<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________.
Commission File Number: 0-22788
AXYS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2969941
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
180 KIMBALL WAY
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(Address of principal executive offices)
(650) 829-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
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 outstanding shares of the registrant's Common Stock, $0.001 par
value, was 29,998,477 at April 30, 1998.
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AXYS PHARMACEUTICALS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited) *
Consolidated Balance Sheets - March 31, 1998 and December 31,1997..................................... 3
Consolidated Statements of Operations - Three months ended March 31, 1998 and 1997.................. 4
Consolidated Statements of Cash Flows - Three months ended March 31, 1998 and 1997.................... 5
Notes to Consolidated Financial Statements............................................................ 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................... 10
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk.................................. 15
PART II: OTHER INFORMATION.......................................................................... 16
ITEM 1. Legal Proceedings
ITEM 2. Changes in Securities
ITEM 3. Defaults Upon Senior Securities
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES........................................................................................... 18
</TABLE>
* The financial information contained herein should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, filed
on March 31, 1998.
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AXYS PHARMACEUTICALS, INC.
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(unaudited) (1)(2)
--------- ---------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 35,867 $ 22,938
Short-term marketable investments 56,783 30,470
Prepaid expenses and other current assets 4,788 4,103
--------- ---------
Total current assets 97,438 57,511
Property and equipment, net 21,326 14,454
Investment in joint venture 1,844 --
Note receivable from officer 615 775
Other assets 4,536 844
--------- ---------
TOTAL ASSETS $ 125,759 $ 73,584
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,471 $ 1,622
Accrued compensation 2,083 1,793
Other accrued liabilities 2,999 2,148
Current portion of deferred revenue 8,205 5,410
Current portion of capital lease and debt obligations 7,636 3,390
--------- ---------
Total current liabilities 26,394 14,363
Deferred revenue, noncurrent 222 726
Capital lease and debt obligations, net of current portion 18,880 14,605
Stockholders' equity:
Preferred stock -- --
Common stock 289,051 117,786
Note receivable from officer -- (125)
Accumulated deficit (208,788) (73,771)
--------- ---------
Total stockholders' equity 80,263 43,890
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 125,759 $ 73,584
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
(1) The balance sheet at December 31, 1997 has been derived from the audited
financial statement at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
(2) Represents the balances of Arris Pharmaceutical Corporation only.
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AXYS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997*
--------- ---------
(in thousands, except per
share amounts)
<S> <C> <C>
Revenues $ 8,434 $ 6,689
Operating expenses:
Research and development 15,487 7,847
General and administrative 3,432 1,615
Acquired in-process
research and development 124,888 --
--------- ---------
Total operating expenses 143,807 9,462
--------- ---------
Operating loss (135,373) (2,773)
Interest income 1,381 949
Interest expense (568) (222)
Equity interest in loss of joint
venture (457) --
--------- ---------
Net loss $(135,017) $ (2,046)
========= =========
Basic and diluted net loss per share $ (4.69) $ (0.14)
========= =========
Shares used in computing basic and
diluted net loss per share 28,782 14,898
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
* Reflects the results of Arris Pharmaceutical Corporation only.
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AXYS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------------
1998 1997
---- ----
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(135,017) $(2,046)
Adjustments to reconcile net loss to net cash and
cash equivalents used in operating activities:
Depreciation and amortization 2,072 1,052
Equity interest in loss on joint venture 457
Forgiveness of note receivable from officer 125
Acquired in-process research and development 124,888
Changes in assets and liabilities:
Prepaid expenses and other current assets 1,305 (1,091)
Other assets (2,791) (89)
Accounts payable, accrued liabilities and
deferred revenue (6,647) (2,189)
--------- -------
Net cash and cash equivalents (used in) operating activities (15,608) (4,363)
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Purchases (8,206) (9,683)
Maturities 23,805 12,220
Purchase of restricted cash (2,000)
Acquisition, net of cash balances 13,270
Purchase of property and equipment (830) (1,860)
-------- -------
Net cash and cash equivalents provided by (used in)
investing activities 28,039 (1,323)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 1,535 428
Proceeds from note receivable 593
Proceeds from notes payable and lease financing 2,000
Principal payments on notes payable and capital leases (1,630) (398)
-------- -------
Net cash and cash equivalents provided by financing
activities 498 2,030
-------- --------
Net increase (decrease) in cash and cash equivalents 12,929 (3,656)
Cash and cash equivalents, beginning of period 22,938 10,822
-------- -------
Cash and cash equivalents, end of period $35,867 $ 7,166
======== =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Issuance of common stock and value of options and
warrants issued in acquisition $ 169,730 $ --
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Axys Pharmaceuticals, Inc., a Delaware corporation ("Axys" or the "Company"),
formerly known as Arris Pharmaceutical Corporation ("Arris"), is a leader in the
integration of drug discovery technologies from gene identification through
clinical development. Axys has research collaborations with world-class
pharmaceutical companies that are focused on the discovery of small molecule
therapeutics and cover a broad range of therapeutic areas, including
respiratory, cardiovascular, metabolic and infectious diseases, as well as
oncology and central nervous system disorders.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Arris Protease, Inc., Arris Pharmaceuticals
Canada, Inc., Sequana Therapeutics, Inc. ("Sequana") and its wholly owned
subsidiary NemaPharm, Inc., (see "Acquisition of Sequana", Note 2). All
significant intercompany accounts and transactions have been eliminated.
BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by the Company according to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in complete financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The financial statements reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to state fairly the financial position and results of operations as of
and for the periods indicated. The results of operations for the three-month
period ended March 31, 1998 are not necessarily indicative of the results to be
expected for subsequent quarters or the full fiscal year.
These financial statements should be read in conjunction with the audited
financial statements and the notes thereto included in the Company's 1997 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITION OF SEQUANA
On January 8, 1998, the Company acquired all of the outstanding capital stock of
Sequana, a genomics company that uses industrial-scale gene discovery technology
and functional genomics to discover and characterize genes that cause certain
common diseases. The Company issued approximately 14,620,000 shares of Axys
Common Stock in exchange for all the outstanding common stock of Sequana, on the
basis of 1.35 shares of Arris' Common Stock for one share of Sequana common
stock. The purchase price of $174,070,000 consisted of (i) the issuance of
14,618,013 shares of Company common stock valued at $168,107,000, in exchange
for all outstanding Sequana capital stock, (ii) the issuance of Company warrants
valued at $1,623,000 in exchange for all of the outstanding Sequana warrants,
(iii) severance costs totaling $1,162,000, and (iv) transaction costs totaling
$3,178,000.
The allocation of the purchase price was determined as follows:
Net tangible assets acquired $ 45,882,000
Intangible assets acquired:
Workforce 3,300,000
In-process technology 124,888,000
-----------
Total $174,070,000
===========
The acquisition has been accounted for as a purchase, and accordingly, the
original purchase price was allocated to acquired assets and assumed liabilities
based upon their fair value at the date of acquisition. The purchase price has
been allocated to assets acquired and to in-process research and development
which has been charged as an expense in the Axys consolidated financial
statements for the three months ended March 31, 1998. Intangibles arising from
the acquisition are being amortized on a straight line basis over 36 months. The
operating results of Sequana from January 1, 1998 to March 31, 1998 have been
included in the Company's consolidated results of operations. The operating
results of Sequana from January 1, 1998 to January 8, 1998 (date of acquisition)
are considered immaterial.
As part of the Company's acquisition of Sequana, the Company also obtained 50%
ownership of Genos Biosciences, Inc. ("Genos") (see "Investment in Joint
Venture", note 3).
The following unaudited pro forma financial summary is presented as if the
operations of the Company and Sequana were combined as of December 31, 1996. The
unaudited pro forma combined results are not necessarily indicative of the
actual results that would have occurred had the acquisition been consummated at
that date, or of the future operations of the combined entities. Nonrecurring
charges, such as the acquired in-process research and development charge of
$124.8 million are not reflected in the following pro forma financial summary.
<TABLE>
<CAPTION>
(In thousands, except
PRO FORMA FINANCIAL SUMMARY FOR THE THREE MONTHS ENDED per share amount)
MARCH 31, 1997 (UNAUDITED)
- ------------------------------------------------------------------------------------
<S> <C>
Contract Revenues $9,198
Net Loss (7,678)
Basic and diluted net loss per share $(0.27)
</TABLE>
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT IN JOINT VENTURE
In January 1997, Sequana and Memorial Sloan-Kettering Cancer Center ("MSKCC")
formed Genos, a joint venture focused on the research and identification of
genes and related genetic information of value in the prognosis, diagnosis and
positive treatment of certain common cancers. Sequana and MSKCC each own 50% of
Genos and have committed to make capital contributions of approximately $5
million each to fund its initial operations. As of March 31, 1998, the Company
had invested $3.2 million in Genos, with the remaining capital contribution of
approximately $2.0 million expected to be funded in the first half of 1998. The
investment in Genos is accounted for under the equity method.
Under terms of the agreement, Sequana licensed certain of its technology to
Genos and has contracted with Genos to conduct research and provide certain
other services to the joint venture. Payments to date for such research and
services have not been material.
In connection with the formation of Genos, Sequana sold a warrant to MSKCC to
purchase 350,000 shares of the Sequana's common stock. That warrant was assumed
by the Company as part of the acquisition of Sequana on January 8, 1998, and was
converted to a warrant to purchase an aggregate of 472,500 shares at a price of
$12.87 per share.
4. NOTE PAYABLE
The Company has two lines of credit, one with the Sumitomo Bank, Limited
("Sumitomo") and one with Sumitomo and Silicon Valley Bank jointly, to provide
up to $27 million dollars in debt financing. The loans are subject to certain
financial covenants over the course of the agreements. Interest is computed at
various rates based on a Eurodollar rate and the bank's prime rate, and range
from 7.3% to 7.9%, and 8.5%, respectively at March 31, 1998. Interest and
principal payments are due monthly on $6.1 million of the balance, and interest
only payments are due quarterly on $13.8 million of the balance until September
30, 1998, at which time principal and interest will be payable in 48 monthly
installments. The Company was in compliance with all covenants at March 31,
1998. The balance outstanding on these loans at March 31, 1998 was $19.9
million.
5. STOCK OPTION PLANS
On January 7, 1998, the stockholders of the Company approved: (i) an amendment
to the Company's Certificate of Incorporation to (a) change the corporation's
name from Arris to Axys, and (b) increase the number of authorized shares of the
Company's capital stock to 60 million, and the Common Stock to 50 million; (ii)
the adoption of the 1997 Stock Option Plan; (iii) an increase of 350,000 shares
of common stock authorized for issuance under the 1994 Non-Employee Directors'
Stock Option Plan; and (iv) an increase of 400,000 shares of Common Stock
authorized for issuance under the Employee Stock Purchase Plan.
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards
Board's Statement No. 130, "Reporting Comprehensive Income" (Statement 130).
Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components, accordingly, the adoption of this
statement had no impact on the Company's net income or stockholders' equity.
Comprehensive income is the same as net income as there are no adjustments
reported in stockholders' equity which are to be included in the computation.
7. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
As of January 1, 1998, the Company adopted the Financial Accounting Standards
Board's Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (Statement 131). Statement 131 superseded Statement No. 14,
Financial Reporting for Segments of an Business Enterprise. Statement 131
established standards for the way that public business enterprises report
information about operation segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The adoption of Statement 131 did not affect the results of operations or
financial position, but may affect the disclosure of the segment information
that will be disclosed in the annual report on Form 10-K.
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AXYS PHARMACEUTICALS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ significantly from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
under "Certain Business Risks" below as well as elsewhere herein, together with
those discussed in "Item 1. Business" and "Additional Risk Factors" in the
Company's report on Form 10-K for the fiscal year ended December 31, 1997, filed
March 31, 1998.
OVERVIEW
Since its inception in April 1989, the Company has devoted substantially all of
its resources to its research and development programs. To date, the Company's
only source of revenue has been its corporate collaborations with Pharmacia &
Upjohn, Inc. and its predecessors ("PNU"), Amgen, Inc. ("Amgen"), Bayer AG
("Bayer"), SmithKline Beecham Corporation ("SB"), Merck & Co. ("Merck"), Abbott
Laboratories ("Abbott"), and Bristol-Myers Squibb ("BMS"). In addition, through
its acquisition of Sequana Therapeutics, Inc. ("Sequana") on January 8, 1998,
the following corporate collaborations are included with the revenue sources
listed above, Boehringer Ingelheim International GmbH ("BI"), Corange
International Ltd. ("Corange"), Parke-Davis ("PD"), and Glaxo-Wellcome
("Glaxo"). These collaborations have taken a variety of forms including, in each
case, certain of the following elements: payments to the company of an up-front
commitment and license fees, purchase of the company's common stock, research
funding payments, purchase of compounds produced, reimbursement of patient
collection costs, milestone payments when milestones are achieved, and royalties
upon the sale of any resulting products. Where appropriate, the up-front
commitment fees have been recorded as deferred revenue until earned.
The Company has not been profitable since inception and expects to incur
substantial losses for at least the next several years, primarily due to the
cost of its research and development programs, including preclinical studies and
human clinical trials. The Company expects that losses will fluctuate from
quarter to quarter, that such fluctuations may be substantial, and that results
from prior quarters may not be indicative of future operating results. As of
March 31, 1998, the Company's accumulated deficit was approximately $208.4
million.
RESULTS OF OPERATIONS
The following discussion on results of operations is based on the combined pro
forma operating results (see table below) of the Company and Sequana as if the
acquisition had been effective as of December 31, 1996.
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AXYS PHARMACEUTICALS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PRO FORMA OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
---------------------------------------------------------------------
<S> <C>
Revenues $9,198
Operating expenses:
Research and development 15,361
General and administrative 2,832
---------------
Total operating expenses 18,193
---------------
Operating Loss $(7,678)
===============
</TABLE>
Revenues
The Company's revenues on a pro forma basis were $8.4 million for the
three-month period ended March 31, 1998 compared to $9.1 million for the same
period in 1997. All of the Company's revenues presently are attributable to
collaborations with PNU, Merck, BMS, BI, Corange, PD, and Glaxo. The change in
1998 was primarily due to: (i) the inclusion of the full effects of the research
funding for the collaboration with BMS to develop small molecule inhibitors of
proteases involved in hepatitis C virus infection; and (ii) the inclusion of the
full effects of the research funding for the collaboration with PD to develop
novel therapeutic products for the treatment of schizophrenia and bipolar
disorder; offset by the following: (i) timing of the shipments of small molecule
synthetic organic compounds under the combinatorial chemistry collaboration with
P&U, (250,000 total compounds are due under the three-year agreement, of which
103,602 have been shipped to date); (ii) the ending of the research funded
portion of a tryptase inhibitor collaboration with Bayer during the fourth
quarter of 1997; and (iii) the transfer of the remaining proof-of-concept phase
of the SB collaboration to their internal resources, to develop inhibitors using
Axys' proprietary Delta Technology to target intracellular viral proteases.
Research and development
Research and development expenses were $15.5 for the three-month period ended
March 31, 1998, compared to $15.4 million in the same period in 1997. The change
was primarily due to the continued investment in the Company's research efforts
in new and existing programs and the expenses of programs and facilities added
as part of the January 8, 1998 acquisition of Sequana (see "Acquired in-process
research and development" below). Research and development expenses as a
percentage of total expenses, without the consideration of acquired in-process
research and development expenses of $124.9 million, has remained relatively
constant at approximately 82% of total expenses for the three-months ended March
31, 1998, compared to 84% in the same period in 1997. The Company expects that
its research and development costs will increase for the remainder of 1998 in
absolute dollars when compared
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AXYS PHARMACEUTICALS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
to pro forma amounts in 1997, as a result of further expansion of its
proprietary research programs and conduct of preclinical studies and clinical
trials.
General and administrative
The Company's general and administrative expenses increased to $3.4 million for
the three-month period ended March 31, 1998, compared to $2.8 million in the
same period in 1997. The increase in expenses was primarily due to additional
headcount and facilities acquired to support the additional research programs
obtained through the acquisition of Sequana (see "Acquired in-process research
and development" below). However, some of the administrative costs common to
both companies were eliminated by combining the two companies. In spite of the
overall increase, general and administrative expenses as a percentage of total
expenses, without the consideration of acquired in-process research and
development expenses of $124.9 million, remained relatively constant at
approximately 18% for the three-month period ended March 31, 1998, compared to
16% for the same period in 1997. The Company expects its general and
administrative costs will increase for the remainder of 1998 in absolute dollars
when compared to pro forma amounts in 1997 in order to provide corporate support
for expanding research and development efforts.
Equity interest in loss of joint venture
The equity interest in loss of joint venture at March 31, 1998 represents the
Company's portion of the losses for the quarter ended March 31, 1998 of Genos
Biosciences, Inc. ("Genos"). The Company holds a 50% interest in this joint
venture, which is made up of Sequana and Memorial Sloan-Kettering Cancer Center.
Genos expects to incur increased operating losses in future periods as it
expands its research and development activities. Such losses will result in
corresponding increases in the Company's equity in net loss of joint venture.
Acquired in-process research and development
On January 8, 1998 the Company acquired Sequana, a genomics company based in La
Jolla, California. The acquisition was a tax-free reorganization accounted for
as a purchase. The Company issued approximately 14,620,000 shares of Arris
Common Stock in exchange for all the outstanding common stock of Sequana, on the
basis of 1.35 shares of Arris' Common Stock for one share of Sequana common
stock. The costs associated with the acquisition were approximately $5 million.
The total purchase price of approximately $174 million was allocated to the
assets acquired and liabilities assumed based upon the fair value on the date of
the acquisition. Approximately $125 million of the purchase price was allocated
to in-process research and development and charged to expense at March 31, 1998.
12
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AXYS PHARMACEUTICALS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Interest income and expense
Interest income increased to $1.4 million for the three-months ended March 31,
1998, compared to $949,000 for the same period in 1997. The increase was
primarily due to the average cash balances between the periods, resulting from
the combination of the Company's cash and Sequana's cash. In addition, the
receipt of proceeds from research funding, collection of revenues from the
shipment of compounds under the collaboration with PNU, and reimbursement of
patient collection fees have helped to sustain the cash levels. Interest expense
increased to $568,000 for the three-month period ended March 31, 1998, from
$222,000 for the same period in 1997. The increase for the three-month period
was the result of higher debt balances, primarily from the combination of the
Company's and Sequana's debt financing. The Company has primarily used draw
downs from its lines of credit for capital acquisitions. The Company expects
interest expense to fluctuate as financing needs change for further expansion of
the Company's facilities and acquisition of laboratory equipment.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
private and public offerings of its capital stock and through corporate
collaborations. As of March 31, 1998, the Company had realized approximately $95
million in net proceeds from offerings of its capital stock. In addition, the
Company had realized $84.1 million since inception from its corporate
collaborations.
The Company's principal sources of liquidity are its cash and investments, which
totaled $92.6 million as of March 31, 1998. The Company has two lines of credit
totaling up to $27 million in debt financing. As of March 31, 1998 the Company
had borrowed a total of $19.9 million and had $6.1 million remaining available
under the agreements.
Net cash used in operating activities during the three-month period ended March
31, 1998 was $15.6 million, compared to $4.4 million in the same period in 1997.
The increase was primarily due to the increase in net loss for the three months
ended March 31, 1998 and the timing of cash received under the Company's
collaboration agreements. Cash used in operating activities is expected to
fluctuate from quarter to quarter depending, in part, upon the timing and
amounts, if any, of cash received from existing and any new collaboration
agreements.
The Company also spent approximately $830,000 for the purchase of property,
plant and equipment during the three months ended March 31, 1998. Additional
equipment will be needed as the Company increases its research and development
activities.
The Company's revenues presently are attributable to collaborations with PNU,
Merck, BMS, BI, Corange, PD, and Glaxo. The agreement with Glaxo is currently
under revision. The research support for the Factor Xa program with PNU and the
osteoporosis program with Merck extend through the third and fourth quarters of
1998, respectively. The Combinatorial
13
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AXYS PHARMACEUTICALS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Chemistry collaboration with PNU, and all other collaborations extend beyond the
next 12 months. If the Company is unable to renew or replace any of these
collaborations, such events may have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company expects that its existing capital resources, including research and
development revenues from existing collaborations, will enable the Company to
maintain current and planned operations for at least three years. The Company
will need to raise substantial additional capital to fund its operations beyond
the end of such period. The Company expects that it will seek such additional
funding through new collaborations, through the extension of existing
collaborations or through public or private equity or debt financing.
There can be no assurance that additional financing will be available to the
Company on acceptable terms or at all. Any additional funds raised by issuing
equity securities may result in further dilution to stockholders. If adequate
funds are not available, the Company may be required to delay, to reduce the
scope of or to eliminate one or more of its research or development programs or
to obtain funds through arrangements with collaborative partners or others that
may require the Company to relinquish rights to certain of its technologies or
products that the Company would otherwise seek to develop or commercialize
itself.
CERTAIN BUSINESS RISKS
The Company is at an early stage of development. The Company's technologies are,
in many cases, new and all are still under development. All of the Company's
proposed products are in research or development and will require significant
additional research and development efforts prior to any commercial use,
including extensive preclinical and clinical testing, as well as lengthy
regulatory approval. There can be no assurance that the Company's research and
development efforts will be successful, that any of its proposed products will
prove to be safe and efficacious in clinical trials or that any commercially
successful products will ultimately be developed by the Company. In addition,
many of the Company's currently proposed products are subject to development and
licensing arrangements with the Company's collaborators. Therefore, the Company
is dependent on the research and development efforts of these collaborators.
Moreover, the Company is entitled only to a portion of the revenues, if any,
realized from the commercial sale of any of the proposed products covered by the
collaborations. The Company has experienced significant operating losses since
its inception and expects to incur significant operating losses over at least
the next several years. The development of the Company's technology and proposed
products will require a commitment of substantial funds to conduct these costly
and time consuming activities. All of the Company's revenues to date have been
received pursuant to the Company's collaborations. Should the Company or its
collaborators fail to perform in accordance with the terms of their agreements,
any consequent loss of revenue under the agreements could have a material
adverse effect on the Company's business, financial condition and results of
operations. The
14
<PAGE> 15
AXYS PHARMACEUTICALS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
proposed products under development by the Company have never been manufactured
on a commercial scale and there can be no assurance that such products can be
manufactured at a cost or in quantities necessary to make them commercially
viable. The Company has no sales, marketing or distribution capability. If any
of its products subject to collaborative agreements are successfully developed,
the Company must rely on its collaborators to market such products.
If the Company develops any products which are not subject to collaborative
agreements, it must either rely on other pharmaceutical companies to market such
products or must develop a marketing and sales force with technical expertise
and supporting distribution capability in order to market such products
directly.
The foregoing risks reflect the Company's early stage of development and the
nature of the Company's industry and products. Also inherent in the Company's
stage of development is a range of additional risks, including competition,
uncertainties regarding protection of patents and proprietary rights, government
regulation and uncertainties related to clinical trials and regarding health
care reform. These risks and uncertainties are discussed further in "Item 1. -
Business - Additional Risk Factors" on the Company's report on Form 10-K for the
year ended December 31, 1997, filed by the Company March 31, 1998.
IMPACT OF THE YEAR 2000
The Company has initiated modification of its information technology systems to
recognize the year 2000 and has begun converting critical hardware and data
processing systems. The Company expects the project to be substantially complete
by early 1999. The Company does not expect this project to have a significant
effect on operations, and the costs of modification are expected to be
insignificant. The Company is in the process of replacing its finance
information system which will be year 2000 compliant. In addition, the Company
is evaluating significant vendors and other third parties which could have an
effect on the Company's operations to ensure Year 2000 compliance by such
vendors and third parties.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
15
<PAGE> 16
AXYS PHARMACEUTICALS, INC.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
(a) Not applicable.
(b) Not applicable.
(c) During the first quarter ended March 31, 1998, the Company
has sold the following unregistered securities:
In January 1998, the Company granted Comdisco, Inc. a
warrant to purchase up to 17,896 shares of Common Stock in
exchange for a warrant previously granted to Comdisco by
Sequana. The warrant is exercisable until December 16,
2003 at a price of $6.67 per share.
The issuance and sale of all such securities was intended to be
exempt from registration and prospectus delivery requirements
under the Securities Act of 1933, as amended (the "Securities
Act"), by virtue of Section4(2) thereof due to, among other
things, (i) the limited number of persons to whom the securities
were issued, (ii) the distribution of disclosure documents to the
investor, (iii) the fact that such person represented and
warranted to the Company, among other things, that such person
was acquiring the securities for investment only and not with a
view to the resale or distribution thereof, and (iv) the fact
that a certificate representing the securities was issued with a
legend to the effect that such securities had not been registered
under the Securities Act or any state securities laws and could
not be sold or transferred in the absence of such registration or
an exemption therefrom.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The results of a Special Meeting of Stockholders, held on January
7, 1998 were reported on the Company's annual report on Form 10-K
for the fiscal year ended December 31, 1997.
ITEM 5. OTHER INFORMATION
None
16
<PAGE> 17
AXYS PHARMACEUTICALS, INC.
PART II: OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.83 Amendment to the Collaborative Research Agreement
between Sequana and Corange International Ltd. Effective
June 30, 1995, dated January 9, 1998.
10.84* Amendment No. 2 to the Collaborative Research Agreement
between Sequana and Corange International Ltd. Dated
June 30, 1995, effective February 23, 1998.
10.85 Employment Agreement by and between Tim Harris and the
Company, dated as of January 8, 1998.
10.86 Lease Agreement between Sequana Therapeutics, Inc. and
ARE-John Hopkins Court, LLC, dated as of January 7, 1998
27 Financial Data Schedule
b) Reports on Form 8-K
On January 23, 1998, the Company filed with the Commission a
Current Report on Form 8-K regarding the Merger.
- --------------------------
* Confidential treatment has been requested with respect to certain portions of
this exhibit.
17
<PAGE> 18
AXYS PHARMACEUTICALS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AXYS PHARMACEUTICALS, INC.
Date: May 15, 1998 By: /s/ John P. Walker
-------------------------------------------------
John P. Walker
President, Chief Executive Officer and Director
Date: May 15, 1998 By: /s/ Frederick J. Ruegsegger
-------------------------------------------------
Frederick J. Ruegsegger
Senior Vice President Finance and Corporate
Development and Chief Financial Officer
(Principal Financial and Accounting Officer)
18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.83 Amendment to the Collaborative Research Agreement
between Sequana and Corange International Ltd. Effective
June 30, 1995, dated January 9, 1998.
10.84* Amendment No. 2 to the Collaborative Research Agreement
between Sequana and Corange International Ltd. Dated
June 30, 1995, effective February 23, 1998.
