SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25544
Miravant Medical Technologies
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(Exact name of Registrant as specified in its charter)
Delaware 77-0222872
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7408 Hollister Avenue, Santa Barbara, California 93117
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(Address of principal executive offices, including zip code)
(805) 685-9880
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1998
----- -------------------------------
Common Stock, $.01 par value 16,041,339
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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Page
Item 1. Consolidated Financial Statements
Consolidated balance sheets as of September 30, 1998 and
December 31, 1997.......................................... 3
Consolidated statements of operations for the three months ended
September 30, 1998 and 1997, and for the nine months ended
September 30, 1998 and 1997................................. 4
Consolidated statements of cash .flows for the. nine months ended
September 30, 1998 and 1997................................. 5
Notes to consolidated financial statements...................... 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................... 16
Signatures..................................................... 17
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS
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September 30, December 31,
1998 1997
--------------------- ------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents.............................................. $ 15,966,000 $ 55,666,000
Investments in short-term marketable securities......................... 15,229,000 27,796,000
Accounts receivable..................................................... 1,331,000 1,833,000
Prepaid expenses and other current assets............................... 893,000 772,000
--------------------- ------------------
Total current assets....................................................... 33,419,000 86,067,000
Property, plant & equipment:
Vehicles................................................................ 28,000 28,000
Furniture and fixtures.................................................. 1,713,000 1,578,000
Equipment............................................................... 4,996,000 3,752,000
Leasehold improvements.................................................. 4,223,000 3,071,000
Capital lease equipment................................................. 184,000 184,000
--------------------- ------------------
11,144,000 8,613,000
Accumulated depreciation and amortization.............................. 4,779,000 2,886,000
--------------------- ------------------
6,365,000 5,727,000
Investments in affiliates.................................................. 1,481,000 895,000
Loan to affiliate, net of reserve of $1.0 million at September 30, 1998.... -- --
Patents and other assets................................................... 1,200,000 342,000
===================== ==================
Total assets............................................................... $ 42,465,000 $ 93,031,000
===================== ==================
Liabilities and shareholders' equity Current liabilities:
Accounts payable........................................................ $ 2,635,000 $ 4,290,000
Accrued payroll and expenses............................................ 727,000 1,022,000
Current portion of capital lease obligations............................ 4,000 21,000
--------------------- ------------------
Total current liabilities.................................................. 3,366,000 5,333,000
Shareholders' equity:
Common stock, 50,000,000 shares authorized; 13,691,704 and 13,952,847 shares
issued and outstanding at September 30, 1998 and
December 31, 1997, respectively...................................... 149,507,000 170,451,000
Notes receivable from officers.......................................... (2,100,000)
--
Deferred compensation................................................... (3,415,000) (1,899,000)
Unrealized loss on available-for-sale securities........................ (2,995,000) --
Accumulated deficit..................................................... (101,898,000) (80,854,000)
--------------------- ------------------
Total shareholders' equity................................................. 39,099,000 87,698,000
--------------------- ------------------
Total liabilities and shareholders' equity................................. $ 42,465,000 $ 93,031,000
===================== ==================
</TABLE>
MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three months ended September 30, Nine months ended September 30,
1998 1997 1998 1997
------------------- ------------------ ------------------ -----------------
Revenues:
Grants, licensing and royalty income........ $ 3,753,000 $ 694,000 $ 5,719,000 $ 1,418,000
Total Revenues................................. ------------------- ------------------ ------------------ -----------------
3,753,000 694,000 5,719,000 1,418,000
Costs and expenses:
Research and development.................... 5,471,000 5,761,000 19,635,000 13,991,000
Selling, general and administrative......... 2,824,000 3,056,000 8,406,000 7,326,000
Loss in affiliate........................... 526,000 273,000 1,921,000 745,000
-------------------- ------------------ ------------------ -----------------
Total costs and expenses....................... 8,821,000 9,090,000 29,962,000 22,062,000
Loss from operations........................... (5,068,000) (8,396,000) (24,243,000) (20,644,000)
Interest and other income (expense):
Interest and other income................... 1,005,000 607,000 3,200,000 1,686,000
Interest expense............................ -- (1,000) (1,000) (5,000)
------------------ ------------------ ---------------- -----------------
Total net interest and other income............ 1,005,000 606,000 3,199,000 1,681,000
-------------------- ------------------ ------------------ -----------------
Net loss....................................... $ (4,063,000) $ (7,790,000) $ (21,044,000) $ (18,963,000)
================== ================== ================ =================
Net loss per share - basic and diluted......... $ (0.30) $ (0.63) $ (1.51) $ (1.53)
================== ================== ================ =================
Shares used in computing net loss per share.... 13,724,679 12,410,110 13,976,017 12,382,409
==================== ================== ================== =================
</TABLE>
MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine months ended September 30,
Operating activities: 1998 1997
------------------- ---------------------
Net loss........................................................... $ (21,044,000) $ (18,963,000)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization................................... 1,985,000 689,000
Amortization of deferred compensation........................... 1,892,000 1,008,000
Reserve for loan receivable from affiliate...................... 1,026,000 --
Changes in operating assets and liabilities:
Accounts receivable.......................................... 502,000 787,000
Prepaid expenses and other assets............................ (1,072,000) (490,000)
Accounts payable and accrued payroll and expenses............ (1,949,000) 1,107,000
------------------- -------------------
Net cash used in operating activities.............................. (18,660,000) (15,862,000)
Investing activities:
Purchases of marketable securities................................. (36,545,000) (2,900,000)
Sales of marketable securities..................................... 49,112,000 10,500,000
Investments in affiliates.......................................... (2,105,000) 745,000
Purchases of property, plant and equipment......................... (2,531,000) (1,524,000)
------------------- ---------------------
Net cash provided by investing activities.......................... 7,931,000 6,821,000
Financing activities:
Proceeds from issuance of Common Stock, less issuance costs........ 3,333,000 43,609,000
Purchases of Common Stock.......................................... (29,161,000) (4,316,000)
Payments of executive officer notes................................ (2,100,000) --
Payments of capital lease obligations.............................. (17,000) (32,000)
Payments of loan to affiliate...................................... (1,026,000) --
Payments of long-term obligations.................................. -- (42,000)
---------------- -------------------
Net cash (used in) provided by financing activities................ (28,971,000) 39,219,000
Net (decrease) increase in cash and cash equivalents............... (39,700,000) 30,178,000
Cash and cash equivalents at beginning of period................... 55,666,000 31,498,000
=================== =====================
Cash and cash equivalents at end of period......................... $ 15,966,000 $ 61,676,000
=================== =====================
Supplemental disclosures:
State taxes paid................................................... $ 96,000 $ 92,000
=================== =====================
Interest paid...................................................... $ 1,000 $ 6,000
=================== =====================
Non-cash investing activities:
Investment in affiliate from issuance of Common Stock............. $ 1,476,000 $ --
=================== =====================
Unrealized loss on available-for-sale securities.................. $ 2,995,000 $ --
=================== =====================
</TABLE>
MIRAVANT MEDICAL TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The information contained herein has been prepared in accordance with Rule
10-01 of Regulation S-X. The information at September 30, 1998, and for the
three and nine month periods ended September 30, 1998 and 1997, is
unaudited. In the opinion of management, the information reflects all
adjustments necessary to make the results of operations for the interim
periods a fair statement of such operations. All such adjustments are of a
normal recurring nature. Interim results are not necessarily indicative of
results for a full year. For a presentation including all disclosures
required by generally accepted accounting principles, these financial
statements should be read in conjunction with the audited consolidated
financial statements for the year ended December 31, 1997 included in the
Miravant Medical Technologies Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
2. Investments in Affiliates
Xillix Technologies Corp
In June 1998, the Company purchased a $5.0 million, 9% equity interest in
Xillix Technologies Corp. ("Xillix"). The Company received 2,691,904 shares
of Xillix common stock, in exchange for $3.0 million in cash and the
remainder in restricted Miravant Common Stock at the market value on the
date of the agreement, which represented 58,909 shares of Common Stock at
$25.06 per share or $1.5 million. The investment will be accounted for
under the cost method and classified as available-for-sale. At September
30, 1998, in accordance with the accounting for available-for-sale
securities, the investment was adjusted to the current market value of
Xillix common stock, with the resulting unrealized loss recorded as a
separate component of shareholders' equity.
Ramus Medical Technologies
In connection with the investment made in Ramus Medical Technologies
("Ramus"), an event occurred to start the six month purchase period under
the Option to Purchase Ramus Medical Technologies Agreement dated December
27, 1996 whereby the Company has the exclusive option to purchase the
remaining shares of Ramus for a specified amount under certain terms and
conditions no later than March 3, 1999.
3. Loan to Affiliate
In April 1998, the Company entered into a revolving credit agreement with
its affiliate, Ramus, pursuant to which the Company, at the request of
Ramus, shall from time to time make loans to Ramus in an aggregate
outstanding principal amount not exceeding at any one time $2.0 million.
The unpaid principal amount of the loans, which are to be used to fund
Ramus' clinical trial and operating costs, accrues interest at a variable
rate (7.35% as of September 30, 1998) based on the Company's bank rate, and
matures in March 2000. The loans are evidenced by a promissory note, the
balance of which shall be convertible under certain circumstances at the
option of the Company into shares of Ramus stock. As of September 30, 1998,
Ramus had borrowed $1.0 million under the revolving credit agreement and an
additional $750,000 through October 1998. The Company has established a
reserve for the entire outstanding balance of the loan receivable at
September 30, 1998, which is included in loss in affiliate in the
consolidated statements of operations.
4. Shareholders' Equity
In July 1998, in accordance with the amended Securities Purchase Agreement
("Amendment Agreement") dated June 30, 1998, with the purchasers of 900,000
shares of the Company's Common Stock under the Securities Purchase
Agreement dated September 22, 1997, the Company repurchased 225,000 shares
subject to the price protection provisions of the Amendment Agreement for
both the August 1 and September 1, 1998 measurement dates. This repurchase
eliminated the Company's obligation to issue additional shares or pay cash
under the amended price protection provisions with respect to the
repurchased shares. Although the Company maintains the right, it is under
no obligation nor has it notified the parties of its intent to repurchase
any or all of the remaining shares. The repurchased shares will be retired
by the Company.
In addition, as the Company did not repurchase all of the purchasers
original 900,000 shares within sixty (60) days of the closing of the
Amendment Agreement, the Company is obligated under the terms of the the
Amendment Agreement to issue an additional 450,000 warrants to the
purchasers, at an exercise price of $35.00 per share, the earlier of five
business days after March 1, 1999 or the termination of the amended lock-up
agreement with the purchasers.
5. Per Share Data
During the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"),
which supersedes Accounting Principles Board Opinion No. 15 and required a
change in the method used to compute earnings per share. SFAS 128 replaced
the presentation of primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share and reflects the
potential dilution that would occur if securities or other contracts to
issue common stock were exercised or converted to common stock. Common
stock equivalent shares from stock options and warrants have been excluded
from this computation as their effect is anti-dilutive. All previously
stated earnings per share amounts conform to the new SFAS 128 requirements.
Basic loss per common share is computed by dividing the net loss by the
weighted average shares outstanding during the period in accordance with
SFAS 128. Since the effect of the assumed exercise of common stock options
and other convertible securities was anti-dilutive, basic and diluted loss
per share as presented on the consolidated statements of operations are the
same.
6. Comprehensive Income (Loss)
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of SFAS 130
had no impact on the Company's net loss or shareholders' equity. SFAS 130
requires unrealized gains or losses on available-for-sale securities and
foreign currency translation adjustments, which prior to adoption were
reported separately in shareholders' equity, to be included in
comprehensive income.
For the three months ended September 30, 1998 and 1997, comprehensive loss
amounted to approximately $7.1 million and $7.8 million, respectively. For
the nine months ended September 30, 1998 and 1997, comprehensive loss
amounted to approximately $24.0 million and $19.0 million, respectively.
