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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-15006
T CELL SCIENCES, INC.
(Exact name of registrant as specified in charter)
DELAWARE NO. 13-3191702
(State of Incorporation) (I.R.S Employer Identification No.)
119 FOURTH AVENUE, NEEDHAM, MASSACHUSETTS 02194-2725
(Address of principal executive offices) (Zip code)
(617) 433-0771
(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 .
--- ---
Outstanding as of
Class August 12, 1996
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Common Stock, par value $.001 19,946,601
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T CELL SCIENCES, INC.
TABLE OF CONTENTS
JUNE 30, 1996
Page
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PART I -- FINANCIAL INFORMATION
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Condensed Consolidated Balance Sheets --
June 30, 1996 and December 31, 1995.................................... 3
Condensed Consolidated Statements of Operations --
Quarters ended June 30, 1996 and 1995.................................. 4
Six Months ended June 30, 1996 and 1995................................ 5
Condensed Consolidated Statements of Cash Flows --
Six months ended June 30, 1996 and 1995................................ 6
Notes to Condensed Consolidated Financial Statements............................ 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................. 9
PART II -- OTHER INFORMATION
- ----------------------------
Item 1. Legal Proceedings...................................................... 12
Item 5. Other Information...................................................... 12
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits........................................................... 13
B. Reports on Form 8-K................................................ 13
Signatures...................................................................... 14
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
T CELL SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
JUNE 30, DECEMBER 31,
1996 1995
================================================================================================
ASSETS
Current Assets:
Cash and Cash Equivalents $ 6,726,626 $ 12,275,217
Accounts Receivable, Net 9,593 339,167
Inventories 14,600 403,293
Prepaid Expenses and Other 288,787 541,411
Current Portion Note Receivable 380,000 --
- ------------------------------------------------------------------------------------------------
Total Current Assets 7,419,606 13,559,088
- ------------------------------------------------------------------------------------------------
Property and Equipment, Net 512,842 1,172,137
Restricted Cash 850,000 850,000
Long-term Note Receivable 1,649,751 --
Other Noncurrent Assets 1,312,438 2,951,062
- ------------------------------------------------------------------------------------------------
Total Assets $ 11,744,637 $ 18,532,287
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 177,429 $ 724,944
Accrued Expenses 1,204,494 1,504,586
Deferred Revenue -- 121,083
- ------------------------------------------------------------------------------------------------
Total Current Liabilities 1,381,923 2,350,613
- ------------------------------------------------------------------------------------------------
Collaborator Advance 181,573 181,573
- ------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock, $.001 Par Value 19,966 19,905
Additional Paid-in Capital 62,728,168 62,399,255
Less: Common Treasury Shares at Cost (68,938) (80,523)
Accumulated Deficit (52,498,055) (46,338,536)
- ------------------------------------------------------------------------------------------------
Total Stockholders' Equity 10,181,141 16,000,101
- ------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 11,744,637 $ 18,532,287
================================================================================================
See accompanying notes to financial statements
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T CELL SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED JUNE 30, 1996 AND 1995
JUNE 30, JUNE 30,
1996 1995
=======================================================================================
OPERATING REVENUE:
Product Development and Licensing Agreements $ 179,396 $ 547,940
Product Sales 8,725 614,154
- ---------------------------------------------------------------------------------------
Total Operating Revenue 188,121 1,162,094
- ---------------------------------------------------------------------------------------
OPERATING EXPENSE:
Cost of Product Sales 2,837 452,413
Research and Development 1,437,072 2,013,800
General and Administrative 3,072,249 987,939
Marketing and Sales 97,880 444,504
- ---------------------------------------------------------------------------------------
Total Operating Expenses 4,610,038 3,898,656
- ---------------------------------------------------------------------------------------
Operating Loss (4,421,917) (2,736,562)
Non Operating Income, Net 114,019 151,689
- ---------------------------------------------------------------------------------------
Net Loss $(4,307,898) $(2,584,873)
=======================================================================================
Net Loss Per Common Share $ (0.22) $ (0.15)
=======================================================================================
Weighted Average Common Shares Outstanding 19,938,202 17,055,686
=======================================================================================
See accompanying notes to financial statements
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T CELL SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
JUNE 30, JUNE 30,
1996 1995
=============================================================================================
OPERATING REVENUE:
Product Development and Licensing Agreements $ 270,613 $ 1,136,616
Product Sales 506,338 1,206,939
- ---------------------------------------------------------------------------------------------
Total Operating Revenue 776,951 2,343,555
- ---------------------------------------------------------------------------------------------
OPERATING EXPENSE:
Cost of Product Sales 351,172 941,663
Research and Development 2,928,109 3,993,600
General and Administrative 3,936,027 2,047,311
Marketing and Sales 282,907 737,380
- ---------------------------------------------------------------------------------------------
Total Operating Expenses 7,498,215 7,719,954
- ---------------------------------------------------------------------------------------------
Operating Loss (6,721,264) (5,376,399)
Non Operating Income, Net 561,745 381,065
- ---------------------------------------------------------------------------------------------
Net Loss $(6,159,519) $(4,995,334)
=============================================================================================
Net Loss Per Common Share $ (0.31) $ (0.29)
=============================================================================================
Weighted Average Common Shares Outstanding 19,923,790 17,054,953
=============================================================================================
See accompanying notes to financial statements
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T CELL SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
JUNE 30, JUNE 30,
Increase (Decrease) in Cash & Cash Equivalents 1996 1995
===========================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(6,159,519) $(4,995,334)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 280,873 291,026
Gain on Sale of Research Products and Operations of
T Cell Diagnostics, Inc. (309,753) --
Severance agreement stock option vesting acceleration 170,288 --
Write-off of capitalized patent costs 1,751,626 --
Decrease of collaborator advance -- (318,427)
Net Change in Current Assets and Current Liabilities (1,058,327) (461,194)
- -------------------------------------------------------------------------------------------
Net Cash Used by Operating Activities (5,324,812) (5,483,929)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (11,567) (6,945)
Sale/Disposal of Fixed Assets -- 106,961
Increase in Patents and Trademarks (318,318) (359,186)
Redemption of Short Term Investments -- 8,539,666
Other Noncurrent Assets (64,164) --
- -------------------------------------------------------------------------------------------
Net Cash Provided by Investing Activities (394,049) 8,280,496
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Exercise of Stock Options 158,685 7,124
Sale of Stock 11,585 16,739
- -------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 170,270 23,863
- -------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (5,548,591) 2,820,430
Cash and Cash Equivalents at Beginning of Period 12,275,217 7,644,653
- -------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 6,726,626 $10,465,083
===========================================================================================
See accompanying notes to financial statements
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T CELL SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(1) NATURE OF BUSINESS
------------------
T Cell Sciences, Inc. (the "Company"), is a biopharmaceutical company
engaged in the discovery and development of innovative drugs targeting the
immune and inflammatory systems. The Company was incorporated in the State of
Delaware on December 9, 1983. T Cell Diagnostics, Inc. ("TCD"), a wholly-owned
subsidiary of the Company, was formed in 1991 to capitalize on the sales of
diagnostic and research products emanating from the Company's proprietary
technology. On March 5, 1996 the Company sold the research products and
operations of TCD to Endogen, Inc. while retaining the TRAx[Registered
Trademark] diagnostic franchise.
The condensed consolidated financial statements include the accounts of
T Cell Sciences, Inc. and its wholly owned subsidiary, T Cell Diagnostics, Inc.
All intercompany transactions have been eliminated.
(2) INTERIM FINANCIAL STATEMENTS
----------------------------
The accompanying condensed consolidated financial statements for the
three and six month periods ended June 30, 1996 and 1995 include the
consolidated accounts of the Company, and have been prepared in accordance with
generally accepted accounting principles and with the instructions to Form 10-Q
and article 10 of Regulation S-X. In the opinion of management, the information
contained herein reflects all adjustments, consisting solely of normal recurring
adjustments, that are necessary to present fairly the financial positions at
June 30, 1996 and December 31, 1995, the results of operations for the three and
six month periods ended June 30, 1996 and 1995, and the cash flows for the six
month periods ended June 30 30, 1996 and 1995. The results of operations for the
three and six month periods ended June 30, 1996 is not necessarily indicative of
results for any future interim period or for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, although the Company believes that the disclosures
included are adequate to make the information presented not misleading. The
condensed consolidated financial statements and the notes included herein should
be read in conjunction with footnotes contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
(3) EQUIPMENT OPERATING LEASE
-------------------------
In August 1994, the Company entered into a lease agreement to with a
five-year term lease up to $2,000,000 of equipment. The lease agreement requires
that the Company maintain certain restrictive covenants determined at the end of
each fiscal quarter, including a cash, cash equivalents and short-term
investments balance of not less than $10,000,000 and certain financial ratios.
At September 30, 1995 the Company's cash, cash equivalents and short-term
investments balance was below the minimum covenant requirement. In accordance
with the lease agreement, in November 1995, the Company pledged as collateral to
the lessor the cash amount outstanding on the lease. In March 1996, the Company
repaid approximately $980,000 of the outstanding total obligation under the
lease in conjunction with the sale of the research products and operations of
TCD. At June 30, 1996, the Company had approximately $850,000 outstanding on the
lease.
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(4) LITIGATION
----------
In December 1994, the Company filed a lawsuit in the Superior Court of
Massachusetts against the landlord of its former Cambridge, Massachusetts
headquarters, to recover the damages incurred by the Company resulting from the
evacuation of the building, due to air quality problems which caused skin and
respiratory irritation to a significant number of employees. The landlord
defendant has filed counterclaims, alleging the Company has breached its lease
obligations. The landlord's mortgagor has filed claims against the Company for
payment of the same rent alleged to be owed. The Company believes at this time
that it will prevail on the merits of the lawsuits and is vigorously defending
the claims brought against it. Due to the pre-trial stage of the lawsuits, a
range of potential losses, which the Company believes are unlikely, can not be
estimated at this time. Accordingly, no accrual has been made in the financial
statements relative to any potential effects on the Company's future operating
results. The Company's insurance carrier is reimbursing the Company for certain
legal expenses associated with the counterclaims, under a reservation of rights,
but has filed a motion for summary judgment seeking a determination of
noncoverage. The Company has filed a motion to strike the insurer's motion for
summary judgment on the grounds that it was not timely filed.
(5) DISPOSITION OF ASSETS
---------------------
On March 5, 1996, the Company sold the research products and operations
of TCD to Endogen, Inc. ("Endogen") for a purchase price of approximately
$2,900,000. The sale did not include the TRAx product franchise and related
assets. The purchase price was paid in the form of a convertible subordinated
note in the principal amount of $1,900,000, due in ten semi-annual installments
commencing September 1, 1996 with interest receivable thereon at the rate of 7%
per annum. The outstanding principal of the note is convertible at any time at
the option of the Company into shares of common stock of Endogen. Endogen also
paid the Company approximately $528,000 in cash and provided a $452,000 short
term note receivable to fund the Company's purchase of certain property and
equipment outstanding under an operating lease. These assets were transferred to
Endogen upon closing of the sale. The short term note receivable was
subsequently collected on March 27, 1996.
(6) WRITE-OFF OF CAPITALIZED PATENT COSTS
-------------------------------------
During the second quarter of 1996, as part of the Company's
realignment of certain of its operations, the Company suspended internal
funding of the research and development of its T Cell antigen receptor program
pending completion of negotiations to transfer certain of its patent and
license rights related to such technology to Astra AB ("Astra"). In June 1996,
as a result of these negotiations and in accordance with Statement of
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, the Company evaluated and
subsequently wrote off approximately $1,752,000 of capitalized patent costs
relating to its T Cell antigen receptor program.
(7) SEVERANCE AGREEMENT CHARGE
--------------------------
On May 29, 1996 the Company announced changes in it senior management.
As part of the reorganization, the Company recorded a $425,000 charge to
earnings resulting from a severance agreement with the Company's former
President and Chief Executive Officer. The charge included a $255,000 severance
payment and a non-cash charge of approximately $170,000 relating to the
acceleration of certain stock option vesting rights.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
OVERVIEW
In an effort to focus its business operations on its therapeutic drug
programs, the Company recently realigned certain of its operations. On March 5,
1996, the Company sold the operations and research product line of its wholly
owned subsidiary TCD, excluding the TRAx product franchise and related assets,
to Endogen for a purchase price of approximately $2,900,000. While the Company
will continue the development of its TRAx product franchise, its present plan is
to defer filing a 510(k) application with the FDA for clearance to market TRAx
CD8 in the United States while it focuses on establishing a partnership for
international distribution of its TRAx technology. Furthering its focus toward
the development of proprietary therapeutic products, the Company reorganized its
senior management in June 1996, with the appointment of Una S. Ryan Ph. D., its
Chief Scientific Officer, to the position of President and Chief Operating
Officer, and its Chairman James D. Grant, as Chief Executive Officer. The
Company also appointed Norman W. Gorin as Chief Financial Officer.
The Company has in the past developed and produced both therapeutic and
diagnostic products, including the development of T cell receptor therapeutics
in collaboration with Astra. The Company has recently suspended internal funding
of the research and development of its T cell receptor therapeutic programs
pending the conclusion of negotiations with Astra to transfer certain of its
rights to the technology. In conjunction with these developments, the Company
has written off certain capitalized patent costs related to the T cell receptor
technology, incurring a $1,752,000 charge to earnings.