10.85 Employment Agreement by and between Tim Harris and the
Company, dated as of January 8, 1998.
10.86 Lease Agreement between Sequana Therapeutics, Inc. and
Are-John Hopkins Court, LLC, dated as of January 7, 1998.
27 Financial Data Schedule
</TABLE>
- --------------------------
* Confidential treatment has been requested with respect to certain portions of
this exhibit.
<PAGE> 1
Exhibit 10.83
[SEQUANA THERAPEUTICS LETTERHEAD]
January 9, 1998
Claus-Jorg Ruetsch
VP of International Legal Affairs
German Offices
Sandhofer Strasse 176
D-68305 Mannheim
Germany
Dear Dr. Ruetsch,
COLLABORATIVE RESEARCH AGREEMENT BETWEEN SEQUANA THERAPEUTICS, INC., AND
THE CORANGE INTERNATIONAL LTD. EFFECTIVE JUNE 30, 1995 ("AGREEMENT")
We refer to the Agreement and confirm that it is the mutual agreement of the
parties to amend the Agreement effective January 9, 1998 to delete Section
2.2(ii) in its entirety and replace it with the following:
"Corange or its nominee shall purchase equity securities issued
by AxyS Pharmaceuticals, Inc. ("AxyS") in the amount of
$1,250,000 per year on each annual anniversary of the Effective
Date through February 14, 1999. The securities shall be common
stock of AxyS purchased by Corange or its nominee at a price per
share equal to one hundred thirty-five percent (135%) of the
average closing sale price of AxyS common stock as reported in
the Wall Street Journal for the twenty (20) day period ending as
of the date three (3) business days prior to the date of purchase
of shares for such year."
All other terms of the Agreement remain unchanged.
We are enclosing duplicate copies of this letter. If the above is acceptable to
Corange, please have the copies signed on behalf of Corange by a duly authorized
signatory and return one fully signed copy to us for our records.
1.
<PAGE> 2
Sincerely,
/s/ Tim Harris
Tim Harris, Ph.D.
Sr. VP of Research & Development
Accepted this 14 day of January, 1998
Corange International Ltd.
Per: /s/ Gerald Moeller
---------------------
Title: CEO
- -----------------------------
cc: Sibylle Hubschmann
Business Development
Boehringer Mannheim
2.
<PAGE> 1
EXHIBIT 10.84
AMENDMENT NO. 2
TO
COLLABORATIVE RESEARCH AGREEMENT
BETWEEN SEQUANA THERAPEUTICS, INC.
AND
CORANGE INTERNATIONAL LTD.
DATED 30TH JUNE, 1995
This Amendment No. 2 (the "Amendment") to the Collaborative Research
Agreement entered into as of the 30th day of July, 1995, as amended by letter
dated January 9, 1998 (the "Original Agreement") is made by and between SEQUANA
THERAPEUTICS, INC., a California corporation, having its principal place of
business at 11099 North Torrey Pines Road, Suite 160, La Jolla, California,
92037 ("Sequana") and CORANGE INTERNATIONAL LTD., a Bermuda corporation
("Corange") effective as of February 23, 1998.
WHEREAS, the Parties desire to amend the Original Agreement on the terms
provided below:
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
premises and covenants set forth below, for other good and valuable
consideration the receipt and sufficiency of which the Parties acknowledge, the
Parties, intending to be legally bound, agree as follows:
1. Unless otherwise defined in this Amendment, the capitalized terms used in
this Amendment shall have the same meaning as given them in the Original
Agreement.
2. A new Section 1.4A shall be inserted as follows:
1.4A "Biomedical" means any research tool (including, without
limitation, probes, antibodies, conjugates or kits) for identifying
diagnostic markers for human disease, which tool is not subject to
regulation by the FDA and is not subject to regulation by any equivalent
agency to the FDA in a Major Country other than the United States of
America.
3. Section 1.12 shall be deleted in its entirety and the following Section
1.12 shall be inserted in lieu thereof:
1.12 "Diagnostic" means any Biomedical, diagnostic device, compound or
kit that is discovered, or the utility of which is discovered by Sequana or
Corange based on one or more Osteoporosis Gene(s) and that is covered by a
Corange Patent, Sequana Patent or Joint Patent anywhere in the world.
"Diagnostic" shall also include any service related to such a Diagnostic.
4. Section 2.3(iii) shall be deleted in its entirety and the following Section
2.3(iii) shall be inserted in lieu thereof:
<PAGE> 2
2.3(iii) [*]
5. Section 2.5 shall be deleted in its entirety and the following Section 2.5
shall be inserted in lieu thereof:
2.5 [*]
[*]
(iv) The JRMC shall stipulate in writing when each research
milestone has been achieved. In the event the JRMC cannot agree whether
a milestone has been achieved, the decision will be subject to the
resolution procedure of Article 3.3.
* Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.
<PAGE> 3
Except as modified above, the Original Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, the day and
year first above written.
<TABLE>
<S> <C>
SEQUANA THERAPEUTICS, INC. CORANGE INTERNATIONAL LTD
By: /s/ DANIEL H. PETREE By: /s/ GERALD MOELLER
--------------------------------- -------------------------------
Name: Daniel H. Petree Name: Dr. GERALD MOELLER
------------------------------- -----------------------------
Title: President and COO Title: President and CEO
------------------------------ ----------------------------
BOEHRINGER MANNHEIM GMBH
By: /s/ GUNTER SCHUMACHER
-------------------------------
Name: Dr. GUNTER SCHUMACHER
-----------------------------
Title: Sr. V.P. R&D Therapeutics
----------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.85
AXYS PHARMACEUTICALS
KEY EMPLOYEE AGREEMENT
FOR
TIM HARRIS
This Employment Agreement ("Agreement") is entered into as of the 8th
day of January 1998, by and between Tim Harris ("Executive") and AxyS
Pharmaceuticals (the "Company").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 Subject to terms set forth herein, the Company agrees to employ
Executive in the position of Senior Vice President of Research and Development,
La Jolla, and Executive hereby accepts such employment effective as of January
8, 1998 (the "Employment Date"). During the term of his employment with the
Company, Executive will devote his best efforts and substantially all of his
business time and attention (except for vacation periods as set forth herein and
reasonable periods of illness or other incapacities permitted by the Company's
general employment policies) to the business of the Company.
1.2 Executive shall serve in an executive capacity and shall perform
such duties as are customarily associated with his then current title,
consistent with the Bylaws of the Company and as required by the Company.
1.3 The employment relationship between the parties shall also be
governed by the general employment policies and practices of the Company,
including those relating to protection of confidential information and
assignment of inventions, except that when the terms of this Agreement differ
from or are in conflict with the Company's general employment policies or
practices, this Agreement shall control.
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder a minimum annualized base salary of $235,000, payable in accordance
with the company's normal payroll practices.
<PAGE> 2
2.2 DISCRETIONARY BONUS. Executive will be eligible for a discretionary
bonus one year from the Employment Date, in an amount equal to up to one year's
base salary earned as follows:
(a) Up to fifty percent (50%) of annual base salary if
Executive meets both of the following criteria:
(i) RETENTION OF KEY STAFF. As of the first anniversary of
the Employment Date, the Company must have retained eighty percent (80%) or
better of the key research and development staff, a list of whom shall be agreed
upon between Executive and the Company prior to the Employment Date. For
purposes of calculating this percentage, the parties agree that any identified
key member of the research and development staff who is terminated for any
reason by the Company shall be counted as if he or she had remained employed by
the Company.
(ii) INTEGRATION. Executive must have performed a strongly
constructive role in causing the successful integration of Arris and Sequana as
determined in the sole discretion of the Company.
(b) Fifty percent (50%) of annual base salary if
Executive remains an active employee for a one year period after the Employment
Date.
2.3 STANDARD COMPANY BENEFITS. Executive shall be entitled to all rights
and benefits for which he is eligible under the terms and conditions of the
standard Company benefits and compensation practices which may be in effect from
time to time and provided by the Company to its employees generally.
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to execute and abide by the Company's
standard Proprietary Information and Inventions Agreement.
3.2 REMEDIES. Executive's duties under the Proprietary Information and
Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Proprietary Information and
Inventions Agreement would be inadequate, and he therefore agrees that the
Company shall be entitled to injunctive relief in case of any such breach or
threatened breach.
4. OUTSIDE ACTIVITIES.
4.1 Except with the prior written consent of the Company, Executive will
not during the term of this Agreement undertake or engage in any other
employment, occupation or business enterprise, other than ones in which
Executive is a passive investor. Executive may engage in civic and
not-for-profit activities so long as such activities do not materially interfere
with the performance of his duties hereunder.
2
<PAGE> 3
4.2 Except as permitted by Section 4.3, Executive agrees not to acquire,
assume or participate in, directly or indirectly, any position, investment or
interest known by him to be adverse or antagonistic to the Company, its business
or prospects, financial or otherwise.
4.3 During the term of his employment by the Company, except on behalf
of the Company, Executive will not directly or indirectly, whether as an
officer, director, stockholder, partner, proprietor, associate, representative,
consultant, or in any capacity whatsoever engage in, become financially
interested in, be employed by or have any business connection with any other
person, corporation, firm, partnership or other entity whatsoever which were
known by him to compete directly with the Company, throughout the world, in any
line of business engaged in (or planned to be engaged in) by the Company;
provided, however, that anything above to the contrary notwithstanding, he may
own, as a passive investor, securities of any competitor corporation, so long as
his direct holdings in any one such corporation shall not in the aggregate
constitute more than 2% of the voting stock of such corporation.
5. TERMINATION OF EMPLOYMENT.
5.1 TERMINATION WITHOUT CAUSE.
(a) The Company shall have the right to terminate Executive's
employment with the Company at any time without cause (the "Termination Date").
(b) In the event Executive's employment is terminated without
cause before one year has elapsed from the Employment Date, and the Executive
signs the general release of claims set forth hereto as Exhibit A, the Company
shall provide Executive with the following compensation:
(i) Continuation of his base salary from the Termination
Date until one year has elapsed from the Employment Date;
(ii) The entire Discretionary Bonus set forth in Paragraph
2.2 herein, which shall be paid on the Termination Date;
(iii) Should Executive elect continued health care
coverage under COBRA, the Company will reimburse him for his COBRA coverage
costs from the Termination Date until one year has elapsed from the Employment
Date; and
(iv) The Company will accelerate the vesting of any stock
options which would vest during the period from the Termination Date until one
year has elapsed from the Employment Date such that all such options would be
vested as of the Termination Date. Executive understands and agrees that no
stock options will continue to vest after the Termination Date. Executive may
exercise these options in accordance with the terms of his stock option
agreements and the governing stock option plan.
(c) In the event Executive's employment is terminated without cause on
or after one year after the Employment Date, he will not be entitled to
severance pay, pay in
3
<PAGE> 4
lieu of notice or any other such compensation, except as provided in the
Company's Severance Benefit Plan, if any, in effect on the Termination Date.
5.2 TERMINATION FOR CAUSE.
(a) The Company shall have the right to terminate Executive's
employment with the Company at any time for cause.
(b) "Cause" for termination shall mean:
(i) conviction of a misdemeanor or felony involving
dishonesty, fraud, theft or embezzlement or any other felony, or other crime or
offense involving money or property of the Company (in any case in an amount or
at a value in excess of $1,000);
(ii) failure or refusal in any material respect to follow
reasonable written policies or directives established by the Company; or
(iii) willful and persistent failure or refusal to attend
to Executive's material duties or obligations of employment if such failure or
refusal has continued for at least ten (10) days after the Employee's receipt of
notice from the Company specifying the failure or refusal.
(c) In the event Executive's employment is terminated at any time
with cause, he will not be entitled to severance pay, pay in lieu of notice or
any other such compensation.
5.3 VOLUNTARY OR MUTUAL TERMINATION.
(a) Executive may voluntarily terminate his employment with the
Company at any time, after which no further compensation will be paid to
Executive.
(b) In the event Executive voluntarily terminates his employment,
he will not be entitled to severance pay, pay in lieu of notice or any other
such compensation, provided, however, that if within one year of the Employment
Date, Executive resigns from employment solely due to a relocation of
Executive's primary work location to a location which is greater than fifty (50)
miles from his current work location, he shall be entitled to receive the
severance compensation set forth in Paragraph 5.1(b) herein.
6. RESTRICTIVE COVENANT. In the event Executive voluntarily terminates
his employment with the Company, or his employment is terminated for cause, then
for a period of
4
<PAGE> 5
six (6) months following the Termination Date, Executive shall not, without
first obtaining the prior written approval of the Company, directly or
indirectly engage or prepare to engage, in any research and/or development
activities on programs which compete with those of the Company in existence at
the time of such termination.
7. NONINTERFERENCE.
While employed by the Company, and for one (1) year immediately
following the Termination Date, Executive agrees not to interfere with the
business of the Company by:
(a) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in order
to become an employee, consultant or independent contractor to or for any
competitor of the Company; or
(b) directly or indirectly soliciting the business of a customer
or proposed customer of the Company for a research and/or development program or
programs which compete with those of the Company in existence at the time of
such termination. For this purpose, a customer or proposed customer of the
Company shall mean an entity with whom, during the six (6) month period prior to
the date of Executive's termination, the Company has been in contact for the
purpose of attempting to establish a relationship concerning a research and/or
development program which is competitive with the program concerning which
Executive would solicit business.
8. GENERAL PROVISIONS.
8.1 NOTICES. Any notices provided hereunder must be in writing and shall
be deemed effective upon the earlier of personal delivery (including personal
delivery by telex) or the third day after mailing by first class mail, to the
Company at its primary office location and to Executive at his address as listed
on the Company payroll.
8.2 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
8.3 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
8.4 COMPLETE AGREEMENT. This Agreement constitutes the entire agreement
between Executive and the Company and it is the complete, final, and exclusive
embodiment of their agreement with regard to this subject matter. It is entered
into without reliance on any promise or representation other than those
expressly contained herein, and it cannot be modified or amended except in a
writing signed by an officer of the Company.
5
<PAGE> 6
8.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any of his duties hereunder and he may not assign any
of his rights hereunder without the written consent of the Company, which shall
not be withheld unreasonably.
8.8 ATTORNEY FEES. If either party hereto brings any action to enforce
his or its rights hereunder, the prevailing party in any such action shall be
entitled to recover his or its reasonable attorneys' fees and costs incurred in
connection with such action.
8.9 CHOICE OF LAW. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the State of
California.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
AxyS PHARMACEUTICALS
By: /s/ DANIEL PETREE
--------------------------------
Daniel Petree
Date:
------------------------------
Accepted and agreed this
15th day of May, 1998.
/s/ TIM HARRIS
- -------------------------------
Tim Harris
6
<PAGE> 7
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
Except as otherwise set forth in this Agreement, I hereby release,
acquit and forever discharge AxyS Pharmaceuticals, its parents and subsidiaries,
and their officers, directors, agents, servants, employees, attorneys,
shareholders, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys fees,
damages, indemnities and obligations of every kind and nature, in law, equity,
or otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed, arising out of or in any way related to agreements, events, acts or
conduct at any time prior to and including the execution date of this Agreement,
including but not limited to: all such claims and demands directly or indirectly
arising out of or in any way connected with my employment with the Company or
the termination of that employment; claims or demands related to salary,
bonuses, commissions, stock, stock options, or any other ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of compensation; claims pursuant to any federal, state or
local law, statute, or cause of action including, but not limited to, the
federal Civil Rights Act of 1964, as amended; the federal Americans with
Disabilities Act of 1990; the federal Age Discrimination in Employment Act of
1967, as amended ("ADEA"); the California Fair Employment and Housing Act, as
amended; tort law; contract law; wrongful discharge; discrimination; harassment;
fraud; defamation; emotional distress; and breach of the implied covenant of
good faith and fair dealing.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (1) my waiver and release do not apply to any rights or claims that may
arise after the execution date of this Agreement; (2) I have been advised hereby
that I have the right to consult with an attorney prior to executing this
Agreement; (3) I have twenty-one (21) days to consider this Agreement (although
I may choose to voluntarily execute this Agreement earlier); (4) I have seven
(7) days following the execution of this Agreement by the parties to revoke the
Agreement; and (5) this Agreement shall not be effective until the date upon
which the revocation period has expired, which shall be the eighth day after
this Agreement is executed by me, provided that the Company has also executed
this Agreement by that date ("Effective Date").
7
<PAGE> 8
In giving this release, which includes claims which may be unknown to me
at present, I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.
By:________________________________
TIM HARRIS
Date:______________________________
8
<PAGE> 1
Exhibit 10.86
3550 John Hopkins Court
San Diego, CA 92121
LEASE
BY AND BETWEEN
ARE-JOHN HOPKINS COURT, LLC
and
SEQUANA THERAPEUTICS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
------- ----
<S> <C> <C>
1. Lease of Premises 1
2. Basic Lease Provisions 2
3. Term 4
4. Possession and Commencement Date 4
5. Rent 6
6. Rent Adjustments 7
7. Operating Expenses 7
8. Rentable and Usable Area 11
9. Security Deposit 12
10. Use 14
11. Brokers 16
12. Holding Over 16
13. Taxes on Tenant's Property 17
14. Condition of Demised Premises 18
15. Common Areas and Parking Facilities 18
16. Utilities and Services 19
17. Alterations 22
18. Repairs and Maintenance 25
19. Liens 27
20. Indemnification and Exculpation 28
21. Insurance - Waiver of Subrogation 29
22. Damage or Destruction 32
23. Eminent Domain 34
24. Defaults and Remedies 35
25. Assignment or Subletting 40
26. Attorneys' Fees 44
27. Bankruptcy 44
28. Definition of Landlord 45
29. Estoppel Certificate 45
30. Joint and Several Obligations 46
31. Limitation of Landlord's Liability 46
32. Project Control by Landlord 47
33. Quiet Enjoyment 48
34. Quitclaim Deed 48
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
35. Rules and Regulations 48
36. Subordination and Attornment 48
37. Surrender 50
38. Waiver and Modification 50
39. Waiver of Jury Trial and Counterclaims 50
40. [Intentionally Omitted] 50
41. Hazardous Materials 50
42. [Intentionally Omitted] 54
43. Miscellaneous 55
44. [Intentionally Omitted] 57
45. Option to Extend Term 57
46. Expansion Rights 59
Exhibits
--------
"A-1" The Legal Description of the Land
"A-2" The Demised Premises
"A-3" The Project
"B" The Work Letter
"C" The Form of Acknowledgment of Term Commencement/Expiration Date
"D" The Rules and Regulations
"E" Landlord's Property List
"F" The Form of Estoppel Certificate
"G" The Environmental and Building Reports
</TABLE>
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LEASE
THIS LEASE ("Lease") is made as of the 7th day of January, 1998, by
and between ARE-JOHN HOPKINS COURT, LLC, a Delaware limited liability company
(hereinafter called "Landlord"), and SEQUANA THERAPEUTICS, INC., a California
corporation (hereinafter called "Tenant"). Landlord and Tenant are sometimes
hereinafter referred to as the Parties.
RECITALS
A. Landlord is the owner of that certain parcel of real property
located at the intersection of John Hopkins Court and John J. Hopkins Drive in
San Diego California, more particularly described on Exhibit "A-1" attached
hereto (the "Land").
B. Landlord desires to lease to Tenant and Tenant desires to lease
from Landlord, upon the terms and conditions set forth herein, the Demised
Premises (as hereinafter defined) within the building to be constructed on the
Land, which building will have a mailing address of 3550 John Hopkins Court.
NOW THEREFORE, in consideration of the mutual covenants,
representations and provisions contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1. Lease of Premises
1.1 Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, on the terms and conditions set forth herein, those certain
premises (the "Demised Premises") to be located within the building (the
"Building") to be constructed on the Land, and to have a mailing address of 3550
John Hopkins Court in San Diego, California. The Demised Premises are depicted
on the floor plans attached hereto as Exhibit "A-2" and are to be situated on
the floor(s) and suite(s) of the Building as set forth in Section 2.1.2. The
Land, the Building, and any other building to be located thereon and all
landscaping, parking facilities, and other improvements and appurtenances
related thereto or to be developed thereon, including, without limitation, all
driveways, sideways, parking areas, and land scaped areas, shall be a part of
the development to be constructed and known as
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Alexandria Life Sciences Center, the site plan for which is attached hereto as
Exhibit "A-3" (the "Project"). All portions of the Project which will be for the
non-exclusive use of tenants of the Building, including, without limitation,
driveways, sidewalks, parking areas, landscaped areas, service corridors,
stairways, elevators, public restrooms and Building lobbies, are hereinafter
referred to as "Common Area".
2. Basic Lease Provisions
2.1 For convenience of the parties, certain basic provisions
of this Lease are set forth herein. The provisions set forth herein are subject
to the remaining terms and conditions of this Lease and are to be interpreted in
light of such remaining terms and conditions.
2.1.1 Address of the Building:
3550 John Hopkins Court
San Diego, California 92121
2.1.2 Designation of Demised Premises:
Suite: 101
Floor: First (exact location to be determined by
mutual consent)
2.1.3 (a) Rentable Area of Demised Premises:
10,000 square feet
(b) Rentable Area of Building:
55,200 square feet
(c) Usable Area of Demised Premises:
To be determined
2.1.4 Initial Basic Annual Rent:
$37.80 per square foot of Rentable Area (subject to
adjustment in accordance with Section 6 hereof)
2.1.5 Initial Monthly Rental Installments of Basic Annual
Rent: $3.15 per square foot of Rentable Area
(subject to adjustment in accordance with Section 6
hereof)
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2.1.6 Tenant's Estimated Pro Rata Share of the Building:
18.12%
2.1.7 (a) Term Commencement Date:
As defined in Section 4.2
(b) Term Expiration Date:
Ten (10) years after the Term Commencement Date
2.1.8 Security Deposit: $3.15 per square foot of
Rentable Area
2.1.9 Permitted Use: Office use, research and
development and related, legal uses, as consistent
with the City of San Diego SR zoning ordinance
2.1.10 (a) Address for Rent Payment:
135 N. Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: Corporate Secretary
(b) Address for Notices to Landlord:
135 N. Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: Corporate Secretary
With a copy to:
11440 West Bernardo Court, Suite 170
San Diego, California 92127
Attention: Corporate Secretary
(c) Address for Notices to Tenant:
11099 North Torrey Pines Road, Suite 160
La Jolla, California 92037
Attention: Geneva R. Davis
2.1.11 Guarantor of Lease: None
2.1.12 The following Exhibits are attached hereto and
incorporated herein: A-1, A-2, A-3, B, C, D, E, F
and G
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2.1.13 Leasehold Improvement Allowance:
$150.00 per square foot of Rentable Area of the
Demised Premises
2.1.14 Space Plan Submittal Date: April 30, 1998
3. Term
3.1 This Lease shall take effect upon the date of execution
and delivery hereof by the Parties and each of the provisions hereof shall be
binding upon and inure to the benefit of Landlord and Tenant from the date of
execution and delivery hereof by the Parties.
3.2 The term of this Lease (the "Term") shall be that period
from the Term Commencement Date (as defined in Section 4.2 below) through the
Term Expiration Date, subject to earlier termination or extension of this Lease
as provided herein.
4. Possession and Commencement Date
4.1 Landlord shall use its reasonable efforts to deliver
possession of the Demised Premises to Tenant on April 1, 1999 (the "Target Term
Commencement Date") with the Leasehold Improvements and the Landlord's Work
(each as defined in the work letter ("Work Letter") attached hereto as Exhibit
"B") substantially completed. Tenant agrees that it shall submit to Landlord
for review and approval Tenant's space plans ("Space Plans") for the Demised
Premises not later than the date set forth in Section 2.1.14 above. Landlord's
Work shall be deemed substantially completed, as that term is used in this
Article 4 and elsewhere in this Lease, if Landlord has substantially completed
all of Landlord's Work identified on Tenant's plans and specifications (subject
only to a punch list of items that do not materially interfere with Tenant's use
of the Demised Premises), and has received the temporary occupancy certificate
from the City of San Diego, if required, and a substantial completion
certificate from the architect for the occupancy of the Demised Premises.
Notwithstanding the foregoing, if the date of the actual Term Commencement Date
is delayed beyond the Target Term Commencement Date due solely to the failure of
Tenant or Tenant's architect to timely review and approve the Construction
Drawings (as defined in the Work Letter) and/or review, approve and/or deliver
any item in the Work Letter, including, but not limited to, Tenant's submittal
to Landlord of the Space Plans by the date provided in Section 2.1.14
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above, then the actual Term Commencement Date for the Demised Premises will
remain the Target Term Commencement Date (as such date shall be extended due to
delays caused solely by Landlord or Landlord's agents).
4.2 The actual Term Commencement Date shall be the date on
which Landlord tenders possession of the Demised Premises to Tenant with
Landlord's Work and the Leasehold Improvements substantially completed.
Notwithstanding anything to the contrary contained herein, in the event that
Landlord's Work and the Leasehold Improvements are substantially completed prior
to the Target Term Commencement Date, Landlord shall tender possession of the
Demised Premises to Tenant (and, accordingly, the actual Term Commencement Date
shall occur) on the earlier to occur of (i) thirtieth (30th) day after the date
on which Landlord delivers written notice to Tenant informing Tenant of the
substantial completion of Landlord's Work and the Leasehold Improvements in
accordance with the terms hereof, and (ii) the Target Term Commencement Date.
Upon the delivery of the Demised Premises to Tenant as provided herein, Landlord
and Tenant shall execute and deliver a supplement to this Lease confirming: (a)
the delivery of the Demised Premises; (b) the actual Term Commencement Date; (c)
the Term Expiration Date; (d) the Rentable Area of the Building; (e) the
Rentable Area of the Demised Premises; and (f) the Usable Area of the Demised
Premises. Such supplement shall be attached to this Lease as Exhibit "C."
However, failure to execute and deliver such supplement shall not affect
Landlord's or Tenant's liability hereunder. If Landlord fails to tender
possession of the Demised Premises to Tenant on or before the Target Term
Commencement Date for any reason whatsoever, (i) Landlord shall have no
liability to Tenant for such failure but Tenant shall not be responsible for the
payment of any Rent (as defined below) until the actual Term Commencement Date
occurs and (ii) for each day following the Target Term Commencement Date (as the
same may be extended due to Force-Majeure Delays or Tenant-Caused Delays (as
such terms are defined in the Work Letter)) that Landlord actually delivers
possession of the Demised Premises to Tenant, Tenant, as Tenant's sole and
exclusive remedy, shall receive one (1) day of abatement of Basic Annual Rent.