The difference between net loss and comprehensive loss relates to the
unrealized loss the Company recorded for its available-for-sale securities
on its investment in its affiliate Xillix.
7. Commitments and Contingencies
In July 1998, the Company entered into a lease agreement for approximately
27,400 square feet of primarily office space. The current base rent for
this lease is approximately $34,250 per month. The lease expires in October
2003 and provides for rent to be adjusted annually based on increases in
the consumer price index. The lease also provides the Company with the
ability to sublet all or a portion of the property. The leased property is
located in a business park where the Company's headquarters are located and
is subject to a master lease agreement.
8. Short-Term Loan to Officer
In August 1998, the Company made a short-term loan to its Chief Executive
Officer. The note accrues interest at a fixed rate of 5.5% and matures
ninety (90) days from the date of issuance. Currently, the note has an
outstanding balance of $296,000 plus accrued interest.
9. Subsequent Event
In October 1998, in accordance with the Amendment Agreement dated June 30,
1998, the Company repurchased 112,500 shares subject to the price
protection provisions of the Amendment Agreement for the October 1, 1998
measurement date. This repurchase eliminated the Company's obligation to
issue additional shares or pay cash under the amended price protection
provisions with respect to the repurchased shares. Additionally, in
November 1998, the Company fulfilled its obligation related to 112,500
shares subject to the price protection provisions for the November 1, 1998
measurement date. The Company elected to pay the purchasers cash for the
difference between the original purchase price and the thirty (30) day
average closing bid price prior to the November 1, 1998 measurement date,
which amounted to $4.6 million. These shares and a corresponding number of
warrants are now released from the provisions under the amended lock-up
agreement with the purchasers. Although the Company maintains the right, it
is under no obligation nor has it notified the parties of its intent to
repurchase any or all of the remaining shares. The repurchased shares will
be retired by the Company.
10. Reclassifications
Certain reclassifications have been made to the previous 1998 quarterly
financial statements to conform to the current quarter presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. This Quarterly Report on
Form 10-Q may be deemed to include forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve risk and uncertainty, including financial,
clinical, business environment and trend projections. Although Miravant Medical
Technologies believes that its expectations are based on reasonable assumptions,
it can give no assurance that its goals will be achieved. The important factors
that could cause actual results to differ materially from those in the forward
looking statements herein include, without limitation, the early stage of
development of both the Company and its products, the timing and uncertainty of
results of both research and regulatory processes, the extensive government
regulation applicable to the Company's business, the unproven safety and
efficacy of the Company's drug and device products, the Company's significant
additional financing requirements, the uncertainty of future capital funding,
the highly competitive environment of the international pharmaceuticals and
medical device industries and the presence of a number of competitors with
significantly greater financial, technical and other resources and extensive
operating histories, the Company's potential exposure to product liability or
recall, uncertainties relating to patents and other intellectual property,
including whether the Company will obtain sufficient protection or competitive
advantage therefrom, uncertainties relating to the Company's ability to
successfully complete its Year 2000 initiatives and the Company's dependence
upon a limited number of key personnel and consultants and its significant
reliance upon its collaborative partners for achieving its goals, and other
factors detailed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
General
Since its inception, the Company has been principally engaged in the
research and development of drugs and medical device products for use in
PhotoPoint(TM), the Company's proprietary technologies for photodynamic therapy.
The Company has been unprofitable since its founding and has incurred a
cumulative net loss of approximately $101.9 million as of September 30, 1998.
The Company expects to continue to incur substantial and increasing operating
losses for the next several years due to continued and increased spending on
research and development programs, the funding of preclinical and clinical
testing and regulatory activities and the costs of manufacturing, marketing,
sales, distribution and administrative activities.
The Company's revenues primarily reflect income earned from licensing
agreements, grants and license royalties from the sale of medical device
products. To date, the Company has received no revenue from the sale of drug
products, and the Company is not permitted to engage in commercial sales of
drugs or devices until such time, if ever, as the Company receives requisite
regulatory approvals. As a result, the Company does not expect to record
significant product sales until such approvals are received.
Until the Company commercializes its product(s), the Company expects
revenues to continue to be attributable to licensing agreements, grants and
license royalties from the sale of medical device products. The Company
anticipates that future revenues and results of operations may continue to
fluctuate significantly depending on, among other factors, the timing and
outcome of applications for regulatory approvals, the continued support from its
collaborative partners, the Company's ability to successfully manufacture,
market and distribute its drug and device products and/or the establishment of
collaborative arrangements for the manufacturing, marketing and distribution of
its products. The Company anticipates its operating activities will result in
substantial net losses for several more years.
The Company is currently conducting clinical trials in oncology and
ophthalmology. In dermatology, the Company is investigating the development of
topical formulations of its photoselective drugs. Based upon the outcome of
these studies and various economic and development factors, including cost,
reimbursement and the available alternative therapies, the Company may or may
not elect to further develop PhotoPoint procedures in oncology, ophthalmology,
dermatology or in any other indications.
In June 1998, the Company and Pharmacia & Upjohn, Inc. ("Pharmacia &
Upjohn") amended the development and funding provisions of their previously
executed Purlytin(TM) license agreements discussed below. Under the amended
ophthalmology agreement, the Company will conduct all preclinical and U.S.
clinical trials and will be reimbursed by Pharmacia & Upjohn for all
out-of-pocket expenses incurred, provided that the trials are conducted in
accordance with the agreement. Pharmacia & Upjohn will conduct all international
clinical trials in ophthalmology. Under the Amendment Agreement for the fields
of oncology and urology, the Company will conduct all preclinical and clinical
trials and will receive up to $20 million over the next two years, to be paid
quarterly beginning in July 1998, for the reimbursement of direct and indirect
costs incurred and the achievement of specified milestones. Under both of the
Amendment Agreements, Pharmacia & Upjohn will also pay the Company royalties on
product sales.
During the third quarter of 1998 and in connection with the amended
Pharmacia & Upjohn agreements, the Company implemented a program to restructure
its cash expenditures and to focus its resources on its core development
programs, which emphasize large potential market opportunities. The program was
designed to utilize the cost reimbursement components of the amended Pharmacia &
Upjohn agreements as well as streamline administrative activities, reduce
overhead costs and eliminate positions the were not central to the core
development programs.
The Company has awarded, and may award in the future, stock options that
vest upon the achievement of certain milestones. Under Accounting Principles
Board Opinion No. 25, such options are accounted for as variable stock options.
As such, until the milestone is achieved (but only after it is determined to be
probable), deferred compensation is recorded in an amount equal to the
difference between the fair market value of the Common Stock on the date of
determination less the option exercise price and is adjusted from period to
period to reflect changes in the market value of the Common Stock. Deferred
compensation, as it relates to a particular milestone, is amortized over the
period between when achievement of the milestone becomes probable and when the
milestone is estimated to be achieved. Amortization of deferred compensation
could result in significant additional compensation expense being recorded in
future periods based on the market value of the Common Stock from period to
period.
Effective June 21, 1996, the Compensation Committee of the Board of
Directors adjusted the future vesting periods of variable stock options covering
400,000 shares of Common Stock. These variable stock options were adjusted to
change the vesting periods to specific dates as opposed to the original vesting
periods which were based upon the achievement of milestones; no change was made
to the exercise prices of these variable stock options. This change in the
vesting periods provides for the options to be accounted for as non-variable
options and therefore alleviates the impact of deferred compensation fluctuating
in future periods based on changes in the per share market value from period to
period. As of September 30, 1998, options covering 302,500 shares with an
exercise price of $34.75 per share have vested and options covering 75,000
shares have been canceled. The remaining unvested shares will vest in the years
1998 through 2000.
Year 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. The Company's
computer equipment and software and devices with embedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process accounting, payroll, database, network, and software transactions,
possible disruption of environmental, lighting, and security controls, possible
disruption of copier and fax capabilities, and loss of telephone voicemail
messages, in addition to other similar normal business activities.
The Company has undertaken various initiatives intended to ensure that its
computer equipment and software will function properly with respect to dates in
the Year 2000 and thereafter. For this purpose, the term "computer equipment and
software" includes systems that are commonly thought of as Information
Technology ("IT") systems, including accounting, data processing, and
telephone/PBX systems and other miscellaneous systems, as well as systems that
are not commonly thought of as IT systems, such as alarm systems, fax machines,
air conditioning units, internally developed software and other miscellaneous
systems. Both IT and non-IT systems may contain embedded technology, which
complicates the Company's Year 2000 identification, assessment, remediation, and
testing efforts. Based upon its identification and assessment efforts to date,
the Company believes that certain of the computer equipment and software it
currently uses may require replacement or modification. In addition, in the
ordinary course of replacing computer equipment and software, the Company
attempts to obtain replacements that are Year 2000 compliant. Utilizing both
internal and external resources to identify and assess needed Year 2000
remediation, the Company currently anticipates that its Year 2000
identification, assessment, remediation and testing efforts, which began in
February 1998, will be completed by June 30, 1999. The Company estimates that as
of September 30, 1998, it had completed approximately 25% of the initiatives
that it believes will be necessary to fully address potential Year 2000 issues
relating to its computer equipment and software. The projects comprising the
remaining 75% of the initiatives are in process and expected to be completed on
or about June 30, 1999. Additionally, the Company has recently commenced its
initiatives relating to the non-IT systems. The following table describes the
Year 2000 initiatives as well as the Company's progress and the anticipated
completion dates as of September 30, 1998:
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Time Percent
Year 2000 Initiatives Table Complete
Initial IT system identification...................................... 2/98 - 10/98 100%
Initial IT system assessment.......................................... 2/98 - 11/98 95%
Remediation and testing regarding central system issues............... 2/98 - 6/99 15%
Identification, assessment, remediation and testing regarding
desktop and individual system 2/98 - 6/99 35%
issues..................................................................
Identification regarding non-IT system issues......................... 2/98 - 10/98 100%
Assessment regarding non-IT system issues............................. 2/98 - 11/98 65%
Remediation and testing regarding non-IT system issues................ 2/98 - 6/99 35%
</TABLE>
The Company is in the process of communicating with its significant vendors
and service providers and strategic partners to determine the extent to which
interfaces with such entities are vulnerable to Year entities are Year 2000
compliant. This process is expected to be completed in December 1998.
The Company believes that the cost of its Year 2000 assessment, remediation
and testing efforts, as well as those costs related to Year 2000 issues of third
parties, are expected to approximate $250,000. As of September 30, 1998, the
Company had not incurred any external costs related to its Year 2000
identification, assessment, remediation and testing efforts. Other non-Year 2000
IT efforts have not been materially delayed or impacted by Year 2000
initiatives. The Company presently believes that the Year 2000 issue will not
pose significant operational problems for the Company. However, if all Year 2000
issues are not properly identified, or assessment, remediation and testing are
not effected timely with respect to Year 2000 problems that are identified,
there can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's results of operations or adversely affect the Company's
relationships with vendors, or others. Additionally, there can be no assurance
that the Year 2000 issues of other entities will not have a material adverse
impact on the Company's results of operations.
Results of Operations
The following table provides a summary of the Company's revenues for the
three and nine month periods ended September 30, 1998 and 1997:
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Three months ended Nine months ended
September 30, September 30,
(Unaudited) (Unaudited)
Consolidated Revenues 1998 1997 1998 1997
- --------------------- ----------------- ------------------ ----------------- -----------------
Grants and contracts....$ 230,000 $ -- $ 568,000 $ --
Royalties............... 30,000 62,000 163,000 186,000
License................. 3,493,000 632,000 4,988,000 1,232,000
----------------- ----------------- ----------------- -----------------
Total revenues..........$ 3,753,000 $ 694,000 $ 5,719,000 $ 1,418,000
================= ================== ================= =================
</TABLE>
Revenues. For the three months ended September 30, 1998, revenues increased
to $3.8 million from $694,000 for the three months ended September 30, 1997.
Total revenues for the nine months ended September 30, 1998 increased to $5.7
million as compared to $1.4 million for the same period in 1997. The increase in
revenues for both the three and nine month periods ended September 30, 1998 is
primarily related to a $2.5 million quarterly payment received for oncology
under the June 1998 amended license agreement with Pharmacia & Upjohn.
