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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER: 0-23736
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GUILFORD PHARMACEUTICALS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1841960
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6611 TRIBUTARY STREET
BALTIMORE, MARYLAND 21224
(410) 631-6300
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
TITLE OF CLASS
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X ]
As of March 17, 1998, the aggregate value of the approximately 19,445,145
shares of common stock of the Registrant issued and outstanding on such date,
excluding approximately 3,577,015 shares held by all affiliates of the
Registrant, was approximately $366,950,506. This figure is based on the closing
sales price of $23.125 per share of the Registrant's common stock as reported
on the Nasdaq(R) National Market on March 17, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents incorporated by reference and the
Part of the Form 10-K into which the document is incorporated:
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Guilford Pharmaceuticals Inc. (together with its subsidiaries, "Guilford"
or the "Company") is a biopharmaceutical company engaged in the development and
commercialization of novel products in two principal areas: (i) targeted and
controlled drug delivery systems using proprietary biodegradable polymers for
the treatment of cancer and other diseases; and (ii) therapeutic and diagnostic
products for neurological diseases and conditions.
Drug Delivery Business
The Company's first product in its drug delivery business is GLIADEL(R)
wafer ("GLIADEL"), a novel treatment for glioblastoma multiforme, the most
common and rapidly fatal form of brain cancer. GLIADEL was cleared for
marketing by the U.S. Food and Drug Administration ("FDA") in September 1996
for use as an adjunct to surgery to prolong survival in patients with recurrent
glioblastoma multiforme for whom surgical resection is indicated. GLIADEL was
commercially launched in the United States in February, 1997 by the Company's
worldwide (except for Scandinavia) marketing partner, Rhone-Poulenc Rorer
Pharmaceuticals, Inc. (together with its parent, Rhone-Poulenc Rorer, Inc.,
"RPR"). RPR has informed the Company that it has applied for regulatory
clearance in several other countries, including France, Canada, Argentina,
South Africa, Brazil, Korea and New Zealand, and is preparing to make filings
in other countries. During the first quarter of 1998, RPR obtained regulatory
clearance to market GLIADEL in Argentina and Brazil. The Company and RPR plan
to seek expansion of the labeling for GLIADEL for malignant glioma at the time
of initial surgery, and in this regard commenced patient enrollment in
December, 1997 in a multi-center Phase III clinical trial in Europe, the United
States and Israel for GLIADEL in patients undergoing initial surgery for
malignant glioma. Additionally, in October, 1996 the Company commenced a
Phase I dose-escalation clinical trial for a high-dose formulation of GLIADEL
at varying concentrations of BCNU, the chemotherapeutic agent used in GLIADEL,
with levels ranging from 6.5% up to 20%, in contrast to the 3.85% concentration
contained in the currently marketed formulation of GLIADEL. RPR is also
preparing to initiate clinical trials for GLIADEL for pediatric and metastatic
brain cancer in 1998. Under its agreements with RPR, the Company is eligible
to receive up to an aggregate of $40 million in milestone and other payments
from RPR in the event that RPR is able to achieve certain specified
international marketing clearances and to expand the marketing indication for
GLIADEL to first surgery patients.
The Company is also working to broaden its line of polymer-based oncology
products through the use of other chemotherapeutic agents, different polymer
systems and various formulations. The Company's first product candidate in
this program is a controlled release formulation of the chemotherapeutic agent,
paclitaxel (Taxol(R)) for peritoneal administration. In this formulation, the
paclitaxel is delivered via a proprietary biodegradable polyphosphoester
("PPE") polymer exclusively developed in collaboration with scientists at The
Johns Hopkins University ("Johns Hopkins"), and is initially targeted for the
treatment of ovarian cancer. Other cancers that may be suitable for this type
of targeted therapeutic approach include tumors of the prostate, head and neck,
breast, liver and lungs.
Neurological Products Program
In Guilford's neurological business, the Company is developing DOPASCAN(R)
Injection ("DOPASCAN"), a radio-labeled tropane derivative imaging agent for
the diagnosis and monitoring of Parkinson's disease, as well as neurotrophic
(i.e., nerve regenerative) and neuroprotectant small molecules as potential
treatments for a range of neurodegenerative diseases and conditions such as
Parkinson's disease, Alzheimer's disease, stroke, ALS, multiple sclerosis,
spinal cord injury and peripheral neuropathies. In addition, the Company is
researching small molecule therapeutics for cocaine and possibly other
addictions.
In 1997, the Company completed a multi-center Phase II clinical trial in
North America of DOPASCAN in conjunction with the Parkinson Study Group, the
results of which indicate that DOPASCAN can differentiate subjects with a
Parkinsonian disorder (i.e., Parkinson's disease and progressive supranuclear
palsy) from subjects without a Parkinsonian disorder (e.g., essential tremor
and healthy controls) with a high sensitivity (98%) and specificity (97%). No
serious adverse events were attributed to DOPASCAN in this study.
The Company's neurotrophic program is based on observations first made in
Dr. Solomon Snyder's laboratory at Johns Hopkins that immunophilins, which are
intracellular proteins which bind to immunosuppressant drugs such as FK 506 and
cyclophilin A, are enriched 10-40 fold in the central nervous system. The
Company is the exclusive licensee from Johns Hopkins of a U.S. patent
application covering the neurotrophic effects of certain immunosuppressant
drugs and other immunophilin ligands. Guilford scientists, together with their
academic collaborators, further demonstrated that the neurotrophic pathway
could be separated from the immunosuppressant pathway, and Guilford scientists
have synthesized hundreds of proprietary small molecules which are potently
neurotrophic, orally-bioavailable and cross the blood-brain barrier. Certain
in vivo pre-clinical results with one of the Company's novel neuroimmunophilin
ligands, GPI 1046, were published in the March 4, 1997 issue of the Proceedings
of the National Academy of Sciences. These experiments demonstrated that GPI
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1046 induced significant nerve regeneration and functional recovery in rodent
models of both central neuronal degeneration and peripheral nerve damage. In
September 1997, the Company announced interim results from preliminary
experiments which appear to confirm these findings in a primate model of
Parkinson's disease.
In August, 1997, the Company entered into a collaboration with Amgen Inc.
("Amgen") respecting the research, development and commercialization of the
Company's FKBP-based neuroimmunophilin ligand technology ("Neuroimmunophilin
Technology") for all human therapeutic and diagnostic applications. Pursuant
to the terms of the Company's agreements with Amgen (the "Amgen Agreements"),
Amgen initially paid the Company a one time, non-refundable payment of $15
million and invested an additional $20 million in the Company in exchange for
640,095 shares of the Company's common stock and five-year Warrants to purchase
up to an additional 700,000 shares of Company common stock at an exercise price
of $35.15 per share. Amgen also agreed to pay up to $13.5 million in the
aggregate, payable quarterly over three years, to support research activities
at the Company relating to the Neuroimmunophilin Technology, with an option to
fund a fourth year of research, or under certain conditions, to terminate the
research program after two years. Further, in the event Amgen achieves certain
specified development and regulatory milestones in each of ten different
clinical indications, Amgen has agreed to pay to the Company up to $392 million
in the aggregate. The Company will receive royalties on product sales, if any,
related to the Neuroimmunophilin Technology in the future. There can be no
assurance, however, that Amgen will be able to successfully develop any
FKBP-based neuroimmunophilin compound into a safe and effective regulatory
approved drug for neurological or other uses, and that Guilford will thereby
earn any of the milestone payments related to such development activities or
any royalties related to product sales.
In its neuroprotectant program, Guilford is developing novel compounds to
protect brain cells from ischemia (the lack of oxygen delivery from reduced
blood flow) and other disorders caused by massive release of excitatory amino
acid neurotransmitters such as glutamate. The Company is exploring three
distinct intervention points in a biochemical pathway in neuronal damage: (i)
pre-synaptic inhibition of glutamate release by inhibiting the enzyme,
NAALADase; (ii) post-synaptic inhibition of poly(ADP-ribose) polymerase
("PARP"); and (iii) post-synaptic inhibition of nitric oxide via inhibition of
Nitric Oxide Synthase ("NOS").
The Company's prototype NAALADase inhibitor, GPI 5000, has demonstrated
significant neuroprotectant activity in several cell culture and animal models
of neurodegeneration. In in vitro and in vivo models of focal ischemia,
GPI-5000 exhibited approximately 95% and 65% neuroprotection of cortical
neurons, respectively. In addition, in 1997, Company scientists presented
data on GPI 5000 in models of stroke, ALS, Parkinson's disease, myelination,
nerve crush, and spinal cord injury at the Annual Meeting of the Society for
Neuroscience.
With respect to the Company's current prototype PARP inhibitor Compound,
GPI-6150, data suggest that this compound is several times more potent as a
PARP inhibitor than the prototype compound, GPI 6000, previously used by the
Company to establish proof of principle of the relevant mechanism of action.
In a study presented in September, 1997, GPI 6000 was shown to be effective in
reducing neuronal damage in a rat model of stroke. The Company is currently
testing GPI 6150 and other proprietary small molecule PARP inhibitors in
various animal models of ischemia.
The Company also focused its efforts on researching and developing
therapeutics for cocaine and other addictions, and in 1997, was awarded a Small
Business Innovation Research (SBIR) grant and a one year contract with the
Office of National Drug Control Policy to provide funding for certain aspects
of the Company's addiction therapeutics program in the amounts of $100,000 and
$650,000, respectively.
* * * * *
Any statements made by the Company in this annual report that are forward
looking are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The forward-looking statements
contained in this annual report, include, but are not limited to, those
concerning application for international regulatory clearances and labeling
expansions for GLIADEL, polymer product line extensions, the commencement and
completion of the research program relating to the Company's FKBP-based
neuroimmunophilin ligand technology and other technologies, clinical
development activities, including without limitation commencement and conduct
of clinical trials related to GLIADEL, the Company's strategic plans,
anticipated expenditures and the need for additional funds, all of which
involve significant risks and uncertainties. Investors are cautioned that
these forward-looking statements involve risks and uncertainties that could
cause the actual results to differ from those expressed in or implied by those
statements. Information concerning factors that could affect such results are
set forth herein and in the Company's filings with the Securities and Exchange
Commission, including the section entitled "Risk Factors" set forth herein.
GLIADEL(R) and DOPASCAN(R) are registered trademarks of the Company.
Taxol(R) is a registered trademark of Bristol-Myers Squibb Company.
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PRODUCT AND DEVELOPMENT PROGRAMS
The following table summarizes the current status of the Company's
product, product candidates and research programs:
<TABLE>
<CAPTION>
PROGRAM/PRODUCT CANDIDATES DISEASE INDICATIONS/CONDITIONS STATUS (1) CORPORATE PARTNER
-------------------------- ------------------------------ -------------------- -------------------------
<S> <C> <C> <C>
DRUG DELIVERY BUSINESS
GLIADEL Recurrent glioblastoma Market RPR (2); Orion Farmos (3)
(3.85% BCNU) multiforme
Malignant glioma at time of Phase III RPR (2); Orion Farmos (3)
initial surgery
GLIADEL Malignant glioma Phase I RPR (2); Orion Farmos (3)
(6.5% up to 20% BCNU)
Controlled-release paclitaxel Ovarian Cancer Preclinical __
(paclitaxel in PPE microspheres)
NEUROLOGICAL PRODUCTS PROGRAM
DOPASCAN Imaging agent to diagnose and Phase II DRL (5)
monitor Parkinson's disease
NEUROTROPHIC DRUGS (6)
Neuroimmunophilin ligands Parkinson's disease Preclinical Amgen
Other nerve growth and repair
indications (Alzheimer's disease,
traumatic brain injury, traumatic
spinal cord injury, multiple
sclerosis, neuropathy, stroke and
others)
NEUROPROTECTIVE DRUGS (6)
NAALADase inhibitors Stroke, head trauma, ALS, Preclinical --
Parkinson's disease, and
peripheral neuropathies
PARP inhibitors Stroke, cardiac ischemia, septic Preclinical --
shock
NOS inhibitors Stroke, head trauma Research --
ADDICTION THERAPEUTICS (6)
Dopamine transporter ligand Cocaine addiction Research --
</TABLE>
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(1) "Research" includes initial research related to specific molecular
targets, synthesis of new chemical entities and assay development for the
identification of lead compounds. "Preclinical" includes testing of lead
compounds in vitro and in animal models, pharmacology and toxicology
testing, product formulation and process development prior to the
commencement of clinical trials.
(2) RPR is the Company's corporate partner throughout the world, excluding
Scandinavia
(3) Orion Farmos is the Company's corporate partner in Scandinavia for
GLIADEL.
(4) Orion Farmos has certain rights of first refusal regarding Scandinavia.
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(5) Daiichi Redioisotope Laboratories, Ltd. ("DRL") is the Company's corporate
partner in Japan, Korea and Taiwan for DOPASCAN.
(6) As used in this annual report, a "prototype" compound is one which the
Company uses to establish proof of principle of the relevant mechanism of
action, but which it does not intend to develop into a product because of
pharmacokinetic characteristics of the compound, the Company's proprietary
position with respect to such compound or for other reasons. Upon in vitro
and in vivo proof of principal of intervention in a biochemical mechanism
of action, the Company seeks to develop proprietary lead compounds in this
program through medicinal chemistry both around the prototype compounds
and other compounds.
Development and commercialization of the Company's product and product
candidates are subject to numerous risks and uncertainties, certain of which
are set forth under the section herein captioned "Risk Factors" and in this
annual report.
DRUG DELIVERY BUSINESS
The Company's drug delivery business currently involves the use of
biodegradable polymers for targeted and controlled drug delivery of
chemotherapeutic drugs to treat cancer. Delivering high drug concentrations
locally for a sustained period of time may increase the efficacy of
chemotherapy in slowing tumor growth and/or reducing tumor mass and may
decrease the side effects associated with systemic drug administration.
Guilford has developed expertise in the discovery, clinical development and
manufacturing of polymer-based drug delivery products.
GLIADEL
The Company's first product in its drug delivery business is GLIADEL, a
novel treatment for malignant glioma, the most common and rapidly fatal form of
primary brain cancer. GLIADEL is a white wafer about the size of a dime made of
a proprietary biodegradable polymer which contains the cancer chemotherapeutic
drug BCNU (carmustine). Up to eight GLIADEL wafers are implanted in the cavity
created when a neurosurgeon removes the brain tumor. The wafers gradually
degrade in the cavity and deliver BCNU directly to the tumor site in high
concentrations for an extended period of time without exposing the rest of the
body to the toxic side effects of BCNU. GLIADEL is used to complement standard
therapy with surgery, radiation therapy and systemic chemotherapy in patients
with recurrent glioblastoma multiforme. In a North American Phase III clinical
trial, GLIADEL was shown to increase the six-month survival rate by more than
50% in these patients. The availability of GLIADEL gives physicians a new
treatment option for this rapidly fatal disease.
The Company entered into a strategic agreement with RPR in June 1996
granting RPR the worldwide (excluding Scandinavia) rights to market, sell and
distribute GLIADEL. During 1996, RPR paid Guilford $27.5 million in milestone
payments, $7.5 million in an equity investment in Company Common Stock and
extended to the Company a $7.5 million line of credit to support future
expansion of the Company's GLIADEL and other polymer manufacturing capacity.
Under its agreements with RPR, Guilford receives a combined transfer price and
royalty of 35% up to 40% of the net sales of GLIADEL. For 1997, the Company's
revenues related to GLIADEL sales were $7.3 million, $5.7 million of which
were paid as a transfer price on units sold to RPR and $1.6 million of which
were paid as royalties on RPR sales to end-users. In addition, the Company
could earn additional payments totaling up to $40.0 million (including $7.5
million in the form of an equity investment), subject to achievement of certain
milestone events, including expanded labeling to include use of GLIADEL at the
time of initial surgery and specified international marketing approvals. There
can be no assurance however that the Company will receive any or all of these
payments as they are contingent on obtaining clearances for GLIADEL, the timing
and extent of which are not within the control of the Company, and there can be
no assurance that any or all of such regulatory objectives will be attained.
The Company pays a royalty to Massachusetts Institute of Technology ("MIT") on
sales of GLIADEL pursuant to the license agreement under which the Company
acquired the underlying technology for this product.
On September 23, 1996 the FDA approved the Company's New Drug Application
("NDA") for GLIADEL for use as an adjunct to surgery to prolong survival in
patients with recurrent glioblastoma multiforme for whom surgery is indicated.
RPR, the Company's worldwide (except for Scandinavia) marketing partner for
GLIADEL, commercially launched GLIADEL in the United States in February, 1997
through RPR's existing oncology sales force. RPR has informed that Company
that it has applied for regulatory clearance in several other countries,
including [France], Canada, Argentina, South Africa, Brazil, Korea and New
Zealand, and is preparing to make similar filings in other countries. During
the first quarter of 1998, RPR obtained regulatory clearance to market GLIADEL
in Argentina and Brazil. The Company and RPR are also planning to seek
expansion of the labeling for GLIADEL.
Guilford and RPR have initiated a series of new clinical trials for the
purpose of seeking to expand the market for GLIADEL. Patient enrollment
commenced in December, 1997 for a multi-center Phase III randomized,
double-blind, placebo-controlled trial in Europe, the United States and Israel
in patients undergoing initial surgery for malignant glioma. In addition,
following completion of preclinical studies suggesting that higher
concentrations of BCNU in GLIADEL may be even more effective and appear to be
safe, Guilford initiated a Phase I clinical trial in October, 1996 to test the
safety of escalating the concentration of BCNU in GLIADEL from its current
level of 3.85% up to 20%. RPR is also preparing to initiate clinical trials
for GLIADEL for pediatric and metastatic brain cancer in
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1998.
The Company entered into its agreement with Orion Farmos, a major
Scandinavian health care company, for the sales, marketing and distribution of
GLIADEL in Scandinavia in October 1995. The agreement provides for payments to
Guilford based on GLIADEL sales made by Orion Farmos in Scandinavia. Orion
Farmos has commenced sales of GLIADEL in Scandinavia on a named hospital basis.
Future sales of GLIADEL are subject to certain risks, including the
following. The Company's agreements with RPR do not impose any minimum
purchase requirements on the part of RPR, and there can be no assurance that
RPR will be successful in marketing and selling GLIADEL. In particular, prior
to the commercial launch of GLIADEL in the United States in February 1997,
RPR's oncology sales force had no prior experience marketing and selling a
product to neurosurgeons. Furthermore, GLIADEL represents a novel approach to
the treatment of brain cancer, and there can be no assurance of broad
acceptance by the medical or patient communities. The Company currently relies
on a single supplier for BCNU, the chemotherapeutic agent used in GLIADEL, and
on its own single manufacturing facility to produce GLIADEL. Inability to
secure timely, sufficient, or GMP quality supply of BCNU, unforeseen plant
shutdowns due to personnel or plant or equipment problems, risks associated
with regulatory compliance (including the need to manufacture GLIADEL in
accordance with the FDA's current Good Manufacturing Practice (cGMP)
regulations), uncertainties regarding the receipt and timing of international
regulatory clearances for GLIADEL, the potential inability to meet future
product demand, the risk of product recalls due to excessive product breakage
or other reasons, among others, could adversely affect the timing and extent of
any future revenues related to GLIADEL sales. For discussion of these and
other risks, see the section herein captioned "Risk Factors".
Other Polymer-Based Drug Delivery Products. The Company is working to
broaden its line of polymer-based products to include drug delivery products
for the treatment of tumors outside the central nervous system. Other cancers
that may be suitable for this type of targeted therapeutic approach include
tumors of the prostate, ovaries, head and neck, breast, esophagus, liver,
pancreas, lung and colon. In addition, the Company is investigating other
polymer systems and additional configurations such as micro- and nanospheres,
gels, beads and rods for stereotactic implantation. The Company's first
product candidate in this program is a controlled release formulation of the
chemotherapeutic agent, paclitaxel (Taxol(R)) for peritoneal administration.
In this formulation the paclitaxel is delivered via a PPE polymer developed in
collaboration with scientists at Johns Hopkins, and is initially targeted for
the treatment of ovarian cancer. As part of this effort, the Company has
entered into two research collaborations with a biomedical engineering
laboratory at Johns Hopkins to discover new polymers and to advise the Company
on new product development. In June 1996, the Company entered into a license
agreement with MIT and Johns Hopkins relating to a patent application claiming
certain biodegradable polymers for use in connection with the controlled local
delivery of certain chemotherapeutic agents (including paclitaxel (Taxol(R))
and camptothecin) for treating solid tumors. In July 1996, the Company entered
into a license agreement with Johns Hopkins relating to two issued U.S. patents
relating to PPE polymers.
Neurological Products Program
DOPASCAN. The Company's product candidate for the diagnosis and
monitoring of Parkinson's disease, DOPASCAN, is administered intravenously in
trace quantities and allows physicians to obtain images of dopamine neurons in
the brain. Dopamine neurons are highly concentrated in a specialized area of
the brain that degenerates in Parkinson's disease. Parkinson's disease is a
common neurodegenerative disorder affecting more than 600,000 patients in the
United States. In its early stages, Parkinson's disease can be very difficult
to distinguish clinically from other diseases with similar symptoms but which
do not respond well or at all to specific therapy for Parkinson's disease.
Unfortunately, there are no diagnostic tests currently available that can
reliably detect the neuronal degeneration in Parkinson's disease, and the
typical delay between the onset of symptoms and clinical diagnosis is more than
two years. The primary way to establish the diagnosis at present is through
repeated physician visits and the use of therapeutic trials of drugs such as
L-Dopa, which carry with them the risk of unnecessary, sometimes severe, side
effects. Following intavenous injections with DOPASCAN, images of a subject's
brain are obtained with the SPECT camera and can identify loss of dopamine
neurons in the brain, and to date, over 1,000 patients have been imaged in the
United States and Europe using DOPASCAN. In a multi-center Phase IIb clinical
trial conducted by the Parkinson's Study Group in the United States and
completed in 1997, DOPASCAN accurately differentiated patients clinically
diagnosed with a Parkinsonian disorder (i.e., Parkinson's disease and
progressive supranuclear palsy) from subjects without a Parkinsonian disorder
(e.g., essential tremor and healthy controls) with a high sensitivity (98%) and
specificity (97%). In addition, no serious adverse events were attributed to
DOPASCAN in this study. There can be no assurance, however, that similar
results will be seen in any other clinical trials for DOPASCAN that may be
conducted in the future or that DOPASCAN will be approved as a safe and
effective FDA-cleared diagnostic.
The Company has entered into an agreement with DRL, a leading Japanese
radiopharmaceutical company, to develop and commercialize DOPASCAN in Japan,
Korea and Taiwan. DRL has informed the Company that it has completed Phase II
clinical trials in Japan and anticipates commencing Phase III clinical trials
in 1998. The Company intends to seek partners for distribution of this
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product in other territories, including the United States and Europe.
Neurotrophic Drugs
Guilford, together with it corporate partner, Amgen, is developing small
molecule, orally bioavailable compounds to promote nerve growth and repair
(neurotrophic agents) for the treatment of neurological disorders. The
degeneration or damage of nerve cells in the brain and peripheral neurons
resulting from certain diseases and conditions causes a loss of either central
nervous system function (e.g., Alzheimer's disease, Parkinson's disease,
multiple sclerosis, spinal cord injury and stroke) or peripheral nerve function
(e.g., diabetic neuropathy and other peripheral neuropathies). Under normal
circumstances, damaged nerves have a very limited ability to regrow, which
poses a major obstacle for the treatment of these conditions.
In 1990, scientists at Johns Hopkins led by Dr. Solomon H. Snyder
discovered that a binding protein for commonly used immunosuppressive agents
such as tacrolimus (FK-506), was concentrated 10 to 40 fold higher in the brain
than in the immune system. The Johns Hopkins scientists went on to discover
that commonly used immunosuppressive drugs can promote nerve growth, and
Guilford has exclusively licensed from Johns Hopkins a U.S. patent application
claiming these discoveries. Guilford and Johns Hopkins scientists further
discovered that the mechanism of nerve growth promotion is independent of the
mechanism responsible for immunosuppression, and is mediated by binding to the
major neuroimmunophilin in the brain. This binding was discovered to initiate a
previously unknown neurotrophic cascade.
Based on these discoveries, the Company has synthesized hundreds of
proprietary small molecule neuroimmunophilin ligands in several distinct
chemical series that promote nerve growth without being immunosuppressive. The
Company has filed numerous patent applications in the United States and
internationally relating to both novel compositions and methods of treating
neurological disorders utilizing these compounds. These compounds induce nerve
growth directly, as well as potentiate nerve growth in the presence of nerve
growth factors. Several of Guilford's lead compounds have exhibited
neurotrophic effects at picomolar and even sub-picomolar concentrations in in
vitro nerve cell cultures.
Experimental results for one of these compounds, GPI-1046, were reported
in 1996 and published in the March 4, 1997 issue of the Proceedings of the
National Academy of Sciences. In two animal models of Parkinson's disease,
GPI-1046 demonstrated neuroprotective and neuroregenerative effects and
recovery of behavioral function. In one experiment where a neurotoxin and
GPI-1046 were administered simultaneously, the compound produced a 90%
protection and/or regeneration of the nigral-striatal dopamine neurons, the
dopamine neurons which are selectively lost in Parkinson's disease. In another
experiment where GPI-1046 was administered up to one month following the
administration of the neurotoxin, a 45% regeneration of functional striatal
dopamine neurons and near complete normalization of behavior in the affected
animals was observed. In September 1997, the Company announced interim results
from preliminary experiments which appear to confirm these findings in a
primate model of Parkinson's disease. In addition to animal models of
Parkinson's disease, GPI-1046 has been shown to promote nerve regeneration in a
rat model of peripheral nerve injury. In this model, GPI-1046 increased the
size and number of axons and also increased the degree of myelination of nerve
cells in a damaged sciatic nerve, leading to partial functional improvement in
the paralyzed leg. Data also show that Guilford's neuroimmunophilin ligand
compounds exhibit systemic activity, oral bioavailability, and the ability to
cross the blood-brain barrier, unlike many naturally occurring nerve growth
factors. The preclinical results discussed above and elsewhere in this annual
report are based on a limited number of animal studies and animal models of
disease, and there can be no assurance that the Company and its collaborative
partner, Amgen, will be able to successfully develop one or more of these
compounds or that they will be approved as a safe and effective drug.
Company scientists have designed and synthesized additional compounds from
several distinct chemical series with improved potency and pharmacokinetic
profiles compared to GPI-1046. One such example, GPI-1216, potently promotes
neurite outgrowth in chick sensory neurons in cell culture in sub-picomolar
concentrations, and has been shown to be efficacious in an in vivo model of
Parkinson's disease. Additional compounds from other patent series, such as
GPI-1511, GPI-1234 and GPI-1485, have been shown in animal models to be orally
useful and more potent than GPI-1046 in vivo.
Company data indicate that the Company's neuroimmunophilin ligands can
produce nerve regeneration following multiple routes of administration,
including oral administration. Further, neuroimmunophilin ligands are able to
cross the blood-brain barrier, while many naturally-occurring nerve growth
factors, proteins and peptides are not orally bioavailable and do not cross the
blood-brain barrier. Several of the Company's neuroimmunophilin ligand
compounds have shown neurotrophic effects in a range of different types of
neurons such as dopaminergic, cholinergic, serotonergic and peripheral, and
therefore could be useful in a range of disorders, including potentially
certain neurological disorders, such as Parkinson's disease and Alzheimer's
disease, and other non-neurological diseases and conditions.
In August 1997, the Company entered into a collaboration with Amgen
respecting the research, development and commercialization of the
Neuroimmunophilin Technology for all human therapeutic and diagnostic
applications. Pursuant to the terms of the Amgen
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Agreements, Amgen initially paid the Company a one time, non-refundable payment
of $15 million and invested an additional $20 million in the Company in
exchange for 640,095 shares of the Company's common stock and five-year
Warrants to purchase up to an additional 700,000 shares of Company common stock
at an exercise price of $35.15 per share. In connection with the sale of
these securities, the Company granted Amgen certain demand and "piggyback"
registration rights under applicable securities laws.
Amgen also agreed to provide to the Company up to $13.5 million in the
aggregate, payable quarterly over three years, to support research activities
at the Company relating to the Neuroimmunophilin Technology, with an option to
fund a fourth year of research or, under certain conditions, to terminate the
research program after two years. Subject to its obligation to fund two years
of research at Guilford, Amgen has the right to discontinue all its activities
relating to the development and commercialization of the Neuroimmunophilin
Technology at any time. The Amgen Agreements provide for milestone payments of
up to $392 million in the aggregate to the Company in the event Amgen achieves
certain specified development milestones in each of ten different clinical
indications, seven of which are neurological (i.e., Parkinson's disease,
Alzheimer's disease, traumatic brain injury, traumatic spinal cord injury,
multiple sclerosis, neuropathy and stroke) and three of which are
non-neurological. In addition, the Company will receive royalties on product
sales, if any, related to the Neuroimmunophilin Technology in the future.
Under the Amgen Agreements, Amgen will conduct and pay for the development and
commercialization of products related to the Neuroimmunophilin Technology.
Under certain limited circumstances, Guilford has the option to conduct certain
Phase I and Phase II clinical trials on one product candidate and has the right
to co-promote in the United States one product commercialized under the Amgen
Agreements.
As noted in the section herein captioned "Risk Factors" and elsewhere in
this annual report, there can be no assurance Amgen will be able to
successfully develop any FKBP-based neuroimmunophilin compound or that such
compounds will be approved as safe and effective drugs for neurological or
other uses and that Guilford will earn any of the milestone payments related to
such development activities. In particular, there can be no assurance that
Amgen will be able to achieve any of the development milestones set forth in
the Amgen Agreements with respect to any specified indication. The research,
development and commercialization of early stage technology like the
Neuroimmunophilin Technology is subject to significant risks and uncertainty
respecting, among other things, selection of an appropriate lead compound,
successful completion of the pre-clinical and clinical development activities,
regulatory clearances, formulation of final product dosage forms, scale-up from
bench quantities to commercial quantities and manufacture of products and
commercialization of such products as well as the successful preservation and
extension of the patent and other intellectual property rights. For discussion
of these and other risks, see the section herein captioned "Risk Factors".
Neuroprotective Drugs
Guilford is developing novel compounds to protect brain cells against
damage from ischemia (the lack of oxygen delivery from reduced blood flow) and
other insults and disorders which cause damage due to massive release of
excitatory amino acid neurotransmitters such as glutamate. The Company's
approach is to identify and clinically test compounds that have the ability to
intervene at three distinct steps in a biochemical pathway leading to neuronal
damage: (i) inhibition of NAALADase; (ii) inhibition of PARP; and (iii)
inhibition of NOS.
In normal brain function, the pre-synaptic release of the neurotransmitter
glutamate, resulting in stimulation of post-synaptic glutamate receptors
(including n-methyl-D-aspartate (NMDA)), plays a critical role in many central
neuronal functions. However, in conditions such as ischemia, epilepsy and
Huntington's disease, there is a massive increase in pre-synaptic glutamate
release, which results in excessive activation of post-synaptic glutamate
receptors. This, in turn, causes excess production of the neurotransmitter
nitric oxide, mediated by the enzyme NOS, which results in damage to cellular
DNA. The nerve cell then attempts to repair such damage, mediated by the enzyme
PARP, which leads to depletion of cell energy and cell death.
NAALADase Inhibitors
To date, a number of biopharmaceutical companies have attempted to find
compounds which might block the effects of excess glutamate on post-synaptic
glutamate receptors. However, a number of post-synaptic glutamate antagonists
have been associated with toxicities.
Guilford scientists have succeeded in inhibiting an enzyme, NAALADase,
involved in the pre-synaptic release of glutamate, that is, preventing
excessive levels of glutamate from being produced and released in the first
place. The Company has identified compounds which exhibit nanomolar potency in
vitro. The Company has filed a number of composition of matter patent
applications, relating to several series of novel compounds, and method of use
patent applications, relating to the use of NAALADase inhibitors for
neurological and anti-cancer uses. GPI-5000, the Company's prototype
pre-synaptic glutamate inhibitor, has demonstrated significant neuroprotectant
activity in several cell culture and animal models of neurodegeneration. In
both in vitro and in vivo models of focal ischemia, GPI-5000 exhibited
approximately 95% and 65% neuroprotection of cortical neurons , respectively.
To the Company's knowledge, such a magnitude of neuroprotection is
significantly greater than that reported by post-synaptic glutamate receptor
antagonists, calcium channel antagonists or pH modulators tested under similar
conditions. In addition, because GPI-5000, as well as Guilford's other series
of
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proprietary compounds, do not interact with post-synaptic glutamate receptors,
they may not be associated with the toxicities associated with post-synaptic
glutamate antagonists. In addition, in 1997, Company scientists presented data
on GPI 5000 in models of stroke, ALS, Parkinson's disease, myelination, nerve
crush, and spinal cord injury at the Annual Meeting for the Society for
Neuroscience.
PARP Inhibitors
The Company is developing compounds which inhibit PARP, a nuclear enzyme
that is involved in the repair of damaged DNA. Nitric oxide has been shown to
damage DNA in nerve cells and to trigger the activation of PARP, which in turn
leads to depletion of energy in the cell, resulting in cell death. Guilford and
Johns Hopkins scientists have shown that inhibitors of PARP can prevent
neurotoxicity in cultures of cerebral cortical neurons, suggesting that they
may be effective in treating stroke and neurodegenerative diseases. Guilford
scientists have developed a high throughput assay to screen for PARP
inhibitors, and the Company has filed U.S. and international patent
applications for several series of PARP inhibitors and has an exclusive license
to a U.S. patent for the use of PARP inhibitors to treat disease conditions
caused by NMDA neurotoxicity, such as stroke. Among the series of PARP
inhibitors, the Company's proprietary GPI 6150 family of compounds has been
shown to be the most potent. Animal data suggest that GPI 6150 is several
times more potent as a PARP inhibitor than the prototype compound, GPI 6000,
previously used by the Company to establish proof of principle of the relevant
mechanism of action. In a study presented in September, 1997, GPI 6000 was
shown to be effective in reducing neuronal tissue damage in a rat model of
stroke. The Company is currently testing another prototype compounds, GPI
6150, and other proprietary small molecule PARP inhibitors in various animal
models of ischemia, and Guilford scientists have found that GPI 6150 can
significantly protect against neuronal damage in a rat model of focal ischemia,
although chemical studies are necessary to confirm these results from animal
studies.
NOS Inhibitors
The Company is researching compounds that inhibit the formation of nitric
oxide, a neurotransmitter that mediates certain important actions of glutamate.
When excess glutamate is released (e.g., due to stroke or severe head trauma),
a variety of biochemical effects occur, including activation of NOS, an enzyme
that synthesizes nitric oxide from the amino acid arginine. In animal models of
vascular stroke, treatment with nitroarginine, a NOS inhibitor, blocked 70% of
neuronal damage. There are three distinct known forms of NOS: neuronal NOS
(nNOS), inducible NOS (iNOS) and endothelial NOS (eNOS). In animal models of
stroke, there is a 50% reduction of neuronal damage in a "knock-out" mouse
lacking nNOS. In contrast, inhibition of eNOS will reduce blood flow to the
brain during stroke, thus aggravating nerve cell damage. Consequently, there is
considerable interest in identifying compounds which selectively inhibit nNOS.
The Company is currently investigating novel mechanisms to selectively inhibit
nNOS activity. The Company has an exclusive license to an issued U.S. patent
which relates to the use of NOS inhibitors to prevent or treat disease
conditions caused by glutamate neurotoxicity.
Addiction Therapeutics
The Company is also focusing its efforts on the development of
therapeutics for cocaine addiction and other addictive behaviors. The
Company's cocaine addiction therapeutics program focuses on the development of
drugs which prevent cocaine from binding to dopamine transporters while
minimally affecting normal dopamine transport function, thus potentially
limiting the effects of cocaine.
Guilford scientists have identified and synthesized novel compounds with
specificity for the cocaine recognition site in the brain and the Company has
filed patent applications covering several classes of compounds. A prototype
compound, GPI-2138, is 17 times more potent in binding to the cocaine binding
site than in inhibiting dopamine uptake, compared to cocaine. In animal
experiments, GPI-2138 blocked certain behavioral effects produced by cocaine,
including hyperlocomotion and cocaine self-administration. Company scientists
have synthesized other compounds which exhibit a binding-to-uptake ratio in
vitro of as high as 38 times greater than cocaine. The Company has also entered
into a cooperative research and development agreement with the National
Institute of Drug Abuse to identify and develop cocaine antagonists. In
addition to cocaine addiction, other forms of addiction, including alcohol and
heroin addiction, may result from facilitation of dopaminergic
neurotransmission in certain areas of the brain. As a result, Guilford
scientists are currently investigating whether GPI-2138 and related compounds
may block the addictive properties of alcohol and heroin in laboratory animals.
The Company is using GPI-2138 to establish proof of principle of the relevant
mechanism of action but does not intend to further develop this compound into a
product. The Company is currently seeking to develop proprietary lead compounds
in this program through medicinal chemistry around GPI-2138 and other
compounds. In 1997, the Company was awarded a Small Business Innovation
Research (SBIR) grant and a one year contract with the Office of National Drug
Control Policy to provide funding for certain aspects of the Company's
addiction therapeutics program in the amounts of $100,000 and $650,000,
respectively.
MANUFACTURING AND RAW MATERIALS
The Company currently manufactures GLIADEL using a proprietary process at
its 12,500 square foot manufacturing facility in Baltimore, Maryland.
Approximately 5,500 square feet of packaging, quality control, laboratory, and
warehouse space were added in
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1996 to support the commercial launch of GLIADEL. The facility has been in
operation since April 1995 and was inspected by the FDA in October 1995. The
Company's current facilities are designed to enable the Company to produce up
to 8,000 GLIADEL treatments (each consisting of eight GLIADEL wafers) annually.
In January, 1998 the Company completed construction of an expansion of its
manufacturing facilities to allow for the additional synthesis of the
polyanhydride co-polymer used in the manufacture of GLIADEL. The Company also
will be able to use this facility to produce its newest proprietary
biodegradable polymers, the PPEs, in connection with the development of other
polymer-based products. In addition, the Company has commenced construction of
a second clean room facility, which the Company expects to be completed by the
end of 1998 and will increase the Company's GLIADEL manufacturing capacity to
20,000-30,000 treatments annually. Furthermore, the Company expects that this
second clean room facility will also provide sufficient capacity to produce any
clinical supply of PPE polymer based product candidates needed in the future,
including its paclitaxel/PPE polymer product candidate currently under
development for ovarian cancer.
The Company believes that the various materials used in GLIADEL are
readily available and will continue to be available at reasonable prices.
Nevertheless, while the Company believes that it has an adequate supply of
BCNU, the active chemotherapeutic ingredient in GLIADEL, to meet current demand
and has entered into an agreement for process development of BCNU with a
potential second source of BCNU, any interruption in the ability of the current
supplier to deliver this ingredient could prevent the Company from delivering
the product on a timely basis. The Company depends upon the availability of
certain single-source raw materials in its formulations, but is seeking
alternate suppliers for most of these raw materials as well. There can be no
assurance that such sources can be secured successfully on terms acceptable to
the Company, or at all. Failure of any supplier to provide sufficient
quantities of raw material in accordance with cGMP could cause delays in
clinical trials and commercialization of products.
Pursuant to its agreements with Nordion International Inc., a leading
supplier of radiolabeled products based in Canada, and its European subsidiary,
Nordion Europe S.A. (collectively, "Nordion"), the Company synthesizes the
precursor of DOPASCAN and supplies it to Nordion, which then radiolabels
DOPASCAN with Iodine-123 for distribution to hospitals involved in the clinical
trials in North America and Europe, respectively. During the term of these
agreements, Nordion has agreed not to perform development, manufacture or
supply services for any competing Iodine-123 radiolabeled imaging diagnostic
for Parkinson's disease based on dopamine transporter binding.
GOVERNMENT REGULATION AND PRODUCT TESTING
All domestic prescription pharmaceutical manufacturers are subject to
extensive regulation by the federal government, principally the FDA and, to a
lesser extent, by state and local and perhaps foreign governments if products
are marketed abroad. Biologics and controlled drug products, such as vaccines
and narcotics, and radiolabeled drugs, are often regulated more stringently
than are other drugs. The Federal Food, Drug, and Cosmetic Act and other
federal statutes and regulations govern or influence the development, testing,
manufacture, labeling, storage, approval, advertising, promotion, sale and
distribution of prescription pharmaceutical products. Pharmaceutical
manufacturers are also subject to certain recordkeeping and reporting
requirements. Noncompliance with applicable requirements can result in warning
letters, fines, recall or seizure of products, total or partial suspension of
production and/or distribution, refusal of the government to enter into supply
contracts or to approve marketing applications and criminal prosecution.
Upon FDA approval, a drug may only be marketed for the approved
indications in the approved dosage forms and at the approved dosage levels. The
FDA also may require post-marketing testing and surveillance to monitor the
record of the approved product. Manufacturers of approved drug products are
subject to ongoing compliance with FDA regulations. For example, the FDA
mandates that drugs be manufactured in conformity with cGMP regulations. In
complying with the cGMP regulations, manufacturers must continue to expend
time, money and effort in production, recordkeeping and quality control to
ensure that the product meets applicable specifications and other requirements.
The FDA periodically inspects drug manufacturing facilities to ensure
compliance with applicable cGMP requirements. Failure to comply subjects the
manufacturer to possible FDA action, such as suspension of manufacturing,
seizure of the product or voluntary recall of a product. Adverse experiences
with the product must be reported to the FDA. The FDA also may require the
submission of any lot of the product for inspection and may restrict the
release of any lot that does not comply with FDA regulations, or may otherwise
order the suspension of manufacture, voluntary recall or seizure. Product
approvals may be withdrawn if compliance with regulatory requirements is not
maintained or if problems concerning safety or efficacy of the product occur
following approval.
FULL CLINICAL TESTING REQUIREMENTS
The steps required before a newly marketed drug may be commercially
distributed in the United States include: (i) conducting appropriate
preclinical laboratory and animal tests; (ii) submitting to the FDA an
application for an IND, which must become effective before clinical trials may
commence; (iii) conducting well-controlled human clinical trials that establish
the safety and efficacy of the drug product; (iv) filing with the FDA a NDA for
non-biological drugs; and (v) obtaining FDA approval of the NDA prior to any
commercial sale or shipment of the non-biological drug. In addition to
obtaining FDA approval for each indication to be treated with each product,
each domestic drug manufacturing establishment must register with the FDA, list
its drug products with the FDA, comply
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with cGMP requirements and be subject to inspection by the FDA. Foreign
manufacturing establishments distributing drugs in the United States also must
comply with cGMP requirements, list their products, and are subject to periodic
inspection by FDA or by local authorities under agreement with FDA. Under the
FDA Modernization Act of 1997 ("FDAMA"), which was enacted on November 21, 1997
and which became effective in many respects on February 19, 1998, foreign
manufacturers are now required to register their establishments. The FDAMA
also contains numerous other provisions pertaining to or involving the review
and approval of drugs and devices. One of its purposes is to streamline or
improve the FDA drug application review and approval process. The precise
impact that these new statutory provisions will have on Guilford's product
candidates is unclear, however, particularly until the FDA begins to implement
the new law.
With respect to a drug product with an active ingredient not previously
approved by the FDA, the manufacturer must usually submit a full NDA, including
complete reports of preclinical, clinical and laboratory studies, to prove that
the product is safe and effective. Under the FDAMA, the FDA is to issue a
guideline that describes when abbreviated study reports may be submitted. A
full NDA may also need to be submitted for a drug product with a previously
approved active ingredient if studies are required to demonstrate safety and
efficacy, such as when the drug will be used to treat an indication for which
the drug was not previously approved, or where the method of drug delivery is
changed. In addition, the manufacturer of an approved drug may be required to
submit for the FDA's review and approval a supplemental NDA, including reports
of appropriate clinical testing, prior to marketing the drug with additional
indications or making other significant changes to the product or its
manufacture. The FDAMA also contains provisions on the approval of supplemental
applications. By May 21, 1998 the FDA is required to publish or issue
standards for the review of such applications and guidelines clarifying data
requirements. A manufacturer intending to conduct clinical trials ordinarily
will be required first to submit an IND to the FDA containing information
relating to previously conducted preclinical studies.
Preclinical testing includes formulation development, laboratory
evaluation of product chemistry and animal studies to assess the potential
safety and efficacy of the product formulation. Preclinical tests usually must
be conducted in accordance with the FDA regulations concerning Good Laboratory
Practices ("GLPs"). The results of the preclinical tests are submitted to the
FDA as part of the IND and are reviewed by the FDA prior to authorizing the
sponsor to conduct clinical trials in human subjects. Unless the FDA issues a
clinical hold on an IND, the IND will become effective 30 days following its
receipt by the FDA. There is no certainty that submission of an IND will result
in the commencement of clinical trials or that the commencement of one phase of
a clinical trial will result in commencement of other phases or that the
performance of any clinical trials will result in FDA approval.
Clinical trials for new drugs typically are conducted in three phases and
are subject to detailed protocols. Clinical trials involve the administration
of the investigational drug product to human subjects. Each protocol indicating
how the clinical trial will be conducted usually must be submitted for review
to the FDA as part of the IND. The FDA's review of a study protocol does not
necessarily mean that, if the study is successful, it will constitute proof of
efficacy or safety. Further, each clinical study must be conducted under the
auspices of an independent institutional review board ("IRB") established
pursuant to FDA regulations. The IRB considers, among other factors, ethical
concerns and informed consent requirements. The FDA or the IRB may require
changes in a protocol both prior to and after the commencement of a trial.
There is no assurance that the IRB or the FDA will permit a study to go forward
or, once started, to be completed. Clinical trials may be placed on hold at any
time for a variety of reasons, particularly if safety concerns arise, or
regulatory requirements are not met.
The three phases of clinical trials are generally conducted sequentially,
but they may overlap. In Phase I, the initial introduction of the drug into
humans, the drug is tested for safety, side effects, dosage tolerance,
metabolism and clinical pharmacology. Phase II involves controlled tests in a
larger but still limited patient population to determine the efficacy of the
drug for specific indications, to determine optimal dosage and to identify
possible side effects and safety risks. Phase II testing for an indication
typically takes at least from one and one-half to two and one-half years to
complete. If preliminary evidence suggesting effectiveness has been obtained
during Phase II evaluations, expanded Phase III trials are undertaken to gather
additional information about effectiveness and safety that is needed to
evaluate the overall benefit-risk relationship of the drug and to provide an
adequate basis for physician labeling. Phase III studies for a specific
indication generally take at least from two and one-half to five years to
complete. There can be no assurance that Phase I, Phase II or Phase III testing
will be completed successfully within any specified time period, if at all,
with respect to any of the Company's product candidates.
Reports of results of the preclinical studies and clinical trials for
non-biological drugs are submitted to the FDA in the form of an NDA for
approval of marketing and commercial shipment. New user fee legislation enacted
in 1997 now requires the submission in fiscal year 1997 of $256,846 to cover
the costs of FDA review of a full NDA. Annual fees also exist for certain
approved prescription drugs and the establishments that make them. The NDA
typically includes information pertaining to the preparation of drug
substances, analytical methods, drug product formulation, details on the
manufacture of finished product as well as proposed product packaging and
labeling. Submission of an NDA does not assure FDA approval for marketing. The
FDAMA requires FDA, not later than 180 days after enactment, to issue proposed
regulations governing the approval of radiopharmaceuticals, such as DOPASCAN.
Not later than 18 months after enactment, FDA is required to promulgate final
regulations. It is unclear how these other provisions may affect the potential
for approval of DOPASCAN.
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The median FDA approval time is currently about 14 months, although
reviews and approvals of treatments for cancer and other serious or
life-threatening diseases may be accelerated or expedited. The approval process
may take substantially longer if, among other things, the FDA has questions or
concerns about the safety and/or efficacy of a product. In general, the FDA
requires at least two properly conducted, adequate and well-controlled clinical
studies demonstrating efficacy with sufficient levels of statistical assurance.
The FDAMA now provides that FDA may consider one clinical study, as
appropriate. The FDA also may request long-term toxicity studies or other
studies relating to product safety or efficacy. For example, the FDA may
require additional clinical tests following NDA approval to confirm product
safety and efficacy (Phase IV clinical tests). Notwithstanding the submission
of such data, the FDA ultimately may decide that the application does not
satisfy its regulatory criteria for approval.
Phase III or other clinical studies may be conducted after, rather than
before, FDA approval under certain circumstances. Traditionally, for example,
the FDA may determine under its expedited or accelerated approval regulations
that earlier studies may establish an adequate basis for drug product approval,
provided that the sponsor agrees to conduct additional studies after approval
to verify safety and effectiveness. Treatment with an experimental drug of
patients not in clinical trials may also be allowed under a Treatment IND
before general marketing begins and pending FDA approval. Charging for an
investigational drug also may be allowed under a Treatment IND to recover
certain costs of development if various requirements are met. These
cost-recovery, treatment and expedited or accelerated approval regulations are
limited, for example, to drug products intended to treat AIDS or other serious
or life-threatening diseases and that provide meaningful therapeutic benefit to
patients over existing treatments or that are for diseases for which no
satisfactory alternative therapy exists. The FDAMA contains provisions for the
approval of "Fast Track Products" and for "Expanded Access to Investigational
Therapies and Diagnostics". These new statutory provisions apply to many
products covered by the FDA's regulations. Not later than November 21, 1998,
FDA must issue guidance on the policies and procedures to "fast track" drugs.
The provisions governing investigational products became effective on February
19, 1988. No assurances exist that the Company's product candidates will
qualify for cost-recovery, expedited or accelerated approvals or for treatment
use under the FDA's old regulations or the new statutory provisions.
The full NDA process for newly marketed non-biological drugs takes a
number of years and involves the expenditure of substantial resources. There
can be no assurance that any approval will be granted on a timely basis, or at
all or that the Company will have sufficient resources to carry such potential
products through the regulatory approval process.
ABBREVIATED TESTING REQUIREMENTS
The Drug Price Competition and Patent Term Restoration Act of 1984
("DPC-PTR Act") established abbreviated procedures for obtaining FDA approval
for many non-biological drugs which are off-patent and whose marketing
exclusivity has expired. Applicability of the DPC-PTR Act means that a full NDA
is not required for approval of a competitive product. Abbreviated requirements
are applicable to drugs which are, for example, either bioequivalent to brand
name drugs, or otherwise similar to brand name drugs, such that all the safety
and efficacy studies previously done on the innovator product need not be
repeated for approval. Changes in approved drug products, such as in the
delivery system, dosage form, or strength, can be the subject of abbreviated
application requirements. There can be no assurance that abbreviated
applications will be available or suitable for the Company's non-biological
drug products or that FDA approval of such applications can be obtained.
A five year period of market exclusivity is provided for newly marketed
active ingredients of drug products not previously approved and a three-year
period for certain changes in approved drug products that require for approval
the submission of safety and efficacy information (other than bioequivalence
studies). A period of five years is available for new chemical entities not
previously approved by FDA. A period of three years is available for changes in
approved products, such as in delivery systems of previously approved products.
Both periods of marketing exclusivity mean that abbreviated applications, which
generally rely to some degree on approvals or on some data submitted by
previous applicants for comparable innovator drug products, cannot be approved
during the period of exclusivity. The market exclusivity provisions of the
DPC-PTR Act bar only the marketing of competitive products that are the subject
of abbreviated applications, not products that are the subject of full NDAs.
The DPC-PTR Act also may provide a maximum time of five years to be restored to
the life of any one patent for the period it takes to obtain FDA approval of a
drug product, including biological drugs. No assurances exist that the
exclusivity or patent restoration benefits of the DPC-PTR Act will apply to any
product candidates of the Company.
OTHER REGULATION
Products marketed outside the United States which are manufactured in the
United States are subject to certain FDA regulations, as well as regulation by
the country in which the products are to be sold. The Company also would be
subject to foreign regulatory requirements governing clinical trials and
pharmaceutical sales, if products are marketed abroad. Whether or not FDA
approval has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must usually be obtained prior to the
commencement of marketing of the product in those countries. The approval
process varies from country to country and the time required may be longer or
shorter than that required for FDA approval.
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The Company also is governed by other federal, state and local laws of
general applicability. These laws include, but are not limited to, those
regulating working conditions enforced by the Occupational Safety and Health
Administration and regulating environmental hazards under such statutes as the
Toxic Substances Control Act, the Resource Conservation and Recovery Act and
other environmental laws enforced by the United States Environmental Protection
Agency ("USEPA"). The DEA regulates controlled substances, such as narcotics.
Establishments handling controlled substances must, for example, be licensed
and inspected by the DEA, and may be subject to export, import, security and
production quota requirements. Radiolabeled products, including drugs, are also
subject to regulation by the Department of Transportation and to state and
federal licensing requirements. Various states often have comparable health and
environmental laws, such as those governing the use and disposal of controlled
and radiolabeled products.
While the Company is not actively involved in product areas involving
biotechnology and has no current plans to develop products utilizing modern
biotechnology, if the Company were to move in that direction, it would
potentially be subject to extensive regulation. The USEPA, the FDA and other
federal and state regulatory bodies have developed or are in the process of
developing specific requirements concerning products of biotechnology that may
affect research and development programs and product lines. The Company is
unable to predict whether any governmental agency will adopt requirements,
including regulations, which would have a material and adverse effect on any
future product applications involving biotechnology.
PATENTS AND PROPRIETARY TECHNOLOGY
Guilford believes that patent and trade secret protection is crucial to
its business and that its future will depend in part on its ability to obtain
patents, maintain trade secret protection and operate without infringing the
proprietary rights of others. As of December 31, 1997, the Company owned or had
licensed rights to 58 U.S. and 123 foreign patents and 74 U.S. and 299 foreign
patent applications with claims relating to its biodegradable polymer, imaging,
neurotrophic, neuroprotective, addiction therapeutics and other programs.
The role, validity and value of patents, licenses and proprietary
technology in the business of the Company are subject to various uncertainties
and contingencies. The Company's success will depend in part on its ability to
obtain, maintain and enforce patent protection for its products and processes
or license rights to patents, maintain trade secret protection and operate
without infringing upon the proprietary rights of others. The degree of patent
protection afforded to pharmaceutical and biotechnological inventions is
uncertain, and a number of Guilford's product candidates are subject to this
uncertainty. The Company is aware of a company which has asserted in a public
filing that it has patent applications claiming the use of certain of its
immunosuppressive compounds and multidrug resistance compounds for nerve growth
applications, as well as a patent and patent applications relating to compounds
which it claims are useful in nerve growth applications. While the Company does
not believe that its neurotrophic compounds infringe on such company's patent,
no assurance can be given as to the ability of the Company's patents and patent
applications to adequately protect the Company's neurotrophic product
candidates or that the Company's neurotrophic product candidates will not
infringe or be dominated by this company's patent or patent applications, if
issued. There can be no assurance that any patent applications filed by, or
assigned or licensed to, the Company will be granted, that the Company will
develop additional products or processes that are patentable, or that any
patents issued to, or licensed by, the Company will provide the Company with
any competitive advantages or adequate protection for its products. In
addition, there can be no assurance that any existing or future patents or
intellectual property issued to, or licensed by, the Company will not
subsequently be challenged, invalidated or circumvented by others.
It is Guilford's policy to control the disclosure and use of Guilford's
know-how and trade secrets under confidentiality agreements with employees,
consultants and other parties. There can be no assurance, however, that its
confidentiality agreements will be honored, that others will not independently
develop equivalent or competing technology, that disputes will not arise
concerning the ownership of intellectual property or the applicability of
confidentiality obligations, or that disclosure of Guilford's trade secrets
will not occur. To the extent that consultants or other research collaborators
use intellectual property owned by others in their work with the Company,
disputes may also arise as to the rights to related or resulting intellectual
property.
Guilford supports and collaborates in research conducted in universities
and in governmental research organizations. There can be no assurance that the
Company will have or be able to acquire exclusive rights to the inventions or
technical information derived from such collaborations or that disputes will
not arise as to rights in derivative or related research programs conducted by
the Company. In addition, in the event of a contractual breach by the Company,
certain of the Company's collaborative research contracts provide for transfer
of technology (including any patents or patent applications) to the contract
sponsors.
If the Company is required to defend against charges of infringement of
patent or proprietary rights of third parties or to protect its own patent or
proprietary rights against third parties, the Company may incur substantial
costs and could lose rights to develop or market certain products or be
required to pay monetary damages or royalties to license proprietary rights
from third parties. In response to actual or threatened litigation, the Company
may seek licenses from third parties or attempt to redesign its products or
processes to avoid infringement; however, there can be no assurance that the
Company will be able to obtain licenses on acceptable terms or at all or
redesign its products or processes. In addition to being a party to patent
infringement litigation, the Company could be required to
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participate in patent interference proceedings declared by the U.S. Patent and
Trademark Office, which would be expensive and time-consuming, even if the
Company were to prevail in such a proceeding. The Company may also be forced to
initiate legal proceedings to protect its patent position or other proprietary
rights. These proceedings typically are costly, protracted, and offer no
assurance of success.
TECHNOLOGY LICENSING AGREEMENTS
In March 1994, the Company entered into an agreement (the "GLIADEL
Agreement") with Scios Inc. ("Scios") pursuant to which the Company licensed
from Scios exclusive worldwide rights to 35 U.S. patents and patent
applications as well as 115 corresponding international patents and patent
applications for polyanhydride biodegradable polymer technology for use in the
field of tumors of the central nervous system and cerebral edema. GLIADEL is
covered by three U.S. patents which expire between 2005 and 2010 and certain
related international patents and patent applications. In April 1994, Scios
assigned all of its rights and obligations under the GLIADEL Agreement to MIT.
Under the terms of the GLIADEL Agreement, Guilford is obligated to pay a
royalty on all net sales of products incorporating such technology as well as a
percentage of all royalties received by Guilford from sublicensees and certain
advance and minimum annual royalty payments. In 1997, Guilford paid $301,000 in
royalty payments to MIT related to payments made to the Company from RPR and
Orion Farmos related to GLIADEL. Guilford has exclusive worldwide rights to the
technology for brain cancer therapeutics, subject to certain conditions,
including a requirement to perform appropriate preclinical tests and file an
IND with the FDA within 24 months of the identification of a drug-polymer
product having greater efficacy than GLIADEL. In addition, Guilford is
obligated to spend a minimum dollar amount in developing products resulting
from the technology through 1997 and to meet certain development milestones.
Although the Company believes that it can comply with such obligations, failure
of the Company to perform these obligations could result in the Company losing
its right to the new polymer-based product.
In June 1996, the Company entered into a license agreement with MIT and
Johns Hopkins respecting a patent application covering certain biodegradable
polymers for use in connection with the controlled local delivery of certain
chemotherapeutic agents (including paclitaxel (Taxol(R)) and camptothecin) for
treating solid tumors. Under this agreement, the Company is obligated to make
certain annual and milestone payments to MIT and to pay royalties based on any
sales of products incorporating the technology licensed to Guilford.
Furthermore, under the terms of the agreement, the Company has committed to
spend minimum amounts to develop the technology and to meet certain development
milestones. Although the Company believes that it can comply with such
obligations, failure of the Company to perform these obligations could result
in the Company losing its rights to such technology.
In July 1996, the Company entered into a license agreement with Johns
Hopkins for two U.S. patents respecting certain PPE polymers developed at Johns
Hopkins. This agreement, among other things, requires Guilford to pay certain
processing, maintenance and/or up-front fees, milestone payments and royalties,
a portion of proceeds from sublicenses, and fees and costs related to patent
prosecution and maintenance and to spend minimum amounts for and meet deadlines
regarding development of this technology. In the event of termination of these
licenses, the Company could lose its rights to use of the licensed technology.
The Company has also entered into a sponsored research agreement with Johns
Hopkins with respect to this PPE technology and has a right of first
negotiation regarding inventions that result from this work. As of December
31, 1997, including the patents mentioned above, the Company owned or had
licensed rights to five U.S. patents and six U.S. patent applications with
claims relating to PPE polymers.
The Company obtained exclusive worldwide rights to DOPASCAN pursuant to a
March 1994 license agreement (the "RTI Agreement") with Research Triangle
Institute ("RTI"), which grants Guilford rights to various U.S. and
international patents and patent applications relating to binding ligands for
certain receptors in the brain which are or may be useful as dopamine neuron
imaging agents. DOPASCAN and certain related precursors and analogues are
covered by U.S. patents which start expiring in 2009, as well as certain
related international patents and patent applications. Under the RTI Agreement,
the Company reimbursed RTI for certain past patent-related expenses and agreed
to make annual payments to RTI to support mutually agreed upon research to be
conducted at RTI through March 1999. In addition, the Company is obligated to
pay RTI a royalty on gross revenues to Guilford from products derived from the
licensed technology and from sublicensee proceeds and to make certain minimum
royalty payments following the first commercial sale of such products. In
January 1997, the Company paid RTI $32,000 as a result of a payment received
from DRL, the Company's DOPASCAN partner in Japan. Guilford must use
commercially reasonable efforts to develop products related to the licensed
technology and to meet certain performance milestones. Failure of the Company
to perform its obligations under the RTI Agreement in the future could result
in termination of the license.
Guilford and Johns Hopkins are parties to exclusive license agreements
covering the neurotrophic use of neuroimmunophilin ligands, which was jointly
discovered by scientists at, and is jointly owned by, Johns Hopkins and
Guilford; and inhibition of NOS and PARP for neuroprotective uses and certain
other technologies. These agreements, among other things, require Guilford to
pay certain processing, maintenance, and/or up-front fees, milestone payments
and royalties, a portion of proceeds from sublicenses, and fees and costs
related to patent prosecution and maintenance and to spend minimum amounts for
and meet deadlines regarding development of the technologies. In the event of
termination of these licenses, the Company could lose its rights to use of the
licensed technology (or in the case of joint inventions, exclusive use of such
technology).
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United States Government Rights
Aspects of the technology licensed under the Company's license agreements
may be subject to certain Government Rights. These rights include a
non-exclusive, royalty-free worldwide license to practice or have practiced
such inventions for any governmental purpose. In addition, the U.S. government
has the right to grant licenses which may be exclusive under any of such
inventions to a third-party if it determines that: (i) adequate steps have not
been taken to commercialize such inventions; (ii) such action is necessary to
meet public health or safety needs; or (iii) such action is necessary to meet
requirements for public use under federal regulations. The government also has
the right to take title to a subject invention if there is failure to disclose
the invention and elect title within specified time limits. In addition, the
government may acquire title in any country in which a patent application is
not filed within specified time limits. Federal law requires any licensor of an
invention that was partially funded by the federal government to obtain a
covenant from any exclusive licensee to manufacture products using the
invention substantially in the United States. Further, the Government Rights
include the right to use and disclose without limitation technical data
relating to licensed technology that was developed in whole or in part at
government expense. Provisions recognizing these Government Rights are
contained in the Company's principal technology license agreements.
SALES, MARKETING AND DISTRIBUTION
In general, the Company's strategy is to seek to establish strategic
alliances with larger pharmaceutical companies to develop and promote products
that require extensive development, sales and marketing resources. Within the
United States, the Company may seek to retain co-promotion rights with respect
to some or all compounds or indications in any such strategic alliances, or the
Company may elect to market and distribute its products directly where the
commercial prospects so warrant.
In June 1996, the Company entered into a marketing, sales and distribution
rights agreement and other related agreements with RPR granting RPR worldwide
(excluding Scandinavia) marketing, sales, promotion and distribution rights for
GLIADEL. Upon execution of these agreements, the Company received $7.5 million
for 281,531 shares of Common Stock. Furthermore, in addition to an aggregate of
$27.5 million in rights payments made by RPR upon execution of the agreements
in June 1996 and FDA clearance of the GLIADEL NDA in September 1996, the
agreements with RPR provide for up to an additional $40 million in payments in
the event that certain regulatory and other milestones are achieved, although
there can be no assurance that any or all of such milestones will be attained
and certain of these payments are contingent on international regulatory
filings and clearances, the timing and extent of which are largely within the
control of RPR. Moreover, RPR may, under certain circumstances, fund up to
approximately $17 million for the development of higher dose forms of GLIADEL
being developed by the Company and for certain additional clinical studies
related to GLIADEL. Finally, under these agreements, the Company has the right
under certain circumstances to borrow up to an aggregate of $7.5 million to
expand the Company's GLIADEL manufacturing and related facilities. In addition
to the payments outlined above, the Company will act as the exclusive
manufacturer of GLIADEL and will receive transfer price payments and royalties
based on any "net sales" (as defined in the agreements with RPR) of GLIADEL.
RPR's exclusive rights terminate in a particular country upon the later of the
expiration of the last to expire of certain patents applicable in that country
or the last commercial sale of GLIADEL in that country. Under the Company's
agreements with RPR, RPR has an exclusive six-month period following
development of new polymer technology by the Company to make an offer to
license such technology for oncology applications.
In October 1995, the Company entered into an agreement appointing Orion
Farmos distributor for GLIADEL in Scandinavia, and in December 1995 the Company
entered into an agreement with DRL for the marketing, sale and distribution of
DOPASCAN in Japan, Korea and Taiwan.
In August 1997, the Company entered into a collaboration with Amgen
respecting the research, development and commercialization of the
Neuroimmunophilin Technology for all human therapeutic and diagnostic
applications. Pursuant to the terms of the Amgen Agreements, Amgen initially
paid the Company a one time, non-refundable payment of $15 million and invested
an additional $20 million in the Company in exchange for 640,095 shares of the
Company's common stock and five-year Warrants to purchase up to an additional
700,000 shares of Company common stock at an exercise price of $35.15 per
share. In connection with the sale of these securities, the Company granted
Amgen certain demand and "piggyback" registration rights under applicable
securities laws. Amgen also agreed to provide to the Company up to $13.5
million in the aggregate, payable quarterly over three years, to support
research activities at the Company relating to the Neuroimmunophilin
Technology, with an option to fund a fourth year of research or, under certain
conditions, to terminate the research program after two years. The Amgen
Agreements provide for milestone payments of up to $392 million in the
aggregate to the Company in the event Amgen achieves certain specified
development milestones in each of ten different clinical indications, seven of
which are neurological (i.e., Parkinson's disease, Alzheimer's disease,
traumatic brain injury, traumatic spinal cord injury, multiple sclerosis,
neuropathy and stroke) and three of which are non-neurological. In addition,
the Company will receive royalties on product sales, if any, related to the
Neuroimmunophilin Technology in the future. Amgen has agreed to fund, develop
and commercialize the Neuroimmunophilin Technology. Under certain limited
circumstances, Guilford has the option to conduct certain Phase I and Phase II
clinical trials on certain product candidates and has the right to co-promote
in the United States
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one product commercialized under the Amgen Agreements. Amgen has the right to
and may elect at any time to discontinue all activities relating to the
development and commercialization of the Neuroimmunophilin Technology.
COMPETITION
The Company is involved in evolving technological fields in which
developments are expected to continue at a rapid pace. Guilford's success
depends upon its ability to compete effectively in the research, development
and commercialization of products and technologies in its areas of focus.
Competition from pharmaceutical, chemical and biotechnology companies,
universities and research institutes is intense and expected to increase. Many
of these competitors have substantially greater research and development
capabilities, experience and manufacturing, marketing, financial and managerial
resources and represent significant competition for the Company. Acquisitions
of competing companies by large pharmaceutical or other companies could enhance
the financial, marketing and other resources available to these competitors.
These competitors may develop products which are superior to those under
development by the Company.
The Company is aware of several competing approaches under development for
the treatment of malignant glioma including using radioactive seeds for
interstitial radiotherapy, increasing the permeability of the blood-brain
barrier to chemotherapeutic agents, sensitizing cancer cells to
chemotherapeutic agents using gene therapy and developing chemotherapeutics
directed to specific receptors in brain tumors. To the Company's knowledge,
none of these approaches has resulted in compounds studied in randomized,
controlled trials which have shown them to be superior to conventional therapy.
The Company believes that two other companies are clinically evaluating
imaging agents for dopamine neurons. In addition, a variety of radiolabeled
compounds for use with Positron Emission Tomography ("PET") scanners have been
used to image dopamine neurons successfully in patients with Parkinson's
disease. PET scanning is currently only available in a limited number of
hospitals in the United States and Europe.
A number of companies have shown interest in trying to develop
neurotrophic agents to promote nerve growth and repair in neurodegenerative
disorders and traumatic central nervous system injuries. However much of this
activity has focused on naturally occurring growth factors. Such large
molecules generally cannot cross the blood-brain barrier and thus present
problems in administration and delivery. One company has announced that certain
of its neuroimmunophilin ligands showed positive results in stimulating nerve
growth in an animal model of nerve crush, and has disclosed that it has made
patent filings covering compounds and uses in connection with nerve growth
promotion. In addition, another company announced that IGF-1 showed positive
results in clinical trials of a peripheral neurodegenerative disorder.
There is intense competition to develop an effective and safe
neuroprotective drug or biological agent. Calcium channel antagonists, calpain
inhibitors, adenosine receptor antagonists, free radical scavengers, superoxide
dismutase inducers, proteoloytic enzyme inhibitors, phospholipase inhibitors
and a variety of other agents are under active development by others.
Glutamate or NMDA receptor antagonists are under development by several other
companies.
In the field of cocaine addiction, most of the investigated compounds to
date have been studied by academic and government groups. Further, much of this
work has been with known agents, such as carbamazepine, that are commercially
available for other indications. Guilford is aware of another company that is
investigating the use of butylcholinesterase as a treatment for acute cocaine
overdose. The Company is aware of one company that is investigating an
immunological approach in an attempt to develop a cocaine vaccine. The Company
is not aware of other commercial research programs targeting specific cocaine
antagonists, which do not interfere with normal dopamine neuron function.
Any product candidate that the Company develops and for which it gains
regulatory approval, including GLIADEL, must then compete for market acceptance
and market share. For certain of the Company's product candidates, an
important factor will be the timing of market introduction of competitive
products. Accordingly, the relative speed with which the Company and competing
companies can develop products, complete the clinical testing and approval
processes, and supply commercial quantities of the products to the market is
expected to be an important determinant of market success. Other competitive
factors include capabilities of the Company's collaborators, product efficacy
and safety, timing and scope of regulatory approval, product availability,
marketing and sales capabilities, reimbursement coverage, the amount of
clinical benefit of the Company's product candidates relative to their cost,
method of administration, price and patent protection. There can be no
assurance that the Company's competitors will not develop more effective or
more affordable products or achieve earlier product development completion,
patent protection, regulatory approval or product commercialization than the
Company. The achievement of any of these goals by the Company's competitors
could have a material adverse effect on the Company's business, financial
condition and results of operations.
PRODUCT LIABILITY AND INSURANCE
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Product liability risk is inherent in the testing, manufacture, marketing
and sale of the Company's product candidates, and there can be no assurance
that the Company will be able to avoid significant product liability exposure.
While the Company currently maintains $10,000,000 of product liability
insurance covering clinical trials and product sales, there can be no assurance
that such or any future insurance coverage obtained by the Company will be
adequate or that claims will be covered by the Company's insurance. The
Company's insurance policies provide coverage on a claims-made basis and are
subject to annual renewal. Product liability insurance varies in cost, can be
difficult to obtain and may not be available to the Company in the future on
acceptable terms, or at all.
EMPLOYEES
At December 31, 1997, the Company employed 198 individuals. Of these 198
employees, 167 were employed in the areas of research and product development
and in manufacturing and quality control of GLIADEL. The remaining 31 employees
performed general and administrative functions, including executive, finance
and administration, legal and business development. None of the Company's
employees are currently represented by a labor union. To date, the Company has
experienced no work stoppages related to labor issues and believes its
relations with its employees are good.
All employees are required to enter into a confidentiality agreement with
the Company. Hiring and retaining qualified personnel are important factors for
the Company's future success. The Company is likely to continue to add
personnel particularly in the areas of research, clinical research and
operations, including manufacturing. Intense competition exists for these
qualified personnel from other biotechnology and biopharmaceutical companies,
academic, research and governmental organizations. There can be no assurance
that the Company will be able to continue to hire qualified personnel and, if
hired, that the Company will be able to retain these individuals.
SCIENTIFIC ADVISORY BOARD
Guilford's Scientific Advisory Board consists of individuals with
recognized expertise in fields related to Guilford's research and development
programs. The Scientific Advisory Board meets with the Company at least twice a
year to discuss research priorities and new developments in neuroscience and
consults with and meets informally with the Company on an as-needed basis.
The following persons are members of Guilford's Scientific Advisory Board:
SOLOMON H. SNYDER, M.D. has been a Director of the Company and Chairman of
the Scientific Advisory Board since the Company's inception in July 1993. Dr.
Snyder received his M.D. in 1962 from Georgetown Medical School, trained as a
Research Associate with Julius Axelrod at the National Institute of Mental
Health and completed his Psychiatry Residency at Johns Hopkins Hospital. He is
presently Director of the Department of Neuroscience at Johns Hopkins Medical
School and Distinguished Service Professor of Neuroscience, Pharmacology and
Molecular Sciences, and Psychiatry. Dr. Snyder has received a number of awards
including the Albert Lasker Award in Basic Biomedical Research, the Wolf Prize
and the Bower Award. He is a member of the U.S. National Academy of Sciences,
the Institute of Medicine and the American Academy of Arts and Sciences. Dr.
Snyder is a director of Scios.
Dr. Snyder has provided consulting services to the Company under
consulting agreements since August 1993. In September 1995, the Company and Dr.
Snyder entered into a new consulting agreement pursuant to which Dr. Snyder
will provide consulting services to the Company through August 1998, unless the
agreement is further extended or earlier terminated. Under the agreement, Dr.
Snyder performs consulting and advisory services as requested by the Company
for a minimum of 24 days and a maximum of 38 days per year, subject to
adjustment under certain circumstances. With certain limited exceptions, Dr.
Snyder has agreed not to engage in any business activity with or provide any
consulting or related services to any organization which directly competes with
the Company during the term of the agreement and for a period of one year
thereafter.
JOSEPH COYLE, M.D. is Chairman of the consolidated Department of
Psychiatry and Ebens Draper Professor of Psychiatry and Neuroscience at the
Harvard Medical School. He obtained his M.D. from Johns Hopkins in 1969 and
completed his Psychiatry Residency at Johns Hopkins. His research involves
clinical as well as basic studies of neurotransmitter systems and drug actions
in the brain. He has received numerous honors, including the McAlpin Award of
the National Mental Health Association, the Gold Medal Award of the Society for
Biological Psychiatry and election to the Institute of Medicine of the National
Academy of Sciences.
SAMUEL H. BARONDES, M.D. is the Jeanne and Sanford Robertson Professor of
Neurobiology and Psychiatry and Director of the Center for Neurobiology and
Psychiatry at the University of California, San Francisco. He received his M.D.
from Columbia University in 1958, trained in internal medicine at the Peter
Bent Brigham Hospital, in molecular biology at the National Institutes of
Health and in psychiatry at the McLean and Massachusetts General Hospitals. Dr.
Barondes has received a number of awards including the Royer Award and the
Stillmark Medal, is a member of the Institute of Medicine, and also serves as
President of the McKnight Endowment Fund for Neuroscience.
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Paul Greengard, Ph.D. Received his Ph.D. from Johns Hopkins in 1953.
Following service as the Director of the Biochemistry Department at Ciba-Geigy
Research Laboratories and as Professor of Pharmacology at Yale University, he
assumed his present position as Professor at Rockefeller University in 1983.
His research on molecular mechanisms of signal transduction and drug action has
been recognized by numerous awards including the Life Sciences Award of the
Federation of American Societies for Experimental Biology and the Bristol-Myers
Award for Neuroscience. Dr. Greengard is a member of the National Academy of
Sciences and the American Academy of Arts and Sciences.
ROBERT LANGER, Ph.D. is presently Germeshausen Professor in the Department
of Chemical Engineering at MIT. Dr. Langer obtained his Ph.D. from MIT in 1974
and since then has been a member of the MIT faculty. Dr. Langer is a leading
authority on polymer drug delivery systems. He has received numerous awards
including election to the U.S. National Academy of Sciences, the National
Academy of Engineering and the Institute of Medicine.
IRA SHOULSON, M.D. obtained his M.D. from the University of Rochester in
1971 where he completed internal medicine and neurology residencies. He is
presently Louis C. Lasagna Professor of Experimental Therapeutics and Professor
of Neurology, Pharmacology and Medicine at the University of Rochester. He is
the recipient of numerous honors including the Modern Medicine Award for
Distinguished Achievement. Dr. Shoulson is a national leader in the design and
execution of major clinical trials evaluating drug actions in Parkinson's
disease, Huntington's disease and other movement disorders. Dr. Shoulson has
served two terms as a member of the Peripheral and Central Nervous System
Advisory Committee of the FDA.
ANNE YOUNG, M.D., Ph.D. obtained her M.D. and Ph.D. degrees from Johns
Hopkins Medical School in 1973 and 1974, respectively, and completed her
Neurology Residency at the University of California in San Francisco. She
served on the faculty of the Neurology Department at the University of Michigan
and since 1991 has been Julieanne Dorn Professor of Neurology at the Harvard
Medical School and Chief of the Neurology Service at the Massachusetts General
Hospital. She has received numerous honors including election to the American
Academy of Arts and Sciences. Her laboratory research focuses on the actions of
excitatory amino acids in the brain, while her clinical research deals with
movement disorders.
ITEM 1A. EXECUTIVE OFFICERS OF REGISTRANT
CRAIG R. SMITH, M.D., age 52, joined the Corporation as a Director at the
Corporation's inception in July 1993. Dr. Smith was elected President and Chief
Executive Officer in August 1993 and was elected Chairman of the Board in
January 1994. Prior to joining the Corporation, Dr. Smith was Senior Vice
President for Business and Market Development at Centocor, Inc., a
biotechnology corporation. Dr. Smith joined Centocor in 1988 as Vice President
of Clinical Research after serving on the Faculty of the Department of Medicine
at Johns Hopkins Medical School for 13 years. Dr. Smith received his M.D. from
the State University of New York at Buffalo in 1972 and received training in
Internal Medicine at Johns Hopkins Hospital from 1972 to 1975.
JOHN P. BRENNAN, age 55, joined the Corporation as Vice President,
Operations in January 1994 and became Senior Vice President, Operations in
January 1997. From 1980 to 1993, he was Vice President, Technical Operations
and Manufacturing for G.D. Searle and Co., a pharmaceutical company, and was
responsible for the operation of manufacturing plants in North America, Latin
America and Europe and the worldwide pharmaceutical and process technology from
1980 to 1993. From 1977 to 1980, Mr. Brennan was General Manager of the E.R.
Squibb & Sons, Inc. manufacturing facility in Humacao, Puerto Rico. Mr. Brennan
held various technical positions at Smith Kline Corporation from 1960 to 1977.
Mr. Brennan has over 37 years of experience in the pharmaceutical industry.
Mr. Brennan received his B.S. in Chemistry from the Philadelphia College of
Pharmacy and Science in 1968 and attended the Wharton Graduate Management
Program in 1976.
ANDREW R. JORDAN, age 50, joined the Corporation as Vice President,
Secretary, Treasurer and Chief Financial Officer in September 1993 and became
Senior Vice President, Treasurer and Chief Financial Officer in January 1997.
Prior to joining the Corporation, Mr. Jordan held various positions with KPMG
Peat Marwick LLP, a public accounting firm, beginning in 1973, including
partner since 1983. Mr. Jordan's experience at KPMG Peat Marwick LLP included
advising early stage and emerging technology companies and initial and
secondary public equity and debt offerings. He received his B.A. from Rutgers
College in 1969 and his MBA from Rutgers Graduate School of Business in 1973
and is a Certified Public Accountant.
DAVID R. SAVELLO, Ph.D., age 52, joined the Corporation as Senior Vice
President, Drug Development in April 1997. Prior to joining the Corporation,
Dr. Savello was employed by Glaxo Wellcome, Inc. ("Glaxo") since 1985, most
recently as Vice President, North American Regulatory Affairs from 1995 to
1997. Prior to 1995, Dr. Savello served as Vice President, Drug Development
and later as Vice President, Regulatory Affairs and Compliance, at the
affiliated entity Glaxo Research Institute. Dr. Savello's duties at Glaxo
included leading U.S. and Canadian regulatory operations and International
Research and Development, Quality Assurance, and Good Manufacturing Practices
for all bulk drug substance and clinical supplies manufacturing and packaging.
Dr. Savello received his Ph.D. and M.S. in pharmaceuticals from the University
of Maryland in 1972 and 1971, respectively, and his B.S. in pharmacy in
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1968 from the Massachusetts College of Pharmacy.
NICHOLAS LANDEKIC, age 39, joined the Corporation in March 1995 as Vice
President, Business Development. From January 1992 to February 1995, Mr.
Landekic was Senior Director of Business Development at Cephalon, Inc. and was
responsible for licensing and other corporate collaborations. From 1989 to
1992, he was a Senior Manager of Product Planning at Bristol-Myers Squibb
Company and was responsible for worldwide commercial development and strategic
planning for currently marketed and new central nervous system products. From
1985 to 1989, Mr. Landekic worked for Johnson & Johnson Corporation in a
variety of positions in business development and finance. Mr. Landekic
received his M.B.A. in Finance/Marketing from the State University of New York
at Albany, an M.A. in Biology from Indiana University and a B.S. in Biology
from Marist College.
THOMAS C. SEOH, age 40, joined the Corporation in April 1995 as Vice
President, General Counsel and Secretary. From 1992 to 1995, Mr. Seoh was
affiliated with the ICN Pharmaceuticals, Inc. ("ICN") group, as Vice President
and Associate General Counsel of ICN from 1994 to 1995, Vice President, General
Counsel and Secretary of Viratek, Inc. from 1993 to 1994 and Deputy General
Counsel of SPI Pharmaceuticals, Inc. from 1992 to 1994, providing legal
function support for pharmaceutical operations, research and development and
corporate development. From 1990 to 1992, Mr. Seoh was General Counsel and
Secretary of Consolidated Press U.S., Inc., the North American holding
corporation of the Sydney, Australia-based Consolidated Press group. Prior
thereto, Mr. Seoh was associated with the New York and London law offices of
Lord, Day & Lord, Barrett Smith. Mr. Seoh received his J.D. and A.B. from
Harvard University.
PETER D. SUZDAK, Ph.D., age 39, joined the Corporation in March 1995 as
Vice President, Research. Prior thereto, Dr. Suzdak was Director of
Neurobiology at Novo Nordisk A/S and was responsible for all neurobiology
research from 1993 to 1995, and Department Head for Receptor Neurochemistry
from 1988 to 1992 as well as a member of the drug discovery management group
from 1989 to 1995. Prior thereto, Dr. Suzdak was a Pharmacology Research
Associate in the Clinical Neuroscience Branch of the National Institute of
Mental Health in Bethesda, Maryland from 1985 to 1988. Dr. Suzdak received his
Ph.D. in Neuroscience from the University of Connecticut and a B.S. in Pharmacy
from St. Johns University.
WILLIAM C. VINCEK, Ph.D., age 50, joined the Company as Vice President,
Corporate Quality in August 1997. From November 1993 until Dr. Vincek joined
the Company, he was Group Director, CMC & Preclinical Regulatory Affairs and
Global Research and Development GMP Quality Assurance at Glaxo. Prior thereto
from 1984 until October 1993, Dr. Vincek held various positions at SmithKline
Beecham Pharmaceuticals and related entities, most recently from July 1992
until October 1993 as Director, Pharmaceutical Analysis Department. Dr. Vincek
received his Ph.D. in Medicinal Chemistry from the University of Kansas, where
he also received a M.S. in Medicinal Chemistry. Dr. Vincek received a B.S. in
Chemistry from Colorado State University.
ITEM 2. PROPERTIES.
In August 1994, the Company entered into a master lease for an
approximately 83,000 square foot building in Baltimore, Maryland. The Company
currently occupies 23,000 square feet for office space, 18,000 square feet for
manufacturing space, and 42,000 square feet of research and development
laboratories. The Company is currently in the process of adding 5,000 square
feet to its animal handling facilities and expects completion by April, 1998.
The master lease expires in July 2005. Two five-year renewal options are
available to the Company or the Company may exercise a purchase option any time
after the ninth year for the then current fair market value. In June 1997, the
Company entered into a lease with an affiliate of Scios for approximately
16,200 square feet of laboratory and office space with an initial term ending
on December 31, 1998. In October, 1997, the Company exercised its option under
the lease to extend the term until June 30, 1999. In February, 1998 the
parties amended this lease to include an additional 16,500 square feet of
laboratory and office space and extended the term until July 31, 1999.
In February 1998, the Company entered into an operating lease with a trust
affiliated with First Union National Bank ("First Union") respecting the
construction and occupancy of a new laboratory and office facility, consisting
of approximately 72,500 square feet and scheduled to be completed in the second
quarter, 1999. The lease expires in February 2005, at which time the Company
has an option (i) to purchase the property or (ii) to sell the property on
behalf of the trust (subject to certain limitations and related obligations).
In addition, the Company may, with the consent of First Union, enter into a new
lease arrangement. See "Management's Discussion of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" for a more complete
description of the Company's arrangements with First Union. The Company
expects to consolidate all its operations into its current and this new
facility in 1999.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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None.
ITEM 4A. RISK FACTORS
An investment in the shares of the Company's common stock is speculative in
nature and involves a high degree of risk. In addition to the other information
contained in this annual report, the following factors should be considered
carefully in evaluating the Company and its business before purchasing the
shares of the Company's common stock. This annual report contains, in addition
to historical information, forward-looking statements, including, but not
limited to, those concerning application for international regulatory
clearances and labeling expansions for GLIADEL, polymer product line
extensions, the commencement and completion of the research program relating to
the Company's FKBP-based neuroimmunophilin ligand technology and other
technologies, clinical development activities, including without limitation
commencement and conduct of clinical trials related to GLIADEL, the Company's
strategic plans, anticipated expenditures and the need for additional funds,
all of which involve risks and uncertainties. The Company's actual results
could differ materially. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below, as well as
those discussed elsewhere in this annual report.
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY. The Company
incurred annual net operating losses from its inception through the end of
fiscal 1997, with the sole exception of fiscal 1996 and, as of December 31,
1997, had an accumulated deficit of $26.3 million. Prior to February 25, 1997,
the date on which GLIADEL was commercially launched in the United States,
substantially all of the Company's revenues had been recognized as research and
development or non-recurring milestone payments under the Company's
collaborations, and again in fiscal 1997, the majority of the Company's
revenues came in the form of non-recurring milestone payments. Except for
revenues from sales and non-recurring milestone payments related to GLIADEL
under the Company's agreements with RPR and the research funding and
non-recurring rights and milestone payments payable under the Company's
collaboration with Amgen relating to the Company's Neuroimmunophilin
Technology, the Company's product candidates are not expected to generate
revenues for at least the next several years, if at all, and whether GLIADEL
sales will generate any significant revenues remains uncertain. Furthermore,
whether the Company will ever recognize revenues from milestone payments or
royalties paid on product sales under its collaboration with Amgen is subject
to significant risk and uncertainty, including but not limited to, risks
associated with new product development, the conduct of pre-clinical studies
and human clinical trials, obtaining regulatory approval, scale-up and
manufacturing of new products and commercialization of new products, all of
which risks are discussed below in this "Risk Factors" section. While the
Company reported net income for the second and third quarters of 1996 and the
third quarter of 1997, the income recognized in the 1996 periods was the result
of significant and non-recurring payments from RPR with respect to GLIADEL and
the income reported in the third quarter 1997 was primarily be due to receipt
of a one-time, non-recurring rights payment from Amgen. The Company does not
anticipate that fiscal 1998 will be profitable, and there can be no assurance
that the Company will ever achieve or sustain profitability in the future.
Furthermore, the Company expects to experience quarter-to-quarter and
year-to-year fluctuations in its operating results due to a variety of factors,
including, but not limited to, the timing and amount of sales of GLIADEL, the
timing and realization of milestone and other payments under the Company's
collaborative agreements, including its collaboration with Amgen, and expenses
relating to the Company's research and development, clinical and manufacturing
activities as well as activities undertaken in connection with the preservation
and extension of the Company's intellectual property rights. The Company's
ability to realize sustained profitability in the future will depend upon,
among other things, the successful marketing of GLIADEL by RPR, receipt of
regulatory clearance for additional indications for GLIADEL in the United
States as well as Europe and other countries, the successful completion of
clinical trials for and, if completed, receipt of regulatory clearance for the
marketing of, DOPASCAN, and the successful development of any product
candidates falling under the Company's collaboration with Amgen. In addition,
the Company must enter into collaborative arrangements and license agreements
on acceptable terms with others with respect to its product candidates and
earlier stage technologies as they are developed. The Company will be required
to conduct substantial additional research, development and clinical trials and
to receive necessary regulatory clearances that, together with future general
and administrative expenses, are expected to result in significant expenses for
the foreseeable future. No assurance can be given as to the ability of the
Company to achieve significant and sustained revenues or realize sustained
profitable operating results.
DEPENDENCE ON GLIADEL AND RPR. The Company's prospects are highly dependent
on sales by RPR of the Company's first commercial product, GLIADEL, which was
commercially launched in the United States in February, 1997. The Company
currently has insufficient information upon which to assess the ability of the
product to gain market acceptance or the extent of the marketing efforts
necessary to gain any such acceptance. The failure of GLIADEL to gain market
acceptance would have a material adverse effect on the Company's business,
financial condition and results of operations.
To date, the Company has received clearance from the FDA to market GLIADEL
in the United States only for patients with recurrent glioblastoma multiforme
for whom surgical resection is indicated. The number of patients undergoing
surgery for recurrent glioblastoma multiforme is very limited. The Company
believes that the total number of patients in the United States who undergo
surgery for recurrent glioblastoma multiforme may be less than 10,000 per year.
In order to expand the indications for which GLIADEL may be used, the Company
and RPR must successfully complete additional lengthy clinical trials and
thereafter receive clearance from
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the FDA. No assurance can be given as to the ability of the Company or RPR to
successfully complete these clinical trials and to receive appropriate
regulatory clearance on a timely basis, or at all, and the inability to do so
would have a material adverse effect on the Company's business, financial
condition and results of operations. To date, RPR has received international
regulatory approvals in only two countries to market GLIADEL, and there can be
no assurance that any other such approvals will be obtained.
The Company granted RPR exclusive worldwide (excluding Scandinavia)
marketing, sales and distribution rights for GLIADEL. The Company's agreements
with RPR do not impose any minimum purchase or sale requirements on RPR.
Therefore, the success of GLIADEL is entirely dependent upon the sales and
marketing efforts of RPR. The Company has limited experience in dealing with
RPR for the sale of products, and prior to the February, 1997 commercial launch
of GLIADEL in the United States, RPR's oncology sales force had no prior
experience in marketing a product to neurosurgeons. There can be no assurance
that RPR will elect to aggressively market and promote GLIADEL and will
successfully do so, and the inability or unwillingness of RPR to do so would
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, GLIADEL is a very fragile product.
Product recalls due to excessive breakage of the GLIADEL wafers or for other
reasons could also have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company's agreements with RPR provide for additional payments to the
Company upon the timely achievement of designated milestones relating to
further clinical development and regulatory approvals. In many instances,
achievement of the milestone is dependent on the efforts of RPR. No assurance
can be given that any of these milestones will be satisfied in such a manner as
will allow the Company to become entitled to these payments. The potential
milestone payments under the RPR agreements are significant. Therefore,
failure to meet the milestones under the agreements could have a material
adverse effect on the Company's business, financial condition and result of
operations.
THE AMGEN COLLABORATION. The amounts payable to the Company under the
Amgen Agreements in the form of future potential development milestone
payments and royalty payments on product sales are dependent on a number of
factors, many of which are not within the Company's control, including the
selection of an appropriate lead compound(s), successful completion of the
pre-clinical and clinical development activities, regulatory clearances and
commercialization of the Neuroimmunophilin Technology, as well as the
successful preservation and extension of the patent and other intellectual
property rights licensed to Amgen, all of which are subject to significant
risks and uncertainties. For a description of these and other material risks
related to the research, development and commercialization of the
Neuroimmunophilin Technology, see the Risk Factor sections set forth below
entitled "Technological Uncertainties," "Uncertainty Regarding Patent and
Proprietary Technology," "Dependence on Licenses of Intellectual Property,"
"Uncertainty of Preclinical and Clinical Trial Results," "Government Regulation
and Product Approvals," "Novel Alternative Technologies and Therapeutic
Approaches" and "Competition and Technological Change."
Moreover, under the terms of the Amgen Agreements, the Company has no
control over the development activities regarding the Neuroimmunophilin
Technology which have been left to the sole discretion of Amgen. The Amgen
Agreements also do not specify a timetable for achieving developmental and
commercialization goals with respect to the Neuroimmunophilin Technology. In
the event that Amgen determines to conduct clinical trials on a product
candidate resulting from its collaboration with the Company, there can be no
assurance as to the ability of Amgen to successfully complete any such clinical
trials and thereafter to receive clearance from domestic or foreign regulatory
authorities to market any such products. Further, the Neuroimmunophilin
Technology represents a new approach to the treatment of certain types of
neurological and other diseases and conditions, and Guilford and Amgen have
limited experience in the formulation of and in scaling-up and manufacturing
the types of compounds covered by the Neuroimmunophilin Technology, and there
can be no assurance that Amgen will ever be successful in scaling up any such
compounds needed for commercial sale. For a more complete description of the
kinds of risks associated with product manufacture, see the second paragraph
under the section entitled "Limited Manufacturing Capabilities" below. In the
event Amgen is able to obtain all regulatory approvals necessary to market a
product resulting from its collaboration with the Company, the Amgen Agreements
do not specify any minimum sales requirements for Amgen, and thus any royalty
amounts payable to the Company in the future will be entirely dependent upon
the sales and marketing efforts of Amgen, over which Guilford will have no
control. In addition, there can be no assurance that Amgen will not in the
future pursue technologies for product candidates competitive with the
Neuroimmunophilin Technology.
RELIANCE ON SUPPLIERS. The Company currently is able to purchase certain
key components for GLIADEL and its product candidates only from single
suppliers. These suppliers are subject to many strict regulatory requirements.
There can be no assurance that these suppliers will comply, or have complied,
with applicable regulatory requirements or that they will otherwise continue to
supply the Company with the key components for its product candidates. In the
event that suppliers are unable or refuse to supply the Company, or will supply
the Company only at a prohibitive cost, there can be no assurance that the
Company could access additional sources at acceptable prices, on a timely
basis, or at all. The current formulation of GLIADEL utilizes BCNU
(carmustine) as its chemotherapeutic agent. BCNU is currently
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available only from a single source in the United States and the Company is not
aware of any supplier outside of the United States. The Company currently
obtains its BCNU from this U.S. supplier on a purchase order basis and not
pursuant to any long-term supply agreement. While the Company is taking steps
to obtain an additional supplier, the process of qualifying a second supplier
is lengthy, and there can be no assurance that the Company's efforts will be
successful. Failure to receive key supplies necessary for the manufacture of
GLIADEL on a timely basis at a reasonable cost could result in delays of
product shipments, which would have a material adverse effect on the Company's
business, financial condition and results of operations. The manufacture of
DOPASCAN requires a precursor to be labeled with a radioactive isotope of
iodine to form the final product. Only a limited number of companies are
capable of performing the necessary radioiodination of the precursor and
distribution of the final radioiodinated product. While the Company currently
has a development and supply arrangement with one of these companies for
planned phase III clinical trials, there can be no assurance that the Company,
if necessary or desirable, will be able to enter into an agreement with another
of these companies for the radioiodination of the precursor on acceptable
terms, or at all, or that the Company's current supplier will meet the
Company's need for DOPASCAN.
LIMITED MANUFACTURING CAPABILITIES. To commercialize GLIADEL, the Company
must be able to manufacture this product in commercial quantities in compliance
with regulatory requirements and at acceptable costs. The Company is
manufacturing its initial product candidate, GLIADEL, at its manufacturing
facility in Baltimore, Maryland, which consists of production laboratories and
a cleanroom occupying approximately 12,500 square feet. The facility currently
has the capacity to manufacture approximately 8,000 GLIADEL treatments per
year. Although the Company believes the facility meets current Good
Manufacturing Practices ("cGMP") requirements and the facility has been
inspected by the FDA, the Company has manufactured only limited quantities of
GLIADEL in the facility. There can be no assurance that the Company will be
able to continue to satisfy applicable regulatory standards, including cGMP
requirements, and other requirements relating to the manufacture of GLIADEL in
the facility. The Company also faces risks inherent in the operation of a
single facility for manufacture of GLIADEL, including risks of unforeseen plant
shutdowns due to personnel, equipment or other factors, and the possible
inability of the facility to produce GLIADEL in quantities sufficient to meet
demand. Any delay in the manufacturing of GLIADEL could result in delays of
product shipments, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
Currently, the Company has no manufacturing capabilities for its product
candidates, and in order to complete the commercialization process of its
product candidates, the Company must either acquire, build or expand its
manufacturing facilities or rely on third parties to manufacture product
candidates. There can be no assurance that the Company or its collaboration
partners will be able to acquire, build or expand facilities that will meet the
Company's quality, quantity and timing requirements on acceptable terms, or at
all, or that the Company or its collaboration partners will be able to enter
into manufacturing contracts with others on acceptable terms, or at all, and
the inability of the Company or its collaboration partners to do so could have
a material adverse effect on the Company's business, financial condition and
results of operations. Third-party manufacturers must also comply with FDA,
DEA, and other regulatory requirements for their facilities, including cGMP
regulations. Moreover, there can be no assurance that the manufacturing of
product candidates on a limited basis for investigational use will lead to a
successful transition to commercial, large-scale production. Small changes in
methods of manufacture may affect the safety, efficacy or controlled release of
the product. Changes in methods of manufacture, including commercial scale-up,
can, among other things, require the performance of new clinical studies.
Should the Company decide to manufacture its other product candidates,
substantial start-up expenses would be incurred, expansion of facilities would
be required and additional personnel would have to be hired.
TECHNOLOGICAL UNCERTAINTIES. Except for GLIADEL, the Company does not
expect to generate revenues from product sales, including any products that may
result from its collaboration with Amgen, for at least the next several years,
if at all. Substantially all of the Company's resources have been, and for the
foreseeable future will continue to be, dedicated to the discovery, development
and commercialization of proprietary products for the diagnosis, treatment and
prevention of neurological diseases and conditions and for targeted, controlled
drug delivery using biodegradable polymers for the treatment of cancer and
other diseases. The Company's product candidates will require additional
development, extensive preclinical and clinical trials, regulatory approval and
additional investment prior to any commercialization. In certain cases, the
Company's compounds, such as GPI-5000, GPI-6000, GPI-6150, and GPI-2138, are
"prototypes," which the Company is using to establish proof of principle of the
relevant mechanism of action, but which the Company does not intend to develop
into a product because of pharmacokinetic characteristics of the compound, the
Company's proprietary position with respect to such compound or for other
reasons. There can be no assurance that the Company's product development
efforts will progress as expected, or at all. In addition, the Company's
product candidates are subject to the risks of failure inherent in the
development of products based on new technologies. These risks include the
possibilities that the Company's new approaches to the diagnosis, treatment and
prevention of neurological diseases and conditions and targeted, controlled
drug delivery will not result in any products that gain market acceptance; that
any or all of the Company's product candidates will be found to be unsafe,
ineffective, or otherwise fail to receive necessary regulatory clearances or,
if granted, such clearances will not be revoked; that any or all of the
products, if safe and effective, will be difficult to manufacture on a large
scale or uneconomical to market; that proprietary rights of third parties will
preclude the Company from
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marketing such products; or that third parties will market superior or more
cost-effective products. As a result, there can be no assurance that the
Company's activities, either directly or through collaboration partners, will
result in any commercially viable products.
NEED FOR ADDITIONAL PARTNERS. The Company's strategy for the research,
development and commercialization of its product candidates has required, and
will continue to require, the Company to enter into various arrangements with
corporate and academic collaborators, licensors, licensees and others, and the
Company will, therefore, be dependent upon the success of these parties in
performing their responsibilities and obligations. The Company is actively
seeking partners to assist in the development of DOPASCAN as well as in the
Company's neuroprotective drug program. There can be no assurance that the
Company will be able to enter into collaborative arrangements or license
agreements that the Company deems necessary or appropriate to develop and
commercialize its product candidates, or that any or all of the contemplated
benefits from such collaborative arrangements or license agreements will be
realized. Failure to obtain such arrangements or agreements could result in
delays in marketing the Company's product candidates or the inability to
proceed with the development, manufacture or sale of product candidates.
Certain of the collaborative arrangements that the Company currently has or may
enter into in the future may place responsibility on the collaborative partner
for preclinical testing, clinical trials and/or preparation and submission of
applications for regulatory approval of potential pharmaceutical or other
products. Should a collaborative partner fail to develop or commercialize
successfully any product candidate to which it has rights, the Company's
business, financial condition and results of operations could be materially and
adversely affected. There can be no assurance that collaborators, including
Amgen, will not pursue alternative technologies or product candidates either on
their own or in collaboration with others, including the Company's competitors,
as a means for developing treatments for the diseases or disorders targeted by
the Company's collaborative arrangements. Collaborative arrangements may also
require the Company to meet certain regulatory, research or other development
milestones and expend minimum levels of funds, and there can be no assurance
that the Company will be successful in doing so. Failure of the Company to meet
its obligations under its collaborative arrangements could result in a
termination of those arrangements and could have a material adverse effect on
the Company's business, financial condition and results of operations.
LIKELY VOLATILITY OF STOCK PRICE. The market price of the Company's common
stock has been and is likely to continue to be highly volatile, and an
investment in these securities involves substantial risks. The market prices
for securities of biotechnology companies (including the Company) have been
highly volatile, and the stock market from time to time has experienced
significant price and volume fluctuations that may be unrelated to the
operating performance of a particular company. A number of factors could
result in the Company's failure to meet the expectations of securities analysts
or investors and may have a significant impact on the price of the Company's
common stock. Such factors include, but are not limited to, announcements by
the Company or its competitors of clinical results, technological innovations,
product sales, new products or product candidates, developments or disputes
concerning patent or proprietary rights, regulatory developments affecting the
Company's products, as well as market conditions for emerging growth companies
and biopharmaceutical companies, economic and other internal and external
factors and period-to-period fluctuations in results of operations.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY TECHNOLOGY. The Company's
success will depend in part on its ability to obtain, maintain and enforce
patent protection for its products and processes or license rights to patents,
maintain trade secret protection and operate without infringing upon the
proprietary rights of others. The degree of patent protection afforded to
pharmaceutical and biotechnological inventions is uncertain, and a number of
Guilford's product candidates are subject to this uncertainty. Guilford is
aware of a company which has asserted in a public filing that it has patent
applications claiming the use of certain of its immunosuppressive compounds and
certain multidrug resistance compounds for nerve growth applications. Such
other company has also publicly claimed holding patents and patent applications
relating to compounds which it claims are useful in nerve growth applications.
While the Company does not believe that its neurotrophic compounds infringe on
such company's patents, no assurance can be given as to the ability of
Guilford's patents and patent applications to adequately protect its
neurotrophic product candidates, or that Guilford's neurotrophic product
candidates will not infringe or be dominated by this company's patents or
patent applications, if issued, or those of any other company. There can be no
assurance that any patent applications filed by, or assigned or licensed to,
the Company will be granted, that the Company will develop additional products
or processes that are patentable, or that any patents issued to, or licensed
by, the Company will provide the Company with any competitive advantages or
adequate protection for its products. In addition, there can be no assurance
that any existing or future patents or intellectual property issued to, or
licensed by, the Company will not subsequently be challenged, invalidated or
circumvented by others.
Guilford's policy is to control the disclosure and use of its know-how and
trade secrets under confidentiality agreements with employees, consultants and
other parties. There can be no assurance, however, that its confidentiality
agreements will be honored, that others will not independently develop
equivalent or competing technology, that disputes will not arise concerning the
ownership of intellectual property or the applicability of confidentiality
obligations, or that disclosure of Guilford's trade secrets will not occur. To
the extent that consultants or other research collaborators use intellectual
property owned by others in their work with the Company, disputes may also
arise as to the rights to related or resulting intellectual property.
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Guilford supports and collaborates in research conducted in universities and
in governmental research organizations. There can be no assurance that the
Company will have or be able to acquire exclusive rights to the inventions or
technical information derived from such collaborations or that disputes will
not arise as to rights in derivative or related research programs conducted by
the Company. In addition, in the event of a contractual breach by the Company,
certain of the Company's collaborative research contracts provide for the
return of technology rights (including any patents or patent applications) to
the contract sponsors.
Questions of infringement of intellectual property rights, including patent
rights, may involve highly technical and subjective analyses. There can be no
assurance that any of the Company's existing or future products or technologies
do not or will not infringe the rights of other parties, that such other
parties may not in the future initiate legal action against the Company to
enforce their claims or that, if such actions are brought, the Company would be
successful in defending itself.
If the Company is required to defend against charges of infringement of
patent or proprietary rights of third parties or to protect its own patent or
proprietary rights against third parties, including its neurotrophic product
candidates, the Company may incur substantial costs and could lose rights to
develop or market certain products or be required to pay monetary damages or
royalties to license proprietary rights from third parties. In response to
actual or threatened litigation, the Company may seek licenses from third
parties or attempt to redesign its products or processes to avoid infringement;
however, there can be no assurance that the Company will be able to obtain
licenses on acceptable terms, or at all, or redesign its products or processes.
In addition to being a party to patent infringement litigation, the Company
could be required to participate in patent interference proceedings declared by
the U.S. Patent and Trademark Office, which would be expensive and
time-consuming, even if the Company were to prevail in such a proceeding. The
Company may also be forced to initiate legal proceedings to protect its patent
position or other proprietary rights. These proceedings typically are costly,
protracted, and offer no assurance of success. Furthermore, under the
Company's collaboration with Amgen, Amgen is responsible for the preparation,
filing, prosecution, maintenance and defense of patent applications and patents
relating to technology covered by the Amgen Agreements, and there can be no
assurance that Amgen will pursue such activities in the same manner or as
vigorously as the Company would if it had such responsibility. Furthermore,
Amgen has the option to take the lead in bringing actions to enforce patent
rights subject to the Amgen Agreements and to defend against third party
infringement suits regarding the Neuroimmunophilin Technology. While Amgen and
Guilford have agreed to consult with each other on such matters, in the event
of disagreement, Amgen's decisions shall control.
DEPENDENCE ON LICENSES OF INTELLECTUAL PROPERTY. The Company has licensed
certain intellectual property from third parties, including certain
intellectual property underlying GLIADEL, DOPASCAN and the Neuroimmunophilin
Technology. Under the terms of its license agreements, the Company is
obligated to exercise diligence, achieve certain milestones, and expend minimum
amounts of resources in bringing potential products to market and make certain
royalty, milestone and patent cost reimbursement payments. In addition, each of
these agreements contains certain record keeping and reporting obligations.
Each agreement is terminable by either party, upon notice, if the other party
defaults in its obligations. There can be no assurance that the Company will
be able to meet its obligations under these agreements on a timely basis, or at
all or that these obligations will not conflict with those under the Company's
other corporate collaborations. Should the Company default under any of these
agreements, the Company may lose its right to market and sell any products
based on the licensed technology. In such event, the Company's business,
financial condition and results of operations would be materially and adversely
affected. The agreements also require the Company to pay a royalty to these
parties on sales of GLIADEL and, if successfully developed, milestone and/or
royalty payments in connection with DOPASCAN or other compounds developed and
commercialized under the Neuroimmunophilin Technology.
RIGHTS WITH RESPECT TO GOVERNMENT SUPPORTED RESEARCH. Aspects of the
technology licensed under the Company's license agreements may be subject to
certain rights held by the U.S. government (the "Government Rights"). These
rights include a non-exclusive, royalty-free, worldwide license to practice or
have practiced such inventions for any governmental purpose. In addition, the
United States government has the right to grant licenses which may be exclusive
under any of such inventions to a third-party if it determines that: (i)
adequate steps have not been taken to commercialize such inventions, (ii) such
action is necessary to meet public health or safety needs or (iii) such action
is necessary to meet requirements for public use under federal regulations.
The government also has the right to take title to a subject invention if there
is failure to disclose the invention and elect title within specified time
limits. In addition, the government may acquire title in any country in which a
patent application is not filed within specified time limits. Federal law
requires any licensor of an invention that was partially funded by the federal
government to obtain a covenant from any exclusive licensee to manufacture
products using the invention substantially in the United States. Further, the
Government Rights include the right to use and disclose without limitation
technical data relating to licensed technology that was developed in whole or
in part at government expense. Provisions recognizing these Government Rights
are contained in the Company's principal technology license agreements.
The Company has entered into a contract with the U.S. Army, funded by the
Office of National Drug Control Policy, to provide certain financial support
for research being conducted by Guilford on a potential cocaine inhibitor. That
contract permits the U.S. government to obtain unlimited rights in data
developed in the course of performing under the contract in the event the
Company fails to make use
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of the data within five years after termination of the contract in conducting
further laboratory investigation and/or clinical trials toward the development
of a commercial product to combat drug abuse.
UNCERTAINTY OF PRECLINICAL AND CLINICAL TRIAL RESULTS. Before obtaining
regulatory approval for the commercial sale of any of its product candidates,
the Company must demonstrate through preclinical and clinical trials that the
product is safe and effective for use in the clinical indication for which
approval is sought. The Company and RPR commenced a Phase III clinical trial
for GLIADEL in December, 1997 for initial surgery for malignant glioma, and the
Company intends to carry out a Phase III clinical trial for DOPASCAN. There
can be no assurance that the results of these trials will be successful, and
adverse results from either of these trials would have a material adverse
effect on the Company's business, financial condition and results of
operations. There can be no assurance that the Company will be permitted to
undertake or continue clinical trials for any of its product candidates, or, if
permitted, that such products will be demonstrated to be safe and effective.
Moreover, the results from preclinical studies and early clinical trial may not
be predictive of results that will be obtained in later stage clinical trials.
There can be no assurance that the Company's present or future clinical trials
will demonstrate the safety and efficacy of any product candidates or will
result in any necessary regulatory approval to market products.
GOVERNMENT REGULATION AND PRODUCT APPROVALS. The Company's research,
preclinical development and clinical trials and the manufacturing and marketing
of its product candidates are subject to extensive regulation by numerous
governmental authorities in the United States and other countries, including,
but not limited to, the FDA and the DEA. Except for GLIADEL, none of the
Company's product candidates has received marketing clearance from the FDA, and
and except with respect to GLIADEL in a very limited number of foreign
countries, none has received clearance from any other foreign regulatory
authority for commercial sale. As a condition to approval of the Company's
product candidates under development, the FDA could require additional
preclinical, clinical or other studies. Any such requirement for the Company
to perform additional preclinical, clinical or other studies or purchase data
from other companies could have a material adverse effect on the Company's
business, financial condition and results of operations.
In order to obtain FDA approval of a new drug product for an indication, the
Company must demonstrate to the satisfaction of the FDA that the product is
safe and effective for its intended use and that the product is capable of
being manufactured in accordance with applicable regulatory standards. There
can be no assurance that the Company will be able to satisfy the foregoing
requirements with respect to any of its drug product candidates or with respect
to the proposed new labeling of GLIADEL for malignant glioma at the time of
initial surgery, that the FDA will approve any of its drug product candidates
or such labeling or that, if such product candidates or such new labeling is
approved, the FDA will approve the full scope of uses and labeling sought by
the Company and its corporate partner, RPR. Failure to obtain regulatory drug
approvals on a timely basis could have a material adverse effect on the
Company's business, financial condition and results of operations. Once FDA
approval is obtained, the FDA may also require post-marketing testing and
surveillance to monitor the record of the approved product and continued
compliance with regulatory requirements. In addition, product approvals may be
withdrawn if compliance with regulatory requirements is not maintained or if
problems concerning safety or efficacy of the product occur following approval.
The process of obtaining FDA and other required approvals or licenses and of
meeting other regulatory requirements to test and market drugs, including
controlled substances and radiolabeled drugs, is rigorous and lengthy and has
required, and will continue to require, the expenditure of substantial
resources. All of the Company's product candidates will need to be the subject
of further clinical and other studies. Unsatisfactory clinical trial results
and other delays in obtaining regulatory approvals or licenses would prevent
the marketing of products developed by the Company, and pending the receipt of
such approvals or licenses and the meeting of other regulatory requirements,
the Company will not receive product revenues or royalties.
The Company hopes to capitalize on current FDA regulations and the new
provisions of the FDA Modernization Act of 1997, as applicable, that permit
fast track approval or treatment use of, and cost recovery for, certain
experimental drugs. The FDA's fast track accelerated or expedited regulations
are limited to drug products intended to treat seriously debilitating or
life-threatening diseases and that provide meaningful therapeutic benefit to
patients over existing treatments or that are for diseases for which no
satisfactory or alternative therapy exists, among other requirements. The
FDAMA contains certain provisions patterned after the accelerated approval
regulations and other provisions pertaining to expanded access, i.e. treatment
uses. Since some of the new statutory provisions and current FDA relations are
different from each other, it is unclear how they will apply, if at all, to the
Company's drug candidates. There can be no assurance that the Company's drug
candidates will qualify for fast track approvals or for treatment use and cost
recovery.
Controlled drug products and radiolabeled drugs are subject to special
regulations in addition to those applicable to other drugs. Certain of the
Company's products and product candidates (including DOPASCAN) are or may be
subject to regulation by the DEA as controlled substances and other federal
agencies as radiolabeled drugs. The failure to continue to obtain exceptions
from DEA for shipment abroad or other activities could have a material adverse
effect on the Company. The Company has obtained registrations for its
facilities from the DEA and exceptions from the DEA with respect to various of
its activities involving DOPASCAN, including the shipment of certain quantities
of a precursor of this product candidate to an overseas collaborative partner.
However, there can be no
25
<PAGE> 26
assurance that such exceptions will be sufficient to cover future activities of
the Company, will not be revoked, or that other requirements to test,
manufacture and market controlled substances or radiolabeled drugs can be
satisfied, or that the Company will be able to obtain additional necessary
approvals or licenses to meet state, federal and international regulatory
requirements to manufacture and distribute such products. The FDAMA requires
FDA to issue and finalize within one and one-half years regulations governing
the approval of radiolabeled drugs. It is unclear how these and other
provisions may affect the potential for approval of DOPASCAN.
NOVEL ALTERNATIVE TECHNOLOGIES AND THERAPEUTIC APPROACHES. Many of the
Company's product development efforts represent novel alternative therapeutic
approaches and new technologies used, among other things, in the diagnosis and
monitoring of Parkinson's disease, the promotion of nerve growth and the
prevention of neuronal damage, and have not been widely studied. There is no
assurance that these approaches and technologies will be successful. Moreover,
the Company is applying these approaches and technologies to discover new
treatments for conditions that are also the subject of research and development
efforts by numerous other companies. The Company's competitors may succeed in
developing technologies or products that are more efficacious or cost-effective
than those of the Company. Rapid technological change or developments by
others may result in the Company's technology or product candidates becoming
obsolete or noncompetitive.
COMPETITION AND TECHNOLOGICAL CHANGE. The Company is involved in evolving
technological fields in which developments are expected to continue at a rapid
pace. Guilford's future success depends upon maintaining its ability to compete
in the research, development and commercialization of products and technologies
in its areas of focus. Competition from pharmaceutical, chemical and
biotechnology companies, universities and research institutions is intense and
expected to increase. Many of these competitors have substantially greater
research and development capabilities and experience and manufacturing,
marketing, financial and managerial resources than the Company and represent
significant competition for the Company. Acquisitions of competing companies by
large pharmaceutical companies or other companies could enhance financial,
marketing and other resources available to these competitors. These
competitors may develop products which are superior to those under development
by the Company The Company is aware of the development by other companies and
research scientists of alternative approaches to the treatment of malignant
glioma, the diagnosis of Parkinson's disease, the promotion of nerve growth and
repair, the treatment and prevention of neuronal damage, and the treatment of
cocaine addiction. There can be no assurance that developments by others will
not render the Company's products or technologies noncompetitive or obsolete,
or that the Company will be able to keep pace with technological developments.