The Company is now focusing its resources on the discovery and
development of innovative drugs targeting the immune and inflammatory systems.
The Company's lead therapeutic program is focused on developing compounds that
inhibit complement activation which is part of the body's immune defense system.
In January 1996, the Company initiated a Phase II clinical trial for the
evaluation of the Company's lead therapeutic compound, TP10, in patients with
ARDS. In July 1996, the Company initiated a Phase I/II clinical trial to prevent
reperfusion injury in patients receiving lung transplants.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996 COMPARED TO QUARTER ENDED JUNE 30, 1995 --
The Company reported a consolidated net loss of $4,308,000 or $.22 per share for
the quarter ended June 30, 1996, compared with a net loss of $2,585,000 or $.15
per share for the quarter ended June 30, 1995. The increase in net loss was
primarily due to a $1,752,000 write-off of certain capitalized patent costs
combined with a $425,000 charge resulting from a severance agreement with its
former President and Chief Executive Officer in June 1996. In addition, revenue
decreased $974,000 for the quarter ended June 30, 1996 compared to the quarter
ended June 30, 1995 primarily due to lower product sales as a result of the sale
of the research products and operations of the Company's diagnostic division in
March 1996. Excluding the write-off of certain capitalized patent costs and the
charge relating to the severance agreement, the net loss for the quarter
decreased 17.6% or $454,000 for the quarter compared to the same period last
year. This decrease was primarily due to the sale of the research products and
operations combined with staff reductions and implementation of discretionary
spending controls across all functional areas in the second half of 1995.
Product development revenue decreased 67.3% or $369,000 to $179,000 for
the quarter ended June 30, 1996 compared to the same quarter last year. The
decrease for the quarter ended June 30, 1996 was primarily the result of
anticipated lower revenue from Astra, the Company's collaborative partner. In
accordance with its agreement with Astra, the Company will not receive
additional research and development revenue funding. Included in product
development revenue is a $100,000 non-refundable execution fee
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from CytoTherapeutics, Inc. In May 1996 the Company granted CytoTherapeutics a
worldwide non-exclusive license to the Company's technology and patent rights
relating to Complement Receptor 1 for a series of milestone payments and
royalties. Product sales revenue was $9,000 for the quarter ended June 30, 1996
compared to $614,000 for the same period last year, and cost of product sales
decreased $450,000 to $3,000 for the quarter compared to last year. The
decrease in product sales and cost of product sales for the quarter ended June
30, 1996 is attributable to the sale of the research products and operations of
TCD to Endogen.
Research and development expenses were $1,437,000 for the quarter ended
June 30, 1996 compared to $2,014,000 for the same period last year. The decrease
is primarily attributable to the restructuring program implemented in the second
half of 1995 which further focused the Company on priority projects, combined
with the sale of the research products and operations of TCD on March 5, 1996.
General and administrative expenses increased $2,084,000 to $3,072,000
for the quarter ended June 30, 1996 from $988,000 for the comparable period
last year. The increase is due to the $425,000 charge resulting from a
severance agreement with its former President and Chief Executive Officer in
June 1996 and the write-off of certain capitalized patent costs of $1,752,000.
Excluding the charge from the senior management reorganization and the
write-down of the capitalized patent costs, general and administrative expenses
decreased $93,000 or 9.4% for the quarter compared to last year. The decrease
is mainly attributable to staff reductions combined with discretionary spending
controls across all functional areas.
Marketing and sales expenses decreased 78.0% to $98,000 for the quarter
ended June 30, 1996 compared to $445,000 for the quarter ended June 30, 1995.
The decrease in marketing and sales expenses is primarily due to the sale of the
research products and operations of TCD in March 1996, combined with the
December 1995 exclusive sales and distribution contract with Diamedix
Corporation for the TRAx CD4 and CD8 microtiter plate format products in the
United States.
Non-operating income of $114,000 for the quarter ended June 30, 1996
reflects interest income which decreased 24.8% for the quarter ended June 30,
1996 compared with $152,000 for the quarter ended June 30, 1995. The decrease in
interest income is primarily the result of lower cash balances during the
quarter ended June 30, 1996 compared to the same period last year.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30,
1995. For the six months ended June 30, 1996, the Company reported a
consolidated net loss of $6,160,000 or $.31 per share, compared with a net loss
of $4,995,000 or $.29 per share for the six months ended June 30, 1995. The
increased loss for the six months ended June 30, 1996 compared to the same
period last year was primarily due to the $1,752,000 write-off of certain
capitalized patent costs, a $425,000 charge resulting from a severance agreement
with Company's former President and Chief Executive Officer, lower product
development revenue from Astra and lower product sales resulting from the sale
of the research products and operations of the Company's diagnostic division in
March 1996.
Product development revenue decreased 76.2% or $866,000 for the six
months ended June 30, 1996 compared to the same period last year. The decrease
reflected the anticipated lower revenue from Astra. In accordance with its
agreement with Astra, the Company will not receive additional research and
development revenue funding. For the six months ended June 30, 1996, product
development included a $100,000 non-refundable execution fee associated with an
agreement granting CytoTherapeutics, Inc. a worldwide, nonexclusive license to
the Company's technology and patent rights relating to Complement Receptor 1 for
a series of milestone payments and royalties.
Product sales revenue for the six months ended June 30, 1996 decreased
58.1% to $506,000 compared to $1,207,000 for the comparable period last year.
The decrease in product sales for the six months ended June 30, 1996 is
attributable to the sale of the research products and operations of TCD to
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Endogen, partially offset by an increase in TRAx product sales. As a result of
the sale of the research products and operations of TCD to Endogen, the
Company's product sales revenue for the period included research product sales
for the first two months of the year only, compared with six months last year.
The Company does not anticipate having additional research product sales in the
foreseeable future.
For the six months ended June 30, 1996, research and development
expenses were $2,928,000 compared to $3,994,000 for the same period last year.
The decrease is primarily attributable to the restructuring program implemented
in the second half of 1995 which further focused the Company on priority
projects combined with the sale of the research products and operations of TCD
on March 5, 1996. In January 1996, the Company announced the start of a Phase
IIa clinical trial evaluating the use of TP10 in Patients with ARDS.
General and administrative expenses increased to $3,936,000 for the six
months ended June 30, 1996 from $2,047,000 for the comparable period last year.
Excluding the $425,000 charge resulting from the severance agreement with the
Company's former President and Chief Executive Officer in June 1996 and the
$1,752,000 write-off of capitalized patent costs, general and administrative
costs decreased 14.1% or $288,000 for the six months compared to last year. The
decrease is mainly attributable to staff reductions combined with the
implementation of discretionary spending controls across all functional areas.
Non-operating income of $562,000 for the six months ended June 30, 1996
includes a gain of $310,000 recognized from the sale of the research products
and operations to Endogen. Interest income decreased 33.9% to $252,000 for the
six months ended June 30, 1996 compared with $381,000 for the six months ended
June 30, 1995. The decrease in interest income is primarily the result of lower
cash balances during the six months ended June 30, 1996 compared to the same
period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents at June 30, 1996 decreased
$5,548,000 to $6,727,000 from $12,275,000 at December 31, 1995. The decrease is
primarily due to the net operating loss of $6,160,000 for the six months ended
June 30, 1996 adjusted for the non-cash write-off of capitalized patent costs of
$1,752,000. Cash used in operations was $5,325,000 for the six months ended June
30, 1996 compared to $5,484,000 for the six months ended June 30, 1995. The
$159,000 decrease in cash used is primarily due to a $832,000 decrease in net
operating loss, adjusted for the write-off of capitalized patent costs and a
charge resulting from a severance agreement with the Company's former President
and Chief Executive Officer.
The Company received a convertible subordinated note receivable in the
principal amount of $1,900,000 in connection with the sale of the research
products and operations of TCD to Endogen. Payments are due in ten semi-annual
installments commencing September 1, 1996 with interest receivable thereon at
the rate of 7% per annum. The outstanding principal amount of the note is
convertible at any time at the option of the Company into shares of common stock
of Endogen.
The Company has no long-term debt. During 1994, the Company entered
into an operating lease agreement with a five year term to lease up to $2
million of equipment. The lease arrangement requires that the Company maintain
certain restrictive financial covenants, determined at the end of each fiscal
quarter. At September 30, 1995 the Company's cash, cash equivalents and
short-term investment balances were below the minimum covenant requirement. In
November 1995, in accordance with the lease agreement, the Company pledged as
collateral cash equal to the amount outstanding on the lease. At June 30, 1996,
the Company had approximately $850,000 outstanding on the lease.
The Company believes its current cash and cash equivalents combined
with anticipated net cash provided by operations will be adequate to meet the
Company's cash requirements for operations through 1996. The Company filed a
Registration Statement with the Securities and Exchange Commission on
July 23, 1996.
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relating to the public offering of up to 5,000,000 shares of its common stock.
If all 5,000,000 shares of Common Stock offered are sold at the public
offering price of $2.9375 assumed in the Registration Statement, the Company
anticipates that it will have sufficient cash to fund its operations through
the end of 1997. The Company is considering alternative sources of funding and
capital such as through partnering and financing opportunities.
Certain of the statements set forth above and elsewhere in this Prospectus,
including statements regarding anticipated revenue, expenses and cash
projections, are forward-looking and are based upon the Company's current belief
about further activities and events. Actual results may differ materially from
anticipated results.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
-----------------
No material changes since the Company's annual report on Form 10-K for
the year ended December 31, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
On May 21, 1996 the Company held its Annual Meeting of Stockholders at
which the voters elected six directors to its Board of Directors.
At the Company's Annual Meeting of Stockholders, the following were
elected to the Board of Directors:
For Withheld Authority
--- ------------------
James D. Grant 14,555,745 129,054
Patrick C. Kung 14,553,065 131,734
Alan W. Tuck 14,552,965 131,834
John P. Munson 14,553,265 131,534
John Simon 14,555,345 129,454
Thomas R. Ostermueller 14,555,845 128,954
The number of shares issued, outstanding and eligible to vote as of
the record date of March 29, 1996 were 19,896,804. Quorum was 14,685,799 shares
represented by 259 proxies or 73.8% of the eligible voting shares tabulated.
ITEM 5. OTHER INFORMATION:
-----------------
The Company announced on July 2, 1996 that it has been issued a U.S.
patent for the proprietary technology and testing kits used in the TRAx product
line, including TRAx CD4, a diagnostic product used to measure the number of
CD4 cells in blood. The TRAx CD4 test kit represents the first diagnostic
product utilizing this technology providing laboratories with a cost efficient
alternative to flow cytometry.
On July 23, 1996, the Company filed a Registration Statement with the
Securities and Exchange Commission relating to a public offering by the Company
of up to 5,000,000 shares of its common stock.
On August 1, 1996, the Company announced the start of patient
enrollment in a Phase I/II clinical trial evaluating the use of the Company's
lead complement inhibitor, TP10, in patients with reperfusion injury following
lung transplant surgery. The objectives of the trial are to determine the safety
and pharmacokinetics of TP10 in patients following lung transplant surgery, and
to determine the ability
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of TP10 to reduce reperfusion injury and improve lung function in patients
following lung transplant surgery.
The Company announced on August 13, 1996 that Dr. Una S. Ryan has been
appointed Chief Executive Officer in addition to her current position as
President of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
A. EXHIBITS
10.11 Lease between Fourth Avenue Ventures Limited Partnership and
the Company dated May 1, 1996.
B. REPORTS ON FORM 8-K
The Company reported on Form 8-K, dated June 3, 1996, the changes in
its senior management with the appointment of Dr. Una Ryan as President and
Chief Operating Officer. Mr. James D. Grant, Chairman of the Board of the
Company, assumed the position of Chief Executive Officer.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
T CELL SCIENCES, INC.
BY: /s/ Norman W. Gorin
-------------------------------
Norman W. Gorin
Vice President, Finance
and Chief Financial Officer
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EXHIBIT 10.11
LEASE
FOURTH AVENUE VENTURES LIMITED PARTNERSHIP
LANDLORD
TO
T CELL SCIENCES, INC.
TENANT
115 Fourth Avenue
Needham Heights, MA
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TABLE OF CONTENTS
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Page No.