Additionally, for the three and nine month periods ended September 30, 1998, the
Company recorded revenues of $993,000 and $2.5 million, respectively, in
association with the specific reimbursement for costs incurred in preclinical
and clinical trials in ophthalmology. For the three and nine month periods ended
September 30, 1997, the Company recorded revenues of $632,000 and $1.2 million,
respectively, for the specific reimbursement of clinical costs in ophthalmology
and oncology. In addition, the Company recorded $230,000 and $568,000 for the
three and nine month periods ended September 30, 1998, respectively, associated
with two on-going grants, which began in the fourth quarter of 1997. There were
no active grants or grant revenue recorded during the first nine months in 1997.
Under the amended license agreements with Pharmacia & Upjohn, the Company
anticipates recording license income for the specific reimbursement of clinical
costs for ophthalmology, as well as income related to quarterly payments for
oncology, throughout 1998 and beyond. The level of such license, grant and
royalty income is likely to fluctuate materially from period to period and in
the future depending on the amount of clinical costs incurred and/or reimbursed,
the achievement of milestones and the extent of development activities under the
amended Pharmacia & Upjohn license agreements, the amount of grant income
awarded and expended and the amount of device products sold by Laserscope,
pursuant to a license agreement, entered into in 1992 and terminating in April
1999, which provides royalties from the sale of the Company's previously
designed device products.
Research and Development. The Company's research and development expenses
for the three months ended September 30, 1998 decreased to $5.5 million from
$5.8 million for the three months ended September 30, 1997. Research and
development expenses for the nine months ended September 30, 1998 increased to
$19.6 million from $14.0 million for the nine months ended September 30, 1997.
The slight decrease in research and development expenses for the three months
ended September 30, 1998 relates primarily to the timing of costs incurred
within the various phases of the Company's preclinical and clinical trials. The
increase in research and development expenses for the nine months ended
September 30, 1998 relates primarily to (i) the costs associated with the
screening, treatment and monitoring of qualified individuals participating in
clinical trials, (ii) the preparation of the documentation for clinical trials
and regulatory filings and (iii) the preclinical work associated with the
development of existing and new drug compounds, formulations and clinical
programs. In addition, research and development expenses continue to increase in
conjunction with the Company's progression through the various stages of
preclinical and clinical trials and the increased costs associated with the
purchase of raw materials and supplies for the production of clinical devices
and drugs for use in these trials and the development of new drugs and drug
formulations. Future research and development expenses may fluctuate depending
on the impact of the Company's cost restructuring program implemented in
September 1998, the continued expenses incurred in its clinical trials in
ophthalmology and oncology, and the costs associated with the pharmaceutical
manufacturing scale-up and the expansion of its research and development
programs, which includes the increased hiring of personnel and continued
expansion of preclinical and clinical testing. See "--General."
Selling, General and Administrative. The Company's selling, general and
administrative expenses for the three months ended September 30, 1998 decreased
to $2.8 million from $3.1 million for the three months ended September 30, 1997.
Total selling, general and administrative costs for the first nine months of
1998 increased to $8.4 million as compared to $7.3 million for the same period
in 1997. Expenses for the three months ended September 30, 1998 decreased
slightly as compared to the same period in 1997, as the Company incurred
increased expenses in professional services received from consultants and
attorneys and costs associated with payroll and overhead, which were offset by a
decrease in advertising expenses. The increase in selling, general and
administrative expenses for the nine month period ending September 30, 1998 as
compared to the same period in 1997 are a result of (i) the increase in costs
associated with professional services received from financial consultants and
attorneys and (ii) the increase in payroll and overhead costs due to the
addition of administrative and corporate personnel. Future selling, general and
administrative expenses may fluctuate depending on the impact of the Company's
cost restructuring program implemented in September 1998, the extent of the
increased support required for research and development activities, the
continuing corporate development and professional services, compensation expense
associated with stock options and financial consultants and general corporate
matters, as well as the other factors described above.
Loss in Investment in Affiliate. For the three months ended September 30,
1998 and 1997, the Company recorded as expense $526,000 and $273,000,
respectively, in connection with its investment in Ramus in December 1996. For
the nine months ended September 30, 1998, the Company recorded $1.9 million as
expense related to Ramus as compared to $745,000 for the nine months ended
September 30, 1997. For the three months ended September 30, 1998, the $526,000
loss represents additions to the reserve created for the outstanding loan
balance Ramus has with the Company. For the nine months ended September 30,
1998, the $1.9 million loss consists of $1.0 million representing the total
reserve for the Ramus loan, as well as $895,000 which represents 100% of Ramus'
losses to the extent of the investment in Ramus made by the Company. The
expenses recorded for the three and nine month periods in 1997 solely represent
100% of Ramus' losses for those time periods. While Ramus' losses from
operations are expected to continue throughout 1998 and beyond, the Company will
not record any further losses associated with Ramus' operating losses, as the
investment in Ramus has been completely reduced to zero as of September 30,
1998. However, as Ramus does continue to borrow funds under the loan agreement
the Company may continue to increase the reserve associated with the Ramus loan.
Interest and Other Income. For the three months ended September 30, 1998,
net interest and other income increased to $1.0 million compared to net interest
and other income of $606,000 for the three months ended September 30, 1997.
Total net interest and other income for the nine months ended September 30, 1998
increased to $3.2 million as compared to $1.7 million for the same period in
1997. The increase in net interest and other income for both the three and nine
month periods in 1998 resulted primarily from the investment of proceeds
received from the Company's private equity offerings in September 1997 and
October 1997.
The Company does not believe that inflation has had a material impact on
its results of operations.
Liquidity and Capital Resources
Since inception through September 30, 1998, the Company has accumulated a
deficit of approximately $101.9 million and expects to continue to incur
substantial and increasing operating losses for the next several years. The
Company has financed its operations primarily through private placements of
common and preferred stock, private placements of convertible notes and
short-term notes, its initial public offering, Pharmacia & Upjohn's purchase of
Common Stock and a secondary public offering. As of September 30, 1998, the
Company had received proceeds from the sale of equity securities and convertible
notes of approximately $181.5 million. The Company has available a $1.0 million
bank line of credit which has a variable rate of interest based on the bank's
lending rate (7.35% as of September 30, 1998), which expires on January 31,
1999, and is collateralized by the Company's cash balances. The credit agreement
subjects the Company to certain customary restrictions, including a prohibition
on the payment of dividends. The Company presently has no outstanding borrowings
under the bank line of credit.
In connection with the original agreement entered into with Pharmacia &
Upjohn in July 1995 and the amended license agreements entered into in June
1998, for the nine months ended September 30, 1998 the Company has recorded
license income of $2.5 million for the specific reimbursement of clinical costs
in ophthalmology and $2.5 million of quarterly payments related to oncology.
Under the amended license agreements, the Company anticipates recording license
income for the specific reimbursement of clinical costs in ophthalmology, as
well as quarterly and milestone payments for oncology, throughout the remainder
of 1998 and beyond.
In June 1998, the Company purchased a $5.0 million, 9% equity interest in
Xillix. The Company received 2,691,904 shares of Xillix Common Stock, in
exchange for $3.0 million in cash and the remainder in restricted Miravant
Common Stock at the market value on the date of the agreement, which represented
58,909 shares of Common Stock at $25.06 per share or $1.5 million. In addition
to the investment, the Company entered into a strategic alliance agreement with
Xillix to co-develop proprietary systems incorporating the technology of each
company and to share the research and development costs.
Under the revolving credit agreement entered into in April 1998 with its
affiliate, Ramus, the Company has provided Ramus with $1.0 million of the $2.0
million credit limit as of September 30, 1998. At the request of Ramus, the
Company will continue, from time to time, to provide Ramus with additional
amounts under this agreement. Through October 1998, the Company funded an
additional $750,000, which increased the outstanding loan balance to $1.8
million.
For the first nine months of 1998, the Company required cash for operations
of approximately $18.7 million compared to $15.9 million for the same period in
1997. The increase in cash used in operations was primarily due to an increase
in operating activities associated with the continued expansion of preclinical
and clinical testing, the increase in research and development programs and
personnel, the reduction of accounts payable and the increase in general
corporate activities. For the first nine months of 1998, the Company required
cash for its financing activities of approximately $29.0 million as compared to
cash provided by its financing activities of $39.2 million for the same period
in 1997. The increase in cash required is primarily related to the repurchase by
the Company of its Common Stock under the Board authorized repurchase program
and the repurchase of its Common Stock pursuant to the amended Securities
Purchase Agreement, which amounted to $17.9 million and $11.3 million,
respectively. Additionally, the increase in cash required for financing
activities relates to the issuance of executive equity notes during the first
three months of 1998. Cash provided by financing activities in 1997 related
primarily to funds received from the private placement equity offerings.
The Company invested a total of $2.5 million in property, plant and
equipment during the first nine months of 1998 compared to $1.5 million during
the same period in 1997. The increase is directly related to costs incurred for
the expansion of the Company's laboratory and office space as well as the
purchase of equipment for this space. The Company expects to continue to
purchase property and equipment in the future as it expands its preclinical,
clinical and research and development activities. Since inception, the Company
has entered into capital lease agreements for approximately $184,000 of
equipment, consisting primarily of laboratory equipment. The Company expects to
continue to lease equipment from time to time as needed, when and if financing
resources become available at acceptable terms to the Company.
The Company's capital funding requirements will depend on numerous factors,
including the progress and magnitude of the Company's research and development
programs and preclinical testing and clinical trials, the time involved in
obtaining regulatory approvals, the cost involved in filing and maintaining
patent claims, technological advances, competitor and market conditions, the
ability of the Company to establish and maintain collaborative arrangements, the
cost of manufacturing scale-up and the cost and effectiveness of
commercialization activities and arrangements.
The Company is likely to require substantial funding to continue its
research and development activities, preclinical and clinical testing and
manufacturing, marketing, sales, distribution, administrative activities and
additional investment opportunities in affiliates. Additionally, under the
Amendment Agreement dated June 30, 1998 to the Company's Securities Purchase
Agreement dated September 22, 1997, the Company is likely to be required to
expend substantial funds to fulfill its obligations under the price protection
provisions. Furthermore, the Company may expend significant additional cash
resources to repurchase shares of its Common Stock if it exercises its option to
repurchase its shares under the Amendment Agreement. The Company has raised
funds in the past through the public or private sale of securities, and may
raise funds in the future through public or private financings, collaborative
arrangements or from other sources. The success of such efforts will depend in
large part upon continuing developments in the Company's preclinical and
clinical testing. The Company continues to explore and, as appropriate, enter
into discussions with other companies regarding the potential for equity
investment, collaborative arrangements, license agreements or development or
other funding programs with the Company in exchange for manufacturing,
marketing, distribution or other rights to products developed by the Company.
However, there can be no assurance that discussions with other companies will
result in any investments, collaborative arrangements, agreements or funding, or
that the necessary additional financing through debt or equity financing will be
available to the Company on acceptable terms, if at all. Further, there can be
no assurance that any arrangements resulting from these discussions will
successfully reduce the Company's funding requirements. If additional funding is
not available to the Company when needed, the Company will be required to scale
back its research and development programs, preclinical and clinical testing and
administrative activities and the Company's business and financial results and
condition would be materially adversely affected.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See Exhibit Index on page 18.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Miravant Medical Technologies
Date: November 13, 1998 By: /S/ John M. Philpott
--------------------
John M. Philpott
Chief Financial Officer and Controller
(on behalf of the Company and as
Principal Financial Officer and
Principal Accounting Officer)
<TABLE>
<CAPTION>
<S> <C> <C>
INDEX TO EXHIBITS
Incorporating
Exhibit Reference
Number Description (if applicable)
3.1 Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant
filed with the Delaware Secretary of State on September 12, 1997. [E][3.1]
3.2 Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant [C][3.11]
filed with the Delaware Secretary of State on July 24, 1995.