4.3 Landlord shall allow Tenant to enter upon the Demised
Premises prior to the Term Commencement Date for the purpose of installing
improvements or placing personal property therein, provided that (a) Tenant
furnishes to Landlord evidence satisfactory to Landlord that insurance coverages
required of Tenant under the provisions of Article 21 are in effect, and (b)
such
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entry is subject to all the terms and conditions of this Lease other than the
payment of Basic Annual Rent or Additional Rent (as defined below).
4.4 Access to and possession of areas necessary for utilities,
services, safety and operation of the Building and the Project are reserved to
Landlord.
4.5 Landlord shall cause to be constructed the Leasehold
Improvements at a cost to Landlord not to exceed One Million Five Hundred
Thousand Dollars ($1,500,000.00) (the "Leasehold Improvement Allowance")
pursuant to the Work Letter attached hereto as Exhibit "B". Any costs incurred
in performing the Leasehold Improvements described in the Work Letter in excess
of the Leasehold Improvement Allowance shall be borne solely by Tenant.
5. Rent
5.1 Tenant agrees, commencing on the Term Commencement Date,
to pay Landlord the Basic Annual Rent based upon an initial monthly rental rate
set forth in Section 2.1.5, subject to the rental adjustments provided in
Article 6 hereof. Basic Annual Rent shall be paid in the equal monthly
installments each in advance on the first day of each and every calendar month
during the Term of this Lease.
5.2 In addition to Basic Annual Rent, Tenant agrees to pay to
Landlord as additional rent ("Additional Rent") at times hereinafter specified
in this Lease (i) Tenant's pro rata share ("Tenant's Pro Rata Share"), as set
forth in Section 2.1.6 and as may be subsequently amended, of Operating Expenses
as provided in Article 7 and (ii) any other amounts that Tenant assumes or
agrees to pay under the provisions of this Lease that are owed to Landlord,
including without limitation the cost of utilities not paid by Tenant directly
to the supplier and any and all other sums that may become due by reason of any
default of Tenant or failure on Tenant's part to comply with the agreements,
terms, covenants and conditions of this Lease to be performed by Tenant, after
notice and lapse of applicable cure period.
5.3 Basic Annual Rent and Additional Rent shall together be
denominated "Rent". Rent shall be paid to Landlord, without abatement,
deduction, or offset, in lawful money of the United States of America, at the
office of Landlord as set forth in Section 2.1.10 or to such other person or at
such other place as
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Landlord may from time designate in writing. In the event the Term of this Lease
commences or ends on a day other than the first day of a calendar month, then
the Rent for such fraction of a month shall be prorated on a thirty (30) day
basis for such period and shall be paid at the then current rate for such
fractional month.
6. Rent Adjustments
6.1 On the first (1st) anniversary of the Term Commencement
Date, and on such date every year thereafter during the Term (each a "Rent
Adjustment Date"), Basic Annual Rent shall increase three and a half percent
(3.5%) from the prior year's Basic Annual Rent. Each such adjustment shall
become effective on the applicable Rent Adjustment Date.
6.2 [INTENTIONALLY OMITTED]
7. Operating Expenses
7.1 As used herein, the term "Operating Expenses" shall
include:
(a) Government impositions including, without limitation,
property tax costs consisting of real and personal property taxes, levies and
assessments including lighting and landscape maintenance assessments, amounts
due under any improvement bond upon the Building and/or Project including the
parcel or parcels of real property upon which the Building and areas serving
such Building are located or assessments levied in lieu thereof imposed by any
governmental authority or agency, any tax on or measured by gross rentals
received from the rental of space in the Building, or tax based on the square
footage of the Demised Premises or Buildings as well as any parking charges,
utilities surcharges, or any other costs levied, assessed or imposed by, or at
the direction of, or resulting from statutes or regulations, or interpretations
thereof, promulgated by any federal, state, regional, municipal or local
government authority in connection with the use or occupancy of the Building or
the parking facilities serving the Building, any tax on this transaction or any
document to which Tenant is a party creating or transferring an interest in the
Demised Premises, any fee for a business license to operate an office building,
and any expenses, including the reasonable cost of attorneys or experts,
reasonably incurred by Landlord in seeking reduction by the taxing authority of
the applicable taxes, less tax refunds obtained as a result of an application
for review thereof. Operating Expenses shall not include any net income,
franchise, capital stock, estate or inheritance or gift taxes or taxes which are
the
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personal obligation of Tenant or of another tenant of the Project. In addition,
and notwithstanding anything to the contrary in this Lease, Tenant shall not be
required to pay any portion of any tax or assessment expense: (i) levied on
Landlord's business income, unless such tax or assessment is imposed in lieu of
real property taxes; (ii) in excess of the amount which would be payable if such
tax or assessment expense (including carrying costs) were paid in installments
over the longest permitted term without becoming delinquent; (iii) imposed on
land and improvements other than the Project; (iv) occasioned by Landlord's
failure to pay timely or perform any obligation of Landlord except to the extent
such delay is attributable to Tenant; (v) consisting of a tax or assessment for
the investigation, remediation or removal of any Hazardous Material attributable
to another tenant of the Building and/or existing prior to Tenant taking
possession of the Demised Premises; or (vi) attributable to Landlord's net gift
or transfer taxes except to the extent such tax pertains to this Lease
transaction.
(b) All other costs of any kind paid or incurred by
Landlord in connection with the use, operation, maintenance, repair and
replacement of the Building and the Project including, by way of examples and
not as a limitation upon the generality of the foregoing, costs of repairs and
replacements to improvements within the Project as appropriate to maintain the
Project as required hereunder, including cost of funding such reasonable
reserves as Landlord, consistent with good business practice, may establish to
provide for future repairs and replacements (but not to exceed Twenty Five
Thousand Dollars ($25,000) per annum for Tenant's portion of said reserves),
costs of utilities furnished to the Common Areas, sewer fees, cable T.V., when
applicable, trash collection, cleaning, including windows, heating, ventilation,
air-conditioning, maintenance of landscape and grounds, maintenance of drives
and parking areas, security services and devices, building supplies, maintenance
and replacement to equipment utilized for operation and maintenance of the
Project, capital expenditures (to the extent such expenditures exceed the
previously unapplied portion of Tenant's reserve payments, such excess shall be
amortized over the useful life of the improvement as determined under GAAP
standards, but in no event to exceed seven (7) years), costs of complying with
any applicable laws (to the extent not attributable to the acts or omissions of
other tenants and provided that capital expenditures incurred in complying with
applicable laws shall be amortized over the useful life of the improvement as
determined under GAAP standards, but in no event to exceed seven (7) years),
hazardous waste remediation (to the extent attributable to the acts or omissions
of Tenant or its agents, employees, contractors or invitees, or incurred by
Landlord as a recurring expense in the ordinary course of maintenance of the
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Project), rules or regulations, insurance premiums including premiums for public
liability, property casualty, earthquake and environmental coverages (to the
extent commercially reasonable), portions of insured losses paid by Landlord as
part of deductible portion of loss by reason of insurance policy terms (provided
however, with respect to deductibles paid under earthquake coverages, Tenant
shall not be responsible for its Pro Rata Share of any deductible paid in excess
of 10% of the loss and that Tenant shall pay no more than one hundred thousand
dollars ($100,000) in insurance coverage deductibles per occurrence per annum
with the balance of Tenant's Pro Rata Share of the insurance deductibles to be
paid by Tenant over the useful life of the replaced improvement as determined
under GAAP standards, but in no event to exceed seven (7) years), service
contracts, costs of services of independent contractors retained to do work of
nature before referenced, and costs of compensation (including employment taxes
and health and insurance benefits) of all persons who perform regular and
recurring duties connected with the day-to-day operation and maintenance of the
Project (including the pro rata cost of Landlord's property manager and his/her
office expenses), its equipment, the adjacent walks, landscaped areas, drives,
and parking areas, including without limitation, janitors, floor waxers,
window-washers, watchmen, gardeners, sweepers, and handymen and costs of
management services, which costs of management services shall not exceed two
percent (2%) of the Basic Annual Rent due from Tenant.
(c) Notwithstanding the foregoing, Operating Expenses
shall not include any leasing commissions, legal expenses relating to tenants,
costs of repair to the extent actually reimbursed by payment received by
Landlord of insurance proceeds, interest upon loans to Landlord or secured by
mortgage or deed of trust covering the Project or a portion thereof (provided
interest upon a government assessment or improvement bond payable in
installments is an Operating Expense under subparagraph (a) above), salaries of
executive officers of Landlord, depreciation claimed by Landlord for tax
purposes (provided this exclusion of "depreciation" is not intended to delete
from Operating Expenses actual costs of repairs and replacements and reasonable
reserves in regard thereto which are provided for in subparagraph (b) above) and
taxes of the types set forth within the last sentence of subparagraph (a) above.
In addition, and notwithstanding anything to the contrary in this Lease,
Operating Expenses shall not include any portion of the following repairs,
maintenance, improvements, replacements, premiums, claims, losses, fees,
commissions, charges, disbursements, attorneys' fees, experts' fees, costs and
expenses (collectively, "Costs"): (i) Costs occasioned solely by Landlord's
gross negligence, willful misconduct or intentional violation of law, or
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Costs arising solely and directly out of the failure of Landlord to construct
the Leasehold Improvements in a good and workmanlike manner; (ii) Costs solely
and directly occasioned by fire or other casualty, or by the exercise of the
power of eminent domain, but only to the extent covered and paid for by
insurance; (iii) Costs for which Landlord has a contractual right of
reimbursement from other tenants of the Project, or Costs which Tenant pays
directly to a third person; (iv) Costs incurred in connection with any tenant
improvement, alteration or redecorating of any portion of the Building not
constituting Common Area; (v) Costs arising from the disproportionate use of any
utility or service supplied by Landlord to any other occupant of the Project or
associated with separately metered utilities or with utilities and services of a
type not provided to Tenant; and (vi) interest, charges and fees incurred on
debt, payments on mortgages and rent under ground leases.
7.2 Tenant shall pay to Landlord on the first day of each
calendar month of the Term of this Lease, as Additional Rent, Landlord's
estimate (as determined in Landlord's sole discretion) of Tenant's Pro Rata
Share (as set forth in 2.1.6) of Operating Expenses with respect to the Project
for such month. Landlord shall endeavor to provide to Tenant prior to the
commencement of each calendar year of the Term, an estimated budget of Operating
Expenses with respect to the Project for such calendar year.
(a) Within one hundred eighty (180) days after the
conclusion of each calendar year, Landlord shall furnish to Tenant a statement
showing in reasonable detail the actual Operating Expenses and Tenant's Pro Rata
Share of Operating Expenses for the previous calendar year. Any additional sum
due from Tenant to Landlord shall be due and payable within thirty (30) days
thereafter. If the amounts paid by Tenant pursuant to Section 7.2 exceed
Tenant's Pro Rata Share of Operating Expense for the previous calendar year, the
difference shall be credited by Landlord against the Rent next due and owing
from Tenant; provided that, if the Lease Term has expired, Landlord shall
accompany said statement with payment for the amount of such difference.
(b) Any amount due under Section 7.2 for any period which
is less than a full month shall be prorated (based on a 30-day month) for such
fractional month.
7.3 Tenant shall have the right, at Tenant's expense, upon
reasonable notice during reasonable business hours, to have a Certified Public
Ac-
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countant inspect the portion of Landlord's books that are relevant to
preparation of Landlord's actual Operating Expenses for any year end provided
any request for such review shall be furnished within thirty (30) days of
Tenant's receipt of such statement as to the prior year's Operating Expenses and
that Landlord shall receive a copy of the results of such audit. An annual
statement shall be deemed final and binding upon Tenant unless a request for
review is furnished within said thirty day period. As a condition precedent to
Tenant exercising its right of inspection under this Section 7.3, Tenant shall
not be in monetary Default under the Lease in any respect and shall have paid to
Landlord any disputed Operating Expenses claimed by Landlord as being owed by
Tenant under this Lease.
7.4 Tenant shall not be responsible for Operating Expenses
attributable to the time period prior to the Term Commencement Date, except if
Landlord shall permit Tenant possession of the Demised Premises for the use set
forth in Section 2.1.9 prior to the Term Commencement Date, Tenant shall be
responsible for Operating Expenses from such earlier date of possession. The
responsibility of Tenant for Operating Expenses attributable to the Demised
Premises shall continue to the latest of (i) the date of termination of the
Lease, or (ii) the date Tenant has fully vacated the Demised Premises.
7.5 Operating Expenses for the calendar year in which Tenant's
obligation to share therein commences and in the calendar year in which such
obligation ceases, shall be prorated on a basis reasonably determined by
Landlord. Expenses such as taxes, assessments and insurance premiums which are
incurred for an extended time period shall be prorated based upon time periods
to which applicable so that the amounts attributed to the Demised Premises
relate in a reasonable manner to the time period wherein Tenant has an
obligation to share in Operating Expenses.
8. Rentable and Usable Area
8.1 The term "Usable Area" as set forth in Section 2.1.3 (c)
and as may otherwise be referenced within this Lease is generally calculated in
accor dance with the 1980 Standard Method for Measuring Floor Area in Office
Buildings as adopted by the Building Owners and Managers Association (BOMA).
The Usable Area refers generally to that approximate area to be occupied by
Tenant, such area having been calculated by measuring to the finished surface of
the office side of corridor and other permanent walls, to the center of
partitions that separate the office space of Tenant from adjoining usable area
of other tenants and to the
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inside finished surfaces of the dominant portion of the permanent outer Building
walls. No deductions are made with respect to such calculations for any columns
or projections which may be included within that area necessary to the Building.
8.2 The "Rentable Area" of the Building is generally
determined by making separate calculations of Rentable Area applicable to each
floor and/or suite within the Building and totaling the Rentable Area of all
floors and/or suites within the Building. The Rentable Area of a floor and/or
suite is computed by measuring to the outside finished surface of the permanent
outer Building walls. The full area calculated as before set forth is included
as Rentable Area without deduction for columns and projections or vertical
penetrations which are defined as stairs, elevator shafts, flues, pipe shafts,
vertical ducts, and the like and their enclosing walls.
8.3 The Rentable Area of the Building is the total of Rentable
Area of all suites within the Building.
8.4 The term "Rentable Area" when applied to Tenant is that
area equal to the Usable Area of the Demised Premises plus an equitable
allocation of Rentable Area within the Building which is not then utilized or
expected to be utilized as Usable Area, including but not limited to the portion
of the Building devoted to corridors, equipment rooms, restrooms, elevator lobby
and mailroom.
8.5 Review of allocations of Rentable Areas as between tenants
of the Building and the Project may be made as frequently as in Landlord's
opinion appears appropriate in order to facilitate an equitable apportionment of
Operating Expenses. If such review is by a licensed architect, made in
accordance with BOMA standards, and allocations are certified correct by such
licensed architect, the Tenant shall be bound by such certifications.
9. Security Deposit
9.1 Tenant shall deposit with Landlord upon the execution of
this Lease the sum set forth in Section 2.1.8, which sum shall be held by
Landlord as security for the faithful performance by Tenant of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the Term hereof. If Tenant defaults with respect to any provision of this
Lease, including but not limited to any provision relating to the payment of
Rent, Landlord may (but shall not be required to) use, apply or retain all or
any part of such security deposit
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for the payment of any Rent or any other sum in default, or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant's default. If any portion of said deposit is so used or applied, Tenant
shall, within ten (10) days following demand therefore, deposit cash with
Landlord in an amount sufficient to restore the security deposit to its original
amount and Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall not be required to keep this security deposit separate from its
general fund. Tenant shall be entitled to interest on such deposit at rates paid
from time to time on money market or passbook accounts as quoted by the Bank of
America or other financial institutions reasonably acceptable to Landlord.
9.2 In the event of bankruptcy or other debtor-creditor
proceedings against Tenant, such security deposit shall be deemed to be applied
first to the payment of Rent and other charges due Landlord for all periods
prior to the filing of such proceedings.
9.3 Landlord may deliver the funds deposited hereunder by
Tenant to any purchaser of Landlord's interest in the Demised Premises and
thereupon Landlord shall be discharged from any further liability with respect
to such deposit. This provision shall also apply to any subsequent transfers.
9.4 The unapplied security deposit, or any balance thereof,
shall be returned to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest hereunder) within thirty (30) days after the expiration or
earlier termination of this Lease, except for amounts that Landlord has deducted
therefrom in order to cure defaults of Tenant under this Lease or compensate
Landlord for damages for which Tenant is liable pursuant to this Lease.
9.5 In lieu of the cash security deposit provided in Section
2.1.8 hereof, Tenant may, prior to the date this Lease is executed by both
Parties, deliver to Landlord and maintain throughout the Term hereof an
irrevocable standby letter of credit (the "Letter of Credit") in favor of
Landlord, in form and substance acceptable to Landlord in its sole discretion,
and in the amount of the security deposit, with a term of not less than the Term
of this Lease. Notwithstanding the foregoing, Tenant's Letter of Credit may have
a term of less than the Term of this Lease, provided that in the event that
Tenant fails to deliver to Landlord a replacement Letter of Credit (or a cash
deposit in such amount) on or before the thirtieth (30th) day prior to the
expiration date of any such shorter term Letter of Credit, Landlord may draw
upon such Letter of Credit and hold such funds as a cash
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security deposit in accordance with the terms of this Lease. The Letter of
Credit shall be issued by a bank or other financial institution acceptable to
Landlord, in Landlord's sole discretion, and may be drawn upon by Landlord at
any time that Landlord is or would be entitled to apply or use the security
deposit (or any portion) thereof as provided in Section 9.1 hereof.
10. Use
10.1 Tenant shall use the Demised Premises for the purpose set
forth in Section 2.1.9 and shall not use the Demised Premises, or permit the
Demised Premises to be used, for any other purpose without the prior written
consent of Landlord which may be withheld in Landlord's reasonable discretion
consistent with the then existing use of the Building.
10.2 Tenant shall not use or occupy the Demised Premises in
violation of any federal, state and local laws and regulations, zoning
ordinances, or of the certificate of occupancy issued for the Building, and
shall, upon five (5) days' written notice from Landlord, discontinue any use of
the Demised Premises which is declared or claimed by any governmental authority
having jurisdiction to be a violation of law, regulation or zoning ordinance or
of said certificate of occupancy, Tenant shall comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the nature
of Tenant's particular use or occupancy of the Demised Premises, impose any duty
upon Tenant or Landlord with respect to the Demised Premises or with respect to
the use or occupancy thereof.
10.3 Tenant shall not do or permit to be done anything which
will invalidate or increase the cost of any fire, environmental, extended
coverage or any other insurance policy covering the Building and Project without
Landlord's prior written consent, which may be withheld in Landlord's sole
discretion (unless Tenant pays the cost of any such increase), and shall comply
with all rules, orders, regulations, and requirements of the insurers of the
Building and Project and Tenant shall promptly upon demand reimburse Landlord
for any additional premium charged for such policy by reason of Tenant's failure
to comply with the provisions of this Section.
10.4 Tenant shall keep all doors opening onto public corridors
closed, except when in use for ingress and egress.
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10.5 No additional locks or bolts of any kind shall be placed
upon any of the doors or windows by Tenant nor shall any changes be made in
existing locks or the mechanism thereof unless Tenant provides copies of the new
keys to Landlord so that Landlord can access the Demised Premises in accordance
with the terms of this Lease (provided that Tenant may change or add locks for
any portions of the Demised Premises that are reasonably designated by Tenant as
restricted or private areas and, in such cases, Tenant shall not be required to
provide such new keys to Landlord). Tenant must, upon termination of this Lease
return to Landlord all keys to offices and restrooms, either furnished to, or
otherwise procured by Tenant. In the event any key so furnished is lost, Tenant
shall pay to Landlord the cost of replacing the same or of changing the lock or
locks opened by such lost key if Landlord shall deem it necessary to make such
change.
10.6 No awnings or other projection shall be attached to any
outside wall of the building. No curtains, blinds, shades or screens shall be
attached to or hung in, or used in connection with, any window or door of the
Demised Premises other than Landlord's standard window coverings. Neither the
interior nor exterior of any windows shall be coated or otherwise sunscreened
without the express written consent of Landlord, nor shall any bottles, parcels,
or other articles be placed on the windowsills. No equipment, furniture or other
items of personal property shall be placed on any exterior balcony without the
express written consent of Landlord.
10.7 No sign, advertisement, or notice shall be exhibited,
painted or affixed by Tenant on any part of the Building without the prior
written consent of Landlord. Interior signs on doors and the directory tablet
shall be inscribed, painted or affixed for Tenant by Landlord at the expense of
Tenant, and shall be of a size, color and type acceptable to Landlord. The
directory tablet shall be provided exclusively for the display of the name and
location of tenants only. Nothing may be placed on the exterior of corridor
walls or corridor doors other than Landlord's standard lettering.
10.8 Tenant shall cause any office equipment or machinery to
be installed in the Demised Premises so as to reasonably prevent sounds or
vibrations therefrom from extending into Common Areas as defined in Section 1.1,
or other offices or premises in the Building. Further, no equipment weighing
five hundred (500) pounds, or greater, shall be placed upon the Demised Premises
without advance notice to and approved by Landlord and placement, if approved by
Landlord, shall be at a location designed to carry the weight of such equipment.
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10.9 Tenant shall not do or permit anything to be done in or
about the Demised Premises which shall in any way obstruct or interfere with the
rights of other tenants or occupants of the Building, or injure or annoy them,
or use or allow the Demised Premises to be used for immoral, unlawful or
objectionable purpose, nor shall Tenant knowingly cause, maintain or permit any
nuisance or waste in, on, or about the Demised Premises, Building or Project.
Landlord hereby acknowledges that Tenant's use of the Demised Premises in
accordance with the use set forth in Section 2.1.9 shall not be deemed to be an
immoral or objectionable purpose.
11. Brokers
11.1 Tenant and Landlord each represents and warrants to the
other that it has had no dealings with any real estate broker or agent in
connection with the negotiation of this Lease other than John Burnham & Company,
as have been disclosed in writing to each other and that it knows of no other
real estate broker or agent who is or might be entitled to a commission in
connection with this Lease. Any commission owed to John Burnham & Company in
connection with the negotiation of this Lease shall be paid by Landlord
pursuant to a separate written agreement between Landlord and John Burnham &
Company.
11.2 Tenant represents and warrants that no broker or agent
has made any representation or warranty relied upon by Tenant in Tenant's
decision to enter into this Lease other than as contained in this Lease.
11.3 Tenant acknowledges and agrees that the employment of
brokers, if any, by Landlord is for the purpose of solicitation of offers of
lease from prospective tenants and no authority is granted to any broker to
furnish any representation (written or oral) or warranty from Landlord unless
expressly contained within this Lease. Landlord in executing this Lease does so
in reliance upon Tenant's representations and warranties contained within
Sections 11.1 and 11.2 herein.
12. Holding Over
12.1 If, with Landlord's express written consent, Tenant holds
possession of all or any part of the Demised Premises after the Term of this
Lease, Tenant shall become a tenant from month-to-month upon the date of such
expiration or earlier termination, and in such case Tenant shall continue to pay
in accordance with Article 5 the Basic Annual Rent as adjusted from the Term
Commencement Date in accordance with Article 6, and Tenant's Pro Rata Share of
Operating
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Expenses, and such month-to-month tenancy shall be subject to every other term,
covenant and agreement contained herein.
12.2 If Tenant remains in possession of the Demised Premises
after the expiration or earlier termination of the Term hereof without the
express written consent of Landlord, Tenant shall become a tenant at sufferance
upon the terms of this Lease except that the monthly rental shall be equal to
one hundred twenty five percent (125%) of the Rent (Basic Annual Rent and
Additional Rent) in effect during the last thirty (30) days of the Lease Term.
12.3 Acceptance by Landlord of Rent after such expiration or
earlier termination shall not result in a renewal or reinstatement of this
Lease.
12.4 The foregoing provisions of this Article 12 are in
addition to and do not affect Landlord's right to re-entry or any other rights
of Landlord hereunder or as otherwise provided by law.
13. Taxes on Tenant's Property
13.1 Tenant shall pay, prior to delinquency, any and all taxes
or assessments levied against any personal property or trade fixtures placed in
or about the Demised Premises.
13.2 If any such taxes on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property or, if the assessed
valuation of the Building is increased by the inclusion therein of a value
attributable to Tenant's personal property or trade fixtures, and if Landlord
pays the taxes based upon such increase in the assessed valued, then Tenant
shall within thirty (30) days after demand repay to Landlord the taxes so levied
against Landlord.
13.3 If any improvements in or alterations to the Demised
Premises, owned by Tenant, are assessed for real property tax purposes at a
valuation higher than the valuation at which improvements conforming to
Landlord's "Building Standard" in other spaces in the Building are assessed,
then the real property taxes and assessments levied against Landlord or the
Building by reason of such excess assessed valuation shall be deemed to be taxes
levied against personal property of Tenant and shall be governed by the
provisions of Section 13.2 above. Any such excess assessed valuation due to
improvements in or alterations to space in the Building leased by other tenants
of Landlord shall not be included in the Operating
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Expenses defined in Section 7, but shall be treated, as to such other tenants,
as provided in this Section 13.3. If the records of the County Assessor are
available and sufficiently detailed to serve as a basis for determining whether
said tenant improvements or alterations are assessed at a higher valuation than
Landlord's "Building Standard," such records shall be binding on both Landlord
and Tenant.
14. Condition of Demised Premises
14.1 Tenant acknowledges that neither Landlord nor any agent
of Landlord has made any representation or warranty with respect to the
condition of the Demised Premises or the Building or Project, or with respect to
the suitability for the conduct of Tenant's business except as expressly set
forth in this Lease. The taking of possession of the Demised Premises by Tenant
shall, except as otherwise agreed in writing by Landlord and Tenant conclusively
establish that the Demised Premises and Building were at such time in good,
sanitary and satisfactory condition and repair. Notwithstanding the foregoing,
Landlord shall provide that, on the Term Commencement Date, (i) the electrical,
plumbing, and mechanical systems servicing the Demised Premises are in working
order and in good condition, (ii) all ceiling area over the Demised Premises is
covered by ceiling tiles that are unbroken, (iii) the roof over the Demised
Premises is in good condition and water tight, (iv) there are no cracks, holes,
or other damage to walls, floors, and doors at the Demised Premises known to
Landlord that have not been repaired, (v) any broken or damaged glass at the
Demised Premises has been replaced with new glass, and (vi) the carpet at the
Demised Premises is in good condition and there are no areas in need of
immediate replacement to make such areas suitable for occupan cy. Without in any
way limiting Tenant's rights pursuant to Section 5.4 of the Work Letter: (a)
Tenant's acceptance of the Demised Premises or submission of a "punch list"
shall not be deemed a waiver of Tenant's right to have construction defects in
the Leasehold Improvements or the Demised Premises repaired at no cost to
Tenant; (b) Tenant shall give notice to Landlord whenever any such defect
becomes reasonably apparent, and Landlord shall cause such defect to be
repaired; and (c) Tenant's right to have Landlord cause such defects to be
repaired shall be deemed waived if written notice is not given to Landlord
within thirty (30) days of the date Tenant discovers such defect.