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SECTION 1 Reference Information .............................................. 1
Section 1.1. Reference Information .................................... 1
Section 1.2. Exhibits ................................................. 3
Section 1.3. Parking .................................................. 4
Section 1.4. Shipping and Receiving ................................... 4
SECTION 2 Premises and Term .................................................. 4
Section 2.1. Premises ................................................. 4
Section 2.2. Term ..................................................... 4
SECTION 3 Condition of Premises .............................................. 4
Section 3.1. Condition of Premises .................................... 4
SECTION 4 Fixed Rent ......................................................... 5
Section 4.1. The Fixed Rent ........................................... 5
Section 4.2 Extension Term Rent ...................................... 5
SECTION 5 Operating Expenses ................................................. 6
Section 5.1. Payment of Operating Expenses ............................ 6
Section 5.2. Definition of Operating Expenses ......................... 6
Section 5.3. Determination of Operating Expenses ...................... 7
Section 5.4. Final Accounting for Lease Year .......................... 7
SECTION 6 Insurance .......................................................... 8
Section 6.1. Tenant's Insurance ....................................... 8
Section 6.2. Landlord's Insurance ..................................... 9
Section 6.3 Tenant Reimbursement of Insurance Taken Out by Landlord ... 9
Section 6.4. Requirements Applicable to Insurance Policies ............ 9
Section 6.5. Waiver of Subrogation .................................... 9
SECTION 7 Utilities .......................................................... 10
Section 7.1. Utilities ................................................ 10
SECTION 8 Landlord's Covenants ............................................... 10
Section 8.1. Building Maintenance ..................................... 10
Section 8.2. Common Area Maintenance .................................. 11
SECTION 9 Tenant's Covenants ................................................. 11
Section 9.1. Use ...................................................... 11
Section 9.2. Repair and Maintenance ................................... 11
Section 9.3. Compliance with Law and Insurance Requirements ........... 12
Section 9.4. Alterations and Improvements ............................. 13
Section 9.5. Indemnity ................................................ 14
Section 9.6. Landlord's Right to Enter ................................ 15
Section 9.7. Personal Property at Tenant's Risk ....................... 15
Section 9.8. Payment of Landlord's Cost of Enforcement ................ 15
Section 9.9. Yield Up ................................................. 15
Section 9.10. Landlord's Expenses Re Consents ......................... 16
Section 9.11. Rules and Regulations ................................... 16
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Section 9.12. Holding Over .......................................... 16
Section 9.13. Assignment: Subletting and Change of Control .......... 17
Section 9.14. Overloading and Nuisance .............................. 19
Section 9.15. Tenant's Credit Obligations ........................... 19
Section 9.16. Signs ................................................. 19
SECTION 10 Casualty or Taking .............................................. 20
Section 10.1. Termination ........................................... 20
Section 10.2. Restoration ........................................... 20
Section 10.3. Award ................................................. 20
SECTION 11 Default ......................................................... 21
Section 11.1. Events of Default ..................................... 21
Section 11.2. Remedies .............................................. 22
Section 11.3. Remedies Cumulative ................................... 23
Section 11.4. Right to Cure Defaults ................................ 23
Section 11.5. Effect of Waivers of Default .......................... 23
Section 11.6. No Accord and Satisfaction ............................ 23
Section 11.7. Interest on Overdue Sums .............................. 24
SECTION 12 Mortgages ....................................................... 24
Section 12.1. Rights of Mortgage Holders ............................ 24
Section 12.2. Subordination of Lease ................................ 25
Section 12.3. Estoppel Certificate .................................. 25
SECTION 13 Environmental Compliance ........................................ 26
Section 13.1 Definitions ........................................... 26
Section 13.2 Indemnity ............................................. 26
Section 13.3 Preexisting Condition ................................. 27
SECTION 14 Miscellaneous ................................................... 27
Section 14.1. Notices from One Party to the Other ................... 27
Section 14.2. Quiet Enjoyment ....................................... 27
Section 14.3. Lease Not to be Recorded: Notice of Lease ............. 27
Section 14.4. Bind and Inure: Limitation of Landlord's Liability .... 27
Section 14.5. Acts of God ........................................... 28
Section 14.6. Brokerage ............................................. 28
Section 14.7. Miscellaneous ......................................... 28
Section 14.8. Security Deposit ...................................... 28
SECTION 15 Improvements .................................................... 29
Section 15.1. Entryway .............................................. 29
Section 15.2. Capital Improvements .................................. 29
Section 15.3. Tenant Improvements ................................... 29
SECTION 16 Direct Lease Cancellation ....................................... 31
Section 16.1. Direct Lease Cancellation ............................. 31
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LEASE
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SECTION 1
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Reference Information
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SECTION 1.1. REFERENCE INFORMATION. Reference in this Lease to any of
the following shall have the meaning set forth below:
Date of this Lease: May 1, 1996
Premises: As defined in Section 2.1 herein.
Landlord: Fourth Avenue Ventures Limited Partnership
Address of Landlord: c/o The Davis Companies, One Appleton Street, Boston,
Massachusetts 02116
Tenant: T CELL Sciences, Inc., a Delaware corporation
Address of Tenant: 115 Fourth Avenue, Needham, Massachusetts 02194
Term Commencement Date (or Commencement Date): May 1, 1996.
Term Expiration Date: April 30, 2002.
Lease Term: From the Term Commencement Date to the Term Expiration
Date.
Early Termination Option: At Tenant's election, exercisable by written
notice of the election to Landlord accompanied by Tenant's payment to Landlord
of $250,000 in good and immediately available funds, which notice and payment
must be received by Landlord on or before July 31, 1999, and provided that this
Lease has then been maintained without default not cured within any applicable
grace or cure period, Tenant may change the Term Expiration Date to April 30,
2000.
Extension Option: At Tenant's election, exercisable by written notice of
the election to Landlord received by Landlord on or before April 30, 2001,
provided Tenant has not exercised the Early Termination Option and Tenant has
then maintained this Lease without default not cured within any applicable grace
or cure period, Tenant may change the Term Expiration Date to April 30, 2007. If
Tenant exercises this Extension Option, the portion of the Lease Term from May
1, 2002 until April 30, 2007 shall sometimes be referred to as the "Extension
Term".
Premises Square Footage: approximately 54,317 rentable square feet. The
approximately 9,110 square feet of the Premises previously demised by the Direct
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Lease (defined in Section 16 hereof) is sometimes hereinafter referred to as the
"Direct Lease Space" or "DLS". The portion of the Premises exclusive of the
Direct Lease Space is sometimes hereinafter referred to as the "Repligen
Replacement Lease Space" or "RRLS".
Annual Fixed Rent: RRLS: $598,992.75 year through June 30, 1997; $678992.75 per
year thereafter; plus DLS: $77,435 per year.
Both: Provided further, however that if Tenant exercises its
Extension Option, Annual Fixed Rent from and after May 1,
2002 shall be the Fair Market Rent, as determined as
hereinafter provided.
Permitted Uses: Office, research and development, and the production of
biological products, provided (i) that any such use will be
conducted only and exclusively at the so-called Biosafety
Level 1, for recombinant DNA research, in accordance with
the standards for recombinant DNA research set forth in the
National Institutes of Health ("NIH") document entitled
"Guidelines for Research Involving Recombinant DNA Molecules
("NIH Guidelines"), and up to and including Biosafety Level
2, for all other biological research, in accordance with the
relevant requirements and procedures described in a document
entitled "Biosafety in Microbiological and Biomedical
Laboratories," Third Edition, U.S. Department of Health and
Human Services, Public Health Service, Centers for Disease
Control and Prevention, and the National Institute of
Health, U.S. Government Printing Office, Washington, D.C.
May 1993, HHS Publication No. (CDC) 93-8395, as well as
regulations promulgated by the United States Department of
Labor, Occupational Safety and Health Administration
("OSHA"), and subject also to any other applicable
regulations, requirements, procedures and restrictions (as
applicable, the "Biosafety Guidelines"), and (ii) that any
such research and development, including any animal
laboratory research, is permitted pursuant to a special
permit duly issued by the Town of Needham which remains in
full force and effect and any amendments thereto. Tenant
acknowledges that animal laboratory research is not now
permitted
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under the permit from the Town of Needham. The use of any
agent or material not referenced in the Biosafety
Guidelines, or if referenced in the Biosafety Guidelines
which have been amended or modified from time to time, and
which impose a risk on the occupants of the Building and
Property greater than that permitted pursuant to Biosafety
Level 1 and/or Biosafety Level 2 as provided above and as
set forth in the Biosafety Guidelines, shall not be
permitted except in Landlord's reasonable discretion as
determined in Landlord's sole judgment.
Commercial General Liability Insurance Limits:
Bodily Injury and No less than $1,000,000 per
Property Damage: occurrence and $2,000,000 in the
aggregate for the Premises, with excess
coverage as set forth in Section 6.
Tenant's RRLS: 57.53%
Proportionate
Fraction: DLS: 11.59%
Total: 69.12%
Security Deposit: $70,251.69; 75% of one twelfth of the sum of the initial
Annual Fixed Rent and estimated annual Operating Expenses
and Utilities Additional Rent ($598,992 + $77,435 +
$447,600.00) to be adjusted at the commencement of the
Extension Term to equal 75% of one twelfth of the sum of the
then applicable Annual Fixed Rent and estimated annual
Operating Expenses and Utilities Additional Rent. Landlord
acknowledges that Tenant has previously paid Landlord
$12,000 to be applied to the Security Deposit required by
this Lease.
SECTION 1.2. EXHIBITS. The following Exhibits are attached to and
incorporated in this Lease:
Exhibit A: Plan of Premises
Exhibit A-l: Real Property Description
Exhibit A-2: Biosafety Guidelines
Exhibit B: Existing Equipment
Exhibit C: NRC Survey
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Exhibit D: Trade Fixtures
Exhibit E: Omitted
Exhibit F: Environmental Report
Exhibit 5.3 Landlord's estimated budget for 1996 Operating Expenses
Exhibit 12.2 Form of Subordination, Non-Disturbance and Attornment
Agreement
Exhibit 15.1: Sketch of Entryway
SECTION 1.3. PARKING. Tenant, and its employees, agents, contractors, and
invitees shall have the right, in common with others, to use 104 parking spaces
in the parking lot for the Building.
SECTION 1.4. SHIPPING AND RECEIVING. Tenant shall have access to the
Premises through the common shipping and receiving area marked on Exhibit A, the
loading dock in the rear of the Premises, and may use said facilities in common
with Landlord, in accordance with all reasonable rules and regulations set forth
by Landlord from time to time.
SECTION 2
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Premises and Term
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SECTION 2.1. PREMISES. Landlord hereby leases and demises to Tenant and
Tenant hereby leases from Landlord, on the terms, covenants and conditions
hereinafter set forth and other matters of record, the premises designated in
Exhibit A attached hereto and incorporated herein by this reference (the
"Premises"), consisting of the Premises Square Footage, as defined in Section
1.1, located in the building at 115-119 Fourth Avenue (the "Building") in the
Town of Needham, Norfolk County, Massachusetts 02194, and located on the real
property described in Exhibit A-1 attached hereto and incorporated herein (the
"Property"), the now-existing equipment, including the Existing Equipment set
forth on Exhibit B, and the non-exclusive right to use any common areas
designated as such on Exhibit A ("Common Areas"). Landlord hereby represents and
warrants to Tenant that it has the full right and authority to lease the
Premises and Existing Equipment to Tenant and that no existing contract or
obligation between Landlord and any other current or former tenant of the
Building will be violated by this Agreement.
SECTION 2.2. TERM. To have and to hold for an original term beginning on
the Commencement Date, and continuing until the Term Expiration Date as said
terms are defined in Section 1.1, unless sooner terminated as hereinafter
provided.
SECTION 3
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Condition of Premises
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SECTION 3.1. CONDITION OF PREMISES. Tenant's obligations hereunder shall
commence on the Term Commencement Date. Tenant acknowledges that the
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Premises, in its "as is" condition, is in good, sanitary and reasonable
condition, order and repair and is to the best of Tenant's knowledge and belief
in compliance with all laws as of that date. Landlord has no obligation to do
any work in the Premises to prepare it for Tenant's occupancy; provided,
however, that the foregoing does not release Landlord of its obligations under
Sections 8.1, 9.2, 15.1 and 15.2 hereof to be performed after the Commencement
Date.
SECTION 4
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Fixed Rent
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SECTION 4.1. THE FIXED RENT. Tenant shall pay rent to Landlord c/o The
Davis Companies, One Appleton Street, Boston, Massachusetts 02116 or at such
other place or to such other person or entity as Landlord may by notice to
Tenant from time to time direct, in monthly installments of one-twelfth of the
then applicable Annual Fixed Rent (subject to adjustments pursuant to Section
4.2, without set off or deduction, except as provided herein) in advance on the
first day of each calendar month included in the term, and for any portion of a
calendar month during the lease term, at that rate payable in advance for such
portion.
SECTION 4.2. EXTENSION TERM RENT. Provided Tenant has timely exercised its
extension option as provided herein, the Annual Fixed Rent shall be redetermined
as follows:
(i) On or before April 30, 2001, Landlord shall notify Tenant of the amount
which Landlord reasonably believes to be the Market Rent for the Premises (and
the allocation of that rent between the RRLS and the DLS) as of April 30, 2002.
Unless Tenant notifies Landlord that it does not agree with Landlord's
redetermined Annual Fixed Rent, from and after April 30, 2002, the Annual Fixed
Rent shall be that amount redetermined by the Landlord.
