the current market rates at the time the option is exercised.
<PAGE>
EXHIBIT F
CONTINUATION OF "RENT" SECTION 3(A)
Notwithstanding the foregoing, if all but a portion of the Leased Premises is
not available for occupancy on the "Commencement Date", the monthly rental set
forth above shall be prorated from the date the entire Leased Premises is
available for occupancy (the "date of full occupancy") to the end of that
calendar month and the monthly base rental for the period from the
"Commencement Date" to the date of full occupancy shall (1) be the percentage of
the monthly rental set forth above which is proportionate to the amount of the
Leased Premises that is available for occupancy and (2) shall be prorated from
the "Commencement Date" to the date of full occupancy.
<PAGE>
STATE OF NORTH CAROLINA
FIRST AMENDMENT TO
LEASE AGREEMENT
COUNTY OF DURHAM
THIS FIRST AMENDMENT TO LEASE AGREEMENT (the "First Amendment") is made and
entered into this 15th day of December, 1995 by and between Hamad Jassim Althani
by Rajai Zumot (hereinafter referred to as "Lessor") and Blue Cross and Blue
Shield of North Carolina (hereinafter referred to as "Lessee").
WITNESSETH:
WHEREAS, pursuant to that certain Lease dated November 8, 1994 (the
"Lease") by and between Lessor and Lessee, Lessor leased to Lessee certain
premises containing approximately 11,851 rentable square feet (the "Premises"),
in a building known as South Park Office Center, Durham, Durham County, North
Carolina (the "Building"), all as more particularly described in the Lease, for
a term which commenced on January 1, 1995 and expires on December 31, 1999 (the
"Original Term"); and
WHEREAS, Lessor and Lessee desire to amend the Lease to, among other
things, increase the rentable square footage leased by the Lessee by 4,282 to
16,133 total rentable square feet, and extend the term of the Lease.
NOW, THEREFORE, for and in consideration of the premises, mutual promises
and the provisions contained herein, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged,
Lessor and Lessee hereby agree to amend the Lease as follows:
1. Demised Premises. Lessee hereby agrees to rent from Lessor, an
additional 2,738 rentable square feet in the Building, more particularly
described as Suite 390, an additional 1,069 rentable square feet in the
Building, more particularly described as Suite 311, and an additional 475
rentable square feet in the Building, more particularly described as Suite 415
(collectively referred to as the "Additional Premises"), commencing on January
1, 1996, running concurrent with the Original Term, and expiring on December 31,
1999. Provided, however, Lessee understands and acknowledges that the additional
1,069 rentable square feet, referred to above, and the additional 475 rentable
square feet, referred to above, are not currently available to be rented to
Lessee by Lessor. Lessee hereby agrees to accept the additional 1,069 rentable
square feet and the additional 475 rentable square feet as soon as they are made
available to Lessee for occupancy by Lessor, but in no event earlier than
January 1, 1996. Lessee hereby agrees, acknowledges and understands that said
additional 1,069 rentable square feet and said additional 475 rentable square
feet shall not be made available for occupancy to Lessee by Lessor until the
current tenants occupying
<PAGE>
said spaces have moved out of said spaces and executed acceptable Termination
Agreements and any and all other documents required by Lessor. Lessor agrees to
notify Lessee when said spaces are available for occupancy, and Lessee agrees to
begin paying rent on the additional 1,069 rentable square feet and the
additional 475 rentable square feet when said spaces are made available for
occupancy by Lessee.
2. Rent for Additional Premises. In addition to the rent payable under the
Lease for the Premises, the minimum annual rent payable under the Lease for the
Additional Premises shall be payable in equal monthly installments in accordance
with Paragraph 3 of the Lease, without set-off or deduction, as set forth below:
Lease Year Annual Rent Per Square Foot Additional Monthly Rent
January 1, 1996-
December 31, 1996 $16.12 $5,752.15/month
January 1, 1997-
December 31, 1997 $16.76 $5,980.53/month
January 1, 1998-
December 31, 1998 $17.44 $6,223.17/month
January 1, 1999-
December 31, 1999 $18.13 $6,469.39/month
Note: The above-stated Additional Monthly Rental amounts assume Lessee
takes occupancy of the additional 1,069 rentable square feet and the additional
475 rentable square feet and begins paying rent for said spaces on January 1,
1996. In the event Lessee takes occupancy of the additional 1,069 rentable
square feet and/or the additional 475 rentable square feet after January 1,
1996, Lessor agrees the Additional Monthly Rental amounts shall be prorated
accordingly.
Note Further: For the purposes of prorating various expenses, the
Additional Premises leased by the Lessee during the Original Term will represent
an additional 7.39% of the Building.