Any product candidate that the Company develops and for which it gains
regulatory approval, including GLIADEL, must then compete for market acceptance
and market share. For certain of the Company's product candidates, an
important factor will be the timing of market introduction of competitive
products. Accordingly, the relative speed with which the Company and competing
companies can develop products, complete the clinical testing and approval
processes, and supply commercial quantities of the products to the market is
expected to be an important determinant of market success. Other competitive
factors include capabilities of the Company's collaborators, product efficacy
and safety, timing and scope of regulatory approval, product availability,
marketing and sale capabilities, reimbursement coverage, the amount of clinical
benefit of the Company's product candidates relative to their cost, method of
administration, price and patient protection. There can be no assurance that
the Company's competitors will not develop more effective or more affordable
products or achieve earlier product development completion, patent protection,
regulatory approval or product commercialization than the Company. The
achievement of any of these goals by the Company's competitors could have a
material adverse effect on the Company's business, financial conditions and
results of operations.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. The Company will
require substantial funds in order to continue its research and development
programs and preclinical and clinical testing and to manufacture and, where
applicable, market its products. The Company's capital requirements depend on
numerous factors, including the progress of its research and development
programs, the progress of preclinical and clinical testing, the time and costs
involved in obtaining regulatory approvals, the cost of filing, prosecuting,
defending and enforcing any patent claims and other intellectual property
rights, competing technological and market developments, changes in the
Company's existing research relationships, the ability of the Company to
establish collaborative arrangements, the development of collaborative and
licensing agreements and other arrangements and the progress of manufacturing
scale-up efforts.
The Company believes that its existing resources will be sufficient to fund
the Company's activities at least for the next twelve months. There can be no
assurance, however, that changes in the Company's research and development and
commercialization plans or other factors affecting the Company's operating
expenses including potential acquisitions will not result in the expenditure of
these resources before that time. The Company anticipates that it will fund
future capital requirements through a combination of revenues generated under
its agreements with RPR relating to GLIADEL, public or private financings (as
necessary), additional collaborative or other research and development
agreements, commercialization and marketing arrangements with corporate
partners or other potential sources. The Company's ability to raise future
capital on acceptable terms is dependent on conditions in the public and
private equity markets and the performance of the Company, as well as the
overall performance of other companies in the biopharmaceutical and
26
<PAGE> 27
biotechnology sectors. There can be no assurance that required future
financing arrangements will be available on acceptable terms, or at all.
LIMITED CLINICAL AND REGULATORY COMPLIANCE CAPABILITIES. The Company has
limited resources in the areas of product testing and regulatory compliance,
and thus will have to expend capital to acquire and expand such capabilities,
reach collaborative arrangements with third parties to provide these
capabilities or contract with third parties to provide these capabilities in
order to carry its products through the necessary regulatory approvals and
prepare its product candidates for commercialization and marketing.
REIMBURSEMENT UNCERTAINTY. Sales of the Company's product candidates will
depend in part on the availability of reimbursement from third-party health
care payors, such as government and private insurance plans. Reimbursement
policies for GLIADEL remain uncertain. No assurance can be given that any
reimbursement will be available at all or will be available at price levels
sufficient to realize an appropriate return on the Company's investment in
GLIADEL or other products in development.
RISK OF PRODUCT LIABILITY. The Company may potentially become subject to
large liability claims and significant defense costs as a result of the design,
manufacture or marketing of, or the conduct of clinical trials involving, its
products. A product liability related claim or recall could have a material
adverse effect on the Company. The Company currently maintains only $10
million of product liability insurance covering clinical trials and product
sales, and there can be no assurance that such or any future insurance coverage
obtained by the Company will be adequate or that claims, if any, will be
covered by the Company's insurance. Product liability insurance varies in
cost, can be difficult to obtain and may not be available in the future on
terms acceptable to the Company, if at all. An inability to obtain or maintain
sufficient insurance coverage at an acceptable cost or otherwise protect
against potential product liability claims could prevent or inhibit the
clinical development and/or commercialization of any products developed by the
Company.
DEPENDENCE ON QUALIFIED PERSONNEL AND CONSULTANTS. The Company is highly
dependent on the principal members of its management and scientific staff,
including the Company's Chief Executive Officer, Craig R. Smith, M.D., and
member of the Company's Board of Directors and Chairman of the Company's
Scientific Advisory Board, Solomon H. Snyder, M.D. The loss by the Company of
the services of either of these individuals or other members of its senior
management could have a material adverse effect on the Company's business,
financial condition and results of operations. Although the Company has
entered into a consulting agreement with Dr. Snyder and an employment
agreement with Dr. Smith that provide for the protection of the Company's
proprietary rights, either Dr. Snyder or Dr. Smith may terminate his
relationship with the Company at any time. Accordingly, there can be no
assurance that either of these individuals or other employees or consultants
will remain with the Company or that, in the future, these employees or
consultants will not organize, or become employed by or associated with
companies competitive with the Company.
The Company's planned activities will require individuals with expertise in
many areas including, without limitation, preclinical testing, clinical trial
management, regulatory affairs, manufacturing and business development. These
activities will require the addition of new personnel, including management
personnel and the development of additional expertise by existing management
personnel. Recruiting and retaining qualified personnel, collaborators,
advisors and consultants will be critical to the Company's activities, and
there can be no assurance that the Company will be able to attract and retain
the personnel necessary for the development of the Company's business. There
is significant competition for experienced scientists from numerous
pharmaceutical, biotechnology and health care companies and academic and other
research institutions. The inability to hire such personnel or to develop such
expertise could have a material adverse effect on the Company's operations. In
addition, the Company is dependent on collaborators at research institutions
and its Scientific Advisory Board members and consultants.
LACK OF SALES AND MARKETING EXPERIENCE. The Company currently has not
established a sales force, and the Company has no experience in marketing or
selling a product in a commercial setting. In the event the Company decides to
establish an in-house sales force, there can be no assurance its efforts will
be successful. In addition, if the Company succeeds in bringing additional
products to market, it will compete with many other companies that currently
have extensive and well-funded marketing and sales operations. There can be no
assurance that the Company's marketing and sales efforts would compete
successfully against such other companies.
HAZARDOUS AND RADIOACTIVE MATERIALS; ENVIRONMENTAL MATTERS; ANIMAL TESTING.
Research and development processes sponsored by the Company involve the
controlled use of hazardous and radioactive materials. The Company and its
collaborative partners are subject to international, federal, state and local
laws and regulations governing the use, manufacture, storage, handling and
disposal of hazardous and radioactive materials. The Company believes that the
safety procedures relating to its in-house research and development and
manufacturing efforts comply in all material respects with the standards
prescribed by such laws and regulations. However, the risk of accidental
contamination or injury from these materials cannot be completely eliminated.
Moreover, there can be no assurance that the Company's collaborative partners
are in compliance with such standards or that the Company and its collaborative
partners will be in compliance with such standards in the future. In such
event, the business, operations or finances of the Company may be materially
adversely affected, and the Company and/or its collaborative partners could be
held liable for damages, fines or other
27
<PAGE> 28
liability, and any such liability could exceed the resources of the Company.
Although the Company believes that it is and will continue to be in compliance
in all material respects with applicable environmental laws and regulations and
currently does not expect to make material capital expenditures for
environmental control facilities in the near term, there can be no assurance
that the Company will not be required to incur significant costs to comply with
environmental laws and regulations in the future or that the operations,
business or assets of the Company will not be materially adversely affected by
current or future environmental laws or regulations. In addition, much of the
research and development efforts sponsored by the Company involves use of
laboratory animals. The Company may be adversely affected by changes in laws,
regulations or accepted clinical procedures or by social pressures that would
restrict the use of animals in testing or by actions against the Company or its
collaborators by groups or individuals opposed to such testing.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION AND EXCHANGE RIGHTS. As of
March 17, 1998, the Company had approximately 19,445,145 shares of common stock
outstanding. As of that date, there were options to purchase approximately an
aggregate of 3,139,288 shares of common stock and warrants to purchase
1,012,934 shares outstanding. A significant portion of the outstanding common
stock and shares issuable upon exercise of outstanding options are freely
tradable. Holders of the Company's common stock and warrants (representing
approximately an aggregate of 1,853,029 shares), including Amgen, have demand
and/or piggyback registration rights. The foregoing registration rights may be
exercised at any time and would permit the resale of some or all of such shares
in the public market. If the Company were required to include shares in a
Company-initiated registration pursuant to the exercise of registration rights,
the sale of such shares could have a material adverse effect on the Company's
ability to raise additional capital. No prediction can be made as to the
effect, if any, that sales of shares of the Company's common stock or the
availability of such shares for sale will have on the market prices of the
common stock of the Company prevailing from time to time. The possibility that
substantial amounts of the Company's common stock may be sold in the public
market may adversely affect prevailing market prices for its common stock and
could impair the Company's ability to raise capital through the sale of its
equity securities.
ANTI-TAKEOVER PROVISIONS; PREFERRED STOCK. The Company's Amended and
Restated Certificate of Incorporation, as amended, and the Delaware General
Corporation Law contain certain provisions, including the requirements of
Section 203 of the Delaware General Corporation Law, that may delay or prevent
an attempt by a third party to acquire control of the Company. The Company has
adopted a stockholder rights plan intended to deter hostile or coercive
attempts to acquire the Company through the distribution of rights to
stockholders enabling those stockholders to acquire shares of the Company's
common stock, or that of an acquirer, at a substantial discount to the public
market price should any person or group acquire more than 20% of the Company's
common stock without approval of the Board of Directors under certain
circumstances. The Company has reserved 300,000 shares of Series A Junior
Participating Preferred Stock for issuance in connection with the stockholder
rights plan. The Company is authorized to issue an additional 4,700,000 shares
of Preferred stock in one or more series, having terms fixed by the Board of
Directors without a stockholder vote. No shares of preferred stock of the
Company are currently outstanding. While the Board of Directors has no current
intentions or plans to issue any Preferred Stock, issuance of these shares
could also be used as an anti-takeover device.
ABSENCE OF DIVIDENDS. The Company has never declared or paid any cash
dividends on its common stock and does not intend to do so for the foreseeable
future. In addition, the Company is prohibited from paying any cash dividends
under the terms of its current loan and lease agreements.
YEAR 2000 COMPLIANCE. The Company uses a significant number of computer
software programs and operating systems in its internal operations, including
applications used in financial business systems, manufacturing processes and
various administrative functions. To the extent that these systems contain
source code that is unable to appropriately interpret the upcoming calendar
year "2000", some level of modification or even the possible replacement of
such source code or application may be necessary. The Company is in the
process of identifying the software applications that may not be "Year 2000"
compliant. Based upon the information known at this time about the Company's
current systems, there can be no assurance that the Company will be able to
address the "Year 2000" issues in a timely manner.
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<PAGE> 29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the Nasdaq(R) National Market
under the symbol "GLFD." The following table sets forth the range of high and
low sale prices for the Common Stock as reported on the Nasdaq(R) National
Market for the periods indicated below.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1995
First Quarter . . . . . . . . . . . . . . . . $ 4.25 $ 2.96
Second Quarter . . . . . . . . . . . . . . . . 4.25 3.17
Third Quarter . . . . . . . . . . . . . . . . 9.42 4.17
Fourth Quarter . . . . . . . . . . . . . . . . 11.00 7.50
1996
First Quarter . . . . . . . . . . . . . . . . 16.58 10.33
Second Quarter . . . . . . . . . . . . . . . . 23.83 13.33
Third Quarter . . . . . . . . . . . . . . . . 19.92 11.58
Fourth Quarter . . . . . . . . . . . . . . . . 23.25 16.50
1997
First Quarter . . . . . . . . . . . . . . . . 29.00 20.75
Second Quarter . . . . . . . . . . . . . . . . 27.00 20.25
Third Quarter . . . . . . . . . . . . . . . . 30.63 20.75
Fourth Quarter . . . . . . . . . . . . . . . . 32.00 18.38
1998
First Quarter (through March 17, 1998) . . . . 23.75 17.63
</TABLE>
As of March 17, 1998, there were approximately 196 holders of record of
the Company's common stock and in excess of 400 beneficial stockholders.
The Company has never declared or paid any cash dividends and does not
intend to do so for the foreseeable future. The Company currently intends to
retain all earnings, if any, to finance the development of its business. Under
the Company's various loan and lease agreements with certain financial
institutions, the Company may not declare, during the term of these agreements,
any cash dividends on its common stock without the prior written consent of
these financial institutions and, in certain cases, the Maryland Industrial
Development Financing Authority.
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<PAGE> 30
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The following selected consolidated financial data with respect to the
Company for the period from inception on July 14, 1993 through December 31,
1993 and for each of the years in the four year period ended December 31, 1997
have been derived from the Company's consolidated financial statements which
have been audited by KPMG Peat Marwick LLP, the Company's independent auditors.
The Company's consolidated financial statements as of December 31, 1996 and
1997, and for each of the years in the three year period ended December 31,
1997, including the Notes thereto, are included elsewhere in this annual
report. The information set forth below should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
<TABLE>
<CAPTION>
JULY 14, 1993
(DATE OF INCEPTION) YEARS ENDED DECEMBER 31,
TO DECEMBER 31, -------------------------------------------------------------
1993 1994 1995 1996 1997
------------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues................ $ -- $ -- $ 586 $28,020 $23,828
Costs and Expenses:
Cost of sales -- -- -- -- 2,585
Research and
development................... 1,061 2,869 9,688 18,761 30,293
General and
administrative................ 367 2,369 4,367 6,736 9.076
Compensation -- warrants........ -- 991 -- -- --
------------------ ------------- ------------- ------------- ------------
Total costs and
expenses................. 1,428 6,229 14,055 25,497 41,954
------------------ ------------- ------------- ------------- ------------
Operating income (loss) ........ (1,428) (6,229) (13,469) 2,523 (18,126)
Other income (expense),
net......................... 15 332 832 2,550 6,689
------------------ ------------- ------------- ------------- ------------
Net income (loss)............. $(1,413) $(5,897) $ (12,637) $ 5,073 $ (11,437)
------------------ ------------- ------------- ------------- ------------
Basic earnings (loss) per
common share (1)............. $ (0.67) $ (1.45) $ (1.72) $ 0.39 $ (0.65)
------------------ ------------- ------------- ------------- ------------
Average common shares
outstanding (1).............. 2,111 4,067 7,354 13,001 17,570
Diluted earnings (loss)
per common share (1)......... $ (0.67) $ (1.45) $ (1.72) $ 0.35 $ (0.65)
------------------ ------------- ------------- ------------- ------------
Average common and
dilutive equivalent shares
outstanding (1).............. 2,111 4,067 7,354 14,634 17,570
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------
1993 1994 1995 1996 1997
------------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
investments (2) ................ $2,562 $11,834 $19,454 $77,439 $160,219
Total assets (2).................. 3,258 14,562 26,048 93,659 180,081
Long-term debt.................... -- 1,431 4,696 10,905 10,926
Total stockholders' equity........ 2,887 11,421 17,773 75,877 158,294
</TABLE>
- ----------
(1) For information concerning the calculation of earnings (loss) per share,
see Note 2 of Notes to Consolidated Financial Statements.
(2) Includes restricted investments of $1.2 million, $3.6 million, $10.1
million, and $12.1 million at December 31, 1994, 1995, 1996 and December
31, 1997, respectively. See Note 6 of Notes to Consolidated Financial
Statements.
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<PAGE> 31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this annual report. The forward-looking statements
contained in this annual report, include, but are not limited to, those
concerning application for international regulatory clearances and labeling
expansion for GLIADEL, polymer product line extensions, the commencement and
completion of the research program relating to the Company's FKBP-based
neuroimmunophilin ligand technology and other technologies, clinical
development activities, including without limitation commencement and conduct
of clinical trials related to GLIADEL, the Company's strategic plans,
anticipated expenditures and the need for additional funds, all of which
involve significant risks and uncertainties. The Company's actual results may
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 in the section herein captioned "Risk
Factors" and elsewhere in this annual report.
GENERAL
Guilford is a biopharmaceutical company engaged in the development and
commercialization of novel products in two principal areas: (i) targeted and
controlled drug delivery products for the treatment of cancer and other
diseases; and (ii) therapeutic and diagnostic products for neurological
diseases and conditions.
The Company anticipates that its future revenues will come primarily from
two sources: (i) transfer payments and/or royalties related to sales of GLIADEL
and other products that may be developed in the future, including products
developed under the Amgen collaboration, and (ii) milestone, rights and other
payments made under the Company's current and any future collaboration
agreements relating to the research, development and/or commercialization of
the Company's technologies. The Company is eligible for certain milestone and
other payments in the future under its collaborations with RPR and Amgen if
certain regulatory and/or development objectives are attained and views these
potential payments as significant future revenue opportunities. As noted in
the section herein captioned "Risk Factors" and elsewhere in this annual
report, there can be no assurance, however, that the Company will be successful
in its efforts to enter into future collaborations for the research,
development and/or commercialization of its technologies or will receive any or
all of the milestone payments for which it is eligible under its existing or
any future collaborations.
Through December 31, 1996, substantially all the Company's revenues had
been recognized as non-refundable research and development or rights and
milestone payments under the Company's collaborations. While the Company
reported net income of $5.1 million for fiscal 1996, the Company incurred net
operating losses from its inception through the first quarter of 1996 and again
in the fourth quarter of 1996. For the year ended December 31, 1997, the
Company incurred a net loss of $11.4 million. Through December 31, 1997, the
Company had an accumulated deficit of $26.3 million.
In addition to revenues related to GLIADEL, the Company's only other
significant revenues recognized in fiscal year 1997 consist of the one-time,
non-refundable signing fee of $15 million from Amgen and $1.125 million in
payments from Amgen related to certain research activities conducted at
Guilford. Pursuant to the Amgen Agreements, effective October 1, 1997, Amgen
agreed to pay up to $13.5 million in the aggregate, payable quarterly over
three years, to support research activities at the Company relating to the
Neuroimmunophilin Technology, with an option to fund a fourth year of research,
or under certain conditions, to terminate the research program after two years.
In addition, in the future the Company may be entitled to certain
non-refundable, milestone payments in the event certain development milestones
are achieved by Amgen and to royalties on future product sales, if any. As
noted in the section herein captioned "Risk Factors" and elsewhere in this
annual report, whether the Company will ever recognize future revenues in the
form of milestone payments and royalties under the Amgen Agreement is subject
to significant risk and uncertainty, and there can be no assurance that the
Company will recognize significant revenues, if any, from these sources in the
future.
The Company was not profitable in 1997, and there can be no assurance that
the Company will ever achieve or sustain profitability in the future.
Furthermore, the Company expects to experience quarter-to-quarter and
year-to-year fluctuations in its operating results based upon the timing and
amount of sales of GLIADEL, the timing and realization of milestone and other
payments under the Company's agreements with RPR and Amgen and other existing
and potential collaborations, expenditures relating to the Company's research
and development, clinical and manufacturing activities, and the extent and
timing of costs related to the Company's patenting activities and other
activities undertaken in connection with the preservation and extension of the
Company's intellectual property rights.
The Company expects that expenses related to research and product
development, preclinical testing, clinical trials, regulatory matters,
operations, manufacturing and general and administrative expenses will continue
to increase as the Company commercializes GLIADEL through its marketing
partners and conducts research and development activities to develop its other
technologies and potential products. The Company has experienced substantial
personnel growth since its inception. At December 31, 1997 the Company had 198
full-time employees as compared to 140 full-time employees at December 31,
1996. The Company's ability to achieve consistent profitability in
31
<PAGE> 32
the future will depend, among other things, upon future sales of GLIADEL as
well as the Company's ability, either alone or with others, to develop its
product candidates successfully including any product candidates identified
pursuant to activities under the collaboration with Amgen, conduct clinical
trials, obtain required regulatory clearances, manufacture at reasonable cost
and successfully market its product candidates and enter into collaborative
arrangements and license agreements on acceptable terms. For discussion of
these and other risks, see the section herein captioned "Risk Factors".
RESULTS OF OPERATIONS
Years Ended December 31, 1997, 1996 and 1995
In 1997, the Company recognized $23.8 million in revenues, consisting
primarily of the one-time, non-refundable signing payment of $15 million from
Amgen, $1.125 million from Amgen to fund research at Guilford related to the
Neuroimmunophilin Technology, and revenues from product sales and royalties
relating to GLIADEL as well as amounts reimbursed by RPR relating to the
Company's efforts to develop a high dose GLIADEL product. In 1996, the Company
recognized $28.0 million in revenues, primarily consisting of a total of $27.5
million in non-recurring milestone payments made by RPR in June and September
1996. In 1995, the Company recognized $0.6 million in revenues, primarily
consisting of a non-refundable license fee payment pursuant to the Company's
agreement with DRL related to DOPASCAN.
Revenues from GLIADEL sales consist of two main components: (i) transfer
price payments related to sales of product directly to RPR and (ii) royalty
payments made by RPR to the Company on product sales to end-users. GLIADEL was
commercially launched in the United States by RPR on February 25, 1997. The
majority of the revenues from GLIADEL in each of the first two quarters of 1997
consisted of transfer price payments related to sales of GLIADEL to RPR in
order for RPR to build up an initial inventory of the product. The reduction
in revenues related to GLIADEL sales in the second half of 1997 as compared to
the first half of 1997 primarily resulted from the reduction in the level of
transfer payments made by RPR from $3.8 million in the first half of 1997 to
$1.9 million in the second half of 1997, reflecting a stabilization in RPR's
current inventory requirements for GLIADEL. This decrease in GLIADEL revenues
was partially offset by an increase in royalties recognized on end-user sales
from $650,000 in royalties in the first half of 1997 to $972,000 in the second
half of 1997. As noted in the section herein captioned "Risk Factors" and
elsewhere in this annual report, future GLIADEL sales are subject to a number
of risks and uncertainties, and there can be no assurance that GLIADEL sales
will generate significant revenues for the Company.
Cost of sales for the year ended December 31, 1997 were $2.6 million.
Included in this amount is approximately $281,000 representing royalty payments
made to a third party from which the Company has licensed certain technologies
related to GLIADEL and certain costs specifically related to the commercial
product launch of GLIADEL in the United States. As GLIADEL was commercially
launched in the United States in February 1997, the Company did not incur cost
of sales prior to 1997. To the extent GLIADEL production levels increase, the
Company expects that per unit product costs may decrease as economies of scale
are achieved. There can be no assurance, however, that GLIADEL product sales
will ever reach levels necessary for the Company to realize significant costs
savings related to manufacturing economies of scale.
Research and development expenses increased to $30.3 million as compared
to $18.8 million in 1996 and $9.7 million in 1995. The increase of $11.5
million in research and development costs from 1996 to 1997 was primarily
attributable to expenses related to increased personnel costs, contracted
research, consulting, laboratory supplies, and in addition royalties owed to a
third-party licensor of certain technology relating to contract revenues
recognized under the Amgen Agreements. In 1997, the Company continued to
accelerate its neuroimmunophilin, pre-synaptic glutamate inhibitor, polymer,
and other research and development programs, continued to fund development
activities at the third party manufacturer for DOPASCAN, and continued with
Phase I clinical trials for a high dose formulation of GLIADEL. The increase
in research and development costs from 1995 to 1996 of $9.1 million was
primarily attributable to expenses related to increased personnel costs and
contracted research, consulting and laboratory supplies. During 1996, the
Company accelerated its neuroimmunophilin, neurotrophic and addictive
therapeutics research and development programs, initiated and completed
enrollment of a multi-center Phase II clinical trial in the United States for
DOPASCAN, finalized preparation of its new drug application for GLIADEL
(submitted in February 1996) and prepared for the commercial launch of GLIADEL.
In addition, in 1997 and 1996 research and development expenses included
charges relating to certain consulting agreements entered into in April 1996,
consisting of non-cash compensation expense of $985,000 and $1.2 million,
respectively, and cash compensation expense of $244,000 and $135,000,
respectively. These agreements are intended to enhance the Company's ability
to develop new polymer technologies and products for the delivery of
chemotherapeutics in indications where local tumor recurrence is likely and
controlled release may be more effective than current therapies. The Company
expects it will be required to record varying amounts of non-cash compensation
charges in research and development expenses through 2001 relating to these
agreements of up to an additional $1.2 million in the aggregate. The Company
anticipates that its research and development expenses will continue to
increase in future periods.
General and administrative expenses increased to $9.1 million in 1997 as
compared to $6.7 million in 1996 and $4.4 million in 1995. The increases in
general and administrative expenses of $2.4 million from 1996 to 1997 and of
$2.3 million from 1995 to 1996 were
32
<PAGE> 33
attributable to higher personnel costs related to an increase in the number of
employees necessary to support the Company's research and development and
commercialization activities. Additionally, indirect personnel costs, including
recruiting and relocation costs, have increased as the total number of such
employees has increased. Increases in costs related to patenting and other
activities related to establishment and preservation of the Company's
intellectual property rights and costs related to operations as a public
company also contributed to increased general and administrative expenditures
over these periods. The Company anticipates that its general and
administrative expenses will continue to increase in future periods.
Other income and expense relates primarily to interest income and interest
expense. Interest income increased to $7.5 million in 1997 compared to $3.1
million in 1996 and $0.8 million in 1995. The increase in 1997 was primarily
attributable to an increase in the average invested capital in 1997 as compared
to the prior periods. The increase in average invested capital was primarily
due to the public sale of the Company's Common Stock in April, 1997, the
one-time, non-refundable signing fee of $15 million paid by Amgen in August
1997 and the sale of shares of Company common stock and warrants to Amgen for
$20 million consummated in October, 1997. The increase in 1996 as compared to
1995 was primarily attributable to an increase in the average invested capital
resulting from the Company's equity offering in March, 1996 and from revenues
from RPR. In 1997, 1996 and 1995, the Company incurred interest expense of
$0.8 million, $0.5 million and $0.2 million, respectively, relating to
borrowings under its loan agreements with First Union (formerly Signet Bank)
providing for the construction of manufacturing, administrative and research
and development facilities and the purchase of related equipment.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and investments were $160.2 million at December 31,
1997. Included in this amount is $12.1 million of restricted cash held as
collateral with respect to certain of the Company's indebtedness. The Company
had incurred an accumulated deficit at December 31, 1997 of $26.3 million and
expects to continue to incur additional operating losses from time to time in
the future.
The Company incurred capital expenditures of $6.4 million in 1997 as
compared to $9.1 million in 1996 and $3.7 million in 1995. These capital
expenditures were related to the construction of the Company's GLIADEL
manufacturing facility and related tenant improvements for research and
development laboratories and administrative offices. Additionally, other
purchases included capital equipment, including laboratory and manufacturing
equipment, and computer hardware and software to support the Company's
activities.
In 1997, the Company utilized its $5.0 million operating lease arrangement
with General Electric Capital Corporation to lease certain equipment. In
March, 1998, the Company entered into master equipment lease arrangements for
up to an aggregate of $10.75 million, pursuant to which the Company expects to
lease additional equipment, including computer hardware and software, furniture
and fixtures. Depending on the type of equipment covered and certain other
factors, the term of any lease entered into under these arrangement can range
from two to four years. Such financing, along with the Company's internal
resources as well as external sources of funds, is expected to provide for the
Company's equipment needs for the foreseeable future.
In February 1998, in order to meet the Company's future facilities needs,
the Company entered into an operating lease with a trust affiliated with First
Union for an approximately 72,500 square foot facility to be constructed on a
lot adjacent to the Company's current headquarters in Baltimore, Maryland in
order to support the Company's future research, development and administrative
activities over the next several years. During the construction period, the
Company will act as construction agent for the trust, responsible for
performing all duties associated with the development of the property and
anticipates that the facility will be ready for occupancy prior to the end of
the second quarter of 1999. The lease expires in February, 2005 and the
Company anticipates that the lease payments for this facility will not exceed
$2.0 million annually. At the expiration of the lease term, the Company has
two options under its agreement with the trust. The Company can purchase the
property for an amount equal to any and all unamortized acquisition and
construction costs as well as accrued but unpaid interest and similar costs
incurred by the trust as part of its acquisition and construction activities
related to the property (the"Termination Amount"), or the Company can sell the
property on behalf of the trust, which is then obligated to apply the proceeds
from such sale against repayment of the Termination Amount. If such sale
proceeds are insufficient to cover the entire Termination Amount, the Company
is then obligated to repay any such shortfall subject to a total cap on such
payments equal to 83% of the Termination Amount. In addition, the Company may,
with the consent of First Union, enter into a new lease arrangement.
The Company has available up to $7.5 million under a loan agreement with
RPR respecting expansion of the Company's GLIADEL and polymer manufacturing
capacity. As of January 2, 1997, $4.0 million was available under the loan
agreement; the remainder is available no earlier than 12 nor later than 18
months following funding of the initial tranche. Any principal amounts borrowed
under this loan agreement are due five years from the date borrowed and will
carry an interest rate equal to the lowest rate paid by RPR from time to time
on its most senior indebtedness. No amounts were outstanding under this loan
at December 31, 1997. The Company has not yet determined whether to draw on
the capital available under its loan agreement with RPR to fund the expansion
of the Company's manufacturing facilities.
33
<PAGE> 34
The Company will require substantial funds in order to continue its
research and development programs and preclinical and clinical testing, to
manufacture and, where applicable, market its products and to meet its future
facilities needs. The Company's capital requirements depend on numerous
factors, including the progress of its research and development programs, the
progress of preclinical and clinical testing, the time and costs involved in
obtaining regulatory approvals, the cost of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights, competing
technological and market developments, changes in the Company's existing
research relationships, the ability of the Company to establish collaborative
arrangements, the development of collaborative and licensing agreements and
other arrangements and the progress of manufacturing scale-up efforts.
The Company believes that its existing resources, including the proceeds
from the sale of common stock and warrants to Amgen in October, 1997 and the
interest earned thereon, will be sufficient to fund the Company's activities
for at least the next 12 months. There can be no assurance, however, that
changes in the Company's research and development and commercialization plans
or other factors affecting the Company's operating expenses including potential
acquisitions, and anticipated capital expenditures will not result in the
expenditure of these proceeds and the Company's other resources before that
time.
The Company anticipates that it will fund future capital requirements
through a combination of its existing working capital, revenues (including
product sales, royalty income, and milestones/licensing fees) generated under
its agreements with RPR relating to GLIADEL and Amgen relating to the
Neuroimmunophilin Technology, public or private equity or debt financing (as
necessary), additional collaborative or other research and development
agreements, commercialization and marketing arrangements with corporate
partners or other potential sources. The Company's ability to raise future
capital on acceptable terms is dependent on conditions in the public and
private equity markets and the performance of the Company, as well as the
overall performance of other companies in the biopharmaceutical and
biotechnology sectors. There can be no assurance that any required future
financing arrangements will be available on acceptable terms, or at all.
The Company has assessed and continues to assess the impact of the "Year
2000" issue on its reporting systems and operations. The Year 2000 issue
exists because many computer systems and applications currently use two-digit
date fields to designate a year. As the century date occurs, date sensitive
systems will recognize the year 2000 as 1900 or not at all. This inability to
recognize or properly treat the year 2000 may cause the Company's systems to
process critical financial and operational information incorrectly. The
Company does not expect the costs associated with becoming Year 2000 compliant
will be material.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
34
<PAGE> 35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
GUILFORD PHARMACEUTICALS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report . . . . . . . . . 36
Consolidated Balance Sheets . . . . . . . . . 37
Consolidated Statements of Operations . . . . 38
Consolidated Statements of Stockholders'
Equity . . . . . . . . . . . . . . . . . . . 39
Consolidated Statements of Cash Flows . . . . 40
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . 41
35
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Guilford Pharmaceuticals Inc.:
We have audited the accompanying consolidated balance sheets of Guilford
Pharmaceuticals Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Guilford
Pharmaceuticals Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Baltimore, Maryland
February 13, 1998
36
<PAGE> 37
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------- ----------------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 24,980 $ 16,560
Short-term investments 27,946 20,097
Short-term investments - restricted 2,428 1,608
Accounts receivable 606 376
Inventories 1,342 1,533
Other current assets 494 435
---------------------- ----------------------
Total current assets 57,796 40,609
Investments 95,174 30,653
Investments - restricted 9,691 8,521
Property and equipment, net 17,153 13,455
Other assets 267 421
---------------------- ----------------------
$ 180,081 $ 93,659
====================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 2,743 $ 2,038
Current portion of long-term debt 2,159 1,481
Accrued expenses and other current liabilities 4,834 3,358
Deferred income 1,125 -
---------------------- ----------------------
Total current liabilities 10,861 6,877
Long-term liabilities:
Long-term debt, net of current portion 10,926 10,905
---------------------- ----------------------
Total liabilities 21,787 17,782
Stockholders' equity:
Preferred stock, par value $.01 per share
Authorized 4,700,000 shares, none issued - -
Series A junior participating preferred stock,
par value $.01 per share. Authorized 300,000
shares, none issued - -
Common stock, par value $.01 per share.
Authorized 40,000,000 shares
19,387,946 and 13,979,490 issued and
outstanding at December 31, 1997
and December 31, 1996 194 140
Additional paid-in capital 185,205 90,880
Accumulated deficit (26,311) (14,874)
Notes receivable on common stock (60) (129)
Unrealized gain on available for sale securities 426 62
Treasury stock, at cost (878) -
Deferred compensation (282) (202)
---------------------- ----------------------
Total stockholders' equity 158,294 75,877
---------------------- ----------------------
$ 180,081 $ 93,659
====================== ======================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
37
<PAGE> 38
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
Consolidated Statements Of Operations
(in thousands, except share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
-------------------------------------------------
<S> <C> <C> <C>
Revenues:
Contract revenues $ 15,000 $ 27,600 $ 556
Net product sales 5,741 - -
License fees and royalties 1,628 - -
Revenues under collaborative agreements 1,459 420 30
-------------------------------------------------
Total revenues 23,828 28,020 586
Costs and Expenses:
Cost of sales 2,585 - -
Research and development 30,293 18,761 9,688
General and administrative 9,076 6,736 4,367
-------------------------------------------------
Total costs and expenses 41,954 25,497 14,055
-------------------------------------------------
Operating income (loss) (18,126) 2,523 (13,469)
Other income (expense):
Interest income 7,477 3,070 823
Interest expense (837) (528) (190)
Other income 49 8 199
-------------------------------------------------
Net income (loss) $ (11,437) $ 5,073 $ (12,637)
=================================================
Basic earnings (loss) per common share $ (0.65) $ 0.39 $ (1.72)
=================================================
Average common shares outstanding 17,570 13,001 7,354
=================================================
Diluted earnings (loss) per common share $ (0.65) $ 0.35 $ (1.72)
=================================================
Average common and dilutive equivalent
shares outstanding 17,570 14,634 7,354
=================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
38
<PAGE> 39
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
COMMON STOCK
------------ ADDITIONAL
NUMBER PAID-IN
OF SHARES AMOUNT CAPITAL
--------- ------ -------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1995 3,657,315 $ 37 $ 19,048
Issuance of common stock in follow-on public offering at $6.50*
per share, net of offering costs 3,000,000 30 17,901
Other issuances of common stock 63,286 1 280
Exercise of warrants by Scios Inc. 72,464 166
Equity proceeds from Gell Pharmaceuticals relating to the put option 726
Amortization of deferred compensation
Reduction in notes receivable on common stock
Net loss for the year
------------ ------------ --------------
BALANCE, DECEMBER 31, 1995 6,793,065 $ 68 $ 38,121
Issuance of common stock in follow-on public offering at $20.00*
per share, net of offering costs 2,300,000 23 42,880
Other issuances of common stock 226,595 2 7,679
Three-for-two stock split 4,659,830 47 (47)
Equity proceeds from Gell Pharmaceuticals relating to the put option 1,076
Amortization of stock option compensation 1,171
Amortization of deferred compensation
Reduction in notes receivable on common stock
Unrealized gain on available for sale securities
Net income for the year
------------ ------------ --------------
BALANCE, DECEMBER 31, 1996 13,979,490 $ 140 $ 90,880
Issuance of common stock in follow-on public offering
at $20.00 per share, net of offering costs 3,737,500 37 70,429
Other issuances of common stock 1,670,956 17 22,911
Purchase of 9,360 shares of common stock
Amortization of stock option compensation 985
Amortization of deferred compensation
Reduction in notes receivable on common stock
Unrealized gain on available for sale securities
Net loss for the year
------------ ------------ --------------
BALANCE, DECEMBER 31, 1997 19,387,946 $ 194 $ 185,205
============ ============ ==============
<CAPTION>
NOTES UNREALIZED
RECEIVABLE GAIN ON
ACCUMULATED ON COMMON AVAILABLE FOR
DEFICIT STOCK SALE SECURITIES
------- ----- ---------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ (7,310) $ (149) $ -
Issuance of common stock in follow-on public offering at $6.50*
per share, net of offering costs
Other issuances of common stock
Exercise of warrants by Scios Inc.
Equity proceeds from Gell Pharmaceuticals relating to the put option
Amortization of deferred compensation
Reduction in notes receivable on common stock 10
Net loss for the year (12,637)
-------------- -------------- --------------
BALANCE, DECEMBER 31, 1995 $ (19,947) $ (139) $ -
Issuance of common stock in follow-on public offering at $20.00*
per share, net of offering costs
Other issuances of common stock
Three-for-two stock split
Equity proceeds from Gell Pharmaceuticals relating to the put option
Amortization of stock option compensation
Amortization of deferred compensation
Reduction in notes receivable on common stock 10
Unrealized gain on available for sale securities 62
Net income for the year 5,073
-------------- -------------- --------------
BALANCE, DECEMBER 31, 1996 $ (14,874) $ (129) $ 62
Issuance of common stock in follow-on public offering
at $20.00 per share, net of offering costs
Other issuances of common stock
Purchase of 9,360 shares of common stock
Amortization of stock option compensation
Amortization of deferred compensation
Reduction in notes receivable on common stock 69
Unrealized gain on available for sale securities 364
Net loss for the year (11,437)
-------------- -------------- --------------
BALANCE, DECEMBER 31, 1997 $ (26,311) $ (60) $ 426
============== ============== ==============
<CAPTION>
TOTAL
TREASURY DEFERRED STOCKHOLDERS'
STOCK, AT COST COMPENSATION EQUITY
--------------- -------------- --------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ - $ (205) $ 11,421
Issuance of common stock in follow-on public offering at $6.50*
per share, net of offering costs 17,931
Other issuances of common stock (237) 44
Exercise of warrants by Scios Inc. 166
Equity proceeds from Gell Pharmaceuticals relating to the put option 726
Amortization of deferred compensation 112 112
Reduction in notes receivable on common stock 10
Net loss for the year (12,637)
--------------- -------------- --------------
BALANCE, DECEMBER 31, 1995 $ - $ (330) $ 17,773
Issuance of common stock in follow-on public offering at $20.00*
per share, net of offering costs 42,903
Other issuances of common stock 7,681
Three-for-two stock split -
Equity proceeds from Gell Pharmaceuticals relating to the put option 1,076
Amortization of stock option compensation 1,171
Amortization of deferred compensation 128 128
Reduction in notes receivable on common stock 10
Unrealized gain on available for sale securities 62
Net income for the year 5,073
--------------- -------------- --------------
BALANCE, DECEMBER 31, 1996 $ - $ (202) $ 75,877
Issuance of common stock in follow-on public offering
at $20.00 per share, net of offering costs 70,466
Other issuances of common stock (331) 22,597
Purchase of 9,360 shares of common stock (878) (878)
Amortization of stock option compensation 985
Amortization of deferred compensation 251 251
Reduction in notes receivable on common stock 69
Unrealized gain on available for sale securities 364
Net loss for the year (11,437)
--------------- -------------- --------------
BALANCE, DECEMBER 31, 1997 $ (878) $ (282) $ 158,294
=============== ============== ==============
</TABLE>
*Per share prices are pre-stock split
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
39
<PAGE> 40
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (11,437) $ 5,073 $ (12,637)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,735 1,102 567
Noncash compensation expense 1,236 1,309 122
Changes in assets and liabilities:
Accounts receivable (230) - -
Collaborative research receivable - 180 (556)
Inventory 191 (1,533) -
Other current assets (59) (144) (177)
Other assets 154 (130) 4
Accounts payable 705 398 428
Accrued expenses and other liabilities 1,476 1,712 1,177
Deferred income 1,125 - -
----------------- ---------------- ----------------
Net cash provided by (used in) operating activities (4,104) 7,967 (11,072)
----------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in purchases of property and equipment (6,433) (9,101) (3,706)
Maturities of held-to-maturity investments 42,619 48,368 40,071
Maturities of available-for-sale investments 57,499 - -
Purchases of held-to-maturity investments (42,249) (56,557) (47,470)
Purchases of available-for-sale investments (132,204) (36,076) -
Restricted investments 339 (1,358) -
----------------- ---------------- ----------------
Net cash (used in) investing activities (80,429) (54,724) (11,105)
----------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuances of common stock 93,063 50,584 18,113
Purchase of treasury stock (878) - -
Proceeds from bond and term loan issuances 1,843 7,867 3,558
Equity proceeds from Gell Pharmaceuticals, Inc.
relating to the put option - 1,076 726
Payment of notes receivable on common stock 69 - -
Principal payments on bond payable (941) (470) -
Principal payments on term loan payable (203) - -
----------------- ---------------- ----------------
Net cash provided by financing activities 92,953 59,057 22,397
----------------- ---------------- ----------------
Net increase in cash and cash equivalents 8,420 12,300 220
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR 16,560 4,260 4,040
----------------- ---------------- ----------------
CASH AND CASH EQUIVALENTS AT THE END OF YEAR $ 24,980 $ 16,560 $ 4,260
================= ================ ================
Supplemental disclosures of cash flow information:
Net interest paid $ 828 $ 470 $ 165
Unrealized gain on available-for-sale securities 364 62 -
Issued shares of common stock in lieu of cash bonus - - 28
Issuances of common stock to executive officers - - 237
Collateral transferred from unrestricted to restricted
investments, net $ 1,170 $ 5,129 $ 2,490
================= ================ ================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
40
<PAGE> 41
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(1) ORGANIZATION AND BUSINESS ACTIVITIES
Guilford Pharmaceuticals Inc. (together with its subsidiaries, "Guilford"
or the "Company") is a biopharmaceutical company engaged in the development and
commercialization of novel products in two principal areas: (i) targeted and
controlled drug delivery systems using proprietary biodegradable polymers for
the treatment of cancer and other diseases; and (ii) therapeutic and diagnostic
products for neurological diseases and conditions.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of Guilford
Pharmaceuticals Inc. and subsidiaries, all of which are wholly-owned. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Cash and cash equivalents
Highly liquid investments with a maturity of three months or less at the
date of purchase are classified as cash equivalents.
Investments
The Company classifies investments at the time of purchase as either
available-for-sale or held-to-maturity. Investments in securities that are
classified as available-for-sale are carried at their fair values. Changes in
the fair values of available-for-sale securities are recognized as a separate
component of stockholders' equity as unrealized gains and losses. Realized
gains and losses from the sale of available-for-sale securities are determined
on a specific identification basis. Held-to-maturity securities are carried at
cost adjusted for amortized premium or discount.
A decline in the market value of any available-for-sale or held to
maturity security below cost that is deemed to be other than temporary would
result in a reduction in the carrying amount to fair value. The impairment is
charged to earnings and a new cost basis for the security is established.
Dividends and interest income are recognized when earned.
41
<PAGE> 42
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using a weighted-average approach which approximates the first-in, first-out
method.
Property and equipment
Property and equipment are recorded at cost, including interest on funds
borrowed to finance construction of real property. Depreciation and
amortization are provided using the straight-line method over the estimated
useful lives of the assets, generally three to seven years for furniture and
equipment, and over the shorter of the estimated useful life of leasehold
improvements or the related lease term for such improvements. Upon the
disposition of assets, the costs and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is included in the
statements of operation. Expenditures for repairs and maintenance are expensed
as incurred.
Revenue recognition
Product sales are recognized at the time the product is certified and
shipped. Title of the goods passes to the buyer upon shipment. Sales are
reported net of estimated discounts, rebates, chargebacks and product returns.
Royalty revenue is recognized at such time as the Company's sales,
marketing and distribution partner(s) ships product(s) and the title passes to
third parties.
Collaborative research revenue is recognized, up to the contractual
limits, when the Company meets its performance obligations under the respective
agreements. Contract and non-refundable licensing revenue is recognized when
milestones are met and the Company's significant performance obligations have
been satisfied in accordance with the terms of the respective agreements.
Payments received that relate to future performance are deferred and recognized
as revenue at the time such future performance has been accomplished.
Research and development, patent and royalty costs
Research and development, patent, and royalty costs are expensed as
incurred. Royalty expense related to product sales is recognized concurrently
with the recognition of product revenue and included as part of cost of sales.
Royalty expense from third party sales is expensed as incurred and is offset
against royalty revenue related to third party sales.
Accounting for income taxes
Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The measurement of deferred tax assets is
reduced, if necessary, by a valuation allowance for any tax benefits, which are
not expected to be realized. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the period that such tax rate changes
are enacted.
42
<PAGE> 43
Stock-based compensation
Prior to January 1, 1996, the Company accounted for its share option plans
in accordance with the provisions of APB No. 25, "Accounting for Stock Issued
to Employees" ("APB 25") and related interpretations. As such, compensation
expense is recorded on the date of grant if the market value at the date of
grant exceeds the exercise price. Compensation expense is amortized and charged
against earnings over the respective vesting periods. Under the Company's share
option plans, share options are granted to employees at an exercise price that
equals the current fair market value at the date of grant. On January 1, 1996,
the Company adopted the SFAS No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), which permits companies to continue to apply the provisions of
APB 25 related to employee share options. Under SFAS 123, the Company is
required to provide pro forma net earnings (loss) and pro forma earnings (loss)
per share footnote disclosures for employee stock option grants as if the
fair-value based method defined in SFAS 123 had been applied. Stock-based
awards issued to non-employees are accounted for under the fair-value based
method defined in SFAS 123 (see note 11).
Earnings (loss) per share
Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings
per Share", which replaces the presentation of Primary and Fully Diluted
earnings per share ("EPS") with that of Basic EPS and Diluted EPS. Basic EPS is
computed by dividing earnings (loss) available to common stockholders by the
weighted-average number of common shares outstanding for the period. The
computation of Diluted EPS is similar to Basic EPS except that the
weighted-average number of shares outstanding for the period is increased to
include the number of additional common shares that would have been outstanding
if the dilutive potential common shares had been issued. Potential common
shares are excluded if the effect on earnings (loss) per share is antidilutive.
All prior period EPS data have been restated to reflect Basic and Diluted EPS.
The following table presents the computations of basic and diluted EPS:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(in thousands, except share data)
<S> <C> <C> <C>
Net earnings (loss) applicable to
common stockholders $ (11,437) $ 5,073 $ (12,637)
========== ========= ==========
Weighted-average shares outstanding 17,570 13,001 7,354
Employee stock options - 751 -
Warrants and put options - 882 -
---------- --------- ----------
Dillutive potential common shares - 1,633 -
---------- --------- ----------
Total weighted-average diluted shares (1) 17,570 14,634 7,354
========== ========= ==========
Basic EPS $ (.65) $ .39 $ (1.72)
========== ========= ==========
Diluted EPS $ (.65) $ . 35 $ (1.72)
========== ========= ==========
</TABLE>
(1) At December 31, 1997 and 1995, there were 1,692,458 and 539,075
instruments, respectively, that were considered antidilutive and accordingly
excluded in the above calculation.
43
<PAGE> 44
Impairment of long-lived assets
The Company reviews its long-lived assets for impairment when events or
changes in circumstances indicate that the carrying amount of a long-lived
asset may not be recoverable. Such asset is deemed impaired and written down to
its fair value if expected future cash flows are less than its carrying amount.
Fair value of financial instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. The fair
values of financial instruments approximate their recorded value.
Concentration of credit risk
The Company invests excess cash in accordance with a policy objective that
seeks to preserve both liquidity and safety of principal. The policy limits
investments to certain instruments issued by institutions with strong
investment grade credit ratings at the time of purchase and places restrictions
on their terms and concentrations by type and issuer. The Company has not
realized any significant losses on its investments.
Year 2000 date conversion
The Company has established policies and procedures for the identification,
evaluation, and implementation of potential changes to existing systems and
applications necessary to achieve a year 2000 date conversion with no
disruption to business operations. Management does not believe that costs
associated with the conversion will be material to the results of operations or
financial position of the Company.
Uncertainties
The Company is subject to certain risks common to companies within the
biotechnology industry. These include, but are not limited to, development by
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology, estimation by the Company of the size and
characteristics of the market for the Company's product(s), acceptance of the
Company's product(s), health care containment initiatives and product liability
and compliance with government regulations and agencies, including the U.S.
Food and Drug Administration.
Use of estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
44
<PAGE> 45
Significant Customer and Product
The Company sells only one product, GLIADEL, a novel treatment for recurrent
malignant gliablastome multiforme, the most fatal form of brain cancer. The
Company markets, sells and distributes its product through two customers who
are larger pharmaceutical companies. In 1997, approximately 98% of sales were
with one of these customers. The Company expects that future sales will also be
derived largely from the same customer and will be relying upon that customer's
ability to obtain regulatory clearance where necessary and then market, sell
and distribute the product.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation.
.
45
<PAGE> 46
(3) INVESTMENTS
Investments in marketable securities as of December 31, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Holding Holding Fair
1997 Costs Gains Losses Value
---- ----- ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury Securities $ 97,499 $ 458 $ (89) $ 97,868
Corporate Debt Securities 6,990 13 (5) 6,998
Other Debt Securities 6,292 49 - 6,341
--------- -------- --------- ---------
$ 110,781 $ 520 $ (94) $ 111,207
--------- -------- --------- ---------
Held-to-maturity:
U.S. Treasury Securities $ 20,162 $ 24 $ (4) $ 20,182
Corporate Debt Securities 3,870 7 (4) 3,873
--------- -------- --------- ---------
$ 24,032 $ 31 $ (8) $ 24,055
--------- -------- --------- ---------
$ 134,813 $ 551 $ (102) $ 135,262
========= ======== ========= =========
1996
----
Available-for-sale:
U.S. Treasury Securities $ 33,459 $ 167 $ (106) $ 33,520
Corporate Debt Securities 1,190 4 (1) 1,193
Other Debt Securities 1,427 13 (15) 1,425
--------- -------- --------- ---------
$ 36,076 $ 184 $ (122) $ 36,138
--------- -------- --------- ---------
Held-to-maturity:
U.S. Treasury Securities $ 23,051 $ 83 $ (88) $ 23,046
Corporate Debt Securities 1,690 18 (2) 1,706
--------- -------- --------- ---------
$ 24,741 $ 101 $ (90) $ 24,752
--------- -------- --------- ---------
$ 60,817 $ 285 $ (212) $ 60,890
========= ======== ========= =========
</TABLE>
46
<PAGE> 47
Maturities of debt securities classified as available-for-sale and
held-to-maturity were as follows at December 31, 1997 and 1996 (maturities of
mortgage-backed securities and collateralized mortgage obligations have been
presented based upon estimated cash flows, assuming no change in the current
interest rate environment):
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Available-for-sale
Due in 1 year or less $ 10,584 $ 10,572 $ 9,177 $ 9,291
Due in 1-2 years 41,489 41,694 14,945 14,885
Due in 2-5 years 58,708 58,941 11,954 11,962
--------- --------- -------- --------
$ 110,781 $ 111,207 $ 36,076 $ 36,138
--------- --------- -------- --------
Held-to-maturity
Due in 1 year or less $ 22,009 $ 22,033 $ 20,935 $ 20,975
Due in 1-2 years 2,023 2,022 3,806 3,777
--------- --------- -------- --------
$ 24,032 $ 24,055 $ 24,741 $ 24,752
--------- --------- -------- --------
$ 134,813 $ 135,262 $ 60,817 $ 60,890
========= ========= ======== ========
</TABLE>
(4) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using a weighted-average approach which approximates the first-in, first-out
(FIFO) method. Inventories are shown net of applicable reserves and
allowances. Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Inventory:
Raw materials $ 386 $ 600
Work in process 497 432
Finished goods 459 501
------- -------
$ 1,342 $ 1,533
======= =======
</TABLE>
Inventories includes products and materials that may be either available
for sale and/or production or utilized internally in the Company's development
activities. Inventories identified for development activities are expensed
immediately upon designation as intended for such use.
47
<PAGE> 48
(5) COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Property and Equipment:
Laboratory equipment $ 4,779 $ 1,322
Manufacturing equipment 2,299 1,677
Computer and office equipment 3,825 2,126
Leasehold improvements 7,773 9,767
Construction in process 2,925 276
--------- ---------
$ 21,601 $ 15,168
Less accumulated depreciation and amortization (4,448) (1,713)
--------- ---------
$ 17,153 $ 13,455
========= =========
Accrued Expenses and Other Current Liabilities:
Consulting and contracted research costs $ 862 $ 935
Legal and professional 665 231
Payroll and related costs 2,000 1,238
Other current liabilities 1,307 954
--------- ---------
$ 4,834 $ 3,358
========= =========
</TABLE>
(6) INDEBTEDNESS
Long-term debt at December 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Borrowings under bond financing arrangement,
payable in monthly installments of $78,000, plus interest
at LIBOR + .75% (6.75% at December 31,1997),
with final payment due December, 2004 $ 6,588 $ 7,530
Borrowings under term loan, payable in monthly
installments of $101,515, plus interest
at LIBOR + .625% (6.625% at December 31, 1997),
with final payment due April, 2003 6,497 4,856
-------- ---------
Total long-term debt $ 13,085 $ 12,386
Less current installments (2,159) (1,481)
-------- ---------
Long-term debt, excluding current installments $ 10,926 $ 10,905
======== =========
</TABLE>
48
<PAGE> 49
Bond financing arrangement
In 1994, the Company entered into a $8 million bond financing arrangement
with a commercial bank. The bond was issued by the Maryland Economic
Development Corporation and 50% of the outstanding borrowings are guaranteed by
the Maryland Industrial Development Financing Authority.
Term loan agreement
In 1996, the Company entered into a term loan agreement, as amended, with
a commercial bank for up to $6.7 million. During 1997, the Company borrowed
$1.8 million, the remaining available principal amount under the term loan
agreement. The outstanding principal balance was $6.5 million and $4.9 million
at December 31, 1997 and 1996, respectively.
Restrictive covenants
The aforementioned debt agreements contain restrictions which require the
Company to meet certain financial covenants. Under the bond financing
arrangement, the Company is required to maintain cash collateral equal to
approximately 50% of the outstanding principal balance, $3.2 million and $3.7
million at December 31, 1997 and 1996, respectively. In accordance with the
term loan agreement, the Company is required to maintain cash collateral equal
to 100% of the outstanding principal balance, $6.5 million and $4.9 million at
December 31, 1997 and 1996, respectively. The cash collateral is included in
the accompanying consolidated balance sheets as "Investments-restricted". In
addition to the cash collateral, the Company may not declare any dividends on
its common stock without prior written consent.
(7) LEASES
The Company has several non-cancelable operating leases for equipment and
buildings. Rent expense for operating leases was approximately $1.5 million, $
.7 million and $.5 million at December 31, 1997, 1996 and 1995, respectively.
The Company's future minimum lease payments under these non-cancelable
operating leases for years subsequent to December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Amount
Year (in thousands)
-------------- --------------
<S> <C>
1998 $ 2,165
1999 1,712
2000 1,146
2001 486
2002 306
Beyond 2002 790
-------
$ 6,605
=======
</TABLE>
49
<PAGE> 50
Included in the data presented above is a Master Lease Agreement ("Master
Agreement"), which agreement expired December 31, 1997, for financing certain
equipment up to a maximum of $5 million. Each equipment lease the Company
executes under the Master Agreement is for a term of 49 months and requires the
Company to post an irrevocable letter of credit equal to 70% of the equipment
cost covered by each lease as collateral. Under the terms of the Master
Agreement, the percentage of collateral required for each lease is reduced at
the anniversary of each such equipment lease. The Company had leased $3.4
million and $2.0 million in equipment as of December 31, 1997 and 1996,
respectively. All of the equipment leased under these agreements has been
accounted for as operating leases. The Company had set aside $2.4 million and
$1.4 million as collateral to support the letters of credit at December 31,
1997 and 1996, respectively. The collateral is included in the accompanying
consolidated balance sheets under "Short-term investments-restricted".
Also included above, is a Master Lease Arrangement, related to the land
and building which the Company presently occupies, which expires in July 2005
with options to renew for two five-year periods. The Company has the option to
purchase the building after the ninth year for its then current fair market
value. In addition, the Company has several short-term (18 months or less)
leases to support current research and development activities. The annual
minimum facility rents aggregate approximately $1.3 million.
In January 1998, the Company entered into a new Master Agreement to
finance up to $10 million of additional capital equipment. The agreement is
effective until December 31, 1999 (see note 17).
(8) INCOME TAXES
As of December 31, 1997, the Company had net operating loss ("NOL")
carryforwards available for federal income tax purposes of approximately $23
million, which expire at various dates between 2008 to 2012, including
approximately $1.7 million acquired in a tax free stock transaction from GELL
Pharmaceuticals Inc. in 1997. NOL carryforwards are subject to ownership
change limitations and may also be subject to various other limitations on the
amounts to be utilized. As of December 31, 1997, the Company had foreign tax
credit carryforwards of approximately $61,000 expiring in 2000 and 2001, and
general business tax credit carryforwards of approximately $1.7 million
expiring between 2008 and 2012.
Actual income tax expense differs from the expected income tax expense
computed at the effective federal rate as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- ----------
(in thousands)
<S> <C> <C> <C>
Computed "expected" tax expense at statutory rate $(3,889) $1,725 $ (4,296)
State income tax, net of federal benefit ( 515) 230 ( 567)
Research collaboration revenue - 557 -
Compensatory stock awards (373) - -
Change in valuation allowance increase (decrease) 4,734 (2,552) 4,849
Other 43 40 14
------- ------- --------
$ - $ - $ -
======= ======= ========
</TABLE>
50
<PAGE> 51
Realization of net deferred tax assets related to the Company's NOL
carryforwards and other items is dependent on future earnings, which are
uncertain. Accordingly, a valuation allowance has been established equal to net
deferred tax assets which are not likely to be realized in the future,
resulting in net deferred tax assets of approximately $138,000 at December 31,
1997. The change in the valuation allowance was an increase of approximately
$6.6 million in 1997 and a decrease of approximately $2.6 million in 1996.
Significant components of the Company's deferred tax assets and
liabilities as of December 31, 1997 and 1996 are shown below.
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
-------- ---------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 8,869 $ 3,971
Research and experimentation credits 1,710 450
Compensatory stock grants 1,228 861
Alternative minimum tax credit carryforwards 138 179
Accrued expenses 403 257
Contribution carryover and capitalized start-up costs 51 38
-------- --------
12,399 5,756
Deferred tax liabilities:
Prepaid expenses, depreciation and stock gains (215) (153)
-------- --------
Net deferred tax assets 12,184 5,603
Valuation allowance (12,046) (5,424)
-------- --------
Net deferred tax assets reported $ 138 $ 179
======== ========
</TABLE>
(9) CAPITAL TRANSACTIONS
On October 1, 1997, the Company sold 640,095 shares of common stock to
Amgen Inc. ("Amgen") for $15 million (see note 13). In addition, the Company
issued for $5 million a five-year warrant to purchase up to 700,000 shares of
the Company's common stock at an exercise price of $35.15 per share.
In April 1997, the Company completed a follow-on public equity offering of
approximately 3.7 million shares of its common stock providing net proceeds of
approximately $71 million to the Company.
On October 15, 1996, the Board of Directors declared a three-for-two stock
split. Equity transactions (including number of shares) prior to that date have
been adjusted to reflect the stock split. In June 1996, the Company entered
into a stock purchase agreement with Rhone-Poulenc Rorer Pharmaceuticals Inc.
and its parent corporation (collectively "RPR") (see note 13) whereby, RPR
purchased 281,531 shares of the Company's common stock for $7.5 million. In
March 1996, the Company completed a follow-on public equity offering of
approximately 3.5 million shares of its common stock, providing net proceeds of
approximately $43 million to the Company.
In August 1995, the Company completed a follow-on public offering of
approximately 4.5 million shares of common stock, providing net proceeds of
approximately $18 million to the Company.
51
<PAGE> 52
(10) STOCKHOLDER RIGHTS PLAN
In September 1995, the Board of Directors adopted a Stockholder Rights
Plan in which preferred stock purchase rights ("Rights") were granted at the
rate of one Right for each share of common stock. All rights expire on October
10, 2005. At December 31, 1997, the Rights were neither exercisable nor traded
separately from the Company's common stock, and become exercisable only if a
person or group becomes the beneficial owner of 20% or more of the Company's
common stock or announces a tender or exchange offer which would result in its
ownership of 20% or more of the Company's common stock. Each holder of a Right,
other than the acquiring person, would be entitled to purchase $120 worth of
common stock of the Company for each Right at the exercise price of $60 per
Right, which would effectively enable such Rights holders to purchase common
stock at one-half of the then current price.
If the Company is acquired in a merger, or 50% or more of the Company's
assets are sold in one or more related transactions, each Right would entitle
the holder thereof to purchase $120 worth of common stock of the acquiring
company at the exercise price of $60 per Right. At any time after a person or
group of persons becomes the beneficial owner of 20% or more of the common
stock, the Board of Directors, on behalf of all stockholders, may exchange one
share of common stock for each Right, other than Rights held by the acquiring
person.
(11) SHARE OPTION AND RESTRICTED SHARE PLANS
The 1993 Employee Share Option and Restricted Share Plan
The 1993 Employee Share Option and Restricted Share Plan, as amended, (the
"1993 Plan"), was established to provide eligible individuals with an
opportunity to acquire or increase an equity interest in the Company and to
encourage such individuals to continue in the employment of the Company. Share
options are granted at the fair market value of the stock on the day
immediately preceding the date of grant or date of initial employment, if
later. Share options are exercisable for a period not to exceed ten years from
the date of grant. In general, share options vest over four years.
Shares awarded under the restricted share provisions of the 1993 Plan are
valued at the fair market value of the stock on the day immediately preceding
the date of award (date of grant, if later) and require a vesting period
determined by the Board of Directors. Should an individual leave the employment
of the Company for any reason (other than by reason of death or permanent
disability), the award recipient would forfeit their ownership rights for all
share options and restricted shares not otherwise fully vested.
At December 31, 1997, the maximum share options issuable under the 1993
Plan are 3,435,000, of which up to 300,000 may be issuable under the restricted
share provisions. At December 31, 1997, there were 1,299,715 share options
available for grant under the 1993 Plan.
52
<PAGE> 53
The Directors' Plan
The Director's Stock Option Plan (the "Directors' Plan") was established
to provide non-employee directors an opportunity to acquire or increase an
equity interest in the Company. Under the Directors' Plan, 300,000 shares of
common stock are reserved for issuance at an exercise price not less than fair
value of the Company's common stock on the day immediately preceding the date
of grant. Such share options vest 50% at the end of year one and 100% at the
end of year two. Under the Directors' Plan 22,500, 37,500 and 60,000 share
options were granted during 1997, 1996 and 1995, respectively. As of December
31, 1997, 120,000 share options were outstanding under the Directors' Plan, of
which 78,750 are exercisable as of December 31, 1997. In 1996, the Company
granted 120,000 options outside of the Directors' Plan to two directors with an
exercise price of $13.54 (market value at date of grant). Approximately
105,000 share options were fully vested in 1997 and the remaining 15,000 share
options fully vest in 1998. At December 31, 1997, there were 180,000 share
options available for grant under the Directors' Plan.
Consultants
In 1996, the Company granted share options to each of two consultants to
purchase up to 225,000 shares of the Company's common stock, valid for 10
years from issuance, with varying exercise prices. Vesting periods are based on
either the passage of time or based upon the achievement of certain milestones,
which, if ever achieved, would result in accelerated vesting of up to 150,000
of the aforementioned share options for each consultant, of which 75,300 were
exercisable as of December 31, 1997. The Company recognized $985,000 and $1.2
million in non-cash compensation expense in accordance with SFAS 123 relating
to the value of such share options (as established using the Black Scholes
pricing model) for the years ended December 31, 1997 and 1996, respectively,
and it expects to charge varying amounts (up to an additional $1.2 million in
the aggregate) of non-cash compensation expense to operations through 2001
relating to such agreements.
Additional information with respect to the Company's share option plan(s)
activity is summarized as follows:
<TABLE>
<CAPTION>
Weighted -
Share Average
Options Exercise Price
------------ --------------
<S> <C> <C>
Balance, January 1, 1995 221,627 $ 2.09
Granted 586,725 5.28
Exercised (19,565) 0.77
Canceled ( 6,750) 3.75
---------- ---------
Balance, December 31, 1995 782,037 4.47
Granted 1,786,740 15.71
Exercised (58,363) 3.02
Canceled (6,658) 10.82
---------- ---------
Balance, December 31, 1996 2,503,756 12.24
Granted 329,600 25.07
Exercised (262,925) 6.58
Canceled (150,511) 13.29
---------- ---------
Balance, December 31, 1997 2,419,920 $ 14.53
========== =========
</TABLE>
53
<PAGE> 54
Share options outstanding and exercisable by price range are as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------------------------- ----------------------------------
Outstanding Weighted Average Weighted- Exercisable Weighted-
Range of as of Remaining Average as of Average
Exercise Prices Dec. 31, 1997 Contractual Life Exercise Price Dec. 31, 1997 Exercise Price
--------------- ----------------- -------------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.00 - $10.00 553,890 7.2 $5.10 326,072 $ 5.39
$10.01 - $20.00 1,486,279 7.8 $15.47 347,172 $15.56
$20.01 - $30.00 379,751 9.3 $24.62 41,250 $25.29
---------- ---- ------ ------- ------
2,419,920 7.9 $14.53 714,494 $11.48
========= ==== ====== ======= ======
</TABLE>
Pro forma option information
The per share weighted-average fair value of all share options granted
during 1997 and 1996 was $10.00 and $7.21 on the date of grant using the Black
Scholes option-pricing model with the following weighted-average assumptions:
1997 expected dividend yield 0%, risk-free interest rate of 6.2%, volatility of
40% and an expected life of 4 years; 1996 expected dividend yield 0%, risk-free
interest rate of 6.1%, volatility of 50% and an expected life of 4 years. The
per share weighted-average fair value of share options granted during 1996 to
consultants was $6.12 using similar assumptions.
The Company applies APB 25 in accounting for share options granted to
employees and, accordingly, no compensation expense has been recognized related
to such share options to the extent that such share options were granted at an
exercise price that equaled the fair market value at the grant date. Had the
Company determined compensation cost based on the fair value at the grant date
for its share options under SFAS 123, (using the Black-Scholes pricing model),
the Company's net earnings (loss) would have been reduced (increased) to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
in thousands,
(except per share data)
<S> <C> <C> <C> <C>
Net earnings (loss) As reported ($11,437) $ 5,073 ($12,637)
Pro forma ( 12,532) 4,373 ( 12,740)
Basic earnings (loss) per share As reported (0.65) 0.39 (1.70)
Pro forma (0.71) 0.34 (1.73)
Diluted earnings (loss) per share As reported (0.65) 0.35 (1.70)
Pro forma (0.71) 0.30 (1.73)
</TABLE>
54
<PAGE> 55
Pro forma net earnings (loss) reflects only stock option grants beginning
in 1995. Accordingly, the full impact of calculating compensation cost for
share options under SFAS 123 is not reflected in the pro forma net earnings
(loss) amounts presented above since compensation costs for share options
granted prior to January 1, 1995 is not considered.
(12) 401(k) PROFIT SHARING PLAN
The Company has a 401(k) Profit Sharing Plan (the "401(k) Plan") available
to all employees meeting certain eligibility criteria which permits
participants to contribute up to 15% of their compensation not to exceed the
limits established by the Internal Revenue Code. The Company may make "matching
contributions" equal to a percentage of a participant's contribution or may
contribute a discretionary amount to the Plan.
Effective January 1997, the Company has elected to make "matching
contributions" in the Company's common stock equal to 50% of the first 6% of an
employee's salary contributed to such employees 401(k) Plan account. Such
amounts vest 25% per year based on a participant's years of service with the
Company.
(13) SIGNIFICANT CONTRACTS AND LICENSING AGREEMENTS
Agreements with Amgen Inc.
In August 1997, the Company entered into an agreement with Amgen (the
"Agreement") respecting the research, development and commercialization of the
Company's FKBP-based neuroimmunophilin ligand technology ("Neuroimmunophilin
Technology") for all human therapeutic and diagnostic applications. Pursuant
to the terms of the Agreement, Amgen initially paid the Company an aggregate of
$35 million, consisting of a one-time non-refundable payment of $15 million
upon the signing of the Agreement and $20 million for 640,095 shares of the
Company's common stock and five-year warrants to purchase up to an additional
700,000 shares of the Company's common stock at an exercise price of $35.15 per
share. In connection with the sale of these securities, the Company granted
Amgen certain demand and "piggyback" registration rights under the applicable
securities laws.
Under the terms of the Agreement, Amgen agreed to provide the Company up
to $13.5 million over three years in the aggregate to support research
activities relating to the Neuroimmunophilin Technology, with an option to fund
a fourth year of research.
Additionally, the Agreement provides for certain milestone payments to the
Company, in up to ten different specified clinical indications, in the event
Amgen achieves certain development milestones. In addition, the Company will
receive royalties on product sales, if any, related to the Neuroimmunophilin
Technology.
55
<PAGE> 56
Agreements with Rhone-Poulenc Rorer Pharmaceuticals Inc.
In June 1996, the Company entered into a Marketing, Sales and Distribution
Rights Agreement (together with related agreements, the "RPR Agreements") with
RPR granting RPR worldwide marketing rights (excluding Scandinavia) for
GLIADEL. The Company received $15 million upon the signing of these agreements
($7.5 million as an equity investment and $7.5 million as a non-refundable
rights payment). On September 23, 1996, the Company obtained clearance from the
FDA for GLIADEL for recurrent glioblastoma multiforme where surgical tumor
removal is indicated and, accordingly, received a $20 million non-refundable
milestone payment from RPR. RPR is obligated to make up to $40 million in
additional milestone payments, including $7.5 million in the form of an equity
investment, only if the Company achieves certain regulatory approvals. In
addition, RPR may also fund up to $17 million for the development of a
higher-dose GLIADEL product and to fund certain additional clinical studies, if
any, related to GLIADEL. The Company manufactures and supplies GLIADEL to RPR
and receives a transfer price and royalties based on sales.
Under the RPR Agreements, the Company has the right to borrow up to an
aggregate of $7.5 million under certain conditions, including $4 million which
became available January 2, 1997, and the remainder no earlier than 12 nor
later than 18 months following funding of the initial $4 million. The loan
proceeds are available to provide for expansion of the Company's existing
facility supporting the production of GLIADEL and the construction of a second
facility for the scale-up, production of GLIADEL and other polymer systems. Any
principal amounts borrowed under this loan agreement are due five years from
the date borrowed and will carry an interest rate equal to the lowest rate paid
by of RPR on its most senior indebtedness. Both the principal and interest due
under this agreement may, at the Company's election, be repaid by offsetting
certain amounts due to the Company under the RPR Agreements. The Company has
not drawn down any of the available funds under the RPR Agreements.
Other contracts and agreements
In May 1997, the Company entered into a Development and Supply Agreement
(together with related agreements, the "Nordion Agreement") with MDS Nordion
Inc. and MDS Nordion S.A. (collectively "Nordion") for the development and the
exclusive supply of DOPASCAN (R) Injection ("DOPASCAN") for Phase III clinical
trials expected to be conducted by the Company in the United States, Canada and
Europe. The Nordion Agreement provides for the Company to make certain
milestone payments related to the development work and the purchase of certain
manufacturing equipment aggregating up to $2.0 million, of which the Company
paid or accrued $1.6 million through December 31, 1997.
In October 1995, the Company entered into a license and distribution
agreement with Orion Corporation Farmos ("Orion Farmos") respecting sales,
marketing and distribution of GLIADEL in Scandinavia and pursuant to which
Orion Farmos paid a licensing fee of $100,000 to the Company in 1996.
Additionally, the Company will receive both a transfer price on materials
shipped to Orion Farmos and royalties on future product sales, if any.
56
<PAGE> 57
In December 1995, the Company entered into an agreement with Daiichi
Radioisotope Laboratories, Ltd. ("DRL") respecting DOPASCAN in Japan, Taiwan
and Korea for which the Company received a one-time non-refundable license fee
of $555,000. Under this agreement, the Company will receive a milestone payment
upon the filing of the first application for regulatory approval in certain
foreign countries. Additionally the Company receives both a transfer price on
materials shipped to DRL and royalties on future product sales, if any.
The Company has entered into licensing, technology transfer and
development agreements with The Johns Hopkins University under which it is
required to make certain payments for patent maintenance costs, processing
fees, license payments and development payments aggregating approximately
$643,000 through 2001. The Company has also agreed to spend $500,000 per year
through 2014 with respect to internal research and development activities to
develop such technologies and may be required to make certain payments, as
defined, to The Johns Hopkins University should agreed-upon milestones be
attained. In addition, the Company will be required to pay a royalty on future
net sales of all licensed products, if any, as well as a percentage (as
defined) of royalties received by the Company from sublicensees, if any.
The Company has also entered into various other licensing, research and
development agreements which commit the Company to fund certain mutually
agreed-upon research and development projects, either on a best efforts basis
or upon attainment of certain performance milestones, as defined, or both, for
various periods unless canceled by the respective parties. Such future amounts
to be paid are approximately $1.9 million through 2001. In addition, the
Company will be required to pay a royalty on future net sales of all licensed
products, if any, as well as a percentage of all royalties received by the
Company from sublicensees, if any.
(14) GELL PHARMACEUTICALS INC.
In February 1995, the Company and The Abell Foundation, Inc., a
Baltimore-based not-for-profit corporation ("Abell"), established Gell
Pharmaceuticals Inc. ("Gell"). Gell was formed primarily to track Abell's $2.5
million equity investment that, in substance, was intended to purchase 750,000
shares of the Company's common stock at the transaction date, which shares had
an approximate fair market value of $2.4 million. Abell received an 80% equity
interest in Gell for $2.5 million with a "put option" to exchange such equity
interest for 750,000 shares of common stock of the Company. Guilford received a
20% equity interest for nominal cash consideration and technology "know-how,"
which had a net carrying value of zero at the transaction date.
In March 1997, Abell exercised its put option to receive the 750,000
shares of the Company's common stock in exchange for its 80% interest in Gell.
After such date, Gell became a wholly owned subsidiary of the Company and is
included in the accompanying consolidated financial statements.
57
<PAGE> 58
(15) RELATED PARTY TRANSACTIONS
In September 1995, the Company entered into a three year consulting
agreement with the Chairman of its Scientific Advisory Board (the "Consultant")
who is also a non-employee director, under which the Consultant is to provide
consulting and advisory services as requested by the Company. The Company is
obligated to pay an annual consulting fee of $150,000 (1st year), $160,000 (2nd
year), and $170,000 (3rd year) and has granted the Consultant 90,000 share
options at fair market value. These options vest one-third upon each
anniversary of the grant date so long as the individual remains a consultant
under the agreement.
Notes receivable on common stock aggregating $60,000 and $129,750 at
December 31, 1997 and 1996, respectively, represent amounts due from officers
of the Company and are reflected as a reduction from stockholders' equity.
Scios Inc., a significant stockholder, has billed the Company for certain
services, equipment purchases, and facility rents related to the Company's
research and development activities aggregating $340,835, $295,000 and $233,000
in 1997, 1996 and 1995, respectively.
(16) LEGAL MATTERS
The Company from time to time is involved in routine legal matters
incidental to its normal operations. In management's opinion, the resolution
of such matters will not have a material effect on its financial condition or
results of operations.
(17) SUBSEQUENT EVENT (UNAUDITED)
Lease Agreement - Facility
In February 1998, the Company entered into several agreements relating to
the Company's new research and development facility. The facility, which is
expected to be approximately 72,000 square feet, is adjacent to the Company's
existing facility in Baltimore and construction costs are estimated not to
exceed $20 million in the aggregate. The lease term is for a maximum term of
84 months, which includes a construction period of up to 24 months.
Lease Agreement - Equipment
In March 1998, the Company entered into Master Lease Agreements to provide
up to $10.8 million in computer and equipment financing, the term of which
expires on December 31, 1999. The term of each lease may range from 24 to 48
months based upon the type of equipment being financed.
58
<PAGE> 59
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
59
<PAGE> 60
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's executive officers is contained
in Item 1A of Part I. The information concerning the Company's directors and
with regard to Item 405 of Regulation S-K is to be contained under the caption
"Election of Directors" in the Company's 1998 Proxy Statement, which will be
filed no later than 120 days following December 31, 1997, and is hereby
incorporated herein by reference.
The directors and executive officers of the Company as of March 16, 1998
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Craig R. Smith, M.D. 52 Chairman of the Board, President, and Chief Executive Officer
John P. Brennan 55 Senior Vice President, Operations
Andrew R. Jordan 50 Senior Vice President, Chief Financial Officer and Treasurer
David R. Savello, Ph.D. 52 Senior Vice President, Development
Nicholas Landekic 39 Vice President, Business Development
Thomas C. Seoh 40 Vice President, General Counsel and Secretary
Peter D. Suzdak, Ph.D. 39 Vice President, Research
William C. Vincek, Ph.D. 50 Vice President, Corporate Quality
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is hereby incorporated by reference
from the information to be contained under the caption "Executive Compensation"
in the Company's 1998 Proxy Statement, which will be filed no later than 120
days following December 31, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is hereby incorporated by reference
from the information to be contained under the caption "Beneficial Ownership of
Common Stock" in the Company's 1998 Proxy Statement, which will be filed no
later than 120 days following December 31, 1997. .
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is hereby incorporated by reference
from the information to be contained under the caption "Beneficial Ownership of
Common Stock" and "Certain Relationships and Related Party Transactions" in the
Company's 1998 Proxy Statement, which will be filed no later than 120 days
following December 31, 1997.
60
<PAGE> 61
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
All required financial statements of the registrant as set forth under Item 8
of this report on Form 10-K.
(a)(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or the required
information is included in the Consolidated Financial Statements or notes
thereto.
(a)(3) Exhibits
The following exhibits are filed with this Form 10-K or incorporated herein
by reference to the document set forth next to the exhibit listed below:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------------ ------------------------------------------------------------------------------------
<S> <C>
3.01A(1) Amended and Restated Certificate of Incorporation of the Company.
3.01B(13) Certificate of Amendment to Amended and Restated Certificate of Incorporation
3.02A(1) Amended and Restated By-laws of the Company.
3.02B(2) Amendments to Amended and Restated By-laws of the Company.
4.01(1) Specimen Stock Certificate.
4.02(5) Stockholder Rights Agreement dated September 26, 1995.
10.01A(1) 1993 Employee Share Option and Restricted Share Plan ("Option Plan").
10.01B(6) (7) Amendments to Option Plan
(11) (12)
10.02(1) Series A Preferred Stock Purchase Agreement, dated September 30, 1993, as
amended between the Company and holders of its Series A Preferred Stock
("Series A Agreement").
10.02A(4) Amendment, dated August 25, 1994, to Series A Agreement.
10.02B(3) Amendment, dated February 15, 1995, to Series A Agreement.
10.03(1)+ License Agreement, effective March 18, 1994, between the Company and Research
Triangle Institute, a not-for-profit corporation existing under the laws of
North Carolina.
10.03A(1) Appendix A to Exhibit 10.04.
10.04(1)+ License Agreement, dated March 15, 1994, between the Company and Scios Nova.
10.05(1) Employment Agreement between the Company and Craig R. Smith, M.D.
10.06(1) Employment Agreement between the Company and Andrew R. Jordan.
10.07(1) Employment Agreement between the Company and John P. Brennan.
10.08(12) Employment Agreement between the Company and David R. Savello, Ph.D.
10.09(14) Employment Agreement between the Company and William C. Vincek, Ph.D.
10.10(3) Employment Agreement between the Company and Peter D. Suzdak.
10.11(3) Employment Agreement between the Company and Nicholas Landekic.
10.12(6) Employment Agreement between the Company and Thomas C. Seoh.
10.13(7) Amendments to certain executive officer employment letter agreements
10.14(1) Restricted Share Agreement, dated February 14, 1994, between the Company and
John P. Brennan.
10.15A(1) Consulting Agreement, dated August 1, 1993, as amended on February 28, 1994,
between the Company and Solomon H. Snyder, M.D (the "Snyder Consulting
Agreement").
10.15B(8) September 1, 1995 amendment to Snyder Consulting Agreement.
10.15C November 19, 1997 amendment to Snyder Consulting Agreement.
10.16A(1)+ License Agreement, dated December 20, 1993, between the Company and The Johns
Hopkins University ("JHU Agreement").
10.16B(1) Appendix B to JHU Agreement.
</TABLE>
61
<PAGE> 62
<TABLE>
<S> <C>
10.17(1) Form of Director and Officer Indemnification Agreement.
10.18(1) Form of Tax Indemnity Agreement.
10.19A(1) Guilford Pharmaceuticals Inc. Directors' Stock Option Plan.
10.19B(7)(13) Amendments to Directors' Stock Option Plan
10.20(4) Lease Agreement, dated August 30, 1994, between Crown Royal, L.P. and the
Company.
10.21 (13) Lease Agreement, dated June 9, 1997 between SN Properties, Inc. and the
Company ("Freeport Lease").
10.21A Amendment, dated February 10, 1998, to Freeport Lease.
10.22(6) Subscription and Stockholders Agreement, dated February 17, 1995, among Gell
Pharmaceuticals Inc., the Company and the Abell Foundation, Inc.
10.23(3) Exchange and Registration Rights Agreement, dated February 17, 1995, among
the Company and the Abell Foundation, Inc., and the several holders named in
Appendix I.
10.24(3) Master Services Agreement, dated February 17, 1995, between the Company and
Gell Pharmaceuticals Inc.
10.25(3) Loan and Financing Agreement between the Maryland Economic Development
Corporation ("MEDCO"), the Company and Signet Bank/Maryland ("Signet").
10.26(3) Leasehold Deed of Trust by and between the Company and Janice E. Godwin and
Ross Chaffin (as trustees) for the benefit of MEDCO and Signet.
10.27A(3) Insurance Agreement between the Maryland Industrial Development Financing
Authority and Signet.
10.27B (11) Letter, dated April 2, 1996, amending Insurance Agreement.
10.28(8)+ License Agreement, dated December 9, 1995, by and between the Company and
Daiichi Radioisotope Laboratories, Ltd.
10.29(9)+ License and Distribution Agreement, dated October 13, 1995, by and between
the Company and Orion Corporation Farmos.
10.30(10)+ DOPASCAN Supply Agreement, dated July 10, 1996, by and among the Company and
Nordion International Inc. and Nordion Europe S.A.
10.31 (13) Development and Phase III Clinical Trail Supply Agreement, dated May 22, 1997
between MDS Nordion Inc. and MDS Nordion S.A., on the one hand, and the Company,
on the other.
10.32(10)+ Bulk Pharmaceutical Sales Contract, dated September 23, 1994, between the
Company and Aerojet-General Corporation.
10.33(10) Equipment Lease, dated September 18, 1996, between the Company and General
Electric Capital Corporation
10.34 (11) Term Loan, dated April 30, 1996, as amended on December 6, 1996, by and
between the Company and Signet Bank.
10.35(7) Marketing, Sales and Distribution Rights Agreement between Rhone-Poulenc
Rorer Pharmaceuticals Inc. ("RPR"), the Company and GPI Holdings, Inc., dated
June 13, 1996.
10.36(7) Manufacturing and Supply Agreement between RPR and the Company, dated June
13, 1996.
10.37(7) Stock Purchase Agreement between the Company and Rhone-Poulenc Rorer Inc.
("RPR Inc."), dated June 13, 1996.
10.38(7) Loan Agreement between the Company and RPR Inc., dated June 13, 1996
10.39 (13) Non-Qualified Stock Option Agreement, dated April 1, 1997, with David R.
Savello, Ph.D.
10.40+ Collaboration and License Agreement, dated December 15, 1997 and effective as
of August 20, 1997, between Amgen Inc. ("Amgen"), GPI NIL Holdings, Inc. and
the Company.
10.41 (14) Stock and Warrant Purchase Agreement, dated October 1, 1997, between Amgen
and the Company.
10.42 (14) Registration Rights Agreement, dated October 1, 1997, between Amgen and the
Company.
10.43 (14) Warrant, dated October 1, 1997 issued to Amgen
10.44 Security Agreement, dated as of February 5, 1998, between First Secruity
Bank, National Association, not individually, but solely as the Owner Trustee
under the Guilford Real Estate Trust 1998-1 (the "Trust") and First Union.
10.45 Amended and Restated Trust Agreement, dated as of February 5, 1998 between
the Several Holders from time to time parties thereto and the Trust.
10.46 Agency Agreement, dated as of February 5, 1998, between the Company and the
Trust.
10.47 Credit Agreement, dated as of February 5, 1998, among the Trust, the Several
Holders from time to time parties thereto and First Union.
</TABLE>
62
<PAGE> 63
<TABLE>
<S> <C>
10.48 Participation Agreement, dated as of February 5, 1998, among the Company, the
Trust, the various and other lending institutions which are parties hereto
from time to time, as Holders, the various and other lending institutions
which are parties hereto from time to time, as Lenders, and First Union.
10.49 Lease Agreement, dated as of February 5, 1998, between the Trust and the
Company.
11.01 Statement re: Computation of Per Share Earnings (See Notes to Consolidated Financial
Statements, Note 2)
21.01 Subsidiaries of Registrant
23.01 Consent of KPMG Peat Marwick LLP.
24.01 Power of Attorney (contained in signature page).
27.01 Financial Data Schedule
</TABLE>
- ----------
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (No. 33-76938) declared effective June 16, 1994.
(2) Incorporated by reference from the Registrant's Registration Statement on
Form S-8 (No. 333-17833) declared effective December 13, 1996.
(3) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994.
(4) Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994.
(5) Incorporated by reference from the Registrant's Form 8-K filed October 10,
1995.
(6) Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (No. 33-94530) declared effective August 16, 1995.
(7) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996.
(8) Incorporated by reference from the Registrant's Form 10-K, filed February
23, 1996.
(9) Incorporated by reference from the Registrant's Form 10-KA, filed March 4,
1996.
(10) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
(11) Incorporated by reference from the Registrant's Form 10-K, filed March
7, 1997.
(12) Incorporated by reference from Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997.
(13) Incorporated by reference from Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
(14) Incorporated by reference from Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997.
+ Confidential treatment of certain portions of these agreements has been
granted by the Securities and Exchange Commission.
(b) Reports on 8-K:
None
63
<PAGE> 64
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of Section 13 or 15(d) 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.
GUILFORD PHARMACEUTICALS INC.
March 27, 1998
By: /s/ CRAIG R. SMITH, M.D.
-----------------------------------------
Craig R. Smith, M.D.
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints, Craig R. Smith, M.D., Andrew R. Jordan, Thomas
C. Seoh, Jordan P. Karp and Michael J. Silver, and each of them, his or her
true and lawful attorney-in-fact and agents, with full power of substitution
and resubstitution, from such person and in each person's name, place and
stead, in any and all capacities, to sign the report and any and all amendments
to this report, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, and
any of them, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ CRAIG R. SMITH, M.D. Chief Executive Officer, March 27, 1998
----------------------------------------- President and Director
Craig R. Smith, M.D. (Principal Executive
Officer)
/s/ ANDREW R. JORDAN Sr. Vice President, Chief March 27, 1998
----------------------------------------- Financial Officer, and
Andrew R. Jordan Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ SOLOMON H. SNYDER, M.D. Director March 27, 1998
------------------------------------------
Solomon H. Snyder, M.D.
/s/ RICHARD L. CASEY Director March 27, 1998
------------------------------------------
Richard L. Casey
/s/ GEORGE L. BUNTING, JR. Director March 27, 1998
------------------------------------------
George L. Bunting, Jr.
/s/ W. LEIGH THOMPSON, M.D., Ph.D. Director March 27, 1998
------------------------------------------
W. Leigh Thompson, M.D., Ph.D.
/s/ ELIZABETH M. GREETHAM Director March 27, 1998
------------------------------------------
Elizabeth M. Greetham
</TABLE>
64
<PAGE> 1
EXHIBIT 10.15C
AMENDMENT TO CONSULTING AGREEMENT
This AMENDMENT TO CONSULTING AGREEMENT, executed as of the dates set
forth below by the signatories hereto, with an effective date of June 7, 1996,
is made between Guilford Pharmaceuticals Inc., a Delaware corporation with a
principal place of business at 6611 Tributary Street, Baltimore, Maryland 21224
(the "Company"), and Solomon H. Snyder, M.D. (the "Consultant").
WHEREAS, the Company and the Consultant are parties to a Consulting
Agreement, dated as September 1, 1995 (the "Agreement"); and
WHEREAS, the Consultant's academic institution, The Johns Hopkins
University School of Medicine, has requested certain supplemental provisions and
a modification to the Agreement; and
WHEREAS, the parties hereto agree and consent to such supplemental
provisions and modification;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties hereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Consultant hereby agree as follows:
1. The following language shall be added to the end of
Section 5 of the Agreement:
"The parties acknowledge that the Johns Hopkins
University is not a party to this agreement, which is a
private contract between the Consultant and the Company."
2. The following language shall be added as a new Section 21
to the end of the Agreement:
"21. References to Johns Hopkins. With the limited
exception of citing Consultant's faculty title, the
Company and its affiliates will not use the names,
likenesses, or logos of the Johns Hopkins University, any
of its Schools or Divisions, or the Johns Hopkins Hospital
and Health System in any of their fundraising or
investment documents, general publications,
advertisements, or marketing and promotional materials
without the prior written permission of the Johns Hopkins
University. A request for such permission must be
submitted by Consultant to the School of Medicine's
Conflict of Interest Review Coordinator, who in
appropriate circumstances, will have it reviewed by the
School of Medicine's Office of Public Affairs."
<PAGE> 2
3. Section 7 of the Agreement is amended and restated in its
entirety to read as follows:
"7. Assignments; Inventions. The Consultant hereby
agrees to use his best efforts without further
compensation to assign or to have assigned to the Company
all of his right, title and interest in and to, any and
all inventions, processes, systems, improvements,
modifications, secrets, designs or discoveries, etc.,
whether or not made, possessed, discovered or conceived by
him, individually or jointly with any other person or
persons, whether made in or out of working hours, free and
clear of all liens, charges and encumbrances, created or
conceived by him during the term of this Agreement and
patented or reduced to practice within one year
thereafter, which relate to the business of the Company
and which are not owned by The Johns Hopkins University
pursuant to the Johns Hopkins School of Medicine
Intellectual Property Guidelines (dated January 1, 1995),
a copy of which is attached hereto as Exhibit 1 and
incorporated herein by reference (collectively, the
"Inventions")."
All other terms and provisions of the Agreement continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
GUILFORD PHARMACEUTICALS INC.
By /s/Nicholas Landekic /s/ Solomon H. Snyder, M.D.
----------------------------------------- ----------------------------
Name: Nicholas Landekic Solomon H. Snyder, M.D.
Title: Vice President, Business Development
Date: 11/19/97 Date: 11/19/97
2
<PAGE> 1
EXHIBIT 10.21A
FIRST AMENDMENT TO LEASE AGREEMENT
The FIRST AMENDMENT TO LEASE AGREEMENT (this "Amendment") effective as
of February 10, 1998, by and between SN Properties Inc., a Delaware corporation
having an address of 2450 Bayshore Parkway, Mountain View, California 94043
("Landlord"), and Guilford Pharmaceuticals Inc., a Delaware corporation having
an address of 6611 Tributary Street, Baltimore, Maryland 21223 ("Tenant").
BACKGROUND
A. Landlord and Tenant previously entered into a Lease Agreement (the
"Lease") dated June 9, 1997 concerning certain space within the building at
6200 Freeport Centre, Baltimore, Maryland.
B. Tenant has previously exercised its option to extend the term of
the Lease so that it would expire on June 30, 1999.
C. The parties hereto desire to amend the Lease to increase the space
leased to Tenant, further extend the term of the Lease, and modify the rent as
set forth herein and otherwise to clarify certain matters between them.
THE PARTIES AGREE HEREBY AS FOLLOWS:
1. Definitions. Except as specifically defined herein, capitalized
terms shall have the definition given to them in the Lease.
2. Amendment of Premises. Effective February 10, 1998, the
definition of Premises in subparagraph (b) of Section I of the Lease is hereby
amended so that the Premises consist of approximately thirty-two thousand seven
hundred eight (32,708) square feet (the "Premises Square Footage") has
described Article 2 below. Exhibit B of the Lease is amended to be as set
forth in Addendum A to this Amendment. Landlord agrees that, in order for
Tenant to make its leased space secure from other tenants of Landlord in the
remainder of the Building, Tenant may, so long as fire and safety codes permit
it, secure the door in hallway near room 123 so that other tenants in the
building cannot enter Tenant's space and that Tenant may at Tenant's expense
add a similar door in the hallway between rooms 171 and 182. The location of
the doors are indicated on Addendum A. Tenant agrees that Landlord shall not be
obligated to provide air conditioning or heating to rooms 182, 184, 184A, 190,
190A and192 as shown on Addendum A until such time as the remaining space
serviced by the air handler serving such rooms has been leased by Landlord to
another tenant.
3. Base Rent. The parties agree that the first paragraph of
subparagraph (e) of Section I of the Lease is hereby amended to read in its
entirety as follows:
(e) Base Rent. During each month of the Lease after
the date of this
<PAGE> 2
Amendment, Tenant shall pay the Base Rent which is
Two Dollars and Twenty-five Cents ($2.25) multiplied
by the Premises Square Footage of the Premises (i.e.
$73,593 per month). Rent for February, 1998, shall
be $61,778.80 reflecting proration for 10 days in the
original space and 18 days in the expanded space at
the revised rent.
4. Lease Term. The parties agree that Section III of the Lease is
hereby amended so that the term of the Lease shall now extend until midnight on
July 31, 1999 as to the entire space included in the Premises following this
Amendment.
5. Lease Condition of Premises. Tenant has inspected the new areas
being added to the Premises and requested that Landlord address the items
listed on Addendum B. Landlord agrees to address all items on Addendum B in a
timely manner. In particular, the air handling systems and hoods will be
energized so that the hoods may be checked prior to February 10 and the
flooring and steel plate in the scale-up lab will be repaired prior to February
10.
6. Miscellaneous. Except as otherwise modified by this Amendment,
the parties agree that the Lease continues in full force and effect. Landlord
and Tenant expressly agree that neither has made any representation or promise
with respect to the Premises or the Building except as set forth in the Lease
or in the Amendment. This Amendment contains the entire agreement of the
parties with respect to the subject matter of this Amendment and supersedes all
prior agreements, negotiations, understandings, or discussions between the
parties. This Amendment shall be governed by the laws of the jurisdiction in
which the Building is located.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the
day and year first written above.
Landlord: Tenant:
SN PROPERTIES INC. GUILFORD PHARMACEUTICALS INC.
By: /s/ John H. Newman By: /s/ John P. Brennan
-------------------------- ----------------------------------
John H. Newman John P. Brennan
Vice President Vice President, Operations
Attachments: Addendum A -- Floor plan indicating leased premises and common
area after the Amendment.
Addendum B -- Repair items
<PAGE> 1
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
EXHIBIT 10.40
COLLABORATION AND LICENSE AGREEMENT
DATED DECEMBER 15, 1997
AND
EFFECTIVE AS OF AUGUST 20, 1997
AMONG
GUILFORD PHARMACEUTICALS INC.
GPI NIL HOLDINGS, INC.
AND
AMGEN INC.
<PAGE> 2
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION
- -------
PAGE
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ARTICLE ONE - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Active Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Additional Indication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Alzheimer's Disease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Amgen Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Category Two Indications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Co-Develop or Co-Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Co-Development Indication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 COGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 Collaboration Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 Combined Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Commercialize or Commercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Commercially Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 Competition Impaired Licensed Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 Competitive Compounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 Contract Research Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 Controls or Controlled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.26 Co-Promote or Co-Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.27 Co-Promotion Indication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.28 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 Develop or Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.31 Extension Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 FDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.33 Field of Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.34 FTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.35 First Commercial Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.36 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.37 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.38 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.39 Governmental Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.40 Guilford Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.41 Guilford Researcher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.42 Guilford Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.43 [*] Indications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.44 IND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.45 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.46 [*] Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.47 [*] License Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.48 Joint Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.49 Joint Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.50 Lead Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.51 Licensed Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.52 Major Market Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.53 Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.54 Milestones or Milestone Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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1.55 Multiple Sclerosis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.56 NDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.57 Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.58 Neuroimmunophilin Compounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.59 Neuropathy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.60 [*] Indications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.61 Parkinson's Disease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.62 Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.63 Patented Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.64 Patent Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.65 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.66 Pivotal Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.67 Regulatory Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.68 Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.69 Research Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.70 Research Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.71 Research Program Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.72 Research Program Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.73 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.74 Significant Medical Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.75 Stroke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.76 Third Party (ies) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.77 Third Party Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.78 Traumatic Brain Injury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.79 Traumatic Spinal Cord Injury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.80 Unpatented Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE TWO - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Guilford and Holdings Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 9
2.2 Amgen Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE THREE - EXCLUSIVITY AND LICENSE GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 License Grant to Amgen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 License Grant to Guilford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Transfer of Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 [*] Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE FOUR - RESEARCH AND RESEARCH FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Research Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Research Program Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Guilford Researchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Reporting and Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6 Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7 Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE FIVE - STRATEGIES AND GOALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Development Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE SIX - DEVELOPMENT AND MANUFACTURING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Amgen Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Guilford Option to Co-Develop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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6.4 Product Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.7 Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE SEVEN - SALES AND MARKETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 Commercialization of Licensed Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Guilford Option to Co-Promote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE EIGHT - FEES AND MILESTONES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1 Signing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.3 Category One Indication Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.4 Category Two Indication Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.5 Category three Indication Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.6 Category Four Indication Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE NINE - ROYALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.1 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.2 Maximum Royalty Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.3 Royalty Adjustment for Unpatented Products . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.4 Third Party Royalty Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.5 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.6 Adjustments for COGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.7 [*] Royalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.8 Term of Royalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.9 Calculation of Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.10 Reports and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE TEN - CONFIDENTIALITY, PUBLICATION AND PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . 24
10.1 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.3 Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.6 Authorized Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE ELEVEN - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.1 Indemnification by Amgen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.2 Indemnification by Guilford and Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.3 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE TWELVE - TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.2 Termination of Research Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.3 Termination of Licensed Product Development and Commercialization . . . . . . . . . . . . . . . 27
12.4 Termination of Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.5 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.6 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.7 Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.8 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE THIRTEEN - INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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13.1 Patent Prosecution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.2 Enforcement of Patent Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.3 Infringement Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.4 Cooperation Among the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE FOURTEEN - DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.2 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.3 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.5 Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.6 Arbitration Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.8 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE FIFTEEN - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.2 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.3 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.8 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.11 Entire Agreement of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.12 Independent Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.13 No Trademark Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.14 Accrued Rights; Surviving Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
COLLABORATION AND LICENSE AGREEMENT
COLLABORATION AND LICENSE AGREEMENT (the "Agreement"), entered into on
December 15, 1997 (the "Signing Date") and effective as of August 20, 1997 (the
"Effective Date"), by and among Guilford Pharmaceuticals Inc., a Delaware
corporation with its principal place of business at 6611 Tributary Street,
Baltimore, Maryland 21224 ("Guilford"), GPI NIL Holdings, Inc., a Delaware
corporation and wholly-owned subsidiary of Guilford with its principal place of
business at 222 Delaware Avenue, Wilmington, Delaware 19899 ("Holdings"), and
Amgen Inc., a Delaware corporation, with its principal place of business at
Amgen Center, Thousand Oaks, California 91320-1789 ("Amgen").
WHEREAS, Amgen is engaged in the research, development and
commercialization of human pharmaceutical products;
WHEREAS, Guilford has developed and obtained or filed for patent
protection and Guilford and/or Holdings is the owner and/or exclusive licensee
of certain other rights relating to certain small molecule neuroimmunophilin
ligands with neurotrophic and other activities which may have human
pharmaceutical applications;
WHEREAS, the parties have executed a Binding Term Sheet dated as of
the Effective Date (the "Binding Term Sheet") and pursuant thereto entered into
a collaboration respecting the research, development and commercialization of
the Guilford proprietary small molecule FK 506 binding protein-based
neuroimmunophilin compounds;
WHEREAS, Section 35 of the Binding Term Sheet provides, among other
things, that the parties will use good faith efforts to negotiate and executive
definitive agreements relating to the transactions set forth therein;
WHEREAS, prior to the Signing Date, Guilford and Amgen have entered
into a (i) Stock and Warrant Purchase Agreement dated as of October 1, 1997,
(ii) Registration Rights Agreement dated as of October 1, 1997 and (iii)
Warrant dated as of October 1, 1997 (together with this Agreement,
collectively, the "Definitive Agreements"), pursuant to Section 35 of the
Binding Term Sheet; and
WHEREAS, the parties now desire to enter into this Agreement, pursuant
to Section 35 of the Binding Term Sheet.
NOW, THEREFORE, the parties in consideration of the mutual
representations, warranties and covenants contained herein and other good and
valuable consideration, the parties agree as follows:
ARTICLE ONE
DEFINITIONS
When used in this Agreement, each of the following capitalized terms
shall have the meanings set forth in this Article One. Any terms defined
elsewhere in this Agreement shall be given equal weight and importance as
though set forth in this Article One.
1.1 "ACTIVE ENTITY" shall mean [*].
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
1.2 "ACQUISITION" shall mean the acquisition, directly or indirectly, by
any Third Party of (i) fifty percent (50%) or more of the shares of common
stock entitled to vote for the election of directors of Guilford and/or
Holdings and/or (ii) the sale or other transfer of all or substantially all of
the assets of Guilford and/or Holdings or the assets to which this Agreement
relates.
1.3 "ADDITIONAL INDICATION" will be as defined in Section 8.2(b) below.
1.4 "AFFILIATE" shall mean a Person that, directly or indirectly, through
one or more intermediates, controls, is controlled by, or is under common
control with the Person specified.
1.5 "ALZHEIMER'S DISEASE" shall mean [*]
1.6 "AMGEN CONFIDENTIAL INFORMATION" shall mean Confidential Information
and Materials owned by Amgen or otherwise designated as Amgen Confidential
Information hereunder but shall not include Joint Confidential Information or
Research Program Materials.
1.7 "AMGEN GUILFORD-DERIVED TECHNOLOGY" shall mean all proprietary data,
information, know-how and intellectual property developed, discovered or
invented by Amgen personnel during the term of the Research Program directly
resulting from the use of Guilford Technology, provided, however, in no event
will Amgen Guilford-Derived Technology include any intellectual property owned
or Controlled by Amgen prior to or on the Effective Date and, provided further,
however, that Amgen Guilford-Derived Technology shall not include any
improvements or modifications of such intellectual property owned or Controlled
by Amgen on or prior to the Effective Date which do not primarily result from
the collaboration among the Parties hereunder.
1.8 [*].
1.9 "CATEGORY FOUR INDICATIONS" shall mean all indications other than the
Category One Indication, the Category Two Indications or the Category Three
Indications.
1.10 "CATEGORY ONE INDICATION" shall mean the first indication to be
developed of Parkinson's Disease or Alzheimer's Disease.
1.11 "CATEGORY THREE INDICATIONS" shall mean [*].
1.12 "CATEGORY TWO INDICATIONS" shall mean indications of (a) the second to
be developed of Parkinson's Disease or Alzheimer's Disease, (b) Traumatic Brain
Injury, (c) Traumatic Spinal Cord Injury, (d) Multiple Sclerosis, (e)
Neuropathy and (f) Stroke.
1.13 "CO-DEVELOP" OR "CO-DEVELOPMENT" shall mean, with respect to
Guilford's option to co-develop the Co-Development Indication as set forth in
Article Six, Guilford's conduct of Phase I and Phase II (but not Phase III)
clinical trials in the capacity of a contract clinical research organization,
subject to Amgen's approval of sites, investigators, protocols, investigators'
brochures, monitoring and data analysis plans, budgets and all other matters
not limited to implementation of any of the foregoing.
1.14 "CO-DEVELOPMENT INDICATION" shall mean a single indication for a
single Licensed Product for which Amgen has decided to file an IND (or in the
event a new IND
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<PAGE> 8
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
is not required, an IND amendment) and which Amgen has selected and Guilford
has accepted in accordance with Section 6.2 below.
1.15 "COGS" shall mean and include [*].
1.16 "COLLABORATION TECHNOLOGY" shall mean all technology encompassed by
the Guilford Technology, Amgen Guilford-Derived Technology and Joint
Technology.
1.17 "COMBINED NET SALES" shall mean with respect to a Licensed Product,
Net Sales of the Licensed Product in countries in which it is a Patented
Product plus Net Sales of the Licensed Product in countries in which it is an
Unpatented Product.
1.18 "COMMERCIALIZE" OR "COMMERCIALIZATION" shall mean those activities
relating to the promotion, marketing and sale of Licensed Products.
1.19 "COMMERCIALLY REASONABLE EFFORTS" shall mean efforts and resources
[*].
1.20 "COMPETITION" shall exist with respect to a Licensed Product in a
Major Market County if one or more Competitive Compounds shall be commercially
available in such Major Market Country and shall have in the aggregate a [*] or
more share of the total market (based on data provided by IMS International,
or if such data are not available, based on such other data mutually agreed to
by Amgen and Guilford) in that Major Market Country as measured by sales
dollars [*]. In the event that IMS International data (or such other mutually
agreed data) sufficient to determine the percentage market share in a
particular Major Market Country of the European Union is unavailable, the
average percent market share of the Major Market Countries of the European
Union for which sufficient data is available will be deemed to be the percent
market share in that particular Major Market Country of the European Union,
unless Amgen and Guilford mutually agree to use another proxy.
1.21 "COMPETITION IMPAIRED LICENSED PRODUCT" shall mean a Licensed Product
which is sold in a country in which Competition exists with respect to such
Licensed Product.
1.22 "COMPETITIVE COMPOUNDS" shall mean and include compounds (other than
Licensed Products Developed and Commercialized by Amgen pursuant to this
Agreement) which [*].
1.23 "CONFIDENTIAL INFORMATION" shall mean with respect to each Party,
non-public proprietary data, information and/or materials which belong in whole
or in part to such Party.
1.24 "CONTRACT RESEARCH AGREEMENT" shall mean the contract research
agreement substantially in form attached hereto as Exhibit D to be executed by
Amgen and Guilford in connection with Guilford's exercise of its option to
Co-Develop.
1.25 "CONTROLS" OR "CONTROLLED" shall mean with respect to intellectual
property possession of the ability to grant licenses or sublicenses without
violating the terms of any agreement or other arrangement with, or the rights
of, any Third Party.
1.26 "CO-PROMOTE" OR "CO-PROMOTION" shall mean, with respect to Guilford's
option to co-promote the Co-Promotion Indication as set forth in Article Seven,
that Amgen and Guilford shall each maintain a field sales force to promote and
detail Licensed Products while Amgen shall control all marketing and shall make
and record all sales of Licensed
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<PAGE> 9
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
Products.
1.27 "CO-PROMOTION INDICATION" will be as defined in Section 7.2 below.
1.28 "DEFAULT" shall mean with respect to a Party that (i) any
representation or warranty of such Party shall have been untrue in any material
respect when made or (ii) such Party shall have failed to perform any material
obligation set forth in this Agreement.
1.29 "DEVELOP" OR "DEVELOPMENT" shall mean those activities related to the
clinical development of Licensed Products including those activities related to
the obtainment of Governmental Approvals for the clinical testing and
commercial sale of Licensed Products. Development activities will specifically
include (i) all activities relating to toxicology, in vitro assays, animal
models of clinical efficacy and other studies required to support a Regulatory
Filing to initiate clinical testing of a Licensed Product and (ii) all
activities relating to clinical studies and determination of safety and
efficacy of a Licensed Product in humans to support a Regulatory Filing to
initiate Commercialization of a Licensed Product.
1.30 "EFFECTIVE DATE" shall mean August 20, 1997.
1.31 "EXTENSION OPTION" will be as defined in Section 4.1(d) below.
1.32 "FDA" shall mean the Federal Food and Drug Administration of the
United States Department of Health and Human Services or any successor agency
thereof.
1.33 "FIELD OF USE" shall mean all human therapeutic, prophylactic and
diagnostic uses of Licensed Products.
1.34 "FTE" shall mean full time equivalent scientific person year
(consisting of a minimum of a total of one thousand eight hundred eighty (1880)
hours per year of scientific work on or directly related to the Research
Program). Work on or directly related to the Research Program can include, but
is not limited to, experimental laboratory work, recording and writing up
results, reviewing literature and references, holding scientific discussions,
managing and leading scientific staff, carrying out management duties related
to the Research Program, and to the extent specifically approved by Amgen,
writing up results for publications or presentation and attending or presenting
appropriate seminars and symposia.
1.35 "FIRST COMMERCIAL SALE" shall mean with respect to any Licensed
Product approved for commercial sale, the first transfer by Amgen, its
Affiliates and/or its sublicensees of the Licensed Product to a non-Affiliate
Third Party in exchange for cash or some equivalent to which value can be
assigned.
1.36 "FORCE MAJEURE" shall mean any occurrence beyond the reasonable
control of a Party that prevents or substantially interferes with the
performance by the Party of any of its obligations hereunder, if such occurs by
reason of any act of God, flood, fire, explosion, breakdown of plant,
earthquake, strike, lockout, labor dispute, casualty or accident; or war,
revolution, civil commotion, acts of public enemies, blockage or embargo; or
any injunction, law order, proclamation, regulation, ordinance, demand or
requirement of any government or of any subdivision, authority or
representative or any such government, inability to procure or use materials,
labor, equipment, transportation, or energy sufficient to meet manufacturing
needs without the necessity of allocation, or any other cause whatsoever,
whether similar or dissimilar to those above enumerated,
4
<PAGE> 10
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
beyond the reasonable control of such Party, if and only if the Party affected
shall have used reasonable efforts to avoid such occurrence and to remedy it
promptly if it shall have occurred.
1.37 "GAAP" shall mean United States generally accepted accounting
principles consistently applied.
1.38 "GOVERNMENTAL APPROVALS" shall mean any approvals, licenses,
registrations, authorizations, or equivalents, of any foreign or United States
federal, state or local regulatory agency, department, bureau or other
government entity, including the FDA, necessary for the manufacture, use,
storage, transport, export, import, clinical testing and/or sale of Licensed
Products in a country.
1.39 "GOVERNMENTAL AUTHORITIES" shall mean all United States governmental
entities, agencies and bureaus, including the FDA and comparable foreign
governmental and/or regulatory agencies which control the manufacture, use,
storage, transport, export, import, clinical testing and/or sale of
pharmaceutical products.
1.40 "GUILFORD CONFIDENTIAL INFORMATION" shall mean Confidential
Information and Materials owned by Guilford and/or Holdings or otherwise
designated as Guilford Confidential Information hereunder but shall not include
Joint Confidential Information or Research Program Materials.
1.41 "GUILFORD RESEARCHER" shall mean professional researchers and
scientists employed by Guilford including, but not limited to, chemists,
biologists and toxicologists having at least a Bachelors Degree in science.
1.42 "GUILFORD TECHNOLOGY" shall mean all proprietary data, information,
know-how and intellectual property (a) developed, discovered or invented by
Guilford personnel in the conduct of the Research Program, (b) owned or
Controlled by Guilford and/or Holdings on the Effective Date and/or during the
term of this Agreement which claim, describe and/or relate to Neuroimmunophilin
Compounds and/or (c) owned or Controlled by Guilford and/or Holdings on the
Effective Date and/or during the term of this Agreement and necessary or useful
to make, use or sell Neuroimmunophilin Compounds. Guilford Technology will
specifically include, without limitation, the Patent Rights set forth on
Exhibit A attached hereto and incorporated herein.
1.43 [*].
1.44 "IND" shall mean an Investigational New Drug Application covering a
Licensed Product filed with the FDA pursuant to 21 CFR 312.20.
1.45 "INITIAL TERM" will be as defined in Section 4.1(d) below.
1.46 "[*] CONSENT" shall mean a Consent and Agreement among Amgen,
Guilford, Holdings and [*] in the form attached hereto as Exhibit B.
1.47 "[*] LICENSE AGREEMENTS" shall mean the License Agreement between [*]
and Guilford [*], and the [*] License Agreement between [*] and Guilford [*].
1.48 "JOINT CONFIDENTIAL INFORMATION" shall mean Confidential Information
owned jointly by Amgen and Guilford or otherwise designated as Joint
Confidential Information hereunder.
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
1.49 "JOINT TECHNOLOGY" shall mean all proprietary data, information,
know-how and intellectual property developed, discovered or invented jointly by
Guilford personnel and Amgen personnel during the term of this Agreement.
1.50 "LEAD SELECTION" shall mean with respect to Licensed Product
Development, the earlier of (i) commencement by Amgen of toxicology studies
under FDA Good Laboratory Practices of at least one (1) month in duration or
(ii) following Amgen's decision to file an IND on the Licensed Product,
commencement by Amgen of toxicology studies under FDA Good Laboratory Practices
of less than one month in duration.
1.51 "LICENSED PRODUCTS" shall mean all products described and/or claimed
in and/or incorporating Collaboration Technology. For the purposes of Royalty
payments under Article Nine below, a single Licensed Product will comprise all
formulations (e.g., tablets, gel-caps, topical formulations, parenteral
formulations, sustained release formulations, etc.) of the same Active Entity
and all indications for which that Active Entity may be used.
1.52 "MAJOR MARKET COUNTRIES" shall mean the United States, European Union
countries (as such countries may change from time to time) and Japan.
1.53 "MATERIALS" shall mean Amgen or Guilford, as the case may be,
proprietary research materials including, but not limited to, compounds,
assays, reagents, protocols, data and materials derived therefrom. Materials
shall not include Research Program Materials.
1.54 "MILESTONES" OR "MILESTONE PAYMENTS" shall mean the payments to be
made by Amgen to Holdings upon occurrence of certain events as set forth in
Article Eight.
1.55 "MULTIPLE SCLEROSIS" shall mean [*] .
1.56 "NDA" shall mean a New Drug Application covering a Licensed Product
filed with FDA pursuant to 21 CFR 314.
1.57 "NET SALES" shall mean [*].
1.58 "NEUROIMMUNOPHILIN COMPOUNDS" shall mean compounds that [*] and,
notwithstanding the foregoing, those compounds covered by the Guilford
Technology Patent Rights set forth on Exhibit A attached hereto and
incorporated by reference herein.
1.59 "NEUROPATHY" shall mean [*].
1.60 [*]
1.61 "PARKINSON'S DISEASE" shall mean [*] .
1.62 "PARTY" shall mean Amgen, Guilford or Holdings, as the case may be,
and "PARTIES" shall mean Amgen, Guilford and Holdings.
1.63 "PATENTED PRODUCT" shall mean a Licensed Product the sale of which
would, but for the licenses granted under this Agreement, infringe one or more
claims of a valid, issued patent included in the Collaboration Technology in
the country of sale.