3.3 Restated Certificate of Incorporation of the Registrant filed with the Delaware Secretary [B][3.1]
of State on December 14, 1994.
3.4 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.2]
the Delaware Secretary of State on March 17, 1994.
3.5 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.3]
the Delaware Secretary of State on October 7, 1992.
3.6 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.4]
the Delaware Secretary of State on November 21, 1991.
3.7 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.5]
the Delaware Secretary of State on September 27, 1991.
3.8 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.6]
the Delaware Secretary of State on December 20, 1989.
3.9 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.7]
the Delaware Secretary of State on August 11, 1989.
3.10 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.8]
the Delaware Secretary of State on July 13, 1989.
3.11 Certificate of Incorporation of the Registrant filed with the Delaware Secretary of State [A][3.9]
on June 16, 1989.
3.12 Amended and Restated Bylaws of the Registrant. [E][3.12]
4.1 Specimen Certificate of Common Stock. [B][4.1]
4.2 Form of Convertible Promissory Note. [A][4.3]
4.3 Form of Indenture. [A][4.4]
4.4 Special Registration Rights Undertaking. [A][4.5]
4.5 Undertaking Agreement dated August 31, 1994. [A][4.6]
4.6 Letter Agreement dated March 10, 1994. [A][4.7]
4.7 Form of $10,000,000 Common Stock and Warrants Offering Investment Agreement. [A][4.8]
4.8 Form of $55 Common Stock Purchase Warrant. [D][4.1]
4.9 Form of $60 Common Stock Purchase Warrant. [D][4.2]
4.10 Form of $35 Amended and Restated Common Stock Purchase Warrant. [F][4.1]
4.11 Form of Additional $35 Common Stock Purchase Warrant. [F][4.2]
4.12 Warrant to Purchase 10,000 Shares of Common Stock between the Registrant and Charles S. [G][4.12]
Love.*
10.1 Commercial Lease Agreement dated May 27, 1998 between the Registrant and Raytheon Company [H] [10.4]
27.1 Financial Data Schedule.
- -------------------------------------------
[A] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Registration Statement on Form S-1
(File No. 33-87138).
[B] Incorporated by reference from the exhibit referred to in brackets
contained in Amendment No. 2 to the Registrant's Registration
Statement on Form S-1 (File No. 33-87138).
[C] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 10-Q for the quarter ended June
30, 1995, as amended on Form 10-Q/A dated December 6, 1995 (File No.
0-25544).
[D] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Registration Statement on Form S-3
(File No. 333-39905).
[E] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 10-Q for the quarter ended
September 30, 1997 (File No. 0-25544).
[F] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 8-K dated June 30, 1998 (File No.
0-25544).
[G] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 10-Q for the quarter ended June
30, 1998 (File No. 0-25544).
[H] Exhibit A-1 to this exhibit is incorporated by reference from the
exhibit referred to in the Registrant's Registration Statement on
Form S-1 (File No. 33-87138)
* Confidential portions of this exhibit have been deleted and filed
separately with the Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
</TABLE>
Initials /s/ DEM/TH
[FORM 204N-R-12/91]
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only, May
27, 1998, is made by and between Raytheon Company d.b.a. Raytheon Systems
Company ("Lessor") and Miravant Medical Technologies ("Lessee"), (collectively
the "Parties," or individually a "Party").
1.2 Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 7402 Hollister Avenue, Goleta located in the
County of Santa Barbara, State of California and generally described as
(describe briefly the nature of the property) a free standing industrial
building of approximately 27,400 square feet and part of the Hollister Business
Park ("Premises"). (See Paragraph 2 for further provisions.)
1.3 Term: Five (5) years and 2 1/2 months ("Original Term)" commencing
August 1, 1998 ("Commencement Date") and ending October 14, 2003 ("Expiration
Date"). (See Paragraph 3 for further provisions.)
1.4 Early Possession: N/A ("Early Possession Date"). (See Paragraphs 3.2
and 3.3 for further provisions.)
1.5 Base Rent: $34,250.00 per month ("Base Rent"), payable on the first
(1st) day of each month commencing October 15, 1998, $17,125 and thereafter on
the first of every month $34,250. (See paragraph 4 for further provisions.)
X If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.
1.6 Base Rent Paid Upon Execution: $17,125.00 as Base Rent for the period
October 15 through October 31, 1998.
1.7 Security Deposit: $34,250 ("Security Deposit"). (See Paragraph 5 for
further provisions.)
1.8 Permitted Use: See #9 of the Addendum. (See Paragraph 6 for further
provisions).
1.9 Insuring Party. Lessor is the "Insuring Party" unless otherwise stated
herein. (See Paragraph 8 for further provisions.)
1.10 Real Estate Brokers: The following real estate brokers (collectively,
the "Brokers") and brokerage relationships exist in this transaction and are
consented to by the Parties (check applicable boxes): CB Richard Ellis, Inc. and
Blair Hayes Commercial represents Lessor exclusively ("Lessor's Broker"); XX
both Lessor and Lessee, and represents Lessee exclusively ("Lessee's Broker");
both Lessee and Lessor. (See Paragraph 15 for further provisions.)
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by N/A ("Guarantor"). (See Paragraph 37 for further provisions.)
1.12 Addenda. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 1 through 16 and Exhibits N/A, all of which constitute a part
of this Lease.
2. Premises.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been unused in calculating rental, is an approximation which Lessor and
Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 SECTION NOT APPLICABLE TO THIS LEASE (SEE ADDENDUM #9.B)
2.3 SECTION NOT APPLICABLE TO THIS LEASE
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that Lessee has made such investigation as it
deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to Lessee's occupancy of the Premises and/or the
term of this Lease, and (c) that neither Lessor, nor any of Lessor's agents, has
made any oral or written representations or warranties with respect to the said
matters other than as set forth in this Lease.
2.5 Lessee Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease, however,
(including but not limited to the obligations to pay Real Property Taxes and
insurance premiums and to maintain the Premises) shall be in effect during such
period. Any such early possession shall not affect nor advance the Expiration
Date of the Original Term.
3.3 Delay In Possession. If for any reason Lessor cannot deliver possession
on the Premises to Lessee as agreed herein by the Early Possession Date, if one
is specified in Paragraph 1.4, or, if no Early Possession Date is specified, by
the Commencement Date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days
thereafter, cancel this Lease, in which event the Parties shall be discharged
from all obligations hereunder; provided, however, that if such written notice
by Lessee is not received by Lessor within said ten (10) day period, Lessee's
right to cancel this Lease shall terminate and be of no further force or effect.
Except as may be otherwise provided, and regardless of when the term actually
commences, if possession is not tendered to Lessee when required by this Lease
and Lessee does not terminate this Lease, as aforesaid, the period free of the
obligation to pay Base Rent, if any, that Lessee would otherwise have enjoyed
shall run from the date of delivery of possession and continue for a period
equal to what Lessee would otherwise have enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omission of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction, on or before
the day on which it is due under the terms of this Lease. Base Rent and all
other rent and charges for any period during the term hereof which is for less
than one (1) full calendar month shall be prorated based upon the actual number
of days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit moneys with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional moneys with Lessor sufficient to maintain the same ratio between the
Security Deposit and the Base Rent as those amounts are specified in the Basic
Provisions. Lessor shall not be required to keep all or any part of the Security
Deposit separate from its general accounts. Lessor shall, at the expiration or
earlier termination of the term hereof and after Lessee has vacated the
Premises, return to Lessee (or, at Lessor's option, to the last assignee, if
any, of Lessee's interest herein), that portion of the Security Deposit not used
or applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no
part of the Security Deposit shall be considered to be held in trust, to bear
interest or other increment for its use, or to be prepayment for any moneys to
be paid by Lessee under this Lease.
6. Use.
6.1 Use. Lessee shall use and occupy the Premises only for the purposes set
forth in Paragraph 1.8, or any other use which is comparable thereto, and for no
other purpose. Lessee shall not use or permit the use of the Premises in a
manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties. Lessor
hereby agrees to not unreasonably withhold or delay its consent to any written
request by Lessee, Lessees assignees or subtenants, and by prospective assignees
and subtenants of the Lessee, its assignees and subtenants, for a modification
of said permitted purpose for which the premises may be used or occupied, so
long as the same will not impair the structural integrity of the improvements on
the Premises, the mechanical or electrical systems therein, is not significantly
more burdensome to the Premises and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within five (5) business days give a written notification
of same, which notice shall include an explanation of Lessor's reasonable
objections to the change in use.
6.2 Hazardous Substances. (SEE ADDENDUM)
(a) Reportable Uses Require Consent. The term "Hazardous Substance" as
used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety
or welfare, the environment or the Premises, (ii) regulated or monitored by
any governmental authority, or (iii) a basis for liability of Lessor to any
governmental agency or third party under any applicable statute or common
law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products, by-products
or fractions thereof. Lessee shall not engage in any activity in, on or
about the Premises which constitutes a Reportable Use (as hereinafter
defined) of Hazardous Substances without the express prior written consent
of Lessor and compliance in a timely manner (at Lessee's sole cost and
expense) with all Applicable Law (as defined in Paragraph 6.3). "Reportable
Use" shall mean (i) the installation or use of any above or below ground
storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business
plan is required to be filed with, any governmental authority. Reportable
Use shall also include Lessee's being responsible for the presence in, on
or about the Premises of a Hazardous Substance with respect to which any
Applicable Law requires that a notice be given to persons entering or
occupying the Premises or neighboring properties. Notwithstanding the
foregoing, Lessee may, without Lessor's prior consent, but in compliance
with all Applicable Law, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of Lessee's
business permitted on the Premises, so long as such use is not a Reportable
Use and does not expose the Premises or neighboring property to any
meaningful risk of contamination or damage or expose Lessor to any
liability therefor. In addition, Lessor may (but without any obligation to
do so) condition its consent to the use or presence of any Hazardous
Substance, activity or storage tank by Lessee upon Lessee's giving Lessor
such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefrom or
therefor, including, but not limited to, the installation (and removal on
or before Lease expiration or earlier termination) of reasonably necessary
protective modifications to the Premises (such as concrete encasements)
and/or the deposit of an additional Security Deposit under Paragraph 5
hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance, or a condition involving or resulting
from same, has come to be located in, on, under or about the Premises,
other than as previously consented to by Lessor, Lessee shall immediately
give written notice of such fact to Lessor, Lessee shall also immediately
give Lessor a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action or proceeding
given to, or received from, any governmental authority or private party, or
persons entering or occupying the Premises, concerning the presence, spill,
release, discharge of, or exposure to, any Hazardous Substance or
contamination in, on, or about the Premises, including but not limited to
all such documents as may be involved in any Reportable Uses involving the
Premises.
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or
damages, liabilities, judgments, costs, claims, liens expenses, penalties,
permits and attorney's and consultant's fees arising out of or involving
any Hazardous Substance or storage tank brought onto the Premises by or for
Lessee or under Lessee's control. Lessee's obligations under this Paragraph
6 shall include, but not be limited to, the effects of any contamination or
injury to person, property or the environment created or suffered by
Lessee, and the cost of investigation (including consultant's and
attorney's fees and testing), removal, remediation, restoration and/or
abatement thereof, or of any contamination therein involved, and shall
survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and
Lessee shall release Lessee from its obligations under this Lease with
respect to Hazardous Substances or storage tanks, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3 Lessee's Compliance with Law. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "Applicable Law," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Lessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Law.