3. Extension of Lease Term for the Premises and Additional Premises. The
term of the Lease for the Premises and Additional Premises, a total of 16,133
rentable square feet, shall be extended for an additional two (2) year term,
commencing on January 1, 2000 and expiring on December 31, 2001 (the "Extended
Term").
4. Rent for Extended Term. The minimum annual rent payable under the Lease
for the Extended Term shall be payable in equal monthly installments in
accordance
2
<PAGE>
with Paragraph 3 of the Lease, without set-off or deduction, as set forth below:
Lease Year Annual Rent Per Square Foot Monthly Rent
January 1, 2000-
December 31, 2000 $18.85 $25,342.25/month
January 1, 2001-
December 31, 2001 $19.60 $26,350.57/month
Note: For the purposes of prorating various expenses, the total space
leased
by the Lessee during the Extended Term will represent 27.83% of the Building.
5. Renewal Option. Lessee's Renewal Option, as provided in Exhibit E,
Paragraph 2, of the Lease, shall be deleted and replaced with the following
Renewal Option: At the expiration of the Extended Term, provided Lessee is not
in default under any of the terms of the Lease and any amendments thereto,
Lessee shall have the right to renew the term of the Lease for one (1)
additional term of five (5) years, provided Lessee has given Lessor at least 180
days prior written notice of Lessee's intent to exercise its right to renew. The
rental rate for such renewal period shall be at the current market rate at the
time the option is exercised.
6. Operating Expenses. For the purposes of the Additional Premises during
the Original Term, and the Premises and the Additional Premises during the
Extended Term, the 1995 calendar year will be the "Base Year" for the
determination of calculating any excess operating expenses payable by the Lessee
as additional rent.
7. Improvements. Lessor shall provide Lessee a maximum amount of
$19,269.00, which equals $4.50 per rentable square foot multiplied by the 4,282
rentable square feet, as an allowance for making improvements to the additional
4,282 rentable square feet. Lessee will submit to Lessor an outline of
improvements for Lessor's approval, and such approval will not be unreasonably
withheld. Lessee agrees that all such work shall be completed in a good and
workmanlike manner and that such improvements to the Additional Premises shall
be in compliance with federal, state and local law, including, but not limited
to, the Americans with Disabilities Act (the "ADA") and, upon request of Lessor,
Lessee shall provide Lessor with evidence reasonably satisfactory to Lessor that
such work was performed in compliance with the ADA. Furthermore, Lessee
covenants and agrees that any and all future alterations or improvements made by
Lessee to the Additional Premises or the Premises shall comply with the ADA.
8. Mutual Acknowledgment of Non-Existence of Claims. Lessor and Lessee
acknowledge and agree that as of the date hereof there are no known claims by
either
3
<PAGE>
party against the other party hereto arising from their relationship as Lessor
and Lessee pursuant to the terms of the Lease, as amended.
9. Binding Effect. This First Amendment shall apply to, inure to the
benefit of, and be binding upon the parties hereto and upon their respective
heirs, legal representatives, successors and permitted assigns, except as
otherwise provided herein.
10. Full Force and Effect. Except as amended hereby, all terms, covenants
and conditions of the Lease shall remain the same and continue in full force and
effect and shall be deemed unchanged. To the extent that there is any conflict
between the terms of this First Amendment and those of the Lease, the terms of
this First Amendment will govern.
11. Effective Date. The provisions of this First Amendment are effective on
December __, 1995.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this First
Amendment as of the day and year first above written.
Lessor:
Hamad Jassim Althani by Rajai Zumot
(Corporate Seal)
By: /s/ Rajai Zumot
--------------------------------------------
Title: General Agent
--------------------------------------------
Lessee:
Blue Cross and Blue Shield of North Carolina
(Corporate Seal)
By: /s/ Kenneth C. Otis II
--------------------------------------------
Title: President
--------------------------------------------
Attest:
By: /s/ (Signature Illegible)
----------------------------
Title: Secretary
----------------------------
4
<PAGE>
STATE OF NORTH CAROLINA
SECOND AMENDMENT TO
LEASE AGREEMENT
COUNTY OF DURHAM
THIS SECOND AMENDMENT TO LEASE AGREEMENT (the "Second Amendment") is made
and entered into this ____ day of January, 1999 by and between Hamad Jassim
Althani by Rajai Zumot ("Landlord") and Blue Cross and Blue Shield of North
Carolina ("Tenant").