1.64 "PATENT RIGHT" shall mean patent applications, patents issuing thereon
and any extensions or restorations by existing or future extension or
restoration mechanisms,
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
including without limitation Supplementary Protection Certificates or the
equivalent thereof, renewals, continuations, continuations-in-part, divisions,
patents-of-addition, and/or reissues of any patent.
1.65 "PERSON" shall mean any individual, firm, corporation, partnership,
limited liability company, trust, unincorporated organization or other entity
or a government agency or political subdivision thereto, and shall include any
successor (by merger or otherwise) of such Person.
1.66 "PIVOTAL TRIAL" shall mean a clinical trial which, if the defined
end-points are met, is intended by Amgen as of the start of such trial to be
the clinical trial which will constitute sufficient basis for receipt of
marketing approval in the United States.
1.67 "REGULATORY FILINGS" shall mean, collectively, INDs, Biologics
License Applications, Drug Master Files, NDAs and/or any other comparable
filings as may be required by Governmental Authorities to obtain Governmental
Approvals.
1.68 "RESEARCH" shall mean those activities directed to the chemistry and
pre-clinical development of Licensed Products including screening metabolism,
pharmacokinetics, toxicology, in vivo screening and assays, all of which are
intended to determine whether clinical testing of a product candidate is
warranted.
1.69 "RESEARCH PLAN" will be as defined in Section 4.1(a) below.
1.70 "RESEARCH PROGRAM" shall mean the research program conducted by
Guilford and funded by Amgen in accordance with the provisions of Article Four
below.
1.71 "RESEARCH PROGRAM FUNDING" will be as defined in Section 4.2(a) below.
1.72 "RESEARCH PROGRAM MATERIALS" shall mean and include compounds, assays,
reagents, protocols, data and materials derived therefrom by Guilford in the
conduct of the Research Program and/or which constitute Guilford Technology.
1.73 "ROYALTIES" shall mean those royalties payable by Amgen to Holdings
pursuant to Article Nine of this Agreement.
1.74 "SIGNIFICANT MEDICAL MARKET" shall mean with respect to a Licensed
Product that the product is expected to have greater than one hundred million
dollars ($100,000,000) (adjusted annually by an amount equal to the percentage
increase or decrease, if any, in the United States Consumer Price Index (or any
comparable successor index) from the Effective Date to the year in which the
determination is made) in market potential in the United States. If a dispute
shall arise among the Parties with respect to a determination of Significant
Medical Market, such dispute shall be submitted to Amgen's and Guilford's
respective chief executive officers in accordance with Section 14.2 below
during which time such officers may choose as an alternative to Arbitration
under Sections 14.3 - 14.6 below to mutually agree on a mechanism to appoint a
neutral third party expert of recognized national standing with appropriate
experience to conclusively resolve such dispute.
1.75 "STROKE" shall mean either partial or total motor, sensory, or
cognitive deficit directly attributable to acute cerebral ischemia. Clinical
trials for Stroke will include patients with thrombo-occlusive or
thrombo-embolic cerebrovascular disease and would be designed to measure the
effect of acute administration of a drug on eventual functional
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<PAGE> 13
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
outcome as measured by an accepted clinical stroke scale.
1.76 "THIRD PARTY(IES)" shall mean any Person other than Guilford, Holdings
and/or Amgen.
1.77 "THIRD PARTY ROYALTIES" shall mean royalties payable by Amgen, its
Affiliates or sublicensees to a non-Affiliate Third Party (or multiple
non-Affiliate Third Parties) to make, have made, use, sell, offer for sale or
import Licensed Products where the royalty payable to such non-Affiliate Third
Party is based on Patent Rights owned or Controlled by such Third Party.
1.78 "TRAUMATIC BRAIN INJURY" shall mean patients with closed head injuries
of a traumatic etiology, including patients in coma or with significant
neurologic deficit(s). Clinical trials for Traumatic Brain Injury will be
designed to measure the effect of acute drug administration on acute and/or
chronic outcome.
1.79 "TRAUMATIC SPINAL CORD INJURY" shall mean patients with traumatic (not
ischemic or other etiologies) spinal cord injury, including patients with
partial to total spinal cord lesions with the primary clinical deficit of motor
weakness. Clinical trials for Traumatic Spinal Cord Injury will be designed to
measure the effect of acute administration on acute and/or chronic outcome.
1.80 "UNPATENTED PRODUCT" shall mean a Licensed Product the sale of which
would not infringe one or more claims of a valid, issued patent included in the
Collaboration Technology in the country of sale.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
2.1 GUILFORD AND HOLDINGS REPRESENTATIONS AND WARRANTIES. Guilford and
Holdings represent and warrant that:
(a) No Conflict. (i) [*] the terms of this Agreement do not
conflict in any material respect with the terms of any other Guilford and/or
Holdings contractual obligations and (ii) neither Guilford nor Holdings have
granted to any Person any right which would conflict in any material respect
with the rights granted to Amgen hereunder.
(b) Binding Agreement. This Agreement is a legal and valid
obligation binding upon Guilford and Holdings and enforceable in accordance
with its terms except as (i) enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights and (ii) equitable principles of general
applicability.
(c) Corporate Power. Guilford and Holdings are each duly
organized and validly existing under the laws of Delaware and have full
corporate power and authority to enter into this Agreement and carry out of
provisions hereof.
(d) Due Authorization. Guilford and Holdings are duly authorized
to execute and deliver this Agreement. The Person executing this Agreement on
behalf of Guilford and Holdings is duly authorized to so by all requisite
corporate action.
(e) Patent Rights. Guilford and/or Holdings own or Control all of
the Patent Rights set forth on Exhibit A. The Patent Rights set forth on
Exhibit A hereto include all
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
Patent Rights owned or Controlled by Guilford, Holdings or any Affiliate of
Guilford and/or Holdings which claim or describe Neuroimmunophilin Compounds as
of the Effective Date. Except as set forth on Schedule 2(e) hereto, neither
Guilford nor Holdings is aware of any action, suit, inquiry or investigation
which questions or threatens the validity of any Patent Rights included in the
Guilford Technology.
(f) [*] License Agreements. The [*] License Agreements are in
full force and effect.
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
2.2 AMGEN REPRESENTATIONS AND WARRANTIES. Amgen represents and warrants
that:
(a) No Conflict. The terms of this Agreement do not conflict in
any material respect with the terms of any other Amgen contractual obligations.
(b) Binding Agreement. This Agreement is a legal and valid
obligation binding upon Amgen and enforceable in accordance with its terms
except as (i) enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights and (ii) equitable principles of general applicability.
(c) Corporate Power. Amgen is duly organized and validly existing
under the laws of Delaware and has full corporate power and authority to enter
into this Agreement and carry out of provisions hereof.
(d) Due Authorization. Amgen is duly authorized to execute and
deliver this Agreement. The Person executing this Agreement on behalf of Amgen
is duly authorized to so by all requisite corporate action.
(e) Other Research Programs. As of the Effective Date, except for
the evaluation of the Guilford Technology for purposes of determining whether
or not to enter into a business relationship with Guilford, Amgen is not
engaged in a research program directed to the discovery of Neuroimmunophilin
Compounds.
ARTICLE THREE
EXCLUSIVITY AND LICENSE GRANT
3.1 EXCLUSIVITY. Guilford, Holdings and Guilford's other wholly-owned
subsidiaries will work exclusively with Amgen, and will not participate either
alone or in collaboration with a Third Party, in the field of Research,
Development and Commercialization of Neuroimmunophilin Compounds during the
term of this Agreement; provided, however, Amgen acknowledges that the
foregoing will not be construed to limit or otherwise prevent Guilford,
Holdings and Guilford's other wholly-owned subsidiaries from conducting
research, development and/or commercialization activities on compounds and/or
products other than Neuroimmunophilin Compounds and Licensed Products.
3.2 LICENSE GRANT TO AMGEN. Guilford and Holdings hereby grant to Amgen
an exclusive worldwide license, with a right to sublicense, under the
Collaboration Technology to make, have made, use, sell, offer to sell and
import Licensed Products in the Field of Use.
3.3 LICENSE GRANT TO GUILFORD. Amgen hereby grants to Guilford and
Holdings a non-exclusive worldwide license, with no right to sublicense, under
the Collaboration Technology to use Licensed Products in the Field of Use to
the extent necessary for Guilford to conduct Research hereunder, Co-Develop a
single indication for a single Licensed Product and Co-Promote a single
indication for a single Licensed Product as set forth in this Agreement. This
sublicense specifically excludes, without limitation, all rights and licenses
under the Collaboration Technology to make, have made, sell or import Licensed
Products.
3.4 TRANSFER OF TECHNOLOGY. Guilford and Holdings represent and warrant
that prior
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
to the Signing Date each has provided to Amgen in writing (or other mutually
agreed tangible form) all Guilford Technology that existed as of October 1,
1997. After October 1, 1997, Guilford shall transfer technology to Amgen in
conjunction with Guilford's disclosure obligations under Section 4.4(d) below.
All disclosures by Guilford and/or Holdings will be in sufficient detail to
allow Amgen to practice all useful embodiments of Guilford Technology and Joint
Technology, as the case may be.
3.5 [*] CONSENT. Guilford and Holdings represent and warrant that since
the Effective Date they have used and agree to continue to use their best
efforts to deliver to Amgen the [*] Consent as soon as possible. During the
term of this Agreement, Guilford and Holdings will promptly provide to Amgen
copies of any formal notice(s) of default received by Guilford and/or Holdings
from [*] stating that Guilford and/or Holdings is in material breach or default
of any of the terms and conditions of the [*] License Agreements.
ARTICLE FOUR
RESEARCH AND RESEARCH FUNDING
4.1 RESEARCH PROGRAM.
(a) Research Plan. Guilford will conduct the Research Program in
accordance with an annual research plan developed by Amgen and Guilford and
approved by Amgen (the "Research Plan"). As the Research Program progresses
and new data and information become available, Amgen, after discussion and
consultation with Guilford, may amend the Research Plan.
(b) Third Party Agreements. Amgen may elect to enter into
agreements with Third Parties, including academic collaboration and contract
research agreements, to conduct research and/or otherwise assist Amgen in the
Research, Development and Commercialization of Neuroimmunophilin Compounds.
All such agreements shall be at Amgen's sole expense.
(c) Goal. The goal of the Research Program will be the discovery
and selection of Neuroimmunophilin Compounds for Development by Amgen.
(d) Term. The term of the Research Program, and Amgen's funding
thereof, will begin as of October 1, 1997. The initial term of the Research
Program will be three (3) years (the "Initial Term"), subject to Section 12.2
below. Amgen shall have the option to extend the Initial Term of the Research
Program by one (1) year on the terms and conditions set forth herein (the
"Extension Option"). Amgen shall exercise the Extension Option by providing
written notice to Guilford on or before the date which is one hundred twenty
days (120) days prior to the expiration of the Initial Term.
4.2 RESEARCH PROGRAM FUNDING.
(a) Maximum Commitment. Amgen will fund a maximum of [*] Guilford
Researcher FTEs at [*] (i.e., maximum four million five hundred thousand
dollars ($4,500,000 per year in total) to conduct the Research Program (the
"Research Program Funding").
(b) FTE Carry-Overs. Due to staffing limitations beyond
Guilford's reasonable control, the number of Guilford Researcher FTEs devoted
to the Research Program may fluctuate on a quarterly basis. In no event,
however, will Guilford devote
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
less than [*] Guilford Researcher FTEs to the Research Program in any calendar
quarter. In the event that Guilford devotes less than [*] Guilford Researcher
FTEs to the Research Program in any quarter, Guilford shall be entitled to
carry-over the difference between [*] and the actual number of Guilford
Researcher FTEs devoted to the Research Program in that quarter against future
quarters subject to the limitations that in no event will (i) Guilford devote
more than [*] Guilford Researcher FTEs in any quarter without Amgen's prior
consent and (ii) Amgen be required to fund more than [*] Guilford Researcher
FTEs in any calendar year.
(c) Payments and Credits.
(i) Estimates. Subject to the limitations set forth in
subsection (b) above, no less than thirty (30) days prior to first day
of each calendar quarter, Guilford shall provide Amgen with an
estimate of the number of Guilford Researcher FTEs to be devoted to
the Research Program in the next calendar quarter.
(ii) Reports. Subject to the limitations set forth in
subsection (b) above, no less than thirty (30) days prior to first day
of each calendar quarter, Guilford will provide Amgen with a report
setting forth the number of Guilford Researcher FTEs actually devoted
to the Research Program in the preceding quarter and a description of
the activities of each Guilford Researcher in furtherance of the
Research Program. Amgen shall be entitled to take as a one-time
credit the amount by which the number of Guilford Researcher FTEs
funded by Amgen in that quarter exceeds the number of Guilford
Researcher FTEs actually devoted to the Research Program in that
quarter against Amgen's future Research Funding commitment (the "Amgen
Funding Credit").
(iii) Calculation of Payments. No later than five (5) days
prior to first day of each calendar quarter, Amgen will provide
Research Funding to Guilford for that calendar quarter. Research
Funding payments by Amgen will be equal to the (FTE rate) multiplied
by [(the number of Guilford Researcher FTEs set forth in the Guilford
estimate for that quarter) minus (the Amgen Funding Credit, if any)].
(iv) First and Last Quarters. Guilford shall prior to the
Signing Date provide Amgen with the Guilford estimate of the Guilford
Researcher FTEs to be devoted to the Research Program for the first
calendar quarter (or portion thereof) of the Research Program and
Amgen shall provide Guilford with Research Funding based on such
estimate within five (5) days after the Signing Date. Within sixty
(60) days after termination of the Research Program, Guilford shall
refund to Amgen any Amgen Funding Credit which has not been previously
credited against Amgen's Research Funding commitment.
4.3 GUILFORD RESEARCHERS.
(a) Allocation. It is Amgen's and Guilford's expectation that for
the first year of the Research Program, [*] Guilford Researcher FTEs will be
devoted to chemistry of Licensed Products and [*] Guilford Researcher FTEs will
be devoted to pre-clinical development of Licensed Products (i.e., screening
metabolism, pharmacokinetics and toxicology; assay development; and in vivo
screening) in accordance with the Research Plan. Such allocation will be
subject to review and if necessary will be modified pursuant to the Research
Plan.
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Exchange Commission.
(b) Continuity. While Amgen recognizes Guilford's need for
flexibility in staffing personnel for its overall business, Amgen and Guilford
also acknowledge that it is important to the Research Program to have personnel
devoted full-time to working in the Research Program. Accordingly, in order to
maximize the effective conduct of the Research Program, Guilford will use
reasonable best efforts to maximize the continuity of Guilford personnel
conducting the Research Program and provide as devoted Research Program
full-time personnel at least [*] of the Guilford Researcher FTEs funded by
Amgen.
(c) Invention Assignment Agreements. Each Guilford Researcher
conducting the Research Program will enter into a non-disclosure and invention
assignment agreement substantially in the form attached hereto as Exhibit C.
Each scientist of Amgen conducting the Research Program will have executed
Amgen's standard non-disclosure and invention assignment agreement.
4.4 REPORTING AND DISCLOSURE.
(a) Reports. On a quarterly basis during the term of the Research
Program Guilford will provide Amgen and Holdings with written reports
summarizing all material data and information arising out of the conduct of the
Research Program. In the event that after receipt of any such report, Amgen
shall request additional data or information relating to Research Program data
or Guilford Technology, Guilford shall promptly provide such data or
information to Amgen with a copy to Holdings.
(b) Quarterly Meetings. Amgen and Guilford will meet on a
quarterly basis to review in reasonable detail (i) all data and information
generated in the conduct of the Research Program by Guilford, (ii) all Guilford
Technology and Joint Technology developed by Guilford and (iii) all Amgen
Guilford-Derived Technology and Joint Technology developed by Amgen.
(c) Monthly Meetings. On no less than a monthly basis, Amgen and
Guilford will meet (whether in person, by video-conference or tele-conference)
to discuss any material data or developments arising out of the Research
Program or which constitute Guilford Technology, Joint Technology or Amgen
Guilford-Derived Technology.
(d) Disclosure.
(i) Guilford. During the term of this Agreement,
Guilford will promptly disclose to Amgen and Holdings all inventions,
techniques and discoveries (whether patentable or not) arising out of
the conduct of the Research Program by Guilford and all inventions,
techniques and discoveries (whether patentable or not) included in
Guilford Technology and Joint Technology.
(ii) Amgen. During the term of this Agreement, Amgen will
promptly disclose to Guilford and Guilford will disclose to Holdings
all inventions, techniques and discoveries (whether patentable or not)
included in Amgen Guilford-Derived Technology and Joint Technology.
4.5 DATA. All data and information arising out of the Research Program
will be Joint Confidential Information.
4.6 MATERIALS.
(a) Research Program Materials. Upon request by Amgen, Guilford
will
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
promptly provide to Amgen such quantities of Research Program Materials as
shall be reasonably available.
(b) Guilford Owned Materials. Upon Amgen's request, Guilford will
supply Amgen with Guilford owned Materials for use by Amgen in the Research and
Development of Licensed Products, provided that supply of such Guilford owned
Materials will not, in Guilford's judgment, (i) conflict with Guilford's
internal or collaborative research programs, (ii) conflict with Guilford's
internal policies regarding such materials or (iii) violate any agreement to
which Guilford is a party. Any Guilford owned Materials provided to Amgen
hereunder (i) may only be used by Amgen in the Research and Development of
Licensed Products and (ii) may not be supplied to Third Parties without
Guilford's prior written consent which can be withheld for any reason in
Guilford's sole discretion. The provision of Guilford owned Materials
hereunder will not constitute any grant, option or license under any Guilford
Patent Rights, except as expressly set forth herein.
(c) Amgen Owned Materials. Upon Guilford's request, Amgen will
supply Guilford with Amgen owned Materials for use by Guilford in conducting
the Research Program, provided that supply of such Amgen owned Materials will
not, in Amgen's judgment, (i) conflict with Amgen's internal or collaborative
research programs, (ii) conflict with Amgen's internal policies regarding such
materials or (iii) violate any agreement to which Amgen is a party. Any Amgen
owned Materials provided to Guilford hereunder (i) may only be used by Guilford
in the conduct of the Research Program and (ii) may not be supplied to Third
Parties without Amgen's prior written consent which can be withheld for any
reason in Amgen's sole discretion. The provision of Amgen owned Materials
hereunder will not constitute any grant, option or license under any Amgen
Patent Rights, except as expressly set forth herein.
4.7 COVENANT. Guilford will use reasonable best efforts (a) to devote [*]
Guilford Researcher FTEs per year to the conduct of the Research Program, (b)
to pursue and conduct the Research Program to meet the goals of the Research
Program and (c) to carry out all work performed in connection with the Research
Program in compliance with any federal, state or local laws, regulations and
guidelines governing the conduct of such work.
ARTICLE FIVE
STRATEGIES AND GOALS
5.1 STRATEGIES. Notwithstanding anything to the contrary set forth
herein, including, but not limited to, Section 6.2 below, but subject to
Sections 6.6 and 7.3 below, Amgen will determine all strategies for, and make
all decisions regarding, and fund all activities related to, the Development
and Commercialization of Licensed Products, including which IND candidates to
take into Development, which indications to pursue and when, which Development
candidates to Commercialize and which regulatory and marketing strategies to
adopt. [*]
5.2 DEVELOPMENT GOALS. It is the hope and goal of the Parties that within
the first [*] years of this Agreement, Guilford will identify at least [*]
Neuroimmunophilin Compounds which are IND candidates and Amgen will file at
least [*] INDs (which may be for a single Licensed Product or different
Licensed Products) and initiate at least [*] Phase II and [*] Phase III
clinical trials for Licensed Product(s). It is also the hope and goal of Amgen
to Develop and Commercialize Licensed Products worldwide. The Parties
recognize and agree that each of these events and the events described in
Section
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
5.1 above depend on the scientific rationale for therapeutic activity of
Licensed Products, the pre-clinical safety profiles demonstrated by Licensed
Products, the clinical benefits demonstrated in clinical trials of Licensed
Products and the commercial opportunity presented by Licensed Products. There
can be no guarantee or commitment by Amgen or Guilford to meet these goals and,
provided their obligation to use Commercially Reasonable Efforts has been met,
it will not be a Default by Amgen or Guilford if these goals are not met.
ARTICLE SIX
DEVELOPMENT AND MANUFACTURING
6.1 AMGEN DEVELOPMENT. Notwithstanding anything to the contrary set forth
in this Agreement, but subject to Section 6.6 below, Amgen will conduct, fund
and make all decisions regarding the Development of Licensed Products.
6.2 GUILFORD OPTION TO CO-DEVELOP. Guilford shall have the option to
Co-Develop the Co-Development Indication under the Contract Research Agreement.
(a) Selection. Within six (6) months after Amgen's decision to
file the third IND for a Licensed Product, Amgen, after consultation with
Guilford (at which time Guilford may propose to Amgen a Co-Development
Indication), will select a Co-Development Indication. It is understood that
Amgen may file more than one (1) IND on the same Licensed Product and that the
three (3) INDs referred to above may be for indications for the same or
different Licensed Products. Notwithstanding the foregoing, Amgen will have no
obligation to select a Co-Development Indication in the event that in Amgen's
commercially reasonable judgment, pre-clinical studies do not suggest
sufficient potential therapeutic application and/or commercial opportunity is
insufficient to warrant clinical development of more than three (3) different
indications.
(b) Exercise of Option. Upon Amgen's selection of the
Co-Development Indication, Amgen will notify Guilford in writing of Amgen's
selection. Guilford will have sixty (60) days from receipt of written notice
from Amgen to notify Amgen in writing of Guilford's election to exercise its
option to Co-Develop the Co-Development Indication. Guilford's option to
Co-Develop shall terminate upon exercise or if Guilford does not elect to
exercise its option to Co-Develop, at the end of such sixty (60) day period.
Without limiting the generality of the foregoing, under no circumstances shall
Amgen be obligated to propose an alternative indication if Guilford does not
elect to exercise its option to Co-Develop the indication selected by Amgen.
(c) Guilford Co-Development Clinical Plan. In the event Guilford
exercises its option to Co-Develop, Guilford may propose to Amgen for approval
a clinical plan for the Phase I and Phase II clinical trials for the
Co-Development Indication (the "Co-Development Clinical Plan"). The
Co-Development Clinical Plan will be consistent with Amgen's overall
development plan for Licensed Products, including regulatory strategies and
timetables, and with Amgen standard development procedures and practices.
Amgen may approve or reject one or more clinical trials contained in the
proposed Co-Development Clinical Plan or may request additional clinical trials
to be included in the Co-Development Clinical Plan.
(d) Guilford Co-Development Activities. In the event Guilford
exercises its option to Co-Develop the Co-Development Indication, Guilford and
Amgen will execute the Contract Research Agreement prior to performance by
Guilford of any Co-Development activities. Consistent with the Contract
Research Agreement, Guilford will
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
prepare and submit to Amgen for approval draft protocols, monitoring plans,
investigators' brochures, data analysis plans and lists of proposed sites and
clinical investigators for each Phase I and Phase II clinical trial set forth
in the Co-Development Clinical Plan. Subject to Amgen's approval, Guilford
will conduct and monitor the studies in accordance with these protocols and
plans. Clinical studies in the Co-Development Indication will be governed by
Amgen's overall development plan for Licensed Products, including regulatory
strategies and timetables, and will be consistent with Amgen standard
development procedures and practices. In the event that Guilford elects to
terminate the Contract Research Agreement pursuant to its terms other than for
an uncured breach thereof by Amgen or Amgen elects to terminate the Contract
Research Agreement pursuant to its terms because of an uncured breach thereof
by Guilford, Guilford's right to Co-Develop the Co-Development Indication will
terminate.
(e) Regulatory Matters. Consistent with the Contract Research
Agreement with respect to the Co-Development Indication, Amgen will be the
regulatory sponsor of the Co-Development Indication clinical trials conducted
by Guilford and will hold the IND and be responsible for all FDA contact.
(f) Costs. Amgen will fund Guilford's outside costs associated
with the conduct of the Co-Development Indication Phase I and Phase II clinical
trials (per patient costs and site costs) as set forth in a budget proposed by
Guilford and approved by Amgen. Amgen will also reimburse Guilford for
internal costs actually incurred by Guilford in the conduct of the
Co-Development Indication Phase I and II clinical trials, provided, however,
that Amgen shall not be obligated to reimburse Guilford for any costs in excess
of what a contract research organization would charge to conduct an equivalent
study.
6.3 REGULATORY MATTERS. Notwithstanding anything to the contrary set
forth in this Agreement, Amgen in its sole discretion will have complete
control, authority and responsibility for the regulatory strategies adopted for
the Development of all Licensed Products. Amgen will be responsible for and
will own all Regulatory Filings for Licensed Products.
6.4 PRODUCT PLANS. Promptly upon approval by Amgen, Amgen will provide to
Guilford and Holdings copies of the Amgen annual development plans for Licensed
Products.
6.5 MEETINGS. Amgen and Guilford will meet on a quarterly basis to
review the progress and status of development of Licensed Products. On no less
than a monthly basis, Amgen and Guilford will meet (whether in person, by
video-conference or tele-conference) to discuss any material data or
developments arising out of Licensed Product Development. Amgen and Guilford
will meet on a quarterly basis to review the progress and status of Guilford's
development of the Co-Development Indication. On no less than a monthly basis,
Guilford and Amgen will meet (whether in person, by video-conference or
tele-conference) to discuss any material data or developments arising out of
the Co-Development Indication development.
6.6 COVENANT. Amgen will use Commercially Reasonable Efforts to Develop
Licensed Products.
6.7 MANUFACTURING. Amgen shall be responsible for the manufacturing of
Licensed Products, directly and/or through contracted Third Parties.
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
ARTICLE SEVEN
SALES AND MARKETING
7.1 COMMERCIALIZATION OF LICENSED PRODUCTS. Subject to Section 7.3
below, Amgen in its sole discretion will make all decisions regarding the
Commercialization and sales and marketing of Licensed Products.
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
7.2 GUILFORD OPTION TO CO-PROMOTE. Guilford shall have the option to
Co-Promote in the United States a single Licensed Product in a mutually agreed
single indication other than Parkinson's Disease or Alzheimer's Disease (the
"Co-Promotion Indication").
(a) Exercise of Option. For so long as Guilford's option to
Co-Promote the Co-Promotion Indication is exercisable, promptly following
Amgen's filing of an NDA for a Licensed Product in an indication other than
Parkinson's Disease or Alzheimer's Disease, Amgen and Guilford will discuss
whether the indication is an appropriate Co-Promotion Indication. Upon
agreement by Amgen and Guilford, the indication will become the Co-Promotion
Indication. If Amgen and Guilford fail to agree on whether the indication is
an appropriate indication for Co-Promotion, Guilford's option to Co-Promote a
single indication for a Licensed Product will remain in effect.
(b) Guilford Co-Promotion Activities. In the event Guilford
exercises its option to Co-Promote, Co-Promotion by Guilford will be limited to
Guilford field sales force representatives double calling with Amgen's field
sales force representatives on physician's offices. Guilford field sales force
representatives will not call on national accounts. Co-Promotion by Guilford
will be in accordance with Amgen's sales and marketing plan using Amgen's field
sales materials.
(c) Guilford Licensed Product Sales Force. Guilford will be
entitled to have at least [*] field sales force representatives but in no event
will the Guilford sales force exceed the lesser of [*] field sales force
representatives or [*] of the allocated Amgen field sales force effort for the
Co-Promotion Indication for the Licensed Product.
(d) Costs. Amgen will reimburse Guilford for Co-Promotion
activities by Guilford sales representatives at the fully-loaded cost to Amgen
(salary, benefits, travel and district managers) of an equivalent number of
Amgen sales representatives for the Co-Promotion Indication for the Licensed
Product.
7.3 COVENANT. Amgen will use Commercially Reasonable Efforts to market
and sell Licensed Products.
ARTICLE EIGHT
FEES AND MILESTONES
8.1 SIGNING FEE. Amgen has paid to Holdings a signing fee of fifteen
million dollars ($15,000,000) on August 21, 1997.
8.2 MILESTONES.
(a) Indication Basis. Milestones will be payable to Holdings
one-time on an indication by indication basis in accordance with Sections 8.3 -
8.6 below, as applicable, regardless of the number of Licensed Products
Developed.
(b) Additional Indication Milestones. Notwithstanding anything to
the contrary set forth in this Agreement, Milestones will be payable for an
indication (an "Additional Indication") being Developed for a Licensed Product
that was previously FDA approved for another indication if, and only if, (i)
the indication represents a Significant Medical Market and the Licensed Product
addresses the majority of eligible patients in the Significant Medical Market
and (ii) the indication represents a disease category which is distinct from
previously FDA approved indications (i.e., Additional Indication Milestones
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
will not be paid for studies and approvals to treat subpopulations within a
previously FDA approved indication or new or different treatment regimens for
previously FDA approved indications). The foregoing determination shall be
made within thirty (30) days of each applicable milestone event set forth in
Sections 8.3(b), 8.4(b), 8.5(b) and 8.6 below.
(c) Milestone Events. The events which trigger Milestone Payments
and the amounts thereof for the Category One Indication, Category Two
Indications and Category Three Indications will depend on whether the
indication is the first FDA approved indication for a Licensed Product or an
Additional Indication. Milestone Payments for indications that are not
Additional Indications will be payable in accordance with the events and
corresponding amounts set forth in subsection (a) of Sections 8.3 - 8.5 below,
as applicable. Milestone Payments for Additional Indications will be payable
in accordance with the events and corresponding amounts set forth in subsection
(b) of Sections 8.3 - 8.5 below, as applicable. In the event that different
indications for a Licensed Product that has not been previously FDA approved
for any indication are being Developed in parallel, each indication will be
treated independently for the purposes of determining Milestone Payments until
one of the indications is FDA approved; at which time the remaining indications
in Development will be treated as Additional Indications and any unpaid
Milestones with respect to that indication will be determined based on the
percentage of such unpaid Milestones and upon the corresponding events as set
forth below in this Section 8.2(c). The foregoing notwithstanding, in no event
will total Milestone Payments for any indication exceed the total amounts set
forth in Sections 8.3 - 8.5 below for the applicable category.
<TABLE>
<S> <C>
Start of a Pivotal Trial in U.S. 15%
NDA submission to FDA 30%
NDA approval by FDA 55%
</TABLE>
(d) Pivotal Trial. For the purposes of Milestone payments hereunder,
in the event that the FDA shall notify Amgen that an NDA filing may be made
based solely on the results of a clinical trial which would not otherwise
constitute a Pivotal Trial, the Milestone Payments set forth herein below for
"Start of a Pivotal Trial in U.S." will be payable upon receipt of such notice.
The foregoing notwithstanding, the decision to seek FDA approval to file an NDA
based solely on data from a clinical trial which would not otherwise constitute
a Pivotal Trial will be made by Amgen in its business discretion consistent
with Amgen's regulatory strategy for Licensed Products.
8.3 CATEGORY ONE INDICATION MILESTONES.
(a) Category One Indication Milestones will be payable one-time on
the occurrence of the milestone events set forth below the first time such
events are achieved in the Development of a Licensed Product for the Category
One Indication. Milestone Payments for the Category One Indication will total
fifty-six million ($56,000,000) payable as set forth below.
<TABLE>
<S> <C>
Lead Selection $1.0 million
IND filing with FDA $5.0 million
Start of a Pivotal Trial in U.S. $7.5 million
NDA submission to FDA $15.0 million
NDA approval by FDA $27.5 million
--- -------- -- --- ----- -------
Total $56.0 million
</TABLE>
(b) If the Category One Indication is an Additional Indication, the
Category One
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
Milestones will (subject to Section 8.2 (b) above) be paid as set forth below.
<TABLE>
<S> <C>
Start of a Pivotal Trial in U.S. $8.4 million
NDA submission to FDA $16.8 million
NDA approval by FDA $30.8 million
--- -------- -- --- ----- -------
Total $56.0 million
</TABLE>
8.4 CATEGORY TWO INDICATION MILESTONES.
(a) Category Two Indication Milestones will be payable one-time on
the occurrence of the milestone events set forth below the first time such
events are achieved in the Development of a Licensed Product for a Category Two
Indication. Milestones for each Category Two Indication will total forty-two
million ($42,000,000) and be payable as set forth below.
<TABLE>
<S> <C>
Lead Selection $0.75 million
IND filing with FDA $3.75 million
Start of a Pivotal Trial in U.S. $5.625 million
NDA submission to FDA $11.25 million
NDA approval by FDA $20.625 million
--- -------- -- --- ------- -------
Total $42.0 million
</TABLE>
(b) If a Category Two Indication is an Additional Indication, the
Category Two Milestones will (subject to Section 8.2 (b) above) be paid as set
forth below.
<TABLE>
<S> <C>
Start of a Pivotal Trial in U.S. $6.3 million
NDA submission to FDA $12.6 million
NDA approval by FDA $23.1 million
--- -------- -- --- ----- -------
Total $42.0 million
</TABLE>
8.5 CATEGORY THREE INDICATION MILESTONES.
(a) Category Three Indication Milestones will be payable one-time on
the occurrence of the milestone events set forth below the first time such
events are achieved in the Development of a Licensed Product for a Category
Three Indication. Milestones for each Category Three Indication will total [*]
and be payable as set forth below.
<TABLE>
<S> <C>
Lead Selection $[*]
IND filing with FDA $[*]
Start of a Pivotal Trial in U.S. $[*]
NDA submission to FDA $[*]
NDA approval by FDA $[*]
--- -------- -- --- ----
Total $[*]
</TABLE>
(b) If a Category Three Indication is an Additional Indication, the
Category Three Milestones will (subject to Section 8.2 (b) above) be paid as
set forth below.
<TABLE>
<S> <C>
Start of a Pivotal Trial in the U.S. $[*]
NDA submission to FDA $[*]
NDA approval by FDA $[*]
--- -------- -- --- ----
Total $[*]
</TABLE>
8.6 CATEGORY FOUR INDICATION MILESTONES. Category Four Indication
Milestones will
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Exchange Commission.
(subject to Section 8.2(b) above) if an Additional Indication) be payable
one-time on the occurrence of the milestone event set forth below the first
time such event is achieved in the Development of a Licensed Product for a
Category Four Indication. The Milestone payment for each Category Four
Indication will total [*] payable as set forth below.
<TABLE>
<S> <C>
NDA approval by FDA $[*]
</TABLE>
ARTICLE NINE
ROYALTIES
9.1 ROYALTIES. Royalties will be payable on a Licensed Product by
Licensed Product basis (a) based upon annual Combined Net Sales of the Licensed
Product aggregated in the Major Market Countries and (b) on a country by
country basis outside the Major Market Countries as set forth below. Amgen
will pay to Holdings, Royalties equal to:
- [*] of that portion of annual Combined Net Sales of a Licensed
Product in the Major Market Countries less than or equal to three
hundred million dollars ($300,000,000);
- [*] of that portion of annual Combined Net Sales of a Licensed
Product in the Major Market Countries greater than three hundred
million dollars ($300,000,000) and less than or equal to seven hundred
million dollars ($700,000,000);
- [*] of that portion of annual Combined Net Sales of a Licensed
Product in the Major Market Countries greater than seven hundred
million dollars ($700,000,000); and
- [*] of Net Sales of a Licensed Product in each country outside the
Major Market Countries.
9.2 MAXIMUM ROYALTY ADJUSTMENTS. Royalties on a Licensed Product are
subject to reductions and adjustments as a result of certain events as set
forth below; provided, however, in no event will Royalties on a Licensed
Product in any country be reduced by more than fifty percent (50%) or reduced
below a worldwide weighted average Royalty rate equal to [*] of worldwide
annual Net Sales by reason of the Unpatented Product, Third Party Royalty,
Competition, and COGS Royalty reductions and adjustments set forth below.
9.3 ROYALTY ADJUSTMENT FOR UNPATENTED PRODUCTS. Royalties payable to
Holdings on Unpatented Products will be payable at [*] of the rates set forth
in Section 9.1 above. Royalty adjustments for Unpatented Products will be made
on a quarterly basis.
9.4 THIRD PARTY ROYALTY CREDIT. On a country by country basis, [*] of
Third Party Royalties paid by Amgen will be creditable against Royalties
payable to Holdings hereunder. Notwithstanding the foregoing, in no event will
Amgen be entitled to credit against Royalties payable to Holdings, Third Party
Royalties which exceed in the aggregate [*] of Net Sales of a Licensed Product
in any country without the consent of Holdings, such consent not to be
unreasonably withheld. Credit for Third Party Royalties will be made on a
quarterly basis.
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Exchange Commission.
9.5 COMPETITION. The Royalty rates applicable to Net Sales of a Licensed
Product in the Major Market Countries will be adjusted on a quarterly basis as
set forth below in the event Competition exists in that Major Market Country.
If Competition exists in a Major Market Country during the applicable period,
the Royalty rates applicable to Net Sales of a Competition Impaired Licensed
Product will be adjusted as set forth below based upon whether one (1) or more
than one (1) Competitive Compound shall be commercially available. There will
be no adjustment of the Royalty schedule for Competition outside the Major
Market Countries.
(a) One Competitive Compound. In the event Competition exists and
one Competitive Compound is commercially available in a Major Market Country,
the Royalty rate on the Competition Impaired Licensed Product in that Major
Market Country will be as set forth below:
(i) [*] of that portion of annual Combined Net Sales of the
Competition Impaired Licensed Product in the Major Market Countries
less than or equal to three hundred million dollars ($300,000,000);
(ii) [*] of that portion of annual Combined Net Sales of the
Competition Impaired Licensed Product in the Major Market Countries
greater than three hundred million dollars ($300,000,000) and less
than or equal to seven hundred million dollars ($700,000,000); and
(iii) [*] of that portion of annual Combined Net Sales of the
Competition Impaired Licensed Product in the Major Market Countries
greater than seven hundred million dollars ($700,000,000).
(b) More Than One Competitive Compound. In the event Competition
exists and more than one Competitive Compound is commercially available in a
Major Market Country, the Royalty rate on the Competition Impaired Licensed
Product in that Major Market Country will be as set forth below:
(i) [*] of that portion of annual Combined Net Sales of the
Competition Impaired Licensed Product in the Major Market Countries
less than or equal to three hundred million dollars ($300,000,000);
(ii) [*] of that portion of annual Combined Net Sales of the
Competition Impaired Licensed Product in the Major Market Countries
greater than three hundred million dollars ($300,000,000) and less
than or equal to seven hundred million dollars ($700,000,000); and
(iii) [*] of that portion of annual Combined Net Sales of the
Competition Impaired Licensed Product in the Major Market Countries
greater than seven hundred million dollars ($700,000,000).
(c) Additional Adjustment. The Royalty rate adjustments set forth
above for competitive markets are intended to allow Amgen to profitably
commercialize Licensed Products given the Royalties payable to Guilford and the
pressures of the competitive environment. In the event the competitive
environment for a Licensed Product in certain markets is such that
commercialization of the Licensed Product becomes uneconomic to Amgen at the
Royalty rates set forth above, the Parties will in good faith discuss an
adjustment of the Royalty payable to Holdings on Licensed Products. In
addition, in the event that market share data for a Major Market Country
becomes unavailable, unless covered under Section 1.20 above, the Parties will
in good faith discuss an appropriate
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substitute for determining Competition for that Major Market County.
9.6 ADJUSTMENTS FOR COGS. On a Licensed Product by Licensed Product
basis, in the event that at any time after the twenty-four (24) month period
following the First Commercial Sale of a Licensed Product in any of the Major
Market Countries, COGS, calculated on a combined worldwide annual basis, shall
(i) be less than [*] of total worldwide annual Net Sales, the applicable
Royalty on Net Sales will be increased by [*] for each [*] by which COGS for
such annual period is less than [*] or (ii) exceed [*] of total worldwide
annual Net Sales, the applicable Royalty rate will be reduced by [*] for each
[*] by which COGS for such annual period is greater than [*] of total worldwide
annual Net Sales. Subject to Section 9.9(a) below, adjustments for COGS, if
any, will be made quarterly based on Amgen's estimate of COGS for the annual
period. Such estimate shall be consistent with Amgen's internal cost
accounting.
9.7 [*] ROYALTY. Notwithstanding anything to the contrary set forth in
this Agreement, if the [*] License Agreements shall be terminated and Amgen
shall enter into a license agreement with [*] regarding any Collaboration
Technology (as contemplated by the [*] Consent), Amgen shall deduct the full
amount of any royalties and other payments actually made by Amgen, its
Affiliates or sublicensees to [*] from Royalties and Milestones payable to
Holdings hereunder, provided, however, Holdings shall have approved the amounts
of any payments under such license agreement, such approval not to be
unreasonably withheld.
9.8 TERM OF ROYALTY. Royalties will be payable on a country by country
basis on a Patented Product until the last to expire of the patents covering
such Patented Product and on an Unpatented Product for [*] years from First
Commercial Sale of the Unpatented Product. Upon the expiration of Amgen's
obligation to pay Royalties to Guilford hereunder with respect to a Licensed
Product, Amgen shall have a fully paid unrestricted license under the
Collaboration Technology to make, have made, use, sell, offer to sell and
import such Licensed Product.
9.9 CALCULATION OF ROYALTIES.
(a) Adjustments. While Royalties for a Licensed Product will be
calculated and paid quarterly (other than with respect to the maximum Royalty
adjustments under Section 9.2 above), any difference between (x) annual Royalty
based on aggregating quarterly calculations and (y) annual Royalty based on
actual Net Sales for the year plus any required Royalty adjustments will be
accounted for by an adjustment payment by Amgen at the time the fourth (4th)
quarter Royalty payment is made or an adjustment credit against Amgen's future
Royalty obligations. In addition, if at the time of determining any
Competition adjustments, applicable IMS International data (or such other data
as may be mutually agreed by the Parties) for such time period is unavailable,
Amgen may make a reasonable estimate thereof based on prior available IMS
International data (or such other data as may be mutually agreed by the
Parties) and calculate the applicable Royalty based on such estimate, and any
difference in Royalty payments made by Amgen based on such estimate and Royalty
payments based on actual data, once available, will be accounted for by an
adjustment payment by Amgen at the time the next quarter Royalty payment is
made or an adjustment credit against Amgen's future Royalty obligations, as the
case may be.
(b) Competition Calculation. [*]
(c) Full Periods. Royalties will be calculated based on full (not
partial) periods (i.e., full calendar years and full quarters, as the case may
be). In determining Royalties
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and adjustments thereto, it will be assumed that the status with respect to a
Licensed Product (e.g., whether a Licensed Product is a Patented Product or
Unpatented Product, whether a Competitive Compound is commercially available,
etc.) at the end of the applicable period was in effect for the entire period.
(d) Example Calculation. An example Royalty calculation is
attached hereto as Exhibit E. The Parties acknowledge and agree that the
formulas used in such example may not be the only formulas that can be used to
achieve, under the circumstances contained in the example, the same results and
that such example does not contain all possible circumstances and formulas that
may apply at any given period.
9.10 REPORTS AND PAYMENTS.
(a) Cumulative Royalties. The obligation to pay Royalties under
this Article Nine shall be imposed only once (i) with respect to any sale of
the same unit of Licensed Product and (ii) with respect to a single unit of
Licensed Product regardless of how many valid issued or, assuming they were to
issue, patent claims included in the Collaboration Technology would, but for
this Agreement, be infringed by the making, using or selling of such Licensed
Product.
(b) Statements and Payments. Amgen shall deliver to Holdings
within sixty (60) days after the end of each calendar quarter, a statement
certified by Amgen as accurate to the best of its ability based on information
available to Amgen, setting forth for the previous quarter the following
information on a country-by-country basis: (i) Net Sales of Patented Products
in the Major Market Countries and non-Major Market Countries, (ii) Net Sales of
Unpatented Products in the Major Market Countries and non-Major Market
Countries, (iii) the basis for any Royalty adjustments and (iv) the Royalty due
hereunder, which report shall be accompanied by a remittance of the Royalty
due.
(c) Taxes. All taxes levied on account of Royalties accruing
under this Agreement shall be paid by Holdings. If laws or regulations require
withholding of taxes from any payment by Amgen to Holdings hereunder, the taxes
will be deducted by Amgen from remittable Royalty to Holdings and will be paid
by Amgen to the proper taxing authority. Amgen will furnish Holdings with the
original copies of all official receipts for such taxes. In the event of any
such withholding, the Parties agree to confer and cooperate in good faith
regarding any filings with tax authorities and other measures that may be taken
to minimize the amount of any such withholding.
(d) Currency. All amounts payable and calculations hereunder
shall be in United States dollars, and all payments under this Article Nine
shall be made to Holdings. As applicable, Net Sales and COGS shall be
translated into United States dollars at the rate of exchange at which United
States dollars are listed in International Financial Statistics (publisher,
International Monetary Fund) or if it is not available, The Wall Street Journal
for the currency of the country in which the sale is made at the average of the
calendar quarter in which such sales were made.
(e) Audit. Amgen, its Affiliates and sublicensees shall maintain
books and records as necessary to allow the accurate calculation of Royalties
due hereunder including any records required to calculate any Royalty
adjustments hereunder. Once per year Holdings shall have the right to engage
an independent accounting firm acceptable to Amgen, at Holdings' expense, which
shall have the right to examine in confidence during normal business hours the
relevant Amgen records in order to determine and/or verify the amount of
Royalty payments due hereunder. The Holdings independent auditor will prepare
a report confirming or challenging the Royalties paid by Amgen for any of the
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preceding three (3) annual periods (except any period which has previously been
subject to audit thereunder). In the event there was an under-payment by Amgen
hereunder, Amgen shall promptly make payment to Holdings of any short-fall. In
the event that there was an over-payment by Amgen hereunder, Amgen shall credit
the excess amount against future payments. In the event any payment by Amgen
shall prove to have been incorrect by more than (7%) to Holdings' detriment,
Amgen will pay the fees and costs of Holdings' independent auditor.
(f) Record Retention. Amgen shall keep complete and accurate
records in sufficient detail to permit Holdings to confirm the accuracy of
calculations of all payments hereunder. Such records shall be retained by
Amgen for no less than a seven (7) year period following the year in which any
such payments were made hereunder.
(g) Survival. Subsections (e) and (f) of this Section 9.10 shall
survive any termination of this Agreement for the period set forth therein.
ARTICLE TEN
CONFIDENTIALITY, PUBLICATION AND
PUBLIC ANNOUNCEMENTS
10.1 CONFIDENTIAL INFORMATION.
(a) Joint Confidential Information. Data and information arising
out of the Research Program and Guilford's Co-Development of the Co-Development
Indication will be Joint Confidential Information. Each Party will keep Joint
Confidential Information confidential and use and disclose such information
only in accordance with Section 10.6.
(b) Amgen Confidential Information. Data and information arising
out of the research, pre-clinical and clinical Development and
Commercialization of Licensed Products by Amgen that is not Joint Confidential
Information will be Amgen Confidential Information.
(c) Ownership Upon Termination. Notwithstanding the foregoing, to
the extent Amgen shall have transferred any pre-clinical and/or clinical data
to Guilford in connection with a termination of this Agreement by Amgen as
specifically provided in Sections 12.3 or 12.5 (b) below, (i) all raw in vivo,
in vitro and clinical data included in the transferred data will be Guilford
Confidential Information, (ii) all forms, methodologies and information used
in the preparation of such data which are proprietary to Amgen will be Amgen
Confidential Information (provided Amgen will grant to Guilford the right to
use such information but only to the extent necessary to allow Guilford to use
the transferred data) and (iii) and all other data and information will be
Joint Confidential Information hereunder.
10.2 SEC FILINGS. The Parties understand that the financial terms of this
Agreement will be of material importance to Guilford and of substantial
interest to Guilford's shareholders and the investment community and that this
Agreement will be filed with the SEC in connection with Guilford's SEC filings.
The Parties will consult with one another on the terms of this Agreement to be
redacted in SEC filings. Guilford agrees to seek confidential treatment in its
SEC filings for the Royalty rates set forth in Article Nine and Amgen agrees
that the signing fee, equity investment, Research Program Funding, total
Milestone Payments, CNS indications and schedule of Category One and Category
Two Milestone Payments will be disclosed.
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10.3 PUBLICATIONS. No Party will publish the structure of any Licensed
Product prior to publication of the structure in a patent application.
Guilford will submit to Amgen for review and approval all proposed academic,
scientific and medical publications relating to Licensed Products and/or
Collaboration Technology no less than thirty (30) days prior to submission for
publication. Amgen will use best efforts to provide to Guilford copies of all
Amgen academic, scientific and medical publications relating to Licensed
Products and/or Collaboration Technology prior to publication. Amgen and
Guilford will each comply with standard academic practice regarding authorship
of scientific publications and recognition of contribution of other parties in
any publications relating to Licensed Products and/or Collaboration Technology.
10.4 PUBLIC ANNOUNCEMENTS.
(a) Coordination. The Parties agree on the importance of
coordinating their public announcements respecting this Agreement and the
subject matter thereof (other than academic, scientific or medical publications
which are subject to the publication provision set forth above). Guilford and
Amgen will, from time to time, and at the request of the other Party discuss
and agree on the general information content relating to this Agreement,
Collaboration Technology and Licensed Products which may be publicly disclosed.
(b) Guilford Announcements. Neither Guilford nor Holdings will
make any public announcement (whether required by law or otherwise) regarding
this Agreement, Collaboration Technology or Licensed Products (other than
academic, scientific or medical publications which are subject to the
publication provision set forth above) without giving Amgen the opportunity to
review and comment prior to release unless Guilford shall deliver to Amgen a
written opinion of outside counsel reasonably acceptable to Amgen that the
specific disclosure is required by law and that time did not permit Amgen's
review and Guilford indemnifies Amgen against any costs, expenses, damages or
liabilities arising out of any material omission or false or misleading
statements therein.
(c) Use of Names. In no event will any Party use the name of any
other Party in any press release or public announcement without the prior
approval of the named Party.
10.5 CONFIDENTIALITY. Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing, the Parties agree that, for the term
of this Agreement and for five (5) years thereafter, each Party (the "Receiving
Party"), receiving hereunder any Confidential Information of any other Party or
Parties (the "Disclosing Party(ies)"), shall keep such information confidential
and shall not publish or otherwise disclose or use for any purpose other than
as provided for in this Agreement except, to the extent that it can be
established:
(a) by the Receiving Party that the Confidential Information was
already known to the Receiving Party (other than under an obligation of
confidentiality), at the time of disclosure by the Disclosing Party and such
Receiving Party has documentary evidence to that effect;
(b) by the Receiving Party that the Confidential Information was
generally available to the public or otherwise part of the public domain at the
time of its disclosure to the Receiving Party;
(c) by the Receiving Party that the Confidential Information became
generally
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available to the public or otherwise part of the public domain after its
disclosure or development, as the case may be, and other than through any act
or omission of a party in breach of this confidentiality obligation; or
(d) by the Receiving Party that the Confidential Information was
disclosed to that Party, other than under an obligation of confidentiality, by
a Third Party who had no obligation to the Disclosing Party not to disclose
such information to others.
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10.6 AUTHORIZED DISCLOSURE.
Each Party. Each Party may disclose Confidential Information
belonging to another Party or Parties to the extent such disclosure is
reasonably necessary:
(i) filing or prosecuting patent applications,
(ii) prosecuting or defending litigation, and
(iii) complying with applicable governmental laws and
regulations.
(b) Amgen. In addition pursuant to Section 10.6(a) above, Amgen
shall have the right to disclose (i) Guilford Confidential Information in
Developing and Commercializing Licensed Products under terms of confidentiality
consistent with those contained in this Agreement and (ii) Joint Confidential
Information in Developing and Commercializing Licensed Products as deemed
necessary by Amgen.
(c) Guilford. Guilford, with Amgen's prior approval, shall have
the right to disclose Amgen Confidential Information and Joint Confidential
Information in connection with Guilford's Co-Development of the Co-Development
Indication and in Guilford's Co-Promotion of the Co-Promotion Indication in
accordance with the terms and conditions set forth in this Agreement.
ARTICLE ELEVEN
INDEMNIFICATION
11.1 INDEMNIFICATION BY AMGEN. Amgen will indemnify Guilford and Holdings
and hold Guilford and Holdings harmless from all liability, loss, damage and
cost arising out of (i) any claims of any nature (other than claims by Third
Parties relating to patent infringement) arising out of the research,
development, marketing and/or sale of Licensed Products by, on behalf of or
under authority of, Amgen and/or (ii) any Amgen representation or warranty set
forth herein being untrue in any material respect when made.
11.2 INDEMNIFICATION BY GUILFORD AND HOLDINGS. Guilford and Holdings will
indemnify Amgen and hold Amgen harmless from all liability, loss, damage and
cost arising out of (i) any claims of any nature (other than claims by Third
Parties relating to patent infringement) arising out of the research,
development or promotion of Licensed Products by, on behalf of or under
authority of, Guilford and/or Holdings and/or (ii) any Guilford and/or Holdings
representation or warranty set forth herein having been untrue in any material
respect when made.
11.3 PROCEDURE. Each Party will notify the others in the event it becomes
aware of a claim for which indemnification may be sought hereunder. In case
any proceeding (including any governmental investigation) shall be instituted
involving any Party in respect of which indemnity may be sought pursuant to
this Article Eleven, such Party (the "Indemnified Party") shall promptly notify
the other Party (the "Indemnifying Party") in writing and the Indemnifying
Party and Indemnified Party shall meet to discuss how to respond to any claims
that are the subject matter of such proceeding. The Indemnifying Party, upon
request of the Indemnified Party, shall retain counsel reasonably satisfactory
to the Indemnified Party to represent the Indemnified Party and shall pay the
fees and expenses of such counsel related to such proceeding. In any such
proceeding, the
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Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. All such fees and expenses shall be reimbursed as they are
incurred. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Party agrees to indemnify the Indemnified Party from and against any loss or
liability by reason of such settlement or judgment. The Indemnifying Party
shall not, without the written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which the
Indemnified Party is, or arising out of the same set of facts could have been,
a party and indemnity could have been sought hereunder by the Indemnified
Party, unless such settlement includes an unconditional release of the
Indemnified Party from all liability on claims that are the subject matter of
such proceeding.
11.4 INSURANCE. During the term of this Agreement, each Party will each
maintain, through self insurance or commercially placed insurance, coverage for
the indemnification obligations set forth herein.
ARTICLE TWELVE
TERM AND TERMINATION
12.1 TERM. This Agreement will continue in full force and effect until
the last to expire of the Patents Rights included in Collaboration Technology.
12.2 TERMINATION OF RESEARCH PROGRAM. In the event that at the end of the
second year of the Research Program, no Neuroimmunophilin Compound has been
identified which, in Amgen's sole opinion, is an IND candidate or likely to
lead to an IND candidate, Amgen shall have the option to terminate the Research
Program upon thirty (30) days prior written notice to Guilford. Upon such
termination, Amgen will have no further funding obligation for the Research
Program.
12.3 TERMINATION OF LICENSED PRODUCT DEVELOPMENT AND COMMERCIALIZATION.
Subject to satisfaction of Amgen's minimum Research Program Funding commitment
(i.e., two (2) years of Research Program Funding), in the event that Amgen
shall elect at any time to discontinue all activities relating to the
Development and Commercialization of Licensed Products or shall elect to
discontinue use of Commercially Reasonable Efforts in the Development and
Commercialization of Licensed Products, Amgen shall provide written notice to
Guilford and Holdings setting forth Amgen's election and upon Guilford and
Holdings receipt of such notice this Agreement will terminate. In the event
this Agreement shall be terminated pursuant to this Section 12.3:
(a) Amgen shall be deemed to have met all of its obligations to use
Commercially Reasonable Efforts under the terms of this Agreement;
(b) Amgen will transfer to Guilford and Holdings all material
pre-clinical and clinical data on Licensed Products reasonably available to
Amgen on the date of termination; and
(c) Amgen will grant to Guilford and Holdings a non-exclusive,
royalty-free,
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worldwide license to the Amgen Guilford-Derived Technology which relates
primarily and specifically to Neuroimmunophilin Compounds to make, have made,
use, sell and import Neuroimmunophilin Compounds in the Field of Use.
12.4 TERMINATION OF LICENSES. Amgen shall have the right to terminate any
of its licenses to the Collaboration Technology, in whole or in part, upon
sixty (60) days prior written notice to Guilford and Holdings.
12.5 DEFAULT.
(a) Amgen. Upon the Default by Amgen under this Agreement,
Guilford shall notify Amgen of such Default and require that Amgen cure such
Default within sixty (60) days. In the event Amgen shall not have cured the
Default at the end of the sixty (60) day grace period:
(i) Guilford may terminate this Agreement and all licenses to
the Collaboration Technology granted by Guilford and Holdings to Amgen
herein will revert to Guilford and Holdings;
(ii) Amgen will satisfy its minimum Research Funding
commitment hereunder (i.e., two (2) years);
(iii) Amgen will transfer to Guilford all material
pre-clinical and clinical data on Licensed Products reasonably
available to Amgen on the date termination; and
(iv) Amgen will grant to Guilford and Holdings a
non-exclusive, royalty-free, worldwide license to the Amgen
Guilford-Derived Technology which relates primarily and specifically
to Neuroimmunophilin Compounds to make, have made, use, sell and
import Neuroimmunophilin Compounds in the Field of Use.
(b) Guilford and Holdings. Upon the Default by Guilford and/or
Holdings under this Agreement, Amgen shall notify Guilford and/or Holdings of
such Default and require that Guilford and/or Holdings, as the case may be,
cure such Default within sixty (60) days. In the event Guilford and/or
Holdings shall not have cured the Default at the end of the sixty (60) day
grace period Amgen may elect to do one or more of the following:
(i) terminate the Research Program;
(ii) terminate the sublicense to the Collaboration Technology
granted by Amgen to Guilford and Holdings hereunder;
(iii) terminate Guilford's option to Co-Develop the
Co-Development Indication or, in the event the option has been
exercised, the Contract Research Agreement;
(iv) terminate Guilford's option to Co-Promote the
Co-Promotion Indication or, in the event the option has been
exercised, the right to conduct Co-Promotion activities; and
(v) deduct from Royalties and Milestones payable to Holdings
any costs, liabilities, damages, claims or expenses incurred by Amgen
which result directly from Guilford's and/or Holdings' Default,
including any Third Party liabilities.
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12.6 BANKRUPTCY. Amgen may, in addition to any other remedies available to
it by law or in equity, exercise the rights set forth below by written notice
to Guilford and/or Holdings, as the case may be (the "Insolvent Party"), in the
event the Insolvent Party shall have become insolvent or bankrupt, or shall
have made an assignment for the benefit of its creditors, or there shall have
been appointed a trustee or receiver of the Insolvent Party or for all or a
substantial part of its property, or any case or proceeding shall have been
commenced or other action taken by or against the Insolvent Party in bankruptcy
or seeking reorganization, liquidation, dissolution, winding-up arrangement,
composition or readjustment of its debts or any other relief under any
bankruptcy, insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect, or there shall have been issued a
warrant of attachment, execution, distraint or similar process against any
substantial part of the property of the Insolvent Party, and any such event
shall have continued for sixty (60) days undismissed, unbonded and
undischarged.
(a) Rights in Bankruptcy. All rights and licenses granted under
or pursuant to this Agreement by Guilford and Holdings are, and shall otherwise
be deemed to be, for purposes of Section 365 (n) of the U.S. Bankruptcy Code,
licenses of rights to "intellectual property" as defined under Section 101 of
the U.S. Bankruptcy Code. The Parties agree that the Parties as licensees of
such rights under this Agreement, shall retain and may fully exercise all of
their rights and elections under the U.S. Bankruptcy Code. The Parties further
agree that, in the event of the commencement of a bankruptcy proceeding by or
against either Guilford or Holdings under the U.S. Bankruptcy Code, Amgen shall
be entitled to a complete duplicate of (or complete access to, as appropriate)
any such intellectual property and all embodiments of such intellectual
property, and same, if not already in the their possession, shall be promptly
delivered to them (i) upon any such commencement of a bankruptcy proceeding
upon its written request therefor, unless the Party subject to such proceeding
elects to continue to perform all of their obligations under this Agreement or
(ii) if not delivered under (i) above, upon the rejection of this Agreement by
or on behalf of the Party subject to such proceeding upon written request
therefor by Amgen.
(b) Guilford. In the event Guilford or Holdings shall be an
Insolvent Party, Amgen:
(i) may terminate the Research Program;
(ii) may terminate Guilford's option to Co-Develop the
Co-Development Indication or, in the event the option has been
exercised, the Contract Research Agreement;
(iii) may terminate Guilford's option to Co-Promote the
Co-Promotion Indication or, in the event the option has been
exercised, the right to conduct Co-Promotion activities; and
(iv) shall retain all licenses to Collaboration Technology
granted by Guilford and Holdings to Amgen herein, subject to the
payment to Holdings of the Milestones and Royalties set forth above.
12.7 ACQUISITION. Upon the Acquisition of Guilford and/or Holdings by a
Third Party, Guilford shall promptly notify Amgen in writing of such
Acquisition and Amgen shall have the right within one hundred and twenty (120)
days following such Acquisition to:
(a) terminate the Research Program;
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(b) terminate Guilford's option to Co-Develop or the Contract
Research Agreement;
(c) terminate Guilford's option to Co-Promote and/or right to conduct
Co-Promotion activities; and
(d) retain all licenses to Collaboration Technology granted by
Guilford and Holdings to Amgen herein, subject to the payment to Holdings of
the Milestones and Royalties set forth above.
Notwithstanding the foregoing in this Section 12.7, the sale or other
transfer of all of the shares or all or substantially all of the assets of
Holdings to another direct or indirect wholly-owned subsidiary of Guilford
shall not constitute an Acquisition for the purposes of this Section 12.7.
12.8 DAMAGES. No Party will be liable for consequential damages incurred
by any other Party arising out of any Default under this Agreement.
ARTICLE THIRTEEN
INTELLECTUAL PROPERTY
13.1 PATENT PROSECUTION. Amgen, at its expense, shall be responsible for
worldwide preparation, filing, prosecution, maintenance and defense of patent
applications and patents claiming generically or specifically inventions
included in Guilford Technology ("Guilford Inventions"), Joint Technology
("Joint Inventions") and Amgen Guilford-Derived Technology ("Amgen
Inventions"). In the event Amgen elects not to prepare, file, prosecute,
maintain or defend any Guilford Inventions or Joint Inventions, Amgen shall
give Guilford and Holdings sufficient notice to afford Guilford the opportunity
to do so at Guilford's cost, in which event, Guilford and Holdings will own any
patents issuing thereon.
13.2 ENFORCEMENT OF PATENT RIGHTS. Amgen shall have the right but not the
obligation, in its own name, to enforce Patent Rights included within the
Collaboration Technology against any Third Party suspected of infringing a
claim of a Patent Right included in Collaboration Technology. Amgen shall have
exclusive control over the conduct of any such proceedings, including the right
to settle or compromise such proceedings consistent with Amgen's licenses under
Collaboration Technology. The expense of any proceeding Amgen initiates,
including lawyers' fees and costs, shall be borne by Amgen. Guilford and
Holdings agree to cooperate fully with Amgen in such action upon request by
Amgen. Any award or recovery paid to Amgen by a Third Party as a result of
such patent infringement proceedings (whether by way of settlement or
otherwise) shall first be applied toward reimbursement of legal fees, costs and
expenses incurred by the Parties. From the remainder, if any, Amgen shall pay
to Holdings an amount equal to the applicable Royalty rate as applied to the
remainder as though such remainder were Net Sales of Licensed Products in the
year in which the award or recovery is received.
13.3 INFRINGEMENT DEFENSE. Amgen shall have the right, but not the
obligation, to defend and control any suit against any of Amgen, Amgen's
Affiliates or sublicensees, Guilford and/or Guilford's Affiliates alleging
infringement of any patent or other intellectual property right of a Third
Party arising out of the manufacture, use, sale, offer to sell or importation
of a Licensed Product by Amgen, Amgen's Affiliates or sublicensees. In the
event such suit or action is brought by [*]Amgen and Guilford will
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
each bear fifty percent (50%) of all costs and expenses, including lawyers'
fees and costs, associated with such suit. Amgen will provide Guilford with
quarterly reports setting forth Guilford's portion of such fees and costs and
Guilford will make payment of such amounts to Amgen within thirty (30) days
following receipt of Amgen's report. In the event such suit is brought by or
on behalf of any other Third Party, Amgen shall be responsible for the costs
and expenses, including lawyer's fees and costs, associated with any suit or
action. In either case, promptly following the filing of any such suit or
action, Amgen and Guilford will agree on the appropriate amount of cash reserve
for Guilford to maintain against possible settlement or damages payments
arising out of such suit or action. In no event will the Guilford cash
reserve, at any time, be less than fifty percent (50%) of the amount of any
settlement to a Third Party litigant proposed by Amgen of which Amgen notifies
Guilford in writing. In the event the patent claim of any Third Party is held
in a final and unappealable order of a court to be valid and infringed, or if
Amgen enters into a settlement of such proceedings, Amgen shall pay the full
amount of any damages and/or settlement amounts due to such Third Party and
Guilford shall promptly reimburse Amgen for fifty percent (50%) of such
amounts.
13.4 COOPERATION AMONG THE PARTIES. The Parties agree to cooperate with
each other in the preparation, filing, prosecuting, maintenance, defense and
enforcement of Patent Rights included in Collaboration Technology. In any
action taken in the prosecution of, or in the defense of an action by a Third
Party related to patent invalidity or non-patentability of any patent
application or patent claiming Collaboration Technology, neither party shall
admit the invalidity or non-patentability of any Patent Right or take any other
action that may diminish Patent Rights within Collaboration Technology without
the other party's prior written consent. Amgen agrees to provide Guilford and
Holdings with sufficient time to review, comment and consult on all patent
applications and patents and all correspondence to and from the various patent
offices, including, but not limited to, proposed responses, interferences and
oppositions, claiming Guilford Inventions, Joint Inventions or Amgen
Inventions. The Parties agree to cooperate with each other and to use best
efforts to ensure the cooperation of any of their respective personnel and
licensee(s) or licensor(s) as might reasonably be requested in any such
matters, and shall sign any necessary legal papers and provide the prosecuting
party with data or other information in support thereof. The Parties will
confer on what action to take with respect to the defense of infringement
proceedings naming both Amgen and Guilford or in proceedings to enforce patents
claiming Collaboration Technology against a Third Party. If the Parties cannot
agree on the course of action to be taken in the filing, prosecution,
maintenance, or enforcement of any patent application or patent within
Collaboration Technology or in the defense of any Third Party infringement
action, Amgen's decisions shall control.
ARTICLE FOURTEEN
DISPUTE RESOLUTION
14.1 GENERAL. The Parties desire to establish the procedures in this
Article 14 to facilitate the resolution of any dispute pertaining to the rights
and obligations of the Parties under this Agreement in an expedient and
commercially reasonable manner by mutual cooperation and without resort to
litigation. Except as otherwise provided in this Agreement or agreed by the
Parties in writing, all disputes under this Agreement will be resolved as set
forth in this Article 14.
14.2 DISPUTES. If the Parties are unable to resolve a dispute among them
informally, Amgen, on the one hand, and Guilford and Holdings, on the other
hand, by written notice to the other, may have such dispute referred to their
respective executive officers
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
designated below or their successors, for attempted resolution by good faith
negotiations:
FOR AMGEN: Chief Executive Officer of Amgen
FOR GUILFORD AND HOLDINGS: Chief Executive Officer of Guilford
(a) Any such dispute shall be submitted to the above-designated
executive officers no later than thirty (30) days following such request by
either Amgen or Guilford and Holdings. In the event the designated executive
officers are not able to resolve any such dispute within sixty (60) days after
submission of the dispute to such executive officers, Amgen or Guilford, as the
case may be, may by written notice to the other commence the Arbitration
process set forth in Section 14.3 below.
(b) All negotiations pursuant to this Section 14.2 shall be treated
as compromise and settlement negotiations. Nothing said or disclosed, nor any
document produced, in the course of such negotiations which is not otherwise
independently discoverable shall be offered or received as evidence or used for
impeachment or for any other purpose in any current or future arbitration or
litigation.
14.3 ARBITRATION. If a dispute has not been resolved by negotiation as
provided in Section 14.2 above, then, except as otherwise provided in this
Section 14.3, the Dispute shall be determined by arbitration in Denver,
Colorado in accordance with the Commercial Arbitration Rules of the AAA and, if
applicable, its Supplementary Procedures for Large, Complex Disputes or Patent
Arbitration Rules, in effect on the Signing Date, by three (3) arbitrators each
of whom (i) has the qualifications and experience set forth in subsection (a)
of this Section 14.3 and (ii) is selected as provided in subsection (b) of this
Section 14.3. Any issue as to whether or the extent to which the dispute is
subject to the arbitration and other dispute resolution provisions contained in
this Agreement, including, but not limited to, issues relating to the validity
or enforceability of these arbitration provisions, the applicability of any
statute of limitations or other defense relating to the timeliness of the
assertion of any claim or any other matter relating to the arbitrability of
such claim, shall be decided by the arbitrators; provided, however, that any
person or entity who or which has not agreed to be bound by the provisions of
this Agreement or these arbitration provisions shall not be bound by any
arbitration award rendered by the arbitrators unless such person or entity
participates in the arbitration proceeding and does not object to being bound
by such award at or prior to the commencement of the arbitration hearing. The
arbitrators shall base their award on the terms of this Agreement, and they
shall endeavor to follow the law and judicial precedents which a U.S.
District Judge sitting in the District of Delaware would apply in the event the
dispute were litigated in such court; provided, however, that nothing contained
herein shall be deemed to enlarge the grounds for vacating arbitral awards even
if, despite such endeavors, the arbitrators fail to correctly follow applicable
law. The arbitrators shall render their award in writing and, unless all
Parties agree otherwise, shall include an explanation in reasonable detail of
the reasons for their award. The arbitration shall be governed by the
substantive laws of the State of Delaware and applicable to contracts made and
to be performed therein, without regard to conflicts of law rules, and by the
arbitration law of the Federal Arbitration Act (Title 9, U.S. Code), and
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. The Parties expressly waive any putative right
they may otherwise have to seek an award of punitive damages arising out of any
dispute hereunder.
(a) Qualifications. Each person named on any lists of potential
arbitrators shall be either (i) a neutral and impartial lawyer with excellent
academic and professional credentials (x) who is or has been practicing law at
least fifteen (15) years, specializing in
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
either general commercial litigation or general corporate and commercial
matters, with experience in the field of the pharmaceutical/biotechnology
industry and (y) who has had both training and experience as an arbitrator and
is generally available to serve as an arbitrator, or (ii) an impartial and
neutral retired U.S. federal court judge or an impartial and neutral retired
judge from the highest state court who (x) served as a judge for at least ten
(10) years and (y) has had both training and experience as an arbitrator and is
generally available to serve as an arbitrator.
(b) Selection. Each arbitrator shall be selected as provided in
this Section 14.3 and otherwise in accordance with the AAA's Commercial
Arbitration Rules in effect on the Signing Date.
14.4 EXPENSES. All expenses and fees of the arbitrators and expenses for
hearing facilities and other expenses of the arbitration shall be borne equally
by Amgen, on the one hand, and Guilford and Holdings, on the other hand, unless
the Parties agree otherwise or unless the arbitrators in the award assess such
expenses against one of the Parties or allocate such expenses other than
equally between Amgen, on the one hand, and Guilford and Holdings, on the other
hand. Each of the Parties shall bear its own counsel fees and the expenses of
its witnesses except (i) to the extent otherwise provided in this Agreement or
by applicable law or (ii) to the extent the arbitrators in their discretion
determine for any reason to allocate such fees and expenses among the Parties
in a different manner. Any attorney or retired judge who serves as an
arbitrator shall be compensated at a rate equal to his or her current regular
hourly billing rate unless otherwise mutually agreed upon by the Parties and
the arbitrator.
14.5 CERTAIN TERMS. For purposes of this Article 14, the term "impartial"
shall mean any person who is not nor has been within the previous five (5)
years an employee or paid consultant of a Party, and does not have any other
extended familial, close social, material ownership or other relationship to a
Party.
14.6 ARBITRATION CONFIDENTIALITY. All aspects of an arbitration conducted
pursuant to this Agreement shall be and remain confidential and all
participants shall be bound by judicially enforceable obligations of strict
confidentiality except to the extent (i) required by law, including, without
limitation, securities laws, but subject to Section 10.4 above, or (ii) the
Parties agree in writing to waive in whole or part such confidentiality.
14.7 SURVIVAL. Any duty to arbitrate under this Agreement shall survive
and remain in effect and enforceable after termination of this Agreement for
any reason.
14.8 JURISDICTION. For the purposes of this Article 14, the Parties
acknowledge their diversity (Guilford having its principal place of business in
Maryland, Holdings domiciled in Delaware and Amgen having its principal place
of business in California) and agree to accept the jurisdiction of the Federal
District Court in Denver, Colorado or the Colorado state courts of general
jurisdiction in Denver, Colorado for purposes of enforcing any arbitral award
hereunder.
ARTICLE FIFTEEN
MISCELLANEOUS
15.1 ASSIGNMENT. Neither this Agreement nor any interest hereunder shall
be assignable by any Party without the prior written consent of the other
Parties, except for assignment by operation of law in connection with a merger
of a Party with or into another Person provided that such Party is the
surviving and controlling entity or the sale
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
of all of the shares or all or substantially of the assets of Holdings to
another direct or indirect wholly-owned subsidiary of Guilford. This Agreement
shall be binding upon the successors and permitted assigns of the Parties and
the name of a Party appearing herein shall be deemed to include the names of
such Party's successors and permitted assigns to the extent necessary to carry
out the intent of this Agreement. Any assignment not in accordance with this
Section 15.1 shall be void.
15.2 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of the
Agreement.
15.3 FORCE MAJEURE. No Party shall be liable to any other Party for loss
or damages or shall have any right to terminate this Agreement for any default
or delay attributable to any Force Majeure, if the Party affected shall give
prompt notice of any such cause to the other Parties. The Party giving such
notice shall thereupon be excused from such of its obligations hereunder as it
is thereby disabled from performing for so long as it is so disabled, provided,
however, that such affected Party commences and continues to take reasonable
and diligent actions to cure such cause.
15.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission (receipt verified), mailed by registered or certified mail (return
receipt requested), postage prepaid, or sent by express courier service, to the
parties at the following addresses (or at such other address for a Party as
shall be specified by like notice, provided, however, that notices of a change
of address shall be effective only upon receipt thereof):
All correspondence to Amgen shall be addressed as follows:
Amgen Center
1840 DeHavilland Drive
Thousand Oaks, California 91320-1789
Attn: Vice President Product Licensing
cc: Corporate Secretary
All correspondence to Guilford shall be addressed as follows:
Guilford Pharmaceuticals Inc.
6611 Tributary Street
Baltimore, Maryland 21224
Attn: Corporate Secretary
All correspondence to Holdings shall be addressed as follows:
GPI NIL Holdings, Inc.
222 Delaware Avenue, 10th Floor
Wilmington, Delaware 19899
Attn: Daniel P. McCollom
Corporate Secretary
15.5 AMENDMENT. No amendment, modification or supplement of any provision
of this Agreement shall be valid or effective unless made in writing and signed
by a duly authorized officer of each Party.
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
15.6 WAIVER. No provision of the Agreement shall be waived by any act,
omission or knowledge of any Party or its agents or employees except by an
instrument in writing expressly waiving such provision and signed by a duly
authorized officer of the waiving Party.
15.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which need not contain the signature of more than one
Party but all such counterparts taken together shall constitute one and the
same agreement.
15.8 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are
for convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.
15.9 GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the substantive laws of the State of Delaware (without regard
to conflict of law principles) and the Parties hereby submit to the exclusive
jurisdiction of the Colorado courts, both state and federal, located in Denver,
Colorado.
15.10 SEVERABILITY. In the event that any clause or portion thereof in this
Agreement is for any reason held to be invalid, illegal or unenforceable, the
same shall not affect any other portion of this Agreement, as it is the intent
of the Parties that this Agreement shall be construed in such fashion as to
maintain its existence, validity and enforceability to the greatest extent
possible. In any such event, this Agreement shall be construed as if such
clause of portion thereof had never been contained in this Agreement, and there
shall be deemed substituted therefor such provision as will most nearly carry
out the intent of the Parties as expressed in this Agreement to the fullest
extent permitted by applicable law unless doing so would have the effect of
materially altering the right and obligations of the Parties in which event
this Agreement shall terminate and all the rights and obligations granted to
the Parties hereunder shall cease and be of no further force and effect.
15.11 ENTIRE AGREEMENT OF THE PARTIES. This Agreement and the other
Definitive Agreements constitute and contain the complete, final and exclusive
understanding and agreement of the Parties and cancels and supersedes any and
all prior negotiations, correspondence, understandings and agreements, whether
oral or written, among the Parties, including, without limitation, the Binding
Term Sheet (which shall be deemed null and void and of no further force and
effect), respecting the subject matter hereof and thereof.
15.12 INDEPENDENT CONTRACTORS. The relationship between Amgen, Guilford and
Holdings created by this Agreement is one of independent contractors and no
Party shall have the power or authority to bind or obligate the other except as
expressly set forth in this Agreement.
15.13 NO TRADEMARK RIGHTS. Expect as otherwise provided herein, no right,
express or implied, is granted by this Agreement to use in any manner the name
"Guilford Pharmaceuticals," "GPI NIL Holdings," "Amgen," or any other trade
name or trademark of the other Party or its Affiliates in connection with the
performance of this Agreement.
15.14 ACCRUED RIGHTS; SURVIVING OBLIGATIONS. Unless explicitly provided
otherwise in this Agreement, termination, relinquishment or expiration of the
Agreement for any reason shall be without prejudice to any rights which shall
have accrued to the benefit to any Party prior to such termination,
relinquishment or expiration, including damages arising from any breach
hereunder. Such termination, relinquishment or expiration shall
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Exchange Commission.
not relieve any Party from obligations which are expressly indicated to survive
termination or expiration of the Agreement.
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
IN WITNESS WHEREOF, duly authorized representatives of the Parties
have duly executed this Agreement on the Signing Date to be effective as of the
Effective Date.
AMGEN INC.
By /s/ Gordon M. Binder
--- ------ -- ------
Name: Gordon M. Binder
Title: Chief Executive Officer
GUILFORD PHARMACEUTICALS INC.
By /s/ Craig R. Smith, M.D.
--- ----- -- ------ ----
Name: Craig R. Smith, M.D.
Title: President and Chief Executive Officer
GPI NIL HOLDINGS, INC.
By /s/ Daniel P. McCollom
--- ------ -- --------
Name: Daniel P. McCollom
Title: Vice President
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* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
SCHEDULE 2(a)
[*]
<PAGE> 46
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
SCHEDULE 2(e)
[*]
<PAGE> 47
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
EXHIBIT A
GUILFORD PATENT RIGHTS
[*]
<PAGE> 48
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
EXHIBIT B
[*]
<PAGE> 49
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
EXHIBIT C
FORM OF GUILFORD NON-DISCLOSURE AND INVENTION AGREEMENT
[Filed as Exhibit 10.01 to the Registration Statement on Form S-1 of Guilford
Pharmaceuticals Inc. (SEC File No. 33-76938), declared effective June 16, 1994]
<PAGE> 50
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
EXHIBIT D
FORM OF CONTRACT RESEARCH AGREEMENT
[*]
<PAGE> 51
* Confidential Portions Omitted and Supplied Separately to the Securities and
Exchange Commission.
EXHIBIT E
[*]
<PAGE> 1
EXHIBIT 10.44
- --------------------------------------------------------------------------------
SECURITY AGREEMENT
Dated as of February 5, 1998
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as the Owner Trustee under
the Guilford Real Estate Trust 1998-1
and
FIRST UNION NATIONAL BANK,
as the Agent for the Lenders and the Holders
and accepted and agreed to by
GUILFORD PHARMACEUTICALS INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. GRANT OF SECURITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. PAYMENT OF OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. OTHER COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5. DEFAULT; REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. REMEDIES NOT EXCLUSIVE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. PERFORMANCE BY THE AGENT OF THE BORROWER'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8. DUTY OF THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. POWERS COUPLED WITH AN INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10. EXECUTION OF FINANCING STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
11. SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12. AUTHORITY OF THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
15. AMENDMENT IN WRITING; NO WAIVERS; CUMULATIVE REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
16. SECTION HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
17. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
18. THE BORROWER'S WAIVER OF RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
19. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
20. OBLIGATIONS ARE WITHOUT RECOURSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
21. PARTIAL RELEASE; FULL RELEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
22. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
</TABLE>
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<TABLE>
<S> <C>
23. CONFLICTS WITH PARTICIPATION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
24. LESSEE AS A PARTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
</TABLE>
ii
<PAGE> 4
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of February 5, 1998 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Security Agreement"), is made between FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not individually, but solely as
Owner Trustee under the Guilford Real Estate Trust 1998-1 (the "Borrower"), and
FIRST UNION NATIONAL BANK, a national banking association ("Bank"), as agent
for (a) the Lenders (hereinafter defined) under the Credit Agreement dated as
of February 5, 1998 (as amended, modified, extended, supplemented, restated
and/or replaced from time to time, the "Credit Agreement") by and among the
Borrower, the lending institutions from time to time parties thereto (the
"Lenders") and Bank as the agent for the Lenders and (b) the holders of the
certificates issued pursuant to the Amended and Restated Trust Agreement dated
as of February 5, 1998 (as amended, modified, extended, supplemented, restated
and/or replaced from time to time, the "Trust Agreement") among the holders
from time to time parties thereto (the "Holders") and the Borrower, in its
individual capacity thereunder and in its capacity as Owner Trustee thereunder.
The Lenders and the Holders, together with their successors and permitted
assigns, are collectively referred to hereinafter as the "Secured Parties."
Bank, in its capacity as agent for the Secured Parties is referred to
hereinafter as the "Agent," and this Security Agreement is accepted and agreed
to by GUILFORD PHARMACEUTICALS INC., a Delaware corporation.
Preliminary Statement
Pursuant to the Credit Agreement, the Lenders have severally agreed to
make Loans to the Borrower in an aggregate amount not to exceed $19,400,000
upon the terms and subject to the conditions set forth therein, to be evidenced
by the Notes issued by the Borrower under the Credit Agreement. Pursuant to
the Trust Agreement, the Holders have agreed to purchase the ownership
interests of the Trust created thereby in an aggregate amount not to exceed
$600,000 upon the terms and subject to the conditions set forth therein, to be
evidenced by the Certificates issued by the Borrower under the Trust Agreement.
The Borrower is, or shall be upon the date of the initial Advance with respect
to each Property, the legal and beneficial owner of such Property (except the
Borrower may have a ground leasehold interest in certain Properties pursuant to
one (1) or more Ground Leases).
It is a condition, among others, to the obligation of the Lenders to
make their respective Loans to the Borrower under the Credit Agreement and the
Holders to make their respective Holder Advances under the Trust Agreement that
the Borrower shall have executed and delivered this Security Agreement to the
Agent, for the benefit of the Lenders and the Holders.
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to make their respective Loans under the Credit Agreement and to induce
the Holders to make their respective Holder Advances under the Trust Agreement,
the Borrower hereby agrees with the Agent, for the benefit of the Lenders and
the Holders, as follows:
<PAGE> 5
1. DEFINITIONS.
(a) As used herein, the following terms shall have the following
respective meanings:
"Accounts" shall mean all "accounts," as such term is defined
in the Uniform Commercial Code, now owned or hereafter acquired by the
Borrower, including without limitation (i) all accounts receivable,
other receivables, book debts and other forms of obligations now owned
or hereafter received or acquired by or belonging or owing to the
Borrower, whether arising out of goods sold or leased or services
rendered by it or from any other transaction (including without
limitation any such obligations which may be characterized as an
account under the Uniform Commercial Code), (ii) all of the Borrower's
rights in, to and under all purchase orders or receipts now owned or
hereafter acquired by it for goods or services, (iii) all of the
Borrower's rights to any goods represented by any of the foregoing
(including without limitation unpaid sellers' rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned,
reclaimed or repossessed goods), (iv) all monies due or to become due
to the Borrower under all purchase orders and contracts for the sale
or lease of goods or the performance of services or both by the
Borrower (whether or not yet earned by performance on the part of the
Borrower now) or hereafter in existence, including without limitation
the right to receive the proceeds of said purchase orders and
contracts, and (v) all collateral security and guarantees of any kind,
now or hereafter in existence, given by any Person with respect to any
of the foregoing.
"Chattel Paper" shall mean any and all "chattel paper," as
such term is defined in the Uniform Commercial Code, now owned or
hereafter acquired by the Borrower, wherever located.
"Documents" shall mean any and all "documents", as such term
is defined in the Uniform Commercial Code, now owned or hereafter
acquired by the Borrower, wherever located, including without
limitation each bill of lading, dock warrant, dock receipt, warehouse
receipt or order for the delivery of goods, and also any other
document which in the regular course of business or financing is
treated as adequately evidencing that the person in possession of it
is entitled to receive, hold and dispose of the document and the goods
it covers.
"General Intangibles" shall mean any and all "general
intangibles," as such term is defined in the Uniform Commercial Code,
now owned or hereafter acquired by the Borrower, including without
limitation all contracts, undertakings, or agreements (including
without limitation any and all contracts and agreements with any and
all contractors, sub-contractors and architects with respect to any
Property) in or under which the Borrower may now or hereafter have any
right (other than any right evidenced by Chattel Paper, Documents or
Instruments), title or interest, including without limitation any
agreements relating to the terms of payment or the terms of
performance of any Account.
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<PAGE> 6
"Holders" shall have the meaning specified in the first
paragraph of this Security Agreement.
"Instruments" shall mean any and all "instruments", as such
term is defined in the Uniform Commercial Code, now owned or hereafter
acquired by the Borrower, wherever located, including without
limitation all certificated securities, all certificates of deposit,
and all notes and other, without limitation, evidences of
indebtedness, other than instruments that constitute, or are a part of
a group of writings that constitute, Chattel Paper.
"Investment Property" shall mean any and all "investment
property," as such term is defined in the Uniform Commercial Code, now
owned or hereafter acquired by the Borrower, wherever located.
"Lenders" shall have the meaning specified in the first
paragraph of this Security Agreement.
"Lessee" shall mean Guilford Pharmaceuticals Inc., a Delaware
corporation, its successors, permitted assigns and permitted
transferees.
"Obligations" shall mean any and all obligations of the
Borrower, now existing or hereafter arising under the Credit
Agreement, the Notes, the Trust Agreement, the Certificates and/or any
other Operative Agreement.
(b) Capitalized terms used but not otherwise defined in
this Security Agreement shall have the respective meanings specified
in the Credit Agreement or Appendix A to the Participation Agreement
dated as of February 5, 1998 (as amended, modified, extended,
supplemented, restated and/or replaced from time to time in accordance
with the applicable provisions thereof, the "Participation Agreement")
among Lessee, the Borrower, the Holders, the Lenders and the Bank, as
agent for the Lenders and respecting the Security Documents, as the
agent for the Lenders and the Holders, to the extent of their
interests.
(c) The rules of usage set forth in Appendix A to the
Participation Agreement shall apply to this Security Agreement.
2. GRANT OF SECURITY INTEREST.
To secure payment of all the amounts advanced under the Credit Agreement in
connection with the Notes, all the amounts advanced or contributed under the
Trust Agreement in connection with the Certificates and all other amounts now
or hereafter owing to the Lenders, the Holders or the Agent thereunder or under
any other Operative Agreement, THE BORROWER HEREBY CONVEYS, GRANTS, ASSIGNS,
TRANSFERS, HYPOTHECATES, MORTGAGES AND SETS OVER TO THE AGENT FOR THE BENEFIT
OF THE SECURED PARTIES, A FIRST PRIORITY SECURITY INTEREST IN AND LIEN ON THE
TRUST ESTATE, WHETHER
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<PAGE> 7
NOW EXISTING OR HEREAFTER ACQUIRED INCLUDING WITHOUT LIMITATION THE FOLLOWING:
(a) all right, title and interest of the Borrower
in and to the Operative Agreements now existing or hereafter
acquired by the Borrower (including without limitation all
rights to payment and indemnity rights of the Borrower under
the Participation Agreement) (all of the foregoing in this
paragraph (a) being referred to as the "Rights in Operative
Agreements");
(b) all right, title and interest of the Borrower
in and to all of the Equipment;
(c) all right, title and interest of the Borrower
in and to all of the Fixtures;
(d) all the estate, right, title, claim or demand
whatsoever of the Borrower, in possession or expectancy, in
and to each Property, Fixture or Equipment or any part
thereof;
(e) all right, title and interest of the Borrower
in and to all substitutes, modifications and replacements of,
and all additions, accessions and improvements to, the
Fixtures and Equipment, subsequently acquired or leased by the
Borrower or constructed, assembled or placed by the Borrower
on any Property, immediately upon such acquisition, lease,
construction, assembling or placement, and in each such case,
without any further conveyance, assignment or other act by the
Borrower;
(f) all right, title and interest of the Borrower
in, to and under books and records relating to or used in
connection with the operation of one (1) or more Properties or
any part thereof; all rights of the Borrower to the payment of
money and all property; and all rights in and to any causes of
action or choices in action now or hereafter existing in favor
of the Borrower and all rights to any recoveries therefrom;
(g) all right, title and interest of the Borrower
in and to all unearned premiums under insurance policies now
held or subsequently obtained by the Lessee relating to one
(1) or more Properties and the Borrower's interest in and to
all proceeds of any insurance policies maintained by or for
the benefit of the Borrower, including without limitation any
right to collect and receive such proceeds; and all awards and
other compensation, including without limitation the interest
payable thereon and any right to collect and receive the same,
made to the present or any subsequent owner of any Property
for the taking by eminent domain, condemnation or otherwise,
of all or any part of any Property or any easement or other
right therein;
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<PAGE> 8
(h) all right, title and interest of the Borrower
in and to (i) all consents, licenses, certificates and other
governmental approvals relating to construction, completion,
use or operation of any Property or any part thereof and (ii)
all Plans and Specifications relating to any Property;
(i) all right, title and interest of the Borrower
in and to all Rent and all other rents, payments, purchase
prices, receipts, revenues, issues and profits payable under
the Lease or pursuant to any other lease with respect to any
Property;
(j) all right, title and interest of the Borrower
in and to all Instruments and Documents;
(k) all right, title and interest of the Borrower
in and to all General Intangibles;
(l) all right, title and interest of the Borrower
in and to all Chattel Paper (including without limitation all
rights under the Lease) and each Ground Lease;
(m) all right, title and interest of the Borrower
in and to all money, cash or cash equivalent and bank
accounts;
(n) all right, title and interest of the Borrower
in and to all Accounts;
(o) all right, title and interest of the Borrower
in and to all proceeds of letters of credit issued in favor of
the Borrower in connection with any Property; and
(p) all right, title and interest of the Borrower
in and to all proceeds, both cash and noncash, of any of the
foregoing.
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by the Borrower and described in the foregoing
clauses (a) through (p) are collectively referred to as the "Trust Property").
TO HAVE AND TO HOLD the Trust Property and the rights and privileges
hereby granted unto the Agent (for the benefit of the Lenders and the Holders)
its successors and assigns for the uses and purposes set forth, until all of
the obligations of the Borrower under the Operative Agreements are paid in
full; provided, that EXCLUDED from the Trust Property at all times and in all
respects shall be all Excepted Payments.
5
<PAGE> 9
3. PAYMENT OF OBLIGATIONS.
The Borrower shall pay all Obligations in accordance with the terms of the
Credit Agreement, the Notes, the Trust Agreement, the Certificates and the
other Operative Agreements and perform each term to be performed by it under
the Credit Agreement, the Notes, the Trust Agreement, the Certificates and the
other Operative Agreements.
4. OTHER COVENANTS.
At any time and from time to time, upon the written request of the Agent, and
at the expense of the Borrower (with funds provided by the Lessee for such
purpose), the Borrower will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the Agent reasonably
may request for the purposes of obtaining or preserving the full benefits of
this Security Agreement and of the rights and powers granted by this Security
Agreement.
5. DEFAULT; REMEDIES.
(a) If a Credit Agreement Event of Default has occurred and is
continuing:
(i) the Agent, in addition to all other remedies
available at law or in equity, shall have the right forthwith
to enter upon any Property (or any other place where any
component of any Property is located at such time) without
charge, and take possession of all or any portion of the Trust
Property, and to re-let the Trust Property and receive the
rents, issues and profits thereof, to make repairs and to
apply said rentals and profits, after payment of all necessary
or proper charges and expenses, on account of the amounts
hereby secured (subject to the Excepted Payments); and
(ii) the Agent, shall, as a matter of right, be
entitled to the appointment of a receiver for the Trust
Property, and the Borrower hereby consents to such appointment
and waives notice of any application therefor.
(b) If a Credit Agreement Event of Default has occurred
and is continuing, the Agent may proceed by an action at law, suit in
equity or other appropriate proceeding, to protect and enforce its
rights, whether for the foreclosure of the Lien of this Security
Agreement, or for the specific performance of any agreement contained
herein or for an injunction against the violation of any of the terms
hereof. The proceeds of any sale of any of the Trust Property shall
be applied pursuant to Section 8.7 of the Participation Agreement. In
addition, the Agent may proceed under Section 11 hereof.
(c) The Borrower hereby waives the benefit of all
appraisement, valuation, stay, extension and redemption laws now or
hereafter in force and all rights of marshalling in the event of any
sale of the Trust Property or any portion thereof or interest therein.
6
<PAGE> 10
(d) Notwithstanding anything to the contrary in this
Security Agreement, so long as no event of default on the part of
Lessee under any Operative Agreement to which Lessee is a party shall
exist which would entitle the Lessor to terminate the Lease, or if
such an event of default shall exist, so long as Lessee's time to cure
the default shall not have expired, the term of the Lease shall not be
terminated or modified in any respect whatsoever and Lessee's right of
possession to the Properties and its other rights arising out of the
Lease will all be fully recognized and protected by the Agent and
shall not be disturbed, canceled, terminated or otherwise affected by
reason of this Security Agreement or any action or proceeding
instituted by the Agent to enforce its rights under this Security
Agreement, or any extension, renewal, consolidation or replacement of
same, irrespective of whether Lessee shall have been joined in any
action or proceeding.
6. REMEDIES NOT EXCLUSIVE.
The Agent shall be entitled to enforce payment of the indebtedness and
performance of the Obligations and to exercise all rights and powers under this
Security Agreement or under any of the other Operative Agreements or other
agreements or any laws now or hereafter in force, notwithstanding some or all
of the Obligations may now or hereafter be otherwise secured, whether by deed
of trust, mortgage, security agreement, pledge, Lien, assignment or otherwise.
Neither the acceptance of this Security Agreement nor its enforcement, shall
prejudice or in any manner affect the Agent's right to realize upon or enforce
any other security now or hereafter held by the Agent, it being agreed that the
Agent shall be entitled to enforce this Security Agreement and any other
security now or hereafter held by the Agent in such order and manner as the
Agent may determine in its absolute discretion. No remedy conferred hereunder
or under any other Operative Agreement upon or reserved to the Agent is
intended to be exclusive of any other remedy herein or therein or by law
provided or permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or thereunder or now or hereafter existing
at law or in equity or by statute. Every power or remedy given by any of the
Operative Agreements to the Agent or to which it may otherwise be entitled, may
be exercised, concurrently or independently, from time to time and as often as
may be deemed expedient by the Agent. In no event shall the Agent, in the
exercise of the remedies provided in this Security Agreement (including without
limitation in connection with the assignment of Rents to the Agent, or the
appointment of a receiver and the entry of such receiver onto all or any part
of the Land), be deemed a "mortgagee in possession" or a "pledgee in
possession", and the Agent shall not in any way be made liable for any act,
either of commission or omission, in connection with the exercise of such
remedies.
7. PERFORMANCE BY THE AGENT OF THE BORROWER'S OBLIGATIONS.
If the Borrower fails to perform or comply with any of its agreements contained
herein the Agent, at its option, but without any obligation so to do, may
perform or comply, or otherwise cause performance or compliance, with such
agreement. The expenses of the Agent incurred in connection with actions
undertaken as provided in this Section 7, together with interest thereon at a
rate per annum equal to the Overdue Rate, from the date of payment by the Agent
to the date
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<PAGE> 11
reimbursed by the Borrower, shall be payable by the Borrower (with funds
provided by the Lessee for such purpose) to the Agent on demand and constitutes
part of the Obligations secured hereby.
8. DUTY OF THE AGENT.
The Agent's sole duty with respect to the custody, safekeeping and physical
preservation of any Trust Property in its possession, under Section 9-207 of
the Uniform Commercial Code or otherwise, shall be to deal with it in the same
manner as the Agent deals with similar property for its own account. Neither
the Agent, any Lender, any Holder nor any of their respective directors,
officers, employees, shareholders, partners or agents shall be liable for
failure to demand, collect or realize upon any of the Trust Property or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Trust Property upon the request of the Borrower or any other Person or
to take any other action whatsoever with regard to the Trust Property or any
part thereof.
9. POWERS COUPLED WITH AN INTEREST.
All powers, authorizations and agencies contained in this Security Agreement
are coupled with an interest and are irrevocable until this Security Agreement
is terminated and the Liens created hereby are released.
10. EXECUTION OF FINANCING STATEMENTS.
Pursuant to Section 9-402 of the Uniform Commercial Code, the Borrower
authorizes the Agent at the expense of the Borrower (such amounts to be paid
with funds provided by the Lessee for such purpose) to file financing
statements with respect to the Trust Property under this Security Agreement
without the signature of the Borrower in such form and in such filing offices
as the Agent reasonably determines appropriate to perfect the security
interests of the Agent under this Security Agreement. A carbon, photographic
or other reproduction of this Security Agreement shall be sufficient as a
financing statement for filing in any jurisdiction. For purposes of such
financing statement, the Borrower shall be deemed to be the debtor, and the
Agent shall be deemed to be the secured party. The address of the Borrower is
79 South Main Street, Salt Lake City, Utah 84111, Attention: Val T. Orton,
Vice President, and the address of the Agent is First Union National Bank, c/o
First Union Capital Markets Group, DC-6, 301 South College Street, Charlotte,
North Carolina 28288-0166, Attention: Ms. Jane O. Hurley, Capital Markets
Services.
11. SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE.
(a) It is the intention of the parties hereto that this
Security Agreement as it relates to matters of the grant, perfection and
priority of security interests the subject hereof, shall constitute a security
agreement within the meaning of the Uniform Commercial Code of the States in
which the Trust Property is located. If a Credit Agreement Event of Default
shall occur, then in addition to having any other right or remedy available at
law or in equity, the Agent may proceed under the applicable Uniform Commercial
Code and exercise such rights and remedies
8
<PAGE> 12
as may be provided to a secured party by such Uniform Commercial Code with
respect to all or any portion of the Trust Property which is personal property
(including without limitation taking possession of and selling such property).
If the Agent shall elect to proceed under the Uniform Commercial Code, then
thirty (30) days' prior written notice of sale of the personal property shall
be deemed reasonable notice and the reasonable expenses of retaking, holding,
preparing for sale, selling and the like incurred by the Agent shall include,
but not be limited to, reasonable attorneys' fees and legal expenses. At the
Agent's request, the Borrower shall assemble such personal property and make it
available to the Agent at a place designated by the Agent which is reasonably
convenient to both parties.
(b) The Borrower, upon request by the Agent from time to
time, shall execute, acknowledge and deliver to the Agent one (1) or more
separate security agreements, in form satisfactory to the Agent, covering all
or any part of the Trust Property and will further execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, any financing
statement, affidavit, continuation statement or certificate or other document
as the Agent may request in order to perfect, preserve, maintain, continue or
extend the security interest under, and the priority of the Liens granted by,
this Security Agreement and such security instrument. The Borrower further
agrees to pay to the Agent (with funds provided by the Lessee for such purpose)
on demand all costs and expenses incurred by the Agent in connection with the
preparation, execution, recording, filing and re-filing of any such document
and all reasonable costs and expenses of any record searches for financing
statements the Agent shall reasonably require. The filing of any financing or
continuation statements in the records relating to personal property or
chattels shall not be construed as in any way impairing the right of the Agent
to proceed against any property encumbered by this Security Agreement.
12. AUTHORITY OF THE AGENT.
The Borrower acknowledges that the rights and responsibilities of the Agent
under this Security Agreement with respect to any action taken by the Agent or
the exercise or non-exercise by the Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Security Agreement shall be governed by the Credit Agreement and
Section 8.6 of the Participation Agreement and by such other agreements with
respect thereto as may exist from time to time (until such time as all amounts
due and owing to the Secured Parties and the Agent under the Operative
Agreements have been paid in full), but the Agent shall be conclusively
presumed to be acting as agent for the Secured Parties with full and valid
authority so to act or refrain from acting, and the Borrower shall be under no
obligation, or entitlement, to make any inquiry respecting such authority.
13. NOTICES.
All notices required or permitted to be given under this Security Agreement
shall be in writing and delivered as provided in Section 12.2 of the
Participation Agreement.
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<PAGE> 13
14. SEVERABILITY.
Any provision of this Security Agreement which is prohibited or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof.
15. AMENDMENT IN WRITING; NO WAIVERS; CUMULATIVE REMEDIES.
(a) None of the terms or provisions of this Security
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with the terms of Section 12.4 of the Participation Agreement.
(b) No failure to exercise, nor any delay in exercising,
on the part of the Agent, any right, power or privilege hereunder shall operate
as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Agent of any
right or remedy hereunder on any one (1) occasion shall not be construed as a
bar to any right or remedy which the Agent would otherwise have on any future
occasion.
(c) The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
16. SECTION HEADINGS.
The section headings used in this Security Agreement are for convenience of
reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
17. SUCCESSORS AND ASSIGNS.
This Security Agreement shall be binding upon the successors of the Borrower,
and the Borrower shall not assign any of its rights or obligations hereunder or
with respect to any of the Trust Property without the prior written consent of
the Agent. This Security Agreement shall inure to the benefit of the Agent,
the Lenders, the Holders and their respective successors and assigns, in
accordance with their respective interest herein.
18. THE BORROWER'S WAIVER OF RIGHTS.
Except as otherwise set forth herein, to the fullest extent permitted by law,
the Borrower waives the benefit of all laws now existing or that may
subsequently be enacted providing for (a) any appraisement before sale of any
portion of the Trust Property, (b) any extension of the time for the
enforcement of the collection of the indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (c)
exemption of any portion of the Trust Property from attachment, levy or sale
under execution or exemption from civil process. Except as otherwise set forth
herein, to the fullest extent the Borrower may do so, the Borrower
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<PAGE> 14
agrees that the Borrower will not at any time insist upon, plead, claim or take
the benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Security Agreement before exercising any other remedy
granted hereunder and the Borrower, for the Borrower and its successors and
assigns, and for any and all Persons ever claiming any interest in the Trust
Property, to the extent permitted by law, hereby waives and releases all rights
of redemption, valuation, appraisement, stay of execution, notice of election
to mature or declare due the whole of the Obligations and marshalling in the
event of foreclosure of the Liens hereby created.
19. GOVERNING LAW.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 11(a) HEREOF, THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF MARYLAND.
20. OBLIGATIONS ARE WITHOUT RECOURSE.
The provisions of the Participation Agreement relating to limitations on
liability are hereby incorporated by reference herein, Mutatis Mutandis.
21. PARTIAL RELEASE; FULL RELEASE.
The Agent may release for such consideration as it may require any portion of
the Trust Property without (as to the remainder of the Trust Property) in any
way impairing or affecting the Lien, security interest and priority herein
provided for the Agent compared to any other Lien holder or secured party.
Further, the Agent shall execute and deliver to the Borrower such documents and
instruments as may be required to release the Lien and security interest
created by this Security Agreement with respect to the Properties as provided
in Section 8.8 of the Participation Agreement or to grant the easements and
permit the other matters provided for in Section 8.5 of the Participation
Agreement.
22. MISCELLANEOUS.
(a) This Security Agreement is one (1) of the documents
which create Liens and security interests that secure payment and performance
of the Obligations. The Agent, at its election, may commence or consolidate in
a single action all proceedings to realize upon all such Liens and security
interests. The Borrower hereby waives (i) any objections to the commencement
or continuation of an action to foreclose the Lien of this Security Agreement
or exercise of any other remedies hereunder based on any action being
prosecuted or any judgment entered with respect to the Obligations or any Liens
or security interests that secure payment and performance of the Obligations
and (ii) any objections to the commencement of, continuation of, or entry of a
judgment in any such other action based on any action or judgment connected to
this Security Agreement. In case of a foreclosure sale, the Trust Property may
be sold, at the Agent's election, in one (1) parcel or in more than one (1)
parcel and the Agent is specifically empowered
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<PAGE> 15
(without being required to do so, and in its sole and absolute discretion) to
cause successive sales of portions of the Trust Property to be held.
(b) This Security Agreement may not be amended, waived,
discharged or terminated except in accordance with Section 12.4 of the
Participation Agreement. Upon the prior written consent of the Majority
Secured Parties and unless such matter is a Unanimous Vote Matter, the Agent
may release any portion of the Trust Property or any other security, and grant
such extensions and indulgences in relation to the Obligations secured hereby
without in any manner affecting the priority of the Lien hereof on any part of
the Trust Property.
(c) THE PROVISIONS OF THE PARTICIPATION AGREEMENT
RELATING TO SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY
INCORPORATED BY REFERENCE HEREIN, MUTATIS MUTANDIS.
23. CONFLICTS WITH PARTICIPATION AGREEMENT.
Notwithstanding any other provision hereof, in the event of any conflict
between the terms of this Security Agreement and the Participation Agreement,
the terms of the Participation Agreement shall govern.
24. LESSEE AS A PARTY.
LESSEE HAS EXECUTED THIS SECURITY AGREEMENT FOR THE SOLE PURPOSE OF
SUBJECTING TO THE SECURITY INTERESTS GRANTED HEREUNDER ALL OF ITS RIGHT, TITLE,
ESTATE AND INTEREST, IF ANY, IN AND TO THE TRUST PROPERTY TO SECURE ITS
OBLIGATIONS UNDER THE OPERATIVE AGREEMENTS. ACCORDINGLY, LESSEE HEREBY GRANTS
TO THE AGENT (FOR THE BENEFIT OF THE LENDERS AND THE HOLDERS) A SECURITY
INTEREST IN AND TO ALL OF ITS RIGHT, TITLE, ESTATE AND INTEREST, IF ANY, IN AND
TO THE TRUST PROPERTY (TO THE EXTENT LESSEE HAS ANY RIGHT, TITLE OR INTEREST
THEREIN AND WITHOUT REGARD TO ANY LANGUAGE IN SECTION 2 OR THE DEFINITION OF
"TRUST PROPERTY' OR ANY DEFINITION OF ANY ITEM CONSTITUTING THE TRUST PROPERTY
WHICH OTHERWISE WOULD LIMIT THE TRUST PROPERTY TO THE RIGHT, TITLE AND INTEREST
OF THE BORROWER THEREIN) TO SECURE ITS OBLIGATIONS UNDER THE OPERATIVE
AGREEMENTS. LESSEE ACKNOWLEDGES AND AGREES THAT, SUBJECT TO SECTION 5(D) OF
THIS SECURITY AGREEMENT, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, THE AGENT
SHALL HAVE THE RIGHT TO EXERCISE ANY OR ALL OF ITS REMEDIES HEREUNDER AS
AGAINST ANY SUCH RIGHT, TITLE, ESTATE OR INTEREST OF LESSEE IN OR TO THE TRUST
PROPERTY.
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<PAGE> 16
IN WITNESS WHEREOF, each of the undersigned have caused the Security
Agreement to be duly executed and delivered as of the date first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but solely as the
Owner Trustee under the Guilford Real Estate Trust
1998-1
By: /s/ Brett R. King
-----------------------------------------------
Name: Brett R. King
---------------------------------------------
Title: Assistant Vice President
--------------------------------------------
FIRST UNION NATIONAL BANK, as the Agent
for the Lenders and the Holders
By: /s/ Louis E. Flori
-----------------------------------------------
Name: Louis E. Flori
---------------------------------------------
Title: Vice President
--------------------------------------------
Accepted and Agreed to:
GUILFORD PHARMACEUTICALS INC.
By: /s/ Andrew R. Jordan
-----------------------------------------------
Name: Andrew R. Jordan
---------------------------------------------
Title: Senior Vice President & Chief Financial
------------------------------------------
Officer
--------
<PAGE> 1
EXHIBIT 10.45
AMENDED AND RESTATED TRUST AGREEMENT
dated as of February 5, 1998
between
The Several Holders
from Time to Time Parties Hereto,
as the Holders,
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as the Owner Trustee
GUILFORD REAL ESTATE TRUST 1998-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II AUTHORITY TO EXECUTE AND PERFORM VARIOUS DOCUMENTS;
DECLARATION OF TRUST BY TRUST COMPANY . . . . . . . . . . . . . . . . . 2
SECTION 2.1 Authority To Execute and Perform Various Documents . . . . . . . 2
SECTION 2.2 Declaration of Trust by Trust Company. . . . . . . . . . . . . . 2
ARTICLE III CONTRIBUTIONS AND PAYMENTS. . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.1 Procedure for Holder Advances; Certificates. . . . . . . . . . . 3
SECTION 3.2 Holder Yield . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.3 Scheduled Return of Holder Advances. . . . . . . . . . . . . . . 5
SECTION 3.4 Early Return of Advances. . . . . . . . . . . . . . . . . . . . 5
SECTION 3.5 Payments from Trust Estate Only. . . . . . . . . . . . . . . . . 6
SECTION 3.6 Method of Payment. . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.7 Computation of Yield. . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.8 Conversion and Continuation Options. . . . . . . . . . . . . . . 7
SECTION 3.9 Notice of Amounts Payable. . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV COLLECTIONS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . 8
SECTION 4.1 Collections and Remittances by the Owner Trustee. . . . . . . . 8
SECTION 4.2 Priority of Distributions. . . . . . . . . . . . . . . . . . . . 9
SECTION 4.3 Excepted Payments. . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.4 Distributions after Default. . . . . . . . . . . . . . . . . . . 9
ARTICLE V DUTIES OF THE OWNER TRUSTEE. . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5.1 Notice of Certain Events. . . . . . . . . . . . . . . . . . . . 9
SECTION 5.2 Action Upon Instructions. . . . . . . . . . . . . . . . . . . . 10
SECTION 5.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5.4 No Duties Except as Specified In
Trust Agreement or Instructions. . . . . . . . . . . . . . . . . 11
SECTION 5.5 No Action Except Under Specified Documents or Instructions. . . 11
SECTION 5.6 Absence of Duties. . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI THE OWNER TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.1 Acceptance of Trust and Duties. . . . . . . . . . . . . . . . . 12
SECTION 6.2 Furnishing of Documents. . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.3 No Representations or Warranties as to the
Properties or Operative Agreements. . . . . . . . . . . . . . . 13
SECTION 6.4 No Segregation of Moneys; No Interest. . . . . . . . . . . . . . 13
SECTION 6.5 Reliance; Advice of Counsel. . . . . . . . . . . . . . . . . . . 13
SECTION 6.6 Liability With Respect to Documents. . . . . . . . . . . . . . . 14
</TABLE>
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<TABLE>
<S> <C>
SECTION 6.7 Not Acting In Individual Capacity. . . . . . . . . . . . . . . . 14
SECTION 6.8 Books and Records; Tax Returns. . . . . . . . . . . . . . . . . 14
ARTICLE VII INDEMNIFICATION OF THE OWNER TRUSTEE. . . . . . . . . . . . . . . . . 15
SECTION 7.1 Indemnification Generally. . . . . . . . . . . . . . . . . . . . 15
SECTION 7.2 Compensation and Expenses. . . . . . . . . . . . . . . . . . . . 15
ARTICLE VIII TERMINATION OF TRUST AGREEMENT . . . . . . . . . . . . . . . . . . . 15
SECTION 8.1 Termination of Trust Agreement. . . . . . . . . . . . . . . . . 15
SECTION 8.2 Termination at Option of the Holders. . . . . . . . . . . . . . 16
SECTION 8.3 Termination at Option of the Owner Trustee. . . . . . . . . . . 16
SECTION 8.4 Actions by the Owner Trustee Upon Termination. . . . . . . . . . 16
ARTICLE IX SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES AND SEPARATE
OWNER TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 9.1 Resignation of the Owner Trustee; Appointment of Successor. . . 17
SECTION 9.2 Co-Trustees and Separate Trustees. . . . . . . . . . . . . . . . 18
SECTION 9.3 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE X AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 10.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 10.2 Limitation on Amendments. . . . . . . . . . . . . . . . . . . . 21
ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 11.1 No Legal Title to Trust Estate in the Holders. . . . . . . . . 21
SECTION 11.2 Sale of a Property by the Owner Trustee is Binding. . . . . . . 21
SECTION 11.3 Limitations on Rights of Others. . . . . . . . . . . . . . . . 22
SECTION 11.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 11.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 11.6 Limitation on the Holders' Liability. . . . . . . . . . . . . . 22
SECTION 11.7 Separate Counterparts. . . . . . . . . . . . . . . . . . . . . 22
SECTION 11.8 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 22
SECTION 11.9 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 11.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 11.11 Performance by the Holders. . . . . . . . . . . . . . . . . . 23
SECTION 11.12 Conflict with Operative Agreements. . . . . . . . . . . . . . 23
SECTION 11.13 No Implied Waiver. . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.14 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION. . . . . . . . 24
SECTION 11.15 AMENDMENT AND RESTATEMENT OF PRIOR TRUST AGREEMENT. . . . . . 24
</TABLE>
Schedule I - Holder Commitments
EXHIBIT A - Form of Holder Certificate
ii
<PAGE> 4
AMENDED AND RESTATED TRUST AGREEMENT
THIS AMENDED AND RESTATED TRUST AGREEMENT, dated as of February 5, 1998
(as amended, modified, extended, supplemented, restated and/or replaced from
time to time, the "Trust Agreement"), is among the several banks and other
financial institutions from time to time parties to this Trust Agreement
(individually, each of the foregoing may be referred to as a "Holder," and
collectively, the foregoing together with such other persons and entities that
become holders hereunder, the "Holders"), and FIRST SECURITY BANK, NATIONAL
ASSOCIATION, in its individual capacity ("Trust Company"), and in its capacity
as owner trustee hereunder, together with its successors and assigns (the
"Owner Trustee").
WHEREAS, the parties hereto wish to amend and restate in its entirety the
Trust Agreement dated as of January 14, 1998 between such parties;
WHEREAS, in order to provide a portion of the funds for carrying out the
other transactions contemplated by the Operative Agreements, each Holder will
make its respective Holder Advances pursuant to this Trust Agreement and the
Participation Agreement (as defined below);
WHEREAS, the Holders desire to provide for the Trust to exist solely for
the purpose of (a) developing, acquiring, installing, designing, constructing
and testing various Properties and leasing such Properties to Lessee and (b)
carrying out certain transactions contemplated by the Operative Agreements; and
WHEREAS, Trust Company is willing to act as trustee hereunder and to
accept the trust created hereby (the "Trust").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS.
For purposes of this Trust Agreement (including without limitation the
"WHEREAS" clauses set forth above), capitalized terms used in this Trust
Agreement and not otherwise defined herein shall have the meanings assigned to
them in Appendix A to that certain Participation Agreement dated as of February
5, 1998 (as amended, modified, extended, supplemented, restated and/or replaced
from time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among Guilford Pharmaceuticals Inc., the
<PAGE> 5
Owner Trustee, the various banks and other lending institutions which are
parties thereto from time to time, as the Holders, the various banks and other
lending institutions which are parties thereto from time to time, as the
Lenders, and First Union National Bank, as agent for the Lenders and respecting
the Security Documents, as the agent for the Lenders and the Holders, to the
extent of their interests. Unless otherwise indicated, references in this
Trust Agreement to articles, sections, paragraphs, clauses, appendices,
schedules and exhibits are to the same contained in this Trust Agreement.