(ii) However, if Tenant notifies Landlord on or before May 15, 2001 that
Tenant disagrees with the Landlord's redetermination, (such notice is
hereinafter referred to as "Tenant's Disagreement Notice") unless Landlord and
Tenant otherwise agree in writing, the redetermined Fixed Annual Rent shall be
the greater of (x) the sum of (1) $756,427.75 (the then payable Fixed Annual
Rent) plus (2) the annualized amount of the aggregate additional rent then
payable monthly for Capital Improvements and Tenant Improvements in accordance
with Sections 15.2 and 15.3 hereof or (y)the Market Rent as of April 30, 2002
determined by arbitration in accordance with the terms set forth below in this
Section 4.2:
(a) Each of Tenant and Landlord shall within the 7 days next after
Tenant's Disagreement Notice choose an arbitrator knowledgeable in the field of
establishing fair rental values in this area and notify the other of the chosen
arbitrator's name, address and phone number;
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(b) The arbitrators selected in accordance with "(a)" above shall
select a third arbitrator knowledgeable in the field;
(c) The selections shall be completed no later than 30 days next after
Tenant's Disagreement Notice;
(d) Within thirty (30) days after their appointment, the arbitrators
shall determine the Market Rent for the Premises as of April 30, 2002 (and the
allocation of that rent between the RRLS and the DLS) and shall notify Landlord
and Tenant of such determination within seven (7) days, which determination (and
the allocation of that rent between the RRLS and the DLS) shall be final and
binding upon Tenant and Landlord;
(e) The foregoing arbitration shall be conducted in accordance with the
rules of the American Arbitration Association or its successors;
(f) Landlord and Tenant shall each pay one-half (1/2) of the cost of
the arbitration proceedings.
SECTION 4.3. CONFIRMATION OF EXTENSION TERM RENT. Each of Landlord and
Tenant agree to execute and deliver, reasonably after the request of the other,
a letter confirming the amount of the Annual Fixed Rent redetermined in
accordance with Section 4.2 hereof.
SECTION 5
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Operating Expenses
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SECTION 5.1. PAYMENT OF OPERATING EXPENSES. Tenant shall pay to Landlord,
at the time and in the manner hereinafter set forth, as Additional Rent, an
amount equal to Tenant's Proportionate Fraction of the Operating Expenses
defined in Section 5.2.
SECTION 5.2. DEFINITION OF OPERATING EXPENSES. The term "Operating
Expenses" shall mean the total costs incurred by Landlord for management,
operation and maintenance of the Building and the Property, including without
limitation, (i) expenses for insurance, property management, (including, without
limitation, a management fee equal to 5% of gross receipts), building
maintenance, a percentage of the wages of Landlord's employees directly involved
in the maintenance of the Premises based on Landlord's allocation of their
services to the Building and Property, landscaping, and Common Area Maintenance,
as defined in Section 8.2; (ii) all utilities and services to the Common Areas
and Premises, except in the latter instance, to the extent such utilities and
services servicing the Premises are separately metered or submetered; (iii)
except as provided in Section 9.4 (c), real and personal property taxes and
assessments, provided, however, Tenant shall not seek an abatement cr refund of
any such taxes or assessments without Landlord's prior written consent; (iv)
supplies,
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equipment utilities and tools used in management operation and Maintenance of
the Building that would not generally be capitalized; and (v) capital
improvements to the Building, amortized over the useful life of the capital
improvement(s); Operating Expenses shall exclude all cleaning and extermination
costs relating to the Premises and any other part of the Building, and Tenant
acknowledges that Landlord has no obligation to provide cleaning or
extermination services to the Premises.
SECTION 5.3. DETERMINATION OF OPERATING EXPENSES. During the last month of
each calendar year of the Lease Term ("Lease Year"), Landlord shall provide
Tenant notice of Landlord's estimate of the Operating Expenses for the ensuing
Lease Year or applicable portion thereof. Landlord's estimate of Operating
Expenses for 1996 is attached hereto as Exhibit 5.3. On or before the first day
of each month during the ensuing Lease Year or applicable portion thereof,
beginning on the Commencement Date, Tenant shall pay to Landlord 1/12th of
Landlord's estimate of the annual Operating Expenses attributable to the
Premises, provided however that if such notice is not given in the last month of
a Lease Year, Tenant shall continue to pay on the basis of the prior year's
estimate, if any, until the month after such notice is given. If at any time or
times the actual Operating Expenses-vary-or can be reasonably predicted to vary
from Landlord's estimate by more than five percent (5%), Landlord shall, by
notice to Tenant, revise its estimate for such year and subsequent payments by
Tenant for such year shall be based upon such revised estimate.
SECTION 5.4. FINAL ACCOUNTING FOR LEASE YEAR. Landlord shall deliver to
Tenant a statement of Operating Expenses and the cost associated therewith,
showing the calculation of Tenant' s Proportionate Fraction of the Operating
Expenses for the Lease Year or portion thereof as the case may be, prepared by
Landlord from Landlord's books and records. Landlord shall attempt to deliver
such statement within 120 days after the close of Landlord's fiscal year end,
but any Landlord's delay in delivery of such statement shall not relieve Tenant
of its obligations hereunder. If on the basis of such statement Tenant owes or
is owed an amount that is more or less than the estimated payments for such
calendar year previously made by Tenant, then Tenant or Landlord, as the case
may be, shall pay the deficiency to the other party within thirty (30) days
after delivery of the statement. Tenant, at its expense, shall have the right
within thirty (30) days from the date of receipt of Landlord's statement and
upon reasonable written notice to Landlord, to reasonably review Landlord's
books and records relating to the Operating Expenses for the year covered by the
statement. Tenant's audit right hereunder shall not limit Tenant's obligation to
make all payments of Annual Fixed Rent, Additional Rent and other sums in a
timely manner, as set forth in the Lease. Provided Landlord has not sold,
assigned, or transferred its interest in the Building or Property, Tenant's
Proportionate Fraction in any Lease Year of the portion of the annual Operating
Expenses attributable to landscaping; Common Area Maintenance excluding
snowplowing and utilities, if any; property management, but excluding property
management performed by third parties; and supplies used in the management,
operation and maintenance of the Building ("Capped Operating Expenses") shall
not exceed an amount equal to Tenant's Proportionate Fraction of the Capped
Operating
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Expenses in the Base Year increased by ten percent (10%) for each succeeding
Lease Year, including the current Lease Year ("Maximum Amount"). The Base Year
shall be calendar year 1995. Tenant acknowledges that in the event Tenant's
Proportionate Fraction of the Capped Operating Expenses exceed the Maximum
Amount in any Lease Year, Landlord may carry the excess forward into the Capped
Operating Expenses of any successive year or years of the Lease Term.
SECTION 6
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Insurance
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SECTION 6.1. TENANT'S INSURANCE. Tenant shall maintain at its own expense
throughout the Lease Term the following insurance:
(a) Commercial general liability (including Contractual Liability)
insurance for any injury to person or property occurring on or about or arising
out of the Premises, the parking lot and the Common Areas, naming Tenant as an
insured,, and as additional insureds Landlord and such persons as Landlord shall
designate from time to time, in amounts which shall, at the beginning of the
Lease Term, be at least equal to the limits set forth in Section 1;
(b) Products Liability coverage with limits of not less than
$1,000,000.00 each occurrence, naming as insured Tenant, and if available naming
as additional insured Landlord and such persons as Landlord shall designate from
time to time.
(c) Worker's compensation insurance with statutory limits covering all
of Tenant's employees working at the Premises;
(d) All risk property insurance on a full replacement value basis
covering Tenant for its personal property, betterments, and improvements naming
Landlord as a loss payee as its interest may appear;
(e) Intentionally Deleted;
(f) Excess insurance over item (a) and employees liability of
$3,000,000 naming Landlord and such additional persons as Landlord shall
designate from time to time as an additional insured; and
(g) and effective on the first day of the Extension Term, such limits
may be increased on the above policies of insurance or additional types of
insurance coverage may be required, provided such increased limits or additional
policies do not exceed those limits or those policies that may have become
standard and commercially reasonable within the industry.
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SECTION 6.2. LANDLORD'S INSURANCE. Landlord shall maintain throughout the
Term the following insurance, provided Landlord maintains excess insurance over
Section 6.2(a) of $3,000,000.00:
(a) Commercial general liability insurance for bodily injury and
property damage liability in such amounts and with such deductibles as Landlord
may consider appropriate; and
(b) All risk property insurance on a replacement full value, insuring
the Building with such deductibles, if any, as Landlord shall consider
appropriate.
(c) Such other insurance as Landlord considers reasonable and
appropriate.
SECTION 6.3. TENANT REIMBURSEMENT OF INSURANCE TAKEN OUT BY LANDLORD.
Notwithstanding any provision to the contrary, Tenant shall reimburse Landlord
for all of Landlord's costs incurred in providing such insurance to the extent
attributable to any special endorsement or increase in premium resulting from
the use, business or operations of Tenant or any special or extraordinary
hazards resulting therefrom. Landlord acknowledges that to the best of
Landlord's knowledge and belief, the Permitted Uses, as defined in Section 1.1
of the Lease, will not require any special endorsement or increase in premium
effective on the Commencement Date.
SECTION 6.4. REQUIREMENTS APPLICABLE TO INSURANCE POLICIES. All policies
for insurance required under the provisions of Section 6.1 shall be obtained
from responsible companies qualified to do business in the Commonwealth of
Massachusetts and in good standing therein, which companies shall be subject to
Landlord's reasonable approval. Tenant agrees to furnish Landlord with insurance
company certificates of all such insurance and copies of the policies there for
prior to the beginning of the Commencement Date and of each renewal policy at
least thirty (30) days prior to the expiration of the policy it renews. Each
such policy shall be noncancellable and shall not be changed materially with
respect to the interest of Landlord and such mortgagees without at least thirty
(30) days' prior written notice thereto. In the event Tenant fails to produce
certificates of all such insurance and/or copies of the policies therefore prior
to the Commencement Date or within ten (10) days of written demand by Landlord,
Landlord may at its option obtain all or a portion of the insurance coverage
required of Tenant as set forth in Section 6.1, and all costs and expenses
incurred by Landlord, including reasonable attorneys' and consulting fees
pursuant thereto shall be paid by Tenant to Landlord immediately on demand.
SECTION 6.5. WAIVER OF SUBROGATION. Each party, on behalf of itself and its
insurers, waives all rights of recovery and subrogation against the other for
loss to the extent such loss is actually recovered or recoverable from the
waiving party's insurance if such waiver is allowed by such insurance.
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SECTION 7
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Utilities
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SECTION 7.1. UTILITIES. Tenant shall pay to Landlord as Additional Rent,
all charges for water, sewer, gas, electricity and other utilities or services
used or consumed by Tenant in the Building, whether called charge, tax,
assessment, fee or otherwise, including, without limitation, water and sewer use
charges and taxes, if any, which Landlord in its discretion has caused to be
separately metered or submetered during the term of the Lease. Such charges
shall be paid within thirty (30) days of receipt of Landlord's invoice therefor.
In the event that Tenant receives a bill for any of the above charges directly
from a utility company, then Tenant shall pay the amount owing directly to such
utility company, and upon request shall forward copies of the paid invoices to
Landlord. In the event that any of such utilities or services shall not be
separately metered or submetered, then Tenant shall pay to Landlord as
Additional Rent, its proportionate fraction of such charges as reasonably
estimated by Landlord; provided that if any of such utilities or services are
provided to less than all of the rentable space in the Building or if Tenant's
use of any of such utilities or services shall be disproportionate more or less,
Tenant shall pay such share of the same as Landlord may reasonably consider
appropriate, based on an allocation of utility use prepared by a consultant
retained by Landlord. Landlord shall not be liable for any interruption or
failure in the supply of any such utilities to the Premises unless due to
Landlord's failure to timely pay for such utilities (if Landlord is obligated to
do so by the terms of this Lease) after having received timely payment for such
utilities from Tenant (if Tenant is obligated to do so by the terms of this
Lease).
SECTION 8
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Landlord's Covenants
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SECTION 8.1. BUILDING MAINTENANCE. Landlord shall maintain and repair the
exterior walls (exclusive of interior glass and doors in the Premises and
exclusive of the interior surfaces of the exterior walls in the Premises, all of
which Tenant shall maintain and repair), roof, foundation, structural supports
of the Building, Common Areas, and the portion of the Building heating,
plumbing, electrical, air-conditioning and mechanical systems and equipment
located outside the Premises, except any part of such systems which serve
exclusively the Premises. The cost of all work performed by Landlord under this
Section 8.1 and Section 8.2 below shall be an Operating Expense hereunder,
except to the extent such work is (i) a service to Tenant or is work for which
Landlord has the right to receive full reimbursement from Tenant, (ii) is
required due to the negligence or willful misconduct of Tenant or its agents,
employees or invitees, (iii) a service to other tenants or is work for which
Landlord has the right to receive full reimbursement from other tenants, or (iv)
is work servicing the interior, nonstructural portion of the Building
exclusively occupied by Landlord ("Landlord's Premises"), and the portion of the
Building heating, plumbing, electrical, air conditioning and mechanical systems
which exclusively serve Landlord's Premises. Tenant shall bear the full-cost
of-any and all work relating to Section 8.1 (i) and (ii).
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SECTION 8.2. COMMON AREA MAINTENANCE. Landlord shall maintain and repair
the Common Areas of the Building and Property, including without limitation the
parking lot, and shall provide snowplowing for the same.
SECTION 9
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Tenant's Covenants
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SECTION 9.1. USE. Tenant shall use the Premises only for the Permitted Uses
and shall from time to time procure all licenses and permits necessary therefore
at Tenant's sole expense.