WITNESSETH:
WHEREAS, pursuant to that certain Lease dated November 8, 1994 (the
"Lease") by and between Landlord and Tenant, Landlord leased to Tenant certain
premises containing approximately 11,851 rentable square feet (the "Premises"),
in a building known as South Park Office Center, Durham, Durham County, North
Carolina (the "Building"), all as more particularly described in the Lease, for
a term which commenced on January 1, 1995 and expires on December 31, 1999; and
WHEREAS, pursuant to that First Amendment to Lease Agreement dated December
15, 1995, ("First Amendment"), Landlord and Tenant amended the Lease to, among
other things, increase the rentable square footage leased by Tenant by 4,282
rentable square feet to 16,133 total rentable square feet, and extend the term
of the Lease to expire on December 31, 2001, and set forth the rent for the
original and the extended term.
WHEREAS, Landlord and Tenant desire to amend the Lease to, among other
things, decrease the rentable square footage leased by the Tenant by 475
rentable square feet, more particularly described as Suite 415 of the Building,
to 15,658 total rentable square feet and adjust the rent accordingly.
NOW, THEREFORE, for and in consideration of the premises, mutual promises
and the
1
<PAGE>
provisions contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant
hereby agree to amend the Lease as follows:
1. Effective on the date first set forth above, which shall be the date
that this Second Amendment is fully executed by Landlord and Tenant ("Effective
Date"), the Premises are hereby reduced by 475 rentable square feet, being more
particularly described as Suite 415 of the Building, to 15,658 total rentable
square feet.
2. The minimum annual rent for the Premises shall be reduced by the amount
obtained when 475 is multiplied by the applicable rent per rentable square foot.
The new minimum annual rent shall be payable in equal monthly installments in
accordance with Paragraph 3 of the Lease, without set off or deduction as set
forth on the following schedule:
Lease Year Monthly Base Rent
Effective Date - December 31, 1999 $23,656.63 ($18.13 per square foot)
January 1, 2000 - December 31, 2000 $24,596.11 ($18.85 per square foot)
January 1, 2001 - December 31, 2001 $25,574.73 ($19.60 per square foot)
3. After reducing the Premises by 475 rentable square feet, for the
purposes of prorating various expenses for calculating additional rent, the
total space leased by the Tenant as of the Effective Date is 27.01% of the
Building.
4. Except as amended herein, Landlord and Tenant acknowledge and agree that
all other terms, conditions and provisions of the Lease, as amended by the First
and Second Lease Amendments, shall be and remain in full force and effect. All
defined terms from the Lease used herein shall have the same meanings as used in
the Lease.
2
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
effective as of the day and year first above written.
LANDLORD:
Hamad Jassim Althani by Rajai Zumot
By:
--------------------------------------------
Title:
--------------------------------------------
TENANT:
Blue Cross and Blue Shield of North Carolina
By:
--------------------------------------------
Title:
--------------------------------------------
Attest:
By:
----------------------------
Title: Secretary
-------------------
(corporate seal)
3
Exhibit 11.1 Computations of Basic Loss Per Share.
TRIMERIS, INC.
STATEMENTS RE: COMPUTATIONS OF BASIC LOSS PER SHARE
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------- ----------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Common shares outstanding
(weighted average)(1) 10,532 11,521 10,527 11,070
Common Stock equivalents
(using the treasury stock method):
Stock Options and Awards
(weighted average) Pursuant
to Staff Accounting Bulletin
No. 83 (2) 100 100 100 100
-------- -------- -------- --------
Total weighted average shares 10,632 11,621 10,627 11,170
======== ======== ======== ========
Net loss $ (5,330) $ (6,330) $ (8,297) $(11,697)
======== ======== ======== ========
Basic net loss per share $ (0.50 $(0.54) $ (0.78) $ (1.05)
======== ======== ======== ========
</TABLE>
(1)Assumes the retroactive conversion of the Preferred Stock into shares of
Common Stock which occurred upon the completion of the Company's Initial
Public Offering in October, 1997, for all periods presented.
(2)Includes all options and awards issued during the twelve-month period prior
to the initial filing of the registration statement relating to the Company's
Initial Public Offering, in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 83.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 28,825
<SECURITIES> 13,009
<RECEIVABLES> 26
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,204
<PP&E> 5,235
<DEPRECIATION> 3,195
<TOTAL-ASSETS> 45,041
<CURRENT-LIABILITIES> 5,373
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 39,036
<TOTAL-LIABILITY-AND-EQUITY> 45,041
<SALES> 0
<TOTAL-REVENUES> 81
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,181
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85
<INCOME-PRETAX> (11,697)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,697)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,697)
<EPS-BASIC> (1.05)<F1>
<EPS-DILUTED> (1.05)
<FN>
EPS-BASIC
</FN>
</TABLE>