SECTION 1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the Participation Agreement
shall apply to this Trust Agreement.
ARTICLE II
AUTHORITY TO EXECUTE AND PERFORM VARIOUS DOCUMENTS;
DECLARATION OF TRUST BY TRUST COMPANY
SECTION 2.1 AUTHORITY TO EXECUTE AND PERFORM VARIOUS DOCUMENTS.
Each Holder hereby authorizes and directs the Owner Trustee (a) to execute
and deliver, as trustee for and on behalf of each such Holder, each Operative
Agreement to which the Owner Trustee is a party and any other agreements,
instruments, certificates or documents related to the transactions contemplated
hereby to which the Owner Trustee is a party, (b) to take whatever action shall
be required to be taken by the Owner Trustee by the terms of, and exercise its
rights and perform its duties under, each of the documents, agreements,
instruments and certificates referred to in clause (a) above as set forth in
such documents, agreements and certificates, and (c) subject to the terms of
this Trust Agreement, to take such other action in connection with the
foregoing as the Holders may from time to time direct.
SECTION 2.2 DECLARATION OF TRUST BY TRUST COMPANY.
(a) Trust Company hereby declares that it will hold all estate,
right, title and interest of the Owner Trustee in, to and under each
Property, each Holder Advance, the Operative Agreements and any other
property contributed by any Holder, including without limitation all
amounts of Rent, insurance proceeds and condemnation awards, indemnity or
other payments of any kind (collectively, the "Trust Estate") as the Owner
Trustee upon the trusts set forth herein and for the use and benefit of
each Holder, subject, however, to the provisions of the Credit Agreement
and the Security Documents. The name of the Trust shall be "Guilford Real
Estate Trust 1998-1".
(b) The sole purpose of the Trust is to hold title to the Trust
Estate for the benefit of the Holders and to engage in activities
ancillary and incidental thereto as the Holders shall determine to be
desirable. Except in connection with the foregoing, the
2
<PAGE> 6
Owner Trustee shall not (i) engage in any business activity, (ii) have any
property, rights or interest, whether real or personal, tangible or
intangible, (iii) incur any legal liability or obligation, whether fixed
or contingent, matured or unmatured, other than in the normal course of
the administration of the Trust or (iv) subject any of its property or
assets to any mortgage, Lien, security interest or other claim or
encumbrance, other than in favor of the Lenders or the Holders pursuant to
the provisions of the Operative Agreements and this Trust Agreement. THIS
TRUST IS NOT A BUSINESS TRUST. THE SOLE PURPOSE OF THE TRUST IS TO
ACQUIRE AND HOLD TITLE TO THE TRUST ESTATE, SUBJECT TO THE RIGHTS OF THE
LENDERS, FOR THE BENEFIT OF THE HOLDERS. THE OWNER TRUSTEE MAY NOT
TRANSACT BUSINESS OF ANY KIND WITH RESPECT TO ANY PROPERTY COMPRISING THE
TRUST ESTATE NOR SHALL THIS AGREEMENT BE DEEMED TO BE, OR CREATE OR
EVIDENCE THE EXISTENCE OF A CORPORATION DE FACTO OR DE JURE, OR A
MASSACHUSETTS TRUST, OR ANY OTHER TYPE OF BUSINESS TRUST, ASSOCIATION OR
JOINT VENTURE BETWEEN THE OWNER TRUSTEE, THE HOLDERS, THE AGENT AND THE
LENDERS.
ARTICLE III
CONTRIBUTIONS AND PAYMENTS
SECTION 3.1 PROCEDURE FOR HOLDER ADVANCES; CERTIFICATES.
(a) Upon receipt from Lessee by the Agent of a Requisition, and
subject to the terms and conditions of the Participation Agreement, the
Agent shall request from each Holder an Advance and each Holder shall make
an Advance under the Holder Commitment of such Holder, as set forth on
Schedule 1 hereto, on each date Advances are made pursuant to Section 5 of
the Participation Agreement. The Agent may request an Advance under the
Holder Commitments during the Commitment Period on any date that an
Advance may be requested pursuant to the terms of Section 5.2(a) of the
Participation Agreement, provided, that the Agent shall give each Holder
irrevocable notice (which notice must be received by such Holder no less
than five (5) Business Days prior to the requested date of the Holder
Advance) specifying (i) the amount to be advanced (which on any date shall
not be in excess of the then Available Holder Commitment), (ii) the
requested date of advance, (iii) whether the Holder Advance is to be a
Eurodollar Holder Advance or an ABR Holder Advance or a combination
thereof, (iv) if the Holder Advance is to be a combination of Eurodollar
Holder Advances and ABR Holder Advances, the respective amounts of each
type of Holder Advance and (v) the Interest Period applicable to any
Eurodollar Holder Advances. Pursuant to the terms of the Participation
Agreement, the Agent shall be deemed to have delivered such notice upon
the delivery of a notice by the Construction Agent or Lessee containing
such required information.
3
<PAGE> 7
(b) Upon receipt of any such notice delivered pursuant to Section
3.1(a), each Holder shall make the amount of its Advance available to the
Agent for the account of the Owner Trustee at the office of the Agent
referred to in Section 12.3 of the Participation Agreement prior to 12:00
Noon, Charlotte, North Carolina time on the date requested by Lessee in
funds immediately available to the Owner Trustee.
(c) Holder Yield accruing on each Holder Advance during the
Construction Period with respect to any property shall, subject to the
limitations set forth in Section 5.1(b) of the Participation Agreement, be
added to the amount of the Holder Advance on the relevant Scheduled
Interest Payment Date. On such Scheduled Interest Payment Date, the
Holder Property Cost and Holder Construction Property Cost shall be
increased by the amount of Holder Yield added to the Holder Advance.
(d) The Holder Advances made by each Holder to the Trust Estate
shall be evidenced by a Certificate of the Owner Trustee, substantially in
the form of EXHIBIT A hereto, issued in the name of the Holder and in an
amount equal to the Holder Commitment of such Holder. Each Certificate
shall (i) be dated on or about the Initial Closing Date, (ii) be stated to
mature on the Maturity Date and (iii) bear a yield on the unpaid Holder
Amount thereof from time to time outstanding at the Holder Yield.
(e) To the extent that the Owner Trustee, in its capacity as
Borrower under the Credit Agreement, shall have elected to terminate or
reduce the amount of the Commitments pursuant to Section 2.5(a) of the
Credit Agreement, a pro rata election shall be deemed to have been made
with respect to the Holder Commitment. The Holder Commitments respecting
any particular Property shall automatically be reduced to zero (0) sixty
(60) days after the occurrence of the Rent Commencement Date respecting
such Property. On any date on which the Commitments shall be reduced to
zero (0) as a result of a Credit Agreement Event of Default, the Holder
Commitments shall automatically be reduced to zero (0) and the Owner
Trustee shall prepay the Certificate in full for the outstanding Holder
Amount, together with accrued but unpaid Holder Yield thereon and all
other amounts owing under the Certificate.
SECTION 3.2 HOLDER YIELD.
(a) The Owner Trustee shall pay to each Holder, from the Trust
Estate, its pro rata portion of Holder Yield on Holder Advances made
hereunder. Payment of Holder Yield to each Holder shall be made in
arrears on each Scheduled Interest Payment Date occurring after the Rent
Commencement Date or as otherwise provided herein or in Section 2.6 of the
Credit Agreement or Section 8.7 of the Participation Agreement.
(b) If all or a portion of Holder Yield shall not be received by the
Holders when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall, without limiting the rights of the
Holders hereunder or under any Operative Agreement, bear interest at the
Holder Overdue Rate, in each case from the date of nonpayment until paid
(whether after or before judgment) and shall be paid upon demand.
4
<PAGE> 8
SECTION 3.3 SCHEDULED RETURN OF HOLDER ADVANCES.
The outstanding Holder Amount shall be due in full on the Expiration Date.
On each such date and on the Expiration Date, subject to the terms of the
Participation Agreement, the Owner Trustee shall pay to each Holder its portion
of the aggregate Holder Amount then due, together with all accrued but unpaid
Holder Yield and all other amounts due to such Holders from the Owner Trustee
hereunder or under the Operative Agreements.
SECTION 3.4 EARLY RETURN OF ADVANCES.
(a) Subject to Sections 11.2(e), 11.3 and 11.4 of the Participation
Agreement, the Owner Trustee may at any time and from time to time prepay
the Certificates, in whole or in part, without premium or penalty, upon at
least three (3) Business Days' irrevocable notice to the Agent, on behalf
of the Holders, specifying the date and amount of prepayment and whether
the prepayment is of ABR Holder Advances or Eurodollar Holder Advances or
a combination thereof, and, if a combination thereof, the amount allocable
to each. Upon receipt of such notice, the Agent shall promptly notify the
Holders thereof. If such notice is given, the amount specified in such
notice shall be due and payable on the date specified therein. Amounts
prepaid shall not be readvanced, except as set forth in Section 5.2(d) of
the Participation Agreement.
(b) If on any date the Agent or the Owner Trustee shall receive any
payment in respect of (i) any Casualty, Condemnation or Environmental
Violation pursuant to Sections 15.1(a) or 15.1(g) or Article XVI of the
Lease (excluding any payments in respect thereof which are payable to
Lessee in accordance with the Lease), or (ii) the Termination Value of any
Property in connection with the delivery of a Termination Notice pursuant
to Article XVI of the Lease, or (iii) the Termination Value of any
Property or such other applicable amount in connection with the exercise
of a Purchase Option under Article XX of the Lease or the exercise of the
option of the Owner Trustee to transfer the Properties to the Lessee
pursuant to Section 20.3 of the Lease or (iv) any payment required to be
made or elected to be made by the Construction Agent to the Owner Trustee
pursuant to the Agency Agreement, then in each case, the Holders shall
receive proceeds in accordance with Section 8.7(b) of the Participation
Agreement.
(c) Each prepayment of the Certificates pursuant to Section 3.4(a)
shall be allocated to reduce the respective Holder Property Costs of all
Properties pro rata according to the Holder Property Costs of such
Properties immediately before giving effect to such prepayment. Each
prepayment of the Certificates pursuant to Section 3.4(b) shall be
allocated to reduce the Holder Property Cost of the Property or Properties
subject to the respective Casualty, Condemnation, Environmental Violation,
termination, purchase, transfer or other circumstance giving rise to such
prepayment. Any amounts applied to reduce the Holder Property Cost of any
Construction Period Property pursuant to this paragraph (c) shall also be
applied to reduce the Construction Loan Property Cost of such Property
until such Construction Loan Property Cost has been reduced to zero (0).
5
<PAGE> 9
SECTION 3.5 PAYMENTS FROM TRUST ESTATE ONLY.
All payments to be made by the Owner Trustee under this Trust Agreement
(including without limitation any payments pursuant to Section 11.4 of the
Participation Agreement) shall be made only from the income and proceeds from
the Trust Estate and only to the extent that the Owner Trustee shall have
received income or proceeds from the Trust Estate to make such payments in
accordance with the terms hereof, except as specifically provided in Section
6.1. Each Holder agrees that it will look solely to the income and proceeds
from the Trust Estate to the extent available for payment as herein provided
and that, except as specially provided in any Operative Agreement, Trust
Company shall not be liable to any Holder for any amounts payable under this
Trust Agreement and shall not be subject to any liability under this Trust
Agreement.
SECTION 3.6 METHOD OF PAYMENT.
All amounts payable to a Holder pursuant to this Trust Agreement shall be
paid or caused to be paid by the Owner Trustee to, or for the account of, such
Holder, or its nominee, by transferring such amount in immediately available
funds to a bank institution or banking institutions with bank wire transfer
facilities for the account of such Holder or as otherwise instructed in writing
from time to time by such Holder.
SECTION 3.7 COMPUTATION OF YIELD.
(a) Whenever it is calculated on the basis of the Prime Lending
Rate, Holder Yield shall be calculated on the basis of a year of three
hundred sixty-five (365) days (or three hundred sixty-six (366) days, as
the case may be) for the actual days elapsed; and, otherwise, Holder Yield
shall be calculated on the basis of a year of three hundred sixty (360)
days for the actual days elapsed. Any change in the Holder Yield
resulting from a change in the ABR or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the
day on which such change becomes effective.
(b) Pursuant to Section 12.12 of the Participation Agreement, the
calculation of Holder Yield under this Section 3.7 shall be made by the
Agent. Each determination of an interest rate by the Agent shall be
conclusive and binding on the Owner Trustee and the Holders in the absence
of manifest error.
(c) If the Eurodollar Rate cannot be determined by the Agent in the
manner specified in the definition of the term "Eurodollar Rate", the
Owner Trustee shall give or cause to be given telecopy or telephonic
notice thereof to the Holders as soon as practicable after receipt of same
from the Agent. Commencing on the Scheduled Interest Payment Date next
occurring after the delivery of such notice and continuing until such time
as the Eurodollar Rate can be determined by the Agent in the manner
specified in the definition of such term, all outstanding Holder Advances
shall bear a yield at the ABR. Until such time as the Eurodollar Rate can
be determined by the Agent in the manner specified in the definition of
such term, no further Eurodollar Holder Advances shall be
6
<PAGE> 10
made or shall be continued as such at the end of the then current Interest
Period nor shall the Owner Trustee have the right to convert ABR Holder
Advances to Eurodollar Holder Advances.
SECTION 3.8 CONVERSION AND CONTINUATION OPTIONS.
(a) The Owner Trustee may elect from time to time to convert
Eurodollar Holder Advances to ABR Holder Advances by giving the Agent (on
behalf of the Holders) at least three (3) Business Days' prior irrevocable
notice of such election, provided, that any such conversion of Eurodollar
Holder Advances may only be made on the last day of an Interest Period
with respect thereto, and provided, further, to the extent an Event of
Default has occurred and is continuing on the last day of any such
Interest Period, the applicable Eurodollar Holder Advance shall
automatically be converted to an ABR Holder Advance. The Owner Trustee
may elect from time to time to convert ABR Holder Advances to Eurodollar
Holder Advances by giving the Agent (on behalf of the Holders) at least
three (3) Business Days' prior irrevocable notice of such election. Any
such notice of conversion to Eurodollar Holder Advances shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon
receipt of any such notice, the Agent (on behalf of the Holders) shall
promptly notify each Holder thereof. All or any part of outstanding
Eurodollar Holder Advances or ABR Holder Advances may be converted as
provided herein, provided, that (i) no ABR Holder Advance may be converted
into a Eurodollar Holder Advance after the date that is one (1) month
prior to the Maturity Date and (ii) such notice of conversion shall
contain an election by the Owner Trustee of an Interest Period for such
Eurodollar Holder Advance to be created by such conversion and such
Interest Period shall be in accordance with the terms of the definition of
the term "Interest Period" including without limitation subparagraphs (A)
through (D) thereof.
(b) Subject to the restrictions set forth in Section 3.1, any
Eurodollar Holder Advance may be continued as such upon the expiration of
the then current Interest Period with respect thereto by the Owner Trustee
giving irrevocable notice to the Agent (on behalf of the Holders) in
accordance with the notice provisions for the conversion of ABR Holder
Advances to Eurodollar Holder Advances set forth herein and the applicable
provisions of the term "Interest Period" of the length of the next
Interest Period to be applicable to such Eurodollar Holder Advances,
provided, that no Eurodollar Holder Advance may be continued as such after
the date that is one (1) month prior to the Maturity Date, provided,
further, no Eurodollar Holder Advance may be continued as such if an Event
of Default has occurred and is continuing as of the last day of the
Interest Period for such Eurodollar Holder Advance, and provided, further,
that if the Owner Trustee shall fail to give any required notice as
described above or if such continuation is not permitted pursuant to the
preceding proviso or otherwise, such Advances shall automatically be
converted to ABR Advances on the last day of such then expiring Interest
Period.
7
<PAGE> 11
SECTION 3.9 NOTICE OF AMOUNTS PAYABLE.
(a) In the event that any Holder becomes aware that any amounts are
or will be owed to it pursuant to Sections 11.2(e), 11.3 or 11.4 of the
Participation Agreement or that it is unable to make Holder Advances which
bear a yield based on the Eurodollar Rate plus the Applicable Percentage
for Eurodollar Holder Advances, then it shall promptly notify the Owner
Trustee thereof and, as soon as possible thereafter, such Holder shall
submit to the Owner Trustee a certificate indicating the amount owing to
it and the calculation thereof. The amounts set forth in such certificate
shall be prima facie evidence of the obligations of the Owner Trustee
hereunder.
(b) In the event that any Holder delivers to the Owner Trustee a
certificate in accordance with Section 3.9(a), or any Holder is required
to make Holder Advances with Holder Yields calculated at the ABR in
accordance with Section 11.3(d) of the Participation Agreement, subject to
Section 9.2 of the Participation Agreement, the Owner Trustee may, at the
expense of Lessee and in the discretion of the Owner Trustee, (i) require
such Holder to transfer or assign, in whole or (with such Holder's
consent) in part, without recourse (in accordance with Section 11.8), all
or (with such Holder's consent) part of its interests, rights (except for
rights to be indemnified for actions taken while a party hereunder) and
obligations under this Agreement to a replacement bank or institution if
the Owner Trustee (subject to Section 9.2 of the Participation Agreement)
and with the full cooperation of such Holder) can identify a Person who is
ready, willing and able to be such replacement bank or institution with
respect thereto and such replacement bank or institution (which may be
another Holder) shall assume such assigned obligations, or (ii) during
such time as no Default or Event of Default has occurred and is
continuing, terminate the Holder Commitment of such Holder and prepay the
outstanding Holder Advances of such Holder, provided, however, that (x)
subject to Section 9.2 of the Participation Agreement, the Owner Trustee
or such replacement bank or institution, as the case may be, shall have
paid to such Holder in immediately available funds the amount of the
Holder Advances and Holder Yield accrued to the date of such payment on
the Holder Advances made by it hereunder (and, if such Holder is also a
Lender, the principal and interest on all Loans accrued and unpaid
thereon) and (y) such assignment or termination of the Holder Commitment
of the Holder and prepayment of the Holder Advances do not conflict with
any law, rule or regulation or order of any court or Governmental
Authority.
ARTICLE IV
COLLECTIONS AND DISTRIBUTIONS
SECTION 4.1 COLLECTIONS AND REMITTANCES BY THE OWNER TRUSTEE.
The Owner Trustee agrees that, subject to the provisions of this Trust
Agreement and the Operative Agreements, it will during the term of this Trust
administer the Trust Estate and, at the
8
<PAGE> 12
direction of the Holders, take steps to collect all Rent and other sums payable
to the Owner Trustee by Lessee under the Lease. The Owner Trustee agrees to
distribute, or cause to be distributed, all proceeds received from the Trust
Estate in accordance with Article III and Sections 4.2 and 4.3. The Owner
Trustee shall make, or cause to be made, such distribution promptly upon
receipt of such proceeds (provided, such proceeds are available for
distribution) by the Agent (on behalf of the Owner Trustee), it being
understood and agreed that the Owner Trustee shall not be obligated to make, or
to cause to be made, such distribution until the funds for such distribution
have been received by the Agent (on behalf of the Owner Trustee) in cash or its
equivalent reasonably acceptable to the Owner Trustee.
SECTION 4.2 PRIORITY OF DISTRIBUTIONS.
Subject to the terms and requirements of the Operative Agreements, all
payments and amounts received by Trust Company as the Owner Trustee or on its
behalf shall be distributed to the Agent for allocation by the Agent in
accordance with the terms of Section 8.7 of the Participation Agreement or, if
such payments or amounts are received by the Owner Trustee from the Agent, then
they shall be distributed forthwith upon receipt in the following order of
priority: first, in accordance with the Holder Yield protection provisions set
forth in Section 11.3 of the Participation Agreement; and, second, the balance,
if any, of such payment or amount remaining thereafter shall be distributed to
the Holders pro rata (based on the ratio of the individual Holder's Holder
Commitment to the aggregate of all the Holders' Holder Commitments).
SECTION 4.3 EXCEPTED PAYMENTS.
Anything in this Article IV or elsewhere in this Trust Agreement to the
contrary notwithstanding, any Excepted Payment received at any time by the
Owner Trustee shall be distributed promptly to the Person entitled to receive
such Excepted Payment.
SECTION 4.4 DISTRIBUTIONS AFTER DEFAULT.
Subject to the terms of Section 5.1, the proceeds received by the Owner
Trustee from the exercise of any remedy under the Lease shall be distributed
pursuant to Section 4.2 above. This Trust shall cease and terminate in
accordance with the terms set forth in Section 8.1 and upon the final
disposition by the Owner Trustee of all of the Trust Estate pursuant to this
Section 4.4.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.1 NOTICE OF CERTAIN EVENTS.
In the event the Owner Trustee shall have knowledge of any Default or
Event of Default, the Owner Trustee shall give written notice thereof within
five (5) Business Days to each Holder, Lessee and the Agent unless such Default
or Event of Default no longer exists before the giving
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of such notice. Subject to the provisions of Section 5.3 of this Trust
Agreement and Sections 8.5 and 9.2 of the Participation Agreement, the Owner
Trustee shall take or refrain from taking such action as the Agent shall direct
until such time as the Loans are paid in full (and as more specifically
provided in Sections 8.2(h) and 8.6 of the Participation Agreement) and
thereafter as the Majority Holders shall direct, in each case by written
instructions to the Owner Trustee. If the Owner Trustee shall have given the
Agent and the Holders (and respecting Sections 8.5 and 9.2 of the Participation
Agreement, the Lessee) notice of any event and shall not have received written
instructions as above provided within thirty (30) days after mailing notice of
such event to the Agent and the Holders (and respecting Sections 8.5 and 9.2 of
the Participation Agreement, the Lessee), the Owner Trustee may, but shall be
under no duty to, and shall have no liability for its failure or refusal to,
take or refrain from taking any action with respect thereto, not inconsistent
with the provisions of the Operative Agreements, as the Owner Trustee shall
deem advisable and in the best interests of the Lenders and the Holders. For
all purposes of this Trust Agreement, in the absence of actual knowledge of a
Responsible Officer in the Corporate Trust Department of Trust Company, the
Owner Trustee shall be deemed not to have knowledge of any Default or Event of
Default unless a Responsible Officer of the Corporate Trust Department of Trust
Company receives notice thereof given by or on behalf of a Holder, Lessee or
the Agent.
SECTION 5.2 ACTION UPON INSTRUCTIONS.
Subject to the provisions of Sections 5.1 and 5.3, upon the written
instructions of the Agent or the Majority Holders (as applicable), the Owner
Trustee will take or refrain from taking such action or actions as may be
specified in such instructions.
SECTION 5.3 INDEMNIFICATION.
The Owner Trustee shall not be required to take or refrain from taking any
action under this Trust Agreement or any other Operative Agreement (other than
the actions specified in the first sentence of Section 5.1 and in the last
sentence of Section 5.4) unless Trust Company shall have been indemnified by
Lessee or, at their election, by the Holders and the Lenders against any
liability, fee, cost or expense (including without limitation reasonable
attorneys' fees and expenses) that may be incurred or charged in connection
therewith, other than such as may result from the willful misconduct or gross
negligence of the Owner Trustee. The Owner Trustee shall not be required to
take any action under any Operative Agreement if the Owner Trustee shall
reasonably determine, or shall have been advised by counsel, that such action
is likely to result in personal liability for which the Owner Trustee has not
been and will not be adequately indemnified or is contrary to the terms hereof
or of any Operative Agreement to which the Owner Trustee is a party or is
otherwise contrary to law. The Owner Trustee shall be under no liability with
respect to any action taken or omitted to be taken by the Owner Trustee in
accordance with instructions of the Agent or the Majority Holders pursuant to
Section 5.2.
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SECTION 5.4 NO DUTIES EXCEPT AS SPECIFIED IN TRUST AGREEMENT OR
INSTRUCTIONS.
The Owner Trustee shall not have any duty or obligation to manage,
control, use, make any payment in respect of, register, record, insure,
inspect, sell, dispose of or otherwise deal with any Property or any other part
of the Trust Estate, or to otherwise take or refrain from taking any action
under or in connection with any Operative Agreement to which the Owner Trustee
is a party, except as expressly provided by the terms of this Trust Agreement
or in written instructions from the Agent and/or the Majority Holders, as
applicable, received pursuant to Sections 5.1, 5.2 or 8.4 of this Trust
Agreement or Sections 8.2(h) or 8.6 of the Participation Agreement or from the
Lessee pursuant to Sections 8.5 or 9.2 of the Participation Agreement; and no
implied duties or obligations shall be read into this Trust Agreement against
the Owner Trustee. The Owner Trustee shall have no duty or obligation to
supervise or monitor the performance of the Construction Agent pursuant to the
Agency Agreement which for all purposes shall be an independent contractor.
The Owner Trustee nevertheless agrees that it will (in its individual capacity
and at its own cost and expense), promptly take all action as may be necessary
to discharge any Lessor Liens on any part of the Trust Estate.
SECTION 5.5 NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR INSTRUCTIONS.
The Owner Trustee agrees that it will not manage, control, use, sell,
dispose of or otherwise deal with any Property or any other part of the Trust
Estate except (a) as required by the terms of the Operative Agreements, (b) in
accordance with the powers granted to, or the authority conferred upon, it
pursuant to this Trust Agreement, (c) in accordance with the express terms
hereof or with written instructions from the Agent and/or the Majority Holders,
as applicable, pursuant to Sections 5.1, 5.2 or 8.4 or (d) from the Lessee
pursuant to Sections 8.5 or 9.2 of the Participation Agreement.
SECTION 5.6 ABSENCE OF DUTIES.
(a) Except in accordance with written instructions furnished
pursuant to Sections 5.1, 5.2 or 8.4, and without limitation of the
generality of Section 5.4, the Owner Trustee shall not have any duty to
(i) file, record or deposit any Operative Agreement or any other document,
or to maintain any such filing, recording or deposit or to refile,
rerecord or redeposit any such document; (ii) obtain insurance on any
Property or effect or maintain any such insurance, other than to receive
and forward to each Holder and the Agent any notices, policies,
certificates or binders furnished to the Owner Trustee pursuant to the
Lease; (iii) maintain any Property; (iv) pay or discharge any Tax or any
Lien owing with respect to or assessed or levied against any part of the
Trust Estate, except as provided in the last sentence of Section 5.4,
other than to forward notice of such Tax or Lien received by the Owner
Trustee to each Holder, the Lessee and the Agent; (v) confirm, verify,
investigate or inquire into the failure to receive any reports or
financial statements of Lessee or any other Person; (vi) inspect any
Property any time or ascertain or inquire as to the performance or
observance of any of the covenants of Lessee or any other Person under any
Operative Agreement with respect to any Property; or (vii)
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manage, control, use, sell, dispose of or otherwise deal with any Property
or any part thereof or any other part of the Trust Estate, except as
provided in Section 5.5.
(b) The Owner Trustee, in the exercise or administration of the
trusts and powers hereunder, including without limitation its obligations
under Section 5.2, may, at the expense of Lessee, employ agents,
attorneys, accountants, and auditors and enter into agreements with any of
them and the Owner Trustee shall not be liable, either in its individual
capacity or in its capacity as the Owner Trustee, for the default or
misconduct of any such agents, attorneys, accountants or auditors if such
agents, attorneys, accountants or auditors shall have been selected by it
in good faith.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.1 ACCEPTANCE OF TRUST AND DUTIES.
The Owner Trustee accepts the trust and duties hereby created and agrees
to perform the same, but only upon the terms of this Trust Agreement. The
Owner Trustee agrees to receive, manage and disburse all moneys constituting
part of the Trust Estate actually received by it as the Owner Trustee in
accordance with the terms of this Trust Agreement. The Owner Trustee shall not
be answerable or accountable under any circumstances, except for (i) its own
willful misconduct or gross negligence, (ii) the inaccuracy of any of its
representations or warranties contained in Section 6.3 of this Trust Agreement
or Section 6.1 of the Participation Agreement, (iii) its failure to perform
obligations expressly undertaken by it in the last sentence of Section 5.4 of
this Trust Agreement or in Section 8.2(a) of the Participation Agreement, (iv)
Taxes based on or measured by any fees, commissions or compensation received by
it for acting as the Owner Trustee in connection with any of the transactions
contemplated by the Operative Agreements, or (v) its failure to use ordinary
care to receive, manage and disburse moneys actually received by it in
accordance with the terms of the Operative Agreements.
SECTION 6.2 FURNISHING OF DOCUMENTS.
The Owner Trustee will furnish to each Holder and to the Agent, promptly
upon receipt thereof, duplicates or copies of all reports, notices, requests,
demands, opinions, certificates, financial statements and any other instruments
or writings furnished to the Owner Trustee hereunder or under the Operative
Agreements, unless by the express terms of any Operative Agreement a copy of
the same is required to be furnished by some other Person directly to the
Holders and/or the Agent, or the Owner Trustee shall have determined that the
same has already been furnished to the Holders and the Agent.
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SECTION 6.3 NO REPRESENTATIONS OR WARRANTIES AS TO THE PROPERTIES OR
OPERATIVE AGREEMENTS.
THE OWNER TRUSTEE MAKES (i) NO REPRESENTATION OR WARRANTY, EITHER EXPRESS
OR IMPLIED, AS TO THE TITLE, VALUE, USE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR
ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF) AND THE OWNER TRUSTEE SHALL
NOT BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE
OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT
except that the Owner Trustee hereby represents, warrants and covenants to each
Holder that it will comply with the last sentence of Section 5.4, and (ii) no
representation or warranty as to the validity or enforceability of any
Operative Agreement or as to the correctness of any statement made by a Person
other than the Owner Trustee or the Owner Trustee contained in any thereof,
except that the Owner Trustee represents, warrants and covenants to each Holder
that this Trust Agreement has been and each of the other Operative Agreements
which contemplates execution thereof by the Owner Trustee has been or will be
executed and delivered by its officers who are, or will be, duly authorized to
execute and deliver documents on its behalf.
SECTION 6.4 NO SEGREGATION OF MONEYS; NO INTEREST.
Except as otherwise provided herein or in any of the other Operative
Agreements, moneys received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law, and may be
deposited under such general conditions as may be prescribed by law, and
neither Trust Company nor the Owner Trustee shall be liable for any interest
thereon, except as may be agreed to in writing by the Owner Trustee or the
Trust Company.
SECTION 6.5 RELIANCE; ADVICE OF COUNSEL.
The Owner Trustee shall not incur any liability to any Person in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it in good faith to be signed by the proper party or
parties. The Owner Trustee may accept and rely upon a certified copy of a
resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect. As to any fact or matter
the manner of ascertainment of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on an Officer's Certificate of
the relevant party, as to such fact or matter, and such certificate shall
constitute full protection to the Owner Trustee for any action taken or omitted
to be taken by it in good faith in reliance thereon. In the administration of
the trusts hereunder, the Owner Trustee may execute any of the trusts or powers
hereof and perform its powers and duties hereunder directly or through agents
or attorneys and may consult with counsel, accountants and other skilled
Persons to be selected and employed by it, and the Owner Trustee shall not be
liable for anything done,
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suffered or omitted in good faith by it in accordance with the advice or
opinion of any such counsel, accountants or other skilled Persons and not
contrary to this Trust Agreement.
SECTION 6.6 LIABILITY WITH RESPECT TO DOCUMENTS.
The Owner Trustee, either in its trust or individual capacities, shall not
incur any liability to any Person for or in respect of the recitals herein, the
validity or sufficiency of this Trust Agreement or for the due execution hereof
by each Holder or for the form, character, genuineness, sufficiency, value or
validity of any Property or for or in respect of the validity or sufficiency of
any of the Operative Agreements and the Owner Trustee, either in its trust or
individual capacities, shall in no event assume or incur any liability, duty or
obligation to any Person or to any Holder, other than as expressly provided for
herein or in any of the other Operative Agreements.
SECTION 6.7 NOT ACTING IN INDIVIDUAL CAPACITY.
All Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by the Operative Agreements shall look only to the
Trust Estate (or a part thereof, as the case may be) for payment or
satisfaction thereof, except as specifically provided in this Article VI and
except to the extent that the Owner Trustee shall otherwise expressly agree in
any Operative Agreement to which it is a party, including without limitation
Section 6.1 and Section 8.2(a) of the Participation Agreement and the last
sentence of Section 5.4 hereof.
SECTION 6.8 BOOKS AND RECORDS; TAX RETURNS.
(a) The Owner Trustee shall be responsible for the keeping of all
appropriate books and records relating to the receipt and disbursement of
all moneys that it may receive hereunder, or under any other Operative
Agreement. The Owner Trustee shall, at the expense of Lessee, file an
application with the Internal Revenue Service for a taxpayer
identification number with respect to the trust created hereby. The Owner
Trustee shall, at the expense of Lessee, prepare or cause to be prepared
and the Owner Trustee shall sign and/or file the federal fiduciary tax
return with respect to Taxes due and payable by the trust created hereby
in connection with the transactions contemplated hereby and by any other
Operative Agreement. Each Holder shall furnish the Owner Trustee with all
such information as may be reasonably required from such Holder (as such
is requested in writing by the Owner Trustee) in connection with the
preparation of such tax returns. The Owner Trustee shall keep copies of
all returns delivered to or filed by it.
(b) The Owner Trustee, either in its trust or individual capacities,
shall be under no obligation to appear in, prosecute or defend any action,
which in its opinion may require it to incur any out-of-pocket expense or
any liability unless the Owner Trustee shall be furnished with such
reasonable security and indemnity by Lessee (or, at the election of the
Majority Secured Parties, by the Holders and the Lenders) against such
expense or liability as it may require. The Owner Trustee may, but shall
be under no duty to, undertake such action as it may deem necessary at any
and all times, without any
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further action by the Agent or any Holder to protect one (1) or more of
the Properties and the rights and interests of the Holders pursuant to the
terms of this Trust Agreement; provided, however, that the Owner Trustee
may obtain reimbursement for the out-of-pocket expenses and costs of such
actions, undertakings or proceedings from Lessee.
ARTICLE VII
INDEMNIFICATION OF THE OWNER TRUSTEE
SECTION 7.1 INDEMNIFICATION GENERALLY.
The Owner Trustee is indemnified for matters related to the transactions
described herein by Lessee pursuant to Section 11 of the Participation
Agreement. Except as may be specifically provided from time to time hereafter
in writing by the Holders, the Owner Trustee shall not have any right of
indemnification from any Holder with respect to the transactions described
herein or in any of the other Operative Agreements.
SECTION 7.2 COMPENSATION AND EXPENSES.
Lessee has agreed to pay the fees and expenses of the Owner Trustee as
provided in Section 7.3 of the Participation Agreement.
ARTICLE VIII
TERMINATION OF TRUST AGREEMENT
SECTION 8.1 TERMINATION OF TRUST AGREEMENT.
This Trust Agreement and the trusts created hereby shall terminate and the
Trust Estate shall, subject to the provisions of the Participation Agreement,
the other Operative Agreements and Article IV of this Trust Agreement, be
distributed pro rata to the Holders, and this Trust Agreement shall be of no
further force or effect, upon the earliest of (a) the joint written request of
the Majority Holders following the sale or other final disposition by the Owner
Trustee of all property constituting part of the Trust Estate and the final
distribution by the Owner Trustee of all moneys or other property or proceeds
constituting part of the Trust Estate in accordance with the terms hereof;
provided, however, that (except as provided for in the Operative Agreements)
the Trust Estate shall not be subject to sale or other final disposition by the
Owner Trustee prior to the payment in full and discharge of the Loans and all
other indebtedness secured by the Credit Documents and the release of the
Credit Documents and the Liens granted thereby and the payment in full of the
Holder Amount and Holder Yield thereon and all other amounts owing to the
Holders under any of the Operative Agreements and (b) fifty (50) years after
the date hereof.
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SECTION 8.2 TERMINATION AT OPTION OF THE HOLDERS.
Notwithstanding Section 8.1, this Trust Agreement and the trusts created
hereby shall terminate and the Trust Estate shall be distributed pro rata to
the Holders, and this Trust Agreement shall be of no further force and effect,
upon the joint election of the Holders by notice to the Owner Trustee, if such
notice shall be accompanied by the written agreement of each Holder assuming
all the obligations of the Owner Trustee under or contemplated by the Operative
Agreements and all other obligations of the Owner Trustee incurred by it as
trustee hereunder; provided, however, that each Holder agrees for the express
benefit of the Agent and the Lenders, that without the consent of the Majority
Lenders, no such election shall be effective until the Liens and security
interests of the Security Documents on the Collateral shall have been released
and until full payment of the principal of, and interest on the Loans and all
other sums due to the Lenders shall have been made. Such written agreement
shall be reasonably satisfactory in form and substance to the Owner Trustee and
shall release the Owner Trustee from all further obligations of the Owner
Trustee hereunder and under the agreements and other instruments mentioned in
the preceding sentence.
SECTION 8.3 TERMINATION AT OPTION OF THE OWNER TRUSTEE.
At any time that the Lease shall no longer be in full force and effect and
the Agent shall have confirmed in writing to the Owner Trustee that the Lenders
have received payment in full of the principal of and interest on the Loans and
that all other sums due to the Agent and the Lenders under the Operative
Agreements shall have been made, then the Holders hereby authorize the Owner
Trustee to: (a) terminate this Trust Agreement and the trusts created hereby
and (b) distribute and convey the Trust Estate pro rata to the Holders by
executing the necessary transfer documents as contemplated by Section 8.4. The
exercise of such option by the Owner Trustee shall cause this Trust Agreement
to be of no further force and effect and shall release the Owner Trustee from
all further obligations of the Owner Trustee hereunder and under the agreements
and other instruments mentioned in the preceding sentence.
SECTION 8.4 ACTIONS BY THE OWNER TRUSTEE UPON TERMINATION.
Upon termination of this Trust Agreement and the trusts created hereby
pursuant to Sections 8.1, 8.2 or 8.3, the Owner Trustee shall upon notice of
such event take such action as may be necessary or as may be requested by the
Majority Holders to transfer the Trust Estate pro rata to the Holders,
including without limitation the execution of instruments of transfer or
assignment with respect to any of the Operative Agreements to which the Owner
Trustee is a party.
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ARTICLE IX
SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES
AND SEPARATE OWNER TRUSTEES
SECTION 9.1 RESIGNATION OF THE OWNER TRUSTEE; APPOINTMENT OF SUCCESSOR.
(a) The Owner Trustee may resign at any time without cause by giving
at least thirty (30) days' prior written notice to each Holder, the Agent
and Lessee; provided, however, that such resignation shall not be
effective until the acceptance of appointment by a successor Owner Trustee
under Section 9.1(b). The Owner Trustee may be removed with or without
cause at any time by the Majority Holders upon consent to such removal by
the Agent and with sixty (60) days' prior written notice to the Owner
Trustee, a copy of which notice shall be concurrently delivered by the
Majority Holders to the Agent and Lessee. Any such removal shall be
effective upon the acceptance of appointment by a successor Owner Trustee
under Section 9.1(b). In case of the resignation or removal of the Owner
Trustee, the Holders may appoint a successor Owner Trustee by an
instrument signed by the Majority Holders; provided, however, that such
successor Owner Trustee must be approved by the Agent. In the event the
Owner Trustee shall be an individual, his death or incapacity, or
termination of employment (whether voluntary or involuntary) with First
Security Bank, National Association (or a successor corporate Owner
Trustee) shall be treated as a resignation hereunder and shall be
effective immediately. If a successor Owner Trustee shall not have been
appointed within thirty (30) days after the giving of written notice of
such resignation or the delivery of the written instrument with respect to
such removal, the Owner Trustee or any Holder may apply to any court of
competent jurisdiction to appoint a successor Owner Trustee to act until
such time, if any, as a successor shall have been appointed and shall have
accepted its appointment as above provided. Any successor Owner Trustee
so appointed by such court shall immediately and without further act be
superseded by any successor Owner Trustee appointed as above provided
within one (1) year from the date of the appointment by such court.
(b) Any successor Owner Trustee, however appointed, shall execute
and deliver to the predecessor Owner Trustee an instrument accepting such
appointment, and thereupon such successor Owner Trustee, without further
act shall become vested with all the estates, properties, rights, powers,
duties and trusts of the predecessor Owner Trustee in the trusts hereunder
with like effect as if originally named an Owner Trustee herein; but
nevertheless, upon the written request of such successor Owner Trustee
such predecessor Owner Trustee shall execute and deliver an instrument
transferring to such successor Owner Trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers, duties and trusts
of such predecessor Owner Trustee, and such predecessor Owner Trustee
shall duly assign, transfer, deliver and pay over to such successor Owner
Trustee all moneys or other property then held by such predecessor Owner
Trustee upon the trusts herein expressed.
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(c) Any successor Owner Trustee, however appointed, shall be a bank
or trust company incorporated and doing business within the United States
of America and having a combined capital and surplus of at least
$50,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon
reasonable or customary terms.
(d) Any corporation into which the Owner Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Owner
Trustee shall be a party, or any corporation to which substantially all
the corporate trust business of the Owner Trustee may be transferred,
shall, subject to the terms of Section 9.1(c), be the Owner Trustee under
this Trust Agreement without further act.
SECTION 9.2 CO-TRUSTEES AND SEPARATE TRUSTEES.
Whenever the Owner Trustee or the Majority Holders shall deem it necessary
or prudent in order either (a) to conform to any law of any jurisdiction in
which all or any part of the Trust Estate shall be situated or to which it may
be subject or to make any claim or bring any suit with respect to the Trust
Estate or any Operative Agreement, (b) shall be advised by counsel satisfactory
to it that it is so necessary or prudent, or (c) the Owner Trustee shall have
been directed to do so by the Majority Holders and the Agent, the Owner Trustee
and the Holders shall execute and deliver an agreement supplemental hereto and
all other instruments and agreements, and shall take all other action,
necessary or proper to constitute one (1) or more Persons who need not meet the
requirements of Section 9.1(c) (and the Owner Trustee may appoint one (1) or
more of its officers) either as co-trustee or co-trustees (the "Co-Owner
Trustee"), jointly with the Owner Trustee, of all or any part of the Trust
Estate, or as separate trustee or separate trustees of all or any part of the
Trust Estate, and to vest in such Persons, in such capacity, such title to the
Trust Estate or any part thereof and such rights or duties as may be necessary
or desirable, all for such period and under such terms and conditions as are
satisfactory to the Owner Trustee and the Holders. In accordance with the
foregoing:
(i) The Owner Trustee shall appoint a Co-Owner Trustee hereunder in
part so that if, under any present or future law of any state where any
Property is located or of any jurisdiction in which it may be necessary to
perform any act in carrying out the trusts herein created, the Owner
Trustee or any of its successors may be incompetent or unqualified or
incapacitated or unwilling to perform certain acts as such Owner Trustee,
then upon the written request of the Owner Trustee of any of its
successors received by any Co-Owner Trustee, all of such acts required to
be performed in such jurisdiction in the execution of the trust hereby
created, shall and will be performed by any Co-Owner Trustee, or any of
his successors, in trust acting alone, as if he or such successor had been
specifically authorized so to do or had been the sole Owner Trustee
hereunder. Any Co-Owner Trustee shall continue to perform such acts until
otherwise directed in writing by the Owner Trustee or any of its
successors. Any request in writing by the Owner Trustee or any of its
successors to the Co-Owner Trustee shall be sufficient warrant for him to
take such action as may be so requested.
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(ii) Except as it may be deemed necessary for any Co-Owner Trustee or
any of his successors solely or jointly to execute the trusts herein
created, the Owner Trustee or any of its successors shall solely have and
exercise the powers, and shall be solely charged with the performance of
the duties, hereinbefore declared on the part of the Owner Trustee to be
had, exercised and performed; and any Co-Owner Trustee shall not be liable
therefor. Any Co-Owner Trustee or any successor to him may delegate to
the Owner Trustee or its successor hereunder the exercise of any power,
discretion or otherwise, conferred by any provision of this Trust
Agreement.
(iii) Any act of the Owner Trustee herein required or authorized
shall and will be jointly or separately performed by the Owner Trustee or
its successors hereunder and by any Co-Owner Trustee or any of his
successors appointed hereunder, if such joint performance or separate
performance shall be necessary to the legality of such act and when so
acting all references herein to "First Security Bank, National
Association" shall be deemed to be references to such Co-Owner Trustee in
its individual capacity and all references to "Owner Trustee" shall be
deemed to be references to any Co-Owner Trustee, and such Co-Owner Trustee
shall be entitled to all the protection, indemnification, immunity and
compensation herein provided to the Owner Trustee acting singly in
reference to such acts (subject to the limitations to such a protection,
indemnification, immunity and compensation set forth herein).
(iv) The Owner Trustee or its successor in trust shall have and is
hereby given the power at any time by an instrument in writing duly
executed by a Responsible Officer, to remove any Co-Owner Trustee or his
successor, from his position as Co-Owner Trustee hereunder. In the case
of death, resignation, removal, incapacity or inability to act hereunder
of the Co-Owner Trustee, or his successor as Co-Owner Trustee, any adult
citizen of the United States of America may be appointed Co-Owner Trustee
hereunder by the person who shall at the time be a Responsible Officer of
the corporation then acting as the Owner Trustee hereunder by an
instrument in writing duly executed, and under its corporate seal, and,
subject to its right to revoke such appointment or to appoint another
person, the Owner Trustee shall appoint a successor Co-Owner Trustee, such
appointment to be immediately effective in case of the death, resignation,
removal or inability or incapacity to act hereunder of the Co-Owner
Trustee. In the event a vacancy occurs in the office of the Co-Owner
Trustee, either by reason of resignation, removal, incapacity or inability
to act and no successor is appointed pursuant to the foregoing provisions
within thirty (30) days after such vacancy occurs, the Holders and the
Agent may jointly appoint a successor to the Co-Owner Trustee in the same
manner as is provided for the appointment of a successor to the Co-Owner
Trustee hereunder.
(v) At any time or times, for the purposes of meeting the legal
requirements of any jurisdiction in which any part of the Trust Estate
hereunder may at the time be located, or to avoid any violation of law or
imposition of taxes not otherwise imposed on the Owner Trustee, or if the
Owner Trustee shall deem it desirable for its own protection, the Owner
Trustee shall have power to appoint one (1) or more persons (who may be
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officers of the Owner Trustee either to act as an additional co-trustee,
jointly with the Owner Trustee) of all or any part of the Trust Estate
hereunder, or of any property constituting part thereof, or to act as
separate trustee of any part of the Trust Estate in either case with such
powers as may be provided in the instrument of appointment and are
consistent with the terms hereof, and to vest in such person or persons in
the capacity as aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the remaining provisions of this
Section 9.2.
(vi) Notwithstanding any provision of this Trust Agreement to the
contrary, any additional co-trustee shall act upon and be subject to the
following terms and conditions:
All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred or imposed solely upon and
solely exercised and performed by the Owner Trustee except to the
extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Owner Trustee or the Owner
Trustee shall be incompetent or unqualified to perform such act or
acts or to avoid any violation of law or imposition of taxes not
otherwise imposed on the Owner Trustee, or if the Owner Trustee shall
deem it desirable for its own protection, in which event such rights,
powers, duties and obligations shall be exercised and performed by
such co-trustee or Co-Owner Trustee.
(vii) No power granted by this Trust Agreement to, or which this
Trust Agreement provides may be exercised by, the Owner Trustee in respect
of the custody, control and management of moneys may be exercised by any
Co-Owner Trustee or any subsequently appointed co-trustee except jointly
with, or with the consent in writing of, the Owner Trustee for
disbursement or application in accordance with the terms hereof.
(viii) All moneys which may be received or collected by any
Co-Owner Trustee or such subsequently appointed co-trustees shall be paid
over to the Owner Trustee to be distributed in accordance with this Trust
Agreement and the other Operative Agreements.
(ix) Any Co-Owner Trustee, or any subsequently appointed co-trustee
to the extent permitted by law, does hereby constitute the Owner Trustee
or its successors hereunder his or her agent or attorney in fact, with
full power and authority to do any and all acts and things and exercise
any and all discretion authorized or permitted by the Co-Owner Trustee or
such subsequently appointed co-trustee, in its behalf or in its name.
(x) No trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder.
SECTION 9.3 NOTICE.
At all times that a successor Owner Trustee is appointed pursuant to
Section 9.1, an Owner Trustee resigns pursuant to Section 9.1 or the Co-Owner
Trustee, a co-trustee or separate
20
<PAGE> 24
trustee, is appointed pursuant to Section 9.2, the Holders shall give joint
notice of such fact within thirty (30) days of its occurrence to (x) Lessee, if
the Lease is then in effect and (y) the Agent, if the Credit Agreement is in
effect.
ARTICLE X
AMENDMENTS
SECTION 10.1 AMENDMENTS.
This Trust Agreement may be terminated, amended, supplemented, waived or
modified in accordance with Section 12.4 of the Participation Agreement.
SECTION 10.2 LIMITATION ON AMENDMENTS.
Notwithstanding Section 10.1, the Owner Trustee shall not, without the
consent of the Agent execute any amendment that might result in the trusts
created hereunder being terminated prior to the satisfaction and discharge of
the Lien and security interest of the Security Documents on the Collateral or
prior to the payment in full of the principal of, and interest on the Loans and
other than in accordance with the terms of the Credit Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 NO LEGAL TITLE TO TRUST ESTATE IN THE HOLDERS.
The Holders shall not have legal title to any part of the Trust Estate;
provided, however, that each Holder has a pro rata beneficial interest in the
Trust Estate. No transfer, by operation of law or otherwise, of any right,
title or interest of a Holder in and to the Trust Estate or hereunder shall
operate to terminate this Trust Agreement or the Trust or the trusts hereunder
or entitle any successor or transferee to an accounting or to the transfer to
it of legal title to any part of the Trust Estate.
SECTION 11.2 SALE OF A PROPERTY BY THE OWNER TRUSTEE IS BINDING.
Any sale, transfer, or other conveyance of any Property or any part
thereof by the Owner Trustee made pursuant to the terms of this Trust Agreement
or any other Operative Agreement shall bind the Holders and shall be effective
to sell, transfer and convey all right, title and interest of the Owner Trustee
and the Holders in and to such Property or any part thereof. No purchaser or
other grantee shall be required to inquire as to the authorization, necessity,
expediency or regularity of such sale or conveyance or as to the application of
any sale or other proceeds with respect thereto by the Owner Trustee.
21
<PAGE> 25
SECTION 11.3 LIMITATIONS ON RIGHTS OF OTHERS.
Nothing in this Trust Agreement whether express or implied, shall be
construed to give to any Person, other than the Owner Trustee and each Holder,
any legal or equitable right, remedy or claim under or in respect of this Trust
Agreement, any covenants, conditions or provisions contained herein or in the
Trust Estate; but this Trust Agreement shall be held for the sole and exclusive
benefit of the Owner Trustee and the Holders. The Agent shall have the right
to enforce the provisions of Sections 5.1, 5.2, 5.3, 5.4, 6.2, 6.8, 8.1, 8.2,
8.3, 9.1, 9.2, 9.3, 10.1 and 10.2 prior to the payment in full of the principal
of and interest on the Loans and such other amounts due and payable to the
Lenders or the Agent under the Operative Agreements.
SECTION 11.4 NOTICES.
Unless otherwise expressly specified or permitted by the terms hereof, all
notices hereunder shall be given as provided in Section 12.2 of the
Participation Agreement.
SECTION 11.5 SEVERABILITY.
Any provision of this Trust Agreement that may be determined by competent
authority to be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
SECTION 11.6 LIMITATION ON THE HOLDERS' LIABILITY.
No Holder shall have any liability for the performance of this Trust
Agreement except as expressly set forth herein.
SECTION 11.7 SEPARATE COUNTERPARTS.
This Trust Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one (1) and
the same instrument.
SECTION 11.8 SUCCESSORS AND ASSIGNS.
(a) All covenants and agreements contained herein shall be binding
upon, and inure to the benefit of, Trust Company, the Owner Trustee and
its successors and assigns and each Holder and its successors and assigns,
all as herein provided. Any request, notice, direction, consent, waiver
or other instrument or action by a Holder shall bind the successors and
assigns of such Holder.
22
<PAGE> 26
(b) Any Holder may transfer or assign all or any portion of its
right, title and interest in the Trust Estate, this Trust Agreement and
the Certificate of such Holder in accordance with the requirements of
Section 10.1 of the Participation Agreement and pursuant to an assignment
agreement in a form acceptable to the Owner Trustee, which assignment
agreement shall provide, without limitation, that the assignee undertakes
and assumes all obligations and covenants of a Holder under this Trust
Agreement and the other Operative Agreements. The Holder proposing the
transfer or assignment shall notify the Owner Trustee, the Agent and
Lessee in writing of the effective date of the transfer or assignment,
which effective date shall be at least three (3) Business Days after the
date of such notification. The Owner Trustee shall maintain a register
showing the Holders and their respective interests in the Trust Estate
and, upon the occurrence of a permitted assignment pursuant to this
Section 11.8(b), shall issue a Certificate to the assignee and, if the
assigning Holder is maintaining an interest hereunder, a new Certificate
to such assigning Holder representing its revised interest in the Trust
Estate. The Owner Trustee shall not recognize any purported assignment or
transfer by a Holder that does not comply with the terms of this Section
11.8 and any such attempted transfer or assignment by a Holder in
violation of the terms of this Section 11.8 shall be null and void and of
no effect.
SECTION 11.9 HEADINGS.
The headings of the various articles and sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 11.10 GOVERNING LAW.
THIS TRUST AGREEMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAW
OF, THE STATE OF UTAH.
SECTION 11.11 PERFORMANCE BY THE HOLDERS.
Any obligation of the Owner Trustee hereunder or under any Operative
Agreement or other document contemplated herein may be performed by the Holders
(or by one (1) of them with the written consent of the other) and any such
performance shall not be construed as a revocation of the trusts created
hereby.
SECTION 11.12 CONFLICT WITH OPERATIVE AGREEMENTS.
If this Trust Agreement (or any instructions given by a Holder pursuant
hereto) shall require that any action be taken with respect to any matter and
any other Operative Agreement (or any instructions duly given in accordance
with the terms thereof) shall require that a different action be taken with
respect to such matter, and such actions shall be mutually exclusive, the
provisions of such other Operative Agreement, in respect thereof, shall
control.
23
<PAGE> 27
SECTION 11.13 NO IMPLIED WAIVER.
No term or provision of this Trust Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing entered
into as provided in Section 10.1; and any such waiver of the term hereof shall
be effective only in the specific instance and for the specific purpose given.
SECTION 11.14 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION.
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO
JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY REFERENCE
HEREIN, MUTATIS MUTANDIS.
SECTION 11.15 AMENDMENT AND RESTATEMENT OF PRIOR TRUST AGREEMENT.
This Trust Agreement amends, supersedes and restates in its entirety and
in all respects the Trust Agreement dated as of January 14, 1998 between the
parties hereto. Such earlier Trust Agreement is of no further force or effect.
[SIGNATURE PAGE FOLLOWS]
24
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the date set forth above.
HOLDER:
FIRST UNION NATIONAL BANK
By: /s/ Louis E. Flori
------------------------
Name: Louis E. Flori
----------------------
Title: Vice President
---------------------
OWNER TRUSTEE:
FIRST SECURITY BANK, NATIONAL ASSOCIATION
By: /s/ Brett R. King
----------------------------
Name: Brett R. King
---------------------------
Title: Assistant Vice President
--------------------------
(Guilford Real Estate Trust 1998-1)
<PAGE> 29
SCHEDULE I
HOLDER COMMITMENTS
<TABLE>
<CAPTION>
Holder Commitment
-----------------
Name of Holder Amount/Percentage
-------------- -----------------
<S> <C> <C>
First Union National Bank $600,000 100%
c/o First Union Capital Markets Group
301 South College Street, DC-6
Charlotte, North Carolina 28288-0166
Attention: Ms. Jane O. Hurley,
Capital Markets Services
Telephone: (704) 383-3812
Telecopy: (704) 383-7989
TOTAL $600,000 100%
</TABLE>
I-1
<PAGE> 30
EXHIBIT A
FORM OF HOLDER CERTIFICATE
FIRST SECURITY BANK, NATIONAL ASSOCIATION
TRUSTEE UNDER
TRUST AGREEMENT DATED AS OF FEBRUARY 5, 1998
HOLDER CERTIFICATE
GUILFORD REAL ESTATE TRUST 1998-1
$__________________ ___________, 199__
FIRST SECURITY BANK, NATIONAL ASSOCIATION, as trustee (herein in such
capacity called the "Owner Trustee") under that certain Trust Agreement dated
as of February 5, 1998 (herein called the "Trust Agreement", the defined terms
therein not otherwise defined herein being used herein with the same meanings),
among the several banks and other financial institutions from time to time
parties to the Trust Agreement as the Holders and the Owner Trustee, hereby
certifies for the benefit of ___________________ as follows: (i) this Holder
Certificate is a Holder Certificate referred to in Section 3.1(d) of the Trust
Agreement, which Holder Certificate has been issued by the Owner Trustee
pursuant to the Trust Agreement and (ii) subject to the prior payment of Notes
to the extent provided for in Section 8.7 of the Participation Agreement, and
to the assignment, pledge or mortgage of the Trust Estate to secure the Notes
as set forth in the applicable Operative Agreements, the holder of this Holder
Certificate has an undivided beneficial interest in properties of the Owner
Trustee constituting part of the Trust Estate and is entitled to receive as
provided in the Trust Agreement, a portion of the Rent received or to be
received by the Owner Trustee for the Properties, as well as a portion of
certain other payments which may be received by the Trustee pursuant to the
terms of the Operative Agreements as more particularly set forth therein.
All amounts payable hereunder and under the Trust Agreement shall be paid
only from the income and proceeds from the Trust Estate and only to the extent
that the Owner Trustee (or the Agent on behalf of the Owner Trustee) shall have
received sufficient income or proceeds from the Trust Estate to make such
payments in accordance with the terms of the Trust Agreement, except as
specifically provided in Section 6.1 of the Trust Agreement; and the holder
hereof, by its acceptance of this Holder Certificate, agrees that it will look
solely to the income and proceeds from the Trust Estate to the extent available
for distribution to the holder hereof as provided in the Trust Agreement and
that, except as specifically provided in the Trust
A-1
<PAGE> 31
Agreement, the Owner Trustee is not personally liable to the holder hereof for
any amount payable under this Holder Certificate or the Trust Agreement.
The amounts payable to the holder hereof pursuant to the Trust Agreement
shall be paid or caused to be paid by the Owner Trustee to, or for the account
of, such Holder, or its nominee, by transferring such amount in immediately
available funds to a bank institution or banking institutions with bank wire
transfer facilities for the account of such Holder or as otherwise instructed
in writing from time to time by such Holder.
This Holder Certificate shall mature, and all amounts payable to the
holder hereof pursuant to the Trust Agreement shall be due and payable, on the
Maturity Date.
This Holder Certificate shall bear a yield on the unpaid amount hereof
from time to time outstanding hereunder and under the Trust Agreement at the
Holder Yield as provided in the Trust Agreement. The Holder Yield on this
Holder Certificate shall be computed as provided in the Trust Agreement and
shall be payable at the rates, at the times and from the dates specified in the
Trust Agreement.
From and after the execution of the Participation Agreement, the rights of
the holder of this Holder Certificate under the Trust Agreement as well as the
beneficial interest of the holder of this Holder Certificate in and to the
properties of the Owner Trustee constituting part of the Trust Estate, are
subject and subordinate to the rights of the holders of the Notes to the extent
provided in the applicable Operative Agreements. The Trust Estate has been or
will be assigned, pledged and mortgaged to the Agent, on behalf of the Lenders
and the Holders, as security for the Notes and the Holder Certificates.
Reference is hereby made to the Trust Agreement, the Participation Agreement,
the Credit Agreement, the Security Agreement and the Notes for statements of
the rights of the holder of this Holder Certificate and of the rights of the
holders of, and the nature and extent of the security for, the Notes, as well
as for a statement of the terms and conditions of the trusts created by the
Trust Agreement, to all of which terms and conditions the holder hereof agrees
by its acceptance of this Holder Certificate.
The holder hereof, by its acceptance of this Holder Certificate, agrees
not to transfer this Holder Certificate except in accordance with the terms of
the Trust Agreement and the other Operative Agreements.
THIS HOLDER CERTIFICATE SHALL BE INTERPRETED AND ENFORCED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS)
AND DECISIONS OF THE STATE OF UTAH. WHENEVER POSSIBLE EACH PROVISION OF THIS
HOLDER CERTIFICATE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND
VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS HOLDER CERTIFICATE
SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
A-2
<PAGE> 32
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS HOLDER CERTIFICATE.
THIS HOLDER CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR "BLUE SKY" LAW, AND MAY NOT BE
TRANSFERRED, SOLD OR OFFERED FOR SALE IN VIOLATION OF SUCH ACT OR LAWS.
THIS HOLDER CERTIFICATE (OR ANY PORTION HEREOF) MAY ONLY BE TRANSFERRED TO
A PERSON IN ACCORDANCE WITH THE PROVISIONS OF THE TRUST AGREEMENT REFERRED TO
ABOVE AND THE PARTICIPATION AGREEMENT REFERRED TO IN SUCH TRUST AGREEMENT.
[The remainder of this page has been intentionally left blank.]
A-3
<PAGE> 33
IN WITNESS WHEREOF, the undersigned authorized officer of the Owner
Trustee has executed this Holder Certificate as of the date first set forth
above.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly set forth
herein, but solely as the Owner Trustee under the
Guilford Real Estate Trust 1998-1
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 1
EXHIBIT 10.46
AGENCY AGREEMENT
Dated as of February 5, 1998
between
GUILFORD PHARMACEUTICALS INC.,
as the Construction Agent
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as the
Owner Trustee under the Guilford Real Estate Trust 1998-1
as the Lessor
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS; RULES OF USAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
1.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------
ARTICLE II APPOINTMENT OF THE CONSTRUCTION AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
2.2 Acceptance and Undertaking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------------------
2.3 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----
2.4 Scope of Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------------
2.5 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------------
2.6 Covenants of the Construction Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------------------------
2.7A. Supplemental Covenants of the Construction Agent. . . . . . . . . . . . . . . . . . . . . . . . 6
------------------------------------------------
ARTICLE III THE PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------
3.2 Amendments; Modifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-------------------------
3.3 Limited Obligation Event. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------------------------
3.4 Failure to Complete Construction Period Properties and Purchase
---------------------------------------------------------------
Obligation - Environmental Violations and Abandonment.. . . . . . . . . . . . . . . . . . . . . . 10
-----------------------------------------------------
ARTICLE IV PAYMENT OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Right to Receive Construction Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----------------------------------
ARTICLE V EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-----------------
5.2 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-------
5.3 Remedies; Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-----------------------------
5.4 Limitation on Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
----------------------
ARTICLE VI THE LESSOR'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Exercise of the Lessor's Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-------------------------------
6.2 The Lessor's Right to Cure the Construction Agent's Defaults. . . . . . . . . . . . . . . . . . . 15
------------------------------------------------------------
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-------
7.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
----------------------
7.3 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------------
7.4 SUBMISSION TO JURISDICTION; VENUE; WAIVERS; ARBITRATION . . . . . . . . . . . . . . . . . . . . . 16
-------------------------------------------------------
7.5 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
----------------------
7.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
------------
7.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
------------
7.8 Headings and Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
------------------------------
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
7.9 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------------
</TABLE>
ii
<PAGE> 4
AGENCY AGREEMENT
THIS AGENCY AGREEMENT, dated as of February 5, 1998 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
the "Agreement"), between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association ("FSB"), not individually, but solely as Owner Trustee
under the Guilford Real Estate Trust 1998-1 (the "Lessor") and GUILFORD
PHARMACEUTICALS INC., a Delaware corporation (the "Construction Agent").
PRELIMINARY STATEMENT
A. The Lessor and the Construction Agent are parties to that
certain Lease Agreement dated as of even date herewith (as amended, modified,
extended, supplemented, restated and/or replaced from time to time, the
"Lease"), pursuant to which the Construction Agent, as lessee (in such
capacity, the "Lessee") has agreed to lease certain Land, Improvements and
Equipment and/or to sublease a ground leasehold in certain Properties subject
to one (1) or more Ground Leases from the Lessor.
B. In connection with the execution and delivery of the
Participation Agreement, the Lease and the other Operative Agreements, and
subject to the terms and conditions hereof, (i) the Lessor desires to appoint
the Construction Agent as its sole and exclusive agent in connection with the
identification and acquisition or ground lease of the Properties (provided,
title to the Properties shall be held in the name of the Lessor, except that
the interest of the Lessor in certain of the Properties shall be a ground
leasehold interest pursuant to one (1) or more Ground Leases, if requested by
the Construction Agent) and the development, acquisition, installation,
construction and testing of the Improvements and the Equipment in accordance
with the Plans and Specifications and (ii) the Construction Agent desires, for
the benefit of the Lessor, to identify and acquire or ground lease the
Properties and to cause the development, acquisition, installation,
construction and testing of the Improvements, the Equipment and the other
components of the Properties in accordance with the Plans and Specifications
and to undertake such other liabilities and obligations as are herein set
forth.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
<PAGE> 5
ARTICLE I
DEFINITIONS; RULES OF USAGE
1.1 DEFINITIONS.
For purposes of this Agreement, capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned to
them in Appendix A to that certain Participation Agreement dated as of February
5, 1998 (as amended, modified, extended, supplemented, restated and/or replaced
from time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among the Construction Agent, the Lessor, the
various banks and lending institutions parties thereto from time to time, as
Holders, the various banks and lending institutions parties thereto from time
to time, as Lenders, and First Union National Bank, as the agent for the
Lenders and respecting the Security Documents, as the agent for the Lenders and
the Holders, to the extent of their interests. Unless otherwise indicated,
references in this Agreement to articles, sections, paragraphs, clauses,
appendices, schedules and exhibits are to the same contained in this Agreement.
1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the
Participation Agreement shall apply to this Agreement.
ARTICLE II
APPOINTMENT OF THE CONSTRUCTION AGENT
2.1 APPOINTMENT.
Subject to the terms and conditions hereof, the Lessor hereby
irrevocably designates and appoints the Construction Agent as its exclusive
agent, and the Construction Agent accepts such appointment, in connection with
the identification and acquisition from time to time of the Properties
(provided, title to the Properties shall be held in the name of the Lessor,
except that the interest of the Lessor in certain Properties shall be a ground
leasehold interest pursuant to one (1) or more Ground Leases if requested by
the Construction Agent) and the development, acquisition, installation,
construction and testing of the Improvements, the Equipment and the other
components of the Properties in accordance with the Plans and Specifications on
the Land, and pursuant to the terms of the Operative Agreements.
Notwithstanding any provisions hereof or in any other Operative Agreement to
the contrary, the Construction Agent acknowledges and agrees that the Lessor
shall advance no more than the sum of the aggregate Commitment of the Lenders
plus the aggregate amount of the Holder Commitments of the Holders in regard to
the Properties (including without limitation for any and all Advances in the
aggregate from the Lenders under the Credit Agreement and from the Holders
under the Trust Agreement).
2
<PAGE> 6
2.2 ACCEPTANCE AND UNDERTAKING.
The Construction Agent hereby unconditionally accepts the agency
appointment and undertakes, for the benefit of the Lessor, to identify and
acquire certain Properties (provided, title to the Properties shall be held in
the name of the Lessor, except that the interest of the Lessor in certain
Properties shall be a ground leasehold interest pursuant to one (1) or more
Ground Leases if requested by the Construction Agent) and the development,
acquisition, installation, design, construction and testing of the
Improvements, the Equipment and the other components of the Properties in
accordance with the Plans and Specifications and the Operative Agreements.
2.3 TERM.
This Agreement shall commence on the date hereof and shall terminate
on the Construction Period Termination Date.
2.4 SCOPE OF AUTHORITY.
(a) The Lessor hereby expressly authorizes the
Construction Agent, or any agent or contractor of the Construction
Agent, and the Construction Agent unconditionally agrees for the
benefit of the Lessor, subject to Section 2.4(b), to take all action
necessary or desirable for the performance and satisfaction of any and
all of the Lessor's obligations under any construction agreement and
to fulfill all of the obligations of the Construction Agent including
without limitation:
(i) the identification and assistance with the
acquisition of Properties in accordance with the terms and
conditions of the Participation Agreement;
(ii) all design and supervisory functions relating
to the development, acquisition, installation, construction
and testing of the related Improvements, Equipment and other
components of the applicable Property and performing all
engineering work related thereto;
(iii) (A) negotiating, entering into, performing
and enforcing all contracts and arrangements to acquire or
ground lease the Properties and to procure the equipment
necessary to construct the Properties and (B) negotiating,
executing, performing and enforcing all contracts and
arrangements to develop, acquire, install, construct and test
the Improvements, the Equipment and the other components of
the Properties on such terms and conditions as are customary
and reasonable in light of local and national standards and
practices and the businesses in which the Lessee is engaged;
(iv) obtaining all necessary permits, licenses,
consents, approvals, entitlements and other authorizations,
including without limitation all of the foregoing required for
the Properties and the use and occupancy thereof and those
3
<PAGE> 7
required under applicable Law (including without limitation
Environmental Laws), from all Governmental Authorities in
connection with the development, acquisition, installation,
construction and testing of the Improvements, the Equipment
and the other components of the Properties in accordance with
the Plans and Specifications;
(v) maintaining all books and records with
respect to the Properties and the construction, operation and
management thereof; and
(vi) performing any other acts necessary in
connection with the identification and acquisition or ground
leasing of the Properties and the development, acquisition,
installation, construction and testing of the related
Improvements, Equipment and all other additional components of
the Properties in accordance with the Plans and
Specifications.
(b) Neither the Construction Agent nor any of its
Affiliates or agents shall enter into any contract or consent to any
contract in the name of the Lessor without the Lessor's prior written
consent, such consent to be given or withheld in the exercise of the
Lessor's reasonable discretion; provided, however, that (i) no such
contract will increase the obligations of the Lessor beyond the
obligations of the Lessor as are expressly set forth in the Operative
Agreements and (ii) each such contract shall be expressly non-recourse
to the Lessor on terms and conditions that are reasonably acceptable
to the Lessor.
(c) Subject to the terms and conditions of this Agreement
and the other Operative Agreements, the Construction Agent shall have
sole management and control over the installation, construction and
testing means, methods, sequences and procedures with respect to the
Properties.
2.5 DELEGATION OF DUTIES
The Construction Agent may execute any of its duties under this
Agreement by or through agents, contractors, employees or attorneys-in-fact;
provided, however, that no such delegation shall limit or reduce in any way the
Construction Agent's duties and obligations under this Agreement.
2.6 COVENANTS OF THE CONSTRUCTION AGENT.
The Construction Agent hereby covenants and agrees that it will:
(a) following the Construction Commencement Date for each
Property, cause the development, acquisition, installation, design,
construction and testing of such Property to be prosecuted in a good
and workmanlike manner, and respecting each Property in accordance
with the applicable Plans and Specifications, the Construction Budget,
the applicable contracts relating to the Improvements, the Equipment,
other
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components of such Property and procurement of construction materials,
the applicable construction contracts, the applicable construction
schedule, prevalent industry practices and otherwise in accordance
with Section 3.1 hereof;
(b) commence construction and cause the initial
Construction Advance to be made with respect to the Improvements on
dates that are each within six (6) months after the Initial Closing
Date;
(c) cause the Completion Date for any Improvements to
occur on or before the earlier of (i) the date that is twenty-four
(24) months after the initial Construction Advance made in connection
with such Improvements or (ii) the Construction Period Termination
Date, in each case free and clear (by removal or bonding) of Liens or
claims for materials supplied or labor or services performed in
connection with the development, acquisition, installation,
construction or testing thereof;
(d) cause the Improvements to be substantially completed
within eighteen (18) months after the initial Construction Advance is
made in connection with such Improvements;
(e) at all times subsequent to the initial Advance
respecting a Property (i) cause good and marketable title to the
applicable Property to vest in the Owner Trustee (except that the
interest of the Lessor in certain Properties shall be a ground
leasehold interest pursuant to one (1) or more Ground Leases if
requested by the Construction Agent), (ii) cause a valid, perfected,
first priority Lien on the applicable Property to be in place in favor
of the Agent (for the benefit of the Lenders and the Holders), (iii)
file all necessary documents under the applicable real property law
and Article 9 of the Uniform Commercial Code to perfect such title and
Liens and (iv) not permit Liens (other than Permitted Liens and Lessor
Liens) to be filed or maintained respecting the applicable Property;
(f) no less than five (5) Business Days prior to the
scheduled date for the initial Construction Advance to be made in
connection with any Property, the Construction Agent shall deliver to
the Agent (for the benefit of the Lessor) true, complete and correct
copies of the Construction Budget therefor. Thereafter, the
Construction Agent, on a monthly basis, shall deliver to the Lessor
true, correct and complete copies of any material modifications of the
Construction Budget and progress reports regarding the development,
acquisition, installation, construction and testing of the Properties;
(g) procure insurance for the Properties during the
Construction Period in accordance with the provisions of Article XIV
of the Lease;
(h) on or before the Construction Period Termination
Date, cause the Rent Commencement Date to occur with respect to all
Properties or purchase any such Properties for an amount equal to
(subject to the provisions of Section 3.3 hereof) the
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sum referenced in Section 5.3(b) hereof and otherwise in compliance
with the other terms and provisions of the Operative Agreements; and
(i) except for the payment of real estate taxes or the
equivalency charge as referenced in Sections 1:08 and 6:05(ii) of the
Land Disposition Agreement prior to the Completion Date, the
Construction Agent shall (i) satisfy, or cause to be satisfied, all
obligations of the Developer (as such term is defined in the Land
Disposition Agreement) pursuant to each of the Land Disposition
Agreement and the City of Baltimore Commitment and (ii) be fully
responsible for all liabilities of the Developer pursuant to each of
the Land Disposition Agreement and the City of Baltimore Commitment.
2.6A. SUPPLEMENTAL COVENANTS OF THE CONSTRUCTION AGENT.
To the extent any other provisions of the Operative Agreements
conflict with the provisions of Section 2.6A, the provisions of this Section
2.6A shall govern. With respect to the Properties, the Construction Agent
hereby covenants and agrees that:
(a) The Construction Agent will cause the acquisition of
the Land to be prosecuted with diligence and continuity and will
complete, on or before the Completion Date, (i) the construction of
Improvements in accordance with the Plans and Specifications, and (ii)
the purchase and installation of all necessary components in or at the
Properties, all of which shall be completed free and clear of Liens
(except for Lessor Liens and Permitted Liens.)
(b) All building and other governmental permits necessary
for particular Work have been obtained with respect to the Properties
or will be obtained prior to commencing the particular Work for which
they are required.
(c) The Plans and Specifications have been approved (or
will be prior to commencing the particular Work for which approvals
are required), to the extent required by applicable law or any
restrictive covenant, respectively, by all local authorities and the
beneficiary of any such covenant; the applicable portions of the Plans
and Specifications to be approved have also been approved (or will be
prior to commencing the particular Work for which approvals are
required) by the Construction Agent, the Agent and the Agent's
construction inspector; all construction, if any, heretofore performed
on each Property has been performed within the perimeter of such
Property in accordance with the Plans and Specifications and in
accordance with any restrictive covenants applicable thereto; there
are no material structural defects in the Improvements; and no
material violation of any law exists with respect to any Property.
The Construction Agent shall not permit any changes in the Plans and
Specifications (after they have been delivered to the Agent) or any
change orders in the construction contracts for any Property (after
they have been delivered to the Agent) which would increase the
unfunded cost thereof without the prior written consent of the Agent
and any governmental authorities having jurisdiction if such consent
is required.
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(d) The Construction Agent will permit the Agent and its
representatives (including but not limited to the Agent's construction
inspector) to enter upon any of the Properties during normal working
hours and upon reasonable advance notice to the Construction Agent, to
inspect the Properties and all materials at the site, and will
cooperate, and cause the contractors of the Construction Agent to
cooperate, with the Agent and the Agent's construction inspector in
connection with any such inspections. Upon any such entry, the
entering party shall not disrupt the construction process in any
material way and shall use reasonable care in conducting itself.
(e) Unless such was previously attached to a Requisition
and delivered to the Agent, the Construction Agent will deliver to the
Agent, on demand in writing, copies of any contracts, bills of sale,
statements, receipted vouchers or agreements, under which the
Construction Agent claims title to any materials, fixtures or articles
incorporated in any of the Properties or subject to the lien of the
Security Documents.
(f) The Construction Agent upon demand in writing by the
Agent in its reasonable discretion, will commence and proceed promptly
and diligently to correct any structural defect in the Properties or
any departure from the Plans and Specifications not approved as herein
provided. The Agent shall determine in its reasonable discretion
whether the Construction Agent is acting promptly and diligently. No
approval by the Financing Parties of any Advances will constitute a
waiver of the Agent's right to require compliance with this covenant
with respect to any such defects or departures from the Plans and
Specifications.
(g) At the Agent's written request, the Construction
Agent will (i) deliver to the Agent the names of all Persons with whom
it intends to contract for the acquisition of the Properties or for
the furnishing of labor or materials therefor, and a copy of each
contract, subcontract and agreement relating thereto, and (ii) obtain
the approval of the Agent (which approval shall not be unreasonably
withheld, delayed or conditioned) prior to executing any contract or
any subcontract with respect to the acquisition and/or construction of
the Properties.
(h) During the acquisition and/or construction of the
Properties, the Construction Agent will keep adequate records and
books of account with respect to the Properties and will upon
reasonable prior notice to the Construction Agent permit the Agent, by
its agents, accountants and attorneys during normal working hours, to
visit and inspect the Properties and examine such records and books of
account and to discuss the affairs, finances and accounts pertaining
thereto with representatives and agents of the Construction Agent at
such reasonable times as may be reasonably requested by the Agent.
(i) The Construction Agent will comply (in all material
respects) with all applicable building restrictions, zoning
ordinances, building codes, environmental protection requirements and
other governmental requirements applicable to the Properties.
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(j) The Construction Agent will promptly pay or cause to
be paid all of the contractors, subcontractors and materialmen
performing Work in connection with the Properties the amounts justly
due to them, and receive and apply the Advances solely for the purpose
of paying the costs of the Completion of the Properties or as
otherwise expressly permitted pursuant to the Operative Agreements.
No person contracting with the Construction Agent with respect
to the acquisition and/or construction of the Properties shall have
the right to be reimbursed by the Financing Parties under any
circumstances whatsoever. The participation of the Financing Parties
in the transactions contemplated hereby, shall not in any way be
construed as obligating the Financing Parties to any Person for the
payment of any expense incurred with respect to the acquisition and/or
construction of the Properties.
(k) As soon as the footings and foundations (if any) of
any new Improvements to be constructed as part of the Properties are
in, if deemed necessary by the Agent, the Construction Agent shall
cause to be delivered to the Agent a location survey prepared by a
surveyor approved by the Agent showing the location of such new
Improvements in relation to the boundary lines thereof and setback
restrictions applicable thereto and stating that such location is in
compliance with all setback and other applicable restrictions. As
construction of such new Improvements progresses, and upon their
completion, the Construction Agent will supply such further location
surveys as the Agent may reasonably require from time to time to
assure itself that such new Improvements do not extend beyond such
boundary lines and setback and other restrictions.
(l) The Construction Agent will take such action and
institute such proceedings as shall be necessary to cause and require
all contractors, subcontractors, and material suppliers to complete
their contracts related to the Properties diligently in accordance
with the terms of such contracts, including without limitation the
correcting of any defective Work.
ARTICLE III
THE PROPERTIES
3.1 CONSTRUCTION.
The Construction Agent shall cause the Improvements, the Equipment and
all other components of the Properties to be developed, acquired, installed,
constructed and tested in compliance with all Legal Requirements, all Insurance
Requirements, all manufacturer's specifications and standards and the standards
maintained by the Construction Agent for similar properties owned or operated
by the Construction Agent, and all specifications and standards applicable to
properties of the Lessee which are similar to the Permitted Facilities, unless
non-
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compliance, individually or in the aggregate, shall not have and could not be
reasonably expected to have a Material Adverse Effect.
3.2 AMENDMENTS; MODIFICATIONS.
(a) The Construction Agent may at any time revise, amend
or modify (i) the Plans and Specifications without the consent of the
Lessor; provided, that any such amendment to the Plans and
Specifications does not (x) result in the Completion Date of the
Improvements occurring on or after the Construction Period Termination
Date or (y) result in the cost of all Improvements exceeding the
amount specified in the Construction Budget, as amended from time to
time, or an amount equal to the sum of the then Available Commitments
plus the then Available Holder Commitments (reduced by the amount, if
any, necessary to pay for the cost of construction and development of
Improvements on other Properties which are currently under
construction but have not yet been completed (such amount the
"Unfunded Amount")), and (ii) the Construction Budget and enter into
any related amendments, modifications or supplements without the
consent of the Lessor; provided, that such revisions, amendments or
modifications to the Plans and Specifications or related amendments,
modifications or supplements to the Construction Budget do not result
in any increase in total Property Costs greater than the amount
specified in the Construction Budget, as amended from time to time, or
the then Available Commitments and Available Holder Commitment
(reduced by the Unfunded Amount).
(b) The Construction Agent agrees that it will not
implement any revision, amendment or modification to the Plans and
Specifications for any Property if the aggregate effect of such
revision, amendment or modification, when taken together with any
previous or contemporaneous revision, amendment or modification to the
Plans and Specifications for any Property, would cause a material
reduction in value in excess of the cost reduction of such revision,
amendment or modification of the Property when completed, unless such
revision, amendment or modification is required by Legal Requirements.
3.3 LIMITED OBLIGATION EVENT.
If at any time prior to the Completion Date with respect to any
Construction Period Property there occurs a Limited Obligation Event, then the
Construction Agent shall elect one of the options set forth in the following
Sections 3.3(a) and 3.3(b): (a) the Construction Agent shall pay to the Lessor,
on a date designated by the Lessor, an aggregate amount equal to (i) the
Termination Value of such Construction Period Property plus (ii) any and all
fees and expenses incurred by or on behalf of the Lessor or the Agent in
connection with such Construction Period Property (including without limitation
the transfer thereof) and on such date Lessor shall transfer and convey to the
Construction Agent all right, title and interest of Lessor in and to such
Construction Period Property or (b) the Construction Agent shall pay to the
Lessor, on a date designated by the Lessor, an aggregate amount equal to the
Maximum Residual Guarantee Amount (calculated for these purposes as an amount
equal to the product of the aggregate
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Property Cost for such Construction Period Property times eighty-nine percent
(89%)) and thereafter the Construction Agent (within one hundred twenty days
(120) of the occurrence of the Limited Obligation Event) shall cause such
Construction Period Property to be transferred to a Person other than the
Construction Agent or any Affiliate of the Construction Agent (or, to the
extent the Limited Obligation Event is a Condemnation, then the Construction
Agent shall coordinate, at the request of the Lessor, such proceedings with the
applicable Governmental Authority). Any and all proceeds from such
Construction Period Property after the occurrence of a Limited Obligation Event
(including without limitation insurance proceeds and condemnation proceeds)
shall be payable to the Lessor until such time as there shall have been paid in
full the aggregate Termination Value for such Construction Period Property and
any and all fees and expenses incurred by or on behalf of the Lessor or the
Agent in connection with such Construction Period Property (including without
limitation the transfer thereof). Excess proceeds shall be payable to the
Construction Agent for its individual account. To the extent proceeds from
such Construction Period Property are insufficient to pay fully the fees and
expenses referenced in the prior sentence, the Construction Agent shall pay the
shortfall; provided, the aggregate sum of such fees and expenses plus the
Maximum Residual Guarantee Amount referenced above shall not exceed eighty-nine
and nine tenths percent (89.9%) of the aggregate Property Cost for such
Construction Period Property. In connection with any transfer referenced above
of such Construction Period Property by the Lessor, the Lessor shall convey
such Construction Period Property "AS-IS, WHERE-IS" and in its then present
physical condition to the applicable Person free and clear of Lessor Liens. If
a Casualty, Condemnation or Force Majeure Event occurs which does not
constitute a Limited Obligation Event, the Construction Agent shall promptly
and diligently complete the development, acquisition, refinancing,
installation, construction and testing of such Construction Period Property in
accordance with the Plans and Specifications and with the terms hereof and
cause the Completion Date with respect to such Construction Period Property to
occur on or prior to the Construction Period Termination Date.
3.4 FAILURE TO COMPLETE CONSTRUCTION PERIOD PROPERTIES AND
PURCHASE OBLIGATION - ENVIRONMENTAL VIOLATIONS AND ABANDONMENT.
If at any time prior to the Completion Date with respect to any
Construction Period Property (a) there shall occur any Environmental Violation
which the Lessor deems material in its reasonable discretion or (b) the
Construction Agent shall abandon or permanently discontinue the construction
and development of such Construction Period Property (which abandonment or
permanent discontinuance shall be deemed to have occurred if no work at such
Construction Period Property site is undertaken or completed during a
continuous period of sixty (60) days or more for reasons other than a Limited
Obligation Event, then the Construction Agent shall pay to Lessor, on a date
designated by the Lessor, an aggregate amount equal to the liquidated damages
amount referenced in Section 5.3(b) of this Agreement regarding such
Construction Period Property and on such date Lessor shall transfer and convey
to the Construction Agent all right, title and interest of Lessor in and to
such Construction Period Property. At the cost and expense of the Construction
Agent, the Lessor shall convey such Construction Period Property "AS-IS,
WHERE-IS" and in its then present physical condition to the Construction Agent
or its designee free and clear of Lessor Liens. If the Construction Agent is
not required to pay such liquidated
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damages, it shall promptly and diligently complete the development,
acquisition, refinancing, installation, construction and testing of such
Construction Period Property in accordance with the Plans and Specifications
and with the terms hereof and cause the Completion Date with respect to such
Construction Period Property to occur on or prior to the Construction Period
Termination Date. Any determination that an Environmental Violation is
immaterial for purposes of this Agreement shall not limit the obligations of
Lessee respecting such Environmental Violation under the Lease.
ARTICLE IV
PAYMENT OF FUNDS
4.1 RIGHT TO RECEIVE CONSTRUCTION COST.
(a) In connection with the development, acquisition,
installation, construction and testing of any Property and during the
course of the construction of the Improvements on any Property, the
Construction Agent may request that the Lessor advance funds for the
payment of Property Acquisition Costs or other Property Costs, and the
Lessor will comply with such request to the extent provided for under
the Participation Agreement. The Construction Agent and the Lessor
acknowledge and agree that the Construction Agent's right to request
such funds and the Lessor's obligation to advance such funds for the
payment of Property Acquisition Costs or other Property Costs is
subject in all respects to the terms and conditions of the
Participation Agreement and each of the other Operative Agreements.
Without limiting the generality of the foregoing it is specifically
understood and agreed that in no event shall the aggregate amounts
advanced by the Lenders and the Holders for Property Acquisition Costs
or other Property Costs and any other amounts due and owing hereunder
or under any of the other Operative Agreements exceed the sum of the
aggregate Commitment of the Lenders plus the aggregate amount of the
Holder Commitments, including without limitation such amounts owing
for (i) development, acquisition, installation, design, construction
and testing of the Properties, (ii) additional amounts which accrue or
become due and owing under the Credit Agreement or Trust Agreement as
obligations of the Lessor prior to any Completion Date or (iii) any
other purpose specified in the Operative Agreements.
(b) The proceeds of any funds made available to the
Lessor to pay Property Acquisition Costs or other Property Costs shall
be made available to the Construction Agent in accordance with the
Requisition relating thereto and the terms of the Participation
Agreement. The Construction Agent will use such proceeds only to pay
the Property Acquisition Costs or other Property Costs set forth in
the Requisition relating to such funds.
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ARTICLE V
EVENTS OF DEFAULT
5.1 EVENTS OF DEFAULT.
If any one (1) or more of the following events (each an "Agency
Agreement Event of Default") shall occur:
(a) the Construction Agent fails to apply any funds paid
by the Lessor to the Construction Agent in a manner consistent with
the requirements of the Operative Agreements and as specified in the
applicable Requisition for the development, acquisition, installation,
construction and testing of the Properties and related Improvements
and Equipment or otherwise respecting the Properties to the payment of
Property Acquisition Costs or other Property Costs;
(b) except as otherwise provided in Sections 3.3, 5.1(a),
5.1(c), 5.1(d), 5.1(e) or 5.1(f), the Completion Date with respect to
any Property shall fail to occur for any reason on or prior to the
Construction Period Termination Date;
(c) except as otherwise provided in Sections 5.1(a),
5.1(b), 5.1(d), 5.1(e) or 5.1(f), the Construction Agent shall
materially breach any of its representations or warranties under this
Agreement or shall fail to observe or perform any term, covenant or
condition of this Agreement other than as set forth in paragraphs (a),
(b), (d), (e) or (f) of this Section 5.1 and such failure to observe
or perform any such term, covenant or condition shall continue for
more than fifteen (15) days after notice thereof to the Construction
Agent; provided, if any such failure to observe or perform any such
term, covenant or condition is not capable of remedy with such fifteen
(15) day period but may be remedied with further diligence and if the
Construction Agent has and continues to pursue such remedy, then the
Construction Agent shall be granted additional time to pursue such
remedy but in no event more than an additional thirty (30) days;
(d) any Lease Event of Default;
(e) the Construction Agent shall abandon or permanently
discontinue the construction and development of any Construction
Period Property, which abandonment or permanent discontinuance shall
be deemed to have occurred if no Work at such Construction Period
Property site is undertaken or completed during a continuous period of
sixty (60) days or more for reasons other than a Limited Obligation
Event and prior to such abandonment or permanent discontinuance, the
Lenders and the Holders shall have consistently made the Advances
requested from time to time to the Construction Agent; and
(f) in connection with any Property, this Agreement and
the obligations of the Construction Agent regarding such Property or
pursuant to this Agreement, the
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Construction Agent (through any act or omission) shall have been
grossly negligent or engaged in any act or omission constituting
willful misconduct or fraud.
then, in any such event, the Lessor may, in addition to the other rights and
remedies provided for in this Agreement, terminate this Agreement by giving the
Construction Agent written notice of such termination and upon the expiration
of the time fixed in such notice and the payment of all amounts owing by the
Construction Agent hereunder (including without limitation any amounts
specified under Section 5.3 hereof), this Agreement shall terminate. The
Construction Agent shall pay all costs and expenses incurred by or on behalf of
the Lessor, including without limitation reasonable fees and expenses of
counsel, as a result of any Agency Agreement Event of Default hereunder.
5.2 DAMAGES.
The termination of this Agreement pursuant to Section 5.1 shall in no
event relieve the Construction Agent of its liability and obligations
hereunder, all of which shall survive any such termination.
5.3 REMEDIES; REMEDIES CUMULATIVE.
(a) (intentionally omitted)
(b) Upon the occurrence of an Agency Agreement Event of
Default, the Lessor shall have (in addition to its rights otherwise
described in this Agreement or existing at law, equity or otherwise)
the option (and shall be deemed automatically, and without any further
action, to have exercised such option upon the occurrence of any Lease
Event of Default arising under Sections 17.1(g), (h), (i) or (j) of
the Lease) to transfer and convey to the Construction Agent upon a
date designated by the Lessor all right, title and interest of the
Lessor in and to any Property or Properties (including without
limitation any Land and/or any Improvements, any interest in any
Improvements, any Equipment and any Property then under construction)
for which the Rent Commencement Date has not yet occurred (a
"Construction Period Property"). On any transfer and conveyance date
specified by the Lessor pursuant to this Section 5.3(b), (i) the
Lessor shall transfer and convey (at the cost of the Construction
Agent) all right, title and interest of the Lessor in and to any or
all such Construction Period Properties free and clear of the Lien of
the Lease and all Lessor Liens, (ii) the Construction Agent hereby
covenants and agrees that it will accept such transfer and conveyance
of right, title and interest in and to the respective Construction
Period Property or Construction Period Properties and (iii) the
Construction Agent hereby promises to pay to the Lessor, as liquidated
damages (it being agreed that it would be impossible accurately to
determine actual damages), an aggregate amount equal to the
Termination Value of any or all such Construction Period Properties.
The Construction Agent specifically acknowledges and agrees that its
obligations under this Section 5.3(b), including without limitation
its obligations to accept the transfer and conveyance of Construction
Period Properties and its payment obligations described in
subparagraph (iii) of this Section 5.3(b), shall be
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absolute and unconditional under any and all circumstances and shall
be performed and/or paid, as the case may be, without notice or demand
and without any abatement, reduction, diminution, setoff, defense,
counterclaim or recoupment whatsoever. The foregoing provisions of
this Section 5.3(b) are not intended to, and shall not, limit or
impair the rights of the Lessee pursuant to Section 3.3.
(c) The Construction Agent shall have the right to cure
an Agency Agreement Event of Default hereunder with respect to any
given Property by purchasing or causing the Lessee to purchase such
Property from the Lessor (to the extent such Agency Agreement Event of
Default is no longer continuing with respect to any other Property
remaining subject to this Agreement after such purchase) for an amount
equal to the liquidated damages amount set forth in Section 5.3(b) of
this Agreement. Any such purchase shall be deemed a full cure of all
Agency Agreement Events of Default; provided, the foregoing shall not
affect the obligations of the Indemnity Provider (in its capacity as
the Indemnity Provider) pursuant to the Operative Agreements or the
rights or the ability of any Indemnified Person respecting the
indemnification provisions of the Operative Agreements.
(d) No failure to exercise and no delay in exercising, on
the part of the Lessor, any right, remedy, power or privilege under
this Agreement or under the other Operative Agreements shall operate
as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Agreement are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
5.4 LIMITATION ON RECOURSE.
Notwithstanding anything contained herein or in any other Operative
Agreement to the contrary (except for and subject to the last sentence of this
Section 5.4), upon the occurrence and during the continuance of an Agency
Agreement Event of Default described in clause (b) or clause (c) of Section
5.1, so long as the Construction Agent relinquishes its interest in the
Properties and conveys its right, title or interest therein and possession
thereof to the Lessor or its designee free and clear of all Liens (other than
Lessor Liens, Liens for Taxes that are not yet due and Liens in favor of
municipalities to the extent agreed to by the Lessor), accompanied by an
affidavit (in form and substance reasonably satisfactory to the Lessee and the
Construction Agent) to the Lessor and the Lessor's title insurer to such effect
and appropriate statements of termination and such other documents as the
Lessor shall reasonably request (each in form and substance reasonably
satisfactory to the Lessor and the Construction Agent), the Lessor's maximum
recovery on a recourse basis against the Construction Agent shall be limited to
89.9% of the aggregate Property Cost for such Properties (including without
limitation capitalized interest and yield thereon to the date of payment
thereof). The Construction Agent nonetheless acknowledges and agrees that the
Lessor shall be entitled to recover 100% of the amounts owed to the Lessor in
accordance with the Operative Agreements from its interest in the Property so
relinquished. Notwithstanding anything contained herein or in any other
Operative Agreement to
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the contrary, the Construction Agent and the Lessor hereby agree that the
above-referenced limitations on the liability of the Construction Agent shall
be limited to claims arising expressly under a breach of contract theory and
that the Lessor has not waived, and hereby expressly reserves, its right to
bring any cause of action, suit or claim in law or in equity to the extent such
is raised under a theory other than breach of contract.
ARTICLE VI
THE LESSOR'S RIGHTS
6.1 EXERCISE OF THE LESSOR'S RIGHTS.
Subject to the Excepted Payments, the Construction Agent and the
Lessor hereby acknowledge and agree that, subject to and in accordance with the
terms of the Security Agreement made by the Lessor in favor of the Agent, the
rights and powers of the Lessor under this Agreement have been assigned to the
Agent.
6.2 THE LESSOR'S RIGHT TO CURE THE CONSTRUCTION AGENT'S DEFAULTS.
The Lessor, without waiving or releasing any obligation or Agency
Agreement Event of Default, may (but shall be under no obligation to) remedy
any Agency Agreement Event of Default for the account of and at the sole cost
and expense of the Construction Agent. All out-of-pocket costs and expenses so
incurred (including without limitation reasonable fees and expenses of
counsel), together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid by the Lessor, shall be paid by the
Construction Agent to the Lessor on demand.
ARTICLE VII
MISCELLANEOUS
7.1 NOTICES.
All notices required or permitted to be given under this Agreement
shall be in writing and delivered as provided in Section 12.2 of the
Participation Agreement.
7.2 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
Lessor, the Construction Agent and their respective successors and the assigns
of the Lessor. The Construction Agent may not assign this Agreement or any of
its rights or obligations hereunder or with respect to any Property in whole or
in part to any Person without the prior written consent
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of the Agent, the Lenders, the Holders and the Lessor (which consent shall not
be unreasonably withheld, conditioned or delayed).
7.3 GOVERNING LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF MARYLAND, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
7.4 SUBMISSION TO JURISDICTION; VENUE; WAIVERS; ARBITRATION
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION
TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY REFERENCE
HEREIN, MUTATIS MUTANDIS.
7.5 AMENDMENTS AND WAIVERS.
This Agreement may not be terminated, amended, supplemented, waived or
modified except in accordance with the provisions of Section 12.4 of the
Participation Agreement.
7.6 COUNTERPARTS.
This Agreement may be executed in any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute one
(1) and the same instrument.
7.7 SEVERABILITY.
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
7.8 HEADINGS AND TABLE OF CONTENTS.
The headings and table of contents contained in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.9 WAIVER OF JURY TRIAL.
TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, THE LESSOR AND THE
CONSTRUCTION AGENT IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND ANY COUNTERCLAIM
THEREUNDER.
16
<PAGE> 20
[The remainder of this page has been left blank intentionally.]
17
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
GUILFORD PHARMACEUTICALS INC., as the Construction
Agent
By: /s/ Andrew R. Jordan
---------------------------------------
Name: Andrew R. Jordan
---------------------------------------------
Title: Senior Vice President & Chief Financial Officer
-------------------------------------------------
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as Owner Trustee under the
Guilford Real Estate Trust 1998-1, as the Lessor
By: /s/Brett R. King
-----------------------------------------------
Name: Brett R. King
---------------------------------------------
Title: Assistant Vice President
------------------------------------
<PAGE> 1
EXHIBIT 10.47
CREDIT AGREEMENT
Dated as of February 5, 1998
among
First Security Bank, National Association,
not individually, except as
expressly stated herein,
but solely as the Owner Trustee
under the Guilford Real Estate Trust 1998-1,
as the Borrower,
The Several Lenders
from Time to Time Parties Hereto,
and
FIRST UNION NATIONAL BANK,
as the Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 (intentionally omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Termination or Reduction of Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Prepayments and Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Conversion and Continuation Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Interest Rates and Payment Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Computation of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 Pro Rata Treatment and Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.11 Notice of Amounts Payable; Mandatory Assignment. . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Conditions to Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Conditions to Each Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1 Other Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Ownership of Properties, Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Disposition of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 Compliance with Operative Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.7 Discharge of Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.8 Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 Reliance by the Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6 Non-Reliance on the Agent and Other Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
7.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.8 The Agent in Its Individual Capacity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9 Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.10 Actions of the Agent on Behalf of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.11 The Agent's Duty of Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 Collection and Allocation of Payments and Other Amounts. . . . . . . . . . . . . . . . . . . . 18
8.2 Certain Remedial Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 Excepted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 9 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.4 Survival of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.5 Payment of Expenses and Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.6 Successors and Assigns; Participations and Assignments. . . . . . . . . . . . . . . . . . . . 20
9.7 Participations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.8 Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.9 The Register; Disclosure; Pledges to Federal Reserve Banks. . . . . . . . . . . . . . . . . . 23
9.10 Adjustments; Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.13 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.14 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . 24
9.16 Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.17 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.18 Nonrecourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.19 USURY SAVINGS PROVISION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
SCHEDULES
Schedule 1.1 Commitments and Addresses of Lenders
EXHIBITS
EXHIBIT A-1 Form of Tranche A Note
EXHIBIT A-2 Form of Tranche B Note
EXHIBIT B Form of Assignment and Acceptance
ii
<PAGE> 4
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 5, 1998 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
the "Agreement") is among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly stated herein, but solely as the Owner
Trustee under the Guilford Real Estate Trust 1998-1 (the "Owner Trustee" or the
"Borrower"), the several banks and other financial institutions from time to
time parties to this Agreement (the "Lenders") and FIRST UNION NATIONAL BANK, a
national banking association, as a Lender and as the agent for the Lenders (the
"Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONS.
For purposes of this Agreement, capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned to
them in Appendix A to that certain Participation Agreement dated as of February
5, 1998 (as amended, modified, extended, supplemented, restated and/or replaced
from time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among Guilford Pharmaceuticals Inc., the Borrower,
the various banks and other lending institutions which are parties thereto from
time to time, as the Holders, the various banks and other lending institutions
which are parties thereto from time to time, as the Lenders, and First Union
National Bank, as agent for the Lenders and respecting the Security Documents,
as the agent for the Lenders and the Holders, to the extent of their interests.
Unless otherwise indicated, references in this Agreement to articles, sections,
paragraphs, clauses, appendices, schedules and exhibits are to the same
contained in this Agreement.
1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Agreement.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 COMMITMENTS.
(a) Subject to the terms and conditions hereof, each of the
Lenders severally agrees to make the portion of the Tranche A Loans and the
Tranche B Loans to the Borrower from time to time during the Commitment Period
in an amount up to such Lender's Commitment as is set
<PAGE> 5
forth adjacent to such Lender's name in Schedule 1.1 hereto for the purpose of
enabling the Borrower to purchase the Properties and to pay Property
Acquisition Costs, Property Costs and Transaction Expenses, provided, that the
aggregate principal amount at any one (1) time outstanding with respect to each
of the Tranche A Loans and the Tranche B Loans shall not exceed the amount of
the Tranche A Commitments and the Tranche B Commitments respectively. Any
prepayments of the Loans, whether mandatory or at the Borrower's election,
shall not be subject to reborrowing except as set forth in Section 5.2(d) of
the Participation Agreement.
(b) The Loans may from time to time be (i) Eurodollar Loans, (ii)
ABR Loans, or (iii) a combination thereof, as determined by the Borrower and
notified to the Agent in accordance with Sections 2.3 and 2.7. In the event
the Borrower fails to provide notice pursuant to Section 2.3, the Loan shall be
an ABR Loan. Further, any Loans by the Lenders on a given date in an aggregate
amount less than $100,000 shall be ABR Loans, unless the remaining Available
Commitment for the Lenders in the aggregate is less than $100,000, in which
case, the Borrower may elect a Eurodollar Loan for such remaining amount.
(c) The Commitment of each Lender to make Tranche A Loans and
Tranche B Loans shall be pro rata.
2.2 NOTES.
The Loans made by each Lender shall be evidenced by promissory notes
of the Borrower, substantially in the form of EXHIBIT A-1 in the case of the
Tranche A Loans (each, a "Tranche A Note") or EXHIBIT A-2 in the case of the
Tranche B Loans (each, a "Tranche B Note," and with the Tranche A Notes, the
"Notes"), with appropriate insertions as to payee, date and principal amount,
payable to the order of such Lender and in a principal amount equal to the
Tranche A Commitment or Tranche B Commitment, as the case may be, of such
Lender. Each Lender is hereby authorized to record the date, Type and amount
of each Loan made by such Lender, each continuation thereof, each conversion of
all or a portion thereof to another Type, and the date and amount of each
payment or prepayment of principal thereof on the schedule annexed to and
constituting a part of its Note, and any such recordation shall constitute
prima facie evidence of the accuracy of the information so recorded, provided,
that the failure to make any such recordation or any error in such recordation
shall not affect the Borrower's obligations hereunder or under such Note. Each
Note shall (i) be dated the Initial Closing Date, (ii) be stated to mature on
the Maturity Date and (iii) provide for the payment of principal in accordance
with Section 2.6(d) and the payment of interest in accordance with Section 2.8.
2.3 PROCEDURE FOR BORROWING.
(a) The Borrower may borrow under the Commitments during the
Commitment Period on any Business Day that an Advance may be requested pursuant
to the terms of Section 5.2 of the Participation Agreement, provided, that the
Borrower shall give the Agent irrevocable notice (which must be received by the
Agent prior to 12:00 Noon, Charlotte, North Carolina time, at least five (5)
Business Days prior to the requested Borrowing Date specifying (i) the
2
<PAGE> 6
amount to be borrowed (which on any date shall not be in excess of the then
Available Commitments), (ii) the requested Borrowing Date, (iii) whether the
borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof,
(iv) if the borrowing is to be a combination of Eurodollar Loans and ABR Loans,
the respective amounts of each Type of Loan and (v) the Interest Period
applicable to each Eurodollar Loan. Pursuant to the terms of the Participation
Agreement, the Borrower shall be deemed to have delivered such notice upon the
delivery of a notice by the Construction Agent or the Lessee containing such
required information. Upon receipt of any such notice from the Borrower, the
Agent shall promptly notify each Lender thereof. Each Lender will make the
amount of its pro rata share of each borrowing available to the Agent for the
account of the Borrower at the office of the Agent specified in Section 9.2
prior to 12:00 Noon, Charlotte, North Carolina time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Agent. Such
borrowing will then be made available to the Borrower by the Agent crediting an
account designated, subject to Section 9.1 of the Participation Agreement, by
the Borrower on the books of such office with the aggregate of the amounts made
available to the Agent by the Lenders and in like funds as received by the
Agent. No amount of any Loan which is repaid or prepaid by the Borrower may be
reborrowed hereunder, except as set forth in Section 5.2(d) of the
Participation Agreement.
(b) Interest accruing on each Loan during the Construction Period
with respect to any Property shall, subject to the limitations set forth in
Section 5.1(b) of the Participation Agreement be added to the principal amount
of such Loan on the relevant Scheduled Interest Payment Date. On each such
Scheduled Interest Payment Date, the Loan Property Cost and Construction Loan
Property Cost shall be increased by the amount of interest added to the Loans.
2.4 (INTENTIONALLY OMITTED)
2.5 TERMINATION OR REDUCTION OF COMMITMENTS.
(a) The Borrower shall have the right, upon not less than three
(3) Business Days' written notice to the Agent, to terminate the Commitments
or, from time to time, to reduce the amount of the Commitments, provided, that
(i) after giving effect to such reduction, the aggregate outstanding principal
amount of the Loans shall not exceed the aggregate Commitments and (ii) such
notice shall be accompanied by a certificate of the Construction Agent stating
that the amount equal to ninety-seven percent (97%) of aggregate Budgeted Total
Property Costs as of the date of such reduction does not exceed the aggregate
amount of Available Commitments as of such date after giving effect to such
reduction. Any such reduction (A) shall be in an amount equal to the lesser of
(1) $1,000,000 (or an even multiple thereof) or (2) the remaining Available
Commitments, (B) shall reduce permanently the Commitments then in effect and
(C) shall be pro rata for the Commitments of all Lenders and pro rata between
the Tranche A Loans and the Tranche B Loans.
(b) The Commitments respecting any particular Property shall
automatically be reduced to zero (0) sixty (60) days after the occurrence of
the Rent Commencement Date respecting such Property. On any date on which the
Commitments shall automatically be
3
<PAGE> 7
reduced to zero (0) pursuant to Section 6, the Borrower shall prepay all
outstanding Loans, together with accrued unpaid interest thereon and all other
amounts owing thereunder.
2.6 PREPAYMENTS AND PAYMENTS.
(a) Subject to Sections 11.2(e), 11.3 and 11.4 of the
Participation Agreement, the Borrower may at any time and from time to time
prepay the Loans, in whole or in part, without premium or penalty, upon at
least three (3) Business Days' irrevocable notice to the Agent, specifying the
date and amount of prepayment and whether the prepayment is of Eurodollar
Loans, ABR Loans or a combination thereof, and, if a combination thereof, the
amount allocable to each. Upon receipt of any such notice the Agent shall
promptly notify each Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified
therein. Amounts prepaid may not be reborrowed, and shall reduce the
Commitments and the Available Commitments, except in each case as set forth in
Section 5.2(d) of the Participation Agreement.
(b) If on any date the Agent or the Lessor shall receive any
payment in respect of (i) any Casualty, Condemnation or Environmental Violation
pursuant to Sections 15.1(a) or 15.1(g) or Article XVI of the Lease (excluding
any payments in respect thereof which are payable to the Lessee in accordance
with the Lease), or (ii) the Termination Value of any Property in connection
with the delivery of a Termination Notice pursuant to Article XVI of the Lease,
or (iii) the Termination Value of any Property in connection with the exercise
of the Purchase Option under Article XX of the Lease or the exercise of the
option of the Lessor to transfer the Properties to the Lessee pursuant to
Section 20.3 of the Lease, or (iv) any payment required to be made or elected
to be made by the Construction Agent to the Lessor pursuant to the terms of the
Agency Agreement, then in each case, the Borrower shall pay such amounts to the
Agent and the Agent shall be required to apply and pay such amounts in
accordance with the provisions of Section 8.7(b)(ii) of the Participation
Agreement.
(c) Each prepayment of the Loans pursuant to Section 2.6(a) shall
be allocated to reduce the respective Loan Property Costs of all Properties pro
rata according to the Loan Property Costs of such Properties immediately before
giving effect to such prepayment. Each prepayment of the Loans pursuant to
Section 2.6(b) shall be allocated to reduce the Loan Property Cost of the
Property or Properties subject to the respective Casualty, Condemnation,
Environmental Violation, termination, purchase, transfer or other circumstance
giving rise to such prepayment. Any amounts applied to reduce the Loan
Property Cost of any Construction Period Property pursuant to this paragraph
(c) shall also be applied to reduce the Construction Loan Property Cost of such
Property until such Construction Loan Property Cost has been reduced to zero
(0).
(d) On each date referenced in Schedule 1 to the Participation
Agreement, the Borrower shall repay the outstanding principal balance of the
Loans in part in such amounts referenced in such Schedule 1, and all amounts so
repaid pursuant to this Section 2.6(d) shall be applied to reduce the
outstanding principal balance of the Loans.
4
<PAGE> 8
(e) The outstanding principal balance of the Loans and all other
amounts then due and owing under this Agreement or otherwise with respect to
the Loans shall be due and payable in full on the Maturity Date.
2.7 CONVERSION AND CONTINUATION OPTIONS.
(a) The Borrower may elect from time to time to convert Eurodollar
Loans to ABR Loans by giving the Agent at least three (3) Business Days' prior
irrevocable notice of such election, provided, that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto, and provided, further, to the extent a Credit Agreement Event
of Default has occurred and is continuing on the last day of any such Interest
Period, the applicable Eurodollar Loan shall automatically be converted to an
ABR Loan. The Borrower may elect from time to time to convert ABR Loans to
Eurodollar Loans by giving the Agent at least three (3) Business Days' prior
irrevocable notice of such election. Upon receipt of any such notice, the
Agent shall promptly notify each Lender thereof. All or any part of
outstanding Eurodollar Loans or ABR Loans may be converted as provided herein,
provided, that (i) no ABR Loan may be converted into a Eurodollar Loan after
the date that is one (1) month prior to the Maturity Date and (ii) such notice
of conversion regarding any Eurodollar Loan shall contain an election by the
Borrower of an Interest Period for such Eurodollar Loan to be created by such
conversion and such Interest Period shall be in accordance with the terms of
the definition of the term "Interest Period" including without limitation
subparagraphs (A) through (D) thereof.
(b) Subject to the restrictions set forth in Section 2.3 hereof,
any Eurodollar Loan may be continued as such upon the expiration of the current
Interest Period with respect thereto by the Borrower giving irrevocable notice
to the Agent, in accordance with the applicable notice provision for the
conversion of ABR Loans to Eurodollar Loans set forth herein, of the length of
the next Interest Period to be applicable to such Loans, provided, that no
Eurodollar Loan may be continued as such after the date that is one (1) month
prior to the Maturity Date, provided, further, no Eurodollar Loans may be
continued as such if a Credit Agreement Event of Default has occurred and is
continuing as of the last day of the Interest Period for such Eurodollar Loan,
and provided, further, that if the Borrower shall fail to give any required
notice as described above or otherwise herein, or if such continuation is not
permitted pursuant to the proceeding proviso, such Loan shall automatically be
converted to an ABR Loan on the last day of such then expiring Interest Period.
2.8 INTEREST RATES AND PAYMENT DATES.
(a) The Loans outstanding hereunder from time to time shall bear
interest at a rate per annum equal to either (i) with respect to a Eurodollar
Loan, the Eurodollar Rate determined for the applicable Interest Period plus
the Applicable Percentage or (ii) with respect to an ABR Loan, the ABR, as
selected by the Borrower in accordance with the provisions hereof; provided,
however, (A) upon delivery by the Agent of the notice described in Section
2.9(c), the Loans of each of the Lenders shall bear interest at the ABR
applicable from time to time from and after the dates and during the periods
specified in Section 2.9(c), (B) upon the delivery by a Lender of the
5
<PAGE> 9
notice described in Section 11.3(f) of the Participation Agreement, the Loans
of such Lender shall bear interest at the ABR applicable from time to time from
and after the dates and during the periods specified in Section 11.3(f) of the
Participation Agreement and (C) in such other circumstances as expressly
provided herein, the Loans shall bear interest at the ABR.
(b) If all or a portion of (i) the principal amount of any Loan,
(ii) any interest payable thereon or (iii) any other amount payable hereunder
shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum which
is the lesser of (x) the then current rate of interest respecting such payment
plus two percent (2%) and (y) the highest interest rate permitted by applicable
law, in each case from the date of such non-payment until such amount is paid
in full (whether after or before judgment).
(c) Interest shall be payable in arrears on the applicable
Scheduled Interest Payment Date, provided, that (i) interest accruing pursuant
to paragraph (b) of this Section 2.8 shall be payable from time to time on
demand and (ii) each prepayment of the Loans shall be accompanied by accrued
interest to the date of such prepayment on the amount prepaid.
2.9 COMPUTATION OF INTEREST.
(a) Whenever it is calculated on the basis of the Prime Lending
Rate, interest shall be calculated on the basis of a year of three hundred
sixty-five (365) days (or three hundred sixty-six (366) days, as the case may
be) for the actual days elapsed; and, otherwise, interest shall be calculated
on the basis of a year of three hundred sixty (360) days for the actual days
elapsed. The Agent shall as soon as practicable notify the Borrower and the
Lenders of each determination of a Eurodollar Rate. Any change in the interest
rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve
Requirements shall become effective as of the day on which such change becomes
effective. The Agent shall as soon as practicable notify the Borrower and the
Lenders of the effective date and the amount of each such change in interest
rate.
(b) Each determination of an interest rate by the Agent pursuant
to any provision of this Agreement shall be conclusive and binding on the
Borrower and the Lenders in the absence of manifest error.
(c) If the Eurodollar Rate cannot be determined by the Agent in
the manner specified in the definition of the term "Eurodollar Rate", the Agent
shall give telecopy or telephonic notice thereof to the Borrower and the
Lenders as soon as practicable thereafter. Until such time as the Eurodollar
Rate can be determined by the Agent in the manner specified in the definition
of such term, no further Eurodollar Loans shall be made or shall be continued
as such at the end of the then current Interest Period nor shall the Borrower
have the right to convert ABR Loans to Eurodollar Loans.
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2.10 PRO RATA TREATMENT AND PAYMENTS.