15. Common Areas and Parking Facilities
15.1 Tenant shall have the non-exclusive right, in common with
others, to use the Common Areas, subject to the rules and regulations adopted by
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Landlord and attached hereto as Exhibit "D" together with such other reasonable
and non-discriminatory rules and regulations as are hereafter promulgated by
Landlord in its discretion (the "Rules and Regulations"). Notwithstanding the
foregoing, Tenant shall not be required to comply with any new Rules and
Regulations unless the same do not unreasonably interfere with Tenant's use of
the Demised Premises or Tenant's parking rights and do not materially increase
the obligations or decrease the rights of Tenant under this Lease.
15.2 As an appurtenance to the Demised Premises, Tenant shall
have the non-exclusive right to use within the Project up to a maximum of three
(3) parking spaces per one thousand (1,000) square feet of Rentable Area leased
by Tenant on a first-come, first-served non-assigned basis, for Tenant's
employees, guests and invitees. Landlord shall not assign more parking rights to
tenants in the Project than spaces that actually exist. Landlord shall endeavor
to provide to Tenant (at no additional cost to Tenant) an additional underground
area for general storage and/or hazardous materials and other waste storage and
containment, without altering the parking ratio of three (3) parking spaces per
one thousand (1,000) square feet of Rentable Area.
15.3 Landlord reserves the right to modify Common Areas
including the right to add or remove exterior and interior landscaping and to
subdivide real property. It is recognized that Landlord specifically reserves
the right as to a portion of the Building to allow exclusive use of corridors
and restroom facilities located on specific floors to one or more tenants
occupying such floors, provided Tenant herein shall not be deprived of the use
of the corridors reasonably required to serve the Demised Premises or of
restroom facilities serving the floor upon which the Demised Premise are
located, and no such modification of the Common Areas shall unreasonably
interfere with or diminish Tenant's use of the Demised Premises or materially
increase the obligations or decrease the rights of Tenant under this Lease.
Landlord shall at all times use its reasonable efforts to minimize any
disruption to Tenant due to such modifications.
16. Utilities and Services
16.1 To the extent such items are not included in Operating
Expenses, Tenant shall pay for all water (including the cost to service, repair,
replace and operate any reverse osmosis and/or deionized water systems and other
treated water), gas, heat, light, power, telephone, janitorial service, refuse
collection, hazardous material collection and other utilities and services
supplied to the
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Demised Premises, together with any taxes thereon. Tenant shall also pay for the
cost to service, repair, relocate, replumb, replace and operate any gas or
liquid distribution systems servicing the Demised Premises including any located
in the Building but outside the Demised Premises. If any such utility is not
separately metered to Tenant, Tenant shall pay a reasonable proportion based
upon its use of such utility to be determined by Landlord of all charges jointly
metered with other premises or, in the alternative, Landlord may, at its option,
monitor the usage of such utilities by Tenant and charge Tenant with the cost of
purchasing, installing and monitoring such metering equipment, which shall be
paid by Tenant as Additional Rent.
16.2 Landlord shall not be liable for nor shall any eviction
of Tenant result from the failure to furnish any such utility or service whether
or not such failure is caused by accident, breakage, repairs, strikes, lockouts
or other labor disturbances or labor disputes of any character, governmental
regulation, moratorium or other governmental action, inability despite the
exercise of reasonable diligence or by any other cause, including the gross
negligence of Landlord. In the event of such failure, Tenant shall not be
entitled to any abatement or reduction of Rent, nor be relieved from the
operation of any covenant or agreement of this Lease.
16.3 Tenant shall pay for, prior to delinquency, any utilities
which may be furnished and billed to the Demised Premises during the Term of
this Lease.
16.4 Tenant shall not, without the prior written consent of
Landlord, use any device in the Demised Premises, including, but without
limitation, data processing machines (excluding personal computers) and non
standard laboratory equipment, which will in any way increase the amount of
ventilation, air exchange, gas, electricity or water beyond the initial capacity
of the Building as proportionately allocated to the Demised Premises based upon
Tenant's Pro Rata Share as set forth in Section 2.1.6 above.
16.5 If Tenant shall require services in excess of that
usually furnished or supplied for similar space in the Building, by reason of
equipment operated and/or extended hours of business operation, then Tenant
shall first procure the consent of Landlord for the use thereof, which consent
Landlord may condition upon the availability of such excess utilities or
services and Tenant's
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payment as Additional Rent of an amount equal to the cost to provide such excess
services and utility capacity.
16.6 Utilities and services provided by Landlord and billed to
the Demised Premises shall be paid by Tenant directly to the supplier of such
utility or service.
16.7 Landlord shall provide water in Common Areas for drinking
and lavatory purposes only, but if Tenant requires, uses or consumes water for
any purpose in addition to ordinary drinking and lavatory purposes of which fact
Tenant constitutes Landlord to be the sole judge, Landlord may install a water
meter and thereby measure Tenant's water consumption for all purposes. Tenant
shall pay Landlord for the cost of the meter and the cost of the installation
thereof and throughout the duration of Tenant's occupancy, Tenant shall keep
said meter and installation equipment in good working order and repair at
Tenant's own cost and expense, in default of which Landlord may cause such meter
and equipment to be replaced or repaired and collect the cost thereof from
Tenant. Tenant agrees to pay for water consumed, as shown on said meter, as and
when bills are rendered, and on default in making such payment, Landlord may pay
such charges and collect the same from Tenant. Any such costs or expenses
incurred, or payments made by Landlord for any of the reasons or purposes
hereinabove stated shall be deemed to be Additional Rent payments by Tenant and
collectible by Landlord as such.
16.8 Landlord reserves the right to stop service of the
elevator, plumbing, ventilation, air conditioning and electric systems, when
necessary, by reason of accident or emergency or for repairs, alterations or
improvements, in the judgment of Landlord desirable or necessary to be made,
until said repairs, alterations or improvements shall have been completed, and
Landlord shall further have no responsibility or liability for failure to supply
elevator facilities, plumbing, ventilation, air conditioning or electric
service, when prevented from doing so by strike or accident, or by laws, rules,
order, ordinances, directions, regulations or requirements of any federal,
state, country or municipal authority or failure to deliver gas, oil or other
suitable fuel supply or inability by exercise of reasonable diligence to obtain
gas, oil or other suitable fuel. It is expressly understood and agreed that any
covenants on Landlord's part to furnish any service pursuant to any of the
terms, covenants, conditions, provisions or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, shall not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever. Notwithstanding the foregoing, in
the event
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that any of Landlord's repairs, alterations or improvements affect Tenant's
vivarium or other critical Building systems, Landlord shall (except in cases of
emergency) provide Tenant with reasonable advance notice and use reasonable
efforts to minimize any disruption to Tenant (including, if reasonably
available, providing Tenant with the use of a back-up generator). In the event
of fire, earthquake, flood, vandalism, war, storm or similar cause of damage or
destruction, this Section shall not apply and the provisions of Article 22
entitled Damage or Destruction shall apply and control.
16.9 Notwithstanding anything to the contrary in this Lease,
if as a consequence of (i) a material cessation of utilities required to be
provided to the Demised Premises by Landlord, or (ii) the presence of a
significant amount of Hazardous Materials which does not result from Tenant's
release or emission of such Hazardous Material in or about the Demised Premises
in violation of Hazardous Materials Laws, which renders the Demised Premises
uninhabitable, and in any of the foregoing cases, Tenant is unable to use the
Demised Premises for a continuous and consecutive period of thirty (30) days
following written notice by Tenant to Landlord and Landlord's lenders, and
Landlord fails or refuses to take any action to correct or otherwise remedy such
situation, then (a) Tenant shall be entitled to terminate the Lease upon ten
(10) days written notice to Landlord and (b) Tenant shall receive one (1) day of
abatement of Basic Annual Rent for each day that Tenant is unable to use the
Demised Premises, to the extent that Landlord receives proceeds pursuant to its
rental interruption insurance for and to the extent of each such day of
abatement. If the interference persists for more than one hundred eighty (180)
consecutive calendar days following written notice to Landlord and Landlord's
lender despite Landlord's actions and efforts to correct or remedy such
interference, then (i) Tenant shall have the right to terminate this Lease upon
ten (10) days written notice to Landlord and (ii) Tenant shall receive one (1)
day of abatement of Basic Annual Rent for each day that Tenant is unable to use
the Demised Premises, to the extent that Landlord receives proceeds pursuant to
its rental interruption insurance for and to the extent of each such day of
abatement.
17. Alterations
17.1 Tenant shall make no alterations, additions or
improvements in or to the Demised Premises without Landlord's prior written
consent, which approval shall not be unreasonably withheld and provided that
Landlord shall not be required to incur any costs in connection therewith and
then only by architects, contractors, suppliers or mechanics approved by
Landlord in Landlord's sole
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discretion. In seeking Landlord's approval, Tenant shall provide Landlord, at
least fourteen (14) days in advance of any proposed construction, with plans,
specifications, bid proposals, work contracts and such other information
concerning the nature and cost of the alterations as may be reasonably requested
by Landlord.
17.2 Tenant agrees that there shall be no construction of
partitions or other obstructions which might interfere with free access to
mechanical installation or service facilities of the Building or interfere with
the moving of Landlord's equipment to or from the enclosures containing said
installations or facilities.
17.3 Tenant agrees that any work by Tenant shall be
accomplished in such a manner as to permit any fire sprinkler system and fire
water supply lines to remain fully operable at all times.
17.4 All such work shall be done at such times and in such
manner as Landlord may from time to time designate. Tenant covenants and agrees
that all work done by Tenant shall be performed in full compliance with all
laws, rules, orders, ordinances, directions, regulations, and requirements of
all governmental agencies, offices, departments, bureaus and boards having
jurisdiction, and in full compliance with the rules, orders, directions,
regulations, and requirements of any applicable fire rating bureau. Tenant shall
obtain all applicable building permits and occupancy certificates. Tenant shall
provide Landlord with "as-built" plans showing any material change in the
Demised Premises. As used in the preceding sentence, the term "material change"
shall mean any change for which any permit is obtained or any change that costs
$10,000 or more.
17.5 Before commencing any work, Tenant shall give Landlord at
least fourteen (14) days' prior written notice of the proposed commencement of
such work and shall, if required by Landlord, secure at Tenant's own cost and
expense a completion and lien indemnity bond satisfactory to Landlord for said
work.
17.6 Subject to Section 17.8, all alterations, attached
equipment, decorations, fixtures, trade fixtures, additions and improvements
attached to or built into the Demised Premises, made by either party, including
(without limiting the generality of the foregoing) all wallcovering, built-in
cabinet work and paneling, exterior venting fume hoods and walk in freezers and
refrigerators, shall, unless prior to such construction or installation,
Landlord elects otherwise, become the property of Landlord upon the expiration
or earlier termination of the Term of this
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Lease, and shall remain upon and be surrendered with the Demised Premises as a
part thereof.
17.7 Tenant shall repair any damage to the Demised Premises
caused by Tenant's removal of any property from the Demised Premises. During any
such restoration period, Tenant shall pay Rent to Landlord as provided herein as
if said space were otherwise occupied by Tenant.
17.8 All business and trade fixtures, machinery and equipment,
built-in furniture and cabinets, including but not limited to, those items
listed on Exhibit "E" attached hereto, together with all additions and
accessories thereto, installed in and upon the Demised Premises and paid for by
Landlord shall be and remain the property of Landlord and shall not be removed
by Tenant at any time during the Term of this Lease (except with Landlord's
prior written consent). Notwithstanding anything to the contrary contained
herein, in no event may Tenant remove from the Demised Premises any improvement
which materially or adversely affects any Building system or as to which
Landlord contributed payment (including, without limitation, the Leasehold
Improvements or fume hoods to which Landlord contributed payment), without
Landlord's prior written consent, which may be withheld in Landlord's sole
discretion; provided, however, that Landlord shall not withhold its consent to
the removal of any improvements which may affect the Building systems and which
Landlord has not contributed payment if following such removal Tenant restores
the Demised Premises to its original condition (including, without limitation,
if deemed necessary by Landlord, any and all required adjustments to the HVAC
system). If Tenant shall fail to remove all of its effects from the Demised
Premises prior to termination of this Lease, then Landlord may, at its option,
remove the same in accordance with law, and store said effects, and Tenant
agrees to pay Landlord upon demand any expenses incurred for such removal and
storage or Landlord may, at its option, in accordance with law, sell said
property or any of the same, for such price as Landlord may obtain and apply the
proceeds of such sale against any amounts due under this Lease from Tenant to
Landlord and against any expenses incident to the removal, storage and sale of
said personal property.
17.9 [INTENTIONALLY OMITTED]
17.10 Tenant shall pay to Landlord an amount equal to five
percent (5%) of the cost to Tenant of all changes installed by Tenant or its
contractors or agents (other than Minor Alterations, as hereinafter defined) to
cover Landlord's
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overhead and expenses for plan review, coordination, scheduling and supervision
thereof. For purposes of payment of such sum, Tenant shall submit to Landlord
copies of all bills, invoices, and statements covering the costs of such
changes, which will be accompanied by payment to Landlord of the percentage fee
set forth above. Nothing contained in this provision shall be construed as
obligating Tenant to pay such fee to Landlord with respect to the work to be
performed pursuant to the Work Letter. Tenant shall indemnify, defend, protect
and hold Landlord harmless from and against any and all claims, causes of
action, demands, obligations, losses, damages, liabilities, judgments, costs
and expenses (including, without limitation, attorneys' fees, charges and
disbursements) in connection with any work done by or at the direction of Tenant
or its contractors.
17.11 Notwithstanding any of the foregoing, Tenant may
construct non-structural alterations, additions and improvements ("Minor
Alterations") in the Demised Premises with not less than fourteen (14) days
prior written notice to Landlord but without Landlord's prior approval, if: i)
the cost of such work (whether conducted in one or a series of jobs) does not
exceed Twenty Five Thousand Dollars ($25,000); ii) the Minor Alterations do not
impact the Building systems such as electrical, heating, air conditioning, water
and plumbing; and iii) the Minor Alterations are not visible from Common Areas
of the Building. Minor Alterations shall not be subject to Section 17.10 above.
Upon request, Landlord shall advise Tenant in writing whether it reserves the
right to require Tenant to remove any alterations from the Demised Premises upon
termination of this Lease. Alterations and Tenant's trade fixtures, furniture,
equipment and other personal property placed in the Demised Premises and paid
for by Tenant ("Tenant's Property") shall at all times be and remain Tenant's
property, and Tenant shall be entitled to all depreciation, amortization and
other tax benefits with respect thereto. Except for alterations which cannot be
removed without structural injury to the Demised Premises, or which have become
fixtures of the Building, at any time, Tenant may remove Tenant's Property from
the Demised Premises, provided that Tenant repairs all damage caused by such
Property removal. Landlord shall have no lien or other interest whatsoever in
any item of Tenant's Property located in the Demised Premises, and shall execute
any document reasonably necessary to waive any lien or interest in Tenant's
Property located in the Demised Premises.
18. Repairs and Maintenance
18.1 Landlord shall repair and maintain the structural and
exterior portions and Common Areas of the Building and Project, including,
without
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limitations, roofing and covering materials, foundations, walls, the plumbing,
fire sprinkler system (if any), heating, ventilating, air conditioning,
elevator, and electrical systems installed or furnished by Landlord (and the
full cost thereof shall be included as part of Operating Expenses to the extent
permitted under Section 7 hereof), except to the extent such maintenance or
repairs are required in whole or in part because of any act, neglect, fault of
or omissions of any duty by Tenant, its agents, servants, employees or invitees,
in which case Tenant shall pay to Landlord the portion of the cost of such
maintenance and repairs attributable to Tenant as set forth above.
18.2 Except for services of Landlord, if any, required by
Section 18.1, Tenant shall at Tenant's sole cost and expense keep the Demised
Premises and every part thereof in good condition and repair, damage thereto
from ordinary wear and tear excepted. Tenant shall, upon the expiration or
sooner termination of the Term hereof, surrender the Demised Premises to
Landlord in as good as condition as when received, ordinary wear and tear,
casualties not caused by Tenant (subject to the provisions of Section 22 below),
condemnation, Hazardous Materials (other than those released or emitted by
Tenant in or about the Demised Premises) and alterations with respect to which
Landlord has not reserved the right to require removal excepted. Landlord shall
have no obligation to alter, remodel, improve, repair, decorate or paint the
Demised Premises or any part thereof. Tenant shall be responsible at its sole
cost, for its own janitorial services for the Demised Premises. Notwithstanding
anything to the contrary in this Lease, Tenant shall have no responsibility to
perform or construct any repair, maintenance or improvement (i) necessitated by
the acts or omissions of Landlord or any other occupant of the Project, or their
respective agents, employees or contractors, (ii) occasioned by the exercise of
the power of eminent domain, (iii) required as a consequence of any violation of
law or construction defect in the Demised Premises or the Project existing prior
to the Term Commencement Date, and (iv) for which Landlord has a right of
reimbursement from others.
18.3 Landlord shall not be liable for any failure to make any
repairs or to perform any maintenance which is an obligation of Landlord unless
such failure shall persist for an unreasonable time (not to exceed thirty (30)
days unless such repair or maintenance work normally takes longer than thirty
(30) days) in which event Landlord shall have a period of time reasonably
required to complete such work after written notice of the need of such repairs
or maintenance is given to Landlord by Tenant. In the event Landlord fails to
make any repairs or perform any maintenance as provided in this Lease within a
reasonable time after
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receipt written notice from Tenant, Tenant may make repairs at Tenant's expense
and seek reimbursement from Landlord without any offset or deduction from Rent
and Tenant shall have no other rights with respect to any such failure.
Notwithstanding the above, Tenant shall not be entitled to terminate the Lease
by reason of any failure of Landlord to make repairs or perform any maintenance
within the time periods provided herein.
18.4 Repairs under this Article 18 which are obligations of
Landlord are subject to allocation among Tenant and other tenants as Operating
Expenses, to the extent permitted under Section 7 hereof.
18.5 This Article 18 relates to repairs and maintenance
arising in ordinary course of operation of the Building and any related
facilities. In the event of fire, earthquake, flood, vandalism, war, or similar
cause of damage or destruction, this Article 18 shall not be applicable and the
provisions of Article 22 entitled "Damage or Destruction" shall apply and
control.
19. Liens
19.1 Subject to the immediately succeeding sentence, Tenant
shall keep the Demised Premises, the Building and the Land free from any liens
arising out of work performed, materials furnished or obligations incurred by
Tenant. Tenant further covenants and agrees that any mechanic's lien filed
against the Demised Premises or against the Building for work claimed to have
been done for, or materials claimed to have been furnished to Tenant, will be
discharged by Tenant, by bond or otherwise, within ten (10) days after Tenant's
receipt of written notice (whether from Landlord or otherwise) of the filing
thereof, at the sole cost and expense of Tenant.
19.2 Should Tenant fail to discharge any lien of the nature
described in Section 19.1, Landlord may at Landlord's election pay such claim or
post a bond or otherwise provide security to eliminate the lien as a claim
against title and the cost thereof shall be immediately due from Tenant as
Additional Rent.
19.3 In the event Tenant shall lease or finance the
acquisition of office equipment, furnishings, or other personal property of a
removable nature utilized by Tenant in the operation of Tenant's business,
Tenant warrants that any Uniform Commercial Code Financing Statement executed by
Tenant will upon its face or by exhibit thereto indicate that such Financing
Statement is applicable only
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to removable personal property of Tenant located within the Demised Premises. In
no event shall the address of the Building be furnished on the statement without
qualifying language as to applicability of the lien only to removable personal
property, located in an identified suite held by Tenant. Should any holder of a
Financing Statement executed by Tenant record or place of record a Financing
Statement which appears to constitute a lien against any interest of Landlord or
against equipment which may be located other than within the Demised Premises,
Tenant shall within ten (10) days after filing such Financing Statement cause
(i) a copy of the Security Agreement or other documents to which Financing
Statement pertains to be furnished to Landlord to facilitate Landlord's being in
a position to show such lien is not applicable to Landlord's interest and (ii)
its lender to amend documents of record so as to clarify that such lien is not
applicable to any interest of Landlord in the Building or Project.
20. Indemnification and Exculpation
20.1 Tenant agrees to indemnify, defend, protect, save and
hold Landlord harmless from and against any and all demands, claims,
liabilities, losses, costs, expenses, actions, causes of action, damages or
judgments, and all reasonable expenses incurred in investigating or resisting
the same (including, without limitation, reasonable attorneys' fees and
disbursements), for injury to person or to property occurring within or about
the Demised Premises, arising directly or indirectly out of Tenant's, it's
employees, agents or guests use or occupancy of the Demised Premises or a breach
or default by Tenant in the performance of any of its obligations hereunder.
Notwithstanding anything to the contrary in this Lease, Landlord shall not be
released from, and shall indemnify, defend, protect and hold harmless Tenant
from, all damages, liabilities, judgments, actions, claims, attorneys' fees,
consultants' fees, payments, costs and expenses arising from the gross
negligence or willful misconduct of Landlord or its agents or guests, Landlord's
violation of law with respect to the Building, or a material breach of
Landlord's obligations or representations under this Lease.
20.2 Landlord shall not be liable to Tenant and Tenant assumes
all risk of damage to personal property, including loss of records kept within
the Demised Premises if the cause of such damage is of a nature which, if Tenant
had elected to maintain fire and theft insurance with extended coverage and
business records endorsement available on a commercially reasonable basis, would
be a loss subject to settlement by the insurance carrier including but not
limited to, damage or losses caused by fire, electrical malfunctions, gas
explosion, and water damage
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of any type including, but not limited to, broken water lines, malfunction of
fire sprinkler system, roof leakage or stoppages of lines unless and except if
such loss is due to the gross negligence or willful misconduct of Landlord, its
agents or guests, Landlord's violation of law with respect to the Building, or a
material breach of Landlord's obligations or representations under this Lease.
Tenant further waives any claim for injury to Tenant's business or loss of
income relating to any such damage or destruction of personal property including
any loss of records.
20.3 Landlord shall not be liable for any damages arising from
any act, omission or neglect of any other tenant in the Building or Project or
of any other third party.
20.4 Security devices and services, if any, while intended to
deter crime may not in given instances prevent theft or other criminal acts and
it is agreed that Landlord shall not be liable for injuries or losses caused by
criminal acts of third parties and the risk that any security device or service
may malfunction or otherwise be circumvented by a criminal is assumed by Tenant.
Tenant shall at Tenant's cost obtain insurance coverage to the extent Tenant
desires protection against such criminal acts.
21. Insurance - Waiver of Subrogation
21.1 Landlord, as part of Operating Expenses shall carry
insurance upon the Building, in an amount equal to full replacement cost
(exclusive of the costs of excavation, foundations, and footings, and without
reference to depreciation taken by Landlord upon its books or tax returns)
providing protection against any peril generally included within the
classification "Fire and Extended Coverage" together with insurance against
sprinkler damage (if applicable), vandalism and malicious mischief. Landlord,
subject to availability and cost thereof and, as part of Operating Expenses (but
not to be deemed as being required of Landlord) shall further insure as Landlord
deems appropriate coverage against flood, environmental hazard and earthquake,
loss or failure of building equipment, rental loss during the period of repair
or rebuild, workmen's compensation insurance and fidelity bonds for employees
employed to perform services. Notwithstanding the foregoing, Landlord may, but
shall not be deemed required to, provide insurance as to any tenant improvements
whether or not installed by Tenant or which are in addition to the Standard
Improvements customarily furnished by Landlord without regard to whether or not
such are made a part of the Building.
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21.2 Landlord, as part of Operating Expenses, shall carry
public liability insurance with single limit of not less than One Million
Dollars ($1,000,000.00) for death or bodily injury, or property damage with
respect to the Project.
21.3 Tenant at its own cost shall procure and continue in
effect from the Term Commencement Date or the date of occupancy, whichever first
occurs, and continuing throughout the Term of this Lease (and occupancy by
Tenant, if any, after termination of this Lease) commercial general liability
insurance with a combined single limit of not less than Two Million Dollars
($2,000,000.00) per occurrence with respect to the Demised Premises.
21.4 The aforesaid insurance required of Tenant shall name
Landlord, without liability for premiums, as an additional named insured. Said
insurance shall be with companies having a rating of not less than policyholder
rating of A and financial category rating of at least Class XII in "Best's
Insurance Guide." Tenant shall obtain for Landlord from the insurance companies
or cause the insurance companies to furnish certificates of coverage to
Landlord. No such policy shall be cancellable or subject to reduction of
coverage or cancellation except after thirty (30) days' prior written notice to
Landlord from the insurer. All such policies shall be written as primary
policies, not contributing with and not in excess of the coverage which Landlord
may carry. Tenant's policy may be a "blanket policy" which specifically provides
that the amount of insurance shall not be prejudiced by other losses covered by
the policy. Tenant shall, at least twenty (20) days prior to the expiration of
such policies, furnish Landlord with renewals or binders. Tenant agrees that if
Tenant does not take out and maintain such insurance, Landlord may (but shall
not be required to) procure said insurance on Tenant's behalf and at its cost to
be paid as Additional Rent.
21.5 Tenant assumes the risk of damage to any fixtures, goods,
inventory, merchandise, equipment, and leasehold improvements, and Landlord
shall not be liable for injury to Tenant's business or any loss of income
therefrom relative to such damage, subject to the other provisions of this
Lease. Tenant at Tenant's cost shall carry such insurance as Tenant desires for
Tenant's protection with respect to personal property of Tenant or business
interruption.
21.6 In each instance where insurance is to name Landlord as
additional insured, Tenant shall upon written request of Landlord also designate
and furnish certificates so evidencing Landlord as additional insured to (i) any
lender of
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Landlord holding a security interest in the Building or the Land, and/or (ii)
the landlord under any lease wherein Landlord is tenant of the Land if the
interest of Landlord is or shall become that of a tenant under a ground lease
rather than that of a fee owner, and/or (iii) any management company retained by
Landlord to manage the Project.