SECTION 9.2. REPAIR AND MAINTENANCE. Tenant shall maintain in good order,
condition and repair the Premises, and every part thereof, including the signs,
interior, the face of the ceiling over Tenant's floor space, mechanical systems
and utility lines located in the Premises, and other equipment and systems,
wherever located, exclusively serving the Premises, all doors, door checks,
interior windows and plate glass, door fronts, exposed plumbing and sewage and
other utility facilities, fixtures, lighting, wall surfaces, floor surfaces and
ceiling surfaces located in the Premises and all other interior repairs,
foreseen and unforeseen, as required. Tenant shall maintain the Premises in such
condition as it is on the Commencement Date or may be put in during the Lease
Term, reasonable use and wear and damage by fire or other casualty required to
be insured against only excepted. Tenant shall make all repairs and replacements
and do all other work necessary for the foregoing purposes whether the same may
be ordinary or extraordinary, foreseen or unforeseen. Tenant shall keep in a
safe, secure and sanitary condition all trash and rubbish temporarily stored at
the Premises and shall arrange for and be responsible for all of the costs of a
trash and rubbish removal service in connection with Tenant's use of the
Premises, including without limitation the removal by a licensed organization of
biological, medical or hazardous substances, all in compliance with all laws,
rules and regulations. Tenant shall maintain in good order, condition and repair
the hereinafter described five (5) HVAC systems and boiler exclusively serving
the Premises, and any replacements thereof, whether in whole or in part: (a)
Worthington Package Unit Model #ULH150003U, Serial #74F68A32; (b) Worthington
Package Unit Model #ULH150003U, Serial #74F67G427; (c) Split Trane Unit, with
air handler, Serial #KOK191723, located in the second floor mechanical room, and
two condenser units, Serial #'s 621640COK08217 and 621640COK08216, located at
pads at the rear of the Building; (d) the Worthington 50 Ton, Split Unit, with
air handler located in the overhead in the first floor mechanical room (next to
office area), and Trane condenser Model #RAUB0251BD11B, Serial #J84681582
located on the roof, serving the first floor office area, the cafeteria and the
old kitchen area; (e) the Carrier "Weather Maker" air handler Model #40RR-024-0,
Serial #2594F01837 located in the overhead of the first floor mechanical room,
and Carrier "Weather Maker" condenser Model #38AH-054-600, Serial #1795F45006
located on the roof; and (f) the 8-section gas fired H.B. Smith hot water
boiler, Model #350, Cover #3006 and Inspection #W8051, with two TACO circulating
pumps.
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Notwithstanding the foregoing, before proceeding with any Capital Replacement
(as hereinafter defined), the Tenant shall first notify Landlord in writing
reasonably describing the necessary system repair or equipment replacement and
requesting the Landlord's consent to designate such repair or replacement a
Capital Replacement. Any such request shall be accompanied by a proposal for
replacement from a company reasonably acceptable to Landlord indicating the work
to be done and that the price of such work qualifies it monetarily as a Capital
Replacement. Upon receipt of such a request and proposal, Landlord will not
unreasonably withhold or delay its consent to the designation of such
replacement as a Capital Replacement, unless only the replacement is
necessitated by Tenant's intentionally tortuous or negligent act. As used
herein, the term "Capital Replacement" shall mean any Landlord approved (i)
replacement of any of the above-listed HVAC equipment which can not be repaired,
the cost of which on a per incident basis exceeds $10,000 or (ii) repair or
replacement of (x) any sewer or drain lines under the first floor slab or (y)
the main electrical service from the street to the switch gear, the cost of
either of which on a per incident basis exceeds $10,000. Landlord shall
reimburse Tenant for the cost of any Capital Replacement in excess of $10,000
reasonably after Landlord receives and confirms Tenant's certification to
Landlord that such Capital Replacement has been completed and fully paid for.
Notwithstanding the foregoing, Landlord and Tenant agree that the two HVAC
systems referenced in clauses (a) and (b) need to be replaced before the next
cooling season. Landlord agrees that the replacement of those two HVAC systems
shall constitute a Capital Replacement and agrees to reimburse Tenant for the
cost of such Capital Replacement, but not in excess of $20,000, reasonably after
Landlord receives and confirms Tenant's certification to Landlord that such
Capital Replacement has been completed and fully paid for. The reimbursed cost
of any Capital Replacement shall be pro rated over the useful life of the
replaced item, as determined by general accounting principles, consistently
applied, and such cost shall be included as one of the Operating Expenses.
SECTION 9.3. COMPLIANCE WITH LAW AND INSURANCE REQUIREMENTS. Tenant shall
not use the Premises or permit the Premises to be used in whole or in part for
any purpose or use that is in violation of any applicable laws, ordinances,
regulations or rules of any governmental agency or public authority. Tenant
shall make all repairs alterations, additions or replacements to the Premises
required-by any law or ordinance or any order or regulation of any public
authority arising from Tenant's use of the Premises and shall keep the Premises
equipped with all safety appliances so required. Tenant shall notify Landlord of
any incident which would require the filing of a notice under any Environmental
Law, as hereinafter defined, and shall comply with the orders and regulations of
all governmental authorities with respect to zoning, building, fire, health and
other codes, regulations, ordinances or laws applicable to the Premises.
Landlord may if it so elects, after reasonable advance notice (which in no
event, need exceed 48 hours advance notice), make any of the repairs,
alterations, additions or replacements referred to in Section 9.3 which affect
the Premises, the Building, or Property which remain undone after 15 days'
notice (except that no notice shall be
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required in an emergency), and Tenant shall reimburse Landlord for the cost
thereof on demand.
Tenant will provide Landlord, from time to time upon Landlord's reasonable
request, with reasonable records and information specifically identifying any
medical or biological material, or Hazardous Substance, as hereinafter defined,
generated, used, stored or disposed of on the Premises by Tenant.
Landlord shall have the right to make such inspections as Landlord shall
elect from time to time upon reasonable prior notice and at reasonable times in
light of the circumstances surrounding said inspection, to determine if Tenant
is complying with this Section. Tenant shall bear the cost of such inspection in
the event the inspection reveals any material incident(s) of noncompliance.
Tenant shall comply promptly with the recommendations of any insurer of
Landlord or Tenant, foreseen or unforeseen, ordinary as well as extraordinary,
which may be applicable to the Premises, by reason of Tenant's use thereof. In
no event shall any activity be conducted by Tenant on the Premises which may
give rise to any cancellation of any insurance policy or make any insurance
unobtainable.
SECTION 9.4. ALTERATIONS AND IMPROVEMENTS.
(a) Tenant shall not make any structural or non-structural installations,
alterations, additions or improvements in or to the Premises, other than
interior non-structural alterations costing less than ten thousand dollars
($10,000.00) per expenditure, without on each occasion obtaining the prior
written consent of Landlord. Any such work so approved by Landlord shall be
performed (i) in a good and workmanlike manner employing materials of good
quality; (ii) so as to conform with all applicable zoning, building, fire,
health and other codes, regulations, ordinances and laws and with all applicable
insurance requirements; (iii) in accordance with plans and specifications
approved by Landlord; and (iv) in accordance with the terms of the Lease. All
plans, specifications and drawings of any installations, alterations, additions
or improvements in excess of $10,000.00 per expenditure or which require
permits and/or licenses shall be, unless otherwise agreed to by the Landlord,
prepared or certified by a licensed architect at Tenant's expense and submitted
to Landlord ("Certified Plans"). Plans, specifications and drawings of interior
non-structural alterations costing less than $10,000.00 per expenditure which do
not require permits or licenses may be prepared by Tenant's designee, provided
Tenant's designee submits said plans, drawings and specifications to Landlord's
designee for review but not approval prior to construction. Landlord may approve
the Certified Plans in its reasonable discretion, within thirty (30) days of
submission, unless any delay is caused by Tenant or its employees, agents, or
contractors. Any Certified Plans not disapproved in whole or part within 30 days
after date of submission, if not disapproved in whole or in part within 7 days
thereafter after Tenant's second request to Landlord for approval noting, among
other things, that the Certified Plans will be deemed approved if not
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disapproved in whole or in part within 7 days, shall be deemed approved. At the
time of Landlord's approval of the Certified Plans, Landlord shall designate the
nonstructural alterations installations, additions or improvements which may be
removed by Tenant upon the termination of the Lease in accordance with Section
9.9. Tenant shall procure at Tenant's sole expense all necessary. permits and
licenses before undertaking any work on the Premises. Any building permit or
certificate of occupancy applied for by Tenant must be also signed by Landlord
before submission to a government authority. Tenant shall keep the Premises at
all times free of liens for labor and material. Tenant shall employ for such
work only contractors approved by Landlord, which approval shall not be
unreasonably withheld or delayed, and shall require all contractors employed by
Tenant to carry worker's compensation insurance in accordance with statutory
requirements and commercial general liability insurance covering such
contractors on or about the Premises in amounts that at least equal the limits
set forth in Sections 1, but excluding excess coverage as set forth in Section
6.1(f) and to submit certificates evidencing such coverage to Landlord prior to
the commencement of such work. Tenant shall hold Landlord harmless and
indemnified from all injury, loss, claims or damage to any person or property
occasioned by or growing out of such work. Landlord may inspect the work of
Tenant at reasonable times and give notice of observed defects.
(b) Notwithstanding the foregoing, with Landlord's prior written consent in
each instance, which consent shall not be unreasonably withheld or delayed,
Tenant may make any nonstructural alterations or improvements to the portion of
the Premises designated as the Pilot Lab on Exhibit A which do not adversely
affect the Building's structure or electrical, plumbing or HVAC systems. The
waiver of the requirement for Landlord's approval under this Section 9.4(b)
shall not relieve Tenant from its obligation to comply with all other conditions
of Section 9.4.
(c) Tenant shall pay to Landlord upon request, any increase in real
property taxes or assessments imposed on Landlord by the Town of Needham or any
governmental, quasi-governmental, or municipal body, or any alteration,
addition, or improvement installed by Tenant pursuant to this Section 9.4. To
the extent available, Landlord shall provide Tenant with documentation
evidencing the basis for any tax increase or assessment. Tenant shall not
approach the Town of Needham or any governmental, quasi-governmental, or
municipal body with respect to such real property taxes or assessments without
Landlord's prior written consent following thirty (30) days prior written
notice.
SECTION 9.5. INDEMNITY. At Landlord's option, either the Landlord shall
defend with all costs reimbursed by Tenant, or Tenant shall defend, with counsel
approved by Landlord, which approval shall not be unreasonably withheld or
delayed, all actions against Landlord, or any partner, trustee, stockholder,
officer, director, employee or beneficiary of Landlord, and holders of mortgages
secured by the Building (collectively, the "Indemnified Parties") with respect
to, and shall pay, protect, indemnify and save harmless, all Indemnified Parties
from and against, any and all liabilities, losses, damages, costs, expenses
(including reasonable attorneys' fees and expenses), causes of
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action, suits, claims, demands or judgments of any nature arising from (a)
injury to or death of any person, or damage to or loss of property, occurring
in, about or upon the Premises or resulting from the use, condition or occupancy
of the Premises unless caused solely by the negligence of any Indemnified Party
or its servants or agents, (b) violation of this Lease by Tenant, (c) any act,
fault, omission, or other misconduct of Tenant or its agents, contractors,
licensees, subtenants or invitees.
SECTION 9.6. LANDLORD'S RIGHT TO ENTER. Tenant shall permit Landlord and
its agents to enter into the Premises, including without limitation access to
the roof, corridors, elevator, and mechanical rooms (provided, however, that as
concerns the Lab Space, such access shall occur only after reasonable notice,
which in no event need exceed 48 hours advance notice, and provided further that
no advance notice is required in the event of an emergency) to examine the
Premises, make such repairs and replacements as Landlord may elect pursuant to
this Lease, cure any default hereunder, and upon reasonable notice by Landlord
to show the Premises to prospective purchasers, brokers and lenders, and for
other reasonable purposes and, during the last year of the term, to show the
Premises to prospective tenants and others and to keep affixed in suitable
places notices of availability of the Premises.
SECTION 9.7. PERSONAL PROPERTY AT TENANT'S RISK. All furnishings, Trade
Fixtures, equipment, effects and property of every kind of Tenant and of all
persons claiming by, through or under Tenant which may be on the Premises, shall
be at the sole risk and hazard of Tenant and if the whole or any part thereof
shall be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes, or other pipes, by theft or from any other
cause, except only the Landlord's gross negligence, no part of said loss or
damage shall be charged to or to be borne by Landlord. Tenant shall insure
Tenant's personal property.
SECTION 9.8. PAYMENT OF LANDLORD'S COST OF ENFORCEMENT. Tenant shall pay,
on demand, Landlord's expenses, including reasonable attorney's fees, incurred
in enforcing any obligation of Tenant under this Lease or in curing any default
by Tenant under this Lease as provided in Section 11.4.
SECTION 9.9. YIELD UP.