(a) Each borrowing by the Borrower from the Lenders hereunder and
any reduction of the Commitments of the Lenders shall be made pro rata
according to their respective Commitments. Subject to the provisions of
Section 8.7 of the Participation Agreement and Section 2.11(b) hereof, each
payment (including without limitation each prepayment) by the Borrower on
account of principal of and interest on the Loans shall be made pro rata
according to the respective outstanding principal amounts on the Loans then
held by the Lenders. All payments (including without limitation prepayments)
to be made by the Borrower hereunder and under the Notes, whether on account of
principal, interest or otherwise, shall be made without setoff or counterclaim
and shall be made prior to 12:00 Noon, Charlotte, North Carolina time, on the
due date thereof to the Agent, for the account of the Lenders, at the Agent's
office specified in Section 9.2, in Dollars and in immediately available funds.
The Agent shall distribute such payments to the Lenders promptly upon receipt
in like funds as received. If any payment hereunder becomes due and payable on
a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day; provided, however, if such payment includes an amount
of interest calculated with reference to the Eurodollar Rate and the result of
such extension would be to extend such payment into another calendar month,
then such payment shall be made on the immediately preceding Business Day. In
the case of any extension of any payment of principal pursuant to the preceding
two (2) sentences, interest thereon shall be payable at the then applicable
rate during such extension.
(b) Unless the Agent shall have been notified in writing by any
Lender prior to a borrowing that such Lender will not make its share of such
borrowing available to the Agent, the Agent may assume that such Lender is
making such amount available to the Agent, and the Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If
such amount is not made available to the Agent by the required time on the
Borrowing Date therefor, such Lender shall pay to the Agent, on demand, such
amount with interest thereon at a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Agent. A certificate of the Agent submitted to any Lender
with respect to any amounts owing under this Section 2.10(b) shall be
conclusive in the absence of manifest error. With respect to any Lender other
than First Union National Bank (if any), to the extent any such Lender's share
of such borrowing is not made available to the Agent by such Lender within
three (3) Business Days of such Borrowing Date, the Agent shall also be
entitled to recover such amount with interest thereon at the rate as set forth
above on demand from the Borrower.
2.11 NOTICE OF AMOUNTS PAYABLE; MANDATORY ASSIGNMENT.
(a) In the event that any Lender becomes aware that any amounts
are or will be owed to it pursuant to Sections 11.2(e), 11.3 or 11.4 of the
Participation Agreement or that it is unable to make Eurodollar Loans, then it
shall promptly notify the Borrower, the Lessee and the Agent thereof and, as
soon as possible thereafter, such Lender shall submit to the Borrower (with a
copy to the Agent) a certificate indicating the amount owing to it and the
calculation thereof. The
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amounts set forth in such certificate shall be, absent manifest error, prima
facie evidence of the obligations of the Borrower hereunder.
(b) In the event that any Lender delivers to the Borrower a
certificate in accordance with Section 2.11(a) in connection with amounts
payable pursuant to Sections 11.2(e), 11.3 or 11.4 of the Participation
Agreement or such Lender is required to make Loans as ABR Loans in accordance
with Section 11.3(d) of the Participation Agreement then, subject to Section
9.1 of the Participation Agreement, the Borrower may, at its own expense
(provided, such amounts shall be reimbursed or paid entirely (as elected by the
Borrower) by the Lessee, as Supplemental Rent) and in the discretion of the
Borrower, (i) require such Lender to transfer or assign, in whole or (with such
Lender's consent) in part, without recourse (in accordance with Section 9.8),
all or (with such Lender's consent) part of its interests, rights (except for
rights to be indemnified for actions taken while a party hereunder) and
obligations under this Agreement to a replacement bank or institution if the
Borrower (subject to Section 9.1 of the Participation Agreement), with the full
cooperation of such Lender, can identify a Person who is ready, willing and
able to be such replacement bank or institution with respect thereto and such
replacement bank or institution (which may be another Lender) shall assume such
assigned obligations, or (ii) during such time as no Credit Agreement Default
or Credit Agreement Event of Default has occurred and is continuing, terminate
the Commitment of such Lender and prepay all outstanding Loans of such Lender;
provided, however, that (x) subject to Section 9.1 of the Participation
Agreement, the Borrower or such replacement bank or institution, as the case
may be, shall have paid to such Lender in immediately available funds the
principal of and interest accrued to the date of such payment on the Loans made
by it hereunder and all other amounts owed to it hereunder (and, if such Lender
is also a Holder, all Holder Advances and Holder Yield accrued and unpaid
thereon), (y) any termination of the Commitment of such Lender shall be pro
rata for such Lender's Tranche A Commitment and such Lender's Tranche B
Commitment and further subject to the terms of the first sentence of Section
2.5(a) and clause (B) of the second sentence of Section 2.5(a) and (z) such
assignment or termination of the Commitment of such Lender and prepayment of
Loans does not conflict with any law, rule or regulation or order of any court
or Governmental Authority.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and
to make the Loans, each of the Trust Company and the Owner Trustee hereby makes
and affirms the representations and warranties set forth in Section 6.1 of the
Participation Agreement to the same extent as if such representations and
warranties were set forth in this Agreement in their entirety.
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SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS TO EFFECTIVENESS.
The effectiveness of this Agreement is subject to the satisfaction of
all conditions precedent set forth in Section 5.3 of the Participation
Agreement required by said Section to be satisfied on or prior to the Initial
Closing Date.
4.2 CONDITIONS TO EACH LOAN.
The agreement of each Lender to make any Loan requested to be made by
it on any date is subject to the satisfaction of all conditions precedent set
forth in Section 5.3 and 5.4 of the Participation Agreement required by said
Sections to be satisfied on or prior to the date of the applicable Loan.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date of such Loan that,
subject to any determination that must be made by the Agent, the Lenders or the
Holders, the conditions contained in this Section 4.2 have been satisfied.
SECTION 5. COVENANTS
So long as any Loan or Note remains outstanding and unpaid or any
other amount is owing to any Lender or the Agent hereunder:
5.1 OTHER ACTIVITIES.
The Borrower shall not conduct, transact or otherwise engage in, or
commit to transact, conduct or otherwise engage in, any business or operations
other than the entry into, and exercise of rights and performance of
obligations in respect of, the Operative Agreements and other activities
incidental or related to the foregoing.
5.2 OWNERSHIP OF PROPERTIES, INDEBTEDNESS.
The Borrower shall not own, lease, manage or otherwise operate any
properties or assets other than in connection with the activities described in
Section 5.1, or incur, create, assume or suffer to exist any Indebtedness or
other consensual liabilities or financial obligations other than as may be
incurred, created or assumed or as may exist in connection with the activities
described in Section 5.1 (including without limitation the Loans and other
obligations incurred by the Borrower hereunder).
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5.3 DISPOSITION OF ASSETS.
The Borrower shall not convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets, whether now owned
or hereafter acquired, except to the extent expressly contemplated by the
Operative Agreements.
5.4 COMPLIANCE WITH OPERATIVE AGREEMENTS.
The Borrower shall at all times (a) observe and perform all of the
covenants, conditions and obligations required to be performed by it (whether
in its capacity as the Lessor, the Owner Trustee or otherwise) under each
Operative Agreement to which it is a party and (b) observe and perform, or
cause to be observed and performed, all of the covenants, conditions and
obligations of the Lessor under the Lease, even in the event that the Lease is
terminated at stated expiration following a Lease Event of Default or
otherwise.
5.5 FURTHER ASSURANCES.
At any time and from time to time, upon the written request of the
Agent, and at the expense of the Borrower (provided, such amounts shall be
reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as
Supplemental Rent), the Borrower will promptly and duly execute and deliver
such further instruments and documents and take such further action as the
Agent or the Majority Lenders may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and the other
Operative Agreements and of the rights and powers herein or therein granted.
5.6 NOTICES.
If on any date, a Responsible Officer of the Borrower shall obtain
actual knowledge of the occurrence of a Credit Agreement Default or Credit
Agreement Event of Default, the Borrower will give written notice thereof to
the Agent and the Lessee within five (5) Business Days after such date.
5.7 DISCHARGE OF LIENS.
Neither the Borrower nor the Trust Company will create or permit to
exist at any time, and will, at its own expense, promptly take such action as
may be necessary duly to discharge, or cause to be discharged, all Lessor Liens
attributable to it, provided, that the Borrower and the Trust Company shall not
be required to discharge any Lessor Lien while the same is being contested in
good faith by appropriate proceedings diligently prosecuted so long as such
proceedings shall not involve any material danger of impairment of any of the
Liens contemplated by the Security Documents or of the sale, forfeiture or loss
of, and shall not materially interfere with the disposition of, any Property or
title thereto or any interest therein or the payment of Rent.
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5.8 TRUST AGREEMENT.
Without prejudice to any right under the Trust Agreement of the Owner
Trustee to resign, the Owner Trustee (a) agrees not to terminate or revoke the
trust created by the Trust Agreement except as permitted by Article VIII of the
Trust Agreement, (b) agrees not to amend, supplement, terminate, revoke or
otherwise modify any provision of the Trust Agreement in any manner which could
reasonably be expected to have an adverse effect on the rights or interests of
the Agent or the Lenders hereunder or under the other Operative Agreements and
(c) agrees to comply with all of the terms of the Trust Agreement.
SECTION 6. EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events (each a
"Credit Agreement Event of Default"):
(a) Except as provided in Sections 6(c), the Borrower shall
default in the payment when due of any principal on the Loans or default in the
payment when due of any interest on the Loans, and in either such case, such
default shall continue for three (3) or more consecutive Business Days; or
(b) Except as provided in Sections 6(a) and 6(c), the Borrower
shall default, and such default shall continue for seven (7) or more
consecutive days, in the payment of any amount owing under any Credit Document;
or
(c) (i) The Borrower shall default in the payment of any amount
due on the Maturity Date owing under any Credit Document or (ii) the Borrower
shall default in the payment when due of any principal or interest on the Loans
payable with regard to any obligation of Lessee to pay Termination Value when
due or to pay Basic Rent or Supplemental Rent at such time as any Termination
Value is due; or
(d) The Borrower shall default in the due performance or
observance by it of any term, covenant or agreement contained in any Credit
Document to which it is a party (other than those referred to in paragraphs
(a), (b) and (c) above), provided, that in the case of any such default under
Sections 5.4, 5.5 or 5.8(c), such default shall have continued unremedied for a
period of at least fifteen (15) consecutive days after notice to the Borrower
and the Lessee by the Agent or the Majority Lenders, provided, further, if any
such default under Sections 5.4, 5.5 or 5.8(c) is not capable of remedy within
such fifteen (15) consecutive day period but may be remedied with further
diligence and if the Borrower has and continues to pursue diligently such
remedy, then the Borrower shall be granted additional time to pursue such
remedy but in no event more than an additional thirty (30) consecutive days.
(e) Any representation, warranty or statement made or deemed made
by the Borrower herein or in any other Credit Document or by the Borrower or
the Lessee in the Participation Agreement, or in any statement or certificate
delivered or required to be delivered pursuant
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hereto or thereto, shall prove to be untrue in any material respect on the date
as of which made or deemed made and shall continue to be false or inaccurate in
such way for fifteen (15) days after notice thereof to Borrower and Lessee;
provided, if such default is not capable of remedy within such fifteen (15) day
period but may be remedied with further diligence and if the Borrower or the
Lessee has and continues to pursue such remedy, then the Borrower and the
Lessee shall be granted additional time to pursue such remedy but in no event
more than an additional thirty (30) days; or
(f) (i) Any Lease Event of Default shall have occurred and be
continuing, or (ii) the Owner Tustee shall default in the due performance or
observance by it of any term, covenant or agreement contained in the
Participation Agreement or in the Trust Agreement to or for the benefit of the
Agent or a Lender, provided, that in the case of this clause (ii) such default
shall have continued unremedied for a period of at least fifteen (15)
consecutive days after notice to the Owner Trustee and Lessee by the Agent or
the Majority Lenders, provided, further, that in the case of this clause (ii),
such default is not capable of remedy within such fifteen (15) consecutive day
period but may be remedied with further diligence and if the Borrower has and
continues to pursue diligently such remedy, then the Borrower shall be granted
additional time to pursue such remedy but in no event more than an additional
thirty (30) consecutive days; or
(g) The Borrower shall commence a voluntary case concerning itself
under the Bankruptcy Code or an involuntary case is commenced against the
Borrower and the petition is not contravened within ten (10) days after
commencement of the case or an involuntary case is commenced against the
Borrower and the petition is not dismissed within ninety (90) days after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower; or the Borrower commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower, or there is
commenced against the Borrower any such proceeding which remains undismissed
for a period of ninety (90) days; or the Borrower is adjudicated insolvent or
bankrupt, or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower suffers any appointment of any custodian
or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of ninety (90) days; or the Borrower
makes a general assignment for the benefit of creditors; or any corporate or
partnership action is taken by the Borrower for the purpose of effecting any of
the foregoing; or
(h) Any Security Document shall cease to be in full force and
effect, or shall cease to give the Agent the Liens, rights, powers and
privileges purported to be created thereby (including without limitation a
first priority perfected security interest in, and Lien on, all of the
Properties), in favor of the Agent on behalf of the Lenders and the Holders,
superior to and prior to the rights of all third Persons and subject to no
other Liens (except in each case to the extent expressly permitted herein or in
any Operative Agreement) other than any Ground Lease; or
(i) The Lease shall cease to be enforceable against the Lessee; or
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(j) One (1) or more judgments or decrees shall be entered against
the Borrower involving a liability of $100,000 or more in the aggregate for all
such judgments and decrees for the Borrower and any such judgments or decrees
shall not have been vacated, discharged or stayed or bonded pending appeal
within ninety (90) days from the entry thereof, then, and in any such event,
(A) if such event is a Credit Agreement Event of Default specified in paragraph
(g) above with respect to the Borrower, automatically the Commitments shall
immediately terminate and the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement and the Notes shall
immediately become due and payable, and (B) if such event is any other Credit
Agreement Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Lenders, the Agent may, or upon
the request of the Majority Lenders, the Agent shall, by notice to the Borrower
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Majority Lenders,
the Agent may, or upon the request of the Majority Lenders, the Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the Notes to be
due and payable forthwith, whereupon the same shall immediately become due and
payable (any of the foregoing occurrences or actions referred to in clause (A)
or (B) above, an "Acceleration"). Except as expressly provided above in this
Section 6, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
Upon the occurrence of any Credit Agreement Event of Default and at
any time thereafter so long as any Credit Agreement Event of Default shall be
continuing, the Agent shall, upon the written instructions of the Majority
Secured Parties, exercise any or all of the rights and powers and pursue any
and all of the remedies available to it hereunder and (subject to the terms
thereof) under the other Credit Documents, the Lease and the other Operative
Agreements and shall have any and all rights and remedies available under the
Uniform Commercial Code or any provision of law.
Upon the occurrence of any Credit Agreement Event of Default and at
any time thereafter so long as any Credit Agreement Event of Default shall be
continuing, the Agent may, and upon request of the Majority Secured Parties
shall, proceed to protect and enforce this Agreement, the Notes, the other
Credit Documents and the Lease by suit or suits or proceedings in equity, at
law or in bankruptcy, and whether for the specific performance of any covenant
or agreement herein contained or in execution or aid of any power herein
granted, or for foreclosure hereunder, or for the appointment of a receiver or
receivers for the Property or for the recovery of judgment for the indebtedness
secured thereby or for the enforcement of any other proper, legal or equitable
remedy available under applicable laws.
The Borrower shall be liable for any and all accrued and unpaid
amounts due hereunder before, after or during the exercise of any of the
foregoing remedies, including without limitation all reasonable legal fees and
other reasonable costs and expenses incurred by the Agent or any Lender by
reason of the occurrence of any Credit Agreement Event of Default or the
exercise of remedies with respect thereto.
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SECTION 7. THE AGENT
7.1 APPOINTMENT.
Each Lender hereby irrevocably designates and appoints the Agent as
the agent of such Lender under this Agreement and the other Operative
Agreements, and each such Lender irrevocably authorizes the Agent, in such
capacity, to execute the Operative Agreements as agent for and on behalf of
such Lender, to take such action on behalf of such Lender under the provisions
of this Agreement and the other Operative Agreements and to exercise such
powers and perform such duties as are expressly delegated to the Agent by the
terms of this Agreement and other Operative Agreements, together with such
other powers as are reasonably incidental thereto. Without limiting the
generality of the foregoing, each of the Lenders hereby specifically
acknowledges the terms and provisions of the Participation Agreement and
directs the Agent to exercise such powers, make such decisions and otherwise
perform such duties as are delegated to the Agent thereunder without being
required to obtain any specific consent with respect thereto from any Lender,
unless the matter under consideration is a Unanimous Vote Matter or otherwise
requires the consent of the Majority Lenders and/or the Majority Secured
Parties. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Operative Agreement or otherwise exist against the Agent.
7.2 DELEGATION OF DUTIES.
The Agent may execute any of its duties under this Agreement and the
other Operative Agreements by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
7.3 EXCULPATORY PROVISIONS.
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (a) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Operative Agreement (except for its
or such Person's own gross negligence or willful misconduct) or (b) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or the Lessee or any officer
thereof contained in this Agreement or any other Operative Agreement or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Operative Agreement or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Operative Agreement or for any failure of the Borrower or the Lessee to perform
its obligations hereunder or thereunder. The Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
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<PAGE> 18
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Operative Agreement, or to inspect the properties, books
or records of the Borrower or the Lessee.
7.4 RELIANCE BY THE AGENT.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including without limitation counsel to the
Borrower or the Lessee), independent accountants and other experts selected by
the Agent. The Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Agent. The Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Operative Agreement unless it shall first receive such advice or
concurrence of the Majority Lenders, the Majority Secured Parties or all
Secured Parties, as the case may be, as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other
Operative Agreements in accordance with a request of the Majority Lenders, the
Majority Secured Parties or all Secured Parties, as the case may be, and such
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Notes (or all Secured Parties, as
the case may be).
7.5 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Credit Agreement Default or Credit Agreement Event of Default
hereunder unless the Agent has received written notice from a Lender or the
Borrower referring to this Agreement, describing such Credit Agreement Default
or Credit Agreement Event of Default and stating that such notice is a "notice
of default". In the event that the Agent receives such a notice, the Agent
shall give notice thereof to the Lenders. The Agent shall take such action
with respect to such Credit Agreement Default or Credit Agreement Event of
Default as shall be reasonably directed by the Majority Secured Parties;
provided, that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Credit Agreement Default or Credit
Agreement Event of Default as it shall deem advisable in the best interests of
the Secured Parties; provided, further, the foregoing shall not limit (a) the
rights of the Majority Secured Parties to elect remedies as set forth in
Section 6 and/or (b) the rights of the Majority Secured Parties or all Secured
Parties, as the case may be, as described in the Participation Agreement
(including without limitation Sections 8.2(h) and 8.6 of the Participation
Agreement).
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7.6 NON-RELIANCE ON THE AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the Agent
hereinafter taken, including without limitation any review of the affairs of
the Borrower or the Lessee, shall be deemed to constitute any representation or
warranty by the Agent to any Lender. Each Lender represents to the Agent that
it has, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and the
Lessee and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Operative Agreements, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and the Lessee. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the
Borrower or the Lessee which may come into the possession of the Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
7.7 INDEMNIFICATION.
The Lenders agree to indemnify the Agent, in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation
of the Borrower to do so), ratably according to their respective Commitment
Percentages in effect on the date on which indemnification is sought under this
Section 7.7 (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with their Commitment Percentages immediately prior to
such date), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following the payment of the Notes) be imposed on, incurred by or
asserted against any of them in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Operative Agreements or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any of them
under or in connection with any of the foregoing; provided, that no Lender
shall be liable for the payment of any portion of such liabilities,
obligations, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the gross negligence or willful misconduct
of the Agent. The agreements in this Section 7.7 shall survive the payment of
the Notes and all other amounts payable hereunder.
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7.8 THE AGENT IN ITS INDIVIDUAL CAPACITY.
The Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or the Lessee as
though the Agent were not the Agent hereunder and under the other Operative
Agreements. With respect to its Loans made or renewed by it and any Note
issued to it, the Agent shall have the same rights and powers under this
Agreement and the other Operative Agreements as any Lender and may exercise the
same as though it were not the Agent, and the terms "Lender" and "Lenders"
shall include the Agent in its individual capacity.
7.9 SUCCESSOR AGENT.
The Agent may resign at any time as the Agent upon thirty (30) days'
notice to the Lenders, the Borrower and, so long as no Lease Event of Default
shall have occurred and be continuing, the Lessee. If the Agent shall resign
as the Agent under this Agreement, the Majority Lenders shall appoint from
among the Lenders a successor Agent which successor Agent shall be subject to
the approval of the Borrower and, so long as no Lease Event of Default shall
have occurred and be continuing, the Lessee, such approval not to be
unreasonably withheld or delayed. If no successor Agent is appointed prior to
the effective date of the resignation of the resigning Agent, the Agent may
appoint, after consulting with the Lenders and subject to the approval of the
Borrower and, so long as no Lease Event of Default shall have occurred and be
continuing, the Lessee, such approval not to be unreasonably withheld or
delayed, a successor Agent from among the Lenders. If no successor Agent has
accepted appointment as the Agent by the date which is thirty (30) days
following a retiring Agent's notice of resignation, the retiring Agent's notice
of resignation shall nevertheless thereupon become effective and the Lenders
shall perform all of the duties of the Agent until such time, if any, as the
Majority Lenders appoint a successor Agent, as provided for above. Upon the
effective date of such resignation, only such successor Agent shall succeed to
all the rights, powers and duties of the retiring Agent and the term "Agent"
shall mean such successor agent and the retiring Agent's rights, powers and
duties in such capacity shall be terminated. After any retiring Agent resigns
hereunder as the Agent, the provisions of this Article VII and Section 9.5
shall inure to their respective benefit as to any actions taken or omitted to
be taken by it while it was the Agent under this Agreement.
7.10 ACTIONS OF THE AGENT ON BEHALF OF HOLDERS.
The parties hereto specifically acknowledge and consent to the Agent's
acting on behalf of the Holders as provided in the Participation Agreement,
and, in any such case, the Lenders acknowledge that the Holders shall be
entitled to vote as "Secured Parties" hereunder to the extent required or
permitted by the Operative Agreements (including without limitation Sections
8.2(h) and 8.6 of the Participation Agreement).
7.11 THE AGENT'S DUTY OF CARE.
Other than the exercise of reasonable care to assure the safe custody
of the Collateral while being held by the Agent hereunder or under any other
Operative Agreement, the Agent
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shall have no duty or liability to preserve rights pertaining thereto,
it being understood and agreed that the Lessee shall be responsible for
preservation of all rights in the Collateral, and the Agent shall be relieved
of all responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Lessee. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which the Agent accords its own property, which shall be no less than the
treatment employed by a reasonable and prudent agent in the industry, it being
understood that the Agent shall not have responsibility for taking any
necessary steps to preserve rights against any parties with respect to any of
the Collateral.
SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL
8.1 COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.
The Lessee, the Construction Agent, the Agent, the Lenders, the
Holders and the Borrower have agreed pursuant to the terms of Section 8.7 of
the Participation Agreement to a procedure for the allocation and distribution
of certain payments and distributions, including without limitation the
proceeds of Collateral.
8.2 CERTAIN REMEDIAL MATTERS.
Notwithstanding any other provision of this Agreement or any other
Credit Document:
(a) the Borrower shall at all times retain to the exclusion of all
other parties, all rights to Excepted Payments payable to it and to demand,
collect or commence an action at law to obtain such payments and to enforce any
judgment with respect thereto; and
(b) the Borrower and each Holder shall at all times retain the
right, but not to the exclusion of the Agent, (i) to retain all rights with
respect to insurance that Article XIV of the Lease specifically confers upon
the "Lessor", (ii) to provide such insurance as the Lessee shall have failed to
maintain or as the Borrower or any Holder may desire, and (iii) to enforce
compliance by the Lessee with the provisions of Articles VIII, IX, X, XI, XIV
and XVII of the Lease.
8.3 EXCEPTED PAYMENTS.
Notwithstanding any other provision of this Agreement or the Security
Documents, any Excepted Payment received at any time by the Agent shall be
distributed promptly to the Person entitled to receive such Excepted Payment.
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SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS.
None of the terms or provisions of this Agreement may be terminated,
amended, supplemented, waived or modified except in accordance with the terms
of Section 12.4 of the Participation Agreement.
9.2 NOTICES.
All notices required or permitted to be given under this Agreement
shall be given in accordance with Section 12.2 of the Participation Agreement.
9.3 NO WAIVER; CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part of the
Agent or any Lender, any right, remedy, power or privilege hereunder or under
the other Credit Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by the Borrower under the
Operative Agreements shall survive the execution and delivery of this Agreement
and the Notes and the making of the Loans hereunder.
9.5 PAYMENT OF EXPENSES AND TAXES.
The Borrower agrees to (with funds provided by the Lessee as
Supplemental Rent): (a) pay all reasonable out-of-pocket costs and expenses of
(i) the Agent whether or not the transactions herein contemplated are
consummated, in connection with the negotiation, preparation, execution and
delivery of the Operative Agreements and the documents and instruments referred
to therein (including without limitation the reasonable fees and disbursements
of Moore & Van Allen, PLLC) and any amendment, waiver or consent relating
thereto (including without limitation the reasonable fees and disbursements of
counsel to the Agent) and (ii) the Agent and each of the Lenders in connection
with the enforcement of the Operative Agreements and the documents and
instruments referred to therein (including without limitation the reasonable
fees and disbursements of counsel for the Agent and for each of the Lenders)
and (b) pay and hold each of the Lenders harmless from and against any and all
present and future stamp and other similar taxes with respect to the foregoing
matters and save each of the Lenders harmless from and against any all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to such Lender) to pay such taxes.
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9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of each Lender.
9.7 PARTICIPATIONS.
Subject to and in accordance with Section 10.1 of the Participation
Agreement, any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one (1) or more banks,
financial institutions or other entities (each, a "Participant") participating
interests in any Loan owing to such Lender, any Note held by such Lender, any
Commitment of such Lender or any other interest of such Lender hereunder and
under the other Operative Agreements; provided, that any such sale of a
participating interest shall be in a principal amount of at least $2,000,000 or
such lesser amount constituting such Lender's entire interest in this Agreement
and the Notes. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to
the other parties to this Agreement shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Note for all purposes under this Agreement and the
Notes, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the Notes. In no event shall any
Participant have any right to approve any amendment or waiver of any provision
of this Agreement or any other Operative Agreement, or any consent to any
departure by the Borrower or any other Person therefrom, except to the extent
that such amendment, waiver or consent would (a) reduce the principal of, or
interest on, any Loan or Note, or postpone the date of the final maturity of
any Loan or Note, in each case to the extent subject to such participation or
(b) release all or substantially all of the Collateral. The Borrower agrees
that, while a Credit Agreement Event of Default shall have occurred and be
continuing, if amounts outstanding under this Agreement and the Notes are due
or unpaid, or shall have become due and payable upon the occurrence of a Credit
Agreement Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect
of its participating interests in amounts owing directly to it as a Lender
under this Agreement or any Note, provided, that in purchasing such
participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the proceeds thereof as provided in Section 9.10(a) as
fully as if it were a Lender hereunder. The Borrower also agrees that each
Participant shall be entitled to the benefits of Sections 11.2(e), 11.3 and
11.4 of the Participation Agreement with respect to its participation in the
Commitments and the Loans outstanding from time to time as if it was a Lender;
provided, that such Participant shall have complied with the requirements of
said Sections and provided, further, that no Participant shall be entitled to
receive any greater amount pursuant to any such Section than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
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9.8 ASSIGNMENTS.
(a) Subject to and in accordance with Section 10.1 of the
Participation Agreement, any Lender may, in the ordinary course of its business
and in accordance with applicable law, at any time and from time to time assign
to any Lender or any Affiliate of any Lender or, with the consent, subject to
Section 9.1 of the Participation Agreement, of the Borrower and the Agent
(which in each case shall not be unreasonably withheld or delayed and which
consent of the Borrower shall not be required during the continuation of any
Credit Agreement Event of Default), to an additional bank, financial
institution or other entity that is either organized under the laws of the
United States or any state thereof or is a foreign bank that operates a branch
office in the United States, (each, a "Purchasing Lender") all or any part of
its rights and obligations under this Agreement and the other Operative
Agreements pursuant to an Assignment and Acceptance, substantially in the form
of EXHIBIT B, executed by such Purchasing Lender, such assigning Lender (and,
in the case of a Purchasing Lender that is not a Lender or an Affiliate
thereof, subject to Section 9.1 of the Participation Agreement, by the Borrower
and the Agent) and delivered to the Agent for its acceptance and recording in
the Register; provided, that no such assignment to a Purchasing Lender (other
than any Lender or any Affiliate thereof) shall be in an aggregate principal
amount less than $5,000,000 (other than in the case of an assignment of all of
a Lender's interests under this Agreement and the Notes). Upon such execution,
delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) the Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein, and (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto). Notwithstanding anything to the contrary in
this Agreement, the consent of the Borrower shall not be required, and, unless
requested by the relevant Purchasing Lender and/or assigning Lender, new Notes
shall not be required to be executed and delivered by the Borrower, for any
assignment which occurs at any time when any of the events described in Section
6(g) shall have occurred and be continuing.
(b) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not a Lender or an Affiliate thereof, by the Borrower and the
Agent) together with payment to the Agent of a registration and processing fee
of $2,500 (which shall not be payable by the Borrower or the Lessee, except as
otherwise provided in connection with an assignment requested in accordance
with Section 2.11(b)), the Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) promptly after the effective date determined pursuant
thereto, record the information contained therein in the Register and give
notice of such acceptance and recordation to the Lenders and the Borrower. On
or prior to such effective date, the Borrower, at its own expense, shall
execute and deliver to the Agent new Notes (in exchange for the Notes of the
assigning Lender), each in an amount equal to the Commitment assumed or Loans
purchased by the relevant Purchasing Lender pursuant to such Assignment and
Acceptance, and, if the assigning Lender has retained a Commitment or any Loan
hereunder, new Notes to the order of the
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assigning Lender, each in an amount equal to the Commitment or Loans retained
by it hereunder. Such new Notes shall be dated the effective date of the
applicable Assignment and Acceptance and shall otherwise be in the form of the
Notes replaced thereby.
(c) Each Purchasing Lender (other than any Lender organized and
existing under the laws of the U.S. or any political subdivision in or of the
U.S.), by executing and delivering an Assignment and Acceptance,
(i) agrees to execute and deliver to the Agent, as
promptly as practicable, four (4) signed copies (two (2) for the Agent and two
(2) for delivery by the Agent to the Borrower) of Form 1001 or Form 4224 (or
any successor form or comparable form) (it being understood that if the
applicable form is not so delivered, payments under or in respect of this
Agreement may be subject to withholding and deduction);
(ii) represents and warrants to the Borrower and the Agent
that the form so delivered is true and accurate and that, as of the effective
date of the applicable Assignment and Acceptance, each of such Purchasing
Lender's lending offices is entitled to receive payments of principal and
interest under or in respect of this Agreement without withholding or deduction
for or on account of any taxes imposed by the U.S. Federal government;
(iii) agrees to annually hereafter deliver to each of the
Borrower and the Agent not later than December 31 of the year preceding the
year to which it will apply, two (2) further properly completed signed copies
of Form 1001 or Form 4224 (or any successor form or comparable form), as
appropriate, unless an event has occurred which renders the relevant form
inapplicable (it being understood that if the applicable form is not so
delivered, payments under or in respect of this Agreement may be subject to
withholding and deduction);
(iv) agrees to promptly notify the Borrower and the Agent
in writing if it ceases to be entitled to receive payments of principal and
interest under or in respect of this Agreement without withholding or deduction
for or on account of any taxes imposed by the U.S. or any political subdivision
in or of the U.S. (it being understood that payments under or in respect of
this Agreement may be subject to withholding and deduction in such event);
(v) acknowledges that in the event it ceases to be exempt
from withholding and/or deduction of such taxes, the Agent may withhold and/or
deduct the applicable amount from any payments to which such assignee Lender
would otherwise be entitled, without any liability to such assignee Lender
therefor; and
(vi) agrees to indemnify the Borrower and the Agent from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs or expenses that result from such assignee
Lender's breach of any such representation, warranty or agreement.
(d) Any Lender party to this Agreement may, from time to time and
without the consent of the Borrower or any other Person, pledge or assign for
security purposes any portion
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of its Loans or any other interests in this Agreement and the other Credit
Documents to any Federal Reserve Bank.
9.9 THE REGISTER; DISCLOSURE; PLEDGES TO FEDERAL RESERVE BANKS.
(a) The Agent shall maintain for the benefit of the Lenders at its
address referred to in Section 9.2 a copy of each Assignment and Acceptance
delivered to it and a register (the "Register") for the recordation of the
names and addresses of the Lenders, the Commitments of the Lenders, and the
principal amount of the Loans owing to each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of clearly
demonstrable error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as the owner of the Loan recorded
therein for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Lender at any reasonable time and from
time to time upon reasonable notice.
(b) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law.
9.10 ADJUSTMENTS; SET-OFF.
(a) Except as otherwise expressly provided in Section 8.1 hereof
and Section 8.7 of the Participation Agreement where, and to the extent, one
(1) Lender is entitled to payments prior to other Lenders, if any Lender (a
"Benefitted Lender") shall at any time receive any payment of all or part of
its Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 6(g), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans, or interest thereon,
such Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the event of such recovery, but without interest.
(b) In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence of a Credit Agreement Event of Default, the Agent and each
Lender is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any
other Indebtedness at any time held or owing by the Agent or such Lender
(including without limitation by branches and agencies of the Agent or such
Lender wherever located) to or for the credit or the account of the Borrower
against and on account of the obligations and liabilities of the Borrower to
the Agent or such Lender under this Agreement or under any of the other
Operative Agreements, including without
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limitation all interests in obligations of the Borrower purchased by any such
Lender pursuant to Section 9.10(a), and all other claims of any nature or
description arising out of or connected with this Agreement or any other
Operative Agreement, irrespective or whether or not the Agent or such Lender
shall have made any demand and although said obligations, liabilities or
claims, or any of them, shall be contingent or unmatured.
9.11 COUNTERPARTS.
This Agreement may be executed by one (1) or more of the parties to
this Agreement on any number of separate counterparts (including without
limitation by telecopy), and all of said counterparts taken together shall be
deemed to constitute one (1) and the same instrument. A set of the copies of
this Agreement signed by all the parties shall be lodged with the Borrower and
the Agent.
9.12 SEVERABILITY.
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
9.13 INTEGRATION.
This Agreement and the other Credit Documents represent the agreement
of the Borrower, the Agent, and the Lenders with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Credit Documents.
9.14 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED,
INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF MARYLAND.
9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION.
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION
TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY REFERENCE
HEREIN, MUTATIS MUTANDIS.
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9.16 ACKNOWLEDGEMENTS.
The Borrower hereby acknowledges that:
(a) neither the Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection with
this Agreement or any of the other Credit Documents, and the relationship
between the Agent and the Lenders, on one (1) hand, and the Borrower, on the
other hand, in connection herewith or therewith is solely that of debtor and
creditor; and
(b) no joint venture is created hereby or by the other Credit
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrower and the Lenders.
9.17 WAIVERS OF JURY TRIAL.
THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, TRIAL
BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.18 NONRECOURSE.
In addition to and not in limitation of Section 12.9 of the
Participation Agreement, anything to the contrary contained in this Agreement
or in any other Operative Agreement notwithstanding, no Exculpated Person shall
be personally liable in any respect for any liability or obligation hereunder
or under any other Operative Agreement including without limitation the payment
of the principal of, or interest on, the Notes, or for monetary damages for the
breach of performance of any of the covenants contained in this Agreement, the
Notes or any of the other Operative Agreements. The Agent and the Lenders
agree that, in the event any of them pursues any remedies available to them
under this Agreement, the Notes or any other Operative Agreement, neither the
Agent nor the Lenders shall have any recourse against the Borrower, nor any
other Exculpated Person, for any deficiency, loss or claim for monetary damages
or otherwise resulting therefrom and recourse shall be had solely and
exclusively against the Trust Estate and the Lessee; but nothing contained
herein shall be taken to prevent recourse against or the enforcement of
remedies against the Trust Estate in respect of any and all liabilities,
obligations and undertakings contained in this Agreement, the Notes or any
other Operative Agreement. The Agent and the Lenders further agree that the
Borrower shall not be responsible for the payment of any amounts owing
hereunder (excluding principal and interest (other than Overdue Interest) in
respect of the Loans) (such non-excluded amounts, "Supplemental Amounts")
except to the extent that payments of Supplemental Rent designated by the
Lessee for application to such Supplemental Amounts shall have been paid by the
Lessee pursuant to the Lease (it being understood that the failure by the
Lessee for any reason to pay any Supplemental Rent in respect of such
Supplemental Amounts shall nevertheless be deemed to constitute a
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default by the Borrower for the purposes of Section 6). Notwithstanding the
foregoing provisions of this Section 9.18, nothing in this Agreement or any
other Operative Agreement shall (a) constitute a waiver, release or discharge
of any obligation evidenced or secured by this Agreement or any other Credit
Document, (b) limit the right of the Agent or any Lender to name the Borrower
as a party defendant in any action or suit for judicial foreclosure and sale
under any Security Document, or (c) affect in any way the validity or
enforceability of any guaranty (whether of payment and/or performance) given to
the Lessor, the Agent or the Lenders, or of any indemnity agreement given by
the Borrower, in connection with the Loans made hereunder.
9.19 USURY SAVINGS PROVISION.
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN
STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT AND
THAT N.C. GEN. STAT. Section 24-9 SHALL APPLY WITH RESPECT TO THIS AGREEMENT.
TO THE EXTENT N.C. GEN. STAT. Section 24-9 IS HEREAFTER DEEMED NOT TO APPLY BY
A COURT OF COMPETENT JURISDICTION AND ANY PAYMENTS HEREUNDER ARE HEREINAFTER
CHARACTERIZED BY ANY COURT OF COMPETENT JURISDICTION AS THE REPAYMENT OF
PRINCIPAL AND INTEREST THEREON, THE FOLLOWING PROVISIONS OF THIS SECTION 9.19
SHALL APPLY. ANY SUCH PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE REFERRED TO
HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY
LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL
ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT
LIMITATION PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL
ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS
AGREEMENT OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER
APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE
AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD OTHERWISE BE
PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION
SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER
SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM
NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF
EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF THE AGENT OR ANY
LENDER SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS CHARACTERIZED AS INTEREST
WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND
WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL
AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST
SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF
PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED
TO THE BORROWER OR ANY OTHER
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PAYOR THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE
EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND
PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT
INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON
THE DATE OF SUCH DEMAND, AND NEITHER THE AGENT NOR ANY LENDER INTENDS TO CHARGE
OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST
PAID OR AGREED TO BE PAID TO THE AGENT OR ANY LENDER SHALL, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD
THROUGHOUT THE FULL STATED TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR
EXTENSION) OF THIS AGREEMENT SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH
PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE
LAW.
27
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually,
except as expressly stated herein, but solely as the Owner
Trustee under the Guilford Real Estate Trust 1998-1
By:/s/ Brett R. King
------------------------------------------------
Name: Brett R. King
----------------------------------------------
Title: Assistant Vice President
-------------------------------------
FIRST UNION NATIONAL BANK, as the Agent and a Lender
By:/s/ Louis E. Flori
------------------------------------------------
Name: Louis E. Flori
----------------------------------------------
Title: Vice President
---------------------------------------------
<PAGE> 32
Schedule 1.1
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
--------------------- ---------------------
Name and Address of Lenders Amount/Percentage Amount/Percentage
- --------------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
First Union National Bank $16,600,000 100% $2,800,000 100%
c/o First Union Capital Markets Group
DC-6
301 South College Street
Charlotte, North Carolina 28288-0166
Attention: Ms. Jane O. Hurley,
Capital Markets Services
Telephone: (704) 383-3812
Telecopy: (704) 383-7989
TOTAL $16,600,000 100% $2,800,000 100%
</TABLE>
<PAGE> 33
EXHIBIT A-1
TRANCHE A NOTE
(Guilford Real Estate Trust 1998-1)
$______________ ___________, 199__
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee
under the Guilford Real Estate Trust 1998-1 (the "Borrower"), hereby
unconditionally promises to pay to the order of [LENDER] (the "Lender"), at the
office of First Union National Bank, located at c/o First Union Capital Markets
Group, DC-6, 301 South College Street, Charlotte, North Carolina 28288-0166 or
at such other address as may be specified by First Union National Bank, in
lawful money of the United States of America and in immediately available
funds, on the Maturity Date, the principal amount of (a)
___________________________________________________ AND NO/100 DOLLARS
($_____________), or, if less, (b) the aggregate unpaid principal amount of all
Tranche A Loans made by the Lender to the Borrower pursuant to Section 2.1 of
the Credit Agreement (as defined below). The Borrower agrees to pay interest
in like money at such office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in Section 2.8 of such
Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Tranche A Loan made pursuant to the Credit Agreement and the date and amount of
each payment or prepayment of principal thereof, each continuation thereof and
each conversion of all or a portion thereof to another Type. Each such
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement or any error in
such endorsement shall not affect the obligations of the Borrower in respect of
such Loan.
This Note (a) is one (1) of the Notes referred to in the Credit
Agreement dated as of February 5, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Borrower, the
Lender, the other banks and financial institutions from time to time parties
thereto and First Union National Bank, as the Agent, (b) is subject to the
provisions of the Credit Agreement (including without limitation Section 9.18
thereof) and (c) is subject to optional and mandatory prepayment in whole or in
part as provided in the Credit Agreement. Reference is hereby made to the
Credit Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in
respect thereof.
A1-1
<PAGE> 34
Upon the occurrence of any one (1) or more of the Events of Default,
all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF MARYLAND.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually,
but solely as the Owner Trustee under the Guilford Real
Estate Trust 1998-1
By:
-----------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
A1-2
<PAGE> 35
EXHIBIT A-2
TRANCHE B NOTE
(Guilford Real Estate Trust 1998-1)
$______________ _________, 19__
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee
under the Guilford Real Estate Trust 1998-1 (the "Borrower"), hereby
unconditionally promises to pay to the order of [LENDER] (the "Lender") at the
office of First Union National Bank located at c/o First Union Capital Markets
Group, DC-6, 301 South College Street, Charlotte, North Carolina 28288-0166 or
at such other address as may be specified by First Union National Bank, in
lawful money of the United States of America and in immediately available
funds, on the Maturity Date, the principal amount of (a)
___________________________________________________ AND NO/100 DOLLARS
($_____________), or, if less, (b) the aggregate unpaid principal amount of all
Tranche B Loans made by the Lender to the Borrower pursuant to Section 2.1 of
the Credit Agreement (as defined below). The Borrower agrees to pay interest
in like money at such office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in Section 2.8 of such
Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Tranche B Loan made pursuant to the Credit Agreement and the date and amount of
each payment or prepayment of principal thereof, each continuation thereof and
each conversion of all or a portion thereof to another Type. Each such
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement or any error in
such endorsement shall not affect the obligations of the Borrower in respect of
such Loan.
This Note (a) is one (1) of the Notes referred to in the Credit
Agreement dated as of February 5, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Borrower, the
Lender, the other banks and financial institutions from time to time parties
thereto and First Union National Bank, as the Agent, (b) is subject to the
provisions of the Credit Agreement (including without limitation Section 9.18
thereof) and (c) is subject to optional and mandatory prepayment in whole or in
part as provided in the Credit Agreement. Reference is hereby made to the
Credit Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in
respect thereof.
A2-1
<PAGE> 36
Upon the occurrence of any one (1) or more of the Events of Default,
all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF MARYLAND.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as the Owner Trustee under the
Guilford Real Estate Trust 1998-1
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
A2-2
<PAGE> 37
EXHIBIT B
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of February 5,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in
its individual capacity, but solely as the Owner Trustee under the Guilford
Real Estate Trust 1998-1 (the "Owner Trustee" or the "Borrower"), the Lenders
named therein and FIRST UNION NATIONAL BANK, as the Agent. Unless otherwise
defined herein, terms defined in the Credit Agreement (or pursuant to Section 1
of the Credit Agreement, defined in other agreements) and used herein shall
have the meanings given to them in or pursuant to the Credit Agreement.
____________________ (the "Assignor") and _______________ (the
"Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor, as of
the Effective Date (as defined below), a ___% interest (the "Assigned
Interest") in and to the Assignor's rights and obligations under the Credit
Agreement with respect to the credit facility contained in the Credit Agreement
as are set forth on Schedule 1 hereto (the "Assigned Facility"), in a principal
amount for the Assigned Facility as set forth on Schedule 1.
2. The Assignor (a) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or any other
Operative Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any other Operative
Agreement or any other instrument or document furnished pursuant thereto, other
than that it has not created any adverse claim upon the interest being assigned
by it hereunder and that such interest is free and clear of any such adverse
claim; (b) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower, or any other obligor
or the performance or observance by the Borrower, or any other obligor of any
of their respective obligations under the Credit Agreement or any other
Operative Agreement or any other instrument or document furnished pursuant
hereto or thereto; and (c) attaches the Note held by it evidencing the Assigned
Facility and requests that the Agent exchange such Note for a new Note payable
to the Assignor and (if the Assignor has retained any interest in the Assigned
Facility) a new Note payable to the Assignee in the respective amounts which
reflect the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received copies of the Operative
B-1
<PAGE> 38
Agreements, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (c) agrees that it will, independently and without
reliance upon the Assignor, the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement, the other Operative Agreements or any other instrument or document
furnished pursuant hereto or thereto; (d) appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under the Credit Agreement, the other Operative Agreements or any
other instrument or document furnished pursuant hereto or thereto as are
delegated to the Agent by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions of
the Credit Agreement and the other Operative Agreements to which Assignee is a
party and will perform in accordance herewith all the obligations which by the
terms of the Credit Agreement and the other Operative Agreements to which
Assignee is a party are required to be performed by it as a Lender including
without limitation, if it is organized under the laws of a jurisdiction outside
the U.S., its obligation pursuant to Section 11.2(e) of the Participation
Agreement.
4. The effective date of this Assignment and Acceptance shall be
________, ____ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance by
it and recording by the Agent pursuant to Section 9.9 of the Credit Agreement,
effective as of the Effective Date (which shall not, unless otherwise agreed to
by the Agent, be earlier than five (5) Business Days after the date of such
acceptance and recording by the Agent).
5. Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments in respect of the Assigned
Interest (including without limitation payments of principal, interest, fees
and other amounts) to the Assignee whether such amounts have accrued prior to
the Effective Date or accrue subsequent to the Effective Date. The Assignor
and the Assignee shall make all appropriate adjustments in payments by the
Agent for periods prior to the Effective Date or with respect to the making of
this assignment directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment
and Acceptance, have the rights and obligations of a Lender thereunder and
under the other Operative Agreements and shall be bound by the provisions
thereof and (b) the Assignor shall, to the extent provided in this Assignment
and Acceptance, relinquish its rights and be released from its obligations
under the Credit Agreement and the other Operative Agreements.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MARYLAND.
B-2
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their
respective duly authorized officers on Schedule 1 hereto.
[Name of Assignor]
By:
-----------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
[Name of Assignee]
By:
-----------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
Consented To:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually,
but solely as the Owner Trustee under the Guilford Real Estate
Trust 1998-1
By:
-----------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
FIRST UNION NATIONAL BANK, as the Agent
By:
-----------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
[consents required only to the extent expressly provided in Section 9.8 of the
Credit Agreement]
<PAGE> 40
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE CREDIT AGREEMENT,
DATED AS OF FEBRUARY 5, 1998,
AMONG
FIRST SECURITY BANK, NATIONAL ASSOCIATION
NOT INDIVIDUALLY,
BUT SOLELY AS THE OWNER TRUSTEE,
THE LENDERS NAMED THEREIN
AND
FIRST UNION NATIONAL BANK, AS THE AGENT
FOR THE LENDERS (IN SUCH CAPACITY, THE "AGENT")
Name of Assignor:
-------------------------------------------
Name of Assignee:
-------------------------------------------
Effective Date of Assignment:
----------------------
<TABLE>
<CAPTION>
Credit Principal Commitment
Facility Assigned Amount Assigned Percentage Assigned
----------------- --------------- -------------------
<S> <C> <C>
$ %
---------------- ------------ ------------
[Name of Assignor]
By:
--------------------------------------------------------
Name:
------------------------------------------------------
Title:
-----------------------------------------------------
[Name of Assignee]
By:
--------------------------------------------------------
Name:
------------------------------------------------------
Title:
-----------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.48
- -------------
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
Dated as of February 5, 1998
among
GUILFORD PHARMACEUTICALS INC.,
as the Construction Agent and as the Lessee,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as expressly
stated herein, but solely as the Owner Trustee
under the Guilford Real Estate Trust 1998-1,
THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE
PARTIES HERETO FROM TIME TO TIME, as the Holders,
THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE
PARTIES HERETO FROM TIME TO TIME, as the Lenders,
and
FIRST UNION NATIONAL BANK,
as the Agent for the Lenders
and respecting the Security Documents,
as the Agent for the Lenders and the Holders,
to the extent of their interests
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1A. INITIAL LENDER AND INITIAL HOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. THE LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. HOLDER ADVANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. SUMMARY OF TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1. Operative Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------------
3.2. Property Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------------
3.3. Construction of Improvements; Commencement of Basic Rent. . . . . . . . . . . . . . . . . . . 3
--------------------------------------------------------
SECTION 4. THE CLOSINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1. Initial Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------------
4.2. Initial Closing Date; Property Closing Dates; Acquisition Advances; Construction Advances. . 3
-----------------------------------------------------------------------------------------
SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING
REQUIREMENTS ON COMPLETION DATE; THE LESSEE'S
DELIVERY OF NOTICES; RESTRICTIONS ON LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-------
5.2. Procedures for Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
----------------------
5.3. Conditions Precedent for the Lessor, the Lessee, the Construction Agent, the Agent,
-----------------------------------------------------------------------------------
the Lenders and the Holders Relating to the Initial Closing Date and the Advance of
-----------------------------------------------------------------------------------
Funds for the Acquisition of a Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------------------------------
5.4. Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders Relating
------------------------------------------------------------------------------------
to the Advance of Funds after the Acquisition Advance. . . . . . . . . . . . . . . . . . . . 11
-----------------------------------------------------
5.4A. Application of Proceeds of the Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------------------------------------
5.4B. Conditions Precedent to the Agent's Approval of Requisitions. . . . . . . . . . . . . . . . 14
--------------------------------------------------------------
5.5. Additional Reporting and Delivery Requirements on Completion Date and
----------------------------------------------------------------------
on Construction Period Termination Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
---------------------------------------
5.6. The Construction Agent Delivery of Construction Budget Modifications. . . . . . . . . . . . . 19
--------------------------------------------------------------------
5.7. Restrictions on Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------------------
5.8. Real Estate Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------------
5.9. Cash Collateral Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------------------
SECTION 6. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1. Representations and Warranties of the Borrower. . . . . . . . . . . . . . . . . . . . . . . . 20
----------------------------------------------
6.2. Representations and Warranties of the Construction Agent and the Lessee. . . . . . . . . . . 23
-----------------------------------------------------------------------
SECTION 7. PAYMENT OF CERTAIN EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1. Transaction Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
--------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.2. Brokers' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------------
7.3. Certain Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------------------------
7.4. Structuring Fee and Administration Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------------------------------
SECTION 8. OTHER COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1. Cooperation with the Construction Agent or the Lessee. . . . . . . . . . . . . . . . . . . . 30
-----------------------------------------------------
8.2. Covenants of the Owner Trustee and the Holders. . . . . . . . . . . . . . . . . . . . . . . . 30
----------------------------------------------
8.3. The Lessee Covenants, Consent and Acknowledgment. . . . . . . . . . . . . . . . . . . . . . . 32
------------------------------------------------
8.3A. Additional Affirmative Covenants of the Lessee. . . . . . . . . . . . . . . . . . . . . . . 35
----------------------------------------------
8.3B. Additional Negative Covenants of the Lessee. . . . . . . . . . . . . . . . . . . . . . . . . 40
-------------------------------------------
8.4. Sharing of Certain Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
---------------------------
8.5. Grant of Easements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
------------------------
8.6. Appointment by the Agent, the Lenders, the Holders and the Owner Trustee. . . . . . . . . . . 44
------------------------------------------------------------------------
8.7. Collection and Allocation of Payments and Other Amounts. . . . . . . . . . . . . . . . . . . 45
-------------------------------------------------------
8.8. Release of Properties, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
---------------------------
8.9. Lessee Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
----------------
SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.1. The Construction Agent's and the Lessee's Credit Agreement Rights. . . . . . . . . . . . . . 49
-----------------------------------------------------------------
9.2. The Construction Agent's and the Lessee's Trust Agreement Rights. . . . . . . . . . . . . . . 49
----------------------------------------------------------------
SECTION 10. TRANSFER OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.1. Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
------------------------
10.2. Effect of Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
------------------
SECTION 11. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.1. General Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
-----------------
11.2. General Tax Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
---------------------
11.3. Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
---------------------------------
11.4. Funding/Contribution Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
------------------------------
11.5. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT
--------------------------------------------------------
LIABILITY, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
---------------
11.6. Termination of Earlier Indemnification Agreement. . . . . . . . . . . . . . . . . . . . . . 62
------------------------------------------------
SECTION 12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.1. Survival of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
----------------------
12.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
-------
12.3. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
------------
12.4. Terminations, Amendments, Waivers, Etc.; Unanimous Vote Matters. . . . . . . . . . . . . . . 64
---------------------------------------------------------------
12.5. Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
--------------
12.6. Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
-------------------
12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE; ARBITRATION. . . . . 66
-----------------------------------------------------------------------------------
12.8. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
------------
12.9. Liability Limited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
-----------------
12.10. Rights of the Lessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
--------------------
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
12.11. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
------------------
12.12. Calculations under Operative Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 70
---------------------------------------
12.13. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
---------------
12.14. Financial Reporting/Tax Characterization. . . . . . . . . . . . . . . . . . . . . . . . . . 72
----------------------------------------
12.15. (intentionally omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
</TABLE>
SCHEDULE 1 - Repayment of Loans
EXHIBITS
A - Form of Requisition - Sections 4.2, 5.2, 5.3 and 5.4
B - Form of Outside Counsel Opinion for the Lessee - Section 5.3(j)
C - Form of Secretary's Certificate - Section 5.3(z)
D - Form of Officer's Certificate - Section 5.3(aa)
E - Form of Officer's Certificate - Section 5.3(bb)
F - Form of Officer's Certificate - Section 5.3(cc)
G - Form of Outside Counsel Opinion for the Owner Trustee -Section 5.3(dd)
H - Form of Outside Counsel Opinion for the Lessee - Section 5.3(ee)
I - Form of Officer's Certificate - Section 5.5
J - Description of Material Litigation - Section 6.2(d)
Appendix A - Rules of Usage and Definitions
iii
<PAGE> 5
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of February 5, 1998 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Agreement") is by and among GUILFORD PHARMACEUTICALS INC., a Delaware
corporation (the "Lessee" or the "Construction Agent"); FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association, not individually (in its
individual capacity, the "Trust Company"), except as expressly stated herein,
but solely as the Owner Trustee under the Guilford Real Estate Trust 1998-1
(the "Owner Trustee", the "Borrower" or the "Lessor"); the various banks and
other lending institutions which are parties hereto from time to time as
lenders (subject to the definition of Lenders in Appendix A hereto,
individually, a "Lender" and collectively, the "Lenders"); FIRST UNION NATIONAL
BANK, a national banking association, as the agent for the Lenders and
respecting the Security Documents, as the agent for the Lenders and the
Holders, to the extent of their interests (in such capacity, the "Agent"); the
various banks and other lending institutions which are parties hereto from time
to time as holders of certificates issued with respect to the Guilford Real
Estate Trust 1998-1 (subject to the definition of Holders in Appendix A hereto,
individually, a "Holder" and collectively, the "Holders"). Capitalized terms
used but not otherwise defined in this Agreement shall have the meanings set
forth in Appendix A hereto.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:
SECTION 1A. INITIAL LENDER AND INITIAL HOLDER.
Notwithstanding the various references in the Operative Agreements to
multiple Lenders and multiple Holders, First Union National Bank is the only
Lender and the only Holder as of the date of this Agreement. Additional
Lenders and additional Holders may become parties to the Operative Agreements
subsequent to the date hereof pursuant to the assignment provisions set forth
in the applicable Operative Agreements.
SECTION 1. THE LOANS.
Subject to the terms and conditions of this Agreement and in reliance
on the representations and warranties of each of the parties hereto contained
herein or made pursuant hereto, the Lenders have agreed to make Loans to the
Lessor from time to time in an aggregate principal amount of up to the
aggregate amount of the Commitments of the Lenders in order for the Lessor to
acquire the Properties and certain Improvements, to develop and construct
certain Improvements in accordance with the Agency Agreement and the terms and
provisions hereof and for the other purposes described herein, and in
consideration of the receipt of proceeds of the Loans, the Lessor will issue
the Notes. The Loans shall be made and the Notes shall be issued pursuant to
the Credit Agreement. Pursuant to Section 5 of this Agreement and Section 2 of
the Credit Agreement, the Loans will be made to the Lessor from time to time at
the request of the
<PAGE> 6
Construction Agent in consideration for the Construction Agent agreeing for the
benefit of the Lessor, pursuant to the Agency Agreement, so that the Lessor may
acquire the Properties, acquire the Equipment and construct certain
Improvements, and so that the Lessee may lease the Properties, each in
accordance with the Agency Agreement and the other Operative Agreements. The
Loans and the obligations of the Lessor under the Credit Agreement shall be
secured by the Collateral.
SECTION 2. HOLDER ADVANCES.
Subject to the terms and conditions of this Agreement and in reliance
on the representations and warranties of each of the parties hereto contained
herein or made pursuant hereto, on each date Advances are requested to be made
in accordance with Section 5 hereof, each Holder shall make a Holder Advance on
a pro rata basis to the Lessor with respect to the Guilford Real Estate Trust
1998-1 based on its Holder Commitment in an amount in immediately available
funds such that the aggregate of all Holder Advances on such date shall be
three percent (3%) of the amount of the Requested Funds on such date; provided,
that no Holder shall be obligated for any Holder Advance in excess of its pro
rata share of the Available Holder Commitment. The aggregate amount of Holder
Advances shall be up to the aggregate amount of the Holder Commitments. No
prepayment or any other payment with respect to any Advance shall be permitted
such that the Holder Advance with respect to such Advance is less than three
percent (3%) of the outstanding amount of such Advance, except in connection
with termination or expiration of the Term or in connection with the exercise
of remedies relating to the occurrence of a Lease Event of Default. The
representations, warranties, covenants and agreements of the Holders herein and
in the other Operative Agreements are several, and not joint or joint and
several.
SECTION 3. SUMMARY OF TRANSACTIONS.
3.1. OPERATIVE AGREEMENTS.
On the date hereof, each of the respective parties hereto and thereto
shall execute and deliver this Agreement, the Lease, each applicable Ground
Lease, the Agency Agreement, the Credit Agreement, the Notes, the Trust
Agreement, the Certificates, the Security Agreement and such other documents,
instruments, certificates and opinions of counsel as agreed to by the parties
hereto.
3.2. PROPERTY PURCHASE.
On each Property Closing Date and subject to the terms and conditions
of this Agreement (a) the Holders will each make a Holder Advance in accordance
with Sections 2 and 5 of this Agreement and the terms and provisions of the
Trust Agreement, (b) the Lenders will each make Loans in accordance with
Sections 1 and 5 of this Agreement and the terms and provisions of the Credit
Agreement, (c) the Lessor will purchase and acquire good and marketable title
to or ground lease pursuant to a Ground Lease, the applicable Property, each to
be within an Approved State, identified by the Construction Agent, in each case
pursuant to a Deed, Bill of Sale or
2
<PAGE> 7
Ground Lease, as the case may be, and grant the Agent a lien on such Property
by execution of the required Security Documents, (d) the Agent, the Lessee and
the Lessor shall execute and deliver a Lease Supplement relating to such
Property and (e) the Term shall commence with respect to such Property.
3.3. CONSTRUCTION OF IMPROVEMENTS; COMMENCEMENT OF BASIC RENT.
Construction Advances will be made with respect to particular
Improvements to be constructed and with respect to ongoing Work regarding the
Equipment and construction of particular Improvements, in each case, pursuant
to the terms and conditions of this Agreement and the Agency Agreement. The
Construction Agent will act as a construction agent on behalf of the Lessor
respecting the Work regarding the Equipment, the construction of such
Improvements and the expenditures of the Construction Advances related to the
foregoing. The Construction Agent shall promptly notify the Lessor upon
Completion of the Improvements and the Lessee shall commence to pay Basic Rent
as of the Rent Commencement Date.
SECTION 4. THE CLOSINGS.
4.1. INITIAL CLOSING DATE.
All documents and instruments required to be delivered on the Initial
Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC,
Charlotte, North Carolina, or at such other location as may be determined by
the Lessor, the Agent and the Lessee.
4.2. INITIAL CLOSING DATE; PROPERTY CLOSING DATES; ACQUISITION
ADVANCES; CONSTRUCTION ADVANCES.
The Construction Agent shall deliver to the Agent a requisition (a
"Requisition"), in the form attached hereto as EXHIBIT A or in such other form
as is satisfactory to the Agent, in its reasonable discretion, in connection
with (a) the Transaction Expenses and other fees, expenses and disbursements
payable, pursuant to Section 7.1, by the Lessor and (b) each Acquisition
Advance pursuant to Section 5.3 and (c) each Construction Advance pursuant to
Sections 5.4., 5.4A, 5.4B and 5.4C.
SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT;
REPORTING REQUIREMENTS ON COMPLETION DATE;
THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS.
5.1. GENERAL.
(a) To the extent funds have been advanced to the Lessor
as Loans by the Lenders and to the Lessor as Holder Advances by the
Holders, the Lessor will use such funds from time to time in
accordance with the terms and conditions of this Agreement and the
other Operative Agreements (i) at the direction of the Construction
Agent to acquire the Properties in accordance with the terms of this
Agreement, the Agency
3
<PAGE> 8
Agreement and the other Operative Agreements, (ii) to make Advances to
the Construction Agent to permit the acquisition, testing,
engineering, installation, development, construction, modification,
design, and renovation, as applicable, of the Properties (or
components thereof) in accordance with the terms of the Agency
Agreement and the other Operative Agreements, and (iii) to pay
Transaction Expenses, fees, expenses and other disbursements payable
by the Lessor under Sections 7.1(a) and 7.1(b).
(b) In lieu of the payment of interest on the Loans and
Holder Yield on the Holder Advances on any Scheduled Interest Payment
Date with respect to any Property during the period prior to the Rent
Commencement Date with respect to such Property, (i) each Lender's
Loan shall automatically be increased by the amount of interest
accrued and unpaid on such Loan for such period (except to the extent
that at any time such increase would cause such Lender's Loan to
exceed such Lender's Available Commitment, in which case the Lessee
shall pay such excess amount to such Lender in immediately available
funds on the date such Lender's Available Commitment is exceeded), and
(ii) each Holder's Holder Advance shall automatically be increased by
the amount of Holder Yield accrued and unpaid on such Holder Advance
for such period (except to the extent that at any time such increase
would cause the Holder Advance of such Holder to exceed such Holder's
Available Holder Commitment, in which case the Lessee shall pay such
excess amount to such Holder in immediately available funds on the
date the Available Holder Commitment of such Holder was exceeded).
Such increases in a Lender's Loan and a Holder's Holder Advance shall
occur without any disbursement of funds by any Person.
5.2. PROCEDURES FOR FUNDING.
(a) The Construction Agent shall designate the date for
Advances hereunder in accordance with the terms and provisions hereof;
provided, however, it is understood and agreed that no more than two
(2) Advances (excluding any conversion and/or continuation of any
Loans or Holder Advances) may be requested during any calendar month.
Not less than (i) one (1) Business Day prior to the Initial Closing
Date and (ii) five (5) Business Days prior to the date on which any
Acquisition Advance or Construction Advance is to be made (unless such
Acquisition Advance or Construction Advance is concurrent with the
Initial Closing Date in which case the deliveries hereinafter
referenced may be delivered one (1) Business Day prior to the date of
the requested Advance), the Construction Agent shall deliver to the
Agent, (A) with respect to the Initial Closing Date and each
Acquisition Advance, a Requisition as described in Section 4.2 hereof
(including without limitation a legal description of the Land, if any,
a schedule of the Improvements, if any, and a schedule of the
Equipment, if any, acquired or to be acquired on such date, and a
schedule of the Work, if any, to be performed, each of the foregoing
in a form reasonably acceptable to the Agent) and (B) with respect to
each Construction Advance, a Requisition identifying (among other
things) the Property to which such Construction Advance relates.
4
<PAGE> 9
(b) Each Requisition shall: (i) be irrevocable, (ii)
request funds in an amount that is not in excess of the total
aggregate of the Available Commitments plus the Available Holder
Commitments at such time, and (iii) request that the Holders make
Holder Advances and that the Lenders make Loans to the Lessor for the
payment of Transaction Expenses, Property Acquisition Costs (in the
case of an Acquisition Advance) or other Property Costs (in the case
of a Construction Advance) that have previously been incurred or are
to be incurred on the date of such Advance to the extent such were not
subject to a prior Requisition, in each case as specified in the
Requisition.
(c) Subject to the satisfaction of the conditions
precedent set forth in Sections 5.3, 5.4, 5.4A, 5.4B or 5.4C, as
applicable, on each Property Closing Date or the date on which the
Construction Advance is to be made, as applicable, (i) the Lenders
shall make Loans based on their respective Lender Commitments to the
Lessor in an aggregate amount equal to ninety-seven percent (97%) of
the Requested Funds specified in any Requisition (ratably between the
Tranche A Lenders and the Tranche B Lenders with the Tranche A Lenders
funding eighty-three percent (83%) of the Requested Funds and the
Tranche B Lenders funding fourteen percent (14%) of the Requested
Funds), up to an aggregate principal amount equal to the aggregate of
the Available Commitments, (ii) each Holder shall make a Holder
Advance based on its Holder Commitment in an amount such that the
aggregate of all Holder Advances at such time shall be three percent
(3%) of the balance of the Requested Funds specified in such
Requisition, up to the aggregate advanced amount equal to the
aggregate of the Available Holder Commitments; and (iii) the total
amount of such Loans and Holder Advances made on such date shall (x)
be used by the Lessor to pay Property Costs and/or Transaction
Expenses within three (3) Business Days of the receipt by the Lessor
of such Advance or (y) be advanced by the Lessor on the date of such
Advance to the Construction Agent or the Lessee to pay Property Costs,
as applicable. Notwithstanding that the Operative Agreements state
that Advances shall be directed to the Lessor, each Advance shall in
fact be directed to the Agent (for the benefit of the Lessor) and
applied by the Agent (for the benefit of the Lessor) pursuant to the
requirements imposed on the Lessor under the Operative Agreements.
(d) With respect to an Advance obtained by the Lessor to
pay for Property Costs and/or Transaction Expenses or other costs
payable under Section 7.1 hereof and not expended by the Lessor for
such purpose on the date of such Advance, such amounts shall be held
by the Lessor (or the Agent on behalf of the Lessor) until the
applicable closing date or, if such closing date does not occur within
three (3) Business Days of the date of the Lessor's receipt of such
Advance, shall be applied regarding the applicable Advance to repay
the Lenders and the Holders and, subject to the terms hereof, and of
the Credit Agreement and the Trust Agreement, shall remain available
for future Advances. Any such amounts held by the Lessor (or the
Agent on behalf of the Lessor) shall be subject to the lien of the
Security Agreement.
(e) All Operative Agreements which are to be delivered to
the Lessor, the Agent, the Lenders or the Holders shall be delivered
to the Agent, on behalf of the Lessor,
5
<PAGE> 10
the Agent, the Lenders or the Holders, and such items (except for
Notes, Certificates, Bills of Sale, the Ground Leases and chattel
paper originals, with respect to which in each case there shall be
only one original) shall be delivered with originals sufficient for
the Lessor, the Agent, each Lender and each Holder. All other items
which are to be delivered to the Lessor, the Agent, the Lenders or the
Holders shall be delivered to the Agent, on behalf of the Lessor, the
Agent, the Lenders or the Holders, and such other items shall be held
by the Agent. To the extent any such other items are requested in
writing from time to time by the Lessor, any Lender or any Holder, the
Agent shall provide a copy of such item to the party requesting it.
(f) Notwithstanding the completion of any closing under
this Agreement pursuant to Sections 5.3, 5.4, 5.4A, 5.4B and 5.4C,
each condition precedent in connection with any such closing may be
subsequently enforced by the Agent (unless such has been expressly
waived in writing by the Agent).
5.3. CONDITIONS PRECEDENT FOR THE LESSOR, THE LESSEE, THE
CONSTRUCTION AGENT, THE AGENT, THE LENDERS AND THE HOLDERS
RELATING TO THE INITIAL CLOSING DATE AND THE ADVANCE OF FUNDS
FOR THE ACQUISITION OF A PROPERTY.
The obligations (i) on the Initial Closing Date of the Lessor, the
Lessee, the Construction Agent, the Agent, the Lenders and the Holders to enter
into the transactions contemplated by this Agreement, including without
limitation the obligation to execute and deliver the applicable Operative
Agreements to which each is a party on the Initial Closing Date, (ii) on the
Initial Closing Date of the Holders to make Holder Advances, and of the Lenders
to make Loans in order to pay Transaction Expenses, fees, expenses and other
disbursements payable by the Lessor under Section 7.1(a) of this Agreement and
(iii) on a Property Closing Date for the purpose of providing funds to the
Lessor necessary to pay the Transaction Expenses, fees, expenses and other
disbursements payable by the Lessor under Section 7.1(b) of this Agreement and
to acquire or ground lease a Property (an "Acquisition Advance"), in each case
(with regard to the foregoing Sections 5.3(i), (ii) and (iii)) are subject to
the satisfaction or waiver of the following conditions precedent on or prior to
the Initial Closing Date or the applicable Property Closing Date, as the case
may be (to the extent such conditions precedent require the delivery of any
agreement, certificate, instrument, memorandum, legal or other opinion,
appraisal, commitment, title insurance commitment, lien report or any other
document of any kind or type, such shall be in form and substance satisfactory
to the Agent, in its reasonable discretion; notwithstanding the foregoing, the
obligations of each party shall not be subject to any conditions contained in
this Section 5.3 which are required to be performed by such party):
(a) the correctness of the representations and warranties
of the parties to this Agreement contained herein, in each of the
other Operative Agreements and each certificate delivered pursuant to
any Operative Agreement on each such date;
6
<PAGE> 11
(b) the performance by the parties to this Agreement of
their respective agreements contained herein and in the other
Operative Agreements to be performed by them on or prior to each such
date;
(c) the Agent shall have received a fully executed
counterpart copy of the Requisition, appropriately completed, and to
the extent requested by the Agent, the Construction Inspector shall
have reviewed and approved the same;
(d) title to each such Property shall conform to the
representations and warranties set forth in Section 6.2(l) hereof;
(e) the Construction Agent shall have delivered to the
Agent a good standing certificate for the Construction Agent in the
state where each such Property is located, the Deed with respect to
the Land and existing Improvements (if any), a copy of the Ground
Lease (if any), and a copy of the Bill of Sale with respect to the
Equipment (if any), respecting such of the foregoing as are being
acquired or ground leased on each such date with the proceeds of the
Loans and Holder Advances or which have been previously acquired or
ground leased with the proceeds of the Loans and Holder Advances and
such Land, existing Improvements (if any) and Equipment (if any) shall
be located in an Approved State;
(f) there shall not have occurred and be continuing any
Default or Event of Default under any of the Operative Agreements
which has not been waived by the applicable Financing Parties, as the
case may be, and no Default or Event of Default under any of the
Operative Agreements will have occurred after giving effect to the
Advance requested by each such Requisition;
(g) the Construction Agent shall have delivered to the
Agent title insurance commitments to issue policies respecting each
such Property in favor of the Lessor and the Agent from a title
insurance company acceptable to the Agent, with such title exceptions
thereto as are acceptable to the Agent;
(h) the Construction Agent shall have delivered to the
Agent an environmental site assessment respecting each such Property
prepared by an independent recognized professional acceptable to the
Agent;
(i) the Construction Agent shall have delivered to the
Agent a survey (with a flood hazard certification) respecting each
such Property prepared by an independent recognized professional
acceptable to the Agent;
(j) unless such an opinion has previously been delivered
with respect to a particular state, the Construction Agent shall have
caused to be delivered to the Agent a legal opinion in the form
attached hereto as EXHIBIT B or in such other form as is acceptable to
the Agent with respect to local law real property issues respecting
the state
7
<PAGE> 12
in which each such Property is located addressed to the Lessor, the
Agent, the Lenders and the Holders, prepared by counsel acceptable to
the Agent;
(k) (intentionally omitted);
(l) the Construction Agent shall have delivered to the
Agent invoices for, or other reasonably satisfactory evidence of, the
various Transaction Expenses and other fees, expenses and
disbursements referenced in Sections 7.1(a) or 7.1(b) of this
Agreement, as appropriate;
(m) the Construction Agent shall have caused to be
delivered to the Agent a Mortgage Instrument (in such form as is
acceptable to the Agent, with revisions as necessary to conform to
applicable state law), Lessor Financing Statements and Lender
Financing Statements respecting each such Property, all fully executed
and in recordable form;
(n) the Lessee shall have delivered to the Agent with
respect to each such Property a Lease Supplement and a memorandum (or
short form lease) regarding the Lease and such Lease Supplement (such
memorandum or short form lease to be in the form attached to the Lease
as EXHIBIT B or in such other form as is acceptable to the Agent, with
modifications as necessary to conform to applicable state law, and in
form suitable for recording);
(o) with respect to each Acquisition Advance, the sum of
the Available Commitment plus the Available Holder Commitment (after
deducting the Unfunded Amount, if any, and after giving effect to the
Acquisition Advance) will be sufficient to pay all amounts payable
therefrom;
(p) if any such Property is subject to a Ground Lease,
the Construction Agent shall have caused a lease memorandum (or short
form lease) to be delivered to the Agent for such Ground Lease and, if
requested by the Agent, a landlord waiver and a mortgagee waiver (in
each case, in such form as is acceptable to the Agent);
(q) counsel (acceptable to the Agent) for the ground
lessor of each such Property subject to a Ground Lease shall have
issued to the Lessor, the Agent, the Lenders and the Holders, its
opinion;
(r) the Construction Agent shall have delivered to the
Agent a preliminary Construction Budget for each such Property, if
applicable;
(s) the Construction Agent shall have provided evidence
to the Agent of insurance with respect to each such Property as
provided in the Lease;
8
<PAGE> 13
(t) subject to Section 5.5 of this Agreement, the
Construction Agent shall have caused an Appraisal regarding each such
Property to be provided to the Agent from an appraiser satisfactory to
the Agent;
(u) the Construction Agent shall cause (i) Uniform
Commercial Code lien searches, tax lien searches and judgment lien
searches regarding the Lessee to be conducted (and copies thereof to
be delivered to the Agent) in such jurisdictions as determined by the
Agent by a nationally recognized search company acceptable to the
Agent and (ii) the liens referenced in such lien searches which are
objectionable to the Agent to be either removed or otherwise handled
in a manner satisfactory to the Agent;
(v) all taxes, fees and other charges in connection with
the execution, delivery, recording, filing and registration of the
Operative Agreements and/or documents related thereto shall have been
paid or provisions for such payment shall have been made to the
satisfaction of the Agent;
(w) (intentionally omitted);
(x) each of the Operative Agreements to be entered into
on such date shall have been duly authorized, executed and delivered
by the parties thereto, and shall be in full force and effect, and the
Agent shall have received a fully executed copy of each of the
Operative Agreements;
(y) since the date of the most recent audited Financial
Statements (as such term is defined in the Lessee Credit Agreement) of
the Lessee, there shall not have occurred any event, condition or
state of facts which shall have or could reasonably be expected to
have a Material Adverse Effect, other than as specifically
contemplated by the Operative Agreements;
(z) as of the Initial Closing Date only, the Agent shall
have received an Officer's Certificate, dated as of the Initial
Closing Date, of the Lessee in the form attached hereto as EXHIBIT C
or in such other form as is acceptable to the Agent stating that (i)
each and every representation and warranty of the Lessee contained in
the Operative Agreements to which it is a party is true and correct on
and as of the Initial Closing Date; (ii) no Default or Event of
Default which has not been waived by the applicable Financing Parties,
as the case may be, has occurred and is continuing under any Operative
Agreement; (iii) each Operative Agreement to which the Lessee is a
party is in full force and effect with respect to it; and (iv) the
Lessee has duly performed and complied with all covenants, agreements
and conditions contained herein or in any Operative Agreement required
to be performed or complied with by it on or prior to the Initial
Closing Date;
(aa) as of the Initial Closing Date only, the Agent shall
have received (i) a certificate of the Secretary or an Assistant
Secretary of the Lessee, dated as of the Initial Closing Date, in the
form attached hereto as EXHIBIT D or in such other form as is
9
<PAGE> 14
acceptable to the Agent attaching and certifying as to (1) the
resolutions of its Board of Directors duly authorizing the execution,
delivery and performance by the Lessee of each of the Operative
Agreements to which it is or will be a party, (2) its articles of
incorporation certified as of a recent date by the Secretary of State
of its state of incorporation and its by-laws and (3) the incumbency
and signature of persons authorized to execute and deliver on its
behalf the Operative Agreements to which it is or will be a party and
(ii) a good standing certificate (or local equivalent) from the
appropriate office of the respective states where the Lessee is
incorporated and where the principal place of business of the Lessee
is located as to its good standing in each such state;
(bb) as of the Initial Closing Date only, the Agent shall
have received an Officer's Certificate of the Lessor dated as of the
Initial Closing Date in the form attached hereto as EXHIBIT E or in
such other form as is acceptable to the Agent, stating that (i) each
and every representation and warranty of the Lessor contained in the
Operative Agreements to which it is a party is true and correct on and
as of the Initial Closing Date, (ii) each Operative Agreement to which
the Lessor is a party is in full force and effect with respect to it
and (iii) the Lessor has duly performed and complied with all
covenants, agreements and conditions contained herein or in any
Operative Agreement required to be performed or complied with by it on
or prior to the Initial Closing Date;
(cc) as of the Initial Closing Date only, the Agent shall
have received (i) a certificate of the Secretary, an Assistant
Secretary, Trust Officer or Vice President of the Trust Company in the
form attached hereto as EXHIBIT F or in such other form as is
acceptable to the Agent, attaching and certifying as to (A) the
signing resolutions duly authorizing the execution, delivery and
performance by the Lessor of each of the Operative Agreements to
which it is or will be a party, (B) its articles of association or
other equivalent charter documents and its by-laws, as the case may
be, certified as of a recent date by an appropriate officer of the
Trust Company and (C) the incumbency and signature of persons
authorized to execute and deliver on its behalf the Operative
Agreements to which it is a party and (ii) a good standing certificate
from the Office of the Comptroller of the Currency;
(dd) as of the Initial Closing Date only, counsel for the
Lessor acceptable to the Agent shall have issued to the Lessee, the
Holders, the Lenders and the Agent its opinion in the form attached
hereto as EXHIBIT G or in such other form as is reasonably acceptable
to the Agent;
(ee) as of the Initial Closing Date only, the Construction
Agent shall have caused to be delivered to the Agent a legal opinion
in the form attached hereto as EXHIBIT H or in such other form as is
acceptable to the Agent, addressed to the Lessor, the Agent, the
Lenders and the Holders, from counsel acceptable to the Agent; and
(ff) as of the Initial Closing Date only, the Construction
Agent shall have forwarded, or caused to have been forwarded, to the
Equal Opportunity Compliance Office of the City of Baltimore, a
completed copy of the MBE and WBE Information and
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<PAGE> 15
Utilization Commitment Form as required pursuant to the City of
Baltimore Commitment.
5.4. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS
AND THE HOLDERS RELATING TO THE ADVANCE OF FUNDS AFTER THE
ACQUISITION ADVANCE.
Subject to Sections 5.4A, 5.4B and 5.4C, the obligations of the
Holders to make Holder Advances, and the Lenders to make Loans in connection
with all requests for Advances subsequent to the acquisition of a Property (and
to pay the Transaction Expenses, fees, expenses and other disbursements payable
by the Lessor under Section 7.1 of this Agreement in connection therewith) are
subject to the satisfaction or waiver of the following conditions precedent (To
the extent such conditions precedent require the delivery of any agreement,
certificate, instrument, memorandum, legal or other opinion, appraisal,
commitment, title insurance commitment, lien report or any other document of
any kind or type, such shall be in form and substance satisfactory to the
Agent, in its reasonable discretion. Notwithstanding the foregoing, the
obligations of each party shall not be subject to any conditions contained in
this Section 5.4 which are required to be performed by such party.):
(a) the correctness on such date of the representations
and warranties of the parties to this Agreement contained herein, in
each of the other Operative Agreements and in each certificate
delivered pursuant to any Operative Agreement;
(b) the performance by the parties to this Agreement of
their respective agreements contained herein and in the other
Operative Agreements to be performed by them on or prior to each such
date;
(c) the Agent shall have received a fully executed
counterpart of the Requisition, appropriately completed, and to the
extent requested by the Agent, the Construction Inspector shall have
reviewed and approved the same;
(d) based upon the most recent Construction Budget which
shall satisfy the requirements of this Agreement, the Available
Commitments and the Available Holder Commitment (after deducting the
Unfunded Amount) will be sufficient to complete the Improvements;
(e) there shall not have occurred and be continuing any
Default or Event of Default under any of the Operative Agreements
which has not been waived by the applicable Financing Parties, as the
case may be, and no Default or Event of Default under any of the
Operative Agreements will have occurred after giving effect to the
Construction Advance requested by the applicable Requisition;
(f) the title insurance policy delivered in connection
with the requirements of Section 5.3(g) shall provide for (or shall be
endorsed to provide for) insurance in an amount at least equal to the
maximum total Property Cost indicated by the Construction
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Budget referred to in subparagraph (d) above and there shall be no
title change or exception objectionable to the Agent;
(g) the Construction Agent shall have delivered to the
Agent copies of the Plans and Specifications for the applicable
Improvements;
(h) the Construction Agent shall have delivered to the
Agent invoices for, or other reasonably satisfactory evidence of, any
Transaction Expenses and other fees, expenses and disbursements
referenced in Section 7.1(b) that are to be paid with the Advance;
(i) the Construction Agent shall have delivered, or
caused to be delivered to the Agent, invoices, Bills of Sale or other
documents acceptable to the Agent, in each case with regard to any
Equipment or other components of such Property then being acquired
with the proceeds of the Loans and Holder Advances and naming the
Lessor as purchaser and transferee;
(j) all taxes, fees and other charges in connection with
the execution, delivery, recording, filing and registration of the
Operative Agreements shall have been paid or provisions for such
payment shall have been made to the satisfaction of the Agent; and
(k) since the date of the most recent audited Financial
Statements (as such term is defined in the Lessee Credit Agreement) of
the Lessee, there shall not have occurred any event, condition or
state of facts which shall have or could reasonably be expected to
have a Material Adverse Effect, other than as specifically
contemplated by the Operative Agreements.
5.4A. APPLICATION OF PROCEEDS OF THE ADVANCES.
(a) To the extent any other provision of the Operative
Agreements conflicts with the provisions of this Section 5.4A, the
provisions of this Section 5.4A shall govern. Advances will be
disbursed to the Construction Agent to pay for Property Costs or to
reimburse the Construction Agent for the payment of Property Costs,
included in the Construction Budget and the Plans and Specification
which at such time have previously been approved by the Agent and the
Agent's construction inspector or which are otherwise approved by the
Agent, as the construction of the Properties progresses.
Disbursements shall be made only against Requisitions approved by the
Agent pursuant to the procedures set forth herein and in the other
Operative Agreements.
(b) All Requisitions shall be subject to the prior
approval of the Agent. The Agent shall have a period of five (5)
Business Days within which to approve any Requisition and shall not be
required to approve Requisitions more than twice each month. All
Advances will be made directly to the Construction Agent; provided,
however, that notwithstanding any provision of any Operative
Agreement, the Agent may, in its sole discretion, require that all
Advances be made directly to the Construction Agent
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or be jointly payable to the Construction Agent and to any contractor,
or to subcontractors, laborers, materialmen or Persons furnishing
labor, services, materials or equipment used or to be used on or in
connection with the acquisition and/or construction of the Properties
or to any combination thereof, or to pay any loan fees, taxes,
inspection fees, recording charges, legal fees and any other
outstanding amounts due relating to Properties and the full cost of
its Completion. Any such disbursement or payment shall be deemed to
have been made to the Construction Agent or for its account. Upon
receipt of any funds requested by Requisition, the Construction Agent
promptly shall apply such funds to payments of the costs of the
acquisition and/or construction of the Properties for which such funds
are requested by the Requisition.
(c) Requisitions for Property Costs, other than the
direct costs of construction and renovation, must (i) include an
itemization of the costs for which payment is requested, (ii) have
attached thereto invoices evidencing such costs, (iii) indicate that
the delivery to the Property of any Equipment for which payment is
requested has been completed, and (iv) have attached thereto any
additional documents or information (including without limitation any
financing statements or amendments to financing statements and all
filing fees necessary for the filing thereof) reasonably required by
the Agent in order to create or perfect, or continue the perfection
of, the Agent's security interest in any Equipment or other property
pursuant to the terms of the Operative Agreements.
(d) Requisitions for direct costs of construction and
renovation of the Properties must (i) include the AIA approved
progress payment form, which must be signed by the Construction Agent
and the Construction Agent's architect or construction manager and
(ii) be approved by the Agent's construction inspector, not to be
unreasonably delayed, conditioned or withheld. Disbursements for
direct costs of construction and renovation of the Properties shall be
subject to retention (the "Retainage") in an amount equal to ten
percent (10%) of the value of the Work performed and materials in
place with respect to such Work; provided that, (A) as each
contractor, subcontractor or materialman completes its Work and
delivers a waiver of liens to the Agent, the Retainage with respect to
that contractor, subcontractor or materialman will be released, and
(B) at such time as the Improvements shall have been fifty percent
(50%) completed in accordance with the Plans and Specifications, the
Retainage shall be reduced to an amount equal to five percent (5%) of
the value of the Work performed. The Retainage with respect to the
Properties may be released upon compliance with the conditions set
forth in paragraph (e) of this Section 5.4A.
(e) The final disbursement for direct costs of
construction and renovation and the Retainage with respect to the
Properties will be withheld until the Agent (unless waived at such
time by the Agent) has been furnished with and approved copies of
certificates of completion (each such certificate may be referred to
as a "Completion Certificate") (i) (A) signed by the Construction
Agent and the Construction Agent's architect stating that each
Property has been designed pursuant to and in accordance with all
applicable zoning and building laws, ordinances and regulations and
(B) signed by the
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Construction Agent and the Construction Agent's general contractor
stating that each Property has been constructed and completed pursuant
to and in accordance with the applicable Plans and Specifications
(previously approved by the Agent and the Agent's construction
inspector); (ii) final waivers of liens from all materialmen,
contractors and subcontractors; (iii) a copy of the "as built" survey
with respect to each Property; (iv) evidence of hazard insurance
meeting the requirements of the Lease Agreement covering such
Property; (v) a copy of the permanent use and occupancy certificate
authorizing use and occupancy of the Properties in such form as those
governmental agencies having jurisdiction customarily issue upon
completion of improvements and readiness thereof for use in the City
of Baltimore, Maryland; (vi) an updated title insurance policy, if
required by the Agent; and (vii) to the extent requested by the Agent,
an Appraisal for each Property as referenced in Section 5.5 of this
Agreement.
(f) The Agent will not approve Requisitions for materials
which are not physically incorporated into the applicable Properties,
other than for materials (i) actually delivered to the site or a
bonded warehouse in the City of Baltimore, Maryland and stored in a
place secured and insured against theft, vandalism and other damage,
all in a manner reasonably satisfactory to the Agent or (ii) which
cannot feasibly be purchased without advance payment (provided, prior
to the funding of any such advance payments, the Agent may require
additional due diligence to be undertaken and additional safeguard
measures to be implemented, all as determined by the Agent in its
reasonable discretion).
(g) None of the Financing Parties makes any warranty,
either express or implied, that the permitted aggregate amount of
Advances will be sufficient to pay all of the Property Costs necessary
for Completion.
(h) No Advances shall in any way be construed as
obligating any Financing Party to any Person for the payment of any
expense incurred with respect to any Property, and no Person
contracting with the Construction Agent in connection with the
construction of the Properties shall be reimbursed by any Financing
Party under any circumstances whatsoever. No Financing Party shall in
any event be responsible or liable to any Person other than the
Construction Agent for the disbursement of or failure to disburse
proceeds of any Advance, or any part thereof, and neither any
contractor, subcontractor nor material or equipment supplier shall
have any right or claim against any Financing Party under any
Operative Agreement or in connection with the administration thereof.
5.4B. CONDITIONS PRECEDENT TO THE AGENT'S APPROVAL OF REQUISITIONS.
The Agent shall not be obligated to approve any Requisition until the
Agent shall have received a Requisition meeting the requirements of the
Operative Agreements, and until all of the following conditions precedent shall
have been fully met and complied with in all respects:
(a) No Event of Default shall have occurred and be
continuing.
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(b) There shall be sufficient time in the reasonable
opinion of the Agent to complete the applicable Property not later
than the Construction Period Termination Date.
(c) The Construction Agent shall have delivered to the
Agent copies of all permits required for the Work for which a
Requisition has been submitted.
(d) The Construction Agent shall have furnished to the
Agent waivers of Liens and receipt of payment as to each contractor
and each subcontractor for all Work performed to the date of the last
previous Requisition and waivers of Liens as to each supplier for
materials included in the last previous Requisition, within thirty
(30) days from the date of funding of the last previous Requisition,
or prior to the next Requisition, which shall first occur.
(e) The Construction Agent shall have delivered to the
Agent copies of any contracts, public works agreements and other
agreements executed by the Construction Agent in connection with the
construction or renovation of the applicable Property, all of which
must have been approved by the Agent (such approval not to be
unreasonably withheld, conditioned or delayed).
(f) At the option of the Agent, the title insurance
company insuring the title to the Property shall have issued a title
continuation or endorsement showing that the fee simple title to the
Property is clear of Liens (other than Lessor Liens and Permitted
Liens) to the date of such disbursement and that no financing
statements affecting the Property, or any part thereof, other than in
favor of Agent, or in connection with Lessor Liens or Permitted Liens,
have been filed.
(g) The Construction Agent shall have delivered to the
Agent three sets of Plans and Specifications (prior to commencing the
particular Work to which such Plans and Specifications relates),
signed and sealed by the Construction Agent's architect and approved
by the Agent. The Construction Agent shall have certified to the
Agent, and the Agent's construction inspector shall have confirmed,
that all construction Work which has been completed on the Properties
with respect to which the Requisition is being submitted is in
conformity with the applicable Plans and Specifications. Upon the
request of the Agent, the Construction Agent will specify the nature
of any deviations from such Plans and Specifications.
(h) The Agent shall have received, upon the Agent's
request, evidence satisfactory to it that all prior disbursements have
been properly applied to costs of the applicable Property.
(i) With respect to any new construction, the Agent shall
have received a current location survey conforming to the requirements
of Section 2.6A(k) of the Agency Agreement.
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(j) The sum of the funds being requisitioned, plus all
prior Advances, plus the aggregate of all retentions and undisbursed
funds shall be sufficient, in the reasonable judgment of the Agent, to
complete the applicable Property in accordance with the applicable
Plans and Specifications.
(k) The Agent shall have received (i) evidence acceptable
to the Agent in its sole discretion that construction Work performed
and materials in place to the date of the Requisition are satisfactory
both as to the quality and quantity, and that the subsoil is suitable
for the continued construction of the applicable Property, and (ii) a
certification from the Agent's construction inspector that the Work
performed in is compliance with all applicable governmental
requirements.
(l) Notwithstanding any other provisions of this
Agreement, prior to any Advance for costs of each item of personal
property Equipment, the Agent must have received and approved
reasonably satisfactory evidence of the following items:
(i) a specific description of such item,
including name of manufacturer,
manufacturer's I.D. number or serial number
and any other information reasonably
requested by the Agent in order to
sufficiently describe the item being financed
so that the Agent's security interest in such
item is adequately and may be or will be
adequately perfected, upon delivery to the
Construction Agent of such item of Equipment.
(ii) an amendment to this Agreement, if necessary
in the reasonable judgment of the Agent,
pursuant to which the Construction Agent
specifically grants to the Agent a security
interest in such item (or Construction
Agent's interest therein in respect of items
on order but not yet received), and
(iii) a financing statement or amendment to
financing statement, if necessary in the
reasonable judgment of the Agent, together
with all filing fees therefor, to be filed
among the appropriate financing statement
records in order to perfect such security
interest.
(m) If the disbursement is the final disbursement for the
costs of the Properties, in order to obtain the Agent's approval of
such disbursement (including without limitation the Retainage), in
addition to the satisfaction of all conditions set forth in this
Section, the Construction Agent shall have provided (i) the Completion
Certificates, appropriately completed, and the accompanying documents
described therein, and (ii) if reasonably required to protect the
interests of the Agent, the Lender and the Holders, evidence
satisfactory to Lender than an affidavit of completion has been
recorded in the appropriate governmental office in the City of
Baltimore, Maryland.
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(n) The Construction Agent shall cause each of the
Construction Agent's general contractor, all major sub-contractors
specified by the Agent and the Construction Agent's architect to
execute an agreement to complete which will provide, among other
things, that (i) upon request in writing by the Agent, they will
continue to provide the services called for by their contracts with
the Construction Agent and in accordance with the terms thereof
following an Event of Default and (ii) they consent to the assignment
of their contracts by the Construction Agent to the Agent. The
Construction Agent shall cause such general contractor, major
sub-contractors and architect to agree to give the Agent notice of a
default under their respective contracts with the Construction Agent
and under the agreement to complete and an opportunity to cure under
their contracts with the Construction Agent and to acknowledge the
existence of the Agent's interests in the Properties. To the extent
requested by the Agent at any time, the Construction Agent (i) shall
assign on a collateral basis the Construction Agent's contracts with
its general contractor and its architect within ten (10) Business Days
of such request on terms and conditions reasonably acceptable to the
Agent and (ii) shall cause its general contractor to provide a bond in
an amount up to $20,000,000 in favor of the Agent on behalf of all the
Financing Parties and on terms and conditions which are acceptable to
the Agent in its reasonable discretion.
(o) The Construction Agent authorizes the Agent to place
signs at each Property at any reasonable locations selected by the
Agent (during the construction of the Properties) and agreed to by the
Construction Agent, and to prepare and furnish news releases to the
news media or any other publications selected by the Agent advertising
the fact that financial assistance for the Properties has been
obtained from the Holders and the Lenders, and the details of such
financial assistance (but in no event any confidential information
regarding the Construction Agent or its business). Any sign placed on
any Property by the Construction Agent which identifies such Property
shall identify the Holders and the Lenders as the parties providing
financing for such Property. Any such news releases must be first
approved by the Construction Agent, which will not unreasonably
withhold its approval.
(p) The Completion Date shall be established by the
delivery to the Agent by the Construction Agent of the Completion
Certificates (appropriately completed) executed by the Construction
Agent, the Construction Agent's architect and the Construction Agent's
general contractor, as the case may be, and approved in writing by the
Agent. The Completion Certificates delivered to the Agent shall have
attached thereto the items described in Section 5.4A(e) hereof.
Notwithstanding the foregoing, the Completion Certificates
shall state that they are given without prejudice to any rights
against third parties which may exist at the date of such Completion
Certificates or which may subsequently come into being. It shall be
the duty of the Construction Agent to cause the Completion
Certificates to be furnished as soon as the construction and
renovation of the Properties shall have been completed.
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5.4C. ADDITIONAL FUNDING LIMITATIONS.
With respect to the Property located in or about the City of
Baltimore, Maryland, the Construction Agent shall deliver to the Agent on or
prior to (a) April 30, 1998 fully executed contracts for the general contractor
and the architect and copies of the sufficiently completed (as determined in
the reasonable judgment of the Agent and the Agent's construction inspector)
Plans and Specifications and the Construction Budget and that such have been
reviewed and approved by the Agent's construction inspector (such approval not
to be unreasonably withheld or delayed) and (b) July 31, 1998 copies of the
final Plans and Specifications and the final Construction Budget. The
Construction Agent will also provide to the Agent any and all related
construction documents reasonably requested from time to time by the Agent.
Prior to April 30, 1998, the Holders and the Lenders agree to fund Advances
(assuming all conditions precedent under the Operative Agreements are satisfied
with respect to each applicable Advance) in an aggregate amount not to exceed
$3,100,000. The general contractor's contract shall provide for the Completion
of the Property located in the City of Baltimore, Maryland at a price not to
exceed $18,500,000. Assuming such contracts for the general contractor and the
architect are in form and substance reasonably satisfactory to the Agent, then
the Holders and the Lenders shall make available the Available Holder
Commitments and the Available Commitments, as the case may be, for additional
Advances in accordance with the applicable provisions of the Operative
Agreements.
5.5. ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON COMPLETION
DATE AND ON CONSTRUCTION PERIOD TERMINATION DATE.
On or prior to the Completion Date for each Property, the Construction
Agent shall deliver to the Agent an Officer's Certificate in the form attached
hereto as EXHIBIT I or in such other form as is acceptable to the Agent
specifying (a) the address for such Property, (b) the Completion Date for such
Property, (c) the aggregate Property Cost for such Property, (d) detailed,
itemized documentation supporting the asserted Property Cost figures and (e)
that all representations and warranties of the Construction Agent and Lessee in
each of the Operative Agreements and each certificate delivered pursuant
thereto are true and correct as of the Completion Date (provided, that such
certificate may update such representations and warranties to the extent
necessary to reflect changed circumstances, so long as such changed
circumstances do not adversely affect any Financing Party or otherwise result
in a Material Adverse Effect). The Agent shall have the right to contest the
information contained in such Officer's Certificate. Furthermore, on or prior
to the Completion Date for each Property, the Construction Agent shall deliver
or cause to be delivered to the Agent (unless previously delivered to the
Agent) originals of the following, each of which shall be in form and substance
acceptable to the Agent, in its reasonable discretion: (u) a title insurance
endorsement regarding the title insurance policy delivered in connection with
the requirements of Section 5.3(g), but only to the extent such endorsement is
necessary to provide for insurance in an amount at least equal to the maximum
total Property Cost and, if endorsed, the endorsement shall not include a title
change or exception objectionable to the Agent; (v) an as-built survey for such
Property, (w) insurance certificates respecting such Property as required
hereunder and under the Lease Agreement, (x) a memorandum (or short form) of
the Lease and such Lease Supplement (in form suitable for
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recording), (y) if requested by the Agent, amendments to the Lessor Financing
Statements executed by the appropriate parties and (z) if requested by the
Agent, an Appraisal regarding such Property evidencing an appraised value of
such Property of no less than thirty-four percent (34%) of the aggregate
Property Cost of such Property. In addition, on the Completion Date for such
Property the Construction Agent covenants and agrees that the recording fees,
documentary stamp taxes or similar amounts required to be paid in connection
with the related Mortgage Instrument shall be paid in an amount required by
applicable law, subject, however, to the obligations of the Lenders and the
Holders to fund such costs to the extent required pursuant to Section 7.1.
5.6. THE CONSTRUCTION AGENT DELIVERY OF CONSTRUCTION BUDGET
MODIFICATIONS.
The Construction Agent may modify the Construction Budget if, but only
if, the aggregate amount of unfunded cost pursuant to such modified
Construction Budget does not exceed the sum of the Available Commitment plus
the Available Holder Commitment. The Construction Agent covenants and agrees
to deliver to the Agent each month notification of any modification to any
Construction Budget regarding any Property if such modification materially
increases the cost to construct such Property; provided no Construction Budget
may be increased unless (a) the title insurance policies referenced in Section
5.3(g) are also modified or endorsed, if necessary, to provide for insurance in
an amount that satisfies the requirements of Section 5.4(f) of this Agreement
and (b) after giving effect to any such amendment, the Construction Budget
remains in compliance with the requirements of Section 5.4(d) of this
Agreement.
5.7. RESTRICTIONS ON LIENS.
On each Property Closing Date, the Construction Agent shall cause each
Property acquired by the Lessor on such date to be free and clear of all Liens
except those referenced in Sections 6.2(r)(i) and 6.2(r)(ii). On each date a
Property is either sold to a third party in accordance with the terms of the
Operative Agreements or, pursuant to Section 22.1(a) of the Lease Agreement,
retained by the Lessor, the Lessee shall cause such Property to be free and
clear of all Liens (other than Lessor Liens and such other Liens that are
expressly set forth as title exceptions on the title commitment issued under
Section 5.3(g) with respect to such Property, to the extent such title
commitment has been approved by the Agent).
5.8. REAL ESTATE TAXES.
An amount equal to one hundred fifty percent (150%) of the real estate
taxes relating to each Property prior to the twenty-four (24) month anniversary
of the Initial Closing Date (as such amount shall be determined by the Agent in
its reasonable discretion) shall be funded by the Lenders and the Holders on or
about the Initial Closing Date (at such time as determined by the Agent and
into an account as determined by the Agent). Such amount shall constitute an
Advance for all purposes of the Operative Agreements from and after the date
the Lenders and the Holders fund the same. The Construction Agent shall
deliver a notice to the Agent no later than thirty (30) days prior to the due
date for payment of any such real estate taxes specifying the amount and
address to which such payment should be forwarded. The Agent shall cause such
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real estate taxes to be paid with the proceeds of the above-described account.
Excess amounts remaining in such account after such twenty-four (24) month
anniversary of the Initial Closing Date shall be returned on the next Payment
Date ratably to the Lenders as a prepayment on the Loans (in accordance with
Section 2.6 of the Credit Agreement) and an early return of the Holder Advances
(in accordance with Section 3.4 of the Trust Agreement).
Any amounts remaining in such account after the Construction Period
Termination Date shall be promptly remitted at the end of the applicable
Interest Period(s) to the Lenders and the Holders ratably in accordance with
the then current outstanding Loans and Holder Advances as partial prepayments
thereof.
5.9. CASH COLLATERAL ACCOUNT.
The Lessee shall make cash deposits in U.S. Dollars into the Cash
Collateral Account from time to time so that at all points in time prior to the
Construction Period Termination Date the amount on deposit in the Cash
Collateral Account equals or exceeds the then current aggregate Property Cost;
provided, such amount on deposit in the Cash Collateral Account may, at the
Lessee's election, be reduced dollar for dollar (up to $1,000,000) with regard
to the amount of the MIDFA Guaranty (if any). Upon Completion of the
Properties and to the extent no Default or Event of Default shall have occurred
and be continuing at such time, the Lessee may withdraw from the Cash
Collateral Account the amount by which the balance of the Cash Collateral
Account exceeds an amount equal to (a) eighty-three percent (83%) of the then
current aggregate Property Cost minus (b) $1,000,000 less (i) seventeen percent
(17%) of (ii) the aggregate Property Cost for such Properties as of the date of
Completion for such Properties in excess of $18,500,000; provided, such amount
on deposit in the Cash Collateral Account may, at the Lessee's election, be
reduced dollar for dollar (up to $1,000,000) with regard to the amount of the
MIDFA Guaranty (if any).
SECTION 6. REPRESENTATIONS AND WARRANTIES.
6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
Effective as of the Initial Closing Date and the date of each Advance,
the Trust Company in its individual capacity and as the Borrower, as indicated,
represents and warrants to each of the other parties hereto as follows,
provided, that the representations in the following paragraphs (h), (j) and (k)
are made solely in its capacity as the Borrower:
(a) It is a national banking association and is duly
organized and validly existing and in good standing under the laws of
the United States of America and has the power and authority to enter
into and perform its obligations under the Trust Agreement and
(assuming due authorization, execution and delivery of the Trust
Agreement by the Holders) has the corporate and trust power and
authority to act as the Owner Trustee and to enter into and perform
the obligations under each of the other Operative Agreements to which
the Trust Company or the Owner Trustee, as the case may be, is or will
be a party and each other agreement, instrument and document to be
executed and delivered by it on
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or before such Closing Date in connection with or as contemplated by
each such Operative Agreement to which the Trust Company or the Owner
Trustee, as the case may be, is or will be a party;
(b) The execution, delivery and performance of each
Operative Agreement to which it is or will be a party, either in its
individual capacity or (assuming due authorization, execution and
delivery of the Trust Agreement by the Holders) as the Owner Trustee,
as the case may be, has been duly authorized by all necessary action
on its part and neither the execution and delivery thereof, nor the
consummation of the transactions contemplated thereby, nor compliance
by it with any of the terms and provisions thereof (i) does or will
require any approval or consent of any trustee or holders of any of
its indebtedness or obligations, (ii) does or will contravene any
Legal Requirement relating to its banking or trust powers or (iii)
does or will contravene or result in any breach of or constitute any
default under, or result in the creation of any Lien upon any of its
property under, (A) its charter or by-laws, or (B) any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
bank loan or credit agreement or other agreement or instrument to
which it is a party or by which it or its properties may be bound or
affected, which contravention, breach, default or Lien under clause
(B) would materially and adversely affect its ability, in its
individual capacity or as the Owner Trustee, to perform its
obligations under the Operative Agreements to which it is a party;
(c) The Trust Agreement and, assuming the Trust Agreement
is the legal, valid and binding obligation of the Holders, each other
Operative Agreement to which the Trust Company or the Owner Trustee,
as the case may be, is or will be a party have been, or on or before
such Closing Date will be, duly executed and delivered by the Trust
Company or the Owner Trustee, as the case may be, and the Trust
Agreement and each such other Operative Agreement to which the Trust
Company or the Owner Trustee, as the case may be, is a party
constitutes, or upon execution and delivery will constitute, a legal,
valid and binding obligation enforceable against the Trust Company or
the Owner Trustee, as the case may be, in accordance with the terms
thereof;
(d) There is no action or proceeding pending or, to its
knowledge, threatened to which it is or will be a party, either in its
individual capacity or as the Owner Trustee, before any Governmental
Authority that, if adversely determined, would materially and
adversely affect its ability, in its individual capacity or as the
Owner Trustee, to perform its obligations under the Operative
Agreements to which it is a party or would question the validity or
enforceability of any of the Operative Agreements to which it is or
will become a party;
(e) It has not assigned or transferred any of its right,
title or interest in or under the Lease, the Agency Agreement or its
interest in any Property or any portion thereof, except in accordance
with the Operative Agreements;
(f) No Default of Event of Default under the Operative
Agreements attributable to it has occurred and is continuing;
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(g) Except as otherwise contemplated in the Operative
Agreements, the proceeds of the Loans and Holder Advances shall not be
applied by the Owner Trustee for any purpose other than the purchase
and/or lease of the Properties, the acquisition, installation and
testing of the Equipment, the design, construction and development of
Improvements and the payment of Transaction Expenses and the fees,
expenses and other disbursements referenced in Sections 7.1(a) and
7.1(b) of this Agreement, in each case which accrue prior to the Rent
Commencement Date with respect to a particular Property;
(h) Neither the Owner Trustee nor any Person authorized
by the Owner Trustee to act on its behalf has offered or sold any
interest in the Trust Estate or the Notes, or in any similar security
relating to a Property, or in any security the offering of which for
the purposes of the Securities Act would be deemed to be part of the
same offering as the offering of the aforementioned securities to, or
solicited any offer to acquire any of the same from, any Person other
than, in the case of the Notes, the Agent, and neither the Owner
Trustee nor any Person authorized by the Owner Trustee to act on its
behalf will take any action which would subject, as a direct result of
such action alone, the issuance or sale of any interest in the Trust
Estate or the Notes to the provisions of Section 5 of the Securities
Act or require the qualification of any Operative Agreement under the
Trust Indenture Act of 1939, as amended;
(i) The Owner Trustee's principal place of business,
chief executive office and office where the documents, accounts and
records relating to the transactions contemplated by this Agreement
and each other Operative Agreement are kept are located at 79 South
Main Street, Salt Lake City, Utah 84111;
(j) The Owner Trustee is not engaged principally in, and
does not have as one (1) of its important activities, the business of
extending credit for the purpose of purchasing or carrying any margin
stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System of the United States), and no part of the
proceeds of the Loans or the Holder Advances will be used by it to
purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any such margin stock or for any
purpose that violates, or is inconsistent with, the provisions of
Regulations G, T, U, or X of the Board of Governors of the Federal
Reserve System of the United States;
(k) The Owner Trustee is not an "investment company" or a
company controlled by an "investment company" within the meaning of
the Investment Company Act;
(l) Each Property is free and clear of all Lessor Liens
attributable to the Owner Trustee in its individual capacity; and
(m) The Owner Trustee, in its trust capacity, is a party
to no documents, instruments or agreements other than the Operative
Agreements to which it is a party and
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any other documents delivered by the Owner Trustee in connection with
the Operative Agreements.
6.2. REPRESENTATIONS AND WARRANTIES OF THE CONSTRUCTION AGENT AND
THE LESSEE.
Effective as of the Initial Closing Date, the date of each Advance and
the Rent Commencement Date, the Construction Agent and the Lessee represent and
warrant to each of the other parties hereto that:
(a) (intentionally omitted);
(b) The execution and delivery by each of the
Construction Agent and the Lessee of this Agreement and the other
applicable Operative Agreements as of such date and the performance by
each of the Construction Agent and the Lessee of its respective
obligations under this Agreement and the other applicable Operative
Agreements are within the corporate, partnership or limited liability
company (as the case may be) powers of each of the Construction Agent
and the Lessee, have been duly authorized by all necessary corporate,
partnership or limited liability company (as the case may be) action
on the part of each of the Construction Agent and the Lessee
(including without limitation any necessary shareholder action), have
been duly executed and delivered, have received all necessary
governmental approval, and do not and will not (i) violate any Legal
Requirement which is binding on the Construction Agent, the Lessee or
any of their Subsidiaries, (ii) contravene or conflict with, or result
in a breach of, any provision of the Articles of Incorporation,
By-Laws or other organizational documents of any of the Construction
Agent, the Lessee or any of their Subsidiaries or any material
provision of any agreement, indenture, instrument or other document
which is binding on any of the Construction Agent, the Lessee or any
of their Subsidiaries or (iii) result in, or require, the creation or
imposition of any Lien (other than pursuant to the terms of the
Operative Agreements) on any asset of any of the Construction Agent,
the Lessee or any of their Subsidiaries;
(c) This Agreement and the other applicable Operative
Agreements to which the Construction Agent or the Lessee are parties,
executed prior to and as of such date, constitute the legal, valid and
binding obligation of the Construction Agent or the Lessee, as
applicable, enforceable against the Construction Agent or the Lessee,
as applicable, in accordance with their terms, subject to bankruptcy,
insolvency, liquidation, reorganization, fraudulent conveyance and
similar laws affecting creditors' rights generally, and general
principles of equity. The Construction Agent and the Lessee have each
executed the various Operative Agreements required to be executed as
of such date;
(d) Except as described in EXHIBIT J, there are no
material actions, suits or proceedings pending or, to our knowledge,
threatened against either the Construction Agent or the Lessee in any
court or before any Governmental Authority that if adversely
determined to the interests of the Construction Agent or the Lessee
shall have or could reasonably be expected to have a Material Adverse
Effect;
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(e) No Governmental Action by any Governmental Authority
or other authorization, registration, consent, approval, waiver,
notice or other action by, to or of any other Person pursuant to any
Legal Requirement, contract, indenture, instrument or agreement or for
any other reason is required to authorize or is required in connection
with (i) the execution, delivery or performance of any Operative
Agreement by the Construction Agent or the Lessee, (ii) the legality,
validity, binding effect or enforceability of any Operative Agreement
as to the Construction Agent or the Lessee or (iii) the acquisition,
ownership, construction, completion, occupancy, operation, leasing or
subleasing of any Property by the Construction Agent or the Lessee in
each case, except those which have been obtained and are in full force
and effect and those which the Lessee expects to obtain in the
ordinary course;
(f) Upon the execution and delivery of each Lease
Supplement to the Lease, (i) the Lessee will have unconditionally
accepted the Property subject to the Lease Supplement and will have
taken all required actions on its part so that it will have a valid
and subsisting leasehold interest in such Property, subject only to
the Permitted Liens, and (ii) no offset will exist with respect to any
Rent or other sums payable under the Lease;
(g) Except as otherwise contemplated by the Operative
Agreements, the Construction Agent shall not use the proceeds of any
Holder Advance or Loan for any purpose other than the purchase and/or
lease of the Properties, the acquisition, installation and testing of
the Equipment, the design and construction of Improvements and the
payment of Transaction Expenses and the fees, expenses and other
disbursements referenced in Sections 7.1(a) and 7.1(b) of this
Agreement, in each case which accrue prior to the Rent Commencement
Date with respect to a particular Property;
(h) All information heretofore or contemporaneously
herewith furnished by either the Construction Agent or the Lessee or
any of their Subsidiaries to the Agent, the Owner Trustee, any Lender
or any Holder for purposes of or in connection with this Agreement and
the transactions contemplated hereby is, and all information hereafter
furnished by or on behalf of the Construction Agent, the Lessee or any
of their Subsidiaries to the Agent, the Owner Trustee, any Lender or
any Holder pursuant hereto or in connection herewith will be, true and
accurate in every material respect on the date as of which such
information is dated or certified, and such information, taken as a
whole, does not and will not omit to state any material fact necessary
to make such information, taken as a whole, not misleading;
(i) The principal place of business, chief executive
office and office of the Construction Agent and the Lessee where the
documents, accounts and records (or copies thereof) relating to the
transactions contemplated by this Agreement and each other Operative
Agreement will be kept (from and after delivery of executed originals
thereof) are located at 6611 Tributary Street, Baltimore, Maryland
21224;
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(j) The representations and warranties of the
Construction Agent and the Lessee set forth in any of the Operative
Agreements are true and correct in all material respects on and as of
each such date as if made on and as of such date. The Construction
Agent and the Lessee are in all material respects in compliance with
their respective obligations under the Operative Agreements and there
exists no Default or Event of Default under any of the Operative
Agreements which is continuing and which has not been cured within any
cure period expressly granted under the terms of the applicable
Operative Agreement or otherwise waived in accordance with the
applicable Operative Agreement. No Default or Event of Default will
occur under any of the Operative Agreements as a result of, or after
giving effect to, the Advance requested by the Requisition on the date
of each Advance;
(k) As of each Property Closing Date, the date of each
subsequent Advance and the Rent Commencement Date only, each Property
then being financed consists of (i) unimproved Land or (ii) Land and
existing Improvements thereon which Improvements are either suitable
for occupancy at the time of acquisition or ground leasing or will be
renovated and/or modified in accordance with the terms of this
Agreement. Each Property then being financed is located at the
location set forth on the applicable Requisition, each of which is in
one (1) of the Approved States;
(l) As of each Property Closing Date, the Lessor has good
and marketable fee simple title to each Property, or, if any Property
is the subject of a Ground Lease, the Lessor will have a valid ground
leasehold interest enforceable against the ground lessor of such
Property in accordance with the terms of such Ground Lease, subject
only to (i) such Liens referenced in Sections 6.2(r)(i) and 6.2(r)(ii)
on the applicable Property Closing Date and (ii) subject to Section
5.7, Permitted Liens after the applicable Property Closing Date;
(m) As of each Property Closing Date, the date of each
subsequent Advance and the Rent Commencement Date only, no portion of
any Property is located in an area identified as a special flood
hazard area by the Federal Emergency Management Agency or other
applicable agency, or if any such Property is located in an area
identified as a special flood hazard area by the Federal Emergency
Management Agency or other applicable agency, then flood insurance has
been obtained for such Property in accordance with Section 14.2(b) of
the Lease and in accordance with the National Flood Insurance Act of
1968, as amended;
(n) As of each Property Closing Date, the date of each
subsequent Advance and the Rent Commencement Date only, each Property
complies with all Insurance Requirements and all standards of Lessee
with respect to similar properties owned or leased by Lessee, if any;
(o) As of each Property Closing Date, the date of each
subsequent Advance and the Rent Commencement Date only, each Property
complies with all Legal Requirements as of such date (including
without limitation all zoning and land use laws
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and Environmental Laws), except to the extent that failure to comply
therewith, individually or in the aggregate, shall not have and could
not reasonably be expected to have a Material Adverse Effect;
(p) As of each Property Closing Date, the date of each
subsequent Advance and the Rent Commencement Date only, all utility
services and facilities necessary for the construction and operation
of the Improvements and the installation and operation of the
Equipment regarding each Property (including without limitation gas,
electrical, water and sewage services and facilities) are available at
the applicable Land and will be constructed prior to the Completion
Date for such Property or, to the extent any such utility services or
facilities are not available at the applicable Land, all necessary
access thereto (by easement or otherwise) has been obtained for the
duration of the reasonably anticipated useful life of such Property
and the cost to ensure such access has been included in the
Construction Budget;
(q) As of each Property Closing Date, the date of each
subsequent Advance and the Rent Commencement Date only, acquisition,
installation and testing of the Equipment (if any) and construction of
the Improvements (if any) to such date shall have been performed in a
good and workmanlike manner, substantially in accordance with the
applicable Plans and Specifications;
(r) (i) Assuming no act or omission by the Lessor (as
opposed to those imputed to the Lessor due to acts or omissions of the
Construction Agent or the Lessee) has impaired title to any Property,
the Security Documents create, as security for the Obligations (as
such term is defined in the Security Agreement), valid and enforceable
security interests in, and Liens on, all of the Collateral, in favor
of the Agent, for the ratable benefit of the Lenders and the Holders,
as their respective interests appear in the Operative Agreements, and
such security interests and Liens are subject to no other Liens other
than Liens that are expressly set forth as title exceptions on the
title commitment issued under Section 5.3(g) with respect to the
applicable Property, to the extent such title commitment has been
approved by the Agent. Assuming no act or omission by the Lessor (as
opposed to those imputed to the Lessor due to acts or omissions of the
Construction Agent or the Lessee) has impaired title to any Property,
upon recordation of the Mortgage Instrument in the real estate
recording office in the applicable Approved State identified by the
Construction Agent or the Lessee, the Lien created by the Mortgage
Instrument in the real property described therein shall be a perfected
first priority mortgage Lien on such real property in favor of the
Agent, for the ratable benefit of the Lenders and the Holders, as
their respective interests appear in the Operative Agreements. To the
extent that the security interests in the portion of the Collateral
comprised of personal property can be perfected by filing in the
filing offices in the applicable Approved States or elsewhere
identified by the Construction Agent or the Lessee, upon filing of the
Lender Financing Statements in such filing offices, the security
interests created by the Security Agreement shall be perfected first
priority security interests in such personal property in favor of the
Agent, for the ratable benefit of the Lenders and the Holders, as
their respective interests appear in the Operative Agreements;
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(ii) The Lease Agreement creates, as security for the
obligations of the Lessee under the Lease Agreement, valid and
enforceable security interests in, and Liens on, each Property leased
thereunder, in favor of the Lessor, and such security interests and
Liens are subject to no other Liens other than Liens that are
expressly set forth as title exceptions on the title commitment issued
under Section 5.3(g) with respect to the applicable Property, to the
extent such title commitment has been approved by the Agent. Upon
recordation of the memorandum of the Lease Agreement and the
memorandum of a Ground Lease, if any (or, in either case, a short form
lease), in the real estate recording office in the applicable Approved
State identified by the Construction Agent or the Lessee, the Lien
created by the Lease Agreement in the real property described therein
shall be a perfected first priority mortgage Lien on such real
property in favor of the Agent, for the ratable benefit of the Lenders
and the Holders, as their respective interests appear in the Operative
Agreements. To the extent that the security interests in the portion
of any Property comprised of personal property can be perfected by the
filing in the filing offices in the applicable Approved State or
elsewhere identified by the Construction Agent or the Lessee upon
filing of the Lessor Financing Statements in such filing offices, a
security interest created by the Lease Agreement shall be perfected
first priority security interests in such personal property in favor
of the Lessor, which rights pursuant to the Lessor Financing
Statements are assigned to the Agent, for the ratable benefit of the
Lenders and the Holders, as their respective interests appear in the
Operative Agreements;
(s) The Plans and Specifications for each Property will
be prepared prior to the commencement of construction in accordance
with all applicable Legal Requirements (including without limitation
all applicable Environmental Laws and building, planning, zoning and
fire codes), except to the extent the failure to comply therewith,
individually or in the aggregate, shall not have and could not
reasonably be expected to have a Material Adverse Effect. Upon
completion of the Improvements for each Property in accordance with
the applicable Plans and Specifications, such Improvements will be
within any building restriction lines and will not encroach in any
manner onto any adjoining land (except as permitted by express written
easements, which have been approved by the Agent);
(t) As of the Rent Commencement Date only, each Property
shall be improved in accordance with the applicable Plans and
Specifications in a good and workmanlike manner and shall be
operational; and
(u) As of each Property Closing Date only, each Property
has been acquired or ground leased pursuant to a Ground Lease at a
price that is not in excess of fair market value or fair market rental
value, as the case may be.