21.7 Notwithstanding anything to the contrary in this Lease,
Landlord and Tenant each hereby waive any and all rights of recovery against the
other or against the officers, directors, employees, agents, and representatives
of the other, on account of loss or damage occasioned to such waiving party or
its property or the property of others under its control that is caused by or
results from a risk which is actually or required to have been insured against
under this Lease, without regard to the negligence or willful misconduct of the
entity so released. Such waivers shall continue as long as their respective
insurers so permit. Any termination of such a waiver shall be by written notice
of circumstances as hereinafter set forth. Landlord and Tenant upon obtaining
the policies of insurance required or permitted under this Lease shall give
notice to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease. If such policies shall not be obtainable
with such waiver or shall be so obtainable only at a premium over that
chargeable without such waiver, the party seeking such policy shall notify the
other thereof, and the latter shall have ten (10) days thereafter to either (i)
procure such insurance with companies reasonably satisfactory to the other party
or (ii) agree to pay such additional premium (in the Tenant's case, in the
proportion which the area of the Demised Premises bears to the insured area). If
neither (i) nor (ii ) are done, this Section 21.7 shall have no effect during
such time as such policies shall not be obtainable or the party in whose favor a
waiver of subrogation is desired refuses to pay the additional premium. If such
policies shall at any time be unobtainable, but shall be subsequently
obtainable, neither party shall be subsequently liable for a failure to obtain
such insurance until a reasonable time after notification thereof by the other
party. If the release of either Landlord or Tenant, as set forth in the first
sentence of this Section 21.7 shall contravene any law with respect to
exculpatory agreements, the liability of the party in question shall be deemed
not released but shall be secondary to the other's insurer.
21.8 Landlord may require insurance policy limits to be raised
to conform with requirements of Landlord's lender and/or to bring coverage
limits to levels then being required of new tenants within the Project.
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22. Damage or Destruction
22.1 In the event of a partial or total destruction of the
Building wherein the Demised Premises are located by fire or other perils
covered by extended coverage insurance required to be carried under Section 21
hereof or earthquake insurance actually carried hereunder, and if the damage
thereto is such that, in Landlord's reasonable judgment, the Building may be
repaired, reconstructed or restored within a period of six (6) months from the
date of the happening of such casualty and Landlord will receive insurance
proceeds sufficient to cover the cost of such repairs (except for any deductible
amount provided by Landlord's policy), provided that insurance proceeds are
actually available therefor. Landlord shall commence and proceed diligently with
the work of repair, reconstruction and restoration and this Lease shall
continue in full force and effect. If in Landlord's reasonable opinion the
Building cannot be repaired, reconstructed or restored within a period of six
(6) months from the date of such casualty, Tenant shall have the right to
terminate the Lease as of the date of destruction. Tenant shall give written
notice to Landlord of it's election to either terminate, or to continue in full
force and effect the Lease within fourteen (14) days of the date of Landlord's
notification to Tenant to restore the Building.
22.2 In the event of any damage to or destruction of the
Building wherein the Demised Premises are located, other than as provided in
Section 22.1, Landlord may elect, in its sole discretion, not to repair the
Building in which event this Lease shall terminate as of the date of
destruction. Landlord shall give written notice to Tenant of its election not to
repair, reconstruct or restore the Building or Project within the thirty (30)
day period following the date of damage or destruction. If Landlord elects to
repair, reconstruct and restore the Building, within thirty (30) days of the
date of destruction, Landlord shall provide Tenant in writing with Landlord's
reasonable time estimate for completion of repair and restoration of the
Building. If in Landlord's reasonable opinion the Building cannot be repaired,
reconstructed or restored within a period of six (6) months from the date of
such casualty, Tenant shall have the right to terminate the Lease as of the date
of destruction. Tenant shall give written notice to Landlord of it's election to
either terminate, or to continue in full force and effect the Lease within
fourteen (14) days of the date of Landlord's notification to Tenant to restore
the Building.
22.3 Upon any termination of this Lease under any of the
provisions of this Article, the parties shall be released thereby without
further obligation
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to the other from the date possession of the Demised Premises is surrendered to
the Landlord except for items which have theretofore occurred.
22.4 In the event of repair, reconstruction and restoration as
herein provided, Rent shall be abated proportionately based on the extent to
which Tenant's use of the Demised Premises is impaired during the period of such
repair, reconstruction or restoration, unless Landlord provides Tenant with
other space during the period of repair, which in Tenant's reasonable opinion is
suitable for the temporary conduct of Tenant's business.
22.5 Notwithstanding anything to the contrary contained in
this Article, should Landlord be delayed or prevented from completing the repair
or restoration of the damage to the Demised Premises after the occurrence of
such damage or destruction by reason of acts of God or war, governmental
restrictions, inability to procure the necessary labor or materials, strikes, or
other uses beyond the control of Landlord, the time for Landlord to commence or
complete repairs shall be extended, provided that, upon the written election of
Landlord, Landlord shall be relieved of its obligation to make such repairs or
restoration and Tenant shall be released from its obligation under this Lease as
of the end of eight (8) months from date of destruction, if repairs required to
provide Tenant use of the Demised Premises are not then substantially complete.
22.6 If Landlord is obligated to or elects to repair or
restore as herein provided, Landlord shall be obligated to restore to a
condition substantially the same or better than which existed prior to the
casualty of the Demised Premises which were originally provided at Landlord's
expense; the repair and restoration of items not provided at Landlord's expense
shall be the obligation of Tenant. In the event Tenant elected to upgrade
certain improvements, at Tenant's sole cost, from the standard normally provided
by Landlord, Landlord shall upon the need for replacement due to an insured
loss, provide only the standard Landlord improvements unless Tenant shall elect
to again upgrade and pay any additional cost of such upgrades, except to such
extent as insurance proceeds which, if received, the excess proceeds are
adequate to provide such upgrades, in addition to providing for basic
reconstruction and standard improvements and all Leasehold Improvements
installed by Landlord to the condition in which they existed immediately prior
to the casualty.
22.7 Notwithstanding anything to the contrary contained in
this Article: (a) Landlord shall not have any obligation whatsoever to repair,
recon-
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struct or restore the Demised Premises to the extent that insurance proceeds are
not actually available therefor or when the damage resulting from any casualty
covered under this Article occurs during the last twelve (12) months of the Term
of this Lease or any extension hereof unless Tenant exercised within thirty (30)
days of the damage, its rights to extend the Term of the lease as provided in
Section 45 below; and (b) Tenant shall have the right to terminate this Lease
when the damage resulting from any casualty covered under this Article occurs
during the last twelve (12) months of the Term of this Lease or any extension
hereof (provided that Tenant delivers written notice of its election to
terminate within fourteen (14) days of the date on which Tenant is notified of
such damage). Notwithstanding anything to the contrary in this Lease, in the
event of damage to the Demised Premises which is not fully covered by insurance
actually carried, Landlord shall not have the right to terminate this Lease (i)
if the damage is relatively minor (e.g., repair or restoration would cost less
than five percent (5%) of the replacement cost of the Building), or (ii) if
Landlord determines to rebuild the Building.
23. Eminent Domain
23.1 In the event the whole of the Demised Premises, or such
part thereof as shall materially and substantially interfere with the Tenant's
use, occupancy and enjoyment thereof, shall be taken for any public or
quasi-public purpose by any lawful power or authority by exercise of the right
of appropriation, condemnation or eminent domain, or sold to prevent such
taking, Tenant or Landlord may upon at least thirty (30) days prior written
notice to the other party, terminate this Lease effective as of the date
possession is required to be surrendered to said authority.
23.2 In the event of a partial taking of the Building, the
Project or of drives, walkways, and parking areas serving the Building for any
public or quasi-public purpose by any lawful power or authority by exercise of
right of appropriation, condemnation, or eminent domain, or sold to prevent
such taking, then without regard as to whether any portion of the Demised
Premises occupied by Tenant was so taken, Landlord may elect to terminate this
Lease as of such taking if such taking is, in the sole opinion of Landlord, of a
material nature such as to make it uneconomical to continue use of the
unappropriated portion for purposes of office rentals or laboratory space.
Tenant may elect to terminate this Lease provided such taking materially and
substantially diminishes Tenant's use, occupancy and enjoyment of the Demised
Premises. In no event shall this Lease be terminated when such a partial taking
does not have a material adverse effect upon Landlord or Tenant or both.
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23.3 Tenant shall be entitled to any award which is
specifically awarded as compensation for the taking of Tenant's personal
property, which was installed at Tenant's expense, for costs of Tenant moving to
a new location, the Lease bonus value (the difference between the Rent and fair
market rent, if the Rent is lower than the fair market rent) and Tenant's trade
fixtures. Except as before set forth, any award for such taking shall belong to
Landlord.
23.4 If upon any taking of the nature described in this
Article 23 this Lease continues in effect, the Landlord shall promptly proceed
to restore the Demised Premises, Building, and Project to substantially their
same condition prior to such partial taking. From and after the date of such
taking, the Rent shall be abated proportionately based upon the extent to which
Tenant's use of the Demised Premises has diminished.
24. Defaults and Remedies
24.1 Late payment by Tenant to Landlord of Rent and other sums
due will cause Landlord to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult and impracticable to ascertain. Such
costs include, but are not limited to, processing and accounting charges and
late charges which may be imposed on Landlord by the terms of any mortgage or
trust deed covering the Demised Premises. Therefore, if any installment of Rent
due from Tenant is not received by Landlord within five (5) days after the date
such payment is due, Tenant shall pay to Landlord an additional sum of five
percent (5%) of the overdue rent as a late charge. The parties agree that this
late charge represents a fair and reasonable estimate of the costs that Landlord
will incur by reason of late payment by Tenant. In addition to the late charge,
Rent not paid when due shall bear interest from the 5th day after date due until
paid at the lesser of (i) ten percent (10%) per annum or (ii) the maximum rate
permitted by law. Notwithstanding the foregoing but without limitation upon
Landlord's ability to declare Tenant in default for any non-payment or late
payment of Rent, Landlord shall not impose any late charge or interest on
account of Tenant's failure to pay any sum due to Landlord under this Lease,
unless Tenant's failure to pay continues for five (5) days after Tenant's actual
receipt of written notice of delinquency from Landlord.
24.2 No payment by Tenant or receipt by Landlord of a lesser
amount than the rent payment herein stipulated shall be deemed to be other than
on account of the rent, nor shall any endorsement or statement on any check or
any
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letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
provided. If at any time a dispute shall arise as to any amount or sum of money
to be paid by Tenant to Landlord, Tenant shall have the right to make payment
"under protest" and such payment shall not be regarded as a voluntary payment,
and there shall survive the right on the part of Tenant to institute suit for
recovery of the payment paid under protest.
24.3 If Tenant fails to pay any sum of money (other than Basic
Annual Rent or Rental Adjustments) required to be paid by it hereunder, or shall
fail to perform any other act on its part to be performed hereunder, Landlord
may, without waiving or releasing Tenant from any obligations of Tenant, but
shall not be obligated to, make such payment or perform such act; provided, that
such failure by Tenant continues beyond the applicable cure period set forth
below. All sums so paid or incurred by Landlord, together with interest thereon,
from the date such sums were paid or incurred, at the annual rate equal to ten
percent (10%) per annum or highest rate permitted by law, whichever is less,
shall be payable to Landlord on demand as Additional Rent.
24.4 The occurrence of any one or more of the following events
shall constitute a "Default" hereunder by Tenant:
(a) The abandonment of the Demised Premises by Tenant;
(b) The failure by Tenant to make any payment of Rent, as
and when due where such failure shall continue for a period of five (5) days
thereafter;
(c) The failure by Tenant to observe or perform any
obligation or covenant contained herein (other than described in Section 24.4(a)
and 24.4(b)) to be performed by Tenant, where such failure shall continue for a
period of fifteen (15) days after written notice thereof from Landlord to
Tenant. Such notice shall be in lieu of, and not in addition to, any notice
required under California Code or Civil Procedure Section 1161; provided that
if the nature of Tenant's default is such that it reasonably requires more than
fifteen (15) days to cure, then Tenant shall not be deemed to be in default if
Tenant shall commence such cure within said fifteen (15) day period and
thereafter diligently prosecute the same to
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completion provided, however, that such cure is completed no later than ninety
(90) days from the date of written notice;
(d) Tenant makes an assignment for the benefit of
creditors;
(e) A receiver, trustee or custodian is appointed to, or
does, take title, possession or control of all, or substantially all, of
Tenant's assets and is not removed within sixty (60) days;
(f) Tenant files a voluntary petition under the
Bankruptcy Code (or any similar law) or an order for relief is entered against
Tenant pursuant to a voluntary or involuntary proceeding commenced under any
chapter of the Bankruptcy Code;
(g) Any involuntary petition is filed against the Tenant
under any chapter of the Bankruptcy Code and is not dismissed within one hundred
twenty (120) days; or
(h) Tenant's interest in this Lease is attached, executed
upon, or otherwise judicially seized and such action is not released within one
hundred twenty (120) days of the action.
Notices required to be given under this Section shall
specify the alleged default and shall demand that Tenant perform the provisions
of this Lease or pay the Rent that is in arrears, as the case may be, within the
applicable period of time, or quit the Demised Premises. No such notice shall be
deemed a forfeiture or a termination of this Lease unless Landlord elects
otherwise in such notice. Tenant shall not be in default of this Lease solely
because (a) it vacates the Demised Premises (provided Tenant's obligations under
the Lease, including the obligation to pay Rent, are kept current), or (b) as a
consequence of the appointment of a receiver or the exercise by any third party
of any other remedy with respect to Tenant, Tenant's interest in this Lease or
Tenant's other assets, unless the petition, receiver, attachment or other remedy
is not discharged within sixty (60) days.
24.5 In the event of a Default by Tenant, and at any time
thereafter, with or without notice or demand and without limiting Landlord in
the exercise of any right or remedy which Landlord may have, Landlord shall be
entitled to
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terminate Tenant's right to possession of the Demised Premises by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. In such event, Landlord shall
have the immediate right to re-enter and remove all persons and property in
accordance with applicable law, and such property may be removed and stored in a
public warehouse or elsewhere at the cost of, and for the account of Tenant, all
without being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby. In the event that Landlord shall elect
to so terminate this Lease, then Landlord shall be entitled to recover from
Tenant all damages incurred by Landlord by reason of Tenant's default,
including:
(a) The worth at the time of award of any unpaid Rent
which had been earned at the time of such termination; plus
(b) The worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until the time of
award exceeds that portion of such rental loss which Tenant proves could have
been reasonably avoided; plus
(c) The worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award exceeds the
amount of such rental loss which Tenant proves could have been reasonably
avoided; plus
(d) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligation under this Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, the cost of restoring
the Premises to the condition required under the terms of this Lease; plus
(e) At the Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time by
applicable law.
As used in Subsections (a) and (b) above, "worth at the
time of award" shall be computed by allowing interest at the rate specified in
Section 24.1. As used in Subsection (c) above, the "worth at the time of the
award" shall be computed by taking the present value of such amount, by using
the discount rate
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of the Federal Reserve Bank of San Francisco at the time of the award plus one
(1) percentage point.
24.6 If Landlord does not elect to terminate this Lease as
provided in this Section, then Landlord may, from time to time, recover all Rent
as it becomes due under this Lease. At any time thereafter, Landlord may elect
to terminate this Lease and to recover damage to which Landlord is entitled.
24.7 In the event Landlord elects to terminate this Lease and
relet the Premises, it may execute any new lease in its own name. Tenant
hereunder shall have no right or authority whatsoever to collect any Rent from
such tenant. The proceeds of any such reletting shall be applied as follows:
First, to the payment of any indebtedness other than Rent
due hereunder from Tenant to Landlord, including, but not limited to, storage
charges or brokerage commissions owing from Tenant to Landlord as the result of
such reletting;
Second, to the payment of the costs and expenses of
reletting the Premises, including alterations and repairs which Landlord deems
reasonably necessary and advisable and reasonable attorneys' fees incurred by
Landlord in connection with the retaking of the Premises and such reletting;
Third, to the payment of rent and other charges due and
unpaid hereunder; and
Fourth, to the payment of future rent and other damages
payable by Tenant under this Lease.
24.8 All rights, options, and remedies of Landlord contained
in this Lease shall be construed and held to be nonexclusive and cumulative.
Landlord shall have the right to pursue any one or all of such remedies or any
other remedy or relief which may be provided by law, whether or not stated in
this Lease. No waiver of any default of Tenant hereunder shall be implied from
any acceptance by Landlord of any Rent or other payments due hereunder or any
omission by Landlord to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect defaults
other than as specified in said waiver.
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24.9 Termination of this Lease or Tenant's right to possession
by Landlord shall not relieve Tenant from any liability to Landlord which has
theretofore accrued or shall arise based upon events which occurred prior to
the last to occur of (i) the date of Lease termination or (ii) the date
possession of Demised Premises is surrendered.
24.10 Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event shall such failure to continue be for more than thirty (30) days after
written notice by Tenant specifying wherein Landlord has failed to perform such
obligation; provided, however, that if the nature of Landlord's obligation is
such that more than thirty (30) days are required for performance, then Landlord
shall not be in default if Landlord commences performance within such thirty
(30) day period and thereafter diligently prosecutes the same to completion. In
the event Landlord fails to perform any of its obligations under this Lease and
(except in case of emergency posing an immediate threat to persons or property,
in which case no prior notice shall be required) fails to cure such default
within the period set forth in the preceding sentence, then Tenant may, in
addition to Tenant's other rights at law and equity cure any default of Landlord
at Landlord's cost and demand reimbursement by Landlord of the cost of such
cure, with interest thereon at the rate of ten percent (10%) per annum or the
highest rate allowed by law, whichever is less, from the date of the expenditure
until repaid.
24.11 In the event of any failure to perform obligations on
the part of Landlord, Tenant will give notice by registered or certified mail to
any beneficiary of a deed of trust or mortgagee or a mortgage covering the
Building and to any landlord of any lease in which building is located whose
address shall have been furnished and shall offer such beneficiary, mortgagee
and/or landlord a reasonable opportunity to cure the default (not to exceed
sixty (60) days), provided the Landlord shall have furnished to Tenant in
writing the names and addresses of all such persons who are to receive such
notices.
25. Assignment or Subletting
25.1 Except as hereinafter provided, Tenant shall not, either
voluntarily or by operation of law, directly or indirectly, sell, hypothecate,
assign, pledge, encumber or otherwise transfer this Lease, or sublet the Demised
Premises or any part hereof, or permit or suffer the Demises Premises or any
part thereof to be used or occupied as work space, storage space, mailing
privileges, concession or otherwise by
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anyone other than Tenant or Tenant's employees, without the prior written
consent of Landlord in each instance, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, Tenant may, without Landlord's consent,
sublease up to twenty five percent (25%) of the Demised Premises to (or permit
or suffer up to twenty five percent (25%) of the Demised Premises to be used or
occupied as work space, storage space, mailing privileges, concession or
otherwise by) any of Tenant's partners or in connection with any strategic
business alliance made by Tenant.
25.2 If Tenant is a corporation, the shares of which are not
actively traded upon a stock exchange or in the over-the-counter market, a
transfer or series of transfers whereby twenty-five percent (25%) or more of the
issued and outstanding shares of such corporation are or the voting control is
transferred (but excepting transfers upon deaths of individual shareholders)
from a person or persons or entity or entities which were owners thereof at time
of execution of this Lease to persons or entities who were not owners of shares
of the corporation at time of execution of this Lease shall be deemed an
assignment of this Lease requiring the consent of Landlord as provided in
Section 25.1 above.
25.3 If Tenant desires to assign this Lease to any entity into
which Tenant is merged, with which Tenant is consolidated, or which acquires all
or substantially all of the assets of Tenant, provided that the assignee first
executes, acknowledge and delivers to Landlord an agreement whereby the assignee
agrees to be bound by all of the covenants and agreements in this Lease and that
the assignee shall have a net worth (determined in accordance with generally
accepted accounting principles consistently applied) immediately after such
assignment which is at least equal to the net worth (as so determined by
Landlord) of Tenant immediately prior to the assignment (or as of the date
hereof, if greater), then (i) Landlord, upon receipt of proof of the foregoing,
will consent to the assignment and (ii) the provisions of Sections 25.6 (a), (b)
and (d) shall not apply to such assignment.
25.4 In the event Tenant desires to assign, sublease,
hypothecate or otherwise transfer this Lease or sublet the Demised Premises,
then at least thirty (30) days prior to the date when Tenant desires the
assignment or sublease to be effective (the "Assignment Date"), Tenant shall
give Landlord a notice ("the Assignment Notice") containing information
(including references) concerning the character of the proposed assignee or
sublessee, the Assignment Date, any ownership or commercial relationship
between Tenant and the proposed assignee or sublessee, and the consideration and
all other material terms and conditions of the proposed assignment or sublease,
all in such detail as Landlord shall reasonably
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require. Tenant shall also tender to Landlord, reasonable attorneys' fees,
actually incurred by Landlord, not to exceed five hundred dollars ($500) in
reviewing Tenants request for such assignment.
25.5 Landlord in making its determination as to whether
consent should be given to a proposed assignment or sublease, may give
consideration to the financial strength of such successor (notwithstanding the
assignor remaining liable for Tenant's performance), any change in use which
such successor proposes to make in use of Demised Premises, and such other
factors as Landlord, in its sole discretion, may consider. In no event shall
Landlord be deemed to be unreasonable for declining to consent to transfer to a
successor of poor reputation, lacking financial qualifications, or seeking
change in use.
25.6 As conditions precedent to Landlord considering a request
by Tenant to Tenant's transfer of rights or sharing of the Premises, Landlord
may require, without limitation, any or all of the following:
(a) Tenant shall remain fully liable under this Lease
during the unexpired Term hereof;
(b) Tenant shall provide Landlord with evidence
reasonably satisfactory to Landlord respecting the relevant business experience
and financial responsibility and status of the third party concerned;
(c) Tenant shall reimburse Landlord for Landlord's
reasonable attorneys' fees incurred in connection with the review, processing
and documentation of such request, not to exceed five hundred dollars ($500);
(d) If Tenant's transfer of rights or sharing of the
Premises provides for the receipt by, on behalf or on account of Tenant of any
consideration of any kind whatsoever (including, but not by way of limitation,
a premium rental for a sublease or lump sum payment for an assignment) in excess
of the rental and other charges due Landlord under this Lease, Tenant shall pay
fifty percent (50%) of any rent paid by the assignee or sublessee in excess of
Rent payable by Tenant under this Lease, after deducting therefrom the actual
out of pocket costs to Tenant to effectuate the assignment or sublease,
including, without limitation, the unamortized costs of any alterations
installed in the Demised Premises at Tenant's expense, and any attorneys' fees,
brokerage or leasing commissions, redecorating and remodeling costs in
connection with such proposed assign-
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ment or subletting; provided, however, that Tenant shall not be required to make
such payment to Landlord in the event of any merger involving Tenant so long as
the assumption of this Lease is not the primary purpose of such merger. If said
consideration consists of cash paid to Tenant, said payment to Landlord shall be
made upon receipt by Tenant of said cash payment;
(e) Written agreement from any third party concerned that
in the event Landlord gives such third party notice that Tenant is in default
under this Lease, such third party shall thereafter make all payments otherwise
due Tenant directly to Landlord, which payments will be received by Landlord
without any liability on Landlord except to credit such payment against those
due under the Lease, and any such third party shall agree to attorn to Landlord
or its successors and assigns should this Lease be terminated for any reason;
provided, however that in no event shall Landlord or its successors or assigns
be obligated to accept such attornment;
(f) Any such transfer and consent shall be effected on
forms reasonably approved by Landlord as to form and substance;
(g) Tenant shall not then be in Default hereunder in any
respect;
(h) Such third party's proposed use of the Premises shall
be the same as Tenant's permitted use;
(i) Landlord shall not be bound by any provision of any
agreement pertaining to Tenant's transfer of rights or sharing of the Premises;
(j) Tenant shall deliver to Landlord one executed copy of
any and all written instruments evidencing or relating to Tenant's transfer of
rights or sharing of the Premises; and
(k) A list of Hazardous Material (as defined in Section
41.6 below), certified by the proposed sublessee to be true and correct, which
the proposed sublessee intends to use or store in the Demised Premises.
Additionally, Tenant shall deliver to Landlord, on or before the date any
proposed sublessee takes occupancy of the Demised Premises, all of the items
relating to Hazardous Material of such proposed sublessee as described in
Section 41.2 below.
25.7 Any sale, assignment, hypothecation or transfer of this
Lease or subletting of the Demised Premises that is not in compliance with the
provisions
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of this Article 25 shall be void and shall, at the option of Landlord, terminate
this Lease, pursuant to Article 24 hereof.
25.8 The consent by Landlord to an assignment or subletting
shall not relieve Tenant or any assignees of this Lease or sublessee of the
Demised Premises from obtaining the consent of Landlord to any further
assignment or subletting nor shall it release Tenant or any assignee or
sublessee of Tenant from full and primary liability under the Lease.
25.9 Notwithstanding any subletting or assignment, Tenant
shall remain fully and primarily liable for the payment of all Rent and other
sums due, or to become due hereunder, and for the full performance of all other
terms, condi tions, and covenants to be kept and performed by Tenant. The
acceptance of Rent or any other sum due hereunder, or the acceptance of
performance of any other term, covenant, or condition thereof, from any other
person or entity shall not be deemed to be a waiver of any of the provisions of
this Lease or a consent to any subletting, assignment or other transfer of the
Demised Premises.
25.10 If Tenant shall sublet the Demised Premises or any part,
Tenant hereby immediately and irrevocably assigns to Landlord, as security for
Tenant's obligations under this Lease, all rent from any subletting of all or a
part of the Demised Premises and Landlord as assignee for Tenant, or a receiver
for Tenant appointed on Landlord's application, may collect such rent and apply
it toward Tenant's obligations under this Lease; except that, until the
occurrence of an act of default by Tenant, Tenant shall have the right to
collect such rent.
26. Attorneys' Fees
26.1 If either party commences an action against the other
party arising out of or in connection with this Lease, the prevailing party
shall be entitled to have and recover from the non-prevailing party reasonable
attorneys' fees and costs of suit. "Prevailing party" shall include a party who
dismisses an action for recovery hereunder in exchange for sums allegedly due,
performance of covenants allegedly breached or consideration substantially equal
to the relief sought in the action.
27. Bankruptcy
27.1 In the event a debtor, trustee, or debtor in possession
under the Bankruptcy Code, or other person with similar rights, duties and
powers under any
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other law, proposes to cure any default under this Lease or to assume or assign
this Lease, and is obliged to provide adequate assurance to Landlord that (i) a
default will be cured, (ii) Landlord will be compensated for its damages arising
from any breach of this Lease, or (iii) future performance under this Lease will
occur, then adequate assurance shall include any or all of the following, as
designated by Landlord:
(a) Those acts specified in the Bankruptcy Code or other
law as included within the meaning of adequate assurance, even if this Lease
does not concern a shopping center or other facility described in such laws;
(b) A prompt cash payment to compensate Landlord for any
monetary defaults or actual damages arising directly from a breach of this
Lease;
(c) A cash deposit in an amount at least equal to the
Security Deposit as referenced in 2.1.8 originally required at time of execution
of this Lease.