(a) At the expiration of the term or earlier termination of this Lease,
Tenant may in its discretion (i) remove all of its personal property not Trade
Fixtures (as defined in 9.9(b)) and its Trade Fixtures and (ii) remove non
structural alterations and improvements in the Premises, provided Tenant has
obtained Landlord's written consent to removal thereof pursuant to Section 9.4
(a), installed by Tenant pursuant to Section 9.4(a), but in any event at the
expiration of the term or earlier termination of this Lease, Tenant shall (iii)
surrender all keys to the Premises; (iv) remove Tenant's personal property in
the Premises; (v) [Intentionally deleted]; (vi) remove all Tenant's signs
wherever located; (vii) repair all damage caused by any removal permitted or
required under Section 9.9(a) (i), (ii), (iv) and (vi), and cap off any open
utility lines;
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and (viii) yield up the Premises (including all other alterations, additions and
improvements pursuant to Section 9.4 made by Tenant) in broom-clean condition
and in the same condition as the Premises were in on the Commencement Date and
as hereafter improved, reasonable wear and tear excepted, and in compliance with
all laws, in which Tenant is obliged to keep and maintain the Premises under
this Lease. In order to insure compliance with the terms of this subsection,
Tenant, no more than 30 days prior to the end of the term or earlier termination
of this Lease, shall cause to be performed, at Tenant's sole expense and by an
engineering company satisfactory to Landlord, an NRC close-out survey similar to
the survey, described in Exhibit C. If such survey discloses any contamination
which is not of a generally acceptable level, Tenant, at its sole expense, shall
cause such contamination to be remedied in a manner reasonably satisfactory to
Landlord. Any property not so removed shall be deemed abandoned following the
failure to remove such property after ten (10) days and may be removed and
disposed of by Landlord in such manner as Landlord shall determine and Tenant
shall pay Landlord the entire cost and expense incurred by it in effecting such
removal and disposition (net of any net receipts from disposition after removal,
without implying any duty on Landlord to obtain or attempt to obtain any
disposition proceeds) and in making any incidental repairs and replacements to
the Premises and for use and occupancy during the period after the expiration of
the term and prior to Tenant's performance of its obligations under this Section
9.9.
(b) For purposes of this Lease, "Trade Fixtures" shall mean the affixed
equipment and fixtures listed on Exhibit D, attached hereto and made a part
hereof, and as amended from time to time by mutual written agreement.
SECTION 9.10. LANDLORD'S EXPENSES RE CONSENTS. Tenant shall reimburse
Landlord promptly on demand for all reasonable legal and other expenses incurred
by Landlord in connection with all requests by Tenant for consent or approval
hereunder.
SECTION 9.11. RULES AND REGULATIONS. Upon notice thereof, Tenant shall
comply with such reasonable Rules and Regulations applicable to the Building and
Property generally as may be adopted and posted on the Building from time to
time by Landlord to provide for the beneficial operation of the Building and
Property, including without limitation rules relating to the security of the
Premises, the Building and Property and any security system implemented by
Landlord.
SECTION 9.12. HOLDING OVER. Tenant shall vacate the Premises immediately
upon the expiration or sooner termination of this Lease. If Tenant retains
possession of the Premises or any part thereof after the termination of the term
without Landlord's consent, Tenant shall pay Landlord a use and occupancy charge
at double the monthly rate of Annual Fixed Rent specified in Section 1 for the
time Tenant thus remains in possession and, in addition thereto, shall pay
Landlord for all damages, excluding consequential and indirect damages,
sustained by reason of Tenant's retention of possession. The provisions of this
Section do not exclude Landlord's rights of re-entry or any other right
hereunder, including without limitation, the right to remove Tenant
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through summary proceedings for holding over beyond the expiration of the term
of this Lease.
SECTION 9.13. ASSIGNMENT: SUBLETTING AND CHANGE OF CONTROL.
(a) Tenant shall not assign, transfer, mortgage or pledge this Lease or
grant a security interest in Tenant's rights hereunder or sublease (which term
shall be deemed to include the granting of concessions and licenses and the
like), all or any part of the Premises or suffer or permit this Lease or the
leasehold estate hereby created or any other rights arising under this Lease to
be assigned, transferred or encumbered, in whole or in part, whether
voluntarily, involuntarily or by operation of law, or permit the occupancy of
the Premises by anyone other than Tenant.
Without limiting the generality of the foregoing, any of the following
events with respect to Tenant (or its assignee, as permitted hereunder),
occurring in a series of one or more transactions, shall be deemed an assignment
for the purposes of this Lease, and shall require Landlord's prior written
consent, which may be withheld in Landlord's reasonable discretion as determined
in Landlord's sole judgment: (i) dissolution; (ii) reorganization; (iii)
[Intentionally deleted] or (iv) [Intentionally Deleted].
A Permitted Merger and/or Consolidation, as hereinafter defined with
respect to Tenant (or its assignee permitted hereunder) shall not be deemed an
assignment for purposes of this Lease. Tenant acknowledges that mergers and/or
consolidations affecting Tenant, or its assignee permitted hereunder, that do
not satisfy the following definitions shall be prohibited as assignments that
shall require Landlord's prior written consent, which may be withheld in its
reasonable discretion as determined in Landlord's sole judgment. For purposes of
this Section, a Permitted Merger and/or Consolidation shall be deemed to occur
if Tenant merges and/or consolidates with or into, any individual or entity
assuming all the obligations of Tenant herein, the net worth of the surviving
individual or entity remaining bound hereunder equals or exceeds the Tenant's
Net Worth, as hereinafter defined, on a pro forma basis after giving effect to
such merger or consolidation, and at all times during the Lease Term, the total
sum of the surviving individual's or entity's unpledged and unrestricted cash,
marketable securities and available but unused lines of credit shall not be less
than $3,000,000.00, provided however, that Landlord shall waive the surviving
individual's or entity's credit obligation as provided above upon the
commencement of year 6 of the Lease Term, and thereafter, provided the surviving
individual or entity is not in default beyond the expiration of applicable grace
periods under the Lease. At any time during the Lease Term that the surviving
individual or entity is not a public company, Landlord, at its expense and upon
reasonable notice, shall have the right from time to time to audit the surviving
individual's or entity's books and records relating to the surviving
individual's or entity's financial statements certified by the surviving
individual or an officer of the surviving entity to determine the extent of the
surviving individual's or entity's compliance with this Section; provided,
however, that Landlord shall not exercise the audit rights herein granted more
than once per year without cause prior to an event of
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default. The surviving individual's or entity's failure to comply with this
Section shall be deemed an event of default pursuant to Section 11. "Tenant's
Net Worth" shall mean Tenant's shareholders' equity as reported in Tenant's Form
10-Q report dated nearest to, but not later than the Commencement Date.
(b) Tenant may assign or transfer its interest hereunder to Tenant's
Subsidiary, as hereinafter defined, without Landlord's prior written consent.
Subsidiary shall be defined as any entity which directly or indirectly, is
controlled by Tenant solely by virtue of Tenant being the beneficial owner of
51% or more of Tenant's outstanding common stock or other equity interests.
(c) In the event of any assignment or transfer pursuant to Section 9.13 (a)
or (b), Tenant shall not be relieved of any of its obligations or liabilities
hereunder and shall indemnify and hold harmless Landlord from and against any
and all liabilities, damages, suits, actions, expenses and costs incurred by
Landlord arising from the breach of the conditions of the Lease by Tenant's
assignee or successor in interest or its employees, contractors, assigns, agents
and invitees. Any attempted assignment, transfer, mortgage, pledge, grant of
security interest, sublease or other encumbrance, except with prior written
approval thereof from Landlord at its sole discretion shall be void. No
assignment, transfer, mortgage, grant of, security interest, sublease or other
encumbrance whether or not approved, and no indulgence granted by Landlord to
any assignee or sublessee, shall in any way impair the continuing primary
liability (which after an assignment shall be joint and several with the
assignee) of Tenant hereunder, and no approval in a particular instance shall be
deemed to be a waiver of the obligation to obtain Landlord's approval in any
other case. In the event of a default by any assignee, sublessee or other
successor of Tenant in the performance of any of the terms or obligations of
Tenant under this Lease, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against any such assignee, sublessee or
other successor.
(d) Landlord may sell, assign, transfer, mortgage, lease, or pledge or
grant a security interest with respect to all or any portion of Landlord's
interest in the Premises, Building or Property, without restriction. Nothing
herein shall prohibit Tenant from collaterally assigning its leasehold interest
in the Premises for financing purposes, subject to Landlord's prior written
consent, which may be withheld in Landlord's reasonable discretion.
(e) Notwithstanding the foregoing, Landlord agrees that it will not
unreasonably withhold or delay its consent to a sublease of a portion not in
excess of one half of the Premises, provided that the sublessee and the terms of
the sublease are reasonably satisfactory to the Landlord and its mortgagees,
that the sublessee's proposed use is an allowed use, that the proposed use is
consistent with other tenant uses in the Building and that Tenant and such
sublessee execute and deliver to Landlord an agreement satisfactory to Landlord
and its mortgagees confirming, among other things, that Tenant remains primarily
liable for all the tenant payment and performance
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obligations under the Lease and that upon termination of the Lease, the sublease
shall also terminate, unless only Landlord elects not to have such sublease
terminate, in which event the subtenant shall attorn to Landlord on all the
terms and conditions of the sublease.
SECTION 9.14. OVERLOADING AND NUISANCE. Tenant shall not injure, overload,
waste, deface or otherwise harm the Premises, commit any nuisance, permit the
emission of any objectionable noise, vibration or odor, make, allow or suffer
any waste or make any use of the Premises which is improper, offensive or
contrary to any law or ordinance or which will invalidate any of Landlord's
insurance.
SECTION 9.15. TENANT'S CREDIT OBLIGATIONS.
(a) At all times during the Lease Term, the total sum of Tenant's unpledged
and unrestricted cash, marketable securities and available but unused lines of
credit shall not be less than $3,000,000.00, provided however, that Landlord
shall waive Tenant's credit obligation as provided above upon the commencement
of year 6 of the Lease Term, and thereafter, provided Tenant is not in default
beyond the expiration of applicable grace periods under the Lease. At any time
during the Lease Term that Tenant is not a public company, Landlord, at its
expense and upon reasonable notice, shall have the right from time to time to
audit Tenant's books and records relating to Tenant's financial statements
certified by an officer of Tenant to determine the extent of Tenant's compliance
with this Section 9.15(a); provided, however, that Landlord shall not exercise
the audit rights herein granted more than once per year without cause prior to
an event of default. Tenant's failure to comply with this Section 9.15 shall be
deemed an event of default pursuant to Section 11.
(b) In each year of the Lease Term, Tenant shall send a balance sheet,
income statement and statement of changes in financial position to Landlord
within fifty (50) days of the end of each of the first three fiscal quarters in
Tenant's Fiscal Year and audited Financial Statements within one hundred and
five (105) days after the end of the Tenant's Fiscal Year, which period may be
extended by Tenant for five (5) additional days if Tenant has filed an extension
with the Securities Exchange Commission.
SECTION 9.16. SIGNS. No sign, advertisement or notice referring to Tenant
shall be inscribed, painted, affixed or otherwise displayed on any part of the
exterior of the building (including Tenant's windows and doors) without the
prior written approval of Landlord, which shall not be unreasonably withheld or
delayed. Further, any such sign, advertisement or notice shall be constructed
and maintained by Tenant in conformity with any applicable zoning ordinances.
Landlord agrees to existing signage.
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SECTION 10
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Casualty or Taking
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SECTION 10.1. TERMINATION. In the event that greater than twenty-five (25%)
percent of the Building shall be taken by any public authority or for any public
use or destroyed by the action of any public authority (a "Taking") then this
Lease may be terminated by Landlord effective on the effective date of the
Taking. In the event that the Premises or the Building shall be destroyed or
damaged by fire or casualty (a "Casualty") and if Landlord's architect, engineer
or contractor shall determine that it will require in excess of 360 days from
the date of the Casualty to restore the Premises or the Building, this Lease may
be terminated by Landlord by notice to Tenant. In the case of a Taking or
Casualty, Landlord's election shall be made by the giving of notice by Landlord
to Tenant within sixty (60) days after Landlord receives notice of the Taking or
Casualty.
SECTION 10.2. RESTORATION. In the event of a Taking or a Casualty, if
Landlord fails to exercise the election to terminate provided in Section 10.1,
this Lease shall continue in force and a just proportion of the Annual Fixed
Rent and other charges hereunder, according to the nature and extent of the
damages sustained by the Premises, shall be abated from the date of the Casualty
or Taking until the Premises, or what may remain thereof, shall be put by
Landlord in the same condition for use as of the Commencement Date hereof, as it
may have been improved hereafter as provided in Section 15 hereof, subject to
zoning and building laws or ordinances then in existence, which, unless Landlord
has exercised its option to terminate pursuant to Section 10.1, Landlord
covenants to do with reasonable diligence at Landlord's expense. Prior to the
commencement of restoration, Landlord's architect will represent to Tenant that
Landlord's net insurance proceeds are sufficient to complete the restoration in
accordance with the terms of this Lease. In the event Landlord fails to complete
the restoration within 360 days from the date of Taking or Casualty, or
following Landlord's failure to commence restoration within 150 days of the
Taking or Casualty or following Landlord's failure to continue restoration for
ninety (90) consecutive days, unless Landlord's delay under any of these
circumstances arises from events beyond Landlord's control as set forth in
Section 14.5 or is caused by Tenant, Tenant may terminate this Lease upon thirty
(30) days prior written notice to Landlord. Landlord's obligations with respect
to restoration shall not require Landlord to expend more than the net proceeds
of insurance recovered or damages awarded for such Casualty or Taking and made
available for restoration by Landlord's mortgagees. "Net proceeds of insurance
recovered or damages awarded" refers to the gross amount of such insurance or
damages less the reasonable expenses of Landlord in connection with the
collection of the same, including without limitation, fees and expenses for
legal and appraisal services.