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SECTION 7. PAYMENT OF CERTAIN EXPENSES.
7.1. TRANSACTION EXPENSES.
(a) The Lessor agrees on the Initial Closing Date, to
pay, or cause to be paid, all Transaction Expenses arising from the
Initial Closing Date, including without limitation all reasonable
fees, expenses and disbursements of the various legal counsels for the
Lessor and the Agent in connection with the transactions contemplated
by the Operative Agreements and incurred in connection with such
Initial Closing Date, the initial fees and expenses of the Owner
Trustee due and payable on such Initial Closing Date, all fees, taxes
and expenses for the recording, registration and filing of documents
and all other reasonable fees, expenses and disbursements incurred in
connection with such Initial Closing Date; provided, however, the
Lessor shall pay such amounts described in this Section 7.1(a) only if
(i) such amounts are properly described in a Requisition delivered on
or before the Initial Closing Date, and (ii) funds are made available
by the Lenders and the Holders in connection with such Requisition in
an amount sufficient to allow such payment. On the Initial Closing
Date after delivery and receipt of the Requisition referenced in
Section 4.2(a) hereof and satisfaction of the other conditions
precedent for such date, the Holders shall make Holder Advances and
the Lenders shall make Loans to the Lessor to pay for the Transaction
Expenses, fees, expenses and other disbursements referenced in this
Section 7.1(a). The Lessee agrees to timely pay all amounts referred
to in this Section 7.1(a) to the extent not paid by the Lessor.
(b) Assuming no Default or Event of Default shall have
occurred and be continuing and only for the period prior to the Rent
Commencement Date, the Lessor agrees on each Property Closing Date, on
the date of any Construction Advance and on the Completion Date to
pay, or cause to be paid, all Transaction Expenses including without
limitation all reasonable fees, expenses and disbursements of the
various legal counsels for the Lessor and the Agent in connection with
the transactions contemplated by the Operative Agreements and billed
in connection with such Advance or such Completion Date, all amounts
described in Section 7.1(a) of this Agreement which have not been
previously paid, the annual fees and reasonable out-of-pocket expenses
of the Owner Trustee, all fees, expenses and disbursements incurred
with respect to the various items referenced in Sections 5.3, 5.4
and/or 5.5 (including without limitation any premiums for title
insurance policies and charges for any updates to such policies) and
all other reasonable fees, expenses and disbursements in connection
with such Advance or such Completion Date including without limitation
all expenses relating to and all fees, taxes and expenses for the
recording, registration and filing of documents and during the
Commitment Period, all fees, expenses and costs referenced in Sections
7.3(a), 7.3(b), 7.3(d) and 7.4; provided, however, the Lessor shall
pay such amounts described in this Section 7.1(b) only if (i) such
amounts are properly described in a Requisition delivered on the
applicable date and (ii) funds are made available by the Lenders and
the Holders in connection with such Requisition in an amount
sufficient to allow such payment. On each Property Closing Date, on
the date of any Construction Advance or any Completion
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<PAGE> 33
Date, after delivery of the applicable Requisition and satisfaction of
the other conditions precedent for such date, the Holders shall make a
Holder Advance and the Lenders shall make Loans to the Lessor to pay
for the Transaction Expenses, fees, expenses and other disbursements
referenced in this Section 7.1(b). The Lessee agrees to timely pay
all amounts referred to in this Section 7.1(b) to the extent not paid
by the Lessor.
7.2. BROKERS' FEES.
The Lessee agrees to pay or cause to be paid any and all brokers'
fees, if any, including without limitation any interest and penalties thereon,
which are payable in connection with the transactions contemplated by this
Agreement and the other Operative Agreements.
7.3. CERTAIN FEES AND EXPENSES.
The Lessee agrees to pay or cause to be paid (a) the initial and
annual Owner Trustee's fee and all reasonable expenses of the Owner Trustee and
any co-trustees (including without limitation reasonable counsel fees and
expenses) or any successor owner trustee and/or co-trustee, for acting as the
owner trustee under the Trust Agreement, (b) all reasonable costs and expenses
incurred by the Construction Agent, the Lessee, the Agent, the Lenders, the
Holders or the Lessor in entering into any Lease Supplement and any future
amendments, modifications, supplements, restatements and/or replacements with
respect to any of the Operative Agreements, whether or not such Lease
Supplement, amendments, modifications, supplements, restatements and/or
replacements are ultimately entered into, or giving or withholding of waivers
of consents hereto or thereto, which have been requested by the Construction
Agent, the Lessee, the Agent, the Lenders, the Holders or the Lessor, (c) all
reasonable costs and expenses incurred by the Construction Agent, the Lessee,
the Agent, the Lenders, the Holders or the Lessor in connection with any
exercise of remedies under any Operative Agreement or any purchase of any
Property by the Construction Agent, the Lessee or any third party and (d) all
reasonable costs and expenses incurred by the Construction Agent, the Lessee,
the Agent, the Lenders, the Holders or the Lessor in connection with any
transfer or conveyance of any Property, whether or not such transfer or
conveyance is ultimately accomplished.
7.4. STRUCTURING FEE AND ADMINISTRATION FEE.
The Lessee shall pay the structuring fees, administration fees and any
other fees and expenses described in the engagement letter dated January 8,
1998 executed by First Union Capital Markets and accepted and agreed to by the
Lessee.
7.5. FEES AND EXPENSES OF THE AGENT'S CONSTRUCTION INSPECTOR.
The Lenders and the Holders shall pay (for their own account and
without counting such amounts as Advances) the fees and expenses payable from
time to time to the Agent's construction inspector with respect to the
Properties. Such amounts shall be payable ratably based on the relative
Commitments and Holder Commitments of such entities.
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<PAGE> 34
SECTION 8. OTHER COVENANTS AND AGREEMENTS.
8.1. COOPERATION WITH THE CONSTRUCTION AGENT OR THE LESSEE.
The Holders, the Lenders, the Lessor (at the direction of the Majority
Secured Parties) and the Agent shall, at the expense of and to the extent
reasonably requested by the Construction Agent or the Lessee (but without
assuming additional liabilities on account thereof and only to the extent such
is acceptable to the Holders, the Lenders, the Lessor (at the direction of the
Majority Secured Parties) and the Agent in their reasonable discretion),
cooperate with the Construction Agent or the Lessee in connection with the
Construction Agent or the Lessee satisfying its covenant obligations contained
in the Operative Agreements including without limitation at any time and from
time to time, promptly and duly executing and delivering any and all such
further instruments, documents and financing statements (and continuation
statements related thereto).
8.2. COVENANTS OF THE OWNER TRUSTEE AND THE HOLDERS.
Each of the Owner Trustee and the Holders hereby agrees that so long
as this Agreement is in effect:
(a) Neither the Owner Trustee (in its trust capacity or
in its individual capacity) nor any Holder will create, take any
action to cause or permit to exist at any time, and each of them will,
at its own cost and expense, promptly take such action as may be
necessary duly to discharge, or to cause to be discharged, any and all
Lessor Liens on the Properties attributable to it; provided, however,
that the Owner Trustee and the Holders shall not be required to so
discharge any such Lessor Lien while the same is being contested in
good faith by appropriate proceedings diligently prosecuted so long as
such proceedings shall not materially and adversely affect the rights
of the Lessee under the Lease and the other Operative Agreements or
involve any material danger of impairment of the Liens of the Security
Documents or of the sale, forfeiture or loss of, and shall not
interfere with the use or disposition of, any Property or title
thereto or any interest therein or the payment of Rent;
(b) Without prejudice to any right under the Trust
Agreement of the Owner Trustee to resign (subject to the requirement
set forth in the Trust Agreement that such resignation shall not be
effective until a successor shall have agreed to accept such
appointment), or the Holders' rights under the Trust Agreement to
remove the institution acting as the Owner Trustee (after consent to
such removal by the Agent as provided in the Trust Agreement), each of
the Owner Trustee and the Holders hereby agrees with the Lessee and
the Agent (i) not to terminate or revoke the trust created by the
Trust Agreement except as permitted by Article VIII of the Trust
Agreement, (ii) not to amend, supplement, terminate or revoke or
otherwise modify any provision of the Trust Agreement in such a manner
as to adversely affect the rights of any such party without the prior
written consent of such party and (iii) to comply with all of the
terms of the Trust Agreement, the nonperformance of which would
adversely affect such party;
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(c) The Owner Trustee or any successor may resign or be
removed by the Holders as the Owner Trustee, a successor Owner Trustee
may be appointed and a corporation may become the Owner Trustee under
the Trust Agreement, only in accordance with the provisions of Article
IX of the Trust Agreement and, with respect to such appointment, with
the consent of the Lessee, which consent shall not be unreasonably
withheld or delayed;
(d) The Owner Trustee, in its capacity as the Owner
Trustee under the Trust Agreement, and not in its individual capacity,
shall not contract for, create, incur or assume any Indebtedness, or
enter into any business or other activity or enter into any contracts
or agreements, other than pursuant to or under the Operative
Agreements, and the Owner Trustee shall not take any action that
prohibits it from performing under the Operative Agreements;
(e) The Holders will not instruct the Owner Trustee to
take any action in violation of the terms of any Operative Agreement;
(f) Neither any Holder nor the Owner Trustee shall (i)
commence any case, proceeding or other action with respect to the
Owner Trustee under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, arrangement, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (ii)
seek appointment of a receiver, trustee, custodian or other similar
official with respect to the Owner Trustee or for all or any
substantial benefit of the creditors of the Owner Trustee; and neither
any Holder nor the Owner Trustee shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any
of the acts set forth in this paragraph;
(g) The Owner Trustee shall give prompt notice to the
Lessee, the Holders and the Agent if the Owner Trustee's principal
place of business or chief executive office, or the office where the
records concerning the accounts or contract rights relating to any
Property are kept, shall cease to be located at 79 South Main Street,
Salt Lake City, Utah 84111, or if it shall change its name;
(h) The Owner Trustee shall take or refrain from taking
such actions and grant or refrain from granting such approvals with
respect to the Operative Agreements and/or relating to any Property in
each case as directed in writing by the Agent (until such time as the
Loans are paid in full, and then by the Majority Holders) or, in
connection with Sections 8.5 and 9.2 hereof, the Lessee; provided,
however, that notwithstanding the foregoing provisions of this
subparagraph (h) the Owner Trustee, the Agent, the Lenders and the
Holders each acknowledge, covenant and agree that neither the Owner
Trustee nor the Agent shall act or refrain from acting, regarding each
Unanimous Vote Matter, until such party has received the approval of
each Lender and each Holder affected by such matter;
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(i) The Owner Trustee shall maintain the trust powers
necessary to fully perform under the Operative Agreements;
(j) The Owner Trustee shall not make any alterations or
improvements to the Property or Improvements without the Lessee's
consent, except to the extent required by reason of an emergency or
subsequent to the occurrence of and during the continuance of an Event
of Default.
(k) Whenever the Owner Trustee receives a notice pursuant
to any of the Operative Agreements from a party other than a Financing
Party, the Lessee or the Construction Agent, the Owner Trustee shall
promptly send a copy of such notice to the Lessee, unless (i) the
Owner Trustee has actual knowledge that the Lessee has received a copy
of such notice or (ii) under the applicable provisions of the
Operative Agreements, the Agent, the Holders or the Lenders are
required to send such a copy of such notice to the Lessee.
8.3. THE LESSEE COVENANTS, CONSENT AND ACKNOWLEDGMENT.
(a) The Lessee acknowledges and agrees that the Owner
Trustee, pursuant to the terms and conditions of the Security
Agreement and the Mortgage Instruments, shall create Liens respecting
the various personal property, fixtures and real property described
therein in favor of the Agent. The Lessee hereby irrevocably consents
to the creation, perfection and maintenance of such Liens. Each of
the Construction Agent and the Lessee shall, to the extent reasonably
requested by any of the other parties hereto, cooperate with the other
parties in connection with their covenants herein or in the other
Operative Agreements and shall from time to time duly execute and
deliver any and all such future instruments, documents and financing
statements (and continuation statements related thereto) as any other
party hereto may reasonably request.
(b) The Lessor hereby instructs the Lessee, and the
Lessee hereby acknowledges and agrees, that until such time as the
Loans and the Holder Advances are paid in full and the Liens evidenced
by the Security Agreement and the Mortgage Instruments have been
released (i) any and all Rent (excluding Excepted Payments which shall
be payable to each Holder or other Person as appropriate) and any and
all other amounts of any kind or type under any of the Operative
Agreements due and owing or payable to any Person shall instead be
paid directly to the Agent (excluding Excepted Payments which shall be
payable to each Holder or other Person as appropriate) or as the Agent
may direct from time to time for allocation and distribution in
accordance with the procedures set forth in Section 8.7 hereof, (ii)
all rights of the Lessor under the Lease shall be exercised by the
Agent and (iii) the Lessee shall cause all notices, certificates,
financial statements, communications and other information which are
delivered, or are required to be delivered, to the Lessor, to also to
be delivered at the same time to the Agent.
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(c) The Lessee shall not consent to or permit any
amendment, supplement or other modification of the terms or provisions
of any Operative Agreement except in accordance with Section 12.4 of
this Agreement.
(d) The Lessee hereby covenants and agrees to cause an
Appraisal or reappraisal (in form and substance satisfactory to the
Agent and from an appraiser selected by the Agent) to be issued
respecting any Property as requested by the Agent (i) at each and
every time as such shall be required to satisfy any regulatory
requirements imposed on the Agent, the Lessor, the Trust Company, any
Lender and/or any Holder and (ii) after the occurrence of an Event of
Default.
(e) The Lessee hereby covenants and agrees that, except
for amounts payable as Basic Rent, any and all payment obligations
owing from time to time under the Operative Agreements by any Person
(excluding Advances to be made in accordance with the applicable
provisions of the Operative Agreements) to the Agent, any Lender, any
Holder or any other Person shall (without further action) be deemed to
be Supplemental Rent obligations payable by the Lessee. Without
limitation, such obligations of the Lessee shall include without
limitation arrangement fees, administrative fees, participation fees,
commitment fees, unused fees, prepayment penalties, breakage costs,
indemnities, trustee fees and transaction expenses incurred by the
parties hereto in connection with the transactions contemplated by the
Operative Agreements.
(f) At any time the Lessor or the Agent is entitled under
the Operative Agreements to possession of a Property or any component
thereof, each of the Construction Agent and the Lessee hereby
covenants and agrees, at its own cost and expense, to assemble and
make the same available to the Agent (on behalf of the Lessor).
(g) (intentionally omitted)
(h) (intentionally omitted)
(i) The Lessee hereby covenants and agrees that it shall
give prompt notice to the Agent if the Lessee's principal place of
business or chief executive office, or the office where the records
(or copies thereof) concerning the accounts or contract rights
relating to any Property are kept, shall cease to be located at 6611
Tributary Street, Baltimore, Maryland 21224 or if it shall change its
name.
(j) (intentionally omitted)
(k) (intentionally omitted)
(l) (intentionally omitted)
(m) The Lessee shall promptly notify the Agent, or cause
the Agent to be promptly notified, upon the Lessee gaining knowledge
of the occurrence of any Default or
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Event of Default which is continuing at such time. In any event, such
notice shall be provided to the Agent within ten (10) Business Days
after the date on which of when the Lessee gains such knowledge.
(n) Until all of the obligations under the Operative
Agreements have been finally and indefeasibly paid and satisfied in
full and the Commitments and the Holder Commitments terminated unless
consent has been obtained from the Majority Secured Parties, the
Lessee will:
(i) except as permitted by the express provisions
of the Lessee Credit Agreement, preserve and maintain its
separate legal existence and all rights, franchises, licenses
and privileges necessary to the conduct of its business, and
qualify and remain qualified as a foreign corporation (or
partnership, limited liability company or other such similar
entity, as the case may be) and authorized to do business in
each jurisdiction in which the failure to do so qualify would
have a Material Adverse Effect;
(ii) pay and perform all obligations of the Lessee
under the Operative Agreements and pay and perform (A) all
taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (B) all
other indebtedness, obligations and liabilities in accordance
with customary trade practices, which if not paid would have a
Material Adverse Effect; provided that the Lessee may contest
any item described in this Section 8.3(n)(ii) in good faith so
long as adequate reserves are maintained with respect thereto
in accordance with GAAP;
(iii) to the extent failure to do so would have a
Material Adverse Effect, observe and remain in compliance with
all applicable Laws and maintain in full force and effect all
Governmental Actions, in each case applicable to the conduct
of its business; keep in full force and effect all licenses,
certifications or accreditations necessary for any Property to
carry on its business; and not permit the termination of any
insurance reimbursement program available to any Property; and
(iv) provided that the Agent, the Lenders and the
Holders use reasonable efforts to minimize disruption to the
business of the Lessee, permit representatives of the Agent or
any Lender or Holder, from time to time, to visit and inspect
its properties; inspect, audit and make extracts from its
financial and accounting books and records, including without
limitation management letters prepared by independent
accountants; and discuss with its principal officers, and its
independent accountants, its business, assets, liabilities,
financial condition, results of operations and business
prospects.
(o) (intentionally omitted)
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<PAGE> 39
(p) Prior to the Construction Period Termination Date,
the Lessee will permit the Agent and its authorized agents to enter upon the
Property during normal working hours and upon reasonable advance notice to the
Lessee, as often as the Agent desires, for the purpose of inspecting the
construction of the Improvements. Upon any such entry, the entering party shall
not disrupt the construction process in any material way and shall use
reasonable care in conducting itself. Failure of the Financing Parties or
their authorized agents to discover or to reject materials or workmanship shall
not make them liable to the Lessee or to any other Person on account of such
deficiency, nor shall any prior failure constitute a waiver of the Financing
Parties' right to subsequently reject any such workmanship or materials.
(q) The Lessee shall remove, at its cost, all Lessee
Equipment from the Properties on or prior to the Expiration Date (unless the
Lease is terminated earlier and in such case, on or prior to such date of
termination). At its cost, the Lessee shall cause any damage to any Property
caused by the removal of Lessee Equipment to be promptly repaired in a
workmanlike manner or shall make arrangements (reasonably satisfactory to the
Agent) for such repair work. To the extent such Lessee Equipment is not so
removed on or prior to the Expiration Date (or such earlier date of
termination), then such Lessee Equipment shall automatically and without
further action be deemed to be the property of the Lessor.
(r) Except as otherwise provided pursuant to the Pledge
Agreement, the Lessee shall not, and shall cause each of its Subsidiaries not
to, transfer any interest in the stock of any Credit Support Subsidiary.
Except as otherwise provided pursuant to the Pledge Agreement and Section
8.3B(m)(iii) of this Agreement, the Lessee shall, and shall cause each of its
Subsidiaries to, keep the stock of any Credit Support Subsidiary free and clear
of any and all encumbrances. Except as otherwise provided pursuant to the
Pledge Agreement and Section 8.3B(m)(iii) of this Agreement, the Lessee shall
not, and shall cause each of its Subsidiaries not to, transfer any interest in
the stock of any Credit Support Subsidiary.
(s) On or prior to the date which is thirty (30) days
after the fiscal year end of the Lessee, the Lessee shall submit to the Agent
the annual budget (including without limitation a projected income statement
and balance sheet) for the Lessee and its Subsidiaries for the next following
fiscal year.
8.3A. ADDITIONAL AFFIRMATIVE COVENANTS OF THE LESSEE.
Until the Expiration Date, the Lessee will, and will cause each
Subsidiary (direct and indirect) of the Lessee, unless the prior written
consent to do otherwise has been obtained from the Agent to:
(a) Maintain, and cause each of its Subsidiaries (direct
and indirect) to maintain, at all times, a system of accounting
established and administered in accordance with sound business
practices; and subject to the provisions of Section 12.13 of the
Participation Agreement furnish to the Agent:
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<PAGE> 40
(i) as soon as available but in no event more than
fifty (50) days after the close of each of the Lessee's fiscal
quarters, a copy of the Form 10-Q for the Lessee and its
Subsidiaries (direct and indirect) on a consolidated basis for
such fiscal quarter filed with the United States Securities and
Exchange Commission ("SEC") accompanied by a certificate of the
chief financial officer of the Lessee stating whether any event
has occurred which constitutes a Lease Default or a Lease Event
of Default, and, if so, stating the facts with respect thereto
and demonstrating (in a manner reasonably satisfactory to the
Agent) compliance with all financial covenants; and
(ii) as soon as available but in no event more than
one hundred twenty (120) days after the close of each of the
Lessee's fiscal years, a copy of the Annual Report to
Shareholders and/or Form 10-K filed with the SEC for the Lessee
and its Subsidiaries (direct and indirect) on a consolidated
basis; and
(iii) as soon as available but in no event more than
one hundred twenty (120) days after the close of each of the
Lessee's fiscal years, an audit report of the Independent
Accountant, together with a certificate of such Independent
Accountant stating directly to the Agent that in the course of
such Independent Accountant's audit of the financial statements
of the Lessee and its Subsidiaries (direct and indirect) on a
consolidated basis and review and examination of all other
relevant information, the Independent Accountant has acquired
no knowledge of any Lease Event of Default, or under any other
indebtedness of the Lessee or its Subsidiaries, (direct or
indirect) and has acquired no knowledge of any other event
which would constitute such a Lease Event of Default or any
other indebtedness of the Lessee or its Subsidiaries (direct or
indirect) with the giving of notice or the lapse of time or
both, and, if so, stating the facts with respect thereto unless
such Independent Accountants, consistent with industry
practice, do not give such certificates; and
(iv) copies of all other reports made by the
Independent Accountant and delivered to the Lessee or its
Subsidiaries (direct or indirect) in connection with the annual
audit described in (iii) of this subsection and such other and
additional information, reports or statements as the Agent may
from time to time reasonably request.
(b) Pay and discharge, and cause each of its Subsidiaries
(direct and indirect) to pay and discharge, all Taxes prior to the
date on which penalties attach thereto, and all lawful claims which,
if unpaid might become a Lien upon any of its properties, subject to
the right of the Lessee to contest the same in accordance with the
same conditions imposed in Section 13.1 of the Lease with respect to
Legal Requirements. If the Lessee or any of its Subsidiaries (direct
or indirect) fails to pay any of such Taxes at the time or
36
<PAGE> 41
in the manner provided in this Section, the Lessor may, at its option,
pay such Taxes and the Lessee or any of its Subsidiaries (direct or
indirect) shall pay to the Lessor the amount of any sum so paid, with
interest thereon at the Overdue Rate.
(c) In addition to the insurance required by Article XIV
hereof, maintain insurance with responsible insurance companies on
such of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses. The Lessee shall file
with the Agent, upon request, a detailed list of the insurance then in
effect, stating the names of the insurance companies, the amounts and
rates of insurance, dates of the expiration thereof and the properties
and risks covered thereby. Consistent with the first sentence of this
Section 8.3A(c), within thirty (30) days after notice from the Agent,
the Lessee shall obtain such additional insurance as the Agent may
reasonably request.
(d) Continue, and cause each of its Subsidiaries (direct
and indirect) to continue, to engage in or support its business of the
discovery, development and marketing of pharmaceuticals and medical
devices and shall cause to be done all things necessary to obtain,
preserve and to keep in full force and effect (i) the Lessee's
existence in good standing as a Delaware corporation qualified to do
business in all jurisdictions where the failure to so qualify would
have a Material Adverse Effect and (ii) the existence of each
Subsidiary of Lessee (direct and indirect) in good standing in its
particular jurisdiction of its formation and in all jurisdictions
where the failure to so qualify would have a material adverse effect
on the business of such Subsidiary and (iii) its Licenses which are
necessary for its business operations at each Permitted Facility, and
(iv) observe the valid requirements of any Governmental Authority in
all material respects. Notwithstanding the foregoing, the Lessee and
each Subsidiary (direct and indirect) may, with prior notice to, but
without consent of, the Agent, change its state of incorporation if
such change would not otherwise result in the occurrence of a Lease
Event of Default.
(e) Keep, and cause each of its Subsidiaries (direct and
indirect) to keep, and until the Expiration Date, use its best efforts
to cause the General Contractor to keep, adequate records and books of
account with respect to each Property, and the business of the Lessee
and each of its Subsidiaries (direct and indirect) in accordance with
GAAP; and subject to the provisions of Section 12.13 of the
Participation Agreement hereof permit the Agent, by its agents,
accountants and attorneys, to visit and inspect each Property and each
Permitted Facility, to examine such records and books of account and
to discuss the affairs, finances and accounts pertaining thereto with
agents of the Lessee or any of its Subsidiaries (direct or indirect)
at its offices during normal business hours and at such other
reasonable times as may be requested by the Agent.
(f) (intentionally omitted)
(g) As soon as possible but in no event later than the
120th day after the close of each of the Lessee's fiscal years,
furnish to the Agent a certificate of both the chief
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<PAGE> 42
financial officer and the chief executive officer of the Lessee
certifying that to the best of their knowledge and belief the Lessee
and its Subsidiaries (direct and indirect) have fulfilled all of the
obligations of the Lessee and its Subsidiaries (direct and indirect)
under the Operative Agreements throughout the fiscal year most
recently ended and that no Lease Default or Lease Event of Default
exists, or, if such Lease Default or Lease Event of Default does
exist or has occurred over the prior year, setting forth the nature
and circumstances of such Lease Default or Lease Event of Default, and
the current status thereof.
(h) Notify the Agent in writing within two (2) Business
Days of the date on which the Lessee or any of its Subsidiaries
(direct or indirect) obtains knowledge of the commencement of any
litigation against or affecting the Lessee, any of its Subsidiaries
(direct or indirect), any Permitted Facility or any Property and of
all proceedings before any court or any governmental or regulatory
agency affecting the Lessee, any of its Subsidiaries (direct or
indirect), any Permitted Facility or any Property, which, if adversely
determined, would materially adversely affect the conduct of the
Lessee's or any of its Subsidiaries' (direct or indirect) business,
the financial condition of the Lessee or any of its Subsidiaries
(direct or indirect) or in any manner materially adversely affect the
Lessee's use of any Property in the ordinary course of business.
(i) (i) Take, and cause each of its Subsidiaries
(direct and indirect) to take, any and all steps
necessary to renew the Licenses in accordance with all
applicable laws, rules and regulations and shall fully,
promptly and faithfully comply with and perform its obligations
and duties under the Licenses in accordance with the terms
thereof, including, without limitation, (A) the payment of any
and all issuance, renewal or other fees, charges, assessments
and other expenses assessed by any issuing Governmental
Authority in connection with any of the Licenses, (B) the
filing of any and all reports, surveys, schedules,
certificates, applications and other items required by any
issuing Governmental Authority as a condition precedent to any
renewal, issuance, or continuation of any of the Licenses and
(C) the operation and maintenance of each Permitted Facility in
compliance with all applicable laws, rules and regulations
imposed by any Governmental Authority upon the Lessee's
business conducted at such Permitted Facility.
(ii) Use its best efforts, and cause its
Subsidiaries (direct and indirect) to use best efforts, to
obtain from the appropriate Governmental Authority such
Licenses, approvals and permits as are necessary for the
operation, growth and development of the Lessee's and its
Subsidiaries' (direct and indirect) businesses in a
commercially reasonable manner.
(j) The Lessee shall keep and maintain each Property in
compliance in all material respects with all applicable environmental
laws of all Governmental Authorities, and further agrees to comply
with any and all recommendations to the Lessee set forth in
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the Environmental Report and furnish to the Agent written evidence of
such compliance with thirty (30) days of the Initial Closing Date.
The Lessee agrees to give notice to the Agent within two (2) Business
Days of its acquiring knowledge of any Hazardous Substance upon any
Property, with a full description of all known information regarding
such Hazardous Substance and promptly comply with any laws requiring
the removal, treatment or disposal of such Hazardous Substance and
provide the Agent with satisfactory evidence within sixty (60) days
after a demand by them, with a bond, letter of credit or similar
financial assurance evidencing to the satisfaction of the Agent that
the necessary funds are available to pay the cost of removing,
treating and disposing of such Hazardous Substance and discharging any
encumbrance which may be established on any Property as a result
thereof; provided, however, that if the Lessee in the exercise of
reasonable diligence is unable within sixty (60) days to ascertain the
nature and extent of such Hazardous Substances and/or the cost of
appropriate remediation, the Agent and the Lessee shall establish such
additional time period as may be reasonably required of the Lessee to
provide financial assurance for remediation which is satisfactory to
the Agent. The Lessee further agrees to indemnify and hold harmless
each Financing Party from any and all claims which may now or in the
future be asserted as a result of the presence of any Hazardous
Substance upon any Property. Other than such materials required in
connection with the Lessee's business, the Lessee shall not place,
manufacture or store, or permit to be placed, manufactured or stored,
on any Property any Hazardous Substance. Further, in the event of a
Release emanating from any Property, the Lessee shall (i) report the
Release to the appropriate Governmental Authorities (to the extent
required by law); (ii) in consultation with such Governmental
Authorities, identify the appropriate remedial measures in response to
the Release; and (iii) promptly implement in accordance with any
plans, orders or approvals of any Governmental Authority such remedial
measures as shall cause mitigation, removal and remediation of any and
all effects upon the environment resulting from the Release. Notice
of any and all Releases shall be reported to the Agent. In addition
to the foregoing, the Lessee shall cause any of its Subsidiaries to
provide notice to the Agent of any Hazardous Substances contamination
or any release of Hazardous Substances upon any of its properties
concerning which such Subsidiary is required by law to provide notice
and information to any Governmental Authority.
(k) The Lessee shall satisfy all of its obligations
pursuant to Section 5.9 of the Participation Agreement.
(l) The Lessee shall comply in all material respects with
any and all of its obligations under the Prior Lease subject to all
notice and cure periods contained therein.
(m) (intentionally omitted)
(n) Lessee and GPI Holdings, Inc. on a consolidated basis
(i) shall at all times maintain cash, Cash Equivalents, short-term investments
and investments in the aggregate in an amount equal to or greater than
$40,000,000 (as shown on Lessee's then most recent balance sheet, prepared in
accordance with GAAP), and such in all cases shall not be subject to any Lien
or (ii) (A) as of the end of each fiscal quarter for the immediately preceding
twelve (12) month
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period, shall maintain a Cashflow Coverage Ratio greater than 1.25 to 1.00 and
(B) shall at all times maintain a Tangible Net Worth of not less than
$40,000,000.
(o) Lessee shall notify the Agent in writing regarding
the formation or acquisition of any Subsidiary within thirty (30) days of such
formation or acquisition.
8.3B. ADDITIONAL NEGATIVE COVENANTS OF THE LESSEE.
Until the Expiration Date, the Lessee will not, and will cause each
Subsidiary (direct or indirect) of the Lessee not to, without the prior written
consent of the Agent:
(a) Create, incur, assume or suffer to exist any Lien of
any kind upon any of its property or assets including the Security,
whether now owned or hereafter acquired, except (i) the Permitted
Liens; (ii) Liens securing purchase money indebtedness permitted by
Section 8.3B(k)(iv) of this Agreement; provided, that such shall
attach only to the property being financed; (iii) Liens on accounts,
inventory and other current assets of the Lessee which are not part of
the Security; (iv) Liens imposed by law, such as carriers',
warehousemen's, mechanics', materialmen's and vendors' liens, incurred
in good faith in the ordinary course of business and securing
obligations which are not yet due or which are being contested in good
faith by appropriate proceedings; (v) Liens upon property (other than
upon any Property or any component hereof) existing at the time such
property is acquired by the Lessee or any Subsidiary (direct or
indirect) of the Lessee; provided, in each case, that (A) such Liens
were not created in contemplation of the acquisition by the Lessee or
any Subsidiary (direct or indirect) of the Lessee of such property,
and (B) such Liens do not attach or extend to any other property; (vi)
attachment, judgment or other similar Liens arising in connection with
court proceedings, provided, that the execution or other enforcement
of such Liens is effectively stayed and the claims secured thereby are
being actively contested in good faith by appropriate legal
proceedings; (vii) Liens permitted by the Agent; (viii) Liens for
Taxes not delinquent or being contested in good faith and by
appropriate proceedings, (ix) Liens in connection with worker's
compensation, unemployment insurance and other security obligations;
(x) deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising
in the ordinary course of business; (xi) Liens contemplated in favor
of the Agent pursuant to the Operative Agreements; (xii) Liens
contemplated under that certain Loan Agreement dated June 13, 1996
(the "RPR Agreement") between Lessee and Rhone-Poulenc Rorer Inc. and
(xiii) extensions, renewals and replacements of any Lien permitted
hereunder or under the other Operative Agreements.
(b) Enter into any merger or consolidation or acquire
(except by gift or bequest) all or substantially all of the assets of
any person, firm, joint venture or corporation; provided, however,
that, so long as no Lease Event of Default shall have occurred and be
continuing immediately prior to or after giving effect to the
specified transaction (i) the Lessee may acquire (A) all or any part
or interest of any person in intellectual property or other intangible
assets and (B) all or substantially all of the assets
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or stock of any other person to the extent the limitation on capital
expenditures set forth in Section 8.3B(f) hereof would not be
exceeded; and (ii) any Subsidiary (direct or indirect) of the Lessee
may merge with or into or consolidate or combine with the Lessee or
with another Subsidiary (direct or indirect) of the Lessee, provided,
that if such merger involves the Lessee as a merging party the Lessee
is the surviving corporation. Neither the Lessee nor any Subsidiary
(direct or indirect) of the Lessee shall sell, lease or otherwise
dispose of any of its assets except: (i) assets disposed of in the
ordinary course of business; (ii) intellectual property assigned,
licensed or sublicensed in the ordinary course of business; (iii)
Equipment disposed of in accordance with the provisions of the
Operative Agreements; (iv) assets (other than the Equipment) sold or
otherwise disposed of which are obsolete or no longer useful in the
business in arm's-length transactions; or (v) machinery, equipment and
other tangible personal property (other than the Equipment) sold or
otherwise disposed of in the ordinary course of business in
arm's-length transactions; provided, that the proceeds of such
transactions are used within three (3) months after the closing of
such transactions to purchase comparable machinery, equipment and
tangible personal property, as the case may be. Further, neither the
Lessee nor any Subsidiary (direct or indirect) of the Lessee shall
(except for Permitted Subsidiary Activity) sell, transfer, assign or
encumber, in any manner, any License with respect to the business
operations on any Property; or enter into any new ventures or
businesses, other than the business of the discovery, development and
marketing of pharmaceuticals and medical devices or activities in
support thereof. Notwithstanding anything to the contrary contained in
this Section 8.3B(b), neither the Lessee nor any Subsidiary (direct or
indirect) of the Lessee shall be required to obtain the written
consent of any Financing Party with respect to any sale, lease,
transfer, assignment or other disposition of assets of any kind to the
Lessee or to a Subsidiary (direct or indirect) of the Lessee;
provided, however, that (x) prior to any sale, lease, transfer,
assignment or other disposition of assets in any twelve (12) month
period having an aggregate "net book value" (as defined in GAAP) in
excess of two million five hundred thousand dollars ($2,500,000) to a
Subsidiary (direct or indirect) of the Lessee (as opposed to the
Lessee), the applicable recipient Subsidiary (direct or indirect) of
the Lessee shall have delivered to the Agent a guarantee agreement
substantially in form and substance reasonably satisfactory to the
Agent or (y) with respect to any investment by the Lessee, the Lessee
shall be in compliance with Section 8.3B(d) below.
(c) Exclusive of Section 8.3B(d) of this Section, make
loans or advances to any Person or permit loans or advances to any
Person to remain outstanding except for: (i) loans and advances
existing on the Initial Closing Date; (ii) advances made for normal
and customary business purposes; (iii) loans to employees for the
purchase of common stock of the Lessee; and (iv) additional loans
which, in any event, shall not at any time exceed $6,000,000 for the
Lessee and its Subsidiaries (direct and indirect) on a consolidated
basis in the aggregate outstanding at the end of any one fiscal
quarter.
(d) Exclusive of Section 8.3B(c) and excluding matters
pertaining directly to loans, advances or investments in or with GPI
Holdings, Inc., make any loans, advances or investments in or with any
Subsidiary (direct or indirect) or Affiliate of the Lessee or
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any new venture or Person in an amount which exceeds $6,000,000 for
the Lessee and its Subsidiaries (direct or indirect) on a consolidated
basis, in the aggregate outstanding at the end of any one fiscal year.
(e) (intentionally omitted)
(f) Make any capital expenditures for fixed assets
exceeding, in the aggregate, during any one fiscal year, the total sum
of $10,000,000 for the Lessee and its Subsidiaries (direct or
indirect) on a consolidated basis.
(g) Declare any dividends (other than dividends payable
in capital stock of the Lessee) on any shares of any class of its
capital stock (other than preferred stock).
(h) Fail to notify the Agent of any changes in the chief
executive officer or chief financial officer of the Lessee or any
Subsidiary (direct or indirect) of the Lessee within thirty (30) days
of such change, giving specific reasons for any such change.
(i) Except as may be otherwise permitted under Section
8.3B(c), pay or lend, or permit any payment of or loan of, either
directly or indirectly, any sum or sums of money to any stockholder of
the Lessee or any of its Subsidiaries (direct or indirect) other than
payments made in accordance with existing arrangements (including
without limitation all extensions and renewals thereof) and payments
made for normal and customary business purposes.
(j) (i) Restate or amend or permit any Affiliate to
restate or amend any Plan established and maintained by the Lessee or
any Affiliate of the Lessee, in a manner designed to disqualify such
Plan under the applicable requirements of the Code; (ii) permit any
officers of the Lessee or any Affiliate of the Lessee to materially
adversely affect the qualified tax-exempt status of any Plan of the
Lessee or any Affiliate of the Lessee to engage in any Prohibited
Transaction; (iv) incur or permit any Affiliate of the Lessee to incur
any Accumulated Funding Deficiency, whether or not waived, in
connection with any Plan; (v) take or permit any Affiliate of the
Lessee to take any action or fail to take any action which causes a
termination of any Plan in a manner which could result in the
imposition of a lien on the property of the Lessee or any Affiliate of
the Lessee pursuant to Section 4068 of ERISA; (vi) fail to notify the
Agent that notice has been received of a termination of any
Multiemployer Plan to which the Lessee or any Affiliate of the Lessee
has an obligation to contribute; (vii) incur or permit any Affiliate
of the Lessee to incur a complete or partial withdrawal from any
Multiemployer Plan to which the Lessee or any Affiliate of the Lessee
has an obligation to contribute that shall have or could reasonably be
expected to have a Material Adverse Effect; or (viii) fail to notify
the Agent that notice has been received from the administrator of any
Multiemployer Plan to which the Lessee or any Affiliate of the Lessee
has an obligation to contribute that any such plan will be placed in
"reorganization".
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(k) Create, incur, assume or suffer to exist any
liability for borrowed money (as measured on a consolidated basis for
the Lessee and its Subsidiaries (direct and indirect)) at any point in
time except: (i) indebtedness in existence on the Initial Closing
Date and of which the Lessee has informed the Agent in writing prior
to the Initial Closing Date; (ii) indebtedness of the Lessee secured
by encumbrances specifically permitted by Section 8.3B(a); (iii)
short-term trade indebtedness incurred in the ordinary course of the
Lessee's business operations; (iv) indebtedness incurred to finance
the purchase price of tangible assets acquired to the extent the
aggregate principal amount of such indebtedness incurred at any time
of the Lessee does not exceed $10,000,000; (v) lease, royalty and
other similar deferred payments required to be made in connection with
the licensure or acquisition of intellectual property and other
intangible assets; (vi) indebtedness subordinated to the obligations
of the Lessee under the Operative Agreements on terms acceptable to
the Agent; (vii) unsecured indebtedness incurred for working capital
purposes in the form of a working capital loan in a maximum aggregate
principal amount not to exceed $5,000,000 at any time outstanding;
(viii) additional unsecured indebtedness in an amount not to exceed
$5,000,000 at any time outstanding for the Lessee and all its
Subsidiaries (direct and indirect); (ix) indebtedness incurred
pursuant to the RPR Agreement and (x) indebtedness (not to exceed the
principal amount of the indebtedness being refinanced) representing
the refinancing of any indebtedness permitted under this Section
8.3B(k).
(l) Notwithstanding anything to the contrary contained
herein, the parties hereto acknowledge and agree that (i) the
covenants set forth in Sections 8.3B(a) and 8.3B(k) above shall not be
construed to prohibit the Lessee from entering into, and performing
under, any operating lease, sale/leaseback or other similar
arrangement the purposes of which is to permit the use by the Lessee
of equipment, furniture and/or fixtures in the normal course of its
business, including without limitation the Master Lease Agreement
dated September 10, 1996 between the Lessee and General Electric
Capital Corporation (and all agreements and instruments contemplated
thereby), and (ii) all calculations with respect to covenants in this
Agreement shall be made by ignoring any intercompany loans or advances
between or among any of the Lessee and/or its Subsidiaries (direct or
indirect).
(m) Except for Permitted Subsidiary Activity, Lessee
shall not permit any Credit Support Subsidiary to engage in any
business or other activity and notwithstanding the foregoing, Lessee
shall not permit any Credit Support Subsidiary without the prior
written consent of the Agent (not to be unreasonably withheld, delayed
or conditioned) to (i) incur or otherwise be obligated for any
Indebtedness (except for intercompany Indebtedness directly with
Lessee or a wholly-owned Subsidiary (direct or indirect) of Lessee) or
(ii) cause or permit any of its assets to be subject to any Lien or
(iii) merge with or into or otherwise consolidate with any Person
except for Lessee (and in which case Lessee shall be the surviving
entity).
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8.4. SHARING OF CERTAIN PAYMENTS.
Except for Excepted Payments, the parties hereto acknowledge and
agree that all payments due and owing by the Lessee to the Lessor under the
Lease or any of the other Operative Agreements shall be made by the Lessee
directly to the Agent as more particularly provided in Section 8.3 hereof. The
Lessor, the Holders, the Agent, the Lenders and the Lessee acknowledge the
terms of Section 8.7 of this Agreement regarding the allocation of payments and
other amounts made or received from time to time under the Operative Agreements
and agree, that all such payments and amounts are to be allocated as provided
in Section 8.7 of this Agreement.
8.5. GRANT OF EASEMENTS, ETC.
The Agent, the Lenders and the Holders hereby agree that, so long as
no Event of Default shall have occurred and be continuing, the Owner Trustee
shall, and the Agent shall cause the trustee under any Mortgage Instrument to,
from time to time at the request of the Lessee (and with the prior consent of
the Agent), (i) grant easements and other rights in the nature of easements
with respect to any Property, (ii) release existing easements or other rights
in the nature of easements which are for the benefit of any Property, (iii)
execute and deliver to any Person any instrument appropriate to confirm or
effect such grants or releases, and (iv) execute and deliver to any Person such
other documents or materials in connection with the acquisition, development,
construction, testing or operation of any Property, including without
limitation reciprocal easement agreements, construction contracts, operating
agreements, development agreements, plats, replats or subdivision documents;
provided, that each of the agreements referred to in this Section 8.5 shall be
on commercially reasonable terms so as not to diminish the value of any
Property in any material respect.
8.6. APPOINTMENT BY THE AGENT, THE LENDERS, THE HOLDERS AND THE
OWNER TRUSTEE.
The Holders hereby appoint the Agent to act as collateral agent for
the Holders in connection with the Lien granted by the Security Documents to
secure the Holder Amount. The Lenders and the Holders acknowledge and agree
and direct that the rights and remedies of the beneficiaries of the Lien of the
Security Documents shall be exercised by the Agent on behalf of the Lenders and
the Holders as directed from time to time by the Majority Secured Parties or,
pursuant to Sections 8.2(h) and 12.4, all of the Lenders and the Holders, as
the case may be; provided, in all cases, the Agent shall allocate payments and
other amounts received in accordance with Section 8.7. The Agent is further
appointed to provide notices under the Operative Agreements on behalf of the
Owner Trustee (as determined by the Agent, in its reasonable discretion), to
receive notices under the Operative Agreements on behalf of the Owner Trustee
and (subject to Sections 8.5 and 9.2) to take such other action under the
Operative Agreements on behalf of the Owner Trustee as the Agent shall
determine in its reasonable discretion from time to time. The Tranche A
Lenders hereby further appoint the Agent to act on their behalf in connection
with the Guaranty. The Agent hereby accepts such appointments. For purposes
hereof, the provisions of Section 7 of the Credit Agreement, together with such
other
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terms and provisions of the Credit Agreement and the other Operative Agreements
as required for the full interpretation and operation of Section 7 of the
Credit Agreement are hereby incorporated by reference as if restated herein for
the mutual benefit of the Agent and each Holder as if each Holder were a Lender
thereunder. Outstanding Holder Advances and outstanding Loans shall each be
taken into account for purposes of determining Majority Secured Parties.
Further, the Agent shall be entitled to take such action on behalf of the Owner
Trustee as is delegated to the Agent under any Operative Agreement (whether
express or implied) as may be reasonably incidental thereto. The parties
hereto hereby agree to the provisions contained in this Section 8.6. Any
appointment of a successor agent under Section 7.9 of the Credit Agreement
shall also be effective as an appointment of a successor agent for purposes of
this Section 8.6.
8.7. COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.
(a) Notwithstanding any other provision in the Operative
Agreements, amounts payable to the Holders shall in all cases be
subordinate to amounts payable to the Lenders. The Lessee and the
Construction Agent have agreed pursuant to the terms of this Agreement
to pay to (i) the Agent any and all Rent (excluding Excepted Payments)
and any and all other amounts of any kind or type under any of the
Operative Agreements due and owing or payable to any Person and (ii)
each Person as appropriate the Excepted Payments. Promptly after
receipt, the Agent shall apply and allocate, in accordance with the
terms of this Section 8.7, such amounts received from the Lessee or
the Construction Agent and all other payments, receipts and other
consideration of any kind whatsoever received by the Agent pursuant to
the Security Agreement or otherwise received by the Agent, the Holders
or any of the Lenders in connection with the Collateral, the Security
Documents or any of the other Operative Agreements. Ratable
distributions among the Lenders and the Holders under this Section 8.7
shall be made based on (in the case of the Lenders) the ratio of the
outstanding Loans to the aggregate Property Cost and (in the case of
the Holders) the ratio of the outstanding Holder Advances to the
aggregate Property Cost. Ratable distributions among the Tranche A
Lenders under this Section 8.7 shall be made based on the ratio of the
individual Tranche A Lender's Commitment for Tranche A Loans to the
aggregate of all the Tranche A Lenders' Commitments for Tranche A
Loans. Ratable distributions among the Tranche B Lenders under this
Section 8.7 shall be made based on the ratio of the individual Tranche
B Lender's Commitment for Tranche B Loans to the aggregate of all the
Tranche B Lenders' Commitments for Tranche B Loans. Ratable
distributions among the Lenders (in situations where the Tranche A
Lenders are not differentiated from the Tranche B Lenders) shall be
made based on the ratio of the individual Lender's Commitment to the
aggregate of all the Lenders' Commitments. Ratable distributions
among the Holders under this Section 8.7 shall be based on the ratio
of the individual Holder's Holder Commitment to the aggregate of all
the Holders' Holder Commitments.
(b) Payments and other amounts received by the Agent from
time to time in accordance with the terms of subparagraph (a) shall be
applied and allocated as follows:
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(i) Any such payment or amount identified as or
deemed to be Basic Rent shall be applied and allocated by the
Agent first, to the Lenders for application and allocation to
the payment of interest on the Loans which is due and payable
on such date and thereafter the principal of the Loans which
is due and payable on such date and second, to the Holders for
application and allocation to the payment of accrued Holder
Yield which is due and payable on such date with respect to
the Holder Advances and thereafter the portion of the Holder
Advances which is due and payable on such date; and
thereafter, if no Default or Event of Default is in effect,
any excess shall be paid to such Person or Persons as the
Lessee may designate; provided, that if a Default or Event of
Default is in effect, such excess (if any) shall instead be
held by the Agent until the earlier of (I) the first date
thereafter on which no Default or Event of Default shall be in
effect (in which case such payments or returns shall then be
made to such other Person or Persons as the Lessee may
designate) and (II) the Maturity Date or the Expiration Date,
as the case may be (or, if earlier, the date of any
Acceleration), in which case such amounts shall be applied and
allocated in the manner contemplated by Section 8.7(b)(iv).
(ii) If on any date the Agent or the Lessor shall
receive any amount in respect of (A) any Casualty or
Condemnation pursuant to Sections 15.1(a) or 15.1(g) of the
Lease (excluding any payments in respect thereof which are
payable to the Lessee in accordance with the Lease), or (B)
the Termination Value in connection with the delivery of a
Termination Notice pursuant to Article XVI of the Lease, or
(C) the Termination Value in connection with the exercise of
the Purchase Option under Section 20.1 of the Lease or the
exercise of the option of the Lessor to transfer the
Properties to the Lessee pursuant to Section 20.3 of the
Lease, or (D) any payment required to be made or elected to be
made by the Construction Agent to the Lessor pursuant to the
terms of the Agency Agreement, then in each case, the Lessor
shall be required to pay such amount received (1) if no
Acceleration has occurred, first, to prepay the principal
balance of the Loans, and accrued interest thereon, on a pro
rata basis, and second, to prepay the Holder Advances and
accrued Holder Yield thereon, on a pro rata basis, or (2) if
an Acceleration has occurred, to apply and allocate the
proceeds respecting Sections 8.7(b)(ii)(A) through
8.7(b)(ii)(D) in accordance with Section 8.7(b)(iii) hereof.
(iii) Subject to Section 8.7(c), an amount equal to
any payment identified as proceeds of the sale or other
disposition (or lease upon the exercise of remedies) of the
Properties or any portion thereof, whether pursuant to Article
XXII of the Lease or the exercise of remedies under the
Security Documents or otherwise, the execution of remedies set
forth in the Lease and any payment in respect of excess wear
and tear pursuant to Section 22.3 of the Lease (whether such
payment relates to a period before or after the Construction
Period Termination Date) shall be applied and allocated by the
Agent first, ratably to the payment of the principal and
interest of the Tranche B Loans then outstanding, second, to
the extent such amount exceeds the maximum amount to be
returned
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pursuant to the foregoing provisions of this paragraph (iii),
ratably to the payment of the principal and interest of the
Tranche A Loans then outstanding, third, to any and all other
amounts owing under the Operative Agreements to the Lenders
under the Tranche B Loans, fourth, to any and all other
amounts owing under the Operative Agreements to the Lenders
under the Tranche A Loans, fifth, ratably to the payment to
the Holders of the outstanding principal balance of all Holder
Advances plus all outstanding Holder Yield with respect to
such outstanding Holder Advances, sixth, to any and all other
amounts owing under the Operative Agreements to the Holders,
and seventh, to the extent moneys remain after application and
allocation pursuant to clauses first through sixth above, to
the Owner Trustee for application and allocation to any and
all other amounts owing to the Holders or the Owner Trustee
and as the Holders shall determine; provided, where no Event
of Default shall exist and be continuing and a prepayment is
made for any reason with respect to less than the full amount
of the outstanding principal amount of the Loans and the
outstanding Holder Advances, the proceeds shall be applied and
allocated ratably to the Lenders and to the Holders.
(iv) Subject to Section 8.7(c), an amount equal to
(A) any such payment identified as a payment pursuant to
Section 22.1(b) of the Lease (or otherwise) of the Maximum
Residual Guarantee Amount (and any such lesser amount as may
be required by Section 22.1(b) of the Lease), any such payment
pursuant to the Pledge Agreement, any such payment pursuant to
the Guaranty and any such payment which derives from the Cash
Collateral Account and (B) any other amount payable upon any
exercise of remedies after the occurrence of an Event of
Default not covered by Sections 8.7(b)(i) or 8.7(b)(iii) above
(including without limitation any amount received in
connection with an Acceleration which does not represent
proceeds from the sale or liquidation of the Properties),
shall be applied and allocated by the Agent first, ratably, to
the payment of the principal and interest balance of Tranche A
Loans then outstanding, second, ratably to the payment of the
principal and interest balance of the Tranche B Loans then
outstanding, third, to the payment of any other amounts owing
to the Lenders hereunder or under any of the other Operative
Agreement, fourth, ratably to the payment of the principal
balance of all Holder Advances plus all outstanding Holder
Yield with respect to such outstanding Holder Advances, and
fifth, to the extent moneys remain after application and
allocation pursuant to clauses first through fourth above, to
the Owner Trustee for application and allocation to Holder
Advances and Holder Yield and any other amounts owing to the
Holders or the Owner Trustee as the Holders shall determine.
(v) An amount equal to any such payment
identified as Supplemental Rent shall be applied and allocated
by the Agent to the payment of any amounts then owing to the
Agent, the Lenders, the Holders and the other parties to the
Operative Agreements (or any of them) (other than any such
amounts payable pursuant to the preceding provisions of this
Section 8.7(b)) as shall be determined by the Agent in its
reasonable discretion; provided, however, that Supplemental
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Rent received upon the exercise of remedies after the
occurrence and continuance of an Event of Default in lieu
of or in substitution of the Maximum Residual Guarantee Amount
or as a partial payment thereon shall be applied and allocated
as set forth in Section 8.7(b)(iv).
(vi) The Agent in its reasonable judgment shall
identify the nature of each payment or amount received by the
Agent and apply and allocate each such amount in the manner
specified above.
(c) Upon the termination of the Commitments and the
payment in full of the Loans and all other amounts owing by the Owner
Trustee hereunder or under any Credit Document and the payment in full
of all amounts owing to the Holders and the Owner Trustee under the
Trust Agreement, any moneys remaining with the Agent shall be returned
to the Owner Trustee or such other Person or Persons as the Holders
may designate for application and allocation to any and all other
amounts owing to the Holders or the Owner Trustee and as the Holders
shall determine. In the event of an Acceleration it is agreed that,
prior to the application and allocation of amounts received by the
Agent in the order described in Section 8.7(b) above, any such amounts
shall first be applied and allocated to the payment of (i) any and
all sums advanced by the Agent in order to preserve the Collateral or
to preserve its Lien thereon, (ii) the expenses of retaking, holding,
preparing for sale or lease, selling or otherwise disposing or
realizing on the Collateral, or of any exercise by the Agent of its
rights under the Security Documents, together with reasonable
attorneys' fees and expenses and court costs and (iii) any and all
other amounts reasonably owed to the Agent under or in connection with
the transactions contemplated by the Operative Agreements (including
without limitation any accrued and unpaid administration fees).
8.8. RELEASE OF PROPERTIES, ETC.
If the Lessee shall at any time purchase any Property pursuant to the
Lease, or the Construction Agent shall purchase any Property pursuant to the
Agency Agreement, or if any Property shall be sold in accordance with Article
XXII of the Lease, then, upon satisfaction by the Owner Trustee of its
obligation to prepay the Loans, Holder Advances and all other amounts owing to
the Lenders and the Holders under the Operative Agreements, the Agent is hereby
authorized and directed to release such Properties from the Liens created by
the Security Documents to the extent of its interest therein. In addition,
upon the termination of the Commitments and the Holder Commitments and the
payment in full of the Loans, the Holder Advances and all other amounts owing
by the Owner Trustee hereunder or under any other Operative Agreement the Agent
is hereby authorized and directed to release all of the Properties from the
Liens created by the Security Documents to the extent of its interest therein.
Upon request of the Owner Trustee following any such release, the Agent shall,
at the sole cost and expense of the Lessee, execute and deliver to the Owner
Trustee and the Lessee such deeds of release, termination statements, similar
instruments and other documents as the Owner Trustee or the Lessee shall
reasonably request to evidence such release.
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8.9. LESSEE EQUIPMENT.
Upon Lessee's reasonable request, the Agent shall execute and deliver
instruments confirming that any Lessee Equipment or proposed Lessee Equipment
is not subject to any lien or other encumbrance in favor of the Financing
Parties.
SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT.
9.1. THE CONSTRUCTION AGENT'S AND THE LESSEE'S CREDIT AGREEMENT
RIGHTS.
Notwithstanding anything to the contrary contained in the Credit
Agreement, the Agent, the Lenders, the Holders, the Construction Agent, the
Lessee and the Owner Trustee hereby agree that, prior to the occurrence and
continuation of any Default or Event of Default, the Construction Agent or the
Lessee, as the case may be, shall exclusively have the following rights:
(a) the right to designate an account to which amounts
funded under the Operative Agreements shall be credited pursuant to
Section 2.3(a) of the Credit Agreement;
(b) the right to terminate or reduce the Commitments
pursuant to Section 2.5(a) of the Credit Agreement;
(c) the right to exercise the prepayment option pursuant
to Section 2.6 of the Credit Agreement;
(d) the right to exercise the conversion and continuation
options pursuant to Section 2.7 of the Credit Agreement;
(e) the right to receive any notice and any certificate,
in each case issued pursuant to Section 2.11(a) of the Credit
Agreement;
(f) the right to replace any Lender pursuant to Section
2.11(b) of the Credit Agreement;
(g) the right to approve any successor agent pursuant to
Section 7.9 of the Credit Agreement; and
(h) the right to consent to any assignment by a Lender to
which the Lessor has the right to consent pursuant to Section 9.8 of
the Credit Agreement.
9.2. THE CONSTRUCTION AGENT'S AND THE LESSEE'S TRUST AGREEMENT
RIGHTS.
Notwithstanding anything to the contrary contained in the Trust
Agreement, the Construction Agent, the Lessee, the Owner Trustee and the
Holders hereby agree that, prior to
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the occurrence and continuation of any Default or Event of Default, the
Construction Agent or the Lessee, as the case may be, shall exclusively have
the following rights:
(a) the right to exercise the early return of Advances
option pursuant to Section 3.4 of the Trust Agreement;
(b) the right to exercise the conversion and continuation
options pursuant to Section 3.8 of the Trust Agreement;
(c) the right to receive any notice and any certificate,
in each case issued pursuant to Section 3.9(a) of the Trust Agreement;
(d) the right to replace any Holder pursuant to Section
3.9(b) of the Trust Agreement;
(e) the right to exercise the removal options contained
in Section 3.9 of the Trust Agreement; and
(f) no removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to Section 9.1 of the Trust Agreement
shall be made without the prior written consent (not to be
unreasonably withheld or delayed) of the Lessee.
SECTION 10. TRANSFER OF INTEREST.
10.1. RESTRICTIONS ON TRANSFER.
Each Lender may participate, assign or transfer all or a portion of
its interest hereunder and under the other Operative Agreements only in
accordance with Sections 9.7 and 9.8 of the Credit Agreement; provided, each
participant, assignee or transferee must obtain the same ratable interest in
Tranche A Loans and Tranche B Loans. The Holders may, directly or indirectly,
assign, convey or otherwise transfer any of their right, title or interest in
or to the Trust Estate or the Trust Agreement only with the prior written
consent of the Agent and the Lessee (which consent shall not be unreasonably
withheld or delayed), in accordance with the terms of Section 11.8(b) of the
Trust Agreement and also in accordance with the terms of the following
paragraphs of this Section 10.1. Prior to any such assignment, conveyance or
other transfer to any Person, such Person shall execute and deliver to the
Owner Trustee, the Agent and the Lessee an investor's letter (in form and
substance reasonably satisfactory to the Agent and the Lessee).
Each Certificate delivered to any Holder acquiring its interest after
the Initial Closing Date shall be issued without registration of such
Certificate under the Securities Act, or under any state securities or "blue
sky" law, and without qualification of this Trust Agreement under the Trust
Indenture Act of 1939, as amended. All Certificates issued hereunder shall
bear a legend that shall read substantially as follows:
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THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES OR "BLUE SKY" LAW, AND MAY NOT BE
TRANSFERRED, SOLD OR OFFERED FOR SALE IN VIOLATION OF
SUCH ACT OR LAWS.
In connection with any sale, transference or assignment by any Holder
of any participation interest in all or a portion of the interests represented
by such Holder's Certificate (a "Certificate Participation") or any right to
payment thereunder to any Person (a "Certificate Participant"), the selling
Holder shall obtain from such Certificate Participant a certificate containing
the following representations and warranties from such Certificate Participant.
(a) The Certificate Participant is a sophisticated
institutional investor with sufficient knowledge and experience in
financial and business matters to enable it to evaluate the merits and
risk of acquiring the Certificate Participation. It is acquiring the
Certificate Participation for its own account for investment and not
with a view to any distribution (as such term is used in Section 2(11)
of the Securities Act) thereof and if in the future it should decide
to dispose of its interest in the Certificate Participation, it
understands that it may do so only in compliance with the Securities
Act and the rules and the regulations of the SEC thereunder and any
applicable state securities laws, if applicable. It is aware that the
Certificate Participation has not been registered under the Securities
Act or qualified or registered under any state or other jurisdiction's
securities laws.
(b) The Certificate Participant understands and agrees
that any documentation providing for the Participation will contain a
paragraph that shall read substantially as follows:
THIS CERTIFICATE PARTICIPATION HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES OR "BLUE SKY" LAW, AND MAY NOT BE TRANSFERRED, SOLD
OR OFFERED FOR SALE IN VIOLATION OF SUCH ACT OR LAWS.
The Owner Trustee may, subject to the rights of the Lessee under the Lease and
the other Operative Agreements and to the Lien of the applicable Security
Documents but only with the prior written consent of the Agent (which consent
may be withheld by the Agent in its sole discretion) and (provided, no Default
or Event of Default has occurred and is continuing) with the consent of the
Lessee, directly or indirectly, assign, convey, appoint an agent with respect
to enforcement of, or otherwise transfer any of its right, title or interest in
or to any Property, the Lease, the Trust Agreement and the other Operative
Agreements (including without limitation any right to indemnification
thereunder), or any other document relating to a Property or any interest in a
Property as provided in the Trust Agreement and the Lease. The provisions of
the immediately preceding sentence shall not apply to the obligations of the
Owner Trustee to
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transfer Property to the Lessee or a third party purchaser pursuant to Article
XXII of the Lease upon payment for such Property in accordance with the terms
and conditions of the Lease. Neither the Lessee nor the Construction Agent may
assign any of the Operative Agreements or any of their respective rights or
obligations thereunder or with respect to any Property in whole or in part to
any Person without the prior written consent of the Agent, the Lenders, the
Holders and the Lessor.
10.2. EFFECT OF TRANSFER.
From and after any transfer effected in accordance with this Section
10, the transferor shall be released, to the extent of such transfer, from its
liability hereunder and under the other documents to which it is a party in
respect of obligations to be performed on or after the date of such transfer;
provided, however, that any transferor shall remain liable hereunder and under
such other documents to the extent that the transferee shall not have assumed
the obligations of the transferor thereunder. Upon any transfer by the Owner
Trustee, a Holder or a Lender as above provided, any such transferee shall
assume the obligations of the Owner Trustee, the Holder or the Lender, as the
case may be, and shall be deemed an "Owner Trustee", "Holder", or "Lender", as
the case may be, for all purposes of such documents and each reference herein
to the transferor shall thereafter be deemed a reference to such transferee for
all purposes, except as provided in the preceding sentence. Notwithstanding
any transfer of all or a portion of the transferor's interest as provided in
this Section 10, the transferor shall be entitled to all benefits accrued and
all rights vested prior to such transfer including without limitation rights to
indemnification under any such document. Promptly upon any such transfer, the
Owner Trustee, the Holders or the Lenders (as the case may be) shall provide
copies of all documents evidencing such transfer to the Lessee.
SECTION 11. INDEMNIFICATION.
11.1. GENERAL INDEMNITY.
Whether or not any of the transactions contemplated hereby shall be
consummated, the Indemnity Provider hereby assumes liability for and agrees to
defend, indemnify and hold harmless each Indemnified Person on an After Tax
Basis from and against any Claims, which may be imposed on, incurred by or
asserted against an Indemnified Person by any third party, including without
limitation Claims arising from the negligence of an Indemnified Person (but not
to the extent such Claims arise from the gross negligence or willful misconduct
of such Indemnified Person itself, as determined by a court of competent
jurisdiction, as opposed to gross negligence or willful misconduct imputed to
such Indemnified Person) in any way relating to or arising or alleged to arise
out of the execution, delivery, performance or enforcement of this Agreement,
the Lease or any other Operative Agreement or on or with respect to any
Property or any component thereof, including without limitation Claims in any
way relating to or arising or alleged to arise out of (a) the financing,
refinancing, purchase, acceptance, rejection, ownership, design, construction,
refurbishment, development, delivery, acceptance, nondelivery, leasing,
subleasing, possession, use, occupancy, operation, maintenance repair,
modification, transportation, condition, sale, return, repossession (whether by
summary proceedings or
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otherwise), or any other disposition of any Property or any part thereof,
including without limitation the acquisition, holding or disposition of any
interest in the Property, lease or agreement comprising a portion of any
thereof; (b) any latent or other defects in any Property or any portion thereof
whether or not discoverable by an Indemnified Person or the Indemnity Provider;
(c) a violation of Environmental Laws, Environmental Claims or other loss of or
damage to any property or the environment relating to the Property, the Lease,
the Agency Agreement or the Indemnity Provider; (d) the Operative Agreements,
or any transaction contemplated thereby; (e) any breach by the Indemnity
Provider of any of its representations or warranties under the Operative
Agreements to which the Indemnity Provider is a party or failure by the
Indemnity Provider to perform or observe any covenant or agreement to be
performed by it under any of the Operative Agreements; (f) the transactions
contemplated hereby or by any other Operative Agreement, in respect of the
application of Parts 4 and 5 of Subtitle B of Title I of ERISA; and (g)
personal injury, death or property damage, including without limitation Claims
based on strict or absolute liability in tort.
If a written Claim is made against any Indemnified Person or if any
proceeding shall be commenced against such Indemnified Person (including
without limitation a written notice of such proceeding), for any Claim, such
Indemnified Person shall promptly notify the Indemnity Provider in writing and
shall not take action with respect to such Claim without the consent of the
Indemnity Provider for thirty (30) days after the receipt of such notice by the
Indemnity Provider; provided, however, that in the case of any such Claim, if
action shall be required by law or regulation to be taken prior to the end of
such period of thirty (30) days, such Indemnified Person shall endeavor to, in
such notice to the Indemnity Provider, inform the Indemnity Provider of such
shorter period, and no action shall be taken with respect to such Claim without
the consent of the Indemnity Provider before seven (7) days before the end of
such shorter period; provided, further, that the failure of such Indemnified
Person to give the notices referred to in this sentence shall not diminish the
Indemnity Provider's obligation hereunder except to the extent such failure
materially precludes the Indemnity Provider from contesting such Claim (and
then the Indemnity Provider's obligation hereunder shall only be diminished to
the extent of such material preclusion).
If, within thirty (30) days of receipt of such notice from the
Indemnified Person (or such shorter period as the Indemnified Person has
notified the Indemnity Provider is required by law or regulation for the
Indemnified Person to respond to such Claim), the Indemnity Provider shall
request in writing that such Indemnified Person respond to such Claim, the
Indemnified Person shall, at the expense of the Indemnity Provider, in good
faith conduct and control such action (including without limitation by pursuit
of appeals) (provided, however, that (A) if such Claim, in the Indemnity
Provider's reasonable discretion, can be pursued by the Indemnity Provider on
behalf of or in the name of such Indemnified Person, the Indemnified Person, at
the Indemnity Provider's request, shall allow the Indemnity Provider to conduct
and control the response to such Claim and (B) in the case of any Claim (and
notwithstanding the provisions of the foregoing subsection (A)), the
Indemnified Person may request the Indemnity Provider to conduct and control
the response to such Claim (with counsel to be selected by the Indemnity
Provider and consented to by such Indemnified Person, such consent not to be
unreasonably withheld; provided, however, that any Indemnified Person may
retain separate counsel at the expense of the
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Indemnity Provider in the event of a conflict of interest between such
Indemnified Person and the Indemnity Provider and, provided, further, that in
no event shall the Indemnity Provider be responsible for the costs of more than
one separate counsel for all Indemnified Persons unless a conflict of interest
exists between Indemnified Persons in which case the Indemnified Persons which
have the conflict of interest may retain separate counsel at the expense of
the Indemnity Provider)) by, in the sole discretion of the Person conducting
and controlling the response to such Claim (1) resisting payment thereof, (2)
not paying the same except under protest, if protest is necessary and proper,
(3) if the payment be made, using reasonable efforts to obtain a refund thereof
in appropriate administrative and judicial proceedings, or (4) taking such
other action as is reasonably requested by the Indemnity Provider from time to
time.
The party controlling the response to any Claim shall consult in good
faith with the non-controlling party and shall keep the non-controlling party
reasonably informed as to the conduct of the response to such Claim; provided,
that all decisions ultimately shall be made in the discretion of the
controlling party. Notwithstanding the foregoing, no settlement shall be
entered into with respect to any Claim without the Indemnity Provider's consent
(which consent shall not be unreasonably withheld, conditioned or delayed).
The parties agree that an Indemnified Person may at any time decline to take
further action with respect to the response to such Claim and may settle such
Claim if such Indemnified Person shall waive its rights to any indemnity from
the Indemnity Provider that otherwise would be payable in respect of such Claim
(and any future Claim, the pursuit of which is precluded by reason of such
resolution of such Claim) and shall pay to the Indemnity Provider any amount
previously paid or advanced by the Indemnity Provider pursuant to this Section
11.1 by way of indemnification or advance for the payment of an amount
regarding such Claim.
Notwithstanding the foregoing provisions of this Section 11.1, an
Indemnified Person shall not be required to take any action and no Indemnity
Provider shall be permitted to respond to any Claim in its own name or that of
the Indemnified Person unless (A) the Indemnity Provider shall have agreed to
pay and shall pay to such Indemnified Person on demand and on an After Tax
Basis all reasonable costs, losses and expenses that such Indemnified Person
actually incurs in connection with such Claim, including without limitation all
reasonable legal, accounting and investigatory fees and disbursements and, if
the Indemnified Person has informed the Indemnity Provider that it intends to
contest such Claim (whether or not the control of the contest is then assumed
by the Indemnity Provider), the Indemnity Provider shall have agreed that the
Claim is an indemnifiable Claim hereunder, (B) in the case of a Claim that must
be pursued in the name of an Indemnified Person (or an Affiliate thereof), the
amount of the potential indemnity (taking into account all similar or logically
related Claims that have been or could be raised for which the Indemnity
Provider may be liable to pay an indemnity under this Section 11.1) exceeds
$25,000 (or such lesser amount as may be subsequently agreed between the
Indemnity Provider and the Indemnified Person), (C) the Indemnified Person and
the Indemnity Provider shall have reasonably determined that the action to be
taken will not result in any material danger of sale, forfeiture or loss of the
Property, or any part thereof or interest therein, will not interfere with the
payment of Rent, and will not result in risk of criminal liability, (D) if
such Claim shall involve the payment of any amount prior to the resolution of
such Claim, the Indemnity Provider shall provide to the Indemnified Person an
interest-free
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advance in an amount equal to the amount that the Indemnified Person is
required to pay (with no additional net after-tax cost to such Indemnified
Person) prior to the date such payment is due, (E) in the case of a Claim that
must be pursued in the name of an Indemnified Person (or an Affiliate thereof),
the Indemnity Provider shall have provided to such Indemnified Person an
opinion of independent counsel selected by the Indemnity Provider and
reasonably satisfactory to the Indemnified Person stating that a reasonable
basis exists to contest such Claim (or, in the case of an appeal of an adverse
determination, an opinion of such counsel to the effect that the position
asserted in such appeal will more likely than not prevail) and (F) no Event of
Default shall have occurred and be continuing. In no event shall an Indemnified
Person be required to appeal an adverse judicial determination to the United
States Supreme Court. In addition, an Indemnified Person shall not be required
to contest any Claim in its name (or that of an Affiliate) if the subject
matter thereof shall be of a continuing nature and shall have previously been
decided adversely by a court of competent jurisdiction pursuant to the contest
provisions of this Section 11.1, unless there shall have been a change in law
(or interpretation thereof) and the Indemnified Person shall have received, at
the Indemnity Provider's expense, an opinion of independent counsel selected by
the Indemnity Provider and reasonably acceptable to the Indemnified Person
stating that as a result of such change in law (or interpretation thereof), it
is more likely than not that the Indemnified Person will prevail in such
contest. In no event shall the Indemnity Provider be permitted to adjust or
settle any Claim without the consent of the Indemnified Person (which consent
shall not be unreasonably withheld, conditioned or delayed) to the extent any
such adjustment or settlement involves, or is reasonably likely to involve, any
performance by or adverse admission by or with respect to the Indemnified
Person.
11.2. GENERAL TAX INDEMNITY.
(a) The Indemnity Provider shall pay and assume liability
for, and does hereby agree to indemnify, protect and defend each
Property and all Indemnified Persons, and hold them harmless against,
all Impositions on an After Tax Basis, and all payments pursuant to
the Operative Agreements shall be made free and clear of and without
deduction for any and all present and future Impositions.
(b) Notwithstanding anything to the contrary in Section
11.2(a) hereof, the following shall be excluded from the indemnity
required by Section 11.2(a):
(i) Taxes (other than Taxes that are, or are in
the nature of, sales, use, rental, value added, transfer or
property taxes) that are imposed on a Indemnified Person
(other than the Lessor, the Owner Trustee and the Trust,
excluding, however, any Taxes for fees or services) by any
foreign government (other than as a result of the status of
the Lessee) or the United States federal government that are
based on or measured by the gross income or net income
(including without limitation taxes based on capital gains and
minimum taxes) of such Person; provided, that this clause (i)
shall not be interpreted to prevent a payment from being made
on an After Tax Basis if such payment is otherwise required to
be so made;
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(ii) Taxes (other than Taxes that are, or are in
the nature of, sales, use, rental, value added, transfer or
property taxes) that are imposed on any Indemnified Person
(other than the Lessor, the Owner Trustee and the Trust,
excluding, however, any Taxes for fees or services) by any
state or local jurisdiction or taxing authority within any
state or local jurisdiction and that are based upon or
measured by the gross income or net income (including without
limitation taxes based on capital gains and minimum taxes) of
such Person or are franchise taxes or taxes imposed on capital
or capital surplus; provided that this clause (ii) shall not
be interpreted to prevent a payment from being made on an
After Tax Basis if such payment is otherwise required to be so
made;
(iii) any Tax to the extent it relates to any act,
event or omission that occurs after the termination of the
Lease and redelivery or sale of the Property in accordance
with the terms of the Lease (but not any Tax that relates to
such termination, redelivery or sale and/or to any period
prior to such termination, redelivery or sale); and
(iv) any Taxes which are imposed on an Indemnified
Person as a result of the gross negligence or willful
misconduct of such Indemnified Person itself, as determined by
a court of competent jurisdiction (as opposed to gross
negligence or willful misconduct imputed to such Indemnified
Person), but not Taxes imposed as a result of ordinary
negligence of such Indemnified Person;
(c) (i) Subject to the terms of Section 11.2(f), the
Indemnity Provider shall pay or cause to be paid all
Impositions directly to the taxing authorities where feasible
and otherwise to the Indemnified Person, as appropriate, and
the Indemnity Provider shall at its own expense, upon such
Indemnified Person's reasonable request, furnish to such
Indemnified Person copies of official receipts or other
satisfactory proof evidencing such payment.
(ii) In the case of Impositions for which no
contest is conducted pursuant to Section 11.2(f) and which the
Indemnity Provider pays directly to the taxing authorities,
the Indemnity Provider shall pay such Impositions prior to the
latest time permitted by the relevant taxing authority for
timely payment. In the case of Impositions for which the
Indemnity Provider reimburses an Indemnified Person, the
Indemnity Provider shall do so within thirty (30) days after
receipt by the Indemnity Provider of demand by such
Indemnified Person describing in reasonable detail the nature
of the Imposition and the basis for the demand (including
without limitation the computation of the amount payable),
accompanied by receipts or other reasonable evidence of such
demand. In the case of Impositions for which a contest is
conducted pursuant to Section 11.2(f), the Indemnity Provider
shall pay such Impositions or reimburse such Indemnified
Person for such Impositions, to the extent not previously paid
or reimbursed pursuant to subsection (a), prior to the latest
time permitted by the relevant taxing authority for timely
payment after conclusion of all contests under Section
11.2(f).
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(iii) At the Indemnity Provider's request, the
amount of any indemnification payment by the Indemnity
Provider pursuant to subsection (a) shall be verified and
certified by an independent public accounting firm mutually
acceptable to the Indemnity Provider and the Indemnified
Person. The fees and expenses of such independent public
accounting firm shall be paid by the Indemnity Provider unless
such verification shall result in an adjustment in the
Indemnity Provider's favor of ten percent (10%) or more of the
payment as computed by the Indemnified Person, in which case
such fee shall be paid by the Indemnified Person.
(d) The Indemnity Provider shall be responsible for
preparing and filing any real and personal property or ad valorem tax
returns in respect of each Property and any other tax returns required
for the Owner Trustee to the extent such returns relate solely to one
or more transactions described in the Operative Agreements. In case
any other report or tax return shall be required to be made with
respect to any obligations of the Indemnity Provider under or arising
out of subsection (a) and of which the Indemnity Provider has
knowledge or should have knowledge, the Indemnity Provider, at its
sole cost and expense, shall notify the relevant Indemnified Person of
such requirement and (except if such Indemnified Person notifies the
Indemnity Provider that such Indemnified Person intends to prepare and
file such report or return) (A) to the extent required or permitted by
and consistent with Legal Requirements, make and file in the Indemnity
Provider's name such return, statement or report; and (B) in the case
of any other such return, statement or report required to be made in
the name of such Indemnified Person, advise such Indemnified Person of
such fact and prepare such return, statement or report for filing by
such Indemnified Person or, where such return, statement or report
shall be required to reflect items in addition to any obligations of
the Indemnity Provider under or arising out of subsection (a), provide
such Indemnified Person at the Indemnity Provider's expense with
information sufficient to permit such return, statement or report to
be properly made with respect to any obligations of the Indemnity
Provider under or arising out of subsection (a). Such Indemnified
Person shall, upon the Indemnity Provider's request and at the
Indemnity Provider's expense, provide any data maintained by such
Indemnified Person (and not otherwise available to or within the
control of the Indemnity Provider) with respect to each Property or
such Indemnified Person which the Indemnity Provider may reasonably
require to prepare any required tax returns or reports.
(e) As between the Indemnity Provider on one hand, and
each Financing Party on the other hand, the Indemnity Provider shall
be responsible for, and the Indemnity Provider shall indemnify and
hold harmless each Financing Party (without duplication of any
indemnification required by subsection (a)) on an After Tax Basis
against, any obligation for United States or foreign withholding taxes
or similar levies, imposts, charges, fees, deductions or withholdings
(collectively, "Withholdings") imposed in respect of the interest
payable on the Notes, Holder Yield payable on the Certificates or with
respect to any other payments under the Operative Agreement (all such
payments being referred to herein as "Exempt Payments" to be made
without deduction,
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withholding or set off) (and, if any Financing Party receives a demand
for such payment from any taxing authority or a Withholding is
otherwise required with respect to any Exempt Payment, the Indemnity
Provider shall discharge such demand on behalf of such Financing
Party); provided, however, that the obligation of the Indemnity
Provider under this Section 11.2(e) shall not apply to:
(i) Withholdings on any Exempt Payment to any
Financing Party which is a non-U.S. Person unless such
Financing Party is, on the date hereof (or on the date it
becomes a Financing Party hereunder) and on the date of any
change in the principal place of business or the lending
office of such Financing Party, entitled to submit and does
submit a properly completed Form 1001 (relating to such
Financing Party and entitling it to a complete exemption from
Withholding on such Exempt Payment) or Form 4224 (relating to
such Financing Party and entitling it to a complete exemption
from withholding on such Exempt Payments) or is otherwise
subject to complete exemption from Withholding with respect to
such Exempt Payment (except where the failure of the exemption
results from a change in the principal place of business of
the Lessee; provided if a failure of exemption for any
Financing Party results from a change in the principal place
of business or lending office of any other Financing Party,
then such other Financing Party shall be liable for any
Withholding or indemnity with respect thereto), or
(ii) Any U.S. Taxes imposed solely by reason of
the failure by a non-U.S. Person to comply with applicable
certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity
or connections with the United States of America of such
non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition
to relief or exemption from such U.S. Taxes.
For the purposes of this Section 11.2(e), (A) "U.S. Person" shall mean
such term as defined in Section 7701(a)(30) of the Code, (B) "U.S.
Taxes" shall mean any present or future tax, assessment or other
charge or levy imposed by or on behalf of the United States of America
or any taxing authority thereof or therein, (C) "Form 1001" shall mean
Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the
Department of the Treasury of the United States of America and (D)
"Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade or Business
in the United States) of the Department of Treasury of the United
States of America (or in relation to either such Form such successor
and related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a claim
to which such Form relates). Each of the Forms referred to in the
foregoing clauses (C) and (D) shall include such successor and related
forms as may from time to time be adopted by the relevant taxing
authorities of the United States of America to document a claim to
which such Form relates.
If a Financing Party or an Affiliate with whom such Financing
Party files a consolidated tax return (or equivalent) subsequently
receives the benefit in any country of
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a tax credit or an allowance resulting from U.S. Taxes with respect to
which it has received a payment of an additional amount under this
Section 11.2(e), such Financing Party will pay to the Indemnity
Provider such part of that benefit as in the opinion of such Financing
Party will leave it (after such payment) in a position no more and no
less favorable than it would have been in if no additional payment had
been required to be paid, provided always that (i) such Financing
Party will be the sole judge of the amount of any such benefit and of
the date on which it is received, (ii) such Financing Party will have
the absolute discretion as to the order and manner in which it employs
or claims tax credits and allowances available to it and (iii) such
Financing Party will not be obliged to disclose to the Borrower any
information regarding its tax affairs or tax computations.
Each non-U.S. Person that shall become a Financing Party after
the date hereof shall, upon the effectiveness of the related transfer
or otherwise upon becoming a Financing Party hereunder, be required to
provide all of the forms and statements referenced above or other
evidences of exemption from Withholdings.
(f) If a written Claim is made against any Indemnified
Person or if any proceeding shall be commenced against such
Indemnified Person (including without limitation a written notice of
such proceeding), for any Impositions, the provisions in Section 11.1
relating to notification and rights to contest shall apply; provided,
however, that the Indemnity Provider shall have the right to conduct
and control such contest only if such contest involves a Tax other
than a Tax on net income of the Indemnified Person and can be pursued
independently from any other proceeding involving a Tax liability of
such Indemnified Person.
11.3. INCREASED COSTS, ILLEGALITY, ETC.
(a) If, due to either (i) the introduction of or any
change in or in the interpretation of any law or regulation or (ii)
the compliance with any guideline or request hereafter adopted,
promulgated or made by any central bank or other governmental
authority (whether or not having the force of law), there shall be any
increase in the cost to any Financing Party of agreeing to make or
making, funding or maintaining Advances, then the Lessee shall from
time to time, upon demand by such Financing Party (with a copy of such
demand to the Agent but subject to the terms of Section 2.11 of the
Credit Agreement and 3.9 of the Trust Agreement, as the case may be),
pay to the Agent for the account of such Financing Party additional
amounts sufficient to compensate such Financing Party for such
increased cost. A certificate as to the amount of such increased
cost, submitted to the Lessee and the Agent by such Financing Party,
shall be conclusive and binding for all purposes, absent manifest
error.
(b) If any Financing Party determines that compliance
with any law or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having
the force of law, but in each case promulgated or made after the date
hereof) affects or would affect the amount of capital required or
expected to be maintained by such Financing Party or any corporation
controlling such Financing
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Party and that the amount of such capital is increased by or based
upon the existence of such Financing Party's commitment to make
Advances and other commitments of this type or upon the Advances,
then, upon demand by such Financing Party (with a copy of such demand
to the Agent but subject to the terms of Section 2.11 of the Credit
Agreement and 3.9 of the Trust Agreement), the Lessee shall pay to the
Agent for the account of such Financing Party, from time to time as
specified by such Financing Party, additional amounts sufficient to
compensate such Financing Party or such corporation in the light of
such circumstances, to the extent that such Financing Party reasonably
determines such increase in capital to be allocable to the existence
of such Financing Party's commitment to make such Advances. A
certificate as to such amounts submitted to the Lessee and the Agent
by such Financing Party shall be conclusive and binding for all
purposes, absent manifest error.
(c) Without limiting the effect of the foregoing, the
Lessee shall pay to each Financing Party on the last day of the
Interest Period therefor so long as such Financing Party is
maintaining reserves against "Eurocurrency liabilities" under
Regulation D an additional amount (determined by such Financing Party
and notified to the Lessee through the Agent) equal to the product of
the following for each Eurodollar Loan or Eurodollar Holder Advance,
as the case may be, for each day during such Interest Period:
(i) the principal amount of such Eurodollar Loan
or Eurodollar Holder Advance, as the case may be, outstanding
on such day; and
(ii) the remainder of (x) a fraction the numerator
of which is the rate (expressed as a decimal) at which
interest accrues on such Eurodollar Loan or Eurodollar Holder
Advance, as the case may be, for such Interest Period as
provided in the Credit Agreement or the Trust Agreement, as
the case may be (less the Applicable Percentage), and the
denominator of which is one (1) minus the effective rate
(expressed as a decimal) at which such reserve requirements
are imposed on such Financing Party on such day minus (y) such
numerator; and
(iii) 1/360.
(d) Without affecting its rights under Sections 11.3(a),
11.3(b) or 11.3(c) or any other provision of any Operative Agreement,
each Financing Party agrees that if there is any increase in any cost
to or reduction in any amount receivable by such Financing Party with
respect to which the Lessee would be obligated to compensate such
Financing Party pursuant to Sections 11.3(a) or 11.3(b), such
Financing Party shall use reasonable efforts to select an alternative
office for Advances which would not result in any such increase in any
cost to or reduction in any amount receivable by such Financing Party;
provided, however, that no Financing Party shall be obligated to
select an alternative office for Advances if such Financing Party
determines that (i) as a result of such selection such Financing Party
would be in violation of any applicable law, regulation, treaty, or
guideline, or would incur additional costs or expenses or (ii) such
selection
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would be inadvisable for regulatory reasons or materially inconsistent
with the interests of such Financing Party.
(e) With reference to the obligations of the Lessee set
forth in Sections 11.3(a) through 11.3(d), the Lessee shall not have
any obligation to pay to any Financing Party amounts owing under such
Sections for any period which is more than one (1) year prior to the
date upon which the request for payment therefor is delivered to the
Lessee.
(f) Notwithstanding any other provision of this
Agreement, if any Financing Party shall notify the Agent that the
introduction of or any change in or in the interpretation of any law
or regulation makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for any Financing
Party to perform its obligations hereunder to make or maintain
Eurodollar Loans or Eurodollar Holder Advances, as the case may be,
then (i) each Eurodollar Loan or Eurodollar Holder Advance, as the
case may be, will automatically, at the earlier of the end of the
Interest Period for such Eurodollar Loan or Eurodollar Holder Advance,
as the case may be, or the date required by law, convert into an ABR
Loan or an ABR Holder Advance, as the case may be, and (iii) the
obligation of the Financing Parties to make, convert or continue
Eurodollar Loans or Eurodollar Holder Advances, as the case may be,
shall be suspended until the Agent shall notify the Lessee that such
Financing Party has determined that the circumstances causing such
suspension no longer exist.
11.4. FUNDING/CONTRIBUTION INDEMNITY.
Subject to the provisions of Section 2.11(a) of the Credit Agreement
and 3.9(a) of the Trust Agreement, as the case may be, the Lessee agrees to
indemnify each Financing Party and to hold each Financing Party harmless from
any loss or reasonable expense which such Financing Party may sustain or incur
as a consequence of (a) any default in connection with the drawing of funds for
any Advance, (b) any default in making any prepayment after a notice thereof
has been given in accordance with the provisions of the Operative Agreements or
(c) the making of a voluntary or involuntary prepayment of Eurodollar Loans or
Eurodollar Holder Advances, as the case may be, on a day which is not the last
day of an Interest Period with respect thereto. Such indemnification shall be
in an amount equal to the excess, if any, of (x) the amount of interest or
Holder Yield, as the case may be, which would have accrued on the amount so
prepaid, or not so borrowed, accepted, converted or continued for the period
from the date of such prepayment or of such failure to borrow, accept, convert
or continue to the last day of such Interest Period (or, in the case of a
failure to borrow, accept, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable
Eurodollar Rate plus the Applicable Percentage for such Loan or Holder Advance,
as the case may be, for such Interest Period over (y) the amount of interest
(as determined by such Financing Party in its reasonable discretion) which
would have accrued to such Financing Party on such amount by (i) (in the case
of the Lenders) reemploying such funds in loans of the same type and amount
during the period from the date of prepayment or failure to borrow to the last
day of the then applicable Interest Period (or, in the case of a failure to
borrow, the Interest Period that would have commenced on the date of such
failure) and (ii) (in the case of the Holders) placing such amount on deposit
for a
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comparable period with leading banks in the relevant interest rate market.
This covenant shall survive the termination of the Operative Agreements and the
payment of all other amounts payable hereunder for a period of ninety (90) days
after such termination of the Operative Agreements.
11.5. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT
LIABILITY, ETC.
WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION PROVISIONS OF
ANY AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING INDEMNIFICATION
OF ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER EXPRESSLY
RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS FOR LOSS
OR DAMAGE, DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR OMISSION
ON THE PART OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE
(WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY, AND
INDEMNIFIES, EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE AND HARMLESS FROM
AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES,
COSTS, LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT LIMITATION
ATTORNEY'S FEES AND EXPENSES), DESCRIBED ABOVE, INCURRED BY ANY SUCH
BENEFICIARY (IRRESPECTIVE OF WHETHER ANY SUCH BENEFICIARY IS A PARTY TO THE
ACTION FOR WHICH INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE
AGREEMENT IS SOUGHT) ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY.
11.6. TERMINATION OF EARLIER INDEMNIFICATION AGREEMENT.
As of the Initial Closing Date, the Owner Trustee and First
Union National Bank hereby agree that each of the indemnification agreements
executed prior to the Initial Closing Date by the Lessee (in favor of the Owner
Trustee, with respect to, among other things, the liabilities arising with
regard to a Property or pursuant to the Land Disposition Agreement) and by the
Owner Trustee (in favor of First Union National Bank, with respect to, amount
other things, the liabilities arising with regard to a Property pursuant to the
Land Disposition Agreement) are without further action, terminated and are of
no further force or effect.
SECTION 12. MISCELLANEOUS.
12.1. SURVIVAL OF AGREEMENTS.
The representations, warranties, covenants, indemnities and agreements
of the parties provided for in the Operative Agreements, and the parties'
obligations under any and all thereof, shall survive the execution and delivery
of this Agreement, the transfer of any Property to the
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Owner Trustee, the acquisition of any Property (or any of its components), the
construction of any Improvements, the Completion of any Property, any
disposition of any interest of the Owner Trustee in any Property or any
interest of the Holders in the Trust Estate, the payment of the Notes and any
disposition thereof and shall be and continue in effect notwithstanding any
investigation made by any party and the fact that any party may waive
compliance with any of the other terms, provisions or conditions of any of the
Operative Agreements. Except as otherwise expressly set forth herein or in
other Operative Agreements, the indemnities of the parties provided for in the
Operative Agreements shall survive the expiration or termination of any
thereof.
12.2. NOTICES.
All notices required or permitted to be given under any Operative
Agreement shall be in writing. Notices may be served by certified or
registered mail, postage paid with return receipt requested; by private
courier, prepaid; by telex, facsimile, or other telecommunication device
capable of transmitting or creating a written record; or personally. Mailed
notices shall be deemed delivered when delivered as addressed, or if the
addressee refuses delivery, when presented for delivery notwithstanding such
refusal. Telex or telecommunicated notices shall be deemed delivered when
receipt is either confirmed by confirming transmission equipment or
acknowledged by the addressee or its office. Personal delivery shall be
effective when accomplished. Unless a party changes its address by giving
notice to the other party as provided herein, notices shall be delivered to the
parties at the following addresses:
If to the Construction Agent or the Lessee, to such entity at
the following address:
Guilford Pharmaceuticals Inc.
6611 Tributary Street
Baltimore, Maryland 21224
Attention: Mr. Andrew R. Jordan,
Senior Vice President and
Chief Financial Officer
Telephone: (410) 631-6325
Telecopy: (410) 631-6899
If to the Owner Trustee, to it at the following address:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Mr. Val T. Orton,
Vice President
Telephone: (801) 246-5300
Telecopy: (801) 246-5053
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<PAGE> 68
If to the Holders, to each such Holder at the address set
forth for such Holder on Schedule I of the Trust Agreement.
If to the Agent, to it at the following address:
First Union National Bank
c/o First Union Capital Markets Group
DC-6
301 South College Street
Charlotte, North Carolina 28288-0166
Attention: Ms. Jane O. Hurley,
Capital Markets Services
Telephone: (704) 383-3812
Telecopy: (704) 383-7989
If to any Lender, to it at the address set forth for such
Lender in Schedule 1.1 of the Credit Agreement.
From time to time any party may designate additional parties
and/or another address for notice purposes by notice to each of the
other parties hereto. Each notice hereunder shall be effective upon
receipt or refusal thereof.
12.3. COUNTERPARTS.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one (1) and
the same instrument.
12.4. TERMINATIONS, AMENDMENTS, WAIVERS, ETC.; UNANIMOUS VOTE
MATTERS.
Each Operative Agreement may be terminated, amended, supplemented,
waived or modified only by an instrument in writing signed by, subject to
Article VIII of the Trust Agreement regarding termination of the Trust
Agreement, the Majority Secured Parties and the Lessee and/or the Construction
Agent (to the extent the Lessee and/or the Construction Agent is a party to
such Operative Agreement); provided, to the extent no Default or Event of
Default shall have occurred and be continuing, the Majority Secured Parties
shall not amend, supplement, waive or modify any provision of any Operative
Agreement in such a manner as to adversely affect the rights of the Lessee
and/or the Construction Agent without the prior written consent (not to be
unreasonably withheld or delayed) of the Lessee and/or the Construction Agent.
In addition, (a) the Unanimous Vote Matters shall require the consent of each
Lender and each Holder affected by such matter and (b) any provision of any
Operative Agreement incorporated by reference or otherwise referenced in a
second Operative Agreement shall remain, respecting such second Operative
Agreement, in its original form without regard to any such termination,
amendment, supplement, waiver or modification in the first Operative Agreement
except if such has been agreed to by an instrument in writing signed by,
subject to Article VIII of the Trust
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<PAGE> 69
Agreement regarding termination of the Trust Agreement, the Majority Secured
Parties and the Lessee and/or the Construction Agent (to the extent the Lessee
and/or the Construction Agent is a party to such Operative Agreement).
Notwithstanding the foregoing, no such termination, amendment,
supplement, waiver or modification shall, without the consent of the Agent and,
to the extent affected thereby, each Lender and each Holder (collectively, the
"Unanimous Vote Matters") (i) reduce the amount of any Note or any Certificate,
extend the scheduled date of maturity of any Note, extend the scheduled
Expiration Date, extend any payment date of any Note or Certificate, reduce the
stated rate of interest payable on any Note, reduce the stated Holder Yield
payable on any Certificate (other than as a result of waiving the applicability
of any post-default increase in interest rates or Holder Yields), modify the
priority of any Lien in favor of the Agent under any Security Document,
subordinate any obligation owed to any Lender or Holder or increase the amount
or extend the expiration date of any Lender's Commitment or the Holder
Commitment of any Holder, or (ii) terminate, amend, supplement, waive or modify
any provision of this Section 12.4 or reduce the percentages specified in the
definitions of Majority Lenders, Majority Holders or Majority Secured Parties,
or consent to the assignment or transfer by the Owner Trustee of any of its
rights and obligations under any Credit Document or release a material portion
of the Collateral (except in accordance with Section 8.8) or release the Lessee
from its obligations under any Operative Agreement or otherwise alter any
payment obligations of the Lessee to the Lessor or any Financing Party under
the Operative Agreements, or (iii) terminate, amend, supplement, waive or
modify any provision of Section 7 of the Credit Agreement, or (iv) permit
Advances for Work in excess of the Construction Budget, or (v) eliminate the
automatic option under Section 5.3(b) of the Agency Agreement requiring that
the Construction Agent pay certain liquidated damages in exchange for the
conveyance of a Property to the Construction Agent. Any such termination,
amendment, supplement, waiver or modification shall apply equally to each of
the Lenders and the Holders and shall be binding upon all the parties to this
Agreement. In the case of any waiver, each party to this Agreement shall be
restored to its former position and rights under the Operative Agreements, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
If at a time when the conditions precedent set forth in the Operative
Agreements to any Loan are, in the opinion of the Majority Lenders, satisfied,
any Lender shall fail to fulfill its obligations to make such Loan (any such
Lender, a "Defaulting Lender") then, for so long as such failure shall
continue, the Defaulting Lender shall (unless the Lessee and the Majority
Lenders, determined as if the Defaulting Lender were not a "Lender", shall
otherwise consent in writing) be deemed for all purposes relating to
terminations, amendments, supplements, waivers or modifications under the
Operative Agreements to have no Loans, shall not be treated as a "Lender" when
performing the computation of Majority Lenders or Majority Secured Parties, and
shall have no rights under this Section 12.4; provided that any action taken
pursuant to the second paragraph of this Section 12.4 shall not be effective as
against the Defaulting Lender.
If at a time when the conditions precedent set forth in the Operative
Agreements to any Holder Advance are, in the opinion of the Majority Holders,
satisfied, any Holder shall fail to
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fulfill its obligations to make such Holder Advance (any such Holder, a
"Defaulting Holder") then, for so long as such failure shall continue, the
Defaulting Holder shall (unless the Lessee and the Majority Holders, determined
as if the Defaulting Holder were not a "Holder", shall otherwise consent in
writing) be deemed for all purposes relating to terminations, amendments,
supplements, waivers or modifications under the Operative Agreements to have no
Holder Advances, shall not be treated as a "Holder" when performing the
computation of Majority Holders or Majority Secured Parties, and shall have no
rights under this Section 12.4; provided that any action taken pursuant to the
second paragraph of this Section 12.4 shall not be effective as against the
Defaulting Holder.
12.5. HEADINGS, ETC.
The Table of Contents and headings of the various Articles and
Sections of this Agreement are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof.
12.6. PARTIES IN INTEREST.
Except as expressly provided herein, none of the provisions of this
Agreement are intended for the benefit of any Person except the parties hereto.
12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; VENUE; ARBITRATION.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND. Any legal
action or proceeding with respect to this Agreement or any other
Operative Agreement may be brought in the courts of the State of North
Carolina in Mecklenburg County or of the United States for the Western
District of North Carolina, and, by execution and delivery of this
Agreement, each of the parties to this Agreement hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the nonexclusive jurisdiction of such courts. Each
of the parties to this Agreement further irrevocably consents to the
service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to it at the address set out for
notices pursuant to Section 12.2, such service to become effective
three (3) days after such mailing. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by
Law or to commence legal proceedings or to otherwise proceed against
any party in any other jurisdiction.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW,
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
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<PAGE> 71
RELATING TO THIS AGREEMENT, ANY OTHER OPERATIVE AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.
(c) Each of the parties to this Agreement hereby
irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement or any other
Operative Agreement brought in the courts referred to in subsection
(a) above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
(d) Notwithstanding the provisions of Section 12.7(a) or
of any other Operative Agreement to the contrary, upon demand of any
party to this Agreement and/or any other Operative Agreement, whether
made before or within three (3) months after institution of any
judicial proceeding, any dispute, claim or controversy arising out of,
connected with or relating to this Agreement and/or any other
Operative Agreement between or among parties to this Agreement and/or
any other Operative Agreement ("Disputes") shall be resolved by
binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include without limitation tort
claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from
agreements executed in the future, or claims arising out of or
connected with the transaction reflected by this Agreement and/or any
other Operative Agreement.
Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration
Rules") of the American Arbitration Association (the "AAA") and Title
9 of the United States Code. All arbitration hearings shall be
conducted in Charlotte, North Carolina. A hearing shall begin within
ninety (90) days of demand for arbitration and all hearings shall be
concluded within one hundred twenty (120) days of demand for
arbitration. These time limitations may not be extended unless a
party shows cause for extension and then no more than a total
extension of sixty (60) days. The expedited procedures set forth in
Rule 51 et seq. of the Arbitration Rules shall be applicable to claims
of less than $1,000,000. All applicable statutes of limitation shall
apply to any Dispute. A judgment upon the award may be entered in any
court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys selected from the
Commercial Financial Disputes Arbitration Panel of the AAA. The
single arbitrator selected for expedited procedure shall be a retired
judge from the highest court of general jurisdiction, state or
federal, of the state where the hearing will be conducted or if such
person is not available to serve, the single arbitrator may be a
licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to swap
agreements.
Notwithstanding the immediately preceding binding arbitration
provisions, the parties to this Agreement and/or any other Operative
Agreement agree to preserve, without diminution, certain remedies that
the Agent on behalf of the Lenders and the
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<PAGE> 72
Holders may employ or exercise freely, independently or in connection
with an arbitration proceeding or after an arbitration action is
brought. The Agent on behalf of the Lenders and the Holders shall
have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as
applicable (i) all rights to foreclose against any real or personal
property or other security by exercising a power of sale granted
under any Operative Agreement or under applicable Law or by judicial
foreclosure and sale, including without limitation a proceeding to
confirm the sale; (ii) all rights of self-help including without
limitation peaceful occupation of real property and collection of
rents, set-off and peaceful possession of personal property; (iii)
obtaining provisional or ancillary remedies including without
limitation injunctive relief, sequestration, garnishment, attachment,
appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of
judgment. Preservation of these remedies does not limit the power of
an arbitrator to grant similar remedies that may be requested by a
party in a Dispute.
The parties to this Agreement and/or any other Operative
Agreement agree that they shall not have a remedy of special, punitive
or exemplary damages against any other party in any Dispute and hereby
waive any right or claim to special, punitive or exemplary damages
they have now or which may arise in the future in connection with any
Dispute whether the Dispute is resolved by arbitration or judicially.
By execution and delivery of this Agreement and/or any other
Operative Agreement, each of the parties hereto and/or thereto
accepts, for itself and in connection with its properties, generally
and unconditionally, the non-exclusive jurisdiction relating to any
arbitration proceedings conducted under the Arbitration Rules in
Charlotte, North Carolina and irrevocably agrees to be bound by any
final judgment rendered thereby in connection with this Agreement
and/or any other Operative Agreement from which no appeal has been
taken or is available.
12.8. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12.9. LIABILITY LIMITED.
(a) The Lenders, the Agent, the Lessee, the Owner Trustee
and the Holders each acknowledge and agree that the Owner Trustee is
(except as otherwise expressly provided herein or therein) entering
into this Agreement and the other Operative Agreements to which it is
a party (other than the Trust Agreement and to the extent otherwise
provided in Section 6.1 of this Agreement), solely in its capacity as
trustee under the Trust Agreement and not in its individual capacity
and that the Trust Company
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shall not be liable or accountable under any circumstances whatsoever
in its individual capacity for or on account of any statements,
representations, warranties, covenants or obligations stated to be
those of the Owner Trustee, except for its own gross negligence or
willful misconduct and as otherwise expressly provided herein or in
the other Operative Agreements.
(b) Anything to the contrary contained in this Agreement,
the Credit Agreement, the Notes or in any other Operative Agreement
notwithstanding, no Exculpated Person shall be personally liable in
any respect for any liability or obligation arising hereunder or in
any other Operative Agreement including without limitation the payment
of the principal of, or interest on, the Notes, or for monetary
damages for the breach of performance of any of the covenants
contained in the Credit Agreement, the Notes, this Agreement, the
Security Agreement or any of the other Operative Agreements. The
Lenders, the Holders and the Agent agree that, in the event any
remedies under any Operative Agreement are pursued, neither the
Lenders, the Holders nor the Agent shall have any recourse against any
Exculpated Person, for any deficiency, loss or Claim for monetary
damages or otherwise resulting therefrom and recourse shall be had
solely and exclusively against the Trust Estate (excluding Excepted
Payments) and the Lessee (with respect to the Lessee's obligations
under the Operative Agreements); but nothing contained herein shall be
taken to prevent recourse against or the enforcement of remedies
against the Trust Estate (excluding Excepted Payments) in respect of
any and all liabilities, obligations and undertakings contained herein
and/or in any other Operative Agreement. Notwithstanding the
provisions of this Section, nothing in any Operative Agreement shall:
(i) constitute a waiver, release or discharge of any indebtedness or
obligation evidenced by the Notes and/or the Certificates arising
under any Operative Agreement or secured by any Operative Agreement,
but the same shall continue until paid or discharged; (ii) relieve any
Exculpated Person from liability and responsibility for (but only to
the extent of the damages arising by reason of): active waste
knowingly committed by any Exculpated Person with respect to any
Property, any fraud, gross negligence or willful misconduct on the
part of any Exculpated Person; (iii) relieve any Exculpated Person
from liability and responsibility for (but only to the extent of the
moneys misappropriated, misapplied or not turned over) (A) except for
Excepted Payments, misappropriation or misapplication by the Lessor
(i.e., application in a manner contrary to any of the Operative
Agreements) of any insurance proceeds or condemnation award paid or
delivered to the Lessor by any Person other than the Agent, (B) except
for Excepted Payments, any deposits or any escrows or amounts owed by
the Construction Agent under the Agency Agreement held by the Lessor
or (C) except for Excepted Payments, any rent or other income received
by the Lessor from the Lessee that is not turned over to the Agent; or
(iv) affect or in any way limit the Agent's rights and remedies under
any Operative Agreement with respect to the Rents and rights and
powers of the Agent under the Operative Agreements or to obtain a
judgment against the Lessee's interest in the Properties or the
Agent's rights and powers to obtain a judgment against the Lessor
(provided, that no deficiency judgment or other money judgment shall
be enforced against any Exculpated Person except to the extent of the
Lessor's interest in the
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Trust Estate (excluding Excepted Payments) or to the extent the Lessor
may be liable as otherwise contemplated in clauses (ii) and (iii) of
this Section 12.9(b)).
12.10. RIGHTS OF THE LESSEE.
If at any time all obligations (i) of the Owner Trustee under the
Credit Agreement, the Security Documents and the other Operative Agreements and
(ii) of the Lessee under the Operative Agreements have in each case been
satisfied or discharged in full, then the Lessee shall be entitled to (a)
terminate the Lease and (b) receive all amounts then held under the Operative
Agreements and all proceeds with respect to any of the Properties. Upon the
termination of the Lease pursuant to the foregoing clause (a), the Lessor shall
transfer to the Lessee or its designee all of its right, title and interest
free and clear of the Lien of the Lease, the Lien of the Security Documents and
all Lessor Liens in and to any Properties then subject to the Lease and any
amounts or proceeds referred to in the foregoing clause (b) shall be paid over
to the Lessee.
12.11. FURTHER ASSURANCES.
The parties hereto shall promptly cause to be taken, executed,
acknowledged or delivered, at the sole expense of the Lessee, all such further
acts, conveyances, documents and assurances as the other parties may from time
to time reasonably request in order to carry out and effectuate the intent and
purposes of this Participation Agreement, the other Operative Agreements and
the transactions contemplated hereby and thereby (including without limitation
the preparation, execution and filing of any and all Uniform Commercial Code
financing statements, filings of Mortgage Instruments and other filings or
registrations which the parties hereto may from time to time request to be
filed or effected). The Lessee, at its own expense and without need of any
prior request from any other party, shall take such action as may be necessary
(including without limitation any action specified in the preceding sentence),
or (if the Owner Trustee shall so request) as so requested, in order to
maintain and protect all security interests provided for hereunder or under any
other Operative Agreement.
12.12. CALCULATIONS UNDER OPERATIVE AGREEMENTS.
The parties hereto agree that all calculations and numerical
determinations to be made under the Operative Agreements by the Owner Trustee
shall be made by the Agent and that such calculations and determinations shall
be conclusive and binding on the parties hereto in the absence of manifest
error.
12.13. CONFIDENTIALITY.
Each Financing Party severally shall keep confidential all non-public
information pertaining to the Lessee or any of its Subsidiaries which is
provided to it by the Lessee or any of its Subsidiaries and which an officer of
the Lessee or any of its Subsidiaries has requested in writing be kept
confidential, and shall not disclose such information to any Person except:
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(a) to the extent such information is public when
received by such Person or becomes public thereafter due to the act or
omission of any party other than such Person;
(b) to the extent such information is independently
obtained from a source other than the Lessee or any of its
Subsidiaries and such information from such source is not, to such
Person's knowledge after reasonable investigation, subject to an
obligation of confidentiality or, if such information is subject to an
obligation of confidentiality, that disclosure of such information is
permitted;
(c) to counsel, auditors or accountants retained by any
such Person or any Affiliates of any such Person (if such Affiliates
are permitted to receive such information pursuant to clause (f) or
(g) below), provided they agree to keep such information confidential
as if such Person or Affiliate were party to this Agreement and to
financial institution regulators, including examiners of any Financing
Party or any Affiliate thereof in the course of examinations of such
Persons;
(d) in connection with any litigation or the enforcement
or preservation of the rights of any Financing Party under the
Operative Agreements;
(e) to the extent required by any applicable statute,
rule or regulation or court order (including without limitation, by
way of subpoena) or pursuant to the request of any regulatory or
Governmental Authority having jurisdiction over any such Person;
provided, however, that such Person shall endeavor (if not otherwise
prohibited by Law) to promptly notify the Lessee prior to any
disclosure made pursuant to this clause (e), except that no such
Person shall be subject to any liability whatsoever for any failure to
so notify the Lessee;
(f) any Financing Party may disclose such information to
another Financing Party or to any Affiliate of a Financing Party that
is a direct or indirect owner of any Financing Party;
(g) any Financing Party may disclose such information to
an Affiliate of any Financing Party to the extent required in
connection with the transactions contemplated hereby or to the extent
such Affiliate is involved in, or provides advice or assistance to
such Person with respect to, such transactions (provided, in each case
that such Affiliate has agreed in writing to maintain confidentiality
as if it were such Financing Party (as the case may be)); or
(h) to the extent disclosure to any other financial
institution or other Person is appropriate in connection with any
proposed or actual (i) assignment or grant of a participation by any
of the Lenders of interests in the Credit Agreement or any Note to
such other financial institution (who will in turn be required by the
Agent to agree in writing to maintain confidentiality as if it were a
Lender originally party to this Agreement) or (ii) assignment by any
Holder of interests in the Trust Agreement to
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another Person (who will in turn be required by the transferring
Holder to agree in writing to maintain confidentiality as if it were a
Holder originally party to this Agreement).