6.4 Inspection; Compliance. Lessor and Lessor's Lender(s) (as defined in
Paragraph 8.3(a)) shall have the right to enter into Premises at any time, in
the case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor with respect to Lessee's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused or materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In any such case, Lessee shall upon request reimburse Lessor
or Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. Maintenance; Repairs, Utility Installations; Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraph 2.2, 7.2 (Lessor's
obligations to repair), 9 (damage and destruction), and 14 (condemnation),
Lessee shall, at Lessee's sole cost and expense and at all times, keep the
Premises and every part thereof in good order, condition and repair,
structural and non-structural (whether or not such portion of the Premises
requiring repairs, or the means of repairing the same, are reasonably or
readily accessible to Lessee, and whether or not the need for such repairs
occurs as a result of Lessee's use, any prior use, the elements or the age
of such portion of the Premises), including, without limiting the
generality of the foregoing, all equipment or facilities serving the
Premises, such as plumbing, heating, air-conditioning, ventilating,
electrical, lighting facilities, boilers, fired or unfired pressure
vessels, fire sprinkler and/or standpipe and hose or other automatic fire
extinguishing system, including fire alarm and/or smoke detection systems
and equipment, fire hydrants, fixtures, walls (interior and exterior),
foundations, ceilings, roofs, floors, windows, doors, plate glass,
skylights, landscaping, driveways, parking lots, fences, retaining walls,
signs, sidewalks and parkways located in, on, about, or adjacent to the
Premises. Lessee shall not cause or permit any Hazardous Substance to be
spilled or released in, on, under or about the Premises (including through
the plumbing or sanitary sewer system) and shall promptly, at Lessee's
expense, take all investigatory and/or remedial action reasonably
recommended, whether or not formally ordered or required, for the cleanup
of any contamination of, and for the maintenance, security and/or
monitoring of the Premises, the elements surrounding same, or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance and/or storage tank
brought onto the Premises by or for Lessee or under its control. Lessee, in
keeping the Premises in good order, condition and repair, shall exercise
and perform good maintenance practices. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises
and all improvements thereon or a part thereof in good order, condition and
state of repair. If Lessee occupies the Premises for seven (7) years or
more, Lessor may require Lessee to repaint the exterior of the buildings on
the Premises as reasonably required, but not more frequently than once
every seven (7) years.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance
for, and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if
any, located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire
sprinkler and/or standpipe and hose or other automatic fire extinguishing
systems, including fire alarm and/or smoke detection, (iv) landscaping and
irrigation systems, (v) roof covering and drain maintenance, and (vi)
asphalt and parking lot maintenance.
7.2 Lessor's Obligations. Except for the warranties and agreements of
Lessor contained in Paragraphs, 9 (relating to destruction of the Premises) and
14 (relating to condemnation of the Premises), it is intended by the Parties
hereto that Lessor have no obligation, in any manner whatsoever, to repair and
maintain the Premises, the improvements located thereon, or the equipment
therein, whether structural or non-structural, all of which obligations are
intended to be that of the Lessee under Paragraph 7.1 hereof. It is the
intention of the Parties that the terms of this Lease govern the respective
obligations of the Parties as to maintenance and repair of the Premises. Lessee
and Lessor expressly waive the benefit of any statute now or hereafter in effect
to the extent it is inconsistent with the terms of this Lease with respect to,
or which affords Lessee the right to make repairs at the expense of Lessor or to
terminate this Lease by reason of any needed repairs.
7.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility Installations" is
used in this Lease to refer to all carpeting, window coverings, air lines,
power panels, electrical distribution, security, fire protection systems,
communication systems, lighting fixtures, heating, ventilating, and air
conditioning equipment, plumbing, and fencing in, on or about the Premises.
The term "Trade Fixtures" shall mean Lessee's machinery and equipment that
can be removed without doing material damage to the Premises. The term
"Alterations" shall mean any modification of the improvements on the
Premises from that which are provided by Lessor under the terms of this
Lease, other than Utility Installations or Trade Fixtures, whether by
addition or deletion. "Lessee Owned Alterations and/or Utility
Installations" are defined as Alterations and/or Utility Installations made
by Lessee that are not yet owned by Lessor as defined in Paragraph 7.4(a).
Lessee shall not make any Alterations or Utility Installations in, on,
under or about the Premises without Lessor's prior written consent. Lessee
may, however, make non-structural Utility Installations to the interior of
the Premises (excluding the roof), as long as they are not visible from the
outside, do not involve puncturing, relocating or removing the roof or any
existing walls, and the cumulative cost thereof during the term of this
Lease as extended does not exceed $25,000.
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All
consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by
subsequent specific consent, shall be deemed conditioned upon: (i) Lessee's
acquiring all applicable permits required by governmental authorities, (ii)
the furnishing of copies of such permits together with a copy of the plans
and specifications for the Alteration or Utility Installation to Lessor
prior to commencement of the work thereon, and (iii) the compliance by
Lessee with all conditions of said permits in a prompt and expeditious
manner. Any Alterations or Utility Installations by Lessee during the term
of this Lease shall be done in a good and workmanlike manner, with good and
sufficient materials, and in compliance with all Applicable Law. Lessee
shall promptly upon completion thereof furnish Lessor with as-built plans
and specifications therefor. Lessor may (but without obligation to do so)
condition its consent to any requested Alteration or Utility Installation
that costs $10,000 or more upon Lessee's providing Lessor with a lien and
completion bond in an amount equal to one and one-half times the estimated
cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor under Paragraph 36
hereof.
(c) Indemnification. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanics' or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of any work in, on or about the Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises.
If Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to one and one-half times the
amount of such contested lien, claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the Premises
free from the effect of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor's attorney's fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be
the property of and owned by Lessee, but considered a part of the Premises.
Lessor may, at any time and at its option, elect in writing to Lessee to be
the owner of all or any specified part of the Lessee Owned Alterations and
Utility Installations. Unless otherwise instructed per subparagraph 7.4(b)
hereof, all Lessee Owned Alterations and Utility Installations shall, at
the expiration or earlier termination of this Lease, become the property of
Lessor and remain upon and be surrendered by Lessee with the Premises.
(b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease,
notwithstanding their installation may have been consented to by Lessor.
Lessor may require the removal at any time of all or any part of any Lessee
Owned Alterations or Utility Installations made without the required
consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, with
all of the improvements, parts and surfaces thereof clean and free of
debris and in good operating order, condition and state of repair, ordinary
wear and tear excepted. "Ordinary wear and tear" shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease.
Except as otherwise agreed or specified in writing by Lessor, the Premises,
as surrendered, shall include the Utility Installations. The obligation of
Lessee shall include the repair of any damage occasioned by the
installation, maintenance or removal of Lessee's Trade Fixtures,
furnishings, equipment, and Alterations and/or Utility Installations, as
well as the removal of any storage tank installed by or for Lessee, and the
removal, replacement, or remediation of any soil, material or ground water
contaminated by Lessee, all as may then be required by Applicable Law
and/or good service practice. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation
to repair and restore the Premises per this Lease.
8. Insurance; Indemnity.
8.1 Payment For Insurance. Regardless of whether the Lessor or Lessee is
the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000 per occurrence. Premiums for policy
periods commencing prior to or extending beyond the Lease term shall be prorated
to correspond to the Lease term. Payment shall be made by Lessee to Lessor
within ten (10) days following receipt of an invoice for any amount due.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of
insurance protecting Lessee and Lessor (as an additional insured)
against claims for bodily injury, personal injury and property damage
based upon, involving or arising out of the ownership, use, occupancy
or maintenance of the Premises and all areas appurtenant thereto. Such
insurance shall be on an occurrence basis providing single limit
coverage in an amount not less than $5,000,000 per occurrence with an
"Additional Insured-Managers or Lessors of Premises" Endorsement and
contain the "Amendment of the Pollution Exclusion" for damage caused
by heat, smoke or fumes from a hostile fire. The policy shall not
contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under
this Lease as an "insured contract" for the performance of Lessee's
indemnity obligations under this Lease. The limits of said insurance
required by this Lease or as carried by Lessee shall not, however,
limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to
and not contributory with any similar insurance carried by Lessor,
whose insurance shall be considered excess insurance only.
(b) Carried by Lessor. In the event Lessor is the Insuring Party,
Lessor shall also maintain liability insurance described in Paragraph
8.2(a), above, in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 Property Insurance--Building, Improvements and Rental Value.
(a) Building and Improvements. The Insuring Party shall obtain and
keep in force during the term of this Lease a policy or policies in the
name of Lessor, with loss payable to Lessor and to the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lender(s)"),
insuring loss or damage to the Premises. The amount of such insurance shall
be equal to the full replacement cost of the Premises, as the same shall
exist from time to time, or the amount required by Lenders, but in no event
more than the commercially reasonable and available insurable value
thereof, if, by reason of the unique nature or age of the improvements
involved, such latter amount is less than full replacement cost. If Lessor
is the Insuring Party, however, Lessee Owned Alterations and Utility
Installations shall be insured by Lessee under Paragraph 8.4 rather than by
Lessor. If the coverage is available and commercially appropriate, such
policy or policies shall insure against all risks of direct physical loss
or damage (except the perils of flood and/or earthquake unless required by
a Lender), including coverage for any additional costs resulting from
debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Premises required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws
as the result of a covered cause of loss. Said policy or policies shall
also contain an agreed valuation provision in lieu of any coinsurance
clause, waiver of subrogation, and inflation guard protection causing an
increase in the annual property insurance coverage amount by a factor of
not less than the adjusted U.S. Department of Labor Consumer Price Index
for All Urban Consumers for the city nearest to where the Premises are
located. If such insurance coverage has a deductible clause, the deductible
amount shall not exceed $1,000 per occurrence, and Lessee shall be liable
for such deducible amount in the event of an Insured Loss, as defined
Paragraph 9.1(c).
(b) Rental Value. The Insuring Party shall, in addition, obtain and
keep in force during the term of this Lease a policy or policies in the
name of Lessor with loss payable to Lessor and Lender(s), insuring the loss
of the full rental and other charges payable by Lessee to Lessor under this
Lease for one (1) year (including all real estate taxes, insurance costs,
and any scheduled rental increases). Said insurance shall provide that in
the event the Lease is terminated by reason of an insured loss, the period
of indemnity for such coverage shall be extended beyond the date of the
completion of repairs or replacement of the Premises, to provide for one
full year's loss of rental revenues from the date of any such loss. Said
insurance shall contain an agreed valuation provision in lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually
to reflect the projected rental income, property taxes, insurance premium
costs and other expenses, if any, otherwise payable by Lessee, for the next
twelve (12) month period. Lessee shall be liable for any deductible amount
in the event of such loss.
(c) Adjacent Premises. If the Premises are part of a larger building,
or if the Premises are part of a group of buildings owned by Lessor which
are adjacent to the Premises, the Lessee shall pay for any increase in the
premiums for the property insurance of such building or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) Tenant's Improvements. If the Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned
Alterations and Utility Installations.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Lessee Owned Alterations and Utility
Installations in, on, or about the Premises similar in coverage to that carried
by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by this Paragraph 8.4 and shall provide Lessor with
written evidence that such insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least A, X or such other rating as may be required by a Lender having a lien on
the Premises, as set forth in the most current issue of "Best's Insurance
Guide." Lessee shall not do or permit to be done anything which shall invalidate
the insurance policies referred to in this Paragraph 8. If Lessee is the
insuring Party, Lessee shall cause to be delivered to Lessor certified copies of
policies of such insurance or certificate evidencing the existence and amounts
of such insurance with the insureds and loss payable clauses as required by this
Lease. No such policy shall be cancellable or subject to modification except
after thirty (30) days prior written notice to Lessor. Lessee shall at least
thirty (30) days prior to the expiration of such policies, furnish Lessor with
evidence of renewals or "insurance binders" evidencing renewal thereof, or
Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee to Lessor upon demand. If the Insuring Party
shall fail to procure and maintain the insurance required to be carried by the
Insuring Party under this Paragraph 8, the other Party may, but shall not be
required to, procure and maintain the same, but at Lessee's expense.
8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor ("Waiving Party") each hereby release and relieve the other,
and waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss of or damage to the Waiving Party's property arising
out of or incident to the perils required to be insured against under Paragraph
8. The effect of such releases and waivers of the right to recover damages shall
not be limited by the amount of insurance carried or required, or by any
deductibles applicable hereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is
less than 50% of the then Replacement Cost of the Premises immediately
prior to such damage or destruction, excluding from such calculation the
value of the land and Lessee Owned Alterations and Utility Installations.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations
the repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(c) "Insured Loss" shall mean damage or destruction to improvements on
the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible
amounts or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building
codes, ordinances or laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by,
a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Partial Damage - Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make the insurance
proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds (except as to the deductible
which is Lessee's responsibility) as and when required to complete said repairs.