SECTION 10.3. AWARD. In the case of a Casualty or Taking, irrespective of
the form in which recovery may be had by law, all rights to damages or
compensation shall belong to Landlord in all cases, except with respect to an
award which provides a specific apportionment to Tenant. In the case of a
Casualty or Taking, Tenant hereby
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assigns to Landlord all of Tenant's rights to such damages and compensation and
covenants to deliver such further assignments thereof as Landlord may from time
to time reasonably request, except as provided in this Section 10.3.
SECTION 11
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Default
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SECTION 11.1. EVENTS OF DEFAULT. The following events shall be deemed to be
events of default under this Lease:
(a) if Tenant shall default in the performance of any of its
obligations to pay the Annual Fixed Rent, Additional Rent, or any other sum
payable hereunder and if such default shall continue for five (5) days following
receipt of written notice from Landlord; or
(b) if within thirty (30) days after notice from Landlord to Tenant
specifying any other default or defaults, Tenant has not fully corrected the
default or defaults so specified, or Tenant has not to Landlord's satisfaction
diligently pursued such correction to completion; or
(c) if any assignment for the benefit of creditors shall be made by
Tenant; or
(d) if Tenant's leasehold interest shall be taken on execution or other
process of law in any action against Tenant; or
(e) if a lien or other involuntary encumbrance is filed against
Tenant's leasehold interest, and is not discharged within twenty (20) days
thereafter unless Tenant posts a bond satisfactory to Landlord; or
(f) if a petition is filed by Tenant for liquidation, or for
reorganization or an arrangement or any other relief under any provision of the
Bankruptcy Code as then in force and effect; or
(g) if an involuntary petition under any of the provisions of said
Bankruptcy Code is filed against Tenant and such involuntary petition is not
dismissed within thirty (30) days thereafter; or
(h) if within ten (10) days after a violation of either the Permitted
Uses section or any provision in Section 13 titled "Environmental Compliance";
or
(i) if Tenant fails to comply with Section 9.15 (a) within five (5)
days following written notice of default from Landlord;
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(j) if Tenant fails to comply with Section 9.3 within thirty (30)
days, or such longer period as determined by Landlord using reasonable
discretion in Landlord's sole judgment, after notice from Landlord to Tenant
specifying a default;
then, and in any of such cases, Landlord and the agents and servants of Landlord
lawfully may, in addition to and not in derogation of any remedies for any
preceding breach of covenant, immediately or at any time thereafter and without
demand or notice and with or without process of law, forcibly, if necessary,
enter into and upon the Premises or any part thereof in the name of the whole,
or mail a notice of termination addressed to Tenant, and repossess the same as
of Landlord's former estate and expel Tenant and those claiming through or under
Tenant and remove its and their effects without being deemed guilty of any
manner of trespass and without prejudice to any remedies which might otherwise
be used for arrears of rent or prior breach of covenant, and upon such entry or
mailing as aforesaid this Lease shall terminate, Tenant hereby waiving all
statutory rights (including, without limitation, rights of redemption, if any)
to the extent such rights may be lawfully waived. Landlord, without notice to
Tenant, may store Tenant's effects, and those of any person claiming through or
under Tenant at the expense and risk of Tenant, and, if Landlord so elects, may
sell such effects at public auction or private sale and apply the net proceeds
to the payment of all sums due to Landlord from Tenant, if any, and pay over the
balance, if any, to Tenant.
SECTION 11.2. REMEDIES. In the event that this Lease is terminated under
any of the provisions contained in Section 11.1, Tenant shall pay forthwith to
Landlord, as compensation, the present value, utilizing the reference rate set
by Chemical Bank, NA, headquartered in New York City, New York at the time of
default, of the excess of the total rent reserved for the residue of the Lease
Term over the fair market rental value of the Premises for the residue of the
Lease Term. In calculating the rent reserved there shall be included, in
addition to the Annual Fixed Rent, Operating Expenses and Additional Rent, the
value of all other considerations agreed to be paid or performed by Tenant
during the residue. Alternatively, at Landlord's election, Tenant shall pay
punctually to Landlord all the sums and shall perform all the obligations which
Tenant covenants in this Lease to pay and to perform in the same manner and to
the same extent and at the same time as if this Lease had not been terminated.
In calculating the amounts to be paid by Tenant pursuant to the preceding
sentence, Landlord shall use reasonable efforts as determined in Landlord's sole
judgment to mitigate damages, and Tenant shall be credited with any amount paid
to Landlord pursuant to the first sentence of this Section 11.2 and also with
the net proceeds of any rent obtained by Landlord by reletting the Premises,
after deducting all Landlord's reasonable expenses in connection with such
reletting, including, without limitation, all repossession costs, brokerage
commissions, fees for legal services and expenses of preparing the Premises for
such reletting, it being agreed by Tenant that Landlord may (i) relet the
Premises or any part or parts thereof for a term or terms which may at
Landlord's reasonable option be equal to or less than or exceed the period which
would otherwise have constituted the balance of the term hereof and may grant
such concessions and free rent as Landlord in its reasonable judgment considers
advisable or necessary to relet the same
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and (ii) make such alterations, repairs and decorations in the Premises as
Landlord in its reasonable judgment considers advisable or necessary to relet
the same, and no action of Landlord in accordance with the foregoing or failure
to relet or to collect rent under reletting shall operate or be construed to
release or reduce Tenant's liability as aforesaid.
SECTION 11.3. REMEDIES CUMULATIVE. Except as otherwise expressly provided
herein, any and all rights and remedies which Landlord may have under this Lease
and at law and equity shall be cumulative and shall not be deemed inconsistent
with each other, and any two or more of all rights and remedies may be exercised
at the same time to the extent permitted by law.
SECTION 11.4. RIGHT TO CURE DEFAULTS. At any time following thirty (30)
days' prior notice to Tenant (except in cases of emergency, noncompliance with
laws, or health hazards as determined by Landlord when no notice shall be
required), Landlord may (but shall not be obligated to) cure any default by
Tenant under this Lease, and whenever Landlord so elects, all reasonable costs
and expenses incurred by Landlord, including reasonable attorneys' fees, in
curing a default shall be paid by Tenant to Landlord as Additional Rent on
demand, together with interest thereon at the rate provided in Section 11.7 from
the date of payment by Landlord to the date of reimbursement by Tenant.
At any time following thirty (30) days' prior written notice to Landlord,
Tenant may cure any default by Landlord under this Lease, provided Landlord has
failed to cure or commence to cure said default. All reasonable costs and
expenses incurred by Tenant, including reasonable attorneys' fees, in curing a
default may be offset by Tenant against Fixed Annual Rent.
SECTION 11.5. EFFECT OF WAIVERS OF DEFAULT. Any consent or permission by
Landlord to any act or omission which otherwise would be a breach of any
covenant or condition herein, or any waiver by Landlord of the breach of any
covenant or condition herein, shall not in any way be held or construed (unless
expressly so declared) to operate so as to impair the continuing obligation of
any covenant or condition herein, or otherwise operate to permit the same or
similar acts or omissions except as to the specific instance. The failure of
Landlord to seek redress for violation of, or to insist upon the strict
performance of, any covenant or condition of this Lease shall not be deemed a
waiver of such violation nor prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. The receipt by Landlord of rent with knowledge of the breach
of any covenant of this Lease shall not be deemed to have been a waiver of such
breach by Landlord or of any of Landlord's remedies on account thereof,
including its right of termination.
SECTION 11.6. NO ACCORD AND SATISFACTION. No acceptance by Landlord of a
lesser sum than the Annual Fixed Rent, Additional Rent or any other charge then
due shall be deemed to be other than on account of the earliest installment of
such rent or charge
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due, unless Landlord elects by notice to Tenant to credit such sum against the
most recent installment due. Any endorsement or statement on any check or any
letter accompanying any check or payment as rent or other charge shall not be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such installment
or pursue any other remedy under this Lease or otherwise.
SECTION 11.7. INTEREST ON OVERDUE SUMS. If Tenant fails to pay any payments
of Annual Fixed Rent or Additional Rent arising pursuant to Section 5 within 5
days of the due date thereof (i.e., the due date set forth in the Lease,
disregarding any requirement of notice from Landlord or any period of grace
allowed to Tenant as set forth in Section 11.1 (a), an amount equaling the
greater of (i) the unpaid amount plus interest at a variable rate equal to two
(2%) percent in excess of the base rate (prime rate) of Chemical Bank, NA,
headquartered in New York City, New York, from time to time in effect (the
"Delinquency Rate") commencing with the due date and continuing through the day
on which payment of such delinquent payment with interest thereon is paid; or
(ii) $500.00 shall be immediately due and payable from Tenant to Landlord. If
Tenant fails to pay any other sum payable by Tenant to Landlord under the Lease
by the due date, as provided above, Tenant shall pay an amount equaling the
unpaid amount plus interest at the Delinquency Rate commencing with the due date
and continuing through the day on which payment of such delinquent payment with
interest thereon is paid. If such interest rate is in excess of any maximum
interest rate permissible under applicable law, the Delinquency Rate shall be
the maximum interest rate permissible under applicable law.
SECTION 12
----------
Mortgages
---------
SECTION 12.1. RIGHTS OF MORTGAGE HOLDERS. No Annual Fixed Rent, Additional
Rent or any other charge shall be paid more than ten (10) days prior to the due
date thereof and payments made in violation of this provision shall (except to
the extent that such payments are actually received by a mortgagee in possession
or in the process of foreclosing its mortgage) be a nullity as against such
mortgagee and Tenant shall be liable for the amount of such payments to such
mortgagee.
In the event of any act or omission by Landlord which would give Tenant the
right to terminate this Lease or to claim a partial or total eviction, Tenant
shall not exercise any such right (a) until it shall have given written notice,
in the manner provided in Section 13.1, of such act or omission to the holder of
any mortgage encumbering the Premises whose name and address shall have been
furnished to Tenant in writing, at the last address so furnished, and (b) until
a reasonable period for remedying such act or omission shall have elapsed
following the giving of such notice, provided that following the giving of such
notice, Landlord or such holder shall not, with reasonable diligence, have
commenced and continued to remedy such act or omission or to cause the same to
be remedied.
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In the event any proceedings are brought for the foreclosure of, or in the
event of exercise of the power of sale under, any mortgage now or hereafter
encumbering the Premises, Tenant shall attorn to the purchaser upon such
foreclosure or sale or upon any grant of a deed in lieu of foreclosure and
recognize such purchaser as Landlord under this Lease, provided such purchaser
recognizes Tenant.
SECTION 12.2. SUBORDINATION OF LEASE. Upon not less than five (5) business
days' prior notice by Landlord, Tenant shall execute and deliver a
Subordination, Non-Disturbance and Attornment Agreement in form as attached
hereto as Exhibit 12.2 (the "SNDA"). Upon execution and delivery of the
Tenant-signed SNDA by Landlord and the holder of the applicable lender interest,
this Lease shall be subject to and subordinate to any mortgage, deed of trust,
sale/leaseback transaction or any transaction now or hereafter placed upon the
Building, the Property, or both, and the rights of any assignee of Landlord or
mortgagee, trustee, beneficiary, landlord or leaseback lessor under any of the
foregoing, and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof. If
any mortgagee, trustee, beneficiary, sale/leaseback lessor or assignee elects to
have this Lease be an encumbrance upon the Property prior to the lien of its
mortgage, deed of trust, leaseback lease or other security arrangement and gives
notice thereof to Tenant at any time, this Lease shall be deemed prior thereto,
whether this Lease is dated prior or subsequent to the date thereof or the date
of recording thereof, provided any such mortgagee, trustee, beneficiary,
sale/leaseback lessor or assignee recognizes Tenant and the terms of this Lease,
and in such event, this Lease shall be made expressly to bind and inure to the
benefit of the successors and assigns of Tenant and of the holder and upon
anyone purchasing the Building and Property at any foreclosure sale. Tenant
agrees to execute and deliver any appropriate instruments in the holder's
customary form necessary to carry out the agreements contained in this Section
12.2.
SECTION 12.3. ESTOPPEL CERTIFICATE. Upon not less than five (5) business
days' prior notice by Landlord, Tenant shall execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect and that, except as stated therein, Tenant has no
knowledge of any defenses, offsets or counterclaims against its obligations to
pay the Annual Fixed Rent, Additional Rent and any other charges and to perform
its other covenants under this Lease (or, if there have been any modifications
that the same is in full force and effect as modified and stating the
modifications and, if there are any defenses, offsets or counterclaims, setting
them forth in reasonable detail), the dates to which the Annual Fixed Rent, and
Additional Rent and other charges have been paid and a statement that Landlord
is not in default hereunder (or if in default, the nature of such default, in
reasonable detail) (hereinafter "Estoppel Certificate"). Any Estoppel
Certificate delivered by Tenant pursuant to this Section 12.3 may be relied upon
by any prospective purchaser or mortgagee of the Building. Upon not less than
five (5) business days' prior written notice by Tenant, Landlord shall execute,
acknowledge and deliver an Estoppel Certificate to Tenant.
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SECTION 13
----------
Environmental Compliance
------------------------
SECTION 13.1 DEFINITIONS.
(1) "Environment" means any surface or subsurface water, water vapor,
surface or subsurface land, air, fish, wildlife, micro-organisms and all other
natural resources.