Subject to the terms of Sections 12.13(a), (b), (d) and (e) under the
terms of any one or more of which circumstances disclosure shall be permitted,
each Financing Party severally agrees to keep confidential all non-public
information pertaining to the financing structure described in the unrecorded
Operative Agreements.
12.14. FINANCIAL REPORTING/TAX CHARACTERIZATION.
Lessee agrees to obtain advice from its own accountants and tax
counsel regarding the financial reporting treatment and the tax
characterization of the transactions described in the Operative Agreements.
Lessee further agrees that Lessee shall not rely upon any statement of any
Financing Party or any of their respective Affiliates and/or Subsidiaries
regarding any such financial reporting treatment and/or tax characterization.
12.15. (intentionally omitted)
[The remainder of this page has been left blank intentionally.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
GUILFORD PHARMACEUTICALS INC., as the
Construction Agent and as the Lessee
By: /s/ Andrew R. Jordan
----------------------------------------
Name: Andrew R. Jordan
--------------------------------------
Title: Senior Vice President & Chief Financial
-----------------------------------------
Officer
-------
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, except as
expressly stated herein, but solely as the Owner
Trustee under the Guilford Real Estate Trust
1998-1
By: /s/ Brett R. King
----------------------------------------
Name: Brett R. King
--------------------------------------
Title: Assistant Vice President
--------------------------------------
FIRST UNION NATIONAL BANK, as a Holder, as a
Lender and as the Agent
By: /s/ Louis E. Flori
----------------------------------------
Name: Louis E. Flori
--------------------------------------
Title: Vice President
--------------------------------------
<PAGE> 78
SCHEDULE 1
Repayment of Loans
From the Rent Commencement Date and thereafter until and including the
Expiration Date, the Owner Trustee shall pay (or cause to be paid) to the Agent
for the benefit of the Lenders on the first Business Day of each calendar month
an amount equal to $17,113.40 payable for the benefit of the Tranche A Lenders
and an amount equal to $2,886.60 payable for the benefit of the Tranche B
Lenders. All such amounts referenced in this Schedule 1 shall be applied to
the outstanding principal balance of the Tranche A Loans and the Tranche B
Loans, respectively.
<PAGE> 79
EXHIBIT A
REQUISITION FORM
(Pursuant to Sections 4.2, 5.2, 5.3 and 5.4 of the Participation Agreement)
GUILFORD PHARMACEUTICALS INC., a Delaware corporation (the "Company")
hereby certifies as true and correct and delivers the following Requisition to
FIRST UNION NATIONAL BANK, as the agent for the Lenders (hereinafter defined)
and respecting the Security Documents, as the agent for the Lenders and the
Holders (hereinafter defined), to the extent of their interests (the "Agent"):
Reference is made herein to that certain Participation Agreement dated
as of February 5, 1998 (as amended, modified, extended, supplemented, restated
and/or replaced from time to time, the "Participation Agreement") among the
Company, in its capacity as the Lessee and as the Construction Agent, First
Security Bank, National Association, as the Owner Trustee, the various banks
and other lending institutions which are parties thereto from time to time, as
holders (the "Holders"), the various banks and other lending institutions which
are parties thereto from time to time, as lenders (the "Lenders"), and the
Agent. Capitalized terms used herein but not otherwise defined herein shall
have the meanings set forth therefor in the Participation Agreement.
Check one:
INITIAL CLOSING DATE:
---- -----------------
(one (1) Business Days prior notice required for Advance)
PROPERTY CLOSING DATE:
---- -----------------
(unless such Property Closing Date is concurrent with the Initial
Closing Date, five (5) Business Days prior notice required for
Advance)
CONSTRUCTION ADVANCE DATE:
---- -------------
(unless such Property Closing Date is concurrent with the Initial
Closing Date, five (5) Business Days prior notice required for
Advance)
1. Transaction Expenses and other fees, expenses and disbursements under
Sections 7.1(a) or 7.1(b) of the Participation Agreement and any and
all other amounts contemplated to be financed under the Participation
Agreement including without limitation any Work, broker's fees, taxes,
recording fees and the like (with supporting invoices or closing
statement attached):
A-1
<PAGE> 80
<TABLE>
<S> <C>
Party to Whom Amount Owed
Amount is Owed (in U.S. Dollars)
-------------- -----------------
-------------- -----------------
-------------- -----------------
-------------- -----------------
-------------- -----------------
</TABLE>
2. Description of Land (which shall be a legal description of the Land in
connection with an Advance to pay Property Acquisition Costs): See
attached Schedule 1
3. Description of Improvements: See attached Schedule 2
4. Description of Equipment: See attached Schedule 3
5. Description of Work: See attached Schedule 4
6. Aggregate Loans and Holder Advances requested since the Initial
Closing Date with respect to each Property for which Advances are
requested under this Requisition (listed on a Property by Property
basis), including without limitation all amounts requested under this
Requisition: [IDENTIFY ON A PROPERTY BY PROPERTY BASIS]
$ [Property]
--------------
In connection with this Requisition, the Company hereby requests that
the Lenders make Loans to the Lessor in the amount of $______________ and that
the Holders make Holder Advances to the Lessor in the amount of
$________________. The Company hereby certifies (i) that the foregoing amounts
requested do not exceed the total aggregate of the Available Commitments plus
the Available Holder Commitments and (ii) each of the provisions of the
Participation Agreement applicable to the Loans and Holder Advances requested
hereunder have been complied with as of the date of this Requisition.
The Company has caused this Requisition to the executed by its duly
authorized officer as of this _____ day of __________, ______.
GUILFORD PHARMACEUTICALS INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
A-2
<PAGE> 81
Schedule 1
Description of Land
(Legal Description and Street Address)
A-3
<PAGE> 82
Schedule 2
Description of Improvements
A-4
<PAGE> 83
Schedule 3
Description of Equipment
================================================================================
General Description Make Model Serial Number
------------------- ---- ----- -------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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A-5
<PAGE> 84
Schedule 4
Work
Work Performed for which the Advance is requested:
- ----------------------------------------------------------------
- ----------------------------------------------------------------
A-6
<PAGE> 85
EXHIBIT B
[Outside Counsel Opinion for the Lessee]
(Pursuant to Section 5.3(j) of the
Participation Agreement)
____________, ______
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Synthetic Lease Financing Provided in favor of _______________
Dear Sirs:
We have acted as special counsel to Guilford Pharmaceuticals Inc., a Delaware
(the "Lessee") in connection with certain transactions contemplated by the
Participation Agreement dated as of February 5, 1998 (the "Participation
Agreement"), among the Lessee, First Security Bank, National Association, as
the Owner Trustee (the "Owner Trustee"), the various banks and other lending
institutions which are parties thereto from time to time, as holders (the
"Holders"), the various banks and other lending institutions which are parties
thereto from time to time, as lenders (the "Lenders") and First Union National
Bank, as the agent for the Lenders and respecting the Security Documents, as
the agent for the Lenders and the Holders, to the extent of their interests
(the "Agent"). This opinion is delivered pursuant to Section 5.3(j) of the
Participation Agreement. All capitalized terms used herein, and not otherwise
defined herein, shall have the meanings assigned thereto in Appendix A to the
Participation Agreement.
In connection with the foregoing, we have examined originals, or copies
certified to our satisfaction, of [IDENTIFY THE APPLICABLE OPERATIVE
AGREEMENTS, INCLUDING EACH MORTGAGE INSTRUMENT, RELATED UCC FIXTURE FILINGS,
ADDITIONAL UCCS (HEREINAFTER DEFINED), DEEDS AND MEMORANDA OF LEASE] and such
other corporate documents and records of the Lessee, certificates of public
officials and representatives of the Lessee as to certain factual matters, and
such other instruments and documents which we have deemed necessary or
advisable to examine for the purpose of this opinion. With respect to such
examination, we have assumed (i) the statements of fact made in all such
certificates, documents and instruments are true, accurate and complete; (ii)
the due authorization, execution and delivery of the Operative Agreements by
the parties thereto; (iii) the genuineness of all signatures, the authenticity
and completeness of all documents, certificates, instruments, records and
corporate records submitted to us as originals and the conformity to the
original instruments of all documents submitted to us as copies, and the
authenticity and completeness of the originals of such copies; (iv) that all
parties have all requisite corporate power and authority to execute, deliver
and perform the Operative Agreements; and (v) except as to the Lessee, the
enforceability of the Mortgage Instrument, the Memorandum of Lease and the UCC
financing statements against all parties thereto.
B-1
<PAGE> 86
Based on the foregoing, and having due regard for such legal considerations as
we deem relevant, and subject to the limitations and assumptions set forth
herein, including without limitation the matters set forth in the last two (2)
paragraphs hereof, we are of the opinion that:
(a) The Mortgage Instrument and Memorandum of Lease are
enforceable in accordance with their respective terms, except as limited by
laws generally affecting the enforcement of creditors' rights, which laws will
not materially prevent the realization of the benefits intended by such
documents.
(b) Each form of Mortgage Instrument and UCC fixture filing
relating thereto, attached hereto as Schedules 1 and 2, respectively, is in
proper form for filing and recording with the offices of [IDENTIFY THE
RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO
BE LOCATED]. Upon filing of each Mortgage Instrument and UCC fixture filing in
[IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE
PROPERTIES ARE TO BE LOCATED], the Agent will have a valid, perfected lien and
security interest in that portion of the Collateral described in such Mortgage
Instrument or UCC fixture filing to the extent such Collateral is comprised of
real property and/or fixtures.
(c) The forms of UCC financing statements relating to the Security
Documents, attached hereto as Schedule 3 (the "Additional UCCs"), are in proper
form for filing and recording with the offices of [IDENTIFY (i) THE RECORDING
OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED
AND (ii) THE SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED]. Upon
filing of the Additional UCCs in [IDENTIFY (i) THE RECORDING OFFICES OF THE
RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED AND (ii) THE
SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED], the Agent will have
a valid, perfected lien and security interest in that portion of the Collateral
which can be perfected by filing UCC-1 financing statements under Article 9 of
the UCC.
(d) Each form of Deed and Memorandum of Lease is in appropriate
form for filing and recording with the [IDENTIFY THE RECORDING OFFICES OF THE
RESPECTIVE COUNTY CLERKS FOR THE COUNTIES WHERE THE PROPERTIES ARE TO BE
LOCATED].
(e) Each Memorandum of Lease, when filed and recorded with the
[IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS FOR THE
COUNTIES WHERE THE PROPERTIES ARE TO BE LOCATED], will have been filed and
recorded in all public offices in the State of __________ in which filing or
recording is necessary to provide constructive notice of the Lease to third
Persons and to establish of record the interest of the Lessor thereunder as to
the Properties described in each such Memorandum of Lease.
(f) Title to the Properties located in the State of ___________
may be held in the name of the Owner Trustee as follows: First Security Bank,
National Association, not individually, but solely as the Owner Trustee under
the Guilford Real Estate Trust 1998-1.
B-2
<PAGE> 87
(g) The execution and delivery by First Security Bank, National
Association, individually or as the Owner Trustee, as the case may be, of the
Operative Agreements to which it is a party and compliance by First Security
Bank, National Association, individually or as the Owner Trustee, with all of
the provisions thereof do not and will not contravene any law, rule or
regulation of [IDENTIFY THE STATE].
(h) By reason of their participation in the transaction
contemplated under the Operative Agreements, none of the Agent, the Lenders,
the Holders or the Owner Trustee has to (a) qualify as a foreign corporation in
[IDENTIFY THE STATE], (b) file any application or any designation for service
of process in [IDENTIFY THE STATE] or (c) pay any franchise, income, sales,
excise, stamp or other taxes of any kind to [IDENTIFY THE STATE].
(i) The provisions in the Operative Agreements concerning Rent,
interest, fees, prepayment premiums and other similar charges do not violate
the usury laws or other similar laws regulating the use or forbearance of money
of [IDENTIFY THE STATE].
(j) If the transactions contemplated by the Operative Agreements
are characterized as a lease transaction by a court of competent jurisdiction,
the Lease and the applicable Lease Supplement shall demise to the Lessee a
valid leasehold interest in the Properties described in such Lease Supplement.
(k) If the transactions contemplated by the Operative Agreements
are characterized as a loan transaction by a court of competent jurisdiction,
the combination of the Mortgage Instruments, the Deeds, the Lease and the
applicable Lease Supplements (and the other Operative Agreements incorporated
therein by reference) are sufficient to create a valid, perfected lien or
security interest in the Properties therein described, enforceable as a
mortgage in [IDENTIFY THE STATE].
This opinion is limited to the matters stated herein and no opinion is implied
or may be inferred beyond the matters stated herein. This opinion is based on
and is limited to the laws of the State of ___________ and the federal laws of
the United States of America. Insofar as the foregoing opinion relates to
matters of law other than the foregoing, no opinion is hereby given.
This opinion is for the sole benefit of the Lessee, the Construction Agent, the
Owner Trustee, the Holders, the Lenders, the Agent and their respective
successors and assigns and may not be relied upon by any other person other
than such parties and their respective successors and assigns without the
express written consent of the undersigned. The opinions expressed herein are
as of the date hereof and we make no undertaking to amend or supplement such
opinions if facts come to our attention or changes in the current law of the
jurisdictions mentioned herein occur which could affect such opinions.
Very truly yours,
[LESSEE'S OUTSIDE COUNSEL]
B-3
<PAGE> 88
Distribution List
First Union National Bank, as the Agent, a Holder and a Lender
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Holders
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Lenders
Guilford Pharmaceuticals Inc., as the Construction Agent and the Lessee
First Security Bank, National Association, not individually, but solely as the
Owner Trustee under the Guilford Real Estate Trust 1998-1
B-4
<PAGE> 89
Schedule 1
Form of Mortgage Instrument
<PAGE> 90
Schedule 2
Forms of UCC Fixture Filings
<PAGE> 91
Schedule 3
Forms of UCC Financing Statements
<PAGE> 92
EXHIBIT C
GUILFORD PHARMACEUTICALS INC.
OFFICER'S CERTIFICATE
(Pursuant to Section 5.3(z) of the Participation Agreement)
GUILFORD PHARMACEUTICALS INC., a Delaware corporation (the "Company"),
DOES HEREBY CERTIFY as follows:
1. Each and every representation and warranty of the Company
contained in the Operative Agreements to which it is a party
is true and correct on and as of the date hereof.
2. No Default or Event of Default has occurred and is continuing
under any Operative Agreement.
3. Each Operative Agreement to which the Company is a party is in
full force and effect with respect to it.
4. The Company has duly performed and complied with all
covenants, agreements and conditions contained in the
Participation Agreement (hereinafter defined) or in any
Operative Agreement required to be performed or complied with
by it on or prior to the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement dated as of February 5, 1998 among the Company, as the Lessee and as
the Construction Agent, First Security Bank, National Association, as the Owner
Trustee, the various banks and other lending institutions which are parties
thereto from time to time, as holders (the "Holders"), the various banks and
other lending institutions which are parties thereto from time to time, as
lenders (the "Lenders") and First Union National Bank, as the agent for the
Lenders and respecting the Security Documents, as the agent for the Lenders and
the Holders, to the extent of their interests (the "Agent").
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be
duly executed and delivered as of this _____ day of __________, ______.
GUILFORD PHARMACEUTICALS INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
C-1
<PAGE> 93
EXHIBIT D
GUILFORD PHARMACEUTICALS INC.
SECRETARY'S CERTIFICATE
(Pursuant to Section 5.3(aa) of the Participation Agreement)
GUILFORD PHARMACEUTICALS INC., a Delaware corporation (the "Company")
DOES HEREBY CERTIFY as follows:
1. Attached hereto as Schedule 1 is a true, correct and complete
copy of the resolutions of the Board of Directors of the
Company duly adopted by the Board of Directors of the Company
on __________. Such resolutions have not been amended,
modified or rescinded since their date of adoption and remain
in full force and effect as of the date hereof.
2. Attached hereto as Schedule 2 is a true, correct and complete
copy of the Articles of Incorporation of the Company on file
in the Office of the Secretary of State of __________. Such
Articles of Incorporation have not been amended, modified or
rescinded since their date of adoption and remain in full
force and effect as of the date hereof.
3. Attached hereto as Schedule 3 is a true, correct and complete
copy of the Bylaws of the Company. Such Bylaws have not been
amended, modified or rescinded since their date of adoption
and remain in full force and effect as of the date hereof.
4. The persons named below now hold the offices set forth
opposite their names, and the signatures opposite their names
and titles are their true and correct signatures.
<TABLE>
<CAPTION>
Name Office Signature
---- ------ ---------
<S> <C> <C>
------------------- ----------------------- ----------------------
------------------- ----------------------- ----------------------
</TABLE>
IN WITNESS WHEREOF, the Company has caused this Secretary's Certificate to be
duly executed and delivered as of this _____ day of ___________, ______.
GUILFORD PHARMACEUTICALS INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
D-1
<PAGE> 94
Schedule 1
BOARD RESOLUTIONS
D-2
<PAGE> 95
Schedule 2
ARTICLES OF INCORPORATION
D-3
<PAGE> 96
Schedule 3
BYLAWS
D-4
<PAGE> 97
EXHIBIT E
FIRST SECURITY BANK, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
(Pursuant to Section 5.3(bb) of the Participation Agreement)
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not individually (except with respect to paragraph 1 below, to the
extent any such representations and warranties are made in its individual
capacity) but solely as the owner trustee under the Guilford Real Estate Trust
1998-1 (the "Owner Trustee"), DOES HEREBY CERTIFY as follows:
1. Each and every representation and warranty of the Owner
Trustee contained in the Operative Agreements to which it is a
party is true and correct on and as of the date hereof.
2. Each Operative Agreement to which the Owner Trustee is a party
is in full force and effect with respect to it.
3. The Owner Trustee has duly performed and complied with all
covenants, agreements and conditions contained in the
Participation Agreement (hereinafter defined) or in any
Operative Agreement required to be performed or complied with
by it on or prior to the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement dated as of February 5, 1998 among Guilford Pharmaceuticals Inc., as
the Lessee and as the Construction Agent, the Owner Trustee, the various banks
and other lending institutions which are parties thereto from time to time, as
holders (the "Holders"), the various banks and other lending institutions which
are parties thereto from time to time, as lenders (the "Lenders") and First
Union National Bank, as the agent for the Lenders and respecting the Security
Documents, as the agent for the Lenders and the Holders, to the extent of their
interests (the "Agent").
E-1
<PAGE> 98
IN WITNESS WHEREOF, the Owner Trustee has caused this Officer's Certificate to
be duly executed and delivered as of this _____ day of __________, ______.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, except as
expressly stated herein, but solely as the Owner
Trustee under the Guilford Real Estate Trust 1998-1
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
E-2
<PAGE> 99
EXHIBIT F
FIRST SECURITY BANK, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
(Pursuant to Section 5.3(cc) of the Participation Agreement)
CERTIFICATE OF ASSISTANT SECRETARY
I, ______________________, duly elected and qualified Assistant
Secretary of the Board of Directors of First Security Bank, National
Association (the "Association"), hereby certify as follows:
1. The Association is a National Banking Association duly
organized, validly existing and in good standing under the laws of the United
States. With respect thereto the following is noted:
A. Pursuant to Revised Statutes 324, et seq., as amended, 12
U.S.C. 1, et seq., the Comptroller of the Currency charters
and exercises regulatory and supervisory authority over all
National Banking Associations;
B. On December 9, 1881, the First National Bank of Ogden, Utah
was chartered as a National Banking Association under the laws
of the United States and under Charter No. 2597;
C. On October 2, 1922, in connection with a consolidation of The
First National Bank of Ogden, Ogden, Utah, and The Utah
National Bank of Ogden, Ogden, Utah, the title was changed to
"The First & Utah National Bank of Ogden"; on January 18,
1923, The First & Utah National Bank of Ogden changed its
title to "First Utah National Bank of Ogden"; on January 19,
1926, the title was changed to "First National Bank of Ogden";
on February 24, 1934, the title was changed to "First Security
Bank of Utah, National Association"; on June 21, 1996, the
title was changed to "First Security Bank, National
Association"; and
D. First Security Bank, National Association, Ogden, Utah,
continues to hold a valid certificate to do business as a
National Banking Association.
2. The Association's Articles of Association, as amended, are in
full force and effect, and a true, correct and complete copy is attached hereto
as Schedule A and incorporated herein by reference. Said Articles were last
amended October 20, 1975, as required by law on notice at a duly called special
meeting of the shareholders of the Association.
F-1
<PAGE> 100
3. The Association's By-Laws, as amended, are in full force and
effect; and a true, correct and complete copy is attached hereto as Schedule B
and incorporated herein by reference. Said By-Laws, still in full force and
effect, were adopted September 17, 1942, by resolution, after proper notice of
consideration and adoption of By-Laws was given to each and every shareholder,
at a regularly called meeting of the Board of Directors with a quorum present.
4. Pursuant to the authority vested in it by an Act of Congress
approved December 23, 1913 and known as the Federal Reserve Act, as amended,
the Federal Reserve Board (now the Board of Governors of the Federal Reserve
System) has granted to the Association now known as "First Security Bank,
National Association" of Ogden, Utah, the right to act, when not in
contravention of State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver,
committee of estates of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into competition
with National Banks are permitted to act under the laws of the State of Utah;
and under the provisions of applicable law, the authority so granted remains in
full force and effect.
5. Pursuant to authority vested by Act of Congress (12 U.S.C. 92a
and 12 U.S.C. 481, as amended) the Comptroller of the Currency has issued
Regulation 9, as amended, dealing, in part, with the Fiduciary Powers of
National Banks, said regulation providing in subparagraph 9.7 (a) (1-2):
(1) The board of directors is responsible for the proper exercise
of fiduciary powers by the Bank. All matters pertinent
thereto, including the determination of policies, the
investment and disposition of property held in fiduciary
capacity, and the direction and review of the actions of all
officers, employees, and committees utilized by the Bank in
the exercise of its fiduciary powers, are the responsibility
of the board. In discharging this responsibility, the board
of directors may assign, by action duly entered in the
minutes, the administration of such of the Bank's fiduciary
powers as it may consider proper to assign to such
director(s), officer(s), employee(s) or committee(s) as it may
designate.
(2) No fiduciary account shall be accepted without the prior
approval of the board, or of the director(s), officer(s), or
committee(s) to whom the board may have designated the
performance of that responsibility. . . .
6. A Resolution relating to Exercise of Fiduciary Powers was
adopted by the Board of Directors at a meeting held July 26, 1994 at which time
there was a quorum present; said resolution is still in full force and effect
and has not been rescinded. Said resolution is attached hereto as Schedule C
and incorporated herein by reference.
F-2
<PAGE> 101
7. A Resolution relating to the Designation of Officers and
Employees to Exercise Fiduciary Powers was adopted by the Trust Policy
Committee at a meeting held February 7, 1996 at which time a quorum was
present; said resolution is still in full force and effect and has not been
rescinded. Said resolution is attached hereto as Schedule D and is
incorporated herein by reference.
8. Attached hereto as Schedule E and incorporated herein by
reference, is a listing of facsimile signatures of persons authorized (herein
"Authorized Signatory or Signatories") on behalf of the Association and its
Trust Group to act in exercise of its fiduciary powers subject to the
resolutions in Paragraphs 6 and 7, above.
9. The principal office of the First Security Bank, National
Association, Trust Group and of its departments, except for the St. George,
Utah, Ogden, Utah, and Provo, Utah, branch offices, is located at 79 South Main
Street, Salt Lake City, Utah 84111 and all records relating to fiduciary
accounts are located at such principal office of the Trust Group or in storage
facilities within Salt Lake County, Utah, except for those of the Ogden, Utah,
St. George, Utah, and Provo, Utah, branch offices, which are located at said
office.
10. Each Authorized Signatory (i) is a duly elected or appointed,
duly qualified officer or employee of the Association; (ii) holds the office or
job title set forth below his or her name on the date hereof; (iii) and the
facsimile signature appearing opposite the name of each such officer or
employee is a true replica of his or her signature.
F-3
<PAGE> 102
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Association this __________ day of _________________, 1998.
(SEAL)
--------------------------------------
R. James Steenblik
Senior Vice President
Assistant Secretary
F-4
<PAGE> 103
Schedule A
ARTICLES OF ASSOCIATION
F-5
<PAGE> 104
Schedule B
BY-LAWS
F-6
<PAGE> 105
Schedule C
RESOLUTION RELATING TO
EXERCISE OF FIDUCIARY POWERS
F-7
<PAGE> 106
Schedule D
RESOLUTION RELATING TO THE
DESIGNATION OF OFFICERS AND EMPLOYEES
TO EXERCISE FIDUCIARY POWERS
F-8
<PAGE> 107
Schedule E
AUTHORIZED SIGNATORY OR SIGNATORIES
F-9
<PAGE> 108
EXHIBIT G
[Outside Counsel Opinion for the Owner Trustee]
(Pursuant to Section 5.3(dd) of the
Participation Agreement)
___________, ______
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Trust Agreement dated as of February 5, 1998
Dear Sirs:
We have acted as special counsel for First Security Bank, National
Association, a national banking association, in its individual capacity ("FSB")
and in its capacity as trustee (the "Owner Trustee") under the Trust Agreement
dated as of February 5, 1998 (the "Trust Agreement") by and among it and the
various banks and other lending institutions which are parties thereto from
time to time, as holders (the "Holders"), in connection with the execution and
delivery by the Owner Trustee of the Operative Agreements to which it is a
party. Except as otherwise defined herein, the terms used herein shall have
the meanings set forth in Appendix A to the Participation Agreement dated as of
February 5, 1998 (the "Participation Agreement") by and among Guilford
Pharmaceuticals Inc. (the "Lessee"), First Security Bank, National Association,
as the Owner Trustee, the Holders, the various banks and other lending
institutions which are parties thereto from time to time, as lenders (the
"Lenders") and First Union National Bank, as the agent for the Lenders and
respecting the Security Documents, as the agent for the Lenders and the
Holders, to the extent of their interests (the "Agent").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records and other
instruments as we have deemed necessary or advisable for the purpose of
rendering this opinion.
Based upon the foregoing, we are of the opinion that:
1. FSB is a national banking association duly organized, validly
existing and in good standing under the laws of the United States of America
and each of FSB and the Owner Trustee has under the laws of the State of Utah
and federal banking law the power and authority to enter into and perform its
obligations under the Trust Agreement and each other Operative Agreement to
which it is a party.
2. The Owner Trustee is the duly appointed trustee under the
Trust Agreement.
G-1
<PAGE> 109
3. The Trust Agreement has been duly authorized, executed and
delivered by one (1) of the officers of FSB and, assuming due authorization,
execution and delivery by the Holders, is a legal, valid and binding obligation
of the Owner Trustee (and to the extent set forth therein, against FSB),
enforceable against the Owner Trustee (and to the extent set forth therein,
against FSB) in accordance with its terms, and the Trust Agreement creates
under the laws of the State of Utah for the Holders the beneficial interest in
the Trust Estate it purports to create and is a valid trust under the laws of
the State of Utah.
4. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by FSB, and, assuming due authorization,
execution and delivery by the other parties thereto, are legal, valid and
binding obligations of FSB, enforceable against FSB in accordance with their
respective terms.
5. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by the Owner Trustee, and, assuming due
authorization, execution and delivery by the other parties thereto, are legal,
valid and binding obligations of the Owner Trustee, enforceable against the
Owner Trustee in accordance with their respective terms. The Notes and
Certificates have been duly issued, executed and delivered by the Owner
Trustee, pursuant to authorization contained in the Trust Agreement, and the
Certificates are entitled to the benefits and security afforded by the Trust
Agreement in accordance with its terms and the terms of the Trust Agreement.
6. The execution and delivery by each of FSB and the Owner
Trustee of the Trust Agreement and the Operative Agreements to which it is a
party, and compliance by FSB or the Owner Trustee, as the case may be, with all
of the provisions thereof do not and will not contravene any Laws applicable to
or binding on FSB, or as the Owner Trustee, or contravene the provisions of, or
constitute a default under, its charter documents or by-laws or, to our
knowledge after due inquiry, any indenture, mortgage contract or other
agreement or instrument to which FSB or Owner Trustee is a party or by which it
or any of its property may be bound or affected.
7. The execution and delivery of the Operative Agreements by each
of FSB and the Owner Trustee and the performance by each of FSB and the Owner
Trustee of their respective obligations thereunder does not require on or prior
to the date hereof the consent or approval of, the giving of notice to, the
registration or filing with, or the taking of any action in respect of any
Governmental Authority or any court.
8. Assuming that the trust created by the Trust Agreement is
treated as a grantor trust for federal income tax purposes within the
contemplation of Section 671 through 678 of the Internal Revenue Code of 1986,
there are no fees, taxes, or other charges (except taxes imposed on fees
payable to the Owner Trustee) payable to the State of Utah or any political
subdivision thereof in connection with the execution, delivery or performance
by the Owner Trustee, the Agent, the Lenders, the Lessee or the Holders, as the
case may be, of the Operative Agreements or in connection with the acquisition
of any Property by the Owner Trustee or in connection with the making by any
Holder of its investment in the Trust or its acquisition of the beneficial
interest
G-2
<PAGE> 110
in the Trust Estate or in connection with the issuance and acquisition of the
Certificates, or the Notes, and neither the Owner Trustee, the Trust Estate nor
the trust created by the Trust Agreement will be subject to any fee, tax or
other governmental charge (except taxes on fees payable to the Owner Trustee)
under the laws of the State of Utah or any political subdivision thereof on,
based on or measured by, directly or indirectly, the gross receipts, net income
or value of the Trust Estate by reason of the creation or continued existence
of the trust under the terms of the Trust Agreement pursuant to the laws of the
State of Utah or the Owner Trustee's performance of its duties under the Trust
Agreement.
9. There is no fee, tax or other governmental charge under the
laws of the State of Utah or any political subdivision thereof in existence on
the date hereof on, based on or measured by any payments under the
Certificates, Notes or the beneficial interest in the Trust Estate, by reason
of the creation of the trust under the Trust Agreement pursuant to the laws of
the State of Utah or the Owner Trustee's performance of its duties under the
Trust Agreement within the State of Utah.
10. Upon the filing of the financing statement on form UCC-1 in
the form attached hereto as Schedule 1 with the Utah Division of Corporation
and Commercial Code, the Agent's security interest in the Trust Estate, for the
benefit of the Lenders and the Holders, will be perfected, to the extent that
such perfection is governed by Article 9 of the Uniform Commercial Code as in
effect in the State of Utah (the "Utah UCC").
Your attention is directed to the Utah UCC, which provides, in part,
that a filed financing statement which does not state a maturity date or which
states a maturity date of more than five (5) years is effective only for a
period of five (5) years from the date of filing, unless within six (6) months
prior to the expiration of said period a continuation statement is filed in the
same office or offices in which the original statement was filed. The
continuation statement must be signed by the secured party, identify the
original statement by file number and state that the original statement is
still effective. Upon the timely filing of a continuation statement, the
effectiveness of the original financing statement is continued for five (5)
years after the last date to which the original statement was effective.
Succeeding continuation statements may be filed in the same manner to continue
the effectiveness of the original statement.
The foregoing opinions are subject to the following assumptions, exceptions and
qualifications:
A. We are attorneys admitted to practice in the State of Utah and
in rendering the foregoing opinions we have not passed upon, or purported to
pass upon, the laws of any jurisdictions other than the State of Utah and the
federal banking law governing the banking and trust powers of FSB. In
addition, without limiting the foregoing we express no opinion with respect to
(i) federal securities laws, including the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of
1939, as amended, (ii) the Federal Aviation Act of 1958, as amended, (iii) the
Federal Communications Act of 1934, as amended, or (iv) state securities or
blue sky laws. Insofar as the foregoing opinions relate to the legality,
validity, binding effect and enforceability of the documents involved in these
transactions, which by their terms are governed by the laws of a state other
than Utah, we have
G-3
<PAGE> 111
assumed that the laws of such state (as to which we express no opinion), are in
all material aspects identical to the laws of the State of Utah.
B. The opinions set forth in paragraphs 3, 4, and 5 above are
subject to the qualification that enforceability of the Trust Agreement and the
other Operative Agreements to which FSB and the Owner Trustee are parties, in
accordance with their respective terms, may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, receivership or similar laws affecting
enforcement of creditors' rights generally, and (ii) general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in equity or at law.
C. As to the documents involved in these transactions, we have
assumed that each is a legal, valid and binding obligation of each party
thereto, other than FSB or the Owner Trustee, and is enforceable against each
such party in accordance with their respective terms.
D. We have assumed that all signatures, other than those of the
Owner Trustee or FSB, on documents and instruments involved in these
transactions are genuine, that all documents and instruments submitted to us as
originals are authentic, and that all documents and instruments submitted to us
as copies conform with the originals, which facts we have not independently
verified.
E. We do not purport to be experts in respect of, or express any
opinion concerning laws, rules or regulations applicable to the particular
nature of the equipment or property involved in these transactions.
F. We have made no investigation of, and we express no opinion
concerning, the nature of the title to any part of the equipment or property
involved in these transactions or the priority of any mortgage or security
interest.
G. We have assumed that the Participation Agreement and the
transactions contemplated thereby are not within the prohibitions of Section
406 of the Employee Retirement Income Security Act of 1974.
H. In addition to any other limitation by operation of law upon
the scope, meaning, or purpose of this opinion, the opinions expressed herein
speak only as of the date hereof. We have no obligation to advise the
recipients of this opinion (or any third party) and make no undertaking to
amend or supplement such opinions if facts come to our attention or changes in
the current law of the jurisdictions mentioned herein occur which could affect
such opinions the legal analysis, a legal conclusion or any information
confirmation herein.
I. This opinion is for the sole benefit of the Lessee, the
Construction Agent, the Owner Trustee, the Holders, the Lenders, the Agent and
their respective successors and assigns in matters directly related to the
Participation Agreement or the transaction contemplated thereunder and may not
be relied upon by any other person other than such parties and their respective
successors and assigns without the express written consent of the undersigned.
The
G-4
<PAGE> 112
opinions expressed in this letter are limited to the matter set forth in this
letter, and no other opinions should be inferred beyond the matters expressly
stated.
Very truly yours,
RAY, QUINNEY & NEBEKER
M. John Ashton
G-5
<PAGE> 113
Distribution List
First Union National Bank, as the Agent, a Holder and a Lender
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Holders
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Lenders
Guilford Pharmaceuticals Inc., as the Construction Agent and the Lessee
First Security Bank, National Association, not individually, but solely as the
Owner Trustee under the Guilford Real Estate Trust 1998-1
G-6
<PAGE> 114
EXHIBIT H
[Outside Counsel Opinion for the Lessee]
(Pursuant to Section 5.3(ee) of the Participation Agreement)
[ARNOLD & PORTER TO MODIFY TO REFLECT
ULTIMATE INCLUSION OF SUBSIDIARIES]
____________, ______
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Synthetic Lease Financing Provided in favor of Guilford
Pharmaceuticals Inc.
Dear Sirs:
We have acted as special counsel to Guilford Pharmaceuticals Inc., a Delaware
corporation (the "Lessee") in connection with certain transactions contemplated
by the Participation Agreement dated as of February 5, 1998 (the "Participation
Agreement"), among the Lessee, First Security Bank, National Association, as
the Owner Trustee (the "Owner Trustee"), the various banks and other lending
institutions which are parties thereto from time to time, as holders (the
"Holders"), the various banks and other lending institutions which are parties
thereto from time to time, as lenders (the "Lenders") and First Union National
Bank, as the agent for the Lenders and respecting the Security Documents, as
the agent for the Lenders and the Holders, to the extent of their interests
(the "Agent"). This opinion is delivered pursuant to Section 5.3(ee) of the
Participation Agreement. All capitalized terms used herein, and not otherwise
defined herein, shall have the meanings assigned thereto in Appendix A to the
Participation Agreement.
In connection with the foregoing, we have examined originals, or copies
certified to our satisfaction, of the Operative Agreements, and such other
corporate documents and records of the Lessee, certificates of public officials
and representatives of the Lessee as to certain factual matters, and such other
instruments and documents which we have deemed necessary or advisable to
examine for the purpose of this opinion. With respect to such examination, we
have assumed (i) the statements of fact made in all such certificates,
documents and instruments are true, accurate and complete; (ii) the due
authorization, execution and delivery of the Operative Agreements by the
parties thereto other than the Lessee; (iii) the genuineness of all signatures
(other than the signatures of persons signing on behalf of the Lessee), the
authenticity and completeness of all documents, certificates, instruments,
records and corporate records submitted to us as originals and the conformity
to the original instruments of all documents submitted to us as copies, and the
authenticity and completeness of the originals of such copies; (iv) that all
parties other than the Lessee have all requisite corporate power and authority
to execute, deliver and perform the Operative Agreements; and (v) the
enforceability of the Operative Agreements
H-1
<PAGE> 115
against all parties thereto other than the Lessee and respecting the opinion
set forth below in section (i), First Security Bank, National Association,
individually or as the Owner Trustee, as the case may be. We have further
assumed that the laws of the States of [STATE OF LAWYER'S ADMISSION] and North
Carolina are substantively identical.
Based on the foregoing, and having due regard for such legal considerations as
we deem relevant, and subject to the limitations and assumptions set forth
herein, including without limitation the matters set forth in the last two (2)
paragraphs hereof, we are of the opinion that:
(a) The Lessee is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware and has the power and
authority to conduct its business as presently conducted and to execute,
deliver and perform its obligations under the Operative Agreements to which it
is a party. The Lessee is duly qualified to do business in all jurisdictions
in which its failure to so qualify would materially impair its ability to
perform its obligations under the Operative Agreements to which it is a party
or its financial position or its business as now and now proposed to be
conducted.
(b) The execution, delivery and performance by the Lessee of the
Operative Agreements to which it is a party have been duly authorized by all
necessary corporate action on the part of the Lessee and the Operative
Agreements to which the Lessee is a party have been duly executed and delivered
by the Lessee.
(c) The Operative Agreements to which the Lessee is a party
constitute valid and binding obligations of the Lessee enforceable against the
Lessee in accordance with the terms thereof, subject to bankruptcy, insolvency,
liquidation, reorganization, fraudulent conveyance, and similar laws affecting
creditors' rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law).
(d) The execution and delivery by the Lessee of the Operative
Agreements to which it is a party and compliance by the Lessee with all of the
provisions thereof do not and will not (i) contravene the provisions of, or
result in any breach of or constitute any default under, or result in the
creation of any Lien (other than Permitted Liens and Lessor Liens) upon any of
its property under, its Articles of Incorporation and By-Laws or any indenture,
mortgage, chattel mortgage, deed of trust, lease, conditional sales contract,
bank loan or credit agreement or other agreement or instrument to which the
Lessee is a party or by which it or any of its property may be bound or
affected, or (ii) contravene any Laws or any order of any Governmental
Authority applicable to or binding on the Lessee.
(e) No Governmental Action by, and no notice to or filing with,
any Governmental Authority is required for the due execution, delivery or
performance by the Lessee of any of the Operative Agreements to which it is a
party or for the acquisition, ownership, construction and completion of the
Properties, except for those which have been obtained.
(f) Except as set forth on Schedule 1 hereto, there are no
actions, suits or proceedings pending or to our knowledge, threatened against
the Lessee in any court or before any
H-2
<PAGE> 116
Governmental Authority, that concern the Properties or the Lessee's interest
therein or that question the validity or enforceability of any Operative
Agreement to which the Lessee is a party or the overall transaction described
in the Operative Agreements to which the Lessee is a party.
(g) Neither the nature of the Properties, nor any relationship
between the Lessee and any other Person, nor any circumstance in connection
with the execution, delivery and performance of the Operative Agreements to
which the Lessee is a party is such as to require any approval of stockholders
of, or approval or consent of any trustee or holders of indebtedness of, the
Lessee, except for such approvals and consents which have been duly obtained
and are in full force and effect.
(h) The Security Documents which have been executed and delivered
as of the date of this opinion create, for the benefit of the Agent, the
security interests in the Collateral described therein which by their terms
such Security Documents purport to create. Upon filing of the UCC-1 financing
statements (attached hereto as Schedule 2) relating to the Security Documents
in the recording offices of (A) the respective county clerk where the principal
place of business of the Lessee is located and (B) the Secretary of State where
the principal place of business of the Lessee is located, the Agent will have a
valid, perfected lien and security interest in that portion of the Collateral
which can be perfected by the filing of UCC-1 financing statements under
Article 9 of the UCC in [IDENTIFY THE STATE].
(i) The Operative Agreements to which First Security Bank,
National Association, individually or as the Owner Trustee, is a party
constitute valid and binding obligations of such party and are enforceable
against First Security Bank, National Association, individually or as the Owner
Trustee, as the case may be, in accordance with the terms thereof, subject to
bankruptcy, insolvency, liquidation, reorganization, fraudulent conveyance, and
similar laws affecting creditors, rights generally, and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
(j) The issuance, sale and delivery of the Notes and the issuance
and delivery of the Certificates under the circumstances contemplated by the
Participation Agreement do not, under existing law, require registration of the
Notes or the Certificates being issued on the date hereof under the Securities
Act of 1933, as amended, or the qualification of the Loan Agreement under the
Trust Indenture Act of 1939, as amended.
This opinion is limited to the matters stated herein and no opinion is implied
or may be inferred beyond the matters stated herein. This opinion is based on
and is limited to the laws of the States of __________, and the federal laws of
the United States of America. Insofar as the foregoing opinion relates to
matters of law other than the foregoing, no opinion is hereby given.
This opinion is for the sole benefit of the Lessee, the Construction Agent, the
Owner Trustee, the Holders, the Lenders, the Agent and their respective
successors and assigns and may not be relied upon by any other person other
than such parties and their respective successors and assigns without the
express written consent of the undersigned. The opinions expressed herein are
as of the date hereof and we make no undertaking to amend or supplement such
opinions if facts come
H-3
<PAGE> 117
to our attention or changes in the current law of the jurisdictions mentioned
herein occur which could affect such opinions.
Very truly yours,
[LESSEE'S OUTSIDE COUNSEL]
H-4
<PAGE> 118
Distribution List
First Union National Bank, as the Agent, a Holder and a Lender
Guilford Pharmaceuticals Inc., as the Construction Agent and the Lessee
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Holders
The various banks and other lending institutions which are parties to the
Participation Agreement from time to time, as additional Lenders
First Security Bank, National Association, not individually, but solely as the
Owner Trustee under the Guilford Real Estate Trust 1998-1
H-5
<PAGE> 119
Schedule 1
(Litigation)
H-6
<PAGE> 120
Schedule 2
(UCC-1 Financing Statements)
H-7
<PAGE> 121
EXHIBIT I
GUILFORD PHARMACEUTICALS INC.
OFFICER'S CERTIFICATE
(Pursuant to Section 5.5 of the Participation Agreement)
GUILFORD PHARMACEUTICALS INC., a Delaware corporation (the "Company") DOES
HEREBY CERTIFY as follows:
1. The address for the subject Property is ______________________________
________________________________.
2. The Completion Date for the construction of Improvements at the
Property occurred on ______________.
3. The aggregate Property Cost for the Property was $___________.
4. Attached hereto as Schedule 1 is the detailed, itemized documentation
supporting the asserted Property Cost figures.
5. All representations and warranties of the Company in each Operative
Agreement and in each certificate delivered pursuant thereto
(including without limitation the Incorporated Representations and
Warranties) are true and correct as of the Completion Date.
Capitalized terms used in this Officer's Certificate and not otherwise defined
have the respective meanings ascribed thereto in the Participation Agreement
dated as of February 5, 1998 among the Company, as the Lessee and as the
Construction Agent, First Security Bank, National Association, as the Owner
Trustee, the various banks and other lending institutions which are parties
thereto from time to time, as holders (the "Holders"), the various banks and
other lending institutions which are parties thereto from time to time, as
lenders (the "Lenders"), First Union National Bank, as the agent for the
Lenders and respecting the Security Documents, as the agent for the Lenders and
the Holders, to the extent of their interests.
[The remainder of this page has been intentionally left blank.]
I-1
<PAGE> 122
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be
duly executed and delivered as of this ____ day of ______________, ______.
GUILFORD PHARMACEUTICALS INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
I-2
<PAGE> 123
Schedule I
(Itemized Documentation in Support of Asserted Property Cost)
I-3
<PAGE> 124
EXHIBIT J
[Description of Material Litigation]
(Pursuant to Section 6.2(d) of the Participation Agreement)
None
J-1
<PAGE> 125
------------------------------------------------------------------------------
Appendix A
Rules of Usage and Definitions
------------------------------------------------------------------------------
I. Rules of Usage
The following rules of usage shall apply to this Appendix A and the Operative
Agreements (and each appendix, schedule, exhibit and annex to the foregoing)
unless otherwise required by the context or unless otherwise defined therein:
(a) Except as otherwise expressly provided, any definitions set
forth herein or in any other document shall be equally applicable to the
singular and plural forms of the terms defined.
(b) Except as otherwise expressly provided, references in any
document to articles, sections, paragraphs, clauses, annexes, appendices,
schedules or exhibits are references to articles, sections, paragraphs,
clauses, annexes, appendices, schedules or exhibits in or to such document.
(c) The headings, subheadings and table of contents used in any
document are solely for convenience of reference and shall not constitute a
part of any such document nor shall they affect the meaning, construction or
effect of any provision thereof.
(d) References to any Person shall include such Person, its
successors, permitted assigns and permitted transferees.
(e) Except as otherwise expressly provided, reference to any
agreement means such agreement as amended, modified, extended, supplemented,
restated and/or replaced from time to time in accordance with the applicable
provisions thereof.
(f) Except as otherwise expressly provided, references to any law
includes any amendment or modification to such law and any rules or regulations
issued thereunder or any law enacted in substitution or replacement therefor.
(g) When used in any document, words such as "hereunder",
"hereto", "hereof" and "herein" and other words of like import shall, unless
the context clearly indicates to the contrary, refer to the whole of the
applicable document and not to any particular article, section, subsection,
paragraph or clause thereof.
(h) References to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof the
rule of ejusdem generis shall not be
<PAGE> 126
applicable to limit a general statement, followed by or referable to an
enumeration of specific matters, to matters similar to those specifically
mentioned.
(i) References herein to "attorney's fees", "legal fees", "costs
of counsel" or other such references shall be deemed to include the allocated
cost of in-house counsel.
(j) Each of the parties to the Operative Agreements and their
counsel have reviewed and revised, or requested revisions to, the Operative
Agreements, and the usual rule of construction that any ambiguities are to be
resolved against the drafting party shall be inapplicable in the construing and
interpretation of the Operative Agreements and any amendments or exhibits
thereto.
(k) Capitalized terms used in any Operative Agreements which are
not defined in this Appendix A but are defined in another Operative Agreement
shall have the meaning so ascribed to such term in the applicable Operative
Agreement.
II. Definitions
"AAA" shall have the meaning given to such term in Section 12.7(d) of
the Participation Agreement.
"ABR" shall mean, for any day, a rate per annum equal to the greater
of (a) the Prime Lending Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day plus one-half of one percent (0.5%). For
purposes hereof: "Prime Lending Rate" shall mean the rate announced by the
Agent from time to time as its prime lending rate as in effect from time to
time. The Prime Lending Rate is a reference rate and is one of several
interest rate bases used by the Agent and does not necessarily represent the
lowest or most favorable rate offered by the Agent actually charged to any
customer. Any Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate. The Prime Lending Rate
shall change automatically and without notice from time to time as and when the
prime lending rate of the Agent changes. "Federal Funds Effective Rate" shall
mean, for any period, a fluctuating interest rate per annum equal for each day
during such period to the weighted average of the rates on overnight Federal
funds transactions with members or the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three (3) Federal funds brokers of recognized
standing selected by it. Any change in the ABR due to a change in the Prime
Lending Rate or the Federal Funds Effective Rate shall be effective as of the
opening of business on the effective day of such change in the Prime Lending
Rate or the Federal Funds Effective Rate, respectively.
"ABR Holder Advance" shall mean a Holder Advance bearing a Holder Yield
based on the ABR.
Appendix A-2
<PAGE> 127
"ABR Loans" shall mean Loans the rate of interest applicable to which
is based upon the ABR.
"Acceleration" shall have the meaning given to such term in Section 6
of the Credit Agreement.
"Accounts" shall have the meaning given to such term in Section 1 of
the Security Agreement.
"Accumulated Funding Deficiency" shall mean an "accumulated funding
deficiency" as defined in Section 302 of ERISA or Section 412(a) of the Code.
"Acquisition Advance" shall have the meaning given to such term in
Section 5.3 of the Participation Agreement.
"Acquisition Loan" shall mean any Loan made in connection with an
Acquisition Advance.
"Additional Incorporated Terms" shall have the meaning given to such
term in Section 28.1 of the Lease.
"Advance" shall mean a Construction Advance or an Acquisition Advance.
"Affiliate" shall mean, with respect to any Person, any Person or
group acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person.
"After Tax Basis" shall mean, with respect to any payment to be
received, the amount of such payment increased so that, after deduction of the
amount of all taxes required to be paid by the recipient calculated at the then
maximum marginal rates generally applicable to Persons of the same type as the
recipients with respect to the receipt by the recipient of such amounts (less
any tax savings realized as a result of the payment of the indemnified amount),
such increased payment (as so reduced) is equal to the payment otherwise
required to be made.
"Agency Agreement" shall mean the Agency Agreement, dated on or about
the Initial Closing Date between the Construction Agent and the Lessor.
"Agency Agreement Event of Default" shall mean any event or condition
defined as an "Agency Agreement Event of Default" as defined in Section 5.1 of
the Agency Agreement.
"Agent" shall mean First Union National Bank, as agent for the Lenders
pursuant to the Credit Agreement, or any successor agent appointed in
accordance with the terms of the Credit Agreement and respecting the Security
Documents, for the Lenders and the Holders, to the extent of their interests.
Appendix A-3
<PAGE> 128
"Applicable Percentage" shall mean for Eurodollar Loans and Eurodollar
Holder Advances, the appropriate applicable percentages as shown below:
<TABLE>
<CAPTION>
=====================================================================
APPLICABLE APPLICABLE
PERCENTAGE PERCENTAGE APPLICABLE
FOR FOR PERCENTAGE FOR
EURODOLLAR LOANS EURODOLLAR LOANS EURODOLLAR
(TRANCHE A LOANS) (TRANCHE B LOANS) HOLDER ADVANCES
- ---------------------------------------------------------------------
<S> <C> <C>
PRIOR TO THE DATE OF PRIOR TO THE DATE OF PRIOR TO THE DATE OF
COMPLETION FOR THE COMPLETION FOR THE COMPLETION FOR THE
PROPERTIES: .750% PROPERTIES: .750% PROPERTIES : .750%
- ---------------------------------------------------------------------
AFTER THE DATE OF AFTER THE DATE OF AFTER THE DATE OF
COMPLETION FOR THE COMPLETION FOR THE COMPLETION FOR THE
PROPERTIES: .625% PROPERTIES: .625% PROPERTIES : .625%
=====================================================================
</TABLE>
"Appraisal" shall mean, with respect to any Property, an appraisal to
be delivered in connection with the Participation Agreement or in accordance
with the terms of the Lease, in each case prepared by a reputable appraiser
reasonably acceptable to the Agent, which in the judgment of counsel to the
Agent, complies with all of the provisions of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, as amended, the rules and
regulations adopted pursuant thereto, and all other applicable Legal
Requirements.
"Appraisal Procedure" shall have the meaning given such term in Section
22.4 of the Lease.
"Approved State" shall mean Maryland.
"Appurtenant Rights" shall mean (a) all agreements, easements, rights
of way or use, rights of ingress or egress, privileges, appurtenances,
tenements, hereditaments and other rights and benefits at any time belonging or
pertaining to the Land underlying the Improvements or the Improvements,
including without limitation the use of any streets, ways, alleys, vaults or
strips of land adjoining, abutting, adjacent or contiguous to the Land and (b)
all permits, licenses and rights, whether or not of record, appurtenant to such
Land or the Improvements.
"Arbitration Rules" shall have the meaning given to such term in
Section 12.7(d) of the Participation Agreement.
"Assignment and Acceptance" shall mean the Assignment and Acceptance
in the form attached to the Credit Agreement as EXHIBIT B.
"Available Commitment" shall mean, as to any Lender at any time, an
amount equal to the excess, if any, of (a) the amount of such Lender's
Commitment over (b) the aggregate principal amount of all Loans made by such
Lender as of such date after giving effect to Section 5.2(d) of the
Participation Agreement (but without giving effect to any other repayments or
prepayments of any Loans hereunder).
Appendix A-4
<PAGE> 129
"Available Holder Commitments" shall mean an amount equal to the
excess, if any, of (a) the aggregate amount of the Holder Commitments over (b)
the aggregate amount of the Holder Advances made since the Initial Closing Date
after giving effect to Section 5.2(d) of the Participation Agreement (but
without giving effect to any other repayments or prepayments of any Holder
Advances).
"Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled
"Bankruptcy," as now or hereafter in effect or any successor thereto.
"Basic Rent" shall mean, the sum of (a) the Loan Basic Rent and (b)
the Lessor Basic Rent, calculated as of the applicable date on which Basic Rent
is due.
"Benefitted Lender" shall have the meaning specified in Section
9.10(a) of the Credit Agreement.
"Bill of Sale" shall mean a Bill of Sale regarding Equipment in form
and substance satisfactory to the Agent.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States (or any successor).
"Borrower" shall mean the Owner Trustee, not in its individual
capacity but as Borrower under the Credit Agreement.
"Borrowing Date" shall mean any Business Day specified in a notice
delivered pursuant to Section 2.3 of the Credit Agreement as a date on which
the Lessor requests the Lenders to make Loans hereunder.
"Budgeted Total Property Cost" shall mean, at any date of
determination with respect to any Construction Period Property, an amount equal
to the aggregate amount which the Construction Agent in good faith expects to
be expended in order to achieve Completion with respect to such Property.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in North Carolina or any other states from which
the Agent, any Lender or any Holder funds or engages in administrative
activities with respect to the transactions under the Operative Agreements are
authorized or required by law to close; provided, however, that when used in
connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London interbank market.
"Capital Lease" shall mean, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
Appendix A-5
<PAGE> 130
"Capitalized Lease" shall mean, as applied to any Person, any lease of
property (whether real, personal, tangible, intangible or mixed of such Person)
by such Person as the lessee which would be capitalized on a balance sheet of
such Person prepared in accordance with GAAP.
"Capital Stock" shall mean any nonredeemable capital stock of the
Lessee or any of its Subsidiaries, whether common or preferred.
"Cash Collateral" shall mean such cash and cash equivalents
constituting part of the Collateral pledged by the Lessee and maintained with
the Agent in trust account, all as referenced in the Cash Collateral Agreement.
"Cash Collateral Account" shall mean the cash collateral account which
is the subject of the Cash Collateral Agreement.
"Cash Collateral Agreement" shall mean the Assignment of Cash
Collateral Account dated on or about the Initial Closing Date executed by
Guilford in favor of the Agent.
"Cash Collateral Agreement Event of Default" shall have the meaning
specified in Section 3.1 of the Cash Collateral Agreement.
"Cash Equivalents" shall mean (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (b) U.S. dollar denominated
time and demand deposits and certificates of deposit of (i) any Lender, (ii)
any domestic commercial bank having capital and surplus in excess of
$500,000,000 or (iii) any bank whose short-term commercial paper rating from
S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1
or the equivalent thereof (any such bank being an "Approved Bank"), in each
case with maturities of not more than 270 days from the date of acquisition,
(c) commercial paper and variable or fixed rate notes issued by any Approved
Bank (or by the parent company thereof) or any variable rate notes issued by,
or guaranteed by, any domestic corporation rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof) or better by
Moody's and maturing within six months of the date of acquisition and (d)
repurchase agreements with a bank or trust company (including any of the
Lenders) or securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States of America in which the Agent shall have a perfected first priority
security interest (subject to no other Liens) and having, on the date of
purchase thereof, a fair market value of at least 100% of the amount of the
repurchase obligations.
"Cashflow Coverage Ratio" shall mean, with respect to the Lessee and
its Subsidiaries (direct and indirect), on a consolidated basis, as of the end
of each fiscal quarter of the Lessee for the four fiscal quarter period ending
on such date, the ratio of (a) EBITDAR for the applicable period to (b) the sum
of (i) Interest Expense for the applicable period plus (ii) current maturities
of Funded Debt Payments for the applicable period plus (iii) Rental Expense for
the applicable period
Appendix A-6
<PAGE> 131
plus (iv) income taxes (determined in accordance with GAAP) payable by the
Lessee and/or its Subsidiaries (direct or indirect) on a consolidated basis for
the applicable period.
"Casualty" shall mean any damage or destruction of all or any portion
of the Property as a result of a fire or other casualty.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as
amended by the Superfund Amendments and Reauthorization Act of 1986.
"Certificate" shall mean a Certificate in favor of each Holder
regarding the Holder Commitment of such Holder issued pursuant to the terms and
conditions of the Trust Agreement in favor of each Holder.
"Certificate Participant" shall have the meaning specified in Section
10.1 of the Participation Agreement.
"Certificate Participation" shall have the meaning specified in
Section 10.1 of the Participation Agreement.
"Chattel Paper" shall have the meaning given to such term in Section 1
of the Security Agreement.
"City of Baltimore Commitment" shall mean the Commitment to Comply
with Ordinance 610 - Minority & Women's Business Enterprise Program of the City
of Baltimore dated on or about January 26, 1998 executed by the Lessor.
"Claims" shall mean any and all obligations, liabilities, losses,
actions, suits, penalties, claims, demands, costs and expenses (including
without limitation reasonable attorney's fees and expenses) of any nature
whatsoever.
"Closing Date" shall mean the Initial Closing Date and each Property
Closing Date.
"Code" shall mean the Internal Revenue Code of 1986 together with
rules and regulations promulgated thereunder, as amended from time to time, or
any successor statute thereto.
"Collateral" shall mean all assets of the Lessor, the Construction
Agent and the Lessee, now owned or hereafter acquired, upon which a Lien is
purported to be created by one or more of the Security Documents.
"Commencement Date" shall have the meaning specified in Section 2.2 of
the Lease.
"Commitment" shall mean, as to any Lender, the obligation of such
Lender to make the portion of the Loans to the Lessor in an aggregate principal
amount at any time outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 1.1 of the Credit
Appendix A-7
<PAGE> 132
Agreement, as such amount may be increased or reduced from time to time in
accordance with the provisions of the Operative Agreements.
"Commitment Percentage" shall mean, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such
Lender's Loans then outstanding constitutes of the aggregate principal amount
of all of the Loans then outstanding), and such Commitment Percentage shall
take into account both the Lender's Tranche A Commitment and the Lender's
Tranche B Commitment.
"Commitment Period" shall mean the period from and including the
Initial Closing Date to and including sixty (60) days after the Rent
Commencement Date or such earlier date as the Commitments shall terminate as
provided in the Credit Agreement or the Holder Commitment shall terminate as
provided in the Trust Agreement.
"Commonly Controlled Entity" shall mean any Subsidiary of the Lessee
or any other trade or business (whether or not incorporated) which is under
"common control" (as defined in the Code) and of which the Lessee or any of its
Subsidiaries is a part.
"Completion" shall mean, with respect to a Property, such time as the
acquisition, installation, testing and final completion (including without
limitation, all punch list items) of the Improvements on such Property has been
achieved in accordance with the Plans and Specifications, the Agency Agreement
and/or the Lease, and in compliance with all Legal Requirements and Insurance
Requirements and a certificate of occupancy has been issued with respect to
such Property by the appropriate governmental entity (except if non-compliance,
individually or in the aggregate, shall not have and could not reasonably be
expected to have a Material Adverse Effect). If the Lessor purchases a
Property that includes existing Improvements that are to be immediately
occupied by the Lessee, the date of Completion for such Property shall be the
Property Closing Date.
"Completion Certificate" shall have the meaning specified in Section
5.4B(e) of the Participation Agreement.
"Completion Date" shall mean, with respect to a Property, the earlier
of (a) the date on which Completion for such Property has occurred or (b) the
Construction Period Termination Date.
"Condemnation" shall mean any taking or sale of the use, access,
occupancy, easement rights or title to any Property or any part thereof, wholly
or partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including without limitation an action by
a Governmental Authority to change the grade of, or widen the streets adjacent
to, any Property or alter the pedestrian or vehicular traffic flow to any
Property so as to result in a change in access to such Property, or by or on
account of an eviction by paramount title or any transfer made in lieu of any
such proceeding or action.
Appendix A-8
<PAGE> 133
"Consolidated Subsidiary" shall mean, as to any Person, any Subsidiary
of such Person which under the rules of GAAP consistently applied should have
its financial results consolidated with those of such Person for purposes of
financial accounting statements.
"Construction Advance" shall mean an advance of funds to pay Property
Costs pursuant to Section 5.4 of the Participation Agreement.
"Construction Agent" shall mean Guilford Pharmaceuticals Inc., a
Delaware corporation, as the construction agent under the Agency Agreement.
"Construction Budget" shall mean the cost of acquisition,
installation, testing, constructing and developing any Property as determined
by the Construction Agent in its reasonable, good faith judgment.
"Construction Commencement Date" shall mean, with respect to
Improvements, the date on which construction of such Improvements commences
pursuant to the Agency Agreement.
"Construction Inspector" shall mean an architectural or engineering
firm of the Agent's choice, to be engaged by the Agent at the Lessee's expense,
to perform various services on behalf of the Financing Parties including
without limitation examination of the Plans and Specifications and changes
thereto, examination of cost breakdowns and estimates, periodic inspections on
the behalf of the Financing Parties and advising and rendering periodic reports
to the Agent concerning the same.
"Construction Contract" shall mean any contract entered into between
the Construction Agent or the Lessee with a Contractor for the construction of
Improvements or any portion thereof on the Property.
"Construction Loan" shall mean any Loan made in connection with a
Construction Advance.
"Construction Loan Property Cost" shall mean with respect to each
Construction Period Property at the date of determination, an amount equal to
(a) the aggregate principal amount of Construction Loans made on or prior to
such date with respect to the Property minus (b) the aggregate principal amount
of prepayments or repayments of the Loans allocated to reduce the Construction
Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit
Agreement.
"Construction Period" shall mean, with respect to a Property, the
period commencing on the Construction Commencement Date for such Property and
ending on the Completion Date for such Property.
"Construction Period Property" means, at any date of determination,
any Property as to which the Rent Commencement Date has not occurred on or
prior to such date.
Appendix A-9
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"Construction Period Termination Date" shall mean (a) the earlier of
(i) the date that the Commitments have been terminated in their entirety in
accordance with the terms of Section 2.5(a) of the Credit Agreement, or (ii)
the twenty-four (24) month anniversary of the Initial Closing Date or (b) such
later date as shall be agreed to by the Majority Secured Parties.
"Contractor" shall mean each entity with whom the Construction Agent
or the Lessee contracts to construct any Improvements or any portion thereof on
the Property.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Lessee, are treated as a single
employer under Section 414 of the Code.
"Co-Owner Trustee" shall have the meaning specified in Section 9.2 of
the Trust Agreement.
"Credit Agreement" shall mean the Credit Agreement, dated on or about
the Initial Closing Date, among the Lessor, the Agent and the Lenders, as
specified therein.
"Credit Agreement Default" shall mean any event or condition which,
with the lapse of time or the giving of notice, or both, would constitute a
Credit Agreement Event of Default.
"Credit Agreement Event of Default" shall mean any event or condition
defined as a "Credit Agreement Event of Default" in Section 6 of the Credit
Agreement.
"Credit Support Subsidiaries" shall mean GPI Holdings, Inc., GPI
Polymer Holdings, Inc. and GPI NIL Holdings, Inc., each a Delaware holding
company.
"Credit Documents" shall mean the Participation Agreement, the Credit
Agreement, the Notes and the Security Documents.
"Deed" shall mean a warranty deed regarding the Land and/or
Improvements in form and substance satisfactory to the Agent.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Holder" shall have the meaning given to such term in
Section 12.4 of the Participation Agreement.
"Defaulting Lender" shall have the meaning given to such term in
Section 12.4 of the Participation Agreement.
"Deficiency Balance" shall have the meaning given in Section 22.1(b) of
the Lease Agreement.
Appendix A-10
<PAGE> 135
"Disputes" shall have the meaning given to such term in Section
12.7(d) of the Participation Agreement.
"Documents" shall have the meaning given to such term in Section 1 of
the Security Agreement.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"EBITDA" shall mean for any period with respect to the Lessee and its
Subsidiaries (direct and indirect) on a consolidated basis, the sum of (a) net
income for such period plus (b) depreciation, amortization, income taxes and
other non-cash charges for such period, in each case determined in accordance
with GAAP applied on a consistent basis. Except as expressly provided
otherwise, the applicable period shall be for the four consecutive quarters
ending as of the date of determination.
"EBITDAR" shall mean, for any period with respect to the Lessee and
its Subsidiaries (direct and indirect) on a consolidated basis, the sum of (a)
EBITDA for such period plus (b) to the extent deducted in determining EBITDA
for such period, Rental Expense for such period.
"Election Date" shall have the meaning given to such term in Section
20.1 of the Lease.
"Election Notice" shall have the meaning given to such term in Section
20.1 of the Lease.
"Employee Benefit Plan" or "Plan" shall mean an employee benefit plan
(within the meaning of Section 3(3) of ERISA, including without limitation any
Multiemployer Plan), or any "plan" as defined in Section 4975(e)(1) of the Code
and as interpreted by the Internal Revenue Service and the Department of Labor
in rules, regulations, releases or bulletins in effect on any Closing Date.
"Environmental Claims" shall mean any investigation, notice,
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial, or private in nature) arising (a) pursuant to, or in
connection with, an actual or alleged violation of, any Environmental Law, (b)
in connection with any Hazardous Substance, (c) from any abatement, removal,
remedial, corrective, or other response action in connection with a Hazardous
Substance, Environmental Law, or other order of a Tribunal or (d) from any
actual or alleged damage, injury, threat, or harm to health, safety, natural
resources, or the environment.
"Environmental Laws" shall mean any Law, permit, consent, approval,
license, award, or other authorization or requirement of any Tribunal relating
to emissions, discharges, releases, threatened releases of any Hazardous
Substance into ambient air, surface water, ground water, publicly owned
treatment works, septic system, or land, or otherwise relating to the handling,
storage, treatment, generation, use, or disposal of Hazardous Substances,
pollution or to the
Appendix A-11
<PAGE> 136
protection of health or the environment, including without limitation CERCLA,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
and state statutes analogous thereto.
"Environmental Report" shall mean each Phase I environmental appraisal
and all other reports, letters or recommendations concerning any Property in
form and substance reasonably satisfactory to the Agent by any environmental
consultant in relation to any Property and any and all supplements thereto.
"Environmental Violation" shall mean any activity, occurrence or
condition that violates or threatens (if the threat requires remediation under
any Environmental Law and is not remediated during any grace period allowed
under such Environmental Law) to violate or results in or threatens (if the
threat requires remediation under any Environmental Law and is not remediated
during any grace period allowed under such Environmental Law) to result in
noncompliance with any Environmental Law.
"Equipment" shall mean only equipment, apparatus, furnishings,
fittings and personal property of every kind and nature whatsoever purchased,
leased or otherwise acquired using the proceeds of the Loans or the Holder
Advances by the Construction Agent, the Lessee or the Lessor and all
improvements and modifications thereto and replacements thereof, whether or not
now owned or hereafter acquired or now or subsequently attached to, contained
in or used or usable in any way in connection with any operation of any
Improvements or other improvements to real property, including but without
limiting the generality of the foregoing, all equipment described in the
Appraisal including without limitation all heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilation, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment, escalators,
elevators, loading and unloading equipment and systems, cleaning systems
(including without limitation window cleaning apparatus), telephones,
communication systems (including without limitation satellite dishes and
antennae), televisions, computers, sprinkler systems and other fire prevention
and extinguishing apparatus and materials, security systems, motors, engines,
machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of
every kind and description.
"Equipment Schedule" shall mean (a) each Equipment Schedule attached
to the applicable Requisition and (b) each Equipment Schedule attached to the
applicable Lease Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean each entity required to be aggregated
with the Lessee pursuant to the requirements of Section 414(b) or (c) of the
Code.
"Eurocurrency Reserve Requirements" shall mean for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal) of reserve requirements in effect on such day
(including without limitation basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed
Appendix A-12
<PAGE> 137
on eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D) maintained by a member bank of the Federal Reserve System.
"Eurodollar Holder Advance" shall mean a Holder Advance bearing a
Holder Yield based on the Eurodollar Rate.
"Eurodollar Loans" shall mean Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean for the Interest Period for each
Eurodollar Loan or Eurodollar Holder Advance comprising part of the same
borrowing or advance (including without limitation conversions, extensions and
renewals), a per annum interest rate equal to the per annum rate determined by
the Agent on the basis of the offered rates for deposits in dollars for a
period of time corresponding to such Interest Period (and commencing on the
first day of such Interest Period), reported on Telerate page 3750 as of 11:00
a.m. (London time) two (2) Business Days before the first day of such Interest
Period. In the event no such offered rates appear on Telerate page 3750,
"Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan
or Eurodollar Holder Advance comprising part of the same borrowing or advance
(including without limitation conversions, extensions and renewals), a per
annum interest rate equal to the per annum rate determined by the Agent on the
basis of the offered rates for deposits in dollars for a period of time
corresponding to such Interest Period (and commencing on the first day of such
Interest Period), which appear on the Reuters Screen LIBO Page as of 11:00 a.m.
(London time) two (2) Business Days before the first day of such Interest
Period (provided that if at least two (2) such offered rates appear on the
Reuters Screen LIBO Page, the rate in respect of such Interest Period will be
the arithmetic mean of such offered rates). As used herein, "Reuters Screen
LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor
Money Rates Service (or such other page as may replace the LIBO page on that
service for the purpose of displaying London interbank offered rates of major
banks) ("RMMRS"). In the event the RMMRS is not then quoting such offered
rates, "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar
Loan or Eurodollar Holder Advance comprising part of the same borrowing or
advance (including without limitation conversions, extensions and renewals),
the average (rounded upward to the nearest one-sixteenth (1/16) of one percent
(1%)) per annum rate of interest determined by the office of the Agent (each
such determination to be conclusive and binding) as of two (2) Business Days
prior to the first day of such Interest Period, as the effective rate at which
deposits in immediately available funds in U.S. dollars are being, have been,
or would be offered or quoted by the Agent to major banks in the applicable
interbank market for Eurodollar deposits at any time during the Business Day
which is the second Business Day immediately preceding the first day of such
Interest Period, for a term comparable to such Interest Period and in the
amount of the requested Eurodollar Loan and/or Eurodollar Holder Advance. If
no such offers or quotes are generally available for such amount, then the
Agent shall be entitled to determine the Eurodollar Rate from another
recognized service or interbank quotation, or by estimating in its reasonable
judgment the per annum rate (as described above) that would be applicable if
such quote or offers were generally available.
Appendix A-13
<PAGE> 138
"Event of Default" shall mean a Lease Event of Default, an Agency
Agreement Event of Default, a Pledge Agreement Event of Default, a Cash
Collateral Agreement Event of Default or a Credit Agreement Event of Default.
"Excepted Payments" shall mean: (a) all indemnity payments (including
without limitation indemnity payments made pursuant to Section 11 of the
Participation Agreement), whether made by adjustment to Basic Rent or
otherwise, to which the Owner Trustee, any Holder or any of their respective
Affiliates, agents, officers, directors or employees is entitled;
(b) any amounts (other than Basic Rent or Termination Value)
payable under any Operative Agreement to reimburse the Owner Trustee, any
Holder or any of their respective Affiliates (including without limitation the
reasonable expenses of the Owner Trustee, the Trust Company and the Holders
incurred in connection with any such payment) for performing or complying with
any of the obligations of the Lessee under and as permitted by any Operative
Agreement;
(c) any amount payable to a Holder by any transferee of such
interest of a Holder as the purchase price of such Holder's interest in the
Trust Estate (or a portion thereof);
(d) any insurance proceeds (or payments with respect to risks
self-insured or policy deductibles) under liability policies other than such
proceeds or payments payable to the Agent or any Lender;
(e) any insurance proceeds under policies maintained by the Owner
Trustee or any Holder;
(f) Transaction Expenses or other amounts, fees, disbursements or
expenses paid or payable to or for the benefit of the Owner Trustee or any
Holder;
(g) all right, title and interest of any Holder or the Owner
Trustee to any Property or any portion thereof or any other property to the
extent any of the foregoing has been released from the Liens of the Security
Documents and the Lease pursuant to the terms thereof;
(h) upon termination of the Credit Agreement pursuant to the terms
thereof, all remaining property covered by the Lease or Security Documents;
(i) all payments in respect of the Holder Yield;
(j) any payments in respect of interest to the extent attributable
to payments referred to in clauses (a) through (i) above; and
(k) any rights of either the Owner Trustee or the Trust Company to
demand, collect, sue for or otherwise receive and enforce payment of any of the
foregoing amounts, provided that such rights shall not include the right to
terminate the Lease.
Appendix A-14
<PAGE> 139
"Excess Proceeds" shall mean the excess, if any, of the aggregate of
all awards, compensation or insurance proceeds payable in connection with a
Casualty or Condemnation over the Termination Value paid by the Lessee pursuant
to the Lease with respect to such Casualty or Condemnation.
"Exculpated Persons" shall mean the Borrower, the Holders, the Lessor,
their officers, directors, shareholders and partners.
"Exempt Payments" shall have the meaning specified in Section 11.2(e)
of the Participation Agreement.
"Expiration Date" shall mean the last day of the Term; provided, in no
event shall the Expiration Date be later than the seventh annual anniversary of
the Initial Closing Date, unless such later date has been expressly agreed to
in writing by each of the Lessor, the Lessee, the Agent, the Lenders and the
Holders.
"Fair Market Sales Value" shall mean, with respect to any Property,
the amount, which in any event, shall not be less than zero (0), that would be
paid in cash in an arms-length transaction between an informed and willing
purchaser and an informed and willing seller, neither of whom is under any
compulsion to purchase or sell, respectively, such Property. Fair Market Sales
Value of any Property shall be determined based on the assumption that, except
for purposes of Section 17 of the Lease, such Property is in the condition and
state of repair required under Section 10.1 of the Lease and the Lessee is in
compliance with the other requirements of the Operative Agreements.
"Federal Funds Effective Rate" shall have the meaning given to such
term in the definition of ABR.
"Financing Party" shall mean the Lessor, the Owner Trustee, in its
trust capacity, the Agent, the Holders, the Lenders.
"Fixtures" shall mean all fixtures relating to the Improvements,
including without limitation all components thereof, located in or on the
Improvements, together with all replacements, modifications, alterations and
additions thereto.
"Force Majeure Event" shall mean any event beyond the control of the
Construction Agent, other than a Casualty or Condemnation, including without
limitation strikes, lockouts, adverse soil conditions, acts of God, adverse
weather conditions, inability to obtain labor or materials, governmental
activities, civil commotion and enemy action; but excluding any event, cause or
condition that results from the Construction Agent's financial condition.
"Form 1001" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.
Appendix A-15
<PAGE> 140
"Form 4224" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.
"Funded Debt" shall mean, with respect to any Person, without
duplication, all long term Indebtedness of such Person as stated on the balance
sheet of such Person, determined in accordance with GAAP.
"Funded Debt Payments" shall mean, as of the end of each fiscal
quarter of the Lessee and its Subsidiaries (direct and indirect) on a
consolidated basis, the sum of all scheduled current maturities of Funded Debt.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the accounting principles board of the
American Institute of Certified Public Accountants, and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"General Contractor" shall mean Riparius Construction, Inc., its
successors and permitted assigns or any other general contractor approved by
the Agent and with whom the Construction Agent contracts for the renovations of
and improvements to any Permitted Facility.
"Governmental Action" shall mean all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, written interpretations, decrees, licenses, exemptions,
publications, filings, notices to and declarations of or with, or required by,
any Governmental Authority, or required by any Legal Requirement, and shall
include, without limitation, all environmental and operating permits and
licenses that are required for the full use, occupancy, zoning and operating of
the Property.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Ground Lease" shall mean a ground lease (in form and substance
satisfactory to the Agent) respecting any Property owned by the Lessee (or a
parent corporation or any Subsidiary of the Lessee) and leased to the Lessor
where such lease (a) has at least a ninety-nine (99) year term and payments set
at no more than $1.00 per year, or (b) is subject to such other terms and
conditions as are satisfactory to the Agent.
"Guaranty" shall mean the Guaranty Agreement dated on or about the
Initial Closing Date executed by the Lessee in favor of the Financing Parties.
"Guilford" shall mean Guilford Pharmaceuticals Inc., a Delaware
corporation, and its successors and permitted assigns.
"Guilford Real Estate Trust 1998-1" shall mean the grantor trust
created pursuant to the terms and conditions of the Trust Agreement.
Appendix A-16
<PAGE> 141
"Hard Costs" shall mean all costs and expenses payable for supplies,
materials, labor and profit with respect to the Improvements under any
Construction Contract.
"Hazardous Substance" shall mean any of the following: (a) any
petroleum or petroleum product, explosives, radioactive materials, asbestos,
formaldehyde, polychlorinated biphenyls, lead and radon gas; (b) any substance,
material, product, derivative, compound or mixture, mineral, chemical, waste,
gas, medical waste, or pollutant, in each case whether naturally occurring,
man-made or the by-product of any process, that is toxic, harmful or hazardous
to the environment or human health or safety as determined in accordance with
any Environmental Law; or (c) any substance, material, product, derivative,
compound or mixture, mineral, chemical, waste, gas, medical waste or pollutant
that would support the assertion of any claim under any Environmental Law,
whether or not defined as hazardous as such under any Environmental Law.
"Holder Advance" shall mean any advance made by any Holder to the
Owner Trustee pursuant to the terms of the Trust Agreement or the Participation
Agreement.
"Holder Amount" shall mean as of any date, the aggregate amount of
Holder Advances made by each Holder to the Trust Estate pursuant to Section 2
of the Participation Agreement and Section 3.1 of the Trust Agreement less any
payments of any Holder Advances received by the Holders pursuant to Section 3.4
of the Trust Agreement.
"Holder Commitments" shall mean $600,000, as such amount may be
increased or reduced from time to time in accordance with the provisions of the
Operative Agreements; provided, if there shall be more than one (1) Holder, the
Holder Commitment of each Holder shall be as set forth in Schedule I to the
Trust Agreement as such Schedule I may be amended and replaced from time to
time.
"Holder Construction Property Cost" shall mean, with respect to each
Construction Period Property, at any date of determination, an amount equal to
the outstanding Holder Advances made with respect thereto under the Trust
Agreement.
"Holder Overdue Rate" shall mean the lesser of (a) the then current
rate of Holder Yield respecting the particular amount in question plus two
percent (2%) and (b) the highest rate permitted by applicable law.
"Holder Property Cost" shall mean with respect to a Property an amount
equal to the outstanding Holder Advances with respect thereto.
"Holder Yield" shall mean with respect to Holder Advances from time to
time either the Eurodollar Rate plus the Applicable Percentage or the ABR as
elected by the Owner Trustee from time to time with respect to such Holder
Advances in accordance with the terms of the Trust Agreement; provided,
however, (a) upon delivery of the notice described in Section 3.7(c) of the
Trust Agreement, the outstanding Holder Advances of each Holder shall bear a
yield at the
Appendix A-17
<PAGE> 142
ABR applicable from time to time from and after the dates and during the
periods specified in Section 3.7(c) of the Trust Agreement, and (b) upon the
delivery by a Holder of the notice described in Section 11.3(f) of the
Participation Agreement, the Holder Advances of such Holder shall bear a yield
at the ABR applicable from time to time after the dates and during the periods
specified in Section 11.3(f) of the Participation Agreement.
"Holders" shall mean First Union National Bank and shall include the
other banks and financial institutions which may be from time to time holders
of Certificates in connection with the Guilford Real Estate Trust 1998-1.
"Impositions" shall mean, except to the extent described in the
following sentence, any and all liabilities, losses, expenses, costs, charges
and Liens of any kind whatsoever for fees, taxes, levies, imposts, duties,
charges, assessments or withholdings ("Taxes") including but not limited to (i)
real and personal property taxes, including without limitation personal
property taxes on any property covered by the Lease that is classified by
Governmental Authorities as personal property, and real estate or ad valorem
taxes in the nature of property taxes; (ii) sales taxes, use taxes and other
similar taxes (including rent taxes and intangibles taxes); (iii) excise taxes;
(iv) real estate transfer taxes, conveyance taxes, stamp taxes and documentary
recording taxes and fees; (v) taxes that are or are in the nature of franchise,
income, value added, privilege and doing business taxes, license and
registration fees; (vi) assessments on any Property, including without
limitation all assessments for public Improvements or benefits, whether or not
such improvements are commenced or completed within the Term; and (vii) taxes,
Liens, assessments or charges asserted, imposed or assessed by the PBGC or any
governmental authority succeeding to or performing functions similar to, the
PBGC; and in each case all interest, additions to tax and penalties thereon,
which at any time prior to, during or with respect to the Term or in respect of
any period for which the Lessee shall be obligated to pay Supplemental Rent,
may be levied, assessed or imposed by any Governmental Authority upon or with
respect to (a) any Property or any part thereof or interest therein; (b) the
leasing, financing, refinancing, demolition, construction, substitution,
subleasing, assignment, control, condition, occupancy, servicing, maintenance,
repair, ownership, possession, activity conducted on, delivery, insuring, use,
operation, improvement, sale, transfer of title, return or other disposition of
such Property or any part thereof or interest therein; (c) the Notes, other
indebtedness with respect to any Property, or the Certificates, or any part
thereof or interest therein; (d) the rentals, receipts or earnings arising from
any Property or any part thereof or interest therein; (e) the Operative
Agreements, the performance thereof, or any payment made or accrued pursuant
thereto; (f) the income or other proceeds received with respect to any Property
or any part thereof or interest therein upon the sale or disposition thereof;
(g) any contract (including the Agency Agreement) relating to the construction,
acquisition or delivery of the Improvements or any part thereof or interest
therein; (h) the issuance of the Notes or the Certificates; (i) the Owner
Trustee, the Trust or the Trust Estate; or (j) otherwise in connection with the
transactions contemplated by the Operative Agreements.
"Improvements" shall mean, with respect to the construction,
renovations and/or Modifications on any Land, all buildings, structures,
Fixtures, and other improvements of every kind existing at any time and from
time to time on or under the Land purchased, leased or
Appendix A-18
<PAGE> 143
otherwise acquired using the proceeds of the Loans or the Holder Advances,
together with any and all appurtenances to such buildings, structures or
improvements, including without limitation sidewalks, utility pipes, conduits
and lines, parking areas and roadways, and including without limitation all
Modifications and other additions to or changes in the Improvements at any
time, including without limitation (a) any Improvements existing as of the
Property Closing Date as such Improvements may be referenced on the applicable
Requisition and (b) any Improvements made subsequent to such Property Closing
Date.
"Indebtedness" of a Person shall mean, without duplication, such
Person's:
(a) obligations for borrowed money;
(b) obligations representing the deferred purchase price
of Property (whether real, personal, tangible, intangible or mixed) or
services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade);
(c) obligations, whether or not assumed, secured by liens
or payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person;
(d) obligations which are evidenced by notes, acceptances
or other similar instruments;
(e) Capitalized Lease obligations;
(f) net liabilities under interest rate swap, exchange or
cap agreements; and
(g) contingent obligations.
"Indemnified Person" shall mean the Lessor, the Owner Trustee, in its
individual and its trust capacity, the Trust, the Trust Company, the Agent, the
Holders, the Lenders and their respective successors, assigns, directors,
shareholders, partners, officers, employees, agents and Affiliates.
"Indemnity Provider" shall mean, respecting each Property, the Lessee.
"Independent Accountant" shall mean an Independent Person registered
and qualified to practice the profession of accounting under the laws of the
State of Maryland.
"Independent Person" shall mean a person designated by the Lessee,
approved by the Agent and not an employee of the Lessee or any Subsidiary of
the Lessee.
"Initial Closing Date" shall mean February 20, 1998.
Appendix A-19
<PAGE> 144
"Initial Construction Advance" shall mean any initial Advance to pay
for: (a) Property Costs for construction of any Improvements; and (b) the
Property Costs of restoring or repairing any Property which is required to be
restored or repaired in accordance with Section 15.1(e) of the Lease.
"Instruments" shall have the meaning given to such term in Section 1
of the Security Agreement.
"Insurance Requirements" shall mean all terms and conditions of any
insurance policy either required by the Lease to be maintained by the Lessee or
required by the Agency Agreement to be maintained by the Construction Agent,
and all requirements of the issuer of any such policy and, regarding self
insurance, any other requirements of the Lessee.
"Interest Expense" shall mean for any period with respect to the
Lessee and its Subsidiaries (direct and indirect) on a consolidated basis all
interest expense, including the amortization of debt discount and premium and
the interest component under Capital Leases, in each case determined in
accordance with GAAP applied on a consistent basis. Except as expressly
provided otherwise, the applicable period shall be for the four consecutive
quarters ending as of the date of determination.
"Interest Period" shall mean (a) during the Commitment Period and
thereafter as to any Eurodollar Loan or Eurodollar Holder Advance (i) with
respect to the initial Interest Period, the period beginning on the date of the
first Eurodollar Loan and Eurodollar Holder Advance and ending one (1) month,
two (2) months or three (3) months thereafter, as selected by the Lessor (in
the case of a Eurodollar Loan) or the Owner Trustee (in the case of a
Eurodollar Holder Advance) in its applicable notice given with respect thereto
and (ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan or Eurodollar
Holder Advance and ending one (1) month, two (2) months or three (3) months
thereafter, as selected by the Lessor by irrevocable notice to the Agent (in
the case of a Eurodollar Loan) or by the Owner Trustee (in the case of a
Eurodollar Holder Advance) in each case not less than three (3) Business Days
prior to the last day of the then current Interest Period with respect thereto;
provided, however, that all of the foregoing provisions relating to Interest
Periods are subject to the following: (A) if any Interest Period would end on
a day which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day (except that where the next succeeding
Business Day falls in the next succeeding calendar month, then on the next
preceding Business Day), (B) no Interest Period shall extend beyond the
Maturity Date or the Expiration Date, as the case may be, (C) where an Interest
Period begins on a day for which there is no numerically corresponding day in
the calendar month in which the Interest Period is to end, such Interest Period
shall end on the last Business Day of such calendar month, (D) there shall not
be more than four (4) Interest Periods outstanding at any one (1) time.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended, together with the rules and regulations promulgated
thereunder.
Appendix A-20
<PAGE> 145
"Land" shall mean a parcel of real property described on (a) the
Requisition issued by the Construction Agent on the Property Closing Date
relating to such parcel and (b) the schedules to each applicable Lease
Supplement executed and delivered in accordance with the requirements of
Section 2.4 of the Lease.
"Land Disposition Agreement" shall mean the Disposition Agreement
dated on or about January 28, 1998 between the Mayor and City Council of
Baltimore and the Lessor.
"Law" shall mean any statute, law, ordinance, regulation, rule,
directive, order, writ, injunction or decree of any Tribunal.
"Lease" or "Lease Agreement" shall mean the Lease Agreement dated on
or about the Initial Closing Date, between the Lessor and the Lessee, together
with any Lease Supplements thereto.
"Lease Default" shall mean any event or condition which, with the
lapse of time or the giving of notice, or both, would constitute a Lease Event
of Default.
"Lease Event of Default" shall have the meaning specified in Section
17.1 of the Lease.
"Lease Supplement" shall mean each Lease Supplement substantially in
the form of EXHIBIT A to the Lease, together with all attachments and schedules
thereto.
"Legal Requirements" shall mean all foreign, federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Owner Trustee, any
Holder, the Lessor, the Lessee, the Agent, any Lender or any Property, Land,
Improvement, Equipment or the taxation, demolition, construction, use or
alteration of such Improvements, whether now or hereafter enacted and in force,
including without limitation any that require repairs, modifications or
alterations in or to any Property or in any way limit the use and enjoyment
thereof (including without limitation all building, zoning and fire codes and
the Americans with Disabilities Act of 1990, 42 U.S.C. Section 12101 et. seq.,
and any other similar federal, state or local laws or ordinances and the
regulations promulgated thereunder) and any that may relate to environmental
requirements (including without limitation all Environmental Laws), and all
permits, certificates of occupancy, licenses, authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instruments which are either of record or known to the Lessee
affecting any Property or the Appurtenant Rights.
"Lender Commitments" shall mean $19,400,000, as such amount may be
increased or reduced from time to time in accordance with the provisions of the
Operative Agreements; provided, if there shall be more than one (1) Lender, the
Lender Commitment of each Lender shall be as set forth in Schedule 1.1 to the
Credit Agreement as such Schedule 1.1 may be amended and replaced from time to
time.
Appendix A-21
<PAGE> 146
"Lender Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdiction in order to procure a security interest in favor of the
Agent in the Collateral subject to the Security Documents.
"Lenders" shall mean First Union National Bank and shall include the
other banks and financial institutions which may be from time to time party to
the Participation Agreement and the Credit Agreement.
"Lessee" shall have the meaning set forth in the Lease.
"Lessee Credit Agreement" shall mean that certain Loan and Financing
Agreement dated as of December 5, 1994 by and among the Maryland Economic
Development Corporation, the Lessee and Signet Bank/Maryland (a predecessor in
interest to First Union National Bank), as such may hereafter be amended,
modified, supplemented, restated and/or replaced from time to time.
"Lessee Credit Agreement Event of Default" shall mean an Event of
Default as defined in Section 10.1 of the Lessee Credit Agreement.
"Lessee Equipment" shall mean equipment which (a) is personal property
or a fixture (but does not otherwise constitute an interest in real property),
(b) to the extent such constitutes an interest in real property (other than as
a fixture), it shall not be subject to any Lien, (c) is not financed with any
Advance, (d) is not a replacement for any Equipment, (e) is not a Modification
required by any Legal Requirement or any Insurance Requirement, (f) is not
integral to the operation of any Improvements with respect to any Property and
(g) may be removed from any Property without causing material damage to such
Property which cannot be expeditiously repaired.
"Lessor" shall mean the Owner Trustee, not in its individual capacity,
but as the Lessor under the Lease.
"Lessor Basic Rent" shall mean the scheduled Holder Yield due on the
Holder Advances on any Scheduled Interest Payment Date pursuant to the Trust
Agreement (but not including interest on (a) any such scheduled Holder Yield
due on the Holder Advances prior to the Rent Commencement Date with respect to
the Property to which such Holder Advances relate or (b) overdue amounts under
the Trust Agreement or otherwise).
"Lessor Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdictions in order to protect the Lessor's interest under the
Lease to the extent the Lease is a security agreement or a mortgage.
"Lessor Lien" shall mean any Lien, true lease or sublease or
disposition of title arising as a result of (a) any claim against the Lessor or
the Trust Company, in its individual capacity, not resulting from the
transactions contemplated by the Operative Agreements, (b) any act or
Appendix A-22
<PAGE> 147
omission of the Lessor or the Trust Company, in its individual capacity, which
is not required by the Operative Agreements or is in violation of any of the
terms of the Operative Agreements, (c) any claim against the Lessor or the
Trust Company, in its individual capacity, with respect to Taxes or Transaction
Expenses against which the Lessee is not required to indemnify the Lessor or
the Trust Company, in its individual capacity, pursuant to Section 11 of the
Participation Agreement or (d) any claim against the Lessor arising out of any
transfer by the Lessor of all or any portion of the interest of the Lessor in
the Properties, the Trust Estate or the Operative Agreements other than the
transfer of title to or possession of any Properties by the Lessor pursuant to
and in accordance with the Lease, the Credit Agreement, the Security Agreement
or the Participation Agreement or pursuant to the exercise of the remedies set
forth in Article XVII of the Lease.
"Licenses" shall mean any and all licenses, certificates of authority,
operating permits, franchises and other licenses, authorizations, certificates,
permits or approvals, including without limitation construction permits, now
existing or at any time hereafter issued by, or on behalf of, any Governmental
Authority with respect to each Permitted Facility, the acquisition and
construction of the Permitted Facility or any renovation, expansion, leasing,
ownership and/or operation of the Permitted Facility and any and all operating
licenses issued by any Governmental Authority, as the same may from time to
time be amended, renewed, restated, reissued, restricted, supplemented or
otherwise modified.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien, option or charge of any kind.
"Limited Obligation Event" shall mean any Casualty, Condemnation or
Force Majeure Event occurring prior to the Construction Period Termination Date
to the extent (but only to the extent) (a) no such Casualty, Condemnation or
Force Majeure Event is caused by any act or omission of the Construction Agent,
the Lessee and/or any of their respective Affiliates, (b)(i) with respect to
any such Casualty or Condemnation, the proceeds therefrom exceed or are
reasonably expected to exceed twenty-five percent (25%) of the aggregate
Construction Budget for such Construction Period Property and/or (ii) the
Lessor, in its reasonable discretion, shall have determined that any such
Casualty or Condemnation is reasonably likely to prevent such Construction
Period Property from being completed by the Construction Period Termination
Date and (c)(i) any such Force Majeure Event shall have occurred and be
continuing for ninety (90) consecutive days or more and/or (ii) the Lessor, in
its reasonable discretion, shall have determined that any such Force Majeure
Event is reasonably like to prevent such Construction Period Property from
being completed by the Construction Period Termination Date.
"Limited Recourse Amount" shall mean with respect to all the
Properties on an aggregate basis, an amount equal to the sum of the Termination
Values with respect to all the Properties on an aggregate basis on each Payment
Date, less the Maximum Residual Guarantee Amount as of such date with respect
to all the Properties on an aggregate basis.
"Loan Basic Rent" shall mean the scheduled repayment of Loan amounts
on each date and in the manner as specified in Schedule 1 to the Participation
Agreement and interest due on
Appendix A-23
<PAGE> 148
the Loans on any Scheduled Interest Payment Date pursuant to the Credit
Agreement (but not including interest on (a) any such Loan due prior to the
Rent Commencement Date with respect to the Property to which such Loan relates
or (b) any overdue amounts under Section 2.8(c) of the Credit Agreement or
otherwise).
"Loan Property Cost" shall mean, with respect to each Property at any
date of determination, an amount equal to (a) the aggregate principal amount
all Loans (including without limitation all Acquisition Loans and Construction
Loans) made on or prior to such date with respect to such Property minus (b)
the aggregate amount of prepayments or repayments as the case may be of the
Loans allocated to reduce the Loan Property Cost of such Property pursuant to
Section 2.6(c) of the Credit Agreement.
"Loans" shall mean the loans extended pursuant to the Credit Agreement
and shall include both the Tranche A Loans and the Tranche B Loans.
"Majority Holders" shall mean at any time, Holders whose Holder
Advances outstanding represent at least sixty-six and two thirds percent (66
2/3%) of the aggregate Holder Advances outstanding.
"Majority Lenders" shall mean at any time, Lenders whose Loans
outstanding represent at least sixty-six and two thirds percent (66 2/3%) of
the aggregate Loans outstanding.
"Majority Secured Parties" shall mean at any time, Lenders and Holders
whose Loans and Holder Advances outstanding represent at least sixty-six and
two thirds percent (66 2/3%) of the aggregate Advances outstanding.
"Marketing Period" shall mean, if the Lessee has given a Sale Notice
in accordance with Section 20.1 of the Lease, the period commencing on the date
such Sale Notice is given and ending on the Expiration Date.
"Material Adverse Effect" shall, mean a material adverse effect on (a)
the business, condition (financial or otherwise), assets, liabilities or
operations of the Lessee, (b) the ability of the Lessee to perform its
respective obligations under any Operative Agreement to which it is a party,
(c) the validity or enforceability of any Operative Agreement or the rights and
remedies of the Agent, the Lenders, the Holders, or the Lessor thereunder, (d)
the validity, priority or enforceability of any Lien on any Property created by
any of the Operative Agreements, or (e) the value, utility or useful life of
any Property or the use, or ability of the Lessee to use, any Property for the
purpose for which it was intended.
"Maturity Date" shall mean the Expiration Date.
"Maximum Residual Guarantee Amount" shall mean an amount equal to the
product of (a) the aggregate Property Cost for all of Properties times (b)(i)
from (and including) the Initial Closing Date to (and including) the date of
Completion for the Properties, eighty-nine percent
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(89%) and (ii) from (but not including) the date of Completion for the
Properties and thereafter, eighty-three percent (83%).
"MIDFA Guaranty" shall mean the insurance agreement or any similar
document (in each case in form and substance satisfactory to the Agent)
securing the obligations of the Construction Agent and the Lessee and/or the
Lessor, the Borrower or the Owner Trustee under the Operative Agreements.
"Modifications" shall have the meaning specified in Section 11.1(a) of
the Lease.
"Moody's" shall mean Moody's Investors Service, Inc., or any successor
or assignee of the business of such company in the business of rating
securities.
"Mortgage Instrument" shall mean any mortgage, deed of trust or any
other instrument executed by the Owner Trustee and the Lessee (or regarding any
Property subject to a Ground Lease, the applicable Affiliate of the Lessee) in
favor of the Agent (for the benefit of the Lenders and the Holders) and
evidencing a Lien on the Property, in form and substance reasonably acceptable
to the Agent.
"Multiemployer Plan" shall mean any plan described in Section
4001(a)(3) of ERISA to which contributions are or have been made or required by
the Lessee or any of its Subsidiaries or ERISA Affiliates.
"Multiple Employer Plan" shall mean a plan to which the Lessee or any
ERISA Affiliate and at least one (1) other employer other than an ERISA
Affiliate is making or accruing an obligation to make, or has made or accrued
an obligation to make, contributions.
"New Facility" shall have the meaning given to such term in Section
28.1 of the Lease.
"Notes" shall mean those notes issued to the Lenders pursuant to the
Credit Agreement and shall include both the Tranche A Notes and the Tranche B
Notes.
"Obligations" shall have the meaning given to such term in Section 1
of the Security Agreement.
"Officer's Certificate" with respect to any person shall mean a
certificate executed on behalf of such person by a Responsible Officer who has
made or caused to be made such examination or investigation as is necessary to
enable such Responsible Officer to express an informed opinion with respect to
the subject matter of such Officer's Certificate.
"Operative Agreements" shall mean the following: the Participation
Agreement, the Agency Agreement, the Guaranty, the Trust Agreement, the
Certificates, the Credit Agreement, the Notes, the Lease, the Lease Supplements
(and memoranda of the Lease and each Lease Supplement in a form reasonably
acceptable to the Agent), the Security Agreement, the Cash Collateral
Agreement, the Pledge Agreement, the MIDFA Guaranty (if any), the other
Security
Appendix A-25
<PAGE> 150
Documents, the Mortgage Instruments, the Ground Leases, the Deeds, the Bills of
Sale, the Land Disposition Agreement, the City of Baltimore Commitment and any
and all other agreements, documents and instruments executed in connection with
any of the foregoing.
"Original Executed Counterpart" shall have the meaning given to such
term in Section 5 of EXHIBIT A to the Lease.
"Overdue Interest" shall mean any interest payable pursuant to Section
2.8(c) of the Credit Agreement.
"Overdue Rate" shall mean (a) with respect to the Loan Basic Rent, and
any other amount owed under or with respect to the Credit Agreement or the
Security Documents, the rate specified in Section 2.8(b) of the Credit
Agreement, (b) with respect to the Lessor Basic Rent, the Holder Yield and any
other amount owed under or with respect to the Trust Agreement, the Holder
Overdue Rate, and (c) with respect to any other amount, the amount referred to
in clause (y) of Section 2.8(b) of the Credit Agreement.
"Owner Trustee," "Borrower" or "Lessor" shall mean First Security
Bank, National Association, not individually, except as expressly stated in the
various Operative Agreements, but solely as the Owner Trustee under the
Guilford Real Estate Trust 1998-1, and any successor or replacement Owner
Trustee expressly permitted under the Operative Agreements.
"Participant" shall have the meaning given to such term in Section 9.7
of the Credit Agreement.
"Participation Agreement" shall mean the Participation Agreement dated
on or about the Initial Closing Date, among the Lessee, the Owner Trustee, not
in its individual capacity except as expressly stated therein, the Holders, the
Lenders and the Agent.
"Payment Date" shall mean any date on which the amounts set forth in
Schedule 1 to the Participation Agreement are scheduled to be paid, any
Scheduled Interest Payment Date and any date on which interest or Holder Yield
in connection with a prepayment of principal on the Loans or of the Holder
Advances is due under the Credit Agreement or the Trust Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation created by
Section 4002(a) of ERISA or any successor thereto.
"Pension Plan" shall mean a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan), and to which the Lessee or any ERISA Affiliate may have
any liability, including without limitation any liability by reason of having
been a substantial employer within the meaning of section 4063 of ERISA at any
time during the preceding five (5) years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
Appendix A-26
<PAGE> 151
"Permitted Facility" shall mean a laboratory and any ancillary office
and/or manufacturing facility of the type and size customarily used and
operated by the Lessee in its ordinary course of business as of the Initial
Closing Date.
"Permitted Liens" shall mean:
(a) the respective rights and interests of the parties to
the Operative Agreements as provided in the Operative Agreements;
(b) the rights of any sublessee or assignee under a
sublease or an assignment expressly permitted by the terms of the
Lease for no longer than the duration of the Lease;
(c) Liens for Taxes that either are not yet due or are
being contested in accordance with the provisions of Section 13.1 of
the Lease;
(d) Liens arising by operation of law, materialmen's,
mechanics', workmen's, repairmen's, employees', carriers',
warehousemen's and other like Liens relating to the construction of
the Improvements or in connection with any Modifications or arising in
the ordinary course of business for amounts that either are not more
than thirty (30) days past due or are being diligently contested in
good faith by appropriate proceedings, so long as such proceedings
satisfy the conditions for the continuation of proceedings to contest
Taxes set forth in Section 13.1 of the Lease;
(e) Liens of any of the types referred to in clause (d)
above that have been bonded for not less than the full amount in
dispute (or as to which other security arrangements satisfactory to
the Lessor and the Agent have been made), which bonding (or
arrangements) shall comply with applicable Legal Requirements, and
shall have effectively stayed any execution or enforcement of such
Liens;
(f) Liens arising out of judgments or awards with respect
to which appeals or other proceedings for review are being prosecuted
in good faith and for the payment of which adequate reserves have been
provided as required by GAAP or other appropriate provisions have been
made, so long as such proceedings have the effect of staying the
execution of such judgments or awards and satisfy the conditions for
the continuation of proceedings to contest Taxes set forth in Section
13.1 of the Lease; and
(g) Liens in favor of municipalities to the extent agreed
to by the Lessor.
"Permitted Subsidiary Activity" shall mean (a) with respect to GPI
Holdings, Inc., (i) owning and maintaining intangible assets, including but not
limited to, stocks, bonds, and other financial instruments and securities and
collecting and disbursing income from such investments; (ii) engaging financial
advisors and hiring employees to oversee investment activities; (iii) engaging
service providers, including attorneys and accountants; (iv) performing all
obligations under existing agreements to which it is a party as of the Initial
Closing Date; and (v) any other act or activity incidental to and in support of
the foregoing, including transfer of funds or other
Appendix A-27
<PAGE> 152
assets through dividends to Lessee or by way of intercompany loans or advances
to Lessee or its Subsidiaries (direct or indirect), and (b) with respect to GPI
Polymer Holdings, Inc. and GPI NIL Holdings, Inc., (i) owning and maintaining
intangible assets, including but not limited to, stocks, bonds, and other
financial instruments and securities and collecting and disbursing income from
such investments; (ii) engaging financial advisors and hiring employees to
oversee investment activities; (iii) engaging service providers, including
attorneys and accountants; (iv) acquiring, owning (through fee simple ownership
as well as licenses and assignments), and maintaining intellectual property,
including patents, tradenames, trademarks, technology, trade secrets, and
know-how (collectively, "IP"); (v) engaging third parties (including Guilford
Pharmaceuticals Inc.) to perform research and development of IP; (vi) licensing
and sublicensing IP; (vii) developing (including manufacturing of) products
through contracts with third parties (including Guilford Pharmaceuticals Inc.)
utilizing the IP and commercializing such products; (viii) acquiring
additional IP; (ix) engaging advisors and hiring employees to oversee IP
activities; (x) performing all obligations under existing agreements to which
it is a party as of the Initial Closing Date; (xi) registering IP on a
worldwide basis; and (xii) any other act or activity incidental to and in
support of the foregoing, including transfer of funds or other assets through
dividends to GPI Holdings, Inc. or by way of intercompany loans or advances to
Lessee or its Subsidiaries (direct or indirect).
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
governmental authority or any other entity.
"Plan" shall mean any pension, profit sharing, savings, stock bonus or
other deferred compensation plan which is subject to the requirements of ERISA,
together with any related trusts.
"Plans and Specifications" shall mean, with respect to Improvements,
the plans and specifications for such Improvements to be constructed or already
existing, as such Plans and Specifications may be amended, modified or
supplemented from time to time in accordance with the terms of the Operative
Agreements.
"Pledge Agreement" shall mean (a) the Pledge Agreement dated on or
about the Initial Closing Date between the Lessee and the Agent and (b) the
stock powers requested by the Agent to be executed in connection therewith.
"Pledge Agreement Event of Default" shall mean any event or condition
defined in Section 8 of the Pledge Agreement as a "Pledge Agreement Event of
Default".
"Prime Lending Rate" shall have the meaning given to such term in the
definition of ABR.
"Prior Deed of Trust" shall mean the Leasehold Deed of Trust dated as
of December 5, 1994 between the Lessee, the trustees referenced therein,
conveying to Signet Bank of Maryland (a predecessor in interest to First Union
National Bank) and the Maryland Economic
Appendix A-28
<PAGE> 153
Development Corporation, collectively as the beneficiary, as such is recorded
in the City of Baltimore, Maryland Registry.
"Prior Land" shall mean the 7.487 acre (approximately) tract of land
located at 6611 Tributary Street in Baltimore City, Maryland, as more
particularly described in Exhibit A attached to the Prior Deed of Trust and
made a part thereof, and by this reference a part hereof, together with any and
all improvements thereon.
"Prior Lease" shall mean the Lease Agreement dated August 30, 1994
between the Lessee as lessee and the Prior Owner as lessor, creating the
Lessee's leasehold estate in the Prior Land and the improvements, together with
all supplements thereto.
"Prior Owner" shall mean Crown Royal Limited Partnership, a Maryland
limited partnership, the fee owner of the Prior Land and the improvements, and
lessor pursuant to the Prior Lease.
"Proceeds" or "proceeds" shall mean, when used with respect to any of
the Security, all proceeds within the meaning of the Maryland Uniform
Commercial Code and shall include the proceeds of any and all insurance
policies.
"Prohibited Transaction" shall mean a "prohibited transaction" as
defined in Section 406 of ERISA or Section 4975 of the Code.
"Property" shall mean, with respect to each Permitted Facility that is
(or is to be) acquired, constructed and/or renovated pursuant to the terms of
the Operative Agreements, the Land and each item of Equipment and the various
Improvements, in each case located on such Land, including without limitation
each Construction Period Property, each Property subject to a Ground Lease and
each Property for which the Term has commenced.
"Property Acquisition Cost" shall mean the cost to the Lessor to
purchase a Property on a Property Closing Date.
"Property Closing Date" shall mean the date on which the Lessor
purchases a Property or, with respect to the first Advance, the date on which
the Lessor seeks reimbursement for Property previously purchased by the Lessor.
"Property Cost" shall mean with respect to a Property the aggregate
amount (and/or the various items and occurrences giving rise to such amounts)
of the Loan Property Cost plus the Holder Property Cost for such Property (as
such amounts shall be increased equally among all Properties respecting the
Holder Advances and the Loans extended from time to time to pay for the
Transaction Expenses, fees, expenses and other disbursements referenced in
Sections 7.1(a) and 7.1(b) of the Participation Agreement).
"Purchase Option" shall have the meaning given to such term in Section
20.1 of the Lease.
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<PAGE> 154
"Purchasing Lender" shall have the meaning given to such term in
Section 9.8(a) of the Credit Agreement.
"Register" shall have the meaning given to such term in Section 9.9(a)
of the Credit Agreement.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
"Release" shall mean any release, pumping, pouring, emptying,
injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge,
disposal or emission of a Hazardous Substance.
"Rent" shall mean, collectively, the Basic Rent and the Supplemental
Rent, in each case payable under the Lease.
"Rent Commencement Date" shall mean, regarding each Property, the
earlier to occur of the Construction Period Termination Date and the Completion
Date.
"Rental Expense" shall mean, for any period, the total rental expense
under all leases (other than Capital Leases) of the Lessee and its Subsidiaries
(direct and indirect) on a consolidated basis, as determined in accordance with
GAAP.
"Reportable Event" shall mean a "reportable event" as defined by Title
IV of ERISA.
"Reportable Event" shall have the meaning specified in ERISA.
"Requested Funds" shall mean any funds requested by the Lessee or the
Construction Agent, as applicable, in accordance with Section 5 of the
Participation Agreement.
"Requisition" shall have the meaning specified in Section 4.2 of the
Participation Agreement.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the
Board of Directors, the Chairman or Vice Chairman of the Executive Committee of
the Board of Directors, the President, any Senior Vice President or Executive
Vice President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer, except that when used with respect to
the Trust Company or the Owner Trustee, "Responsible Officer" shall also
include the Cashier, any Assistant Cashier, any Trust Officer or Assistant
Trust Officer, the Controller and any Assistant Controller or any other officer
of the Trust Company or the Owner Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust
Appendix A-30
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matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Retainage" shall have the meaning specified in Section 5.4A(d) of the
Participation Agreement.
"RPR Agreement" shall have the meaning specified in Section 8.3B(a) of
the Participation Agreement.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., or any successor or assignee of the business of such division in
the business of rating securities.
"Sale Date" shall have the meaning given to such term in Section
20.3(a) of the Lease.
"Sale Notice" shall mean a notice given to the Lessor in connection
with the election by the Lessee of its Sale Option.
"Sale Option" shall have the meaning given to such term in Section
20.1 of the Lease.
"Sale Proceeds Shortfall" shall mean the amount by which the proceeds
of a sale described in Section 22.1 of the Lease are less than the Limited
Recourse Amount with respect to the Properties if it has been determined that
the Fair Market Sales Value of the Properties at the expiration of the term of
the Lease has been impaired by greater than expected wear and tear during the
Term of the Lease.
"Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar
Loan or Eurodollar Holder Advance, the last day of the Interest Period
applicable to such Eurodollar Loan or Eurodollar Holder Advance, (b) as to any
ABR Loan or any ABR Holder Advance, the fifteenth day of each month and (c) as
to all Loans and Holder Advances, the date of any voluntary or involuntary
payment, prepayment, return or redemption, and the Maturity Date or the
Expiration Date, as the case may be.
"SEC" shall have the meaning specified for such term in Section
8.3A(a)(i) of the Lease.
"Secured Parties" shall have the meaning given to such term in the
Security Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security" shall mean all of the security for the Lessee's and/or the
Owner Trustee's obligations under the Operative Agreements, in the Operative
Agreements, together with all proceeds thereof and additions thereto.
"Security Agreement" shall mean the Security Agreement dated on or
about the Initial Closing Date between the Lessor and the Agent, for the
benefit of the Secured Parties.
Appendix A-31
<PAGE> 156
"Security Documents" shall mean the collective reference to the
Security Agreement, the Cash Collateral Agreement, the Pledge Agreement, the
MIDFA Guaranty (if any), the Guaranty, the Mortgage Instruments, (to the extent
the Lease is construed as a security instrument) the Lease and all other
security documents hereafter delivered to the Agent granting a lien on any
asset or assets of any Person to secure the obligations and liabilities of the
Lessor under the Credit Agreement and/or under any of the other Credit
Documents or to secure any guarantee of any such obligations and liabilities.
"Soft Costs" shall mean all costs which are ordinarily and reasonably
incurred in relation to the acquisition, development, installation, design,
construction, improvement and testing of the Properties other than Hard Costs,
including without limitation structuring fees, administrative fees, legal fees,
upfront fees, fees and expenses related to appraisals, title examinations,
title insurance, document recordation, surveys, environmental site assessments,
geotechnical soil investigations and similar costs and professional fees
customarily associated with a real estate closing, the Lender Unused Fee, the
Holder Unused Fee, fees and expenses of the Owner Trustee payable or
reimbursable under the Operative Agreements and costs and expenses incurred
pursuant to Sections 7.3(a) and 7.3(b) of the Participation Agreement.
"Subsidiary" shall mean, as to any Person, any corporation of which at
least a majority of the outstanding stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person, or by one
(1) or more Subsidiaries, or by such Person and one (1) or more Subsidiaries.
"Supplemental Amounts" shall have the meaning given to such term in
Section 9.18 of the Credit Agreement.
"Supplemental Rent" shall mean all amounts, liabilities and
obligations (other than Basic Rent) which the Lessee assumes or agrees to pay
to the Lessor, the Trust Company, the Holders, the Agent, the Lenders or any
other Person under the Lease or under any of the other Operative Agreements
including without limitation payments of the Termination Value and the Maximum
Residual Guarantee Amount and all indemnification amounts, liabilities and
obligations.
"Tangible Net Worth" shall mean the total assets of the Lessee and its
Subsidiaries (direct and indirect) on a consolidated basis exclusive of
goodwill, trademarks, licenses and such other assets as are classified as
intangible assets (including without limitation any and all loans (whether or
not permitted) referenced in Section 8.3B(c)(iv) and any and all loans,
advances or investments (whether or not permitted) referenced in Section
8.3B(d) in accordance with GAAP less total liabilities of the Lessee and its
Subsidiaries (direct and indirect) on a consolidated basis.
"Taxes" shall have the meaning specified in the definition of
"Impositions".
"Term" shall have the meaning specified in Section 2.2 of the Lease.
Appendix A-32
<PAGE> 157
"Termination Date" shall have the meaning specified in Section 16.2(a)
of the Lease.
"Termination Event" shall mean (a) with respect to any Pension Plan,
the occurrence of a Reportable Event or an event described in Section 4062(e)
of ERISA, (b) the withdrawal of the Lessee or any ERISA Affiliate from a
Multiple Employer Plan during a plan year in which it was a substantial
employer (as such term is defined in Section 4001(a)(2) of ERISA), or the
termination of a Multiple Employer Plan, (c) the distribution of a notice of
intent to terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2)
or 4041A of ERISA, (d) the institution of proceedings to terminate a Plan or
Multiemployer Plan by the PBGC under Section 4042 of ERISA, (e) any other event
or condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan, or (f) the complete or partial withdrawal of the Lessee or
any ERISA Affiliate from a Multiemployer Plan.
"Termination Notice" shall have the meaning specified in Section 16.1
of the Lease.
"Termination Value" shall mean the sum of (a) either (i) with respect
to all Properties, an amount equal to the aggregate outstanding Property Cost
for all the Properties, in each case as of the last occurring Payment Date, or
(ii) with respect to a particular Property, an amount equal to the product of
the Termination Value of all the Properties times a fraction, the numerator of
which is the Property Cost allocable to the particular Property in question and
the denominator of which is the aggregate Property Cost for all the Properties,
in each case as of the last occurring Payment Date, plus (b) respecting the
amounts described in each of the foregoing subclause (i) or (ii), as
applicable, any and all accrued but unpaid interest on the Loans and any and
all Holder Yield on the Holder Advances related to the applicable Property
Cost, plus (c) to the extent the same is not duplicative of the amounts payable
under clause (b) above, all other Rent and other amounts then due and payable
or accrued under the Agency Agreement, Lease and/or under any other Operative
Agreement (including without limitation amounts under Sections 11.1 and 11.2 of
the Participation Agreement and all costs and expenses referred to in clause
FIRST of Section 22.2 of the Lease).