In the event, however, the shortage in proceeds was due to the fact that, by
reason of the unique nature of the improvements, full replacement cost insurance
coverage was not commercially reasonable and available, Lessor shall have no
obligation to pay for the shortage in insurance proceeds or to fully restore the
unique aspects of the Premises unless Lessee provides Lessor with the funds to
cover same, or adequate assurance thereof, within ten (10) days following
receipt of written notice of such shortage and request therefor. If Lessor
receives said funds or adequate assurance thereof within said ten (10) day
period, the party responsible for making the repairs shall complete them as soon
as reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If in such case Lessor does not so elect, then this Lease
shall terminate sixty (60) days following the occurrence of the damage or
destruction. Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for any funds contributed by Lessee to repair any such
damage or destruction. Premises Partial Damage due to flood or earthquake shall
be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
9.3 Partial Damage - Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6.
9.5 Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one (1) month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("Exercise Period"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within ten (10) days after the expiration
of the Exercise Period, notwithstanding any term or provision in the grant of
option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in Paragraph 9.2 (Partial Damage
- Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which
such damage, its repair or the restoration continues (not to exceed the
period for which rental value insurance is required under Paragraph
8.3(b)), shall be abated in proportion to the degree to which Lessee's use
of the Premises is impaired. Except for abatement of Base Rent, Real
Property Taxes, insurance premiums, and other charges, if any, as
aforesaid, all other obligations of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage
suffered by reason of any such repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual
notice of Lessee's election to terminate this Lessee on a date not less
than sixty (60) days following the giving of such notice. If Lessee gives
such notice to Lessor and such Lenders and such repair or restoration is
not commenced within thirty (30) days after receipt of such notice, this
Lease shall terminate as of the date specified in said notice. If Lessor or
a Lender commences the repair or restoration of the Premises within thirty
(30) days after receipt of such notice, this Lease shall continue in full
force and effect. "Commence" as used in this Paragraph shall mean either
the unconditional authorization of the preparation of the required plans,
or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may, but shall not be obligated to, at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000, whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the giving of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the investigation and remediation of such Hazardous Substance
Condition totally at Lessee's expense and without reimbursement from Lessor
except to the extent of an amount equal to twelve (12) times the then monthly
Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with
the funds required of Lessee or satisfactory assurance thereof within thirty
(30) days following Lessee's said commitment. In such event this Lease shall
continue in full force and effect, and Lessor shall proceed to make such
investigation and remediation as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the
required funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination.
9.8 Termination-Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 9, an equitable adjustment shall be made concerning advance
Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall,
in addition, return to Lessee so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 Waive Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. Real Property Taxes.
10.1 (a) Payment of Taxes. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand.
(b) Advance Payment. In order to insure payment when due and before
delinquency of any or all Real Property Taxes, Lessor reserves the right,
at Lessor's option, to estimate the current Real Property Taxes applicable
to the Premises, and to require such current year's Real Property Taxes to
be paid in advance to Lessor by Lessee, either: (i) in a lump sum amount
equal to the installment due, at least twenty (20) days prior to the
applicable delinquency date, or (ii) monthly in advance with the payment of
the Base Rent. If Lessor elects to require payment monthly in advance, the
monthly payment shall be that equal monthly amount which, over the number
of months remaining before the month in which the applicable tax
installment would become delinquent (and without interest thereon), would
provide a fund large enough to fully discharge before delinquency the
estimated installment of taxes to be paid. When the actual amount of the
applicable tax bill is known, the amount of such equal monthly advance
payment shall be adjusted as required to provide the fund needed to pay the
applicable taxes before delinquency. If the amount paid to Lessor by Lessee
under the provisions of this Paragraph are insufficient to discharge the
obligations of Lessee to pay such Real Property Taxes as the same become
due, Lessee shall pay to Lessor, upon Lessor's demand, such additional sums
are necessary to pay such obligations. All moneys paid to Lessor under this
Paragraph may be intermingled with other moneys of Lessor and shall not
bear interest. In the event of a Breach by Lessee in the performance of the
obligations of Lessee under this Lease, then any balance of funds paid to
Lessor under the provisions of this Paragraph may, subject to proration as
provided in Paragraph 10.1(a), at the option of Lessor, be treated as an
additional Security Deposit under Paragraph 5.
10.2 Definition of "Real Property Taxes." As used herein, the term "Real
Property Taxes" shall include any form of real estate or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Premises by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, levied against any legal or equitable interest of Lessor in
the Premises or in the real property of which the Premises are a part, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "Real Property Taxes" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in applicable law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the Premises or
in the improvements thereon, the execution of this Lease, or any modification,
amendment or transfer thereof, and whether or not contemplated by the Parties.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"assignment") or sublet all or any part of Lessee's interest in this Lease
or in the Premises without Lessor's proper written consent given under and
subject to the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a
formal assignment or hypothecation of this Lease or Lessee's assets occurs,
which results or will result in a reduction of the Net Worth of Lessee, as
hereinafter defined, by an amount equal to or greater than twenty-five
percent (25%) of such Net Worth of Lessee as it was represented to Lessor
at the time of the execution by Lessor of this Lease or at the time of the
most recent assignment to which Lessor has consented, or as it exists
immediately prior to said transaction or transactions constituting such
reduction, at whichever time said Net Worth of Lessee was or is greater,
shall be considered an assignment of this Lease by Lessee to which Lessor
may reasonably withhold its consent. "Net Worth of Lessee" for purpose of
this Lease shall be the net worth of Lessee (excluding any guarantors)
established under generally accepted accounting principles consistently
applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1(c), or a noncurable
Breach without the necessity of any notice and grace period. If Lessor
elects to treat such unconsented to assignment or subletting as a
noncurable Breach, Lessor shall have the right to either: (i) terminate
this Lease, or (ii) upon thirty (30) days written notice ("Lessor's
Notice"), increase the monthly Base Rent to fair market rental value or one
hundred ten percent (110%) of the Base Rent then in effect, whichever is
greater. Pending determination of the new fair market rental value, if
disputed by Lessee, Lessee shall pay the amount set forth in Lessor's
Notice, with any overpayment credited against the next installment(s) of
Base Rent coming due, and any underpayment for the period retroactively to
the effective date of the adjustment being due and payable immediately upon
the determination thereof. Further, in the event of such Breach and market
value adjustment, (i) the purchase price of any option to purchase the
Premises held by Lessee shall be subject to similar adjustment to the then
fair market value (without the Lease being considered an encumbrance of any
deduction for depreciation or obsolescence, and considering the Premises at
its highest and best use and in good condition) or one hundred ten percent
(110%) of the price previously in effect, whichever is greater, (ii) any
index-oriented rental or price adjustment formulas contained in this Lease
shall be adjusted to require that the base index be determined with
reference to the index applicable to the time of such adjustment, and (iii)
any fixed rental adjustments scheduled during the remainder of the Lease
term shall be increased in the same ratio as the new market rental bears to
the Base Rent in effect immediately prior to the market value adjustment.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed
by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such
assignment nor the acceptance of any rent or performance shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the
Default or Breach by Lessee of any of the terms, covenants or conditions of
this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee
or to any subsequent or successive assignment or subletting by the
sublessee. However, Lessor may consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable on the Lease or sublease and
without obtaining their consent, and such action shall not relieve such
persons from liability under this Lease or sublease.
(d) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or any one else responsible for the performance of the Lessee's
obligations under this Lease, including the sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefore to Lessor, or any security held by Lessor or Lessee.
(e) Each request for consent to an assignment to subletting shall be
in writing, accompanied by information relevant to Lessor's determination
as to the financial and operational responsibility and appropriateness of
the proposed assignee or sublessee, including but not limited to the
intended use and/or required modification of the Premises, if any, together
with a non-refundable deposit of $1,000 or ten percent (10%) of the current
monthly Base Rent, whichever is greater, as reasonable consideration for
Lessor's considering and processing the request for consent. Lessee agrees
to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for
the benefit of Lessor, to have assumed and agreed to conform and comply
with each and every term, covenant, condition and obligation herein to be
observed or performed by Lessee during the term of said assignment or
sublease, other than such obligations as are contrary to or inconsistent
with provisions of an assignment or sublease to which Lessor has
specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.1(c)
shall give Lessor the right (but not the obligation to require that the
Security Deposit be increased to an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
amount required to establish such Security Deposit a condition to Lessor's
consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment structure of the
rent payable under this Lease be adjusted to what is then the market value
and/or adjustment structure for property similar to the Premises as then
constituted.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a
portion of the Premises heretofore or hereafter made by Lessee, and Lessor
may collect such rent and income and apply same toward Lessee's obligations
under this Lease; provided, however, that until a Breach (as defined in
Paragraph 13.1) shall occur in the performance of Lessee's obligations
under this Lease, Lessee may, except as otherwise provided in this Lease,
receive, collect and enjoy the rents accruing under such sublease. Lessor
shall not, by reason of this or any other assignment of such sublease to
Lessor, nor by reason of the collection of the rents from a sublessee, be
deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a
Breach exists in the performance of Lessee's obligations under this Lease,
to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary,
Lessee shall have no right or claim against said sublessee, or, until the
Breach has been cured, against Lessor, for any such rents and other charges
so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in
which event Lessor shall undertake the obligations of the sublessor under
such sublease from the time of the exercise of said option to the
expiration of such sublease; provided, however, Lessor shall not be liable
for any prepaid rents or security deposit paid by such sublessee to such
sublessor or for any other prior Defaults or Breaches of such sublessor
under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said Default. A "Default" is defined as a
failure by the Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "Breach"
is defined as the occurrence of any one or more of the following Defaults, and,
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable grace
period, shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2
and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third
party, as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease,
or the failure of Lessee to fulfill any obligation under this Lease which
endangers or threatens life or property, where such failure continues for a
period of three (3) days following written notice thereof by or on behalf
of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with Applicable
Law per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1(b), (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or
non-subordination of this lease per Paragraph 30, (vi) the guaranty of the
performance of Lessee's obligations under this Lease if required under
Paragraphs 1.11 and 37, (vii) the execution of any document requested under
Paragraph 42 (easements), or (viii) any other documentation or information
which Lessor may reasonably require of Lessee under the terms of this
Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40
hereof, that are to be observed, complied with or performed by Lessee,
other than those described in subparagraphs (a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written
notice thereof by or on behalf of Lessor to Lessee; provided, however, that
if the nature of Lessee's Default is such that more than thirty (30) days
are reasonably required for its cure, then it shall not be deemed to be a
Breach of this Lease by Lessee if Lessee commences such cure within said
thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. ss.