28. Definition of Landlord
28.1 The term "Landlord" as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be limited
to mean and include only Landlord or the successor-in-interest of Landlord under
this Lease at the time in question. In the event of any transfer, assignment or
the conveyance of Landlord's title or leasehold, the Landlord herein named (and
in case of any subsequent transfers or conveyances, the then grantor) shall be
freed and relieved from, and after the date of such transfer, assignment or
conveyance, of all liability for the performance of any covenants or obligations
contained in this Lease (including, without limitation, any obligations or
liability related to the security deposit) arising after the date of such
transfer, assignment or conveyance, provided that such transferee assumes in
writing the obligations of Landlord under this Lease. Landlord may transfer its
interest in the Demised Premises or this Lease without the consent of Tenant and
such transfer or subsequent transfer shall not be deemed a violation on the part
of Landlord or the then grantor of any of the terms or conditions of this Lease.
29. Estoppel Certificate
29.1 Tenant and Landlord shall within ten (10) days of written
notice from Landlord or Tenant, execute, acknowledge and deliver a statement in
writing substantially in the form attached to this Lease as Exhibit "F" (as
appropriately
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modified in the case of a statement by Landlord) with the blanks filled in, and
on any other form reasonably requested by a proposed lender or purchaser, (i)
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified is in full force and effect) and the dates to which the rental
and other charges are paid in advanced, if any, (ii) acknowledging that there
are not, to Landlord's or Tenant's knowledge, any uncured defaults on the part
of the other hereunder, or specifying such defaults if any are claimed and (iii)
setting forth such further information with respect to this Lease or the Demised
Premises as may be requested thereon. Any such statement may be relied upon by
any prospective purchaser or encumbrancer of all or any portion of the real
property of which the Demised Premises are a part. Tenant's or Landlord's
failure to deliver such statement within such time shall, at the option of the
requesting party, constitute a default under this Lease, and, in any event,
shall be conclusive upon such party that the Lease is in full force and effect
and without modification except as may be represented by the requesting party in
any certificate prepared by the requesting party and delivered to the other
party for execution.
30. Joint and Several Obligations
30.1 If more than one person or entity executes this Lease as
Tenant,
(a) Each of them is jointly and severally liable for the
keeping, observing and performing of all of the terms, covenants, conditions,
provisions and agreements of this Lease to be kept, observed and performed by
Tenant, and
(b) The term "Tenant" as used in this Lease shall mean
and include each of them jointly and severally. The act of, notice from, notice
to, refund to, or the signature of, any one or more of them, with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted, so given or received such
notice or refund or so signed.
31. Limitation of Landlord's Liability
31.1 If Landlord is in default of this Lease, and as a
consequence, Tenant recovers a money judgment against Landlord, the judgment
shall be satisfied only out of the proceeds of sale received on execution of the
judgment and levy
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against the right, title and interest of Landlord in the Building and Project of
which the Demises Premises are a part, and out of rent or other income from such
real property receivable by Landlord or out of the consideration received by
Landlord from the sale, financing, refinancing, or other disposition of all or
any part of Landlord's right, title, and interest in the Building and Project of
which the Demised Premises are a part.
31.2 Landlord shall not be personally liable for any
deficiency. If Landlord is a partnership, joint venture or limited liability
company, the partners or members of such entity shall not be personally liable
and no partner or member of Landlord shall be sued or named as a party in any
suit or action or service of process be made against any partner or member of
Landlord except as may be necessary to secure jurisdiction of the partnership,
joint venture or limited liability company. If Landlord is a corporation, the
shareholders, directors, officers, employees, and/or agents of such corporation
shall not be personally liable and no shareholder, director, officer, employee
or agent of Landlord shall be sued or named as a party in any suit or action or
service of process made against any shareholder, director, officer, employee or
agent of Landlord. No partner, member, shareholder, director, em ployee, or
agent of Landlord shall be required to answer or otherwise plead to any service
of process and no judgment will be taken or writ of execution levied against any
partner, member, shareholder, director, employee or agent of Landlord.
31.3 Each of the covenants and agreements of this Article 31
shall be applicable to any covenant or agreement either expressly contained in
this Lease or imposed by statute or by common law and shall survive the
termination of this Lease. The provisions of this Article 31 shall not apply,
however, to any losses, costs, claims or damages arising from or relating to the
failure of a successor or assignee of Landlord to assume liability for the
obligations of Landlord which accrued prior to the date of an assignment or
other transfer of Landlord's interest in the Demised Premises.
32. Project Control by Landlord
32.1 Subject to Article 15 hereof, Landlord reserves full
control over the Building and Project to the extent not inconsistent with
Tenant's enjoyment of the Demised Premises. This reservation includes but is not
limited to right of Landlord to subdivide the Project, convert the Building and
or other buildings within the Project to condominium units, the right to grant
easements and licenses to others and the right to maintain or establish
ownership of Building separate from fee title to land.
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32.2 Tenant shall, should Landlord so request, promptly join
with Landlord in execution of such documents as may be reasonably appropriate to
assist Landlord to implement any such action provided Tenant need not execute
any document which is of nature wherein liability is created in Tenant or if by
reason of the terms of such document, Tenant will be deprived of the quiet
enjoyment and use of the Demised Premises as granted by this Lease, or Tenant's
use of the Demised Premises or Tenant's parking rights will be materially
diminished.
33. Quiet Enjoyment
33.1 So long as Tenant is not in Default, Landlord covenants
that Landlord or anyone acting through or under Landlord will not disturb
Tenant's occupancy of the Demised Premises except as permitted by the
provisions of this Lease.
34. Quitclaim Deed
34.1 Tenant shall execute and deliver to Landlord on the
expiration or termination of this Lease, immediately on Landlord's request, in
recordable form, a quitclaim deed to the Demised Premises or such other
documentation reasonably requested by Landlord evidencing termination of this
Lease.
35. Rules and Regulations
35.1 Subject to Article 15 hereof, Tenant shall faithfully
observe and comply with the Rules and Regulations attached hereto as Exhibit "D"
and all reasonable and nondiscriminatory modifications thereof and additions
thereto from time to time put into effect by Landlord. Landlord shall not be
responsible to Tenant for the violation or non-performance by any other tenant
or any agent, employee or invitee thereof of any of said Rules and Regulations.
36. Subordination and Attornment
36.1 This Lease shall be subject and subordinate to the lien
of any mortgage, deed of trust, or lease in which Landlord is tenant now or
hereafter in force against the Project and Building of which the Demised
Premises are a part, and to all advances made or hereafter to be made upon the
security thereof without the necessity of the execution and delivery of any
further instruments on the part of Tenant to effectuate such subordination,
provided that as a condition to such
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subordination, the applicable lender or landlord agrees, so long as no Default
exists, not to disturb Tenant and recognize Tenant as the tenant under this
Lease in the event of any foreclosure of the applicable loan or termination of
the applicable lease (the "Non-Disturbance Condition").
36.2 Notwithstanding the foregoing, Tenant shall execute and
deliver upon ten (10) days written notice such further instrument or instruments
evidencing such subordination and non-disturbance of this Lease to the lien of
any such mortgage or mortgages or deeds of trust or lease in which Landlord is
tenant as may be required by Landlord. However (subject to the Non-Disturbance
Condition), if any such mortgagee, beneficiary or Landlord under lease wherein
Landlord is tenant so elects, this Lease shall be deemed prior in lien to any
such lease, mortgage, or deed of trust upon or including the Demised Premises
regardless of date and Tenant will execute a statement in writing to such effect
at Landlord's request.
36.3 In the event any proceedings are brought for foreclosure,
or in the event of the exercise of the power of sale under any mortgage or deed
of trust made by the Landlord covering the Demised Premises, the Tenant shall at
the election of the purchaser at such foreclosure or sale attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as the
Landlord under this Lease, so long as such purchaser executes a written
recognition agreement in form reasonably satisfactory to Landlord and Tenant
providing that, so long as Tenant is not in Default hereunder, Tenant's rights
of occupancy shall not be disturbed and Tenant shall receive all of the rights
and services provided for under this Lease. Notwithstanding anything to the
contrary in this Article 36, Landlord shall exercise reasonable efforts, prior
to the date the Parties execute this Lease, to obtain from any lenders or ground
lessors of the Project a written agreement in form reasonably satisfactory to
Landlord and Tenant providing for recognition of Tenant's interests under this
Lease in the event of a foreclosure of the lender's security interest or
termination of the ground lease. Further, as a condition to Tenant's obligation
to subordinate its leasehold interest to a ground lease or instrument of
security, Landlord shall obtain from any such ground lessors or lenders a
written recognition agreement in form reasonably satisfactory to Landlord,
Tenant and such lender or ground-lessor providing that Tenant's rights of
occupancy shall not be disturbed in the event of a termination of the ground
lease or a foreclosure of the loan, and that in the event of such termination or
foreclosure, so long as Tenant is not in Default hereunder, Tenant shall receive
all of the rights and services provided for under this Lease.
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37. Surrender
37.1 No surrender of possession of any part of the Demised
Premises shall release Tenant from any of its obligations hereunder unless
accepted by Landlord.
37.2 The voluntary or other surrender of this Lease by Tenant
shall not work a merger, unless Landlord consents and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies.
37.3 The voluntary or other surrender of any ground or
underlying lease that now exists or may hereafter be executed affecting the
Building or Project, or a mutual cancellation, thereof, or of Landlord's
interest therein, shall not work a merger and shall, at the option of the
successor of Landlord's interest in the Building or Project, operate as an
assignment of this Lease.
38. Waiver and Modification
38.1 No provision of this Lease may be modified, amended or
added to except by an agreement in writing. The waiver by Landlord or Tenant of
any breach of any term, covenant or condition herein contained shall not be
deemed to be a waiver of any subsequent breach of the same or any other term,
covenant or condition herein contained.
39. Waiver of Jury Trial and Counterclaims
39.1 The parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising out of or in
any way connected with this Lease, the relationship of Landlord and Tenant,
Tenant's use or occupancy of the Demised Premises, and or any claim of injury or
damage.
40. [INTENTIONALLY OMITTED]
41. Hazardous Materials
41.1 Prohibition/Compliance. Tenant shall not cause any
Hazardous Material (as hereinafter defined) to be brought upon, kept or used in
or about the Demised Premises or the Project in violation of applicable law by
Tenant, its agents, employees, contractors or invitees. If Tenant breaches the
obligation stated
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in the preceding sentence, or if Tenant's acts or omissions results in
contamination of the Demised Premises, the Building, the Project or any adjacent
Property or if contamination of the Demised Premises, the Building, the Project
or any adjacent Property by Hazardous Material otherwise occurs during the Term
of this Lease or any extension or renewal hereof or holding over hereunder, by
reason of Tenant's acts or omissions, then Tenant shall indemnify, defend and
hold Landlord, its agents and contractors harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities, or losses (including
without limitation diminution in value of the Demised Premises or any portion of
the Project, damages for the loss or restriction on use of rentable or usable
space or of any amenity of the Demised Premises or Project, damages arising
from any adverse impact on marketing of space in the Demised Premises or the
Project, and sums paid in settlement of claims, attorneys' fees, consultant fees
and expert fees) which arise during or after the Lease Term as a result of such
contamination. This indemnification of Landlord by Tenant includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal, or restoration work required by
any federal, state or local governmental agency or political subdivision because
of Hazardous Material present in the air, soil or ground water above on or under
the Demised Premises. Without limiting the foregoing, if the presence of any
Hazardous Material on the Demised Premises, the Building, the Project or any
adjacent Property, caused by Tenant results in any contamination of the Demised
Premises, the Building, the Project or any adjacent Property, Tenant shall
promptly take all actions at its sole expense as are necessary to return the
Demised Premises, the Building, the Project or any adjacent Property, as close
as reasonably possible to the condition existing prior to the time of such
contamination and to satisfy all applicable legal regulations and requirements,
provided that Landlord's approval of such action shall first be obtained, which
approval shall not unreasonably be withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Demised Premises, the Building or the Project. To the best knowledge of
Landlord, except as disclosed to Tenant in those certain reports identified on
Exhibit "G" attached hereto, (i) no Hazardous Materials are present on the soil,
surface water or groundwater thereof, (ii) no underground storage tanks or
asbestos containing building materials are present on the Project, and (iii) no
action, proceeding, or claim is pending or threatened concerning the Project
concerning any Hazardous Materials or pursuant to any laws regarding Hazardous
Materials ("Hazardous Materials Laws"). Landlord shall comply with any Hazardous
Materials Laws relating to any Hazardous Material present at any time on or
about the Demised Premises or the Project, or the soil, air, improvements,
groundwater or surface water thereof, except to the
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extent that such Hazardous Material is released, emitted or aggregated on or
about the Project by Tenant or Tenant's employees or agents, by other tenants of
the Building, or by third parties. Upon Tenant taking possession of the Demised
Premises improved with laboratory improvements, Landlord shall provide Tenant
with a letter report prepared by a reputable environmental engineering firm,
describing the environmental condition of the Demised Premises at time of
delivery to Tenant which shall be used by Landlord to establish that the Demised
Premises were delivered to Tenant free of Hazardous Materials, except as may be
set forth in the report. As used herein, the phrase "knowledge of Landlord"
shall mean the actual knowledge of Alan D. Gold and Gary A. Kreitzer as of the
date hereof.
41.2 Business. Landlord acknowledges that it is not the intent
of this Article 41 to prohibit Tenant from operating its business as described
in Section 2.1.9 above. Tenant may operate its business according to the custom
of the industry so long as the use or presence of Hazardous Material is strictly
and properly monitored according to all applicable governmental requirements. As
a material inducement to Landlord to allow Tenant to use Hazardous Material in
connection with its business, Tenant agrees to deliver to Landlord prior to the
Term Commencement Date a list identifying each type of Hazardous Material to be
present on the Demised Premises and setting forth any and all governmental
approvals or permits required in connection with the presence of such Hazardous
Material on the Demised Premises ("Hazardous Material List"). Tenant shall
deliver to Landlord an updated Hazardous Material List at least once a year and
shall also deliver an updated list before any new type of Hazardous Material is
brought onto the Demised Premises. Tenant shall promptly notify Landlord in
writing of any material change to such list. Tenant shall deliver to Landlord,
upon request, true and correct copies of the following documents (hereinafter
referred to as the "Documents") relating to the handling, storage, disposal and
emission of Hazardous Material prior to the Term Commencement Date, or if
unavailable at that time, concurrent with the receipt from or submission to a
governmental agency: permits; approvals; reports and correspondence; storage and
management plans, notice of violations of any laws; plans relating to the
installation of any storage tanks to be installed in or under the Project
(provided, said installation of tanks shall only be permitted after Landlord has
given Tenant its written consent to do so, which consent may be withheld in
Landlord's sole and absolute discretion); and all closure plans or any other
documents required by any and all federal, state and local governmental agencies
and authorities for any storage tanks installed in, on or under the Project for
the closure of any such tanks. Tenant is not required, however, to provide
Landlord with any portion(s) of the Documents containing
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information of a proprietary nature which, in and of themselves, do not contain
a reference to any Hazardous Material or hazardous activities. It is not the
intent of this Section to provide Landlord with information which could be
detrimental to Tenant's business should such information become possessed by
Tenant's competitors. At the written request of Landlord, Tenant agrees that it
shall enter into a written agreement with other tenant's at the Building
concerning the equitable allocation of fire control areas (as defined in the
Uniform Building Code, and adopted by the City of San Diego ("UBC")) within the
Building for the storage of Hazardous Materials. In the event that Tenant's use
of Hazardous Materials is such that it utilizes fire control areas in the
Building in excess of Tenant's Pro Rata Share of the Building as set forth in
Section 2.1.6 above, Tenant agrees that it shall, at its own expense, and upon
the written request of Landlord, establish and maintain a separate area of the
Demised Premises classified by the UBC as an "H" occupancy area, for the use and
storage of Hazardous Materials, or take such other action so that its share of
the fire control areas of the Building is not greater than Tenant's Pro Rata
Share of the Building.
41.3 Testing. At any time, and from time to time, prior to the
expiration of the Lease Term Landlord shall have the right to conduct
appropriate tests of the Demised Premises, Building and Project to demonstrate
that contamination has occurred as a result of Tenant's use of the Demised
Premises. Tenant shall be solely responsible for and shall defend, indemnify and
hold the Landlord, its agents and contractors harmless from and against any and
all claims, costs and liabilities including actual attorneys' fees and costs,
arising out of or in connection with any removal, clean up, restoration and
materials required hereunder to return the Demised Premises and any other
property of whatever nature to their condition existing prior to the time of any
such contamination to the extent Hazardous Materials are found and it is
determined that Tenant has violated the provisions of Section 41.1 hereof.
Tenant shall pay for the cost of the tests of the Demised Premises only if
Hazardous Materials are found and it is determined that Tenant violated the
provisions of Section 41.1 hereof.
41.4 Underground Tanks. If underground or other storage tanks
storing Hazardous Materials are located on the Demised Premises and utilized or
are hereafter placed on the Demised Premises by Tenant, Tenant shall monitor the
storage tanks, maintain appropriate records, implement reporting procedures,
properly close any underground storage tanks, and take or cause to be taken all
other steps necessary or required under the California Administrative Code,
Title 23, Chapter 3, Subchapter 16, "Underground Storage Tank Regulations," and
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Division 20, Chapter 6.7 of the California Health & Safety Code, "Underground
Storage of Hazardous Substances," as they now exist or may hereafter be adopted
or amended.
41.5 Tenant's Obligations. Tenant's obligations under this
Article 41 shall survive the termination of the Lease. During any period of time
employed by Tenant or Landlord after the termination of this Lease to complete
the removal from the Demised Premises of any such Hazardous Materials, Tenant
shall continue to pay the Rent in accordance with this Lease, which Rent shall
be prorated daily (except to the extent that Landlord actually receives rent for
the Demised Premises from a new tenant for such period); provided, however, that
Tenant shall not be obligated to pay the holdover Rent set forth in Section 12.2
hereof.
41.6 Definition of "Hazardous Material". As used herein, the
term "Hazardous Material" means any hazardous or toxic substance, material or
waste which is or becomes regulated by any local governmental authority, the
State of California or the United States government. The term "Hazardous
Material" includes, without limitation, any material or substance which is (i)
defined as a "hazardous waste, " "extremely hazardous waste" or "restricted
hazardous waste" under Section 25515 or 25117, or listed pursuant to Section
25140, of the California Health and Safety Code, Division 20, Chapter 6.5
(Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under
Section 25316 of the California Health and Safety Code, Division 2, Chapter 6.8
(Carpenter-Presly-Tanner Hazardous Substance Account Act), (iii) defined as a
"hazardous material," "hazardous substance" or "hazardous waste" under Section
25501 of the California Health and Safety Code, Division 20, Chapter 6.95
(Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) listed under Article
9 and defined as hazardous or extremely hazardous pursuant to Article 11 of
Title 22 of the California Administrative Code, Division 4, Chapter 20, (viii)
designated as a "hazardous substance" pursuant to Section 311 of the Federal
Water Pollution Control Act (33 U.S.C. Section 1317), (ix) defined as a
"hazardous waste" pursuant to Section 1004 of the Federal Resource Conversation
and Recovery Act, 42 U.S.C. Section 6901, et. seq. (42 U.S.C. Section 6903), or
(x) defined as a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
Section 9601 et. seq. (42 U.S.C. Section 9601).
42. [INTENTIONALLY OMITTED]
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43. Miscellaneous
43.1 Terms and Headings. Where applicable in this Lease, the
singular includes the plural and the masculine or neuter includes the masculine,
feminine and neuter. The section headings of this Lease are not a part of this
Lease and shall have no effect upon the construction or interpretation of any
part hereof.
43.2 Examination of Lease. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or
option for lease, and it is not effective as a lease or otherwise until
execution by and delivery to both Landlord and Tenant.
43.3 Time. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor.
43.4 Covenants and Conditions. Each provision of this Lease
performable by Tenant shall be deemed both a condition and a covenant.
43.5 Consents. Whenever consent, designation, judgment,
determination or approval of either party is required, that party shall not
unreasonably withhold or delay such consent, approval, designation, judgment or
determination.
43.6 Entire Agreement. The terms of this Lease are intended by
the parties as a final expression of their agreement with respect to the terms
as are included herein, and may not be contradicted by evidence of any prior or
contemporaneous agreement. The Basic Lease Provisions and Exhibits (including,
without limitation, the Work Letter) all constitute a single document and are
incorporated herein.
43.7 Severability. Any provision of this Lease which shall
prove to be invalid, void, or illegal in no way affects, impairs or invalidates
any other provision hereof, and such other provisions shall remain in full force
and effect.
43.8 Recording. Landlord may, but shall not be obligated to,
record a short form memorandum hereof without the consent of Tenant. Neither
parties shall record this Lease.
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43.9 Impartial Construction. The language in all parts of this
Lease shall be in all cases construed as a whole according to its fair meaning
and not strictly for or against either Landlord or Tenant.
43.10 Inurement. Each of the covenants, conditions and
agreements herein contained shall inure to the benefit of and shall apply to and
be binding upon the parties hereto and their respective heirs, legatees,
devisees, executors, administrators, successors, assigns, sublessees, or any
person who may come into possession of said Demised Premises or any part thereof
in any manner whatsoever. Nothing in this Section 43.10 contained shall in any
way alter the provisions against assignment or subletting in this Lease
provided.
43.11 Notices. Any notice, consent, demand, bill, statement,
or other communication required or permitted to be given hereunder must be in
writing and may be given by personal delivery or by mail, and if given by mail
shall be deemed sufficiently given three (3) business days after time when
deposited in United States Mail if sent by registered or certified mail,
addressed to Tenant at the Demised Premises, or to Tenant or Landlord at the
addresses shown in Section 2.1.10 of the Basic Lease Provisions. Either party
may, by notice to the other given pursuant to this Section, specify additional
or different addresses for notice purposes. Notices hereunder may also be given
by reputable overnight courier and shall be deemed given one (1) business day
after deposited with a reputable overnight courier service, addressed as set
forth above.
43.12 California Jurisdiction. This Lease has been negotiated
and entered into in the State of California and shall be governed by, construed
and enforced in accordance with the laws of the State of California, applied to
contracts made in California for California domiciliaries to be wholly performed
in California.
43.13 Authority. That individual or those individuals signing
this Lease guarantee, warrant and represent that said individual or individuals
have the power, authority and legal capacity to sign this release on behalf of
and to bind all entities, corporations, partnerships, joint venturers or other
organizations and/or entities on whose behalf said individual or individuals
have signed.
43.14 Landlord's Entry. Notwithstanding anything to the
contrary contained in this Lease, Landlord and Landlord's agents, except in the
case of emergency or other imminent threat to the Building or its occupants, or
by consent
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of Tenant or its employees, shall provide Tenant with twenty-four (24) hours'
notice prior to entry of the Demised Premises. Any entry by Landlord and
Landlord's agents shall not impair Tenant's operations more than reasonably
necessary, shall comply with all reasonable security measures of Tenant, and
Tenant shall have the right to have an employee accompany Landlord at all times
that Landlord is present on the Demised Premises. Without limiting the
generality of the foregoing: (a) Tenant acknowledges that Landlord may be
performing certain work in the Building during the Term of the Lease; (b) Tenant
hereby agrees to allow Landlord to enter onto the Demised Premises on
twenty-four (24) hours' notice to Tenant to perform such work; and (c) Tenant
shall not be entitled to any abatement of Rent by reason of Landlord's
construction activities at the Building.
43.15 Reasonable Expenditures. Any expenditure by a party
permitted or required under this Lease, for which such party is entitled to
demand and does demand reimbursement from the other party, shall be limited to
the fair market value of the goods and services involved, shall be reasonably
incurred and shall be substantiated by documentary evidence (to the extent
reasonably available) available for inspection and review by the other party or
its representative during normal business hours. All other costs and expenses
incurred by either party in connection with this Lease and the negotiation and
execution of this Lease (including, without limitation, any attorneys' fees)
shall be borne by such party as its sole cost and expense.
44. [INTENTIONALLY OMITTED]
45. Option to Extend Term.
45.1 Provided that Tenant is not then in Default, Tenant shall
have the option ("Option") to extend the Term of this Lease upon the following
terms and conditions:
(a) Tenant shall have two (2) consecutive options to
extend the Term of this Lease each for a period of five (5) years.
(b) In the event Tenant elects to exercise an Option
under Section 45.1(a), the Lease terms shall be the same terms and conditions as
set forth in this Lease except for the Basic Annual Rent, which shall increase
three and a half percent (3.5%) from the prior year's Basic Annual Rent and
which shall
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remain subject to the terms of Section 6.1 hereof for each additional year of
the extended Term.
(c) The Option herein granted is not assignable separate
and apart from this Lease.
(d) The Option herein granted is for Tenant to extend the
Lease for all (and not less than all) of the Demised Premises.
(e) The Option is conditional upon Tenant giving Landlord
written notice of its election to exercise the Option at least six (6) months
prior to the end of the expiration of the initial Term of this Lease or any
prior extension thereof.
(f) Tenant shall not have the right to exercise any
Option, notwithstanding anything set forth above to the contrary:
(1) During the time commencing from the date Landlord
gives to Tenant a written notice that Tenant is in default under any provi sions
of this Lease and continuing until the default alleged in said notice is cured;
or
(2) At any time after an event of Default as
described in Article 24, of the Lease (without any necessity of Landlord to give
notice of such default to Tenant) and continuing until any such default is
cured, if curable; or
(3) In the event that Tenant has defaulted in the
performance of its obligations three (3) or more times and a service charge has
become payable under Section 24.1 for each of such defaults during the
twelve-month period immediately prior to the date that Tenant intends to
exercise the Option, whether or not the defaults are cured.
(g) The period of time within which the Option may be
exercised shall not be extended or enlarged by reason of the Tenant's inability
to exercise the Option because of the foregoing provisions of subparagraph (f).