(2) "Environmental Law" means any and all federal, state, local and
foreign laws, regulations, rules, bylaws, ordinances, permits (including without
limitation, authorizations, approvals, registrations and licenses, collectively,
"Permits"), administrative orders, judicial decisions or the like (all,
collectively, "Laws") relating to (1) pollution or protection of the
Environment, natural resources or human health from any Hazardous Substance or
(2) nuisance, trespass or "toxic tort," so called, including, without
limitation, Laws relating to emissions, discharges releases or threatened
releases of any Hazardous Substance or otherwise relating to the manufacture,
processing, importation, distribution, use, presence, generation, treatment,
storage, disposal, transportation or handling of any Hazardous Substance.
(3) "Hazardous Substance" means any chemical, pollutant, containment,
waste (including without limitation, toxic, hazardous, infectious, sanitary,
Solid, radioactive and petroleum waste, collectively, "Waste"), toxic substance,
hazardous substance, extremely hazardous substance, hazardous material,
radioactive material, oil and petroleum product, as such terms, or any similar
terms, are or shall be used under any Environmental Law.
(4) "Premises" for purposes of this Section 13 means the land surface
and the entire subsurface of soil, sand, gravel, stone and rock, all surface
water and subsurface water, whether flowing or stagnant, the ambient air, and
all structures, fixtures and buildings located, situated or erected on the
Property, Building, and Premises, and all machinery and equipment located at or
in connection with any such structure.
(5) "Release" means any discharging, disposing, emitting, leaking,
pumping, pouring, emptying, injecting, escaping, leaching, dumping or spilling
into the Environment (including the abandonment or discarding of barrels,
containers and other closed receptacles).
SECTION 13.2 INDEMNITY. Lessor and Lessee shall each indemnify, defend with
counsel reasonably acceptable to the other and hold the other, and any mortgagee
of the Building, fully harmless from and against any and all liability, loss,
suits, claims, actions, causes of action, proceedings, demands, costs,
penalties, damages, fines and expenses, including, without limitation, attorneys
fees, consultants' fees, laboratory fees and clean up costs, and the costs and
expenses of investigating and defending any claims or
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proceedings, resulting from, or attributable to (i) the presence of any
Hazardous Substance on the Premises or the Property arising from the action or
negligence of the party against whom indemnity is sought, its officers,
employees, contractors, agents and invitees (collectively, "Indemnitor"), or
arising out of the generation, storage, treatment, handling, transportation,
disposal or release by Indemnitor of any Hazardous Substance at or near the
Premises or the Property, and (ii) any violation(s) by Indemnitor of any
applicable law regarding Hazardous Substances or the operation of the Premises
or the Property. This hold harmless and indemnity shall not include
consequential damage or damage to or loss of personal property.
SECTION 13.3 PREEXISTING CONDITION. Exhibit F identifies the most recent
level of the groundwater contamination in the exterior wells on the Property, as
determined by Landlord's environmental engineer.
SECTION 14
----------
Miscellaneous
-------------
SECTION 14.1. NOTICES FROM ONE PARTY TO THE OTHER. All notices required or
permitted hereunder shall be in writing and addressed, if to Tenant, at the
Address of Tenant or such other address as Tenant shall have last designated by
notice in writing to Landlord, and, if to Landlord, at the Address of Landlord
or such other address as Landlord shall have last designated by notice in
writing to Tenant with a copy to Gary P. Lilienthal, Esquire, Bernkopf, Goodman
& Baseman, 125 Summer Street, Boston, Massachusetts. Any notice shall be deemed
duly given when delivered or tendered for delivery at such address.
SECTION 14.2. QUIET ENJOYMENT. Landlord agrees that upon Tenant's paying
the rent and performing and observing the terms, covenants, conditions and
provisions on its part to be performed and observed, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises during the term without
any manner of hindrance or molestation from Landlord or anyone claiming under
Landlord, subject, however, to the terms of this Lease.
SECTION 14.3. LEASE NOT TO BE RECORDED: NOTICE OF LEASE. Tenant agrees that
it will not record this Lease. If the Term of this Lease, including options,
exceeds seven (7) years, Landlord and Tenant agree that, on the request of
either, they will enter and record a notice of lease in form reasonably
acceptable to Landlord.
SECTION 14.4. BIND AND INURE: LIMITATION OF LANDLORD'S LIABILITY. The
obligations of this Lease shall run with the land, and this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No owner of the Premises shall be liable under this
Lease except for breaches of Landlord's obligations occurring while owner of the
Premises. The obligations of Landlord shall be binding upon the assets of
Landlord which comprise the Premises but not upon other assets of Landlord. No
individual partner, trustee, stockholder, officer, director,
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employee or beneficiary of Landlord shall be personally liable under this Lease
and Tenant shall look solely to Landlord's interest in the Premises in pursuit
of its remedies upon an event of default hereunder, and the general assets of
Landlord and its partners, trustees, stockholders, officers, employees or
beneficiaries of Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant.
SECTION 14.5. ACTS OF GOD. In any case where either party hereto is
required to do any act, delays caused by or resulting from acts of God, war,
civil commotion, fire, flood or other casualty, labor difficulties, shortages of
labor, materials or equipment, government regulations, unusually severe weather,
or other causes beyond such party's reasonable control shall not be counted in
determining the time during which work shall be completed, whether such time be
designated by a fixed date, a fixed time or a "reasonable time", and such time
shall be deemed to be extended by the period of such delay.
SECTION 14.6. BROKERAGE. Tenant and Landlord warrant and represent to each
other that neither party has had any dealings with any broker or agent in
connection with this Lease and covenants to defend with counsel approved by the
other, and will hold harmless and indemnify the other from and against any and
all cost, expense or liability for any compensation, commissions and charges
claimed by any broker or agent.
SECTION 14.7. MISCELLANEOUS. This Lease shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts. There are no
prior oral or written agreements between Landlord and Tenant affecting this
Lease.
SECTION 14.8. SECURITY DEPOSIT. Tenant shall pay the Security Deposit
simultaneously with execution of this Lease. The Security Deposit will be held
by Landlord, as security and without any obligation to segregate the Security
Deposit from other funds held by Landlord, for and during the Lease Term, which
deposit shall be returned to Tenant, within thirty (30) days after the
expiration of the Lease Term provided there exists no breach of any undertaking
of Tenant. Landlord may apply all or part of the Security Deposit to an
obligation of Tenant hereunder, whereupon Tenant shall immediately upon request
by Landlord restore the Security Deposit to the then applicable fully-funded
amount, except for any portion of the Security Deposit taken or applied by
Landlord pursuant to Section 9.4(d). Tenant shall not have the right to call
upon Landlord to apply all or any part of the Security Deposit to cure any
default or fulfill any obligation of Tenant, but such use shall be solely in the
discretion of Landlord. Provided that Landlord gives Tenant notice of the name
of such grantee or transferee, upon any proper conveyance by Landlord of its
interest under this Lease, the Security Deposit may be delivered by Landlord to
Landlord's grantee or transferee. Upon any such delivery and upon confirmation
of receipt thereof by Landlord's grantee or transferee, Tenant hereby releases
Landlord herein named of any and all liability with respect to the Security
Deposit, its application and return, and Tenant agrees to look
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solely to such grantee or transferee. This provision shall also apply to
subsequent grantees and transferees.
SECTION 15
----------
Improvements
------------
SECTION 15.1. ENTRYWAY. Landlord agrees to install (i) a new front entry to
the Premises in accordance with the sketch attached hereto as Exhibit 15.1 and
(ii) two shower stalls in the first floor bathroom, on or before the date six
months after the Commencement Date.
SECTION 15.2. CAPITAL IMPROVEMENTS.
(a) In addition to the new front entry and shower stalls referenced in
Section 15.1, Landlord agrees to invest approximately $100,000.00 in Capital
Improvements to the Building. Landlord agrees to solicit Tenant's suggestions on
which Capital Improvements shall be made to the Building and to consider
Tenant's input when deciding which improvements to fund; however, Landlord shall
have the final choice over which Capital Improvements shall be made.
Notwithstanding the foregoing, Landlord and Tenant shall reasonably agree on
such Capital Improvements, and Landlord agrees to implement such Capital
Improvements with the six months next following the date that Landlord and
Tenant agree upon the Capital Improvements to be made. In addition to sums
otherwise payable under this Lease, Tenant agrees that Tenant shall pay Landlord
additional rent each month associated with the Capital Improvements. The amount
of such additional rent shall be determined, and redetermined monthly, as
necessary, by Landlord as the Capital Improvements are completed, and shall be
equal to that monthly payment that would be required to amortize a loan on a
self-liquidating basis, which loan has as its initial principal balance the
amount of substantially completed Capital Improvements (less any amortized
principal from prior payments, if any), an interest rate of 12% per year, and a
term equal to the term of the Lease remaining from and after the date on which
the first loan payment in the redetermined amount is payable.
(b) If the Lease is terminated earlier than April 30, 2002, whether at
Tenant's election or for any other reason, upon such termination there shall be
immediately due and payable as additional rent, an amount equal to the aggregate
unamortized amount of Capital Improvements.
SECTION 15.3. TENANT IMPROVEMENTS.
(a) As part of any alterations and improvements to be made by the
Tenant in accordance with Section 9.4 hereof, Tenant may first seek Landlord's
consent to deem such improvements "Qualified Tenant Improvements," all as
hereinafter provided. Upon completion of a Qualified Tenant Improvement, Tenant
shall be entitled to reimbursement of 50% of the cost thereof from Landlord. A
"Qualified Tenant
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Improvement" shall be a tenant improvement that, in the Landlord's reasonable
discretion, will add future value to the Premises and is not in any material
manner an improvement specific to the Tenant's permitted use or that would be
required to be demolished or removed upon termination of this Lease. In
addition, no tenant improvement shall be deemed a "Qualified Tenant Improvement"
unless and until the Tenant has provided the Landlord with reasonable plans and
specifications for improvements, including the estimated cost thereof (including
the allocation of the cost between the RRLS and the DLS), and Landlord has
confirmed in writing that such improvements at such cost may be considered
"Qualified Tenant Improvements". The requirement to submit plans, specifications
and pricing shall be a prerequisite to classification as "Qualified Tenant
Improvements" notwithstanding anything in Section 9.4 to the contrary concerning
improvements or alterations costing less than $10,000.00.
(b) Tenant agrees that from and after the date of Landlord's
reimbursement of all or any portion of the Qualified Tenant Improvements, Tenant
shall pay to Landlord additional rent each month together with the other rent
payable under this Lease. The amount of such additional rent shall be determined
for each reimbursed Qualified Tenant Improvement and aggregated for all such
reimbursed Qualified Tenant Improvements, and shall be equal to that monthly
payment that would be required to amortize a loan on a self-liquidating basis,
which loan has as its initial principal balance the amount reimbursed (less any
amortized principal from prior payments, if any), an interest rate of 12% per
year, and a term equal to the remaining term of the Lease.
(c) Landlord shall not be required to reimburse any amount of Qualified
Tenant Improvements prior to August 1, 1996. Thereafter, the aggregate amount
available for reimbursement (the "Reimbursement Limit") will be $100,000.00
until such time (the "Increase Event") if at all, as Tenant demonstrates to
Landlord's reasonable satisfaction, based upon quarterly operating reports
certified by Tenant's CPAs, that the total sum of Tenant's unpledged and
unrestricted cash and marketable securities has for each of such two consecutive
business quarters equaled or exceeded 300% of the difference between annualized
cash receipts and annualized short term expenditures; provided however that when
determining cash receipts, there shall be excluded from the calculation any
receipts of a non-recurring nature. When and if the Increase Event occurs the
Reimbursement Limit shall be increased to $200,000.
(d) If the Lease is terminated earlier than April 30, 2002, whether at
Tenant's election or for any other reason, upon such termination there shall be
immediately due and payable as additional rent, an amount equal to the aggregate
unamortized amount of reimbursed Qualified Tenant Improvements.
(e) To obtain a reimbursement for a Qualified Tenant Improvement,
Tenant shall provide Landlord with a written request for reimbursement
certifying that the work for which reimbursement is requested (the "Work")
qualifies as a Qualified
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Tenant Improvement, reimbursement has not previously been requested for the
Work; the Work has been completed to the Tenant's satisfaction and Tenant has
already paid for the Work. Tenant shall additionally provide Landlord with such
evidence of payment for and completion of the Work as Landlord reasonably
requests.
SECTION 16
----------
Direct Lease Cancellation
-------------------------
SECTION 16.1. DIRECT LEASE CANCELLATION. Landlord and Tenant acknowledge
that the space leased hereunder includes the approximately 9,110 square feet in
the Building that Tenant previously leased from Landlord under a Lease
commencing February 1, 1995 (the "Direct Lease"). In consideration of the change
in mutual obligations and rights contained herein, the Landlord and Tenant
acknowledge and agree that the Direct Lease is hereby cancelled, effective as of
the Commencement Date herein.
{signatures on next page}
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WITNESS the execution hereof under seal as of the day and year first above
written.
TENANT:
T CELL SCIENCES, INC.
By /s/ Alan W. Tuck
--------------------------------
Alan W. Tuck, President
LANDLORD:
FOURTH AVENUE VENTURES
LIMITED PARTNERSHIP
By: Cendav Investment Corp., its
sole General Partner
By /s/ Paul R. Marcus
--------------------------------
Paul R. Marcus, Vice President