101 or any successor statute thereto (unless, in the case of a petition
filed against Lessee, the same is dismissed within sixty (60) days; (iii)
the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within
thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where such seizure is not discharged
within thirty (30) days; provided, however, in the event that any provision
of this subparagraph (e) is contrary to any applicable law, such provision
shall be of no force or effect, and not affect the validity of the
remaining provisions.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a guarantor, (ii) the termination of a
guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a guarantor's becoming insolvent or
the subject of a bankruptcy filing, (iv) a guarantor's refusal to honor the
guaranty, or (v) a guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such
event, to provide Lessor with written alternative assurance or security,
which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the guarantors that
existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to
Lessor. In such event Lessor shall be entitled to recover from Lessee: (i)
the worth at the time of the award of the unpaid rent which had been earned
at the time of termination; (ii) the worth at the time of award of the
amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss
that the Lessee proves could have been reasonably avoided; (iii) the worth
at the time of award of the amount by which the unpaid rent for the balance
of the term after the time of award exceeds the amount of such rental loss
that the Lessee proves could be reasonably avoided; and (iv) any other
amount necessary to compensate Lessor for all the detriment proximately
caused by the Lessee's failure to perform its obligations under this Lease
or which in the ordinary course of things would be likely to result
therefrom, including but not limited to the cost of recovering possession
of the Premises, expenses of reletting, including necessary renovation and
alteration of the Premises, reasonable attorneys' fees, and that portion of
the leasing commission paid by Lessor applicable to the unexpired term of
this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at
the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Default or Breach of this Lease shall not waive
Lessor's right to recover damages under this Paragraph. If termination of
this Lease is obtained through the provisional remedy of unlawful detainer,
Lessor shall have the right to recover in such proceeding the unpaid rent
and damages as are recoverable therein, or Lessor may reserve therein the
right to recover all or any part thereof in a separate suit for such rent
and/or damages. If a notice and grace period required under subparagraphs
13.1(b), (c) or (d) was not previously given, a notice to pay rent or quit,
or to perform or quit, as the case may be, given to Lessee under any
statute authorizing the forfeiture of leases for unlawful detainer shall
also constitute the applicable notice for grace period purposes required by
subparagraphs 13.1(b), (c) or (d). In such case, the applicable grace
period under subparagraphs 13.1(b), (c) or (d) and under the unlawful
detainer statute shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of
the two such grace periods shall constitute both an unlawful detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in this
Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's
Breach and abandonment and recover the rent as it becomes due, provided
Lessee has the right to sublet or assign, subject only to reasonable
limitations. See Paragraphs 12 and 36 for the limitations on assignment and
subletting which limitations Lessee and Lessor agree are reasonable. Acts
of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver to protect the Lessor's interest under the Lease,
shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the termination
of Lessee's right to possession shall not relieve Lessee from liability
under any indemnity provisions of this Lease as to matters occurring or
accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 Inducement Recapture In Event Of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions," shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within five (5) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by the holders of any ground lease, mortgage or deed of trust covering the
Premises whose name and address shall have been furnished Lessee in writing for
such purpose, of written notice specifying wherein such obligation of Lessor has
not been performed; provided, however, that if the nature of Lessor's obligation
is such that more than thirty (30) days after such notice are reasonably
required for its performance, then Lessor shall not be in breach of this Lease
if performance is commenced within such thirty (30) day period and thereafter
diligently pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than twenty-five percent
(25%) of the floor area of the Premises, or more than fifty percent (50%) of the
land area not occupied by any building, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the building located on the Premises. No reduction of
Base Rent shall occur if the only portion of the Premises taken is land on which
there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
15. Broker's Fee.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of this
Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to said
Brokers jointly, or in such separate shares as they may mutually designate in
writing, a fee as set forth in a separate written agreement between Lessor and
said Brokers (or in the event there is no separate written agreement between
Lessor and said Brokers, the sum of 3% of total) for brokerage services rendered
by said Brokers to Lessor in this transaction.
15.3 Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that: (a) if Lessee exercises any Option (as defined in Paragraph
39.1) or any Option subsequently granted which is substantially similar to an
Option granted to Lessee in this Lease, or (b) if Lessee acquires any rights to
the Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or (c) if Lessee remains in possession of the Premises,
with the consent of Lessor, after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of any other lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Brokers a fee in accordance with the schedule of said Brokers in effect at
the time of the execution of this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent of
its interest in any commission arising from this Lease and may enforce that
right directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that it has
had no dealings with any person, firm, broker or finder (other than the Brokers,
if any named in Paragraph 1.10) in connection with the negotiation of this Lease
and/or the consummation of the transaction contemplated hereby, and that no
broker or other person, firm or entity other than said named Brokers is entitled
to any commission or finder's fee in connection with said transaction. Lessee
and Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. Tenancy Statement.
16.1 Each Party (as "Responding Party") shall within ten (10) days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Tenancy Statement" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15, upon such transfer or assignment
and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceed the maximum rate allowed by law, in addition to the late charge provided
for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that it
has made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this Lease
and as to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
23. Notices.
23.1 All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by messenger or courier service) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for the purpose of mailing or delivering notices to
Lessee. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reason thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorney's Fees. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) or Broker in any such proceeding, action, or appeal
thereon, shall be entitled to reasonable attorney's fees. Such fees may be
awarded in the same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment. The term, "Prevailing
Party" shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fees award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof and the right to install, and
all revenues from the installation of, such advertising signs on the Premises,
including the roof, as do not unreasonably interfere with the conduct of
Lessee's business.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act
by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but
not limited to architects', attorneys', engineers' or other consultants'
fees) incurred in the consideration of, or response to, a request by Lessee
for any Lessor consent pertaining to this Lease or the Premises, including
but not limited to consents to an assignment, a subletting or the presence
or use of a Hazardous Substance, practice or storage tank, shall be paid by
Lessee to Lessor upon receipt of an invoice and supporting documentation
therefor. Subject to Paragraph 12.2(e) (applicable to assignment or
subletting), Lessor may, as a condition to considering any such request by
Lessee, require that Lessee deposit with Lessor an amount of money (in
addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering
and responding to Lessee's request. Except as otherwise provided, any
unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease or
subletting of the Premises by Lessee shall not constitute an
acknowledgement that no Default or Breach by Lessee of this Lease exists,
nor shall such consent be deemed a waiver of any then existing Default or
Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessor's consent shall not preclude the
imposition by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular matter
for which consent is being given.
37. Guarantor.
37.1 If there are to be any Guarantors of this Lease per Paragraph 1.11,
the form of the guaranty to be executed by each such Guarantor shall be in the
form most recently published by the American Industrial Real Estate Association,
and each said Guarantor shall have the same obligations as Lessee under this
Lease, including but not limited to the obligation to provide the Tenancy
Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if any
such Guarantor fails or refuses, upon reasonable request by Lessor to give: (a)
evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signature of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises
and the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. Options.
39.1 Definition. As used in this Paragraph 39 the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) not applicable to this lease.
39.2 Options Personal To Original Lessee. Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be voluntarily or involuntarily assigned or exercised by any person or
entity other than said original Lessee while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any Multiple Options to
extend or renew this Lease, a later Option cannot be exercised unless the prior
Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1
and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid
(without regard to whether notice thereof is given Lessee), or (iii) during
the time Lessee is in Breach of this Lease, or (iv) in the event that
Lessor has given to Lessee three (3) or more notices of Default under
Paragraph 13.1, whether or not the Defaults are cured, during the twelve
(12) month period immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during
the term of this Lease, (i) Lessee fails to pay to Lessor a monetary
obligation of Lessee for a period of thirty (30) days after such obligation
becomes due (without any necessity of Lessor to give notice thereof to
Lessee), or (ii) Lessor gives to Lessee three (3) or more notices of
Default under Paragraph 13.1 during any twelve (12) month period, whether
or not the Defaults are cured, or (iii) if Lessee commits a Breach of this
Lease.
40. Multiple Buildings. If the Premises are a part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. Security Measures. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves to itself the right, from time to time,
to grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
44. Authority. If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee, the
obligations of such Multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR
SUBMISSION TO YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS
SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY
AS THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE
TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR
EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER
THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY
IS LOCATED SHOULD BE CONSULTED.
The Parties hereto have executed this Lease at the place and on the
dates specified above to their respective signatures.
Executed at: Lexington, Massachusetts Executed at: Santa Barbara, California
on: July 23, 1998 on: June 1, 1998
------------- --------------
By LESSOR: By LESSEE:
Raytheon Company d.b.a. Raytheon Systems Miravant Medical Technologies
By: /s/ Thomas D. Hyde By: /s/ David E. Mai
Name Printed: Thomas D. Hyde Name Printed: David E. Mai
Title: Senior Vice President, Title: President
General Counsel Raytheon
Company
By:
By:
Name Printed:
Name Printed:
Title:
Title:
Address:
Address:
Telephone: (805) 685-9880
Telephone: ( )
Facsimile: (805) 685-2959
Facsimile: ( )
NOTE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 345 So. Figueroa
Street, Suite M-1, Los Angeles, California 90071. (213) 687-8777. Fax No. (213)
687-8616
ADDENDUM
ADDENDUM TO THAT A.I.R. STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE --
NET (the "PRINTED FORM"), DATED MAY 12, 1998, BY AND BETWEEN RAYTHEON COMPANY
D.B.A. RAYTHEON SYSTEMS COMPANY AS "LESSOR" AND MIRAVANT MEDICAL TECHNOLOGIES AS
"LESSEE" FOR THAT CERTAIN PROPERTY COMMONLY KNOWN 7402 HOLLISTER AVENUE, GOLETA,
COUNTY OF SANTA BARBARA, STATE OF CALIFORNIA. THIS ADDENDUM AND THE PRINTED FORM
SHALL CONSTITUTE, AND TOGETHER ARE SOMETIMES REFERRED TO HEREIN AS, THE
"SUBLEASE."
LESSOR AND LESSEE HEREBY AGREE AS FOLLOWS:
1. Recitals:
The following are added to this Sublease as Recitals:
A. "Pursuant to a Lease Agreement dated as of April 1, 1986
(the "Master Lease"), between Hollister Business Park, Ltd.,
a California limited partnership, as "Landlord" ("Master
Lessor"), and Hughes Aircraft Company, a Delaware
Corporation, as "Tenant" ("Hughes"), a copy of which is
attached hereto as Exhibit A-1, Sublessor leased from Master
Lessor those certain premises described in paragraph 1.1 of
the Master Lease (the "Master Premises").
B. Pursuant to a merger Hughes Aircraft Company is now know as
Raytheon Company ("Sublessor").
C. Sublessor wishes to sublease to Miravant Medical
Technologies ("Sublessee"), and Sublessee wish to hire from
Sublessor a portion of the Master Premises described more
particularly in Section 1.2 of the Printed Form."
2. Sublease:Sublessor and Sublessee acknowledge and agree that,
notwithstanding any provision of the Printed Form or this Addendum which may
suggest the contrary, this Sublease is subject and at all time subordinate to
the provisions of the Master Lease, and Sublessee acknowledges that it has read
the attached Master Lease. Further, for all purposes under this Sublease, unless
the context clearly requires otherwise, the terms "Lessor" and "Lessee" in the
Printed Form shall mean respectively "Sublessor" and "Sublessee."
3. Defined Terms: Unless expressly proved to the contrary herein,
capitalized terms used herein shall have the meanings ascribed to them in the
Printed Form.
4. Amendmentand Modifications: The terms, covenants, agreements and
conditions of this Addendum are intended to, and shall, amend and modify the
provisions of the Printed Form. In the event of any inconsistency between the
provisions of this Addendum and the provisions of the Printed Form, the
provisions of this Addendum shall prevail.
5. Base Rent:
(a) The following is added to this Sublease as Section 4.2:
"4.2 CPI Adjustment: On the first day of each Lease Year (defined
below), during the Original Term (each an "Adjustment Date"), the Base
Rent payable by Sublessee under this Sublease shall be increased
pursuant to the terms of this Section 4.2. The Base Rent, as adjusted,
shall thereafter be payable by Sublessee each month until the next
following Adjustment Date.
(a) Calculation: On each Adjustment Date, the Base
Rent shall be adjusted to equal the Base Rent payable by
Sublessee for the first Lease Year multiplied by a fraction,
the numerator of which shall equal the "Anniversary Index"
(defined below), and the denominator of which shall equal the
"Base Index" (defined below); provided, however in no event
shall the Base Rent payable following an Adjustment Date be
less than one hundred three percent (103%) nor more than one
hundred seven percent (107%) of the Base Rent payable
immediately prior thereto.