(h) All rights of Tenant under the provisions of the
Option shall terminate and be of no further force or effect even after Tenant's
due and timely exercise of an Option, if, after such exercise, but prior to the
commencement date of the new term: (1) Tenant fails to pay to Landlord a
monetary obligation of
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Tenant for a period of twenty (20) days after written notice from Landlord to
Tenant; (2) Tenant fails to commence to cure a default (other than a monetary
default) within thirty (30) days after the date Landlord gives notice to Tenant
of such default; or (3) Tenant has defaulted three (3) or more times and a
service charge under Section 24.1 has become payable for any such default,
during the period from the date of the exercise of such option to the date of
the commence ment of such option term, whether or not such defaults are cured.
46. Expansion Rights.
46.1 Provided that Tenant is not then in Default, Tenant shall
have the right, but not the obligation, to expand the Demised Premises (the
"Expansion Right") in accordance with the provisions set forth below.
46.1.1 Available Space. For the purposes of the Expansion
Right: (i) the term "First Floor Available Space" shall mean any Rentable Area
within the first floor of the Building other than the Demised Premises; (ii) the
term "Second Floor Available Space" shall mean any Rentable Area within the
second floor of the Building which Landlord is not obligated, as of the date
hereof, to deliver to Genos Biosciences, Inc. pursuant to the terms of its
lease; (iii) the term "3530 Available Space" shall mean any Rentable Area within
any free-standing office or laboratory building upon the land immediately
adjacent to the Building to be constructed and to have a mailing address of 3530
John Hopkins Court; and (iv) the term "Available Space" shall mean,
collectively, the First Floor Available Space, the Second Floor Available Space
and the 3530 Available Space. Tenant may exercise the Expansion Right as to any
Available Space; provided, however, that (notwithstanding anything to the
contrary contained herein) Tenant's ability to exercise the Expansion Right as
to any Second Floor Available Space shall be subordinate to the right of Genos
Biosciences, Inc. to exercise its expansion right as to such space pursuant to
the terms of its lease executed concurrently herewith; further provided,
however, that (notwithstanding anything to the contrary contained herein)
Tenant's ability to exercise the Expansion Right as to any 3530 Available Space
shall only arise in the event that Landlord constructs or determines to pursue a
speculative development project for a free-standing office or laboratory
building upon the land immediately adjacent to the Building and desires to lease
such new building for any purpose other than for parking, storage or placement
of temporary trailers; and further provided, however, that if the Available
Space was configured for use by a single tenant, Tenant must exercise the
Expansion Right as to all of
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such available Space. Tenant may not exercise the Expansion Right as to a
portion or less than all or any Available Space configured for use by a single
tenant.
46.1.2 Exercise of Right. From time to time, Landlord
shall provide Tenant with written notice as to areas which Landlord believes are
or will become Available Space (the "Available Space Notice"). The Available
Space Notice shall identify the location, configuration, rentable square feet
and rental rate of the Available Space. Upon receipt of the Available Space
Notice and for ten (10) business days thereafter (the "Expansion Right Period"),
Tenant may exercise the Expansion Right by providing Landlord with written
notice (the "Expansion Right Exercise Notice") that Tenant exercises its
Expansion Right as to the Avail able Space identified in the Available Space
Notice. If Tenant does not exercise the Expansion Right within the Expansion
Right Period, the Expansion Right shall terminate as to the Available Space
identified in the Available Space Notice until after it has been occupied by a
new tenant, or is vacant for one hundred eighty (180) days after the Available
Space Notice is given, after which time the Expansion Right shall renew as to
said Available Space.
46.1.3 Amendment to Lease; Additional Lease. Within ten
(10) business days after the proper exercise of the Expansion Right, Tenant and
Landlord shall enter into a written amendment to the Lease (the "Amendment")
(or, in the case of any 3530 Available Space, an additional lease on
substantially similar terms as those set forth herein) which shall provide,
unless otherwise agreed in writing: (a) that the Amendment (or additional lease)
shall be effective the later of (i) ten (10) days after the date of the
Amendment (or additional lease) or (ii) the date by which all of the following
have occurred, (A) the prior tenant vacates the Available Space, (B) Landlord
has delivered legal possession of this Available Space to Tenant in
substantially the condition set forth in Section 14.1 above and (C) Landlord has
obtained the temporary certificate of occupancy, if required, from the
appropriate governmental authorities required for the legal occupancy of the
Available Space; (b) that the Demised Premises under the Lease shall be
increased to include (or the demised premises under the additional lease shall
include) the rentable square feet of the Available Space; (c) that the new Basic
Annual Rent shall be increased, with the Available Space increasing the Basic
Annual Rent at the square foot rental rate then applicable under the Lease; (d)
that Tenant's new Pro Rata Share of Operating Expenses shall be increased, based
upon the addition of the Available Space to the Demised Premises; (e) that the
Security Deposit shall be increased (which shall be payable upon execution of
the Amendment and shall be equal to one (1) month's Basic Annual Rent for said
Available Space); and (f) that
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the number of parking spaces allocated to Tenant shall be increased
proportionately. Provided Landlord has delivered to Tenant within five (5)
business days of Tenant's exercise of the Expansion Right, the Amendment (or the
additional lease) in form reasonably satisfactory to Tenant, in the event Tenant
does not execute and deliver to Landlord the Amendment (or the additional lease)
within the ten (10) day period stated herein, Tenant's Expansion Right as to the
Available Space shall terminate until after it has been occupied by a new
tenant, or is vacant for one hundred eighty (180) days after the Available Space
Notice is given, after which time the Expansion Right renews as to said
Available Space. Landlord shall not be required to provide any tenant
improvements for the Available Space. In all other respects, the Lease shall
remain in full force and effect, and shall apply to the Available Space.
46.1.4 Term Limitation. Notwithstanding any other
provision relating to the Expansion Right, Tenant shall not be entitled to
exercise the Expansion Right if the remaining Term under the Lease (not
including unexercised options to extend the Term) is less than one (1) year.
46.2 The exercise by Tenant of the Expansion Right is
subject to the following terms and conditions:
(a) The Expansion Right herein granted to Tenant is
personal to Tenant and is not assignable.
(b) Tenant shall not have the right to exercise the
Expansion Right, notwithstanding anything set forth above to the contrary:
(1) During the time commencing from the date
Landlord gives to Tenant a written notice that Tenant is in default under any
material provisions of this Lease and continuing until the default alleged in
said notice is cured; or
(2) At any time after an event of default as
described in Article 24 of this Lease (without any necessity of Landlord to give
notice of such default to Tenant), and continuing until any such default is
cured, if curable.
(c) The period of time within which the Expansion
Right may be exercised shall not be extended or enlarged by reason of the
Tenant's inability to exercise the Expansion Right because of the foregoing
provisions of subparagraph (b).
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(d) All rights of Tenant under the provisions of the
Expansion Right shall terminate and be of no further force or effect, even after
Tenant's due and timely exercise of the Expansion Right, if, after such
exercise, but prior to the commencement date of the Term of the lease for the
Available Space or part, (i) Tenant fails to pay the Landlord a monetary
obligation of Tenant for a period of ten (10) days after written notice from
Landlord to Tenant; or (ii) Tenant fails to cure a default (other than a
monetary default) within thirty (30) days after Landlord gives notice to Tenant
of such default.
46.3 Tenant shall be responsible for any brokerage fees owed
to any third party engaged by Tenant in connection with any Expansion Right and
shall indemnify Landlord with respect to any claims for any fees or commissions
made by any person with whom Tenant dealt in connection with exercising the
Expansion Right.
46.4 The Expansion Right shall be exercised only as provided
in this Agreement and supersede all prior agreements with respect to Available
Space.
46.5 Notwithstanding anything to the contrary contained
herein, Landlord hereby covenants and agrees not to actively market the First
Floor Available Space until the Term Commencement Date occurs. Nothing herein
shall prevent Landlord from accepting any unsolicited offers for the First Floor
Available Space prior to the Term Commencement Date so long as Landlord has
otherwise complied with the terms of Section 46.1.2.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the date first above written.
LANDLORD: TENANT:
ARE-JOHN HOPKINS COURT, LLC, SEQUANA THERAPEUTICS, INC.,
a Delaware limited liability company a California corporation
By: ARE-QRS CORP., a Maryland
Corporation, Managing Member
By: /s/ GARY A. KREITZER By: /s/ M. SCOTT SALKA
--------------------------------- ------------------------------
Name: Gary A. Kreitzer Name: M. Scott Salka
Its: Senior Vice President Its: VP, CFO
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EXHIBIT "A-1"
THE LEGAL DESCRIPTION OF THE LAND
PARCELS 1 & 2 IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA
AS SHOWN AT PAGE 16665 OF PARCEL MAPS FILED IN THE OFFICE OF THE COUNTY RECORDER
OF SAN DIEGO COUNTY, OCTOBER 24, 1991.
<PAGE> 68
EXHIBIT "A-2"
THE DEMISED PREMISES*
[MAP]
* 10,000 square feet to be located on the first floor; exact location to
be determined by mutual agreement.
<PAGE> 69
EXHIBIT "A-3"
THE PROJECT
[MAP OF ALEXANDRIA REAL ESTATE EQUITIES, INC.]
<PAGE> 70
EXHIBIT "B"
WORK LETTER
THIS WORK LETTER (this "Work Letter") is made and entered into as of
January 7, 1998, by and between ARE-JOHN HOPKINS COURT, LLC, a Delaware limited
liability company ("Landlord"), and SEQUANA THERAPEUTICS, INC., a California
corporation ("Tenant"), and is attached to and made a part of that certain
Lease, dated as of January 7, 1998 (the "Lease"), by and between Landlord and
Tenant. All capitalized terms used but not otherwise defined herein shall have
the meanings given them in the Lease.
1. General Requirements.
1.1 Tenant's Authorized Representative. Tenant designates Geneva R.
Davis ("Tenant's Agent") as the person authorized to initial all plans, drawings
and change orders on Tenant's behalf pursuant to this Work Letter. Landlord
shall not be obligated to respond to or act upon any such item until such item
has been initialed or approved in writing by Tenant's Agent. Neither Tenant nor
Tenant's Agent shall be authorized to direct Landlord's contractors in the
performance of Landlord's Total Work (as hereinafter defined) other than as
specifically provided herein.
1.2 Development Schedule. The schedule for design and development of
Landlord's Work (as hereinafter defined) and the Leasehold Improvements (as
hereinafter defined), including without limitation the time periods for
preparation and review of construction documents, approvals and performance,
whether by Landlord or by Tenant, shall be in accordance with that certain Time
and Responsibility Schedule prepared by Landlord and Tenant, and attached as
Schedule A to this Work Letter, subject to adjustment as mutually agreed to in
writing by the parties or as provided in this Work Letter (the "Development
Schedule").
1.3 Architects and Consultants. The architect, engineering consultants,
design team, general contractor and all subcontractors responsible for the
construction of Landlord's Work, the Leasehold Improvements and all other
construction related to the Project shall be selected by Landlord in its
discretion; provided, however, that Landlord's selection of the architect,
general contractor and all Major Subcontractors (as hereinafter defined)
responsible for construction of the Leasehold Improvements shall be approved by
Tenant in Tenant's reasonable discretion.
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Notwithstanding the foregoing, Tenant hereby agrees to, and acknowledges
that Landlord has selected and may retain, Lusardi Construction Co. as the
general contractor for the Project (including Landlord's Work and the Leasehold
Improvements) and Carrier Johnson Wu as the architect for the Project (including
Landlord's Work and the Leasehold Improvements). Landlord agrees to bid (or
cause the general contractor to bid) all Major Subcontractor work in connection
with the Leasehold Improvements to a minimum of two (2) subcontractors. As used
herein, the term "Major Subcontractor" shall mean any subcontractor engaged to
perform work for a cost in excess of $100,000.00, or any subcontractor engaged
to perform the plumbing, electrical, HVAC or casework for the Leasehold
Improvements.
2. Landlord's Work.
2.1 Landlord agrees to construct a two-story scientific research
building of approximately 55,200 rentable square feet as measured according to
the BOMA Standard (the "Building"). The Building shall be a concrete steel frame
structure with reflected glass windows and shall include on-site surface parking
at a ratio of approximately three (3) spaces per 1,000 square feet of Rentable
Area in the Building (subject to Tenant's storage space and mechanical space
requirements). All work required to design and construct the Building, exclusive
of the Leasehold Improvements and the Tenant Work (each as herein defined), is
herein collectively referred to as the "Landlord's Work."
2.2 Landlord has indicated to Tenant that the construction plans,
specifications and drawings with respect to Landlord's Work (the "Base Building
Construction Drawings") are consistent with the Hope Architects & Engineers
plans and specifications, dated March 20, 1991, which were previously approved
by the City of San Diego. Prior to the execution hereof, the Base Building
Construction Drawings have been prepared and have been approved by Landlord and
Tenant; however, the Base Building Construction Drawings require certain
revisions in order to comply with current building codes. Landlord agrees to
commence construction of Landlord's Work following approval of the revised Base
Building Construction Drawings by both parties hereto and the City of San
Diego's building department (the "Building Permit"). Tenant shall cooperate and
assist Landlord in obtaining the Building Permit, which Building Permit shall be
obtained at Land lord's expense. In the event that governmental or
quasi-governmental authorities having jurisdiction over the construction of
Landlord's Work or any permit, license or approval required in connection
therewith shall impose terms or conditions to the Building Permit that are
inconsistent with Landlord's obligations hereunder or which
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increase the cost of constructing Landlord's Work, or which will materially
delay the construction of Landlord's Work, Landlord and Tenant shall make all
reasonable and good faith efforts to agree upon an approach, strategy or course
of action to mitigate or remove any such terms and conditions, provided that
Landlord shall nevertheless remain obligated to construct the Building in
accordance with the basic parameters set forth in Section 2.1 of this Work
Letter.
2.3 Not later than One Hundred Thirty Five (135) days following the
mutual execution of the Lease, Tenant shall deliver to Landlord design drawings
and specifications (the "Space Plans") detailing Tenant's requirements for the
Leasehold Improvements. The Space Plans shall be sufficiently detailed to show
the impact of the Leasehold Improvement upon the base Building and any design
changes which may be necessary. Landlord shall deliver in writing any reasonable
objections, questions or comments of Landlord, the Project's architect or
supervising engineer with regard to the Space Plans within ten (10) business
days of delivery thereof. Within fifteen (15) calendar days following delivery
of any such objections, Tenant shall cause the Space Plans to be revised to
eliminate such objections, and shall resubmit said drawings to Landlord for
approval.
2.4 Landlord's Work shall be constructed substantially in conformity
with the Base Building Construction Drawings and the Building Permit. However,
construction of Landlord's Work shall be subject to such modifications which are
(i) required due to field conditions, and/or (ii) required in order to meet the
requirements of applicable governmental and quasi-governmental laws, regulations
and codes (collectively, "Code"). Notwithstanding anything to the contrary
contained herein, the parties hereby acknowledge and agree that the design of
the Project (i) may be subject to approval by various governmental review
committees and (ii) must conform to any Planned Industrial Development permit,
SR Zone use and Coastal Zone Area use requirements.
3. Leasehold Improvements.
3.1 As used herein, the term "Leasehold Improvements" shall mean all
initial improvements to the Building desired by Tenant of a fixed and permanent
nature, exclusive of Landlord's Work, as shown on the Leasehold Improvement
Construction Drawings (as hereinafter defined). Other than the Leasehold
Improvements and Landlord's Work, Landlord shall not have any obligation
whatsoever with respect to the finishing of the premises for Tenant's use and
occupancy. The Leasehold Improvements (including, without limitation, the cost
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of construction, project management by Landlord (which fee shall not exceed
three percent (3%) of the total cost of the Leasehold Improvements), cost of
space planning, architect, engineering and other related services, building
permits and other planning and inspection fees, and the cost of HVAC systems,
utility distribution systems, laboratory gas and liquid systems, emergency
power systems and hazardous waste containment systems) shall be designed to meet
a budget of not more that One Hundred Fifty Dollars ($150.00) per square foot of
Rentable Area in the Demised Premises (the "Leasehold Improvement Budget"), at
an aggregate cost to Landlord not to exceed One Million Five Hundred Thousand
Dollars ($1,500,000.00) (the "Leasehold Improvement Allowance"). Any costs
incurred in performing the Leasehold Improvements in excess of the Leasehold
Improvement Allowance shall be borne solely by Tenant, as hereinafter provided.
Tenant shall not be entitled to use any portion of the Leasehold Improvement
Allowance on personal property improvements without the prior express written
approval of Landlord which it may withheld in its sole discretion. Tenant shall
have until December 31, 1999 to expend the unused portion of the Leasehold
Improvement Allowance, after which date Landlord's obligation to fund such costs
shall expire.
3.2 Landlord agrees to commence construction of the Leasehold
Improvements following approval of the Leasehold Improvement Construction
Drawings by both parties hereto and upon obtaining a building permit authorizing
the construction of a the Leasehold Improvements consistent with this Work
Letter (the "Leasehold Improvement Permit"). Tenant shall cooperate and assist
Landlord in obtaining the Leasehold Improvement Permit, the cost of which
Leasehold Improvement Permit shall be deducted from the Leasehold Improvement
Allowance. In the event that governmental or quasi-governmental authorities
having jurisdiction over the construction of the Leasehold Improvements or any
permit, license or approval required in connection therewith shall impose terms
or conditions to the Leasehold Improvement Permit that are inconsistent with
Landlord's obligations hereunder or which increase the cost of constructing the
Leasehold Improvements, or which will materially delay the construction of the
Leasehold Improvements, Landlord and Tenant shall make all reasonable and good
faith efforts to agree upon an approach, strategy or course of action to
mitigate or remove any such terms and conditions, provided that Landlord shall
nevertheless remain obligated to construct the Building in accordance with the
basic parameters set forth in Section 2.1 of this Work Letter.
3.3 Landlord shall cause the Project's architect to prepare and submit
for Tenant's review and approval preliminary plans and specifications for
develop-
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ment of the Leasehold Improvements (the "Leasehold Improvement Preliminary
Plans"). Tenant shall be solely responsible for ensuring that the Leasehold
Improvement Preliminary Plans reflect Tenant's requirements for the Leasehold
Improvements. Tenant shall deliver its written comments to the Leasehold
Improvement Preliminary Plans to Landlord not later than five (5) days after
Tenant's receipt of the same. Landlord and the Project's architect shall
consider all such comments in good faith, but in no event shall Tenant's review
and comment rights pursuant to the foregoing sentence require or obligate
Landlord to exceed the Leasehold Improvement Budget.
3.4 Following the completion of the Leasehold Improvement Preliminary
Plans, Landlord shall cause the Project's architect to prepare and deliver to
Tenant for review and comment construction plans, specifications and drawings
for the Leasehold Improvements (the "Leasehold Improvement Construction
Drawings" and, together with the Base Building Construction Drawings, the
"Construction Drawings"), which Leasehold Improvement Construction Drawings
shall be prepared substantially in accordance with the Leasehold Improvement
Preliminary Plans. Tenant shall be solely responsible for ensuring that the
Leasehold Improvement Construction Drawings reflect Tenant's requirements for
the Leasehold Improvements. Tenant shall deliver its written comments on the
Leasehold Improvement Construction Drawings to Landlord not later than five (5)
days after Tenant's receipt of same. Landlord shall consider all such comments
in good faith, but in no event shall Tenant's review and comment rights pursuant
to the foregoing sentence delay Landlord's design or construction schedule for
the Leasehold Improvements. Provided that the design reflected in the Leasehold
Improvement Construction Drawings is consistent with the overall design of the
Leasehold Improvements as contemplated hereby and the Leasehold Improvement
Preliminary Plans as approved by Tenant, Tenant shall approve the Leasehold
Improvement Construction Drawings as submitted by Landlord.
3.5 The Leasehold Improvements shall be constructed substantially in
conformity with the Leasehold Improvement Construction Drawings and the
Leasehold Improvement Permit. However, construction of the Leasehold
Improvements shall be subject to such modifications which are (i) required due
to field conditions, and/or (ii) required in order to meet Code.
4. Certain Approvals. It is hereby acknowledged by Landlord and Tenant
that (i) the Building Permit must be issued not later than May 30, 1998, in
order for Landlord's Work to be substantially complete by April 1, 1999, and
(ii) the
B-5
<PAGE> 75
Leasehold Improvement Construction Drawings must be completed and approved not
later than July 31, 1998, in order for the Leasehold Improvements to be
substantially complete by April 1, 1999. In the event of any dispute regarding
the design of the Leasehold Improvements prior to the completion of the
Leasehold Improvement Construction Drawings, which dispute is not settled within
five (5) days after notice of such dispute is delivered by one party to the
other, Tenant shall have the right to make the final decision regarding the
design in question, provided that Tenant acts reasonably and such final decision
is consistent with the base Building and either Landlord's or Tenant's position
in such dispute (or a compromise position based therein in whole or part). Any
subsequent changes, modifications or alterations to the Base Building
Construction Plans or the Leasehold Improvement Construction Drawings following
Landlord's and Tenant's approval of same and requested by Tenant before
completion of Landlord's Total Work shall be processed in the manner provided in
Section 6 of this Work Letter.
5. Performance of Landlord's Total Work.
5.1 As used herein, "Landlord's Total Work" shall mean Landlord's Work
and the Leasehold Improvements. On or before the Term Commencement Date (subject
to Tenant-Caused Delays and Force-Majeure Delays, each as hereinafter defined),
Landlord shall substantially complete or cause to be substantially completed
Landlord's Total Work in a good and workmanlike manner and in accordance with
applicable law, in accordance with the Base Building Construction Drawings and
the Leasehold Improvement Construction Drawings and subject to the terms of this
Work Letter. As used herein, (i) the term "Tenant Caused Delays" shall mean any
delays caused by Tenant or any agent of Tenant and (ii) the term "Force-Majeure
Delays" shall mean any delays resulting from influences, events or circumstances
outside the reasonable control of Landlord. Landlord agrees to consult with
Tenant, to the extent reasonable under the circumstances (including, but not
limited to, the then-current Development Schedule), regarding any change to
Landlord's Total Work which (i) is required due to field conditions, (ii) will
materially impact the design of Landlord's Work, the Leasehold Improvements or
the ability to meet the requirements of the Space Plans as approved by Landlord,
and (iii) has more than one alternative solution. Landlord further agrees to
implement any reasonable alternative solution promptly proposed by Tenant for
such change, to the extent that such alternative will not increase the Base
Building Budget or the Leasehold Improvement Budget or delay the completion of
Landlord's Total Work (unless Tenant agrees to accept such risks and in such
event and delays so caused shall be deemed a Tenant-Caused Delay and Tenant
shall be
B-6
<PAGE> 76
solely responsible for any increased costs), or adversely impact the structure
or systems serving the Building. Subject to the terms of the last sentence of
Section 3.1 hereof, following completion of Landlord's Total Work, no allowance
or credit shall be granted in connection with any unused materials or any
portion of Landlord's Total Work which is waived by Tenant. Landlord's Total
Work shall constitute a single, non-recurring obligation on the part of
Landlord.
5.2 Where more than one (1) type of material or structure is indicated
on the Base Building Construction Drawings or the Leasehold Improvement
Construction Drawings, the option will be within Landlord's sole discretion. As
to all building materials and Base Building equipment which Landlord is
obligated to supply under this Work Letter, Landlord shall select the
manufacturer thereof in its sole discretion.
5.3 In recognition and consideration of the fact that the Building has
not been constructed as of the date hereof, it is hereby agreed by the parties
hereto that Landlord may make Minor Variations (as herein defined) in the size,
design, engineering, configuration and siting of Landlord's Total Work, and such
Minor Variations shall not render the Lease void or voidable, nor shall any such
Minor Variations entitle the Tenant to any reduction or abatement in Rent,
anything herein contained and any rule of law or equity to the contrary
notwithstanding. As used herein, the term "Minor Variations" shall mean any
modifications to Landlord's Total Work which do change the basic parameters set
forth in Section 2.1 of this Work Letter, to the extent such modifications are
reasonably required: (i) to comply with Code and/or to obtain or to comply with
any required permit (including, but not limited to, the Building Permit and the
Leasehold Improvement Permit); (ii) to comply with any request by the Tenant for
modifications to Landlord's Total Work; (iii) to comport with good design,
engineering, and construction practices; or (iv) to make reasonable adjustments
for field deviations encountered in the construction of Landlord's Total Work.
5.4 Upon the date Landlord's Total Work is substantially complete,
Tenant shall accept the Demised Premises in the condition in which they then
exist. Tenant's taking possession and acceptance of the Demised Premises shall
not constitute a waiver of any warranty of any construction defect in regard to
workmanship (including installation of equipment) or material (exclusive of
equipment provided by manufacturers) of the Building completed by or on behalf
of Landlord or any design defect (or non-compliance with Code) in the Landlord's
Work. Tenant shall have one (1) year after Landlord's Total Work is
substantially
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<PAGE> 77
complete within which to notify Landlord of any such construction or design
defect or Code deficiency (collectively, "Defect") in the Building discovered by
Tenant, and Landlord shall use reasonable efforts to cause the applicable
contractor to remedy any such Defect within ninety (90) days thereafter.
Notwithstanding the foregoing, Landlord shall not be in default under the Lease
if, by the nature of such Defect, more than ninety (90) days are required to
correct and remedy such Defect and Landlord commences its remedial action within
such ninety (90) day period and thereafter diligently and continuously
prosecutes such curative and remedial action to completion. Tenant shall be
entitled to receive the benefit of all manufacturer's equipment warranties
relating to equipment installed in the Building, exclusive of equipment which
is not paid for out of the Leasehold Improvement Allowance. If requested by
Tenant, Landlord shall attempt to obtain extended warranties from manufacturers
and suppliers of such equipment, but the cost of any such extended warranties
shall be borne solely by Tenant. Landlord shall diligently pursue any claims
arising out of latent defects in the Building.
6. Changes. Any changes requested by Tenant to Landlord's Work or the
Leasehold Improvements after the date of mutual approval of the Base Building
Construction Drawing or the Leasehold Improvement Construction Drawings, as
applicable, shall be requested and instituted in accordance with the provisions
of this Section 6 and shall be subject to the written approval of Landlord and
the Project's architect.
6.1 In the event that, after the Leasehold Improvement Construction
Drawings have been approved by Landlord and Tenant, Tenant shall request changes
to Landlord's Work or the Leasehold Improvements or request changes to the work
already installed ("Changes"), Tenant shall request such Changes by notifying
Landlord in writing in substantially the same form as the AIA standard change
order form (a "Change Request"), which Change Request shall detail the nature
and extent of any such Change, and, if the nature of such Change requires
revisions to the Base Building Construction Drawings or the Leasehold
Improvement Construction Drawings, then Tenant shall be solely responsible for
the cost of such revisions. Such Change Request must be signed by Tenant's Agent
or Landlord shall not be required to process such Change Request. Landlord
shall, before proceeding with any Change, use its best efforts to respond to
Tenant as soon as is reasonably possible with an estimate of (i) the time it
will take Landlord to analyze the Change Request, and (ii) the architectural and
engineering fees and costs which will be incurred in order to analyze such
Change Request, and Landlord shall thereafter submit to Tenant in writing,
within five (5) business days
B-8
<PAGE> 78
receipt of the Change Request (or such longer period of time as is reasonably
required depending on the extent of the Change Request), an analysis of the
additional cost or savings involved, including without limitation architectural
and engineering costs and the period of time, if any, that the Change will
extend the date on which Landlord's Total Work will be substantially complete.