"Tranche A Commitments" shall mean the obligation of the Tranche A
Lenders to make the Tranche A Loans to the Lessor in an aggregate principal
amount at any one (1) time outstanding not to exceed the aggregate of the
amounts set forth opposite each Tranche A Lender's name on Schedule 1.1 to the
Credit Agreement, as such amount may be reduced from time to time in accordance
with the provisions of the Operative Agreements; provided, no Tranche A Lender
shall be obligated to make Tranche A Loans in excess of such Tranche A Lender's
share of the Tranche A Commitments as set forth adjacent to such Tranche A
Lender's name on Schedule 1.1 to Credit Agreement.
"Tranche A Lenders" shall mean First Union National Bank and shall
include the several banks and other financial institutions from time to time
party to the Credit Agreement that commit to make the Tranche A Loans.
Appendix A-33
<PAGE> 158
"Tranche A Loans" shall mean the Loans made pursuant to the Tranche A
Commitment.
"Tranche A Note" shall have the meaning given to it in Section 2.2 of
the Credit Agreement.
"Tranche B Commitments" shall mean the obligation of the Tranche B
Lenders to make the Tranche B Loans to the Lessor in an aggregate principal
amount at any one (1) time outstanding not to exceed the aggregate of the
amounts set forth opposite each Tranche B Lender's name on Schedule 1.1 to the
Credit Agreement, as such amount may be reduced from time to time in accordance
with the provisions of the Operative Agreements; provided, no Tranche B Lender
shall be obligated to make Tranche B Loans in excess of such Tranche B Lender's
share of the Tranche B Commitments as set forth adjacent to such Tranche B
Lender's name on Schedule 1.1 to Credit Agreement.
"Tranche B Lenders" shall mean First Union National Bank and shall
include the several banks and other financial institutions from time to time
party to the Credit Agreement that commit to make the Tranche B Loans.
"Tranche B Loan" shall mean the Loans made pursuant to the Tranche B
Commitment.
"Tranche B Note" shall have the meaning given to it in Section 2.2 of
the Credit Agreement.
"Transaction Expenses" shall mean all Soft Costs and all other costs
and expenses incurred in connection with the preparation, execution and
delivery of the Operative Agreements and the transactions contemplated by the
Operative Agreements including without limitation all costs and expenses
described in Section 7.1 of the Participation Agreement and the following:
(a) the reasonable fees, out-of-pocket expenses and
disbursements of counsel in negotiating the terms of the Operative
Agreements and the other transaction documents, preparing for the
closings under, and rendering opinions in connection with, such
transactions and in rendering other services customary for counsel
representing parties to transactions of the types involved in the
transactions contemplated by the Operative Agreements;
(b) the reasonable fees, out-of-pocket expenses and
disbursements of accountants for the Lessee or the Construction Agent
in connection with the transaction contemplated by the Operative
Agreements;
(c) any and all other reasonable fees, charges or other
amounts payable to the Lenders, the Agent, the Holders, the Owner
Trustee or any broker which arises under any of the Operative
Agreements;
(d) any other reasonable fee, out-of-pocket expenses,
disbursement or cost of any party to the Operative Agreements or any
of the other transaction documents;
Appendix A-34
<PAGE> 159
(e) any and all Taxes and fees incurred in recording or
filing any Operative Agreement or any other transaction document, any
deed, declaration, mortgage, security agreement, notice or financing
statement with any public office, registry or governmental agency in
connection with the transactions contemplated by the Operative
Agreement; and
(f) the reasonable fees, out-of-pocket expenses and
disbursements of the Construction Inspector in connection with the
transactions contemplated by the Operative Agreements.
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision agency, department,
commission, board, bureau or instrumentality of a governmental body.
"Trust" shall mean the Guilford Real Estate Trust 1998-1.
"Trust Agreement" shall mean the Amended and Restated Trust Agreement
dated on or about the Initial Closing Date between the Holders and the Owner
Trustee.
"Trust Company" shall mean First Security Bank, National Association,
in its individual capacity, and any successor owner trustee under the Trust
Agreement in its individual capacity.
"Trust Estate" shall have the meaning specified in Section 2.2 of the
Trust Agreement.
"Trust Property" shall have the meaning specified in Section 2 of the
Security Agreement.
"Type" shall mean, as to any Loan, whether it is an ABR Loan or a
Eurodollar Loan.
"UCC Financing Statements" shall mean collectively the Lender
Financing Statements and the Lessor Financing Statements.
"Unanimous Vote Matters" shall have the meaning given it in Section
12.4 of the Participation Agreement.
"Unfunded Amount" shall have the meaning specified in Section 3.2 of
the Agency Agreement.
"Unfunded Liability" shall mean, with respect to any Plan, at any
time, the amount (if any) by which (a) the present value of all benefits under
such Plan exceeds (b) the fair market value of all Plan assets allocable to
such benefits, all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of the Company or any member of the Controlled Group to the PBGC or
such Plan under Title IV of ERISA.
Appendix A-35
<PAGE> 160
"Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial
Code as in effect in any applicable jurisdiction.
"United States Bankruptcy Code" shall mean Title 11 of the United
States Code.
"U.S. Person" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"U.S. Taxes" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"Withholdings" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"Work" shall mean the furnishing of labor, materials, components,
furniture, furnishings, fixtures, appliances, machinery, equipment, tools,
power, water, fuel, lubricants, supplies, goods and/or services with respect to
any Property.
Appendix A-36
<PAGE> 1
EXHIBIT 10.49
LEASE AGREEMENT
Dated as of February 5, 1998
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually,
but solely as the Owner Trustee
under the Guilford Real Estate Trust 1998-1,
as Lessor
and
GUILFORD PHARMACEUTICALS INC.,
as Lessee
- ------------------------------------------------------------------------------
This Lease Agreement is subject to a security interest in favor of First Union
National Bank, as the agent for the Lenders and respecting the Security
Documents, as the agent for the Lenders and the Holders, to the extent of their
interests (the "Agent") under a Security Agreement dated as of February 5,
1998, between First Security Bank, National Association, not individually, but
solely as the Owner Trustee under the Guilford Real Estate Trust 1998-1 and the
Agent, as amended, modified, extended, supplemented, restated and/or replaced
from time to time in accordance with the applicable provisions thereof. This
Lease Agreement has been executed in several counterparts. To the extent, if
any, that this Lease Agreement constitutes chattel paper (as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease Agreement may be created
through the transfer or possession of any counterpart other than the original
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Lease Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Lease Supplements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Payment of Basic Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Supplemental Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Performance on a Non-Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Rent Payment Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Taxes; Utility Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Net Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2 No Termination or Abatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.1 Ownership of the Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1 Condition of the Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Possession and Use of the Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.3 Integrated Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Compliance With Legal Requirements,
Insurance Requirements and Manufacturer's Specifications and Standards . . . . . . . . . . . . . . 10
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.1 Maintenance and Repair; Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.2 Environmental Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.1 Modifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.1 Warranty of Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.1 Permitted Contests Other Than in Respect of Indemnities. . . . . . . . . . . . . . . . . . . 14
13.2 Impositions, Utility Charges, Other Matters; Compliance with Legal . . . . . . . . . . . . . 14
Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE XIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.1 Public Liability and Workers' Compensation Insurance. . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
14.2 Permanent Hazard and Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.3 Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE XV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.1 Casualty and Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.2 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
15.3 Notice of Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
16.1 Termination Upon Certain Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
16.2 Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
17.1 Lease Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
17.2 Surrender of Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
17.3 Reletting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
17.4 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
17.5 Power of Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17.6 Final Liquidated Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17.7 Environmental Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17.8 Waiver of Certain Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17.9 Assignment of Rights Under Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17.10 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18.1 Lessor's Right to Cure Lessee's Lease Defaults. . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option. . . . . . . . . . . . . . . 27
19.2 No Purchase or Termination With Respect to Less than All of a Property. . . . . . . . . . . . 27
ARTICLE XX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
20.1 Purchase Option or Sale Option-General Provisions. . . . . . . . . . . . . . . . . . . . . . 28
20.2 Lessee Purchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
20.3 Third Party Sale Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XXI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
21.1 [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XXII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
22.1 Sale Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
22.2 Application of Proceeds of Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
22.3 Indemnity for Excessive Wear. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
22.4 Appraisal Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
22.5 Certain Obligations Continue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XXIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
23.1 Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XXIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24.1 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XXV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
25.1 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
25.2 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XXVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
26.1 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XXVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
27.1 Acceptance of Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
27.2 No Merger of Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XXVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
28.1 (intentionally omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XXIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
29.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
30.1 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
30.2 Amendments and Modifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
30.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
30.4 Headings and Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
30.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
30.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
30.7 Calculation of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
30.8 Memoranda of Lease and Lease Supplements. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
30.9 Allocations between the Lenders and the Holders. . . . . . . . . . . . . . . . . . . . . . . 38
30.10 Limitations on Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
30.11 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
30.12 Exercise of Lessor Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
30.13 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . 39
30.14 USURY SAVINGS PROVISION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
EXHIBITS
EXHIBIT A - Lease Supplement No. ____
EXHIBIT B - Memorandum of Lease and Lease Supplement No. ____
iii
<PAGE> 5
LEASE AGREEMENT
THIS LEASE AGREEMENT dated as of February 5, 1998 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Lease") is between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, having its principal office at 79 South Main Street, Salt
Lake City, Utah 84111, not individually, but solely as the Owner Trustee under
the Guilford Real Estate Trust 1998-1, as lessor (the "Lessor"), and GUILFORD
PHARMACEUTICALS INC., a Delaware corporation, having its principal place of
business at 6611 Tributary Street, Baltimore, Maryland 21224, as lessee (the
"Lessee").
W I T N E S S E T H:
A. WHEREAS, subject to the terms and conditions of the
Participation Agreement and the Agency Agreement, Lessor will (i) purchase or
ground lease various parcels of real property, some of which will (or may) have
existing Improvements thereon, from one (1) or more third parties designated by
Lessee and (ii) fund the acquisition, installation, testing, use, development,
construction, operation, maintenance, repair, refurbishment and restoration of
the Properties by the Construction Agent; and
B. WHEREAS, the Term shall commence with respect to each Property
upon the Property Closing Date with respect thereto; provided, Basic Rent with
respect thereto shall not be payable until the applicable Rent Commencement
Date; and
C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires
to lease from Lessor, each Property;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 DEFINITIONS.
For purposes of this Lease, capitalized terms used in this
Lease and not otherwise defined herein shall have the meanings assigned to them
in Appendix A to that certain Participation Agreement dated as of February 5,
1998 (as amended, modified, extended, supplemented, restated and/or replaced
from time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among Lessee, Lessor, the various banks and other
lending institutions which are parties thereto from time to time, as the
Holders, the various banks and other lending institutions which are parties
thereto from time to time, as the Lenders, and First Union National Bank, as
agent for the Lenders and respecting the Security Documents,
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<PAGE> 6
as the agent for the Lenders and the Holders, to the extent of their interests.
Unless otherwise indicated, references in this Lease to articles, sections,
paragraphs, clauses, appendices, schedules and exhibits are to the same
contained in this Lease.
1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the
Participation Agreement shall apply to this Lease.
ARTICLE II
2.1 PROPERTY.
Subject to the terms and conditions hereinafter set forth and
contained in the respective Lease Supplement relating to each Property, Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor, each Property.
2.2 LEASE TERM.
The term of this Lease with respect to each Property (the
"Term") shall begin upon the Property Closing Date for such Property (in each
case the "Commencement Date") and shall end on the seventh annual anniversary
of the Initial Closing Date, unless the Term is earlier terminated.
Notwithstanding the foregoing, Lessee shall not be obligated to pay Basic Rent
until the Rent Commencement Date with respect to such Property.
2.3 TITLE.
Each Property is leased to Lessee without any representation
or warranty, express or implied, by Lessor and subject to the rights of parties
in possession (if any), the existing state of title (including without
limitation the Permitted Liens) and all applicable Legal Requirements. Lessee
shall in no event have any recourse against Lessor for any defect in Lessor's
title to any Property or any interest of Lessee therein other than for Lessor
Liens.
2.4 LEASE SUPPLEMENTS.
On or prior to each Commencement Date, Lessee and Lessor shall each
execute and deliver a Lease Supplement for the Property to be leased effective
as of such Commencement Date in substantially the form of EXHIBIT A hereto.
2
<PAGE> 7
ARTICLE III
3.1 RENT.
(a) Lessee shall pay Basic Rent in arrears on each
Payment Date, and on any date on which this Lease shall terminate with
respect to any or all Properties during the Term; provided, however,
with respect to each individual Property Lessee shall have no
obligation to pay Basic Rent with respect to such Property until the
Rent Commencement Date with respect to such Property (notwithstanding
that Basic Rent for such Property shall accrue from and including the
Scheduled Interest Payment Date immediately preceding such Rent
Commencement Date).
(b) Basic Rent shall be due and payable in lawful money
of the United States and shall be paid by wire transfer of immediately
available funds on the due date therefor (or within the applicable
grace period) to such account or accounts at such bank or banks as
Lessor shall from time to time direct.
(c) Lessee's inability or failure to take possession of
all or any portion of any Property when delivered by Lessor, whether
or not attributable to any act or omission of Lessor, the Construction
Agent, Lessee or any other Person or for any other reason whatsoever,
shall not delay or otherwise affect Lessee's obligation to pay Rent
for such Property in accordance with the terms of this Lease.
(d) Lessee shall make all payments of Rent prior to 12:00
Noon, Charlotte, North Carolina time, on the applicable date for
payment of such amount.
3.2 PAYMENT OF BASIC RENT.
Basic Rent shall be paid absolutely net to Lessor or its
designee, so that this Lease shall yield to Lessor the full amount thereof,
without setoff, deduction or reduction.
3.3 SUPPLEMENTAL RENT.
Lessee shall pay to the Person entitled thereto any and all
Supplemental Rent when and as the same shall become due and payable, and if
Lessee fails to pay any Supplemental Rent within three (3) days after the same
is due, Lessor shall have all rights, powers and remedies provided for herein
or by law or equity or otherwise in the case of nonpayment of Basic Rent. The
Lessee shall have the option without penalty to pay additional Supplemental
Rent to prepay the Notes in whole or in part (consistent with Section 9.1(c) of
the Participation Agreement and Section 2.6 of the Credit Agreement) and to
prepay the Holder Advances in whole or in part (consistent with Section 9.2(a)
of the Participation Agreement and Section 3.4 of the Trust Agreement). All
such payments of Supplemental Rent shall be in the full amount thereof, without
setoff, deduction or reduction. Lessee shall pay to the appropriate Person, as
Supplemental Rent due and owing to such Person, among other things, on demand,
to the extent permitted by applicable Legal Requirements, (a) any and all
payment obligations (except for
3
<PAGE> 8
amounts payable as Basic Rent) owing from time to time under the Operative
Agreements by any Person to the Agent, any Lender, any Holder or any other
Person and (b) interest at the applicable Overdue Rate on any installment of
Basic Rent not paid when due (subject to the applicable grace period) for the
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due or demanded by the appropriate Person (subject to any
applicable grace period) for the period from the due date or the date of any
such demand, as the case may be, until the same shall be paid. It shall be an
additional Supplemental Rent obligation of Lessee to pay to the appropriate
Person all rent and other amounts when such become due and owing from time to
time under each Ground Lease and without the necessity of any notice from
Lessor with regard thereto. The expiration or other termination of Lessee's
obligations to pay Basic Rent hereunder shall not limit or modify the
obligations of Lessee with respect to Supplemental Rent. Unless expressly
provided otherwise in this Lease, in the event of any failure on the part of
Lessee to pay and discharge any Supplemental Rent as and when due, Lessee shall
also promptly pay and discharge any fine, penalty, interest or cost which may
be assessed or added for nonpayment or late payment of such Supplemental Rent,
all of which shall also constitute Supplemental Rent.
3.4 PERFORMANCE ON A NON-BUSINESS DAY.
If any Basic Rent is required hereunder on a day that is not a
Business Day, then such Basic Rent shall be due on the corresponding Scheduled
Interest Payment Date. If any Supplemental Rent is required hereunder on a day
that is not a Business Day, then such Supplemental Rent shall be due on the
next succeeding Business Day.
3.5 RENT PAYMENT PROVISIONS.
Lessee shall make payment of all Basic Rent and Supplemental
Rent when due (subject to the applicable grace periods) regardless of whether
any of the provisions of the Operative Agreements pursuant to which same is
calculated and is owing shall have been rejected, avoided or disavowed in any
bankruptcy or insolvency proceeding involving any of the parties to any of the
Operative Agreements. Such provisions of such Operative Agreements and their
related definitions are incorporated herein by reference and shall survive any
termination, amendment or rejection of any such Operative Agreements.
ARTICLE IV
4.1 TAXES; UTILITY CHARGES.
Lessee shall pay or cause to be paid all Impositions with
respect to the Properties and/or the use, occupancy, operation, repair, access,
maintenance or operation thereof and all charges for electricity, power, gas,
oil, water, telephone, sanitary sewer service and all other rents, utilities
and operating expenses of any kind or type used in or on any Property and
related real property during the Term. Upon Lessor's request, Lessee shall
provide from time to time Lessor with evidence of all such payments referenced
in the foregoing sentence. Lessee shall be
4
<PAGE> 9
entitled to receive any credit or refund with respect to any Imposition or
utility charge paid by Lessee. Unless an Event of Default shall have occurred
and be continuing, the amount of any credit or refund received by Lessor on
account of any Imposition or utility charge paid by Lessee, net of the costs
and expenses incurred by Lessor in obtaining such credit or refund, shall be
promptly paid over to Lessee. All charges for Impositions or utilities imposed
with respect to any Property for a period during which this Lease expires or
terminates shall be adjusted and prorated on a daily basis between Lessor and
Lessee, and each party shall pay or reimburse the other for such party's pro
rata share thereof.. Notwithstanding the foregoing provisions of this Section
4.1, Lessee shall not be responsible for Impositions to the extent such
Impositions are expressly excluded from the general tax indemnity pursuant to
the provisions of Section 11.2(b) of the Participation Agreement.
ARTICLE V
5.1 QUIET ENJOYMENT.
Subject to the rights of Lessor contained in Sections 17.2,
17.3 and 20.3 and the other terms of this Lease and the other Operative
Agreements and so long as no Event of Default shall have occurred and be
continuing, Lessee shall peaceably and quietly have, hold and enjoy each
Property for the applicable Term, free of any claim or other action by Lessor
or anyone rightfully claiming by, through or under Lessor (other than Lessee)
with respect to any matters arising from and after the applicable Commencement
Date.
ARTICLE VI
6.1 NET LEASE.
This Lease shall constitute a net lease, and the obligations
of Lessee hereunder are absolute and unconditional. Lessee shall pay all
operating expenses arising out of the use, operation and/or occupancy of each
Property. Any present or future law to the contrary notwithstanding, this
Lease shall not terminate, nor shall Lessee be entitled to any abatement,
suspension, deferment, reduction, setoff, counterclaim, or defense with respect
to the Rent, nor shall the obligations of Lessee hereunder be affected (except
as expressly herein permitted and by performance of the obligations in
connection therewith) for any reason whatsoever, including without limitation
by reason of: (a) any damage to or destruction of any Property or any part
thereof; (b) any taking of any Property or any part thereof or interest therein
by Condemnation or otherwise; (c) any prohibition, limitation, restriction or
prevention of Lessee's use, occupancy or enjoyment of any Property or any part
thereof, or any interference with such use, occupancy or enjoyment by any
Person or for any other reason; (d) any title defect, Lien or any matter
affecting title to any Property; (e) any eviction by paramount title or
otherwise; (f) any default by Lessor hereunder; (g) any action for bankruptcy,
insolvency, reorganization, liquidation, dissolution or other proceeding
relating to or affecting the Agent, any Lender, Lessor, Lessee, any Holder or
any Governmental Authority; (h) the impossibility or illegality of performance
by Lessor, Lessee
5
<PAGE> 10
or both; (i) any action of any Governmental Authority or any other Person; (j)
Lessee's acquisition of ownership of all or part of any Property; (k) breach of
any warranty or representation with respect to any Property or any Operative
Agreement; (l) any defect in the condition, quality or fitness for use of any
Property or any part thereof; or (m) any other cause or circumstance whether
similar or dissimilar to the foregoing and whether or not Lessee shall have
notice or knowledge of any of the foregoing. The parties intend that the
obligations of Lessee hereunder shall be covenants, agreements and obligations
that are separate and independent from any obligations of Lessor hereunder and
shall continue unaffected unless such covenants, agreements and obligations
shall have been modified or terminated in accordance with an express provision
of this Lease. Lessor and Lessee acknowledge and agree that the provisions of
this Section 6.1 have been specifically reviewed and subject to negotiation.
Notwithstanding the provisions of this Section 6.1, Lessee expressly reserves
and retains the right to sue Lessor in a court of law for damages relating to
any breach of Lessor's contractual obligations, tortious misconduct or
otherwise.
6.2 NO TERMINATION OR ABATEMENT.
Lessee shall remain obligated under this Lease in accordance
with its terms and shall not take any action to terminate, rescind or avoid
this Lease, notwithstanding any action for bankruptcy, insolvency,
reorganization, liquidation, dissolution, or other proceeding affecting any
Person or any Governmental Authority, or any action with respect to this Lease
or any Operative Agreement which may be taken by any trustee, receiver or
liquidator of any Person or any Governmental Authority or by any court with
respect to any Person, or any Governmental Authority. Lessee hereby waives all
right (a) to terminate or surrender this Lease (except as permitted under the
terms of the Operative Agreements) or (b) to avail itself of any abatement,
suspension, deferment, reduction, setoff, counterclaim or defense with respect
to any Rent. Lessee shall remain obligated under this Lease in accordance with
its terms and Lessee hereby waives any and all rights now or hereafter
conferred by statute or otherwise to modify or to avoid strict compliance with
its obligations under this Lease. Notwithstanding any such statute or
otherwise, Lessee shall be bound by all of the terms and conditions contained
in this Lease.
ARTICLE VII
7.1 OWNERSHIP OF THE PROPERTIES.
(a) Lessor and Lessee intend that (i) for financial
accounting purposes with respect to Lessee (A) this Lease will be
treated as an "operating lease" pursuant to Statement of Financial
Accounting Standards No. 13, as amended, (B) Lessor will be treated as
the owner and lessor of each Property and (C) Lessee will be treated
as the lessee of each Property, but (ii) for federal and all state and
local income tax purposes and bankruptcy purposes (A) this Lease will
be treated as a financing arrangement and (B) Lessee will be treated
as the owner of the Properties and will be entitled to all tax
benefits ordinarily available to owners of property similar to the
Properties for such tax purposes. Notwithstanding the foregoing,
neither party hereto has made, or shall be deemed to have
6
<PAGE> 11
made, any representation or warranty as to the availability of any of
the foregoing treatments under applicable accounting rules, tax,
bankruptcy, regulatory, commercial or real estate law or under any
other set of rules. Lessee shall claim the cost recovery tax
deductions associated with each Property, and Lessor shall not, to the
extent not prohibited by Law, take on its tax return a position
inconsistent with Lessee's claim of such deductions.
(b) For all purposes other than as set forth in Section
7.1(a)(i), Lessor and Lessee intend this Lease to constitute a finance
lease and not a true lease. In order to secure the obligations of
Lessee now existing or hereafter arising under any and all Operative
Agreements, Lessee hereby conveys, grants, assigns, transfers,
hypothecates, mortgages and sets over to Lessor, for the benefit of
all Financing Parties, a first priority security interest (but
subject to the security interest in the assets granted by Lessee in
favor of the Agent in accordance with the Security Agreement) in and
lien on all right, title and interest of Lessee (now owned or
hereafter acquired) in and to all Properties, to the extent such is
personal property and irrevocably grants and conveys a lien, deed of
trust and mortgage on all right, title and interest of Lessee (now
owned or hereafter acquired) in and to all Properties to the extent
such is real property. Lessor and Lessee further intend and agree
that, for the purpose of securing the obligations of Lessee and/or the
Construction Agent now existing or hereafter arising under the
Operative Agreements, (i) this Lease shall be a security agreement
within the meaning of Article 9 of the Uniform Commercial Code
respecting each of the Properties and all proceeds (including without
limitation insurance proceeds thereof) to the extent such is personal
property and an irrevocable grant and conveyance of a lien, deed of
trust and mortgage on each of the Properties and all proceeds
(including without limitation insurance proceeds thereof) to the
extent such is real property; (ii) the acquisition of title (or to the
extent applicable, a leasehold interest pursuant to a Ground Lease) in
each Property referenced in Article II constitutes a grant by Lessee
to Lessor of a security interest, lien, deed of trust and mortgage in
all of Lessee's right, title and interest in and to each Property and
all proceeds (including without limitation insurance proceeds thereof)
of the conversion, voluntary or involuntary, of the foregoing into
cash, investments, securities or other property, whether in the form
of cash, investments, securities or other property, and an assignment
of all rents, profits and income produced by each Property; and (iii)
notifications to Persons holding such property, and acknowledgments,
receipts or confirmations from financial intermediaries, bankers or
agents (as applicable) of Lessee shall be deemed to have been given
for the purpose of perfecting such lien, security interest, mortgage
lien and deed of trust under applicable law. Lessee shall promptly
take such actions as Lessor may reasonably request (including without
limitation the filing of Uniform Commercial Code Financing Statements,
Uniform Commercial Code Fixture Filings and memoranda (or short forms)
of this Lease and the various Lease Supplements) to ensure that the
lien, security interest, lien, mortgage lien and deed of trust in each
Property and the other items referenced above will be deemed to be a
perfected lien, security interest, mortgage lien and deed of trust of
first priority under applicable law and will be maintained as such
throughout the Term.
7
<PAGE> 12
ARTICLE VIII
8.1 CONDITION OF THE PROPERTIES.
LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH
PROPERTY "AS-IS WHERE-IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS
OR IMPLIED) BY LESSOR (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND
CLEAR OF LESSOR LIENS) AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF
TITLE, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF (IF ANY), (C) ANY
STATE OF FACTS REGARDING ITS PHYSICAL CONDITION OR WHICH AN ACCURATE SURVEY
MIGHT SHOW, (D) ALL APPLICABLE LEGAL REQUIREMENTS AND (E) VIOLATIONS OF LEGAL
REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF AND/OR THE DATE OF THE
APPLICABLE LEASE SUPPLEMENT. NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR
ANY HOLDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION,
WARRANTY OR COVENANT (EXPRESS OR IMPLIED) (EXCEPT THAT LESSOR SHALL KEEP EACH
PROPERTY FREE AND CLEAR OF LESSOR LIENS) OR SHALL BE DEEMED TO HAVE ANY
LIABILITY WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE, CONDITION,
DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY (OR ANY
PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND
NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER SHALL BE LIABLE FOR
ANY LATENT, HIDDEN, OR PATENT DEFECT THEREON OR THE FAILURE OF ANY PROPERTY, OR
ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT. LESSEE HAS OR PRIOR TO
THE COMMENCEMENT DATE WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH
PROPERTY AND THE IMPROVEMENTS THEREON (IF ANY), IS OR WILL BE (INSOFAR AS
LESSOR, THE AGENT, EACH LENDER AND EACH HOLDER ARE CONCERNED) SATISFIED WITH
THE RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS LEASE SOLELY ON THE
BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL RISKS INCIDENT TO THE
MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS BETWEEN LESSOR, THE AGENT, THE
LENDERS AND THE HOLDERS, ON THE ONE (1) HAND, AND LESSEE, ON THE OTHER HAND,
ARE TO BE BORNE BY LESSEE.
8.2 POSSESSION AND USE OF THE PROPERTIES.
(a) At all times during the Term with respect to each
Property, such Property shall be a Permitted Facility and shall be
used by Lessee in the ordinary course of its business. Lessee shall
pay, or cause to be paid, all charges and costs required in connection
with the use of the Properties as contemplated by this Lease. Lessee
shall not commit or permit any waste of the Properties or any part
thereof, normal wear and tear excepted.
8
<PAGE> 13
(b) The address stated in Section 12.2 of the
Participation Agreement is the principal place of business and chief
executive office of Lessee (as such terms are used in Section 9-103(3)
of the Uniform Commercial Code of any applicable jurisdiction), and
Lessee will provide Lessor with prior written notice of any change of
location of its principal place of business or chief executive office.
Regarding a particular Property, each Lease Supplement correctly
identifies the initial location of the related Equipment (if any) and
Improvements (if any) and contains an accurate legal description for
the related parcel of Land or a copy of the Ground Lease (if any).
The Equipment and Improvements respecting each particular Property
will be located only at the location identified in the applicable
Lease Supplement.
(c) Lessee will not attach or incorporate any item of
Equipment to or in any other item of equipment or personal property or
to or in any real property in a manner that could give rise to the
assertion of any Lien on such item of Equipment by reason of such
attachment or the assertion of a claim that such item of Equipment has
become a fixture and is subject to a Lien in favor of a third party
that is prior to the Liens thereon created by the Operative
Agreements.
(d) On the Commencement Date for each Property, Lessor
and Lessee shall execute a Lease Supplement in regard to such Property
which shall contain an Equipment Schedule that has a complete
description of each item of Equipment which is then a part of the
Property, an Improvement Schedule that has a complete description of
each Improvement which is then a part of the Property and a legal
description of the Land to be leased hereunder (or in the case of any
Property subject to a Ground Lease to be subleased hereunder) as of
such date. Each Property subject to a Ground Lease shall be deemed to
be ground subleased from Lessor to Lessee as of the Commencement Date,
and such ground sublease shall be in effect until this Lease is
terminated or expires, in each case in accordance with the terms and
provisions hereof. Lessee shall satisfy and perform all obligations
imposed on Lessor under each Ground Lease. Simultaneously with the
execution and delivery of each Lease Supplement, such Equipment,
Improvements, Land, ground subleasehold interest, all additional
Equipment and Improvements which are financed under the Operative
Agreements after the Commencement Date and the remainder of such
Property shall be deemed to have been accepted by Lessee for all
purposes of this Lease and to be subject to this Lease.
(e) At all times during the Term with respect to each
Property, Lessee will comply with all obligations under and (to the
extent no Event of Default exists and no Material Adverse Effect shall
result) shall be permitted to exercise all rights and remedies under,
all operation and easement agreements and related or similar
agreements applicable to such Property.
9
<PAGE> 14
8.3 INTEGRATED PROPERTIES.
On the Rent Commencement Date for each Property, such Property
and the applicable property subject to a Ground Lease shall constitute (and for
the duration of the Term shall continue to constitute) all of the equipment,
facilities, rights, other personal property and other real property necessary
or appropriate to operate, utilize, maintain and control a Permitted Facility
in a commercially reasonable manner.
ARTICLE IX
9.1 COMPLIANCE WITH LEGAL REQUIREMENTS, INSURANCE REQUIREMENTS AND
MANUFACTURER'S SPECIFICATIONS AND STANDARDS.
Subject to the terms of Article XIII relating to permitted
contests, Lessee, at its sole cost and expense, shall (a) comply with all
applicable Legal Requirements (including without limitation all Environmental
Laws) and all Insurance Requirements relating to the Properties, (b) procure,
maintain and comply with all licenses, permits, orders, approvals, consents and
other authorizations required for the acquisition, installation, testing, use,
development, construction, operation, maintenance, repair, refurbishment and
restoration of the Properties, and (c) comply with all manufacturer's
specifications and standards, including without limitation the acquisition,
installation, testing, use, development, construction, operation, maintenance,
repair, refurbishment and restoration of the Properties, whether or not
compliance therewith shall require structural or extraordinary changes in any
Property or interfere with the use and enjoyment of any Property unless the
failure to procure, maintain and comply with such items identified in
subparagraphs (b) and (c), individually or in the aggregate, shall not and
could not reasonably be expected to have a Material Adverse Effect. Lessor
agrees to take such actions as may be reasonably requested by Lessee in
connection with the compliance by Lessee of its obligations under this Section
9.1.
ARTICLE X
10.1 MAINTENANCE AND REPAIR; RETURN.
(a) Lessee, at its sole cost and expense, shall maintain
each Property in good condition, repair and working order (ordinary
wear and tear excepted) and in the repair and condition as when
originally delivered to Lessor and make all necessary repairs thereto
and replacements thereof, of every kind and nature whatsoever, whether
interior or exterior, ordinary or extraordinary, structural or
nonstructural or foreseen or unforeseen, in each case as required by
Section 9.1 and on a basis consistent with the operation and
maintenance of properties or equipment comparable in type and function
to the applicable Property, such that such Property is capable of
being immediately utilized by a third party and in compliance with
standard industry practice subject, however, to the provisions of
Article XV with respect to Casualty and Condemnation.
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(b) Lessee shall not use or locate any component of any
Property outside of any Approved State. Lessee shall not move or
relocate any component of any Property beyond the boundaries of the
Land (comprising part of such Property) described in the applicable
Lease Supplement, except for the temporary removal of Equipment and
other personal property for repair or replacement.
(c) If any component of any Property becomes worn out,
lost, destroyed, damaged beyond repair or otherwise permanently
rendered unfit for use, Lessee, at its own expense, will within a
reasonable time replace such component with a replacement component
which is free and clear of all Liens (other than Permitted Liens and
Lessor Liens) and has a value, utility and useful life at least equal
to the component replaced (assuming the component replaced had been
maintained and repaired in accordance with the requirements of this
Lease). All such replacement components which are added to any
Property shall immediately become the property of (and title thereto
shall vest in) Lessor and shall be deemed incorporated in such
Property and subject to the terms of this Lease as if originally
leased hereunder.
(d) Upon reasonable advance written notice, Lessor and
its agents shall have the right to inspect each Property and all
maintenance records with respect thereto at any reasonable time during
normal business hours but shall not, in the absence of an Event of
Default, materially disrupt the business of Lessee.
(e) Lessee shall cause to be delivered to Lessor (at
Lessee's sole expense) one (1) or more additional Appraisals (or
reappraisals of Property) as Lessor may request if any one (1) of
Lessor, the Agent, the Trust Company, any Lender or any Holder is
required pursuant to any applicable Legal Requirement to obtain such
Appraisals (or reappraisals) and upon the occurrence of any Event of
Default.
(f) Lessor shall under no circumstances be required (or
permitted, unless (x) an emergency exists and then only after Lessee
has failed to cure such emergency after receiving reasonable prior
notice from Lessor or (y) an Event of Default shall have occurred and
be continuing) to build any improvements or install any equipment on
any Property, make any repairs, replacements, alterations or renewals
of any nature or description to any Property, make any expenditure
whatsoever in connection with this Lease or maintain any Property in
any way. Lessor shall not be required to maintain, repair or rebuild
all or any part of any Property, and Lessee waives the right to (i)
require Lessor to maintain, repair, or rebuild all or any part of any
Property, or (ii) make repairs at the expense of Lessor pursuant to
any Legal Requirement, Insurance Requirement, contract, agreement,
covenant, condition or restriction at any time in effect.
(g) Lessee shall, upon the expiration or earlier
termination of this Lease with respect to a Property, if Lessee shall
not have exercised its Purchase Option with respect to such Property
and purchased such Property, surrender such Property (i) to Lessor
pursuant to the exercise of the applicable remedies upon the
occurrence of a Lease Event
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of Default or (ii) pursuant to the second paragraph of Section 22.1(a)
hereof, to Lessor or the third party purchaser, as the case may be,
subject to Lessee's obligations under this Lease (including without
limitation the obligations of Lessee at the time of such surrender
under Sections 9.1, 10.1(a) through (f), 10.2, 11.1, 12.1, 22.1 and
23.1).
10.2 ENVIRONMENTAL INSPECTION.
If Lessee has not given notice of exercise of its Purchase
Option on the Expiration Date pursuant to Section 20.1 or for whatever reason
Lessee does not purchase a Property in accordance with the terms of this
Lease, then not more than one hundred twenty (120) days nor less than sixty
(60) days prior to the Expiration Date, Lessee at its expense shall cause to be
delivered to Lessor a Phase I environmental site assessment recently prepared
(no more than thirty (30) days prior to the date of delivery) by an independent
recognized professional reasonably acceptable to Lessor, and in form, scope and
content reasonably satisfactory to Lessor.
ARTICLE XI
11.1 MODIFICATIONS.
(a) Lessee at its sole cost and expense, at any time and
from time to time without the consent of Lessor may make
modifications, alterations, renovations, improvements and additions to
any Property or any part thereof and substitutions and replacements
therefor (collectively, "Modifications"), and Lessee shall make any
and all Modifications required to be made pursuant to all Legal
Requirements, Insurance Requirements and manufacturer's specifications
and standards; provided, that: (i) no Modification shall materially
impair the value, utility or useful life of any Property from that
which existed immediately prior to such Modification; (ii) each
Modification shall be done expeditiously and in a good and workmanlike
manner; (iii) no Modification shall adversely affect the structural
integrity of any Property; (iv) to the extent required by Section
14.2(a), Lessee shall maintain builders' risk insurance at all times
when a Modification is in progress; (v) subject to the terms of
Article XIII relating to permitted contests, Lessee shall pay all
costs and expenses and discharge any Liens other than Permitted Liens
arising with respect to any Modification; (vi) each Modification shall
comply with the requirements of this Lease (including without
limitation Sections 8.2 and 10.1); and (vii) no Improvement shall be
demolished or otherwise rendered unfit for use unless Lessee shall
finance the proposed replacement Modification outside of this lease
facility; provided, further, Lessee shall not make any Modification
(unless required by any Legal Requirement) to the extent any such
Modification, individually or in the aggregate, shall or could
reasonably be expected to have a Material Adverse Effect. All
Modifications (which in all cases shall exclude the Lessee Equipment)
shall immediately and without further action upon their incorporation
into the applicable Property (1) become property of Lessor, (2) be
subject to this Lease and (3) be titled in the name of Lessor. Lessee
shall not remove or attempt to remove any Modification from any
Property; provided, the foregoing restriction shall not restrict the
rights of the Lessee
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regarding Lessee Equipment. Each Ground Lease for a Property shall
expressly provide for the provisions of the foregoing sentence.
Lessee, at its own cost and expense, will pay for the repairs of any
damage to any Property caused by the removal or attempted removal of
any Modification.
(b) The construction process provided for in the Agency
Agreement is acknowledged by Lessor to be consistent with and in
compliance with the terms and provisions of this Article XI.
ARTICLE XII
12.1 WARRANTY OF TITLE.
(a) Lessee hereby acknowledges and shall cause title in
each Property (including without limitation all Equipment, all
Improvements, all replacement components to each Property and all
Modifications (excluding Lessee Equipment)) immediately and without
further action to vest in and become the property of Lessor and to be
subject to the terms of this Lease (provided, respecting each Property
subject to a Ground Lease, Lessor's interest therein is acknowledged
to be a leasehold interest pursuant to such Ground Lease) from and
after the date hereof or such date of incorporation into any Property.
Lessee agrees that, subject to the terms of Article XIII relating to
permitted contests, Lessee shall not directly or indirectly create or
allow to remain, and shall promptly discharge at its sole cost and
expense, any Lien, defect, attachment, levy, title retention agreement
or claim upon any Property, any component thereof or any Modifications
(excluding Lessee Equipment) or any Lien, attachment, levy or claim
with respect to the Rent or with respect to any amounts held by
Lessor, the Agent or any Holder pursuant to any Operative Agreement,
other than Permitted Liens and Lessor Liens. Lessee shall promptly
notify Lessor in the event it receives actual knowledge that a Lien
other than a Permitted Lien or Lessor Lien has occurred with respect
to a Property, the Rent or any other such amounts, and Lessee
represents and warrants to, and covenants with, Lessor that the Liens
in favor of Lessor created by the Operative Agreements are (and until
the Financing Parties under the Operative Agreements have been paid in
full shall remain) first priority perfected Liens subject only to
Permitted Liens and Lessor Liens. At all times subsequent to the
Commencement Date respecting a Property, Lessee shall (i) cause a
valid, perfected, first priority Lien on each applicable Property to
be in place in favor of the Agent (for the benefit of the Lenders and
the Holders) and (ii) file, or cause to be filed, all necessary
documents under the applicable real property law and Article 9 of the
Uniform Commercial Code to perfect such title and Liens.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of Lessor, expressed or implied,
to or for the performance by any contractor, mechanic, laborer,
materialman, supplier or vendor of any labor or services or for the
furnishing of any materials for any construction, alteration,
addition, repair or
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demolition of or to any Property or any part thereof. NOTICE IS
HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR,
SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO
ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE,
AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO
ANY PROPERTY EXCEPT FOR PERMITTED LIENS.
ARTICLE XIII
13.1 PERMITTED CONTESTS OTHER THAN IN RESPECT OF INDEMNITIES.
Except to the extent otherwise provided for in Section 11 of
the Participation Agreement, Lessee, on its own or on Lessor's behalf but at
Lessee's sole cost and expense, may contest, by appropriate administrative or
judicial proceedings conducted in good faith and with due diligence, the
amount, validity or application, in whole or in part, of any Legal Requirement,
Imposition or utility charge payable pursuant to Section 4.1 or any Lien,
attachment, levy, encumbrance or encroachment, and Lessor agrees not to pay,
settle or otherwise compromise any such item, provided, that (a) the
commencement and continuation of such proceedings shall suspend the collection
of any such contested amount from, and suspend the enforcement thereof against,
the applicable Properties, Lessor, each Holder, the Agent and each Lender; (b)
there shall not be imposed a Lien (other than Permitted Liens and Lessor Liens)
on any Property and no part of any Property nor any Rent would be in any
material risk of being sold, forfeited, lost or deferred; (c) at no time during
the permitted contest shall there be a risk of the imposition of criminal
liability or material civil liability on Lessor, any Holder, the Agent or any
Lender for failure to comply therewith; and (d) in the event that, at any time,
there shall be a material risk of extending the application of such item beyond
the end of the Term, then Lessee shall deliver to Lessor an Officer's
Certificate certifying as to the matters set forth in clauses (a), (b) and (c)
of this Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute
and deliver to Lessee such authorizations and other documents as may reasonably
be required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.
13.2 IMPOSITIONS, UTILITY CHARGES, OTHER MATTERS; COMPLIANCE WITH
LEGAL REQUIREMENTS.
Except with respect to Impositions, Legal Requirements,
utility charges and such other matters referenced in Section 13.1 which are the
subject of ongoing proceedings contesting the same in a manner consistent with
the requirements of Section 13.1, Lessee shall cause (a) all Impositions,
utility charges and such other matters to be timely paid, settled or
compromised, as appropriate, with respect to each Property and (b) each
Property to comply with all applicable Legal Requirements.
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ARTICLE XIV
14.1 PUBLIC LIABILITY AND WORKERS' COMPENSATION INSURANCE.
During the Term for each Property, Lessee shall procure and
carry, at Lessee's sole cost and expense, commercial general liability and
umbrella liability insurance for claims for injuries or death sustained by
persons or damage to property while on such Property or respecting the
Equipment and such other public liability coverages as are then customarily
carried by similarly situated companies conducting business similar to that
conducted by Lessee. Such insurance shall be on terms and in amounts that are
no less favorable than insurance maintained by Lessee with respect to similar
properties and equipment that it owns and are then carried by similarly
situated companies conducting business similar to that conducted by Lessee, and
in no event shall have a minimum (a) combined single limit per occurrence
coverage (i) for commercial general liability of less than $1,000,000 and (ii)
for umbrella liability of less than $1,000,000 and (b) aggregate limit for
commercial general liability of less than $2,000,000. The policies shall name
Lessee as the insured and shall be endorsed to name Lessor, the Holders, the
Agent and the Lenders as additional 1insureds. The policies shall also
specifically provide that such policies shall be considered primary insurance
which shall apply to any loss or claim before any contribution by any insurance
which Lessor, any Holder, the Agent or any Lender may have in force. In the
operation of the Properties, Lessee shall comply with applicable workers'
compensation laws and protect Lessor, each Holder, the Agent and each Lender
against any liability under such laws.
14.2 PERMANENT HAZARD AND OTHER INSURANCE.
(a) During the Term for each Property, Lessee shall keep
such Property insured against all risk of physical loss or damage by
fire and other risks and shall maintain builders' risk insurance
during construction of any Improvements or Modifications in each case
in amounts no less than the Termination Value from time to time and on
terms that (i) are no less favorable than insurance covering other
similar properties owned by Lessee and (ii) are then carried by
similarly situated companies conducting business similar to that
conducted by Lessee. The policies shall name Lessee as the insured
and shall be endorsed to name Lessor, the Holders and the Agent (on
behalf of the Lenders and the Holders) as a named additional insured
and loss payee, to the extent of their respective interests; provided,
so long as no Event of Default exists, any loss payable under the
insurance policies required by this Section for losses up to and
including $1,000,000 will be paid to Lessee.
(b) If, during the Term with respect to a Property the
area in which such Property is located is designated a "flood-prone"
area pursuant to the Flood Disaster Protection Act of 1973, or any
amendments or supplements thereto or is in a zone designated A or V,
then Lessee shall comply with the National Flood Insurance Program as
set forth in the Flood Disaster Protection Act of 1973. In addition,
Lessee will fully comply with the requirements of the National Flood
Insurance Act of 1968 and the Flood
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Disaster Protection Act of 1973, as each may be amended from time to
time, and with any other Legal Requirement, concerning flood insurance
to the extent that it applies to any such Property. During the Term,
Lessee shall, in the operation and use of each Property, maintain
workers' compensation insurance consistent with that carried by
similarly situated companies conducting business similar to that
conducted by Lessee and containing minimum liability limits of no less
than $100,000. In the operation of each Property, Lessee shall comply
with workers' compensation laws applicable to Lessee, and protect
Lessor, each Holder, the Agent and each Lender against any liability
under such laws.
14.3 COVERAGE.
(a) As of the date of this Lease and annually thereafter
during the Term, Lessee shall furnish the Agent (on behalf of Lessor
and the other beneficiaries of such insurance coverage) with
certificates prepared by the insurers or insurance broker of Lessee
showing the insurance required under Sections 14.1 and 14.2 to be in
effect, naming (to the extent of their respective interests) Lessor,
the Holders, the Agent and the Lenders as additional insureds and loss
payees and evidencing the other requirements of this Article XIV. All
such insurance shall be at the cost and expense of Lessee and provided
by nationally recognized, financially sound insurance companies having
an A+ or better rating by A.M. Best's Key Rating Guide. Lessee shall
cause such certificates to include a provision for thirty (30) days'
advance written notice by the insurer to the Agent (on behalf of
Lessor and the other beneficiaries of such insurance coverage) in the
event of cancellation or material alteration of such insurance. If an
Event of Default has occurred and is continuing and the Agent (on
behalf of Lessor and the other beneficiaries of such insurance
coverage) so requests, Lessee shall deliver to the Agent (on behalf of
Lessor and the other beneficiaries of such insurance coverage) copies
of all insurance policies required by Sections 14.1 and 14.2.
(b) Lessee agrees that the insurance policy or policies
required by Sections 14.1, 14.2(a) and 14.2(b) shall include an
appropriate clause pursuant to which any such policy shall provide
that it will not be invalidated should Lessee or any Contractor, as
the case may be, waive, at any time, any or all rights of recovery
against any party for losses covered by such policy or due to any
breach of warranty, fraud, action, inaction or misrepresentation by
Lessee or any Person acting on behalf of Lessee. Lessee hereby waives
any and all such rights against Lessor, the Holders, the Agent and the
Lenders to the extent of payments made to any such Person under any
such policy.
(c) Neither Lessor nor Lessee shall carry separate
insurance concurrent in kind or form or contributing in the event of
loss with any insurance required under this Article XIV, except that
Lessor may carry separate liability insurance at Lessor's sole cost so
long as (i) Lessee's insurance is designated as primary and in no
event excess or contributory to any insurance Lessor may have in force
which would apply to a loss covered under Lessee's policy and (ii)
each such insurance policy will not cause Lessee's
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insurance required under this Article XIV to be subject to a
coinsurance exception of any kind.
(d) Lessee shall pay as they become due all premiums for
the insurance required by Section 14.1 and Section 14.2, shall renew
or replace each policy prior to the expiration date thereof or
otherwise maintain the coverage required by such Sections without any
lapse in coverage.
ARTICLE XV
15.1 CASUALTY AND CONDEMNATION.
(a) Subject to the provisions of the Agency Agreement and
this Article XV and Article XVI (in the event Lessee delivers, or is
obligated to deliver or is deemed to have delivered, a Termination
Notice), and prior to the occurrence and continuation of a Default or
an Event of Default, Lessee shall be entitled to receive (and Lessor
hereby irrevocably assigns to Lessee all of Lessor's right, title and
interest in) any condemnation proceeds, award, compensation or
insurance proceeds under Sections 14.2(a) or 14.2(b) hereof to which
Lessee or Lessor may become entitled by reason of their respective
interests in a Property (i) if all or a portion of such Property is
damaged or destroyed in whole or in part by a Casualty or (ii) if the
use, access, occupancy, easement rights or title to such Property or
any part thereof is the subject of a Condemnation; provided, however,
if a Default or an Event of Default shall have occurred and be
continuing or if such award, compensation or insurance proceeds shall
exceed $1,000,000, then such award, compensation or insurance proceeds
shall be paid directly to Lessor or, if received by Lessee, shall be
held in trust for Lessor, and shall be paid over by Lessee to Lessor
and held in accordance with the terms of this paragraph (a). All
amounts held by Lessor hereunder on account of any award, compensation
or insurance proceeds either paid directly to Lessor or turned over to
Lessor shall be held as security for the performance of Lessee's
obligations hereunder and under the other Operative Agreements. Upon
Lessee's performance of all its obligations pursuant hereto and
pursuant to the other Operative Agreements (and provided no Lease
Event of Default shall have occurred and be continuing) Lessor shall
return to Lessee any such award, compensation or insurance proceeds.
(b) Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At Lessee's
reasonable request, and at Lessee's sole cost and expense, Lessor and
the Agent shall participate in any such proceeding, action,
negotiation, prosecution or adjustment. Lessor and Lessee agree that
this Lease shall control the rights of Lessor and Lessee in and to any
such award, compensation or insurance payment.
(c) (intentionally omitted)
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(d) In the event of a Casualty or a Condemnation, this
Lease shall terminate with respect to the applicable Property in
accordance with Section 16.1 if Lessee, within thirty (30) days after
such occurrence, delivers to Lessor a notice to such effect.
(e) If pursuant to this Section 15.1 this Lease shall
continue in full force and effect following a Casualty or Condemnation
with respect to the affected Property, Lessee shall, at its sole cost
and expense and using, if available, the proceeds of any award,
compensation or insurance with respect to such Casualty or
Condemnation (including without limitation any such award,
compensation or insurance which has been received by Lessor or the
Agent and which should be turned over to Lessee pursuant to the terms
of the Operative Agreements, and if not available or sufficient, using
its own funds), promptly and diligently repair any damage to the
applicable Property caused by such Casualty or Condemnation in
conformity with the requirements of Sections 10.1 and 11.1, using the
as-built Plans and Specifications or manufacturer's specifications for
the applicable Improvements, Equipment or other components of the
applicable Property (as modified to give effect to any subsequent
Modifications, any Condemnation affecting the applicable Property and
all applicable Legal Requirements), so as to restore the applicable
Property to the same or a greater remaining economic value, useful
life, utility, condition, operation and function as existed
immediately prior to such Casualty or Condemnation (assuming all
maintenance and repair standards have been satisfied). In such event,
title to the applicable Property shall remain with Lessor.
(f) In no event shall a Casualty or Condemnation affect
Lessee's obligations to pay Rent pursuant to Article III.
(g) Notwithstanding anything to the contrary set forth in
Section 15.1(a) or Section 15.1(e), if during the Term with respect to
a Property a Casualty occurs with respect to such Property or Lessee
receives notice of a Condemnation with respect to such Property, and
following such Casualty or Condemnation, the applicable Property
cannot reasonably be restored, repaired or replaced on or before the
day one hundred eighty (180) days prior to the Expiration Date or the
date nine (9) months after the occurrence of such Casualty or
Condemnation (if such Casualty or Condemnation occurs during the Term)
to the same or a greater remaining economic value, useful life,
utility, condition, operation and function as existed immediately
prior to such Casualty or Condemnation (assuming all maintenance and
repair standards have been satisfied) or on or before such day such
Property is not in fact so restored, repaired or replaced, then Lessee
shall be required to exercise its Purchase Option for such Property on
the next Payment Date (notwithstanding the limits on such exercise
contained in Section 20.2) and pay Lessor the Termination Value for
such Property; provided, if any Default or Event of Default has
occurred and is
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continuing, Lessee shall also promptly (and in any event within three
(3) Business Days) pay Lessor any award, compensation or insurance
proceeds received on account of any Casualty or Condemnation with
respect to any Property; provided, further, that if no Default or
Event of Default has occurred and is continuing, any Excess Proceeds
shall be paid to Lessee. If a Default or an Event of Default has
occurred and is continuing and any Loans, Holder Advances or other
amounts are owing with respect thereto, then any Excess Proceeds (to
the extent of any such Loans, Holder Advances or other amounts owing
with respect thereto) shall be paid to Lessor, held as security for
the performance of Lessee's obligations hereunder and under the other
Operative Agreements and applied to such obligations upon the exercise
of remedies in connection with the occurrence of an Event of Default,
with the remainder of such Excess Proceeds in excess of such Loans,
Holder Advances and other amounts owing with respect thereto being
distributed to the Lessee.
15.2 Environmental Matters.
Promptly upon Lessee's actual knowledge of the presence of
Hazardous Substances (other than Hazardous Substances, if any, used in the
ordinary course of Lessee's business in accordance with Law) in any portion of
any Property or Properties in concentrations and conditions that constitute an
Environmental Violation and which, in the reasonable opinion of Lessee, the
cost to undertake any legally required response, clean up, remedial or other
action will or might result in a cost to Lessee of more than $15,000, Lessee
shall notify Lessor in writing of such condition. Lessor acknowledges that
Lessee has given notice and Lessee hereby gives notice of any conditions
described in the environmental reports previously provided by Lessee to the
Agent; provided notwithstanding such notice, Lessee shall with respect to any
Environmental Violation referenced in such environmental reports take all other
actions required under the Operative Agreements subsequent to notification
thereof (including without limitation the delivery of a Termination Notice with
respect to any affected Property or any necessary removal, cleanup or
remediation of such Environmental Violation as elected by Lessee). In the
event of any Environmental Violation (regardless of whether notice thereof must
be given), Lessee shall, not later than thirty (30) days after Lessee has
actual knowledge of such Environmental Violation, either deliver to Lessor a
Termination Notice with respect to the applicable Property or Properties
pursuant to Section 16.1, if applicable, or, at Lessee's sole cost and expense,
promptly and diligently undertake and diligently complete any response, clean
up, remedial or other action (including without limitation the pursuit by
Lessee of appropriate action against any off-site or third party source for
contamination) necessary to remove, cleanup or remediate the Environmental
Violation in accordance with all Environmental Laws. Any such undertaking
shall be timely completed in accordance with prudent industry standards. If
Lessee does not deliver a Termination Notice with respect to such Property
pursuant to Section 16.1, Lessee shall, upon completion of remedial action by
Lessee, cause to be prepared by a reputable environmental consultant acceptable
to Lessor a report describing the Environmental Violation and the actions taken
by Lessee (or its agents) in response to such Environmental Violation, and a
statement by the consultant that the Environmental Violation has been remedied
in full compliance with applicable Environmental Law. Not less than sixty (60)
days prior to any time that Lessee elects to cease operations with respect to
any Property or to remarket any Property pursuant to Section 20.1 hereof or any
other provision of any Operative Agreement, Lessee at its expense shall cause
to be delivered to Lessor a Phase I environmental site assessment respecting
such Property recently prepared (no more than thirty (30) days prior to the
date of delivery) by an independent recognized professional acceptable to
Lessor in its reasonable discretion and in form, scope and content satisfactory
to Lessor in its reasonable discretion. Notwithstanding any
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other provision of any Operative Agreement, if Lessee fails to comply with the
foregoing obligation regarding the Phase I environmental site assessment,
Lessee shall be obligated to purchase such Property for its Termination Value
and shall not be permitted to exercise (and Lessor shall have no obligation to
honor any such exercise) any rights under any Operative Agreement regarding a
sale of such Property to a Person other than Lessee or any Affiliate of Lessee.
15.3 NOTICE OF ENVIRONMENTAL MATTERS.
Promptly, but in any event within five (5) Business Days from
the date Lessee has actual knowledge thereof, Lessee shall provide to Lessor
written notice of any pending or threatened claim, action or proceeding
involving any Environmental Law or any Release on or in connection with any
Property or Properties. All such notices shall describe in reasonable detail
the nature of the claim, action or proceeding and Lessee's proposed response
thereto. In addition, Lessee shall provide to Lessor, within five (5) Business
Days of receipt, copies of all material written communications with any
Governmental Authority relating to any Environmental Law in connection with any
Property. Lessee shall also promptly provide such detailed reports of any such
material environmental claims as may reasonably be requested by Lessor.
ARTICLE XVI
16.1 TERMINATION UPON CERTAIN EVENTS.
If Lessee has delivered, or is deemed to have delivered,
written notice of a termination of this Lease with respect to the applicable
Property to Lessor in the form described in Section 16.2(a) (a "Termination
Notice") pursuant to the provisions of this Lease, then following the
applicable Casualty, Condemnation or Environmental Violation, this Lease shall
terminate with respect to the affected Property on the applicable Termination
Date.
16.2 PROCEDURES.
(a) A Termination Notice shall contain: (i) notice of
termination of this Lease with respect to the affected Property on a
Payment Date not more than sixty (60) days after Lessor's receipt of
such Termination Notice (the "Termination Date"); and (ii) a binding
and irrevocable agreement of Lessee to pay the Termination Value for
the applicable Property and purchase such Property on such Termination
Date.
(b) On each Termination Date, Lessee shall pay to Lessor
the Termination Value for the applicable Property, and Lessor shall
convey such Property or the remaining portion thereof, if any, to
Lessee (or Lessee's designee), all in accordance with Section 20.2.
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ARTICLE XVII
17.1 LEASE EVENTS OF DEFAULT.
If any one (1) or more of the following events (each a "Lease
Event of Default") shall occur:
(a) Lessee shall fail to make payment of (i) any Basic
Rent (except as set forth in clause (ii)) within three (3) consecutive
Business Days after the same has become due and payable or (ii) any
Termination Value, on the date any such payment is due and payable, or
any payment of Basic Rent or Supplemental Rent due on the due date of
any such payment of Termination Value, or any amount due on the
Expiration Date;
(b) Lessee shall fail to make payment of any Supplemental
Rent (other than Supplemental Rent referred to in Section 17.1(a)(ii))
which has become due and payable within seven (7) or more consecutive
days after receipt of written notice that such payment is due;
(c) Lessee shall fail to maintain insurance as required
by Article XIV of this Lease or to deliver any requisite annual
certificate with respect thereto within ten (10) Business Days of the
date such certificate is due under the terms hereof;
(d) (i) Lessee shall fail to observe or perform any term,
covenant, obligation or condition of Lessee under this Lease or any
other Operative Agreement (excluding the Agency Agreement) to which
Lessee is a party other than those set forth in Sections 17.1(a), (b)
or (c) hereof, and such failure shall (except for the covenants set
forth in Sections 8.3A(n), 8.3B(f), 8.3B(k) and 8.3B(m) of the
Participation Agreement for which there shall be no grace periods)
continue for fifteen (15) days after notice thereof to the Lessee;
provided, if any such failure is not capable of remedy with such
fifteen (15) day period but may be remedied with further diligence and
if Lessee has and continues to pursue such remedy, then Lessee shall
be granted additional time to pursue such remedy but in no event more
than an additional thirty (30) days, or (ii) any representation or
warranty made by Lessee set forth in this Lease or in any other
Operative Agreement or in any document entered into in connection
herewith or therewith or in any document, certificate or financial or
other statement delivered in connection herewith or therewith shall be
false or inaccurate in any material way when made and shall continue
to be false or inaccurate in such way for fifteen (15) days after
notice thereof to Lessee; provided, if such default is not capable of
remedy within such fifteen (15) day period but may be remedied with
further diligence and if Lessee has and continues to pursue such
remedy, then Lessee shall be granted additional time to pursue such
remedy but in no event more than an additional thirty (30) days;
(e) (intentionally omitted)
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(f) Lessee or any of its Subsidiaries shall default
(beyond applicable periods of grace and/or notice and cure) in the
payment when due of any principal of or interest on any Indebtedness
having an outstanding principal amount of at least $1,000,000; or any
other event or condition shall occur which results in a default of any
such Indebtedness or enables the holder of any such Indebtedness or
any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) The liquidation or dissolution of Lessee, or the
suspension of the business of Lessee, or the filing by Lessee of a
voluntary petition or an answer seeking reorganization, arrangement,
readjustment of its debts or for any other relief under the United
States Bankruptcy Code, as amended, or under any other insolvency act
or law, state or federal, now or hereafter existing, or any other
action of Lessee indicating its consent to, approval of or
acquiescence in, any such petition or proceeding; the application by
Lessee for, or the appointment by consent or acquiescence of Lessee of
a receiver, a trustee or a custodian of Lessee for all or a
substantial part of its property; the making by Lessee of any
assignment for the benefit of creditors; the admission by Lessee in
writing of its inability to pay its debts as they mature or Lessee is
generally not paying its debts and other financial obligations as they
become due and payable; or Lessee taking any corporate action to
authorize any of the foregoing;
(h) (i) The filing of an involuntary petition against
Lessee in bankruptcy or seeking reorganization, arrangement,
readjustment of its debts or for any other relief under the United
States Bankruptcy Code, as amended, or under any other insolvency act
or law, state or federal, now or hereafter existing; or the
involuntary appointment of a receiver, a trustee or a custodian of
Lessee for all or a substantial part of its property; or the issuance
of a warrant of attachment, execution or similar process against any
substantial part of the property of Lessee; and (ii) the continuance
of any of the events in clause (i) for ninety consecutive (90) days
undismissed or undischarged;
(i) The adjudication of Lessee as bankrupt or insolvent;
(j) The entering of any order in any proceedings against
Lessee or any Subsidiary decreeing the dissolution, divestiture or
split-up of Lessee or any Subsidiary, if such order remains in effect
for more than sixty (60) consecutive days;
(k) Any report, certificate, financial statement or other
instrument delivered to Lessor by or on behalf of Lessee pursuant to
the terms of this Lease or any other Operative Agreement is false or
misleading in any material respect when made or delivered;
(l) Any Lessee Credit Agreement Event of Default
regarding the failure to make a payment shall have occurred and be
continuing and shall not have been waived;
(m) A final judgment or judgments for the payment of
money shall be rendered by a court or courts against Lessee or any of
its Subsidiaries or any of their assets in
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excess of $1,000,000 in the aggregate, and (i) the same shall not be
discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within ninety (90)
days from the date of entry thereof, or (ii) Lessee or such Subsidiary
shall not, within said period of ninety (90) days, or such longer
period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal, or (iii) such judgment or judgments shall not be
discharged (or provisions shall not be made for such discharge) within
ninety (90) days after a decision has been reached with respect to
such appeal and the related stay has been lifted;
(n) Lessee or any member of the Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess of
$2,000,000 which it shall have become liable to pay to the PBGC or to
a Pension Plan under Title IV of ERISA; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee
to be appointed to administer any such Pension Plan or Pension Plans;
or a condition shall exist under Sections 4042(a)(1) or 4042(a)(2) of
ERISA by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Pension Plan or Pension Plans must be
terminated;
(o) (intentionally omitted); or
(p) Any Operative Agreement (excluding the Agency
Agreement and also excluding any other Operative Agreement to which
Lessee is not a party) shall cease to be in full force and effect;
then, in any such event, Lessor may, in addition to the other rights and
remedies provided for in this Article XVII and in Section 18.1, terminate this
Lease by giving Lessee five (5) Business Days notice of such termination
(provided, notwithstanding the foregoing, this Lease shall be deemed to be
automatically terminated without the giving of notice upon the occurrence of a
Lease Event of Default under Sections 17.1(g), (h) or (i)), and this Lease
shall terminate, and all rights of Lessee under this Lease shall cease. Lessee
shall, to the fullest extent permitted by law, pay as Supplemental Rent all
costs and expenses incurred by or on behalf of Lessor or any other Financing
Party, including without limitation reasonable fees and expenses of counsel, as
a result of any Lease Event of Default hereunder.
A POWER OF SALE HAS BEEN GRANTED IN THIS LEASE. A POWER OF SALE MAY
ALLOW LESSOR TO TAKE THE PROPERTIES AND SELL THE PROPERTIES WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE OF A LEASE EVENT OF DEFAULT.
17.2 SURRENDER OF POSSESSION.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant
to Section 17.1, Lessee shall, upon thirty (30) days written notice, surrender
to Lessor possession of the Properties. Lessor may enter upon and
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repossess the Properties by such means as are available at law or in equity,
and may remove Lessee and all other Persons and any and all personal property
and Lessee's equipment and personalty and severable Modifications from the
Properties. Lessor shall have no liability by reason of any such entry,
repossession or removal performed in accordance with applicable law. Upon the
written demand of Lessor, Lessee shall return the Properties promptly to
Lessor, in the manner and condition required by, and otherwise in accordance
with the provisions of, Section 22.1(c) hereof.
17.3 RELETTING.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant
to Section 17.1, Lessor may, but shall be under no obligation to, relet any or
all of the Properties, for the account of Lessee or otherwise, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the Term) and on such conditions (which may include
concessions or free rent) and for such purposes as Lessor may determine, and
Lessor may collect, receive and retain the rents resulting from such reletting.
Lessor shall not be liable to Lessee for any failure to relet any Property or
for any failure to collect any rent due upon such reletting.
17.4 DAMAGES.
Neither (a) the termination of this Lease as to all or any of
the Properties pursuant to Section 17.1; (b) the repossession of all or any of
the Properties; nor (c) the failure of Lessor to relet all or any of the
Properties, the reletting of all or any portion thereof, nor the failure of
Lessor to collect or receive any rentals due upon any such reletting, shall
relieve Lessee of its liabilities and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. If any Lease Event of
Default shall have occurred and be continuing and notwithstanding any
termination of this Lease pursuant to Section 17.1, Lessee shall forthwith pay
to Lessor all Rent and other sums due and payable hereunder to and including
without limitation the date of such termination. Thereafter, on the days on
which the Basic Rent or Supplemental Rent, as applicable, are payable under
this Lease or would have been payable under this Lease if the same had not
been terminated pursuant to Section 17.1 and until the end of the Term hereof
or what would have been the Term in the absence of such termination, Lessee
shall pay Lessor, as current liquidated damages (it being agreed that it would
be impossible accurately to determine actual damages) an amount equal to the
Basic Rent and Supplemental Rent that are payable under this Lease or would
have been payable by Lessee hereunder if this Lease had not been terminated
pursuant to Section 17.1, less the net proceeds, if any, which are actually
received by Lessor with respect to the period in question of any reletting of
any Property or any portion thereof; provided, that Lessee's obligation to make
payments of Basic Rent and Supplemental Rent under this Section 17.4 shall
continue only so long as Lessor shall not have received the amounts specified
in Section 17.6. In calculating the amount of such net proceeds from
reletting, there shall be deducted all of Lessor's, any Holder's, the Agent's
and any Lender's reasonable expenses in connection therewith, including without
limitation repossession costs, brokerage or sales commissions, fees and
expenses for counsel and any necessary repair or alteration costs and expenses
incurred in preparation for such reletting. Lessor shall promptly
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remit any net proceeds remaining, if any (after deducting therefrom all such
Basic Rent, Supplemental Rent and expenses payable to any of the Financing
Parties), to Lessee. To the extent Lessor receives any damages pursuant to
this Section 17.4, such amounts shall be regarded as amounts paid on account of
Rent. Lessee specifically acknowledges and agrees that its obligations under
this Section 17.4 shall be absolute and unconditional under any and all
circumstances and shall be paid and/or performed, as the case may be, without
notice or demand and without any abatement, reduction, diminution, setoff,
defense, counterclaim or recoupment whatsoever.
17.5 POWER OF SALE.
Without limiting any other remedies set forth in this Lease,
in the event that a court of competent jurisdiction rules that this Lease
constitutes a mortgage, deed of trust or other secured financing, then Lessor
and Lessee agree that Lessee has granted, pursuant to Section 7.1(b) hereof and
each Lease Supplement, a Lien against the Properties WITH POWER OF SALE, and
that, upon the occurrence and during the continuance of any Lease Event of
Default, Lessor shall have the power and authority, to the extent provided by
law, after prior notice and lapse of such time as may be required by law, to
foreclose its interest (or cause such interest to be foreclosed) in all or any
part of the Properties.
17.6 FINAL LIQUIDATED DAMAGES.
If a Lease Event of Default shall have occurred and be
continuing, whether or not this Lease shall have been terminated pursuant to
Section 17.1 and whether or not Lessor shall have collected any current
liquidated damages pursuant to Section 17.4, Lessor shall have the right to
recover, by demand to Lessee and at Lessor's election, and Lessee shall pay to
Lessor, as and for final liquidated damages, but exclusive of the indemnities
payable under Section 11 of the Participation Agreement (which, if requested,
shall be paid concurrently), and in lieu of all current liquidated damages
beyond the date of such demand (it being agreed that it would be impossible
accurately to determine actual damages) the Termination Value. Upon payment of
the amount specified pursuant to the first sentence of this Section 17.6,
Lessee shall be entitled to receive from Lessor, either at Lessee's request or
upon Lessor's election, in either case at Lessee's cost, an assignment of
Lessor's entire right, title and interest in and to the Properties,
Improvements, Fixtures, Modifications, Equipment and all components thereof, in
each case in recordable form and otherwise in conformity with local custom and
free and clear of the Lien of this Lease (including without limitation the
release of any memoranda of Lease and/or the Lease Supplement recorded in
connection therewith) and any Lessor Liens. The Properties shall be conveyed
to Lessee "AS-IS, WHERE-IS" and in their then present physical condition. If
any statute or rule of law shall limit the amount of such final liquidated
damages to less than the amount agreed upon, Lessor shall be entitled to the
maximum amount allowable under such statute or rule of law; provided, however,
Lessee shall not be entitled to receive an assignment of Lessor's interest in
the Properties, the Improvements, Fixtures, Modifications, Equipment or the
components thereof unless Lessee shall have paid in full the Termination Value.
Lessee specifically acknowledges and agrees that its obligations under this
Section 17.6 shall be absolute and unconditional under any and all
circumstances and shall be paid and/or performed, as the
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case may be, without notice or demand and without any abatement, reduction,
diminution, setoff, defense, counterclaim or recoupment whatsoever.
17.7 ENVIRONMENTAL COSTS.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant
to Section 17.1, Lessee shall pay directly to any third party (or at Lessor's
election, reimburse Lessor) for the cost of any environmental testing and/or
remediation work undertaken respecting any Property, as such testing or work is
deemed necessary in the reasonable judgment of Lessor. Lessee shall pay all
amounts referenced in the immediately preceding sentence within ten (10)
Business Days of any request by Lessor for such payment. The provisions of
this Section 17.7 shall not limit the obligations of Lessee under any Operative
Agreement regarding indemnification obligations, environmental testing,
remediation and/or work.
17.8 WAIVER OF CERTAIN RIGHTS.
If this Lease shall be terminated pursuant to Section 17.1,
Lessee waives, to the fullest extent permitted by Law, (a) any notice of
re-entry or the institution of legal proceedings to obtain re-entry or
possession; (b) any right of redemption, re-entry or possession; (c) the
benefit of any laws now or hereafter in force exempting property from liability
for rent or for debt; and (d) any other rights which might otherwise limit or
modify any of Lessor's rights or remedies under this Article XVII.
17.9 ASSIGNMENT OF RIGHTS UNDER CONTRACTS.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant
to Section 17.1, Lessee shall upon Lessor's demand promptly assign, transfer
and set over to Lessor all of Lessee's right, title and interest in and to each
agreement executed by Lessee in connection with the acquisition, installation,
testing, use, development, construction, operation, maintenance, repair,
refurbishment and restoration of the Properties (including without limitation
all right, title and interest of Lessee with respect to all warranty,
performance, service and indemnity provisions), as and to the extent that the
same relate to the acquisition, installation, testing, use, development,
construction, operation, maintenance, repair, refurbishment and restoration of
the Properties or any of them.
17.10 REMEDIES CUMULATIVE.
The remedies herein provided shall be cumulative and in
addition to (and not in limitation of) any other remedies available at law,
equity or otherwise, including without limitation any mortgage foreclosure
remedies.
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ARTICLE XVIII
18.1 LESSOR'S RIGHT TO CURE LESSEE'S LEASE DEFAULTS.
Lessor, without waiving or releasing any obligation or Lease
Event of Default, may (but shall be under no obligation to) remedy any Lease
Event of Default for the account and at the sole cost and expense of Lessee,
including without limitation the failure by Lessee to maintain the insurance
required by Article XIV, and may, to the fullest extent permitted by law, and
notwithstanding any right of quiet enjoyment in favor of Lessee, enter upon any
Property, and take all such action thereon as may be necessary therefor;
provided, however, any such entry shall minimize disruption of Lessee's
business and shall follow such reasonable procedures as Lessee prescribes. No
such entry shall be deemed an eviction of any lessee. All out-of-pocket costs
and expenses so incurred (including without limitation fees and expenses of
counsel), together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid by Lessor, shall be paid by Lessee to
Lessor on demand.
ARTICLE XIX
19.1 PROVISIONS RELATING TO LESSEE'S EXERCISE OF ITS PURCHASE
OPTION.
Subject to Section 19.2, in connection with any termination of
this Lease with respect to any Property pursuant to the terms of Section 16.2,
or in connection with Lessee's exercise of its Purchase Option, upon the date
on which this Lease is to terminate with respect to any Property, and upon
tender by Lessee of the amounts set forth in Sections 16.2(b) or 20.2, as
applicable, Lessor shall execute and deliver to Lessee (or to Lessee's
designee) at Lessee's cost and expense an assignment (by deed or other
appropriate instrument) of Lessor's entire interest in such Property, in each
case in recordable form and otherwise in conformity with local custom and free
and clear of any Lessor Liens attributable to Lessor but without any other
warranties (of title or otherwise) from Lessor. Such Property shall be
conveyed to Lessee "AS-IS, "WHERE-IS" and in then present physical condition.
19.2 NO PURCHASE OR TERMINATION WITH RESPECT TO LESS THAN ALL OF A
PROPERTY.
Lessee shall not be entitled to exercise its Purchase Option or the
Sale Option separately with respect to a portion of any Property consisting of
Land, Equipment, Improvements and/or any interest pursuant to a Ground Lease
but shall be required to exercise its Purchase Option or the Sale Option with
respect to an entire Property.
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ARTICLE XX
20.1 PURCHASE OPTION OR SALE OPTION-GENERAL PROVISIONS.
Not less than one hundred twenty (120) days and no more than
one hundred eighty (180) days prior to either the third, fourth, fifth or sixth
annual anniversary of the date of this Lease, the Expiration Date or,
respecting the Purchase Option only, any Payment Date (such third, fourth,
fifth or sixth annual anniversary date, such Expiration Date or, respecting the
Purchase Option only, any such Payment Date being hereinafter referred to as
the "Election Date"), Lessee may give Lessor irrevocable written notice (the
"Election Notice") that Lessee is electing to exercise either (a) the option to
purchase all, but not less than all, the Properties on the applicable Election
Date (the "Purchase Option") or (b) with respect to an Election Notice given in
connection with the third or fourth annual anniversary of the date of this
Lease or the Expiration Date only, the option to remarket all, but not less
than all, the Properties to a Person other than Lessee or any Affiliate of
Lessee and cause a sale of such Properties to occur on the applicable Election
Date pursuant to the terms of Section 22.1 (the "Sale Option"). If Lessee does
not give an Election Notice indicating the Purchase Option or the Sale Option
at least one hundred twenty (120) days and not more than one hundred eighty
(180) days prior to the Expiration Date, then Lessee shall be deemed to have
elected for the Purchase Option to apply on the Expiration Date. If Lessee
shall either (i) elect (or be deemed to have elected) to exercise the Purchase
Option or (ii) elect the Sale Option and fail to cause all, but not less than
all, the Properties to be sold in accordance with the terms of Section 22.1 on
the applicable Election Date, then in either case Lessee shall pay to Lessor on
the date on which such purchase or sale is scheduled to occur an amount equal
to the Termination Value for all, but not less than all, the Properties (which
the parties do not intend to be a "bargain" purchase), and in connection
therewith, Lessee shall comply with the terms and provisions of Section 22.1(c)
to the same extent as if Lessor had exercised its option to retain one (1) or
more Properties pursuant to Section 22.1(a) and, upon receipt of such amounts
and satisfaction of such obligations, Lessor shall transfer to Lessee all of
Lessor's right, title and interest in and to all, but not less than all, the
Properties in accordance with Section 20.2.
20.2 LESSEE PURCHASE OPTION.
Provided, no Default or Event of Default shall have occurred
and be continuing (other than those that will be cured by the payment of the
Termination Value for all the Properties) and provided, that the Election
Notice has been appropriately given specifying the Purchase Option, Lessee
shall purchase all the Properties on the applicable Election Date at a price
equal to the Termination Value for such Properties (which the parties do not
intend to be a "bargain" purchase price).
Subject to Section 19.2, in connection with any termination of
this Lease with respect to any Property pursuant to the terms of Section 16.2,
or in connection with Lessee's exercise of its Purchase Option, upon the date
on which this Lease is to terminate with respect to a Property or all of the
Properties, and upon tender by Lessee of the amounts set forth in Section
16.2(b) or this Section 20.2, as applicable, Lessor shall execute, acknowledge
(where
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required) and deliver to Lessee, at Lessee's cost and expense, each of the
following: (a) a termination or assignment (as requested by the Lessee) of
each applicable Ground Lease and special warranty Deeds conveying each Property
(to the extent it is real property not subject to a Ground Lease) to Lessee
free and clear of the Lien of this Lease, the Lien of the Credit Documents and
any Lessor Liens; (b) a Bill of Sale conveying each Property (to the extent it
is personal property) to Lessee free and clear of the Lien of this Lease, the
Lien of the Credit Documents and any Lessor Liens; (c) any real estate tax
affidavit or other document required by law to be executed and filed in order
to record the applicable Deed and/or the applicable Ground Lease termination;
(d) FIRPTA affidavits and (e) such other documents as are customarily provided
in similar transactions. All of the foregoing documentation must be in form
and substance reasonably satisfactory to Lessor and Lessee. The applicable
Property shall be conveyed to Lessee "AS-IS, WHERE-IS" and in then present
physical condition.
If any Property is the subject of remediation efforts
respecting Hazardous Substances at the applicable Election Date which could
materially and adversely impact the Fair Market Sales Value of such Property
(with materiality determined in Lessor's reasonable discretion), then Lessee
shall be obligated to repurchase each such Property pursuant to Section 20.2.
On the applicable Election Date on which Lessee has elected to
exercise its Purchase Option, Lessee shall pay (or cause to be paid) to Lessor,
the Agent and all other parties, as appropriate, the sum of all reasonable
costs and expenses incurred by any such party (unless such are expressly
prohibited by the Operative Agreements) in connection with the election by
Lessee to exercise its Purchase Option and all Rent and all other amounts then
due and payable or accrued under this Lease and/or any other Operative
Agreement.
20.3 THIRD PARTY SALE OPTION.
(a) Provided, that (i) no Default or Event of Default
shall have occurred and be continuing and (ii) the Election Notice has
been appropriately given specifying the Sale Option, Lessee shall
undertake to cause a sale of the Properties on the applicable Election
Date (all as specified in the Election Notice), in accordance with the
provisions of Section 22.1 hereof. Such Election Date on which a sale
is required may be hereafter referred to as the "Sale Date".
(b) In the event Lessee exercises the Sale Option then,
as soon as practicable and in all events not less than sixty (60) days
prior to the Sale Date, Lessee at its expense shall cause to be
delivered to Lessor a Phase I environmental site assessment for each
of the Properties recently prepared (no more than ninety (90) days old
prior to the Sale Date) by an independent recognized professional
reasonably acceptable to Lessor and in form, scope and content
reasonably satisfactory to Lessor. In the event that Lessor shall not
have received such environmental site assessment by the date sixty
(60) days prior to the Sale Date or in the event that such
environmental assessment shall reveal the existence of any material
violation of Environmental Laws, other material Environmental
Violation or potential material Environmental Violation (with
materiality determined in each case by
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Lessor in its reasonable discretion), then Lessee on the Sale Date
shall pay to Lessor an amount equal to the Termination Value for all
the Properties and any and all other amounts due and owing hereunder.
Upon receipt of such payment and all other amounts due under the
Operative Agreements, Lessor shall transfer to Lessee all of Lessor's
right, title and interest in and to all the Properties in accordance
with Section 19.1.
ARTICLE XXI
21.1 [INTENTIONALLY OMITTED].
ARTICLE XXII
22.1 SALE PROCEDURE.
(a) During the Marketing Period, Lessee, on behalf of
Lessor, shall obtain bids for the cash purchase of all the Properties
in connection with a sale to one (1) or more third party purchasers to
be consummated on the Sale Date for the highest price reasonably
available, shall notify Lessor promptly of the name and address of
each prospective purchaser and the cash price which each prospective
purchaser shall have offered to pay for each such Property and shall
provide Lessor with such additional information about the bids and the
bid solicitation procedure as Lessor may reasonably request from time
to time. All such prospective purchasers must be Persons other than
Lessee or any Affiliate of Lessee. On the Sale Date, Lessee shall pay
(or cause to be paid) to Lessor and all other parties, as appropriate,
the sum of all reasonable costs and expenses (unless such are
expressly prohibited by the Operative Agreements) incurred by Lessor
and/or the Agent (as the case may be) in connection with such sale of
one or more Properties, all Rent and all other amounts then due and
payable or accrued under this Lease and/or any other Operative
Agreement.
Lessor may reject any and all bids and may solicit and obtain
bids by giving Lessee written notice to that effect; provided,
however, that notwithstanding the foregoing, Lessor may not reject the
bids submitted by Lessee if such bids, in the aggregate, are greater
than or equal to the sum of the Limited Recourse Amount for all the
Properties, and represent bona fide offers from one (1) or more third
party purchasers. If the highest price which a prospective purchaser
or the prospective purchasers shall have offered to pay for all the
Properties on the Sale Date is less than the sum of the Limited
Recourse Amount for all the Properties or if such bids do not
represent bona fide offers from one (1) or more third parties or if
there are no bids, Lessor may elect to retain one or more of the
Properties by giving Lessee prior written notice of Lessor's election
to retain the same, and promptly upon receipt of such notice, Lessee
shall surrender, or cause to be surrendered, each of the Properties
specified in such notice in accordance with the terms and conditions
of Section 10.1. Upon acceptance of any bid, Lessor agrees, at
Lessee's request and expense, to execute a contract of sale with
respect to such sale, so long as the
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same is consistent with the terms of this Article 22 and provides by
its terms that it is nonrecourse to Lessor.
Unless Lessor shall have elected to retain one or more of the
Properties pursuant to the provisions of the preceding paragraph,
Lessee shall arrange for Lessor to sell all the Properties free and
clear of the Lien of this Lease and any Lessor Liens (all of which
Lessor shall release), without recourse or warranty (of title or
otherwise), for cash on the Sale Date to the purchaser or purchasers
offering the highest cash sales price, as identified by Lessee or
Lessor, as the case may be. To effect such transfer and assignment,
Lessor shall execute, acknowledge (where required) and deliver to the
appropriate purchaser each of the following: (a) special warranty
Deeds conveying each such Property (to the extent it is real property
titled to Lessor) and an assignment of the Ground Lease conveying the
leasehold interest of Lessor in each such Property (to the extent it
is real property and subject to a Ground Lease) to the appropriate
purchaser free and clear of the Lien of this Lease, the Lien of the
Credit Documents and any Lessor Liens; (b) a Bill of Sale conveying
each such Property (to the extent it is personal property) titled to
Lessor to the appropriate purchaser free and clear of the Lien of this
Lease, the Lien of the Credit Documents and any Lessor Liens; (c) any
real estate tax affidavit or other document required by law to be
executed and filed in order to record each Deed and/or each Ground
Lease assignment; (d) FIRPTA affidavits, as appropriate and (e) such
other documents as are customarily provided in similar transactions.
All of the foregoing documentation must be in form and substance
reasonably satisfactory to Lessor and Lessee. Lessee shall surrender
the Properties so sold or subject to such documents to each purchaser
in the condition specified in Section 10.1, or in such other condition
as may be agreed between Lessee and such purchaser. Lessee shall not
take or fail to take any action which would have the effect of
unreasonably discouraging bona fide third party bids for any Property.
If each of the Properties is not either (i) sold on the Sale Date in
accordance with the terms of this Section 22.1, or (ii) retained by
Lessor pursuant to an affirmative election made by Lessor pursuant to
the second sentence of the second paragraph of this Section 22.1(a),
then (x) Lessee shall be obligated to pay Lessor on the Sale Date an
amount equal to the Maximum Residual Guarantee Amount for all the
Properties and (y) if a sale of the Properties is consummated after
the Sale Date by Lessor, Lessor shall remit to Lessee, promptly after
consummation of such sale, an amount equal to the excess of (A) the
aggregate purchase price paid for the Properties in such sale over (B)
the excess of (I) the aggregate Property Cost for the Properties, plus
an amount equal to the sum of any and all reasonable out-of-pocket
fees, expenses and other amounts incurred by Lessee in connection with
any of the Properties or the sale thereof, plus any and all Basic Rent
and Supplemental Rent then due and owing or accrued over (II) any
amount paid by Lessee to Lessor pursuant to clause (x) above.
(b) If the Properties are sold on a Sale Date to one (1)
or more third party purchasers in accordance with the terms of Section
22.1(a) and the aggregate purchase price paid for all the Properties
is less than the sum of the aggregate Property Cost for all the
Properties (hereinafter such difference shall be referred to as the
"Deficiency Balance"), then Lessee hereby unconditionally promises to
pay to Lessor on the Sale Date
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the lesser of (i) the Deficiency Balance, or (ii) the Maximum Residual
Guarantee Amount for all the Properties. On a Sale Date if (x) Lessor
receives the aggregate Termination Value for all the Properties from
one (1) or more third party purchasers, (y) Lessor and such other
parties receive all other amounts specified in the last sentence of
the first paragraph of Section 22.1(a) and (z) the aggregate purchase
price paid for all the Properties on such date exceeds the sum of the
aggregate Property Cost for all the Properties, then Lessee may retain
such excess. If one or more of the Properties are retained by Lessor
pursuant to an affirmative election made by Lessor pursuant to the
provisions of Section 22.1(a), then Lessee hereby unconditionally
promises to pay to Lessor on the Sale Date an amount equal to the
Maximum Residual Guarantee Amount for the Properties so retained. Any
payment of the foregoing amounts described in this Section 22.1(b)
shall be made together with a payment of all other amounts referenced
in the last sentence of the first paragraph of Section 22.1(a).
(c) In the event that all the Properties are either sold
to one (1) or more third party purchasers on the Sale Date or retained
by Lessor in connection with an affirmative election made by Lessor
pursuant to the provisions of Section 22.1(a), then in either case on
the applicable Sale Date; Lessee shall provide Lessor or such third
party purchaser (unless otherwise agreed by such third party
purchaser) with the following (except to the extent such constitutes
intellectual property of Lessee or licensing or other such rights of
Lessee to manufacture its products, engage in research, development
and commercialization activities and otherwise conduct its business
(but excluding the general operation of the Property)) (i) all
permits, certificates of occupancy, governmental licenses and
authorizations necessary to use, operate, repair, access and maintain
each such Property, and (ii) such manuals, permits, easements,
licenses, rights-of-way and other rights and privileges in the nature
of an easement as are reasonably necessary or desirable in connection
with the use, operation, repair, access to or maintenance of each such
Property for its intended purpose or otherwise as Lessor or such third
party purchaser(s) shall reasonably request (and a royalty-free
license or similar agreement to effectuate the foregoing on terms
reasonably agreeable to Lessor or such third party purchaser(s), as
applicable). All assignments, licenses, easements, agreements and
other deliveries required by clauses (i) and (ii) of this paragraph
(c) shall be in form reasonably satisfactory to Lessor or such third
party purchaser(s), as applicable, and shall be fully assignable
(including without limitation both primary assignments and assignments
given in the nature of security) without payment of any fee, cost or
other charge. Notwithstanding the foregoing, to the extent any item
listed in clauses (i) or (ii) of this paragraph (c) is not assignable
under its terms or under applicable law, Lessee shall not have any
obligations under this paragraph (c) with respect to the assignment of
such item. Lessee shall also execute any documentation reasonably
requested by Lessor or such third party purchaser(s), as applicable,
evidencing the continuation or assignment of each Ground Lease.
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22.2 APPLICATION OF PROCEEDS OF SALE.
Lessor shall apply the proceeds of sale of any Property in the
following order of priority:
(a) FIRST, to pay or to reimburse Lessor (and/or the
Agent, as the case may be) for the payment of all reasonable costs and
expenses incurred by Lessor (and/or the Agent, as the case may be) in
connection with the sale (to the extent Lessee has not satisfied its
obligation to pay such costs and expenses);
(b) SECOND, so long as the Credit Agreement is in effect
and any Loans or Holder Advances or any amount is owing to the
Financing Parties under any Operative Agreement, to the Agent to be
applied pursuant to intercreditor provisions among Lessor, the Lenders
and the Holders contained in the Operative Agreements; and
(c) THIRD, to Lessee.
22.3 INDEMNITY FOR EXCESSIVE WEAR.
If the proceeds of the sale described in Section 22.1 with
respect to the Properties shall be less than the Limited Recourse Amount with
respect to the Properties, and at the time of such sale it shall have been
reasonably determined (pursuant to the Appraisal Procedure) that the Fair
Market Sales Value of the Properties shall have been impaired by greater than
expected ordinary wear and tear during the term of the Lease, Lessee shall pay
to Lessor within ten (10) Business Days after receipt of Lessor's written
statement (i) the amount of such excess wear and tear determined by the
Appraisal Procedure or (ii) the amount of the Sale Proceeds Shortfall,
whichever amount is less.
22.4 APPRAISAL PROCEDURE.
For determining the Fair Market Sales Value of the Properties
or any other amount which may, pursuant to any provision of any Operative
Agreement, be determined by an appraisal procedure, Lessor and Lessee shall use
the following procedure (the "Appraisal Procedure"). Lessor and Lessee shall
endeavor to reach a mutual agreement as to such amount for a period of ten (10)
Business Days from commencement of the Appraisal Procedure under the applicable
section of the Lease, and if they cannot agree within ten (10) Business Days,
then two (2) qualified appraisers, one (1) chosen by Lessee and one (1) chosen
by Lessor, shall mutually agree thereupon, but if either party shall fail to
choose an appraiser within twenty (20) days after notice from the other party
of the selection of its appraiser, then the appraisal by such appointed
appraiser shall be binding on Lessee and Lessor. If the two (2) appraisers
cannot agree within twenty (20) days after both shall have been appointed, then
a third appraiser shall be selected by the two (2) appraisers or, failing
agreement as to such third appraiser within thirty (30) days after both shall
have been appointed, by the American Arbitration Association. The decisions of
the three (3) appraisers shall be given within twenty (20) days of the
appointment of the third appraiser and the decision of the appraiser most
different from the average of the other two (2)
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<PAGE> 38
shall be discarded and such average shall be binding on Lessor and Lessee;
provided, that if the highest appraisal and the lowest appraisal are
equidistant from the third appraisal, the third appraisal shall be binding on
Lessor and Lessee. The fees and expenses of the appraiser appointed by Lessee
shall be paid by Lessee; the fees and expenses of the appraiser appointed by
Lessor shall be paid by Lessor (such fees and expenses not being indemnified
pursuant to Section 13 of the Participation Agreement); and the fees and
expenses of the third appraiser shall be divided equally between Lessee and
Lessor.
22.5 CERTAIN OBLIGATIONS CONTINUE.
During the Marketing Period, the obligation of Lessee to pay
Rent with respect to the Properties (including without limitation the
installment of Basic Rent due on the Sale Date) shall continue undiminished
until payment in full to Lessor of all amounts due to Lessor or any other
Person with respect to all Properties or any Operative Agreement. Lessor shall
have the right, but shall be under no duty, to solicit bids, to inquire into
the efforts of Lessee to obtain bids or otherwise to take action in connection
with any such sale, other than as expressly provided in this Article XXII.
ARTICLE XXIII
23.1 HOLDING OVER.
If Lessee shall for any reason remain in possession of a
Property after the expiration or earlier termination of this Lease as to such
Property (unless such Property is conveyed to Lessee), such possession shall be
as a tenancy at sufferance during which time Lessee shall continue to pay
Supplemental Rent that would be payable by Lessee hereunder were the Lease
then in full force and effect with respect to such Property and Lessee shall
continue to pay Basic Rent at the lesser of the highest lawful rate and one
hundred ten percent (110%) of the last payment of Basic Rent due with respect
to such Property prior to such expiration or earlier termination of this Lease.
Such Basic Rent shall be payable from time to time upon demand by Lessor and
such additional amount of Basic Rent shall be applied by Lessor ratably to the
Lenders and the Holders based on their relative amounts of the then outstanding
aggregate Property Cost for all Properties. During any period of tenancy at
sufferance, Lessee shall, subject to the second preceding sentence, be
obligated to perform and observe all of the terms, covenants and conditions of
this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenants at sufferance, to continue their occupancy and
use of such Property. Nothing contained in this Article XXIII shall constitute
the consent, express or implied, of Lessor to the holding over of Lessee after
the expiration or earlier termination of this Lease as to any Property (unless
such Property is conveyed to Lessee) and nothing contained herein shall be read
or construed as preventing Lessor from maintaining a suit for possession of
such Property or exercising any other remedy available to Lessor at law or in
equity.
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ARTICLE XXIV
24.1 RISK OF LOSS.
During the Term, unless Lessee shall not be in actual
possession of any Property in question solely by reason of Lessor's exercise of
its remedies of dispossession under Article XVII, the risk of loss or decrease
in the enjoyment and beneficial use of such Property as a result of the damage
or destruction thereof by fire, the elements, casualties, thefts, riots, wars
or otherwise is assumed by Lessee, and Lessor shall in no event be answerable
or accountable therefor.
ARTICLE XXV
25.1 ASSIGNMENT.
(a) Lessee may not assign this Lease or any of its rights
or obligations hereunder or with respect to any Property in whole or
in part to any Person without the prior written consent of the Agent,
the Lenders, the Holders and Lessor (which consent shall not be
unreasonably withheld, conditioned or delayed).
(b) No assignment by Lessee (referenced in this Section
25.1 or otherwise) or other relinquishment of possession to any
Property shall in any way discharge or diminish any of the obligations
of Lessee to Lessor hereunder and Lessee shall remain directly and
primarily liable under the Operative Agreements as to any rights or
obligations assigned by Lessee or regarding any Property in which
rights or obligations have been assigned or otherwise transferred.
25.2 SUBLEASES.
(a) Promptly, but in any event within five (5) Business
Days, following the execution and delivery of any sublease permitted
by this Article XXV, Lessee shall notify Lessor of the execution of
such sublease. As of the date of each Lease Supplement, Lessee shall
lease the respective Properties described in such Lease Supplement
from Lessor, and any existing tenant respecting such Property shall
automatically be deemed to be a subtenant of Lessee and not a tenant
of Lessor.
(b) Without the prior written consent of the Agent, any
Lender, any Holder or Lessor and subject to the other provisions of
this Section 25.2, Lessee may sublet any Property or portion thereof
to any wholly-owned Subsidiary of Lessee. Except as referenced in the
immediately preceding sentence, no other subleases shall be permitted
unless consented to in writing by Lessor (such consent not to be
unreasonably withheld, conditioned or delayed). All subleasing shall
be done on market terms and shall in no way diminish the fair market
value or useful life of any applicable Property.
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(c) No sublease (referenced in this Section 25.2 or
otherwise) or other relinquishment of possession to any Property shall
in any way discharge or diminish any of Lessee's obligations to Lessor
hereunder and Lessee shall remain directly and primarily liable under
this Lease as to such Property, or portion thereof, so sublet. The
term of any such sublease shall not extend beyond the Term. Each
sublease shall be expressly subject and subordinate to this Lease.
ARTICLE XXVI
26.1 NO WAIVER.
No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy upon a
default hereunder, and no acceptance of full or partial payment of Rent during
the continuance of any such default, shall constitute a waiver of any such
default or of any such term. To the fullest extent permitted by law, no waiver
of any default shall affect or alter this Lease, and this Lease shall continue
in full force and effect with respect to any other then existing or subsequent
default.
ARTICLE XXVII
27.1 ACCEPTANCE OF SURRENDER.
No surrender to Lessor of this Lease or of all or any portion
of any Property or of any part of any thereof or of any interest therein shall
be valid or effective unless agreed to and accepted in writing by Lessor and no
act by Lessor or the Agent or any representative or agent of Lessor or the
Agent, other than a written acceptance, shall constitute an acceptance of any
such surrender.
27.2 NO MERGER OF TITLE.
There shall be no merger of this Lease or of the leasehold
estate created hereby by reason of the fact that the same Person may acquire,
own or hold, directly or indirectly, in whole or in part, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate, (b) any right, title or interest in any Property, (c) any Notes, or (d)
a beneficial interest in Lessor.
ARTICLE XXVIII
28.1 (INTENTIONALLY OMITTED)
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ARTICLE XXIX
29.1 NOTICES.
All notices required or permitted to be given under this Lease
shall be in writing and delivered as provided in the Participation Agreement.
ARTICLE XXX
30.1 MISCELLANEOUS.
Anything contained in this Lease to the contrary
notwithstanding, all claims against and liabilities of Lessee or Lessor arising
from events commencing prior to the expiration or earlier termination of this
Lease shall survive such expiration or earlier termination. If any provision
of this Lease shall be held to be unenforceable in any jurisdiction, such
unenforceability shall not affect the enforceability of any other provision of
this Lease in such jurisdiction or of such provision or of any other provision
hereof in any other jurisdiction.
30.2 AMENDMENTS AND MODIFICATIONS.
Neither this Lease nor any Lease Supplement may be amended,
waived, discharged or terminated except in accordance with the provisions of
Section 12.4 of the Participation Agreement.
30.3 SUCCESSORS AND ASSIGNS.
All the terms and provisions of this Lease shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
30.4 HEADINGS AND TABLE OF CONTENTS.
The headings and table of contents in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
30.5 COUNTERPARTS.
This Lease may be executed in any number of counterparts, each
of which shall be an original, but all of which shall together constitute one
(1) and the same instrument.
30.6 GOVERNING LAW.
THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND.
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30.7 CALCULATION OF RENT.
All calculation of Rent payable hereunder shall be computed
based on the actual number of days elapsed over a year of three hundred sixty
(360) days or, to the extent such Rent is based on the Prime Lending Rate,
three hundred sixty-five (365) (or three hundred sixty-six (366), as
applicable) days.
30.8 MEMORANDA OF LEASE AND LEASE SUPPLEMENTS.
This Lease shall not be recorded; provided, Lessor and Lessee
shall promptly record (a) a memorandum of this Lease and the applicable Lease
Supplement (in substantially the form of EXHIBIT B attached hereto) or a short
form lease (in form and substance reasonably satisfactory to Lessor) regarding
each Property promptly after the acquisition thereof in the local filing office
with respect thereto, in all cases at Lessee's cost and expense, and as
required under applicable law to sufficiently evidence this Lease and any such
Lease Supplement in the applicable real estate filing records.
30.9 ALLOCATIONS BETWEEN THE LENDERS AND THE HOLDERS.
Notwithstanding any other term or provision of this Lease to
the contrary, the allocations of the proceeds of the Properties and any and all
other Rent and other amounts received hereunder shall be subject to the
inter-creditor provisions between the Lenders and the Holders contained in the
Operative Agreements (or as otherwise agreed among the Lenders and the Holders
from time to time).
30.10 LIMITATIONS ON RECOURSE.
Notwithstanding anything contained in this Lease to the
contrary, Lessee agrees to look solely to Lessor's estate and interest in the
Properties (and in no circumstance to the Agent, the Lenders, the Holders or
otherwise to Lessor) for the collection of any judgment requiring the payment
of money by Lessor in the event of liability by Lessor, and no other property
or assets of Lessor or any shareholder, owner or partner (direct or indirect)
in or of Lessor, or any director, officer, employee, beneficiary, Affiliate of
any of the foregoing shall be subject to levy, execution or other enforcement
procedure for the satisfaction of the remedies of Lessee under or with respect
to this Lease, the relationship of Lessor and Lessee hereunder or Lessee's use
of the Properties or any other liability of Lessor to Lessee. Nothing in this
Section shall be interpreted so as to limit the terms of Sections 6.1 or 6.2 or
the provisions of Section 12.9 of the Participation Agreement.
30.11 WAIVERS OF JURY TRIAL.
EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO
THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW,
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WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE
AND FOR ANY COUNTERCLAIM THEREIN.
30.12 EXERCISE OF LESSOR RIGHTS.
Lessee hereby acknowledges and agrees that the rights and
powers of Lessor under this Lease have been assigned to the Agent pursuant to
the terms of the Security Agreement and the other Operative Agreements. Lessor
and Lessee hereby acknowledge and agree that (a) the Agent shall, in its
discretion, direct and/or act on behalf of Lessor pursuant to the provisions of
Sections 8.2(h) and 8.6 of the Participation Agreement, (b) all notices to be
given to Lessor shall be given to the Agent and (c) all notices to be given by
Lessor may be given by the Agent, at its election.
30.13 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION.
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO
SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY
REFERENCE HEREIN, MUTATIS MUTANDIS.
30.14 USURY SAVINGS PROVISION.
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND
CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN
EFFECT. TO THE EXTENT ANY RENT OR PAYMENTS HEREUNDER ARE HEREINAFTER
CHARACTERIZED BY ANY COURT OF COMPETENT JURISDICTION AS THE REPAYMENT OF
PRINCIPAL AND INTEREST THEREON, THIS SECTION 30.14 SHALL APPLY. ANY SUCH RENT
OR PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE REFERRED TO HEREIN AS
"INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY LIMITED BY THE
PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH
AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR
ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION
PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL ANY
INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS LEASE
OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER
APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE
AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD OTHERWISE BE
PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION
SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER
SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM
NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW,
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WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR
AGREEMENT. IF LESSOR SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS
CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR
UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS
OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE
BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF
THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF
INTEREST, OR REFUNDED TO LESSEE OR ANY OTHER PAYOR THEREOF, IF AND TO THE
EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF
PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS
EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO
RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH
DEMAND, AND LESSOR DOES NOT INTEND TO CHARGE OR RECEIVE ANY UNEARNED INTEREST
IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE PAID TO LESSOR
SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED,
ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM (INCLUDING WITHOUT
LIMITATION ANY RENEWAL OR EXTENSION) OF THIS LEASE SO THAT THE AMOUNT OF
INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS
AMOUNT PERMITTED BY APPLICABLE LAW.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.
GUILFORD PHARMACEUTICALS INC.
By: /s/ Andrew R. Jordan
----------------------------------------
Name: Andrew R. Jordan
--------------------------------------
Title: Senior Vice President &
--------------------------------------
Chief Financial Officer
--------------------------------------
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as the Owner
Trustee under the Guilford Real Estate Trust
1998-1, as Lessor
By: /s/ Brett R. King
----------------------------------------
Name: Brett R. King
--------------------------------------
Title: Assistant Vice President
--------------------------------------
Receipt of this original
counterpart of the foregoing
Lease is hereby acknowledged
as the date hereof
FIRST UNION NATIONAL BANK,
as the Agent
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
<PAGE> 46
EXHIBIT A TO THE LEASE
LEASE SUPPLEMENT NO. ___
THIS LEASE SUPPLEMENT NO. ___ (this "Lease Supplement") dated as of
[________________] between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, not individually, but solely as the Owner Trustee
under the Guilford Real Estate Trust 1998-1, as lessor (the "Lessor"), and
GUILFORD PHARMACEUTICALS INC., a Delaware corporation, as lessee (the
"Lessee").
WHEREAS, Lessor is the owner or will be the owner of the Property
described on Schedule 1 hereto (the "Leased Property") and wishes to lease the
same to Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS; RULES OF USAGE. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in Appendix A to the Participation
Agreement, dated as of February 5, 1998, among Lessee, Lessor, not
individually, except as expressly stated therein, but solely as the Owner
Trustee under the Guilford Real Estate Trust 1998-1, the various banks and
other lending institutions which are parties thereto from time to time, as the
Holders, the various banks and other lending institutions which are parties
thereto from time to time, as the Lenders, and First Union National Bank, as
the Agent for the Lenders and respecting the Security Documents, as the Agent
for the Lenders and Holders, to the extent of their interests, as such may be
amended, modified, extended, supplemented, restated and/or replaced from time
to time.
SECTION 2. THE PROPERTIES. Attached hereto as Schedule 1 is the
description of the Leased Property, with an Equipment Schedule attached hereto
as Schedule 1-A, an Improvement Schedule attached hereto as Schedule 1-B and [A
LEGAL DESCRIPTION OF THE LAND / A COPY OF THE GROUND LEASE] attached hereto as
Schedule 1-C. Effective upon the execution and delivery of this Lease
Supplement by Lessor and Lessee, the Leased Property shall be subject to the
terms and provisions of the Lease. Without further action, any and all
additional Equipment funded under the Operative Agreements and any and all
additional Improvements made to the Land shall be deemed to be titled to the
Lessor and subject to the terms and conditions of the Lease and this Lease
Supplement.
SECTION 3. USE OF PROPERTY. At all times during the Term with
respect to each Property, Lessee will comply with all obligations under and (to
the extent no Event of Default exists and provided, that such exercise will
not result in a Material Adverse Effect) shall be permitted to exercise all
rights and remedies under, all operation and easement agreements and related or
similar agreements applicable to such Property.
A-1
<PAGE> 47
SECTION 4. RATIFICATION; INCORPORATION BY REFERENCE. Except as
specifically modified hereby, the terms and provisions of the Lease and the
Operative Agreements are hereby ratified and confirmed and remain in full force
and effect. The Lease is hereby incorporated herein by reference as though
restated herein in its entirety.
SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original
of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED, INTERPRETED TO AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE
STATE OF MARYLAND.
SECTION 7. MORTGAGE; POWER OF SALE. Without limiting any other
remedies set forth in the Lease, in the event that a court of competent
jurisdiction rules that the Lease constitutes a mortgage, deed of trust or
other secured financing, then Lessor and Lessee agree that Lessee hereby grants
a Lien against the Leased Property WITH POWER OF SALE, and that, upon the
occurrence of any Lease Event of Default, Lessor shall have the power and
authority, to the extent provided by law, after prior notice and lapse of such
time as may be required by law, to foreclose its interest (or cause such
interest to be foreclosed) in all or any part of the Leased Property.
SECTION 8. COUNTERPART EXECUTION. This Lease Supplement may be
executed in any number of counterparts and by each of the parties hereto in
separate counterparts, all such counterparts together constituting but one (1)
and the same instrument.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
A-2
<PAGE> 48
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of
the date and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as the Owner Trustee under the
Guilford Real Estate Trust 1998-1, as Lessor
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
GUILFORD PHARMACEUTICALS INC.,
as Lessee
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
Receipt of this original counterpart of the foregoing Lease Supplement is
hereby acknowledged as the date hereof.
FIRST UNION NATIONAL BANK, as
the Agent
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
A-3
<PAGE> 49
[CONFORM TO STATE LAW REQUIREMENTS]
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as the Owner Trustee under the Guilford Real Estate Trust 1998-1, on
behalf of the Owner Trustee.
[Notarial Seal]
-----------------------------
Notary Public
My commission expires:____________
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of GUILFORD
PHARMACEUTICALS INC., a Delaware corporation, on behalf of the corporation.
[Notarial Seal]
-----------------------------
Notary Public
My commission expires:____________
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ________________ this ____ day of
___________, by _____________, as __________________ of FIRST UNION NATIONAL
BANK, a national banking association, as the Agent.
[Notarial Seal]
-----------------------------
Notary Public
My commission expires:____________
A-4
<PAGE> 50
SCHEDULE 1
TO LEASE SUPPLEMENT NO. ____
(Description of the Leased Property)
A-5
<PAGE> 51
SCHEDULE 1-A
TO LEASE SUPPLEMENT NO. ____
(Equipment)
A-6
<PAGE> 52
SCHEDULE 1-B
TO LEASE SUPPLEMENT NO. ____
(Improvements)
A-7
<PAGE> 53
SCHEDULE 1-C
TO LEASE SUPPLEMENT NO. ____
[(LAND)/
(GROUND LEASE)]
A-8
<PAGE> 54
EXHIBIT B TO THE LEASE
[MODIFY OR SUBSTITUTE SHORT FORM LEASE AS
NECESSARY FOR LOCAL LAW REQUIREMENTS]
Recordation requested by:
Moore & Van Allen, PLLC
After recordation return to:
Moore & Van Allen, PLLC (WMA)
100 North Tryon Street, Floor 47
Charlotte, NC 28202-4003
Space above this line
for Recorder's use
- ------------------------------------------------------------------------------
MEMORANDUM OF LEASE AGREEMENT
AND
LEASE SUPPLEMENT NO. _____________
THIS MEMORANDUM OF LEASE AGREEMENT AND LEASE SUPPLEMENT NO.
____________ ("Memorandum"), dated as of _____________, 199___, is by and
between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not individually, but solely as the Owner Trustee under the
Guilford Real Estate Trust 1998-1, with an office at 79 South Main Street, Salt
Lake City, Utah 84111 (hereinafter referred to as "Lessor") and GUILFORD
PHARMACEUTICALS INC., a Delaware corporation, with an office at 6611 Tributary
Street, Baltimore, Maryland 21224 (hereinafter referred to as "Lessee").
WITNESSETH:
That for value received, Lessor and Lessee do hereby covenant, promise
and agree as follows:
1. DEMISED PREMISES AND DATE OF LEASE. Lessor has leased to
Lessee, and Lessee has leased from Lessor, for the Term (as hereinafter
defined), certain real property and other property located in ________________,
which is described in the attached Schedule 1 (the "Property"), pursuant to the
terms of a Lease Agreement between Lessor and Lessee dated as of February 5,
1998__ (as such may be amended, modified, extended, supplemented, restated
and/or replaced from time to time, "Lease") and a Lease Supplement No. _____
between Lessor and Lessee dated as of ______________ (the "Lease Supplement").
B-1
<PAGE> 55
2. TERM, RENEWAL, EXTENSION AND PURCHASE OPTION. The term of the
Lease for the Property ("Term") commenced as of __________, 19__ and shall end
as of _________, __, unless the Term is extended or earlier terminated in
accordance with the provisions of the Lease. The tenant has a purchase option
under the Lease.
3. TAX PAYER NUMBERS.
Lessor's tax payer number: __________________.
Lessee's tax payer number: ____________________.
4. MORTGAGE; POWER OF SALE. Without limiting any other remedies
set forth in the Lease, in the event that a court of competent jurisdiction
rules that the Lease constitutes a mortgage, deed of trust or other secured
financing, then Lessor and Lessee agree that Lessee has granted, pursuant to
the terms of the Lease and the Lease Supplement, a Lien against the Property
WITH POWER OF SALE, and that, upon the occurrence and during the continuance of
any Lease Event of Default, Lessor shall have the power and authority, to the
extent provided by law, after prior notice and lapse of such time as may be
required by law, to foreclose its interest (or cause such interest to be
foreclosed) in all or any part of the Property.
5. EFFECT OF MEMORANDUM. The purpose of this instrument is to
give notice of the Lease and the Lease Supplement and their respective terms,
covenants and conditions to the same extent as if the Lease and the Lease
Supplement were fully set forth herein. This Memorandum shall not modify in
any manner the terms, conditions or intent of the Lease or the Lease Supplement
and the parties agree that this Memorandum is not intended nor shall it be used
to interpret the Lease or the Lease Supplement or determine the intent of the
parties under the Lease or the Lease Supplement.
[The remainder of this page has been intentionally left blank.]
B-2
<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have duly executed this
instrument as of the day and year first written.
LESSOR:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually,
but solely as the Owner Trustee under the Guilford Real
Estate Trust 1998-1
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
LESSEE:
GUILFORD PHARMACEUTICALS INC.,
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
B-3
<PAGE> 57
SCHEDULE 1
(Description of Property)
B-4
<PAGE> 58
[CONFORM TO STATE LAW REQUIREMENTS]
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Memorandum of Lease Agreement and Lease Supplement No.
_____ was acknowledged before me, the undersigned Notary Public, in the County
of _________________ this _____ day of ______________, by ________________, as
__________________ of FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not individually, but solely as the Owner Trustee under
the Guilford Real Estate Trust 1998-1, on behalf of the Owner Trustee.
[Notarial Seal]
----------------------------
Notary Public
My commission expires:____________
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
The foregoing Memorandum of Lease Agreement and Lease Supplement No.
_____ was acknowledged before me, the undersigned Notary Public, in the County
of _________________ this _____ day of ______________, by ________________, as
__________________ of GUILFORD PHARMACEUTICALS INC., a Delaware corporation, on
behalf of the corporation.
[Notarial Seal]
----------------------------
Notary Public
My commission expires:____________
B-5
<PAGE> 1
EXHIBIT 21.01
SUBSIDIARIES OF GUILFORD PHARMACEUTICALS INC.
Below is a list of direct and indirect subsidiaries of the Corporation. All
subsidiaries are wholly-owned.
1. GPI Holdings, Inc., a Delaware corporation
2. Gell Pharmaceuticals, Inc., a Delaware corporation
3. Holabird Holdings N.V., a Netherlands corporation
4. GPI Polymer Holdings, Inc., a Delaware corporation
5. GPI NIL Holdings, Inc., a Delaware corporation
<PAGE> 1
EXHIBIT 23.01
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Stockholders of
Guilford Pharmaceuticals Inc.:
We consent to incorporation by reference in the registration statements (No.
33-90828 and No. 333-17833) on Form S-8 and registration statement No.
333-35415 on Form S-3 of Guilford Pharmaceuticals Inc. of our report dated
February 13, 1998, relating to the consolidated balance sheets of Guilford
Pharmaceuticals Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1997,
which report appears in the December 31, 1997 annual report on Form 10-K of
Guilford Pharmaceuticals Inc.
KPMG Peat Marwick LLP
Baltimore, Maryland
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 24,980
<SECURITIES> 0
<RECEIVABLES> 606
<ALLOWANCES> 0
<INVENTORY> 1,342
<CURRENT-ASSETS> 57,796
<PP&E> 21,601
<DEPRECIATION> 4,448
<TOTAL-ASSETS> 180,081
<CURRENT-LIABILITIES> 10,861
<BONDS> 10,926
0
0
<COMMON> 194
<OTHER-SE> 158,100
<TOTAL-LIABILITY-AND-EQUITY> 180,081
<SALES> 7,369
<TOTAL-REVENUES> 23,828
<CGS> 2,585
<TOTAL-COSTS> 41,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 837
<INCOME-PRETAX> (11,437)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,437)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,437)
<EPS-PRIMARY> (.65)<F1>
<EPS-DILUTED> (.65)
<FN>
<F1>EPS has been restated for the years ending December 31, 1995 and 1996 due to
the implementation of SAB 98 and SFAS 128.
</FN>
</TABLE>