Addendum
Raytheon Systems Company/Miravant Medical Technologies
May 27, 1998
Page 2 of 5
(b) Definitions: (i) A "Lease Year" shall mean each
successive period of twelve (12) consecutive calendar months
commencing on the commencement Date;
(ii) The "Anniversary Index" shall mean the "CPI"
(defined below), published during the month which is three (3)
months preceding an Adjustment Date;
(iii) The "Base Index" shall mean the CPI as
published for the month which is three (3) months prior to the
Commencement Date;
(iv) The "CPI" shall mean the Consumer Price Index
(1982 - 1984 = 100), for All Urban Consumers, All Items (Los
Angeles - Anaheim - Riverside), published monthly by the
Bureau of Labor Statistics of the United States Department of
Labor. If, at any time during the Term of this Sublease, the
CPI shall be discontinued, Sublessor and Sublessee shall
mutually and reasonable agree to substitute such other
official index published by the Bureau of Labor Statistics, or
by another nationally recognized publisher of similar
statistical information, as is then generally recognized and
accepted for like determinations of purchasing power."
6. Commencement Date: Notwithstanding any provision of Section 1.3 of the
Printed Form to the contrary, the "Commencement Date" shall be the earlier of
(i) August 1, 1998, (ii) or the date on which this Lease has been fully executed
and returned to Sublessor and Sublessee (iii) the date on which Sublessee takes
actual possession of the Premises.
7. Use: (a) Subject to the provisions of this Section 7, Sublessee shall
have the right to use the Premises for medical device and pharmaceutical
research and development and manufacturing, and such other uses as may be
permitted by applicable zoning or other use regulations, provided that (i) said
use shall not violate the use provisions of Paragraph 1.2 of the Master Lease
and (ii) Sublessee shall not allow the Premises to be used for any purpose or
purposes without the prior written consent of Sublessor. At lease ten (10) days
prior to Sublessee's commencement of installation of the Initial Alterations,
Sublessee shall deliver to Sublessor copies of all permits, certifications,
licenses, consents or similar permissions or approvals held by Sublessee's
business as permitted herein or which may be reasonable requested by Sublessor.
Sublessee further covenants and agrees that it shall not use, or suffer or
permit any person or persons to use, the Premises or any part hereof for any use
or purpose contrary to any rules and regulations affecting the Hollister
Business Park.
(b) In accordance with and subject to the provisions of Section 6.2 of the
Printed Form, Sublessor hereby consents and agrees that the Hazardous substances
listed on Exhibit C attached hereto and made a part hereof (i.e., Sublessee's
business plan on file with the Santa Barbara County Fire Department), shall be
permitted to be used by Sublessee on or about the Premises, provided (i) that
such use shall at all times be in compliance with all Applicable Law and (ii)
any material change in the quantities of such Hazardous Substances shall be
subject to Sublessor's prior written consent. The foregoing is, provided
Sublessee complies with the provisions of Section 6.2 of the Printed Form
(including, without limitation, the consent requirements), not intended to limit
the types of Hazardous Substances, or quantities thereof, permitted to be used
on or about the Premises, so long as Sublessor is given notice of the types and
quantities Sublessee used and such use complies with all permits and
regulations.
8. Initial Alterations: In accordance with Section 7.3 of the Printed Form,
all Alterations or Utility Installations that Sublessee desires to make prior to
the Commencement Date (the "Initial Alterations"), shall require the consent of
Sublessor and shall be presented to Sublessor in written form with proposed
detailed plans. The installation of the Initial Alterations by Sublessee, and
all consents given by Sublessor in connection therewith, shall be subject to,
and governed by, the provisions of Sections 7.3 (b) and 7.3 (c) of the Printed
Form. Unless Sublessor's consent to the Initial Alterations requires otherwise
or unless Sublessor agrees to the contrary in writing, the Initial Alterations
shall, for purposes of Section 7.4 of the Printed Form, not be deemed "Lessee
Owned Alterations."
9. Conditionof the Premises: (a) As a material inducement to the execution
and delivery of this Sublease by Sublessor, Sublessee does hereby acknowledge,
represent, warrant and agree, to and with Sublessor, that except as otherwise
expressly set forth in the Sublease, (i) Sublessee is leasing the Premises in as
"AS IS", "WHERE IS" condition as of the date the Premises are delivered to
Sublessee, subject to all facts, circumstances, conditions and defects; (ii)
Sublessor has no obligation to repair or correct any such facts, circumstances,
conditions or defects or compensate Sublessee for same, including, without
limitation, when such repairs or corrections are required by or as a result of
the Americans with Disabilities Act of 1990, 42 U.S.C. ss.12201 et seq.; (iii)
Sublessee has heretofore undertaken all such inspections and examinations of the
Premises and all covenants, conditions, restrictions, laws, rules and
regulations affecting the Premises, including, without limitation, in respect of
signage, chemical storage and permitted uses, which Sublessee deems necessary or
appropriate under the circumstances, and that based upon same, Sublessee is and
will be relying strictly and solely upon such inspections and examinations and
the advice and counsel of its own agents and offices; and (iv) Sublessor is not
making and has not made any warranty or representation with respect to the
physical conditions or the fitness for any particular purpose of all or any part
of the Premises as an inducement to the Sublessee to enter into this Sublease or
for any other purpose. Sublessee has been given access to, and has entered upon,
the Premises to perform its own inspections thereof. Sublessee agrees that it is
relying solely on its own inspections and not on representations of Sublessor in
determining to lease the Premises on the terms and conditions set forth herein.
10. Parking: Subject to the provisions of this Section 10 and subject to
interruptions in availability due to damage, destruction, repairs and other
causes outside of the reasonable control of Sublessor during the term of this
Lease, from time to time during the Term, including the Extension Term, if any,
Sublessee shall be entitled to the exclusive use (for the use of its officers,
employees and invitees), of seventy-six (76) of the ninety-one (91) parking
spaces located adjacent to the Premises and more particularly depicted on
Exhibit D attached hereto and made a part hereof. Sublessee shall have the right
to use the parking spaces allocated to it pursuant to this Section 10 at no
charge during the Term; however, such arrangement is personal to, and shall be
for the benefit of, only Miravant Medical Technologies; in all other cases,
Sublessor's prevailing changes, from time to time, shall apply. All rights under
this Section 10 shall automatically terminate upon the expiration or earlier
termination of this Sublease. Sublessor shall be responsible for the cost and
maintenance of the parking area and associated building landscaping.
11. Compliance with Master Lease:
(a) Definitions: Except as otherwise expressly provided
herein, during the Term and for all subsequent periods with respect to
obligations arising prior to the termination of this Sublease,
Sublessee shall comply with and perform, for the benefit of Sublessor
and Master Lessor, all of the terms, covenants, conditions and
obligations of the "tenant" or "lessee" under the Master Lease
allocable or applicable to the Premises. Such terms, covenants,
conditions and obligations shall, unless the context of the Master
Lease indicates otherwise, be applied with the terms "Sublessor" and
"Sublessee" substituted respectively for "Landlord" (or "Lessor") and
"Tenant" (or "Lessee") and with the term "Premises" under the Sublease
and Master Lease meaning the Premises demised hereunder. Sublessee
shall not do, permit or suffer any act, occurrence or omission which if
done, permitted or suffered by Sublessor would be (with notice, the
passage of time or both), in violation of or a default by the Sublessor
under the Master Lease, or could lead in any respect to the termination
of the Master Lease.
(b) Consents: Sublessor shall use reasonable efforts to obtain
from the Master Lessor any approvals or consents reasonably requested
by Sublessee and any work, services, repairs or other performance to be
performed by the Master Lessor under the Master Lease; provided,
however, in the case of legal proceedings requested by Sublessee to be
instituted, Sublessee shall indemnify, defend, protect and hold
Sublessor harmless from and against any legal fees and disbursements
and all other costs, expenses, liabilities, claims and obligations
incurred by or asserted against Sublessor in connection with any such
proceeding. The parties acknowledge and agree that Sublessor shall not
be liable to and Sublessee hereby waives and releases all claims
against Sublessor for any damages suffered by Sublessee as a result of
the Master Lessor's failure, for any reason, to grant its consent or
approval as to any matter related to this Sublease.
12. Modifications to Certain Incorporated Provisions: Notwithstanding the
incorporation of the provisions of the Master Lease above provided in Section
11, certain of those provisions as the same apply to this Sublease are modified
as follows:
(a) Notices: In the event that Sublessor shall receive any
notice from Master Lessor for any reason pertaining to the Sublease or
Master Lease, then, within three (3) days from the date of such
receipt, Sublessor shall send a copy of such notice to Sublessee.
The Provisions of the Master Lease regarding the
giving of notices are hereby amended to add after the name "Tenant" the
phrase "Sublessor," and to insert the following:
Notices to Sublessor:
Raytheon Systems Company Raytheon Company
Real Estate Department Executive Offices
Bldg. AOI MS A162 141 Spring Street
Post Office Box 9399 Lexington, MA 02173
Long Beach, CA 90810 Attn: Director of Corporate Services
Attention: Manager, Real Estate
13. Indemnification; Exculpation:
(a) Non-liability of Sublessor: Sublessor shall not be liable
to Sublessee and Sublessee hereby waives and releases all claims
against Sublessor and its partners, officers, directors, employees,
trustees, successors, assigns, agents servants, affiliated,
representatives and contractors (collectively, "Sublessor Affiliates"),
for injury or damage to any person or property occurring or incurred in
connection with or in any way relating to the Premises. Without
limiting the foregoing, neither Sublessor Affiliates shall be liable
for and there shall be no abatement of Base Rent or additional rent for
(i) any damage to Sublessee's property stored with or entrusted to
Sublessor or Sublessor Affiliates, (ii) loss of or damage to any
property by theft or any other wrongful or illegal act, or (iii) any
injury or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water or rain which may leak
from any part of the Premises or from the pipes, appliances,
appurtenances or plumbing works therein or from the roof, street or
sub-surface or from any other place or resulting from dampness or any
other cause whatsoever or from the acts or omissions of other
sublessees, occupants or other visitors to the Premises or from any
other cause whatsoever, or (iv) any latent or other defect in the
Premises.
14. Indemnification of Sublessor: Sublessee shall indemnify, defend ,
protect and hold Sublessor harmless from and against any and all claims, suits,
judgments, losses, costs, obligations, damages, expenses, interest and
liabilities, including, without limitation, actual attorneys' fees and costs,
incurred or asserted in connection with (i) injury or damage to any person or
property whatsoever arising out of or in connection with this Sublease, the
Premises or Sublessee's activities in or about the Premises including, without
limitation, when such injury or damage has been caused in whole or in part by
the act, negligence, fault or omission of Sublessee, its agents, servants,
contractors, employees, representatives, licensees or invitees, or (ii) any
breach or default by Sublessee or its obligations under this Sublease. The
provisions of this Section 14 shall survive the expiration or earlier
termination of this Sublease.
15. Master Lessor Default; Consents: Notwithstanding any provision of this
Sublease to the contrary, (a) Sublessor shall not be liable or responsible in
any way for any loss, damage, cost, expense, obligation or liability suffered by
Sublessee by reason or as the result of any breach, default or failure to
perform by the Master Lessor under the Master Lease and (b) whenever the consent
or approval of Sublessor and Master Lessor is required for a particular act,
event or transaction (i) any such consent or approval of Sublessor shall be
subject to the consent and approval of the Master Lessor and (ii) should Master
Lessor refuse to grant such consent or approval, under all circumstances,
Sublessor shall be released from any obligation to grant its consent or
approval.
16. Nonrecourse Liability: Sublessor shall in no event or at any time be
personally liable for the payment or performance of any obligation required or
permitted of the Sublessor under this Sublease or under any document executed in
connection herewith. In the event of any actual or alleged failure, breach or
default by Sublessor under this Sublease or any such document, the sole recourse
of Sublessee shall be against the interest of Sublessor in the Premises.
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
executed as of the date first written above.
AGREED AND ACCEPTED:
"SUBLESSOR"
Raytheon Company d.b.a. Raytheon Systems Company
By: /s/ Thomas D. Hyde
Thomas D. Hyde
Title: Senior Vice President, General
Counsel Raytheon Company
Date: July 23, 1998
"SUBLESSEE"
Miravant Medical Technologies
By: /s/ David E. Mai
David E. Mai
Title: President
Date: July 16, 1998
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN
THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998, AND IS
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