Any such delay in the completion of Landlord's Total Work caused by a Change
shall be deemed a Tenant-Caused Delay.
6.2 If Tenant approves in writing the cost or savings and the extension
in the time for completion of Landlord's Total Work, if any, Landlord shall
cause the approved Change to be instituted.
7. Costs.
7.1 It is understood and agreed that Landlord is under no obligation to
bear any portion of the cost of any of the Leasehold Improvements except to the
extent of the Leasehold Improvement Allowance. All costs, expenses and fees
expressly permitted by the Lease and this Work Letter to be incurred by or on
behalf of Landlord arising from, out of, or in connection with, the Leasehold
Improvements (collectively, the "Leasehold Improvements Cost") shall first be
deducted by Landlord from the Leasehold Improvement Allowance. If the Leasehold
Improvements Cost exceeds the Leasehold Improvement Allowance, Tenant shall, as
a condition precedent to Landlord's obligation to complete the Leasehold
Improvements, deposit in an interest-bearing account with an escrow holder
mutually acceptable to Landlord and Tenant one hundred percent (100%) of the
then current Leasehold Improvements Cost in excess of the Leasehold Improvement
Allowance, to be disbursed on a progress payment basis proportionately with the
disbursement of the Leasehold Improvement Allowance by Landlord. All interest in
such account shall accrue for the benefit of Tenant. Any sums so deposited by
Tenant and remaining unused following completion of the Leasehold Improvements
shall be returned to Tenant. If Tenant fails to pay, or is late paying, any sum
due to Landlord under this Work Letter, Landlord shall have all of the rights
and remedies set forth in the Lease for nonpayment of Rent (including, but not
limited to, the right to interest at the Default Rate and the right to assess a
late charge), and for purposes of any litigation instituted with regard to such
amounts the same will be considered Rent.
7.2 Landlord shall bear all costs, expenses and fees incurred by or on
behalf of Landlord in connection with the acquisition of the land on which the
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<PAGE> 79
Building is to be constructed and construction of Landlord's Work and related
site improvements, subject to the terms hereof and the terms of the Lease.
8. Tenant Access.
8.1 Landlord hereby agrees to permit Tenant access, at Tenant's sole
risk and expense, to the Building thirty (30) days prior to the Term
Commencement Date to perform any work ("Tenant's Work") required by Tenant other
than Landlord's Total Work, including, by way of example only, installation of
telephones, cabling, special equipment and, to the extent reasonable, trade
fixtures and furniture, during normal business hours or at such other times as
are reasonably designated therefor or agreed to by Landlord, provided that such
work is coordinated with the Project's architect, and complies the terms of the
Lease and all such other reasonable restrictions and conditions as Landlord may
impose. So long as Tenant shall engage only in the activities enumerated in the
preceding sentence, such access shall not constitute acceptance of possession,
nor occupancy or use of the Building. Notwithstanding the foregoing, Tenant
shall have no right to enter onto the Building unless and until Tenant shall
deliver to Landlord evidence reasonably satisfactory to Landlord evidencing the
insurance reasonably required by Landlord in connection with such
pre-commencement access (including, but not limited to, any insurance which
Landlord may require pursuant to Section 21 of the Lease).
8.2 In no event shall Tenant or its employees, consultants, agents,
contractors, and suppliers interfere with the performance of Landlord's Total
Work, nor with any inspections or issuance of final approvals by the City or
County of San Diego, and in the event of any such interference Landlord shall
have the right to exclude Tenant and Tenant's employees, consultants,
contractors and agents from the Building until the substantial completion of
Landlord's Total Work.
8.3 The fact that Tenant may, with Landlord's consent, enter into the
Building prior to the date Landlord's Total Work is substantially complete for
the purpose of performing any Tenant's Work shall not be deemed an acceptance by
Tenant of possession of the Demised Premises, but in such event Tenant shall
indemnify, defend, protect and hold Landlord harmless from any loss of or damage
to Tenant's property, completed work, fixtures, equipment, materials or
merchandise, and from liability for death of, or injury to, any person, caused
by the willful misconduct or negligence of Tenant or its agents.
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<PAGE> 80
9. Miscellaneous.
9.1 Consents. Whenever consent or approval of either party is required
under this Work Letter, that party shall not unreasonably withhold, condition or
delay such consent or approval, except as may be expressly set forth herein to
the contrary.
9.2 Modification. No modification, waiver or amendment of this Work
Letter or of any of its conditions or provisions shall be binding upon Landlord
or Tenant unless in writing signed by Landlord and Tenant.
9.3 Counterparts. This Work Letter may be executed in any number of
counterparts but all counterparts taken together shall constitute a single
document.
9.4 Governing Law. This Work Letter shall be governed by, construed and
enforced in accordance with the laws of the State of California.
9.5 Time of the Essence. Time is of the essence of this Work Letter and
of each and all provisions thereof.
9.6 Severability. If any term or provision of this Work Letter is
declared invalid or unenforceable, the remainder of this Work Letter shall not
be affected by such determination and shall continue to be valid and
enforceable.
9.7 Merger. All understandings and agreements, oral or written,
heretofore made between the parties hereto and relating to Landlord's Total Work
are merged in this Work Letter, which alone (but inclusive of provisions of the
Lease incorporated herein and the final approved Constructions Drawings and
specifications prepared pursuant hereto) fully and completely expresses the
agreement between Landlord and Tenant with regard to the matters set forth in
this Work Letter.
9.8 Arbitration. Any unresolved dispute concerning the Leasehold
Improvements shall be submitted to binding arbitration under the commercial
rules of the American Arbitration Association in San Diego, California.
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<PAGE> 81
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter
to be effective on the date first above written.
LANDLORD: TENANT:
ARE-JOHN HOPKINS COURT, LLC, SEQUANA THERAPEUTICS, INC.,
a Delaware limited liability company a California corporation
By: ARE-QRS CORP., a Maryland
Corporation, Managing Member
By: /s/ GARY A. KREITZER By: /s/ M. SCOTT SALKA
--------------------------------- ------------------------------
Name: Gary A. Kreitzer Name: M. Scott Salka
Its: Senior Vice President Its: VP, CFO
B-12
<PAGE> 82
SCHEDULE A
THE DEVELOPMENT SCHEDULE*
Sequana Therapeutics, Inc.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
1997 1998 1999
- ---------------------------------------------------------------------------------------------------------------------------------
EVENT
EVENT COMPLETED Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 PRE PLANNING
2 Lease Negotiation ########
3 Execute Lease Agreement ###
4
5
6 PLANNING, ENGINEERING
& ARCHITECTURE
7 Site & Base Building plan
preparation/finalization #############
8 Tenant Space Programming ##################
9 Tenant Space Plan Submittal
to Landlord ###
10 Submit site & Base Building
permit plans to city #############
1 Site (grading) permit issuance ###
2 Base Building permit issuance ###
3 Tenant improvement plans
preparation #############
4 Submit tenant improvement
permit plans to city ##################
5 Tenant improvement permit ###
6
7
8 SITE DEVELOPMENT & BASE
BUILDING CONSTRUCTION
9 Site Development ###
10 Base Building Construction #################################
1
2
3 LEASEHOLD IMPROVEMENTS
4 Tenant improvement construction #######################
5
6
7 OCCUPANCY
8 Substantial Completion/
Certificate of Occupancy ###
9 Lease Commencement, Move-in
& Occupancy /////
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Key: ### On-Going Work Test *Subject to modification as mutually
agreed to in writing pursuant to the
/// Key Milestone Date Work Letter.
Alexandria Real Estate Equities, Inc. - Confidential
B-13
<PAGE> 83
EXHIBIT "C"
ACKNOWLEDGMENT OF TERM COMMENCEMENT DATE
This acknowledgment is made pursuant to Section 4 of that certain Lease dated
__________, 1997, by and between ARE-John Hopkins Court, LLC, a Delaware
limited liability company, Landlord, and __________, a __________ corporation,
Tenant, of Suite ___ at 3550 John Hopkins Court in the County of San Diego,
California.
We hereby acknowledge that the Term Commencement Date of the Lease is
__________, 199__.
ACCEPTED:
("Landlord")
ARE-John Hopkins Court, LLC,
a Delaware limited liability company
By: ARE-QRS Corp.,
a Maryland corporation
Its managing member
By: _________________________________
Its: __________________________
Date: _______________________________
ACCEPTED:
("Tenant")
______________________
a ________ corporation
By: _________________________________
Its: __________________________
Date: _______________________________
<PAGE> 84
EXHIBIT "D"
RULES AND REGULATIONS
- 1 -
The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or hall shall not be obstructed or used for any purpose
other than ingress or egress.
- 2 -
No awnings or other projections shall be attached to the outside walls of
the Building.
- 3 -
The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed, nor shall any bottles, parcels or
other articles be placed on the windowsills. If Tenant desires window curtains,
the same must be of such uniform shape, color, material and make as may be
prescribed by Landlord. Neither the interior not the exterior of any windows
shall be coated or otherwise sunscreened without Landlord's prior written
consent.
- 4 -
No sign, advertisement or notice shall be exhibited, painted or affixed
by Tenant on any part of, or so as to be seen from the outside of, its Premises
or the Building without Landlord's prior written consent. In the event of
Tenant's violation of the foregoing, Landlord may remove the same without any
liability and may charge the expense incurred in such removal to Tenant. All
signs whether on doors, directory tablets or elsewhere, shall be inscribed,
painted or affixed for Tenant by Landlord at the expense of Tenant, and shall
be of a size, color and style acceptable to Landlord.
- 5 -
The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of Tenant only; and
Landlord reserves the right to exclude any other names therefrom, and each and
every name in addition to the name of Tenant placed upon such bulletin board or
directory, shall be subject to Landlord's prior written consent (and if approved
by Landlord, all costs therefor shall be paid by Tenant). Any such listings or
representations, once installed, shall be subject to relocation or removal upon
Landlord's written request for any reason (except that any such relocations or
removals at Landlord's request, unless such request is based upon Tenant's
breach of the Lease, of which these Rules and Regulations are a part, shall be
paid for by Landlord), and Tenant shall pay for the removal of any such
listings or representations upon its departure from its Premises. Tenant shall
be entitled to one column line of such bulletin board or directory.
- 6 -
All doors opening into public corridors shall be kept closed, except when
being used for ingress and egress.
- 7 -
Except as allowed under Tenant's Lease, Tenant shall not mark, paint,
drill or bore into, cut or string wires in, lay linoleum or other floor
coverings in, or in any way deface any part of its Premises or the Building,
except with Landlord's prior written consent and as Landlord may direct.
1
<PAGE> 85
-8-
All keys shall be obtained from Landlord and neither Tenant, its agents
or employees shall have any duplicate keys made except as to allow Tenant's
employees to access its Premises and other secured areas within the Premises. No
duplicate keys shall be made to the Building without Landlord's prior written
consent. Except in such areas as Tenant and Landlord may agree are confidential
or "security" spaces, no additional locks or bolts of any kind shall be placed
upon any of the doors or windows by Tenant, nor shall any changes be made in
existing locks or the mechanisms thereof. Tenant must, upon the termination of
its tenancy, give to Landlord all keys pertaining to the Premises and the
Building, and in the event of the loss of any keys so furnished, Tenant shall
pay Landlord the cost of replacing same or of changing the lock or locks opened
by such lost key(s) if Landlord shall deem it necessary to make such change.
-9-
No windows or other air conditioning or heating units or other similar
apparatus shall be installed or used by Tenant without Landlord's prior written
consent. Tenant shall not be permitted upon the roof at any time except as may
be necessary to perform repairs and maintenance to rooftop equipment.
-10-
The water and wash closets and other plumbing fixtures shall not be used
for any purpose other than those for which they were constructed and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures by Tenant of its servants,
employees, agents, visitors or licensees shall be borne by Tenant.
-11-
All removals from, or the carrying in or out of, the Building of any
safes, freight, furniture, heavy or bulky matter of any description, must take
place only between the hours of 7:00 A.M. and 6:00 P.M. on days other than
Saturdays, Sundays and holidays (no moving being permitted on Saturdays, Sundays
or holidays without special permission). Landlord reserves the right to inspect
all safes or other heavy or bulky equipment or articles, the weight of which may
exceed the floor load for which the Building is designed, or such equipment or
articles as may violate any of the provisions of the Lease of which these Rules
and Regulations are a part. Tenant shall not use any machinery or other bulky
articles in the Premises, even though its installation may have been permitted,
which may cause any noise, or jar, or tremor to the floors or walks, or which by
its weight might injure the floor of the Building.
-12-
Neither Tenant nor servants, employees, agents, visitors or licensees
shall at any time bring or keep upon the Premises any flammable, combustible or
explosive fluid, chemical or substance, except for a reasonable quantity of such
material reasonably necessary for the conduct of Tenant's trade or business.
-13-
Tenant shall not, without Landlord's prior written consent, occupy or
permit any portion of the Premises to be occupied or used for other than as
provided under Section 2.1.9. The Premises shall not be used for lodging or
sleeping.
2
<PAGE> 86
-14-
Tenant shall not make, or permit to be made, any unseemly or disturbing
noises, or disturb or interfere with occupants of the Building or neighboring
buildings or premises or those having business with it by the use of any
musical instrument, radio, phonographs or unusual noise, or in any other way.
Neither Tenant nor its servants, employees, agents, visitors or licensees shall
throw anything out of doors, windows or skylights or down the passageways.
-15-
No motorized vehicles, birds or non-laboratory animals of any kind except
as required pursuant to the American Disability Act shall be brought into or
kept in or about Tenant's Premises and no cooking shall be done or permitted by
Tenant in its Premises, except that the preparation of coffee, tea, hot
chocolate, pastries, sandwiches and similar microwaveable items for Tenant, its
employees and visitors shall be permitted provided such activities do not
otherwise violate the Lease of which these Rules and Regulations are part and
provided power shall not exceed that amount which can be provided by a 30 amp
circuit. Tenant shall not cause or permit any unusual or objectionable odors to
be produced in or emanate from the Premises.
-16-
There shall not be used in any space, or in the public halls of the
Building, any hand trucks except those equipped with rubber tires and side
guards.
-17-
No vending or coin operated machines shall be placed within the Premises
without Landlord's prior written consent.
-18-
No person shall be employed by Tenant to do janitorial work in any Common
Area of said Building without Landlord's prior written consent. Any person
employed by Tenant to do janitorial, maintenance or similar work in the Common
Areas with Landlord's consent shall, while in the Building, be subject to and
under the control and direction of Landlord or its agent or representative (but
not as an agent or servant of Landlord) and Tenant shall be responsible for all
acts of such persons.
-19-
Landlord shall have the right to prohibit any advertising by Tenant which,
in Landlord's opinion, tends to impair the reputation of the Building or its
desirability as an office building, and upon written notice from Landlord,
Tenant shall refrain from or discontinue such advertising. Nothing in this
provision, however, shall be construed to prevent Tenant from installing
reasonable signage at the Building identifying Tenant provided such signage is
located at a place and is of a size and is constructed or a material acceptable
to Landlord.
-20-
Canvassing, soliciting and peddling in the Building are prohibited and
Tenant shall cooperate to prevent same.
3
<PAGE> 87
-21-
Landlord reserves the right to control access to the Building by all
persons after reasonable hours of generally recognized business days and at
all hours on Sundays and legal holidays. Tenant shall be responsible for all
persons for whom it requests after-hours access and shall be liable to Landlord
for all acts of such persons. Landlord assumes no responsibility and shall not
be liable for any damage resulting from the admission of any unauthorized
person to the Building. Upon request Tenant shall provide Landlord with a
description and license plate number of all its personnel's vehicles utilizing
parking at the Building.
-22-
Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of the
Rules and Regulations of the Building.
-23-
Landlord and Tenant agree that there shall be no consent to any waiver
of any of these Rules or Regulations unless said waiver is done in writing and
acknowledged by Landlord.
-24-
Landlord reserves the right at any time to change or rescind any one or
more of these Rules or Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord's judgment may from time to
time be necessary for the management, safety, care and cleanliness of the
Premises and Building, and for the preservation of good order therein, as well
as for the convenience of other occupants and tenants therein. Landlord shall
not be responsible to Tenant herein or to any other person for the
non-observance of the Rules and Regulations by any other tenant or other
person. Tenant shall be deemed to have read these Rules and Regulations and to
have agreed to abide by them as a condition to its occupancy of the Premises.
4
<PAGE> 88
EXHIBIT "E"
LANDLORD'S PROPERTY LIST
* Piping
* Ductwork
* Exhaust vents
* Wiring
* Cabling
* Electrical panels
* Transfer switches
* Transformers
* Circuits
* Conduits
* Gas and Vacuum distribution systems
* Specialized water systems (reverse osmosis and deionized systems)
* Exterior exhausting fume hoods
* Casework
* Bench tops
* Built-in cabinets
* Wall and floor coverings
* Building boilers
* Air-handlers
* Steam coils
* Heat exchangers
* Chillers
* Waste disposal systems
* Steam generators
* Light fixtures
* Life and safety systems (i.e., security systems (exclusive of CPU, video
monitors, surveillance cameras and associated movable equipment), fire
alarms, eye wash stations and fire sprinklers)
* Drop ceiling structure and tiles
* Sinks and hot water heaters
* Autoclaves and related glass washers and dryers (exclusive of bench/table
top or other moveable equipment)
* Walk-in temperature controlled rooms
<PAGE> 89
EXHIBIT "F"
FORM OF ESTOPPEL CERTIFICATE
This Tenant Estoppel Certificate (this "Certificate"), dated as of
__________, 199_, is executed by __________ ("Lessee") in favor of ARE-John
Hopkins Court, LLC, a Delaware limited liability company ("Lessor") and
__________ ("_______").
Recitals
A. Lessee and Lessor have entered into a Lease Agreement dated as of
__________ ("Lease") for a portion of the Property located at __________ (the
"Property").
B. Pursuant to the Lease, Lessee has agreed that upon the request of
Lessor, Lessee would execute and deliver a tenant estoppel certificate
certifying to the status of the Lease.
C. Lessor has requested that Lessee execute this Certificate. Lessee
certifies, warrants, and represents to Lessor and __________ as follows:
Section 1. Lessee.
Lessee is the lessee of the Property (the "Leased Premises"), pursuant to
the Lease, a correct copy of which is attached as Exhibit A.
Section 2. Leased Premises.
The Leased Premises consist of __________ (_______) square feet of the
(______) floor of the Property, as more particularly described in the Lease.
Section 3. Full Force of Lease.
As of the date of this Certificate, the Lease is in full force, has not
been terminated, and is enforceable in accordance with its terms, subject only
to any offsets, counter-claims, or defenses of Lessee as set forth in Section
14 hereof.
Section 4. Complete Agreement.
The Lease constitutes the complete agreement between Lessor and Lessee
for the Leased Premises and the Property, and no amendments, modifications or
extensions to the Lease, either written or oral, currently exist, other than
_____________________________________________________________________________.
Section 5. Acceptance of Leased Premises.
Lessee has accepted and is currently occupying the Leased Premises.
<PAGE> 90
Section 6. Lease Term
The term of the Lease commenced on and ends
----------
on , subject to the following options to extend:
--------- ---------------------
- -------------------------------------------------------------------------------
Section 7. Purchase Rights.
Lessee has no option, right of first refusal, right of
first offer, or other right to purchase all or any portion of the Leased
Premises or all or any portion of the Property, except as follows:
------------
- ------------------------------------------------------------------------------
Section 8. Rights of Lessee.
Except as expressly stated in this Certificate, Lessee:
(a) has no right to renew or extend the term of the
Lease;
(b) has no option or other right to purchase all or
any part of the Leased Premises or all or any part of the Property;
(c) has no right, title, or interest in the Leased
Premises, other than as Lessee under the Lease.
Section 9. Rent
(a) The rent under the Lease is current, and Lessee
is not in default in the performance or any of its obligations under the
Lease.
(b) Lessee is currently paying base rent under the
Lease in the amount of $ per month. Lessee has not received and is
----------
not entitled to any abatement, refunds, rebates, concessions or forgiveness
of rent or other charges, free rent, partial rent, or credits, offsets or
reductions in rent, except as follows: .
--------------------------------------
(c) Lessee's estimated share of operating
expenses, common area charges, insurance, real estate taxes and administrative
and overhead expenses is % and is currently being paid at the rate of
---
$ per month.
------------
(d) To the best of Lessee's knowledge, there are no
existing defenses or offsets against rent due or to become due under the terms
of the Lease, and there has been no default or other wrongful act or omission
by the landlord under the lease or otherwise in connection with Lessee's
occupancy of the Leased Premises, except as follows:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(If none, please state "None").
Section 10. Security Deposit.
The amount of Lessee's security deposit held by Lessor
under the Lease is Dollars ($ ).
-------------------- -------
<PAGE> 91
Section 11. Prepaid Rent.
The amount of prepaid rent, separate from the
security deposit, is __________________Dollars ($______) covering the period
from ______________ to ______________.
Section 12. Insurance.
All insurance, if any, required to be maintained
by Lessee under the Lease is presently in effect.
Section 13. Tenant Improvements.
All construction of buildings, site improvements
and facilities and interior tenant improvements and other requirements
respecting the Leased Premises which Lessor was to have performed in accordance
with the terms of the Lease have been performed and completed in all respects
and accepted by Lessee, except____________________. All tenant allowances,
reimbursements for construction costs and other, similar sums agreed to be paid
by the landlord respecting the Leased Premises have been paid, except follows:
______________________________________________________________________________.
Section 14. Lessor's Obligations.
As of the date of this Certificate, to the best of
Lessee's knowledge, Lessor has performed all obligations required of Lessor
under the Lease; no offsets, counterclaims, or defenses of Lessee under the
Lease exist against Lessor; and no events have occurred that, with the passage
of time or the giving of notice, would constitute a basis for offsets,
counterclaims, or defenses against Lessor, except as follows:__________________
______________________________________________________________________________.
Section 15. Assignments by Landlord.
Lessee has received no notice of any assignment,
hypothecation or pledge of the Lease or rentals under the Lease by Landlord.
Section 16. Assignments by Lessee.
Lessee has not sublet or assigned the Leased
Premises or leased any portion thereof to any sublessee or assignee. No one
except Lessee and its employees will occupy the Leased Premises. The address for
notices to be sent to Lessee is as set forth in the Lease.
<PAGE> 92
Section 17. Environmental Matters
(a) To the best of Lessee's knowledge, the use,
maintenance and operation of the Leased Premises will at all times comply with
all applicable federal, state, county and local statutes, laws, rules and
regulations of any governmental authorities relating to environmental, health or
safety matters (collectively, "Environmental Laws").
(b) The undersigned represents and warrants that
it has not used, generated, released, discharged, stored or disposed of any
hazardous waste, toxic substances or related materials (collectively "Hazardous
Materials") on, under, in or about the Leased Premises, or transported any
Hazardous Materials to or from the Leased Premises, other than Hazardous
Materials used in the ordinary and commercially reasonable course of Lessee's
business in compliance with all Environmental Laws. The term "Hazardous
Materials" shall mean (a) any "hazardous substance" as such term is presently
defined in Section 101 (14) of the comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. S 9601 et seq.)
and any regulations promulgated thereunder ("CERCLA"), (b) any additional
substances or materials which are hereafter incorporated in or added to the
definition of "hazardous substances," "hazardous waste," "toxic substances" or
"toxic waste" under any other Environmental law or other law applicable to the
Leased Premises or under regulations promulgated pursuant thereto.
(c) Lessee will not use the Leased Premises for
any activities which, directly or indirectly, involve the use, generation,
treatment, storage, transportation or disposal of any petroleum product or any
Hazardous Material (other than in the ordinary course of the business to be
conducted by Lessee in full compliance with applicable Environmental Laws and in
a manner which will not pose a hazard to the Health and safety of the occupants
of the Leased Premises or any other property).
(d) Lessee has not received any notice, written or
oral, of violation of any Environmental Law or of any allegation which, if true,
would contradict anything contained herein and there are no writs, injunctions,
decrees, orders or judgments outstanding, no lawsuits, claims, proceedings or
investigations pending or threatened, relating to the use, maintenance or
operation of the Leased Premises, nor is Lessee aware of a basis for any such
proceeding.
<PAGE> 93
Section 18. Notification by Lessee.
From the date of this Certificate and continuing
until ____________________, Lessee agrees to immediately notify Lessor and
________________________ at the following addresses, on the occurrence of any
event or the discovery of any fact that would make any representation contained
in this Certificate inaccurate:
Alexandria Real Estate Equities, Inc.
11440 West Bernardo Court
Suite 170
San Diego, California 92127
Attn: Gary A. Kreitzer
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Lessee makes this Certificate with the knowledge
that it will be relied on by ___________________________ in agreeing to
___________________________.
Lessee has executed this Certificate as of the
date first written above by the persons named below, who are duly authorized to
do so.
LESSEE:
---------------------------------
By:
-----------------------------------
Its:
-----------------------------------
Dated:
----------------------------------
<PAGE> 94
EXHIBIT "G"
THE ENVIRONMENTAL AND BUILDING REPORTS
Phase I Environmental Site Assessment of Parcels 1 and 2 of John Hopkins Court,
San Diego, California, 92121 dated January 22, 1997 prepared for Alexandria
Real Estate Equities, Inc. (fka Health Science Properties, Inc.) Prepared by
Dames & Moore, Job no. 29311-012-035.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND STATEMENTS OF CASH
FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 35,867
<SECURITIES> 56,783
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 97,438
<PP&E> 44,029
<DEPRECIATION> (22,703)
<TOTAL-ASSETS> 125,759
<CURRENT-LIABILITIES> 26,394
<BONDS> 0
0
0
<COMMON> 289,051
<OTHER-SE> 80,263
<TOTAL-LIABILITY-AND-EQUITY> 125,759
<SALES> 0
<TOTAL-REVENUES> 8,434
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 568
<INCOME-PRETAX> (135,017)
<INCOME-TAX> 0
<INCOME-CONTINUING> (135,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (135,017)
<EPS-PRIMARY> (4.69)
<EPS-DILUTED> (4.69)
</TABLE>
